AT&T successfully bribed a Oklahoma telecom regulator to allow the phone company to keep at least $30 million annually in excess revenue. Despite the fact two key players in the bribery scandal were eventually sent to federal prison, Oklahoma’s state government has done all it can to protect AT&T. At issue is up to $16 billion in refunds and damages payable by AT&T — approximately $15,000 per customer, that the state claims would not be in the public interest. Now a consumer group — Oklahomans Against Bribery — is taking its case for refunds to the U.S. Supreme Court.

Remarkably, AT&T has remained so confident of its case and close relationship with Oklahoma state officials, the company drew gasps in a 2015 hearing after its attorney argued even bribed votes count at the Oklahoma Corporation Commission (OCC), the state’s telecommunications regulator, and the Commission has no jurisdiction to tell AT&T to make things right with Oklahoma ratepayers.

The Oklahoma Corporation Commission: “Perjury Palace”

The notorious scandal began with the passage of the Tax Reform Act of 1986 during the Reagan Administration. Echoing recent tax changes passed during the Trump Administration, Republicans argued that reduced taxes would cut the burden on corporations by changing the way those taxes were calculated, with savings trickling down to individual taxpayers. Under Oklahoma law, when a regulated utility wins a tax break, so should ratepayers in the form of lower rates. In June, 1987 the OCC ordered utilities including Southwestern Bell Telephone Company (today doing business as AT&T) to be prepared to refund the excess revenue that came as a result of the tax cut.

Only AT&T had no serious intention of refunding the money to its customers. Investigators claimed the company’s senior Oklahoma executives conspired with at least one of their attorneys to bribe Corporation Commissioner Bob Hopkins with a $10,000 payment in return for his vote allowing AT&T to “invest” the excess money in network upgrades. AT&T got its wish in a 2-1 vote. For almost 30 years, the lone dissenter in that vote, Corporation Commissioner Bob Anthony, has led the charge to reopen the case and get consumers a long overdue refund.

In 1988, when he was running for a seat on the Corporation Commission, Anthony said he was warned he would not be a good fit.

“A friend and Crowe and Dunlevy attorney advised me that someone like me should not run for election to the Oklahoma Corporation Commission, calling it the ‘perjury palace,'” Anthony wrote in a 2016 dissent opinion of the rate case.

Even before Anthony won his seat on the Commission, the bribery attempts began, often involving a high-powered utility lawyer named William Anderson, hired by SBC/AT&T:

“My first introduction to this entire episode was in about the last six weeks of my campaign….I was sent word that some people wanted to meet me. Well, I was running a campaign so I was happy to meet people interested.

“So, I went over to Mr. [William] Anderson’s office, and we had a nice chat. He’s…an authority on utility regulation. We had a nice little chat, and he handed me an envelope, and I put it in my pocket. And I remember driving home, not at the first stop light, but at the second stop light, I opened up the envelope and there were 10 $100 dollar bills in it, with a little slip of paper in one person’s handwriting that had five names written on it. Now, I was supposed to assume that that was five people [who] contributed $200 apiece, and that I didn’t have to report it by name.

“I told this story to a high school friend of mine who just happened to be the U.S. Attorney at the time. And before I told him the name of the person, he said, ‘Was that Bill Anderson?’ And I said, ‘Yeah, that’s who that was.’ And he said, ‘Well, Bob, we’ve been interested in his activities for a long period of time, but it’s awfully difficult to get inside information.’ And I said, ‘If he continues to have dealings with me, I’ll keep you posted.'”

It wasn’t long before Anthony associated Anderson’s presence with pocketfuls of cash waiting to fall on the table:

“I remember the time he had 50 $100 dollar bills. And I said, ‘You know I grew up in the business world, and we counted money when it came in.’ And so he’d chuckle, and then I’d start counting it out, 1-2-3-4, and then it would get up to 45-46-47-48-49-50! And, uh, he had a funny little thing he’d like to say,…’Well, if there was one extra, I’d a’ jumped up there and grabbed it.’ And we’d chuckle about that.

“Then he’d go on and explain about what was expected for the money. The definition of bribery, out of Black’s Law Dictionary, includes a quid pro quo. If he just gives me a gift that’s not necessarily a bribe. But, if he does, like he did, say, ‘You know, these companies I represent, they expect to make a profit. They expect to be in business a long time. And we’re not going to bother you every day, but someday there will be some officer of one of the companies I represent, and we’ll need an appointment, and we’d expect for you to give us an appointment.’

“Well, a certain amount of this is a wink and a nod, too. But, there was no doubt in our minds what was going on. Very clearly what was happening was people were giving me a large number of hundred dollar bills because they were buying access, and they were buying influence. And those words were even used in conversations that I had with utility executives.

“So my high school friend arranged for me to meet him in his US Attorney’s office, and there were two top FBI agents from the city who were there. And I agreed to keep them informed if activities continued.

“And Mr. Anderson called, and he called again, and he wanted to establish a relationship. And eventually they got recording equipment put in my office, and he continued his activity.”

Anthony recounted how utility lobbyists and lawyers introduced themselves, almost always around the issue of money.

“You know, sometimes I get money for the commissioners,” one lawyer told Anthony, adding some lawyers and lobbyists frequently offer $300 or $400 in “walking around money.” Those lobbying Anthony also reminded him they were aware of his campaign deficit, and despite being illegal, one offered to bundle a $10,000 contribution to help retire his debt.

The SBC/AT&T Bribery Case

The prospect of AT&T getting to keep at least $30 million in excess revenue a year (later revised upwards in an independent audit to $120 million annually) meant going the extra mile with commissioners to assure a vote in AT&T’s favor. By this time, Anthony had volunteered to serve as a FBI informant and had turned over any money he received improperly to the government. Federal investigators also obtained wiretap warrants, which caught telephone company executives discussing the bribe they didn’t want to know about.

“Do it and don’t let me know how you do it,” Oklahoma SBC/AT&T division president Royce Caldwell is heard saying on one wiretap.

Anthony argues there is substantial evidence that AT&T’s bribery is only a part of a much broader conspiracy involving a variety of utilities who were routinely bribing regulators to win votes at the OCC. But the AT&T case was special because of the amount of money involved.

“Multiple executives and attorneys were involved,” he said. A judge that later reviewed the case called the money given to Anthony, “no more or no less than an effort to have him look with favor on their pending rate matters.”

Other executives named by Anthony in the case were David Miller, SBC’s vice president in Oklahoma for governmental and regulation affairs and SBC attorneys William Free and Glen Glass.

In a sworn affidavit, Anthony cited a FBI wiretapped conversation between Anderson and Free in which Anderson said, “[Glen] Glass knew the whole deal. We all knew. They all knew we were trying to work something.”

What they apparently knew is that their attorney, Mr. Anderson, had found OCC Commissioner Robert Hopkins, a grateful recipient of $10,000 in telephone company bribe money, and the critical second vote in favor of AT&T being allowed to keep its excess revenue.

In 1994, a federal grand jury indicted Anderson and Hopkins for illegal bribery and conspiracy charges. Both were found guilty in late 1994 and sentenced to federal prison.

The Bribery Worked: AT&T Still Benefits Today from Rigged Vote That Was Never Overturned

Despite convictions, jail time, and clear and convincing evidence of a corrupted regulatory process, the order granting AT&T permission to keep the money was never overturned, despite repeated efforts by Anthony to throw out the tainted vote.

Since the late 1980s, AT&T has collected an estimated $16 billion in excess charges from Oklahoma ratepayers, including interest. But every effort to see that money returned to Oklahoma consumers and businesses has met a roadblock of resistance from AT&T, the Oklahoma state government, and regulatory agencies who call the case “ancient history” and “closed for further debate.”

The most serious effort to overturn the OCC’s original vote came in 2015-2016, when a coalition of consumers, business leaders, and philanthropists teamed up to convince the OCC and the courts they should toss out the tainted vote. They ran head-on into then Oklahoma Attorney General Scott Pruitt (today the head of the Environmental Protection Agency in the Trump Administration.)

Pruitt had been a staunch defender and supporter of AT&T in his role as Attorney General. In 2014, shortly after Pruitt dismissed another challenge about excess revenue in favor of AT&T, the phone company and its executives richly rewarded Pruitt’s campaign coffers with $43,500 — 44.5% of all donations for the summer and fall 2014 period. Pruitt ran unopposed in 2014.

Pruitt’s office renewed opposition to those challenging AT&T once again in 2015:

The Oklahoma Attorney General’s Office has maintained the position that the PUD 260 matter should not be reopened for nearly 20 years. As Attorney General Drew Edmondson stated to the Oklahoma Supreme Court in 1997, and again in 2010, “[t]he public interest would not be served by reopening an evidentiary hearing occurring nearly [two] decade[s] ago. The resources of the Commission and of the parties could be better utilized than by rehashing ‘ancient history.’ Accordingly, a rehearing of this cause is not in the best interests of [Southwestern Bell Telephone]’s customers and is not advocated by the Attorney General.”

Independent news site NonDoc took issue with Pruitt’s premise:

How can Pruitt expect his position on PUD 260 to ring true with the public considering his lengthy and documented history of defending major corporate interests in Oklahoma?

For a politician so well-versed in the art of pandering — whose campaign website asks voters to “Help Scott protect the citizens of Oklahoma” — how does the potential reimbursement of an estimated $15,000 for every qualifying AT&T customer in the state not serve their “best interests?”

Whose best interest is really protected by refusing to re-examine a corrupt moment in Oklahoma’s political history?

The answer likely lies somewhere in the political realities of our time. When corporations are considered people, it’s corporate dollars that count, especially when most actual people can’t be bothered to get out and vote.

In 2016, the OCC dismissed yet another attempt to revisit the issue, this time with prejudice, telling the group and consumers across Oklahoma the issue cannot be litigated ever again.

Headed for the U.S. Supreme Court

After being uniformly rejected by Oklahoma’s conservative politicians and judiciary, the group of citizens fighting to get the original late 1980s ruling overturned and force refunds for customers is taking their case to the U.S. Supreme Court this week.

Oklahomans Against Bribery continues to believe the law is on their side, despite arguments from AT&T’s attorneys that even bribery-tainted votes count.

“We took on this fight when the Attorney General stopped representing Oklahoma ratepayers and started defending AT&T,” said bribery refund applicant and Nichols Hills Mayor Sody Clements. “We hoped the Corporation Commission and the Oklahoma Supreme Court would finally do the right thing – declare once and for all that bribed votes don’t count in this state, and give the billions stolen by AT&T back to the ratepayers.  Unfortunately everyone has passed the buck and claimed it’s someone else’s problem to fix. We believe the buck will stop at the United States Supreme Court.”

Their petition for writ of certiorari, filed March 19, argues their “right to petition” under the First Amendment was violated when the OCC dismissed their bribery refund application “with prejudice,” prohibiting them from ever raising the issue again.

“Denying citizens the right to further petition their legislative bodies on legislative matters – especially matters involving proven public corruption – threatens and undermines our very republican form of government,” the petition argues. “The high importance of this case to the public interest, both from a monetary standpoint and from the standpoint of harm done – now and in the future – to ‘the good order of society,’ warrants review.”

The U.S. Supreme Court is expected to rule on the petition before the end of its term in early summer 2018.

Even bribed votes still count at the Oklahoma Corporation Commission, argues AT&T’s attorneys. This overview looks at the AT&T Bribery Case still on appeal. (5:46)

Pennsylvania Gov. Tom Wolf wants broadband service to be available to every Pennsylvania resident by the year 2022, but will offer only a token amount of state funding to private bidders in the upcoming FCC Connect America Fund Phase II Auction.

“I want to ensure every Pennsylvania household and business has access to modern day high-speed internet,” Wolf said. “Equal access to the internet, regardless of location or income, must be provided if Pennsylvania is to remain competitive, if we want to offer every child the best education, if we want to live in a state where we all can access modern day healthcare options, if we want a state where our farms and other businesses thrive, and the jobs of tomorrow are created.”

Wolf will create the Pennsylvania Office of Broadband Initiatives, which will develop and execute a forthcoming state plan to get service to every corner of the state over the next four years. The governor will also set aside up to $35 million for his new Pennsylvania Broadband Investment Incentive Program, which is supposed to convince incumbent phone and cable companies to extend service into adjacent rural areas that lack service today.

According to State Rep. Pam Snyder (D-Greene/Fayette/Washington), about 800,000 Pennsylvanians currently lack broadband access. About two-thirds are in rural areas while the rest are in underserved urban areas served by providers that don’t meet the FCC’s definition of broadband service. About 20% of rural Pennsylvania residents are stuck with DSL as their only option, compared to 3% in urban areas. Broadband service is defined under Pennsylvania law as at least 1.544 Mbps download speed and 128 kilobits per second upload speed. The FCC’s national standard is 25/3 Mbps.

To achieve 100% coverage, providers would have to upgrade their networks and extend them to places that are currently unserved, as well as upgrade older broadband technology incapable of achieving 25 Mbps, the minimum federally defined speed qualifying as broadband.

Two years ago, Verizon turned down federal subsidies to expand rural broadband in the northeast, including $140 million earmarked for Pennsylvania and nearly $170 million for New York. New York won back money originally offered to Verizon, Pennsylvania did not and its share was forfeit. What made the difference?

“New York had a half a billion dollars they brought to the table,” said Pennsylvania Public Utility Commission spokesman Nils Hagen-Frederiksen last November. Pennsylvania offers up to $35 million.

Gov. Wolf’s new initiatives may be part of an effort to give the state’s rural broadband program more credibility in Washington, especially as up to $2 billion in new federal funding becomes available for broadband expansion across the country.

A separate effort now underway at Penn State involves an 11-month study of broadband access in rural Pennsylvania, in part to determine exactly how bad rural broadband service is in the state.

“Very slow and constantly having to reset it,” Sharon Czarniak of Turbotville told WNEP-TV in Scranton. “We get it through Verizon because it’s not available any other way in our area because it’s too rural.”

If service in the town of Turbotville is challenging, outside of town it is impossible.

“Surrounding areas all outside of Turbotville in the mountainous areas, there is no service for internet,” Missy Magargle said.

George Sudol told the TV station his internet service is weather-dependent.

“Storms, a little bit of rain or anything, will knock us right offline. Besides being slow, we have problems just getting online a lot of times,” Sudol said.

Unfortunately for the residents of Turbotville, and other rural communities across Pennsylvania, $35 million won’t go very far providing broadband improvements. But it is a start.

WNEP-TV in Scranton reports on faster internet for rural Pennsylvania. (2:37)

The Chair of the New York State Public Service Commission announced today that the Commission is seeking a possible revocation of Charter Communication’s franchise to serve New York City and a $1 million fine payable to New York State for failing to meet its network buildout obligations agreed to as part of its 2016 merger with Time Warner Cable.

“It is critically important that regulated companies strictly adhere to the state’s rules and regulations,” said Commission chair John B. Rhodes. “If a regulated entity like Charter’s cable business decides to violate or ignore the rules, we will take swift action and hold them accountable to the full extent of the law.”

The most serious potential consequence is the revocation of Charter’s franchise agreement with New York City, which would force the cable operator out of the most important media market in the country. The Commission has opened an official proceeding to investigate whether Charter has tried to achieve its network expansion targets by using addresses in New York City where the company was allegedly already offering service or should have been.

Is Charter Meeting its Buildout Obligations in New York?

One of the key requirements Charter had to meet in New York in return for approval of its buyout of Time Warner Cable was an expansion of its cable footprint to at least 145,000 additional New York homes or businesses over a four-year buildout period. These “passings” — where service would be available for the first time, had to be in areas where the company was not already compelled to offer service through its existing franchise agreements. This requirement was designed to overcome the cable company’s traditional objections to servicing a location because of inadequate Return On Investment. A detailed audit performed by the Commission discovered more than 14,000 ineligible passings included by Charter in its December milestone report. Once these addresses were disqualified, Charter fall short of its obligation by more than 8,000 passings. As a result, this triggers an automatic $1 million fine, payable each time Charter fails to meet its agreed-upon buildout milestones.

New York City officials were concerned that Charter’s most recent milestone report asserted the cable company expanded service to 12,467 addresses in New York City, despite an existing franchise agreement with the city that included requirements that would guarantee those addresses either already had or should have had cable service available. If those allegations are proven true, Charter attempted to meet its buildout obligations by fudging the numbers.

“Metropolitan NYC is one of the most-wired cities in America and the world, and essentially, 100% of the NYC areas are served by one or more 100 Megabits per second (Mbps) wireline providers
such as Verizon FiOS, Cablevision, RCN, and Charter itself,” the Commission wrote.

The PSC’s staff conducted detailed reviews of 490 of those addresses claimed by Charter as having cable service available for the first time. None of them were found to be valid for inclusion in Charter’s service expansion reports, either because they were already serviced by Charter’s network or received service from a competing provider offering at least 100 Mbps service, or both.

In two instances, the staff found Charter was claiming new service expansion in buildings clearly already covered by the city’s existing franchise agreement.

“In a more egregious example, Charter also listed the Reuters Building as countable toward the December 2017 target in Charter’s January 2018 filing, which has a listed address of 3 Times Square,” the PSC wrote. “Staff could not find any photos of the building prior to 2014 beside aerial views, but construction was completed in 2001, well before the effective date of the current franchise agreements.”

In either case, Charter may be stuck between a rock and a hard place. If the company argues it did, in fact, provision cable service only recently, Charter probably materially breached its franchise agreement with the city, providing immediate grounds to begin franchise revocation proceedings under PSL §227.11. If Charter argues instead it was in compliance with its franchise agreement and did in fact already offer cable service to those addresses, Charter would be subject to an investigation about why it misled the regulator by claiming those locations as “new passings” when they were not.

Franchise Fee Dispute

A second controversy involves the amounts of franchise fee payments payable to New York City. City officials claim those payments have declined year-over-year since Charter completed its merger with Time Warner Cable.

A decline in franchise fee payments could be the result of cord-cutting, which has taken its toll on cable TV subscriptions at almost every cable company in the country. The fewer cable TV subscribers, the more likely revenue declines are going to occur, which in turn cuts franchise fee payments.

Charter Communications’ business model is also a departure from its predecessor, Time Warner Cable. In addition to ending many pricing promotions, Charter also stopped marketing stripped down, budget-conscious television packages. Many customers also faced dramatic rate increases as a result of Charter’s new bundled TV packages, which in some cases required customers to pay substantially more to keep all the channels included in their original Time Warner Cable package. As a result, many customers changed providers. Others decided to “cut the cord” and drop television service altogether while retaining broadband. The franchise fee does not apply to internet or phone service — just television.

Still, the PSC wants to audit Charter’s books to verify the company’s accounting has not departed from Time Warner Cable’s interpretation of the franchise fee agreement and unfairly undercut the city.

Charter has been given 21 days to respond with clear and convincing evidence it is not in violation of its franchise agreement with New York City or its merger obligations with New York State. If the Commission does not receive satisfactory evidence by the deadline, it is likely to begin hearings on whether Charter has committed material breaches of its agreements serious enough to warrant fines and/or franchise revocation.

Charter Communications CEO Thomas Rutledge’s 2017 salary was equal to the average pay of 148 Charter employees, according to a new regulatory filing.

The cable company’s proxy filing showed the CEO’s total compensation last year was $7.8 million. The average Charter employee is paid $52,722.

While the average cable company employee no longer qualifies for a pension, two of Charter’s top executives do, and Mr. Rutledge’s is currently worth $1,268,082.

Other top Charter executives all made in excess of $1 million in 2017:

• • President/COO John Bickham: $4.88 million
  • Senior Executive VP David Ellen: $3.14 million
  • Chief Financial Officer Christopher Winfrey: $2.07 million
  • Chief Accounting Officer and Controller Kevin Howard: $1.54 million

Each of Charter’s 12-member board of directors also received considerable compensation in 2017, ranging from $299,522-$506,628 in cash and stock awards.

Dear Chairman Pai:

We write this letter to express our serious concerns that the map released by the Federal Communications Commission last week showing presumptive eligible areas for Mobility Fund Phase II (MF II) support may not be an accurate depiction of areas in need of universal service support.  We understand that the map was developed based on a preliminary assessment from a one-time data collection effort that will be verified through a challenge process. However, we are concerned that the map misrepresents the existence of 4G LTE services in many areas.  As a result, the Commission’s proposed challenge process may not be robust enough to adequately address the shortcomings in the Commission’s assessment of geographic areas in need of support for this proceeding.

MF II is intended to provide $4.53 billion in support over 10 years to preserve and expand mobile coverage to rural areas. These resources will be made available to provide 4G LTE service where it is not economically viable today to deploy services through private sector means alone.  Having consistently traveled throughout rural areas in our states, it appears that there are significant gaps in mobile coverage beyond what is represented by the map’s initial presentation of “eligible areas.” To accurately target support to communities truly in need of broadband service, it is critical we collect standardized and accurate data.

For too long, millions of rural Americans have been living without consistent and reliable mobile broadband service.  Identifying rural areas as not eligible for support will exacerbate the digital divide, denying fundamental economic opportunities to these rural communities.  We strongly urge the Commission to accurately and consistently identify areas that do not have unsubsidized 4G LTE service and provide Congress with an update on final eligible areas before auctioning $4.53 billion of MF II support.

In addition to Senator Roger Wicker (R-Miss.), the letter was signed by Maggie Hassan (D-N.H.), Jerry Moran (R-Kan.), Angus King (I-Maine), Cory Gardner (R-Colo.), Amy Klobuchar (D-Minn.), Pat Roberts (R-Kan.), Roy Blunt (R-Mo.), Gary Peters (D-Mich.) and Thom Tillis (R-N.C.).

The Senate Commerce, Science and Transportation Subcommittee held a hearing on broadband infrastructure needs. The FCC’s wireless broadband coverage map was a main issue in contention. (Note, the hearing begins at the 30:00 mark.) (2:05:00)