The Federal Communications Commission will seek hundreds of millions of dollars in fines from America’s four largest wireless companies after company officials apparently lied to Congress and regulators about ending the lucrative sale of customer locations to third parties in early 2019.

The Wall Street Journal reported the FCC has sent Notices of Apparent Liability to Verizon, AT&T, T-Mobile, and Sprint accusing the companies of continuing to sell the real-time locations of customers after telling Congress they would stop.

The companies allegedly routinely sold personal customer data to middlemen companies that had very few controls over who ultimately received that information. Clients included private investigators, debt collectors, police agencies, and even potentially ex-partners engaged in stalking. Customers have never been clearly informed that their location data was subject to resale to third parties, and privacy concerns were immediately raised after revelations data aggregators LocationSmart, Inc., and Zumigo, Inc., were selling data to inappropriate entities and individuals.

After being exposed in early 2019, all four carriers promised to end or curtail the practice, but an FCC investigation found carriers were not being forthright.

In January, FCC Chairman Ajit Pai disclosed the practice because of ongoing oversight by the House Energy and Commerce Committee, which had demanded an investigation by the FCC early last year. In a letter to the Committee, Pai wrote that the agency found U.S. carriers “apparently” broke the law by continuing to sell location data.

“I am committed to ensuring that all entities subject to our jurisdiction comply with the Communications Act and the FCC’s rules, including those that protect consumers’ sensitive information, such as real-time location data,” Pai wrote.

Too little, too late, according to Rep. Frank Pallone (D-N.J.), who chairs the Committee.

(Image by Brad Jonas originally for Pando.com)

“Following our longstanding calls to take action, the FCC finally informed the Committee today that one or more wireless carriers apparently violated federal privacy protections by turning a blind eye to the widespread disclosure of consumers’ real-time location data,” Pallone said in a statement in January, 2019. “This is certainly a step in the right direction, but I’ll be watching to make sure the FCC doesn’t just let these lawbreakers off the hook with a slap on the wrist.”

Today’s revelations infuriated Sen. Ron Wyden (D-Ore.) who tweeted:

“Ajit Pai has failed to protect consumers at every turn. This issue came to light after my office and dedicated journalists discovered how wireless carriers shared Americans’ locations without consent. He investigated only after public pressure mounted.”

Consumers often unwittingly share their real-time locations with cell phone providers whenever their phones are switched on and connected to a cellular or Wi-Fi network. Carriers have developed a lucrative business reselling that information to third parties, typically data aggregators that combine location information with data collected from other companies and sell it on. Buyers often include law enforcement agencies and private investigators, but one reporter found it simple as an individual to get real-time data about his location by paying $300 to a data aggregator. Privacy advocates worry that stalkers could easily track their victims through such services, with victims unaware their own cell phone company betrayed their location in return for money.

A Notice of Apparent Liability demands a written response from a targeted individual or company to explain why they should not be subject to the monetary penalty specified in the letter. Many companies win significant reductions or fine waivers through negotiations with the FCC. The Journal reports that so far, the FCC has not been willing to offer settlements, but that could change as carriers try to negotiate a settlement through the agency’s administrative process.

The article does not specify the exact fines targeted for each carrier. AT&T and Verizon have more than adequate financial resources to pay almost any fine in full. But a multi-million fine against T-Mobile and Sprint could complicate the final agreement between T-Mobile and Sprint to merge, which is expected to happen in the coming weeks. Under the revised merger agreement, both companies agreed to split any expenses related to liabilities up to $200 million, leaving Sprint investor-owner SoftBank responsible for the rest.

Canoe Ventures

The impact of video cord-cutting and a growing intolerance for heavy advertising loads seem to be taking a toll on the cable industry’s lucrative advertising business.

Canoe Ventures, owned by Comcast, Charter Spectrum, and Cox, reports the number of ads being viewed by video-on-demand users rose just 4% in 2019, just a fraction of the growth the company reported over the past three years.

Many ad-supported cable networks make parts of their programming libraries available for on-demand viewing by video subscribers. Cable companies sell advertising that fills the original commercial breaks, sometimes resulting in a viewing experience comparable to live viewing — ads and all. But customers are increasingly turning away from cable video-on-demand, either because they are canceling their video packages or are becoming more intolerant of heavy ad loads.

Canoe Ventures claims its slowed growth comes from selling out ad inventory on the cable video-on-demand platform. But during the first six months of 2019, 13.1 billion ads were collectively viewed by customers, which is nearly identical to the 13 billion ads viewed during the same months in 2018. Assuming Canoe Ventures has nearly sold out all available space on its ad insertion platform, that should result in consumers seeing more ads. But with ad viewing almost flat, that likely means less video-on-demand content is being watched.

Cable system overbuilder WideOpenWest, better known to customers as WOW!, has begun offering its customers subscriptions to streaming video competitors fuboTV, Philo, Sling, and YouTube TV, in what could be a gradual move away from selling its own video packages.

WOW!, like every cable operator, is losing cable television customers to cord-cutting. As of the end of 2019, the company had just 381,000 video subscribers remaining, down another 6,300 in the last three months. Because of its small size, WOW! does not qualify for the steep volume discounts offered to cable television and satellite TV companies that have tens of millions of video customers. As a result, it either has to continue to raise prices or watch its cable television packages become unprofitable. WOW! has apparently decided it is smarter to partner with nationwide video streaming providers, if only to keep its broadband and television customers from switching to a competitor.

“WOW! has always put a high value on offering choices to consumers,” said WOW! CEO Teresa Elder. “This is one more way we’re empowering customers to determine when, where and how they consume information and entertainment. Our robust broadband network is the natural choice for high-speed data customers […] who want to access streaming services on their terms.”

WOW! specializes in providing service in communities already served by another cable operator. Many of its systems are in the Midwest, where it competes with Charter Spectrum, Cox, or Comcast.

WOW! will offer customers one free Amazon Fire TV Stick and a $25 rebate that can be used to buy other set-top boxes that will support streaming TV alternatives.

If successful, it may not be too long before WOW! stops selling cable television altogether, to focus on its broadband business.

Only former TWC Maxx customers in Southern California qualify for bill credits.

If you were a Time Warner Cable internet customer in California, Charter Communications may refund you up to $180 if the company did not deliver the internet speed it advertised.

Charter has settled the lawsuit filed by the district attorneys of Los Angeles, San Diego, and Riverside that alleged Time Warner Cable knowingly sold customers internet speed it could not deliver. Charter will pay $16.9 million, most of which will be returned to affected customers in the form of a bill credit.

“This historic settlement serves as a warning to all companies in California that deceptive practices are bad for consumers and bad for business,” said Los Angeles County District Attorney Jackie Lacey. “We as prosecutors demand that all service providers — large and small — live up to their claims and fairly market their products.”

There are three tiers of relief for impacted customers:

• Customers subscribed to Time Warner Cable Maxx internet service in the past will be offered one of two free services. Cable TV and internet customers will receive three free months of Showtime (current subscribers excluded). Internet-only customers will receive one free month of Spectrum Choice, a slimmed down streaming TV package (current subscribers excluded). Both services will automatically be disconnected at the end of the free service period, protecting customers from future billing unless they subsequently subscribe.
• Internet customers subscribed to a premium Time Warner Cable Maxx speed tier will receive a one time credit of $90.
• If the customer was also supplied a legacy cable modem unable to support the subscribed premium internet speed tier, the subscriber will receive a one time credit of $180.

Charter Communications will automatically notify impacted subscribers and apply service credits within the next 60 days, but you will have to call Spectrum to activate the Showtime or Spectrum Choice offers.

The settlement also sets aside a payment to the plaintiffs of $1.9 million, to be split evenly between the three cities.

The lawsuit and corresponding settlement are similar to the 2017 internet speed case filed against Time Warner Cable by the New York Attorney General’s office. New York and Los Angeles were among the first cities upgraded to Time Warner Cable Maxx service, which raised internet speed for customers up to 300 Mbps. In New York, the lawsuit alleged Time Warner Cable knowingly advertised higher internet speed its network could not always support because of congestion and antiquated cable equipment and modems.

Milken in the 1980s (Image: The Gentleman’s Journal)

President Donald Trump granted clemency on Tuesday to Michael Milken, the so-called “junk bond king” who violated scores of securities and insider trading laws and was instrumental in helping finance the creation of America’s cable monopoly.

Milken used his position at the now-defunct Drexel Burnham Lambert to run its “high-yield bond unit.” More commonly known as “junk bonds,” these high-risk securities are typically issued by companies to finance mergers and acquisitions, often to strip assets or put competing companies out of business.

As a result, a new era of media and telecommunications tycoons emerged. Many successfully gained control of other companies and consolidated them into business empires, significantly reducing or eliminating serious competitors. Most of those companies still hold dominant positions today or have since merged with even larger companies. President Trump credited Milken for helping “create entire industries, such as wireless communications and cable television.”

By the late 1980s, Milken had advised scores of firms to rely on leveraged junk bond financing of corporate takeovers, a practice that endures to this day. Milken financed Rupert Murdoch’s ambitions to turn what was once a small newspaper chain into News Corp., which today still dominates in broadcasting, cable news channels like Fox News, and newspapers including the Wall Street Journal.

Milken also helped arrange financing for Craig McCaw, an early pioneer in cellular communications that leveraged cellular licenses McCaw borrowed heavily to obtain into one of the country’s first major wireless companies. But McCaw found bigger riches buying and selling mobile companies, first acquiring MCI’s cellular division in 1986 and selling his family’s cable operations to what would later become Comcast. By 1990, McCaw was the country’s highest paid CEO. Four years later, he sold McCaw Cellular to AT&T for $11.5 billion. AT&T sold that wireless company to Cingular in 2004 and then acquired Cingular itself some years later. McCaw would later plow $1.1 billion of family and borrowed money to take control of Nextel in 1995, only to sell it 11 years later to Sprint for $6.5 billion.

Malone

The country’s first cable giant, Tele-Communications, Inc. (TCI) would not have been possible without Milken’s junk bond financing scheme. Cable tycoon John Malone acquired hundreds of regional cable operators to create a cable empire that was often loathed by subscribers. TCI leveraged its position as a de facto monopoly, scaring off competitors, raising prices, and often delivering horrendous service. Vice President Al Gore would later characterize the Milken-financed emerging cable industry as a “cable Cosa Nostra,” and Malone himself as “Darth Vader.”

Time Warner’s cable division was also created as a result of a wave of consolidation that snapped up countless locally owned cable operators and smaller operators run by various media companies. Ted Turner also depended on Milken’s junk bond financing to create Turner Broadcasting, turning what was originally a single UHF independent TV station in Atlanta, Ga., into a superstation seen around the country and the launch of Cable News Network, better known as CNN.

Sometimes Milken’s clients benefited from his advice, sometimes they became targets themselves. Years after Turner Broadcasting was a major powerhouse in the cable programming business, Time Warner relied on a similar acquisition strategy to acquire Turner Broadcasting itself. Milken reportedly received a $50 million bonus for “advising” on the transaction, despite being in jail at the time. Years later, TBS founder Ted Turner would regret the buyout, which took CNN and TNT out of his hands.

Turner

Other household names from the past and present that expanded as a result of Milken’s financial advice include Viacom (now a part of CBS), MCI (embroiled in one of the country’s largest fraud schemes before being quietly sold off to Verizon), Telemundo (now effectively owned by Comcast), and Metromedia (which sold its network of popular independent TV stations to News Corp., which rechristened them FOX television network affiliates).

Milken quickly attracted the attention of the Securities and Exchange Commission, which took years to build a case against the Wall Street star. It took arbitrageur Ivan Boesky to help bring Milken down after pleading guilty to securities fraud and insider trading. He ‘ratted out’ Milken, which prompted a major investigation of him and the investment firm he worked for.

Milken was eventually indicted for racketeering and securities fraud in 1989 and through a plea bargain, pleaded guilty to securities and reporting violations, which won him a reduced sentence. He was supposed to serve 10 years in jail, but was released after just 22 months for good behavior. He was also fined $600 million (later apparently reduced to $200 million), a fraction of his reported net worth of nearly $4 billion. Although Milken was permanently barred from the securities industry, he still received compensation from certain transactions after that ban, which raised eyebrows.

Critics claim Milken’s legacy emboldened Wall Street to engage in riskier behavior and to innovate new leveraging schemes. Some claim that eventually helped create the conditions leading to the 2008 Great Recession.

The president offered nothing but praise for Milken in his pardoning statement and claimed prosecutors were overzealous in pursuing Milken. The president received an earful of advice in favor of a presidential pardon from his Treasury Secretary, Steve Mnuchin, who is a close person friend of Milken and has flown on his private plane. Many Trump allies, including conservative powerhouse donors Sheldon and Miriam Adelson and property developer Richard LeFrak also lobbied the president on Milken’s behalf. So did the president’s personal lawyer Rudy Giuliani, who ironically helped prosecute Milken in the 1980s. Some benefactors of Milken’s financial advice were also in favor of a pardon, including Rupert Murdoch.

Milken’s fans have been persistently seeking pardon relief for years. They failed to win a presidential pardon from former president Bill Clinton in 2001, after a joint letter strenuously objecting to the idea was sent from the SEC and U.S. attorney’s office in the Southern District of New York. The letter said pardoning Milken would “send the wrong message to Wall Street.”