La Schiazza

AT&T Illinois president Paul La Schiazza is in the business of predicting the future of other mobile phone companies.  In an interview with the Journal-Star, La Schiazza said AT&T should be permitted to complete its purchase of T-Mobile, because if they don’t, T-Mobile will never make the investment in 4G upgrades and “whether we buy them or not, (T-Mobile) is going to go away eventually.”

That’s ironic for Mr. La Schiazza to say, considering his employer made a decision not to make substantial investments in 4G upgrades itself, before suggesting it would with the purchase of T-Mobile.

La Schiazza admits AT&T has thrown its landline business under the bus, now considering it antiquated and irrelevant for a growing number of Americans.

“More people, especially young people, are cutting the cord,” he said, referring to customers who drop landline service completely. “We’ve changed our business model to be a mobile/broadband company,” said La Schiazza.

La Schiazza was also willing to call out AT&T itself when he noted wireless companies in Illinois, including his, have put rural areas at a “significant disadvantage.”  That’s because wireless companies ignore rural areas where providing coverage does not make economic sense.  Yet La Schiazza oddly claimed that with the absorption of T-Mobile, 97 percent of Illinois could get enhanced AT&T service.  He did not explain exactly what business formula was used to justify the enhanced proposed coverage maps he brought with him to the interview.

David Kolata, executive director of the Chicago-based Citizens Utility Board, provided the newspaper with a countering viewpoint — rare in newspaper stories featuring interviews with AT&T executives.  Kolata told the newspaper he was less thrilled about a possible T-Mobile-AT&T merger. “The cellphone industry is already pretty concentrated. When one of the biggest players buys another large company, it raises competitive concerns,” he said.

“The fact that the Department of Justice and five or six state attorney generals (including Lisa Madigan in Illinois) across the country oppose the merger as currently proposed is an indication that it could be bad for consumers,” said Kolata.

[Thanks to Stop the Cap! reader Bob for the news tip.]

Crumpton

NAACP national board member and former Missouri Public Service Commission member Harold Crumpton believes that combining AT&T and T-Mobile will create 100,000 new jobs, despite the fact both companies have promoted “cost savings” from eliminating redundant services and winning “increased efficiencies.”

That’s code language for layoffs, and it has been that way with every telecommunications merger in the last decade.  But Crumpton prefers to deny reality in a guest opinion piece published today in the St. Louis Post-Dispatch:

Most mergers result in — and pay for themselves with — job losses and higher prices. Not this one.

If, to use the government antitrust lingo, there is a “relevant product market” for this merger, it would be “jobs” because jobs are the No. 1 product of the broadband factory. The AT&T and T-Mobile merger is structured as an engine of job creation — yielding 100,000 new jobs by delivering on President Obama’s call for a national high-speed broadband network. That’s far more jobs than would be lost because of AT&T and T-Mobile overlaps.

Ironically, AT&T announced the repatriation of 5,000 call center jobs and pledged not to terminate call center employees because of the merger. Two hours later, without warning to AT&T, the Justice Department filed its suit. Suffice to say that President Obama, our greatest champion of job creation, was not well-served that morning.

How will AT&T produce all these new jobs? By creating the first national next-generation high-speed (4G) mobile network. The merger is what will make the network possible, and it will do that by aggregating and redeploying spectrum T-Mobile can’t use for 4G. In this way, the network would reach 55 million more Americans than 4G currently reaches.

AT&T couldn’t have argued the case better.  Oh wait.  They have, in the company’s advocacy package mailed to the NAACP and dozens of other groups who receive the company’s financial support.  Those talking points inevitably end up in the guest editorials penned by Crumpton and others.

While the bloom is clearly off the rose of the AT&T/T-Mobile merger, thanks in part to consumer groups and the U.S. Department of Justice who filed a lawsuit to stop it, AT&T is still flailing about trying to find some way to get the deal done, if only to avoid the outrageous break-up fee self-imposed by the telecommunications giant if the deal falls apart.  AT&T’s promise to bring an end to the obnoxious practice of offshoring their customer support call centers — if the merger gets approved — has been compared with blackmail by some customers who have spent an hour or more negotiating with heavily accented customer support agents that companies like Discover Card routinely mock.

AT&T promises customers a solution to the "Peggy Problem" if their merger with T-Mobile gets approved.

It clearly wasn’t enough to move critics of the deal to reconsider — AT&T could voluntarily hire American workers who speak the language of their customers for the benefit of those customers with or without a merger with the fourth largest wireless carrier in the country.

Crumpton argues President Obama was not well served by the Justice Department.  Consumer groups argue T-Mobile and AT&T’s customers will not be well-served if this merger ever happens.

As Stop the Cap! has repeatedly argued, both AT&T and T-Mobile will construct 4G mobile broadband networks in all of the places where the economics to deploy those networks makes sense.  No more, no less, no matter if AT&T and T-Mobile are two companies or one.

Crumpton might as well have argued the merger would deliver 4G service to Sprint customers as well.  It’s the same disconnected logic.

Crumpton thinks AT&T’s high-priced, heavily-capped 4G network will somehow solve the pervasive problem of the digital divide — the millions of poor Americans who can’t afford AT&T’s prices.  Incredibly, Crumpton’s answer is to allow one of the most price-aggressive, innovative carriers in the country favored by many budget-conscious consumers to be snapped up by the lowest rated, if not most-hated wireless company in the country.

It just doesn’t make sense.  But it does make dollars… for the NAACP, which receives boatloads of corporate money from AT&T.  It’s no surprise the pretzel-twisted logic that drives merger advocates like Mr. Crumpton comes fact-free.  The money makes up for all that.

“The NAACP stands ready to work with the public and private sectors to ensure that every American has an equal opportunity to participate in and benefit from this awesome ‘broadband revolution,'” Crumpton writes.

We can only hope that is true.  The NAACP can get started by admitting publicly it receives substantial support from AT&T and it will either agree to remain neutral in corporate advocacy issues to avoid conflicts of interest, or return AT&T’s money.  After all, it sounds like they need it to build the digital divide-erasing 4G network Crumpton is purportedly so concerned about.

Fiber optic cable spool

For the most populated provinces in Canada, questions about when fiber-to-the-home service will become a reality are easy to answer:  Never, indefinitely.

Some of Canada’s largest telecommunications providers have their minds made up — fiber isn’t for consumers, it’s for their backbone and business networks.  For citizens of Toronto, Calgary, Montreal, and Vancouver coping with bandwidth shortages, providers have a much better answer: pay more, use less Internet.

Fiber broadband projects in Canada are hard to find, because providers refuse to invest in broadband upgrades to deliver the kinds of speeds and capacity Canadians increasingly demand.  Instead, companies like Bell, Shaw, and Rogers continue to hand out pithy upload speeds, throttled downloads, and often stingy usage caps.  Much of the country still relies on basic DSL service from Bell or Telus, and the most-promoted broadband expansion project in the country — Bell’s Fibe, is phoney baloney because it relies on existing copper telephone wires to deliver the last mile of service to customers.

Much like in the United States, the move to replace outdated copper phone lines and coaxial cable in favor of near-limitless capacity fiber remains stalled in most areas.  The reasons are simple: lack of competition to drive providers to invest in upgrades and the unwillingness to spend $1000 per home to install fiber when a 100GB usage cap and slower speeds will suffice.

The Toronto Globe & Mail reports that while 30-50 percent of homes in South Korea and Japan have fiber broadband, only 18 percent of Americans and less than 2 percent of Canadians have access to the networks that routinely deliver 100Mbps affordable broadband without rationed broadband usage plans.

In fact, the biggest fiber projects underway in Canada are being built in unexpected places that run contrary to the conventional wisdom that suggest fiber installs only make sense in large, population-dense, urban areas.

Manitoba’s MTS plans to spend $125-million over the next five years to launch its fiber to the home service, FiON.  By the end of 2015, MTS expects to deploy fiber to about 120,000 homes in close to 20 Manitoba communities.  In Saskatchewan, SaskTel is investing $199 million in its network in 2011 and approximately $670 million in a seven-year Next Generation Broadband Access Program (2011 – 2017). This program will deploy Fiber to the Premises (FTTP) and upgrade the broadband network in the nine largest urban centers in the province – Saskatoon, Regina, Moose Jaw, Weyburn, Estevan, Swift Current, Yorkton, North Battleford and Prince Albert.

“Saskatchewan continues to be a growing and dynamic place,” Minister responsible for SaskTel Bill Boyd said. “The deployment of FTTP will create the bandwidth capacity to allow SaskTel to deploy exciting new next generation technologies to better serve the people of Saskatchewan.”

But the largest fiber project of all will serve the unlikely provinces of Atlantic Canada, among the most economically challenged in the country.  Bell Aliant is targeting its FibreOP fiber to the home network to over 600,000 homes by the end of next year.  On that network, Bell Aliant plans to sell speeds up to 170/30Mbps to start.

In comparison, residents in larger provinces are making due with 3-10Mbps DSL service from Bell or Telus, or expensive usage-limited, speed-throttled cable broadband service from companies like Rogers, Shaw, and Videotron.

Bell Canada is trying to convince its customers it has the fiber optic network they want.  Its Fibe Internet service sure sounds like fiber, but the product fails truth-in-advertising because it isn’t an all-fiber-network at all. It’s similar to AT&T’s U-verse — relying on fiber to the neighborhood, using existing copper phone wires to finish the job.  Technically, that isn’t much different from today’s cable systems, which also use fiber to reach into individual neighborhoods.  Traditional coaxial cable handles the signal for the rest of the journey into subscriber homes.

A half-fiber network can do better than none at all.  In Ontario, Bell sells Fibe Internet packages at speeds up to 25Mbps, but even those speeds cannot compare to what true fiber networks can deliver.

Globe & Mail readers seemed to understand today’s broadband realities in the barely competitive broadband market. One reader’s take:

“The problem in Canada (and elsewhere) preventing wide scale deployment of FTTH isn’t the technology, nor the cost. It’s a lack of political vision and will, coupled with incumbent service providers doing whatever they can to hold on to a dysfunctional model that serves their interests at the expense of consumers.”

Another:

“The problem with incumbents is they only think in 2-3 year terms. If they can’t make their money back in that period of time, they’re not interested. Thinking 20, heck even 10 years ahead is not in their vocabulary.”

Frontier Communications has announced the availability of Metro Ethernet service to a total of 55 cities in 11 states, with one Frontier representative describing it as perfect for individuals “who are serious gamers, people who download videos and those who watch TV and movies on their computers.”  Apparently Diana Anderson, technical supervisor for Frontier in Kennewick, Wash., has not read Frontier’s Washington State service tariff (5.7.7b) to understand the cost implications of signing up for the service.

Metro Ethernet falls between DSL and fiber optic connectivity, and delivers service at speeds that can approach 100Mbps or more, depending on telephone company facilities and the distance of copper between your home or business and the central switching office.  There are Metro Ethernet services that work over fiber networks, fiber-copper hybrid networks, and even traditional copper landlines — the ones Frontier uses to deliver its MetroE service.

Frontier is pitching Metro Ethernet primarily to medium and large-sized businesses who need more speed than the phone company can offer over its traditional DSL products.  The reason it’s not marketed to consumers is the cost.  Frontier’s Metro Ethernet service is included in Frontier’s tariff for Washington with an installation fee of $320 and a Metro Ethernet-Special Transport fee of $75 a month per DS1 (1.544Mbps).  Customers can get additional speed above 1.544Mbps by paying for additional DS1’s.

We called Frontier’s customer service and asked about service pricing in the Rochester area.  A residential customer service representative had to transfer us to the business products office — they do not sell “residential” Metro Ethernet.  A representative there said the service was available in several parts of Rochester, but was “completely unfeasible” for residential customers because of its cost.  Frontier DSL is the recommended solution for all residential customers in western New York, despite the fact the service does not exceed 3Mbps in our neighborhood (although it is marketed at speeds up to 10Mbps locally).

The following communities now have access to Frontier MetroE service:

• Coeur d’Alene, Idaho
• Bloomington, Carbondale, DeKalb, Freeport, Jacksonville, Lincoln, Marion and Olney, Illinois
• Elkhart, Fort Wayne, Lafayette, Richmond, Terra Haute and Valparaiso, Indiana
• Adrian, Coldwater, Mount Pleasant, Muskegon and Sturgis, Michigan
• Bryson City, Burnsville, Cherokee, Creedmoor, Durham , Hayesville, Marion and Murphy, North Carolina
• Gardnerville, Nevada
• Athens, Bowling Green, Delaware, Jackson, Marion, Medina, Troy and Wilmington, Ohio
• Beaverton, Coos Bay, Gresham and Hillsboro, Oregon
• Myrtle Beach, South Carolina
• Everett and Kennewick, Washington
• Merrill, Sun Prairie and Wausau, Wisconsin

Let us know what kind of pricing and promotions you can get from Frontier for Metro Ethernet in your area in our comments section.

The primary backers of the ABC Plan

Today, Federal Communications Commission Chairman Julius Genachowski is scheduled to deliver a major announcement on reforming the Universal Service Fund (USF) — a federal program designed to subsidize the costs of delivering telecommunications services to rural America.

The reform, long overdue, would transition a significant percentage of USF fees every telephone customer pays towards broadband deployment — a noble endeavor.  For years, Americans have paid more than $5 billion annually to phone companies large and small to maintain rural landline service.  Small co-op phone companies depend on the income to deliver affordable service in places like rural Iowa, Kansas, and Alaska.  But large companies like AT&T and Verizon also collect a significant share (around $800 million annually) to reduce their costs of service in the rural communities they serve.

That’s particularly ironic for AT&T, which time and time again has sought the right to abandon universal rural landline service altogether.

Genachowski’s idea would divert USF funding towards broadband construction projects.  The argument goes that even low speed DSL requires a well-maintained landline network, so phone companies that want to deploy rural broadband will have to spend the money on necessary upgrades to provide just enough service to earn their USF subsidies.  The lower the speed, the lower the cost to upgrade networks and provide the service.  Some may choose wireless technology instead.  Since the telephone companies have fought long and hard to define “broadband” as anything approaching 3-4Mbps, that will likely be the kind of speed rural Americans will receive.

At first glance, USF reform seems like a good idea, but as with everything at the FCC these days, the devil is always in the details.

Dampier: Another day, another self-serving plan from the phone companies that will cost you more.

While headline skimmers are likely to walk away with the idea that the FCC is doing something good for rural broadband, in fact, the Commission may simply end up rubber stamping an industry-written and supported plan that will substantially raise phone bills and divert your money into projects and services the industry was planning to sell you anyway.

Stop the Cap! wrote about the ABC Plan a few weeks ago when we discovered almost all of the support for the phone-company-written proposal comes from the phone companies who back it, as well as various third party organizations that receive substantial financial support from those companies.  It’s a dollar-a-holler astroturf movement in the making, and if the ABC Plan is enacted, you will pay for it.

[Read Universal Service Reform Proposal from Big Telcos Would Rocket Phone Bills Higher and Astroturf and Industry-Backed, Dollar-a-Holler Friends Support Telco’s USF Reform Plan.]

Here is what you probably won’t hear at today’s event.

At the core of the ABC Plan is a proposal to slash the per-minute rates rural phone companies can charge big city phone companies like AT&T and Verizon to connect calls to rural areas.  You win a gold star if you correctly guessed this proposal originated with AT&T and Verizon, who together will save literally billions in call connection costs under their plan.

With a proposal like this, you would assume most rural phone companies are howling in protest.  It turns out some are, especially some of the smallest, family-run and co-op based providers.  But a bunch of phone companies that consider rural America their target area — Frontier, CenturyLink, FairPoint and Windstream, are all on board with AT&T and Verizon.  Why?

Because these phone companies have a way to cover that lost revenue — by jacking up your phone bill’s USF surcharge to as much as $11 a month per line to make up the difference.  In the first year of implementation, your rates could increase up to $4.50 per line (and that fee also extends to cell phones).  Critics have been widely publicizing the increased phone bills guaranteed under the ABC Plan.  In response, advocates for the industry are rushing out the results of a new study released yesterday from the Phoenix Center Chief Economist Dr. George S. Ford that claims the exact opposite.  Dr. Ford claims each customer could pay approximately $14 less per year in access charges if the industry’s ABC Plan is fully implemented.

Genachowski

Who is right?  State regulators suggest rate increases, not decreases, will result.  The “Phoenix Center,” unsurprisingly, has not disclosed who paid for the study, but there is a long record of a close working relationship between that research group and both AT&T and Verizon.

But it gets even worse.

This shell game allows your local phone company to raise rates and blame it on the government, despite the fact those companies will directly benefit from that revenue in many cases.  It’s a real win-win for AT&T and Verizon, who watch their costs plummet while also sticking you with a higher phone bill.

The USF program was designed to provide for the neediest rural phone companies, but under the new industry-written rules being considered by the FCC, just about everyone can get a piece, as long as “everyone” is defined as “the phone company.”  There is a reason this plan does not win the hearts and minds of the cable industry, independent Wireless ISPs, municipalities, or other competing upstarts.  As written, the USF reform plan guarantees virtually all of the financial support stays in the Bell family.  Under the arcane rules of participation, only telephone companies are a natural fit to receive USF money.

Genachowski will likely suggest this plan will provide for rural broadband in areas where it is unavailable today.  He just won’t say what kind of broadband rural America will get.  He can’t, because the industry wrote their own rules in their plan to keep accountability and oversight as far away as possible.

For example, let’s assume you are a frustrated customer of Frontier Communications in West Virginia who lives three blocks away from the nearest neighbor who pays $50 a month for 3Mbps DSL broadband.  You can’t buy the service at any price because Frontier doesn’t offer it.  You have called them a dozen times and they keep promising it’s on the way, but they cannot say when.  You may have even seen them running new cable in the neighborhood.

Frontier has made it clear they intend to wire a significantly greater percentage of the Mountain State than Verizon ever did when it ran things.  Let’s take them at their word for this example.

The telephone companies have helpfully written their own rules for the FCC to adopt.

Frontier’s decision to provide broadband service in West Virginia does not come out of the goodness of their heart.  At a time when landline customers are increasingly disconnecting service, Frontier’s long-term business plan is to keep customers connected by selling packages of phone, broadband, and satellite TV in rural markets.  Investment in DSL broadband deployment has been underway with or without the assistance of the Universal Service Fund because it makes financial sense.  Our customer in West Virginia might disconnect his landline and use a cell phone instead, costing Frontier any potential broadband, TV and telephone service revenue.

Under the ABC Plan, Frontier can be subsidized by ratepayers nationwide to deliver the service they were planning to provide anyway.  And what kind of service?  The same 3Mbps DSL the neighbors have.

If your county government, a cable operator, or wireless competitor decided they could deliver 10-20Mbps broadband for the same $50 a month, could they receive the USF subsidy to build a better network instead?  Under the phone company plan, the answer would be almost certainly no.

Simon Fitch, the consumer advocate of the Federal-State Joint Board on Universal Service, which advises the FCC on universal service matters, says the ABC Plan is a consumer disaster.

“Although a stated goal of the FCC’s reform effort is to refocus universal-service funding to support broadband, the industry’s ABC plan requires no real commitment to make broadband available to unserved and underserved communities,” Fitch writes. “Companies would receive funds to provide broadband with upload and download speeds that are already obsolete. States would be given no real enforcement power.”

Fitch is certain companies like AT&T and Verizon will receive enormous ratepayer-financed subsidies they don’t actually need to provide service.

Back to AT&T.

In several states, AT&T is seeking the right to terminate its universal service obligation altogether, which would allow the same company fiercely backing the ABC Plan to entirely walk away from its landline network.  Why?  Because AT&T sees its future profits in wireless.  Under the ABC Plan, AT&T could build rural cell towers with your money to provide “replacement service” over a wireless network with or without great coverage, and with a 2GB usage cap.

At the press conference, Genachowski could still declare victory because rural America would, in fact, get broadband.  Somehow, the parts about who is actually paying for it, the fact it comes with no speed, coverage, or quality guarantees, and starts with a 2GB usage cap on the wireless side will all be left out.

Fortunately, not everyone is as enamored with the ABC Plan as the groups cashing checks written by AT&T.

In addition to state regulators, Consumers Union, the AARP, Free Press, and the National Association of Consumer Advocates are all opposed to the plan, which delivers all of the benefits to giant phone companies while sticking you with the bill.

There is a better way.  State regulators and consumer groups have their own plans which accomplish the same noble goal of delivering subsidies to broadband providers of all kinds without increasing your telephone bill.  It’s up to the FCC to demonstrate it’s not simply a rubber stamp for the schemes being pushed by AT&T and Verizon.