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New York Grants Charter Spectrum Yet Another Extension

For the sixth time, the New York State Public Service Commission has granted another extension to Charter Communications, allowing the company to continue doing business in the state, despite a July 2018 order revoking its merger agreement with Time Warner Cable.

“On January 12, 2019, Charter filed a letter requesting that the Commission grant further 30-day extensions by January 14, 2019,” the Commission wrote in its decision. “This order grants limited 21-day extensions.”

As a result, the newest deadlines for Charter to appeal the Commission’s decision to cancel Charter’s merger with Time Warner Cable is Feb. 4 and to file a Six-Month Exit Plan for Spectrum, informing the Commission how Charter plans to transition service to a new provider, is March 4.

The Commission claims that private, ongoing discussions between Charter and the Commission’s staff are “productive” and the company has ceased airing what the Commission claimed to be misleading advertising about the state of its expansion effort in New York State.

Last fall, the Commission laid out the framework for a settlement agreement, requiring Charter Spectrum to address “issues relating to the inclusion of certain categories of addresses and whether they are valid ‘passings’ under the Merger Approval Order; penalty actions and amounts under dispute in Supreme Court; and a schedule for compliance (including enforcement mechanisms) going forward.”

The state telecommunications regulator has been involved in a two-year long dispute with Charter over expanding rural broadband options for New York residents. The original merger approval order required Charter to build out its service to areas the company had not serviced before.

Charter’s rural broadband expansion was important for Gov. Andrew Cuomo’s 2015 Broadband for All program, which was supposed to expand broadband access to 2.42 million unserved or underserved rural households, making broadband available to 99.5% of the state by 2018. Governor Cuomo’s plan remains unfinished, in part, because of the ongoing dispute with Charter.

AT&T Introduces Phony 5GE to Highlight Newly Lit Spectrum (It’s Really Still 4G LTE)

AT&T customers with Samsung Galaxy 8 Active or LG’s V30 or V40 smartphones began noticing a new icon on their phones starting last weekend: an italicized 5GE, leading some to believe 5G wireless service has now reached AT&T’s network.

Not so fast, AT&T.

AT&T’s use of 5GE, which stands for “5G Evolution” in AT&T’s techie parlance, is another example of how wireless carriers exploit up and coming technology upgrades that are unprotected from overzealous marketing misuse. The actual 5G standard is different from 5GE, and customers using 5G on millimeter wave frequencies can expect very different performance in comparison to today’s 4G LTE experience. But with 5G being hyped in the media, AT&T is attempting to capture some of that excitement for itself.

The company’s marketing division managed to accomplish a speed and technology upgrade without spending millions of dollars on actual 5G network upgrades — just by changing an icon on customers’ phones and making them believe they are getting a 5G experience. In fact, 5GE is actually just the latest evolution of 4G LTE already known to Verizon customers as LTE-Advanced or LTE Plus on Sprint’s network — technology including carrier aggregation, 256 QAM, and 4×4 MIMO that has been in use on competing cellular networks in the U.S. since at least 2016. But just as Verizon customers saw significant speed improvements from Verizon’s updates to the 4G LTE standard, as AT&T deploys similar upgrades in each of its markets, customers should notice similar performance improvements.

AT&T claims 5GE is already live in 400+ markets with more to come. In the short term, the “upgrade” that was pushed to AT&T network devices last weekend only switched on the 5Gicon, which will mean little to AT&T customers already reached by 5Gand never knew it until this past weekend, and nothing to those still waiting for the upgrade to arrive.

Walter Piecyk, an analyst at BTIG Research, says AT&T’s latest spectrum deployments will matter more than whatever the company brands its latest upgrade, and could eventually allow AT&T to surpass Verizon Wireless in network performance.

AT&T’s recent effort to improve its network by deploying more wireless spectrum — up to 60 MHz in many areas, is not the 5G upgrade customers might expect, but it will deliver faster speeds and more performance on today’s smartphones.

AT&T calls its forthcoming actual 5G network 5G+, and the company is launching a modest but authentic 5G experience in limited “innovation zones” in Jacksonville, Fla., Atlanta, Ga., Indianapolis, Ind., Louisville, Ky., New Orleans, La., Charlotte and Raleigh, N.C., Oklahoma City, Okla., as well as Dallas, Houston, San Antonio, and Waco, Tex.

In a money-saving maneuver, AT&T’s combined spectrum upgrades include 20 MHz of FirstNet first responder spectrum (prime 700 MHz spectrum shared with AT&T customers except during emergencies) it received in 2017, 20 MHz of AWS-3 spectrum (1755-1780 MHz for uplink operations and 2155-2180 MHz for downlink) it acquired for $18 billion in 2015, and 20 MHz of WCS spectrum (2300 MHz) it acquired from NextWave for $650 million back in 2012. All of this spectrum is expected to be activated at the same time as technicians work to upgrade each AT&T cell tower. This dramatically cuts AT&T’s costs and truck rolls for incremental upgrades.

AT&T calls its improved 4G LTE network “5G Evolution”

“We’re turning up not only the FirstNet spectrum that we got, but all of this other spectrum that we’ve acquired over the last few years,” AT&T CEO Randall Stephenson told investors at a December conference. “So as we climb these cell towers, we turn up the spectrum. By the time we get to end of 2019, we will have increased the capacity on AT&T’s network by 50%. I mean, you just have to pause and think about this. The entire AT&T wireless network capacity is going to increase over the next 14 months by 50%. I mean, that’s huge.”

Some areas have already received partial upgrades, others may find newly improved rural coverage as AT&T meets its commitments to the government’s FirstNet platform, which calls for more robust rural coverage. Some areas that never had AT&T coverage before may get it for the first time.

AT&T’s biggest competitor, Verizon, has commanded a lead in 4G LTE coverage from 2010 forward after utilizing a considerable amount of its available spectrum for the faster standard. But Verizon has not been a robust bidder for new spectrum recently, except for the millimeter wave frequencies it bought for its emerging 5G network. It has some additional unused AWS-3 spectrum it can use for expansion, but Piecyk believes Verizon may already be using those frequencies in many markets where it is likely facing a spectrum crunch.

While AT&T lights up 60 MHz of additional spectrum, Verizon is primarily depending on the ongoing conversion of 10-15 MHz of existing spectrum it now uses for 3G service to LTE each year. But the company is reportedly running out of frequencies in areas where data demand requires that extra spectrum the most.

The only short term solution for Verizon, which is not participating in marketing hoopla like 5GE, is to make its current spectrum more efficient. That means more cell towers sharing the same frequencies to reduce the load on each tower, improved antenna technology, and using newly available spectrum in the CBRS and millimeter wave bands to manage network traffic. Verizon may even use unlicensed shared spectrum to handle some of the load. Unfortunately, smartphones equipped to take advantage of these new bands are not yet available and may not be until 2020.

For AT&T, improved network performance is seen as a key to resume robust growth in new subscribers.  After Verizon dramatically improved its LTE network in 2014, AT&T stopped growing its lucrative post-paid phone subscriber base, according to Piecyk. Now it may be AT&T’s chance to turn the tables on Verizon.

This AT&T produced video helps consumers understand what 5G, beam forming, small cells, and coverage differences between 4G and 5G are all about. Notice the 5G trial speed test showed download speeds topping out at around 137 Mbps. (4:26)

Minnesota Regulators: Frontier is a Shoddy, Criminally Rogue Phone Company

(Image courtesy: Minnesota Public Radio)

Minnesota regulators slammed the performance of Frontier Communications in a highly critical 133-page report released Friday, describing a rogue phone company that appears to have knowingly violated at least 35 state laws and operating rules, while jeopardizing the lives and wellbeing of 100,000 Frontier customers in parts of northeastern and southern Minnesota and the Twin Cities metro area.

“Many of the issues reported by consumers show direct violations of Minnesota law and Commission rules, and indicate broad, systemic problems with Frontier’s service quality, recordkeeping and business operations,” the report concluded.

A year-long investigation by the Minnesota Commerce Department found ample evidence of Frontier’s terrible customer service, fraudulent billing, and its rapidly deteriorating and often decrepit landline network, sometimes left in disrepair for months or years with little regard for the safety of customers, workers, or the public.

As part of the investigation, seven public hearings were held last fall in Frontier’s Minnesota service area. The resulting report is based on more than 1,000 consumer complaints and statements, as well as Frontier’s responses to information requests by the Commerce Department.

In many cases, Frontier left health-compromised customers using landline-based health/safety monitoring services without phone service for over a month, putting cost-saving measures ahead of the safety of customers that need reliable phone service the most. The investigation also found “that orders for new telephone or internet access service, being a new source of revenue for Frontier, and a sales commission for the customer service representative, take priority over repairs of internet or phone.”

The report also blasted Frontier’s shoddy customer service department, described as “shocking” in the report. In dozens of complaints, customers reported correcting service problems was often a nightmare.

Decrepit Network Facilities Falling Off Poles and Drowned in Ditches

Frontier wireline pedestal in Kelsey, Minn., knocked over and submersed in ice water. (Image courtesy of: Mr. and Ms. Ulshafer)

Waterville, Minn. residents that have experienced frequent outages for years were given every excuse in the book by Frontier officials, at one point blaming a mouse in a central office for chewing through their phone lines. Frontier customer Harry Tolzman chronicled years of Frontier’s apparent ineptness in providing reliable phone and internet service to his rural part of Minnesota. His testimony to Minnesota regulators, reproduced in part below, explains a lot of what the report found wrong at Frontier Communications these days:

“[One day, Frontier] decided that they needed to rebury the telephone cable that was — that ran from Elysian to our rural route Waterville, so they contract[ed] with an outfit out of Indiana, Direct Line Communications Underground Burying, who in turn sublets to another company called Premier Underground. So one day these guys show up from Indiana and they needed to bore underneath State Highway 60 to get the cable from across the highway to our residence, which was on the north side of the highway. So they came out and they bored underneath the highway and they ran the cable and then they got into a big argument with the local technician as to where the cable was to run and so they got mad and left.

The next day another outfit, same, Premier Underground out of Indiana, shows up, and they were supposed to connect the cable from the highway down to the closest junction box, which is about 100 yards from my place to the road and it’s another 100 yards from the road to the nearest junction box. So they started in with their plow and they plowed up to the house and they hit some tree trunks and the plow would jump out of the ground.

Finally they got up to the house where I had decorative rock and they say, well, we can’t dig here so we’ll just lay it on top of the rock. And then wherever it jumped out of the ground because of a root, it’s buried about one inch below the ground, in other places it’s 8 or 10 inches, where it should be. So anyhow, they said that’s the best we can do. Then they went across the road to make the connection to the nearest junction box, and they went right down the shoulder of the road about three feet off the blacktop and they were going down the road with their plow. And lo and behold, the state highway department drove by and happened to see them going right down the shoulder of the road. And so they questioned them, and lo and behold they didn’t have a permit to bury this cable.

So the next day a guy shows up and he hooks up his pickup to the cable and he pulls it all out. And the local technician comes out and he lays a temporary line on top of the ground over to where they had plowed underneath the road, and he made the connection so we could get our telephone service back. And they said they would be back to re-bury it in the proper right-of-way position as soon as they had the proper permits. That was two and a half years ago. And this cable is laying in the road ditch, and meanwhile the state highway department came along and they mowed the road ditch and they cut the cable. So they replaced the cable again. And then another time a snowmobile took the cable out. So that cable still lies there strung between the sumac bushes so that they can’t mow it when they mow the road ditch.

And I keep calling these people to get this fixed and they keep telling me, well, they don’t have the permit yet. So I called the highway department in Mankato and they say there’s been no application for a permit to re-bury your cable. In the interim, I had opened up a complaint with the Federal Communications Commission, which is located in Washington, D.C., and they in turn responded to me. And Frontier had the gall to tell them that they had investigated the above statements and offered the following resolution. Upon the investigation, Frontier showed that the line was repaired as of August 11, 2017, Frontier will be burying the line on August 31, 2017. Frontier spoke with Mr. Tolzman and advised him of the above information. They had the gall to tell them it was fixed and that same problem is still there, the cable lies between the bushes. So whenever we have moisture or rain, we’ll be out of service for our landline phone. And it’s just very frustrating to have to call and get a customer service rep many states away that runs his routine check and tells you, well, the problem is not on their end, it’s in your house, and yet it’s never been a problem within the house.”

A Frontier installer draped a new line across this customer’s residential propane tank, and then left. (Image courtesy: (Image courtesy: Mark Steil, MPR News)

As Stop the Cap! reported in 2018, Frontier’s network infrastructure in Minnesota was literally falling off utility poles. Customers reported Frontier technicians used trees as makeshift utility poles, strung phone cables across yards and fields, unburied, and in one case, draped a phone cable over the customer’s propane tank. Despite months or years of complaints, Frontier repeatedly failed to repair infrastructure it knew or should have known was in disrepair, and in several documented cases, Frontier technicians dealt with the loudest complaining customers by swapping line pairs with a satisfied customer, silencing the complaining customer while giving their troublesome or failing line to another customer without their knowledge.

Company officials also lobbied Minnesota officials hard over the summer of 2018 to limit the scope of the investigation into its business practices in the state, claiming at one point that anything short of a gag order forbidding customers from complaining at public hearings about the performance of Frontier’s DSL service would “violate federal law” and “create false expectations and confusion for customers.”

“Holding public hearings directed to internet access service complaints would not be constructive because the Commission would be precluded from taking action concerning internet service rates or service quality using any information it may collect during the public hearings,” Frontier claimed.

Customer Service Hell

Elizabeth Mohr’s testimony described an experience typical of many Frontier complaints. When Mohr complained about the poor quality of her Frontier DSL service, which came nowhere near the 12 Mbps she was offered, Frontier unilaterally disconnected her service without notice, leaving her without phone service for 12 days. The company “lost” five of the six repair tickets assigned to Mohr’s disconnect complaint. Frontier later refused to reactivate her DSL service, claiming it had “no ports available,” despite the fact taxpayers helped subsidize the expansion of internet access in her neighborhood.

“We found it took us 47 of our hours on the phone with Frontier to get service, even though they sent us a flier that said you should be able to call and get it,” Mohr testified. “So 47 hours on the phone of our time, six tickets, five of which were closed with no answer. They never showed up.”

Frontier’s bad customer service isn’t a new experience for Mohr either.

“You can get better service from them but you have to be willing to put up a fight. I have been hung up on, probably in the last 13 years, probably 200 times,” Mohr said. “When I would call and say, I have an issue with your network, they wouldn’t believe me. Between my husband and myself, we have 20 years of network administration. We could ping to their system and tell them where the problem was failing and they wouldn’t believe us, and they would hang up on us. So clearly, Frontier has a problem.”

Shellie Metzler of Finlayson claimed she has to be placed on a waiting list to have her phone line repaired — something more in common with East Berlin in the 1970s than the United States in 2019. She waited over a year for repairs for her basic Frontier landline and DSL service, repeatedly being told in over 20 hours of phone calls with the company “there were no lines available.”

The wait was not worth it. After service was installed, Ms. Metzler reported, “I could not hear when on the phone because of the static. Also, each time the phone rang, the internet would go offline.”

Like many Minnesotans, Metzler is still paying for broadband internet service she is not receiving. Metzler was sold Frontier’s Broadband Ultra 12 Mbps DSL service.

“I am receiving, if lucky, 1.2 Mbps,” Metzler reported. “Last week within two days the internet dropped over 100 times. Dropped service and slow internet speeds are everyday occurrences. I should not be charged for the 12 Mbps because I have never had it. I should not be charged for the 6 Mbps because I do not get that either.”

The report also had little positive to say about Frontier’s customer service department:

Subscribers received inaccurate information and expressed great frustration when dealing with Frontier’s customer service personnel, even characterizing the service as being rude and/or unhelpful. Customers also said Frontier’s customer service representatives would often refuse to transfer the customer to a supervisor or the supervisor would fail to return their call as requested.

Many customers reported that contacting Frontier was anything but convenient, describing long hold times prior to speaking with a customer service representatives. Also, several consumers reported that they believed Frontier representatives were unqualified, untrained, or otherwise provided them with inaccurate information. In some cases, representatives yelled at customers and accused them of being rude or inappropriate.

Frontier’s Repairs: ‘Like Placing a Band-Aid on a Hemorrhage’

Frontier’s “High Speed” 21st Century Network fantasy claims extend back to 2010 when former CEO Maggie Wilderotter was telling customers Frontier was loaded with fiber.

The state investigation also uncovered evidence that Frontier often “repairs” poor service for a complaining customer by swapping the bad line pair with another customer with good service who is not likely to complain when their service suddenly deteriorates:

Frontier’s practice is that, when one customer is out of service [or is receiving impaired service] and requests repair, in order to restore service to that subscriber, Frontier disconnects, without notice, the service of another subscriber, and “swaps” the other subscriber’s working lines or cards for the non-working line or card of the subscriber whose service is being restored.

A typical example is the public comment of Debra Boldt of Glen, Minn., who lives on a lake with some summer residents. Ms. Boldt reported that to restore service to one neighbor, Frontier switches non-working lines with the working line of a summer resident who may not know their service is disconnected until they next visit; and, when that person complains, Frontier will then switch the working line from a different resident.

Similarly, Tom Grant testified at the Lakeville public hearing that Frontier technicians have told him, “they basically move cards or switches to be able to solve the problem for that individual customer, while knowing full well that that creates havoc for others that reside on that same node.”

Wayne Nierenhausen testified that technicians have told him: “[W]hen they get a complaint, there’s some kind of card within that box that’s a quarter-mile from my house that they will change to basically whoever made the complaint to get faster speed, but then when another call is made, they’ll switch that card out, put it to whoever made the complaint, and then put the old card back in.”

Customer service problems particularly affect the elderly and infirm, who are the most likely to still have landline service.

The report also heavily criticized Frontier for covering up problems by miscoding trouble reports and service outages to avoid drawing regulator attention. Outages impacting regulated basic phone service were frequently classified as unregulated internet outages, coded as being the fault of the customer, or trouble tickets were closed before repairs were completed. Closing trouble tickets prematurely also extends an extra benefit to Frontier — the company will not credit customers for extended outages if the original trouble ticket is closed.

As a last resort, if Frontier deems repairs too costly, customers are told to “live with it.”

Medically Necessary Phone Service Repairs Ignored

The report also found Frontier’s unwillingness to expedite repairs for customers with serious medical issues were “shocking” because customers were often not informed service representatives have no authority to request a medical-related expedited repair, and notes placed on customer accounts by those representatives are routinely ignored. The company admitted the only way a customer can be flagged a medical priority customer is if a doctor certifies annually, in writing, there is a medical need to maintain reliable phone service:

A letter/document must be received from the customer’s physician annually certifying that a medical emergency exists and that phone service is essential, and that the letter or document must contain the following:

  • State registration or license number of physician.
  • Name and address of seriously ill person.
  • Name, signature of licensed physician or public health official (nurse or physician’s assistant) certifying illness or medical emergency and date.
  • Optional – Any services beyond local exchange service that may be necessary to reach customer’s doctor and that absence of such services would be a serious risk of inaccessibility of emergency medical assistance.

Customers are instructed to mail or fax the documentation to:

Frontier Correspondence
PO Box 5166
Tampa, FL 33675
Fax: 1- 888-609-9919

Billing Controversies

Frontier used to mail checks refunding credit balances to departing customers. Today they mail gift cards, occasionally with no balance on them.

The report also found many “direct violations” of Minnesota law and rules from the company’s billing practices. Customers reported Frontier misrepresented its “vacation rate,” offering discounted phone service during seasonal disconnects at vacation properties. Instead, many customers report being billed normal rates and were refused credits, even when the company admitted the problem was theirs and would be fixed.

Customers also report steep late fees for online payments made before the due date, because Frontier reserves the right to take at least five days (and sometimes more) to process online payments, and does not always honor the date of payments initiated by customers. Many others reported Frontier continued to bill closed accounts for months despite cancelling service. One customer who refused to pay several hundred dollars in new charges on his closed account had his credit ruined after Frontier reported him delinquent. A subsequent agreement to pay off the outstanding bills on the closed account in return for getting negative information removed from his credit report was later refused by Frontier… after the company cashed his check.

Customers who pass away while being Frontier customers had better share their account passwords with surviving relatives. As Tabitha Odegaard discovered after her father in law passed away in November 2017, Frontier will not cancel service for deceased customers without a proper account password. Odegaard told regulators she was still paying for service on behalf of her father-in-law in 2018.

Customers that plan to cancel service might be better off removing auto-pay from their account and not paying their last bill until a final bill is generated. Receiving refunds for cancelled service is a hit-or-miss affair at Frontier, according to the report. Customers must wait at least 90 days for a refund to arrive. Most customers end up with a gift card covering any credit balances, but some report their gift card arrived with a zero balance, or did not arrive at all. In such cases, customers have to wait an additional two months before a replacement card will be issued. One customer reported his refund took seven months to arrive, after getting a gift card with no balance on it. Other customers report only getting a credit balance on their monthly bill for their closed account, with no refund, gradually depleted by ongoing billing fees, taxes and surcharges that accrue each month. The credit balance runs out while waiting for a refund that never arrives.

Report Recommends Fundamental Changes and Frontier Responds

The report recommends that Frontier be required to refund or credit customers for service outages and unauthorized charges; add staffing to improve customer service; and increase investments in infrastructure and equipment.

Frontier responded with a written statement, reading in part:

“Frontier strongly disagrees with the assertions in the Department of Commerce’s initial comments and is reviewing the Department’s filing with the Minnesota Public Utilities Commission. Frontier and its employees work hard to provide reliable, affordable telecommunications services to approximately 90,000 customers in Minnesota, many in rural communities where no other provider will invest in providing service. Frontier recognizes we experience service issues and delays from time-to-time with some of our customers. We are an ethical company committed to our customers and the Minnesota communities we serve. We take this matter seriously and will respond appropriately before the Public Utilities Commission.”

Minnesota Public Radio reported in October 2018 that Frontier has slashed its technical workforce by 50% in Minnesota over the last five years. (4:08)

A Lukewarm Reception for Vermont’s Plan to Lure Internet Providers

Vermont residents want better internet service and protection for universal access to phone service, even if customers have to pay a surcharge on their bill to make sure the traditional landline is still available in 100% of the state.

In contrast, some residents complain, Vermont regulators want to make life easier for a telecom industry that wants to abandon universal service, fails to connect rural customers to the internet, and has left major cell phone signal gaps around the state.

In 2017, Vermont commissioned two surveys that asked 400 business and 418 residential customers about their telecommunications services. It was quickly clear from the results that most wanted some changes.

Vermont is a largely rural, small state that presents a difficult business case for many for-profit telecom companies. Verizon Communications sold its landline business in northern New England, including Vermont, to FairPoint Communications in 2007. FairPoint limped along for several years until it declared bankruptcy and was eventually acquired by Consolidated Communications, which still provides telephone service to most of the state.

Many rural areas are not furnished with anything close to the FCC’s definition of broadband (25/3 Mbps). DSL service at speeds hovering around 4 Mbps is still common, especially in areas relying on Verizon’s old copper wire infrastructure.

Comcast dominates cable service in the state, except for a portion of east-central Vermont, which is served by Charter Communications (Spectrum). Getting cable broadband service in rural Vermont remains challenging, as those areas usually fail the Return On Investment test. Still, 85% of respondents said they had internet service available in their home. Vermont’s Department of Public Service (DPS) estimates about 7% of homes in Vermont have no internet provider offering service, with a larger percentage served only by the incumbent phone company.

The majority of residents own cell phones, with Verizon (47.5%) and AT&T (31.8%) dominating market share. Sprint has 0.6% of the market; T-Mobile has a 1.2% share, both largely due to coverage issues. But even with Verizon and AT&T, 40% of respondents said cell phone companies cannot deliver a signal in their homes. As a result, many residents are hanging on to landline service, which is considered more reliable than cell service. Some 40% of those relying on cell phones said they would consider going back to a landline for various reasons.

With the FCC ready to cut support funding for rural landline service, residents were asked if the state should maintain funding to assure continued universal access to landline service. Among respondents, 87.8% thought it was either “very important” or “somewhat important.” The study also found 51% would accept a general statewide rate increase to cover those costs, while 29% preferred rate increases be targeted to rural ratepayers only. About 16% did not like either idea, and 4% liked both.

When asked whether residents would be interested in having a fiber connection in their home, 80% of respondents said “yes,” but 30% were unwilling to pay a higher bill to get it.

Ironically, the state’s most aggressive residential fiber buildouts are run by some of the smallest community-owned internet providers, rural electric or telecom co-ops, and small independent phone companies. What makes these smaller providers different is that they answer to their customers, not shareholders.

Comcast and Charter are the two largest cable companies in Vermont.

Recently, the DPS released a 100+ page final draft of its 2018 Vermont Telecommunications Plan, setting out a vision of where Vermont should be a decade from now, especially regarding rural broadband expansion, pole attachment issues, and cell tower/small cell zoning.

The report acknowledges the state’s own existing rural broadband expansion fund is woefully inadequate. In 2017, the Vermont Universal Service Fund paid out $220,000 to assist ISPs with building out networks to rural areas.

“The amount of money available to the fund pales in comparison to the amount of funding requests that the Department receives, which is generally in the millions of dollars,” the draft report states. “With approximately 20,000 unserved and underserved addresses in Vermont, the Connectivity Initiative cannot make a meaningful dent in the number of underserved locations.”

Much of the report focuses on ideas to lure incumbent providers into volunteering to expand their networks, either through deregulation, pole attachment reform, direct subsidies, or cost sharing arrangements that split the expenses of network extensions between providers, the state, and residents.

A significant weakness in the report covered the forthcoming challenge of upgrading a state like Vermont with 5G wireless service:

Small cell deployment has been attempted along rural routes with very limited success and the national efforts to expand small-cell, distributed-antenna systems, and 5G upgrades have focused on urban areas. The common refrain on 5G is that ‘it’s not coming to rural America.’ 5G should come to rural Vermont and the state should take efforts to improve its reach into rural areas.

A small cell attached to a light pole.

To accomplish this, the report only recommends streamlining the permitting process for new cell towers and small cells. The report says nothing about how the state can make a compelling case to convince providers to spend millions to deploy small cells in rural areas.

Where for-profit providers refuse to provide service, local communities and co-op phone or electric providers often step into the void. But Vermont prohibits municipalities from using tax dollars to fund telecommunications projects, which the law claims was designed to protect communities from investing in ‘unprofitable broadband networks.’

The draft proposal offers a mild recommendation to change the law to allow towns to bond for some capital expenditures on existing or starting networks:

Vermont could use a similar program to help start Communications Union Districts as well as allow towns to invest in existing networks of incumbent providers. Limitations on the authority to bond would need to be put in place. Such limitations should include focusing capital to underserved locations only, limiting the amount (or percentage) of tax payer dollars allowed to be collateralized, and setting technical requirements for the service.

Such restrictions often leave community broadband projects untenable and lacking a sufficient service area or customer base to cover construction and operating expenses. Instead, only the most difficult and costly-to-serve areas would be served. The current law also prevents local communities from making decisions on the local level to meet local needs.

At a public hearing last Tuesday in Montpelier, the report faced immediate criticism from a state legislator and some consumers for being vague and lacking measurable, attainable goals.

“This plan does not appear to move Vermont ahead in a way that enables it to compete effectively,” said state Sen. Mark MacDonald (D-Orange). “It doesn’t seem to be moving forward at the pace we’re capable of.”

Clay Purvis, director of telecommunications and connectivity for the DPS, defended the plan by alluding to how the state intends to establish a cooperative environment for internet service providers and help cut through red tape. But much of those efforts are focused on resolving controversial pole attachment fees and disputes, assuming there are providers fighting to place their competing infrastructure on those utility poles.

Montpelier resident Stephen Whitaker was profoundly underwhelmed by the report.

“There is no plan at all here,” Whitaker said at Tuesday’s public hearing. “There is some new background information from the 2014 version, but there’s no plan there. There is no objective to reach the statutory goals.”

FCC Panel Recommends Taxing Websites and Giving the Proceeds to Big Telecom Companies

The telecom industry wants a new tax on broadband services to pay for rural broadband expansion.

Nearly two years after FCC Chairman Ajit Pai announced the formation of a new federal advisory committee on broadband development, the telecom industry-stacked panel has recommended implementing a new tax on websites and online subscription services like Netflix, Hulu, and Amazon Prime Video and turning over the proceeds to many of the same companies dominating the Committee.

The proposal is part of a large set of recommendations from the Broadband Deployment Advisory Committee (BDAC) designed to promote and streamline broadband expansion, especially in rural areas. If adopted by the states, the new tax would create a large broadband deployment fund that could be accessed by telecommunications companies like AT&T and Comcast to expand service without having to pay back the funds or give up part ownership of the taxpayer-funded expansion.

What caught many by surprise was the sweeping impact the new tax could have on the internet economy, because online businesses, streaming services, and even many website owners could be subject to the tax, if enacted:

Entities that financially benefit from access to a broadband system located in the state, including advertising providers, shall contribute to the Broadband Deployment Fund.

A comprehensive piece by Jon Brodkin on Ars Technica points out defining the meaning of “entities” and “advertising providers” will be crucial to determine who will have to pay the tax and who won’t:

Article 11 of the BDAC’s model state code would create a Rural Broadband Deployment Assistance Fund, paid for by contributions from broadband providers and “Broadband Dependent Services.”

The definition of “Broadband Dependent Services” is where things get interesting. An earlier version of that definition—available in this document—reads as follows:

“Broadband Dependent Service” means a subscription-based retail service for which consumers pay a one time or recurring fee which requires the capabilities of the Broadband Service which the consumer has purchased and shall also include entities that financially benefit from access to a broadband system located in the state, including advertising providers.

The BDAC met on December 7 and pared that definition back a bit to exclude “entities that financially benefit from access to a broadband system.” Video is available here; the discussion on the definition starts around 2:04:45.

BDAC Chair Elizabeth Bowles, who also runs an Arkansas-based wireless Internet service provider called Aristotle, expressed concern that the original version of the definition “was including every small business in America,” potentially forcing them all to pay the new tax.

Nurse

AT&T has been one of the strongest advocates for the new tax, and argued it should be as expansive as possible.

“It basically is everybody [that should be taxed] because this is a societal objective,” said Chris Nurse, assistant vice president for state legislative and regulatory affairs at AT&T. “Universal service is a societal objective. We want to spread that $20 or $30 billion burden more broadly so the tax is low on everybody.”

Google Fiber policy chief John Burchett objected, claiming under AT&T’s vision, everyone who has an internet connection would be taxed. In his view, AT&T’s proposal was “absurd.”

As the debate raged on, it became clear AT&T was once again looking for a way to be compensated by companies like Amazon and Facebook — using its ‘pipes’ without contributing towards the cost of the network.

“Who are we cutting out and who are we leaving in?” Nurse asked. “Today it’s basically the telephone companies [who pay] and not Google and not Amazon and not Facebook, right? And they’re gigantic beneficiaries from the broadband ecosystem. Should they contribute or not? Someone has to pay.”

Burchett

In the end, the BDAC settled on adopting a compromise over what broadband entities will be subject to the new tax:

“Broadband Dependent Service” means a subscription-based retail service for which consumers pay a one time or recurring fee, and shall also include advertising-supported services which requires the capabilities of the Broadband Service which the consumer has purchased.

This compromise definition primarily targets the new tax on streaming video services — the ones AT&T itself competes with. But it will also cover any websites sponsored with online advertising — like Facebook and Google, ISPs, subscription services delivered over the internet, as well as AT&T’s broadband competitors.

The proposal also seeks to guarantee that rural residents be granted access to affordable broadband, but the industry-dominated Committee chose to define “affordable” as the cost of internet access in urban areas, which some would argue isn’t affordable at all.

The draft proposal has been criticized by many stakeholders, including the National Rural Electric Cooperative Association, representing electric cooperatives. The group implied the new proposal was just the latest attempt to get the telecom industry’s wish list enacted.

“Instead of focusing on solutions for unserved and underserved rural communities, many of the recommendations focus on issues specific to urban areas where broadband is already available,” said NRECA CEO Jim Matheson. “Ignoring the precedent of federal law and laws in 20 states, the state model code would treat co-op poles like those belonging to large investor-owned utilities. The state model code would also cap pole attachment rates in state statute, effectively making those rates permanent. This code, in effect, increases regulatory burdens while giving co-ops less time and less money to comply with those regulations.”

The National Multifamily Housing Council also objected to another proposal approved in the draft.

“Article 8 of the MSC grants broadband providers the unilateral right to install facilities in all multifamily residential and other commercial buildings and mandate construction of broadband facilities at the property owner’s expense without regard to the rights and concerns of the owner,” the organization claimed. “NMHC/NAA and its real estate industry partners argued that Article 8 of the MSC is riddled with many practical and legal problems. Among the most serious issues with the MSC is that it interferes with private property rights, disrupts negotiations and existing contracts between property owners and communications service providers and will lead to costly regulation and litigation at the state level without any assurance of actually spurring broadband deployment.”

AT&T would be among the biggest beneficiaries of the tax fund, already receiving $428 million annually from another rural broadband fund to expand wireless internet access in rural areas. If Nurse’s predictions are correct, the tax could collect $20-30 billion, far more than has ever been spent on rural broadband before.

Liccardo

Critics also contend the BDAC’s industry-friendly proposals are predictable for a Committee created by FCC Chairman Ajit Pai and well-stacked with telecom industry executives and lobbyists. The former head of the BDAC was arrested by the FBI on fraud charges, and San Jose Mayor Sam Liccardo quit the Committee in January, writing, “the industry-heavy makeup of BDAC will simply relegate the body to being a vehicle for advancing the interests of the telecommunications industry over those of the public” in his letter of resignation.

Whatever the BDAC ultimately decides, the final proposal has a long road to travel before becoming law. Each state can choose to adopt the proposal, part of it, or none of it. In the end, it is just a “model code” for states to consider. But it will be part of the argument made by the telecom industry that laws must be streamlined to prevent delays in deploying service, and that those benefiting from broadband should cover more of the costs to provide it.

Ironically, the person most likely to be embarrassed by the model code could be FCC Chairman Ajit Pai, who has almost universally rejected new taxes and fees on broadband services. But his approval is not required to advance the argument and the model code to the states, where the telecom industry’s lobbyists are waiting to begin advocating the passage of new state laws enacting its recommendations.

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