The second half of 2016 shows losses in broadband and television customers.

Frontier Communications CEO is blaming employees for the company’s deteriorating financial condition and operating performance and has allegedly dropped bonuses and merit pay increases for lower-level employees.

Sources inside Frontier Communications tell Stop the Cap! Frontier CEO Dan McCarthy notified employees in email on March 2 — one week before employees were expecting to receive their annual bonus — the company would no longer be providing bonus compensation for “lower banded management employees.” They hired redundancy representation for employers for this case.

“He implied that he too was affected but I highly doubt that is the case,” one source tells us. “We weren’t notified via a ‘Town Hall’, no conference call, no face to face with our managers, only a cowardly e-mail sent from behind a desk thousands of miles away. Keep in mind that people use that to pay house taxes, medical bills, pay off other bills, pay college tuition, etc, and a week before we were slated to get it we’re told that it isn’t coming.”

McCarthy has been on the hot seat with Wall Street for weeks after reporting yet another quarter where many of Frontier’s most profitable customers are fleeing faster than the company can replace them with new ones. McCarthy also told investors that many of Frontier’s losses in the last quarter were due to the company finally disconnecting service and writing off customers who haven’t paid their Frontier phone bills for as long as a year in acquired former Verizon territories in Florida, Texas, and California.

McCarthy

“There was certainly no suggestion that the big acquisition would pay off in the company’s Q4 earning report when subscriber counts, average revenue per residential user, and quarter-over-quarter revenue all fell,” wrote Daniel B. Kline of TMFDankline. “That has been the pattern in all three quarters since the Verizon deal closed, and while McCarthy has done an excellent job controlling expenses, his excuses for the drop in subscribers have started to sound a bit hollow.”

That effort to “control expenses” may be coming at the expense of customers that Frontier is depending on to stay in business.

New York Attorney General Eric Schneiderman last month announced the state was reviewing Frontier’s performance in western New York. A Rochester television station has aired more than a half-dozen stories about deteriorating service quality at Frontier since last summer. After airing the first few stories, the station was inundated with hundreds of complaints about Frontier’s spotty broadband and phone service.

News10NBC (WHEC-TV) reported it can take weeks for a Frontier technician to show up on a service call. Customer service is no help and customers are not getting the services they paid to receive.

Frontier was also implicated last month in knocking a Rochester area radio station off the air. After the company first blamed the radio station’s equipment for the problem, Frontier eventually admitted its own “old infrastructure” was responsible for outages that interrupted broadcasts for hours at a time.

Frontier’s stock continues its descent.

Schneiderman has been focused on keeping New York’s ISPs honest about their speed claims and performance, but service reliability is also increasingly an issue, especially after high winds in a recent storm in western New York left nearly half of the Rochester metro area without essential utilities for several days. Infrastructure upkeep, particularly aging utility poles, is now under investigation by the state’s Public Service Commission. Early evidence revealed local utilities may have underinvested in pole maintenance for years due to cost cutting. Some utility poles in western New York are well over 50 years old, originally placed in the 1950s and 1960s. Hundreds failed in the high winds.

Frontier’s track record of blaming others for their own problems has not been well-received by employees.

“Maggie Wilderotter [former CEO of Frontier Communications] was bad but McCarthy’s leadership is erratic and catastrophic,” shares another Frontier middle management employee wishing to stay anonymous. “McCarthy was defending the regional management autonomy approach as a unique strength for Frontier last summer, now he’s declared that is inefficient and is centralizing management decisions at corporate headquarters. He was selling Wall Street on Frontier’s IPTV project in 2016 by promoting expanded service territories. Now that project is on hold and there are signs Frontier is pulling back on meaningful and long overdue broadband speed upgrades. He recently announced he was reorganizing residential and commercial sales units, something our competitors did long ago and will only disrupt things at Frontier even more. Poor customer service was the result of “on-shoring” our call centers? Not exactly. Poor training and inadequate support have left our call center employees unable to properly handle customer concerns. Employees can reach out to an employment law attorney when facing unjust treatment in the workplace. He also consistently downplayed how nightmarish the Verizon conversion was for our new customers in Florida, Texas, and California. It was bad planning, bad vision, and poor execution and the buck stops with our CEO.”

Another source tells us:

“We worked 60-80 weeks, late nights, weekends, countless hours away from our families to push forward with projects that were horrible for our customers and senior leadership was told to get the job done regardless any way they could. We worked through the AT&T and Verizon conversions. We performed as employees of Frontier. Who did not perform? Those making these horrible financial and planning decisions that caused major outages to former Verizon customers when they finally cut over. Some problems were so severe that many customers decided to leave.”

Frontier insiders tell us the company is on a mission to slash expenses across the board to turn in better financial results that can protect the company’s dividend payout to shareholders and, in turn, executive pay and bonuses. The company is reportedly considering allowing more employees to work from home to cut facilities costs, utilities, and maintenance expenses.

“There have been numerous resignations over this and morale is at an all-time low within the company,” a source tells us.

One of the employees sharing the latest developments reports he has turned in his resignation this month and hired an employment lawyer at HKM.com to get the compensation he deserves.

“I figure I should follow so many of our customers to a company that isn’t great, but at least makes an effort delivering what it promises.”

Frontier’s Problems Afflict Hundreds of Customers in Western N.Y.

WHEC-TV Rochester has been following problems with Frontier Communications since last summer. Until the acquisition of former Verizon customers in Texas, Florida, and California, the Rochester, N.Y. metropolitan area was considered Frontier’s largest legacy city service area. But just like in smaller rural communities, service problems have plagued Frontier, with complaints rolling in about slow or non-existent broadband, landline outages, poor billing and customer service practices, and service calls that take weeks before anyone shows up.

WHEC-TV Rochester began covering problems with Frontier on Aug. 22, 2016 with an investigation into internet woes at a Geneseo insurance agency. (2:21)

One day later (Aug. 23, 2016) complaints from other Frontier customers poured into WHEC-TV’s newsroom because of outages and bad service. (2:54)

In September, 2016 WHEC-TV was back with another story from frustrated and angry customers who can’t get suitable service from Frontier Communications, but found a $200 early termination fee on their bills when they tried to cancel. Now the Attorney General is getting involved. (3:18)

In late December, WHEC reported it had asked the N.Y. Public Service Commission to start an investigation into Frontier Communications over its broadband service. (2:20)

In February, when N.Y. Attorney General Eric Schneiderman came to town to discuss the honesty of ISP speed claims, WHEC reporter Jennifer Lewke instead questioned him about the hundreds of complaints the station had received about Frontier Communications. (3:03)

About one week after the Attorney General visited Rochester, WHEC reported Frontier Communications’ “old and outdated” equipment was directly responsible for taking a local radio station off the air for hours at a time. (1:10)

Several days after a windstorm in the Rochester area took away power to nearly half the metropolitan area, WHEC reports residents are frustrated waiting for cable and phone service to be restored. An investigation into utility infrastructure is now underway. (3:17)

Emery

It’s 2017 and a lot of Missouri residents are still tortured by the lack of access to basic broadband service, and if a community broadband ban bill becomes state law it will remain that way for years to come.

SB 186 is essentially a copy of last year’s community broadband ban that eventually died in the legislature. Just like last year, many of the sponsors and promoters of the latest attempt to impose a municipal broadband ban have close ties to the American Legislative Exchange Council (ALEC) and receive copious amounts of money from Missouri’s largest telecom companies. Some even win awards from the state’s biggest telecom lobbyists.

State Sen. Ed Emery (R-Lamar) loves the headlines he attracts from throwing ideological bombs into the public debate (he called homosexuality a mental illness, compared public education to slavery and a pathway to prison, and questioned whether former president Barack Obama was actually an American citizen). But he is not in touch with the rural residents in his state who have had their pleas for broadband service ignored by AT&T and other telecom companies for years.

Emery is a big fan of ALEC and serves as a Missouri state chairman. In 2015 he told an audience at an ALEC event he found the group’s efforts inspiring and helpful. ALEC acts as a giant clearinghouse for corporate-inspired legislation that ends up in the hands of friendly state legislators. ALEC’s model bills, including one banning municipal broadband, win passage in part because state legislatures do not get the kind of media attention and public scrutiny seen in Washington. SB 186, its predecessor, and other similar bills introduced in other states are frequently ghostwritten by telecom company lawyers and lobbyists and are designed to stop municipal broadband networks before they can get started.

Emery’s current bill is designed to apply a “scorched earth” response to communities trying to find ways to get rural broadband service up and running after a decade of being ignored by private telecom companies. It’s corporate protectionism and welfare at its finest, with a thicket of language that would force public providers into price and speed regulation. Emery’s bill would interfere with the types of loan agreements communities could contemplate to provide the service, and the language required for a mandatory referendum is heavily slanted to suggest such service is redundant and unnecessary. Emery’s bill also offers assurances his business friends could get gigabit speeds from community-owned providers, but not necessarily consumers.

Like the failed broadband hit bill introduced in Virginia, SB 186 is an ironic piece of legislation, heavy-handed with regulation and micromanagement and anchored with bureaucratic requirements designed to guarantee disappointment and costly failure. Emery’s career in public life has been spent railing against costly and unnecessary overregulation, yet his bill exemplifies both in action.

SB 186 also protects the status quo for broadband in Missouri, which is dreadful outside of major cities. It would assure incumbent telecom companies won’t face any service-improving competition and keep municipalities off their turf. For example, Columbia Water and Light has a “dark fiber” institutional fiber network at its disposal that is woefully underutilized. In addition to helping provide some connectivity for local government functions, the city-owned network also leases connections to hospitals and other public buildings, as well as some businesses. But the utility does not sell internet service itself.

The city believes much of the fiber network’s capacity is sitting un-utilized and could prove a valuable asset to the local connectivity economy. With the fiber already in place, expanding the network could be a cost-effective/common sense way to reach city residents that want better internet service than what incumbents are offering, and the city is more than willing to open the network up to those incumbents as well. SB 186 could eliminate that option in Missouri, just to protect the same private companies that have delivered underwhelming service for years.

In cities like Centralia, now exploring enhanced smart grid technology to improve the area’s electricity infrastructure, SB 186 would make the upgrade much more costly. Smart grid technology relies on fiber optic technology, often laid deep into neighborhoods and office parks. Only a tiny portion of that capacity is used to monitor utility infrastructure. The rest of the bandwidth on the fiber optic cable — already in place, could easily offer gigabit broadband service to every resident and business, especially if the city wires fiber to or near individual utility meters. That wouldn’t be allowed under SB 186 either, so communities like Centralia could not recoup some of the cost of the fiber optic technology by selling broadband service. That’s great news for companies like AT&T, CenturyLink, and Charter Communications. It’s also a relief for the phone companies who need not invest in their networks to offer something better than 20th century DSL.

Rural America: not a broadband-a-plenty

Emery offers two contradictory defenses for his bill:

1. It is necessary to protect taxpayers from municipal broadband which Emery calls “unsuccessful, leaving ratepayers to cover debt costs.” But when asked by local media for any examples of a Missouri public broadband project that has failed, he could not.
2. “We need more private-sector opportunities and not drive them out or hinder offerings coming into a community.”

In other words, Emery believes all public broadband networks are failures -and- they represent a major threat to private telecom companies that will be discouraged from investing in broadband expansion because a publicly owned competitor could be ready to “drive them out.”

Of course, neither is true. In rural Missouri there is no line of eager telecom companies seeking to expand broadband service into unprofitable rural communities and where only one broadband provider exists, there is no pressure to improve service quality or speed. In the first instance, there is no investment by private companies to discourage and in the second, the presence of a new provider encourages upgrades and investment. It’s a concept called “competition.” Sen. Emery would have a difficult time providing the name(s) of telecom companies that exited a community because of the presence of a municipal broadband alternative.

Rural farms are among the least likely places to get adequate internet service.

Sen. Emery’s family has a feed and grain business background, and those businesses (as well as Missouri’s farmers) are among the hardest hit economically by the lack of suitable broadband. But Emery is now far away from the business his father and grandfather ran. These days, he harvests big dollar contributions from some of the country’s largest corporations and much of his last campaign was financed by just two families — one with a vendetta against unions and the other — Rex Sinquefield — bucking to be Missouri’s own version of the Koch Brothers, who has his own private agenda he’d like enacted into law. Sinquefield has close ties to the Grow Missouri PAC, that also has close ties to the Club for Growth, ALEC, and the Koch Brothers’ backed Americans for Prosperity. Birds of a feather flock together.

Missouri’s biggest telecom companies are also generous contributors to Sen. Emery, which isn’t a surprise considering his bill and voting record directly benefits their businesses in the state. That may explain why the Missouri Cable Telecommunications Association — the state’s top cable lobbying group — gave Emery its Legislator of the Year award. Not to be outdone, the phone companies’ Missouri Telecommunications Industry Association gave Emery its own Leadership Award. Anyone who can introduce a bill that eliminates the best prospect of competition in suburban and rural Missouri for years is probably worthy of both.

In return for favors like that, some familiar names appear at the top of Emery’s list of campaign contributors:

• AT&T ($6,000)
• Comcast ($4,000)
• Verizon Communications ($4,000)
• CenturyLink ($3,500)
• Charter ($2,000)
• Time Warner Cable ($1,500)
• Charter Communications ($1,325)
• Sprint ($1,000)

Emery clearly listens to their interests more than average Missouri consumers still searching for broadband service.

The St. Louis Post-Dispatch reported last summer that there are significant gaps in broadband coverage even in St. Louis County, where one million residents live. “Fringe suburban spots” too costly to meet Return On Investment requirements guarantee no service, indefinitely. In St. Clair County, 5,000 homes are without broadband for the same reason. In large parts of the state, what constitutes broadband no longer meets that definition — 25Mbps, as established by the FCC. Every telephone ratepayer pays a “universal service fee” on their phone bill, in part to extend broadband into rural areas. But that extension has been spotty because not every phone company accepts the money and the conditions that come with it to broaden their reach. That leaves many rural Missourians with <1Mbps DSL service. That’s the case in Wildwood, where streaming media is out of the question because internet speeds are too low.

The Broadband Berlin Wall: Wildwood, Mo. — Broadband service is easily available to the east of Highway 109. But to the west, service is spotty to non-existent.

Wildwood — in western St. Louis County, is living in “Third World conditions,” even though “we’re not in rural Timbuktu,” according to resident Marilyn Gilbert. It’s also comparable to Cold War-era Berlin, except in reverse. Eastern Wildwood offers residents broadband options from both Charter and AT&T. But the Broadband Berlin Wall dividing the community — Highway 109, separates the broadband haves’ from the have-nots’. The larger part of Wildwood to the west, now growing with new housing and businesses, is a broadband swamp with few, if any choices for local residents.

Gilbert “enjoys” AT&T DSL and speeds that never come close to 1Mbps. It is her only option.

“I tried to download my Windows update and it timed out,” she said. “The amount of time you waste waiting for things to open up or download!”

Remember, this is in St. Louis County, the old home for the headquarters of Charter Communications, which dominates the city of St. Louis.

Despite earning billions every year from the broadband business, Charter has refused to extend its lines of service into the western half of Wildwood, despite efforts to attract the company that date back six years. Residents report broadband availability is among their top concerns taken to local officials, who have in turn sought help from Charter, AT&T, and the state legislature.

The city of Wildwood’s efforts were met with a demand by Charter to pay the cable company $3 million in taxpayer funds to extend service. The city said no.

“The comment we hear constantly is that kids need high-speed (internet) in order to access their school work,” said Wildwood councilman Larry McGowen. “These days, internet is just like another utility. It has become every bit as important in people’s lives as electricity.”

But it apparently is not important enough to allow Wildwood and other communities the option of constructing their own local broadband solutions for residents if Emery’s bill becomes law.

Ironically, the same companies that refuse to extend their service into rural Missouri are also vehemently opposed to letting local governments do it in their absence.

The stalemate has caused some residents to sell their homes and move, just to get internet access. David Norell left town because he couldn’t survive with satellite internet service, which costs $80 a month and offers spotty service with a low data allowance.

That makes Emery’s bill, and others like it, a travesty. Banning local communities from doing the job large for-profit companies won’t seems nothing short of corporate protectionism. After all, as critics of Emery’s bill charge, how can a local government unfairly compete with a company that doesn’t compete at all? Also of concern is the fact those residents that do get token DSL service from AT&T may be trapped using it forever if Emery’s bill keeps better and faster service from co-ops and other public broadband options off the table.

If it seems like Sen. Emery is putting the interests of big telecom companies – many dues-paying members of ALEC – above those of his constituents, perhaps he is. Consider the fact Emery is a state chairman at ALEC, an organization that included this loyalty pledge in its draft state chair agreement:

I will act with care and loyalty and put the interests of the organization (ALEC) first.

Emery has taken heat for his ongoing love affair with ALEC before, including an ethics complaint about a $3,000 meal at the Dallas Chop House where Emery ate. ALEC’s corporate members picked up the tab. That kind of unethical conflict of interest, along with the aforementioned loyalty pledge, infuriated the St. Louis Post-Dispatch:

Mr. Emery and his ilk can believe what they want, but they should play no part in allowing corporations to hide their agendas, and their lobbying expenses, by pretending to be something they are not. The proof is in ALEC’s actions, which as Washington Post columnist Dana Milbank outlined, hid itself behind closed doors in a meeting last week in the nation’s capital, pushing reporters away while claiming they had nothing to hide.

No, ALEC exists solely to hide. To hide money. To hide agendas. To hide its hijacking of democracy.

Lawmakers who care about the constitution and their commitment to voters should be fleeing faster than the corporations who realize ALEC is simply a bad investment.

Emery at a 2015 ALEC event.

It was not an isolated incident. Ed and his wife Rebecca Emery also enjoyed a $141.10 meal paid for by the Missouri Telecommunications Association. It’s safe to assume nobody had just a small salad. Other meals and drinks were courtesy of AT&T and CenturyLink. (Peabody Energy footed the bill for the Emerys’ taxi rides back and forth.)

When the wining and dining ended, the lobbyists were back with campaign contribution checks in hand.

These kinds of municipal broadband bans are toxic to economic development for rural communities that already face built-in economic and infrastructure disadvantages. The 21st century digital knowledge economy has the potential to make rural America equally competitive, assuming there is adequate infrastructure in place to participate.

Relying on private investment alone can work in urban areas where broadband profits are easy because the essential infrastructure to provide the service was constructed and paid for decades ago, originally to deliver telephone and television service. Rural areas suffer from deteriorated wireline infrastructure some phone companies want to abandon altogether and no cable broadband service at all.

Charter and AT&T first answer to shareholders. Local governments answer to their residents. Legislators are supposed to do the same. For Mr. Emery, loyalty to the interests of ALEC and the state’s telecommunications companies seems clear. It’s too bad his bill suggests a lot less loyalty to the voters in his district that need internet access or better broadband are will assuredly not get it if this bill ever becomes state law.

New York State taxpayers will contribute $212 million to expand broadband to reach 89,514 homes and institutions in mostly in rural upstate communities that either lack internet access or have to endure very slow speed DSL service from the phone company. All recipients have agreed, as a condition of receiving the money, not to impose data caps on their customers.

This week, New York Governor Andrew M. Cuomo announced the latest winning projects that will receive grants from a second round of funding from the New NY Broadband Program, part of the governor’s effort to achieve 100% broadband penetration in the Empire State.

Gov. Cuomo

Twenty six cable and phone companies, mostly for-profit businesses, will share awards ranging from $226,184 for Cable Communications of Willsboro to reach 558 homes in the Essex County communities of Willsboro and Essex, on the border of Lake Champlain and the state of Vermont to $47,770,970 for Armstrong Telecommunications to reach 16,545 homes in Allegany, Cattaraugus, Erie, Livingston, Steuben, and Wyoming counties in the Finger Lakes Region and Southern Tier.

“Broadband is today what electricity was nearly a century ago – essential to creating economic opportunity, driving innovation and an absolute necessity for our way of life,” Governor Cuomo said. “These awards will provide homes and businesses with access to the high-speed internet required to participate and succeed in the modern economy, and are a major step toward broadband for all in New York.”

Grant recipients provided $56,253,037 in private matching funds, with New York taxpayers picking up the remaining 75% of the total expansion cost — about $2,366 per home or business.

A separate agreement with the New York State Public Service Commission obligates Charter Communications (formerly Time Warner Cable) to embark on its own company-funded expansion program to expand service to approximately 145,000 unserved and underserved premises. Charter has identified Columbia, Erie, Jefferson, Onondaga, Oswego, and Sullivan as “Year One Priority Counties” where most upgrades will be taking place in 2017, including expansion to reach 100Mbps speeds during the first six months of this year.

The winning providers had to guarantee they would upgrade speeds to at least 100Mbps except in the “most remote areas” where 25Mbps is acceptable. Although the state targeted 50% private sector co-investment, providers ultimately came closer to the absolute minimum of 20% in matching funds. They must also guarantee that broadband service will be available to customers for no more than $60 a month to qualify for the grant. Cable Communications of Willsboro, for example, now offers 8/1Mbps for $59.95 a month. Presumably it will have to boost speeds as part of its grant award.

The grant program was also designed to favor applicants offering fiber-to-the-home or hybrid fiber/cable (HFC) technology currently favored by cable operators. DSL and fixed wireless applicants had to give evidence the governor’s need for speed would be delivered using those technologies. All applicants must also agree not to impose data caps of any kind for New York residents.

New York is a rare exception to rural broadband expansion in states that mostly rely on politicians begging and pleading with providers to expand their service areas. At best, this has delivered modest results without access to supplemental funding to achieve Return On Investment requirements private companies demand.

As New York progresses through multiple rounds of bidding, each new round becomes more challenging because of the increasing expense to reach each remaining unwired rural home, business, and farm. In the current round, the costs to wire a single home are at least four times more than what Verizon spent to extend its FiOS service to a new home or business in downstate New York.

To meet 100% penetration, some properties will require a $20,000 or more investment to extend service. Gov. Cuomo has decided that broadband should be treated as a necessary utility, not a convenience. In effect, New York wants universal service standards to be applied to broadband, regardless of cost.

All projects must be finished by the end of 2018. The Broadband Program Office is currently finalizing a Request for Proposals for the Program’s upcoming Round III, which will launch within 30 days. This round will seek to complete the goal of bringing high-speed internet access to New York’s remaining unserved and underserved communities. Round III will be paid for by the $170 million in Connect America Funds Verizon forfeit because of their lack of interest in expanding rural broadband service. New York officials successfully petitioned the Federal Communications Commission to reallocate those funds to the state to disburse to reach the remaining rural areas still without suitable internet access.

Phase 2 Awardees

Pai

As a result of the multibillion dollar cable merger between Charter Communications, Bright House Networks, and Time Warner Cable, the three companies involved freely admitted: your cable bill was unlikely to decrease, you won’t have any new competitive options, there was no guarantee your service would improve, or that you would get faster broadband service than what Time Warner Cable Maxx was already delivering to about half its customer base.

While shareholders and Wall Street bankers made substantial gains, top Time Warner Cable executives walked away with multimillion dollar golden parachute packages, and Charter took control of what is now the country’s supersized, second most powerful cable operator, regulators also required the dealmakers share at least a tiny portion of the spoils with customers.

Then President Donald Trump’s FCC chairman — Ajit Pai — took leadership of the telecom regulator. Now all bets are off.

Pai is reconsidering the settled deal conditions imposed by the FCC under the last administration, and wants to give Charter Communications a free pass to let them out of their commitment to compete. Last week, Pai circulated a petition among his fellow commissioners to roll back the commitment Charter acknowledged to expand its service area to at least one million new homes that already get broadband service from another cable or telephone company.

Former FCC chairman Thomas Wheeler sought the competition requirement to prove that cable operators can successfully run their businesses in direct competition with each other, potentially inspiring other cable companies to face off with incumbent operators outside of their own territories. A paradigm shift worked for Google, which inspired ISPs to boost speeds in light of its gigabit Google Fiber service, which reset customer expectations.

The FCC order approving the merger deal was hardly onerous, requiring Charter to compete head-to-head for customers in places the company can choose itself. Lawmakers eliminated exclusive cable franchise agreements years ago, but established major cable operators like Charter have gone out of their way to avoid competing in areas that already receive cable service. While Wheeler may have hoped some of that competition would be directed against fellow cable companies, Charter CEO Thomas Rutledge quickly made clear to investors and the FCC Charter would continue to avoid direct cable competition, instead promising to expand service into non-cable areas that already get DSL service from the phone company or no broadband at all.

“When I talked to the FCC, I said I can’t overbuild another cable company, because then I could never buy it, because you always block those,” Rutledge said. “It’s really about overbuilding telephone companies.”

Charter’s CEO believes most phone companies are not competing on the same level as cable operators and are unwilling to make the necessary investments to upgrade their aging wired infrastructure to offer faster internet speeds. That makes competing with telephone companies like Windstream, Frontier, and Verizon’s DSL-only service areas a much better proposition than trying to compete head-to-head with Comcast, Cox, or Cablevision.

Rutledge’s clear views about Charter’s expansion plans apparently never made it to the American Cable Association, a cable industry lobbying group that defends the interests of independent and smaller cable operators. Despite Rutledge’s public statements, the ACA and its members are afraid Charter could expand on their turf anyway, potentially forcing small cable operators to compete with the same level of service Charter offers. The horror.

The ACA’s arguments found a sympathetic audience in Mr. Pai and now he wants to let Charter off the hook, at the expense of competition and better service for consumers.

Under the proposal circulated by Pai, Charter would still be required to expand its cable broadband service by at least one million new homes, but those homes would no longer have to be in areas outside of Charter’s existing service footprint. In practical terms, this would mean Charter would focus on wiring areas not far from where it provides service today — ‘DSL or nothing’-country. Charter would also be able to fritter away the number of expansions required by counting newly constructed neighborhood developments it would have likely wired anyway, as well as upgrading its remaining shoddy legacy cable systems — some still incapable of offering broadband or phone service.

The ACA’s talking points prefer to emphasize the David vs. Goliath scenario of a big bully of a cable company like Charter being forced to compete (and likely obliterate) existing small cable operators:

“The overbuild condition imposed by the FCC on Charter is stunningly bad and inexplicable government policy,” said ACA president and CEO Matthew Polka, in a statement. “On the one hand, the FCC found that Charter will be too big and therefore it imposed a series of conditions to ensure it does not exercise any additional market power. At the same time, the FCC, out of the blue, is forcing Charter to get even bigger.”

The real goal here is to minimize direct competition at all costs. The FCC’s deal conditions already included the need for more rural broadband expansion. Wheeler’s second goal was to introduce a new model — cable company competing against cable company — fighting for new customers by offering consumers better service and pricing. The existence of such competition would belie the industry’s claim that cable overbuilds and head-to-head competition is uneconomical. Wildly profitable, perhaps not, but certainly possible. Historically, the traditional way cable operators dealt with the few instances of direct cable competition was to buy them out to put them out of business. Rutledge was certainly thinking along those lines when he complained that the FCC’s order to compete did not include permission to eventually devour its competitor, effectively making competition go away.

Had Charter chosen to compete with cable companies not afraid to spend money to upgrade service above and beyond the anemic broadband speeds Charter offers, it would likely find few takers for its maximum 300Mbps broadband service that comes with a $200 install fee.

“Why would we go where we could get killed?” Rutledge admitted.

Industry claims that the cable business is already fiercely competitive are also countered by Rutledge’s own statements making clear direct competition with brethren cable companies on the cusp of speed-boosting DOCSIS 3.1 upgrades was bad for business. Instead, he would focus on competing with inferior phone companies, which he characterized as mired in debt, still skeptical about the financial wisdom of fiber optic upgrades, and the only competitor where dismal 3-10Mbps DSL service presented a ripe opportunity to steal customers away.

Clyburn – A likely “no” vote.

Charter’s merger approval and its conditions are a sealed deal that was acceptable to Charter and its shareholders and at least offered small token treats to ordinary consumers. Mr. Pai’s willingness to reopen and undo those commitments is just one reason we’ve referred to his regulatory philosophy as irresponsible, nakedly anti-consumer, and anti-competitive. Mr. Pai’s willingness to embrace things as they are comes at the same time most consumers are paying the highest broadband bills ever while also facing an epidemic of usage caps, usage billing, and increasing service and equipment fees. Mr. Pai’s other actions, including ending an effort to introduce competition into the set-top box market, curtailing customer privacy, ending inquiries on usage caps/zero rating, threatening to eliminate Net Neutrality, and reducing the FCC’s already anemic focus on consumer protection makes it clear Mr. Pai is a company man, on a mission to defend the interests of Big Telecom companies and their lobbyists (that also have a history of hiring friendly regulators for high-paying positions once their government job ends.)

That conclusion seems apt considering what Mr. Pai said about Chairman Wheeler’s vision of improving broadband: “one more step down the path of micromanaging where, when, and how ISPs deploy infrastructure.” Missing from his statement are consumers who have spent the last 20 years watching ISPs govern themselves while waiting… waiting… waiting for broadband service that never comes.

Mr. Pai’s proposal needs just one additional vote to win passage. That extra vote is unlikely until President Trump appoints another Republican commissioner. Pai’s proposal isn’t likely to win support from the sole remaining Democrat commissioner still at the FCC — Mignon Clyburn.

Pai

Like President Donald Trump, Ajit Pai is a busy man. He’s spent his first month as FCC chairman gutting his predecessor’s legacy, reversing pro-consumer policies, ending forays into set-top box competition, fair pricing for inmate phone calls, cheap internet access for the poor, ending reviews of data caps and zero rating practices, and threatening to terminate Net Neutrality with extreme prejudice.

No wonder Bob Quinn, AT&T senior executive vice president of external & legislative affairs applauded President Trump’s appointment of Pai, proclaiming he will “quickly and decisively put back in place the commonsense regulatory framework necessary to support the President’s agenda for job creation, innovation and investment. We look forward to working with him and his team and the FCC to support President Trump’s growth agenda.”

AT&T’s only growth agenda is sending customers ever-increasing bills, and with Mr. Pai at the helm of the FCC, they are sure to get their wish.

Over their terms at the FCC under the Obama Administration, Republican Commissioners Ajit Pai and Michael O’Rielly frequently complained their minority voices on the Commission were ignored and newly proposed regulations or policies would come before the FCC so quickly, there was inadequate time for public review. But since Pai teamed up with O’Rielly to abolish many of the most important achievements of his predecessor, Chairman Thomas Wheeler, they have reportedly all but ignored the sole remaining Democrat currently serving on the Commission — Mignon Clyburn.

Last Friday, Clyburn accused Pai of hypocrisy for complaining about policies being rushed for a vote without explanation before doing the same thing himself late last week.

Clyburn

“Today is apparently ‘take out the trash day.’ In an eponymous episode of the West Wing, White House Chief of Staff Josh Lyman stated: ‘Any stories we have to give the press that we’re not wild about, we give all in a lump on Friday . . . Because no one reads the paper on Saturday,'” Clyburn said in a statement. “Today multiple Bureaus retract—without a shred of explanation—several items released under the previous administration that focus on competition, consumer protection, cybersecurity and other issues core to the FCC’s mission. In the past, then-Commissioner Pai was critical of the agency majority for not providing sufficient reasoning behind its decisions.”

Clyburn’s office asked for more than the allotted two days to review a dozen items that suddenly appeared on the FCC’s agenda.

“We were rebuffed,” Clyburn wrote.

Clyburn then accused Pai of violating the Administrative Procedure Act, which requires adequate public notice and a comment period for public input. When she asked the chairman to comply with the “reasoned decision-making requirements of the APA,” she was told ‘No deal.’

Mr. Pai’s regulatory rollback agenda has moved with breathtaking speed, according to some FCC observers. Consumer group Free Press today called Pai’s progress “Orwellian.” Over less than a month, Pai — with the help of Commissioner O’Rielly — has:

• Announced the formation of a Broadband Deployment Advisory Committee that is expected to be stacked with industry stakeholders that will recommend reform the FCC’s pole attachment rules, identify “unreasonable” regulatory barriers to broadband deployment, encourage local governments to adopt “deployment-friendly” policies, and develop a “model code” for local franchising, zoning, permitting, and rights-of-way regulations for telecom infrastructure like cell towers. Few expect the eventual “model code” to stray far from Big Telecom companies’ wish lists;
• Near-unilaterally loosened rules allowing AM radio stations to continue making their presence felt on the overcrowded FM band through the use of low-power FM “translator” stations that rebroadcast the AM station’s programming;
• Changed FCC policies to give broader notice of upcoming agenda items and policy proposals, ostensibly to improve public access to FCC rulemaking procedures. But observers suggest the change will primarily benefit industry lobbyists who will have advance detailed notice about the FCC’s upcoming agenda items, allowing them time to lobby for or against the proposals, or suggest changes;
• Rescinded “Improving the Nation’s Digital Infrastructure,” a policy paper promoting rural broadband deployment and other broadband improvements released just prior to the inauguration of President Trump. On Feb. 3, the FCC set “aside and rescinds the Digital Infrastructure Paper, and any and all guidance, determinations, recommendations, and conclusions contained therein. The Digital Infrastructure Paper will have no legal or other effect or meaning going forward.”
• Rescinded “in its entirety and effective immediately, earlier guidance provided in a March 12, 2014, public notice, DA 14-330, “Processing of Broadcast Television Applications Proposing Sharing Arrangements and Contingent Interests,” which attempted to limit ongoing media consolidation controversies including allowing one TV station to effectively operate and provide content for so-called ‘competing’ stations in a local area.
• Closed the FCC’s investigation into wireless carriers’ zero-rating policies, which allow subscribers free access to “preferred provider content” without it counting against their data plan. Critics call zero rating an end run around Net Neutrality, because providers treat their own content as “preferred.” AT&T charges other content providers to participate in its zero rating program.
• Instructed the FCC’s legal team to stop defending court challenges to its authority to ensure fair and reasonable telephone rates for incarcerated prisoners held captive to using a single carrier to make phone calls at prices much higher than what the public pays. Those rates were as high as $5.70 for a 15-minute in-state collect call placed from an incarceration facility in Kentucky. In that state alone, consumers effectively paid $2.79 million in kickbacks to state prison systems or a county jail. In contrast, a similar 15-minute call placed from a West Virginia jail or prison would cost $0.48. As a result of Pai’s actions, companies like Global Tel*Link, Securus, and Telmate “can continue the practice of price gouging prisoners and their families,” according to Prison Phone Justice;
• Ended former FCC Chairman Wheeler’s attempt to force competition in the cable set-top box marketplace, allowing consumers to take a bite out of the $20 billion cable companies make in rental fees annually. At least 99% of subscribers now pay an average of $231 a year to lease the boxes, even after the company has fully recouped their original cost. Customers in Canada can buy their own set-top boxes and DVRs.
• Killed an expansion of the FCC’s Lifeline program to offer discounted internet access to the poor. Pai reversed approvals made to nine providers — none accused of waste, fraud, or abuse — including Kajeet, Spot On, Boomerang Wireless, KonaTel, FreedomPop, Applied Research Designs, Liberty Cablevision of Puerto Rico, Northland Cable Television and Wabash Independent Networks. Pai later defended the move claiming his predecessor rushed through approval of the providers and he was rescinding those “midnight rules” as current chairman. Many Republicans are seeking a complete elimination of the Lifeline program.
• Rescinded the latest progress report on modernizing the Universal Service Fund’s E-Rate program, which is designed to subsidize telecom services for schools and libraries. It could be the first step in eliminating or dramatically reforming the Fund;
• Gave two violators of the FCC’s rules on properly collecting and reporting information about the source of political advertising aired on stations air a free pass.
• Threw out a white paper from the FCC’s own Homeland Security Bureau advising the agency on cybersecurity issues. Pai doesn’t think the FCC should be involved in cybersecurity, so anything contrary to his agenda of reducing the role of the FCC is likely destined for the nearest wastepaper basket.

FCC letter to AT&T’s Bob Quinn letting him know the company is off the hook with the FCC on zero rating.

“Ajit Pai has been on the wrong side of just about every major issue that has come before the FCC during his tenure,” said Craig Aaron, president of Free Press. “He’s never met a mega-merger he didn’t like or a public safeguard he didn’t try to undermine. He’s been an inveterate opponent of Net Neutrality, expanded broadband access for low-income families, broadband privacy, prison-phone justice, media diversity and more. If Trump really wanted an FCC chairman who’d stand up against the runaway media consolidation that he himself decried in the AT&T/Time Warner deal, Pai would have been his last choice — though corporate lobbyists across the capital are probably thrilled.”