Charter Communications’ new CEO Thomas Rutledge loves Connecticut so much, he is moving the company’s executive headquarters to a new facility in Stamford — just minutes from his tony estate in New Canaan —  at taxpayer expense.

Rutledge has been running Charter, based in St. Louis, largely from Connecticut and a temporary executive suite in New York City since he accepted the position days after quitting as Cablevision’s chief operating officer in December, 2011.

But instead of relocating to St. Louis, Rutledge will force about 100 employees to quit or move to Connecticut, with taxpayers picking up the tab. Charter blamed the move, in part, on the downsizing of St. Louis’ airport which company spokesperson Jessica Hardecke said hampered the ability of the company’s employees to visit its cable systems in 25 states.

Under the terms of the corporate welfare deal, Charter will receive a 10-year loan of $6.5 million financed at 2%, with principal payments deferred for three years. If Charter meets modest job milestone requirements, the loan’s balance will be transferred to state taxpayers who will pay it back in part or in full, depending on Charter’s job growth performance. The company has promised to add up to 200 jobs in Stamford, which will earn them an added bonus. The package allows Charter the opportunity to access up to $2 million in grant funding — $1 million for each additional 50 corporate jobs they bring to Connecticut. The company can also receive $1 million in grants if it adds 100 jobs. The grants are capped at $2 million.

News reports indicate Charter is eyeing 70,000 square feet of premium office space in a 15-story high rise in downtown Stamford shared with UBS Financial Services and Harmon International.

Rutledge has a long history of stubbornly sticking close to home. While an executive at Cablevision, he refused to move closer to the company’s headquarters on Long Island, requiring the cable company to provide a helicopter service that flew him back and forth from Connecticut every day.

Rutledge

Rutledge could have self-financed the entire move out of his personal compensation. His four-year pay package at Charter is worth about $90 million, according to recent filings with the Securities and Exchange Commission.

Two other former senior executives who left Cablevision to join Rutledge at Charter may have known Rutledge would never move to Missouri. Neither Charter’s chief operating officer or chief marketing officer have put their New York City-area homes up for sale. Now they don’t have to.

St. Louis officials were shocked by the decision, and were fuming about the company’s surprise announcement Oct. 2, because nobody gave them an opportunity to make a counteroffer to get Charter’s executives to stay.

Steve Johnson, executive vice president for economic development at the Regional Chamber and Growth Association, wasn’t given a chance to change Charter’s mind either. “You never want to lose corporate headquarters and the cachet that goes with them,” Johnson says. “But I’m not sure there was anything we could do to influence this one.”

County Executive Charlie Dooley was more succinct: “I don’t believe [Rutledge] wanted to come to St. Louis.”

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KMOV in St. Louis reports local officials were unpleasantly surprised with Charter’s sudden announcement, but were partly mollified with promises Charter would hire an additional 300 modestly paid customer service workers in St. Louis (without any taxpayer incentives) between now and the end of the year. (2 minutes)

 [flv width=”640″ height=”380″]http://www.phillipdampier.com/video/KTVI St Louis Charter Moving Headquarters Out of St Louis Area 10-2-12.flv[/flv]

KTVI in St. Louis notes Charter’s executive exit from Missouri has become a political issue, with Republicans complaining the state has to do even more for businesses to keep this from happening again. (2 minutes)

A growing scandal over alleged diversion of British taxpayer funds intended for fiber broadband rollouts has now cost one whistleblower his job, terminated after suggesting British Telecom (BT) is artificially inflating infrastructure expenses.

The Conservative government’s Department for Culture, Media, and Sport (DCMS) oversees £1 billion in public subsidies to improve broadband in Britain. Much of that is earmarked to construct fiber to the neighborhood facilities in smaller towns and villages — the rural subsidy providing the only chance most of these residents have for better broadband service. But a whistleblower inside the DCMS has said the primary government-approved contractor, BT, is artificially inflating its prices — pocketing a growing amount of taxpayer funds instead of enhancing its broadband buildout.

Courtesy: Br0kenTeleph0n3 (click to enlarge)

The whistleblower, identified as Michael Kiely, a DCMS broadband project consultant, was fired after he detailed BT’s ever-growing (and highly confidential) cost estimates to several village and town councils fighting for a better deal from the phone company. The issue has been closely watched by the Br0kenTeleph0n3 blog, which reports on how Britain’s broadband stimulus funding is being spent. The blog reported the DCMS sacked Kiely, apparently for exposing BT’s secret pricing schemes.

“I am getting increasingly concerned at the way in which whistleblowers are being bullied,” Margaret Hodge, chair of the Public Accounts Committee, told the Guardian newspaper while demanding an investigation. “All too often people hide behind commercial confidentiality. This culture denies us the right to know how our money is being spent.”

Many local governments are matching broadband subsidies with local funds to increase the number of homes reached by fiber-enhanced Internet access. The demand for fast broadband is so great in the UK, the initial plan to spend £530 million has now been effectively doubled, with even more money coming from the European Commission and other sources. Britain’s broadband expansion plan envisions reaching as many rural homes as feasible with the available funds. The more funds diverted away from broadband expansion into the pockets of others, the fewer number of homes can be reached.

The enormous amount of available government funding  appears to have caught BT by surprise, and Kiely suspects the company is inventing new fees, while inflating others, to ‘soak up’ the additional money without having to deliver any improvements in service.

Kiely noted BT appeared to be setting  new wholesale rates for fiber cabinets, despite the fact costs vary widely in different regions. Kiely notes that even as BT enjoys economies of scale, the price it charges for rural cabinets appears to be rising, even though costs are declining.

In rural areas, BT is seeking up to £30,000 for each fiber cabinet, despite the fact the average price in Northern Ireland’s recent broadband roll-out was just over £13,000 each.

BT’s estimate for two fiber cabinets in Great Asby, which will service hundreds of residents, was estimated at £60,000, a price Kiely also suggests is inflated.

The phone company has made cost verification nearly impossible with strict, mandatory confidentiality agreements that prohibit local councils from learning BT’s true costs. BT’s non-disclosure agreement also prohibits local governments from comparing notes about what the company charges in nearby communities. The government has approved only two vendors for the government-funded broadband expansion — BT and Fujitsu, with BT winning the overwhelming majority of contracts.

The giant, former state-owned phone company, comparable to AT&T or Bell Canada, can also hide cost reductions achieved from experience rolling out service, economies of scale like volume discounts, and other labor savings. BT’s attempt to create standardized pricing also leaves plenty of room to inflate prices by rolling in unexplained charges like “planning costs,” “availability charges,” and “take up bonuses.”

Despite this, BT says claims it is misspending public funds are completely baseless, and points to its own independent investment in British broadband.

“It is ludicrous that some people are suggesting that we are trying to pass on the full cost of deployment to our public sector partners,” BT said in a statement. “In fact, we are looking at a low double digit year payback in these areas even when the public funds are taken into account.”

Courtesy: Br0kenTeleph0n3 (Click to enlarge)

Conservative party loyalist Maria Miller, recently appointed as the government’s new culture secretary during a cabinet reshuffle, has not commented on the BT controversy. Instead, she has prioritized reducing government “red tape” for providers like BT while also tamping down expectations for the broadband expansion program.

Among her deregulation priorities: scrap the right for local governments to object to the placement of often unsightly broadband street cabinets, force “reasonable” terms on private landowners where necessary infrastructure must be placed or routed across, and sweeping permission to allow virtually anyone to put overhead lines up anywhere they please. All of these objectives heavily favor BT’s interests, according to industry observers.

Miller also recently took pressure off BT to deliver game-changing speeds by redefining “superfast broadband” as “potential headline download access speeds greater than 24Mbps.” That falls far short of the 100Mbps service most expected in return for more than £1 billion in taxpayer subsidies, often directed to BT.

Even more telling, Miller considers 2Mbps broadband speeds adequate: “Our investment will help provide 90% of homes and businesses with access to superfast broadband and for everyone in the UK to have access to at least 2Mbps,” she said.

The European continent, in comparison, is targeting 30Mbps as the bare minimum speed, with at least 50% of Europeans getting 100Mbps service by 2020.

Great Britain’s broadband expansion plan is highly dependent on fiber to the neighborhood (FTTN) technology, with traditional copper phone lines carrying the service the rest of the way into a home or office. Both AT&T’s U-verse and Bell’s Fibe are examples of FTTN technology.

As elsewhere, BT considers 24Mbps a suitable maximum speed for FTTN technology, but most customers will not even achieve that. Just like traditional DSL, distance matters, as does line quality. BT has quietly told most councils the average speed most local residents will actually receive is 15Mbps on average.

[flv width=”640″ height=”372″]http://www.phillipdampier.com/video/Jeremy Hunt Announces Superfast broadband 2010.flv[/flv]

Former Secretary of State for Olympics, Culture, Media and Sport Jeremy Hunt outlining Britain’s superfast broadband initiative in 2010. (4 minutes)

Phillip “You Guys Need a Timeout” Dampier

AT&T and Time Warner Cable are complaining they have gotten a raw deal from Kansas City, Mo. and Kansas City, Ks., in comparison to the incentives Google was granted to wire both cities with gigabit fiber broadband.

“It’s time to modernize our industry’s rules and regulations…so all consumers benefit from fair and equal competition,” read a statement from AT&T.

“There are certain portions of the agreement between Google and Kansas City, Kan., that put them at a competitive advantage compared with not just us but also the other competitors in the field,” said Alex Dudley, a Time Warner Cable spokesman. “We’re happy to compete with Google, but we’d just like an even playing field.”

The Wall Street Journal seemed to suggest Google was getting the keys to both cities, with grants of free office space and free power for Google’s equipment, according to the agreement on file with the cities. The company also gets the use of all the cities’ “assets and infrastructure”—including fiber, buildings, land and computer tools, for no charge. Both cities are even providing Google a team of government employees “dedicated to the project,” says the Journal.

The Google Fiber project was so desired that the local governments rolled out the red carpet. In Kansas City, Mo., for instance, the city is allowing Google to construct “fiberhuts,” small buildings that house equipment on city land at no cost, according to a person familiar with the matter.

The cities are discounting other services, as well. For the right to attach its cables to city utility poles, Google is paying Kansas City, Kan., only $10 per pole per year—compared with the $18.95 Time Warner Cable pays. Both cities have also waived permit and inspection fees for Google.

The cities are even helping Google market its fiber build-out. And both are implementing city-managed marketing and education programs about the gigabit network that will, among other things, include direct mailings and community meetings.

Several cable executives complain that the cities also gave Google the unusual right to start its fiber project only in neighborhoods guaranteeing high demand for the service through pre-registrations. Most cable and phone companies were required by franchise agreements with regional governments to build out most of the markets they entered, regardless of demand.

But the Journal missed two key points:

1. Time Warner Cable has been granted the same concessions given to Google on the Missouri side, and AT&T presumably will also get them when it completes negotiations with city officials on the matter.
2. Both cable and phone companies have the benefit of incumbency, and the article ignores concessions each had secured when their operations first got started.

The Bell System enjoyed a monopoly on phone service for decades, with concessions on rights-of-way, telephone poles and placement. AT&T was a major beneficiary, and although the AT&T of today is not the same corporation that older Americans once knew, the company continues a century-long tradition of winning the benefit of the doubt in both the state and federal legislature. AT&T has won statewide video franchise agreements that give the company the power to determine where it will roll out its more advanced U-verse platform, and enjoys carefully crafted federal tax policies that helped them not only avoid paying any federal tax in 2011 — the company actually secured a $420 million “refund” subsidized by taxpayers.

Cable operators also won major concessions from local governments under pressure from citizens eager to buy cable television. At the time, cable companies were granted exclusive franchises — a cable monopoly — to operate, an important distinction for investors concerned about the value of their early investments. Local zoning and pole attachment matters were either negotiated or dealt with legislatively to allow cable companies the right to hang their wires on existing utility poles. Franchise agreements permitted the gradual roll-out of cable service in each franchise area, often allowing two, three, or more years to introduce service. It was not uncommon for neighborhoods on one side of town to have cable two years before the other side could sign up. That sounds awfully familiar to AT&T U-verse today.

Google’s proposal to build a revolutionary broadband network delivering 1Gbps deserved and got the same type of treatment then-revolutionary phone and cable service won back in the day.

Time Warner Cable also won much the same treatment Google is now getting, and the cable operator has gotten $27,000 in fees refunded and will avoid another $100,000 in permit fees going forward. Time Warner Cable and Google will both receive free traffic control services during network construction — not that Time Warner Cable plans much of a change for customers in either Missouri or Kansas.

AT&T will likely also receive the same treatment, although it would be hypocritical of them to complain that Google gets to pick and choose where it provides service. Large swaths of Kansas City and suburbs are still waiting for U-verse to arrive, and many areas will never get the service. Cable operators had to wire a little further, but also benefited from years of monopoly status and network construction expenses paid off years ago when there literally was no competition.

Those paragons of virtue at Goldman Sachs are appalled Google has such a good relationship with Kansas City officials more than happy to have the gigabit speeds neither AT&T or Time Warner Cable would even consider providing.

Google’s rights “appear to be significantly more favorable than those cable, Verizon or any other fiber overbuilders achieved when striking deals with local governments in the past,” Goldman Sachs analyst Jason Armstrong told the Journal. “We’re surprised Time Warner Cable hasn’t been more vocal in its opposition.”

But then the cable company has secured most of the same benefits Google has, so why complain at all?

In fact, city officials had to browbeat Time Warner to modernize its network in ways it would have not done otherwise without the new agreement.

Both AT&T and Time Warner have every right to be concerned. Their substandard networks and high prices (along with a lousy history of customer service, according to national surveys) put them at a competitive disadvantage if Google does not make any major mistakes. Neither cable or phone company has made any noise about upgrading service to compete, and should customers begin to leave in droves, then both companies may actually have something to cry about.

The Wall Street Journal’s report on the concessions granted to Google wanders off into the Net Neutrality debate for some reason, and misses several important facts reviewed above.  (3 minutes)

Comcast’s porn charged cable bills run into the hundreds of dollars for one 80-year old customer who claims she never ordered them.

An 80-year-old Richmond, Virginia woman has been billed more than a thousand dollars by Comcast for adult pay per view movies she never ordered.

Shirley Mascaro has been fighting with Comcast for nearly a year over an endless series of $13.99 titles that have regularly appeared on her monthly bill since February.

Mascaro not only says she never watched the movies, she has no idea how to order pay per view programming.

Mascaro refused to pay for the movies she did not order, resulting in one bill for $700. Comcast shut off her service, despite regular complaints and promised service credits for the movies.

One young Comcast employee stood in Mascaro’s living room and doubted her veracity when she claimed she was not watching titles like “Xtsy,” “Pant,” and “Juicy.”

“‘Everybody says they don’t order these moves, but they really do,'” Mascaro recalls the Comcast employee telling her.

Another employee offered that perhaps one of Mascaro’s neighbors was stealing her cable.

“Maybe they are but I don’t know,” Mascaro replied. “You need to find out.”

Mascaro suspects Comcast’s cable box might be the culprit. The charges began right after Comcast installed the box on her new television.

With no end in sight to the porn fees, Mascaro contacted WWBT in Richmond and appealed to their consumer reporter for assistance. That quickly got the attention of Comcast, who called the entire matter “an isolated problem.”

Comcast released a statement to NBC12 apologizing to Mascaro and crediting all disputed charges on her account. But Mascaro, and the TV station, are not so sure the charges will not be back. 12 On Your Side reporter Diane Walker promised to keep watching.

Mascaro also wants Comcast to send her a letter just in case the company tries to ruin her credit over the unpaid porn movies.

[flv width=”640″ height=”500″]http://www.phillipdampier.com/video/WWBT Richmond Elderly woman charged hundreds of dollars by Comcast for porn 10-2-12.mp4[/flv]

An 80-year-old Richmond, Va. woman’s year-long dispute over hundreds of dollars in Comcast pay-per-view-porn she says she never ordered may finally be over. WWBT reports.  (3 minutes)

An industry orphan?

Sprint CEO Dan Hesse probably rues the day his Board of Directors pulled the plug on a merger deal that would have combined MetroPCS and Sprint back in February. The merger was abandoned after board members openly worried the transaction would distract Sprint from its network improvement project — dubbed Network Vision — then just getting underway.

The deal with T-Mobile and MetroPCS may have limited Sprint’s takeover options, although analysts say a hostile counteroffer for MetroPCS could still take the small carrier away from T-Mobile.

Hesse himself is a proponent of additional wireless industry consolidation. He believes the current market has too many wireless carriers and the two dominant providers — AT&T and Verizon — enjoy economy of scale Sprint cannot hope to achieve in its current position.

Hesse

Wall Street was more pessimistic about Sprint after the T-Mobile/MetroPCS merger was announced, suggesting they may be an industry orphan, pushed into a corner and running out of options.

Shares of Leap Wireless, the owner of Cricket, rose as much as 17 percent after the T-Mobile deal was announced, signaling Cricket is likely an endangered species. Leap’s cellular network is similar in scope to MetroPCS, although the two companies largely serve different markets. Wall Street’s favorite dance card has Sprint and Leap Wireless as future partners, and Sprint may be forced to acquire the smaller carrier to save face. Leap operates its own modest network of cell towers and has plans to roll out LTE 4G service to its customers. That spectrum could become important to Sprint, especially in the larger urban areas Cricket targets.

An endangered species.

Some Wall Street analysts say deals with MetroPCS, Leap, and other small regional carriers are small potatoes. Many advocate for a much larger merger between Sprint and T-Mobile to more realistically confront the de-facto duopoly of AT&T and Verizon Wireless.

Regulators under the Obama Administration may take a dim view of a merger that combines the third and fourth largest nationwide carriers, but nobody expects much regulatory resistance approving mergers that wipe out MetroPCS and Cricket.

“The problems that Sprint and T-Mobile have are they are not as big as AT&T and Verizon,” Piper Jaffray’s Chris Larsen told Bloomberg News in a phone interview. “They don’t have the scale so therefore it is harder to compete. Increasing your size 25 percent, it helps. But when you are less than half as big as your rival, getting 25 percent bigger narrows the gap, but it does not close the gap.”

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CNBC reports the T-Mobile/MetroPCS deal reignites wireless consolidation and leaves Sprint in a potentially difficult position.  (5 minutes)

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Bloomberg News reports T-Mobile needs more subscribers, but some Wall Street analysts think the company is making a mistake focusing on the prepaid market.  (1 minute)