AT&T has made it a whole lot easier to learn who has bought Apple’s transformative iPad.  An AT&T security lapse permitted a third party to access and obtain the e-mail addresses and individual iPad ID’s of all 114,000 current owners of the device.  That third party, Goatse Security, then promptly handed over the entire list — some 2,000 pages long, to Gawker — who exposed some big name iPad owners last week.

More importantly, several high officials in government and the military were also identified as iPad owners, even as the security lapse could have given access to the exact location of any of them.

In the media and entertainment industries, affected accounts belonged to top executives at the New York Times Company, Dow Jones, Condé Nast, Viacom, Time Warner, News Corporation, HBO and Hearst.

Within the tech industry, accounts were compromised at Google, Amazon, Microsoft and AOL, among others. In finance, accounts belonged to companies from Goldman Sachs to JP Morgan to Citigroup to Morgan Stanley, along with dozens of venture capital and private equity firms.

Some of the movers and shakers exposed (Image: Gawker)

In government, affected accounts included a GMail user who appears to be Rahm Emanuel and staffers in the Senate, House of Representatives, Department of Justice, NASA, Department of Homeland Security, FAA, FCC, and National Institute of Health, among others. Dozens of employees of the federal court system also appeared on the list.

While Gawker considers the implications of a widespread security breach and whether Apple or AT&T is to blame, others are focusing more intently on AT&T’s role in the misadventure.

AT&T e-mailed every iPad owner notification of the security breach only after it became public news:

“On June 7 we learned that unauthorized computer ‘hackers’ maliciously exploited a function designed to make your iPad log-in process faster by pre-populating an AT&T authentication page with the email address you used to register your iPad for 3G service. The self-described hackers wrote software code to randomly generate numbers that mimicked serial numbers of the AT&T SIM card for iPad – called the integrated circuit card identification (ICC-ID) – and repeatedly queried an AT&T web address. When a number generated by the hackers matched an actual ICC-ID, the authentication page log-in screen was returned to the hackers with the email address associated with the ICC-ID already populated on the log-in screen.

The hackers deliberately went to great efforts with a random program to extract possible ICC-IDs and capture customer email addresses. They then put together a list of these emails and distributed it for their own publicity.

As soon as we became aware of this situation, we took swift action to prevent any further unauthorized exposure of customer email addresses. Within hours, AT&T disabled the mechanism that automatically populated the email address. Now, the authentication page log-in screen requires the user to enter both their email address and their password.”

AT&T’s damage control has been one-part victim, two-parts minimize the impact, sprinkled with “attack the messenger” all over the top.

AT&T’s characterization of the security team that exposed the security flaw as malicious hackers brought a swift response from Goatse:

AT&T had plenty of time to inform the public before our disclosure. It was not done. Post-patch, disclosure should be immediate– within the hour. Days afterward is not acceptable.

[…] The potential for this sort of attack and the number of iPad users on the list we saw who were stewards of major public and commercial infrastructure necessitated our public disclosure. People in critical positions have a right to completely understand the scope of vulnerability immediately. Not days or weeks or months after potential intrusion.

In addition AT&T says the person responsible for this went “to great efforts”. I’ll tell you this, the finder of the AT&T email leak spent just over a single hour of labor total (not counting the time the script ran with no human intervention) to scrape the 114,000 emails. If you see this as “great efforts”, so be it.

AT&T’s mistakes just keep on coming, ranging from ongoing billing errors amounting to hundreds of dollars to threatening customers with cease and desist orders just for e-mailing concerns to the company.

[flv width=”640″ height=”500″]http://www.phillipdampier.com/video/Bloomberg Goatse Owens Calls ATT Security Flaw Egregious 6-10-10.flv[/flv]

Bloomberg News ran this interview with a representative from Goatse Security that got a bit over-technical for the average Bloomberg viewer.  (4 minutes)

Bresnan Communications, the nation’s 13th largest cable operator with 308,000 customers in Colorado, Montana, Wyoming, and Utah, has been sold to Cablevision for $1.36 billion dollars — $4,300 a subscriber — well above the asking price of one billion dollars, including the company’s debt obligations.

Providence Equity Partners Inc. of Providence, Rhode Island, majority owner of Bresnan unloaded the cable company to help boost its earnings for clients.  Private equity firms like Providence have been suffering in the current economic climate, turning in their worst returns since 2000.  Many are selling off holdings to pay investors.

Bresnan spokesman Shawn Beqaj said the sale had nothing to do with founder William Bresnan’s death last November at age 75.

Bresnan, 30 percent owned by Comcast, today specializes in providing service in the sparsely populated mountain west states that have been ignored by larger companies.  At least 44 percent of Bresnan’s business is in Montana, where 688 of the company’s 1,300 employees work.  But the company’s founder, William Bresnan didn’t start out providing service in any of the states where the company operates today.

The acquisition by Cablevision, known mostly for its suburban New York City-area cable systems, would bring Bresnan’s current owners a considerable bonus over the asking price, and Cablevision (and the debt-financing banks) will pay in cash.

Other bidders included Suddenlink and a company controlled by former cable czar Dr. John Malone.

Cablevision managed to leverage the deal with less than $400 million of its own equity, financing the remaining $1 billion dollars between Citigroup and Bank of America Merrill Lynch in non-recourse debt.  That means if Cablevision’s buyout of Bresnan falters, the banks can only recoup their losses by seizing and selling the acquired Bresnan systems.  They can’t go after Cablevision’s other cable systems or sports ventures to make up the difference.

Considering Bresnan subscribers in the Northern Rockies face little prospect of robust competition, and Bresnan cable broadband can easily exceed broadband speeds offered by telephone rival Qwest, most analysts expect few problems from the deal.

[flv]http://www.phillipdampier.com/video/CNBC Bresnan Acquired by Cablevision 6-14-10.flv[/flv]

CNBC explains the Bresnan-Cablevision Deal.  (3 minutes)

Bresnan Founder’s Story Is Echoed Across the Entire Cable Industry

The late William Bresnan -- Founder, Bresnan Communications

Bresnan’s journey through the cable industry over several decades tells the story of the often-ruthless deal-making, horse-trading, and customer-financed  mergers and acquisitions starting after cable deregulation in 1984.  Rates spiked to pay ever-increasing sums to buy and sell cable properties.  To own a cable system, it was said in the late 1980s, was a license to print money.

Bresnan’s involvement in the cable industry began with a job in the engineering department of a midwestern cable company and moved into management at a number of companies, most now long-gone after waves of consolidation.  Those with cable television dating back to the 1970s may even recall some of the names:

H&B American Cablevision: Operator of rural cable systems, most with around 12 channels, offering residents clear reception of over-the-air television signals.  They had a loyal customer base, stable earnings, but little potential for growth.

TelePrompTer: The nation’s largest urban and suburban cable operator through much of the 1970s, but a 1972 bribery scandal for a cable franchise agreement in Trenton, N.J., lead to bribery and perjury charges for TelePrompTer’s principal owner, Irving Berlin Kahn.  The famous songwriter’s nephew ordered the company to spend nearly everything to help mount his defense.  The TelePrompTer scandal would ultimately force the company to sell itself to…

Group W Cable: Westinghouse acquired the financially-troubled TelePrompTer in 1981.  Group W itself would exit the business by 1986 with an acquisition feeding frenzy among four other cable operators — American Television and Communications Corp.; Tele-Communications Inc.; Comcast Corp. and Daniels & Associates Inc.  Ironically, only Comcast would survive merger-mania intact.  ATC systems eventually became a part of Time Warner Cable.  TCI systems were acquired by Comcast.  Daniels was itself a buyer and seller of cable systems.

Bresnan Communications was founded in 1984, not in the mountain west, but in the upper peninsula of Michigan where Bresnan acquired and ran several small cable systems thanks to the help of cable czar Dr. John Malone, CEO of Tele-Communications, Inc., (TCI).  Millions of Americans are familiar with TCI’s own journey through consolidation, first becoming AT&T Broadband and then later as a part of Comcast.

Over the next 14 years, Bresnan expanded operations with Malone’s help.  At one point Bresnan jointly operated cable systems with TCI in northern Michigan, Wisconsin, Minnesota, Nebraska, Georgia and Mississippi serving approximately 660,000 customers. The company even bought cable systems in post-Communist Poland and in Chile, the latter eventually sold outright to TCI.

Bresnan Customers Benefit from Founder’s Technical Background

What set Bresnan Communications apart from the rest of the smaller players in the industry was the founder’s in-depth understanding of cable technology.  Bresnan understood where the industry was going, and had an insatiable appetite for new technology that would also leverage additional growth in the business.

Bresnan spent heavily to upgrade his cable systems, deploying the hybrid fiber-coaxial cable architecture (HFC) in 1997 which is still in use at most cable systems today.  HFC would set the stage for Bresnan to compete with satellite television’s multi-hundred channels, and would let him sell telephone and broadband service to his customers.

That was unprecedented for smaller cable operators.  In the 1990s, it was still common to find small cable systems running only a few dozen channels.  If these legacy cable systems didn’t upgrade, DISH and DirecTV could eat them for lunch.  For those that would raise the necessary money, upgrades were performed.  For those that couldn’t, many would exit the business, selling their cable systems to larger, better-equipped enterprises.

Buy Low, Sell High

Beyond anything else, Bresnan was a businessman.  He had a track record of acquiring cable systems at fire sale prices and selling them for a tidy profit.  So during the height of the dot.com boom, he could hardly ignore a 1999 call from Microsoft co-founder Paul Allen.  Flush with cash to spend, Allen saw cable systems as a key component of his dream for a “wired world.”  Cable companies owned dozens of networks brimming with content that he believed could help drive people to broadband.  Owning both the content and the pipeline to deliver it could drive up the value of both, and Allen could control both.  He had already established himself as owner of Charter Communications, itself a medium-sized cable operator.

Allen’s cable acquisition shopping spree inflated values of cable systems to all-time highs, finally reaching nearly $5,000 per subscriber in crazed bidding wars.  Allen offered $3.1 billion dollars for Bresnan’s small cable empire.  Bresnan sold.

Bresnan Communications Recreated

By 2003, the dot.com boom was well over and done with, and those high-spending online tycoons saw the value of their acquisitions and enterprises erode away.  For Allen, his much-treasured vision had become a cash-sucking albatross.  Charter Communications’ stock by then had lost 95 percent of its original value.  Consumer protection regulation had also arrived in 2003, putting a stop to subscriber rate increase-fueled bidding wars.  Cable rates had risen 61 percent from the time the industry was deregulated in 1984 until legislative relief took effect in early 2003.  When the Money Party ended, stock prices for cable operators crashed.

Bresnan saw the deflation in the industry as an opportunity to buy his way back in, and started shopping.  That year AT&T Broadband, formerly TCI, found itself considering an acquisition offer from rival Comcast.  AT&T owned cable systems large and small, several of which were in the Northern Rockies, hardly cable’s fast lane.  While Comcast had big plans for AT&T cable systems in larger areas, it would be willing to part with smaller systems acquired as part of the deal.

By the time Bresnan arrived with an offer in hand, cable system values dropped further, and his bid for the roughly 300,000 subscribers that comprise today’s Bresnan Communications would be accepted at the fire sale price of $2,100 per subscriber.

Since the acquisition, Bresnan upgraded its systems, offering speeds up to 15/1 Mbps in its rural service area and maintains a reputation in the industry for running well-managed cable operations.

Ontario County, N.Y.

Ontario County, just south and east of Rochester, N.Y., is unleashing the power of fiber optics after private providers turned their noses up at the rapidly-growing Finger Lakes region.

“We just said we need this so badly, we just did it ourselves,” says Ed Hemminger, president and CEO of Axcess Ontario, a non-profit corporation created by the county government to run the $7.5 million dollar project.  Hemminger appeared on this afternoon’s edition of CNBC’s Power Lunch.

The 180-mile fiber optic network now two-thirds complete is expected to be finished by year’s end.  Hospitals and schools are already leasing capacity on the fiber ring.

Axcess Ontario doesn’t actually provide broadband service to businesses and consumers itself.  Instead it leases capacity to all-comers, inviting them to use the fiber ring to enhance their broadband infrastructure.  The company doesn’t provide residential service, for example, but it could enhance another provider’s ability to deliver service.  Right now, the county is contemplating a wireless Internet service for consumers, if they can find a provider.  Frontier Communications could be a likely contender, considering it already provides a Wi-Fi service in downtown Rochester and in portions of suburban towns like Brighton, Pittsford, and Greece.

Hemminger

Ontario County is one of the bright spots in western and central New York’s difficult economy.  Both residential and business growth continues, despite the recession, particularly in communities like Canandaigua, Victor and Geneva.  Having a state-of-the-art fiber ring enhances the area’s ability to attract new businesses and jobs to the Finger Lakes region, often better known for tourism.  At least that is the plan.

“Honestly every company is an Internet company because they all have to use the Internet,” Hemminger claims.

Having the county build the network was the only prospect for getting it done.

“We can have a Return on Investment of 25 years, while the private sector has to recoup its costs in three to four years,” Hemminger says.

Thanks to Stop the Cap! reader Jeff for sending word.

[flv]http://www.phillipdampier.com/video/CNBC Making Broadband Accessible 6-10.10.flv[/flv]

Ed Hemminger discusses the Axcess Ontario fiber ring project in Ontario County, N.Y., on today’s edition of Power Lunch on CNBC.  (2 minutes)

AT&T is a paid sponsor of the eightWest program, which may have had something to do with those eight minutes of positive coverage.

Last month, a Rochester, N.Y., morning television news show handed over five minutes of airtime in a thinly-disguised advertisement for local phone company Frontier Communications.

WOOD-TV in Grand Rapids took shilling to a whole new level this morning on its hour-long morning lifestyle program eightWest when it handed over nearly eight minutes to promote AT&T’s U-verse service, infomercial-style.

Essentially handing the microphone over to AT&T area marketing manager Dan Wells, the show’s hosts fell all over themselves talking about how wonderful the service was.  Channel 8’s Terry DeBoer had her original AT&T installation personally supervised by Wells, a service ordinary Grand Rapids consumers probably won’t receive.

As the “Cutting Edge” segment progressed, the station ran a chyron including AT&T’s logo and slogan, “Rethink Possible” as Wells talked about all of the service’s claimed benefits.  DeBoer just thought it was all awesome, gushing this sampler of reactions as a technobeat soundtrack pounded away in the background:

• “An exciting new adventure in television!”
• “It really is quite remarkable!”
• “The super-sized DVR is awesome!”
• “What are the other services and features that take U-verse to the next level?”
• “It’s exclusively offered to you by our friends at AT&T.”
• “Thanks to the power of AT&T and all of their services, you can save money.”

After eight minutes of enthusiasm, there was no time left to inform viewers of a slightly relevant fact only visitors to their website might have noticed: AT&T is a sponsor of the eightWest program.

[flv width=”480″ height=”380″]http://www.phillipdampier.com/video/WOOD Grand Rapids ATT U-Verse 6-10-10.flv[/flv]

Spend eight minutes in AT&T’s marketing Universe on WOOD-TV’s morning lifestyle program, eightWest.  (8 minutes)

“If (Comcast) can’t rape and pillage, it’s probably not a great investment.” — Dr. John Malone, former CEO Tele-Communications, Inc. (TCI Cable)

Susan Crawford

The age of content producers blissfully producing websites and ignoring broadband policy is over.

That message comes courtesy of President Barack Obama’s former Special Assistant for Science, Technology, and Innovation Policy, Susan Crawford, who rang warning bells over corporate control of the Internet last week at the Personal Democracy Forum in New York City.

Crawford, now a law professor at the University of Michigan, delivered a presentation arguing that increased corporate dominance over broadband has stalled the Gilded Age of the communications revolution.

Even as broadband becomes an increasingly important component of an American economy in recovery, marketplace concentration and laissez-faire broadband policies have combined to allow a handful of companies to control broadband access, with the potential of limiting access to web services and stalling entrepreneurial online innovation.

Crawford builds her case for a threatened broadband future:

• As of 2010, 75-85 percent of the population will have only one choice of provider capable of delivering 50-100Mbps speeds — their local cable company;
• Major cable systems have clustered their operations and do not compete with each other;
• Verizon has suspended expansion of FiOS, its fiber to the home service, indefinitely;
• Comcast, the nation’s largest cable operator with 24 million customers, 16.3 million of which take their broadband service, seeks a merger with NBC-Universal, providing a built-in incentive to limit broadband distribution of video content to non-subscribers who cut cable’s cord.

[flv width=”640″ height=”380″]http://www.phillipdampier.com/video/Susan Crawford at PdF 10 Rethinking Broadband 6-2-2010.flv[/flv]

Watch Susan Crawford’s presentation warning the tech community about the implications of America’s broadband duopoly given free rein.  (17 minutes)