Lowell McAdam (right) speaks with Ivan Seidenberg (left). (Courtesy: Fortune)

Ex-Verizon CEO Ivan Seidenberg retired last August, but his paycheck never stopped coming.  In fact, he earned more in 2011 than he did for the last two years he worked for the phone company full time.

The Associated Press reports Seidenberg accomplished what others can only dream about — earning $26.4 million and not having to show up for work.  Even better, that represents a major salary increase for the ex-CEO, who had to make do with only $18.1 million in 2010 and a paltry $17.5 million in 2009.

Seidenberg is the highest paid CEO in the telecommunications industry — even though he no longer works for Verizon as its CEO.  AT&T’s Randall Stephenson only earned $18.7 million last year.  Stephenson actually reports for work every day, although disgruntled shareholders may wish he hadn’t.

Seidenberg’s successor walked into the top floor at Verizon headquarters with a special welcoming gift — $10 million in restricted stock. Lowell McAdam earned $23 million in 2011, despite the company’s efforts to cut $20,000 annually from each Verizon employee’s benefit package as the phone company struggles to reduce costs to “remain competitive.”

The Republican takeover of the North Carolina legislature in 2010 was great news for some of the state’s largest telecommunications companies, who successfully received almost universal support from those legislators to outlaw community broadband service in North Carolina — the 19th state to throw up impediments to a comfortable corporate broadband duopoly.

Dialing Up the Dollars — produced by the National Institute on Money in State Politics, found companies including AT&T, Time Warner Cable, CenturyLink, and the state cable lobby collectively spent more than $1.5 million over the past five years on campaign contributions.  Most of the money went to legislators willing to enact legislation that would largely prohibit publicly-owned competitive broadband networks from operating in the state.

North Carolina consumer groups have fought anti-community broadband initiatives for the past several years, with most handily defeated in the legislature.  But in 2010, Republicans assumed control of both the House and Senate for the first time since the late 1800s, and the change in party control made all the difference.  Of 97 Republican lawmakers who voted, 95 supported HB 129, the corporate-written broadband competition ban introduced by Rep. Marilyn Avila, a legislator who spent so much time working with the cable lobby, we’ve routinely referred to her as “(R-Time Warner Cable).”

Democrats were mostly opposed to the measure: 45 against, 25 for.  Stop the Cap! called out those lawmakers as well, many of whom received substantial industry money in the form of campaign donations.

[flv width=”640″ height=”380″]http://www.phillipdampier.com/video/Community Fiber Networks Are Faster Cheaper Than Incumbents.flv[/flv]

The Institute for Local Self-Reliance pondered broadband speeds and value in North Carolina and found commercial providers lacking.  (3 minutes)

*AT&T’s total includes contributions from BellSouth in 2006 and 2008 and AT&T Mobility LLC. **CenturyLink’s total includes contributions from Embarq Corp.

According to Catharine Rice, president of the SouthEast Association of Telecommunications Officers and Advisors, HB 129 received the greatest lobbying support from Time Warner Cable, the state cable lobbying association — the North Carolina Cable and Telecommunications Association (NCCTA), and CenturyLink.

Following the bill’s passage, the NCCTA issued a press release stating, “We are grateful to the members of the General Assembly who stood up for good government by voting for this bill.”

CenturyLink sent e-mail to its employees suggesting they write thank you letters to supportive legislators:

 “Thanks to the passage of House Bill 129, CenturyLink has gained added confidence to invest in North Carolina and grow our business in the state.”

[flv width=”640″ height=”380″]http://www.phillipdampier.com/video/CenturyLink Frustration.flv[/flv]

A CenturyLink customer endures frustration from an infinite loop while calling customer service. Is this how the company will grow the business in North Carolina?  (1 minute)

Consumers Pay the Price

In North Carolina, both Time Warner Cable and AT&T increased prices in 2011.

After the bill became law without the signature of Gov. Bev Purdue, Time Warner Cable increased cable rates across North Carolina.  CenturyLink’s version of AT&T’s U-verse — Prism — has seen only incremental growth with around 70,000 customers nationwide.  The phone company also announced an Internet Overcharging scheme — usage caps — on their broadband customers late last fall.

Someone had to pay for the enormous largesse of campaign cash headed into lawmaker pockets.  For the state’s largest cable operator — Time Warner Cable — another rate increase handily covered the bill.

In all, lawmakers received thousands of dollars each from the state’s incumbent telecom companies:

• Lawmakers who voted in favor of HB 129 received, on average, $3,768, which is 76 percent more than the average $2,135 received by the those who voted against the bill;
• 78 Republican lawmakers received an average of $3,824, which is 36 percent more than the average $2,803 received by 53 Democrats;
• Those in key legislative leadership positions received, on average, $13,531, which is more than double the $2,753 average received by other lawmakers;
• The four primary sponsors of the bill received a total of $37,750, for an average of $9,438, which is more than double the $3,658 received on average by those who did not sponsor the bill.

Even worse for rural North Carolina, little progress has been made by commercial providers to expand broadband in less populated areas of the state.  AT&T earlier announced it was largely finished expanding its U-verse network and has stalled DSL deployment as it determines what to do with that part of its business.

In fact, the most aggressive broadband expansion has come from existing community providers North Carolina’s lawmakers voted to constrain. Salisbury’s Fibrant has opted for a slower growth strategy to meet the demand for its service and handle the expense associated with installing it.  Wilson’s Greenlight fiber to the home network supplies 100/100Mbps speeds to those who want it today.

In Upside-Down World at the state capitol in Raleigh, community-owned providers are the problem, not today’s duopoly of phone and cable companies that deliver overpriced, comparatively slow broadband while ignoring rural areas of the state.

Key Players

Some of the key players that were “motivated” to support the cable and phone company agenda, according to the report:

Tillis collected $37,000 from Big Telecom for his last election, in which he ran unopposed. Tillis was in a position to make sure the telecom industry's agenda was moved through the new Republican-controlled legislature.

Thom Tillis, who became speaker of the house in 2011, received $37,000 in 2010–2011 (despite running unopposed in 2010), which is more than any other lawmaker and significantly more than the $4,250 he received 2006–2008 combined. AT&T, Time Warner Cable, and Verizon each gave Tillis $1,000 in early-mid January, just before he was sworn in as speaker on January 26. Tillis voted for the bill, and was in a key position to ensure it moved along the legislative pipeline.

The others:

• Senate President Pro Tempore Phil Berger received $19,500, also a bump from the $13,500 he received in 2008 and the $15,250 in 2006. He voted for the bill.
• Senate Majority Leader Harry Brown received $9,000, significantly more than the $2,750 he received in 2006 and 2008 combined. Brown voted in favor of the bill.
• Democratic Leader Martin Nesbitt, who voted for the bill, received $8,250 from telecommunication donors; Nesbitt had received no contributions from telecommunication donors in earlier elections.

The law is now firmly in place, leaving North Carolina wondering where things go from here.  AT&T earlier announced it had no solutions for the rural broadband challenge, and now it and other phone and cable companies have made certain communities across North Carolina don’t get to implement their solutions either.

What You Can Do

1. If you live in North Carolina, check to see how your elected officials voted on this measure, and how much they collected from the corporate interests who supported their campaigns.  Then contact them and let them know how disappointed you are they voted against competition, against lower rates, against better broadband, and with out of state cable and phone companies responsible for this bill and the status quo it delivers.  Don’t support lawmakers that don’t support your interests.
2. If you live outside of North Carolina and we alert you to a similar measure being introduced in your state, get involved. It is much easier to keep these corporate welfare bills from becoming law than it is to repeal them once enacted.  If you enjoy paying higher prices for reduced service and slow speeds, don’t get involved in the fight. If you want something better and don’t appreciate big corporations writing laws in this country, tell your lawmakers to vote against these measures or else you will take your vote elsewhere.
3. Support community broadband. If you are lucky enough to be served by a publicly-owned broadband provider that delivers good service, give them your business.  Yes, it may cost a few dollars more when incumbent companies are willing to slash rates to drive these locally owned providers out of business, but you will almost always receive a technically superior connection from fiber-based providers and the money earned stays right in your community. Plus, unlike companies like CenturyLink, they won’t slap usage caps on your broadband service.

[flv width=”640″ height=”500″]http://www.phillipdampier.com/video/Time Warner Cable – Fiber Spot.flv[/flv]

What do you do when your company doesn’t have a true, fiber to home network and faces competition from someone that does?  You obfuscate like Time Warner Cable did in this ad produced for their Southern California customers. (1 minute)

A Wall Street analyst says Sprint has a 50/50 chance of being forced into bankruptcy, either pulling through a difficult upgrade to LTE 4G and stabilizing its partnership with Clearwire, or sinking under a load of debt incurred by Apple’s iPhone and network upgrade expenses.

Sanford Bernstein Research analyst Craig Moffett downgraded Sprint this morning from “market perform” to “underperform,” noting Sprint’s complicated five year credit default swap financing deal already prices in a 50/50 chance Sprint will be forced into Chapter 11 bankruptcy reorganization.

Moffett told investors he believes Sprint’s near term future can be described in one of two ways:

“In the first, the company successfully navigates its complicated Network Vision upgrade, stabilizes Clearwire‘s financial position, and delivers a compelling 4G product. In the second, some combination of its gargantuan take-or-pay contract with Apple, a hobbled 4G offering, and a stupendous debt burden bring the company to its knees.”

Moffett says Sprint’s biggest risk may come from Apple’s forthcoming 4G LTE iPhone, which he does not believe will work well on Sprint’s network.

“The problem is 4G. Sprint doesn’t have enough free-and-clear spectrum on which to launch a competitive LTE network, and it doesn’t have the money to clear spectrum that’s already in use,” Moffett said. “We expect Sprint’s competitiveness to begin to backslide when LTE becomes the nation’s de facto standard.”

Sprint continues to rely primarily on its troubled partner Clearwire for 4G service, which uses the aging WiMAX standard other carriers abroad are decommissioning.

With the iPhone 5 due later this year, should it provide access to 4G LTE service, Sprint could be in real trouble.  By fall, Sprint’s LTE network is expected to only provide limited coverage in a handful of cities, and on PCS spectrum less suitable for penetrating buildings.  Sprint would be forced to compete against Verizon’s nearly-completed LTE network as well as AT&T’s mixture of LTE and HSPA+ 4G services.  Verizon and AT&T will operate their 4G networks on 700MHz spectrum which can deliver robust signals indoors and out.

“Unfortunately, at this point we simply don’t believe there is any analytical framework that provides strong conviction as to whether Sprint can or cannot avoid bankruptcy over the next four years or so,” Moffett says. “Instead, one is left with this; are the perceived risks rising, or are they falling? We conclude … that risks of bankruptcy are rising, and that perceived risks will rise still further with the release of the first 4G iPhone.”

[flv]http://www.phillipdampier.com/video/CNBC Sprint to Go Bankrupt 3-19-12.flv[/flv]

CNBC speaks with Craig Moffett about the challenges afflicting Sprint’s effort to build a 4G LTE network and how a bankruptcy might affect customers.  (4 minutes)

Won 1.1 million new customers in 2011

Comcast and Time Warner Cable collectively picked up more than 1.5 million new customers in 2011, with most of the growth coming from dissatisfied DSL subscribers seeking better broadband speeds.

Leichtman Research Group, Inc. (LRG) found the eighteen largest cable and telephone providers in the US — representing about 93% of the market — acquired 3 million net additional high-speed Internet subscribers in 2011. Annual net broadband additions in 2011 were 88% of the total in 2010.

The top broadband providers now account for 78.6 million subscribers — with cable companies having over 44.3 million broadband subscribers, and telephone companies having over 34.3 million subscribers.

Stalled growth

Despite AT&T’s position as the second largest Internet Service Provider in the country, the company only picked up 117,000 new customers in 2011.  In contrast, Time Warner Cable, with 6 million fewer customers, added almost a half-million new broadband subscriptions last year.

Frontier Communications, which made broadband a primary target for expansion, has not seen considerable growth either.  The company only added just short of 38,000 new broadband customers last year, almost all getting DSL, often at speeds of 1-3Mbps.

Other key findings include:

• The top cable companies netted 75% of the broadband additions in 2011;
• The top cable companies added 2.3 million broadband subscribers in 2011 — 98% of the total net additions for the top cable companies in 2010;
• The top telephone providers added 750,000 broadband subs in 2011 — 68% of the total net additions for the top telephone companies in 2010;
• In the fourth quarter of 2011, cable and telephone providers added 765,000 broadband subscribers — with cable companies accounting for 82% of the broadband additions in the quarter.

Now serving 10.3 million

“Despite a high level of broadband penetration in the US, the top broadband providers added 88% as many subscribers in 2011 as in 2010,” said Bruce Leichtman, president and principal analyst for Leichtman Research Group, Inc. “At the end of 2011, the top broadband providers in the US cumulatively had over 78.6 million subscribers, an increase of nearly 25 million over the past five years.”

Americans are increasingly treating broadband as an essential “utility” service, as fundamental as electricity or clean water.

The majority of consumers who lack the service either consider it irrelevant in their lives (a factor that increases with the age of the surveyed respondent), cannot obtain service from their provider because of their location, or cannot afford the service.

Sources: The Companies and Leichtman Research Group, Inc.
* LRG estimate
** Includes LRG estimates for Bright House Networks, and RCN
^ Totals prior to Time Warner Cable’s acquisition of Insight completed on 2/29/2012
^^ LRG estimate does not include wireless subscribers
Company subscriber counts may not represent solely residential households
Totals reflect pro forma results from system sales and acquisitions
Top cable and telephone companies represent approximately 93% of all subscribers

Sen. Paul Hornback (R-AT&T)

A Kentucky state senate panel on Tuesday approved a bill admittedly-authored by AT&T that could allow the company to abandon providing basic telephone service in areas deemed not sufficiently profitable.

Senate Bill 12 is just the latest effort by AT&T to end “Universal Service,” the basic principal that all Americans should have equal access to basic landline telephone service.

The proposed legislation would allow the three largest phone companies in Kentucky — AT&T, Windstream, and Cincinnati Bell to abandon customers who, in one possible scenario, do not agree to a more deluxe feature package that includes long distance calling, wireless service, and/or broadband.

“This bill represents a grave threat to continued, stand-alone, basic telephone service for many Kentuckians who don’t have the luxury of access to Twitter and all the things that we in urban areas tend to take for granted,” Tom FitzGerald, director of the Kentucky Resources Council told the Lexington Herald-Leader.

AT&T says allowing it the right to terminate rural landline service would “spur innovation and create jobs.” It would also strip Kentucky of its power to investigate and force resolutions of consumer complaints.

The optics of the bill’s primary sponsor, Sen. Paul Hornback (R-Shelbyville/AT&T), sitting next to the two AT&T executives who authored the bill as he testified before the Senate Committee on Economic Development, Tourism and Labor was not lost on the bill’s opponents.

“It’s obvious who he is really working for,” said our regular Kentucky reader Paul in Louisville.

Daniel, the Stop the Cap! reader who first shared the story with us, is not happy either.

“This infuriates me,” he writes. “If AT&T gets their way, they will have less reason to invest in areas that are underserved or not served at all, and allow them to further push people to their horrific cell service.”

Daniel barely gets DSL from AT&T — 3Mbps if he’s lucky, and most of his neighbors cannot get any broadband from the company because they don’t officially service the area with broadband.  Daniel suspects once AT&T is deregulated further, they will have even fewer reasons to focus on less-populated regions of the state.

Hornback: "Nobody knows better than AT&T what the company needs the legislature to do for it."

“AT&T is my only reliable option – and if I can’t keep their Internet service then I will lose my job,” he says.

In 2006, AT&T helped push through a deregulation measure that stripped the Kentucky Public Service Commission of its ability to oversee prices for telecommunications services in the state. Customers of both AT&T and Cincinnati Bell soon saw price increases after the legislation passed with arguably no improvement in service.

Hornback argues S.12 will help “modernize telecommunications in the state of Kentucky,” without explaining exactly how abandoning customers enhances their level of service.

AT&T says they will not completely exit rural Kentucky if given the power to disconnect its landline network.  It can sell rural customers AT&T cell phone service instead. Critics say that comes at a substantially higher price and offers only limited broadband.

Hornback defended that, suggesting the company is wasting money and resources keeping its current antiquated landline facilities when it might be better spending that money on wireless services.

But customers would face charges starting at nearly $40 a month after taxes and fees for a basic AT&T wireless plan with as few as 200 calling minutes a month.

Hornback got around initial opposition to an earlier measure he introduced — SB 135, by reintroducing essentially the same measure inside another unrelated bill.  Hornback said that was an effort to give the legislation “a fresh start” in light of heated criticism from consumer groups, the AARP, and even Kentucky businesses.

The committee voted 9-1 for Hornback/AT&T’s measure and sent the bill forward to the Senate floor.  The single “no” vote came from Sen. Denise Harper Angel (D-Louisville).

Phone companies in Kentucky

AT&T’s clout in the state capital is unparalleled according to the newspaper:

It employs 31 legislative lobbyists, including a former PSC vice chairwoman and past chairs of the state Democratic and Republican parties, spending about $80,000 last year on legislative lobbying. Its political action committee has given at least $91,000 in state political donations since 2007.

Remarkably, Hornback defended AT&T’s authorship of his bill that would directly benefit the company’s interests.

Nobody knows better than AT&T what the company needs the legislature to do for it, Hornback said.