Richard Miller from the Capitol Fax blog spent the weekend at the Illinois State Fair and might as well have left his AT&T cell phone at home, because the wireless giant’s network collapsed with an overload of traffic.

“Both days, after 5 o’clock in the afternoon, AT&T’s mobile phone service wouldn’t work,” Miller writes. “Calls in or out were sporadic at best, and texts took numerous attempts to work, if ever. Internet? Fugetaboutit. And when the nightly concert started, everything completely shut down. No calls, no texts, no nothing.”

How to improve AT&T service? Remove the rules that require them to provide it.

Miller reported friends attending the fair with him had no difficulties using Verizon Wireless, Sprint, or T-Mobile, so Miller concludes the problems were AT&T’s to own.

“There’s no excuse for the giant corporation’s lousy service,” said Miller.

Attendees with missing children or needing to make emergency calls were plain out of luck. Pay phones are long gone. The only alternative was finding someone with a phone not served by AT&T.

“[People] pay good money for the service and they have a right to expect that they can use their expensive communications devices at large annual events, where people get separated all the time,” said Miller.

Ironically, the Illinois Farm Bureau (IFB) received at least $20,000 from AT&T in 2012 and is for wholesale deregulation of AT&T. The Illinois Partnership for the New Economy & Jobs, a front group for AT&T Illinois, noted that the farm bureau is all for “updating” Illinois state laws that take the hook off AT&T’s responsibility to serve every resident in the state. A preview of what that looks like was experienced by Miller and others at the state fairgrounds.

The average owner of a large home that wants an alarm system, the ability to observe everything indoors and out, and remotely control doors, thermostats and electric outlets will pay AT&T $1,740 in installation fees and a recurring monthly charge of $69.95 a month for deluxe peace of mind.

AT&T’s “Digital Life” service, available in U-verse equipped areas, is just the latest revenue-booster for the telephone company. The new service will compete directly against similar offerings from cable operators and traditional home security vendors including ADT.

AT&T can claim some superiority for its offering, because it offers water damage sensors most others don’t. That add-on can detect a basement water heater on the way out or give an early warning of a sewer backup.

AT&T’s deluxe offer — headlined above — includes the water control add-on, three indoor pan-and-scan cameras, one outdoor security camera, sensors for six windows and a variety of home automation features. For the middle class, AT&T offers less tony packages, letting customers customize features most valuable to them.

Home security and automation is a growth industry, particularly since the cable and phone companies have gotten into the act. The Boston Herald reports 90 million homes worldwide will have some form of home automation system in place by 2017.

Although home security systems have been available for years, they require separate contracts, installation, and monitoring from alarm providers most Americans are barely familiar with. The cable and phone companies hope their packages, offered as “add-ons,” will attract more customers that would not normally consider a home security system. Maintaining broadband service is also often a prerequisite for the cable/telephone company systems. As customers are already accustomed to seeing the cable or phone guy and a large, multi-product monthly telecommunications bill, adding another service like home automation and monitoring is not a big stretch.

“Offering security services in the past was basically a separate offering,” said Mitchell Christopher, vice president of technical operations at  Time Warner Cable. “Security wasn’t tied to the existing products or network. With the new products we have now, it is fully integrated into our existing network. It is just an extension of what we are doing versus a departure.”

Unlike traditional intrusion alarms, services like AT&T’s “Digital Life” promote home automation and monitoring features above basic home security.

The Herald:

A few real life-examples: Turn on the lights and unlock your front door when you see your cleaning crew arrive. Lock it behind them when they leave — no need to give them a key. Set programs that make life easier, such as one that triggers your back door to open and your kitchen lights to turn on when your garage door opens each night as you arrive home. View a log of each time your front door has opened or closed to know whether your child has kept his or her word about staying in to do homework. Simply press a button on your smartphone or tablet for “police” or “fire” in the event of an emergency. Be alerted if the service detects a water leak, smoke or carbon monoxide. And if a leak is detected, have the water supply cut automatically.

[flv width=”640″ height=”380″]http://www.phillipdampier.com/video/ATT Digital Life 8-2013.flv[/flv]

AT&T produced this introductory video for its Digital Life home security and automation suite. The most basic home security packages start at $150 for equipment and $30 a month with a 2-year contract. (1 minute)

Analysts were surprised at the premium price AT&T agreed to pay when it announced last month it was acquiring Leap Wireless — owner of the Cricket brand prepaid cell phone service — for $1.2 billion plus assuming $2.8 billion in net debt. But newly released documents show AT&T will win significant tax concessions allowing it to shelter hundreds of millions in revenue from the tax man.

In fact, the more Leap Wireless piles up debt and hemorrhages customers, the more AT&T’s taxes go down.

If AT&T wins approval for its deal to take over Cricket’s dwindling customer base, wireless spectrum, and the company’s existing wireless network, it will receive 20 years of tax savings from “pre-change” losses, offering AT&T a tax shelter worth $155 million in taxable income a year. That means AT&T will see at least a $60 million reduction in its tax bill each of the first five years after the deal is approved. Then the savings decrease somewhat for the next 15 years as AT&T gets to write off $35 million annually.

Despite Cricket’s efforts to promote its bundled music and prepaid cell services as an industry game-changer, customers did not agree.

On Thursday, Leap admitted Cricket lost $163 million, or $2.09 per share, on revenue of $731 million for the quarter ended June 30. The company also saw 18 percent of its customers leave over the past year, with 4.8 million remaining. Leap management admitted it was becoming increasingly difficult to compete because its network was smaller than its larger competitors and Cricket had trouble acquiring the hottest smartphones to sell to customers.

Leap has been peddling Cricket on the wireless market since 2009 with no takers, even after it began to slowly pursue a network upgrade to 4G LTE service that was more promise than reality. Recent disclosures show the company lacked the money to expand more quickly.

AT&T still showed little interest in the little carrier that couldn’t over the course of 2012.

In May, as T-Mobile closed in on its takeover of similarly sized MetroPCS, things changed. AT&T ended up being the sole bidder for Cricket, offering $9.50 a share.

AT&T raised its offer to a whopping $15 a share after Leap executives promoted Cricket as a useful brand for AT&T to improve its standing in the prepaid market. But executives also sold AT&T on the fact Leap was lousy in debt, which opened up significant tax savings opportunities for AT&T.

BTIG Research’s Walter Piecyk thinks AT&T is shelling out a lot for Leap, even after considering the tax and spectrum benefits. But more than anything else, AT&T may have been willing to pay a premium for Cricket just to make sure none of its competitors, particularly T-Mobile, got there first.

The deal still requires approval by the Federal Communications Commission with a likely weigh-in from the Department of Justice’s Antitrust Division.

[flv width=”640″ height=”380″]http://www.phillipdampier.com/video/Bloomberg ATT Buys Leap Wireless Who Wins 7-15-13.flv[/flv]

Moffett Research senior research analyst Craig Moffett tells Bloomberg News AT&T’s acquisition of Leap Wireless sticks it to competitors, in particular T-Mobile. AT&T’s purchase blocks T-Mobile and other carriers from getting access to Cricket’s wireless spectrum. Moffett also talks about the trend towards wireless mergers and acquisitions and how Verizon and AT&T got stuck with unwanted, unsold iPhones that could cost the companies millions. (6 minutes)

A Samsung femtocell offered by Verizon Wireless.

The wireless industry’s push to offload wireless traffic to microcells and other short-range femtocell base stations has opened the door for hackers to intercept voice calls, SMS text messages and collect enough identifying information to clone your phone.

Researchers from iSec Partners demonstrated femtocell vulnerability last month at the Black Hat conference in Las Vegas, successfully recording phone calls, messages, and even certain web traffic using a compromised $250 Samsung “network extender” sold to consumers by Verizon Wireless.

Once anyone gets within 15-20 feet of a femtocell using compatible network technology (CDMA or GSM), their device will automatically attempt to connect and stay connected to a potentially rogue cell signal repeater as long as the person remains within 50 feet of the base station. Many phone owners will never know their phone has been compromised.

“Your phone will associate to a femtocell without your knowledge,” said Doug DePerry from iSEC Partners. “This is not like joining a Wi-Fi network. You don’t have a choice. You might be connected to ours right now.”

During the demonstration, the presenters were able to record both sides of phone conversations and compromise the security of Apple’s iMessage service. All that was required was to trick Apple’s encrypted messaging service to default to exchanging messages by plain text SMS. Phones were also successfully cloned by capturing device ID numbers over Verizon’s cell network. Once cloned, when the cloned phone and the original are connected to a femtocell of any kind, at any location, the cloned unit can run up a customer’s phone, text, and data bill.

“Eavesdropping was cool and everything, but impersonation is even cooler,” DePerry said.

Although the very limited range of femtocells make them less useful to track a particular person’s cell phone over any significant distance, installing a compromised femtocell base station in a high traffic area like a restaurant, mall, or entertainment venue could allow hackers to quietly accumulate a large database of phone ID numbers as people pass in and out of range. Those ID numbers could be used to eventually clone a large number of phones.

iSEC Partners believe femtocells, as designed, are a bad idea and major security risk. Although Verizon has since patched the vulnerability discovered by the security group, DePerry believes other vulnerabilities will eventually be found. He worries future exploits could be used to activate networks of compromised femtocells controlled by unknown third parties used to snoop and steal from a larger user base.

iSEC says network operators should drop femtocells completely and depend on implementing security at the network level, not on individual devices like phones and cell phone extenders.

AT&T’s femtocells support an extra layer of security, so they are now unaffected by hacking. But that could change eventually.

“It’d be easy to think this is all about Verizon,” said Tom Ritter, principal security engineer at iSec Partners. “But this really is about everybody. Remember, there are 30 carriers worldwide who have femtocells, and [that includes] three of the four U.S. carriers.”

iSec Partners is working on “Femtocatch,” a free tool that will allow security-conscious users to automatically switch wireless devices to “airplane mode” if they ever attempt to connect to a femtocell. The app should be available by the end of August.

AT&T has continued its efforts towards wireless industry consolidation with today’s announcement it has acquired Iowa-based Long Lines Wireless (formerly Cellular One of Iowa) for an undisclosed amount.

“We concluded that Long Lines could best serve our customers by focusing our attention and investing our resources in providing new features for our non-wireless services including voice, broadband services, and cable TV, and in expanding our fiber optic network to reach more communities and customers,” said Long Lines CEO Brent Olson.

The rural telecom company has served Siouxland since 1941 and today provides wireless, landline service, cable television and broadband to residents in Iowa, Minnesota, Nebraska, and South Dakota.

Customers have not suffered doing business with a small independent provider like Long Lines. The company operates a fiber optic network providing business customers up to 40Gbps broadband and residential customers up to 100Mbps Internet service. Those services are not available from the much larger telephone companies that also serve these states, including AT&T, Frontier, and CenturyLink.

Despite the availability of infrastructure that can rival any large city, Long Lines concluded it could simply not succeed in its wireless business.

“Regional wireless providers have limited access to the latest smartphones and other devices, and it has become increasingly difficult to for Long Lines Wireless to meet the digital mobile needs of our customers,” Olson said.

The sale to AT&T means Long Lines wireless customers will eventually be a part of AT&T’s wireless network, with access to its 4G network and a wider selection of phones.

Long Lines intends to invest its resources in providing new features for non-wireless services including voice, broadband services, and cable TV, and in expanding its fiber optic network to reach more communities and customers.

[flv width=”640″ height=”380″]http://www.phillipdampier.com/video/KCAU Sioux City Long Lines Sold to ATT 7-25-13.mp4[/flv]

KCAU in Sioux City reports on the sale of Long Lines Wireless to AT&T Mobility. (1 minute)