Phillip “It’s hard to trust a group that so spectacularly flip-flopped on Internet policies when its benefactor AT&T changed its tune” Dampier

When Republican FCC Commisioner Ajit Pai turned up last week at a telecom symposium to warn a more activist FCC could ruin broadband providers’ efforts to charge consumers more money for less service, he was speaking to a very friendly audience.

The conservative Phoenix Center, which ran the event, has been spewing out industry-friendly “research reports” for years that attempt to justify the country’s sky-high broadband pricing. It also promotes a “hands-off” mindset on industry oversight, calling it common sense and consumer-friendly.

Unfortunately for the group and its supporting authors, it has a serious credibility problem — exposed as an industry-funded “think tank” operating as a mercenary research arm for AT&T and other phone companies. In fact, the same group that today generates endless research condemning Net Neutrality had a very different position in 2004 when it published an Op-Ed entitled, “Net Neutrality: Now More Than Ever.”

What changed? Its benefactor. In 2004, AT&T was a competing long distance carrier fighting local phone companies. Today it –is– one of those phone companies. With its Baby Bell owners controlling AT&T’s purse-strings starting in 2006, the Phoenix Center dutifully flip-flopped to maintain continuity with the ‘new AT&T,’ strongly opposed to most forms of broadband regulation.

So it comes as no surprise the Phoenix Center continues pumping out cheerleading “research reports” that attempt to bolster credibility to forces opposing Net Neutrality and supporting an Internet Overcharging free-for-all with the help of usage billing and caps.

One particular bit of nonsense that completely ignores marketplace reality came in Phoenix Center Chief Economist Dr. George Ford’s report, “A Most Egregious Act? The Impact on Consumers of Usage-Based Pricing.”

For example, Ford argues:

A prohibition of differential pricing renders a single price that lies between the low price for the restricted service and the high price for the unrestricted service. Therefore, prohibitions against usage based pricing forces some consumers to pay more for services they do not want or use, while others are allowed to pay less for services they do. The prohibition, in effect, results in a transfer of wealth from one group of consumers to another, and profits are also reduced. Overall consumer welfare is diminished, even though some consumers are better off.

We’re number one… in prices, even with the increasing prevalence of usage-based pricing Ford believes benefits consumers. (Image: CRTC)

But Ford completely ignores the current conditions in today’s broadband market that have made it easy for providers to promulgate an unpopular end to flat rate, unlimited broadband in favor of a highly-flawed, usage-based billing policy:

1. Ford ignores the broadband market is essentially a duopoly for most consumers and effectively a monopoly in rural America. That gives providers what they call “pricing power,” the ability to increase prices at will and change pricing models because consumers are dependent on the service and have limited options to take their business elsewhere;
2. The only “transfer of wealth” involved here is from consumers to providers. While profits soar and costs drop, Ford complains that those using the service more are somehow subsidized by lighter users, when it fact providers enjoy a 90-95% gross margin on broadband. As Time Warner Cable CEO Glenn Britt admitted, the most significant cost attributed on the cable company’s balance sheet for broadband comes from its backbone traffic costs, which are minuscule in contrast to the increasing prices the cable company charges for its broadband service;
3. Consumer welfare is reduced primarily from the high costs charged by providers, made possible by scant competition that would otherwise drive prices downwards, not from expenses associated with broadband traffic;
4. Ford is careful not to advocate for a true usage-based billing system that would be a revenue nightmare for his benefactors. In a strict usage-based pricing model, customers would pay a small fee for infrastructure, support, and equipment expenses and a variable charge based on actual usage. But no provider in the United States advocates for this system. Instead, providers force consumers into tiered broadband plans that include different usage allowances the vast majority of customers will either not exhaust or will exceed, which raises profits even higher with usage overlimit penalties. With no unused usage rollover, most customers are in the same position Ford claims will diminish consumer welfare: paying for service they do not want or use;
5. Most consumers favor unlimited, flat use plans even if they could save money with a usage-constrained pricing model. Since keeping customers happy with a more expensive unlimited plan they like instead of a lower priced plan they don’t want would seem to enhance provider profits. But Ford ignores this reality, perhaps understanding providers are actually laying the groundwork to broadly monetize Internet usage. Whether a provider adopts usage-based billing or a strict cap on usage, which is growing in most households, the inevitable result is still the same: more profits, less cost from constrained usage. Inevitably this will force customers into higher-priced, higher-profit upgrades that deliver a higher usage allowance, again something consumers simply do not want. This is already a reality in the wireless marketplace, and is well-acknowledged by both AT&T and Verizon Wireless.

Although Americans are paying higher cell phone bills than ever before, some of America’s largest wireless providers have been saving a fortune, enjoying near-tax-free status thanks to an economic stimulus package that allowed companies to write off expenses associated with expanding their businesses.

Under accelerated depreciation, both AT&T and Verizon have been able to slash tax obligations by claiming deductions for capital investments most analysts believe they would have made with or without the income tax windfall. Despite this, both companies have raised prices and have cut jobs and employee benefits.

Washington lawmakers are now debating tax policies that could reduce or end corporate subsidies and raise their tax payments.

The stimulus incentives were designed to promote spending and investment by large corporations retrenching in the face of the Great Recession. Through a combination of special interest amendments guaranteed to favor certain businesses and creative accounting, the two largest wireless companies in the country wrote off investments originally planned before the stimulus package was enacted.

Without the corporate welfare package, telecom analyst Craig Moffett predicted AT&T would have paid a 35% tax rate over the past four years, amounting to $29.3 billion in taxes. Instead, it paid $13.3 billion total. Last year it paid 0% — nothing.

Verizon Wireless has skirted around its tax bill thanks to its offshore partner Vodafone. By shifting certain money overseas, and through other creative measures, Verizon ended up paying a 6% tax rate — $1.3 billion total taxes in four years. Not bad for America’s largest wireless operator. Two years ago, Verizon was estimated to have paid nothing at all.

Citizens for Tax Justice and the Institute on Taxation and Economic Policy claim corporate tax subsidies effectively cost taxpayers $14.5 billion for AT&T and $12.3 billion for Verizon Wireless over the past four years. Only one company benefited more than AT&T and Verizon: mortgage underwriter Wells Fargo.

If the ability to take accelerated depreciation were to be withdrawn in current tax negotiations, AT&T and Verizon would both find themselves paying taxes at rates comparable to many upper-middle class Americans.

AT&T would see its tax rate rise from 13.3% in 2013 to 29 percent by 2016. Verizon will pay 25% in 2013 and 27% by 2016. Both companies would still continue to aggressively pursue loopholes and other write-offs, including larger contributions to both companies’ pension plans which would reduce cash liabilities.

For the third year in a row, AT&T is celebrating the holidays by telling more than 100 New Haven-area employees they will be spending a lot more time with their families this Christmas, without a job.

In mid-November, AT&T announced it was cutting 100 telephone operators. Now the company is back for more — telling 106 employees, many hard at work cleaning up storm damage from Hurricane Sandy, their services as AT&T technicians are no longer required.

As shell-shocked employees left AT&T’s New Haven headquarters with “early retirement” papers, the local union representing many of the technicians vowed to fight the layoffs.

“Many of the guys losing their jobs are the ones who go out in trucks and restore your service after a storm,” CWA Local 1298 president Bill Henderson told WTNH-TV. Henderson says the next time your U-verse or phone service goes out in Connecticut, you better be very patient because it could take a lot longer for service to be restored.

AT&T says many of the workers involved were no longer needed as consumers move away from traditional landline and wired service in favor of wireless, but Henderson wondered if that were the case, why were many of his workers forced to work mandatory overtime through much of November restoring service after Hurricane Sandy.

State regulators are already reviewing the performance of utility companies that left many residents with extended outages. Some communities said utilities were woefully unprepared to deal with the storm. Now the union wants the state’s telecommunications regulator to review the layoffs to determine if AT&T’s service in the state will decline further. The impact could be much more than an inconvenience to customers.

Off to the unemployment office we go, unless we’re willing to work elsewhere in the state.

“When we had hurricane Irene, it took our state down economically for a week and a half, and we can’t afford to do that going into the future,” Henderson argues. “We have to do better, we can’t do worse.”

An AT&T spokesman denied the company was laying off any worker, and claimed the company is offering employees access to other positions in other parts of Connecticut.

“The affected employees all have a guaranteed job offer that ensures they will be offered another job in Connecticut,” said spokesman Marty Richter. “All employees declared surplus in Connecticut in the last two years have either found other jobs with the company, continued to work in their current job while awaiting a guaranteed job offer, or elected to take a voluntary retirement package.”

Richter suggested some the affected technicians probably won’t be moved too far away.

“It’s likely that many will be offered jobs as U-verse technicians, in which case they could still be pulled in if needed for network restoration in extreme circumstances like a big storm,” Richter said.

AT&T used to employee at least 4,000 operators in the state of Connecticut alone. Today that number is down to less than 100. When telecommunications companies look for “cost savings,” getting rid of workers or slashing salaries and benefits remain favorite targets.

“It seems like they do it every year at this time,” Henderson said. “This is a company that made $13 billion last year and is on pace to make $17 billion this year and just gave a $2 million bonus to its CEO. They’re important jobs to keep. This is a corporation that only cares about the bottom line.”

[flv width=”640″ height=”380″]http://www.phillipdampier.com/video/WTNH New Haven ATT announces major job cuts 11-30-12.mp4[/flv]

WTNH in New Haven says more than 100 AT&T employees will lose their jobs right before the holidays. It could ultimately affect the quality of your AT&T service, union officials warn.  (2 minutes)

AT&T has once again received the dubious distinction of being America’s worst cell phone company, according to ratings (sub. required) from Consumer Reports.

AT&T’s bottom-of-the-barrel status has become something of an annual tradition in the consumer magazine’s ratings, as the company remains in last place year after year for dreadful performance, poor value, and downright lousy customer service. Its one bright spot: the company’s new 4G LTE service, which gets top marks for speed, although that rating comes before the majority of its customers are on the new network.

Verizon Wireless also took a tumble in the ratings published in the January 2013 issue. Verizon got downgraded for its new Share Everything plan, rated as only a fair value. Verizon’s vaunted customer service also declined significantly.

The highest ratings went to companies many never heard of:

• Consumer Cellular: This company resells AT&T service. The disparity between this top-rated, no contract provider and AT&T demonstrates that a bad customer experience with AT&T’s high prices and poor customer service can topple your ratings across the board. Consumer Cellular will face the same growing pains AT&T’s customers do in congested cities, but their customers seem to tolerate them better;
• U.S. Cellular: Top rated last year, this regional carrier provides service in the Pacific Northwest, Midwest, parts of the East and New England. The carrier, like the southern U.S. provider C-Spire, would probably have been acquired by one of the top-four carriers if the Justice Department seemed willing to accept further market consolidation. Its customers benefit from the company’s independence.
• Credo Mobile: Resells the Sprint network, but delivers superior customer service, which boosts its overall ratings. Formerly known as Working Assets, this progressive organization also enjoys loyalty because customers approve of the political and social causes with which it affiliates.

Overall, the magazine increasingly recommends consumers investigate no-contract or prepaid service plans before signing an expensive 2-year contract with the major four carriers. Pricing changes in 2012 have caused many subscribers to see bills rise, even as perks and benefits continue to erode. Device activation fees, upgrade fees, limits on early upgrades, restricted data plans, and all-or-nothing offerings that deliver (and charge) for features many consumers don’t use much have all reduced the value of contract service.

What keeps most customers coming back to another two-year contract is the chance to grab the hottest new smartphone at a discount. But consumers ultimately pay back whatever they have saved in higher fees over the life of the contract, which may make buying your own device at full price a better value with a no-contract plan.

Veteran Assembly Speaker John Pérez, the Grand Marshal of a parade of incoming lawmakers attending AT&T’s festivities.

The ballots counted and the winners declared, newly elected members of the California State Assembly could have paused a few days to pen thank you notes or call supporters. Despite an uncommonly grueling campaign, there was simply no time for that when some of America’s largest corporations come calling with trips and gifts worthy of the grand prize on a game show.

More than a few consoled themselves (for now) with something closer to home — wiling away several hours inside AT&T’s luxury suite watching a Kings game with a corporate lobbyist.

Welcome to the world of lobbying on the state level — where “oversight,” “accountability,” and “unseemly” are mere words in a dictionary.

After a historic independent, bipartisan panel redrew California’s electoral districts without the usual political gerrymandering, a number of new faces are headed to Sacramento to do the people’s business. That represents trouble for AT&T and other major corporate interests, who promptly flooded the freshman class with offers of free trips, luxury suites, golf outings, and other “educational opportunities.”

“‘Hey guys, line up and receive your gifts,'” Bob Stern, former chief counsel to the state Fair Political Practices Commission half-joked to a reporter for the Los Angeles Times.

California’s electoral reform was supposed to discourage state lawmakers from finding themselves representing the interests of major corporate benefactors above those of the voters that elected them, but loopholes are everywhere.

The state Democratic party provides cover for legislators with their hands in the goody bag. Veteran Assembly Speaker John Pérez (D-Los Angeles) led the unseemly parade of a dozen newly-elected lawmakers to AT&T’s informal shindig at the Sleep Train Arena, where their host — the chief lobbyist for AT&T in California — was standing at the door waiting to shake hands. Ethical violation? Not a chance.

The rule that lawmakers must not take more than $420 in gifts per year was easily sidestepped by redefining the gathering as a state Democratic Party event, not one sponsored by AT&T.

That allowed freshman Jim Frazier, representing Oakley, to confuse his time at AT&T’s Luxury Lounge with an open town hall. Frazier told the newspaper the time with AT&T corporate officials was “a great opportunity to start meeting the people who worked so hard to represent their districts.”

Jose Medina, the incoming assemblyman from Riverside readily agreed, noting that spending time with corporate lobbyists was “part of my job” and that it would have no impact on his decisionmaking, with the exception of pondering another plate of AT&T’s Clams Casino or holding out for the next round of Hot Cheese Puffs.

The face time is a golden opportunity for company lobbyists to “educate” freshman lawmakers about the issues, at least the way companies like AT&T see them.

If sports with AT&T isn’t exciting enough, lawmakers can select from a wide menu of vacationing alternatives, ranging from trips to Hawaii paid for by tobacco lobbyists and Big Pharma, or jet-setting to Brazil bankrolled in part by Chevron.

Philip Ung, an advocate with Common Cause, was unimpressed with the freshman defense for racking up corporate frequent flyer miles.

“They have obviously convinced themselves that the people’s business is best solved poolside with mai tais in hand,” he told the Times. “Congress [on the federal level] banned this type of travel years ago.”