Retired employees of Embarq, an independent phone company bought by CenturyLink in 2009 for $11.6 billion dollars, are getting a Christmas “gift” they’d rather not receive: a permanently frozen pension.

Following some earlier moves by other telecommunications firms, CenturyLink is now notifying former Embarq employees that it will permanently freeze benefit accruals for employees not represented by unions as of Dec. 31.

“These changes align our retirement benefits closer to those offered by our competitors, many of whom have previously effected similar changes over the past several years,” CenturyLink said in a filing with the federal government.

It estimated that the changes will save the company about $20 million during the next five years.

CenturyLink apparently had $11.6 billion to acquire Embarq, but does not have $20 million to spare to pay former employees legitimate pension benefit accruals after decades of service.

It is not the first time Embarq’s former employees have suffered from benefits downsizing.  In 2008, retirees were notified their health care benefits were being canceled, the company’s non-profit matching gift program was being thrown under the bus, and life insurance benefits for those most likely to need them were being capped at $10,000.

Many retirees, already having lost their savings in the Great Recession, and have no prospects for future employment, cannot afford to replace the lost benefits.  Many are well into their 70s.

A daughter of one retiree reacted to the ongoing parade of canceled benefits and broken promises to retired employees:

Last night my mother called me in tears. Not with tears of sadness but with tears of rage.

She received a letter yesterday telling her that the company that took over the company that she worked at for 25 years is stopping almost all of her retirement benefits.

Now at 70 years old this tough woman who worked almost every day of her life, never taking a dime from anyone is upset and enraged. She raised two children on her own after her divorce and at 37 years of age became one of the first female telephone lineman in Michigan (1974) later moving to and working in Florida.

She worked all those years, for the most part, to build retirement benefits that she could depend upon and that would provide the security she had been promised by the American way of life.

During her retirement years she has watched her peers turn over property and monies to their children so that they could claim poverty and collect more assistance from the government and to avoid loosing property when it comes time to move into a retirement home. She considers this cheating and never considered it.

Now, with her small 401K (that lost over 100,000 a few years ago) and social security) she makes too much for additional medical benefits that others who did not work or that collected welfare can easily get. The margin of error here? About $100 she says.

To say she is angry is an understatement. There is no way that I know of to get other persons affected by this decision to join together than to somehow get some type of exposure to what has happened. Who will fight the system for these folks who, even if they could start some type of legal action, will probably be dead before anything is decided?

Talk about disenfranchised seniors!

Not every retiree will face the prospect of seeing their benefits terminated, however.  Union employees are protected from CenturyLink’s actions, as are Embarq’s former top-floor executives.

Mike Fuller, the retired chief operating officer of Embarq Corp., keeps his package worth $24 million after leaving the Overland Park company.

Fuller received $2.7 million in severance and bonuses and will get $21.4 million in stock and other benefits over the next couple of years, according to documents filed with the U.S. Securities and Exchange Commission.

Dan Hesse, former chairman and chief executive, maintains a compensation package worth $5.9 million in 2006. He received $960,482 in salary, a $1.2 million bonus, various stock awards and other benefits.  He has since gone on to become CEO of Sprint-Nextel.

Thomas Gerke, Embarq’s top lawyer, received $460,558 in salary and other benefits totaling $2.9 million.

Some current CenturyLink employees are also finding their Christmas spirit challenged by news some are being laid off.

In Galesburg, Ill., over a dozen call center employees will keep their jobs through Christmas, but not long after that.

The reason for the layoffs?  “The company just needs to do business better,” said Company Market Development Manager Jack Moore.

“The center’s closing is part of the company’s overall plan to improve costs and gain operational efficiencies, by consolidating centers,” Moore said. “This consolidation allows the company to streamline customer service, and capture the synergies enabled by the merger of Embarq and CenturyLink.”

Qwest’s head of financial matters told Bloomberg News the company’s decision to sell out to CenturyLink made good financial sense because the telecommunications industry needs more industry consolidation.

Chief Financial Officer Joe Euteneuer said the time was right for Qwest to sell operations in the north-central and mountain west region because there were too many competitors in the marketplace.  Euteneuer said the telecommunications market needs to resemble the cable-TV business, which has been heavily concentrated into two huge powerhouses — Comcast and Time Warner Cable.

Qwest’s merger with independent telephone company CenturyLink continues the consolidation underway among independent phone companies not affiliated with AT&T or Verizon Communications.  The merged entity will challenge Frontier Communications’ position in the landline marketplace.  Regulators in Qwest’s service area have been giving cursory review of the proposed merger and the company expects few problems in getting the merger deal approved in every state affected.

Euteneuer

The merged entity, tentatively to be called CenturyLink, has been spending most of its public relations efforts talking up the reshuffling of its management and executive office operations.

CenturyLink is promoting executives to new regional management positions the company unveiled Friday.  CenturyLink’s new regional structure:

• Eastern, headquarters in Wake Forest: President Todd Schafer, current president of Century Link’s Mid-Atlantic region. Member states are Georgia, New Jersey, North Carolina, Ohio, Pennsylvania, South Carolina, Tennessee and Virginia.
• Midwest, headquarters in Minneapolis: President Duane Ring, current president of CenturyLink’s Northeast region; Illinois, Indiana, Iowa, Michigan, Minnesota, Nebraska, North Dakota, South Dakota, Wisconsin.
• Mountain, headquarters in Denver: President Kenny Wyatt, current president of CenturyLink’s South Central region; Colorado, Montana, Utah, Wyoming.
• Southern, headquarters in Orlando: President Dana Chase, current president of CenturyLink’s Southern region; Alabama, Arkansas, Florida, Kansas, Louisiana; Mississippi, Missouri, Oklahoma, Texas.
• Northwest, headquarters in Seattle: President Brian Stading, current vice president of network operations and engineering for Qwest; California, Idaho, Oregon, Washington.
• Southwest, headquarters in Phoenix: President Terry Beeler, current president of CenturyLink’s Western region; Arizona, New Mexico, Nevada.

For both companies’ tens of thousands of employees, there is some trepidation about “cost savings” (translation: job losses) that are also expected from this deal.

In Nebraska, more than one thousand employees remain unsure whether they’ll still have jobs after the merger.

Qwest’s president for Nebraska operations, Rex Fisher, is not waiting around to find out.  He’s leaving, saying CenturyLink’s plan to restructure management roles “weren’t opportunities I was interested in,” the 53-year-old executive said.

A Qwest spokeswoman told the Omaha World-Herald the change in itself will have minimal immediate impact on the workforce level in Omaha.

Joanna Hjelmeland told the newspaper specific changes for Omaha’s workforce will “become more clear down the road,” Hjelmeland said.

“We are combining two companies, and in some instances there are going to be redundancies,” she said. “Eventually there are going to be job reductions as a result of the merger.”

[flv width=”512″ height=”404″]http://www.phillipdampier.com/video/WKBT La Crosse WI CenturyLink moving regional headquarters out of La Crosse 12-1-10.flv[/flv]

WKBT-TV in La Crosse, Wis., reports the city is going to lose Qwest’s regional headquarters, formerly located in La Crosse, as part of the merger shuffle.  (1 minute)

Brian Stading, current vice president of customer operations for Qwest in Denver, is now preparing to relocate to head the regional office in Seattle.  He outlined some of the changes expected to impact Qwest/CenturyLink customers in the region.

“I think you’ll see the continued focus on providing the highest quality service at the best possible price, both from a local phone service as well as from a high-speed Internet perspective and you’ll see a continued emphasis on expanding our broadband capability both in the city as well as in regional areas,” Stading told the Puget Sound Business Journal.

Stading claims the company will be refocusing efforts to improve the reliability of its core business – landline service, and make incremental upgrades to broadband capability and speed.

“A lot of that does overlap with our high-speed broad deployment because any time we have the opportunity to go put in new fiber lines, it just provides additional quality throughout our backbone networks, so the two really do go hand in hand, both the expansion as well as the continued emphasis on reliability,” Stading said.

But there is every indication Stading is referring to middle-mile fiber infrastructure — cable that runs between telephone company central office facilities, and not to individual customer homes.  CenturyLink, like Qwest, relies almost exclusively on DSL service delivered over standard telephone lines for broadband services.  Qwest has also been deploying ADSL 2+ technology, a more advanced form of traditional DSL, in some areas in the Pacific Northwest and mountain west region.  But many Qwest customers have no access to broadband at all, because of the remote areas the phone company serves in many states.

[flv width=”640″ height=”500″]http://www.phillipdampier.com/video/Bloomberg Qwest’s Euteneuer Says Industry Consolidation Was Needed 11-18-10.flv[/flv]

Bloomberg News talks to Joe Euteneuer, Qwest’s CFO about why Qwest merged with CenturyLink.  (4 minutes)

Although not too far from Winston-Salem and Greensboro, Caswell County has a population of just over 23,000 people

In a painful display of callous disregard for the broadband needs of rural North Carolina, where half the state’s population lives, nine Republicans and two Democrats on the House Public Utilities committee voted down a bill to deliver service to 60 percent of Caswell County that currently goes without.

HB2067, introduced by Rep. Bill Faison (D-Orange/Caswell) would have allowed the rural county to provide broadband service to unserved residents and businesses.  What Rep. Faison did manage to put in HB2067 was initiative towards 21st Century technology.  The bill would have authorized Caswell County to install better technology, both up and down, where Centurylink offers slow DSL as the only option.  In introducing the bill, Faison explained that recent broadband data showed only 40 percent of Caswell County had access to broadband.

Already suffering from the exodus of textile jobs that used to provide an economic base for the area, the failure to obtain broadband has proven disastrous to the work of the county’s 21st Century Group, trying to restore Caswell County’s economy with a higher-tech future.  Six years of work was blocked by CenturyLink — the local phone company and 11 legislators, who told residents they don’t deserve anything better than they already have (which is often nothing.)

Without HB2067, Caswell County cannot even apply for federal stimulus broadband grant funds because the state law doesn’t provide specific authority to deliver the service.  Faison’s bill would correct that oversight and encourage public/private partnerships to get busy bringing broadband to the region.

CenturyLink and its top lobbyist Steve Brewer would hear none of it — Goliath was afraid that David would install better technology and force Centurylink to upgrade or hit the road.

Brewer was given more than half the available time for discussion about the proposed bill to fill the ears of committee members with half-truths.

CenturyLink, Brewer claimed, was more than willing to work with the county to provide the kind of speed its business park needed, yet failed to mention its long history of refusing to expand service to unserved areas.  Brewer’s claim that 70 percent of Caswell County is served by CenturyLink doesn’t mean the company offers broadband to all of those customers.  His further claim that 90 percent of those areas include equipment that is “DSL capable” also doesn’t mean those areas are providing the service today, just that they could… someday.  Many factors can disqualify a potential customer from getting DSL service, especially in rural areas where line quality is not always the best.

Bartlett Yancey House Restaurant and Gallery, a famous landmark in Caswell County.

Faison sought to explore exactly what Brewer defined as “broadband” service.  Brewer claimed DSL service offered anywhere from “1.5 to 6Mbps,” admitting speeds decline with distance and is untenable more than three miles from the telephone company switch facility.

Of course, Caswell County’s large rural expanse puts many of the unserved beyond the maximum distance DSL can work without additional equipment.  Many rural areas that can get DSL are typically offered between 768kbps-3Mbps service.  Caswell County is so rural, it met the Rural Utility Service’s (RUS) classic definition of an underserved community.  That allowed the county to technically qualify for first round federal broadband grant funding.

Unfortunately, legislators are not always as informed as they need to be to recognize statements riddled with loopholes and asterisks.

For instance, Rep. Daniel McComas (R-New Hanover) asked whether he could get high speed Internet over a phone line.  Although Brewer answered yes, what qualifies as “high speed” was left unanswered, as was exactly how many Caswell County residents requested DSL service, only to be refused by CenturyLink.  Yes, you can get DSL broadband over a phone line — but that doesn’t mean you will in Caswell County.

“The only definition of high speed Internet in North Carolina is from a statute from 10 years ago,” Faison noted. “You would have to admit that what was high speed Internet 10 years ago is not high speed Internet today.”

Just as the call for a vote was made, Brewer delivered an uninvited closing argument — probably unnecessary since no consumers were invited to speak on the issue.  If you don’t have broadband in Caswell County, 11 legislators on that committee weren’t interested in hearing from you anyway.

Brewer said the bill was completely unnecessary, because “federal broadband grants were no longer available,” and besides, it was unfair competition for the county to deliver broadband service better than what CenturyLink provides.  Of course, broadband grants -are- still available from the RUS, and few on the committee probably understood the irony of a phone company demanding that Caswell County not be allowed to deliver quality broadband service CenturyLink refuses to provide.

The substitute Committee bill would have protected CenturyLink from their fears of "unfair" competition by not allowing the county to build out broadband service where CenturyLink already provides it if it was not better service, but the company remained adamantly opposed to the county providing broadband service even in areas where they refuse to deliver it themselves for fear they would have to offer real broadband to Caswell County.

CenturyLink also claimed the county would have ‘secret insider information’ about CenturyLink’s every move through the permit process.  The glacial pace of the phone company’s broadband expansion is hardly a secret to the residents who live there.  Besides, permits are not required for the phone company to work in their own right-of-way.  Unlike cities who control the rights of way in their corporate limits, the state owns and controls the rights of way going through the unincorporated parts of the County.  Brewer’s comments were intended to scare legislators, not inform them.  It was a flat out lie.

The vote illustrates the disconnect many in the state legislature have about broadband.  Most of those in favor of the of the bill were Democrats mostly from rural sections of the state.  Two of the “no” votes came from Democrats in urban Mecklenburg County, which includes the city of Charlotte.  Representatives Beverly Earle and Becky Carney already have several choices for broadband service where they live.  Shame on them for condemning their rural neighbors in the north to a broadband backwater.

Mecklenburg County legislators were sure in a big hurry a few years back to do the bidding of AT&T, opening the doors to their kind of competition with statewide video franchising.  U-verse, which is available in parts of Charlotte, was supposed to put a stop the relentless rate increases and deliver competition.  So far, they’ve managed to sign up around 13,000 residents out of a potential 4 million plus in North Carolina, and the rate hikes just keep on coming.

The Republicans on the committee voted lock-step against the bill, even those from rural regions of the state.  Most of them are grateful recipients of big telecom money or are not running for re-election.  None of them can be bothered to ponder better broadband for their constituents unless it comes from a company cutting them a campaign contribution check.

When the vote was over, AT&T’s lobbyist Herb Crenshaw warmly shook McComas’ hand and congratulated him for a job well done. AT&T’s next check to McComas’ campaign fund will likely be bigger than the $500 he collected during the first quarter of this year.

The hit job on the broadband needs of rural Caswell County was complete.

The Members of the House Public Utilities Committee Voting Against Better Broadband for Caswell County & The Reasons Why
…and these amounts are just from the 1st quarter of 2010!

Rep. Harold J. Brubaker (R-Randolph) — Big Bucks Brubaker ran to the bank with $4,000 from AT&T, $4,000 from CenturyLink, $2,000 from Time Warner Cable, and $2,000 from Verizon.

Rep. Hugh Blackwell (R-Burke) — Blackwell accepted $500 from AT&T and $250 from Time Warner Cable.

Rep. Becky Carney (D–Mecklenburg) — AT&T and Time Warner Cable both cut checks for $500 each for Ms. Carney.

Rep. Beverly Earle (D-Mecklenburg) — She’s nice at half the price, with a grateful CenturyLink cutting a check for $250.

Rep. W. Robert Grady (R-Onslow) — Zippo.  He’s not running for re-election.

Rep. Jim Gulley (R-Mecklenburg) — Nada.  He’s not running again either.

Rep. Julia Howard (R–Davie/Iredell) — She gets around.  AT&T found her $500, CenturyLink provided a cool $2,000, and Time Warner Cable did even better with $2,500.

Rep. Linda Johnson (R-Cabarrus) — A double mint.  AT&T $500, Time Warner Cable $500.

Rep. Daniel McComas (R-New Hanover) — AT&T gave him $500, Time Warner Cable doubled that with $1,000.

Rep. Tim Moore (R-Cleveland) — Walking around money — AT&T $500, Time Warner Cable $500.

Rep. Wil Neumann (R-Gaston) — AT&T $500, but thanks to this year’s hefty rate hike, Time Warner Cable could afford $1,000 for Mr. Neumann.

Representatives Who Supported Rural North Carolina’s Need for Better Broadband, Voting For HB2067

Rep. Bill Faison (D-Orange, Caswell)

Rep. Kelly Alexander, Jr. (D–Mecklenburg)

Rep. Angela Bryant (D–Nash, Halifax)

Rep. Pricey Harrison (D-Guilford)

Rep. Marvin Lucas (D-Cumberland)

Rep. Nelson Cole (D-Rockingham)

Totals for 2010 (so far) for Telecom Contributions in the North Carolina General Assembly

AT&T $72,740

CenturyLink $51,750

Time Warner Cable $20,450

Verizon $10,500

(All figures are from the North Carolina State Board of Elections website, from candidates filings.)

North Carolina Legislature

We collectively sighed last Wednesday when the Senate Finance Committee temporarily pulled S1209, but the victory is short-lived.  Sources tell us S1209 is scheduled to return this Tuesday, one day after the long Memorial Day weekend.

We are not happy with some of the rumors that have been circulating around the Legislative Building in Raleigh.  One suggests S1209 will be modified into a one year, renewable moratorium on municipal broadband while a joint task force ponders questions about financing of municipal broadband, broadband adoption and speed, and overall competition in North Carolina.  Without a clear sunset provision, the legislature can renew the moratorium indefinitely, assuring incumbent phone and cable companies of a continued easy ride into our wallets.

Much has also been said by Sen. Clodfelter regarding the legality of municipal broadband in North Carolina.  Some of his earlier comments suggest he’d be a proponent for a moratorium while the state legislature thrashes out the legal questions.

But the courts have already effectively dealt with this question and handed victory to municipalities.  Why bother with a moratorium when in 2005, Laurinburg, North Carolina won its court battle against big telecom companies.  The judge ruled:

“Laurinburg’s network is run over fiber optic “wires or cable,” providing a “system” for “transmit[ting]” and “receiv[ing]” electronic signals capable of being converted to “audio” and/or “video” streams of information. See N.C. Gen. Stat. § 160A-319(b). We believe this fits within a broad construction of the definition of a CTS. Therefore, we hold that Laurinburg is acting within its municipal authority to run its network, and was not acting ultra vires in contracting with School Link to provide the network’s ISP service.”

Doesn’t the legislature have better things to do than to spend all of this valuable time doing work for big phone and cable companies?

We need you to again write and call your legislators. We have been told by numerous sources that your input has been very effective in pushing back S1209.  The more North Carolina consumers speak out against this anti-consumer bill, the less likely it will ever become law.

Here are the points you need to raise in your next letter or phone call:

1. Why is the legislature still spending time on this unnecessary, anti-consumer legislation?  S1209 is wanted by large phone and cable companies.  You want your town or city to have every option open to deliver better service if a consensus is reached for it in your community.  The current system already provides effective checks and balances.  We don’t need S1209.
2. Studying broadband issues is fine, but placing a moratorium on municipal broadband projects in the meantime is completely unacceptable.
3. Corning’s plant in Hickory, North Carolina produces 40 percent of the world’s supply of fiber optic cable.  Passing S1209 impedes fiber projects in North Carolina, hurting our own workers and state economy.
4. North Carolina needs all the broadband expansion it can get.  We are ranked 41st out of 50 states.  Passing S1209 preserves mediocre broadband service in our state indefinitely.

For some of you, this will be your third or fourth call or e-mail.  Perhaps it’s time to remind legislators you are becoming increasingly concerned that measures like S1209 continue to be debated.  While Time Warner Cable and CenturyLink/Embarq’s legislative priorities continue to get plenty of time and attention in Raleigh, they don’t get a vote in the next election.  Remind them you do, and your continued support hinges on whether you can feel confident members represents your interests, not those of big cable and phone companies.

Remember the three rules when contacting your legislators:

• Be polite.
• Be persuasive.
• Be persistent.

Well-informed constituents who can defeat industry talking points represents the nuclear option against bad telecommunications legislation.

Now get on the phones and e-mail and get busy.  Remember — one e-mail message per address.  No carbon copies!

Here is the list:

Senator Hoyle's legislation lays the foundation for cable and phone companies to spend hundreds of thousands of subscriber dollars to mail smear campaign pieces like this one from Comcast.

(This piece is written by Jay Ovittore and Phillip Dampier.)

The good news is that all the pushback on an all-out-moratorium on municipal broadband was successful and Senator David Hoyle (D-Gaston) withdrew the idea.  The bad news is he had an even worse idea to replace it.

Hoyle Wednesday unveiled a new draft bill that hopelessly ties up municipal broadband projects into knots of red tape that, if passed into law, will bury municipal broadband projects in North Carolina indefinitely.

Hoyle sprung his telecom-industry-friendly legislation on the public after getting plenty of input and encouragement from the state’s cable and phone companies who already knew what was in it because they helped craft it.

For a retiring state senator who doesn’t have to worry about the next election, what better parting gift can you give to your friends in the cable and phone industry than a bill that preserves the comfortable duopoly they’ve  enjoyed for years.

Hoyle and those supporting the legislation will argue their bill doesn’t ban municipal broadband — it simply places conditions on such projects before they can go forward.  But what are those conditions?

Section One of the draft bill requires local governments to get funding for “external communications services” (ie. municipal broadband) by way of a General Obligation Bond (a GO Bond).  In North Carolina, that requires a taxpayer-funded referendum to be held for public input at the next election.

On the surface, getting public approval for municipal broadband isn’t a bad idea — no local government official expecting to win re-election would ever proceed on such projects without voter support.  But this requirement also gives plenty of advance notice to incumbent providers that a new player could be invading their turf.

We know what that means.  A well-funded opposition campaign to demagogue the project.  Local cable companies can insert an unlimited number of free ads during every advertising break to slam the proposal.  Phone companies can release a blizzard of opposition mailers to convince consumers it’s as scary as Halloween — all tricks and no treats.

How can a local city or county government respond to the misinformation barrage?  They can’t.  Public officials can’t spend taxpayer dollars to promote such projects or refute industry propaganda.  They can’t even financially assist a citizen-run campaign.

That’s a fight with ground rules only Don King could love.

In the end, that leaves ordinary citizens of North Carolina facing down a multi-billion dollar statewide consortium of telecommunications interests hellbent on preserving and protecting the status qu0.

The earlier-discussed moratorium was a brick wall against municipal broadband.  Hoyle’s bill is the Great Wall of China with the logos of AT&T, Time Warner Cable, and CenturyLink plastered all over it.

But wait, there’s more.  To deal with municipal broadband projects that got an initial green light to dare to interfere with the phone and cable industries’ grand business plans, another provision provides a near endless supply additional referendums to get rid of the projects.  Hoyle’s bill actually demands more votes should existing systems need:

• refinancing to reduce the interest rate or restructure existing debt;
• to make repairs to the system’s “fixtures;” and/or
• to upgrade the system to meet subscribers’ needs.

Ponder the insanity:

• The legislation could be interpreted to demand a public referendum if your service goes out.  Can you wait until the next election to get back your cable service?
• If a municipal broadband fiber cable falls in your backyard, does it make a sound?  It won’t, but you will when you learn that cable might not be reattached to the pole until the whole town holds a referendum about it;
• Would you be upset if your local municipal provider could refinance its debt at a much lower interest rate, letting them cut their prices, but they can’t before the next election?
• While cable and phone companies refuse to upgrade their service to levels that would have made such municipal alternatives unnecessary, they also want to make certain the one provider that did meet your needs can’t upgrade… without a public vote.

These systems are not constructed with public tax dollars, but Senator Hoyle wants every citizen in a community, subscriber or not, to ponder the future of a local municipal broadband provider.  It’s like giving AT&T veto power over Time Warner Cable’s channel lineup.  Guess who has to pay for these constant referendums?  Taxpayers.  So while Senator Hoyle complains municipal broadband costs the state tax revenue, his legislation guarantees increased government spending on pointless referendums.  That’s logic only a politician working for the interests of big cable can appreciate.

For the cable and phone companies, and their good friends in the North Carolina legislature, this is their idea of a level playing field.  In reality it’s about as level as a downhill ski run.

Let’s extend that “fairness” out to incumbent cable and phone companies and consider whether you got a vote on:

• Whether or not the cable and phone companies got to put their wires on phone poles plunked down in front of your house;
• Whether or not you wanted either company to dig up your yard to bury their wiring;
• Whether you wanted that giant metal refrigerator-sized metal box installed on your street, in your yard, or on the phone pole you see from your window every day;
• Whether or not you want the cable company to repair Mrs. Jenkins’ problems with HBO up the street whenever it rains or replace the cable the squirrels chewed up;
• What channels and services you want to pay for, which ones you do not, and at what price you need to pay your local phone or cable company.
• What cable or phone company gets to provide service in your community.

Apparently the fairness concept only applies to potential new competitors, not the existing providers.

Let’s also consider the cable television industry didn’t just magically bloom into a multi-billion dollar business without government help.  In the early days of cable television, investors were assured that they were financing a monopoly provider, guaranteed through a franchise agreement process that gave newly built cable companies exclusivity to help repay construction costs.  Franchise wars broke out between 1978 and 1984 as competing companies promised the moon with state-of-the-art two-way cable systems with the capacity to offer 70 or more channels.  The players then included Time’s American Television and Communications Corporation, Warner’s Amex, and Telecommunications, Inc. (TCI).  ATC and Amex would later evolve into Time Warner Cable and TCI became AT&T Cable before being sold to Comcast.  Communities seeking cable television for their residents would later learn a lot of these promises made were promises broken – reneged on by large cable companies with few, if any consequences.

During the Reagan Administration, then-FCC Chairman Mark Fowler bestowed additional deregulation benefits on the cable industry.  The Museum of Broadcast Communications explains:

The Cable Communications Policy Act of 1984 addressed the two issues that still hindered cable television’s growth and profitability: rate regulation and the relative uncertainty surrounding franchise renewals. Largely the result of extensive negotiation and compromise between the cable industry’s national organization, the National Cable Television Association, and the League of Cities representing municipalities franchising cable systems, the act provided substantial comfort to the cable industry’s future.

Its major provisions created a standard procedure for renewing franchises that gave operators relatively certain renewal, and it deregulated rates so that operators could charge what they wanted for different service tiers as long as there was “effective competition” to the service. This was defined as the presence of three or more over-the-air signals, a very easy standard that over 90% of all cable markets could meet. The act also allowed cities to receive up to 5% of the operator’s revenues in an annual franchise fee and made some minor concessions in mandating “leased access” channels to be available to groups desiring to “speak” via cable television.

Additional reforms guaranteed pole attachment rights to the cable industry so they could wire and service their network unencumbered by utility company interference or high pole attachment fees.  Cable consolidation allowed formerly mom and pop cable systems to become part of a cable industry where just a handful of cable companies provide service to the majority of cable households.  Countless millions are spent each year by the industry to lobby state and federal governments to keep the party going without regulatory interference, suggesting competiti0n alone is the only regulation required.

Except when a new competitor enters the market, of course.  Fearing competition from municipal providers who will force cable and phone companies to charge reasonable rates and upgrade service, the best possible solution is to find a way to ban such projects.

Forcing regular referendums and the complexities and expenses associated with them guarantees no community in North Carolina would ever bother with the onerous requirements to launch municipal broadband projects.

That’s not just Jay and I saying that.  What Hoyle has proposed hardly breaks new ground.  It’s the same dog and pony show the industry has brought to other states to stop competition and keep prices high and service slow.

So let’s learn from the painful experiences of others:

First lobbying for legislation requiring referendums and then winning it, SBC (later AT&T) and Comcast used the opportunity to spend more than $300,000 of their subscribers’ money to launch a major misinformation campaign with misleading and inaccurate mailers that successfully fought off a proposition to deliver better and cheaper service through a municipal broadband project in Batavia, Geneva, and St. Charles, Illinois.  Fiber for Our Future documented the whole sordid affair from start to finish as a lesson to others confronting industry-backed referendum requirements.

[flv]http://www.phillipdampier.com/video/unproven.flv[/flv]

Want a preview of the distortion and misinformation-campaign cable and phone providers will bring to stop municipal broadband?  Watch this SBC (today AT&T) executive tell city officials in Illinois that fiber is “unproven,” that the phone company’s DSL speeds are comparable to Comcast Cable, and that consumers don’t need the 3Mbps speed the company was delivering back in 2004 when this video was taken.  “What are you going to do with 20 megabits.  I mean, it’s like having an Indy race car and you don’t have the race track to drive it on.”  (3 minutes)

Longmont, Colorado spent years suffering with bad broadband service from Comcast and Qwest and sought a better alternative with a municipally-run provider.  But then the cable and phone giants spent $200,000 to put a stop to that.  While local subscribers may have preferred that $200,000 be used to reduce their rates, for Comcast and Qwest it was an investment in maintaining future pricing only duopolies can achieve, all while delivering “good enough for you” broadband service to Longmont residents.  In 2006, the Baller Herbst Law Firm collected information on industry-backed barriers to municipal broadband, and the list went on for nine pages.  Many of them sound eerily familiar to what Hoyle proposes (after cable and phone companies whispered time tested, industry proven ideas into his ear).

The city of North St. Paul, Minnesota has advice for states like North Carolina after their own experience with a coordinated industry-backed smear campaign against municipal broadband enabled by legislation similar to what Hoyle proposes:

What should be of interest to all communities was the organized opposition.  It appears that the incumbent providers, industry associations and politically conservative think tanks teamed up to promote negative news stories, do polling and opposition phone calls, provide transportation for identified “no” voters and create web sites.

While we heard some advocates lamenting this high priced anti-municipal fiber effort, this response is something that community leaders must expect and be prepared for.  A strong community education and mobilization effort must be a part of any municipal telecommunications initiative.  A coalition of business owners and residents must be created and maintained that can counter the expected efforts of the incumbent providers.  The benefits of the community-owned network should be documented and promoted so that an overwhelming majority of voters will choose to vote yes.  We hope that, one way or the other, North St. Paul gets the “More, Better Broadband” that the MN Broadband Coalition supports.

Of course, when local communities are banned from spending a nickel on advocacy for their projects, it effectively hands a restraining order to broadband advocates who can’t even get on the playing field, level or otherwise.

Outraged yet?

It will only get worse if Hoyle’s bill ever becomes law.  Residents in communities like Salisbury endured a sampling of the kind of negative campaign this industry will launch wherever municipal broadband competition threatens to appear.  In 2009, residents were hassled with push-polling phone calls from industry-backed astroturf groups claiming to represent ordinary citizens, but were actually little more than sock puppets for big telecom.  Your mailbox will be filled with blizzards of misleading mailers that current cable and phone customers pay for.  If they need more money, they can always raise your rates to cover the difference.  In the end, with the help of elected officials who don’t care about North Carolina consumers, existing municipal projects can bleed themselves dry (later to be used by the industry as “failed examples” to claim such projects are too risky to try) and proposed ones will never see a spade plunged into the soil to bury the first strand of fiber optic cable.

But it’s not all bad news.  It doesn’t have to happen this way.  You can tell your state representative you are watching them like a hawk on this issue.  Any “yes” vote for legislation like that proposed by Senator Hoyle is a no vote for them at the next election.  Let them know you are well aware of the game plan here — it has been tried in other states with similar legislation that is little more than protectionism for big telecom. Tell your elected officials you already have the power to choose whether or not you want these projects simply by voting for or against the elected officials that propose them.  While the concept of a referendum sounds fair on the surface, it’s not when you consider the past experiences of other communities who faced well-funded opposition campaigns, helpless to correct the record or fairly argue their position on the matter.  Providers know that, which is why they advocate this type of legislation in the first place.  It effectively stops competition, stops better service, and stops North Carolina residents from enjoying lower priced cable, phone, and broadband service.

There are a few stand-up representatives of the people of North Carolina who do deserve our gratitude and thanks today.

Rep. Paul Luebke, (D-Durham County) (who co-chairs the Revenue Law Study Committee) [email protected] 919-733-7663 College Teacher

Rep. Jennifer Weiss, (D-Wake County) [email protected] 919-715-3010 Lawyer-Mom

They both will likely face fierce opposition from the incumbent providers and their fellow legislators. Please take the time to thank them for standing with consumers today and for trying to protect the future of North Carolina and its economy.

Stop the Cap! will have video of today’s remarks by both legislators soon.  We hope to follow with a complete video record of today’s events surrounding the anti-competition legislation proposed by Senator Hoyle.  It will serve as a testament to just how much work we have to do to remove legislators who have stopped representing the public interest, and renew our support for those who stand with consumers.

Meanwhile, check out these two delightful pieces paid for by the cable and phone industry, sent to homes where municipal broadband projects faced a referendum in 2003 and 2004.  More than a dozen different mailers were sent to every home in the communities of Batavia, Geneva, and St. Charles, Illinois from phone and cable companies.  Now imagine the repercussions when not one of those communities could respond with their own mailers correcting the record and giving their side of the argument.  There is a reason why special interests spend enormous sums of money to protect their turf, and the battle is over before it even begins when those interests demand the other side not have the opportunity to respond in kind.

What smears do providers in North Carolina have in store for you?

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