Wall Street is encouraging Verizon Communications to sell off its landline telephone operations to clear a path for a potentially-profitable merger with British mobile phone company Vodafone Group Plc.

Analysts at Goldman Sachs Group are behind the research report, which suggests Verizon’s recent non-aggression treaty with Comcast and Time Warner Cable makes the sale of Verizon’s landline phone and FiOS fiber to the home network more likely. Verizon will earn a percentage of every cable TV/phone/broadband subscription sold, effectively making Verizon’s own wired network redundant. Potential buyers could include Frontier Communications, CenturyLink, or Windstream, which all have business plans that depend on landline networks fewer Americans are using.

Should Verizon clear away its legacy landline and FiOS networks, Goldman Sachs suggests, a merger with Vodafone would be a “clear fit” for the two companies.

“The remaining wireless and enterprise businesses would have faster growth and a clear fit with Vodafone’s assets and strategy, making it a more attractive merger partner,” Bloomberg News quotes from the report.

“Given that it no longer faces the threat of integrated cable competitors, Verizon could potentially spin off its remaining [landline] assets,” along with “large” pension and benefit liabilities, the Goldman analysts added.

Verizon would also eliminate its ongoing dispute with the two largest unions representing its landline workers — Communications Workers of America and the International Brotherhood of Electrical Workers.  Both unions are still trying to negotiate a new contract with Verizon after a brief, but contentious, summer strike. Verizon Wireless is almost entirely non-unionized.

Vodafone’s share price has been rising recently, perhaps anticipating a potential merger that would give Vodafone a stronger hand in the U.S. marketplace.

Verizon’s investment in its landline network, along with interest in expanding its well-regarded FiOS fiber to the home service, has remained stalled for the past few years.  Recently, the company indicated an interest in moving away from fiber optics to serve broadband customers, and rely on its wireless LTE 4G network instead.

Verizon’s new CEO Lowell McAdam comes from Verizon’s wireless division, and has not shared his predecessor’s enthusiasm for fiber upgrades.

Merger Partner?

While the prospect of an all-wireless future for Verizon may seem good for shareholders, consumers are likely to pay the price:

1. The Justice Department is reviewing the antitrust implications of the non-aggression treaty between Verizon and its cable competitors;
2. The sale of Verizon’s landline network to an independent provider could doom the company’s fiber optic network and limit rural Verizon customers to 1-3Mbps DSL;
3. Verizon Wireless’ prices reflect its market share and lack of strong competition.  The company’s LTE wireless network, although fast, has suffered from reliability problems and is heavily usage-limited.  It may prove unsuitable as a home broadband replacement for rural customers;
4. Reduced competition for telephone, video, and broadband will likely result in higher prices for existing cable subscribers, too.

Verizon is hardly the first phone company to ponder getting out of the phone business.  AT&T has been lobbying to rescind rural universal service requirements for years.  If successful, AT&T could abandon its rural landline network and provide customers with higher-priced cell phone service instead.

[flv width=”640″ height=”380″]http://www.phillipdampier.com/video/CWA Parody of Verizon Video.flv[/flv]

Verizon’s unionized workers are still fighting for a new contract, and released this parody video in response to a company-produced DVD mailed to union workers’ homes.  (3 minutes)

Static isn't just for the UHF dial, it's for powerhouse lobbying groups, too.

While surface reporting on “white space” broadband and “super Wi-Fi” seem to suggest the United States is on the cusp of opening up much of the UHF television dial to wireless broadband, behind the scenes broadband advocates are fretting about being outmaneuvered by the powerful broadcast lobby.  The theory behind “white space” broadband seems simple enough.  Anyone who has flipped channels up and down the UHF dial sees a lot of unused real estate.  While most cities receive 5-10 UHF TV channels, there are dozens of apparently empty channels filled with what seems to be nothing at all. Can’t we make more efficient use of the UHF dial and open the excess to other uses?

The FCC has been studying just that, with the proposition that broadcasters could be relocated closer together or agree to sell their broadcast license and sign off the air for good.  Theoretically, the UHF dial would be reduced to channels 14-30.  Stations on channels 31-51 would have to relocate down the dial to make way for broadband.

That was the plan anyway

Naturally, the National Association of Broadcasters (NAB), the broadcast industry lobbying group, was not happy to learn of this plan, which is still heavily promoted by wireless telecommunications companies.  They quickly argued there were not enough UHF channels left to accommodate every TV station on the air today, and some cities bordering Canada faced losing major stations if the plan was adopted.

In the clash of the lobbying titans, it appears broadcasters have at least temporarily won the upper hand.  Legislation authored by the powerful House Communications Subcommittee Chairman Greg Walden (R-Ore.), would grant the FCC authority to conduct spectrum horse-trading and auctions, but only if the sales take “all reasonable efforts to preserve” the coverage area of impacted broadcast stations.

In the minds of several wireless broadband advocates, “reasonable efforts” kills it. That key passage is open to wide interpretation, which in Beltway language means a full employment program for Washington law firms who will end up letting a judge decide what “reasonable” really means.

Blair Levin

Blair Levin, an attorney who served as chief of staff to FCC Chairman Reed Hundt from 1993 to 1997, where he oversaw the implementation of the disastrous 1996 Telecom Act, is all sour grapes about the latest developments in Congress.  That is to be expected — he was once considered the Obama Administration’s chief “broadband czar.”

“The legislation ties the FCC’s hands in a variety of ways,” Levin tells TVNewsCheck. “It opens it up to litigation risk, which then, in conjunction with the other handcuffs, makes it difficult to pull off a successful auction. The nature of the bill dramatically increases the probability that there will be less spectrum recovered and less money for the [U.S.] Treasury.”

Broadcasters have been legitimately worried about where they might fit within the new, slimmed-down UHF dial.  The more broadcasters packed closer together, the greater the chance of interference and reduced signal coverage for those who happen to live between two cities sharing the same channel number.  The NAB has consistently opposed forcing station-owners’ hands and wants stations compensated for their costs and inconvenience.

Before the first “white space” broadband signal takes to the airwaves, the government will have to set aside at least $3 billion to defray expenses incurred by television stations moving down the dial.  With language that guarantees broadcasters won’t have to suffer from an interference nightmare, FCC engineers will have a much harder time finding enough channels for the number of stations that need to move.  That could mean fewer channel positions up for auction.

Blair believes stations can extract even more by playing the litigation threat card.

“Nobody wants to go to an auction when there is the threat of a judge anywhere having the ability of holding it up,” Blair said. “I believe a good lawyer could find a way to get the question of  whether the FCC took all reasonable efforts in front of a judge. If you are designing the auction and a big law firm shows up and says, ‘If you don’t take care of my single broadcaster, we are going to find a way to get to court.’ That’s a real threat.’’

The Lady Gaga problem

Lady Gaga's wireless microphone malfunction.

Assuming Washington can fling enough cash to soothe the nerves of worried broadcasters, impediments to white space broadband don’t stop with the local Fox station.  The next complication is the wireless microphone issue.  When you see Lady Gaga in her latest outrageous outfit, you probably are not noticing her wireless microphone.  Performers of all kinds use these low power devices that often work over unused UHF spectrum.  Only it may not be unused for long.

Spectrum Bridge, a “white space” database administrator charged with coordinating who is using what frequency for what purpose, understands the challenges of trying to keep track of TV reporters, bands on tour, and other wireless microphone users, who all expect an interference-free experience.  Electric companies and municipalities also plan to utilize white space spectrum to manage smart city and smart grid communications.  A year later, Super Wi-Fi applications that deliver longer distance Wi-Fi service are expected to arrive.

It’s becoming a crowded neighborhood.

Congress’ NAB-friendly, Republican-sponsored bill may be modified substantially in a Democratic-controlled Senate, and there is still plenty of time for lobbyists to work their magic.  But it’s safe to say that those who have waited at least seven years for white space broadband to become a reality will have to wait a little longer.

While you ponder Verizon Wireless’ latest LTE 4G outage or try to convince yourself Sprint really is selling “4G” service from Clearwire, South Korea’s Sunkyoung Telecom (SK Telecom) is deploying new technology to enormously boost wireless Internet speeds to as high as 100Mbps.

SK Telecom has developed new Heterogeneous Network Integration Solution (HNIS) technology that weds 3G/4G service with any open Wi-Fi network to deliver speeds many times faster than North Americans can get from their wireless providers.  The technology is designed to work without a lot of consumer intervention.  For example, HNIS will automatically provision open Wi-Fi access wherever subscribers travel.  The combination of mobile broadband with Wi-Fi works seamlessly as well.  Currently, smartphones can use Wi-Fi or mobile data, but not both at the same time.  HNIS changes that.

While mobile operators cope with spectrum and capacity issues, HNIS can reduce the load on wireless networks, without creating a hassle for wireless customers who used to register with every Wi-Fi service they encountered.  The theoretical speed of an HNIS-enhanced 3G and Wi-Fi connection in South Korea will be 60Mbps when SK Telecom fully deploys the technology this year.  As SK expands the technology to its 4G networks, theoretical maximum speeds will increase to 100Mbps.

SK is so confident in the technology, it plans to equip all of its smartphones with the new technology starting in 2013.

Byun Jae-Woan, CTO of SK Telecom said, “SK Telecom will provide customers with a data service of much greater speed with Heterogeneous Network Integration Solution, which represents one of the company’s world’s top-level network operation technologies. By realizing the speed of fixed-line services with wireless networks, SK Telecom will allow its customers to experience a new and innovative mobile life.”

Operators like AT&T are installing their own Wi-Fi hotspots in heavy use areas to try and offload data traffic to Wi-Fi.  But customers have to make the connection themselves. HNIS quietly handles this process in the background while staying in touch with SK’s 3G and 4G networks to maintain a consistent data connection.

One of the things we have tried to teach readers over the last few years is how important it is to follow the money trail when encountering a group, politician, or researcher counter-intuitively arguing “up is down” or “right is left.”  So when a business columnist in the Press of Atlantic City slammed rural broadband as a service provided “to a group of people who mostly don’t want it,” we started digging:

The FCC claims this effort will give 7 million rural people reliable access to high-speed Internet connections. So the hundreds of millions of urban and suburban Americans who wish their Internet was faster and more reliable will pay for 2 percent of us to get just that.

Or maybe we’ll be paying for redundant, overpriced telecom work by companies that donate to rural politicians.

Federal stimulus spending in response to the recession already included $7.2 billion for this same purpose. An analysis by Navigant Economics of three big projects under that Broadband Initiatives Program found:

Even “areas in which very high proportions of households were already served by multiple existing broadband providers” were eligible for subsidized broadband work.

The author’s suspicion that money was involved in all this was correct, but he completely missed who was boarding the money train.

Navigant Economics, the “research group” that produced the inflammatory report slamming rural broadband funding, happens to count AT&T as one of its important clients.

The group, a subsidiary of Navigant Consulting, provides economic and financial analysis of legal and business issues to law firms, corporations and government agencies.

In fact, Navigant pitches its services to a range of corporate clients:

Navigant Economics provides economic analysis in litigation and regulatory proceedings involving competition issues. Our experts have provided testimony in proceedings before District Courts, the Department of Justice, the Federal Trade Commission, the Federal Communications Commission, the Federal Energy Regulatory Commission, and numerous state Public Utilities Commissions.

We provide economic analysis and testimony in connection with mergers and acquisitions and antitrust claims of:

• Anticompetitive horizontal agreements (price fixing, bid rigging, potential anticompetitive effects of joint ventures)
• Unilateral conduct (predatory pricing, refusals to deal, monopolization via patent fraud)
• Vertical restraints (exclusive dealing, requirement contracting, tying and bundling)

We also offer economic analysis and testimony on issues of price and rate of return regulation, mandatory access, quality of service, and benefit-cost analysis, with especial expertise in regulatory proceedings involving communications and the Internet (software and hardware sectors, network unbundling and “net neutrality” issues affecting telecom and cable firms, retransmission consent and other content-related issues, and the range of wireless spectrum issues) and all types of energy markets.

Phillip "Making Sense, Not Dollars" Dampier

The result is what critics refer to as “dollar a holler research” — bought-and-paid-for-results that coincidentally fit the framework of a client’s public policy agenda.  In this case, AT&T (among other phone companies) has fretted about broadband stimulus funding ever since the Obama Administration made it clear the industry would not collectively control the program or reward themselves at taxpayer expense.  In addition to criticizing the decision-making process, phone and cable companies have objected to numerous applicants who applied for grants to build networks serving communities those companies have ignored or under-served for years.

To say AT&T has no vested interest in the outcome of rural broadband would be the first major understatement of 2012.

Martyn Roetter with MFR Consulting said Navigant was giving a bad name to researchers.

“Navigant Economics as well as other economists in academia and the consulting profession seem increasingly prepared to support arguments in favor of their clients’ desires and goals regardless of whether they are reasonable or preposterous,” Roetter wrote. “Unfortunately this behavior tends to blur the distinction between (a) respectable advocacy with findings based on evidence and rational arguments and (b) indefensible nonsense, discrediting both academics and consultants.”

Navigant spent much of 2011 trying to convince regulators and the public that T-Mobile actually doesn’t compete with AT&T, so there should be no problem letting the two companies merge.  Readers win no prizes guessing who paid for that stunner of a conclusion.  Thankfully, the Department of Justice quickly dismissed that notion as a whole lot of hooey.

Navigant’s second ludicrous conclusion is that there is no rural broadband availability problem.  Navigant has a love affair with slow speed, spotty DSL (sold by AT&T) and heavily-capped 3G wireless (also sold by AT&T) as the Frankincense and Myrrh of rural Internet life.  With those, you don’t need any broadband expansion (particularly from a third party interloper).

“The notion that a nominal maximum speed in a shared radio access network is comparable to a nominal maximum speed of a fixed broadband line to a location is a striking example of ignorance, wilful or otherwise, of the very different operating characteristics and capabilities of these two transmission media,” Roetter soberly observed.

But he knows better.

Roetter

Kevin Post, columnist for the Press of Atlantic City, bought Navigant’s conclusions hook, line, and sinker and repeated them in the press.  In fact, he upped the ante parroting the time-honored provider argument that rural America doesn’t need 21st century broadband because, well, they just don’t want it:

This costly effort is aimed at bringing broadband to a group of people who mostly don’t want it, according to a 2010 Pew Internet survey.

Half of Americans who don’t use the Internet told Pew that the main reason is they don’t find it relevant to their lives.

Only one in 10 nonusers said they would be interested in starting to use the Internet sometime in the future.

Actually, the Pew Internet survey came well before Navigant’s outlandish conclusions, and didn’t directly address the rural broadband availability problem.  Instead, Pew was looking at broadband adoption rates, primarily in places that already have one or more broadband providers.  Pew found what providers have already realized themselves: broadband growth and adoption is slowing; everyone who wants the service in urban America already has it or wants it.  Those that don’t are typically older and lack computers or are too poor to afford the asking price.

Post’s suggestion that a Pew Study concluded rural America does not want broadband service is an exercise in fixing the facts.

That’s the magic of the Dollar-a-Holler Echo Machine.  Big telecom companies hire public policy consultants and researchers to find their way to “scientific” evidence proving their corporate agenda, and then feeds the “facts” and “research” to receptive reporters, astroturf “consumer groups,” and politicians to bolster their case.  It’s not AT&T suggesting there is no rural broadband problem — it’s Navigant Economics.

As Roetter writes, “A basic knowledge of wireless markets exposes the […] indefensible nature of the positions outlined above. A policy based on ‘tell me what you want to hear, pay me, and I will reproduce it all regardless of its merits’ is a disservice to professionals who try to remain objective and independent, i.e. professional.”

AT&T Mobility has agreed to refund Florida wireless customers for a $2.99 Roadside Assistance Plan many never signed up for and didn’t want.

An agreement with Florida Attorney General Pam Bondi could net full refunds for as many as 600,000 Florida customers who discovered they were enrolled in the add-on plan. The agreement requires AT&T to fully refund all charges for those who didn’t ask for the plan and never used it.

“All customers who paid for unwanted services deserve to be made whole, and we have guaranteed that AT&T Mobility will fully refund their money,” the Attorney General said. “Additionally, AT&T Mobility must notify customers via text message of added charges and service cancellation procedures.”

Specifically, AT&T will send a text message to customers five days after enrolling in the option confirming forthcoming charges.  The message will include cancellation instructions.

Customers complained AT&T automatically enrolled them in a 30-day free trial of Roadside Assistance without their knowledge or consent and began charging them for the service when the trial expired.  Some claim they were never given notification of the trial and assumed the charges were part of their cellular service.

In addition to full refunds for Florida customers, AT&T Mobility will:

• Provide prepaid telephone cards with a face value of $550,000 for donation to members of the U.S. military;
• Donate $10,000 to the Florida Law Enforcement Officer of the Year program;
• Pay $1.2 million to the Attorney General’s Office for future enforcement and attorneys’ fees and costs.

Impacted customers will be notified by postcard or letter with further details about the AT&T settlement at a future date.

[Updated 12:35pm EDT 3/21/2012: Please note Stop the Cap! is in no way affiliated with AT&T.  Readers have been leaving comments attached to this article requesting removal/refunds for the Roadside Assistance program. We are not AT&T so we cannot handle these requests.  We recommend you scrutinize your AT&T monthly bill and look for a $2.99 charge labeled “Roadside Assistance.” If you see this on your statement, you -are- being billed for this feature. If you do not see it specified, you are not being billed for it.

Those who have been charged should call AT&T customer service at the number shown on your bill. 

We recommend you follow this procedure:

1. Tell AT&T you never requested this feature.
2. If you have never used this service, ask AT&T to retroactively credit you for -ALL- charges billed to your account all the way back to the first month you were billed for them. This would appear as a credit on a future AT&T invoice.
3. Make sure AT&T removes future charges from your bill as well.

At some point in the future, you will receive a plain-text settlement postcard in the mail from the class action settlement fund. But you can pursue a full refund from AT&T yourself without waiting around for that. Just remember you cannot get your money back telling us about it. You need to contact AT&T directly.]