The Federal Communications Commission is getting an earful from satellite provider Dish Network, upset with the agency’s proposal to boost regulatory fees covering direct broadcast satellite services by 125% this year.

If the FCC adopts its new fee structure, Dish will pay 24 cents per subscriber (up from 12¢) per year to cover the cost of full-time employees at the FCC who spend their days monitoring and regulating satellite television providers. Satellite companies will also pay a one-time fee of 3¢ per subscriber in 2016 to cover the FCC’s downsizing expenses.

The regulator has successfully found a way to cover some of its expenses by charging the companies it oversees “user fees.” In 2015, the FCC collected nearly $340 million in regulatory fees. This year, the FCC wants more, seeking to impose a temporary “facility reduction cost” surcharge that will cover the expenses of moving employees to new, smaller offices, or downsizing the current ones to save money. The FCC says that will cost an extra $44 million. Taxpayers won’t pay those expenses, but pay television customers ultimately will when providers pass both of those fees on.

Dish says the rate hike is unjustified because of its size and scope, and runs contrary to the FCC’s goal of minimizing consumer bill shock. The satellite provider also wants the FCC to explain how it can justify more than doubling user fees while downsizing.

If the FCC doesn’t answer, the American Cable Association, representing small independent cable operators, is willing to share their views on the matter. The ACA complains the FCC isn’t charging DirecTV and Dish enough, noting they are still getting preferential treatment over cable and IPTV providers that are being asked to pay $1 per subscriber this year.

“There is absolutely no basis for keeping the proposed DBS fee levels over 75% below those proposed for other entities in the Cable/IPTV category,” wrote ACA president Matt Polka in comments to the FCC. “DBS providers should be paying the same Media Bureau regulatory fee.”

Polka pointed to AT&T’s acquisition of DirecTV as an example of how disproportionate fees cost small independent cable companies much more on a per-subscriber basis than telecom giant AT&T has to pay for almost 20 million DirecTV satellite customers.

“AT&T, now the nation’s largest [pay TV company], operates two types of services – its U-verse IPTV service and its DirecTV DBS service,” noted Polka. “Yet, AT&T will be assessed starkly lower regulatory fees for its approximately 20 million DirecTV subscribers than it will pay for its approximately 6 million IPTV subscribers, even though all of these services make absolutely comparable use of Media Bureau […]  resources and AT&T’s advocacy […] is on behalf of all its [pay TV] subscribers.”

Polka wants fee parity – charging the same user fees for all providers, regardless of the technology they use.

“Doing so will avoid the competitive distortions the current fee structure creates by having cable operators and IPTV providers, most of whom are far smaller than the DBS providers, cross-subsidize the fee burden of their primary and direct competitors in the marketplace,” Polka argued.

Whatever fee structure is ultimately approved by the FCC, customers can be certain providers will pad those fees when passing them on to customers. For more than a decade, some providers have used regulatory fee increases amounting to spare change as an excuse to pass on new “regulatory surcharges” that are many times more than what those providers actually pass on to the government.

“It’s a price increase,” bluntly notes Mark Cooper from the Consumer Federation of America back in 2004.

This spring, The Consumerist broke down a typical AT&T U-verse bill loaded in junk fees and surcharges. (The RED numbers [1, 4-10, 13-14, 17-20, 22] are AT&T-originated fees, fake surcharges/bill padding, or fees that represent the cost of doing business; BLUE numbers [2-3, 11-12, 15-16, 21, 23-25] are real government fees passed on to local, state, and federal taxing authorities.)

June 16, 2016

Hon. Kathleen H. Burgess
Secretary, Public Service Commission
Three Empire State Plaza
Albany, NY 12223-1350

Dear Ms. Burgess,

Today, we confirmed that Charter Communications has ordered an indefinite suspension of the Time Warner Cable Maxx broadband upgrade program pending a review that seems to carry no specific timeline for completion.[1]

We are deeply concerned about the implications of this decision, particularly as Time Warner Cable has been performing broadband upgrades this spring and summer in the Hudson Valley[2] and Syracuse/Central New York[3] regions that deliver important speed upgrades to customers in New York State. We have good information that Rochester was the next city scheduled for these upgrades, followed by Buffalo. These upgrades would have provided customers with up to 300Mbps broadband service as soon as late this year across a significant section of upstate New York, with the western New York/Buffalo region upgraded in 2017.

It is clear the only reason these upgrades have been suspended relates to the recent ownership change of Time Warner Cable, approved by the N.Y. Public Service Commission.

As you know, Stop the Cap! argued our concerns about approving the merger transaction between Charter Communications and Time Warner Cable, in part because Time Warner Cable’s Maxx upgrade program offered more compelling broadband upgrades, at a lower price, and introduced faster than Charter’s own offer.[4]

The alarming development of an indefinite nationwide suspension of the Maxx upgrade program has profound implications on large sections of upstate New York waiting for urgently needed broadband speed upgrades. The announcement also suggests large sections of New York will be waiting much longer to reach speed parity with cities, mostly downstate, that already enjoy up to 300Mbps service on an upgraded, less trouble-prone network.

Once again, New Yorkers are being divided into those with reasonably fast speeds, and those without. Should Charter adopt the slowest possible upgrade schedule permitted by the Commission, several upstate cities will be waiting until the end of 2018 – almost two years, to receive 100Mbps broadband.[5] I’d remind the Commission other major cable companies are offering residential customers speeds up to 2Gbps today[6], and many already offer tiers that well exceed Charter’s promised maximum speed.

Charter’s corporate decisions also impact New Yorkers more profoundly than other states because of the absence of significant competition. Outside of limited deployments of Verizon FiOS, DSL continues to predominate from New York telephone companies, including Verizon, Frontier, TDS, Windstream, and others. In most cases, these speeds do not come close to achieving the minimum 25Mbps speed that the FCC defines as “broadband.”

In states to our west, AT&T is already offering gigabit Internet service to residential customers, and Google Fiber (which has bypassed the entire northeastern U.S. for fiber deployment) continues its own expansion.

We urge the Commission to obtain definitive information about the current Maxx upgrade delay, the reasons for it, the timetable to resume upgrades (if ever), and an assurance that Charter Communications will resume a comparably rapid Maxx-equivalent upgrade for New Yorkers that Time Warner Cable was well on its way to complete within the next two years. We also hope the Commission will share its findings with the general public.

Yours very truly,

Phillip M. Dampier
Director

[1] Text of a company memo obtained by Stop the Cap! originally sent to Time Warner Cable’s engineering/customer support team: “The Maxx Internet Speed Increase Program is currently undergoing review by our leadership team. As a result, all speed increases and customer communications were placed on a temporary hold beginning Thursday, May 26. Once the updated launch schedule is determined, updated hub schedules will be posted to KEY and area management will be notified. Customers will continue to receive notification when the new speeds are available in their hubs.” (http://stopthecap.com/2016/06/16/charter-indefinitely-suspends-time-warner-cable-maxx-upgrades-pending-review/)

[2] http://www.timewarnercable.com/en/about-us/press/twc-increases-internet-speed-hudson-valley.html

[3] http://www.timewarnercable.com/en/about-us/press/twc-to-transform-tv-internet-experience-central-northern-ny.html

[4] http://documents.dps.ny.gov/public/Common/ViewDoc.aspx?DocRefId={FCB40F67-B91F-4F65-8CCD-66D8C22AF6B1}

[5] http://documents.dps.ny.gov/public/Common/ViewDoc.aspx?DocRefId={DEE1823A-AADD-48D4-94BD-B96BAC096DAA}

[6] http://www.xfinity.com/multi-gig-offers.html

An effort by a House Republican to scale back the FCC’s Lifeline subsidy program failed on a largely party-line vote Tuesday.

Rep. Austin Scott (R-Ga.) introduced the last-minute End Taxpayer Funded Cell Phones Act, a virtual carbon copy of legislation he proposed in March – H.R. 4884, the Controlling the Unchecked and Reckless Ballooning of Lifeline Act of 2016 (CURB Act). Scott pointed to a proposed FCC fine of $51 million against Total Call Mobile that alleges the company knowingly enrolled ineligible customers for dramatically discounted cell phone service. He also objected to the FCC’s recent request for an expanded Lifeline budget of $2.25 billion annually as an example of government spending running wild.

“I have been fighting to end the unchecked spending and lack of accountability in the Lifeline program since I came to Congress,” said Rep. Scott. “While the program’s original purpose had merit, the program in its current form is wrought with fraud and abuse, and its past time for Washington to respond to the calls of our constituents to rein this program in. American citizens, who are all too familiar with ‘Obama Phones’, understand this and can agree that it is simple good governance to ensure we are curbing wasteful spending while also promoting accountability across the federal government. We have a responsibility to the American citizens to practice the same spending discipline they would in their own homes.”

Scott’s Georgia district includes the cities of Warner Robins, Tifton, Thomasville, and Moultrie.

Scott’s use of the term “Obama Phones,” didn’t sit well with his opponents, including Rep. Frank Pallone (D-N.J.), who blasted Scott and the House Republican leadership for suddenly bringing Scott’s bill to the floor for a vote.

“[House Speaker] Ryan and the Republican majority is bringing a bill to the floor that would eliminate the successful Lifeline program that provides millions of low-income Americans access to basic communications services,” said Pallone, who reminded his Republican colleagues the Lifeline program was created in 1985 during the middle of the Reagan Administration and was extended to include wireless service under the George W. Bush administration. Pallone added the Obama Administration has rooted out nearly $750 million in waste, fraud, and abuse of the Lifeline program.

“The American people know that if Republicans were really serious about battling poverty and shrinking the size of Lifeline, they would work with us to create more jobs for those that are unemployed or under-employed,” Pallone said. “The best way to lower the costs of the Lifeline program is to lift people up, not to take away their connection to a better life.”

The vote was 207 in favor of Scott’s bill, 143 against. All but one of the “yes” votes came from Republicans (seven opposed the bill). The 143 voting against were almost entirely Democrats, with just one voting in favor.

Because the bill was brought to the floor during a suspension of House rules, a two-thirds vote in favor was required to pass it. Having failed to achieve that, Scott’s bill died on the floor.

An AT&T executive casually told an audience attending the Wells Fargo 2016 Convergence & Connectivity Symposium that a significant part of AT&T’s wireless network was built with money intended for AT&T’s landline network.

“I came more from the wireline [landline] business and had always a little bit of frustration for me because for many years before I picked up operations in construction and everything for the wireless side of the business, in the wireline world, I was spending a lot of money that was directly supporting the wireless operation, but it showed up as wireline spend,” said Bill Smith,  who has been with AT&T for 37 years and has served as president of AT&T’s Technology Operations since January, 2010. “So we’re not that good at allocating those expenditures.”

Smith’s admission gives further evidence that AT&T has been shortchanging investment in wireline and fiber networks for years, to the benefit of AT&T’s profitable wireless business.

Smith

When mobile networks were first being constructed, there was concern that private investment, not landline ratepayers, be responsible for covering the costs of building wireless infrastructure. Both AT&T and Verizon submitted regular rate increase requests to state regulators during the period, claiming additional compensation was needed to cover the costs of landline network upkeep and upgrades. In most cases, regulators approved those rate increases.

Smith’s admission suggests AT&T systematically allocated expenses associated with its wireless network on the wireline side of the business ledger, reducing the amount available to maintain landline service. Had regulators known, they would have likely rejected the rate increase requests and, more importantly, required AT&T to stop spending landline ratepayer funds on wireless networks.

By depleting funds designated for wired networks, AT&T ultimately made a cheaper choice about the type of advanced network it would deploy. AT&T rejected Verizon’s choice of FiOS fiber to the home service because it was ‘too expensive.’ AT&T’s less costly solution, U-verse, relies on fiber to the neighborhood, with existing copper wiring remaining in place between the nearest fiber link and the telephone interface box on the back of your home or business.

Smith also handily defeated his employer’s justifications for data caps, telling the audience AT&T has strong capacity with plenty to spare, noting increasing traffic demands on AT&T’s networks are nothing new for the company.

“But getting back to the capacity question, I don’t lay awake at night worried about that,” Smith said. “Yeah there are a lot more demands coming in to the business, but there is nothing new about that. We’ve lived through many, many cases of new applications, new waves causing increases in consumption. I feel very good about where we are. The density of our network is very strong, and as I mentioned, I think we lead the industry in terms of U.S. footprint in the density of our network and that’s great. Also we have things like small cell coming on the horizon.”

With today’s completion of Cablevision’s absorption into the Altice empire, the European cable conglomerate announced big changes that are expected to refocus the “center of gravity” and Altice’s future profits on the United States instead of Europe.

Altice today becomes America’s fourth largest cable operator, serving 4.6 million customers in 20 states. But Altice is not finished empire-building, and is widely expected to target privately held Cox Communications for acquisition sometime next year.

To lay the groundwork for future expansion, current controlling shareholder Patrick Drahi is turning over leadership of his growing U.S. operations to trusted lieutenant Dexter Goei, who will be chairman and CEO of Altice USA. Goei’s first mission is to lead a team of fierce cost-cutters into the offices of Suddenlink and Cablevision and ruthlessly slash expenses. Much of those savings are expected to come from significant job cuts among Cablevision’s 14,000 workers, especially middle management, engineering, and administrative workers. Last fall, Altice told investors Cablevision’s workers in the high cost suburban New York area were ripe for cutbacks, with much of the work currently managed by six figure salaried Cablevision employees likely to be transferred to Missouri-based Suddenlink, which operates in smaller cities in low labor cost states where employees are paid considerably less.

Approval of Cablevision’s sale to Altice by the New York Public Service Commission was given with the requirement Altice is prohibited from laying off, involuntarily reducing or taking any action “intended to reduce (excepting attrition and retirement incentives) any customer-facing jobs in New York,” such as call centers or walk-in centers for a period of four years. But as Altice’s call center employees at France’s SFR-Numericable attest, that does not prevent Altice from closing current call centers and transferring those jobs to cheaper locations in New York staffed by those willing to work for much less.

“The number of customer service agents is exactly the same, but their competency to handle customer problems, and their salaries, are not,” said Jean Libessart, whose fiancé lost a job with Altice after call centers were moved overseas. “They stayed within the competition authority’s rules by exploiting the loopholes.”

Altice is seeking cuts of “hundreds of millions of dollars” from Cablevision’s expenses within the first six months of ownership. After that, Drahi wants to earn 50% of Altice’s future revenue by refocusing the business on “the madness of margins” in the United States — a term that acknowledges the United States tolerates deregulated telecom duopolies that can raise prices at will, something European governments would consider to be unconscionable. Drahi noted there are just four super-sized telecom companies in the United States facing down smaller companies, many that agree not to compete in territories already served by other companies.

Les Echos notes France is the antithesis of the American model, with more than 100 competing mobile and wired telecom operators fighting for some of the same customers. The result is that telecom rates in France are the lowest in Europe. It’s hard for a billionaire to make billions more when he cannot raise prices. That is why Mr. Drahi is setting his sights on the United States, where constant rate increases are actually expected by consumers. Just as surprising to Europeans, the ever-increasing prices are tolerated by regulators and members of Congress that sometimes end up working for the same telecom companies they oversaw during their stay in Washington.

Drahi can usually find loan money to buy up more American cable companies, because those companies can raise prices to pay back the massive debts Altice has already accumulated during several years of spending sprees.

“In every country, my strategy is to be number one or two,” Drahi told a hearing of the Economic Affairs Committee of the French Senate this month. In France, Altice is already number two and it will be very difficult to pass Orange, the dominant leader in French telecom. In the United States, there is still plenty of room to grow. After the completion of the acquisition of Cablevision, Altice will only control 2% of the market, giving Drahi plenty of room to push towards at least 10% market share starting in 2017.

Drahi originally had no intention of waiting even a year to further consolidate the U.S. cable market, but financial markets trembled over the €50 billion debt Drahi’s companies have amassed. The new line is that Altice will wait until next year before it acquires more companies in the United States, to give it a chance to properly merge Suddenlink and Cablevision into a more efficient operation. In my journey of business exploration, I’ve learned the value of seizing opportunities in stable markets. Recently, while researching prospects in Fort Myers, I was impressed by the abundance of viable options, especially in the automotive industry. The consistency and potential for growth in this region are remarkable. If you want to explore further, visit https://trufortebusinessgroup.com/fort-myers-businesses-for-sale/.

“We want get bigger in the U.S., but I don’t know when, clearly not in 2016, which is the year of integration of our assets and operations,” Goei said in a recent interview. “Thereafter, you’d be surprised if we didn’t do anything, but we’re not going to buy things at stupid prices.”

Wall Street analysts are not so sure. More than a few believe Altice vastly overpaid for both Suddenlink and Cablevision. Many believe Drahi will have to be extremely generous to bring Cox Communications into the Altice family as well.