AT&T’s attempt to avoid oversight and enforcement of consumer protection laws by the Federal Trade Commission (FTC) failed in a federal appeals court Monday, overturning a 2016 decision that agreed with AT&T the FTC could not oversee or punish AT&T for its business practices.

In a unanimous 11-0 decision by the Ninth Circuit Court of Appeals, the court found AT&T’s interpretation of a law it said gave the Federal Communications Commission exclusive authority to regulate and oversee “common carrier” telecom companies was overly broad and based on a misinterpretation of the law. The decision means the FTC will continue to pursue AT&T in court to secure relief for AT&T’s wireless customers that the FTC claims were misled by AT&T’s unlimited data plan that was not truly unlimited.

“The phrase ‘common carriers subject to the acts to regulate commerce’ thus provides immunity from FTC regulation only to the extent that a common carrier is engaging in common-carrier services,” the court ruled Monday. In laymen’s terms, the judges found that the FCC does have the regulatory authority to oversee common carrier services like basic telephone service, but the law does not prevent other government agencies like the FTC to oversee AT&T’s conduct in non common-carrier services.

The FTC and the FCC both argued that allowing AT&T and the 2016 lower court opinion to stand would create a regulatory loophole through which virtually any corporation with even the slightest ownership stake in a common carrier telecommunications company could escape all oversight and enforcement of consumer protection laws.

The dispute began in 2014, when the FTC sued AT&T in court for intentionally throttling wireless internet speeds of millions of AT&T customers hanging on to their legacy unlimited data plans.

The FTC’s complaint alleged that the company failed to adequately disclose to its customers on unlimited data plans that, if they reached a certain amount of data use in a given billing cycle, AT&T reduced – or “throttled” – their data speeds to the point that many common mobile phone applications – like web browsing, GPS navigation and watching streaming video –  become difficult or nearly impossible to use.

“AT&T promised its customers ‘unlimited’ data, and in many instances, it has failed to deliver on that promise,” said former FTC Chairwoman Edith Ramirez in 2014. “The issue here is simple: ‘unlimited’ means unlimited.”

According to the FTC’s complaint, AT&T’s marketing materials emphasized the “unlimited” amount of data that would be available to consumers who signed up for its unlimited plans. The complaint alleged that, even as unlimited plan consumers renewed their contracts, the company still failed to inform them of the throttling program. When customers canceled their contracts after being throttled, AT&T charged those customers early termination fees, which typically amount to hundreds of dollars.

The complaint accused AT&T of violating the FTC Act by changing the terms of customers’ unlimited data plans while those customers were still under contract, and by failing to adequately disclose the nature of the throttling program to consumers who renewed their unlimited data plans.

AT&T responded in court asking the case be dismissed, arguing that the FTC could not bring a case against AT&T because, as a common carrier, only the FCC has jurisdiction over the company.

The case was largely decided on whether Congress intended to exempt common carrier companies from FTC oversight based on their “status” or their “activities.” AT&T argued the law clearly gave companies deemed to be common carriers a blanket exemption from FTC oversight. The FTC argued Congress only intended to exempt the specific common carrier “activities” or services sold by a company from FTC oversight, not the entire company. The three-judge panel of the Court of Appeals agreed with AT&T’s view, affirming AT&T’s claim it was untouchable by the FTC and dismissed the FTC’s lawsuit.

Judge Kozinski, questioning AT&T: “I’m regulated by the FTC and I don’t like it. I go out and I buy a small, money-losing common carrier. Do I say, ‘bye bye FTC,’ under your reading of the statute?”

The decision was a stunner in D.C. regulatory circles and opened a chasm-sized loophole for almost any company to completely escape the FTC’s oversight and enforcement of consumer protection laws just by providing a single common carrier service (or acquiring a small phone company that does) to secure blanket immunity. The FTC appealed the decision before the Ninth Circuit Court of Appeals.

Both the FTC and at least one judge hearing the federal agency’s appeal saw the potential impact of the earlier 2016 decision immediately.

“I’m regulated by the FTC and I don’t like it,” Judge Alex Kozinski said to AT&T’s attorney. “I go out and I buy a small, money-losing common carrier. Do I say, ‘bye bye FTC,’ under your reading of the statute?”

The FTC warned if AT&T’s view was upheld, any company could buy a common carrier and violate federal consumer protection laws with no recourse for consumers and no available FTC enforcement action.

This week’s decision, called “common sense” by the judge who wrote the summary of the court’s finding, restores the FTC’s authority over non-common carrier services at companies large and small, including AT&T. It is also a relief to FCC Chairman Ajit Pai, who earlier argued the FTC had jurisdiction over abusive ISPs and would effectively oversee broadband providers without any need to continue the net neutrality policies of his predecessor. Had the court ruled in favor of AT&T, Pai’s policy would have transferred oversight of internet services to an agency legally prohibited from overseeing most broadband providers.

The FTC was pleased with the decision.

“It ensures that the FTC can and will continue to play its vital role in safeguarding consumer interests including privacy protection, as well as stopping anti-competitive market behavior,” Maureen Ohlhausen, acting Chairwoman, said in an emailed statement.

AT&T was not, and claimed the court ignored the merits of the case.

“We are reviewing the opinion and continue to believe we ultimately will prevail,” the representative said in an emailed statement, which did not definitively state whether AT&T intended to appeal the decision.

AT&T is rolling out mobile 5G service for its wireless smartphone and tablet customers in a dozen U.S. cities by year’s end, starting in parts of Atlanta, Ga., and portions of Dallas and Waco, Tex.

“After significantly contributing to the first phase of 5G standards, conducting multi-city trials, and literally transforming our network for the future, we’re planning to be the first carrier to deliver standards-based mobile 5G – and do it much sooner than most people thought possible,” said Igal Elbaz, senior vice president, wireless network architecture and design. “Our mobile 5G firsts will put our customers in the middle of it all.”

AT&T’s mobile 5G will work differently from the fixed wireless home broadband service Verizon is launching this year using small small cell neighborhood antennas. But like Verizon, AT&T is taking a gradual, incremental approach to the next generation of wireless technology.

In 2017, AT&T announced what it calls “5G Evolution” service in almost two dozen cities, although this branding was derided as “fake 5G” in the tech press because, in reality, it is just an improvement of today’s widely deployed 4G LTE service. Similar technology is also in place at T-Mobile. In the fall of 2017, AT&T introduced 4G LTE-Licensed Assisted Access (LTE-LAA) technology in Indianapolis and parts of Chicago, Los Angeles and San Francisco. This network lays the foundation to offer gigabit speed wireless service, and is especially useful in areas where AT&T’s spectrum holdings are tight.

AT&T’s initial 5G rollout will serve parts of:
A – Atlanta, Ga.
B – Waco, Tex.
C – Dallas, Tex.

AT&T is preparing its existing wireless network to permit gradual migration to the completed 5G wireless standard over both existing and new spectrum.

This year, AT&T plans to launch some 5G service using millimeter wave spectrum, which is very line-of-sight and offers a more limited service area. But the technology will support very fast wireless speeds and offer plenty of bandwidth. AT&T could deploy this technology initially in dense population areas and places like stadiums, malls, and convention centers.

“Ultimately, we expect to reach theoretical peak speeds of multiple gigabits per second on devices through mobile 5G,” AT&T wrote in a press release. “While speed is important, we also expect to see much lower latency rates. With higher speeds and lower latency rates, our mobile 5G network will eventually unlock a number of new, exciting experiences for our customers.”

If past precedent means anything, AT&T will likely only initially offer 5G service in selected parts of each city. It needn’t hurry, because equipment designed to work with the new spectrum isn’t expected to become widely available until 2019. A gradual transition will also please shareholders by keeping network upgrade costs predictable over the next 3-5 years.

AT&T isn’t expected to use 5G technology anytime soon as part of its taxpayer-funded, rural wireless broadband deployment. AT&T currently uses its 4G LTE technology to power its fixed wireless rural broadband service. AT&T claims this service was designed to assure download speeds of at least 10 Mbps, although customers using it report speeds are often lower, although sometimes higher. AT&T does not offer and network performance guarantees, stating, “service performance may be affected by your proximity to a cell site, the capacity of the cell site, the number of other users connected to the same cell site, the surrounding terrain, radio frequency interference, applicable network management practices, and the applications you use.” That will also be true of AT&T’s forthcoming 5G network.

Some residents in Houston and Dallas are furious at AT&T and its contractors for causing major damage to homeowners’ property, in one case burning down a Houston family home after accidentally hitting a natural gas line that resulted in a fire.

Joyce Skala’s home in Cypress was seriously damaged in a fire just before Thanksgiving 2017 and almost three months later, Skala says AT&T and its contractors won’t talk to her about the damages and who will pay for them.

“Everything you look at when you leave your house in the morning, it was gone,” Skala told KPRC News after the Nov. 14 fire. “I have not heard from a soul — not one. Not even a representative of a representative.”

The damage was not an isolated incident. KPRC noted two days later, AT&T’s contractors damaged an electric line in Shelli Moore’s yard in a different neighborhood, causing a power outage. Repairing the damage will cost her almost $2,000, and so far, Moore appears to be left holding the bill.

“That would break me,” she said. “I have no idea where I would come up with that kind of money, but we have to have lights and heat,” Moore said.

Joyce Skala’s home, destroyed by fire after an AT&T contractor hit a natural gas line (Image: KTRK)

In the Dallas-Ft. Worth area, utility workers made themselves right at home at Norma Logan’s home, using her back patio as a dining area and completely “trashing” her backyard.

Logan came home to find AT&T digging a deep trench along her back fence, damaging sections of it, as well as destroying her personal property. Then they left without a word.

“They broke many things out there,” Logan told KTVT. “They broke the fence. They broke the statue. They broke some of the things that I use to decorate the flower bed.”

A day later, the workers returned unannounced, this time with heavy equipment that continued to tear up her yard. But before getting to work, they spent a leisurely breakfast at her patio table just outside her back door. They didn’t bother to clean up after they finished.

The subcontractor responsible in these cases was NX Utilities, which has piled up a number of complaints against it since last fall. But AT&T appears to still be using the company to construct its fiber to the home network in both cities.

Contractors left evidence of their presence behind. (Image: Logan)

Anni Shugart’s Cypress home was damaged by an electric surge, and AT&T didn’t want to talk to her about the damage to her home either.

“I couldn’t get anywhere with AT&T,” Shugart said.

Shugart, like others, was left holding the bill after AT&T denied her claim, suggesting they are not responsible for the damages. They pointed her to NX Utilities, but that didn’t make much difference either so she called her insurance company, which is covering her repairs, except for the $4,500 deductible she is paying out of pocket.

“Well, I hope I’ll get it back eventually,” she said. “It’s a lot of money.”

Two days later, contractors hit another gas line. Four days after that they cut another underground power line.

“People in my neighborhood are mad at AT&T,” homeowner Pam Grossman told KPRC.

AT&T claims that it is not directly responsible for the damage, because it was caused by its third-party contractor NX Utilities. In fact, NX is just one of several layers of contractors working on AT&T’s fiber project, and in the event of a problem, the contractors are excellent at pointing fingers at one another.

KPRC reports when the fire marshal turned up to investigate the fires, the report included claims from contractors blamed each other while holding themselves harmless.

“There was no way that his company was involved in the fire,” said the owner of Connect Links in the fire marshal’s report.

KPRC in Houston reviews the damage being done in the Houston area by AT&T’s subcontractors managing the company’s fiber buildout. (3:58)

AT&T contractor NX Utilities allegedly damaged Norma Logan’s fence in the Dallas-Ft. Worth area. (Image: KTVT)

AT&T won’t say how many damage reports about it or its contractors have been filed in Houston and Dallas-Ft. Worth. But AT&T did say it was doing both cities a big favor by enabling them for gigabit fiber internet, and regrets the problems that have developed along the way.

“Our goal is to minimize impact on residents before, during and after construction and to keep them informed through a variety of means throughout the network expansion process,” AT&T said in a statement. “If construction-related issues do occur, we work quickly to resolve and restore any impacts from our work.”

The key emphasis is “our work” and AT&T feels its subcontractors are responsible for fixing their own problems.

“Whether large or small, these damages impact the public and that is not lost on us,” AT&T said. “We track damages and other issues and review performance with our contractors performing the work. As we identify poor performers, we cull those out. Damage can occur for a number of reasons, from contractor error to locates not being accurate. Before we begin a project, we talk with locating firms to provide them with some high-level visibility into where we anticipate completing work on a regular basis. Furthermore, as a part of the large project locate process, we typically provide 30-60 days’ notice versus the minimum 10 days.”

Logan discovered utility workers dug this trench in her backyard along the fence line. (Image: KTVT)

AT&T says projects of this large size and scope require careful planning and implementation, and the company has gotten significant experience managing fiber upgrades in a number of cities where it provides telephone and broadband service.

“We have dozens of supervisors and inspectors in the field to ensure our contractors are performing to our standard,” said AT&T. “We work closely with city officials to ensure our work is done in a timely and orderly fashion. Our contractors are trained to obtain proper permitting, closely follow local construction codes, and abide by rules governing rights-of-way and property easements.”

But many homeowners report they never got any advance notification about the construction work and even less often understood how it would impact on their property.

Logan said she received no notification, despite claims by NX it placed fliers on her door. But those fliers said nothing about heavy construction equipment being brought in, driven over grass and into a cramped backyard to dig. Logan was incensed as she watched equipment dig a trench several feet deep along her backyard fence line, ruining some of her lawn ornaments and damaging her fence.

A second day of empty coffee cups and fast food wrappers left on her patio table was also an unpleasant reminder of their presence.

NX later claimed they reprimanded their workers, not for the damage done to her property, but for not cleaning up their trash as they left.

The sudden arrival of heavy equipment attempting to navigate into Logan’s backyard only upset her further. (Image: KTVT)

AT&T is not the only telecom company that receives criticism for property damage while installing fiber cables. Google Fiber generated “hundreds of complaints” in the Austin area for construction mishaps, including alleged flooding from backed up storm drains that damaged multiple properties. In Charlotte, N.C., Google was accused of causing damage to water wells and allegedly struck a sanitary sewer, flooding a home with raw sewage.

Since September 2015, Charlotte city officials have cited contractors for ordinance violations more than 40 times for $21,300, data show. That included $14,200 in general violations and $6,700 for closing a portion of a right-of-way without the proper traffic control. Fines ranged from $100 to $1,800. Ansco, a contractor for AT&T, was cited the most: 17 times for $8,400. Bechtel, which does work for Google, was cited six times for $2,100, including fines that also mentioned another subcontractor.

How to protect yourself

If a company is performing work involving installation of underground cables, that carries the greatest risk of potential damage to property or other utilities. Many mishaps are caused by inaccurate maps that purport to show where other underground utilities are installed. In some areas, those maps are incomplete or wrong. In the United States, these problems are so serious that there is a nationwide free hotline – 811 – available to consumers and contractors for free on-site location flagging of where underground utilities are actually located.

AT&T is installing fiber optics in several Texas cities.

You can request your own site survey at no charge and photograph the results for your records.

Here is how to request a site survey:

• Call 811 from anywhere in the country at least two days before digging and your call will automatically be routed to your local one call center. Visit the 811 service state map to see if your local one call center accepts online requests.
• Give the operator information about how to contact you, approximately where you or a contractor will likely dig, and what type of work will be done. If you don’t know all the details, that is okay. Request a general assessment of where utilities have placed their cables on or near your property and let 811 know a contractor hired by the telecom company will be doing the work independently.
• Utility companies who have potential facilities involved will be notified of the imminent arrival of a contractor preparing to dig on or near your property.
• Each affected utility company will send a location team to mark the approximate location of underground utility lines. Sometimes they spray paint the location on grass or pavement in different colors reflecting the service. In other cases, they plant small plastic flags in a line where the cabling is located. This typically occurs within 2-3 working days, but some states may have different rules.  To access specific information about your state, visit the 811 state map.

Contractors are usually required by ordinance to notify you in advance of any utility work that is done on or near your property. This notice is usually in writing and can be a mailed or placed flier or a doorhanger card. Retain this notification until the work is complete. It will generally include contact information about the company doing the work and what to do in case a problem arises, and most importantly, who to contact.

Prior to the arrival of the construction crews, photograph your yard to document its current condition. Make sure to get clear photos along property lines or easements, documenting the condition of fencing, landscaping, and any pre-existing structures. If damage occurs, you will have before and after photos to show the contractor, town officials, and/or your attorney.

If possible, stay home on the day work is being done. Making your presence known will greatly reduce the chance utility workers will be careless with your personal property or how they conduct themselves. Document any suspicious or disturbing activity by taking video on your cell phone. Watch for workers attempting to access areas of your property unaffected by the work. They do not have the right to use your outdoor furniture for lounging or eating. They also do not have the right to relieve themselves in your yard.

Buried wire flags

In every case, they are responsible for reasonably restoring your property to the same condition it was in before they arrived. That means repairing ruts or reseeding disturbed portions of your lawn, repairing or replacing damaged items like fencing, lawn ornaments, buildings, and other personal property. If they damage or kill a tree, they are responsible for removing and replacing it, if it was located on your property and not in an easement (in those cases, contact your local town or city officials and ask how to proceed.)

If you discover damage to another company’s infrastructure (or public utilities), call the affected company or public utility right away. They will need to document the damage and arrange for repairs. If a utility power line is knocked down or damaged between the pole or yard pedestal and your home, some companies may require you to hire a private contractor to replace the line. You will want to notify the contractor that did the damage about the incident and begin documenting the process to receive reimbursement.

It is not your responsibility to navigate a company’s complex maze of contractors and subcontractors. Contact the telecom company doing the work and insist they identify the contractor involved and agree to liaison with you to get the matter resolved quickly to your satisfaction. They cannot walk away from their responsibility to correct damage just because they chose to hire an independent company to perform work on their behalf.

When an AT&T contractor hit a utility line, it caused a power surge damaging homeowners’ utility boxes and outside walls. (Image: KPRC)

KPRC asked Texas real estate attorney Nikolas Spencer about who is responsible in these cases according to Texas state law.

“All of them are,” he said. “If they know that this particular subcontractor is routinely causing fires at people’s houses, or even just nicking the lines themselves, that’s a repeated and dangerous situation that AT&T is on notice as happening. They’re responsible for that.”

Your municipality may be willing to share violation details about contractors performing work in your area. If you can document repeated instances of careless work or violations, that can be strong evidence to prove AT&T was aware of the situation, yet continued to use an offending contractor.

KPRC recommends hiring an attorney if severe damage is caused by a utility. For minor property damage, you may get fast results asking for a supervisor or filing a complaint with the Better Business Bureau or a state Attorney General’s office. Those complaints are generally forwarded to a senior customer service manager better empowered to get quick results.

Having a fiber optic upgrade is almost always a good thing, and can increase the value of your home in a sale. But for many homeowners, it has been decades since major utility construction work was done in older neighborhoods and people can forget the disruption, noise, inconvenience, and occasional damage that can be done along the way. Those best prepared in advance to fight for their interests are the most likely to win quick resolution and satisfaction from utility companies that do damage and may not have adequate resources (or interest) in correcting the problem before you give up in frustration and go away.

KTVT in Dallas reports AT&T’s fiber construction crews have damaged personal property and inconvenienced customers. (2:03)

AT&T is staying committed to its wireline network in the face of two significant natural disasters by replacing beyond-repair copper wiring with fiber optics.

The phone company has recently notified the Federal Communications Commission its existing facilities in parts of California that were damaged by last year’s wildfires will be replaced by fiber optic infrastructure.

Fierce Telecom notes customers affected by the Nuns, Tubbs, Redwood and Sulphur fires will be served by a new optical fiber network in portions of Sonoma, Ukiah, Santa Rosa, and Lower Lake.

“The circuits will be transferred to fiber based NGDLC systems,” AT&T said in a FCC filing. “The transfer of these circuits does not compromise the capacity of the cabinets.”

In Florida, as a result of last September’s Hurricane Irma, AT&T will migrate its irreparably damaged copper wire network that strings throughout the Florida Keys to a new fiber to the home network.

AT&T’s decision to maintain its wired networks comes in contrast to Verizon’s 2013 attempt to scrap its copper facilities on Fire Island, N.Y. and certain New Jersey barrier islands left devastated by Superstorm Sandy. Verizon hoped to replace traditional landline service with a wireless alternative known as VoiceLink. A firestorm of protests over the service’s limitations, sound quality, and reliability forced Verizon to scrap the plan in New York and install its FiOS fiber-to-the-home network instead.

Frontier Communications, mired in $18 billion in debt, is preparing to sell a package of landline assets in California, Texas, and Florida the company acquired just two years ago in a $10.5 billion deal.

A Bloomberg News report indicated the sale is part of an effort to boost available funds and repair a damaged business plan that has left the company with a massive debt load and an ongoing departure of customers unhappy with Frontier’s products and services.

Frontier has posted falling revenue for the last five consecutive quarters and the company has spent much of 2017 attempting to borrow more money and refinance the debt it already has, accumulated in part from its acquisitions of sold-off wireline assets owned by AT&T (Connecticut) and Verizon (multiple states).

Frontier has a poor record of successfully transferring customers to the company’s billing and backend systems, which has often caused service disruptions and billing errors. Bad publicity followed Frontier in Texas, Florida and California where the company acquired 3.7 million new voice lines, 2.2 million broadband customers, and 1.2 million FiOS accounts.

What makes Frontier’s properties in those three states valuable is the widespread availability of fiber-to-the-home service. Potential buyers, including private equity firms and other non-traditional bidders, see a future in providing valuable fiber backhaul connectivity to forthcoming 5G wireless networks, which require fiber connections deep into neighborhoods to connect small cell technology with the provider’s network.

Bloomberg reports the assets are likely to be split up and sold in parts, instead of a single package. That could mean Frontier will sell off each state independently or the split could be based on technology, with fiber assets sold separately from Frontier’s acquired copper wire networks in the three states. Frontier may have trouble finding buyers for legacy copper service areas that have never been upgraded with fiber optic service. Frontier is also increasingly unlikely to upgrade those areas itself.