Cruz Control

A group of Republican senators are warning the chairman of the Federal Communications Commission he’d better not touch statewide bans on community broadband networks.

In a letter sent to FCC Chairman Tom Wheeler, Republican Sens. Deb Fisher, Ron Johnson, Ted Cruz, Mike Enzi, John Barrasso, Pat Roberts, Lamar Alexander, John Cornyn, Tom Coburn, Tim Scott and Marco Rubio slammed Wheeler for his willingness to override or ignore state laws co-written by cable and telephone companies that banish municipal broadband from providing any competition.

“The insinuation that the Federal Communications Commission will force taxpayer-funded competition against private broadband providers — against the wishes of the states — is deeply troubling,” said the senators. “Inserting the commission into states’ economic and fiscal affairs in such a cavalier fashion shows a lack of respect for states’ rights,” they said.

Comcast, AT&T, Verizon, Time Warner Cable, and other operators are among the campaign contributors of the nine senators.

Echoing the sentiment of the cable and phone companies, the Republicans called community owned broadband “an unnecessary and risky government liability” and warned Wheeler there would be consequences if he was serious about ignoring the state laws, many enacted with the assistance of the American Legislative Exchange Council (ALEC).

“State political leaders are accountable to the voters who elect them, and the Commission would be well-advised to respect state sovereignty,” said the senators. “We look forward to your timely response, and we hope you will think critically about the Commission’s role and how it can more appropriately interact with our state authorities.”

Community broadband has largely been the only wired competitor facing off against cable and phone companies. Consumers have a much bigger chance of seeing a municipal provider in their community than Google Fiber or another overbuilder.

“Those are nine senators that moonlight for Comcast and AT&T I won’t be voting for,” says Stop the Cap! reader Tom Resden who shared the story. “Municipal broadband balances a playing field that has favored big cable and phone companies for years. These are the same type of senators that 100 years ago would have opposed municipal power and co-ops, willing to leave people in the dark rather than allow a player that answers only to customers get traction. It’s not a state rights issue when the corporations wrote the legislation their well-funded lackeys in statehouses around the country helped hurry into law. What we are really talking about is the corporate right to suppress competition.”

AT&T U-verse television customers: Al Jazeera America is coming soon to your television lineup whether you want the network or not.

Just days after the final closedown of Current TV — purchased by Qatar-based Al Jazeera as a platform to launch Al Jazeera America, a new U.S. based news network — AT&T suddenly threw the network off its lineup.

Both companies accused each other of violating the contract. AT&T said it never signed on to carry Al Jazeera America, it signed a contract to carry Current TV. Al Jazeera said it bought Current TV and had an iron clad contract with AT&T to carry whatever programming came from the channel.

Whether called Current TV or Al Jazeera America, it wasn’t on AT&T’s lineup after launching last August. Al Jazeera promptly sued AT&T for violating its contract in its complaint: Al Jazeera America LLC v. AT&T Services Inc.

What made the case unusual is that Al Jazeera filed a confidential lawsuit in the Delaware Chancery Court. In most program disputes, the players are only too happy to supply the media with their respective sides, including copies of any legal complaints.

When the media requested a copy of Al Jazeera’s lawsuit, it arrived heavily redacted to a four line summary Bloomberg News called “nonsense.”

A group of five journalists and Bloomberg filed their own complaint with the court requesting to unseal details of the case, arguing if the Qatari news channel wanted to use the U.S. court system, it had to follow court procedure and respect America’s First Amendment.

Vice Chancellor Sam Glasscock III agreed with the journalists, ruling the American public was being kept in the dark about the case with redactions so severe, no one could learn about the disputed contract terms, much less read a complete description of the dispute.

Desperate to avoid having to make the case public, Al Jazeera quickly appealed Glasscock’s decision, but that appeal was dismissed by the Delaware Supreme Court last week as having been accepted improvidently.

That decision appears to have rung alarm bells back in Qatar and Al Jazeera’s owners announced it would drop the case completely after reaching a quick settlement with AT&T. They claimed their actions would wipe the public record clean of the lawsuit, erasing the complaint and related papers from the public record and preventing Bloomberg and other journalists from getting access to the lawsuit.

Despite the court order to unseal the lawsuit, the Delaware Court of Chancery granted a 10-day stay to allow the parties to finish their settlement and seek an order to expunge the record of the lawsuit.

That brought a hostile response from the journalists. David Finger, a lawyer for some of the media challengers, said Al Jazeera’s argument around the unsealing order “lacks any basis in law.”

“If the complaint was improperly filed under seal (as this court has already found), the public had the right to review the complaint at the moment of filing,” Finger’s letter states. “That right cannot be taken away retroactively.”

Finger also argued the right to public access is not squelched because an action is close to settlement and the Chancery Court has rejected arguments to the contrary in past cases.

The strenuous objections from Al Jazeera are only bringing more attention to the case. AT&T has decided to steer clear of the controversy, only stating it had reached an agreement in principle to add Al Jazeera America to the U-verse lineup.

[flv]http://www.phillipdampier.com/video/CNN Netflix Slowdown Who is to Blame 6-6-14.flv[/flv]

CNN explores who is responsible for Netflix’s streaming problems on Verizon FiOS and AT&T U-verse. While one industry analyst seems keen to blame Netflix, his other articles on the subject show an increasing bias towards big ISPs like Verizon and AT&T. (2:54)

Netflix’s May speed rankings confirm Verizon FiOS customers are likely to find a degraded video streaming experience while using the otherwise speedy fiber to the home service. Netflix performance on Verizon FiOS dropped considerably last month — so much so that Frontier and Windstream DSL customers now get better Netflix performance than any Verizon customer receives. AT&T U-verse customers fared even worse with streaming performance below that offered by Mediacom — America’s bottom-rated cable company and CenturyLink DSL. In fact AT&T U-verse customers receive only marginally better service than Hughes satellite and Clearwire wireless customers. Verizon’s DSL came in dead last.

Coincidentally, both Verizon and AT&T, following Comcast’s lead, have been in negotiations with Netflix to receive payment from the streaming video provider to better handle its traffic. Verizon CEO Lowell McAdam said he’s confident about getting payments from Netflix, and he turned out to be correct — Verizon and Netflix reached an agreement in late April that is still being implemented. AT&T also says it is negotiating with Netflix. Verizon’s streaming video partnership with Redbox has not been affected by the sudden deterioration in online video streaming on Verizon’s network.

The problems with Netflix on some ISP’s have gone all the way to the top.

“My wife and I like to lay in bed and watch Netflix,” Tom Wheeler, chairman of the US Federal Communications Commission, said in January. The two companies serving Wheeler’s neighborhood are Comcast and Verizon. When enough customers launch streams on Netflix, saturating the inbound connection to either ISP, the video stops. When it does, Wheeler’s wife joins the parade of irritated customers.

“You’re chairman of the FCC,” she says to him. “Why is this happening?”

Last week, Netflix decided to answer that question with a more informative error message appearing when available bandwidth is insufficient to support a high quality stream.

“The Verizon network is crowded right now,” the message says. Netflix then attempts to restore the stream by serving up a degraded, lower quality/bit rate version to the paying customer.

[flv]http://www.phillipdampier.com/video/Bloomberg Netflix-Verizon War of Words 6-6-14.flv[/flv]

Bloomberg interviews Todd O’Boyle from Common Cause. He places the blame for this debacle solely on the shoulders of Verizon and other ISPs. (5:39)

The inability to successfully maintain a stable stream of Netflix content that ranges from 256kbps to 5.8Mbps seems odd on ISPs that offer customers connections far faster than that. The average Netflix stream is 2Mbps, slow enough to be comfortably supported on even a 3Mbps DSL connection. Netflix’s problems with Comcast evaporated after agreeing to pay the cable company to maintain a better connection between its customers and Netflix’s content delivery network. The same cannot be said for perfomance on AT&T’s U-verse platform. Although Verizon signed an agreement with Netflix, it has clearly not been implemented as of yet.

“We started a small-scale test in early May that lets consumers know, while they’re watching Netflix, that their experience is degraded due to a lack of capacity into their broadband provider’s network,” said Netflix’s Joris Evers. “We are testing this across the U.S. wherever there is significant and persistent network congestion.”

The companies with the biggest drops in Netflix performance are the same ones strongly advocating special paid “fast lanes” on the Internet for preferred traffic to resolve exactly these kinds of performance problems.

“Some large US ISPs are erecting toll booths, providing sufficient capacity for services requested by their subscribers to flow through only when those services pay the toll,” said Evers. “In this way, ISPs are double-dipping by getting both their subscribers and Internet content providers to pay for access to each other. We believe these ISP tolls are wrong because they raise costs, stifle innovation and harm consumers. ISPs should provide sufficient capacity into their network to provide consumers the broadband experience for which they pay.”

The error message fingering Verizon as the culprit for a poorer Netflix experience brought an angry response from Verizon on its blog:

Reports from this morning have suggested that Netflix is engaging in a PR stunt in an attempt to shift blame to ISPs for the buffering that some of its customers may be experiencing. According to one journalist’s tweet from last night, Netflix is displaying a message on the screen for users who experience buffering which says: “The Verizon network is crowded right now.”

This claim is not only inaccurate, it is deliberately misleading.

The source of the problem is almost certainly NOT congestion in Verizon’s network. Instead, the problem is most likely congestion on the connection that Netflix has chosen to use to reach Verizon’s network. Of course, Netflix is solely responsible for choosing how their traffic is routed into any ISP’s network.

[…] It is sad that Netflix is willing to deliberately mislead its customers so they can be used as pawns in business negotiations and regulatory proceedings.

It would be more accurate for Netflix’s message screen to say: “The path that we have chosen to reach Verizon’s network is crowded right now.”

However, that would highlight their responsibility for the problem.

Milch

That was quickly followed by a cease and desist letter from Verizon demanding Netflix remove error messages that blame Verizon for the problem. It also demanded a list of Verizon customers that received the Netflix notification.

“Failure to provide this information may lead us to pursue legal remedies,” wrote Verizon general counsel Randal Milch in a letter to Netflix general counsel David Hyman.

“This is about consumers not getting what they paid for from their broadband provider,” Netflix spokesman Jonathan Friedland said. “We are trying to provide more transparency, just like we do with the ISP Speed Index, and Verizon is trying to shut down that discussion.”

“Verizon’s unwillingness to augment its access ports to major Internet backbone providers is squarely Verizon’s fault,” Netflix general counsel David Hyman wrote.

“Netflix does not purposely select congested routes,” added Evers. “We pay some of the world’s largest transit networks to deliver Netflix video right to the front door of an ISP. Where the problem occurs is at that door — the interconnection point — when the broadband provider hasn’t provided enough capacity to accommodate the traffic their customer requested.”

Despite all that, Netflix also admitted it plans to drop the error messages after the “small-scale test” ends on June 16.

[flv]http://www.phillipdampier.com/video/CNBC Buffering Blame Game 6-6-14.flv[/flv]

CNBC explains how Netflix content gets to end viewers over a complicated series of Internet connections between Netflix and your ISP. (1:31)

AT&T’s Magic Fiber Fairy brings fiber to you, if you approve AT&T’s business agenda.

If it wins approval from regulators to buy satellite TV provider DirecTV, AT&T says it will have enough money to afford to expand its gigabit fiber network Gigapower U-verse to an extra two million homes.

That bit of non-sequitur was the highlight of AT&T’s regulatory filing with the Securities and Exchange Commission. AT&T claims money for the fiber expansion will come from anticipated savings from programming volume discounts AT&T will get combining DirecTV’s 20.3 million customers with AT&T’s 5.7 million U-verse TV subscribers.

AT&T expects cost synergies to exceed $1.6 billion annual run-rate by three years after closing.  These savings will begin in the first year after closing, ramp up over four years and grow with the addition of video subscribers thereafter.  It is anticipated that at least 40% of these total synergies will be realized by year two after closing.  These synergies are conservative and derived from items such as programming cost reductions, operational efficiencies and reductions in redundant broadcast infrastructure.  Programming cost reductions are the most significant part of the expected cost synergies.  At this time, AT&T’s U-verse content costs represent approximately 60% of its subscriber video revenues.  With the scale this transaction provides, we estimate AT&T’s U-verse content costs after the completion of the transaction will be reduced by approximately 20% or more as compared with our forecasted standalone content costs.

AT&T believes that despite perennially increasing programming costs, especially for popular over-the-air and cable networks, the 20 percent of anticipated savings will give AT&T enough money to vastly expand its fiber network.

“The economics of this transaction will allow the combined company to upgrade two million additional locations to high-speed broadband with Gigapower FTTP (fiber to the premise) and expand our high-speed broadband footprint to an additional 13 million locations where AT&T will be able to offer a pay TV and high-speed broadband bundle,” AT&T wrote.

On AT&T’s budget, the company can send you this really nice star ceiling kit, but it won’t pay for gigabit broadband.

Before announcing its intent to buy DirecTV, AT&T already promised to expand Gigapower U-verse to up to 100 cities, while telling investors it anticipated flat spending on network improvements. On Tuesday, AT&T went further and dramatically cut investments in its wireline network to a level that raised concerns for the financial security of several of its vendors, including those supplying fiber optic cable and equipment.

AT&T predicted savings from the merger will amount to $1.6 billion a year, but not until three years after the merger closes. There are questions whether this amount is enough to fund the kind of fiber expansion AT&T promises.

In 2012, AT&T committed to expanding U-verse to 8.5 million more customer locations at a cost of $6 billion. That investment paid for AT&T’s less-costly fiber to the neighborhood service. Based on AT&T’s figures, the cost to deploy fiber into each neighborhood, while still utilizing existing copper wiring to bring service into each home, was $705 per home or business.

AT&T Gigapower U-verse requires AT&T to spend considerably more to extend fiber service directly to each premises it intends to serve. Google is spending approximately $4,000 to reach each home with fiber optics in Kansas City. But AT&T’s math suggests it only has to spend about $800 per home (based on the $1.6 billion savings figure it expects to begin receiving in 2017) for decommissioning the remaining copper and extending U-verse fiber for each of two million customer homes passed. What does AT&T know that Google does not?

But wait. AT&T is also committing to use that $1.6 billion to expand traditional fiber to the neighborhood U-verse to 13 million additional homes as well. That means AT&T has a budget that limits it to $106 per home for a combined 15 million new locations passed. That amount is enough for a fiber optic star ceiling kit or a really nice fiber strand light fixture, but it isn’t nearly enough to bring gigabit broadband to AT&T customers.

One thing is certain: AT&T will not be passing on any cost savings to customers in the form of lower bills. AT&T’s proposed investment is a blatant appeal to regulators with promises of broadband expansion the company has already made and shows few signs of actually delivering.

AT&T’s claim it wants to expand gigabit fiber to the home service to as many as 100 cities nationwide requires closer inspection on news this week it has slashed spending on its wireline business.

Investors knocked AT&T’s share price today as they learned earnings from AT&T’s wired networks will be lower than expected.

TheStreet reported this morning the spending cuts are so significant, they are creating a financial risk for a number of AT&T’s major vendors.

Research firm Jefferies issued a research note warning that AT&T’s spending cuts began last month and seem to be ongoing. As a result the companies that have the most exposure to AT&T’s wireline business are at increased financial risk. Those suppliers include optical fiber equipment manufacturer Alcatel-Lucent, as well as Ciena, Juniper, ADTRAN, Finisar, and JDS Uniphase. As a result, all but Finisar saw their share prices drop significantly in morning trading.

Earlier today, AT&T reported it was ahead of schedule to complete its Project VIP expansion of its 4G LTE wireless and U-verse networks. As U-verse expansion nears an end, vendor orders may be in decline. Wall Street analysts see no evidence AT&T is preparing to spend much on any other expansion efforts, including fiber to the home service.

As Broadband Reports’ notes, without significant capital to invest in fiber upgrades, they are not going to happen.

These cuts make it hard to take the company’s claims of meaningful 1 Gbps fiber expansion seriously as there’s simply no budget cordoned off for such a project (“Project VIP” funds are already in use on other efforts). While AT&T has the press believing they’re deploying 1 Gbps to “up to 100 cities,” AT&T’s shrinking CAPEX tells a different story entirely.

Fiber to the home service is more costly than AT&T U-verse’s fiber to the neighborhood service because it requires a fiber cable be brought directly to each home or business — a more costly endeavor that requires careful cable burial or overhead drop line replacement, as well as the possibility of in-home wiring adjustments. Considering the billions spent on U-verse expansion to date, at least as much will be required to upgrade to fiber to the home service and there are no signs AT&T is ready to invest in anything beyond press releases.