Goei

While Wall Street and the tech media seems excited about the prospect of 5G and other fixed wireless home broadband services, Altice, which owns Cablevision and Suddenlink, dismissed wireless broadband as inadequate to meet rapidly growing broadband usage.

“In terms of usage patterns, our customers are taking an average download speed of 162 Mbps as of the second quarter of 2018, which is up 74% year-over-year,” Dexter Goei, CEO of Altice USA told investors on a recent conference call. “[Our customers now use] over 220 GB of data per month, which is up 20% year-over-year, with 10 in-home connected devices, on average. If you take the top 10% of our highest data consuming customers as a leading indicator, they are using, on average, almost 1 terabyte of data per month with 26 in-home connected devices. To support these usage patterns, which are mainly driven by video streaming and the proliferation of new over-the-top [streaming] services, it requires a high quality fixed network like ours. There is no substitute.”

Goei argued America’s wireless carriers are not positioned to offer a credible, serious home broadband alternative.

“For example, so-called unlimited data plans from the U.S. mobile operators start capping or significantly throttling customers at 20 GB of usage per month,” Goei said. “Over 60% of our customers are now using over 100 GB of data per month right now, which the mobile operators do not and will not have the capacity to match on a scaled basis unless they overbuild with a new dense fiber network.”

Altice just so happens to be building a dense fiber network, scrapping Cablevision’s remaining coaxial cable in New York, New Jersey, and Connecticut in favor of a fiber-to-the-home network that will eventually reach all of its customers.

Phone companies can beat their cable competitors, but only if they invest in fiber upgrades that can deliver as-advertised broadband service and speed.

TDS Telecom, an independent phone company based in Chicago, has reported good results from the $60 million in fiber upgrades it has committed to complete in 2018.

TDS has been overbuilding beyond its existing telephone service areas to deliver broadband, phone, and television service to communities evaluated as:

• Having a good demographic mix of upper middle class residents;
• Experiencing population growth;
• Underserved by incumbent phone/cable companies;
• Offers good population density where homes and business are close enough to each other to warrant the expense of wiring each for fiber service.

TDS chief financial officer Vicki Villacrez made her case with investors to think positively about investments in fiber, reporting one TDS market garnered a 54% market share in broadband and took 33% of the market share for video after fiber service arrived.

TDS, unlike many other independent phone companies, is not avoiding investments in delivering faster broadband speed to customers. TDS typically reinvests 75% of its revenue in network upgrades and returns the other 25% to shareholders. Outside of its landline service areas, TDS has also acquired cable companies to provide service to customers, offering gigabit speeds in many areas.

In rural areas, the company is combining federal Connect America Funds with its own money to deploy bonded DSL service in areas too unprofitable to serve with fiber. This typically delivers faster internet service than rural broadband rollouts from other phone companies like Windstream and Frontier.

TDS is often the third provider in its overbuilt markets, a fact that is usually not well-received by investors because it can constrain market share and potential profits. TDS chooses its overbuild markets where incumbents have chronically underinvested in their networks, and the result is “pent-up demand” by customers, according to Villacrez. TDS’ market share is typically higher in their markets than other overbuilders.

Villacrez routinely tells investors the company’s success largely depends on fiber upgrades. About 24 percent of TDS Telecom’s local landline service area now has fiber to the home service, and the company is aggressively cutting the number of customers still served by slow traditional ADSL service.

It took the four commissioners of the New York Public Service Commission just 20 minutes to vote unanimously to undo the multi-billion dollar 2016 merger of Charter Communications and Time Warner Cable, by revoking its approval for failing to meet the public interest.

“Charter’s repeated failures to serve New Yorkers and honor its commitments are well documented and are only getting worse. After more than a year of administrative enforcement efforts to bring Charter into compliance with the Commission’s merger order, the time has come for stronger actions to protect New Yorkers and the public interest,” said Commission Chair John B. Rhodes. “Charter’s non-compliance and brazenly disrespectful behavior toward New York State and its customers necessitates the actions taken today seeking court-ordered penalties for its failures, and revoking the Charter merger approval.”

If the order withstands inevitable court challenges, it would be the first time a regulator drove a large cable operator out of business in a state for bad conduct. It would also make history, achieving similar notoriety to the 1981 case of Tele-Communications, Inc., vs. Jefferson City, Mo., when TCI’s national director of franchising personally threatened the mayor and the city’s cable consultant if their franchise was not renewed. When the city voted to award the franchise to another cable operator, TCI refused to sell its system, withheld franchise fee payments, and alternately told the city it would either strip its cables off utility poles in spite or let them “rot on the pole” rather than sell at any price.

Without modification, the Charter/Time Warner Cable merger was a bad deal for New York

After Stop the Cap! and other consumer groups participated in a detailed review of Charter Communications’ proposal to acquire Time Warner Cable, the Public Service Commission adopted many of our pro-consumer suggestions to ensure the merger benefited the people of New York at least partly as much as the executives and shareholders of the two companies. New York State law demands that telecommunications mergers must meet a public interest test to win approval. On its face, the Commission found the Charter/Time Warner Cable proposal failed to meet this test. The state received detailed evidence showing Time Warner Cable’s existing upgrade plan offered a better deal to New York residents than Charter’s own proposal. Time Warner Cable also maintained a large workforce in New York in call centers, direct hire technicians, and its corporate headquarters.

After a detailed analysis, the PSC rejected the merger for failure to meet the public interest. At the same time, it also offered Charter a way to turn that rejection into a conditional approval. If the company agreed to “enforceable and concrete conditions” that would deliver positive net benefits for New Yorkers to share in the rewards of the merger deal, the Commission would approve the transaction.

Charter has complied with most of the deal conditions demanded by the Commission. The company has boosted its broadband speeds across the state ahead of schedule, committed to at least seven years of broadband service without data caps, introduced an affordable internet access program and temporarily maintained an existing offer for $14.99 slow-speed internet access available to any New York customer, and agreed to maintain jobs in New York (with the exception of a 1.5 year strike action ongoing in New York City affecting technicians).

But the most costly condition for Charter to meet is also the one it has repeatedly failed to meet — its commitment to wire unserved rural areas, largely in upstate New York. Charter committed to a timetable to roll out high-speed internet access for 145,000 homes and businesses that currently lack access to any internet provider.

Charter’s merger deal meets Gov. Cuomo’s Broadband for All Program

Gov. Andrew Cuomo announcing rural broadband initiatives in New York in 2015.

This rural broadband expansion condition was integral to Gov. Andrew Cuomo’s Broadband for All program, promising to make broadband access available to every resident and business in New York State.

Cuomo’s broadband program depended on several sources to accomplish its goal:

• State/Private Funding: The state invested $500 million of $5.7 billion dollars it earned from settling lawsuits against big banks and insurance companies over the improprieties that helped trigger the 2008 Great Recession. This money was designed to incentivize the private sector to expand high-speed internet access in underserved/unserved areas. Recipients had to provide a 1:1 financial match of whatever grant funds were given, putting the dollar value of this part of the program at over $1 billion.
• The FCC: The Federal Communications Commission’s Connect America Fund (CAF) offered funding to incumbent providers to expand service in certain areas in New York. Some $170 million of that funding allocated to the state was declined, principally by Verizon, which showed little interest in expanding its rural broadband network. A bipartisan effort to retain and divert those funds into the New NY Broadband Program was successful, allowing the state to fund several rural broadband projects Verizon was not interested in.
• Charter/Time Warner Cable Merger: To win approval of its merger in New York, Charter agreed to pass an additional 145,000 homes and businesses in less densely populated areas across the state. The company was required to file regular updates on its progress and coordinate with the state the exact locations it planned to serve. This was to ensure Charter would not spend money wiring areas already receiving broadband expansion funding.

For the program to be successful, it was essential that duplication of expansion efforts be avoided. As the program’s public funding wound down, the state discovered it lacked enough money to attract private bidders to serve the last 75,628 locations around the state that remained without a service provider, deemed too remote and expensive to serve. The state awarded over $15 million in state funds and an additional $13.6 million in federal and private funding to Hughes Network Services, LLC, which will furnish satellite-based internet service to those locations. That solution prompted loud complaints from residents discovering they were baited with high-speed internet access that realistically could provide gigabit speed, and suddenly switched to satellite service that cannot guarantee to consistently meet the FCC’s 25/3 Mbps broadband standard and comes with a data cap of 50 GB (or less in some instances) a month, rendering its usefulness highly questionable.

Bait rural upstate customers with the promise of Spectrum internet access, switch to expanding service in New York City instead

Rural broadband for urban customers.

The Cuomo Administration may also have to temper its excitement for successfully completing the Broadband for All program if Charter fails to deliver service to the homes and businesses the state expected it would. In fact, the Commission today accused Charter of substituting broadband expansion in dense urban areas where the company would undoubtedly offer service with or without an expansion commitment for the rural upstate areas it originally promised to service. By adding one customer in a converted loft in Brooklyn while deleting a customer it planned to serve in upstate Livingston County, Charter would save a substantial sum. In all, the Commission alleges Charter’s attempts to count urban areas as “newly passed” while leaving rural upstate areas unserved could save the company tens of millions of dollars.

The company’s failure to meet its rural buildout commitment began almost immediately. Despite a requirement to complete an initial buildout to 36,250 homes and businesses by May 18, 2017, Charter only managed to reach 15,164 premises — just 41.8% of its goal. As a result, the Commission began talks with Charter to get the company back on track and monitor Charter’s claim that utility companies were stalling approval of Charter’s pole attachment requests. The Commission even offered its staff to assist Charter with a comprehensive database tracking pole attachment issues, in hopes of facilitating prompt resolution of any problems that delayed service expansion.

To further assist Charter, the Commission set a new schedule of Charter’s buildout obligations for the period between December 2017 and May 2020, comprised of roughly 20,000-23,000 new passings during each six month period, a significant reduction from the original requirement of 36,250 new passings in the first buildout phase.

To incentivize Charter to stay on track, the Commission also required the company to establish a $12 million Letter of Credit to secure Charter’s obligations. If Charter missed further deadlines, the state could draw funds each time Charter missed a target, typically in $1 million increments.

On Jan. 8, 2018, Charter filed its first report under the new settlement on its buildout progress. The company claimed it exceeded its target by reaching 42,889 homes and businesses in the previous six months. The company also began airing commercials inserted into cable channels seen by Spectrum customers around the state, proclaiming it was expanding service ahead of schedule.

On closer inspection, however, the PSC discovered the most innovative part of Charter’s new-found success was inflating the numbers of new passings by including over 12,000 addresses in New York City and several upstate cities, 1,762 locations where Spectrum service was already available, and more than 250 addresses that were in areas that already received state funding to expand service. In addition to not being rural areas, Charter’s existing franchise agreements would have compelled the company to offer service to most of these addresses with or without the PSC deal conditions.

The state informed Charter it planned to disqualify 18,363 passings from the December report filed on Jan. 8, which meant Charter again failed to satisfy the required 36,771 passings it was supposed to have finished by mid-December. The Commission also removed addresses Charter unilaterally added to its 145,000 buildout plan where other providers already offered service or were planning to with the assistance of already-awarded grant funding.

The many fines for Charter Communications

The Commission has fined Charter $1 million for missing its December targets and another $1 million for not making good on correcting its earlier failures. On Friday, it fined Charter once again for another $1 million, reaching a total of $3 million in fines. The PSC also directed its Counsel to bring an enforcement action in State Supreme Court to seek additional penalties for past failures and ongoing non-compliance with its obligations. Earlier this month, the PSC referred a false advertising claim to the Attorney General’s office regarding Charter’s misleading ads about its progress expanding rural broadband in New York.

The number of alleged misdeeds by Charter has been amply covered by Stop the Cap! in our own investigative report.

In fact, to date, the Commission says Charter has never met any of its rural buildout targets. In response, Charter claimed it effectively did not have to, arguing that once the merger was approved, Charter was under no obligation to answer to the Commission’s regulatory requirements respecting broadband rollouts. Under federal deregulation laws, the state cannot regulate broadband service, Charter argued.

$12 million is a small price to pay when saving tens of millions not expanding rural service

The Commission also suspects that Charter’s $12 million Letter of Credit is a small price to pay for reneging on its broadband commitments.

“It appears that the prospect of forfeiting its right to earn back all of Settlement Agreement’s $12 million Letter of Credit does not seem to be an appropriate incentive where the company stands to save tens of millions of dollars by failing to live up to its buildout obligations in New York,” the Commission wrote.

A 4-0 Vote to Kick Charter Spectrum Out of New York

What has gotten the company’s intention is a 4-0 unanimous vote to cancel the approval of the company’s merger agreement with the state, which effectively puts Charter out of business in New York. The Commission ordered Charter to file a plan within 60 days detailing how it plans to cease service in New York and transition to another provider without causing any service disruptions for customers.

Such a move is unprecedented, but not unwarranted in the eyes of the Commission, which claims it gave Charter ample warnings to correct its bad behavior.

“Both the Commission and the DPS [PSC] Staff have repeatedly attempted to correct Charter’s behavior and secure its performance of the Approval Order’s Network Expansion Condition,” the Commission wrote. “Charter continues to show an inability or a total unwillingness to extend its network in the manner intended by the Commission to pass the requisite number of unserved or underserved homes and/or businesses, which make evident that there was not – and is not – a corporate commitment of compliance with regard to this important public interest condition.”

Now the company faces a requirement to file a six-month transition plan to end service in all areas formerly served by Time Warner Cable in New York State by early 2019. The Commission has also made it clear it is done talking and negotiating with Charter, denying all requests for a rehearing.

“Charter’s repeated, continued, and brazen non-compliance with the Commission-imposed regulatory obligations and failure to act in the public’s interest necessitates a more stringent remedy,” the Commission concluded.

The New York Public Service Commission holds a special session to fine Charter Communications and revoke its merger with Time Warner Cable. (Hearing commences at 5:00 mark) (25:24)

New York City’s cable franchise territories

A proposal to replace Charter Communications’ Spectrum cable systems in New York with a workers co-op, owned and self-managed by its workers, would offer a bundle of television, phone, and broadband service price-capped at $100 a month for residential customers.

Developed by several dozen striking Charter/Spectrum workers, the 18-page proposal, “New York City Communication July 2018 Business Plan” would, for now, address only the five boroughs of New York City and nearby Bergen, N.J. But Troy Walcott, a striking member of the International Brotherhood of Electric Workers (IBEW) Local 3, says the current proposal was written as “a proof of concept” that can be adopted across New York State.

“The best time is now,” Walcott told LaborPress, noting that if the city (or state) decided not to renew Charter Communications’ franchise agreements in the city, there will still be a few years left before it expires, giving the proposed co-op time to develop its own network or plan to overhaul what was originally Time Warner Cable’s system in places like Manhattan.

A citywide co-op would also introduce competitive service in boroughs presently serviced by Altice, formerly Cablevision. The group would have to build its own network in those areas. If New York revokes Charter’s franchise, the cable system would likely take the city and/or state to court, setting up years of litigation. Past precedent has shown that cable systems abandoning or forced from an area are exceptionally rare, and usually involve a friendly sale of the existing system to another provider. One example was Adelphia Communications Corporation, which ran the fifth largest cable company in the country until it filed bankruptcy in 2002 after investigators revealed internal executive corruption. Adelphia systems were sold to Comcast and Time Warner Cable in most areas, although the communities of Mooresville, Davidson, and Cornelius, N.C., acquired the bankrupt Adelphia system serving parts of the three communities in 2007 for $80 million, relaunching it as a community-owned cable provider with mixed results.

A workers co-op is owned and run by its workers in the public interest.

If New York does strip Charter of its Spectrum cable franchises in the state, and if that effort survives the inevitable court challenges, Charter would likely sell its systems in New York to Comcast, an obviously motivated buyer. Another possible, but less-likely buyer is Altice, which acquired Cablevision and already provides service in parts of downstate New York, New Jersey, and Connecticut.

Charter is facing multiple investigations in New York over its business conduct. In New York City, where its franchise agreement is set to expire July 18, 2020, the company is under fire for its creative interpretation of “located in New York City” — language in Article 17 of the franchise agreement which requires Charter to use vendors registered to do business in New York, have a long-term commercial lease in New York, and more than 50% of its workforce living in New York.

With a substantial amount of its workforce on strike in the area for the last year and a half, and the industry’s trend to shift work to third-party contractors as a cost saving measure, the IBEW has been documenting instances of Charter-badged commercial vehicles parked overnight behind a Far Rockaway florist shop or in residential neighborhoods, often with out-of-state license plates.

Charter officials deny those accusations, and claim at least 75% of its vendors and contractors are located within New York City.

When Kate Blumm, assistant commissioner of the New York City Department of Information Technology & Telecommunications (DoITT) confronted Charter officials about its possible use of out-of-state vendors, the response from Charter was less than reassuring.

“Once we started to probe, we realized that Charter was essentially making the argument that if you are a worker and you are doing work in the city, therefore, you are located in the city,” Blumm said during the March 13 episode of the “Blue Collar Buzz” podcast. “They pointed us to a Macmillan online dictionary definition of what the word ‘located’ means — and we kind of looked at ourselves and were scratching our heads — this is not the spirit and intent of this provision. This provision says that Charter has to use best efforts to use vendors located in the city.”

As a result, the DoITT has pushed its franchise agreement audit one year earlier than normal, now scheduled to begin Sept. 1. The city’s concerns about Charter’s performance have been amplified at the state level by the New York Public Service Commission, which has hammered Charter executives for months about the company’s inability to meet its obligations under the 2016 Merger Order approving the takeover of Time Warner Cable.

Tell us what you think about your cable TV service – whether it’s @verizon , @Altice or @GetSpectrum – send us your comments so we can make sure New Yorkers get the best service possible 📺👉https://t.co/ic2cx3sAjW

— NYC IT & Telecomm (@NYCDoITT) July 11, 2018

“Not only has the company failed to meet its obligations to build out its cable system as required, it continues to make patently false and misleading claims to consumers that it has met those obligations without in any way acknowledging the findings of the Public Service Commission to the contrary,” said PSC Chairman John B. Rhodes. “Our patience with Charter has come to an end and now we must move to take much stronger actions.”

Mayor de Blasio

Backers of the cable co-op note many of those on their business plan development team have direct experience designing, surveying, building, and maintaining the existing Spectrum cable system originally owned by Time Warner Cable.

“We know the system because we built it,” Walcott said. “The system was already crumbling and the infrastructure needed to be redone. This is something that’s going to have to get done anyway. We’re saying, instead of letting them do it, let’s start doing it and rebuilding it ourselves — the people that are actually going to build it anyway.”

Finding enough money to proceed will be the co-op’s biggest challenge. New York City officials, like Mayor Bill De Blasio, are in favor of more cable competition in spirit, but are careful not to commit themselves, or the sizable sums required if the group decides to begin building a competing system or bid to acquire the current Spectrum system. So far, the New York City Council has committed to gradually increasing financial support for the development and cultivation of worker cooperatives, starting with $1.2 million in 2015 and increasing to $2.2 million last year. A full-scale acquisition of the existing infrastructure owned by Charter in New York would likely run into the billions of dollars.

The group hopes public demand and dislike of Charter/Spectrum will force elected officials to get involved in the effort.

Murphy

Every Minnesota resident would receive access to high-speed internet service under a new proposal that would fund broadband expansion with sales tax revenue earned from out-of-state internet purchases.

The Connect MN plan, backed by the Democratic-Farmer-Labor Party (DFL) candidate for governor Erin Murphy, would offer rural and underserved Minnesotans 100/20 Mbps broadband service by 2026. To pay for the expansion program, Murphy proposes to invest $100 million annually in Minnesota’s Broadband Development Grant Program, which would provide funding to public and private providers to incentivize expansion into areas currently unprofitable to serve.

“For too long, we have talked about the importance of broadband at the Capitol without the investment needed to address the scope of the challenge,” said Murphy. “When I am Governor, we will move forward with a strategic plan that will connect every Minnesotan with the high-speed internet they need to succeed.”

Funding for the broadband expansion would come from new sales tax collections on out-of-state online purchases that have largely gone uncollected in the past. With the recent Supreme Court decision, South Dakota v. Wayfair, out-of-state retailers would be compelled to collect Minnesota’s sales tax when shipping items to a Minnesota address and remit the proceeds to the state government. The U.S. Government Accountability Office estimates more uniform collection of sales tax on out-of-state purchases will collect an extra $132-206 million for Minnesota annually. Dedicating much of that money to improve broadband service in the state could result in extending service to 550,000 unserved households — more than 26% of the state — within eight years.

Colored sections show areas lacking at least 25/3 Mbps broadband.

That level of investment would put Minnesota in the same league as New York, where in 2015 Gov. Andrew Cuomo announced a $500 million investment by the state in rural broadband expansion in an effort to achieve statewide broadband access by 2018. Cuomo’s plan is still under construction, and has been criticized for missing its end goal of universal coverage, with about 1-2% of state residents left with the option of satellite-delivered internet access.

Murphy’s plan would dramatically expand on her predecessor’s own broadband initiatives. Incumbent Gov. Mark Dayton’s (DFL) 2018 plan proposed to invest $30 million and reach 11,000 homes and businesses. Since taking office, Gov. Dayton claims to have secured enough funding to expand broadband access to 33,852 households, 5,189 businesses, and 300 community institutions in Greater Minnesota since taking office in 2011. Reaching the half million still unserved homes would take decades at current funding levels.

Murphy’s proposal also goes far beyond rural broadband expansion programs in other states. Tennessee currently offers a $45 million investment in rural broadband over three years — with less than $30 million specifically designated for rural broadband hookups. In West Virginia, a state ranked 43rd in wired broadband by the FCC’s 2018 Broadband Deployment Report, less than $2 million was available this year for rural broadband expansion, combining available funds from a Community Development Block Grant program with leftover money originally set aside for water and sewer projects.

Murphy claims universal access to broadband spurs innovation and drives economic development, education, healthcare and quality of life. One study indicates that a community will see a $10 return on investment for every $1 invested in broadband.

“This is a once-in-a-generation opportunity to make progress on an issue holding back too many Minnesotans in communities all over the state,” said Murphy. “It’s a critical step in ensuring that everyone in Minnesota can build a bright future for themselves and their families.”