For the first time, a state has announced it is returning stimulus funding made available by the Obama Administration to improve broadband service.

Wisconsin governor Scott Walker said thanks, but no thanks to the U.S. Department of Congress, returning $23 million in broadband stimulus funds allocated to build a fiber-optic “middle mile” network to 380 Wisconsin communities — including 385 libraries. 82 schools, and numerous public safety offices in rural areas.

The decision to reject the money came in concert with a public relations push by Republicans in Washington this week calling on governors to curtail “wasteful spending” and reject stimulus projects.  Walker’s timing of the rejection has political watchers suspicious of an orchestrated campaign by state and national Republicans to call out the president’s economic programs.  Critics of the Walker administration are also accusing the governor of doing AT&T’s bidding in rejecting the public money.

AT&T has plenty of good friends in the state government, which has historically granted most of AT&T’s legislative checklist in the past ten years.  Wisconsin has taken a “hands-off” approach to cable and phone companies.  Statewide video franchising makes AT&T’s efforts to expand its U-verse IPTV system easy, without having to answer to local communities.  Rural commitments to landline phone service have also been eased for AT&T, thanks to a large lobbying effort.  Publicly-owned municipal broadband networks open to ordinary consumers are few and far between in the state, thanks to heavy opposition from the phone giant.

Walker’s track record of being extremely pro-business, and the fact he accepted more than $20,000 in campaign contributions from AT&T made it easy to claim Walker was delivering another favor to the state’s largest phone company.

But is Walker’s rejection of the state’s broadband stimulus money a help or a hindrance to AT&T?  Is Wisconsin’s governor correct when he says federal government bureaucracy was at fault?

Stop the Cap! decided to investigate.

BadgerNet: An Introduction

Governor Walker

Wisconsin’s institutional broadband network, which delivers broadband connections to large educational facilities, public libraries, and government users, is named BadgerNet — which makes perfect sense for the Badger State.  State law limits who can utilize the service — ordinary residential customers cannot — so the network is not well known outside of the circle of groups authorized to access it.

Currently BadgerNet largely exists as an extension of AT&T’s network in Wisconsin.  That is a critical point.  Had BadgerNet initially been created as an independent entity, today’s stimulus rejection might never have happened.  Wisconsin, no doubt at the behest of AT&T, built its network with a leasing arrangement, signing five-year term contracts to rent space on AT&T’s fiber-copper wire facilities.  That kept initial construction costs down, and allows the state to theoretically “walk away” from part of the network if something better comes along — a highly unlikely proposition in a state like Wisconsin.  It’s not an economic leader and has large numbers of rural counties competitors would be unlikely to serve.

Wisconsin Republicans call this arrangement with AT&T a “public-private partnership.”  Democrats call it a giveaway to AT&T, and BadgerNet officials call it one big fat headache.

Wisconsin's BadgerNet

Obama’s Broadband Stimulus

President Obama

When the Obama Administration unveiled its broadband stimulus program, it not only promised to deliver new broadband projects, but also the employment prospects for an army of consultants hired to navigate through the terms and conditions that always accompany money from Washington.

The control measures established by the Department of Commerce, which administers the money from the federal government, are designed to protect against waste, fraud, and abuse.  Unfortunately, they are often more impenetrable than software licensing agreements.  If you want the money, you must follow every requirement, or risk forfeiting it back to the government.

Wisconsin’s proposal to expand BadgerNet with broadband stimulus funding would mean discarding slower speed data connections for super-fast fiber optics.  Some 203 new miles of optical fiber were to be laid, serving 385 school districts, 74 libraries, and eight community colleges.

The federal government liked what it saw and awarded nearly $24 million in funds to launch the “middle-mile” project.  Along with the virtual check came pages of fine print — rules about how the money could and could not be spent.

As state officials and BadgerNet 2.0’s planners poured over the documents, they began reaching for the Tylenol.  AT&T’s ownership interests in the existing network turned out to be a major problem.

The ‘AT&T Problem’

“We, as a state, do not own our network. We purchase a managed service through the BadgerNet contract,” Diane Kohn, acting administrator for the Division of Enterprise Technology in the Department of Administration told the Milwaukee Journal Sentinel.

Most grant recipients either plan to build a new network from the ground up or build on an existing non-profit network.  Neither is the case in Wisconsin because of AT&T’s involvement.

“From a federal perspective, it was like we were some kind of unknown start-up firm with all of these risks attached to it,” said Robert Bocher, an information technology consultant for the Department of Public Instruction. “In fact, our network has been around since the mid-1990s.”

But it got even more difficult when BadgerNet discovered the federal government requires new fiber networks built with stimulus funds to be utilized for at least 20 years.  This important control measure protects taxpayers from fronting the costs to build state of the art fiber networks, only to be later sold off to private interests or discarded as a budget cutting move.

Wisconsin’s agreement with AT&T runs for five years, not 20.  Additionally, since AT&T largely administers the infrastructure, much of the $23 million could have ended up going straight to AT&T to cover construction costs.  BadgerNet lacks sufficient funding to completely sever ties with AT&T and build its own network, and Gov. Walker isn’t about the deliver the money required to start a new network from scratch.

BadgerNet learned a lesson most grant recipients discover after winning the money — spending it comes with plenty of wires attached, and none of them transport data.

The Davis-Bacon Act

A Depression-era law is also being blamed for supposedly creating major hurdles for broadband network construction.  The 1931 Davis-Bacon Act was enacted to require public works projects be built at local prevailing wages.  The Act became law after contractors began importing cheap labor (typically underpaid African-Americans from southern states) to work competitively bid public construction projects during the Roosevelt Administration.

Mikonowicz

Republicans currently suspect the Act of being little more than a union protection law, raising labor costs artificially and helping to bust budgets.  Wisconsin Republican senator Ron Johnson used complications in a Sauk County broadband project to bash the Act, accusing it of being responsible for wasting taxpayer dollars.

David Mikonowicz, the utility superintendent for Reedsburg, complained the Act would require him to pay more than double his anticipated labor costs for a fiber project in the community.  Mikonowicz claimed the Act didn’t provide a prevailing wage for fiber contractors, so he was forced to bid out the project at wages suitable for high voltage wiring projects — $40 an hour.

That false premise made it to the pages of the Journal Sentinel in an earlier piece — a bit of political theater to bash unions, the federal government, and play up local communities as the innocent victims of both.

Stop the Cap! had no problems finding a prevailing Davis-Bacon Act wage covering Sauk County fiber installers, so we are unsure why Mikonowicz could not:

Teledata System Installer/Technician $11.70-21.26/hr

Low voltage construction, installation, maintenance and removal of teledata facilities (voice, data, and video) including outside plant, telephone and data inside wire, interconnect, terminal equipment, central offices, PABX, fiber optic cable and equipment, micro waves, V-SAT, bypass, CATV, WAN (wide area networks), LAN (local area networks), and ISDN (integrated systems digital network)

The Loyal Opposition & Everyone Else

The loss of nearly two dozen million dollars in federal government money was catnip for the loyal opposition.

Rep. Pocan

State Rep. Mark Pocan (D-Madison) said Walker’s broadband money giveback was hurting the state.

“Not only is he turning away construction jobs that would have come with the federal grant to expand broadband fiber to schools and libraries across Wisconsin, but he’s closing off potential to business growth that comes with bridging the digital divide,” Pocan said. “What’s worse, the root of his decision wasn’t what was in the best interest of Wisconsin, rather the best interest of his big telecommunications campaign donors.”

Gov. Walker used the occasion to blame the federal government for unnecessary bureaucracy. Mike Huebsch, appointed by the governor to serve as secretary of the state Department of Administration, issued a memo warning if they didn’t return the money, state taxpayers could be on the hook for the entire amount if the federal government found the state didn’t comply with grant requirements.

Ordinary Wisconsin residents would never see improved broadband in their homes from the middle mile project, so much of their reaction comes from a reflexive dislike of the governor, taxes and spending, AT&T, or a combination of all three.

AT&T has kept quiet through the entire affair, only stating it wasn’t interested in becoming a formal grant recipient stuck with the federal government’s rules.

Republicans and “tea party” members are thrilled Wisconsin is a leader in throwing federal money for broadband, railways, and other public works projects back to Washington, in hopes it will set an example for the federal government to follow.

What Happens Next

The state says it is negotiating an extension of the existing AT&T contract for another five years, and points to advances in copper wire-delivered bandwidth and the fact AT&T already provides fiber connectivity for certain parts of BadgerNet.

While AT&T has been labeled the ultimate culprit for the broadband stimulus debacle, it’s not as guilty as some might think for these reasons:

1. The initial failure of the state to own and operate its own network, instead of leasing access from AT&T;
2. AT&T gets the money whether Wisconsin leases another five years of service from AT&T, or stimulus funding gets diverted to AT&T to bolster BadgerNet’s existing network;
3. AT&T is sitting pretty whether it has a five year lease or a 20-year stimulus-mandated contract.  In fact, AT&T could set its rates at today’s relatively high prices for network connectivity that Wisconsin would still be paying two decades from now.

That doesn’t mean AT&T is a good actor in Wisconsin.  While the company has steered clear of this debate, its lobbyists continue to fight off any potential competition from community-owned networks that threaten to deliver service to residential and business customers.  Few Big Telecom providers complain about institutional networks like BadgerNet, because heavy lobbying on their part several years ago won state laws that forever prohibit ordinary consumers from ever buying service from them.

Verizon’s lobbyists are warning western New York politicians that unless they defeat a state measure to allow Verizon ratepayers to share in the proceeds of any future landline network sell-offs, Verizon may take a multi-billion dollar proposed data center elsewhere.

The Niagara county community of Somerset, population 2,900, is the planned home for the new high-tech infrastructure project.  Verizon officials propose to use Lake Ontario breezes and water to help cool the energy-intensive facility, to be located on 160 acres just yards from the shoreline.  In all, the Verizon campus will consist of three buildings — each 300,000 square feet in size.  If built as proposed, it would be among the largest of Verizon’s 250 data centers around the world.

But there’s a hitch.

While Verizon project manager Bruce Biesecker showed drawings and answered questions from an eager audience of local residents, Verizon lobbyists were telling reporters the entire project could end up in another state because of legislation under consideration in the state legislature.

Our regular reader Smith6612 dropped us a note wondering if we knew about the project.  Yes, we did.  But we also noticed company officials spending almost as much time complaining about interference from Albany threatening to derail the data center as they spent talking about the project itself.  Company officials also rarely named the exact bill in question or how it would directly threaten its data center investment.

Stop the Cap! covered the introduction of New York Assembly Bill 2208/Senate Bill 7263 earlier this year.  Introduced by Assemblyman Richard Brodsky (D-Westchester) and Senator Brian X. Foley (D-Blue Point), the companion bills came in response to watching Verizon sell off large segments of its landline network in a dozen states to Frontier Communications.  Both legislators were concerned the deal forced subscribers to deal with a new phone company that earned an “F” rating from the Better Business Bureau, all while personally enriching company executives and shareholders in a tax-free transaction.  They don’t want to see a repeat performance for rural New York residents.

Brodsky and Foley argue that such sales should be in the interests of ratepayers, especially rural customers who have few alternative choices.  Their legislation would compel Verizon to share 40 percent of the proceeds of any sale with their customers — the ones that pay the monthly bills that made Verizon’s network possible.  Alternatively, Verizon could spend an equal amount on verifiable infrastructure improvements and escape writing checks to ratepayers.  In either case, the legislation forces Verizon to spend less on bonus bonanzas for a handful of deal-making executives and more on the customers who have to live with the results.

Verizon lobbyists and company officials have routinely mischaracterized the legislation, claiming it singles out the state’s largest phone company with a “40 percent tax” that “exempts cable companies.”  They have also repeatedly hinted the legislation could force Verizon out of the state.

“That weighs as heavily in our decision as do things like power, taxes, environment,” Verizon spokesman John Bonomo said. “The business climate in the state is as important as some of those other factors.”

Verizon officials have not exactly been subtle about what they want to get the multi-billion dollar project ultimately built:  solid opposition to the two bills, which garnered support from consumer and ratepayer groups and the Communications Workers of America.  The legislation passed the state Assembly but ultimately died in the Senate several weeks ago.  Verizon is obsessed about keeping such bills from being reintroduced.

With billions at stake, the western New York delegation of politicians in Niagara and nearby Erie Counties have been especially supine to Verizon’s arguments.  In particular, some Republicans in the state legislature have made it their mission to see the bill permanently killed.

Unfortunately, the quality of the reporting done by local media about Verizon’s lobbying agenda has been especially underwhelming — frequently shallow, lazy, and downright inaccurate.  The assertions raised about the Brodsky/Foley legislation in area newspapers and television news reports makes one wonder if any of the reporters actually read the bills in question.

Take Bill Wolcott’s piece in the Lockport Union-Sun & Journal.

Wolcott never strays far from Verizon’s talking points, describing the bills as “[containing] conditions for givebacks of 40 percent for telephone providers, but does not do the same with cable TV corporations.”

Wolcott does not bother to accurately depict “givebacks” in terms of what they actually are — refunds to Verizon customers.

Verizon’s red herring complaint of unfair treatment is also repeated by the reporter, who apparently does not realize there are major differences between Time Warner Cable, which controls the overwhelming majority of cable subscribers in western and central New York and Verizon’s telephone operations:

1. Time Warner Cable has no plans to sell off its network to the highest bidder, abandoning rural and suburban areas served today.  Verizon did exactly that in most of the dozen states it left on July 1st;
2. Verizon’s landline network provides universal service to New York telephone customers, for which it receives a substantial subsidy from the Universal Service Fund;
3. Time Warner Cable is not held to universal service standards, something Verizon rarely complains about these days now that the phone company is in the same business as Time Warner through its selectively deployed FiOS network (which incidentally is not available in the Niagara county area where the data center is proposed.)
4. Verizon’s prior landline selloffs have almost always resulted in bankruptcies for the buyers, leaving phone customers uncertain about the level of service they will ultimately receive.

The proposed site for Verizon's data center in Somerset. Lake Ontario is visible in the distance. (Courtesy: WIVB-TV Buffalo)

The Buffalo News reporter did little better, misrepresenting a fundamental part of the bill (underlining ours):

Under the weight of a multibillion- dollar deficit, the State Assembly in the spring passed a bill that would require telephone companies to return 40 percent of their proceeds to the state if they reached a joint venture with another company or sold off some of their properties in New York.

Reporter Teresa Sharp managed to bungle an important fact.  The state of New York would not receive the proceeds — Verizon ratepayers would.

Most television coverage didn’t bother to challenge the inaccurate assertions made by Republican lawmakers or Verizon representatives either.  Talking points were read and reporters simply nodded their heads.

As a public service to the Buffalo-area media, Stop the Cap! presents a primer on the actual language of the legislation Verizon wants to see dead (underlining ours):

         (1) PROVIDES SHORT-TERM AND LONG-TERM ECONOMIC BENEFITS TO RATEPAYERS.
   49    (2)  EQUITABLY ALLOCATES, WHERE THE COMMISSION HAS RATEMAKING AUTHORI-
   50  TY, THE TOTAL SHORT-TERM AND LONG-TERM FORECASTED ECONOMIC BENEFITS,  AS
   51  DETERMINED  BY  THE  COMMISSION, OF THE PROPOSED MERGER, ACQUISITION, OR
   52  CONTROL BETWEEN SHAREHOLDERS AND RATEPAYERS.  RATEPAYERS  SHALL  RECEIVE
   53  NOT  LESS  THAN  FORTY  PERCENT OF SUCH BENEFITS; PROVIDED, HOWEVER THAT
   54  REINVESTMENT OF SUCH BENEFITS  IN  A  TELEPHONE  CORPORATION'S  IN-STATE
   55  INFRASTRUCTURE MAY BE DEEMED TO SATISFY SUCH REQUIREMENT.

What this means is that Verizon has two choices if it chooses to throw its rural New York landline customers overboard — before paying enormous cash bonuses to executives and deliver subscribers into the waiting hands of a potentially unstable buyer, up to 40 percent of the proceeds must be reinvested in improving the existing telephone network.  Barring that, the same percentage of proceeds must be returned to ratepayers in the form of refund checks or service credits.

Verizon may have a major problem giving customers their fair share, but they have no problem asking New York taxpayers for generous tax breaks.

Verizon has applied for a 20-year payment-in-lieu-of-taxes, or PILOT agreement, which would deliver substantial property tax savings, not a small matter in a region with the highest property taxes in the country.  It also wants a sales tax exemption on building materials and the equipment to be installed at the data center.  The sales tax break alone is expected to cost state taxpayers up to $330 million in lost tax revenue.

Because Verizon is upset about the legislation, local politicians have done one better expressing outrage that Albany politicians could drive Verizon to pack up its data center and head out of state.

Corwin

Somerset Supervisor Richard Meyers was quoted in Wolcott’s piece suggesting New York residents don’t want any part of a bill that returns money to phone customers if Verizon sells them out.

“I’ll tell you who’s calling the shots in the Senate, and that’s the residents of New York state,” Meyers said. “The average citizen in New York state does not like this bill, and I don’t either. I think it stinks. It’s not a necessary bill, and there’s a lot of time and energy wasted.”

Assemblywoman Jane Corwin, (R-Clarence) characterized the legislation as a union plot, quoted bashing the bills in the Lockport newspaper:

“It’s a very bad bill, being pushed by the Communication Workers of America, the union that represents the workforce at Verizon,” she said. “Of all the people that stand to get hurt, it’s the employees that would get hurt the most, and the investors as well. The whole bill doesn’t make sense.”

“This bill chills any business incentive to invest in New York state … because they stand to lose 40 percent of that investment down the line. The playing field will be made uneven, if we start taking 40 percent of that potential away from Verizon and not from the cable companies and Internet companies.”

She  contends that the CWA was putting pressure on the Assembly. “The shame of it all is that it’s been driven by a special interest group. They are the ones pushing this bill.”

What is especially chilling is that Corwin never bothers to mention concern for the one group affected above all others: Verizon landline customers.  To her, they are incidental.  The CWA?  A “special interest group.”  Verizon?  A source of campaign contributions for her.  This year, she has already picked up some nice change from the folks at Big Red:

Source: New York State Board of Elections

That’s not bad for a New York Assemblywoman serving a rural district whose total campaign take since her first election is just under $125,000.

State senator George Maziarz (R-Newfane) is just as bad.

“It’s a terrible piece of legislation, and I’m doing all I can to make sure it doesn’t pass,” said Maziarz, who heads the Senate’s Energy and Telecommunications Committee.

Verizon also thanks Maziarz for his efforts, for which he has been well-rewarded in the last two election cycles:

Source: New York State Board of Elections

Maziarz

The prospect of new high technology jobs and investment are more than promising to an upstate economy that has suffered difficult economic times for years.  But Verizon’s threats to skip Somerset for its new data center because of “anti-business” hostility ignores the company’s own willingness to abandon its rural customers.  In states where Verizon has sold off landline service — ending the prospects for real improvements in broadband and other modern services — communities like Somerset were the first to go, seen as too small and isolated for Verizon’s urban-based business plans.

The legislation Verizon fears protects New York residents, including those in Niagara County, from deals that enrich a handful of executives and Wall Street bankers while delivering sub-standard service to customers left behind.  Verizon’s record of sell-offs has been a disaster for customers, forced to endure long-term service disruptions, inaccurate bills with unfair charges, low quality broadband, and high prices.

Ironically, Verizon’s fear is totally misplaced, assuming they intend to remain committed to serving customers across the state — from cities as large as New York -and- towns as small as Somerset.  Even using Verizon’s own language, they can avoid the 40% “tax” if they simply keep providing service to their customers.

That’s just one of many facts the media in western New York needs to do a much better job of communicating to their readers and viewers.

[flv width=”640″ height=”500″]http://www.phillipdampier.com/video/Verizon Data Center 10-18-10.flv[/flv]

WIVB and WKBW-TV in Buffalo delivered several one-sided reports about the proposed Verizon Data Center while allow inaccurate information about Assemblyman Brodsky’s proposed bill to go unchallenged.  (8 minutes)

Back in the 1980s, a group of ragtag rural home satellite dishowners with 10 foot dishes took on the cable television industry for forcing viewers to purchase a set top decoder unit ($395) and paying programming prices higher than what cable viewers paid.  It was all part of an effort by the cable industry, which had an ownership interest in most cable networks back then, to discourage consumers from purchasing satellite dishes to escape ever-increasing cable rates.

Back then, these consumers ran into the same kind of Congress we endure today — quick to listen to industry representatives bearing campaign contributions and slow to respond to the needs and interests of their constituents who elected them.  Indeed, in one infamous example, a call placed to then-New York Senator Al D’Amato resulted in a staff member asking “what company are you with?”

Despite the power and influence of corporate interests protecting their turf, earning enormous profits along the way, many satellite dishowners stayed in the fight, and as cable rate increases continued, major reforms were finally enacted in the 1992 Cable Act which made small satellite dish services like DISH and DirecTV possible.

The struggle for Net Neutrality reminds me of that fight, and the fact it would take time to overcome the special interests and obtain important reforms.  Here at Stop the Cap!, we’ve won more battles than we’ve lost thanks to a small army of consumers who despise Internet Overcharging schemes and are tired of paying outrageous high prices for broadband and other telecommunications services.  Giving up the fight is not an option.

As the 111th Congress draws to a close, efforts to enact Net Neutrality through legislation this year have come to naught.

We were also disappointed by Julius Genachowski, the chairman of the Federal Communications Commission.  Despite his promising start at the agency, after more than a year watching his performance he has proven to be far better at making speeches than actually implementing policy.  His indecision and dawdling has resulted in a failure to deliver on his promise to reclassify broadband as — what it is — a telecommunications service.  That leaves standing a federal court decision that swept away the Commission’s authority to oversee broadband and stop abusive behavior.  For providers, that’s a dream come true.  Just consider this week’s story that Clear is throttling their customers despite marketing claims they would never do such a thing.

But not to worry, America.  AT&T is “committed to an open Internet,” proclaims the company in a new, feel-good advertisement.  AT&T’s public policy ad claims the company stands with the Obama Administration on delivering universal access to broadband by 2020.

“The future,” the ad claims, “has always been our business.”

The notion is just so warm and fuzzy, it makes me want to adopt puppies and kittens.

[flv width=”640″ height=”380″]http://www.phillipdampier.com/video/ATT Public Policy Commercial.flv[/flv]

AT&T’s newest ad promotes the company’s public policy agenda, which opposes Net Neutrality while still claiming to respect its core principles.  (1 minute)

Of course, AT&T is not so warm and friendly in Washington.  This is the company that dwarfs all other Big Telecoms in spending its customers’ money on hardcore lobbying blitzkriegs on Capitol Hill, drowning Washington in cash and fooling consumers with fake front groups pretending to represent their interests.

Suz, a third-year graduate student at Georgetown University’s Communication, Culture and Technology (CCT) program, noticed some of our earlier coverage on the topic of AT&T and wrote this is a company with a history:

The ad really struck me because of its message and because of the medium. In another class I’m currently taking – The Development of Electronic Media – we just came to the chapter on the development of the telephone and the major influence that AT&T held over that field for the majority of the 20th century. In part because of government regulations supporting the idea of “universal service” and in part because of the desire to connect rural areas with urban areas on the same line of service, the federal powers – though they put a little pressure on after AT&T acquired Western Union with the threat of anti-trust lawsuit – eventually support AT&T’s decompetitive nature by insisting on a compatible network and blocking “duplicative” services, giving AT&T the far-and-away lead in the market.

“The future has always been our business – AT&T.”

Now, there was a lot of history between this “golden age” of monopoly for AT&T and its eventual position today. But what I find striking is the similar-sounding stance to then-CEO Vail’s mission statement of universal service. Their motive may not have been as altruistic as the motto was (one way to attain universal service is to place it in the hands of one provider), but it eventually convinced the government that its powers could be used for good, even at the expense of a competitive (and innovative) marketplace.

Welcome to AT&T v2.0.

AT&T’s dominance in landlines is now at an end, but its influence over the telecommunications medium of the 21st century — the Internet, is just beginning.

The timing could not be more ironic, either.  While AT&T supports the goal for universal broadband service, it is fiercely lobbying to abandon a promise it made a generation earlier to deliver universal landline telephone service.  For that earlier commitment to wire every home, it was granted monopoly status for much of the 20th century.

AT&T has promised to be benevolent if it can remain a completely unregulated mega-player in the broadband industry.  It won’t openly censor opposing viewpoints, but it reserves the right to slow them down to make room for its preferred content partners.  AT&T won’t control what you see or do online, but it does want the right to limit how much of the seeing and doing you can do without overlimit usage fees kicking in.  But no worries, America — AT&T promises full disclosure, so at least you will know you’ve been network managed and overcharged for service.

Jeffrey Burnbaum — writing for the Washington Post — notes AT&T was the gold standard of high powered lobbying and little has changed today:

In the 1980s, AT&T was known for having one of the largest and most skilled corporate offices in Washington. Its representatives were everywhere and well-regarded on Capitol Hill. I remember one encounter between a tall AT&T lobbyist and an elegant McLean matron at a congressional cocktail party. The woman pecked the lobbyist on the cheek and then teased him: “I see you’re wearing your sincere blue suit.” He laughed knowingly — as did the lawmakers standing nearby and with whom he held much sway.

But personal respect wasn’t enough to hold back the tide, either. The telecommunications act of 1996 demonstrated the growing clout of the Baby Bells and AT&T made one last stab at restoring its prowess. In 1998 it hired a former White House deputy chief of staff, James W. Cicconi, to reorganize its Washington presence.

The former aide to George H. W. Bush put together what stands to this day as the model of a contemporary lobbying campaign. Under his guidance, AT&T dispensed tons of campaign cash, formed coalitions with sympathetic-sounding organizations, hired some of the biggest names in downtown Washington as lobbyists and spent millions of dollars on television advertising.

Net Neutrality advocates believe broadband reform is essential in the marketplace duopoly that exists today for most Americans.  With limited options, providers must do more than commit to an open Internet — they must be compelled to deliver it.  The industry’s scare tactics of slowed investment, job losses, and lost innovation are as patently ridiculous — and offensive — as similar claims made by the company over its breakup in the early 1980s.  With the power and influence of lobbying, telecommunications deregulation has allowed them to start putting the pieces back together again.  They are richer and more powerful than ever.

But can they be overcome?  Considering the cable industry deeply underestimated the impact of a consumer outcry over the industry’s abusive practices in the 1980s and early 1990s, the answer remains yes.  Just like the speeds of AT&T’s DSL service, it is just going to take awhile.

AT&T unveiled it’s U-verse system Monday in the Triad region of North Carolina, hoping to poach customers from Time Warner Cable’s “triple play” package of phone, broadband, and cable service.

AT&T U-verse services, which are delivered over AT&T’s Internet Protocol (IP) hybrid fiber-copper network, offer an alternative to cable with a DVR that can record more programming than the competition, features and apps not available from the local cable company, and additional channels new to the region. AT&T U-verse can combine every AT&T service a customer subscribes to onto a single monthly bill.

The most popular Internet-only tier of service has somewhat anemic download speeds up to 6 Mbps for $43 a month — other packages range from $38 for 3 Mbps to $65 for 24 Mbps.

U-verse TV packages include “local-channel only” service for $19 a month (with a stinging $199 installation fee), to more than 390 channels for $112 a month, with a $29 activation fee.  Other packages include U-100 with 130 channels for $54 a month and U-200 with 230 channels for $67.  High definition channels, now numbering more than 130, cost $10 extra per month.  Want premium channels in HD?  That’s another $5 a month.

Like other providers, AT&T has tinkered with pricing to deliver the most savings to customers who bring all of their business to AT&T with a triple-play bundle subscription.

“Today’s expansion of AT&T U-verse reflects our commitment to make the investments necessary to bring consumers across the Piedmont Triad a new era of true video competition,” Cynthia Marshall, AT&T North Carolina president said in a statement. “Local residents have asked for more choices in television service and today we’re delivering.”

[flv width=”640″ height=”500″]http://www.phillipdampier.com/video/ATT U-verse introduction.flv[/flv]

Watch this comprehensive video from AT&T explaining the many types of services U-verse offers and helpful tips to prepare for service installation.  Then view an actual installation in a customer’s home who shows off the equipment.  Stop the Cap! recommends you let AT&T do all of the required wiring for you.  That’s why you are paying that installation fee!  (22 minutes)

Brubaker

But despite the company’s claims that competition will deliver lower prices for consumers, the evidence suggests otherwise.

AT&T credits a statewide video franchising bill passed in the North Carolina legislature for making U-verse possible in the state.  Company officials showed their thanks by inviting the two state legislators instrumental in shepherding AT&T’s agenda through the General Assembly to be on hand to take credit for introducing cable competition in the state.  They also publicly thanked them in their press release.

Seventeen term House Rep. Harold Brubaker (R-Randolph) congratulated AT&T for its accomplishments.  Brubaker received $4,000 in campaign contributions from AT&T in the first quarter of 2010.

The representative from Asheboro co-sponsored the 2006 Video Service Competition Act which stripped local oversight of cable operators and made AT&T’s entry into North Carolina effortless.  For other would-be competitors, especially municipalities seeking to build their own fiber networks, Brubaker has been far less helpful.  Most recently, he voted against an effort to bring broadband service to Caswell County in areas incumbent provider CenturyLink has ignored for years.

Adams

“Prior to the legislation, you had geographic areas where you operated in, so it kind of like took the walls down. The legislation took the walls down to allow for more direct competition for the consumer. Competition is great.  The consumer’s the one that benefits,” said Brubaker.  “AT&T’s presence in the market will very definitely save customers money.”

Rep. Alma Adams (D-Guilford), another co-sponsor, said AT&T’s arrival was exactly what she hoped for when she supported the legislation.

“As policymakers, our goal was to increase investment in North Carolina and give consumers more choices and innovative new services,” said Adams. “Today’s announcement makes that goal a reality for Triad residents.”

Adams added that AT&T U-verse also provided a safety valve for consumers who want an alternative to incumbent provider Time Warner Cable.

“Even if they like a particular company, they always like to know that there’s some other opportunities out there that they can look at as well, so they can do some comparing,” she said.

[flv width=”480″ height=”380″]http://www.phillipdampier.com/video/Important Information about ATT U-Verse system.flv[/flv]

AT&T delivered more time and attention to North Carolina legislators at their launch event than they ever will on U-verse.  AT&T segregates Public Access, Educational, and Government channels on a single U-verse TV channel that makes for tedious viewing.  Watch this demonstration from the California Public Utilities Commission.  (4 minutes)

AT&T announced the service would initially be available in limited areas of Forsyth, Davidson, Guilford, Rockingham and Alamance counties, and we do mean “limited.”  Many Triad residents who checked to see if the service was available in their area found it was not.  In fact, AT&T refuses to disclose exactly how many customers in the region can actually sign up for the service.  We couldn’t find anyone who could order the service when it officially launched.

“There will be small pockets around most of the entire area,” Chuck Greene, AT&T’s regional director for the Piedmont Triad told the News-Record. “Once we complete the build-out, it will include parts of Davidson, Caswell and Randolph.”

AT&T lobbied hard to sweep away earlier provisions in local video franchises that committed providers to rapidly expand service to every possible customer in their respective service areas.  Under the Video Services Competition Act, AT&T can take its sweet time, perhaps for years before service becomes widely available across the region.  Some areas will never receive the service.

Time Warner Cable welcomed competition from AT&T U-verse.

“For a long time, Time Warner Cable has faced competition from satellite and dish providers,” Scott Pryzwansky, the company’s local public affairs manager, wrote to the News-Record. “We continue to invest in our network and remain committed to bring the best products and services to the Triad. We are confident we will maintain positive relationships with our customers.”

Time Warner Cable has little to fear from AT&T’s arrival.  Pryzwansky said Time Warner Cable has not lowered its pricing in any of the markets where it faces AT&T U-verse competition.  Both AT&T and Time Warner Cable have raised prices at least annually for their respective subscribers.  The only exception in North Carolina has been in Wilson, where municipal provider Greenlight has kept Time Warner Cable from increasing prices.

Time Warner Cable maintains a special website to cope with competition from AT&T U-verse and satellite providers. Hilariously, the site quotes a piece from DSL Reports about U-verse price increases. Time Warner subscribers might not want to venture too far beyond that piece, because editor Karl Bode reports on the cable company's own rate hikes as well. (Click image to visit TWC site)

Stop the Cap! reader Sam in Greensboro thinks AT&T’s arrival is much ado about nothing.

“AT&T prices their U-verse service nearly the same or more as Time Warner Cable, especially after the introductory rate expires,” he says.  “Few people are going to be bothered switching back to Time Warner after the year is up, so they’ll be paying the same high prices for cable service to AT&T instead of the cable company — a distinction with no difference.”

Sam won’t bother with U-verse because he is disgusted with AT&T’s lobbying efforts to stop consumer broadband reform and Net Neutrality.

“It’s like dealing with the devil,” Sam writes.  “Why would I want to pay AT&T my money so they can turn around and spend it working against my interests as a consumer?”

The only good thing about U-verse’s arrival is that it may stall Time Warner Cable from trying another Internet Overcharging scheme in the area.

“Time Warner has to think twice about another usage cap and overlimit fee ‘experiment’ in the Triad if customers can simply flee to U-verse, although knowing AT&T they’d love to have the same rationing of the Internet they force on their wireless customers,” Sam said.

[flv width=”636″ height=”373″]http://www.phillipdampier.com/video/TWC Fights Back U-verse.flv[/flv]

Time Warner Cable maintains a sometimes-bizarre web campaign to convince customers not to switch to U-verse or satellite.  We’ve put together the various videos so you can watch them all at once.  (4 minutes)

Like Time Warner Cable, AT&T does not offer a-la-carte cable programming, either.  Customers can only choose from large packages of programming, not individual channels.

Triad area cable customers told local media they were tentatively glad U-verse is competing, but many are taking a wait and see approach as to whether they’ll actually see any savings.

WFMY News 2 spoke with cable customers today. One man said he feels like a “hostage” to his cable company because they have a monopoly on TV, Internet and phone bundles. A woman said cable and satellite companies drive her “crazy,” so she gave up and now simply rents movies.

“I am happy, but it’s hard times. I have three children. We live on one income,” Jamie Rettie, a Time Warner Cable customer told News 2. Whether she switches to AT&T or not, she’s said she’s hoping for a change in her bill.

“Hopefully they’ll keep competing against each another and have better and better prices for their services,” she said. “(I’ll) wait out my contract and we’ll see what happens.”

Some residents, like Thomas, are left picking the lesser of two evils:

“I don’t know who’s worse at their game, as Time Warner Cable and AT&T are both evil corporate entities that care only about their bottom line,” he writes. “Search the Internet and understand this service limits the amount of TV’s that can be used at one time.”

[flv width=”640″ height=”500″]http://www.phillipdampier.com/video/Greensboro Media Cover U-Verse Launch 9-13-10.flv[/flv]

Watch several news reports from Triad area TV stations about the introduction of AT&T U-verse.  In order, we include reports from WXII, WGHP, and WFMY-TV.  (7 minutes)

Verizon Hands Out More Money for Lobbying Than Any Other Telecom Company

Verizon spent $4.44 million dollars in the second quarter of 2010 on lobbyist activities designed to influence the federal government on broadband matters and other issues of concern to the telecommunications giant.

Verizon’s lobbying budget routinely exceeds $16 million a year.  It achieved the top spot among all telecommunications companies willing to spend millions to get its views heard in Washington, even as it stops expansion of its fiber optic FiOS project and has reduced spending on network upgrades, especially for landlines.

Verizon’s lobbying activities were disclosed as part of federal reporting requirements.  Verizon’s filing shows the company has several lobbyists working on a number of issues of interest to the company, particularly broadband and wireless phone legislation.

The company’s disclosure form lists the names of some of their top lobbyists.  The revolving door seems to always be turning in Washington, as former members of Congress and their aides leave to accept lucrative positions at Washington-area lobbying firms.  Among Verizon’s:

Shirley Bloomfield: From 2007-2009, she represented Qwest while also working with Rep. David Obey (D-Wisc.).  Bloomfield also lobbied for the National Telecommunications Co-Op and served as a press aide for the House Budget Committee.  From 2009 on, she’s been the VP of Federal Government Relations (read that – lobbyist) for Verizon Communications.  She kept one foot firmly planted at Big Telecom and the other in the halls of Congress.

Frank Cantrel Jr.: He’s been in this lobbying business for a long time.  After serving as an aide for ex-Senator Bob Packwood (R-Oregon), Cantrel worked for MCI’s interests for nearly a decade before moving on to represent Verizon’s from 2006 forward.  You could have spotted him July 20th at the invitation-only “Beers and Burgers” event for Rep. Roger Wicker (R-Miss.) bought and paid for by several lobbyists with campaign contributions in hand.  Would you like some fries with that “compromise” on Net Neutrality?

Bloomfield

Peter Davidson: General Counsel for former House Majority Leader “Darth” Dick Armey (R-Tex.), Davidson learned lobbying and corporate-backed astroturfing from the grand poohbah himself.  He spent time lobbying for US West and Qwest.  While Armey left for FreedomWorks, Davidson spent time as General Counsel at the Office of U.S. Trade Representative before getting paid the big bucks by Verizon.

Brian Rice: Verizon’s newest addition to its lobbying army, Rice comes straight from the office of Senator John Kerry (D-Mass.) where he served as Kerry’s Communications Policy Advisor.  Anyone want to guess what he “advised” the senator to do that helped make him the perfect choice for Verizon’s newest lobbyist?

Representing your constituents’ interests can be a major problem for members of Congress and their staffers who know only too well that riches await them working at lobbying firms after their stint in public service ends.  But few will be offered positions if they spend their time and energy alienating their future employers, which is just another reason why many members of Congress are receptive to industry arguments, especially when accompanied by a generous campaign contribution at an industry-sponsored golf tournament, barbecue, or luncheon.

For too many members of Congress, your needs come second (or third… or don’t even make the list.)