AT&T is tracking some of their customers in a data mining experiment few know about.

AT&T is watching you.

America’s second largest cell phone company admitted Sunday it is quietly tracking the habits of customers using their AT&T cell phones to learn what they do with their time, where they work and play, how long they spend in traffic, what pubs they visit, and how long they stay.

The industry calls it “data mining,” and the treasure trove of information companies clandestinely collect about their customers could eventually become a major profit center when packaged and resold to third parties. AT&T researchers are experimenting with “big data,” according to a weekend report in the Star Ledger, sifting through vast amounts of location information customers unknowingly provide the phone company that could fetch a high price on the open market.

The newspaper reports AT&T Labs has been quietly following its customers in Morristown, N.J. in an experiment to prove its “big data” concept.

AT&T researchers mapped the movement of workers in and out of the city each day, following customers from their home to the office and beyond to favored nightspots such as bars and restaurants — all by tracking where customers’ cell phones were at different times of the week.

The result was a highly-detailed “snapshot” of daily life in Morristown. Plotted on a map, AT&T knows that workers commute from as far east as Queens, N.Y., and the city’s nightlife attracts people from northern New Jersey and Brooklyn.

Company researchers tracked customers as they moved from cell tower to cell tower as they traveled, and from that the company was able to predict patterns of behavior from local residents. For example, AT&T knows your commuting shortcuts, and can deduce (and share with urban planners) problem intersections or likely workarounds residents will typically use when traffic snarls.

Such sophisticated tracking alarms privacy advocates despite company claims personally identifiable information is scrubbed before accessed by third parties. AT&T customers are automatically opted-in for data mining when they sign up for AT&T cell service. It is included in the company’s terms of service, AT&T says.

The Morristown project was considered experimental, but AT&T has high hopes it can eventually use its “big data” concept to create a new source of revenue for the company.

AT&T is not alone using tracking capabilities to monitor its customers. Verizon is not far behind, the newspaper reports. Google itself tracks smartphone owners to help spot traffic jams for the company’s “live traffic” maps.

Privacy advocates question how informed customers are about location tracking and data mining, and what companies can ultimately do with the data.

Lee Tien, senior staff attorney with the Electronic Frontier Foundation, a San Francisco-based nonprofit organization specializing in free speech, privacy and consumer rights, told the newspaper consumers have a right to be concerned.

“One of the things you learn in kindergarten is that if you want to play with somebody else’s toys, you ask them,” Tien said. “What is distressing, and I think sad, about the big data appetite is so often it is essentially saying, ‘Hey, we don’t have to ask.’ ”

Sen. Paul Hornback (R-AT&T)

A Kentucky state senate panel on Tuesday approved a bill admittedly-authored by AT&T that could allow the company to abandon providing basic telephone service in areas deemed not sufficiently profitable.

Senate Bill 12 is just the latest effort by AT&T to end “Universal Service,” the basic principal that all Americans should have equal access to basic landline telephone service.

The proposed legislation would allow the three largest phone companies in Kentucky — AT&T, Windstream, and Cincinnati Bell to abandon customers who, in one possible scenario, do not agree to a more deluxe feature package that includes long distance calling, wireless service, and/or broadband.

“This bill represents a grave threat to continued, stand-alone, basic telephone service for many Kentuckians who don’t have the luxury of access to Twitter and all the things that we in urban areas tend to take for granted,” Tom FitzGerald, director of the Kentucky Resources Council told the Lexington Herald-Leader.

AT&T says allowing it the right to terminate rural landline service would “spur innovation and create jobs.” It would also strip Kentucky of its power to investigate and force resolutions of consumer complaints.

The optics of the bill’s primary sponsor, Sen. Paul Hornback (R-Shelbyville/AT&T), sitting next to the two AT&T executives who authored the bill as he testified before the Senate Committee on Economic Development, Tourism and Labor was not lost on the bill’s opponents.

“It’s obvious who he is really working for,” said our regular Kentucky reader Paul in Louisville.

Daniel, the Stop the Cap! reader who first shared the story with us, is not happy either.

“This infuriates me,” he writes. “If AT&T gets their way, they will have less reason to invest in areas that are underserved or not served at all, and allow them to further push people to their horrific cell service.”

Daniel barely gets DSL from AT&T — 3Mbps if he’s lucky, and most of his neighbors cannot get any broadband from the company because they don’t officially service the area with broadband.  Daniel suspects once AT&T is deregulated further, they will have even fewer reasons to focus on less-populated regions of the state.

Hornback: "Nobody knows better than AT&T what the company needs the legislature to do for it."

“AT&T is my only reliable option – and if I can’t keep their Internet service then I will lose my job,” he says.

In 2006, AT&T helped push through a deregulation measure that stripped the Kentucky Public Service Commission of its ability to oversee prices for telecommunications services in the state. Customers of both AT&T and Cincinnati Bell soon saw price increases after the legislation passed with arguably no improvement in service.

Hornback argues S.12 will help “modernize telecommunications in the state of Kentucky,” without explaining exactly how abandoning customers enhances their level of service.

AT&T says they will not completely exit rural Kentucky if given the power to disconnect its landline network.  It can sell rural customers AT&T cell phone service instead. Critics say that comes at a substantially higher price and offers only limited broadband.

Hornback defended that, suggesting the company is wasting money and resources keeping its current antiquated landline facilities when it might be better spending that money on wireless services.

But customers would face charges starting at nearly $40 a month after taxes and fees for a basic AT&T wireless plan with as few as 200 calling minutes a month.

Hornback got around initial opposition to an earlier measure he introduced — SB 135, by reintroducing essentially the same measure inside another unrelated bill.  Hornback said that was an effort to give the legislation “a fresh start” in light of heated criticism from consumer groups, the AARP, and even Kentucky businesses.

The committee voted 9-1 for Hornback/AT&T’s measure and sent the bill forward to the Senate floor.  The single “no” vote came from Sen. Denise Harper Angel (D-Louisville).

Phone companies in Kentucky

AT&T’s clout in the state capital is unparalleled according to the newspaper:

It employs 31 legislative lobbyists, including a former PSC vice chairwoman and past chairs of the state Democratic and Republican parties, spending about $80,000 last year on legislative lobbying. Its political action committee has given at least $91,000 in state political donations since 2007.

Remarkably, Hornback defended AT&T’s authorship of his bill that would directly benefit the company’s interests.

Nobody knows better than AT&T what the company needs the legislature to do for it, Hornback said.

AT&T has once again scored dead last in a nationwide survey (subscription required) of wireless providers commissioned by consumer magazine Consumer Reports.

Among national coverage carriers, Verizon Wireless again scored the highest, but not highest overall when including smaller independent and regional carriers.  Top honors were won by Consumer Cellular, a relatively small company in Portland, Ore. that ironically depends on bottom-rated AT&T’s network to deliver service.  What sets Consumer Cellular apart from other carriers is its near-exclusive focus on selling phone service to America’s senior population.  Working with groups like the AARP to market simple cell phones to older, less technologically-comfortable customers, over 85% of Consumer Cellular customers are over the age of 50.  The vast majority are occasional cell phone users, primarily using cell phones to make and receive calls.

Regional carrier U.S. Cellular, which used to top Consumer Reports‘ surveys, scored second.  Most U.S. Cellular customers are in the Pacific Northwest, Midwest, and parts of the East including New England.  CREDO, better known under its former name Working Assets Wireless, scored third.  It provides service over the Sprint network.

Among major-sized providers, only Sprint managed to escape the poor ratings for value received by AT&T, Verizon, and T-Mobile.  Also ironic, T-Mobile continued to score better than AT&T, which is still working feverishly to acquire the German-owned carrier.

AT&T also did poorly in delivering reliable voice and data services, according to respondents.  Customer service was also deemed lacking.

Consumer Reports

“Our survey indicates that subscribers to prepaid and smaller standard-service providers are happiest overall with their cell-phone service,” said Paul Reynolds, electronics editor for Consumer Reports. “However, these carriers aren’t for everyone. Some are only regional, and prepaid carriers tend to offer few or no smart phones.”

Consumer Cellular being a prime example. 

Consumer Reports surveyed 66,000 Americans for its 2011 Wireless Satisfaction Survey and found little had changed from last year.  The consumer magazine recommends consumers who don’t make or receive a lot of calls or are not addicted to wireless data services consider a prepaid plan instead of a two-year contract.  Competition in the prepaid arena continues to force prices down, and most providers offer month-to-month service plans that can be automatically renewed through a checking account or credit card, eliminating any hassle purchasing “top up” cards.

Most of the prepaid providers resell service provided by AT&T, Sprint, or Verizon Wireless.  Two that don’t: MetroPCS and Leap Wireless’ Cricket, received little regard from those surveyed.  MetroPCS scored second from the bottom and Cricket didn’t make the ratings at all.  Two prepaid plans to consider first: TracFone, excellent for occasional calling, and Straight Talk, sold by Wal-Mart — better for those who like to talk a lot on their phones.  If you don’t need the sexiest handset around, Stop the Cap! also recommends Page Plus, which relies on the Verizon Wireless network, especially if you don’t need a lot of data services.

Don't bother.

Cox’s ambitious plans to get into the cell phone business were already tempered by the cable company’s decision last spring to simply resell Sprint service under the Cox name.  Now it’s “game over” as the company today quietly stopped signing up new customers and will pull the plug on existing ones March 30, 2012.

Those customers already signed up for Cox’s “unbelievably fair” cell service will officially become Sprint customers next April.

In a confidential memo obtained by Engadget, Cox executives ultimately decided it didn’t make sense for the company to invest in a limited range 3G cellular network.

Cox’s plans to utilize the 700MHz wireless spectrum it acquired in 2008 for 3G-powered wireless service began to go wrong almost from inception.  The wireless business is increasingly in the hands of two super-sized companies, thanks to ongoing mergers and acquisitions.  That leaves smaller, regional companies at a competitive disadvantage unless they heavily discount service.  While Cox was contemplating its first 3G network, AT&T, Verizon, and Sprint were well on the way to launching next generation 4G service that would have left Cox behind.

Cox itself is a regularly-rumored takeover target, likely by Time Warner Cable.  No cable industry buyer has much interest in a cell phone service.  Shedding it could make the company more attractive for would-be suitors.

Engadget reader Sal Petrarca observed:

“I always thought it ironic when I [heard Cox’s radio ad asking customers] ‘You wouldn’t order cable from the phone company, would you?’ I guess no one is going to be ordering [cell] phones from the cable company now, eh?”