AT&T stands to benefit enormously from the latest attempt to deregulate telecommunications services that could leave rural Michigan residents without a phone line, strips consumer protection and oversight rules to protect ratepayers, and wipes out the state Public Service Commission’s (PSC) traditional role of arbitrating telephone service and billing disputes.  In short, it delivers all of the benefits to AT&T and hangs up on Michigan consumers when their telephone service goes wrong.

AT&T  has found a real friend in Rep. Ken Horn (R-Frankenmuth), who introduced H.4314, a bill to overhaul Michigan’s telecommunications law.  Horn is AT&T’s top recipient of political contributions made by the company (and its employees) in the Michigan House.  He’s the third largest recipient of phone company money in the state, according to records from Project Vote Smart.  Horn’s bill delivers absolutely no discernible benefits to Michigan ratepayers.  Instead, Christmas comes early for big phone companies as Horn’s bill fulfills a wish list drawn up to eliminate decades of consumer-friendly protections:

1. Eliminates the PSC’s annual report on telecom competition and rate fairness in Michigan;
2. Allows AT&T to stop cooperating with the PSC in supplying information to help produce said report;
3. Strips away the requirement that companies like AT&T keep proper records that show the costs of delivering their services to customers;
4. Allows companies to keep secret the rates for services delivered by contract;
5. Eliminates the requirement that companies like AT&T deliver “high quality basic local service” to all residents in the state;
6. Expires all service quality standards established by the Commission on June 30, 2011;
7. Allows companies to escape punishment by eliminating the PSC’s authority to issue fines, cease and desist orders, or revocation of service licenses when a company has violated state law;
8. Requires all parties in a mediated dispute to keep the outcome secret;
9. Eliminates state-mandated fair billing practices;
10. Permits AT&T and other companies to sell, lease, or otherwise transfer assets and sell service to an affiliate below cost;
11. Allows companies to discriminate in favor of an affiliated burglar and fire alarm service over a similar service offered by another provider;
12. Eliminates the requirement that companies provide each customer a clear and simple explanation of the terms and conditions of services purchased by the customer and a statement of all fees, charges, and taxes that will be included in the customer’s monthly bill.
13. Allows AT&T and other providers to market products and services without giving the customer a true and fair estimate of the real “out the door” price for service — after taxes, fees, and surcharges.
14. Allows AT&T and other phone companies to discontinue service in any area provided with anything resembling a two-way telecommunications service including wireless, radio, or Voice Over IP service;
15. Eliminates the telecommunication relay service advisory board, which ensures quality service to the hard of hearing and deaf communities;
16. Reduces privacy guideline requirements protecting customers.

In tandem with Horn’s bill, AT&T released a congratulatory brochure reminding legislators they got the first half of their agenda enacted six years ago, now it is time for the rest of their dreams to come true.

Calling the proposed bill part of  “an innovation agenda to ‘modernize’ Michigan’s Telecommunications Act,” AT&T characterized the legislation as the ultimate red tape cutter, eliminating “a rotary phone mentality in a Smartphone, Wi-Fi world.”

Innovation, AT&T Style

But the proposed bill goes well beyond eliminating what AT&T considers outdated regulations and old phones — it could also eliminate phone service to Michigan’s most rural communities.

President Barack Obama was in Michigan last month to promote expanding broadband service, particularly in sparsely covered communities in the upper peninsula.  Large sections of Michigan remain underserved by AT&T, who does not extend DSL service into many rural areas.  Nothing in AT&T’s reform measure will bring broadband to these areas.  In fact, the bill grants AT&T permission to abandon landline service to these areas altogether, taking the prospects for DSL with it.

By winning an unrestrained playground for its products and services, for which it can charge whatever it likes — AT&T will follow Verizon’s lead and enhance service through its U-verse platform in urban and wealthy areas of the state at the expense of rural areas which are deemed unprofitable to serve.  While that’s great news for AT&T’s profit and loss statement, it hardly benefits the residents of Michigan who have helped build AT&T’s enormous network with decades of bill payments.

AT&T has a different position, of course. The phone company claims the bill will “better serve consumers” by eliminating “non-productive investments,” which really means investments in a landline network many Americans in more urban areas don’t care about anymore.  AT&T has focused much of its attention on its wireless network, which can deliver benefits to residents in Ann Arbor, Detroit, Saginaw and Grand Rapids, but is hardly a broadband replacement for Marquette or Elk Rapids — not with that 2GB monthly usage cap.  For urban dwellers, the promise of AT&T U-verse replacing AT&T DSL makes the phone company relevant in the broadband marketplace once again, but at the potential price of rural Michigan, who will never see the service in their neck of the woods.

AT&T claims their telecom reform agenda “means putting up a sign that says we are a state that gets it and will welcome and not restrain innovation,” the company says. “20th century regulations stand in the way of 21st century technology. Now is the opportunity to clear these roadblocks to investment and innovation.”

But AT&T’s policy bulldozer does far more than just sweeping away so-called “outdated” regulations.  It strips away fundamental consumer protection from unfair rate hikes, deteriorating phone service, billing errors, privacy protection, and the most basic right Americans have counted on for decades — the opportunity to purchase affordable landline service in even the most rural parts of the state.

Unfortunately, AT&T’s “innovation agenda” is deregulation at a price.  In Ohio, after similar legislation was passed, AT&T promptly raised rates on consumers last summer.  They did the same thing in California.  And Illinois.  Even U-verse, while delivering a second option for urban residents, simply does not save most subscribers money, especially after the introductory promotional rate expires.  It comes with rate hikes itself.

The Michigan Telephone Blog analyzes most of the bill’s outcomes with the same skeptical eye we have, and delivers a warning to other phone companies and businesses that could pay the price for AT&T’s version of “reform”:

If you are with a CLEC, an alarm company, or really any business that depends on telecommunications service in Michigan, you probably should have your legal department and/or your tariff guys looking at this bill.  If you belong to any type of consumer or business organization, especially one that protects senior citizens (who often hang onto the older technology, including the phone service they’ve always used) or small businesses (that often can’t move to other technologies for various reasons, particularly when they are located in less densely-populated areas), you should probably take a close look at this bill as well.

Frontier attempts to dig themselves out.

The Oregonian has been covering the plight of Frontier customers in the Pacific Northwest who signed up for Verizon’s fiber to the home service — FiOS — and are now facing down the new owners who want to raise the price by $30 a month.

Frontier has done itself no favors in the media with an ongoing series of reports of service problems, rate increases, and now the latest signs it wants out of the television delivery business altogether.

In a letter dated March 4th, Steven Crosby — senior vice president of government and regulatory affairs, told the city administrator in Dundee, Ore., Frontier FiOS TV has been a flop.

Since Frontier Communications Northwest, Inc., acquired Verizon’s operations on July 1, 2010, it has built on Verizon’s prior actions and continued to offer a robust and aggressively priced video product to attract Dundee subscribers.  Despite these efforts, however, customer growth has been disappointing and stagnant and Frontier has not achieved a commercially reasonable level of subscriber penetration.

Frontier also admits it has been under-pricing its video service to stay competitive and attract new customers, but those days are over.  The company earlier announced its intention to raise rates by $30 a month for its standard cable TV service, making it more costly than its nearest competitor, Comcast.

Frontier recognizes the impact its enormous rate increase will have on its subscriber base, soberly noting it is likely to “further depress subscriber penetration.”

With this in mind, Frontier is exercising its right under the franchise agreement it has in Dundee to provide notice it intends to terminate its video service at a future date, after providing subscribers with 90 days advance notification.

Similar letters went to city administrators in Newberg, McMinnville, and Wilsonville.  City officials had no reservations about interpreting the meaning of the letters and plans to implement a $500 installation fee for future FiOS TV installations.

“Looking at it, you expect there will be no new customers,” Dan Danicic, Newberg’s city manager told The Oregonian. “Getting this opt-out notice is not a huge surprise to me, but we are disappointed.”

Frontier's rate increases are driving many consumers back to Comcast for their television service.

Sources tell Stop the Cap! there was considerable debate inside Frontier’s offices last week on how to implement directives from executives to shut down FiOS installations as quickly as possible.  Initial efforts to quietly raise the installation price — without giving subscribers’ advance notice — were on track until Frontier’s legal department quashed the plan.  Concerns were also raised inside the customer support units responsible for taking orders and handling customer billing inquiries over how to deal with the inevitable subscriber backlash when the first bills arrived in the mail.

“Frontier hates dealing with FiOS and they can’t wait to be rid of it — they claim that the product is at least 10 years away from really returning any investment from its original deployment,” a well-placed source told Stop the Cap! late last week.

Frontier FiOS is an anomaly for the rural phone company, which delivers the vast majority of its broadband customers DSL service over copper wire phone lines, usually at speeds approaching 3Mbps.  Frontier FiOS “came along with the deal,” one Indiana Frontier official told local media there in response to rate hikes there.

Still, media reports that the company plans to ditch its TV customers created a small panic inside Frontier by the weekend.

“Getting customers switched over to satellite TV service in an orderly manner was the original plan, but reports the company was abandoning the service altogether risks we’ll lose our customers to Comcast, and many will take their phone lines to the cable company, too,” a second source informed Stop the Cap! this morning.  “We were told ‘orderly transition’ over and over again, so reassuring customers is today’s top priority.”

Dundee, Oregon

Evidence of this campaign was not difficult to find over the weekend, as The Oregonian amended its original story claiming Frontier does not have immediate plans to exit the video business.

Crosby told the newspaper: “Our actual implementation decisions will be business driven. At this time, there is no change in our FiOS video offerings or in our FiOS video service delivery to our customers. And this filing does not affect our FiOS high speed service.”

Stephanie Schifano, identifying herself as an employee of Frontier Communications, attempted to spin the letters sent to several Oregon communities as a simple matter of business and not a foreshadowed abandonment of television service.

“Frontier is exercising our right under the franchise agreements to terminate the franchises. The right to terminate soon expires, and if Frontier didn’t give notice now we may have been required to provide this service, with these franchises, for another 12 years. This notice offers Frontier the flexibility to continue to analyze the FiOS Video/TV business and continue to service our customers,” Schifano wrote.

But both of our sources well-familiar with Frontier FiOS say the company’s actions speak louder than its words.

“When you increase the installation fee to $500 and raise your prices nearly $30 higher than Comcast, you would be crazy not to interpret the message Frontier is trying to send — go get your satellite dish from us and get off FiOS,” our second source told us.

Telecompetitor read into some of the company’s comments about utilizing the acquired fiber network in a new way, perhaps for over-the-top Internet video content.

“That’s wishful thinking,” our second source says.  “Frontier’s only online video efforts surround its rebranded Hulu service, relabeled myfitv.”

Frontier's online video platform serves up mostly repurposed Hulu content.

“The company has no plans I am aware of for a grand video strategy — FiOS covers far too small a service area and there is no way Frontier will spend more money to increase that fiber footprint,” our source adds. “Frontier wants to meet its general obligations made as part of its deal with state regulators when it bought Verizon FiOS with the landline deal, and little else.”

Frontier will continue to offer FiOS to broadband customers for the time being, regardless of what it does with its video package.

“If it’s already there and not costing a lot of money to maintain for broadband, why not?” our source says.

One direct sales contractor for competitor Comcast suspects that train may have already left the station.

Calling Frontier’s customer service operation “a circus,” the salesman says Comcast is benefiting from Frontier’s ball-dropping.

“Many Frontier customers are unhappy with the customer service side while stating they do enjoy their phone, Internet, and video services provided by the FiOS network, but lose the business on the practically non-existing customer service side.”

The contractor says he hears stories from Frontier customers all day who are fed up with the frustration of extended hold times, inaccurate or missing bills, online account access problems, excessive call transfers to deal with service issues and high fees.

For regulators, the aggravation is much the same.

After being promised by CEO Maggie Wilderotter that Frontier would be an aggressive competitor in a barely competitive marketplace, Frontier has raised rates by 46 percent, irritated their customers with customer service problems and outages, and now has served notice it intends to flee the TV business at an undetermined point in the future.

North Carolina Legislature

Stop the Cap! has obtained the audio from Wednesday’s Public Utilities Committee meeting that quickly pushed through H129, Time Warner’s custom-written, anti-competition and community broadband destruction bill.

Listening to the 44 minute hearing will be disturbing to anyone who supports open government and the concept of voting for or against a complete bill, not one Rep. Marilyn Avila (R-Time Warner Cable) openly admits is going to be changed.  For her, that represents no reason to delay the bill — her good friends at Time Warner need this legislation passed today, not tomorrow or next week.

As you listen, we’ve included a voter’s guide with time-indexed comments to help draw your attention to some critical points, and some much-needed fact checking.  It will also help you identify the members of the legislature that need to stay, and those that need to go.

Our apologies for the distorted audio at times.  When a member leans into the microphone, as some clearly do, it creates significant audio distortion.  It gets worse in the last 10 minutes, so watch your volume.

North Carolina’s House Public Utilities Committee Meeting on H129 – Wednesday, March 2, 2011. (44 minutes)
You must remain on this page to hear the clip, or you can download the clip and listen later.

Your Audio Guide to The Committee Meeting

The shocking conclusion of this legislative travesty is the chairman adjourning before a recorded vote can be taken.  Without it, constituents can’t identify how their member voted and hold them accountable at the next election.

[Update 3:05pm Monday — Stop the Cap! misidentified Rep. Warren as Rep. Rowan at the 40:00 mark.  We have corrected the audio log above and regret the error.]

Avila’s bill, H129, is up for a vote early this afternoon.  If you live in North Carolina, this is your last chance to contact the members of the committee voting on the bill and encourage them to vote NO.  Tell them you are tired of these anti-competitive bills coming up year after year.  Let them know you support community broadband, that the bill does not exempt existing networks from its lethal regulatory requirements, and that there is no need for these kinds of bills, as local governments already answer to voters.

Rep. Marilyn Avila (R-Time Warner Cable) is getting significant blowback from some of her own constituents for introducing a bill that benefits a cable company, and almost nobody else.

Avila’s district extends into the northern part of Raleigh, the capital city of North Carolina.  Now, the city is making it clear it wants no part of Avila’s bill, H129, which will guarantee residents will continue to pay escalating cable bills year after year.

Raleigh’s City Council adopted a resolution opposing Avila’s legislation, written on behalf of Time Warner Cable.

H129 will destroy North Carolina’s community-owned broadband networks and prevent new ones from launching.

Council Member Bonner Gaylord, who authored the resolution, says passage of these kinds of anti-competitive bills would stop local governments from providing needed communications services, especially advanced high-speed broadband, and deny local governments the availability of federal grants under the American Recovery and Reinvestment Act to assist in providing affordable access to high-capacity broadband service in unserved and underserved areas.

North Carolina’s broadband rankings do not speak highly of the state’s existing broadband penetration, speeds, or pricing.  Large parts of western North Carolina lack broadband altogether, and what is available is often very slow speed DSL, often providing just 1.5Mbps service.  The mountainous western areas of the state are not well-reached by cable companies, and because of geographic and distance impediments, even telephone company DSL service is sporadically available.

Take Rockingham County, where the local government is pre-occupied with trying to find providers — any providers — to extend broadband service across the north central part of North Carolina.  Adjacent to Caswell County (which Stop the Cap! featured last year), it’s just one more example of how providers have ignored large sections of the state too rural, too poor, or too difficult for them to reach.

On Monday, Mark Wells, executive director for the Rockingham County Business and Technology Center, delivered a report to the county on his progress trying to get someone to provide service between the communities of Wentworth and Madison, which currently have no access to broadband.  Wells reports he is doing all he can to get CenturyLink, the area’s phone company, to step up and provide service, and the county is trying to see if Clearwire could extend service into the northern sections of the state.

Rockingham County, N.C.

Unfortunately, Clearwire has proved to be no broadband replacement, heavily throttling their customers to speeds that occasionally seem more like dial-up than actual broadband.

Rockingham County opposes H129 for the same reasons the city of Raleigh does.  The Board of Commissioners recognizes the broadband reality of northern North Carolina.  Unless local governments have a free hand to address the digital divide themselves, there will be no long-term solution for broadband availability in rural North Carolina.  That’s the message they are sending to their representatives in Raleigh.

Addressing the state’s broadband shortage requires public and private assistance.  Public governments can construct networks that require a longer window to pay off than private “return on investment” requirements allow, and private companies can access community networks to sell their services to the public they currently do not serve (or serve well).

But because companies like Time Warner do not want the competition, particularly from networks more advanced and capable than their own, they would prefer to see them shut down and banned — which is exactly what Avila’s bill would accomplish.

Last year, Sen. David Hoyle openly admitted Time Warner Cable wrote his bill.  There is little doubt the same is true for Avila’s bill this year.

The city of Raleigh, North Carolina

The city has an entirely different set of recommendations for Avila to consider:

1. The State of North Carolina adopt policies to encourage the development of high-speed broadband, including advanced, next-generation fiber-to-the-premises networks, in order to fully serve the citizens and advance education and economic development throughout the state;
2. The General Assembly provide incentives for both public and private development of high-capacity connections in order to handle rapidly growing data needs;
3. The General Assembly promote competition by curtailing predatory pricing practices that are used to push new providers and public broadband services out of the market; and,
4. The General Assembly reject any legislation similar to the Level Playing Field bills that would have a chilling effect on local economies and would impede or remove local government’s ability to provide broadband services to enhance economic development and improve quality of life for their citizens.

The resolution also noted that several North Carolina municipalities; including Wilson, Salisbury, Morganton, Laurinburg and Davidson, already have successfully launched local high-speed broadband networks in response to private provider’s unwillingness or inability to provide high-speed service “to serve the public and promote economic development in their respective areas.”

Although the English needs a little work, Korean broadband delivers a reality most Americans can only imagine.

South Korea has launched a nationwide broadband upgrade to rid themselves of 100Mbps service for $38 a month, claiming those speeds and prices are no longer sufficient for Korea’s new digital economy.

By the end of 2012, South Korea intends to connect every home in the country to the Internet at one gigabit per second and slash the monthly price to just $27 a month.

That’s more than 200 times faster than speeds enjoyed by most Americans, who pay an average of $46 a month — nearly double Korea’s planned price. Even more galling for Canadians — those speeds and prices are for completely unlimited access.

Stop the Cap! reader John in Victoria, B.C., thinks South Korea’s broadband improvements call out just how ludicrous Canada’s Internet Overcharging schemes really are.

“If the Canadian Radio-TV and Telecommunications Commission ultimately allows $2 per gigabyte in overlimit fees, we would have to pay $5,184,000 per month for the same thing,” John says. “If this comparison doesn’t make people want to chuck the CRTC, what will?”

For the government of South Korea, which is spearheading the Internet expansion effort, broadband has become a national priority for the fast-growing Korean economy.

[flv width=”640″ height=”447″]http://www.phillipdampier.com/video/Hello CJ TV.flv[/flv]

Korea’s CJ HelloVision cable system delivers TV programming, broadband, and phone service at speeds and prices that make North American providers look ridiculous.  Bonus: That sure looks like Sarah Palin making a cameo appearance in this animated video.  (1 minute)

South Korea historically trailed Japan’s economic post-World War II revival for decades, but no more. The country, which used to be poorer than the Communist People’s Republic of Korea to the north, has grown to the world’s 13th largest economic power, and has designs on being a world leader in the transition to the digital/information economy. They are already ahead of North America, with an advanced broadband platform that can sustain concepts like cloud computing that are just getting off the ground in Canada and the USA.

The KCC is spearheading Korea's broadband advancements

Only the most rural parts of Korea still rely on copper phone wires delivering DSL service, now considered archaic. Most of the country is now wired for fiber optics, making a transition from 100Mbps-1Gbps relatively simple. With new laser technology, existing fiber cables can transmit faster speeds, and when fiber is laid in the country, extra strands are buried for future use. The costs of burying 10 or 100 or 1,000 strands come mostly from labor, not the wiring.

Private electronics companies are strong proponents of the infrastructure upgrades, and service providers are on board to deliver the service. That is in marked contrast with providers in the United States and Canada who consider expensive upgrades an unnecessary proposition.

“Providers in the USA and Canada defend their existing networks as ‘good enough for average residential use,’ something that would be laughed away here in Korea or in Japan,” Dr. Park Sung-Jin, a Korean broadband researcher who travels between Seoul and Los Angeles tells Stop the Cap! “Large providers like AT&T cannot afford to lose their propaganda arguments of broadband sufficiency because if they did, they would lose face and be forced to transform broadband in the USA at the expense of their enormous profits.”

“In Asia, we would never allow our providers to dictate the national broadband policies of the country, and our discussions are long past arguing over what speeds are correct,” Park says.  “Now we’re arguing about how to bring the cost down.”

Japan delivers 1Gbps broadband service for $70 a month, a price scoffed at by Choi Gwang-gi, the 28-year old Korean now in charge of the Korea’s expansive broadband plans.

“I can’t imagine anyone in Korea paying that much,” Choi told the New York Times. “No, no, that’s unthinkable.”

A pilot gigabit project initiated by the government is underway with 5,000 households in five South Korean cities. Each customer pays about 30,000 won a month, or less than $27.

“A lot of Koreans are early adopters,” Mr. Choi said, “and we thought we needed to be prepared for things like 3-D TV, Internet protocol TV, high-definition multimedia, gaming and videoconferencing, ultra-high-definition TV, cloud computing.”

[flv]http://www.phillipdampier.com/video/200Mbps Broadband.flv[/flv]

Hello Broadband delivers a silly advertisement for its soon to be obsolete 200Mbps broadband service.  (1 minute)

Meanwhile, according to Dr. Park, North American providers like Bell, Rogers, and Comcast are spending millions trying to convince lawmakers in both countries that such speeds are wholly unnecessary.

“The United States and Canada are the worst, with providers spending countless millions themselves and through their lackey trade associations and illicit ‘consumer groups’ working for them trying to convince lawmakers American broadband isn’t so bad after all, but it is,” Park says. “They routinely claim any country that is ahead of the U.S. or Canada is a ‘special case’ because of urban density or government subsidies, but that can’t explain away all of the disparity in speeds and accessibility, only money and monopoly profits can.”

Both Romania and Latvia now beat Canada and the USA in broadband speeds and pricing, and North America’s dominance in a digital economy could be at risk.

Closer to home Don Norman, co-founder of the Nielsen Norman Group in Fremont, Calif., told the Times Korea is on the right track.

“The gigabit Internet is essential for the future, absolutely essential, and all the technologists will tell you this,” said Norman. “We’re all going to be doing cloud computing, for example, and that won’t work if you’re not always connected. Games. Videoconferencing. Video on demand. All this will require huge bandwidth, huge speed.”

In Canada, such predictions have given companies like Bell an excuse to engage in a national Internet Overcharging scheme they claim will help pay for building these kinds of future networks. But other countries around the world now deliver speeds Canada only promises their citizens, without overcharging them to pay for it.

“Charging for broadband traffic would be like you or I charging for the wind — it has no real value except in the eyes of the people who stand to profit from it,” Park said.

Will people notice a difference between 100Mbps and 1Gbps? Koreans say they will, according to the New York Times.

One of the customers already connected to Mr. Choi’s pilot program is Moon Ki-soo, 42, an Internet consultant. He got a gigabit hookup about a year ago through CJ Hellovision, although because of the internal wiring of his apartment building his actual connection speed clocks in at 278 megabits a second.

But even that speed — about a quarter-gigabit — has him dazzled.

“It is so much more convenient to watch movies and drama shows now,” he told the newspaper.

[flv width=”368″ height=”228″]http://www.phillipdampier.com/video/Giga Internet.flv[/flv]

This Korean language promotional video for Giga Internet, the marketing brand for 1Gbps broadband, still dazzles the imagination for those who lack the ability to follow the words.  As you watch, consider how America’s typical DSL service provider leaves millions of Americans with a ‘covered wagon’ 3Mbps broadband solution.  (6 minutes)

[flv width=”480″ height=”340″]http://www.phillipdampier.com/video/SK Broadband.mp4[/flv]

A stylish ad for SK Broadband, declaring new high speeds will let users “See the Unseen.”  (1 minute)