Just six months after the transition to digital television in the United States, proponents for the wireless mobile industry are back before the Federal Communications Commission asking the agency to “free up” additional frequencies by forcing major changes to local television stations.

The CTIA – The Wireless Association, a trade group representing big mobile providers like Verizon, Sprint, and AT&T, and the Consumer Electronics Association have suggested high power television broadcasting should be replaced with networks of lower powered regional relay transmitters serving smaller areas.  With considerably reduced power and antenna height, the groups argue, stations can be compacted into a smaller range of available channels, opening up new opportunities for wireless broadband services.

The number of available channels for television broadcasts has been shrinking since the early 1980s, when UHF channels 70-83 were largely reassigned for mobile phone use.  Today’s UHF band ends at channel 51, as channels 52-69 are reassigned to several interests, including first responders and other public safety uses.  With further compacting of the UHF band, up to 100-180 MHz of spectrum may be freed for mobile broadband use across the country.

How can this be done when the FCC believes many large urban regions of the country have used every available channel?  By reducing the coverage area of individual transmitters.  The wireless association claims interference problems come from high powered transmitters using soaring television antennas to give most television stations 30-40 miles of coverage area from a single transmitter site.  By dramatically reducing both the power and antenna height, and instead using a network of relay transmitters serving smaller areas, television stations can cover their local communities and reduce distant signal reception.  It’s these distant signals, and their capacity to interfere with other stations which requires the FCC to keep stations occupying the same or nearby channels far apart.

KATV-TV Little Rock's transmission tower

The CTIA suggests that with proper engineering of a low-powered network of transmitters, the Commission could reallocate UHF channels 28-51 for wireless communications instead, leaving UHF stations sharing channels 14-27.

The wireless lobby is selling this plan as a “win” for broadcasters, even though they will need to construct a network of lower powered transmitters and antennas to serve essentially every town in their existing service areas.  For most, that would involve constructing 15-20 new transmitter sites.  The wireless group says a more localized ‘cell-tower’ like approach to television transmission would serve areas currently not able to receive reception because of obstacles between the main high powered transmitter and a viewer’s set.  Proper placement of transmission antennas would maximize reception for each transmitter.  The wireless industry is even willing to bear the expense of purchasing transmitters, estimated at up to $1.8 billion dollars nationwide, to help broadcasters make the transition.  That’s actually a cheap price to pay considering the frequencies converted for their use are worth tens of billions more.

The plan got a boost of sorts from the Justice Department, who filed their own comments with the FCC suggesting adding frequency spectrum for wireless-based broadband should be a top priority for the Commission.

“Given the potential of wireless services to reach underserved areas and to provide an alternative to wireline broadband providers in other areas, the Commission’s primary tool for promoting broadband competition should be freeing up spectrum,” Justice officials wrote.

The Justice Department believes handing over additional frequency spectrum will promote competition, increase wireless broadband speeds, and lower prices, despite no evidence that wireless broadband competition would suddenly appear on the scene, or that the prevailing wireless carriers would actually reduce pricing and relax usage limits.

Broadcasters are not thrilled with the wireless industry plan.

The National Association of Broadcasters, to paraphrase, knocked the wireless industry for getting too greedy with its spectrum requests.  The NAB believes wireless providers like Verizon, AT&T, Sprint and T-Mobile are sitting on frequencies already allocated, but not yet used, for mobile communications networks, and they should use them before they come knocking looking for more.

Even more concerning to the NAB is the disruption the CTIA plan would cause for Americans still watching over-the-air free television.  Channel numbers would almost certainly have to be reassigned… again, at least for UHF stations.  That created significant confusion for viewers on the final date of the DTV transition in June when many stations either moved their digital signal back to their original analog channel number or relocated somewhere else on the dial.  Many Americans lost reception until they were taught to re-scan their televisions or converters to find the channels gone missing.

The NAB also questions the reception improvement a network of low power television transmitters could provide, particularly for those just on the edge of one relay transmitter and another.  Anyone trying to watch a low power television station today more than a few miles from the transmitter site can testify it’s not a pleasant experience.  Even greater concerns impact those “distant viewers” who may live between two or more cities, each with their own local stations.  Those viewers, using external antennas, can often watch television from several cities depending which direction their rooftop antenna is pointed, but could end up receiving no signals at all if CTIA’s plan is approved.

Broadcasters are also concerned about the impact lower powered transmitters will have on the forthcoming Mobile DTV service, which will bring programming to devices on-the-go.

The war over frequencies continues, as the broadcasters and mobile providers fight over who ultimately controls airwave real estate estimated to be worth $36-65 billion dollars.

Phillip Dampier

In a remarkable statement to the Federal Communications Commission in Washington, AT&T has joined Verizon in predicting the imminent demise of Ma Bell’s classic telephone network.

AT&T writes in its 30 page comment, “That transition is underway already: with each passing day, more and more communications services migrate to broadband and Internet Protocol (IP)-based services, leaving the public switched telephone network (“PSTN”) and plain-old telephone service (“POTS”) as relics of a by-gone era.”

AT&T claims abandoning the old legacy phone network would help the company devote its full resources into staying relevant by constructing a broadband, IP-based network that would deliver voice, data, and video to consumers, presumably over its U-verse platform.  That, according to AT&T, could help the company achieve universal broadband coverage in its service areas, but only if investment-friendly regulations are supported by Washington policymakers.

The Commission has been charged by Congress with formulating a National Broadband Plan that will result in broadband availability for 100% of the United States. That auspicious goal is within reach, but […] will not be met in a timely or efficient manner if providers are forced to continue to invest in and to maintain two networks. Broadband is dramatically changing the way Americans live, work, obtain health care, and interact with the government. Congress and the Commission have rightly made universal broadband access a core national priority. But achieving this goal will take an enormous investment of capital. Private investment from network operators has brought broadband access to over 90% of Americans, and these operators will continue to play a pivotal role in bringing broadband to the remaining 8-10% of citizens who do not currently have broadband access. It is accordingly crucial that the Commission pursue forward-looking regulatory policies that remove disincentives to private investment and encourage operators to extend broadband to unserved areas.

While broadband usage – and the importance of broadband to Americans’ lives – is growing every day, the business model for legacy phone services is in a death spiral. Revenues from POTS are plummeting as customers cut their landlines in favor of the convenience and advanced features of wireless and VoIP services. At the same time, due to the high fixed costs of providing POTS, every customer who abandons this service raises the average cost-per-line to serve the remaining customers. With an outdated product, falling revenues, and rising costs, the POTS business is unsustainable for the long run.

AT&T cites a growing number of Americans cutting their wired phone line service — 22% according to the National Center for Health Statistics.  Craig Moffett from Bernstein Research pegs it closer to 25%, with an additional 700,000 phone lines being disconnected every month.  With a shrinking customer base, the viability of companies providing only wired phone service has come into question.  Verizon and AT&T, the nation’s largest phone companies, have made the judgment it’s a dying business.  Conversely, Frontier Communications and a few other independent phone companies remain believers in rural copper wire phone networks, and are willing to buy the discarded, mostly rural regions their bigger counterparts can’t wait to exit.

But AT&T’s advocacy for an end to “plain old telephone service” is just a tad self-serving when one explores their “To-Do” list for Washington regulatory agencies and lawmakers.  AT&T suggests their future plan benefits all Americans.  Critics would contend it mostly benefits AT&T and its shareholders, especially in light of AT&T’s future revenues being directly impacted by customers disconnecting their AT&T phone lines.  AT&T themselves note collective industry revenue for basic phone service fell from $178.6 billion in 2000 to $130.8 billion in 2007, a 27% decrease.

AT&T’s Action Plan to Avoid Obsolescence Explored

At the heart of AT&T’s proposal for 21st century telephone service is an end to analog telephone service, designed more than 100 years ago to carry voice calls, and the launch of broadband-based service to every home in their service area.  From this new platform, AT&T can deliver telephone, television, and Internet service over a single network.  In fact, they already do in several cities where AT&T’s U-verse has launched. Instead of getting one revenue stream from basic phone service, AT&T can now earn from any number of services a broadband platform can support.

AT&T compares their plan with the transition from analog to digital television, except you won’t have to trade in your existing phones or attach converter boxes to every telephone in the house.  Just like the switch to digital television, AT&T wants a date certain to pull the plug on Ma Bell’s old phone network, the sooner the better.

But AT&T’s plan has plenty of strings attached.

First, the company believes the only path to private investment and a successful transition is a near-complete deregulation of the telephone industry.  It wants the federal government, specifically the FCC, to take control of oversight of phone companies across America, if only to end a patchwork of state regulations and service requirements.  Remember, the Ma Bell most Americans grew up with was a regulated monopoly.  In return for guaranteed profits, phone companies agreed to meet service obligations, provide service to any home or business that wanted it, serve the disabled, and provide discounted phone service to the economically disadvantaged.  Rural customers were assured they would have access to phone service and at reasonable prices, and if something stopped working, government oversight ensured problems would be repaired to the customer’s satisfaction.

In AT&T’s view, such requirements are quaint and outdated, and it wants to bear few of those burdens going forward.  Indeed, in a too-cute-by-half aside, the company argues that since it will design the network to operate under the same protocol the unregulated Internet uses, it should be unregulated as well.

Such deregulation could impact a myriad of policies governing phone service that most Americans take for granted — minimum service standards, requirements that telephone companies complete calls between one another – even if competitors, and reasonably priced basic phone service even in the most remote locations.  But AT&T is asking for even more – a comprehensive review and possible elimination of any regulation that could be interpreted as interfering with the transition to an all-broadband telephone network.  AT&T includes everything but the kitchen sink in this category, ranging from service quality requirements, reporting, recordkeeping, data collection, accounting, and depreciation and amortization rules governing how quickly the company can write off obsolete equipment.

Ma Bell's network is due for a retirement, advocates AT&T

Ironically, AT&T wants deregulation -and- access to public taxpayer dollars to construct their new network.  The company advocates government-funded award programs to promote universal broadband access.  One would provide money for wired broadband service, perfect for companies like AT&T that want to build those networks, and another for wireless mobile projects to expand service into unserved or underserved areas, also perfect for AT&T Mobility — the same wireless carrier slammed by Verizon Wireless for largely ignoring rural America with 3G wireless data upgrades.

While there is some justification for a review of federal and state rules that may no longer realistically apply to today’s telecommunications marketplace, AT&T goes out of its way to be self-serving in its recommendations.  It dangles the bright and shiny object of a 21st century broadband-based telephone network, but only if they get to run it essentially “no questions asked,” with little oversight and an infusion of public taxpayer dollars to compliment private investment.

AT&T may be correct that the days for Ma Bell’s “plain old telephone service” are indeed numbered.  But for a company that earns billions in profits and answers to shareholders demanding maximum return, shouldn’t their long term well-being first be a question between AT&T management and shareholders?  Are they incapable of a private course correction that makes their future relevance more secure?  AT&T’s U-verse did not require public tax dollars to be successful, and the company spent generously on lobbyists and astroturf campaigns to smooth the way forward with “statewide franchising,” bypassing local government oversight.

The real question on the table is how far does the Obama Administration and the FCC want to go to achieve universal broadband?  AT&T suggests that only massive deregulation will entice private investors to step up and make the investments required to help achieve whatever definition of “universal broadband” the Commission comes up with.  But that price is way too high to pay.  AT&T answers first and always to its shareholders.  If they want public tax dollars funding, even in part, their transition to an all-broadband future, they must also answer to the other “stockholders,” namely the American people helping to foot the bill.

FCC Commissioner Mignon Clyburn

At least one FCC commissioner remains unconvinced that Verizon Wireless’ recent decision to double the fee consumers pay for service cancellation is justified.  Virtually every carrier offering discounts on handsets and other equipment tie those savings to a two year service contract, with a stinging early termination fee (ETF) if one decides to leave before the contract is up.

Commissioner Mignon Clyburn released a public statement Wednesday questioning Verizon’s logic in their explanation that doubling the cancel fee from $175 to $350 helped defray costs ranging from network expansion and marketing to paying to keep the lights on in Verizon Wireless retail stores.  Clyburn called Verizon’s answers unsatisfying at best, alarming at worst.

“I am concerned about what appears to be a shifting and tenuous rationale for ETFs. No longer is the claim that ETFs are tied solely to the true cost of the wireless device; rather, they are now also used to foot the bill for ‘advertising costs, commissions for sales personnel, and store costs.’ Consumers already pay high monthly fees for voice and data designed to cover the costs of doing business. So when they are assessed excessive penalties, especially when they are near the end of their contract term, it is hard for me to believe that the public interest is being well served,” Clyburn wrote in a public statement.

Verizon also continues to get heat over mysterious fees appearing on some Verizon Wireless customer bills.  As Stop the Cap! reported back in September, consumers with basic service plans occasionally find $1.99 “data charges” on their monthly bills, and several have obtained refunds from the carrier after pointing out they do not use data features on their phones.

The mystery was suggested solved when a purported, unnamed Verizon Wireless employee engaged in some whistleblowing at The New York Times:

“The phone is designed in such a way that you can almost never avoid getting $1.99 charge on the bill. Around the OK button on a typical flip phone are the up, down, left, right arrows. If you open the flip and accidentally press the up arrow key, you see that the phone starts to connect to the web. So you hit END right away. Well, too late. You will be charged $1.99 for that 0.02 kilobytes of data. NOT COOL. I’ve had phones for years, and I sometimes do that mistake to this day, as I’m sure you have. Legal, yes; ethical, NO.

“Every month, the 87 million customers will accidentally hit that key a few times a month! That’s over $300 million per month in data revenue off a simple mistake!

“Our marketing, billing, and technical departments are all aware of this. But they have failed to do anything about it—and why? Because if you get 87 million customers to pay $1.99, why stop this revenue? Customer Service might credit you if you call and complain, but this practice is just not right.

“Now, you can ask to have this feature blocked. But even then, if you one of those buttons by accident, your phone transmits data; you get a message that you cannot use the service because it’s blocked–BUT you just used 0.06 kilobytes of data to get that message, so you are now charged $1.99 again!

“They have started training us reps that too many data blocks are being put on accounts now; they’re actually making us take classes called Alternatives to Data Blocks. They do not want all the blocks, because 40% of Verizon’s revenue now comes from data use. I just know there are millions of people out there that don’t even notice this $1.99 on the bill.”

Verizon's new termination fee appears random and capricious, some company critics charge.

Verizon Wireless denies it charges consumers for accidental web usage that lands on their mobile phone home page, which they claim is exempt from charges.  But Clyburn isn’t buying that explanation either.

“I am also alarmed by the fact that many consumers have been charged phantom fees for inadvertently pressing a key on their phones thereby launching Verizon Wireless’s mobile Internet service. The company asserted in its response to the Bureau that it ‘does not charge users when the browser is launched,’ but recent press reports and consumer complaints strongly suggest otherwise,” Clyburn writes.

“These issues cannot be ignored. Wireless communications are an essential part of our lives, linking us to our places of business, our communities, and our loved ones. The bottom line is that wireless companies can truly earn their desired long-term commitments from consumers by focusing primarily on developing innovative products, maintaining affordable prices, and providing excellent customer service. I look forward to exploring this issue in greater depth with my colleagues in the New Year,” she adds.

Verizon Wireless is also the only carrier that has not responded to a campaign by a Times columnist to let customers get rid of the airtime-wasting 15 seconds of voicemail instructions people wait through when trying to leave messages, something the wireless industry admits is there precisely to use up airtime and maximize revenue.

Clyburn joined the Commission this year, appointed by incoming President Barack Obama.  Her father James is the third-ranking Democrat in the House behind House Speaker Nancy Pelosi and Majority Leader Steny Hoyer.

[flv width=”480″ height=”380″]http://www.phillipdampier.com/video/WIVB Buffalo Best and Worst Cell Providers 12-7-09.flv[/flv]

WIVB-TV Buffalo reviewed Consumer Reports’ findings regarding the nation’s best and worst cell phone providers.  Despite Verizon’s controversial fees, it remains top-rated by the magazine’s readers. (12/7/09 – 2 minutes)

Redefining their "new position" to basically mean their "old position"

AT&T’s all-new position on Net Neutrality suspiciously sounds like its old position on Net Neutrality.

In a three-page letter addressed to FCC Chairman Julius Genachowski, James W. Cicconi, AT&T’s senior vice president for external and legislative affairs wrote in glowing terms about the Obama Administration’s efforts to expand broadband service and preserving the “open Internet.”  Those goals are shared by AT&T, according to Cicconi.  But are they?

AT&T has spent millions fighting Net Neutrality policies, calling them unnecessary and harmful to broadband innovation and investment.  Ed Whitacre, Jr., AT&T’s former chairman and CEO infamously kicked off a contentious debate when he declared content producers shouldn’t be allowed to use AT&T’s “pipes for free.”

Little has changed.

Yesterday’s letter to Genachowski brings nothing new to the table from AT&T.  In short, they still feel broad-based Net Neutrality regulations will be harmful to investment.  AT&T wants the FCC’s definition of Net Neutrality to be “flexible enough to accommodate the types of voluntary business agreements that have been permitted for 75 years.”  Flexible, in this instance, means gutting the clear, unambiguous prohibition against fiddling with Internet traffic and inserting loopholes that gut the policy’s effectiveness.  AT&T’s “voluntary agreements” never include consumers.

AT&T wants to provide “value-added” services to content producers who agree to pay more to obtain them.  That typically means additional speed or a guarantee of prioritized service.  Unfortunately, on a finite broadband network, those getting preferential treatment can reduce the quality of service for those who don’t pay.  By trying to refocus the FCC’s attention on obsessing over subjective interpretations of “unreasonable and anti-competitive” content discrimination, AT&T gets a free pass to configure a broadband protection racket and rake in money from content producers afraid to be stuck in the slow lane.

Cicconi

AT&T also continues to complain that such regulations would prevent the company from offering consumers “value-added” broadband services.  As long as those services do not discriminate, providers can freely provide network enhancements like faster speed tiers, “Powerboost” technology which temporarily speeds up connections, and even network management which keeps viruses, malware, and other junk traffic away from subscribers.

Ben Scott at Free Press, a consumer advocacy group, read between AT&T’s latest lines and saw a naked effort to gut Net Neutrality before being enacted:

“After leading a rabid anti-net neutrality lobbying campaign for years, AT&T now submits a letter to the Federal Communications Commission purporting to offer common ground,” Scott said. “What they are proposing would allow them to violate the core principle of Net Neutrality — letting them control the Internet by picking winners and losers in a pay-for-play scheme. That would destroy the free and open Internet, and the FCC should reject this false compromise out of hand.”

“Make no mistake, AT&T opposes Net Neutrality. Their proposed solution is a bait and switch. As bait, they ask to return to a standard of nondiscrimination that was long applied to the telephone network. But they fail to mention that this standard was part of a system of pro-competitive common carriage rules that they have railed against applying to broadband networks for years. They haven’t changed their mind about common carriage. They are simply cherry-picking one piece of the old rules and calling it a compromise. The entire Net Neutrality debate is about the creation of a new system of nondiscrimination that fits broadband networks, not telephone networks –a debate the telephone companies forced by stripping away consumer protection rules from broadband under the Bush administration,” Scott added.

Public Knowledge also called out AT&T in a statement from Gigi Sohn.

AT&T has tried to draw what is an imaginary line among types of discrimination. The company advised the FCC that while ‘unreasonable’ discrimination can be banned, any discrimination caused by ‘voluntary commercial agreements’ is just fine because the parties involved agreed to it. That is nonsense.

As we have said consistently, the Internet has functioned as well as it has because control of the crucial roles at each end of the network. Side deals made by a carrier like AT&T and a content provider or other company take that control out of the hands of the consumer.

Similarly, it is unfortunate that AT&T has resorted to the old tactic of threatening not to invest in its network if the company does not get what it wants in a rulemaking. The growth of the Internet will be driven by consumer demand, not by gimmicks. If the company is truly interested in consumers, it will allow consumers to remain in control.

Senator Amy Klobuchar

Senator Amy Klobuchar (D-Minnesota) is expected to introduce legislation this week to protect consumers from excessive early termination fees for ending their cell phone contracts early.

The Cell Phone Consumer Empowerment Act comes a few weeks after Verizon Wireless doubled their cancellation fees November 15 from $175 to $350 for “advanced” mobile phones.

Klobuchar sent a letter to Verizon Wireless President and CEO Lowell C. McAdam, criticizing the company’s decision to increase its Early Termination Fees (ETFs) for new smart phone customers.  Klobuchar also sent a letter to Federal Communications Chairman (FCC) Julius Genachowski, urging a review of the Verizon Wireless decision to raise these fees.

“These fees are anti-consumer and anti-competitive and they bear little to no relationship to the cost of the handset device,” said Klobuchar, a member of the Senate Commerce Committee.

Klobuchar’s bill is anticipated to specifically target Verizon Wireless over its decision to double fees for consumers.  Although the specific details of how the legislation will control fees is still being worked out, Klobuchar’s bill is expected to force providers to incrementally reduce fees for every month of service a customer completes and possibly set a ceiling on the fee charged depending on the retail price of the phone.

Klobuchar introduced a similar bill during the last session of Congress and many cell phone providers responded by pro-rating cancellation fees for departing customers, typically 1/24th of the fee waived for each month a customer stayed with the provider during a two-year contract.  But Verizon Wireless’ decision to double their fee, which could set a new trend in the industry, directly increases prices for consumers, according to Klobuchar.

“Under the company’s new plan, the penalty for leaving the contact halfway through a two-year contract would be $230 – still higher than the $175 ETF Verizon Wireless previously charged for these phones,” Klobuchar wrote to McAdam.

Verizon Wireless is the nation’s largest cell phone service provider.  Verizon customers purchasing an Advanced Device (smart phone) with a one or two year service agreement will be subject to an ETF of up to $350 if they disconnect service prior to the minimum term.  The $350 ETF will decrease $10 for each month of service completed.

The cell phone industry has defended cancellation fees as necessary because providers subsidize the cost of the cell phones sold to consumers.  Customers can purchase phones at the retail price and not be committed to any contract or termination fees.  Some advanced handsets can cost well over $500 if purchased without a contract.

Copies of correspondence to McAdam and Genachowski appear below.

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