Sen. John McCain (R-Arizona)

What a week.  Broadband policy now has its very own death panel, in the form of accusations that Net Neutrality policies are:

• a Marxist-Obama plot to control the Internet;
• designed to silence conservative talk radio like the Fairness Doctrine;
• going to ruin Sen. John “I don’t use e-mail” McCain’s (R-Arizona) day.

Just a few years ago we watched former Sen. Ted Stevens (R-Alaska) tell us the Internet is not a truck but a series of tubes.  Glenn Beck earlier this week was coddling a small, terrified puppy that he claimed represented cowardly media missing out on the grand Marxist conspiracy underway, and Net Neutrality was just the latest piece of the coup puzzle.  Now one Tennessee congresswoman believes Net Neutrality is the Fairness Doctrine of 2009 and is being run by a czar.

Let’s review:

Sen. John McCain (R-Arizona) has introduced the ironically named “Internet Freedom Act” to free the broadband industry from potential oppressive government overregulation.

“Today I’m pleased to introduce ‘The Internet Freedom Act of 2009’ that will keep the Internet free from government control and regulation,” said McCain.  “It will allow for continued innovation that will in turn create more high-paying jobs for the millions of Americans who are out of work or seeking new employment,” McCain continued.  “Keeping businesses free from oppressive regulations is the best stimulus for the current economy.”

It’s certainly a stimulus — for broadband provider coffers and for McCain himself, who is Congress’ top recipient of big telecom money in the form of campaign contributions (over $900,000 and counting).  He’s the best senator the telecom industry could buy.  But wait, the guy who doesn’t own a computer or use e-mail says ‘father knows best’ for America’s online communities? McCain released a statement introducing his new bill:

The wireless industry exploded over the past twenty years due to limited government regulation.  Wireless carriers invested $100 billion in infrastructure and development over the past three years which has led to faster networks, more competitors in the marketplace and lower prices compared to any other country.  Meanwhile, wired telephones and networks have become a slow dying breed as they are mired in state and Federal regulations, universal service contribution requirements and limitations on use.

And we all know who has one of those dying breed rotary dial wired telephones, don’t we?

In fact, wireless industry profits have exploded over the past twenty years as the vast majority of Americans signed up for service.  The industry has been so awash in cash they’ve been on a consolidation shopping spree for at least the past three years, buying each other out through mergers and acquisitions.  The number of competitors John McCain thinks he sees growing is, in reality, a case of double vision.  He should get that checked.  Lower pricing?  Not quite.

Consumers don’t dump wired telephones because of government regulations:

“Honey, I can’t believe they are doing a Reverse Morris Trust deal with the phone company over in West Virginia.  We should cancel our Verizon phone line and take our business elsewhere… to Verizon Wireless instead — that will show them!”

Consumers confronting two telephone bills, one for the wireless and one for the wired phone, makes one redundant for those Americans trying to economize in this difficult economy.  The McCain family doesn’t have to

The dog knows more than it's telling

economize thanks to Comcast, AT&T and Verizon – just a few cutting checks to the self-described maverick.  Increasingly, consumers are looking for better deals and finding one with the cable company’s “digital phone” product, or an Internet-based Voice Over IP service.  State and federal regulations aren’t the problem — the quality and price of the service can be.

The vast majority of those consumers switching to wireless do not escape “universal service contribution requirements” either.  More often than not, wireless phone bills are decorated like Christmas trees with add-ons for everything from USF fees to 911 support surcharges, local, county, state and federal taxes, among others.

Limitations on use?  That would not be the wired telephone line’s flat rate calling plan.  The limitations are more commonly found on the wireless side, where many consumers get an allowance and a per-minute fee for exceeding it.  It sounds like the out of touch senator probably still makes station to station calls to “enterprise numbers.”  Welcome to the 21st century.

In short, John McCain doesn’t understand what he is talking about.  He apparently does understand those big telecom industry checks he gets, however.  No doubt that is the real inspiration for this industry-friendly legislation.

Rachel Maddow spent several minutes Friday night breaking down McCain’s legislation and what Net Neutrality is really all about.

[flv width=”596″ height=”336″]http://www.phillipdampier.com/video/MSNBC Rachel Maddow Net Neutrality 10-23-09.flv[/flv]

Rachel Maddow and Xeni Jardin, co-editor of Boing Boing discuss Sen. McCain’s “Internet Freedom Act” and Net Neutrality. (6 minutes)

Glenn Beck from His Morning Zoo days on KZZP-FM Phoenix - Would Thomas Paine approve?

We’ve already dealt with the psychotic world of Glenn Beck.  The self-described “rodeo clown” is entertaining, as long as you recognize reality has a restraining order against Beck and must keep at least 900 feet away from him at all times.  Art Brodsky from Public Knowledge speaks to Beck’s worldview:

“Mr. Beck fails to understand the fundamentals of how the Internet works. He should be in favor of Net Neutrality, because it guarantees streaming of his program will not be able to be placed behind, say, Keith Olbermann’s Countdown. That could happen if NBC’s owner decided to pay protection money for prioritized data transmission.”

Meanwhile, Rep. Marsha Blackburn (R-Tennessee) took time out from her tireless efforts to root out the czar problem in the Obama White House to conflate Net Neutrality with the Fairness Doctrine, conservative talk radio’s garlic-to-a-vampire bugaboo.  Appearing at an event sponsored by the Astroturf group “Safe Internet Alliance,” Blackburn railed against “government interference” in broadband, as Kim Hart from The Hill took it all down.  It was an amazing feat, considering she stumbled her way through a statement:

“Net neutrality, as I see it, is the Fairness Doctrine for the Internet,” she said.  The creators “fully understand what the Fairness Doctrine would be when it applies to TV or radio.  What they do not want is the federal government policing how they deploy their content over the Internet and they want the ISPs to manage their networks and deploy the content however they have agreed on with ISP.  They do not want a czar of the Internet to determine when they can deploy their creativity over the Internet. “They do not want a czar to determine what speeds will be available….  We are watching the FCC very closely as it relates to that issue.”

When it comes to broadband expansion, she said, she wants to make sure “all individuals’ rights are respected and that we look at the freedom of all broadband participants.” She said Congress needs to make sure the groups receiving stimulus funds for broadband expansion are able to deploy reasonable and effective network management tools so they can be helpful in tracking down illegal activity.”

“We shouldn’t look at technology as how do we punish and impede, but how do we encourage innovation,” she said.  “That needs to be a key thought as we move forward.  How do we encourage that innovation and not impede it?”

Blackburn herself is impeding a rational discussion with her word salad.

Rep. Marsha Blackburn (R-Tennessee)

Blackburn doesn’t see or understand much of anything.  Her off the rails representation of Net Neutrality as the equivalent of the Fairness Doctrine is bizarre at best, just plain rock stupid at worst.  Indeed, the Fairness Doctrine did dictate a form of balance in opinions for licensed radio and television stations in this country before it was repealed.  Net Neutrality specifically requires Internet providers, and everyone else, to keep their hands out of determining whether something is balanced or not.  The Internet is not a licensed medium, and the free exchange of ideas possible on today’s Internet already provides the ultimate fairness, where ideas can be freely expressed by anyone.

Glenn Beck sees Marxists.  Marsha Blackburn sees czars.  These folks need to cut down on the borscht for lunch.

Blackburn’s only priority for broadband stimulus seems to be using the money to help ferret out illegal activity online.  Perhaps she can come over and clear out my spam folder.

I didn’t even realize we had a Broadband Speed Czar.  I want to be the Broadband Speed Czar, moving across the land and banishing slow, expensive, and just plain lousy slow broadband technologies.  I decree no Internet Overcharging experiments and fiber-fast speeds for all!

As for the “Safe Internet Alliance,” considering their members include AT&T, the National Cable & Telecommunications Association, Verizon, and a whole mess of other astroturfers (many who also belong to Broadband for America), we can guess the kind of safety they are looking for.

With all of the discussion about Net Neutrality recently, the mainstream media often has a difficult time absorbing what this concept means and ends up confusing it with Internet Overcharging schemes.  CNN is the latest to make the mistake — not once but twice in three days as Nicole Lapin and Tony Harris discuss how Net Neutrality policies will impact consumers.

Lapin suggests this week’s decision by the FCC to begin writing a formal Net Neutrality policy was a done deal, and that it would prevent Internet providers from charging higher prices for consumers who use their broadband accounts a lot.

Both statements are incorrect.

The FCC is only at the start of writing a formal Net Neutrality policy.  The basic tenets Chairman Julius Genachowski would like to see a part of a formal Net Neutrality rulemaking are on the table, but there is plenty of time between now and a final vote for telecommunications industry lobbyists to sweep several pages from Genachowski’s wish-list to the floor (and replace them with their own.)

Nothing in the proposed Net Neutrality policies would currently prohibit providers from moving to Internet Overcharging schemes like usage allowances, overlimit fees, and other pricing changes that are ultimately designed to reduce usage and extract higher pricing from consumers.

Rep. Eric Massa (D-NY) has a bill to put a stop the Internet Overcharging schemes that continues to need your support and advocacy with your member of Congress.  See the Take Action section for further details.

For the record:

Net Neutrality: A set of policies that prevents Internet providers from discriminating against certain broadband services or website content providers with speed throttles, blocks, or other impediments.  Providers would not be allowed to set up special premium traffic lanes with faster speed delivery of online web content for “preferred partners,” while leaving everyone else on a slower traffic lane.  It preserves the Internet we have today.

Internet Overcharging: Practices by broadband providers to limit usage of your broadband service and/or charge higher pricing based on arbitrary claims that consumers are “overusing” their unlimited broadband service.  These include usage caps or limits, usage allowances, consumption billing that includes usage allowances, overlimit fees/penalties for exceeding those limits, speed throttles that kick in when a user reaches their usage limit, and any accompanying services sold to consumers who think they might exceed their plan allowance (overlimit “insurance” policies, extra usage blocks sold at premium prices, etc.)

[flv width=”570″ height=”324″]http://www.phillipdampier.com/video/2009-10-21-CNN-FCC Net Neutrality.flv[/flv]

CNN’s Tony Harris talks with Nicole Lapin about Net Neutrality, and how the policy impacts small businesses that sell on the web.  (October 21 – 3 minutes)

Earlier today the two revisited the issue of Net Neutrality to explore the outcome of the FCC Net Neutrality decision:

[flv width=”570″ height=”324″]http://www.phillipdampier.com/video/2009-10-23-CNN-Net Neutrality Victory.flv[/flv]

CNN’s Tony Harris and Nicole Lapin discuss the “victory” for Net Neutrality proponents.  (October 23 – 2 minutes)

One day before the Federal Communications Commission in Washington announced draft guidelines to establish an American Net Neutrality policy, the Canadian Radio-television Telecommunications Commission (CRTC) announced its own guidelines to govern what Canadian broadband providers can and cannot do with the Internet traffic they deliver to millions of Canadian consumers.  While Bell (Canada), the nation’s largest telecommunications company praised the CRTC for its provider-friendly ruling, consumer groups varied their responses from “a step in the right direction” to “weak” to “here comes more gouging.”

The CRTC Net Neutrality policy for Canada essentially permits providers to continue to throttle broadband speeds for both retail and wholesale customers, and block traffic altogether should the CRTC grant permission in “exceptional cases,” as long as the provider discloses the practice to consumers up front, and warns them in advance of any policy changes that further slow their connections.

Laurel Russworm, who runs Stop Usage Based Billing, was not pleased.

“The CRTC decision doesn’t have a silver lining I can find; in fact they essentially said that usage based billing and caps are good tools to use to fight congestion. All Bell Canada has to do is warn us first, then they can gouge as they please. They’ve deferred making a decision on usage based billing until after the court challenges are dismissed, but I’m not holding my breath,” Russworm wrote.

On Wednesday the CRTC decided that Internet providers in Canada need measures to manage the traffic on their networks at certain times to deal with what providers claim to be a congestion problem.  At hearings held this past summer, several CRTC commissioners were receptive to the claims providers made that Canadian broadband does not have the capacity their American neighbors have.  Providers like Bell and Rogers claim that peer to peer traffic and increasing consumption of high bandwidth services have created capacity shortages on their networks, requiring traffic management which artificially slows certain traffic on their networks at “peak times.”  Canadian broadband providers almost universally also impose Internet Overcharging schemes on their customers, limiting customer use and charging them overlimit penalties for exceeding usage allowances.

The commission accepted the providers’ claims and gave the green light to those practices, but said before a provider literally blocks access to online services, or throttles time sensitive traffic on services like Voice Over IP telephone or two-way video conferencing to the point it becomes “degraded,” it needs to get Commission permission first.

Mirko Bibic, Bell Canada’s senior vice-president of regulatory and government affairs, told The Globe and Mail the ruling gives carriers the right to run their businesses the way they see fit. “We’re the experts, and we get the flexibility to determine how to manage our networks to give the user the best experience,” he said.

Bell already “throttles” its Internet service by slowing peer-to-peer downloading between 4:30 p.m. and 1 a.m. to make sure the network is not overloaded by a relatively small number of people transferring large video and music files.

Independent Internet providers are among the biggest proponents of Net Neutrality, and a ban on Internet Overcharging schemes known in Canada as “usage based billing.”  Many Canadian broadband providers obtain connectivity through wholesale accounts purchased from Bell.  The Canadian phone giant imposed both speed throttles and usage based billing on their wholesale customers.  Those costs, and the speed bumps that go with them, are now increasingly passed on to consumers.  Independent providers fear being put out of business.

For many of them, Wednesday’s decision might as well never have happened.

“This has really not changed anything,” Tom Copeland, chair of the Canadian Association of Internet Providers, told PC World.

Copeland said the “biggest, most glaring omission” from the ruling is the lack of restraints on the time of day or how long suppliers like phone or cable companies can manipulate traffic. “So we could continue to see traffic management every day of the year,” he said.

“We’re still not addressing the cause of the problem,” he added: “Either weak points in the network, or abuse by users.” Most casual users of peer-to-peer applications — the biggest offending programs in the eyes of providers – aren’t the problem, he said.

“We just went backwards at warp speed,” lamented John Lawford, counsel for a coalition of consumer groups that fought for an end to throttling of Internet traffic of consumers, “ while we watch the U.S. rocket ahead.”

“The CRTC has said in this decision that ISPs own your content and own your Internet connection” said Lawford, “You just got owned.”

The Public Interest Advocacy Centre represented the Consumers’ Association of Canada, Canada Without Poverty and Option consommateurs during the hearings on Net Neutrality.  PIAC argued that the Telecommunications Act required ISPs not to interfere with customers’ Internet traffic unless such traffic was clearly harming other users of the network and not otherwise.  “ISPs should act as common carriers and just carry traffic, not as broadcasters deciding what you watch” continued Lawford, “but now they can decide what gets through – and how much they get to charge you for the privilege.”  Lawford also noted the CRTC’s requirement for the ISPs to disclose their “Internet traffic management practices” will not actually stop any of the practices.

The CRTC has repeatedly taken broadband industry-friendly positions in direct opposition to Canadian consumer interests, helping to set the stage for Canada’s rapid decline in broadband leadership.  The country’s standing in broadband rankings has taken a stunning fall from its earlier top-shelf position.  Regulatory policies that permit abusive, anti-competitive practices and reward providers for rationing broadband instead of investing in expanding it are at the heart of the problem.

Since the CRTC has taken positions more worthy of a industry trade group than an independent regulator, an increasing number of Canadians are demanding the CRTC lead or get out of the way.  A large group of Canadian voters upset about any issue is sure to attract politicians, and the New Democratic Party of Canada (NDP) has arrived.

Charlie Angus (NDP)

Charlie Angus, New Democrat Digital Affairs Critic and MP for Timmins-James Bay, who already is on record opposing Internet Overcharging schemes, says the CRTC dropped the ball on Net Neutrality.

“Yesterday’s CRTC decision on Internet traffic-management practices is a blow to the future of digital innovation in Canada,” Angus said in a statement.

“This interference [from traffic management] will be bad news for small third-party competitors and leaves consumers subject to digital snooping and interference from cable giants,” he added.

“Basically the CRTC has left the wolves in charge of the henhouse. ISP giants have been given the green light to shape traffic on the internet in favor of their corporate interests,” he said. “This decision is a huge blow to the future competitiveness of the Internet.”

Angus says that the premise of today’s decision – that notification from the ISP will allow customers to make an informed decision on where to buy Internet service – misses the harsh reality that the market for Internet service in Canada is not nearly competitive enough to work.

“Canada has fallen to the back of the pack in Internet service provision and pricing after leading the way for years. This is the direct result of a small band of ISP giants blocking out competition,” Angus said. “This decision clears the way for ISPs to squeeze out third-party players who are attempting to provide better price and service options.”

South of the border, the FCC has taken clear steps toward the establishment of Internet neutrality on U.S. networks.

Angus said that principle of Net Neutrality should be at the center of Internet policy in Canada, and that the CRTC has missed a golden opportunity with yesterday’s decision.

“The principle of Net Neutrality must be a cornerstone of the innovation agenda. The CRTC has once again acted as the rubber stamp for large ISP and cable players to dominate the market and decide which traffic goes in the fast lane and which traffic gets stuck in the slow lane. This decision continues a long and dismal tradition of Canada’s communication policy decisions chipping away at the public interest to the benefit of a few corporate giants.”

Dissolve the CRTC, a group collecting signatures to petition for the closure of the Commission, also made several comments about the CRTC decision.

Among their conclusions:

• The new policy leaves the door open to providers deciding their economic interests are better served from traffic management practices like throttles and usage limits than network investments.  Short term limits may serve the interests of stockholders, but could discourage long term investments needed to create new 21st century broadband platforms;
• The Commission’s encouragement that providers make additional investments in their networks is likely to fall on deaf ears.  It was Bell’s lack of investment in their broadband network which led to the traffic management practices, and the recent hearings about them, in the first place.  Without mandates, there is no real pressure on Bell to change their investment strategy.
• The Commission’s policy to regulate this issue through a user complaint process that calls out bad actors has no historical precedent of working.  The CRTC has a long history of ignoring public involvement in telecommunications proceedings, and does not like to involve themselves with individual customer complaints.  Campaigns to flood the CRTC with complaints on specific issues using their language may be the only way to get them to investigate.  Additionally, complaints that call out the disparity in network management policies between wholesale and retail accounts may only lead to additional restrictions on both types of accounts, making a bad situation even worse.

Canadians must contact their elected officials and demand federal legislation to enact true consumer protection and broadband reform policies to restore Canada to a position of leadership in broadband.  The CRTC is ineffective and must not be the final arbiter on these important issues.

The FCC today voted unanimously to begin writing a formal Net Neutrality policy to govern broadband services across the United States.  Three Democratic commissioners voted yes and applauded the concept of Net Neutrality.  The two Republican commissioners also voted to move the process forward, but signaled they would likely oppose the final draft of the rules.

Support for Net Neutrality, which would prohibit providers from slowing down, blocking, or charging higher pricing for favored access to web content, was spearheaded by FCC Chairman Julius Genachowski.

Genachowski said the rules were needed to protect consumers from abusive behavior by telecommunications companies that might seek to block or restrict access to broadband content, including telephone and video services.

“Internet users should always have the final say about their online service, whether it’s the software, applications or services they choose, or the networks and hardware they use to the connect to the Internet,” Genachowski said.

Other Democratic commissioners agreed with Genachowski.  Commissioner Michael Copps stated it was important to hear from everyone about the proposed rules.

“We need to recognize that the gatekeepers of today may not be the gatekeepers of tomorrow,” Copps said.

John McCain

Many Republicans were unconvinced of the need to establish Net Neutrality as formal policy.

“I do not share the majority’s view that the Internet is showing breaks and cracks, nor do I believe that the government is the best tool to fix it,” Republican commissioner Robert McDowell said.

“These new rules should rightly be viewed by consumers suspiciously as another government power grab over a private service provided by private companies in a competitive marketplace,” Sen. John McCain wrote in an opinion piece published by The Washington Times.

McCain compared Net Neutrality with the federal bailout of Wall Street and the American auto industry.

Under the draft proposed rules, subject to reasonable network management, a provider of broadband Internet access service:

1. would not be allowed to prevent any of its users from sending or receiving the lawful content of the user’s choice over the Internet;
2. would not be allowed to prevent any of its users from running the lawful applications or using the lawful services of the user’s choice;
3. would not be allowed to prevent any of its users from connecting to and using on its network the user’s choice of lawful devices that do not harm the network;
4. would not be allowed to deprive any of its users of the user’s entitlement to competition among network providers, application providers, service providers, and content providers;
5. would be required to treat lawful content, applications, and services in a nondiscriminatory manner; and
6. would be required to disclose such information concerning network management and other practices as is reasonably required for users and content, application, and service providers to enjoy the protections specified in this rulemaking.

The draft rules make clear that providers would also be permitted to address harmful traffic and traffic unwanted by users, such as spam, and prevent both the transfer of unlawful content, such as child pornography, and the unlawful transfer of content, such as a transfer that would infringe copyright.

Today’s vote marks only a beginning of the process to begin writing the formal policy of Net Neutrality governing Internet use in the United States.  As with the ponderous debate on health care reform, what ends up defining “Net Neutrality” will be open to interpretation, and a barrage of lobbyists and arm twisting from politicians will be part of what comes next.

On the eve of the historic vote, Verizon Communications seemed to join Google in affirming some of the basic principles of Net Neutrality.

However, the devil is in the details, as is always the case in telecommunications policy.

Verizon supports its own interpretation of Net Neutrality, which is wrapped in a concept they call “innovation without permission,” which is code language for a deregulatory open free-market environment.  It broadly accepts the concept that telecommunications companies should not interfere with legal content, but the company doesn’t want a whole barrage of new regulations to specifically define what would constitute “interference.”  Verizon believes onerous rules would stifle investment, and that existing rules already in place at the FCC are sufficient protection.

Things get downright dicey when Verizon spells out its “network management” principles, warning the FCC overly specific rules in this area could have unintended consequences.

Broadband network providers should have the flexibility to manage their networks to deal with issues like traffic congestion, spam, “malware” and denial of service attacks, as well as other threats that may emerge in the future–so long as they do it reasonably, consistent with their customers’ preferences, and don’t unreasonably discriminate in ways that either harm users or are anti-competitive. They should also be free to offer managed network services, such as IP television.

It is in this area where very specific rules are appropriate to write, because what one company defines as appropriate “network management,” could be discriminatory against selected content those providers seek to “manage.”

No broadband user has ever objected to network management that controls spam, “malware,” denial of service attacks, and other like-minded traffic.  In fact, most consumers wish more could be done to control these things.  Nothing in the current framework of telecommunications regulations or in those proposed have ever sought to impede this type of management.

No consumer minds having access to additional content, such as IP television.  But consumers do object when such content is used as an excuse to ram through Internet Overcharging schemes limiting broadband usage or imposing higher fees for using the types of services companies like Verizon now advocate.  “The broadband sky is falling” rhetoric about “exafloods,” overloaded “Internet brownouts,” and other such scaremongering nonsense often comes from the same providers that now want to provide IP television.  What they provide with their left hand, they want to limit with their right.

It’s anti-competitive, because the same companies with an interest in selling these pay television services (FiOS, cable television, fiber-telephone U-verse, etc.) also provide the broadband service that companies like Netflix and Hulu use to indirectly challenge their video business models.

Another concern is “traffic congestion” management, which all too often has meant speed throttles selectively imposed on “offending” applications, particularly peer to peer traffic.  There is good traffic management, such as routing equipment that provides even delivery of services like streaming video and Voice Over IP telephone calls, which rapidly deteriorate on loaded down networks, and then there is bad traffic management which selectively slows down the speed of whatever the provider deems to be of “lower priority.”  Allowing the customer to make the decision about which traffic gets priority is one thing.  Allowing a provider to do it without the consent of the customer is quite another.

Too often, the “unintended consequences” Verizon and Google speak about in the joint statement go to the provider’s favor, not to the consumer.  Overly broad, non-specific language opens loopholes through which providers will eagerly leap through.

Verizon also advocates transparency — “All providers of broadband access, services and applications should provide their customers with clear information about their offerings.”

Disclosure alone doesn’t suffice for consumers, particularly if there are few competitive places to take your business if you disagree with company policies.  Those rules should include realistic speed information (marketing stating “up to 10Mbps” that in reality only delivers 3Mbps would be one example).  It should not simply be an escape clause for providers to abuse their customers with throttled, slow service, and give them the excuse that “we disclosed it.”

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Federal Communications Commission Open Meeting

October 22, 2009

112 minutes

(Warning: Loud audio)

This newspaper ad is running across West Virginia opposing the sale of the state's phone business to Frontier Communications

Opposition to the sale of Verizon’s landline business to Frontier Communications in 13 states continues to increase, particularly in Ohio and West Virginia, where several employee unions have argued the deal represents a win for Wall Street and company executives, but a raw deal for millions of consumers.

The Communications Workers of America and the International Brotherhood of Electrical Workers, who also warned state regulators in New England about the consequences of approving the sale of Verizon’s operations in Maine, New Hampshire, and Vermont to FairPoint Communications, continue to warn consumers and state officials that a similar deal between Verizon and Frontier Communications could spell major problems for telephone customers.  They call on state officials to reject the deal and force Verizon to invest some of their substantial profits earned in these communities into providing better service instead of dumping customers overboard.

The CWA says the sale would put $3.3 billion dollars into Verizon’s coffers — tax free — and leave Frontier buried in debt, which could impact both new and existing Frontier Communications customers, including hundreds of thousands of those in Rochester, New York, Frontier’s biggest service area.

“Verizon Communications has been divesting assets to smaller, less stable corporations in order to reap large, tax-free, profits,” CWA International Representative Elaine Harris said. “Verizon proposes to repeat that formula, and its disastrous effects, with the sale of all of its wireline operations here in West Virginia to Frontier.”

The CWA considers the transaction based primarily on corporate greed, not the best interests of phone customers.

“The only winner in all of these deals has been Verizon Communications and especially Verizon’s corporate executives,” Harris said. Verizon CEO Ivan Seidenberg is the highest paid executive in the telecom industry, with $24.31 million dollars in annual compensation from Verizon.

“His salary could have funded the entire network of senior services in West Virginia last year and he still would have had $8 million in his pocket,” Harris said.

The deal will leave Frontier Corporation with a total of $8 billion dollars in debt. “The West Virginia consumers will experience the effects of converting more than 617,000 aging access lines to a smaller, debt-ridden company,” Harris said. “The public will be forced to pick up the pieces if Frontier follows Verizon’s other buyers and files for bankruptcy.”

“We’ve closely watched the failures of the companies that purchased Verizon’s assets and we don’t need a crystal ball to figure out what will happen if Verizon tries the same scheme in West Virginia. There’s absolutely no reason to gamble West Virginia’s telecommunication’s future just to increase Verizon’s bottom line,” Harris added.

The CWA is running radio ads across the state of West Virginia opposing the deal.

Audio Clip: Communications Workers of America Radio Ad (1 minute)
You must remain on this page to hear the clip, or you can download the clip and listen later.

Verizon spokesman Harry Mitchell said Verizon wants to sell its access lines so the company can focus on its wireless and broadband business. Mitchell told The Charleston Gazette the union has opposed the deal from day one.

“They’re spending their members’ dues on advertising in an effort to cloud the issue,” he said.

Frontier Communications has protested accusations that their purchase of Verizon assets will result in the same kinds of colossal failures impacting other Verizon sell-offs.  Company officials claim Frontier already has a successful customer support operation in DeLand, Florida, and billing and operating systems in place.

In West Virginia, those existing operations serve 144,000 Frontier customers.  If the deal is approved, Frontier will take on the responsibility of serving 1.3 million landlines across the southeastern U.S. alone.

The International Brotherhood of Electrical Workers, integrally involved in fighting the FairPoint transaction in New England, says the Frontier deal is reminiscent of what happened with FairPoint:

Regulators in the 14 states where Verizon now proposes to sell its landlines to Frontier face an almost identical situation as New England regulators did last year. Frontier Communications is proposing to buy Verizon’s entire wire line operation in West Virginia – as well as Verizon’s scattered landlines across 13 other states – in a similarly structured deal.

In both cases, Verizon chose a much smaller company in order to take advantage of an obscure tax loophole. With the Frontier sale, Verizon will avoid paying any taxes on the $3.3 billion it will receive from Frontier. Frontier will have to cope with three times more employees, three times more access lines and a 75 percent increase in its debt from $4.5 to $8 billion.

Verizon has a very poor track record in these sales. Verizon sold its Hawaii operations to Hawaiian Telcom in 2005 and it filed for bankruptcy. Customers, service and employees have suffered as a result.

Frontier – just like FairPoint – is a making promises that it may not be able to meet. Like FairPoint, state regulators are being asked to approve a deal where a small company will attempt to simultaneously run a much larger operation, pay off billions of dollars more in debt, integrate Verizon’s computer systems and spend more money to expand broadband.

In the end Verizon will profit but consumers, workers and communities are put at real risk.

Expanding broadband access is an especially critical factor for all rural areas. But Frontier has failed to make any specific commitments, set any timeline or offer a plan for its broadband buildout.

Union leaders believe that states shouldn’t risk their telecommunications’ future just so Verizon can fatten its bottom line. Regulators shouldn’t approve this sale because the risks are too great. Instead, our legislators, regulators and the Governor should require Verizon to meet its service responsibilities. Verizon shouldn’t be allowed to walk away with $3.3 billion tax free, and leave the fate of its customers in the hands of a company with a lot less resources. If Frontier should falter, customers and the public would be required to pick up the pieces – not Verizon!

The track record for Verizon spinoffs has hardly been one of success.

FairPoint Communications, the company to which Verizon sold its Maine, New Hampshire and Vermont operations in 2008, is foundering as it tries to integrate operations and is choking on the debt it incurred to finance the transaction Since the deal was announced, FairPoint’s stock price has declined by about 95%, and the company has been forced to suspend dividend payments.

Hawaiian Telecom, the company to which Verizon sold its Hawaii operations in 2005, filed for bankruptcy. Verizon sold its 715,000 access lines in Hawaii. Since then, Hawaiian Telcom has experienced significant transition issues that resulted in major financial and customer service problems. In three years, the company lost 21% of its customers. In December 2008, Hawaiian Telcom filed for bankruptcy.

The yellow pages company that Verizon spun off also filed for bankruptcy. In November 2006, Verizon spun off its yellow pages directory business to Verizon shareholders, loading the new company, Idearc, with about $9.5 billion in debt and extracting a cool $9 billion in cash and debt reduction. Last year, interest payments alone on Idearc’s debt accounted for almost one-quarter of its total revenues! Representing something of a Verizon failing company “hat trick,” Idearc filed for bankruptcy in March 2009.

[flv]http://www.phillipdampier.com/video/WSAZ Huntington Frontier CWA Fight 10-14-09.flv[/flv]

WSAZ-TV Huntington, West Virginia reported on the growing opposition to the Frontier sale by employee groups on October 14th. (3 minutes)

In Washington State, IBEW Local 89, outside Seattle, says the sale could cripple one of America’s most tech-savvy regions.

“We’ve always been a leader in communications in this part of the country,” said Ray Egelhoff, business manager of IBEW Local 89. “If this happens, we’re afraid businesses won’t move in, and some may even move out.”

Egelhoff, along with more than 1,500 Verizon workers who may become Frontier employees, deluged officials with letters and e-mails expressing their concerns. More than 500 have gone out so far to senators, house members, governors and business leaders. The workers worry Frontier —at about the a third the size of Verizon—won’t be able to absorb the huge Verizon assets, won’t be able to keep customers happy and, eventually, will have to shed staff.

Robert Erickson, International Representative in the IBEW’s Telecommunications Department said, “The deal poses risks to consumers and employees. Frontier is making all kinds of promises about synergy and how they’ll expand broadband. FairPoint Communications made the same grand claims and now they can’t meet their commitments and fulfill the promises they made. It’s clear that Frontier will be in a similar situation and not have the resources to fulfill the commitments they are making.”

Consumer groups are also raising objections to the sale.

The National Association of State Utility Consumer Advocates urged the Federal Communications Commission, which is reviewing the proposed transaction, to reject the deal.

“The merger proposed by Frontier and Verizon is not in the public interest,” said David Springe, president of the consumer advocate group. “The failure of the companies to offer adequate consumer benefits or protections puts customers at risk of being served by a company without enough financial strength to make necessary improvements to local telephone facilities and widen the deployment of broadband access.”

Free Press, a nonpartisan group that works to reform the media, also raised concerns about the sale in a filing with the FCC. Free Press cited Verizon’s sale of lines in New Hampshire, Maine, and Vermont to FairPoint, which subsequently acquired substantial debt, was unable to accommodate the increased service area, and is now on the edge of bankruptcy.

“This trend has the potential to leave rural areas with ill-equipped companies offering inadequate service at high prices,” says the Free Press report. “This is in direct contrast to the stated intent of Congress and the Obama Administration to foster universal broadband to all Americans.”

[flv]http://www.phillipdampier.com/video/WCHS Charleston Verizon Sale Fight 10-14-09.flv[/flv]

WCHS-TV in Charleston, WV talked with the CWA and company officials about the sale of Verizon operations to Frontier Communications. (1 minute)