The general counsel of the Federal Communications Commission predicts your landline will stop working within the next ten years, abandoned by companies like AT&T and Verizon in favor of wireless service in rural America or fiber (if you are lucky) in the cities.

Phillip “Did you know your landline will be dead within ten years?” Dampier

Sean Lev, the FCC’s general counsel, said in a blog post that “we should do everything we can to speed the way while protecting consumers, competition, and public safety.”

But the FCC seems to be abdicating its responsibility to do exactly that by singing the same song some of America’s largest phone companies have hummed since they decided to get out of the copper landline business for fun and profit.

Traditional boring telephone service is regulated as a utility — a guaranteed-to-be-available service for any American who wants it. Hundreds of millions of Americans do, especially in rural areas where America’s cell phone love affair is tempered by dreadful reception, especially in mountainous areas. Oh, and the nearest cable company is ten miles away.

AT&T and Verizon — two of America’s direct descendants of the Bell System, just don’t want to pay to keep up a network most of urban America doesn’t seem to want or need anymore. In addition to a dwindling customer base, providing a regulated legacy service means having to answer to unions and government-types who make sure employees are fairly compensated and customers are given reasonable service at a fair price. The alternatives on offer from AT&T and Verizon carry no such regulatory (or union) baggage. Prices can change at will and customers have no guarantee they will receive service or have someone to complain to if that service is sub-standard.

While in the past regulators have taken the lead to make sure telephone companies meet their obligations, the new FCC seems to spend most of its time observing the business agendas of the companies themselves.

Lev implied to the Associated Press the FCC is not exactly leading the parade on the future of landlines. He seems more comfortable trying to analyze the intentions of AT&T and Verizon’s executives:

Most phone companies aren’t set to retire their landline equipment immediately. The equipment has been bought and paid for, and there’s no real incentive to shut down a working network. He thinks phone companies will continue to use landlines for five to 10 years, suggesting that regulators have some time to figure out how to tackle the issue.

Lev

AT&T is more direct: It wants to switch off all of its landline service, everywhere, by 2020. Customers will be given a choice of wireless or U-verse in urban areas and only wireless in rural ones. Where U-verse doesn’t serve, AT&T DSL customers will be in the same boat as Verizon customers on Fire Island: pick an expensive wireless data plan, satellite fraudband, or go without.

Verizon prefers a “gradual phase-out” according to Tom Maguire, Verizon’s senior vice president of operations support.

Verizon claims it has no plans to shut down working service for customers, but it does not want to spend millions to continue to support infrastructure fewer customers actually use. That means watching the gradual deterioration of Verizon’s copper-based facilities, kept in service until they inevitably fail, at which point Verizon will offer to “restore service” with its Voice Link wireless product instead.

For voice calls, that may suffice for some, especially those comfortable relying on cell technology already. But at a time when the United States is already struggling with a rural broadband problem, abandoning millions of rural DSL customers only makes rural broadband an even bigger challenge. The wireless alternative is too variable in reception quality, too expensive, and too usage capped.

Moffett

A consolidated cable industry envisioned by Dr. John Malone, currently bidding for a merger between Charter Communications and Time Warner Cable, would feature widespread usage caps and usage billing and could obliterate competition from over-the-top online video providers, predicts a cable industry analyst.

Craig Moffett, now out on his own as co-head of independent Wall Street research firm MoffettNathanson, says broadband usage pricing is the sleeper issue of the last five years.

“I’ve written for years that [usage based pricing] is the single most important issue in all [the telecom sector],” Moffett said in an interview last week. “I’ve always been amazed by how little attention people have always paid to the issue.”

The Street reports that a unified cable cartel limiting consumer access to the Internet or more importantly monetizing that access would immediately devastate streaming video competitors including Netflix, Amazon, YouTube and Hulu.

If usage based pricing were implemented across the cable industry tomorrow, Moffett believes Netflix’s subscriber base would immediately fall from 30 million to 10 million. Nascent video players like Intel and Apple would likely find their business plans untenable, and some analysts believe the sweeping price changes would probably end the shift towards integrating streaming technology into large flat panel television sets.

Consumer backlash

Moffett says the impact would be broadly felt. Other analysts predict it could cause a national consumer uprising, especially at a time when other countries are swiftly moving to get rid of usage limits and consumption-based billing that have never been popular with customers.

“I think it will become clear that over the summer the window may have already closed for the cable operators to move to a usage based pricing theme,” Moffett said.

The Federal Communications Commission has done almost nothing about the issue of usage caps and usage pricing. Former FCC chairman Julius Genachowski even applauded the unpopular price scheme, calling it an important innovation.

Customers call it something else, and an uproar from consumers and competitors alike could overshadow the broadband successes of the Obama Administration. It would represent “a laughable setback for the nation’s communications infrastructure,” predict increasingly pessimistic Wall Street analysts concerned about the inevitable backlash.

The Street:

In a new broadband pricing regime, regulators would have to condone what consumers and competitors would immediately recognize as anti-competitive. Meanwhile, immensely popular content providers such as Netflix, Amazon Prime, Hulu, YouTube and the like would have to lose a Washington lobbying battle to the interests of cable monopolies, their arcane billing and off shored customer service.

Hollywood and broadcast networks would lose marginal new content buyers such as Netflix. Tablet makers such as Apple, Google, Samsung and Amazon would see the value of their fastest growing products put at risk.

Most importantly, it would be an affront to one of the few clear consumer victories for the Department of Justice in the Obama administration.

The company best known for the 10 daily newspapers it publishes, including the Chicago Tribune, the Orlando Sentinel, the Baltimore Sun, and the Los Angeles Times, can’t wait to get out of the newspaper business.

Last December, the Tribune Company, the second largest newspaper publisher in the country, emerged from bankruptcy without its $13 billion debt and old owners. Now in charge: the same Wall Street banks that lent the company billions to go private. Two months after assuming control, Tribune’s new owners hired Evercore Partners and J.P. Morgan to oversee the dumping of Tribune’s newspaper portfolio.

Founded in 1847 with the launch of the Chicago Tribune, 166 years later the Tribune Company was finished with print news, probably for good.

Investment bank and now owner

Today’s Tribune, controlled by Oaktree Capital Management, best known for investing in “distressed” companies, JPMorgan Chase, a Wall Street investment firm, and Angelo, Gordon & Co., a hedge fund sponsor best known for helping the U.S. government deal with the toxic assets accumulated by banks that helped trigger The Great Recession, want into the television business instead.

Tribune, which already owned 23 local television stations including flagship WGN in Chicago, bought another 19 Monday in a deal estimated to be worth at least $2.7 billion.

The stations were acquired from Local TV Holdings, itself owned and controlled by Wall Street investment firm Oak Hill Capital Partners, founded by Texas oil billionaire Robert Bass. Oak Hill acquired the television outlets from The New York Times and News Corp., in two prior deals. Tribune won’t pay for the stations outright. It is financing the deal with a $4.1 billion credit line granted by banks including JPMorgan Chase and Citigroup.

The stations involved:

Assuming the deal meets the approval of the Federal Communications Commission, Tribune will control 42 stations in 16 markets, including New York, Los Angeles, and Miami.

It expects to pay off the loans and generate returns from the “significant free cash flow” generated by the stations.

Where will that cash flow originate? From pay television subscribers asked to pay a growing amount each year for the formerly “free TV” stations.

“Smaller players feel like they’re losing their way with pay-TV providers and broadcast networks,” Craig Huber, analyst at Huber Research Partners, told USA Today. “They feel like they’re at a disadvantage here unless they size up.”

As cable programming rates continue to increase and subscribers threaten to cut the cord, pay television providers have been more willing to play hardball and kick stations off the cable or satellite dial when they cannot reach a retransmission consent agreement.

With up to 90 percent of a station’s viewership coming from pay television platforms, a lengthy standoff can destroy a station’s primary source of income: advertising revenue.

To protect themselves, television station owners are retaliating by threatening providers with the loss of all of their stations across the country, not just one or two. The resulting subscriber uproar could prove politically difficult and threaten customer relationships with providers. The more stations a company controls, the bigger the threat it can pose to Comcast, DirecTV, AT&T and other national providers.

Tribune is not alone bulking up the number of stations they own and control. Last month Gannett nearly doubled its portfolio from 23 to 43 stations with the acquisition of Belo’s TV stations for $1.5 billion in cash and agreeing to cover $715 million in accumulated debt.

Sinclair Broadcast Group, already the largest local TV station owner in the country, has gotten even larger with the purchase of four TV stations owned by Titan TV Broadcast Group. If the deal is approved, Sinclair will own 140 stations in 72 markets. In some cities, Sinclair will nominally own or control up to five local stations.

Sinclair management is well-known for injecting conservative political viewpoints into local newscasts and programming decisions. In 2004, two weeks before the presidential election, Sinclair ordered all of its television stations to air propaganda critical of Democratic candidate John Kerry. Later that year, Sinclair ordered its ABC affiliated stations not to broadcast a “Nightline” episode about soldiers killed in the Iraq war, fearing it would turn the public against the war.

But for most owners, politics has nothing to do with the desire to supersize. It’s a matter of money.

Even smaller station groups are now consolidating. Media General and New Young Broadcasting Holding, are merging their combined 30 stations.

(Image: The Wall Street Journal)

Critics worry the changing landscape of local television will threaten the concept of “local service” stations are required to provide as a condition of their broadcast license. A station owner that lives and works in the community served is becoming an increasing rarity, and the Federal Communications Commission has allowed stations that used to fiercely compete for local news viewers to now “share resources.” Many stations, especially those owned by out of area investment banks, have discontinued local news altogether in cost-savings maneuvers.

“This deal adds to a blizzard of broadcast industry consolidation that is poised to leave America’s media system less local, less diverse and less accountable to the people in these communities,” said Free Press’ Craig Aaron in a statement on the deal. “By the time all these deals are done, a handful of companies could control almost all of the network affiliates in major markets and swing states. Local broadcasts are becoming simulcasts, with the same cookie-cutter content piped in from distant corporate headquarters, once-competitive stations combined into single newsrooms and fewer journalists forced to fill more hours of airtime.”

“The FCC needs to wake up to what’s happening on local TV,” said Aaron. “Wall Street may be overjoyed at this merger mania, but the rest of us should be very worried about having fewer viewpoints on the air and fewer reporters on the beat.”

[flv width=”640″ height=”500″]http://www.phillipdampier.com/video/Former FCC commissioner Michael Copps shares his concerns about media consolidation 2013.mp4[/flv]

Former FCC commissioner Michael Copps shares his concerns about increasing media consolidation and its impact on an informed electorate. (Aired on Carolina Journal Radio May 23, 2013) (1 minute)

Would you be surprised to learn a company with just a basic, outdated website replete with spelling and grammar errors holds at least 760 television station construction permits and licenses and just wrote a check for $46.5 million to buy 52 more stations from nine different owners, with plans to shut every last one of them down in the future?

That is precisely the business plan of “Landover Wireless Corp.” and its series of limited liability corporate entities, which are grabbing up as much UHF television spectrum they can apply for across the country.

They are not alone.

CTB Spectrum Services, a company associated with Landover 2 LLC, has 356 UHF TV construction permits/licenses. Its website offers slightly more information about its operations, but not much.

DTV America, a mysterious Sunrise, Fla.-based venture with an official mailing address of 12717 W. Sunrise Boulevard (Suite 372) has its headquarters inside a private mailbox at a UPS Store. The company also has countless requests for television licenses on the UHF dial. DTV America manager John Kyle is also listed as chairman and president of The Pharmacy Television Network, which appears to broadcast its programming on video displays inside pharmacies. DTV America has the lowest profile of all three companies, with no apparent website.

And you thought over the air television was dead.

DTV America’s home is inside a mailbox at the UPS Store in Sunrise, Fla.

A number of low power television owners are surprised to see the sudden rush to launch more than 1,000 new television stations across the country, particularly in rural markets that have been considered a financial dead-end for low power television. Being in the LPTV business and making a living at it often depends on whether a local cable company or satellite dish provider will pick up and relay the station to the majority of Americans that do all of their television viewing on a paid platform. Without this carriage, low power television outlets have several strikes against them: challenging reception from operating with relatively low power, the lack of compelling programming — many of these outlets air paid religious, home shopping, music, or infomercial programming 24 hours a day, and the lack of familiarity by viewers who may not realize these stations are on the air.

From information Stop the Cap! has obtained, none of these ventures actually intend to stay in the over-the-air television business. Instead, they are using FCC licensing rules to get valuable UHF spectrum without having to bid for it at forthcoming spectrum auctions. At least two of the companies claim they are raising capital to build a unicast 4G wireless content delivery network. But some critics contend they are actually spectrum squatters — speculators that have no intention of building anything. Instead, critics charge they will conduct minor experiments to effectively stall the FCC, hanging onto their permits and licenses until they can sell their holdings to a wireless provider hungry for 500-700MHz spectrum and willing to pay top dollar to get it.

Meanwhile, Landover’s $46.5 million buys them dozens of low power stations airing 30-minute commercials like “Skin Solutions by Dr. Graf.” The company claims it will keep those stations on the air until their wireless network is ready, and then the infomercials (along with the rest of the television programming) will be gone for good. Landover also managed to acquire larger Class A TV stations as part of the deal, including one each in Las Vegas and Sacramento, and three in Texas. These stations might become part of the company’s 4G network, sold off or compensated to sign-off forever as part of forthcoming “spectrum packing” by the FCC — further shrinking the UHF TV dial and auctioning off the “excess” spectrum to AT&T, Verizon, Sprint, and other cell companies.

CTB’s License Map

CTB also holds multiple TV licenses in several of its markets. The company claims it will combine those stations together in something akin to a high-powered cellular network to create a bigger wireless data pipe using “patent pending multi-frequency cellular terrestrial network technology [that] increases capacity by hundreds of times through frequency re-use, while also enabling full mobility, broadband Internet, and location-based services.”

CTB’s sales pitch claims its TV licenses offer up to 228MHz of bandwidth that is “essentially identical to 700MHz spectrum, but can be acquired at a fraction of the cost.” The company also claims it has exclusive rights to TV “White Space” spectrum via first adjacent channels, which are treated like guard bands to protect against interference from nearby stations.

All of these companies are applying for channels largely in low-interest rural markets, where they face few challenges from competing applicants. CTB calls this part of their rural “corridor” strategy. One such corridor covers stations in a line from Wisconsin west to Idaho.

All three companies are betting the FCC will allow them to eventually convert their over-the-air television licenses into wireless data networks, or let them sell the spectrum to deeper pocketed players in keeping with the Commission’s plan to open up more frequencies for data-hungry users. If the FCC allows it, these three entities will end up with the rights to prime wireless spectrum covering up to 90 percent of the country without having to spend a penny at forthcoming spectrum auctions.

But there are financial risks. The type of low power station licenses held by most of these companies do not get them a seat at the spectrum packing table. LPTV outlets are considered low-priority stations, and in larger communities, many could be forced off the air without compensation to make enough room for more important, full power stations.

No license, no 4G data network for Landover, CTB and others. But the chances of that happening in rural markets, where residents are lucky to have two or three over the air stations, are slim.

The technology might offer unique broadband opportunities for rural areas where conventional low-range cell towers are too expensive, if the technology works. A higher powered transmitter serving a rural, larger geographic area might prove financially attractive in low population density areas. Only time will tell if any of these entities will be able to raise the capital needed to fulfill the FCC’s construction permit obligations, which give owners just a few years to get their stations on the air or face forfeiture of their permit and/or license.

Powell

You and I may think America can do better providing fast and inexpensive broadband service. But a former chairman of the FCC now representing industry interests waved shiny keys of distraction to explain away why cable companies are still delivering Internet speeds slower than those found in Romania, Latvia, South Korea and Japan.

Michael Powell, the poster child of D.C.’s “revolving door” problem gave a well-compensated, rousing (yet fact-lacking) defense of an industry he was supposed to oversee in the public interest as the Bush Administration’s FCC chairman from 2001-2005.

“America is home to the world’s very best Internet companies,” said Michael Powell, chief executive of the National Cable and Telecommunications Assn. at the annual Cable Show in Washington, D.C. “We have worked hard to reach everyone, and now offer service to 93% of American homes. Despite our success, many people like to denigrate U.S. broadband by painting false comparisons to other countries. There are some nations doing very well, but it is foolish to compare countries like Latvia and France to the United States of America.”

Powell’s response is hardly a fact-filled defense for cable company broadband that still delivers slow speeds at high prices. Instead of attempting to call the statistics inaccurate, he tried to explain away the discrepancy by complaining people are ignoring the size of the country and its population.

In denial

Powell’s arguments might have some merit if the cable industry did not make a point of bypassing vast rural areas that do not meet Return on Investment tests. It is difficult to claim cable companies cannot deliver comparatively fast service in rural Iowa when they don’t offer any service at all.

The People’s Republic of China’s population is far larger than our own and is now a vital market for fiber optics manufacturers and suppliers. While some of America’s cable industry CEOs repeatedly argue America does not need fiber broadband or gigabit broadband speeds, the Chinese government has insisted that every new housing development be pre-wired with fiber that will easily and inexpensively supply those speeds in the near future.

Powell is correct to say speeds are improving in the United States, but there is growing evidence they are improving even faster overseas, especially in countries that are basing their primary telecommunication infrastructure on fiber optics, which can support enormously fast Internet speeds. As those fiber networks are lit, America will fall even faster in broadband rankings as long as cable operators continue to insist there is no demand or interest in the next generation of high-speed service. At the prices they charge, they may just prove their own “no demand”-argument, at least in this country.

Powell himself helped lay the foundation for America’s broadband duopoly by deregulating the industry with one hand while ignoring the need for competitive checks and balances with the other. At the end of Powell’s tenure, his greatest achievement was constructing an industry-friendly personal resumé to win lucrative employment as a telecommunications lobbyist.

Who better to speak with “authority” on telecommunications matters than a well-connected former FCC chairman that does the industry’s bidding? The NCTA hired him to deliver just the kind of defense cable operators hope Americans will believe.

Those that are aware of what broadband is like abroad don’t.