Time Warner Cable customers who purchased their own cable modems to avoid the company’s $8 monthly rental fee will effectively be forced to indirectly pay those fees once again if Charter Communications wins approval to buy the cable operator.

A major modem manufacturer, Zoom Telephonics, has asked the Federal Communications Commission to reject Charter’s buyout of Time Warner Cable and Bright House Networks because it will hurt cost-conscious consumers that invested in their own equipment to avoid costly modem rental fees.

Zoom’s argument is that Charter builds modem fees into the price of its broadband service and offers no discounts to consumers that own their own equipment. At least 14% of Time Warner Cable customers have purchased their own modems and are not charged the $8 rental fee. Charter has promised not to charge separate modem fees for three years after its acquisition deal is approved, but that also means the company is building the cost of that equipment into the price of broadband service.

Zoom has an interest in the outcome because Charter has yet to approve any Zoom cable modem model for use on its network. Time Warner Cable has certified at least one Zoom model in the past. Assuming the buyout is approved, consumers would have a disincentive to buy Zoom cable modems (or those manufactured by anyone else) because the equipment will be provided with the service.

Zoom has tangled with Charter before, most recently in the summer of 2014 when it criticized Charter’s policy forbidding new customers from using their own modems with Charter’s service. From June 26, 2012 until Aug. 22, 2014, Charter’s website stated, “For new Internet Customers and customers switching to our New Package Pricing, we will no longer allow customer owned modems on our network.”

Zoom claims Charter modified that policy three days before a key FCC filing deadline that could have eventually brought regulator attention on the cable operator. But Zoom remains unhappy with how Charter deals with the issue of customer-owned equipment.

“Charter has still not adopted certification standards that are open to Zoom and other cable modem producers, nor has Charter yet made a commitment for timely certifications under this program,” Zoom claimed in the summer of 2014. “Of the 17 cable modems Charter shows as qualified for customer attachment to its network, not one is stocked by leading cable modem retailers Walmart, Staples, and Office Depot and not one has 802.11ac wireless capability. Charter still does not separately list the cost of its leased modems on customer bills, and Charter does not offer a corresponding savings to all customers who buy a qualified cable modem and attach it to the Charter network.”

Zoom wants Charter to be required to offer consumers that own their own equipment a tangible monthly discount for broadband service as a condition of any merger approval.

“The Communications Act says that cable companies should sell cable modem leases and Internet service separately,” Andrew Jay Schwartzman, a professor at Georgetown University Law Center who is representing Zoom, told the Los Angeles Times. “By combining the prices, Charter’s customers are deprived of the ability to purchase advanced cable modems and save the cost of monthly rental fees.”

Charter argues the Act only covers set-top boxes used for cable television service, not modem fees. Charter also claims its introductory prices are lower than what most cable companies charge, modem fee or not.

“Customers will benefit from Charter’s pro-customer and pro-broadband model with transparent billing policies,” Tamara Smith, a Charter spokeswoman, told the newspaper. “It features straightforward, nationally uniform pricing with no data caps, no usage-based pricing, no modem fees, no early termination fees and does not pass on federal or state Universal Service Fund fees to customers.”

But Charter is only guaranteeing those customer-friendly policies for three years, after which it can raise prices and add fees at will.

Gov. Haslam

Top officials of four southern states are coordinating efforts with Republican House members to oppose the Federal Communications Commission’s preemption of state laws that restrict or prohibit municipal/public broadband competition.

South Carolina Governor Nikki Haley, Tennessee Governor Bill Haslam, Alabama Attorney General Luther Strange, and Tennessee Attorney General Herbert Slattery have all backed efforts by House Republicans to curtail the regulatory powers of the FCC, claiming states’ rights should have precedence over the federal regulator. All four have sent letters to the House Energy & Commerce Committee putting their opposition on paper.

In 2014, FCC chairman Thomas Wheeler announced the FCC would seek to preempt state laws in North Carolina and Tennessee that severely restrict the development of broadband networks owned or controlled by municipalities and public utilities. The laws typically allow existing municipal networks to continue operating, but prohibit expansion beyond a pre-defined service area. Networks planning to launch after the laws took effect usually face onerous conditions and disclosure requirements that make many untenable. Large incumbent cable and phone companies were exempted from the law.

Wheeler’s efforts came in response to requests from community broadband providers seeking to deliver service to expanded service areas. The debate has put several local governments and utilities in an uncomfortable position of opposing their colleagues in state government.

In North Carolina, Attorney General Roy Cooper has taken the FCC to court in a petition to the U.S. Court of Appeals for the Fourth Circuit.

“Despite recognition that the State of North Carolina creates and retains control over municipal governments, the FCC unlawfully inserted itself between the State and the State’s political subdivisions,” Cooper wrote to the court. Cooper says the FCC’s actions are unconstitutional and exceeds the commission’s authority; “is arbitrary, capricious, and an abuse of discretion within the meaning of the Administrative Procedure Act; and is otherwise contrary to law.”

Much of the opposition to municipal broadband comes from Republican politicians on the state and federal level. Most claim municipal providers represent unfair competition to the private sector. The American Legislative Exchange Council (ALEC) considers municipal broadband a significant issue. The corporate-funded group offers state legislators the opportunity to meet with telecom company lobbyists. Legislators are also provided already-written sample legislation restricting municipal broadband developed by ALEC’s telecom company members, including AT&T, Comcast, and Time Warner Cable. In states where Republicans hold the majority in the state legislature, such bills often become law.

The FCC represents a serious threat to the telecom company-sponsored broadband legislation. Instead of debating the impact of the law on unpopular phone and cable companies, the four state officeholders claim the dispute is a battle pitting states’ rights against the powers of the federal government.

Haslam, who also serves as the national chairman of the Republican Governors Association, formally asked Congress to intervene against the FCC to protect state sovereignty. In a separate appeal to the FCC, Tennessee officials argued the FCC violated the country’s founding concept of separation of state and federal power, citing the 10th Amendment to the Constitution reserving power not delegated to the United States for the states respectively, or to the people.

Haslam’s critics contend the governor has delegated his own power to protect the interests of large telecommunications corporations operating in his state — companies the critics claimed wrote and lobbied for a state law that established anticompetitive broadband corporate protectionism in Tennessee. Among Haslam’s top campaign contributors are AT&T and Comcast — Tennessee’s two largest telecommunications companies.

Gov. Haley

Slattery, appointed by the Tennessee Supreme Court, argued in his letter to Congress the FCC lacked any authority to circumvent Tennessee state law.

The FCC has consistently claimed it is not overturning any state laws. Instead, it is performing its duties under its mandate.

The FCC cites Section 706 authority to regulate when broadband is not being deployed in a reasonable and timely manner, something that cannot happen if a state law impedes new competitors and entrants.

Alabama’s attorney general joined the fight in a brief to the Sixth Circuit opposing preemption, with a copy sent to the House Subcommittee on Communications and Technology, which is planning to hold a hearing on the matter. Alabama has several municipal and public utility networks operating in the state. AT&T and Comcast also serve large parts of Alabama. AT&T gave $11,000 to Strange’s campaign, Comcast sent $8,500. The Koch Brothers, fierce opponents of community broadband, also donated $10,000 to Strange through Koch Industries.

South Carolina Governor Nikki Haley told legislators she strongly opposes external entities like the FCC overreaching into her state’s business. She did not mention AT&T is her fifth largest contributor, donating more than $16,000 to her last campaign. South Carolina’s largest cable operator is Time Warner Cable. It donated $9,900 to the governor’s campaign fund.

AT&T has introduced 23 new communities and adjacent service areas in North Carolina, Georgia, Florida, Illinois, Texas, and Tennessee to the possibility of getting gigabit broadband speeds, if customers are willing to wait for AT&T to reach their home or small business.

Here are the latest cities on AT&T’s new launch list:

• Florida: Coral Gables, Homestead, Miami Gardens, North Miami, Oviedo, Sanford, and Parkland
• Georgia: Alpharetta, Cartersville, Duluth, East Point, Avondale Estates, Jonesboro, and Rome
• Illinois: Bolingbrook, Mundelein, Shorewood, Elmwood Park, Volo, and parts of Munster, Ind.
• North Carolina: Clemmons, Garner, Holly Springs and Salisbury
• Tennessee: Spring Hill and Gallatin
• Texas:  Hunters Creek Village and Rosenberg

AT&T claims its fiber to the home service will eventually reach more than 14 million customers across its service area, but adds it will only reach a fraction of them – one million – by the end of 2015. Most customers will have around a 7% chance of getting gigabit speeds from AT&T this year.

Warren

In Salisbury, N.C., where Fibrant delivers community-owned broadband at speeds up to 10Gbps, AT&T gave space in its press release for Rep. Harry Warren, the local Republican member of the state House of Representatives, to praise the phone company.

“I’m excited about this new development, and appreciate AT&T’s continued investment in Rowan County,” Warren said.

Warren says he fought to protect Fibrant from a 2011 state law — drafted by the state’s largest phone and cable companies — that effectively outlawed community-owned broadband competition. But he, along with most of his Republican colleagues, also voted in favor of it.

Earlier this year, Federal Communications Commission chairman Thomas Wheeler announced the FCC would pre-empt municipal broadband bans in North Carolina and Tennessee. Warren told the Salisbury Post he wondered if Wheeler was guilty of “federal overreach.”

“That’s my biggest concern about it,” he said.

Both AT&T and Time Warner Cable have been regular contributors to Warren’s campaigns since 2010.

Brock

State Sen. Andrew Brock, also a Republican, told the newspaper Wheeler’s actions show how out of touch the Obama Administration is with “technology and the pocketbooks of American families.”

“I find it interesting that a bureaucrat that is not beholden to the people can make such a claim without going through Congress,” Brock said.

The year Brock voted in favor of banning community broadband competition in North Carolina, he received $3,750 from telecom companies. This election cycle, Time Warner Cable is his second largest contributor. AT&T and CenturyLink also each donated $1,000 to Brock’s campaign fund.

While AT&T is free to expand its gigabit U-verse upgrade as fast or as slow as it chooses, the community providers that delivered gigabit speeds well before AT&T are limited by state law from expanding service outside of their original service areas or city limits. In plain English, that effectively gives AT&T state-sanctioned authority to decide who will receive gigabit speeds and who will not.

The FCC’s pre-emption, if upheld despite ongoing challenges from Republican lawmakers on the state and federal level, could allow Fibrant to join forces with other municipal providers in North Carolina to expand fiber broadband to new communities around the state.

While AT&T is in no hurry to expand and upgrade U-verse broadband to its wireline customers in the United States, the Dallas-based company has spent more than $7 billion trying to attract wireless customers in Mexico that so far don’t show much interest in the U.S. company.

AT&T last month reported it is losing big south of the border. After spending $4.4 billion to acquire two competing wireless companies in Mexico and committing another $3 billion to upgrade their networks to 4G service, customers are continuing to abandon the carrier.

The losses AT&T continues to incur improving wireless service in Tabasco, Veracruz, and Baja California has not bothered AT&T to date — in fact the company plans to dump even more money into the Mexican cellular market, despite achieving a market share of only around 8.5 percent, effectively making it about as relevant as Sprint in the United States. Its largest competitors are the gigantic América Móvil, which has nearly 70 percent of the market and Telefónica, which holds a 22 percent share.

So far, AT&T has been forced to support different websites for its two different carriers – Iusacell and Nextel Mexico. The former also maintains the Unefon brand, which targets low income Mexicans with cheap prepaid service.

Part of AT&T’s problem recouping its investment is the fact Mexicans cannot afford the pricing Americans pay for cell service. While AT&T charges $50+ for a low-end cell plan in Texas, just across the Mexican border AT&T offers a $13 basic plan offering 500 calling minutes and 500MB of data.

AT&T’s decision to spend billions in Mexico while it reduces spending on further expansion of its U-verse network has nothing to do with Net Neutrality or Title II enforcement by the Federal Communications Commission. It is all about finding new customers. Wireless penetration has now topped 100 percent in the U.S. (because some families maintain multiple devices, sometimes with different carriers). In Mexico, less than 50% of the population has a cell phone and even fewer own smartphones. AT&T believes that gives it plenty of room to grow. AT&T believes wireless service brings the best potential for profits both inside and outside of the U.S., and the company thinks it can dramatically improve market share in Mexico and charge prices that will bring it a healthy return.

Their customers apparently disagree. In Mexico, for the first nine months of the year, AT&T lost 689,000 wireless subscribers — a decline of almost 8 percent. Even customers attracted to try AT&T for the first time often decide to leave, giving AT&T Mexico a churn rate exceeding 5% — five times worse than what AT&T experiences in the United States.

Some Wall Street analysts are critical of AT&T throwing good money after bad down south. Michael Hodel of Morningstar doesn’t like what he sees. The incumbent Mexican telecom giant América Móvil has kept the lion’s share of the market for years and has vastly more scale than AT&T. Hodel sees losses for AT&T until 2018.

Others wonder how AT&T Mexico will be able to introduce the premium priced services it will depend on to get a return on its investment. The Mexican economy is unlikely to allow customers to pay substantially more for wireless service.

AT&T CEO Randall Stephenson has told investors if AT&T builds a 4G network, customers will come and pay AT&T’s asking price.

“We are convinced that what we experienced in the U.S., we will experience in Mexico,” Stephenson said at an investor conference in May. “So you are going to see the mobile Internet revolution take off in Mexico. We intend to ride that wave.”

Free trade supporters and those who support the deregulation of the Mexican telecom market are trying to use AT&T’s experience as evidence that free markets and trade works.

“AT&T’s moves are the clearest evidence of success in Mexico’s reforms, and it’s hard to overstate the importance,” said Christopher Wilson, deputy director of the Mexico Institute at the Woodrow Wilson International Center for Scholars in Washington.

For customers, it isn’t a matter of free trade. It’s good coverage at a reasonable price that matters most, and AT&T Mexico has not yet achieved that.

Arturo Diaz, originally an Iusacell customer in Mexico City, recently dropped his AT&T Mexico service.

“Their coverage is not very good outside of large cities and AT&T’s reputation is to raise prices, which they seem to do a lot in the U.S.,” Diaz said. “If you can afford a better phone and plan, you switch to América Móvil. With the stronger American dollar, the peso is devalued again, so more people will likely want a budget prepaid plan which they can get from Telcel. I’m not sure what AT&T is doing in Mexico and their plans from two different companies are a mess. I signed up with América Móvil last month.”

The Hilton Convention Center in Anaheim, Calif. Come for the color but don’t stay for the $500 Wi-Fi.

The Federal Communications Commission’s Enforcement Bureau today announced a tentative $25,000 fine against Hilton Worldwide Holdings, Inc., owner of the Hilton Hotel Chain, for allegedly obstructing a FCC investigation into the blocking of consumers’ use of personal Wi-Fi while visiting hotel properties.

“Hotel guests deserve to have their Wi-Fi blocking complaints investigated by the Commission,” said Travis LeBlanc, chief of the FCC Enforcement Bureau. “To permit any company to unilaterally redefine the scope of our investigation would undermine the independent search for the truth and the due administration of the law.”

The regulator accuses Hilton of stonewalling requests for information and documents about how the hotel chain manages Wi-Fi for visitors and guests. In August 2014, the FCC received a consumer complaint accusing Hilton of purposely blocking visitors’ Wi-Fi hot spots on its property in Anaheim, Calif., to compel guests to pay a $500 fee to use Hilton’s own Wi-Fi network. The complaint was followed by others who alleged similar experiences with Hilton hotels elsewhere.

In most cases, fees of that amount are sought from vendors attending conventions and other large events held at Hilton hotels. Wi-Fi services can be a lucrative revenue generator, but not if vendors rely on company or personal cell phone hotspot services to bypass the hotel’s internal Wi-Fi network. Hilton hotels in the area generally offer Wi-Fi in rooms for prices ranging from free to $14.95 a night. The charges evidently vary depending on the promotion in effect when a room is booked. Fees for convention vendors are often dramatically higher, which seems to be the case surrounding this complaint.

In November 2014, the FCC issued Hilton a letter of inquiry seeking information concerning basic company information, relevant corporate policies, and specifics regarding Wi-Fi management practices at Hilton-brand properties in the United States. After nearly one year, the FCC alleges Hilton has effectively ignored the FCC’s request for the vast majority of its properties. Hilton runs hotels under the Hilton, Conrad, DoubleTree, Embassy Suites, and Waldorf Astoria brands.

In the last two years, the FCC has made it clear it will aggressively pursue and fine those intentionally interfering with Wi-Fi signals, especially if a revenue motive is found. In October 2014, the FCC fined Marriott International, Inc. and Marriott Hotel Services, Inc. $600,000 for similar Wi-Fi blocking activities at the Gaylord Opryland Hotel and Convention Center in Nashville, Tenn. In August 2015, the FCC fined Smart City Holdings, LLC $750,000 for similar Wi-Fi blocking at multiple convention centers across the country. The Commission also recently proposed to fine M.C. Dean $718,000 for apparent Wi-Fi blocking at the Baltimore Convention Center.