ToddTool could have been forced into bankruptcy, taking its 14 employees straight to the unemployment line, had AT&T followed through on its threat to collect a million dollar fraudulent phone bill.

Michael Smith and his 14 employees can now sleep again after AT&T dropped a $1.15 million lawsuit against Smith’s small manufacturing company after the story went viral.

The lawsuit was filed over fraudulent long distance calls placed through Smith’s PBX phone system to the war-torn nation of Somalia over a four day period in 2009.

Smith discovered the fraud after getting long distance bills totaling $891,470 the following month.

More than $260,000 of additional charges were billed by Verizon, Smith’s landline phone company, and Verizon forgave those charges a few months after Smith filed a billing dispute. Verizon noticed the unusual calling activity and temporarily suspended Smith’s international long distance service. The phone hackers then simply used a “dial-around” long distance access code for AT&T to keep the calls going through, resulting in a huge bill from AT&T, which charged $22 a minute for the calls.

Unlike Verizon, AT&T wanted its money and despite multiple attempts to get credit for the fraudulent long distance calls, AT&T refused to relent, filing suit against Smith for the full cost of the fraudulent calls, plus interest.

Smith told a Salem, Mass. newspaper if he paid the bill, it would force his company into bankruptcy and put his 14 employees on the unemployment line.

The company claims in its lawsuit Smith should have known better — securing his PBX system more effectively against international long distance fraud and that under Federal Communications Commission regulations, AT&T is entitled to collect from the owner of the phone line, regardless of who actually made the call.

Smith told The Salem News he’s tried to resolve the matter, even reaching out to the CEO of AT&T, but a secretary at the company called and said that once AT&T refers a case to outside counsel, they are done talking.

AT&T later offered to waive the accumulating interest charges on the unpaid balance (now $197,000 and growing) if Smith paid the company $891,470 for the phone calls to Somalia.

Smith filed a countersuit instead, claiming AT&T is abusing the legal process and violating Massachusetts consumer protection laws. A judge was pushing the case to mediation.

Smith’s interview with the Salem newspaper came at additional risk: AT&T’s lawyers threatened they would take action if he “disparaged” the company’s name in the media.

After the story ran nationwide this morning on the Associated Press wire service, the company suddenly dropped the case.

In a statement sent to the media, AT&T writes it is no longer pursuing its claims against Michael Smith, of Ipswich, “though we are entitled by law to collect the amounts owed.”

Beahn’s booking photo

A competitor to dominant cable provider Mediacom has been accused of stealing the cable company’s broadband service and reselling it as its own in a bizarre Georgia case that also includes a feud between Albany’s Water, Gas & Light Commission and the defendant.

Back in December, a Georgia Power representative alerted Mediacom about unauthorized equipment placed on a utility pole. When Mike Donalson, Mediacom’s regional security manager arrived at the location off McCollum Drive in Albany, he was surprised to discover a residential Mediacom cable modem powered by a standard car battery sealed in a weatherproof enclosure. Tracking the wiring that exited the box, Donalson eventually found himself at the front door of Addtran Logistics, Inc.

Mediacom immediately launched an investigation and discovered that L2Networks had allegedly contracted with Addtran to provide Internet service. Mediacom alleges in its lawsuit L2 provided the service through a cable modem originally assigned to Beahn’s mother-in-law for residential broadband service at her home.

The company called the Dougherty County Police Department, who arrested Beahn on felony charges for theft of service.

Mediacom is seeking compensatory and punitive damages in its civil suit.

Beahn first came into national prominence in May when he filed the first formal Net Neutrality complaint with the Federal Communications Commission against the Albany Water, Gas & Light Commission claiming the local authority was refusing to allow L2 employees 24-hour access to utility-owned facilities where L2 has placed equipment.

[flv]http://www.phillipdampier.com/video/WFXL Albany Mediacom Files Suit Against L2 6-8-12.flv[/flv]

WFXL in Albany, Ga. reports L2 Networks is headed to court to face charges it used to a Mediacom residential cable modem to deliver business class service under L2’s name.  (1 minute)

The arrival of the LTE/4G wireless standard in the United States, and its adoption by the country’s two largest super-carriers AT&T and Verizon was supposed to open the door for true equipment interoperability, allowing customers to take devices purchased from one carrier to another. In the past, incompatible network standards (GSM – AT&T and CDMA – Verizon Wireless) made device portability a practical impossibility. The arrival of LTE could have changed everything, with device manufacturers using chipsets that would allow an iPad owner to switch from Verizon to AT&T without having to purchase a brand new tablet.

A new lawsuit filed by a small regional cell phone company alleges AT&T conspired to create their own wireless fiefdom that would not only discourage their own customers from considering a switch to a new carrier, but also locked out smaller competitors from getting roaming access.

C-Spire, formerly Cellular South, filed suit in U.S. federal court accusing AT&T and two of their biggest equipment vendors — Qualcomm and Motorola, of conspiring to keep the southern U.S. carrier from selling the newest and hottest devices and hampering their planned upgrade to LTE. The company also accuses AT&T of blocking access to roaming service for the benefit of C-Spire customers traveling outside of the company’s limited coverage area.

According to the lawsuit, the interoperability benefits of LTE have been artificially blocked by some of America’s largest carriers that force consumers to only use devices specifically approved for a single company’s network.

Divide Your Frequencies to Conquer and Hold Market Share

The Federal Communications Commission licenses wireless phone companies to use specific frequencies for phone calls and data communications. An industry standard group, the 3rd Generation Partnership Project (3GPP), is largely responsible for defining the standards of operation for wireless technology networks like LTE. In the United States, the group is dominated by the two largest cell phone companies and the technology vendors that make their living selling chipsets and phones to those major carriers.

Smaller carriers specifically bought spectrum near frequencies used by larger companies AT&T and Verizon with the plan to sign roaming agreements with them. But now Verizon is selling off its "Lower A, B and C" spectrum and intends to focus its LTE network on Upper C "Band 13," which it occupies almost exclusively. Meanwhile, AT&T has carved out its own exclusive "Band 17" for its Lower B and C frequencies where it will be able to effectively lock out other carriers. (Cellular South is now known as C-Spire).

It is 3GPP that elected to organize wireless spectrum into a series of frequency “blocks” and “bands” that different companies utilize to reach customers. Verizon Wireless, for example, has its 4G LTE network on a large chunk of the 700MHz band known as the “Upper C-block” or “Band 13.” Verizon earlier won control of some frequencies on the lower “A and B blocks,” which gave smaller companies the confidence to invest in adjacent frequencies, believing they would be able to negotiate roaming deals with Verizon.

Verizon has since elected to mass its 4G LTE operations on its “Upper C block,” and is selling off its lower “A and B block” frequencies. That leaves Verizon with overwhelming control of “Band 13.” The companies manufacturing equipment sold by Verizon are manufacturing phones that only work on Verizon’s frequencies, not those used by Verizon’s competitors. This effectively stops a Verizon customer from taking their device (and their business) to a competitor’s network.

This limitation comes not from the LTE network technology standard, but from the wireless companies themselves and equipment manufacturers who design phones to their specifications.

It would be like buying a television set from your local NBC station and discovering that was the only station the set could receive.

Verizon effectively created its own wireless “gated community” comprised of itself and a single tiny competitor still sharing a small portion of “Band 13.” AT&T was stuck in a considerably more crowded neighborhood, sharing space with more than a dozen smaller players, some who have a clear interest in being there to coordinate roaming agreements with AT&T to extend their coverage.

Regional cell phone companies could not exist without a roaming agreement that lets customers maintain coverage outside of their home service area. Without it, customers would gravitate to larger companies who do provide that coverage.

But large companies like AT&T and Verizon also have a vested interest not selling access to the crown jewels of their network, giving up a competitive advantage.

AT&T noticed its larger competitor Verizon Wireless had effectively segregated its operations onto its own band, and if that worked for them, why can’t AT&T have its own band, too?

Using a controversial argument that AT&T needed protection from potential interference coming from television signals operating on UHF Channel 51, located near the “A Block,” AT&T managed to convince 3GPP to carve out brand new “Band 17” from pieces of “Band 12.” Coincidentally, “Band 17” happens to comprise frequencies controlled by AT&T.

C-Spire alleges AT&T has since asked manufacturers to create devices that only support “Band 17,” not the much larger “Band 12,” effectively locking out small regional phone companies from LTE roaming agreements and the latest phones and devices.

Not surprisingly, Qualcomm and Motorola, who depend on AT&T for a considerable amount of revenue, fully supported the wireless company’s plan to create a new band just for itself. C-Spire’s lawsuit claims the resulting anti-competitive conspiracy has now graduated to foot-dragging by those manufacturers, reluctant to release new phones and devices that support the greater “Band 12” on which C-Spire and other smaller carriers’ 4G LTE networks reside. That is particularly suspicious to C-Spire, which notes companies manufacturing devices supporting all of “Band 12” would have automatically worked with AT&T’s new “Band 17.” Instead, manufacturers chose to create equipment that only worked on AT&T’s frequencies.

C-Spire says both AT&T and Verizon have once again managed to lock customers to their individual networks, have created artificial barriers to block roaming agreements, and have pressured manufacturers to “go slow” on new phones and devices for smaller competitors.

Driving the Competition Out of Business

LTE: Required for future competition.

Smaller carriers have always been disadvantaged by manufacturers’ exclusive marketing agreements with AT&T and Verizon that bring the hottest new devices to one or the other, leaving smaller players with older technology or smartphones with fewer features. Even worse, both AT&T and Verizon have forced manufacturers to enforce proprietary standards that make it difficult for consumers to leave one company for another and take their phones with them. C-Spire and other regional companies have primarily managed to compete because they often sell service at lower prices. They have also survived because roaming agreements allow companies to sell functionally equivalent service to customers who do not always remain within the local coverage area.

But recent developments may soon make smaller competitors less viable than ever:

1. AT&T’s spectrum plans make it difficult for smaller companies to use their valuable 700MHz spectrum, the most robust available, for LTE 4G service. Instead, companies like C-Spire will have to use less advantageous higher frequencies at an added cost to remain competitive in their own local markets.
2. Equipment manufacturers, who answer to the billion-dollar contracts they have with both Verizon and AT&T, remain slow to release devices that work on smaller networks, leaving companies like C-Spire without attractive technology to sell to customers.
3. The ultimate refusal by AT&T and Verizon to allow LTE roaming or make it prohibitively expensive or technologically difficult to access could be the final blow. Why sign up for C-Spire if you can’t get 4G service outside of your home service area? C-Spire admits in its lawsuit it cannot survive if it cannot sign reasonable roaming agreements with AT&T or Verizon.

Cspire complaint filed against AT&T, Qualcomm and Motorola

Stephenson: Payback time.

Six weeks after AT&T’s colossal $39 billion dollar merger with T-Mobile USA fell apart, AT&T CEO Randall Stephenson opened his checkbook and donated $30,800 (the maximum allowed under federal law) to the Republican National Committee.

That contribution dwarfs Stephenson’s largest previous donation over the past twenty years: $5,000, according to the Center for Responsive Politics.

Bloomberg reports that Stephenson took a credibility and pay hit from the merger debacle, forcing AT&T to turn over $4 billion in deal penalties to its rival, T-Mobile, including precious wireless spectrum. The deal’s collapse personally cost Stephenson more than $2 million in bonus pay.

Although AT&T is not commenting, Wall Street analysts are, and they suspect Stephenson is sending the Obama Administration a clear message that he is upset with the decision to challenge the merger. The rest of AT&T appears to be following suit, with nearly two-thirds of political contributions, mostly from company executives, going to the Republican party which has traditionally maintained a much more friendly relationship with the communications giant.

Several Republicans criticized the Justice Department and Federal Communications Commission for interfering with the merger deal which consumer advocates argued would reduce competition and raise prices for wireless services. Republicans have also expressed near-universal support for AT&T’s policy positions on Net Neutrality, community broadband, usage-based pricing, spectrum and price deregulation, removal of state oversight of telecommunications services, and marketplace consolidation.

AT&T is a major sponsor of this summer’s Republican National Convention in Tampa, Fla. Several former lobbyists for AT&T are now working with the Romney campaign and its money bundling operations on behalf of the Republican presidential candidate.

The center reports no personal political contributions from the heads of either Verizon Wireless or Sprint.

Roger Entner, an analyst with Recon Analytics in Dedham, Massachusetts, notes AT&T was still trying to make nice with Obama Administration officials as late as last December, sending ornate cupcakes to various administration officials, including those at the FCC.

Entner noted it didn’t work.