When Verizon Wireless finally fired up its network in Alaska in September of 2014, the writing was on the wall for at least one of Alaska’s homegrown wireless competitors.

Faced with competing against Verizon’s $115 million, state-of-the-art advanced LTE network that already supports new features like Voice over LTE (far ahead of what many customers in the lower 48 states get) Alaska Communications System Group, Inc., decided it was time to sell.

An ACS and GCI-shared cell tower. (Photo: Rosemarie Alexander)

ACS’ 109,000 wireless customers won’t be going far. The buyer, General Communications, Inc., (GCI) is a co-investor in the Alaska Wireless Network that ACS also relies on to offer wireless service. Besides billing and rate plans, most ACS customers won’t notice much of a change after the $300 million sale is complete during the first quarter of this year. GCI will end up with about 253,000 customers after the transaction is finished, which represents about one-third of the Alaskan wireless marketplace. The sale will mean most Alaskans will have a practical choice of three major wireless carriers — AT&T, Verizon Wireless, and GCI.

ACS, weighed down by debt, wanted out of the wireless business because it has proven expensive to support a network serving a high-cost, low margin state like Alaska, where small communities are often far apart. Serving cities like Fairbanks and Juneau is one thing. Serving hundreds of settlements like Meyers Chuck (pop. 21) or towns like Unalakleet (pop. 688) is another.

Like many traditional rural or independent telephone companies, ACS sees gold in its future focusing on selling lucrative broadband service to residential and business customers, where profit margins often exceed 50 percent. There is plenty of room to grow if ACS invests in network upgrades. ACS currently only has a 20 percent share of Alaska’s broadband market, primarily selling DSL service. GCI, which sells cable broadband, has managed a speed advantage.

Both companies have reassured Wall Street that despite ACS’ renewed focus on broadband, there will be no fierce competition, no price wars, or lower prices for consumers. ACS will devote considerable resources into bolstering its business broadband marketing and has already secured contracts with the state government and a regional health consortium.

Despite the $300 million windfall, ACS plans to turn most of that money towards paying off its debts and possibly reinstating a dividend payout program for shareholders. The company is expected to only spend $35 million to $40 million annually on capital investment projects and executives promise they will only open their wallet for projects that guarantee a high return on that investment. As a result, ACS will likely not spend much on rural broadband expansion.

Phillip Dampier

Welcome to 2015!

This is the seventh year Stop the Cap! has fought for better broadband across North America and beyond. Whether your provider is Comcast, Time Warner Cable, Rogers, Bell, AT&T, Verizon or a (dwindling) number of other cable and telephone companies, there is plenty of room for improvement.

When we began in the summer of 2008, Frontier Communications was contemplating a usage cap of just 5GB a month on their broadband service. A year later Time Warner Cable market tested caps as high as 40GB a month. For almost as long as we’ve existed, Comcast has believed 250GB a month was all most customers ever needed. Rogers’ most popular Internet package today offers 60GB a month, despite the fact Canadians on average watch more online video than anyone else. AT&T thinks 150GB a month is fine for DSL and 250GB is all you’d need as a U-verse customer. Verizon doesn’t see a need for limits on either its DSL or fiber optic networks. Neither does Cablevision.

Usage caps and so-called “usage-based billing” continue to be one of the most under-reported stories in the tech press. Touted as “fair pricing,” these plans are in fact little more than profit-padding for a service that already earns companies as much as 90% gross margin. There is nothing fair about usage-based billing in North America. Customers face the same prices they have always paid for unlimited service, but now endure an arbitrary usage allowance that usually includes a stiff overlimit fee. Those providers charging usage pricing do not offer the fastest service, have not made significant improvements above and beyond other providers that still charge flat rate prices, and frequently also charge excessive modem rental fees.

The duopoly most Americans have for broadband service has become quite fat and happy collecting ever-increasing amounts of money for service that only seems to improve after an upstart competitor like Google arrives ready to offer better service at a lower price. Customers in Kansas City, Austin, and a handful of other communities are getting the best upgrades and are empowered to negotiate a lower price for service. The rest of the country is not so lucky. A handful of often-under capitalized fiber competitors have arrived in some areas, but their market share generally remains a fraction of what the cable and phone companies have locked up.

We have always believed broadband was destined to become the next must-have utility service, following clean water, electricity, gas and some form of telephone service. Unfortunately, Washington policymakers continue to treat Internet access as an optional extra, allowing one or two companies to dominate access in most communities. Policymakers and regulators have done very little to protect consumers from the effects of marketplace concentration, allowing cable and phone companies to merge and raise prices, remain uncommitted to protecting the Open Internet with strong Net Neutrality protections, and not taking the effects of usage caps seriously.

One of the most effective ways a community can combat bad service and high prices is to support launching its own public broadband network. Throughout the United States, local town and counties enduring “good enough for you” broadband (or no service at all) are constructing their own fiber optic networks to better meet the realities of the 21st century digital economy. They face industry-funded opposition in at least 20 states where lawmakers have banned or severely curtailed these networks to protect private telecom giants from the effects of serious competition.

In 2015, Stop the Cap! will continue to fight for consumers looking for a better deal:

• We continue to oppose industry consolidation. Mergers and buyouts benefit executives and shareholders. They almost never benefit customers who soon find rate increases, fewer choices, and often worse service as a result. Connecticut residents know that first hand enduring Frontier Communications’ recent bungled transition from AT&T service. Customers that dislike Time Warner Cable will likely loathe Comcast if that merger wins regulator approval. AT&T’s buyout of DirecTV leaves one less competitive choice for customers living in AT&T’s service areas looking for an alternative to U-verse television. Imagine if the government had approved AT&T’s attempted buyout of T-Mobile, the one wireless carrier now willing to throw a monkey-wrench into the current dominance of almost-identical expensive wireless service plans from AT&T and Verizon.
• Usage caps and consumption billing remain unjustified, particularly for wired broadband. Despite industry claims that usage caps and usage billing stimulate investment, in most cases the costs of delivering broadband service and the amounts companies invest in network upgrades continue their relentless decline on a per customer basis. Usage billing is no prescription for congestion problems either. Most congestion problems occur during peak usage levels — when light and heavy users alike are most likely to be online. A truly fair usage pricing scheme would charge a fair price for actual usage and nothing else. But such a pricing scheme would likely cut broadband bills and profits. So providers offer pre-determined compulsory usage allowances at current prices instead, and do not offer a flat rate option or rollover unused usage to a future month. As a result, customers often pay more for less service and constantly have to check their usage to make sure they do not get an unexpected surprise on their bill.
• Strong Net Neutrality protection is the best guarantee of preserving the Internet as it exists today – where success or failure of an online venture is based on what it offers customers, not on the size of its bank account. A nationwide end to laws restricting the development and expansion of community broadband is also essential to give communities self-determination of their broadband future.
• We will continue to educate consumers on how to negotiate a better deal with your provider and avoid expensive surcharges like modem rental fees. We will also continue to enlighten you about the pervasive influence of Big Telecom money on non-profits, state and federal governments, and researchers that support the various agendas of some of the largest telecom corporations in the country.

Broadband is improving at an incredible pace around the world, but back home prices continue to rise while Internet speed improvements are often met by usage cap road bumps. Internet affordability remains as much of a problem as rural broadband access. The more you know, the more effective you can argue for a change in telecom policies, where the public interest is better-balanced against corporate profits and duopoly prices.

Thank you for being a part of our efforts to make things better.

AT&T CEO Randall Stephenson’s public hissy fit against the Obama Administration’s sudden backbone on Net Neutrality may complicate AT&T’s plans to win approval of its merger with DirecTV. forcing AT&T to retract threats to suspend fiber buildouts if the administration moves forward with its efforts to ban Internet fast lanes.

Hours after Stephenson told investors AT&T wouldn’t continue with plans to bring U-verse with GigaPower fiber broadband to more cities as long as Net Neutrality was on the agenda, the FCC requested clarification about exactly what AT&T and its CEO was planning. More importantly, it noted responses would become part of the record in its consideration of AT&T’s proposed acquisition of the satellite television provider. The regulator could not send a clearer message that Stephenson’s statements could affect the company’s $48.5 billion merger deal.

AT&T responded – four days after the FCC’s deadline – in a three-page letter with a heavily redacted attachment that basically told the Commission it misunderstood AT&T’s true intentions:

The premise of the Commission’s November 14 Letter is incorrect. AT&T is not limiting our FTTP deployment to 2 million homes. To the contrary, AT&T still plans to complete the major initiative we announced in April to expand our ultra-fast GigaPower fiber network in 25 major metropolitan areas nationwide, including 21 new major metropolitan areas. In addition, as AT&T has described to the Commission in this proceeding, the synergies created by our DIRECTV transaction will allow us to extend our GigaPower service to at least 2 million additional customer locations, beyond those announced in April, within four years after close.

Although AT&T is willing to say it will deliver improved broadband to at least “15 million customer locations, mostly in rural areas,” it is also continuing its fiber shell game with the FCC by not specifying exactly how many of those customers will receive fiber broadband, how many will receive an incremental speed upgrade to their existing U-verse fiber/copper service, or not get fiber at all. AT&T routinely promises upgrades using a mix of technologies “such as” fiber to the home and fixed wireless, part of AT&T’s broader agenda to abandon its rural landline service and force customers to a much costlier and less reliable wireless data connection. It isn’t willing to tell the public who will win fiber upgrades and who will be forced off DSL in favor of AT&T’s enormously profitable wireless service.

Your right to know… undelivered. AT&T redacted information about its specific fiber plans.

Fun Fact: AT&T is cutting its investment in network upgrades by $3 billion in 2015 and plans a budget of $18 billion for capex investments across the entire company in 2015 — almost three times less than what AT&T is ready to spend just to acquire DirecTV.

The FCC was provided a market-by-market breakdown of how many customers currently get U-verse over AT&T’s fiber/copper “fiber to the neighborhood” network and those already getting fiber straight to the home. But this does not tell the FCC how many homes and businesses AT&T intends to wire for GigaPower — its gigabit speed network that requires fiber to the premises. Indeed, AT&T would only disclose how many homes and businesses it plans to provide with traditional U-verse using a combination of fiber and copper wiring — an inferior technology not capable of the speeds AT&T repeatedly touts in its press releases.

That has all the makings of an AT&T Fiber Snow Job only Buffalo could love.

AT&T also complained about the Obama Administration’s efforts to spoil AT&T’s fast lane Money Party:

At the same time, President Obama’s proposal in early November to regulate the entire Internet under rules from the 1930s injects significant uncertainty into the economics underlying our investment decisions. While we have reiterated that we will stand by the commitments described above, this uncertainty makes it prudent to pause consideration of any further investments – beyond those discussed above – to bring advanced broadband networks to even more customer locations, including additional upgrades of existing DSL and IPDSL lines, that might be feasible in the future under a more stable and predictable regulatory regime. To be clear, AT&T has not stated that the President’s proposal would render all of these locations unprofitable. Rather, AT&T simply cannot evaluate additional investment beyond its existing commitments until the regulatory treatment of broadband service is clarified.

AT&T’s too-cute-by-half ‘1930s era regulation’ talking point, also echoed by its financially tethered minions in the dollar-a-holler sock-puppet sector, suggests the Obama Administration is seeking to regulate AT&T as a monopoly provider. Except the Obama Administration is proposing nothing of the sort. The FCC should give AT&T’s comments the same weight it should give its fiber commitments — treat them as suspect at best. As we’ve written repeatedly, AT&T’s fabulous fiber future looks splendid on paper, but without evidence of spending sufficient to pay for it, AT&T’s piece of work should be filed under fiction.

Stephenson: No fiber for you

AT&T’s decision to suspend fiber broadband upgrades over the Obama Administration’s strong support for Net Neutrality may backfire on the telecom giant’s multi-billion dollar bid to acquire DirecTV.

The Federal Communications Commission has dispatched a letter to Robert W. Quinn, Jr., AT&T’s senior vice President and federal regulatory & chief privacy officer, inquiring whether AT&T really meant what it said about plans to suspend fiber expansion and that might impact at least two million additional homes that are part of a broadband expansion commitment included in AT&T’s offer to acquire DirecTV.

The FCC’s Jamillia Ferris wants AT&T to clarify CEO Randall Stephenson’s comments at a recent investor event, requesting information that may reveal whether AT&T was using the suspension of its fiber buildout as a political weapon against Net Neutrality.

“We made some comments in the DirecTV announcement that we would build fiber to two million additional homes,” Stephenson said at a Wells Fargo technology conference last week. “We will obviously commit to that once the DirecTV deal is done, we will keep going. But what we have also announced on top of that is that we are going to deploy fiber to 100 cities. And look, we can’t go out and just invest that kind of money deploying fiber to 100 cities other than these two million not knowing under what rules that investment will be governed. And so we have to pause and we have to just put a stop on those kinds of investments that we are doing today.”

The FCC’s request suggests the company’s answers may impact how the FCC treats AT&T’s request for approval of its merger with DirecTV.

Requested from AT&T no later than Nov. 21:

(a) Data regarding the Company’s current plans for fiber deployment, specifically:

(1) the current number of households to which fiber is deployed and the breakdown by technology (i.e., FTTP or FTTN) and geographic area of deployment;

(2) the total number of households to which the Company planned to deploy fiber prior to the Company’s decision to limit deployment to the 2 million households and the breakdown by technology and geographic area of deployment; and

(3) the total number of households to which the Company currently plans to deploy fiber, including the 2 million households, and the breakdown by technology and geographic area of deployment;

(b) A description of

(1) whether the AT&T FTTP Investment Model demonstrates that fiber deployment is now unprofitable; and

(2) whether the fiber to the 2 million homes following acquisition of DirecTV would be unprofitable; and

(c) All documents relating to the Company’s decision to limit AT&T’s deployment of fiber to 2 million homes following the acquisition of DirecTV.