Gov. Ivey signs SB149.

Alabama Governor Kay Ivey last week signed into law SB149, the Alabama Broadband Accessibility Act, authorizing the creation of a broadband accessibility grant program to be administered by the Alabama Department of Economic and Community Affairs. The bill, sponsored by Senator Clay Scofield (R-District 9) and Representative Donnie Chesteen (R-District 87), also creates the Alabama Broadband Accessibility Fund.

According to a press release from the governor’s office, there are more than 842,000 people in Alabama without access to a wired connection capable of 25 Mbps download speeds. Over 1 million people in Alabama have access to only one wired provider and another 276,000 people don’t have any wired internet providers available where they live.

“The internet is vital to economic development, health, education, and to be honest, all areas of our modern life. This common sense legislation will help us attract new broadband to areas that need it most, especially in rural Alabama,” Governor Ivey said. “I congratulate Senator Scofield and Representative Chesteen for a job well done in seeing this bill through the legislature. It is just another step forward as we improve access to high-speed internet sooner rather than later.”

Sen. Scofield

Media reports claimed the new bill would help “thousands” of Alabama’s unconnected to get access to broadband service for the first time. A closer look at the legislation shows an effort to encourage private internet providers in the state to expand their networks in areas they currently consider unprofitable to serve.

At the heart of the new law is up to $20 million in state tax credits for providers willing to expand broadband:

1. A state income tax credit equal to 10% of the new investment a provider spends to build or upgrade broadband service in a qualified unserved area.
2. A 10-year exemption from sales tax for any qualified broadband network facilities that are built with new investment, starting the date those upgrades go live.
3. A sales tax exemption applicable to the purchase of equipment needed for the upgrade.

Rep. Chesteen

There are annual caps on the credits, limiting the amount Alabama is willing to spend on the program:

1. $750,000 limit per provider if the upgrade provides up to 10/1 Mbps service;
2. $1,400,000 limit per provider if the upgrade delivers up to 25/3 Mbps service.
3. $20 million annual cap on program – $18 million designated for rural projects, $2 million for areas that do not receive at least 10/1 Mbps service.

In contrast, New York State’s rural broadband expansion effort paid $209.7 million in the third round of its funding program alone to extend service to an additional 122,285 rural homes, businesses and community institutions. Fairpoint Communications (today doing business as Consolidated Communications) received $3.2 million — more than twice the maximum amount Alabama will pay any one provider — to extend service to just 407 homes in the Capital and mid-Hudson region of the state.

Alabama is also counting on the Trump Administration’s infrastructure improvement spending program that will enable applicants to finance a project by combining loans and grants to provide broadband to eligible rural and tribal areas. But almost all that money will be spent on private providers, and will cover only a small portion of their costs. For a broadband expansion program to be successful, providers will have to determine if the amount of tax credits and exemptions available will allow such projects to pass the critical Return On Investment (ROI) test companies use to decide where to offer service.

Sen. Kennedy (R-La.)

Senator John Kennedy (R-La.) today introduced a companion bill that broadly copies an industry-favoring, fake net neutrality protection bill introduced last year in the U.S. House of Representatives by Rep. Marsha Blackburn (R-Tenn.).

The Open Internet Preservation Act is essentially the Senate version of Blackburn’s House bill, bringing along all the major flaws and industry favoritism one expects from Blackburn, a notorious defender of large telephone and cable companies and a favorite target for their campaign contributions.

Blackburn was naturally delighted.

“Sen. Kennedy brings leadership and focus to this discussion of preserving a free and open internet,” Blackburn said in a statement. ” I appreciate his work and his attention to this issue.  Title II 1930s era regulation was a heavy-handed approach that would stifle innovation and investment. This legislation will go a long way toward achieving the goal of protecting consumers.”

Kennedy made sweeping claims about the power of his bill to protect consumers — power not actually in his bill.

“Some cable companies and content providers aren’t going to be happy with this bill because it prohibits them from blocking and throttling web content,” Kennedy said in a statement. “They won’t be able to micromanage your web surfing or punish you for downloading 50 movies each month. This bill strikes a compromise that benefits the consumer.”

Except it won’t. We expect no cable company will oppose a measure that is based largely on the recommendations from the cable industry itself. Nothing in the bill would prohibit Comcast, AT&T, or other companies from “punishing” you for downloading 50 movies each month with a much higher bill as a result of exceeding your data cap and facing punitive overlimit fees.

Read Stop the Cap!’s detailed analysis of Rep. Marsha Blackburn’s net neutrality bill.

Even Kennedy admits his bill isn’t perfect, and considering it is based on a bill introduced by Rep. Blackburn that we analyzed last year, Kennedy is being modest.

“If the Democrats are serious about this issue and finding a permanent solution, then they should come to the table and work with me and Rep. Blackburn on these bills,” said Kennedy. “Does this bill resolve every issue in the net neutrality debate? No, it doesn’t. It’s not a silver bullet. But it’s a good start.”

It’s actually a very bad start, in our view. The industry would like to declare the net neutrality issue ‘settled’ with the passage of a bill it effectively wrote itself.

We urge readers to vehemently oppose both measures, which represent net neutrality in name-only. The best way to find a permanent solution for preserving real net neutrality will come at the next election, when voters can replace lawmakers that represent the interests of big telecom companies over those of their constituents. Allowing either fake net neutrality measure to proceed will make it exponentially more difficult to raise the issue in the future.

Cheyenne Mayor Marion Orr

An effort to pass legislation that would award state grants to help rural Wyoming communities get high-speed internet was dead on arrival as far as telecom industry lobbyists were concerned.

So they “fixed it” with a secret substitute bill quietly written by the state’s telecom companies.

The replacement legislation effectively turns the state grant program into a fund for the state’s dominant telecom companies — CenturyLink and Charter Communications.

Stop the Cap! has learned the replacement bill gives high priority to eliminating potential competition by blocking funding for communities to establish their own public broadband alternatives to the phone and cable company if those companies already offer service anywhere inside the community.

The bill also seeks to define the Wyoming government’s involvement in broadband as a non-adversarial partnership with the telecom industry, according to Wyoming Senate Minority Leader Chris Rothfuss (D-District 9).

Under the substitute bill, Rothfuss said the telecom industry will now have a say over how the state awards grant funds. The industry is concerned tax dollars could be given to their competitors to offer service in communities where CenturyLink and Charter already provide modest service. But nothing in the bill would keep either company from collecting state funds for themselves, to expand broadband into unserved areas.

The attempt to switch the bills during a state senate committee meeting was met with surprise and outrage by Cheyenne Mayor Marion Orr.

“I shouldn’t have been surprised to learn industry completely re-wrote proposed broadband legislation to their favor as a ‘substitute bill’ in legislative committee today,” Orr wrote on her Facebook page on Feb. 19. “The substitute bill is substantially different than the original bill. And it wasn’t posted online or anywhere for anyone except insiders to have access to. CenturyLink and Spectrum are bullies. It’s wrong, and they are hurting Cheyenne and other Wyoming communities from gaining affordable access.”

The committee working on the bill may have hoped to switch the bills without notice, but Orr was having none of that.

“As soon as I realized the committee was working a different version that none of us had access to – I spoke up,” she said. “The committee set it aside and will hear it again tomorrow night. This is NOT good governance and the committee realized it. I will stay on this. Guaranteed.”

The substitute bill appears to have subsequently passed and is still facing review by the state legislature.

Orr remains furious Wyoming’s telecom companies that have not delivered on ubiquitous, affordable broadband will now have more power than ever to determine who gets service, who pays to extend service, and what companies can provide it.

“It’s as important as turning on electricity, it’s as important as turning on a tap and having water, it’s an absolute must if we’re going to grow,” Orr said.

Some of America’s top telephone and cable companies will likely pay little, if any federal taxes as a result of the passage of a Republican-sponsored tax cut plan, while some may also receive generous “refunds” based on depreciation-related expenses and future investments the companies would have made with or without changes to the tax code.

For several years in the last decade, companies with significant infrastructure expenses often did not spend a penny in federal taxes thanks to generous loopholes and incentive programs designed to encourage corporations to invest in new equipment, research, and development. The new Republican-sponsored tax cut is expected to provide a windfall of tax savings for every corporation in the country, but telecom companies are expected to do especially well with a combination of a lower corporate tax rate and the GOP’s failure to fulfill a commitment to close many of the tax loopholes and incentives that were originally designed to get companies spending during the Great Recession.

No provider has promised customers lower rates as a result of the billions of additional dollars the companies are expected to keep in the bank starting next year. In fact, there are early signs that much of the anticipated windfall will be returned to shareholders in the form of increased dividend payouts and accelerated share buyback schemes that reduce the number of shares available for sale, boosting both the sale price of the stock and executive bonus compensation tied to the price performance of the stock.

Despite that, companies including AT&T and Comcast are cranking up their PR machines to get on the good side of the Trump Administration, suggesting the new tax cuts will directly benefit middle class employees at both companies.

AT&T’s capex increased $1.1 billion to $11.2 billion for the first six months of 2017 without the tax cut legislation.

AT&T announced it would pay a one-time $1,000 bonus to its workers and invest an additional $1 billion in network upgrades as a direct result of the tax cuts.

However, a closer look reveals AT&T’s commitments to boost compensation came not as a result of the tax cut but instead from nearly a year of hard negotiations with the Communications Workers of America (CWA), one of the biggest unions representing AT&T workers.

The CWA argued that AT&T needed to follow-through on the Republican Party’s promise that passage of the tax cuts would result in higher wages for the middle class.

“Republicans, including the president, said the average household would get $4,000 under this tax plan,” CWA spokesperson Candice Johnson told The Daily Beast. In November, CWA officials began to demand $4,000 raises for AT&T workers promised by the GOP. “This bonus came out of that conversation. It’s a start, and we’re going to keep holding our leaders accountable.”

Instead of $4,000 more a year for AT&T workers as a result of the tax cut bill, the union’s influence achieved a $1,000 one time bonus and an average salary bump of 10.1%. Without pressure from the union, many AT&T employees and union officials believe AT&T would have offered little, if anything to its employees as a result of the tax cut.

AT&T’s Christmas Bonus will cost the company a fraction of the amount it risks losing if its $109 billion merger deal with Time Warner, Inc., does not survive an antitrust review by the Justice Department and the courts. The Justice Department announced its opposition to the merger. The connection between AT&T’s press release, which plays into the Trump Administration’s talking points about the tax cut law, and AT&T’s need for a friendlier response to its merger deal by administration officials, was not lost on Crane’s Chicago Business:

By now, companies have learned the art of crafting the type of upbeat, largely symbolic press releases our president loves, with enough big numbers to get them on the White House’s good side. If this time around that also means some extra money in workers’ pockets, all the better. But some of these announcements come across as more gimmicky than others, and it’s not hard to wonder if there are also other motives at work.

AT&T is angling to overcome regulatory objections to its $109 billion merger with Time Warner Inc. and either way, needs to invest in the U.S. to build out its fiber-optic cable and 5G networks. Analysts estimate AT&T’s net income will be close to $14 billion this year.

AT&T’s commitment to spend up to $1 billion additional dollars next year as a direct result of the tax cut is recycled old news, critics charge, because AT&T previously announced the same $1 billion commitment in early November. Regardless, the extra spending is a small fraction of AT&T’s overall capex budget.

In 2016, at the height of so-called “investment-killing net neutrality,” AT&T exceeded its 2016 capex forecast, spending $22.9 billion — $900,000 more than it expected. In 2017, AT&T announced it expected to spend $22 billion again this year, primarily on its wireless network and wired business solutions. The other major former Baby Bell – Verizon Communications, spent $17.1 billion in 2016 and expected to spend up to $17.5 billion this year.

AT&T’s promise to spend an additional $1 billion is a token amount, especially when considering the tax cut savings likely to be won by phone companies like AT&T and Verizon. From 2008-2015, AT&T paid an effective federal tax rate of just 8.1%, according to the Institute on Taxation and Economic Policy. It will pay considerably less under the Republican tax law, potentially saving the company billions. During the same period, Verizon paid absolutely zero federal taxes during many of those years, and in fact won a refund from the IRS because of network investments and depreciation-related savings. Because the GOP did not close many of the corporate loopholes the politicians initially promised would be ended, many telecom companies could once again pay little, if any federal tax, and may secure hefty refunds.

Source: Institute on Taxation and Economic Policy

Comcast’s $1,000 Christmas Bonus and $50 Billion Spending Commitment

Not to be outdone, Comcast has also promised a $1,000 one time Christmas bonus for its employees as a result of the passage of the GOP tax measure, along with a commitment to spend $50 billion on its business over the next five years:

Based on the passage of tax reform and the FCC’s action on broadband, Brian L. Roberts, chairman and CEO of Comcast NBCUniversal, announced that the company would award special $1,000 bonuses to more than 100,000 eligible frontline and non-executive employees. Roberts also announced that the company expects to spend well in excess of $50 billion over the next five years investing in infrastructure to radically improve and extend our broadband plant and capacity, and our television, film and theme park offerings.

Roberts

Comcast’s spending on its theme parks acquired from NBCUniversal has been especially bullish, with Roberts announcing earlier this year nearly $2 billion in spending  in 2017. In fact, Comcast’s capex spending has trended higher year after year, especially after its acquisition of NBCUniversal. In 2014, the company spent $7.2 billion on capital investments. In 2015, as net neutrality rules took effect, Comcast raised investments to $8.1 billion. In 2016, the capex budget fell slightly to $7.597 billion in 2016, but was forecast to reach $8.445 billion in 2017. Ars Technica reports that from the fourth quarter of 2016 through the third quarter of 2017, Comcast spent $9.4 billion on capital investments.

Much of that spending has been to pay for its X1 set-top box, theme park upgrades, and scaling up its broadband infrastructure to handle faster internet speeds. Earlier in 2017, Comcast also boosted its commitment to spend billions on buying back shares of its own stock, which will benefit shareholders and company executive compensation plans.

As the industry marches towards fiber upgrades and DOCSIS 3.1 deployment, Comcast’s capex forecast without the tax cuts would like come very close to Roberts’ $50 billion estimate over the next five years, assuming the company spent a reasonable average of close to $10 billion annually. Roberts said he “expects” spending at that level, but did not commit to it formally, so there is no penalty for overestimating investment numbers.

AT&T earlier noted predictions about capital investments always relate to actual need at the time and the company doesn’t spend money it does not need to spend.

“There is no reason to expect capital expenditures to increase by the same amount year after year,” AT&T said at the time. “Capital expenditures tend to be ‘lumpy.’ Providers make significant expenditures to upgrade and expand their networks in one year (e.g., perhaps because a new generation of technology has just been introduced), and then focus the next year on signing up customers and integrating those new facilities into their existing networks, and then make additional capital expenditures later, and so on.”

But there are political upsides to making no-strings-attached investment predictions anyway.

Comcast’s share repurchase program also allows the company to boost dividend payouts to shareholders.

Issuing a favorable press release that dovetails with the Trump Administration’s tax cut plan could buy Comcast goodwill from the administration as the company faces calls from Congress to extend merger deal conditions and restrictions on its 2011 acquisition of NBCUniversal. Those conditions are scheduled to expire in September 2018.

Jon Brodkin notes that telecom companies frequently tie their spending plans to regulatory matters going in their favor:

When ISPs are asking the government for a specific policy change—such as the repeal of a regulation or a tax break—they are quick to claim that the desired policy will lead to more investment.

AT&T, for example, announced last month that it would invest “an additional $1 billion” if Congress passes tax reform. With the tax reform now passed by Congress, AT&T said yesterday that it will move ahead with that $1 billion increase.

But neither one of those AT&T announcements said what the exact level of investment would have been if the tax bill wasn’t passed.

And in 2010, AT&T told the FCC that capital expenditures are based on technology upgrade cycles rather than government policy. At the time, AT&T was asking the FCC for a favor—the company wanted a declaration that the wireless market is competitive, a finding that can influence how the FCC regulates wireless carriers.

Rep. Marsha Blackburn (R-Tennessee, but mostly AT&T and Comcast)

Rep. Marsha Blackburn, who claims to represent the interests of voters in Tennessee but generally prefers the views (and campaign contributions) from AT&T and Comcast, is the first Republican to propose a bait-and-switch “net neutrality” broadband bill she claims will protect a free and open internet, but will actually prohibit net neutrality as America has known it over the last two years.

“No blocking. No throttling. The Open Internet Preservation Act will ensure the internet is a free and open space,” Blackburn tweeted to her followers shortly after giving an exclusive interview introducing her bill to Breitbart News. An early copy was also furnished to TechFreedom, an industry-funded front group that has opposed net neutrality. “This legislation is simple, it provides light-touch regulation so companies can invest and innovate, and make sure our internet is up to 21st century standards.”

Congresswoman Blackburn hopes you will take her word on that and not bother to actually read and understand what her bill actually does to the concept of a free and open internet.

We did read the bill and are prepared to help you understand it.

No overt censorship but plenty of “reasonable network management”

Blackburn’s bill non-controversially forbids the censorship of “lawful content, applications, services, or non-harmful devices.” Virtually every ISP in the country has already volunteered they have no intention of censoring legal content on the internet. But Blackburn’s bill includes a safety clause that allows ISPs to avoid accusations of tinkering with traffic — “reasonable network management,” which in this case is vaguely defined in the bill as “a practice that has a primarily technical network management justification.” Blackburn also defines a network management practice “reasonable” if “it is primarily used for and tailored to achieving a legitimate network management purpose, taking into account the particular network architecture and technology of the broadband internet access service.”

Despite that word salad, there is nothing in her bill that clearly defines what is “legitimate” and what is not. Comcast, for example, has its own view about how it manages and prices traffic on its broadband service. Stream XFINITY content and it does not count against your Comcast cap. Stream Hulu and it does. Comcast claims that is fair if one considers the ‘particular network architecture’ that delivers Comcast’s own content is allegedly different from the public internet. Blackburn’s bill would treat data caps, zero rating, and Comcast’s version of “fairness” as all perfectly legal.

Large telecommunications companies have insisted there is no need to pass laws or enact regulations governing internet censorship because they would never contemplate blocking legal content,  making the need for legislation unnecessary. But they are strongly likely to favor her bill, creating a direct contradiction to their repeated insistence net neutrality was “a solution in search of a problem.” There is a reason for the sudden support among many Republicans for Blackburn’s concept of net neutrality — blocking regulatory agencies from oversight of internet service provider interference and abuse.

We need to ensure that the internet cannot block or throttle users. This comes from light-touch regulations from Congress, not unelected bureaucrats. https://t.co/Bzr0jstvsG

— Marsha Blackburn (@MarshaBlackburn) December 19, 2017

The “Specialized Services” Hindenburg-sized loophole

Blackburn’s bill covers all the bases for the telecom industry she routinely supports.

Most importantly, her bill creates an enormous loophole allowing internet service providers to offer “specialized services” to the public any way they choose, as long as they do not “threaten the meaningful availability of broadband internet access service or [offer services] that have been devised or promoted in a manner designed to evade the purposes of this section.”

Blackburn defines a “specialized service” as “services other than broadband internet access service that are offered over the same network as, and that may share network capacity with, broadband internet access service.’’

That effectively means any website, streaming service, cloud storage or app could qualify as a “specialized service.” Blackburn’s bill would allow an ISP to establish paid prioritization (fast lanes) for selected content, usage cap non-preferred content, or steer web users to preferred websites and services. It effectively makes all internet content open to ISP manipulation. Just to be certain ISPs are protected from net neutrality rules for next generation applications and services, her bill also permanently forbids regulatory agencies from expanding the definition of net neutrality.

Obliterating the concept of states’ rights

Republicans are usually strong proponents of limiting the power of the federal government, especially when it comes to preempting state laws, but that concept is turned on its head when Big Telecom campaign contributions are at stake. Blackburn completely abandons any pretense of a state being able to write its own laws governing internet openness by specifically banning that option:

“No State or political subdivision of a State shall adopt, maintain, enforce, or impose or continue in effect any law, rule, regulation, duty, requirement, standard, or other provision having the force and effect of law relating to or with respect to internet openness obligations for provision of broadband internet access service.”

Permanently assuring ISPs easy court victories if net neutrality violations are uncovered

Blackburn’s bill ignores several years of court rulings on net neutrality cases that have called out the flaw of the FCC’s earlier dependence on defining the internet as an “information service” subject to oversight under Section 706 of the 1996 Telecom Act. The courts have ruled this foundation is inadequate to enforce net neutrality. The foundation that has proved adequate and has so-far survived court challenge exists in Title II of the Communications Act, made applicable when the internet was redefined as a common carrier “telecommunications service.” Rep. Blackburn’s bill would return net neutrality enforcement to the same flawed authority courts have already ruled does not apply, neutering net neutrality in the courts.

Critics contend Rep. Blackburn’s real motive is to permanently end oversight of large cable and phone companies and prevent federal agencies from coming to the rescue of content providers and consumers.

“Blackburn’s legislation fails at the very thing it claims to accomplish. It prohibits a few open-internet violations, but opens the door to rampant abuse through paid-prioritization schemes that split the internet into fast lanes for the richest companies and slow lanes for everyone else,” said Craig Aaron, Free Press Action Fund President and CEO. “This bill’s true goal is to let a few unregulated monopolies and duopolies stifle competition and control the future of communications.”

“Congress must reject last week’s FCC ruling and restore Title II authority at the agency,” Aaron added. “The 2015 rules worked extraordinarily well from the get-go, with investment and innovation flourishing across the sector. That’s because they gave the FCC the authority to prevent paid prioritization and other forms of discrimination, while promoting competition, open markets, universal service and equal access.”