Phillip "An Ex-Frontier Customer" Dampier

The other week while sitting in the dentist’s office waiting for my wallet to be drilled, I overheard a conversation at the reception desk over the latest effort by Frontier Communications to shoot itself in the proverbial foot.

“I decided to get rid of my phone line the other day and when I called Frontier to disconnect, I was told I would owe them more than $150 in disconnection fees for a contract I never knew I had with them,” opened the conversation.

“That happened to my sister as well, and she couldn’t believe it because nobody ever told her she was on a contract,” came the reply.

“I never knew I was either, and I told the representative they needed to show me where I signed up for anything like that or else I’m not paying it,” insisted the latest victim of Frontier’s phantom service contracts.

Within a minute or two, all had decided they were done doing business with the phone company that got its start more than 100 years ago as the well-regarded Rochester Telephone Corporation.  In 2012, there was no turning back after $150 “disconnect” penalties and other insults.  They were intent on being rid of Frontier once and for all.

With customer unfriendly policies like that, it comes as no surprise Frontier has been losing customers in the Rochester market for years, mostly to cell phone providers or Time Warner Cable — the latter which delivers more value and far superior broadband speed in western New York communities not served by Verizon FiOS.

Surprise... you're on a contract with a $150 cancellation penalty.

Twenty years ago, Rochester Telephone delivered excellent value, charging about half what then-NYNEX customers in Buffalo and Syracuse paid for telephone service. But as Frontier has increasingly disengaged from being an aggressive contender for telecommunications services in Rochester, people in this region of one million noticed, especially when Verizon’s fiber to the home service arrived in Buffalo, Syracuse, Albany, and beyond.

What did Frontier offer? Not much. Frontier’s local general manager Ann Burr, who used to be in charge at Time Warner Cable locally, told local media Rochester didn’t need faster broadband speeds. That’s a fitting argument for a company that doesn’t deliver them and believes 3Mbps broadband is plenty fast enough.  If you don’t like it, feel free to leave, so long as you aren’t trapped with that long-term service contract you never knew you had. (The New York Attorney General’s office has already spanked Frontier once for the practice, forcing them to issue refunds, and judging from last week’s conversation, it appears the problem has not abated.)

The fact is, Frontier offers little compelling to the landline customers they have left.

Rochester’s experience with Frontier seems apropos when contemplating the phone company’s latest quarterly results, which one analyst called “ugly.” Having listened to at least a dozen of Frontier’s quarterly conference calls with investors over the past three years, there seems to be no shortage of promises of better days to come.  Frontier is among the few companies I have heard call customer losses of 5-11% every quarter “an improvement.”

As one investor put it, the management at Frontier should win an Academy Award for feigned optimism.

This week, the company announced first-quarter earnings fell 51% thanks to lower revenue earned from the dwindling number of residential and business customers. But better days are ahead, really.

Road to nowhere?

Frontier has spent the last year treating their “system conversion” for ex-Verizon territories as the telecom equivalent of the Holy Grail.  Once achieved, the company can do anything. The reorganization underway internally at the company is supposed to improve its lackluster customer service, generate more marketing opportunities, save the company money, and open the door to a new chapter of a unified Frontier family, with ex-Verizon and always-Frontier employees coming together to do things “the Frontier way.”

How much longer investors will stick around waiting for the promised land remains an open question. The stock has already achieved a 52-week low, and if the company cuts its dividend — the primary point of attraction for investors — it will drop much lower.

Frontier’s management decisions have effectively left the company between a rock (Wall Street) and a hard place (its dwindling customers).  Much of the company’s success is predicated on rural broadband/landline service, where the company expects to face little competition.  But Verizon, the company that sold them much of their inherited network, has a little surprise for them.  After selling off the “junk” (a deteriorating copper landline network they no longer care much about), the company’s wireless division is coming back to town to poach Frontier’s customers.

Verizon’s grand plan is to pitch two products:

1. Home Phone Connect: Verizon’s landline replacement works with the customer’s home phones over Verizon Wireless’ network. Customers can share minutes on an existing Verizon Wireless plan for $9.99 a month or get unlimited calling for $19.99 a month. It comes with most popular calling features included.
2. Verizon HomeFusion Broadband: Verizon Wireless has excess capacity in rural areas, especially on 4G LTE-equipped towers, so why not put it to use? While commanding a premium at $60 a month for just 10GB of usage, customers who value speed over money may tolerate that diamond price.  If Verizon finds a way to relax that usage limit and lower prices, it could present a real competitive threat to phone companies delivering lower end DSL service.

[flv width=”480″ height=”290″]http://www.phillipdampier.com/video/Home Phone Connect – Home Phone Transfer Verizon Wireless.flv[/flv]

Verizon Wireless introduces Home Phone Connect, a product designed to tell landline companies like Frontier to take a hike.  (2 minutes)

While Verizon isn’t likely to immediately grab major market share with either product, it foreshadows an intent to leverage their rural wireless network to remain a player, even in places where they have abandoned selling landline service.

How to Stop the Erosion

Turning things around? Frontier contemplates licensing U-verse from AT&T

Even in a barely-competitive marketplace, companies must invest to keep up. But that investment annoys Wall Street, which can depress the stock (and the all-important dividend). But improved service retains customers (and may even win a few ex-customers back). So news that Frontier was considering licensing U-verse technology to upgrade their major markets is a logical first step to stop the bleeding. Frontier is irrelevant delivering broadband at speeds of 3Mbps at out the door prices that meet or exceed what the much-faster cable competition charges. U-verse would allow Frontier to deliver faster broadband (up to 24Mbps is plenty fast for a lot of consumers), build its own IPTV offering instead of relying on satellite dish reseller agreements, and maintain landline customers, assuming the company prices its bundle correctly.

While we are big proponents of fiber-to-the-home service, it is clear Frontier will never spend the money to deliver it, even to their largest service areas. They will prefer the cheaper route of fiber to the neighborhood, relying on existing copper infrastructure to connect individual homes to the service. It represents a reasonable first step.

Frontier also must continue aggressive investments in their broadband network in more rural areas. Some of the company’s regional backbones remain woefully congested, and the company just doesn’t deliver the speeds it markets on its website in too many areas.

High speed should really mean "high speed"

Jameson, a Stop the Cap! reader, is a good example. He signed up for “Frontier Max DSL” which claims it can deliver up to 6Mbps in his part of east-central Indiana.  He ended up with 1.6Mbps instead, in part of because Frontier’s records were inaccurate.

I called Frontier tech support after reading some stuff on Stop the Cap! and another site, learning that since I live under 5000 feet from the DSL termination point (the Frontier building down the road) that I shouldn’t have any problems getting their highest speeds. I got lucky and got a customer support agent who understood my problem, and a tech support guy who genuinely seemed concerned about my issue. The tech guy checked Frontier’s records and I was labeled as being 30,000 feet from the building, but I’m really only around 4200 feet away, and my speeds were provisioned at 1.6mbps down and around 450kbps up. He put in a support ticket to have my speeds automatically raised up to the max I’m paying for.

Jameson ended up with around 7Mbps — a little better than the advertised speed, but only because he thought to ask and reached the right people at Frontier to follow through.

Some of our readers in West Virginia are not so lucky, having the mediocre speeds they fought to receive reduced further when a technician suddenly remotely adjusts speed provisioning on customer equipment to reduce their maximum broadband speed.

Frontier’s DSL problems don’t just exist in rural areas. We experienced it first-hand in 2009 when the company advertised up to 10Mbps speeds in Rochester, and delivered 3.1Mbps to us instead.

Consumer Reports documents this is not an isolated problem, with only two-thirds of Frontier customers getting the broadband speeds they pay to receive. If and when a competitor does better, Frontier loses another customer.

Finally, Frontier must improve its customer service. The company is notorious for giving inconsistent answers to customer questions, doesn’t always follow through on commitments, and maintains far too many “gotcha” terms and conditions on contracts that leave customers exposed to unjustified early termination fees.

[flv width=”640″ height=”380″]http://www.phillipdampier.com/video/CNET Verizon HomeFusion Broadband May 2012.flv[/flv]

CNET shows off the equipment used with Verizon’s new HomeFusion wireless broadband service.  (2 minutes)

Stop the Cap! has written extensively about the American Legislative Exchange Council’s pervasive influence on state telecommunications policies long before Trayvon Martin and Florida’s “Stand Your Ground” law put a spotlight on the shadowy corporate-backed group in the national media.

ALEC’s mission is clear.  It acts as a go-between between corporate interests who customize business-friendly state legislation in their favor and the legislators willing to introduce those bills as their own. ALEC provides the cover some legislators need to protect their image in the public eye.

A handful of legislators in safe districts are bold enough to openly admit introducing legislation written by a company like AT&T.  Take Kentucky Republican Sen. Paul Hornback.  He introduced a deregulation measure in Kentucky’s state Senate that would do away with universal landline service and almost entirely deregulate AT&T’s operations in Kentucky.  When the media found out Hornback introduced legislation AT&T actually wrote, he didn’t seem to mind one bit and doubled down on the apparent conflict of interest.

Sen. Paul Hornback (R-AT&T)

“You work with the authorities in any industry to figure out what they need to move that industry forward,” Hornback said, defending his bill that would do exactly that, at the expense of Kentucky consumers facing rate hikes AT&T has pushed in other states where similar measures were passed.

Hornback is the exception to the rule.  For more timid legislators concerned about their next election campaign, ALEC is only too happy to provide cover.

When ALEC’s connection to Florida’s controversial “Stand Your Ground” law was exposed, it swept the secretive group into the Martin media tornado.  When reports surfaced connecting the dots between ALEC and some of America’s largest corporations, Coca-Cola, Kraft Foods, Intuit, and Pepsi fled ALEC’s membership roster.  No soft drink company wants to be connected to a controversial Florida gun law.

First Coca-Cola and Kraft Foods, Now AT&T

Today, Color of Change, a group dedicated to amplifying the voice of African-Americans to make government more responsive to minorities set its sights on AT&T, one of ALEC’s most prominent members.

They have a major fight on their hands.  Few corporations have used ALEC as effectively as the descendant of Ma Bell.  AT&T’s enormous lobbying machine has frequently used ALEC to help introduce deregulation measures in states across the country.

“Even after we wrote AT&T to let them know that more than 85,000 ColorOfChange members have asked that they disassociate themselves from ALEC, the company has remained silent,” says Color of Change. “It’s clear that they think we will just go away.”

Throwing away their membership in ALEC would be a major blow to AT&T’s lobbyists who are well-connected inside the group. AT&T has several leadership roles within ALEC’s various state chapters:

ALEC State Chairs Affiliated With AT&T

• Arkansas:
  — Ted Mullenix, AT&T
• California:
  — Pete Anderson, AT&T
• Connecticut:
  — John Emra, AT&T
• Louisiana:
  — Daniel Wilson, AT&T
• Mississippi:
  — Randal Russell, AT&T
• Texas:
  — Holly Reed, AT&T

How do these ALEC-involved lobbyists influence elected officials?  They wine and dine lawmakers and their families, encouraging them to introduce legislation favorable to AT&T.

Everyone Knows Randy Russell – AT&T’s Go-To-Guy in Mississippi

Beckett

AT&T lobbyist Randy Russell has been representing the interests of Big Telecom in Mississippi for more than a decade.  Originally registered as a lobbyist for AT&T predecessor BellSouth, Russell today also serves as ALEC’s state chairman in the Magnolia State.

When he isn’t spending his time in the state capital — Jackson — he’s wining and dining lawmakers who might be future supporters of AT&T’s business agenda in the legislature.

Lucky for AT&T Russell found Rep. Jim Beckett (R-Bruce).  And what a find.  Beckett is in the catbird seat, serving as chairman of the House Public Utilities Committee — the oversight committee responsible for ensuring that when someone in Mississippi picks up a phone, there is actually a dial tone.

Unfortunately for Mississippi consumers Beckett has AT&T’s Russell on his speed dial.

The Cottonmouth Blog discovered both men have spent a lot of time together:

It seems that Russell and AT&T picked up the food tab for Rep. Jim Beckett and his wife at the ALEC meeting in at the Westin Kierland Resort in Scottsdale, Ariz. from November 30 to December 2, 2011.  AT&T also paid for a few rounds of golf for Rep. Beckett while there.  All said and done, AT&T paid $565.39 to cover expenses for Rep. Beckett and his wife on their three day trip to Scottsdale.

But that’s not all.  AT&T also picked up the tab for $151.70 worth of food and tickets while Rep. Beckett and his wife were at the Spring ALEC meeting in Cincinnati, OH in late April of 2011. AT&T also paid $22.62 for food for Rep. Beckett and his wife while he attended the 2011 Summer ALEC meeting in New Orleans.

The total amount AT&T gave to Rep. Jim Beckett and his wife in 2011 through Randy Russell?  $876.85.  The names of the Becketts appear a total of 36 times in AT&T’s 2011 lobbying report, most of it while the Becketts are at ALEC retreats.

AT&T also helped more directly with $2,500 in campaign contributions to Beckett’s campaign fund.  What did all of AT&T’s money and travel vouchers buy them?

Dialing for Deregulation

House Bill 825 — ‘The AT&T Total Deregulation Act’: A bill introduced by none other than Rep. Beckett that would effectively strip what remaining oversight exists over AT&T’s operations in Mississippi.  It’s a bill very familiar to Stop the Cap!, because it includes all of the usual “bullet points” found in ALEC’s own legislative database — all of enormous interest and importance to AT&T.

Northern District Public Service Commissioner Brandon Presley, who deals with consumer complaints about AT&T’s service in the state, effectively called HB 825 an unmitigated disaster for ratepayers from Corinth in the north to Biloxi in the south:

[…] House Bill 825 would totally strip the PSC of any authority to hold AT&T accountable for rate increases and lousy landline and cell phone coverage. Presley said the bill was requested by AT&T as retaliation against the PSC for denying a rate increase and for complaining of poor cellular and residential phone service. The PSC won a case in the Mississippi Supreme Court to limit charges to customers after AT&T appealed the PSC’s ruling.

[…] Presley said the Legislature passed the first phase of deregulation in 2006 and since then complaints to the Commission about billing errors, poor service and the like have risen from 1,735 in 2006 to 4,361 in 2011 an increase of over 150%. “This is evidence enough of why this bill is bad for consumers.”

[…] Along with removing all of the Public Service Commission’s authority to investigate abuses, extortion and customer complaints, House Bill 825 also removes the Commission’s authority to designate conditions for AT&T’s receiving of millions in federal funds to promote rural cell phone service. Presley said the Commission’s authority to place conditions on those dollars has been the main tool to increase cell phone coverage in rural counties. “Rural Mississippi’s interests are gutted in this bill.” Presley said.

Cottonmouth reminds readers who may not be familiar with Mississippi that Beckett’s home district — Bruce — puts his AT&T ghost-written legislation at odds with his own constituents:

“Bruce [isn’t] exactly urban,” the blogger writes. “Matter of fact, anyone who has driven on Highway 7 right outside of Bruce and tried to make an AT&T cell phone call could tell you just how much this bill will hurt Rep. Beckett’s constituents.”

Even Beckett’s fellow Republicans serving the state PSC couldn’t stomach the legislation that guaranteed even more customer complaints.  Southern District Public Service Commissioner Leonard Bentz issued his own press release attacking the bill:

“This is a very bad bill for consumers in Mississippi,” Commissioner Bentz stated. “Even though AT&T will tell you that the oversight that we [PSC] have is limited, the little we do have is piece of mind for the consumers.”

“You don’t have to think very long to understand why this bill is bad. Think back to last time you called  in a problem to AT&T and the lack of customer service you received. This bill would make it worse. It is important to understand AT&T will lead you to believe this bill will affect only a small number of customers, but that is not so. As it stands right now, all customers with AT&T have the ability to file complaints with the Public Service Commission, and have the PSC on their side to help them navigate the system. The bill clearly states customer appeals will be removed from the PSC jurisdiction.

The third commissioner on the PSC, Republican Central District Public Service Commissioner Lynn Posey, hoped HB 825 would simply go away, seeking to bury it in a “study committee.”

Despite the universal opposition to the measure among those tasked with overseeing the state’s phone companies, Beckett decided AT&T knew better and quickly pushed HB 825 through his committee.  What makes Beckett an expert in telecommunications policy?  Not too much: He calls himself a lawyer on his biography page, but he’s also the owner of Beckett Oil & Gas.

Despite efforts by consumer advocates, a slightly-amended measure passed both the Republican-controlled state House and Senate and this week will be sent to the desk Gov. Phil Bryant for his signature.

“The small telephone companies in this state, many of them are opposed to this,” said Rep. Cecil Brown (D-Jackson). “If it hurts their business, it’s going to hurt your local communities. That’s all there is to it.”

The price the phone company paid to get Rep. Beckett on Team AT&T?: $2,500 + ALEC-sponsored free meals and travel.

[flv]http://www.phillipdampier.com/video/KTTC Rochester ALEC 2-3-12.mp4[/flv]

KTTP in Rochester, Minn. explores the influence of state lobbyists working with ALEC who push lawmakers to introduce legislation corporations wrote themselves.  (4 minutes)

Appalachia: A major target for copper theft

Some 8,000 residents in Pike, Scioto, and Jackson counties found themselves without phone service when copper thieves mistakenly cut a critical fiber optic line serving Frontier Communications customers across the region.

As a result, phone service, broadband, 911, and even ATM machines were left out of order for hours last Wednesday, not restored until Thursday afternoon.

Pike County Sheriff Richard Henderson told WBNS-TV the outage was devastating for emergency responders.

“It’s a fear for us, because we depend on it for people to be able to call us for emergency situations,” Henderson said.

As a result of the fiber cut, the department was able to forward cellular 911 calls to neighboring counties, but the delay in response could have been life-threatening in some cases.

Frontier and other phone companies in Appalachia have been particularly hard-hit by copper theft, often committed by those with substance abuse problems.

Scrap copper prices remain very high, and some scrap dealers are accused of looking the other way when suspiciously-obtained “scrap copper” is delivered for a cash sale.

Brazen copper thieves have even stripped copper phone wiring in broad daylight, literally tearing it off utility poles as they drive down rural country roads.

Some of the worst problems have occurred in West Virginia, where lawmakers are beefing up criminal penalties for copper theft in an effort to control the problem.

Unfortunately for phone companies like Frontier, thieves often mistake fiber optic cabling — worthless for scrap metal resale — for copper, and with phone companies increasingly dependent on fiber to move a substantial amount of data traffic and phone calls between central offices and beyond, a single fiber cut can create major headaches for customers, and an expensive, often complex repair job for technicians.

Some companies in hard-hit areas are now building network redundancy into their service areas, allowing for quicker restoration of service.

That won’t help customers who are missing the phone cable that used to wind through their neighborhood, but maintaining a backup could be a life-saver in cases where phone companies rely on fiber and copper cables to move large numbers of calls between their switching centers and beyond.

[flv width=”600″ height=”356″]http://www.phillipdampier.com/video/WBNS Columbus Thieves Cripple 911 Internet Phone Services In Pike Scioto Jackson Counties 3-30-12.f4v[/flv]

WBNS in Columbus covered the extensive impact copper theft can have disrupting daily life in southern Ohio.  (3 minutes)

Cuomo

New York’s telecommunications providers are up in arms over Gov. Andrew Cuomo’s decision to yank permanent deregulation for the “digital phone” industry (otherwise known as “Voice Over IP/VoIP”) from his budget, even though the phone service is already deregulated in New York.

Now Verizon Communications and Time Warner Cable are claiming that without the deregulation they already enjoy, innovation, investment, and competition will be stifled.

“Verizon is very disappointed that New York’s lawmakers, who want the public to believe that New York is open for business, will not be acting on this important measure to modernize the state’s outdated telecommunications laws in this year’s budget,” Verizon spokesman John Bonomo told the Albany Times-Union.

“It’s about new technologies, it’s about new services,” echoed Rory Whelan, regional vice president of government relations for Time Warner Cable. “We want New York to be at the forefront of where we roll out our new products and services.”

That notion has left consumer groups and telecommunications unions scratching their heads.

“They are saying that this is going to open the flood gates to more investment,” said Bob Master, political director for one chapter of the Communications Workers of America, which represents Verizon workers. “It’s ridiculous.”

Master says Verizon has been abandoning and ignoring their landline network for years, preferring to invest in Verizon Wireless and its limited FiOS fiber-to-the-home service which is available in only selected areas of the state.

New York’s Public Service Commission has largely not regulated competing phone service since Time Warner Cable first introduced the service as an experiment in Rochester.  As part of then-Rochester Telephone Corporation’s (now Frontier Communications) “Open Market” Plan, competing telephone companies could offer landline service in the company’s service area, so long as Rochester Telephone received the same deregulation benefits.  Only the cable company showed serious interest in providing home phone service, which it first delivered using traditional digital phone switches phone companies like Verizon and Rochester Telephone use.  Time Warner later abandoned that service for a VoIP alternative it branded as “digital phone.”

Time Warner’s “digital phone,” as well as Verizon’s own VoIP service sold with FiOS, have co-existed regulation-free.  Consumer advocates suspect the push to deregulate could eventually benefit Verizon more than cable operators, because it gives the phone company the right to question why any of its telephone services are regulated.  Verizon’s FiOS fiber-based phone lines do not operate on the same network its still-regulated landlines do.  Verizon, along with all traditional phone companies in New York, are subject to “universal service” guidelines which assure even the most rural New Yorkers have access to reliable telephone service.

But Verizon, like most traditional phone companies, sees substantial investment in “modernizing” legacy copper-based networks as an anachronism, especially as they continue to lose customers switching to cheaper cable providers or wireless phones.  The company recently declared its fiber optic replacement network, FiOS, at the end of its expansion phase.  That leaves the majority of New Yorkers with a copper-based telephone network companies only invest enough in to keep functioning.

Diaz

Bronx Borough President Ruben Diaz, Jr., joined many New York Assembly Democrats in strong opposition to the bill, which Diaz thinks undercuts New York consumers:

If this proposal were to become law, all consumers would lose out. For starters, customers would not be able to bring service complaints to the Public Service Commission, as they currently can with traditional service. Additionally, there would be no way for the state to set standards for quality or for service in underserved regions — meaning that customers could get stuck with exorbitantly high rates or be unable to obtain service at all in some areas of the state.

Verizon FiOS, one of the main options for VoIP coverage, has now been installed in many regions of the state, including most of downstate. However, Verizon has chosen not offer the service in upstate cities like Albany, Binghamton, Buffalo, Rochester, Syracuse and Utica. The result is both a virtual monopoly for the cable companies in those areas and another blow to lower-income working families who live in cities. That’s precisely why the state should be able to guarantee common sense regulations for VoIP service.

The problems with deregulating VoIP service are multifold. While traditional phone companies pay into a fund that supports “lifeline” phone access for elderly and disadvantaged New Yorkers, VoIP providers would not have to. We do not have to guess at how things would look if the state gives up its right to regulate internet phone service — we can just look at the states where traditional land line service has been deregulated. According to a recent survey of 20 states that have seen land line deregulation, 17 of those states have seen rate increases. We simply cannot afford that, particularly when our fragile national recovery is just beginning to take hold.

Verizon appears undeterred by the governor’s decision to pull the deregulation measure from consideration in his budget measure.  Bills to deregulate continue to float through the Republican-controlled Senate and Democratic-controlled Assembly, but New York’s legislature is notoriously indecisive and slow to act.  Time Warner’s Whelan believes the best chances for the deregulatory measure will be in the GOP-controlled Senate where a similar bill passed last year.  Verizon says it will continue to push for the bill in both chambers.

“We intend to continue pushing for this important measure, and for other measures that will benefit the state’s consumers and businesses to keep up with technological change and help the state thrive and succeed,” Bonomo said.

In the era of today’s “triple play” package of voice, data, and phone service, satellite television providers have been left at a competitive disadvantage.  Both Dish Network and DirecTV can sell you all the television signals you want, but their satellite-based distribution limits the options to include broadband and telephone service in the package.  Now Dish wants to convert some of their satellite spectrum to sell voice and data service over a network of land based wireless towers that will put the company in direct competition with AT&T and Verizon Wireless.

Dish CEO Charlie Ergen hopes to avoid making the same mistakes that threaten to kill a similar venture — LightSquared, because of interference concerns.

Dish’s spectrum is way, way up the radio dial, above 2,000MHz.  Other spectrum users in the neighborhood are primarily low-powered, line of sight communications, often satellite-based.  LightSquared’s service would have operated at around 1,500MHz, had it not obliterated reception of global positioning satellite services (GPS) in certain instances.  Whenever new spectrum users begin to move into a neighborhood, those already there feel threatened, primarily from the fear of interference problems.

Both LightSquared and Dish’s proposed services operate at considerably higher power than other incumbent users, and interference to existing services is a proven problem when sensitive reception equipment is unprepared to deal with signal overload.  The Federal Communications Commission found just cause to deny LightSquared operating permission for precisely that reason.  Ergen hopes to sell the FCC on a plan he says will avoid those interference problems.

Ergen

Ergen’s spectrum doesn’t sit immediately next door to other, existing users.  His frequencies are comparable to living the next block over, and there is a protective fence keeping the neighbors apart.

“It’s not as close to GPS, so it’s unlikely to interfere,” Matthew Desch, chief executive officer of Iridium Communications Inc., which operates more than 60 satellites, told Bloomberg News. “But the approval is going to take some time. The FCC is going to make sure they don’t have another LightSquared problem on their hands.”

Mike Marcus, director of Marcus Spectrum Solutions LLC adds Dish has some space between its frequencies — known as a guard band — and other users.  Marcus believes Dish won’t have an interference problem unless existing wireless carriers market handsets and other equipment insufficiently selective to reject interference from higher powered users nearby.

But whether Dish will ultimately spend the billions required to build a nationwide satellite and land-based broadband and phone network to accompany its existing satellite service remains unknown.

Bloomberg reports Wall Street analysts may prefer Dish sell its spectrum assets for a quick profit.  Barclays Capital estimates Dish’s spectrum could net the company about $7.3 billion.  If AT&T or Verizon Wireless were buyers, it would also protect them from new competition in the wireless market.

Regulators may be prepared to limit any such sale, however.  Industry analysts note a similar license for LightSquared required government approval before leasing capacity (or selling the network outright) to AT&T or Verizon Wireless.  The government may seek the same limits on Dish Network’s spectrum.

Ergen may have the final word however.

Vijay Jayant, an analyst at ISI Group in New York:

If the government sets rules that limit how Dish can use the spectrum, Ergen may choose to hoard it, said Jayant, which could be antithetical to the government’s mission of promoting wireless competition.

“Dish isn’t a patsy for the government,” Jayant said. “Dish’s attitude is, ‘Make the rules fair and we’ll do the right thing. Make them unfair and we’ll sit on the spectrum,’ and it will be another black eye for the government.”