AT&T’s latest effort to rid itself of universal service obligations and a commitment to offer discounted phone service to more than one million low-income Californians has been temporarily stopped in the state legislature after advocates for the poor objected to the bill.

AB 1407 would have made major changes to the state’s regulations governing LifeLine, the low-cost phone service for the poor. In its place, both AT&T and Verizon advocated a voucher program that would effectively raise rates for everyone, gut regulatory authority to limit future rate hikes, and open a loophole that could allow phone companies to unilaterally abandon landline service in favor of wireless.

The bill, introduced by Assemblyman Steven Bradford (D-Gardena), would drop the current LifeLine program offering landline service at rates not to exceed $6.84 a month and replace it with a fixed amount voucher worth $11.85 a month that could be applied to reduce a wireless or landline provider bill. AT&T says the proposal will make it easier for consumers to adopt wireless LifeLine phone service and cut burdensome oversight and rate regulations.

Consumer groups argue the legislation delivers all of its benefits to phone companies like AT&T while eliminating consumer protection regulations. The California Public Utilities Commission (CPUC) also complained the bill could end guaranteed quality landline service, potentially permitting AT&T and other companies to stop providing wired phone service and force customers to wireless services instead.

The little-known and less understood bill moved quickly through the Democratic-controlled legislature over the summer and on July 9, AB 1407 passed a key Senate committee in a 6-1 vote, well on the way to passage in the state Senate. Consumer groups and low-income advocates learned of the bill and launched a broad-based opposition campaign including the Coalition for Economic Survival, AARP, the California Labor Federation and The Utility Reform Network. The Howard Jarvis Taxpayers Association, a tea party group that vigilantly monitors the state legislature for attempts to circumvent Proposition 13 limits on tax hikes, also opposed the measure because it adds a 3.3% state-mandated surcharge on all intrastate telephone services, also applicable to Voice over IP providers.

AT&T found a good friend in Bradford, who has advocated for the company’s interests since AT&T became his biggest campaign contributor by far, donating more than $40,000 to his re-election coffers.

Bradford

Larry Gross of the Los Angeles-based Coalition for Economic Survival described Bradford as a “front person for AT&T.”

Bradford and AT&T’s lobbyists, dominating earlier discussions on AB 1407, were overrun at an Aug. 19 hearing when a group of tenants from San Francisco’s Central City SRO Collaborative (CCSRO) appeared and opposed the bill and its impact on the poor.

BeyondChron noted Bradford was so confident about the momentum his AT&T-ghost-written bill had received, he waived his testimony. Minutes later, he discovered the growing number of speakers lined up to oppose the bill. Bradford then attempted to rebut the surprising opposition, but it was too late. The tenants persuaded the majority on the Senate Appropriations Committee to suspend further consideration of the bill for now.

The proposed legislation had support from a number of elected officials, almost all recipients of AT&T campaign contributions.

Nearly all the non-profit groups supporting AB 1407 also received direct financial support from AT&T and/or Verizon. Among the first 20 supporters investigated by Stop the Cap!, all but a few turned out to have direct financial ties to either AT&T, Verizon, or both:

Verizon is linked from COFEM’s home page.

• Asian Pacific Islander American Public Affairs Association: AT&T is a “major sponsor.”
• Bakersfield Homeless Center: AT&T is a funding partner.
• Brotherhood Crusade: AT&T is a “silver partner.” Verizon, which also supports the measure, is a “platinum” donor.
• California Black Chamber of Commerce: Verizon is a “corporate member.”
• California Hispanic Chamber of Commerce: AT&T is a corporate member.
• California Partnership to End Domestic Violence: Verizon cut them a check for $130,000 to become a partner.
• Center for Fathers and Families: AT&T is a sponsor.
• COFEM: Verizon is so important to their mission, the company’s logo is on the group’s home page.
• Community Youth Center of San Francisco: AT&T is a “diamond sponsor.”
• Congress of California Seniors: Verizon is one of their “key sponsors.”
• Eskaton Foundation: AT&T is a “level 3” donor.
• Florence Douglas Senior Center: AT&T is a “primary sponsor.”

We stopped looking after researching the first 20 groups, but it is highly likely the others will also have similar ties.

Although Assemblyman Bradford repeatedly has claimed there is no intent to eliminate or diminish universal service “Carrier of Last Resort (COLR)” obligations that require basic phone service be provided to any California resident requesting it, the CPUC found ambiguous language in the bill that muddies the author’s intent. One section of AB 1407 states that “any lifeline provider, including a local exchange carrier, may use any technology, or multiple technologies, within the provider’s service territory.” This could be interpreted to allow a provider to meet its basic service obligation with wireless technology that may not meet the CPUC’s definition of basic landline service.

The legislation repeatedly states LifeLine providers should only be obligated to offer the minimum service elements as required by the FCC. Those provisions ignore the CPUC’s own rules and AT&T could theoretically prevent a wireless LifeLine customer from switching back to landline service because the wireless alternative is considered good enough.

Other provisions in the bill are tailored primarily for the benefit of wireless providers, including AT&T, and introduce new fees and charges for services that many customers would assume are included in the price of basic service:

• Flat rate local calling is eliminated;
• Providers can charge customers extra or deduct wireless minutes for 911 calls, calls to toll-free 800-type numbers, and incoming calls of all kinds;
• Providers can require a deposit for LifeLine customers and all former exemptions from taxes, surcharges and fees are canceled;
• The requirement to provide a toll-free method to reach customer service is eliminated;
• Providers can charge extra or deduct minutes for use of the California 711 Relay Service;
• Provisions requiring providers to offer surcharge-free outgoing calling service, touch-tone dialing, directory assistance (for LifeLine customers), access to an operator, a listing in the telephone directory, and a copy of the White Pages are eliminated.

The bill is probably shelved for the rest of this year but will likely return for consideration in 2014.

Phillip “Every other 2008 spectrum bidder except U.S. Cellular has since sold its winnings to AT&T or Verizon Wireless or has never provided competitive service” Dampier

AT&T is unhappy with a proposal from a wireless competitor it originally tried to buy in 2011 that would offer smaller competitors a more realistic chance of winning favored 600MHz spectrum vacated by UHF television stations at a forthcoming FCC auction.

T-Mobile’s “Dynamic Market Rule” proposal would establish a cap on the amount of spectrum market leaders AT&T and Verizon Wireless, flush with financial resources for the auction, could win.

“Imposing modest constraints on excessive low-band spectrum aggregation will promote competition, increase consumer choice, encourage innovation, and accelerate broadband deployment,” T-Mobile offered in its proposal to the FCC.

Without some limits, wireless competitors Sprint and T-Mobile, among other smaller carriers, could find themselves outbid for the prime spectrum, well-suited for penetrating buildings and requiring a smaller network of cell towers to deliver blanket coverage.

In a public policy blog post today, AT&T argues T-Mobile is behind the times and its proposal is unfair and unworkable:

First, the purported advantage of low band spectrum – that it allows more coverage and better building penetration with fewer cell sites – has been overtaken by marketplace realities under which capacity not coverage drives network deployment.  Carriers deploying low band and high band spectrum alike must squeeze as many cell sites as they can into their networks to meet exploding demand for data services.  Second, to the extent this is less the case in rural areas, those areas are not spectrum-constrained and the lower cost of building out low band spectrum in such areas is offset by the higher cost of the spectrum itself.

[…] But this is not the only point that should concern policymakers.  Such caps will also suppress auction revenues, potentially to the point of auction failure, ultimately reducing the amount of spectrum freed up for mobile broadband use and undermining the auction’s ability to meet critical statutory goals.

[…] Even if T-Mobile’s proposal did not result in complete auction failure, its proposed caps would suppress auction revenues, reducing the amount of spectrum freed up for mobile broadband use as well as funds generated for FirstNet and to pay down the national debt.  That is because strict limits on participation by otherwise qualified bidders will make the auction less competitive and will yield less revenue.  Indeed, if T-Mobile’s proposed spectrum cap was strictly enforced, Verizon estimates it would be barred from bidding in 7 of the top 10 markets.  AT&T would face similar bidding limitations, as noted in our filing.

AT&T suggests the last major auction in 2008 attracted 214 qualified bidders and 101 bidders won licenses, including carriers of all sizes and new entrants.

But an analysis by Stop the Cap! shows the breakaway winners of the 2008 auction were none other than AT&T and Verizon Wireless, which paid a combined $16.3 billion of the total $19.592 billion raised. For that money, they acquired:

• Block A – Verizon Wireless and U.S. Cellular both bought 25 licenses each. In this block, Verizon targeted urban areas, while U.S. Cellular bought licenses primarily in the northern part of the U.S., where it provides regional cellular service. Cavalier Telephone and CenturyTel also bought 23 and 21 licenses, respectively. Cavalier Telephone is now wholly owned by Windstream, which does not provide cell service and was selling its 700MHz spectrum to none other than AT&T. So is CenturyLink (formerly CenturyTel).

• Block B – AT&T Mobility was the biggest buyer in the B block, with 227 licenses totaling $6.6 billion. U.S. Cellular and Verizon bought 127 and 77 licenses, respectively. AT&T Mobility and Verizon Wireless bought licenses around the country, while U.S. Cellular continued with its strategy to buy licenses in its home network northern regions.

• Block C – Of the 10 licenses in the C Block, Verizon Wireless bought the 7 that cover the contiguous 48 states (and Hawaii). Those seven licenses cost Verizon roughly $4.7 billion. Of the other three, Triad Communications — a wireless spectrum speculator — bought the two covering Alaska, Puerto Rico and the U.S. Virgin Islands through its Triad 700, LLC investor partnership, while Small Ventures USA, L.P. bought the one covering the Gulf of Mexico. Triad 700, LLC sold its spectrum last fall to AT&T while Small Ventures USA sold theirs to Verizon Wireless.

• Block E – EchoStar spent $711 million to buy 168 of the 176 available Block E licenses. This block, made up of unpaired spectrum, will likely be used to stream television shows. Qualcomm also bought 5 licenses. Neither company has used its spectrum to offer any services five years after the auction ended.

So much for improving the competitive landscape of wireless. Other than U.S. Cellular, which is rumored to be on AT&T and Verizon Wireless’ acquisitions wish list, every auction winner has either sold its spectrum to the wireless giants or has done nothing with it.

If “highest bidder wins”-rules apply at the forthcoming auction, expect more of the same.

AT&T and Verizon Wireless have significant financial resources to outbid Sprint, T-Mobile and smaller carriers and will likely win the bulk of the available spectrum whether they actually need it or not. Smaller victories may be won by smaller competitors, but only in rural areas and sections of the country disfavored by the largest two.

Time Warner Cable admitted this morning extracting more revenue from existing customers was more important than attracting new ones, and long time subscribers responded by canceling service in above average numbers.

In a conference call largely hosted by incoming CEO Robert Marcus, a number of Wall Street analysts listened to Marcus’ vision for Time Warner under his forthcoming leadership. Marcus offered competing, potentially incompatible visions in his defense of a lackluster quarter: charge existing customers higher prices for service to boost average revenue per subscriber (ARPU) while also improving the customer-company relationship.

For most of 2013, Time Warner has been aggressively moving away from heavily discounted promotional offers to attract customers. Both outgoing CEO Glenn Britt and Marcus have repeatedly stressed heavy discounting of service during the past two years is now over, and the company is looking forward to resetting prices higher when the promotions end later this year.

It is part of the company’s plan to “drive better performance in the residential business.” An unfortunate side effect is that the company continues to lose video and phone customers and its broadband service growth has been so slow, one analyst called it “anemic.” The company’s quarterly results show Time Warner added only 8,000 new broadband customers in the last three months. The company still earned $1.42 billion from broadband sales alone over the last three months, mostly because of rising broadband bills.

Courtesy: Jacobson

Offsetting that growth, TWC lost 191,000 residential video subscribers, leaving it with about 11.9 million video customers. At least 56,000 customers also pulled the plug on Time Warner Cable telephone service.

“As we discussed before, this [new pricing] approach represents a conscious decision to pursue subscribers with higher ARPU, higher profit and lower churn even if that means fewer connects,” said Marcus as he defended the results. “So it’s not a surprise that as in the first quarter of 2013, subscriber net adds were down in the second quarter on a year-over-year basis.”

As customers deal with increasing prices for cable television and broadband service and the irritation of modem rental fees, many are cutting back on their packages to keep their bill stable.

Marcus admitted customer sign ups of triple play — phone, broadband, and cable TV service — were way down in the second quarter and a lot fewer single and double-play customers were convinced to upgrade. The company’s promotional offers have come with a higher price and slower broadband service, often only 3Mbps.

In a number of markets, especially in the midwest, customers are shopping around for other providers. They are finding AT&T U-verse to be a formidable competitor.

“Throughout the quarter, U-verse was pretty aggressive with a beacon price of $79 for their triple play and $49 for their double play,” said Marcus. “I would characterize those as aggressive promotional prices, and they had an impact. I would say that the impact was more pronounced as the quarter wore on. We’ve now responded to that in the market, and I expect that our relative performance should improve there.”

But for much of the rest of the country where competition is less robust, Time Warner intends to continue to hold the line on pricing and resist discounting even if it means subscribers threaten to cancel.

Time Warner Cable has gotten itself ready for an onslaught of unhappy customers, assigning nearly 1,000 employees to staff four national customer retention centers dedicated to trying to persuade customers not to leave. But these specially trained representatives have a dual mission — keep customers with Time Warner Cable, but don’t give away the store doing so.

Stock buybacks and shareholder dividends were a major priority for Time Warner Cable’s cash on hand.

“Not only are our reps saving more customers, they are also preserving more ARPU among the customers they save,” said Marcus. “As promotional roll-offs peak in the second half of 2013, we expect that our new retention capabilities will drive better revenue growth.”

In the broadband market, Time Warner changed little in the second quarter except to raise prices on service and equipment. Marcus could only point to the addition of 3,500 new Wi-Fi hotspots, mostly in New York City, as its signature achievement over the past three months.

On the residential side, broadband revenues were up 12.5%, but most of that growth came from a combination of the modem lease fee, an increase in the number of 30/5 and 50/5Mbps customers and a successful Turbo promotion.

Results for video and voice were considerably worse. Revenues were down about 4%.

But the company managed to report its highest ARPU ever, with customers now paying an average of more than $105 a month for Time Warner service. Most of that increase came from rising broadband prices.

Time Warner Cable has also been preoccupied with spending excess cash on hand to buy back its own stock, which creates shareholder value. Time Warner expects to spend at least $2.5 billion on stock buybacks this year. Shareholders also received $829 million in dividends (113% of Time Warner’s free cash flow).

“We repurchased 6.6 million shares for $638 million, and through July, we have repurchased approximately 83 million shares at an average cost of around $78.50 per share since we began the program in November of 2010,” reported chief financial officer Arthur T. Minson.

Time Warner Cable’s Board of Directors recently approved increasing spending up to $4 billion on stock buybacks.

[flv width=”640″ height=”380″]http://www.phillipdampier.com/video/WRGB Albany TWC Modem Fee 7-31-13.flv[/flv]

WRGB in Albany reports Time Warner Cable customers are angry about another price hike on the company’s modem lease fee effective Aug. 18. WRGB recommends customers buy their own modems to avoid the fee. Time Warner Cable’s Glenn Britt admitted earlier the fee is really just a hidden rate increase. (3 minutes)

The general counsel of the Federal Communications Commission predicts your landline will stop working within the next ten years, abandoned by companies like AT&T and Verizon in favor of wireless service in rural America or fiber (if you are lucky) in the cities.

Phillip “Did you know your landline will be dead within ten years?” Dampier

Sean Lev, the FCC’s general counsel, said in a blog post that “we should do everything we can to speed the way while protecting consumers, competition, and public safety.”

But the FCC seems to be abdicating its responsibility to do exactly that by singing the same song some of America’s largest phone companies have hummed since they decided to get out of the copper landline business for fun and profit.

Traditional boring telephone service is regulated as a utility — a guaranteed-to-be-available service for any American who wants it. Hundreds of millions of Americans do, especially in rural areas where America’s cell phone love affair is tempered by dreadful reception, especially in mountainous areas. Oh, and the nearest cable company is ten miles away.

AT&T and Verizon — two of America’s direct descendants of the Bell System, just don’t want to pay to keep up a network most of urban America doesn’t seem to want or need anymore. In addition to a dwindling customer base, providing a regulated legacy service means having to answer to unions and government-types who make sure employees are fairly compensated and customers are given reasonable service at a fair price. The alternatives on offer from AT&T and Verizon carry no such regulatory (or union) baggage. Prices can change at will and customers have no guarantee they will receive service or have someone to complain to if that service is sub-standard.

While in the past regulators have taken the lead to make sure telephone companies meet their obligations, the new FCC seems to spend most of its time observing the business agendas of the companies themselves.

Lev implied to the Associated Press the FCC is not exactly leading the parade on the future of landlines. He seems more comfortable trying to analyze the intentions of AT&T and Verizon’s executives:

Most phone companies aren’t set to retire their landline equipment immediately. The equipment has been bought and paid for, and there’s no real incentive to shut down a working network. He thinks phone companies will continue to use landlines for five to 10 years, suggesting that regulators have some time to figure out how to tackle the issue.

Lev

AT&T is more direct: It wants to switch off all of its landline service, everywhere, by 2020. Customers will be given a choice of wireless or U-verse in urban areas and only wireless in rural ones. Where U-verse doesn’t serve, AT&T DSL customers will be in the same boat as Verizon customers on Fire Island: pick an expensive wireless data plan, satellite fraudband, or go without.

Verizon prefers a “gradual phase-out” according to Tom Maguire, Verizon’s senior vice president of operations support.

Verizon claims it has no plans to shut down working service for customers, but it does not want to spend millions to continue to support infrastructure fewer customers actually use. That means watching the gradual deterioration of Verizon’s copper-based facilities, kept in service until they inevitably fail, at which point Verizon will offer to “restore service” with its Voice Link wireless product instead.

For voice calls, that may suffice for some, especially those comfortable relying on cell technology already. But at a time when the United States is already struggling with a rural broadband problem, abandoning millions of rural DSL customers only makes rural broadband an even bigger challenge. The wireless alternative is too variable in reception quality, too expensive, and too usage capped.

Schneiderman

The New York Attorney General has some strong words for Verizon Communications:

“Verizon [must] divest those portions of its New York franchise where it is no longer willing to continue providing wireline service and replace Verizon with another carrier that will provide wireline service.”

Attorney General Eric Schneiderman is more than a little concerned with Verizon’s plans to abandon offering landline service on the western half of Fire Island and potentially other areas further upstate to satisfy the company’s wireless business strategy.

In a hostile 13-page filing directed to the New York Public Service Commission, Schneiderman’s office accused Verizon of abdicating its responsibility to provide universal access to high quality landline service in favor of moving customers to inferior Verizon Wireless service.

“Verizon is asking the Commission to depart from a century of telephone service regulation, which had as one of its fundamental principles, universal wireline telephone service for all customers,” Schneiderman wrote.

In return for a guaranteed monopoly, profits, and a secure franchise area across portions of New York, telephone companies like Verizon historically agreed to offer phone service to any customer who wanted it. State and federal universal service rules provided subsidies to phone companies to reach their most rural or expensive-to-reach customers.

The goal, Schneiderman argued, was for every resident in New York to have home phone service, enabling them to communicate with their doctors, families, schools, friends and businesses, as well as to send for police, fire and ambulance assistance in an emergency.

Verizon’s intended replacement, Voice Link, represents a downgrade in service even worse than hundred-year old copper wire “plain old telephone service,” according to the attorney general. Schneiderman called Verizon’s Voice Link inferior and its thick 10-page terms, conditions, and disclaimers “legalistic,” leaving consumers without services they previously received or imposing significant new burdens and obligations.

The issues cited by Schneiderman:

Voice Link Service “is not compatible with fax machines, DVR services, credit card machines, medical alert or other monitoring services or some High Speed or DSL Internet services.” Customers in western Fire Island and other rural parts of New York have no FiOS or cable modem Internet providers to switch to, so those who rely on these services have no alternatives if switched to Voice Link.

Because Voice Link “may not be compatible with certain monitored home security systems,” customers’ homes and businesses will be at greater risk from flooding by burst plumbing, fire or burglars. In the case of plumbing emergencies, visit Carlson Plumbing Company website for reliable solutions and prompt support.

Although wireline customers whose service is suspended for nonpayment can still reach a 911 operator in emergencies, suspension of Voice Link “will prevent ALL Service, including any 911 dialing and associated emergency response services. Customers may also lose the ability to receive or place calls, even to 911, if they fail to “promptly notify Verizon” of a change in their address, email, or credit card expiration date.

Customers must “defend, indemnify and hold harmless Verizon from and against all claims … for infringement of any intellectual property rights arising from use of Voice Link or its software.”

Voice Link Service “does not allow the Customer to make 500, 700, 900, 950, 976, 0, 00, 01, 0+, calling card or dial-around calls (e.g., 10-10-XXXX),” so customers will be unable to use such pay-per-call information services. Voice Link Service “does not allow the Customer to accept collect calls or third number billed calls. The Company will not bill any charges on behalf of other carriers. [Customers] must have an International Calling Plan in order to make international calls. Wireline customers are able to subscribe to toll and international calling plans provided by other carriers, and have these and other third-party service charges included on their Verizon bills.

Verizon Voice Link

Voice Link Service “is subject to the availability of adequate wireless coverage throughout your home, and is not available in all locations.”

Unlike wireline service, which supplies its own power over the copper wiring, Voice Link uses customers’ house current to operate. Verizon has not disclosed how much customers’ electric utility bills will increase to power the Voice Link device. Also, if electric power is interrupted, Customers may have to “reset or reconfigure equipment prior to using” Voice Link. This may be difficult for some physically limited or technologically unsophisticated customers to perform.

During power interruptions, the wireless Devices used in Voice Link are battery operated. Although the Devices include a rechargeable battery back-up that provides only 36 hours of standby power and up to 2.5 hours of talk time in the event of a commercial power outage, “[a ]fter the battery is exhausted, the Service (including 911 dialing) will not function until power is restored.”

After the expiration of a one year replacement warranty for the battery back-up included with customers’ wireless Device, customers “are responsible for replacing the back-up battery as needed,” but Verizon has not disclosed the cost of such replacement batteries.

Wireline customers purchase their own telephones from competitive manufacturers, but the Voice Link device is only supplied by Verizon, which continues to own it. Thus, customers will have to pay Verizon to repair the device if “such repair or maintenance is made necessary due to misuse, abuse or intentional damage to the Device.” Verizon has not disclosed what [the] repair or replacement might cost customers in such event.

When wireline customers end their service with Verizon, they have no equipment to return to the company. However, Voice Link customers who cancel their service “are responsible for returning their Wireless Device to [Verizon] in an undamaged condition. Failure to return the Device within 30 days … may result in [Verizon] charging [customers] an unreturned equipment fee.” Verizon has not disclosed the amount of this fee.

Schneiderman accused Verizon of dragging its feet on repairs on Fire Island and forcing Voice Link on customers as the only available alternative.

“It is clear that Verizon is leveraging the storm damage from Sandy as part of its long-term strategy to abandon its copper networks by substituting Voice Link for [landline] service on western Fire Island and forcing customers to accept wireless Voice Link wherever it does not build FiOS,” Schneiderman argued. “Verizon’s failure to make prompt repairs to its Fire Island facilities during the seven months following Sandy left the Commission little choice but to provide temporary approval of Voice Link so that customers would have some form of telephone service during the 2013 summer beach season. However, this ‘temporary approval’ should not be expanded to allow Verizon to avoid its obligations permanently, on Fire Island or anywhere else in New York.”

Schneiderman wants the PSC to force the issue with Verizon, and not on the preferred terms of its senior executives.

“Rather than allow Verizon to provide inadequate Voice Link service to Fire Island and other New York customers, the Commission should compel the company to either maintain its wireline network throughout its franchise territory or sell
those parts where it is unwilling to do so to another provider that will provide adequate service,” Schneiderman wrote.