The United States may be a leader in many things, but broadband isn’t one of them. The country has now fallen two more positions — to 19th place, behind South Korea, Sweden, Denmark, the United Kingdom, and even Iceland, since the Berkman Center for Internet and Society released its last rankings in 2009.

In 2004, President George W. Bush complained about the U.S. falling to 10th place, which he declared was “ten spots too low.”

Now eastern Europe and former Soviet Republics in the Baltics threaten to overtake the United States, and countries in southeast Asia already have.  Innovation in the United Kingdom, Australia and New Zealand means deploying fiber to the home service to the vast majority of the population.  Innovation in North America means conjuring up new pricing schemes to raise prices on broadband service and engage in competition-busting mergers and acquisitions.

But a USA Today editorial this week also places much of the blame on corporate influence inside Washington, which has promulgated legislative policies that favor telecommunications companies and throw customers under the bus.

“The simple answer is that other countries have policies that promote competition and innovation,” the editors write. “In contrast, policies here have allowed a few dominant players that control the least interesting parts of the broadband landscape (the cables and the wireless spectrum) to dominate.”

Indeed, a series of telecommunications laws enacted by Congress, combined with short-sighted policies at the Federal Communications Commission, have allowed a handful of super-sized players to own and control broadband service in America, resulting in providers establishing non-competing fiefdoms that avoid head-on competition.

The worst policy of all allowed broadband providers to keep competitors from reaching customers over existing broadband networks.  During the days of dial-up, you could purchase Internet access from the phone company, a large provider like MSN or AOL, or thousands of smaller regional and local service providers.  Simply dial a local access number and you were connected to the provider of your choice.  Now, U.S. law gives broadband network operators the right to restrict these independents from selling service over their networks.  Comcast need not sell anything other than Comcast Internet.  Frontier Communications can make a killing selling its own DSL service, while protecting that revenue from other Internet Service Providers who might sell the service over Frontier’s network for half the price.  Time Warner Cable voluntarily allows Earthlink and a handful of other companies to sell cable broadband service over its infrastructure, but at prices equal to or higher than what Time Warner charges itself.

Broadband providers argue that allowing competitors to sell service on their network would discourage future investment and rob shareholders a return on investments already made.  Today, major cable operators and phone companies are falling all over themselves denying they are in anything but the broadband business.  It has become an enormously lucrative enterprise, more profitable than television or telephone service.

USA Today compares the broadband landscape back home with that in South Korea — perennially the world’s fastest, and considerably less expensive than what North Americans pay for service:

South Korea has made broadband a national priority, mandating deployment and in some cases giving private companies incentives to build out. It has also prevented major players from monopolizing their businesses, encouraging competition and innovation. In South Korea, consumers can get broadband service from a cable or telecom company. But they may also choose among myriad independent providers that are given access to the physical infrastructure. This competition keeps prices down and the quality of service high.

[…] But over time, cable and telecom companies worked the courts and Congress to make sure that this competitive world would never come to be [in the United States]. […] Wireless is a bit better. But the market has remained a near duopoly, with none of the smaller players emerging as a strong competitor to AT&T and Verizon.

The same open network concept has fought its way forward in Canada (where Bell has worked furiously to sabotage the business plans of independent providers) and in the United Kingdom, Australia and New Zealand where all three governments have decided the best solution would be to scrap the ancient landline network and start fresh with an open-to-all-comers fiber to the home service.

Back home in the States it is business as usual with increasing broadband prices and the looming prospect of usage-limiting schemes designed to cut capital costs, monetize broadband usage, and stop cord-cutting.

The opposing point of view comes courtesy of dollar-a-holler, corporate-backed think tank The Heartland Institute, who is stuck quoting notorious industry-funded studies and think tanks like the Discovery Institute and the Technology Policy Institute:

The idea that European and Asian countries are lapping America in the race for broadband speed and penetration is a fallacy created with statistics comparing “persons” instead of “households.” Once you make that correction, the USA is firmly planted among the top of industrialized nations, as economist Scott Wallsten pointed out when he was a staffer at the Federal Communications Commission in 2009.

And as tech researcher Bret Swanson of Entropy Economics points out, if you measure Internet usage by gigabytes used per month — a better measure of the speed and utility of networks — the USA has nearly lapped Western Europe once and Asia twice.

If you measure how many mouse clicks customers in New York make on a Thursday afternoon, we could be number one as well!  Gigabytes used per month does not measure the speed or price of service on broadband networks, considerations that actually do impact broadband rankings.

Mr. Wallsten is a familiar favorite go-to-guy for The Heartland Institute.  He’s also the choice of Time Warner Cable, who paid him $20,000 for a 2010 essay: “The Future of Digital Communications Research and Policy.”

There is big money to be made writing corporate-funded research reports.  Bret Swanson knows that very well, having been involved with the Discovery Institute, a “research group” that delivers paid, “credentialed” reports to telecommunications company clients who waive them before Congress to support their positions.  Swanson is also a “Visiting Fellow” at Arts+Labs/Digital Society, which counted as its “partners” AT&T and Verizon.

The gentleman from Heartland also quotes from the misnamed “Progressive Policy Institute,” which counts among its funding partners, AT&T.

It would have been probably easier (but ineffectively transparent) to simply quote from AT&T and Comcast directly.

The Heartland Institute, unsurprisingly, believes letting existing broadband providers deliver service exactly the way they want is the best option:

The digital economy — one of the only vibrant economic sectors left — doesn’t need more government “investment” or regulation. It needs only for government to butt out and let the market work the magic that continues to bring us the marvels of the modern age.

That magic will cost you $50 a month and rising.  If some providers have their way, while the rest of the world abandons usage caps, American providers can’t wait to slap them on, reducing the value of your service even further.

History is best ignored when a Wall Street Journal columnist frames an argument in favor of strengthening the hegemony of Ma Bell, and darn ‘ole past precedent gets in the way of the writer’s “facts.”

Gordon Crovitz is a media and information industry adviser and executive, including former publisher of The Wall Street Journal, executive vice president of Dow Jones and president of its Consumer Media Group.  But today he’s unofficially, unabashedly AT&T.

In a column published this week, Crovitz hosts a whine and cheese festival on behalf of poor and abused AT&T, whose multi-billion dollar takeover of T-Mobile is in tatters. Crovitz places the blame squarely on the government for ruining everything:

How soon we forget the risks of overregulation: Last week, the Federal Communications Commission flexed the same muscle it once used to quash market forces in the phone industry to quash market forces in the wireless industry.

Today’s AT&T, a spinoff from the original, needs more spectrum to catch up with market leader Verizon, also a Ma Bell descendant, to support iPhones, Androids and other devices that feature video and sophisticated apps. It wants to buy T-Mobile, a division of a German company, which doesn’t have the resources to compete in the United States on its own. But the FCC decided to apply antitrust theory from the industrial era and claims to know better than wireless companies how they should operate their businesses.

AT&T’s proposed acquisition is best understood as a private-sector solution to a government-created problem. The FCC has not been able to get Congress to approve auctions to reallocate spectrum to wireless from less valuable uses. AT&T wants T-Mobile’s bandwidth so it can extend the latest fourth-generation network to 97% of the country from 80% and improve its spotty service in congested areas.

Under laws dating to the 1920s, the FCC gets to decide if a merger is in the “public interest,” a vague standard for top-down decision making. Government is the last institution in this era of fast technological innovation to act as if it has the information and power to dictate how change happens.

Crovitz apparently prefers AT&T and its phone pal Verizon Wireless dictate how “change happens,” because the two companies control the vast majority of wireless telecommunications in the United States.  Both also charge near-identical prices for near-identical levels of service.  AT&T & VZW are completely comfortable with that status quo, especially if disruptive competitor T-Mobile is dealt with in the usual industry manner (merger/buyout).

There is nothing vague about the FCC report that condemns the merger of AT&T and T-Mobile for the anti-competitive monstrosity it represents.  In hundreds of pages Crovitz evidently never read, a careful and credible argument against the deal was laid out for all to examine.  That evidence is far more persuasive than AT&T’s heavily-redacted filings the public was not authorized to see (for ‘competitive reasons’), and a multi-million-dollar-a-holler public relations distortion strategy based on hollow promises.

Playing Catch-Up With Verizon Wireless?  Hardly.

AT&T hardly needs to “catch up” with Verizon Wireless.  Both companies own wireless spectrum they have warehoused for “future use.”  As a backdrop to the merger, FCC Chairman Julius Genachowski has already indicated the agency is hard at work carefully re-allocating spectrum to make more room for wireless services.  The “bandwidth crisis” AT&T talks about is a convenient argument for a merger, until you realize T-Mobile’s mostly-urban wireless network won’t help AT&T achieve its goal of rural wireless expansion.  T-Mobile has never provided service in rural America and never will.

Crovitz attempts to leverage Verizon Wireless’ recent deal with America’s largest cable companies as an argument for the AT&T and T-Mobile merger, suggesting that deal was a game changer.  What goes unsaid is the fact AT&T could have pursued that deal for themselves.  Did they?  No.  Despite AT&T’s public relations spin, the proposed merger with T-Mobile is much more than a spectrum acquisition. As the FCC and the Justice Department have argued, this merger is about ridding AT&T of a competitor willing to offer more services at lower prices.  That forces AT&T to respond in kind to compete, and consumers have benefited greatly from that competition. Verizon Wireless is hardly competition at all considering both companies price services nearly identically.  Beyond that is Sprint, already saddled with the financial albatross Clearwire and questions about its long term viability in a duopolistic wireless market.

Crovitz is wrong on his other “facts” as well:

Deutsche Telekom is hardly short on cash.  The company has plenty of resources and could bolster T-Mobile USA to compete if it saw fit.  It doesn’t, preferring to focus on its more lucrative European markets.  Instead of selling the operation on the open market to other players, which could include foreign providers interested in competing in the high-priced American market, it elected to be courted by AT&T.

Overconfident AT&T

The merger illustrates AT&T’s unparalleled level of overconfidence it could deal with regulators and consumer groups who would certainly object to the deal.  The company has since spent millions it could have used to improve its network on campaign-contribution-fueled support building on Capitol Hill, a shameless dollar-a-holler astroturf campaign that pays off non-profit groups to sing the deal’s praises, and an expensive ad campaign to sucker Americans into thinking reduced competition will somehow deliver lower prices and better service.

Even former Republican FCC Chairman Kevin Martin would have likely paused over such an obvious monopoly-building operation.  The Obama Administration’s FCC chairman — Julius Genachowski —  while often too timid for our tastes, at least knows when it is time to join the chorus of opposition.

The FCC doesn’t pretend to tell AT&T how to run its business.  It does, however, serve the public interest by providing checks and balances to unfettered corporate power.  While the Wall Street Journal‘s world view of capitalism would have been favored by the most egregious robber barons, history has taught us that when big corporations get a stranglehold on vital industries, the entire economy can suffer.

Crovitz would have us ignore the massive corporate abuses of 100 years ago that eventually provoked Congress into trust-busting legislative reform, breaking up the monopolies and oligopolies that presided over the railways, early telecommunications networks, and industrial raw materials like oil and steel.  Restrained competition brought monopoly prices and blockades against would-be competitors.  What was true then is still true now, only the technology has changed.

In 1911, the economy was powered in part by railroads, which transported goods and raw materials.  Telecommunications networks like the telegraph and early telephone helped conduct business and coordinated the movement of goods.  In 2011’s growing digital economy, telecommunications increasingly represents the railroads, telegraph, and telephone all combined-into-one.  Some of America’s richest tech companies depend on broadband and communications to fuel demand for their products.  Allowing AT&T to control the largest part of that pipeline could be disastrous to everyone but that company and their shareholders.

History Repeats Itself

In 1914, the Clayton Act was passed to put a stop to increasing anti-competitive activity and abusive market tactics.  Amazingly, the problems being solved a century ago are back with a vengeance today, all thanks to the endless drumbeat for deregulation, which has fueled mergers, acquisitions, and increased concentration of market power.  That Act cracked down on:

• Price discrimination: selling products and services at different prices to similarly situated buyers;
• Tying and exclusive-dealing contracts: sales on condition that the buyer sign exclusive contracts that force an end to dealing with the seller’s competitors;
• Corporate mergers: acquisitions of competing companies to reduce competition; and
• Interlocking directorates: Boards of directors of competing companies, packed with common members.

Today’s laissez-faire attitude towards government checks and balances helped provoke the Great Recession, corporate scandals of epic proportions, and a revolving door in Washington where regulators end up working for the companies they used to regulate. Just ask former FCC chairman Michael Powell. Three years ago he worked for us.  Today he works for Big Cable’s largest lobbying group — the National Cable & Telecommunications Association.  FCC Commissioner Meredith Attwell Baker went to work for Comcast shortly after green-lighting their super-merger with NBC-Universal.

It’s All About the Money. Always.

The only thing stopping AT&T from providing wireless nirvana to rural America is its own unwillingness to spend money on behalf of customers to upgrade its network.  The company claims it didn’t see the value of spending nearly $4 billion needed to deliver expansive 4G service, but suddenly had no trouble at all finding nearly ten times that amount to purchase T-Mobile USA.

Did AT&T suddenly win PowerBall?

AT&T saw crushing a competitor Job #1.  Central Idaho’s 4G service could wait.

Crovitz later notes AT&T “was unusually blunt” criticizing the FCC report, a classic case of protesting too much.  The company got caught with its rhetorical pants down, with a series of evolving arguments for a deal that never made the first bit of sense once you began to dig deeper into their case.

In the end, Mr. Crovitz wants you to blame Big Government for AT&T’s pervasive dropped-call problem that its competitors don’t seem to have.

It’s not the company that owns and runs the network, it is that Obama and his nasty henchmen at the FCC who are responsible!  Who knew?

[flv width=”360″ height=”290″]http://www.phillipdampier.com/video/Bloomberg FCC Says ATT Failed to Show Public Benefit of Merger 11-30-11.mp4[/flv]

Bloomberg News reports the FCC found AT&T failed to demonstrate any real public benefit of its merger with T-Mobile USA.  (2 minutes)

Verizon Communications and AT&T together represent the largest providers of legacy copper wire landline phone service in the United States.  Over the past ten years, the traditional landline business has taken a beating as consumers increasingly turn their backs on the technology Alexander Graham Bell helped invent more than 100 years ago.  No utility service faces more customer defections than the phone company, and providers are increasingly rewriting their business models or lobbying to abandon unprofitable service areas altogether.

For some customers, investments in network improvements have brought advanced fiber optics straight to the home.  But in smaller communities, customers are making due with a deteriorating network phone companies no longer want to maintain.

The Glorious Growth Years

Back in the late 1980s, before most of us realized there was an Internet (or that you might be able to access it from home), the concept of connecting computers together to share information meant buying a 300-1200bps modem and using your home phone line to dial up hobbyist computer bulletin boards, CompuServe, PeopleLink, Delphi, GEnie, and QuantumLink.

Landline service was never perfect, but it worked reliably enough to make and receive phone calls and connect to low speed data networks.  As the 1990s arrived, an explosion in data and wireless services would bring both growth and unprecedented challenges for traditional telephone companies. Businesses demanded access to additional phone lines to power dedicated data lines and fax machines.  Residential customers wanted extra phone lines as well, mostly to keep data traffic off the primary house line. It was the era of frenzied area code splits, cell phones for all, and talk America could even run out of seven digit phone numbers to assign to all of the new lines.

As revenue and earnings exploded with the installation of new voice, data, and fax lines, Wall Street investors soon took notice.  Sleepy and safe phone company stocks were suddenly hot, and a deregulation-fueled consolidation frenzy soon resulted as phone companies merged and acquired one another.  Among the Bell System operating companies, familiar names like NYNEX, Bell Atlantic, BellSouth, Southwestern Bell, Pacific Telesis, Ameritech, and US West were gone, replaced by AT&T, Qwest, and Verizon.  Independent phone companies were not immune to the merger and acquisition game.  Today’s largest independent phone companies including Frontier Communications, CenturyLink, FairPoint, and Windstream have all grown mostly through buyouts of other providers.

The Bottom Drops Out

The rapid growth years of the traditional wired phone line came to an end around the same time as the dot.com crash and accompanying recession from 2000-2002.  While cell phone growth would continue, new competitors — especially cable-delivered “digital phone” service and other Voice Over IP providers like Vonage seriously cut into market share and revenue.  The need for additional phone lines to access the Internet subsided with the growth of DSL and cable broadband.  As household income stagnated, choices began to be made about where to cut back, and the traditional landline was a popular favorite.  Why pay for both a landline and a cell phone?  The cell phone stayed, the landline went.  Even dedicated fax machines are increasingly deemed unnecessary in an e-mail world.

The growing realization that the traditional copper wire telephone line was at risk of being the next “horse and buggy business” forced companies to consider a handful of options: ride out the landline declines and lower shareholder expectations, transform their existing networks to sustain new products like faster broadband and television service to give customers reasons to stay, or transition focus on business customers who bring more revenue.

AT&T and Verizon have adopted all three strategies, depending on where customers happen to live.

AT&T: If You are Still Waiting for DSL From Us, Forget It

In October, John J. Stephens, chief financial officer and executive vice-president at AT&T made it clear to investors the company’s interest in growing its legacy wired business had come to an end.  The company had lost landline customers for years, most switching to cell phone alternatives, sometimes sold by AT&T itself.  Spending enormous sums to upgrade AT&T’s copper landline network just didn’t make financial sense in every area.  Instead, AT&T split its operating territories in two: those suitable for upgrades to the company’s U-verse/IP platform, and those in smaller communities who will soon find themselves pushed to switch to AT&T wireless service instead.  That makes the prospects for customers still waiting for wired DSL service from AT&T pretty dim.

“We’ll continue to focus on transforming [existing] DSL lines into high speed [U-verse].” Stephens said. “In those areas where we don’t have U-verse, I think our plans have been fairly clear. We expect to have an LTE [wireless mobile broadband] rollout to 97% of the country. […] We believe that’s going to be able to provide a wireless solution at a high speed, good quality, good cost on a profitable basis for us. That’s the long-term solution to the non-U-verse areas.”

AT&T’s lobbyists have signaled this agenda for years, pressing state and federal lawmakers to get rid of “universal service” requirements that mandate reliable, basic landline telephone service to any customer in their service area who requests it.  AT&T wants the definition of “basic telephone service” expanded to allow the company the option of discontinuing its landline network and selling rural residents cell phone service instead.  The expense associated with maintaining AT&T’s degrading copper wire network is always cause for grumbling on Wall Street, most recently after this year’s repair costs from storms that impacted some of AT&T’s service areas.  Storm damages brought outages in the southern United States, flooded regions along the Mississippi, and rained-out areas of California.

Those problems were exacerbated when AT&T’s repairs don’t always correct the problems.  Repeated outages blamed on inadequate repairs and investment brought negative publicity for the phone company, as well as a number of requests to disconnect service as customers find other providers.

In places where AT&T will never deploy U-verse, AT&T has been content asking lawmakers to ease up on the phone company, urging that minimum service standards and oversight be abolished, along with the power of regulators to fine the company for repeated transgressions.  AT&T argues increased competition makes regulation unnecessary.

AT&T’s bean counters have calculated investment in U-verse only makes sense in urban-suburban areas.  In more distant suburbs and rural areas, the return on investment isn’t fast enough to justify spending money up-front on service improvements.  Maintaining the decades-old landline network doesn’t make much sense to AT&T either.  Instead, the company sees wireless service as the best prospect to serve its rural customers (and deliver the company higher profits from the more expensive service plans that come with the phones).

“What I see happening with LTE and data is just a huge growth opportunity,” said Ralph de la Vega, CEO and president of AT&T Mobility & Consumer Markets. “We mentioned today that our smartphones now make up 52% of our postpaid base. But I think the way we need to think about smartphones in the future is the smartphone is going to equal the phone in the future. It will be 100% in the next 2 or 3 years. These devices are so good and the costs are coming down so much that I think in the future, you could look at close to 100% penetration.”

Some customers may find AT&T penetrating their wallets, but for the phone company, better days may be ahead:

• Moving customers to the wireless platform exposes them to higher revenue, higher-priced wireless service plans;
• Basic cell phones, which come with lower-priced voice plans are being increasingly replaced with smartphones which come with required, extra-cost data plans;
• Getting rid of the rural landline network slashes AT&T’s upkeep costs and holds customers in place with two-year service contracts common with wireless phones.

Consumers happy with their existing landline service may be less than impressed with AT&T’s cellular network coverage, its dropped call-problem, and the company’s alternative for rural broadband – heavily usage-capped and expensive LTE network access.  AT&T sells wired DSL plans for as little as $14.95 a month with a 150GB usage limit.  AT&T’s wireless LTE network will cost considerably more and is accompanied with usage limits a fraction of that amount.

Verizon: A Tale of Two Networks

Big Red has two wired landline networks: screaming fast FiOS fiber to the home for some, slow speed DSL over a decrepit copper wire network for everyone else.

Verizon is less opaque than AT&T regarding which service areas it treats as valued assets and which aren’t worth the time of day.  The company began selling off its undesirable customers several years ago, starting with Hawaii.  Northern New England was next, followed by several former GTE territories Verizon acquired in 2000.

While Verizon enjoyed the proceeds of the tax-free transactions, most of the impacted customers did not.  Hawaiian Telcom floundered for a few years with bad service and an outrageous debt load before declaring bankruptcy.  Maine, New Hampshire and Vermont suffered through a year-long transition to buyer FairPoint Communications, complete with poor service and notoriously inaccurate billing before that company also declared bankruptcy.  Former Verizon customers in the Pacific Northwest, Indiana, and West Virginia (among others) are coping with Frontier Communications own billing and service problems.

The FairPoint Trust called the $2.3 billion acquisition of Verizon’s New England operations “disastrous.”  It also echoed what Verizon obviously understood itself: its landline operation in New England had been allowed to deteriorate into “inferior assets that had no future.”

Frontier Communications itself judged the network it purchased from Verizon in West Virginia in need of serious upgrades and repairs.  Critics of the deal called Verizon’s West Virginia network “a technical disaster area.”

But while Verizon is capable of landline neglect, it is also the only major phone company delivering true fiber-to-the-home service over its award winning (and expensive to build) FiOS network.

The feast or famine approach Verizon has used for capital investments has resulted in amazing service for some, a loss of reliable service to many others.

FiOS has allowed Verizon to remain a serious player, particularly in the northeast, despite the onslaught of competition from Cablevision, Comcast, and Time Warner Cable.  Average revenues earned from FiOS customers are much higher than what the company earns from customers on its copper wire telephone network.

Some Verizon shareholders have never liked the price for the company’s fiber future.  When the economy tanked in late 2008, an indefinite suspension of FiOS expansion soon followed, leaving Verizon’s network expansion plans in limbo.  The company is still slowly completing the portion of its fiber network promised under existing agreements, but has avoided introducing the service in new cities and towns.  At the same time, Verizon is loathe to maintain investment in its antiquated copper wire landline network, which in some areas was supposed to be retired in favor of FiOS.

As long as Verizon’s older network can be held together, with fingers crossed, customers still have a dial tone.  But when things start to fail, customers are in for serious headaches.  They are popping aspirin almost daily at Bistro Chat Noir, a prestigious French restaurant along Madison Avenue on Manhattan’s Upper East Side.  If you plan to dine there, it is best to bring cash.  Even if the management wanted to take your Visa or Mastercard, the restaurant’s phone lines are out so often, they can’t easily process your payment.

These days, the resourceful owners rely on a neighbor’s graciously shared Wi-Fi connection (presumably powered by competitor Time Warner Cable) to process credit card transactions manually.

The New York Times wrote Verizon’s atrocious level of service isn’t isolated to one bistro:

“Obviously, this is not the way we want to do business,” said Ms. Latapie, who has started giving clients her personal cellphone number to avoid missing reservations when the restaurant’s phone is not performing properly. “When people can’t get through, I tell them it’s Verizon. And if they live in this area, they know — because they have the same problem.”

However irritating, sporadic utility failures are not uncommon. But along a a stretch of Madison Avenue in what is arguably the city’s most expensive shopping and eating district, phone and Internet blackouts have become a nightmarish routine of life for many expensive restaurants, stores and hotels.

For weeks now, mundane tasks — making dinner reservations and paying for purchases by credit card — have become a frustrating challenge.

“We are in the highest rent district in North America and we don’t have communication,” said Jillian Wright, whose spa on East 66th Street is on the second floor of a brownstone building and not ideal for walk-ins. Ms. Wright said she was losing clients daily, and her spa’s phone number goes straight to a voicemail message apologizing to clients for Verizon’s service.

The service failures have affected dozens of businesses, primarily in the East 60s along Madison Avenue. The scope of the problem varies, with some businesses having no phone or Internet service at all for the past several weeks and others experiencing blackouts that last days or a few hours.

Meetings with Verizon officials have deteriorated into spin-and-excuse sessions where company officials promise results but continue to deliver lousy service.  It turns out the problem is Verizon’s ancient copper wiring found underneath the streets in the area.  Just two feet away from Verizon’s cables are steam heating pipes, which warm the tunnels and create major condensation problems.  Couple that with water runoff from the streets above — salt-laden in the winter time — and you have a recipe for corrosion that destroys reliable phone service.

Eventually, Verizon plans to wire FiOS fiber across a large section of Madison Avenue, but with the company’s unwillingness to invest appropriate sums to get the job done, business and residential customers are simply kept waiting.

Or they can switch to Time Warner Cable, and many are.

Your Telephone Is Temporarily Out of Service…

Verizon’s service woes are not just for big city dwellers.  Residents in Virginia are coping with Verizon landline problems in suburban neighborhoods, too.  Verizon employees openly admit they are fighting a losing battle with management to replace defective cables and equipment that should have been replaced years ago.  Management keeps winning and customers keep losing.

“When we come to this area, we dread it,” admits Alex Long, a cable splicer at Verizon for 22 years.

Long just pulled up to a pole off Burksdale Road in Norfolk and found nothing he had not seen many times before  — untrimmed tree branches overgrown into the overhead wires.  The branches had managed to rub the phone cable’s insulation down to bare copper wire.

As a result, whenever it rains, telephone service in the neighborhood becomes sporadic.  If tree branches don’t knock service out, cable-chewing squirrels do.  The lines, the equipment, and the technology is well past its prime, but Verizon management insists repair crews fix what is already there instead of replacing it with something better.  It’s all a matter of money, and Verizon wants to spend as little as possible on its copper landline network.

Long’s experiences were the highlight of a piece published by the Virginian-Pilot, which has heard complaints from readers about dreadful Verizon phone service across the region.

The repairman discloses Verizon technicians have known about the bad cable for at least five years, but requests to replace it have been repeatedly rejected.

“The cable’s totally shot,” Long told the newspaper. “It needs to be replaced, and the company’s budget doesn’t allow for it. That’s what engineering keeps telling us.”

In Hampton Roads, Va., it is a case of the fiber haves and have nots.  The parts of Hampton Roads that have been upgraded to Verizon’s fiber to the home network are virtually trouble-free in comparison to neighborhoods where copper cables still deliver service.  Verizon’s legacy network is of such concern, the Virginia State Corporation Commission has increasingly taken a close look at the level of service Verizon is providing in non-FiOS areas.

William Irby, director of the commission’s Division of Communications, has heard plenty of concerns that Verizon is neglecting their copper network in favor of FiOS fiber.

Verizon’s copper wire neglect might not be such a big problem had the company provided a date certain for upgrade relief.  But with FiOS expansion also stalled, some cities are now wondering if Verizon is abandoning them.

Boston is one of them.

Left Behind: The Cities Without FiOS

Verizon FiOS is well-known in eastern Massachusetts.  There are those who have it and those who want it.  Verizon had been aggressively pursuing franchise agreements with 111 communities across the state until the company announced it was putting on the brakes and ceasing further expansion efforts in new areas.  That leaves Boston and other communities like Quincy behind because they didn’t sign agreements with the company fast enough.

“If you’ve got FiOS, lucky you,” shares Quincy resident Roger Jones. “If you don’t, good luck.”

Jones says Verizon has left Quincy with a neglected landline network the company doesn’t seem interested in maintaining, much less replacing with fiber optics.

“The company believed in fiber optics because they saw the opportunities fiber could deliver, like additional revenue from selling TV channels,” Jones says. “But then Wall Street caught up to them and said it was all too much.  I might even understand that, except they won’t spend a nickle maintaining what they already have either, unless the regulators twist their arms and threaten fines over the bad service.”

Jones says his Verizon phone line was out three times earlier this year.

“Three strikes and they were out — I switched to Comcast,” Jones says. “A Verizon repair guy that came to my house the third time said all of his relatives switched to Comcast because service got to be so unreliable with Verizon’s old network.”

Back on Burksdale Road in Norfolk, Long was trying to track down another customer’s phone troubles — a loud hum on their line.  Hours later, Long decided it was a futile effort and began looking for an unused replacement pair of good wires he could switch to for the customer.  With the growing number of Verizon customers disconnecting their landline service permanently, that task gets easier every day.

Long told the newspaper it was no surprise Burksdale Road customers were experiencing problems.  Closures which were designed to protect the cable where it splits off individual phone lines were supposed to be water and air-tight.  Instead, he was working with a deteriorating rubber enclosure that showed its age after years of service.  Unfortunately, he explains, Burksdale Road customers will simply have to make due.

Not only won’t Long be able to replace the deteriorating infrastructure he finds, he’ll be forced to improvise with Verizon’s latest cost-cutting solution for wet cables — covering them with sheeting that resembles a plastic garbage bag.  Even that is nothing new for Burksdale Road.  Several houses down, a cable “rain-slicker” was already tightly wrapped around a section of cable where the rubber closure had gone missing altogether.

After getting the dial tone back, Long handed the customer his business card with his direct number and apologized.

“You may have problems again,” he said, advising the customer to call him directly the next time his phone line stops working.

Verizon better hope the customer doesn’t call the local cable company to switch providers or disconnect his landline altogether.

A Federal Communications Commission proposal to require Internet Service Providers to report service outages may meet with legal challenges, despite the agency’s insistence the program is designed to help monitor network reliability and potential cybersecurity threats.

The FCC has been seeking service outage reports since May, when it first asked providers for information to track 911 outages over broadband Voice Over IP networks and determine if further regulations were needed to increase service reliability.

The agency is also reported to be concerned about botnet attacks — coordinated denial-of-service attacks on individual websites done for political, personal, or profit-motivated reasons.

Providers object to turning over the data, accusing the agency of exceeding its authority.  Some are signalling they might challenge the requirements in court if the Commission doesn’t curtail the program.

Providers may be objecting because the data collected could become public, allowing anyone to chart the reliability of each respective broadband service provider.  Competitors could potentially use that information to their advantage.  Additionally, data that shows ongoing problems could be used to justify additional oversight or regulatory measures to improve performance.

Jeffery Goldthorp, the FCC’s associate bureau chief for cybersecurity and homeland security admits the agency might not have a clear mandate to pursue its monitoring program, telling CNET there was ambiguity in the agency’s authority.

Republican FCC Commissioner Robert McDowell goes further, saying “in my view, we do not have Congress’s authority to act as suggested.”

FairPoint Communications, which took control of Verizon landlines in Maine, New Hampshire, and Vermont in 2009 and then promptly went bankrupt is now appealing to New Hampshire’s regulators and legislature for deregulation.

Teresa Rosenberger, the company’s New Hampshire president, told the Nashua Telegraph that before FairPoint Communications took over Verizon’s northern New England landlines in 2009, that means of communication was the “only game in town.” Now that Verizon’s “monopoly” no longer exists, FairPoint wants the “shackles [removed from] our ankles.”

Setting aside the fact Verizon and FairPoint both faced identical competitors — Comcast and AT&T in parts of the state, the primary difference between the incumbent landline phone company and its cable competition is that the latter enjoys the right to choose its customers.  Landline providers must deliver universal access to basic service, something both FairPoint and Verizon managed for more than a century.

Rosenberger claims that with the rapid decline of landlines, FairPoint should be free from regulatory constraints it argues limits its ability to compete on pricing and service.  Rosenberger uses FairPoint’s biggest failure — its rapid loss of customers — as the core argument for allowing deregulation, which would deliver few checks and balances from state regulators.

FairPoint’s market share in New Hampshire is now down to 49% and dropping.  Its competition — Comcast and wireless mobile providers, now account for the majority of phone lines in the state.  FairPoint’s line losses spiked when the company took over providing service in northern New England from Verizon Communications.  Many FairPoint customers would describe that level of service as poor, with billing and service complaints reaching epic proportions before the company ultimately declared bankruptcy.

Rosenberger points out that the traditional way utility services deal with changing business models is to sell off non-performing or excess assets.  Electric utilities sell excess power, but phone companies like FairPoint have few things other providers want.

In particular, FairPoint is upset it is saddled with a statewide network of telephone poles that “nobody wants.”

“We lose a ton of money on these poles” when work has to be done on them, Rosenberger told the newspaper. “There is the flag rate, the excavation fee, paying for a cop out there – and that’s before taxation and reporting requirements.”

FairPoint notes their competitors gets to use those poles, and are not necessarily contributing their fair share towards their upkeep.

FairPoint isn’t asking to abandon its universal service obligation, something AT&T has lobbied for throughout its territories.  But it does want to do away with pricing regulations and reporting requirements.  If FairPoint offers a business customer a special discount rate, it must file that rate publicly with state regulators, which is public information.  FairPoint says its competitors may be using that information to undercut them in contract negotiations.  But the public price regulations are in place to prevent a phone company from offering dirt cheap service for a select few, effectively subsidized by other ratepayers.

FairPoint also wants quality of service reporting regulations eased, and that comes as a concern to some New Englanders who lived through FairPoint’s messy transition from Verizon service.  Even today, there are ongoing disputes over whether FairPoint is meeting state obligations on everything from how quickly they answer customer calls to whether or not service problems are resolved on a timely basis.