Good news to report for North Carolina consumers.  With a coordinated pro-consumer pushback, we’re achieving some victories in the battle to stop big cable and phone companies from pushing community broadband networks out of the state.  Since Rep. Marilyn Avila (R-Time Warner Cable) was not amenable to withdrawing the bill cable lobbyists authored, your appeals to members of the Finance Committee made a major difference: winning exemptions for the state’s existing community networks and redefining an under-served area to any community where 50 percent of households cannot obtain high-speed broadband service.

North Carolina’s local media is becoming increasingly aware of H.129 for the first time, and so are many consumers — outraged over reports state government is spending its valuable time working on the cable industry’s wishlist.

Today was a very important victory and we are glad to have done our part to win it, but this battle is by no means over.  We fully expect Time Warner trickery — their lobbyists will be back next week to try and undo what we have accomplished together.

We’ve been here before.  A de-fanged bill is okay, but a bill voted down altogether is better.

Please thank Chairman Mitchell S. Setzer for his call for a recorded vote, which helped us track who represents consumers and who fights for the cable company’s agenda.

We’d also like to thank Rep. K. Alexander, Rep. Faison, Rep. Luebke, Rep. Ross, Rep. H. Warren, and Rep. Womble for their strong support for better broadband in North Carolina.  There will be more to thank along the way, but this is a good start.

We are continuing the consumer fight to see H.129 shot down as the travesty it represents.  This proposed legislation does not deliver a single new broadband connection, improve ones that already exist, or deliver lower prices to anyone.

Citizens in Raleigh are making their feelings known on WRAL-TV’s website:

“NC should be encouraging and assisting rural cities and towns looking at doing this, not putting up obstacles. But I’m sure the Time Warner, Comcast and AT&T lobbyists have deep pockets full of excellent graft.”

“This all comes down to the city of Wilson. They offered every telecom and cable provider to provide 100Mbps internet access to 100% of the people in the city if they want it at a rate of $50/month (I think that was the amount). Every single private company laughed and said it was not profitable and they would take the contract. So, the City of Wilson took it upon themselves to provide the product the city wanted. Now, all of the companies are whining? Provide what the City of Wilson did at the price they did and there would be no problem. Don’t blame this on taxes. The simple issue is that TWC, Charter, and you name it want to make 100-200% profit and offer substandard high speed internet. “

“Come on NC. Reject the Bill and approve an order to allow cities to provide this technology if the monopolistic companies will not. Get them out of our state.”

“Frankly, if it were to mean that I could dump Time Warner Cable and their cra**y service and their “Oh we’re raising our rates again due to the Sun coming up 5 minutes late” attitude, I would be elated!”

“When will it ever be enough for the cable and phone companies? Their lines and equipment have been in place for YEARS and what do we get….rate increases every year, outages, lines cut, spotty internet service. It’s high time they have some competition. If they can afford to give new customers discounts for 12 months, why not keep the prices at that level with only moderate increase over time and then KEEP MORE customers in the fold? Just a thought!”

“The internet service offered by Wilson ROCKS. Twice the speed at half the price of TWC. No wonder they’re trying to block this from happening.”

The people are speaking, and they do not want state legislators moonlighting for the interests of cable and phone companies.  Remind your legislators you want more choice, not less.  Tell them to oppose H.129 and ask Rep. Avila to withdraw her bill.

Rep. Marilyn Avila (R-Time Warner Cable) at today’s House Finance Committee Meeting (1 Hour, 13 minutes)

Just a few days after Broadband Reports broke the news AT&T was imposing an Internet Overcharging scheme on its broadband customers, evidence continues to arrive illustrating the company’s planned usage limits are more about protecting their U-verse video business than actually controlling “heavy users.”

Dave Burstein, a well-known industry analyst who has tracked the broadband universe for years was so miffed about the nonsense he was reading in the Wall Street Journal, he picked up the phone and called the AT&T spokesperson who claimed the company was overburdened by heavy users:

Mark Siegal, AT&T’s top flack, hung up the phone on me when I said his comment to the Wall Street Journal was apparently a lie. It’s prohibitively unlikely their DSL cap “is to ensure the quality of the customer experience” necessary to solve “congestion in certain points of the network and interfering with other people’s access.” I’m certain that far less than 1% of the time do AT&T DSL customers have any impact from congestion. I’m pretty confident it’s less than 1/10th of 1% and probably less than 1/100th of 1%. My sources that wireline congestion on AT&T is minimal include statements from two CTOs of the company. Cheng, now a veteran in D.C., knew the comment was misleading at best. A mantra in D.C. is “wireline may not have congestion but wireless is different.” It was Sunday and perhaps hard to factcheck, but he’ll easily confirm the problem on Monday.

AT&T has long maintained they have a more robust network and cable is the one with “bandwidth hog” problems. But Comcast’s cap was 60% higher than AT&T and Comcast has said they will raise it. AT&T has gone 13 years without caps on their DSL network because they said they didn’t need them. Traffic growth is actually down slightly (Cisco, Odlyzko) so there’s only one reason to impose caps now: their video service, U-Verse, has become a $5B business. They don’t want people to be able to cut the cord and watch all their video over the net. 150 gigabytes is 40-80 hours of U-Verse quality TV, far less than the average U-Verse user watches.

In fact, AT&T is one of America’s largest Internet Service Providers, and maintains an important role in America’s Internet backbone.  As one of the largest providers, AT&T doesn’t worry about broadband traffic like a small wireless ISP does.  Its broadband pipes from the middle-mile to their nationwide network offers near limitless capacity thanks to fiber optic technology.  In fact, AT&T’s theoretical “bottlenecks” occur in the “last mile” of the network, from the phone company’s central switching offices or its interface between a fiber connection and the plain old copper wires that work their way into your home or business.

But first, a word about costs.

We have new evidence from both Burstein and the Internet Overcharging drama unfolding in Canada that providers literally pay pennies per gigabyte of traffic.  In fact, the broadband traffic customers generate represents only 2%-5% of what we pay for broadband in both countries.  Burstein uses some of Craig Moffett’s prolific comments in the media against his own argument for Internet Overcharging.  Moffett, a Wall Street analyst, is not alone when he reports broadband margins are as high as 90%, according to official company filings.  John Hodulik from UBS joins him.

Burstein gives providers’ argued need for increased investment to keep up with demand the benefit of the doubt and is willing to suggest profit margins at a reduced 75%.  In either case, running a large broadband network is a veritable license to print money in North America.  The costs to provide the service keep dropping, and providers keep on raising prices.

Burstein was generous with Comcast when he called their 250GB usage limit imposed in 2008 “fair.”  But as Stop the Cap! has argued, Comcast — like other Internet Overchargers — has not grown the cap over time, even as their costs decline.  In fact, customers are probably lucky the country’s largest cable operator hasn’t reduced it, as providers in Canada have done repeatedly. Burstein calls on Comcast to honor their promise and raise their cap.

Burstein also notes the rest of the world enjoys lower prices, more competition, and often faster service — with providers across the board still enjoying considerable profits.

But why not here?

America’s broadband market is a monopoly or duopoly in virtually every American city.  One cable operator and one telephone company deliver service to the vast majority of American broadband users.  Wireless providers are largely owned by legacy phone companies and strictly limit usage.  Without significant competition, providers can raise prices at will and milk profits to sustain their balance sheets even as other business divisions suffer from a downturned economy or shifting cultural changes.  The “landline” is rapidly becoming a thing of the past, and cable television provided by cable and phone companies could face cord cutting from consumers watching their favorite shows over their broadband connections.

Burstein tracks the business model:

15 gigabytes/month: The average (mean) user in the U.S., per Cisco’s respected VNI survey and numerous comments from the major companies.

Going Down: Bandwidth usage growth per customer. The rate has been about 30% per year, with the rate slightly falling the last few years. The growth in average usage is actually going down slightly, per Cisco VNI and the MINTS data of Professor Andrew Odlyzko.

Going Down: Capital investment required. In 2009, AT&T cut U-Verse by 1/3rd. In 2010, Verizon cut FiOS by 2/3rds. John Stankey of AT&T has said they will cut U-Verse much further after this year. Fran Shammo of Verizon says “Wireline will continue to come down year over year.” Cablecos have been dropping capex as a % of sales and often in absolute dollars. According to a recent survey by Heavy Reading, 70% of the cable networks have been upgraded to DOCSIS 3.0 already. There’s no significant capital spending beyond that at least until mid-decade. The Columbia University CITI report to the broadband plan aggregated analysts forecast and predicted a drop in overall capital spending on broadband, particularly in wireline. The primary capital spending for wired broadband is behind us, with few significant network buildouts in the next five years or longer.

Going Up: Profit Margins. Prices for broadband have generally been going up in the U.S. since 2007 while costs drop. Comcast, Time Warner, Verizon and most others have raised their broadband prices and ARPU. They also have (modestly) raised the prices of triple play including broadband, according to Dave Barden of Bank of America. Capex is dropping pretty dramatically while other operating costs are also falling. Customer support costs have gone down as few new customers (who need more support) are added. Modems and other gear continue dropping in price. Costs down, prices up = higher profits. Both Stankey and Shammo pointed to improved margins.

AT&T argues their usage caps are less about the money and more about dealing with network congestion.  But does that play out?

AT&T has a convenient argument to use, which several journalists have come to believe gives the company a track record of being victimized by “heavy users.”  Namely, their network congestion brought about by the flood of iPhone users on AT&T Mobility’s cellular network.  Even if a reporter does not understand the profound differences between a wired and wireless broadband network, they have heard about AT&T’s problems coping with their wireless traffic.

In short, the company underestimated demand from its exclusive deal with Apple for the wildly popular phone, and refused to invest adequately to mitigate overcongested cities.  Instead, it spent millions lobbying for permission to “manage” the traffic with artificially-slowed speeds, usage limits, confiscatory overlimit penalties, and even some equipment to offload wireless users onto home broadband connections (for which AT&T still deducts airtime and data usage from your wireless allowance.)  Robust Wi-Fi also tries to drive customers off of AT&T’s inadequate 3G network.

For home broadband users who will be affected by AT&T’s Internet Overcharging scheme, let’s break them into two separate categories: DSL customers who face a 150GB cap and U-verse customers who will get a 250GB allowance.

AT&T DSL is a legacy product dependent on traditional copper wire phone lines.  Available in many areas unserved by U-verse, this technology typically provides up to 6Mbps service — often slower, sometimes higher.  The distance between the phone company office and one’s home usually determines what speeds customers receive.  In rural areas, 1-3Mbps is often typical.  In some urban areas, higher speeds are sometimes possible.  DSL is not a “shared” technology like cable broadband.  Each DSL customer has their own line between their home and central office (or remote repeater).  From there, a connection from the central office to AT&T’s backbone is made over a middle mile network.

But AT&T’s DSL customers are already constrained by the reduced speeds DSL provides them.  It is unlikely a customer with 3Mbps DSL service is going to present much of a traffic challenge to a multi-billion dollar company unless they purposely under-invest in network upgrades.

Where congestion does exist, it occurs at the central office — usually because the company inadequately provisioned a sufficiently large data pipe to handle the traffic.  Since these circuits are increasingly fiber-based, congestion issues disappear when AT&T uses technology from this century instead of the last.

AT&T argues heavy users are overburdening their DSL lines, but their prescription makes no sense.  The company says, despite the alleged traffic jam, it is more than willing to sell users additional capacity for $10 per 50GB increment.  If AT&T’s aim was to cut congestion, they would be unwilling to sell additional capacity they don’t have to customers who need it.

A usage cap on AT&T’s new U-verse platform makes even less sense and opens a political minefield.

When one pushes away the promotional and marketing glitz AT&T provides when pitching U-verse, you are left looking at just one thing — a high speed broadband connection.  AT&T’s entire platform of television, phone, and broadband all resides on that single, super-speed broadband pipeline.

AT&T has built this super fast pipe with a combination of fiber optic cables and copper phone wires.  It uses fiber, which doesn’t degrade with distance the way copper wire connections do, to reduce the amount of copper phone wiring between your home and AT&T.  With this “fiber to the neighborhood” approach, AT&T can create a robust pipeline which can accommodate multiple television channels, a phone line, and your broadband connection all running concurrently.

AT&T only seeks to limit one part of that connection, however: the broadband service you could theoretically use to bypass AT&T’s television and phone service in favor of another provider.  It’s the same platform — only the services are different.

AT&T claims network congestion is a problem for U-verse as well, which is a controversial claim to make considering AT&T designed U-verse with excess capacity that goes unused to this day.

What does AT&T’s U-verse network look like?

AT&T’s regional offices maintain watch over their U-verse network of TV, Internet, and phone services.  This portion of the network is entirely fiber-based.  From there, fiber extends to individual central offices, part of the company’s middle-mile network.  AT&T’s fiber journey typically ends at large metal cabinets strategically placed in different neighborhoods.  These “Video Ready Access Devices” (VRADs) are probably familiar to you if you live in an AT&T area.  Sometimes derided as “lawn refrigerators,” the huge metal cabinets contain the interface between the fiber optic network and the copper wire telephone lines running to your home.

It’s this “choke point” AT&T tries to claim as a point of congestion.  If enough customers use their connection at the same time, it can “overburden” the network.  But can it, really?

Early adopters of U-verse pestered AT&T engineers about the network as it was constructed and learned a lot about it.

Phil Karn has been a U-verse customer since November 2009 and has become an expert on how his U-verse service works, and importantly how it holds back a considerable amount of available bandwidth.

An AT&T engineer “tried to tell me that the network equipment was like the engine in a sports car. You don’t want to drive it at the red line all the time because that will wear it out. I don’t know if he was told to use that analogy or if he came up with it on his own, but needless to say it’s a pretty silly one. And completely inapplicable,” Karn shares on his website.

He then claimed, rather weakly, that backhaul capacity considerations from the VRAD limit how much can be offered to each individual subscriber. This argument might even have begun to hold water except for the numbers he then provided. The VRADs, he said, are connected by 10 gigabit Ethernet over fiber, and each VRAD serves upwards of 200 homes. Let’s see…10 gigabits over 200 homes is 50 megabits per home. My [U-Verse] link runs at 32.2Mbps.

The whole point is that it doesn’t really matter how fast or slow the backhaul from the VRAD may be. With modern Internet routers and priority [Quality of Service] mechanisms, there is no reason to force capacity to remain idle when a user could be using it. Not unless, of course, you’re trying to maintain the public impression that broadband capacity is really scarce and expensive.

In fact, because few Internet users fully drive their broadband connections on a continuous basis, it can be argued that continuous video streams delivered to television sets left on in the homes of U-verse customers for hours at a time present a bigger “congestion” problem for AT&T, at least at this point in their network.  But the company has no plans to limit television viewing — only their broadband Internet service.

U-verse is AT&T’s answer to slow speed DSL, and part of how the company intends to stay relevant as landline customers depart.  But the company’s business plan depends on a certain percentage of customers subscribing to their pricey television service.  Should AT&T’s broadband customers decide to stop paying for television service, watching everything online instead, that threatens a $5 billion dollar business.

Burstein predicted this scenario when he discussed it with former FCC Chairman Kevin Martin:

“In 2005, Kevin Martin discussed with me the issue of what he would do if AT&T favored U-verse. I believe he felt he would have to act, but at that point hoped competition would prevent him from facing that decision. Now AT&T’s multi-million dollar über-lobbyist Jim Cicconi has presumably told them [current FCC Chairman] Julius Genachowski is sufficiently under control he won’t do anything about this.”

In the end, many of AT&T’s arguments simply are incoherent.  If only a small handful of AT&T customers are creating such a dilemma for the company it has to inconvenience every customer with a usage limit, AT&T has a much larger problem to contend with.  Furthermore, the company’s existing acceptable use policy already includes provisions for dealing with users that create problems on their network, all without bothering everyone else.

Word has reached Stop the Cap! that hundreds of e-mails and phone calls are pouring into Rep. Marilyn Avila’s (R-Time Warner Cable) office protesting her hard work on behalf of the state’s largest cable company.  We are being called “mean and nasty” by those supporting Avila’s anti-consumer bill, H.129.

Our answer to that: we are not “mean” or “nasty.”  We are fed up c0nsumers (and voters) who have serious concerns about certain state legislators who introduce bills custom-written by cable lobbyists to enact their business agenda into law.

These anti-community broadband bills have come year after year in North Carolina, despite the fact the state has an “also-ran” reputation as a broadband backwater, with tremendous room for improvement in broadband speed, price, availability, and choice of providers. The bills have also been nothing but trouble for those that have introduced them, alienating constituents and bringing them bad press:

Ty Harrell resigned his office in disgrace over financial irregularities, but he was already in hot water when he introduced his bill. We were stunned when his office staff literally handed the phone to a cable industry lobbyist sitting there to answer questions.  We held him accountable.

David Hoyle did not leave office at his finest moment either, openly admitting on television Time Warner Cable wrote the bill he introduced.

This year, it’s Ms. Avila, who repeatedly promised to hold existing community-owned networks harmless by exempting them from the draconian, project-killing legislation she has proposed.  But after closed door meetings, we learned those promises were hollow.  The words of her bill may have changed, but the results are exactly the same — she is micromanaging community networks into insolvency (while exempting the companies that wrote the bill she introduced).

The unanswered, critical question every legislator needs to ask is: How does H.129 improve North Carolina’s dismal broadband ranking and deliver improved service?

The answer is, it does nothing.  Not only does it ignore the chasm of low quality service prevalent west of Charlotte and north of Winston-Salem, it specifically erects roadblocks to keep any community from trying to resolve a situation they’ve dealt with for years and years.  Ask any rural community’s leader if they’ve heard from constituents upset by the unavailability or quality of broadband in their area and you will get an earful.  The truth is, had the cable and telephone companies in the state had a real interest in providing 21st century service to these communities, they would have already done it.  With H.129, they can rest easy knowing nobody else will try.

This is not an auspicious position for Ms. Avila to take.  She ran for office upset with backroom deals, insider political maneuvering, and closed government.  Reviewing her campaign platform, the one thing she emphasized time and again was her promise to bring “open government” to the people in her district, just north of the state capital.

Where is the open government on H.129?  Nowhere to be found.

Stop the Cap! would have loved to include the complete video record of the first meeting to modify her bill to protect incumbent providers.  Only there is no video record.  The meeting was held behind closed doors, and it took a source to reveal details about how the cable and phone companies ran it as their own.  It’s the epitome of the kind of back-room deals Ms. Avila railed against in her campaign.

Considering the results, we can understand why the meeting was secret.  The cable lobby understands full well the power of sunshine’s disinfecting power.  Shining a bright light on the cozy connection between legislators and the companies whose interests they brazenly represent tells a story they do not want the voting public to hear.

Unfortunately, it gets worse.  We’ve learned Ms. Avila plans to bring H.129 to a vote in the Finance Committee as early as this Thursday, with no public discussion allowed.  Voters can be spectators of their own broadband demise, but they will not be allowed to say a word about it.  Meanwhile, certain members of the legislature have had plenty of time to meet repeatedly with cable and phone company lobbyists.

As we’ve seen time and time again, that lobbying campaign of disinformation tries to muddy the implications of bills such as these.

Legislators who may not understand what H.129 is really all about need to hear from the public and communities to understand precisely what they are voting for and what impact this legislation will have.  The ripple effects go far beyond just keeping Time Warner and CenturyLink free from pesky competition.

Neither company is truly harmed by community broadband networks.  In fact, both of them have thumbed their noses and shrugged their shoulders even in the presence of much larger competitive threats in their urban markets — Time Warner for the phone company and AT&T’s U-verse, which is available in limited areas.

The best thing Ms. Avila could do is withdraw her legislation because it simply is not in the best interests of North Carolina.  Barring that, she should do what she promised and specifically exempt ALL existing community networks in the state from the provisions of her bill.  At this point, that delivers a win to bondholders who will see their investment pay off, communities can continue to provide service to interested customers, and everyone else will continue to enjoy the benefits of lower rates these networks bring every telecommunications customer.

That’s common sense to everyone except the cable and phone companies that will stop at nothing to bury community-owned providers.

Where does your legislator stand?  If you have not made your feelings known to the members of the Finance Committee, time is running out.  Call and e-mail them and let them know you expect them to vote NO on H.129 when it reaches their committee this week.  We’re going to do our best to watch what may turn out to be another “voice vote” that prevents voters from knowing how individual members voted.  This time, we’ll be paying close attention to the lips and movements of individual committee members and take our own vote so we know who to thank and who needs to held accountable.

Finance Committee Members

(click each name for contact information)

Senior Chairman	Rep. Howard
Chairman	Rep. Folwell
Chairman	Rep. Setzer
Chairman	Rep. Starnes
Vice Chairman	Rep. Lewis
Vice Chairman	Rep. McComas
Vice Chairman	Rep. Wainwright
Members	Rep. K. Alexander, Rep. Brandon, Rep. Brawley, Rep. Carney, Rep. Collins, Rep. Cotham, Rep. Faison, Rep. Gibson, Rep. Hackney, Rep. Hall, Rep. Hill, Rep. Jordan, Rep. Luebke, Rep. McCormick, Rep. McGee, Rep. Moffitt, Rep. T. Moore, Rep. Rhyne, Rep. Ross, Rep. Samuelson, Rep. Stam, Rep. Stone, Rep. H. Warren, Rep. Weiss, Rep. Womble

 

Despite promises to protect North Carolina’s existing community-owned broadband providers, Reps. Julia “My Word is My Bond” Howard and Marilyn “I Do What Time Warner Tells Me” Avila have reneged and intend to ram through their anti-community-broadband bulldozer bill.

Stop the Cap! learned this evening that Avila has no intention of meeting with North Carolina communities again, even as resolutions continue to pile up in Raleigh condemning their special interest legislation.

Asheville and Rockingham County have joined the city of Raleigh issuing resolutions opposing H129 and are openly wondering why state legislators are so contemptuously overruling the interests of North Carolina communities for the benefit of out-of-state corporations.

The answer, clearly, is money.

Rep. Howard apparently answers to the interests of companies like AT&T, which has donated more than $1,500 to her campaign, CenturyLink — $4,000, and Time Warner Cable, which so far has shorted her with just $750.  It evidently doesn’t take much to influence a legislator these days, and we anticipate her telecommunications contributions will spike in the near future for a job well done.  That enormous contribution from CenturyLink is telling, considering they are not the primary phone company in Howard’s district.

As a result of the sellout, H129 will likely move to the Finance Committee as early as next Thursday, effectively unchanged from its original.  The implications for the state are staggering, particularly if it drives existing community networks out of business.  That will take the state’s bond rating with it.

The sad part of all this is that both representatives were elected to serve the interests of their districts, and instead they are paying more attention to the well being of big cable and phone companies who honestly don’t need their help to earn enormous profits in the state.

While unserved communities and those stuck with dismal, antiquated DSL service have their pleas for better broadband ignored, Avila and Howard are doing all they can to sabotage the networks that do provide 21st century broadband to their residents.

With this kind of hostility, don’t look for Google to bring Gigabit broadband to the Tar Heel State anytime soon.  With all of the impediments and roadblocks these two legislators have thrown up on behalf of their friends at the cable and phone company, can Google expect to be treated any better?  The search giant even signed a letter strongly opposing H129, to no avail.

It’s not too late for Rep. Howard to prove us wrong.  She can turn this around in a second by demanding real exemptions for existing municipal networks — and I mean real exemptions, not the fake passes contained in the so-called substitute amendment.  Better yet, she can distance herself altogether from this disaster.

North Carolina residents must get on the phone and call Finance Committee members and tell them this broadband train wreck needs to stop in their committee with a resounding NO vote.

Let them know H129 will not only deliver years of sub-standard broadband service in the state, it will also ruin two showcase fiber networks, harm the state’s bond rating, and make North Carolina an also-ran in broadband innovation.

At a time when the state needs to move towards digital economy jobs, thumbing your nose at the likes of Google, Alcatel-Lucent, and Intel is a giant mistake — adding insult to injury to the potential loss of community broadband networks the cable and phone companies will stop at nothing to eliminate.

Finance Committee Members

(click each name for contact information)

Senior Chairman	Rep. Howard
Chairman	Rep. Folwell
Chairman	Rep. Setzer
Chairman	Rep. Starnes
Vice Chairman	Rep. Lewis
Vice Chairman	Rep. McComas
Vice Chairman	Rep. Wainwright
Members	Rep. K. Alexander, Rep. Brandon, Rep. Brawley, Rep. Carney, Rep. Collins, Rep. Cotham, Rep. Faison, Rep. Gibson, Rep. Hackney, Rep. Hall, Rep. Hill, Rep. Jordan, Rep. Luebke, Rep. McCormick, Rep. McGee, Rep. Moffitt, Rep. T. Moore, Rep. Rhyne, Rep. Ross, Rep. Samuelson, Rep. Stam, Rep. Stone, Rep. H. Warren, Rep. Weiss, Rep. Womble

AT&T stands to benefit enormously from the latest attempt to deregulate telecommunications services that could leave rural Michigan residents without a phone line, strips consumer protection and oversight rules to protect ratepayers, and wipes out the state Public Service Commission’s (PSC) traditional role of arbitrating telephone service and billing disputes.  In short, it delivers all of the benefits to AT&T and hangs up on Michigan consumers when their telephone service goes wrong.

AT&T  has found a real friend in Rep. Ken Horn (R-Frankenmuth), who introduced H.4314, a bill to overhaul Michigan’s telecommunications law.  Horn is AT&T’s top recipient of political contributions made by the company (and its employees) in the Michigan House.  He’s the third largest recipient of phone company money in the state, according to records from Project Vote Smart.  Horn’s bill delivers absolutely no discernible benefits to Michigan ratepayers.  Instead, Christmas comes early for big phone companies as Horn’s bill fulfills a wish list drawn up to eliminate decades of consumer-friendly protections:

1. Eliminates the PSC’s annual report on telecom competition and rate fairness in Michigan;
2. Allows AT&T to stop cooperating with the PSC in supplying information to help produce said report;
3. Strips away the requirement that companies like AT&T keep proper records that show the costs of delivering their services to customers;
4. Allows companies to keep secret the rates for services delivered by contract;
5. Eliminates the requirement that companies like AT&T deliver “high quality basic local service” to all residents in the state;
6. Expires all service quality standards established by the Commission on June 30, 2011;
7. Allows companies to escape punishment by eliminating the PSC’s authority to issue fines, cease and desist orders, or revocation of service licenses when a company has violated state law;
8. Requires all parties in a mediated dispute to keep the outcome secret;
9. Eliminates state-mandated fair billing practices;
10. Permits AT&T and other companies to sell, lease, or otherwise transfer assets and sell service to an affiliate below cost;
11. Allows companies to discriminate in favor of an affiliated burglar and fire alarm service over a similar service offered by another provider;
12. Eliminates the requirement that companies provide each customer a clear and simple explanation of the terms and conditions of services purchased by the customer and a statement of all fees, charges, and taxes that will be included in the customer’s monthly bill.
13. Allows AT&T and other providers to market products and services without giving the customer a true and fair estimate of the real “out the door” price for service — after taxes, fees, and surcharges.
14. Allows AT&T and other phone companies to discontinue service in any area provided with anything resembling a two-way telecommunications service including wireless, radio, or Voice Over IP service;
15. Eliminates the telecommunication relay service advisory board, which ensures quality service to the hard of hearing and deaf communities;
16. Reduces privacy guideline requirements protecting customers.

In tandem with Horn’s bill, AT&T released a congratulatory brochure reminding legislators they got the first half of their agenda enacted six years ago, now it is time for the rest of their dreams to come true.

Calling the proposed bill part of  “an innovation agenda to ‘modernize’ Michigan’s Telecommunications Act,” AT&T characterized the legislation as the ultimate red tape cutter, eliminating “a rotary phone mentality in a Smartphone, Wi-Fi world.”

Innovation, AT&T Style

But the proposed bill goes well beyond eliminating what AT&T considers outdated regulations and old phones — it could also eliminate phone service to Michigan’s most rural communities.

President Barack Obama was in Michigan last month to promote expanding broadband service, particularly in sparsely covered communities in the upper peninsula.  Large sections of Michigan remain underserved by AT&T, who does not extend DSL service into many rural areas.  Nothing in AT&T’s reform measure will bring broadband to these areas.  In fact, the bill grants AT&T permission to abandon landline service to these areas altogether, taking the prospects for DSL with it.

By winning an unrestrained playground for its products and services, for which it can charge whatever it likes — AT&T will follow Verizon’s lead and enhance service through its U-verse platform in urban and wealthy areas of the state at the expense of rural areas which are deemed unprofitable to serve.  While that’s great news for AT&T’s profit and loss statement, it hardly benefits the residents of Michigan who have helped build AT&T’s enormous network with decades of bill payments.

AT&T has a different position, of course. The phone company claims the bill will “better serve consumers” by eliminating “non-productive investments,” which really means investments in a landline network many Americans in more urban areas don’t care about anymore.  AT&T has focused much of its attention on its wireless network, which can deliver benefits to residents in Ann Arbor, Detroit, Saginaw and Grand Rapids, but is hardly a broadband replacement for Marquette or Elk Rapids — not with that 2GB monthly usage cap.  For urban dwellers, the promise of AT&T U-verse replacing AT&T DSL makes the phone company relevant in the broadband marketplace once again, but at the potential price of rural Michigan, who will never see the service in their neck of the woods.

AT&T claims their telecom reform agenda “means putting up a sign that says we are a state that gets it and will welcome and not restrain innovation,” the company says. “20th century regulations stand in the way of 21st century technology. Now is the opportunity to clear these roadblocks to investment and innovation.”

But AT&T’s policy bulldozer does far more than just sweeping away so-called “outdated” regulations.  It strips away fundamental consumer protection from unfair rate hikes, deteriorating phone service, billing errors, privacy protection, and the most basic right Americans have counted on for decades — the opportunity to purchase affordable landline service in even the most rural parts of the state.

Unfortunately, AT&T’s “innovation agenda” is deregulation at a price.  In Ohio, after similar legislation was passed, AT&T promptly raised rates on consumers last summer.  They did the same thing in California.  And Illinois.  Even U-verse, while delivering a second option for urban residents, simply does not save most subscribers money, especially after the introductory promotional rate expires.  It comes with rate hikes itself.

The Michigan Telephone Blog analyzes most of the bill’s outcomes with the same skeptical eye we have, and delivers a warning to other phone companies and businesses that could pay the price for AT&T’s version of “reform”:

If you are with a CLEC, an alarm company, or really any business that depends on telecommunications service in Michigan, you probably should have your legal department and/or your tariff guys looking at this bill.  If you belong to any type of consumer or business organization, especially one that protects senior citizens (who often hang onto the older technology, including the phone service they’ve always used) or small businesses (that often can’t move to other technologies for various reasons, particularly when they are located in less densely-populated areas), you should probably take a close look at this bill as well.