Windstream delivers turtle slow Internet speeds to customers paying for fast connections.

Windstream broadband customers in Georgia were not imagining their turtle-slow DSL Internet speeds after all. After a year-long investigation, the Governor’s Office of Consumer Protection (GOCP) this week announced a $600,000 settlement with the rural telephone company over claims it was ripping off customers by falsely advertising broadband speeds it was in no position to deliver.

“This is essentially a truth in advertising case,” says John Sours, administrator of the Governor’s Office of Consumer Protection.  “What consumers thought they were getting from a major company was significantly different from what they allegedly received. People need to be able to make informed choices about buying the services they need to communicate and do business. We are confident that this settlement will ensure that will now occur here.”

A GOCP investigation found substantial evidence Windstream routinely advertised and sold certain Internet speeds to customers it should have known it could not provide and/or guarantee, especially over its deteriorating copper landline network. Customers complained they should have been sold cheaper broadband packages with Internet speeds Windstream could actually deliver.

Customers who called to complain about the poor performance of their connection received empty promises from Windstream representatives that misrepresented the time frame within which broadband speeds would improve. In some cases, customers were not told their speed issues would likely never be resolved. In rural Georgia communities, DSL broadband is often the only available option.

The GOCP also found that some of Windstream’s “Lifetime Price Guarantee bundle” advertisements falsely implied that the advertised offer included high-speed Internet packages with speeds of “up to 12 Mbps”.

Windstream was also criticized for advertising a free 6-month “Hulu Plus” subscription but did not clearly disclose that consumers who failed to cancel the subscription at or before the 6-month period would be charged membership fees every month afterwards, until the membership was cancelled.

To resolve these allegations, Windstream will pay a total of $600,000, which includes a $175,000 civil penalty, $175,000 in administrative fees and expenses, and $250,000 in cy pres restitution to be used to buy new computer equipment for the Technical College System of Georgia. Customers will receive no compensation from the settlement, but Stop the Cap! strongly recommends that affected customers insist on compensation by appealing directly to Windstream for service credits and/or a penalty-free exit from any service commitments.

“Windstream … has cooperated fully throughout the inquiry by the Governor’s Office of Consumer Protection,” wrote a company spokesperson in a statement. “Windstream is pleased to resolve this inquiry by entering an assurance of voluntary compliance with all applicable advertising laws. That agreement includes no finding or admission of violation by the company.”

Windstream has represented to the Governor’s Office of Consumer Protection that it is in the process of investing about $14 million to upgrade its fiber-supported areas in Georgia.  The company says that 90% or more of these upgrades were completed by the end of 2013, with the remaining upgrades slated for completion by mid-2014. The company expects the upgrades to address systemic download speed issues in the areas undergoing the upgrades. It is also seeking federal funding as well as exploring other options for upgrading the Internet service for consumers who are served by network equipment supported by copper-fed wires.

[flv]http://www.phillipdampier.com/video/WGCL Atlanta Windstream Settles False Advertising Suit 2-25-14.mp4[/flv]

WGCL in Atlanta reports Windstream has agreed to settle charges they falsely advertised broadband speeds customers could never receive. The state gets $600,000, customers get nothing. (1:56)

Phillip “Follow the Money” Dampier

“In the 1990s, U.S. policymakers faced critical choices about who should build the Internet, how it should be governed, and to what extent it should be regulated and taxed. For the most part, they chose wisely to open a regulated telecommunications market to competition, stimulate private investment in broadband and digital technologies, and democratize access.” — Will Marshall, guest columnist

Is competition in Internet access robust enough for you? Has your provider been sufficiently stimulated to invest in the latest broadband technologies to keep America at the top of broadband speed and availability rankings? Is Net Neutrality the law of the land or the latest victim of a Verizon lawsuit to overturn the concept of democratizing access to online content?

I’m not certain what country Will Marshall lives in, but for most Americans, Internet access is provided by a duopoly of providers that must be dragged kicking and screaming to upgrade their networks without jacking up prices and limiting usage.

Marshall is president and founder of the Progressive Policy Institute, a so-called “third way” group inspired by centrist Democrats led by President Bill Clinton in the 1990s. Unlike traditional liberals suspicious of corporate agendas, these Democrats were friendly to big business and welcomed the largess of corporate cash to keep them competitive in election races. It was under this atmosphere that Clinton signed the bought-and-paid-for 1996 Telecom Act, ghostwritten by lobbyists for big broadcasters, phone and cable companies, and other big media interests. Long on rhetoric about self-governing, free market competition but short on specifics, the ’96 law transformed the media landscape in ways that still impact us today.

Media ownership laws were relaxed, allowing massive buyouts of radio stations under a handful of giant corporations like Clear Channel, which promptly dispensed with large numbers of employees that provided locally produced programming. In their place, we now get cookie-cutter radio that sounds the same from Maine to Oregon. Television stations eagerly began lobbying for a similar framework for relaxing ownership limits in their business. Phone companies won their own freedoms from regulation, including largely toothless broadband regulations that allowed Internet providers to declare victory regardless of how good or bad broadband has gotten in the United States.

Marshall’s views appeared in a guest column this week in The Orlando Sentinel, which is open to publishing opinion pieces from writers hailing from Washington, D.C., without bothering to offer readers with some full disclosure.

Marshall

While Marshall’s opinions may be his own, readers should be aware that PPI would likely not exist without its corporate sponsors — among them AT&T, hardly a disinterested player in the telecommunications policy debate.

Marshall’s column suggests competition is doing a great job at keeping prices low and allows you – the consumer – to decide which technologies and services thrive. There must be another reason my Time Warner Cable bill keeps increasing and my choice for broadband technology — fiber optics — is nowhere in sight. I don’t have a choice of Verizon FiOS, in part because phone and cable companies maintain fiefdoms where other phone and cable companies don’t dare to tread. That leaves me with one other option: Frontier Communications, which is still encouraging me to sign up for their 3.1Mbps DSL.

“The broadband Internet also is a powerful magnet for private investment,” Marshall writes. “In 2013, telecom and tech companies topped PPI’s ranking of the companies investing the most in the U.S. economy. And America is moving at warp speed toward the ‘Internet of Everything,’ which promises to spread the productivity-raising potential of digital technology across the entire economy.”

Nothing about AT&T or the cable companies is about “warp speed.” In reality, AT&T and Verizon plan to pour their enormous profits into corporate set-asides to repurchase their own stock, pay dividends to shareholders, and continue to richly compensate their executives. It’s good to know that PPI offers rankings that place telecom companies on top. Unfortunately, those without a financial connection to AT&T are less optimistic. The U.S. continues its long slide away from broadband leadership as even developing countries in the former Eastern Bloc race ahead of us. Verizon’s biggest single investment of 2013 wasn’t in the U.S. economy — it was to spend $130 billion to buyout U.K.-based Vodafone’s 45% ownership interest in Verizon Wireless. Verizon’s customers get stalled FiOS expansion, Cadillac-priced wireless service, and a plan to ditch rural landlines and push those customers to cell service instead.

AT&T financially supports the Progressive Policy Institute

“A recent federal court decision regarding the FCC’s Open Internet Order has prompted pro-regulatory advocates from the ’90s to demand a rewrite of the legal framework that allowed today’s Internet to flourish,” Marshall writes in a section that also includes insidious NSA wiretapping and Internet censorship in Russia and China.

Marshall’s AT&T public policy agenda is showing.

Net Neutrality proponents don’t advocate an open Internet for no reason. It was AT&T’s former CEO Ed Whitacre that threw down the gauntlet declaring Google and other content providers would not be allowed to use AT&T’s pipes for free. AT&T has since patented technology that will allow it to discriminate in favor of preferred web traffic while artificially slowing down content it doesn’t like on its network.

“Pro-regulatory advocates” are not the ones advocating change — it is AT&T, Verizon, and Comcast, among others, that want to monetize Internet usage and web traffic for even higher profits. Net Neutrality as law protects the Internet experience Marshall celebrates. He just can’t see past AT&T’s money to realize that.

AT&T is a frequent backer of anti-community broadband initiatives, as are some of the nation’s biggest cable companies.

The Kansas Senate’s Commerce Committee has introduced a bill that would make it next to impossible to build publicly owned community broadband networks that could potentially compete against the state’s largest cable and phone companies.

Senate Bill 304 is the latest in a series of measures introduced in state legislatures across the country to limit or prohibit local communities from building better broadband networks that large commercial providers refuse to offer.

SB 304 is among the most protectionist around, going well beyond the model bill produced by the corporate-backed American Legislative Exchange Council (ALEC). At its heart, the bill bans just about any would-be competitor that works with, is run by, or backed by a local municipality:

Sec. 4. Except with regard to unserved areas, a municipality may not, directly or indirectly offer or provide to one or more subscribers, video, telecommunications or broadband service; or purchase, lease, construct, maintain or operate any facility for the purpose of enabling a private business or entity to offer, provide, carry, or deliver video, telecommunications or broadband service to one or more subscribers.

For purposes of this act, a municipality offers or provides video, telecommunications or broadband service if the municipality offers or provides the service:

• Directly or indirectly, including through an authority or instrumentality:
• Acting on behalf of the municipality; or for the benefit of the municipality;
• by itself;
• through a partnership, joint venture or other entity in which the municipality participates; or
• by contract, resale or otherwise.

Tribune, Kansas is the county seat of Greeley County.

This language effectively prohibits just about everything from municipally owned broadband networks, public-private partnerships, buying an existing cable or phone company to improve service, allowing municipal utilities to establish broadband through an independent authority, or even contracting with a private company to offer service where none exists.

The proposed legislation falls far short of its intended goals to:

• Ensure that video, telecommunications and broadband services are provided through fair competition;
• Provide the widest possible diversity of sources of information, news and entertainment to the general public;
• Encourage the development and widespread use of technological advances in providing video, telecommunications and broadband services at competitive rates and,
• Ensure that video, telecommunications and broadband services are each provided within a consistent, comprehensive and nondiscriminatory federal, state and local government framework.

Proponents claim the bill is open to allowing municipalities to build broadband services in “unserved areas.” But upon closer inspection, the bill’s definition of “unserved” is practically impossible to meet anywhere in Kansas:

“Unserved area” means one or more contiguous census blocks within the legal boundaries of a municipality seeking to provide the unserved area with video, telecommunications or broadband service, where at least nine out of 10 households lack access to facilities-based, terrestrial broadband service, either fixed or mobile, or satellite broadband service, at the minimum broadband transmission speed as defined by the FCC.

Even the FCC does not consider satellite broadband service when it draws maps where broadband is unavailable. But this Big Telecom-backed bill does. Even worse, it requires would-be providers to prove that 90 percent of customers within a “census block” don’t have access to either mobile or satellite broadband. Since satellite Internet access is available to anyone with a view of the southern sky, and the most likely unserved customers would be in rural areas, it would be next to impossible for any part of the notoriously flat and wide open state to qualify as “unserved.”

Each rectangle represents one “census block” within a larger “census tract” that partially covers Greeley County. Under the proposed legislation, a community provider would have to visit each census block to verify whether a private company is capable of providing broadband service, including satellite Internet access.

To illustrate, Stop the Cap! looked at Greeley County in western Kansas. The county’s total population? 1,247 — the smallest in the state. Assume Greeley County Broadband, a fictional municipal provider, wanted to launch fiber broadband service in the area. Under the proposed bill, the largest potential customer base is 1,247 — too small for most private providers. Still, if a private company decided to wire up the county, it could with few impediments, assuming investors were willing to wait for a return on their investment in the rural county. If SB 304 became law, a publicly owned broadband network would have to do much more before a single cable could be installed on a utility pole.

Census Block 958100-1-075, in downtown Tribune, has a population of 10.

To open for business, Greeley County Broadband would have to spend tens of thousands of dollars to independently verify its intended service area — the county — is unserved by any existing broadband technology, including satellite and mobile broadband. The authors of the bill intentionally make that difficult. Just one census tract in Greeley County (#9561), encompassing the county seat town of Tribune (pop. 741) has dozens of census blocks. Some are populated, others are not.

Greeley County Broadband now has several big problems. Under the language in the bill, a municipal provider must first define its service area entirely within its borders — in this case Greeley County — and base it on contiguous census blocks. That means if pockets of qualifying potential customers exist in a census block surrounded by non-qualifying census blocks, Greeley County Broadband cannot include them in its service area.

Census Block 958100-1-075 — essentially at the intersection of Broadway Ave. and West Harper St., right next to City Hall — has a population of 10. AT&T Mobility’s coverage maps show Tribune is covered by its 3G wireless data network (but not 4G). That census block, along with every other in the area, would be disqualified from getting municipal broadband the moment AT&T upgrades to 4G service, whether reception is great or not. It doesn’t matter that customers will have to pay around $60 for a handful of gigabytes a month.

But wait, Verizon Wireless declares it already provides 4G LTE service across Greeley County (and almost all Kansas). So Greeley County Broadband, among other would-be providers, are out of business before even launching. Assuming there was no 4G service, if just two of those ten residents had a clear view to any satellite broadband provider, Greeley County Broadband would not be permitted to provide anyone in the census block with service under the proposed law. Under these restrictions, no municipal provider could write a tenable business plan, starved of potential customers.

Kansans need to consider whether that is “fair competition” or corporate protectionism. Is it a level playing field to restrict one provider without restricting others? If competition promotes investment in technologically challenged rural Kansas, would not more competition from municipal providers force private companies to finally upgrade their networks to compete?

In fact, the bill introduced this week protects incumbent cable and phone companies from competition and upgrades by keeping out the only likely competition most Kansans will ever see beyond AT&T, Comcast, or CenturyLink’s comfortable duopoly – a municipal or community-owned broadband alternative. Providing the widest possible diversity is impossible in a bill that features the widest possible definition of conditions that will keep new entrants out of the market. Community-owned networks usually offer superior technology (often fiber optics) in communities that are usually trapped with the most basic, outdated services. While the Kansas legislature coddles AT&T, that same company wants to mothball its rural landline network pushing broadband-starved customers to prohibitively expensive, usage capped wireless broadband service indefinitely.

Seeing Big Red? The areas colored dark red represent the claimed coverage of Verizon Wireless’ 4G LTE network in Kansas. Under SB 304, these areas would be prohibited from having a community-owned broadband alternative.

AT&T’s investment in U-verse expansion is expected to peak this year as part of its “Project VIP” effort to bring the fiber to the neighborhood service to more areas and offer faster broadband speeds to current customers.

AT&T is spending $6 billion over three years to broaden the footprint of U-verse, which now earns AT&T 57% of its total consumer revenues. In 2013, AT&T earned $13 billion in revenue from U-verse, up 28%.

AT&T’s investment in U-verse is dwarfed by the company’s efforts to benefit shareholders. In the last quarter of 2013, AT&T realized $6.9 billion in profits on revenue of $33.2 billion. For 2013, AT&T repurchased 366 million shares of its own stock for around $13 billion and paid out another $10 billion in shareholder dividends. Together, the total return for shareholders for the year was $23 billion and in the last two years AT&T achieved a new record benefiting shareholders with $45 billion in returns. In contrast, AT&T will spend just $6 billion on the current round of U-verse upgrades, with those markets left out likely pushed to wireless-only service if the company succeeds in winning approval to decommission its rural landline network.

Most of AT&T’s revenue growth is coming from its wireless business, particularly wireless data. After AT&T eliminated its flat rate plans, monetizing data usage has become very profitable — $23 billion per year and growing at 17% annually. Because increasing wireless usage forces customers to upgrade to higher cost plans offering more generous usage allowances, AT&T’s average revenue per customer increased by 3.9% — the highest in the wireless industry and the 20th consecutive quarter of customers collectively paying higher cell phone bills.

“The next steps are to make our networks even more powerful and layer on services that will drive new growth in the years ahead,” said AT&T CEO Randall Stephenson.

AT&T is counting on even higher customer bills as the company moves forward on several revenue-enhancing initiatives:

1. Moving an increasing number of customers away from subsidized handsets. AT&T Next allows wireless customers to get a new handset every year, but in return AT&T no longer subsidizes equipment purchases. Instead, most Next customers finance their current phone and will finance their next one, assuring AT&T of a constant revenue stream for equipment. AT&T expects to gradually move away from phone subsidies altogether;
2. Data plans for cars are forthcoming, as auto manufacturers install wireless capability in new vehicles. Many are signing agreements with AT&T that will make it easy for current customers to add vehicles to their existing plan, but customers of other carriers may find signing up for a new plan prohibitively expensive;
3. Internet-connected home security systems are getting a major marketing push in 2014 with advertising blitzes and other promotions. The alarm systems are connected to and use AT&T’s wireless data network;
4. AT&T customers are being pushed to wireless data plans with much higher data allowances than they need, delivering extra profits for AT&T with no impact on its wireless network;
5. AT&T wants to begin selling “sponsored data” services to companies willing to foot the bill for accessing preferred websites. AT&T calls it “toll-free data” but Net Neutrality advocates complain it monetizes data usage and establishes a unlevel playing field where deep pocketed companies can help customers avoid AT&T’s usage meter while others have to contend with customers worried about their data allowance.

[flv]http://www.phillipdampier.com/video/ATT Next – Get A New Smartphone Every Year from ATT Wireless 1-2014.flv[/flv]

AT&T explains its Next program, which lets customers upgrade to a new smartphone every 12 or 18 months. AT&T doesn’t tell you the plan is effectively a lease that benefits them by not having to pay a phone subsidy worth hundreds of dollars to discount a phone they will eventually refurbish and resell after you return it. AT&T Next, as intended, is an endless installment payment plan that never stops as long as you keep upgrading your phone. You also can’t leave AT&T until you pay your current phone off. (1:30)

A new way for AT&T to end phone subsidies.

Despite fierce competition from T-Mobile, AT&T so far has seen little impact from T-Mobile’s aggressive marketing. AT&T added 566,000 new contract customers in the last quarter and sold 1.2 million smartphones to its customer base. AT&T’s customer churn rate — the number of customers coming and going — remains very low despite T-Mobile’s latest offer to cover AT&T’s early termination fees to encourage customers to switch.

Stephenson says AT&T’s superior wireless 4G LTE network and its larger coverage area make customers think twice about taking their business to a smaller carrier.

In 2014, AT&T laid out these plans during its quarterly results conference call this week:

• U-verse will get an expanded TV Everywhere service allowing customers to view programming on smartphones and tablets inside their home and out;
• U-verse broadband speed enhancements should be available to at least two-thirds of customers, with speeds up to 45Mbps;
• LTE coverage expansion targets are expected to be ahead of schedule;
• AT&T will begin a “big effort” on network densification — adding overlapping cell towers and small cell technology in current coverage areas — to handle network congestion;
• AT&T will focus on improving its wired and wireless networks to prioritize video delivery;
• If approved by the government, AT&T will use its acquired Leap/Cricket brand for aggressive new no-contract plans marketed to customers with spotty credit without tainting or devaluing the AT&T brand;
• AT&T will use its agreements with GM, Ford, Nissan, Audi, BMW, and Tesla to offer AT&T wireless connectivity in new 2015 model year vehicles.

[flv]http://www.phillipdampier.com/video/Bloomberg ATT Latest Results Good 1-28-14.flv[/flv]

Bloomberg notes AT&T’s latest financial results are ahead of analyst expectations. Despite competition from T-Mobile, AT&T’s customer defection rate is at a historic low. (2:03)

Canadian investment analysts are recommending that Canada’s telecom giant Bell (BCE) should explore buying out Bell Aliant, Inc. the largest telephone company in the Maritimes, to further consolidate Canada’s telecommunications marketplace.

Bell already effectively controls the phone company serving provinces east of Quebec through its 44 percent stake in the venture. Picking up the rest through a takeover would make financial sense, said Maher Taghi, a telecom analyst at Canada’s Desjardins Securities.

The Globe and Mail reports Yaghi explained in a note to investors a buyout would boost overall free cash flow for Bell (BCE), primarily from the increased revenue paid by customers for phone, television, and Internet service.

Bell Aliant has been one of Canada’s most conservative telecom companies serving the country’s smallest provinces in Atlantic Canada, as well as parts of rural Ontario under the NorthernTel brand and Télébec, which serves rural Quebec.

Unlike Bell (BCE), Bell Aliant has aggressively deployed fiber to the home service in New Brunswick, Prince Edward Island, and Nova Scotia to stem landline losses. Bell Aliant’s FiberOP customers avoid stingy usage caps that are pervasive across the rest of Canada. Its fiber network delivers strong competition to cable operators.

Bell (BCE) is already a major player in Canadian telecommunications, both with its landline operation and Fibe — mostly a fiber-to-the-neighborhood service — wireless phone and broadband, owner of more than two dozen specialty cable networks, a satellite TV service, owner of the CTV television network, new owner of Astral Media, and a few dozen radio stations across Canada. With this level of media concentration, Bell (BCE) would have a tough time trying to buy any additional media assets, but with its current de facto control, Bell would likely have little regulatory scrutiny merging Bell Aliant into its existing operations.

[flv]http://www.phillipdampier.com/video/Bell Aliant FiberOP Intro Video 1-2014.flv[/flv]

Bell Aliant’s FiberOP introductory video explains the network and its features for Atlantic Canada. (2:20)