Verizon Wireless customers in New Jersey were startled Monday when the company sent out text messages labeled “Extreme Alert,” telling people a civil emergency was underway and they should seek immediate shelter.

No, Jersey Shore’s Snooki was not in the building.  It turned out to be a bungled test of the cell phone company’s emergency alert system, designed to text important information to cell phone customers located in specific geographic areas.

The fact Verizon forgot to mention “this is only a test” alarmed those receiving the warnings, as well as area 911 call centers that were subsequently flooded with calls.

Verizon admitted it sent the messages by mistake to customers in Middlesex, Monmouth and Ocean counties.

Emergency officials in all three counties began receiving calls from worried residents and the state homeland security office and emergency management center eventually posted messages on Twitter declaring the messages a false alarm.

At least Verizon didn’t charge customers for the text messages.  They, like other company-initiated communications, come free of charge.

[flv width=”640″ height=”380″]http://www.phillipdampier.com/video/WABC New York EAS Alert 12-12-11.mp4[/flv]

WABC’s New Jersey reporter talked with recipients of Verizon’s scary text message, and emergency officials who had to deal with the onslaught of phone calls from worried residents.  (2 minutes)

Haven't we been here before?

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

Henry De Lamar Clayton, Jr.: Author of the Clayton Act

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)

[flv width=”512″ height=”308″]http://www.phillipdampier.com/video/WSJ Comcast and Verizon Merge Without Merging 12-2-11.flv[/flv]

Comcast and Verizon are attempting a virtual merger, meaning that both sides are agreeing to work together by staying out of each other’s way, Peter Kafka reports on the Wall Street Journal’s digits.  (3 minutes)

[flv width=”512″ height=”308″]http://www.phillipdampier.com/video/WSJ Verizons 3-6 Billion Spectrum Deal Turns Heat on ATT 12-2-11.flv[/flv]

And what of AT&T?  The Wall Street Journal reports Verizon Wireless’ deal is ramping up pressure on rival AT&T, which is fighting to salvage its deal to take over T-Mobile USA, Greg Bensinger reports.  (5 minutes)

Comcast, Time Warner Cable, and Bright House Networks sold AWS spectrum in areas shown here to Verizon Wireless, virtually guaranteeing the cable industry will not compete in the wireless phone business.

Two years ago, Cox Communications was hungry to get into the wireless phone business.  It announced it was launching “unbelievably fair” wireless — an oasis in a wireless desert of tricks and traps on offer from competing wireless companies.  No more expiring minutes, the option of affordable flat rate service, and no hidden fees or surcharges were all supposed to be part of the deal.

“Our research found that value and transparency are very important to consumers when choosing a wireless service plan, but they are not finding these qualities in the wireless plans offered today,” Stephen Bye, vice president of wireless said back in 2010, introducing the service. “Total loss of unused minutes as well as unforeseen overage charges on bills are just two examples of what our customers have told us is just unfair.”

Those same issues still exist for wireless customers today, but Cox won’t be a part of the solution.  The company announced this past May it was exiting the competitive arena of wireless and would simply resell Sprint service instead.  Last month, it announced it wouldn’t even bother with that, and will transition its remaining wireless customers directly to Sprint.

What changed Cox’s mind?  The cost of building and operating a wireless network to compete with much larger national companies.  It simply no longer made sense to build a small regional wireless carrier and rent the rest of your national coverage area from other providers, who set wholesale prices at a level high enough to protect them from would-be competitors.

The lesson Cox learned first has now been taught to America’s largest cable operators Comcast and Time Warner Cable (and its sidekick Bright House Networks).

All three cable operators have effectively signed a non-aggression treaty with Verizon Wireless, agreeing to sell their unused wireless spectrum acquired by auction in 2006 at a 50% markup to Big Red.  In return, Verizon will market cable service to wireless customers.  It’s the ultimate non-compete clause so wide-reaching, Verizon stores will soon be selling Time Warner Cable right next to Verizon FiOS, something unheard of in the telecommunications marketplace.

It’s a win for Verizon Wireless, which accumulates additional wireless spectrum and peace of mind knowing the cable industry will not enter the wireless communications business.  Cable companies get to profit from their purchase of the public airwaves and see the potential of a dramatic reduction in customer poaching, as cable and phone companies stop fighting each other for customers.  Ultimately, it means customers could eventually pay the cable or phone company for all of their telecommunications services from television and broadband to wired and wireless phone service.  What consumers enjoy in one-bill-convenience may eventually come with higher rates made possible from reduced competition.

Verizon Wireless' currently unused AWS spectrum favor the east coast, but not for long.

Verizon will pay $3.6 billion to Comcast, Time Warner and Bright House Networks for the spectrum.  The deal has stockholders cheering because that payment represents a tidy profit for cable operators who did absolutely nothing with the spectrum they purchased five years ago.  It also makes AT&T even more intent on completing its own spectrum merger with T-Mobile USA.

The agreement has concerned consumer advocates because it seems to signal Verizon is content making money primarily from its wireless business, and will repay the favor from the cable industry by pitching phone customers on cable service.  That could ultimately spell big trouble for Verizon’s stalled FiOS fiber-to-the-home network.  Verizon may find it easier and cheaper to end its aggressive entry into Big Cable’s territory by simply reselling traditional cable television products.  It can still market wireless products and services to cable subscribers and not endanger the new atmosphere of goodwill.  Rural broadband, where cable never competes, could be served through wireless spectrum, for example.

For now, Verizon says it intends to continue competing with its FiOS network, but the company stopped deploying the service in new areas nearly two years ago.

The deal will go before regulators at the Justice Department and the Federal Communications Commission for review.  What will likely concern them the most is the appearance of collusion between the cable companies and Verizon.

“A flag is raised when two rival networks move to start selling each other’s services,” a person familiar with the concerns of federal antitrust officials told the Washington Post. “They lose their desire, impetus, to compete. That is a big antitrust flag.”

Mark Cooper, the director of research for the Consumer Federation of America, expressed serious concern as well.

“Verizon was supposed to be the great competitor for Comcast in the video space, while Comcast has been looking for a wireless play to match the Verizon bundle,” he said. “The deal signals bad news for consumers, who can expect higher prices for video, fewer choices and higher prices for wireless.”

Who owns what

Four years into the deal, consumers may not know what company they are dealing with, as cable operators will be able to market Verizon Wireless service under their own respective cable brand names.

The deal is also trouble for lagging Clearwire, which had been providing wireless broadband service to both Comcast and Time Warner Cable.  Under the agreement, both cable companies will end their relationship with Clearwire, which is particularly bad news for the wireless company because of its ongoing financial distress.  Sprint, which has heavily invested in Clearwire, may ultimately find itself with an investment gone sour, troubling news for the third largest wireless company manning the barricades against a nearly-complete duopoly in wireless service between AT&T and Verizon Wireless.

Cable stock cheerleader Craig Moffett from Sanford Bernstein seems thrilled with the prospect.  In a research note to his Wall Street clients, Moffett says AT&T could benefit from the Verizon pact with Big Cable by ending up in a “more duopolistic industry structure without paying for it.” If the FCC approves the non-aggression pact, the deal “would amount to an unmistakable step towards the duopolization of the U.S. wireless market, inasmuch it would leave T-Mobile, once again, stranded without a 4G strategy.”

Cable investors, he adds, are likely to be excited the cable industry won’t spend billions of dollars in capital building a wireless venture, and instead has agreed to work with competitors to cross-sell products and services.  With little competitive pressure, prices won’t be falling anytime soon.

That’s great news for investors, even if it is “unbelievably unfair” for consumers.

[flv width=”640″ height=”380″]http://www.phillipdampier.com/video/Bloomberg Verizon to Buy Wireless Spectrum for 3-6 Billion 12-2-11.flv[/flv]

Bloomberg News explains the deal and its implications in the wireless industry spectrum battle.  (2 minutes)

Verizon Wireless has confirmed a major LTE outage is impacting their data customers up and down the east coast as of late last night.

4G service works only intermittently this morning for impacted customers.  Many Verizon Wireless 4G phones are also not stepping down to the older 3G network properly during the outage, which means no data service at all, unless you are near a Wi-Fi hotspot.

The largest service area affected is New York City, but the outage is also impacting 4G customers in western New York, Pennsylvania, and northern Virginia.

Verizon has no estimated time when the problem will be repaired.

Updated 3:46pm ET — Readers report the outages now extend south into South Carolina, west into Ohio, Indiana, and Illinois, and one reader tells us service is out in California.  Verizon has acknowledged the problem on their Twitter channel, with no time estimates for repair.

Updated 4:58pm ET — Verizon is telling some customers the outage is impacting those with SIM cards, which effectively means LTE/4G.  Customers with 3G only phones still have access, but many 4G phone owners cannot downgrade to 3G service, even when they turn LTE off.