Cicconi

The Telecommunications Act of 1996 was the first major overhaul of telecommunications law in almost 62 years, and the deregulation measure supported with ecstasy by many in the telecom industry was signed into law by none other than President Bill Clinton, opening the door to a massive wave of industry deregulation and multi-billion dollar media consolidation.

It therefore comes as no surprise — to some at least — that AT&T’s top lobbyist Jim Cicconi, perhaps rivaled only by Comcast’s David Cohen in power and influence, has endorsed Hillary Clinton for president. The Wall Street Journal reported Cicconi has joined several other Republican corporate executives signing up for Team Hillary this election cycle.

Cicconi is voting Democratic this year, despite supporting every Republican presidential candidate since President Gerald Ford’s run against Jimmy Carter in 1976. This year is different, he claims.

“I think it’s vital to put our country’s well being ahead of party,” he said in a statement provided by the Clinton campaign. “Hillary Clinton is experienced, qualified, and will make a fine president. The alternative, I fear, would set our nation on a very dark path.”

Comcast’s David Cohen is also well-known for leaning to the left, and has been considered a friend of the Obamas since they took office in 2009. Cohen hosted 120 people in his home for a dinner in 2011 on behalf of Obama’s 2012 re-election campaign. It was an expensive dinner — each guest contributed at least $10,000.

The alternative, Donald Trump, represents what corporate America and Wall Street hates above all else – unpredictability and uncertainty.

Telecom issues have not made a big splash this year in either campaign, and regardless of who wins, their appointments to regulatory agencies like the FCC can have a major impact on consumer broadband initiatives and public policy. A Clinton administration could result in appointments of “centrist” Democrats that Bill favored during his two terms in office. Many of those former regulators are now lobbyists for the telecom industry. Or Hillary could move closer to Obama’s surprisingly tough pro-consumer policies on broadband issues and keep Thomas Wheeler at the helm of the FCC for a few more years.

Cicconi would be pleased to see someone like former Tennessee congressman Harold Ford, Jr., take a seat at the FCC under a future Clinton Administration instead. Ford has served as an honorary co-chairman of Broadband for America, an industry-sponsored astroturf operation, for most of Obama’s two terms in office. He remains a close friend of both Bill and Hillary and is never far from the public eye, turning up regularly on MSNBC.

Broadband for America supports deregulation, opposes Net Neutrality, and essentially shills for its corporate sponsors. Rep. Ford would likely oppose Net Neutrality and continue support for near-total deregulation.

Verizon has also shown itself to be a Friend of Hillary. Three Verizon vice presidents each donated $2,700 to Hillary for America. They were joined by a senior vice president and another vice president, who gave an additional $1,000, according to Salon. A former Hillary Clinton operative who now lobbies for Verizon donated $2,700 as well, along with another Verizon lobbyist who pitched in $1,000.

While Bernie Sanders joined striking Verizon workers on the picket line, the Clinton campaign was cashing checks worth tens of thousands of dollars from Verizon executives and lobbyists. In May 2013, the telecom company paid Hillary a $225,000 honorarium in return for a speech (the text has not been disclosed) to Verizon executives.

The Clinton Foundation also benefited from Verizon contributions ranging from $100,000-250,000.

A $2 monthly price hike for many longtime Netflix subscribers could cause up to 480,000 customers to cancel the service, according to a Wall Street analyst.

Long-standing Netflix customers began seeing $2 price hikes — from $7.99 to $9.99 starting last month. The “two-concurrent stream” HD plan is Netflix’s most popular, and those subscribed the longest will be the last to be affected by the price increase. Customers who enrolled at the $8.99 price implemented in May, 2014 will also pay $9.99 a month starting this October.

“Impacted members will be clearly notified by email and within the service so that they have time to decide which plan/price point works best for them,” Netflix said in a statement.

Netflix’s new subscriber growth had already cooled as content acquisition costs reached new highs, making it harder for Netflix to license new content to keep customers happy with new releases. Nomura Securities analyst Anthony DiClemente believes up to 480,000 current Netflix customers might cancel service after the rate hike takes effect, especially as competing streaming video services like Hulu and Amazon continue to grab market share.

Despite the potential for customer losses, Netflix still stands to gain up to $520 million in new revenue from the rate increases alone. Netflix says it intends to spend the money on content licensing and producing more shows for Netflix customers. A Netflix executive projected the company would spend more than $6 billion in 2017 on content licensing, up from $5 billion this year.

Who needs FiOS when you can get 5G wireless service with a data plan?

Fran Shammo has a message for Verizon customers and investors: fiber optic broadband is so… yesterday. Your millennial kids aren’t interested in gigabit speed, unlimited use Internet in the home. They want to watch most of their content on a smartphone and spend more on usage-capped wireless plans.

Shammo is Verizon’s money man – the chief financial officer and prognosticator of the great Internet future.

Like his boss, CEO Lowell McAdam, Frammo has his feet firmly planted in the direction of Verizon Wireless, the phone company’s top moneymaker. If one ever wondered why Verizon Communications has let FiOS expansion wither on the vine, Mr. McAdam and Mr. Shammo would be the two to speak with.

This week, Shammo doubled down on his pro-wireless rhetoric while attending the Bank of America Merrill Lynch 2016 Media, Communications & Entertainment Conference — one of many regular gathering spots for Wall Street analysts and investors. He left little doubt about the direction Verizon was headed in.

Shammo

“As we look at the world if you will, and we look at our ecosystem, […] the world is moving to a broadband wireless world,” Shammo told the audience. “Now, I am really – when I say world, I am really talking the U.S., right. So, but I do think the world is moving to a wireless world.”

In Shammo’s view, the vast majority of people want to consume content, including entertainment, over a 4G LTE (or future 5G) wireless network on a portable device tied to a data plan. Shammo predicted wireless usage will surpass DSL, cable broadband, and even FiOS consumption in 3-5 years. If he’s right, that means a mountain of money for Verizon and its investors, as consumers will easily have to spend over $100 a month just on a data plan sufficient to cope with Shammo’s predicted usage curve. In fact, your future Verizon Wireless bill will likely rival what you pay for cable television, broadband, and phone service together.

Millennials don’t want fiber, they want wireless data plans

Shammo argued millennials are driving the transition to wireless, claiming they already watch most of their entertainment over smartphones and tablets, not home broadband or linear TV. His view is the rest of us are soon to follow. Shammo claims those under 30 are turning down cable television and disconnecting their home broadband service because they prefer wireless. Others wonder if it is more a matter of being able to afford both. A 2013 survey by Pew data found 84% of households making more than $54,000 have broadband. That number drops to 54% when annual household incomes are lower than $30,000 per year. But those income-challenged millennials don’t always forego Internet access — some rely on their wireless smartphone to access online content instead.

A microcell

Verizon Wireless may be banking on the same kind of “hard choice” many made about their landline service. Pay for a landline and a mobile phone, or just keep mobile and disconnect the home phone to save money. Usage growth curves may soon force a choice about increasing your data plan or keeping broadband service at home. Shammo is betting most need Verizon Wireless more.

Verizon FiOS is really about network densification of our 4G LTE network

Shammo continued to frame its FiOS network as “east coast-centric” and almost a piece of nostalgia. The recent decision to expand FiOS in Boston is not based on a renewed belief in the future of fiber, Shammo admitted, it is being done primarily to lay the infrastructure needed to densify Verizon’s existing LTE wireless network in metro Boston to better manage increased wireless usage. Shammo’s spending priorities couldn’t be clearer.

“Obviously, we said, we would build up Boston now, because it makes sense from a LTE perspective,” Shammo said. “We can spend $300 million over the next three years to make that more palatable to expand FIOS. So we will continue to expand that broadband connection via fiber where it makes financial sense for us.”

In other words, it is much easier to justify capital expenses of $300 million on network expansion to Wall Street if you explain it’s primarily for the high-profit wireless side of the business, not to give customers an alternative to Time Warner Cable or Comcast. FiOS powers cell sites as well as much smaller microcells and short-distance antennas designed to manage usage in high traffic neighborhoods.

Shammo also believes Verizon must not just be a ‘dumb wireless’ connection. Controlling and distributing content is also critically important, and Shammo is still a big believer in Verizon’s ho-hum GO90 platform, which compared to Hulu and Netflix couldn’t draw flies.

Even Verizon CEO McAdam admitted a few weeks ago at another Wall Street conference GO90 was “a little bit overhyped.” Most of GO90’s content library is mostly short video clips targeted at millennials with short attention spans. The downside of making that your target audience is the rumor many who sampled the service early on have already forgotten about it and moved on.

Forget about congested home and on-the-go Wi-Fi and expensive fiber optics. Verizon will sell you 5G wireless (with a data plan) for everywhere.

Shammo believes the future isn’t good for Wi-Fi in the home and on-the-go. As data demands increase, he believes Wi-Fi will become slow and overcongested.

“There is a quality of service with our network that you can’t get with others,” Shammo said. “I mean, most people in this room would realize that when Wi-Fi gets clogged, quality of service goes significantly down. It’s an unmanaged network. You can’t manage that.”

Instead, Verizon will eventually deploy 5G wireless instead of FiOS in many areas without fiber optic service today. Frammo said 5G would cost Verizon a lot less than fiber, “because there is no labor to dig up your front lawn, lay in fiber, or be able to fix something.”

Shammo doesn’t believe 5G wireless will replace 4G LTE wireless, however.

“LTE will be here for a very long time and be the predominant voice, text, data platform for mobile,” Shammo said.

So instead of unlimited fiber optic broadband, Verizon plans to sell home broadband customers something closer to Wi-Fi, except with a data allowance. It’s a return to fixed wireless service.

Verizon Wireless’ existing fixed wireless service is heavily usage capped and not cheap.

Just a few short years ago, Verizon was looking to fixed wireless as a replacement for rural DSL and landline service. Now Shammo sees the economics as favorable to push a similar service on all of its customers, except those already fitted for FiOS. That changes the dynamics on usage as well, because Verizon Wireless ditched unlimited service several years ago except for a dwindling number of customer grandfathered in on its old unlimited plan.

Current 4G LTE fixed wireless customers can expect 5-12Mbps speeds with data plan options of $60 for 10GB, $90 for 20GB, or $120 for 30GB. The 5G service would be substantially faster than Verizon’s current fixed LTE wireless service, but the company’s philosophy favoring data caps for wireless services makes it likely customers will pay much higher prices for service, higher than Verizon charges for FiOS itself.

The Communications Workers of America just proved there is strength in numbers. After 39,000 network technicians and customer service representatives employed by Verizon Communications went on strike April 13 after nearly a year without a contract, Wall Street pondered the potential impact of $200 million in lost business for Verizon’s FiOS, phone and television services.

Reports from customers and union observers suggested Verizon’s temporary workforce of strike replacements proved inept and unsafe, putting increasing pressure on Verizon executives to respond to union demands to share a piece of Verizon’s vast and increasing profits.

The CWA and the International Brotherhood of Electrical Workers (IBEW) have also been some of the strongest advocates of pushing Verizon to continue service upgrades, particularly for its FiOS fiber to the home service. The unions believe the fiber upgrades not only benefit the workers who install and maintain the optical fiber network, but also help Verizon sell more products and services to customers who would love an alternative to their local cable company. Although Verizon FiOS has a substantial presence in major Eastern Seaboard cities, vast areas of Verizon territory are still dependent on its aging copper wire networks that can handle little more than basic landline service and slow speed DSL.

The seven week strike was the largest and longest strike action in the United States since 2011, and attracted the attention of the Obama Administration and the two Democratic candidates for president. It was also one of the most effective, from the union’s point of view.

Verizon workers have been on strike since April 13.

Verizon executives eventually agreed to ‘share the wealth’ with workers, offering to hire 1,400 new permanent employees and pay raises just above 10 percent. It was a long journey for the workers and the unions, which have fought for a new comprehensive agreement with the company for several years. The CWA last struck Verizon for two weeks after negotiations deadlocked in 2011. Their latest contract ended last August, leading the union to begin several months of “informational picketing,” which effectively meant workers visibly protested Verizon’s policies towards its employees but stayed on the job while doing so.

Conservative groups attacked the unions and defended Verizon officials in editorials and columns. Billionaire Steve Forbes called Verizon employees “bamboozled” and greedy. Unless workers capitulated to Verizon executives’ wise and realistic demands, “Big Labor” would reduce Verizon’s tech revolution to something that “looks more like Detroit than Silicon Valley.” Forbes had nothing to say about Verizon’s explosive growth in compensation and bonus packages for the company’s top executives, or its increased debt load from buying out Vodafone, its former wireless partner, or its generous dividend payouts and share buybacks to benefit shareholders.

Did Verizon Capitulate Because it Intends to Sell Off its Wireline Networks?

Is Verizon planning on selling off its wireline networks?

Some on Wall Street were visibly annoyed that Verizon capitulated. Some analysts predicted it was the beginning of the end of Verizon remaining in the wired networks business.

“They needed to end the strike and they bit the bullet,” said Roger Entner of Recon Analytics. He said he thinks the deal “reinforced their commitment to basically exiting [wireline], the least profitable, most problematic part of the business. [The new contract] gives Verizon four years basically to get rid of the unit. Let it be somebody else’s problem.”

That somebody else is likely Frontier Communications. Stop the Cap! has predicted for more than a year our expectation Verizon Communications will continue to gradually sell off its wired service areas, starting with those inland regions not FiOS-enabled, to Frontier as that smaller company’s capacity to borrow money to finance transactions allows. Frontier has a strong interest in staying in the wireline business, and is acknowledged to have stable and friendly relations with its unionized workforce, including former Verizon workers. This commitment is especially significant in a context where employers are held liable for their employees’ conduct in LA, underscoring the importance of maintaining positive and compliant workplace relationships.

Jim Patterson, CEO of Patterson Advisory Group, believes Verizon’s recent investments in fiber optics signals it does intend to stay in the wireline business. But there is a careful line to be drawn between wireline investments in services like FiOS and those made to support its much more profitable wireless unit, Verizon Wireless.

Bruce Kushnick, executive director of New Networks Institute, is increasingly skeptical about Verizon’s FiOS spending priorities.

Shammo

“According to the NY Attorney General, about 75% of Verizon NY’s wireline utility budget has been diverted to fund the construction of fiber optic lines that are used by Verizon Wireless’s cell site facilities and FiOS cable TV,” Kushnick wrote last week in a Huffington Post article that questions Verizon’s announced investments in wiring Boston with fiber optics for FiOS. “On the 1st Quarter 2016 Verizon earnings call, [chief financial officer Fran] Shammo said that the build out is for another Verizon company – Verizon Wireless—and it is going to be paid for by the wireline, state utility— Verizon Massachusetts; i.e., it is diverting the wireline construction budgets to do another company’s build out of fiber, to be used for wireless services.”

If Kushnick is right, Verizon may not care whether the service area(s) it sells are well-fibered or not. The fact Verizon recently sold FiOS-enabled service areas in Texas, Florida, and California to Frontier Communications may bolster Kushnick’s case. Shammo’s statements to Wall Street suggest Verizon is primarily attracted to investing in areas where it needs to improve its wireless service, not its landline, broadband, and television services, delivered over FiOS fiber optics.

“We’ll take one city at a time,” Shammo said on the same conference call. “Obviously we still don’t have Alexandria (Virginia) built out or Baltimore. So if we get to a position where we believe we’re going to need to invest in [wireless network/cell] densification in those cities, then that’s an opportunity for us to take a look at it. But at this time we’re concentrating on Boston.”

Unions Can Make a Big Difference for Workers

Nobody believes individual workers could have negotiated the kind of salary and benefits package the CWA and IBEW won for their organized workforces. The New York Daily News heralded the end of the strike as “score one for the middle class — and for the importance of collective bargaining.”

As wages continue to stagnate for most Americans, union supporters call organized labor the last bulwark against a global wage race to the bottom for the middle class. Challenged by cheap labor overseas, increasing health care costs, and government policies some claim only promote accelerating wealth for about 1% of the population, the CWA’s victory forced Verizon to share some of its profits with the workers that helped make those profits possible.

Share the wealth

“Executives get performance bonuses, stock awards, and retention bonuses for doing a good job, so why shouldn’t we?” argued one picketer outside of a Wall Street event featuring a Verizon executive.

Verizon’s last “final offer” before capitulating was a 6.5% salary hike and little, if any, future job security. Now Verizon will have to hire additional permanent call center workers instead of outsourcing that work to Asian-based call centers. The unions also won other concessions that reduce compulsory relocation to other cities, canceled planned pension and disability insurance cuts, and the CWA got its first contract for Verizon’s previously non-unionized wireless retail force.

Dear Members,

We have had a very busy winter and spring here at Stop the Cap! and we thought it important to update you on our efforts.

You may have noticed a drop in new content online over the last few months, and we’ve had some inquiries about it. The primary reason for this is the additional time and energy being spent to directly connect with legislators and regulators about the issues we are concerned about. Someone recently asked me why we spend a lot of time and energy writing exposés to an audience that almost certainly already agrees with us. If supporters were the only readers here, they would have a point. Stop the Cap! is followed regularly by legislators, regulators, public policy lobbyists, consumer groups, telecom executives, and members of the media. Our content is regularly cited in books, articles, regulatory filings, and in media reports. That is why we spend a lot of time and energy documenting our positions about data caps, usage billing, Net Neutrality, and the state of broadband in the United States and Canada.

A lengthy piece appearing here can easily take more than eight hours (sometimes longer) to put together from research to final publication. We feel it is critical to make sure this information gets into the hands of those that can help make a difference, whether they visit us on the web or not. So we have made an extra effort to inform, educate, and persuade decision-makers and reporters towards our point of view, helping to counter the well-funded propaganda campaigns of Big Telecom companies that regularly distort the issues and defend the indefensible.

Four issues have gotten most of our attention over the last six months:

1. The Charter/Time Warner Cable/Bright House merger;
2. Data cap traps and trials (especially those from Comcast, Blue Ridge, Cox, and Suddenlink);
3. Cablevision/Altice merger;
4. Frontier’s acquisition of Verizon landlines and that phone company’s upgrade plans for existing customers.

We’ve been successful raising important issues about the scarcity of benefits from telecom company mergers. In short, there are none of significance, unless you happen to be a Wall Street banker, a shareholder, or a company executive. The last thing an already-concentrated marketplace needs is more telecom mergers. We’re also continuing to expose just how nonsensical data caps and usage-based billing is for 21st century broadband providers. Despite claims of “fairness,” data caps are nothing more than cable-TV protectionism and the further exploitation of a broadband duopoly that makes it easy for Wall Street analysts to argue “there is room for broadband rate hikes” in North America. Stop the Cap! will continue to coordinate with other consumer groups to fight this issue, and we’ve successfully convinced at least some at the FCC that the excuses offered for data caps don’t hold water.

Dampier

FCC chairman Tom Wheeler’s broadening of Charter’s voluntary three-year moratorium on data caps to a compulsory term as long as seven years sent a clear message to broadband providers that the jig is up — data caps are a direct threat to the emerging online video marketplace that might finally deliver serious competition to the current bloated and overpriced cable television package.

Wheeler’s actions were directly responsible for Comcast’s sudden generosity in more than tripling the usage allowance it has imposed on several markets across the south and midwest. But we won’t be happy until those compulsory data caps are gone for good.

More than 10,000 Comcast customers have already told the FCC in customer complaints that Comcast’s data caps are egregious and unfair. Considering how unresponsive Comcast has been towards its own customers that despise data caps of any kind, Comcast obviously doesn’t care what their customers think. But they care very much about what the FCC thinks about regulatory issues like data caps and set-top box monopolies. How do we know this? Because Comcast’s chief financial officer this week told the audience attending the JPMorgan Technology, Media and Telecom Broker Conference Comcast always pays attention to regulator headwinds.

“I think it’s our job to make sure we pivot and react accordingly and make sure the company thrives whatever the outcome is on some of the regulatory proposals that are out there,” said Comcast’s Mike Cavanagh. We suspect if Chairman Wheeler goes just one step further and calls on ISPs to permanently ditch data caps and usage billing, many would. We will continue to press him to do exactly that.

Stop the Cap! supports municipal and community-owned broadband providers.

Other companies are also still making bad decisions for their customers. Besides Comcast’s ongoing abusive data cap experiment, Cox’s ongoing data cap trial in Cleveland, Ohio is completely unacceptable and has no justification. The usage allowances provided are also unacceptably stingy. Suddenlink, now owned by Altice, should not even attempt to alienate their customers, particularly as the cable conglomerate seeks new acquisition opportunities in the United States in the future. We find it telling that Altice feels justified retaining usage caps on customers in smaller communities served by Suddenlink while denying they would even think of doing the same in Cablevision territory in suburban New York City. Both Suddenlink and Cablevision have upgraded their networks to deliver faster speed service. What is Altice’s excuse about why it treats its urban and rural customers so differently? It frankly doesn’t have one. We’ll be working to convince Altice it is time for Suddenlink’s data caps to be retired for good.

We will also be turning more attention back on the issue of community broadband, which continues to be the only competitive alternative to the phone and cable companies most Americans will likely ever see. The dollar-a-holler lobbyists are still writing editorials and articles claiming “government-owned networks” are risky and/or a failure, without bothering to disclose the authors have a direct financial relationship to the phone and cable companies that don’t want the competition. We will be pressing state lawmakers to ditch municipal broadband bans and not to enact any new ones.

We will also continue to watch AT&T and Verizon — two large phone companies that continue to seek opportunities to neglect or ditch their wired services either by decommissioning rural landlines or selling parts of their service areas to companies like Frontier. AT&T specializes in bait-n-switch bills in state legislatures that promise “upgrades” in return for further deregulation and permission to switch off rural service in favor of wireless alternatives. That’s great for AT&T, but a potential life-threatening disaster for rural America.

We continue to abide by our mandate: fighting data caps and consumption billing and promoting better broadband, regardless of what company or community supplies it.

As always, thank you so much for your financial support (the donate button that sustains us entirely is to your right) and for your engagement in the fight against unfair broadband pricing and policies. Broadband is not just a nice thing to have. It is an essential utility just as important as clean water, electricity, natural gas, and telephone service.

Phillip M. Dampier
Founder & President, Stop the Cap!