Phillip “Another year, another AT&T deregulation measure” Dampier

It’s back.

It seems that nearly every year, AT&T and its well-compensated fan base of state legislators trot out the same old deregulation proposals that would end oversight of basic telephone service and allow AT&T (and other phone companies in Kentucky) to pull the plug on landline service wherever they feel it is no longer profitable to deliver.

This year, it’s Senate Bill 99, introduced once again by Sen. Paul “AT&T Knows Best” Hornback (R-Shelbyville). Back in 2012, Hornback disclosed AT&T largely authors these deregulation measures and he introduces them on AT&T’s behalf. In fact, he’s proud to admit it, telling the press nobody knows better than AT&T what the company needs the legislature to do for it.

“You work with the authorities in any industry to figure out what they need to move that industry forward,” Hornback said. “It’s no conflict.”

While Hornback moves AT&T forward, “his” bill will move rural Kentucky’s best chances for broadband backwards.

AT&T always pulls out all the stops when lobbying for its deregulation bills. In Kentucky, AT&T has more than 30 legislative lobbyists, including a former PSC vice chairwoman and past chairs of the state Democratic and Republican parties working on their behalf. It has spent over $100,000 in state political donations since 2007.

The chief provisions of the bill would:

• End almost all oversight of telephone service by the Public Service Commission anywhere there are more than 15,000 people living within a telephone exchange’s service area;
• Give Kentucky phone companies the right to disconnect urban/suburban basic landline phone service and replace it with either wireless or Voice over IP service;
• Allow rural customers to keep landline service for now, but also permits AT&T and other companies to effectively stop investing in their rural wired networks.

This year, AT&T apparently conceded it was just too tough to convince the legislature to let them disconnect hundreds of thousands of rural Kentucky phone customers at the company’s pleasure, so this time they have permitted rural wired service to continue, with some exceptions that make life easier for AT&T.

First, the end of oversight of telephone service means customers in larger communities in Kentucky will have no recourse if their phone service doesn’t work, is billed incorrectly, is disconnected during a billing dispute, or never installed at all. The PSC has traditionally served as a last resort for customers who do not get satisfaction dealing with the local phone company directly. PSC intervention is taken very seriously by most phone companies, but the state agency will be rendered almost toothless under this bill.

Second, although existing rural phone customers would be able to keep their basic landline service (for now) under this measure, nothing prevents AT&T from marketing alternative wireless phone service to customers experiencing problems with their existing service. Verizon has attempted that in portions of upstate New York, where telephone network deterioration has led to increased complaints. In some cases, Verizon has suggested customers switch to wireless service instead of waiting for phone line repairs which may or may not solve the problem. New rural customers face the possibility of only being offered wireless or alternative phone services.

Third, provisions in the bill give AT&T and other companies wide latitude to offer wireless or Voice over IP alternatives to landline service with little recourse for customers who only later discover these alternatives don’t support faxes, medical or security alarm monitoring, dial-up Internet, credit card processing, etc.

Fourth, the bill eliminates any requirement imposed upon broadband service in existence as of July 15, 2004. In fact, the measure specifically defines both phone and broadband service as “market-based and not subject to state administrative regulation.” That basically means service will be unregulated.

AT&T’s wireless home phone replacement

Here are some real world examples of where S.B. 99 could trip up consumers:

1. An elderly Louisville couple living the summer months in Louisville discover their phone service has been switched to the U-verse platform over the winter as AT&T seeks to decommission its deteriorating landline network in the neighborhood. S.B. 99 offers customers a 30-day opt out provision upon first notification, allowing a customer dissatisfied with the alternative service the right to switch back to their landline. But this couple was in Florida during the 30-day window, did not receive the notification to opt out in time to act, and are now stuck with U-verse. Unfortunately, the home medical monitoring equipment for his pacemaker does not work with Voice over IP phone service. This couple’s recourse: None.
2. A customer moves into a new home currently served by AT&T’s wireless home phone replacement service. The customer doesn’t like the sound quality of the service and wants a traditional landline instead. Her recourse: None.
3. A retired couple uninterested in broadband service or television from AT&T U-verse suddenly discovers AT&T wants to raise prices on landline phone service, but offers savings if the couple agrees to sign up for U-verse. Instead of paying a $25 monthly phone bill, the couple is now being asked, on a fixed income, to pay $100 a month for services they don’t want or need. Their recourse: They can appeal to keep their landline if they meet the aforementioned deadline, but they have no recourse if AT&T raises rates for basic phone service to make its discounted bundled service package seem more attractive.

Hood Harris, president of AT&T Kentucky, follows the same playback AT&T always uses when pushing these bills by framing its argument around landline telephone service regulation, which is an easy sell for cell phone-crazy customers who have not made a landline call in years:

Harris

Some of Kentucky’s laws that regulate our phones were written before cable television, cell phones, the Internet or email existed.

Because of these outdated laws, providers like AT&T must sink resources into outdated technology that could be invested in the modern broadband and wireless technology consumers want and need.

Every dollar invested in old technology is a dollar not being invested in speeding up the build out of new technology across the commonwealth.

It’s no longer the 19th century coming into your home over the old, voice-only phone network that was put in place under now-outdated laws. It’s the 21st century coming into your home over modern networks. While technology has changed dramatically for the better in just the past few years, our laws have not.

Despite what you may have heard, SB 99 will not remove landlines from rural homes or businesses.

Instead, this legislation puts those customers in charge of deciding which communications services they want and need. If you are a rural customer, for example, you may choose to join the nearly 40 percent of Kentuckians who already have moved on from landline home phones and gone only with a wireless phone, or you may choose a landline phone that’s provided over the Internet (known as Voice over Internet Protocol, or VoIP), or you may choose both a VoIP and a wireless service.

But you do not have to — you can keep your existing landline phone if you like. Under SB 99, the choice is yours.

It’s seems like a logical argument, until you read between the lines. Harris implies that those old-fashioned laws governing landlines you don’t have anymore are slowing down AT&T from bringing about a Broadband Renaissance for Kentucky. If AT&T only was freed from the responsibility of patching up its copper wire phone network, it could spend all of its time, money, and attention on improving cell phone service and bring broadband to everyone. Harris promises every resident will have a choice to get the service they want — wireless or wired — as long as you remember he is only talking about basic phone service, not broadband.

If your community isn’t highlighted on this map, AT&T has a wireless-only future in store for you.

Harris avoids disclosing AT&T’s true agenda. The company has freely admitted to shareholders it wants to scrap its rural wired network, now considered too costly to maintain for a diminishing number of customers. Unlike independent phone companies like Frontier, AT&T has been in no hurry to upgrade these rural customers for broadband service. AT&T has not even bothered to apply for federal broadband funding assistance to defray some of the costs of extending DSL to its rural customer base. With no possibility of buying broadband from AT&T, customers have little incentive to keep wired service if a cell phone will do. But decommissioning landline service in rural Kentucky guarantees these customers will probably never receive adequate broadband.

The “long-term cost reduction” AT&T mentions above is for them, not for you.

AT&T claims it will invest the savings in a wireless broadband network for rural customers, but as any smartphone owner will attest, AT&T’s wireless service is much more expensive than traditional phone service and its data plans are stingy and very expensive. Customers who can buy DSL from AT&T pay as little as $14.99 a month for up to 150GB of usage. A wireless data plan with AT&T for a home computer or notebook starts at $50 a month and only provides 5GB of usage before customers face a $10 per gigabyte overlimit fee. Which would you prefer: paying $14.99 for 150GB of usage with AT&T DSL or $1,500 for the same amount of usage on AT&T’s wireless network?

AT&T’s claims it will expand broadband as a result of not having to spend money on its landline network are specious. In fact, regardless of whether Kentucky passes S.B. 99 or not, AT&T has already embarked on its last known U-verse expansion. Project Velocity IP (VIP) devotes $6 billion to expanding U-verse to 57 million homes, reaching 75% of customer locations by the end of 2015. For the remaining 25% of customers, mostly in rural areas, AT&T’s plan isn’t to spend more money on improved wired service. Instead, it will build out its wireless network to serve the remaining customers with its LTE wireless broadband service — the same one that costs you $1,500 a month if you use 150GB.

Wireless is a cash cow for AT&T, so even saddled with its landline network, the company still spends the bulk of its investments on the wireless side of the business. Project VIP could have devoted all its resources to bringing U-verse to a larger customer base, but it won’t. AT&T sees much fatter profits spending $14 billion now to expand its wireless 4G LTE network and collect a lot more money later from its rural Kentucky customers.

Kentucky residents who don’t have U-verse in their area by the end of 2015 are probably never going to get the service, with or without S.B. 99. So why support a measure that delivers all the benefits to AT&T and leaves you sorting through the fine print just to keep the service you have now at a reasonable price. In every other state where AT&T has won deregulation, it raises the rates with no corresponding improvement in service.

Just how bad can AT&T’s wireless home phone replacement be? Just look at their disclaimers:

AT&T Wireless Home Phone is not compatible with home security systems, fax machines, medical alert and monitoring services, credit card machines, IP/PBX Phone systems, or dial-up Internet service. AT&T’s fine print on its website.

“AT&T’s wireless services are not equivalent to wireline Internet.” Wireless Customer Agreement, Section 4.1.

“WE DO NOT GUARANTEE YOU UNINTERRUPTED SERVICE OR COVERAGE. WE CANNOT ASSURE YOU THAT IF YOU PLACE A 911 CALL YOU WILL BE FOUND.” (All caps in original). Section 4.1.

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.

Retirees enjoying employer-based discounts on wireless service are learning they are often ineligible to continue getting a break on their Verizon Wireless bill after the phone company began auditing its discount program.

Verizon Wireless, like many wireless providers, has agreements with many companies extending discounts to workers as an employee benefit. But with millions out of work, ongoing downsizing, and early retirement, Verizon Wireless decided to start periodic audits to re-verify its wireless customers receiving discounts of 15-25% or more they may no longer be qualified to receive.

The audit is likely to earn millions in extra revenue as unqualified customers are dropped from the program.

Among the hardest hit are retirees who find they no longer qualify.

Verizon Wireless blames companies for not including retirees in their employer discount program and several human resources departments blame Verizon Wireless for not giving them that option as part of the employer discount contract.

Among those losing discounts are law enforcement personnel, retirees from the U.S. Post Office, Lockheed Martin, and countless other corporations. Most federal and state government retirees also no longer qualify. A handful of large companies that have major accounts with Verizon Wireless have negotiated discounts for retirees, but they are reportedly few in number.

Most retirees discover they are about to lose their discount when Verizon Wireless auditors request they revalidate their employment in a text message or letter. Every customer getting a discount will now be periodically reverified.

“Verizon Wireless will periodically ask you to validate your current employment status to ensure we have accurate information for the company for which you work, and the discount for which you are eligible to receive,” indicates the company’s employment verification website. “It is our goal to ensure that you continue receiving a discount on eligible plans and features on your wireless service based on your employment with a company that has a business agreement with us. Verizon Wireless has agreements with a large number of companies. If you have changed employers since we last validated your employment status, you may still be eligible for a discount.”

Verizon Wireless’ Current Operational Profitability

“Verizon gives the discount because it wants to,” complained one customer. “Verizon could just as easy give that discount to every retiree if they wanted to, but Verizon chose not to.”

Critics contend Verizon can afford the discount. In one quarter last year, the company earned $20 billion in revenue from its wireless service, up 7.5 percent year over year.

Eliminating discounts, charging new service, activation, and upgrade fees, lengthening the device upgrade window, and launching new, higher-priced, bundled service plans that include services many customers don’t use have all helped the company continue to boost its earnings.

“Shame on you, Verizon,” wrote another recent retiree. “I will take my business elsewhere as soon as I can. Verizon has always been more expensive, but coverage was the best, so I stuck with them.  This is the thanks you get for being a loyal customer for many years.”

AT&T is offering T-Mobile customers — and only T-Mobile customers — up to $450 to switch their wireless service to AT&T, but is the switch actually worth it? A close inspection of AT&T’s fine print suggests some customers might want to think twice.

According to AT&T, beginning Jan. 3, under the limited-time offer, T-Mobile customers who switch to AT&T can trade-in their current smartphone for a promotion card of up to $250, which can be used toward AT&T products and services.  Trade-in values will vary based on make, model and age of the smartphone, but many of the latest and most popular smartphones will qualify for a value of $250.  T-Mobile customers can receive an extra $200 credit per line when they transfer their wireless service to AT&T and choose an AT&T Next plan, buy a device at full retail price or activate a device they currently own. The “Next” plan offers customers a chance to upgrade to a new device every year under an installment plan that divides the retail price of the phone over 20 months.

[flv]http://www.phillipdampier.com/video/CNN The Most Dangeous Man in Wireless 1-8-14.flv[/flv]

The Wall Street Journal’s ‘Digits’ explores the open marketing warfare between AT&T and T-Mobile. (3:34)

Although $450 sounds like an outstanding deal, some Wall Street analysts that usually panic when a company seems to be giving away the store, are still sleeping well at night.

“It’s not as great an offer as it appears on the surface,” Michael Hodel, equity analyst at Morningstar tells MarketWatch. “The fine print is critical.”

1. Not every smartphone will qualify for the $250 “promotional card.” Only the latest model smartphones showing no signs of wear and tear are going to earn full value. Customers with older feature or basic phones will not qualify for anything at all. Customers may be able to get just as much selling their old phone themselves.
2. AT&T is not offering a cash rebate. The value of the “promotional card” and the $200 ‘switch from T-Mobile’ bonus can only be spent on AT&T products and services. The promotional card will help defray the cost of buying a new smartphone from AT&T (which may not have the best price) and the $200 bonus will appear as a credit on a future AT&T bill.
3. By accepting the $200 bonus, customers give up any device subsidies, an important distinction if you want an Apple iPhone. AT&T’s device subsidy on this phone is higher than $200.
4. AT&T has tighter credit standards than T-Mobile. Customers with spotty credit may be asked to put down a deposit with AT&T before the company will take your business.

Legere

AT&T argues its offer will benefit T-Mobile customers by giving them access to the larger coverage area of AT&T’s wireless network and more widespread 4G service. But AT&T customers pay higher prices for access to that network. A T-Mobile customer is more likely to be sensitive to the price of the service — one of the strongest marketing points T-Mobile has in its favor. Most customers unhappy with T-Mobile’s less robust coverage tend to cancel service at the end of their contract (or earlier) and switch to either AT&T and Verizon Wireless.

According to an October report from MoffettNathanson Research, a typical T-Mobile family with 3-5 lines on a single account usually save around $50 a month off AT&T’s prices. That represents $600 a year in savings.

T-Mobile’s scrappy and aggressive marketing has had an impact, particularly on AT&T. Just a few years earlier AT&T tried to buyout T-Mobile in a consolidation move rejected by the Justice Department’s Antitrust Division. After the merger collapsed, incoming T-Mobile CEO John Legere has long forgotten whatever niceties existed between the two companies when they were trying to join forces. Legere has been on the attack against both AT&T and Verizon Wireless all year, and the effort is clearly beginning to pay off as T-Mobile adds customers.

Last year at the Consumer Electronics Show (CES) Legere called AT&T’s network “crap” on stage. So when Legere crashed AT&T’s party at this year’s CES convention, still sporting his pink T-Mobile t-shirt, AT&T’s security guards threw him out.

[flv]http://www.phillipdampier.com/video/CNN The Most Dangeous Man in Wireless 1-8-14.flv[/flv]

CNN calls T-Mobile’s John Legere the most dangerous man in wireless, for exposing “disgusting” AT&T and Verizon’s over 90% gross margin on their wireless services and their consumer unfriendly business practices. (2:41)

Horse and buggy broadband in the slow lane.

One of Australia’s largest broadband suppliers has declared the country’s satellite solution for rural broadband hopelessly overloaded to the point of being “almost unusable” and has stopped selling access.

iiNet announced this week it would no longer sign up new customers of NBN Co’s rural satellite network because the service is oversold in their view.

“We could not continue to offer a service markedly below both our own and our customers’ expectations,”  iiNet’s chief executive Michael Malone said in a statement. “During occasional peak periods the service was so slow as to be almost unusable. As more people are added to the network, quality will only decline further. In the absence of any action by NBN Co to increase transmission capacity, I call on the rest of the industry to respect their existing customers and also cease sale.”

NBN Co, however, claimed it still had room for an extra 5,000 customers — mostly on its spot beam targeting central and western Australia. A spokesperson for the satellite venture did admit satellite beams covering NSW, Tasmania and Queensland were near capacity. NBN Co is investigating leasing more bandwidth on board the satellite, but cost concerns may make that impossible.

The venture claims 48,000 Australians can satisfactorily share the interim satellite broadband service, which is supposed to offer 6Mbps speed. But as Australians join others around the world favoring online video and video conferencing over services like Skype, those original estimates have to be scrapped. In the evenings, some customers report speeds drop below 56kbps or the service simply freezes up and stops working altogether. In response, NBN has adopted a strict monthly usage limit of 9GB and has told customers they will likely have to wait up to two years for a capacity increase.

The government is planning to launch two new custom-made satellites in 2015 to ease capacity concerns. NBN Co claims the two satellites will deliver 25/5Mbps service for 200,000 rural Australians, assuming usage estimates of today’s average broadband user.

Critics contend satellite broadband is not a good long-term solution except in the most rural of sparsely populated areas. Although providing wired service may be too costly, ground-based wireless services could be the most capable technology to contend with future demand and capacity concerns.

iiNet and other ISPs may already be headed in that direction. Some are advising customers to choose fixed wireless options from Australia’s cell phone providers, although those plans are heavily capped and very expensive.

Broadband availability has a direct impact on property sales in rural Australia. A couple that purchased a home in Mount Bruno, near Wangaratta in north-east Victoria discovered only after closing the deal that NBN Co would not sell them satellite broadband because the spot beam targeting Victoria was full.

The couple needs Internet access for work and their telephone line is unsuitable for ADSL. Mobile broadband in the Mount Bruno area is sub-par and expensive as well. As a result, the couple will have to rent office space in Glenrowan or Wangaratta that qualifies for wired broadband until at least 2015, when the next NBN satellite is launched.

iiNet regrets having to turn customers away.

“At its peak, we had 500 customers signing up every week for our NBN satellite services. There is clearly a significant demand for higher quality broadband in remote Australia, and we’re absolutely gutted that we’ve had to withdraw this crucial service from sale,” said Malone.