Insiders at the Federal Communications Commission have leaked word all five commissioners have cast their votes in favor of a controversial partnership deal between Verizon Wireless and the nation’s largest cable operators to cross-market products and services to customers.

Three Democrats and two Republicans have approved both the marketing agreement and a spectrum transfer deal from cable operators to Verizon Wireless.  Republicans did not approve of an order mandating a data roaming obligation or the recognition the FCC has the authority to oversee the marketing agreement, but both will remain part of the final order.

The Justice Department earlier approved the modified deal that includes a time limit on the marketing partnership and restricts certain cross-marketing in FiOS-wired areas.

FCC chairman Julius Genachowski said the spectrum transfer was urgently needed to address wireless spectrum shortages. But consumer groups opposed the deal, calling it anti-competitive and anti-consumer. Some unions also say the deal comes close to collusion and will lead to Verizon further pulling back from its fiber upgrade FiOS in favor of selling cable subscriptions.

“If you are a voice copper customer and you call in [with] trouble on your line, when we go out to repair that we are actually moving you to the FiOS product. We are not repairing the copper anymore.” — Fran Shammo, Verizon’s executive vice-president and chief financial officer

Verizon has declared the end of the copper wire phone line, at least in areas where the company’s companion fiber optic network FiOS is available. Fran Shammo, chief financial officer of Verizon Communications spoke about the death of the copper-based landline and the company’s strategic plans for its wired and wireless networks in the coming quarter at Oppenheimer’s 15th Annual Technology, Internet & Communications Conference last Wednesday.

Verizon’s quiet and involuntary switch-out to fiber service is part of the company’s grander marketing effort to push customers towards upgrading service.

“The benefit we are getting […]  if you are a voice customer and we move you to [fiber] we now can upsell you to the Internet,” Shammo explained. “If you come over as a voice and DSL customer and we move you to FiOS, you now are a candidate for the video product. So there is an upsell which is definitely a benefit to this.”

Verizon earlier announced it would no longer sell standalone DSL service to customers, and has stopped selling copper-based DSL products in areas where Verizon FiOS is available. It even discourages customers from considering standalone FiOS broadband, with a budget-busting price of $64.99 for stand-alone 15/5Mbps service with a two-year contract or $69.99 on a month-to-month basis. Verizon offers considerably better value when customers sign up for multiple FiOS services.

Scrap heap

Verizon says the reliability of fiber makes maintaining older copper wire networks pointless.

“The bigger benefit is we are transforming the cost structure of our copper business because the copper fails two to three times more than fiber, which means we have two to three more times we have a tech and a truck rolling out to that copper connection. So we are eliminating that,” Frammo said.

Frammo added decreasing repair and maintenance expenses will help improve profit margins for the company.

Both CEO Lowell McAdam and Frammo have made profit margins a much higher priority for Verizon Communications than ever before.

“If you look at the [landline] side of the business, […] we have made a shift that said we are going to focus more on the profitability of FiOS this year. And that is important for us to do, because we need to generate the cash flow so that we can reinvest in those platforms,” Frammo said. “But I think as an industry as a whole you are seeing a different focus now, that it is more on returns, it is more on profitability. Can that continue? Sure. Obviously, you might have your blips here and there based on how fast something grows in one quarter versus another, but if you look at Verizon Wireless and you look at Verizon we are expanding our margins.”

Frammo addressed several key plans Verizon has for both its wired and wireless businesses, and what political priorities the company has for the rest of the year:

Verizon Wireless’ 4G LTE Network is a Platform for Profits

Shammo told investors Verizon’s 4G LTE platform is now available to 76 percent of its customers in 337 markets. LTE, Shammo said, delivers not only the speed customers want but reduced operating costs for the cell phone provider. But Shammo said that will not bring reduced prices for customers — Verizon intends to use its LTE network as a platform for increasing profitability.

“When you take that network and you overlay our shared plan with that and now others are following with that shared plan, the entire industry from a shared perspective has a lot of room for growth because when you think about that network and the speed it provides, and then you take all these devices and you think about the number of tablets that have been sold in the United States that are not connected to a wireless network, you now enable people to connect those devices much easier.

“So when you think about that speed and that price plan that pools those data minutes, the growth profile here is really good for the industry and very, very good for Verizon Wireless because we think we have a strategic lead here.

“We are going to have to wait to see what the usage profile of this is. But can we expand our data, our data pricing? Of course we can, so you just add in more tiers. But that is part of where we think the future is going because when you think about the speeds and the video capability of LTE we do project out that that usage is going to continue to substantially increase which then folks will buy up.

“So it is going to be very, very easy for people to attach devices to just go beyond what we know today as a smartphone, a dongle, or a tablet. Now take it to your car, now take it inside your home for remote medical monitoring or whatever else that can happen in that house. Those can also now be attached to that price plan and everything can run off of that network.”

Frammo also hinted Verizon Wireless may be prepared to bring back an old concept from the days of long distance dialing — peak and off-peak data usage rates. Use Verizon’s network during peak usage periods and the company could charge a premium. But its LTE 4G platform also allows it to offer reduced rates when the network is being used less.

Shammo

Killing Off Your Phone Subsidy One Dollar at a Time

Shammo said Verizon Wireless is moving forward (along with other carriers) to gradually reduce equipment subsidies customers get when they upgrade their phones at contract renewal time. Verizon earlier discontinued customer loyalty discounts like its “New Every Two” plan and has stopped offering early upgrade incentives. Now the company is eliminating subsidies for some customers altogether and won’t offer them on several different types of devices.

“The industry has done a lot around trying to reform the upgrade policies and implement upgrade fees to try to strengthen the financial capability of that subsidy on a smartphone,” Shammo said. “We have also taken the track of not subsidizing tablets, less subsidy on dongles. It really is now all around the attachment of those devices into those price plans.”

Shammo added as competitors reduce subsidies, Verizon can continue to bring them down further over time. Shammo said that will improve the company’s margins.

Verizon Prepaid vs. Contract (Postpaid) Customers: “The religious belief is you can’t do anything that is going to deteriorate the postpaid base.”

Despite the company’s improved margins and declining costs from its 4G LTE platform, Frammo said Verizon has no plans to reduce prepaid pricing, because it could erode revenue from customers on two year contracts who might consider switching to a no-contract, prepaid plan.

“Obviously we are a postpaid carrier so anything we do — the religious belief is you can’t do anything that is going to deteriorate the postpaid base,” Frammo said. “I think people are willing to pay a slight premium to get on [Verizon’s] most reliable network and what we are finding is people are coming to that network. I think at this point we are very, very satisfied with where the prepaid market is. We are a premium to that prepaid market and, based on our growth trajectory right now, we are very comfortable with that price point.”

Verizon’s Political Priority for 2012: Where is our corporate tax cut?

While Shammo would not answer a question about which presidential candidate he feels would best serve Verizon’s interests if elected, Shammo made it clear the company is terrified of a so-called “tax cliff” — the expiration of the Bush-era tax cuts and a capital gains tax increase that would raise taxes on the wealthiest corporations from the current 15 percent to up to 25 percent — still lower than the tax rate paid by many middle class workers.

“Whoever is elected needs to deal with that tax cliff because that tax cliff could be detrimental to the economic performance of the U.S.,” Shammo said. “Then on a longer-term we definitely need corporate tax reform in the United States. We are not competitive with the rest of the world and I think everyone understands that. That is going to be harder to achieve, but I think that Washington understands that there needs to be some change within the corporate tax structure.”

Dish Network is planning to introduce 5Mbps nationwide satellite broadband service after its partner company EchoStar successfully launched the satellite that will host the new service.

Bloomberg News reports Dish will introduce the service in late September or October this year and intends to market it in areas where DSL or cable broadband has been spotty or unavailable.

Dish’s broadband service will use its new EchoStar 17 satellite launched in July. The satellite can technically support download speeds up to 15Mbps, but Dish wants to start with slower speeds to maximize the number of potential customers the satellite can accommodate, which the company estimates can be as high as two million.

With an estimated 8-10 million Americans currently bypassed by broadband, Dish may have little trouble establishing a substantial customer base, if the service works as advertised. Past satellite broadband ventures have traditionally offered slow speeds and draconian “fair usage policies” which strictly limit how much customers can use the service.  The services are not cheap either.

EchoStar’s vice president of investor relations Deepak Dutt said the newest generation of satellite broadband services offer much faster service and higher capacity by an order of magnitude. But average usage per subscriber has also risen, providing a challenge for satellite broadband providers that may lack the capacity to sustain high bandwidth content, especially streaming video.

Dish already offers up to 12Mbps satellite broadband through a marketing partnership with Carlsbad, Calif.-based ViaSat, Inc. But ViaSat’s service is limited to certain geographic regions in the United States. Dish insiders say their service with EchoStar will compliment, not replace their deal with ViaSat, and will expand coverage nationwide.

The combination of broadband and satellite television may make it possible for Dish to sell new bundled packages that can compete with phone and cable companies. Dish also claims to be waiting for Federal Communications Commission approval to use its wireless spectrum to offer mobile Internet and phone service, which could also be included in a future bundled offer.

Wireless Internet Service Providers (WISPs) are incensed about efforts by CenturyLink to win waivers from the Federal Communications Commission’s Connect America rural broadband funding program that could leave WISPs facing new competition from CenturyLink made possible by surcharges paid by phone customers nationwide.

At issue is a filing from CenturyLink before the FCC that would allow the phone company to “change the rules,” according to critics. One of CenturyLink’s most prominent arguments is that WISPs have data caps that inconvenience customers. But CenturyLink buries the fact it has usage caps of its own in a footnote.

“The waiver application we filed … would allow CenturyLink to spend tens of millions of dollars to bring more broadband services to more rural and high-cost customers who do not have reasonable access to broadband service today,” CenturyLink said in a media release. “These funds would be provided by the FCC’s Connect America Fund, as well as additional investment dollars would be provided by CenturyLink. If the waiver application is approved, CenturyLink will build needed broadband services to thousands of homes in Arizona, Colorado, Washington, Oregon and several other states.”

CenturyLink claims WISPs charge considerably more for service, suffer from line-of-sight restrictions which could leave many rural customers without service, have limited spectrum which keeps broadband speeds to a bare minimum and often forces customers to endure stringent data usage caps.

The waiver request would allow CenturyLink to receive and use federal Connect America funds to deploy its DSL service to rural customers already served by WISPs if two conditions are met:

• The state where CenturyLink would spend the money has not independently verified the coverage area of the wireless ISP and objective data opens the door to an argument that a WISP cannot adequately service areas where they claim coverage;
• The WISP imposes unusually high prices ($720/yr or more) or severe usage caps (25GB per month or less).

Chuck Siefert, CEO of the Montana Internet Corporation (MIC), a WISP, argues CenturyLink has no case, and is attempting to modify the rules to accomplish its own objectives rather than adhering to the original goals of the program — to deliver broadband to the rural unserved:

CenturyLink is simply raising an old protest in a new venue. Having been designated as eligible for almost ninety million dollars of the Connect America Program (CAP), it wishes to have the opportunity to use more than a third of that as it chooses, rather than as the Commission designated after input and analysis from all parties. The Rubicon has been crossed with respect to this issue: unserved areas are those that are not served by fixed wireless providers.  Regardless of CenturyLink’s opinion of the quality of service provided, these areas have been deemed served by the Commission and CAP incremental support may not be used to build out broadband in these areas. CenturyLink is certainly capable of using other funding to build out in these areas; the Commission has not precluded that.

CenturyLink’s complaints that WISPs often come with data usage caps is ironic because CenturyLink is now imposing usage caps on its own broadband service. CenturyLink argues data caps expose the limitations inherent in wireless broadband in their filing with the FCC:

Satellite broadband also often comes encumbered with restrictive data caps. The same is true of many of the WISPs subject to this waiver request. They impose on their users highly restrictive data caps of less than 25 GB per month. Indeed, two of the WISPs impose a cap of just 5 GB per month.

It is no surprise that these WISPs would impose such unusually low caps; like satellite providers, they must ration out their highly constrained capacity among the various end users who compete for it. WISP broadband capacity—unlike the customer-specific links in DSL-based broadband—is shared by all customers within a given wireless cell or sector.

This means that the more customers a WISP persuades to sign up, the worse the average service quality gets for all customers unless the WISP sharply limits how much customers may consume.

That imperative may be an unavoidable consequence of the WISPs’ technology, but it further underscores the need to give the affected consumers a robust broadband alternative.

Siefert claims CenturyLink’s assertions about the quality of its DSL service, pricing, and performance simply fall short of the truth, and MIC does better by its customers.

Pricing

CenturyLink charges a $134.89 non-recurring charge plus $29.99/mo for “up to 1.5Mbps” DSL service, plus “up to” $99.95 for professional installation. CenturyLink’s DSL modem costs $99 and has a one-year warranty.

Siefert claims MIC charges $30/mo for “bursting speeds up to 10Mbps” and $250 for technician installation, but the company offers regular installation promotions that cost $99. MIC warrants its equipment for the life of the service and charges no fee for service calls as long as the customer is current on their bill.

But Stop the Cap! found speeds and pricing less advantageous than Siefert might have the FCC believe. For instance, MIC’s $30 tier only guarantees 384kbps with speed “bursts” up to 10Mbps. Getting committed 2Mbps service runs $55 a month with the same “bursting” speed of 10Mbps. We also found CenturyLink willing to negotiate installation charges, and the company frequently discounts or even waives them if a customer signs up for a multi-service package.

Data Caps

CenturyLink now imposes a 150GB usage cap on customers with 1.5Mbps service or slower, 250GB for customers at higher speeds.

MIC claims it does not even monitor individual customer usage. Siefert says data use limitations are found in the terms and conditions of its service and are imposed only when a customer creates a problem for other users on the network.

“Rather than strictly applying data caps, MIC’s policy is to contact its customers and explain the impact their usage has on other customers,” Siefert explains. “As a small provider in a local community, MIC is able to do this in a way that a carrier like CenturyLink cannot. CenturyLink’s representations regarding transfer caps imply that WISPs arbitrarily and automatically shut a customer down once the cap is reached. This assertion is not based on evidence and is not an accurate statement of MIC’s approach to the caps. CenturyLink’s argument that WISPs operate like satellite and therefore WISPs service areas should be categorized as unserved areas based on how transfer caps are used fails.”

Stop the Cap! found different information on MIC’s website, however, including a 20GB monthly data cap and a $15/GB overage charge. Siefert’s submission to the FCC may suggest the published cap is a guideline more than a rule.

Performance

CenturyLink still uses T1-level circuits (1.5Mbps) to connect at least some of their remote D-SLAMs, according to Siefert, which helps the phone company extend DSL service to homes and businesses far away from the company’s central office. The net result is that customers fight for the bandwidth on an insufficient backhaul, which dramatically reduces speeds during peak usage times. In Helena, Montana CenturyLink “daisy-chains” D-SLAMs to support customers over a single T3 line, creating latency problems, packet loss, and further reductions in speed and performance.

MIC is capable of providing a total of 252Mbps per distribution site. The incoming next generation of wireless technology will increase that to 1.4Gbps. Additional distribution sites can divide the traffic load similar to how new cell towers can reduce demand on other nearby towers.

Speeds

CenturyLink sells speeds “up to” a certain level without guaranteeing customers will actually get the speed they are paying to receive. Siefert says CenturyLink customers in Montana currently can manage up to 7Mbps in some areas.

MIC says it can commit to its customers they can receive 10-40Mbps (and 80Mbps by the end of 2012) over its wireless network.

Independent Netindex.com suggests MIC does offers faster service on average than CenturyLink provides in Montana:

• Montana (statewide average): MIC 5.04Mbps vs. CenturyLink 3.8Mbps
• Helena: MIC 5.08Mbps vs. CenturyLink 2.73Mbps

The Wireless Internet Service Provider Association says their members are not eligible for federal Connect America subsidies, and most wireless providers are privately financed operations built with the support of their rural customers.

Said Richard Harnish, WISPA’s executive director, “We find it hard to believe that a company like CenturyLink that gets millions of dollars in federal support now wants more free money to overbuild unsubsidized rural broadband networks that WISPs already successfully operate. To do this, CenturyLink has attempted to discredit the taxpayer-funded National Broadband Map and invent its own standards in an effort to show that they should receive more than $30 million in additional subsidies.  Our strong opposition reflects WISPA’s view that CenturyLink’s arguments are factually and technically flawed.  We thank the other associations, state agencies and WISPs that support our views.”

AT&T loves corporate free speech rights, the same ones it is using to deny customers access to Google’s Play Movies service.

With wireless Net Neutrality rendered largely ineffective with the help of AT&T and Verizon Wireless’ extensive lobbying and legal threats, AT&T has leveraged its right to govern its own network by deciding to block its wireless customers from watching Google Play Store’s streaming movie service over its 3G and 4G networks. This block is enforced even though AT&T already throttles heavy “unlimited” users and charges others more for using more data.

Geek.com was the first to discover AT&T’s curious dislike of Google Play Movies, while leaving other streaming services like Netflix, HBO Go, YouTube, and others alone (for now):

Instead of The Anchorman […] I was greeted with an error message telling me that I was not allowed to stream this movie over the mobile network. Assuming it was just an error, I tried again and got the same message. After a few minutes of playing with settings, it became clear that I was not going to be able to watch this movie without WiFi.

Yes, it seems that AT&T has removed the ability to watch Google Play Movie files over their 3G and LTE networks. This only happens with Google Play Movies, and only on AT&T. […] Curiously enough, you can download or “pin” a Google Play Movie over 3G and LTE and the only warning you get is one from Google explaining that you might incur data costs.

AT&T and Verizon have both declared Net Neutrality violates their free speech rights as corporate citizens — rights further expanded with the Supreme Court’s “Citizens United” decision.

When Federal Communications Commission chairman Julius Genachowski sought to introduce mild Net Neutrality protections for the Internet, both companies threatened to sue (Verizon has a case pending) and conservative commentators launched into tirades about “an Obama takeover of the Internet.”

RUSH LIMBAUGH: Today the FCC approved a proposal by chairman Julius Genachowski to give the FCC power to prevent broadband providers from selectively blocking web traffic. And that’s just a ruse. Net Neutrality is not what this is really all about. This is about the feds wanting to control the Internet just as they control the public airwaves. They want to be able to determine who gets to say what, where, how often — they want to be able to determine what search services are providing what answers to your queries. It’s total government control of the Internet, and the regime has just awarded it to itself.

It’s another gleaming aspect of free speech, free market, private industry Obama has decided to take over as a Christmas present to himself and the Democrat National Committee and to Mr. Soros. He’s even beaten Hugo Chavez to the punch. Chavez is just talking about taking over the Internet in Venezuela; Obama has got it done.

Geek.com doesn’t think the Obama Administration is blocking Google Play over AT&T — AT&T is. They just cannot understand the reasoning why:

I can’t imagine any real world justification for this behavior. If you pay your carrier for an internet connection to your phone, should the provider really be allowed to control how you use that connection? What’s more is that this happened over AT&T’s high speed and mostly empty LTE network. I can easily create a wireless hotspot on this same phone and stream a video from the Nexus 7, using the exact same data connection to accomplish the exact same task. This move is confusing at best, and AT&T is going to quickly alienate customers eager to take advantage of their brand new LTE devices as they receive them.

[flv width=”640″ height=”500″]http://www.phillipdampier.com/video/Corporateland.flv[/flv]

Mark Fiore channels Disney-sentimentality schtick on a whole new level with his take on AT&T’s Pinocchio-CorporateLand dream come true: the right to be human. (1 minute)