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2014: The End Game in Telecommunications: The Perfect, Man-Made Storm

01/09/2014 01:50 pm ET | Updated Mar 11, 2014

  • "Since deregulation, landline costs skyrocket. The monthly cost of measured AT&T phone service (in California) has soared more than 260% since 2008." Los Angeles Times, Dec 6th, 2013
  • "Internet Service Providers Are Now the Most Hated Companies in U.S..." "ISPs received the lowest customer satisfaction ranking of any industry in America. And that's saying something, considering ACSI (American Customer Satisfaction Index) typically surveys nearly 50 industries per year." Huffington Post, May 22, 2013
  • "Fire Island Erupts Over Verizon's Wireless Voice Link. Forget about not being upgraded to fiber optic services. Customers are 'extremely disappointed,' 'horrified,' 'very frustrated,' with 'grave distress and dissatisfaction' about Verizon's plan to stop fixing their phone lines and giving them an inferior wireless replacement, Voice Link, which can't handle basic services like fax, DSL or even reliable e911 service." Huffington Post, July 3rd, 2013
  • "Killing Copper? Customers Say They Felt Pressured into FiOS." "'Consumers are filing complaints with us alleging that Verizon is engaged in deceptive marketing practices,' said Eric Friedman, Director of Maryland's Montgomery County Office of Consumer Protection." NBC Washington, December 10th, 2013
  • America Is 32nd in the World in Broadband Download Speeds and 42nd in Upload Speeds, Net Index by Ookla, January 1st, 2014

As the above quotes demonstrate, America is not a happy camper with their phone companies, AT&T and Verizon (not to mention their cable companies). But, truth is, the year 2013 will be remembered as the year that, for the first time in telecommunications history, an incumbent utility phone company, Verizon, decided to not repair the customers' wires after a major storm.

Unfortunately, all of this has just been a prelude to a reduction of business or residential customers' rights and services throughout the US, regardless of whether the customer is using a wired or wireless phone or who wants broadband or cable competition in 2014.

And this is not about market forces or even technology driving change. This is a man-made storm to make more money and get rid of regulations. The major incumbent phone companies, which also own the largest wireless companies, and who also, with the cable companies, control most of broadband, Internet and cable services, are working together -- a 'cabal,' a 'trust,' or some might call it -- Mob Bell.

We are all for capitalism and making hefty profits in a free market. This ain't that. The incumbent companies are utilities that control essential infrastructure and instead of competition they are now colluding in multiple ways and have figured out how to have the government protect them -- as a group. It harms the U.S. economy and it harms every customer in multiple ways.

The Perfect, Man-Made Storm: The End Game in Telecommunications

The 2013 scorecard shows that America has been under attack by the companies, who are taking more and more control by erasing oversight, regulation and obligations.

  • Buying the Takeover of Telecom. In just three years, 2011-2013, five companies -- AT&T, Verizon, Centurylink, Comcast and Time Warner, and the cable association, NCTA, spent an estimated $227 million dollars in federal lobbying and campaign financing. This is separate from the state lobbying, foundation grants or sponsorships. (Source of the basic data: Opensecrets.org)
  • 30 States have Stripped Away Some, if Not Almost All Basic Telecommunications Regulations, Obligations and Oversight. In Florida, the state commission was defunded in many areas and they can't even ask the phone companies how many lines are in service. And the state law removed most of the obligations including 'carrier of last resort' -- the obligation to make sure that customers have access to wireline phone service or that the company repairs the lines after a storm. It also allows the company to force customers onto their own wireless company-supplied service -- or just dump the customer.
  • The Rise of ALEC, the American Legislative Exchange Council in Telecommunications. ALEC is a group designed to facilitate their corporate members, such as AT&T and Verizon, in creating 'model legislation' that is used by ALEC-member state legislators, many of whom are funded by these same corporations with campaign financing or 'foundation grants' for their districts.
  • 2014 Goal: The changes in the 30 states were based on ALEC's model legislation and the 2014 goal is to finish the job in the remaining states.
  • NOTE: In December, 2013, FCC Commissioner Ajit Pai congratulated ALEC on its 'model legislation' that pushed the strip-mining of the regulations.
  • The AT&T-FCC IP Transition is in Full Swing at the FCC. This federal campaign is based on essentially the same AT&T conjured state-based model legislation. The FCC has created a Technology Transition Task Force to force this transition, even though it has little to do with technology and everything to do with AT&T's plan to make more money and get rid of regulatory oversight.
  • The Telco Congressional Campaign has Started. With 30 states now swallowed by AT&T, Verizon and Centurylink's strip-mining of regulations, there's a new cry from telco-friendly Congressional politicians to start erasing the entire Telecommunications Act of 1934, updated in 1996.
  • 19 States Restricted Municipalities from offering Competitive Broadband. At last count, this other telco-cable-ALEC based model legislation and campaign helped to restrict, if not completely stop municipalities from offering competitive broadband services, even when the incumbents were never going to do it.
  • Hyped and Manipulated Data Are Now the Standard. From the 'wireless only' statistics, which only represent residential voice service and no data or business services, to the 'access line accounting' that doesn't include the majority of data lines in service, such as DSL to U-Verse TV, the companies have skillfully been able to bring in reasonable sounding, but 'distorted' statistics to make their case.
  • No More Serious High Speed Wired Deployments or Cable Competition. Verizon announced that it is no longer going to expand its FiOS deployment outside of the current 'footprint'. Meanwhile, AT&T has stated it will be building out some more of U-Verse, its 'copper-to-the-home' service, but in the end, AT&T will service less than 50% of their territory with TV capable services -- in 22 states.
  • As noted, America is 32nd in broadband download speeds and it is going to get worse due to this slowdown in upgrading the wired networks.
  • The Wireline-Wireless-Cable Collusion. Verizon's wireless company isn't competing with the wireline company and Verizon has a deal with the cable companies to bundle their cable services with wireless in areas they aren't upgrading. Moreover, customers can't get competitive broadband, Internet or cable services over the wires coming into their homes
.

And the Implications Are Pretty Horrific. The Apparent AT&T and Verizon Plan:

  • Let the copper wiring degrade -- which appears to have been the plan for the last decade. Then they can claim it has 'chronic problems.'
  • Close down the copper wiring in areas they don't want to serve and push these customers onto wireless -- which they also own.
  • Close down the copper wiring in areas that are considered the 'upgraded' networks -- Verizon's FiOS or AT&T's U-Verse -- and force customers to migrate to 'upsell them'.
  • 'Harvest' all customers who don't want to switch with continuous rate increases -- or until they scream uncle.
  • Get the state and federal regulators to allow them to do these actions without any regulations or push-back.
  • Keep competitors and business segments that depend on copper off the networks and take over their clients. This includes the remaining competitors, companies offering cloud services, and the alarm industry.
  • 'Vertically integrate,' meaning allow only the companies' broadband, Internet, phone or cable affiliates to use the wires and give them advantages to harm competition of any sort.

How Many People are Impacted by All of these Maneuvers?

Regardless of what the companies say, using their own data, closing whole areas of the U.S. will impact everyone including small businesses, residential customers, schools, libraries, municipalities, among others. And this won't be only in rural areas. We found:

  • AT&T's U-Verse is probably 99 percent copper-to-the-home. Out of 76 million locations, AT&T only has 5 million U-Verse TV locations--less than 7 percent.
  • AT&T could be abandoning 57 percent of customers,
  • Verizon also only 5 million households have FiOS TV out of 27 million households in its territories--only 18 percent of households. 82 percent of the wires are still copper.
  • Verizon could be abandoning 47 percent of customers.

Not a Fair Fight: There's No Level Playing Field.

With a cabal of companies and their associations spending $227 million on federal lobbying in just three years -- that over $70 million a year, (and as mentioned, this doesn't including state lobbying and campaign financing, foundation grants or sponsorships) and our side spending... well, squat, there is no even playing field.

The Creation of Mob Bell: The Return of Humpty Dumpty.

In 1984, the original AT&T was broken up because it blocked competition. Seven 'Baby Bells' were created, each controlling specific states. And there were also independent local companies, such as GTE.

AT&T became a 'long distance' company, and there was also the maverick MCI. In 1996, the Telecom Act was created to open up the wires to all forms of competition --phone or broadband or Internet or even video service. AT&T and MCI entered the local phone markets, as did thousands of independent Internet Service Providers and CLECs (Competitive Local Exchange Companies).

(NOTE: Every 'triple play' still has a 'long distance' charge for 'interstate' calls, i.e., calls made across state lines, and there are separate related taxes, fees and surcharges.)

During the 1980's and 1990's, AT&T, MCI and the other competitors acted as a 'balance' to the force. By 2007, the Baby Bells married each other, the FCC removed requirements to let competitors use the networks and AT&T and MCI were bought. Three mega-Bells were formed-- AT&T, Verizon and Centurylink -- that don't compete for wireline services, even though every merger was predicated on them going at it.

Today, there aren't any deep-pocket companies who currently act as a balancing force. Google, Microsoft and Apple and many other Tech companies have deals with the network providers so they aren't going to stand up for the public. And with the recent rash of the telco-ALEC bills defunding the state commissions, severely limiting their oversight, and a dysfunctional FCC, there is no balance for the public interest.

How can AT&T in California raise rates 260% over the last few years, with similar rate increases happening throughout the US, for example, if there was real competition?

Conclusion: The Squeeze Play Is On.

The public is totally unaware of these issues and much of the press appears to simply parrot the corporate press releases. However, as the opening quotes detail, customers may have started to notice the problems when it impacts them.

The question is: Will the telcos be able to buy the changes they want and fool the public and politicians and thus have carte blanche to simply raise rates, shut off customers, force-migrate them to their own affiliate wireless companies or onto their other services they don't want, with no force to compel them to upgrade ALL of the utility customers?

Don't Get Mad: Get Even.

Over the next few weeks, we will be offering our own plan for the future.

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