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Community Broadband Bits 28 - Bruce Kushnick

If you think the United States cannot afford to take a fiber optic cable to just about every home in the country, you might be surprised to find out that we have already paid for it. We just haven't received it. Our first podcast guest in 2013, Bruce Kushnick of the New Networks Institute, explains the $300 billion ripoff.

Bruce and I discuss how the big telephone companies promised to build a fiber optic Internet in return for being allowed to increase their prices. This brings us to Kushnick's Law: "A regulated company will always renege on promises to provide public benefits tomorrow in exchange for regulatory and financial benefits today."

The telephone companies raised their prices, but decided to give the proceeds out to shareholders rather than invest in the promised networks. We got higher prices and DSL rather than the fiber optic networks we were promised. Our regulators largely failed us, in part because the only people who pay attention to Public Utility Commissions are the industries regulated by them and the occasional underfunded consumer advocate.

This is a very good introduction to why we all pay far too much for services that are too slow and insufficiently reliable.

We want your feedback and suggestions for the show - please e-mail us or leave a comment below. Also, feel free to suggest other guests, topics, or questions you want us to address.

This show is 26 minutes long and can be played below on this page or subscribe via iTunes or via the tool of your choice using this feed. Search for us in iTunes and leave a positive comment!

Listen to previous episodes here.

Thanks to mojo monkeys for the music, licensed using Creative Commons.

After Buying NC Legislation, AT&T Kills NC Jobs

When the North Carolina General Assembly passed a bill written by the cable and telephone industry (with help from ALEC), they probably didn't expect AT&T to turn around and slash its local workforce.

And yet, that is what AT&T has done: "Hey North Carolina, thanks for that monopoly, hope you don't mind if we move a bunch of jobs down to Alabama."

We had just published our report on how Time Warner Cable and AT&T bought anti-competition legislation in North Carolina when we heard the layoff news.

Unfortunately, there is no real surprise there -- the big telecom firms are much better at slashing jobs than creating them. The increased profits from the consolidation that creates such big firms arise specifically from eliminating jobs. To AT&T, the workers in Greensboro are inefficient. After all, AT&T is a global company -- those call service jobs could be done in Birmingham or India.

If the networks serving Greensboro and surrounding communities were locally owned, particularly if owned by the communities themselves, the support jobs would almost certainly be local. That may strike AT&T as inefficient, but perfect efficiency by that definition leaves most of us unemployed.

The question for North Carolina is when it will recognize that its own best interests lie far from the best interests of Time Warner Cable, AT&T, and CenturyLink. If North Carolina wants to be a leader in the digital age, it has to let its communities decide for themselves if slow DSL and cable connections cut it or whether they would prefer to build their own blazing-fast, low cost networks like Wilson's Fiber Optic Greenlight.

Take a minute help us spread our graphic on Facebook today, about North Carolina's dumb decision. If you want to stay in the loop when these companies threaten states with restrictive laws, sign up on DecideLocally.com to get occasional alerts.

Community Built Network Saves Local Jobs in Princeton, Illinois

Kudos to Richard Downey, Village Administrator for the Village of Kronenwetter in Wisconsin. Mr. Downey reminded us that we have yet to write about the fiber network in Princeton, Illinois. While we have noted Princeton in our list of economic development successes, we haven't delved into the network that serves the city, the schools, and the business community.

Princeton is home to about 7,500 people and is located in the north central region of the state in Bureau County. They have their own electric, water, and wastewater utilities and began offering broadband connectivity in late 2003. We spoke with Jason Bird, Superintendent of Princeton Electric Department, who shared the network's story with us.

In 2003, the city’s largest electric and water consumer was also the largest employer. At the time, incumbents served the community with T1 connections. The manufacturing company moved to Mexico, taking 450 jobs with it. The community was stunned.

Approximately 6 months later, Ingersoll Rand, the community's second largest employer with about 300 jobs, also considered moving away from Princeton. While lack of needed broadband was not the only reason, the Ingersoll Rand CEO let community leaders know that it was one of the influential factors. The company liked being in Princeton, and the city would have been on the top of the location list if not for the sad state of connectivity. At the time, the only commercial option was unreliable T1 connections for $1,500 - $2,000 per month. If Ingersoll Rand moved, the community would experience job losses equal to 10% of the population. Community leaders needed to act and do it quickly.

To retain Ingersoll Rand, the City Council decided unanimously to go into the telecommunications industry. They issued an RFP and encouraged incumbents AT&T and Comcast to bid; neither were interested. (Interestingly, once Princeton let it be known that they were going to build the network without them, there were some local upgrades from both companies.)

IVNet, located in Peru, Illinois, won the bid to manage and provide retail services over the network. Construction began immediately with employees from the electric utility doing the actual construction on the initial 12 miles of fiber backbone. Ingersoll Rand was connected to the fiber network eight weeks later and is still a customer. The company pays around $500/mo for 3 Mbps and has made a $6 million investment in their facility, also contributing to the local economy.

Map of Illinois showing Princeton

Like many other municipals offering fiber connectivity, Princeton did not want to offer retail services directly. The utility did not want to risk its excellent customer service reputation by biting off more than it could chew so it forged a partnership with IVNet. IVNet also runs Connecting Point Computer Centers. Fees from fiber customers are split 50/50 between IVNet and Princeton.

Princeton now has 75-78 commercial customers and most banks in town are connected with fiber. While Bird does not point to the broadband utility as the only factor in bringing in new employers, he credits its presence, along with the fact that it is offered by an electric utility, as attractive for potential employers.

Local schools are saving money and achieving twice the capacity that they received from private providers. Bird estimates the schools were paying $350/mo in 2003 for speeds up to 3 Mbps from the private sector and now pay $200/mo for 6 Mbps with Internet service provided by IVNet. The local hospital uses the fiber network for its 10 Mbps connection. Princeton also provides free wireless at hotspots in town, including the Amtrak Depot and a local city park.

The network has now expanded to over 30 miles with a second loop, creating a figure 8. The fiber network is 80% aerial with 20% underground. Princeton now buries conduit as a matter of course whenever there is any digging or development. Points-of-presence (POPs) are located in the police department, the high school, and the power plant facility.

While fiber-to-the-home is provided on a request basis, most customers are commercial and industrial. New customers can be connected in 2-3 days. Bird told the story of a NASA scientist whose wife grew up in the Princeton area and who wanted to work from a home office in Princeton. He now has a 3 Mbps capacity connection and a secure server located near a POP.

The city paid for the initial fiber network through a loan from the electric utility to the telecommunications division of the utility. The loan was then reimbursed in full with a $350,000 grant received from the state of Illinois.* The larger, present network has also been paid off for some time and is fully sustainable. Connectivity fees pay for operation and maintenance and usually there is a little left over every year, which goes back to the electric utility’s cash on hand. They have plans for their network to join the gigabit club. Bird says the community has applied for a grant from iFiber, a collaborative administering a $6.8 million BTOP grant to earmarked for northern Illinois. If Princeton receives the award, upgrades will come much quicker.

Bird says the city's network is successful because there is no worry about returns for stockholders. The City considers its stockholders to be people in the community. The  goal is not to maximize profits, but to give the community what it needs at a reasonable price.

Bird recalls testifying in front of the State Commerce Commission when Illinois considered legislation that would limit municipalities’ ability to provide telecommunications services. He was asked why he thought municipalities should be able to offer the service and replied that it was not a new idea and that municipalities have been filing gaps left by the private sector for many years. Bird emphasized that is it a different model, focused on customers rather than profit. He recalls being seated between representatives from AT&T and Comcast and remembers that “they didn’t like that answer.”

Photo courtesy of ILPlanner, used under Creative Commons License. Map from Wikipedia.

* Postscript: We spoke with Jason Bird to get more detail on the grant Princeton received from the State of Illinois. He told us that the state grant came from the Illinois Commerce Commission (ICC).

Princeton applied for the digital inclusion grant before they began building the network as a way to pay for the infrastructure. There was significant delay at the ICC in determining award recipients, and Princeton had to act against time to preserve Ingersoll Rand. Rather than wait indefinitely, the City Council decided to transfer $350,000 from the electric utility to the telecom division so construction could begin. City leaders agreed to use the grant to repay the loan from electric to telecom if it was awarded to Princeton.

According to Bird, Princeton is the only grant recipient to have completed its project.

The Empire Lobbies Back: How National Cable and DSL Companies Banned The Competition in North Carolina

Publication Date: 
January 3, 2013
Author(s): 
Todd O'Boyle, Common Cause
Author(s): 
Christopher Mitchell, Institute for Local Self-Reliance

In late 2006, Wilson, North Carolina, voted to build a Fiber-­‐to-­‐the-­‐Home network. Wilson’s decision came after attempts to work with Time Warner Cable and EMBARQ (now CenturyLink) to improve local connectivity failed.

Wilson’s decision and resulting network was recently examined in a case study by Todd O’Boyle of Common Cause and ILSR's Christopher Mitchell titled Carolina’s Connected Community: Wilson Gives Greenlight to Fast Internet. This new report picks up with Wilson’s legacy: an intense multiyear lobbying campaign by Time Warner Cable, AT&T, CenturyLink, and others to bar communities from building their own networks. The report examines how millions of political dollars bought restrictions in the state that will propagate private monopolies rather than serve North Carolinians.

Download the new report here: The Empire Lobbies Back: How National Cable and DSL Companies Banned The Competition in North Carolina

These companies can and do try year after year to create barriers to community-­‐owned networks. They only have to succeed once; because of their lobbying power, they have near limitless power to stop future bills that would restore local authority. Unfortunately, success means more obstacles and less economic development for residents and businesses in North Carolina and other places where broadband accessibility is tragically low.

It certainly makes sense for these big companies to want to limit local authority to build next-­‐generation networks. What remains puzzling is why any state legislature would want to limit the ability of a community to build a network to improve educational outcomes, create new jobs, and give both residents and businesses more choices for an essential service. This decision should be made by those that have to feel the consequences—for better and for worse.

This story was originally posted on the ILSR website.

AT&T, Others Overcharge Subscribers Based on Secret Bandwidth Meters

Imagine going to a gas station, putting 10 gallons into your car's 12 gallon tank, and driving off only to find your needle only approaches half a tank? This scenario is quite rare because government inspects gas stations to ensure they are not lying about how much gasoline they dispense.

But when it comes to the Internet, we have found measurements of how much data one uses is unregulated, providing no check on massive companies like AT&T and Time Warner Cable. And we are seeing the results -- AT&T is not open about what its limits are or how to tell when one has exceeded them.

Stop The Cap has noted that AT&T has advertised unlimited bandwidth for its DSL/ U-verse product while chiding and charging customers who exceeded certain amounts of monthly usage. Customers were quietly warned and charged $10 for each additional 50 GB over 150 GB for DSL subscribers or 250 GB for U-verse customers.  Clearly, "unlimited" has several definitions, depending on whether one is a customer or an ISP.

Complaints have also come in from SuddenLink customers and others. The ISP charged usage based customers for bandwidth usage when they didn't even have power. Simlarly, AT&T customers began to complain about inaccurate meters from the beginning of the program. This from a 2011 DSL Reports story - one of many comments from AT&T customers:

AT&T's data appears to be wholely corrupted. Some days, AT&T will under-report my data usage by as much as 91%. (They said I used 92 meg, my firewall says I used 1.1 Gigs.) Some days, AT&T will over-report my data usage by as much as 4700%. (They said I used 3.8 Gig, dd-wrt says I used 80 meg. And no, this day wasn't anywhere near the day they under-reported.)

Most of us don't keep track of our bandwidth usage, because there is no easy way to do it. For the most part, we have to take the word of our Internet service providers, but who is ensuring that they are accurate? Mismeasuring could be the result of incompetence or fraud, but the FCC has not stepped up to ensure consumers get what they are promised.

DSL Reports has extensively covered this AT&T bandwidth cap story and its refusal to open its meters to verification. One customer recorded a persistent pattern of inaccuracuracies, finding that AT&T was over recording the households daily usage by about 20-30%. The user contacted AT&T support to get a definition of "metered usage" because there was no definition on its website. From the article (and reposted from Slashdot):

Boy, did I get a surprise. After several calls, they finally told me they consider the methodology by which they calculate bandwidth usage to be proprietary. Yes, you read that right; it's a secret. They left me with the option to contact their executive offices via snail mail.

As long as there is no meaningful competition for broadband customers, AT&T will face no market penalty for abusing its customers. And unfortunately, the FCC has been asleep at this wheel as well. Also from Karl at DSLReports:

Worse perhaps, is that regulators in both the United States and Canada haven't shown the slightest interest in the problem despite the fact that ISPs are billing like utilities, with nobody but the consumer confirming whether their meters are accurate.

We have yet to hear of a credible reason to need bandwidth meters on wired networks. The companies that have invested in modern networks -- from community fiber to Verizon's FiOS -- see no need to count bits. It only seems to be those who don't want to invest and cable companies that want to slow the growth of over-the-top video pushing these limits.

AT&T's Many Broken Merger Promises

AT&T and others regularly woo their regulators and policymakers with promises to built increase investments or expand networks in return for deregulation or merger approval. A recent Gerry Smith Huffington Post article examines a familiar pattern of broken promises made by telcos, what has developed into a chronic wham-bam-thank-you-ma'am attitude by these massive corporations.

We actually have a name for this, Kushnick's Law: "A regulated company will always renege on promises to provide public benefits tomorrow in exchange for regulatory and financial benefits today." 

Smith revisits promises made back in 2006 when AT&T merged with BellSouth. AT&T promised to roll out broadband to every customer in its territory by 2007. Tell that to Cedric Wiggins from rural Mississippi. From the article:

But five years after that deadline, Wiggins, 26, is still waiting. Inside his trailer, his only affordable Internet option is a sluggish dial-up modem that takes five minutes to load the online job listing sites he has visited since being laid-off as a truck driver in May. Every few months, he calls AT&T to ask when he will receive a faster connection. The answer never changes.

“They said they don’t offer it in my area right now,” he said. “There’s nothing I can do.”

Smith found that promises made to gain merger approval are traditionally broken and/or so weakly constructed that the players can comply with little or no effort. Empty promises continue to be accepted by the feds and conveniently forgotten, except people like Wiggins.

No one knows the pattern better than those on the inside:

“We have a problem at the commission, historically, with following-up on merger conditions,” said Michael Copps, who served on the FCC from 2001 to 2011, and who voted to approve the AT&T-BellSouth merger. “A lot of these conditions that get attached are not that great, and they are not always really enforced.”

AT&T tells Smith it kept its promise, but would not respond when pressed for details about where it had expanded. Self reporting is accepted from the FCC on merger conditions, putting the burden on the public to demonstrate noncompliance -- though most of the public is rarely even aware that such promises were made.

Promises are often littered with loopholes. From the article:

AT&T committed to provide Internet service at minimum speeds that were hardly faster than dial-up, they say, while pledging to deliver “alternative technologies,” including satellite Internet, through as much as 15 percent of its territory. And at the time, satellite Internet was already available through nearly all of BellSouth’s turf, making AT&T’s commitment “utterly meaningless,” said Dave Burstein, editor of the telecom industry publication DSL Prime.

Smith also looks into a 2009 promise made by CenturyLink in order to get approval to buy Ebarq in the South and Midwest. CenturyLink promised to bring wired Internet access to 90% of the population within three years but 87% of those customers already had it. Meeting that commitment was almost meaningless. 

Monopoly Money

But we cannot simply leave the blame at the feet of the FCC or other agencies. Smith details how the gigantic AT&T/BellSouth merger almost fell through, but for the efforts of AT&T's lobbyists. FCC Commissioners received a letter signed by 29 members of Congress - all but two had each received significant contributions from AT&T and BellSouth PACs and PAC employees over three election cycles, according to InfluenceExplorer.com.

When the deal was finally approved, expectations were high:

AT&T had made “real, tangible, and important broadband commitments” and there would be “no exceptions for sparsely populated areas,” Copps said at the time.

AT&T’s commitment “will only further encourage the deployment and adoption of broadband networks into yet unserved or underserved areas,” Chairman Kevin J. Martin and Commissioner Deborah Taylor Tate said back then.

The 2006 CEO, Ed Whitacre, doubled his salary to $31 million, stock price almost doubled, and $5 billion in dividends went out to investors. The following year, stock went up another 16% and the company paid another $8.7 billion in dividends. Clearly, AT&T reaped the rewards for making promises, but it is equally clear that they also reaped rewards for breaking promises. Even 2006 backers of the deal now realize AT&T has not lived up to its commitment:

“It gives me heartburn,” said Tyrone Ellis, who as chairman of Mississippi’s public utilities committee in 2006 wrote to the FCC to urge approval of the deal, citing the promise of rural broadband throughout AT&T’s territory. “They didn’t follow through. But I don’t have the power to force their hand. The FCC does.”

Meanwhile in Mississippi, Wiggins and his neighbors sit on the unfortunate side of the digital divide. Looking for a full time position, paying bills, conducting business, public safety, and the ability to communicate with loved ones are all hampered by the lack of anything beyond dial-up or expensive satellite.

lFCC Logo

For years now, the FCC and other agencies have allowed harmful consolidation while failing to attach meaningful conditions. We just examined how Comcast gamed the FCC to take over NBC -- the public gained practically nothing in allowing a massive company even more market power. 

The problem with such massive companies is not just that they can squash competition and raise prices with impunity. Their scale and dominance allows them to shape how the entire industry is regulated by the public. They buy legislation in DC and state capitals with near-impunity. They slow innovation, harming the economy. 

Communities are smart to depend on themselves for essential infrastruture, not promises from distant mega-corporations. 

Rural California Farms Need Fiber to be Fertile

In yet another reminder that fiber optics and wireless are complementary, not substitutes, we just read about rural California farms needing better telecommunications that the big companies have refused to provide.

This article offers a good introduction to why farms need access to the Internet. Modern farming takes advantage of gains in communications technology -- when it can and is not hobbled by a lack of modern infrastructure. For example:

An even more efficient use of water, said Bryon Horn, is to put moisture sensors into the soil beneath individual trees, like olives and almonds, so that each tree gets exactly the right amount of moisture. But that requires something that the valley lacks: wireless connectivity. In fact, even commercial cellphone coverage in the area is spotty.

...

But doing so has been difficult. The larger telcos, she said, are not interested, and a consultant representing smaller telecommunications companies told Hogg and other officials that the large telcos make it almost impossible to expand to underserved areas. To buy wholesale Internet access from AT&T in the Salinas area, the consultant said, costs $136 per megabit per month compared to 50 cents per megabit per month in the city of Sunnyvale. [emphasis ours]

Wireless works best where it has access to abundant wired connectivity. Just like plants need water, wireless towers need fiber to backhaul the data. Having AT&T as your only option is bad news. AT&T exists to make profits, not provide essential services at affordable rates. This is precisely why we argue that residents and businesses must have some voice in the telecom networks upon which they depend -- they are too important to entrust to massive corporations like AT&T or Comcast.

The public built the roads that allow these farmers to get their crops to market and it ensured that they were connected to the electric grid. Despite entirely too many subsidies, the large providers have not only failed to offer a modern connection but are actually hindering others from doing it. It is time to stop subsidizing those companies and embrace the benefits of ownership by cooperatives or local governments that are locally accountable.

From what we can tell, some in the San Joaquin Valley Regional Broadband Consortium get it and are trying to solve this problem for good. Smart public investments can do that -- finding ways of funnelling more money to monopolists will not.

Photo courtesy of David Dixon, licensed for reuse under Creative Commons.

Community Broadband Bits 23 - Harold Feld from Public Knowledge

One hundred years after Teddy Roosevelt and AT&T agreed to the Kingsbury Commitment, Harold Feld joins us on Community Broadband Bits podcast to explain what the Kingsbury Commitment was and why it matters. In short, AT&T wants to change the way telecommunications networks are regulated and Harold is one of our best allies on this subject.

AT&T is leaning on the FCC and passing laws in state after state that deregulate telecommunications. Whether we want to deal with it or not, these policies are being discussed and consumer protections thus far have taken a beating. This interview is the first of many that will help us to make sense of how things are changing and what we can do about it.

We also discuss the ways in which the Federal Communications Commission and Federal Trade Commission spurred investment in next-generation networks by blocking the AT&T-T-Mobile Merger on anti-trust grounds.

Harold is senior Vice President of Public Knowledge and writes the Tales of the Sausage Factory blog.

We want your feedback and suggestions for the show - please e-mail us or leave a comment below. Also, feel free to suggest other guests, topics, or questions you want us to address.

This show is 22 minutes long and can be played below on this page or subscribe via iTunes or via the tool of your choice using this feed. Search for us in iTunes and leave a positive comment!

Listen to previous episodes here.

Thanks to mojo monkeys for the music, licensed using Creative Commons.

Community Broadband Bits 20 - Amalia Deloney

Amalia Deloney (follow on Twitter) joins us for our 20th Community Broadband Bits podcast to discuss how her work with the Media Action Grassroots Network and the Center for Media Justice overlaps with our focus on community broadband networks.

We talk about the digital divide, particularly in relation to the attempted merger between AT&T and T-Mobile that would have raised prices among vulnerable populations. We also discuss the present campaign for Prison Phone Justice to ensure families are able to talk to incarcerated loved ones at affordable rates.

While many of our readers are mostly concerned with how we access the Internet, telecommunications impacts millions of Americans in a different way -- they cannot, or can barely afford to talk to each other because the cable/DSL/wireless networks are ignoring, or worse - exploiting - their needs. We want to build networks that will connect everyone.

We want your feedback and suggestions for the show - please e-mail us or leave a comment below. Also, feel free to suggest other guests, topics, or questions you want us to address.

This show is 20 minutes long and can be played below on this page or subscribe via iTunes or via the tool of your choice using this feed. Search for us in iTunes and leave a positive comment!

Listen to previous episodes here.

Thanks to Fit and the Conniptions for the music, licensed using Creative Commons.

Audio of Dirty Trick Push Poll in Lafayette from 2005

We sometimes fail to communicate the great lengths to which big cable and telecommunications companies will go to intimidate and scare voters into opposing a community broadband projects. They have deployed a variety of dirty tricks and we have done a poor job of cataloging them.

But a recent phone call with John St. Julien in Lafayette, Louisiana, reminded me of a push poll that an alert citizen recorded back when Cox, Bellsouth (now AT&T), and/or other opponents of the municipal broadband project commissioned a "push poll" to scare voters into opposing a referendum on whether the City should build its own network. We tell the full story about this campaign in our Broadband at the Speed of Light report.

But in anticipation of our interview with John St Julien tomorrow, we thought we should make sure our readers/listeners had a chance to hear this 30 minute call. In it, a pollster is asking a series of questions commissioned by opponents to the community broadband network and responding to it. The audio is sometimes hard to make out, but well worth it as the person recording it has some pretty funny responses to some of the questions being posed.

This is just one of the reasons that referenda are a poor tool for measuring community support of a project. While the big companies can dump unlimited funds into their self-interested "vote no" campaigns, the city itself cannot encourage voters to go one way or another. And local groups supporting a community broadband network have far fewer resources.

For instance, when Longmont, Colorado, had its first referendum, Comcast blitzed the community with something like $250,000 in ads and misinformation (setting a local record for expenditures) -- resulting in a pretty significant majority for the "nay" voters. After citizens realized they'd been had, they clamored for another vote. Two years later, Comcast dropped $400,000 on Longmont but the grassroots successfully out-organized the cash-dump.

If you want to know more about how your community can win a fight like this, read more about Lafayette and listen to our conversation with John St. Julien tomorrow (the first of several).

Here is the push poll and response.