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from: The Capital Times

Smoke and mirrors?

As cable deregulation picks up steam in the Legislature, critics say AT&T has a long track record of broken promises

Judith Davidoff — 10/31/2007 10:05 am

It was the early 1990s, the nascent days of the Internet, and Vice President Al Gore was talking everywhere about an "information superhighway" that would link homes, businesses and medical centers with fiber optic cables capable of high speed data transmission.

"We have a dream for...an information superhighway that can save lives, create jobs and give every American, young and old, the chance for the best education available to anyone, anywhere," Gore said at the high-profile Superhighway Summit in January 1994.

Ameritech--then the umbrella company for Wisconsin Bell, as well as the "Baby Bells" in Ohio, Michigan, Illinois and Indiana--jumped on the bandwagon and announced that it would upgrade most of its networks by replacing its old copper wiring with fiber optic and coaxial cables. This was technology that was capable of delivering high-definition television and fast Internet service: over 45 megabits per second, which is about 10 times faster than most connections available in the country today, according to telecommunications experts.

The company argued, as did other telephone companies across the country, that it could accomplish these feats if state restrictions on their profit margins were lifted. The Wisconsin Legislature complied with a phone deregulation bill in 1993 and Ameritech promised to make $700 million in infrastructure improvements, including replacing its aging copper wiring with fiber optic circuits. (Ameritech, which later merged with SBC, bought AT&T and changed its name in 2006 to AT&T because of its former rival's better known moniker.)

But critics say Ameritech vastly oversold the public and legislators on what they would do and then dropped the ball.

The upshot, they say, is that Wisconsin institutions never got the high-speed service they were promised. And they say these broken promises are especially relevant now because AT&T is once again promising new technologies --and job growth --if state lawmakers approve a pending bill that would allow telecoms to provide video services without paying municipal franchise fees.

The bill, sponsored by Rep. Phil Montgomery, R-Green Bay, and Sen. Jeff Plale, D-South Milwaukee, was easily approved this morning by the Joint Finance Committee. It passed the state Assembly months ago, but stalled in the state Senate under the watch of former Majority Leader Judy Robson, D-Beloit.

But her successor, Sen. Russ Decker, D-Weston, is a fan of the bill and has promised to put it once again on a fast track. It could go to the Senate floor as early as next week, says a spokeswoman for Decker.

Cynthia Laitman, a telecommunications instructor and frequent critic of the bill, says legislators should take a hard look at AT&T's performance in the state before signing off on the video franchise bill.

"AT&T has spent a lot of money to convince people that this cable bill is going to create good jobs, bring cutting-edge technology to the state and lower costs," says Laitman, who also heads a state chapter of TeleTruth, a telecommunications watchdog group. "But it's all smoke and mirrors. People need to look at the facts. In 1994 the company promised new jobs and expanded broadband in exchange for a bill that allowed it to charge more money. That bill passed and their profits sky-rocketed. But they didn't keep their promises. So the question is ndsh should we allow ourselves to be suckered again. You know what they say, 'Fool me once, shame on you. Fool me twice, shame on me.'"

But AT&T says it fulfilled its obligations and more.

"We fully met our commitment by bringing fiber optics to all 700 educational locations in our service territory," spokesman Jeff Bentoff says.

A Capital Times investigation has found the situation more murky. In a required filing to the Public Service Commission after the 1993 bill went through, Ameritech laid out its infrastructure plans, which included extending "broadband facilities (originally described as fiber optic facilities) to the doorsteps of every secondary school (defined as middle school, junior and senior high schools), technical school, university college, and main federated library in our exchange areas by the end of 1998."

In the same document, however, it said that "for the purposes of the Ameritech commitment in this plan, the 'doorstep' will mean the closest manhole, pedestal or hut on the grounds of or adjacent to the institution."

Translated, that meant that Ameritech, to save money, did not extend high-speed fiber optic cable all the way to premises, but instead connected it somewhere near the entity to its already-laid, much slower, copper wiring. Among its many advantages, only fiber optic cable has the necessary bandwidth for carrying voice, data and video simultaneously.

"It's a classic bait-and-switch," says Bruce Kushnick, executive director of TeleTruth, whose only funding comes from providing expert witness testimony on class action lawsuits involving telecom companies.

Wisconsin's experience with high-speed cable is similar to scenarios played out in states across the country, say Kushnick and others. The result is that the United States now lags behind Japan, South Korea and many other industrialized nations in terms of the availability of bandwidth and bandwidth speed.

As tech writer Robert Cringely argues in his book, "The $200 Billion Rip-Off: Our Broadband Was Stolen," "America went from having the fastest and cheapest Internet service in the world to what we have today -- not very fast, not very cheap Internet service that is hurting our ability to compete economically with the rest of the world."

Pushing the bill

As the telecoms rushed in the early 1990s to secure their place on the so-called information superhighway, Ameritech announced plans to rewire its service areas.

According to a January 1994 Chicago Tribune article, Ameritech was set to spend $5 billion "installing optical fiber to bring the information superhighway to Midwest homes, schools and businesses." In its 1993 Fact Book, Ameritech also said it was launching a "digital video network upgrade that by the end of the decade will connect 6 million customers in its region to interactive information and entertainment services, as well as traditional cable TV service, from their homes, schools, offices, libraries and hospitals."

In a 1994 filing with the Federal Communications Commissions, Wisconsin Bell said it would, for starters, rewire 146,000 households in Milwaukee for video dial tone.

Video dial tone was a term used in the 1990s for the transmission of television and other video services over phone lines (fiber and hybrid fiber-coax networks) at speeds up to 45 megabits per second.

Video dial tone, however, never made it to Milwaukee. A Sept. 20, 1997 Milwaukee Journal Sentinel article noted that Ameritech stopped work on its cable television service in metropolitan Milwaukee in January 1996 and AT&T spokesman Bentoff confirms that Ameritech never provided cable television services to those homes.

But Kushnick says Ameritech's ambitious pronouncements to rewire the state set the stage for the company's pitch to the Wisconsin Legislature to deregulate the phone industry, whereby the state would no longer regulate a company's profit margins, but rather set prices on services. This meant that companies could rake in new profits by holding prices steady but cutting costs.

Ameritech and other phone companies sought these changes because they were being battered by telecom upstarts, including cell phone companies and independent phone outfits.

A May 22, 1994 article in the Wisconsin State Journal describes the heavy -- and heady -- lobbying for the legislation, dubbed the "Information Superhighway bill."

"Since March, lobbyists and some lawmakers have been touting the promises of a future in which houses, businesses, schools and other institutions can tap into a vast, affordable interactive information network: the information superhighway," the paper reported.

But by the time Gov. Tommy Thompson signed Wisconsin's 1994 telecommunications bill and Ameritech submitted its first infrastructure plans to the Public Service Commission, there was no commitment by Ameritech to wire any homes, just educational and medical facilities. And with its redefinition of the word "doorstep" Ameritech also showed it had no intention of extending high speed fiber optic cable to the premises of institutions.

In the same filing, however, it implied it would replace its aging copper wiring with advanced technologies.

The deployment of broadband, it wrote, would mean "on-demand access to the advanced digital network at bandwidths far exceeding those commonly available today. At present, these institutions have access to the copper-based telecommunications world as close as the nearest telephone or pedestal. Ameritech is committed to making access to the broadband world as readily available as copper facilities are today."

Spokesman Bentoff says Ameritech met its commitment to bring fiber optics to the educational institutions in its service territory and Gary Everson, who oversees the telecommunications division of the Public Service Commission, agrees that "they did get it deployed as planned."

But the reality of Ameritech's "deployment," based on the company's definition for 'doorstep," was far from ideal, according to author Todd Oppenheimer in "The Flickering Mind: The False Promise Technology in the Classroom and How Learning Can be Saved."

Schools were surprised to find that not only did Ameritech fail to run fiber optic to what they understood to be their "doorstep," but that it cost them plenty to connect Ameritech's line to internal systems, Oppenheimer wrote of Wisconsin's experience:

"As it turned out, the job of running high-bandwidth service from those doorsteps to some closet inside the school building, and then to classroom systems, was no small task. Since this wasn't Ameritech's responsibility, a number of educators suddenly had to become instant telecommunications specialists as they sought bids, negotiated writing contracts, and paid the bills on huge obligations that were not in their budgets."

Where are the jobs?

Critics say AT&T's record on job growth in Wisconsin also does not bode well for the future.

In 1993, when Ameritech was on the cusp of pitching its broadband plans to the state legislature, its workforce numbered 5,569 employees, according to Wisconsin Bell's 1993 Annual Report.

By 2004, that number had dropped to 2,951 employees, according to FCC Statistics of Common Carriers.

Bentoff disputes that Ameritech's Wisconsin workforce dropped by nearly half in 10 years, noting that regulatory filings to the FCC don't cover all employees, including "employees in various affiliates and service companies that are still part of AT&T."

He says the jobs that did dry up between 1993 and 2004 were "due to consolidation of management functions in regional locations outside of Wisconsin," but he declined to provide AT&T's employee counts for that period.

Despite AT&T's declining workforce in the state, supporters of the video franchise bill argue it would indeed foster job growth, as well as bring new telecommunications technology to the state and save consumers money.

They say these prospects have gotten lost amid the "melodrama" created by critics of the bill who have made a lot of noise about the bill's effects on consumer protections and public access channels.

"This legislation is also about jobs and development," legislators Montgomery and Plale said in a news release. "Every day Wisconsin waits to pass this legislation is another day that Wisconsin loses ground in job growth."

Plale and Montgomery say nearly 300 jobs have already been created in Milwaukee and the Fox Valley in anticipation of the bill and "indications are that more will be necessary as AT&T works to take its video service statewide."

Of these jobs, Plale aide Katy Venskus says 200 jobs will go to technicians in Milwaukee and 90 jobs will be housed in customer service call centers in the Fox Valley.

At a news conference in Madison this summer, Thomas Cohen, a spokesman for the Fiber-to-the-Home Council, a national trade association, predicted AT&T alone would spend $400 million in new infrastructure over the next two to three years in Wisconsin and add 1,000 new jobs if the state passes the video franchising law. These jobs, Cohen promised, would be "good high-tech jobs" for workers who "string wires" and build utility boxes.

AT&T officials, while declining to cite the number of new jobs that would be created, insist good jobs would result from passage of the video franchise bill and subsequent installation of the company's new video system, U-Verse.

Bentoff says "technicians who are specially trained" are needed to install U-Verse in customers' homes.

"This service is very important to our union workforce because it means more customers and also helps us retain existing customers and that's all very good for our union workforce," says Bentoff, who added that AT&T is the only telecom and video provider in the state to employ Communications Worker of America union members.

"The union is strongly behind the investment in Project Lightspeed," he says.

The Communications Workers of America, which represents AT&T employees in the field and in the office, does not appear eager to discuss its support, however.

When contacted by a reporter, Ann McNeary, chair of the Wisconsin Political Council of the Communications Workers of America, said she could not comment on anything and then hung up the phone.

Phil Neuenfeldt, secretary-treasurer of the Wisconsin State AFL-CIO, the parent union for CWA, did not return two phone calls seeking comment on the proposed bill, even though Wisconsin State AFL-CIO president David Newby had identified him and McNeary as the people in the know.

An internal July 25 memo to union members obtained by The Capital Times, however, reveals that while the CWA publicly supports the video franchise bill, some members, at least, are skeptical about AT&T's claims about future job growth.

In the memo, Rich Pearson, chair of the CWA Local 4603's Mobilization committee, blasts AT&T's decision over the summer to close a customer service center in Milwaukee.

"While we are all aware that AT&T has been whittling away at the workforce for years, this decision comes even as they tout the fact they are adding jobs in Wisconsin," he wrote.

"It is important that the public and our legislators realize that these new jobs are term jobs, with limited benefits, and, in the case of Prem Techs in particular, jobs that have wages which are dramatically out of line with other positions in the company."

According to an AT&T job description, a premises technician educates customers on service features, verifies that services are working correctly and installs and rearranges inside wires, among other duties.

Bentoff says Ameritech and the union, in anticipation of passage of the video franchise bill, have agreed to several new job titles and appropriate wages for them.

"They are market-based and compare very favorably to similar jobs in the market," he says. Our competitors in areas like video are largely non-unionized cable companies that do not offer the same wages and benefits that we do. These are good jobs with good wages and benefits. Premises Technician is one, but Technical Support Representative II and Dispatcher are two other titles we have added."

Fast track

Laitman and others have been working in recent months to amend the video franchise bill that passed in the Joint Finance Committee today. Sen. Mark Miller, D-Madison, was working on a substitute bill that mirrored legislation passed in Illinois and was more palatable in terms of consumer protections, but he says he probably doesn't have the votes in the full Senate to pass it.

Miller says he still thinks the bill is a "terrible" bill, but adds that the new Senate Majority leader was determined to get stalled items out of the finance committee.

"Sen. Decker made commitments to move these things as soon as we passed the budget," Miller says.

Meanwhile, video franchise bill authors Plale and Montgomery have also teamed up on another telecommunications bill. Introduced in October, this one would deregulate basic local phone service in two years. Under the legislation, local phone companies would no longer have to submit rate increases to the Public Service Commission for basic local phone service. Critics say senior citizens and rural residents would be most adversely affected because these populations still rely in large part on traditional land line service.

The Wisconsin Legislative Reference Bureau says a telecommunications company would also not be subject to any "infrastructure investment requirements."

This provision, says Tom Allibone, an independent auditor based in New Jersey who conducts audits for TeleTruth, "would wipe the slate clean of all prior commitments." AT&T, in other words, would be legally absolved of all its former promises "to build out the infrastructure to support broadband," he argues.

Says Laitman: "This brings it full cycle."