Frontier Communications Sued Yet Again For Lying About Its Pathetic Broadband Speeds

from the do-not-pass-go,-do-not-collect-$200 dept

For a long time we've talked about the fact that if you really want to understand why U.S. broadband is expensive and mediocre, you should take a good hard look at Frontier Communications. The regional phone company in 25 states has, for years, been accused of neglecting to adequately upgrade or repair its network, despite millions in wasted taxpayer subsidies. Protected from both competition and accountability thanks to state and federal corruption, the company has happily price gouged captive customers without facing real penalties.

In recent years that has shifted slightly thanks largely to individual states like Washington, New York, and Minnesota, which have all sued the company at various times for neglecting its network, advertising speeds its sluggish DSL lines can't deliver, or inundating its subscribers with bullshit fees and surcharges (a neat trick that lets ISPs advertise one price, then charge you a much higher rate).

This week Frontier found itself again under fire for, you guessed it, lying about its broadband speeds and overcharging consumers for substandard service. This latest suit (pdf) was jointly filed by the FTC, the attorneys general from Arizona, Indiana, Michigan, North Carolina, and Wisconsin, and the district attorneys’ offices of LA County and Riverside County, California. Like previous suits, the new FTC suit accused Frontier of advertising speeds it knows its aging and distance-constrained DSL lines can't deliver, failing to disclose those limits to consumers, and overbilling subscribers based on speeds they can't actually get.

Granted there's a reason Frontier keeps getting sued without much changing. And that's because the fines levied upon regional telecom monopolies are usually a small fraction of the money made from exploiting captive consumers (and local governments). As such, the penalties are just viewed as the cost of doing business, get quickly brushed aside, and little really changes in the underlying market mechanics.

Thanks to the Trump administration's net neutrality repeal (which also gutted FCC consumer protection authority), the FCC is now limited as to what it can do to thwart this behavior. That left (as telecom lobbyists intended) most oversight to the FTC, which can't make new rules, lacks the resources and staff to adequately tackle telecom (on top of fifty million other obligations across a universe of other sectors) and is limited to enforcement actions in instances where it's extremely clear a company is engaged in "unfair and deceptive" behavior under the FTC Act.

The telecom lobby knew all of this, which was the whole point of the net neutrality repeal. That was acknowledged by acting Commissioner Rebecca Slaughter in a statement on the lawsuit:

"As important as this case is, it also shows why the FTC can never fully fill the regulatory gap left in the wake of the repeal of Net Neutrality at the FCC, the expert agency on telecommunications services,” Acting Chair Rebecca Kelly Slaughter said of the lawsuit.

“The FTC will do what we can to hold broadband providers accountable,” she added. “But the pandemic has underscored the essential nature of internet access; just like the country’s water, electricity, and phone services, ISPs require direct and on-going oversight. That active oversight by the proper regulator may have prevented these violations."

While these scattershot enforcement actions do help somewhat, you can't fix US broadband dysfunction without targeting its two root causes: regional monopolization and state and federal corruption. There are a million ways to do that: restore FCC consumer protection authority, properly fund and staff regulators, ramp up flimsy antitrust enforcement in telecom, embrace genuine pro-competition policies incumbents won't like (including supporting community broadband), stop mindlessly rubber stamping every idiotic merger that comes down the road, and hold telecom companies accountable for repeated empty pre-merger promises. If none of that works and they remain absolutely dedicated to obnoxious behavior, break them up.

But US policy leaders decidedly don't want to actually do any of that. One, because these companies are politically powerful campaign contributors in a pay to play system. They're also tightly tethered to our intelligence and law enforcement apparatus, further reducing any political incentive to hold them accountable. So instead we get government policy (and a lot of press coverage and rhetoric) that treats the resulting problems as ambiguous issues that just dropped out of the sky one day (see: endless lip service about the "digital divide") without acknowledging that corruption and monopolization are the obvious cause.

Filed Under: broadband speeds, fcc, ftc, truth in advertising
Companies: frontier communications

Broadband ISP Frontier Just Keeps Happily Ripping People Off With Bogus Fees, And Zero Real Repurcussions

from the do-not-pass-go,-do-not-collect-$200 dept

When you're a natural monopoly in America you get away with a lot. Take for example Frontier Communications, which has spent the last few years stumbling in and out of bankruptcy while dodging no shortage of scandals, including allegations of subsidy fraud. Last year, Frontier got a light wrist slap for fraudulently charging its customers a "rental" fee for modems they already owned. The company also paid a tiny $900,000 fine last year to Washington State AG Bob Ferguson for using bogus fees to rip off the company's captive subscriber base.

Of particular annoyance in consumer complaints has been the company's $4 per month "Internet Infrastructure Surcharge," which is a completely nonsensical, bullshit charge the company levies below the line. The surcharge doesn't really go to "infrastructure" (that's what your entire bill is for). What it does do is give Frontier a way to continually increase consumer prices while falsely advertising a lower rate. Other ISPs engage in similar behavior with little real penalty (see CenturyLink's "Internet Cost Recovery" fee).

While the $900,000 Washington State AG fine is semi-helpful, like most US regulatory "penalties" it's a tiny fraction of the money made via the dubious business practice. And while the company stopped charging the fee in Washington, it still charges it across the rest of its 22 state footprint. Note that Frontier has 3,735,000 broadband subscribers, each paying $4 a month in completely erroneous surcharges. That's nearly $15 million in bullshit charges in just one month, or $180 million in dodgy revenue every year.

Facing only a light wrist slap for the practice, Frontier seems intent on doubling down on this behavior. The company this week announced it will be bumping the fee to $7 per month. Frontier attempted to explain away the bogus surcharge this way:

"The increase applies to Frontier customers based on individual service packages and reflects increasing maintenance and other network costs, including the rapidly rising costs of supporting our customers' increased Internet traffic and usage, and consumer demand for greater bandwidth, services, and other requirements that affect our Internet network. Customers on price-lock and promotional pricing will not see this increase until their terms expire."

But again, "maintenance and other network costs" is what the entirety of your bill is for, and the fee's real purpose is to help the iSP engage in false advertising on pricing.

Despite decades of this, federal regulators at the FCC have largely been utterly pathetic on this issue. While there was some basic rules requiring at least some transparency in pricing baked into the FCC's net neutrality rules, those were gutted by industry lobbyists during the Trump administration repeal. This kind of misleading pricing could also be mitigated via policies that push more competition to market, but since most US markets lack competitive options, and building more competitive options tends to upset politically powerful telecom monopolies, we usually only pay lip service to that concept as well.

Filed Under: bogus fees, broadband, competition, fees
Companies: frontier, frontier communications

Broadband Monopolies Keep Getting Money For Networks Never Fully Deployed

from the round-and-round-we-go dept

As we've noted a few times, there's an underlying belief in American tech policy that if we just keep throwing money at entrenched broadband monopolies we can lift US broadband out of the depths of mediocrity. But as we've noted more than a few times, heavily subsidizing a bunch of regional monopolies, while not doing anything about the conditions that created and insulate those monopolies, doesn't result in much changing. It's especially ineffective when you don't really punish ISPs for decades of taking taxpayer money in exchange for network upgrades that almost always, like clockwork, wind up unfinished.

The latest case in point: in 2015, regional monopolies CenturyLink and Frontier Communications took nearly $800 million in taxpayer funds to expand broadband to underserved areas they deemed too expensive to wire themselves. And guess what happened:

"The deadline to hit 100 percent of the required deployments passed on December 31, 2020. Both CenturyLink and Frontier informed the FCC that they missed the deadline to finish deployment in numerous states."

CenturyLink rather coyly acknowledged that it failed to meet deployment milestones in more than 25 states. Frontier failed to meet its deployment targets in around 17 states. Under the law, ISPs have a year from the point they finally inform the FCC that haven't done what they promised to... actually do what they promised.

And while that same law says the the government can take back taxpayer funding "equal to 1.89 times the average amount of support per location received in the support area," plus another ten percent of the carrier's total funding in that area, that often never happens. ISP lawyers routinely tap dance over, under, and around those milestones; and penalties are particularly pathetic when there's a captured regulator like outgoing FCC boss Ajit Pai at the helm.

A shining example of this lack of accountability is Frontier Communications, which we've long held up as a stunning example of monopolization and corruption in states like West Virginia. This is a company that time, and time, and time again has failed to meet its obligations tied to taxpayer subsidies, and in some instances was even caught defrauding the government. The federal response to this? To throw yet more taxpayer and ratepayer money at the company via the recent, scandal-plagued Rural Deployment Opportunity Fund auction:

"CenturyLink and Frontier are both getting more money from the FCC in the new Rural Digital Opportunity Fund, with CenturyLink getting $262.4 million spread over 10 years and Frontier getting $370.9 million over 10 years.

"Sen. Shelley Moore Capito (R-W.Va.) recently urged the FCC to block Frontier's new funding, saying that "Frontier has a documented pattern of history demonstrating inability to meet FCC deadlines for completion of Connect America Fund Phase II support in West Virginia."

Folks in DC (especially the Ajit Pai types) claim they're focus is "lifting burdensome regulations to boost network investment." In reality, they've effectively ceded all policy decisions to regional monopolies, which they're utterly incapable of holding accountable for much of anything. When the data then shows that this clearly and obviously only results in less competition, stifled investment, wasted money, and mediocrity, the impulse is almost always to pretend that this data isn't real... then double down on the same decisions that brought us there. Rinse, wash, repeat.

Now with COVID highlighting broadband's importance in an entirely new way, there's a massive new push to solve the problem by throwing more money at it. But until and unless policymakers embrace polices that specifically target the dominance of entrenched monopolies, driving more competition to market, we're not getting off this ridiculous hamster wheel.

Filed Under: broadband, broken promises, fcc, promises, subsidies, taxpayers
Companies: centurylink, frontier, frontier communications

We Had To Pass A Law To Stop Telecom Monopolies From Charging You 'Rental Fees' For Things You Already Own

from the broken-industries dept

For much of the last few years, broadband customers have been complaining that Frontier Communications, the nation's third-biggest telco, had been charging its customers a rental fee for modems they already owned. Normally, you're supposed to be able to buy your own modem instead of paying your ISP a rental fee upwards of $10 per month. To nab some extra dough from captive customers, Frontier basically decided to charge its customers a rental fee anyway, giving them a polite, though giant, middle finger when they complained.

This façade persisted until customers had a problem with their hardware, at which point the ISP would just shrug and claim there was nothing they could do. When consumers complained to the Trump FCC about this, the agency did... absolutely nothing. As with most complaints to the Trump FCC, the agency just forwards your complaint to the ISP in question then does... nothing whatsoever.

This kind of behavior is the norm for the broadband industry, given it faces minimal pressure to try harder due to limited competition and captured regulators. So consumer advocates last year successfully pushed for the passage of the Television Viewer Protection Act (TVPA). The law, which likely would have never made it past a broken and corrupt Congress in standalone form, had to be shoveled into a budget bill in order to be passed by Congress and signed by President Trump in December 2019. It's not likely that many, including Trump, even noticed that the provision existed in the broader bill.

The bill prohibits charging consumers a rental fee for hardware they already own. It also requires that ISPs be a bit more transparent about all the bullshit fees broadband providers use to pad their advertised rates. And it gives you a 24 hours to cancel cable TV for any reason. It's not perfect; the bill doesn't prohibit ISPs from using bogus fees to raise your rate while under contract. It's also loosely worded enough that ISPs could likely find some new ways to tap dance around it. But it's still a step in the right direction:

"For years, consumers have been misled by pay-TV providers advertising service for one price and then charging another," Public Knowledge Senior VP Harold Feld said in a press release today. "Until now, consumers have had zero recourse for dealing with these surprise fees other than ending service and paying an unfair termination fee for the privilege. Not anymore."

Granted, even after the bill was passed, the FCC delayed implementing it for six months, arguing that not ripping consumers off was too onerous of a requirement to place on a regional telecom monopoly during a pandemic. Keep in mind Frontier is a bankrupt mess with a long history of dodgy behavior and fraud. And, more often than not, the FCC's reaction (basically: ¯\_(ツ)_/¯) is pretty much the norm. Especially during the Trump FCC, which is so disinterested in consumer protection, it effectively lobotomized its authority just because Comcast and AT&T asked it to.

The cable industry alone makes a whopping $28 billion annually in bullshit fees. They've been doing this sort of thing for decades and, aside from the occasional noise, the U.S. government simply couldn't give any less of a shit. And of course it's not just telecom. Countless heavily monopolized sectors (banking, airlines) engage in the same behavior, and those in a position to do something about it simply couldn't care less. There's almost an understated American belief that tricking users into paying more via bogus fees is just creative pricing and it's the consumer's fault for being ripped off.

So here we are. Having to sneakily pass a new law to stop monopolies from charging you even more money for things you already own. Now we have to wait to see if anybody can be bothered to actually enforce it.

Filed Under: broadband, fcc, fees, ownership, rental fees, sneaky fees, tvpa
Companies: frontier communications

Washington State AG Fines Frontier Communications A Pittance For Its Bullshit Fees

from the 'completely-fraudulent-surcharge' dept

In telecom policy circles, there's an army of "experts" who twist themselves into pretzels trying to pretend U.S. telecom is a healthy, normal, vibrant market. Blinded by partisan loyalties, sector financial links, or ideologies embedded decades ago in grad school, they're incapable of even acknowledging that Americans pay too much money for spotty, substandard service with historically terrible customer support. They're even less likely to acknowledge the corruption, regulatory capture, and lack of competition that made this dysfunction possible. If it is acknowledged, it's downplayed to a comical degree.

As in the Ma Bell days, at the heart of U.S. broadband dysfunction sits phone companies. Providers that have long refused to upgrade their aging DSL networks despite millions in taxpayer subsidies, yet lobby for state laws that ensure nobody else can deliver broadband in these neglected footprints either. These are companies that have a bizarre disdain for their paying customers, delivering the bare minimum (slow DSL) at the highest rates they can possibly charge without a full-scale consumer revolt. It's not surprising, then, that many telco DSL customers are fleeing to cable, assuming they even have a second broadband option.

The poster child for U.S. telecom dysfunction is Frontier Communications. Frontier has repeatedly been busted in a series of scandals involving substandard service and the misuse of taxpayer money. Frontier-related graft and corruption in many states (like West Virginia) is so severe, state leaders have buried reports detailing the depth of the problem, and, until recently, a Frontier executive did double duty as a state representative without anybody in the state thinking that was a conflict of interest.

In many states, regulatory capture ensures that Frontier's behavior never sees so much as a wrist slap. That was particularly noticeable when Frontier was recently busted charging users a $10 monthly "rental" fee for modems that the users owned. Frontier, like many big ISPs, has also been given free reign to impose all manner of additional sleazy and misleading fees, usually used to help broadband and TV providers falsely advertise a lower rate.

Even in states where consumer protection is a little tougher, the penalties aren't routinely damaging enough to deter bad behavior. The latest case in point: Washington State Attorney General Bob Ferguson reached a settlement with Frontier last week (pdf) in which Frontier will pay a $900,000 fine for years of imposing bullshit fees on the company's customers. One such fee, dubbed the "Internet Infrastructure Surcharge," imposed an additional $4 monthly on user bills:

"Ferguson began investigating Frontier in 2018 after receiving more than 600 complaints and "focused on Frontier Northwest's failure to adequately disclose fees during sales of cable, Internet and phone services since 2016," Ferguson's announcement said. "For example, the company charged as much as $3.99—nearly $50 per year—for an 'Internet Infrastructure Surcharge,' without adequately disclosing the surcharge in its advertising."

Note that Frontier has 3,735,000 broadband subscribers, each paying $4 a month in completely erroneous surcharges. That's nearly $15 million in bullshit charges in just one month, or $180 million in fraudulent revenue every year. While the $900,000 fine is semi-helpful, it's far from a deterrent -- especially considering that the ISP's settlement with the state doesn't require they stop charging the bullshit fee, just that they make it clear to consumers on their bill. $900,000 is chump change to these regional monopolies.

Keep in mind that Washington is one of the most "aggressive" states in the country at consumer protection, which admittedly isn't saying much. Also keep in mind that this is just one ISP. Numerous ISPs routinely engage in this same or worse behavior, usually with absolutely no penalty whatsoever from state or federal regulators like the FCC. It's the exact sort of behavior that's only made possible by two things: a lack of competition in the broadband market, and feckless, captured regulators who are more worried about campaign contributions than outright fraud.

All ignored, in turn, but a laundry list of telecom policy experts who've made entire careers out of pretending that the US telecom sector is healthy and immensely innovative. In reality, the closest many of these companies get to innovation is in coming up with ethically dubious surcharges.

Filed Under: bogus fees, fake fees, fine, washington state, wrist slap
Companies: frontier communications

Major US ISP Frontier Files For Bankruptcy, Monopolistic Apathy Isn't A Business Model.

from the ma-bell-got-the-ill-communication dept

The nation's phone companies don't really want to be in the residential broadband business. They routinely refuse to upgrade their networks despite millions in taxpayer subsidies, yet often lobby to ensure nobody else can deliver broadband in these neglected footprints either. US telcos have a bizarre disdain for their paying customers, delivering the bare minimum (slow DSL) at the highest rates they can possibly charge without a full-scale consumer revolt. It's not surprising, then, that many telco DSL customers are fleeing to cable broadband monopolies like Comcast, assuming they even have the choice.

The poster child for this kind of dysfunction has long been Frontier Communications. Frontier, the third biggest telco in the U.S., has been repeatedly busted in a series of scandals involving substandard service and the misuse of taxpayer money. In States like West Virginia, leaders have buried reports exposing the depth of Frontier's grift, and, until recently, a Frontier executive did double duty as a state representative without anybody in the state thinking that was a conflict of interest. The company has since been under investigations from New York to Minnesota for failing to upgrade or even repair its aging network.

This week, Frontier finally filed for bankruptcy, hoping to finally wipe the slate clean after several decades of bungled and ill-advised mergers, massive debt, and operating a business model where snide neglect was the centerpiece. Of course the company's announcement can't acknowledge any of these self-inflicted gunshot wounds, with Frontier insisting it has learned its lesson:

"With this agreement with our Bondholders, we can now focus on executing our strategy to drive operational efficiencies and position our business for long-term growth,” said Bernie Han, President and Chief Executive Officer. “At the same time, the COVID-19 pandemic continues to impact the entire business community, and our team is focused on ensuring the health and safety of our employees and customers. The services we provide to our customers keeps them connected, safe and informed, and I would like to thank our team for their continued dedication, especially in light of the current environment."

But nobody has learned any lessons here. Frontier engaged in mindless mergers and growth for growth's sake, refused to upgrade vast swaths of its network, and then ran to government (read: lobbying) shelter when the house of cards started to fall apart. And while it acknowledged in a report to investors that mindless M&A and under-investing in its network was a part of the problem, investors generally like network under-investment and mindless M&As because they're profitable on the short term.

There are a few simple reasons the U.S. has mediocre to terrible broadband, and contrary to conventional wisdom the problem isn't logistics, geography, financing (we've thrown billions upon billions the the problem) or the difficulty in deploying it. The problem is the entire U.S. system is built to reward short term thinking and punish long term vision, especially as it pertains to unsexy things like infrastructure. Well that, and powerful telecom monopolies that all but own state and federal legislatures and most regulators, ensuring that real disruption and competition rarely takes root.

Filed Under: bankruptcy, broadband, competition
Companies: frontier, frontier communications

After Years Of Scandal And Incompetence, US Telco Frontier Files For Bankruptcy

from the ill-communication dept

We've long explored how the nation's phone companies don't really even want to be in the residential broadband business. They routinely refuse to upgrade their networks despite millions in taxpayer subsidies, yet often lobby to ensure nobody else can deliver broadband in these neglected footprints either. US telcos have a bizarre disdain for their paying customers, delivering the bare minimum (slow DSL) at the highest rates they can possibly charge without a full-scale consumer revolt. It's not surprising, then, that many telco DSL customers are fleeing to cable, assuming they even have a second broadband option.

This dynamic often results in some absurd dysfunction. Like in West Virginia, where incumbent telco Frontier has repeatedly been busted in a series of scandals involving substandard service and the misuse of taxpayer money. The graft and corruption in the state is so severe, state leaders have buried reports, and, until recently, a Frontier executive did double duty as a state representative without anybody in the state thinking that was a conflict of interest. The company has since been under investigations from New York to Minnesota for failing to upgrade or even repair its aging network.

Not too surprisingly, this combination of apathy, incompetence, and corruption is not particularly sustainable. Last week, Frontier announced it would be exploring a bankruptcy sometime in March. That's thanks in no small part to $16.3 billion in debt it accumulated from buying Verizon's unwanted DSL networks in numerous states as part of a "growth for growth's sake" mindset that involved rampant expansion, and then neglecting the acquired territories. Shockingly, angry customers then fled to the exits, only compounding Frontier's problems:

"Frontier has been losing customers and reducing its staff. Its residential-customer base dropped from 4.15 million to 3.81 million in the 12-month period ending September 30, 2019, including a loss of 90,000 customers in the most recent quarter. Also in that 12-month period, Frontier's business-customer base declined from 422,000 to 381,000."

The bankruptcy comes on the heels of a similar bankruptcy filing by Windstream Communications. Windstream, too, engaged in a "growth for growth's sake" mindset that involved hoovering up government subsidies, acquiring network assets it refused to upgrade, then blaming everything but its own behavior as neglected customers fled for the exits. Once the debt is wiped from the books for both companies, the cycle will just start all over again thanks to US lawmakers that simply refuse to hold politically-powerful telecom giants accountable.

The failure of US telcos may not be great for residential broadband, but it's wonderful news for the nation's equally-despised cable companies, which have been quietly securing an even greater monopoly over broadband across countless US markets, meaning higher prices for everybody -- even if you've never paid a dollar to a US telco. The resulting climate of regulatory capture and muted competition is a major reason you all pay an arm and a leg for substandard service. And no, contrary to industry claims, 5G wireless isn't going to magically fix a corruption and competition problem few in tech or telecom want to seriously address.

Filed Under: bankruptcy, broadband, competition, dsl
Companies: frontier communications

The Pai FCC Sits On Its Hands While Phone Companies Rip Off American Taxpayers

from the ill-communication dept

We've talked often about how the nation's phone companies, now fixated on video and online advertising, have effectively just been letting their DSL and phone networks fall apart while still charging exorbitant rates. Not only did these companies take billions in taxpayer dollars to build these older copper-based networks, they took billions more in subsidies for fiber upgrades they never fully deployed. Yet increasingly we've watched as they've refused to upgrade or even repair their networks across countless states, leaving customers trapped with expensive service that often doesn't even meet the FCC's standard definition of broadband (25 Mbps).

This problem has often been exemplified by Frontier Communications in West Virginia, where local Charleston Gazette reporter Eric Eyre has quietly done an amazing job the last few years chronicling the state's immense corruption and dysfunction, from the state's use of broadband stimulus subsidies on unused, overpowered routers and overpaid, redundant consultants, to state leaders' attempts to bury reports supporting allegations that Frontier engaged in systemic, statewide fraud on the taxpayer dime.

Though not quite as profound, similar problems have plagued Frontier's operations in the state of Minnesota. The Minnesota Attorney General's office has been investigating whether Frontier violated state consumer-protection laws for a while now, and not long ago issued a 133 page report (pdf) detailing how terrible the company is at maintaining and repairing its network despite endless taxpayer subsidies. The report clearly illustrated a pattern of the company letting outages go on for months at a time, often putting paying customers at risk:

"The findings of this investigation detail an extraordinary situation, where customers have suffered with outages of months, or more, when the law requires telephone utilities to make all reasonable efforts to prevent interruptions of service. When interruptions occur, telephone utilities are to restore service “with the shortest possible delay.” Frontier customers with these outages include those with family members with urgent medical needs, such as pacemakers monitored by their medical teams via the customer’s landline."

Given that Frontier receives $283.4 million each year from the FCC's Connect America Fund (CAF), there's some obvious questions here as to who is minding the store and ensuring that Frontier is adhering to the law.

Like most broadband dysfunction, giant broadband ISPs get away with this sort of thing thanks to two things: a lack of real broadband competition, and regulatory capture. Case in point: Ajit Pai, whose FCC is supposed at least occasionally protect the American public. Senators in Minnesota have recently been pressing him to take some kind of action, even to publicly condemn the kind of grift and consumer mistreatment that's pretty common in the the state. In a letter posted to the FCC website (pdf), Pai effectively acknowledged the problem, though falls well short of saying he'll actually do anything about it:

"...the FCC will remain vigilant to ensure that our rules are observed and taxpayer funds respected. Accordingly, I have conveyed the information from your letter regarding the state commission’s investigation to our staff and have asked them carefully to monitor this development. Thank you for bringing this aspect of the issue to my attention."

While Pai is just a particularly obvious example of the regulatory capture that has infected telecom, this kind of "maybe we'll look into it" attitude has plagued both parties for decades when it comes to big telecom's long history of taxpayer-supported shenanigans and overall apathy. Needless to say, local state Senators weren't particularly enthusiastic about Pai's promise, especially given Pai's often breathless claims that he's a champion of stopping fraud and waste:

"For a chairman who is so concerned with rooting out waste, fraud and abuse, it's baffling that the commission tasked with overseeing billions of dollars in public money is declining to investigate the more than a thousand allegations of poor service by a company that receives that public money to provide those services," US Sen. Tina Smith (D-Minn.) told Ars in a statement today."

Given this is America, this will likely just be dismissed as partisan bickering. But it shouldn't be. We've thrown endless billions in taxpayer dollars at giant telecom conglomerates with often just a fleeting effort to ensure that money is being spent wisely. And while it's nice the Pai FCC will "monitor" the problem, we're long past that point. If you dig for more than twenty seconds, you can find endless examples of giant ISPs taking taxpayer dollars in exchange for the technological equivalent of damp garbage. And were Pai a quarter of the stalwart defender of fraud and waste he professes to be, this stuff would be met with a lot more than just "we might look into it."

Filed Under: ajit pai, fcc, fiber, oversight, subsidies, taxpayers, upgrades
Companies: frontier communications

After Report Suggests It Ripped Off Taxpayers, Frontier Communications Shrugs When Asked For Subsidies Back

from the graft-ahoy dept

For years we've noted how if you want to really understand the dysfunction at the heart of the U.S. broadband industry, you should take a closer look at West Virginia. Like most states, West Virginia's state legislature is so awash in ISP campaign contributions it literally lets incumbent ISPs write state law, only amplifying the existing lack of broadband competition in the state. So when the state received $126.3 million in broadband stimulus funds, it's not particularly surprising that a report by the US Commerce Department's Office of Inspector General (pdf) found more than a few examples of fraud and waste.

More specifically, Frontier was accused of buying and storing miles of unused fiber to drive up costs, as well as the use of various "loading" and "invoice processing" fees to milk taxpayers for an additional $5 million. The report's findings come on the heels of previous reports that found Frontier and the state used taxpayer money on unused, overpowered routers and overpaid, redundant, and seemingly purposeless consultants. As is often the case with regulatory capture, efforts to hold anybody accountable for any of this have so far gone nowhere.

But after the Inspector General's report, the federal government decided it might be a good idea to at least ask for some of this misspent money back from Frontier and the State. According to the Charleston Gazette Mail, of particular interest were these additional "loading" surcharges, and the fact Frontier stockpiled 49 miles of unused fiber to drive up build costs:

"The Commerce Department letter cites findings that Frontier misled the public about the amount of unused fiber cable — called “maintenance coil” — the company installed across the state. The extra fiber, which is stored at public buildings and used for repairs, drove up the broadband expansion project’s cost. Frontier placed 49 miles of spooled-up, unused fiber in West Virginia, four times the amount the company had disclosed to state officials.The feds have ordered state officials to disclose whether the extra coil was included in the total miles of fiber the state claimed Frontier built with stimulus funds. The state also must get an “explanation from Frontier for the reason it misrepresented the maintenance coil mileage to the public,” according to the Commerce Department’s Aug. 21 letter.

This sort of stuff happens pretty much constantly in telecom as companies pay empty lip service to "bridging the digital divide." But whereas giants like Comcast, AT&T and Verizon have the lobbying and policy chops to obfuscate such graft, West Virginia is so dysfunctional Frontier doesn't even have to try. Case in point: a Frontier executive has spent years also employed as State Senate leader -- without anybody raising much of an eyebrow. That employee was only recently fired -- but only because he finally failed to oppose a bill Frontier wanted killed.

With that kind of support, it's not too surprising that Frontier executives say they won't be returning the misspent taxpayer money anytime soon:

"In a letter to West Virginia Chief Technology Officer John Dunlap this week, Frontier asserted that any funds the state might return to the federal government “are, of course, not recoverable from Frontier.”...Frontier also disputed the federal government’s determination that the state must return $4.7 million, urging the state to file an appeal. "To avoid the waste of millions of West Virginia taxpayer dollars, the [state] should appeal,” wrote Mark McKenzie, a Frontier engineer who oversaw the company’s role in the project.

Again, if you've tracked the similar reports bubbling out of the state for years, the $4.7 million the feds want returned is likely only the tip of the iceberg. But because state legislatures are often little more than glorified rubber stamps for the interests of giant telecom operators, it's less than likely that these inquiries result in anything vaguely resembling genuine accountability. As a result, West Virginia remains one of the least broadband-connected states in the union, a story of graft and regulatory capture that plays out in countless states across the country on a daily basis. This is, as they say, why we can't have nice things.

Filed Under: broadband, subsidies, taxpayers, west virginia
Companies: frontier communications

Frontier Communications Caught (Again) Ripping Off West Virginia Taxpayers

from the your-estimates-seem-a-little-high dept

So (for good reason), we keep noting that if you want to see how the American broadband market really works, you should take a close look at West Virginia. As in most states, a lack of competition keeps broadband prices high and speeds slow, with far too many consumers forced to pay a tidy sum for DSL speeds circa 2002. But the state has also been embroiled in scandal after scandal involving Frontier Communication's mismanagement of taxpayer subsidies that were intended to try and resolve this problem.

Local Charleston Gazette reporter Eric Eyre has quietly done an amazing job the last few years chronicling West Virginia's immense broadband dysfunction, from the State's use of broadband stimulus subsidies on unused, overpowered routers and overpaid, redundant consultants, to state leaders' attempts to bury reports supporting allegations that Frontier engaged in systemic, statewide fraud on the taxpayer dime.

Eyre is back again directing readers to a new report by the US Commerce Department's Office of Inspector General (pdf) which found that Frontier pretty consistently tried to game the subsidy system, imposing various "loading" and "invoice processing" fees -- outlawed by federal grant rules governing stimulus funding -- on to invoices submitted to the state. Frontier consistently used these fees to pad their bills to the tune of $4.7 million, and internal memos feature employees clearly demonstrating that Frontier saw this bill padding as a way to glean some additional profit on the taxpayer's dime:

The scathing, 31-page report declared the payments "unreasonable" and "unallowable." Meanwhile, Frontier saw the tacked-on charges as a “revenue opportunity,” according to an internal company email cited in the report. Frontier employees referred to the extra fees as “markups” and “profit."

Keep in mind Frontier had already been fighting a lawsuit alleging that it used a wide variety of tricks to both jack up its original estimates for broadband deployment -- and ensure any subsidies would only be used to shore up Frontier's internal networks, and not to improve overall broadband penetration and competition in the state. This new report notes that one of the tricks used by Frontier was to order and store a massive amount of unused fiber for future "repairs," allowing it to bill more than projects actually cost:

"What’s more, Frontier misled the public about the amount of unused fiber cable — called “maintenance coil” — the company installed across the state, according to the report. The extra fiber, which is stored at public facilities and used for repairs, drove up the broadband expansion project’s cost. Frontier wound up placing 49 miles of spooled-up, unused fiber across West Virginia — four times the amount the company had disclosed to state officials, according to the report.

Unsurprisingly, Frontier insists it has done nothing wrong, despite years of similar allegations across the state. This is the same Frontier that just got done firing a seven year employee because, at his part-time job as West Virginia senate leader, he voted for a new law that would actually help improve broadband penetration and competition in the state. Oddly, state officials (many of the same ones that tried to bury reports alleging the same sort of thing earlier) aren't commenting on the report's findings.

It should be noted that this is how state politics has worked for years for the likes of AT&T and Verizon, who long found it easy to gobble up subsidies and tax breaks, then pay state lawmakers and regulators to look the other way when it came time for accountability over how subsidies are spent. More often than not, these companies are simultaneously being allowed to quite literally write state telecommunications law ensuring that competition in the broadband sector remains muted. All while everybody in the chain professes their unwavering dedication to free markets and consumer welfare.

But Frontier has neither the competency nor the legal and accounting firepower of its larger counterparts, and as it has stumbled closer to bankruptcy courtesy of some questionable business decisions over the last few years, keeping formerly loyal state politicians and regulators consistently looking the other direction has proven increasingly difficult. Still, believing that this ends with anything even remotely resembling accountability and justice remains a very risky wager.

Filed Under: broadband, stimulus, subsidies, west virginia
Companies: frontier communications