AT&T Preps For Even More Cuts After $42 Billion+ In Trump Tax Cuts And Regulatory Favors

from the ill-communication dept

It seems like only yesterday that AT&T CEO Randall Stephenson was promising on live television that if Trump followed through on his tax cuts, the company would dramatically boost investment and add thousands of new jobs. Not "entry-level jobs," mind you, but "7,000 jobs of people putting fiber in the ground, hard-hat jobs that make $70,000 to $80,000 per year." Each $1 billion in new investment spurred by government favors, AT&T insisted, would result in 7,000 new jobs. "Lower taxes drives more investment, drives more hiring, drives greater wages," Stephenson said.

The same rhetoric was a common occurrence as AT&T lobbied to have net neutrality (and FCC oversight in general) stripped away, insisting this would result in significant job creation and a massive surge in investment. The amount of money AT&T saved from turning the FCC into a glorified rubber stamp for industry is likely incalculable. The tax cuts were more easily calculated, with CBS suggesting the cuts should net AT&T around $42 billion.

Here on planet Earth the exact opposite of what AT&T promised occurred: the company actually decreased its 2020 CAPEX by some $3 billion, and unions say the company has cut more than 37,000 jobs since the Trump tax cuts took effect.

This week, AT&T announced it would be conducting another $6 billion in cuts that will include additional "headcount rationalization," which in human language likely indicates even more layoffs:

"The effort may include layoffs. Stankey didn't specifically mention that word, but instead said the operator would enact a "headcount rationalization," a term that could include layoffs as well as reductions by not hiring replacements for workers who retire or leave. That program, he said, would reduce the operator's labor expenses by 4%, or roughly $1.5 billion, by the end of 2020. He added that the reduction would target employees in AT&T's call centers, management structures and distribution strategy. AT&T employed roughly 252,000 people at the end of September."

It's odd that when news outlets discuss AT&T's cost-cutting and layoff strategies, they fail to mention we just got done throwing tens of billions in regulatory favors and tax cuts at the company in exchange for absolutely nothing. In fact, we apparently paid AT&T to do the exact opposite of what it repeatedly promised to do. It's particularly galling given that most of AT&T's current problems stem directly from spending too much money on harmful megamergers and bumbling its entry into the online streaming video space.

But as usual, the end result isn't AT&T executives paying any sort of penalty for incompetence, it's the company's workers and customers who have to pay for the mistakes -- in more ways than one. And it's all being subsidized by American taxpayers who, thanks to a general press unwillingness to call a duck a duck, often don't understand the scope of the grift directly underfoot.

Filed Under: competition, jobs, layoffs, monopolies, subsidies, tax cuts
Companies: at&t

Want To Know Why U.S. Broadband Is A Bad Joke? Take a Close Look at Frontier Communications

from the ill-communication 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, 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, 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.

This dynamic often results in some almost comedic 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 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.

But it's not just West Virginia. Frontier has since been under investigations from New York to Minnesota for failing to upgrade or even repair its aging network, at points putting human lives at risk. The company has also been repeatedly under fire for blatantly ripping its users off. For example, it has been charging its customers a rental fee for modems they already own. Very rarely do you see state leaders stand up to the company. And you'll certainly never see any kind of substantive pushback by the current, industry-captured FCC.

Customers who can leave (usually to the other end of the duopoly, Comcast), have been fleeing whenever possible, resulting in a looming bankruptcy by the company. In a report to investors this week we're only now starting to finally see something close to truth from the company as it tries to own up to its incompetence. Frontier had apparently tried to redact much of the report detailing the scope of network neglect, but appears to have bungled that as well:

"For example, one redacted sentence says that "Frontier WV's copper network has at least 952,163 connection points that are susceptible to moisture, corrosion, loose connections, etc. that may cause interruptions of service to customers."...The failed redaction of the number of connection points was coupled with failed redactions about the age of the network. The consultant firm's report said that 46.8 percent of Frontier's West Virginia network is between 36 and 47 years old. Both the percentage and the numbers of years were unsuccessfully "redacted" by Frontier.

The report makes it clear that the company probably shouldn't have engaged in mindless M&As, acquiring unwanted aging phone networks from AT&T and Verizon in "growth for growth's sake." Many of those deals were completely bungled and saddled the company with unneeded debt. Most should have been blocked by regulators and lawmakers who were too busy kissing the company's ass. Frontier also should have invested money back into the network to build a stronger company and retain subscribers, instead of engaging in repeated stock buybacks.

There are two reasons the company didn't do better on these fronts. One is sniveling, feckless, U.S. regulators and cash-compromised state and federal lawmakers, who rubber stamp every merger thrown on their desks, and refuse to hold politically powerful monopolies accountable. The other? A lack of competition across most of Frontier's territories:

"So why would a company like Frontier not immediately hit the upgrade button and start a massive copper retirement-fiber upgrade plan to keep the company in the black? In short, Frontier has survived chronic underinvestment because of a lack of broadband competition. Nearly two million Frontier customers have only one choice for internet access: Frontier. For another 11.3 million, there is only one other choice – a cable company that many detest. Frontier has enjoyed its broadband monopoly/duopoly for at least two decades. So long as its customers have fewer options, Frontier is under less pressure to invest in upgrades."

There were ample opportunities for state and federal leaders to step in and correct these problems, while embracing pro-competition policies that minimized the need for government involvement. Instead we let a regional monopoly dictate state and federal policy, and now act surprised when the end result is a smoldering dumpster fire. Granted as Frontier stumbles toward bankruptcy most of its debt will be wiped clean, nobody in the U.S. will learn anything from the process, and a universe of "very serious telecom policy thinkers" will continue to turn a blind eye to the entire mess as history repeats itself.

Filed Under: broadband, cable, competition, corruption, dsl, fcc, promises, subsidies, west virginia
Companies: frontier

Oh Look, More Giant ISPs Taking Taxpayer Money For Unfinished Networks

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

For more than a decade we've highlighted how the U.S. simply adores throwing taxpayer money at giant telecom companies in exchange for networks they then only half deploy. Whether it's on the city, state, or federal level, we've thrown untold billions at mono/duopolies which in turn dodge their obligations under these agreements with little to no real penalty. While sometimes this money winds up being used as intended, just as often this money winds up being pocketed by executives and shareholders with little discernible impact on America's broken and uncompetitive broadband markets.

The latest case in point: both Centurylink and Frontier have informed the FCC they've failed to meet FCC required broadband milestones after receiving millions in taxpayer subsidies:

"CenturyLink notified the Federal Communications Commission that it "may not have reached the deployment milestone" in 23 states and that it hit the latest deadline in only 10 states. Frontier similarly notified the FCC that it "may not have met" the requirements in 13 states. Frontier met or exceeded the requirement in 16 other states. Under program rules, the ISPs were required to bring Internet access to 80 percent of funded locations by the end of 2019 and must hit 100 percent by the end of 2020."

Keep in mind, these deployment goals aren't exactly what you'd call difficult. Under the terms of the FCC's 2015 Connect America Fund Auction, the two ISPs agreed to expand access to DSL at speeds of 10 Mbps down and 1 Mbps (1 Mbps!) up in exchange for big taxpayer payouts. In CenturyLink's case, the company is slated to net $505.7 million annually for six years to deploy service to 1,174,142 homes and businesses in 33 states. For Frontier, the company received $283.4 million annually for six years to bring access to 774,000 locations in 29 states.

Keep in mind these customers aren't even really getting broadband, which is defined as at least 25 Mbps by the FCC. What these territories are getting is overpriced, slow DSL, belched up from somewhere around 2003 or so from two companies that have a long, sordid history of atrocious customer service and a failure to upgrade or repair their aging networks. In most markets that's giving giants like Comcast and Spectrum an even bigger monopoly, resulting in higher rates for all broadband users as competition wanes.

Unsurprisingly, throwing billions at companies for antiquated broadband service (that's never fully deployed anyway) doesn't really fix things. In large part because we don't fully understand the problem we're trying to fix. Despite a lot of claims to the contrary, we don't actually know where broadband is deployed. US broadband maps are notorious garbage, and the telecom lobby has fought tooth and nail against efforts to fix them. Why? It's two-pronged: better maps would only highlight a lack of competition (potentially prompting somebody to actually fix it), and it helps them obscure the waste and fraud on the subsidy end.

Ideally, the FCC would step in here and punish both companies for failing to meet arguably modest goals or not being honest about where broadband is available. But there's little real indication that's actually going to happen. Just ask Verizon, which was given billions in subsidies and tax breaks by countless states and cities in exchange for fiber it never fully deployed. Or AT&T, which routinely receives billions in tax breaks, subsidies, and regulatory favors in exchange for jobs and broadband deployment that somehow never fully materialize. The penalties for both companies have been utterly nonexistent.

There's a chorus of telecom sector sycophants and Trump FCC officials that throw face-fanning tantrums every time some podunk town in Nebraska decides to spend a million bucks to build a better alternative to Comcast. But you'll notice those same folks never have a single sour word to say about the multi-decade tendency to throw billions of dollars at unaccountable monopolies in exchange for networks they never fully deploy. These folks are usually pretty easy to spot: like Pai, just look for the folks going comically out of their way to even acknowledge the limited competition and high prices that plague the US broadband sector.

Were you to do a proper audit of the telecom sector over the last 30 years, I'd all but guarantee the amount of money thrown at the sector could have funded a fiber optic line to every home in America several times over. Instead, thanks in large part to revolving door regulators and cronyism, we've built a system that throws unaccountable billions at giants like AT&T and Comcast, in exchange for substandard broadband, terrible customer service, and an eternal fountain of empty promises.

Filed Under: broadband, competition, dsl, failed obligations, fcc, subsidies, taxpayer funds
Companies: centurylink, frontier

Some FCC Subsidized Low Income Phones Are A Chinese Malware Shitshow

from the ill-communication dept

We've long talked about the problems with the FCC's Lifeline program, which was created by Reagan and expanded by Bush Junior (yet somehow earned the nickname "Obamaphone"). The $2 billion program doles out a measly $9.25 per month subsidy that low-income homes can use to help pay a tiny fraction of their wireless, phone, or broadband bills (enrolled participants have to choose one). But for years, the FCC has struggled to police fraud within the program, with big and small carriers alike frequently caught "accidentally" getting millions in taxpayer dollars they didn't deserve.

Late last week another issue popped up with the government program, albeit of a different variety. Researchers over at MalwareBytes discovered that one-such government-subsidized low income wireless carrier, Assurance Wireless by Virgin Mobile, has been selling devices to low-income customers that are riddled with malware. One of the questionable apps pre-loaded on the device is dubbed "wireless update," and opens the door to malicious apps being installed without user awareness or consent:

"Thus, we detect this app as Android/PUP.Riskware.Autoins.Fota.fbcvd, a detection name that should sound familiar to Malwarebytes for Android customers. That’s because the app is actually a variant of Adups, a China-based company caught collecting user data, creating backdoors for mobile devices and, yes, developing auto-installers."

Neat! Another malware app actually poses as the device's settings app, and can't be removed at all:

"It’s with great frustration that I must write about another unremovable pre-installed app found on the UMX U683CL phone: the mobile device’s own Settings app functions as a heavily-obfuscated malware we detect as Android/Trojan.Dropper.Agent.UMX. Because the app serves as the dashboard from which settings are changed, removing it would leave the device unusable."

When notified by journalists and lawmakers (Wyden) of the problem, the Ajit Pai FCC did what it's now infamous for, nothing:

Sure, Lifeline doesn't fund handsets, but it does fund this particular carrier, which would quickly take action if it meant losing taxpayer money. This is technically part of a broader problem the FCC/FTC don't seem too concerned about: the market, left to its own devices, is slowly turning things like privacy and security into luxury features exclusive to those who can afford it. A recent study by Privacy International found that the low-income budget phones we throw at the poor with pride routinely come with outdated OS', malware, and other issues we don't seem to care much about.

Filed Under: fcc, lifeline, malware, subsidies
Companies: assurance wireless

Accountability Is Nowhere To Be Found For Foxconn's Wisconsin Head Fake

from the hype-and-bluster dept

If you recall, the state of Wisconsin had originally promised Taiwan-based Foxconn a $3 billion subsidy if the company invested $10 billion in a Wisconsin LCD panel plant that created 13,000 jobs. But as the subsidy grew to $4.5 billion, the promised factory began to shrink further and further to the point where nobody is certain that anything meaningful is going to get built at all.

Last October, reports emerged clearly illustrating the ever-shrinking nature of the deal. They also highlighted how Foxconn was effectively just using nonsense to justify its failure to follow through, showing that while the company hadn't built much of anything meaningful in the state, it was still routinely promising to deploy a "AI 8K+5G ecosystem" in the state to somehow make everything better. Shockingly, that mish-mash of buzz words is effectively meaningless.

Whatever Foxconn is building in the state now, it's certainly not the massive factory that was supposed to create 13,000 jobs. Feckless leaders appear to have just finally figured out the original deal should be amended in the wake of Foxconn's head fake (something even Foxconn seemed amenable to initially), yet documents obtained by The Verge show that the company is refusing to budge in any meaningful capacity until somebody grows a spine and forces them to:

"Documents obtained by The Verge show that Wisconsin officials have repeatedly — and with growing urgency — warned Foxconn that its current project has veered far from what was described in the original deal and that the contract must be amended if the company is to receive subsidies. Foxconn, however, has declined to amend the contract, and it indicated that it nevertheless intends to apply for tax credits.

Foxconn has “refused by inaction” to amend the deal, says Wisconsin Department of Administration Secretary Joel Brennan. “They were continuously encouraged. It’s a relatively recent development, where they have said, ‘No, we don’t want to do anything with the contract.’ Our expectation has been, and continues to be, that they should want to come back and have discussions about this."

Local politicians have compared the scandal to the Fyre Festival, and many locals say the company is being aggressively secretive and often misleading. Even many of the "innovation hubs", which Foxconn promised would somehow be better than the ever-shrinking factory it originally proposed, are little more than empty buildings at this juncture, and we still seem miles away from the company -- or any of the project's original architects and hype men (Paul Ryan, Scott Walker, Donald Trump) -- being held accountable in any way that actually matters.

Meanwhile, the few jobs that are created by Foxconn's efforts could ultimately cost state taxpayers anywhere between $300,000 to $500,000 per job, once again highlighting how we may just want to reconsider this generation-long habit of throwing billions at giant corporations for doing nothing.

Filed Under: handouts, subsidies, wisconsin
Companies: foxconn

Trump Whines About AT&T, Ignores His FCC Has Spent Two Years Kissing The Company's Ass

from the ill-communication dept

While there are countless news outlets that justifiably criticize the President, Trump has long been particularly fixated on CNN. So fixated, in fact, that it's believed this disdain for the network (in addition to Rupert Murdoch's competitive desires) played a starring role in his DOJ's bungled effort to try and block AT&T's $86 billion merger with CNN parent company Time Warner.

This week, Trump doubled down once again, proclaiming that the public should stop using AT&T services as punishment for CNN's criticism of the President:

The tirade resulted in a fairly feeble effort to get the #DumpATT hashtag trending on Twitter, and some consternation and furrowed brows among journalists who took the rambling Tweet a bit too seriously.

The irony here, at least if you're an adult who has actually paid attention to this administration's policies, is that AT&T has received a near-endless list of favors from Trump's administration, many of which it's not entirely clear that Trump is even aware of. In fact, AT&T has probably received more regulatory handouts from this administration than any other administration in American history. Which, if you tracked the favors doled out by Bush-era FCC boss Michael Powell (now the top lobbyist for the cable industry), that's saying something.

AT&T was a massive beneficiary of the Trump tax cuts, now saving $3 billion annually in perpetuity. According to AT&T, that money was supposed to go back into the company's network and employees, but instead resulted widespread layoffs. Trump's FCC also gave AT&T a massive regulatory handout when it helped kill broadband privacy protections, killed net neutrality rules with popular bipartisan support, and voluntarily eroded its own authority over ISPs like AT&T at lobbyist behest. Trump's FCC has also routinely turned a blind eye to AT&T scandals like its failure to police location data sales.

There's countless other favors AT&T has gleaned from the Trump administration as well, whether it's the FCC decision to weaken the very definition of broadband competition or the killing of plans to bring more competition to the cable box. The Trump administration fealty to AT&T is so severe, we're at the point that when reporters contact Trump's FCC for information, they've occasionally been directed to US Telecom, a lobbyist organization spearheaded by... AT&T.

People tend to look at the Trump DOJ's decision to sue to thwart the Time Warner merger (which again had more to do with helping Rupert Murdoch and hurting CNN than any disdain for AT&T) as a sign of Trump's "opposition" to AT&T, but you'd be pretty hard pressed to find a company that's done as well under Trump as CNN's new parent company. That quickly forgotten $600,000 AT&T's lobbyists paid now-imprisoned Trump lawyer Michael Cohen for broader access to the administration seems to have been money well spent.

The entire fracas once again highlights how Trump's Twitter tirades are only tangentially related to reality, and very rarely tethered to his administration's actual policies. In fact, based on his comments on net neutrality, it's not really clear the President of the United States has the foggiest understanding of what his own FCC is doing. If Trump really wanted to hurt AT&T and CNN, a good first step would probably be to stop kissing the Dallas-based telecom giant's massive, monopolized ass.

Filed Under: antitrust, doj, donald trump, fcc, oversight, regulations, subsidies, telcos
Companies: at&t

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

Wisconsin's Overhyped Foxconn Deal Keeps Getting Lamer By The Week

from the pray-I-don't-alter-the-deal-further dept

Last year, you probably recall that former Wisconsin Governor Scott Walker signed a "revolutionary" deal: the state promised Taiwan-based Foxconn a $3 billion state subsidy if the company invested $10 billion in a Wisconsin plant that would create 13,000 jobs. Walker hoped the deal would finally help cement job growth that he had been promising supporters for years, and the press was quick to hype the plan without really focusing too much on the math, or Foxconn's history of not really living up to similar promises in countries like Vietnam, India, and Brazil.

Quietly buried under the blistering hype (greatly fueled by the Trump administration), groups like Wisconsin’s non-partisan Legislative Fiscal Bureau began to point out that it would take until 2043 for taxpayers to recoup the subsidy. And as the finer details of the plan began to emerge late last year, the $3 billion subsidy quickly ballooned to $4.1 billion, leading some to point out that the math no longer made sense at all and, with an unemployment rate of 3.2% and a $100,000 per job subsidy, it was technically impossible for the massive subsidy to ever be repaid (in jobs, walnuts, or anything else).

Worse, as the project moved along and subsidies ballooned, the scale of the project began to shrink. An excellent report at The Verge last October noted how the original plan for a 20 million square foot factory that would build 10-foot by 11-foot panels for 75-inch TV screens, slowly shrunk to a Generation 6 plant that only produces 5-foot by 6-foot glass panels, and with original plans for $10 billion worth of investment (Foxconn's original promise) also shrinking to a $2.5 billion investment. Walkers response to the dubious deal was, it should be noted, that critics should "suck lemons":

"There’s a whole lot of people out there scrambling to try and come up with a reason not to like this,” he said in July of last year. “They can go suck lemons. The rest of us are going to cheer and figure out how we are going to get this thing going forward.” Several weeks later, he called the deal a “once-in-a-lifetime opportunity” that will be “transformational” for the state. “These LCD displays will be made in America for the very first time, right here in the state of Wisconsin."

About that. This week, a Reuters report revealed that the original plan for a massive factory bringing 13,000 jobs to the region had changed yet again. Now, Foxconn executives claim, there will be no factory or manufacturing jobs at all. While Wisconsin might get an engineering office, even that doesn't sound all that certain according to Foxconn executives:

"Now, those plans may be scaled back or even shelved, Louis Woo, special assistant to Foxconn Chief Executive Terry Gou, told Reuters. He said the company was still evaluating options for Wisconsin, but cited the steep cost of making advanced TV screens in the United States, where labor expenses are comparatively high.

“In terms of TV, we have no place in the U.S.,” he said in an interview. “We can’t compete."

Rather than a focus on LCD manufacturing, Foxconn wants to create a "technology hub" in Wisconsin that would largely consist of research facilities along with packaging and assembly operations, Woo said. It would also produce specialized tech products for industrial, healthcare, and professional applications, he added.

“In Wisconsin we’re not building a factory. You can’t use a factory to view our Wisconsin investment,” Woo said.

And instead of the 5,200 new jobs that were supposed to arrive before the end of 2020, the Reuters report is now saying those numbers will be closer to 1,000. Maybe? Who knows. Given its expertise in this subject, it's hard to believe Foxconn didn't realize all of this from the start, since the market hasn't magically shifted in just a year or two. Also keep in mind that while the project shrinks, taxpayer money has already been spent preparing for the factory's construction, including the demolition of some homes previously on the target site.

Given the incredible shrinking nature of this project it's also unclear (especially if you've listened to the excellent Reply All podcast on this subject) why anybody would believe anything being said now about this ever-devolving boondoggle.

Filed Under: factories, lcds, scott walker, subsidies, suckers, wisconsin
Companies: foxconn

The Foxconn Wisconsin Deal Has Devolved Into A Pile Of Shifting Promises, Buzzwords, And Hype

from the prey-I-don't-alter-our-deal-further dept

Last year, you'll recall that Wisconsin Governor Scott Walker signed what at the time was treated as a revolutionary deal: the state promised Taiwan-based Foxconn a $3 billion state subsidy if the company invested $10 billion in a Wisconsin plant that created 13,000 jobs. Walker hoped that the deal would finally help cement job growth that he had promised his supporters for years, and the press was quick to hype the plan without really giving it too much thought. Quietly, Wisconsin’s non-partisan Legislative Fiscal Bureau was busy pointing out that it would take until 2043 for taxpayers to recoup the subsidy, though that obviously took second fiddle to the hype of bringing American jobs back from overseas to focus on cool new tech.

But as the details of the plan solidified by late last year, the $3 billion subsidy quickly ballooned to $4.1 billion, and some folks quietly began to notice that the math really didn't make much sense:

"Wisconsin currently has an unemployment rate of 3.2%, so they are only so many workers available locally. Realistically, the payback period for a $100,000 per job deal is not 20 years, not 42 years, but somewhere between hundreds of years and never. At $230,000 or $1 million per job, there is no hope of recapturing the state funds spent from taxes on the company and its workers."

Many now doubt whether the subsidy will ever pay for itself. This week, The Verge offered up a new piece dissecting the deal and it's well worth a read. It notes that while the scope of the subsidies Foxconn would receive slowly ballooned, the promised factory Foxconn was supposed to build kept shrinking in size and scope. Instead of building 10-foot by 11-foot panels for 75-inch TV screens, Foxconn would be building a Generation 6 plant that only produces 5-foot by 6-foot glass panels.

Instead of a 10.5 plant needing $10 billion in investment (Foxconn's original promise), the Gen 6 plant actually being built requires about a $2.5 billion investment. And still, the scope of the promised plant continued to shrink:

"But Foxconn officials also said that the company was still committed to a $10 billion investment and 13,000 jobs, adding it might eventually add a Gen 10.5 plant, but it would get there in “phases.” The phases were not spelled out.

Just seven weeks later, in late August, the company announced the plans had changed yet again — far more radically. Woo told the Racine Journal Times that Foxconn would never add a Gen 10.5 plant to its Racine campus, despite past statements, because by the time it was built, the market would be glutted by other manufacturers in China."

Of course none of this should really be surprising, especially given that Foxonn has made similar, magically-shrinking promises of similar ilk in countries like Vietnam, India, and Brazil. And this is all before you seriously consider the environmental impact of the arrangement, which many aren't. At this point, the fading promises have become almost comedic in nature (if you ignore taxpayers footing the bill for the kerfuffle). Vast plans to build a major panel manufacturer plant with thousands of new jobs have been replaced by hype, buzzwords, and nonsense:

"Even the Gen 6 panels might not be manufactured in Racine for long. “We are not really interested in television,” Woo told the newspaper, though he said the company wants to build America’s first thin-film transistor (TFT) fabrication, which can be used in LCD products. Rather, Woo said, workers at the Wisconsin plant will be focused on figuring out new ways to use Foxconn’s display, cellular, and AI technology, building out an “ecosystem” Woo calls “AI 8K+5G."

We've already noted that 5G is important but violently over-hyped, and this idea of an "AI 8K+5G ecosystem" is largely meaningless (they really should have thrown a blockchain reference in for good measure). A May 2018 poll of locals found that 66% doubted the deal would ever actually meaningfully benefit the local economy, and the plan isn't having anywhere near the impact on polling that Walker had hoped ahead of the midterms. At this rate, Wisconsin will be lucky to see a few thousand jobs in exchange for an investment most objective observers doubt will ever actually pay for itself.

Filed Under: crony capitalism, factories, jobs, scott brown, subsidies, wisconsin
Companies: foxconn

After Nabbing Billions In Tax Breaks, AT&T's Promised Job Growth Magically Evaporates

from the Charlie-Brown-playing-football dept

Telecom monopolies have a pretty good racket going. They'll consistently demand all manner of tax cuts, subsidies, and other government perks in exchange for broadband networks they only half or partially deploy--or jobs that never materialize. The nation's telcos in particular have received countless billions in taxpayer subsidies to expand their broadband networks, yet time and time again we've shown how they've wiggled out of these obligations, leaving huge swaths of America left outside of the reach of fast, inexpensive, competitive broadband (that's particularly true if you're poor).

It doesn't matter how many times we go through this little stage play, it's a cycle that just never ends. AT&T's lobbying and policy folks are exceptionally good at routinely promising state and federal governments that a cornocopia of new jobs and amazing broadband investment is just around the corner, but only if AT&T gets what it wants: be that the death of net neutrality, a lower tax rate, more subsidies, or any number of protectionist or otherwise terrible laws designed largely to protect AT&T's non-competitive geographical fiefdoms. It's a cycle, and a level of institutional gullibility, that's pretty staggering in scope and repetition.

Yet somehow we never wise up. We never audit investment promises. And we certainly never hold giant telecom monopolies accountable. For example, AT&T spent most of last year promising all manner of incredible broadband investment, new jobs, and new innovations if the Trump administration was willing to give it a massive new tax cut. These cuts would, we were repeatedly told, result in a huge boon for broadband investment and "really good jobs":

"Lower taxes drives more investment, drives more hiring, drives greater wages," Stephenson said on CNBC's "Squawk Box." "All of this fits together."...For example, he said AT&T would have to add 7,000 jobs to execute on every $1 billion of capital investment. "There are jobs wearing hard hats … to put that capital into the ground or on cell towers," he said. "There are high-paying, really good jobs with great benefits. The correlation is tight — very, very tight."

The AT&T CEO said that reducing business regulations is another way to get companies to invest. Regulation is "effectively a tax on investment," he argued. "Take regulation down, you get investment up."

The Trump administration was happy to oblige, doling out cuts worth upwards of $20 billion for AT&T. But this theater ignored the fact that AT&T (and countless other companies like it) have long engaged in all manner of financial bookkeeping magic to ensure they already pay a relative pittance in taxes (especially true in telecom where complex mergers and gamesmanship like Reverse Morris Trusts can be used to endlessly dodge tax obligations). And it also ignored how many times AT&T has made these empty promises then failed to follow through.

And it's happening again. Despite its $20 billion in tax savings and record profits, AT&T continues to lay off thousands of employees in the wake of the Trump tax cuts:

"Though AT&T is earning record profits, spending billions on stock buybacks and is expecting an estimated windfall of $20bn in savings from Donald Trump’s tax reforms, it has continued to lay off workers and outsource jobs...In the last seven years, AT&T has closed 44 call centers, according to the Communications Workers of America labor union. Four closures, including the facility in Harrisburg took place this year. While some workers are able to relocate to other call centers in the US, many are left jobless. For some, their jobs are sent offshore, where workers can be paid less than $2 an hour."

Some of these job cuts reflect AT&T's waning interest in being an actual broadband company as it pivots (like Verizon) to more lucrative online advertising. Others reflect the company's efforts to manage the massive debt incurred from its endless quest to grow bigger for growth's sake via an endless wave of megamergers. Unsurprisingly (if you spend five full minutes reading a telecom history book), any real savings from tax cuts, mergers, consolidation and mindless deregulation of natural monopolies (like net neutrality) goes to executive compensation and investors, not to employees or back into the network.

Of course enriching investors and executives is the whole point. Yet we seem intent on adding a layer of bullshit onto these proceedings that try and suggest that such mindless fealty to AT&T is good for everybody, when that's simply not true. To sell the public and press on this manufactured idea, AT&T and other telecom companies (like Charter) promised employees bonuses (not to be confused with actual raises) as a direct result of the tax cuts. But there too AT&T was misleading, failing to mention those bonuses had already been secured as part of routine union negotiations:

"In a December 2017 news release advocating in favor of Trump’s tax cuts, AT&T promised bonuses of $1,000 to 200,000 employees over the next year. The news release omitted that unions had already previously negotiated those bonuses with AT&T before the tax cut bill was passed."

AT&T's broadband investment promises are also routinely hollow. One thing AT&T likes to do is take the CAPEX and network investment numbers it would have had anyway, and claim these are "new" goals only made possible if AT&T gets what it wants. Few in the press ever really bother to fact-check AT&T's math. Neither do lawmakers, who have come to rely on AT&T's generous windfalls to help fund their next election. The end result usually winds up being some scattered upgrades in more competitive areas, but huge swaths of America with decidedly last-generation DSL despite a parade of subsidies and tax breaks for AT&T (again, a trend especially notable in low-income AT&T markets).

Our immense gullibility to these bogus promises is a bit more stark to me than it is to most, having watched this play out countless times with nary a single penalty for AT&T over the last few decades. The drama played out again recently with the assault on net neutrality, a move that will result in countless anti-competitive headaches and rate hikes for captive customers, but was similarly framed as an incredible gift to consumers, innovation, American jobs and network investment. Someday we may learn our lesson and stop throwing billions at blatant grifters like AT&T, but it's abundantly clear it's not happening anytime soon.

Filed Under: broadband, job growth, promises, rent seeking, subsidies, tax breaks
Companies: at&t