Unions Want Verizon Investigated For Neglecting Taxpayer-Funded Broadband Networks, But Nobody Cares

from the ill-communication dept

Labor unions would like it very much if somebody would investigate Verizon for its neglect of the company's aging DSL lines. As we've noted previously, both AT&T and Verizon are busy trying to walk away from aging DSL lines they no longer want to focus instead on profitable (read: usage capped) wireless. The problem historically has been that both companies have received billions in tax breaks and subsidies to not only build and support DSL, but to upgrade those lines to fiber. Instead, in case after case, we've shown how Verizon simply took the money and then convinced state lawmakers to forget about the obligation.

Last week, the Communications Workers of America (CWA) wrote letters to six state regulatory agencies and the FCC, urging somebody to launch an investigation into Verizon's "neglect" of its DSL customers. According to the CWA, Verizon's own filings suggest the telco spent "just" $200 million to maintain its copper network in eleven states and DC over the last seven years. Basically, argues the union, Verizon DSL customers pay an arm and a leg for barely-adequate service Verizon can't be bothered to maintain (or repair very quickly when it breaks) because they no longer care about these users:

"Across the Verizon landline footprint, residential and single-line business customers pay between $300 and $370 a year for basic voice service and about $400 a year for DSL service. Even using our conservative calculations, Verizon spends less than one percent of the rate it charges for basic voice service and less than half a percent of the rate it charges for a voice/DSL bundled service on the upkeep of its copper network."

And while the CWA is only looking after its own interests here (it's currently negotiating a new contract and is using community angst for leverage), the union is absolutely correct. For years, Verizon has been literally trying to drive these paying customers away with the clever one-two punch of apathy and rate hikes. Elsewhere, Verizon employees have been complaining for years that they aren't given the tools necessary to do their jobs in these unwanted areas. Classier still, Verizon has consistently been using natural disasters like Sandy as cover, simply refusing to repair storm-damaged customers, telling them wireless service (usually very expensive if it's even available) will have to be good enough.

Basically, Verizon's letting millions of DSL users rot on the vine. If these users don't flee on their own accord, Verizon ultimately sells them to a rotating crop of sucker smaller telcos with disproportional appetites and negligible talent for acquisitions, who (usually thanks to complicated Reverse Morris Trust deals) take on so much debt in the transactions that they won't be able to upgrade these lines for years to come (and in several instances have stumbled into bankruptcy).

Here's the thing the CWA doesn't get: nobody in state or federal government cares about any of this. Nobody cares that Verizon promised both Pennslyvania and New Jersey symmetrical fiber for all in exchange for subsidies and tax cuts, then walked away from the promises. Nobody in state or federal government cares that Verizon promised to deploy fiber to all of New York City in exchange for a lucrative franchise agreement, only to balk at the obligation. Sure, local communities care that Verizon has a long, rich history of ripping off taxpayers and leaving work unfinished, but both the federal and state governments have shown repeatedly, consistently and indisputably that they really couldn't care less about Verizon's penchant for fraud.

And here's the rub: even if you were to see a significant audit and investigation of Verizon, in many instances you'd technically find that the telco adhered to the law. And that's quite often because companies like AT&T and Verizon have so much political power they're literally able to change the law after the fact (much like they did when their role in wholesale NSA spying was revealed). Verizon convinced both Pennsylvania and New Jersey to simply look the other way when Verizon took state taxpayers for a ride, and now Verizon's kindly asking many states to look the other way while it neglects millions of taxpayer-subsidized DSL lines. And, loyal to the last, state and federal government are happy to oblige.

Filed Under: broadband, dsl, fiber, investment, labor unions, taxpayers, unions, wireless
Companies: verizon

Venture Capital Trade Association Hires Patent Troll Lawyers, Fights Against Patent Reform... Even As Most VCs Want Patent Reform

from the this-is-just-strange dept

The venture capitalists who are members of the National Venture Capital Association (NVCA) may want to reconsider why they support an organization that is actively working against the interests of venture capitalists and innovation. It has long been known that most venture investors in the tech world know damn well that patents get in the way of innovation, rather than help it. For years, we've written about some of the most high-profile venture capitalists -- the ones that entrepreneurs would die to have invest in them -- arguing about the need for patent reform and how patents often act as a tax on innovation, rather than an incentive for innovation.

So... it seemed really, really odd earlier this year, when a guy hired by the NVCA to appear at a Congressional hearing on patent reform argued against patent reform and suggested, if anything, that patent protections needed to be ratcheted up. The guy in question, Robert Taylor, seemed like an odd choice. He was not a venture capitalist, but rather a consultant who focused on patent strategies for startups -- in other words, someone who would directly profit from a bigger patent mess.

But, his view is clearly not in the mainstream among venture capitalists. This can be evidenced from a few different places. First, a little over a year ago, a study was conducted by Robin Feldman on venture capitalist views towards patents, and it put to rest the myth that VCs love patents. That study was actually conducted in coordination with the NVCA. The survey was distributed by the NVCA to its members. And those members did not like patents or what they did to innovation. Some quotes from the results:

When asked whether they see patent assertion as positive for startups and the startup community, 72% of venture capitalists disagree....

74% of the venture capitalists reported that patent demands had either a highly significant or a moderately significant impact on companies that received them, including distracting management, expending resources, or altering business plans....

When companies spend money trying to protect their intellectual property position, they are not expanding; and when companies spend time thinking about patent demands, they are not inventing....

... the venture capitalists were in general agreement that patent demands are increasing against venture-backed companies. 79% responded that the number of patent demands have increased over the last five years for their portfolio companies overall....

For 59% of the venture capitalists, the patent demands came either all or mostly from those whose core activity is licensing or litigating patents....

In other words, the vast majority of NVCA VCs recognize that patent trolling is a massive problem. And, yes, the majority of the problem comes from the trolls: The report includes a ton of heart-wrenching anecdotal stories about startups that were basically destroyed by patent trolls -- which were mostly relayed by these VCs.

And, if you needed any more evidence that venture capitalists realize the patent system today is broken and reform is needed, you can just look at this letter a ton of venture capitalists sent to Congress earlier this year, demanding reform, and highlighting how patent trolls are a massive tax on innovation. The signatories to the letter (and there are a lot of them) basically represent a who's who of venture capitalists that any Silicon Valley startup would love to have invest in them -- including Andreessen Horowitz, Union Square Ventures, YCombinator, Greylock, Benchmark, Kleiner Perkins, Foundation Capital, Softech VC, SV Angels, Canaan Partners, First Round Capital, Lowercase Capital, Spark Capital and many more. It's hard to think of a top VC firm that isn't listed.

These are the companies and individuals who funded nearly all of the top internet companies today: Google, Twitter, Tumblr, Facebook, Amazon, eBay, Airbnb, Github, Pinterest, Slack, StackExchange, Kickstarter, Etsy, Cloudflare, Lending Club and many, many more.

Given all of this, many people were left scratching their heads and wondering why the NVCA was coming out against the rather clear wishes of its own members, and the rather detailed literature and studies highlighting how problematic today's patent system is for innovation and startups. Even some of the Congressional Reps at that hearing wondered about it, leading NVCA to issue a rather bizarre clarification that Taylor's testimony was not on behalf of NVCA members, but some amorphous "broader industry."

To be clear, Mr. Taylor was present at the hearing to testify as NVCA's outside counsel on behalf of the broader industry, not as a representative of individual NVCA member firms.

Huh? What "broader industry"? And if he wasn't representing the interests of the NVCA's members, why was he there as the NVCA's representative at the hearing?

The same clarification also sought to totally reinterpret the Feldman study (which, again, had been done in cooperation with the NVCA), arguing that even though the vast, vast majority of NVCA members had real problems with patent trolls and saw them as damaging, the fact that a few did not, somehow made it okay for the NVCA to side with the few and to argue for stronger patents, even though the VCs and startups in the survey clearly indicated that such a solution would be a problem.

... the survey findings do not indicate a difference of opinion between NVCA's position on patent litigation reform and the issue of patent assertions....

Hell yes it does.

From there, the NVCA blatantly lies and says that it actually supports reforms that deal with "abuses with patent assertions"... but immediately caveats that by claiming "we also believe that any attempt to reform the system must maintain strong patent enforcement mechanisms..."

This whole story got stranger still last month, when it was revealed that the NVCA hired lawyers closely connected to some big patent trolls to pressure Congress into weakening or killing patent reform.

A review of the leaked document also reveals another surprise: the names of the lawyers that the trade group has assigned to examine the law. One of them is Michael Spillner, who is general counsel for Tessera, which has been widely described as a patent troll. Another is William Nelson, a partner at the law firm Tensegrity, which was founded in 2012 by several elite lawyers seeking to cash in on the popularity of patent trolling.

All of this should raise serious concerns among actual venture capitalists about just what their trade organization is doing in their name. It appears to have handed the keys to those in bed with the patent trolls, and against the interests of its actual members and the most well-known, successful and sought-after venture capitalists in the world.

Filed Under: innovation, investment, patent reform, patent trolls, patents, startups, venture capital
Companies: nvca

If You Really Think TPP Is About 'Trade' Then Your Analysis Is Already Wrong

from the don't-fall-for-the-marketing. dept

George Mason University professor Bill Schneider recently had an interesting blog post over at Reuters in which he discusses how Hillary Clinton is in a tough spot concerning the TPP and TTIP agreements, in that much of the Democratic party is now vehemently against these "trade" deals, while historically, the Clintons have been for them. The piece argues that whichever side Hillary takes will create a problem for her presidential campaign. The politics in the piece may be right, but almost the entire thing is built on the assumption that the TPP agreement really is about "trade" and that such an agreement will lead to cheaper goods and such. Take this passage for example:

Trade is not an ideological issue. It’s a populist issue — the people versus the establishment. Ordinary Americans are suspicious of trade deals. Economists have a hard time understanding this, but most people see trade not as an economic issue but as a moral issue.

People think it’s wrong for them to benefit as consumers from lower prices for foreign-made goods if it throws Americans out of work. Will they purchase the foreign-made goods? Of course they will — as long as they’re cheaper. That’s rational economic behavior. They just don’t think they should be allowed to.

I don't think that's actually what people are thinking at all, but even if we run with it, it's based on the very faulty premise that these agreements have anything to do with free trade at all. As we've discussed in the past, they do not. They are quite clearly often about the opposite of free trade. In the past, we've strongly recommended Michael Goodwin's epic comic about TPP where he shows how it's really got little to do with free trade, and everything to do with the ability to move investment capital around: Perhaps an even better explanation comes from Tim Lee over at Vox, who goes into the history of these agreements, noting that the "free trade" stuff has mostly already been taken care of, as there aren't that many meaningful tariffs/trade barriers left. Instead, trade agreements have become a sort of secret playground for big corporations to abuse the process and force favorable regulations to be put in place around the globe. He discusses the history and how organized labor, the copyright industries, the pharmaceutical industries and more now basically use trade agreements as a secretive, anti-democratic process to force through regulations they want.

As the opportunities for trade liberalization have dwindled, the nature of trade agreements has shifted. They're no longer just about removing barriers to trade. They've become a mechanism for setting global economic rules more generally.

This trend is alarming to Simon Lester, a free trader at the Cato Institute. "We've added in these new issues that I'm skeptical of," he says. "It's not clear what the benefits are, and they cause a lot of controversy."

And this system for setting global rules has some serious defects. We expect the laws that govern our economic lives will be made in a transparent, representative, and accountable fashion. The TPP negotiation process is none of these — it's secretive, it's dominated by powerful insiders, and it provides little opportunity for public input.

If you make the facile assumption that the TPP is actually about free trade, then you might be confused about all the hubbub about it. If you actually take the time to understand that much of what's in there has nothing to do with free trade and, in fact, may be the opposite of free trade, you realize why there's so much concern.

Filed Under: free trade, hillary clinton, investment, non-tarriff barriers, regulations, secrecy, tpp, trade, trade agreements, ttip

Bad Copyright Laws Scaring Off Necessary Investment In New Digital Platforms

from the shooting-themselves-in-the-foot dept

For many years, we've noted that while some in the legacy entertainment industry seem to think that there's a "battle" between "Hollywood" and "Silicon Valley" it's a very weird sort of war in which one of those parties -- Silicon Valley -- keeps supplying more and more "weapons" to the other party to help it adapt and succeed in a changing world. There are many examples of this, but the clearest is with the VCR, which the MPAA fought hard to outlaw in the 1970s and 1980s. The MPAA's Jack Valenti famously said in 1982 that "the VCR is to the American film producer and the American public as the Boston strangler is to the woman home alone." It was just four years later that home video revenue surpassed box office revenue for Hollywood. It wasn't the Boston strangler, it was the savior. Similar stories can be told elsewhere. The legacy entertainment industry has sued over MP3 players and YouTube, yet has now (finally) embraced online music and video years later than it should have.

And yet, that same legacy industry keeps trying to do everything to hamstring innovation that will only help it. A few years ago, we wrote about a fantastic post (sadly now gone from the internet) by Tyler Crowley, talking about the entrepreneur's view of innovation options and how many areas are welcoming for innovation -- which he described using the analogy of islands:

For tech folks, from the 35,000' view, there are islands of opportunity. There's Apple Island, Facebook Island, Microsoft Island, among many others and yes there's Music Biz Island. Now, we as tech folks have many friends who have sailed to Apple Island and we know that it's $99/year to doc your boat and if you build anything Apple Island will tax you at 30%. Many of our friends are partying their asses off on Apple Island while making millions (and in some recent cases billions) and that sure sounds like a nice place to build a business.

But what about Music Biz Island? Not so much:

Now, we also know of Music Biz Island which is where the natives start firing cannons as you approach, and if not stuck at sea, one must negotiate with the chiefs for 9 months before given permission to dock. Those who do go ashore are slowly eaten alive by the native cannibals. As a result, all the tugboats and lighthouses (investors, advisors) warn to stay far away from Music Biz Island, as nobody has ever gotten off alive. If that wasn't bad enough, while Apple and Facebook Island are built with sea walls to protect from the rising oceans, Music Biz Island is already 5 ft under and the educated locals are fleeing for Topspin Island.

As we pointed out, this leads to the legacy entertainment companies poisoning the well that contains the innovation water it desperately needs.

There's a parallel to this in terms of copyright laws. As the legacy entertainment industry keeps pushing for more draconian copyright laws, it only serves to scare more investors away. When we get good results, like the ruling in the Cablevision case saying that cloud-based services were legal, it resulted in a huge growth in investment in cloud services -- in contrast to much less spending in Europe, where the laws were a lot more ambiguous.

A new study from Fifth Era and Engine takes this finding even further, highlighting how bad or vague copyright laws are seriously scaring off investment in necessary platforms and innovation. A big part of this appears to be worries about absolutely insane statutory damages awards. The study surveyed tons of investors around the globe and they found an obvious concern about investing in areas where lawsuits could so easily destroy platforms:

In all eight countries surveyed, early stage investors view the risk of uncertain and potentially large damages as of significant concern as they look to invest in [Digital Content Intermediaries]. 85% agree or strongly agree that this is a major factor in making them uncomfortable about investing in [Digital Content Intermediaries].

And they're very specific about how the direct concern involves music and videos and the threat of a lawsuit that could simply put those companies out of business:

88% of worldwide investors surveyed said they are uncomfortable investing in [Digital Content Intermediaries] that offer user generated music and video given an ambiguous regulatory framework.

This is really unfortunate on a number of different levels:

1. First, it limits the necessary innovation in services and business models that are likely to create the success stories of tomorrow. We need more experiments and platforms that allow places for artists and creators to create, promote, connect with fans and make money for their efforts. Yet if the legacy industry is scaring away all the investors, that's not going to happen.
2. Second, it locks in the few dominant players of today. Want to build the next YouTube? Good luck. You'll need lots of money to do so, but you're less likely to get it at this stage. The legacy players keep hating the big successful platforms, but don't realize that their own moves lock those players in the dominant positions.
3. Third, without competition in these spaces and platforms, content creators are less likely to get the best deals. When the legacy industry basically allows one player to become dominant, then it can set terms that are more in its favor. This is what so many from the legacy content industry are complaining about today -- without recognizing that their own actions regarding copyright law have helped create that situation.

Of course, many in those legacy industries actually see this sort of thing as a feature not a bug of pushing for greater copyright protectionism. They think -- ridiculously -- that by hamstringing innovation and investment they get to hold onto their perch longer. This is just wrong. It's trying to hold back the tide, while driving fans to alternative and often unauthorized platforms instead. Rather than supporting the innovation they need, pushing for bad copyright laws only helps to alienate the innovators the industry needs the most and the biggest fans whose support the content industry needs to thrive.

Filed Under: copyright, digital platforms, intermediaries, investment, movies, music, studies

Sorry: AT&T & Verizon Can't Upgrade Or Repair Your Aging DSL Line Because Parts Are Too Hard To Find

from the your-call-is-not-important-to-us dept

While the government and industry pay a lot of lip service toward expanding broadband availability and competition, we've noted how giant phone companies like AT&T and Verizon are actually backing away from unwanted DSL markets. Through a combination of apathy (failing to repair the lines timely) and price hikes for services that cost less than ever to offer, the telcos are actively driving DSL users to either cable competitors or wireless (or both, since cable operators now help sell Verizon wireless services). Fixed-line broadband is perfectly profitable, it's just not profitable enough quickly enough for telco investors.

As a result, these companies are shifting their attention to significantly-more-expensive wireless services with caps and overages, and pretending this is just as good as an uncapped, less expensive DSL line. The result? A huge swath of the country where the cable broadband monopoly is going to be more potent than ever, resulting in worse customer service (if that's even possible) and higher prices than ever before.

Of course, AT&T and Verizon can't just come forth and say that they no longer care about huge swaths of the country, so as they go state to state trying to gut all regulations requiring they continue to offer fixed-line services, they're claiming that if state legislatures do their bidding, the states will somehow be awash with amazing new technologies. AT&T calls this the "IP transition," and has been successful in conflating a general shift toward wireless and IP networks with the company's refusal to upgrade fixed-line assets. Both companies have even gone so far as to have folks like Steve Forbes issue editorials proclaiming DSL lines are dead -- news to those for whom that's their only reliable connectivity option.

Verizon has also used natural disasters as justification for refusing to repair or upgrade customers, with some victims of Hurricane Sandy on the East Coast still waiting for their DSL lines to get repaired. Most recently, Verizon tried to claim that the reason it just sold its unwanted fixed-line assets in Florida, Texas and California was because of regulators' positions on net neutrality.

It's of course not just rural regions that are impacted by this shift: Baltimore's one of several cities (like Boston, Alexandria and Buffalo) that didn't get chosen for Verizon's now-dead FiOS expansion plans. With Verizon not willing to spend the money for further FiOS expansion, the company needed something to tell locals that not only aren't seeing upgrades, but in some cases are now waiting months for repairs. This month's excuse? Parts are just too hard to find:

"It's not just the wires that are going bad, it's the switches," said Sherry Lichtenberg, the principal researcher for telecommunications at the Washington-based National Regulatory Research Institute. "It's really hard to find parts." AT&T officials have said the company sometimes has to scrounge on eBay for parts."

Yes that's AT&T, a company that saw $132.4 billion in revenues last year, claiming that it has to head to eBay to upgrade its networks. Of course, parts aren't hard to find when you replace those older parts -- like in more upscale development communities where AT&T is slowly starting to offer very limited 1 Gbps fiber deployments (deployments, it should be noted, that AT&T also claims it paused over net neutrality). Parts also aren't hard to find when you're offering wireless LTE services with $15 per gigabyte overages. Parts are, apparently, only hard to find in areas you're intentionally abandoning -- but don't want to admit you're intentionally abandoning.

On one hand, you can understand that Verizon and AT&T are simply heading where the real money is. The problem is that after refusing to upgrade many markets, the telcos have lobbied for laws prohibiting these same towns and cities from upgrading themselves (or in some cases engaging in public/private partnerships). When the FCC recently (and quite belatedly) announced they'd be trying to eliminate the most contentious parts of these protectionist laws, the broadband industry threatened to sue. As such, the telecom industry has created a giant painful ouroboros of intentional dysfunction, one that only begins to unravel when we stop letting AT&T, Comcast and Verizon write state telecom law.

Filed Under: broadband, competition, dsl, investment, parts, repairs, spare parts, upgrade, wireless
Companies: at&t, verizon

Latest Trade Agreements Are About The Opposite Of Free Trade: Protectionism For Big Business

from the this-is-not-free-trade dept

We've been talking a lot about the various big "trade agreements" that are being worked on around the globe -- with a major focus on the TPP (Trans Pacific Partnership) and the TTIP (Trans-Atlantic Trade and Investment Pact). These are frequently referred to as "free trade agreements." But an important point that gets lost in the various debates is that, generally speaking these are not free trade agreements at all. In many ways, they're the opposite. Free trade is about removing barriers to trade -- which are, generally speaking, a good thing. But the simple fact is that for the most part we already have pretty low trade barriers with most of the countries involved in these negotiations. Instead, this is almost entirely about a combination of regulatory arbitrage, and the ability to better move money around by giant multinational companies. The economics comic artist Michael Goodwin did a nice job demonstrating all this in a comic about the TPP a while back. Here's just two panels, though I highly recommend the whole thing: Economist Dean Baker has a good article describing this in more detail as well, showing that these agreements aren't about "free trade" at all. As he notes, basic free trade generally makes sense. But, that's not what's really being discussed in these agreements:

In TPP and TTIP we are not talking about the textbook trade story. The actual trade barriers between the United States and the countries in these deals, with few exceptions, are already quite low. This means that there is little to be gained by lowering them still further.

Instead, he notes -- as we have in the past -- that these "trade agreements" are really just the opposite. They're about gifts for certain big businesses that they couldn't get through legislation:

TPP and TTIP are about getting special deals for businesses that they would have difficulty getting through the normal political process.

He lists out a bunch of examples, but here are a couple we've been focused on:

The pharmaceutical industry and entertainment industries will get longer and stronger patent and copyright protection.

Note how this is the opposite of true free trade. Longer and stronger copyrights and patents are actually barriers to trade. They're putting up regulatory barriers to the free flow of information, protecting certain legacy businesses at the expense of innovative firms. And, it's all done in secret, with basically only input from businesses. The only time voters actually get to see what's in it is when it's a done deal, and fully negotiated. At that point, the parties are too committed to actually allow any fixes that protect consumers or innovation.

So, when you hear people talking about these agreements as if they're "free trade" agreements, just recognize that calling them free trade agreements is a lie -- and it's a lie that's used to convince the gullible that these agreements must be good for the economy. And it appears to work on some people:

As Thomas Friedman once famously said in reference to his support of CAFTA, "I didn't even know what was in it. I just knew two words: free trade." Others in the media may be too sophisticated to express themselves so bluntly, but undoubtedly most share Friedman's view. Under such circumstances, there will be few politicians prepared to stand up for principle or their constituents and vote against the pacts regardless of what it is in them.

In short: people (correctly) believe that free trade is generally a good thing. Businesses recognize this -- and even though we generally have an awful lot of free trade around the globe these days, with fewer and fewer tariffs and trade barriers, governments are working on "free trade deals" because they know by calling them that, people will often support them, believing blindly that they're good things. Instead, there's very little that's actually about free trade, and an awful lot that's about propping up and protecting legacy business models, while stifling the important free flow of information.

Filed Under: corporate sovereignty, dean baker, economix, free trade, investment, isds, michael goodwin, tafta, tpp, trade agreements, ttip