AT&T's 1000 Foot Violation of AT&T-DirecTV Merger Conditions?

AT&T's 1000 Foot Violation of AT&T-DirecTV Merger Conditions?
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AT&T Press Release, December 7th, 2015

"Over 1 million Locations Passed Today, AT&T More Than Doubling Footprint by End of 2016"

"Recently we marked a major milestone deploying the AT&T GigaPower network to more than 1 million locations, and we expect to more than double availability by the end of 2016."

AT&T has been touting its new Gigapower, Fiber to the Premises, "FTTP", services over the last two years and deployment was included as part of the requirement by the FCC for the AT&T-DirecTV merger. According to the actual commitments, after 4 years, AT&T is supposed to have 12.5 million FTTP-broadband 'mass-market' customer locations.

2.Condition. a. Within four (4) years, in accordance with the timing requirements set forth in subparts
2.a.(i) through 2.a.(v), the Company shall deploy FTTP-based Broadband Internet Access Service to at least 12.5 million mass-market customer locations"

And yet, at a recent AT&T investor presentation. Ralph de la Vega, Vice Chairman, AT&T, claimed that the accounting of the 1 million fiber optic buildings that the company supposedly has completed--is counting anything within 1000 feet of the actual location.

"Yes, you know that through project VIP which ended about a year ago, we made a commitment to take fiber to about 1 million business, we've got that done so we've got a 1 million base of businesses that we have fiber either to that building or within a 1,000 feet of the building which makes AT&T the company in America that has more fiber connections to buildings in the country. But in addition to that we've committed to the FCC as part of the DTV merger to take fiber to 12.5 million additional living units and of course we will make that commitment, but if we pass a business along the way we're going to make sure that we get fiber to that business as we expand our cell sites with small cells or macro cells and we pass a building, we will take fiber to that building."

I decided to check the FCC's merger conditions--there is no mention that the "FTTP" accounting is based on anything 1000 feet from a building. These are taken from the actual commitments for "Fiber to the Premises" and here is the legal definition from the merger conditions. It is NOT 1000 feet... it is to the actual physical location.

"'Fiber to the Premises' or 'FTTP' means the technology for providing Broadband Internet Access Service by running fiber optic cable directly from an Internet Service Provider ('ISP') to a subscriber's home or business location."

And by the end of 2016, AT&T is supposed to have 2.6 million 'locations', not some phantom wire 1000 feet away, which could be in a cabinet or on a pole in the public 'right-of-way'.


(ii) By December 31, 2016, the Company shall expand its FTTP coverage to at least 2.6 million of the aforementioned customer locations;"

Is AT&T counting locations that are passed by a wire 1000 feet away as part of the AT&T-DirecTV merger commitments?

NOTE: AT&T's de la Vega got it wrong. The commitment isn't to 'living units', whether single family homes or multi-dwelling units (MDUs) only, but to 'customer locations', including small businesses.

"Again, Where is the AT&T Fiber?"

There have been others who have recently noticed that AT&T's capital expenditures are too low to support these required build outs and that there is no way to even track the deployments.

A respected industry blog, Pots & Pans, explored the numbers and they don't add up. The summary:

"It's just hard to see that AT&T is serious about actually meeting the fiber targets it promised to the FCC. To meet their goals will cost something in the range of $14 billion, and yet they have told Wall Street they will only be spending $2 billion per year on wireline capital. Something isn't adding up."

Yet, according to the AT&T-DirecTV merger conditions, there are 'reporting and outside compliance officers' that are supposed to be doing oversight. The FCC writes:

"F. Reporting and Outside Compliance Officer
398. Some commenters contend that AT&T has failed to comply with voluntary commitments it has made in previous transaction proceedings or with conditions imposed by the Commission. AT&T disputes these claims. Given the important role that these conditions serve in securing the public interest benefits of this transaction, we find that compliance with the conditions must be ensured. Accordingly, to ensure that AT&T complies with the conditions of this Order, we require that AT&T retain both an internal company compliance officer and an independent, external compliance officer that will report and monitor, respectively, the combined entity's compliance in accordance with the terms of this Order. Enforcement responsibilities remain the sole province of the Commission."

Compliance? Really?

Let us be clear--The FCC's oversight has been an embarrassment for as long as I can remember and no merger condition of significance was ever been enforced, or ever investigated.

An example? In the AT&T-DirecTV merger proposal we detailed that in the previous AT&T-BellSouth merger, AT&T was supposed to have 100% coverage of broadband in 22 states by the end of 2007.

And yet, AT&T, in 2012, claimed it did not have broadband coverage in 25% of its territory.

AT&T's VIP Announcement, October, 2012

"In the 25 percent of AT&T's wireline customer locations where it's currently not economically feasible to build a competitive IP wireline network, the company said it will utilize its expanding 4G LTE wireless network -- as it becomes available..."

We even filed a complaint. The FCC's rejection to our complaint included no investigation and no mention that AT&T had made these or other statements.

But there were lots of statements at the time. DirecTV wrote:

"AT&T intends to expand its plans to build and enhance high-speed broadband service to 15 million customer locations, mostly in rural areas where AT&T does not provide high-speed broadband service today."

The FCC's response was that AT&T might be discussing locations outside of their own footprint and using other technologies but never verified their speculation.

"However, New Networks fails to consider the extent to which deployment of such additional service might be to areas located outside of AT&T's incumbent local exchange carrier ('ILEC') territory. Further, as discussed above, it fails to consider the extent to which AT&T had deployed wireline broadband technologies other than U-verse or wireless technologies."

Like I said, the FCC's enforcement has always been an embarrassment. AT&T has never competed 'outside' its territory for wired residential broadband with any force--like going into a Verizon territory, nor were there other technologies deployed. The FCC just didn't do its job in the first place and covered over its tracks--and harmed everyone living in an AT&T state that did not get broadband.

AT&T Will "Pass" Less than 16% of its 21 States with Fiber after 4 Years.

But the kicker to all of this is--even if AT&T ever does the 12.5 million locations with fiber optics, at the end of the day, AT&T is only doing a fraction of their total base of locations with fiber optics. According to the US Census and FCC data on the incumbent phone utility companies territories, AT&T covers around 77 million locations (last Census info), and so 12.5 million locations is only 16% of the total coverage in 21 states. (AT&T sold off Connecticut since 2007.)


Wireless-Wireline Collusion?

Finally, is AT&T Wireless paying to use these wires, or paying for any of the construction expenditures, or is it getting a free ride? According to AT&T:

"But if we pass a business along the way we're going to make sure that we get fiber to that business as we expand our cell sites with small cells or macro cells and we pass a building, we will take fiber to that building."

  • Is AT&T going to rent these networks to competitors?
  • Are they going to charge competitors the same amount that AT&T Wireless pays to use the wires?

Like Verizon, we believe there are massive cross-subsidies of the wireless company's deployments--which means that the wires will go where the Wireless company sees fit; and who knows, it may be counting these fiber optic wires as 'businesses passed' rather than whether the "location" is actually connected or not. Sounds like the same old playing with language and definitions as usual.

Conclusion: The American Public Needs Answers.

This smells like 'business as usual' by the FCC and AT&T... and the outcome for the public will be the usual since AT&T can tell them anything; the FCC will just cover it up.

Where are the compliance officers and their reports? Where are the audits of the books? Is it true that AT&T can now claim 1000 feet is 'close enough'? Where is the capEx in the financials to cover the cost of these infrastructure build outs?

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