Pay TV and AT&T Uverse and Telecom and Utilities and Communications

AT&T's stealth over U-verse drawes fire

September 17, 2007

Some in the telecom industry think AT&T had the Indiana General Assembly twirled around its finger like a coil of phone cord last year.

It lobbied legislators in the 2006 session to rewrite the state's telecommunications laws so it could more easily deploy its "U-verse" video product. The marvel of technology squeezes high-definition TV, Internet and phone service through ordinary copper wires entering the home.

Here was AT&T's pitch: Give us, and by default other video providers, the ability to obtain a statewide video franchise rather than negotiating city-by-city, as cable operators had to do, and new competition will flood the market. TV commercials promised consumers new capabilities at lower rates.

Only time will tell if that prediction comes true. What is clear is that AT&T is still asking for what some are calling self-serving regulatory breaks--arguably with anticompetitive abandon.

The Indiana Utility Regulatory Commission next month is set to hear the latest argument since AT&T last February asked to shield from public view any and all records of where it has already deployed U-verse.

The IURC requires that each company to which it grants a video franchise provide quarterly reports that include locations of each neighborhood served. AT&T turned over some data. But unlike other video providers, it has asked that the IURC shield its existing U-verse footprint from public access.

At stake are the financial interests of AT&T versus the ability of Indiana policymakers to determine whether the privileges granted the telecom giant are in the best interest of competition and consumers.

As if guarding a state secret, AT&T seeks to forbid IURC staff from accessing its U-verse market penetration data without good reason and without written acknowledgement of its confidentiality. The company also seeks "sanctions" for failure to comply, although AT&T doesn't elaborate.

The company maintains that the data is sensitive because it faces competition everywhere it offers U-verse. It says cable TV providers are entrenched and could use the knowledge of where AT&T is offering the service to target marketing efforts and provide incentives to retain customers.

"The ... data at issue here would be a gold mine of competitive intelligence for the cable incumbents," Robert Nixon, director of TV services for AT&T, told the commission Sept. 10.

But the state's cable operators say they already have a good feel for where AT&T is rolling out U-verse.

A cable trade group said AT&T is concealing its true motivation for seeking to block U-verse's whereabouts.

"AT&T is trying to exploit the law to cherry-pick where it offers service," said Tim Oakes, vice president and general counsel for the Indiana Cable Telecommunications Association.

Oakes contends that AT&T doesn't want it widely known that it's targeting more affluent, more densely populated areas that are more profitable. That contrasts with cable companies, whose old municipal franchises required them to build out their networks broadly in a community--including to low-income neighborhoods.

Oakes said AT&T also is trying to conceal any failure on its part to make the kind of market penetration promised during legislative debate.

It isn't just the predictable crowd from the cable industry asking questions about AT&T's request for market confidentiality.

"Are the people of Indiana getting the [services] they bargained for?" said State Rep. Matt Pierce, D-Bloomington.

Opponents seek denial

The lawmaker, who teaches telecommunications courses at Indiana University, has asked the commission to deny AT&T's request for confidentiality.

One of Pierce's key concerns is whether AT&T is "redlining," that is, offering U-verse service only to more affluent neighborhoods and avoiding poorer ones. The legislation included a directive that AT&T and other providers offer broad access to services and not discriminate based on the income levels of customers.

Keeping U-verse locations from public view will "impede the ability of policymakers to properly evaluate whether their policies are actually promoting effective competition in the marketplace," Pierce told the IURC.

Of the 17 holders of video franchise certificates, "AT&T is the only provider which sought to shield from public disclosure information required to be reported to the commission on a quarterly basis--namely, the actual geographic locations where video service is currently being offered in Indiana, at a census block level," Ronald Keen, director of telecommunications and consumer services for the Indiana Office of Utility Consumer Counselor, wrote to the commission.

The OUCC also opposes AT&T's request for confidentiality.

Keen argues that a video provider does not merit protection from public disclosure after it launches a product in a given area. He also reminded the IURC that granting AT&T's request could limit information the agency must provide in its annual report to the state's Regulatory Flexibility Committee.

"In the past, the commission has encountered difficulty and frustration when it was not able to give legislators the amount of detail they requested because of prior IURC orders granting requests to protect highly granular market data from public disclosure," Keen said.

Cable TV firms say they have a pretty good idea where AT&T has rolled out UVerse.

One conspicuous sign is when contractors install a refrigerator-size box--derisively known in some neighborhoods as a "lawn fridge," packed with computer equipment that makes U-verse work. Oakes said cable crews in the field make note of their locations.

In some cases, it is possible to enter an address at AT&T's Web site to determine if service is offered in a particular area. However, AT&T noted in testimony that it is fine-tuning that site to prevent data-mining.

And then there's the sight of door-to-door salespeople AT&T has hired.

Last month, for example, one such sales crew combed an upper-middle-class neighborhood in Fishers, whipping out a menu of U-verse channels and trying to sign up customers on their doorsteps. Residents couldn't have been that surprised. Just weeks earlier, contractors for AT&T were ripping up lawns in the neighborhood to install fiber-optic cable needed to support U-verse.

Even more conspicuous is when a cable TV customer who switches to U-verse calls the cable company to cancel service.

"We put a dot on a map. It's that simple," said Mark Apple, regional vice president of Comcast in Indianapolis.

Essential data to both

AT&T counters in its filings with the IURC that cable firms learn only so much through these measures.

"I liken this to a scavenger hunt where the incumbent cable company seeks to answer the question, 'Where's AT&T?' They can piece together the various clues, but it will take time and money to accumulate and interpret them," AT&T's Nixon told the commission.

"Then they will make educated guesses as to where the treasure is buried. It's likely they will dig in the wrong area along the way. If, however, they were given a map with a series of 'X's' showing exactly where the treasure is, they would obviously not spend any time, money or effort searching in the wrong place."

Moreover, AT&T argues that the IURC can still maintain its oversight obligations of monitoring competition because it would still have access to the data.

State Rep. Pierce contends the average consumer also needs to know where a video provider offers service--if only to make a case to the commission that a low-income neighborhood may be being bypassed.

AT&T argues that simply observing a pattern of deployment "does not constitute evidence of redlining."

True, said Pierce, "but the fact of the matter is you need a starting point of information."

Granting AT&T's confidentiality request "could significantly impair Indiana citizens' ability to identify and take action to eliminate areas with income-based discrimination in the provision of video services," said the OUCC's Keen.

The city of Indianapolis knew exactly where Comcast and Bright House Networks operated in Marion County, as both historically had a franchise agreement to operate in the city.

Although the city lost much of its authority when cable providers filed for a state video franchise, "we want all of our constituents able to have U-verse competition available to them. Not just in select areas," said Rick Maultra, director of the city's Cable Communications Agency.

AT&T spokesman Mike Marker said the company has invested more than $250 million in U-verse and has hired hundreds of people as a result.

He cited a handful of studies that suggest lower-income neighborhoods may actually spend more money on multi-channel video than high-income households.

"We are working hard to make [U-verse] available to as many homes as possible as quickly as we can," he said.

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