EBB: Emergency Broadband Boondoggle for Big Telecom & Cable

The Digital Divide is now a marketing scheme for Big Telecom Cable’s new revenue and profit center.

Photo by LA Ortega; overcharging by Big Telecom

We divided this story up into 4 parts — This is Part 1.

The Washington Post headline says it all:

“The government has a program to cut your Internet bill. Verizon is using it to force you onto a new data plan.”

The EBB, Emergency Broadband Benefit, is a government subsidy program giving out $3.2 billion to broadband providers to cover discounts of up to $50 a month for qualified low income ‘households’.

The FCC says this program is for households to get online:

“The Emergency Broadband Benefit is an FCC program to help families and households struggling to afford internet service during the COVID-19 pandemic. This new benefit will connect eligible households to jobs, critical healthcare services, virtual classrooms, and so much more.”

And it reimburses the companies offering the services with up to $50 per household.

“The Emergency Broadband Benefit will provide a discount of up to $50 per month towards broadband service for eligible households and up to $75 per month for households on qualifying Tribal lands.”

While the funding comes at the end of the most critical period of the pandemic, Verizon, AT&T and others have turned it into a marketing plan to increase profits. They will be reimbursed at essentially retail rates as well as get new potential low-income families to sign up — adding to their subscriber numbers that they use to raise investor expectations — i.e.; more profits.

In other words, the Digital Divide is now a marketing scheme for Big Telecom and Cable’s new revenue and profit center.

But if you stare at the opening graphic, there are some serious questions. Moreover, other publications, like the Washington Post, Ars Technica and Stop the Cap have also started to question the intentions of Big Telecom — Verizon et al.

It isn’t just about the price of service — the real story is — AT&T et al. created the Digital Divide by letting their state utility public telecommunications networks deteriorate. Instead of upgrading the state utilities to fiber optics as they promised, they took the money and are subsidizing their wireless networks or worse, they bought media and entertainment companies that they ran into the ground.

And, because they control the wireline infrastructure, they also control the price of wireless, which depends on wired utility backhaul services. Wireless prices in the United States are inflated compared to overseas. Their failure to deliver on their promises to build out fiber infrastructure to the premises means there has been no direct competition for the cable companies, who could just continue to raise rates and add made up fees.

But at the core is their market power, which is so overpowering that they have been able to erase and rewrite history. Most people don’t even know that there are still public state telecom utilities in America. We’ll get to that in this series of stories.

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Let’s stay focused on the opening and start with the deceptive marketing. AT&T’s advertised plans and prices leave out major hidden charges to the customer. This practice has become the industry standard for broadband, internet, cable TV and even wireless.

1) 30–40+% of the Charges that a Customer Pays Are Missing from the Advertised Price.

AT&T has a wireline service for $45.00, (which is now called “AT&T Internet” or sometimes U-Verse, or it could be DSL or even DirecTV. AT&T has been continually changing the names.) Regardless, the advertised price doesn’t include 30%-40% of the actual costs, such as:

§ Broadband modem, at $10/mo. is not in the advertised price.

§ Made up fees being charged, including a “Cost Recovery” fee.

§ Other surcharges that are not government mandated, and unidentified taxes, are also missing.

§ The fine print even mentions potential other activation fees.

§ And if you don’t use Autopay, there is a financial penalty.

The fine print says:

“INTERNET OFFER: Additional Fees & Taxes: AT&T one-time transactional fees, $10/mo. equipment fee, and monthly cost recovery surcharges which are not government-required may apply, as well as taxes. See att.com/fees for details. Installation: $99 installation for full tech install. Credit restrictions apply. Pricing subject to change. Subj. to Internet Terms of Service at att.com/internet-terms.”

2) Charging for Made Up Fees that are Not Government Sanctioned.

AT&T et al. claim that they should have special privileges– like charging customers to pay their taxes, with a separate line item on the bill. Last time we checked taxes are part of the cost of doing business.

“Monthly fees collected by AT&T from its customers to recover costs AT&T pays in taxes and required payments levied by state governments. These fees are not a taxes or surcharges which the government requires AT&T to collect from its customers.”

These made-up fees are on all services, wireline or wireless. Take the “Admin Fee”.

“The Administrative Fee is a charge assessed by AT&T that helps defray a portion of certain expenses AT&T incurs, including but not limited to: (a) charges AT&T or its agents pay to interconnect with other carriers to deliver calls from AT&T customers to their customers; and (b) charges associated with cell site rents and maintenance. It is not a tax or charge which the government requires AT&T to collect from its customers. This charge is subject to change from time to time as AT&T’s costs change.”

THEY ARE CHARGING LOW INCOME FAMILIES THESE MADE-UP FEES IN THEIR EMERGENCY BROADBAND BENEFIT. And this, in turn, will be CHARGED TO THE FEDERAL GOVERNMENT WHO WILL BE REIMBURSING AT&T AT SUPRA-RETAIL RATES.

Affordability is one of the main issues with the Digital Divide — and here’s one of the reasons why.

The IRREGULATORS Position: Only government related fees, such as the E911 Emergency service fees, may be charged to customers, especially to low-income families under government subsidy plans.

3) Charging $10 Extra a Month for a Modem — Is Wrong.

AT&T and the other ISPs are charging $10 a month extra for a broadband modem, even though their service doesn’t work without a modem. AT&T is also selling modems for $75 and wireless routers for $100.

AT&T buys in bulk; we estimate that AT&T’s wholesale cost that it pays for tens of thousands of basic modems is $25-$35 per device. They also get to take a tax deduction when it has been ‘written off’ (‘depreciated’).

At the end of 1 year, the low-income family will have paid $120.00 on something that probably cost $25, and the rest is profit and tax savings.

Why are customers being gouged? If it only cost the company $20-$30 total, then the device is not only written off, but also paid for after a few months. At this cost to AT&T, the modem should be about $2-$3 a month to the end user, and in year 2 there is no cost.

We address this more fully in this series, but the question is — should the companies be required to lower their excessive charges with excessive profits for a low income, government subsidy program?

Worse, how many reading this just found that that over the last few years they paid $120 a year for equipment that has been written off and has no expense?

4) The Discount Is Temporary and the Prices Are ‘Promotional’.

AT&T writes:

“The monthly EBB is temporary. Existing internet customers who elect to participate in the program will remain on the eligible plan in effect when the program ends. You will be notified by email, text message and/or direct mail prior to the program benefit ending.”

INTERNET OFFER: Pricing for residential customers only. Intro pricing for new internet accounts is for first 12 months only. After 12 mos., then prevailing rate applies. Existing internet accounts will receive the prevailing rate.”

5) To Get the Discount, the Household Must Use Autopay.

This is on one of the ‘unlimited’ wireless plans, (as very small print) which claims that the service is free with the EBB discount. But the fine print shows that there will be an additional $15 if ‘Autopay’ is not used.

Do low-income families regularly use AutoPay and even have credit cards? Once the EBB discount leaves, the price of this wireless service goes to $65.00 a month, not counting taxes, fees and those made-up surcharges.

6) The US Government Is Paying these Made-Up Fees, and for a Modem that Should have Come with the Service at $45 Bucks a Month.

We do not question the need for subsidies to low income families as an emergency measure. It is outrageous that EBB is subsidizing made up fees that Big Telecom and Cable routinely place on the bills of unwitting customers. This FCC program is benefiting these companies royally, and it is not costing them a penny. They are adding customers and receiving guaranteed payments, eliminating the cost of uncollectibles.

Why isn’t the FCC negotiating with the companies to waive non-government related fees for low income households? Shouldn’t they contribute something to this national cause, particularly given their dereliction in maintaining and upgrading their local utility networks, as well as their cross-subsidization of wireless and other lines of business with utility ratepayer funds?

The ‘Emergency’, is here. Now is the time to fix this mess, the deeper issues. Government subsidies should stop and the government needs to halt the cross-subsidies of wireless and the other lines of business, with the state public telecommunications utilities and use these new funds to upgrade the state utilities and lower rates.

Special thanks to the IRREGULATORS team for work on this series.

New Networks Institute,Executive Director, & Founding Member, IRREGULATORS; Telecom analyst for 38 years, and I have been playing the piano for 63 years.