DSL Prime: AT&T's Ashcroft

In the latest news: AT&T and Verizon may need the best legal talent in the industry.

by Dave Burstein of DSL Prime and Future of TV [September 11, 2006]

"I want to apologize for any inconvenience this incident has caused."
—Travis Dodge, AT&T, to Tom Perkins.

A billion euro IPO at Neuf Cegetel shows the potential of combining voice, DSL at 15 Mbps, and video in a package for 30 euro. Iliad/Free set the model, Neuf matched, and both are reporting actual profits high enough to pay tens of millions in taxes. Incredible growth toward two million customers each. Terrible for France Telecom, perhaps, but that's what competition should be doing.

Deutsche Telecom just announced "drastic price reductions," to about 50 euro for the triple play, heading in the right direction after bleeding a million customers.

In the U.S., we're struggling to get the same services for $99. Prices are actually rising for basic local service (FCC data) and are going up for long distance as well as AT&T and MCI were swallowed. Even more amazing is wireless, where costs are dropping 5 to 15 percent per year. Dave Barden, Bank of America, reports "across all providers, across all customer segments, [wireless] industry pricing has been flat to rising year to date." One of the smartest guys in D.C. still has this wrong, justifying policy with the claim prices are dropping. That's simply incorrect.

Meanwhile, AT&T and Verizon may need the country's best legal talent to deal with their poor security and the Hewlett-Packard scandal. Fortunately, AT&T just hired John Ashcroft, Bush's Attorney General. Verizon already has on the payroll Bush's daddy's Attorney General, Bob Barr.

Verizon President Larry Babbio is entangled as an HP board member who presumably knew what was going on. Only a fool would believe, as the WSJ reports HP's Dunn saying, "she and other H-P directors didn't learn that 'pretexting' involved the potentially fraudulent representation of identity until August." How the heck did they think the investigators got the phone records? Babbio for sure knew these would never have been legitimately released.

Say hello at VON. Sorry I'm missing the DSL Forum at BBWF in Vancouver and Think Equity in San Francisco, and wish I could make it to London for Telco 2.0. I hope to catch Commissioners Adelstein and McDowell in Dallas on the 21st, where I understand Adelstein's harmonica will lead the band at the NAB Radio Show. Despite my "the buck stops here" judgment of the FCC Chair, best of luck to Kevin Martin in his re-nomination hearing.

AT&T, Hewlett-Packard, John Ashcroft, and Larry Babbio
Tracking reporters and a billionaire
John Ashcroft, formerly George Bush's Attorney General and since July 20th an AT&T registered lobbyist, is the perfect man to resolve their latest crisis. AT&T leaked the phone records of Hewlett-Packard board member Tom Perkins, as well as reporters from the WSJ, New York Times, and the San Jose Mercury. Perkins and ally George Keyworth are now off the board for talking to reporters.

Abusing reporters is part of the game, but embarrassing billionaires is a very dumb move. Bill Lockyer, California Attorney General, is looking for someone to indict. A thorough investigation is called for. Ashcroft believes in using the strongest possible methods to get information he wants. National Journal reports Ashcroft was hired to work on "privacy issues related to telecommunications law." Very timely.

Larry Babbio, Verizon President, is a Hewlett-Packard board member who presumably acted on the report and was well informed on what happened. He has his own powerful legal shield if necessary; Bill Barr, U.S. Attorney General in the first Bush presidency, works for Verizon. I wasn't surprised Babbio declined my request for an interview about how Verizon protects its own customers from this kind of snooping. Babbio is a smart guy with a spirit I like, and Verizon is building the best network in the western world.

Babbio remains Vice Chairman but has quietly handed over many duties to Virginia Ruesterholz with the title President—Verizon Telecom. That job makes her one of the most powerful women in America, but she carefully avoids publicity and the rumors that Babbio has begun a transition. Ruesterholz is an engineer with close ties to the Stevens Institute in New Jersey, where Babbio's $6 million donation funded a new building. She has strong backup as well—husband Kevin Ruesterholz leads Next Generation Networks at Lucent. Everyone in the industry is tracking her closely.

Alcatel's Taiwan Miscalculation
Penalty for non-delivery likely, new 600,000 line tender
Alcatel suspended deliveries to Chunghwa after several hundred thousand lines were shipped, after deciding the contract was unprofitable. Alcatel and subcontractors Foxconn/Hon Hai, ZyXEL, and Broadcom had bid a low $48 to win a contract for nearly a million units. Foxconn failed to win a price reduction from Broadcom, and wanted to substitute a chip from Realtek. Chunghwa was reluctant to allow the change, because the Realtek chip had limited shipment records. Alcatel and Foxconn finally agreed to deliver as ordered, and I'm told a Taiwanese newspaper predicted they would pay a major penalty. Alcatel did not comment.

Broadcom, Conexant, Infineon, and Taiwanese chipmaker Trendchip all qualified in the earlier round and are favored in the new 600,000 line tender. ECI had the contract before Alcatel and has an opportunity.

Copyright 2006 Dave Burstein.
The DSL Prime Newsletter is reprinted with permission.

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