Phillip Dampier

Today is Stop the Cap!‘s first anniversary.  One year ago today, this website was launched with the news that Frontier Communications, the local telephone company in Rochester, New York and in dozens of mostly rural communities nationwide, had quietly changed its Acceptable Use Policy to define appropriate maximum usage of their DSL service at a measly 5GB per month.

The  boneheaded, out of touch decision was called out for what it was: a profiteering provider pilfering wallets of their broadband customers.

All the signs of a Money Party among cable and DSL providers at consumer expense were apparent last summer.  Time Warner Cable was experimenting with a consumption billing plan in Beaumont, Texas.  In Canada, rhetoric about “bit caps” was already being circulated, trying to convince Canadians that broadband service was somehow as difficult to provide there as it is in Australia and New Zealand, where such caps were already in place.

To bring limits, rationing quotas, and consumption based billing to the United States would require consumers to ignore massive profits broadband providers were harvesting quarter after quarter at existing prices.  But demands for big profits from Wall Street meant they had to come from somewhere, and for cable companies with eroding profits from their cable TV divisions, and telephone companies dealing with disconnect requests for wired telephone lines, broadband was their choice.

It seems that what was insanely profitable a decade ago, when cable modem and DSL service started to introduce Americans to broadband, would now simply be ‘piles of  cash stacked like cord wood’-profitable as traffic increased. As the broadband adoption rate increased, bandwidth costs plummeted, and several providers also proudly trumpeted their reduced investments in their networks as a hallmark of keeping “costs under control.”

Consumers began actually using their service for… broadband-specific services, at the encouragement of providers’ marketing departments, touting their “always on” connection at “blazing fast speeds” to download music, movies, play games, and more.  Network utilization increased, and providers want someone to pay for a “bandwidth crisis” that isn’t a crisis at all.  Responsible investment in network infrastructure should be a given, in recognition that at least a small portion of those growing profits must be spent on maintaining and improving service.

One year ago, I laid out what was before us:

Cable operators have been discussing implementing usage caps in several markets to control what they refer to as a “broadband crisis.” The industry has embarked on a lobbying campaign to convince Americans, with scant evidence and absolutely no independent analysis of their numbers, that the country is headed to a massive shortage in bandwidth in just a few short years, and that a tiny percentage of customers are hogging your bandwidth.

Frontier, ever the rascally competitor, has decided to one-up Time Warner’s Road Runner product by slapping on a usage cap now for DSL customers before Road Runner considers doing the same. And in a spectacularly stupid move competitively, they have implemented a draconian cap that even the cable industry wouldn’t try to implement.

Time Warner Cable “took one for the team,” according to industry-friendly Multichannel News, when it introduced a ludicrous Internet Overcharging experiment of its own announced this past April, which would have “saved” customers money by getting them to “pay for what they use.”  In fact, their plan proved my point last summer, following the same roadmap of “bandwidth crisis” to “heavy downloaders” to trying to squeeze customers for more money for upgrades they could easily have done with the enormous profits they already earn.

Their proposal would have made a deliciously profitable $50 a month Internet service now cost consumers $150 a month with absolutely zero improvement in service, speed, or performance.  But Wall Street would have been happy with the higher returns.

Some 400+ articles later, we’ve educated consumers across North America about the reality of Internet Overcharging.  Despite industry propaganda “education” efforts, astroturfing groups we’ve exposed as having direct connections with the telecommunications providers paying them to produce worthless studies, fear-mongering about Internet brownouts by equipment vendors with solutions to sell, and a hack-a-thon of formerly respectable broadband pioneers and ex-government officials who sold their credentials for a paycheck to lobby and spout industry propaganda, most consumers continue to reject overcharging for their broadband service.  Consumers instinctively know a cable company with a rate change always means a rate increase, and plans to “save people money” actually means they will “protect industry profits.”

We have achieved victory after victory in 2008-2009:

• Fought back against Frontier’s boneheaded plan, and convinced them that DSL can compete best on price and flexibility — no usage cap has ever been enforced at Frontier, and today they are using Time Warner Cable’s blundering profiteering experiment against them in their marketing materials.  For rural Frontier customers with no other broadband provider, that’s a major relief from being stuck with one broadband option that rations their usage to ludicrously low levels.
• Stopped Time Warner Cable’s experiment before it got off the ground in several “test cities.”  The people of Austin, San Antonio, Rochester, and the Triad region of North Carolina did Time Warner Cable customers nationwide a tremendous service in halting this experiment before it spread.  Our efforts even brought a United States Senator, Charles Schumer, to the front lawn of Time Warner Cable in Rochester to announce the nightmare was, at least for now, over.  We managed to even see an end to the overcharging of customers in Beaumont, Texas who lived through a summer, winter, and spring, overpaying for their broadband service.
• We raised hell in the North Carolina state legislature, coming to the aid of Wilson and other communities in the state trying to get municipal broadband projects off the ground.  Communities across the state faced anti-consumer corporate protectionist legislation written by the telecommunications industry, introduced by willing elected officials who took big telecom money, and sold out their constituents.  We killed two bills, forced a sponsor of one such measure to repudiate his own bill, and gave major headaches to legislators that thought they could just cash those big checks, vote against your interests, and you’d never know.  Those days are over.
• We helped bring legislation up in Congress to draw attention to the issue of Internet Overcharging, and have called out providers who want to use their marketing departments to lie to customers about their broadband costs and profits, while being considerably more honest with their shareholders in their quarterly financial reports.  Congressman Eric Massa’s legislation would demand companies show proof of the need to implement consumption based billing.  Indeed, as consumers find out how profitable broadband service is at today’s prices, they’ll never tolerate the profit padding providers seek with tomorrow’s caps/limits, penalties and fees, and unjustified tiers.

As you can see, Internet Overcharging is not a dead concept.  An educated consumer will recognize a swindle when they see one, and providers continue to test overcharging schemes in focus groups in different parts of the country.  They’ll use any analogy, from a buffet lunch to a toll road traveled by big trucks and little cars.  They’re looking for anything they can find to sucker you into believing paying more for your broadband service is fair.

Broadband service must be fast, affordable, and competitive.  In too many communities in Canada and the United States, a monopoly or duopoly marketplace has guaranteed none of those things.  In our second year, we must remain vigilant in our core mission to fight Internet Overcharging, but we also need to fight for more competition, regulation where competition does not exist, oversight over providers, and support for projects that will enhance broadband and make it more affordable than ever.  With your help, we can stand toe to toe with any provider, because the facts are on our side, not theirs, when it comes to Internet Overcharging schemes.

Welcome to Year Two!

One of the benefits of being an investor in Clearwire is that Time Warner Cable will get to leverage the benefits of that investment.  This fall, Time Warner Cable will introduce a wireless broadband option, similar to what Comcast is offering, to provide a portable version of Road Runner.

The Time Warner Cable WiMax service will launch first in Dallas and Charlotte, North Carolina.

If it is anything comparable to what Comcast is providing through Clearwire, expect 4Mbps service for about $30 more a month.  Roaming service may also be an option outside of Clearwire service areas on Sprint’s 3G data network.  Comcast charges an extra $20 a month for that capability.

No usage allowance information has been released.

Cox Cable DOCSIS 3 modem

Cox Cable’s ‘Ultimate Internet’ broadband tier is now available to Cox customers in Rhode Island.  Offering 50Mbps downstream and 5Mbps upstream, the premium speed service sells for $109.99 a month with an annual contract.  The service comes as a benefit from the recent upgrade to DOCSIS 3 technology in Cox Cable’s Rhode Island service area.  Cox Cable has generally unenforced usage allowances on all of their broadband service tiers.  Theoretically, the ‘Ultimate Internet’ tier is limited to 300GB downstream and 100GB upstream traffic per month, but very few Cox Cable customers have ever been contacted about their usage, regardless of the amount.

Joel Evans, a Cox Cable customer living in Rhode Island, posted a review of his experience with the new Cox Cable broadband tier on Geek.com:

Before the upgrade I was peaking around 21 Mbps download and 4 Mbps upload. These were actually great speeds considering that the promised speed was really more around 20 Mbps and 3 Mbps, respectively. After the upgrade, however, I noticed an incredible speed bump. Instead of the promised 50 Mbps down and 5 Mbps up, I received 65 Mbps down and 6 Mbps up. I can only imagine that these will probably fluctuate over time.

It wasn’t until I was recently asked by Cox how my experience has been that I noticed how much of a difference more bandwidth makes. For example, I stream Hulu to my Apple TV (thanks to boxee) and usually there’s a bit of lag with the stream. Nowadays it streams right away as if I’m watching live television.

A mandatory service call by Cox Cable is required for installation, because technicians will check line quality and also swap out a customer’s older cable modem with one capable of handing DOCSIS 3 “channel bonding,” which allows multiple cable channels to be connected together to permit faster broadband speeds.

Cox plans to expand availability of the ‘Ultimate Internet’ tier to more than two-thirds of its systems by the end of 2010.

High speed data revenue continued to be one of the few bright spots for Time Warner Cable in the second quarter of 2009.  Time Warner Cable’s broadband division increased revenues by 10% in the six months ending June 30, from $2,026,000,000 dollars  in 2008 to $2,224,000,000 dollars in 2009, (9% measuring last quarter only) as a result of continued subscriber growth and an increase in commercial networking and transport revenues.

At the same time, the company announced further declines in most capital expenses to administer that network.  Although the company increased spending on scalable infrastructure (improvements to the existing network) for the six months ending June 30th from $258 million in June 2008 to $334 million in June 2009, the majority of that expense was related to introducing Switched Digital Video (SDV), a method of allowing the cable company to deliver additional digital television channels to neighborhoods.

Upgrade costs plummeted in the six months ending June 30th, from $147 million in June 2008 to $86 million in June 2009.

The costs for Time Warner Cable’s broadband revenue continue their rapid decline, dropping by 14%, from $77 million dollars in the six months ending June 30th 2008 to just $66 million dollars in the six months ending June 30th, 2009.

Despite the increase in revenues and decrease in costs, Time Warner Cable is still committed to revisiting its Internet Overcharging schemes going forward, with company officials admitting on a conference call this morning they are going to take a look at broadband pricing going forward.

One potential reason is that broadband is a success while the company continues to battle with revenue challenges on the video side of the business.  Most of the increasing costs facing Time Warner Cable are from programming expenses, which continue to increase.  The company also continued to face challenges from subscribers dropping cable television service, which they attribute to the bad economy.  Investors were anxious about the challenging results and from competition from telephone and satellite.  AT&T continues to be the most formidable challenger for Time Warner Cable across its service area, with continued expansion of U-verse.  Company officials downplayed Verizon FiOS’ impact on Time Warner Cable, noting expansion of Verizon FiOS seems to have stalled due to economic challenges.

Nevertheless, the company is moving foward to expand DOCSIS 3 in just one city in 2009 – metropolitan New York.

We’ll have additional coverage, including soundbites and further details coming shortly.

Shaw's flyer distributed to Novus customers (click to enlarge)

Letting Shaw get away with this will let them buy up competitors like Novus for a pocket full of Toonies.

[Update 10:16am EDT 7/29] – Brion, one of our loyal readers, had a chance to visit Novus’ website and discovered that Novus has usage allowances on its own broadband service.  That’s naughty.  They are far more generous than Shaw’s, which start at 10GB and are more commonly in the 60GB range for average customers, but that’s besides the point.  The Comments section is where the discussion about the usage allowances are taking place.  We call on Novus to explain their limit policy, and more importantly, consider dropping it altogether and using that as a competitive tool against Shaw, which has far lower limits.  If the vast majority of customers are unlikely to hit them, why have them at all?  Write an Acceptable Use Policy that allows for informal communication with the extreme users consuming terabytes of bandwidth a month and offers them a commercial plan for them to consider.  Don’t be a part of the Internet Overcharging crowd.  We celebrate the kind of competition Novus can provide residents of Vancouver and Burnaby, but we’d like to make sure the competition is worth fighting for.

[Update 6:12pm EDT] — Welcome to Novus customers who discovered this site through Novus’ campaign website. Stop the Cap! is an all-consumer website designed to promote and defend the competitive broadband marketplace in both the United States and Canada.  Paul-Andre Dechêne is our Canadian editor. We are unalterably opposed to Internet Overcharging schemes, which include bit/usage caps, consumption-based pricing, and fees or penalties imposed by providers for exceeding them.  We are pro-competition, pro-Net Neutrality, and opposed to throttles.  Companies like Novus which provide needed competition in the cable television, telephone, and broadband marketplace are essential for a healthy marketplace with rational pricing.  Shaw’s obvious predatory pricing tactics are designed to drive away Novus’ customers, making the company ripe for takeover, by Shaw of course, for a pocketful of Toonies.  While those Shaw prices sound good today, driving away competition guarantees much, much higher pricing tomorrow in a monopoly environment.  Novus is installing fiber optic-based service, which means they are already kilometers ahead of Bell and the usual assortment of the Shaw/Rogers/Vidéotron old school cable companies.

We welcome your views.  Just leave your public comments in the editor box at the bottom of the page (or click the comments link just below the headline).  You can explore more than 400 articles on our issues from the menu bar at the top.  Drop down menus will let you read about the issues that are most relevant to you.  Thanks for joining us.  The fight for affordable broadband continues across Canada, and we welcome your participation.  Bookmark us and drop by regularly. — Phillip M. Dampier, Editor]

Imagine paying $9.95 a month for a digital cable package with two free high-definition set-top boxes with personal video recorders, more than 200 digital channels, more than 25 high-definition channels, and a movie channel package.  Not convinced?  How about also getting two free months thrown in.

Need telephone service?  How about free nationwide/U.S. calling, free installation, and a whole mess of phone features for $9.95 a month?  Don’t forget broadband.  That’s just $9.95 a month as well for 15Mbps service with free Powerboost.  To sweeten the deal to diabetic coma proportions, Shaw will throw in two free months of service for each of those packages, too.

What’s the catch?  You have to live in an area currently served by Novus Entertainment, Inc., an upstart independent fiber-based competitor wiring metro Vancouver, British Columbia.  Novus has aggressively wired high rise condominiums and other densely populated neighborhoods and buildings in Vancouver.  Novus is a tiny company compared to Canada’s national cable companies.  Shaw provides cable television service to 2.1 million customers in several Canadian provinces.  Novus has 9,000 subscribers in 220 buildings in Downtown Vancouver and Burnaby and is planning an expansion into Richmond. Those buildings are being peppered with marketing from Shaw, including this special pricing offer.

Existing Shaw customers, and those who live outside of Novus’ service area, cannot obtain the special pricing.  That is the heart of a complaint lodged by Novus against Shaw at the Competition Bureau of Canada and in the British Columbia Supreme Court, charging Shaw is engaged in predatory pricing designed to put Novus out of business.

“Shaw is abusing its dominant position in the market by offering services – which it normally makes nearly 50 per cent margins on – at a sizeable loss as a means to destroy a local competitor,” said Donna Robertson, Co-President and Chief Legal Officer of Novus Entertainment Inc. “The millions of existing Shaw customers paying full price should be outraged because they’re unwittingly subsidizing the costs that customers with a competitive alternate pay, which is unethical and unfair. If they don’t make the offer available to everyone, current customers should call Shaw and demand the same deal.”

Novus points out Shaw has been “on a buying spree” picking up smaller cable operators and independent providers, but has “been unsuccessful in getting traction with Novus,” company officials suggest.

Stop the Cap! has discovered Shaw’s discount offer is a remarkable one, compared with the regular pricing Shaw customers pay elsewhere:

Shaw Deal for Novus Cable TV Customers

$9.95 digital cable with two personal video recorders, movie channel package, digital channel package
Two free months service

Shaw Deal for Other Canadians

$67.85 HD package
$16.00 Movie Central/HBO or Super Channel premium movie network
$26.95 digital cable “specialty channel” package
$ 3.95 time shifting option
$30.00 Shaw HD personal video recorder set-top box

The grand total: $144.75 per month, with no free months.

“Shaw enjoys increasing cable margins of nearly 50 per cent, which it boasts to investors is ‘best-in-class’ compared to other North American cable companies,” said Robertson. “We believe that Shaw’s targeted campaign is an attempt to eliminate Novus from the competition, which would allow Shaw to maintain its near monopoly status and raise prices for all customers whenever it sees fit”

“Based on Shaw’s actions, we can only assume that they are trying to buy our customers by gouging their own prices,” said Robertson. “They’re offering these services at an enormous loss, while forcing the rest of their customers to make up the difference. We aren’t big enough to compete with Shaw’s predatory pricing, but we are faster and more reliable, and our service is actually less expensive over the long term.”

Novus has launched a website and is busy on Twitter asking Shaw customers across Canada to demand the same special offer they are making available in Novus’ service area.

Do you want the 10 Bucks Offer too? Sign our Petition and call Shaw to request this special rate.

Greater Vancouver – 604-629-8888
Kelowna – 250-762-4433
Prince George – 250-562-1345
Fort St John – 250-785-3039
Victoria – 250-475-5655
Edmonton – 780-490-3555
Calgary – 403-716-6000

Rottenchester, a Stop the Cap! regular reader, discovered an impenetrable recipe for comprehension disaster in an online essay entitled, The Government, Road Runner, and David Letterman: A Farce in Three Acts.  Written by Susan Edelman, who has a Ph.D. in Economics from Stanford University and was an economist at the Federal Communications Commission (FCC) and the Department of Defense, the essay remarkably tries to present a broader point about government involvement in broadband, Road Runner Internet Overcharging, outrage at David Letterman for his comments about Sarah Palin, and government intrusion in our lives.

It’s a taffy pull thesis I don’t have the courage to attempt, and I was left completely mystified about what the takeaway message was.

WHAT IT ALL COMES DOWN TO, AND ARE YOU SURE YOU WANT THIS?
The assertion that Americans having a right to reasonably priced Broadband service.  This might be a good idea, and is in accord with the treatment of other types of transmission lines.  But do not kid yourself:  this would be the creation of another government-enforced right.  Only government can create and enforce rights.  But isn’t government incompetent?  And doesn’t private business do everything right without government meddling?. (And while you are thinking about this, keep in mind that all Americans do not have the right to reasonably priced health care. )

Edelman rapidly risks losing her argument by default, because most readers are likely not to understand it.  Having been involved in the Road Runner Affair since it began in April, she has lost me, and I have lived and breathed this issue for months.  One potential interpretation of her argument might be is the apparent irony of many conservative Rochester residents calling out the Obama Administration in the pages of the local newspaper with reflexive government=bad and free market=good arguments.  Perhaps in her eyes, many of these same people called out in those same pages for regulatory government relief from abusive broadband pricing.

If so, two points:

1)  I honestly believe most people will not ponder her piece long enough to ferret out a takeaway message.

2) There is no evidence the “free marketeers” were the ones reacting with outrage over Time Warner Cable’s experiment gone wild (and then shelved for now.)  In fact, as soon as Senator Charles Schumer (D-NY) got involved, the editorial feedback pages in the local media from conservatives, along with some local conservative talk radio, rapidly turned the issue of Internet Overcharging into a Senator Schumer Bashing Party.  I have no doubt some of those not closely following the issue automatically adopted the opposite position Schumer had just because of their passionate dislike of him.

Most consumers, in my experience, rightly treated this issue as above the usual right-left tug of war.  That’s because overcharging for broadband isn’t a right or left issue.  It’s a consumer issue.  The conservative thinkers appreciate the strong push towards forcing additional competition in the marketplace.  Those with a politically liberal philosophy aren’t opposed to competition, but want the extra security of government oversight and/or regulation where competition does not exist.

It’s my personal view that telecommunications policy is complex enough without dragging David Letterman and Sarah Palin into it.

Phillip Dampier

While western New York was dealing with a rare bout of tornadoes, another storm began brewing online when AT&T customers discovered their access to a website devoted to the posting of images, 4chan, had been blocked.

The 4chan site has become notorious over the past year for its “anything goes” policies about content, particularly in its “random board” /b/. The site has generated a number of controversies, including staged pranks, swarming other websites, and unfortunately, occasional malicious activity by a minority of its users. Since the site permits anonymous posting, and has traditionally been more “self-regulating” than moderated, it’s a polar opposite of most corporate-run online communities.

When 4chan enthusiasts discovered their site was being blocked by AT&T, it represented the online equivalent of of course, you know this means war. AT&T was blasted in the blogosphere, called out by some tech-minded online culture websites, and made a virtual pawn in the Net Neutrality debate. A few angry 4chan enthusiasts even set up a “rioting/’war’/protest” site to launch counteraction against AT&T.

AT&T eventually admitted it was blocking the site for “security reasons” and issued two early statements:

CentralGadget:

AT&T has confirmed that they are “currently blocking portions of the internet site 4chan.org”, but states that they are “following the practices of their policy department.”

AT&T went on to say that they did contact (or, at least, attempted to contact, they wouldn’t clarify) the owners of 4chan. They say that they have specific reasons why they blocked these parts of the site, but they would not disclose them to CentralGadget.com. AT&T states that they have requested specific things and changes from 4chan’s owners, and that 4chan has not complied.

Regardless, without a clear explanation of specific rationale for blocking 4chan… both 4chan and CentralGadget.com encourage you to continue calling AT&T technical support, and filing your complaints there (escalate as high as possible, we have heard reports that Tier 1 support agents are being told to incorrectly state that AT&T doesn’t block any web site).

Broadband Reports:

Beginning Friday, an AT&T customer was impacted by a denial-of-service attack stemming from IP addresses connected to img.4chan.org. To prevent this attack from disrupting service for the impacted AT&T customer, and to prevent the attack from spreading to impact our other customers, AT&T temporarily blocked access to the IP addresses in question for our customers. This action was in no way related to the content at img.4chan.org; our focus was on protecting our customers from malicious traffic.

Overnight Sunday, after we determined the denial-of-service threat no longer existed, AT&T removed the block on the IP addresses in question. We will continue to monitor for denial-of-service activity and any malicious traffic to protect our customers.

Since the end of the weekend, access to 4chan has been restored by AT&T, but the site is performing slowly as it presumably gets attention from a large number of visitors who learned of the site from the controversy, but never heard of it before Sunday.

AT&T’s clumsy explanation fired up a new chapter in the Net Neutrality debate, with various groups and 4chan enthusiasts, and even the DailyKos website, calling this an example of a violation of Net Neutrality — providers denying equal access to all website traffic regardless of its source.

Unfortunately, this is much more an instance of jumping the gun.  Indeed, there is credible evidence 4chan, in addition to its free-wheeling atmosphere, also attracts quite a few malicious attacks, presumably from disgruntled members of the site.  “Denial of service attacks” which throw limitless requests at a web server to slow it down until it essentially crashes under the jamming traffic load, are not uncommon on 4chan.

AT&T’s technical team claims it placed blocks on the impacted IP address(es) to keep the traffic from impacting their own network, and the issue blew up only when AT&T’s non technical customer support staff did a poor job of explaining what was going on to customers.  There are also an open question whether AT&T needed to block -all- traffic on its network to 4chan, or whether blocking just the offending portion would have been sufficient.

Assuming the facts are in AT&T’s favor, and other ISPs have confirmed the attack as being authentic, this is less a case of Net Neutrality abuse, but rather standard procedure at most web hosting companies and service providers to contend with denial of service attacks and other malicious activity.  The hosting providers that provide service to Stop the Cap! engage in the same practices.  One of the hosting companies we use once shut off access to a group of websites it hosted to deal with an attack on just one website.  Once the targeted site was isolated and traffic blocks placed, service resumed for everyone else.  When the attacks were stopped or blocked by other providers down the line, service for the targeted site resumed as well.

But AT&T is not blameless.  A major national ISP like AT&T should have had a rapid and clear response ready for inquiring customers about the 4chan matter.  It was the absence of information initially, and the poorly phrased statements later that created the feeding frenzy of online speculation.

There is a thin line between “network management” policies that deal with malicious traffic and its impact on customers on one side and disingenuously labeling high bandwidth uses of its network (peer to peer, etc.) as requiring “network management” of its own (throttles, etc.).  Historically network technicians have always been given latitude to protect their employer’s network from purposely malicious traffic like “botnets,” “spam servers,” and “denial of service attacks.” They should continue to have that latitude until such time they are shown to be abusing it.

4chan’s own internal policies, and their unwillingness to control some user excesses, also make it very difficult to rush to their defense, particularly when the site owner acknowledges many of those excesses.

There are many legitimate battles to be fought for Net Neutrality.  An ISP dealing with a denial of service attack, barring any new evidence that credibly challenges AT&T’s response, should not be one of them.

Richard Greenfield, Pali Research

Wall Street media analyst Richard Greenfield of Pali Research is telling investors that the era of quick cash from “digital phone” service customer additions is probably coming to an end.

Greenfield penned a research note last week pointing out that despite the blizzard of postcards, mailers, and wall-to-wall advertising cable operators do to promote their “digital phone” services, it’s getting tougher to sign up new customers.  Mike Farrell in Multichannel News condensed the marketspeak down:

In a research note, Greenfield noted that industry-penetration leader Cablevision Systems, which has telephony in 40% of its homes passed and more than 60% of its basic-video base in a triple-play bundle, took six years to reach those milestones. Time Warner Cable after five years has about 15% penetration (27% of subs in a bundle); Comcast, four years into telephony, has 13% phone penetration and 24% of its subs in a triple-play bundle.

The year 2008, the analyst noted, was the first that net telephony additions fell for both Comcast and Time Warner Cable.

“While Cablevision is way ahead of its peers in telephony, the question is now becoming, will its peers be able to get to even 25% penetration, let alone the 40%-plus levels Cablevision has achieved or is the opportunity to further cement the bundle simply dwindling by the day?” Greenfield asked.

For the uninitiated:

• “Homes passed” refers to homes where cable service is available;
• “Triple play bundle” refers to customers who take three services – cable TV, Internet, and telephone service in a bundled package from a provider;
• “Penetration” refers to market share.  In the case of Time Warner Cable, only 15% of their subscribers sign up for “digital phone” service, but the number is higher for those with a bundled package.

Greenfield, who often annoys cable companies and instigates angry press releases from some cable trade associations, represents the Wall Street investor types, who are not pro-company or pro-consumer.  They are simply pro-money for investors.

Investors are very concerned this year about cable company stock value.  They worry customers are starting to cancel cable television packages (or at least downgrade their service to get fewer channels), and are now also concerned telephone revenue will not grow at the traditional rate it has since “digital phone” service was introduced.

Broadband service is the exception.  It remains highly profitable and is continuing to grow even during hard economic times.

Stop the Cap! believes that cable operators will look more and more to broadband profits to help prop up their stock price, making it imperative that broadband service deliver as much profit as possible, while operators crack down on costs.  Internet overcharging schemes, such as limiting and discouraging access, raising prices, or a combination of both can reduce costs even further while maximizing profits, particularly in markets where limited or no competition exists.

Flagler Beach, Florida

Another public-private Wi-Fi initiative has been launched, this one in Flagler Beach, Florida, between the city government and Bright House Networks, the area’s dominant cable operator.

The Wi-Fi network will provide consistent wireless access to the Internet in the downtown business and beach areas, running approximately from Highway 100 (Moody Blvd.) south to 2nd Street and from Highway A1A (Oceanshore Blvd.) west to Flagler Avenue.

City and local tourism officials celebrated the launch of the Metro Wireless Network in Flagler Beach by suggesting it will be a convenience for tourists looking for broadband access.

“It’s also a boost for tourism because promotions that are targeted to bring visitors to the area can tell them that they can connect during their stay in town and don’t have to fish around for access,” said Doug Baxter, president of the Flagler County Chamber of Commerce & Affiliates. “Everybody is stuck to a computer these days. (The free wireless service) is a lure.”

The service is creating some mild controversy in Flagler Beach, where residents have learned “free access” is provided on an unlimited basis only to existing customers of Bright House Networks’ Road Runner broadband service.

Non-subscribers will be granted two hours access per day, but that access is contiguous, not cumulative, meaning the moment one logs into the system, the two hour allowance starts running.  Checking your e-mail first thing in the morning assures when you log on later in the day, your free time will have expired and you will be told to purchase additional time.

The price?

1 hour – $1.95
1 day – $4.95
1 week – $14.95

All pay services are also sold in contiguous blocks of time.  For example, the one hour access fee expires one hour after paying for the service, even if you did not use the service for an entire hour.

JJ32, commenting on The Daytona Beach News-Journal website:

How exactly is this a boon for the tourism industry when tourists can only use it for two hours, or have to pay for the service? This also isn’t unique. Other money-hungry cable companies (looking at you AT&T) have this in other cities, and it looks like Bright House Networks has now joined this notorious lot. I agree that wireless access in public areas is important, but I am tired of pro-cable company press releases saying how much they’re doing for the community, when in reality they’ve just discovered a new way to rake in revenues.

Some area businesses are also unimpressed.

Carol Fisher, owner of the BeachHouse Beanery, said she isn’t likely to promote the city’s service. That because the coffeehouse’s customers can access the wireless network she’s provided for some time, Fisher said, and there are no hoops and hurdles or fees.

City officials are widely distributing a flier explaining the service in greater detail to residents and visitors.

Suddenlink Usage FAQ:

On June 1, 2009, we notified residential Internet customers in our Clovis, New Mexico cable system of a new online tool to help them monitor their Internet usage each month and determine if they are in the typical usage range.

If they are well above the typical range, it could mean several things. For instance: a virus or “spyware” application might have infected a customer’s computer and started generating high levels of Internet traffic, or someone else might be using a customer’s Internet connection without his or her knowledge. To help guard against those issues, we are offering customers a list of steps they can consider, to help make sure their computers and Internet accounts are protected and secure.

We introduced this Internet usage summary tool in Clovis, to evaluate its usefulness, after which we will consider expanding it to all of Suddenlink’s residential Internet customers.

Longtime Stop the Cap! readers will recognize this trick only too well.  When a small cable operator spends its time, talent, and resources on “measuring tools” to help customers “determine if they are in the typical usage range,” it’s only a matter of time before that ‘experiment’ will turn into typical Internet Overcharging activity — usage caps, consumption-based pricing, overlimit fees and penalties, or service termination for those outside of that “typical usage range.”

Suddenlink, one of the nation’s smaller multiple cable system owners serving 1.3 million customers in mostly rural areas, is among the worst-rated providers in the country, based on actual customer reviews.  Its journey towards Internet Overcharging schemes will do its ratings no favor when customers find out.

Suddenlink’s approach is less brazen than earlier Internet Overcharging attempts consumers have fought back.  The company attempts to leverage the usual talking points about Internet activity into a justification for measurement tools, and cleverly tries to suggest the impetus for doing so is to protect customers who might have been hacked or have family members engaged in online activities unknown to others in the home.  But the road that measurement tools provided by a cable company pave today lead to limits and higher pricing tomorrow.

Suddenlink’s contribution to the “education campaign” consumers are being subjected to before the pickpocketing begins does bring some useful information to the table, however.  This small, mostly rural provider, turns in stunning statistics about average customer consumption:

Suddenlink 'Typical Usage' Statistics - Clovis, New Mexico (Suddenlink website 7/23/2009)

Those numbers represent one of three things:

1. Suddenlink is the first provider in a long list of providers producing honest statistics about broadband usage, not the low-ball estimates others have provided to make consumers feel guilty for exceeding them;
2. Suddenlink’s statistics are wrong;
3. People in Clovis download A LOT.

Just about every other major provider, and many small ones, have spent the past year telling the media and the public “the average user” consumes far less than what Suddenlink reports for Clovis, New Mexico:

• Frontier Communications: “Today, the average residential customer on Frontier’s network uses 1.5 gigabytes of bandwidth each month.” — Ann Burr 10/10/2008
• Time Warner Cable: “Our usage data show that about 30% of our customers use less than 1 GB per month.” — Landel Hobbs, COO 4/9/2009
• Time Warner Cable Austin: ‘Users download between 5-6GB per month on average.’ — Scott Young, senior director of digital systems  10/2008
• Comcast: “The average customer uses two to three gigabytes a month.” Jennifer Khoury, Comcast spokeswoman 10/29/2008
• Sunflower Broadband: “Our average users, about 77%, use 6 gigabytes or less of bandwidth per month. Our high-end subscribers, about 2%, use 50 gigs or more.” Sunflower Broadband Website 7/23/2009
• Bell (Canada): “Usage has increased… to more than 10GB (per average user) in 2008.” Bell Internet Usage Tutorial 7/23/2009

For the benefit of Suddenlink subscribers joining Stop the Cap! for the first time, here’s a road map for where things have traditionally gone among every other Internet provider that has introduced “measurement tools” for “your benefit” that were not beaten back by angry subscribers:

… Continue Reading