Broadband Reports this morning revisited Cogeco, the Canadian cable company that engages in Internet Overcharging, but relies on a usage-measurement gauge that customers say can be off from dozens to hundreds of megabytes every day.  Stop the Cap! also reported on this issue in June, with customers outraged that their monthly bill’s accuracy depends on a tool that is very good at making the company extra money, but not so good at fairly measuring actual usage.  The problems continue.

It’s ironic that the electric meter outside of Cogeco headquarters is subject to verification, the gas pump dispensing fuel to Cogeco’s service trucks is audited by Measurement Canada, which also verifies the accuracy of the scale used by the grocery store deli to weigh the meat for the submarine sandwiches purchased by some of their employees.  What isn’t audited, much less independently verified, is Cogeco’s usage measurement tool.

Cogeco customers have resorted to installing their own third party monitoring tools, from built-in traffic measurement in some routers to software applications that they run on their computers.  Thus far, reports of serious discrepancies have caused an indefinite delay before Cogeco actually begins billing overlimit fees and penalties, but many customers are asking why they have to resort to checking up on Cogeco in the first place.

One Toronto resident can’t understand it:  “Since when do customers in this country have to validate a business billing system?   Customers should be assured of fair and accurate billing under the law in Canada. I see a lot of legal challenges coming for this.”

Cogeco customers note the discrepancies will add up — to Internet Overcharges:

“Ever since I slapped Tomato [third party firmware] onto my router and started monitoring my [usage], Cogeco has constantly been anywhere from 20mb to 700mb off every day,” complains one user. “Any discrepancy is unacceptable with their outrageous overage charges,” the user adds. “Twenty five to thirty gigabytes is the difference between paying fifty dollars a month for your Internet or eighty dollars a month,” says another, adding that the problems are “unacceptable.”

As Karl Bode notes in his story, whether the meter works right or not, the customer will still be expected to pay in the end.

Joshua Gans, an economics professor at Melbourne Business School, has a question.

Why are Australians still stuck with usage caps, which Gans notes are virtually non-existent around the rest of the world.

Writing for The Age, Gans notes that had the United States forced users into consumption limits and other usage-based broadband plans, online video sites like YouTube would likely have never started.  Gans called out Australian providers for usage pricing that has to be seen to be believed:

To an outsider, the Australian system seems very strange. Telstra boasts a basic package on its BigPond Cable Extreme network that, for $39.95 a month, gives 200 megabytes in usage. At Telstra’s boasted 30MB a second speeds, that amounts to a minute of high-quality video downloads. After that you pay 15¢ a megabyte. It is hard to imagine that being an option for consumers.

But even its Liberty plan, which costs $69.95 and offers 12GB a month – after which the extreme speed is slowed to the speeds of last century – only allows you 20 hours of video watching a month, provided you do nothing else. That’s about 45 minutes a night.

Gans also zeroes in on another theory why usage caps prevail — to protect incumbent cable and satellite providers’ video business models.  Australia’s largest Internet provider, Telstra, is also the majority stakeholder in Foxtel, Australia’s largest cable/satellite television provider.  Telstra is the equivalent of Bell in Canada or AT&T, before the 1980s “breakup.”  It dominates Australia’s television, mobile phone, wired phone, and broadband needs. It was privatized by the government under former Prime Minister John Howard.

Telstra is well positioned to control much of the Australian playing field competition is expected to compete on.  Competing broadband providers, particularly those using DSL, are confronted with installing their equipment in Telstra-owned phone exchanges, at Telstra pricing.  Telstra’s giant stake in Australia’s broadband also means they play a crucial role in Internet connectivity outside of the country, using undersea fiber cables to connect Australians with the rest of the global Internet.

With these types of ground rules, it’s no surprise Australia’s broadband experience is universally usage capped.  The limitations are so egregious, the Australian government launched a national broadband plan to vastly improve capacity and get the country higher in global broadband rankings.  It will take nearly eight years to complete the project.

For Gans, that’s not good enough.

We are told that the new management of Telstra is more open and ready to meet the challenges brought about by the national broadband network. The NBN will have the capacity to break through usage caps. But why wait eight years?

There is an opportunity for Telstra to demonstrate its new responsiveness and get rid of this anachronism. It could lift its Liberty plan to 100GB and likely face few additional costs if it charged 15¢ a gigabyte. It would send a strong signal to markets.

For North Americans, it’s another illustration that Re-education efforts from domestic providers pointing to Australia as a justification for Internet Overcharging is based on the false premise that customers don’t mind usage caps.  Even in the land down under, consumers want out from under Internet Overcharging’s high prices and limited service.

A Telstra customer rants about Telstra’s inaccurate “usage meter” that resulted in $2,500 monthly broadband bills for this particular customer, and how the broadband provider holds all of the cards when they measure and bill for usage, all while attempting to hold customers to a two year contract. Viewer Warning: Strong profanity.

Champaign-Urbana, Illinois

When an astroturf or telecommunications company tells consumers that laws to permit statewide franchising for cable or telephone company video services are “consumer-friendly,” here is a real world example demonstrating how wrong they are.

After a year of informal negotiations with Comcast, Champaign city officials Tuesday voted unanimously to reject the company’s franchise renewal application.

Council members said they won’t accept a bad franchise agreement.

“We have to defend the rights of 75,000 people who live in Champaign and pay phenomenal amounts of cash for cable services,” city councilperson Tom Bruno told The News-Gazette.

At issue:

• City officials want Comcast to maintain a local office in Champaign-Urbana, which company officials have reportedly refused to guarantee;
• Comcast objects to a request from the city to add a fifth Public, Educational, and Government (PEG) access channel unless the city assures Comcast it will have a considerable lineup of “original” programming;
• Comcast wants to change the formula for computing “gross revenue,” on which the city bases its 5 percent franchise fee, substantially reducing the $700,000 annual payment the city usually receives.

Subscribers and city officials want assurances that Comcast will maintain a local presence, and not adopt a regional approach that places many Comcast employees that make decisions affecting the community well outside of the area.  Comcast’s demand that the city heavily program its existing PEG channels before considering adding a fifth channel as part of a ten year franchise agreement was dismissed by Rick Atterbery, a member of Champaign’s negotiating team and the chairman of the CU Joint Cable & Telecommunications Commission.

“They would require more original programming (on PEG channels) than NBC is providing [its affiliates],” Atterbery said.

Tom Bruno

City officials discovered the state of the cable industry’s willingness to compete when it put out a formal request for proposals for any cable company to apply for the city franchise.  Only one provider, the incumbent Comcast, submitted an application.

Other cities have had similar experiences, finding no cable company of size will apply for a franchise to serve a community already wired by someone else.  Instead, cable companies change hands when operators conduct private negotiations to swap territories, as was the case in Memphis, Tennessee when city officials learned Time Warner Cable was leaving and Comcast was taking over, or through mergers and acquisitions, such as in Buffalo, New York where incumbent operator Adelphia’s franchise was taken over by Time Warner Cable.

In the end, Comcast holds all of the cards.  Should Champaign officials be unable to negotiate an agreement with an intransigent Comcast, the cable company can use the telecommunications industry-friendly statewide franchise law it fought heavily against in 2007.  Like in Tennessee and several other states, AT&T (among others) has been spreading campaign contributions around to attempt to pass legislation to adopt a single franchise agreement for entire states, reducing the time and effort AT&T would have otherwise spent making agreements with individual communities.  Comcast, being the incumbent likely to face competition, strongly opposed the bill in an effort to slow down AT&T.

It would be ironic if Comcast had to resort to a statewide franchise to “opt out” of the local franchise negotiations that it fought so hard to force AT&T to comply with.

The News-Gazette confirms that the city really has little to work with:

The city could theoretically require Comcast to remove or abandon its city facilities, but Comcast could fight a council rejection in court or seek a state franchise, making Comcast’s ouster highly unlikely, Atterbery said.

Deb Piscola, Comcast’s director of government affairs, attended the meeting and said she was optimistic a franchise agreement can be hammered out. She said informal negotiations can continue along with the formal process simultaneously.

“Ninety-nine percent of franchise renewals are completed through the informal process,” she said. “I feel very confident we will reach an agreement.”

Piscola also said she believes Comcast will retain a local office, and that the differences over the franchise fee can be worked out.

[Update: 6:39pm ET -- Clarified article to recognize this week's action involved the Champaign city council, not Urbana.  Our reader Bob reminds us that AT&T U-verse has launched in parts of both cities in the past few weeks, should customers want to take their business elsewhere.]

The usually business-friendly editorial page of the Wall Street Journal published a surprising editorial this morning which threatens to cause a tear in the very fabric of space.  Why AT&T Killed Google Voice: Telecom Operators Are Yesterday’s Business — It’s Time for a National Data Policy That Encourages Innovation, strikes at the heart of the telecommunications industry’s business models, and dismisses them as increasingly outdated, anti-innovation and anti-consumer.

Welcome to our world.

Using the example of AT&T’s blocking Google Voice from iPhone users, which would allow them to bypass their AT&T plan to make long distance calls, author Andy Kessler, a former hedge fund manager, believes this was the moment America wakened to the realization that telecommunications companies and government policies block innovation and limit competition.

To that, I have to wonder, where has Kessler been the last decade?

Perhaps the Google Voice debacle impacted him personally, and that got his fur in a ruffle.  What AT&T did represents business as usual for those of us who have seen it all before.

Telecommunications companies have influenced most of the government policies that govern them, using high priced lobbyists, astroturfing friends, and bait and switch promises of magical service at dirt cheap prices, if only their legislative agenda becomes law.

Supporting them are many of the subscribers of the Wall Street Journal, investors and the investment media that tut-tuts new competitors or game-changing innovation that shakes up the marketplace, and launches price wars that threaten shareholder value. Legislation that hampers industry profits or enacts consumer protection is called “government interference” in most WSJ editorials, while deregulation that strips away oversight and ignores the abusive practices common in highly concentrated markets is advocated as the one-size-fits-all “free market solution.”

Apple has an exclusive deal with AT&T in the U.S., stirring up rumors that AT&T was the one behind Apple rejecting Google Voice. How could AT&T not object? AT&T clings to the old business of charging for voice calls in minutes. It takes not much more than 10 kilobits per second of data to handle voice. In a world of megabit per-second connections, that’s nothing—hence Google’s proposal to offer voice calls for no cost and heap on features galore.

What this episode really uncovers is that AT&T is dying. AT&T is dragging down the rest of us by overcharging us for voice calls and stifling innovation in a mobile data market critical to the U.S. economy.

I wonder what Kessler will think if AT&T’s market trials in Beaumont and Reno suggest they can limit his Internet access and then charge overlimit fees per gigabyte thereafter?  AT&T may have a lot more “dragging” capability than he realizes.

Andy Kessler

Is AT&T dying?  In the traditional wired phone line market, there is evidence they are headed into a slow decline as consumers dump overpriced and overtaxed phone lines for Voice Over IP or mobile phone service.  They certainly aren’t hurting in their mobile phone business.  They’ve become quite comfortable, thank you very much, splitting the majority of mobile telephone customers in the United States with Verizon Wireless.  The companies in real trouble are the smaller players fighting for the scraps thrown from the table — a declining Sprint, T-Mobile, Cricket, MetroPCS, among many others.  They are being told to merge with each other or die by Wall Street.

Is AT&T stifling innovation by being run badly?  Of course not.  They are leveraging their market power to limit potential competition or innovation that forces them into costly upgrades they’d prefer not to do.  With their expensive “public policy” initiatives (read that “K” Street lobbying), they’ve also got a lot of elected officials and government agencies on their side as well.  A Congress that doesn’t demand greater competition, strong antitrust oversight, and a ban on anti-consumer practices, coupled with a bunch of “don’t ask, don’t tell” oversight agencies that only respond to the most egregious abuses (until the media spotlight is turned off), represents the real problem here.

The trick in any communications and media business is to own a pipe between you and your customers so you can charge what you like. Cellphone companies don’t have wired pipes, but by owning spectrum they do have a pipe and pricing power.

True, except Kessler ignores the fact AT&T and Verizon do own wired and wireless pipes, from coast to coast.  Both companies are highly vertically integrated, often serving customers with everything from their basic telephone service to television, broadband, and mobile phone needs.  Customers are heavily marketed to pick up additional product lines from both companies — products not available from the smaller guys like Sprint, T-Mobile, and others.

Kessler also suggests it’s the bidding war for wireless spectrum that results in high prices for consumers.  Even if true, his free market friends would suggest that is the marketplace at work.  Of course, the real reason for high pricing in mobile service is the lack of competition coupled with the convenience of “stable pricing.”  Namely, the current carriers are quite comfortable not rocking the boat too much with one another, which explains why virtually all of them charge comparable prices for wireless data, text messages, and voice plans.  What they will fight for is handset exclusivity, because it never threatens price and service models.  In fact, it allows them to charge even higher premium pricing for highly-sought handsets and the mandatory service plans that sometimes accompany them.  The iPhone is a perfect example of that at work.

Kessler has four prescriptions to cure the American telecommunications ailment:

• End phone exclusivity. Any device should work on any network. Data flows freely.

• Transition away from “owning” airwaves. As we’ve seen with license-free bandwidth via Wi-Fi networking, we can share the airwaves without interfering with each other. Let new carriers emerge based on quality of service rather than spectrum owned. Cellphone coverage from huge cell towers will naturally migrate seamlessly into offices and even homes via Wi-Fi networking. No more dropped calls in the bathroom.

• End municipal exclusivity deals for cable companies. TV channels are like voice pipes, part of an era that is about to pass. A little competition for cable will help the transition to paying for shows instead of overpaying for little-watched networks. Competition brings de facto network neutrality and open access (if you don’t like one service blocking apps, use another), thus one less set of artificial rules to be gamed.

• Encourage faster and faster data connections to our homes and phones. It should more than double every two years. To homes, five megabits today should be 10 megabits in 2011, 25 megabits in 2013 and 100 megabits in 2017. These data-connection speeds are technically doable today, with obsolete voice and video policy holding it back.

An end to phone exclusivity will require government regulation, something unlikely to gain much support from his free market friends.  An even better idea is to stop the cozy relationship between carriers and phone manufacturers by allowing phones to be sold independently, without customers being pressured into two year contracts to enjoy a phone subsidy.  Any phone, sold anywhere, with compatible technology (GSM, CDMA, etc.) should work on any network without a company trying to browbeat customers into contracts, even when bringing along their own phone.  That customer should also be allowed to reprogram their phone to work with another compatible carrier at any time.

Kessler is naive about “owning” airwaves.  Since the government decided it could profit from auctioning them off to the highest bidder, they’ve become monetized and highly valuable.  They are no longer truly licensed in the public interest — they’ve become private property, to be vigilantly protected from encroachment.  Be it satellite, wireless telephony, radio, television, or innovative new services not yet launched, the moment someone applies for a license to share spectrum with existing providers, a chorus of complaints about potential interference arrives at the FCC, with scare stories about potentially massive disruptions.  In reality, the grounds for these hissyfits are more frequently about the fear of competition.

It’s time to admit the concept of airwave auctions has been shortsighted.  While it may bring the government revenue, it will be recouped from consumers as part of provider pricing models.  The higher the bids, the higher the price providers will charge customers for that service.  Let’s consider granting licenses not based on who can bid highest, but rather who can provide the best possible service at reasonable prices to the public.  Those that fail to serve the public interest, or engage in bad behavior, have the very real opportunity of losing that license.  That’s quite an incentive to serve customers first.  It’s such a pro-consumer, novel idea, expect millions of dollars to be spent on lobbying to make sure it never happens.

Municipal exclusivity deals for cable companies ended in 1992 as part of the Cable Television Consumer Protection and Competition Act (the only bill President George H.W. Bush vetoed that was overridden by Congress).  I know because I was integrally involved in fighting for that legislation.  In the last 17 years, there hasn’t exactly been a rush to wire up communities with competing cable companies, now has there?

Let’s be honest here.  Less regulation will not compel cable competition, no matter how much the astroturfers and special interest lobbyists promise it.  Construction and capital costs to “overbuild” a cable provider in most American cities are high enough to discourage investment from the private sector, particularly when they fear a price war will result and reduce profits, and shareholder value.  Overbuilders like El Grande in Texas had to sell themselves to a more capital-rich company just to find financing to build out their network.

I’m afraid without incentives like tax credits or other benefits, the prevailing attitude is that all but the largest cities will make due with one wired phone company and one wired cable company at best.  Only one major provider has seen fit to rewire their service areas with the most robust technological advancement – fiber to the home.  Verizon has done so, with considerable resistance from investors, in their effort to avoid the obsolescence Kessler foresees in the telephone line business.  But Verizon is only wiring limited areas, primarily in urban areas, but almost never in smaller communities.  For customers of other phone companies, particularly smaller independent providers, too bad for you.  Their only hope may be a publicly financed, or public-private partnership, fiber optic wiring project that acts as a common carrier.  Any provider can deliver their service over it, allowing customers to choose.

Because of the duopoly/monopoly state of cable and broadband service in the United States, Net Neutrality will never be protected through competition.  In Canada, when Bell throttled and interfered with Internet service, most cable competitors simply joined the party and did the same.  When a few upstarts, resold un-throttled Bell wholesale broadband service and made that a selling point, Bell simply throttled them, too, without warning.  That put a stop to that pesky competition problem.  Canada foreshadows what will likely happen in the United States without strong Net Neutrality legislation.

Finally, Kessler’s vision of what is holding back broadband speed totally ignores provider complicity in the slow momentum forward.  While some providers have a progressive attitude about speed, seeing faster broadband’s revenue earning-potential, others see it as an unnecessary expense that most consumers don’t really need.  Time Warner Cable, the nation’s second largest cable company, remains on record as being in no hurry to upgrade to DOCSIS 3 technology, unless one of their competitors threatens to beat their speeds.  In fact, they’ve expressed repeated interest in cost controls by experimenting with ways to limit data consumption, protect their video business model, and extract more revenue from customers at current speeds.

If Kessler was looking to the phone companies for an alternative, most Americans can forget it.  Most phone companies, especially smaller independents, have maintained a death grip on old school DSL technology, which provides 1-3Mbps service in rural areas, and “up to 10Mbps” (if you are very, very lucky) in urban and suburban areas.  They are rapidly losing wired phone customers and are holding out for whatever revenue they can grab from yesterday’s broadband technology, usually doing best only where cable doesn’t compete at all.  Some even want to limit consumption at the slow speeds those networks operate at today.  They are in no hurry to upgrade their existing copper wire networks, much less agree to the “double speed” plan Kessler has.

I’m sorry to say Kessler’s marketplace-based hopes and dreams for a better telecommunications world tomorrow are not forthcoming.  Without radical changes in the current “whatever the providers want is okay with us” regulatory approach we have today, the only innovation Kessler should expect to see is providers finding new ways to charge more money for the same service we have today.

We need a complete review and reality check about the total failure of the deregulation-solves-everything approach we’ve lived under for more than a decade.  If Kessler wants faster speeds, more competition, lower prices, and less market abuse, he will never find it without government involvement.  Remember, in the absence of real competition from those that actually want to compete to win, not just share the healthy proceeds from the status quo, we need stronger arguments than “the free market solves everything” and “won’t you please do it out of the goodness of your heart and civic duty?”

[Editor's Note: This past spring, big telecommunications interests in North Carolina tried to pass industry friendly legislation to keep municipal broadband competition out of the marketplace.  For the last several years, this industry has invaded state legislatures with the help of their astroturf front groups to try and pass legislation that puts all of the benefit in their corner and none in yours.  In North Carolina, an industry-written bill to lock out municipal broadband competition was introduced in both houses of the state legislature.  At least one legislator literally handed phone calls off to industry lobbyists when constituents called.

Too often, state politicians end up doing the business of big business, passing bills that hurt communities and people in their own districts, and hope constituents don't find out what is really going on when anti-consumer legislation gets passed with a wink and a nod. All that's left to do is cash that generous campaign donation check!

When municipalities in the state are told the duopoly of providers won't provide a level of service communities need, they dared to build their own. HB1252 would have made that next to impossible. Your direct involvement in calling and writing North Carolina officials to let them know you understood what this anti-consumer legislation represented stopped the special interests in their tracks. You even outmaneuvered astroturf groups like Americans for Prosperity that tried to fool legislators into believing North Carolina citizens supported this terrible bill.

But like in all horror shows, what is left for dead often rises to terrorize the countryside yet again. We'll be watching and waiting... and we'll be ready. -- Phillip Dampier]

HB1252 has officially been sent to a study committee as part of a huge omnibus study bill, HB945. The North Carolina budget has been passed and signed.

Unfortunately, it will be the Revenue Laws Committee which will control the study, which is run by Senator Hoyle and the rest of the big business boys in the House and Senate. The last version of HB1252 said it would go to study in both the Joint Select Committee on High Speed Internet in Rural Communities and Revenue Law, but it appears that the good ole business boys got their way. Who controls the study often controls the results.

The offensive language in the original bill that would have represented a direct threat to municipal broadband projects will die in study either way, but expect to see it resurface early in the next full session.

Version three of HB1252, A Bill To Be Entitled An Act Authorizing The Joint Select Committee On High Speed Internet In Rural Communities And The Revenue Laws Study Committee To Study Local Government Owned And Operated Services, is available to read here.

Enjoy your summer and prepare for battle in the coming months.

From Our Friends at Free Press! Good Stuff!

AT&T launched its U-verse service in parts of the Memphis area Monday, promising competition for Comcast, the dominant cable company in southwest Tennessee.  But some area residents expected much more to come from last year’s controversial industry-friendly statewide franchising law that promoters promised would bring lower prices for service across the state.

AT&T plans to offer U-verse within the next two years to subscribers in Arlington, Bartlett, Collierville, Covington, Dyersburg, Germantown, Lakeland, Memphis, Piperton and Ripley.  Monday’s launch only covers a portion of Memphis, and doesn’t cover large portions of downtown.

An Overview of AT&T U-verse television service

Unlike traditional cable services, AT&T’s U-verse is typically delivered on a copper wire and fiber optic based Internet Protocol network.  Not as advanced as Verizon FiOS, which provides a fiber optic connection straight into the home, AT&T’s system still relies in part on traditional copper phone wire that runs from the pole to your home.  AT&T uses this approach to save money — company officials claim 100% fiber networks are too costly to build, and Wall Street investors balk at the up front costs.

AT&T uses its fiber network from the phone company office to individual neighborhoods to reduce the distance between the homeowner and the company’s equipment, which delivers a digital signal across the customer’s existing phone line.  Just like DSL, the shorter the distance between the customer and the telephone company equipment, the faster the speeds.  AT&T U-verse requires fast speeds to handle the video channels, digital phone, and broadband components that are part of the U-verse product line.

AT&T’s U-verse pricing ranges from $49 a month for an enhanced basic service package of 130 channels to $109 for 390 channels.  Premium channels are extra.  Plans include one AT&T set top box.  AT&T’s system will require a set top box for each television, at a monthly rental of $7 for each additional set, which can increase costs significantly for houses with several televisions.  An HD package runs $10 per month.  AT&T specials often include discounted or free installation, which takes between four to seven hours to complete and is only done on weekdays.  No contracts are required and customers can cancel at any time.

AT&T U-verse pricing in Memphis (click to enlarge)

AT&T claims that 70% of their customers choose a bundled package that includes television, broadband, and/or telephone service.

Company officials credited the passage of the Competitive Cable and Video Services Act, which became effective in July 2008, for paving the way for AT&T U-verse in the city.  AT&T’s praise also included crediting elected officials by name who supported the company’s lobbying efforts towards passage of that bill, which stripped cable franchising authority from local communities and adopted a statewide franchise system.

“We are thrilled to offer this innovative video choice to customers in the Memphis metropolitan area. As we celebrate this Memphis launch, I want to remember the contributions of the Tennessee General Assembly to open Tennessee’s video services marketplace to competition which is truly benefiting consumers. I would like to again thank Memphis area legislators including Speaker Emeritus Jimmy Naifeh, Senator Mark Norris, House Speaker Pro Tem Lois DeBerry, Chairman Ulysses Jones and the many others who supported competition and choice for consumers,” said Gregg Morton, president, AT&T Tennessee.

In turn, elected officials were quoted in AT&T’s press release:

“As Tennessee policymakers, our goal was to increase investment throughout the state and give consumers more choices and innovative new services,” said Senator Norris. “AT&T has been a great community citizen and the launch of AT&T U-verse also supports economic growth in Memphis.”

“We are excited that AT&T has brought their 100 percent Internet Protocol-based television service to Memphis,” said Chairman Jones. “Consumers in Memphis have asked for this and today, AT&T has delivered.”

AT&T Group President for Operations Support John Stankey discusses the company’s fiber strategy and provides an update on its progress in deploying its groundbreaking IPTV service, AT&T U-verse TV. (11 minutes)
You must remain on this page to hear the clip, or you can download the clip and listen later.

The Municipal Technical Advisory Service, in association with the Tennessee Municipal League, noted that the lobbying effort to pass the Act was among the most expensive lobbying campaigns in state history.

This legislation is part of the national trend to diminish or eliminate the franchising authority of cities by granting cable companies the right to provide services without negotiating agreements with local governments.

In recent years, several cable companies operating in Tennessee permitted local franchise agreements to expire and refused to negotiate contracts with cities in anticipation that legislation would be adopted that would give cable companies great advantages in negotiating new agreements.

This tactic has paid off, as this law essentially grants a statewide franchise to these companies. Current franchise holders may now terminate their local agreements and seek a state franchise. A city that has previously negotiated a franchise agreement with one cable provider may be forced to permit other cable companies to serve its area under the same terms and conditions of the existing agreement

Such legislation has traditionally been advocated by telephone companies like AT&T and Verizon who are introducing video services in a bid to remain competitive with cable, which now offers its own telephone service.  Seen as a shortcut to negotiating with each individual municipality, the statewide franchise advocates claims it reduces the time and expense of bring needed competition to communities.

In addition to an expensive lobbying campaign, astroturfer FreedomWorks coincidentally showed up to promote their “Choose Your Cable” campaign, which in fact mirrors AT&T’s public policy advocacy of statewide franchising.

FreedomWorks Chairman Dick Armey commented, “FreedomWorks and our thousands of Tennessee members were proud to take part in the grassroots battle in Tennessee that finally saw this ground-breaking legislation through. We salute the Tennessee state legislature for its leadership in giving Tennessee consumers the advantages of increased competition in the video services market. The Competitive Cable and Video Services Act will offer cable consumers more choices and more innovation. And when businesses are forced to compete for customers, the customers win.”

Incumbent cable operators have had mixed reactions to such proposals, generally opposing them in areas where they would likely face the entry of AT&T or Verizon into their markets, and taking a more favorable approach in areas where they are unlikely to face a strong telephone company competitor.

In Tennessee, with AT&T itching to bring U-verse to state residents, cable operators launched a major opposition effort.

Local municipalities and many consumer advocates strongly oppose statewide franchising legislation, noting such laws remove local oversight over operators that do not perform responsibly and reasonably in their communities.  Additionally, in many states where statewide franchise bills have become law, local communities find franchise fees paid into state bodies that do not always pass on the full amount of that revenue to towns and cities.

Other common problems include:

• Threatened loss of local Public, Educational, and Governmental (PEG) local access channels;
• Reduced control over zoning regulations prohibiting digging and construction without permits;
• Loss of “free service” provisions that deliver cable programming to public schools, community centers, and town, police and fire halls at no charge;
• Loss of authority to help manage customer complaints.

In Tennessee, those opposing the legislation managed to get rid of statewide franchise fee administration, retained control over their existing PEG channels, and kept existing “free service” provisions, as well as reasonable zoning requirements.  However, the telecommunications industry did manage to include language banning municipally owned broadband networks in any area where an incumbent provider exists:

Memphis, Tennessee

Broadband joint venture authority.

The law creates the “Tennessee broadband deployment fund” to be used to promote the deployment of broadband service to rural areas. Guidelines will be developed to govern use of the funds, and grants will be available to local governments, cable companies, and telecommunications companies.

Cities now have the authority to enter into joint ventures with one or more third parties to provide broadband services. Joint ventures will be authorized only in areas that are historically unserved. City electric companies and electric cooperatives that participate in these joint ventures must still comply with other applicable statutes, and no revenues from utility operations may be used to subsidize the joint venture.

Cable operators also managed some concessions, and after the bill was signed into law, the state cable television association said they could live with the result.

Stacey Briggs, executive director of Tennessee Cable Telecommunications Association:

“This has been a good process – not easy, but good – and Speaker Naifeh should be commended for managing this outcome on a highly complex policy.

The cable industry, including Comcast and Charter, stood firm to make sure that our members were treated fairly and that AT&T and other companies were not granted advantages in the law. And, most important for consumers, Tennessee’s cable companies will continue making substantial and meaningful investment in Tennessee. Cable companies will continue to be the leader in bringing the most advanced products, services and newest technologies to consumers across the state.

AT&T and other companies have had the right to compete under local franchising rules for more than a dozen years. This new policy streamlines the franchise process, but it remains to be seen whether new entrants will compete in Tennessee.”

After all of the lobbying was done, the bill was signed into law, and the competition FreedomWorks was touting did arrive, the only thing missing from the consumer perspective was lower pricing.

Comcast, the local cable operator serving Memphis, seemed unfazed by AT&T’s entry into the area.

“We have competed successfully against satellite TV and other competitors for many years,” said Trevor Yant, vice president and general manager of Comcast of Memphis. “AT&T will become another player in the market with the services they choose to offer.”

One of the possible reasons for Comcast’s apparent lack of concern may stem from the reaction of many Memphis residents, who note AT&T’s prices are often higher than those charged by Comcast.

Among the mostly unimpressed reactions on local message boards:

mrhmeisme:
“$109.00 for 390 channels doesn’t sound like a very competitive price for a yet untested product. That’s some 20 percent higher than my current package that has all the channels that interest me. I suppose the proof will be in the pudding.”

Not_Chicken_Little:
“The website for U-verse presents the packages very poorly, and the prices don’t seem to be any bargain. But I am glad to see some competition, even though I don’t think they’ll make much headway. They need to show what they’ve got in a more attractive and understandable way, and cut prices – they don’t make me even think of switching with the lame sales pitch they have now.”

dmat7777:
“I just did a comparison of cost between my current Comcast and the U-verse. For comparable services, U-verse would be about $15 more per month for me. Some of the packaging/options might look better. For example, the Flickr photo being included, but I’m more concerned about how much $$$ per month. I don’t see AT&T taking this seriously. They seem to be doing the typical huge corporate thing, and not addressing the customers real concerns. No surprise there.”

ChickPea:
“$49 a month is too rich for my blood. When someone offers a decent package available for $25-$30 a month, I’ll be in.”

Oddly, the most common requests and complaints among Memphis area residents continue to be unanswered by Tennessee officials who were eager to support the Competitive Cable and Video Services Act, but left out a few things:

umbluegray:
“I want a plan where I can pick and choose the channels I want. I hate paying money to some of the basic channels like MTV, etc.”

ladydonald:
“I would be a big fan of a-la carte programming if it were ever enacted.

A-la carte channels are a niche that all of the providers are totally ignoring. Just think what would or could happen if those options were available.”

Hogs2009:
“It would be nice if you could pick out what cable channels you want and skip the rest. 90% of cable channels I do not want but am charged for. I mainly have cable for sports broadcasting channels, like ESPN, ESPN2, and ESPN Classic. I also like having local on cable because it is more clear, again because some games are on local channels. A-la carte is a great idea!”

Many residents were also suspicious of just how good a local competitor AT&T will be against Comcast, which itself took over providing cable service formerly provided by Time Warner Cable:

DanWesson:.
“Since Comcast bought out service from Time Warner locally, our service has been sub-par. I have had technicians out the house multiple times due to inexplicably losing certain HD channels and internet service that continually drops or can be agonizingly slow, on par with dial-up some days (particularly the hot ones, which is very strange). Their technicians on the phone and who come to the house have been polite and friendly, but they aren’t exactly going out of their way to fix the problem.

Comcast also charges me more than Time Warner did in addition to charging a “modem-rental” fee when the cable modem was free from Time Warner and I haven’t exchanged it since the change.

All that said, I’m not sure AT&T is the way to go as their corporate practices are the worst in the Telecom industry. Customer service has always been non-existent as the customer is merely a cash-cow. I’m all for competition in the marketplace, though. If Direct TV didn’t require a contract that might would be the route I went, but I’d still be reliant on one of these other worthless companies for internet.”

Not_Chicken_Little:
“On the website trying to check availability, U-verse tells me it cannot find my address! It suggests I try again using my AT&T phone number instead and directs me to continue to another screen. That screen, however, has no option to enter a phone number – only the address.

So I already see the level of competence I would have to endure if I choose U-verse. And like dmat7777, I see that the price for comparable service would be considerably higher than what I have now.”

apollo1377:
“AT&T can’t handle phone service. Do you think they can take on more? I think NOT.”

ima_cracker:
“If AT&T could deliver a more reliable package some would pay more to get it.

Instead they are mortgaging the company’s reputation for wireline services, which they continually deride, to try and emulate the cable companies financial model, which has produced a reputation for reliability that is the envy of nobody.

If instead of trying to destroy the value in wireline AT&T decided to pursue a higher quality, more reliable service for cable, they could at some point expect to capture a substantial amount of market share. But they assume the consumer is too stupid to make the distinction between one service and another.”

ChickPea:
“AT&T websites are a perennial problem. Ever since BellSouth was taken over by AT&T, getting any information on local service online has been a struggle. A site map would probably look like a birds nest.
That said, I’m loving my AT&T DSL lite! Cheap and plenty fast for a non-gamer.”

DirecTV wants people out of reach of its satellite service to enjoy unlimited viewing of NFL football games, and today announced it would test providing them over broadband connections.  For $100 more a year than subscribers pay now for the satellite-delivered football game coverage, DirecTV will will offer New York City viewers as many NFL games they can watch over their broadband connection for $349 a year.

DirecTV claims it will sell the service only to those who cannot obtain satellite service from the company, which presumably will limit the broadband content to apartment dwellers and other urban residents who can’t mount a satellite dish.  But in a city like New York, that can easily mean tens of thousands of potential new customers, all watching video content delivered by Cablevision, Time Warner Cable, RCN, or Verizon’s broadband services.  USA Today covered the story this morning:

DirecTV has few customers [in New York City] because skyscrapers block signals coming from satellites orbiting the equator. Also, many landlords and co-op boards don’t allow residents to get a satellite service.

“A lot of the buildings (that can’t get DirecTV) we already have in databases because they’ve got exclusive contracts with cable guys,” says Derek Chang, executive vice president for content strategy and development.

To see the games, broadband customers will download a special video player and punch in a code. Users can install the software on multiple computers, but only one will be able to stream the games at any particular time.

Games with New York’s Jets and Giants, which air on broadcast TV, will be available only when the customer’s computer is outside the New York area.

Cable operators won’t just play defense in the battle for football fans. Comcast will announce today that it will offer the NFL Red Zone Channel to customers of its Sports Entertainment Package. On Sundays, the channel will display football statistics with audio from Sirius XM Radio‘s program “Around the League” — and go live to certain games when the ball is within 20 yards of the goal.

While Cablevision, RCN, and perhaps even Verizon may not express concern about the prospect of carrying NFL games across their networks without “compensation,” Time Warner Cable, which continues to express an interest in Internet Overcharging schemes, may not be so tolerant, especially if the test is successful.  ISPs who support Internet Overcharging routinely use online video growth as a justification for usage caps and consumption pricing.  Will the NFL become part of the Re-education of their customers?

Another question to ponder – would such a service even launch in a broadband marketplace infested with usage caps and limits?

The astroturfers remain hard at work trying to convince conservatives the best way to oppose Obama Administration telecommunications policies would be to adopt industry-friendly views opposing Net Neutrality.

The latest to buy in is The American Spectator, publishing a piece this morning titled, “The Great Regrouping.”  In it, The Prowler casts Net Neutrality as part of the Obama Administration’s plot to impose government controls on the Internet, representing a “grave threat … to free speech and conservatives’ ability to organize and mobilize politically.”

During the last day the House was in session before leaving for its August recess, Rep. Ed Markey’s staff introduced HR 3458, the so-called “Internet Freedom Preservation Act,” which would essentially enable government control of the Internet, treating the networks as a government-managed utility. (For more information about “net neutrality,” read this interview that one of the key “net neutrality” supporters gave to a Canadian socialist publication.) The Markey legislation is considered the last piece of what some conservatives consider to be Democrat and progressive attempts to control the Internet and limit citizens’ ability to use the networks to organize and oppose their agenda.

The bill was introduced the same week it was revealed that the Obama Commerce Department was demanding from the phone and cable companies highly detailed data about private citizens’ Internet and broadband connections as part of plans of “map” broadband networks across the country.

Stop the Cap! readers will recognize the source of the link The Prowler promotes — it’s from the very same Heartland Institute astroturfer we chased last week, who was arguing Net Neutrality was a tool to achieve “socialist utopia.”  I pulled a muscle just reading that overreach.

My direct response can be found below the fold.  Suffice to say, this is an example of classic astroturfing at work:

1. A company’s government affairs department recognizes a potential threat to their business model through government oversight or regulation, or sees a financial benefit from industry-favorable legislation or deregulation.  It considers a range of options, including direct lobbying, consumer outreach, and hiring experienced “inside the beltway” expertise.
2. The company approves a plan of action and frequently hires a Washington-based public relations firm.  That firm usually either has direct contact or close associations with astroturf organizations.  As part of the PR firm’s fee, they assure the company its message will be delivered in ways that help steer any public policy debate towards their corner, using astroturfers to reach both consumers and media suspicious of a direct industry appeal, but will listen to an “independent” group.
3. Suddenly, supposedly independent “public interest” groups start beating the drums.  Some speak directly to consumers raising doubts and fears about regulatory matters, others attempt to suggest the public needs to get behind industry-friendly positions for their own benefit.  Press releases and interview opportunities are made available to the media.  Astroturfers with a known political angle wrap industry positions in ideological shells, using them to illustrate a broader ideological point.
4. Most importantly, carefully avoid exposing the direct industry connection.  Industry executives don’t want to admit they are paying for these campaigns.  PR firms help shield the source of the industry money that flows into astroturf groups, and astroturfers work hard to avoid disclosing where the money is coming from.  Even elected officials who take an industry friendly view do not want to directly reference the companies writing big campaign contribution checks.  They’ll cite those supposedly independent “consulting” and “research” and “public interest” groups when reading the talking points.

Unfortunately for them, this convenient public interest shell game has been exposed.

In today’s case:

Industry opposed to Net Neutrality -> Astroturfer Groups -> Outreach to fuel opposition to Net Neutrality for “consumer” or “ideological” reasons.

… Continue Reading

While researching some stories this afternoon, I spoke with an executive at one of the major broadband providers serving consumers with Internet service who told me the company was simply tearing its proverbial hair out over how much online video services like Hulu were costing them — at least $1-2 per gigabyte.  He also said it was putting serious strain on their broadband network.  He didn’t agree to go “on record” putting his name with his views because he was not authorized by company officials to do so, but he was well armed with talking points that said online video is such a problem, Canada, South Africa, Australia, and New Zealand couldn’t take it any longer and they adopted usage allowances to limit customers watching Hulu and other online video services “like from the BBC.”

These Amateur Hour talking points written at company headquarters will work with a bobblehead-like nodding reporter at a local station getting a 10 second unchallenged sound bite, but they don’t work here.

My industry friend didn’t agree to be on the record, so he’ll remain anonymous, but the points raised are on the record so here we go:

Myth: Hulu is costing broadband providers a ton of money – at least $1-2 per gigabyte.

Truth: Hulu, and other online video services like it, do generate a considerable amount of broadband traffic in the United States.  That online video has posed a potential threat to my provider friend, who faces the prospect of some consumers deciding to disconnect their cable TV service and stick solely with broadband for online video.  However, my friend ignores the fact his company has a way to solve this traffic issue by considering upgrades to DOCSIS 3 technology.  After all, his bosses are actively seeking a way into the online video marketplace themselves.

Dave Burstein, DSL Prime

His employer is testing an online video delivery platform that could easily dwarf Hulu.  Of course, they don’t happen to own or control Hulu, open to any American.  The establishment of an industry-controlled service, available exclusively only to “authenticated” subscribers, really blows the talking point about online video straining their broadband network out of the water.  If Hulu is threatening to do them in, what do they think will happen when their even bigger endeavor launches for millions of users?  Then again, as I told him, such online video drives new subscriptions and they could always take some of that money and invest it in network expansion.

Dave Burstein, a well regarded expert on broadband networks, who writes DSL Prime, obliterates the cost estimate inflation for online video in a short piece titled, HD Video Delivered: 5-8 U.S. cents per hour (SD – 2-4 cents):

Microsoft, Cachelogic and I demo’ed full 6 megabit HD video over the net at Web Video Summit, and the stars are now aligned for HD to become first practical and then common – unless the carriers succeed in taxing the net outrageously. That’s cheap enough that even HD TV over the net can be supported by ads, and it becomes a no-brainer for any movie service that charges to offer true HD.

Dan Rayburn, the guru of the streaming media world, reports “The lowest price I saw in Q1 was two and a half cents per GB delivered for over 500TB of traffic a month. When I questioned many of the major CDNs about this price, nearly all of them told me they don’t price delivery that low, but the contracts say otherwise. That price is not the norm as 500TB a month in delivery is a very large customer.” Repeat: This is not a typical price, even at that large volume. Dan reports more normal prices are 2-4 times this level. So U.S. cents 15-25 is more typical for full HD.

Hulu doesn’t even specialize in HD video programming, so the $1-2 per gigabyte estimate on that talking points handout apparently mistakes a dollar sign for a cents sign.

Myth: Online video is such a problem, Canada, South Africa, Australia, and New Zealand adopted usage allowances to limit customers watching Hulu and other online video services “like from the BBC.”

Truth: My industry friend is apparently unaware Hulu restricts access to the majority of its content outside of the United States.  If you are watching from Canada, Australia, or South Africa, you’re more likely to encounter an error message telling you this content is not licensed for your area.  I’m not sure how that is supposed to impact on overseas ISPs.  The BBC’s iPlayer not only doesn’t provide broadband video content outside of pre-authorized UK-based Internet Service Providers, it offers lower quality streams outside of the UK for what content is available.  It’s a very common complaint heard by the BBC, but they do not have the resources to offer high bandwidth streaming to the entire world.

Most broadband providers won’t use the word “limit” when it comes to controlling subscribers’ access, because that puts them right in the line of fire.  It’s always been our contention that this is about protecting business models and less about “costs.”

There are tremendous differences between online video content services in the United States versus Canada or other usage-capped countries.  In New Zealand, online video services have been shut down because of usage limits.  In Canada, Australia, and South Africa, they’ve never truly gotten off the ground because “bit caps” make them unsustainable.

South Africa this week celebrated the opening of a new underseas cable to bring additional global connectivity to the continent of Africa.  Broadband service in South Africa today has very little video content at all – usage caps are punishingly low across the region because unlike in the USA, international connectivity has traditionally been obscenely expensive.  Many South African ISPs distinguish themselves by placing heavier limits on sites hosted outside of the country than on those hosted domestically, a nod to the connectivity reality.

The truth is that some ISPs in the United States are looking for arguments to justify Internet Overcharging to maintain high profits and keep demand in check.  Consumers are not buying these industry talking points at any price.