Young viewers whose parents subscribe to Time Warner Cable in parts of North Carolina got an eyeful last Tuesday when explicit previews from The Playboy Channel ended up on two on-demand channels dedicated to children.

For at least two hours, Kids on Demand and Kids Preschool on Demand accompanied its menu of available programs for young viewers with steamy footage of naked women pawing themselves and sharing explicit sexual fantasies.

One Raleigh-area family’s four year old made inquiries of his parents as to the reason why Tom ‘n Jerry also included naked women that morning.  Horrified parents called Time Warner Cable, but technicians still took some two hours before finally pulling the pornographic previews from the channels.

Company officials were apologetic about what they characterized as a “technical glitch.”

“We’re very, very sorry it happened – we know parents are concerned,” Time Warner Cable spokesman Keith Poston told several Raleigh area newscasts. “It was a technical malfunction that caused the wrong previews to be shown on our kids’ on-demand channels. Unfortunately it hit at the worst possible time on the worst possible channels.”

Time Warner Cable has had occasional mishaps with customers subjected to unwanted explicit programming.  In 2007, one Time Warner Cable customer wrote The Consumerist about receiving a recycled Digital Video Recorder box that contained the previous owner’s recordings.  His wife might not have been concerned if it involved several editions of MSNBC’s Hardball with Chris Matthews, but instead she found herself scrolling through titles including, Got Male, Foursome, and Hole Diggers (Part Two).  Thankfully, she found it before the kids did.

WRAL-TV Raleigh interviews one North Carolina family who got more than they bargained for when tuning into Time Warner Cable’s kids-on-demand channels, and ponders why the company didn’t yank the channels after the first complaints arrived. (3 minutes)

WTVD-TV Raleigh explains how The Playboy Channel ended up on Time Warner Cable’s video on demand channels.  (3 minutes)

South Africa is the latest country on the way to finally discarding Internet Overcharging schemes like usage caps and usage-based billing.

MWEB, one of South Africa’s largest residential broadband service providers, last week “threw down the gauntlet” and unveiled an unlimited broadband option among its various rate plans.

“We realized there’s a major gap in the market. South Africa doesn’t experience the Internet like the rest of the world does. It’s a fantastic opportunity to change the Internet in South Africa,” MWEB CEO Rudi Jansen told News24.

For a country that has never known anything but expensive, slow, usage-capped Internet, MWEB’s announcement is nothing short of a broadband revolution for 49 million South Africans.

“This is not the end. There are still probably three or four big things that have to change in this market and for us, this is the first step. The other things that have to change are we have to get the mobile operators to offer wholesale data. The more competition there is, the better it is for the market,” said Jansen.

For $73.50US per month, MWEB offers 4Mbps DSL service that is truly unlimited, which is a radical notion in a country used to usage caps averaging 3GB per month.  Customers willing to tolerate slower speeds can reduce their unlimited broadband bill considerably — 384kbps starts at $30 a month; 512kbps is priced at $41 a month.  The company does admit to throttling torrent services, but customers have managed to bypass the throttle by encrypting their torrent traffic.

Although these speeds and prices are terrible in comparison to North American broadband plans, for South Africans, MWEB’s announcement was big news.  That’s because the competition charges far higher prices, often for limited service:

• Telkom, South Africa’s state phone company, wants $35US monthly, five dollars more than MWEB’s lowest speed unlimited alternative, for its DSL service with a 3GB usage allowance;
• Paying $39.50US per month buys you 10GB of usage from Afrihost;
• Using 3G wireless mobile alternatives are for the deep-pocketed only.  Paying $65.50US per month nets you less than a 2GB usage allowance;
• South Africa’s ‘Screamer’ offers a pricey unlimited plan at $54US per month for 384kbps service;
• Neotel offers an unlimited service package, but it’s so confusing few customers can be certain what they’re getting.  (Read this South African blogger’s experience with Neotel.)

MWEB hired marketing firm Quirk to generate buzz about the company’s unlimited service option.  Earlier this month, a Facebook group called Free the Web popped up asking consumers what improvements were needed in South Africa’s broadband service.  It attracted more than 15,000 followers in just two weeks.

What were South Africans complaining about?  Usage caps. Broadband users despise them, especially in a country where 5-10GB allowances are considered ‘generous.’  But the lack of competition for monopoly state-owned phone company Telkom also featured prominently.  Most South Africans rely on DSL service that first starts with renting a line from Telkom.  Telkom prices those in accordance with its monopoly status, and requires consumers to pay line rental fees combining both data and voice services, even if a customer only intends to use the line for data.  Because ADSL broadband speed is totally dependent on the phone company, and Telkom has no incentive to upgrade, few in South Africa can expect to see broadband service exceeding 4-8Mbps.  Most obtain considerably less, often well below 1Mbps.

“Telkom has to allow users of ADSL to split the line rental for the telephone line and the line rental for ADSL. That absolutely has to happen; then this market will grow,” Jansen said.

Jansen

MWEB hopes the unveiling of unlimited broadband will transform South Africans use of the Internet and bring prices down.

“Ubiquitous broadband is what this country needs to grow. We want to do our part in getting South Africa there,” said Jansen. “I hope [our competitors] follow us because I think as a country we desperately need it.”

Jansen may have his wish.  Hours after MWEB announced unlimited broadband, its competitors began to follow suit, meaning South Africans can finally follow Australians and New Zealanders discarding hated Internet Overcharging schemes.

Mybroadband.co.za took note of several broadband package changes coming as a direct result of MWEB’s new service (One South African Rand = 13.6 US cents):

Vox Telecom responded quickly and announced that @lantic will be launching bundled ADSL offerings – which include both ADSL access and an uncapped ISP account.  Pricing starts at R339 for a DSL384 bundle while a 512 Kbps service will cost R589 and a 4 Mbps solution R889.  This undercuts MWEB’s bundled pricing by R10 per month.

Openweb also joined the price war by announcing that they will resell MWEB accounts at the same rates as MWEB.

This is however not where it ends.  Afrihost said that consumers can look forward to their uncapped ADSL services next week, and G-Connect also indicated that they will respond to MWEB’s recent announcement with a competing service.

Even the state monopoly phone company Telkom has started talking about offering unlimited service.

“Uncapped speed-locked ADSL service consumer offerings are in development. However, no time-frames, offering specifications or price points can be disclosed at this stage. In the development process, Telkom is striving for optimal quality, reliability and affordability,” said Ajith Bridgraj, Telkom Senior Specialist for Media Relations.

MWEB expects a surge of new customers, which leads some to worry if the company can sustain its network under the burden of throngs of new customers.  Jansen says they can, noting their connectivity ultimately comes from Seacom, which is an important provider of international connectivity between Africa, Europe, and beyond.

Early tests by Mybroadband appear positive:

MyBroadband got its hands on an uncapped 4 Mbps test account to take the service through its paces – and early test results are very promising.

For basic email and surfing the MWEB uncapped account performed well, and results from Speedtest.net were on par with SAIX and IS based offerings.

Local Speedtest.net downlink speeds ranged between 3.28 Mbps and 4.13 Mbps while local uplink speeds ranged between 0.26 Mbps and 0.42 Mbps.

International Speedtest.net results – tested with servers in London, New York and Brussels – ranged between 2.96 Mbps and 3.61 Mbps while international uplink speeds were fairly steady at between 0.3 Mbps and 0.32 Mbps.

Local latency was fairly consistent and ranged between 17 ms and 41 ms in tests to Johannesburg and Cape Town based servers.  International latency was however less consistent, and ranged between 285 ms and 528 ms to the UK and US.

The MWEB uncapped account performed well with all bandwidth intensive applications.

YouTube videos streamed without any buffering, but some buffering was needed when moving to high definition video streaming (480p and more specifically 720p).

Standard file download speeds were quite consistent at between  2 Mbps and 3.4 Mbps while multi-threaded FTP and HTTP downloads sat at around 3.2 Mbps.

Good news for those keen on torrent services is that the MWEB uncapped account seems torrent friendly.  We selected 10 of the most popular torrents, and total download speeds ranged between 2.8 Mbps and 3.2 Mbps.

American broadband providers contemplating Internet Overcharging schemes of their own often point to usage limits and usage-based billing schemes that exist in other countries, implying they are well-tolerated by consumers abroad and should be likewise domestically.  The truth is, such pricing schemes are as despised abroad as they are domestically, and most countries seeking to improve broadband consider eliminating them a top priority.

http://www.phillipdampier.com/video/Carte Blanche Consumer -- No Broader Than a Band.flv

South African news program ‘Carte Blanche’ provides this general overview of the current state of broadband in South Africa, and the challenges that must be faced to improve it. (10 minutes)

http://www.phillipdampier.com/video/News24 MWEB Unveils Unlimited Broadband 3-19-10.mp4

South Africa’s News24 network reported on MWEB’s unlimited broadband package including an interview with MWEB CEO Rudi Jansen. (3 minutes)

http://www.phillipdampier.com/video/South African Broadband.flv

As part of MWEB’s social marketing campaign, ordinary South Africans talk about their broadband experiences, what the Internet has done for them, and the things they hate the most about South African Internet Service Providers. (9 minutes)

Last week, Stop the Cap! considered the challenges America faced developing universal electric service — so much of that debate echos in today’s struggle to provide universal broadband service.

Although hindsight allows us to recognize the benefits universal electrification has brought Americans over the past 100 years, the transformational benefits from universal broadband are bit more mysterious because many applications haven’t even been envisioned yet.

IBM is a proponent of two revolutionary concepts universal broadband makes possible: The Internet of Things and The System of Systems.  The company produced a video to consider the implications of improved connectivity and how that will impact our daily lives:

IBM Social Media produced this video explaining The Internet of Things, one of the concepts made possible with universal broadband. (5 minutes)

Now imagine the implications if the platform which makes this all possible remains in the hands of a broadband duopoly intent on securing big profits earned from high pricing, limits on service, and other cost-controlling measures.  Transformational broadband — for the right price as long as you don’t use too much, brought to you by big cable and telephone companies.

Stop the Cap! reader Michael writes to alert us he found AT&T’s U-verse online Account Overview now includes a section called “Usage & Recent Activity” that includes a placeholder for a future usage meter.

“I canceled my U-verse TV and bumped my Internet speed up to 12Mbps last weekend, and I remember checking to see if my account updated sometime around the middle of last week.  The old website was still in use then.  Today was the first time I got redirected to the new site, which includes this new placeholder for a usage meter,” writes Michael.

Stop the Cap! reader Michael sent us a screen shot of his AT&T U-verse account, showing this placeholder for a future usage meter. (Click to view the full screen shot)

While customers like Michael are currently being told their “internet plan provides you with unlimited usage — there are no usage details to display,” the potential for usage meters can set the stage for future Internet Overcharging schemes down the road.

AT&T alienated many of its customers in Beaumont, Texas and Reno, Nevada when an extended usage cap trial was underway.  Complaints were filed against AT&T with the Better Business Bureau over dubious marketing practices that sold customers on unlimited broadband, only to dispatch letters to newly signed customers telling them it wasn’t unlimited… after signing up for service.

Stop the Cap! learned the Beaumont/Reno experiment was coming to a close this April.

Internet Overcharging schemes are vastly unpopular with consumers.  A 2008 study found an overwhelming majority of customers (81 percent) opposed to usage limits or usage-based billing, with 51 percent willing to take their business to another provider if implemented.

In Beaumont and Reno, customers threatened to cancel service when they learned of the experimental overcharging scheme being tested.  Some managed to get exempted from the trial.

Customers routinely reject the notion that a company already earning billions in broadband profits today needs to set the stage for even higher pricing and profits tomorrow.

AT&T has spent millions lobbying for the introduction of their U-verse system on favorable franchise terms with the promise it would deliver more competition and lower prices for millions of Americans.

For customers like Michael, usage meters are the first step towards breaking that promise.  When followed with formal usage limits or usage-based billing, higher broadband bills are a sure thing.

AT&T customers should contact AT&T and put them on notice — any effort to impose usage limits or usage-based billing will result in immediate cancellation of your AT&T account.

Stop the Cap! will continue to closely monitor AT&T and we’ll recommend further action should conditions warrant.

Update 3:00pm EDT 3/23 — AT&T tells Broadband Reports that whatever users are seeing, it’s some kind of website glitch, and that the company has no plans to implement a usage meter. “We did do some upgrades to our account management portal this weekend, but we haven’t been able to recreate this screen,” according to AT&T spokesman Seth Bloom.

While that’s good news for AT&T customers, we are unsure exactly how such a glitch could occur with such depth, including wording that specific Internet plans providing unlimited usage.  Further, specifying “U-verse Internet Usage” on the tab above it seems surprisingly specific for a “glitch.”

Barring any new evidence, we’ll take AT&T’s word for it, but readers should continue to report any further “glitches” they might encounter.  If possible, include the URL with any screen shots, which we’ll happily provide to the company in any effort to recreate the page.

Franklin D. Roosevelt, seen here during his years as New York's governor

Franklin Delano Roosevelt

Watching the debate raging through the 1920s was one Franklin Delano Roosevelt, who was elected governor of New York in 1928 on a reformist agenda.  Like many other states, New Yorkers had a problem with their electric companies.  They charged too much, didn’t provide sufficient capacity, and ignored rural areas.

Roosevelt started his political life following in the philosophical (and political) footsteps of his fifth cousin Theodore, the 26th president of the United States.  FDR believed in individualist progressive ideals — improving privately held utilities but steering clear of advocating public ownership.

Roosevelt’s immediate predecessor, Al Smith, spent the 1920s in Albany arguing with the Republican state legislature over who would develop New York’s hydro power resources, which could deliver substantially lower-priced electricity from Buffalo to Long Island.  The legislature wanted the state’s private power companies to develop the resource, with a public service commission reviewing and, where necessary, regulating rates.  Smith wanted the state to build the plants as public utilities, arguing endless lawsuits by private power companies had made rate regulation meaningless.

Early into his term as governor, Roosevelt picked up where Smith left off, advocating first for the construction of a hydroelectric dam on the St. Lawrence River in upstate New York.  The legislature promptly said no.  Roosevelt refused to let go and expanded his proposal to also include the possibility of municipally-owned local power companies, delivering needed power without a profit incentive.

In upstate and western New York, firmly Republican territory, local newspapers blasted Roosevelt’s proposal, occasionally calling him a socialist conniver, an enemy of free enterprise, and dragging big state government into the lives of ordinary citizens.

Electric companies across the state joined the chorus of upstate opposition, but also quietly made preparations to counter Roosevelt’s proposal, just in case it began to catch on.

Roosevelt’s initial efforts to argue his position did not make much headway upstate, because he had to rely on newspapers to deliver his message — the same newspapers that rebutted him at every turn.  Direct mailing letters to voters was expensive and took a long time to create and distribute.  Roosevelt instead turned to the new medium of radio, speaking to residents statewide about issues like electrification.  Radio directly reached listeners and bypassed the newspaper filter, and it allowed the governor to deliver a populist message in terms every consumer could understand — high rates.

Roosevelt lit a fire for reform when he compared what state residents were paying for electricity compared to those on the other side of Lake Ontario, in Canada.  Canada had provincial power, owned and operated by the government.

Roosevelt told listeners that in a “modernized house” (one served by higher voltage lines capable of supporting large electric appliances), residents of Ontario paid just $3.40 a month in electric bills.  But in Westchester County, the same service cost $25.63.  It was $19.95 in New York City and $13.50 in Rochester.

Double-crossing Roosevelt With the Help of ‘The House of Morgan’

The electric companies soon saw the results of those price comparisons as voters demanded better prices.  Republicans began shifting toward Roosevelt’s plan.  For the power companies, it was time for “Plan B.”  Quietly meeting with J.P. Morgan Bank in the summer of 1929, three major upstate New York power companies planned to merge into one giant company: Mohawk Hudson Power Corporation.

The modern day Mohawk Hudson Power Company was Niagara-Mohawk, which has since been purchased by National Grid.

Mohawk Hudson Power Corporation incorporated:

• Buffalo, Niagara & Eastern Power Corp.: Served 500 cities and towns including Buffalo.  Niagara Falls supplied most of its power;
• Northeastern Power Corp.: Served communities along Lake Ontario and the St. Lawrence;
• Mohawk Hudson Power Corp.: Served Albany, Schenectady, Utica, Syracuse, and many other communities.

With such a merger, Roosevelt’s original plan to let upstate power companies compete to offer the best possible rates for hydro power were dashed.  In fact, the power companies loved Roosevelt’s plan because as a combined entity, they’d profit handsomely from state taxpayers paying to construct hydro generating stations, saving them the trouble.  Then as a monopoly cartel, they’d set rates artificially high, pocketing the proceeds. J.P. Morgan Bank would also get paid handsomely for helping make it all possible.

To add insult to injury, just two months later, Mohawk Hudson acquired another state giant — Frontier Power Corporation, which in the words of Time magazine, “set Roosevelt agog.”

Governor Franklin D. Roosevelt of New York (Democrat) declared that the fact that 80% of New York State is now served by one hydro-electric corporation made it necessary for him once again to urge the Legislature (Republican) to create a body of public trustees to develop St. Lawrence water power for the people.

Roosevelt’s experience with the House of Morgan and the power utility trusts would be a lesson he would never forgive or forget.  In fact, it culminated in his broadened vision to consider power an integral part of economic redevelopment after the start of the Great Depression later that year.

Roosevelt’s New Deal

Americans only came to terms with the impact of the Great Depression in 1930, months after the stock market crashed.  What initially hurt Wall Street soon spread across the country in waves of bank failures, massive unemployment, a credit crunch, and rampant homelessness, poverty, and despair.  What was bad in the city could be much worse in rural America.

Services for rural Americans were few and far between, and electric power was absolutely not one of them.  The economic benefits of the boom years usually never made it to rural communities in the first place.  Banks did manage to turn an excellent business convincing rural farmers to mortgage their farms in return for ready cash to acquire farm equipment, pay transportation costs to bring crops to market, and obtain other necessities.  When the bust years arrived, more than a few farmers found themselves foreclosed and evicted from their own farms, seized by lenders to recoup their loans.

After witnessing thousands of farmers and other rural Americans displaced from their homes, Roosevelt embarked on wide-ranging reforms for rural America.  One of the most important was rural electrification, designed to guarantee electricity to any rural American that wanted it.  Through the New Deal, rural Americans would experience the benefits of modernization first-hand — bolstering farm production and development, increasing economic development, improving health and safety, and most importantly, make rural living economically self-sustainable.

After learning from his years as governor of New York, Roosevelt established some core principles for his rural-focused New Deal electrification program:

• Full electrical modernization of households defined the standard for quality of life, no matter where the households resided.
• Electrical modernization of farm productive processes, within the framework of planned production and marketing, would lower farm costs and return farms to prosperity.
• Electricity must be affordable to all households in quantities required for electrical modernization. Publicly owned and private utilities, lightened of their false capitalization by public regulation and the breakup of holding companies, would provide inexpensive electricity.
• Cheap electricity would make the redistribution of population and industry possible, because it could be transmitted long distances and sold at near cost to rural consumers.

President Roosevelt speaks to residents in Tupelo, Mississippi, the first city to benefit from the Tennessee Valley Authority

The mostly rural and poor Tennessee Valley region, covering 80,000 square miles in the southeastern United States, including almost all of Tennessee and parts of Mississippi, Kentucky, Alabama, Georgia, North Carolina, and Virginia was an obvious first choice for rural electrification.  Tupelo, Mississippi was the first community to sign onto Roosevelt’s ambitious Tennessee Valley Authority plan to bring cheap power to a deprived region.

The results of electrification at reasonable prices were… electric.  Widespread poverty wasn’t solved overnight, but evidence of social transformation was at hand.  Americans from coast to coast were modernizing their homes, bringing in new electric appliances which fueled pre-war manufacturing, retail sales, and helped bring down unemployment.  Many businesses were thrilled to participate in New Deal programs, which included stimulus spending to help Americans improve their homes.

The impact of New Deal programs for electricity development exist in every American home.  The refrigerator replaced an ice-block powered icebox.  Hand scrubbed laundry in a sink now agitated in a washing machine.  The radio was made commonplace where electricity to power it was available.  Mixers, blenders, toasters, and other small appliances made their entrance with the advent of widespread electric power.  But the impacts go even further.  Technology as Freedom, by Ronald Tobey, notes:

The New Deal in domestic electrical modernization worked an invisible revolution. The New Deal shifted the majority of American families to an asset strategy for economic security through state-enframed home ownership of electrically modern dwellings. Geographic mobility declined. Unrestrained domination of local politics by a locally resident real estate elite ended. Material accumulation based in the owner-occupied home created unprecedented material affluence. The dwellings modernized their occupants, as households rebuilt their social and labor relations around new technologies. Minority groups previously locked out of affluence gained the keys to their future. The New Deal created the 1950s.

Is ubiquitous broadband the electrification challenge of our age?  Naysayers claim fast broadband is only useful for downloading entertainment products, often illegally.  They suggest economic development doesn’t require fast broadband — any version of broadband is good enough.  Worse yet, government involvement in it is suspect, according to these critics.

But after weeks of witnessing countless communities compete for Google’s Think Big With a Gig broadband project, it’s clear the clamor for affordable, fast broadband service is far more important than the naysayers would suggest.

American Salt Company's salt pile in Hampton Corners, just south of Rochester, N.Y.

Faithful Stop the Cap! reader Lance dropped us a note this afternoon alerting us that Syracuse is the latest Time Warner Cable city getting the benefits of increased speed from Time Warner Cable’s DOCSIS 3 Wideband upgrade.

While those in the Salt City can now sign up for 50Mbps broadband service, Time Warner Cable tells residents of the Flower City to go pound salt — there are no upgrades for you!

Why?

Thank Frontier Communications anemic (read that barely-existent) competition against Time Warner Cable in Rochester.  While the rest of upstate New York is being wired for fiber-to-the-home service from Verizon, Frontier Communications is relying on decade-old DSL service… indefinitely.  For residents like myself, that topped out at a whopping 3.1Mbps. That fails the FCC’s newly-proposed minimum speed to even be considered “broadband.”

Buffalo has been Wideband ready since early this month, and New York City launched service last year.

The Rochester Democrat & Chronicle must have noticed nearby cities were getting speed increases, but Rochester was not, so they contacted Time Warner Cable to find out why:

While those DOCSIS 3.0 products — called Wideband and Road Runner Extreme — are being made available in Buffalo and Syracuse, the company “has just begun its national launch of this product across its entire footprint, but with no additional locations determined at this time,” said spokesman Jeff Unaitis.

The company, however, does plan to roll out a wireless broadband product for the Rochester market before the end of 2010, he said.

(*) - As long as you don't live in Rochester, N.Y.

That’s the nice way of saying Rochester isn’t getting the speed increases because there is no competitive reason to provide it.  With Rochester left off the upgrade list, and no real incentive to run to Frontier (which can’t beat Road Runner’s existing speeds), this community falls behind the rest of the state in broadband speed.

To think last April Time Warner Cable was promising dramatically upgraded service, if the community agreed to accept their Internet Overcharging usage-based billing scheme.  Apparently no other upstate city was required to commit to ripoff pricing, and speed upgrades came anyway.  The fact Rochester is bypassed this year proves our contention their pricing experiment came to Rochester only because they faced no real competitive threat from Frontier then, and they still do not today.

As for the wireless product coming to Rochester, that will come courtesy of rebranded Clearwire service, which has had very mixed reviews.  Time Warner Cable and Comcast are both major investors in Clearwire, and are using their service to provide a wireless add-on.  It won’t come cheap, however, if North Carolina’s pricing also applies here:

• Road Runner Mobile 4G National Elite gives unlimited access to both Time Warner Cable’s 4G Mobile Network and a national 3G network (Sprint, presumably), for use when traveling.
  o $79.95 per month for Road Runner Standard or Turbo customers.
• Road Runner Mobile 4G Elite gives customers unlimited access to the Time Warner Cable 4G Mobile Network.
  o $49.95 per month for Road Runner Standard or Turbo customers.
• Road Runner Mobile 4G Choice gives light users 2GB of service on the Time Warner Cable 4G network each month.
  o Available for $39.95 per month to customers of at least one other Time Warner Cable service.  Additional $5 off if you have a  bundled service package.

As for Wideband pricing, Syracuse residents should expect to pay:

• 30/5Mbps: $25 more than standard Road Runner service;
• 50/5Mbps: $99 per month, but ask about promotional pricing, which may be available.

In Syracuse, Road Runner speed now matches Verizon FiOS on the downstream side, although Verizon can deliver better upload speed at 20Mbps.  Formerly, Road Runner maxed out at 15Mbps in central New York.

About 30 percent of the central New York division of Time Warner Cable is now Wideband-ready, including the entire city of Syracuse.  By October, the company expects to have the faster service available in 70 percent of the central New York area.

William Randolph Hearst

The Progressive Movement of the 1900s-1920s

After the reform-driven progressive movement of the early 20th century was finished taking on the railroads, they turned their attention to so-called “utility services.”  These were telephone, energy, and water providers.

The progressive movement of the early 1900s split into at least two camps:

• Individualist Progressives — Most people in this camp belonged to Theodore Roosevelt’s Progressive Party, also known as the Bull Moose Party.  The Progressive party was made up mostly of disaffected centrists who left the Republican Party after Roosevelt failed to secure the 1912 Republican nomination for president.  A rift had developed between Roosevelt and then-president Taft over how much energy should be devoted to breaking up corrupt big business and corrupt politicians.  The Progressive Party believed the Republicans had developed an unholy alliance with big business, monopoly trusts, and corrupt politicians on the state and federal level.  These individualist progressives believed in a well-regulated capitalist system, and with respect to energy companies, they demanded honoring the services and pricing promised consumers.  Once those conditions were met, government should stay out of it.  These progressives opposed abusive trusts and monopolies and supported competition.  The Progressive Party had support in states like New York, Illinois, California, Michigan, and Pennsylvania — all states with a heavy manufacturing business base that suffered from monopoly abuses.
• Reformist Progressives — Reformist progressives believed essential services should be in the hands of public trusts or municipalities, operated as non-profit “utilities” answering to the communities they served.  They were major advocates for municipal utility projects, and believed it was immoral for important services to be left in the hands of for-profit businesses, much less trusts and monopolies.  Many reformist progressives rallied behind the newspaper magnate William Randolph Hearst, who loudly advocated radical reform in his newspapers.  Hearst even formed the Municipal Ownership League, a local party in New York City, whose primary goal was to force for-profit utilities out of the marketplace — turning services over to municipalities to run for “the public good.”  Reformist progressives often applied moral values to private enterprise, suggesting an improved capitalist model required companies to also consider the social good of operating in the public interest.

Where individualist progressives had control, rate regulation and oversight was the usual model when dealing with electric companies.  California and Wisconsin, fed up with the railroad abuses, saw many similarities in  electric monopolies.  In the end, they applied the same rate regulation philosophy used with the railways for all utility services.  Both states regulated rates charged based on their perception of fair pricing.  Beyond that, they tended to leave private providers alone.  New York’s governor Charles Evans Hughes was an individualist progressive who advocated regulatory crackdowns on monopolies who abused the terms and conditions under which they offered service.  Once they met that obligation, Hughes believed the free market would manage to sort out the rest.

That was all fine and well for communities already served by electric companies, but what about vast numbers of smaller communities bypassed for electric service?

Defenders of the free market, and the companies themselves argued that only through deregulation would providers get sufficient investment to expand their service areas into previously unserved communities.  Apply rate regulation and other government interference and investors will look elsewhere.

Reformist progressives disputed this assertion, believing hunger for quick profit was responsible for the disinterest in serving rural communities, where construction costs were higher and rapid return on investment was unlikely.  Besides, they argued, since most of these companies provided monopoly service, it wasn’t as if they faced imminent price-cutting competition.

Reformers advocated bypassed communities should form their own municipally-run electric companies or cooperatives, managed by local government and answerable to local ratepayers.  This solution was attractive to many communities, especially the growing number of planned new communities that came during the boom years of the 1920s.

As municipal power attracted attention, some in the private power sector balked.  Not only were these companies delivering good service to customers, they were often doing it at far lower prices.  Many large utility companies and their allies made municipal power a political issue, attacking the concept as anti-American.  Their argument: Public money should never be spent to construct services traditionally provided by private companies, even when those companies had yet to wire those communities for service.

Charles Evans Hughes

As political lobbying for bans on municipal power projects grew more intense, newspaper magnate William Randolph Hearst declared all-out war on the electric monopolies.  Hearst advocated that electricity be a delivered only through not-for-profit municipally-run utility companies.

Hearst even went as far to seek the governor of New York’s office several times in the early 1900s, to implement his progressive reforms.  Hearst’s platform included advocacy of public power delivered for the social good. That meant companies would extend service to outlying areas as soon as practical instead of when it was grossly profitable.  Power companies would charge a fair price for good service.  Companies would also advocate for customer safety and work with government to define safety regulations instead of reflexively opposing them at every turn.

In one of several runs for office, his opponent was the aforementioned then-current governor Charles Evans Hughes, who promptly went on the attack.

Hughes had one word for Hearst’s reform views: Socialism

Governor Hughes told the Republican Club of New York in 1908, “Our government is based upon the principles of individualism and not upon those of socialism…. It was founded to attain the aims of liberty, of liberty under law, but wherein each individual for the development and the exercise of his individual powers might have the freest [sic ] opportunity consistent with the equal rights of others.”

Hearst lost the governor’s race each time he ran, and was outmaneuvered by the private industries he sought to reform.  In fact, the industry managed to outwit regulatory advocates at every turn.

For example, since states were permitted only to regulate commerce within its borders, giant national electricity holding companies, also known as “trusts,” typically escaped such regulation by opening headquarters out of state, which allowed them to ignore local and state regulations.  In Riverside, California, Southern Sierras Power Company was able to ignore California state regulations because its head offices were in Denver, Colorado.  That kept pesky state officials out of Sierras’ books to verify whether the rates it charged were fair.

When regulators sought to construct a formula for fair regulated pricing, creative bookkeeping and debt structuring made even confiscatory rates permissible.  Companies learned to use business regulations against the regulators.  For instance, when a regulator believed rates could be lowered, power companies increased their debt obligations, at least on paper.  They paid outrageous administrative fees to the holding companies they themselves often quietly controlled.  Or they used creative accounting tricks to make it appear free cash was obligated to satisfy investors who held company debt and had to be repaid under government rules within a limited time frame.  Companies were able to “prove” to regulators their current rates were fair, and there was no leeway to reduce them.

Only after municipal power companies began providing service at dramatically lower, and sustainable prices did suspicion reach a fever pitch that regulators were being played.

Tomorrow: A “New Deal” for Americans

Richardson County, Nebraska

Richardson County, Nebraska is classic rural Americana.  Fixed at the very southeastern tip of Nebraska, the county’s gently rolling countryside offers a break from the relentless flat prairies in nearby Kansas. Agriculture, cattle and hog farming are important to the local economy.  Large farms grow corn, alfalfa, and wheat, but the area’s 170 growing days also support a significant apple crop as well. Towns within the county range from the tiny Barada, population 28 up to the county seat — Falls City, population 4,671.

With a climate than can deliver temperatures well under zero in the winter and into the triple digits in the summer, tourism isn’t this part of Nebraska’s strength.  But its location, culture, and cost of living are for those who live there.

Originally founded in 1857, Falls City served as a major transit point for escaping slaves caught up in the Kansas-Nebraska Act controversy, one of the many disputes that eventually led to the Civil War.  Like most small towns of the time, growth came with the arrival of the railroads.  First, the Atchison & Nebraska Railroad in 1871 and then the Missouri Pacific in 1882.

The population peaked in 1950 at 6,200, but the town has held its own thanks to the self-sufficiency of its residents and local government.

Falls City is a unique community among thousands of small communities across the heartland and beyond.

The local economic development team promote Falls City’s possibilities as a strategic transit and shipping center.  Regionally, Richardson County is just an hour or two away from Kansas City, Missouri, Topeka, Kansas, and Omaha and Lincoln, Nebraska.  Centrally located, the area offers two day shipping possibilities to most points of the country.

The municipal government owns and operates the local water, gas, electric and waste treatment facilities, which charge rates lower than other communities in Nebraska.  Time Warner Cable’s Nebraska division offers service in most parts of town, and the local, family-owned Southeast Nebraska Communications (SNC) started providing phone service in Falls City, Rulo, Stella, Shubert, Verdon and Salem, as early as 1906.

SNC, which was founded by Edwin H. Towle, began with an attitude of innovation — providing the best, most modern service possible for southeastern Nebraska.  Simply providing “good enough for rural residents” service typical among larger providers was never a part of the company’s philosophy.  The company grew through its innovation, and today leverages all it can out of its copper cable network.  The spirit of innovation that began with Edwin continues today at SNC through family member Dorothy J. Towle, who serves as president of the company.

Towle and other company officials recognize the days of copper wire phone networks remaining relevant in today’s telecommunications marketplace are seriously numbered.

SNC made a decision remarkable for a phone company of its size — it was going to rewire Falls City for fiber optics, straight to the home, at no additional charge to residents and area businesses.

Last July, it stunned the community with the news southeastern Nebraska would have access at speeds cities ten times larger could only dream about.

SNC is investing between $8-10 million in the project, which will reach most city residents by its completion in 2011.  The company is constructing the network with capital improvement funds they’ve conservatively saved year after year, and believes it’s a great investment because of future revenue possibilities fiber optics can bring.  This isn’t a company that worries about pumping up stock prices, boosting dividend payouts, or lavishing executives with enormous pay and benefit packages.  SNC employees live and work in the community and want to enjoy the fruits of their labor.

Operations Manager Ray Joy told the Journal Star the new system will be capable of offering 1,000Mbps to a house.  Right now, SNC offers DSL service at 3-7Mbps.

The company is still working out precisely what speeds it will offer residential and business customers, but they will be far better than what is possible from aging copper wiring.  Best of all, it’s future proof, which SNC believes will save them plenty in the long run.  Upgrading fiber networks just takes a different type of laser — no rewiring required.

SNC first considered wireless technology to serve the community, but rejected it because of insufficient bandwidth capacity.  Fiber’s expandability the choice much easier for the company.

Of the 460 cities and villages in Nebraska, only 11 currently have fiber to the home, and Falls City will be the largest in the state.

Falls City Economic Development and Growth Enterprise, the local economic development team, hopes to promote Falls City’s fiber as perfect for new digital economy businesses, creating new high-paying jobs for area residents.

Current entrepreneurs who live in Falls City are already convinced.

SNC's Management and Employees

Karissa Watson, owner of Kissa’s Kreations, a Web and graphic design service, told the newspaper she is looking forward to the conversion.

“From what I understand, it will be 20 times faster, but I also think the quality will be better because it’s a dedicated versus a shared service,” she said.

Watson wants faster service in order to increase her efficiency.  Slower broadband speeds can cause long waits for businesses moving data back and forth.

Watson and other Falls City residents are being kept informed about the progress of the project in quarterly newsletters sent by the company.  A contracting firm, RVW, Inc. of Columbus, Nebraska is doing the work.  Their technicians are personally visiting every home and business owner before digging begins in a neighborhood, and remain available to address any concerns residents have after work is complete.

SNC markets themselves as locally owned and operated, which is why personal contact with customers is critically important to the company’s success.  Newsletters allude to their nearest competitor, Time Warner Cable, as not exactly being local.  SNC touts their local customer care office, staffed by area residents, local call centers that are answered by “real people,” and a service staff that can often respond to service outages on the same day.

“Unlike some companies, we don’t play games with low teaser rates that go up later,” sums up the company’s marketing attitude.

SNC’s fiber upgrade also could eventually protect them from Time Warner Cable’s relentless drive towards product bundling, which can cost the telephone company landline business.  The cable company can also beat SNC’s broadband speeds on the copper wire network.  With an upgrade, SNC could eventually offer customers a cable-TV alternative, taking the competition back to the nation’s second largest cable operator.

Although 75 percent of the six million Americans served by fiber-to-the-home projects are Verizon FiOS customers, there is considerable growth in fiber deployment among small mom and pop and municipally-owned phone companies.  That’s remarkable because they lack the economy of scale and financial resources larger telephone companies enjoy.  But those small phone companies aren’t caught up in debt, endless mergers and acquisitions, stock price games, and ludicrous compensation for a handful of executives.  For customers of Qwest, Frontier, Windstream, and CenturyLink, fiber remains an elusive dream.

The Journal Star covered several other phone companies with fiber projects in Nebraska:

Cambridge, in southwest Nebraska, also has FTTH technology to serve a population of just more than 1,000.

“We’re very excited,” said Cambridge Economic Development Director Adela Taylor, who called it the “infrastructure of the future.”

She said the fiber optic system was the initiative of the local telephone company, which has been very pro-active over the years in bringing the newest technology to the town. She noted that Cambridge was one of the first towns to have Internet service back in 1993, as a pilot project.

Three River Telco in Lynch is in the midst of a three-year project to install FTTH technology. The company serves about 1, 250 customers in Lynch, Verdel, Springview, Johnstown and Naper in north-central Nebraska.

General Manager Neil Classen said Three River received a $19 million federal loan from the Rural Utilities Service to replace its copper wire system with fiber optics. The company wanted to provide the latest services to customers, including transmitting television signals via Internet protocols.

Classen said the fiber optic system will provide customers with a more reliable communications system and a lot more bandwidth than the existing copper wire network. He said the price tag could be less because fiber optic technology has improved and become more cost-effective.

Fiber dreams are Gone With the Windstream

Windstream serves several Nebraska communities, and for those customers, the news is less exciting.  Windstream has limited itself to installing small amounts of fiber in new subdivisions.

Brad Hedrick, Windstream vice president of operations for Nebraska and Missouri, said installing fiber optics is an extremely expensive proposition and Windstream has no plans to connect every home and business as Falls City is doing.

But he told the newspaper if the federal government wants to kick in federal funds to help small communities convert, Windstream will consider it.

Windstream cannot deliver fiber to the home to their customers, despite $2.997 billion in revenues for 2009.  But a family-owned phone company in Falls City, a telephone company in Cambridge serving 1,000 residents, and Three River Telco in Lynch all can.

For those around in the 1980s, Verizon Wireless’ latest 3G ad slam against AT&T should have brought back some memories.

Someone at Verizon probably spent some time reviewing advertising collections of the 1970s and 1980s and ran across Big Red, the cinnamon-flavored gum with the long-lasting flavor.  First appearing back in 1976, the gum really took off in the early 1980s when the William Wrigley Jr. Company commissioned a catchy jingle for its advertising campaigns.  It stuck, and most still remember it to this day.

Verizon, which bathes its corporate image in red, made the connection, and managed to recreate most of the imagery of several Big Red commercials, mostly from the early 1980s, albeit with updated lyrics.  They certainly got the classic corporate 1980s Reagan-era jingle sound down pat.

For those too young to remember Big Red gum, I’ve brought one of the original advertisements together with Verizon’s reproduction so you can appreciate the scope of their recreation.  Verizon actually borrowed from several Big Red ads, but you’ll get the point.  Too bad it’s the gum priced at 25 cents and not the 3G.  With the gum, you could have any many sticks as you wanted — no chewing limits either. (1 minute)

Strauss

This week Federal Communications Commission chairman Julius Genachowski appointed Karen Peltz Strauss Consumer and Governmental Affairs Bureau Deputy Chief.

Strauss is supposed to focus on disability issues, among other things, and will help the Commission to implement the components of the National Broadband Plan that address access for people with disabilities, including leading the effort to develop a proposed Accessibility and Innovation Forum.

“The FCC has a vital role to play in empowering and protecting all consumers and ensuring they have access to world-class communications networks and technologies” said Chairman Genachowski. “I look forward to drawing on Karen’s extensive experience with telecommunications access issues to realize those goals.”

A news release from the FCC includes a brief review of her 25 years’ experience working on telecommunications access for people with disabilities.

But the agency forgot to mention Strauss also serves on the board of directors of an industry front group — the Alliance for Public Technology.  APT claims it represents the best interests of consumers, but considering who is writing the checks, that’s highly doubtful.

APT’s website suggests the group “makes policy decisions based on the potential benefit to consumers. The Board members themselves as well as APT’s member organizations serve the education, health care, social service and economic development needs of senior citizens, people with disabilities, minorities, children, low income families, rural communities, and all consumers.”

That’s true, if you, as a consumer, are for big telecom mergers like AT&T and BellSouth, which APT supported, oppose Net Neutrality, which APT feels should not be imposed on providers, liked the idea of Cingular being absorbed into AT&T’s empire of wireless, which APT also supported, and so on.

In fact, this group even praised Verizon’s willingness to invest in West Virginia:

Verizon has demonstrated a commitment to increased investment in advanced telecommunications capabilities. According to the company, Verizon invested almost $560 million in its Maryland network and $150 million in West Virginia in 2001 (2002 figures not available). Verizon added more than 31,000 miles of fiber optic cable in Maryland and 20,500 miles of fiber optic cable in West Virginia. Over 2.5 million access lines in Maryland now have access to DSL. Authorization to provide in-region long distance service in Virginia will facilitate Verizon’s capacity to build on economies of scale and scope in order to provide a high standard of service and accelerated deployment of advanced technologies to the consumers of Maryland, Washington, D.C., and West Virginia.

The only thing Verizon wants to accelerate in West Virginia is their exit.

Laughably, one of the reasons APT supports AT&T so much (besides the big checks the company writes to fund their operation) is:

With BellSouth’s entry into the Florida and Tennessee long-distance markets, AT&T began to offer 30 minutes of free long distances to its customers and inserted “thank you” messages into the time between a customer dials a number and the connection occurs. These actions demonstrate tangible benefits for consumers because of an increased number of competitors in the long distance market.

I know that makes me feel warm all over.  Who should I call first?

Wading through APT’s public policy positions unearths absolutely no surprises.  They exist to advocate for the interests of the companies that fund their operations, and that includes all the bully boys:

• AT&T
• CTIA
• Embarq
• Qwest
• United States Telecom Association
• Verizon

Despite this, APT writes with a straight face, “These companies give donations based on a shared vision for the ubiquitous deployment of high-speed telecommunications technology, but have no say in the governance of the association.”

Sure they don’t.  But then again, those checks would stop coming if APT began actually representing the consumers they claim to care so much about.

It’s disappointing the FCC would want someone so closely aligned with the interests of large telecommunications companies working to implement a National Broadband Plan that is supposed to represent the public interest.

It’s just another example of the Inside the Beltway Tickle Party, where lobbyists and “dollar a holler” experts flow between government jobs, privately-funded think tanks, and the private sector.  Consumers are only too aware that their best interests are not represented by employees whose loyalties change depending on what hat they wear to the office.