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Spring 2016: An Update and Progress Report for Our Members

stcDear Members,

We have had a very busy winter and spring here at Stop the Cap! and we thought it important to update you on our efforts.

You may have noticed a drop in new content online over the last few months, and we’ve had some inquiries about it. The primary reason for this is the additional time and energy being spent to directly connect with legislators and regulators about the issues we are concerned about. Someone recently asked me why we spend a lot of time and energy writing exposés to an audience that almost certainly already agrees with us. If supporters were the only readers here, they would have a point. Stop the Cap! is followed regularly by legislators, regulators, public policy lobbyists, consumer groups, telecom executives, and members of the media. Our content is regularly cited in books, articles, regulatory filings, and in media reports. That is why we spend a lot of time and energy documenting our positions about data caps, usage billing, Net Neutrality, and the state of broadband in the United States and Canada.

A lengthy piece appearing here can easily take more than eight hours (sometimes longer) to put together from research to final publication. We feel it is critical to make sure this information gets into the hands of those that can help make a difference, whether they visit us on the web or not. So we have made an extra effort to inform, educate, and persuade decision-makers and reporters towards our point of view, helping to counter the well-funded propaganda campaigns of Big Telecom companies that regularly distort the issues and defend the indefensible.

Four issues have gotten most of our attention over the last six months:

  1. The Charter/Time Warner Cable/Bright House merger;
  2. Data cap traps and trials (especially those from Comcast, Blue Ridge, Cox, and Suddenlink);
  3. Cablevision/Altice merger;
  4. Frontier’s acquisition of Verizon landlines and that phone company’s upgrade plans for existing customers.

We’ve been successful raising important issues about the scarcity of benefits from telecom company mergers. In short, there are none of significance, unless you happen to be a Wall Street banker, a shareholder, or a company executive. The last thing an already-concentrated marketplace needs is more telecom mergers. We’re also continuing to expose just how nonsensical data caps and usage-based billing is for 21st century broadband providers. Despite claims of “fairness,” data caps are nothing more than cable-TV protectionism and the further exploitation of a broadband duopoly that makes it easy for Wall Street analysts to argue “there is room for broadband rate hikes” in North America. Stop the Cap! will continue to coordinate with other consumer groups to fight this issue, and we’ve successfully convinced at least some at the FCC that the excuses offered for data caps don’t hold water.

Dampier

Dampier

FCC chairman Tom Wheeler’s broadening of Charter’s voluntary three-year moratorium on data caps to a compulsory term as long as seven years sent a clear message to broadband providers that the jig is up — data caps are a direct threat to the emerging online video marketplace that might finally deliver serious competition to the current bloated and overpriced cable television package.

Wheeler’s actions were directly responsible for Comcast’s sudden generosity in more than tripling the usage allowance it has imposed on several markets across the south and midwest. But we won’t be happy until those compulsory data caps are gone for good.

More than 10,000 Comcast customers have already told the FCC in customer complaints that Comcast’s data caps are egregious and unfair. Considering how unresponsive Comcast has been towards its own customers that despise data caps of any kind, Comcast obviously doesn’t care what their customers think. But they care very much about what the FCC thinks about regulatory issues like data caps and set-top box monopolies. How do we know this? Because Comcast’s chief financial officer this week told the audience attending the JPMorgan Technology, Media and Telecom Broker Conference Comcast always pays attention to regulator headwinds.

“I think it’s our job to make sure we pivot and react accordingly and make sure the company thrives whatever the outcome is on some of the regulatory proposals that are out there,” said Comcast’s Mike Cavanagh. We suspect if Chairman Wheeler goes just one step further and calls on ISPs to permanently ditch data caps and usage billing, many would. We will continue to press him to do exactly that.

Stop the Cap! supports municipal and community-owned broadband providers.

Stop the Cap! supports municipal and community-owned broadband providers.

Other companies are also still making bad decisions for their customers. Besides Comcast’s ongoing abusive data cap experiment, Cox’s ongoing data cap trial in Cleveland, Ohio is completely unacceptable and has no justification. The usage allowances provided are also unacceptably stingy. Suddenlink, now owned by Altice, should not even attempt to alienate their customers, particularly as the cable conglomerate seeks new acquisition opportunities in the United States in the future. We find it telling that Altice feels justified retaining usage caps on customers in smaller communities served by Suddenlink while denying they would even think of doing the same in Cablevision territory in suburban New York City. Both Suddenlink and Cablevision have upgraded their networks to deliver faster speed service. What is Altice’s excuse about why it treats its urban and rural customers so differently? It frankly doesn’t have one. We’ll be working to convince Altice it is time for Suddenlink’s data caps to be retired for good.

We will also be turning more attention back on the issue of community broadband, which continues to be the only competitive alternative to the phone and cable companies most Americans will likely ever see. The dollar-a-holler lobbyists are still writing editorials and articles claiming “government-owned networks” are risky and/or a failure, without bothering to disclose the authors have a direct financial relationship to the phone and cable companies that don’t want the competition. We will be pressing state lawmakers to ditch municipal broadband bans and not to enact any new ones.

We will also continue to watch AT&T and Verizon — two large phone companies that continue to seek opportunities to neglect or ditch their wired services either by decommissioning rural landlines or selling parts of their service areas to companies like Frontier. AT&T specializes in bait-n-switch bills in state legislatures that promise “upgrades” in return for further deregulation and permission to switch off rural service in favor of wireless alternatives. That’s great for AT&T, but a potential life-threatening disaster for rural America.

We continue to abide by our mandate: fighting data caps and consumption billing and promoting better broadband, regardless of what company or community supplies it.

As always, thank you so much for your financial support (the donate button that sustains us entirely is to your right) and for your engagement in the fight against unfair broadband pricing and policies. Broadband is not just a nice thing to have. It is an essential utility just as important as clean water, electricity, natural gas, and telephone service.

Phillip M. Dampier
Founder & President, Stop the Cap!

Cincinnati Bell Plans to Shutdown Telegraph Grade Service, On Offer Since the 1800s

telegraph key

Telegraph key

If you thought your Internet service was slow, consider being a customer of Cincinnati Bell’s 75 baud Telegraph Grade service, on offer to subscribers since the 1800s for low-speed stock quotes, telegrams, and office-to-home communications. But don’t consider it too long, because the service is about to be discontinued.

The first telegram in the United States was sent on Jan. 11, 1838 using the newly developed “Morse Code” system introduced by Samuel Morse. The message was sent unceremoniously across two miles of wire strung across the sprawling Speedwell Ironworks outside of Morristown, N.J. But the experiment didn’t attract much attention until it was repeated in 1844 in Washington, D.C., where members of Congress looked on as the message, “What hath God wrought” successfully traveled from Washington to Baltimore, Md. A decade later, telegraph lines were strung to every major city on the east coast. By 1861, telegraph cables stretched across the territories west of the Mississippi and reached the West Coast, putting the Pony Express out of business.

It would be a decade after that before The City and Suburban Telegraph Company, later Cincinnati Bell Telephone, was officially incorporated on July 5, 1873, becoming the first company in the city to offer direct communication between the city’s homes and businesses. Only the wealthiest families could afford a private telegraph line, which cost $300 a year provided you lived no more than a mile from the company’s office. After four years, the company only managed to attract 50 paying customers, mostly business tycoons who relied on the telegraph to stay in contact with the office while at home. Other businesses used telegraphs to connect their different offices. Most employed young men to serve as telegraph operators, translating short written messages into a series of dots and dashes and back again.

Telegraph stamps, used to prove payment for sending and receiving messages.

Telegraph stamps, used to prove pre-payment for telegraph messages.

Business was better further east. The story of two men that would change the course of the telegraph and launch a company that remains a household name to this day started in 1838 when banker and real estate entrepreneur Hiram Sibley moved to Rochester, N.Y. He saw plenty of opportunities in upstate New York and quickly settled in, later becoming elected Monroe County Sheriff. That position soon led to his introduction to Judge Samuel L. Selden, who had the patent rights to the House Telegraph system. Seeing an opportunity, the two embarked on their own telegraph business — the New York State Printing Telegraph Company. It did not take long for them to realize competing against the larger New York, Albany, and Buffalo Telegraph Co., was a financial disaster. The two decided it would be smarter to consolidate existing providers instead of building new networks to compete. The first craze of telecommunications company consolidation was underway. With the assistance of deep pocketed investors in Rochester, Sibley and Selden founded the New York and Mississippi Valley Printing Telegraph Company. The new entity would string some of its own telegraph lines westwards, but more importantly it would focus on acquiring its rivals, especially in areas where fierce competition kept profits low and expectations of monopoly wealth even lower.

sibley

Sibley

By 1854, Sibley and Selden were confronted with competitors using two different messaging systems among 13 different companies. Sibley’s solution? Buy them out and unify them with the Morse system, available thanks to a separate acquisition of the Erie & Michigan Telegraph Company. In 1856, the company that had its beginnings in Rochester was renamed the “Western Union Telegraph Company,” which referred to the union of the different telegraph systems of the “western states” of that era (today considered the midwest).

Between 1857 and 1861 merger mania hit almost all the telegraph companies, and by the end of this period, most formerly independent companies were owned by one of six conglomerates:

  • American Telegraph Company (covering the Atlantic and some Gulf states),
  • Western Union Telegraph Company (covering states North of the Ohio River and parts of Iowa, Kansas, Missouri, and Minnesota),
  • New York Albany and Buffalo Electro-Magnetic Telegraph Company (covering New York State),
  • Atlantic and Ohio Telegraph Company (covering Pennsylvania),
  • Illinois & Mississippi Telegraph Company (covering sections of Missouri, Iowa, and Illinois),
  • New Orleans & Ohio Telegraph Company (covering the southern Mississippi Valley and the Southwest).

Much like the cable industry today, these six giants maintained a mutually friendly alliance and never competed for territory. Any remaining independents quickly learned cooperation with these larger systems was essential. But once competition stalled in the telegraph business, so did interest in investing in challenging upgrades.

western unionBy 1860, as the United States continued its expansion westward and tension grew between the northern and southern states over issues like slavery and self-determination, the administration of President James Buchanan realized having a reliable national telegraph network was critical to the security of the country. Unfortunately for the president, his priorities ran headlong into private company intransigence. Persuading the for-profit companies to expand their networks to connect the west coast seemed impossible. None wanted to risk investor dollars on a telegraph line they believed would be too expensive and difficult to maintain.

That same year Congress passed, and President James Buchanan signed, the Pacific Telegraph Act, which authorized the Secretary of the Treasury to seek bids for constructing a transcontinental telegraph line, financed by the federal government. Two of the three bidders eventually dropped out, leaving Hiram Sibley’s Western Union the sole bidder.

The Pacific Telegraph Act of 1860 resulted in the construction on this telegraph line extending from Nebraska to Nevada.

The Pacific Telegraph Act of 1860 resulted in the construction of this telegraph line extending from Nebraska to Carson City, Nev.

To insulate his other business interests from the project, Sibley organized the Pacific Telegraph Company to be responsible for construction of the new telegraph line to the west, starting in Omaha, Neb. Sibley also consolidated several small local companies into the California State Telegraph Company, which in turn launched the Overland Telegraph Company, managing construction of the cable eastward from Carson City, Nev., to Salt Lake City. The line was finally completed in October, 1861, seven months after the outbreak of the Civil War.

While newly elected president Abraham Lincoln was distracted settling into office starting March 4, 1861, Sibley was quietly preparing to consolidate control over the new taxpayer-funded cross-country cable. After the project was complete, Pacific Telegraph and California State Telegraph were quickly merged into Western Union, making Hiram Sibley the undisputed king of the telegraph industry. Any future ventures rising to challenge Western Union were instead eaten up by acquisition. By 1866, Western Union announced it was moving its company headquarters from Rochester to 145 Broadway in New York City.

Sibley retired from Western Union in 1869, and went into the seed and nursery business in Rochester and Chicago. He left the company during its most powerful era, having a virtual monopoly on the telegraph business at least a decade before the telephone would arrive on the scene. He retired the richest man in Rochester, and his home in the East Avenue Historical District still stands today. He gave generously to charity after retirement and helped incorporate a new college in the Southern Tier of New York called Cornell University.

The Hiram Sibley House, constructed in 1869, still stands today at 400 East Ave, Rochester, N.Y.

The Hiram Sibley House, constructed in 1868, still stands today at 400 East Avenue, Rochester, N.Y.

As the 1870s arrived, the Civil War was five years finished and huge changes were coming. Although telegraph service was already in place in many eastern seaboard cities, it took longer to arrive in smaller cities in the midwest and southern United States, and it was not too long after that before the telephone followed.

In Cincinnati, the telegraph service that began in 1873 was threatened by the arrival of the telephone in 1878 — just five years later. That fall, Cincinnati’s telegraph company signed an agreement with Bell Telephone Company of Boston, the first telephone company in the country. Bell held several patents essential for manufacturing telephones and granted the telegraph company an exclusive contract to sell phone service within a 25-mile radius of the city.

Bell Telephone arrived in the era of the Robber Barons, where trusts and monopolies were the product of unfettered capitalism. Bell’s business planners were more than happy following the telegraph industry to the glory days of consolidation and monopolization.

By 1879, the Bell Telephonic Exchange was well on its way, up and running on the corner of Fourth and Walnut streets in downtown Cincinnati — the 10th phone exchange in the nation and the first in Ohio. That year, Cincinnati’s first phone book was printed and the young men that operated the telegraph lines were not welcome manning the huge expanse of manual cord boards built inside the central office.

City and Suburban believed women served as better ambassadors for the newly emerging telephone company and the concept of “Hello Girls” was born. Only later would the Bell System insist on referring to these professional employees as “operators.” In Cincinnati, around two dozen women manned the cord boards in the exchange office during its first year. They were required to memorize the names of all callers and had to quickly learn how to complete calls — a process that involved connecting a patch cable between the caller and the person called on a giant board with a plug for every subscriber. They managed nearly 150,000 completed calls during the first year for over 1,000 customers.

1930s: View of half of the world's longest switchboard at the City and Suburban Telegraph Company (later Cincinnati Bell Telephone). The board held 88 positions and handled a record of 9,722 outgoing calls in 1937. Cincinnati, Ohio. 01/01/1935 Photo by Cincinnati Historical Society/Getty Images

Jan. 1, 1935: View of half of the world’s longest switchboard at the City and Suburban Telegraph Company (later Cincinnati Bell Telephone). The board held 88 positions and handled a record of 9,722 outgoing calls in 1937. (Photo by Cincinnati Historical Society/Getty Images)

The simplicity and directness of the telephone quickly proved a major challenge for the telegraph industry. Western Union saw opportunities investing in telegraph networks overseas to stay ahead of this trend. It also launched a stock ticker service and a money transfer service, allowing people to send money across the country in a matter of hours. Despite the innovation, by 1875, financier Jay Gould had finally managed to assemble a formidable competitor to Western Union — the Atlantic and Pacific Telegraph Company. An overabundance of Western Union stock on the market by 1881 made it possible for Gould to finally launch a successful takeover.

A Telex machine in use during the 1970s.

A Telex machine in use during the 1970s.

Telegraph lines remained in use well into the 20th century, used primarily for business communications, cables, and telegrams which were printed and delivered by messenger. Cincinnati Bell sold telegraph grade data lines for a variety of business applications, including slow speed data services. Even after the Morse code telegraph of the 1800s was long gone, other data services existed well before the arrival of the fax machine and the home computer. Telex messages were exchanged over a network of “teleprinters” which resembled an oversized manual typewriter. AT&T’s Teletypewriter eXchange (TWX) network was common in large businesses during the late 1960s into the 1970s. One of Cincinnati Bell’s other large customers for slow speed data lines was the military.

Cincinnati Bell customers signed up for telegraph grade service received an unconditioned telephone line capable of transmitting at 0-75 baud or 0-150 baud in half-duplex or duplex operation. That was half the data speed of computer modems common in the mid 1980s supporting up to 300 baud — which transmits text at a speed most can read and follow along in real-time.

Remarkably, Cincinnati Bell still needs the permission of regulators to drop the Civil War era telegraph service and in discontinuance requests sent to state and federal authorities, it reminded regulators the change will have no impact on the “public convenience and necessity” because there has been no demand for the service for a long time.

In fact, Cincinnati Bell has no customers to notify of the impending doom of telegraph grade service, because there have been no customers subscribed to it.

cincinnati bellCincinnati Bell’s request would have gone unnoticed if it wasn’t for the long legacy of the telegraph era. Western Union dispatched its last telegram on Jan. 27, 2006, after 155 years of continuous service, and largely kept quiet about it, only notifying current customers: “Effective 2006-01-27, Western Union will discontinue all Telegram and Commercial Messaging services. We regret any inconvenience this may cause you, and we thank you for your loyal patronage. If you have any questions or concerns, please contact a customer service representative.”

Those nostalgic for telegrams might be interested to know another company has risen where Western Union left off. iTelegram promises to bring back the experience of a messenger at your front door, but it’s a costly trip down Memory Lane. A Priority Telegram costs $28.95 + $0.75 per word and is delivered usually within 24 hours, and includes proof of delivery. A “MailGram,” dispatched through the U.S. Mail is a slightly less expensive option, costing $18.95 and includes up to 100 words. It arrives in 3-5 days. Or you could send an e-mail for approximately nothing.

While Cincinnati Bell’s request recalls a distant past, Verizon and AT&T are also asking to discontinue services that customers were still using in the 1990s. Verizon wants to drop postpaid calling cards and personal 800 services that customers used to buy from MCI, now a Verizon subsidiary. For its part, AT&T wants to drop operator-assisted services due to almost no customer demand. In many areas, dialing “0” no longer even works to reach one of those Hello Girls… pardon me, I meant operators.

The Peaceful War Against Comcast’s Data Caps: Don’t Like ‘Em? Get Off Your Butt

Licensed to print money

Licensed to print money

In 2008, Stop the Cap! was launched because the telephone company that serves our hometown of Rochester, N.Y., decided on a whim that it was appropriate to introduce a usage allowance of 5GB per month for their DSL customers. Frontier Communications CEO-at-the-time Maggie Wilderotter defended the idea with the usual claim that the included allowance was more than enough for the majority of Frontier customers. DSL customers already have to endure a lot of issues with Internet service and data caps should certainly not be one of them.

Stop the Cap! drew media attention and focus on the issue of data capping, organized customers for a coordinated pushback, and sufficiently hassled Frontier enough to get them to make the right decision for their customers by quietly rescinding the “allowances.”

As it would turn out, Frontier’s correct decision to suspend usage caps would prove an asset to them less than one year later when Time Warner Cable made it known it would trial its own usage caps in Austin and San Antonio, Tex., Greensboro, N.C., and yes… Rochester, N.Y. starting in the summer of 2009.

Time Warner Cable was slightly more generous with its arbitrary allowance — 40GB of usage for $55 a month. Customers already paying a lot for Internet access would now also have an arbitrary usage allowance and overlimit penalty fees with no service improvements in sight. Frontier’s decision the year before to rescind data caps played to their advantage and the company quickly launched advertising in Rochester attacking Time Warner Cable for its data caps, inviting customers to switch to cap-free Internet with Frontier.

Data caps are here!

Data caps are here!

Time Warner Cable’s experiment lasted less than two weeks and was permanently shelved, never to return. Four years later, Comcast began its own usage cap trial that not only continues to this day, but has expanded to cover more than 1,000 zip codes. Capped service areas typically live with a 300GB usage allowance with an overlimit fee of $10 per 50GB.

Yesterday at the investor-oriented UBS Global Media and Communications Brokers Conference, Comcast chief financial officer Mike Cavanagh assured Wall Street and shareholders Comcast’s desire to boost revenue from monetizing broadband usage remained an “important contributor” to the company’ goal of “demonstrat[ing] value and derive value from that pricing.”

Cavanagh said the company is using the line ‘heavy users should pay more’ to justify its caps.

“It’s been an experiment that we are using that the key data point behind it is kind of intuitive – ‘10% of our client base uses 50% of capacity.'”

While not ready to announce Comcast’s cap plan would be introduced nationwide, Cavanagh assured investors the experiments will continue as Comcast makes sure that over time it is “compensated for the investments that today’s marketplace requires us to make.”

The difference that makes it possible for Comcast to carry its usage cap experiments forward while Time Warner Cable had to quickly end theirs comes down to one thing: organized customer pushback. Time Warner Cable got heat from relentless, organized opposition in the four cities where caps mattered the most to consumers. Comcast, for the most part, is getting about as much heat as it usually does from customers. It’s time to turn the heat up.

protest

In fighting this battle for the last seven years, I can share with readers what works to force change and what doesn’t:

In 2009, Time Warner Cable faced protesters opposed to usage limits at this rally in front of the company's headquarters in Rochester, N.Y.

In 2009, Time Warner Cable faced protesters opposed to usage limits at this rally in front of the company’s headquarters in Rochester, N.Y.

Generally Useless

  • Complaining about usage caps in the comment sections of websites;
  • Signing online petitions;

Impotent But Potentially Useful in Large Numbers

  • Calling the provider to complain about usage caps;
  • Complaining about usage caps to a provider’s social media team (Facebook, Twitter, etc.);
  • Writing complaints on a company’s open support forum;

Useful, But Unlikely to Bring Immediate Results

  • Writing a letter or making a call complaining to elected officials about usage caps;
  • Advocating for more competition, especially from public/municipal broadband;
  • Filing formal complaints with the FCC and Better Business Bureau;
  • Complaining to state telecom regulators and your state Attorney General (they have no direct authority but can attract political attention);
  • Canceling or downgrading service, blaming usage caps for your decision.

Gasoline on a Lit Fire

  • Organizing a protest in front of the local cable office, with local media given at least a day’s notice and invited to attend;
  • Contacting local newsrooms and asking them to write or air stories about usage caps, offering yourself as an interview subject;
  • Sending local press clippings or links to media coverage to your member of Congress and two senators. Suggest another media-friendly event and invite the elected official to attend and speak, which in turn generates even more media interest.
In 2009, Time Warner Cable planned to implement mandatory usage pricing starting in Rochester, N.Y., Greensboro, N.C., and San Antonio and Austin, Tex.

In 2009, Time Warner Cable planned to implement mandatory usage pricing starting in Rochester, N.Y., Greensboro, N.C., and San Antonio and Austin, Tex.

In the battle with Time Warner Cable, we did all the above, but especially the latter, which quickly spun the story out of control of company officials sent to distribute propaganda about usage cap “fairness” and “generous” allowances. We were so relentless, we managed to get under the skin of at least one company spokesperson caught on camera being testy in an on-air interview, which backfired on the company and angered customers even more.

In the case of Comcast, very few of these techniques have been used in the fight against their endless data cap experiment. Customers seem satisfied writing angry comments and signing online petitions. Some have filed complaints with the FCC which are useful measures of hot button issues on which the FCC may act in the last year of the Obama Administration. But there is no detectable organized opposition on the ground to Comcast’s data caps. That may explain why Comcast’s CEO has repeatedly told investors your reactions to Comcast’s caps have been “neutral to slightly positive.” Many Wall Street analysts obviously believe that, because some are advocating the time is right to raise broadband prices even higher. After all, if your reaction to data caps was muted, raising the price another $5 a month probably won’t cost you as a customer either.

It would be very different if these analysts saw regular news reports of small groups of angry customers protesting in front of Comcast offices in different areas of the country. That would likely trigger questions about whether broadband pricing has gotten out of hand. Coverage like that often attracts politicians, who cannot lose opposing a cable company. Once Congress gets interested, the fear regulation might be coming next is usually enough to get companies to pull back and reconsider.

comcast sucksIf you are living with a Comcast data cap and want to see it gone, you can do something about it. Consider organizing your own local movement by tapping fellow angry customers and recruiting local activist groups to the cause. In Rochester, there was no shortage of angry college students and groups ready to protest. Google local progressive political groups, technology clubs, and technology-dependent organizations in your immediate area. Some are likely to be a good resource for building effective public protests, sign-making, and other TV-friendly protest techniques. Contact town governments, the mayor’s office of your city, technology-oriented newspaper columnists, radio talk show/computer support show hosts, etc., to build a mailing list for coordinated announcements about your efforts. Many local officials also oppose data caps.

If a local news reporter has covered tech or consumer issues in the past, many station websites now offer direct e-mail options to reach that reporter. If you give them a good TV-friendly story to cover, they will be back for more coverage as your local protest grows. We helped coordinate and share news about efforts against Time Warner in the cities that were subject to experiments, which also gave us advance notice of their talking points and an ability to offer a consistent response. Several stations carried multiple stories about the cap issue, supported by calls to TV newsrooms to thank them for their coverage and to encourage more.

We realize Comcast’s responsiveness to customers is so atrocious it approaches criminal, but Comcast does respond to Wall Street and shareholders who do not want the company under threat of fact-finding hearings, FCC regulatory action, or Congressional attention. They also don’t want any talk of municipal broadband alternatives. Sidewalk protests in front of the local cable office on the 6 o’clock news is a nightmare.

In the end, Time Warner Cable didn’t want the hassle and got the message — customers despise data caps and want nothing to do with them. Time Warner hasn’t tried compulsory usage caps again. If you want Comcast to get the same message, those living inside Comcast service areas (especially customers) need to lead the charge in their respective communities. We remain willing to help.

FCC Demands Details About Charter’s Suddenly Retired Usage Caps

charter twc bhLess than three months before announcing it would acquire Time Warner Cable in a $55 billion deal, Charter Communications quietly dropped usage caps, in place on its broadband plans since 2009, without explanation and the FCC wants to know why.

FCC officials have sent a letter to Charter requesting a range of information about the company’s broadband services, including information about Charter’s since-dropped usage cap program. The federal agency reviewing its buyout of Time Warner Cable wants to know when Charter dropped its usage caps and why.

Charter Communications has promoted “no usage caps” as a selling point to convince regulators its purchase of Time Warner Cable is a consumer-friendly transaction. Charter has promised a cap-free Internet experience for Time Warner Cable customers for three years, but has not committed to offer unlimited broadband service beyond that date.

Two months before Time Warner Cable planned a since-dropped 2009 market test of usage caps in New York, North Carolina and Texas, Charter Communications confirmed it was introducing “monthly residential bandwidth consumption thresholds” on its broadband customers ranging from 100GB for customers with speeds of 15Mbps or slower and 250GB for customers subscribed to 15-25Mbps service.

“In order to continue providing the best possible experience for our Internet customers, later this month we will be updating our Acceptable Use Policy (AUP) to establish monthly residential bandwidth consumption thresholds,” Charter’s Eric Ketzer told DSL Reports at the time. “More than 99% of our customers will not be affected by our updated policy, as they consume far less bandwidth than the threshold allows.”

Few customers realized Charter had placed a cap on Internet usage because the cable company treated the limits as “soft caps” — guidelines they could cite if they found a customer using a very large amount of bandwidth. But customers were not charged overlimit fees and few ever heard from Charter about their usage, even if it well-exceeded their allowance.

In front of Time Warner Cable protesting Internet Overcharging in 2009.

In front of Time Warner Cable offices in Rochester, N.Y. protesting Time Warner Cable’s proposed usage caps. (April 2009)

Only a handful of companies, including national providers like AT&T (for DSL) and Comcast (in usage cap market trial areas), have followed up usage allowances with stinging overlimit fees for those exceeding them, applied to customer bills. The practice is far more common among smaller and regional cable companies like Alaska’s GCI, which earned 10 percent of its broadband revenue billing customers for excess usage.

In March of this year, Stop the Cap! reported Charter quietly dropped usage caps (or “thresholds”) from their Acceptable Use Policy, ending six years of usage capped service — less than three months before announcing it was acquiring Time Warner Cable.

Time Warner Cable’s own experience with usage caps was short-lived after Stop the Cap! and other consumer advocates and elected officials launched a protest campaign against Time Warner Cable’s plans to expand a test of usage-based billing beyond Beaumont, Tex. to Rochester, N.Y., Greensboro, N.C., and the cities of Austin and San Antonio in Texas.

Time Warner proposed four tiers of usage allowances: 5, 10, 20, and 40 GB priced from $29.95 to $54.90 a month. The overlimit fee was to be $1/GB. Sanford Bernstein, a Wall Street research firm, predicted an average family subscribed to Time Warner’s top 40GB usage plan would pay around $200 a month in overlimit fees if they used Netflix more than 7.25 hours a week.

Within two weeks of launching protests in the four cities where Time Warner was planning to add caps, the plan was shelved permanently. But many Time Warner Cable customers have remained wary of the company’s plans regarding usage caps. Time Warner’s retooled, optional usage capped tiers offered to customers looking for a discount have proved dismal failures since their introduction, with fewer than 1% of Time Warner customers finding usage-limited Internet access compelling.

Rationing Your Internet Experience?

Rationing Your Internet Experience?

Consumer advocates also fear usage caps could reappear under Charter as quickly as they disappeared. Stop the Cap! is suspicious of Charter’s time-limited commitment to keep customers free of usage caps for three years. We are lobbying state and federal regulators to permanently extend that commitment as a condition of approving any merger between Charter and Time Warner.

“Customers must be assured they can always choose a reasonably priced unlimited use Internet option,” said the group’s founder Phillip Dampier. “If Charter/Time Warner Cable/Bright House wants to offer optional discounts for customers volunteering to limit their personal use, we are not opposed to that. But based on Time Warner’s own record, you can count on only a few thousand customers willing to voluntarily surrender unlimited, flat rate access.”

Stop the Cap! believes there is no credible reason Internet providers should be imposing compulsory usage caps or usage billing on anyone.

“Broadband is a huge money-maker and the costs to offer it continue to drop even as provider profits rise,” said Dampier. “Rationing broadband with a usage allowance is as credible as rationing Niagara Falls or breathing.”

The FCC is also requesting documentation detailing Charter’s proposed expansion of Wi-Fi hotspots in Time Warner Cable areas and company plans to boost standard broadband speeds from 15Mbps to 60Mbps. Charter has until Oct. 13 to respond.

Special Report: Drahi Strikes Again: Stop the Cap! Analyzes Altice’s Acquisition of Cablevision

special reportAfter 44 years in the cable television business, the Dolan family has agreed to part with its prize possession, Cablevision Systems Corp. in a $17.7 billion dollar deal with Patrick “The Slasher” Drahi’s Altice NV.

The transaction will profoundly impact Cablevision’s employees, customers, and potentially the cable business in general in the New York City metropolitan area, where Cablevision’s 3.1. million customers live.

Who is Patrick Drahi?

Although few Americans have heard of the self-made billionaire Patrick Drahi, most of French-speaking Europe knows Mr. Drahi only too well, regularly criticized in the French press for surrounding himself with debt-laden acquisitions, stiffing vendors and suppliers, and paying rock-bottom wages to the employees that remain after constant campaigns of ruthless cost cutting.

Drahi’s idol is none other than cable magnate billionaire John Malone, the man pulling the strings at Charter Communications. In the 1970s and 1980s, Malone ran America’s largest cable conglomerate – Tele-Communications, Inc. (TCI), a company castigated by customers for high rates and poor service about as much as Comcast is today.

Altice1Malone’s reputation with the U.S. Congress reached its lowest point in the 1980s when then-Sen. Al Gore, Jr. (D-Tenn.) alternately accused Malone of heading a monopolistic cable “Cosa Nostra” that extorted his constituents with rate increases that exceeded 180% in less than five years and the “Darth Vader of Cable.” Malone taught Drahi that massive sums of money could be made buying and selling cable television (and later broadband) over systems that are usually de facto monopolies. Although entertainment is always in high demand, few governments treat the cable systems that offer it as an “essential utility,” allowing them to charge whatever they want for service.

From his earliest days working for a small cable operator, Drahi dreamed of building a cable empire buying and selling cable systems, extracting whatever he could from subscribers. One of his earliest techniques was flouting a French telecommunications law that, at the time, forbade the carriage of non-French language channels. His cable systems quietly added Arabic language networks to entice the large North African immigrant community in France to sign up for service. Drahi did not directly promote the networks, relying on word-of-mouth to deliver sales in the Arabic speaking community.

The Sacred Monster

While very conservative about spending money on wages, service upgrades, and technology, customers of Drahi-owned cable companies report he had no problem raising their rates. Numericable’s customer satisfaction rating rivals that of Comcast — a one-star cable company charging five-star prices.

Drahi

Drahi

The announced acquisition of Cablevision (and earlier Suddenlink) by Drahi’s company — Altice NV, came with glowing coverage from the American media, particularly cable business news channels, the Wall Street press, and the New York Times. A Sept. 7, 2015 piece by Nicola Clark in the Times presented Drahi as a classic “rags to riches” success story, noting he loathes being interviewed and allegedly leads a humble existence:

Despite a personal fortune estimated at close to €17 billion, Mr. Drahi indulges in few of the trappings of great wealth, friends and colleagues said. Although he keeps several elegant homes — in Geneva, Paris and Tel Aviv — his personal tastes and habits hew to the mundane. He wears a plastic Swatch instead of a Rolex and often arrives at business meetings on foot or a bicycle, instead of by chauffeured car.

Clark only mentions in passing she relied almost entirely on a series of interviews with “a half-dozen friends and colleagues” to paint what turned out to be a one-sided picture of Mr. Drahi for American readers. That story had eyes rolling among staffers in the offices of French newspaper Les Echos, incredulous at the American infatuation with a man the newspaper calls the “sacré monstre” — sacred monster. In New York, reporter Lucie Robequain, foreign business correspondent for the French daily, tried to share the scene at the Goldman Sachs-organized Communacopia conference where the deal was personally announced by Mr. Drahi for her French readers.

cablevision“Newspapers [in America] devote entire pages [about Drahi], emphasizing his self-made-man side which Americans love so much,” Robequain noted. She added the New York Times painted Drahi an almost romantic figure, proposing to his wife one hour after meeting her and then putting everything between them at risk to build his personal fortune.

A later piece in the Times on Sept. 17 by Emily Steel and Mark Scott also was the subject of derision in the European press. Steel and Scott called Altice a “bold new player” in the American cable market and gave Dexter Goei, one of Drahi’s lieutenants (some in the French press prefer ‘minion’) space to gush about the game-changing deal. Goei joined Altice in 2009, having worked for 15 years in investment banking with JP Morgan and Morgan Stanley until the Great Recession arrived.

“There’s a new sheriff in town, and we’re probably going to run it a little differently,” Goei said during the investor conference in New York on Thursday that unveiled the deal.

Phantom Fiber

The Times piece also relied on unnamed “analysts” dangling the promise of fiber optics to appease subscribers concerned about a legendary cost-cutter taking the helm of the cable company.

[…] Analysts said Altice invests heavily in new infrastructure — with a focus on upgrading fixed-line networks with the latest fiber-optic technology. The priority, analysts said, is to provide subscribers with faster Internet connection speeds at competitive prices.

Previous deals involving Altice (Image: Financial Times)

Previous deals involving Altice (Image: Financial Times)

In Europe, the press is skeptical about promised upgrades, noting Altice is “an empire built on a mountain of debt” largely made possible by quantitative easing and record low interest rates, which permit companies to finance buyouts on the cheap. Drahi says he can save money through synergy — sharing operations and minimizing the need for customers to reach out for customer service. Altice officials claim just by simplifying Cablevision’s bills, the company can save $14 million annually.

Drahi’s success story with Wall Street and other investors comes from his ability to cut costs at acquired companies, often dramatically. It is part of the informal deal with investors that has allowed the company generous credit to continue its buying spree. The Cablevision deal promises the Dolans and other investors only $3.3 billion in cash. The rest of the purchase price will come from raising $8.6 billion in new debt, saddled on Cablevision’s books inside Altice.

So while unnamed analysts are promising fiber upgrades for Cablevision customers, the Financial Times and CNBC report only one thing will be on Cablevision’s menu post-merger: spending a lot less, not more. Drahi seems to agree.

In a slide presentation to investors, Altice compares Cablevision’s $49 a month in operating expenses per customer against what its Numericable operation in France spends on its customers: $14 a month.

So how does Numericable spend three times less on subscribers than Cablevision?

Cost Cutting Specialists

Say hello to Michel Combes, former CEO of Alcatel-Lucent. Two years ago, he took leadership of the company that was better known by many as Bell Labs. Known as a cost-cutter, Combes quickly announced plans to strip the company of less profitable business units and fired about 10,000 workers while also holding the line on salaries (except for his) of the remaining employees. After two years in the leadership position, Combes engineered the sale of the company to Nokia, putting himself out of a job. But he won’t be hurting. A breathtaking golden parachute package approved by his colleagues on Alcatel Lucent’s board caused a political furor in France.

Combes

Combes

Combes’ departure bonus was originally planned to amount to $15 million in stock after completing the company’s sale to Nokia, an amount Emmanuel Macron, France’s economic minister, called shocking and irresponsible. Under pressure, the board has since cut the payoff roughly in half. But according to L’Observateur, Drahi has offered his friend an even more lucrative “golden hello” — stock options awarded as a signing bonus worth up to $100 million. Combes’ first role will be to serve as Altice’s chief operating officer, presiding over new rounds of cost-cutting at the company’s various acquisitions. One item spared from review is Combes’ own compensation package. Those under him are not so lucky.

Wages and Jobs

“I do not like to pay salaries, I pay as little as I can,” Drahi told investors at the Goldman Sachs event last week. Drahi complained more than 300 employees at Cablevision were being paid more than $300,000 a year. “This we will change.

In addition to a large number of expected layoffs at Cablevision, widespread salary reductions are also likely to be forthcoming. Drahi’s cable companies have some of the smallest compensation packages in the industry, except at the top executive level.

Cablevision’s already testy relationship with some of its union employees will likely grow much worse under Drahi’s leadership. But that battle may have to wait until another day. In February, the union ratified a two-year agreement with Cablevision. In Europe, Drahi’s reputation among public unions is so poor many of the opinions expressed by unionized workers cannot be printed in a family newspaper.

Suppliers complain Drahi's companies don't pay their bills.

Suppliers complain Drahi’s companies don’t pay their bills.

In Lisbon, Jorge Felix – a representative of the trade union organization of workers at PT (Portugal Telecom) warns U.S. unions should get everything from Altice and Mr. Drahi in writing.

“There are commitments made by Altice before our union and are written,” Felix said, adding that he was disturbed by Drahi’s attitude toward his middle class employees. Felix notes Drahi has already created tremendous controversy in Portugal by stonewalling payment of suppliers and vendors’ outstanding invoices until the company secures written agreements promising enormous discounts, often amounting to 30-40% off current prices. That, in turn, can cause layoffs and salary reductions at suppliers, enriching Altice but hurting just about everyone else.

Drahi: Looking to run faster than the music

France’s Economic Minister Macron seems to agree, lashing out at Drahi’s now familiar business model.

“Is it good for the economy? The answer is no,” he said. “Is it good for investment? The answer is no. Is it good for employment? The answer is no.”

Macron also expressed concern that Drahi’s telecom empire was growing too fast — and taking on too much debt too quickly.

“I have a big concern in terms of leverage on Drahi due to its size and its place in our economy,” he said. “That’s my responsibility to look at it. He is looking to run faster than the music.”

Macron

Macron

Macron and his staff are concerned many of Drahi’s top executives and advisers come from New York’s financial markets and investment banks who either left or were pushed out in the turmoil of the Great Recession. Macron worries Drahi could be constructing the world’s first “too big to fail” cable operator that could cost nearly 100,000 jobs and require a government bailout if things turn sour.

Promised Service Improvement & Upgrades

With each cable consolidation merger, companies routinely promise subscribers will benefit from improved service. As mentioned earlier, unnamed analysts predict Drahi could invest up to $30 billion to improve the cable companies he buys in the United States.

“Which Altice are they talking about,” asks Stop the Cap! reader François Ribaud. “Altice owns Numericable, the largest cable company in metropolitan France, and if they are spending money it certainly was not on us.”

Ribaud’s original cable company Noos was acquired by Numericable in a massive acquisition effort in the early 2000s which today leaves almost all of France served by a single cable operator — Numericable.

“Things stagnated after that because Patrick Drahi does not spend money unless he has to,” Ribaud said. “The set-top boxes are outdated, the broadband service is often oversold, and heaven help you if there are service problems. The North African call center customer service help is an example for Numericable of getting what you pay for. They are awful.”

Charles Dolan

Charles Dolan

Drahi’s competitors in the fixed line and wireless markets eventually forced his wallet open, requiring an investment in fiber optics to help it remain a player in one of Europe’s most contentious telecommunications price wars. Drahi’s company in France lost subscribers as its network suffered from a lack of needed upgrades to manage demand.

“Now that I live in New York, I can say it is completely different than in France,” Ribaud said. “There is certainly no price war here, so there is no need to spend more money. The only people spending money will be customers I assure you.”

The Creator of Home Box Office Signs Off

Cablevision has been rumored “for sale” for so long without a deal, many analysts predicted the founding family would never let go of the company founded by 88-year old Charles Dolan, who helped transform what used to be a rural service to help customers receive distant over the air stations over a shared antenna into an urban and suburban subscription television business. Dolan made cable television something more.

Dolan founded Home Box Office (HBO), a commercial-free premium movie and entertainment channel free from the network “standards and practices” divisions that removed profanity and edited out violence from movies originally shown intact in theaters.

Cablevision systems used to cover 2.9 million subscribers in 19 states, many in small and medium-sized communities. By the 1990s, cable systems were swapped or sold to build regional empire-like service areas. Cablevision was no different, retreating to just three large service areas in New York, Cleveland and Boston. Soon thereafter, Cablevision would only serve metropolitan New York, particularly in Brooklyn, the Bronx, Long Island, parts of northern New Jersey and Connecticut, while exiting Cleveland and Boston.

The New York Post reported secret talks for the sale began in June, and a deal was complete at the end of August. Some of the discussions took place on a yacht floating around the Mediterranean. The Post reports the sale of Cablevision was an emotional experience for Dolan and he still thinks of the people who work there as family. But in the end, the Dolan family’s proceeds from the sale will reinforce their already well-established wealth and prominence. The same is unlikely to be true for Cablevision’s employees and customers under Drahi’s cost-conscious leadership.

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