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Comcast Hotspot Wi-Fi Usage Will Be Tied Back to Customer’s Broadband Account

xfinity wifiComcast customers using the company’s growing network of Wi-Fi network hotspots will have their usage tracked to their broadband accounts, opening the door for Comcast to count wireless use against a customer’s future monthly usage allowance.

As part of a press release announcing that more than 300,000 Comcast hotspots are now available in New England, the cable company added that it is preparing to activate its Xfinity Wi-Fi Neighborhood Hotspots in the region, allowing other Comcast customers to share your Comcast Internet service over a separate Wi-Fi channel provided by your gateway. But it noted customers will need to log-in first, permitting Comcast to measure just how much of the wireless service you are using:

wifi hotXfinity WiFi Neighborhood Hotspots – In June of last year, Comcast announced its plans to create millions of WiFi access points for its customers through a neighborhood hotspot initiative. Comcast is the first major ISP in the country to deploy this innovative technology. This new initiative gives customers with Xfinity Wireless Gateways an additional “xfinitywifi” signal (or SSID) in their home that is completely separate and distinct from the private and secure home WiFi signal. Offered at no additional cost, the additional WiFi signal will allow visiting Xfinity Internet subscribers instant, easy access to fast and reliable WiFi without the need to share the home’s private network password and without an impact to the home subscriber’s speed. And since visitors sign in with their own Xfinity credentials, their usage and activities are tied back to their own accounts, not the homeowner’s.

 

Comcast is testing the reimplementation of a usage cap – now set at 300GB a month – in several cities in the southern U.S. Wireless usage could eventually also be counted against that cap.

Many of Comcast’s primary outdoor hotspots are in larger cities, such as Greater Boston. Most of the one million total hotspots Comcast hopes to activate are located in residential customers’ homes using Comcast’s Wireless Gateway.

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Time Warner Cable, Comcast Crash, Burn in Consumer Reports’ 2014 Ratings

consumer reportsDespite claims of improved customer service and better broadband, Comcast and Time Warner Cable’s customer satisfaction scores are in near-free fall in the latest Consumer Reports National Research Center’s survey of consumers about their experiences with television and Internet services.

Although never popular with customers, both cable operators plummeted in the 2014 Consumer Reports ratings — Time Warner Cable is now only marginally above the perennial consumer disaster that is Mediacom. Comcast performs only slightly better.

In the view of Consumers Union, this provides ample evidence that two wrongs never make a right.

“Both Comcast and Time Warner Cable rank very poorly with consumers when it comes to value for the money and have earned low ratings for customer support,” said Delara Derakhshani.  “A merger combining these two huge companies would give Comcast even greater control over the cable and broadband Internet markets, leading to higher prices, fewer choices, and worse customer service for consumers.”

These ratings reflect Internet service only.

These ratings reflect Internet service only.

Comcast ranked 15th among 17 television service providers included in the ratings and earned particularly low marks from consumers for value for the money and customer support.  Time Warner ranked 16th overall for television service with particularly low ratings for value, reliability, and phone/online customer support.

Another ratings collapse for Comcast and Time Warner Cable

Another ratings collapse for Comcast and Time Warner Cable

Comcast and Time Warner Cable were mediocre on overall satisfaction with Internet service.  Both companies received especially poor marks for value and low ratings for phone/online customer support.

“In an industry with a terrible track record with consumers, these two companies are among the worst when it comes to providing good value for the money,” said Derakhshani.  “The FCC and Department of Justice should stand with consumers and oppose this merger.”

For as long as Stop the Cap! has published, Mediacom has always achieved bottom of the barrel ratings, with satellite fraudband provider HughesNet — the choice of the truly desperate — scoring dead last for Internet service. We’re accustomed to seeing the usual bottom-raters like Frontier (DSL), Windstream (DSL), and FairPoint (DSL) on the south end of the list. But now both Comcast and Time Warner Cable have moved into the same seedy neighborhood of expensive and lousy service. Comcast couldn’t even beat the ratings for Verizon’s DSL service, which is now barely marketed at all. Time Warner Cable scored lower than CenturyLink’s DSL.

Breathing an ever-so-slight sigh of relief this year is Charter Communications, which used to compete with Mediacom for customer raspberries. It ‘rocketed up’ to 18th place.

If you want top-notch broadband service, you need to remember only one word: fiber. It’s the magical optical cable phone and cable companies keep claiming they have but largely don’t (except for Verizon and Cincinnati Bell, among a select few). If you have fiber to the home broadband, you are very happy again this year. If you are served by an independent cable company that threw away the book on customer abuse, you are relieved. Topping the ratings again this year among all cable operators is WOW!, which has a legendary reputation for customer service. Wave/Astound is in second place. Verizon and Frontier FiOS customers stay pleased, and even those signed up with Bright House Networks and Suddenlink report improved service.

Ratings are based on responses from 81,848 Consumer Reports readers. Once again they plainly expose Americans are not happy with their telecom options. The average cost of home communications measured by the Mintel Group is now $154 a month — $1,848 a year. That’s more expensive than the average homeowner’s clothing, furniture or electricity budget. The same issues driving the bad ratings last year are still there in 2014: shoveling TV channels at customers they don’t want or need, imposing sneaky new fees along with broad-based rate increases every year, low value for money, and customer service departments staffed by the Don’t Care Bears.

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Usage Billing Money Maker: Wireless Carriers Will Earn More Than $100 Billion On Data Plans This Year

U.S. wireless carriers are on track to earn more than $100 billion this year from usage-based billing plans for mobile data, the first country in the world to break the symbolic $100 billion mark in data revenue.

Analyst Chetan Sharma reports Verizon Wireless and AT&T are statistically the largest recipients of revenue earned from metering data usage. For the first time in 2013, mobile data revenue surpassed voice revenue in the U.S., making data usage the most lucrative product available from wireless carriers.

A graph from the Economist published last year explains the runaway revenue growth at U.S. wireless carriers. The lack of significant competition has allowed U.S. companies to charge an average of $85 a month for data plans, which are nearly always bundled into compulsory packages of unlimited voice calling and texting. In contrast, customers in China pay just $24 for data plans. In the United Kingdom, the average charge is $9 a month.

mobile-data-prices-chart-2Sharma said the only disruption to this revenue growth in the United States comes from T-Mobile USA, which has recently cut prices on its service plans, forcing AT&T and Verizon Wireless to react with moderate price cutting. But with the significant disparity in market share between AT&T and Verizon vs. T-Mobile, neither larger carrier is expected to take a significant hit to their bottom lines without a mass exodus to the country’s fourth largest provider.

Softbank, the Japanese company that now controls Sprint, has launched a lobbying effort to secure permission to acquire T-Mobile and merge it into the Sprint network. But with reports showing T-Mobile’s willingness to disrupt the wireless market, regulators are likely to be reluctant to remove that competition from the playing field.

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Cable Industry Has Charts to Prove Your Broadband is Screaming Fast

Tracking Cable’s Top Internet Speeds
NCTA-Charts_2_tracking broadband speeds

The National Cable & Telecommunications Association (NCTA) offers this infographic to suggest the deregulated cable broadband industry works well without any interference from meddling politicians.

Their claim: “Ongoing investments have enabled cable providers to continue boosting broadband speeds with top tiers increasing 50% every year.”

The reality: Cable’s broadband speed comes at a very high cost. The majority of Americans cannot buy 505Mbps residential broadband service from Comcast and even if you could, the price tag hovers around $300 a month, with a nearly-$1,000 early contract termination penalty, a $250 installation and $250 activation fee. Customers at other cable providers often find their maximum speed is just 50Mbps and/or their Internet usage is limited by a usage cap.

Google Fiber and some other gigabit fiber to the home providers are offering unlimited 1,000Mbps service for $70 a month with no installation or activation fee if a customer agrees to stick around.

Verdict: The cable industry could do better for much less.

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Time Warner Cable Admits Usage-Based Pricing is a Big Failure; Only Thousands Enrolled

Phillip Dampier March 13, 2014 Audio, Internet Overcharging, Time Warner Cable No Comments
internet limit

Time Warner Cable customer hate usage caps and usage-based pricing.

Time Warner Cable admits customers don’t want usage-based pricing of their broadband service, with only a fraction of one percent of their nationwide customer base choosing to enroll in usage-limited plans in return for a discount.

Time Warner began offering customers a usage-based plan more than two years ago, with discounts starting at $5 a month for light users. Sources at the cable company have repeatedly told Stop the Cap! usage-based pricing has never been popular with customers with only a handful enrolling every month. That was confirmed this week by Time Warner Cable CEO Rob Marcus, noting despite offers of discounts for 5GB and 30GB usage-allowance plans, neither are popular. In fact, Marcus admitted customers strongly want to keep their unlimited use plans.

Speaking at the Deutsche Bank Media, Internet, and Telecom Conference, Marcus added that regardless of the plans’ unpopularity, he intends to keep them around to sell the idea that customers should get acquainted with paying based on usage.

twc logo“If you take the 30GB a month and compare it to what median usage is, let’s say high 20s — 27GB a month, that would suggest a whole lot of customers would do well by taking the 30GB service,” Marcus said. “Notwithstanding that, very few customers — in the thousands — have taken the usage based tiers and I think that speaks to the value they place on unlimited — not bad because we plan to continue to offer unlimited for as far out as we can possibly see.”

Despite the low enrollment, Marcus has no plans to jettison usage pricing anytime soon.

“I think that the concept of ‘use more-pay more – use less-pay less’ is an important principle to have established, so notwithstanding the low uptake of the usage-based tiers I think it is a very important component of our overall pricing philosophy.”

Time Warner Cable CEO Rob Marcus admits usage based pricing plans for broadband are exceptionally unpopular with customers, with only a few thousand enrolled. Mar. 12, 2014 (2:03)
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Time Warner Cable Spams Customers With Empty Promises E-Mail

twc spam

Robert D. Marcus has plenty to be excited about. After less than two full months on the job as CEO, he agreed to sell Time Warner Cable and exit his management role if and when the merger is approved. But he won’t be hurting, because he negotiated a bountiful golden parachute that will award him more than $56 million in exit compensation the day he leaves.

Courtesy: Jacobson

Courtesy: Jacobson

That is but one example of the kind of “innovation” Comzilla will offer Time Warner Cable customers. Others include charging top dollar cable modem rental fees, a broadcast TV surcharge, a completely arbitrary usage cap on broadband service, and an offshore customer service experience even more despised than what Time Warner Cable customers get. 

Without actual head-to-head competition, there is no doubt we will hear executives crow to Wall Street that a supersized Comcast has plenty of room to raise broadband prices even higher and to cut company investments in innovation it won’t need to succeed in a controlled duopoly market.

AT&T and Verizon executives — Comcast’s largest competitors — have shrugged their shoulders about the merger deal, believing it will have almost no effect on their bottom lines. Why should it? Comcast has found a growth formula that works — a tap dance away from competition — buy out other cable companies to grow the customer base instead of winning ex-customers back with better service and a lower price.

It appears Marcus’ grand vision for turning Time Warner Cable around with a massive investment in faster speeds and better service is now dead. All that is left on the table is the vague notion of a “significant investment to improve reliability and to enhance our customer service.” In other words – we’ll do a better job to make sure the service you already pay big money to receive actually works and we’ll do a better job answering our phones.

Survey results show the proposed merger is not at all popular with Time Warner customers.

Nothing about Marcus’ spammed e-mail to customers is likely to change that perception.

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AT&T Proposes Pulling the Plug on Landline Service in Alabama and Florida

carbon hill

Carbon Hill, Ala.

AT&T is seeking permission to disconnect traditional landline service in Alabama and Florida as it plans to abandon its copper wire network and move towards Voice Over IP in urban areas and force customers to use wireless in suburbs and rural communities.

AT&T’s BellSouth holding company has asked the Federal Communications Commission to approve what it calls “an experiment,” beginning in the communities of West Delray Beach, Fla., and Carbon Hill, Ala.

The first phase of the plan would start by asking residents to voluntarily disconnect existing landline service in favor of either U-verse VoIP service or a wireless landline replacement that works with AT&T’s cellular network. In the next phase of the experiment, traditional copper-based landline service would be dropped altogether as AT&T and the FCC study the impact.

“We have proposed conducting the trials in Carbon Hill, Ala., and in West Delray Beach, Fla.,” AT&T writes on the company’s blog. “We chose these locations in an effort to gain insights into some of the more difficult issues that likely will be presented as we transition from legacy networks. For example, the rural and sparsely populated wire center of Carbon Hill poses particularly challenging economic and geographic characteristics.  While Kings Point’s suburban location and large population of older Americans poses different but significant challenges as well.  The lessons we learn from these trials will play a critical role as we begin this transition in our approximately 4700 wire centers across the country to meet our goal of completing the IP transition by the end of 2020.”

Delray-Beach-CrossFit1The transition may prove more controversial than AT&T is willing to admit. A similar effort to move landline customers to wireless service was met with strong resistance when Verizon announced it would not repair wired infrastructure on Fire Island, N.Y., damaged by Hurricane Sandy. Hundreds of complaints were registered with the New York Public Service Commission over the poor quality of service residents received with Verizon’s wireless landline replacement. The company eventually abandoned the wireless-only transition and announced it would also offer FiOS fiber optic service to customers seeking a better alternative.

“Be ready, beware,” Jim Rosenthal, a seasonal Fire Island resident, told Bloomberg News when asked what communities need to know about the changes. “Get your ducks in order. Make the alliances. Speak loudly, make sure you’re not roadkill.”

Customers that have already dropped landline service in favor of wireless and do not depend on AT&T for broadband will not notice any changes. Neither will customers  subscribed to U-verse phone and broadband service. But those who rely on AT&T DSL are likely to lose their wired broadband service and asked to switch to a very expensive wireless broadband alternative sold by AT&T. That alternative may be their only broadband option if the neighborhood is not serviced by a cable competitor.

The biggest impact will be in rural Carbon Hill, where 55% of AT&T customers will only be able to get wireless phone and broadband service, according to AT&T documents. At least 4% of local residents will get no service at all from AT&T, because they are outside of AT&T’s wireless coverage area. The phone company has no plans to expand its U-verse deployment in the rural community northwest of Birmingham. In contrast, every customer in West Delray Beach will be offered U-verse service. That means AT&T’s DSL customers will eventually be forced to switch to either U-verse for broadband or a wireless broadband plan that costs $50 a month, limited to 5GB of usage.

AT&T promises the transition will be an upgrade for customers, but that isn't always the case.

AT&T promises the transition will be an upgrade for customers, but that isn’t always true.

AT&T’s wireless home phone replacement is not compatible with fax machines, home or medical monitoring services, credit card machines, IP/PBX phone systems, dial-up Internet, and other data services. AT&T also disclaims any responsibility for mishandled 911 emergency calls that lack accurate location information about a customer in distress. The company also does not guarantee uninterrupted service or coverage.

AT&T chose Carbon Hill, which was originally a coal mining town, because it represents the classic poor, rural community common across AT&T’s service area. At least 21 percent of customers live below the poverty line. Many cannot afford cable service (if available). AT&T selected Alabama and Florida because both states have been friendly to its political agenda, adopting AT&T-sponsored deregulation measures statewide. AT&T was not required to seek permission from either state to begin its transition, and it is unlikely there will be any strong oversight on the state level.

“We looked for places where state law wasn’t going to be an issue, where the regulatory and legal environment in the state was conducive to the transition,” admitted Christopher Heimann, an AT&T attorney, at a briefing announcing the experiment.

Verizon faced a very different regulatory environment in New York, where unhappy Fire Island customers dissatisfied with Verizon’s wireless landline replacement Voice Link found sympathy from Attorney General Eric Schneiderman, who appealed to the state PSC to block the service. Sources told Stop the Cap! the oversight agency was planning to declare the service inadequate, just as Verizon announced it would offer its fiber optic service FiOS as an alternative option on the island.

Voice Link sparked complaints over dropped calls, poor sound quality, inadequate reception, and inadequacy for use with data services of all kinds. Customers were also upset Verizon’s service would not work as well in the event of a power interruption and the company disclaimed responsibility for assured access to 911.

carbon hill

Carbon Hill, Ala.

Although millions of Americans have disconnected landline telephone service in favor of wireless alternatives, traditional landlines are still commonly used in businesses and by poor and elderly customers. Many medical and security monitoring services also require landlines.

The loss of AT&T’s wired network could also mean no affordable broadband future for rural residents — wireless broadband is typically much more expensive. AT&T admits it will not guarantee DSL customers they will be able to keep wired broadband after the transition.

AT&T will “do our very best” to provide Internet-based services in trial areas, Bob Quinn, senior vice president for federal regulatory matters, said in a 2012 blog post proposing the trials.

“For those few we cannot reach with a broadband service, whether wireline or wireless, they will still be able to keep voice service,” Quinn said. “We are very cognizant that no one should be left behind in this transition.”

AT&T is likely to be the biggest winner if it successfully scraps its copper network. The company wants to drop landline service completely by 2020, saving the company millions while ending government oversight and eliminating service obligations.

“It’s a big darn deal,” said AT&T CEO Randall Stephenson. “The amount of cost that it removes from our legacy businesses is dramatic and it’s significant.”

http://www.phillipdampier.com/video/ATT The Next Generation IP Network 2-21-14.mp4

An AT&T-produced video showing a sunny future with IP-based phone service. But the future may not be so great for AT&T’s rural DSL customers. (1:31)

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Unlike Here, British Broadband Customers Satisfied With Their Broadband Providers

Plusnet offers DSL and fiber broadband plans (in some areas) that offer budget-priced capped or unlimited use plans.

Plusnet offers DSL and fiber broadband plans (in some areas) that offer budget-priced capped or unlimited use plans.

While North American cable and phone broadband providers are among the most-hated companies on the continent, in the United Kingdom, customers gave generally high scores to their Internet providers.

PC Advisor partnered with Broadband Genie, an impartial, independent, and consumer-focused commercial broadband comparison service. Together they engaged an independent survey company (OnPoll) to survey 3,000 broadband users, chosen at random, in late 2013 and early 2014. They asked those users how happy they were with their ISP, tested the speed and reliability of their connections, and found out other valuable tidbits, such as how much they were paying, and for what exactly. Altogether, more than 10,000 U.K. broadband users contributed to the data that made an in-depth assessment of British broadband possible.

The results might stun those on the other side of the Atlantic. Unlike in Canada and the U.S., British broadband users are satisfied overall with their providers, and are enthusiastic about recommending many of them to others. Even the worst-performing provider – BE – still had a 46% recommendation rating, and the company was sold to BSkyB well over a year ago and is in the process of being merged with Sky’s broadband service.

Around 68 percent of British broadband users responding still rely primarily on various flavors of DSL for Internet service. But BT, the national telephone company, is in the process of upgrading facilities and dramatically increasing the amount of fiber optics in its network. The result is what the Brits call “Super Fast Broadband.” Back here, we call it fiber to the neighborhood service similar to AT&T’s U-verse or Bell’s Fibe. In many cases, improved service is providing speeds much closer to 25Mbps vs. the 1-6Mbps many customers used to receive. The upgrade is an important development, especially in rural Britain, often left without Internet access.

Cable broadband is much more common in North American than in the United Kingdom. While cable television became dominant here, the British favored small satellite dishes like those used by DirecTV or Dish customers. With BT dominating wired infrastructure, the government required the company to open its landline network to third-party providers. Some cable companies do exist in England, but they hold only a 12% broadband market share, even lower than fiber to the home service now at nearly 20%.

Great Britain treats broadband as a national priority, and although the current government has controversially settled for a hybrid fiber-copper network instead of delivering fiber straight to every British home, it’s a considerable improvement over what came before, especially in rural areas. Usage caps that used to dominate British broadband plans are now an option for the budget-minded. Unlimited use plans are becoming more mainstream.

With all the upgrade activity and improved service, the Brits have gotten optimistic about their broadband future. Only 12% of those surveyed loathe their broadband supplier. Another 20% were neutral about recommending their ISP, but 51% considered themselves satisfied and another 17% considered their provider top rate. Many in Britain even expect their Internet bill will decrease in 2014, and compared with North American prices, it’s often very low already.

The average price paid by customers of various British ISPs (excluding line rental)

The average price paid by customers of various British ISPs (excluding line rental)

Average speed received by customers varies depending on the technology. Virgin operates cable broadband, Plusnet uses a mix of DSL and fiber, while the slower performers are primarily ADSL.

Average speed test results per ISP (kbps)

  • Virgin: 27,266

    virgin-media-union-logo

    Was top-rated for broadband reliability.

  • Plusnet: 24,529
  • BT: 13,164
  • TalkTalk: 6,910
  • EE: 6,818
  • Demon: 6,586
  • Sky: 5,942
  • Eclipse: 5,786
  • O2: 5,642
  • Be: 5,458
  • AOL: 3,809
  • Post Office: 3,255

Overall ratings and reviews from PC Advisor found Virgin Media (cable) and Plusnet (DSL/Fiber) near tied for top ratings.

http://www.phillipdampier.com/video/PC Advisor Best cheapest fastest broadband UK ISPs rated 2-19-14.mp4

PC Advisor talks about this year’s British ISP review, which reveals Brits are generally satisfied with their broadband speeds and pricing. (3:51)

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House of (Credit) Cards: How to Blow Through Your Usage Cap With One Netflix Show

house-of-cards

“…every kitten grows up to be a cat. They seem so harmless, at first, small, quiet, lapping up their saucer of milk. But once their claws get long enough, they draw blood, sometimes from the hand that feeds them. For those of us climbing to the top of the food chain, there can be no mercy. There is but one rule: Hunt or be hunted.” — Francis Underwood

Addicts of Netflix’s hit series House of Cards may need to grab a card of a different kind to cover overlimit fees charged by your Internet Service Provider for blowing past your usage allowance.

As online video streaming moves into the realm of 4K — the next generation of high-definition video — watching television shows and movies online could get very expensive because of the massive file sizes involved. It’s all just in time for ISP’s increasing enforcement of usage caps.

courtesy-notice-640x259Gizmodo just did the math for those intending to spend a weekend watching the entire second season of the made-for-Netflix series in high-definition:

Streaming in 1080p on Netflix takes up 4.7GB/hour. So a regular one-hour episode of something debiting less than 5GB from your allotment is no big deal. However, with 4K, you’ve got quadruple the pixel count, so you’re burning through 18.8GB/hour. Even if you’re streaming with the new h.265 codec—which cuts the bit rate by about half, but still hasn’t found its way into many consumer products—you’re still looking at 7GB/hour.

But you’re not watching just one episode, are you? Of course not! You’re binging on House of Cards, watching the whole series if not in one weekend then certainly in one month. That’s 639 minutes of top-quality TV, which in 4K tallies up to 75GB if you’re using the latest and greatest codec, and nearly 200GB if not. That means, best case scenario, a quarter of your cap—a third, if you’re a U-Verse customer with a 250GB cap—spent on one television show. Throw in a normal month’s internet usage, and you’re toast.

Sure you can send 900+ emails, download hundreds of songs, upload hundreds of pictures, but you can't watch one standard and one HD movie a day at the same time without blowing past your AT&T DSL limit.

Sure you can send 900+ emails, download hundreds of songs, upload hundreds of pictures, and play online games 24 hours a day, but you can’t also watch one standard and one HD movie a day at the same time without blowing well past your AT&T DSL limit.

What is worse is that h.265 is still more theoretical than actually available to most consumers, so customers will either have to settle with degraded video or prepare to eat close to 19GB an hour at the highest resolution. No wonder Netflix has introduced video degradation settings to save you from your ISP’s arbitrary cap. Of course, your video quality will suffer, especially on a big screen television.

Comcast customers (and presumably Time Warner Cable customers also eventually subjected to Comcast’s cap) will still have a generous 100GB left over to watch, browse, and send that avalanche of e-mails usage cappers love to boast about. If you live in the reality-based community and have a family active online, that 100GB isn’t going to go too far. Video game addicts regularly face downloading huge updates, many ranging from 8-12GB apiece. Call of Duty: Ghosts? That’s 39.5GB. Madden NFL 25? Another 12.51GB, says Gizmodo. Using a file backup cloud storage service can also eat your allowance for breakfast.

Gizmodo also mentions Sony’s Unlimited Video service has 70 titles (and growing) available in 4K. A Sony representative admits a single two-hour movie will burn up 40GB. Watch a few of those and you are well on your way to blowing your allowance Vegas-style.

AT&T cooked up the arbitrary de facto standard overlimit fee now adopted by many American ISPs, and granular it isn’t. Exceed your allowance by even 1 kilobyte and you will be charged an extra $10 for 50 extra gigabytes. Because AT&T, Comcast, Suddenlink, and others are not already paid enough for broadband service and their modem rental.

Online video is the online application most likely to put you over your limit. Most ISPs don’t like to talk about that, however. They prefer to explain caps in terms of activities no online user is likely to ever exceed, including sending thousands of e-mails, viewing hundreds of thousands of web pages, transferring boatloads of songs and images, and watching YouTube videos at low resolution.

If you don’t watch online video, your cable or phone company thanks you for paying for cable television instead. If you haven’t used a peer-to-peer network in years, chances are you won’t exceed any limits either. But as Internet usage continues to evolve, anything that appears to be a competitive threat delivered over your ISP’s broadband pipe can be effectively controlled with the elimination of flat rate Internet service and imposing overlimit fees that deter usage.

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How Charter Communications Let Time Warner Cable Slip from its Grasp

surpriseFew were surprised more by the sudden announcement that Comcast was seeking to acquire Time Warner Cable all by itself than the negotiating team from Charter Communications.

Working for weeks to settle how Comcast and Charter would divide the second largest cable company in the country between them, they learned about the sudden deal with Comcast the same way the rest of the country heard about it — over Comcast-owned CNBC.

After Charter endured weeks of rejection from Time Warner Cable executives over what they called “a lowball offer,” Comcast had entered the fray to help Charter boost its offer and bring more cash to the table to change Time Warner Cable’s mind. In return, Comcast expected to acquire Time Warner’s east coast cable systems and much more.

That is where the trouble began.

Charter_logoAccording to Bloomberg News, the talks broke down because Charter wanted to hold onto as many Time Warner Cable assets as possible. Comcast chief financial officer Michael Angelakis expected Charter to divest more than just the New England, New York, and North Carolina Time Warner Cable systems. Angelakis also wanted control of Time Warner’s valuable regional sports networks in Los Angeles. When he didn’t get them, he stormed out of a meeting threatening to do a deal for Time Warner Cable without involving Charter at all.

The Wall Street Journal confirms the account, adding that both Comcast CEO Brian Roberts and Angelakis agreed the talks with Charter seemed to be going nowhere.

Roberts

Roberts

Roberts called a secret meeting with top Comcast executives including Angelakis, Comcast Cable head Neil Smit, Comcast’s lobbying heavyweight David Cohen, and NBCUniversal CEO Steven Burke. Roberts asked each about the options on the table and their conclusion was to buy Time Warner Cable by themselves and cut Charter out of the deal.

Within days, Comcast CEO Brian Roberts reinitiated talks with Time Warner Cable CEO Robert Marcus. The two companies had talked off and on ever since Charter Communications set its sights on acquiring Time Warner Cable. It was clear from the beginning Marcus and his predecessor Glenn Britt were cool to Charter’s overtures. Not only was Charter a much smaller operation, it also had a checkered past including a recent bankruptcy that wiped out shareholder value and was loaded with debt again.

The alliance between Charter and Liberty Global’s John Malone was also unsettling. Those in the cable industry had watched how ruthless Malone could be back in the 1990s when a then much-smaller Comcast secretly attempted to acquire control of Tele-Communications, Inc. (TCI) — then the nation’s largest cable operator run by Malone. Malone was furious when he learned about the effort and went all out to kill the deal, acquiring the stake Comcast sought himself.

Malone’s cable empire would eventually fall with the sale of TCI to AT&T just a few years later. When AT&T decided it didn’t to stay in the cable business, it sold TCI’s old territories to Comcast, making it the largest cable operator in the country.

Malone

Malone

Malone’s brash attitude has also occasionally rubbed the cable industry’s kingpins the wrong way, especially in his public comments. Last year, Malone criticized Roberts’ more conservative operating style, which means Comcast pays a higher tax rate. Malone specializes in deals that leave his acquisitions with enormous debt loads, manipulating the tax code to stiff the Internal Revenue Service. In June, Malone was back again criticizing the lack of a unified national cable cartel better positioned to defeat the competition.

Under his leadership at TCI, many cable programmers didn’t get on TCI’s cable dial unless they sold part-ownership to TCI. Competitors were dispatched ruthlessly — home satellite dish service, then the most viable competitor, strained under TCI-led efforts to enforce channel encryption.

TCI-owned networks routinely required satellite subscribers to sign up with the nearest TCI cable system, which often billed them at prices higher than what cable subscribers paid. Subscribers had to buy not one, but eventually two decoder modules for several hundred dollars apiece before they could even purchase programming. The cable industry also worked behind the scenes to promote and defend enhanced zoning laws that made installing satellite dishes difficult if not impossible, and denied access to some programming at any price, unless it was delivered by a cable system.

Comcast-LogoMalone called today’s divided industry “Snow White and the Seven Dwarfs” and insisted on a new major consolidation wave to enhance “value creation” and deliver some major blows to satellite and telephone company competitors.

Despite Liberty Global’s ongoing consolidation wave of European cable systems, his lack of financial resources to put his money where his mouth was left Time Warner Cable executives cold.

Already loaded with debt, Malone’s part ownership stake in Charter could not make up for Charter’s current status — a medium-sized cable operator with dismal customer ratings primarily serving smaller communities bypassed by larger operators.

A deal with Charter would mean Time Warner Cable's bonds would be downgraded to junk status.

A deal with Charter would mean Time Warner Cable’s bonds would be downgraded to junk status.

Moody’s Investor Service warned Charter’s offer to acquire Time Warner Cable was primarily financed with the equivalent of a credit card, and would leave the combined entity with $60 billion in debt with bonds promptly downgraded to junk level. Time Warner Cable had always considered its bonds “investment grade.”

Charter’s first clue something was wrong came when Comcast stopped returning e-mail and phone calls. That’s always cause for alarm, but Charter officials had no idea Comcast was secretly negotiating with Time Warner Cable one-on-one. In fact, Comcast’s Roberts was negotiating with Time Warner Cable over a cell phone while attending the Sochi Olympics.

Malone finally got the word the deal was off just a short while before Comcast and Time Warner Cable leaked the story to CNBC.

Ironically, it was Malone who convinced Comcast to seek out a deal with Time Warner Cable. Comcast’s thinking had originally been it had grown large enough as a cable operator and sought out expansion in the content world, acquiring NBCUniversal. But Malone warned online video competitors like Netflix would begin to give customers a reason to cut cable’s cord or at the very least take their business to AT&T or Verizon’s competing platforms.

Comcast executives were convinced that gaining more control over content and distribution was critical to protect profits. Only with the vast scale of a supersized Comcast could the cable company demand lower prices and more control over programming. By dominating broadband, critics of the deal warn Comcast can also keep subscribers from defecting while charging higher prices for Internet access and imposing usage limits that can drive future revenue even higher.

Just like the “good old days” where customers had to do business with the cable company at their asking price or go without, a upsized Comcast will dominate over satellite television, which cannot offer broadband or phone service, as well as the two largest phone companies — AT&T, which so far cannot compete with Comcast’s broadband speed and Verizon, which has pulled the plug on further expansion of FiOS to divert investment into its highly profitable wireless division. If Comcast controls your Internet connection, it can also control what competitors can effectively offer customers. Even if Comcast agrees to voluntarily subscribe to Open Internet principles like Net Neutrality, its usage cap can go a long way to protect it from online video competitors who rely on cable broadband to deliver HD video in the majority of the country not served by U-verse or FiOS.

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  • Dave Hancock: I don't know where AP lives, but in MOST areas of the country MOST people do not have any choice for High Speed Internet (15mbps or above) - it is the...
  • tacitus: That doesn't sound right. Are you in some sort of contract? Where in the country is this?...
  • AP: Good luck cutting cable if you live in an area that has one cable, internet, and phone company like I do. If you want internet or phone with the cable...
  • Dave Hancock: Soon the rest of the cable companies will follow Verizon's lead and start limiting the input bandwidth to their systems (ex: Netflix) to discourage su...
  • Milan in Austin: Cable TV is an obsolete product! I suggest everyone seriously consider dropping cable television. I cut the cord in August of 2013, and don't miss ca...
  • gsuburban: I have to agree that Verizon is not interested in providing its customers with a "clear pipe" due to the politics of peer-to-peer data sharing or what...
  • Scott: Not good, that takes away all your leverage in the situation. If you're holding the money you can work through the BBB or try and negotiate with the ...
  • Hudson Mohawk Press: We knew it couldn't last forever. Starting this month Time Warner Cable of NYC is charging Earthlink Internet customers a $5.99 modem lease fee. The w...
  • Eric: Frontier still sucks..Their service still sucks..they are still a ripofff...
  • punki: Thanks Scott, unfortunately mine is already paid......
  • Scott: Personally I'd refuse to pay, there's no way that's actual usage....
  • punki: Hi guys, I'm exactly in the same situation (also with almost $3000), any feedback will be really appreciated. Thanks,...

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