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Republican-Controlled FCC Votes to Deregulate Business Data Services; Huge Win for AT&T, Verizon

WASHINGTON (Reuters) – The U.S. Federal Communications Commission voted on Thursday to effectively deregulate the $45 billion business data services market in a win for companies like AT&T Inc, CenturyLink Inc and Verizon Communications Inc that will likely lead to price hikes for many small businesses.

The 2-1 vote is a blow to companies such as Sprint Corp and others that claim prices for business data are too high and backed a 2016 plan under former President Barack Obama that would have cut prices.

It marked a significant step in FCC Chairman Ajit Pai’s aggressive agenda to roll back many existing telecommunications rules and Obama era regulations.

Small businesses, schools, libraries and others rely on business data services, or special-access lines, to transmit large amounts of data quickly.

The services are used, among other applications, to connect banks to ATM machines or gasoline pump credit card readers. Wireless carriers rely on them to get data from an end user to a node in a major network or the so-called backhaul of mobile traffic.

Thursday’s vote scrapped most regulatory requirements in the business data services market, although some price caps in areas with little competition will be retained.

Democratic FCC Commissioner Mignon Clyburn, who accused her Republican colleagues of siding with “the interests of multibillion-dollar providers,” said the ruling “opens the door to immediate price hikes” to small businesses. The rule deregulates pricing in a majority of counties and more than 90 percent of buildings using the services.

Pai defended the decision, saying regulatory requirements had threatened competition and investment.

Pai plans as early as next week to unveil plans to dismantle the Obama administration’s “net neutrality” rules, even as he favors a free and open internet under a different regulatory scheme.

He declined to discuss his plans, but said he had met this week with executives at Facebook Inc, Oracle Corp, Cisco Systems Inc and Intel Corp to discuss internet issues.

In recent days, the independent Small Business Administration Office of Advocacy, the European Union and Democratic members of Congress have raised concerns about the lifting of net neutrality rules.

Under Obama, then FCC Chairman Tom Wheeler in April 2016 proposed a sweeping reform plan for business data services that aimed to reduce prices paid. Wheeler had proposed maintaining and lowering lower price caps using legacy data systems with a phased-in 11 percent price reduction.

Sprint, which backed Wheeler’s proposal, told the FCC in a March 22 letter that “thousands of large and small businesses across the country were paying far too much for broadband because of inadequate competition.”

CenturyLink praised Thursday’s decision as something that aligned regulations with “competitive market realities.” Comcast Corp said the vote would help minimize “burdensome and investment-killing regulations, specifically on new entrants.”

Advocacy group Public Knowledge said the decision “doubles down on incumbent market power, forcing businesses, hospitals, schools, and ultimately consumers to pay more for essential connectivity.”

(Reporting by David Shepardson; editing by Andrew Hay and Tom Brown).

Verizon Reports First-Ever Quarterly Loss of Wireless Customers, Despite New Unlimited Data Plan

FILE PHOTO: The logo of Verizon is seen at a retail store in San Diego, California April 21, 2016. REUTERS/Mike Blake/File Photo

(Reuters) – Verizon Communications Inc on Thursday reported its first-ever quarterly loss of subscribers, even as it offered an unlimited data plan, raising questions on whether the No. 1 U.S. wireless carrier may need a larger acquisition than Yahoo to diversify its business.

Verizon has been struggling to fend off smaller rivals T-Mobile US Inc and Sprint Corp in a maturing market for U.S. wireless service, and in February offered an unlimited data plan for the first time in more than five years.

While it has pursued other revenue streams, including a $4.48 billion deal for Yahoo Inc’s core business, analysts have questioned if it should pursue a more transformative combination.

“We continue to believe that the company needs a strategic transaction to support their wireless business for the long-term,” analysts at New Street Research said in a note.

Meanwhile, Verizon’s main competitor AT&T Inc plans to diversify its business through an $85.4 billion acquisition of Time Warner Inc, which would give it control of cable TV channels like HBO and other coveted media assets.

Verizon’s shares were down 1.2 percent at $48.33 in midday trade.

Earlier this week, Verizon Chief Executive Lowell McAdam said in an interview with Bloomberg News that he is open to deal talks with companies ranging from Comcast Corp to Walt Disney Co.

On Thursday, Chief Financial Officer Matthew Ellis clarified the comments, saying that while the company would consider deals that are in the interest of shareholders, it is confident in its assets.

“The ecosystem is constantly changing, and if there’s somebody who comes to us with an idea of how we can kind of leapfrog forward in that environment, we’re going to listen to them,” Ellis said in an interview with Reuters. But he added, “We are very confident with the strategy that we have.”

In the first quarter, Verizon said it lost 307,000 retail postpaid subscribers or those who pay a monthly bill. Analysts on average were expecting net additions of 222,000, according to market research firm FactSet StreetAccount.

Churn, or customer defections, among wireless retail customers who pay bills on a monthly basis, increased to 1.15 percent of total wireless subscribers, compared with the average analyst estimate of 1.03 percent, according to FactSet.

Ellis noted that churn rose in the first half of the quarter but came down in response to the relaunch of unlimited plans. “It really was a tale of two halves,” he said.

But analysts viewed the results as disappointing.

“They badly missed on every important subscriber metric, and it just underscores that the wireless business is a severely growth-challenged business at the moment,” said Craig Moffett, an analyst at MoffettNathanson in an interview.Net income attributable to Verizon fell to $3.45 billion, or 84 cents per share, in the first quarter ended March 31, from $4.31 billion, or $1.06 per share, a year earlier. Excluding items, earnings per share was 95 cents.

Total operating revenue fell to $29.81 billion from $32.17 billion a year earlier.

According to Thomson Reuters I/B/E/S, analysts had expected adjusted earnings per share of 99 cents and revenue of $30.77 billion.

(Reporting by Anjali Athavaley in New York; Editing by Saumyadeb Chakrabarty, Bernard Orr).

Wall Street Analyst: Cable Monopoly Will Double Your Broadband Bill

Thought paying $65 a month for broadband service is too much? Just wait a few years when one Wall Street analyst predicts you will be paying twice that rate for internet access, all because the cable industry is gradually achieving a high-speed broadband monopoly.

Jonathan Chaplin, New Street Research analyst, predicts as a result of cord-cutting and the retreat of phone companies from offering high-speed internet service competition, the cable industry will win as much as 72.2% of the broadband market by the year 2020. With it, they also win the power to raise prices both fast and furiously.

In a note to investors, Chapin wrote the number of Americans left to sign up for broadband service for the first time has dwindled, and most of the rest of new customer additions will come at the expense of phone companies, especially those still selling nothing better than DSL.

“Our long-term penetration forecast is predicated on cable increasing its market share, given a strong network advantage in 70% of the country (this assumes that telco fiber deployment increases from 16% of the country today to close to 30% five years from now),” Chaplin wrote.

Cable companies already control 65% of the U.S. broadband market as of late last year. Chaplin points out large cable operators have largely given up on slapping usage caps and usage pricing on broadband service to replace revenue lost from TV cord-cutting, so now they are likely going to raise general broadband pricing on everyone.

“Comcast and Charter have given up on usage-based pricing for now; however, we expect them to continue annual price increases,” Chaplin said. “As the primary source of value to households shifts increasingly from pay-TV to broadband, we would expect the cable companies to reflect more of the annual rate increases they push through on their bundles to be reflected in broadband than in the past. Interestingly, Comcast is now pricing standalone broadband at $85 for their flagship product, which is a $20 premium to the rack rate bundled price.”

Chaplin himself regularly cheerleads cable operators to do exactly as he predicts: raise prices. Back in late 2015, Chaplin pestered then CEO Robert Marcus of Time Warner Cable about why TWC was avoiding data caps, and in June of that year, Chaplin sent a note to investors claiming broadband was too cheap.

“Our analysis suggests that broadband as a product is underpriced,” Chaplin wrote. new street research“Our work suggests that cable companies have room to take up broadband pricing significantly and we believe regulators should not oppose the re-pricing (it is good for competition & investment).”

“The companies will undoubtedly have to take pay-TV pricing down to help ‘fund’ the price increase for broadband, but this is a good thing for the business,” Chaplin added. “Post re-pricing, [online video] competition would cease to be a threat and the companies would grow revenue and free cash flow at a far faster rate than they would otherwise.”

Charter Watch: Goodbye TWC’s $10 Modem Rental Fee, Hello Spectrum’s $5 Wi-Fi Fee

Former Time Warner Cable and Bright House Networks customers in Florida, Ohio, Michigan, and Wisconsin were glad to see the end of modem rental fees, something promoted as a tangible deal benefit of the merger by new owner Charter Communications. But many of those same customers are now upset to discover that up to $10 modem rental fee has been replaced with a $5 monthly fee for “Wi-Fi service.”

LuAnn Summers, a Bright House customer in Tampa, wrote Stop the Cap! in February to complain her new bill from Charter/Spectrum included a $9.99 activation fee and $5 a month for something called “Wi-Fi Service.” The same fees have since appeared on bills for some customers recently switching away from their old Time Warner Cable service plans to new Spectrum pricing and plans.

Rich D’Angelo in Wisconsin recently took Charter up on its offer to switch away from his legacy TWC plan when his promotion expired in January.

“I was able to get a big speed boost and bundle it with Spectrum’s Silver TV package, which includes two of the premium movie channels I was paying TWC $15 each for every month, and my bill was only supposed to go up $10,” D’Angelo tells Stop the Cap! “Instead, it went up $25 and I feel lied to.”

Wi-Fi sticker shock.

D’Angelo retired his old owned Motorola SB6121 modem in favor of a new network gateway supplied free of charge by Charter because his new package didn’t work with his old modem.

“My 6121 modem was a real workhorse and I bought it right after Time Warner started charging modem fees, but it cannot support Spectrum’s fastest speeds in Wisconsin and I didn’t feel like buying a new modem when Spectrum gives them to customers for free,” D’Angelo explained. “This was the device they handed me and I was not offered any other option.”

Champagne Johnson in Columbus, Ohio also took advantage of Spectrum’s new pricing plans thinking she could save her family money and get better internet speeds from the cable operator that advertises it’s a “new day” for Time Warner Cable subscribers.

“New day but the same old lies and deceit,” Johnson writes Stop the Cap! “Do these cable companies only hire thieves? I was told the cable modem was included, but now I am suddenly getting charged for Wi-Fi, which is crazy. I called Spectrum up and they told me there is a charge if I use their modem for my Wi-Fi. I told them I don’t need their Wi-Fi because I have my own router that works fine and they told me it was included inside their modem and I had to pay for something I won’t use.”

Charter assumes if you use Wi-Fi, you want their Wi-Fi Service

We contacted Charter to learn more about this new charge and what customers can do about it.

It turns out the Wi-Fi charge and activation fee applies when you use a network gateway device provided by the cable company. We learned the reason so many customers are finding this charge on their bill comes as a result of slightly deceptive sales practices when customers choose a Spectrum internet service plan.

“Do you use Wi-Fi at home?” a Charter representative asked us when we inquired about pricing for a new Spectrum service plan to replace our existing Time Warner Cable plan. When we answered yes, the representative said they would send our “free equipment” and noted we would no longer pay a modem rental charge (despite the fact we had owned our own modem at Stop the Cap! HQ for years). “You can either pick it up in a cable store or we can ship it direct to you in a self-install kit.” That equipment was a “network gateway,” which bundles a cable modem and router into a single device.

Our readers confirm that Charter representatives did not ask them if they have an existing in-home router, which probably already provides Wi-Fi access in the home. Nor do they disclose that accepting a network gateway, which was also interchangeably referred to as “a modem” means they are agreeing to pay a $9.99 activation fee and $5/mo ongoing fee for “Wi-Fi service.”

We called three times this afternoon as were given identical information, and no disclosure of any Wi-Fi fees.

On the fourth call, we specifically asked about Wi-Fi fees and the representative told us they did not know the answer and left us on hold for 10 minutes before finally disclosing that Charter does charge both fees. When we asked how to avoid them, we were first told we could not waive the fee if we used Wi-Fi in the home, but a supervisor later clarified that it only applied to their gateway and we could specifically request a “basic modem” or have Wi-Fi disabled on a network gateway, and neither charge would apply.

“How are we supposed to know and understand that in advance?” Johnson asked us.

“Considering more than 90% of Time Warner Cable customers were paying $10 a month for a modem without ever realizing or understanding they could buy their own and avoid that charge, how many Spectrum customers are proficient enough to tell Spectrum they want their network gateway set to bridge mode or want a traditional cable modem without router functionality? It’s clear Charter is going to make $5 a month from a whole lot of customers, and it should be disclosed up front. It even got me and I am a network engineer.”

Summers learned about the controversy of the Wi-Fi charge after googling the fee and discovered a Tampa Bay Times story about the fee.

Spectrum spokesman Joe Durkin told the newspaper the fee should not apply to customers Charter inherited from Bright House who already had internet service. He said Spectrum is reviewing cases the Times has brought to its attention to see if the charges were appropriate.

But that isn’t always the case for customers placing orders on Charter’s website or contacting customer service by phone. In both cases, Charter implied if you want to use Wi-Fi at home, you owe them an extra $5 a month:

Charter’s website suggests that you have to pay $5 a month if you intend to use Wi-Fi at home.

Getting the charges off your bill

Luckily, Charter is readily agreeing to customer requests to remove the charge(s) from customer bills and will supply equipment with Wi-Fi disabled (or not present when using a traditional cable modem). You may need to exchange equipment, however. If either charge appears on your bill, call and complain. While we no longer recommend customers invest in their own cable modems as long as Charter is providing them without a rental fee, we do suggest customers buy their own router and avoid ongoing fees for Wi-Fi service.

Also be aware that if you are still on a legacy Time Warner Cable internet plan, Charter will keep collecting that $10 monthly modem fee until you abandon your Time Warner plan for a Spectrum internet plan. You can still avoid the rental fee by buying your own modem. Charter’s list of supported modems is here.

Corporate/Koch Brother-Linked Group Asks FCC to Repeal Charter/Spectrum’s Data Cap Prohibition

A conservative group funded by corporate interests and the Koch Brothers has asked FCC chairman Ajit Pai to answer its petition and move expeditiously to cancel the prohibition of data caps/usage-based pricing as a condition for FCC approval of Charter Communications’ acquisition of Time Warner Cable and Bright House Networks.

A number of pro-consumer deal conditions were included as part of the merger transaction’s approval, and won the support of a majority of FCC commissioners under the leadership of former FCC chairman Thomas Wheeler, appointed by President Barack Obama.

The Competitive Enterprise Institute (CEI) is hopeful that with Wheeler out of office and a new Republican majority at the FCC under the Trump Administration means the FCC will end requirements that Charter offer unlimited data plans, discounted internet access for low-income consumers, and start allowing Charter to charge fees to Netflix and other content providers to connect to its broadband customers. CEI has every reason to be hopeful, pointing out Chairman Pai is a fan of data caps on residential broadband service, opposes Net Neutrality, and recently effectively killed a Lifeline program that would have extended inexpensive internet access to the poor.

CEI:

As then-Commissioner Pai wrote in 2016, this condition is neither “fair” nor “progressive.” Instead, he called this “the paradigmatic case of the 99% subsidizing the 1%,” as it encourages Charter to raise prices on all consumers in response to costs stemming from the activities of a “bandwidth-hungry few.” Other problematic conditions include the ban on Charter charging “edge providers” a price for interconnection and the requirement that the company operate a “low-income broadband program” for customers who meet certain criteria.

The group is optimistic Pai will oversee the unwinding of Charter’s deal conditions largely pushed by former FCC chairman Thomas Wheeler, after Pai recently led the charge to revoke another condition required of Charter in return for merger approval – a commitment to expand its cable network to pass at least one million new homes that already receive broadband service from another provider.

Pai also opposed the low-income internet program, calling it “rate regulation.” The CEI claimed the requirement will “undermine Charter’s ability to price its services in an economically rational manner.”

“Hopefully, the FCC’s new leadership will seize this opportunity to take a stand against harmful merger conditions that have nothing to do with the transaction at hand—by granting CEI’s petition,” the group wrote on its blog.

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Recent Comments:

  • Jonathan: Emily H. There absolutely has been data caps for a long time now. They do not list the data caps on your bill. The data cap for your service can be fo...
  • JayS: They will upgrade 47,000 customers for $ 20,000,000; 20,000,000/47,000 = $426/per customer. That is per customer, not per premises passing (custom...
  • Lee: Phone line dead 4 times in last 2 months. Third time tech said was cut at neighbors yard pedestal. Fourth time this Sunday I went to neighbors to chec...
  • Me: well well well..cutting all their services..getting antenna..all else is on my cell...
  • Matthew H Mosher: Sure, but it's pretty easy to crap on NY when my wife a d I pays these ridiculous tax rates so that MY KIDS can't get broadband. Meanwhile it runs fib...
  • Lee: It would be interesting to see the age cohort distribution of stock owners this analyst champions. I suspect the majority are not in the 20 to 30 rang...
  • Josh: Ugh. If I used Comcast for TV I'd be using it with my TiVo...never with their box. And I always figured the "Xfinity" thing was just to trick people...
  • Josh: LOL! Sounds like basically "we're a huge corporation, so you should do this for us for free". At least hopefully they'll pay now... Of course this ...
  • goonierag: I am sick of wallstreet the cable companies and telco's gouging the people and of here this s**t from their fans. The internet was developed by the ...
  • FredH: Like cable company CEOs need to be told to raise prices by some a-hole Wall Street analyst....
  • Roger W: Go ahead. Raise it to $90. I dare you. I guarantee you it will be the last day I subscribe to cable service. That'll be your loss....
  • FredH: Charter/Spectrum is rapidly catching Comcast in the "race to the bottom"....

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