A bizarre allegation (and theft-of-service complaint filed with local police) that a Voice Over IP service provider was “stealing” access to its fiber network has triggered the nation’s first formal Net Neutrality complaint under new Federal Communications Commission rules.

The complaint was triggered after Albany (Ga.)’s Water, Gas, and Light Commission (WG&L) filed a report with Dougherty County Police accusing L2Networks of accessing its municipal fiber network without paying.

If the FCC finds the city was correct asserting its claims of theft of service, other broadband providers could begin assessing additional fees for consumers who wish to access Google, Facebook, and Netflix, according the VoIP provider.

The case could create an “irreversible ripple effect along with the creation of various legal challenges across nearly every national content and application provider,” L2Networks CEO Kraig Beahn said in a press release. “We are deeply concerned that the alleged claim could potentially change the landscape of the national Internet marketplace as residential and commercial consumers see it today.”

Beahn's booking photo

In the view of L2Networks, the incident represents a direct and indisputable violation of the Federal Communications Commission’s Net Neutrality policies, which forbids providers from blocking service or selectively charging competitors additional fees to reach customers.

But details about the background of the complaint remain murky and a series of past disputes between Beahn and other telecommunications companies in Albany may require further exploration by federal officials investigating the complaint.

L2Networks is a small Albany-based telecommunications company that provides service to area businesses. L2Networks CEO Kraig Beahn is, however, well-known to both WG&L and local cable operator Mediacom, both of which have previously raised questions about his business practices.

L2 counters WG&L has made life increasingly difficult for the company since the two entities had a falling out in 2011.  That year, WG&L dumped L2 from its plans to deliver a competitive cable television service for Albany residents after the utility’s general manager accused Beahn of not fulfilling the promises he made with WG&L.

In January 2012, Beahn was arrested and charged with felony theft of service after Mediacom discovered an illegal tap on their cable line, which investigators learned was being used to provide Internet and phone service to L2 customer Adtran Logistics. Beahn called the charges “frivolous” and were part of an ongoing dispute with WG&L.

Mediacom vice president of legal and public affairs Tom Larsen noted the company did learn about the suspicious connection from the local utility.

“When our local team went to investigate, they discovered a Mediacom modem connected to two car batteries that was wired into our cable plant and being used [allegedly by L2] to serve a nearby business,” Larsen said.

FCC Chariman Julius Genachowski spent the day hobnobbing with cable industry executives at the Boston Cable Show. In an interview with CNBC, Genachowski defended usage-based pricing, claiming it will bring lower prices to light users, spur “innovation” and enable consumer choice. Verizon Wireless customers on the cusp of being thrown off their grandfathered unlimited data plans may have a bone to pick with the FCC chairman about how innovative and enabling such policies have on them. Genachowski also suggests his controversial Net Neutrality policy is working, despite recent attempts by Comcast to exempt its content from the company’s usage cap and the wireless industry toying with toll-free data for preferred partners. Genachowski had little to offer consumers in the interview, instead suggesting his deregulatory stance on “innovation” will eventually benefit them.  (5 minutes)

Comcast today announced it was incrementally increasing its 250GB usage cap by 50 additional gigabytes per month as part of a new trial, the first allowance increase since the company started the cap in 2008.

But before so-called “heavy users” celebrate, the company is also announcing it will test overlimit fees for customers who exceed the new 300GB cap.

Cathy Avgiris, Executive Vice President and General Manager, Communications and Data Services, Comcast Cable:

We’ve decided to change our approach and replace our static 250 GB usage threshold with more flexible data usage management approaches that benefit consumers and support innovation and that will continue to ensure that all of our customers enjoy the best possible Internet experience over our high-speed data service. In the next few months, therefore, we are going to trial improved data usage management approaches comparable to plans that others in the market are using that will provide customers with more choice and flexibility than our current policy. We’ll be piloting at least two approaches in different markets, and we’ll provide additional details on these trials as they launch. But we can give everyone an overview today.

The first new approach will offer multi-tier usage allowances that incrementally increase usage allotments for each tier of high-speed data service from the current threshold. Thus, we’d start with a 300 GB usage allotment for our Internet Essentials, Economy, and Performance Tiers, and then we would have increasing data allotments for each successive tier of high speed data service (e.g., Blast and Extreme). The very few customers who use more data at each tier can buy additional gigabytes in increments/blocks (e.g., $10 for 50 GB).

The second new approach will increase our data usage thresholds for all tiers to 300 GB per month and also offer additional gigabytes in increments/blocks (e.g., $10 per 50 GB).

In both approaches, we’ll be increasing the initial data usage threshold for our customers from today’s 250 GB per month to at least 300 GB per month.

In markets where we are not trialing a new data usage management approach, we will suspend enforcement of our current usage cap as we transition to a new data usage management approach, although we will continue to contact the very small number of excessive users about their usage.

Tell Comcast to drop the padlock on your broadband connection altogether.

The change comes at the same time Comcast is under fire for allegedly giving preferential, cap-free treatment to its own video content through an Xbox video game console app.

Comcast has followed AT&T’s pricing, testing a new overlimit fee of $10 for each 50GB increment customers exceed their allowance.  While not outrageous on a per gigabyte basis, the minimum charge of $10 is steep, especially considering Comcast pays only pennies per gigabyte to move traffic.

Stop the Cap! urges Comcast customers to use the occasion to demand the company suspend its unnecessary and arbitrary usage cap altogether.

The best approach for consumers is the one Comcast plans for markets not subject to a trial of their latest Internet Overcharging schemes. Namely, leaving the overwhelming majority of Comcast customers alone while informally reaching out to the tiny minority of customers the company feels are consuming data at levels that create significant problems for other customers on their network. With Comcast’s near-universal adoption of DOCSIS 3 technology, those problems are rarer than ever.

Growing questions are being raised about whether Comcast is violating FCC and Department of Justice policies that prohibit the cable company from prioritizing its own content traffic over that of its competitors.

Comcast’s Xfinity Xbox app offers Comcast customers access to Xfinity online video content without eating into their monthly 250GB Internet usage allowance. Netflix has called that exemption unfair, because its content does count against Comcast’s usage cap. New evidence now suggests Comcast may also be prioritizing the delivery of its Xfinity content over other broadband traffic, a true Net Neutrality violation if proven true.

Bryan Berg, founder and chief technology officer at MixMedia, believes he has found proof the cable company is giving its own video content preferential treatment, in this somewhat-technical finding published on his blog:

What I’ve concluded is that Comcast is using separate DOCSIS service flows to prioritize the traffic to the Xfinity Xbox app. This separation allows them to exempt that traffic from both bandwidth cap accounting and download speed limits. It’s still plain-old HTTP delivering MP4-encoded video files, just like the other streaming services use, but additional priority is granted to the Xfinity traffic at the DOCSIS level. I still believe that DSCP values I observed in the packet headers of Xfinity traffic is the method by which Comcast signals that traffic is to be prioritized, both in their backbone and regional networks and their DOCSIS network.

Berg also contends Comcast’s earlier explanation that its Xfinity content should be exempt from its usage cap because it travels over the company’s private Internet network is also flawed:

In addition, contrary to what has been widely speculated, the Xfinity traffic is not delivered via separate, dedicated downstream channel(s)—it uses the same downstream channels as regular Internet traffic.

Berg

Broadband traffic management is of growing interest to Internet Service Providers, who contend it can be used to manage Internet traffic more efficiently and improve speed and time-sensitive online applications like streamed video, online phone calls, and similar services. But manufacturers of traffic management equipment also market the technology to ISPs who want to favor certain kinds of content while de-prioritizing or even throttling the speed of non-preferred content. The technology can also differentiate traffic that counts against a monthly usage cap, and traffic that does not.

Quality of Service (QoS) technology can be used to improve the customer’s online experience or help a provider launch Internet Overcharging and speed throttling schemes that can heavily discriminate against “undesirable” online traffic.

Berg further found that when he saturated his 25Mbps Comcast broadband connection, traffic from providers like Netflix suffered due to the bandwidth constraints.  Because he flooded his connection, Netflix buffered additional content (slowing his stream start time) and reduced the bitrate of the video (which can dramatically reduce the picture quality at slower speeds). But when he launched Xfinity video streaming, that traffic was unaffected by his saturated connection. In fact, he discovered Xfinity traffic was exempted from his normal download speed limit, allowing his connection to exceed 25Mbps.

While that works great for Xfinity fans who do not want their videos degraded when other household members are online, it is inherently unfair to competitors like Netflix who are forced to reduce the quality of your video stream to compensate for lower available bandwidth.

According to the consent decree which governs the merger of the cable operator with NBC-Universal, prioritizing traffic in this way is a no-no when the company also engages in Internet Overcharging schemes, namely its arbitrary usage cap:

“If Comcast offers consumers Internet Access Service under a package that includes caps, tiers, metering, or other usage-based pricing, it shall not measure, count, or otherwise treat Defendants’ affiliated network traffic differently from unaffiliated network traffic. Comcast shall not prioritize Defendants’ Video Programming or other content over other Persons’ Video Programming or other content.”

This graph shows Berg's artificially saturated 25Mbps Comcast broadband connection. The traffic in red represents Xfinity Xbox traffic, which is given such high priority, it allows Berg to exceed his usual download speed limit.

Comcast sent GigaOm a statement that denies the company is doing any such thing:

“It’s really important that we make crystal clear that we are not prioritizing our transmission of Xfinity TV content to the Xbox (as some have speculated). While DSCP markings can be used to assign traffic different priority levels, that is not their only application – and that is not what they are being used for here. It’s also important to point out that our Xfinity TV content being delivered to the Xbox is the same video subscription that customers already paid for and is delivered to their home over our traditional cable network – the difference is that we are now delivering it using IP technology to the Xbox 360, in a similar manner as other IP-based cable service providers. But this is still our traditional cable television service, which is governed by something known as Title VI of the Communications Act, and we provide the service in compliance with applicable FCC rules.”

Our View

Comcast, as usual, is talking out of every side of its mouth. In an effort to justify their unjustified usage cap, they have pretzel-twisted a novel way out of this Net Neutrality debate by paving their own digital highway on a Comcast private drive.

Comcast argues their 250GB usage cap controls last-mile congestion to provide an excellent user experience. That excuse completely evaporates in the context of its new toll-free video traffic. In fact, their earlier argument that its regionally-distributed streaming traffic should not count because it does not travel over the “public Internet” at Comcast’s expense does not even make sense.

Berg provides an example:

A FaceTime call from my house to my neighbor’s—which never leaves even the San Francisco metro area Comcast network, given that both of us are Comcast customers—goes over the “public Internet.”

Yet Comcast’s Xbox streams, which pass from Seattle to Sacramento to San Francisco through all of the same network elements that handle my video call (and then some!) are exempt from the bandwidth cap?

You can’t have it both ways, guys.

DOCSIS 3 technology has vastly expanded the last mile pipe into subscriber homes. If Comcast can launch their own private pipe for unlimited IPTV traffic that travels down the same wires their Internet service does, they can comfortably handle any additional capacity needs to support their “constrained” broadband service without the need to limit their customers’ use.

Usage caps remain an end run around Net Neutrality. Consumers given the opportunity to view content under a usage cap on the “public Internet” or using the “toll-free” traffic lane Comcast created for content from their “preferred partners” will make the obvious choice to protect their usage allowance. Comcast is certainly aware of this, and it is a clever way to discriminate through social engineering. It’s also less obvious. You don’t have to de-prioritize or block traffic from your competition to have an impact, you just have to limit it. Customers who repeatedly exceed their usage allowance face suspension of Comcast broadband service for up to one year. That’s a strong incentive to follow their rules.

Netflix is fighting to force Xfinity traffic to fall under the same arbitrary usage cap regime Netflix endures — a truly shortsighted goal. The real issue here is whether Comcast should be capping any of its Internet service.

Comcast has given us the answer, launching the very bandwidth-intense video streaming it used to decry was contributing to an Internet traffic tsunami.

It’s time for Comcast to drop its usage cap.

After intense lobbying, wireless phone companies won a significant reprieve from the watered-down 2010 Net Neutrality policies introduced by Federal Communications Commission chairman Julius Genachowski.

Now some of America’s largest cell phone companies are considering plans that would offer special “toll-free” access to favored partners’ content, while leaving everyone else subject to the companies’ usage capped data plans.

Much of the discussion about exempting certain content from data allowances is taking place at this week’s CTIA Wireless trade show in New Orleans.

Some highlights:

• T-Mobile USA is planning to expand video streaming services offered to subscribers, but with a twist. Content creators could pay to have their shows streamed to customers, and in turn, T-Mobile would not charge that traffic against the customer’s monthly usage allowance. Whether T-Mobile would maintain an ownership interest in the content is unknown, but “preferred partners” would receive exceptional visibility through aggressive promotional campaigns T-Mobile would launch.  So would T-Mobile, which plans advertising and promotional messages inside that content;
• Verizon Wireless said it was looking to create “toll-free” data services that would be subsidized by content providers. Video, games, and even apps could be promoted to consumers as “data usage”-free, meaning it won’t count against your monthly usage allowance. But Verizon recognizes the concept would be controversial and run afoul of Net Neutrality concerns.
• AT&T has already signaled its interest in creating a “content-provider-pays” model where users get free access to content if content providers pay AT&T’s traffic charges.

All three carriers earlier abandoned all-you-can-eat flat rate data plans, and Net Neutrality proponents claim these latest moves are attempts by wireless phone companies to further monetize data traffic.

The Wall Street Journal reports the plans, in some cases, fly in the face of rhetoric about spectrum shortages and a wireless data traffic crisis (underlining ours):

T-Mobile’s Mr. Duea said the goal of new video offerings that don’t count against data plans would be to get customers interested in consuming more data, and set T-Mobile’s plans apart from those of other carriers.

"Data floods" and "spectrum shortages" don't stop T-Mobile.

Current FCC Net Neutrality rules require wireless carriers to not block competing services from companies like Skype and Google, nor censor content. Both Verizon and MetroPCS are challenging those rules in federal court. But wireless carriers are already exempt from giving preferential treatment to certain types of data or traffic, which opens the door to “toll-free” data services.

Net Neutrality supporters believe these practices will uneven the playing field for content creators and innovative new online start-ups, who may not be able to afford the prices carriers charge for first class treatment. It also influences consumer decision-making by encouraging customers to use the “toll-free” services to preserve their monthly data allowance.

Companies like Ericsson and Cisco have plans to market technology that will allow carriers to divide up data traffic into different traffic lanes, some fast and free to use, others subject to a customer’s monthly data allowance, and certain undesirable traffic shunted to low priority slow lanes.

A Verizon Wireless executive ironically blamed the need for “toll-free” pricing partly on the wireless industry itself, which has almost universally abandoned unlimited data plans.

“As we move away from flat rate pricing, there is room for an 1-800-type of service where certain destinations could offset the cost of the network to get customers to those destinations,” said Verizon’s chief technology officer Tony Melone. “There are Net Neutrality issues that have to be addressed, too.”

Melone added the company wasn’t quite ready to launch the “toll-free” traffic lanes just yet, but claimed certain content providers were discussing deals with the company to participate if and when the new toll booths are opened for traffic.

AT&T CEO Randall Stephenson is kicking himself over his decision to allow “unlimited use” plans on AT&T’s wireless network.

Speaking at the Milken Institute’s Global Conference last Wednesday, Stephenson took the audience on a journey through AT&T’s transformation from a landline provider into a company that today sees wireless as the source of the majority of its revenue and future growth.  But the company left a lot of revenue on the table when it offered “unlimited data” for smartphone customers, particularly those using Apple’s iPhone.  It’s a mistake Stephenson wishes he never made.

“My only regret was how we introduced pricing in the beginning… thirty dollars and you get all you can eat and it’s a variable cost model,” Stephenson complained. “Every additional megabyte you use in this network, I have to invest capital. So get the pricing right. Our average revenue [per customer] has been increasing every single quarter since we started down this path.”

Stephenson admitted AT&T’s problems were created by the company itself when it embraced its transformation into a wireless power player.

Years earlier, the current CEO green-lit a new “smartphone” after a visit from Apple proposing a new device that used a touch screen to make calls, launch applications, and surf the wireless web.  It was called the iPhone.

AT&T’s first iPhone, Stephenson said, was not a major problem for AT&T and did not even launch on the company’s growing 3G network. In 2007, the Apple iPhone came pre-loaded with a selection of apps and used AT&T 2G network to move data.  Stephenson said Apple’s launch of a new iPhone in 2008 that worked on AT&T’s 3G network, along with a new App Store that allowed customers to do more with their phones, changed everything.  By 2009, AT&T’s network was overloaded with data traffic in many areas.

“[There] were volumes [of traffic] that nobody had ever anticipated and we had anticipated big volumes of growth,” Stephenson said.

In Stephenson’s view, AT&T’s solution to the traffic problem early on should have been a change to the pricing model, eliminating flat rate service at the first sign of network congestion.

“I wish we had moved quicker to change the pricing model to make sure that people that were consuming the bandwidth were paying for the bandwidth and [instead] we had a model where the high end users were being subsidized by the low end users,” he said.

Stephenson acknowledged the company has service issues in large American cities like New York, San Francisco, and Los Angeles, and blames them on a combination of voracious wireless data usage and spectrum shortages.  However, industry observers also note that many of AT&T’s service woes may have come from an unwillingness to invest in sufficient network upgrades as aggressively as other carriers, which have not experienced the same level of network congestion and the resulting steep declines in customer satisfaction AT&T has endured for the last three years.

But the ongoing congestion problems have not hurt AT&T’s revenue and profits.  Stephenson admitted that in 2006, AT&T earned almost nothing from wireless data and made between 30-32% margin selling voice and texting service.

“Today, we’re a $20 billion data revenue company and we’re operating at 41-42% margins,” Stephenson said.

Despite that improved revenue, AT&T says if they don’t get spectrum relief soon, they are going to keep raising prices on consumers. Stephenson said the company has been increasing prices across the board on data plans, new smartphone ownership, those upgrading phones, as well as reducing certain benefits for long-term customers. Stephenson said these actions were taken because spectrum has become a precious resource and bandwidth scarcity requires the company to tamp down on demand.  But that’s not a message he delivers to Wall Street, telling investors AT&T’s key earnings and increased revenue come from price adjustments and metering data usage.

Stephenson also fretted there is too much competition in America’s wireless marketplace.  That competition is eating up all of the available wireless spectrum, threatening to create a spectrum crisis if the federal government does not rethink spectrum allocation policies, he argued.  Stephenson believes additional industry consolidation is inevitable because of the capital costs associated with network construction and upgrades. He said he was uncertain whether AT&T will be able to participate in that consolidation after failing to win approval of its buyout of T-Mobile USA.

Stephenson believes the days of heavy investment in wired networks are over. Stephenson has systematically sought to transition AT&T away from prioritizing wired services in favor of wireless, a position he has maintained since his earliest days as AT&T’s CEO. The company’s decision to end expansion of U-verse — AT&T’s fiber-to-the-neighborhood service, and concentrate investment on wireless is part of Stephenson’s grand vision of a wireless America.  Stephenson noted the real fiber revolution isn’t provisioning fiber to the home, it’s wiring fiber to cell towers to support higher data traffic.

But that traffic doesn’t come to users free. Instead, Stephenson believes leaving the meter on guarantees lower rates of congestion because it makes customers think about what they are doing with their phones. It also brings higher profits for AT&T by charging customers for network traffic.  Stephenson believes that assures the returns Wall Street investors demand, attracting capital to front network investments.

With that in mind, Stephenson still believes AT&T can help solve the data digital divide, where poor families cannot afford to participate in the online revolution. Stephenson said it can be managed by handing the disadvantaged sub-$100 smartphones and $20 data plans, assuming they can afford those prices.

What keeps Stephenson up nights?  Worrying about business model busters that manage end-runs around AT&T’s profitable wireless services.

“Apple iMessage is a classic example,” Stephenson noted. “If you’re using iMessage, you’re not using one of our messaging services, right? That’s disruptive to our messaging revenue stream.”

Stephenson remains fearful its network upgrades will improve wireless data service enough to allow customers to switch to Skype for voice and video calling, depriving AT&T of voice revenue.

But the CEO seems less concerned than some of his predecessors that content producers are enjoying “free rides” on AT&T’s network.

“We in this industry have spent more time bemoaning the thought that Google or Facebook may use our network for free, and it just hasn’t played out that way,” Stephenson said. “I mean they do use it for free, they’re getting a bargain, and that is fine.”

“I believe what will play itself out over time, is that the demand model will change this behavior,” he said. “We’re already at a place where some companies that deliver content are coming to us and saying ‘we would like to do a deal with you where you would give us a class of service to deliver our content to your customers.’”

“The content guys that have been so loud about these issues [Net Neutrality] are now the ones coming to us saying we want these models,” Stephenson argued. “I’ve always believed that is what would play out.”

Stop the Cap! edited down Randall Stephenson’s appearance at last Wednesday’s conference.  Stephenson faces few challenges as he presents his world-view about AT&T pricing, spectrum allocation policies, network investments vs. data traffic growth, his vision for AT&T’s future, and how much customers will be forced to pay for today’s “spectrum crisis.”  (28 minutes)

The Consumerist awards AT&T the "Bronze Poo" Award for Third Worst Company in America. (Image: The Consumerist)

A video game company reviled by game fans and the perennially-shoddy Bank of America managed to beat out America’s lowest rated phone company in The Consumerist’s “Worst Company in America” annual award contest, but not by much.

As Electronic-Arts tries to explain away its top-worst rating, AT&T easily took third place after a consolation round decidedly eliminated Walmart.

Congratulations to the folks aboard the Death Star! As soon as we get some proper bronze-colored paint, we’ll be packing up your Bronze Poo and sending it off in the mail. It will, of course, include a 620-page end-user agreement that preempts any class-action lawsuits by AT&T employees.

Some Consumerist readers wondered why game fans rushed to beat EA over the head over its anti-consumer tendencies when Ma Bell was still ripe for some kicking:

The Consumerist notes their award epitomizes the last 12 months for AT&T.

“First it attempted to leap-frog to the head of the wireless pack by swallowing T-Mobile whole, only to fail miserably after many months and at a cost of several billion dollars,” the piece reads. “Then it came tantalizingly close to vying for the coveted Worst Company In America Golden Poo trophy, only to be given the smack-down by a video game company. At least it won’t be leaving the tournament empty-handed.”

Comcast has changed its explanation why the company’s XFINITY TV service, streamed over Xbox 360 has been made exempt from the company’s 250GB usage cap.

Last week, the company claimed the service traveled over the company’s “private IP” network, exempting it from usage restrictions.  That created a small furor among public interest groups and Net Neutrality supporters because of the apparent discrimination against streamed video content not partnered with the country’s biggest cable operator.

Stop the Cap! argued what we’ve always argued — usage caps and speed throttles are simply an end run around Net Neutrality — getting one-up on your competition without appearing to openly discriminate.

Now Comcast hopes to make its own end run around the topic by changing the language in its FAQ:

Before:

After:

Although the words have changed, the story stays the same.

The key principle to remember:

Data = Data

Comcast suggests its Xbox XFINITY TV service turns your game console into a set top box, receiving the same type of video stream its conventional cable boxes receive.  The cable company is attempting to conflate traditional video one would watch from an on-demand movie channel as equivalent to XFINITY TV over the Xbox.  Since the video is stored on Comcast’s own IP network, the company originally argued, it creates less of a strain on Comcast’s cable system.

AT&T's U-verse is an example of an IP-based distribution network.

But the cable industry’s inevitable march to IP-based delivery of all of their content may also bring a convenient excuse to proclaim that data does not always equal data.  They have the phone companies to thank for it.

Take AT&T’s U-verse or Bell’s Fibe.  Both use a more advanced form of DSL to deliver a single digital data pipeline to their respective customers.  Although both companies try to make these “advanced networks” sound sexy, in fact they are both just dumb data pipes, divided into segments to support different services.  The largest segment of that pipe is reserved for video cable TV channels, which take up the most bandwidth. A smaller slice is reserved for broadband, and a much smaller segment is set aside for telephone service.

AT&T and Bell’s pipes don’t know the difference between video, audio, or web content because they are all digital data delivered to customers on an IP-based network.  Yet both AT&T and Bell only slap usage caps on their broadband service, claiming it somehow eases congestion, even though video content always uses the most bandwidth. (They have not yet figured out a way to limit your television viewing to “maintain a good experience for all of their customers,” but we wouldn’t put it past them to try one day.)

What last mile congestion problem?

Comcast’s argument for usage limiting one type of data while exempting other data falls into the same logical black hole.  Comcast’s basic argument for usage caps has always been it protects a shared network experience for customers.  Since cable broadband resources are shared within a neighborhood, the company argues, it must impose limits on “heavy users” who might slow down service for others.

We've heard this all before. Former AT&T CEO Dan Somers: "AT&T didn’t spend $56 billion to get into the cable business to have the blood sucked out of (its) veins."

But in a world where DOCSIS 3 technology and a march to digital video distribution is well underway or near completion at many of the nation’s cable operators, the “last mile” bandwidth shortage problem of the early 2000s has largely disappeared.  In fact, Comcast itself recognized that, throwing the usage door wide open distributing bandwidth heavy XFINITY TV over the Xbox console cap-free.

As broadband advocates and industry insiders continue the debate about whether this constitutes a Net Neutrality violation or not, a greater truth should be considered.  Stop the Cap! believes providers have more than one way to exercise their control over broadband.

Naked discrimination against web content from the competition is a messy, ham-handed way to deal with pesky competitors.  Putting up a content wall around Netflix or Amazon is a concept easy to grasp (and get upset about), even by those who may not understand all of the issues.

Internet Overcharging schemes like usage caps and speed throttles can win providers the same level of control without the political backlash.  Careful modification of consumer behavior can draw customers to company-owned or partnered content without using a heavy hammer.

Simply slap a usage limit on customers, but exempt partnered content from the limit.  Now customers have a choice: use up their precious usage allowance with Netflix or watch some of the same content on the cable company’s own unlimited-use service.

Nobody is “blocking” Netflix, but the end result will likely be the same:

• Comcast wins all the advantages for itself and its “preferred partners”;
• Customers find themselves avoiding the competition to save their usage allowance;
• Competitors struggle selling to consumers squeezed by inflexible usage caps.

It is all a matter of control, and that is nothing new for large telecom companies.

Back in 1999, AT&T Broadband owned a substantial amount of what is today Comcast Cable.  Then-CEO Dan Somers made it clear AT&T’s investment would be protected.

“AT&T didn’t spend $56 billion to get into the cable business to have the blood sucked out of [its] veins,” Somers said, referring to streamed video.

Obviously Comcast agrees.

Walden

When lawmakers talk about “unleashing” anything for “innovation,” it’s a safe bet we’re about to be treated to an anti-regulatory rant about how government rules are ruining everything for big business.  Rep. Greg Walden (R-Ore.) does not disappoint.

Walden is chairman of the Communications and Technology Subcommittee of the House Energy and Commerce Committee, an important place to be if you want to influence telecommunications policy in the United States.  Walden slammed the Federal Communications Commission this morning in an editorial piece in Politico, accusing the agency of regulating communications companies before they have a chance to engage in bad behavior:

Sometimes the FCC acts before thoroughly examining whether regulation is needed. It’s now time to stop putting the regulatory cart before the horse. That’s why this bill requires the FCC to survey the marketplace, identify a failure and conduct a cost-benefit analysis before imposing rules.

[...] When the FCC reviews a merger, it now often imposes unrelated conditions. These extraneous agreements may not correspond to any harm presented by the transaction, may not be justified industry-wide and, in some cases, are outside the commission’s jurisdiction.

Such bootstrapping is unfair to the singled-out parties. It also results in poor policy. Imposing extraneous conditions on a transaction that is not otherwise harmful is inappropriate. And if a transaction is harmful, imposing extraneous conditions cannot cure it. Merger conditions should be directly related to transaction-specific harms, and within the FCC’s general authority.

Walden’s concerns coincide with the corporate agendas of some of the nation’s largest telecommunications companies he oversees as chairman.  That may not be surprising, considering seven of the top 10 corporate contributors to his campaign fund are all telecommunications companies.

Walden's top campaign contributors (Source: Opensecrets.org)

Walden’s record on “innovation” is open to interpretation.  He is on record opposing Net Neutrality, has sought to “streamline” the FCC by hamstringing its authority, and has favored a variety of mergers and acquisitions that have effectively reduced competition for American consumers.

The FCC’s zeal for increased competition appears occasionally in its rulemakings, although the agency under Chairman Julius Genachowski can hardly be considered aggressive and out of control when it comes to some of the most contentious telecom issues that have arisen during the Obama Administration.  It only followed the Justice Department’s lead opposing the AT&T/T-Mobile USA merger.  It punted on Net Neutrality enforcement, doesn’t oppose Internet Overcharging, and has granted more mergers and acquisitions than it has sought to block.

FCC Chairman Julius Genachowski has not always successfully stared down industry efforts to consolidate and deregulate.

Some examples of “unrelated conditions” the FCC has imposed on mergers include no price hikes for consumers for a limited time (Sirius-XM), a discounted Internet service for poor families (Comcast-NBC Universal), and spinoffs of acquired cellular network assets in barely competitive markets (Verizon Wireless-Alltel).

Sirius-XM mostly kept to their agreement, but promptly raised prices when it expired, Comcast followed the FCC’s agreement to the letter but found ways to limit the number of qualified families, and Verizon Wireless sold some of their acquired Alltel assets to AT&T, which at least provided improved AT&T reception in certain markets they largely ignored earlier.

Consumer advocates would argue the FCC should never have approved these transactions in the first place, and the conditions the FCC imposed were so mild, they faced little opposition from the companies involved. But apparently even that is too much for Walden, who we have a hard time seeing opposing any of these mergers.  Besides, some of the largest companies donating to Walden’s campaign fund are already adept at working around the FCC, suing their way past the regulations they oppose.

Walden advocates the FCC only perform its oversight functions after the industry is proven to have imposed unfair, anti-competitive, and discriminatory policies against consumers, not to act to prevent those abuses in the first place.  In short, he wants the FCC to regulate only after the damage has been done. That would be akin to calling the fire department after your house burned to the ground. Companies would be free to walk away with their ill-gotten gains with little threat the FCC would punish bad behavior and fine the bad actors.

If you are Comcast, that is innovation.  If you are a consumer, it’s something else.

Skeptical Science produced this infographic of the Heartland Institute’s funding sources and where the money goes.

The Heartland Institute, a corporate-backed astroturf operation that has steadfastly supported cable and phone companies against the interests of consumers, has threatened legal action against activists, bloggers, and other journalists who published stories about recently-acquired documents connecting the group with major corporate donors.

Among telecommunications companies, both AT&T and Time Warner Cable show up in the alleged donor documents, which Heartland officials claim were obtained under false pretenses and, in some cases, were altered or forged.

Jim Lakely, communications director for the group, was unhappy:

We respectfully ask all activists, bloggers, and other journalists to immediately remove all of these documents and any quotations taken from them, especially the fake “climate strategy” memo and any quotations from the same, from their blogs, Web sites, and publications, and to publish retractions.

The individuals who have commented so far on these documents did not wait for Heartland to confirm or deny the authenticity of the documents. We believe their actions constitute civil and possibly criminal offenses for which we plan to pursue charges and collect payment for damages, including damages to our reputation. We ask them in particular to immediately remove these documents and all statements about them from the blogs, Web sites, and publications, and to publish retractions.

The fact the group implies it will take legal action against those who published stories not to the group’s liking will only draw added attention to the scandal.  Stop the Cap! has tangled with this group several times over the years whenever AT&T and Time Warner Cable’s corporate agendas are being challenged.

The group has steadfastly refused to release their donor lists, at one point telling us, “by not disclosing our donors, we keep the focus on the issue.”

Not really.  That’s because the first rule of politics is to “follow the money.”  Most of these groups do not sing their songs for free, and knowing who paid the songwriter can be very revealing.

The Associated Press found no evidence Heartland’s budget or fundraising documents leaked to the media were faked or altered:

Because Heartland was not specific about what was fake and what was real, The Associated Press attempted to verify independently key parts of separate budget and fundraising documents that were leaked. The federal consultant working on the classroom curriculum, the former TV weatherman, a Chicago elected official who campaigns against hidden local debt and two corporate donors all confirmed to the AP that the sections in the document that pertained to them were accurate. No one the AP contacted said the budget or fundraising documents mentioning them were incorrect.

Heartland can best salvage its reputation and put this behind them by releasing the names of their largest donors, letting consumers decide whether this organization truly represents their interests, or those of the corporations writing the big checks.  In addition to corporate contributions, Heartland’s operations rely on a single person identified only as “Anonymous Donor.” In the past six years, the man has given $14.26 million to the institute, nearly half its $33.9 million in revenue, according to the AP.

Grassroots this is not.