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Corrected: Massachusetts Mad: Comcast Blasted for Rate Increases from Springfield to Boston

Phillip Dampier — Tue, 24 Jan 2012 20:56:13 +0000

Courtesy: WCVB Boston

Correction: In an effort to concatenate two stories regarding Springfield, we erred in reporting about Springfield’s move to sell its municipal cable operation to Knology. That story referred to Springfield, Fla., not Springfield, Mass. We appreciate one of our readers bringing this to our attention, and we regret the error. –PMD

Comcast customers in Massachusetts are hopping mad over the latest round of rate increases from the state’s largest cable operator — the second in 10 months in some areas. Higher cable bills for customers will start arriving by early spring.

City officials in Boston expect eastern Massachusetts customers will face up to 2.9% more for basic service this spring. In western Massachusetts, Springfield city officials finally resolved a prolonged legal battle with the cable operator and granted the company a 10-year franchise renewal that preserves senior discounts for existing customers.

Boston mayor Thomas M. Menino said an examination of Comcast’s cable rates over the past few years proves deregulation “has failed” consumers across greater Boston. Menino says basic cable rates have increased by 80 percent in the three years since the city’s rate control agreement expired.

Menino wants restored authority to regulate cable rates, and has asked the FCC for permission to bring back the city’s oversight powers.

Click here to view the embedded video.

WCVB in Boston talks with city mayor Tom Menino about the latest round of rate increases for Comcast customers. Some Boston locals are responding by dumping cable television altogether. (2 minutes)

Comcast basic service will rise another 4.9 percent this spring, bringing the mostly local-broadcast-channel cable service to $16.58 a month.

The only other major cable provider in Boston, RCN, which serves mostly apartment buildings and other multi-dwelling units, is not planning to increase its prices on the lowest price tier. However, RCN already charges more than Comcast — $17.50 — for comparable service. Other RCN customers face general rate increases this spring.

Verizon says it has no plans to increase prices in Boston either. That statement was deemed ironic by some, considering the fact the phone company has never provided FiOS fiber-to-the-home cable service inside the city of Boston.

All affected providers blame increasing programming costs for the rate hikes.

Click here to view the embedded video.

WGGB in Springfield led a recent evening newscast with news Comcast and competing satellite providers are increasing rates in western Massachusetts, with local residents increasingly questioning the value of their cable-TV services. (2 minutes)

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Comcast Overcharged Philadelphia $875,576,662; Class Action Lawsuit Demands Refund

Phillip Dampier — Mon, 29 Aug 2011 16:23:32 +0000

Residents in greater Philadelphia overpaid Comcast more than $875 million dollars, thanks to the cable company’s alleged anti-competitive practice of building regional cable clusters that scare would-be competitors away.

Those are the primary allegations in a 2003 class action case brought against the country’s largest cable operator — a lawsuit Comcast has appealed, so far unsuccessfully. A three-judge panel of the 3rd Circuit on Tuesday delivered the latest blow to the cable company, denying Comcast’s efforts to get the case thrown out.

At issue is the cable industry’s practice of acquiring and trading cable systems with each another to create regional “clusters,” — large geographic areas all served by the same cable provider — and what that practice does to cable pricing. All the rage in the late 1990s and early 2000s, cable clustering largely put an end to multiple cable systems serving individual cities. In the 1980s and 90s, it was not uncommon to find up to four different cable systems serving different sections of a community. Philadelphia was no different, served by more than a half-dozen cable operators in the greater metropolitan region and surrounding counties.

In the late 1990s, the Court noted Comcast launched a major shopping spree to consolidate the entire area around one cable provider: Comcast. The lawsuit claims subscribers have paid the price ever since.

Comcast’s Cable Swaps and Acquisitions

April 1998: Comcast acquires 27,000 Marcus Cable customers in Harrington, Delaware, which is part of the Philadelphia Designated Market Area (DMA);
June 1999: Comcast acquires 79,000 Greater Philadelphia Cablevision customers in the city of Philadelphia;
January 2000: Comcast acquires 1.1 million Lenfest Communications customers in Berks, Bucks, Chester, Delaware, and Montgomery counties in Pennsylvania, and New Castle County in Delaware;
January 2000: Comcast acquires 212,000 Garden State Cablevision customers in Atlantic, Burlington, Camden, Cape May, Cumberland, Gloucester, Mercer, and Salem counties in New Jersey, which is part of the Philadelphia DMA;
December 2000: Comcast acquires 770,000 AT&T Cable customers in Eastern Pennsylvania (Berks and Bucks counties) and New Jersey, in return for trading 700,000 Comcast customers in Chicago with AT&T (Comcast would later win them back by acquiring AT&T Cable itself);
January 2001: Comcast acquires 464,000 subscribers in Philadelphia and nearby communities in New Jersey in a subscriber trade with Adelphia Communications Corp., wherein Comcast obtained cable systems and approximately 464,000 subscribers located primarily in the Philadelphia area and adjacent New Jersey areas. In return, Comcast turns over its subscribers in Palm Beach, Florida and Los Angeles, California to Adelphia.
April 2001: Comcast wins another 595,000 subscribers in the region in a trade with AT&T Cable;
August 2006: Adelphia implodes and cable companies including Time Warner Cable and Comcast pick over what’s left. Comcast manages to pick up another 41,000 former Adelphia customers that were originally headed to Time Warner in yet another subscriber swap;
August 2007: Comcast acquires Patriot Media and its 81,000 New Jersey customers located within the Philadelphia DMA.

When the acquisitions and transfers were complete, Comcast managed to build a major empire in southeastern Pennsylvania. In 1998, the company had just a 23.9 percent market share in the Philadelphia DMA. Comcast managed to control 77.8 percent of the market by 2002. Despite competition from satellite television and one struggling cable competitor — RCN, Comcast still controlled nearly 70 percent of the market as late as 2007.

Who Pays for the Shopping Spree? Comcast Customers, Say Plaintiffs

Six Comcast customers upset with the relentless rate increases that came with Comcast’s acquisitions joined forces and filed suit against Comcast in 2003. The plaintiffs charged Comcast with anti-competitive business practices and violations of the Sherman Act for building a monopoly presence in the market that also helped keep competitors at bay.

One plaintiff’s expert was able to calculate what he called “a conservative estimate” of how much Comcast has effectively overcharged customers in Philadelphia by preventing effective competition: $875,576,662.

That figure was hotly disputed in Comcast’s court appeal, but last Tuesday the Court rejected Comcast’s arguments. In fact, the Court found merit in the formula used to arrive at the amount of overcharging Comcast has allegedly engaged in — in Philadelphia alone. Comcast’s argument that customers enjoy lower pricing through promotions and other special pricing arrangements fell apart when the Court learned at least 80 percent of Comcast subscribers pay regular “list prices” for service, and the expert who created the ‘wallet damage‘ formula had taken that special pricing into account.

The plaintiffs suggest that had Comcast not engaged in system clustering, one or more of the area’s cable systems might have decided to compete against the other cable systems. In that scenario, customers might have been able to choose from Comcast, Lenfest Communications, Marcus Cable, and/or Patriot Cable for cable service, resulting in increased price competition. While there have been instances of traditional cable operators overbuilding into each other’s territories, those instances have been rare — a point Comcast made in an effort to have the case tossed out. Comcast’s case is that the majority of Americans are served by a single cable provider, but that’s not a problem because the industry faces increasing competition from satellite TV providers and, as of late, large phone companies.

But the Court found the reason for this lack of competition could be, as plaintiffs argue, the successful outcome of the alleged anti-competitive, cable system-clustering strategy.

As an example, a railway monopoly from 100 years ago could claim it isn’t economical for more than one railroad to serve a particular community, but that isn’t a problem because other forms of transportation exist to move goods and people. That argument would be based on a market reality created by the railway industry, which routinely bought out the competition through withering price wars, cross-subsidized by higher prices in other monopoly markets. The end effect was a shrinking number of competitive markets, increasing profits (and prices), and a strong deterrent for would-be competitors to enter the business.

A similar case has been brought by the plaintiffs struggling with high cable bills. In their eyes, cable customers paid for the Monopoly game board on which cable properties were traded or sold. When the shopping spree was complete, higher rates were the result, indefinitely.

The Case of RCN — Programming Denied

Most traditional cable companies do not compete in areas already served by another cable company. It’s a tradition some liken to a cartel, where companies carve up territories and enjoy the market benefits afforded by a lack of competition. But this model is also considered standard operating procedure by Wall Street and other private investors, who fear all-0ut price wars cutting revenues and destroying value and profits. But there are some companies whose entire mission is to challenge this economic model: the cable overbuilders. The business plan of the cable overbuilder is to challenge the status quo and deliver service where cable TV already exists and do so profitably.

One such overbuilder is RCN Corporation, which delivers competitive cable service in Boston, Washington, D.C., New York City, Chicago, and parts of the Lehigh Valley. RCN began operations in 1996 in Boston, just before the cable industry’s quest for clusters went into hyper-drive. Their plans to compete have been challenged by the ever-increasing concentration in the cable-TV marketplace ever since, and the company has had a particularly tough time attracting subscribers in the Philadelphia area. Much of RCN’s service area these days is limited to multi-dwelling units like high-rise condos and apartments, where wiring costs are lower.

One of the most effective ways to keep customers from switching to a competitor is to develop or maintain exclusive programming rights. If a Comcast customer discovered his favorite sporting events could only be seen with a Comcast subscription, that could be a deal-breaker for signing up with RCN. Before the 1992 Cable Act, the cable industry which owned and controlled a number of popular cable networks refused to sell those channels to would-be competitors (or charged unreasonable prices for access).

When this lawsuit was filed in 2003, RCN found itself locked out of Comcast’s SportsNet, just one of several regional sports networks that cable operators withheld from satellite and cable competitors. That’s because the 1992 Cable Act included a loophole: it applied only to networks distributed on satellite. Several regional sports channels were not on satellite, so they could, and were, legally withheld from competitors like RCN. That loophole was finally closed by the FCC last summer. But for more than a decade, RCN had to convince sports fans to sign up for a competing service that didn’t have one of the most popular sports channels on the lineup.

Satellite competitors DirecTV and DISH Network were in the same boat, and the legal case recognizes the impact: satellite TV competition in Philadelphia has a below-average percentage of the market, when compared to other cities.

Plaintiffs argued RCN never had fair access to programming, leaving them to compete with one hand tied behind their back. Even worse, they allege Comcast compelled local contractors into non-compete contracts agreeing not to work for any Comcast competitor, and signing customers up to unusually long contract terms with hefty cancellation penalties in RCN service areas.

All of these accusations were deemed credible by the Court, much to the objection of Comcast, which argued RCN was in serious financial distress and would never be a strongly viable competitor in Philadelphia. Last week’s Court decision found that ironic, accepting that RCN’s present condition could be, as plaintiffs allege, the result of the anti-competitive, unfair business practices Comcast is charged with.

The evidence on the record “demonstrates that Comcast’s alleged clustering conduct indeed could have reduced competition, raised barriers to market entry [by other competitors] … and resulted in higher cable prices to all of its subscribers in the Philadelphia Designated Market Area,” the court ruled.

Comcast: A Competitive Marketplace Begins And Ends Only at Home

One of the most-disputed elements in the case is determining how much, if any, damage was done to consumers in the greater Philadelphia area. Much of the plaintiffs’ case rests on pricing anomalies found in the Philadelphia region, where customers are alleged to be paying significantly higher prices for cable service and not enjoying a significant amount of competition. To build that case, lawyers measured cable rates and available competitors in the various counties in and around the city of Philadelphia.

This is also critical for determining the size of the “class” in the class action lawsuit. The larger the class, the greater risk of significant damages if the court rules against the cable company (or if the case reaches a settlement.) Plaintiffs claim their case should include all cable television customers who subscribe or subscribed at any time since December 1, 1999, to the present to video programming services (other than solely to basic cable services) from Comcast, or any of its subsidiaries or affiliates in Comcast‘s Philadelphia cluster.

They specifically defined the cluster as “areas covered by Comcast‘s cable franchises, or any of its subsidiaries or affiliates, located in the following counties: Berks, Bucks, Chester, Delaware, Montgomery and Philadelphia, Pennsylvania; Kent and New Castle, Delaware; and Atlantic, Burlington, Camden, Cape May, Cumberland, Gloucester, Mercer and Salem, New Jersey.”

Comcast counters the geographic market is exactly the size of one, single household. They argue that subscribers can only choose among video providers serving that customer’s specific home, so what cable competition exists in other counties or communities isn’t relevant.

The side effect of such an argument would be the end of a class action case, since the class size would be reduced from a number in the millions to just one, requiring every impacted consumer to file their own case.

The three judge panel was wholly unimpressed with Comcast’s argument, throwing it out and allowing the case to proceed.

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Boston’s Cable Conundrum: Mayor Upset With Comcast Rate Hikes, But Did Little to Bring Competition

Phillip Dampier — Tue, 10 May 2011 17:58:57 +0000

Menino

Boston Mayor Thomas Menino has problems with Comcast. The cable operator, long a dominant player in the city of Boston, has been raising basic cable prices for the last several years, and the mayor’s office has had enough. This week Menino filed a petition asking the Federal Communications Commission to give the city “emergency control” over the price of basic cable service in Boston — the only control permitted in the largely deregulated cable television marketplace.

Menino waved a study done at the behest of the city showing residents were paying substantially higher prices for the lowest level of service from Comcast. Basic Service, which includes 37 local over the air stations and a handful of shopping and public access channels costs $15.80 inside city limits — up from $9.05 in 2009. In nearby Cambridge, the same service costs $7.30 a month. What’s the difference? Cable rates are completely deregulated in the city, but smaller communities around Boston lack sufficient meaningful competition, so they are permitted by law to continue regulating rates for the lowest tier: Basic Service.

Now Menino wants those rates brought back under control for the benefit of seniors and low income residents, among the 10,000-15,000 local homes that subscribe to the economy service.

It’s just the latest challenge for Boston, which is among a few cities along the coast of the northeastern United States not benefiting from aggressive broadband and video competition between the phone and cable company. Just over 200 miles away, metropolitan New York and the bedroom communities in that state, as well as New Jersey and Connecticut, have access to super fast broadband from Verizon FiOS, Time Warner Cable, Cablevision, and Comcast — the latter predominately serving greater Philadelphia.

Boston has been bypassed for Verizon FiOS, is ignored by other potential cable competitors, and is stuck with poor-performing cable overbuilder – RCN, which has focused most of its efforts on multi-dwelling apartment and condo units in the city. The rest of Boston gets ‘take it or leave it’ service from Comcast or DSL from Verizon.

Comcast was quick to respond to Menino’s call for reregulation, noting they provide $5 senior discounts for their cable customers and offer cheaper service than the alternatives — $17.50 a month from RCN or between $30-35 for promotions from DirecTV and DISH Satellite.

Menino’s dealings with telecommunications companies in Boston have run hot and cold for years. In February, Menino appeared with Comcast senior vice president Steve Hackley to celebrate the opening of a Digital Connectors program for up to 2,800 low income households, paid for by federal stimulus grant money. Under the program, students who complete computer training courses receive discounted Comcast Internet service for $10.95 a month for the first year and $15.95 for the second year.

Boston

Menino’s office has often been a watchdog when it comes to Comcast fulfilling its franchise obligations, and the city had high hopes competition from RCN would extend a choice of cable providers to most city residents. That has not happened.

The city’s other telecommunications provider, Verizon, has been in contention with the city for several years. The trouble began in 2007 when Menino declared war on property tax exemptions for utility poles dating back to 1915, granted to telecom companies like Verizon. Four years later, that battle has culminated in Verizon literally wiring its fiber optic FiOS service around the city of Boston, refusing to deliver service inside it.

The promise of Verizon fiber has often gone unfulfilled or delayed in many larger cities, subject to bureaucratic delays not experienced in smaller communities. Some towns and villages in Massachusetts signed franchise agreements just a few months after the company came knocking.

One local official, not authorized to speak publicly on the matter, told Stop the Cap! many communities welcomed Verizon’s fiber optic initiative with open arms.

“You have to understand there is a different mentality among government officials in smaller towns than there is among larger cities,” the official tells us. “In our town of 35,000 when Verizon offered to wire competitive service in our area, we wanted to know where to sign and when they could get started.”

The official says the local government was concerned about making sure Verizon repaired any damage to local infrastructure, abided by local zoning rules, and guaranteed they would not bypass parts of the town. Negotiators also fought for funding to upgrade equipment for the community’s public access channels, but never went into the negotiations thinking about how much they could extract from the phone company.

“In larger cities in this state, there is a definite mentality that Verizon represents a golden goose ready and willing to lay golden eggs in return for franchise agreements,” the official told us. “Maybe that is true, but when you are in a smaller town, you recognize the degree of willingness to invest capital to tear out old wires and replace them with fiber is far less here than a city like Boston, which has the potential of many more customers.”

Boston, like other large cities, prepared for protracted negotiations with the phone company over the new fiber service. At the same time, Mayor Menino infuriated Verizon when he won his property tax lawsuit against the company, collecting $5 million in tax payments that one city official rubbed in.

Ronald W. Rakow, Boston’s commissioner of assessing, told the Boston Globe at the time: “We will actually be sending a bill to them for that later today,’’ Rakow said. “Don’t want to let the ink dry.’’

No Verizon FiOS for Boston

The argument over property taxes may have been the final straw for Verizon FiOS in Boston. Menino suspected as much, telling the Globe “they insinuated that we weren’t going to get it because of my position on telecommunications.’’

Even then-Verizon CEO Ivan Seidenberg warned the city during a speech at the Boston College Chief Executives’ Club of Boston “to be careful when considering new taxes or regulations.”

Verizon has since stopped expanding its FiOS service to new cities.

“We knew as the financial crisis grew we were smart to sign up earlier rather than later, because if we didn’t, we would never have the service today,” the local official tells us. “I have sympathy with local officials in every city trying to do what is best for their residents, but anyone who understands wired telecommunications should know these kinds of projects are exceedingly rare — grab them when you have the chance.”

Just a few years later, the impact of earlier decisions not to hurry competition into the city of Boston and the city’s tax policies have become clear:

Comcast may be forced to reduce their Basic Service rate, but nothing prevents them from increasing Digital Service cable rates to make up the difference;
RCN’s network has languished, providing competitive choice to just 15,000 local residents. Comcast serves at least 170,000;
Verizon has no plans to offer FiOS in the city indefinitely;
Menino’s victory claim that Verizon should pay its fair share in property taxes seems less victorious today as the phone company began passing on the new taxes to ratepayers as a “Massachusetts Property Tax Recovery Surcharge” in March, 2010.
No other competitor has appeared on the horizon willing to take on Comcast in the city of Boston.

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Philly Gets Ready to Rumble: Comcast, RCN, and Verizon Prepare for Broadband Battle

Phillip Dampier — Thu, 23 Jul 2009 04:03:04 +0000

Photo by K. Ciappa for GPTMC

The city of Philadelphia will witness a three-way battle for your broadband dollar in the coming months as three competitors race to upgrade their networks to deliver the kind of “blazing fast speeds” only dreamed about in much of the rest of the country.

Comcast, the dominant cable provider in Philadelphia, today announced 50Mbps broadband service for greater Philadelphia residents for $99 a month. The new, faster speeds are available because Comcast’s Freedom Region has been upgraded to the DOCSIS 3 standard. Comcast’s Freedom Region includes metro Philadelphia and the counties of Bucks, Chester, Delaware, and Montgomery, as well as northern Delaware and southern New Jersey.

Comcast also doubled the speeds of many of its broadband customers today. Here’s a roundup of the affected tiers:

Performance — 12Mbps/2Mbps — $42.95/month
Performance Plus — 16Mbps/2Mbps — $52.95/month (no change of upload speed from previous tier)
Ultra — 22Mbps/5Mbps — $62.95/month*
Extreme 50 — 50Mbps/10Mbps — $99/month*

*DOCSIS 3 modem upgrade required.

Meanwhile, cable overbuilder RCN, which serves parts of Philadelphia and the Lehigh Valley to the west announced it was aggressively moving to upgrade its own network to DOCSIS 3, and is taking the dramatic step of dumping all of its analog channels from the lineup, switching to all-digital cable, starting in Allentown. RCN has already confirmed it will offer up to 50Mbps service in upgraded areas, but has the capacity to expand to 100Mbps service if needed. RCN had been planning to launch upgraded DOCSIS 3 service starting in New York and Boston, but market conditions in Philadelphia will make it necessary to expand there as well.

The newest player in town is Verizon, whose fiber to the home FiOS service is capable of the fastest download and upload speeds in the marketplace. Verizon has offered packages with equal download and upload speeds (20Mbps/20Mbps being the most common) in the past, but is capable of achieving even faster speeds. It currently provides 50Mbps/20Mbps service in many areas.

“We have a lot of work ahead of us. We will wire the entire city with the nation’s most advanced fiber-optic network, starting with Chestnut Hill, and we expect the first customers to have FiOS services by later this year,” Verizon spokesman Eric Rabe wrote in a blog post. “Other neighborhoods where we will begin building soon are Brewerytown, East and West Mount Airy, South Philadelphia, and the Kensington sections of the city.”

Verizon expects the entire city to be FiOS-ready by 2016, reaching about 660,000 houses and apartment buildings. It is already available in 182 communities surrounding the city.

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