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Stop the Cap Files Opposition to Charter-TWC-Bright House Merger With FCC



Applications of Charter Communications, Inc., Time
Warner Cable Inc., and Advance/Newhouse
Partnership for Consent to the Transfer of                        MB Docket No. 15-149

Control of Cable Television Relay Service


Statement of Opposition

(Click here to download a copy in PDF format.)

October 10, 2015

Stop the Cap! is a Rochester, N.Y.-based consumer group founded in 2008 to fight against the introduction of artificial limits on broadband usage (usage caps, consumption billing, speed throttling) and to promote better broadband speeds and service for consumers. Our group does not solicit or accept funding from lobbyists, companies, or others affiliated with the telecommunications industry. We are entirely supported by individual donors who share our views.


It is our view that the application of Charter Communications to effectively acquire Time Warner Cable and Bright House Networks offers no compelling public interest benefit and is therefore not in the public interest.

Our organization represents the interests of consumers and customers who face ever-growing broadband and television bills. Since its founding in 2008, we have witnessed a gap between the promised benefits of telecom mergers and what actually materializes for customers. Our conclusion is that consumers rarely benefit from these transactions. Prices continue to rise, customer service does not significantly improve, competition suffers, and conditions imposed by regulators to protect consumers or improve service are either not meaningfully met, expire too soon, or are too limited to be useful.

Charter’s claimed public interest benefits from its acquisitions are woefully inadequate and will, in fact, harm consumers if this merger is permitted.

The proposal asks the Commission to approve Charter’s acquisition of not one, but two established cable providers, one considerably larger than Charter itself:

  • Time Warner Cable, the second largest U.S. cable operator with more than 11 million residential and business customers[1];
  • Bright House Networks, the sixth largest U.S. cable operator with approximately 2.5 million customers.[2]

Charter Communications is about half the size of Time Warner Cable.[3]

Charter's broadband customer satisfaction scores are nothing to write home about.

Charter’s broadband customer satisfaction scores are nothing to write home about. Time Warner is no prize either, especially in areas where Maxx upgrades are not yet available.

In the 2015 J.D. Power U.S. Residential Television Service Provider Satisfaction Study, Charter rated poor — second to last place behind five other providers in the North West region, fourth from last behind six others in the South region, and third from last behind five other providers in the West. In fact, at no time did Charter rank anything higher than “about average” for television, broadband, and telephone service and often scored worse.[4]

This is a critical measurement of how Charter is likely to perform in areas currently served by Time Warner Cable and Bright House, should the merger be approved.

“The ability to provide a high-quality experience with all wireline services is paramount, as performance and reliability is the most critical driver of overall satisfaction,” said Kirk Parsons, senior director and technology, media & telecom practice leader at J.D. Power. “The fact that households continue to choose to upgrade their wireline connection to digital service is a testament to its improved performance and benefits, such as higher quality video and faster Internet speeds.”

FCC Chairman Thomas Wheeler has publicly stated his four preferences for telecommunications policies that promote competition and foster enhanced service.[5]

  1. “First, where competition exists, the Commission will protect it,” Wheeler said. “Our effort opposing shrinking the number of nationwide wireless providers from four to three is an example. As applied to fixed networks, the Commission’s Order on tech transition experiments similarly starts with the belief that changes in network technology should not be a license to limit competition.”
  2. “Communications policy has always agreed on one important concept: the exercise of uncontrolled last-mile power is not in the public interest,” Wheeler said. “This has not changed as a result of new technology. When network operators have unrestrained last-mile power, public policy can step in to protect consumers and innovators. When cable companies, for instance, were accused of using their control over the last-mile distribution of video programing to harm competition by keeping content from others, Congress stopped that practice in the 1992 Cable Act. There are two important lessons from this: First, last-mile power cannot be a lever for gaining an unfair advantage. Second, rules of the road can provide guidance to all players and, by restraining future actions that would harm the public interest, incent more investment and more innovation.”
  3. “Where meaningful competition is not available, the Commission will work to create it. For instance, our efforts to expand the amount of unlicensed spectrum create alternative competitive pathways. And we understand the petitions from two communities asking us to pre-empt state laws against citizen-driven broadband expansion to be in the same category, which is why we are looking at that question so closely.”
  4. “Where competition cannot be expected to exist, we must shoulder the responsibility of promoting the deployment of broadband. One thing we already know is the fact that something works in New York City doesn’t mean it works in rural South Dakota. We cannot allow rural America to be behind the broadband curve. Our universal service efforts are focused on bringing better broadband to rural America by whomever steps up to the challenge—not the highest speeds all at once, but steadily to prevent the creation of a new digital divide.”

We will return to these four themes in our statement to see if Charter’s application helps or hinders these priorities. It is our contention Charter’s application does not meaningfully advance the stated goals of the Chairman or the Commission. In fact, Charter’s proposal impedes achievement of some of these goals significantly.

In our presentation, we will regularly refer to Charter’s existing product suite, usually referred to as “Charter Spectrum.” We will also refer to two different types of service from Time Warner Cable.



On January 30, 2014, Time Warner Cable announced its new TWC Maxx initiative that substantially improved broadband speeds for customers without a corresponding rate increase. The upgrade also introduced a new class of cable equipment for video customers offering an enhanced viewing experience, increased plant/service reliability, improved customer support – including more options for in-home service calls, and retained and improved existing budget-priced broadband tiers for fixed and low-income customers.[6]

We will therefore refer to both Time Warner Cable Maxx-upgraded service areas defined above and “legacy service areas” that are currently awaiting Maxx upgrades and now offer slower top Internet speeds ranging from 50-100Mbps.

It is our contention that Charter’s proposal to bring improved broadband speeds, better set-top boxes, faster upgrades, and a three-year commitment to voluntarily adhere to Net Neutrality/Open Internet policies and not impose usage caps on residential broadband service offers little because Time Warner Cable Maxx already offers consumers a more compelling offer on an upgrade timeline nearly equivalent to that proposed by Charter Communications.

Time Warner Cable has also never been credibly accused of violating Net Neutrality principles, is unlikely to do so in the future, and has repeatedly insisted it will not impose compulsory usage caps on its customers. We also argue Charter Communications’ heavy indebtedness as a result of this transaction will likely pose a challenge to complete the company’s promised upgrade plan and its ongoing operations.

In short, consumers are much better off remaining Time Warner Cable and Bright House Networks customers as opposed to Charter Communications customers.

Should the FCC ultimately disagree with our contention, we urge you to impose our ideas for strong and meaningful conditions to protect consumers. Without this, we fear the executives of both companies and their shareholders will be the only ones to actually benefit from this transaction. Consumers will be left with little more than a higher bill.


charter spectrum logoCharter Communications’ proposition to the Commission and customers is to deliver a more compelling product suite offering faster Internet speeds, better set-top equipment, and a three-year commitment to adhere to the Commission’s Open Internet principles and not impose usage caps or modem rental fees on customers.

While on the surface these commitments may seem laudable, when they are closely examined it quickly becomes apparent they offer little to Time Warner Cable customers, particularly the approximately 45% of which will have been upgraded to “Maxx” service by the end of 2015.[7]

Charter customers can generally choose from two tiers of Internet service, according to Charter’s website[8]:

We offer two different Charter Internet connection packages:

Plus – up to 30Mbps Download and 4Mbps upload

Ultra – up to 100Mbps Download and 5Mbps Upload

With Charter Internet Ultra, network speeds can reach up to 100 Megabits per second (Mbps). Your exact speed will depend on the service level to which you subscribe.

Charter charges new customers an introductory monthly price ranging from $29.99 (when Internet service is bundled with video/phone service) to $39.99 (Internet-only service) for its 60Mbps Standard broadband tier.[9] It is this promotional rate Charter is proposing to extend to Time Warner Cable and Bright House Networks customers. But Charter does not commit to a specific time frame under which this promotional rate will apply to these customers. According to Charter’s disclaimer, the promotional rate expires after one year, after which the rate resets to a “standard rate,” currently $59.99 a month.[10]

speed-plan-chart-2014In contrast, Time Warner Cable offers a much larger variety of Internet tiers, starting at $14.99 a month and generally increasing in $10 increments, based on offered speed.[11] In legacy service areas, Time Warner Cable’s pricing can be more compelling, even with the slower Internet speeds, because income-challenged consumers may feel a need to buy service based on price, not performance. Charter all but eliminates these lower-cost options, except in limited circumstances where a customer manages to meet onerous requirements to qualify for a low-income broadband discount plan.

Achieving faster Internet speeds is another priority for Chairman Wheeler. At a speech last fall at 1776, the Chairman said, “a 25Mbps connection is fast becoming ‘table stakes’ in 21st century communications.”[12]

Both Time Warner Cable and Charter Communications will deliver twice or more that minimum speed as their Standard tier offering. Time Warner already achieves this goal in their Maxx service areas, where 50Mbps is the new Standard speed tier. Charter proposes to take more than two years to upgrade Time Warner Cable customers to an incrementally faster 60Mbps speed tier. Additionally, Time Warner Cable Maxx customers are assured they can further upgrade that speed in increments up to 300Mbps. Charter, in contrast, offers most customers a maximum of 100Mbps.[13]

The most important question before the Commission is which cable operator is better positioned to deliver the services customers want and/or need. We argue Time Warner Cable and Bright House, not Charter Communications, are both in a stronger position to deliver.

Since the termination of the Comcast-Time Warner Cable merger, Time Warner Cable has responsibly invested in their infrastructure without assuming an irresponsible amount of debt. Bright House Networks’ owners have taken the company private, but their ongoing investments in a robust Wi-Fi platform, their high consumer satisfaction scores, and their investments in ongoing upgrades to meet challenges of competitors like Verizon FiOS suggest the company is in healthy financial shape.

Time Warner Cable CEO Robert Marcus reported significant progress in their first quarter 2015 report to shareholders and customers, despite the distraction of the Comcast merger[14]:

Over the past 16 months, we’ve made significant investments to improve our customers’ experience:

  • Investing more than $5.2 billion to, among other things, improve the reliability of our network and upgrade customer premise equipment – including set-top boxes and cable modems – with the latest technologies and expand its network to additional residences, commercial buildings and cell towers;
  • Launching TWC Maxx, which features greater reliability, all-digital video, advanced TV services, standard tier of Internet speeds at 50 Mbps, and higher tiers of service up to 300 Mbps. New York, Los Angeles and Austin are complete; Dallas, San Antonio and Kansas City are underway; Charlotte, Raleigh and Hawaii are slated for later this year; and San Diego is expected to be done in early 2016;
  • Introducing Enhanced DVR, a six-tuner set-top box that allows customers to record up to six shows simultaneously and store up to 150 hours of HD content;
  • Increasing the number of Cable Wi-Fi hotspots available to our customers to 400,000;
  • Rolling out our cloud-based video guide to 8 million set-top boxes to date. The guide also makes it easier to browse our On Demand library, which now sits at 30,000 free and paid titles and continues to grow;
  • Expanding our industry-leading TWC TV app – which allows customers to watch live TV and On Demand content and control and program their DVR from inside and outside the home. TWC TV is now available on Xbox One, Xbox 360, Amazon Kindle Fire HD and HDX tablets, Android and IOS phones and tablets, Fan TV, PCs, Samsung TV and Roku;

Serving customers on their schedules rather than ours. We expanded one-hour appointment windows across the company and in Q1 met that window 97 percent of the time. We continue to add nighttime and weekend appointments.



Since that report, Time Warner Cable has announced new Maxx service upgrade areas – Greensboro and Wilmington, N.C. Marcus has indicated additional cities will receive upgrades in 2016.[15]

On the January 29, 2015 quarterly results conference call with investors, Marcus indicated Maxx upgrades delivered tangible benefits to the company, including increased customer satisfaction, higher network reliability, and a stronger product line.[16] Based on those factors, it would be logical to assume Time Warner Cable would continue its upgrade project, and indeed Marcus confirmed this in his remarks:

“Our aim is to have 75% of our footprint enabled with Maxx […] by the end of [2016], and my guess is we’re continuing to roll it out beyond that,” said Marcus. “So the only question is prioritization, and obviously as we think about where to go first, competitive dynamics are a factor. So that includes Google, although it’s not explosively dictated by where Google decides to go. In fact I think we announced the Carolinas before Google did their announcement this week. So competitors are certainly relevant obviously.

At the rate Time Warner Cable has been rolling out Maxx upgrades, which were first announced on January 30, 2014[17], with 45% of its service area upgraded within 23 months, it is likely the company would complete its Maxx upgrade to all of its service areas within the next 24-30 months. Notably, the staff of the New York Department of Public Service found, while investigating this deal, “there is no indication that Petitioner’s plan for converting to all-digital in New York is any different from Time Warner’s existing plan.”[18]

Charter’s upgrade proposal is, in fact, generally inferior to what Time Warner Cable is accomplishing on its own. We strongly recommend the Commission carefully consider whether Charter’s proposal is as truly compelling as they claim.

twc maxxWe are also very concerned about Charter’s plans to deliver affordable Internet access. Chairman Wheeler expressed his concerns about the digital divide in broadband. The cost of access is perhaps the most important factor for getting broadband service in income-challenged households. If Charter’s price is too high, many will go without service.

Charter has no plans to continue Time Warner Cable’s $14.99 Everyday Low Price Internet service – a very important offer for low income residents and senior citizens who are unable to afford the nearly $60 regular price both companies charge for their 50 or 60Mbps tiers. Time Warner Cable offers this $14.99 tier without preconditions, restricted qualifiers, contracts, or limits on what types of services can be bundled with it. Any consumer can buy the service and bundle it with Time Warner Cable telephone service for an additional $10 a month, which offers a nationwide local calling area, as well as free calls to the European Union, Mexico, Puerto Rico, and several Asian nations.

The loss of a $25 plan that includes basic Internet access and a bundled, 911-capable telephone line would be devastating to low-income households and senior citizens. During the Comcast-Time Warner Cable merger hearings in New York, no topic elicited as much interest as Internet affordability and the onerous restrictions cable operators place on their income-qualified budget Internet plans.[19] The same concerns exist today with Charter’s application. Time Warner Cable clearly offers a superior product line for these customers, including two other Internet service tiers offering stepped up Internet speeds in $10 increments. These options would be unavailable from Charter.

Charter’s proposed solution to serve low-income customers is adoption of Bright House Networks’ Connect2Compete program, which offers restricted access to $9.95/month Internet service for those who qualify.

connect2competeStop the Cap! investigated Bright House Networks’ existing offer in a report to our readers in June 2015, and we urge the Commission to look much more closely at the specific conditions Bright House customers have had to endure to qualify to subscribe[20]:

1) You must have at least one child qualified for the National School Lunch Program. They need not be enrolled now.

2) You cannot have been a Bright House broadband customer during the last three months. If you are a current customer, you must first cancel and go without Internet service for 90 days (or call the phone company and hope to get a month-to-month DSL plan in the interim.)

3) If you have an overdue bill older than 12 months, you are not eligible until you pay that bill in full.

4) Bright House does not enroll customers in discounted Internet programs year-round. From a Bright House representative:

“We do participate in this particular program, however, it is only around September that we participate in it. This is a seasonal offer that we have which can only be requested from the middle of August to the middle of September, which is when most start up with school again for the year.”

5) Bright House does not take orders for the Low-Income Internet plan over the Internet. You have to enroll by phone: (205) 591-6880.

Families fall into poverty every day of the year, and poverty-stricken families move from one school district to another every day of the year. So it’s horribly unfair to tell them they’d qualify for this program if only they had fallen into poverty sometime between the middle of August and the middle of September.

It has been our experience covering service providers across all 50 states that most design these low-cost Internet access programs with revenue protection first in mind. Charter Communications is no different. As with Comcast, Connect2Compete is only available to families with school age children. Applicants face an intrusive, complicated, and time-restricted enrollment process that threatens to dampen and discourage participation.

Charter’s claimed interest to meet the needs of low-income customers might be more honorable if not for their insistence otherwise-qualified existing customers cannot downgrade their regular price broadband plan to Connect2Compete unless they voluntarily go without Internet access for three months.

Time Warner Cable goes out of its way to advertise "No Data Caps."

Time Warner Cable goes out of its way to advertise “No Data Caps.”

We strongly recommend Charter Communications be compelled to continue Time Warner’s $14.99 Internet plan, but at speeds no less than 25Mbps, the minimum definition of entry-level broadband by the FCC. We also recommend Charter be required to further discount this plan to $9.95 a month for qualified customers who meet a simple income test the Commission can define and establish. These discount programs should not just be available to families with school-age children. Everyone needs affordable Internet access, whether you are single and looking for your first job or a fixed income senior citizen.

All restrictions for existing customers or those with an outstanding balance must be prohibited and sign-ups must be accepted 365 days a year with re-qualification occurring not more than once annually.

Charter’s broadband offer for lower-income Americans is inadequate, and so is their plan for customers who need enhanced service.

Time Warner Cable Maxx delivers a more compelling offer for consumers and small businesses that need much faster Internet access. Charter’s upgrade will offer customers two choices: 60 or 100Mbps service. Time Warner Cable Maxx offers considerably more[21]:

chartersucksCharter Communications’ commitment to not impose “usage caps” for three years is inadequate. As we have learned from Comcast, the industry definition of a “usage cap” differs widely from the definition understood by most consumers.

Charter’s commitment must be expanded to prohibit all forms of usage pricing, such as those similar to what Comcast is market testing in several of its service areas.[22] In these markets, Comcast has established an arbitrary usage allowance and charges punitive overlimit fees to customers that exceed it. Comcast has repeatedly denied it has “usage caps” because its so-called ‘data plans’ allow customers to voluntarily exceed their usage allowance, at a cost. Without a commitment Charter will also not impose usage-based pricing, its commitment to regulators not to impose “usage caps” is largely meaningless.

More concerning, Charter Communications has a history of capping their customers’ usage. Less than three months before announcing it would acquire Time Warner Cable, Charter Communications quietly dropped usage caps in place on its broadband plans since 2009, without explanation.[23] The FCC itself is investigating this and other related issues as part of this proceeding.[24]

internet limitConsumers have shown no interest in usage-based pricing or usage-capped wired Internet and strongly prefer unlimited access. One only need look at Time Warner Cable’s own results when offering an optional discounted Internet plan for customers volunteering to limit their usage.

Time Warner Cable CEO Rob Marcus noted customers strongly want to keep their unlimited use plans, even if they cost more. Speaking at the Deutsche Bank Media, Internet, and Telecom Conference, Marcus noted:

“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.”[25]

Marcus has repeatedly made it clear compulsory usage caps are off the table at Time Warner Cable – a lesson they learned after customers pushed back and forced them to shelve a usage cap experiment planned for Rochester, N.Y., Greensboro, N.C., and Austin, San Antonio, and Beaumont, Tex. in April 2009[26]. The company has never raised the possibility of compulsory usage limits or usage-based billing again.

“We have no intention of abandoning an unlimited product we think that something that customers value and are willing to pay for,” said Time Warner Cable CEO Robert Marcus. “The way we’ve approached usage-based pricing is to offer it as an option for customers who prefer to pay less because they tend to use less. And we’ve made those available at 5 gigabytes per month and 30 gigabytes per month levels.[27]

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.

Time Warner Cable again offers a superior choice for Americans, and it is an important one. Chairman Wheeler said “last-mile power cannot be a lever for gaining an unfair advantage.” With many consumers having no practical choice for an alternative broadband provider, allowing Charter to impose usage limits or forcing customers into even higher-priced usage billing plans would deliver a major unfair advantage into the hands of the cable operator, always concerned with protecting its cable television package from emerging online video competition.

In fact, almost all of Charter’s so-called customer-friendly commitments and policies have a very unfriendly expiration date of just three years, which should be unacceptable to the Commission. There is no reason Charter cannot extend its commitments to not charge modem fees, adhere to the basic principles of Net Neutrality, and not impose usage caps or other forms of usage billing permanently. Without such a commitment, consumers could soon pay much higher prices for broadband service, and without robust competition unlikely to develop over the next three years, there will be every incentive for Charter to further boost earnings by imposing modem fees and usage pricing on its customers.

One of the strongest incentives for rate increases is the level of debt Charter Communications will assume in this transaction. The Department of Public Service staff in New York concluded New Charter’s debt and lowered credit rating “represents the single most substantial risk of the proposed transaction.”[28]

Debt servicing costs and more expensive credit are both deterrents to investment and are likely to limit the scope of Charter’s ongoing system upgrades and maintenance. Charter is a much smaller cable operator than Time Warner Cable, and is itself still in the process of repairing and upgrading its own cable systems and those it acquired in earlier acquisition deals. Time Warner Cable, in contrast, is in a much stronger financial position to carry out its commitments associated with the Maxx upgrade program.

Charter’s general offer to consider expanding service into unserved areas is vague, or has been redacted. We remind the Commission the past history of winning expansion commitments from cable operators who rely on Return On Investment (ROI) formulas to determine which homes and businesses they will serve have met with limited success.

The pervasive problem of rural broadband availability is unlikely to be resolved substantially by this transaction without the strongest buildout requirements. But even that is unlikely to be of much help for large areas outside of existing video franchise areas.

Compelling Charter Communications to adopt universal service obligations within all existing Time Warner Cable and Bright House franchise areas may be a good start. Under such a requirement, any consumer or business that wants cable service and lives within the geographic boundaries of an existing franchise area would receive it upon request without construction fees, surcharges, or other passed-along fees to reach that customer, regardless of their distance from the existing cable plant or ROI formula. The largest impact of this would be to extend cable service into business parks and commercial buildings, which often lack cable service, but many suburban and exurban residential customers would also benefit. This also would achieve the Chairman’s goal to facilitate rural broadband where incumbents have generally failed to provide the service.

consumer reportsThe Commission must carefully consider Charter’s financial capacity to meet these obligations as well. No commitment is worth much if a company ultimately fails to deliver on it.

An overburdened cable operator is also unlikely to make substantial investments in improving customer service, and that makes the risk of depending on Charter Communications to improve Time Warner Cable’s already poor customer service rating doubtful. It also risks the much higher scores Bright House customers have given to that company for its superior customer service.

Competition is the biggest incentive to improve customer service and responsiveness, and that is unlikely to deliver much pressure on cable companies like Charter over the next few years. In fact, we argue customer service is likely to deteriorate in the short term because of the disruptiveness of any ownership change and eventual billing system integration.

Consumer Reports already rates Time Warner and Charter’s Internet Service poorly[29]:

  • Charter: 63 (Reader Score), Poor Value, Fair Reliability, Good Speed, Mediocre Phone/Online Support, Fair In-Home Support
  • Time Warner Cable: 57 (Reader Score), Poor Value, Fair Reliability, Fair Speed, Mediocre Phone/Online Support, Fair In-Home Support

Charter Communications’ proposed benefits to Time Warner Cable and Bright House cable television customers are also weak and not compelling. Both Time Warner Cable and Charter proposed to move to all-digital cable television to free up bandwidth to offer improved broadband before the merger deal was announced. Bright House was also headed in the same direction.

badbillWhile consumers clamor for smaller, less-costly cable television packages, Charter Communications’ CEO Thomas Rutledge is credited for inventing the “triple play” concept of convincing customers to package more services – broadband, television and telephone — together in return for a discount. Reuters cited his preference for “simplified pricing,”[30] which is why Charter offers most customers only two options for broadband service and one giant television package dubbed Spectrum TV containing more than 200 channels.[31]

Unfortunately, any benefits from an all-digital television package are likely to be diluted when customers get the bill. Currently, many Time Warner Cable customers watch analog channels on television sets around the home without the need to rent a costly set top box. Any transition to digital television will require the rental of a set top box or purchase of a third-party device to view cable television programming. These can represent costly add-ons for an already high cable bill.

With approximately 99 percent of customers renting their set-top box directly from their pay-tv provider, the set-top box rental market may be worth more than $19.5 billion per year, with the average American household spending more than $231 per year on set-top box rental fees, according to findings from Senators Edward J. Markey (D-Mass.) and Richard Blumenthal’s (D-Conn.) query of the top-ten pay-tv multichannel video programming distributors (MVPDs).[32]

Passed by Congress in December, the STELA Reauthorization Act of 2014 repealed the set-top box integration ban, which enabled consumers to access technology that allowed use of a set-top box other than one leased from their cable company. Without the integration ban, by the end of this year, cable companies will no longer be required to make their services compatible with outside set-top boxes, like TiVo for example, bought directly by consumers in the retail marketplace.

American cable subscribers spend, on average, $89.16 a year renting a single set-top box. The average set-top box rental fee for each company was used to calculate an overall set-top box rental cost average across companies: $7.43 a month, or $89.16 per year. Considering many homes rent a DVR box to make and view recordings and maintain less-capable boxes on other televisions, the total cost adds up quickly. The average household spends $231.82 a year on set-top box rental fees, according to Sens. Markey and Blumenthal.

Charter proposes to introduce a new generation of set top boxes but as far as we know, has not disclosed the monthly cost of these IP-capable boxes to subscribers. We do note the current generation of digital set-top boxes leased by Charter cost customers $6.99 a month each, slightly less than the national average.[33] We anticipate this fee may rise after the introduction of more advanced equipment. We note Charter also charges its television customers in a city like St. Louis an extra $6.05 a month for the “Broadcast TV Service Charge” and $4.99 a month for “Whole House Wire Maintenance.”[34]

Other points the Commission should consider in reviewing this transaction:

  1. While it is true Charter and Time Warner don’t compete for the same customers, it is inaccurate to suggest the transaction will not alter competition. Cable industry consolidation is underway, in part, to help larger combined operators secure better volume discounts for increasingly expensive video programming.AT&T’s primary motivation to acquire satellite provider DirecTV was to secure better prices for video programming, both for DirecTV customers but more importantly for its own, much smaller, U-verse TV operation.[35]The cost barrier for new, directly competing entrants into the cable television business is well-recognized, especially by smaller independent cable television providers that lack the ability to secure similar volume discounts for themselves. The American Cable Association, representing small operators, warned the FCC “existing providers of both broadband and MVPD services and new entrants will be deterred from expanding their broadband networks or otherwise undertaking new builds” as a result of increasing programming costs.[36]As a result, it is unlikely a new provider will be able to develop a sustainable business model that includes cable television while paying wholesale programming costs that are dramatically higher than what combined companies like New Charter will pay.
  2. The Commission must insist that Time Warner Cable customers in legacy service areas be treated the same as those already upgraded to Maxx service. If the deal is approved, Charter must be compelled to commit to continue Time Warner Cable’s Maxx upgrade initiative across the entire footprint of Time Warner Cable’s former service areas, to be completed within 30 months. We also agree with the staff recommendation of the N.Y. Department of Public Service that Charter also be compelled to upgrade its facilities to support gigabit broadband, but this should be extended to include all of its service areas, not just the largest cities.This does not pose a significant challenge to cable operators. With the upcoming introduction of DOCSIS 3.1 technology, operators even smaller than Charter will support 1Gbps broadband speeds as they drop analog television signals. Suddenlink[37], MidContinent[38], Cox[39], and Mediacom[40] already have gigabit deployment plans underway.
  3. The Commission must establish and enforce meaningful enforcement mechanisms should Charter fail to achieve its commitments as part of this transaction. Cable consolidation has never significantly benefited consumers. Charter is not guaranteeing Time Warner Cable or Bright House customers will receive a lower bill as a result of this merger. Nor is it committing to pass along the lower prices it will achieve through negotiations for wholesale video programming volume discounts. Cable rates, especially for broadband, will continue to increase. Without meaningful competition, there is no incentive to give consumers a better deal or better service.That is why if the Commission feels it must approve this transaction, the conditions that accompany it to achieve a true public interest benefit must be meaningful, directly relevant to the majority of customers, and ongoing.

Cable operators know once they secure a franchise or become the incumbent provider, no other cable company will negotiate with city officials to take over that franchise if the current provider’s application is denied during renewal. Once Charter (or any other cable company) establishes a presence, there is little or no chance a community will be able to get rid of that provider if it fails to perform. That is why any franchise transfer that comes from an acquisition or merger must be treated with the upmost seriousness. Customers will likely live with the decision the Commission makes for the next 10-20 years or more.

just_say_noAs the Commission must realize, this transaction does not just involve entertainment. Recently, the Obama Administration declared broadband Internet access a “core utility.”[41]

“Broadband has steadily shifted from an optional amenity to a core utility for households, businesses and community institutions,” according to a report from the administration’s Broadband Opportunity Council. “Today, broadband is taking its place alongside water, sewer and electricity as essential infrastructure for communities.”

Our group strongly believes regulators should not take a risk on Charter’s less-then-compelling offer when Time Warner Cable and Bright House have both demonstrated a better financial position. Time Warner has a proven track record of delivering on its commitments to improve service with its Maxx upgrade project. Time Warner Cable has superior options for low-income consumers, offers more broadband options and faster speeds for entrepreneurs in the digital/information economy, and has committed to providing unlimited Internet access – a critical prerequisite for consumers choosing to drop cable television’s one-size-fits-all bloated video package and watch only the shows they want to see and pay for online.

At the start of our presentation, we referred to the Chairman’s four stated goals for improving broadband and competition. At this point, it should be obvious that shrinking the number of companies providing service has not delivered significant service improvements. In fact, for many customers, Charter’s offer is worse.

Allowing further marketplace consolidation widens the gap for cable television programming costs, which could deter new competitors from entering the market. Small providers pay dramatically higher programming costs while the largest receive substantial volume discounts. That is contrary to the Chairman’s goal of protecting last-mile competition.

Online video has created the “cord-cutting” effect, allowing consumers to shop for better video values beyond the local cable company. Without a permanent ban on usage caps and usage pricing, providers like Charter (that maintained usage caps until a few months before this application was filed) have a strong incentive to resume them after the deal’s token three-year commitment expires. Without also closing the obvious loophole of “usage pricing,” nothing precludes Charter from imposing usage-based pricing on consumers immediately after the deal is approved.

Promoting expanded rural broadband, another priority of the Commission, does little if the incumbent providers refuse to offer it. We see nothing in Charter’s public application that commits them to extending service to specific areas Time Warner Cable or Bright House do not service today. In fact, before this application was filed, Charter’s willingness to provide service to unserved areas in their own existing franchise areas was not always evident.[42] It is hard to believe Charter will voluntarily disregard their own Return On Investment formula to provide the service many rural customers eagerly hope might be forthcoming if the provider was somebody other than Time Warner Cable or Bright House.

We urge the FCC to deny Charter’s application. If it sees fit to make a different choice, we strongly recommend you demand Charter meet, at the minimum, the same level of service Time Warner Cable Maxx provides across the entire existing Time Warner franchise area, achieve the same customer service standard well-regarded Bright House manages for its customers, and a better deal for consumers that continue to face spiraling cable bills, few competitive choices, and no new alternatives on the horizon.

  • [1] http://dealbook.nytimes.com/2014/02/13/the-comcast-time-warner-deal-by-the-numbers/?_r=0
  • [2] https://brighthouse.com/about/about-us/about-us.html
  • [3] https://www.charter.com/browse/content/about-charter
  • [4] http://www.jdpower.com/press-releases/2015-us-residential-television-internet-telephone-service-provider-satisfaction
  • [5] http://arstechnica.com/business/2014/09/most-of-the-us-has-no-broadband-competition-at-25mbps-fcc-chair-says/
  • [6] http://www.theverge.com/2014/1/31/5365816/time-warner-cable-maxx-plans-broadband-cable-improvements-in-nyc-la
  • [7] http://www.fiercecable.com/story/twc-promises-maxx-reach-45-customers-end-year-tivo-support-apples-airplay/2015-07-14
  • [8] https://www.myaccount.charter.com/customers/support.aspx?supportarticleid=59
  • [9] https://www.charter.com/browse/content/packages
  • [10] http://stopthecap.com/wp-content/uploads/2015/09/psc-staff-recommend-charter-twc-15-m-0388.pdf
  • [11] http://www.timewarnercable.com/en/plans-packages/internet/internet-service-plans.html?iid=internet-lob:1:1:compareplans
  • [12] http://arstechnica.com/business/2014/09/most-of-the-us-has-no-broadband-competition-at-25mbps-fcc-chair-says/
  • [13] https://www.myaccount.charter.com/customers/support.aspx?supportarticleid=59#speedoptions
  • [14] http://www.twcableuntangled.com/2015/04/twc-gains-momentum-with-best-ever-subscriber-growth-customer-enhancements/
  • [15] http://www.twcableuntangled.com/2015/07/twc-maxx-expands-rollout-in-2015/
  • [16] http://seekingalpha.com/article/2864536-time-warner-cables-twc-ceo-rob-marcus-on-q4-2014-results-earnings-call-transcript?
  • [17] http://www.twcableuntangled.com/2014/01/get-the-details-on-twcs-plan-to-transform-ctv-internet-experience/
  • [18] http://stopthecap.com/wp-content/uploads/2015/09/psc-staff-recommend-charter-twc-15-m-0388.pdf
  • [19] See e.g., Case 14-M-0183, Joint Petition of Comcast Corporation and Time Warner Cable, Inc. for Approval of a Transfer of Control of Subsidiaries and Franchises, Information Forum/Public Statement Hearing (dated June 19, 2014) Tr. 29-33.
  • [20] http://stopthecap.com/2015/06/25/bright-houses-mysterious-internet-discount-program-charter-wants-to-adopt-nationwide
  • [21] http://www.timewarnercable.com/en/enjoy/better-twc/internet.html
  • [22] http://customer.xfinity.com/help-and-support/internet/data-usage-trials/
  • [23] http://stopthecap.com/2015/09/23/fcc-demands-details-about-charters-suddenly-retired-usage-caps/
  • [24] https://www.fcc.gov/document/request-information-sent-charter-communications-inc-0
  • [25] http://stopthecap.com/2014/03/13/time-warner-cable-admits-usage-based-pricing-is-a-big-failure-only-thousands-enrolled/
  • [26] http://abcnews.go.com/Technology/story?id=7368388
  • [27] http://stopthecap.com/2014/10/30/time-warner-cable-recommits-mandatory-usage-caps-long-company-remains-independent/
  • [28] http://documents.dps.ny.gov/public/Common/ViewDoc.aspx?DocRefId={C60985CC-BEE8-43A7-84E8-5A4B4D8E0F54} (p.39)
  • [29] http://www.consumerreports.org/cro/electronics-computers/computers-internet/telecom-services/internet-service-ratings/ratings-overview.htm
  • [30] http://www.reuters.com/article/2014/01/30/us-charter-timewarnercable-rutledge-anal-idUSBREA0T01D20140130
  • [31] https://www.charter.com/browse/content/tv#/channel-lineup
  • [32] http://www.markey.senate.gov/news/press-releases/markey-blumenthal-decry-lack-of-choice-competition-in-pay-tv-video-box-marketplace
  • [33] https://www.charter.com/browse/content/rate-card-info (city of St. Louis, Mo.)
  • [34] https://www.charter.com/browse/content/rate-card-info (city of St. Louis, Mo.)
  • [35] http://www.usatoday.com/story/money/2015/07/24/fcc-approves-ts-acquisition-directv/30626421/
  • [36] http://www.americancable.org/node/5229
  • [37] http://www.multichannel.com/news/technology/suddenlink-boots-1-gig-broadband/392087
  • [38] https://www.midco.com/PressRoom/2014/midcontinent-bringing-gigabit-internet-access-to-the-northern-plains/
  • [39] http://www.multichannel.com/news/distribution/cox-plots-docsis-31-plans/393996
  • [40] http://www.multichannel.com/news/cable-operators/mediacom-sets-residential-1-gig-rollout/393585
  • [41] http://thehill.com/policy/technology/254431-obama-administration-declares-broadband-core-utility-in-report
  • [42] http://www.dslreports.com/forum/r28864058-Why-won-t-Charter-come-another-1-2-mile-for-more-customers

Comcast Dragged Into Upgrade for Santa Cruz After Public Broadband Initiative Announced

Before and after competition

Before and after competition

The best way to guarantee service upgrades from Comcast is to threaten to launch your own competing service provider, which is precisely what worked for the community of Santa Cruz, Calif., where Comcast suddenly found the resources to upgrade the local cable system to support speeds faster than 25Mbps.

For more than two years, customers and local governments across Santa Cruz County have been begging Comcast to upgrade the cable system that would have been state-of-the-art if it was still 1997. Customers could not exceed speeds of 25-28Mbps, but Comcast continued advertising its “Performance” tier (50Mbps), Blast! (105Mbps) and even Extreme option (150Mbps), collecting dozens of extra dollars a month from customers while their broadband speeds maxed out below 30Mbps.

The cable system is so antiquated, it could not officially support consistent service above 25Mbps, and many locals complain their speeds were slower than that.

“The most popular speed in this county is 16/2Mbps, which is the fastest one Comcast will actually give you what you paid for,” said Stop the Cap! reader Jim, who lives in Santa Cruz. “It’s so bad, people are actually envious of Charter, which services customers to the south.”

comcastOokla’s Net Speed Index rated the community of 62,000 447th fastest out of 505 California broadband-enabled cities.

Comcast’s performance was so bad, a frustrated employee began leaking internal company documents exposing the fact the cable system could not deliver speeds above 29Mbps, despite marketing and advertising campaigns selling customers more expensive, faster broadband local employees knew it could not deliver.

“We’ve been complaining to the company in Philadelphia for years, asking them to stop promising something they weren’t delivering,” a Comcast  technician told GoodTimes, a community newspaper. “But they ignored us.”

When customers complained, they were told their equipment was at fault or their cable modems needed to be replaced. In fact, the cable system’s local infrastructure needed to be upgraded, something Comcast has not done until recently.

santa cruzThis summer, the City of Santa Cruz joined forces with Cruzio, a California-based independent Internet Service Provider, to plan a new fiber to the home network within the city.

Under the terms of the partnership, the city will own the network, and Cruzio will act as the developer during engineering and construction and as the operator when the network is complete. Financing for the development of the network will be through city-backed municipal revenue bonds, repaid through the revenue from the sale of network services (and not by the taxpayers). The project will be financially self-sustaining and 100% of the profit generated will stay in the City of Santa Cruz.

Much of that money is likely to flow away from Comcast and into the community fiber provider, which will support speeds up to 1 gigabit. The announcement of impending competition inspired Comcast to upgrade its local cable infrastructure and the cable company suddenly announced service upgrades less than two months after the city announced their fiber project. In August, Comcast added 30 new channels, raised the speeds of two of its residential Xfinity Internet tiers at no additional cost to customers, and introduced four new tiers of Internet service for commercial business customers.

cruzio-logoThe Performance tier speed jumped overnight from 16/2Mbps to 75/5Mbps. Blast! speed increased from 25/4Mbps to 150/10Mbps.

For many local residents, it is too little, too late.

“Comcast can kiss me goodbye when Cruzio rolls into my neighborhood,” said Jim. “They ignored and overbilled us for years and the only time things changed is when competition was announced. Cruzio keeps their money here, Comcast sends it off to Philadelphia. If I have a problem, I know I’m going to get better service in person than dealing with Comcast’s customer service which has no idea where Santa Cruz even is.”

For Comcast customers who paid extra for Internet speeds they never received, company officials suggested they write a letter and ask for a refund, something Comcast will consider on a case-by-case basis.

“Comcast is a fundamentally deceitful company, at the leadership level,” responded local resident Charles Vaske. “They can not be trusted to stick to their word, and they certainly should not be trusted with infrastructure as vital as Internet access. A mere refund for this type of deceit is not appropriate, there should be severe penalties for such intentional crime.”

N.Y. Public Service Commission Staff Unimpressed With Charter-Time Warner Cable Merger Proposal

ny pscStaffers at the New York State Department of Public Service have recommended the Public Service Commission reject the merger of Charter Communications and Time Warner Cable unless significant concessions are made, largely because the alleged benefits are insufficient for New York cable customers.

Although cable operators are largely deregulated under federal law, state and local governments retain control over cable franchise agreements, which permit operators to sell cable television programming. To complete its merger, Charter Communications must win approval to transfer Time Warner Cable franchise agreements to the merged entity, dubbed “New Charter.” That gives state regulators leverage to win concessions and oversight mostly eliminated after the cable industry was deregulated by the federal government.

New York law requires cable operators seeking to join forces to prove the merger is in the public interest and that ratepayers will obtain a “net positive benefit” from the merger. In plain English, Charter must share the benefits of the merger with cable customers in New York, either from lower prices, better service, or both. Charter proposes to offer those benefits in the form of improved service:

  • Additional investments in all-digital systems in Time Warner’s service areas by completing digitization within 30 months of the close of the proposed transaction. This would include faster (60 megabits per second (Mbps) minimum) broadband speed offerings;
  • Merger-specific efficiencies, which would generate savings in a number of areas including combined purchasing power, overhead, product development, engineering, and information technology;
  • Merging Charter’s New York assets, now isolated from the rest of its service territories, to create efficiencies through reduced costs, improved customer service and additional service offerings;
  • Bringing overseas Time Warner jobs back to the United States and adding in-house positions;
  • Expanding to New York, within three years of the close of the proposed transaction, Bright House Networks’ low-income broadband option (Connect2Compete) which partners with schools to provide a $9.95 low-cost Internet service, discounts on Internet-capable devices, and innovative digital literacy training;
  • Promoting the deployment of advanced voice services and enhancing competition in the voice marketplace by creating a more robust competitor;
  • Pledging not to block or throttle Internet traffic or engage in paid prioritization, whether or not the Federal Communications Commission’s (FCC) Open Internet Order is upheld. This commitment would continue for three years, without regard to the outcome of the ongoing litigation challenging federal reclassification.

charter twc bhThe Public Service Commission staff looked at the reported annual “synergy savings” of $800 million anticipated by New Charter from streamlining operations and winning enhanced volume discounts to determine the “net positive benefit” for New York consumers from the merger. Here is the formula the PSC used:

  • New York customers represent 10.879% of New Charter’s customer base — 2.6 million of New Charter’s 23,900,000 combined Charter and Time Warner Cable customers;
  • The agency presumes customers and shareholders nationwide should each receive 50% of the $800 million in savings;
  • Knowing New York deserves roughly 11% of that $800 million, divided equally between customers and shareholders, New Charter owes New Yorkers $43.5 million in benefits annually.

Staffers at the PSC prefer to deal in hard numbers and solid commitments when determining how New Charter intends to meet its obligation to New Yorkers, and all signs indicate the cable company was less than forthcoming. In colloquial terms, New Charter’s response to the PSC’s math can be summed up, ‘Whatever, you can trust us to work out the details after the merger.’

Alleged Deal “Benefits”

New Charter’s promises to invest more capital in New York than Time Warner Cable came with no specific investment commitments, despite repeated efforts to pin New Charter down on its spending plans. Some of the details about New Charter’s spending proposals are redacted in the document, but it isn’t difficult to discern reading between the lines New Charter has no plans to continue Time Warner Cable’s Maxx upgrade program beyond commitments already made, which in New York is limited to New York City, leaving all of upstate New York off the Maxx upgrade list. PSC staffers believe if Time Warner Cable remained independent, some or all of upstate New York would receive those Maxx upgrades in the near future.

new-charter-combined-footprint-640x480New Charter claims another merger benefit is their plan to upgrade Time Warner customers with new and improved IP-capable ‘Worldbox’ equipment and DVR’s offering more recording capacity. While conceding there were some minor benefits from offering customers more capable equipment, PSC staffers were skeptical New Charter’s plan represented much of a “consumer benefit,” because the equipment is not cheap and New Charter’s plan to eliminate analog television signals will mean every customer will have to rent one of Charter’s new boxes or a near equivalent.

New Charter’s promises of faster Internet speeds and upgraded cable systems would normally be seen as a direct consumer benefit, except Time Warner Cable already committed to its own Maxx upgrade effort that often outperforms what New Charter is promising. “Digitalization and associated speed increases can only truly be considered a benefit if [New Charter] can adequately demonstrate that Time Warner would not have otherwise completed a similar transition to an all digital, faster network in a similar timeframe [roughly 30 months],” PSC staffers concluded.

New Charter’s promise to expand low-income Internet access to Time Warner Cable customers, utilizing Bright House Networks’ Connect2Compete program, comes with many of the same restrictions Comcast’s own Internet Essentials program include. That issue was hotly debated during Comcast’s attempt to acquire Time Warner Cable, and many public interest groups opposed the merger for that reason. New Charter has also made no commitments to continue Time Warner’s no-restriction/no-contract/no-prequalification affordable $14.99 Internet service. In fact, the merger may worsen the affordable Internet problem, not improve it.

New Charter’s proposed expansion of Time Warner Cable’s Wi-Fi hotspot program is vague and mostly undefined beyond a general commitment to deploy at least 300,000 new out-of-home Wi-Fi access points across its national footprint within four years. New York regulators want to know how many of those would be in New York. Using the same formula to find how many New Charter customers are located in New York, it seems reasonable that redacted sections regarding the Wi-Fi hotspot program included an inquiry if New Charter planned at least 30,000 new access points for New York. New Charter did mention that once the proposed transaction is complete, it expected to evaluate the merits of leveraging in-home routers as public Wi-Fi access points, much like Comcast is doing today. Because Time Warner Cable has no firm plans about its Wi-Fi hotspot deployment program beyond this year, PSC staffers found it difficult to determine which company had the better Wi-Fi proposal for New Yorkers.

WiFiZonelogoNew Charter’s plans for expanded business broadband were also found to be vague, making it difficult to measure how much benefit New Charter would bring commercial clients in New York.

Status Quo

Time Warner cable systems will become indirect, wholly owned subsidiaries of New Charter. New Charter states that they are not seeking authority for the transfer of customers or for any changes in rates, terms or conditions of service and New Charter will also continue to provide Lifeline Discounted Telephone Service (Lifeline).

The PSC expects that customers will keep the same digital phone number they had with Time Warner; will have the same billing account information; and, other technology will continue to work seamlessly. In other words, the transaction should be technologically transparent for consumers.

The regulator also acknowledges that, after the proposed transaction, there should be no diminution in the number of service provider options available to consumers in the video market because Charter and Time Warner do not have overlapping service areas in New York. Since the potential for direct competition no longer exists, this assertion is in no way a benefit of the proposed transaction, it simply maintains the status quo.

The Bad and the Ugly

Despite claims from both cable companies there will be no negative impact as a result of the proposed transaction, PSC staff identified a number of serious issues that are likely to result if the merger is approved without any enforceable conditions or commitments:

Charter will be among America's top junk bond issuers. (Image: Bloomberg News)

Charter will be among America’s top junk bond issuers. (Image: Bloomberg News)

New Charter intends to load itself with massive debt to pay for the merger. As a result, the combined company’s credit rating will take a significant hit. PSC staffers fear New Charter will be vulnerable if economic conditions decline, even to the point of default or bankruptcy. But before that happens, New Charter’s need to cope with its debt could result in reduced investment in system upgrades.

“If the operating environment declines for cable companies […] New Charter will have more difficulty maintaining the investments necessary to bring expanded products and provide good service quality to its customers and, thus, this represents the single most substantial risk of the proposed transaction,” the PSC staff warns. “Accordingly, the Commission should seek to mitigate this risk and ensure that New York receives net benefits that are sufficient to offset this and the other potential harms.”

After requesting Charter disclose its often hidden regular, non-promotional prices most cable customers eventually pay, the PSC discovered contrary to Charter’s claims its prices are lower than Time Warner Cable, in fact they are often higher. Time Warner Cable customers typically also receive more cable television channels for their dollar than Charter customers do. Consumers who bundled multiple services together got the best savings, but even those deals were priced comparably to what Time Warner Cable charges. In short, promises of savings are illusory.

Time Warner Cable offers $14.99 to anyone without paperwork.

Time Warner Cable offers $14.99 to anyone without paperwork. Charter does not.

Broadband customers will also lose less-expensive broadband options they receive from Time Warner Cable. New Charter will drop Time Warner’s $14.99 “Everyday Low Price” 2Mbps Internet package, along with its Basic 3Mbps ($29.99) and Standard 15Mbps ($34.99) plans. New Charter’s least expensive broadband option for all consumers will be its Spectrum Internet 60Mbps plan, which carries an initial promotional price of $39.99 a month and a regular price just under $60.

“Time Warner’s lower priced offerings represent choices for New York consumers,” PSC staff concluded. “Any loss of these services would likely result in consumers paying more to ensure they have access to the same level of high-speed Internet service and its important resources.”

Jobs: New York is at risk of losing Time Warner Cable’s five call centers employing about 1,996 staff, 61 retail/walk-in centers employing 2,674 staff, nine corporate offices employing around 1,257 staff, nine service/maintenance locations employing approximately 1,687 staff, two media offices employing 435 staff, and 11 other service related functions employing about 1,003 staff, with total employment in the state of nearly 9,052.

PSC staffers have only received a commitment New Charter will not reduce the number of “customer facing” jobs in New York, but has said nothing about where the rest of its New York employees might be heading.

“There is a real danger that New Charter will look to gain operational efficiencies by moving/consolidating customer-facing jobs and other positions to out-of-state locations, despite any claims to the contrary,” the PSC staff reports. “Out-of-state service centers would make it difficult for it to maintain its current level of customer service. Longer wait times and lack of local knowledge could lead to increased frustration and dissatisfaction on the part of New York customers, and a significant decline in the overall level of service provided.”

What New York Regulators May Demand from New Charter to Approve a Merger

The PSC wants Charter to develop gigabit broadband for New York's top-five cities.

The PSC wants Charter to develop gigabit broadband for New York’s top-five cities.

When the PSC staffers added everything up it found the proposed merger offered little benefit to New Yorkers and would not result in a net positive benefit for New York. The staff recommended the merger be denied unless specific commitments are made to sweeten the deal for New York customers.

First, New Charter should be required to develop a strategic implementation plan to build-out its all-digital network to every remaining unserved or underserved Charter and Time Warner franchise area in New York. This would mean that any resident in a town serviced by either cable company would be able to buy service even if the company does not now offer it. Currently, areas considered unprofitable to serve within a franchise area are often bypassed. This would no longer be permitted, and New Charter would have to wire any commercial building, business, school, or home.

Second, Charter’s record of performance in New York is already less than impressive. In Columbia County, Charter operates an ancient one-way video service-only cable system serving Chatham, N.Y. The PSC staff recommends Charter be required to bring that cable system up to date. More broadly, the staff recommends Charter be forced to spend more money on system upgrades and improved service than Time Warner Cable would have on its own.

Third, qualifications to subscribe to Charter’s proposed $9.95 discount Internet program should be broadened to exclude fewer customers. Its speed should also be raised to at least 10Mbps. For everyone else not qualified to subscribe to Connect2Compete, the PSC staff recommends requiring New Charter to continue offering Time Warner’s Everyday Low Price $14.99 Internet tier at an enhanced speed of 3Mbps for a minimum of five years.

Fourth, Time Warner customers in New York should be granted promotional broadband pricing without modem fees for a minimum of three years, making New Charter’s ongoing price of its 60Mbps tier $39.99 a month, not the $59.99 a month Charter typically charges after one year.

Fifth, New Charter should be required to offer broadband service at speeds up to 100Mbps throughout its New York footprint within 30 months of the close of the proposed merger. New Charter should also be compelled to install infrastructure capable of offering 1,000Mbps (1Gbps) service in New York City, Buffalo, Rochester, Syracuse and Albany by 2020.

Six, New York should require New Charter to change its current merger proposal to decrease leveraged debt and present a plan to restore the company’s credit rating to a level more comparable with Time Warner Cable.

Seven, New Charter should submit to oversight of its customer service performance by New York regulators, which will monitor how New Charter treats its customers. If the company falls below acceptable service standards, the PSC will have the authority to intervene based on an agreement with New Charter.

Finally, New Charter will agree to limit any significant changes to its New York call center or other customer-facing positions for at least two years and provide 90 days notice of any significant job relocations or reductions.

FCC Demands Details About Charter’s Suddenly Retired Usage Caps

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

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

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

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

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

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

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

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

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

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

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

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

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

Rationing Your Internet Experience?

Rationing Your Internet Experience?

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

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

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

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

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

Charter Relies on Netflix Testimonial to Sell Time Warner Cable/Bright House Merger to Consumers

netflix charter

Image from Meet New Charter television ad (Image courtesy: Charter Communications)

Charter Communications has begun advocating for its merger with Time Warner Cable and Bright House Networks in advertisements that note Netflix is a merger supporter.

“Netflix says our upcoming merger with Time Warner Cable is a good thing for you,” said the advertisement, which also promoted an Associated Press story that stated Netflix supports Charter’s acquisition of Time Warner Cable.

The 30-second spots, now run by Time Warner in heavy rotation during local ad inserts on cable networks, promotes Charter’s 60Mbps entry-level broadband tier, 200 HD channels, no contracts or hidden fees, and the company’s claim it offers unlimited broadband access. It does not mention Charter executives have included a three-year expiration date on their commitments, after which the company can do almost anything it pleases.

Charter is hoping to enlist Time Warner Cable and Bright House customers to advocate for their merger’s approval with regulators and has launched a new website called Meet New Charter to promote the deal.

As of early September, the sparse website includes four testimonials — one from Reed Hastings, CEO of Netflix who supports the transaction because Charter promises to voluntarily abide by Net Neutrality policies, won’t attempt to extract fees from Netflix to improve the reach of its service for TWC/Bright House customers, and won’t have usage caps — all deterrents to subscribers using online video.

The other three testimonials come from cable and broadcast programming networks depending on carriage deals with Charter to increase their audience reach.

Meet New Charter wrote of these commitments for Time Warner Cable and Bright House Networks customers:

Faster speeds. Charter’s slowest broadband tier is 60Mbps, which enhances the ability of several people in the same house to watch streaming high-definition video at the same time.

Affordable, faster broadband at lower prices. New Charter will price its new 60Mbps entry level speeds based on Charter’s current model, which is less expensive than TWC and BHN’s comparable offerings.   Charter’s pricing model offers nationally uniform pricing with no data caps, no usage-based pricing, no modem fees and no early termination fees.

Committed to Net Neutrality. Charter has long practiced network neutrality and consistently invested in interconnection capacity to avoid network congestion.

Investing in customer care. We are focused on improving New Charter’s customer service and improving our relationships with our customers across our footprint.  Over the last three years, Charter has brought back jobs from overseas call centers and hired thousands of people to improve our customer care services. New Charter will also return TWC call center jobs to the United States and will hire and train thousands of new employees for its customer service call centers and field technician operations.

A quicker rollout of advanced technology. We will complete the full digitization of TWC and BHN—freeing up spectrum that will allow for faster broadband speeds and more high-definition channels and On-Demand offerings.

New Charter customers will transition to Charter’s new cloud-based guide. The new guide will offer intuitive search and discovery and will work on old and new set-top boxes, so consumers will get the benefits of the new guide without needing a technician to visit or to pay more for a new box.

To carry out these ambitions, Charter will have to drop analog video channels from the lineup, which means cable television customers will need to lease set-top boxes or other devices for each connected television in their home.

Consumer Reports has also repeatedly rated Charter as one of the country’s worst cable operators (sub req’d.) for customer service, pricing, customer satisfaction, and reliability. In 2015 it rated among the bottom five cable operators nationwide.

http://www.phillipdampier.com/video/We Are Charter 9-9-15.mp4

Charter Communications has begun running this advertisement in heavy rotation on Time Warner Cable systems promoting its merger deal. (30 seconds)

Cable Operators Told to Get Ready for a Gigabit, But Will Rationed Usage Make It Meaningless?

Phillip Dampier: A cable trade publication is lecturing its readership on better broadband the industry spent years claiming nobody wanted or needed.

Phillip Dampier: A cable trade publication is lecturing its readership on better broadband the industry spent years claiming nobody wanted or needed.

Remember the good old days when cable and phone companies told you there was no demand for faster Internet speeds when 6Mbps from the phone company was all you and your family really needed?

Those days are apparently over.

Multichannel News, the largest trade publication for cable industry executives, warns cable companies gigabit broadband speeds are right around the corner and the technological transformation that will unleash has been constrained for far too long.

Say what?

Proving our theory that those loudest about dismissing the need for faster Internet speeds are the least equipped to deliver them, the forthcoming arrival of DOCSIS 3.1 technology and decreasing costs to deploy fiber optics will allow cable providers to partially meet the gigabit speed challenge, at least on the downstream. Before DOCSIS 3.1, consumers didn’t “need those speeds.” Now companies like Comcast claim it isn’t important what consumers need today — it’s where the world is headed tomorrow.

Comcast 2013:

Comcast executive vice president David L. Cohen writes that the allure of Google Fiber’s gigabit service doesn’t match the needs or capabilities of online Americans.

“For some, the discussion about the broadband Internet seems to begin and end on the issue of ‘gigabit’ access,” Cohen says, in a nod to Google Fiber. “The issue with such speed is really more about demand than supply. Our business customers can already order 10-gig connections. Most websites can’t deliver content as fast as current networks move, and most U.S. homes have routers that can’t support the speed already available to the home.” Essentially, Cohen argues that even if Comcast were to deliver web service as fast as Google Fiber’s 1,000Mbps downloads and uploads, most customers wouldn’t be able to get those speeds because they’ve got the wrong equipment at home.

Comcast 2015:

“We’ve consistently offered the most speeds to the most homes, but with the current pace of tech innovation, sometimes you need to go to where the world is headed and not focus on where it is today.”

“The next great Internet innovation is only an idea away, and we want to help customers push the boundaries of what the Internet can do and do our part to inspire developers to think about what’s possible in a multi-gigabit future.  So, next month we will introduce Gigabit Pro, a new residential Internet service that offers symmetrical, 2-Gigabits-per-second (Gbps) speeds over fiber – at least double what anyone else provides.”

Nelson (Image: Multichannel News)

Nelson (Image: Multichannel News)

Rich Nelson’s guest column in Multichannel News makes it clear American broadband is behind the times. The senior vice president of marketing, broadband & connectivity at Broadcom Corporation says the average U.S. Internet connection of 11.5Mbps “is no longer enough” to support multiple family members streaming over-the-top video content, cloud storage, sharing high-resolution images, interactive online gaming and more.

Nelson credits Google Fiber with lighting a fire under providers to reconsider broadband speeds.

“Google’s Fiber program may have been the spark to light the fuse — Gigabit services have fostered healthy competition among Internet and telecommunications providers, who are now in a position to consider not ‘if’ but ‘when and how’ to deploy Gigabit broadband in order to meet consumer’s perceived ‘need for speed’ and maintain their competitive edge,” Nelson wrote.

But the greatest bottleneck to speed advances is spending money to pay for them. Verizon FiOS was one of the most extravagant network upgrades in years among large American telecom companies and the company was savaged by Wall Street for doing it. Although AT&T got less heat because its U-verse development costs were lower, most analysts still instinctively frown when a company proposes spending billions on network upgrades.

Customer demand for faster broadband is apparent as providers boost Internet speeds.

Customer demand for faster broadband is apparent as providers boost Internet speeds.

The advent of DOCSIS 3.1 — the next generation of cable broadband technology — suggests a win-win-win for Wall Street, cable operators, and consumers. No streets will have to be torn up, no new fiber cables will have to be laid. Most providers will be able to exponentially boost Internet speeds by reallocating bandwidth formerly reserved for analog cable television channels to broadband. The more available bandwidth reserved for broadband, the faster the speeds a company can offer.

Many industry observers predict the cable line will eventually be 100% devoted to broadband, over which telephone, television and Internet access can be delivered just as Verizon does today with FiOS and AT&T manages with its U-verse service.

The benefits of gigabit speeds are not limited to faster Internet browsing however.

Nelson notes communities and municipalities are now using gigabit broadband speeds as a competitive tool selling homes and attracting new businesses to an area. According to a study from the Fiber to the Home (FTTH) Council, communities with widely available gigabit access have experienced a positive impact on economic activity — to the tune of more than $1.4 billion in GDP growth. Those bypassed or stuck in a broadband backwater are now at risk of losing digital economy jobs as businesses and entrepreneurs look elsewhere.

The gigabit broadband gap will increasingly impact the local economies of communities left behind with inadequate Internet speeds as app developers, content producers, and other innovative startups leverage gigabit broadband to market new products and services.

The Pew Research Center envisioned what the next generation of gigabit killer apps might look like. Those communities stuck on the slow lane will likely not have access to an entire generation of applications that simply will never work over DSL.

But before celebrating the fact your local cable company promises to deliver the speed the new apps will need, there is a skunk that threatens to ruin your ultra high speed future: usage-based pricing and caps.

At the same time DOCSIS 3.1 will save the cable industry billions on infrastructure upgrade costs, the price for moving data across the next generation of super high-capacity broadband networks will be lower than ever before. But cable operators are not planning to pass their savings on to you. In fact, broadband prices are rising, along with efforts to apply arbitrary usage limits or charge usage-based pricing. Both are counter-intuitive and unjustified. It would be like charging for a bag of sand in the Sahara Desert or handing a ration book to shoreline residents with coupons allowing them one glass of water each from Lake Ontario.

skunkCox plans to limit its gigabit customers to 2TB of usage a month. AT&T U-verse with GigaPower has a (currently unenforced) limit of 1TB a month, while Suddenlink thinks 550GB is more than enough for its gigabit customers. Comcast is market testing 300GB usage caps in several cities but strangely has no usage cap on its usage-gobbling gigabit plan. Why cap the customers least-equipped to run up usage into the ionosphere while giving gigabit customers a free pass? It doesn’t make much sense.

But then usage caps have never made sense or been justified on wired broadband networks and are questionable on some wireless ones as well.

Stop the Cap! began fighting against usage caps and usage pricing in the summer of 2008 when Frontier Communications proposed to limit its DSL customers to an ‘ample’ 5GB of usage per month. That’s right — 5GB. We predicted then that usage caps would become a growing problem in the United States. With a comfortable duopoly, providers could easily ration Internet access with the flimsiest of excuses to boost profits. Here is what we told the Associated Press seven years ago:

“This isn’t really an issue that’s just going to be about Frontier,” said Phillip Dampier, a Rochester-based technology writer who is campaigning to get Frontier to back off its plans. “Virtually every broadband provider has been suddenly discovering that there’s this so-called ‘bandwidth crisis’ going on in the United States.”

That year, Frontier claimed most of its 559,300 broadband subscribers consumed less than 1.5 gigabytes per month, so 5GB was generous. Frontier CEO Maggie Wilderotter trotted out the same excuses companies like Cox and Suddenlink are still using today to justify these pricing schemes: “The growth of traffic means the company has to invest millions in its network and infrastructure, threatening its profitability.”

Just one year later, Frontier spent $5.3 billion to acquire Verizon landline customers in around two dozen states, so apparently Internet usage growth did not hurt them financially after all. Frankly, usage growth never does. As we told the AP in 2008, the costs of network equipment and connecting to the wider Internet are falling. It still is.

“If they continue to make the necessary investments … there’s no reason they can’t keep up” with increasing customer traffic, we said at the time.

We are happy to report we won our battle with Frontier Communications and today the company even markets the fact their broadband service comes without usage caps. In many of Frontier’s rural service areas, they are the only Internet Service Provider available. Imagine the impact a 5GB usage cap would have had on customers trying to run a home-based business, have kids using the Internet to complete homework assignments, or rely on the Internet for video entertainment.

So why do some providers still try to ration Internet usage? To make more money of course. When the public believes the phony tales of network costs and traffic growth, the duped masses open their wallets and pay even more for what is already overpriced broadband service. Just check this chart produced by the BBC, based on data from the Organization for Economic Co‑operation and Development. Value for money is an alien concept to U.S. providers:


The usual method of combating pricing excess is robust competition. With a chasm-sized gap between fat profits and the real cost of the service, competitors usually lower the price to attract more customers. But the fewer competitors, the bigger the chance the marketplace will gravitate towards comfort-level pricing and avoid rocking the boat with a ruinous price war. It is one of the first principles of capitalism — charging what the market will bear. We’ve seen how well that works in the past 100+ years. Back in 2010, we found an uncomfortable similarity between broadband prices of today with the railroad pricing schemes of the 1800s. A handful of executives and shareholders reap the rewards of monopolistic pricing and pillage not only consumers but threaten local economies as well.

special reportThe abuses were so bad, Congress finally stepped in and authorized regulators to break up the railroad monopolies and regulate abusive pricing. We may be headed in the same direction with broadband. We do not advocate regulation for the sake of regulation. Competition is a much more efficient way to check abusive business practices. But where an effective monopoly or duopoly exists, competition alone will not help. Without consumer-conscious oversight, the forthcoming gigabit broadband revolution will be stalled by speed bumps and toll booths for the benefit of a few giant telecommunications corporations. That will allow other countries to once again leap ahead of the United States and Canada, just as they have done with Internet speeds, delivering superior service at a lower price.

China now ranks first in the world in terms of the total number of fiber to the home broadband subscribers. So far, it isn’t even close to the fastest broadband country because much of China still gets access to the Internet over DSL. The Chinese government considers that unacceptable. It sees the economic opportunities of widespread fiber broadband and has targeted the scrapping of every DSL Internet connection in favor of fiber optics by the end of 2017. As a result, with more than 200 million likely fiber customers, China will become the global leader in fiber infrastructure, fiber technology, and fiber development. What country will lose the most from that transition? The United States. Today, Corning produces 40% of the world’s optical fiber.

Global optical fiber capacity amounted to 13,000 tons in 2014, mainly concentrated in the United States, Japan and China (totaling as much as 85.2% of the world’s total), of which China already ranked first with a share of 39.8%. Besides a big producer of optical fiber, China is also a large consumer, demanding 6,639 tons in 2014, 60.9% of global demand. The figure is expected to increase to 7,144 tons in 2015. Before 2010, over 70% of China’s optical fiber was imported, primarily from the United States. This year, 72.6% of China’s optical fiber will be produced by Chinese companies, which are also exporting a growing amount of fiber around the world.

John Lively, principal analyst at LightCounting Market Research, predicts China could conquer the fiber market in just a few short years and become a global broadband leader, “exporting their broadband networking expertise and technology, just like it does with its energy and transportation programs.”

Meanwhile in the United States, customers will be arguing with Comcast about the accuracy of their usage meter in light of a 300GB usage cap and Frontier’s DSL customers will still be fighting to get speeds better than the 3-6Mbps they get today.

Global Broadband Prices Drop 9%, But Not for North Americans

The cost of residential broadband service around the world dropped an average of 9%, but not in the United States and Canada where providers are effectively raising prices while justifying the added cost with occasional speed boosts.

Point Topic, which tracks residential and business broadband pricing found prices are affected the most when competition increases and incumbent providers are forced to respond with lower prices and/or better service.


Point Topic’s chart shows North Americans pay a significant price for service, but receive some of the worst broadband performance in return when compared against better value for money providers in Central Asia, Eastern Europe, Western Europe, and the Asia-Pacific region. (Chart: Point Topic)

By far the poorest value broadband tracked by Point Topic is traditional DSL from the telephone companies. Speeds have barely budged in many areas while prices wildly fluctuate depending on whether fiber or cable broadband providers are competing for the same customers. The research firm found DSL to be the worst choice for consumers — combing the lowest speeds and the highest per megabit cost among wired providers.

The price of residential DSL is also going up — it was just under $10 per Mbps in the second quarter, an increase from nearly $9 per Mbps the phone companies charged late last year.

DSL is a dreadful value. (Chart: Point Topic)

DSL is a dreadful value. (Chart: Point Topic)

Cable operators facing fiber competition have been forced to improve speeds but are still managing to raise prices. Globally, the average price of cable and fiber broadband based on speed alone is $1 per Mbps, down from $3 per Mbps in the second quarter of 2010. But North Americans are paying more for the service through annual rate increases and ancillary modem rental fees.

The reason North Americans are paying more for broadband service is because providers are attempting to make up for lost television revenue.

The New York Post noted most broadband bills are now up to between $50 and $70 a month for standalone service.

James Dolan, CEO of Cablevision, explained how broadband pricing has evolved in the cable industry.

“We’re going to see a re-stratification of the cable business .… One thing we see is significant uses of data, increasing exponentially,” Dolan told investors late last year. “We think that’s where the growth is going to come from.”

Dan Cryan, research director for digital at IHS, told the newspaper that revenue from U.S. broadband providers in 2014 topped $49 billion, up from $42.1 billion in 2012.

Cable companies collected an average of $4.75 per month more from broadband customers in 2014 over what they paid in 2012.

“Broadband is strategically more important than the number of subscribers indicates because it has the potential to be higher margin,” Cryan said.


(Chart: Point Topic)

Usage Caps & Market Power: AT&T Applies Overlimit Penalties to DSL, Not U-verse Customers


“Note: Enforcement of the 250GB data consumption threshold is currently suspended.” (Image: Houston Chronicle)

AT&T’s enforces usage caps with overlimit penalties on its slow speed DSL service while waiving overlimit fees for its higher speed U-verse Internet service.

In 2011, AT&T introduced a 150GB monthly data cap on its DSL customers and a 250GB cap on U-verse Internet access, promising an overlimit fee of $10 for each 50GB customers stray over their allowance. Since that time, although AT&T continues to claim all customers have a usage allowance, it only penalizes DSL customers with overlimit fees.

What makes one customer subject to a higher bill while another can use as much data as they like without penalty? Competition.

Stop the Cap! has found AT&T’s DSL customers are among those least favored by the phone company. Subjected to a data cap with penalty fees for exceeding the allowance is just one of the issues bothering customers like Sheila Rivers, who lives on Houston’s west side. Her Internet bill has gone up year after year no matter how much data she uses. Her phone line with DSL used to cost her around $45 a month. Last year, it increased to $65 and AT&T has now informed her they want another $10 a month, bringing her phone bill to almost $75 a month. As long as it hasn’t rained recently, she gets just under 6Mbps speeds from AT&T. This past spring her connection barely exceeded 2Mbps.

When Rivers complains about her bill, she is quickly offered U-verse at about half the price for faster speeds. She’d take advantage of the offer, except she can’t. AT&T’s engineers tell her there are “no more ports” open in her neighborhood at the moment.

That’s also true for Jim in downtown Chicago. He’s an AT&T DSL customer and not by choice. AT&T was supposed to upgrade his building to U-verse more than a year ago, but it still has not happened. Comcast has a record of delivering appallingly bad service in his building, judging from his neighbors who cannot stay connected to Comcast’s Internet service. That leaves him with AT&T DSL with that 150GB usage cap. He regularly pays $30 in overlimit fees every month for exceeding it.

“AT&T won’t budge on waiving the extra fees on DSL, unless I agree to sign up for U-verse and then they will issue me a courtesy credit,” Jim tells Stop the Cap! “I keep telling them ‘yes, please’ and around a day later I receive another call canceling my order because U-verse is not available in the building. It’s clear the DSL usage cap is supposed to convince people to switch to U-verse for a bigger allowance.”

uverse caps

(Image: Houston Chronicle)

Except AT&T has not enforced its 250GB usage allowance with overlimit fees anywhere we could find. In fact, customers tell us they are specifically exempted from any U-verse caps based on a message they see on AT&T’s usage measurement tool:

Note: Enforcement of the 250GB data consumption threshold is currently suspended.

This week, the Houston Chronicle’s TechBlog reports usage caps for U-verse have been suspended across the city of Houston. AT&T’s current reasoning for harshly enforcing caps on its DSL service while not enforcing them at all for U-verse customers was murky:

“We’re educating our customers on Internet usage, and we inform them if their usage might affect their monthly bill.”

So what is different about AT&T’s lower speed DSL service that presumably generates less traffic than its higher speed U-verse counterpart?

The answer seems to be competition.

AT&T has aggressively upgraded many of their urban and suburban service areas to U-verse. That upgrade alone does not mean the end of DSL for customers in an upgraded area, but AT&T has clearly embarked on an effort to convince customers to abandon older DSL service in favor of U-verse. In most cases this is accomplished with promotional pricing, dramatically reducing the cost of U-verse and convincing customers sticking with DSL is an expensive mistake.

AT&T also faces cable competition in nearly 100% of their U-verse service areas — competition that has raised broadband speeds and cut prices for new customers. If the competition offers faster Internet speeds with no usage cap, toughing it out with AT&T U-verse may seem unwise. Enforcing that 250GB cap would likely drive a number of customers to the competition.

In contrast, more rural and outer suburban communities are less likely to have a cable competitor and much more likely to qualify only for DSL because AT&T has not upgraded those areas to U-verse. That leaves AT&T with a monopoly, where customers have no other choices for service. It is very easy to enforce usage caps in these areas.

“It doesn’t make any sense that AT&T would cap me to 150GB on my DSL line and charge me overlimit fees for using too much when my next door neighbor with U-verse can use the Internet 24/7 and never be asked to pay anything extra for doing it,” Rivers said. “It rubbed me wrong enough to call Comcast, where I was offered more than 10 times faster service with cable TV thrown in for $15 less than what AT&T has been charging me and no usage caps for now at least. I can’t stand Comcast but AT&T is worse.”

Rivers thinks AT&T is making a big mistake having usage caps at all.

“That one issue just cost them my business after eight years with them.”

Ookla Dumps Net Index in Favor of Misleading, Often Inaccurate “Speedtest Award”

When New is Not Improved

When New is Not Improved

It is disappointing to see a company priding itself on independently measuring America’s broadband performance throw accuracy to the wind and start handing out misleading awards for America’s top broadband providers that their own speed tests often disprove.

Municipal and independently owned Internet providers have relied on Ookla to prove to the world they can offer superior broadband service over what is on offer from the local cable and phone company. Net Index was a useful, independent resource to track broadband speeds and trends based on millions of consumer-run Internet speed and health tests. A provider claiming “up to 10Mbps” service could quickly and easily be verified as a truth-teller or teller of tall tales. As of today, that is no longer as easy to verify:

Ookla Net Index has been discontinued

Ookla is devoted to providing world-class products and services. Sometimes that means saying goodbye to old sites, like Net Index, and hello to new ones…


Those “new and improved” products include:

  • SPEEDTEST AWARDS: Provides insights to consumers on where to find the Fastest ISPs & Mobile Networks worldwide, based on data from millions of Speedtests taken in the first half of 2015;
  • SPEEDTEST INTELLIGENCE: Designed for enterprises, governments and analysts to understand worldwide internet performance, based on the millions of Speedtests run each day.

While there is nothing objectionable about handing out awards for good performance, it turns out only the nation’s biggest telecom companies need apply, because unless you are Comcast, Time Warner Cable, Cox, Charter, or Verizon, you are too small to matter.

fastest ispAmong those that do, Comcast’s Xfinity takes first prize:

Comcast XFINITY is the nation’s largest traditional cable operator and largest home ISP. It offers an extremely wide variety of technologies and speeds, peaking at a fiber-based “Extreme 505” tier. That service isn’t widely available, though; you’re more likely to see top speeds of 105Mbps or 150Mbps using traditional DOCSIS 3 cable technology.

Ookla explains away why better performing ISPs are not qualified for one of their awards:

For a given location – either nationwide or a given state or city – we aim to include only ISPs or mobile networks that provide service for a significant number of customers in that geographic area. So, while Google Fiber is the fastest broadband in states like Kansas or Missouri, they are not suitable to be included in the fastest ISPs nationwide because they only serve a very small portion of the United States. To be included in a given geographic area, an ISP or mobile network must meet a minimum threshold based on the number of unique devices testing each day over a six month period.

In other words, accuracy matters a lot less than coverage area. Ookla’s methodology is further invalidated on the local level by their own website.

The prominent first place national award given to Comcast for having the fastest Internet access could mislead you to believe they are the best provider. But Ookla’s own speed tests show that in states like Minnesota, Comcast only comes in third place. Inexplicably, America’s always-lowest rated cable operator — Mediacom, scores first. Charter comes in second. Ookla does not bother to rank municipal-owned broadband providers that outperform all the above.

Not consistently including public, municipal utility, or co-op broadband providers in states like North Carolina and Colorado does an even bigger disservice to anyone depending on Ookla for independent and accurate results. Many of those providers just don’t show up in Ookla’s listings.

In other cases, providers that offer commercial-only broadband make Ookla’s list while even faster providers that sell to consumers don’t. In Rochester, N.Y., Ookla gives first place among local providers to Sutherland Global Services, a provider of business process and technology management services — not a residential ISP. Greenlight Networks delivers gigabit fiber to the home service to select residents in the area and does not appear on Ookla’s list.

Ookla’s own results show the largest companies deliver uneven results across the country, which comes perilously close to invalidating the usefulness of a “national” award. The fact Ookla intentionally leaves out ISPs that can dramatically outperform the competition drives the final nail into the credibility coffin, rendering Ookla’s “new and improved” results meaningless and very misleading. In short, consumers might find using a Ouija board to choose their next ISP about as useful.

It appears the more meaningful data consumers need to make an informed choice has been shifted to Ookla’s premium “Speedtest Intelligence,” designed to provide the granularity stripped away from Net Index. Based on an inquiry form, it seems Ookla is now selling this information to private clients, leaving consumers stuck with Ookla’s overgeneralized “awards” and incomplete regional test results that exclude too many residential providers to be useful and accurate.

The Philippines: Free Market Broadband Paradise or Deregulated Duopolistic Hellhole?

special reportFans of the “hands-off” approach to broadband oversight finally have a country where they can see a deregulated free marketplace in action, where consumers theoretically pick the winners and losers and where demand governs the kinds of services consumers and businesses can get from their providers.

That country is the Philippines, which has taken the libertarian free market approach to Internet access in a dramatic leap away from the authoritarian Marcos era of the 1980s.

The Deregulation “Miracle”

Until 1995, the Philippines Long Distance Telephone Company (PLDT) maintained a 60-year plus government-sanctioned monopoly on telecommunications services. Its performance was less than compelling. Establishing landline service took up to 10 years on a lengthy waiting list. Getting a phone line was the first problem, making sure it worked consistently was another. Just over 10 years after the United States formally broke up AT&T and the Bell System, the government in Manila approved RA 7925 – the Public Telecommunications Policy Act of 1995, breaking PLDT’s monopoly and establishing a level playing ground for each of 11 regions across the country and its many islands in which private companies could compete with PLDT for customers.

philippinesTo attract investment and competition, the government declared all value-added services like Internet access deregulated and guaranteed the complete privatization of all government telecom facilities no later than 1998. It also initially limited the number of companies that could compete against PLDT in each region to two new entrants. The government felt that would be necessary to attract competitors that knew they would have to quickly invest millions, if not billions, to build telecom infrastructure in the Philippines. It would be hard to make a case for investment in a region where a half-dozen companies all engaged in a price war fighting for customers while stringing new telephone lines and building cell towers.

To prevent cherry-picking only the wealthiest areas of the country, the government declared its desire for a privately funded nationwide telecom network and used the 11 regions, combining urban and rural areas in each, to get it. Competitors were required to support at least 300,000 landlines and 400,000 cellular lines in each region. That assured new networks could not simply be built in urban areas, bypassing smaller communities. After building their networks, companies largely operated on their own in a mostly-free deregulated market, slightly overseen by the National Telecommunications Commission (NTC) — the Philippines equivalent of the FCC.

The early years of telecom deregulation seemed promising. PLDT, much like AT&T in the United States, kept the lion’s share of customers (67.24%) after deregulation took effect, but new competitors quickly captured one-third of the market. But with lax regulation and oversight, some of the Philippines’ most powerful families, many benefiting under years of the Marcos dictatorship, managed to gain influence in the newly competitive Philippines telecom business. In the United States, telecom competition meant a choice between Sprint, MCI, AT&T or others. In the Philippines, you dealt with one or two of nine powerful family owned conglomerates, each operating with a foreign-owned telecom partner. It would be like choosing between companies owned by the Rockefellers, the Astors, the Carnegies, or the Morgans.

pldtThe NTC remained more “hands-off” than the FCC, avoiding significant involvement in critical interconnection issues — how competing telephone companies handle calls from subscribers of a competing provider. That was last an issue in the United States in the early 1900s, where rare independent competitors to the rapidly consolidating Bell System faced a telecom giant that initially refused to handle calls from customers of other companies. American regulators eventually demanded interconnection policies that guaranteed customers could reach any other telephone customer, regardless of what company handled their service. In the Philippines, the NTC eventually mandated less-demanding access, allowing companies to charge long distance rates to reach customers of other companies. In the 1990s, it was not uncommon to find businesses maintaining at least two telephone lines with different companies to escape long distance expenses and stay accessible to all of their potential customers.

PLDT initially fought the opening of the marketplace but benefited handsomely from it once it took effect. The company got away with setting sky-high interconnection rates to connect calls from other smaller providers to its customers. It also made access to its network a minefield of bureaucracy and often required competitors to sign unfair revenue sharing agreements.

It is Cheaper to Buy Out the Competition Instead of Competing With It


(Image Courtesy: Mary Grace Mirandilla-Santos/LIRNEasia)

The investment community eventually balked at the cost of constructing competing telecommunications networks, especially after the dot.com crash in 2000, and a drumbeat for industry consolidation through mergers and acquisitions quickly grew too loud to ignore. Investors fumed over the amount of money being spent by providers to meet their service obligations in the 11 subdivided regions. Instead of building redundant or competing infrastructure, allowing competitors to merge would cut costs and enhance investor return. The NTC let the marketplace decide, as did the government, and it led to a frenzy of industry consolidation that ran far beyond what the FCC and American Justice Department would ever tolerate.

In 2011, the government backed a colossal merger that brought together the wireless networks of Pilipino Telephone Corporation, PLDT, and Smart under the PLDT brand. The three former competitors became one and controlled 66.3% of the Philippine’s wireless customers. The merger was comparable to allowing Verizon to buy out Sprint.

Additional mergers in response to the super-sized PLDT rapidly reduced the competitiveness of Philippine’s telecommunications marketplace to a duopoly. Just two companies — PLDT, Globe, and their respective house brands — dominate landline, DSL, cable, and wireless telecommunications service in the Philippines. The investment community celebrated the deal’s approval as a lucrative goldmine of future revenue gains from a less competitive market.

Philippine Broadband: Hey, It’s at Least Moderately Better Than Afghanistan


(Image courtesy: Mary Grace Mirandilla-Santos/LIRNEasia)

Broadband performance, under any measure other than financial success, has proved abysmal for Philippine consumers and businesses. The country’s broadband speeds are among the worst in the world, only beating Afghanistan in many speed tests. Look the other wayoversight led to a bribery scandal in 2007 that threatened to bring down the government. Officials exploring the development of a National Broadband Network were accused of soliciting kickbacks from Chinese equipment vendor ZTE, which would have been responsible for supplying equipment for the project. The government canceled the project as the scandal widened and some of the principals left the country or in at least one case were kidnapped.

Eight years later, broadband in the Philippines would be considered a North American nightmare. The free market approach has led to free-flowing profits and a profound lack of marketplace competition, with broadband ripoffs and broken promises rampant across the country.

Although both PLDT and Globe Telecom are spending large sums on infrastructure, much of it benefits their very profitable wireless networks and business customers. Despite the investments, residential customers are stuck with some of the world’s worst broadband speeds and performance.

An independent Quality of Service test revealed the bad news all around:

The findings of the Philippine QoSE tests were expected, but nevertheless still disappointing.

The best performing among the three ISPs delivered only 21% of actual versus advertised speed on average. This same ISP also offered at least 256kbps download speed (generally accepted definition of broadband) only 67% of the whole time it was tested, falling short of the required 80% service reliability.

The Broadband Commission defines the core concepts of broadband as an “always-on service” with high capacity “able to carry lots of data per second.” While there is no official definition of broadband locally, the Philippine Digital Strategy 2011-2016 defines broadband Internet service as 2Mbps download speed.

Finally, like the last nail in the coffin, Philippine ISPs performed the worst in terms of value for money when compared to select providers in South Asia and Southeast Asia. The highest value given by any of the three Philippine ISPs tested was a measly 22kbps per US dollar. This figure is too low when compared to similar mobile broadband ISPs that offer 173kbps per dollar in Jakarta, Indonesia and 445kbps per dollar in Colombo, Sri Lanka.

These results have huge implications on truth in advertising, consumer welfare, and the need for appropriate regulation.

My DSL Service is So Bad I Prefer 3GB Usage-Capped Slow Wireless Instead



Home DSL broadband is so bad that customers have increasingly dropped service in favor of tightly managed wireless service. Companies report DSL customer losses over the past few years, with no end in sight.

The telecom regulator has generally just shrugged its shoulders at the situation, suggesting competition between equally poor providers will somehow resolve the problem. That view is applauded by service providers who claim the Internet is “just a value-added service” not essential to basic living needs. But consumer groups wonder why providers are allowed to make false advertising claims about the speed of their service with no repercussions. A range of position papers appealing to the government to create a meaningful minimum broadband speed have been introduced and some are being pushed by members of the Philippine Senate.

Senator Loren Legarda joined scores of other frustrated customers complaining about unreliable and expensive Internet in the country. In a 2014 hearing Legarda complained she had once again lost her DSL Internet connection in her office and her wireless connection was so slow it was unusable.

“As we speak now, there is no Internet connection in my office,” Legarda said. “I received a message this morning from my staff on my way here because I may be e-mailing, etc. And for someone whose deadline was yesterday, I always want things done fast and I’m sure many of you want that efficiency too to serve our people better.”

http://www.phillipdampier.com/video/ANC Poor Broadband Internet 5-14.flv

ANC aired this story about Sen. Legarda’s broadband problems and how Philippines’ providers oversell their networks back in 2014. (4:56)

We Oversold Our Networks So Sue Us, Except You Can’t

Providers blame the problem on oversold networks that attempt to manage too many paying customers on an inadequate network. In other words, they blame themselves with little fear any regulator will create problems for them.

Wireless service is no panacea either. Customers in the Philippines face draconian “fair use policies” on so-called “unlimited plans” that leave them throttled after 1GB of usage per day or 3GB of usage per month, whichever happens first. Providers suggest the policy is a benefit, promising them a better user experience. Besides, they suggest, even those that run into the speed throttle can still browse the Internet, albeit at as speed resembling dial-up:

Your internet speed will slow down if you use up 1GB of data for the day, or accumulate 3GB of data usage for the month.

If you hit the 1GB/day threshold, you’ll experience slower speed, but no worries because as we mentioned above, you can still surf! You’ll move up to normal speed at midnight. If you hit the 3GB/month threshold, your speed will move up to normal speed on the next calendar month (not based on bill cycle).

With a stifling usage allowance, shouldn't providers in the Philippines be offering better speeds?

With a stifling usage allowance, shouldn’t providers in the Philippines be offering better speeds?

Say Hello to the “Promo Pack” – Your Net Neutrality Nightmare Come True

Remember the scary ads from Net Neutrality proponents promising a future of Internet add-ons that would charge you to surf theme-based websites without facing network slowdowns or stingy usage caps if Net Neutrality protections were not forthcoming? In the Philippines, the nightmare came true. Mobile providers sell added cost “promo packs” that bundle extra throttle-free usage with theme-based apps. A package with Spotify runs about $6.50US a month and includes 1GB of usage. Anyone can buy a Spotify premium membership in the Philippines for around $4.37US without the add-on. But even worse are app-based promo packs that bundle free-to-download-and-use apps in the U.S. with special designated usage allowances.

Want to use Google Maps on your wireless provider? A “promo pack” including it costs around $2.17 a month and includes 300MB of usage. That money doesn’t go to Google — it stays in the pocket of the provider – Globe Networks. Twitter will set you back $4.37US a month and includes 600MB of usage, which seems odd for a short message service when contrasted with an identically-priced promo pack for Facebook, that needs the extra usage allowance more than Twitter likely would. But then they also get you for Facebook Messenger, which costs an extra $2.17US per month and comes with its own usage allowance — 300MB.

"What If" actually "Is" in the Philippines.

“What If” actually “Is” in the Philippines.

Globe-Telecom3While segmenting out popular mobile apps for special treatment, Philippine mobile providers have also taken Verizon and AT&T’s lead, pushing plans like myLIFESTYLE that bundle unlimited text and phone calls with expensive data plans.

Lifestyle Promo Packs:

Lifestyle Bundle

Price (Philippine Peso)

Consumable MBs/GBs





Premium membership to Spotify, with 1GB data



Access to Gmail, Yahoo Mail, Evernote, + 10GB Globe Cloud Storage
Explore Bundle



Access to Agoda, Trip Advisor, Cebu Pacific, PAL
Navigation Bundle



Access to Waze, Grab Taxi, Google Maps, MMDA app, Accuweather
Shopping Bundle



Access to Zalora, Amazon, Ebay, OLX, Ayosdito



Access to Facebook



Access to Twitter



Access to Viber
FB Messenger



Access to FB Messenger
Chat Bundle



Access to Viber, Whats App, FB Messenger, Kakao Talk, Line, WeChat
Photo Bundle



Access to Instagram, Photogrid, Photorepost, Instasize

Extra Add-ons:

Basic Price Description
Consumable 100 Stackable Amounts of P100 denomination consumables
Unli Duo 299 Unlimited Calls to Landline/duo
Unli Txt All 299 Unlimited Texts to other networks
Unli iSMS 399 Unlimitend International SMS to one intl. number
Unli IDD 999 Unli IDD calls to one intl. number
DUO International 499 Unlimited calls to US landlines

The Philippines Should Regulate Under the American Example vs. The Philippines Should Not Regulate Under the American Example (It’s Obama’s Fault)

Lincoln_MemorialProviders in the Philippines have learned a lot from America’s telecommunications lobbyists. Their advocacy campaigns revolve around the theme that the United States has the best wireless networks in the world, developed under a largely hands-off regulatory philosophy that the Philippine government should follow.

The government and regulators largely acquiesced to that campaign until this year, when that idea came back to haunt providers. Earlier this year, the Obama Administration and the FCC began taking a more hands-on approach to telecom regulation after recognizing the marketplace is not as competitive as providers suggest. Strong Net Neutrality enforcement, limits on mergers and acquisitions and strong signals marketplace abuses would no longer be tolerated are now being pushed in Washington by the White House and the Federal Communications Commission. Providers in the Philippines no longer advocate following the American model, but it may now be too late.

obamaThe NTC is close to issuing new minimum broadband speed and performance standards and is now listening to Filipino consumers that launched Democracy.net.ph to fight usage caps in the Philippines back in 2011. The NTC may soon require providers advertise average speeds and performance, not “up to” speeds nobody actually receives. Those getting poor service would be entitled to refunds or rebates.

That could be the first step towards a more activist NTC that may have learned the lesson that listening to the broken promises of better service through deregulation has resulted in some of the worst broadband performance the world has to offer. The Philippines took the advocacy arguments of the deregulation crowd and doubled down, not only allowing providers to lie and distort in their advertising, but also permitting massive industry consolidation reducing the choice for most Filipinos to just two providers for almost all telecommunications services. The government looked the other way as corruption turned into a scandal and today it is left with two very powerful conglomerates that deliver third world Internet access while pocketing the generous proceeds.

A Better Way to Better Broadband

A deregulated, free market only works where healthy competition exists. Too few players always leads to reduced innovation, poorer service at higher prices, and a corporate fortress deterring would-be competitors that are unlikely to be able to survive in a fair, competitive fight. For the Philippines (and by extension the United States) to fully benefit from healthy competition, large conglomerates must be broken up and further mergers must be prevented above all else. Until sufficient competition can self-regulate the marketplace, strong oversight is necessary to protect consumers from the abuses that always come from monopolies and duopolies. Charging wireless customers for free apps and suggesting 3GB of usage is equal to unlimited broadband are two places to start cracking down, quickly followed by an investigation into where investment dollars are being spent and for whose benefit. It seems like customers are not reaping any rewards in return for high-priced service.

The Philippine government should also continue exploring a National Broadband Network strategy that puts the country’s broadband needs above the profit motivations of the current duopoly. Governments build roads and bridges, airports and railways. Broadband is another infrastructure project that needs to be developed in the public interest. If private companies want to be a part of that effort, that is wonderful. But they should not be dictating the terms or holding the country back from what may be the biggest scandal of all — broadband that barely performs better than what the Taliban can get these days in Helmand province.

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