The days may be numbered for Sunflower Broadband

A Kansas cable system notorious for Internet Overcharging is nearing a deal to be acquired by a cable overbuilder that does not usage cap broadband customers.

Sunflower Broadband, an independent cable system providing cable, phone, and broadband service to 30,000 Lawrence residents, is expected to be acquired by Georgia-based cable overbuilder Knology, which has been on a buying spree of late.  The asking price – $127 million dollars, according to a report in the cable trade journal Multichannel News.

Sunflower has been overcharging their broadband customers for years with schemes like usage caps and a flat rate service plan that delivers speed throttled broadband service to customers.  Sunflower has remained a hot topic for Stop the Cap! because we hear so many complaints from their long-suffering customers.  In fact, no independent cable operator has generated more reader complaints than Sunflower Broadband, almost all targeting the company’s unjustified usage caps.

Broadband Reports reminds us Sunflower was among the first to implement the idea of low caps and high overages ($2 for each additional gigabyte).  Customers also routinely complain about Sunflower’s stingy upstream speeds, maxed out at just 1Mbps for their $60 Gold tier.

None of the details about Sunflower Broadband’s impending sale can be found in the local newspaper — the Lawrence Journal-World or the local “Channel 6″ news operation.  That’s ironic, considering the same parent company that owns Sunflower Broadband, The World Company, also happens to own the newspaper and Channel 6.  It took a cable trade publication based hundreds of miles away to break the story — not exactly a shining moment for journalism in Lawrence, especially considering an LJWorld reporter need not break a sweat to chase the story.

Part of the reason for the sale may have been AT&T bringing U-verse competition to Lawrence.  U-verse does not have customer unfriendly usage limits.  With AT&T ready to usher away many of Sunflower’s customers, management may have decided now was a good time to sell.

The good news for Lawrence residents is that none of Knology’s cable systems engage in Internet Overcharging schemes, so Sunflower’s usage caps may be gone after the sale.

Still, some Lawrence residents are concerned about the implications of a Knology takeover.  The Lawrence Broadband Observer is among them:

I browsed Knology’s corporate web site and was actually pretty unimpressed. To put it mildly, Knology is well behind Sunflower both geographically and technically. Knology offers service in rural areas much smaller then Lawrence, like Storm Lake, Iowa and Dothan, Alabama. They also offer service in a few towns that are equal or larger then Lawrence like Charleston, South Carolina.

Technically, Knology is well behind Sunflower in what they offer customers in other cities. Top internet speeds (albeit cap-free) are only in the 8-10 megabit range, five times slower then Sunflower’s new DOCSIS 3 offerings. On the television side, while it varies from city to city, Knology generally offers only 30 or so HD channels, which is less then half of what Sunflower offers. Knology offers a rudimentary DVR, but nothing like Sunflower’s multi-room options.

Perhaps Knology is interested in buying Sunflower to learn how to offer more advanced services, knowledge they can take to their other markets. I don’t know, but it seems like this is a case of a large buggy-whip manufacturer buying out a smaller company that makes automobiles.

Most of Knology’s network of systems have been acquired from other companies and providers.  Technically, they are a cable “overbuilder” because they do overlap other providers in some areas, such as Knoxville, Tenn., where they compete with Comcast.  In many communities, they are most common in rental parks and apartments.

Knology’s customers in other cities have usually suffered some transitional glitches (Knology uses a more “advanced e-mail system” they eventually forced their PrairieWave customers to join), but overall they have usually increased broadband speeds in their markets and add lots of new HD channels.  Knology is aggressively deploying DOCSIS 3, something Sunflower already has, so few changes should be expected there.  They do not have a history of downgrading customers.

Clues about the impact of a Knology buy can be found in communities like Rapid City, S.D., who saw their cable system switched from Black Hills FiberCom to PrairieWave to Knology.  Rapid City residents first saw changes to the cable system’s technology and billing.  That was followed by the introduction of new services and packages, and then finally the name change to Knology.

With the anticipated sale, existing Sunflower customers (and ex-customers) might want to impress on the new owner that Internet Overcharging schemes like usage caps and throttled speeds are unacceptable, and you want an immediate end to both.

Remember too it could be worse — Mediacom could have been the buyer.

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Comcast is back with another rate increase effective April 1st, amounting to 3.5 percent for many cable, broadband, and telephone customers.

Although prices vary depending on your specific service area, the range of the price increase is more consistent.

In southern New Jersey, for example, here is the breakdown — all prices are by the month:

• Expanded/Standard service cable-TV tiers are increasing $2.  Expanded service customers could pay up to $50.10, Standard customers $60.55;
• Triple Play customers will see a $5 increase in the second year of their two-year contract from $114.99 to $119.99.  First year pricing remains $99 for new customers;
• Digital Premium Packages are increasing $2;
• Economy Broadband (1Mbps) increases $2, Performance (12Mbps) increases $2, Blast! (16Mbps) increases $2, Ultra sees no price increases (but goes away for new customers effective 4/1);
• Comcast phone line prices are also increasing in certain cases;
• Each additional DVR drops by $5 — Verizon FiOS was hammering Comcast about DVR pricing.

There are no rate changes for business service customers or subscribers with “limited basic service.”  There is also no change in the company’s broadband usage allowance — 250 GB, the only part of Comcast’s service that seems to stubbornly remain at the same level year after year.

Comcast, the nation’s largest cable operator, blamed the mid-year price increases on increased programming and other business costs.

But the company is not exactly hurting.  Comcast’s 4th quarter earnings last year jumped 132 percent to $955 million dollars.  Rate increases that are designed to drive consumers into profitable service bundles, combining television, Internet, and telephone service, guarantee even better financial results in 2010.

Verizon is already capitalizing on Comcast’s rates by offering residents in southern New Jersey an even better price for Verizon FiOS — dropping from $109.99 for two years to $89.99, not including taxes and fees.  But like Comcast, Verizon wants you take a bundle of services, or else face higher prices.  The company recently increased the price for FiOS TV to $64.99 for standalone service.

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A controversial proposal by Montana’s largest cable operator to use public funding for construction of a fiber optic network linking the state’s seven Indian reservations has been rejected by federal officials.

Bresnan Communications sought $70 million broadband stimulus grant to construct the 1,885-mile fiber-optic network to improve broadband connectivity.  Independent and cooperative telephone providers objected, claiming the proposal would duplicate services they already provide.

The debate over broadband stimulus funding in rural Montana has been contentious, particularly after incumbent telephone providers accused Bresnan of lying on their application — implying funds would directly improve broadband service to Native American communities.  They accused the cable operator of using public funds to enhance their own “middle mile network,” infrastructure that helps Bresnan distribute broadband traffic between its central offices and data centers, but not “the last mile” connection customers actually rely on to obtain service.

Montana is not alone in the debate over how federal broadband stimulus money should be spent.  With a limited pool of funds, and an overwhelmed National Telecommunications and Information Agency tasked with processing an unexpected flood of applications, funding decisions have become increasingly political, and many incumbent providers have learned they can jam up an applicant just by flooding federal agencies with comments opposing projects that impact on their service areas.

Click here to view the embedded video.

KULR-TV in Billings covered the NTIA Grant Broadband Workshop held last January and also covered Montana’s woeful existing broadband speeds in these two reports. (1/19/2009 & 8/30/2009 – 2 minutes)

Because “last mile” projects are the most threatening to incumbent providers, these applications typically get the most opposition.  The NTIA, in an effort to reduce their workload, has in turn started focusing on “middle mile” projects which often benefit incumbents, pushing public tax dollars into pre-existing private networks.  That looks great on provider balance sheets — that’s money they don’t have to raise from stockholders or other investors.  Diverting those funds away, even from currently unserved areas, also protects providers’ flanks from the potential threat of competition, both now and in the future.

In Montana, chasing few potential customers spread out over vast distances in rural areas makes the potential threat from competition even scarier.  There, many small phone companies exist as co-ops, less concerned with raking in profits.  They fear the potential threat Bresnan Communications could bring to their viability if the cable operator gets a stronger foothold in their territories, especially when using tax dollars to do so.  But is the threat that large for well-run, customer-oriented companies and co-ops?

Many rural areas served by co-ops and other small independent companies actually receive better and faster broadband service than their more urban counterparts, argues Bonnie Lorang, general manager of Montana Independent Telecommunications Systems, an independent phone company trade group.  That’s because the state’s large urban phone company – Qwest, does not provide DSL into more distant suburban and rural service areas, and has only reached 75 percent of its customers with broadband service.  Smaller independent providers, particularly member-owned cooperatives, are accustomed to serving residents Qwest has been slow to reach.

While true for those forced to rely on Qwest DSL service, those with access to cable modem service can do better.  Bresnan provides up to 8Mbps service for residents in its mountain west region covering parts of Wyoming, Montana, and the western slope of Colorado.  Expanding Bresnan’s service where economically feasible remains a priority for the company, and broadband stimulus funding may make the difference between an “unprofitable” area and one that can be profitable if certain infrastructure costs are underwritten.

“Bresnan has a history of investing in communities that are not considered larger communities,” according to said Shawn Beqaj, spokesman for Bresnan. “Our philosophy is that smaller communities deserve every bit of the services that large communities have.”

Bresnan’s grant application received support from Montana governor Brian Schweitzer, the state’s Native American population, and some consumers unhappy with their current broadband choices, if any.

Montana's phone companies are running these print ads objecting to the broadband stimulus proposal from Bresnan Communications (click to enlarge and see the full ad)

On the other side, the phone companies and their trade groups: the Montana Telecommunications Association and Montana Independent Telecommunications Systems, and the state’s utility oversight agency.  They protested Bresnan was unnecessarily duplicating existing service, and potentially getting taxpayer money to do so.  They also hinted Bresnan exploited Native Americans in an application tailor-written to appeal to federal officials seeking improved service for disadvantaged and challenged minority groups.  Besides, the phone companies argued, Bresnan broke the rules from the outset by only agreeing to provide $6 million in company-provided matching funds, less than the 20 percent in matching dollars required by the stimulus program.

“If an area is unserved, prove it and spend the money on that,” Geoff Feiss, a representative of the Montana Telecommunications Association (MTA), told the Billings Gazette.  “But don’t spend $70 million on an overbuild network that’s going to deprive investment from existing networks and leave behind collateral damage that we’ll never recover from.”

Montana’s Public Service Commission ended up on the side of the MTA, calling Bresnan’s proposal “seriously flawed.”

Bresnan and their allies shot back that phone companies complaining about federal dollars being spent on broadband projects was hypocritical, considering many of those companies receive government assistance from the Universal Service Fund to stay in business themselves.

Consumers looking for broadband were left in the middle or left out entirely.  Many residents of the state are forced to rely on dial-up, satellite, or have been left indefinitely on waiting lists for future DSL expansion projects that take forever to materialize.  Choice is an option too many residents don’t have.  The Great Falls Tribune shared a story familiar to many Montanans:

Tim Lanham can’t get Qwest DSL at his eastside Great Falls home. It’s available to his neighbors across the street and at his office a block away.

He’s called Qwest about the situation, but typically can’t get through to a real person. The whole thing is frustrating, he said.

Lanham used to use Sofast. After its service went down, he switched to a Verizon Wireless card, but that can only be used on one computer at time. Now he has broadband Internet through Bresnan. Still, he wishes he had more options.

“I’d like the different options,” Lanham said. “Essentially they leave us with very few choices.”

At the heart of the debate is how to address the “digital divide” between those with Internet access and those without, and improving connectivity for those stuck with outdated, expensive, and slow “broadband.”

The state’s utility commission believes Montana’s primary problem exists in “the last mile,” namely getting broadband service to rural residents who currently are forced to use dial-up or satellite fraudband service that offers slow speed, tiny usage allowances, and a high price tag.  In most cases, telephone companies have deemed these rural residents too few in number and too far apart to make investments in DSL service worthwhile.  Using broadband stimulus money to subsidize the costs of providing service to rural America provides a direct path to broadband for those who may not obtain access any other way short of moving.

Larger providers have been urging that less money be spent on “last mile” projects and that funding be redirected into “middle mile” projects, which could dramatically reduce the costs companies have to pay to maintain and upgrade their own backbone infrastructure.  Examples of these kinds of projects include installing fiber optic cables between telephone company central offices or extended service “remotes” which reduce the distances between customers and telephone company facilities, extending the distance DSL can cover in rural areas.

For now, Montana will have to wait for both.

Bresnan officials will meet with tribal and state commerce officials before deciding what to do next.

Walter White Tail Feather, director of economic development for the Assiniboine and Sioux tribes on the Fort Peck Indian Reservation in northeastern Montana, told the Gazette he hopes Bresnan reapplies for the funding.

“We think we can make a better proposal this second round,” he said. “This first one was a learning experience. … What we really are doing is working with the state to empower ourselves as a tribal government to create a business, to create opportunities that we don’t have.”

The state’s small phone companies may have won the battle, but are now concerned they could ultimately lose the war over obtaining broadband stimulus money themselves, at least from the NTIA.

Jay Preston, chief executive officer of Ronan Telephone Co., told the Gazette two federal agencies now will be deciding who gets broadband stimulus money: The National Telecommunications and Information Administration and the Rural Utilities Service.

The NTIA “seems to be really, really focusing on the middle-mile idea,” Preston said, while RUS probably will approve funds for rural telephone companies that already are the federal agency’s customers. The RUS loans money to rural co-ops for a variety of projects.

Regardless of where the money comes from, frustrated Montana residents just want better service.  The state ranks dead last, tied with Alaska, in broadband speed, according to a study from the Communications Workers of America.  Residents enjoy an average broadband speed of just 2.3Mbps.

Click here to view the embedded video.

Already-broadband-challenged Montana residents faced a major headache when one of the state’s large Internet Service Providers, SoFast, suddenly shut down last November.  KFBB-TV in Great Falls followed the story over three days in these three reports from November 10-13th, 2009.  (5 minutes)

The Billings Gazette mapped out Montana's fiber landscape

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Source: Trefis

At a time when digital cable revenues are anemic, and rate hikes are among the most important factors for keeping average revenue per customer as high as possible, Time Warner Cable’s broadband division is just a percentage point or two from becoming the most important service on offer from the nation’s second largest cable provider, at least as far as the stock price is concerned.

Trefis, a forward looking valuation analyst, says future growth at Time Warner Cable will largely come from consumers looking for broadband connectivity. While the company’s digital cable division still constitutes the majority of its stock price estimate, 36 percent, the broadband division has now achieved a close second — 35.1 percent, according to Trefis.

Time Warner Cable maintains an 11 percent share of America’s broadband market, a number expected to grow to 13 percent over the course of the next few years.  Trefis predicts a corresponding increase in the stock price as consumers continue to be driven to the cable operator, particularly from less robust DSL service sold by telephone companies.

Trefis notes the need for speed is a driving factor, and the company can expect to also benefit from customers bundling multiple services together when signing up.

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City by city, Comcast is continuing its quest to make the switch to digital cable for an increasing portion of  its cable programming lineup.  Although the majority of subscribers will encounter letters from Comcast switching only a portion of the analog cable lineup, it’s a safe bet Comcast is looking to an all-digital future sooner or later.

Coming less than a year after the switch to digital broadcast television, the march to digital cable is causing confusion for subscribers who don’t understand the difference.

Analog cable television has been around for more than 20 years in most American cities.  It’s the kind of cable television that doesn’t usually need a converter box on top of the TV.  Just plug the cable line into the back of your television set, let the TV find and map available channels, and you can use your standard TV remote to enjoy basic or enhanced basic cable television.  Of course, if you subscribe to premium channels like HBO or Showtime, a box is required to descramble the encrypted signal.

Cable operators began launching “digital cable” in the 1990s, expanding the lineup of programming with hundreds of new channels that are compressed into a digital format, with a half dozen or more digital channels fitting in the same space used by just one analog channel.  Space on the cable line is getting increasingly crowded as cable systems launch new HD channels, support telephone service, and expand broadband service and speeds.

To make room, several of those old school analog channels have to go… digital.  If you already have a set top cable box — you probably won’t even notice the changeover.  But if you don’t have one of those boxes in your home, and your television doesn’t support CableCARD technology, Comcast has some bad news for you.  Sooner or later, you’ll either have to get a set top box or lose an increasing number of channels on your cable dial.

Comcast's digital adapter doesn't support HD channels

Comcast’s digital cable expansion is their solution to the traffic jam on their cable lines.  Some other cable companies take a different approach.  Knowing that many customers hate cable boxes, they’ve left analog channels alone, instead transmitting digital channels only to those homes actually watching them.  If nobody in your neighborhood is watching Current or Fox Business News, why waste the space to send those signals down the line to… nobody.  Time Warner Cable doesn’t for many of their digital channels.  If one lives in an eclectic viewing neighborhood, there are problems with this approach.  Potentially, if enough homes want to watch these lesser-viewed networks, and Time Warner runs out of the space it sets aside to carry a certain number of these channels, the subscriber will see a video busy signal — a message stating the channel is temporarily not available, at least until someone nearby changes channels, making room for the network you want to watch.

Comcast's digital solution is a problem for those who hate "the box" for weaving a rat's nest of cables behind one's television.

In most communities, Comcast will provide up to three digital adapter boxes at no charge, if you install them yourself on each television in your home.  Additional boxes are usually $1.99 per month.  That’s fine if you are still using an older television set and don’t care about HDTV programming — the digital adapters Comcast provides don’t support HD.  If you do want HD channels, you’ll need Comcast’s traditional converter box, which runs about $7 a month per television, or a CableCARD, if your television supports it.  Comcast also has elaborate instructions for customers with multiple TV inputs to support both standard and high definition signals, some through the digital adapter, others not, but it requires a lot of cables.

Customers who loathe boxes and don’t want to pay for them are upset by all of the changes, and either must cope with the new box, or gradually lose more and more analog channels as the conversion continues.  Broadcast basic customers getting only local channels from Comcast are unaffected by all of this, at least for now.  Owners of modern HD television sets aren’t impressed either — their sets, capable of receiving QAM digital cable channels without a box are no help because Comcast encrypts its digital cable lineup in many areas.

But the company still thinks of the project as a service upgrade for its customers, even dubbing it Project Cavalry on their company blog. When one customer wondered why the new equipment wasn’t available in his area yet, a company blogger responded, “We will not be “cherry picking” … all our systems will get the benefits. The Comcast Cavalry just hasn’t swept through your area yet, stay tuned.”

When asked why the devices don’t support HD channels, the response:

The DTA was designed as a low-end, basic device to do one thing and one thing only … convert digital signals back to analog for display on an analog TV. That’s all, no higher end outputs, no VOD, no HD, no interactive guide. Keeping the device simple as described is what kept the price down enough that we can provide so much free equipment to our customers. Also, the RF output makes it compatible with the absolute maximum number of TVs, which is critical to the program. As a digital device, however, it does offer dramatically-improved picture quality over analog even through the RF output.

Click here to view the embedded video.

Watch Comcast’s tutorial on installing their Digital Adapter. (4 minutes)

Click here to view the embedded video.

Watch a coast-to-coast series of news reports detailing the Comcast transition to digital, starting with the message customers see on their now-missing favorite channels. (15 minutes)

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Consumers are increasingly cutting down their cable packages to keep their monthly bill down

Cable television customers have finally reached their limit.  For years, annual rate increases well in excess of inflation have annoyed customers, but beyond complaining, few actually dropped service.  That has begun to change as the economy, consumer debt, job fears, and other expenses have finally provoked customers to begin paring back on their cable package.

According to research from Centris, a consumer research organization, a virtual ceiling of tolerance for cable rate increases appears to have been reached for many subscribers.  Although consumers are not dropping cable en masse, they are not simply accepting a higher bill either.  They are dropping services from their cable package.  In 2008 and 2009, premium movie channels and pay per view suffered most from customer downgrades.  Consumers with multiple premium movie channels started by dropping one or two of them, and their use of pay per view service also dropped.  As the financial impact of the recession wore on, the next round of rate increases caused additional erosion — by late 2009 many consumers discontinued all of their premium services.

The goal?  To reduce or at least maintain a consistent monthly bill.  The average amount consumers are paying for digital cable dropped from $79 a month in the third quarter of 2008 to $70 in the third quarter of 2009.  That decline didn’t come from discounts from the industry — it came from dropping channels and services. In 2010, consumers are still pruning away, now impacting digital basic cable and smaller add-ons like sports and movie tiers.  They are also phoning their provider threatening to cancel service altogether if additional discounts cannot be found.  Cable operators, not surprisingly, have managed to find plenty of savings for consumers who ask and stand their ground, ready to walk away from cable.

The cable industry has sought to promote bundled services as an anti-erosion measure.  It’s much harder to walk away from a provider supplying your television, Internet, and phone service, especially if they lock you into a multi-year service agreement with a cancellation fee.  The savings promoted from bundled services come largely as a result of steeper price increases on standalone products and services, manufacturing “added value” for so-called “triple play” packages.

Some customers have divorced from pay television service altogether, deciding relentless price increases and the 500 channel universe shoveled in their direction just isn’t worth the price.  For many American families, however, such drastic cord cutting would border on traumatic, and they haven’t managed such a drastic step.

Luckily, a growing number of consumers have discovered taking the Luddite approach to television entertainment isn’t a requirement any longer.

Cutting the Cord With Online Viewing

With the growing penetration of fast broadband service in homes across the country, online video has rapidly become one of the most popular online services, particularly when it’s available for free.  The benefits don’t stop at the cost — programming catalogs are becoming increasingly deep and diverse allowing fans to watch entire seasons of shows on-demand, with a limited commercial load.  A consumer looking for something to watch might easily find more entertainment online than wading through hundreds of cable channels of niche and re-purposed programming (and program length commercials).

Cable companies are well aware of the trend towards online video.  First considered part-curiosity, part-piracy, today online video is provided by the major American networks, cable programmers, independent filmmakers, YouTube, and of course, Hulu.  It isn’t just for those torrent sites anymore.  And there is plenty of room for online video to grow.

The industry uses research companies like Centris to carefully track subscriber trends.  They want to be out in front of any sea change in viewing practices that could impact their business model and their revenue, and avoid repeating the mistakes others made in ignoring a potential threat for too long.

Wall Street is well aware of the potential threat as well.

Craig Moffett, a cable industry analyst with Sanford C. Bernstein is among the most prominent trend-watchers for the cable industry.  He sees some warning signs for the future.

“Still no evidence of cord-cutting, but as prices spiral higher, the stresses on the system are unquestionably growing,” Moffett said.

So far, the cable industry has decided the best way to fight potential losses is to get into the game themselves on their terms.  Comcast and Time Warner Cable, the nation’s largest cable operators, are launching their TV Everywhere concepts, which provide their broadband customers with online access to a myriad of cable programming, on demand, and currently for free.  The catch?  You must be a verified, current pay television customer.  If you want to watch a basic cable show, you need a basic cable subscription.  Want to watch Bill Maher online?  You can, assuming you are a verified HBO premium television subscriber.

Comcast’s system is already up and running.  Time Warner Cable is expected to roll out their system sometime this year.

The industry is even selling the public they applaud the online video experience as a win for customers.  Time Warner Cable president and CEO Glenn Britt said, “TV Everywhere is an all-around win for those of us who love television. It will give our customers more control over content and allow them greater access to programs they are already paying for, while enhancing the distributors’ and networks’ robust business model that encourages the creation of great content.”

He didn’t say it also protects Time Warner Cable’s flank from cord-cutting.  Lose the cable subscription and your access to online cable programming goes with it.

But the question remains, is that enough to protect cable television revenue?

The answer might be no.

Click here to view the embedded video.

Bloomberg News reported on ‘The Invasion of the Cable Killers’ — new hardware that lets you bypass cable, back on September 15, 2009.  (2 minutes)

The Coming Online Viewing War: The Players Assemble

Who owns and controls programming ultimately controls the distribution of it.  Time Warner Cable took several shots at Fox a few weeks ago when threatened with the loss of Fox programming over a contract dispute.  Alex Dudley, spokesman for Time Warner Cable, told NY1 viewers much of Fox’s programming is available online for the taking, so even if the network was thrown off the cable company’s lineup, viewers could simply bypass the dispute and watch online… for free.  His message – the dollar value Fox places on its programming is diminished when it gives it away for free online.

The fact so much of network programming is available online for free is part of the dispute over how much cable operators should pay to carry networks on their cable systems.  When the industry passes along those carriage fees to consumers, will that be the last straw for some who will drop their cable subscription and simply watch everything online?

“They’re the ones who are going to resist these price increases that the programmers are trying to push,” said Dudley. “One need look no further than the music industry for an example of what happens when consumers feel taken advantage of by an entire industry.”

Dudley’s remark is more telling than he realizes.  The cable industry is well aware of what happened when the music and newspaper industry ignored nascent challenges to their business models like piracy or free access to their content.  To cable operators, the music and newspaper industries’ online experiences are lessons to be learned and not repeated.  The music industry waited too long to crack down on piracy and lost pricing power as consumers simply stole what they rationalized was overpriced.  The newspaper industry failed to erect pay walls to control access to their content, and newspaper subscribers dropped print subscriptions to read everything online for free.  Cable industry control of content and distribution is key to protecting their business model for pay television.  More on that in a moment.

Now two other parties want to be heard on this matter — consumer electronics manufacturers and advertisers.

The Roku box is popular among Netflix subscribers who want to stream TV shows and movies to their television sets

This week, Advertising Age is running a story on the implications of cord-cutting.

The magazine takes note that online viewing doesn’t require a computer any longer.  Samsung, Boxee, Apple TV, and even Microsoft, manufacturer of the XBox, are now selling devices that bypass cable television and grab online video for users, often for free.

Netflix has already managed that for a monthly fee, and is rolling out service on all sorts of devices, from a set top box that streams content from the web to your television to video game consoles, and now even builds-in the service to some televisions and Blu-Ray DVD players.  Microsoft’s XBox Live service could be germinating a cable television service of its own, as it seeks to license content from programmers starting with Disney’s ESPN.

All of these services, along with traditional laptop or home computer viewing, could evolve into formidable challengers for the pay television industry.  Oh, and some new televisions on offer at this year’s Consumer Electronics Show build in support for Skype, a Voice Over IP telephone service, so phone revenue could be at risk as well.

Advertising Age believes this could be one of the entertainment industry’s biggest business battles of the next few years as millions, if not billions of dollars are at stake.

For the moment, the public face of the debate is a combination of downplaying its potential impact while the players quietly position themselves and their assets for the fight certain to come.

Both Dudley and Britt at Time Warner Cable call the potential trend towards online viewing interesting, but not much of a threat at the moment.

“We see some interesting stuff out there, but right now people are watching more TV than ever; cable-cutting is largely on the fringe,” said Dudley.

“A lot of manufacturers have come out and made announcements, but I don’t think they really are in a position to erode the pay-TV subscriptions that the cable industry has today,” said Park Associates research analyst Jayant Dafari.

“For many people, cable works just fine; the quality is great; the DVR functionality is great; the only gripe they have is that they’re paying for it,” Boxee’s founder and CEO Avner Ronen told Advertising Age. But “there is a growing generation out there where the whole definition of entertainment is changing, and their main source of entertainment is the internet.”

Click here to view the embedded video.

CNBC covered last week’s announcement of a partnership between Nintendo and Netflix to provide Netflix on the popular Nintendo Wii, in this exclusive interview with Reed Hastings, chairman and CEO of Netflix and Reggie Fils-Aime, Nintendo of America president & COO (January 13, 2010 – 5 minutes)

‘If It Becomes A Problem, We’ll Just Cut Them Off‘

The cable industry is in a comfortable position to leverage its control over programming and distribution to ultimately limit any competitive threat from online viewing.  In addition to mega-deals like Comcast’s acquisition of content-rich NBC-Universal (a partner in Hulu), the cable industry owns, controls, or can leverage carriage of its cable lineup contingent on programmers not giving away too much for free.  Advertising Age:

One tech exec, who asked not to be named, predicted that the minute cable operators start to feel the disruption, they will clamp down and use their market power to keep TV and films from seeping into next-generation devices. They’re already putting the squeeze on networks; any free distribution is an argument for lower cable distribution fees.

Stop the Cap! is also a player in this struggle, because a key component of the cable industry’s control of programming is the means it is distributed to consumers, and cable modem service representss one half of the duopoly most Americans find when shopping for broadband.  One potential strategy to eliminating the cord-cutting option is to enact Internet Overcharging schemes like usage limits and consumption billing that effectively makes it impractical for a consumer to “switch” to broadband for all of their online viewing.  Switching to the other half of the duopoly may not be an alternative. As online video projects like TV Everywhere will also be available to telco TV partners who wish to participate, there is every incentive to also limit video consumption on Verizon’s FiOS or AT&T’s U-verse systems.

Effective competition against entrenched players in the marketplace is impossible if those players control the content, the means of its distribution, and the ability to cut you off if you watch too much or switch to an independent competitor.

But this is history repeating itself.  Many of the same players and interests followed the same protectionist path against another competitor – satellite television.  It took strong regulatory policy from Washington to force a fair and level playing ground for an industry that didn’t want to sell content to its competitors, overcharged for access, and kept effective competition at bay for years, all while happily increasing rates for beleaguered consumers.

Here we go again.

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More than a month after Mediacom promised customers their e-mail glitches were solved, problems continue to plague Mediacom customers in Iowa who continue to discover missing e-mail, inaccessible accounts, and delayed messages.  The problem has worsened to the point it merited coverage on the evening news in Des Moines.

Mediacom’s efforts to switch to an “in-house” e-mail system to improve service have caused repeated problems for Mediacom customers who simply can’t get to their e-mail.  The company blamed the problems on “software upgrades” which bring the system down while updates are installed.  Mediacom claims to try and limit downtime to the early hours of the morning when most customers won’t notice.

But they do.

Consumer Reports just released rankings of cable operators in its February 2010 issue and Mediacom rated near the very bottom — 15th of 16 companies providing TV service, dead last among 23 cable “digital phone” providers, and 24th out of 27 Internet providers, and that was only because the very worst-rated Internet providers deserve a special place in hell for their fraudband satellite service.

Mediacom’s worst ratings?  Their lousy reliability and customer service.

“We recognize that we have to continue to do a better job in customer service, and in the past year we committed significant resources to service improvements,” Phyllis Peters, a Mediacom spokeswoman, told the Des Moines Register.

While those service improvements work their way through the system, Mediacom customers don’t have to wait.  They can obtain a Gmail address in seconds and bypass Mediacom’s e-mail nightmare for good.

Click here to view the embedded video.

WHO-TV in Des Moines, Iowa tells the story of an ALS sufferer who depends on e-mail service contending with Mediacom’s inability to provide it. (3 minutes)

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Lawrence, Kansas is a unique place to live.  Its local newspaper, the Lawrence Journal-World, was one of the first in America to begin an online edition in 1995.  Its owner, The World Company, just so happens to also own the independent cable system serving the community, which also provides broadband and phone service to the city’s 90,000 residents.  Its biggest competitor is AT&T, which has been upgrading parts of Lawrence with its U-verse system to stay competitive.

Sunflower Broadband, which provides a “triple play” package of Internet, cable TV and telephone service, has remained controversial among service providers because it instituted an Internet Overcharging scheme with usage caps and overlimit fees.  The company has been used by the American Cable Association, a trade and lobbying group serving independent cable operators, as a poster child for effective rationed broadband schemes that reduce demand and increase broadband profits.

Lawrence, Kansas

Customers generally have loathed usage caps, particularly when they were stuck choosing between Sunflower’s faster, usage capped broadband service or a low speed DSL product from AT&T.  Stop the Cap! receives more complaints about Sunflower Broadband than any other provider, except Time Warner Cable during its own Internet Overcharging experiment in April 2009.  Lawrence residents appreciate the relatively fast speeds Sunflower can provide, but complain they can’t get much use from a service that limits customers to a set allowance and then bills them up to $2 per gigabyte in overlimit penalties when they exceed them.

Last fall, things started to change in Lawrence as AT&T began offering it’s U-verse service in parts of the community.  We began receiving e-mail from Lawrence residents pondering a new service plan Sunflower Broadband introduced — Palladium, an unmetered broadband option priced at $49.95 per month.  It sounded like a good deal, perhaps introduced to protect them from U-verse customer poaching, until they noticed Sunflower was  selling the plan without a fixed downstream or upstream speed.  In fact, no speed was mentioned at all.  Indeed, Sunflower’s Palladium is nothing new to those living abroad under various cap ‘n tier broadband regimes.  It’s comparable to New Zealand Telecom’s Big Time plan, where customers need not fear overlimit fees and penalties, but have to live with a “traffic management” scheme that gives priority to customers on other plans living under a usage cap.

In other words, Palladium customers get last priority on Sunflower’s network.  If the network is not congested, these customers should enjoy relatively fast connections.  But during primetime, expect speeds to drop… and dramatically so according to customers writing us.

Sunflower Broadband's Internet pricing - add $10 if you want standalone service

That customers debate just how slow those speeds can get testify to the nature of cable’s “shared infrastructure.”  Groups of subscribers are pooled together in geographic areas and share a set amount of bandwidth.  As usage increases, so does congestion.  Responsible operators measure that congestion and can split particularly busy neighborhoods into two or more distinct “pools,” each sharing their own bandwidth.  Based on the variable reports we’ve read, it’s apparent Palladium works better in some parts of Lawrence, namely those with fewer broadband enthusiasts, than others.

Network management is a major concern of Net Neutrality proponents.  It allows an operator to artificially impede traffic based on its type, who generates it, and potentially how much a customer has paid to prevent that throttling of their speed.  In the case of Palladium, network management is used to give usage-capped customers first priority for available bandwidth, and push Palladium customers further back in line.

Judging the quality of such a service is a classic case of “your results may vary,” because it is entirely dependent on when one uses the Internet, how many others are logged in and trying to use it at the same time, how many customers are saturating their connections with high traffic downloading and uploading, and how many people are sharing your “pool” of bandwidth.  Oh, and the quality of your cable line can create a major impact as well.

Sunflower Broadband representatives claim Palladium is “optimized for video” and should provide at least 2Mbps service during peak usage and up to 21Mbps service at non-peak times.  That’s a tremendous gap, and we wanted to find out whether most customers were getting closer to the low end or the high end of that range.

Back in October, we wrote a request in the comments section of the Journal-World asking customers to e-mail us with answers to several questions about their experiences with Sunflower Broadband:

• 1) whether you ever exceed the cap.
• 2) do you think there should be one.
• 3) would you prefer faster speed with a cap or slightly slower speed with no cap.
• 4) your experience with the new unlimited option.
• 5) whether you would contemplate switching to AT&T U-verse if it meant escaping a usage cap, even if it had slower speeds.
• 6) Would you pay more for faster speed and no cap?
• 7) your overall feelings about Sunflower Broadband.

We heard from just over two dozen readers sharing their thoughts about the company and its service.  The response was mixed.

Generally speaking, customers hate the usage caps Sunflower Broadband maintains on most of their broadband tiers.  All thought it was unfair and unreasonable to limit broadband service under Sunflower’s Bronze tier to just 2GB per month and their Silver tier to just 25GB per month.  Most customers who wrote subscribed to the Silver tier of service with 7Mbps/256kbps speeds at $29.95 per month.  They also paid a $5 monthly modem rental charge.  Those who wrote who fit the “broadband enthusiast” category were internally debating whether the Gold plan, with its assured 50Mbps/1Mbps speeds for $59.95 per month was a better option, even with a 120GB allowance, or whether they should opt for Palladium’s $49.95 option to escape the usage cap.

Among enthusiasts, some felt Sunflower responded to customer demands by offering an unlimited plan in the first place, and thought it was an acceptable trade-off to obtain lower speeds at peak usage times for a correspondingly lower price, and no cap, as long as speeds were reasonable at all times.  Others were offended they had to make the choice in the first place.

“If I lived anywhere else, I wouldn’t have to choose between a throttled service or one that asks for $60 a month for 120GB of service,” writes Steve from Lawrence.  “AT&T DSL for me is 1.5Mbps service because I live close to the edge of the distance limit from AT&T’s exchange.”

But Justin, also from Lawrence, has a more favorable view. “I hate their usage cap with a passion, but when you look at what small cable companies usually offer their customers, it’s slow speed service at terribly high prices,” he writes. “At least Sunflower did DOCSIS 3 upgrades and can offer big city speeds here.  How long will that take other small independent providers?”

Troy adds, “at least they gave us one choice for unlimited service.  Time Warner Cable and Comcast sure didn’t.”

About half of those who wrote did exceed their usage cap by underestimating the amount of usage in their respective households.  Most of those who did were on the Silver plan.

Dave writes, “I knew right off the bat the Bronze tier was ridiculous for anyone to choose, and our family has three teenagers so we knew that was not an option.  We tried the Silver plan when we switched from AT&T DSL service and blew the lid off that 25GB cap probably within two weeks and got a crazy bill.  At least Sunflower forgave the overlimit fees for the first month, but they could afford to because we upgraded to Palladium, paying them $20 more per month.”

One customer's dismal Palladium speed test result from last October, likely the result of a signal problem

Angela, who shares an apartment with two other roommates had their share of fights over who used up all the broadband allowance.

“We have a wireless network and everyone splits the bill, but when we ran up almost 200GB of usage, we freaked.  Nobody would admit to using that much Internet.  Thanks to my boyfriend, we discovered our wireless router was wide open and one of our lovely neighbors probably hopped on to enjoy,” Angela writes.

Sunflower also forgave their overlimit bill for the first month, but they decided to take advantage of an introductory offer from AT&T and switched to U-verse and are much happier.

“At least with AT&T, we know what our broadband bill is going to be and we don’t have fights or worries about getting a huge bill from Sunflower,” she adds.

Among those answering our question about reduced speed in return for no cap, the consensus view was “we would need to know what speed they are providing.”  Broadband speed was important to most who wrote.  While many may not be able to discern a difference between 10 and 20Mbps service for most online activities, obtaining 2Mbps service when expecting closer to 20Mbps is readily apparent, and that was the biggest problem with Palladium users unimpressed with its performance.

“Palladium is god awful, and close to unusable on the weekends and during the early evening when everyone is online,” writes Kelly, also in Lawrence.  “We have college students all over the neighborhood and these people can’t be unconnected for a minute, so I’m not surprised Palladium crawls when everyone is online.”

Kyle, a regular Stop the Cap! reader writes the whole concept of Palladium leaves a bad taste in his mouth.

“Palladium is the equivalent of going into a restaurant and eating leftovers — whatever speed is leftover, it’s yours.  Sometimes it might be a whole meal, other times scraps!  It’s an example of crappy customer service coming from a provider which doesn’t have much competition (although maybe that will change with U-verse),” he says.

Kyle is on the Gold plan, but remains unimpressed with Sunflower:

“Is there another DOCSIS 3 system in the country that limits upload speed to 1Mbps or has a bandwidth cap this low (120 GB) with DOCSIS 3?”

Stop the Cap! also obtained access to the company’s subscriber-only forums and discovered considerable discontent with Sunflower’s broadband service.

“I recently switched over to Palladium to avoid the new Gold price gouging. I bought the new modem set it up and much to my surprise my speeds were HORRIFIC! Consistently 4.5Mbps service over the course of a week at various times. Upload speeds were so terrible it took 15 minutes to send emails with one minute movies,” writes one user.  “So, for $20 more a month Palladium offers much slower speeds BUT unlimited bandwidth (which according to Sunflower’s own statistics almost no one exceeds their limits anyway.)  What a rip-off. All I want is my old Gold back, same speed and price. I am absolutely disgusted with Sunflower. Calling Palladium “variable speed” is a lie. You are throttling customers – period.”

“So I have Palladium and the speeds are decent, usually around 10Mbps down (we won’t talk about up speeds.) But every time I run a torrent my speeds go down to about 500kbps. The second I turn off my torrent client and run a speed test again its right back up to 10. Has anyone else been having similar issues? It seems like Sunflower throttles my entire connection when they detect a torrent,” writes another.

One Lawrence resident claims he was blacklisted by Sunflower Broadband after criticizing them.

“Their blacklisting of me served as a warning to others after I spoke out nationally.  They are quite pissed and I’m not allowed to go to any event sponsored by them.  I even got removed from the local Twitter festival,” a person who I have chosen to keep anonymous writes. “The nutshell is that the bandwidth from DOCSIS 3.0 is extremely throttled for Palladium users. If they have done heavy downloading the throttle drops speed to about 2Mbps.”

For Lawrence residents who have decided they don’t like the choices Sunflower provides for broadband service, the good news is that AT&T is upgrading their network in the city to provide U-verse service, and many who wrote us have switched just because AT&T does not engage in Internet Overcharging caps and limits in Lawrence.

There is even a blog devoted to comparing Sunflower Broadband service with AT&T U-verse.  The Lawrence Broadband Observer has been reporting on the dueling providers since August.  His verdict: AT&T U-verse wins for broadband for its more stable speeds, and no Internet Overcharging schemes, even if it costs more:

We decided to go with U-verse for our Internet service, canceling our Sunflower Broadband Internet, which we had used for over 13 years. U-verse’ top line internet costs $15 more per month then Sunflower’s; we decided that the advantages of U-Verse for Internet were enough to make this extra $15 per month a reasonable value.

Furthermore, the speed of U-verse has been remarkably consistent, always ranging between 16 and 17Mbps down and about 1.4Mbps up, no matter the time of day.

While Sunflower’s service is very fast at certain times of day, it frequently slows down during evenings or other times of heavy network use, sometimes to less then half of the speed we were paying for.

The other primary reason we went with U-verse was because U-verse does not have bandwidth overage fees or any kind of bandwidth limits. Although we have been careful with Sunflower and managed to avoid any bandwidth overage charges, having “the meter running” all the time was annoying, and we worried that we could always be surprised with an unexpected charge. With U-verse we do not have this worry.  One could almost think of the $15 extra for U-verse as an insurance policy…it buys peace of mind not having to worry about bandwidth overages.

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After much sound and fury, and plenty of media attention, Fox programming remained on Time Warner Cable and Bright House Networks systems through the New Year’s festivities, as the three companies reached “an agreement in principle” to make cable customers ultimately pay more for the right to watch Fox broadcast stations and cable networks.

The wide-ranging agreement covers all of Time Warner Cable’s more than 12 million subscribers as well as 2.4 million Bright House customers.  The deal encompasses Fox-owned, Fox-affiliated television stations covering nearly four million Americans and Fox’s sports and entertainment cable networks seen nationwide.

The major point of contention between Fox and the two cable companies was the fee for carriage rights to Fox television stations.  Known as “retransmission consent,” cable operators must obtain permission from television station owners before they are allowed to put them on cable lineups.  For years, broadcasters were happy just getting clear pictures to cable’s extended reach into suburban and rural communities.  But over the years, broadcast interests have sought cash payments from cable operators in return for that consent.

Leveraging their popularity, station owners feel they have plenty to room to negotiate higher payments, and the cable industry has tried to avoid setting any precedent for cash payments, fearing a new benchmark set with one station owner will soon become the asking price for every other major station in a community.  Cable operators have traditionally signed agreements that launch station or network-owned cable channels instead of large direct cash payments, but Fox’s game of hardball suggests those days are over.

While none of the companies involved would disclose the terms of the final agreement, industry analysts suggest the parties met somewhere near the middle of their respective asking price.  Fox had demanded $1.00 a month per subscriber for each of its affiliated television stations, while Time Warner Cable suggested a quarter per month per subscriber was a fair offer.  Most agree the final deal is in the 50-60 cent range, not including any extras Time Warner Cable threw in on the cable network side.

Chase Carey

All of the parties represented at the negotiating table were pleased with the outcome.

“We’re pleased that, after months of negotiations, we were able to reach a fair agreement with Time Warner Cable — one that recognizes the value of our programming,” News Corp. president and COO Chase Carey said in a press release. Time Warner Cable president and CEO Glenn Britt adds that his company is “happy to have reached a reasonable deal with no disruption in programming.”

Amusingly, Bright House Networks’ own press release is a mirror copy of Time Warner Cable’s — only the names have been changed:

“We’re pleased that an agreement has been reached with no disruption in programming for our customers,” said Steve Miron, Chief Executive Officer, Bright House Networks.

Who wasn’t represented at the negotiating table?  Customers.  Ultimately, whatever amount agreed to, it will be added to customers’ bills in future rate increases.

If other networks seek similar terms, cable operators may have to fork out as much as $5 billion a year — and would likely pass the cost on to subscribers, Craig Moffett, an analyst at Sanford C. Bernstein in New York told Bloomberg News.

“The broadcast networks are really struggling to find a viable business model,” Moffett said. “They’re looking at the cable networks that make money both on advertising and the money that the cable operators pay them and saying, ‘We need a dual revenue stream to survive too.’”

Click here to view the embedded video.

CNBC reports on the deal reached just in time to prevents sports fans from missing out on their New Year’s football games on Fox. (2 minutes)

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Apparently the “fight back” component of Time Warner Cable’s campaign against the high cost of cable has not been a stunning success because the nation’s second largest cable operator continues to roll over its subscribers with some striking rate hikes, this time across upstate New York.

The usual promotional brochure began appearing in mailboxes across the state, filled with glowing words about all of the wonderful things Time Warner Cable did for you since your last rate increase, and promises for more wonderful things to come… along with fine print language at the bottom subtly labeled “2010 Rates.”  They don’t even call it a rate increase anymore, although it will cost most video and broadband subscribers in Rochester an additional $7.70 a month — $92.40 a year, effective February 1st.

After the company complained back in April it “needed” to engage in Internet Overcharging experiments to use that revenue to upgrade networks, the additional $3 a month/$36 a year they will get from millions of Road Runner subscribers in New York alone should be more than enough to do just that.  Those on lower speed economy tiers are also facing rate hikes: $3 a month for Road Runner Lite and $4 a month for Road Runner Basic, reaching $22.95 and $29.95 a month in Rochester, respectively.

As a concession to Rochester, one of the last remaining cities in New York still stuck with 384kbps upload speeds, the company will increase the upload speed for the division’s Standard Road Runner service customers to 1Mbps sometime in 2010.  Those with Road Runner Turbo will probably see upload speed increasing to 2Mbps, accordingly.  But Rochester still isn’t on the upgrade list for DOCSIS 3, bypassed because of the very limited competition Frontier offers the cable company locally.  Verizon FiOS fiber to the home service is being provided in most other large New York cities.

You probably didn’t ask for it, but you’re going to get it anyway: NBA TV HD and the Sundance Channel was added today to the Rochester-area’s digital cable tier.

Time Warner Cable's new rates for the Rochester/Finger Lakes region of western New York become effective February 1st.

Meanwhile in the state capital Albany, news of the rate increase was particularly unwelcome in the hard hit upstate economy.  The Albany Times-Union called the rate increase “an insult” on hard-hit New Yorkers:

Your neighbor lost his job, the housing market is in the tank, and the economic recovery is nowhere in sight.

And now to add insult to injury, as other household costs rise, your cable TV bill is going up next year too — in some cases by nearly 10 percent.

Time Warner Cable sent a flier to local customers this month with the new prices. Except for the most basic package, all the rates are going up. The “basic with standard” TV package, which includes dozens of mainstay cable channels such as CNN, ESPN and Comedy Central in addition to local broadcast channels, will rise 9.7 percent to $61.95 a month from $56.45 currently.

The company’s “All the Best” package that combines TV with Internet and phone service will go from $139.95 a month to $146.95 a month, an increase of 7 percent.

Click here to view the embedded video.

WTEN-TV Albany reports that Time Warner Cable’s latest rate increase will cause many upstate New York residents to drop premium channels in even greater numbers to economize. (2 minutes)

Verizon FiOS, for now anyway, will be cheaper than most of Time Warner Cable’s packages in Syracuse.  The Salt City faces rate increases averaging six to eight percent.  Time Warner Cable spokesman Jim Gordon blamed the rate hikes on the same things cable always blames rate hikes on — increased programming costs.  From the Syracuse Post-Standard:

Time Warner spokesman Jim Gordon said there are two major reasons for the increase: higher prices charges by the providers of programs and the rising cost of doing business. Customers are using more services more often, Gordon said, and cable is becoming more important in people’s lives.

In 2009, the number of channels on which the “start over” feature is available rose from 45 to 90, and customers used the feature 10 million times, he said. Customers also watched 85 million videos on demand, he said. “People are staying home more, and they’re hunkering down and they’re utilizing these services,” he said.

Cable operators are free to raise rates on everything except the basic service of broadcast and educational channels, for which operators need permission of regulators.

Below is a list of popular packages and corresponding rate increases:
• Talk ‘n’ View package, of telephone and cable television service, will rise from $100.50 to $108.95 – an increase of about 8 percent.
• Surf ‘n’ View, a combination of Internet and cable television, will increase from $105.50 to $111.95, an increase of 6 percent.
• All the Best, which combines cable, internet and phone, will rise from $135.50 to $144.95, or 7 percent.

Prices are slightly lower with Verizon Communications Inc.’s FiOS, which recently entered the Central New York market and offers a basic package of telephone, Internet and cable television for $109.99 to $129.99.

Further north in Watertown, rates are also increasing by 6 to 8 percent starting February 1st, the second increase in the past 11 months. Time Warner last raised its rates in March.

Time Warner Cable spokesman Jim Gordon said the current increases are due to price increases by programmers and an increase in the company’s cost of doing business. Gordon also cited an increase in the use of the company’s features including “Start Over” and video on demand.

“People are staying home more because of the current economic situation, and customers are finding value in these enhancements,” Gordon said.  The Watertown Daily Times notes Gordon doesn’t think subscribers will mind enough to leave.

“Our goal in doing this is to enhance the customer experience,” Mr. Gordon said.

Mr. Gordon said he doesn’t think the rate increases will prompt many Time Warner Cable customers to switch to another provider, because of the local customer service the company offers.

“We’re more than ready to compete,” Mr. Gordon said.

Customers can expect to see the following increases on their cable bills this year:

• A combination of standard and basic cable service costs will increase from $62.50 to $67.75, an increase of about 8 percent.
• The Surf ‘n’ View package will increase from $105.50 to $111.95, an increase of about 8 percent.
• The Talk ‘n’ View package will increase from $100.50 to $108.95, an increase of about 8 percent.
• The All the Best package, including cable, phone and Internet service, will rise from $135.50 to $144.95, an increase of about 7 percent.

Verizon FiOS, a new cable provider in the area, has a basic package that includes cable, telephone and Internet service for $109.99 to $129.99.

Satellite television provider DirecTV also has announced rate increases of 3 percent to 5 percent, which also will take effect Feb. 1.

Watertown residents noted the irony of the company’s “Roll Over or Get Tough” campaign in light of today’s rate increase.

“Imagine if you went to the supermarket and they told you that you had to buy 100 items you didn’t want and would never use for ever item you actually wanted. This is how Time Warner Cable operates,” one writes.

A Raymondville resident remarks, “Isn’t it strange after Time Warner solicits its customers to support their get tough effort to fight with the Fox networks in negotiations over price increases for programming that they can institute one of their own? Is this the real reason that they lobbied all of their customers? Is this the beginning of setting things up so that we end up paying for every channel that we watch? If enough people push to get rid of the junk they give us, that we never watch, so we get a package we will? It almost sounds like a shell game in which the pea is not under any of the shells, a no win situation for subscribers no matter how it shakes out. New businesses have been created here ones in which someone has figured out how to get money from consumers without really doing anything to get it. The New American Way. Welcome to the new Millennium.”

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Time Warner Cable and Fox are now into their final day of negotiations before the agreement expires governing Fox-owned affiliate stations and cable networks.

One thing that the dispute has accomplished is increasing media attention on both companies and a spotlight on the business models of television programming and distribution.  It used to be so simple – television programming would air on broadcast television, enjoy massive audiences and the lucrative ad revenue that comes from having top-rated programming.  Cable networks couldn’t survive on the much smaller ad revenue they earn from their smaller audiences, so they charged cable operators a small fee for every subscriber who could watch their channels.

With the advent of TiVo and other digital video recorders, online viewing, and the audience erosion that comes from both, what worked for more than 50 years didn’t work so well anymore.  Time-shifting viewers no longer felt committed to watching live television, satisfied with being able to watch when they want and fast forward past the increasing amount of advertising television stations crammed into programming.  With broadband, viewers could download or stream their favorite programs online, often for free and with limited (if any) commercials.  Cable networks that used to be content running older syndicated programming, movies, and low budget documentaries and specials began creating their own original programming, often just as good as anything the networks produced.  Subscription fees charged programmers increased accordingly to help finance these shows.

Today, some cable networks are coming close to rivaling the viewership of broadcast networks’ lesser-watched programming.  If the economic downturn didn’t challenge the advertising industry, the ongoing loss of network television viewers would have accomplished the same thing – lower ad rates for ABC, CBS, NBC, and Fox.

At the heart of the debate is a new discussion about whether “free over the air television” is a sustainable business model.  Networks like Fox evidently don’t think so, which is why they seek payment from the pay television industry, be it cable, FiOS, U-verse, or satellite.  Since the majority of Americans now watch television through one of these services or through their broadband connection, there is plenty to be made from such payments.  Of course, those costs are passed on to you.

The result?  You are now paying for “free television.”

The hardball game between Fox and Time Warner Cable will be replayed often between the other networks and programmers and pay television companies.

Today’s video reports include another update from the business side of the story, several additional reports from impacted Fox stations, and basic education about what television antennas are all about.

Click here to view the embedded video.

New York Times reporter Brian Stelter reports the two parties remain “pretty far apart” from an agreement in this report from Bloomberg News. (2 minutes)

Click here to view the embedded video.

CNBC discusses the business side of the Time Warner Cable-Fox dispute, and now Sen. John Kerry (D-Mass.) has put himself in the middle of the dispute as well. (1 minute)

Click here to view the embedded video.

In Austin, KXAN-TV reports Time Warner Cable has been telling Texas viewers they can watch most of the Fox Network programming on Hulu for free.  Some Austin residents are sick of hearing about the dispute and are abandoning Time Warner Cable for DirecTV.  “Football is everything in Texas,” say some who are watching the dispute with concern. (3 minutes)

Click here to view the embedded video.

Some local Fox stations are teaching their viewers how to receive their stations if Time Warner Cable no longer carries them on their lineup.  KDFW-TV in Dallas went to Best Buy where they’re only too happy to sell antennas and digital converter boxes to Metroplex residents. (2 minutes)

Click here to view the embedded video.

WOFL-TV in Orlando spent part of the newscast teaching people what a TV antenna is.  For many under 30, television viewing has always been through cable or satellite, never over-the-air, so the concept of rabbit ears is a new one for some. (1 minute)

Lots more to watch below the page break.  Click the link below to continue!

Click here to view the embedded video.

Non-Fox stations in cities across the country have debated whether they should be shining a light on problems with other stations in their market, or be content to sit and watch on the sidelines.  In Tampa-St. Petersburg, Florida the NBC affiliate, WFLA-TV dipped into the story to cover the city’s local Fox station – WTVT, which could be off Bright House Networks by the weekend. (2 minutes)

Click here to view the embedded video.

In other cities where the Fox broadcast affiliate is not at risk, Fox cable networks could still be dropped.  WHAM-TV in Rochester, NY explained what this could mean for western New York Time Warner Cable customers and interviewed a local media professor who is wise to how these negotiations will really play out.

Click here to view the embedded video.

In Syracuse, NY the central New York division of Time Warner Cable is in the same boat as those in the Rochester/Finger Lakes region — the local Fox affiliate stays on cable, but Fox cable networks may not.  But guess what?  Your cable rates are increasing no matter who wins this fight, as WSTM-TV reports.

Click here to view the embedded video.

WNYW-TV in New York is impacted directly by any expiration of the agreement between Fox and Time Warner Cable, as it warns viewers in the New York region in a very biased story spun towards Fox’s position. (3 minutes)

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In the multi-million dollar game of chicken, observers are waiting and watching to see who will stop the inevitable consumer train-wreck that will occur if the nation’s second largest cable operator Time Warner Cable fails to reach an agreement with News Corporation, owner of Fox television and several Fox cable networks.

Another day, more negotiations, but still no end in sight.

Click here to view the embedded video.

The battle between Time Warner Cable and Fox is coming down to the wire, reports CNBC’s Julia Boorstin. (2 minutes)

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One way or another consumers will pay more for their Mediacom cable service in 2010.  The undecided question is will Sinclair-owned television stations get a chunk of your wallet or will Mediacom keep it all for themselves.

Weary Mediacom customers have been through this battle before.  For the second time in three years, residents of Des Moines, Iowa face the prospect of losing access to their local Fox station, owned by Sinclair.

The ads are up and running.

Click here to view the embedded video.

Mediacom is running this spot, customized for each city impacted by the dispute, comparing Sinclair’s demands as another “bailout.”  This one is running in the Pensacola-Mobile market, where station WEAR is threatened with removal from Mediacom’s lineup.

Sinclair is demanding another price increase from the cable operator and Mediacom has a history of playing hardball and refusing to pay.  If the two sides don’t reach agreement by December 31st, 22 Sinclair-owned stations in communities served by Mediacom will be taken off the cable lineup.

Viewers aren’t happy, especially because they do not get a reduced bill from the cable company for the reduced channel lineup that results.

Both sides are waging campaigns to try and get viewers into the fight.  But in the end, it’s a battle of two corporate titans fighting over their portion of your money.

Click here to view the embedded video.

Back in January, 2007 Mediacom customers spent five weeks without Sinclair-owned television stations on their cable dial.  A nasty exchange between Sinclair and Mediacom was documented in this report aired by KCCI-TV Des Moines back on January 23, 2007.   (3 minutes)

Click here to view the embedded video.

The fallout from the 2007 dispute could be measured by disgusted customers who fled Mediacom for other providers, as KCCI found on May 4, 2007. (2 minutes)

Click here to view the embedded video.

WHO-TV Des Moines covers today’s dispute impacting Mediacom and the city’s Fox affiliate. (2 minutes)

Click here to view the embedded video.

KDSM-TV Des Moines is the Sinclair-owned Fox affiliate.  The station covers its own dilemma, warning viewers they might lose the station for the second time in three years.  (3 minutes)

Click here to view the embedded video.

In Cedar Rapids, Sinclair’s KFXA-TV covers the dispute with a decidedly pro-Sinclair point of view. (3 minutes)

Click here to view the embedded video.

WEAR-TV in Pensacola, Florida spends a great deal less “news time” covering the dispute. WEAR is the Sinclair-owned ABC affiliate for the Florida Panhandle. (30 seconds)

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Adam Lynn

Most people agree: They pay their cable company too much money. Not only is this view widely held, it’s also backed up by hard numbers.

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Your company has been in bankruptcy since late March.  Investors wiped out, debtors in court fighting settlements, you try and hang on by keeping customers from fleeing for the limited alternatives.  You also overpay your management to make sure they don’t flee with annoyed customers.  Charter CEO Neil Smit, who waltzed Charter into bankruptcy under his leadership, effectively doubled his salary, becoming St. Louis’ top paid executive, negotiating a $6 million dollar bonus if he helped waltz the company out of bankruptcy.  If he agrees to do his job after that, he gets another bonus.  How nice.

Now that Charter is looking for the bankruptcy exit door, it’s time for someone to pay.  It won’t be Smit.  It will be Charter’s customers.

In addition to across the board price increases, Charter is also considering slapping Internet Overcharging schemes on their broadband customers with “consumption-based billing” sometime next year, Smit told Bloomberg News.

Charter’s failure didn’t come about because their broadband users are using their service too much.  It came from bad management decisions that have plagued the company since it went public in 1999.  Charter has never had a single year since when it did not report a loss, eventually accumulating an enormous $21 billion in debt through mergers and acquisitions and efforts to keep its position as the nation’s fourth largest cable operator.

Now, that same bad management team will be making all-new bad decisions to further alienate Charter’s remaining 5.3 million customers.  Many of them will be hearing from AT&T to switch to U-verse soon enough.

Perhaps instead of punishing customers, Charter should consider replacing the people that put the company where it is today.  If Charter needs money to upgrade their network, why not start with the ridiculous salaries paid to reward the people that failed the company and its customers in the first place.

Tell Charter Cable if they bring consumption billing to your area, you’ll waltz your business to the other provider in town.

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Are you a cable or telephone company scared of the costs associated with tearing out existing underground or overhead copper-based wiring to upgrade to fiber optics?

Why bother going through all of that effort when you can just yank the old copper wire out and push state-of-the-art fiber cable in.

Buckeye CableSystem, a Toledo, Ohio cable operator intends to do just that, using a process invented by an Austrian company, Kabel-X.

Buckeye will inject a Kabel-X supplied fluid between the outer jacket and the inner core of the cable.  This allows the cable company to pull the copper center conductor and the insulating material right out of the center of the cable, leaving plenty of space to insert new fiber optic cables, without having to tear up streets, get permission from local zoning authorities to string new cable, or go through the expense of completely replacing it.

Better known in Europe, where the process has been used throughout the continent, Kabel-X is now making inroads in North America with small scale projects with companies like Buckeye.  Kabel-X has been particularly attractive in eastern Europe, where the process is more affordable than complete cable replacement.  With more limited budgets, re-using existing cable already in place provides an attractive alternative.

Buckeye CableSystem in Toledo

The company claims it can replace up to 1000 feet of existing coaxial cable with fiber in as little as three hours.

Buckeye intends to experiment with the technology in a Toledo subdivision to see how well it works.

The one major downside to using Kabel-X is that service is typically interrupted while the cable work is being done.  Should something go wrong, customers could be left entirely without service, a prospect that mandates small scale experiments to train cable engineering crews to work speedily and efficiently, and prove the technology can work well in a variety of conditions.

“We see the Kabel-X technology as an innovative tool that will allow us to cost effectively deploy a fiber-to-the-home architecture in areas currently served by a traditional hybrid fiber coax network,” Buckeye Cablevision chief technology officer Joe Jensen said.

Buckeye’s efforts to upgrade to true fiber-to-the-home service may come as a response to AT&T’s U-verse service, which began competing for Toledo customers about a year ago.  Buckeye has 150,000 subscribers in the Toledo area, and remains the largest pay television operator, but U-verse is positioned to steal away some of those customers over time.

Buckeye’s cable broadband service, bex-Buckeye Express, offers customers up to 20Mbps service, if you opt to subscribe to other Buckeye services.

The company’s Acceptable Use Policy indicates they do not impose limits on usage at this time, but curiously do admit to throttling the speed of peer-to-peer traffic and dynamically reducing speeds for customers who are considered “high bandwidth users” during peak demand periods.  Both of these seemed to get Comcast into hot water with the Federal Communications Commission.

BUCKEYE EXPRESS™ HIGH SPEED INTERNET SERVICE ACCEPTABLE USE POLICY

Buckeye uses reasonable network management techniques to improve overall network performance and reserves the right to employ additional techniques as necessary or desirable. Some applications, including certain peer-to-peer applications, can consume inordinately high amounts of bandwidth on the network and degrade network performance. Buckeye’s current network management techniques include:

Speed Caps – limiting the speeds that a modem can transmit or receive data. Buckeye may lower the transmission rate or reception rate of high bandwidth users during times of high network demand. This may slow the transmission or reception rate for affected modems.

Connection Limits – limiting the number of simultaneous connections for any modem during an online session. With a typical user having a dozen or so simultaneous connections for routine use, this limit provides a means of identifying and hopefully thwarting malicious attempts to harm the network or other users. This limit is currently set well above the number of connections used by typical user in a session.

Application-based Rate Limiting– limiting transmission speed of certain high bandwidth applications. Some applications, typically peer-to-peer applications, can consume large amounts of bandwidth, often without the knowledge of the user/customer. By limiting the portion of the network capacity available for these applications during periods of high traffic, Buckeye is able to improve the overall performance of the network for all users. Transmission of traffic subject to this technique may be slower during periods of high network usage.

Click here to view the embedded video.

Watch the Kabel-X process at work in this company-produced demonstration video. (7 minutes)

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Like many cable companies, the results for cable television subscriptions continue to be challenged by the downturn in the economy.  So cable operators are increasingly looking to their broadband and “digital phone” divisions to make up the difference in revenue.

Comcast also believes that “pure content” is the place to be, to avoid becoming the owner of “dumb pipes” that simply pass through someone else’s content.  Comcast, the nation’s largest cable operator, is seeking to leverage that content through a reported offer to acquire NBC-Universal.

CNBC explores the likelihood of the deal going through with Tuna Amobi, senior media & entertainment equity analyst with Standard & Poor’s.

Click here to view the embedded video.

CNBC’s Martin Soong reviews Comcast’s third quarter earnings results and discusses the chances Comcast will pull off its interest in acquiring NBC-Universal.  (11/4/09 – 4 minutes)

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Phillip Dampier

Lobbyists, corporate executives, and several interest groups are busy lobbying the newest additions to the Federal Communications Commission in an all-out effort to stop Net Neutrality.

The Hill newspaper today reports Mignon Clyburn, daughter of House Majority Whip James Clyburn (D-S.C.), is particularly under pressure to reject Net Neutrality.  The Hill reports industry lobbyists believe that if her father is amenable to their position, his daughter might also be.  To date, several hundred letters from minority groups and organizations, many opposed to Net Neutrality, have been filed with the FCC.

After reviewing dozens of those letters, it’s readily apparent many are the fruits of AT&T and Verizon lobbying labor, because several adopt both companies’ anti-Net Neutrality talking points, often word for word.

Even the newest Republican commissioner, Meredith Attwell Baker, is under a lobbying assault.

The thinking on K Street is that Baker’s views on net neutrality may not be set. Lobbyists and corporate executives have sought out Baker before the FCC votes on a final rule sometime next year.

“They are trying to get in there and remind her where she comes from to shore up her vote for the anti-net neutrality camp,” said one lobbyist working on the issue.

While the special interest blitz attempts to kill Net Neutrality, one pro-Net Neutrality advocate got into a dispute with some of the minority interest groups opposing Net Neutrality, which was gleefully covered by the broadband industry trade press. Public Knowledge got a bit too close to a nerve of several of these groups who put their logos on a letter sent to the FCC opposing Net Neutrality.  The letter represents the groups’ concerns that broadband for many in America is simply not available, especially for the economically disadvantaged.  They’ve been swayed by industry propaganda to characterize Net Neutrality as a threat to addressing the digital divide by making service ultimately even more expensive.  Some of those groups fired back against Public Knowledge, offended by some of the language used on their blog they felt suggested minority groups were naive and possibly even “selling out” the people they represent.  A few public exchanges later led to an apology from Public Knowledge if feelings were hurt and a plea from Free Press to put aside some of the personal disputes and rhetoric and argue the merits of the issue pro or con.

We agree with Free Press that personality disputes and pointless name calling don’t work and serve only to distract from the issues at hand. These groups advocating against Net Neutrality should be open to receiving additional information that doesn’t come from the broadband industry, particularly arguments that debunk those fear-mongering industry talking points.  Perhaps those groups will be amenable to changing their position once they gather additional facts.

But we also feel the first rule of politics must always be to “follow the money” and that is true for non-profits, for-profits, and government interests.  There must be full disclosure of the financial support and board membership of all of the groups claiming to represent consumer and minority interests.  Consumers, and more importantly members of the groups themselves, deserve to know where the money is coming from and if their boards have members working for or with the telecommunications industry or its friends.

For example, in our own research of the background of 100+ members of Broadband for America, we found instances of telecommunications industry involvement in virtually every single group.  If one chooses to believe that is a coincidence and still feels comfortable with that organization, so be it.  However, if one is concerned to learn that in several cases those ties were being scrubbed from interest groups’ websites, or were not openly disclosed to members, learning about that could be a cause of concern.  People should have the right to make an informed decision.  Some of the groups complaining about Public Knowledge are also members of Broadband for America and have telecommunications industry money backing them.  There is nothing wrong, in my judgment, in making sure that information is out there for readers to consider.

Be aware that while pro-Net Neutrality groups ring their hands over potentially offending one another, opponents are wasting no time mass mailing anti-Net Neutrality correspondence to the FCC.  Let’s remember our first priority is to fight for Net Neutrality.  If a group is offended, send them flowers, apologize quickly if you must, and be done with it.  Don’t entertain the trade press.

Navarrow Wright on BlackWeb 2.0 called proponents of Net Neutrality “digital elites” and then condensed many of the industry talking points that are common to many of the anti-Net Neutrality letters heading to the FCC:

The risk that a regressive pricing mandate that net neutrality rules could impose will shift online costs to the poor is real.

The risk that over-regulation will depress deployment and access is real.

The risk that restrictions on network management will reduce the quality and reliability of Internet service for light users — students, the poor on fixed incomes, the elderly, and community organizers who rely on Internet access to reach their communities – is real.

Wright doesn’t bother to provide any evidence to back up these claims.  Underlining the word real does not make it reality.

We recognize these talking points from the broadband industry’s lobbying efforts against Net Neutrality.  The industry scare tactic about raised prices is exactly the same one they use to justify Internet Overcharging schemes like forced consumption billing and usage caps, despite earning healthy profits and enjoying a decline in their traffic costs.  Read the financial reports from the major players about broadband profits for yourself.  Don’t take our word for it.

Net Neutrality simply demands the status quo — open and equal access to everyone, including the economically disadvantaged Wright is concerned about.  If Wright is concerned about the cost of broadband services for the economically disadvantaged, giving the providers the right to monetize content delivery in new ways, it will lead to even higher prices than we cope with today.

Industry rate hikes come in spite of Net Neutrality, and we call on Wright to join our effort to demand increased competition so these kinds of price increases become untenable.  Time Warner Cable, the nation’s second largest provider, is busily increasing prices for Road Runner service right now in several regions, even without the “imminent threat” of Net Neutrality.

Net Neutrality is hardly “over regulation,” and the empty rhetoric about it depressing investment, deployment, and access has been made every time this industry has faced the prospect of some oversight.  Wright should remember the industry used the same arguments to resist universal wiring requirements made in franchise agreements to guarantee that income challenged neighborhoods had the same access to cable and telephone broadband services as wealthy suburbs.  In their fight to obtain quick and simple statewide video franchising, they argued that without it, it would discourage investment, deployment, and access to competition.  Regulating rates?  Same argument.  The Discovery Institute, which has produced suspect studies on demand for the industry, paid for by the industry, provides an excellent example of “we’ve heard this song before” in comments they made to the FCC back in 2006 to try and reform cable franchising:

V. LEVEL-PLAYING-FIELD REQUIREMENTS ARE ANTICOMPETITIVE

Build-out requirements were an appropriate quid pro quo for the telephone, cable and wireless companies who received an exclusive franchise. An exclusive franchise ensured the viability of average pricing by eliminating the risk of cherry-picking by a competitive entrant, and allowed providers to serve the most profitable customers first who could then, in turn, subsidize the cost of serving everyone else.

Competitive entrants already have an incentive to expand their networks: They must produce consistent revenue gains, and the cost of adding additional users declines as a network grows. But unless flexibly and intelligently applied, a build-out requirement threatens the entire undertaking by creating the possibility that the initial investment will be effectively lost if, for whatever reason, it just isn’t possible to meet the deadline. The evidence that cities possess the inclination to perform this thoughtful and delicate task is entirely conjectural.

Build-out is typically not required of competitive entrants, because it imposes costs that may not be recoverable in a competitive market. Exceptions are Personal Communications Service (PCS) providers and Eligible Telecommunications Carriers (ETCs). However, these examples are clearly distinguishable. As the Commission has noted in another context, the grant of a PCS license confers on the licensee an exclusive right to use a designated portion of the electromagnetic spectrum. In that decision, the Commission rejected a Texas build-out requirement applicable to competitive entrants in the local exchange market.

ETCs are required to provide service and advertise their rates throughout the area for which they seek Universal Service support, but an ETC has the right to resell another carrier’s services. There is no suggestion in the current proceeding that telephone companies seeking to offer video services should have the right to resell the services of the incumbent cable operator, nor should there be. However, in view of the fact that telephone companies cannot be assured of the capital needed to build out their advanced services networks, a resale requirement would probably be the only practical way ensure that a competitive entrant could serve every household.

Build-out is not the same thing as redlining. Redlining is illegal, but by its terms, 47 U.S.C. 621(a)(4)(A) does not require build-out. It merely imposes a reasonableness requirement on the amount of time locally-enacted build-out requirements provide for the competitive entrant to serve every household. There is no Congressional mandate for build-out.

Since cable operators are not required to offer voice services to every household, it is not clear why telephone companies should be required to offer video services throughout their service area. There is no way to predict whether competitive entrants will have access to sufficient capital or be able to gain enough market share to make build-out requirements objectively reasonable. These risk factors suggest that build-out requirements would be anticompetitive.

It is also utter nonsense to suggest network management restrictions will reduce the quality and reliability of Internet service for light users.  In fact, the industry’s proposed “light user” solution is a consumption billing scheme that includes usage allowances and limits, overlimit penalties for exceeding them, and consumers forced into limited use plans, often for little or no savings over existing under-marketed “lite” plans.

Most providers currently tier broadband based on speed.  If a consumer wants to get “light service,” they can purchase a discounted lower speed package perfectly adequate for most web use, and never have to worry about how much they choose to use it.  They want to continue offering speed tiers, but also limit customers’ use of their accounts, giving them a paltry usage allowance and then subjecting them to steep penalties for exceeding it.  Residents in Rochester, New York fought back against two such schemes advocated by Time Warner Cable and Frontier Communications, the local phone company.  It is under the guise of “network management” that these Internet Overcharging schemes were born.  A word to the wise – this price gouging hurts the economically disadvantaged far more than wealthy suburbanites.

I also point Wright’s attention to the broadband situation in Canada, which has adopted the viewpoint of our provider friends.  There, Internet usage is limited by allowances, with fees of $1-5 per gigabyte for exceeding them.  Net Neutrality is not protected, and certain Internet services are “network managed” with speed throttles, reducing their speed by 90% or more, making their use untenable.  Yet, Canadian broadband dropped in global broadband rankings, service providers increased prices anyway, and the digital divide Wright is worried about has not been addressed.  In fact, it’s arguably worse, because the industry won efforts to also limit and ration wholesale broadband access used by independent service providers to create competitive, lower-priced alternatives.

Does that make Wright stupid or a “sell-out?”  Of course not.  It means we have a lot of information to share with Mr. Wright and others like him.  As consumers ourselves, we believe in getting affordable broadband access to disadvantaged communities, and support Universal Service Fund reform and appropriate stimulus funding, or providing municipally built networks to introduce needed competition to get quality, affordable broadband service into urban and rural homes that are woefully underserved.  The industry advocated “don’t regulate us” approach has been in place since the 1990s and has not come close to solving the problem.

It’s our view broadband service is rapidly becoming as important as water, gas and electric, and telephone service, and must be provided to every American that wants a connection, at an affordable price.  When private providers won’t do that, it’s time to follow the same path we took to assure electrification of this country decades earlier, with public projects to get the job done.

We think every person should check out these issues for themselves.  As a consumer, confronting Internet Overcharging schemes was what got this site started, and once I examined the facts about the profitable state of broadband, and the quest to make it even more profitable at consumer expense, I got angry and involved.  That doesn’t make me an “elitist.”  It makes me an informed and involved citizen.

We have always told providers this isn’t personal and we respect the work done by the employees to serve their customers.  Most of us are customers ourselves.  We will debate policy matters and advocate for our position, and try and bring supporting evidence to the table, and let the best argument win.  Along the way, disclosing who represents who and where they money comes from is part of that debate.

It will remain our policy to expose industry connections in organizations that purport to advocate for consumer interests, particularly when those connections are not routinely disclosed.  Consumers have a right to know whether the industry is writing checks to ostensibly independent groups, or have executives seated on their governing boards, potentially influencing their public policy positions.  To not provide this needed information would sell out our readers, and not living up to the standards we set for ourselves.

For the record, Stop the Cap! has zero industry money backing us.  We are 100% consumer-funded and have no involvement in any online business or telecommunications company.

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Charter Cable, which has been in Chapter 11 bankruptcy since March 28, has been among the worst hit cable operators by an American economy in trouble, accusations of poor service, excessive executive compensation, and spiraling debt.  Before entering bankruptcy protection, the company had $21 billion in debt — a significant amount for a cable operator serving just 5.5 million customers in 27 states.

Company founder Paul Allen, a co-founder of Microsoft who controlled 91 percent of Charter Cable before bankruptcy, will control just 35 percent of the company as it emerges from reorganization in the coming weeks.  Allen’s attention will then turn to the bankruptcy of another one of his concerns – Digeo Inc., which is best known for its Moxi HD DVR.

Despite the bankruptcy, Charter Cable aggressively continues to upgrade its broadband service to DOCSIS 3 in many of its service areas, introducing new faster broadband products to customers.  But broadband service from Charter is just one of three services they offer customers, and many are not satisfied with the service they are getting.

Beyond bankruptcy, Charter Cable continues to face bad press for providing poor service, hassling customers with aggressive telemarketing calls, dramatic rate increases, and in one shocking incident this week, a Charter Cable technician in Victorville, California was attacked and killed while on a service call.

Authorities are still searching for a motive for Monday’s unprovoked attack on 25-year-old Trevor Neiman, of Phelan, California.  After surviving three tours of duty in Iraq, Neiman was killed with a small hammer in a Victorville home.  Police say the attack came from a relative of the homeowner who was visiting at the time of the assault.  The suspect, Hesperia resident Johnny Acosta, 45, was arrested on suspicion of murder a short time after fleeing the scene.

“There was no exchange of words. There was nothing that occurred before the unprovoked attack,” said Jody Miller, a spokeswoman for the San Bernardino County Sheriff’s Department told KTLA News.

Click here to view the embedded video.

KABC-TV Los Angeles shares the tragic story of Charter Cable technician Trevor Neiman, and the devastating impact Monday’s attack had on his wife and family. (2 minutes)

Beyond that horrific incident, Charter Cable has been irritating subscribers with a series of rate increases and annoying marketing campaigns across the country.

In West Covina, California Charter Cable is ridding itself of senior discounts and also dramatically increasing rates.  Broadcast basic cable customers face a whopping $10 monthly increase in their cable bill, and the more popular expanded basic service will increase by $5.25 a month.  The company claims the rate increases are part of “an investment in improving the overall customer service experience.”

Resident Hermine Deemer, 83, told the San Gabriel Valley Tribune her bill will increase to $67 a month from $53 – a 26 percent hike.

“That’s a big increase,” Deemer said. “Nobody gets that big of an increase. I know things go up but not that much.”

Charter Cable is calling customers trying to market bundled services including broadband and telephone, claiming the savings from bundling services together would be “higher than the senior discount ever gave.”

Deputy City Manager Chris Freeland said the city has received several calls on the increases but there is little they can do about it.

“We would much rather have the senior discount,” Freeland said. “It’s really beyond our control. The economy is tough and every little dollar for seniors is so precious.”

Customers commenting on the rate increase have encouraged seniors to cancel service and switch to DISH Network satellite service, and several seniors lament they are housebound and television is their primary window to the outside world.  With no increase in Social Security in 2010 and increasing medical costs, many seniors will face difficulty coping with the rate increases.

In Pendleton, Oregon, the city attorney blasted Charter Cable for a $5 increase in broadcast basic service (providing local broadcast channels and some public affairs cable networks) and a $3 increase in expanded basic, claiming it unfairly falls on those least able to afford it, all to subsidize discounts on their bundled service packages.  Peter H. Wells wrote an open letter to Charter Cable published in the East Oregonian:

Per-channel costs for Charter Cable in the Pacific Northwest

By imposing the same $5.00 increase for all service tiers and, in fact, a lower increase for those with expanded basic service, the basic tier customer is paying for a greater portion of the company’s total costs than before the fee increase.

Through February 2005, less than five years ago, basic tier service cost the customer $12.91 per month. The rate change effective in December to $24.99 per month is such that those customers will have had a 93 percent rate increase in the past five years. It also appears that Pendleton’s basic tier customers are paying the same for less service than basic tier customers in other nearby service areas.

Charter representatives claim that the service charge increases over the past few years were to compensate the company for upgrades to the physical plant in Pendleton. I believe that argument is not appropriate. The physical plant upgrades were to allow Charter to provide additional services of telephone, digital cable and Internet. The cost of those upgrades should be borne by the users of those services, not the basic tier customers on whom the increase is being disproportionately imposed.

Unfortunately, Charter Cable’s rates are not within the control of the city management, so Wells could only ask that concerned residents contact Charter Cable and complain.

At least one customer fed up with Charter’s marketing practices found g0ing to a local TV station’s consumer watchdog reporter was even more effective.

Carole McGuire of Madison, Wisconsin turned down Charter’s relentless marketing of their “digital phone” product, which she doesn’t currently purchase.  Despite her disinterest, the visiting salesman left an application, and called her the next day to see if she changed her mind.  After that, McGuire began receiving a barrage of automated phone calls from Charter claiming she ordered the service, and needed to obtain third party verification to meet Federal Communications Commission obligations and process her order.

Not having placed an order, she ignored the calls, but they kept coming… over and over.

Exasperated, she turned to WISC-TV’s On Your Side reporter Erick Franke to see if he could get Charter to stop calling her.

Click here to view the embedded video.

WISC-TV Madison’s On Your Side segment from November 3rd helps a Madison resident put a stop to annoying Charter Cable telemarketing efforts. (3 minutes)

Unfortunately, not even TV stations are immune from dealing with problems with Charter Cable.  About a month ago, residents in Clarksville, Tennessee discovered WKAG-TV in nearby Hopkinsville, Kentucky missing from their cable dial.

Charter Cable had removed the low-power 18,500 watt station claiming it couldn’t obtain a strong enough signal to carry it.  WKAG-TV happened to be the only station in the entire region that produced news programming for Clarksville residents, and had consistently served the community of 100,000 with local newscasts, sports coverage, weather, and public affairs programming.

WKAG management was surprised by the decision to drop the station, and mounted a public campaign to dispute Charter’s poor signal strength assertions.  Charter Cable ignored the station’s first press release and has now been confronted with embarrassing video evidence that the station can be received with a good over-the-air signal with just a two foot antenna from the top of a building at a location even more distant from Charter’s TV reception tower, and from a lower overall height.

Click here to view the embedded video.

WKAG-TV Hopkinsville, Kentucky prepared a web video showing evidence Charter Cable could restore the station to the cable dial in nearby Clarksville, Tennessee. (11/5/09 – 5 minutes)

Charter Cable used to import WKAG from a direct fiber feed, but dropped it several years ago in an apparent cost-cutting move.

Despite complaints from Clarksville residents, Charter continues to ignore customer demands for WKAG’s restoration.

From one side of the country to the other, Charter Cable’s finances are not the only challenge the company faces.  Providing affordable, responsive, and quality service to customers apparently also remains a challenge Charter Cable has yet to surmount.

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PCL Cable's logo and website appear behind the times

Knology, the company that competes with other cable and phone companies by overbuilding their service areas, has purchased the assets of Private Cable Co. LLC, which serves Athens and Decatur, Alabama for $7.5 million, creating new competitive headaches for bankrupt Charter Cable, which serves both communities.  The company said it expects to close the deal by the end of 2009.

Acquiring PCL Cable, which serves areas adjacent to existing Knology service areas, would seem a natural fit.

Decatur City Councilman Gary Hammon said he expects the acquisition to benefit Decatur residents, especially because PCL Cable appears to have frozen operations in place and not expanded their reach.

“PCL hasn’t put any money into Decatur in the last five years,” Decatur City Councilman Gary Hammon told The Decatur Daily. “There are a lot of places in the city where you have Charter cable or no cable. I think competition sharpens the sword.”

PCL Cable’s website appears outdated, outlining a service package that offers fewer channels than many larger cable systems, and a broadband service promoting unlimited access for 5Mbps and 10Mbps tiers of service.  The “full package” includes about 100 channels with no need for a set top box for $93 a month (or $73 if bundled with telephone and/or broadband service).  The last status updates were published in August 2008.

The incumbent cable operator in PCL Cable’s service area is Charter Cable, which also competes with Knology in several southeastern cities.  The buyout, and eventual conversion of PCL Cable into Knology’s family of services, means additional competition for Charter Cable in the two Georgia cities.

Knology Vice President of Communications Tony Palermo talked with The News about the purchase:

Decatur, Alabama

Palermo said it was premature to predict whether the company would expand PCL’s limited footprint in Decatur.

“It’s pretty early on,” Palermo said. “Coming out of the chute, we’re looking at bringing the (existing) PCL footprint into our fold.”

He said Knology already has optical fiber running to PCL, which provides data services.

“Within a relatively short period of time, we’ll be able to bring up products and services to the level of what we’re offering in Huntsville,” Palermo said, to businesses and residents already within PCL’s footprint.

He said the acquisition gives Knology the ability to increase its revenue with investments already made in Huntsville.

“The first step for us is to get the deal done,” Palermo said. “The second step is to transition over to our network and our method and our ways of doing business. That will include checking on the integrity of the distribution network.”

Only after that, Palermo said, will Knology look at expansion in Decatur.

“We will not go in immediately and do any kind of construction work,” he said.

AT&T provides telephone service in Decatur and is on the list for U-verse service at some point in the future, but like Knology, has no immediate plans to roll out service.  AT&T received a video franchise from the city of Decatur to provide service.

Even with immediate service expansion still out of reach in many parts of the community, Palermo is still excited about the prospects for the future.

“Anytime there is good strong competition,” Palermo said, “that always results in goodness for the consumer.”

[Correction: Article adjusted to reflect Decatur and Athens are in Alabama.]

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Despite challenging economic conditions, Time Warner Cable CEO Glenn Britt told CNBC broadband from the cable operator has remained strong during the downturn.  The company reported the addition of 117,000 new Road Runner customers during the third quarter, many switching from rival telephone company-provided DSL service.

A CNBC anchor who visited a conference recently and absorbed cable industry talking points about consumption-based pricing asked Britt about whether Time Warner Cable’s network had the capacity to handle skyrocketing data consumption.

“Our physical plant is very capable and we invest in it in a steady way, so I think we’re able to keep up with demand.  I think the other question you’re really raising is who pays [...] is an evolving thing.  Also the history has been everybody pays the same for unlimited access.  I suspect that will change going forward to some more usage based model, but that in itself is controversial so we’ll have to see what happens,” Britt said.

Britt’s comments about investments in their network are challenged by the company’s own financial reports which showed a decline in those investments and in the cost of obtaining network bandwidth.

Still, Time Warner Cable is upgrading some areas to DOCSIS 3 technology to market higher speed service to broadband enthusiasts.

The company continues to face significant challenges in its mainstay cable television business, losing 84,000 cable televison package customers in the last quarter, a result of the loss of home ownership during the economic crisis according to Britt, and a general downturn in the economy.  Still, through a combination of price increases and marketing bundled services, the company grew average revenue per subscriber to $102.48 a month in the third quarter.

Click here to view the embedded video.

Time Warner CEO Glenn Britt is interviewed on CNBC about the company’s third quarter earnings. (11/6/09 – 4 minutes)

Stop the Cap! reader Nonya advised us about Britt’s latest appearance on CNBC.  If you find news our readers might be interested in, send us your news tip under our “Contact Us” link above.

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America's Broadband Emergency Plan Allows Up to Three Cat-Chasing-Laser-Pointer videos per day

The mainstream media loves a scare story.  Suggestions that a national H1N1 pandemic could bring the Internet as we know it to its knees is a surefire way to get plenty of attention.

The Chicago Tribune, among others, reports that a nationwide outbreak of virus forcing 40% of American workers to remain housebound could result in too many people sitting at home watching Hulu, bringing the entire Internet to a screeching halt.

The answer? Shut down video streaming sites and throttle users during national emergencies.

Of course, even more interesting is what never turns up in these kinds of stories — the news behind the sensationalist headlines.

The report on which this story is based comes courtesy of the General Accounting Office.  The GAO doesn’t simply issue reports willy-nilly.  A member or members of Congress specifically request the government office to research and report back on the issues that concern them.  In this instance, the report comes at the request of:

• Rep. Henry Waxman
• Rep. John D. Dingell
• Rep. Joe Barton
• Rep. Barney Frank
• Rep. Bennie G. Thompson
• Rep. Rick Boucher
• Rep. Cliff Stearns
• Rep. Edward J. Markey

The congressmen weren’t worrying exclusively about your broadband interests.  The GAO notes the study came from concern that such a pandemic could impact the financial services sector (the people that brought you the near-Depression of 2008-09).  The Wall Street crowd could be left without broadband while recovering from flu, and that simply wouldn’t do.

“Concerns exist that a more severe pandemic outbreak than 2009’s could cause large numbers of people staying home to increase their Internet use and overwhelm Internet providers’ network capacities. Such network congestion could prevent staff from broker-dealers and other securities market participants from teleworking during a pandemic. The Department of Homeland Security (DHS) is responsible for ensuring that critical telecommunications infrastructure is protected. GAO was asked to examine a pandemic’s impact on Internet congestion and what actions can be and are being taken to address it, the adequacy of securities market organizations’ pandemic plans, and the Securities and Exchange Commission’s (SEC) oversight of these efforts,” the report states.

Putting aside my personal desire that a little less broadband for deal-making, bailout-demanding “kings of the world” might not be a bad idea, the GAO’s report concludes what we already know — the business model of residential broadband is based on sharing connections and when too many people stay home and use them, it’s slow and doesn’t work well.

Providers do not build networks to handle 100 percent of the total traffic that could be generated because users are neither active on the network all at the same time, nor are they sending maximum traffic at all times. Instead, providers use statistical models based upon past users’ patterns and projected growth to estimate the likely peak load of traffic that could occur and then design and build networks based on the results of the statistical model to accommodate at least this level. According to one provider, this engineering method serves to optimize available capacity for all users. For example, under a cable architecture, 200 to 500 individual cable modems may be connected to a provider’s CMTS, depending on average usage in an area. Although each of these individual modems may be capable of receiving up to 7 or 8 megabits per second (Mbps) of incoming information, the CMTS can transmit a maximum of only about 38 Mbps. Providers’ staff told us that building the residential parts of networks to be capable of handling 100 percent of the traffic that all users could potentially generate would be prohibitively expensive.

In other words, guess your customer demand correctly and 200-500 homes can all share one 38Mbps connection.  Guess incorrectly, or put off expanding that network to meet the anticipated demands because your company wants to collect “cost savings” from reduced investment, and everyone’s connection slows down, especially at peak times.

One way to dramatically boost capacity for cable operators is to bond multiple channels of broadband service together, using the latest DOCSIS 3 standard.  It provides cable operators with increased flexibility to meet growing demands on their network without spending top dollar on wholesale infrastructure upgrades.  Many operators are already reaping the rewards this upgrade provides, by charging customers higher prices for higher speed service.  But it also makes network management easier without inconveniencing existing customers with slowdowns during peak usage.

The GAO didn’t need 77 pages to produce a report that concludes broadband usage skyrockets when people are at home.  Just watching holiday shopping traffic online spike during deal days like “Cyber Monday,” after Thanksgiving would illustrate that.  Should 40 percent of Americans stay home from work, instead of browsing the Internet from their work machines, they’ll be doing it from home.  That moves the bottleneck from commercial broadband accounts to residential broadband networks.

The GAO says such congestion could create all sorts of problems for the financial services sector, slowing down their broadband access.

Providers’ options for addressing expected pandemic-related Internet congestion include providing extra capacity, using network management controls, installing direct lines to organizations, temporarily reducing the maximum transmission rate, and shutting down some Internet sites. Each of these methods is limited either by technical difficulties or questions of authority. In the normal course of business, providers attempt to address congestion in particular neighborhoods by building out additional infrastructure—for example, by adding new or expanding lines and cables. Internet provider staff told us that providers determine how much to invest in expanding network infrastructure based on business expectations. If they determine that a demand for increased capacity exists that can profitably be met, they may choose to invest to increase network capacity in large increments using a variety of methods such as replacing old equipment and increasing the number of devices serving particular neighborhoods. Providers will not attempt to increase network capacity to meet the increased demand resulting from a pandemic, as no one knows when a pandemic outbreak is likely to occur or which neighborhoods would experience congestion. Staff at Internet providers whom we interviewed said they monitor capacity usage constantly and try to run their networks between 40 and 80 percent capacity at peak hours. They added that in the normal course of business, their companies begin the process to expand capacity when a certain utilization threshold is reached, generally 70 to 80 percent of full capacity over a sustained period of time at peak hours.

However, during a pandemic, providers are not likely to be able to address congestion by physically expanding capacity in residential neighborhoods for several reasons. First, building out infrastructure can be very costly and takes time to complete. For example, one provider we spoke with said that it had spent billions of dollars building out infrastructure across the nation over time, and adding capacity to large areas quickly is likely not possible. Second, another provider told us that increasing network capacity requires the physical presence of technicians and advance planning, including preordering the necessary equipment from suppliers or manufacturers. The process can take anywhere from 6 to 8 weeks from the time the order is placed to actual installation. According to this provider, a major constraint to increasing capacity is the number of technicians the firm has available to install the equipment. In addition to the cost and time associated with expanding capacity, during a pandemic outbreak providers may also experience high absenteeism due to staff illnesses, and thus might not have enough staff to upgrade network capacities. Providers said they would, out of necessity, refrain from provisioning new residential services if their staff were reduced significantly during a pandemic. Instead, they would focus on ensuring services for the federal government priority communication programs and performing network management techniques to re-route traffic around congested areas in regional networks or the national backbone. However, these activities would likely not relieve congestion in the residential Internet access networks.

It’s clear some broadband providers are not willing to change their business models to redefine congestion from measurements taken during peak usage when speeds slow, to those that anticipate and tolerate traffic spikes.  That means making due with what broadband providers are delivering today and developing technical and legal means to ration, traffic shape, or simply cut access to high bandwidth traffic during ‘appropriate emergencies.’  Right on cue, the high bandwidth barrage of self-serving provider talking points are on display in the report:

Providers identified one technically feasible alternative that has the potential to reduce Internet congestion during a pandemic, but raised concerns that it could violate customer service agreements and thus would require a directive from the government to implement. Although providers cannot identify users at the computer level to manage traffic from that point, two providers stated that if the residential Internet access network in a particular neighborhood was experiencing congestion, a provider could attempt to reduce congestion by reducing the amount of traffic that each user could send to and receive from his or her network. Such a reduction would require adjusting the configuration file within each customer’s modem to temporarily reduce the maximum transmission speed that that modem was capable of performing—for example, by reducing its incoming capability from 7 Mbps to 1 Mbps. However, according to providers we spoke with, such reductions could violate the agreed-upon levels of services for which customers have paid. Therefore, under current agreements, two providers indicated they would need a directive from the government to take such actions.

Shutting down specific Internet sites would also reduce congestion, although many we spoke with expressed concerns about the feasibility of such an approach. Overall Internet congestion could be reduced if Web sites that accounted for significant amounts of traffic—such as those with video streaming—were shut down during a pandemic. According to one recently issued study, the number of adults who watch videos on video-sharing sites has nearly doubled since 2006, far outpacing the growth of many other Internet activities. However, most providers’ staff told us that blocking users from accessing such sites, while technically possible, would be very difficult and, in their view, would not address the congestion problem and would require a directive from the government.

Enjoy up to one Hogan's Heroes episode per day during the H1N1 flu pandemic

You have to love some of the players in the broadband industry who trot out their most-favored “network management” talking points to handle a national emergency.  It’s interesting to note providers told the GAO they were concerned with violating customer agreements regarding speed guarantees, when most providers never guarantee residential service speeds.  Their first solution is the Net Neutrality-busting traffic throttle, to slow everyone down to ration the “good enough for you” network in your neighborhood.  Shutting down too-popular, high bandwidth websites like Hulu (no worries – you can watch your favorite shows on our cable TV package) is apparently someone’s good idea, but considering providers admit it wouldn’t actually solve the congestion problem, one’s imagination can ponder what other problems such a shutdown might solve.

One provider indicated that such blocking would be difficult because determining which sites should be blocked would be a very subjective process. Additionally, this provider noted that technologically savvy site operators could change their Internet protocol addresses, allowing users to access the site regardless. Another provider told us that some of these large bandwidth sites stream critical news information. Furthermore, some state, local, and federal government offices and agencies, including DHS, currently use or have plans to increase their use of social media Web sites and to use video streaming as a means to communicate with the public. Shutting down such sites without affecting pertinent information would be a challenge for providers and could create more Internet congestion as users would repeatedly try to access these sites. According to one provider, two added complications are the potential liability resulting from lawsuits filed by businesses that lose revenue when their sites are shutdown or restricted and potential claims of anticompetitive practices, denial of free speech, or both. Some providers said that the operators of specific Internet sites could shut down their respective sites with less disruption and more effectively than Internet providers, and suggested that a better course of action would be for the government to work directly with the site operators.

A very subjective process indeed, but one many providers have sought to keep within their “network management” control as they battle Net Neutrality.  One would think “potential claims of anti-competitive practices” would represent an understatement, particularly if cable industry-operated TV Everywhere theoretically kept right on running even while Hulu could not.  As long time net users already know, outright censorship or content blockades almost always meet resistance from enterprising net users who make it their personal mission to get around such limits.

Expanding broadband networks to provide a better safety cushion during periods of peak usage is looking better and better.

Providers could help reduce the potential for a pandemic to cause Internet congestion by ongoing expansions of their networks’ capacities. Some providers are upgrading their networks by moving to higher capacity modems or fiber-to-the-home systems. For example, some cable providers are introducing a network specification that will increase the download capacity of residential networks from the 38 Mbps to about 152 to 155 Mbps. In addition to cable network upgrades, at least one telecommunications provider is offering fiber-to-the home, which is a broadband service operating over a fiber-optic communications network. Specifically, fiber-to-the-home Internet service is designed to provide Internet access with connection speeds ranging from 10 Mbps to 50 Mbps.

Hello.

Sounds like a plan to me, and not just for the benefit of the Wall Street crowd sick at home with the flu.  Such network upgrades can be economical and profitable when leveraged to upsell the broadband enthusiast to higher speed service tiers.  During periods of peak usage, such networks will withstand considerably more demand and provide a better answer to that nagging congestion problem.

The alternative is Comcast or Time Warner Cable, in association with the Department of Homeland Security, having to appear on Wolf Blitzer’s Situation Room telling Americans they have a broadband rationing plan that will give you six options of usage per day.  Choose any one:

• Up to three videos of cats chasing laser pointers on YouTube
• One episode of Hogan’s Heroes
• Up to six videos of your friends playing Guitar Hero on Dailymotion
• Unlimited access to Drugstore.com to browse remedies
• Five MySpace videos of your favorite bands
• Up to 500 “tweets” boring your followers with every possible detail of your stuck-at-home-sick routine

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I realize this is a bit off topic for us, but I was bemused to learn Cablevision, the cable operator in suburban New York (and elsewhere), has launched iO TV Quick View, three new channels that display nine different kids, sports and news networks all on one screen.

Who is this for?  I suppose the carpel tunnel-suffering channel surfer that has worn his finger out moving up and down the cable dial looking for something to watch and never making it all the way to the end of the lineup.

Cablevision says these three channels will let viewers highlight each window showing a network and, with one button press, jump to the channel they want to see.

No doubt these three channels will be part of the pointless bragging rights cable companies play over the number of channels they offer customers, as if most are still concerned with counting them.

The 500 channel universe already threatens to become littered with networks like Cat Fur Entertainment, Dorm Room Cooking Channel, Log Rolling 24/7, Uncle Fred’s Aquarium TV, and the Uighur News Network, before someone came up with this.

Channel 670 (like you’ll find that):  Kids Quick View channel features box views of Disney Channel, Cartoon Network, Nickelodeon, Boomerang, Discovery Kids, Disney XD, Nicktoons, Nick Jr. and Kids Thirteen.

Channel 671: News Quick View channel features News 12, News 12 Traffic & Weather, MSNBC, CNBC, CNN, Fox News Channel, CNN Headline News, Bloomberg TV and BBC World News.

Channel 672: Sports Quick View, featuring MSG, MSG+, YES Network, ESPN, ESPN2, Speed Channel, Golf Channel, SportsNet NY and Versus.

Versus TV

I can already guess there will be some clashing between Cartoon Network’s more-adult oriented cartoons and Nick, Jr., among others.  Putting channels with Glenn Beck, Nancy Grace, and Ed Schultz all on one channel will blow a hole in the fabric of space on 671, and few will pay attention to actual sports on 672 when the scantily clad ladies on Versus turn up… regularly.

“Our focus in the development of iO TV Quick View has been on discoverability and helping our customers find the perfect program to watch,” Cablevision’s SVP of strategic product development, Patrick Donoghue, said in a prepared statement.

“With so many channels to choose from, this new enhancement allows us to present current options in a number of popular programming categories, literally at a glance. And the end result is a visually beautiful presentation with easy navigation both within the mosaic and to the specific channels being spotlighted.”

Yeah, you’re going to pay for it.

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Mountain Cablevision becomes part of the Shaw Cable family with the approval of the CRTC

The Canadian Radio-television and Telecommunications Commission has given approval to Shaw Communications for its acquisition of Hamilton-based Mountain Cablevision, Ltd., a small independent cable operator in southern Ontario.  The $300 million dollar transaction brings 41,000 cable customers, 29,000 Internet subscribers, 30,000 digital phone lines, and 135 Mountain Cablevision employees into the Shaw family, making the Calgary-based cable company Canada’s largest.

“This is a great move for us to come in there and be able to start being around that market. We always said that [...] we want to be in Alberta, British Columbia, and Ontario,” Shaw chief executive Jim Shaw said Friday.

“Rogers had passed on the acquisition so we decided to go in there,” Shaw told analysts. “This is a great move for us, being around that market.”

Mountain Cablevision serves a small part of Hamilton and surrounding communities in southern Ontario

Shaw’s entry into Ontario upset Rogers Communications, eastern Canada’s dominant cable provider.  Rogers sued Shaw in an Ontario court, claiming the purchase violated a near-decade long agreement made personally between Ted Rogers and Jim Shaw to stay out of each other’s territories — Shaw stays out of eastern Canada if Rogers moves no further west than Ontario.

Canadian courts aren’t compelled to recognize handshake deals made over dinner, and the court ruled against Rogers.

With the agreement swept away, some analysts predict Rogers will investigate acquisition opportunities in western Canada, probably in the more populated regions.

Shaw claims it will upgrade Mountain Cablevision’s small cable footprint, which serves only a portion of greater Hamilton – Hamilton Mountain and East Hamilton, as well as the communities of Mount Hope, Caledonia, Hagersville, Jarvis, Dunnville/Byng, Cayuga and Binbrook, all in Ontario.  The company promises better broadband, cable, and telephone service after the upgrades are complete.  Shaw also says it will expand the Mountain Cablevision system into several unserved neighborhoods and townships.  That’s an important distinction, because it indicates Shaw has no intention of competing head to head with Rogers or Ontario’s other dominant cable company Cogeco.

The deal comes during challenging times for Shaw, who announced a 6% decline in profits in the fourth quarter, with gains only from new digital cable additions.  More than 110,000 Shaw customers signed up for digital cable in the third quarter, up from 23,000 in the third quarter a year ago.

In other areas, Shaw lost customers — 5,000 canceling broadband, 4,500 dropping Shaw’s direct to home satellite service, and nearly 9,000 disconnecting their Shaw digital phone line.

Shaw’s next product introduction will likely be its new cell phone service.  The company spent $190 million dollars last year acquiring 18 airwave licenses in northern Ontario, Manitoba, Saskatchewan, Alberta, and British Columbia.

Mountain Cablevision's concentrated service area in the city of Hamilton (click to enlarge)

But Shaw is taking a “very cautious approach” to wireless mobile services, according to the company.  It has refused to set a timetable when service would begin.  Shaw faces a growing number of wireless competitors introducing service in Canada late this year and into early 2010.  DAVE Wireless, Wind Mobile, and Public Mobile are all poised to launch in major Canadian cities, expecting to put competitive pressure on pricing and bring about lower priced, more generous service plans.

Shaw claims it’s not concerned, telling The Financial Post, “If they’re in there, we don’t really care. We already have a relationship with customers and they have zero,” Shaw said. “We have 3.4 million customers we have a relationship every month with.”

Telecommunications companies are increasingly concerned with offering customers “bundles” of telecommunications services from video, broadband, wired phone lines, and now increasingly wireless data and mobile phone services.  Customers purchasing bundles tend to remain loyal to the companies offering them.

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LUS Fiber - Lafayette, Louisiana's public utility municipal broadband provider, offers fast speeds with great rates

Frustrated communities across America, take note.

If your town or city government starts making serious noises about constructing your own, municipally-owned broadband network (especially one built with fiber optics to the home), existing providers who have repeatedly said “no” to requests for faster service at more reasonable prices have a track record of quickly turning around and saying, “yes — why didn’t you ask us before?”

Big existing telecommunications players loathe the thought of facing a new competitor in their midst.  They are accustomed to the usual arrangement of one cable operator and one phone company.  Cable companies provide cable modem service, phone companies mostly provide DSL.  In smaller cities, and where a competitor is missing (or provides a lower quality service), there is almost no drive to upgrade.  Cable will set speeds just above what the phone company is offering, and both will co-exist happily ever after.

For communities being bypassed by the fiber revolution now underway by Verizon, and to a lesser degree AT&T, requests from civic leaders, businesses, and consumers for upgraded service fall on deaf ears.  ‘What you have now is good enough for this market, so be quiet and be lucky we give you what you’ve got now.  Oh, and we’re raising rates, too.’

In Rochester, the one upstate New York city not on the “to-do” list of Verizon (which is merrily wiring urban and suburban communities across their service areas with fiber optic cable FiOS), Time Warner Cable sees little incentive to raise speeds or upgrade to DOCSIS 3 with a phone company competitor that has no apparent plans to move beyond traditional old school DSL service.  Where FiOS does threaten, Time Warner Cable is in a hurry to provide “wideband” broadband as quickly as possible.

In Wilson, North Carolina, years of pleading from local officials to provide something beyond anemic broadband in their community was met with yawns from Time Warner Cable and Embarq, the local phone company.  Wilson decided to build their own municipal fiber network, offering faster speeds at better pricing.  Time Warner and Embarq did what most existing competitors do — they moved through the Four Stages of Telecommunications Competition Grief:

1) Behind the Scenes Threats and Anger: Companies work the phones with local officials trying to browbeat them into dropping the plans to construct municipal broadband, try to gin up partisan opposition, issue overinflated cost estimates, issue warnings about the trouble they’ll cause local politicians who support such initiatives, and snow a blizzard of documents illustrating how wonderful and reasonable their existing service is;

2) Stall Tactics Through Negotiation: Once home office is notified, a series of negotiations to attempt to forestall the project begins, such as throwing crumbs for incrementally better service, offers to build showcase mini-projects that represent a “win” for local politicians, or “looks good on paper” concessions that end up amounting to far less.  Most of these discussions are designed simply to stall to allow the company to prepare for stage three.

3) PR and Legal Blitzkrieg: Assuming local officials haven’t been discouraged away from their idea, or dropped it after starring in a company-sponsored press event – ribbon cutting a small wi-fi or school connectivity project, the next stage is a multi-front battle involving company legal teams filing lawsuits to delay or kill projects, public relations and astroturf lobbying efforts to distort issues and build public opposition, legislative maneuverings to make such projects untenable through industry-friendly laws, and often vague promises about impending upgrades making the entire project unnecessary.

4) Acceptance, Competition, and Better Service: The final stage is the realization consumers don’t always get suckered by astroturf groups and company scare tactics.  They accept the project is moving forward, and send out the press release saying they welcome the competition and are announcing their own significant service upgrade because “customers asked for it.”  Price increases slow, speeds increase, and service improves, all because of the reality that an aggressive competitor is in their future.

Wilson city officials tried negotiations for better service, got nowhere, and had to fight back against a blizzard of nonsense from the telecommunications industry trying to legislate such projects out of existence with changes to state law.  Americans for Prosperity, an astroturf group, even hassled residents in other nearby communities with robocalls to try and stop similar projects.

The arrival of Wilson’s Greenlight service, which offers speeds far faster than Time Warner and Embarq ever did, at lower prices, was a shock to Time Warner’s call centers.  As customers canceled, representatives taking those calls were in denial residents were actually achieving the speeds Time Warner failed to deliver.

Click here to view the embedded video.

Chattanooga’s public power utility fought back against telecommunication company propaganda to construct fiber to the home service across the city, which launched this year. (5 minutes)

In Monticello, Minnesota, local telephone company TDS had spent years refusing requests to improve service in the city.  Speed and access issues plagued the community, northwest of Minneapolis.  Local officials had enough and voted to construct their own fiber to the home municipal network.

Enter the four stages.  TDS started by telling city officials the company’s network was state of the art for Monticello, and couldn’t be immediately improved because there was insufficient return on investment.  Companies want to be assured they are paid back for investments they make, and because Monticello is a relatively small city, there were questions whether the costs for a fiber network would be paid back quickly enough through revenues.

When that didn’t work, the company sued the city as a stalling tactic.  Despite the fact Monticello won case after case, TDS kept filing.  A full assault by large telecommunications interests also began, trying to gin up public opposition.  While the project was approved by voters, and Monticello was tied up in court, TDS quickly moved to stage four and started rapidly building their own fiber network in Monticello, actually putting down fiber the city was prohibited to wire themselves as the lawsuits dragged through the courts.

The company told Ars Technica that despite its earlier refusals to provide fiber service, TDS didn’t act earlier because it didn’t actually know that people really, really wanted fiber; once the referendum was a success, the company moved quickly to give people what it now knew they wanted.

Then, in June, the company said with the advent of its own fiber network, the city of Monticello should back away from constructing theirs, because its economic viability report was partly premised on the fact TDS refused to provide that service.

To underline that, TDS’ new fiber network doubled customer speeds to 50Mbps, trying to keep customers from taking their business to  FiberNet Monticello.

Click here to view the embedded video.

Lafayette staged a multi-year battle with Cox and other providers to bring municipal fiber broadband to it’s corner of Louisiana.  This 30 second ad promoted a “yes” vote on the project.

In Louisiana, Cox Cable is facing accusations it’s engaged in predatory pricing to kill Lafayette Utility System’s fiber to the home network and EATel’s fiber network in Ascension Parish.  Cox Cable froze rates and moved in with DOCSIS 3 upgrades, delivering up to 50Mbps service.  Cox chose to upgrade Lafayette before any other Cox-served community.

The Lafayette Pro-Fiber Blog found this EATel billboard taunting Cox

EATel, an independent phone company that wired fiber across Ascension Parish, also faced down Cox.  When the cable company began promoting cut-rate pricing in Ascension, EATel took out advertising promoting Cox’s special prices — in other cities, much to Cox’s consternation.  EATel’s ads, much like those run by Novus against Shaw in British Columbia, tell Cox’s customers to call the company and ask for the lower price they are advertising elsewhere.

“Cox came in with an incredibly aggressive promotion for TV service with every bell and whistle you could imagine. We couldn’t figure out how they could even make money on it. So we took out an ad in the Lafayette newspaper that basically said, ‘Hey Lafayette, look at the great prices you are going to get from Cox.’ Cox was not amused,” Trae Russell, communications manager for EATel told Telephony Online.

Joey Durel, Jr., president of Lafayette parish, testifies before the House Committee on Energy and Commerce on Lafayette’s municipal fiber network on February 27, 2008. (7 minutes)
You must remain on this page to hear the clip, or you can download the clip and listen later.

Lesson learned — just threatening to bring in a municipal competitor is often all it takes to turn a persistent “no” from the local cable and phone companies into “yes, Yes, YES!”

Of course, not every project is successful.  Some, such as Burlington Telecom Stop the Cap! reported on yesterday face political and cost challenges.  Others are killed through stage managed opposition and astroturf campaigns paid for by the telecommunications industry before they even get started.

In North St. Paul this year,  “PolarNet,” a planned fiber optic broadband network to stimulate the local economy was killed by an astroturf propaganda campaign undertaken by Qwest, Comcast, and other telecommunications companies that would have to deal with PolarNet as a competitor.  The telecommunications companies claimed it would result in higher local taxes and “more government” where it wasn’t needed.  Citizens defeated the proposal 67-33%.

Windom, Minnesota faced similar challenges and their fiber project was shot down in 1999, but with lessons learned, proponents brought it back up and won in 2000.  To this day, the community of 4500 in western Minnesota face considerable envy from adjacent communities — they want service from the fiber-to-the-home system as well.

Almost universally, opponents to municipal broadband systems claim they are financial failures and saddle communities with debt.  In reality, most have forced those opponents to provide improved service in their competitive communities, or those companies will become the financial failure.

Click here to view the embedded video.

Terry Huval of Lafayette Utility System talks with the Fiber Revolution blog about the challenges Lafayette experienced building their own municipal fiber network.  Huval offers excellent advice for other municipalities exploring similar projects.  (April, 2009 – 10 minutes)

Thanks to Stop the Cap! readers Tim and Matt who suggested this story idea.

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