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Stop the Cap! Files for Party Status in California’s Charter-TWC Merger Proceeding

stopthecap-logoStop the Cap! has filed a motion before California’s Public Utilities Commission (CPUC) to request party status in the Charter-Time Warner Cable merger proceeding, better positioning ourselves to influence the outcome.

As other consumer groups in California continue to formally oppose the merger, we are also filing to ask regulators to consider our request to impose conditions on the deal should the CPUC decide to approve it anyway. As we promised after the New York Public Service Commission approved the deal with significant conditions, we are once again taking a hard look at Charter’s three-year commitment not to impose data caps or usage pricing — a term we find completely inadequate.

cpucIt remains our belief three years is far too short a commitment, and it is unlikely consumers will find plentiful alternatives for broadband service should Charter impose caps in 2019 anymore than they can today. As a reminder to consumers and regulators, deal conditions imposed by regulators on the 2011 merger of Comcast and NBC-Universal have already begun to expire, with relatively little change in competition in the marketplace.

Our late filing for party status comes partly in response to inadequate public notice from Charter Communications and new information and suggestions that came as a result of the New York State PSC proceeding that would be directly informative and beneficial for California residents.

In states where public utility regulators have approved the transaction with ‘most-favored state’ provisions, any benefits we can win for consumers in California will also apply in New York and other states as well.

As always, we are extremely grateful to our newest member of the Stop the Cap! team, Matthew Friedman, who has dramatically strengthened our ability to monitor the marketplace on the west coast to broaden our consumer protection efforts.

We remain an all-volunteer organization, so if you’d like to join our team, use the Contact Us button at the top of the page and send a message. We’d love to have more volunteers helping identify and write about pressing broadband issues throughout the U.S. and Canada, and we’re happy to help with the editing.

The full text of our motion appears below:

BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA
MOTION OF STOP THE CAP! FOR PARTY STATUS

I. Introduction
Pursuant to Rule 1.4 of the California Public Utilities Commission’s (“CPUC” or the “Commission”) Rules of Practice and Procedure, Stop the Cap! respectfully requests to be granted party status in the above captioned proceeding.

II. Background and Interest in this Proceeding
Stop the Cap! is a consumer group founded in 2008 to fight against the introduction of artificial limits on broadband usage (such as data caps, usage based pricing, and speed throttling) and to promote better broadband speeds and service for consumers. Our group does not accept funding from lobbyists, companies, or any individual affiliated with the telecommunications industry. We return all corporate donations.

Stop the Cap! understands that this is a relatively late file for party status. While Stop the Cap! is generally opposed to this transaction, we feel that the Intervenors are strongly making the case that the Commission should deny the application, and we would refrain from contributing in that regard. However, should the Commission approve this transaction, Stop the Cap! has a deep and detailed knowledge of data caps and usage based pricing (DC/UBP) from our past 8 years of work on this very specific issue. This information and experience would definitely aid the Commission’s process of tailoring effective mitigation conditions, and our input would be complementary to the existing Intervenors’. Based on our direct experience at the recent Los Angeles PPH, we now understand that an issue as complicated as DC/UBP can’t be effectively dealt with by us as an informal commenter. We have no lawyers guiding us through this process —we are merely a group of individual consumers who have banded together to address a common concern. We therefore respectfully request that the Commission forgive our late filing, and note that we would still be able to take part in full in the discussion of relevant conditions, should this transaction reach that stage.

As a party, Stop the Cap! would aim to protect and promote the public interest of our members and other Californians on the issue of DC/UBP. We have attached the discussion we submitted at the Los Angeles PPH to this filing. It details how the issue of DC/UBP affects numerous other concerns in this proceeding, and presents significant and numerous harms to consumers, especially to low income ones. The submission lays out how DC/UBP can increase prices, foster anti-competitive behavior, circumvent net neutrality, hinder innovation and investment, slow broadband deployment, threaten network security, remove educational opportunities, and can even completely erase any “lifeline” broadband condition this Commission may design. The document also explains why the CPUC’s approval of this transaction would make DC/UBP much more likely to be imposed on existing Time Warner Cable subscribers. It details TWC’s repeated and public pledge to “NEVER” impose DC/UBP on its customers. It discusses why the Commission should be particularly suspect of New Charter when it comes to DC/UBP. Finally, it shows that Charter’s opening testimony actually supports a mitigation condition that sunsets based on a competition test, as opposed to an arbitrarily short three years. This is the kind of information we can present to aid in the Commission’s decision making process.

III. Notice
Service of notices, orders, and other correspondence in this proceeding should be directed to Stop the Cap! [extraneous information deleted]

IV. Conclusion
Stop the Cap!’s participation in this proceeding will not prejudice any party and will not delay the schedule or broaden the scope of the issues in the proceeding. For the reasons stated above, Stop the Cap! respectfully requests that the CPUC grant this motion for party status filing.

Dated: February 2, 2016
Respectfully submitted,

/s/ Matthew Friedman
Matthew Friedman
Stop the Cap!

FCC Chairman Tells Crowd He’s “Not Done Enough” to Bring More Cable Competition

Phillip Dampier February 3, 2016 Competition, Consumer News, Public Policy & Gov't No Comments
Wheeler

Wheeler

FCC Chairman Thomas Wheeler confessed he “has not done enough” to bring consumers more competition to Comcast, Time Warner Cable, Charter, and other cable operators.

Appearing at the Wharton School at the University of Pennsylvania on Tuesday, Wheeler said Comcast’s effort to buy Time Warner Cable in 2015 would not bring additional competition to the marketplace. The FCC remained pessimistic about the deal, stalling for months until a request for approval was eventually withdrawn by Comcast.

Wheeler has been especially sensitive about deals that could impact broadband services — wireless or wired — since becoming chairman of the FCC during President Obama’s second term in office. The FCC has proven itself less concerned with cable television matters, having approved a merger of AT&T and DirecTV while it still contemplates the merger of Charter Communications with Time Warner Cable and Bright House Networks.

Wheeler also spent time speaking about his latest initiative, breaking up the virtual monopoly on set-top boxes. Wheeler has proposed ending that monopoly by creating a new open standard platform for set-top equipment, allowing various manufacturers to develop boxes for retail sale to consumers.

FCC Chairman Rejects Mobile Internet as Useful Competitor to Wired Broadband

Wheeler

Wheeler

FCC chairman Thomas Wheeler considers mobile broadband a poor substitute for fixed/wired Internet access. A fact sheet released by Wheeler’s office shows he is convinced America still has a broadband problem — speeds are too slow, competition is lacking, and 4G/LTE wireless broadband is so usage-capped or speed throttled, it is not a serious substitute for traditional wired broadband.

Wheeler claimed, “approximately 34 million Americans still lack access to fixed broadband at the FCC’s benchmark speed of 25Mbps for downloads, 3Mbps for uploads,” and has previously said those that do often find those speeds from only a single provider, typically a cable company.

Wheeler doesn’t dismiss the need for wireless Internet access, but he considers it an add-on for customers on the go. Other highlights from the fact sheet:

  • A persistent urban-rural digital divide has left 39 percent of the rural population without access to fixed broadband. By comparison, only 4 percent living in urban areas lack access;
  • 41 percent of Tribal Lands residents lack access;
  • 41 percent of schools have not met the Commission’s short-term goal of 100Mbps per 1,000 students/staff;
  • Only 9 percent of schools have fiber connections capable of meeting the FCC’s long-term goal of 1Gbps per 1,000 students.

Wheeler also said that U.S. broadband continues to lag behind other developed nations, only ranking 16th out of the top 34 countries.

Wheeler thinks wireless broadband is an essential service for many, but it should not be compared with wired broadband, as the two services are distinct from one-another:

  • Fixed broadband offers high-speed, high-capacity connections capable of supporting bandwidth-intensive uses, such as streaming video, by multiple users in a household. But fixed broadband can’t provide consumers with the mobile Internet access required to support myriad needs outside the home and while working remotely.
  • Mobile devices provide access to the web while on the go, and are especially useful for real-time two-way interactions, mapping applications, and social media. But consumers who rely solely on mobile broadband tend to perform a more limited range of tasks and are significantly more likely to incur additional usage fees or forego use of the Internet.

Stop the Cap! Files Formal Opposition to Charter-TWC Merger in California

stcStop the Cap! this week formally filed our opposition to the merger of Charter Communications and Time Warner Cable with the California Public Utilities Commission (CPUC), citing our concerns about data caps/usage-based pricing, Internet competitiveness, affordability, and quality of service.

Matthew Friedman, Stop the Cap!’s new director of our California branch, spoke in opposition to the transaction at a public meeting held by the CPUC in Los Angeles on Tuesday. Friedman authored our formal 10,500-word opposition, particularly focusing attention on Charter’s commitment not to cap or meter broadband usage for only three years after the deal is approved.

Charter’s temporary “good behavior” commitments open Time Warner Cable and Bright House Networks customers to the potential of the same kind of usage caps and usage pricing being tested by Comcast, with little likelihood imminent competition will give consumers alternative cap-free choices.

Stop the Cap! proposed a permanent ban on compulsory data caps with New York regulators, which was not adopted. In California, we are asking the CPUC to consider allowing Charter’s “good behavior” commitments to expire only when customers have access to near-equivalent competitors offering unlimited service options, either from resellers of Charter’s broadband network or from existing or new competitors.

It is our view usage caps and usage-based billing represent an end run around Net Neutrality and will be used to limit online video competition.

We also repeat our assertion that Charter’s commitments for Time Warner Cable customers are less compelling than the benefits of Time Warner Cable’s own ongoing upgrade program, dubbed “Maxx.” Charter has committed to providing Time Warner customers with broadband speeds up to 100Mbps. Time Warner Cable Maxx offers a maximum speed of 300Mbps — three times faster than Charter.

Time Warner Cable’s $14.99 Everyday Low Price Internet option, available to any customer without conditions or contracts would be terminated, with customers forced to spend just under $60 for entry-level broadband service. Charter’s offers remove customer choices from the marketplace in an attempt to “simplify” pricing. But that will also force customers into packages with services they don’t want or need.

Here is our formal filing in full, also available for download:

Before the CALIFORNIA PUBLIC UTILITIES COMMISSION

      

Re: Application 15-07-009

Charter/Time Warner/Bright House Transfer

Comments on Data Caps and Usage Based Pricing and Statement of Opposition

January 26, 2016

Stop the Cap! California Branch, Matthew Friedman

 

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

Executive Summary

Part 1 of this document proposes a mitigation condition relating to data caps and usage based pricing (DC/UBP) that would not sunset after an arbitrary number of years. Instead, it would sunset based on the existence of actual competition in the wireline broadband marketplace.

This document details how data caps and usage based pricing present significant and numerous harms to consumers and competition in general, and why the CPUC’s approval of this transaction would make DC/UBP much more likely to be imposed on existing Time Warner Cable subscribers. We detail TWC’s long-standing, public, and vocal commitment against imposing DC/UBP. We explain why the Commission should be particularly suspect of Charter when it comes to DC/UBP. Finally, we show that Charter’s opening testimony actually supports the mitigation condition that is being proposed here.

Stop the Cap! believes that this transaction is clearly not in the public interest, and the Commission should deny the transfer. If however, for some reason the Commission decides to approve the transfer, we respectfully submit this mitigation condition to protect Californians from one of the severe harms this merger will certainly bring.

Part 2 of this document is a broader examination of why the transaction is not in the public interest. We detail how Time Warner Cable is stronger company with superior offerings to Charter, and we show why Charter is proposing a deal that is not only not in the public interest, but a large step backwards for consumers.

The Commission should deny this transfer.

The Proposed Transaction is Not in the Public Interest

Stop the Cap! strongly believes that it’s clear that the Commission should NOT approve this transaction. The testimony of the Intervenors has shown that the “benefits” Charter is claiming are tenuous at best, if even present at all. The only real benefit of this transaction appears to be to the applicants’ shareholders, and possibly not even them.

There are an immense amount of risks, potential harms, and even certain harms that will come to consumers if this transaction is allowed to proceed–more than were present even in the Comcast/TWC scenario. The certain harms far outweigh any potential benefits.

In these comments we focus on data caps and usage based pricing in particular. These practices are almost always detrimental to consumers, as TWC management has recognized, and they shouldn’t be imposed at all. One of the negative aspects of this proposed merger is that TWC customers would lose the “no data caps EVER” pledge from TWC. If for some reason the Commission decides to approve the transfer, the loss of TWC’s anti-data cap corporate attitude must be mitigated, and in a way that matches the permanence of TWC’s current pledge.

If, however, the Commission does decide to approve this transfer, the loss of TWC’s vocal commitment to NEVER impose DC/UBP must be mitigated, and it must be mitigated in a way that matches the permanence of TWC’s commitment. Mitigation conditions that are only temporary in nature are not sufficient to offset those harms.

Proposed Mitigation Condition

New Charter shall refrain from imposing data caps and/or usage-based pricing (DC/UBP) on all of its broadband offerings. New Charter will refrain from increasing prices on non-DC/UBP plans to compensate for this mitigation condition.

This mitigation condition shall sunset when ONE of the following scenarios comes to pass; however, the condition shall sunset only for those New Charter customers for whom one of the following scenarios is true. In all other New Charter areas where none of these scenarios exist, the mitigation condition shall remain in force.

  1. There are at least three (including New Charter) competing wireline broadband providers for the area in which New Charter wishes to sunset this mitigation condition. Resellers leasing lines from New Charter may be counted as competitors only if New Charter does not impose any sort of usage based billing or data caps on the resellers.
  1. There are at least three competing broadband providers (both wired and wireless) for the area in which New Charter wishes to sunset this mitigation condition, and the wireless providers offer a non-usage-based billing plan that is no more expensive than similar non-usage-based billing plans offered by the wireline providers. Providers that offer unlimited data but throttle speed after a certain amount of data is consumed shall be considered as utilising data caps for the sake of this evaluation.

Should a New Charter customer demonstrate that the competing wireless provider is unable to supply actual broadband speed to their physical address (for instance, due to poor reception), then New Charter shall continue to offer that customer data plans not subject to DC/UBP. Additionally, New Charter shall refrain from increasing the price of this non DC/UBP plan above the cost of the comparable DC/UBP plan (before considering any data overage fees).

  1. There is a functional community-owned broadband alternative available to the customers for which New Charter wishes to sunset this mitigation condition.

This condition defines “broadband” as providing the minimum broadband speed as set by the FCC at the time of evaluation for sunsetting.

What is DC/UBP?

“Usage Based Pricing” (sometimes referred to as “Metered Billing” or “Data Caps”) is when an Internet Service Provider places an upper limit on the amount of data a customer can use in a given month. Typically in wireline internet situations, if the customer goes over their monthly allowance, they are charged an additional fee for a set amount of additional data. If this additional data allotment is used, the customer is charged again for a second allotment, and so on until the monthly billing period ends. For instance, Comcast charges its data capped customers $10 for each additional 50GB used.[1] A good way to understand DC/UBP is to begin with what it is not.

DC/UBP is NOT about network management

This assertion has been debunked by scientific research for almost ten years,[2] and now even ISPs themselves are acknowledging the same. In January 2015, National Cable and Telecommunications Association president Michael Powell told a Minority Media and Telecommunications Association audience that while a lot of people had tried to label the cable industry’s interest in the issue as about congestion management, “That’s wrong,” he said. “Our principal purpose is how to fairly monetize a high fixed cost.”[3] However, even this explanation is myth-based. (See discussion next section.)

On 14 August 2015, Comcast’s Vice President of Internet Services, Jason Livingood, stated publicly that DC/UBP was not a network management decision, but a “business decision” that he had no part in making.[4]

Then, on 5 November 2015, an internal Comcast document instructing CS Reps how to answer questions about DC/UBP was leaked. That document instructs Comcast personnel “Do not say: The [DC/UBP] Program is about network management. (It is not.)[5]   (Emphasis added).

Time Warner Cable’s CEO Robert Marcus similarly has spoken about DC/UBP as a business decision (and is his opinion a bad one).[6]

DC/UBP is NOT about pricing fairness

If DC/UBP were truly about pricing fairness, subscribers would pay for exactly the amount of data they used, and no more. This model would be like water or power: there would be no monthly charge whatsoever (or perhaps only a miniscule one): if you used a kilobyte, you’d pay for a kilobyte. If you happened to be on vacation for a month and didn’t use any data, then your broadband bill would be zero. There would be no startup or termination charges. There would be no modem fees, just as there are no gas meter or electrical transformer fees. Tight government regulation over pricing would be beneficial as well.

None of these conditions is present in any of the wireline DC/UBP plans in the US currently, and none that I know of anywhere in the world, though I haven’t done an extensive search. Regardless, it’s clear that the purpose of DC/UBP is not to provide “pricing fairness.”

The GAO’s explanation of DC/UBP

In 2014, the U.S. Government Accountability Office performed a study on DC/UBP. The GAO determined that while it is possible for providers to employ DC/UBP to the consumers’ advantage, “providers facing limited competition could use UBP to increase profits, potentially resulting in negative effects, including increased prices, reductions in content accessed, and increased threats to network security. Several researchers and stakeholders that the GAO interviewed said that UBP could reduce innovation for applications and content if consumers ration their data.”[7]

Simply put: absent sufficient competition, the purpose is two-fold. First, DC/UBP allows cable providers to use their monopoly (or in some much rarer cases duopoly) powers to extract additional revenues from customers. Upon the imposition of DC/UBP, the vast majority of customers have no competing provider of wireline broadband to whom they can turn.[8]

Secondly, DC/UBP gives cable internet providers the ability to use their “terminating monopoly” power to quash competition to their core video offerings. For instance, SlingTV CEO Roger Lynch in early December accused Comcast of setting its data caps just low enough to prevent customers from replacing cable TV with online video streaming.[9]

To see how this terminating monopoly power works, consider one of the increasing number of “cord cutting” households. By some estimates, 1 in 7 Americans are currently television cord-cutters.[10] These consumers do not subscribe to cable television. Instead, they purchase broadband only and subscribe to services such as Hulu, Netflix, Vudu, YouTube, Crackle, Fandor, etc. These services offer direct competition to cable providers’ video offerings. The imposition of “usage based billing” can artificially increase the price of cord cutting so that it is no longer a viable option for consumers.

A typical “cord-cutting” home uses an average of 328GB/mo,[11] exceeding most data-capped plans’ initial allowances. In fact, in October the Associated Press reported that 8% (and rising) of Comcast customers regularly exceed their data allowances and are charged overage fees.[12] As the emergence of UHD and 4k video offerings by streaming services such as Netflix and Amazon continues, these percentages will rise dramatically.[13] Since cable operators’ core video offerings are excluded from a user’s data count, it can quickly become cheaper to subscribe to a bloated cable package than pay data overage fees in addition to a la carte streaming service subscriptions. Then consumers must pay still more additional fees for DVRs to replace streaming’s de facto “on demand” nature. And yet more fees for additional cable boxes. This then is the true purpose of DC/UBP: increasing revenue, in part from overage fees and in part from pushing consumers into traditional cable packages with additional fees.

Potential Public Harms from DC/UBP

DC/UBP financially harms ratepayers, especially lower income customers

The effect of the financial penalties that streaming Netflix (and other such services) carries under DC/UBP plans will push consumers to New Charter’s own, more expensive, subscription offerings since watching video through New Charter’s traditional cable network would not count against consumers’ data allotments. These services are bundled such that subscribers must pay for hundreds of channels they have no interest in in order to get the 10-20 that they actually want to watch, thus artificially inflating their cable bill. (For instance, a recent Civic Science survey found that 56% of pay-tv subscribers would drop ESPN from their lineup in order to save $8/mo on their cable bills.[14] Cable companies, however, do not offer this as an option.) When DC/UBP is not present, cord-cutting is cheaper than cable, sometimes significantly so depending on the type of television in which the cord-cutter is interested.[15] Lower income Californians will be hit especially hard as DC/UBP forces them into those bloated, expensive cable “bundles.” For lower income viewers, this money-saving alternative will no longer be accessible since their prices are artificially inflated by DC/UBP.

This in turn stifles demand for broadband, running counter to Section 706(a)’s mandate. The CPUC has a statutory duty to protect ratepayers from a monopoly player stifling competition and investment, and that mandate is not limited to an arbitrary number of years.

The Commission is correct to want to expand broadband access to underserved areas, but it must also protect against that same access being used to prevent lower-income Californians from saving money on television bills by “cord-cutting.”

New Charter can use DC/UBP to circumvent Net Neutrality rules

Comcast is currently attempting an end-run around net neutrality rules and strongly pushing customers to their new streaming service “Stream TV” over competitors such as Hulu and Netflix. Comcast is exempting their own (more expensive) cord-cutting streaming service from usage-based metering, while competing services count against subscribers’ data allotments. While this is illegal under net neutrality, Comcast is arguing that since Stream TV exclusively uses its own IP network, and not the internet per se, net neutrality doesn’t apply.[16] As Wired.com put it, “Comcast may have found a major net neutrality loophole.”[17] (Note that this example directly contradicts the testimony of Charter’s Dr. Scott Morton.[18])

This is a loophole that New Charter could also use in order to attempt to circumvent net neutrality regulations. However, if the CPUC bars New Charter from instituting DC/UBP, this end-run loophole would be closed, and New Charter would not be able to engage in the anti-competitive customer-harming behavior that Comcast is now attempting.

It’s important to note here that the Commission cannot rely on the federal government to provide this protection to Californians. A number of U.S. Congress members have filed briefs requesting that courts overturn the FCC’s net neutrality rules.[19] Further, at the time of this writing, a number of house members are attempting to insert a net neutrality defunding clause into the omnibus spending bill.[20]

Under a Republican president and Congress, it’s clear that California should expect the federal government to abandon any and all open internet and net neutrality regulations. But as with climate change and carbon emissions legislation, California has the opportunity to lead the country by ensuring net neutrality and protecting competition, in part by adopting this proposed mitigation measure.

DC/UBP also gives ISPs the ability to leverage sponsored data programs. Such programs pose an existential threat to net neutrality, but on a more basic level, harm consumers by increasing fees for the services that participate. Sponsored data programs also present a barrier to entry for new, innovative, and less well-funded competing services.[21]

DC/UBP facilitates anti-competitive behavior

As the GAO report put it,  “…fixed providers—many of whom also provide television video content—could use UBP as a means to raise the price for watching online streaming video services—a competitor to their video services—as households continue to substitute television with streaming video.”[22] New Street Research analyst Jonathan Chaplin points out that usage-based billing would be one of Charter’s strongest potential weapons against online video competitors.[23]

DC/UBP hinders innovation and investment

Again, from the GAO report:

“Because UBP can make it more expensive to watch data-heavy content such as streaming video, it may discourage people from accessing such content and, therefore, discourage them from eliminating their television service. This might adversely affect firms that provide online video streaming services and reduce competition and innovation in the market for providing streaming video content, thereby negatively affecting consumers.

In addition, two industry stakeholders we interviewed believe UBP could in general inhibit innovation that results from experimentation and unlimited access to the Internet. Greater innovation could result in the development of more content and applications that consumers demand and value. Some Internet users, such as heavy data users, may pay more for access under UBP. As a result, some of them may limit their Internet use—as mentioned earlier, some focus group participants said that they have reduced their mobile data usage as a result of UBP—particularly of data-heavy content and applications such as online learning and video. This could lead to reduced use of some beneficial Internet applications and innovation in such applications. For example, one public interest group said that the limits that UBP may impose on the market for innovative applications and content may limit the potential of new startups.”[24]

The report goes on to discuss additional ways DC/UBP might reduce innovation, and the above citation is worth reading in full.

These are the same concerns present in Commissioner Florio’s Alternate Proposed Decision in the Comcast proceeding.[25] The alternate PD discusses these concerns as potential harms of Comcast creating a bottleneck between retail subscribers and edge providers, however, the same concerns are equally applicable to an ISP instituting DC/UBP.

DC/UBP has negative effects on network security

According to a 2012 study, DC/UBP may result in consumers—in an attempt to reduce data usage—foregoing automatic security updates to their computers, which could have negative implications for network security.[26]

DC/UBP removes educational opportunities for lower income citizens

In a June 2014 article, US News and World Report explained how online education can provide a significantly lower-cost and more flexible path to a degree. The article cites a Georgia Institute of Technology announcement that it would be offering an online master’s degree in computer science for $6,600 – about $35,000 less than its on-ground program.[27]

The online education model can put a higher degree in reach for countless people who otherwise could not afford that opportunity. However, this model relies heavily on video teleconferencing and video lectures. DC/UBP could inflate the price of online education such that it too could be unaffordable for lower-income Californians, completely pricing them out of higher degrees that could move them out of poverty into the middle class.

Charter could use DC/UBP as a loophole to completely avoid providing “Lifeline” low cost internet service, thus increasing the digital divide.

Envision a worst-case scenario where New Charter agrees to carry on TWC’s existing $14.99 low-cost plan, but caps the data at 5GB, then charges (as Comcast is currently trialing) $10 for each additional 50GB the subscriber uses. For a typical cord-cutting household that uses approximately 330GB of data a month, that would make the price of this “low-cost lifeline” plan $79.95/mo. A “low-cost” internet option of $80/month will do nothing to close the digital divide.[28]

Mitigating the Loss of TWC’s Commitment Against DC/UBP

Time Warner Cable has frequently stated publicly that it will “NEVER” impose DC/UBP. Over time, TWC has demonstrated an extremely different corporate culture and attitude towards DC/UBP than Charter has demonstrated. TWC’s CEO Robert Marcus has time and again made it clear that compulsory usage caps are off the table at Time Warner Cable – a lesson TWC learned after customers pushed back and forced it to shelve a usage cap experiment planned for Rochester, N.Y., Greensboro, N.C., and Austin, San Antonio, and Beaumont, Tex. in April 2009.[29]

TWC subsequently admitted their flirtation with DC/UBP was a mistake. That story, along with the pledge to never impose usage-based billing, is still on Time Warner Cable’s official blog at the time of this writing.[30]

The company has never raised the possibility of compulsory usage limits or usage-based billing again. In fact, Marcus often seems to be evangelizing AGAINST DC/UBP in general. On an October 2014 Wall Street analyst conference call, Marcus stated “We have no intention of abandoning an unlimited product we think is something that customers value and are willing to pay for. The way we’ve approached usage-based pricing is to offer it as an option for customers who prefer to pay less because they tend to use less. And we’ve made those available at 5 gigabytes per month and 30 gigabytes per month levels.”[31]

It’s notable that while Comcast maintained the price point of the plans it converted from unlimited to mandatory UBP, TWC’s optional UBP plans came with a price discount. However, the discounts on those packages were minimal, and as of 11/21/2015 those packages are no longer advertised on the TWC website.

Marcus has continued to be publicly vocal about TWC’s decision to keep its non-usage-based pricing intact. He spoke to this point at the Deutsche Bank Media, Internet, and Telecom Conference in March of 2014,[32] and again in a July 2015 investor conference call.[33]

On an October 2015 investor call Marcus was questioned by analyst Jonathan Chaplin on TWC’s lack of DC/UBP. Marcus responded that the way to increase revenue was to deliver more utility. DC/UBP is the opposite of that, he said.[34]

If the CPUC approves this transaction without mitigation, it will be allowing for the destruction of the largest US wireline broadband entity dedicated to NEVER instituting compulsory DC/UBP in favor of a mere three year commitment. It would forever remove a policy competitor that subscribers to other wireline broadband providers could point to and say, “Yes, a cable company can be profitable without DC/UBP.” More directly, the loss of TWC’s corporate culture and belief that DC/UBP is a poor business decision would be an immense harm to current and future TWC customers.

Charter Is Particularly Suspect Concerning DC/UBP

This merger’s financing model gives New Charter every incentive to impose DC/UBP

Post-merger, New Charter will be in a precarious financial position.[35] One of the strongest incentives for rate increases is the level of debt Charter Communications will assume in this transaction. The New York Department of Public Service staff, in examining this transaction for that state, concluded that New Charter’s debt and lowered credit rating “represents the single most substantial risk of the proposed transaction.”[36]

Charter’s Mr. Fisher disagrees with this analysis in his opening testimony, stating that “New Charter will be financially healthy to the benefit of its shareholders and consumers throughout the State of California.”[37] [emphasis added]. If this is true, then this proposed mitigation will help ensure that consumers do in fact see some of those benefits, and that they are not all given only to shareholders, an occurrence that happens far too often in transactions such as the one currently under consideration. This is especially important since when Mr. Fisher later lists the benefits that will come from the merger, none of the benefits he lists are in the area of consumer pricing.[38] As we detail later in these comments, prices will actually go UP after the merger.

Charter has provided inaccurate information about their history with DC/UBP

Charter’s expert Dr. Fiona Scott Morton, a professor of economics at the Yale School of Management, stated in FCC testimony:

“For 3 years, New Charter will not charge consumers additional fees to use specific third-party Internet applications, or engage in zero-rating (discriminatory exemptions from a data cap).

These binding commitments provide further assurance beyond the economic reasoning I describe below — assurance that New Charter will not engage in these types of conduct: charging higher interconnection fees, using discriminatory data plans, or reducing the quality of OVD signals. (Note that Charter already does not have data caps for its residential broadband customers. Notwithstanding the dramatic but welcome rise in data usage by broadband customers, Charter has not had an active data cap since January 2012.)”[39]

But this statement is simply incorrect. As of November 2013 Charter had data caps ranging from 100-500GB.[40] Customers in some areas were called by Charter for exceeding their usage allowance,[41] and usage rationing remained in Charter’s Acceptable Use Policy until late 2014,[42] not January 2012 as Dr. Scott Morton claims. In fact, as of 21 November 2015, Charter’s AUP still allows it to define “excessive use of bandwidth” however it sees fit, and take any action that Charter in its sole opinion it deems reasonable.[43] Dr. Scott Morton does not believe Charter has any interest in imposing data caps on customers, despite the fact Charter quietly shelved existing caps on Oct. 1, 2014, just several months before unveiling its bid for both Time Warner and Bright House, neither of which have capped customer usage.[44]

The FCC is rightly concerned about this discrepancy, and has requested that Charter detail when it adopted bandwidth usage caps, when it dropped them, and why.[45] The CPUC would be right to be concerned as well.

Charter has a history of misleading customers and regulators.

For example, Charter advertises Spectrum TV Stream service at $12.99/mo, when most users will actually pay at least $20/mo, some more.[46] While some “padding” via fees is unfortunately normal, this is upwards of a 50% differential. Note that this is in direct contradiction to Mr. Fisher’s opening statement to the CPUC, in which he claims that Charter “does not separately charge users incremental fees that other providers in the industry commonly add on to the advertised price… As a result, consumers have a clearer understanding of… the price that they will see on their bill.”[47]

Another example: The FCC is concerned about 26% owner John Malone’s involvement with this merger, as he has engaged in anticompetitive behaviour in the past.[48] Malone, whom Senator Al Gore once referred to as “The Darth Vader of telecom,”[49] is currently best known as the owner of SiriusXM satellite radio. The two satellite companies merged in 2008 with a mitigation condition forbidding any rate hikes for three years.[50] Upon the expiration of that condition, SiriusXM promised investors an immediate price hike.[51] Based on past history, there’s no reason to believe that any mitigation conditions the CPUC imposes on this transaction won’t be discarded immediately upon expiration.

And a third example: on 20 January 2016 Charter released the results of a survey that it sponsored itself. Charter claims that the results show public support for the merger. However, the statements Charter used in the poll pertaining to data caps were extremely misleading. Respondents were told by the pollster that  “Charter has said that it will not impose data limits on customers after the merger.”[52] However, there was no mention of the incredibly brief 3 year time limit on this commitment, nor the fact that Time Warner has promised for years to never impose data limits on customers. It is definitely misleading, possibly deceitful, for Charter to use responses to this deceptive statement as “proof” of public support for this transaction.

A fourth example: Dr. Scott Morton’s November 2 statement is less than forthcoming in many regards. On Page 10 (Section 27) Dr. Scott Morton completely omits a fourth characteristic of a valuable MVPD partner: the commitment to refrain from implementing DC/UBP. Implementation of DC/UBP would artificially increase the cost of the OVD’s product to the consumer, thus decreasing demand for that service. This increased cost over which the OVD has no control is in effect a barrier to market entry, and therefore a disincentive to innovation and reduction of competition.

It’s also telling that Dr. Scott Morton’s conclusion in Part 49 is that Charter’s “technology” promotes entry of OVDs. Conspicuously absent is the statement that Charter’s “policies” promote entry of OVDs. Even more conspicuous is that as noted in Part 128, Charter promises a mere three years of refraining from disadvantaging OVDs. What Charter is promising is both flimsy and transparent: “You have nothing to worry about, but only hold us to it for three years.”

Still further, in Part 130, Dr. Scott Morton notes Netflix’s statement that “Charter’s new peering policy is a welcome and significant departure from the efforts of some ISPs to collect excess tolls to the Internet.” However, the CPUC must guard against New Charter shifting these “excess tolls” directly onto subscribers as the GAO report referenced earlier warned. DC/UBP would be a prime means for New Charter to do just that.

A fifth example: the opening testimony of Charter’s Mr. Falk is likewise misleading on a number of points. Mr. Falk claims that the merger will come with “no countervailing harms,”[53] however, according to his own statement, there are clearly price increases coming for many TWC customers.[54] Mr. Falk testifies about Charter’s “customer friendly billing practices,” but in reality those practices are not friendly to consumers at all.[55] Mr. Falk then goes on to make a claim that is flatly contradicted by his own expert’s testimony to the FCC,[56] makes misleading statements about the significance of wireline competition,[57] and a statement that is materially false regarding pricing of Charter’s base internet speed tier.[58]

Charter has flatly failed to comply with multiple Commission rulings.

Charter has refused to comply with certain requirements of DIVCA even though the company submitted an affidavit to the Commission swearing to do so.[59] More recently, Charter ignored the January 20 ALJ ruling of A.15-07-009, which required that “Charter and TWCIS shall provide notice to their respective customers not less than 5, nor more than 30 days, prior to” the

Los Angeles Public Participation Hearing scheduled for January 26.[60]  As of the morning of January 25, I had received no such notice either by email or postal mail, even though I hold not one but two California-based TWC accounts. Note that I did check my SPAM folder, and no notices had been diverted there.

The point being… both consumers and the CPUC should be extremely suspect of anything Charter says regarding the benefits of this merger, including their reasoning that DC/UBP is something that they have no interest in instituting. Mitigations should be designed to protect consumers against a potentially hostile and untrustworthy monopolistic player, particularly around an issue as nuanced and complex as usage based pricing.

Charter’s Opening Testimony Supports this Proposed Condition

New Charter should not object to this proposed mitigation condition, since it is substantially supported by Dr. Scott Morton’s November 2 statement, as well as the opening testimony from Mr. Fisher, the Senior VP of Corporate Finance at Charter, and Mr. Falk, Charter’s Senior VP for State Government Affairs.

In her November 2 testimony, Part 132, Dr. Scott Morton discusses New Charter’s open internet commitments. While not addressing DC/UBP directly, in her discussion of other conditions addressing issues such as paid prioritization, zero rating, throttling, etc, Dr. Scott Morton states that the fact these conditions have a finite life should not be cause for concern. She explains that in three years’ time market conditions would be such that “a strategy of foreclosure or otherwise trying to impede OVDs would be even more unprofitable for New Charter.”

Dr. Scott Morton then suggests that should New Charter decide to engage in anticompetitive behaviour in three years’ time, consumers could simply switch to an alternate broadband provider. However, as Dr. Scott Morton goes on to point out, there is currently a lack of competing broadband providers in most of New Charter’s proposed footprint. Other experts have also testified that the US market for fixed broadband is not effectively competitive, and this situation will persist for the foreseeable future.[61] This is true for New Charter’s proposed footprint in California as well.[62]

“Currently AT&T/Verizon have usage allotments that make it economically unattractive to use wireless as an in-home broadband service,” Dr. Scott Morton explains. “T-Mobile and Sprint do offer “unlimited” plans, however, they… de-prioritize traffic above usage thresholds…”[63] So even by her own testimony, wireless providers do not count as potential broadband competition for New Charter.

Dr. Scott Morton goes on to examine what little wireline broadband competition does exist, but as the CPUC is well aware, the companies she cites are not available in most of New Charter’s proposed footprint.

In summary, Dr. Scott Morton testifies that in three years time there will be adequate broadband competition present to prevent New Charter from behaving in an anti-competitive manner. If she is correct, then this proposed mitigation condition will sunset based on the existence of that very competition. If she is incorrect about the amount of time it takes for that competitive marketplace to form, then this mitigation will simply continue to protect consumers until the competition Dr. Scott Morton discussed does actually come into existence.

The mitigation condition being proposed here simply ensures that New Charter only has the ability to behave in an anticompetitive way when the “competing broadband provider[s]” Dr. Scott references are actually in existence. It’s designed in a way to be fair to both consumers, and New Charter.

Why Competition Must Be the Only Trigger for Sunsetting this Condition

The 2014 GAO report examined four mobile providers that impose DC/UBP. ALL OF THEM have increased the variety of plans offered, but even more significantly, ALL OF THEM have increased the amount of their monthly data allowances. That’s not true of the fixed internet providers studied. Some of those providers have introduced higher priced, higher speed plans that also come with increased allowances, but NONE of them have increased the data allowances without an accompanying price increase.[64]

The obvious difference between the wireless and wireline providers’ circumstances is the presence of competition in the mobile sphere, and the lack of competition in the wireline sphere. The GAO report affirms this analysis.[65] The report goes on to explain that without adequate competition (and much evidence proves that duopoly markets do not constitute effective competition[66]), wireline customers have fewer plan choices. Only two of the wireline providers examined even offered discounted UBP plans. The two that did offer discounted plans offered discounts far inferiour to the discounts offered by the more competitive wireless market.[67]

For further evidence, consider the example of Comcast’s usage-based pricing “trial.” Comcast’s DC/UBP policies have resulted in a deluge of FCC complaints, potentially upwards of 11,000.[68] Comcast customers report gross inaccuracies in the company’s data meter, resulting in erroneous overage charges.[69] Customers are also reporting that once they pay Comcast’s $35 add-on for truly unlimited service, speeds for services that compete with Comcast (such as Netflix and Hulu) actually DROP.[70] The company then uses these speed issues to attempt to force customers into renting a modem from Comcast. When pressed hard enough by customers with technical knowledge of modems and routers, however, Comcast reps finally do resolve the speed issues remotely.[71]

The logical action for these customers would be to leave Comcast for a different provider; however, for the vast majority of them there is no other provider available. While admittedly Comcast is a different company from Charter, this example underscores the absolute necessity to sunset mitigation conditions only when actual wireline competition exists in the market…  NOT after an arbitrary number of years. As Commissioner Florio’s Alternate Proposed decision stated:

“We find that conditions that only temporarily or incompletely mitigate identified harms to the public interest are not sufficient to offset those harms. Such conditions also do not ‘preserve the jurisdiction of the commission,’ as required by § 854(c)(7).[72]

Summary on DC/UBP

In the Comcast proceeding, the Proposed Decision offered a condition (specifically #17) which would have restricted Comcast from implementing either data caps or mandatory usage based pricing (DC/UBP) for a period of five years. However, as Commissioner Florio’s Alternate Proposed Decision noted, that condition would have been insufficient to effectively mitigate the underlying potential harm due to the condition’s temporary nature.

Many mitigation conditions in the Comcast PD had no sunset clauses at all, such as Conditions 11 and 12 expanding the Internet Essentials program. Just as a sunset for the expansion of IE would have been unreasonable, so the sunset clause for the prohibition on DC/UBP was inadequate. Additionally, it would have run afoul of the Commission’s mandate under § 854(c)(7).

The behaviour of companies in this industry in general, and Charter’s past behaviour specifically, makes it clear that the CPUC should not take a risk on Charter’s less-than-compelling offer of a mere three year delay of the institution of data caps and usage-based pricing.

Beyond this particular issue, we believe that there is overwhelming evidence that this merger clearly would not be in the best interest of Californians, and that the CPUC should deny the transfer of licenses. However, should the CPUC for some reason allow the transfer to take place, we’d strongly request that the CPUC tailor the mitigation condition concerning data caps and usage-based pricing as this paper has suggested. Only a mitigation condition designed in this way would truly protect Californians, yet also be fair to New Charter by allowing the condition to sunset when the competition that Charter’s experts have testified is so important actually comes into existence.

Part 2 — Additional Reasons This Transaction is Not in the Public Interest

Time Warner Cable’s Superior Recent Upgrade Performance

The most important question before the Commission is which cable operator is better positioned to deliver the services customers in this state want and need. We argue that that operator is Time Warner Cable, not Charter Communications.

Since the termination of the Comcast-Time Warner Cable merger, Time Warner Cable has responsibly invested in their infrastructure without assuming an irresponsible amount of debt. Time Warner Cable CEO Robert Marcus reported significant progress in their first quarter 2015 report to shareholders and customers, despite the distraction of the Comcast merger[73]:

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

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

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

Since that report, Time Warner Cable has announced new Maxx service upgrade areas – Greensboro and Wilmington, N.C. At least 45 percent of Time Warner Cable’s national footprint was serviced with Maxx upgrades by the end of 2015, and Marcus has indicated additional cities will receive upgrades in 2016.[74]

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

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

At the rate Time Warner Cable has been rolling out Maxx upgrades, which were first announced on 30 January 2014[76], with 45% of its service area upgraded within 23 months, it is likely the company would complete its Maxx upgrade to all of its service areas within the next 24-30 months. Note that in Los Angeles these speed increases came with no corresponding price increase. In evaluating this transaction in New York, the NYDPS staff noted, “there is no indication that Petitioner’s plan for converting to all-digital in New York is any different from Time Warner’s existing plan.” The CPUC should examine this issue as well.

Charter, on the other hand, is saddled with debt servicing costs and more expensive credit, both of which are deterrents to investment and are likely to limit the scope of Charter’s ongoing system upgrades and maintenance, not to mention also placing upward pressure on the prices New Charter will charge consumers. Charter is a much smaller cable operator than Time Warner Cable, and is itself still in the process of repairing and upgrading its own cable systems and those it acquired in earlier acquisition deals. Time Warner Cable, in contrast, is in a much stronger financial position to carry out its commitments associated with the Maxx upgrade program.

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

Charter Communications’ Network Upgrade Proposal Is Not a Good Deal for California

Time Warner Cable Maxx offers 50/5 Mbps speeds under its most popular Standard plan. In contrast, Charter proposes to offer 60/5Mbps service under its most-popular Spectrum plan for a markedly higher price. The extra expense over the TWC 50Mbps plan does not justify a mere 10Mbps speed increase. (Currently in Los Angeles, TWC offers 200Mbps for $65/mo… roughly the same price as Charter’s 60/5 plan. TWC’s plan is over three times as fast as Charter’s for nearly the same amount). But perhaps more concerning, this 10Mbps increase comes at a high cost to customers looking for more budget-priced service than those seeking faster speeds.

Charter has no plans to continue Time Warner Cable’s $14.99 Everyday Low Price Internet service – a very important offer for low income residents and senior citizens who are unable to afford the nearly $60 regular price Charter charges for their 60Mbps tier, or those who have no interest in streaming media.

Time Warner Cable offers its $14.99 tier without preconditions, restricted qualifiers, contracts, or limits on what types of services can be bundled with it. Any consumer qualifies for the service and can bundle it with Time Warner Cable telephone service for an additional $10 a month, which offers a nationwide local calling area, as well as free calls to the European Union, Mexico, Puerto Rico, and several Asian nations.

The loss of a $25 plan that includes basic Internet access and a bundled, 911-capable telephone line would be devastating to low-income Californians and senior citizens. During the Comcast-Time Warner Cable hearings, no topic elicited as much interest as Internet affordability. Time Warner Cable clearly offers a larger, superior product line for less money at ALL speed levels in California. Charter would bring Californians fewer options at more expensive prices.

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

Stop the Cap! investigated Bright House Networks’ existing offer in a report to our readers[77] in June 2015, and we urge the Commission to look much more closely at the specific conditions Bright House customers have had to endure to qualify to subscribe:

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

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

3) If you have an overdue bill older than 12 months, you aren’t eligible until you pay it in full.

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

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

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

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

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

The interest in meeting the needs of low-income customers would be laudable if not for the insistence that otherwise-qualified existing customers cannot downgrade their regular price broadband plan to Connect2Compete unless they voluntarily go without Internet service for three months.

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

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

Charter’s broadband offers for lower-income Californians are simply not adequate.

Charter Communications’ Cable Pricing Is More Expensive and Less Flexible than Time Warner Cable’s Pricing

Charter’s commitment to improve cable television does not offer any significant benefit to cable TV subscribers. Both Time Warner Cable and Charter propose to move to all-digital cable television to free up bandwidth to offer improved broadband.

While consumers clamor for smaller, less-costly cable television packages, Charter Communications’ CEO Thomas Rutledge is credited for inventing the “triple play” concept of convincing customers to package more services – broadband, television and telephone — together in return for a discount. Reuters cited his penchant for “simplified pricing,”[78] which is why Charter offers most customers only two options for broadband service and one giant television package dubbed Spectrum TV containing more than 200 channels.[79]

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

With approximately 99 percent of customers renting their set-top box directly from their pay-tv provider, the set-top box rental market may be worth more than $19.5 billion per year, with the average American household spending more than $231 per year on set-top box rental fees. These are some of the findings from Senators Edward J. Markey (D-Mass.) and Richard Blumenthal’s (D-Conn.) query of the top-ten pay-tv multichannel video programming distributors (MVPDs).[80]

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

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

Charter proposes to introduce a new generation of set top boxes but as far as we know, has not disclosed the monthly cost of these IP-capable boxes to subscribers. We anticipate they will cost more than the current equipment provided by Time Warner Cable, which has also been increasing the cost of its set top box rentals. However, Time Warner allows customers to effectively purchase their set top boxes in the form of the Roku device, giving consumers the ability to completely eliminate the set top box rental fee is they so wish.[81]

Other Points the Commission Should Consider in Reviewing This Transaction

  • California must receive ‘most favored state’ status, meaning that whatever conditions other state commissions get from Charter must automatically apply to all Californians as well.
  • The Commission must insist that rural California is treated equally to the Los Angeles market. If this transaction is approved, Charter must be compelled to commit to continue Time Warner Cable’s Maxx upgrade initiative across all of its service areas in California, to be completed within 30 months. Nothing less than that should be acceptable to the Commission. We agree with the New York DPS staff’s recommendation that Charter also be compelled to upgrade facilities to support gigabit broadband, and that should apply to California as well.This upgrade does not pose a significant challenge to any cable operator. With the upcoming introduction of DOCSIS 3.1 technology, cable operators even smaller than Charter will support 1Gbps broadband speeds as they drop analog television signals. Suddenlink[82], MidContinent[83], Cox[84], and Mediacom[85] already have gigabit deployment plans in the works. If Fargo, N.D. is getting gigabit broadband from MidContinent Communications in the near future, Charter should have no problem offering similar service to customers in the likes of Carlsbad, Hesperia, Jurupa Valley, and beyond.
  • The Commission must establish and enforce meaningful enforcement mechanisms should Charter fail to achieve its commitments as part of this transaction. Cable consolidation has never significantly benefited consumers. Charter is not guaranteeing Time Warner Cable customers will receive a lower bill as a result of this merger. Nor is it committing to pass along the lower prices it will achieve through negotiations for video programming volume discounts. Cable rates, especially for broadband, will continue to increase. Without meaningful competition, there is no incentive to give consumers a better deal or better service.

Again, we feel Commissioner Florio’s Alternate PD in the Comcast matter applies equally well here and that the application should be denied. If the Commission feels it must approve this transaction, however, the conditions that accompany it to achieve a true public interest benefit must be meaningful and ongoing. Any failure of New Charter to deliver on those commitments must include a direct benefit to customers, not just to the state government. If fines are imposed, customers should receive a cash rebate or equivalent service credit.
Conclusion

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

As the Commission must realize, this transaction does not involve just entertainment. Several months ago the Obama Administration declared broadband Internet access a “core utility:”[86]

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

Our group strongly believes that California should not take a risk on Charter’s less-than-compelling offer when Time Warner Cable has demonstrated it is in a better financial position and has a proven track record of delivering on its commitments to improve service with its Maxx upgrade project. Time Warner Cable has superior options for low-income Californians, offers more broadband options and faster speeds, and has committed to providing unlimited Internet access – a critical prerequisite for consumers choosing to drop cable television’s one-size-fits-all bloated video packages.

[1] Comcast XFinity website: http://goo.gl/OlWFu3

[2] For instance: “Internet traffic is growing fast — but capacity is keeping pace” Telegeography. 3 September 2008. https://goo.gl/OFBPHX; and Bode, Karl. “The ‘Bandwidth Hog’ is a Myth” DLSreports. 30 November 2011. https://goo.gl/lv6jE5

[3] DSLreports.com (https://goo.gl/0sZasc)

[4] Brodkin, Jon. “Comcast VP: 300GB data cap is ‘business policy’ not ‘technical necessity’ Ars Technica.  14 August 2015. http://goo.gl/1lAFwJ

[5] Morran, Chris. “Leaked Comcast Doc Admits: Data Caps Have Nothing To Do With Congestion” Consumerist. 6 November 2015. http://goo.gl/Uq9o5c

[6] TWC 2014 Q3 Earnings Call. http://goo.gl/Oz9hnL

[7] U.S. Government Accountability Office. “FCC Should Track the Application of Fixed Internet Usage-Based Pricing and Help Improve Consumer Education. November 2014. http://www.gao.gov/products/GAO-15-108

[8] Reply Testimony of Lee L. Selwyn. 15 January 2016. Pages 75-77.

[9] Brodkin, Jon.  “Sling CEO: Comcast data caps so low they hurt competing video providers” Ars Technica. 7 December 2015. http://goo.gl/w98cqJ

[10] Pew Research Center “Home Broadband 2015” report. Page 19, as cited in NHMC reply testimony.

[11] Brodkin, Jon. “Watch out for data caps: Video hungry cord-cutters use 328GB a month” Ars Technica. 14 May 2014.  http://goo.gl/0O8vtR

[12] Arbel, Tali. “How Comcast wants to meter the internet” Associated Press. 27 October 2015. http://goo.gl/tnc66p

[13] Horn, Leslie. “You can burn through your entire broadband data cap in one long weekend” Gizmodo. 18 February 2014. http://goo.gl/Z0yQfY; and also Reply Testimony of Lee L. Selwyn, 15 January 2016, page 114.

[14] Frankel, Daniel. “Survey: 56% of pay-tv customers would ditch ESPN in order to save $8 every month.” FierceCable. 13 Jan 2016. http://goo.gl/CQRCpp

[15] Heisler, Yoni. “How much money does cutting the cord really save?” BGR.  12 November 2015. https://goo.gl/tmiQL2; also Jones, Stacy. “Cost of cable TV vs internet streaming” Bankrate. 24 November 2014. http://goo.gl/tGJqK5

[16] Brodkin, Jon. “Comcast launches streaming TV service that doesn’t count against data caps” Ars Technica. 19 November 2015. http://goo.gl/ITJusN

[17] Finley, Klint. “Comcast may have found a major net neutrality loophole” Wired. 20 November 2015. http://goo.gl/zyFJku

[18] 2 November 2015 Statement of Dr. Scott Morton, Parts 132-133, pages 48-49.

[19] Brodkin, Jon. “House Republicans urge court to throw out net neutrality rules” Ars Technica.

11 November 2015. http://goo.gl/TBV56e

[20] Fung, Brian. “Republicans are trying to defund net neutrality. Will it work?” Washington Post. 24 July 2015.  https://goo.gl/Shk99e

[21] Ravenscraft, Eric. “Sponsored Data Is The Newest, Biggest Threat to Net Neutrality” Lifehacker. 20 January 2016. http://goo.gl/SXtl9C

[22] GAO “Report to the Ranking Member, Subcommittee on Communications and Technology, Committee on Energy and Commerce, House of Representatives” (GAO-15-108) page 26. http://www.gao.gov/assets/670/667164.pdf

[23] Dampier, Phillip. “Wall Street: Usage Caps Are an Important Weapon in Fight Over Cord-Cutting.” Stop the Cap!  18 January 2016. http://goo.gl/FKhsFO

[24] GAO “Report to the Ranking Member, Subcommittee on Communications and Technology, Committee on Energy and Commerce, House of Representatives” (GAO-15-108) page 26.

[25] CPUC A.14-04-013, A14-06-012 Alternate Proposed Decision, pages 71-72.

[26] Marshini Chetty, Richard Banks, A.J. Bernheim Brush, Jonathan Donner, and Rebecca E. Grinter. “‘You’re Capped!’ Understanding the Effects of Bandwidth Caps on Broadband Use in the Home.” ACM Conference on Human Factors in Computing Systems. May 2012.

[27] Haynie, Devon. “Why Online Education May Drive Down the Cost of Your Degree” US News and World Report.  3 June 2014.  http://goo.gl/HSH1Pp

[28] Kehl, Danielle and Lucey, Patrick. “Artificial Scarcity: How Data Caps Harm Consumers and Innovation”  Open Technology Institute. 30 June 2015. https://goo.gl/zt5Jj9

[29] Yao, Deborah. “Time Warner Cable shelves some Internet cap plans” ABC News. 18 April 2009.  http://goo.gl/YynOiM

[30] Simmermon, Jeff. “Launching An Optional Usage-Based Broadband Pricing Plan In Southern Texas” TWC “Untangled” Blog. 27 February 2012.  http://goo.gl/PoS5nR

[31] Dampier, Phillip. “Time Warner Cable Recommits: No Mandatory Usage Caps As Long As Company Remains Independent” Stop the Cap! 30 October 2014.  http://goo.gl/6vxXNx

[32] Dampier, Phillip. “Time Warner Cable Admits Usage-Based Pricing is a Big Failure; Only Thousands Enrolled” Stop the Cap! 13 March 2014. http://goo.gl/lCqp4k

[33] Q2 2015 Time Warner Cable Results-Earnings Call. 30 June 2015. http://goo.gl/JINiwn

[34] Q3 2015 Time Warner Cable Earnings Call. 29 October 2015. https://goo.gl/piDDDc

[35] Media Alliance Reply Testimony to Joint Applicants Opening Testimony, pages 2-3. 15 January 2015.

[36] “Redacted Comments of the New York State Department of Public Service Staff” September 16, 2015. Page 39. http://goo.gl/C1Xpph

[37] Opening Testimony of Charles Fisher, page 6.

[38] Id at 7-8.

[39] “Statement of Dr. Fiona Scott Morton re the Merger of Charter, TWC, and BHN” 2 November 2015. Page 48. http://goo.gl/eEtY5Z

[40] Higginbotham, Stacey. “Want to know if your ISP is capping data? Check our updated chart.” GigaOm. 15 November 2013. https://goo.gl/owGq96

[41] DSL Reports: https://goo.gl/1RXjgm

[42] DSL Reports: https://goo.gl/aoFvuT

[43] “Charter Residential Internet Acceptable Use Policy.” https://goo.gl/8ICMe1

[44] Testimony of Laura Blum Smith, 15 January 2016. Page 14.

[45] Eggerton, John. “FCC Seeks Data Dump from Charter, TWC, Brighthouse” Multichannel News. 23 September 2015.  http://goo.gl/nJEazB

[46] Dampier, Phillip. “Charter and Time Warner Cable Try Internet-Only TV Service to Combat Cord-Cutting, Cord-Nevers” Stop the Cap! 26 October 2015.  http://goo.gl/doimuR

[47] Opening Testimony of Charles Fisher, page 4.

[48] Shields, Todd. “Cable Magnate Malone’s Stakes Scrutinized in Charter-TWC Deal” Bloomberg News. 9 November 2015. http://goo.gl/s6VTMw

[49] Kang, Cecilia and Fung, Brian. “The Darth Vader of Telecom is Back” Washington Post. 26 May 2016.  https://goo.gl/qWS480

[50] Lasar, Matthew. “Sirius/XM merger approved with new conditions” Ars Technica. 28 July 2008. http://goo.gl/LO4aaQ

[51] Lieberman, David. “Sirius XM CEO Mel Karmazin Vows Big Vows Big Consumer Price Hike (If the FCC Allows It)” Deadline Hollywood. 3 May 2011.  https://goo.gl/tTYZE3

[52] Cox, Kate. “Poll Sponsored By Charter Says Charter Is Great, More Charter is Greater” Consumerist. 20 January 2016. http://goo.gl/Xp0wsJ

[53] Opening Testimony of Adam Falk, page 2.

[54] Charter currently charges just under $65/mo for its 60Mbps tier of standalone internet with wireless gateway (outside of promotions). In Los Angeles, though, Time Warner Cable offers for that exact same amount 200Mbps also with a wireless gateway. Time Warner provides over three times the speed Charter does for the same price. That certainly is a countervailing harm to consumers.

[55] Unlike Time Warner, Charter bakes its modem fee into the internet plan. So every single customer is paying that modem fee… even if they own their own modem (like many Time Warner customers do). Not only is that not a “customer friendly billing practice,” but it’s another countervailing harm as well. Later on page 18 of his opening statement, Mr. Falk says “New Charter will bring base speed tiers from 15 Mbps to Charter’s current standard of 60 Mbps at uniform pricing within a year of closing.” Those unfortunate consumers get to take a double hit: not only will Charter be increasing the price of the comparable tier, but they will be taking away even the option to have a cheaper tier should the customer want it. It’s a massive price hike with fewer options available. That certainly doesn’t sound like the “customer friendly billing practices” Mr. Falk is touting, nor does it make his claim that consumers will face no harms from this merger ring particularly true.

[56] On page 3 of his opening statement, Mr. Falk claims that New Charter will face “other forms of competition (e.g., wireless providers).” But as described above, Dr. Scott Morton admits that wireless providers are actually NOT competition for New Charter’s internet offerings.

[57] Also on page 3, Mr. Falk states that “New Charter will face significant competition from wireline competitors (e.g., AT&T and Frontier).” But in reality, the areas where AT&T and/or Frontier (or even Verizon) actually overlap New Charter territory is extremely limited. And at any rate, this proposed mitigation condition would sunset where that overlap is present.

[58] Mr. Falk’s states: “Charter offers its base 60 Mbps service at lower prices than other providers for comparable service, without modem fees…” This simply isn’t true. Currently, Time Warner offers a 50 Mbps off contract for $45/mo. That’s comparable and significantly less expensive than Charter. TWC also offers 100Mbps at $55/mo… still less than Charter’s price for the slower 60Mbps. Mr. Falk’s statement is simply false.

[59] Testimony of Marc Puckett on behalf of Intervenor Town of Apple Valley, page 2. 15 January 2015.

[60] CPUC ALJ Ruling A.15-07-009 page 2.

[61] Testimony of Martyn Roetter on behalf of the County of Monterey. 15 January 2015. Page 1.

[62] Reply Testimony of Lee L. Selwyn. 15 January 2016. Page 116.

[63] Statement of Dr. Scott Morton. 2 November 2015. Page 51, footnote 187.

[64] USGAO. “Report to the Ranking Member, Subcommittee on Communications and Technology, Committee on Energy and Commerce, House of Representatives” (GAO-15-108). November 2014. Page 11. http://www.gao.gov/assets/670/667164.pdf

[65] Id. at 23.

[66] Reply Testimony of Lee L. Selwyn. 15 January 2016. Page 132.

[67] Id pages 24-25.

[68] Brodkin, Jon. “Complaint Factory: Angry Internet subscribers tee off against Comcast, Verizon, AT&T.” Ars Technica. 29 December 2015.  http://goo.gl/484NYO

[69] Dampier, Phillip. “Comcast Customers Buy $35 Usage Cap Insurance, Report ‘Unlimited’ is Slower Than Ever.” Stop the Cap! 28 December 2015.  http://goo.gl/SMfsOg

[70] Id.

[71] Id.

[72] CPUC A.14-04-013, A14-06-012 Alternate Proposed Decision, page 77.

[73] TWC Untangled Blog. 30 April 2015. http://goo.gl/6gp3er

[74] TWC Untangled Blog. 14 July 2015. http://goo.gl/eWZEGl

[75] TWC Q4 2014 Earnings Call Transcript on Seeking Alpha. http://goo.gl/c8QZtR

[76] TWC Untangled Blog. 14 July 2015. http://goo.gl/jafclZ

[77] Dampier, Phillip. “Bright House’s Mysterious Internet Discount Program Charter Wants to Adopt Nationwide” 25 June 2015. http://goo.gl/DVlwpF

[78] Baker, Liana. “Analysis: Charter’s bid for Time Warner Cable hinges on Rutledge’s skill. Reuters. http://goo.gl/QndjSd

[79] Charter Channel Lineup. https://www.charter.com/browse/content/tv#/channel-lineup

[80] Senator Ed Markey Press Release. 30 July 2015. http://goo.gl/PNy2b0

[81] Mlot, Stephanie. “Replace your Time Warner Cable Box with a Roku” PC Magazine. 10 November 2015. http://goo.gl/GkSbu7

[82] Baumgartner, Jeff. “Suddenlink Boots Up 1-Gig Broadband” Multichannel News. 9 July 2015. http://goo.gl/U2SK4X

[83] Midco Press Release. 17 November 2014. https://goo.gl/pKmChH

[84] Baumgartner, Jeff. “Cox Plots DOCSIS 3.1 Plans” Multichannel News. 22 September 2015. http://goo.gl/LDIFsR

[85] Baumgartner, Jeff. “Mediacom Sets Residential 1-Gig Rollout” Multichannel News. 9 September 2015. http://goo.gl/MGFQ02

[86] Trujillo, Mario. “Obama administration declares broadband ‘core utility’ in report” The Hill. 21 September 2015. http://goo.gl/5vazOL

Germany Getting 400/20Mbps Unlimited Cable Broadband Starting at $40/Month

Phillip Dampier January 27, 2016 Broadband Speed, Competition, Consumer News, Liberty/UPC No Comments

unitymediaWhile Comcast, Cox, Suddenlink, and a handful of other cable companies play games with usage caps and expensive broadband, Germany is getting some massive broadband speed improvements with no data caps, speed throttling, or rate increases.

Unitymedia, owned by Liberty Global (related to Liberty Broadband, Charter’s largest single investor), is giving Germans a broadband upgrade you wish you had. Starting Feb. 1, 3.2 million cable homes in the state of North Rhine-Westphalia  will see their broadband speeds double to 400/20Mbps at prices starting at just $40 a month, which includes a flat-rate landline with unlimited free calls across the German landline network, and a free combination wireless/Wi-Fi router and cable modem.

200 germany

Unitymedia’s current offer is for 200/10Mbps. Starting Feb. 1, those speeds will double.

Unitymedia, which also serves customers in the German states of Hesse and Baden-Württemberg, will still be using DOCSIS 3.0 technology for the speed upgrade. DOCSIS 3.1 is expected to bring even faster speeds and better service beginning later in 2016. The company also offers subscribers access to more than 1,000 public Wi-Fi hotspots across all three states, helping give DSL service serious competition.

While U.S. cable operators have dragged their feet on upgrades while raising broadband prices, Unitymedia CEO Lutz Schüler said his company would make the necessary investments to drive network upgrades forward without delay. Schüler may not have much choice. Telephone company Internet providers have benefited from increased speeds of up to 100Mbps that come from deployment of vectoring technology, which can dramatically boost DSL speeds.

The investment also intends to send a message to the telecommunications marketplace that hybrid fiber-coaxial cable systems can deliver dramatically faster and affordable broadband speeds than they often do today, all without usage caps or usage billing.

Wall Street: Usage Caps Are an Important Weapon in Fight Over Cord-Cutting

charter v dishA behind the scenes struggle between DISH Networks and Charter Communications over DISH’s online video service Sling TV has led to an admission by a Wall Street analyst that “usage-based billing” is an important tool for stifling over-the-top online video competition.

On Dec. 21, DISH’s legal team sent a letter to the FCC complaining about Charter’s attempts to “address” the competitive threat of Sling TV, DISH’s online video alternative to cable television.

“Charter’s laser-like focus on Sling TV shows that it views Sling TV as a serious competitive threat rather than a benign interest,” wrote DISH’s attorneys. “Charter is focused on protecting its video subscriber base rather than enhancing the broadband Internet experience for its subscribers. Charter’s documents further reveal thinly veiled complaints to programmers about making their programming available to Sling TV and other [online video] products.”

In the highly redacted filing, Dish suggested Charter was making thinly veiled threats to Disney and Scripps Networks over their willingness to allow their content to be included on Sling TV. DISH has complained to the FCC the cable company was attempting to undermine the new competitor.

A sample from DISH lawyer's highly-redacted submission to the FCC shows much of this fight is occurring out of public view.

A sample from DISH lawyer’s highly redacted submission to the FCC shows much of this fight is occurring out of public view.

On Thursday, the FCC also received an ex parte filing alerting the public that Time Warner (Entertainment) and HBO executives privately met with FCC staff last week, at their invitation, telling them Charter was likely threatening other programmers with unspecified action if they continued to allow their programming to appear on Sling TV.

In that meeting, HBO executives suggested “New Charter” — the combination of Charter Cable, Time Warner Cable, and Bright House Networks — “would be inclined to take action directed at programmers” if services like Sling TV continued to grow. Those threats seem to have been confirmed by Charter CEO Thomas Rutledge, who warned the company would take ‘competitive action’ against programmers selling content to the competition.

In the past, several cable executives have hinted that allowing wider distribution of cable networks over competitors’ networks or direct-to-consumer would dilute the value of those networks to cable operators. That would likely lead to demands for reduced prices when cable networks sought contract renewal. Some cable companies might also drop those networks altogether, arguing customers can get them elsewhere. Either retaliatory move would cut viewer numbers, which in turn would force networks to charge less for advertising.

That the FCC would invite further discussions on the issue of online video competition has some on Wall Street concerned about the prospects of Charter winning approval to buy Time Warner Cable and Bright House.

On Friday, BTIG analyst Richard Greenfield wrote investors, wondering if “we should be less confident in deal approval than we currently are.” With both the Justice Department and the Obama Administration pushing hard for competitive online alternatives to cable television, the FCC may be worried allowing New Charter to have 25-30 percent of the broadband market. With broadband a prerequisite for signing up for services like Sling TV, Rutledge’s “competitive action” could dissuade consumers from choosing online video instead of cable television.

New Street Research analyst Jonathan Chaplin admitted one of Charter’s strongest potential weapons against online video competitors is usage-based Internet billing. That Charter has committed to avoiding usage pricing for the next three years would seem to delay any attempt by Charter to deploy usage caps and usage pricing to stop online competition.

But three years may also not be long to wait, especially if the current “cap-free” commitment helps win merger approval. Chaplin believes Charter’s current commitment to not impose usage caps weakens DISH’s argument, but it could be the subject of special conditions from regulators if the deal is ultimately approved.

The topic appears to be sensitive enough to have provoked Charter to push back hard against DISH and Time Warner (Entertainment) in a blog post published last Friday afternoon.

We are happy to report that the vast majority of stakeholders are pleased with the merger and excited about New Charter.  It’s no surprise, though, that there are some who seek to use the regulatory review process to extract concessions or conditions that further their business goals.  Following the well-worn play book, to achieve that goal, they must first try to discredit the merger, but their allegations are often not based on the facts. For example, charges by Dish and Time Warner’s HBO that New Charter will harm Online Video Distributors simply do not make sense. As we have demonstrated, there is no more OVD-friendly provider than Charter, with our slowest speed at 60Mbps, no data caps, no usage-based billing, no annual contracts and no modem fees. Additionally, we’ve committed that New Charter will offering settlement-free peering to Internet companies, which means we will continue to invest in interconnection to avoid congestion. Netflix CEO Reed Hastings, a supporter of the transaction, stated “the key thing about the Charter deal is it’s all Internet companies that benefit — us, Hulu, Amazon, HBO Now — so that we can all compete for consumers’ affection.”

N.Y. Approves Charter-Time Warner Merger; Stop the Cap!’s Impact on Deal Conditions

charter twc bhConditions recommended by Stop the Cap! to protect New York consumers after a merger of Charter Communications and Time Warner Cable are expected to cost the two cable companies almost one billion dollars and will guarantee statewide adoption of Time Warner Cable’s Maxx upgrade, guaranteeing all customers receive speed upgrades ranging from 60-300Mbps.

On Friday, the N.Y. Public Service Commission announced its conditional approval of the merger transaction, but only if Charter agrees to a series of wide-ranging conditions to guarantee that New York customers receive tangible benefits as a result of the merger:

The Commission agrees that in order for the proposed merger to be in the public interest, the Petitioners must agree to make concrete and enforceable commitments to modernize their cable system and services, expand access, address the digital divide and improve customer service. To this end, we find that with the acceptance by the Petitioners of the enforceable conditions, as discussed in the body of this Order and Appendix A, the proposed merger is in the public interest. These conditions are designed to help ensure a near ubiquitous world-class communications network that meets the needs of all New Yorkers. Absent acceptance of these conditions, the public interest standard cannot be met, and the petition for transaction approval is denied.

Stop the Cap! was quoted and footnoted extensively in the PSC order. We provided the PSC with insight beyond the public relations machine of Charter and Time Warner Cable. We exposed the fact Charter’s promised service improvements were actually more modest than what Time Warner Cable has undertaken on its own through its Maxx upgrade program. We educated regulators about the inadequacy of Charter’s initial commitment to offer low-cost Internet access for low-income families. We questioned the consumer benefits of certain upgrades that could actually increase costs for consumers because of additional equipment fees. We alerted the PSC that Charter would discontinue Time Warner’s affordable $14.99 Internet offer. We strongly recommended the PSC consider making rural broadband expansion a part of this transaction. We also sought additional protections from any future compulsory usage caps or usage-based billing.

special reportAlthough Stop the Cap! was opposed to the transaction from the outset, doubting it was in the public interest, we recognized the chances for approval were greater than the Comcast-TWC merger that was eventually withdrawn. Therefore, we made it a priority to outline multiple conditions we felt should be imposed on Charter if the deal was to be approved.

Our constituency is ordinary consumers and ratepayers. Too often these kinds of mergers are approved with token conditions that only benefit minority or special interests, favored non-profit or government entities, or those with vested business interests (programmers, equipment manufacturers, etc.) It was important to us that any approval bring something beyond free Internet service for schools or community centers, agreements to continue carrying certain cable networks, or a temporary discount or low value coupon that ends up in the mailboxes of customers a year or two from now.

We know what Time Warner Cable customers in New York want: better service, faster speeds, no data caps, no gotcha fees, affordable Internet options, and job protection.

It appears New York regulators understand that as well and intend to force Charter to offer customers a better deal.

Despite publicly saying little about the merger, just a few hours after the PSC’s decision, Gov. Andrew Cuomo’s office issued a press release taking credit for the merger conditions and unveiling the “tenth signature proposal of his 2016 agenda: dramatically expanding and improving access to high-speed Internet in communities statewide.” Once again, the governor will try to entice providers like Time Warner Cable, Frontier Communications, and Verizon to expand rural broadband in New York using public dollars.

Although lacking a catchy title, the “New New York Broadband Program” includes a $500 million solicitation for private sector partners to subsidize rural broadband expansion with state dollars. The key goals of the 2016 program include:

  • stcAccess to broadband at speeds of at least 100Mbps; 25Mbps in the most remote areas of the State.
  • Public-private partnerships with a required 50 percent match in private sector investment targeted across the program.
  • Priority for projects that improve broadband Internet access in unserved areas, libraries and educational opportunity centers.
  • Applications will be chosen through a “reverse-auction” process, which will award funding to bidders seeking the lowest State investment.
  • Auctions to be held within each Regional Economic Development Council region to ensure statewide allocations of funding.

Much of the funding from earlier years ended up going to Time Warner Cable for modest expansion of its cable service, especially in eastern upstate New York. Likely applicants in 2016 include Time Warner Cable, Frontier Communications, community-owned/co-op broadband providers and rural wireless ISPs. Verizon and Cablevision are unlikely to apply.

Despite the governor’s efforts, most New York homes and businesses will be more affected by the Charter-Time Warner Cable merger, if it wins federal approval.

Gov. Cuomo

Gov. Cuomo

The Public Service Commission took its role very seriously, issuing a 93-page decision that took recommendations from consumer groups including Stop the Cap! very seriously. It did not share the industry’s belief that telecommunications providers in New York are heavily competitive.

“Time Warner serves close to 50% of New York State and we have a legitimate interest in ensuring that, when a company of this size provides customers with a service so affected by the public interest, as is communications, that real benefits accrue to consumers as a result of a given transaction,” the PSC wrote.

The PSC had an easier time sorting through comments about this merger, which generated considerably less interest than Comcast’s failed attempt to buy Time Warner.

“Generally, comments supporting the proposed transaction assert that, among other things, the merger will create jobs and provide better products at more affordable rates,” the PSC concluded in its ruling. “Those opposing the transaction state that the merger will inevitably lead to higher rates and potential data caps on broadband services in the future.”

The PSC took a very skeptical approach to Charter’s promised benefits, often finding them vague, questionable, or likely to have occurred with or without Charter’s involvement.

new-yorkFor example, the PSC questioned Charter’s promised network investments and upgrades:

Petitioners, however, decline to specify where in the national footprint of Charter, TWC and BHN these investments will be made or to identify the decisional factors to be used to channel these capital resources to specific areas or customers. There is no analysis to indicate that a reasonable proportion of these investments will be to systems in New York or for the benefit of New York customers. Similarly, there is no proposal by the Petitioners to describe the specific commitments that are being made or the specific enforcement mechanisms that would be used in the event the Petitioners’ implementation fell short of their commitments. Further, in order for these investments to be characterized as part of a net public benefit, Staff concludes, and we agree, that Petitioners would have to establish that these investments would not have been made in the absence of the proposed merger.

In the absence of a demonstration that there is “a tangible commitment to make new investments or invest beyond Time Warner’s current capital investment budgets,” it is difficult to characterize these capital expenditures as a certain benefit to New York customers or a satisfaction of the public interest under the New York statutes.

One of Stop the Cap!’s core arguments in our comments to the PSC was that Charter’s upgrade commitments were not particularly meaningful because Time Warner Cable was gradually upgrading its own systems to a level of service superior to what Charter plans to offer. The PSC clearly understood this and our warning that Charter’s commitments lacked specificity:

Public Benefit Assessment Staff and several commenters suggest that the proposed merger, as described in the Joint Petition and Petitioners’ Reply Comments, does not have sufficient net benefits to warrant a finding that the transaction is in the public interest. We concur. Many of the asserted benefits from the proposed transaction are events triggered by actions taken independently from the merger, and others are likely to be undertaken by TWC in any event, should the merger not be approved. Further, many asserted benefits are only described on a national scale and there is no way to determine if the investments or expenditures will occur in New York. Similarly, many of the projected benefits are described in terms that are too indefinite to permit us to assume that the benefits will occur as described to make a meaningful contribution to the transaction’s net benefits.

Time Warner Cable Maxx speed improvements.

Time Warner Cable Maxx speed improvements.

As a result, the PSC has looked more closely at Time Warner Cable’s Maxx program to be the benchmark for New York, not Charter’s proposed upgrades. They have adopted our recommendation that every Time Warner Cable customer in New York get the same kind of service upgrade residents in New York City enjoy today.

Another argument made by Stop the Cap! dealt with affordable Internet access. Time Warner Cable’s Everyday Low Price Internet ($14.99/mo for 2Mbps) is not fast, but it is affordable and free of the kind of revenue-protecting pre-conditions usually placed on Internet access for the poor. Time Warner’s plan is available to every customer at any time with no restrictions or contracts. In contrast, Charter’s originally proposed affordable Internet program required participants have school-age children, enroll only in the late summer, not have current cable broadband service (or be willing to forego it for 60 days), and not have any prior balance. As with Comcast, pre-conditions like this limit participation. The PSC agreed and now customers will be able to keep their more affordable Internet plans without jumping through artificial hoops launched by Charter.

The days of rural New Yorkers being quoted $20,000 to install Time Warner Cable service are also going to be a thing of the past. In addition to a commitment to pay for line extensions reaching 145,000 unserved or underserved customers, Charter is now required to work with New York’s Broadband 4 All program to receive supplementary funding, as available, to complete service extensions to eventually reach every customer that lives within a franchise area and wants cable service.

There are several other benefits outlined below that make this a better (although not great) deal, at least for New Yorkers. If any other state regulator manages to get an even better deal for that state’s residents, New Yorkers will automatically benefit because of a “most favored state clause” in the PSC’s order, which requires Charter to share those benefits with New York residents.

ny pscAll in all, the New York State Public Service Commission has lived up to its reputation as a consumer-protective body that is responsive to the needs of the public. This is in great contrast to many other states where regulators seem themselves as a business facilitator (and occasionally come directly from the businesses being regulated). In these states, the merger won approval with few, in any, preconditions.

We were delighted to have been extensively quoted and footnoted in the PSC’s order, having proven our case the Charter-Time Warner deal didn’t offer very much for New York. But we’re not happy the PSC punted on data caps. While recognizing they are a concern, the PSC seemed satisfied a three-year guarantee of no data caps was adequate. We disagree. As an increasing number of Comcast customers can attest, data caps are anti-competitive, anti-consumer, and unnecessary. Whatever benefits faster speeds can deliver can be easily curtailed by a data cap. So can online video competition. With much of upstate New York totally dependent on a single provider – Time Warner or Charter – for broadband speeds above 10Mbps, there is plenty of room for mischief that would otherwise be controlled by competitive forces. The PSC saw fit to avoid using its power of approval to get creative on keeping flat rate Internet affordable and available. That is a mistake we predict will be back to haunt us in the future.

Here are the specific conditions, most advocated by Stop the Cap!, that Charter Communications must agree to as a condition of the deal’s approval in New York:

Rural Broadband Access [$355 Million Value]

In addition to the goals accomplished by Gov. Cuomo’s New New York Broadband Program, Charter must agree to unilaterally build-out its network to reach an additional 145,000 “unserved” and “underserved” homes and businesses within four years. This will be an easy target for Charter to reach because the PSC defines “underserved” as any home with less than 100Mbps service. That represents much of upstate New York bypassed by TWC Maxx, so a speed upgrade in just one upstate city will achieve this requirement.

However, the PSC also included a second condition. Subject to the final terms and conditions of the Broadband 4 All Program being comparable to the Connect New York Program, Charter will be required to bid for Broadband 4 All Program funding to offer line extensions to any remaining unserved and underserved home across its entire New York service territory, which means every New Yorker within a cable franchise service area that wants service will be able to get it without being quoted tens of thousands of dollars for construction costs.

This will finally help would-be customers like Stop the Cap! reader Jesse Walser in Jamesville who has tried to get wired broadband in his home for over a decade. Verizon won’t upgrade its network and Time Warner Cable quoted him between $5,900 and $26,000 for installation of a line extension to reach his home.

All Digital Cable System Upgrade

Charter must convert their existing New York systems to an all-digital network (including upgrading the Columbia County Charter cable system to enable broadband communications) capable of delivering faster broadband speeds.

In Columbia County, residents are currently better served by smaller local providers. Both Germantown Telephone and Mid-Hudson Cable offer high-speed access throughout their territories. Berkshire Telephone has almost 100% DSL coverage, and Taconic Telephone has expanded DSL service to much of their huge service territory. Frontier Communications offers some DSL in southern Columbia County. The biggest problem providers are Verizon, which has no plans for DSL service in the area, and Charter Cable, which still runs a basic cable television-only system in the county.

In New York, Charter now provides cable television and other communication services to a relatively small number of customers, from two cable system clusters in and around Plattsburgh (14,000 customers) and Columbia County (2,500 customers). Plattsburgh gets television, phone and broadband service from Charter, but Columbia County is still served by a now-ancient, cable television only system.

Network Modernization and Speed Increases [$305 Million Value]

Charter must convert all of its systems in New York to all-digital within 30 months of the closing of the merger transaction. Charter is also required to offer broadband speeds up to 100Mbps to all customers by the end 2018 and match TWC Maxx speeds of 300Mbps by the end of 2019.

Charter’s all digital upgrade in upstate New York will facilitate faster broadband service, but it will also mean a set-top box or other similar device for every cable connected television in the home.

Broadband Affordability [$250 Million Value]

Despite Charter’s simplified menu of options (two broadband speed tiers and one video package), the PSC has required Charter to allow customers to keep their current plans, at least for the next several years:

  • Charter is required to maintain and advance its commitment to an affordable standalone Internet offering through the continuation of the Time Warner Everyday Low Price $14.99
    service throughout the Time Warner New York territory for up to two years and allow existing customers to keep the service for three years.
  • Charter is required to offer its 60Mbps standalone broadband product throughout New York at uniform national pricing. [$125 million value]
  • Charter is required to allow existing Time Warner customers to retain, without material changes that have the intent to discourage, the standalone and bundled broadband services they subscribe to at the close of the transaction for three years from the date of the closing.
  • Charter is required to provide a low-income broadband offering to eligible customers throughout its New York footprint. The PSC-ordered plan will offer 30Mbps for $14.99 a month to any household eligible for the National School Lunch Program and senior citizens 65 years and older eligible for the federal Supplemental Security Income program. No credit check shall be required and conditions requiring current broadband customers to wait 60 days to qualify and cover any past due bills have been deleted.

Customer Service [$55 Million Value]

Within two years after the close of the proposed transaction, Charter shall invest a minimum of $50 million in service improvement programs.

Charter is required to show a 35% reduction in Time Warner Cable’s 2014 cable PSC Complaint Rate by the end of 2020, with a 17.5% reduction due by the end of 2018. If they don’t achieve that, Charter must invest an additional $2.5 million in its service for each failure.

Job Protection

For the next four years, Charter cannot cut the number of customer facing jobs in New York.

Stop the Cap! Reflects on 2015; Looking Ahead to 2016

Phillip Dampier January 5, 2016 Editorial & Site News 1 Comment

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Dear Readers,

It was another great year at Stop the Cap! and we are very grateful for our growing readership and your involvement in the fight against data caps and for better broadband.

Phillip Dampier

Phillip Dampier

Since 2008, Stop the Cap! has exposed the lies about the need to limit your unlimited broadband. We tirelessly check what company executives tell their investors and Wall Street and what they tell consumers and the press about the successes and challenges providing broadband Internet access. The chasm between the two is wide. While companies like Comcast have spent years telling shifting stories that usage caps are not usage caps at all, that limits are needed to ensure fair access to broadband by all of its customers, and that usage-based billing is only designed to force heavy users to subsidize the investments Comcast makes in faster broadband, company officials tell Wall Street a much simpler (and honest) story: usage caps are about monetizing broadband usage to boost profits.

There has never been anything fair about “fair usage policies” for wired broadband. Rationing Internet usage at a time when fiber optic lines are being installed at a rate not seen since the dot.com boom and the arrival of the next generation standard for delivering broadband over cable television lines simply does not make sense. But it makes a lot of dollars.

Customers continue to make it quite clear to all who choose to listen: usage caps and the industry’s version of usage-based billing are both unacceptable.

Tens of thousands of complaints about usage caps arrived at the FCC in 2015, while the agency continued to drag its feet on a much-needed review of their impact on competition. “Cord cutting” is no longer just a theory. While providers openly engage in wound licking over video subscriber losses, they also quietly appreciate the fact they own the broadband pipes that their new online competitors depend on. Worried that Hulu, Netflix, and Sling TV are stealing your customers? With a crafty usage cap, customers learn soon enough the money “saved” cutting the cord will instead be spent covering overlimit fees incurred using broadband to watch television. Heads they win, tails you lose.

Comcast is by far the biggest menace we will fight in 2016. Their multi-year “experiment” in Internet rationing continues to spread like a virus into new markets, mostly in the deregulatory/hands-off states in the southern and western U.S. The “free market” paradise that was supposed to bring robust competition has too often brought higher bills and usage limits instead. To observers, Comcast’s decision to cap its customers in Chattanooga, Tenn., seems crazy. Comcast faces robust competition from EPB Fiber Optics and AT&T. EPB doesn’t cap its customers and AT&T U-verse wouldn’t dare. But Comcast has decided to cap anyway.

In 2015, consumers continued to despise Comcast (while also throwing Time Warner Cable under the bus for lousy service and high prices), despite CEO Brian Roberts’ reflexive promise he was solidly committed to improving Comcast’s image with customers. Capping customers’ usage while creating a $30-35 “insurance plan” to protect customers from Comcast’s overlimit fees would seem counter-intuitive, or at least ironic, to improving customer relations. Yet Roberts continues to tell investors with a straight face customer reaction to caps remains “neutral to slightly positive.” (Perhaps at the online equivalent of Mistress Raisin’s S&M Club, but likely nowhere else).

In addition to fighting usage caps, Stop the Cap! also taught consumers how to fight for a better deal. We attracted over two million visitors to Stop the Cap! in 2015, many looking to cut their cable and phone bills. We showed them how. These articles were among the most visited for 2015:

#5: How to Get a Better Deal for Verizon FiOS; $79.99 Triple-Play Offer With $300 Rebate Card (14 comments, originally published in December, 

#4: How to Get Verizon Wireless’ 4G $30 Unlimited Use Hotspot Feature Added to Your Account (47 comments, originally published in July, 2011 and no longer timely)

#3: Source: FCC Will Get Serious About Data Caps if Comcast Moves to Impose Them Nationwide (149 comments, first appearing in May, 2015)

#2: Updated! How to Score a Better Deal From Time Warner Cable and Save Over $700 a Year: 2015 Edition (150 comments and first updated in March, 2015 and again over the summer)

#1: How to Score a Better Deal With AT&T U-verse; $28/Mo for 18Mbps, $33/Mo for 24Mbps (112 comments and originally published in December 2013)

Our audience is global. Most of our readers are located in the United States, Canada, and the United Kingdom, but we recorded visitors from 209 countries in 2015.

The interconnection wars between cable and phone companies and online video providers like Netflix also helped bring readers to Stop the Cap! In fact, our busiest day in 2015 came on June 23rd when 14,362 unique visitors arrived to read our story: AT&T, Verizon, Time Warner Cable Implicated In Content Delivery Network Slowdowns.

In 2015, Stop the Cap! published 452 news stories. Since 2008, we’ve archived 4,494 original articles here.

How do people hear about us? The top five referring websites in 2015:

Once people hear about us, many become regular readers and participants. We recognize our top-five participants who frequent the comment section found at the bottom of every Stop the Cap! article:

#5: Limboaz, with 23 comments in 2015

#4: AC, with 27 comments

#3: BobinIllinois, with 27 comments

#2: Paul Houle, with 28 comments

#1: Joe V, with a whopping 67 comments in 2015.

Welcome to 2016. The fight continues.

We appreciate your financial support and you will find a donate button on the right that allows you to make contributions with a credit card or bank account. Stop the Cap! does not accept industry money and is fully funded with contributions from readers like you. Your donations allow us to subscribe to news-gathering and research services, pay costs to support this website, fund software upgrades, and help cover expenses involving testimony before regulatory bodies. Providers may be getting rich, but we certainly are not, which is why making a regular contribution to Stop the Cap! will make a big difference in how far we can take this fight.

Thanks for your support!

P.S. – You can follow breaking stories from us on Twitter (@stopthecap) and Facebook (https://www.facebook.com/stopthecap/). You can follow my own views on broadband and other matters via my Twitter account (@phillipdampier). We intend to beef up our social media presence this year so stay tuned!

Sincerely,

Phillip Dampier – Your Editor

Canada Talks TV: Preparing for A-La-Carte Cable TV; Providers Threaten Rate Hikes

alacarte

Does Canada’s Food TV need special protection when it made 53% gross profits on the backs of cable subscribers that pay for the network whether they watch it or not?

“If you cut your cable, then your Internet is going to go up,” predicts Gary Pelletier, president of the Canadian chapter of the Cable & Telecommunications Association for Marketing.

That is just one of several predictions many Canadian cable and phone companies are claiming will come from the “disastrous decision” to allow consumers the freedom to pick and pay for only the cable channels they want to watch. Amidst claims that over 10,000 jobs will be lost, chaos and bankruptcy will stalk minority and niche cable networks, consumers will pay much higher bills, and American programming will boycott Canada fearing a-la-carte could make its way into the United States, Canada is at least having an adult discussion about the future of television and where it fits in the country’s identity.

Big changes are coming as a result of the latest great soul-searching made by our good neighbors to the north, always concerned about the potential of the Canadian Experience being overrun, if not decimated by the United States’ entertainment hegemony. In a moment of clarity, regulators have just realized what the rest of English-speaking Canada already knew: protectionist content regulations don’t work on the Internet. Canadians routinely bypass geographical restrictions and Canadian content laws with virtual private networks that relocate them, online at least, to a home address in the U.S. so they can binge-watch the unrestricted American versions of Netflix, Hulu and other online video services.

Regulators have now adopted the attitude – “if you can’t beat ’em, join ’em,” encouraging Canadian entertainment producers to create fewer, but better shows that will not only attract Canadian audiences, but those abroad.

Only the exchange is supposed to be mutual. High quality Canadian television productions like Orphan Black, Schitt’s Creek, X Company, The Book of Negroes, This Life, 19-2, Vikings, Killjoys, Rookie Blue, and Murdoch Mysteries are all among Canadian critics’ top favorites. But relatively few Americans know these shows exist or assume they are co-productions owned by some American entertainment conglomerate. Only a brief glimpse of a Canadian flag during the warp speed end credits might clue viewers this isn’t the case.

Despite protectionist media policies that have endured since 1970, the Canadians are now boldly going where Americans have so far feared to tread. They are having the conversation about the future of television and online entertainment in all forms while American media barons remain in denial.

For average consumers, the biggest change will begin next spring when the era of Canadian a-la-carte cable television arrives, allowing consumers to take an ax to the expensive 120-300 channel television package once and for all. Starting March 1, all Canadian providers will be required to offer consumers a basic cable package priced at no more than $25 a month, containing Canadian and U.S. over the air stations and networks, educational, and public channels. If you want more, you can have it by buying channels or mini-packages of networks individually to create a personalized cable TV lineup of networks you actually care to watch.

Programmers across Canada, particularly those catering to sports fans, foreign audiences, religious viewers, and minorities are horrified by the idea. So are media critics that fear the change could help bring an end to Canada’s unique multilingual and multicultural identity.

special reportCustomers like James Rehor of Hamilton explains why.

“Why would I pay for it? Why do I get it? Why does it come on my TV?” asks the 60-year-old construction worker. He’s ready on day one to purge the large number of French and other non-English channels from his Cogeco Cable lineup. Rehor offers comfort to sports programmers, however. He’s a big fan of the Toronto Maple Leafs, so Leafs TV, Sportnet, and TSN will stay.

Non-sports fans are another matter. They can’t wait to ditch the sports networks that are always the most expensive channels in a Canadian cable package.

“Clearly the most expensive (channels) will always be sports,” Pelletier tells the Canadian Press. “At the end of the day, for sports watchers, their cable bill will probably stay the same or increase, maybe … In the case of someone who doesn’t watch any sports at all, their bill will probably decrease.”

http://www.phillipdampier.com/video/CRTC Supporting the creation of content made by Canadians for Canadians and global audiences 3-2015.mp4

An Age of Abundance: Canadian telecom regulators are transforming media regulations in Canada, recognizing the way Canadians watch television has changed. Quality, not quantity, is now most important. CRTC chairman Jean-Pierre Blais discusses the new reality. (6:08)

Pelletier and his industry friends are on a mission to convince Canadians to leave well enough alone and not drop the current all-for-one price cable television package for a-la-carte — not realizing the potential consequences.

catnipSome in the cable industry have tried other scare tactics to no avail.

One industry-backed study predicted pick-and-pay could cost the economy 10,000 jobs. Consumers could care less. Unifor, a union that represents many in the television sector, seemed to agree Canada’s cultural heritage will be at risk with lowest common denominator programming dominating from St. John’s to Vancouver, much of it shoveled from the United States. But Canadians still want their House of Cards and Homeland.

Howard Law, a media spokesman for Unifor, predicts less profitable Canadian channels will fold under a pick-and-pay pricing model.

“The introduction of pick and pay will, in itself, lead to a major loss of revenues to Canadian broadcasting system, which ultimately plays out in less Canadian content and less Canadian jobs and less Canadian broadcasting,” he said in an interview on CBC’s The Exchange with Amanda Lang.

Minority interest and religious channels are also worried about their future. Most of those networks are classified as “specialty channels” by the Canadian Radio-television and Telecommunications Commission (CRTC). Legacy networks that have been around since at least the 1990s have been sitting pretty, protected by their designation as a “Category A” specialty station. Unlike in the United States, Canadian cable networks are licensed to operate by the CRTC, and at least 60 of those Category A networks also enjoy “genre protection,” a CRTC policy that guarantees their channel carriage on Canadian cable, satellite, and telco TV systems and protection from other cable networks that want to run the same kind of programming.

http://www.phillipdampier.com/video/CBC How New CRTC Rules Will Change Canadian TV 3-2015.mp4

For decades, protectionist Canadian content regulations made certain Canadian television reflected its audience. But online video and the Internet has allowed Canadians to bypass traditional cable television to watch they want, not what the government hopes they will. New CRTC rules reflect that reality as Canadian TV rethinks how to get the viewer’s attention. From CBC-TV’s The National (4:16)

CRTC policies have allowed Canadian specialty channels to flourish despite operating in a smaller marketplace with fewer viewers than their American counterparts. That means networks like FoodTV and HGTV in Canada have profit margins ranging from 53-58 percent. Fashion Television and BookTV made an improbable $2.7 million in pre-tax profit, not so much from viewers but from the licensing fees every Canadian cable customer pays for the four networks whether they watch them or not.

From its inception, Canadian TV has always faced a looming shadow from the south. Protecting Canada's identity has been a priority for decades.

From its start, Canadian TV has always faced a looming shadow from the south. Protecting Canada’s identity has been a priority for decades.

“If you’re a specialty channel that’s lived within the protective cocoon of bundling for years, you’ve gotten used to having a full-time job with benefits,” independent technology analyst Carmi Levy told CBC News. “Contrast that with living outside the protective cocoon, you’re essentially a freelancer, you fight for every contract, you have no benefits, there are no guarantees that money will be coming tomorrow or next week.”

It probably won’t be coming from subscribers like Mr. Rehor, who won’t hesitate to drop channels if they go unwatched.

The CRTC is also doing some dropping of its own, starting with genre protection, which could lead many specialty networks to follow American cable networks that today depend on chasing ratings to justify their licensing fees. The unintended result in the United States has been questionable lineup changes like the appearance of Law & Order rerun marathons on WEtv, a network supposedly dedicated to women’s entertainment. Ovation, a fine arts independent cable network that is about a niche as a network can be, depended on weekend binges of PBS’ Antiques Roadshow reruns in 2012 just to attract enough viewers to show up in the ratings.

Lesser known networks like OutTV, Canada’s only network dedicated to lesbian, gay, bisexual, and transgender viewers, may face an uncertain future if it can’t charge a premium price to make up for expected subscriber losses from pick and pay. Other niche channels may have to merge with other networks or more likely relaunch with an online platform and deliver a reduced menu of content to audiences.

crtcLarge Canadian mainstream networks and programmers don’t expect too much change from pick and pay, as most Canadians will likely still demand a package with their programming included. But distributors – cable, satellite, and telco TV platforms, do expect some major changes. The average Canadian now pays around $50 a month for basic cable, a price that will be cut in half next spring.

Rogers Cable already knows what is coming. It ran a trial in 2011 in London, Ont., with 1,000 customers who were given the choice of picking and paying for the channels they wanted. It didn’t take long for the cable company to discover customers loved it and TV stations and cable programmers hated it.

“We found that customers like bundles, but want to build their own. They want a basic package and an extra package they create,” Rogers spokesman Kevin Spafford told the Toronto Sun. “We did get push back from TV stations. There was concern about offering this service. They did not want us to proceed with that model.”

After the trial ended, Rogers allowed the pilot project participants to keep their pick and pay packages, something they’ve held tightly for over four years.

Rogers’ pilot offered something like what the CRTC is demanding be available to all Canadians:

rogers logoROGERS PICK AND PLAY PILOT

  • $20 a month for “skinny basic” TV package of Canadian stations. (The CRTC plan mandates no more than $25.)
  • 15-channel package for $27 a month. Other packages of 20 and 25 stations also offered, for more money. (The CRTC wants networks to offer channels individually or in mini-bundles.)
  • U.S. major networks offered for $3 a month. (Under the CRTC policy, these stations may appear under the basic or a-la-carte tiers.)

REGULAR ROGERS

  • Basic: $40 a month, 190 channels
  • Digital Plus: $63, 220 channels
  • Sports packages: $77, 230 channels
  • VIP TV: $77, 270 channels
  • VIP Ultimate: $119, 320 channels

The upcoming changes are probably the biggest in Canadian cable television history, but they still may not be enough to attract cord-nevers — those who have never subscribed to cable TV. Most are under 30 and already watch all their favorite shows online. Some budget-minded Canadians who want to cut their cable bill may consider joining them by cutting the cord altogether or slimming down their cable packages, but Pelletier warns that cable operators will not leave their money on the table.

cablecordSupplementing a slimmer cable package with a streaming service or two could increase data charges, Pelletier warns. Plus, you may have to surrender any discounts you get from bundling cable with home phone, Internet and/or wireless service.

Usage capped Internet is also still an effective deterrent for cord-cutting and whether your television entertainment comes over the cable or online, providers will still make a run for your wallet. Some observers predict providers will dramatically increase the retail prices of a-la-carte networks to limit potential savings while also continuing to raise broadband prices.

A 2014 national PIAC poll found 90 per cent of 1,000 consumers polled were willing to pay an additional $1 a month per channel, while 54 per cent would be willing to go $3 a month, and 21 per cent would be willing to pay $5 a month for an extra channel of their choosing. Many don’t realize under the current system the wholesale rate for many channels is under 50 cents a month. Considering what Canadians are willing to pay, it is likely cable companies will price channels according to what the marketplace will tolerate, which could be around $3 for each channel a month.

Suspicion about any cable company offering a New Deal is something Americans and Canadians have in common. Mr. Rehor is already keeping a wary eye.

“I think it’s a good idea, I just don’t know how they’re going to really work it,” he says, fearing it could ultimately end up costing the same amount he pays now.

http://www.phillipdampier.com/video/CBC Pick and Pay TV 3-2015.flv

CBC News offers this extended discussion about the implications of “pick and pay” cable television. (10:11)

The Peaceful War Against Comcast’s Data Caps: Don’t Like ‘Em? Get Off Your Butt

Licensed to print money

Licensed to print money

In 2008, Stop the Cap! was launched because the telephone company that serves our hometown of Rochester, N.Y., decided on a whim that it was appropriate to introduce a usage allowance of 5GB per month for their DSL customers. Frontier Communications CEO-at-the-time Maggie Wilderotter defended the idea with the usual claim that the included allowance was more than enough for the majority of Frontier customers. DSL customers already have to endure a lot of issues with Internet service and data caps should certainly not be one of them.

Stop the Cap! drew media attention and focus on the issue of data capping, organized customers for a coordinated pushback, and sufficiently hassled Frontier enough to get them to make the right decision for their customers by quietly rescinding the “allowances.”

As it would turn out, Frontier’s correct decision to suspend usage caps would prove an asset to them less than one year later when Time Warner Cable made it known it would trial its own usage caps in Austin and San Antonio, Tex., Greensboro, N.C., and yes… Rochester, N.Y. starting in the summer of 2009.

Time Warner Cable was slightly more generous with its arbitrary allowance — 40GB of usage for $55 a month. Customers already paying a lot for Internet access would now also have an arbitrary usage allowance and overlimit penalty fees with no service improvements in sight. Frontier’s decision the year before to rescind data caps played to their advantage and the company quickly launched advertising in Rochester attacking Time Warner Cable for its data caps, inviting customers to switch to cap-free Internet with Frontier.

Data caps are here!

Data caps are here!

Time Warner Cable’s experiment lasted less than two weeks and was permanently shelved, never to return. Four years later, Comcast began its own usage cap trial that not only continues to this day, but has expanded to cover more than 1,000 zip codes. Capped service areas typically live with a 300GB usage allowance with an overlimit fee of $10 per 50GB.

Yesterday at the investor-oriented UBS Global Media and Communications Brokers Conference, Comcast chief financial officer Mike Cavanagh assured Wall Street and shareholders Comcast’s desire to boost revenue from monetizing broadband usage remained an “important contributor” to the company’ goal of “demonstrat[ing] value and derive value from that pricing.”

Cavanagh said the company is using the line ‘heavy users should pay more’ to justify its caps.

“It’s been an experiment that we are using that the key data point behind it is kind of intuitive – ‘10% of our client base uses 50% of capacity.'”

While not ready to announce Comcast’s cap plan would be introduced nationwide, Cavanagh assured investors the experiments will continue as Comcast makes sure that over time it is “compensated for the investments that today’s marketplace requires us to make.”

The difference that makes it possible for Comcast to carry its usage cap experiments forward while Time Warner Cable had to quickly end theirs comes down to one thing: organized customer pushback. Time Warner Cable got heat from relentless, organized opposition in the four cities where caps mattered the most to consumers. Comcast, for the most part, is getting about as much heat as it usually does from customers. It’s time to turn the heat up.

protest

In fighting this battle for the last seven years, I can share with readers what works to force change and what doesn’t:

In 2009, Time Warner Cable faced protesters opposed to usage limits at this rally in front of the company's headquarters in Rochester, N.Y.

In 2009, Time Warner Cable faced protesters opposed to usage limits at this rally in front of the company’s headquarters in Rochester, N.Y.

Generally Useless

  • Complaining about usage caps in the comment sections of websites;
  • Signing online petitions;

Impotent But Potentially Useful in Large Numbers

  • Calling the provider to complain about usage caps;
  • Complaining about usage caps to a provider’s social media team (Facebook, Twitter, etc.);
  • Writing complaints on a company’s open support forum;

Useful, But Unlikely to Bring Immediate Results

  • Writing a letter or making a call complaining to elected officials about usage caps;
  • Advocating for more competition, especially from public/municipal broadband;
  • Filing formal complaints with the FCC and Better Business Bureau;
  • Complaining to state telecom regulators and your state Attorney General (they have no direct authority but can attract political attention);
  • Canceling or downgrading service, blaming usage caps for your decision.

Gasoline on a Lit Fire

  • Organizing a protest in front of the local cable office, with local media given at least a day’s notice and invited to attend;
  • Contacting local newsrooms and asking them to write or air stories about usage caps, offering yourself as an interview subject;
  • Sending local press clippings or links to media coverage to your member of Congress and two senators. Suggest another media-friendly event and invite the elected official to attend and speak, which in turn generates even more media interest.
In 2009, Time Warner Cable planned to implement mandatory usage pricing starting in Rochester, N.Y., Greensboro, N.C., and San Antonio and Austin, Tex.

In 2009, Time Warner Cable planned to implement mandatory usage pricing starting in Rochester, N.Y., Greensboro, N.C., and San Antonio and Austin, Tex.

In the battle with Time Warner Cable, we did all the above, but especially the latter, which quickly spun the story out of control of company officials sent to distribute propaganda about usage cap “fairness” and “generous” allowances. We were so relentless, we managed to get under the skin of at least one company spokesperson caught on camera being testy in an on-air interview, which backfired on the company and angered customers even more.

In the case of Comcast, very few of these techniques have been used in the fight against their endless data cap experiment. Customers seem satisfied writing angry comments and signing online petitions. Some have filed complaints with the FCC which are useful measures of hot button issues on which the FCC may act in the last year of the Obama Administration. But there is no detectable organized opposition on the ground to Comcast’s data caps. That may explain why Comcast’s CEO has repeatedly told investors your reactions to Comcast’s caps have been “neutral to slightly positive.” Many Wall Street analysts obviously believe that, because some are advocating the time is right to raise broadband prices even higher. After all, if your reaction to data caps was muted, raising the price another $5 a month probably won’t cost you as a customer either.

It would be very different if these analysts saw regular news reports of small groups of angry customers protesting in front of Comcast offices in different areas of the country. That would likely trigger questions about whether broadband pricing has gotten out of hand. Coverage like that often attracts politicians, who cannot lose opposing a cable company. Once Congress gets interested, the fear regulation might be coming next is usually enough to get companies to pull back and reconsider.

comcast sucksIf you are living with a Comcast data cap and want to see it gone, you can do something about it. Consider organizing your own local movement by tapping fellow angry customers and recruiting local activist groups to the cause. In Rochester, there was no shortage of angry college students and groups ready to protest. Google local progressive political groups, technology clubs, and technology-dependent organizations in your immediate area. Some are likely to be a good resource for building effective public protests, sign-making, and other TV-friendly protest techniques. Contact town governments, the mayor’s office of your city, technology-oriented newspaper columnists, radio talk show/computer support show hosts, etc., to build a mailing list for coordinated announcements about your efforts. Many local officials also oppose data caps.

If a local news reporter has covered tech or consumer issues in the past, many station websites now offer direct e-mail options to reach that reporter. If you give them a good TV-friendly story to cover, they will be back for more coverage as your local protest grows. We helped coordinate and share news about efforts against Time Warner in the cities that were subject to experiments, which also gave us advance notice of their talking points and an ability to offer a consistent response. Several stations carried multiple stories about the cap issue, supported by calls to TV newsrooms to thank them for their coverage and to encourage more.

We realize Comcast’s responsiveness to customers is so atrocious it approaches criminal, but Comcast does respond to Wall Street and shareholders who do not want the company under threat of fact-finding hearings, FCC regulatory action, or Congressional attention. They also don’t want any talk of municipal broadband alternatives. Sidewalk protests in front of the local cable office on the 6 o’clock news is a nightmare.

In the end, Time Warner Cable didn’t want the hassle and got the message — customers despise data caps and want nothing to do with them. Time Warner hasn’t tried compulsory usage caps again. If you want Comcast to get the same message, those living inside Comcast service areas (especially customers) need to lead the charge in their respective communities. We remain willing to help.

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  • Michael Elling: Net neutrality is an unsupportable contrivance. It was coined by someone (Tim Wu) who loved the results of "equal access" but didn't want to put up w...
  • Froggy2011: cable will go bankrupt except for big companies using them. eventually even them leaving them. why because eventually the free movie and show market w...
  • me: I cut in 2009. At first I tried to keep up. But then I realized it did not really mater anymore. *I* *AM* *FREE*!!!! The first year or so was toug...
  • Jonny: My smaller cable company Suddenlink (1.4M customers) started the same thing. 250GB cap with with their medium speed of 50mbps. They are only doing thi...
  • Joe V: Man these guys just don't get it. Not to worry, just as the music industry learned the hard way that to piss off their customers by giving them crap, ...
  • Mike D.: The TV providers have never been willing to fight for the consumer with the other conglomerates who bundled crap with one or two channels of good cont...
  • Sean Colbert: The comcast cap isnt even bad compared to mine. I have Hughesnet Gen4 (All I can get in my area) and I have a 20gb a month limit with an extra 50 in b...
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  • Phillip Dampier: Rats... and I knew I caught this in the proofread and made the change but it stayed a draft while the inaccurate one went live. Thanks for catching th...
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  • bob: how is this fair to existing customers who reside in areas where upgrade hasnt gone through. im supposed to pay 60 plus dollars each month for extreme...
  • Michael Elling: Paul, part of this stems from the industry's infatuation with vertical models and the govt-granted quasi-monopoly structure stemming from spectrum sal...

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