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The Stage Is Set to Kill Telco ADSL: Cable Operators Prepare for DOCSIS 3.1 Competitive Assault

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Next year’s upgrade to DOCSIS 3.1 will support cable broadband speeds up to one gigabit shortly after introduction.

Telephone companies relying on traditional ADSL service to power their broadband offering will likely face a renewed competitive assault in 2016 that will further reduce their already-challenged market share in areas where cable companies compete.

Cable operators are hungry for profitable broadband customers and the best place to find new prospects is at the phone company, where DSL is still a common technology to deliver Internet access. But while cable Internet speeds have risen, significant DSL speed hikes have proven more modest in the residential market.

In 2016, the cable industry intends to poach some of the remaining price-sensitive holdouts still clinging to DSL with revised broadband offers promising more speed for the dollar.

Cable broadband has already proven itself a runaway success when matched against telephone company DSL service. Over the last year, Strategy Analytics found Comcast and Time Warner Cable alone signed up a combined 71 percent of the three million new broadband customers in the U.S.

“Cable operators continue to increase market share in U.S. broadband,” said Jason Blackwell, a director at Strategy Analytics. “Over the past twelve months, Comcast has accounted for 42 percent of new subscribers among the operators that we track.  Fiber growth is still strong, but the telco operators haven’t been able to shake off the losses of DSL subscribers.  In 2016, we expect to see a real battle in broadband, as cable operators begin to roll out DOCSIS 3.1 for even higher speed offers, placing additional pressure on telcos.”

That battle will come in the form of upgraded economy broadband plans, many arriving shortly after providers upgrade to the DOCSIS 3.1 cable broadband platform. Currently those plans offer speeds ranging from 2-6Mbps. Starting next year, customers can expect economy plan prices to stay generally comparable to DSL, with promises of faster and more consistent speeds. A source tells Stop the Cap! at least two significant cable operators are considering 10Mbps to be an appropriate entry-level broadband speed for 2016, in keeping with FCC chairman Thomas Wheeler’s dislike of Internet speeds below 10Mbps.

slowJust a few years earlier, most providers wouldn’t think of offering discounted 10Mbps service, fearing it would cannibalize revenue as customers downgraded to get lower priced service. Increasing demands on bandwidth from online video and multiple in-home users have gradually raised consumer expectations, and their need for speed.

Unfortunately for many phone companies that have neglected significant investment in their aging wireline networks, the costs to keep up with cable will become unmanageable unless investors are willing to tolerate significant growth in capital expenses to pay for network upgrades. Frontier Communications still claims most of their customers are satisfied with 6Mbps DSL, neglecting to mention many of those customers live in areas where cable competition (or faster service from Frontier) is not available.

Where competition does exist, it’s especially bad news for phone companies that still rely on DSL. Earlier this year, Frontier’s former CEO Maggie Wilderotter admitted Frontier’s share of the residential broadband market had dropped to less than 25% in 26 of the 27 states where it provides service. In Connecticut, the one state where Frontier was doing better, its acquired AT&T U-verse system has enabled the phone company to deliver broadband speeds up to 100Mbps. But even those speeds do not satisfy state officials who are seeking proposals from providers to build a gigabit fiber network in a public-private partnership.

DSL speed upgrades have been spotty and more modest.

DSL speed upgrades have been spotty and more modest.

Frontier’s recent experiments with fiber to the home service in a small part of Durham, N.C., and the unintentional revelation of a gigabit broadband inquiry page on Frontier’s website suggests the company may be exploring at least a limited rollout of gigabit fiber service in the state. But company officials have also repeatedly stressed in quarterly results conference calls there were no significant plans to embark on a major spending program to deliver major upgrades across their service areas.

Some phone companies may have little choice except to offer upgrades where cable operators are continuing to rob them of customers. In the northeast, where Frontier has a substantial presence, cable operators including Charter, Comcast and Time Warner Cable are committing to additional speed upgrades. Time Warner Cable’s current standard speed of 15Mbps will rise to 50-60Mbps in 2016, up to ten times faster than Frontier’s most popular “up to” 6Mbps DSL plan.

Most of the broadband customer gains won by Comcast and Time Warner Cable come as a result of DSL disconnects. AT&T said goodbye to 106,000 customers during the third quarter. Verizon managed to pick up 2,000 new subscribers overall, almost all signing up for FiOS fiber to the home service. No cable operator lost broadband market share, reported analyst firm Evercore. Leichtman Research offered additional insight, finding AT&T and Verizon were successful adding 305,000 U-verse and FiOS broadband customers, while losing 432,000 DSL customers during the same quarter.

The message to phone companies couldn’t be clearer: upgrade your networks or else.

Irish Consumers Try to Keep Up With Telecom Company Rate Cuts

Phillip Dampier November 23, 2015 Competition, Consumer News, Public Policy & Gov't 1 Comment

Here’s a problem most North Americans wish they had: confusing rate cuts that are coming as a result of fierce competition for your telecom dollar.

In Ireland, the problem is real and some consumers are finding themselves perplexed watching the cost of broadband, telephone, and television service dropping by as much as $159 a year from the four different providers competing across much of the country. Telco Eircom has a 35% market share (39% in 2013), UPC/Virgin Media Cable – 28% (25% in 2013), Vodafone – 21% (17% in 2013), and Sky – 12% (1% in 2013).

“Neighbors are talking to one another and comparing bills only to find some are paying less than others even though they have the same types of services,” says Richard Donahue, a Dublin resident turned compulsive comparison shopper. “Because competition is getting stronger, local providers are pushing to get customers into bundles of services to keep them from switching.”

broadband ireland

The result is lower pricing to help convince consumers to take all of their business to one provider. The ongoing drop in the price of telephone, television and broadband service has now been measured by Comreg, Ireland’s telecoms regulator. It released a report this month stating prices have “fallen significantly for the average Irish household.”

Consumers willing to make providers fight for their business are saving over $100 a year on bundled service packages. Comreg reported that even without asking, the average consumer subscribing to a package of television and broadband service has seen prices fall by nearly $75 a year across the board. Those also subscribing to telephone service are paying around $50 less a year. Only the cost of standalone broadband has remained the same, but that price has stayed close to what the Irish consider an acceptable range for Internet access — between $15 and $40 a month.

Irish cable competitor UPC (now Virgin Media) sells a package of 240Mbps broadband with an unlimited calling landline for around $50 a month.

Irish cable competitor UPC (now Virgin Media) sells a package of 240Mbps broadband with an unlimited calling landline for around $50 a month.

“Standalone broadband pricing may not be falling, but it isn’t rising either,” reports Donahue. “Service has improved with faster speeds and better reliability so you receive better value for money.”

Even mobile service prices are down by almost $90 a year, but there are some caveats.

“Ireland has one significant mobile problem yet to be sorted — the penalty for breaching allowances, which can be substantial,” Donahue said. “Comreg found almost a third of Ireland has received a warning text from a provider about nearing a limit provided by our allowances for voice minutes, texts, or data.”

Donahue adds the Irish are reticent about changing mobile providers, even if it would save them money.

“We love to complain about poor providers in this country that drop calls and leave us without coverage but 73 percent of us have not changed our provider in at least three years,” he reports. “Most don’t believe there are any savings doing so.”

Ireland appears to be a few years behind North American trends dealing with telecom services. The Comreg report found:

  • Only 9 percent of Irish households subscribe to Netflix
  • 76% of Irish mobile users still text back and forth but are gradually shifting towards app-based messaging services like Hangouts, Facebook Messenger and Whatsapp
  • 43% of those watching online video report watching less traditional live/linear TV
  • Only about 58% of mobile users browse the web with their phones
  • 60% of broadband users couldn’t tell you what broadband speeds they receive/are supposed to receive
  • 88% of those 65+ still have landline phone service, while 46% of those 18-24 still use landlines to make and receive calls.

Comcast Launches Online Video Service It Exempts from Its Own Data Caps

xfinitylogoComcast is inviting controversy launching a new live streaming TV service targeting cord-cutters while exempting it from its own data caps.

Comcast’s Stream TV is comparable to Comcast’s Limited Basic lineup, only instead of using a set-top box, Stream TV delivers online video over the Internet to Comcast’s broadband customers in Massachusetts, New Hampshire, Maine and the Greater Chicago area. For $15 a month, Stream TV offers a large package of local over the air stations, broadcast networks, and HBO, along with thousands of on-demand titles and cloud DVR storage. In Boston, the lineup includes:

WGBH (PBS), HSN. WBZ (CBS), NECN, WHDH (NBC), Community Programming, BNN-Public Access, WWDP-Evine Live, WLVI (CW), WSBK (MyTV), WGBX (PBS), WBIN (Ind.), WBPX (Ion), WMFP (Ind.), The Municipal Channel, Government Access, WFXT (FOX), WCEA (MasTV), WUNI (Univision), EWTN, C-SPAN, CatholicTV, POP, QVC, WYDN (Daystar), WUTF (UniMas), WNEU (Telemundo), Jewelry TV, XFINITY Latino, WGBH World, WGBH Kids, Trinity Broadcasting Network, WGBH Create, Leased Access, WBIN-Antenna TV, WBIN-GRIT TV, WNEU-Exitos, WLVI-BUZZR, WCVB (Me-TV), WFXT-MOVIES!, WHDH-This TV, WFXZ-CA, WUNI-LATV, WFXZ (Mundo Fox), WBZ-Decades, and WFXT-Laff TV + HBO. The package also qualifies the customer as an authenticated cable TV subscriber, making them eligible to view TV Everywhere services from many cable networks.

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Comcast is offering the first month of Stream TV for free with no commitment to its broadband customers subscribed to at least XFINITY Performance Internet (or above). Up to two simultaneous streams are allowed per account and some channels may not be available for viewing outside of the home. Comcast claims it will expand Stream TV to Comcast customers nationwide in 2016. Comcast will not be selling the service to customers of other cable or phone companies, limiting its potential competitive impact.

Competitors like Sling TV offer their own alternatives to bloated cable TV subscriptions at a similar lower price, and they will sell to anyone with a broadband connection. Sling alone is partly responsible for Comcast’s loss of hundreds of thousands of cable TV customers who don’t want to pay for hundreds of channels many never watch. That Comcast might want to launch its own alternative online video package to retain customers is not a surprise. But Comcast’s decision to exempt Stream TV from the company’s data caps while leaving them in place for competitors is sure to spark a firestorm of controversy.

comcast_remoteComcast claims it is reasonable to exempt Stream TV from its 300GB data cap being tested in a growing number of markets.

“Stream TV is a cable streaming service delivered over Comcast’s cable system, not over the Internet,” wrote Comcast in its FAQ. “Therefore, Stream TV data usage will not be counted towards your Xfinity Internet monthly data usage.”

More precisely, Comcast claims it relies on its own internal IP network to distribute Stream TV, not the external Internet competitors use to reach ex-Comcast cable TV subscribers. Comcast’s premise is it is less costly to deliver content over its own network while Internet traffic comes at a premium. Critics will argue Comcast has found an end run around Net Neutrality by relying on usage caps to influence customer behavior.

For the moment, Netflix is reserving comment after being contacted by Ars Technica. But Sling TV and other services that depend on Comcast’s broadband to reach customers will likely not remain silent for long.

Comcast could effectively deter consumers from using competing online video services with the threat of overlimit fees if customers exceed their usage allowance. The cable company could even use the fact its services don’t count against that allowance as a marketing strategy.

Stop the Cap! has warned our members about that prospect for years. Preferential treatment of certain content over others by playing games with usage caps and overlimit fees could have a major impact on emerging online video competition. Since Comcast owns both the broadband lines and the online video service, it can engage in anti-competitive price discrimination. Competitors will also argue that Comcast’s internal IP network is off-limits to them, making it impossible to deliver content on equal terms over a level playing field.

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The next move will likely come from the FCC in response to complaints from Comcast’s competitors. As Ars Technica notes, the Federal Communications Commission’s Net Neutrality rules allow for complaints against so-called zero-rating schemes, with the commission judging on a case-by-case basis whether a practice “unreasonably interferes” with the ability of consumers to reach content or the ability of content providers to reach consumers.

With Comcast’s usage caps and overlimit fees, the only reaching will be for your wallet. Consumers need not wait for Sling TV and others to complain to the FCC. You can also share your own views about Comcast’s usage caps by filing a complaint with the FCC here.

Four Red States Launch Coordinated Attack on Municipal/Public Broadband in Advance of FCC Hearing

Gov. Haslam

Gov. Haslam

Top officials of four southern states are coordinating efforts with Republican House members to oppose the Federal Communications Commission’s preemption of state laws that restrict or prohibit municipal/public broadband competition.

South Carolina Governor Nikki Haley, Tennessee Governor Bill Haslam, Alabama Attorney General Luther Strange, and Tennessee Attorney General Herbert Slattery have all backed efforts by House Republicans to curtail the regulatory powers of the FCC, claiming states’ rights should have precedence over the federal regulator. All four have sent letters to the House Energy & Commerce Committee putting their opposition on paper.

In 2014, FCC chairman Thomas Wheeler announced the FCC would seek to preempt state laws in North Carolina and Tennessee that severely restrict the development of broadband networks owned or controlled by municipalities and public utilities. The laws typically allow existing municipal networks to continue operating, but prohibit expansion beyond a pre-defined service area. Networks planning to launch after the laws took effect usually face onerous conditions and disclosure requirements that make many untenable. Large incumbent cable and phone companies were exempted from the law.

Wheeler’s efforts came in response to requests from community broadband providers seeking to deliver service to expanded service areas. The debate has put several local governments and utilities in an uncomfortable position of opposing their colleagues in state government.

In North Carolina, Attorney General Roy Cooper has taken the FCC to court in a petition to the U.S. Court of Appeals for the Fourth Circuit.

“Despite recognition that the State of North Carolina creates and retains control over municipal governments, the FCC unlawfully inserted itself between the State and the State’s political subdivisions,” Cooper wrote to the court. Cooper says the FCC’s actions are unconstitutional and exceeds the commission’s authority; “is arbitrary, capricious, and an abuse of discretion within the meaning of the Administrative Procedure Act; and is otherwise contrary to law.”

comcast attMuch of the opposition to municipal broadband comes from Republican politicians on the state and federal level. Most claim municipal providers represent unfair competition to the private sector. The American Legislative Exchange Council (ALEC) considers municipal broadband a significant issue. The corporate-funded group offers state legislators the opportunity to meet with telecom company lobbyists. Legislators are also provided already-written sample legislation restricting municipal broadband developed by ALEC’s telecom company members, including AT&T, Comcast, and Time Warner Cable. In states where Republicans hold the majority in the state legislature, such bills often become law.

The FCC represents a serious threat to the telecom company-sponsored broadband legislation. Instead of debating the impact of the law on unpopular phone and cable companies, the four state officeholders claim the dispute is a battle pitting states’ rights against the powers of the federal government.

Haslam, who also serves as the national chairman of the Republican Governors Association, formally asked Congress to intervene against the FCC to protect state sovereignty. In a separate appeal to the FCC, Tennessee officials argued the FCC violated the country’s founding concept of separation of state and federal power, citing the 10th Amendment to the Constitution reserving power not delegated to the United States for the states respectively, or to the people.

Haslam’s critics contend the governor has delegated his own power to protect the interests of large telecommunications corporations operating in his state — companies the critics claimed wrote and lobbied for a state law that established anticompetitive broadband corporate protectionism in Tennessee. Among Haslam’s top campaign contributors are AT&T and Comcast — Tennessee’s two largest telecommunications companies.

Gov. Haley

Gov. Haley

Slattery, appointed by the Tennessee Supreme Court, argued in his letter to Congress the FCC lacked any authority to circumvent Tennessee state law.

The FCC has consistently claimed it is not overturning any state laws. Instead, it is performing its duties under its mandate.

The FCC cites Section 706 authority to regulate when broadband is not being deployed in a reasonable and timely manner, something that cannot happen if a state law impedes new competitors and entrants.

Alabama’s attorney general joined the fight in a brief to the Sixth Circuit opposing preemption, with a copy sent to the House Subcommittee on Communications and Technology, which is planning to hold a hearing on the matter. Alabama has several municipal and public utility networks operating in the state. AT&T and Comcast also serve large parts of Alabama. AT&T gave $11,000 to Strange’s campaign, Comcast sent $8,500. The Koch Brothers, fierce opponents of community broadband, also donated $10,000 to Strange through Koch Industries.

South Carolina Governor Nikki Haley told legislators she strongly opposes external entities like the FCC overreaching into her state’s business. She did not mention AT&T is her fifth largest contributor, donating more than $16,000 to her last campaign. South Carolina’s largest cable operator is Time Warner Cable. It donated $9,900 to the governor’s campaign fund.

Britain Adopting American Broadband Business Model: Less Competition, More Rate Hikes

british poundA decision by Great Britain’s broadband industry to follow America’s lead consolidating the number of competitors to “improve efficiency” and wring “cost savings” out of the business resulted in few service improvements and a much bigger bill for consumers.

A Guardian Money investigation examining British broadband pricing over the past four years found customers paying 25-30 percent more for essentially the same service they received before, with loyal customers facing the steepest rate increases.

It’s a dramatic fall for a market long recognized as one of the most competitive in the world. In 2006, TalkTalk — a major British ISP — even gave away broadband service for free in a promotion to consumers willing to cover BT’s telephone line rental charges.

But pressure from shareholders and investment bankers to deliver American-sized profits have spurred a wave of consolidation among providers in the United Kingdom, similar to the mergers of cable companies in the United States. Well known ISPs like Blueyonder, Tiscali, AOL, BE, Tesco, O2, and others in the United Kingdom have all been swallowed up by bigger rivals – often TalkTalk. As of last year, just four major competitors remain – BT, Sky, TalkTalk and Virgin, which together hold 88% of the market. If regulators allow BT’s takeover of EE, that percentage will rise to 92%.

talktalk-logo-370x229As consumers find fewer and fewer options for broadband, they are also discovering a larger bill, fueled by runaway rate increases well in excess of inflation. While consolidated markets in the United States and Great Britain increasingly lack enough competition to temper rate increases, heavy competition on the European continent has resulted in flat or even lower prices for broadband along with significant service upgrades. British consumers now pay up to 50% more for broadband than many of their European counterparts in Germany, France, the Benelux countries, and beyond.

Also familiar to Americans, the best prices for service only go to new customers. Existing, loyal customers pay the highest prices, while those flipping between providers (or threatening to do so) get much lower “retention” or “new customer” pricing. But only those willing to fight for a better deal get one.

In October, TalkTalk, responsible for much of the consolidation wave, raised broadband prices yet again — the second major price hike this year. Customers are reeling over the rate increases, despite the fact they still seem inexpensive by American standards. Landline rental charges are increasing from $25.40 to $26.91 a month, and are a necessary prerequisite to buying Internet access from TalkTalk. Its Simply Broadband entry-level package is jumping another £2.50 a month just four months after the last rate hike. That means instead of paying an extra $7.60 a month for broadband, customers will now pay $11.40. The average British consumer now pays an average of $57.79 a month for a phone line with enhanced DSL broadband service.

btIn France, competition is forcing providers to move towards fiber optic broadband and scrap DSL service. But French consumers are not paying a premium for upgrades necessitated by competition on the ground. While British households pay close to $60 a month, a comparable package in France from Orange known as L’essentiel d’internet à la maison costs only $36.50 a month, including a TV package and unlimited calling to other landlines. But the deal gets even better if you shop around. Free, a major French competitor, offers a near-identical package for just $32.19 a month. In the United States, packages of this type can cost $130 or more if you do not receive a promotion, $99 a month if you do.

In France, providers rarely claim they need to cap Internet usage or raise prices to cover the cost of investing in their networks. That is considered the cost of doing business in a fiercely competitive marketplace, and it forces French providers to deliver good value and service for money. Providers like Patrick Drahi/Altice’s SFR-Numericable attempted to reap more profits out of its cable business by cutting costs, discontinuing most promotions and marketing, and offshoring customer support to North African call centers. At least one million customers left for better service elsewhere in 2015.

logo_freeIn Britain, there are fewer options for customers to seek a better deal, and the remaining providers know it. As a result, marketplace conditions and an increasing lack of competition have made conditions right for rate increases. BT, Sky, Virgin, and Plusnet (controlled by BT) have all taken advantage and hiked prices once again this year between 6-10%, on top of other large rises.

Ewan Taylor-Gibson, broadband expert at uSwitch.com, told the Guardian, “it’s the existing customers that have borne the brunt of the increase in landline and package costs over recent years.”

Many British consumers are afraid of disrupting their Internet access going through the process of changing providers in a search for a better deal. Some report it can take a few days to a week to process a provider change that should take minutes (because most providers rely entirely on BT’s DSL network over which they offer service). Those willing to make a change are about the only ones still getting a good deal from British providers. Customers are starting to learn that when their new customer promotion ends, asking for an extension or signing up with another company is the only way to prevent a massive bill spike that Taylor-Gibson estimates now averages 89%.

BT spent $1.36 billion dollars securing an agreement with Champions League football.

BT spent $1.36 billion dollars securing an agreement with Champions League football.

Providers with the largest increases use the same excuses as their American counterparts to defend them. BT claims a reduction in income from providing landline service is forcing it to raise prices to make up the shortfall. Critics suggest those increases are also helping BT recoup the $1.36 billion it controversially paid for the rights to carry Champions League football — money it could have invested in network upgrades instead.

The current government seems predisposed to permit the marketplace to resolve pricing on its own, either through competition among the remaining players or allowing skyrocketing prices to reach a level deemed attractive by potential new entrants into the market. The usually protective British regulator Ofcom also seems content taking a light hand to British ISPs, enforcing price disclosures as a solution to increasingly costly Internet service and making it easier for consumers to bounce between the remaining providers many think are overcharging for service.

Things could be worse. British consumers could face the marketplace duopoly or monopoly most customers in the United States and Canada live with, along with even higher prices charged for service. The Guardian surveyed telecom services across several European countries and found that, like in the UK, most customers are required to bundle a landline rental charge and broadband package together to get Internet access, but they are still paying less overall than North Americans do.

Here is what other countries pay for service:

United Kingdom: Basic BT home phone service with unlimited “up to 17Mbps” DSL broadband costs $31.12 per month, plus a monthly landline charge of $27.35 including free weekend calls. An unlimited calling plan with no dialing charges costs an extra $12 a month. Competitor TalkTalk charges $11.40 for unlimited broadband on its entry-level Simply Broadband offer, plus $26.91 for the monthly landline rental charge.

France: Many Orange customers sign up for the popular L’essentiel d’internet à la maison plan, which bundles broadband, a phone line with unlimited calling to other landlines, and a TV package available in many areas for $36.50 a month. Competitor Free.fr charges $32.19 for essentially the same package.

Germany: Deutsche Telekom offers its cheapest home phone/broadband package for $37.75 after a less expensive promotional offer expires. One of its largest competitors, 1&1, offers the same package for $33.29 a month after the teaser rate has ended.

Spain: Telefónica, Spain’s largest phone company, offers service under its Movistar brand combining an unlimited calling landline and up to 30Mbps Internet access for $46.21 a month. Its rival Tele2 offers a comparable package for a dramatically lower price: $29.11 a month.

Ireland: National telecom company Eircomis is overseeing Ireland’s telecom makeover, replacing a lot of copper phone lines with fiber optics. Basic broadband starts with 100Mbps service on the fiber network with a promotional rate of $26.82 for the first four months. After that, things get expensive under European standards. That 100Mbps service carries a regular price of $66.51 a month, deemed “hefty” by the Guardian, although cheaper that what North Americans pay cable companies for 100Mbps download speeds after their promotion ends. For that price, Irish customers also get unlimited calling to other Irish landlines and mobiles. If that is too much, rival Sky offers a basic phone and broadband deal for $32.18 with a one-year contract.

AT&T U-verse with GigaPower Gigabit Internet Dribs and Drabs Out in 23 New Cities

u-verse gigapowerAT&T has introduced 23 new communities and adjacent service areas in North Carolina, Georgia, Florida, Illinois, Texas, and Tennessee to the possibility of getting gigabit broadband speeds, if customers are willing to wait for AT&T to reach their home or small business.

Here are the latest cities on AT&T’s new launch list:

  • Florida: Coral Gables, Homestead, Miami Gardens, North Miami, Oviedo, Sanford, and Parkland
  • Georgia: Alpharetta, Cartersville, Duluth, East Point, Avondale Estates, Jonesboro, and Rome
  • Illinois: Bolingbrook, Mundelein, Shorewood, Elmwood Park, Volo, and parts of Munster, Ind.
  • North Carolina: Clemmons, Garner, Holly Springs and Salisbury
  • Tennessee: Spring Hill and Gallatin
  • Texas:  Hunters Creek Village and Rosenberg

AT&T claims its fiber to the home service will eventually reach more than 14 million customers across its service area, but adds it will only reach a fraction of them – one million – by the end of 2015. Most customers will have around a 7% chance of getting gigabit speeds from AT&T this year.



In Salisbury, N.C., where Fibrant delivers community-owned broadband at speeds up to 10Gbps, AT&T gave space in its press release for Rep. Harry Warren, the local Republican member of the state House of Representatives, to praise the phone company.

“I’m excited about this new development, and appreciate AT&T’s continued investment in Rowan County,” Warren said.

Warren says he fought to protect Fibrant from a 2011 state law — drafted by the state’s largest phone and cable companies — that effectively outlawed community-owned broadband competition. But he, along with most of his Republican colleagues, also voted in favor of it.

Earlier this year, Federal Communications Commission chairman Thomas Wheeler announced the FCC would pre-empt municipal broadband bans in North Carolina and Tennessee. Warren told the Salisbury Post he wondered if Wheeler was guilty of “federal overreach.”

“That’s my biggest concern about it,” he said.

Both AT&T and Time Warner Cable have been regular contributors to Warren’s campaigns since 2010.



State Sen. Andrew Brock, also a Republican, told the newspaper Wheeler’s actions show how out of touch the Obama Administration is with “technology and the pocketbooks of American families.”

“I find it interesting that a bureaucrat that is not beholden to the people can make such a claim without going through Congress,” Brock said.

The year Brock voted in favor of banning community broadband competition in North Carolina, he received $3,750 from telecom companies. This election cycle, Time Warner Cable is his second largest contributor. AT&T and CenturyLink also each donated $1,000 to Brock’s campaign fund.

While AT&T is free to expand its gigabit U-verse upgrade as fast or as slow as it chooses, the community providers that delivered gigabit speeds well before AT&T are limited by state law from expanding service outside of their original service areas or city limits. In plain English, that effectively gives AT&T state-sanctioned authority to decide who will receive gigabit speeds and who will not.

The FCC’s pre-emption, if upheld despite ongoing challenges from Republican lawmakers on the state and federal level, could allow Fibrant to join forces with other municipal providers in North Carolina to expand fiber broadband to new communities around the state.

Charter’s “Expert” Not Too Convincing About Company’s Commitment to Not Reimpose Usage Caps

get the factsAn expert hired by Charter Communications to offer “qualified” views on the competitive impact of a merger involving Charter, Bright House Networks, and Time Warner Cable got his facts wrong about Charter’s data cap policy, a mistake that calls into question his analysis about the company’s potential to abuse broadband customers by imposing data caps after its three-year commitment not to expires.

Theodore Nierenberg, a professor of economics at the Yale School of Management, among other things, offered an expansive rebuttal to opponents of the Charter merger deal, arguing that it would enhance competition and deliver consumers enhanced benefits.

Nierenberg 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, several months before unveiling a bid for both Time Warner and Bright House, neither of which have capped customer usage.

“I conclude that actions such as charging interconnection fees, imposing usage based billing or data caps, or degrading network performance are very unlikely, both because New Charter has no incentive to undertake them, and because the FCC will enforce New Charter’s commitments,” Nierenberg wrote.

charter twc bhBut his facts are in error. The same company that believed usage caps were an essential part of its broadband service between early 2009 until October 2014 has suddenly turned over a new leaf? Nierenberg claims there was effectively no leaf to turn, claiming Charter had no “active data cap” since January 2012¹:

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.)

Customers in some areas were called by Charter for exceeding their usage allowance, and usage rationing remained a fact of life in Charter’s Acceptable Use Policy until late last year, not January 2012 as Nierenberg claims.

So what assurance should a customer take from a company that believed strongly in usage caps for more than five years? Surely not that Charter will never consider engaging in data capping yet again three years from now.

Charter can assure consumers of its good intentions by declaring it will always offer affordable unlimited access Internet without a three-year expiration date. Quietly dropping a cap several months before executing a well-planned buy of Time Warner Cable and Bright House doesn’t inspire confidence. Too often short term rate freezes are followed by accelerated rate hikes once the deal conditions expire.

¹ Page 48

Comcast Steamrolls Arkansas, Louisiana, Tenn. and Virginia With More Usage Caps Starting 12/1

comcast gunComcast is accelerating its rollout of compulsory usage caps, adding new markets in the southern U.S. to its three-year old “trial” of what it calls its “data usage plan.” DSL Reports received a tip Comcast is now sending e-mail to affected customers.

Little Rock, Ark., Houma, LaPlace, and Shreveport, La., as well as Galax, Va., will be treated to Comcast’s 300GB usage cap with a $10 per 50GB overlimit fee beginning Dec. 1. These three states join Florida, Alabama, Kentucky, Georgia, Maine, Mississippi, South Carolina and Arizona, which now face Comcast’s form of usage rationing.

In Tennessee, Comcast is introducing its 300GB cap in Johnson City, Gray, and Greenville. The cable operator is also risking customers by introducing caps in Chattanooga, where it already faces serious competition from gigabit provider EPB, which has no usage limits, and AT&T U-verse, which doesn’t dare enforce its own 250GB cap.

Comcast began rapidly expanding its usage cap trial this fall, with new markets being announced for usage limits about once a month.

Chattanooga resident Ron Rogers called to cancel his Comcast service this afternoon. He’s giving up a good promotional discount Comcast offered to keep him a customer back in January and is headed to EPB Fiber.

“This was the last straw for Comcast,” Rogers tells Stop the Cap! “I am tired of being abused by these people. They must be crazy to think anyone who seriously uses the Internet is going to tolerate this when there are two other providers smart enough to realize usage caps are ridiculous in this day and age. Comcast can shove it.”

data trialsComcast’s spreading usage caps are not popular with customers. Within hours of the news Comcast would be expanding its cap “trial,” more than 900 negative comments appeared on Reddit slamming the company.

“It is just staggering that despite all the bad press, publicity and truly awful service, Comcast is actually taking calculated measures to make things worse,” wrote one Reddit commenter.

Comcast’s frequent defense of its usage plan is that the majority of its customers will never be affected by it, consuming less than 40GB a month. But those with experience living under Comcast’s cap tell Stop the Cap! anyone playing downloadable video games or using online video are at serious risk of being charged penalty overlimit fees.

“It is very easy to hit 100GB just downloading game updates and if you watch your shows online, you will come uncomfortably close to the cap,” said Pat Kershaw in Kentucky. “Leaving a live video stream running overnight one night by mistake after I fell asleep meant a Netflix-free weekend for me last month, because it would have put me past my allowance. Hulu’s autoplay feature is also very dangerous.”

courtesy-noticeHans says any household with kids will quickly learn Comcast isn’t being honest claiming usage caps only affect a “few customers” after they start getting warning messages injected into their web browser.

“What is worse is every time I call support about the messages that I am getting on the 18th of the month because I have already burned through my limit with my kids watching all their online content, support keeps putting me back on the queue for the next person or dropping the line,” Hans writes. “No one wants to deal with it!”

Those web warning messages also become intrusive for many customers, because some claim they never go away until the end of the billing cycle.

“I made sure to go over the 300GB cap this month to see what would happen and I received a phone call telling me I’ve went over and now I receive a popup from Comcast on my computer about every 30 seconds telling me I’ve went over as well,” writes Gldoorii. “The popups never stop. I have to deal with them until the end of the month as they keep interrupting my work.”

Other Comcast customers have grown suspicious about the company’s usage measurement tool, which in some cases reported spikes in usage only after the cap began to be enforced.

comcastdatausagemeter“I checked my data usage on Oct. 21 and it said I only used 162GB,” writes Sharon. “I even have [a screenshot] and saved it as I had a feeling Comcast would pull something. [On] Oct. 23, I had a pop-up on my computer that says ‘you have used 292 of 300GB’ and I went to the data usage and it shows that. Nobody in my house downloaded any huge files the past two days. So, is Comcast artificially pumping up our usage to make us go over or what? It is impossible that I only used 162GB for 21 days and then used 130GB the past two days.”

Sharon is lucky her usage meter is working. Other customers report Comcast’s meter often stops working for weeks.

“My data usage meter still does not work and it has been 19 days,” says Gldoorii. “No chat or support person has been able to figure out why it doesn’t work and that I need to call or chat whenever I want to ask what my usage is.”

Customers who want out also get the Comcast treatment as they head for the exit.

“We were charged a $150 early termination fee because Comcast does not consider imposing a usage cap to be a material change to our contract, which is unbelievable,” writes Anna Lu in Ft. Lauderdale. “These guys are nothing less than crooks and they only forgave it after my roommate complained to the Better Business Bureau. They said they were doing us a favor forgiving the charge. No wonder everyone hates Comcast.”

But not everyone is unhappy about Comcast’s usage caps.

“Our call center volumes are way up ever since Comcast brought caps to Atlanta and Florida,” reports an AT&T sales representative who agreed to talk to Stop the Cap! if we kept his identity private. “It’s common knowledge we do not enforce any caps on U-verse although we cannot tell customers that officially, but most never even ask. We’re signing up ex-Comcast customers right and left. They are not happy we cannot give them the same speeds Comcast does, but they won’t have to worry about a cap from us, at least for now.”

Other customers are waiting impatiently for Google Fiber or other competitors.

“In Atlanta Comcast now offers an unlimited data option add on to your plan for additional $35,” writes a customer on Comcast’s support forum. “So now we get to pay over $100 for 25Mbps service whereas Google Fiber [in] Atlanta [charges] $70 for one gigabit service and no data cap.”

In July, Comcast CEO Brian Roberts downplayed the impact of the company’s usage caps with investors, suggesting some customers actually supported the usage plans.

“We do have a few trials going on in different markets,” Roberts said. “The responses have been neutral to slightly positive. We don’t have any plans on expanding that to other market/bases anytime soon.”

Cablevision’s Next Owner Drove Away One Million Customers in Europe; Profits Come First

The French press continues to ridicule Patrick Drahi's debt-laden acquisitions as "Altice in Wonderland." (Cartoon: Les Echos)

The French press continues to ridicule Patrick Drahi’s debt-laden acquisitions as “Altice in Wonderland.” (Cartoon: Les Echos)

The next owner of Cablevision and Suddenlink put profits ahead of people and managed to drive away more than one million of his own customers in Europe within a year of a massive cost-cutting operation that led to service degradation and noncompetitive prices.

Patrick Drahi’s Altice NV has similar plans in store for both American cable companies if he manages to win regulator approval of the acquisitions.

The Wall Street Journal reports Altice was willing to sacrifice market share if it meant the company could extract cost-savings and higher profits that Drahi could use to help pay off some of his acquisition loans.

Some Wall Street analysts were initially excited to hear Drahi would slash salaries, knock union heads, and eviscerate at least $900 million in costs annually from Cablevision, results likely to boost Cablevision’s share price and fatten investor returns.

The cost-cutting formula is always the same in an Altice takeover. Special teams arrive from Europe within days of a deal closing with strict instructions to cut employees, reduce the salaries of those remaining, and brutally cut costs out of the business. Drahi is famous in Europe for stopping payment on checks to suppliers, leaving them unpaid until they agreed to offer his company discounts up to 40%. Employees also share stories of having to pay for office supplies out-of-pocket and in at least one case, staffed a wireless store that carried no phones in inventory because Drahi stiffed his supplier.



The bad news for Wall Street? Customers of Drahi’s cable and wireless companies are fleeing in droves. At least 1.1 million of Altice’s French customers have taken their business elsewhere, fed up with deteriorating service and uncompetitive prices.

One manager lamented that as Altice-owned Numericable-SFR’s wireless network deteriorated to the point of regularly dropping calls, Drahi borrowed nearly $2 billion he set aside in preparation for further acquisitions.

“Debt is Drahi’s drug,” commented French news site LeJDD.

Drahi leverages his buyouts with loans covering up to 80% of the purchase price. Eerily similar to toxic sub-prime mortgage debt, investment banks consider holding too much of Drahi’s debt potentially poisonous, so they routinely repackage it with other loans and resell it to other financial institutions and unknown investors. That has some in the French government concerned Drahi is building the world’s first “too big to fail” telecom company, while leaving investors in the dark about the risks of holding his loans.

The lessons learned watching Drahi manage one of France’s largest wireless operators may concern U.S. regulators contemplating Drahi’s buyout offers of Cablevision and Suddenlink.

numericable_sfr_logoIn the first quarter under Drahi, SFR boosted margins by 21% based on ruthless cost cutting. But a stunning 445,000 customers quickly left the operator. Critics contend Drahi’s cost cutting does temporarily boost profits, but also allows network quality to degrade, eventually alienating customers who leave. Drahi then uses SFR’s smaller customer base as an excuse for further cost-cutting. Between 2006-2011, Drahi eliminated half of the wireless provider’s workforce and outsourced much of his call center customer support operations.

Those still working at Altice companies after the cost-cutters depart are left in a state of siege.

Optimum-Branding-Spot-New-Logo“He’s a beast,” one employee told LeJDD in a piece that compared working for SFR with being in hell. All expenses are scrutinized, company-paid travel is canceled, team exercises and company meals are dropped, and for vendors and suppliers things are even worse. All projects are frozen and all outstanding invoice payments are stopped, reviewed one-by-one. Drahi’s goal is to find 600 million euros annually in savings to repay the €13 billion he borrowed to acquire SFR in 2014.

Employees, even those represented by France’s powerful trade unions, are scared into silence, reports LeJDD.

“Be happy you have a job,” is the standard response one trade unionist routinely receives from what is left of SFR’s management. Drahi doesn’t spare management below him either. Within weeks of Altice’s takeover, the flown-in French cost cutters immediately terminated 55 of the 70 SFR managers earning more than 150,000 euros per year. At least 100 middle managers were also quickly shown the door. IT and networking positions are also deemed ‘bloated’ and a reorganization quickly whittled employees down to a token force. The marketing department? Abandoned. Also dismantled was SFR’s team of innovators, working on next generation network upgrades and technology.

SuddenlinkLogoCall centers that handle customer service requests were “on the verge of suffocation,” reported LeJDD. One small call center operator had to send his attorney to SFR’s offices to threaten them over an outstanding bill of one million euros. Drahi demanded an immediate 35% discount if the attorney wanted to leave with a check in hand.

Cable customers share their own anecdotal stories, including one forced to acquire and supply his own cable to complete an installation because the technician had run out. Another reported a tardy cable installer humbly apologized, claiming he was forced to pay out-of-pocket for fuel to get his stalled cable truck back on the road again.

The horror stories from Europe are making an impact in New York’s financial markets, along with Altice’s improbable formula of profiting from alienating customers. After 18 months of unbridled growth and 47 billion euros in loans to finance multiple acquisitions, Wall Street is getting worried. Altice has lost 50% of its value in just six months and Moody’s has now rated Altice’s debt as “highly speculative,” the last step on the basement stairs right before “default.”

“Drahi carries too much debt,” said the head of a French investment fund. “He and his team have lost all sense of reality.”

competitionLeJDD put it more colorfully: “The ogre was too greedy.”

To placate investors, Drahi is planning to slow future acquisitions, something he may not have had much say in. Bankers forced Drahi to accept considerably higher interest rates to finance his American cable company buyouts.

Numericable-SFR’s long-dead marketing department is also being revived, offering discounts and marketing the service more aggressively to stem customer defections. But the company’s increasingly poor reputation is making that a hard sell in Europe, where fierce competition among multiple providers has fueled a long-lasting price war.

Altice officials point to the fact their severe cost-cutting strategy may have faced greater challenges in Europe, where competition is always a speed bump to high profits. But company officials privately stress their ‘profits first’ formula stands a better chance of success in America, where customers don’t have a lot of choice. Competition is less risky for Suddenlink than it is for Cablevision. Altice promises to wring $215 million annually in savings out of the largely rural and small city provider Suddenlink. But Altice’s estimate of $900 million in savings from Cablevision, which faces formidable competition from Verizon FiOS, seems much less realistic, according to Wall Street analysts.

MoffettNathanson analyst Craig Moffett said Altice was taking cuts to an extreme.

“You’re talking about huge cuts to customer service levels to installation and maintenance costs to marketing and promotions,” Moffett told Reuters. “You can’t expect to be able to make dramatic cuts… without having an impact on the business.”

Wall Street: Broadband is Underpriced – Slap On Caps and Usage Billing to Kill Cord-Cutting

more moneyBroadband prices in the United States are far too low and it is long past time to “significantly” boost prices and introduce usage caps/consumption-based billing to put an end to the threat of online video competition once and for all.

Those are the views of Jonathan Chaplin, a research analyst for New Street Research LLP, and he made sure to share them with Robert Marcus, CEO of Time Warner Cable on a morning conference call with investors.

“Our analysis suggests that broadband as a product is underpriced,” Chaplin told Marcus, and it is hardly the first time he has beat the drum for higher Internet pricing.

In June, Chaplin wrote a note to investors that pulled no punches about what usage billing is really all about.

new street research“Our work suggests that cable companies have room to take up broadband pricing significantly and we believe regulators should not oppose the re-pricing (it is good for competition & investment),” Chaplin wrote. “The companies will undoubtedly have to take pay-TV pricing down to help ‘fund’ the price increase for broadband, but this is a good thing for the business. Post re-pricing, [online video] competition would cease to be a threat and the companies would grow revenue and free cash flow at a far faster rate than they would otherwise.”

Chaplin pestered Marcus this morning about why Time Warner Cable has remained steadfast in keeping compulsory usage caps or usage-based pricing away from their broadband customers.



“As part of the merger conditions, you made a concession to not moving towards usage-based pricing for a number of years,” Chaplin asked. “I’m wondering if that’s something that you felt the FCC required, or that came up during the course of the Comcast, Time Warner Cable discussions and why you needed to offer that up as a condition.”

Ironically, it was Marcus who schooled Chaplin on the realities of a marketplace where cap-free competitors like Google, Verizon, and AT&T U-verse (their stated cap is not enforced) exist and are more than capable of stealing Time Warner Cable customers if the cable company gets too greedy. Time Warner’s best chance of earning more broadband revenue is to sell faster service, Marcus noted.

“I can’t give you an outlook on where broadband pricing is going, except to say we’re going to continue to deliver more and more utility to customers,” Marcus said. “Generally speaking, where customers get more value out of your products, they’re willing to pay more. But what we actually charge is going to be a function of what the marketplace dictates. It’s a very competitive market out there and we’re going to have to continue to price our products in a way that allows us to acquire and retain them.”

Chaplin’s remarks tying usage pricing to curtailing online video competition are no surprise to consumer advocates, who believe usage-based billing is an obvious weapon cable and phone companies can use to protect their cable-TV revenue. Sling’s CEO considers usage pricing a serious threat to the viability of alternative video providers like Sling TV.

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