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House of (Credit) Cards: How to Blow Through Your Usage Cap With One Netflix Show

house-of-cards

“…every kitten grows up to be a cat. They seem so harmless, at first, small, quiet, lapping up their saucer of milk. But once their claws get long enough, they draw blood, sometimes from the hand that feeds them. For those of us climbing to the top of the food chain, there can be no mercy. There is but one rule: Hunt or be hunted.” — Francis Underwood

Addicts of Netflix’s hit series House of Cards may need to grab a card of a different kind to cover overlimit fees charged by your Internet Service Provider for blowing past your usage allowance.

As online video streaming moves into the realm of 4K — the next generation of high-definition video — watching television shows and movies online could get very expensive because of the massive file sizes involved. It’s all just in time for ISP’s increasing enforcement of usage caps.

courtesy-notice-640x259Gizmodo just did the math for those intending to spend a weekend watching the entire second season of the made-for-Netflix series in high-definition:

Streaming in 1080p on Netflix takes up 4.7GB/hour. So a regular one-hour episode of something debiting less than 5GB from your allotment is no big deal. However, with 4K, you’ve got quadruple the pixel count, so you’re burning through 18.8GB/hour. Even if you’re streaming with the new h.265 codec—which cuts the bit rate by about half, but still hasn’t found its way into many consumer products—you’re still looking at 7GB/hour.

But you’re not watching just one episode, are you? Of course not! You’re binging on House of Cards, watching the whole series if not in one weekend then certainly in one month. That’s 639 minutes of top-quality TV, which in 4K tallies up to 75GB if you’re using the latest and greatest codec, and nearly 200GB if not. That means, best case scenario, a quarter of your cap—a third, if you’re a U-Verse customer with a 250GB cap—spent on one television show. Throw in a normal month’s internet usage, and you’re toast.

Sure you can send 900+ emails, download hundreds of songs, upload hundreds of pictures, but you can't watch one standard and one HD movie a day at the same time without blowing past your AT&T DSL limit.

Sure you can send 900+ emails, download hundreds of songs, upload hundreds of pictures, and play online games 24 hours a day, but you can’t also watch one standard and one HD movie a day at the same time without blowing well past your AT&T DSL limit.

What is worse is that h.265 is still more theoretical than actually available to most consumers, so customers will either have to settle with degraded video or prepare to eat close to 19GB an hour at the highest resolution. No wonder Netflix has introduced video degradation settings to save you from your ISP’s arbitrary cap. Of course, your video quality will suffer, especially on a big screen television.

Comcast customers (and presumably Time Warner Cable customers also eventually subjected to Comcast’s cap) will still have a generous 100GB left over to watch, browse, and send that avalanche of e-mails usage cappers love to boast about. If you live in the reality-based community and have a family active online, that 100GB isn’t going to go too far. Video game addicts regularly face downloading huge updates, many ranging from 8-12GB apiece. Call of Duty: Ghosts? That’s 39.5GB. Madden NFL 25? Another 12.51GB, says Gizmodo. Using a file backup cloud storage service can also eat your allowance for breakfast.

Gizmodo also mentions Sony’s Unlimited Video service has 70 titles (and growing) available in 4K. A Sony representative admits a single two-hour movie will burn up 40GB. Watch a few of those and you are well on your way to blowing your allowance Vegas-style.

AT&T cooked up the arbitrary de facto standard overlimit fee now adopted by many American ISPs, and granular it isn’t. Exceed your allowance by even 1 kilobyte and you will be charged an extra $10 for 50 extra gigabytes. Because AT&T, Comcast, Suddenlink, and others are not already paid enough for broadband service and their modem rental.

Online video is the online application most likely to put you over your limit. Most ISPs don’t like to talk about that, however. They prefer to explain caps in terms of activities no online user is likely to ever exceed, including sending thousands of e-mails, viewing hundreds of thousands of web pages, transferring boatloads of songs and images, and watching YouTube videos at low resolution.

If you don’t watch online video, your cable or phone company thanks you for paying for cable television instead. If you haven’t used a peer-to-peer network in years, chances are you won’t exceed any limits either. But as Internet usage continues to evolve, anything that appears to be a competitive threat delivered over your ISP’s broadband pipe can be effectively controlled with the elimination of flat rate Internet service and imposing overlimit fees that deter usage.

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Comcast Reaches Surprise Agreement to Acquire All of Time Warner Cable for $44 Billion

timewarner twcComcast will announce later this morning it has reached an agreement to acquire all of Time Warner Cable in an all-stock deal worth $44 billion.

If approved by regulators, Comcast will dramatically increase its size as the nation’s largest cable operator with over 33 million subscribers — vastly outnumbering every other cable company in the country. It also likely means Time Warner Cable broadband subscribers will eventually be subject to Comcast’s usage caps and overlimit fees, now being market tested around the country.

The offer of $159 a share for Time Warner Cable stock – $1 less than what TWC CEO Rob Marcus demanded for a buyout – is far higher than the $133 a share in cash and stock offered earlier by Charter Communications.

Tonight’s revelation that Time Warner Cable and Comcast reached a deal, first reported by CNBC, likely caught Charter by surprise. Charter had tried to acquire Time Warner Cable for months, going as far as nominating candidates for TWC’s board of directors that could have influenced a sale of the company. At the same time, Charter thought it was negotiating a friendly deal with Comcast to divide Time Warner Cable territories between the two companies.

Comcast-LogoTime Warner Cable management offered no clues they were negotiating with Comcast and delivered a presentation to shareholders last week promising major upgrades for Time Warner customers and future success as a standalone cable operator. All of those plans are now in doubt.

Comcast and Time Warner Cable reportedly believe the deal will quickly pass any antitrust review before the end of the year because neither company competes in the same markets, but Comcast will offer to divest a token three million subscribers from the combined company, according to sources.

The FCC formerly limited cable companies from owning or controlling more than 30% of the cable industry, but Comcast successfully sued to have that ownership cap overturned. A belief the deal would present looming antitrust problems could be grounds for the U.S. Department of Justice to oppose the deal, likely terminating it.

monopolyConsumer groups hope the deal gets derailed as soon as possible.

“In an already uncompetitive market with high prices that keep going up and up, a merger of the two biggest cable companies should be unthinkable,” said Free Press president Craig Aaron. “This deal would be a disaster for consumers and must be stopped. No one woke up this morning wishing their cable company was bigger or had more control over what they could watch or download. But that — along with higher bills — is  the reality they’ll face tomorrow unless the Department of Justice and the FCC do their jobs and block this merger. Stopping this kind of deal is exactly why we have antitrust laws.”

“It is simply dangerous for a large proportion of our nation’s critical communications infrastructure to be in the hands of one provider,” said Public Knowledge staff attorney John Bergmayer. “It is already the nation’s largest ISP, the nation’s largest video provider, and the nation’s largest home phone provider.  It also controls a movie studio, broadcast network, and many popular cable channels. An enlarged Comcast would be the bully in the schoolyard, able to dictate terms to content creators, Internet companies, other communications networks that must interconnect with it, and distributors who must access its content.”
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Staking the Heart of the Power-Sucking Vampire Cable Box

vampire-power-1-10964134Two years after energy conservation groups revealed many television set-top boxes use almost as much electricity as a typical refrigerator, a voluntary agreement has been reached to cut the energy use of the devices 10-45 percent by 2017.

The Department of Energy, the Natural Resources Defense Council, the American Council for an Energy-Efficient Economy, the Appliance Standards Awareness Project, the Consumer Electronics Association, and the National Cable & Telecommunications Association agreed to new energy efficiency standards for cable boxes expected to save more than $1 billion in electricity annually, once the new equipment is widely deployed in American homes. That represents enough energy to power 700,000 homes and cut five million tons of CO2 emissions each year.

“These energy efficiency standards reflect a collaborative approach among the Energy Department, the pay-TV industry and energy efficiency groups – building on more than three decades of common-sense efficiency standards that are saving American families and businesses hundreds of billions of dollars,” said Energy Secretary Ernest Moniz. “The set-top box efficiency standards will save families money by saving energy, while delivering high quality appliances for consumers that keep pace with technological innovation.”

DVR boxes are the biggest culprits. American DVRs typically use up to 50W regardless of whether someone is watching the TV or not. Most contain hard drives that are either powered on continuously or are shifted into an idle state that does more to protect the life of the drive than cut a consumer’s energy bill. A combination of a DVR and an extra HD set-top box together consume more electricity than an ENERGY STAR-qualified refrigerator-freezer, even when using the remote control to switch the boxes off.

NRDC Set-Top Boxes  Other Appliances-thumb-500x548-3135

Manufacturers were never pressed to produce more energy-efficient equipment by the cable and satellite television industry. Current generation boxes often require lengthy start-up cycles to configure channel lineups, load channel listings, receive authorization data and update software. As a result, any overnight power-down would inconvenience customers the following morning — waiting up to five or more minutes to begin watching television as equipment was switched back on. As a compromise, many cable operators instruct their DVR boxes to power down internal hard drives when not recording or playing back programming, minimizing subscriber inconvenience, but also the possible power savings.

In Europe, many set-top boxes are configured with three levels of power consumption — 22.5W while in use, 13.2W while in standby, and 0.65W when in “Deep Sleep” mode. More data is stored in non-volatile memory within the box, meaning channel data, program listings, and authorization information need not be re-downloaded each time the box is powered on, resulting in much faster recovery from power-saving modes.

The new agreement, which runs through 2017, covers all types of set-top boxes from pay-TV providers, including cable, satellite and telephone companies. The agreement also requires the pay-TV industry to publicly report model-specific set-top box energy use and requires an annual audit of service providers by an independent auditor to make sure boxes are performing at the efficiency levels specified in the agreement. The Energy Department also retains its authority to test set-top boxes under the ENERGY STAR verification program, which provides another verification tool to measure the efficiency of set-top boxes.

Comcast, DirecTV, DISH Network, Time Warner Cable, AT&T, Verizon, Cox Communications, Charter Communications, Cablevision, Bright House Networks and CenturyLink will begin deploying new energy-efficient equipment during service calls. Some customers may be able to eventually swap equipment earlier, depending on the company.

http://www.phillipdampier.com/video/WCCO Minneapolis Check Your Cable Box 6-27-11.mp4

WCCO in Minneapolis reported in 2011 cable operators like Comcast may make subscribers wait 30 minutes or more for set-top box features to become fully available for use after plugging the box in. (1:50)

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AT&T Deregulation Wallops Californians In Their Wallets; Rates Up 222%, Despite Competition Claims

special reportStop the Cap! reader Steve L. has heard enough of AT&T’s promises that deregulation would bring more competition and better deals to Californians.

The Carlsbad resident is staring at the fruits of AT&T’s labor — winning deregulation of phone rates in 2006: a  basic phone bill that has increased from $5.70 a month before deregulation to $21.25 effective Jan. 2, 2014. That represents a 272 percent increase for basic measured (pay-per-minute) local telephone service. As if that was not enough, AT&T is also raising the per-minute rate for semi-local calls for the second time in two years. Earlier this year, AT&T slashed customers’ calling allowances by 25 percent, reducing the 225 minutes a month of toll-free calling down to 168 minutes in January.

Customers living in large, spread out cities in California are accustomed to Zone Usage Measurement (ZUM) charges for calls placed to numbers more than 12 miles from the local telephone exchange. But they may get bill shock after noticing how much the per-minute rates have increased:

  • ZUM 1/2 (12-15 miles): Calls have doubled in price over the last 36 months. Prior to 2013, calls cost three cents per minute. AT&T raised prices to four cents in January and will raise them again to six cents per minute on Jan. 1;
  • ZUM 3 (15-16 miles): Calling prices have increased from five cents a minute in 2012 to six cents a minute in 2013 and will be seven cents per minute in 2014.

attcarlsbad“After surcharges, fees, and taxes, my bill will be nearly $30 per month for measured rate service, representing a near doubling of cost in just a 22-month period,” Steve writes. “I have no other choice than AT&T for a true powered landline, but I am rejecting this latest increase and plan to test and move to a VoIP system.”

The constant parade of rate increases from the state’s largest local telephone company began shortly after the California Public Utilities Commission (CPUC) unanimously approved sweeping deregulation of telephone rates in August 2006. Then Republican Commissioner Rachelle Chong was the driving force behind the effort, reports the San Francisco Chronicle.

Chong embraced AT&T’s attitude about telecommunications deregulation, promising consumers would not face abusive rate hikes or bad service. Under the old system, AT&T telephone rates were capped in California. AT&T had to approach the CPUC and justify any proposed increases. Without solid evidence, the company’s rate increase requests were rejected. Under deregulation, AT&T was permitted to set rates at-will.

“By the end of the 2010, these rate caps will no longer be necessary,” Chong promised as the new rules were being phased in. “The market will be so competitive it will discipline prices.”

Not quite.

att_logoAT&T’s rates have shot up as much as 222 percent for the average Californian’s measured rate phone service. Some customers, including our reader, found rates nearly three times higher than they were before deregulation. In the last few years, AT&T has increased prices on landline service and calling features even more dramatically across the state:

  • AT&T Flat-Rate landline service jumped 115 percent since 2006, from $10.69 to $23 a month;
  • Call Waiting, a popular phone feature, is up nearly 180 percent;
  • Anonymous Call Rejection fees have almost quadrupled;
  • Lifeline Service for California’s most disadvantaged is up 28 percent.

“My belief is that AT&T is essentially harvesting,” Dane Jasper, chief executive of Sonic.net, a competing broadband Internet service in Santa Rosa that tosses in domestic phone service for free, told the newspaper. “They jack up the rate by a pretty egregious amount … because if people leave, well, where are they going? AT&T mobile phone service in at least half the cases. So they’re happy to have them leave or happy to have them stay.”

rate hikesAT&T defends the increases by suggesting rates were artificially restrained by rate regulators under the old system, and the new higher prices reflect economic reality and the deregulated marketplace. But AT&T’s rate increases have blown past other service providers in the state. Verizon’s flat rate service only increased 18 percent since deregulation. Independent providers SureWest and Frontier Communications have only raised prices by about six percent.

With these kinds of rate increases, customers like Steve are making hard choices about whether to keep or ditch their landline service. Ironically, AT&T’s argument to decommission traditional landline service is based on the premise customers are abandoning landline service. AT&T advocates moving customers to its deregulated U-verse platform in urban areas and switch rural customers to wireless-only service.

Chong paid a personal price for her erroneous predictions of consumer savings. In December 2009, the Democratically controlled State Senate refused to hold hearings on Chong’s reappointment to the CPUC, ending her term. AT&T and Verizon strongly backed Chong and lobbied hard for her confirmation. AT&T even turned out its notorious “dollar-a-holler” sock puppet brigade of non-profit groups that showered the legislature with letters supporting her reappointment, without bothering to disclose AT&T had made substantial direct or indirect contributions to the groups in the past.

Murray Bass, head of a small nonprofit in Northern California, initially wrote lawmakers saying Chong was a strong voice for low-income seniors. But in an interview, he admitted he’d endorsed her at the suggestion of executives at AT&T, which had given his group money.

“There’s an essential conflict of interest when a regulated — or supposedly regulated — entity is intervening on behalf of a regulator that’s friendly to them,” said Mark Toney, executive director of the Utility Reform Network, a group that opposed Chong.

SUPPORTERS OF COMMISSIONER CHONG WITH TIES TO AT&T

Organization  Funding Received  Letter Signatory (-ies)
Asian Pacific Islander American Public Affairs (APAPA) The AT&T Foundation gave APAPA $25,000 in 2007. On the APAPA website, AT&T is listed as a top-tier event sponsor with a $50,000 donation in 2009. Joel Wong, Bay Area Chapter PresidentNorm De Young, VP Outreach and Chair of APAPA’s GovernmentRelations Committee (spoke on behalf of Filipino Progress)
CA Small Business Association (CBSA) AT&T is a corporate sponsor of the Small Business Roundtable (CBRT), the advocacy wing of CBSA, which has received $37,500 from AT&T since 2006.    The AT&T Foundation  underwrites  CBRT’s education fund, tech training and website.  Both CBSA and CBRT are active in CPUC proceedings, and CBSA endorses candidates and lobbies public officials.The California Small Business Education Foundation received a 3-year $1.125 million grant from the AT&T foundation.  Betty Jo Ticcoli, the letter’s signatory, is its Chair and CSBA is a member.CSBA is a member of the California Utilities Diversity Council (CUDC) along with AT&T and Verizon. Betty Jo Toccoli
California Hispanic Chambers of Commerce (CHCC) $30,000 from AT&T corporate since 2006, millions more from the Foundation.  Black, Hispanic & Asian Chambers are sharing a 1.25-year $287,000 CETF grant.   AT&T is a corporate member statewide and of several local Hispanic Chambers.  AT&T sponsors CHCC’s annual convention and underwrites local events such as FestivALL, sponsored by the Silicon Valley Hispanic Chamber.Member of  CUDC. Kenneth A. Macias, Chairman of the BoardJoel Ayala, President & CEO
City of Firebaugh $633,000 CETF grant. Jose Antonio Ramirez, City Manager
Cristo Rey High School Sacramento Received a $25,000 grant from AT&T Foundation in 2009. Joan Evans, VP for Advancement
Fresno-Madera Area Agency on Aging (FMAAA) $50,000 SBC Foundation Grant in 2002; $20,000 in 2003; AT&T has sponsored FMAAA’s Scamnot.org website since 2005. Jo Johnson, Executive Director
Latino Community Foundation $25,000 CETF grant. Aida Alvarez, Chairperson
Latino Institute for Corporate Inclusion (LICI) AT&T is a corporate partner of LICI; LICI’s IRS form 990 shows  income of $19,742 in 2008 and it has received $17,500 from AT&T corporate according to AT&T’s 77-M filing with the state, more from the AT&T foundation.Member of CUDC. Ruben Jauregui, President & CEO
Latino Journal $17,500 from AT&T since 2006; AT&T, Verizon and the CPUC are strategic partners in the Journal-sponsored California Education Summit, which AT&T underwrites.Member of CUDC. Jose L. Perez
Mexican American Opportunity Foundation (MAOF) $25,000 from AT&T Foundation. Magda Menendez, Administrator
Other Connections Between AT&T and Chong Supporters
OCA – Organization of Chinese Americans Sacramento AT&T is a corporate partner of national org and both AT&T and Verizon sponsor Asia Week and other heritage events Joyce Eng, President
Tools of Learning for Children Big AT&T logo on website. Told the Los Angeles Times, “he’d endorsed [Chong] at the suggestion of executives at AT&T, which has given his group money.” Murray T Bass, MA, CFP
United Way of Butte & Glenn Counties President Preston Dickinson is former Director of External Affairs for AT&T. W. Jay Coughlin, Executive Director

 Notes

  • 1.  CUDC - The California Utilities Diversity Council is a collaboration between the CPUC , the utility companies and other industry participants  to promote diversity in the utility industry.  AT&T is a gold sponsor of CUDC’s annual convention.
  •  2.  CETF - CETF is a private non-profit corporation created by the California Public Utilities Commission (CPUC) and funded entirely by AT&T and Verizon.  Commissioner Chong is Chair of the CETF Board of Expert Advisors and its Accessibility Committee.  CPUC President Michael Peevey is Chairman of the CETF Board of Directors. The CETF board is appointed by the CPUC, AT&T and Verizon.

Sources:

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Wall Street Erupts in Frenzy Over Proposed Sale and Breakup of Time Warner Cable

News that two major cable operators are contemplating breaking up Time Warner Cable and dividing customers between them has caused stock prices to jump for all three of the companies involved.

CNBC reported Friday that Time Warner Cable approached Comcast earlier this year about a possible friendly takeover under Comcast’s banner to avoid an anticipated leveraged takeover bid by Charter Communications. Top Time Warner Cable executives have repeatedly stressed any offer that left a combined company mired in debt would be disadvantageous to Time Warner Cable shareholders, a clear reference to the type of offer Charter is reportedly preparing. But the executives also stressed they were not ruling out any merger or sale opportunities.

feeding frenzyNews that there were two potential rivals for Time Warner Cable excited investors, particularly when it was revealed possible suitor Comcast is also separately talking to Charter about a possible joint bid that would split up Time Warner Cable customers while minimizing potential regulatory scrutiny.

The Wall Street Journal reported Charter is nearing completion of a complicated financing arrangement that some analysts expect could include up to $15 billion in debt to finance a buyout of Time Warner Cable. Such deals are not unprecedented. Dr. John Malone’s specialty is leveraged buyouts, a technique he used extensively in the 1980s and 1990s to buy countless smaller cable operators in a quest to build Tele-Communications, Inc. (TCI) into the nation’s then-biggest cable operator.

In addition to Barclays Bank, Bank of America, and Deutsche Bank — all expected to finance Malone’s bid — Comcast may also inject cash should it team up with Charter’s buyout. Comcast is interested in acquiring new markets without drawing fire from antitrust regulators.

If the two companies do join forces and pull off a deal, Time Warner Cable’s current subscribers will be transitioned to Charter or Comcast within a year. That is what happened in 2006 to former customers of bankrupt Adelphia Cable who eventually became Comcast or Time Warner Cable customers. Analysts predict the two companies would divide up Time Warner Cable territory according to their respective footprints. New York and Texas would likely face a switch to Comcast service, for example, while North Carolina, Ohio, Maine, and Southern California would likely be turned over to Charter.

http://www.phillipdampier.com/video/CNBC Comcast Charter consider joint bid for Time Warner Cable 11-22-13.mp4

CNBC reports Charter Cable and Comcast might both be interested in a buyout of Time Warner Cable that would dismantle the company and divide subscribers between them. (4:18)

Reportedly financing the next era of cable consolidation.

Reportedly financing the next era of cable consolidation.

Both bids are very real possibilities according to Wall Street analysts. Comcast has sought formal guidance on how to deal with the antitrust implications of a controversial merger between the largest and second-largest cable operators in the country. The industry has laid the groundwork for another wave of consolidation by winning its 2009 court challenge of FCC rules limiting the total market share of any single cable operator to 30 percent. Despite that, a Comcast-Time Warner Cable deal would still face intense scrutiny from the Justice Department. Getting the deal past the FCC may be a deal-breaker, admits Craig Moffett from MoffettNathanson.

“The FCC applies a public interest test that would be much more subjective,” Moffett said. “It wouldn’t be a slam dunk by any means. The FCC would be concerned that Comcast would have de facto control over what would be available on television. If a programmer couldn’t cut a deal with Comcast, they wouldn’t exist.”

Roberts

Roberts

Supporters and opponents of the deal are already lining up. Charter shareholders would likely benefit from a Charter-only buyout so they generally support the deal. Time Warner Cable clearly prefers a deal with Comcast because it can afford a buyout without massive debt financing and deliver shareholder value. Comcast shareholders are also encouraging Comcast to consider s deal with Time Warner Cable. Left out of the equation are Time Warner Cable customers, little more than passive bystanders watching the multi-billion dollar drama.

The personalities involved may also be worth considering, because Comcast CEO Brian Roberts and John Malone have history, notes the Los Angeles Times:

Malone and Roberts first brushed up against each other more than two decades ago. At that time, both Liberty and Comcast were shareholders in Turner Broadcasting, the parent of CNN, TNT, TBS and Cartoon Network. When Time Warner, which was also a shareholder, made a move to buy the entire company,  there was tension because Comcast felt Liberty got a better deal to sell its stake. Roberts grumbled at the time that Liberty was getting “preferential treatment.”

A few years later, it was Malone’s turn to be mad at Roberts. When TCI founder Bob Magness died in 1996, Roberts made a covert attempt to buy his shares, which would have given him control of [TCI]. Malone beat back the effort, but it left a bad taste in his mouth.

“Malone was livid,” wrote Mark Robichaux in his book, “Cable Cowboy: John Malone and the Rise of the Modern Cable Business.”

http://www.phillipdampier.com/video/CNBC Comcast seeks anti-trust advice over TWC deal 11-22-13.mp4

Even cable stock analyst Craig Moffett is somewhat pessimistic a Comcast-TWC merger would have smooth sailing through the FCC’s approval process. Moffett worries Comcast would have too much power over programming content. (3:53)

justiceIronically, when Malone sold TCI to AT&T, the telephone company would later sell its cable assets to Comcast, run by… and Brian Roberts.

Most of the cable industry agrees that the increasing power of broadcasters, studios, and cable programmers is behind the renewed interest in cable consolidation. The industry believes consolidation provides leverage to block massive rate increases in renewal contracts. If a programmer doesn’t budge, the network could instantly lose tens of millions of potential viewers until a new contract is signed.

Many in the cable industry suspect when Glenn Britt retires as CEO by year’s end, Time Warner Cable’s days are numbered. But any new owner should not expect guaranteed smooth sailing.

“We expect a Comcast-TWC deal would draw intense antitrust/regulatory scrutiny and likely resistance, stoked by raw political pushback from cable critics and possibly rivals who would argue it’s simply a ‘bridge too far’ or ‘unthinkable,’” Stifel telecom analysts Christopher C. King and David Kaut wrote in a recent note to clients. “We believe government approval would be possible, but it would be costly, with serious risk. This would be a brawl.”

Usage Cap Man may soon visit ex-Time Warner Cable customers if either Charter or Comcast becomes the new owner.

Usage Cap Man may soon visit Time Warner Cable customers if either Charter or Comcast becomes the new owner.

While the industry frames consolidation around cable TV programming costs, broadband consumers also face an impact from any demise of Time Warner Cable. To date, Time Warner Cable executives have repeatedly defended the presence of an unlimited use tier for its residential broadband customers. Charter has imposed usage caps and Comcast is studying how to best reimpose them. Either buyer would likely move Time Warner Cable customers to a usage-based billing system that could threaten online video competition.

“Our sense is the DOJ and FCC would have concerns about the market fallout of expanded cable concentration and vertical integration, in a broadband world where cable appears to have the upper hand over wireline telcos in most of the country (i.e., outside of the Verizon FiOS and other fiber-fed areas),” Stifel’s King and Kaut wrote. “We suspect the government would raise objections about the potential for Comcast-TWC bullying of competitors and suppliers, given the extent and linkages of their cable/broadband distribution, programming control, and broadcast ownership.”

Since none of the three providers compete head-on, the loss of “competition” would be minimal. Any Comcast-Time Warner Cable deal would likely include semi-voluntary restrictions like those attached to Comcast’s successful acquisition of NBC-Universal, including short-term bans on discriminating against content providers on its broadband service.

Customers can expect a welcome letter from Comcast and/or Charter Cable as early as spring of next year if Time Warner Cable accepts one of the deals.

http://www.phillipdampier.com/video/Bloomberg Comcast and Charter Reportedly Weighing Bid for TWC 11-22-13.flv

Bloomberg News reports if Comcast helps finance a deal between Charter and Time Warner Cable, Comcast would likely grab Time Warner Cable systems in New York for itself. (2:26)

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New FCC Chairman Denies He’s an Industry Shill: “My Client is the American People”

Phillip Dampier November 14, 2013 Competition, Consumer News, History, Public Policy & Gov't, Video 2 Comments
Tom Wheeler circa 1983, when he represented the cable industry.

Tom Wheeler circa 1983, when he represented the cable industry. (Image: The Cable Center)

Skepticism persists over whether new FCC chairman Tom Wheeler, a former cable and telco lobbyist and venture capitalist, will have the interests of an industry he was a part of for decades ahead of the people he is supposed to represent.

The doubts are so significant, The Wall Street Journal’s ‘All Things D’ devoted an entire piece on the subject, interviewing Wheeler about his plans for the federal agency.

“My client today is the American people, and I am going to be the most effective advocate they could hope for,” Wheeler told AllThingsD in a phone interview on Wednesday. “I was (involved in) the early days of cable television when everybody was trying to squash it; I was a was champion for a diversity of voices and the competition that represented. I’m very proud of that period, but it was 30 years ago that I was in in cable, and 10 years ago that I was in wireless.”

Both periods were extremely important for both industries. When Wheeler was president of the National Cable TV Association (now the NCTA), his leadership helped enact the 1984 nationwide deregulation of the cable television industry. Wheeler promised the single national “hands-off” policy for cable television would put control “back in the hands of customers” instead of the local, state, and federal government. The cable lobby pushed hard for extra provisions in the law that would prohibit local or state governments or franchising authorities from reimposing controls the federal government eliminated.

The 1984 Cable Act contained three major provisions to strip away regulatory/rate oversight:

  1. “Basic Cable” rate regulation was removed in any community where a cable company faced “effective competition” from at least three unduplicated over the air television stations. If your community received two fuzzy network affiliates and one local religious station, that was considered effective competition.
  2. Local franchise authorities and cable TV commissions, often citizen-run, had most of their oversight and enforcement powers stripped away, including the most important power to deny a franchise renewal to a bad-acting local cable company, except in the most extreme cases. Cable operators effectively used this provision to launch costly lawsuits burying local communities in litigation expenses when they tried to find a different provider.
  3. Granted local franchise authorities to right to demand cable systems set aside a few channels for Public, Educational, and Government (PEG) use.

The cable industry carefully lobbied for an effective definition of “competition” that made it into the final version of the bill. Estimates from congressional researchers predicted that 97 percent of the country’s cable systems would be deregulated when the law took effect Dec. 29, 1986.

In a 1984 C-SPAN call-in program, Wheeler noted that before deregulation, “the cities were in the driver’s seat” controlling the franchising process. Wheeler claimed cable operators competing for franchise agreements were forced to promise services and technology that ultimately proved too burdensome or expensive to actually deliver. Deregulation, Wheeler promised, would “keep cable rates low because you are not going to be paying for services that [the government says] have to be provided that nobody watches.”

In reality, after the passage of the 1984 Cable Act, cable systems were bought and sold in a frenzy that left control ultimately in the hands of a handful of operators. Soon after, cable rates skyrocketed and cable-industry-owned networks and channels were shoveled on to cable lineups. With every sale and every new channel addition, rates were raised even higher, whether customers wanted the extra programming or not.

Without oversight, cable service itself deteriorated in quality. In some cities, cable operators ignored rights-of-way and often refused to hang or bury cable lines left scattered on lawns. Customer complaints often went unresolved for days or weeks. Cable operators also rolled out new charges for monthly programming magazines and equipment, even as they continued to boost rates for basic cable itself. Prior to deregulation, customers usually paid less than $10 a month for basic cable. After, rates rapidly pushed towards the $20 a month mark. Today’s cable TV prices are much higher.

In the summer of 1984, Wheeler left the NCTA to pursue a new business – The NABU Network, a precursor to cable broadband that turned out to be a commercial failure. The NABU Network coupled a home computer system with a cable-based data service. The only significant North American trial of NABU was in Ottawa, Canada and required significant subsidies from the Canadian government. Wheeler said the NABU system would offer subscribers a mountain of software at a monthly subscription price. Canadians had to buy the NABU PC for around $950 and pay around $10 a month for software access.

The venture fell apart because cable systems in that era lacked two-way capability, making it cumbersome for users to interact with the NABU platform or manage applications. Ottawa Cablevision and Skyline Cablevision introduced NABU in 1983 and discontinued it in 1985.

In 1992, Wheeler went on to become president of CTIA – The Wireless Association, the nation’s biggest cell phone industry trade group. Wheeler beefed up the association’s lobbying forces after joining, turning CTIA into “one of the most influential lobbying forces on Capitol Hill,” according to Connected Planet.

Once there, Wheeler presided over efforts to get government spectrum policies relaxed and keep cancer questions about RF energy leaking from cellphones under wraps:

In a 1994 memo, Wheeler raised objections to a draft of a mobile-phone manual that, among other things, advised consumers how to limit radio-frequency radiation from mobile phones. The book says Wheeler succeeded in getting the industry consumer safety document watered down.

In a September 1994 memo, Wheeler mapped out “a pre-emptive strike” on Rep. Edward Markey (D-Mass.) by highlighting to Markey the involvement of Harvard University. Wheeler, according to the book, even had a backup plan to curry favor with Markey that, if necessary, would “send all cash through Harvard.”

By 2000, Wheeler was being questioned about conflict of interest charges about his lucrative investments in businesses represented under the CTIA’s public policy umbrella, according to RTR Wireless:

But conflict-of-interest issues-real, perceived and otherwise-that flow from Wheeler’s lucrative ties to Aether, OmniSky and now, Metrocall, could have long-term consequences that CTIA and the wireless industry would rather not consider in these halcyon days of soaring stocks, consolidation and deregulation.

The unorthodox arrangement Wheeler has with outside wireless firms begs closer scrutiny by CTIA’s board. Do Wheeler’s money and management ties to firms he advocates set a bad precedent? Could it diminish CTIA’s credibility as an organization?

Wheeler claims to be committed to three principles that will govern how he looks at issues before the FCC:

  1. Is it good for competition? “You can’t have economic growth if you don’t have competition. You can put me down as rabidly pro-competition,” Wheeler said.
  2. Trust between those who run networks and those who use them must be maintained.
  3. Opening up high-speed networks must include guarantees that content will be open and accessible to all. “I am pro-the ability of individuals to access an open network,” he said.

Wheeler asked for a review of all proposals before the FCC and expects that in two months.

Tom Wheeler, then retiring president of the National Cable TV Association (NCTA), appeared on this fascinating 1984 C-SPAN call-in program at the NCTA Convention with future president Tom Mooney. The NCTA promised deregulation would deliver many benefits to cable subscribers. They got higher bills and declining service instead. (June 5, 1984 – 39:00)

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N.Y. Regulator Rules Details About Verizon’s Landline Network Are Not Confidential Company Secrets

Verizon gets out the black marker to redact information in declares "confidential."

Verizon gets out the black marker to redact information it considers “confidential.”

The New York Public Service Commission Monday rejected most of Verizon’s request to keep secret the state of its landline network and details about the company’s plans to distribute Voice Link as an optional wireless landline replacement in the state.

Nearly two months after Verizon announced it was abandoning its original plan to replace defective landlines on Fire Island with Voice Link, Verizon is bristling over a Freedom Of Information Law (FOIL) request from consumer advocates and a union for disclosure of reports filed with the PSC regarding Verizon’s network and its upkeep — information the company considers confidential trade secrets. To underline that belief, Verizon provided the PSC with edited versions of documents it filed with the state considered suitable for public disclosure, one consisting of 330 pages of blanket redactions except for the page headings and page numbers.

“[These discovery requests] are designed solely to advance the Communications Workers of America’s self-serving efforts to prevent Verizon from offering its Voice Link product, even on an optional basis, and to investigate the relationship between Verizon and Verizon Wireless — matters that are beyond the scope of this or any other pending Commission proceeding,” wrote Verizon deputy general counsel Joseph A. Post. “On September 11, 2013, Verizon announced that it had decided to build out a fiber-to-the-premises (“FTTP”) network on western Fire Island, and targeted Memorial Day 2014 for the completion of construction and the general availability of services over the new network.”

The PSC disagreed with Post, ruling the majority of documents labeled “confidential” by Verizon were, in fact, not.

“[...] The information claimed by Verizon to be trade secrets or confidential commercial information does not warrant an exception from disclosure and its request for continued protection from disclosure is denied,” ruled Donna M. Giliberto, assistant counsel & records access officer at the Department of Public Service.

Verizon has until Nov. 14 to file an appeal.

Common Cause New York, the Communications Workers of America-Region 1, Consumers Union, the Fire Island Association, and Richard Brodsky used New York’s public disclosure laws to collectively request documents shedding light on their suspicion Verizon has systematically allowed its landline facilities to deteriorate to the point a wireless landline substitute becomes a rational substitute. They also suspect Verizon diverted funds intended for its landline network to more profitable Verizon Wireless.

“In spite of its obligations under New York law, in spite of the investment by ratepayers in the FIOS wireline system, in spite of the needs and expectations of the people, businesses and economy of the state, Verizon is intending to and has begun to shut down its wireline system,” declared the groups.

Many involved took note of Stop the Cap!’s report in July 2012 that warned then-CEO Lowell McAdam had plans to decommission a substantial part of Verizon’s copper landline network, especially in rural areas, where it intended to replace it with wireless service:

Verizon-logo“In [...] areas that are more rural and more sparsely populated, we have got [a wireless 4G] LTE built that will handle all of those services and so we are going to cut the copper off there,” McAdam said. “We are going to do it over wireless. So I am going to be really shrinking the amount of copper we have out there and then I can focus the investment on that to improve the performance of it. The vision that I have is we are going into the copper plant areas and every place we have FiOS, we are going to kill the copper. We are going to just take it out of service and we are going to move those services onto FiOS. We have got parallel networks in way too many places now, so that is a pot of gold in my view.”

Some consumer groups suspect Fire Island represented an opportunity to test regulators’ tolerance for a transition away from copper landlines in high cost service areas. As Stop the Cap! reported this summer, New Yorkers soundly rejected Verizon Voice Link, with more than 1,700 letters opposing the wireless service and none in favor on record at the PSC.

In early September, a well-placed source in Albany told Stop the Cap! Verizon’s request to substitute Voice Link where it was no longer economically feasible to maintain landline infrastructure was headed for rejection after a constant stream of complaints arrived from affected customers. Verizon suddenly withdrew its proposal on Sept. 11 and announced it would bring FiOS fiber optics to Fire Island instead.

Although Verizon now insists it will only offer Voice Link as an optional service for New York residents going forward, public interest groups still believe Verizon has allowed its landline network to deteriorate to unacceptable levels.

Verizon originally claimed 40% of its facilities on Fire Island were damaged beyond repair when they were assessed after Hurricane Sandy. But residents claim some of that damage existed before the storm struck last October. Some fear Verizon is engaged in a self-fulfilling prophecy, allowing its unprofitable copper wire facilities to fall apart and then point to the sorry state of the network as their principle argument in favor of a switch to wireless service.

Herding money, resources, and customers to Verizon Wireless

Herding money, resources, and customers away from landlines to Verizon Wireless

“In fact, the vast majority of defective lines are a consequence of the failure and refusal of Verizon to maintain and repair the system over time,” the groups assert. “The Commission must make a factual determination of the cause of the 40% defect allegation as part of this proceeding. If, as asserted herein and elsewhere, the evidence shows a pattern of inadequate repair, maintenance and capital investment, the Commission can not and should not approve any loss of wireline service to any customer, as matters of law and sound policy.”

“We assert that Verizon has systematically misallocated costs thereby distorting the extent to which the wireline system has suffered losses, if any. [...] It is fair to say that substantial losses in the landline system are repeatedly used by the Commission and the Company as a justification for rate increases and regulatory decisions affecting the scope, cost, adequacy and nature of telephone service provided to customers of Verizon NY.”

Verizon would seem to confirm as much.

In 2012, Verizon’s chief financial officer Fran Shammo told investors the company was diverting some of the costs of Verizon Wireless’ upgrades by booking them on Verizon’s landline construction budget.

“The fact of the matter is wireline capital — and I won’t get the number but it’s pretty substantial — is being spent on the wireline side of the house to support the wireless growth,” said Shammo. “So the IP backbone, the data transmission, fiber to the cell, that is all on the wireline books but it’s all being built for [Verizon Wireless].”

Funds diverted for Verizon Wireless’ highly profitable business were unavailable to spend on Verizon’s copper wire network or expansion of FiOS. In 2011, Verizon diverted money to deploying fiber optics to 1,848 Verizon Wireless cell towers in the state. In 2012, Verizon deployed fiber to an extra 867 cell tower sites in New York and Connecticut. Public interest groups assert the costs for these fiber to the cell tower builds were effectively paid by Verizon’s landline and FiOS customers, not Verizon Wireless customers.

lightningSince 2003, Verizon has been subject to special attention from the New York Public Service Commission because of an excessive number of subscriber complaints about poor service. As early as a decade ago, the PSC found Verizon’s workforce reductions and declining investment in its landline network were largely responsible for deteriorating service. Each month since, Verizon must file reports on service failures and its plans to fix them.

In September alone, Verizon reported significant failures in service in rural areas upstate, almost entirely due to the weather:

  • Heuvelton: A summer filled with significant thunderstorms resulted in downed poles and service disruptions. Verizon reported the central office serving the community was in jeopardy in June. By mid-July, 7% of customers reported major problems with their landline service.
  • Amber: Nearly 11% of customers were without acceptable service in May because a 100-pair cable serving many of the community’s 274 customers was failing.
  • Chittenango: Nearly 9% of the community’s 1,059 landline customers had significant problems with service because Verizon’s central office switching system in the exchange was failing.
  • Sharon Springs: Almost 11% of Verizon’s customers in this small rural office of 417 lines were knocked out of service in July.
  • Elenburg Dept.: More than 8% of Verizon’s 324 lines in this rural Adirondack community were out of service, usually as a result of a thunderstorm passing through.
  • Hartford: When it rains hard in this Adirondack community, landline service fails for a substantial number of customers. In September, 2.43 inches of rain left 12.4% of customers with dysfunctional landline service.
  • Valley Falls: Nearly one-third of Valley Falls’ 722 landlines were out of service in September after lightning hit several Verizon telephone cables. Problems only worsened towards the end of the month.
  • Kendall: Almost 9% of Verizon customers in the Rochester suburb of Kendall were without service after a rain and wind storm. When a cold front moves through the community, landlines service is threatened.
  • Bolivar: More than 20% of customers lost service July 19th after heavy rain, winds, and power outages hit.
  • Cherry Valley: Verizon blamed seasonal service outages in Cherry Valley on farmers that dig up or damage buried telephone cables. More than 7% of customers were knocked out by harvested phone lines in July.
  • Edmeston: More rain, more service outages for the 801 landlines in this small community in area code 607. More than 13.5% of customers called in with complaints in July. Verizon blamed heavy rain.
  • Clinton Corners: Service failures come after nearly every heavy rainfall due to multiple pair cable failures in the aging infrastructure. More than 9% of customers reported problems in June, 13.2% in July, 8.2% in August, and 12.5% in September.

Verizon’s landline trouble reports disproportionately come from rural communities, exactly those Verizon’s former CEO proposed to serve by wireless. Weather-related failures are often the result of deteriorating infrastructure that results in outages, especially when moisture penetrates aging cables. Rural communities are also the least-likely to be provided fiber service, exposing customers to a larger percentage of the same copper wiring critics charge Verizon is allowing to deteriorate.

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Former FCC Chairman Turned Lobbyist Warns Providers to Hurry Usage Caps & Billing Before It’s Too Late

Powell

Powell

A former chairman of the Federal Communications Commission turned top cable lobbyist rang the warning bell at an industry convention this week, recommending America’s cable operators hurry out usage caps and usage-based billing before a perception takes hold the industry is trying to protect cable television revenue.

Michael Powell, the former head of the FCC during the Bush Administration is now America’s top cable industry lobbyist, serving as president and CEO of the National Cable & Telecommunications Association (NCTA). From 2001-2005 Powell claimed to represent the interests of the American people. From 2011 on, he represents the interests of Comcast, Time Warner Cable, Cox, and other large cable operators.

Attending the SCTE Cable-Tec Expo 2013 in Atlanta, Powell identified the cable industry’s top priority for next year: “broadband, broadband, and broadband.”

The NCTA fears the current unregulated “Wild West” nature of broadband service is ripe for regulatory checks and balances. The NCTA plans to prioritize lobbying to prevent the implementation of consumer protection regulations governing the Internet. Powell warned it would be “World War III” if the FCC moved to oversee broadband by changing its definition as an unregulated “information service” to a regulated common carrier utility.

Powell is very familiar with the FCC’s current definition because he presided over the agency when it contemplated the current framework as it applies to DSL and cable broadband providers.

While Powell has a long record opposing blatant Net Neutrality violations that block competing websites and services, he does not want the FCC meddling in how providers charge or provision access.

Powell believes some of cable's biggest problems come from bad marketing.

Powell believes some of cable’s biggest problems come from bad marketing.

Powell disagreed with statements from some Wall Street analysts like Craig Moffett who earlier predicted the window for broadband usage-based limits and fees was closing or closed already.

Powell does not care that consumers are accustomed to and overwhelmingly support unlimited access. Instead, he urged cable executives to “move with some urgency and purpose” to implement usage-based billing for economic reasons, despite the growing perception such limits are designed to protect cable television service from online competition.

“I don’t think it’s too late,” Powell said. “But it’s not something you can wait for forever.”

Powell pointed to the success wireless carriers have had forcing the majority of customers to usage capped, consumption billing plans and believes the cable industry can do the same.

The NCTA president also described many of the industry’s hurdles as marketing and perception problems.

The cable industry, long bottom-rated by consumers in satisfaction surveys, can do better according to Powell, by making sure they are nimble enough to meet competition head-on.

Powell described Google Fiber as a limited experiment unlikely to directly compete with cable over the long-term, and with a new version of the DOCSIS cable broadband platform on the way, operators will be able to compete with speeds of 500-1,000Mbps and beyond. He just hates that it’s called DOCSIS 3.1, noting it wasn’t “consumer-friendly” in “a 4G and 5G world.”

Kevin Hart, executive vice president and chief technology officer of Cox Communications joked the marketing department would get right on it.

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California Legislature Turns Down AT&T’s Latest “Reforms”: LifeLine/Landline Service Threatened

att californiaAT&T’s latest effort to rid itself of universal service obligations and a commitment to offer discounted phone service to more than one million low-income Californians has been temporarily stopped in the state legislature after advocates for the poor objected to the bill.

AB 1407 would have made major changes to the state’s regulations governing LifeLine, the low-cost phone service for the poor. In its place, both AT&T and Verizon advocated a voucher program that would effectively raise rates for everyone, gut regulatory authority to limit future rate hikes, and open a loophole that could allow phone companies to unilaterally abandon landline service in favor of wireless.

The bill, introduced by Assemblyman Steven Bradford (D-Gardena), would drop the current LifeLine program offering landline service at rates not to exceed $6.84 a month and replace it with a fixed amount voucher worth $11.85 a month that could be applied to reduce a wireless or landline provider bill. AT&T says the proposal will make it easier for consumers to adopt wireless LifeLine phone service and cut burdensome oversight and rate regulations.

Consumer groups argue the legislation delivers all of its benefits to phone companies like AT&T while eliminating consumer protection regulations. The California Public Utilities Commission (CPUC) also complained the bill could end guaranteed quality landline service, potentially permitting AT&T and other companies to stop providing wired phone service and force customers to wireless services instead.

The little-known and less understood bill moved quickly through the Democratic-controlled legislature over the summer and on July 9, AB 1407 passed a key Senate committee in a 6-1 vote, well on the way to passage in the state Senate. Consumer groups and low-income advocates learned of the bill and launched a broad-based opposition campaign including the Coalition for Economic Survival, AARP, the California Labor Federation and The Utility Reform Network. The Howard Jarvis Taxpayers Association, a tea party group that vigilantly monitors the state legislature for attempts to circumvent Proposition 13 limits on tax hikes, also opposed the measure because it adds a 3.3% state-mandated surcharge on all intrastate telephone services, also applicable to Voice over IP providers.

AT&T found a good friend in Bradford, who has advocated for the company’s interests since AT&T became his biggest campaign contributor by far, donating more than $40,000 to his re-election coffers.

Bradford

Bradford

Larry Gross of the Los Angeles-based Coalition for Economic Survival described Bradford as a “front person for AT&T.”

Bradford and AT&T’s lobbyists, dominating earlier discussions on AB 1407, were overrun at an Aug. 19 hearing when a group of tenants from San Francisco’s Central City SRO Collaborative (CCSRO) appeared and opposed the bill and its impact on the poor.

BeyondChron noted Bradford was so confident about the momentum his AT&T-ghost-written bill had received, he waived his testimony. Minutes later, he discovered the growing number of speakers lined up to oppose the bill. Bradford then attempted to rebut the surprising opposition, but it was too late. The tenants persuaded the majority on the Senate Appropriations Committee to suspend further consideration of the bill for now.

The proposed legislation had support from a number of elected officials, almost all recipients of AT&T campaign contributions.

Nearly all the non-profit groups supporting AB 1407 also received direct financial support from AT&T and/or Verizon. Among the first 20 supporters investigated by Stop the Cap!, all but a few turned out to have direct financial ties to either AT&T, Verizon, or both:

COFEM: Verizon is so important to this group, the company is linked from its home page.

Verizon is linked from COFEM’s home page.

  • Asian Pacific Islander American Public Affairs Association: AT&T is a “major sponsor.
  • Bakersfield Homeless Center: AT&T is a funding partner.
  • Brotherhood Crusade: AT&T is a “silver partner.” Verizon, which also supports the measure, is a “platinum” donor.
  • California Black Chamber of Commerce: Verizon is a “corporate member.”
  • California Hispanic Chamber of Commerce: AT&T is a corporate member.
  • California Partnership to End Domestic Violence: Verizon cut them a check for $130,000 to become a partner.
  • Center for Fathers and Families: AT&T is a sponsor.
  • COFEM: Verizon is so important to their mission, the company’s logo is on the group’s home page.
  • Community Youth Center of San Francisco: AT&T is a “diamond sponsor.”
  • Congress of California Seniors: Verizon is one of their “key sponsors.”
  • Eskaton Foundation: AT&T is a “level 3″ donor.
  • Florence Douglas Senior Center: AT&T is a “primary sponsor.”

We stopped looking after researching the first 20 groups, but it is highly likely the others will also have similar ties.

cpucAlthough Assemblyman Bradford repeatedly has claimed there is no intent to eliminate or diminish universal service “Carrier of Last Resort (COLR)” obligations that require basic phone service be provided to any California resident requesting it, the CPUC found ambiguous language in the bill that muddies the author’s intent. One section of AB 1407 states that “any lifeline provider, including a local exchange carrier, may use any technology, or multiple technologies, within the provider’s service territory.” This could be interpreted to allow a provider to meet its basic service obligation with wireless technology that may not meet the CPUC’s definition of basic landline service.

The legislation repeatedly states LifeLine providers should only be obligated to offer the minimum service elements as required by the FCC. Those provisions ignore the CPUC’s own rules and AT&T could theoretically prevent a wireless LifeLine customer from switching back to landline service because the wireless alternative is considered good enough.

Other provisions in the bill are tailored primarily for the benefit of wireless providers, including AT&T, and introduce new fees and charges for services that many customers would assume are included in the price of basic service:

  • Flat rate local calling is eliminated;
  • Providers can charge customers extra or deduct wireless minutes for 911 calls, calls to toll-free 800-type numbers, and incoming calls of all kinds;
  • Providers can require a deposit for LifeLine customers and all former exemptions from taxes, surcharges and fees are canceled;
  • The requirement to provide a toll-free method to reach customer service is eliminated;
  • Providers can charge extra or deduct minutes for use of the California 711 Relay Service;
  • Provisions requiring providers to offer surcharge-free outgoing calling service, touch-tone dialing, directory assistance (for LifeLine customers), access to an operator, a listing in the telephone directory, and a copy of the White Pages are eliminated.

The bill is probably shelved for the rest of this year but will likely return for consideration in 2014.

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Time Warner Cable Approved as a Regulated Phone Service Provider, Now Promptly Seeks Deregulation

investigationTime Warner Cable’s approval of its request to offer regulated “digital phone” service in New York has been quickly followed by an appeal for deregulation to loosen rules covering disconnection for non-payment and reduced service quality standards.

The cable operator now qualifies — as a designated Eligible Telecommunications Carrier (ETC) — for significant federal and state subsidies in return for providing discounted Lifeline telephone service for the state’s poorest residents.

The cable industry has traditionally escaped regulation and oversight with claims “digital phone” Voice over IP (VoIP) products are “unregulated information services.”

In March, the New York Public Service Commission approved a petition filed by subsidiary Time Warner Cable Information Services (NY) LLP (TWCIS-NY), to begin offering regulated telephone service to the company’s 1,235,710 phone customers in New York.

As a result, Time Warner agreed to a range of oversight and service standard requirements. But on May 1 — less than two months later — Time Warner filed a new petition with the PSC requesting deregulation and exemption from several provisions the company initially agreed to follow.

timewarner twc“Now that it is concededly a regulated telephone service provider, Time Warner is acting like other regulated phone companies, in that it immediately is seeking to relax the rules designed to protect customers,” writes Gerry Norlander from the Public Utility Law Project of New York (PULP), a consumer protection group.

Not so, says the cable company.

“In order to offer the best telecommunications service to its customers and expand this customer base, TWCIS-NY respectfully requests that the Commission grant the waivers discussed in this Petition,” the company writes.

The changes Time Warner requests would make it easier for the cable company to disconnect service for late or non-payment, allow Time Warner to avoid distributing unwanted paper telephone directories, and escape oversight of its phone service for all but the most critical “core” customers with special needs.

Your Partial Payment Will Not Necessarily Prevent Us From Cutting Off Your Phone Line

disconnect-noticeThe Telephone Fair Practices Act (TFPA), prohibits regulated phone companies from shutting off phone service for late/non-payment outside of normal business hours, Fridays after 1pm, weekends, and holidays:

(d) Suspension or termination of service–time. A telephone corporation complying with the conditions set forth in this section may suspend or terminate service to a residential customer for nonpayment of bills only between the hours of 8 a.m. and 7:30 p.m., Monday through Thursday, and between 8:00 a.m. and 3:00 p.m. on Friday, provided such day or the following day is not:
(1) a public holiday, as defined in the General Construction Law;
(2) a day on which the main business office of the telephone corporation is closed for business; or
(3) during the periods of December 23rd through December 26th and December 30th through January 2nd.

Time Warner Cable claims those limitations are too much, and “for its customers’ convenience, TWCIS-NY respectfully requests [...] to extend these hours.”

If approved, Time Warner claims it will make your life easier if they can cut you off at their convenience — between the hours of 8:00am and 9:00pm, Monday through Friday, and between 8:00am and 5:00pm on Saturday.

Those times coincidentally match the hours technicians are now dispatched to collect equipment and shut off service for deadbeat customers.

Time Warner says people are often busy or not at home during the day and it would make more sense to coordinate the surrender of service when people are available to hand over equipment. Unfortunately, Time Warner’s preferred hours often fall outside of the calling hours at the Public Service Commission, which maintains a ‘last resort hotline’ for customers about to have their service disconnected.

‘Time Warner Cable Punishes Late Payers With Telephone Service Suspensions and Terminations on a “Massive” Scale’

Unlike cable television and broadband, New York designates telephone service as an essential utility, and regulators take every step to maintain service wherever possible.

Under rules originally adopted when consumers chose both a local and long distance phone company that put all of your charges on a single monthly invoice, regulators sought to protect landline service when customers did not pay the full amount due. Under those rules, partial payments are allocated first to past due charges from the local phone company, then past due charges for regional long distance or local calling, then charges billed by your long distance carrier, and then everything else.

Since your local phone company has the power to cut off your dial tone for late payment, making sure they were first in line to get paid usually kept your phone line working.

“It Appears that Time Warner Has Increased its Reliance Upon Telephone Service Suspensions and Terminations as a Tool to Enforce Customer Payment Obligations.”

cut offAccording to data provided by Time Warner Cable in response to PULP information requests, during the month of March, 2012 Time Warner Cable sent 68,134 shutoff notices to Time Warner phone customers in New York. The threats worked for the majority of those customers. Only 17,218 were eventually disconnected after the shutoff deadline passed.

Since then, shutoffs and suspensions have soared. By July 2013, Time Warner mailed 146,026 shutoff notices and followed through with 42,777 disconnects, increases of 114% and 148%, respectively.

“As a consequence, interruption of phone service for bill collection purposes has reached massive proportion,” says PULP. “It appears that Time Warner has increased its reliance upon telephone service suspensions and terminations as a tool to enforce customer payment obligations. In the 12 months ending July 2013, Time Warner terminated or suspended telephone service on 592,250 occasions for bill collection purposes. Of that number, telephone service was reinstated after an interruption for collection purposes on 461,268 occasions. Thus, 130,982 or 22% of the customers terminated were not promptly reinstated.”

Those figures concern PULP because it suggests many disconnected customers are now without phone service, swelling the “unacceptably large number of New York households lacking telephone service.”

New York now ranks fourth from the bottom of all states in the most recent FCC Universal Services Monitoring Report of telephone subscribers.

Verizon’s Request to “Streamline” the Payment Process Gives Time Warner Cable the Same Idea

In 2010, Verizon New York successfully petitioned the PSC to streamline that payment allocation system. Few people bother with choosing a long distance carrier these days because most phone companies now offer unlimited long distance as part of a bundled service package. Verizon asked to simplify things so that Verizon New York got paid first and everything else came second.

Time Warner is seeking a variation on that same theme, requesting the PSC allow it to allocate partial payments first to telephone service, with the rest distributed to cover charges for broadband and cable television service.

While that is good news for your Time Warner phone line, it is bad news for your broadband and television service which can still be interrupted for non-payment because your partial payment was applied to phone service above all else.

pulpCustomers are unlikely to be aware of this, however. Time Warner Cable bills include a regular notice that if a customer is in arrears for any Time Warner Cable service, telephone service may be shut off.

PULP argues the cable company should let customers decide which services are most important to keep up and running during an emergency.

“For example, a customer might want to jettison cable TV and keep the Internet on to hunt for jobs during a spell of unemployment or other household financial crisis,” writes Norlander. “While the bills include separate items for cable TV, broadband, and telephone services, there is no information given in the bills on how customers can, if they are in arrears, keep the service they pay for with a partial payment.”

Indeed, there is no provision on Time Warner’s website or on its paper bill payment coupon to allocate which services a customer wishes their partial payment to be applied to first.

Time Warner Cable argues it gives late paying customers every opportunity to either make up past due payments or negotiate a payment plan before any service is interrupted.

phone book“Customers have the opportunity to walk into the local [cable] office and make a payment during these extended hours,” Time Warner argues. “They also have the opportunity to pay online and over the phone 24 hours a day, as well as paying cable representatives directly when they arrive at the customer’s premises to disconnect service. TWCIS-NY believes that streamlining of the rules for disconnection of phone and cable services will make the Commission’s rules more consistent across the board and less confusing for customers.”

We Shouldn’t Have to Provide Printed Residential Phone Books We Didn’t Offer Anyway

Time Warner Cable wants to opt out from distributing printed copies of residential telephone directories it doesn’t publish.

When the company provided unregulated telephone service, it never had to offer customers a phone book. But in its new life as a regulated provider, New York requires phone companies to offer, upon request, a printed telephone directory:

Each service provider shall distribute at no charge to its customers within a local exchange area, a copy of the local exchange directory for that area, and one additional copy shall be provided for each working telephone number upon request. A copy shall be filed with the Commission.

Nobody has formally opposed Time Warner Cable’s proposed alternative: distributing residential listings only to customers who specifically request them in print or on CD-ROM.

Most customers don’t realize Time Warner Cable used to outsource most of its telephone service operation to Sprint. In addition to providing VoIP service, Sprint relied on dominant local telephone companies to provide phone books to Time Warner phone customers. In return, Sprint passed along customers’ names, addresses and phone numbers to phone companies like AT&T, Verizon, Frontier, CenturyLink and Windstream to be incorporated into those directories.

In 2010, Time Warner announced a four-year transition project to take its telephone service “in-house.”

Will All of This Competition, Oversight Rules Should Be Relaxed; If Customers Don’t Like Us, They Can Go Somewhere Else

Virtually every telephone company in New York agrees with the assessment Verizon has made for years — if a phone company does not provide excellent service, subscribers will simply switch to a competitor, negating the need for oversight of service quality standards.

Verizon paved the road Time Warner Cable is driving down to provide NY'ers with less-regulated phone service.

Verizon paved the road Time Warner Cable is driving down to offer NY’ers less-regulated phone service.

The PSC agreed, reducing requirements for service outage reporting and other documented service issues. Today, Verizon only reports incidents involving “core” customers — low-income Lifeline subscribers, “special needs” customers including the elderly, those with serious medical conditions, the disabled and the visually impaired. Core customers also include those with no competitive service providers available to them.

Time Warner Cable wants a modified version of the Verizon “core customer” standard applied to its cable phone service — one that defines core customers as those with Lifeline service or special needs.

Time Warner does not want to include those without competitive alternatives and seeks an exemption from any reporting requirements until it signs up at least 5,000 accounts designated as “core customers.” That could take a while. PULP obtained records from Time Warner Cable showing as of Aug. 7 the company has only signed up 149 telephone customers it defines as “core customers.”

The cable company may be thinking of the future. Verizon Communications has made its intentions clear it wants to abandon rural landline service in favor of questionably regulated wireless Voice Link service. The idea that a cable company provides landline service in an area the local phone company no longer does is unprecedented in New York, but perhaps for not much longer.

If Time Warner Cable successfully argues “core customers” need not include those without competing alternatives, the PSC may unintentionally hand the cable operator a rural telephone monopoly without quality of service oversight in some communities.

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