Netflix continues to step up its attacks on providers who implement Internet Overcharging schemes on their wired broadband customers.

That concern is understandable as Netflix increasingly transitions to broadband streaming instead of mailing DVD’s to customers.

Getting in the way are five of the nation’s seven largest broadband providers, all imposing limits on customers just as they discover they might be able to do without cable television.

Netflix’s streamed HD shows now consume around 2GB per hour, according to Netflix general counsel David Hyman.  That can eat through usage allowances quickly.  Hyman penned an op-ed in the Wall Street Journal last year blasting the practices of usage caps and consumption billing.

Hyman

“Wireline bandwidth is an almost unlimited resource due to advances in Internet architecture,” Hyman wrote. “The marginal cost of providing an extra gigabyte of data—enough to deliver one episode of 30 Rock from Netflix—is less than one cent, and falling.”

That doesn’t seem to matter much to Comcast, CenturyLink, Charter Communications, and Cox.  All four providers have introduced hard usage limits on customers — a usage cap.  Exceeding it gives any of those providers the right to cut off your broadband service.  AT&T, always one to see a financial angle, charges for excess use of their DSL and U-verse service — $10 for every 50GB. Time Warner Cable recently announced its own experimental “optional” usage pricing package for very light users who consume fewer than 5GB per month.  It will slap overlimit fees on those participating customers who break through the 5GB ceiling at a rate of $1/GB, an enormous markup.

Providers with strict caps usually argue they come as a result of their own network’s capacity problems.  Cable operators who do not consistently manage their network traffic can experience traffic clogs by overselling service without upgrading capacity to sustain user demand.  But providers like Comcast, Cox, and Charter resolved those capacity problems with upgrades to DOCSIS 3 technology, which offer operators an exponentially bigger pipeline for Internet traffic.

Although Comcast promised to regularly review and adjust usage caps since implementing them four years ago, the nation’s largest cable operator has thus far seen no need to raise them.

“We feel that that is an extraordinarily large amount of data,” says Comcast’s Charlie Davis. “That limit is there to make sure we provide a great online experience for every single paying customer.”

Wall Street bankers have closely monitored the industry’s early results from Internet Overcharging, and have been encouraged, so long as operators implement it carefully.

Credit Suisse in a 2011 report to its investor clients suggested the key for successful usage-based pricing is to introduce it slowly and keep “sticker shock to a minimum in the early days” to reduce backlash by consumers and lawmakers.

Once established, the sky is the limit.

Netflix itself is also battling an Internet Overcharging scheme it faces — double-dipping by cable operators like Comcast.  In addition to the fees Comcast collects from customers for its broadband service, the cable operator also wants to be paid directly by Netflix to allow the movie service’s traffic on its network.

That’s an Internet toll booth, charges Netflix and consumer groups.  It’s also uncompetitive, says Hyman.

This month Comcast unveiled its own movie and TV show streaming service — Xfinity Streampix — from which, unsurprisingly, the cable company has not sought extra traffic payments from itself.

Opposed to Internet Overcharging

Three providers which don’t cap customers don’t see a reason to try.

Verizon Communications says its fiber network FiOS has plenty of capacity and has no plans to restrict customers’ enjoyment of the service.  In 2009, Cablevision’s Jim Blackley told one panel discussion usage caps are not in the cards.

“We don’t want customers to think about byte caps so that’s not on our horizon,” Blackley said. “We literally don’t want consumers to think about how they’re consuming high-speed services. It’s a pretty powerful drug and we want people to use more and more of it.”

California’s Sonic.net Inc., goes even further.  Its CEO, Dane Jasper, believes the Federal Communications Commission needs to be more assertive about protecting America’s broadband revolution and the customers that depend on the service.

The fact different operators can take radically different positions on the subject, despite running similar networks, suggests technical necessity is not the reason providers are implementing usage restrictions and extra fees on customers.

As Hyman writes:

Bandwidth caps with fees piled on top are a lousy way to manage traffic. All of the costs of supplying residential broadband are for supporting peak usage. Bandwidth consumed off-peak is completely free. If Internet service providers really wanted to manage traffic efficiently, they would limit speeds at peak times. If their goal is instead to increase revenues or lessen competition, getting consumers to pay per gigabyte is an excellent strategy.

Consumer access to unlimited bandwidth is good for society. It fosters innovation, drives commerce, and advances political and social discourse. Given that bandwidth is cheap and plentiful and will only grow more so with time, there is no good reason for bandwidth caps and fees to take root.

Consumers and regulators need to take heed of what is happening and avoid winding up like the proverbial frog in a pot of boiling water. It’s time to jump before it’s too late.

Time Warner Cable just won’t let you say goodbye, if they can help it.

A year ago, your editor fought for a better deal from the cable company that has served him since the 1980s.  With a tough economy and downsizing, paying a cable bill that was approaching $175 a month in early 2011 for ‘all their best’ was simply no longer an option.  Time Warner Cable’s customer retentions office responded with a promotion that slashed the bill to just $88.44 for Turbo Internet, cable-TV, and unlimited “digital phone” service with nationwide calling.  Incidental charges included leasing a whole house DVR ($7.04), a second cable box ($6.84), $1 for “digital programming” and $0.34 for the remote control.

When the cable operator introduced DOCSIS 3 broadband speed upgrades, an additional $20 a month brought 30/5Mbps speeds.  The total — $123.66 (before taxes and fees).  That’s a whole lot less for a great deal more service.

When the promotion ended in February, the rate shot back up to $160, but $7.95 of that was for a year of Showtime at a special promotional price.  Showtime was destined for the cancel corner anyway (we didn’t watch more than two hours of anything on Showtime in the last year), but even without it, the rate increase was on the steep side.

So we complained.

Unlike last year, which resulted in considerable confusion and arguing back and forth with different representatives to find the best deal, this year we let Time Warner’s social media representatives do the hard work for us.  Within 24 hours, our rate for all of the same services, plus a special promotion that includes HBO, Cinemax, Showtime, and The Movie Channel at no additional charge, brought the bill down even lower than we managed last year: $102.33 a month for a year.  That includes the 30/5Mbps Road Runner Extreme, Whole House DVR, and one extra cable box.  It doesn’t include taxes and fees, which typically add another $6.50 to the bill.

The whole process was painless, and you can follow in our footsteps if you have a Twitter account:

Step One: Tweet Time Warner:

The key phrase in whatever Tweet you send is to include: @twcablehelp, which brings you to their social media customer service representatives.  I also “followed” twcablehelp so I could see how active they were.  During business hours, you should expect to see a reply like this within the hour:

For those new to Twitter, “DM” refers to a “direct message” — a private Tweet seen only by the intended recipient.  I finally found the menu option that allows me to send a “direct message” on Twitter’s page for Time Warner Cable:

Note the red box around the option on the top right.  By clicking that you will see a drop down menu that includes an option to “Direct Message” TWCableHelp.  You will want to include your Time Warner Cable account number (as seen on your bill) and include your contact phone number.

Within 24-48 hours, a senior retentions specialist should call you to negotiate a better offer for your service.  Make sure you answer those unfamiliar caller ID calls!  But before they call, visit Time Warner Cable’s website and note any currently running new customer promotions.  Also check to see if the competition is offering anything even lower.  Those prices are typically the starting point for your negotiations, and the company should have little trouble meeting them.  However, customers with a poor payment record or past due account may discover the company less willing to negotiate.  Bring account balances current before negotiating for a lower rate.

Some Time Warner Cable territories offer “price protection agreements” or term contracts that lock customers into 1-2 years of service.  Negotiating around these contracts can be difficult to impossible.

An alternative contact method is to direct e-mail Time Warner at: twcable.help@timewarnercable.com (don’t forget the “.” in twcable.help).

The total time spent this year on finding a better deal that will save us $58 a month — $696 a year — about five minutes, far less than the time it took to write this article.  Give it a try and let us know in the comments what kind of deals you can negotiate.

While a downturn economy continues to afflict middle and lower income America, it doesn’t seem to be doing much harm to Time Warner Cable’s profits.

America’s second largest cable operator saw profits jump more than $150 million higher to $564 million last quarter, compared to $392 million at the same time the year before.  Time Warner’s revenue grew by 4% to $5 billion in the fourth quarter alone.  In fact, the company is performing so well, executives announced they would return $3.3 billion in earnings to shareholders through share buybacks and dividend payouts, in addition to the forthcoming $4 billion share repurchase program.  Wall Street liked what they saw, boosting shares 7% after the company posted its quarterly and annual results on its website.

Time Warner’s biggest success story remains its broadband service, which consistently delivers the company new subscribers and has helped offset the loss of video subscribers, numbered at an additional 129,000 who “cut the cord” in the fourth quarter of 2011.

Time Warner Cable earned $1.148 billion in revenue from broadband in the last quarter, an increase of 8.6% over last year.  For 2011, the cable operator earned $4.476 billion selling residential Internet access, also representing an 8.6% growth rate over earnings across 2010.

The company attributed this to “growth in high-speed data subscribers and increases in average revenues per subscriber (due to both price increases and a greater percentage of subscribers purchasing higher-priced tiers of service).”

The increased costs incurred by Time Warner Cable to upgrade and expand their network and cable systems were well offset by the aforementioned price increases and subscriber upgrades.  The company increased capital expenditures to $942 million in the last quarter.  Results over the full year show just a 0.2% overall increase in capital investment, now at $2.937 billion.  System upgrades, Time Warner’s plans to move their systems to all-digital cable television, the ongoing rollout of DOCSIS 3.0, new home security and automation services, and investment in online video and data centers are included in these costs. But a more significant reason for the increase comes from the company’s ongoing expansion into business services, which requires wiring more office buildings for cable.

Britt

Time Warner Cable CEO Glenn Britt led off the conference call with investors with an explanation for the increased expenses.

“We plan to continue our aggressive growth in business services by expanding product offerings, growing our sales force, improving productivity and increasing our serviceable footprint. This means continued investment, both in people and in capital,” Britt said. “Projects include expansion of our content delivery network, which powers our IP video capability, our 2 international headends, completion of DOCSIS 3.0 deployment, and conversion to all-digital in more cities. We expect to be able to accomplish this while maintaining the capital spending of the last 2 years — that is, between $2.9 billion and $3 billion, which represents a continued decline in capital intensity.”

Nothing in Time Warner Cable’s financial disclosures provides any evidence to justify significant changes in their pricing model for broadband, which currently delivers flat rate, unlimited service to customers at different speed rates and price points.  In fact, the company’s investments in DOCSIS 3.0 upgrades, which can support faster broadband speeds and a more even customer experience, have already paid off with subscriber upgrades.

Robert D. Marcus, president and chief operating officer, noted subscribers are increasingly considering faster (and more profitable) broadband tiers.

“Once again, high-speed data net adds over-indexed to our higher-speed tiers,” Marcus noted. “Roughly 3/4 of residential broadband net adds were Turbo or higher. And DOCSIS 3.0 net adds accelerated for the eighth consecutive quarter to an all-time high of 54,000.”

Time Warner’s biggest challenges continue to be the current state of the economy, which has made subscribers much more sensitive to pricing and rate increases, and cord cutting traditional cable television service.

“One group is extremely price-conscious, perhaps due in part to the ongoing economic malaise,” Britt said. “The other group is willing and able to pay for more features and service. We’re going to focus more attention on products and services that best meet each group’s needs rather than pursuing traditional one-size-fits-all solutions.”

That is clearly evident in the company’s bundled service options, including increasingly aggressive discounted pricing for new customers and for those threatening to leave and Time Warner’s super-premium Signature Home service, which delivers super-profits.  Average revenue from Signature Home customers averages $230 a month.  Traditional “triple play” customers who buy phone, Internet, and cable service only bring the cable company an average of $150 a month.

The company’s plans for 2012 do not include a specific statement about implementing an Internet Overcharging scheme like usage billing or usage caps.  But it is unlikely such an announcement would be made explicitly at an earnings announcement.  In the last quarter, Stop the Cap! reported comments from chief financial officer Irene Esteves that the company was still very interested in the concept of selling broadband with usage pricing as a “wonderful hedge” against cord-cutting.

Esteves told a UBS conference she believes usage-based pricing for Time Warner Cable broadband will become a reality sooner or later.  Charging “heavy users” more would already be familiar to consumers used to paying higher prices for heavy use of other services, and she claimed light users would have the option of paying less.

But despite favorable reception to the idea of usage pricing by Wall Street, Esteves acknowledged the company’s past experiments in usage pricing didn’t go as planned, and she suggested the company will introduce usage pricing “the right way rather than quickly.”

Other developments and highlights

• 

  Time Warner faces Verizon's $500 rebate offers in NY City

  Time Warner Beats Up DSL: Time Warner Cable’s most lucrative source for new broadband customers comes at the expense of phone companies still relying on DSL to deliver broadband service.  As DSL speeds have failed to stay competitive with cable broadband, the cable operator has successfully lured price-sensitive DSL customers with attractive ongoing price promotions delivering a year of standard 10/1Mbps cable Internet access for $29.99 a month, often less expensive than the total price of DSL service that frequently delivers slower speeds.

• Stalled Verizon FiOS deployment has limited the amount of competition Time Warner faces from fiber optics to just 12% of the company’s service area.  Where competition does exist, especially in New York State, Time Warner has had to stay aggressive to retain customers with deeply-discounted retention deals to keep up with Verizon’s high value rebate gift cards and new customer offers.  AT&T now provides U-verse competition in about 25% of Time Warner’s service area, but like satellite, AT&T U-verse pricing is less heavily discounted.
• Retention pricing and new customer deals deliver lower prices than ever.  In November, Time Warner started selling a triple play offer for $89.99 a month that includes DVR service and now also includes deep discounts or free 90 day trials of premium movie channels. That is $10 less than the same time last year.
• Premium movie channels continue to take a major hit as subscribers try to reduce their bills, especially after Time Warner began increasing rates on those networks.  HBO now sells for as much as $15 a month in many areas.  Time Warner Cable hopes to ‘revitalize’ premium movie channels with online video services like HBO and Max Go and promotional discounts.
• Long-standing customers of Time Warner’s “triple play” package received a “thank-you gift” — free voice-mail in 2011, something that will continue in 2012.
• Customers signing up for Time Warner’s premium-priced Wideband (50/5Mbps) service ($99/month) are being offered free phone service to sweeten the deal.

What to Expect in 2012

• Time Warner is moving forward to create its own Regional Sports Network for southern California;
• Los Angeles will continue to see large-scale expansion of Time Warner’s growing Wi-Fi network, available for free to premium broadband customers, with thousands of new access points on the way;
• The cable company will introduce Wi-Fi service in other, yet-to-be-announced cities in 2012, with up to 10,000 access points planned.
• Time Warner will be making its “digital phone” product more attractive with lower prices and more features, especially in product bundles, as consumers increasingly discard landlines;
• Expect to see the end of analog cable television in a growing number of Time Warner Cable areas, requiring customers to use new equipment (initially provided free) to continue watching on older televisions and those without existing set top boxes.
• Time Warner will continue to expand its “TV Everywhere” project to include live streaming TV on smartphones, video game consoles, computers, and more.  On-demand programming will be available as well sometime this year across all platforms.
• A nationwide channel re-alignment will move subscribers to consistent channel numbers across the country, in part based on grouping them together into “genres.”  Many areas already have digital cable channels arranged this way, but now they will be consistent from coast-to-coast.
• Time Warner will complete DOCSIS 3 deployment in all areas this year.
• The company is moving to introduce 2-hour service call windows almost everywhere, and 1-hour windows and weekend appointments in some markets.  Several cities now allow customers to select specific times for service appointments.
• Self-install kits will become increasingly available for different products, allowing customers to install equipment themselves;
• Time Warner’s IntelligentHome home security, monitoring, and automation product will expand beyond its launch markets (Syracuse and Rochester, N.Y., Charlotte, N.C. and Los Angeles/Southern Calif.).  The product currently has customers in the thousands, considered relatively small.  But Time Warner has learned subscribers are using the service in surprising ways, which will let them adapt their marketing.  Among the most popular features: remotely watching your pets at home.

Most Memorable Quote: “I think, more than anything else, our pricing strategy is dictated by what the marketplace will bear as opposed to what our underlying cost structure is.” – Robert Marcus, president and chief operating officer, Time Warner Cable

Just a few weeks after announcing $2 rate increases on most tiers of the company’s broadband service, Rogers Communications has announced speed upgrades and tiny increases in usage allowances for certain customers:

• Express: download speeds will increase from up to 12Mbps to up to 18Mbps and data allowance will increase from 60GB to 70GB.
• Extreme: download speeds will increase from up to 24Mbps to up to 28Mbps and data allowance will increase from 100GB to 120GB.

These enhancements apply to customers utilizing Rogers DOCSIS 3.0 capabilities. Rogers will start rolling out the faster speeds to existing Express tier customers currently receiving download speeds of up to 12 Mbps starting January 26^th and will continue over the following weeks. New customers will experience faster speeds beginning February 21^st. All new and existing customers will benefit from higher data allowances starting March 8^th.

Rogers has played repeatedly with their usage allowances, particularly for its Extreme tier, which has seen increases and decreases over the past few years:

Rogers Extreme Tier Usage Cap History

• 2009: 95GB per month
• 2010: Reduced to 80GB per month (-15GB)
• 2011: Increased to 100GB per month (+20GB)
• 2012: Increased to 120GB per month (+20GB)

Rogers’ Express service gets just a 10GB monthly bump, making the speed upgrade less valuable because customers are restrained from using the service.

Rogers says the incremental upgrades are a result of Canadians using the Internet more than ever.

“Rogers customers are increasingly watching movies on Rogers on Demand Online, working from home and using multiple devices like tablets and laptops connected by Wi-Fi to the internet,” said John Boynton, executive vice-president and chief marketing officer at Rogers Communications. “The ways Canadians are using the internet are changing dramatically and we are constantly reviewing our plans and policies to ensure they deliver the best possible customer experience that lines up with evolving needs and usage patterns.”

Apparently those living in western Canada use the Internet even more, because Shaw Communications’ comparable broadband tiers are much more generous:

Shaw Communications Usage Allowances

• High Speed 10Mbps: 125GB per month
• High Speed 20Mbps: 200GB per month
• Broadband 50Mbps: 400GB per month

North America’s broadband rankings continue to take a beating at the expense of countries deploying fiber optic broadband.  While the United States and Canada cope with aging landline technology and an uncompetitive marketplace that tells consumers they don’t need fiber-fast broadband speed, countries like Bulgaria, Lithuania and Estonia are lighting up 50-100Mbps networks that often charge lower prices than North Americans pay for 1-3Mbps DSL.

Ookla, a global leader in broadband testing and web-based network diagnostic applications, reports that the best performing broadband networks for speed, value, and performance are increasingly in Europe and Asia.  While both the United States and Canada used to be among the world leaders in broadband infrastructure, that is no longer true.

Some examples:

• The United States now scores 31st in average download speed, Canada is 33rd;
• In upload speed, America now ranks 37th, Canada a woeful 69th;
• Ookla’s Household Quality Index, which ranks packet loss and general reliability of home connections found Canada scoring 27th place, the United States 38th;
• At a cost per megabit, neither the US or Canada offers very good value.  The USA ranked 29th ($4.95 per megabit), Canada 33rd ($5.85 per megabit);
• Neither country does a great job delivering the speeds and service promised either.  The USA ranked 25th, Canada 32nd.

Ookla found that while speeds are rising in North America, they are not increasing nearly as fast as in other, higher-ranked countries.  Most of the speed gains in North America come from cable or limited fiber-broadband deployments like Verizon FiOS or community-owned fiber to the home networks.  Wireline ADSL service, which represented a larger proportion of home Internet connections in 2008, continues to lose ground to faster options from cable companies, community-owned broadband, and phone company fiber upgrades.  In eastern Europe, the Baltics, Russia and Ukraine, many of the dramatic boosts in broadband speed and quality come as a result of national fiber network upgrade projects.

While speeds in North America are gradually increasing, both the U.S. and Canada are being outpaced by many countries in Europe and Asia.

While providers in the United States and Canada often dismiss fiber as too costly, Ookla found fiber-based networks delivering some of the world’s best values in broadband.

For example, on a cost-per-megabit basis, Bulgaria’s new fiber networks deliver the world’s cheapest Internet service, at an average of just $0.64 per megabit.  The average broadband speeds in the country are now higher than 21/11Mbps.

Elion headquarters in Tallinn. Elion delivers fiber broadband to homes across Estonia.

Contrast that with average speeds in the United States (12.41/2.97Mbps) and Canada (11.95/1.70Mbps).  Other top scoring countries for cost-per-megabit include:

• Romania $0.97 USD
• Lithuania $1.11 USD
• Ukraine $1.17 USD
• Republic of Moldova $1.41 USD
• Latvia $1.80 USD
• Hungary $2.00 USD
• Slovakia $2.04 USD
• Hong Kong $2.26 USD
• Russia $2.51 USD

In terms of download speed, Estonia’s investment in a national fiber network is now paying dividends, with a dramatic increase in national average broadband speeds to 50/28Mbps.  As new cities join Estonia’s fiber network, speeds take a dramatic upswing.  Contrast average speeds in Saue (101.03Mbps), Viimsi (98.98Mbps), Tallinn (69.80Mbps), and Võru (65.58Mbps) with ADSL-rich Pärnu (12.55Mbps), Paide (12.40Mbps), Rapla (8.93Mbps), and Valga (7.71Mbps).

It is much the same story in other fiber-rich countries, where broadband speeds far exceed the averages in the United States and Canada:

Look what happens to Estonia's broadband speed rankings when it switched on its national fiber broadband network.

• Lithuania 31.65 Mbps
• South Korea 31.44 Mbps
• Latvia 25.42 Mbps
• Sweden 24.62 Mbps
• Romania 24.47 Mbps
• Netherlands 24.36 Mbps
• Singapore 22.94 Mbps
• Bulgaria 21.12 Mbps
• Iceland 20.53 Mbps

Despite all of the bad news, the cable industry’s trade publication Multichannel News tried to find victory in the jaws of defeat, noting things could be worse… if they ran traditional phone companies.

Cable operators delivered the fastest average broadband download speeds in 2011 — with major MSOs easily blasting by rival telco and satellite Internet services — according to data from independent testing firm Ookla.

For the full year, the six fastest residential Internet service providers in the U.S. based on average download speed were Comcast, Charter Communications, Cablevision Systems, Time Warner Cable and Insight Communications.

[...] Comcast and Charter delivered average download speeds of 17.19 Megabits per second, followed by Cablevision at 16.40 Mbps, Cox at 15.76 Mbps, TWC at 14.41 Mbps and Insight at 14.22 Mbps.

Verizon Communications fared better than its telco peers with an average download speed of 12.94 Mbps, thanks to FiOS Internet, its fiber-to-the-home service that provides up to 150 Mbps downstream. And overall, Verizon had the highest upstream speeds with an average of 7.41 Mbps. Still, the company’s legacy DSL services dragged down overall speeds.

Behind DSL were woefully slower speeds from the nation’s wireless ISPs (which include 3G broadband from large companies like Verizon Wireless and AT&T), and perennially last place satellite Internet.

Moffett

Despite repeated claims by providers that consumers don’t need fiber-fast broadband speeds, industry analyst Craig Moffett at Sanford Bernstein tells a different story:

“Technology adoption is creating a feedback loop that increasingly favors cable’s physical infrastructure,” Moffett wrote in a research note last month. “As more people are served by higher-speed connections, more and more applications are evolving to take advantage of them. Customers with lower-speed connections are increasingly being forced to upgrade to higher speed connections… or be left behind.”

The conclusion reached by Multichannel News columnist Todd Spangler:

“The relative broadband speeds of cable vs. telco isn’t merely an academic curiosity: Major providers are increasingly touting Internet performance in their marketing as they fight for consumers’ dollars.”

Unfortunately for the cable industry, although DOCSIS 3 upgrades have afforded dramatic increases in broadband download speeds, upload speeds lag behind.  Fiber to the home networks are best positioned to achieve victory in the global broadband race.  That is important not only because it delivers consumer dollars to the best provider in town, but fuels the further development of the digital, knowledge-based economy North America increasingly seeks to lead.

Customers of some of the largest cable, phone, and satellite companies will pay an average of 3-6 percent more for service in a series of rate increases taking effect between now and the end of February.

AT&T U-verse

If your introductory offer has expired, expect to pay more for just about everything as of Feb. 9.

Cable TV:

• U-family will increase from $54 to $57,
• U100 will increase for some from $54 to $59 and for others from $59 to $64,
• U200 will increase from $69 to $72/U200 Latino will increase from $79 to $82,
• U300 will increase from $84 to $87/U300 Latino will increase from $94 to $97,
• U400 will increase from $109 to $114,
• U450 will increase from $117 to $119/U450 Latino will increase from $127 to $129.

For high speed Internet customers who ordered their current speed before June 12, 2011, effective with the February 2012 billing statement, the monthly price for Basic will increase from $19.95 to $25, Express will increase from $30 to $33, Pro will increase from $35 to $38, Elite will increase from $40 to $43, and Max will increase from $45 to $48. If you are paying a monthly high speed Internet equipment fee for the Residential Gateway, the amount will increase from $4 to $6.

For Voice Unlimited, effective on February 1, 2012, the monthly price will increase from $33 to $35.

AT&T blames increased programming costs and “the cost of doing business” for the rate increases.  AT&T is increasing broadband pricing despite enjoying further cost reductions from their Internet Overcharging scheme implemented in 2011.

Comcast

Comcast implements rate increases at different times of the year throughout its national service area.  But a preview of what is forthcoming can be seen in south Florida and Minnesota, where Comcast’s new rates for 2012 have increased an average of 5.8 percent.  That comes after a 2 percent rate hike last year.  It’s a bitter pill for many customers to swallow, because Comcast has also been moving popular cable channels like Turner Classic Movies into the more expensive Digital Preferred package.  The price of that full basic package will now run just short of $85 a month. Customers in Minneapolis are staring down these new rates:

• Basic 1: no change in most franchise areas.
• Digital Economy: increases from $29.95 a month to $34.95 a month, or 16.7 percent.
• Digital Starter: increases from $62.99 a month to $66.49 a month, or 5.6 percent.
• Digital Preferred: increases from $80.99 a month to $84.49 a month, or 4.3 percent.

Comcast blames increased programming costs and upgrade expenses associated with its now completed DOCSIS 3 project.  Comcast also has converted many of its service areas to all-digital service, which has opened up additional room to sell more expensive broadband packages, add additional HD channels, and make room for new product lines relating to home automation and security.

Cox Cable

Broadband Reports readers are sharing anecdotal evidence Cox has begun its own 2012 rate increase campaign.  In Florida, cable TV rates are up yet again:

Prices for Cox TV and Cox Advanced TV will be as follows:

• Cox TV Starter will change from $19.55 to $22.85/mo.
• Advanced TV will change from $5.50 to $4.20/mo.
• Advanced TV Standard Definition receivers will change from $5.55 to $6.99/mo.
• Advanced TV High Definition, High Definition/DVR & DVR receivers will change from $7.45 to $7.99/mo.

Advanced TV Paks will change:

• Any 1 Pak (excluding Variety Pak) from $4.00 to $4.25/mo.
• Any 2 Paks (excluding Variety Pak) from $8.05 to $8.50/mo.
• Any 3 Paks from $12.00 to $12.50/mo.
• Variety Pak will be $4.00/mo.

Premium pricing will change:

• 1 premium channel from $13.99 to $14.99/mo;
• 2 premium channels from $23.99 to $24.99/mo;
• 3 premium channels from $30.99 to $34.99/mo;
• 4 premium channels from $36.99 to $44.99/mo.
• (Pricing for the 3rd and 4th Premium channels will be grandfathered at the current price for existing customers.)

Cox’s Preferred Internet tier is increasing from $49.99 to $53.99 a month.  Basic phone service increases from $11.75 to $13.18, and popular calling features like Caller ID are also increasing (from $5.95 to $9.00 per month).

Rates vary in different franchise areas.

DirecTV

The satellite TV provider will raise rates on Feb. 9 by 4 percent on average. Its costs are going up by more than that, the company said on its website: “The programming costs we pay to owners of TV channels will increase by about 10 percent.”

DirecTV defends its rate increase, noting it will introduce new features in 2012 that include more than 170 HD channels and the most 3D viewing options of any television provider.  The full breakdown is provided from DirecTV:

Consumer Tips

1. Customers who subscribe to bundled services will see the fewest rate increases.  The more services you bundle, the lower the typical cost of each component within the bundle.  It rarely pays to have one company as a TV provider and another delivering your broadband because standalone service pricing is increasingly the most expensive option.
2. Ask for an extension of your introductory or promotional rate.  Request pricing from the competition and be prepared to summarize it with your current provider when arguing for a lower rate.  If your current provider thinks you are serious about jumping to another provider, they may lower your rates to keep your business.
3. Be prepared to switch.  Cable companies base their retention offers on several factors: what the competition offers, how long you have been a customer (2+ years guarantees a better retention deal) and how you pay your bill.  If you are a late payer, expect a much more difficult time negotiating a lower rate.  You may encounter a brick wall if you are labeled a “flipper” that jumps between providers’ introductory pricing offers.  But even these customers will be welcomed back, with lower rates, when they inevitably return.  They just won’t get their promotional offer renewed.
4. Some companies reserve their most aggressive pricing for customers who actually schedule a disconnect or turn in their equipment.  Cable companies have gotten wise to empty threats from negotiating customers.  If you schedule a complete service disconnection two weeks in advance, some companies will take you seriously and call you with the most aggressive “win back” offers available, especially if you turned in your cable equipment.
5. Dump extras overboard.  Premium channel pricing has skyrocketed recently after remaining relatively stable for nearly two decades.  HBO is now at or above $15 a month in many areas.  As customers try to economize, premium movie channels are usually the first to go, and many cable operators are starting to lose preferred wholesale volume pricing discounts.  They are passing along new, higher prices to the dwindling number of premium customers left.  Scrutinize your cable bill carefully for potential savings.  Look for mini-pay tiers of HD channels you never watch, consider downgrading your “digital phone” package to local-only calling if you rarely make long distance calls, and consider tossing “Turbo” broadband speed packages that only incrementally increase download speed.  Many customers originally signed up to obtain higher upload speeds, but as cable companies boost speeds for all of their customers, the extra boost may no longer be worth the money.

Providers establishing Internet Overcharging schemes like usage caps, so-called “consumption billing,” and speed throttles that force subscribers into expensive upgrades are planning for a growth industry in data consumption.

According to new research from a firm that specializes in market strategies, data usage is going up and fast.  Providers that seek to monetize that usage could win enormous new profits just sitting back and waiting for customers to exceed the arbitrary usage caps some companies are now enforcing with their customers and take the proceeds to the bank.

iGR says the demand for connectivity inside the home is at an all-time high, with the biggest growth coming from wireless Wi-Fi connections.  The more devices consumers associate with their home broadband connection, the greater the usage.

That is one of the reasons why providers are increasingly supplying customers with free or inexpensive Wi-Fi routers, to make the connections quick, simple, and potentially profitable down the road.

Comcast's Wireless Gateway: A Future Money Machine?

Comcast announced this week it would supply a free 802.11N “home gateway” free of charge to every new customer signing up for Blast!, Extreme 50 or Extreme 105 broadband service.  In addition to wireless connectivity for every device in the home, the Xfinity Wireless Gateway also includes a built-in cable modem and phone service adapter.  Time Warner Cable strongly encourages new DOCSIS 3 customers use their equipment for Wi-Fi service as well.  AT&T has included its own wireless gateway with U-verse for a few years now.

The offer is hard to refuse.  Nearly 80 percent of homes use wireless access, connecting cell phones, tablets, laptops, personal computers, game consoles, and even set top boxes that let customers stream video entertainment to their television sets.

iGR found average usage in heavily-connected homes at the all time high of 390GB per month.  By 2015, that will rise to more than 440GB per month.  Both numbers are well in excess of average consumption limits by providers like Comcast and AT&T, which top out at just 250GB per month.  Of course, not all Wi-Fi usage is based on traffic from the Internet.  Some users stream content between computers or devices within the home.  But the research is clear — usage is growing, dramatically.

Video is by far the biggest factor, according to iGR.  Their report, U.S. Home Broadband & WiFi Usage Forecast, 2011-2015, says the appetite for downloaded and streamed video is only growing.

Matt Vartabedian, vice president of the wireless and mobile research service at iGR, says home Wi-Fi has become inextricably woven into the personal, social and business fabric of today’s life.

Broadband is increasingly seen by consumers as an essential utility, as important as the home wired telephone, safe drinking water, and reliable electric and natural gas service.

Providers are positioning themselves to take advantage of the growth market in data by establishing what, at first glance, may seem to be generous (often inflexible) usage limits that remain unchanged years after introduction.  While only a handful of consumers may cross those provider-imposed thresholds at first, within a few years, it will be more uncommon to remain within plan limits, especially if you watch online video.

Comcast Cable has been embarked on a gradual effort to convert many of their cable systems to digital platforms, which means more channel space, faster broadband speeds, and major headaches for some customers.

In Harrisonburg, Va., Comcast customers have been surprised and frustrated to find many of their favorite channels missing.  The cable company migrated most of the basic cable lineup to digital.  Customers who already use Comcast set top boxes never noticed the difference, but those who don’t certainly did.

The cable company spent weeks notifying customers they may need a “digital transport adapter” (DTA) — a fancy name for a small set top box — to continue to receive Comcast service on televisions that do not already have a box attached.  Many cable customers are confused by the transition, assuming if they own a “digital-ready” television, they don’t need extra equipment.  But most, in fact, do.

When customers discovered they needed the new box, minor chaos ensued at area Comcast retail outlets.  The Virginia State Police was reportedly pressed into service directing traffic in and out of some crowded cable store parking lots, and one customer even found a trooper guarding the cable company’s front door.

Some customers are telling local media they waited hours in long lines to obtain the equipment.  Several others are complaining even with the boxes, their favorite channels are still missing.

Most of the trouble seems to surround the authorization process required to enable the new equipment.

Comcast DTA (Courtesy: David Trebacz)

A reporter for an area television station discovered that on the air as she attempted, and failed, to get her box authorized for service, even after an hour waiting.  Customers report very long hold times when calling Comcast as well.

The cable company acknowledged some of the challenges.

“For the past few months, we’ve been communicating with our customers in the Shenandoah Valley about our ‘World of More’ digital enhancement,” the company said in a statement. “We’re moving analog channels to digital, and we do see an increase in the number of customers trying to get digital equipment. We’ve been offering extended hours and stepping up staffing to respond to increased demand.”

Comcast says the transition will increase the number of HD channels on offer in Virginia.  It also opens the door to faster broadband speeds through DOCSIS 3 upgrades.  In all, the company plans to add 50 new HD channels in the Staunton, Waynesboro and Augusta County areas after the upgrade is complete.

Area customers just wish the experience worked more seamlessly. Comcast customers in many communities have already dealt with digital upgrades.  Time Warner customers, starting in Maine, are just beginning the experience.

This WHSV reporter in Harrisonburg, Va. tried to demonstrate how to install and activate Comcast’s new set top box equipment… and failed because the cable company authorization process didn’t work.  (2 minutes)

Winston-Salem Time Warner Cable customers can expect to pay around 4% more for cable service in 2012.

Time Warner Cable’s annual rate increases have now reached the Carolinas.

The company is mailing letters to customers that announce rate hikes for off-contract clients in the $2-4 a month range, including price increases for Road Runner broadband that will now cost between $49.45-$57.95 a month.

“Our new prices reflect dramatically higher programming costs, additional programming and features, and continued investment in our network and customer service,” said Time Warner spokesman Scott Pryzwansky. “Time Warner Cable invested more than $350 million in capital in the Carolinas over the past year to make our network even more robust and to enable our customers to get the services and features they want.”

The company also invested heavily in lobbying lawmakers to keep community-owned broadband competition at bay, helping pass a measure through the Republican-controlled legislature that makes municipal broadband competition much more unlikely.

The result is another year of unfettered rate increases for customers in cities like Winston-Salem:

• Cable TV increases from $10.23 to $11.49 for broadcast basic, $64.99-$69.49 for standard analog service, $80.99-$85.49 for digital cable;
• Broadband increases from $47.95 to $49.45 for customers who also have digital cable, $52.95 to $55.95 for customers with any other tier of cable TV, $57.95 for standalone broadband service;
• Telephone rates are unchanged.

Customers can avoid some of the price increases through creative bundling, threatening to take your business elsewhere, or by signing up for alternative providers:

1. Customers on discounted promotional packages, retention deals, and term contracts will not face the rate increases until their promotional rates or contract expires;
2. If you are unhappy with the rate increase, consider calling Time Warner and telling them to cancel your service 1-2 weeks from today’s date.  Then wait for them to start calling you with promotional “win-back” offers that deliver at least a year of substantial savings off regular rates;
3. If you are a broadband standalone customer, consider signing up for Earthlink under their six-month promotion for just under $30 a month.  You will continue to be billed by Time Warner Cable and receive the same speeds and service with two exceptions: no PowerBoost (a temporary speed increase during the first few seconds of downloading), and you lose your Road Runner e-mail address (which you are not actually still using, are you?)  Get a Gmail account, don’t worry about speed gimmicks, and save $28 a month.  At the end of six months, sign up for Time Warner’s Road Runner service under their promotional rate, which is around $30 a month for a year.  Total savings over the 18 month combined promotional rate term: $504!

More than two years after Time Warner introduced DOCSIS 3 speed upgrades in New York, Time Warner is finally completing broadband upgrades for their customers in the Carolinas.  The latest cities scheduled to get the company’s Wideband (50/5Mbps) and Road Runner Extreme (30/5Mbps) services are Wilmington, Jacksonville and Morehead City. The new services will be available by early 2012.

Most customers in eastern North Carolina and parts of South Carolina still get Standard service speeds of 10Mbps download, 512kbps upload.  After the upgrade, a boost in upstream speeds to 1Mbps for Standard service customers is expected.

Time Warner Cable experienced another challenging quarter, continuing to lose cable TV customers who either drop or pare back their television service, often in favor of broadband.

The company reported losses of an additional 128,000 video subscribers during the third quarter, but is partly winning that revenue back with new broadband customers — 89,000 of them in the last three months.

“Broadband is a powerful service for which there appears to be unquestionable consumer thirst,” Time Warner Cable CEO Glenn Britt said on the investor call. “Over time, we will contribute more of our plant’s capacity to broadband.”

The company is also poised to expand its marketing to win new broadband customers away from their primary competition — telephone company DSL service.  Company officials remain confounded by customers who subscribe to Time Warner’s cable TV service and take broadband from “inferior” phone company-delivered DSL.  Time Warner will continue to target these customers with win-over promotions offering a year of Road Runner Standard Service at the $29.95 promotional price point.

For the company as a whole, this is the tenth consecutive quarter of year-over-year residential broadband revenue improvement, coming from a combination of higher-priced, faster speed tiers, price increases, and subscriber additions.  The company’s DOCSIS 3 upgrade has proven itself a winner for customers and the company, with 18 percent of Time Warner subscribers now choosing 30 or 50Mbps broadband services.

Wall Street expressed some concern about statements from CEO Glenn Britt that the company was going to expand capital spending on broadband to handle increasing demand, especially from online video.  That concern comes despite the fact the company’s “capital intensity” (spending) from January-September was the lowest in the history of the company.  The full year’s capital spending is on track to reach up to $3 billion, which is consistent with what the company spent last year.

Glenn Britt

So despite the plans to spend more on broadband, that spending is actually in line with previous years.

In response to an opening question from Deutsche Bank’s Doug Mitchelson, Britt delivered an extended explanation downplaying the company’s spending plans:

In a way, there’s nothing really new here. I think you’ve seen this trend for a while. Our broadband product is very strong.

As most people know, the usage of broadband is skyrocketing, as it has been for some time. And that means that we will need to spend more money on it. We have been already, both in capital and operating expenses.

The great thing about the Internet is lots of third parties dream up lots of new applications that require more speed and more bandwidth. And we anticipate that we’re going to have to devote more capacity to that over time. We will do that by gradually removing our analog signals from our — analog TV signals from our plan. We’ve been doing that over the last several years by migrating to digital using Switched Digital technology. And over the next several years, we’ll be going all digital in the TV space.

I don’t see this driving a dramatic change in our cap spending, I think, to the core of your questions. The spending has been going on for a while, and I think you’re seeing a change in mix. The video spending is going down over time. The business services is going to go up, although it didn’t this quarter. And you’re going to see the spending on broadband going up. But I don’t think the overall trajectory is mutually different.

This quarter, the company’s conference call seemed to embrace greater broadband usage, and pondering Internet Overcharging schemes like usage caps or usage-based billing never came up.  But Richard Greenfield from BTIG alluded to usage in his questions to Rob Marcus, president and chief operating officer at Time Warner Cable.

“I think we’re somewhere in the 7GB a month [range] of downstream bandwidth on a median basis,” Marcus said. “The average is much higher given the disproportionate usage by our high-end users.”

There were plenty of other facts to be gleaned from this morning’s conference call:

TV

• Whole Home DVR service has been introduced nationwide.  In the coming year, Time Warner will begin deploying “home gateways,” which reduce equipment costs;
• Time Warner is testing improved cloud-based set top boxes with home networking capabilities in parts of Syracuse, Los Angeles and Dallas.  These boxes will expand across the country in 2012.  They offer better search capability and deliver an improved user experience;
• 60% of customers reject “triple-play” offers from Time Warner and choose either “single” or “double-play” service instead;
• Much of Time Warner’s revenue growth is coming from rate increases on programming, services, and equipment;
• TV Essentials, the smaller, less expensive video package, is now available in New York City and Northeast Ohio, as well as upstate New York. It will launch nationwide by year end.  Unsurprisingly, company officials admit the less-than-attractive channel lineup has resulted in the vast majority of customers calling about the offering taking the traditional video package instead;
• Customers continue to drop ancillary services to cut their cable bill.  The increasingly expensive DVR box is a new target for cutting, and premium movie channels, adult pay-per-view, and mini-pay services all continue to suffer significant declines in business;
• The Google-Motorola deal will likely have little impact on Time Warner’s set top boxes, which primarily come from Cisco and Samsung.

Broadband

• By the end of the year, Time Warner plans to offer an Android-based TV Everywhere application similar to the existing iPad application, which will also continue to be upgraded to include on-demand offerings;
• Time Warner will make their TV Everywhere service available on game consoles, smart TVs and PCs in the near future;
• New York City customers will soon be able to select from a range of local broadcast stations on the company’s iPad app.  Other markets will start to see local channels added to this app in 2012;
• Major parts of Time Warner’s capital investments this year are: building data centers in Charlotte and Denver, conversion to all-digital in Maine to make room for enhanced broadband, and the continued rollout of DOCSIS 3.0. The company is also continuing to spend significantly on wiring commercial buildings to sell services to business customers;
• TV Essentials customers will soon be offered a “lite user” slower speed discount broadband plan to accompany their video package;
• In Los Angeles, Wideband 50Mbps customers also get 2 gigabytes of 4G/3G mobile broadband for no additional monthly charge on the company-branded Clearwire service. For Turbo Plus and Wideband 30Mbps customers, they can get the same 4G/3G capability for an additional $10 a month. Standard and Turbo customers can get it for an extra $20.  The company’s mobile broadband add-on product has not enjoyed much success with paying customers, however.  Time Warner hopes the value-added bundling of mobile broadband will attract more interest.

Phone

• Cord-cutting is now impacting Time Warner “digital phone” service, too.  Customers are increasingly reluctant to purchase phone service from any landline provider.  Now Time Warner’s regular pricing is starting to cost them business.  Executives revealed Time Warner’s “digital phone” service costs the company $9.06 to provide.  They charge consumers $30.  With that kind of profit margin, the company admits it will have to get more aggressive in pricing to attract new customers (and potentially keep existing ones);
• Time Warner lost 8,000 residential voice line customers last quarter, cushioned by net additions of 13,000 business line customers;
• The company continues to show little interest in selling cell phone products or services, either owned by themselves or others.  Mobile data remains an exception.