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Stop the Cap!’s Testimony Before the N.Y. Public Service Commission on Comcast-TWC Merger

lousy-tshirt-640x640For the benefit of new visitors, text items in bold are clickable links. A complete video from this event will be posted as soon as possible.

Good evening. My name is Phillip Dampier from Stop the Cap!, a Rochester-based all-volunteer consumer group fighting for better broadband service and against Internet usage caps.

This is a critical moment for New York. The Internet has become a necessity for most of us and the future is largely in the hands of one company capable of delivering 21st century broadband to the majority of upstate New York. That company isn’t Verizon, which has ended FiOS fiber expansion while abandoning most of its upstate customers with slow speed DSL. Indeed, as their market share will attest, our broadband future is held in the hands of Time Warner Cable.

Comcast could have become a big player in New York had it chosen to compete head to head with Time Warner. But large cable operators avoid that kind of competition, preferring comfortable fiefdoms that only change hands at the whim of the companies involved. As local officials from across New York have already discovered, no major cable operator will compete for an expiring franchise currently held by another major cable operator.

Ironically, Comcast is using that fact in its favor, noting that since neither company competes directly with the other, making Comcast larger has no impact on competition. But that should hardly be the only test.

At issue is whether this merger is in the public interest. This year, for the first time in a long time, the rules have changed in New York. In the past, the Commission had to prove the merger was not in the best interests of New Yorkers. Now the onus is on Comcast to prove it is. It has fallen far short of meeting that burden.

Let’s start with Comcast’s dysfunctional relationship with its customers. With more than 75 citizen comments filed with the Commission so far. Comcast’s reputation clearly precedes it. The consensus view is perhaps best represented by one exasperated Clinton-area resident who wrote, I quote, “No. No no no. HELL no.

dream onThat kind of reaction is unsurprising considering Consumer Reports ranked Comcast 15th out of 17 large cable companies and called their Internet service and customer relations mediocre. Every year since 2007, Comcast’s CEO acknowledges the problems with customer service and promises to do better. Seven years later, the American Customer Satisfaction Index reports absolutely no measurable improvement. In fact, ACSI has concluded Comcast had the worst customer satisfaction rating of any company or government agency in the country, including the IRS.

In order to sell this $45 billion boondoggle to a skeptical public, Comcast has hired 76 lobbyists from 24 different firms and will reportedly spend millions trying to convince regulators and our elected leaders this deal is good for New York. If the deal gets done, Comcast’s biggest spending spree won’t be on behalf of its customers. Instead, Comcast has announced a $17 billion share buyback to benefit their shareholders. Imagine if this money was instead spent on improving customer service and selling a better product at a lower price.

don't careThe only suitable response to this merger deal is its outright rejection. Some may recommend imposing a handful of temporary conditions in return for approval – like the kind Sen. Al Franken accused Comcast of reneging on after its earlier merger with NBCUniversal. But this is one of those cases where you just can’t fit a round peg into a square deal for consumers, no matter how hard you try.

With respect to television, volume discounts have a huge impact on cable programming costs and competition. The biggest players get the best discounts, smaller ones are stunned by programming rate hikes and new competitors think twice about getting into the business.

AT&T said last week its 5.7 million customer U-verse television service was too small to get the kind of discounts its cable and satellite competitors receive. AT&T’s solution is to buy DirecTV, which might be good for AT&T but is bad for competition.

Frontier Communications has also felt the volume discount sting after adopting several Verizon FiOS franchises. When it lost Verizon’s volume discounts, Frontier began a relentless marketing effort to convince its customers to abandon FiOS TV and switch to technically inferior satellite TV.

Combining Comcast and Time Warner Cable will indeed help Comcast secure better deals from major programmers (including Comcast itself). But Comcast is already on record warning those savings won’t be shared with customers.

Comcast’s executive vice president David Cohen summed it up best: “We are certainly not promising that customer bills will go down or increase less rapidly.”

Is that in the public interest?

xfinity_blowsComcast suggests this merger will make its cable television market share no larger than it had in 2002 when it bought the assets of AT&T Cable. But this is 2014 and cable television is increasingly no longer the industry’s biggest breadwinner. Broadband is, and post-merger Comcast will control 40-50 percent of the Internet access market nationwide.

So what do Time Warner Cable customers get if Comcast takes over? A higher bill and worse service.

Several months before Comcast sought this merger, Time Warner announced a series of major upgrades under an initiative called TWC Maxx. Over the next two years, Time Warner Cable plans to more than triple the Internet speeds customers get now at no additional charge. Those upgrades are already available in parts of New York City, Los Angeles, and Austin.

A Time Warner Cable customer in Queens used to pay $57.99 for 15 megabit broadband. As of last month, for the same price, they get 50 megabits.

In contrast, Comcast’s Internet Plus plan delivers just 25 megabits and costs $69.95 a month – nearly $12 more for half the speed. Who has the better broadband at a better price? Time Warner Cable.

New York State’s digital economy depends on Internet innovation, which means some customers need faster speeds than others. Time Warner Cable’s Maxx initiative already delivers far superior speeds than what Comcast offers, despite claims from Comcast this merger would deliver New York a broadband upgrade.

isp blockTime Warner’s new top of the line Internet service, Ultimate 300 (formerly Ultimate 50), delivers 300 megabit service for $74.99 a month. Comcast’s top cable broadband offer listed on their website is Extreme 105, offering 105 megabit speeds at prices ranging from $99.95 to $114.95.

Is the public interest better served with 300 megabits for $74.99 from Time Warner Cable or paying almost $40 more for one-third of that speed from Comcast? Again, Time Warner Cable has the better deal for customers.

But the charges keep coming.

At least 90 percent of cable customers lease their cable modem from the cable company, and Comcast charges one of the highest lease rates in the industry – $8 a month. Time Warner Cable charges just under $6.

So I ask again, is this merger really in the public interest when broadband customers will be expected to pay more for less service?

Then there is the issue of usage caps, a creative way to put a toll on innovation. Usage caps make high bandwidth applications of the future untenable while also protecting cable television revenue.

If the PSC approves this transaction, the vast majority of New York will live under Comcast’s returning usage cap regime. There is simply no justification for usage limits on residential broadband service, particularly from a company as profitable as Comcast. Verizon FiOS does not have caps. Neither does Cablevision. But the majority of upstate New Yorkers won’t have the option of choosing either.

In 2009, Time Warner Cable lived through a two week public relations nightmare when they attempted an experiment with compulsory usage caps on customers in Rochester. After Stop the Cap! pushed back, then CEO Glenn Britt shelved the idea. Britt would later emphasize he now believed Time Warner should always have an unlimited use tier available for customers who want it.

Whether intended or not, Time Warner actually proved that was the right idea. In early 2012, the company introduced optional usage caps in return for discounts. They quickly discovered customers have no interest in having their Internet usage measured and limited, even for a discount. Out of 11 million Time Warner Cable broadband customers, only a few thousand have been convinced to enroll.

comcast sucksComcast doesn’t give customers a choice. In 2008, a strict 250GB usage cap was imposed on all residential customers with disconnect threats for violators. Since announcing it would re-evaluate that cap in May 2012, it now appears Comcast has settled on a new residential 300GB usage allowance gradually being reintroduced in Comcast service areas starting in southern U.S. markets.

Comcast executive vice president David Cohen cutely calls them “usage thresholds.” At Stop the Cap! we call it Internet Overcharging.

Cohen predicts Comcast will have broadband usage thresholds imposed on every city they serve within five years. Whether you call it a cap or a threshold, it is in fact a limit on how much Internet service you can consume without risking overlimit fees of $10 for each 50GB increment over your allowance.

Unlike Time Warner Cable, Comcast isn’t offering a discount with its usage cap, so those who use less will still pay the same they always have, proving again that usage caps don’t save customers money. (See below for clarification)

At the end of May I watched CNBC interview Comcast CEO Brian Roberts who implied during a discussion about Comcast’s usage caps that usage growth was impinging on the viability of its broadband business. Moments later, Time Warner Cable ran an ad emphasizing its broadband service has no usage caps. Both companies are making plenty of money from broadband.

This merger is bad news for customers faced with Comcast’s legendary bad service, its forthcoming usage caps, or the higher prices it charges. Even promised innovations like their much touted X1 set top platform comes with a gotcha Comcast routinely forgets to mention. Customers have to pay a $99 installation fee.

Stop the Cap! will submit a more comprehensive filing with the PSC outlining all of our objections to this merger, and there are several more. We invite anyone in the audience to visit stopthecap.com for this and other matters related to cable television and broadband. We appreciate being invited to share our views with the Commission and hope to bring a consumer perspective to this important development in our shared telecommunications future. I’d be happy to answer any questions you might have.

http://www.phillipdampier.com/video/TWC News Hearing on Comcast 6-16-14.mp4

Time Warner Cable News covered the Public Service Commission hearing in Buffalo, which included testimony from Stop the Cap!’s Phillip Dampier. Also appearing was a representative from the National Black Chamber of Commerce advocating that telecom companies merge as fast as possible. The Chamber has received significant support from Comcast for several years now and representatives routinely testify in favor of Comcast’s business initiatives. (2:30)

Clarification: Comcast has different trials in different cities:

Nashville, Tennessee: 300 GB per month with $10/50GB overlimit fee;

Tucson, Arizona: Economy Plus through Performance XFINITY Internet tiers: 300 GB. Blast! Internet tier: 350 GB; Extreme 50 customers: 450 GB; Extreme 105: 600 GB. $10/50GB overlimit fee;

Huntsville and Mobile, Alabama; Atlanta, Augusta and Savannah, Georgia; Central Kentucky; Maine; Jackson, Mississippi; Knoxville and Memphis, Tennessee and Charleston, South Carolina: 300 GB per month with $10/50GB; XFINITY Internet Economy Plus customers can choose to enroll in the Flexible-Data Option to receive a $5.00 credit on their monthly bill and reduce their data usage plan from 300 GB to 5 GB. If customers choose this option and use more than 5 GB of data in any given month, they will not receive the $5.00 credit and will be charged an additional $1.00 for each gigabyte of data used over the 5 GB included in the Flexible-Data Option;

Fresno, California, Economy Plus customers also have the option of enrolling in the Flexible-Data Option.

Comcast suggested customers can enroll in a cheaper usage plan in some of these markets. Yes they can, but only if they downgrade to Economy Plus service which offers speeds only up to 3Mbps. Their $5 discount is not available on any other plan.

Drive-By Shallow Reporting On Comcast’s Reintroduction of Usage Caps in South Carolina

More drive-by reporting on usage caps.

More drive-by reporting on Comcast’s usage caps.

When the media covers Internet Overcharging schemes like usage caps and consumption billing, it is often much easier to take the provider’s word for it instead of actually investigating whether subscribers actually need their Internet usage limited.

Comcast’s planned reintroduction of its usage caps on South Carolina customers begins Friday. Instead of the now-retired 250GB limit, Comcast is graciously throwing another 50GB of usage allowance to customers, five years after defining 250GB as more than generous.

The Post & Courier never bothered to investigate if Comcast’s new 300GB usage cap was warranted or if Charleston-area customers wanted it. It was so much easier to just print Comcast’s point of view and throw in a quote or two from an industry analyst.

In fact, the reporter even tried to suggest the Internet Overcharging scheme was an improvement for customers.

The newspaper reported Comcast was the first large Internet provider in the region to allow customers to pay even more for broadband service by extending their allowance in 50GB increments at $10 a pop. (Actually, AT&T beat Comcast to the bank on that idea, but has avoided dropping that hammer on customers who already have to be persuaded to switch to AT&T U-verse broadband that tops out at around 24Mbps for most customers.)

Since 2008, the company’s monthly limit has been capped at 250 GB per household. When customers exceeded that threshold, Comcast didn’t have a firm mechanism for bringing them back in line, other than to issue warnings or threaten to cut off service.

“People didn’t like that static cap. They felt that if they wanted to extend their usage, then they should be allowed to do that,” said Charlie Douglas, a senior director with Comcast.

Charleston is the latest in a series of trial markets the cable giant has used to test the new Internet usage policy in the past year. As with any test period, the company can modify or discontinue the plan at any time.

During the trial period in Charleston, customers will get an extra 50 GB of monthly data than they’re used to having. If they exceed 300 GB, they can pay for more.

“300 GB is well beyond what any typical household is ever going to consume in a month,” Douglas said. “In all of the other trial markets with this (limit), it really doesn’t impact the overwhelming super-majority of customers.”

The average Internet user with Comcast service uses about 16 to 18 GB of data per month, Douglas said.

Customers who use less than five GB per month will start seeing a $5 discount on their bills.

“We think this approach is fair because we’re giving consumers who want to use more data a way to do so, and for consumers who use less, they can pay less,” Douglas said.

Data caps are designed to stop content piracy?

Data caps are designed to stop content piracy?

The Charleston reporter asserts, without any evidence, “data-capping is a trend many Internet service providers are expected to follow in the next few years as the industry aims to reduce network congestion and to find safeguards against online piracy.”

Suggesting data caps are about piracy immediately rings alarm bells. Comcast and other Internet Service Providers fought long and hard against being held accountable for their customers’ actions. The industry wants nothing to do with monitoring online activities lest the government hold them accountable for not actively stopping criminal activity.

“It’s not about piracy, per se,” said Douglas. “We don’t look at what people are doing. The purpose is really a matter of fairness. If people are using a disproportionate amount of data, then they should pay more.”

Comcast’s concern for fairness and disproportionate behavior does not extend to the rapacious pricing and enormous profit it earns selling broadband, flat rate or not.

MIT Technology Review’s David Talbot found “Time Warner Cable and Comcast are already making a 97 percent margin on their ‘almost comically profitable’ Internet services.” That figure was repeated by Craig Moffett, one of the most enthusiastic, well-respected cable industry analysts. That percentage refers to “gross margin,” which is effectively gravy on largely paid off cable plant/infrastructure that last saw a major wholesale upgrade in the 1990s to accommodate the advent of digital cable television and the 500-channel universe. Broadband was introduced in the late 1990s as a cheap-to-deploy but highly profitable, unregulated ancillary service.

How things have changed.

Just follow the money....

Just follow the money….

Customers used to being gouged for cable television are now willing to say goodbye to Comcast’s television package in growing numbers. Today’s must-have service is broadband and Comcast has a high-priced plan for you! But earning up to 97 percent profit from $50+ broadband isn’t enough.

A 300GB limit isn’t designed to control congestion either. In fact, had she investigated that claim, she would have discovered the cable industry itself disavowed that notion earlier this year.

In fact, it’s all about the money.

Michael Powell, the head of the cable industry’s top lobbying group admitted the theory that data caps are designed to control network congestion was wrong.

“Our principal purpose is how to fairly monetize a high fixed cost,” said Powell.

Powell mentioned costs like digging up streets, laying cable and operational expenses. Except the cable industry long ago stopped aggressive buildouts and now maintains a tight Return On Investment formula that keeps cable broadband out of rural areas indefinitely. Operational expenses for broadband have also declined, despite increases in traffic and the number of customers subscribing.

http://www.phillipdampier.com/video/CNBC Internet v. Cable 8-20-10.flv

Don’t take our word for it. Consider the views of Suddenlink Cable CEO Jerry Kent, interviewed in 2010 on CNBC. (8 minutes)

“I think one of the things people don’t realize [relates to] the question of capital intensity and having to keep spending to keep up with capacity,” said Suddenlink CEO Jerry Kent. “Those days are basically over, and you are seeing significant free cash flow generated from the cable operators as our capital expenditures continue to come down.”

Unfortunately, Charleston residents don’t have the benefit of reporting that takes a skeptical view of a company press release and the spokesperson readily willing to underline it.

If Comcast seeks to be the arbiter of ‘fairness,’ then one must ask what concept of fairness allows for a usage cap almost no customers want for a service already grossly overpriced.

Lawrence, Kansas Finally Has Cap-Free Broadband (No Thanks to Sunflower/Knology)

Worst

Worst

Broadband customers in Lawrence, Kan. have been liberated from Internet Overcharging schemes after years of usage-capped Internet access from Sunflower Broadband and Knology.

WideOpenWest’s (better known as WOW!) acquisition of Knology, which in turn purchased Sunflower Broadband from the local newspaper, means usage limits are a thing of the past.

Consumer Reports has top-rated WOW! for customer friendly service, and banishing usage caps is an example of why the cable company earns such high marks.

The company reminds customers that “all WOW! Internet speeds have no usage caps.”

Sunflower Broadband originally offered four different broadband plans, only one without usage caps. Lawrence customers did get speed upgrades faster than many other cable broadband customers, but most were accompanied with draconian usage limits.

Bad

Bad

Bronze: Originally offering 3Mbps/256kbps service, Sunflower’s “lite” usage plan included a 3GB monthly usage limit boosted by Knology in 2012 to $22.95/month offering 3/1Mbps service and a still ridiculously low 5GB usage limit. WOW! has kept the lite plan but removed the usage cap.

Silver: Sunflower’s equivalent of Standard Internet service offered 10/1Mbps broadband with a 50GB usage cap. Knology raised the price to $37.95, left the 50GB cap intact and increased speeds to 18/2Mbps. WOW! dropped the cap.

Gold: Sunflower’s premium 50/1Mbps service offered 250GB of usage for under $60 a month. When Knology took over, speeds were boosted to 50/5Mbps along with the price: $62.95 a month. But the usage cap stayed the same. Today WOW! continues the plan without any caps.

Better

Much Better

Palladium: Sunflower responded to customer complaints about metering Internet usage by offering residents a trade — an unlimited use plan with no speed promises. Palladium could be as slow as 2Mbps during peak usage, 25Mbps when traffic was very low. Knology kept the plan and its 1Mbps upload rate, but raised the price to $47.95 a month. WOW! dumped Palladium altogether, replacing it with a 30/2Mbps unlimited use plan for customers who don’t want to pay $63 a month for the Gold plan.

A number of Lawrence customers annoyed with Sunflower and Knology switched to AT&T U-verse when it was introduced locally. Although U-verse has a 250GB usage cap, Lawrence residents report it remains unenforced.

Stop the Cap! reader Mike, who shared the news WOW! had recently shelved the caps, tells us he switched to AT&T years ago and is happy with their service.

“So far, their cap is not enforced at all here,” Mike writes. “The minute they start enforcing it, I’ll switch to WOW!”

Mediacom Adopts Internet Overcharging Scheme for All Customers: Caps and Overlimit Fees

logo_mediacom_main

…fiction into “fact.”

Although America’s perennially worst-rated cable company is advertising “always faster Internet,” it is also moving “full speed ahead” to enforce usage limits to make sure customers don’t take too much advantage of those speeds.

Broadband Reports notes Mediacom is preparing notices stating effective Sept. 7 usage limits and overlimit fees that used to only apply to new customers or those changing plans will now be enforced for all customers.

A member of their social media team blamed bandwidth hogs for the caps.

“We have a small subset of customers that are using a very large portion of the available bandwidth, which can have a negative impact on the other Internet users in the surrounding area,” said Mediacom’s Social Media Relations Team. “By curbing this behavior, other customers can benefit with faster speeds.”

capacityActually, Mediacom will benefit from lower usage and higher revenue it will collect from the $10 overlimit fee for each additional 50GB of usage. Neighborhood congestion issues are largely a thing of the past because of upgrades to DOCSIS 3 technology.

Although the usage caps for higher priced tiers are generous by current standards, the company can adjust the caps up or down at any time. Mediacom traditionally serves rural areas or small cities that lack significant telephone company competition, so customers may have few alternatives. Both CenturyLink and AT&T have their own usage caps, barely enforced. Frontier Communications, another common provider in Mediacom territory, has tested the water with usage caps in the past but does not regularly impose them.

Broadband Reports assembled the pricing and caps for each Mediacom broadband tier:

  • Mediacom Launch 150GB (3 Mbps, $28)
  • Mediacom Prime 250GB (12-15 Mbps, $46)
  • Mediacom Prime Plus 350GB (20 Mbps, $55)
  • Mediacom Ultra 999GB (50 Mbps, $95)
  • Mediacom Ultra Plus 999GB (105 Mbps, $145)
Mediacom has an online usage tracker and promises to notify customers when they are nearing their usage limit before the overlimit fees begin.

Comcast Expands 300GB Usage Cap to Kentucky, Georgia and Mississippi

Comcast's usage caps are back for customers in three states.

Comcast’s usage caps are back for customers in three states.

Comcast has decided usage caps are in the future for more of its broadband customers.

Effective Sept. 1 XFINITY Internet Service will be capped to 300GB of monthly usage in central Kentucky, Savannah, Ga., and Jackson, Miss. Comcast says the plan provides “additional choice and flexibility.”

We’re uncertain how it does that, exactly.

Comcast will have the additional choice of slapping a $10 overlimit fee for allowance offenders for every extra 50GB of data consumed.

But the company says it will be initially flexible in how it penalizes those heavy users.

“In order for our customers to get accustomed to the new data usage plan, we will be implementing a program that gives you three courtesy months for exceeding the 300GB in any 12-month period,” writes Comcast in a new FAQ. “That means you will only be subject to overage charges if you exceed the 300GB for a fourth time in a 12-month period. On the fourth (and any subsequent occurrence), you will be notified that you have exceeded your 300GB via an email and in-browser notification, that an additional 50GB has automatically been allocated to your account, and that applicable charges will be applied to your bill.”

flex

Choice and flexibility for the customer or Comcast’s bottom line?

Customers with questions and concerns about Comcast’s expanding Internet Overcharging scheme can call Comcast Customer Security Assurance at 1-877-807-6581. Customers might want to assure Comcast if they are going back to usage caps, they will start shopping for a different provider. Stop the Cap! recommends customers in these areas protest the usage caps firmly and loudly.

“There are no legitimate engineering or economic justifications for these caps,” notes consumer group Free Press. “But Comcast’s new Internet Overcharging scheme and its discriminatory treatment of competitors’ video offerings do pose a grave threat to future video competition.”

And to your wallet.

Analysts have estimated that Comcast’s profit margins on broadband service are at least 80 percent or higher. In 2008, Sanford C. Bernstein & Co. analyst Craig Moffett estimated Comcast’s data margins at 80 percent, and Credit Suisse reported in fall 2010 that Comcast’s gross margins on high-speed data had grown to 93 percent.

Since withdrawing a nationwide cap of 250GB in 2012, Comcast had tested usage caps only in Nashville, Tenn., and Tucson, Ariz.

Stop the Cap! thanks reader “MrPaulAR” for the news tip.

Why Time Warner Cable Can Jack Up Rates Willy-Nilly: Lack of Competition

cable ratesAlthough cable and phone companies love to declare themselves part of a fiercely competitive telecommunications marketplace, it is increasingly clear that is more fairy tale than reality, with each staking out their respective market niches to live financially comfortable ever-after.

In the last week, Time Warner Cable managed to alienate its broadband customers announcing another rate increase and a near-doubling of the modem rental fee the company only introduced as its newest money-maker last fall. What used to cost $3.95 a month will be $5.99 by August.

The news of the “price adjustment” went over like a lead balloon for customers in Albany, N.Y., many who just endured an 18-hour service outage the day before, wiping out phone and Internet service.

“They already get almost $60 a month from me for Internet service that cuts out for almost an entire day and now they want more?” asked Albany-area customer Randy Dexter. “If Verizon FiOS was available here, I’d toss Time Warner out of my house for good.”

Alas, the broadband magic sparkle ponies have not brought Dexter or millions of other New Yorkers the top-rated fiber optic network Verizon stopped expanding several years ago. The Wall Street dragons complained about the cost of stringing fiber. Competition, it seems, is bad for business.

In fact, Verizon Wireless and Time Warner Cable are now best friends. Verizon Wireless customers can get a fine deal — not on Verizon’s own FiOS service — but on Time Warner’s cable TV. Time Warner Cable originally thought about getting into the wireless phone business, but it was too expensive. It invites customers to sign up for Verizon Wireless service instead.

timewarner twcThis is hardly a “War of the Roses” relationship either. Wall Street teaches that price wars are expensive and competitive shouting matches do not represent a win-win scenario for companies and their shareholders. The two companies get along fine where Verizon has virtually given up on DSL. Time Warner Cable actually faces more competition from AT&T’s U-verse, which is not saying much. The obvious conclusion: unless you happen to live in a FiOS service area, the best deals and fastest broadband speeds are not for you.

Further upstate in the Rochester-Finger Lakes Region, Time Warner Cable faces an even smaller threat from Frontier Communications. It’s a market share battle akin to United States Cable fighting a war against Uzbekistan Telephone. Frontier’s network in upstate New York is rich in copper and very low in fiber. Frontier has lost landline customers for years and until very recently its broadband DSL offerings have been so unattractive, they are a marketplace afterthought.

Rochester television reporter Rachel Barnhart surveyed the situation on her blog:

Think about this fact: Time Warner, which raked in more than $21 billion last year, has 700,000 subscribers in the Buffalo and Rochester markets. I’m not sure how many of those are businesses. But the Western New York market has 875,000 households. That’s an astounding market penetration. Does this mean Time Warner is the best choice or the least worse option?

Verizon-logoThat means Time Warner Cable has an 80 percent market share. Actually, it is probably higher because that total number of households includes those who either don’t want, need, or can’t afford broadband service. Some may also rely on limited wireless broadband services from Clearwire or one of the large cell phone companies.

In light of cable’s broadband successes, it is no surprise Time Warner is able to set prices and raise them at will. Barnhart, who has broadband-only service, is currently paying Time Warner $37.99 a month for “Lite” service, since reclassified as 1/1Mbps. That does not include the modem rental fee or the forthcoming $3 rate hike. Taken together, “Lite” Internet is getting pricey in western New York at $47 a month.

Retiring CEO Glenn Britt believes there is still money yet to be milked out of subscribers. In addition to believing cable modem rental fees are a growth industry, Britt also wants customers to begin thinking about “the usage component” of broadband service. That is code language for consumption-based billing — a system that imposes an arbitrary usage limit on customers, usually at current pricing levels, with steep fees for exceeding that allowance.

frontierRochester remains a happy hunting ground for Internet Overcharging schemes because the only practical, alternative broadband supplier is Frontier Communications, which Time Warner Cable these days dismisses as an afterthought (remember that 80 percent market share). Without a strong competitor, Time Warner has no problem experimenting with new “usage”-priced tiers.

Time Warner persists with its usage priced plans, despite the fact customers overwhelmingly have told the company they don’t want them. Time Warner’s current discount offer — $5 off any broadband tier if you keep usage under 5GB a month, has been a complete marketing failure. Despite that, Time Warner is back with a slightly better offer — $8 off that 5GB usage tier and adding a new 30GB usage limited option in the Rochester market. We have since learned customers signing up for that 30GB limit will get $5 off their broadband service.

internet limitIn nearby Ohio, the average broadband user already exceeds Time Warner’s 30GB pittance allowance, using 52GB a month. Under both plans, customers who exceed their allowance are charged $1 per GB, with overlimit fees currently not to exceed $25 per month. That 30GB plan would end up costing customers an extra $22 a month above the regular, unlimited plan. So much for the $5 savings.

Unfortunately, as long as Time Warner has an 80 percent market share, the same mentality that makes ever-rising modem rental fees worthwhile might also one day give the cable company courage to remove the word “optional” from those usage limited plans. With usage nearly doubling every year, Time Warner might see consumption billing as its maximum moneymaker.

In 2009, Time Warner valued unlimited-use Internet at $150 as month, which is what they planned to charge before pitchfork and torch-wielding customers turned up outside their offices.

Considering the company already earns 95 percent gross margin on broadband service before the latest round of price increases, one has to ask exactly when the company will be satisfied it is earning enough from broadband service. I fear the answer will be “never,” which is why it is imperative that robust competition exist in the broadband market to keep prices in check.

Unfortunately, as long as Wall Street and providers decide competition is too hard and too unprofitable, the price increases will continue.

Time Warner Cable’s Horn Of Plenty for Austin: Free Wi-Fi for Broadband Customers

Austin gets a horn 'o plenty with free Time Warner Cable Wi-Fi because Google is coming to town.

Austin gets a horn of plenty with free Time Warner Cable Wi-Fi because Google is coming to town.

As Time Warner Cable faces forthcoming competition from Google Fiber in Austin, the company is responding with the construction of a free Wi-Fi network for its broadband customers to protect its business.

TWC WiFi is available now from a limited number of hotspots, but hundreds more will become available across Austin in 2013 as the company builds out its wireless network.

Time Warner Cable customers with Standard Internet or above qualify for free access, as do Business Class customers. Others can trial the service for free and then buy access for $2.95 an hour.

“Increasingly, our Austin customers want to take their high-speed Internet with them out of the home and on-the-go,” said Area Vice President Kathy Brabson. “The TWC WiFi network we are building for Austin will allow our customers to greatly maximize their TWC Internet subscription at no additional charge.”

It is no coincidence Time Warner Cable has selected Austin for a Wi-Fi rollout. The Wi-Fi service was specifically intended to provide more value for Time Warner Cable customers in competitive markets to keep them from switching to a competitor.

It represents a sea change for a cable company that in 2009 targeted Austin for an Internet Overcharging scheme that would have slapped a usage limit and consumption billing on the area’s broadband customers. With the advent of strong competition from Google, Time Warner Cable is giving customers something instead of taking things away.

Austin customers can download the free TWC WiFi Finder app available in Google Play and the Apple App Store or visit www.twc.com/wificoverage to view the hotspot coverage map as the wireless network grows. Once authenticated, customers can also access Wi-Fi hotspots in other cities including New York City, Los Angeles, Chicago, Philadelphia, Atlanta, Baltimore, Boston, Washington, D.C., San Francisco, Orlando, Tampa, Kansas City, Charlotte and more.

Deutsche Telekom’s New 384kbps Speed Throttle “Emasculates the Internet in Germany”

The German Internet is functionally broken.

The German Internet is functionally broken.

Deutsche Telekom, the largest telecommunications company in Germany, has announced it will introduce a brazen Internet Overcharging scheme for customers signing up for its broadband DSL service, including a throttle that reduces speeds to just 384kbps after as little as 75GB of monthly broadband usage.

For now, only new Telekom Deutschland customers signing up after May 1 will be affected by the usage limits. Customers will be offered the option of upgrading their Call & Surf package to get a larger usage allowance, although many parts of Germany are still reliant on DSL and its variants that cannot deliver the advertised speeds that go with the larger allowances:

  • Up to 16Mbps: 75GB per month
  • Up to 50Mbps: 200GB per month
  • Up to 100Mbps: 300GB per month
  • Up to 200Mbps: 400GB per month

“We want to offer customers the best network in the future and we will continue to invest billions to make that happen,” said Michael Hagspihl, marketing director of Telekom Deutschland. “However we cannot continue to sustain higher usage demand while lowering our prices. Customers with very high data volumes will have to pay more in the future.”

Company officials argue German broadband usage demands are accelerating at an ever-increasing rate, putting strain on the company’s network resources.

But critics question if usage demands are the root of the problem, why is DT exempting itself and its “preferred partners” from the data cap, including certain services that offer very high bandwidth video?

The Net Neutrality activist group Netzpolitik.org says DT is “massively violating Net Neutrality while the federal government looks away dreaming that the free market will solve the problem somehow.”

The group points out DT has admitted the speed throttle only applies to content providers who have not partnered up with the German telecom giant.

DT is exempting all of its own in-house content providers, the private television service Entertain, and telephone services (when provided by DT). For everyone else: the speed throttle gets closer the more customers use services like Apple iTunes or Amazon’s Lovefilm service. But DT says those companies can also get special treatment for the right price.

DT’s preferred partner cooperating agreements let “high quality content producers” pay for a managed services contract that guarantees exemption from the speed throttle and prioritization of their traffic on DT’s network, even if it means slowing down non-preferred partner content.

A parody future offer from DT.

A parody future offer from DT.

“You cannot thumb your nose at Net Neutrality principles any better if you tried,” said Rene Pedersen, an Internet activist in Köln. “DT will have their emasculated two-tier Internet and all of Germany will have to suffer the consequences. Their own arguments do not even make sense. If there is a capacity crisis, how can they exempt some video providers that now consume the most network resources?”

throttle“Until a few years ago, providers – just like the post – were just deliverers of packages,” said Netzpolitik’s Andre Masters. “This principle is called Net Neutrality – the equal treatment of data packets on the Internet, regardless of sender, recipient, or content. Now providers want to have a direct influence on the content sent, because they want to earn more money.”

Technology publisher Heise Online says the new usage restricting tariff has “triggered a veritable sh**storm” among net users who consider a 75GB usage limit untenable, particularly for families with multiple Internet users.

Heise is also critical of claims DT has made in the press that suggests German Internet users must either accept the usage caps or understand the company will have to spend at least €80 billion ($108 billion) to build a national fiber network to manage growing traffic.

In contrast, Goldman Sachs last year estimated the cost of wiring every home in the United States with Google Fiber would cost $140 billion, a number now considered inflated. Verizon FiOS managed to get costs down for its own fiber network to a level that suggests Google would only need around $90 billion — $10 billion more than DT claims it needs.

“DT is being disingenuous when they suggest it will cost €80 billion to solve their capacity problem. For that amount every household in Germany would get their own fiber cable with 200Mbps speeds or more,” Heise writes in their editorial. “To avoid slowing users down with a speed throttle, only a small fraction of this amount is needed to extend the Internet backbone and peering agreements between providers. For years network traffic has grown exponentially and DT has kept up with demand. So why does DT suddenly need to reshuffle the cards now?”

DT has also received criticism for how it has depicted its heavy users — mostly as content thieves and software pirates using file swapping networks to steal copyrighted works. But instead of dealing with copyright violations, DT wants a sweeping usage cap system that punishes every customer that wants to use their broadband connection.

“Customers are not insatiable Gierschlünde who want everything for free,” writes Heise. “They already pay a lot of money to Telekom: 12.5 million DSL customers roughly translates into around a half billion euros in sales per month.”

Back to the future.

Back to the future.

The German news magazine Spiegel writes DT’s usage limits strangle the Internet for millions of Germans, especially for competing video providers:

When throttled, customers will need more than 23 hours to watch a DVD-quality movie. At Blu-ray resolution, it will take about two weeks to watch just one film.

[...] The implications of the end of Net Neutrality in Germany represents a form of economic censorship, and German politicians are standing by to watch it happen.

The federal government sees the Internet as a political bargaining chip and not as the social, cultural and economic tool it represents. The government acts in the interests of certain lobbyists, not Germany’s digital future. This allows German telecommunications companies to focus on their economic self-interests without government policies that demand investment in digital infrastructure.

A number of German Internet users are expected to switch to a cable provider, where available, to escape DT’s impending speed caps.

According to the Frankfurter Rundschau, many German cable companies also reserve the right to limit speeds for customers. But in practice, most don’t impose limits until traffic exceeds 60GB daily, and the speed cap is lifted the next day. A cable industry official says its cap currently impacts about 0.1 percent of customers, almost all who use peer-to-peer file swapping networks. Exempt from measurements that bring customers closer to a speed cap: web browsing, video streaming, and video-on-demand.

For now, Germany’s cable operators facing the same traffic growth DT speaks about find no need to impose further limits, stating their networks are handling the traffic with network upgrades as a normal course of business.

“It calls out DT’s claims as fraudulent, because cable Internet users visit the same websites and do the same things DT’s customers do and there only seems to be an ‘urgent’ problem in need of a speed throttle solution on BT’s network,” says Pedersen. “What needs to be throttled are the financial expectations of DT management and shareholders. The Internet is not their personal vault waiting to be plundered.”

http://www.phillipdampier.com/video/What if Net Neutrality.mp4

What if Net Neutrality did not exist?  [Subtitled] (1 minute)

Austin Media Gushing for Google Fiber

Austin’s television news has gone all out for Google Fiber, which is being unveiled today at a press event. Stop the Cap! will have coverage of the announcement, but in the meantime, here is a roundup of local coverage about Google Fiber in Austin:

http://www.phillipdampier.com/video/KTBC Austin Google Fiber Headed to Austin 4-8-13.mp4

Austin’s local Fox affiliate KTBC reports city officials stayed tight-lipped about Google Fiber, but Google may have previewed its intentions by adding The Longhorn Network to its television lineup several months ago. Local technology experts say the upgrade is worth the wait and will be a boon to Austin’s economy. (2 minutes)

http://www.phillipdampier.com/video/KXAN Austin The wait is on for Google Fiber 4-9-13.mp4

Now that Austin will get Google Fiber, how long will residents have to wait to sign up? Mid-2014 is the estimate. KXAN explored how Google was unveiled in Kansas City. The station also took a look at other cities with gigabit fiber networks, many of them publicly owned alternatives to big phone and cable companies. KXAN compares the cost for 1,000Mbps service in different cities around the country. (3 minutes)

http://www.phillipdampier.com/video/KEYE Austin Google Announcement Draws Near 4-9-13.flv

KEYE notes Gov. Rick Perry is showing up for this morning’s unveiling of Google Fiber. In between some minor technical glitches in the report, some viewers say they are ready to sign up for $70 gigabit Internet now, just to stick it to Clearwire ($50 a month) and Time Warner Cable.  (2 minutes)

http://www.phillipdampier.com/video/KVUE Austin Google Going to Austin 4-9-13.mp4

KVUE says Google Fiber could boost Austin’s economy by luring even more high-tech companies. It could also stop Time Warner Cable and AT&T from trying more Internet Overcharging schemes on area customers.  (2 minutes)

Wall Street Journal’s Distorted Views on Broadband Only See the Industry’s Point of View

Phillip Dampier

Phillip Dampier

The Wall Street Journal’s not-living-in-the-real-world editorial page strikes again.

The commentary pages have always been the weakest part of the Journal, primarily because they screech pro-corporate talking points in contrast to the more balanced reporting in the rest of the newspaper.

Mr. Holman W. Jenkins, Jr. decided to distort broadband reality (again) in yesterday’s edition with a glowing commentary on how wonderful broadband providers are in his piece, “Springtime for Broadband.” The only thing missing was a border in fine print labeled, “Sponsored by Verizon, AT&T, and your cable company.”

While your Internet bill is being hiked at the same time your provider is slapping usage limits on your connection, Jenkins dismisses consumer-fueled complaints about broadband price gouging, assaulting Net Neutrality, and overall poor customer service as part of Washington’s “broadband policy circus.”

Charges fly hourly that Google or some other company is guilty of gross insult to net neutrality (that sacred principle nobody can define). Oregon Sen. Ron Wyden has introduced legislation to regulate data caps and Internet pricing. Law professor Susan Crawford, until recently a White House technology adviser, clearly craves to be America’s next go-to talking head on broadband. Lately she’s been everywhere calling for a crackdown on the competing “monopolists” who supply Internet access.

How dare they complain, decries Jenkins in a robust defense of the 21st century version of the railway robber barons.

Comfortably playing patty cake with provider-fed talking points from the industry echo chamber, Jenkins is ready for battle, facts or not.

But wireless providers have invested big money to deploy high-speed mobile networks, and fixed and mobile are inevitably beginning to compete. The latest evidence: Australia recently predicted that up to 30% of households will go the all-wireless route and won’t be customers for its vaunted national broadband project.

Jenkins

Jenkins

Not exactly. The basis for this 30% figure is the National Broadband Network’s own business plan, which warns -if- the company raised prices to a maximum theoretical level, up to 30 percent of its customers would rely on wireless instead… by the year 2039. That is 26 years from now. You have nothing better to do in the meantime, right?

In fact, conservative critics of the fiber network, some defending the big wireless cell phone industry in Australia, have suggested fiber optics is a big waste of money because “wireless is the future.”

That old chestnut again.

“Now you can present a bulletin without touching a typewriter … it’s just there on the computer system, you don’t need a reel to reel tape recorder. I’ve got a touchscreen in front of me. Back then I had a big cartridge deck,” said Ray Hadley on 2GB radio. “Can you imagine the advances in technology in the next 26 years? I can’t. I can’t comprehend it. By the time they finish the NBN, it could be superseded by something we don’t even know about.”

NBN Myths, a website set up to tackle the disinformation campaign from political and industry opponents has one simple fact to convey: “Despite what you may have read from certain clueless commentators, there is not a single country or telecommunications company anywhere in the world that is attempting to replace fixed networks with wireless in urban areas, or even planning to do so in the future.”

Which would you rather have?

Which would you rather have?

Even Telstra, the biggest telecom company in Australia scoffs at such a notion, noting a growing number of its customers have both wired and wireless service, and they do not depend on one over the other.

Research firm Telsyte found that 85 per cent of Australians want speeds of 50Mbps or higher, speeds impossible for wireless to offer. In fact, when the NBN fiber network became available to Australians, almost half the current users as of October last year had chosen an even-faster 100Mbps plan option. But Australians also want mobile broadband, and they are signing up for that as well.

The Australian Bureau of Statistics notes the number of mobile broadband Internet connections also grew by around 40% in Australia between 2009 and 2010. But here is the Achilles heel of wireless: it cannot deliver the same speeds or capacity, and providers charge high prices and deliver low usage caps. As a result, the wireless industry has pulled off a coup: they earn enormous revenues from networks they have successfully rationed. The total amount of data downloaded over Australia’s wireless networks actually fell on a per user basis, despite the growth in customers.

Much of Jenkins’ commentary is spoon-fed by the industry-funded Information Technology and Innovation Foundation, which produces industry-sponsored studies designed to tell America all is well in our broadband duopoly.

In the latest federal survey, the average broadband speed in America is up to 15.6 megabits per second, from 14.3 a year earlier. Nearly half of customers who six months ago made do with one megabit or less have now moved up to higher speeds. Since 2009, the U.S. has gone from 22nd fastest Internet to the eighth fastest.

The 15.6Mbps figure comes from the Federal Communications Commission. The statistics about our global speed ranking come from Akamai’s voluntary speed test program. Other studies rate America much lower. More importantly, while providers in the U.S. try to squeeze out more performance from their copper networks, other countries are laying speedier fiber networks that are destined to once again leapfrog over the United States. Most charge less for their broadband connections as well.

Jenkins also quotes the ITIF which touts 20 million miles of fiber were laid in America last year. But the ITIF, when pressed, will admit the majority of that fiber was “middle mile” connections, institutional or business network fiber you cannot access, or fiber to cell towers. Fiber to the home expansion has stalled, primarily because Verizon has suspended expansion of its FiOS network to new areas after Wall Street loudly complained about the cost.

Jenkins argues that if we leave providers alone and stop criticizing their growing prices, declining competition, and fat profits, the marketplace will suddenly decide to invest in network upgrades yet again.

“The day may come when even Verizon, which visibly soured on its $23 billion FiOS bet, rediscovers an urge to invest in fixed broadband infrastructure to meet growing consumer lust for hi-def services,” writes Jenkins.

Would Wall Street rather see providers invest in network upgrades or return profits to shareholders? Investment expansion in the broadband industry comes when a company senses if they do not spend the money, their business will be swept away by others that will. Cable broadband threatens telephone company DSL, so AT&T cherry-picked communities for investment in its half-measure U-verse fiber to the neighborhood network. Google Fiber, should it choose to expand, will be an even bigger threat to both cable and phone companies. Municipal fiber to the home networks upset the incumbent players so much, they spend millions of ratepayer dollars in efforts to legislate them out of existence.

Jenkins’ view that giving the industry carte blanche to do and charge as it pleases to stimulate a better broadband future is as fanciful as NBN critics in Australia suggesting fiber upgrades should be canceled in favor of waiting 20+ years for improved wireless to come along.

He even approves of Internet Overcharging schemes like usage caps and consumption billing, calling it proper price discrimination in a “fiercely competitive” environment to defray a network’s fixed costs.

Do you think there is fierce competition for your broadband dollar?

Broadband’s fixed costs are so low and predictable, it literally calls out consumption pricing as just the latest overreach for enhanced profits. As Suddenlink’s CEO himself admitted, the era of big expensive cable upgrades are over. Incremental upgrades are cheap, the costs to offer broadband are declining, so it is time to reap the profits.

Jenkins closes with one recommendation we can agree with: “A low-tech way to stir up broadband competition would be to relax the regulatory obstacles to the actual physical provision of broadband.”

We can start by scrapping all the state laws the industry lobbied to enact that prohibit community-owned broadband competition. If big cable and phone companies won’t provide communities with the quality of broadband service they need to compete for 21st century jobs, let those communities do it themselves.

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