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HissyFitWatch: Bell Loses Net Neutrality Case, Threatens to Bury Complaining Consumers In Legal Fees

The first "bricks of paper" arriving from Bell's attorneys in the case of Bell v. Ordinary Canadian consumers

The first legal “bricks of paper” arriving from Bell’s attorneys in the case of Bell v. Ordinary Canadian consumers arrived at the home of Jean-François Mezei of Pointe-Claire, Que.

A Manitoba university student and consumer groups who won their case against Bell’s preferential treatment of its mobile streaming video service are now being threatened with demands they personally cover Bell’s legal expenses as the phone company appeals the ruling in court.

The dispute involves Bell Mobile TV Service — a $5/mo optional add-on that allows Bell’s mobile customers to stream up to 10 hours of video programming, some of it from Bell-owned television networks like CTV, without it counting against the customer’s usage cap. Each additional hour costs $3. The service prices usage based on time, not data usage, which lets Bell stream very high quality video to customers. Competitors like Netflix do not have this option and their customers are billed based on the amount of data consumed, which is around 800 percent higher than what Bell Mobile TV charges.

University of Manitoba graduate student Benjamin Klass filed a complaint with the Canadian Radio-Television and Telecommunications Commission (CRTC) in 2013 accusing Bell of violating Net Neutrality and creating an anti-competitive marketplace for online video. ​Twelve of the 43 channels available on Mobile TV — including CTV, TSN and The Movie Network — are owned by Bell Media, a subsidiary, like Bell Mobility, of the media behemoth BCE.

Klass alleged the practice was a clear violation of Canada’s laws governing broadcasting: “No Canadian carrier shall, in relation to the provision of a telecommunications service or the charging of a rate for it, unjustly discriminate or give an undue or unreasonable preference toward any person, including itself, or subject any person to an undue or unreasonable disadvantage.”

The CRTC agreed with Klass and in late January ruled in favor of Klass’ complaint, giving Bell and Quebec-based Vidéotron (which offers a similar service) until the end of April to close them down in their present form.

BCE, the parent of Bell Mobility, told the CBC it was “shocked” by the CRTC’s ruling, suspecting the complaining groups mislead regulators into thinking Bell favored its own content over others.

“There’s a hint here that the government believes Bell Mobile TV delivers only Bell Media content,” spokesman Jason Laszlo said. “They should know we offer mobile TV content from all of Canada’s leading broadcasters in English and French.”

Bell_Mobility logoLaszlo added Bell-owned content only comprises 20% of Bell Mobile TV programming and that the ruling would deprive more than 1.5 million current Bell Mobile TV subscribers from getting the service after the spring deadline to shut it down.

The CRTC and consumer groups argue that is beside the point.

“At its core, this decision isn’t so much about Bell or Vidéotron,” CRTC chair Jean-Pierre Blais said at a breakfast luncheon in London, Ont., in late January. “It’s about all of us and our ability to access content equally and fairly, in an open market that favours innovation and choice. The CRTC always wants to ensure ­— and this decision supports this goal ­— that Canadians have fair and reasonable access to content. It may be tempting for large vertically integrated companies to offer certain perks to their customers. But when the impetus to innovate steps on the toes of the principle of fair and open access to content, we will intervene.”

Consumer group OpenMedia says Bell’s motivation isn’t to create a level playing field or provide customers with more options for online video. It’s about artificially inflating the cost of accessing services like Netflix and other independent video companies that are innovating away from the traditional pay television package.

“Bell is doing everything in its power to make the Internet more like cable TV,” said OpenMedia campaigns manager Josh Tabish. “They want the power to pick and choose what we see by forcing competing services into a more expensive toll lane online.”

Klass (Image: CBC)

Klass (Image: CBC)

Bell’s legal strategy going forward is an homage to the one American wireless companies used for years to avoid Net Neutrality.

Bell Mobility argues that Bell Mobile TV is a broadcasting service, not a telecommunications service and therefore doesn’t fall under the jurisdiction of the Telecommunications Act.

Since the CRTC was not receptive to that argument, Bell is taking the matter to the Federal Court of Appeal, asking it to overturn the CRTC ruling and grant the company court and legal costs paid for by the Canadian consumers that brought the original complaint.

Jean-François Mezei of Pointe-Claire, Que. is among them and has been the unhappy recipient of several parcels containing “bricks of paper” from FedEx he suspects is just the beginning.

Mezei has been tweeting about ongoing developments in the case, and asked Bell, “how come you have no press release bragging about how Bell Mobility is suing individual citizens who participated in [the CRTC complaint]?”

Klass told CBC News he hasn’t yet made up his mind how to respond to the court filing, but admitted it is unnerving.

“In that regard, it really strikes me as a method of intimidation,” he said. “Right off the bat, it has a chilling effect. It appears that Bell is simply pursuing the argument, that it unsuccessfully made to the CRTC, through the court.”

Wall Street Turning Against Comcast-Time Warner Merger: “We Believe It Will Be Blocked”

Greenfield

Greenfield

An important Wall Street analyst has publicly written what many have thought offline for the past six months — the chances of regulators approving a merger of Comcast and Time Warner Cable are growing less and less each day that passes.

Rich Greenfield from BTIG Research has grown increasingly pessimistic about the odds of Comcast winning approval of its effort to buy Time Warner Cable.

Despite the unified view from the executive suites of both cable companies that the merger is a done-deal just waiting for pro forma paperwork to get handled by the FCC and Department of Justice, Greenfield has seen enough evidence to declare “the tide has turned against the cable monopoly in the past 12 months,” and now places the odds of a merger approval at 30 percent or less.

“Since we realized the inevitability of Title II regulation of broadband in December 2014, we have grown increasingly concerned that Comcast and Time Warner Cable will not be allowed to merge,” Greenfield wrote.

The claim from both cable companies that since Comcast and Time Warner Cable do not directly compete with each other, there in no basis on which the government could block the transaction, may become a moot point.

There are three factors that Greenfield believes will likely deliver a death-blow to the deal:

  • Monopsony Power
  • Broadband Market Share & Control
  • Aftershocks from the Net Neutrality Debate

btigMonopsony power is wielded when one very large buyer of a product or service becomes so important to the seller, it can dictate its own terms and win deals that no other competitor can secure for itself.

Comcast is already the nation’s largest cable operator. Time Warner Cable is second largest. One would have to combine most of the rest of the nation’s cable companies to create a force equally important to cable programming networks.

As Stop the Cap! testified last summer before the Public Service Commission in New York, allowing a merger of Comcast and Time Warner Cable would secure the combined cable company volume discounts on cable programming that no other competitor could negotiate for itself. That would deter competition by preventing start-ups from entering the cable television marketplace because they would be at a severe disadvantage with higher wholesale programming expenses that would probably make their retail prices uncompetitive.

Even worse, large national cable programming distributors could dictate terms on what kinds of programming was available.

comcastbuy_400_241The FCC recognized the danger of monopsony market power and in the 1990s set a 30% maximum market share limit on the number of video customers one company could control nationally. That number was set slightly above the national market share held by the largest cable company at the time — first known as TCI, then AT&T Broadband, and today Comcast. Comcast sued the FCC claiming the cap was unconstitutional and won twice – first in 2001 when a federal court dismissed the rule as arbitrary and again in 2009 when it threw out the FCC’s revised effort.

Comcast itself recognized the 30% cap as an important bellwether for regulators watching the concentration of market power through mergers and acquisitions. When it agreed to buy Time Warner Cable, it volunteered to spin-off enough customers of the combined company to stay under the 30% (now voluntary) cap.

Greenfield argues the importance of concentration in the video programming marketplace has been overtaken by concerns about broadband.

“While Comcast tried to steer the government to evaluate the Time Warner deal on the old paradigm of video subscriber share, it is increasingly clear that DOJ and FCC approval/denial will come down to how they view the competitive landscape of broadband and whether greater broadband market share serves the public interest,” Greenfield wrote.

comcast whoppersIf the Comcast merger deal ultimately fails, the company may have only itself to blame.

Last year Comcast faced intense scrutiny over its interconnection agreements with companies that handle traffic for large content producers like Netflix. Comcast customers faced a deterioration in Netflix streaming quality after Comcast refused to upgrade certain connections to keep up with growing demand. Netflix was eventually forced to establish a direct paid connection agreement with the cable operator, despite the fact Netflix offers cable operators free equipment and connections for just that purpose.

That event poured gasoline on the smoldering debate over Net Neutrality and helped fuel support for a strong Open Internet policy that would give the FCC authority to check connection agreements and ban paid online fast lanes.

Seeing how Comcast affected broadband service for millions of subscribers across dozens of states could shift the debate away from any local impacts of the merger and refocus it on how many broadband customers across the country a single company should manage.

Comcast will control 50% or more of the national broadband market when applying the FCC’s newly defined definition of broadband: 25/3Mbps.

That rings antitrust and anticompetitive alarm bells for any regulator.

Greenfield notes that changing the definition of broadband will dramatically reshape market share. It will nearly eliminate DSL as a suitable competitor and leave Americans with a choice between cable broadband and Verizon FiOS, community owned fiber networks, Google, and a small part of AT&T’s U-verse footprint. If those competitors don’t exist in your community, you will have no choice at all.

cap comcastEven Comcast admits cable broadband enjoys a near-monopoly at 25/3Mbps speeds. controlling 89.7% of the market as of December 2013.

“If regulators take the ‘national’ approach to evaluating broadband competition, the FCC’s redefinition would appear to put the deal in even greater jeopardy,” Greenfield writes. “Beyond the market share of existing subscribers, the larger issue is availability.  Whether or not a current subscriber takes 25/3Mbps or better, the far more relevant question is if a consumer wanted that level of speed do they have a choice beyond their local cable operator?  As of year-end 2013, Comcast’s own filing illustrates that in 63% of their footprint post-Time Warner Cable, they were the only consumer choice for 25 Mbps broadband (we suspect even higher now).”

“With Comcast’s scale both before and especially after the Time Warner Cable transaction, they become ‘the only way’ for a majority of Americans to receive content/programming that requires a robust broadband connection,” Greenfield warned.

Even worse, to protect its video business, a super-sized Comcast will be tempted to introduce usage caps that will deliver a built-in advantage to its own services.

“Over time, the fear is that Comcast will favor its own IP-delivered video services versus third parties, similar to how it is able to offer Comcast IP-based video services as a ‘managed’ service that does not count against bandwidth caps, while third-party video services that look similar count against bandwidth caps,” he wrote. “The natural inclination will be for [Comcast] to protect their business (think usage based caps that only apply to outsiders, peering/interconnection fees, etc.)”

“With the overlay of the populist uprising driving government policy, it is hard to imagine how regulators could approve the Comcast Time Warner Cable transaction at this point,” Greenfield concludes. “Comcast continues to try to get the government to look to the past to get its deal approved.  But the framework is about not only what is current, but what the future will look like – especially in a rapidly changing broadband world.”

FCC Plans to Unveil New Rules to Regulate Broadband Service as a Public Utility; Net Neutrality Included

Phillip Dampier February 3, 2015 Net Neutrality, Public Policy & Gov't No Comments

netneutralityIn a major victory for consumers and public interest groups, the Federal Communications Commission this week will unveil fundamental changes in the oversight of high-speed Internet service, regulating it in the public interest as a public utility.

According to a report in the Wall Street Journal, FCC chairman Thomas Wheeler plans to include robust Net Neutrality protection in the proposal, insisting the agency has a right to oversee providers’ traffic management practices when they impact customers.

Central to the proposal is redefining broadband away from the current, barely regulated “information service” category that has allowed telecom companies to successfully challenge the FCC in court on almost every attempt to oversee broadband Internet service. Wheeler’s plan is expected to reclassify broadband as a “telecommunications service,” which will subject providers to more regulator scrutiny.

The FCC is expected to specifically prohibit providers from blocking, slowing down, or speeding up individual websites in return for financial compensation. The ban on “Internet fast lanes” and “toll booths” will protect Internet startups that would otherwise face an immediate disadvantage from well-heeled competitors that can afford to pay for enhanced access to customers.

But despite claims from Net Neutrality opponents, Wheeler is not expected to impose a one-size-fits-all regulatory regime over broadband. Instead, he prefers to reserve regulatory powers to police individual disputes such as those between Netflix, Comcast, Verizon and other providers which caused traffic slowdowns for consumers in 2014 until paid peering agreements were finalized, compensating ISPs for handling Netflix streaming video content.

Providers fear that reclassifying broadband under Title II rules could subject them to future oversight of practices like usage-based billing, usage caps, speed throttling, broadband pricing and availability. But the Obama Administration is on record opposing price regulation of broadband, and few expect the FCC will adopt a micromanagement approach to broadband oversight.

Wheeler’s proposal is likely to win a majority vote from the three Democratic commissioners. Opposition is a virtual certainty from the Republican minority.

The telecom industry promises whatever rules are adopted will face an immediate challenge in court.

Time Warner Cable Will Extend Maxx Upgrades to 75% of Its Markets by 2016, If Comcast Merger Dies

twc maxxTime Warner Cable plans to reach 75 percent of its customers with Maxx service upgrades offering broadband speed boosts up to 300/20Mbps for the same price it charges for 50Mbps by the end of 2016, assuming a merger with Comcast does not result in the plans being shelved.

Time Warner Cable customers will also escape Comcast’s ongoing experiments with usage caps and usage-based billing if the company remains independent, as Time Warner Cable executives continue to maintain that usage pricing should only be offered to customers that want it.

Company officials discussed the ongoing investments in Maxx upgrades during a quarterly results conference call with investors held earlier today.

CEO Rob Marcus indicated Time Warner Cable will choose markets for Maxx upgrades based on what kind of competition the cable company faces in each city.

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

Time Warner Cable has targeted its Maxx upgrades in areas where its principal competitors — AT&T, Google, and Verizon — have made or announced service and speed improvements. Maxx upgrades are now complete in New York City and Los Angeles. Much of Austin, Tex., is also finished, where both AT&T GigaPower U-verse and Google Fiber plan to offer gigabit service.

This year, Time Warner will focus on bringing Maxx to Charlotte, Dallas, Hawaii, Kansas City, Raleigh, San Antonio and San Diego. Charlotte, Raleigh, and Kansas City will eventually see high-speed competition from both Google Fiber and AT&T U-verse. Time Warner is facing increasingly aggressive competition from Hawaiian Telcom, San Antonio is on Google’s short list and will also likely see faster U-verse, and San Diego is on AT&T’s list for GigaPower upgrades.

Time Warner spent $4.1 billion on capital expenses in 2014, up nearly $900 million above 2013 spending. Most of the money went to network upgrades in Maxx markets where new set-top boxes and cable modems are being provided to customers. Marcus refused to offer any guidance about how much the company intends to spend on upgrades in 2015, citing its looming merger with Comcast.

Marcus

Marcus

Not every city will benefit from network upgrades. Although 2/3rds of Time Warner Cable markets will get Maxx over the next two years, several will have to make do with the service they have now. The Time Warner Cable markets most at risk of being left off the upgrade list also have the weakest competition:

  • Yuma, Ariz.
  • Nebraska
  • Wisconsin
  • Eastern Ohio & Pennsylvania (except Cleveland)
  • Binghamton, Utica, Watertown, Elmira, and Rochester, N.Y.
  • Kentucky
  • West Virginia
  • South Carolina
  • Western Massachusetts
  • Maine

If the merger with Comcast is approved, the Maxx upgrade effort is likely to be shelved or modified by the new owners as customers are gradually shifted to Comcast’s traditional broadband plans.

Marcus also continued to shoot down compulsory usage-based billing and usage caps questions coming from Wall Street analysts. Marcus reminded the audience Time Warner Cable already offers optional usage-based pricing packages, and they have no intention of forcing customers to accept usage billing or caps.

“I think the ultimate success of usage based pricing will depend on customer uptake and customers’ interest in availing themselves of a usage based tier versus unlimited tier,” said Marcus. In earlier conference calls, Marcus admitted only a tiny fraction of Time Warner customers have shown any interest in usage allowances. The overwhelming majority prefer flat rate service.

In contrast, Comcast’s broadband customers in several southern cities continue to be unwilling participants in that cable company’s ongoing usage billing trials.

Google, Cablevision Challenge Traditional Cell Phone Plans, Wireless Usage Caps With Cheap Alternatives

freewheelLuxurious wireless industry profits of up to 50 percent earned from selling some of the world’s most expensive cellular services may soon be a thing of the past as Google and Cablevision prepare to disrupt the market with cheap competition.

With more than 80 percent of all wireless data traffic now moving over Wi-Fi, prices for wireless data services should be in decline, but the reverse has been true. AT&T and Verizon Wireless have banked future profits by dumping unlimited data plans and monetizing wireless usage, predicting a dependable spike in revenue from growing data consumption. Instead of charging customers a flat $30 for unlimited data, carriers like Verizon have switched to plans with voice, texting, and just 1GB of wireless usage at around $60 a month, with each additional gigabyte priced at $15 a month.

With the majority of cell phone customers in the U.S. signed up with AT&T or Verizon’s nearly identical plans, their revenue has soared. Sprint and T-Mobile have modestly challenged the two industry leaders offering cheaper plans, some with unlimited data, but their smaller cellular networks and more limited coverage areas have left many customers wary about switching.

Google intends to remind Americans that the majority of data usage occurs over Wi-Fi networks that don’t require an expensive data plan or enormous 4G network. The search engine giant will launch its own wireless service that depends on Wi-Fi at home and work and combines the networks of Sprint and T-Mobile while on the go, switching automatically to the provider with the best signal and performance.

googleCablevision’s offer, in contrast, will rely entirely on Wi-Fi to power its mobile calling, texting, and data services. Dubbed “Freewheel,” non-Cablevision customers can sign up starting in February for $29.95 a month. Current Cablevision broadband customers get a price break — $9.95 a month.

Cablevision’s dense service area in parts of New York City, Long Island, northern New Jersey and Connecticut offers ample access to Wi-Fi. Cablevision chief operating officer Kristin Dolan said its new service would work best in Wi-Fi dense areas such as college campuses, business districts, and multi-dwelling units.

New York City is working towards its own ubiquitous Wi-Fi network, which could theoretically blanket the city with enough hotspots to make Cablevision’s service area seamless. But the biggest deterrent to dumping your current cell phone provider is likely to be available coverage areas. Google’s answer to that problem is combining the networks of both Sprint and T-Mobile, offering customers access to the best-performing carrier in any particular area. While that isn’t likely to solve coverage issues in states like West Virginia and the Mountain West, where only AT&T and Verizon Wireless offer serious coverage, it will likely be sustainable in large and medium-sized cities where at least one of the two smaller carriers has a solid network of cell towers.

Comparing the Wireless Alternative Providers

  • Google Wireless will offer seamless access to Wi-Fi, Sprint and T-Mobile voice, SMS, and mobile data at an undetermined price. Likely to arrive by the summer of 2015;
  • Cablevision Freewheel depends entirely on Wi-Fi to power unlimited voice, SMS, and data. Launches in February for $29.95/mo ($9.95/mo for Cablevision broadband customers);
  • FreedomPop Wi-Fi ($5/mo) offers an Android app-based “key” to open unlimited Wi-Fi access to 10 million AT&T, Google, and cable industry hotspots nationwide for calling, texting, and mobile data;
  • Republic Wireless developed its own protocol to properly hand off phone calls between different networks without dropping it. Calling plans range from $5-40 a month. Less expensive plans are Wi-Fi only, pricier plans include access to Sprint’s network;
  • Scratch Wireless charges once for its device – a Motorola Photon Q ($99) and everything else is free, as long as you have access to Wi-Fi. Cell-based texting is also free, as a courtesy. If you need voice calling or wireless data when outside the range of a hotspot, you can buy “access passes” to Sprint’s network at prices ranging from $1.99 a day each for voice and data access to $24.99 a month for unlimited data and $14.99 a month for unlimited voice.
Scratch Wireless

Scratch Wireless

Google is pushing the FCC to open new unlicensed spectrum for expanded Wi-Fi to accommodate the growing number of wireless hotspots that are facing co-interference issues.

Wi-Fi-based wireless providers are likely to grow once coverage concerns are eased and there is reliable service as customers hop from hotspot to hotspot. The cable industry has aggressively deployed Wi-Fi access with a potential to introduce wireless service. Comcast is already providing broadband customers with network gateways that offer built-in guest access to other Comcast customers, with the potential of using a crowdsourced network of customers to power Wi-Fi coverage across its service areas. FreedomPop will eventually seek customers to volunteer access to their home or business networks for fellow users as well.

AT&T and Verizon are banking on their robust networks and coverage areas to protect their customer base. Verizon Wireless, in particular, has refused to engage in price wars with competitors, claiming Verizon customers are willing to pay more to access the company’s huge wireless coverage area. AT&T told the Wall Street Journal its customers want seamless access to its network to stay connected wherever they go.

Verizon’s chief financial officer Fran Shammo appeared unfazed by the recent developments. On last week’s conference call with investors, Shammo dismissed Google’s entry as simply another reseller of Sprint’s network. He added Google has no idea about the challenges it will face dealing directly with customers in a service and support capacity. While Google’s approach to combine the coverage of T-Mobile and Sprint together is a novel idea, Shammo thinks there isn’t much to see.

“Resellers, or people leasing the network from carriers, have been around for 15 years,” Shammo said. “It’s a complex issue.”

Investors are taking a cautious wait-and-see approach to the recent developments. Google’s new offering is likely to offer plans that are philosophically compatible with Google’s larger business agenda. Challenging the traditional business models of AT&T and Verizon that have implemented usage caps and usage pricing may be at the top of Google’s list. The new offering could give large data allowances at a low-cost and/or unlimited wireless data for a flat price. Such plans may actually steal price-sensitive customers away from Sprint and T-Mobile, at least initially. Sprint is clearly worried about that, so it has a built-in escape clause that allows a termination of its network agreement with Google almost at will.

http://www.phillipdampier.com/video/WSJ Google Cablevision Challenge Wireless Industry 1-26-15.flv

The Wall Street Journal talks about the trend towards Wi-Fi based mobile calling networks. (1:59)

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