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Proposed “Transparency for Cable Consumers Act” Gets Little Attention in Congress

Phillip Dampier November 14, 2019 Charter Spectrum, Consumer News, Public Policy & Gov't 1 Comment
Rep. Brindisi

Rep. Brindisi

The House of Representatives is showing little love for freshman Rep. Anthony Brindisi’s “Transparency for Cable Consumers Act” (H.R. 1555), a bill that would strengthen consumer protection by targeting the cable industry’s business practices.

The Utica, N.Y. Democrat made Charter Spectrum a significant part of his 2018 campaign, criticizing the cable company in television election ads Spectrum initially refused to air and calling for New York regulators to punish or remove the cable company from the state after failing to meet its 2016 merger obligations.

Brindisi’s bill would increase regulatory oversight of cable operators nationwide, requiring the Federal Communications Commission, Department of Justice, and Federal Trade Commission to do more to protect cable internet subscribers. H.R. 1555 would:

  • Detail actions to protect consumers from predatory actions by cable and internet companies, which includes debt collection methods;
  • Asks the FCC to propose appropriate regulatory consequences for cable or internet companies fined by a state public utility commission, like Charter Communications was in New York;
  • Establishes a working group among the three federal agencies to investigate rising cable internet rates.

Brindisi considers America’s cable industry “predatory” and abusive to its customers. He cites constituent complaints about Spectrum’s debt collection practices as a primary example of that abuse in action.

“Constituents have reported to me Spectrum’s ties to a debt collection company called Credit Management, LP. Spectrum allegedly uses the Plano, Texas, company — whose leadership team is tethered to the cable industry — to collect debts often unrelated to standard non-payment, and instead tied to Spectrum ‘equipment,’ Brindisi alleges. “I urge anyone being harassed by Credit Management, LP, on behalf of Spectrum, to call my office.”

Brindisi is also attacking the recent policy change by Spectrum to stop providing pro-rated refunds when customers cancel service in the middle of a billing cycle.

“Well, Spectrum just raised our rates again, adding insult to injury. And let me tell you something, they are laughing all the way to the bank. Quite literally,” Brindisi added. “Wall Street shares of Charter Communications climbed about 14 percent higher last month thanks, in part, to a ‘boost from higher prices.'”

Brindisi claims lobbyists prowling the halls of Congress have labeled him “The Cable Guy” because of his focus on the cable industry.

“Look, it’s no secret. Spectrum Charter hates me. But what’s more offending, really, is that they think I’ll be quiet,” Brindisi said. “The legislative branch, of which I am included, is one partner in the fight but we need the administration to empower its agencies and regulators to come down hard on Spectrum when they take advantage of us. Right now, I do not see it happening. Instead, I see industry smiling ear-to-ear while it courts — and ‘pays’ — members of Congress to do its bidding.”

Brindisi’s bill has only a slim chance of passage as a standalone measure, so he is attempting to attach it as an amendment to the federal budget, a popular tactic among lawmakers that struggle to get their bills to the floor for individual consideration. Opponents are likely to claim that the measure is unnecessary, redundant, and in conflict with the current administration’s deregulation policies. The bill will need a stronger publicity push to attract constituent support that will be noticed by House lawmakers. Brindisi’s bill has only a single co-sponsor, Rep. Jefferson Van Drew (D-N.J.)

But Brindisi says he is not giving up.

“Well, let me be the first to reiterate: this ‘cable guy’ will not quit until Spectrum blinks, and takes its hand out of your pocket.”

Frontier Communications Warns It May Declare Bankruptcy In Early 2020

Phillip Dampier November 13, 2019 Consumer News, Frontier 48 Comments

After years of customer losses and a stifling debt of $17.5 billion, Frontier Communications was warned investors it may be forced to declare bankruptcy reorganization to protect its assets from creditors that are growing impatient with the phone company.

Analysts suggest Frontier is considering a Chapter 11 bankruptcy filing as early as the first quarter of 2020 as part of a sweeping reorganization of the company that will also include replacing its top management.

Bloomberg News reports corporate advisers have already begun looking for a replacement of CEO Dan McCarthy, a long term Frontier executive that began a career at Rochester Telephone Corporation before it was acquired by Frontier. McCarthy replaced former Frontier CEO Maggie Wilderotter in 2015. Since Wilderotter’s departure, Frontier’s share price has spiraled downwards and customers are leaving in droves.

McCarthy

Over 71,000 Frontier customers disconnected service in the third quarter of 2019 alone, the biggest percentage of customer losses of any major residential telecom company in the United States.

Frontier executives have repeatedly blamed the ongoing disconnection of traditional landline service for its declining results, but other phone companies have curtailed losses by upgrading their networks to attract new broadband customers. Frontier has only grudgingly invested in network upgrades over the last decade, particularly in its legacy copper service areas. The company’s fiber assets were primarily acquired from service territories formerly owned by Verizon and AT&T. Frontier, like CenturyLink and Windstream, attracted shareholders a decade ago by paying out a significant amount of revenue in shareholder dividends. After Frontier made further acquisitions of former Verizon landline territories putting itself deeper into debt, the company suspended its dividend in 2018.

Frontier’s reluctance to invest adequately in its network has been noticed by many of its customers. So have the company’s ongoing billing and service problems. Frontier has been under investigation over its service performance in several states and has left some customers out of service for weeks.

A possible bankruptcy filing would allow the company to renegotiate its debts and labor agreements. Layoffs and restructuring cost cutting would likely follow. Frontier recently sold off its properties in the Pacific Northwest in an effort to raise cash to reduce its debts. Further asset sales could be forthcoming.

Disney+ Launch Marred by Glitches as Demand Overwhelms

Phillip Dampier November 12, 2019 Consumer News, Disney+, Online Video, Reuters No Comments

(Reuters) – Walt Disney Co said demand for its much-anticipated streaming service, Disney+, was well above its expectations in a launch on Tuesday marred by complaints from users about glitches and connection problems.

Disney+ is relying on its extensive library of movies and TV shows as well as a new slate of content to take on market leader Netflix Inc and Apple TV+, Apple Inc’s newly launched streaming service.

Disney shares were up about 2%, while Netflix was down 1%.

“The consumer demand for Disney+ has exceeded our highest expectations. …we are aware of the current user issues and are working to swiftly resolve them,” Disney said in a statement.

Some users who tried to access the service were greeted by an image of “Mickey Mouse” on a blue screen, with a message asking them to exit the app and try again. Many others had trouble finding the Disney+ app in Apple’s App Store.

It was not immediately clear how many users were affected by the outage.

“Not too surprised but @disneyplus looks like it’s already falling over. On FireTV Stick can’t load main page (Unable to connect to Disney+) and couldn’t play The Mandalorian (some account issue),” user @pmhesse here tweeted.

“The Mandalorian,” the latest in the “Star Wars” movie and TV franchise, is an eight-episode live-action series which stars “Game of Thrones” actor Pedro Pascal as a helmeted bounty hunter.

“While it’s easy to focus on the temporary problems, there’s no doubt that this also shows an enormous demand for Disney’s services,” said Clement Thibault, an analyst at financial markets platform Investing.com.

“Big launches often have their hiccups when consumers are fighting to be the first to have a given service.”

Users who accessed Disney+ were upbeat about content from the Marvel superhero universe, the “Star Wars” galaxy, “Toy Story” creator Pixar Animation and the National Geographic.

“Today is the perfect day to just stay home all day on my couch in my PJ’s binging all of my favorite Disney movies on #DisneyPlus,” tweeted @JulieDwoskin.

Reporting by Akanksha Rana in Bengaluru; Editing by Anil D’Silva and Arun Koyyur

Cable One’s Costly Internet Service Helps Cable Company Achieve Record Profits

Phillip Dampier November 12, 2019 Cable One, Competition, Consumer News, Data Caps No Comments

Using a combination of lack of competition, high-priced service plans, and data caps, Cable One is once again the nation’s most profitable cable broadband provider, charging residential customers a record-breaking average of $72.09 a month.

Late last week, the country’s fifth largest cable company reported excellent results to its shareholders, as the company collected the proceeds from increasing rates on broadband service while shedding unprofitable cable television customers.

Cable One serves small and mid-sized cities, mostly in the mid-south, Rockies, New Mexico and Arizona. It has grown larger with the acquisition of NewWave and Fidelity Communications, and told investors on a quarterly results conference call the company would take some of its recent gains and move towards further acquisitions in the near future. NewWave customers will now face Cable One’s stiff data caps, rolling out across legacy NewWave service areas in November and December. NewWave customers have already found their cable television package pruned back to match the current Cable One package, which omits Viacom-owned networks. The same will hold true for Fidelity’s customers once the two companies merge systems.

 

Laulis

Revenues for the third quarter were $285 million compared to $268.3 million at the same time last year, representing a 6.2% increase. Even with the high cost of service, the number of Cable One internet customers is increasing, primarily because competing phone companies typically offer little beyond DSL. In the last quarter, Cable One added 7,400 new internet customers and boosted broadband revenue by 8.2%.

“Cable One still has one of the industry’s lowest broadband penetration of homes passed at just 32.2% and, with limited fiber-based competition, their ceiling is arguably one of the highest in the industry,” Moffett Nathanson analyst Craig Moffett told investors. “They are at last growing the broadband business at a rate fast enough to drive meaningfully higher penetration.”

Cable One makes no secret it now calls itself a broadband company and has been de-emphasizing cable television service over the last few years. In fact, customers who cut the cord are doing Cable One a favor because broadband-only customers boost their overall profit margins. Unlike cable television, where licensing expenses are growing, the cost to provide and support broadband service is dropping — even as Cable One raises internet pricing and constrains customer usage with industry-low data caps. That forces customers to upgrade to more costly, higher speed service plans to get a larger data allowance. Cable One also offers a $40/mo add-on that restores unlimited service, which is popular with their premium customers. Once a customer uses more than 5 TB, their speed is throttled.

“I think the interesting thing that I took note of is that the higher [the] speed that our consumer takes the higher the percentage of unlimited [plan] selling. So that is to say if you take our gig service the percentage of customers that take unlimited there is the highest of any consumer group,” noted Cable One CEO Julia M. Laulis.

Pricing is expected to rise further unless phone companies compete with fiber broadband, an unlikely scenario in the rural and exurban areas Cable One serves.

AT&T Will Pay $60 Million in Refunds to Throttled and Scammed “Unlimited Data” Customers

AT&T will pay $60 million to compensate unlimited data customers that found their data speeds throttled without warning because AT&T deemed them ‘heavy users’ that were slowing down AT&T’s wireless network.

“AT&T baited subscribers with promises of unlimited data, trapped them in multi-year contracts with punishing termination fees, and then scammed them by choking off their access unless they moved to a more expensive plan,” claimed FTC Commissioner Rohit Chopra. “The AT&T throttling scandal is an important case study into how dominant firms operating without meaningful competition can easily renege on their contractual obligations and cheat consumers who have almost no recourse.”

The $60 million in compensation is part of a settlement with the Federal Trade Commission that accused the company of false and misleading advertising after marketing an unlimited data plan subject to severe speed reductions after as little as 2 GB of usage. AT&T also agreed to a permanent injunction forbidding the company from advertising unlimited data plans without clear disclosures that such plans were subject to speed throttling. AT&T will have to prominently disclose such limitations in the future and not in the fine print.

“AT&T promised unlimited data—without qualification—and failed to deliver on that promise,” said Andrew Smith, director of the FTC’s Bureau of Consumer Protection. “While it seems obvious, it bears repeating that Internet providers must tell people about any restrictions on the speed or amount of data promised.”

AT&T’s throttling came to light in 2011 after the company was found to be slashing “unlimited data” smartphone users’ speeds to as low as 128 kbps — roughly 2-3 times the speed of dial up data, after a customer reached 2 GB of usage during a billing month. The FTC claims over 3.5 million AT&T customers were subjected to AT&T’s speed throttle as of October 2014 when the federal agency filed a formal complaint against the wireless carrier.

AT&T fought the FTC in and out of court for five years, claiming the FTC had no jurisdiction over its wireless business. The Ninth Circuit U.S. Court of Appeals disagreed in 2018, when it ruled that the FTC did have jurisdiction to pursue its false advertising claims against the company. Observers believed this court ruling forced AT&T to move towards a settlement.

AT&T’s past and current wireless customers targeted for speed throttling will automatically receive compensation without having to file a claim. The settlement provides customers throttled to 128 kbps an equal share of $13.8 million set aside to compensate current and former customers for the loss of value of their unlimited plan, plus interest. Those throttled to 256 or 512 kbps will split $46.2 million. Current customers will be provided a bill credit, former customers will receive a check in the mail, assuming AT&T can locate your current address. Any unclaimed funds will be sent to the FTC and will not be kept by AT&T. Customers can expect refunds within the next 90 days.

Wireless carriers selling “unlimited data” routinely bury restrictions on such plans in their fine print. Most limit customers to between 20-50 GB of usage per month, after which the company reserves the right to dramatically reduce your data speeds until the next billing cycle begins. The FTC is increasingly concerned that advertising unlimited service while burying important restrictions in the fine print is false advertising. The FTC is sending a message to wireless companies it wants hidden disclosures stopped.

The Commission vote approving the stipulated final order was 4-0-1. Commissioner Rebecca Kelly Slaughter was recused.

FTC Commissioner Deepak Chopra issued a scathing statement about how AT&T does business:

Chopra

AT&T’s Nationwide Bait-and-Switch Scam

When any business, big or small, offers an unlimited service for a fixed fee, that business is taking a risk. If customers use much more of the service than projected, the company will take a hit. Conversely, if customers use less than projected, the company will haul in even larger profits. This is how business works.

As detailed in the Commission’s complaint, AT&T wanted the rewards without the risks, so it turned its offer of an “unlimited” data plan into a bait-and-switch scam that victimized millions of Americans.

Subscribers were lured in with promises of unlimited data service for a fixed fee, trapped into multiple years of service by punitive termination fees, and then forced to switch to a more expensive tiered plan with overage fees to actually receive the unlimited data they were promised.

This scam went hand-in-hand with AT&T’s early monopoly in the iPhone market. In 2007, Apple and AT&T inked a major deal that gave purchasers of the iPhone only one choice for a mobile carrier.

Around this time, AT&T faced a major threat to its wireless business: the company was losing exclusivity over the iPhone. Analysts warned that the company could be “demolished,” potentially losing millions of customers to Verizon.

To prevent this from happening, AT&T aimed to lock down existing subscribers into new long-term contracts by “grandfathering” them in to their unlimited plans when they upgraded their phones. Since data usage can be unpredictable and hard to track, an unlimited plan without risk of overage fees created certainty for cost-conscious consumers.

AT&T throttles

How low can AT&T go? Some wireless customers were throttled to 128 kbps speed after using just 2 GB of data on their AT&T Unlimited Plan.

AT&T is a sophisticated company. It knew it needed to invest in enough capacity to deliver service for subscribers who used a lot of data under their unlimited plans, especially since the company had claimed its network was the “fastest” in the nation.

Instead of living up to its promises, AT&T pulled a bait-and switch.

First, to hold on to customers who might switch to the competition, AT&T marketed an unlimited data plan that was not actually unlimited. AT&T subscribers who signed up for newer phones with unlimited service were likely those who intended to use the most data. Instead, these subscribers were throttled the most, and ended up receiving the slowest, most unreliable data coverage.

According to the FTC’s complaint, roughly 3.5 million customers victimized by AT&T’s fraud saw their speeds go down by up to 95 percent. The iPhone’s internet-intensive functions were practically unusable on AT&T’s network at the diminished speeds. This Swiss-cheese service was not the unlimited deal that was promised. Americans in rural areas without broadband connections, as well as those who depended on the service for their livelihood, got a particularly raw deal.

Second, AT&T made it hard to walk away, trapping subscribers in contract terms. Until 2011, AT&T was the only carrier offering the iPhone and the only network the iPhone worked on. As the exclusive iPhone carrier, AT&T dictated the terms of access, which included signing long-term contracts with big penalties for leaving early. After AT&T lost iPhone exclusivity, new carriers entered the market promising better coverage. But most existing iPhone users were stuck with AT&T until their contracts ran out, unless they paid the expensive early termination fee. And when their contracts did run out, AT&T induced them to renew with false promises of “unlimited” service.

Third, AT&T pushed subscribers into switching to more expensive plans. AT&T allocated the most data and most reliable service to capped data plans with overage fees, while imposing arbitrary limits on subscribers in “unlimited” plans. Unlimited data subscribers who wanted reliable service could pay a big fee to switch carriers, or they could switch for free to a capped data plan with no throttling. While these plans might have been cheaper upfront than the unlimited plan, their low data cap, the high cost of overages, and the expanding capabilities of smartphones made a service price hike inevitable for Americans who wanted what they signed up for. The only truly unlimited data service was therefore available solely through capped plans with expensive overages.

AT&T’s bait-and-switch scam is a good window into the many harms that result from dominant companies operating without the discipline of meaningful competition. Their market power, financial resources, and one-sided information gives them license to ignore their own contractual obligations while aggressively enforcing every little clause in the fine print. Consumers can accept the bad deal, walk away, or fight it, but each choice carries a cost, with dominant firms prevailing almost every time.

In my view, AT&T profited by using its dominance to force customers to keep their end of the deal even as the company failed to deliver and then changed the terms. AT&T’s unlimited data subscribers could have kept paying for limited, unreliable service, paid the penalty to switch to a carrier with better service, or paid a price hike to get the unlimited data service they had been promised. But none of those are good options.

Wireless companies are spending more money on stock buybacks than they are investing in their networks.

AT&T’s broken promises were not inevitable. The company could have upheld its obligations to its customers by making the right infrastructure investments. It certainly had the money to do so. From 2011 to 2015, AT&T paid tens of billions of dollars in dividends and share buybacks. In 2012, as the company boasted to investors that customers were fleeing its unlimited plan for tiered plans, it spent more on share buybacks than it invested in its wireless network. The bottom line is that AT&T fleeced its customers to enrich its executives and its investors.

Scrutiny for Scammers of All Sizes

The FTC sued AT&T in 2014, and an exceptional group of staff litigators racked up big wins in this case. Our staff even prevailed in the Ninth Circuit Court of Appeals, when AT&T tried to sidestep accountability for this massive fraud by claiming it was immune from the FTC’s oversight. I am extremely grateful to our litigators and investigators who persisted, and I am glad to see money being returned to consumers. No settlement is perfect. While I would have liked to see AT&T pay more for the company’s scheme, I fully appreciate the risks and resources associated with litigation.

There are also important lessons from this matter that I hope the entire agency can learn.

Scammers come in all sizes. During my tenure as a commissioner, I have raised concerns about disparate treatment of small firms, where the agency is quick to call out their fraud and where resolutions can include crippling consequences and individual liability. In contrast, the agency is quick to deem large firms as “legitimate” and apply a more soft-touch approach. AT&T’s massive scam is a reminder that we must focus on the practices of a business, rather than the size of a business.

Rigorous analysis yields better results. The Commission must do more to support our litigators and investigators with rigorous analysis of the many ways that companies profit from illegal conduct.

Commission economists typically develop estimates of consumer injury, but this is just one facet of the relief we can seek in court. Economic analysis of consumer injury is not a complete financial analysis, so we must be wary of overly relying on this narrow methodological approach. To arm our litigators effectively, we must conduct rigorous financial analysis that goes beyond the out-of-pocket losses that consumers experience. We also need to ensure we conduct a comprehensive review of a firm’s business model, which can allow us to assess what led to the wrongdoing in order to inform what injunctive relief we should pursue.

It will be critical for the Commission to closely scrutinize AT&T’s moves under order. If the company violates any aspect of this settlement, the agency should seek a contempt judgment in federal court and hold both the company and any appropriate individuals responsible for flouting the order. Given AT&T’s aggressive enforcement of arbitration clauses that ban consumers from taking the company to court, it is critical to be vigilant in our oversight of AT&T under this order.

Conclusion

If consumers don’t pay up when a company fails to live up to its promises, they are often pummeled with late fees, collection calls, and negative credit reporting. Yet when dominant companies don’t deliver on their end of the bargain, too often they can turn a profit, as their customers feel powerless to do anything about it. Cheating is not competing. Without effective government and private enforcement, we will not achieve all of the benefits that competitive markets can deliver.

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  • Marsha: I think if you gave better prices & didn't think the big wigs deserved that big pay that they get, the services would be so much better. Sick to d...
  • Debbie: Worse internet service EVER, When I call about problems they won’t even talk about it they just say it will be better in 2020 because they are fixing ...
  • Mel: Not surprised.. Service is off and on constantly..Poor service, representative communication sucks... Constant billing issues... But like others,I hav...
  • Lou: cancelled my service back in october on the 16 due to no service from any of the included equipment an never getting either my phone or internet worki...
  • Denise: We in the Chenango county are screwed!! No one to compete with! We have no choices & Spectrum knows it! I thought New York was kicking them out!...
  • Diane: Frontier has screwed over their customers for years! I live in such a rural area and it’s all that’s available so I just keep paying for nothing! My ...
  • EJ1977: That is my understanding anyways, but I am no means a corporate bankruptcy expert....
  • EJ1977: It will depend on which bankruptcy they file, but no probably not. Pensions are not protected under bankruptcy laws so if there is money left then it ...
  • William: Could be their terrible predatory practices and awful customer service....................
  • Marcy Ohlemeier: I completely agree- while other providers are two roads up from me they dont provided service in my area, frontier is also my only option....
  • EJ1977: No jobs should be lost because of this and in fact it may saves jobs. Phone companies have to stay open no matter what. Under bankruptcy the company w...
  • EJ1977: You will continue to have service. Due to the nature of things no matter what happens (Chapter 7 or 11) your service will stay up and working. You do ...

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