From Our Friends at Free Press! Good Stuff!

AT&T launched its U-verse service in parts of the Memphis area Monday, promising competition for Comcast, the dominant cable company in southwest Tennessee.  But some area residents expected much more to come from last year’s controversial industry-friendly statewide franchising law that promoters promised would bring lower prices for service across the state.

AT&T plans to offer U-verse within the next two years to subscribers in Arlington, Bartlett, Collierville, Covington, Dyersburg, Germantown, Lakeland, Memphis, Piperton and Ripley.  Monday’s launch only covers a portion of Memphis, and doesn’t cover large portions of downtown.

[flv width=”552″ height=”294″]http://www.phillipdampier.com/video/U-verse overview.flv[/flv]

An Overview of AT&T U-verse television service

Unlike traditional cable services, AT&T’s U-verse is typically delivered on a copper wire and fiber optic based Internet Protocol network.  Not as advanced as Verizon FiOS, which provides a fiber optic connection straight into the home, AT&T’s system still relies in part on traditional copper phone wire that runs from the pole to your home.  AT&T uses this approach to save money — company officials claim 100% fiber networks are too costly to build, and Wall Street investors balk at the up front costs.

AT&T uses its fiber network from the phone company office to individual neighborhoods to reduce the distance between the homeowner and the company’s equipment, which delivers a digital signal across the customer’s existing phone line.  Just like DSL, the shorter the distance between the customer and the telephone company equipment, the faster the speeds.  AT&T U-verse requires fast speeds to handle the video channels, digital phone, and broadband components that are part of the U-verse product line.

AT&T’s U-verse pricing ranges from $49 a month for an enhanced basic service package of 130 channels to $109 for 390 channels.  Premium channels are extra.  Plans include one AT&T set top box.  AT&T’s system will require a set top box for each television, at a monthly rental of $7 for each additional set, which can increase costs significantly for houses with several televisions.  An HD package runs $10 per month.  AT&T specials often include discounted or free installation, which takes between four to seven hours to complete and is only done on weekdays.  No contracts are required and customers can cancel at any time.

AT&T claims that 70% of their customers choose a bundled package that includes television, broadband, and/or telephone service.

Company officials credited the passage of the Competitive Cable and Video Services Act, which became effective in July 2008, for paving the way for AT&T U-verse in the city.  AT&T’s praise also included crediting elected officials by name who supported the company’s lobbying efforts towards passage of that bill, which stripped cable franchising authority from local communities and adopted a statewide franchise system.

“We are thrilled to offer this innovative video choice to customers in the Memphis metropolitan area. As we celebrate this Memphis launch, I want to remember the contributions of the Tennessee General Assembly to open Tennessee’s video services marketplace to competition which is truly benefiting consumers. I would like to again thank Memphis area legislators including Speaker Emeritus Jimmy Naifeh, Senator Mark Norris, House Speaker Pro Tem Lois DeBerry, Chairman Ulysses Jones and the many others who supported competition and choice for consumers,” said Gregg Morton, president, AT&T Tennessee.

In turn, elected officials were quoted in AT&T’s press release:

“As Tennessee policymakers, our goal was to increase investment throughout the state and give consumers more choices and innovative new services,” said Senator Norris. “AT&T has been a great community citizen and the launch of AT&T U-verse also supports economic growth in Memphis.”

“We are excited that AT&T has brought their 100 percent Internet Protocol-based television service to Memphis,” said Chairman Jones. “Consumers in Memphis have asked for this and today, AT&T has delivered.”

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p style=”text-align: center;”>AT&T Group President for Operations Support John Stankey discusses the company’s fiber strategy and provides an update on its progress in deploying its groundbreaking IPTV service, AT&T U-verse TV. (11 minutes)
You must remain on this page to hear the clip, or you can download the clip and listen later.

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p style=”text-align: center;”>

The Municipal Technical Advisory Service, in association with the Tennessee Municipal League, noted that the lobbying effort to pass the Act was among the most expensive lobbying campaigns in state history.

This legislation is part of the national trend to diminish or eliminate the franchising authority of cities by granting cable companies the right to provide services without negotiating agreements with local governments.

In recent years, several cable companies operating in Tennessee permitted local franchise agreements to expire and refused to negotiate contracts with cities in anticipation that legislation would be adopted that would give cable companies great advantages in negotiating new agreements.

This tactic has paid off, as this law essentially grants a statewide franchise to these companies. Current franchise holders may now terminate their local agreements and seek a state franchise. A city that has previously negotiated a franchise agreement with one cable provider may be forced to permit other cable companies to serve its area under the same terms and conditions of the existing agreement

Such legislation has traditionally been advocated by telephone companies like AT&T and Verizon who are introducing video services in a bid to remain competitive with cable, which now offers its own telephone service.  Seen as a shortcut to negotiating with each individual municipality, the statewide franchise advocates claims it reduces the time and expense of bring needed competition to communities.

In addition to an expensive lobbying campaign, astroturfer FreedomWorks coincidentally showed up to promote their “Choose Your Cable” campaign, which in fact mirrors AT&T’s public policy advocacy of statewide franchising.

FreedomWorks Chairman Dick Armey commented, “FreedomWorks and our thousands of Tennessee members were proud to take part in the grassroots battle in Tennessee that finally saw this ground-breaking legislation through. We salute the Tennessee state legislature for its leadership in giving Tennessee consumers the advantages of increased competition in the video services market. The Competitive Cable and Video Services Act will offer cable consumers more choices and more innovation. And when businesses are forced to compete for customers, the customers win.”

Incumbent cable operators have had mixed reactions to such proposals, generally opposing them in areas where they would likely face the entry of AT&T or Verizon into their markets, and taking a more favorable approach in areas where they are unlikely to face a strong telephone company competitor.

In Tennessee, with AT&T itching to bring U-verse to state residents, cable operators launched a major opposition effort.

Local municipalities and many consumer advocates strongly oppose statewide franchising legislation, noting such laws remove local oversight over operators that do not perform responsibly and reasonably in their communities.  Additionally, in many states where statewide franchise bills have become law, local communities find franchise fees paid into state bodies that do not always pass on the full amount of that revenue to towns and cities.

Other common problems include:

• Threatened loss of local Public, Educational, and Governmental (PEG) local access channels;
• Reduced control over zoning regulations prohibiting digging and construction without permits;
• Loss of “free service” provisions that deliver cable programming to public schools, community centers, and town, police and fire halls at no charge;
• Loss of authority to help manage customer complaints.

In Tennessee, those opposing the legislation managed to get rid of statewide franchise fee administration, retained control over their existing PEG channels, and kept existing “free service” provisions, as well as reasonable zoning requirements.  However, the telecommunications industry did manage to include language banning municipally owned broadband networks in any area where an incumbent provider exists:

Memphis, Tennessee

Broadband joint venture authority.

The law creates the “Tennessee broadband deployment fund” to be used to promote the deployment of broadband service to rural areas. Guidelines will be developed to govern use of the funds, and grants will be available to local governments, cable companies, and telecommunications companies.

Cities now have the authority to enter into joint ventures with one or more third parties to provide broadband services. Joint ventures will be authorized only in areas that are historically unserved. City electric companies and electric cooperatives that participate in these joint ventures must still comply with other applicable statutes, and no revenues from utility operations may be used to subsidize the joint venture.

Cable operators also managed some concessions, and after the bill was signed into law, the state cable television association said they could live with the result.

Stacey Briggs, executive director of Tennessee Cable Telecommunications Association:

“This has been a good process – not easy, but good – and Speaker Naifeh should be commended for managing this outcome on a highly complex policy.

The cable industry, including Comcast and Charter, stood firm to make sure that our members were treated fairly and that AT&T and other companies were not granted advantages in the law. And, most important for consumers, Tennessee’s cable companies will continue making substantial and meaningful investment in Tennessee. Cable companies will continue to be the leader in bringing the most advanced products, services and newest technologies to consumers across the state.

AT&T and other companies have had the right to compete under local franchising rules for more than a dozen years. This new policy streamlines the franchise process, but it remains to be seen whether new entrants will compete in Tennessee.”

After all of the lobbying was done, the bill was signed into law, and the competition FreedomWorks was touting did arrive, the only thing missing from the consumer perspective was lower pricing.

Comcast, the local cable operator serving Memphis, seemed unfazed by AT&T’s entry into the area.

“We have competed successfully against satellite TV and other competitors for many years,” said Trevor Yant, vice president and general manager of Comcast of Memphis. “AT&T will become another player in the market with the services they choose to offer.”

One of the possible reasons for Comcast’s apparent lack of concern may stem from the reaction of many Memphis residents, who note AT&T’s prices are often higher than those charged by Comcast.

Among the mostly unimpressed reactions on local message boards:

mrhmeisme:
“$109.00 for 390 channels doesn’t sound like a very competitive price for a yet untested product. That’s some 20 percent higher than my current package that has all the channels that interest me. I suppose the proof will be in the pudding.”

Not_Chicken_Little:
“The website for U-verse presents the packages very poorly, and the prices don’t seem to be any bargain. But I am glad to see some competition, even though I don’t think they’ll make much headway. They need to show what they’ve got in a more attractive and understandable way, and cut prices – they don’t make me even think of switching with the lame sales pitch they have now.”

dmat7777:
“I just did a comparison of cost between my current Comcast and the U-verse. For comparable services, U-verse would be about $15 more per month for me. Some of the packaging/options might look better. For example, the Flickr photo being included, but I’m more concerned about how much $$$ per month. I don’t see AT&T taking this seriously. They seem to be doing the typical huge corporate thing, and not addressing the customers real concerns. No surprise there.”

ChickPea:
“$49 a month is too rich for my blood. When someone offers a decent package available for $25-$30 a month, I’ll be in.”

Oddly, the most common requests and complaints among Memphis area residents continue to be unanswered by Tennessee officials who were eager to support the Competitive Cable and Video Services Act, but left out a few things:

umbluegray:
“I want a plan where I can pick and choose the channels I want. I hate paying money to some of the basic channels like MTV, etc.”

ladydonald:
“I would be a big fan of a-la carte programming if it were ever enacted.

A-la carte channels are a niche that all of the providers are totally ignoring. Just think what would or could happen if those options were available.”

Hogs2009:
“It would be nice if you could pick out what cable channels you want and skip the rest. 90% of cable channels I do not want but am charged for. I mainly have cable for sports broadcasting channels, like ESPN, ESPN2, and ESPN Classic. I also like having local on cable because it is more clear, again because some games are on local channels. A-la carte is a great idea!”

Many residents were also suspicious of just how good a local competitor AT&T will be against Comcast, which itself took over providing cable service formerly provided by Time Warner Cable:

DanWesson:.
“Since Comcast bought out service from Time Warner locally, our service has been sub-par. I have had technicians out the house multiple times due to inexplicably losing certain HD channels and internet service that continually drops or can be agonizingly slow, on par with dial-up some days (particularly the hot ones, which is very strange). Their technicians on the phone and who come to the house have been polite and friendly, but they aren’t exactly going out of their way to fix the problem.

Comcast also charges me more than Time Warner did in addition to charging a “modem-rental” fee when the cable modem was free from Time Warner and I haven’t exchanged it since the change.

All that said, I’m not sure AT&T is the way to go as their corporate practices are the worst in the Telecom industry. Customer service has always been non-existent as the customer is merely a cash-cow. I’m all for competition in the marketplace, though. If Direct TV didn’t require a contract that might would be the route I went, but I’d still be reliant on one of these other worthless companies for internet.”

Not_Chicken_Little:
“On the website trying to check availability, U-verse tells me it cannot find my address! It suggests I try again using my AT&T phone number instead and directs me to continue to another screen. That screen, however, has no option to enter a phone number – only the address.

So I already see the level of competence I would have to endure if I choose U-verse. And like dmat7777, I see that the price for comparable service would be considerably higher than what I have now.”

apollo1377:
“AT&T can’t handle phone service. Do you think they can take on more? I think NOT.”

ima_cracker:
“If AT&T could deliver a more reliable package some would pay more to get it.

Instead they are mortgaging the company’s reputation for wireline services, which they continually deride, to try and emulate the cable companies financial model, which has produced a reputation for reliability that is the envy of nobody.

If instead of trying to destroy the value in wireline AT&T decided to pursue a higher quality, more reliable service for cable, they could at some point expect to capture a substantial amount of market share. But they assume the consumer is too stupid to make the distinction between one service and another.”

ChickPea:
“AT&T websites are a perennial problem. Ever since BellSouth was taken over by AT&T, getting any information on local service online has been a struggle. A site map would probably look like a birds nest.
That said, I’m loving my AT&T DSL lite! Cheap and plenty fast for a non-gamer.”

DirecTV wants people out of reach of its satellite service to enjoy unlimited viewing of NFL football games, and today announced it would test providing them over broadband connections.  For $100 more a year than subscribers pay now for the satellite-delivered football game coverage, DirecTV will will offer New York City viewers as many NFL games they can watch over their broadband connection for $349 a year.

DirecTV claims it will sell the service only to those who cannot obtain satellite service from the company, which presumably will limit the broadband content to apartment dwellers and other urban residents who can’t mount a satellite dish.  But in a city like New York, that can easily mean tens of thousands of potential new customers, all watching video content delivered by Cablevision, Time Warner Cable, RCN, or Verizon’s broadband services.  USA Today covered the story this morning:

DirecTV has few customers [in New York City] because skyscrapers block signals coming from satellites orbiting the equator. Also, many landlords and co-op boards don’t allow residents to get a satellite service.

“A lot of the buildings (that can’t get DirecTV) we already have in databases because they’ve got exclusive contracts with cable guys,” says Derek Chang, executive vice president for content strategy and development.

To see the games, broadband customers will download a special video player and punch in a code. Users can install the software on multiple computers, but only one will be able to stream the games at any particular time.

Games with New York’s Jets and Giants, which air on broadcast TV, will be available only when the customer’s computer is outside the New York area.

Cable operators won’t just play defense in the battle for football fans. Comcast will announce today that it will offer the NFL Red Zone Channel to customers of its Sports Entertainment Package. On Sundays, the channel will display football statistics with audio from Sirius XM Radio‘s program “Around the League” — and go live to certain games when the ball is within 20 yards of the goal.

While Cablevision, RCN, and perhaps even Verizon may not express concern about the prospect of carrying NFL games across their networks without “compensation,” Time Warner Cable, which continues to express an interest in Internet Overcharging schemes, may not be so tolerant, especially if the test is successful.  ISPs who support Internet Overcharging routinely use online video growth as a justification for usage caps and consumption pricing.  Will the NFL become part of the Re-education of their customers?

Another question to ponder – would such a service even launch in a broadband marketplace infested with usage caps and limits?

The astroturfers remain hard at work trying to convince conservatives the best way to oppose Obama Administration telecommunications policies would be to adopt industry-friendly views opposing Net Neutrality.

The latest to buy in is The American Spectator, publishing a piece this morning titled, “The Great Regrouping.”  In it, The Prowler casts Net Neutrality as part of the Obama Administration’s plot to impose government controls on the Internet, representing a “grave threat … to free speech and conservatives’ ability to organize and mobilize politically.”

During the last day the House was in session before leaving for its August recess, Rep. Ed Markey’s staff introduced HR 3458, the so-called “Internet Freedom Preservation Act,” which would essentially enable government control of the Internet, treating the networks as a government-managed utility. (For more information about “net neutrality,” read this interview that one of the key “net neutrality” supporters gave to a Canadian socialist publication.) The Markey legislation is considered the last piece of what some conservatives consider to be Democrat and progressive attempts to control the Internet and limit citizens’ ability to use the networks to organize and oppose their agenda.

The bill was introduced the same week it was revealed that the Obama Commerce Department was demanding from the phone and cable companies highly detailed data about private citizens’ Internet and broadband connections as part of plans of “map” broadband networks across the country.

Stop the Cap! readers will recognize the source of the link The Prowler promotes — it’s from the very same Heartland Institute astroturfer we chased last week, who was arguing Net Neutrality was a tool to achieve “socialist utopia.”  I pulled a muscle just reading that overreach.

My direct response can be found below the fold.  Suffice to say, this is an example of classic astroturfing at work:

1. A company’s government affairs department recognizes a potential threat to their business model through government oversight or regulation, or sees a financial benefit from industry-favorable legislation or deregulation.  It considers a range of options, including direct lobbying, consumer outreach, and hiring experienced “inside the beltway” expertise.
2. The company approves a plan of action and frequently hires a Washington-based public relations firm.  That firm usually either has direct contact or close associations with astroturf organizations.  As part of the PR firm’s fee, they assure the company its message will be delivered in ways that help steer any public policy debate towards their corner, using astroturfers to reach both consumers and media suspicious of a direct industry appeal, but will listen to an “independent” group.
3. Suddenly, supposedly independent “public interest” groups start beating the drums.  Some speak directly to consumers raising doubts and fears about regulatory matters, others attempt to suggest the public needs to get behind industry-friendly positions for their own benefit.  Press releases and interview opportunities are made available to the media.  Astroturfers with a known political angle wrap industry positions in ideological shells, using them to illustrate a broader ideological point.
4. Most importantly, carefully avoid exposing the direct industry connection.  Industry executives don’t want to admit they are paying for these campaigns.  PR firms help shield the source of the industry money that flows into astroturf groups, and astroturfers work hard to avoid disclosing where the money is coming from.  Even elected officials who take an industry friendly view do not want to directly reference the companies writing big campaign contribution checks.  They’ll cite those supposedly independent “consulting” and “research” and “public interest” groups when reading the talking points.

Unfortunately for them, this convenient public interest shell game has been exposed.

In today’s case:

Industry opposed to Net Neutrality -> Astroturfer Groups -> Outreach to fuel opposition to Net Neutrality for “consumer” or “ideological” reasons.

… Continue Reading

While researching some stories this afternoon, I spoke with an executive at one of the major broadband providers serving consumers with Internet service who told me the company was simply tearing its proverbial hair out over how much online video services like Hulu were costing them — at least $1-2 per gigabyte.  He also said it was putting serious strain on their broadband network.  He didn’t agree to go “on record” putting his name with his views because he was not authorized by company officials to do so, but he was well armed with talking points that said online video is such a problem, Canada, South Africa, Australia, and New Zealand couldn’t take it any longer and they adopted usage allowances to limit customers watching Hulu and other online video services “like from the BBC.”

These Amateur Hour talking points written at company headquarters will work with a bobblehead-like nodding reporter at a local station getting a 10 second unchallenged sound bite, but they don’t work here.

My industry friend didn’t agree to be on the record, so he’ll remain anonymous, but the points raised are on the record so here we go:

Myth: Hulu is costing broadband providers a ton of money – at least $1-2 per gigabyte.

Truth: Hulu, and other online video services like it, do generate a considerable amount of broadband traffic in the United States.  That online video has posed a potential threat to my provider friend, who faces the prospect of some consumers deciding to disconnect their cable TV service and stick solely with broadband for online video.  However, my friend ignores the fact his company has a way to solve this traffic issue by considering upgrades to DOCSIS 3 technology.  After all, his bosses are actively seeking a way into the online video marketplace themselves.

His employer is testing an online video delivery platform that could easily dwarf Hulu.  Of course, they don’t happen to own or control Hulu, open to any American.  The establishment of an industry-controlled service, available exclusively only to “authenticated” subscribers, really blows the talking point about online video straining their broadband network out of the water.  If Hulu is threatening to do them in, what do they think will happen when their even bigger endeavor launches for millions of users?  Then again, as I told him, such online video drives new subscriptions and they could always take some of that money and invest it in network expansion.

Dave Burstein, a well regarded expert on broadband networks, who writes DSL Prime, obliterates the cost estimate inflation for online video in a short piece titled, HD Video Delivered: 5-8 U.S. cents per hour (SD – 2-4 cents):

Microsoft, Cachelogic and I demo’ed full 6 megabit HD video over the net at Web Video Summit, and the stars are now aligned for HD to become first practical and then common – unless the carriers succeed in taxing the net outrageously. That’s cheap enough that even HD TV over the net can be supported by ads, and it becomes a no-brainer for any movie service that charges to offer true HD.

Dan Rayburn, the guru of the streaming media world, reports “The lowest price I saw in Q1 was two and a half cents per GB delivered for over 500TB of traffic a month. When I questioned many of the major CDNs about this price, nearly all of them told me they don’t price delivery that low, but the contracts say otherwise. That price is not the norm as 500TB a month in delivery is a very large customer.” Repeat: This is not a typical price, even at that large volume. Dan reports more normal prices are 2-4 times this level. So U.S. cents 15-25 is more typical for full HD.

Hulu doesn’t even specialize in HD video programming, so the $1-2 per gigabyte estimate on that talking points handout apparently mistakes a dollar sign for a cents sign.

Myth: Online video is such a problem, Canada, South Africa, Australia, and New Zealand adopted usage allowances to limit customers watching Hulu and other online video services “like from the BBC.”

Truth: My industry friend is apparently unaware Hulu restricts access to the majority of its content outside of the United States.  If you are watching from Canada, Australia, or South Africa, you’re more likely to encounter an error message telling you this content is not licensed for your area.  I’m not sure how that is supposed to impact on overseas ISPs.  The BBC’s iPlayer not only doesn’t provide broadband video content outside of pre-authorized UK-based Internet Service Providers, it offers lower quality streams outside of the UK for what content is available.  It’s a very common complaint heard by the BBC, but they do not have the resources to offer high bandwidth streaming to the entire world.

Most broadband providers won’t use the word “limit” when it comes to controlling subscribers’ access, because that puts them right in the line of fire.  It’s always been our contention that this is about protecting business models and less about “costs.”

There are tremendous differences between online video content services in the United States versus Canada or other usage-capped countries.  In New Zealand, online video services have been shut down because of usage limits.  In Canada, Australia, and South Africa, they’ve never truly gotten off the ground because “bit caps” make them unsustainable.

South Africa this week celebrated the opening of a new underseas cable to bring additional global connectivity to the continent of Africa.  Broadband service in South Africa today has very little video content at all – usage caps are punishingly low across the region because unlike in the USA, international connectivity has traditionally been obscenely expensive.  Many South African ISPs distinguish themselves by placing heavier limits on sites hosted outside of the country than on those hosted domestically, a nod to the connectivity reality.

The truth is that some ISPs in the United States are looking for arguments to justify Internet Overcharging to maintain high profits and keep demand in check.  Consumers are not buying these industry talking points at any price.