Otero

When a former labor leader suddenly starts advocating for the interests of AT&T and other super-sized telecommunications companies, even as AT&T’s unionized work force prepared to strike, the smell of Big Telecom money and influence permeates the air.

Jack Otero, identified in the Des Moines Register as “a former member of the AFL-CIO Executive Council and past national president of the AFL-CIO’s Labor Council for Latin American Advancement,” penned a particularly suspicious love letter to deregulation that might as well have been written by AT&T’s director of government relations:

[…]Industries — like broadband Internet — are thriving and creating innovations. Tossing a regulatory grenade into these businesses could wreck markets that create value for consumers and jobs for workers.

The United States is one of the most wired nations in the world. More than 95 percent of households have access to at least one wireline broadband provider, and the vast majority can connect at speeds exceeding 100 Mbps. And monthly packages start as low as $15. That means more families can go online to improve their job skills, look for work or help the kids with their school assignments.

More choices and higher speeds — the signs of a vibrant market — are the product of private investment, not public dollars. Internet service providers have invested over $250 billion in the last four years alone. This has created roughly half a million jobs laying fiber-optic and coaxial cable.

But some squeaky wheels are demanding heavy-handed regulations that would move our broadband Internet to the European model, where taxpayers have to subsidize outdated networks with slow speeds. Some want broadband providers to be required to lease their networks to competitors at discounted prices — as they do in Europe. But lawmakers in both parties agree that this policy, tried in the 1996 Telecommunications Act, failed miserably.

Others argue that broadband Internet providers should not be able to impose a small surcharge on the tiny percentage (less than 1 percent) of consumers who download hundreds of movies and tens of thousands of songs every month — effectively the data usage of a business. They say these fees discriminate against online video companies like Netflix. But that’s silly. More than 99 percent of users can watch plenty of Apple TV or Netflix without approaching the lowest data allotment. Without tiered pricing plans, the rest of us would have to underwrite these super-users.

Okay then.

Otero’s Fantasy World of Broadband sounds great, only it does not exist for the vast majority of Americans. Are most of us able to connect at speeds exceeding 100Mbps?

If you happen to live in a community served by a publicly-owned broadband provider Otero effectively dismisses, you can almost take this fact for granted.

Some of America’s most advanced telecommunications providers are actually owned by the public they serve in dozens of communities small and large. EPB Fiber, Greenlight, Fibrant, Lafayette’s LUS Fiber, among others, deliver super-fast upload and download speeds at very reasonable prices while the giant phone and cable companies offer less service for more money.

The only major telecommunications company with a wide deployment of fiber-to-the-home service is Verizon Communications.

You cannot easily buy residential 100Mbps service from Time Warner Cable, AT&T, CenturyLink, Frontier, FairPoint, or a myriad of other telecom companies at any price, unless you purchase an obscenely expensive business account. From the rest, 100Mbps service typically sets you back $100 a month.

Otero’s quote of affordable $15 broadband is not easy to come by either. It usually requires the customer to qualify for food stamps or certain welfare programs, have a family with school-age children, a perfect payment history, and no recent record of subscribing to broadband service at the regular price.

The only people who believe America is the home of a vibrant market for broadband service are paid employees of telecom companies, paid-off politicians, or their sock-puppet friends and organizations who more often than not receive substantial contributions from phone or cable companies. The fact is, the United States endures a home broadband duopoly in most communities — one cable and one phone company. They charge roughly the same rates for a level of service that Europe and Asia left behind years ago. Broadband prices keep going up here, going down there.

Simply put, Mr. Otero and actual reality have yet to meet. Consider his nonsensical diatribe about the impact of the “heavy-handed” 1996 Telecommunications Act, actually a festival of mindless deregulation that resulted in sweeping consolidation in the telecommunications and broadcasting business and higher prices for consumers.

Otero is upset that big companies like AT&T and Verizon originally had to open up their networks in the early 1990s to independent Internet Service Providers who purchased wholesale access at fair (yet profitable) prices. Those fledgling ISPs developed and marketed third-party Internet service based on those open network rates. Remember the days when you could choose your ISP from a whole host of providers? In some markets, this tradition carried forward with DSL service, but for most it would not last.

The telecommunications industry managed to successfully lobby the government and federal regulators to change the rules. Phone companies did not appreciate the fact they had to open their networks for fair access while cable operators did not. So in 2005, the FCC allowed both to control their broadband networks like third world despots. Competitors were effectively not allowed. Wholesale access, where available, was priced at rates that usually guaranteed few ISPs would ever undercut the cable or phone company’s own broadband product.

The lawmakers who believed open networks represented awful policy were almost entirely corporate-friendly or recipients of enormous campaign contributions from the telecom companies themselves.

So which market is actually on the road to failure?

The LCLAA couldn’t do enough to help AT&T swallow up competitor T-Mobile USA.

The American broadband business model is a firmly established duopoly that charges some of the world’s highest prices and has rapidly fallen behind those “failures” in Europe.

In the United Kingdom, BT — the national phone company, is required to sell access at the wholesale rates Otero dismisses as bad policy. As a result, UK consumers have a greater choice of service providers, and at speeds that are increasingly outpacing the United States. Nationally backed fiber to the home networks in eastern Europe and the Baltic states have already blown past the average speeds Americans can affordably buy from the cable company.

Even Canada requires Bell, the dominant phone company, to open its network to independent ISPs selling DSL service. Without this, Canadians would rarely have a chance to find a service provider offering unlimited, flat rate service.

Otero’s final, and most-tired argument is that data caps force “average” users to subsidize “heavy” users. In fact, as Stop the Cap! reported this week, that fallacy can be safely flushed away when you consider the largest ISPs pay, on average, just $1 per month per subscriber for usage, and that price is dropping fast. The only thing being subsidized here is the telecom “dollar-a-holler” fund, paid to various mouthpiece organizations who deliver the industry’s talking points without looking too obvious.

The Des Moines Register omitted the rest of Mr. Otero’s industry connections. We’re always here to help at Stop the Cap!, so here is what the newspaper forgot:

• Mr. Otero is a board member of Directors of the U.S. Hispanic Leadership Institute (USHLI), a group funded in part by AT&T and Verizon;
• He is the past president of the Labor Council for Latin American Advancement, a group that enthusiastically supported the anti-competitive merger of AT&T and T-Mobile USA;

Mr. Otero has a side hobby of penning nearly identical editorials with largely these same broadband talking points. One wonders what might motivate him into writing letters to the Des Moines Register, the Lexington Herald-Leader, the Gainesville Sun, the Star-Banner, and the Ledger-Inquirer.

Otero may have a case for plagiarism, if he chooses to pursue it, against Mr. Roger Campos, president of the Minority Business RoundTable (the top cable lobbyist, the National Cable & Telecommunications Association is labeled an MBRT “strategic partner” on their website). Campos uses some of the exact same talking points in his own “roundtable” of letters to the editor sent to newspapers all over the place, including the Ventura County Star, the Leaf Chronicle, and the Daily Herald.

[flv width=”640″ height=”380″]http://www.phillipdampier.com/video/Bloomberg Roku CEO Gives His Insight into the Future of TV Video 8-7-12.flv[/flv]

Anthony Wood, the chief executive officer of Roku Inc., talks with Bloomberg TV about the changing television industry. (4 minutes)

Rogers Communications has slightly bumped the monthly usage allowance for its “Lite” Internet plan up by 5GB per month to 20GB. The company also doubled the speed of the entry-level package from 3Mbps to 6Mbps. Upload speed remains at 256kbps.

But the plan still carries a hefty price — $38.49 a month, and there is a stiff $4/GB overlimit fee for those who exceed their allowance. Just south of Lake Ontario, Time Warner Cable’s “special offer” provides cap-free 10/1Mbps broadband for $29.99 a month for a year.

Our regular reader Alex mocks the move as another example of Canadian competition at work for consumers. Rogers has made only small adjustments to their usage caps since last summer, and customers who want the most generous usage allowances (paltry when compared to western Canadian ISPs), have to spend money out of pocket to upgrade to DOCSIS 3 technology.

As of today, here is the current roundup of Internet plans from Rogers

Rogers always adds a lot of fine print. For these offers, here come the disclaimers and special conditions:

• Taxes and a $14.95 one-time activation fee apply. Internet modem purchase or monthly rental required.
• †Speeds may vary with Internet traffic, server or other factors. Also see the Acceptable Use Policy at rogers.com/terms. Modem set-up: the system is configured to maximum modem capabilities within Rogers own network.
• ††In some areas, Rogers manages upstream peer-to-peer (P2P) file sharing applications speed to a maximum of 80 kbps per customer for Rogers Hi-Speed Internet (delivered over cable). This policy is maintained at all times. For information on Rogers Internet traffic management practices and Legal Disclosure click here.
• †††Usage allowances apply on a monthly basis and vary by tier of service. Charges apply for additional use beyond the monthly usage allowance associated with your tier of service. For details, visit rogers.com/keepingpace.
• *Note for Lite customers: If you signed up for Lite before July 21st, 2010, your usage allowance remains at 25 GB, and your additional usage charges remains at $2.50/GB.
• **Note for Extreme customers: If you signed up for Extreme before July 21st, 2010, your download speed remains at 10 Mbps and your usage allowance remains at 95 GB.

If you want to compare Rogers’ allowances to what they sold in July 2011, here is a reminder:

Comcast faces $2.4 million in lost sales after a Philadelphia area crime ring sold nearly 6,000 cable customers discounted cable service and free premium channels in return for a one-time fee they pocketed themselves.

Authorities have arrested five men and are looking for 18 others after uncovering the scheme. Prosecutors have been pouring over streams of text messages sent back and forth between members of the “sales crew” referencing strippers, weapons, and luxury goods. One exchange advised one alleged member to destroy “the book” naming customers as police closed in.

Despite pleas to stay “off the map” to avoid attracting attention, at least some of the alleged crooks could not help themselves, some splurging on top dollar luxury watches, autos, technology, and weekends in Atlantic City and Miami Beach.

Prosecutors dubbed the busting of the alleged crime ring “Operation Out of Service.” (Image: Montgomery County District Attorney)

Authorities have since learned the scam was run through “a secret computer” installed in a Comcast subcontractor’s office in Upper Moreland. Customers were approached on the street or in area establishments and offered discounted cable service with free premium movie channels in return for $150.

After payment, the alleged perpetrators logged into Comcast’s account management system and activated channels and changed customer records.

Comcast did not catch on until one of their own employees was solicited while she sat in a beautician’s chair. The employee reported it to Comcast’s security department.

Prosecutors have since released many additional sordid details, primarily focused around another Comcast subcontractor, which appears to be the cable company’s latest weak link:

This corrupt organization was headed by Alston Buchanan of Philadelphia, PA (DOB 10/07/1983). Buchanan designed, implemented and controlled the organization that utilized compromised Comcast technician identifications (IDs) to apply promotional discounts onto Comcast customer accounts.  When used legitimately, the IDs allow Comcast personnel to authorize services, such as premium cable channels or other promotions, to new or existing customers.  Buchanan obtained these unique IDs from a number of sources, including from a terminated employee and an employee on disability. In one instance, Buchanan paid a Comcast subcontractor $5,000 in exchange for her user ID.  This arrangement was brokered by Leighton Harrell of Philadelphia, PA (DOB 1/17/1986).

Once Buchanan had the IDs, he could access the billing accounts for Comcast customers and lower their payments and/or provide them with additional services without Comcast’s knowledge. Those involved in the scheme paid various amounts to Buchanan and his agents ranging from $100.00 – $200.00 to manipulate the billing and services of their Comcast accounts.  The investigation determined there were 5,795 accounts affected over the course of a year from April 2011 to April 2012, with a revenue loss to Comcast Cable of $2,401,673. The effected Comcast accounts were located throughout the Delaware Valley with the majority in Montgomery, Philadelphia, Delaware and Bucks counties.

Buchanan was familiar with Comcast’s billing system, because he was employed by Comcast as a dispatcher from May 2007 through March 2008 and as a dispatcher for Advanced Communications, Incorporated (ACI), a Comcast subcontractor, from October 2009 to July 2010.  In 2010, Comcast began investigating an identical scheme of billing manipulation through unauthorized promotions and believed that Buchanan was responsible.

Earlier this year, Comcast learned this same scheme was being perpetrated when a Comcast employee reported the fraudulent use of IDs to obtain services.  An internal investigation by Comcast revealed that Nicholas Caputo of Virginia Beach, VA (DOB 5/28/1981) was soliciting customers to provide one-time payments in exchange for a reduction of their Comcast bills.  Comcast Security, working with ACI, determined that the account manipulations were originating from the ACI Business Services Router located in the local office for ACI in Hatboro, Upper Moreland Township.

On April 9, 2012, ACI searched the data closet where the Business Services Router was stored.  Upon checking the closet, an unauthorized computer tower was discovered secreted in the corner.   This unauthorized computer tower was hardwired to the modem in the data closet which, in turn, was connected to the Business Services Router in the closet.  Accordingly, the hidden computer tower provided unauthorized access into the Comcast billing accounts.  The investigation revealed that the website “LogMeIn” was used to gain remote access to the unauthorized computer tower.  Ultimately, the computers located in Buchanan’s apartment were found to have accessed the “LogMeIn” accounts associated with the hidden computer tower.

“The Book” the alleged ringleaders wanted destroyed at all costs. (Image: Montgomery County District Attorney)

Comcast’s investigation revealed that Buchanan had an inside connection to ACI through Kendall Singleton of Philadelphia, PA (DOB 7/03/1986), an ACI employee.  On April 9 2012, an unrelated power outage occurred at the ACI office which caused the shutdown of the unauthorized tower.  Knowing that the unauthorized tower would have to be turned-on, Comcast Security installed a hidden camera to monitor the closet.  The next day, Singleton was seen on the camera entering the area of the closet and stooping down in the area of the unauthorized computer tower.  After the computer was re-booted, 96 customer billing accounts were accessed and manipulated within the following hour.

During the course of the investigation, Montgomery County Detectives served search warrants in several locations including the Philadelphia home of Buchanan and Richard Justin Spraggins (DOB 5/22/1983), resulting in the recovery of $103,000.00 cash in an attaché case, computers, cell phones and handwritten ledgers that contained records of the theft scheme, including the agents working for them.  Both Buchanan and Spraggins were in possession of these ledgers.  Analyses of the phones, computers and ledgers revealed the depth and scope of this corrupt organization, and extensive internal communications within the organization pertaining to the illegal scheme.

An investigation into the bank accounts of Buchanan and Spraggins revealed additional evidence of the profitability of the organization’s illegal scheme.  For example, a review of Buchanan’s checking account from December 2010 through April 2012 revealed 748 deposits totaling $221,133.29.  Of these 748 deposits, only 175 were not deposits of $150.00 or increments thereof.  Notably, $150.00 was the usual fee charged for the illegal billing manipulation.

Buchanan, Spraggins, Caputo, Harrell, Irving and Singleton are charged with Corrupt Organizations, Dealing in Proceeds of Unlawful Activity, Criminal Conspiracy, Theft of Services, Theft by Unlawful Taking, Receiving Stolen Property, Unlawful Use of Computer, Computer Theft, Computer Trespass, Criminal Use of Communication Facility and Possessing Instruments of Crime.  Arrest warrants have been issued for more than a dozen others who served as agents in this corrupt organization.

Preliminary hearings are scheduled for September 14, 2012 at 9:30 AM before Magisterial District Judge Jay S. Friedenberg in Willow Grove, Upper Moreland Township.  These cases will be prosecuted by the Captain of the Economic Crimes Team, Assistant District Attorney John F. Walko.

Comcast has obtained a complete list of customers who paid for the discounts or free channels, but does not expect to pursue charges or retroactive payments. The company said it would work with customers to transition them to “authorized packages” in the coming weeks.

[flv width=”640″ height=”380″]http://www.phillipdampier.com/video/KYW Philadelphia Cable TV Conman 8-8-12.mp4[/flv]

KYW in Philadelphia managed to score a short interview with alleged ringleader Alston Buchanan, who called himself a modern day Robin Hood. Of course, Robin Hood didn’t splurge on cars, hookers, and fancy watches, as prosecutors allege members of the cable crime ring did.  (2 minutes)

Comcast last week told Wall Street three important facts:

1. They have plenty of capacity to handle increasing broadband traffic and can deliver faster speeds;
2. They are reducing the amount of money they invest in broadband;
3. They are still moving forward on usage caps and usage billing experiments.

Comcast CEO Brian Roberts told investors the company was well positioned to handle increasing broadband traffic and monetize its usage.

Wall Street liked what it heard. Valuentum Securities Inc., called themselves “big fans of Comcast’s cash flow generation.”

“We’re big fans of the firm’s Video and High-Speed Internet businesses because both are either monopolies or duopolies in their respective markets,” Valuentum concludes. “Further, we believe that both services have become so sticky and important to consumers that Comcast will be able to effectively raise prices year after year without seeing too much volume-related weakness.”

An other way to raise prices is to cap broadband usage and charge customers extra for exceeding their allowance, a plan Comcast has begun testing.

“As you know we announced two different flavors of plans,” Roberts said. “One was capacity linked with the tier that subs are buying and [the other] was just being able to buy blocks of capacity.”

Roberts is referring to Comcast’s pricing experiments now being rolled out in markets like Nashville. The tests will determine whether customers will pay higher prices for different tiers of broadband based on variable speed and usage allowances or whether a flat cap with an overlimit fee is the better way to go.

Roberts

“[Hard] caps are gone,” Roberts said. “We raised the amount people could consume to 300 gigabytes as a base limit. We have not announced the markets for the roll outs yet but I would expect something shortly.”

Comcast used to have a 250GB hard cap which, if exceeded, could result in termination of a customer’s account. Now the company is pondering whether a consistent 300GB cap with an overlimit fee is a better choice.

But Roberts also acknowledged Comcast has plenty of capacity and flexibility to adjust its broadband offerings to compete.

“[…] We have a great network that has tremendous flexibility and capacity to offer more speeds than we offer today and we’re constantly hoping that new applications and needs develop,” Roberts said in response to a question regarding potential competition with Google Fiber.

Comcast added 156,000 new high speed data customers, an 8% increase, over the last quarter. At the same time, the company lost 176,000 video subscribers.

The importance of Comcast’s broadband service was underlined by the fact broadband revenue was the largest contributor to cable revenue growth in the second quarter, with revenue increasing 9%. Comcast attributes that to rate increases, a growing number of new broadband customers, and the 27% of current subscribers upgrading to higher speed services.

Comcast does not and will not have to spend a growing amount of its capital on its broadband service. Comcast cut spending on its network by 5% in the second quarter to $1.1 billion. That represents 11.4 percent of cable revenue earned by Comcast. So far this year, capital expenditures have dropped 2.4% to $2.2 billion — 11.2% of its total revenue.

These days, much of Comcast’s capital expenses support the company’s expansion into business services. The company also expects considerable reductions in spending from completion of its transition to digital — freeing up capacity on existing cable systems instead of spending money to upgrade them. For the full year, including its business services expansion, Comcast expects spending on its own network to be flat.

Comcast’s new X1 platform (Image courtesy: BWOne)

In other Comcast developments of note:

• In June Comcast rolled out its new X1 cloud based set top platform in Boston and is currently launching X1 in Atlanta. Comcast is marketing the upgraded platform first to HD Triple Play customers, who can upgrade for a one-time installation fee. The company plans to roll out the new upgraded platform in five major markets by the end of this year, with a greater expansion in 2013;
• Comcast has increased broadband speeds, particularly in competitive markets, for no additional charge;
• Streampix now offers twice as many titles as the product offered at launch in February;
• Comcast has rolled out its marketing partnership with Verizon Wireless to 22 markets nationwide;
• The company’s ongoing rebranding under the Xfinity name now has a new catchphrase: Xfinity — The Future of Awesome;
• Nearly 75% of Comcast’s customers now take at least two products and almost 40% are signed up for the company’s triple play package;
• Comcast has saved more than $8 million by reducing the number of occasions the company will send technicians to customer homes. The cable company is heavily promoting self-install kits, which has brought a 65% increase  in the number of customers who install Comcast equipment and services themselves.