Waiting for Comcast and Verizon to offer cutting edge broadband to 620,000 Baltimore city residents and businesses appears to be going nowhere, so the city is hiring an Internet consultant to consider whether to sell access to its existing fiber network.

Baltimore officials spent at least a year trying to convince Google to launch its fiber network in the city only to be bypassed in favor of Kansas City, Austin, and Provo, Utah. Local unions and community groups have also attempted to embarrass the local phone company by publicly protesting Verizon’s lack of interest in expanding its fiber optic network FiOS in Baltimore. Comcast has proved a disappointment for many, with the latest technology going to other cities well before Baltimore gets improved service.

Baltimore’s Board of Estimates voted to spend $157,000 to hire Magellan Advisors to produce a cost-benefit analysis of expanding the city’s current fiber infrastructure to deliver better Internet access.

“I’m paying more here for lesser service, so I think one of the things we want to try to do is look at that, look at what [current companies] offer and try to incentivize people to offer more,” Baltimore’s chief information officer Chris Tonjes told the Baltimore Business Journal. “In the short term, we’re going to do a study. In the medium run, we’re going to try to renegotiate the cable franchise agreement. In the longer run we want to make it more profitable for providers to come in here and offer the expanded service.”

Like many cities, Baltimore already owns and operates its own fiber ring, built with public funds to support the city’s public safety radio system. Like many municipal institutional fiber networks, Baltimore’s fiber ring is underutilized. Public safety and other institutional users often use just a fraction of available capacity. Despite the fact such networks are often oversized, they are rarely controversial because they do not typically compete with commercial providers and are usually off-limits to the public.

As Baltimore prepares to update their existing fiber infrastructure, Magellan will study the implications of leasing excess capacity to third-party providers that can sell broadband access to private businesses and individuals. Even Comcast and Verizon would be welcome to lease capacity.

Neither company has shown much interest, and the proposal received a strong rebuke from Maryland Sen. Catherine Pugh (D-Baltimore City):

Pugh

For the most part, municipally-built broadband networks have the economic chips stacked against them and, where tried, have saddled local taxpayers with a mountain of debt and half-built networks that are then sold at fire-sale prices to vulture investors. Taxpayers in Provo, Utah, for instance, spent $40 million to build a relatively small and modest network only to sell it for $1 a few years later because they underestimated the massive costs of operating, upgrading and maintaining it.

But Provo is just the latest exhibit in a long pantheon of such failed initiatives that include Groton, Conn., ($38 million taxpayer loss) and Marietta, Ga., ($35 million taxpayer loss). Cities as large as Philadelphia, New York and Chicago and as small as Lompoc, Calif., and Acworth, Ga., have also tried and failed to launch their own broadband networks — or simply gave up.

Pugh’s editorial, published in both the Wall Street Journal and The Baltimore Sun, failed to disclose Pugh has received political campaign contributions from both Comcast and Verizon. More importantly, Pugh did not bother to mention she is the president-elect of the National Black Caucus of State Legislators, a group with close ties to both Comcast and Verizon Communications.

Among the “member corporations” of the NBCSL — companies who “weigh in” on the policies promoted by the group: AT&T, Comcast, CTIA – The Wireless Association, the National Cable & Telecommunications Association, Time Warner Cable, and Verizon.

Among the NBCSL’s roundtable members: AT&T, Comcast, Time Warner Cable, and Verizon

For the fourth consecutive year, Verizon hosted its Black History Month open house at the Reginald F. Lewis Museum in downtown Baltimore. This year, among Verizon’s special guests: Maryland Senator and president-elect of the National Black Caucus of State Legislators Catherine Pugh. Comcast has also opened its checkbook to the NBCSL. Among the contributions — $50,000 to form the “NBCSL/Comcast Broadband Legislative Fellowship” to “increase efforts to conduct research and develop solutions regarding broadband adoption among African Americans.”

Opening up a competitive, lower-priced broadband alternative owned by the citizens of Baltimore is not one of Pugh’s favored solutions to be sure.

The NBCSL has been more than a little preoccupied with the business agendas of its corporate members. The group’s glowing endorsement of the Comcast-NBCUniversal merger was so positive, Comcast continues to present the group’s submission urging approval of the merger on its website. In 2011, the NBCSL signed on to the campaign to get government approval of the now-dead merger of AT&T and T-Mobile USA, claiming it was in the best interests of African-Americans. Just this month, Time Warner Cable quoted the group’s comments on the dispute between the cable company and CBS on its website.

Stop the Cap! has refuted claims that public broadband is a financial failure in the past. Read our fact check here.

Although Comcast has been the dominant cable provider in Baltimore for years, its monopoly status is “de facto” only, because federal law prohibits exclusive cable franchise agreements. That being said, no other well-known cable provider will agree to offer service in competition with another. Overbuilders — small private entities that have business plans that depend on competing with incumbent operators, are few and far between. For most Americans, the only cable competition comes from satellite providers or the phone company. Satellite television lacks a broadband option and Verizon’s local broadband infrastructure is limited to providing DSL service.

Tonjes

Tonjes hopes the possibility of a public broadband alternative might shake up the city’s broadband landscape, but not every neighborhood is now passed by the city’s fiber ring.

Alito

Justice Samuel Alito was forced to recuse himself from nearly six dozen cases brought to the Supreme Court in the last 10 months because the Alito family owns stock in many of the corporations involved in litigation.

When Alito’s wife Martha Ann’s father died last year, the Alito family inherited a wealth of stock worth up to $1.25 million in some of America’s largest companies, including AT&T and Verizon Communications.

The Associated Press reports Alito’s tardy financial disclosure for 2012 revealed the justice’s reasons for recusal: his sudden ownership of shares in large telecom, pharmaceutical, oil and gas, and tobacco companies.

Federal law requires justices to step away from cases where there is a financial conflict of interest. Alito’s inherited stock represents just such a conflict.

In one case, however, Alito found himself holding Comcast Corp. stock after hearing arguments in a massive class action antitrust case representing two million customers the plaintiffs argued were being overcharged by an illegitimate cable monopoly.

Alito’s Comcast stock was purchased and sold last December. The Court’s 5-4 decision, written by Justice Antonin Scalia, was announced March 27. Alito’s deciding vote fundamentally raised the bar on future lawsuits, making it much more difficult for class action cases to be brought before the courts.

The Comcast suit, in the courts since 2003, argued that cable subscribers in Pennsylvania, New Jersey and Delaware were overcharged at least $875 million because of Comcast’s efforts to monopolize cable service in the Philadelphia area. Comcast amassed its dominant position by buying or swapping cable systems in the region to create a single large cable provider serving the majority of southern New Jersey, Delaware, and southeastern Pennsylvania. By 2002, the lawsuit claimed, Comcast had achieved a 77.8 percent market share.

Comcast argued the lawsuit was too complicated and its proposed method of calculating damages was faulty. The Court’s conservative justices agreed with Comcast, finding the lawsuit fell “far short of establishing that damages are capable of measurement.”

• Voting for Comcast’s position: Chief Justice John Roberts and Justices Antonin Scalia, Anthony Kennedy, Clarence Thomas and Samuel Alito.
• Voting against Comcast: Justices Ruth Bader Ginsburg, Stephen Breyer, Sonia Sotomayor and Elena Kagan.

A study recently published in the Minnesota Law Review found the current Supreme Court is by far the most corporate-friendly of any court in at least 65 years, noting “the Roberts court is indeed highly pro-business — the conservatives extremely so and the liberals only moderately liberal.”

The top two most likely to vote in favor of big business among all justices seated since 1946 are Chief Justice Roberts and Justice Samuel A. Alito, Jr.

“There was a time when being ‘business-friendly’ meant giving corporations a leg-up and a level playing field because doing so creates jobs and bolsters the economy,” wrote Supreme Court reporter Jonathan Valania. “Today, ‘business-friendly’ means letting corporations socialize their costs while privatizing their profits. It means letting corporation literally write the laws that govern them. It means rolling back regulations and de-fanging oversight [….] What we are really talking about is corporatism.”

AT&T and Camden Property Trust have announced an agreement to offer broadband, television, and phone services over fiber to the premises technology beginning this fall, serving new high-end apartment homes owned by the developer in Atlanta, Austin, and Orlando.

AT&T’s suggestion it will build a competing fiber network that would rival Google appears to be, for now, limited to selected, luxury multi-dwelling units participating in a strategic marketing partnership that can guarantee enough customers to make the investment in fiber optics worthwhile.

AT&T’s Connected Communities Initiative is a special program offered to large single-family homebuilders, developers, real estate investment trusts, apartment owners, property management groups and large homeowners’ associations that can deliver AT&T a virtually captive customer base in return for better-than-average service and kickbacks in the form of lucrative commissions.

Camden’s Gaines Ranch in Austin, Tex.

With AT&T’s latest agreement, the new Camden-managed properties will receive the next generation of U-verse High Speed Internet, U-verse TV and U-verse Voice on an all-fiber network that will deliver a level of enhanced service unavailable to most U-verse customers. Most importantly, the fiber infrastructure will let AT&T to offer faster broadband to residents without limiting their television viewing.

Most AT&T U-verse customers receive service over a hybrid fiber-copper phone wire network using a more advanced form of DSL. Fiber from the nearest AT&T central office extends into each neighborhood, but existing copper phone wiring carries the service the last several blocks into individual customer homes. The presence of copper limits the available bandwidth, which has kept AT&T’s top U-verse speeds at around 24Mbps. The only way to increase speeds is to cut the amount of copper in the network. Eliminating it completely is even better.

AT&T has been reluctant to follow Verizon’s lead deploying an all-fiber network. The cost to wire each home with fiber was too prohibitive for AT&T, but providing fiber connectivity to large apartment buildings, condos, or other multi-dwelling units has met AT&T’s cost concerns, especially when the property owner signs over exclusive rights to the buildings’ existing telecommunications infrastructure.

AT&T’s program encourages the participation of property owners with a variety of paid commissions and other compensation, including:

Exclusive Marketing Agreements: Under an AT&T Exclusive Marketing Agreement, residents may still choose their communications and entertainment services provider, but the builder, developer or property owner agrees to exclusively promote AT&T services. In doing so, AT&T provides financial incentives in the form of commissions for property owners and multiple service options for residents. In most cases, renters may have the mistaken impression they can only get service from AT&T, and are informally discouraged from considering alternative providers.

Bulk Contracts: An AT&T Connected Communities bulk agreement offers greater earning potential. With a single, monthly recurring bulk bill for all contracted units, developers and HOAs get below-retail pricing, increased savings on equipment costs, and other rewarding financial incentives. In most cases, building owners include AT&T services either as part of the monthly rent or billed as a mandatory services surcharge. A resident can still sign up for satellite or cable television, but has zero incentive to do so because they would be effectively paying for service twice.

Exclusive Use of Wire:  Property owners grant AT&T exclusive use of the wiring, including coaxial cable, at the property. In addition, owners agree to promote AT&T products to residents. This deters would-be competitors from providing service at a property signed up with AT&T. A cable or satellite competitor would not have access to existing wiring and have to arrange an agreement with the property owner to provision a second cable inside the building. Neither the competing provider or the property owner would have any incentive to do this, regardless of the wishes of renters.

Large properties can also contract with AT&T to provision a site-wide Wi-Fi network for the benefit of residents both around the property and at amenities like clubhouses or poolside.

While such agreements can benefit residents with bulk pricing discounts beyond what they could have obtained from AT&T themselves, it also strongly deters other providers from delivering competitive services.

[flv width=”640″ height=”380″]http://www.phillipdampier.com/video/ATT Connected Communities 9-2012.flv[/flv]

Last fall, AT&T promoted its Connected Communities program with property developers, offering them commissions and other special deals if they sign exclusive marketing agreements with the phone company. In 2013, broadband speeds for certain U-verse Internet customers will be increasing, depending on the infrastructure available. (2 minutes)

[flv width=”640″ height=”380″]http://www.phillipdampier.com/video/Camden Online Communities 8-13.flv[/flv]

Camden Properties emphasizes the online services available to residents, particularly those that promote social interaction. In some cases, those services will now be powered by AT&T U-verse. (1 minute)

Sony’s bid to enter the “over-the-top” online video business has gotten a shot in the arm with news it has reached a preliminary agreement with Viacom, Inc., to carry its popular cable networks on the Japanese electronics giant’s planned online subscription TV service.

Sony wants to build its own virtual cable television service, offering live and on-demand programming delivered over broadband lines in direct competition with cable and phone companies Comcast, Time Warner Cable, AT&T and Verizon.

Getting agreements with traditional must-have cable networks like Comedy Central, ESPN, and USA have been difficult because the networks fear alienating their traditional customers — large cable, telco and satellite TV companies.

The Wall Street Journal reports Viacom’s agreement remains preliminary at the moment and the final details have yet to be worked out. If a final agreement is reached, it will be a breakthrough for so-called online cable systems which have gotten nowhere with other cable network owners, including Comcast-NBC, Walt Disney, Time Warner, and CBS.

Cable executives have repeatedly warned that a wider distribution of cable network programming would make them more reluctant to pay higher prices for the cable networks because of the loss of relative exclusivity. Many cable programming contracts restrict the ability of network owners to sell to would-be online competitors.

Viacom has had contentious relationships with cable and satellite companies in the past, so observers suggest it is no surprise Viacom would be among the first to break with tradition. Viacom’s CEO, Sumner Redstone, also controls CBS which is currently off Time Warner Cable systems in three major cities and has had its pay movie channels Showtime and The Movie Channel blacked out on Time Warner systems nationwide. If Sony’s service gets off the ground, CBS could ask Time Warner customers to sign up with Sony instead to get those networks back.

Cord Cutting is Real (Graphics: The Wall Street Journal)

Competing online video services from Intel and Google have largely gone nowhere because of stalled programming negotiations. How Sony managed a breakthrough remains a mystery. To secure rights, Sony may have been asked to sign a lengthy contract with favorable financial terms for Viacom, or Sony might have agreed to carry the full roster of Viacom-owned cable networks, which include:

The next generation of the Sony PlayStation may be your next cable box.

• BET
• CMT
• Comedy Central
• Logo
• MTV
• MTV2
• Nick at Nite
• Nick Jr.
• Nickelodeon
• Nicktoons
• Palladia
• Spike
• TeenNick
• Tr3s
• TV Land
• VH1

A source told the Journal Sony hopes to launch its new venture by the end of the year, perhaps on the next generation of Sony’s PlayStation gaming console due soon. Sony also could offer the service on its line of Bravia high-definition televisions, as well as tablets and smartphones.

The Journal:

People who have seen demonstrations of Sony’s system say it has some features that are appealing in comparison to traditional pay TV distributors, including one that recommends shows for users based on what they’ve previously watched. Content providers are allowed to supply some of those recommendations, so they can steer users to other episodes on their channels, according to the people familiar with the matter. Sony provides other content suggestions for viewers based on an algorithm.

The development of online cable television in direct competition with large cable and phone companies could spark a new wave of broadband usage restrictions including usage caps and metered billing. The same telecom companies that earn a substantial part of their revenue selling cable television service are likely to find it unsettling to discover Sony undercutting them on price and using “their” broadband lines to do it. Placing restrictions on the amount of broadband traffic a customer can use each month would deliver a significant deterrent to would-be cord cutters.

A German court has blocked Liberty Global’s attempted $4.25 billion purchase of the country’s third largest cable company on antitrust and anti-competition grounds.

John Malone’s European cable conglomerate already owns UnityMedia, but has been turned away from acquiring Kabel Baden-Wuerttemberg on convincing evidence that the combination of the two cable operators would be grossly anti-competitive and violates German antitrust laws.

Liberty Global is hurrying to the German federal court to overturn the regional judge’s decision. If it cannot, it will have to unwind the merger between Kabel BW and UnityMedia.

The head complainant against Malone’s cable consolidation plan is the German telephone conglomerate Deutsche Telekom. Liberty Global’s investors hoped consolidating the German cable systems would lead to higher prices and revenue for the combined cable operation, as well as reduced costs. Liberty has similar plans to spark a renewed wave of cable consolidation in the American cable market.

Deutsche Telekom’s victory has emboldened the German phone company to consider filing a formal challenge to Vodafone’s separate $10.2 billion purchase of Germany’s largest cable company — Kabel Deutschland, on similar grounds.