Stop the Cap! has hammered ISPs for a long time for promising “unlimited” broadband but sneaking in “traffic management speed throttles” they call a matter of fairness and we call deceptive marketing.

Virgin Media’s UK broadband customers have just been introduced to the extreme absurdity of selling “insanely fast” fiber broadband that comes with a sneaky spreadsheet guaranteed to confuse all but the most observant byte counters.

Some customers suspect Virgin Media is just retaliating for repeated findings from British regulators that the company runs dodgy advertising that promises one thing and delivers something entirely different in the fine print. More than two dozen of their TV commercials and print advertisements have been banned for deceptive ad claims, ranging from the “fastest broadband in Britain” (not exactly) to promotions promising “free service” that actually costs around £15 a month (what is a dozen quid or so among friends).

So why does Virgin Media need traffic management? They have oversold the service to too many customers and won’t invest enough in upgrades to keep up with demand.

Network overselling is more common that you might think. ISPs understand that all of their customers will not be online at the same time, so there is only a need to provision enough bandwidth to support their assumptions about anticipated usage. If your ISP serves a gated Luddite community, it won’t need the same data pipe required to provide access along University Row. The trick is to use real science and math to correctly anticipate user demand, but many ISPs answer first to their investors, who simply hate spending good money on upgrades. Expansion proposals are about as popular as North Korea’s Kim Jong-un. The result is “good enough” broadband service that is susceptible to overcrowding during prime usage times.

You already know what happens next. Once the kids are home from school and dinner is finished, your online experience quickly s l  o   w    s     t    o     (buffering).

In Britain, some ISPs are notorious for overselling broadband service that advertises speeds in the dozens of megabits, but can’t even break 1Mbps during peak usage times.

How can this be fixed? With investment in upgrades. What do ISPs do instead? They slap on usage caps and “network management” speed throttles that artificially slow browsing speeds for those considered “heavy users.”

Virgin Media was supposed to be a breath of fresh air from usage caps. Instead, the company promises a truly unlimited experience, with limitations.

Virgin’s latest iteration of its “peak time usage policy” resembles a tax table from the Internal Revenue Service. Can you understand it?

Despite this, Virgin calls its broadband service “to all intents and purposes, completely unlimited.”

Where is that British regulator, again?

The company claims less than 3% of its customers will ever be affected by these limits. They might be right if customers avoid online video, downloading large files or games, cloud storage, or allowing other family members to use their connection at the same time. If one is subjected to the speed throttles, Virgin will take away nearly half of the speed customers were sold.

Here is Virgin’s position on all this:

“Our 100Mb customers receive speeds up to 104.6Mb, proven by Ofcom, and even if you’re one of the 2.3 per cent of heavy users we sometimes, temporarily traffic manage you’ll be receiving speeds of around 60Mb — so you can download and stream as much as you like.Today’s update makes it more flexible and responsive to how people are using our services and is designed to reduce the time customers may spend in traffic management, it could be just one hour. We do not have caps, nor do we charge customers more.”

That is true, but Virgin is charging a premium for broadband service speeds they are prepared to automatically take away when a customer persists in using the service they paid to receive.

Virgin could pay their experts to conjure up speed management charts like the one above, or they could invest in network upgrades that make such network management techniques unnecessary.

Comcast: Get a box or lose your cable TV service

Comcast will encrypt the entire lineup of its cable television service, including local channels, starting with two markets in New England and gradually rolling out this summer across all of Comcast’s service areas.

The encryption will obsolete cable reception of QAM signals, which some cable customers use to avoid paying for set-top equipment.

Comcast called FCC approval of its encryption request a victory for consumers because it will “allow us to automate certain system functions and will reduce the need for scheduled in-home appointments, providing greater convenience for our customers.” Comcast also candidly said it will dramatically reduce signal theft and unauthorized viewing by past due customers, which can now be shut off from the cable office instead of dispatching technicians to the home to disconnect service.

Consumer and Comcast customer Brier Dudley begs to differ. In two columns in the Seattle Times, Dudley writes Comcast is tightening the screws on its customers, forcing them to get unwanted equipment that will eventually cost them monthly rental fees set “at market rates.”

Comcast began requiring digital adapters to unscramble digital signals in 2009. Since then, it steadily has been converting more of its system to digital, scrambling more channels and expanding the requirement to use some kind of a cable box or adapter on every TV.

This requirement received the FCC’s blessing last year. The agency agreed to let cable companies scramble all of their channels and require descramblers on every set.

The FCC’s justification was muddled. Scrambling would purportedly prevent stealing content, though the FCC requires conventional television broadcasters to beam their shows freely over the air.

The FCC also made a tortured environmental argument for the move, saying the mandatory adapters allowed cable companies to remotely activate and deactivate service, reducing service calls and their carbon footprint.

Unmentioned is the environmental effect of factories in China making adapters that must be delivered, attached to every TV and continuously plugged in.

Comcast is attempting to mitigate customer anger about the necessary new equipment, offering free boxes for a limited time. But customers might need a road map to find what they qualify for without having to pay an even higher cable bill:

Limited Basic customers with no set top boxes in their homes will be eligible for up to two DTAs (standard definition digital signal adapters), at no charge for two years (five years if you also receive Medicaid), if they request DTAs beginning 30 days before the date of encryption and no longer than 120 days after encryption. New customers, customers who already have DTA devices or those who request them after the offer period will likely be subject to rental fees much sooner, if not immediately;

Customers who subscribe to a higher level of service and receive Limited Basic service on a secondary TV without Comcast supplied equipment are eligible for one device at no charge for one year;

All other customers are subject to Comcast’s new $1.99 per month “additional outlet service charge” for each outlet registered to a DTA. In Seattle, customers who want to watch local channels in HD have to fork over another $2.50 a month for a special HD version of Comcast’s DTA box.

What if you don’t want the extra equipment and return it? Comcast will automatically cancel your cable TV service.

“Customers who do not have digital equipment on their account will not be able to view any channels after Limited Basic channels are encrypted. For this reason, XFINITY TV service will be removed from the account,” warns Comcast. “This may affect multi-product package rates or discounts.”

The encryption will also cripple third-party set-top devices like older versions of Boxee (not compatible with Comcast’s DTA) and TiVo, which will now need a mind-numbing, complicated workaround to keep operating.

Comcast customers will receive written notification as the company gets ready to encrypt service in each area.

Mohamed

Exiting Rogers Communications CEO Nadir Mohamed won’t be hurting when he leaves one of Canada’s largest telecom companies next year.

Documents filed with securities regulators disclose Mohamed’s golden retirement package includes:

• $5.5 million in cash;
• $6.8 million in non-transferable stock that can be liquidated later;
• Another $6.2 million in stock options.

Mohamed has also signed a non-compete agreement to stay out of the telecom business for a year after he leaves Rogers.

Last year, Mohamed earned $8.21 million from a combination of his $1.2 million salary and various bonuses and stock awards.

Last spring, Mohamed presided over job cuts of 300 management and head office positions.

Rogers increased its rates in January to cover “increasing costs.”

Japan has leapfrogged over Google’s revolutionary 1Gbps broadband service with twice the speed for roughly $20 less a month.

Sony-owned So-net Entertainment on Monday introduced its 2Gbps optical fiber GPON service called NURO, charging as little as $51 a month for 2/1Gbps service.

“Light NURO is reasonably priced, very high-speed fiber to the home broadband that delivers the world’s fastest speeds on technology usually reserved for commercial service,” the company said.

NURO is available in Tokyo and six Kantō region prefectures, including Kanagawa, Chiba, Saitama, Gunma, Tochigi, and Ibaraki.

Customers agreeing to a two-year contract get the best prices and a waiver (in certain circumstances) of installation fees as high as $540. Customers wishing to avoid a term contract can sign up for around $77 a month.

Customers are supplied a wireless router with support for speeds up to 450Mbps backwards-compatible with all Wi-Fi wireless devices.

NURO also offers landline telephone service over the fiber network for $5.38 a month. The charge for local calls is $0.09 for each three minutes. Calls to the United States are even cheaper: $0.08 for each three minutes. (There are no government-mandated surcharges on international calls, which account for the lower prices.) Calls to Voice Over IP lines, including other So-net customers are free. Softbank mobile phones can also be free of charge with an add-on plan.

So-net has been providing broadband service in Japan since 1996 and is an aggressive user of optical fiber technology. The company says its new speeds may be even too fast for current wired home LAN technology, but claims faster broadband speeds also enable customers to share multiple devices within the home with absolutely no speed reductions from the shared connection.

So-net serves a densely populated region of Japan that consists of mostly multi-dwelling apartment units and condos and closely packed single family homes. It is not unusual for many urban Japanese homes to have almost no yard, with square lots accommodating a vehicle, storage shed, and little else. Wiring these densely populated communities helped Japan accelerate fiber deployment with more customers served per square kilometer than in countries like the United States or Canada.

[flv width=”640″ height=”323″]http://www.phillipdampier.com/video/So-net NURO Ad 4-13.flv[/flv]

So-net’s advertising campaign for its NURO fiber to the home service is opaque by western standards, avoiding details about the product, and is strangely presented in English. (2 minutes)

Time Warner Cable and Cablevision customers: Is Charter Cable in your future?

The best way the cable industry can grow revenue in the lucrative broadband business is to bring back the same type of collusion and control cable companies maintained over video programming 20 years ago.

Dr. John Malone did not want to sound nefarious in his recent interview with CNBC’s David Faber, but the new part-owner of Charter Communications has built a reputation as cable’s Darth Vader over the last 30 years. His detractors consider his way of doing business akin to a nationwide cable mafia, complete with exclusive, non-competitive territories that assure operators can charge sky-is-the-limit prices.

Malone is now back in the cable business in a big way, and analysts expect he will quickly amass influence in an industry he once led as CEO of the nation’s then-largest cable operator — Tele-Communications, Inc. (TCI).

[flv]http://www.phillipdampier.com/video/CNBC Malone is Back Into Cable 4-13-13.mp4[/flv]

Why is John Malone back in the cable business and why buy a piece of Charter Cable? Malone tells CNBC’s David Faber Charter is a company with enormous growth potential through mergers and acquisitions. CNBC says Malone could be targeting Time Warner Cable and Cablevision for acquisition by Charter as early as next year. “There is consolidation yet to be done,” Malone hints.  (7 minutes)

Malone notes the cable industry is on the cusp of transformative consolidation through collaborative agreements, mergers, and outright acquisitions both here and abroad. CNBC speculated that could begin with efforts to further reduce the number of cable operators in the United States, perhaps beginning with a deal by Charter Communications to acquire both Time Warner Cable and Cablevision, which could combine under Malone’s stewardship and Charter’s executive leadership to “compete” with Comcast.

Dr. John Malone

CNBC reporters note Malone has high praise for Thomas Rutledge, CEO of Charter Communications. Rutledge’s earlier experience working for both Time Warner Cable and Cablevision could be an asset in combining all three companies into one. Analysts speculate such a deal could be pitched as early as 2014 when Time Warner Cable will undergo a management makeover with the departure of CEO Glenn Britt. CNBC also noted Cablevision’s imminent sale has been rumored for years, and current leader and family patriarch Chuck Dolan is 87 years old. With cheap credit and Malone’s business savvy, both companies could find themselves part of a Malone-engineered takeover that would vastly expand Charter Communications into the second largest cable operator in the country.

Malone sees the days of traditional cable television coming to an end as consumers turn to “over the top” online video for an increasing share of their viewing time. As cable television rates continue to increase, customers are cutting the cord. Malone believes today’s bloated cable packages are ripe for an upheaval from a-la-carte pricing or theme-based programming bouquets that break expensive sports programming or movie channels out of the traditional basic cable lineup. Malone even suspects a challenge to the industry’s current price models could surprisingly come from the programmers themselves.

Sports networks will be among the first to notice their affiliate revenue collected from cable and satellite companies (and passed on to customers in the form of higher rates) will stagnate as customers drop cable television. Declining viewer ratings also mean lower ad revenues. Malone believes at some point sports teams and/or programming networks will decide that the biggest barrier to winning new viewers is the $70-80 asking price for basic cable. If sports programmers find they can reach new audiences selling their programming online, direct-to-consumer, for $5-10 a month, the basic cable all-for-one-price model will quickly collapse.

“As the cable guys and the satellite guys start to lose customers to the over-the-top guys, some of those economics will be reflected back on the sports guys,” Malone said. “They’ll start losing advertising revenue. They’ll lose affiliate revenue. And they have to face reality that maybe you need to segregate your market like everybody else.”

[flv]http://www.phillipdampier.com/video/CNBC Malone on Unbundling Cable 4-13-13.mp4[/flv]

John Malone predicts the demise of the traditional bundle of cable television programming within five years. The future is streamed video online, declares Malone, so it is important the cable industry move to manage that competitive threat by acquiring streaming competitors or launching their own services to assure video programming revenue can be protected.  (5 minutes)

Malone sees the future sustainability of the cable industry dependent on the high revenue broadband business.

“I think it is at a point in history when the most addictive thing in the communications world is high-speed connectivity,” Malone told CNBC. “Everywhere in the world that we operate, we’ve just seen the public want more and more data rate. Whether it’s wireless or wired. There’s a big appetite for it. Cable technology right now is the most cost-effective way to deliver that growth in speed.”

Malone believes there is also plenty of room for revenue growth and cost-cutting, which he said can best be accomplished by getting other cable operators together to “cooperate” and “coordinate” broad scale broadband projects that counter competitive threats from third parties.

Malone helped pioneer the cable industry business practice of “don’t compete in my backyard and I won’t compete in yours,” an informal agreement among operators to stay within their own specific territories, safe and secure from competition. In the 1980s and 1990s, Malone’s TCI was one among many cable operators buying and swapping cable systems to build large, regional system “clusters” where only a single cable company provides service, winning economy of scale and a formidable presence that discouraged other wired competitors from entering the business. In most cities, only the deep pockets of AT&T (U-verse) and Verizon (FiOS) have managed to shake things up.

[flv]http://www.phillipdampier.com/video/CNBC Bring Back the Cable Mafia 4-13-13.mp4[/flv]

Bring back the cable mafia? CNBC’s David Faber gets John Malone to admit vertical and horizontal integration — controlling the content and the pipeline — are important factors to protect cable revenue and expand American dominance in cable internationally. Malone is also a big supporter of industry consolidation and believes mergers and acquisitions are necessary to shrink the number of cable operators in the United States. (5 minutes)

The cable mafia?

Malone wants broadband to be carefully managed under the industry’s own control and direction.

Faber asked if Malone wanted to bring back the days of the “cable mafia.”

“Yes, I think we do want to bring back the days of @Home, the days of Ted Turner, the days when we all got together, because together we provided national scale,” Malone said. “Now I think we have the opportunity to create global scale,” he said. “The goal is not to be bigger. The goal is to be more cost-effective.”