[Editor’s Note: When the original article below was published, one of our Buffalo readers notified us the clip didn’t match the location, and we accidentally discovered a bug which apparently resulted in a few TV stations using the same video delivery platform getting clips mixed up between them.  My thanks to our reader who wishes to remain anonymous who alerted us to this problem, and allowed us to correct it.  Most of the original article still applies, but I’ve modified the details to match the reality!]

Although Buffalo was spared from any experiments with tiered pricing, they weren’t spared the annual rate hike.  One of the interesting differences between Buffalo and Rochester, which are adjacent to one another, is the competitive situation on the ground.

Buffalo has competition across the telephone, broadband, and television business from Time Warner and Verizon, which has wired a significant portion of Erie county with Verizon’s FiOS fiber to the home service.  The two compete effectively with similar product lines.

Rochester has competition across the telephone and broadband business from Time Warner and Frontier Communications, but the latter is stuck reselling DISH satellite service to provide a competing video package, and also has somewhat slower broadband service.  The two are not equal competitors across the board.

Buffalo, like many Time Warner divisions, offers “price protection agreements” in their territory.  Rochester does not — there are no contracts that commit Time Warner customers to any term of service.  In the Rochester market, the competitive threat from Frontier Communications has been judged so weak, there has never been a reason for Time Warner to bother with them in the Flower City.

Competition explains why one market has them and another does not.  In highly competitive markets, customers are tempted to hop from one provider to the other, and back again, to take advantage of substantial new customer discounts or other incentives.  Marketing costs to provide these discounts and incentives can be substantial, and customers can and do exploit them to save money.

The “price protection agreement,” which is another way of saying a “term commitment contract,” anchors customers with one provider for an extended period (typically one to three years), with a substantial penalty for early cancellation.

In less competitive markets, the dominant provider can avoid using contracts because most customers are reluctant to switch to an inferior product.  It also gives that provider the opportunity to bash the lesser competitors, which often do have contracts, with comparison advertising.  Time Warner Rochester has, attacking Frontier’s bundles for lengthy contract terms and $200-300 penalties if customers try and cancel early.  Clearwire is such a minor player, they exist below the radar.  But they have contracts as well, if you want the lowest price service.

In Buffalo, when Time Warner increased rates, Robin Wolfgang, Public Affairs VP for Buffalo, appeared on WGRZ to explain why rates had increased and also suggested customers hop on a price protection agreement to protect them from price changes during the contract.  During the recent Road Runner tiered pricing controversy, many customers outside of Rochester quickly signed up for these agreements for similar reasons – to avoid tiered Road Runner pricing for a few years longer.

This report from WGRZ has a reporter who sounds very familiar to Rochester residents.  Yes, that’s Dave McKinley who spent 18 years in Rochester broadcasting.  His report covers all of the bases, takes a mildly contrary position about where prices are heading, and lets Time Warner have their say.  I would have liked to see a customer complaining about the rate increases though.

Over the next several days, StoptheCap! will be rolling out an interesting story about what happens when a local community decides it needs more than what corporate-owned cable and telephone behemoths are willing to give.  It’s an important story for any community pondering how to create new jobs in a high tech economy, provide state of the art broadband service to small businesses, colleges, and residents, and stop companies from rationing broadband services to customers at top dollar pricing with limits, caps, and overlimit fees.  It’s also a story about what lengths those companies will go to stop that from ever happening.

But first, an introduction to Wilson, North Carolina.

News 14 Carolina or Soviet TV News Circa 1977 - You Decide

Rarely do you encounter a news clip that is so overwhelmingly biased, one-sided, and utterly stunning in its conflict of interest as the one that follows from News 14 Carolina, which resembles a report straight out of Soviet TV’s Vremya newscast, circa 1977.

This “report” consists of a Time Warner-owned newscast anchor reciting Time Warner talking points, and then follows up by interviewing the director of media relations for Time Warner.  No challenges, no follow-ups, just that pasted on smile and bobblehead nod.  Don’t break a sweat with all of that hard reporting there, and I wouldn’t hang around waiting for the Edward R. Murrow Award anytime soon.  At the very end, as a casual aside, viewers are informed the entire report was one giant corporate family affair.

The Greensboro market -is- savvy.  More savvy than Time Warner thought, anyway.  They said no to caps and gas gauges.

But one last question to viewers down there. If you’re getting news from this operation, why?

Are you kidding me?  Time Warner should have paid standard commercial rates for this.  If a reporter or anchor is really not serious about presenting a balanced report or newscast, don’t do one.  This is why people get cynical about broadcast journalism.  An obviously clueless anchor, the very definition of “conflict of interest” reporting, and a blasé disclaimer coming at the end, results in a journalistic train wreck.  The only reason I didn’t put a whole row of thumbs-down here is the possibility that perhaps someone had a gun trained on her under the desk.  Good night and good luck!

Verizon Selling Internet-Phone-TV Package in FiOS Areas for $95 a Month

One of the reasons StoptheCap! always believed Time Warner chose the cities it did for its cap experiment was to steer clear of Verizon, particularly where the company offers its fiber optic service to homes.  Verizon FiOS does not cap Internet usage and has made that well known.

The blowback from Time Warner’s experimental caps wasn’t just limited to the cities “lucky” enough to be chosen.  The story went national, and now competitors are moving in to take advantage of Time Warner’s public relations catastrophe and poach their customers.

Verizon is now offering customers in FiOS territories a bundle of services that are priced well below what Time Warner is charging people in nearby cities where FiOS isn’t.  For $94.99 a month for the first year ($99.99 a month for the second), they are bundling an unlimited digital phone service, a basic cable package with up to 295 channels and a dozen HD channels, and broadband service at 10Mbps down and 2Mbps up!  Oh, and they’ll also give you a $150 rebate in the form of a debit card.  I pay $170 a month to Time Warner in Rochester and don’t even get their digital phone product, and standard Internet service here is 10Mbps down and a silly 384Kbps up.  Ahhh… competition.

And Verizon will, for $10 more, give you 20Mbps down and 5Mbps up, as well as 350 channels, more than 50 in HD.  I have to pay $10 more here and that only gives me “Turbo” Road Runner offering 15Mbps down and 1Mbps up (plus the Powerboost gimmick).  That’s it.

Verizon High Speed Internet DSL Service For $18 A Month

Now you see why Time Warner doesn’t dare try their cap experiment in a community where FiOS is available.  Why would anyone stay a customer?  Heck, even if you wanted to stay with Time Warner for phone and television service, you can buy faster broadband from Verizon on their 10/2 tier for $45 a month, and no caps.

Verizon also gets to target communities where FiOS isn’t yet available, but Time Warner’s threatened caps were, with a guaranteed two year contract-fixed price for DSL comparable to Road Runner Lite for $18 a month. Or they’ll sell their highest DSL tier (7.1Mbps down/768kbps up) for $38 a month and no modem rental fee. No caps there either.

Frontier continues to enjoy smacking Time Warner around for its duplicitous “caps are about you saving money” campaign.  In the Sunday Rochester Democrat & Chronicle, they took another shot at Time Warner’s CEO Glenn Britt for accusing customers of “misunderstanding” their plan, where they try and convince customers that emptying their wallets and handing more money over to Time Warner is somehow a good thing.

Thanks to StoptheCap! reader Bob for sending along the Frontier ad.  Now, if Frontier had not lost the first self-install kit they sent our way (and are supposedly re-shipping express mail to arrive here today), we could have been hooked up by now.

During the usage cap controversy, public officials in the Triad of North Carolina had their hands tied because competitive alternatives for the area just couldn’t provide an equivalent level of service.  Greensboro mayor Yvonne Johnson sought out other cable companies to potentially wire her city.  Unfortunately, cable operators have traditionally maintained their informal agreement to not overbuild, or compete in cities where another operator already provides service.

[This story appeared before last week’s announcement that Time Warner had temporarily shelved the usage caps in these communities.]