Chase Carey (courtesy: Forbes)

Chase Carey, President, Chief Operating Officer of Rupert Murdoch’s News Corp., has blamed the federal government and politicians for giving aid and comfort to Cablevision, the cable system serving most of suburban New York City, forcing Fox to cut off the World Series for millions of subscribers in the recent contract dispute between the two providers.

Carey told Bloomberg News that the standoff with Cablevision would have been resolved much more quickly if lawmakers hadn’t threatened to weigh in, leading the cable provider to hold out in hopes of getting better terms.

“This process would have been resolved more easily, more quickly,” Carey said. “I would actually contend we wouldn’t have gone off the air at all.”

Carey said Fox needs the feeds that it collects from cable companies because even with advertising revenue, the broadcast network loses a “few hundred million dollars” every year. Carey said he came to Washington to explain to lawmakers why Fox needed two streams of revenue and explain why public declarations of support for Cablevision from more than 50 lawmakers only helped to prolong the standoff.

“We’re not running a nonprofit,” Carey said.

Was John Kerry responsible...

If Fox is unprofitable, you wouldn’t know it from Carey’s compensation package.  The COO will earn $8.1 million this year, plus a $15 million bonus and additional compensation totaling more than 26 million dollars.

Carey is upset with Democrats for inserting themselves in private corporate matters, despite the fact the resulting dispute left millions of cable subscribers without the networks they were paying for (and forced to fight for refunds from Cablevision.)

“You’re going to bastardize every negotiation because you’re going to have this specter of arbitration,” he said.

At least 50 members of Congress, many from the northeastern United States where cable blackouts have been the most prevalent, support binding arbitration for such disputes, and criticized Fox for demanding increasing amounts of money for formerly free television signals.  Cablevision contends it was forced to pay an “unfair amount” to get the signals back on cable.

Carey especially targeted Democratic senator John Kerry from Massachusetts, who was among the most vocal opponents of cable systems and programmers putting viewers in the middle of disputes.

...or Rupert Murdoch?

Kerry intends to introduce legislation during the lame duck session of Congress to force both parties to keep programming on while negotiations are underway, especially because consumers have already paid, often in advance, for such programming.  Analysts say Republicans in the Senate will likely filibuster any such measure.  Most Republicans are inclined to share Carey’s view and let the companies duel it out amongst themselves, according to Andrew D. Lipman, a Washington-based partner with the law firm Bingham McCutchen.

Carey himself has been on both sides of the issue.  His former job was chief executive of DirecTV, the largest U.S. satellite-television provider.  Carey at the time thought the television networks and local stations were responsible for their own failing business models and were late to the table demanding payments for cable carriage.  When the Great Recession caused advertising revenue to plummet, both networks and local stations decided the concept of free, ad-supported television was no longer a viable business model.  Now stations want dual revenue streams — ad revenue and payments from the majority of Americans who watch those stations on cable, satellite, or telco-TV.

More importantly, Carey wants the government to butt out, even when consumer dollars are at stake.

[flv width=”640″ height=”500″]http://www.phillipdampier.com/video/Bloomberg Man Who Blacked Out World Series Blames Politicians 11-9-10.flv[/flv]

Bloomberg News reflects on the dispute between News Corp.’s Chase Carey and Cablevision.  (3 minutes)

Although the cable trade press reports it is business as usual at most of the nation’s largest cable companies, news that several companies are losing more cable-TV subscribers than they are adding is creating concern in boardrooms and on Wall Street.  Although the power of the perennial “rate increase” has kept revenues up, cable operators like Time Warner Cable are beginning to realize they can’t just keep raising rates expecting customers to sit still for it.

For more than 30 years, cable operators have assumed (correctly) that raising rates far in excess of inflation will bring about a lot of grumbling from upset subscribers, but few will actually resort to cutting the cord and going back to free TV (or books).  But as many cable households now routinely pay “triple-play” bills well in excess of $200 a month, that is finally starting to change:

• For many households, the switch to digital TV and an increasing number of sub-channels has proved adequate to meet the needs of many viewers, so long as they receive a decent picture and at least a handful of digital sub-channels;
• Online access to at least some cable programming, movies, and television shows on-demand has solved the problem of having too few viewing options.  If nothing of interest is running on local channels, a quick visit to Netflix or Hulu can satisfy most viewers;
• Many increasingly prefer spending their free time online instead of parked in front of the television;
• The realities of the current economy and tightened middle class budgets make many cable packages simply unaffordable, even if customers wanted them.

Time Warner Cable has recognized the growing strain on their video side of the business and has initiated some strong marketing efforts to hold onto customers who are one rate increase away from canceling.

This fall, the cable company unveiled its $33 per service promotion, charging that price for each component of their triple-play package for a year.  While Time Warner has more aggressively priced individual services in the past for new customers, this one is unique because it is open to existing customers as well.  Customers speaking to Time Warner’s retention agents are being offered this package in an effort to keep customers hooked up to the company’s video, broadband, and phone services.  Currently, many markets also include a free year of Showtime or at least six months of DVR service, and a year of Road Runner Turbo.  In highly competitive markets, informal promotions can bring even lower prices or extra add-ons.

A few weeks ago, the cable company unveiled online video streaming of ESPN Networks for existing cable subscribers, and an online remote DVR-programming application that lets subscribers set up recordings while away from home.

Now the company is further bolstering its video packages:

1. As part of its long term agreement with Disney, ABC and ESPN, this week Time Warner Cable added over 300 hours of new On Demand programming content from ABC, Disney and ESPN. In addition, the company will launch Primetime HD On Demand tomorrow, which will also be available to Digital Cable customers at no additional cost.  The new channel Primetime HD On Demand will carry primetime programming from ABC, NBC and CBS in High Definition. Subscribers will have over 100 hours of the networks’ popular primetime programs including NBC’s 30 Rock and The Office; ABC’s Grey’s Anatomy and Desperate Housewives; and CBS’ Medium and CSI.
2. Time Warner Cable Look Back will bolster the existing “Start Over” feature by archiving up to three days of programming on more than two dozen different networks and cable channels.  Now, if you missed a favorite show that aired the evening before, you can watch it on demand.  As with “Start Over,” Time Warner has disabled fast-forwarding, so no zipping through commercials is allowed.  But the service comes free of charge, and includes an impressive lineup of participating networks including ABC, NBC, Fox Cable Networks, Discovery Networks, and Scripps’ Food Network, Cooking Channel, HGTV, and DIY.
3. HBO Max and Go Max, part of TV Everywhere, will reach more than 50 million Time Warner Cable customers by the end of the month.  These services deliver online on-demand access to movies, series, and specials airing on HBO and Cinemax and will be available to customers paying for the premium channels at no additional charge.  More than 70 million customers will have access by the second quarter of 2011.
4. Time Warner Cable CEO Glenn Britt told investors on a conference call held last week that the cable company is aggressively pursuing renewal agreements with programmers that allow the cable company to begin offering smaller, budget priced packages of cable-TV programming.  While it won’t be the a-la-carte option many consumers crave, cable programming packages could begin to resemble what home satellite dish customers used to receive — a core package of two dozen channels with theme or network-based add-on “programming packs” for additional fees.  For example, customers looking for reality or educational programming might buy a “Home and Garden” package consisting of Food TV, HGTV, The Weather Channel, Discovery and The Learning Channel.  Movie fans might get a package of Encore, AMC, Turner Classic Movies, Fox Movies and MGM.  “We have negotiated some additional flexibility beyond what we had a few years ago that will allow us to begin to offer some smaller packages at lower prices. Probably not all the way where we’d like to be. But we’re moving in the right direction,” Britt told investors.

The cable company’s friendly former owner — Time Warner, Inc.,  has also helped man the barricades against cable’s competitors.  For Netflix and Redbox customers: longer waiting times for access to the latest Time Warner movies are likely.  The current delay of 28 days could be extended, according to CEO Jeff Bewkes.

“So far the 28-day window has clearly been a success versus no delay,” Bewkes told investors. “The question of whether we ought to go longer is very much under scrutiny. It may well be a good idea.”

Even local movie theaters face some potential competition, as Time Warner considers introducing a premium pay-per-view option that would allow cable customers to watch movies currently in theaters at home.  But they’ll pay a heavy price to watch — reportedly between $30-50 per title, and the cable operator will insert anti-recording technology into the signal to prevent digital recordings.

Will these new services ultimately stop the bleeding from departing cable customers?  For most it’s a matter of dollars and sense.

[flv width=”640″ height=”500″]http://www.phillipdampier.com/video/Cutting Cable’s Cord 11-9-10.flv[/flv]

The media has gotten aggressive about talking to viewers about how they can get rid of their cable-TV subscription and save plenty.  (10 minutes)

Thomas Clancy Jr., 35, in Long Beach, N.Y., canceled the family’s Cablevision subscription this spring. He said he has been happy with Netflix and other Internet video services since then, even though there isn’t a lot of live sports to be had online.

“The amount of sports that I watched certainly didn’t justify a hundred-dollar-a-month expense for all this stuff. I mean, that’s twelve hundred dollars a year,” Clancy told the Associated Press. “Twelve hundred dollars is … near a vacation.”

Customers like Clancy are comfortable with technology and well-versed on how to hook up Internet video and integrate it with the family’s TV sets.  For customers like him, online video will increasingly be an attractive alternative to high cable TV bills.

For some western New Yorkers, Wegmans' Redbox kiosk is their new "cable company."

For homes with less tech-savvy subscribers who have watched their wages fall over the past decade even as cable rates keep increasing, economic realities driven home by the Great Recession are making the decision for them.

“The price of cable TV has risen to the point where it’s simply not affordable to lots of lower-income homes. And right now there are an awful lot of lower-income homes,” Craig Moffett, a Wall Street analyst who favors the cable industry said. “The evidence suggests that what we’re seeing is a poverty problem rather than a technology phenomenon.”

For these customers, including many in the middle class, each time cable companies like Time Warner increase cable rates, they drop a service or two.

“First it was Showtime, the Movie Channel, and Starz!,” writes Stop the Cap! reader Joanne in Penfield, N.Y., a suburb of Rochester. “Then when they raised the rates again on the premium channels, we dropped them all — bye bye HBO and Cinemax.”

“When Time Warner sends us their rate increase notice right after Christmas as they’ve done for years, we’re dropping digital cable and returning our cable boxes,” she writes.  “If they keep it up, we’ll drop cable altogether — something we might have done earlier if we had some competition around here.”

“I don’t care how much they claim it’s a ‘great value,'” Joanne says. “My husband got laid off from his job at Xerox in 2009 and was just let go from his new job at Carestream.  I already work myself and we have three kids, and our health insurance premiums are skyrocketing at the end of the year.  We haven’t had a real raise in five years, so that made the decision for us.”

Joanne now rents movies from Redbox just inside the local Wegmans grocery store and has a $9 monthly subscription with Netflix, mostly for online streaming.

“It’s more than made up for the $40+ a month we used to spend on premium channels with Time Warner,” she said.

[flv width=”640″ height=”500″]http://www.phillipdampier.com/video/WISN Milwaukee Time Warner Cable Offers Start Over For WISN 12 ABC Programs 11-9-10.flv[/flv]

WISN-TV in Milwaukee introduces viewers to Time Warner Cable’s newest on-demand features.  (1 minute)

Dora Gonzales may have to explore other options for Internet service, thanks to Cable One.

Dora Gonzales sat down in front of her computer this week to check her e-mail, surf the web and play a little Tetris.

Instead of e-mail, the Albuquerque resident found a message telling her to call Cable One’s Internet security department, because her service was canceled.

“You downloaded a movie illegally and we’re shutting your service off,” came the explanation from Cable One, her local cable company.

Gonzales proclaimed her innocence, noting she doesn’t have the first clue how to download movies online.

After several minutes of conversation, Cable One figured out what was probably happening.  Gonzales not surprisingly didn’t secure the wireless network Cable One provided her with its cable modem broadband service.  Someone, possibly a neighbor, hopped on board her connection for some downloading mischief.  As a result, the illegal download was traced back not to the perpetrator, but to Gonzales — who takes the fall because it was her account.

Cable One manager told KOB-TV that Gonzales was ultimately responsible, even though the situation is not unique.

“What will happen is because they’re using your modem, it’s going to come back to you,” said Cable One manager David Gonzalez. “So the movie company or whoever is going to be trying to press charges will be looking at you because it came from your computer.”

Cable One wants to reduce the risk customers might face using the company’s wireless equipment, so effective immediately, it is requiring customers use passwords to access their wireless networks.

While a noble idea, Stop the Cap! reader Jon notes his Cable One gear only offers him the option of WEP security, a wireless security protocol that was broken back in 2005.

“Any neighbor savvy enough to run peer-to-peer traffic over the neighbor’s Wi-Fi is probably well-equipped to hack their way through WEP-based security in mere minutes,” he writes.  “Even worse, it becomes a lot harder for victims to claim innocence when they were running in a ‘secure mode’ that is anything but.”

A quick check with Cable One shows the cable company is equipping at least some of its customers with more security-conscious modems.  The company now advises customers to use WPA-PSK security, which its newer equipment supports.  Existing customers using older WEP-only modems should consider switching them out with Cable One for newer equipment.

Frontier Communications is another provider equipping some of its DSL customers with WEP-only modems.  We had one at Stop the Cap! headquarters when we tested their DSL service last year.

Consumers using wireless routers are advised to use the latest versions of WPA security, which offer better protection.  Be sure to use a password that is easy for you to remember but hard for others to guess.  Using a combination of letters and numbers and avoiding words or phrases is strongly recommended.

[flv width=”480″ height=”290″]http://www.phillipdampier.com/video/KOB Albuquerque Providers Crack Down of Wireless Pirating 11-8-10.flv[/flv]

KOB-TV in Albuquerque reports Cable One is shutting off broadband service for customers not using wireless security.  (2 minutes)

Netflix accounts for 20 percent of all broadband activity in the United States during prime time evening hours.  As expected, “Internet experts” that are really little more than paid lobbyists for the broadband industry have started to feed the media scare stories about the great Internet traffic crisis soon to befall the Internet.

Just a few years ago, it was peer-to-peer traffic responsible for Internet “brownouts,” but now Netflix offers an even better, more convenient scapegoat — especially for the broadband providers that compete with it.

Fortune magazine provides a handy dandy needle to pop the balloon of BS from the broadband industry bully boys:

Just for fun, try to guess the year in which the following warnings about the Internet’s impending meltdown were issued:

No. 1: “Over the coming six to 12 months, computer users around the planet are likely to experience the Internet equivalent of the Great Blackout, or at least frequent brownouts, as our information infrastructure staggers and struggles under the heavy onslaught of new users and new demands.”

No. 2: “Internet access infrastructure, specifically in North America, will likely cease to be adequate for supporting demand within the next three to five years.”

No. 3: “Will Netflix Destroy the Internet?  American broadband capacity might not be able to keep up.”

The answers: 1997, 2007 and this week—and that’s just a small sampling from the past 20 years. Such predictions of the Internet’s breakdown are always premised on  the arrival of a scary new device or application that will send lots of digital bits over the Net.  Back in 1995, when Internet sage Bob Metcalfe tried to explain why he foresaw “the Internet’s catastrophic collapse,” he cited a wave of new “Internet appliances,” in particular the dangerous Sony Playstation, which for the first time had Internet access!

[…]What the chicken littles often miss are the clever ways in which Netflix movies and other content get delivered.  Like most major companies that move lots of Internet traffic, Netflix contracts with companies whose job it is to deliver lots of bits, fast and cheap.  Netflix relies mainly on industry giant Akamai, which runs 77,000 servers with big hard drives that it has placed in every nook and cranny of the Internet.  When a college student downloads “Dexter Season 1” from Netflix there’s a good chance the show is already stored on campus on an Akamai box.

“That video is growing rapidly and going to be huge is true,”  says Akamai co-founder Tom Leighton. “But there’s tons of capacity out at the edges of the network….plenty of capacity in the last mile to your house.”  That capacity, he says, combined with smart delivery of Netflix content from nearby servers, means the Internet can handle Netflix just fine.  If all that traffic had to travel closer to the center of the Internet then many larger peering points would be overwhelmed, Leighton adds. (There’s reason to trust Leighton’s numbers on both counts: he’s also a professor of applied mathematics at MIT.)

[flv width=”640″ height=”380″]http://www.phillipdampier.com/video/KOCO Oklahoma City Netflix Crashing The Internet 11-4-10.flv[/flv]

Check out KOCO-TV Oklahoma City’s “Internet Panic” story, delivering the broadband industry’s talking points about Internet traffic jams in just 30 seconds.  (1 minute)

Virgin Media broadband customers in the United Kingdom who spend free time playing the highly addictive World of Warcraft (WoW) suffered some serious withdrawal episodes after game developers, who may know how to create games like 벳엔드, released a major software patch (v4.0.1).

Just after installation, customers noticed their game play started slowing to a crawl, resulting in game performance worthy of a Noob popping Xanax.  With online ‘street cred’ at risk on the multiplayer game environment, WoW players rushed to Virgin’s support forums inquiring about the sudden slow lane performance:

Ever since this patch I have experienced very high latency (around 2-4k ms) whilst being in combat in 25-man raids. This latency causes me to disconnect from the game after around 10 seconds of very lagged out combat. Outside of raids I seem to yo-yo up and down. I have been as low as 70ms and as high as 1kms.

I have tried everything I can think of game related. I have ensured all the correct ports are opened via port forwarding on my router.  I have tried running the game in its default state with all add-ons removed. I have done virus scans, disabled my firewall and I am running out of options. No one else in-game seems to have the same problems as I do. Admittedly, a couple of them are Virgin Media customers too and have no problems but I cannot think what else it could be.

Now stuck in the slow lane on Virgin Broadband

Virgin Media customers and staff initially seemed at a loss about what could cause just WoW traffic to become very un-WoW.  Virgin’s terms of service includes a virtual paddle to spank customers who “excessively utilize” their broadband connections, and the patch itself — amounting to at least 7GB with accompanying updates — was worthy enough to put some customers in the time-out corner.  But even as company support officials were asking impacted customers to do the problem-solving sleuthing for them, a growing number of customers suspected the provider’s “intelligent network traffic shaping” technology was the real culprit.

Traffic shaping is a term Americans are just getting acquainted with.  It’s essentially a virtual traffic cop that can identify different types of online traffic and assign different levels of priority for different applications.  The broadband industry claims traffic shaping is a net plus for broadband consumers because it forces traffic gorgers like peer to peer file sharing to the back of the line, making room for more predictable performance of Internet phone calls, video, and other time-critical Internet applications. Virgin even markets its broadband service as enhancing online game play by giving the highest possible priority to game-related traffic. Join betpro today for access to a wide range of sports betting options and exciting casino games!

But when traffic shaping goes bad, it can create a nightmare for broadband customers who find roadblocks that ruin their online experience.

Virgin initially denied it was responsible for traffic shaping WoW to the point of unusability. Eventually, Virgin admitted it -was- responsible for the game traffic throttles, but passed the blame to WoW’s game developers, Blizzard Entertainment.  At one point Virgin suggested the company might want to recall the latest patch, just to get the game to work again on Virgin’s broadband network.  When that didn’t fly, company officials eventually released a statement taking responsibility, but telling customers it will be weeks before their “traffic management supplier” can create a workaround:

Since the latest World of Warcraft update we have seen that the type of packets used by Blizzard to deliver the on-line gaming has changed significantly.  This means that Virgin Media’s National (ADSL) traffic management system is unable to recognise the packets as gaming traffic and assumes that they are peer to peer traffic.  Due to this the traffic management system does not place the packets within the gaming queue which has the highest priority and lowest latency within the VM network, instead they fall into the peer to peer class which gets a low level of priority within our network and by default a higher level of latency.

We are working to try and rectify this as soon as we can with our traffic management supplier however it will take us a few weeks to upgrade the traffic manage solution so that is can recognise the new traffic class and correctly classify it as gaming.  Unfortunately due to the nature of most traffic management solutions we can not manually move these packets into the gaming queue as the solution can not work out which ones to move.

We appreciate that some customers will have noticed a similar issue with the previous World of Warcraft update.  The reason behind this is because gaming companies are not prepared to share the updates with Virgin Media or traffic management suppliers prior to its release and so the first time we see the new packets is when people start to use the new updates.  We are trying to change this view point of the gaming companies however at present they are un-willing to work with us.

We apologise for the affect that this has on your gaming experience and we will update you when we have a confirmed fix date for this.

By that time, many WoW enthusiasts will have probably fled Virgin for another provider.

Our reader James, who alerted us to this story, notes it takes a special kind of nerve for a broadband provider running speed traps to blame software developers for the problem.

“So, wait — Virgin is blaming the game developers because their code runs on the assumption that all traffic is treated equally and because they don’t verify their updates with the ISP before pushing them out to consumers?” James incredulously asks.

Virgin could always discontinue their faulty un-intelligent network traffic shaping scheme until a solution can be found, but that hasn’t happened.  It could interfere with “preferred content partnerships” — clients who pay to avoid the speed traps and throttles and always get special treatment.

Paying customers?  They can wait two or three weeks.

A Blizzard representative said Virgin’s buck (or is it pound?)-passing was inexcusable because the game producer -has- made efforts to reach out to ISPs in the past:

“In our defense, most of our previous attempts to work with ISPs have been shut down by the ISP management. I’m going to avoid naming actual ISP names for obvious legal reasons. We’re not the ISP’s actual customer so they rarely care what we have to say.”

And that is a perfect real-world example of what happens when Net Neutrality is not the law of the land.  Providers claim their traffic management schemes benefit their customers, but in reality they are only responsive to the “preferred content partners” that pay them to be responsive.

If Americans want to enjoy a similar level of service from their Internet Service Providers, just oppose Net Neutrality, sit back and wait… and wait… and wait.