A message from Senator Al Franken:

[flv width=”540″ height=”380″]http://www.phillipdampier.com/video/A Message from Senator Franken on Comcast-NBC Merger 1-12-11.flv[/flv]

As you know, the proposed merger between Comcast and NBC Universal is an important moment in our effort to stop big corporations from controlling our media.

But the FCC and Department of Justice may be about to approve this deal. This would have serious consequences for Minnesotans and consumers across America.

Once you’ve watched the video, please sign our open letter asking that this merger be stopped.  Forward this video to all of your friends–we don’t have much time to act. And stay tuned for more information.

WSYR-TV in Syracuse

One television station in central New York has helped provoke Time Warner Cable into fixing flaws with its Digital Phone service and how it handles emergency calls to 911.

WSYR-TV in Syracuse shined a spotlight on several failures by the cable company to properly route 911 calls to the appropriate local agencies, instead diverting some 911 calls to a call center in Colorado.

The cable company also had problems with the accuracy of its customer database, which could leave emergency responders with incomplete or missing address information.

After several New York State county 911 managers brought the matter to the attention of the station, it ran a series of reports that have gotten results.

The cable company told the station it has made significant progress in resolving 911 problems, and several of the county 911 managers the station spoke with tentatively agree — noting they’ve seen improvements from the cable operator.

[flv width=”480″ height=”380″]http://www.phillipdampier.com/video/WSYR Syracuse Time Warner Solving 911 Problems 1-10-11.flv[/flv]

WSYR-TV aired two follow-up reports on the Digital Phone-911 problems.  (Warning: Loud Volume) (4 minutes)

The Canadian Radio-television and Telecommunications Commission

Thanks to quick work from the Canadian Radio-television and Telecommunications Commission (CRTC), Canadian broadband providers have wasted no time announcing new usage limits and penalties for those who exceed them.

The principal culprit for the Internet Overcharging: Bell (Canada), the nation’s largest telecommunications company.

Bell’s newly won right to charge wholesale customers usage-based billing rates has caused a collective groan from independent providers from Vancouver to Charlottetown. Primus, the second-largest alternative communications company in Canada, threw up its hands and announced it was going to pass Bell’s costs along to their customers.  Some other providers have already raised rates, shocking customers who received December bills with $100 in overlimit penalties.

“It’s an economic disincentive for Internet use,” said Matt Stein, vice-president of network services for Primus. “It’s not meant to recover costs. In fact these charges that Bell has levied are many, many, many times what it costs to actually deliver it.”

That is a hallmark example of what happens under Internet Overcharging schemes like “usage-based pricing,” usage caps, or other limited use plans.  Customers don’t pay for their actual broadband use — they overpay, especially when stiff penalties are imposed when they exceed their usage allowance.

“Canada’s broadband market is a racket, period,” says our reader Andy, who lives near Petawawa, in northern Ontario.  “If you are in a major city in the south, you can choose Bell or one of their lackeys or the cable company, which almost always means Shaw or Rogers in English-speaking Canada.”

Andy doesn’t have access to cable, so his broadband comes courtesy of DSL from the phone company.  He counts himself lucky he has that, even though it only delivers around 512kbps and is down at least once a week, especially when the weather is bad.  Other communities have no broadband at all, and some areas are so desperate for access, they have provided financial incentives to attract a provider to town.  It rarely succeeds.  Zeropaid reports a handful on unscrupulous would-be providers have taken the incentives and left town with no broadband service to show for it.

“These guys only want the easy customers and they’ve got them in Toronto or Ottawa,” Andy says. “The rest of us can live with dial-up.”

The Canadian government occasionally launches highly publicized demonstration projects to deliver rural broadband in northern Canada, often over wireless, something Andy scoffs at.

“When the TV cameras are shut off and [Prime Minister] Stephen Harper’s political bandwagon goes home, the networks last for about a month until something goes wrong and the whole thing shuts down, sometimes for weeks before someone repairs it,” Andy says.

There oughta be a law.

Katz

In fact Canada, a country with a reputation for keeping a regulatory eye on essential services, has an agency that is supposed to protect consumers and monitor telecommunications services. Unfortunately for Canadians, it was that agency that gave Bell the go-ahead to kill unlimited, flat rate broadband — the service that has kept most independent service providers in business.

Critics charge the Commission has been acting more like a Big Telecom industry trade group than an independent oversight body, and many independent providers openly wonder how long they’ll survive with Bell’s predatory pricing.

Reviewing who serves on the Commission may provide some answers about why they seem to be closely aligned with Canada’s largest telecom companies.  Many of the commissioners used to work for the very companies they are now asked to regulate, and some are likely to return to them after their stint at the CRTC.  The agency’s supposedly independent commissioners know if they want future employment in the telecommunications industry, it’s best not to antagonize your next boss.

Take Commissioner Leonard Katz.  He joined the CRTC in 2005 and was appointed vice chairman of telecommunications in 2007.  For 30 years before joining the Commission, Katz was employed by Canada’s largest telecom firm, moving up through Bell’s management ranks from 1974-1985.  His last big job at Bell was as the assistant director of Bell’s regulatory lobbying department, where he spent his energy and time dealing with federal politicians and the CRTC.  Katz also loves Canada’s wireless industry, dominated by Rogers Communications.  He was founder and chairman of the Cellular Telecommunications Industry Association Clearinghouse for wireless carriers.

Arpin

Or there was Michel Arpin, a consummate former insider at some of Canada’s largest corporately-owned broadcast station groups like Astral Broadcasting, Mutual Broadcasting, and Radiomutuel.  He also had a side relationship with Telus, a western Canadian telecom company that also belongs to the Canadian Association of Broadcasters (CAB).  Arpin served CAB as vice-chair and chair. Arpin, the corporate media man, also served as the vice-chairman of the CRTC’s broadcast division until late last year.

Other examples:

• Rita Cugini — A regional commissioner for the province of Ontario, her professional background has been working for some of the province’s biggest media interests, including Alliance Atlantis, Telelatino, and CFMT/OMNI.  She also is integrally involved with the Canadian Association of Broadcasters, which bends the ears of regulators regularly on a variety of matters;
• Tim Denton — About as close to the broadband industry as you can get, Denton’s role as a commissioner began in 2008, but his money was made working for the broadband industry, including the Canadian Association of Internet Providers, which lobbies for big broadband provider interests.
• Candice Molnar — Serves today as regional commissioner for Manitoba and Saskatchewan, but she knows most of the prairie provinces’ movers and shakers by name, having spent more than 20 years at SaskTel, Saskatchewan’s biggest phone company.  She helped guide SaskTel from provincial to federal regulation when she worked there and her voting record shows her heart is still with her former employer.

Cugini

With a Commission stacked against ordinary Canadian consumers, it’s no wonder Internet Overcharging schemes and stifled broadband competition rule the day in Canada.

“Rural Canada always pays the biggest price,” says Andy.  “If it didn’t happen in Toronto or Ottawa, it didn’t happen at all.”

Andy complains Canadian broadband will never improve with Internet Overcharging schemes in place.

“They complain about your usage and say if they can restrict it, they can improve service to more people; well, where is my better service?” Andy asks.

“At least I don’t have to worry about their usage allowances… yet,” Andy says. “Even if I left my connection running continuously, at these speeds I doubt I could do much damage.”

Commissioners of the National Telecommunications Commission (NTC), led by its chair Gamaliel Cordoba (middle, in blue shirt) preside in a public hearing Tuesday on the proposed circular requiring broadband data limit for consumers and minimum broadband speed for service providers. The event, which was held at the NTC main office in Quezon City, was attended by various industry stakeholders, including telcos, bloggers, and consumer advocacy groups. Photo by Melvin Calimag; Courtesy: GMANews.tv

Philippine consumers won a major victory this morning, successfully stripping language permitting Internet usage limits from a broadband reform measure before the country’s telecommunications regulator.

In a newly revised draft, this language written by and for some of the nation’s largest telecom providers was removed after a major consumer push-back:

“WHEREAS, it has been observed that few subscribers/users connect to the internet for unreasonably long period [sic] of time depriving other users from connecting to the internet; NOW, THEREFORE… Service providers may set the maximum volume of data allowed per subscriber/user per day.”

Consumer rights group TXTPower was instrumental in exposing the provider-written language and generating a groundswell of opposition to broadband usage limits.  The group’s leader Tonyo Cruz said Internet Overcharging schemes like usage caps deliver all of the benefits to providers while limiting consumer access and increasing bills.

“The adoption of [usage caps] will destroy social media in the Philippines and affect businesses,” Cruz told commissioners at a National Telecommunications Commission public meeting attended by consumers.

Cruz compared broadband in the Philippines with a turtle race.

“Imposing caps would be like putting speed limits on slow-moving turtles,” he said.  “It is one thing for telcos to say that a small percentage of consumers abuse their networks, but is another and more important thing to know whether they actually deliver the promised services and whether they have at the moment or in the future the capacity to deliver them.”

Cruz says his group doesn’t oppose providers dealing individually with consumers who use their accounts to the point of creating problems for other users on the network, but a blanket usage limit punishing every Filipino was unacceptable.

The issue rapidly became a political hot potato when ordinary Filipinos contacted their elected representatives to protest the measure.

Kabataan Partylist representative Mong Palatino put the Commission on notice: “NTC’s draft memo [including usage caps] is clearly anti-consumer and regressive. It tramples on the rights of the consumers to get what they pay for in terms of a reliable Internet service,” Palatino wrote in a widely distributed statement. “By allowing telcos and Internet Service Providers (ISPs) to limit Internet speed and connection, NTC seemingly wants the whole nation to regress to an Internet era that is much slower and highly unstable,” Palatino explained.

For Cruz, the entire argument for usage caps and the complaints about consumers using too much Internet service “ring weird.”

“The telcos who complain about over-use are the same companies actively encouraging consumers to use the Internet and become avid Internet users, to watch and upload videos and photos,” Cruz noted.

Cruz and other consumer activists want the Commission to hold additional public hearings, and stream them live over the Internet.

Filipinos looking for reasons why broadband providers want to limit their Internet usage can find all the explanations needed in the financial reports of companies enthusiastically supporting Internet Overcharging proposals.

As ABS/CBN News noted, “To say that 2010 was a difficult year for the Philippine telecommunications industry is an understatement.”

“Consumers are demanding an unlimited telecommunications experience,” says Renato Razón, an investor and telecom industry watcher for more than 30 years. “The wireless sector and the growth of the Internet, and the companies that compete to provide both, have turned telecommunications in this country on its head.”

Razón tells Stop the Cap! the privatization of telecommunications initially showed a lot of promise for investment and development to get the country on the Asian economic fast track.  But increasingly in recent years, companies have grown fat and lazy, trying to compete with existing networks in need of upgrades — in search of quick profits and no costly capital expenses.

“They learned what they think are important lessons from the huge amounts of money that were spent to build and upgrade wireless networks in the Philippines,” Razón tells us. “They were convinced it was worth countless billions to build wireless infrastructure and wait for the enormous profits that would come later, but then everyone wanted to get into the business and the big profits they thought they’d get never materialized.”

Razón says wireless competition that exploded across major cities in the Philippines was initially a boon to consumers, who today benefit from heavily marketed unlimited calling and texting plans at declining prices.  But now that profits are taking a hit, investors and company executives learned what they feel is a bitter lesson.

As wireless becomes a mature market in the Philippines — with more than 80 percent of consumers already using wireless devices, almost all of the marketing from existing providers targets customers of their competitors.  Customers threatening to switch force providers to offer steeply discounted retention deals that are often infinitely renewable.

Such fire sale pricing enrages investors, who are calling for greater industry consolidation among the three largest operators.  With a fourth provider possibly on the horizon, the chorus demanding that some of the players get out of the market through mergers and acquisitions for the “good of all” could soon grow too loud to ignore.

“Heavy competition is your worst nightmare — it results in price wars and everyone, except consumers of course, are hurt in the end,” he admits.  “I admit I have to divorce myself from the fact my family and I are also consumers — and we love the lower prices — but as an investor, I understand the loud demands to improve shareholder value.”

Razón says executive compensation, often tied to financial performance, delivers the ultimate incentive that executives answer first to shareholders, not customers.

“If a handful of customers get angry at you, that doesn’t cost you the company-paid vacation on the French Riviera and a healthy bonus — an angry compensation committee answering to a dispirited Board of Directors could,” Razón says.

Razón says it’s the same story wherever private companies control telecommunications with few regulations governing their operations.  He believes private market solutions without regulatory oversight helps him more than it helps you.

“I understand what the Philippine government wants — regulations to promote better broadband, but they are only hearing from industry people on how to accomplish that,” Razón believes.  “They answer to shareholders who think about short term results and the health of their investment, not the overall health of the broadband marketplace.”

With financial results for 2010 showing the impact of price competition and predictions of another year of anemic profits, providers are looking for new revenue streams.  Broadband offers one of the few major growth opportunities available to telecom companies in the short term, Razón says.

“At least half this country doesn’t have meaningful broadband, so if you can deliver service over existing infrastructure, keeping capital costs low, you couldn’t count the money coming in fast enough,” Razón says.  “DSL from the phone companies delivers it all — existing phone wires delivering a value-added service to existing phone customers.  It’s not fast, but it’s cheap.”

Rafael Aguado, the chief operations officer of Bayan Telecommunications, agrees the real revenue is in broadband:

“2010 was a challenging year for the telcos, as competition intensified and the Internet/social media and new technologies influenced the shift on consumer behavior on how to communicate, putting pressure on traditional revenue sources like voice calls and international long distance calls. Data and internet subscribers continued to increase and is expected to accelerate to the next level of sustained growth.  It was a difficult year for Bayan but performance was consistent with the industry trend. Total revenue decreased due to lower voice revenues but residential internet and corporate data services posted revenue growth. With sound operating expense management, we expect the year to end in double digit growth in EBITDA. Our growth drivers next year would continue to be data and internet services for both consumer and corporate sectors.”

Philippines Long Distance Telephone Co.

Razón believes usage caps are just another mechanism to protect companies from performing costly upgrades.

“If you can limit usage, you don’t have to spend as much capital upgrading,” Razón says.  “Investors don’t mind if you spend to expand DSL into new territories, because the costs are relatively low.  They will get upset if your support and ongoing costs increase, however.”

That could explain the growing burdens of wireless traffic on the country’s cellular networks.  Some providers have been accused of deliberately overselling access to their networks while refusing to upgrade them to meet growing demands, because the return on “unlimited use” doesn’t deliver:

“The telco industry had a good year but its profitability was greatly reduced due to the highly competitive ‘unlimited plans’ that each provider offered its subscribers. This trend would continue this coming year,” said Ivan Uy, chairman, Commission on Information and Communications Technology (CICT). “What needs to be looked into is the deteriorating service availability or accessibility due to network congestion brought about by the unlimited plans. Customer dissatisfaction has been rising because of higher frequency of dropped calls, delayed SMS, and line unavailability.”

When given a choice how to solve this problem, most companies prefer to advocate for usage limits, not mass scale upgrades.

Even long distance companies, which played through a price war more than a decade ago, see the flow of investment heading into broadband.  Unfortunately, in their eyes, usage demands are coming along as well:

“Competition intensified in the cellular business. Broadband grew strongly. Margins came under pressure even as demand for more network resources increased. For PLDT, 2010 has been a year when it maintained its market leadership in the face of these challenges. Our focus has been managing this transition where traditional revenue sources such as fixed toll revenues like IDD and NDD were on the decline while new revenue sources such as broadband were on the rise. We preserved margins by strengthening cost management given the modest top-line growth.

“We expect the challenges of 2010 to carry into next year. Demand for bucket and unlimited offers in the cellular space will continue. We expect that broadband will keep growing given the growing popularity of social networking and new access devices such as tablets and smartphones. PLDT will continue to invest in its network in order to fortify its market leadership.” — Napoleon Nazareno, president and CEO, Philippine Long Distance Telephone Co.

For a long term investor like Razón who has seen this all before, there is a better answer: invest in your networks and grow them faster than your competitors.

“You have to spend money to earn money I have always found and there is a ton of money to be spent and made on broadband in this country,” Razón says. “The low hanging fruit has already been picked — now we must spend to get broadband into towns and villages and we should also be investing in content and products we can sell to broadband customers.”

Razón thinks Internet Overcharging schemes are a foolish mistake.

“You can’t create value-added services on an artificially limited network and expect consumers to buy,” Razón said.  “If you limit usage, you discourage people from using the services that get them addicted to using it in the first place.  Get them hooked, keep them happy and you have a customer for life.”