A federal appeals court in Washington has struck down, for a second time, a rulemaking by the Federal Communications Commission to limit the size of the nation’s largest cable operators to 30% of the nation’s pay television marketplace, calling the rule “arbitrary and capricious.”

Judge Douglas Howard Ginsburg

The 30% rule, designed to keep no single company from controlling more than 30% of the nation’s pay-TV subscribers, was originally written in 1993 by the FCC because the agency feared a concentrated cable television marketplace would stifle innovation, lock out potential new independent programmers, and discourage new forms of competition.  The cable industry immediately called the cap an overreach, and in 2001, found a friendly reception in court, with a ruling demanding the FCC reconsider the rule in light of competition from satellite television.

The FCC determined satellite competition was inadequate alone to justify reversing the 30% ownership limit, and essentially kept the limit in place, mostly at the urging of FCC Chairman Kevin Martin, who regularly tangled with the cable industry during the Bush Administration.

The decision striking down the 30% rule came in a harshly worded ruling from Judge Douglas H. Ginsburg.

“In light of the changed marketplace, the government’s justification for the 30 percent cap is even weaker now than in 2001 when we held the 30 percent cap unconstitutional,” Judge Ginsburg wrote for a three-member panel of the court.

Ginsburg wrote the FCC was egregiously derelict in its revised rulemaking because it failed to heed the court’s direction, requiring the court to vacate the rule.

The ruling is a “significant gain for cable and apparent big victory for Comcast,” said Andrew Lipman, a Washington- based partner in the media, telecommunications and technology practice at Bingham McCutchen LLP.

The Philadelphia Inquirer noted some Wall Street analysts were pleased with the court’s decision:

Wall Street analyst Craig Moffett called the decision a “moral” victory for Comcast, which contended that the market-cap rule was politically motivated by the Federal Communications Commission and wouldn’t overcome a court challenge. The rule was passed under former FCC Chairman Kevin Martin.

Speculation about what companies Comcast could likely snap up began immediately, ranging from a conceptual merger with Time Warner Cable, the nation’s second largest cable company, to quick buyouts of smaller players like Cablevision or now-bankrupt Charter Cable.

Consumer groups were alarmed by the court ruling.

“This is not the end of the fight,” Andrew Jay Schwartzmann, president and chief executive officer of the Media Access Project, a nonprofit policy advocacy group, said in a statement. “Big cable’s anti-competitive ownership structure has increased prices and limited choices for the American public. Therefore, we will consult with the FCC on whether Supreme Court review is feasible. If not, we’ll be asking Congress to pass new legislation to ensure more choice and lower prices for cable TV service.”

Ben Scott, policy director for Free Press, noted that the intent of the original 1992 Cable Act was to promote competition and consumer choice.  Yet in most cities, consumers face a cable cartel.

“Today consumers experience perpetual price hikes by large operators that already have market dominating purchasing power to decide the fate of new channels. The promises of lower prices through competition from satellite and telecom companies in the video business have never been realized. We encourage the FCC not only to revisit cable ownership limits, but to examine a variety of policy proposals to achieve Congress’s goal to bring consumers more competition and more choice in the cable industry.”

ABC News reported that while Comcast won this legal battle, it has a way to go in the court of public opinion.

Cable providers Comcast, Time Warner and Charter draw low marks on the American Customer Satisfaction Index, tracked by the University of Michigan. On a scale of 0 to 100, Comcast and Time Warner each scored 59 this year. The satellite provider DirectTV ranked first at 71, with Cox Communications cable at 66 and DISH Network at 64.

Astroturfers like Scott Cleland got all excited yesterday about another misinformed piece about broadband usage caps from George Ou, a technology blogger who previously gained infamy from his strident opposition to Net Neutrality and his ridicule of the “scare-mongers” who predicted throttled speeds, multi-tiered broadband service, penalties and blocks for using Voice Over IP services, and providers trying to control what you see on the net.

George Ou

Back in 2006, he wrote a three-pager on ZDNet lambasting Save The Internet, MoveOn, and other Net Neutrality proponents who didn’t agree with Ou’s position that this was simply a technology issue.  He accused the groups of hysteria at a fever pitch over their concerns Net Neutrality opposition was much more about politics, profit, and protection of the providers’ business models.

With positions like that, Ou need not ever worry about job security because his rhetorical stars are in perfect alignment with big telecommunications companies.  I’m sure as long as he joins the broadband tug of war on the side of AT&T and other big providers, some policy institute, astroturf group, or other industry-friendly job would always be there for him to take.

Oh wait.  He has.  But more on that later.

These days, Ou has been pondering broadband usage caps, our bread and butter issue on Stop the Cap!

You do not get a cookie if you guessed he’s all for them, because that would be too easy.

Ou decided that the recent comparison between broadband usage caps in Japan and the United States by Chiehyu Li and James Losey of the New America Foundation, was… problematic.  That usually means we are about to get a technological-jargon-cannon barrage in an effort to suggest those folks at the New America Foundation ‘just don’t understand how the Internet works.’

You decide:

Li and Losey point out that while Japanese ISPs caps the upstream; they are generous with unlimited downstream while American ISPs are beginning to cap both the upstream and downstream.  But this is a flawed analysis because capping the upstream effectively cuts to total downstream peer-to-peer (P2P) traffic to the same levels.  And because P2P is one of the most heavily used application on the Internet accounting for the vast majority of Japanese Internet traffic, cutting upstream usage greatly reduce all P2P traffic and all Internet usage which was necessary because their Internet backbones were severely congested.  I’ve argued that it is far more efficient to manage the network but until then the caps are needed.

Another problem with Li and Losey’s analysis is that it only looks at the usage cap without an analysis of the duty cycle and its ramifications.  When we compare the usable duty cycle between ISPs in Japan compared to ISPs in the U.S. derived from Li and Losey’s data, we see a completely different picture.  By splitting the U.S. ISP usage caps (some of these caps are only in proposal phase) into an upstream and downstream cap proportional to the upstream/downstream connection speeds, I was able to generate Figure 1 below.  What it actually shows is that U.S. broadband providers have usage caps that allow users to use their Internet connection far more frequently than users in Japan.  So while a user in Japan is capped to 40 minutes a day of upstream Internet usage, which indirectly caps download speed because it severely trims the number and generosity of P2P seeders.  AT&T’s proposed DSL usage caps (similar to other DSL providers) allow for 1111 minutes of usage per day on the upstream and 97 minutes on the downstream per day.  So broadband consumers who are dissatisfied with their tiny Time Warner usage caps can simply switch to their DSL provider.

I guess that wraps that up.  Or not.

Ou wants us to assume quite a bit in his own analysis.  His contention that the “vast majority” of Japanese Internet traffic is peer-to-peer is “proven” by linking to an earlier article… written by him… saying just that.  But let’s grant Ou the premise that peer-to-peer is at the epicenter of bandwidth congestion in Japan.  Ou defends Japanese providers for specifically targeting the upstream traffic, pointing out stingy torrent users that don’t give as much as they get will automatically be speed limited during downloads (Bit Torrent’s way of equal sharing).  But he never extends the upstream cap argument to the United States, where he implies a similar traffic overload is occurring.  Instead, he merely acknowledges that domestic providers are experimenting with caps that limit both uploading and downloading, impacting every broadband user, not just those “problem” peer to peer users.

Caps.  The necessary evil?

Ou is okay with the equivalent of dealing with a pesky fly in the kitchen by setting the house on fire.  Doing that might solve the fly problem, but makes living there unpleasant at best in the future.

In fact, the impetus for dealing with the peer to peer “problem” in Japan turns out to be as much about copyright politics as bandwidth management.¹

I also have no idea why Ou would spend time developing a “duty cycle” formula in an effort to try and convince Americans that those generous looking caps in Japan are actually worse for you than the paltry ones tested in the United States.  His formula is dependent on the speed levels offered by Japanese vs. American providers to work.  But then Ou tries to debunk the speeds on offer in Japan as more fiction than reality, and throws his own “duty cycle” formula under the bus as a result:

Li and Losey also paint a dire picture that Japan has 10 or more times the connectivity speed as the US, but the most accurate real-world measurement of Internet throughput in Japan according to the Q1-2009 results from Akamai’s State of the Internet report indicates that Japanese broadband customers only average about 8 Mbps.

Ou then exposes he is completely clueless about the state of broadband in some of the communities that actually cope with usage caps, or were threatened with them.  Ou’s suggestion that unhappy Time Warner Cable customers could simply leave a capped Road Runner for DSL service from the phone company leaves residents in Rochester, New York cold.  For them, that means coping with an Acceptable Use Policy from Frontier that defines 5GB per month as appropriate for their DSL customers.  In Beaumont, Texas, the limbo dance of caps last left residents picking between a cap as low as 20GB with AT&T or a 40GB “standard plan” from Time Warner Cable, before Time Warner dropped the “experiment” for now.

Ou should have just suggested customers in western New York and the Golden Triangle just pick up and move to another city.  It would have been more realistic than his “if you don’t like them, switch” solution.  It also presumes there is a viable DSL service to switch to, as well as whether or not the service can provide a sufficiently speedy connection to take advantage of today’s broadband applications.

And here is where you can draw lines between the special interests, astroturfers, industry-connected folks and actual real, live, consumers.

Ou brings out the shiny keys, waving them in consumers’ faces telling them to look somewhere else for answers:

So the reality is that usage caps isn’t what Americans should be focusing on and the priority should be to encourage more next generation broadband deployment.

Internet Overcharging schemes that charge consumers up to 300% more for their broadband service, with no corresponding improvement in service, is not the problem for Ou, but it certainly was for Time Warner Cable customers in several cities chosen for their Overcharging experiment.  The need to encourage more broadband deployment is fine, but American broadband customers will be broke long before that ever happens without some other pro-consumer solutions.

Ou has a problem though.  He has a new employer.

A corporate restructuring at ZDNet in the spring of 2008 meant Ou was free to pursue other professional interests, and wouldn’t you know, he turned up as Policy Director of “pro-commerce” Digital Society.  That’s a “free market think tank” website whose domain name is administered by one Jon Henke in… you guessed it, suburban Washington, DC (Arlington, Virginia to be exact).

The sharks are in the water.

Jon Henke

Henke, Executive Director of Digital Society, and presumably Ou’s boss, has quite the agenda of his own, and it’s not consumer driven.  He has a long history of involvement in conservative politics, which brings new questions about how Henke would approach “encouraging next generation broadband deployment.”  Does he favor broadband stimulus money?  How about municipal broadband competition?

In addition to his work with Digital Society, Henke also runs something called the DC Signal Team.  What’s that?  Let’s see:

DC Signal is a strategic intelligence and communications firm specializing in new media consulting. Based in the Washington, DC area, we work with a range of clients — corporations, trade associations, campaigns, and individuals — to craft and execute an effective online strategy.  We provide timely intelligence and analysis, as well as communications that can reach and resonate with key opinion makers, policy experts, and elected officials.

Our expertise in new media communications sets DC Signal apart, allowing us to filter out the background noise on the Internet to deliver just the most relevant information, make creative, appropriate recommendations based on that information, and target communications directly to the most influential audiences.

I love the smell of plastic grass in the morning.

That’s right, folks.  DC Signal is a classic PR firm that uses targeted communications to reach the most appropriate audience for their campaigns.  Need to reach consumers and sell them on a pro-industry position?  Set up a “grassroots” group to do it.  Need to baffle the media, lawmakers and opinion leaders with industry BS?  Set up “authoritative” websites to deliver carefully filtered “relevant information.”  What better way to do that than with a blog like Digital Society?

But wait, there’s more.

Henke is also working for an innocuously named group called Arts+Labs, which starts its mission statement out innocently enough:

Arts+Labs is a collaboration between technology and creative communities that have embraced today’s rich Internet environment to deliver innovative and creative digital products and services to consumers. From the early development of motion picture technology, voice recordings and radio to today’s 3D computer graphics, streaming digital movies, “on-demand” entertainment,  online games, news and information, innovative technologies and creativity have always gone hand in hand to enrich our understanding and appreciation of arts, entertainment and culture.

Then things become more ominous.

At the same time, Arts+Labs is working to educate consumers about how net pollution – spam, malware, computer viruses and illegal file trafficking – threatens to transform the Internet from an essential catalyst to safely deliver this content to consumers, into a viral distribution mechanism that will choke off the Internet for consumers and future innovators and creators alike.

I can understand the threats from spam, malware, and computer viruses — what groups out there actually advocate for these? — but the “illegal file trafficking” thrown in at the end had me wondering.

I smell industry money, probably from providers who oppose Net Neutrality and want to throttle peer to peer applications, from Hollywood content producers who want to keep their content off The Pirate Bay, the music industry who is always paranoid about piracy, and of course equipment manufacturers who sell the hardware that does the bandwidth management.

So who “partners” with Arts+Labs?

• Viacom
• NBC Universal
• AT&T
• Broadcast Music, Inc. (BMI)
• Verizon
• Microsoft
• Songwriters Guild of America
• Cisco
• American Society of Composers, Authors and Publishers (ASCAP)

There you go.

Arts+Labs tries to be clever about its agenda, not so much with strident opposition to Net Neutrality, but instead promoting “consumer interests” by insisting that providers fully disclose the abuse about to be heaped on their customers.  In a press release in June, the group advocated its own national broadband strategy recommendations to the FCC:

A Safe Internet and Smart Management Will Boost Digital Society

It also said that a safe Internet must be a core part of a national broadband strategy and that the failure to protect online data and crack down on net pollution such as malware, spam, phishing and other Internet crime will erode the value of the Internet and discourage broadband adoption.

“To drive adoption and build a successful digital society that reaches every American, all of us must accept responsibility for minimizing online risks, protecting users’ privacy, and ensuring data security against malicious online activity and cybercrime,” A+L said.

It also urged the Commission to embrace “smart management tools and techniques.”

“Used effectively, smart management of our networks will stimulate broadband adoption by expanding the scope of activities available to consumers, by addressing network congestion, and by defending against hacking, phishing, identity theft and other forms of cybercrime,” the filing added.

But it said network operators must not abuse management tools to interfere with competitors or consumers rights and noted:  “In a digital society, network managers owe their customers transparency about their network management practices, including proactive disclosure of new policies or innovations that may affect users’ experiences.”

A+L Urges Collaborative Effort, Says Pragmatism Should Trump Ideology

It also urged the Commission to avoid unnecessary regulatory constraints that would interfere with the ability of content providers, network operators and other Internet-related businesses to experiment with new business models and to offer innovative new services and options to consumers.

Finally, A+L urged every Internet industry and every individual who uses the Internet to work together to achieve the nation’s broadband goals.

“Building an inclusive digital society and achieving our broadband goals will require all of us to think outside of silos, to choose pragmatic and effective policies over ideology, and to drive broadband adoption by encouraging the creation of exciting content, protecting intellectual property, and ensuring that the Internet is a safe place to be.  And, the guiding principle on every issue should be to find the solution that moves broadband forward,” A+L concluded.

Broadband throttles and Internet Overcharging aren’t anti-consumer — they are “new policies or innovations.”  As long as the provider discloses them, all is well.

The ideology reference in the press release is remarkable, considering the people who involve themselves in Arts+Media represent a veritable hackathon of the DC political elite, from Mike McCurry, former Clinton Administration press secretary, Mark McKinnon, who advised President George W. Bush, to the aforementioned Jon Henke, who was hired originally to do “new media” damage control for former Virginia senator George “Macaca” Allen and then went to work for the presidential campaign of Fred Thompson.

As usual, the only people not on Arts+Labs’ People page are actual consumers.

To wrap up this party of special interests, which consumers aren’t invited to, we wind our way back to the home page of Digital Society, which features a familiar roster of recommended blogs and websites to visit.  Among them:

• Arts & Labs blog (Henke works with them)
• Broadband Politics (run by Richard Bennett, who forgot he worked for a K Street Lobbyist, actually on K Street (read the comments at the bottom of the linked article)
• Cisco Policy Blog (also a partner with Arts+Labs, has a direct interest in selling the bandwidth management hardware)
• Verizon Policy Blog (also a partner with Arts+Labs, and an interested provider in this issue)

In the beginning of this piece, I recited some of the “scare mongering” Ou accused groups of engaging in on the Net Neutrality debate back in 1996.  The first major Net Neutrality battle was with Comcast over bandwidth throttles.  The barely-conscious FCC under Kevin Martin spanked Comcast (who sued, of course) and we’ve been in a holding pattern ever since.  But the predictions have become remarkably true north of the American border, where Canada endures all of the things Ou swore up and down in 1996 would never happen.

• Most major broadband providers in Canada throttle the speeds of peer to peer applications, reducing speeds to a fraction promised in their marketing materials.
• Most major broadband providers in Canada not only charge customers based on broadband speed, but also by the volume of data consumed, causing spikes in customer bills and a reduction in usage allowances in some cases.  Customers now face overlimit fees and penalties for exceeding the Internet usage ration they are granted each month.
• In 2006, Shaw Communications in Canada tried sticking a $10 monthly fee on broadband customers wanting to use Voice Over IP telephone service.  Vonage Canada complained loudly at the time.
• As far as controlling what you see online, that’s already in the cards in the States, if the cable industry has any say in the matter.

With a pliable FCC, what exists in Canada today will exist in the United States tomorrow without Net Neutrality protections enacted into law.

(footnoted material appears below the break)

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The Communications Workers of America released their 2009 Report on Internet Speeds in All 50 States, and the results show the United States continuing to lag well behind other nations in providing citizens with advanced, fast, and affordable connections to the Internet.  Little improvement has been made in the past year, when CWA released its 2008 findings. (Stop the Cap! reader Dave passed along word the report was in.)

The average download speed for the nation was 5.1 megabits per second (mbps) and the average upload speed was 1.1 mbps. This was only a nine-tenths of a megabit per second increase (from 4.2 mbps to 5.1 mbps) since last year. At this rate, it will take the United States 15 years to catch up with current Internet speeds in South Korea. And when compared to the rest of the world, the United States ranks 28th in average Internet connection speeds.

The CWA does have an interest in this fight.  It’s a labor union whose members work for many of the nation’s telecommunications providers.  CWA seeks a national broadband strategy that just happens to fall in line with the interests of consumers — increased speeds, more rural broadband expansion, more affordable access, and Net Neutrality protections.  CWA doesn’t take a formal position on Internet Overcharging schemes like usage caps, at least not yet.

The report measured broadband speed based on more than 400,000 Americans who voluntarily participated in a speed test offered on the Speed Matters website.  The results were collected and covered a significant part of the country, illustrating real world results of ordinary consumers, not simply the speeds touted by broadband providers in marketing materials.

The CWA report calls out the inadequacy of the deregulated free market approach to deliver broadband service consistently to all Americans.  In fact, the disparity of access and the tiny incremental upgrades in speed suggest it will take at least 15 years for the United States to match the speeds enjoyed today in South Korea, which can rightly be called a world leader in broadband even while this country cannot.

South Koreans enjoy an average connection speed of 20.4Mbps (four times faster than the United States).  Japan provides residents with 15.8Mbps, Sweden offers 12.8Mbps, the Netherlands 11Mbps, and 24 others who do a better job at delivering speedy broadband than their American counterparts.

Broadband remains too expensive for the slow service we enjoy today.  That promotes a digital divide between those affluent enough to afford broadband service and those who are struggling to make ends meet (88% of those earning more than $100,000 a year have service in their homes, while just 35% of those earning under $20,000 subscribe).

Another problem highlighted in the report is the ongoing problem of rural broadband access.  While 67% of urban and suburban residents subscribe to broadband, only 46% of rural households do, assuming they can even obtain service.

Rural areas are by far the most likely to encounter slow service, typically 1-3Mbps provided by DSL from the local phone company.

Until 2009, the United States was the only industrialized country in the world without a national broadband plan.  The Federal Communications Commission is expected to release one shortly, but only time will tell whether the plan will primarily benefit consumers or the special interests, including providers seeking to protect their monopoly or duopoly market position, and get taxpayer dollars to finance broadband projects that provide slow and expensive service to consumers.

The CWA has some recommendations:

Governmental action — in partnership with the private sector — is essential to stimulate broadband investment and adoption. Other countries are far ahead of us. It is time for the United States to take action.

• Universality.  Just as government policies helped bring affordable telephone service to everyone, our policies should ensure that every individual, family, business, and community has access to and can use high speed Internet at a price they can afford — regardless of their income or geographic location.
• High Speed.  Speed matters on the Internet. U.S. policies should promote higher Internet speeds and higher capacity networks. The United States should adopt policies to get us to 10 megabits per second upstream and 1 megabit per second downstream by 2010. New benchmarks in succeeding years should expand the number of households capable of sending and receiving multiple channel high-definition video and reach the global standard of 100 mbps.
• Open Internet.  We must protect free speech on the Internet so that people are able to go to the websites they want and download or upload what they want when they want on the Internet. There should be no degradation of service or censoring any lawful content on the Internet. At the same time, reasonable network management is necessary to preserve an effective and open Internet. Most important, building high-capacity networks will ensure that all Americans have fast, open access to all content on the Internet.
• Consumer Protections and Good Jobs.  Public policies should include consumer and worker protections, should support the growth of good, career jobs, and require the public reporting of deployment, actual speed, price, and service.

Below the jump, we’ve assembled a selection of maps and graphics showing where broadband is today in three of states with our largest reader base — New York, Texas, and North Carolina.

… Continue Reading

In just the second quarter of 2009, Comcast doled out nearly $3.3 million dollars of their subscribers’ money lobbying elected officials on a myriad of issues, covering everything from executive compensation to sports channels to unionizing efforts.

Forbes reported last week the nation’s largest cable company has lobbied on:

• the Excessive Pay Capped Deduction Act of 2009, a bill that would stop tax deductions on excessive compensation given to any employee. Excessive pay is defined as any amount above 100 times the average employee’s compensation at the company;
• the Income Equity Act of 2009, which curbs executive pay by limiting tax deductions on pay greater than 25 times that of the lowest paid employee, or $500,000, whichever is greater;
• the Shareholder Bill of Rights Act of 2009, which gives shareholders the right to approve or reject executive compensation packages.  Shareholders have long been in contention with Comcast over the near $25 million annual salary paid to CEO Brian Roberts;
• the right to carry regional sports channels on terms favorable to the cable operator, both in terms of channel/package placement and pricing;
• the nation’s Broadband Stimulus program — how the funds would be allocated, on what terms, and for what types of projects;
• the issue of unionization activity at Comcast;
• limits on Comcast’s ability to increase ownership of additional cable-related assets and systems.

Meanwhile, Brian Dickerson, a columnist at the Detroit Free Press has also been noticing that AT&T, promising to bring competition to Comcast in cities like Detroit, came at the price of a trojan horse called “statewide franchising,” an issue we’ve covered at length on Stop the Cap!

Deregulating the cable TV business in Michigan was supposed to be good news for metro Detroit cable subscribers and bad news for Comcast, long the dominant cable provider in our region.

At least, that’s how area legislators justified a 2006 law that streamlined the franchising process for rival cable operators such as AT&T and stripped pesky local governments of their authority to stand up for aggrieved cable customers.

Dickerson recites a familiar tune to our readers about how AT&T came to the Michigan state legislature in 2006 promising to bring hardcore competition to Comcast, the state’s most prominent cable provider, if only they would permit AT&T to obtain one statewide franchise agreement, allowing them the flexibility to launch U-verse in cities throughout the state without negotiating with each local government first.

The astroturfers turned up right behind AT&T’s open checkbook (the company spent at least $672,000 in 2006 in Michigan on lobbying and political contributions), touting the benefits of AT&T’s “creative solution” to cable competition.  FreedomWorks even invaded one meeting of the Michigan Municipal League and Michigan Townships Association in the spring of that year “to set the record straight.”  That really meant representing AT&T’s position, and offering plenty of empty promises to Michigan communities seeking competition and lower prices for their residents.

FreedomWorks rapidly also devolved the debate into a partisan “conservative” vs. “liberal” sideshow, hoping to pick up conservatives that would reflexively adopt a pro-AT&T position if it meant doing battle with “liberals.”  And in a two-for-one win for AT&T, the conservative action group also helped jettison Net Neutrality protections.

FreedomWorks President Matt Kibbe was quoted in a December 2006 press release: “To the very end, liberal special interests held out for additional regulatory mandates misleadingly labeled “neutral.” On behalf of more than 12,000 citizen activists in Michigan, I applaud the franchise reforms adopted this week while warning against new efforts in the 94th Legislature to deny basic property rights under the banner of “net neutrality.” We are prepared to defend consumer interests and property rights through relentless grassroots education and advocacy.”

FreedomWorks Michigan Director Randall Thompson concluded, “The issue of franchise reform is evidence that the Freedom Movement is deeply rooted in Michigan. Regular citizens made their voices heard, leading free market think tanks and scholars weighed in on the issue and as a result, public officials adopted good policy.”

Freedom Isn’t Free: Prices escalate across Michigan despite “competition.”

Now, three years after AT&T’s champions in the Legislature crowed that Comcast’s reign as the 800-pound. guerrilla of Michigan cable service was over, Comcast remains the state’s dominant provider, maintains a de facto wire-line monopoly in most its franchise areas, charges higher rates for basic cable service, and has far fewer legal obligations to the subscribers and communities it serves.

Indeed, the story is even worse for Michigan consumers, who in effect paid, as part of their monthly cable bills, for the lobbying and astroturf campaign battle launched against their own best interests and wallets.

The promised competition has arrived in some parts of Michigan, but often at pricing even higher than that charged by the dominant cable company in the area.  Many customers enjoy temporary savings as part of promotional new customer offers, that once expired, leave the customer stuck with everyday high pricing.  As seen in Tennessee, AT&T U-verse packages compete more on numbers of channels offered, not on the pricing of monthly basic service.  A-la-carte channel choice remains unavailable.

In fact, the second biggest winner of the Lobbying Money Party from AT&T ironically turned out to be Comcast.  After all, if AT&T was to be granted special provisions for statewide franchising and other deregulatory benefits, why can’t Comcast receive those benefits as well?

It seemed only fair that if legislators were prepared to relieve AT&T of any obligation to negotiate with local governments, Comcast and other cable providers should enjoy the same privilege. But what about the franchise agreements Comcast had already struck in places where AT&T had no immediate plans to compete?

Some legislators suggested that Comcast be required to live up to existing franchise agreements until competitors were offering service to at least 5% of the community’s residents. But when Sen. Nancy Cassis, R-Novi, proposed such a rule, she was defeated by a voice vote — the anonymous roar of Comcast’s many beneficiaries on both sides of the aisle.

As is the case in Tennessee, should a local franchise agreement not be renewed on favorable terms, there is always the possibility of securing that statewide franchise, bypassing local officials, reneging on hard fought agreements on things like:

• Guarantees that cable service would be made available to all residents, from the poorest to richest neighborhoods;
• Cable operators would agree to customer service benchmarks from call answer time to repair call timeframes;
• Provision and funding of local Public, Educational, and Government (PEG) access channels on the basic tier.

And so, three years after the blizzard of cash was long since pocketed, and astroturfers like FreedomWorks moved on to other industry-sponsored causes célèbre, where are the consumers after the “good public policy” applauded by FreedomWorks was adopted?

Absolutely in the exact same place they were before, only worse.

The Michigan Chapter of the National Association of Telecommunications Officers and Advisors says Comcast celebrated the first anniversary of cable deregulation by raising the price of its cheapest cable package by 25% in many communities; rates for other service tiers jumped between 9%-25%.

Brian Brown, spokesman for a consortium of Michigan cable providers led by Comcast, says the price increases reflect the cost of enhanced services subscribers are demanding. “That’s what the market wants,” he says.

Meanwhile, Comcast has shuttered many of the local service locations it was obligated to maintain under franchise agreements, and is waging a federal court fight to move public access programming off the basic cable line-up.

That’s right.  The market wants higher prices, no local service locations, and a parade of formerly analog cable channels being moved into digital tiers, necessitating additional consumer expense to rent digital converter equipment for every cable-connected television in the home.

Those are the same consumers whose interests have routinely been ignored by the politicians and the providers, and distorted by their bought and paid for political astroturf groups that hoodwink consumers into believing this is a “right-left issue.”

As the battle for Net Neutrality protections begins again this summer, and as we vigilantly maintain watch and prepare for opposition to any reintroduction of Internet Overcharging schemes, just remember the tale of Michigan and Tennessee and the real agenda of the astroturf groups sure to raise their well-financed opposition to pro-consumer legislation and activism yet again.

Champaign-Urbana, Illinois

When an astroturf or telecommunications company tells consumers that laws to permit statewide franchising for cable or telephone company video services are “consumer-friendly,” here is a real world example demonstrating how wrong they are.

After a year of informal negotiations with Comcast, Champaign city officials Tuesday voted unanimously to reject the company’s franchise renewal application.

Council members said they won’t accept a bad franchise agreement.

“We have to defend the rights of 75,000 people who live in Champaign and pay phenomenal amounts of cash for cable services,” city councilperson Tom Bruno told The News-Gazette.

At issue:

• City officials want Comcast to maintain a local office in Champaign-Urbana, which company officials have reportedly refused to guarantee;
• Comcast objects to a request from the city to add a fifth Public, Educational, and Government (PEG) access channel unless the city assures Comcast it will have a considerable lineup of “original” programming;
• Comcast wants to change the formula for computing “gross revenue,” on which the city bases its 5 percent franchise fee, substantially reducing the $700,000 annual payment the city usually receives.

Subscribers and city officials want assurances that Comcast will maintain a local presence, and not adopt a regional approach that places many Comcast employees that make decisions affecting the community well outside of the area.  Comcast’s demand that the city heavily program its existing PEG channels before considering adding a fifth channel as part of a ten year franchise agreement was dismissed by Rick Atterbery, a member of Champaign’s negotiating team and the chairman of the CU Joint Cable & Telecommunications Commission.

“They would require more original programming (on PEG channels) than NBC is providing [its affiliates],” Atterbery said.

Tom Bruno

City officials discovered the state of the cable industry’s willingness to compete when it put out a formal request for proposals for any cable company to apply for the city franchise.  Only one provider, the incumbent Comcast, submitted an application.

Other cities have had similar experiences, finding no cable company of size will apply for a franchise to serve a community already wired by someone else.  Instead, cable companies change hands when operators conduct private negotiations to swap territories, as was the case in Memphis, Tennessee when city officials learned Time Warner Cable was leaving and Comcast was taking over, or through mergers and acquisitions, such as in Buffalo, New York where incumbent operator Adelphia’s franchise was taken over by Time Warner Cable.

In the end, Comcast holds all of the cards.  Should Champaign officials be unable to negotiate an agreement with an intransigent Comcast, the cable company can use the telecommunications industry-friendly statewide franchise law it fought heavily against in 2007.  Like in Tennessee and several other states, AT&T (among others) has been spreading campaign contributions around to attempt to pass legislation to adopt a single franchise agreement for entire states, reducing the time and effort AT&T would have otherwise spent making agreements with individual communities.  Comcast, being the incumbent likely to face competition, strongly opposed the bill in an effort to slow down AT&T.

It would be ironic if Comcast had to resort to a statewide franchise to “opt out” of the local franchise negotiations that it fought so hard to force AT&T to comply with.

The News-Gazette confirms that the city really has little to work with:

The city could theoretically require Comcast to remove or abandon its city facilities, but Comcast could fight a council rejection in court or seek a state franchise, making Comcast’s ouster highly unlikely, Atterbery said.

Deb Piscola, Comcast’s director of government affairs, attended the meeting and said she was optimistic a franchise agreement can be hammered out. She said informal negotiations can continue along with the formal process simultaneously.

“Ninety-nine percent of franchise renewals are completed through the informal process,” she said. “I feel very confident we will reach an agreement.”

Piscola also said she believes Comcast will retain a local office, and that the differences over the franchise fee can be worked out.

[Update: 6:39pm ET — Clarified article to recognize this week’s action involved the Champaign city council, not Urbana.  Our reader Bob reminds us that AT&T U-verse has launched in parts of both cities in the past few weeks, should customers want to take their business elsewhere.]