“We did try, but it’s over now.” — Barry Diller, a major investor in Aereo

The multibillion dollar broadcasting conglomerates that control over-the-air television and most cable networks got everything they wanted today from a 6-3 decision in the U.S. Supreme Court that declared Aereo, an independent provider of online over-the-air television streams, illegal.

The court’s liberal justices joined Chief Justice John Roberts and moderate Anthony Kennedy in a complete repudiation of the legality of Aereo’s business model — selling over the air television signals received by individual tiny antennas and streamed over the Internet — without seeking permission from the stations involved. In a sweeping ruling, the court found that no matter the technology involved, any effort to resell access or copies of television programs without the permission of the copyright holders is illegal. “We conclude that Aereo is not just an equipment supplier,” Justice Breyer wrote in the opinion. “We do not see how the fact that Aereo transmits via personal copies of programs could make a difference.”

Aereo CEO and founder Chet Kanojia quickly released a statement declaring the decision “a massive setback for the American consumer.”

“We’ve said all along that we worked diligently to create a technology that complies with the law, but today’s decision clearly states that how the technology works does not matter. This sends a chilling message to the technology industry,” Kanojia said. “We are disappointed in the outcome, but our work is not done. We will continue to fight for our consumers and fight to create innovative technologies that have a meaningful and positive impact on our world.”

That is news to Barry Diller, perhaps Aereo’s biggest investor. He has said for months if Aereo loses in the Supreme Court, the service will be shut down. He repeated that today on CNBC.

“We did try, but it’s over now.” Diller said.

Image: Wall Street Journal

Reed Hundt, former FCC chairman under the Clinton Administration, said despite the fact the ruling may inconvenience Aereo subscribers, the court wasn’t wrong in its decision.

“Aereo has very little chance surviving in the business and Barry Diller got his hands caught in the regulatory cookie jar,” Hundt said. “You can’t use technological tricks to bypass [cable network] rules and regulations. I think that’s a very reasonable decision.”

Observers worried about the impact the Aereo case might have on ancillary services unintentionally caught up in any broad legal language, but the court appeared to carefully avoid those complications.

The ruling leaves antenna manufacturers unaffected because antenna users simply capture over-the-air signals for reception in the home without paying the kind of ongoing subscription fees Aereo charged its customers.

The decision also protects the legality of cloud computing, DVR recordings, and other new technologies not directly related to the lawsuit. “We agree with the Solicitor General that “[q]uestions involving cloud computing, [remote storage] DVRs, and other novel issues not before the Court, as to which ‘Congress has not plainly marked [the] course,’ should await a case in which they are squarely presented,” Breyer wrote.

The court’s liberal wing shared Breyer’s opinion. Ruth Bader Ginsburg, Sonia Sotomayor and Elena Kagan all voted in favor of broadcasters including Walt Disney (ABC), Comcast (NBC), CBS Corp., and FOX.

Conservatives slammed the majority ruling against Aereo, claiming the court was bending over backwards for Hollywood and giant broadcasting conglomerates. Justice Antonin Scalia’s dissent ripped the majority’s ruling, claiming it would “sow confusion for years to come.” Scalia predicts there will be plenty of new litigation before the courts on issues related to online transmission of copyright works as a result of today’s decision.

Although Aereo was still pre-registering customers as of this afternoon, that isn’t likely to stay true for much longer. Aereo’s only bid to stay alive is to seek licensing agreements with the stations it distributes over its service. With broadcasters’ strengthened hand, it is unlikely they will be receptive to pricing agreements that would allow Aereo to continue providing service for $8 a month. Major cable and satellite operators are signing retransmission consent agreements with volume discounts that run above $1 a month per subscriber for each television station in a local area. In most cities, that would amount to at least $5 a month, but Aereo will likely face even higher costs because it lacks access to discounts.

[flv]http://www.phillipdampier.com/video/CNN Supreme Court rules against Aereo 6-25-14.mp4[/flv]

CNN attempts to explain the meaning of the Aereo case to its less-informed viewers with mixed success. But the story explains why this is relevant to cord cutters. (4:41)

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Bloomberg News reports the Aereo case was a decisive victory for programmers who now have a strengthened hand asking for more compensation during retransmission consent negotiations with cable and satellite providers. (1:55)

[flv]http://www.phillipdampier.com/video/Bloomberg Aereo Ruling Gets Positive Response from Broadcasters 6-25-14.flv[/flv]

Broadcasters called today’s victory “pro-consumer” but that is open to debate. Bloomberg News digs deeper into what this case means for DVR and cloud storage services as well. (5:26)

[flv]http://www.phillipdampier.com/video/Bloomberg Aereo Violating Broadcaster Copyrights Stocks Up 6-25-14.flv[/flv]

Wall Street is rewarding big television networks and station owner groups with higher stock prices after winning a decisive victory against Aereo, Bloomberg reports. (2:35)

ABCom is Albania’s largest ISP.

Albanians no longer have to watch usage meters while browsing the Internet and downloading movies and music. The country’s largest ISP – ABCom – has eliminated data caps on all but its cheapest broadband plans (4Mbps service with a 2GB cap: $4.81 for 15 days or 4Mbps service with a 5GB cap: $9.69 for 30 days). Now residents of Tirana, Durrës, Shkodër, Elbasan, Vlorë, and Gjirokastër can browse the Internet at self-selected speeds between 1-100Mbps with no usage-based billing or fixed caps.

It is remarkable progress for Europe’s poorest country. For much of the 20th century, Albania was infamous for its oppressive Communist dictatorship under the leadership of Enver Hoxha, a man who felt Stalin was the Soviet Union’s last true Communist leader and who courted and later cut ties with both the U.S.S.R. and the People’s Republic of China over what he called their “revisionist Marxist-Leninist” policies that betrayed true socialism. Hoxha’s idea of a worker’s paradise was to force huge numbers of both blue and white color workers into the fields every summer to help harvest the country’s strawberry crop.

During Hoxha’s 40 years in power, telecommunications for most Albanians consisted of a portable radio (and occasionally an imported television). Only 1.4 out of 100 had basic telephone service. If more wanted it, they could not get it. A long waiting list guaranteed an installation date years in the future. Albania began its transformation into a democracy with just 42,000 telephone lines, despite a population of nearly three million.

After the Communist government fell in 1991, life changed little in rural Albania. Peasants found initiatives to improve rural telephone service so irrelevant they knocked out service to about 1,000 villages after commandeering telephone wire to build fences to keep their sheep herds from straying. Even in the capital city Tirana, telecommunications infrastructure was decrepit at best. Even the wealthiest Albanians had to contend with rotary dial telephones produced in a forgotten factory in Bulgaria or Romania. Many preferred refurbished telephones rebuilt with scrap parts obtained from Italy.

Today, like many other countries lacking wired infrastructure, Albanians depend mostly on their cell phones to communicate. In 2012, there were 312,000 landlines in use, but 3.5 million cell phones were active. More than a half million wireless users rely entirely on their phones for Internet access.

“Are you ready for unlimited Internet with guaranteed 100Mbps speed?”

In 1998, ABCom launched its Internet Service Provider business, initially selling DSL and wireless broadband. With Albania’s economy always in difficulty, the country chose the cheaper path followed by North America — adopting Hybrid Fiber-Coax (HFC) network technology instead of fiber to the home, common elsewhere in southern Europe. HFC Internet access is better known by most of us as broadband from our local cable company. Expansion of wired broadband has been very slow in Albania. The concept of delivering television, broadband, and phone service over ABCom’s cable system in a triple play package only began in 2009.

The biggest attractions to wired broadband include no data caps and more reliable fixed broadband speeds the country’s wireless providers cannot deliver. Because of wide income disparity, ABCom offers a large range of speed plans for different budgets: 1, 2, 4, 8, 12, 30, and 100Mbps.

In response, competition from wireless providers has stepped up recently. Vodafone Albania is offering five mobile Internet options for users of its 3G network. Customers can opt to pay for daily, weekly or monthly bundles. The 40MB daily bundle costs $0.58; the 250MB weekly bundle costs $2.91; the 500MB monthly bundle costs $4.85, and the 1GB monthly bundle costs $7.76. The speeds are much slower than the plans offered by ABCom, however.

[flv]http://www.phillipdampier.com/video/ABCom Mesazh Promocional nga ABCom March 2013.mp4[/flv]

ABCom produced this television ad introducing its new triple play TV, broadband, and telephone package for Albanian customers. (Albanian) (0:31)

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My apologies for the poor audio. You will need to stay close to the volume control on this one because the volume may suddenly change between speakers. We had less than ideal recording conditions and no access to the microphone output. Testimony from Comcast begins 5:40 into the video. Our testimony starts at 36:30, which closely follows the transcript already published. Q&A follows me and then the public input session begins.

Note if you wish to receive a copy of this in higher resolution for rebroadcast on a public access channel or for other purposes, please use the Contact Us button and we’ll be able to provide a copy. File size will exceed 1GB, however. (1 hour, 35 minutes)

While your Internet bill is likely north of $50 a month, customers of Slovak Telecom in the eastern European nation of Slovakia will get a free speed upgrade to 300/30Mbps effective Aug. 1, with no change in price.

Slovak Telecom customers on its fiber to the home network subscribed to the super premium “Magi Internet XL” plan will continue to pay just over $27 a month for the service. Customers will see the speed upgrades gradually roll out across the service area over the summer and fall. Customers will be given new equipment to support the new speeds.

Meanwhile, a competing fixed line provider, Slovanet, is taking a cue from Google Fiber and polled residents of the city of Dunajska Streda where it should deploy its fiber to the home service first. Slovanet customers will be able to buy 100Mbps fiber broadband through its subsidiary MadNet, along with a 100-channel TV package and phone service.

The broadband package alone costs $31 a month, more expensive than Slovak Telecom, but it comes with some stunning promotions for customers, starting with a $1.36 installation fee. The other generous offers: a Lenovo brand tablet for $1.36, a cordless phone for $1.36, and a choice of wireless routers as low as $1.36. An add on wireless package is also promotionally priced at $1.36.

Slovanet offers a 20-channel basic cable TV package at no charge to current customers and a 35-channel TV package that includes many of the most popular channels in Slovakia for $12 a month. Phone service is free if you are willing to pay 5¢ per minute to numbers of non-Slovanet customers (calling other Slovanet customers is free).

If you want unlimited local/regional calling, the phone service costs $5.29 a month. Unlimited long distance can be added for $10.77 a month.

For the benefit of new visitors, text items in bold are clickable links. A complete video from this event will be posted as soon as possible.

Good evening. My name is Phillip Dampier from Stop the Cap!, a Rochester-based all-volunteer consumer group fighting for better broadband service and against Internet usage caps.

This is a critical moment for New York. The Internet has become a necessity for most of us and the future is largely in the hands of one company capable of delivering 21st century broadband to the majority of upstate New York. That company isn’t Verizon, which has ended FiOS fiber expansion while abandoning most of its upstate customers with slow speed DSL. Indeed, as their market share will attest, our broadband future is held in the hands of Time Warner Cable.

Comcast could have become a big player in New York had it chosen to compete head to head with Time Warner. But large cable operators avoid that kind of competition, preferring comfortable fiefdoms that only change hands at the whim of the companies involved. As local officials from across New York have already discovered, no major cable operator will compete for an expiring franchise currently held by another major cable operator.

Ironically, Comcast is using that fact in its favor, noting that since neither company competes directly with the other, making Comcast larger has no impact on competition. But that should hardly be the only test.

At issue is whether this merger is in the public interest. This year, for the first time in a long time, the rules have changed in New York. In the past, the Commission had to prove the merger was not in the best interests of New Yorkers. Now the onus is on Comcast to prove it is. It has fallen far short of meeting that burden.

Let’s start with Comcast’s dysfunctional relationship with its customers. With more than 75 citizen comments filed with the Commission so far. Comcast’s reputation clearly precedes it. The consensus view is perhaps best represented by one exasperated Clinton-area resident who wrote, I quote, “No. No no no. HELL no.”

That kind of reaction is unsurprising considering Consumer Reports ranked Comcast 15th out of 17 large cable companies and called their Internet service and customer relations mediocre. Every year since 2007, Comcast’s CEO acknowledges the problems with customer service and promises to do better. Seven years later, the American Customer Satisfaction Index reports absolutely no measurable improvement. In fact, ACSI has concluded Comcast had the worst customer satisfaction rating of any company or government agency in the country, including the IRS.

In order to sell this $45 billion boondoggle to a skeptical public, Comcast has hired 76 lobbyists from 24 different firms and will reportedly spend millions trying to convince regulators and our elected leaders this deal is good for New York. If the deal gets done, Comcast’s biggest spending spree won’t be on behalf of its customers. Instead, Comcast has announced a $17 billion share buyback to benefit their shareholders. Imagine if this money was instead spent on improving customer service and selling a better product at a lower price.

The only suitable response to this merger deal is its outright rejection. Some may recommend imposing a handful of temporary conditions in return for approval – like the kind Sen. Al Franken accused Comcast of reneging on after its earlier merger with NBCUniversal. But this is one of those cases where you just can’t fit a round peg into a square deal for consumers, no matter how hard you try.

With respect to television, volume discounts have a huge impact on cable programming costs and competition. The biggest players get the best discounts, smaller ones are stunned by programming rate hikes and new competitors think twice about getting into the business.

AT&T said last week its 5.7 million customer U-verse television service was too small to get the kind of discounts its cable and satellite competitors receive. AT&T’s solution is to buy DirecTV, which might be good for AT&T but is bad for competition.

Frontier Communications has also felt the volume discount sting after adopting several Verizon FiOS franchises. When it lost Verizon’s volume discounts, Frontier began a relentless marketing effort to convince its customers to abandon FiOS TV and switch to technically inferior satellite TV.

Combining Comcast and Time Warner Cable will indeed help Comcast secure better deals from major programmers (including Comcast itself). But Comcast is already on record warning those savings won’t be shared with customers.

Comcast’s executive vice president David Cohen summed it up best: “We are certainly not promising that customer bills will go down or increase less rapidly.”

Is that in the public interest?

Comcast suggests this merger will make its cable television market share no larger than it had in 2002 when it bought the assets of AT&T Cable. But this is 2014 and cable television is increasingly no longer the industry’s biggest breadwinner. Broadband is, and post-merger Comcast will control 40-50 percent of the Internet access market nationwide.

So what do Time Warner Cable customers get if Comcast takes over? A higher bill and worse service.

Several months before Comcast sought this merger, Time Warner announced a series of major upgrades under an initiative called TWC Maxx. Over the next two years, Time Warner Cable plans to more than triple the Internet speeds customers get now at no additional charge. Those upgrades are already available in parts of New York City, Los Angeles, and Austin.

A Time Warner Cable customer in Queens used to pay $57.99 for 15 megabit broadband. As of last month, for the same price, they get 50 megabits.

In contrast, Comcast’s Internet Plus plan delivers just 25 megabits and costs $69.95 a month – nearly $12 more for half the speed. Who has the better broadband at a better price? Time Warner Cable.

New York State’s digital economy depends on Internet innovation, which means some customers need faster speeds than others. Time Warner Cable’s Maxx initiative already delivers far superior speeds than what Comcast offers, despite claims from Comcast this merger would deliver New York a broadband upgrade.

Time Warner’s new top of the line Internet service, Ultimate 300 (formerly Ultimate 50), delivers 300 megabit service for $74.99 a month. Comcast’s top cable broadband offer listed on their website is Extreme 105, offering 105 megabit speeds at prices ranging from $99.95 to $114.95.

Is the public interest better served with 300 megabits for $74.99 from Time Warner Cable or paying almost $40 more for one-third of that speed from Comcast? Again, Time Warner Cable has the better deal for customers.

But the charges keep coming.

At least 90 percent of cable customers lease their cable modem from the cable company, and Comcast charges one of the highest lease rates in the industry – $8 a month. Time Warner Cable charges just under $6.

So I ask again, is this merger really in the public interest when broadband customers will be expected to pay more for less service?

Then there is the issue of usage caps, a creative way to put a toll on innovation. Usage caps make high bandwidth applications of the future untenable while also protecting cable television revenue.

If the PSC approves this transaction, the vast majority of New York will live under Comcast’s returning usage cap regime. There is simply no justification for usage limits on residential broadband service, particularly from a company as profitable as Comcast. Verizon FiOS does not have caps. Neither does Cablevision. But the majority of upstate New Yorkers won’t have the option of choosing either.

In 2009, Time Warner Cable lived through a two week public relations nightmare when they attempted an experiment with compulsory usage caps on customers in Rochester. After Stop the Cap! pushed back, then CEO Glenn Britt shelved the idea. Britt would later emphasize he now believed Time Warner should always have an unlimited use tier available for customers who want it.

Whether intended or not, Time Warner actually proved that was the right idea. In early 2012, the company introduced optional usage caps in return for discounts. They quickly discovered customers have no interest in having their Internet usage measured and limited, even for a discount. Out of 11 million Time Warner Cable broadband customers, only a few thousand have been convinced to enroll.

Comcast doesn’t give customers a choice. In 2008, a strict 250GB usage cap was imposed on all residential customers with disconnect threats for violators. Since announcing it would re-evaluate that cap in May 2012, it now appears Comcast has settled on a new residential 300GB usage allowance gradually being reintroduced in Comcast service areas starting in southern U.S. markets.

Comcast executive vice president David Cohen cutely calls them “usage thresholds.” At Stop the Cap! we call it Internet Overcharging.

Cohen predicts Comcast will have broadband usage thresholds imposed on every city they serve within five years. Whether you call it a cap or a threshold, it is in fact a limit on how much Internet service you can consume without risking overlimit fees of $10 for each 50GB increment over your allowance.

Unlike Time Warner Cable, Comcast isn’t offering a discount with its usage cap, so those who use less will still pay the same they always have, proving again that usage caps don’t save customers money. (See below for clarification)

At the end of May I watched CNBC interview Comcast CEO Brian Roberts who implied during a discussion about Comcast’s usage caps that usage growth was impinging on the viability of its broadband business. Moments later, Time Warner Cable ran an ad emphasizing its broadband service has no usage caps. Both companies are making plenty of money from broadband.

This merger is bad news for customers faced with Comcast’s legendary bad service, its forthcoming usage caps, or the higher prices it charges. Even promised innovations like their much touted X1 set top platform comes with a gotcha Comcast routinely forgets to mention. Customers have to pay a $99 installation fee.

Stop the Cap! will submit a more comprehensive filing with the PSC outlining all of our objections to this merger, and there are several more. We invite anyone in the audience to visit stopthecap.com for this and other matters related to cable television and broadband. We appreciate being invited to share our views with the Commission and hope to bring a consumer perspective to this important development in our shared telecommunications future. I’d be happy to answer any questions you might have.

[flv]http://www.phillipdampier.com/video/TWC News Hearing on Comcast 6-16-14.mp4[/flv]

Time Warner Cable News covered the Public Service Commission hearing in Buffalo, which included testimony from Stop the Cap!’s Phillip Dampier. Also appearing was a representative from the National Black Chamber of Commerce advocating that telecom companies merge as fast as possible. The Chamber has received significant support from Comcast for several years now and representatives routinely testify in favor of Comcast’s business initiatives. (2:30)

Clarification: Comcast has different trials in different cities:

Nashville, Tennessee: 300 GB per month with $10/50GB overlimit fee;

Tucson, Arizona: Economy Plus through Performance XFINITY Internet tiers: 300 GB. Blast! Internet tier: 350 GB; Extreme 50 customers: 450 GB; Extreme 105: 600 GB. $10/50GB overlimit fee;

Huntsville and Mobile, Alabama; Atlanta, Augusta and Savannah, Georgia; Central Kentucky; Maine; Jackson, Mississippi; Knoxville and Memphis, Tennessee and Charleston, South Carolina: 300 GB per month with $10/50GB; XFINITY Internet Economy Plus customers can choose to enroll in the Flexible-Data Option to receive a $5.00 credit on their monthly bill and reduce their data usage plan from 300 GB to 5 GB. If customers choose this option and use more than 5 GB of data in any given month, they will not receive the $5.00 credit and will be charged an additional $1.00 for each gigabyte of data used over the 5 GB included in the Flexible-Data Option;

Fresno, California, Economy Plus customers also have the option of enrolling in the Flexible-Data Option.

Comcast suggested customers can enroll in a cheaper usage plan in some of these markets. Yes they can, but only if they downgrade to Economy Plus service which offers speeds only up to 3Mbps. Their $5 discount is not available on any other plan.