Again with the domination and control thing.

Dr. John Malone is wasting no time reacquainting the cable industry with the kinds of classic power plays he used while running Tele-Communications, Inc. (TCI), then America’s largest and most powerful cable operator. Malone’s latest salvo: proposing new broadband pricing schemes that run afoul of Net Neutrality by charging consumers higher broadband prices if they watch online video services like Netflix.

Malone, increasing his influence over Charter Communications before launching the next wave of cable company consolidation, implied the industry is hurting from the lack of power and dominance it used to enjoy when it had an unfettered, territorial monopoly back in the 1980s. Malone told an audience at the annual shareholder meeting of Liberty Global he advocates getting the industry’s mojo back by returning to “value creation” pricing models — code language for new ways to charge customers higher prices or add-on fees.

Malone sees raising prices for Internet service key to bringing the industry back to the golden profits it used to enjoy selling television subscriptions, even as customers faced massive rate increases that doubled, tripled, or even quintupled rates for certain services.

Malone’s assessment of the eight current largest cable operators wiring the country: Snow White (Comcast) and the Seven Dwarfs (Everyone Else). The disorganized agendas of various cable operators are troublesome to Malone, who wants the industry to act in lock step with a unified, cooperating voice. Consumer groups call this kind of friendly cooperation “collusion.”

Malone also thinks it is time to discard reliance on cable television to bring home the revenue and profits Wall Street expects. The industry should instead turn its earning attention to broadband, a product few Americans can live without. Malone believes the cable industry is not only positioned to control content distributed on its TV Everywhere online video platform for authenticated cable subscribers, but also have a say in competing content from Netflix, among others, which are totally reliant on the broadband pipes provided by ISPs.

With Netflix consuming a growing percentage of cable broadband resources, and possibly contributing to cable TV cord cutting, Malone does not advocate crushing its competition. Instead, he wants a piece of the action. How? By demanding online video providers pay for using cable broadband infrastructure. Consumers also face surcharges on their broadband accounts if they watch online video services like Netflix, Amazon, YouTube and other over-the-top-video. Malone also advocates the implementation of Internet Overcharging schemes like consumption billing and usage caps.

Malone’s “world of the future,” is, in reality, not much different from AT&T’s 2005 proclamation that use of AT&T’s broadband pipes should come at a cost to content producers.

Then-CEO Ed Whitacre’s public statements fueled support for Net Neutrality, which forbids broadband providers from traffic discrimination techniques like charging extra for certain content or artificially degrading service for producers who refuse to pay.

Malone’s incendiary ideas may be letting too much of the cat out of the bag, say some observers worried Malone’s rhetoric will remind people he was once labeled “the Darth Vader of Cable.” His statements could attract unnecessary attention that could be used to organize opposition.

Last week, the Wall Street Journal reported that broadband providers and content producers were already secretly cutting deals to exchange bandwidth for money without the public scrutiny Malone’s comments will generate.

The newspaper reports some of the biggest Net Neutrality proponents around, particularly Google, are quietly paying millions to large cable companies to guarantee their content reaches customers as quickly and smoothly as possible.

Among the top recipients: Comcast, which collects $25-30 million a year and Time Warner Cable, which nets “tens of millions of dollars” from Google, Microsoft, and Facebook.

The payments are buried in the murky world of “interconnection agreements” governing the backbone pipes carrying huge amounts of web traffic from popular websites and those owned by large telecom providers. Originally, content and broadband providers agreed to peering arrangements that would trade traffic without payment to each other. But as bandwidth-heavy online video began to turn those shared connections into lopsided floods of movies and TV shows headed into subscriber homes against a trickle of content coming back from broadband customers, the cable and phone companies began crying foul.

Netflix has so far navigated around paying Internet Service Providers directly to support their video content. Instead, it is building its own specialized content distribution network intended for ISPs to more effectively and efficiently deliver high bandwidth video. Connections to the Netflix network are free of charge to participating providers, but many ISPs are demanding to be paid.

Some content providers are fearful if they don’t pay, the free “peering” links will become hopelessly overcongested and slow web pages and services to a crawl.

For Verizon customers, that may have already happened as Netflix streams began stuttering and buffering earlier this month.

Cogent, which supplies Verizon with a considerable amount of Netflix traffic, immediately pointed the finger at the phone company for artificially degrading the Netflix viewing experience. Verizon promptly shot back:

Cogent is not compliant with one of the basic and long-standing requirements for most settlement-free peering arrangements: that traffic between the providers be roughly in balance. When the traffic loads are not symmetric, the provider with the heavier load typically pays the other for transit. This isn’t a story about Netflix, or about Verizon “letting” anybody’s traffic deteriorate. This is a fairly boring story about a bandwidth provider that is unhappy that they are out of balance and will have to make alternative arrangements for capacity enhancements, just like any other interconnecting ISP.

Cable giants like Malone see the battle as one the cable industry will have a hard time losing, because it is the only technology present in most communities that can handle the traffic and the growing demand for faster speeds.

Cable operators think content companies have a license to print money, especially since their success is built partly on broadband networks they don’t own or pay for delivering content to customers. At the same time, content companies fear they could be forced out of business if the cable industry decides to give itself preferential treatment.

[flv width=”504″ height=”300″]http://www.phillipdampier.com/video/WSJ Paying ISPs to Move Content 6-20-13.flv[/flv]

Reporters from The Wall Street Journal discuss the secret payment arrangements between content producers and some of America’s largest ISPs. (4 minutes)

Last week, Verizon’s Tom Maguire responded to some of our earlier coverage about Verizon’s decision to abandon landline service on portions of Fire Island devastated by last fall’s Hurricane Sandy. We have received several complaints from readers about our decision to grant space to Verizon to present their views without reciprocation. While we understand those concerns, Stop the Cap! believes readers deserve both sides of a discussion that AT&T and Verizon will soon seek to have with customers across many of their rural service areas. For that reason, we invited Verizon’s participation. This is our response:

Phillip Dampier

Raise your hand if you want Verizon’s Voice Link to replace your traditional telephone service and lose your only wired broadband connection.

Almost no one has. Despite the arguments from Verizon Communications and AT&T that wireless is the answer to troublesome copper wiring and maintaining rural telephone service, dozens of Fire Island, N.Y. customers have been sufficiently provoked to file comments with state regulators, making it clear they want no part of the loss of their landline and its accompanying, affordable broadband service. In more than 135 public comments with the Public Service Commission at press time, Stop the Cap! could only find one comment from a Fire Island resident who had no issues with Verizon’s wireless landline replacement. He was upset Verizon had not wired a nearby yacht club for broadband service.

Both AT&T and Verizon have publicly advocated that rural customers would be better served moving from traditional wired landline service to their respective wireless 4G LTE networks. AT&T characterizes it as “an upgrade” that switches customers to an “all IP” 21st century network. Verizon has been less bold in its public policy statements, framing its position mostly in economic terms  — does it make sense to invest large sums to upgrade or repair damaged infrastructure that serves a relatively small number of customers?

Until recently, customers have been free to make the choice between a landline and wireless service themselves. Now, the residents of Fire Island and some barrier islands off the coast of New Jersey have a very different choice: They can accept Verizon’s Voice Link landline replacement, sign up for cell service that has proved troublesome in both areas, or give up phone service altogether. Verizon has made it clear it is not prepared to replace the destroyed infrastructure on portions of the islands, it will not invest in major upkeep and repairs to network facilities that may have been compromised but are still functioning for now, and will likely never offer its fiber FiOS network in the affected areas.

Stop the Cap! has expressed repeated concern that the decision to abandon wired infrastructure in favor of wireless is based primarily on profit motives, is short-sighted, and represents a downgrade in the quality of an important, regulated utility service, particularly in rural and out-of-the-way places that have few, if any alternatives. Fire Island is shaping up to argue our case, based on the testimony of those actually living and working on the island.

Customers Don’t Want the ‘Solution’ Verizon is Offering

Voice Link is not proving a welcome permanent resident on Fire Island for many customers.

The reasons are clear: inadequate wireless service is common on the island, Voice Link does not perform or sound as good as the landline it replaces, and Verizon’s wireless broadband alternative will cost many residents their unlimited-use DSL service in favor of a wireless capped option that could cost more than $100 a month.

Letter to affected Verizon customers on Fire Island.

Verizon’s strongest argument is that landline service has fallen out of favor in the United States, with customers increasingly disconnecting home phones in favor of cell phones. If Verizon’s statistics are correct, 80 percent of the voice traffic on the island is already handled by Verizon Wireless. (Verizon does not specify if that traffic comes from permanent residents or temporary visitors, a point of contention with residents.)

Maguire was very careful to limit Verizon’s advocacy of Voice Link in terms of its capacity to handle voice calls. That is because Voice Link is currently incompatible with a whole range of important services that have worked fine with traditional landlines for years.

Maguire’s words are important: “Verizon’s commitment is to provide our customers with voice service,” — the kind you had in the late 70s. Voice Link fails faxing, home medical monitoring, home alarm systems, dial-up service, credit card transactions, and home satellite equipment that connects to the telephone network.

Voice Link is no upgrade for Fire Island. It represents turning back the clock, especially for broadband customers.

Maguire claimed in his editorial the company was only considering Voice Link for the universe of customers where the copper network was not supporting their requirements, with the exception of Sandy-impacted Fire Island and some New Jersey barrier islands. But that does not tell the whole story. In a filing with the New York State Public Service Commission, Verizon makes it clear it intends to introduce the same solution in other parts of New York:

It also seeks to deploy Voice Link in other parts of the State, both as an optional service in areas where the company also offers tariffed wireline local exchange service, and (subject to the Commission’s approval) as a sole service offering in particular locations and circumstances.

While Verizon has sought to appease regulators by volunteering to offer an equal level of service for the same or less money, there are questions about whether a regulator has any oversight authority over Voice Link.

“It is a remarkable concept in utility regulation that a regulated utility may determine that costs are unreasonable and as a result choose to provide alternative, and potentially unregulated service to affected customers,” said Louis Barash of Ocean Beach. “Verizon proposes to permit the PSC to regulate that activity, but it is not clear that the Commission has such authority. And it certainly isn’t clear that the Commission would have any authority to reverse its decision, or otherwise to sanction the company, if Verizon failed to comply with its undertakings.”

Broadband & Competition Matters: Forcing Customers Off Unlimited DSL in Favor of Near-Exclusive, Usage-Capped, Verizon Wireless Broadband

Offering broadband is a vital part of any telephone company’s strategy to add and keep customers. Yet Verizon’s DSL customers on the western half of Fire Island will have their broadband service canceled unless wired service (copper or fiber) is available. Verizon’s only alternative is a usage-capped, prohibitively expensive Verizon Wireless mobile data plan that may or may not perform well on the signal-challenged island. There is literally nowhere else for customers to go.

Verizon’s own statistics confirm none of its wireless competitors handle significant traffic on and off the island.

Maguire: “A multimillion dollar investment with no guarantee that residents of the island will even subscribe to our services makes no economic sense. In fact, that’s probably why Verizon is the sole provider on the island. None of the companies we compete with in other parts of New York offer services on the island.”

Maguire’s evidence:

“The company discovered that 80 percent of the voice traffic was already wireless.  If other wireless providers were factored in, it is likely that the percentage is closer to 90 percent.”

That means Verizon’s wireless competitors collectively have a traffic share of less than 10%.

Verizon’s Plan & Public Safety

Residents advise visitors they better have Verizon Wireless and a robust phone that works well in challenging reception areas if they expect to use it while on the island. AT&T, Sprint, and T-Mobile customers are often out of luck. That poses an immediate and direct threat to public safety, according to public safety officials.

“The cellphone service on Fire Island progressively gets worse every year as more and more people are bringing smartphones out there,” explained Dominic Bertucci, chief of the Kismet Fire Department. “There are some days where you can barely get a signal.”

The Brookhaven Town Fire Chiefs Council, which represents the leadership of 39 fire departments and fire companies in the region is vehemently opposed to Voice Link and considers it a safety menace, especially during frequent summer power outages when the island’s population is at its peak.

“Without a copper wire phone service, a service that still functions even during a power failure, how can we insure that the residents can call for help?” asks president John Cronin. “How will they call for the lifesaving services that are provided by the fire and EMS units of Fire Island? The corporate desire for greater profit cannot be made at the expense of the safety of the residents of Fire Island.”

“Wireless service is not reliable,” adds Fair Harbor resident Meredith Davis. “Imagine being in an emergency and having ‘spotty’ reception which happens out there all the time on cell phones. That is not safe and not okay.”

Verizon disclaims legal responsibility for failed wireless 911 calls in its terms and conditions. The most Verizon owes you is a refund of a portion of your monthly service charges.

“If you are unfamiliar with Fire Island, there is very little medical service and the only way off the island is a scheduled ferry service or, for some people who have permits and trucks, a very long drive,” explains lifelong Fire Island resident Nora Olsen. “When someone needs to be rushed to the hospital, they are evacuated by helicopter, which makes timely emergency calls of the essence to save lives. So you can imagine how important it is to have reliable phone service. It should be up to the individual to decide if they want to switch to a wireless service. They should not be forced into it by Verizon. The people who are most likely to want to stick with the phone service they have been used to all their life — senior citizens — are the most likely to need to use the phone to call for help.”

A number of residents also claim Verizon has overblown the real extent of damage on the island and is not operating in good faith.

“In the larger communities of Ocean Beach and Seaview, I have met no one yet that has their connectivity lost,” said resident Karen Warren. “So for Verizon to assert that the infrastructure is largely destroyed and to repair it would be an enormous expense is simply not true. To add insult to injury, before coming out and finding out that our lines were in fact intact, Verizon offered to ‘replace’ our existing DSL data service with LTE Jetpak wireless broadband. The performance and reliability with only a single device connected was horrendous.”

“[Verizon is] pushing us toward a higher-cost and lower-value solution,” Warren concluded.

Getting specific information about the current state of Verizon’s network on Fire Island and repair/replacement costs are hard to come by. Verizon filed an application with the PSC declaring much of the information confidential or a trade secret, refusing to share it with the public. The company was concerned some might access the Public Service Commission website, find the case number about Fire Island, navigate to the specific Verizon filing containing information about their infrastructure… and then vandalize it.

The worst affected communities on Fire Island.

Barash suspects Verizon might be hiding something, especially considering the company requested to bypass usual waiting periods and public notification requirements:

Verizon asserts that it would cost “$4.8 million for a voice-only digital loop carrier system comparable to the networking serving the eastern part of the island.” It is by no means clear, however, that such a system is the minimum required to restore/repair the western part of the system to the service it had pre-storm. Certainly Verizon’s application makes no representation to that effect. This estimate apparently contemplates an entire new system for the western portion of Fire Island, notwithstanding that a meaningful percentage of the copper wire system is still operational.

Moreover, Verizon’s position on the required scope of repairs has been a constantly shifting target. Verizon apparently advised Commission Staff, and Staff repeated at the April 18 Commission Hearing, that the western Fire Island telephone system was “damaged beyond repair by the storm.” Verizon apparently has abandoned that claim; this application indeed is premised on the assumption that the system can be repaired. Furthermore, in its first (May 3) submission to the Commission, Verizon stated that “five of the six cables that run between Fire Island and the mainland – the five that serve the western portion of the Island – were also badly damaged by the storm.” Just a week later, it has abandoned that claim as well, and instead in its amended Certification asserts “Five of the six cables that run throughout Fire Island were badly damaged by the storm.” It is hard to accept at face value Verizon’s estimated repair costs when even at this late date it does not seem to have a handle on exactly the damage that needs repair.

A full Hearing, with notice to affected customers, is necessary to develop facts sufficient to make such determinations and to be reasonably certain the Commission is acting based on reasonably verifiable facts.

Residents deserve a full voice and full disclosure in discussions that will directly impact their vital telecommunications services for years to come. Verizon’s corporate officials will not have to live with the results. Neither will the staff at the PSC.

Stop the Cap! has chosen to directly participate in the New York State Public Service Commission regulatory process and has filed two formal comments thus far. The first outlines Verizon’s greater strategy to abandon landline service in rural areas outlined by Verizon CEO Lowell McAdam in 2012. We also provided the Commission the prices Verizon Wireless intends to charge Verizon DSL customers switching to wireless broadband service. The second objects to Verizon’s excessive request for secrecy and exposes cell coverage issues on Fire Island.

An upstart telecom company has thrown the French mobile market into competitive chaos offering customers unlimited voice, messaging, and certain data services for around $26 a month. Now the company is expanding its footprint by offering free femtocells to customers that can be shared by other customers, according to a report by GigaOm‘s Kevin Fitchard.

France’s Free Mobile is everything North American cell phone providers are not. The company offers dirt cheap, often unlimited service (their backup HSPA+ roaming data network has a 3GB limit), crowdsourced public Wi-Fi networks run by its customers, and soon an even more robust network made possible by handing out network extender devices at no charge, improving indoor reception and data speeds.

Free offers more than just mobile services. Its home broadband service offers 40-100Mbps Internet service, offering plenty of bandwidth to accommodate shared connections.

Freebox home Internet gateway, now including a free femtocell.

Back home in the United States and Canada, cell phone companies ask customers to pay up to $300 for network extender devices to manage reception your provider was supposed to deliver in return for paying them nearly $100 a month. The femtocells connect to a customer’s home broadband connection to make and receive calls. Despite the fact customers are using their own broadband service to power the device, cell phone companies still deduct minutes, texts, and data from monthly usage allowances just as if one was using a nearby cell tower.

Free Mobile customers don’t have to deal with any of that. In return for helping improve the company’s cellular network, customers will get the network extender devices, known as femtocells, free after a nominal shipping charge. New customers will have the femtocell technology built right into Free Mobile’s Freebox Revolution gateway.

Parent company Iliad is depending on its generous customers to help extend the network while keeping prices low for everyone. Considering the costs, few object to sharing a negligible part of their broadband connection with other customers, especially with millions of potential connection points sharing the load.

French cell phone users have a lot to thank Iliad for, even if they are not Free Mobile customers. The appearance of Free Mobile on the scene sparked a massive price war that is delivering savings to every French mobile user.

[flv width=”640″ height=”380″]http://www.phillipdampier.com/video/Free Freebox Server 6-13.mp4[/flv]

Introducing the Freebox Server, a home gateway cool enough to put on your desktop. (1 minute)

[flv width=”640″ height=”380″]http://www.phillipdampier.com/video/Free Designer Starck talks about the Freebox 6-13.mp4[/flv]

Only in France will you find providers spending as much time and attention on the stylish details of a set-top box as they do fretting about its cost. To underline the point, designer Philippe Starck turned up on Free’s website to talk about his design philosophy for the gateway device. (3 minutes, French)

Time Warner Cable is extending an online promotion to Extreme (30/5Mbps) customers to upgrade to Ultimate (50/5Mbps) service for an extra $10 a month above your current pricing.

But you may want to call Time Warner to take advantage of the promotion because we found the cable company’s website forced the selection of a $4.99/month fee for a “Home WiFi and Internet Modem” you will not need if you own your own equipment.

You must have a DOCSIS 3 cable modem to take advantage of this offer.

The deal can be accessed by logging into Time Warner Cable’s My Services page and selecting “View or Make Changes to My Internet Service.”

Would you be surprised to learn a company with just a basic, outdated website replete with spelling and grammar errors holds at least 760 television station construction permits and licenses and just wrote a check for $46.5 million to buy 52 more stations from nine different owners, with plans to shut every last one of them down in the future?

That is precisely the business plan of “Landover Wireless Corp.” and its series of limited liability corporate entities, which are grabbing up as much UHF television spectrum they can apply for across the country.

They are not alone.

CTB Spectrum Services, a company associated with Landover 2 LLC, has 356 UHF TV construction permits/licenses. Its website offers slightly more information about its operations, but not much.

DTV America, a mysterious Sunrise, Fla.-based venture with an official mailing address of 12717 W. Sunrise Boulevard (Suite 372) has its headquarters inside a private mailbox at a UPS Store. The company also has countless requests for television licenses on the UHF dial. DTV America manager John Kyle is also listed as chairman and president of The Pharmacy Television Network, which appears to broadcast its programming on video displays inside pharmacies. DTV America has the lowest profile of all three companies, with no apparent website.

And you thought over the air television was dead.

DTV America’s home is inside a mailbox at the UPS Store in Sunrise, Fla.

A number of low power television owners are surprised to see the sudden rush to launch more than 1,000 new television stations across the country, particularly in rural markets that have been considered a financial dead-end for low power television. Being in the LPTV business and making a living at it often depends on whether a local cable company or satellite dish provider will pick up and relay the station to the majority of Americans that do all of their television viewing on a paid platform. Without this carriage, low power television outlets have several strikes against them: challenging reception from operating with relatively low power, the lack of compelling programming — many of these outlets air paid religious, home shopping, music, or infomercial programming 24 hours a day, and the lack of familiarity by viewers who may not realize these stations are on the air.

From information Stop the Cap! has obtained, none of these ventures actually intend to stay in the over-the-air television business. Instead, they are using FCC licensing rules to get valuable UHF spectrum without having to bid for it at forthcoming spectrum auctions. At least two of the companies claim they are raising capital to build a unicast 4G wireless content delivery network. But some critics contend they are actually spectrum squatters — speculators that have no intention of building anything. Instead, critics charge they will conduct minor experiments to effectively stall the FCC, hanging onto their permits and licenses until they can sell their holdings to a wireless provider hungry for 500-700MHz spectrum and willing to pay top dollar to get it.

Meanwhile, Landover’s $46.5 million buys them dozens of low power stations airing 30-minute commercials like “Skin Solutions by Dr. Graf.” The company claims it will keep those stations on the air until their wireless network is ready, and then the infomercials (along with the rest of the television programming) will be gone for good. Landover also managed to acquire larger Class A TV stations as part of the deal, including one each in Las Vegas and Sacramento, and three in Texas. These stations might become part of the company’s 4G network, sold off or compensated to sign-off forever as part of forthcoming “spectrum packing” by the FCC — further shrinking the UHF TV dial and auctioning off the “excess” spectrum to AT&T, Verizon, Sprint, and other cell companies.

CTB’s License Map

CTB also holds multiple TV licenses in several of its markets. The company claims it will combine those stations together in something akin to a high-powered cellular network to create a bigger wireless data pipe using “patent pending multi-frequency cellular terrestrial network technology [that] increases capacity by hundreds of times through frequency re-use, while also enabling full mobility, broadband Internet, and location-based services.”

CTB’s sales pitch claims its TV licenses offer up to 228MHz of bandwidth that is “essentially identical to 700MHz spectrum, but can be acquired at a fraction of the cost.” The company also claims it has exclusive rights to TV “White Space” spectrum via first adjacent channels, which are treated like guard bands to protect against interference from nearby stations.

All of these companies are applying for channels largely in low-interest rural markets, where they face few challenges from competing applicants. CTB calls this part of their rural “corridor” strategy. One such corridor covers stations in a line from Wisconsin west to Idaho.

All three companies are betting the FCC will allow them to eventually convert their over-the-air television licenses into wireless data networks, or let them sell the spectrum to deeper pocketed players in keeping with the Commission’s plan to open up more frequencies for data-hungry users. If the FCC allows it, these three entities will end up with the rights to prime wireless spectrum covering up to 90 percent of the country without having to spend a penny at forthcoming spectrum auctions.

But there are financial risks. The type of low power station licenses held by most of these companies do not get them a seat at the spectrum packing table. LPTV outlets are considered low-priority stations, and in larger communities, many could be forced off the air without compensation to make enough room for more important, full power stations.

No license, no 4G data network for Landover, CTB and others. But the chances of that happening in rural markets, where residents are lucky to have two or three over the air stations, are slim.

The technology might offer unique broadband opportunities for rural areas where conventional low-range cell towers are too expensive, if the technology works. A higher powered transmitter serving a rural, larger geographic area might prove financially attractive in low population density areas. Only time will tell if any of these entities will be able to raise the capital needed to fulfill the FCC’s construction permit obligations, which give owners just a few years to get their stations on the air or face forfeiture of their permit and/or license.