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Cable One’s Costly Internet Service Helps Cable Company Achieve Record Profits

Phillip Dampier November 12, 2019 Cable One, Competition, Consumer News, Data Caps 1 Comment

Using a combination of lack of competition, high-priced service plans, and data caps, Cable One is once again the nation’s most profitable cable broadband provider, charging residential customers a record-breaking average of $72.09 a month.

Late last week, the country’s fifth largest cable company reported excellent results to its shareholders, as the company collected the proceeds from increasing rates on broadband service while shedding unprofitable cable television customers.

Cable One serves small and mid-sized cities, mostly in the mid-south, Rockies, New Mexico and Arizona. It has grown larger with the acquisition of NewWave and Fidelity Communications, and told investors on a quarterly results conference call the company would take some of its recent gains and move towards further acquisitions in the near future. NewWave customers will now face Cable One’s stiff data caps, rolling out across legacy NewWave service areas in November and December. NewWave customers have already found their cable television package pruned back to match the current Cable One package, which omits Viacom-owned networks. The same will hold true for Fidelity’s customers once the two companies merge systems.

 

Laulis

Revenues for the third quarter were $285 million compared to $268.3 million at the same time last year, representing a 6.2% increase. Even with the high cost of service, the number of Cable One internet customers is increasing, primarily because competing phone companies typically offer little beyond DSL. In the last quarter, Cable One added 7,400 new internet customers and boosted broadband revenue by 8.2%.

“Cable One still has one of the industry’s lowest broadband penetration of homes passed at just 32.2% and, with limited fiber-based competition, their ceiling is arguably one of the highest in the industry,” Moffett Nathanson analyst Craig Moffett told investors. “They are at last growing the broadband business at a rate fast enough to drive meaningfully higher penetration.”

Cable One makes no secret it now calls itself a broadband company and has been de-emphasizing cable television service over the last few years. In fact, customers who cut the cord are doing Cable One a favor because broadband-only customers boost their overall profit margins. Unlike cable television, where licensing expenses are growing, the cost to provide and support broadband service is dropping — even as Cable One raises internet pricing and constrains customer usage with industry-low data caps. That forces customers to upgrade to more costly, higher speed service plans to get a larger data allowance. Cable One also offers a $40/mo add-on that restores unlimited service, which is popular with their premium customers. Once a customer uses more than 5 TB, their speed is throttled.

“I think the interesting thing that I took note of is that the higher [the] speed that our consumer takes the higher the percentage of unlimited [plan] selling. So that is to say if you take our gig service the percentage of customers that take unlimited there is the highest of any consumer group,” noted Cable One CEO Julia M. Laulis.

Pricing is expected to rise further unless phone companies compete with fiber broadband, an unlikely scenario in the rural and exurban areas Cable One serves.

AT&T Will Pay $60 Million in Refunds to Throttled and Scammed “Unlimited Data” Customers

AT&T will pay $60 million to compensate unlimited data customers that found their data speeds throttled without warning because AT&T deemed them ‘heavy users’ that were slowing down AT&T’s wireless network.

“AT&T baited subscribers with promises of unlimited data, trapped them in multi-year contracts with punishing termination fees, and then scammed them by choking off their access unless they moved to a more expensive plan,” claimed FTC Commissioner Rohit Chopra. “The AT&T throttling scandal is an important case study into how dominant firms operating without meaningful competition can easily renege on their contractual obligations and cheat consumers who have almost no recourse.”

The $60 million in compensation is part of a settlement with the Federal Trade Commission that accused the company of false and misleading advertising after marketing an unlimited data plan subject to severe speed reductions after as little as 2 GB of usage. AT&T also agreed to a permanent injunction forbidding the company from advertising unlimited data plans without clear disclosures that such plans were subject to speed throttling. AT&T will have to prominently disclose such limitations in the future and not in the fine print.

“AT&T promised unlimited data—without qualification—and failed to deliver on that promise,” said Andrew Smith, director of the FTC’s Bureau of Consumer Protection. “While it seems obvious, it bears repeating that Internet providers must tell people about any restrictions on the speed or amount of data promised.”

AT&T’s throttling came to light in 2011 after the company was found to be slashing “unlimited data” smartphone users’ speeds to as low as 128 kbps — roughly 2-3 times the speed of dial up data, after a customer reached 2 GB of usage during a billing month. The FTC claims over 3.5 million AT&T customers were subjected to AT&T’s speed throttle as of October 2014 when the federal agency filed a formal complaint against the wireless carrier.

AT&T fought the FTC in and out of court for five years, claiming the FTC had no jurisdiction over its wireless business. The Ninth Circuit U.S. Court of Appeals disagreed in 2018, when it ruled that the FTC did have jurisdiction to pursue its false advertising claims against the company. Observers believed this court ruling forced AT&T to move towards a settlement.

AT&T’s past and current wireless customers targeted for speed throttling will automatically receive compensation without having to file a claim. The settlement provides customers throttled to 128 kbps an equal share of $13.8 million set aside to compensate current and former customers for the loss of value of their unlimited plan, plus interest. Those throttled to 256 or 512 kbps will split $46.2 million. Current customers will be provided a bill credit, former customers will receive a check in the mail, assuming AT&T can locate your current address. Any unclaimed funds will be sent to the FTC and will not be kept by AT&T. Customers can expect refunds within the next 90 days.

Wireless carriers selling “unlimited data” routinely bury restrictions on such plans in their fine print. Most limit customers to between 20-50 GB of usage per month, after which the company reserves the right to dramatically reduce your data speeds until the next billing cycle begins. The FTC is increasingly concerned that advertising unlimited service while burying important restrictions in the fine print is false advertising. The FTC is sending a message to wireless companies it wants hidden disclosures stopped.

The Commission vote approving the stipulated final order was 4-0-1. Commissioner Rebecca Kelly Slaughter was recused.

FTC Commissioner Deepak Chopra issued a scathing statement about how AT&T does business:

Chopra

AT&T’s Nationwide Bait-and-Switch Scam

When any business, big or small, offers an unlimited service for a fixed fee, that business is taking a risk. If customers use much more of the service than projected, the company will take a hit. Conversely, if customers use less than projected, the company will haul in even larger profits. This is how business works.

As detailed in the Commission’s complaint, AT&T wanted the rewards without the risks, so it turned its offer of an “unlimited” data plan into a bait-and-switch scam that victimized millions of Americans.

Subscribers were lured in with promises of unlimited data service for a fixed fee, trapped into multiple years of service by punitive termination fees, and then forced to switch to a more expensive tiered plan with overage fees to actually receive the unlimited data they were promised.

This scam went hand-in-hand with AT&T’s early monopoly in the iPhone market. In 2007, Apple and AT&T inked a major deal that gave purchasers of the iPhone only one choice for a mobile carrier.

Around this time, AT&T faced a major threat to its wireless business: the company was losing exclusivity over the iPhone. Analysts warned that the company could be “demolished,” potentially losing millions of customers to Verizon.

To prevent this from happening, AT&T aimed to lock down existing subscribers into new long-term contracts by “grandfathering” them in to their unlimited plans when they upgraded their phones. Since data usage can be unpredictable and hard to track, an unlimited plan without risk of overage fees created certainty for cost-conscious consumers.

AT&T throttles

How low can AT&T go? Some wireless customers were throttled to 128 kbps speed after using just 2 GB of data on their AT&T Unlimited Plan.

AT&T is a sophisticated company. It knew it needed to invest in enough capacity to deliver service for subscribers who used a lot of data under their unlimited plans, especially since the company had claimed its network was the “fastest” in the nation.

Instead of living up to its promises, AT&T pulled a bait-and switch.

First, to hold on to customers who might switch to the competition, AT&T marketed an unlimited data plan that was not actually unlimited. AT&T subscribers who signed up for newer phones with unlimited service were likely those who intended to use the most data. Instead, these subscribers were throttled the most, and ended up receiving the slowest, most unreliable data coverage.

According to the FTC’s complaint, roughly 3.5 million customers victimized by AT&T’s fraud saw their speeds go down by up to 95 percent. The iPhone’s internet-intensive functions were practically unusable on AT&T’s network at the diminished speeds. This Swiss-cheese service was not the unlimited deal that was promised. Americans in rural areas without broadband connections, as well as those who depended on the service for their livelihood, got a particularly raw deal.

Second, AT&T made it hard to walk away, trapping subscribers in contract terms. Until 2011, AT&T was the only carrier offering the iPhone and the only network the iPhone worked on. As the exclusive iPhone carrier, AT&T dictated the terms of access, which included signing long-term contracts with big penalties for leaving early. After AT&T lost iPhone exclusivity, new carriers entered the market promising better coverage. But most existing iPhone users were stuck with AT&T until their contracts ran out, unless they paid the expensive early termination fee. And when their contracts did run out, AT&T induced them to renew with false promises of “unlimited” service.

Third, AT&T pushed subscribers into switching to more expensive plans. AT&T allocated the most data and most reliable service to capped data plans with overage fees, while imposing arbitrary limits on subscribers in “unlimited” plans. Unlimited data subscribers who wanted reliable service could pay a big fee to switch carriers, or they could switch for free to a capped data plan with no throttling. While these plans might have been cheaper upfront than the unlimited plan, their low data cap, the high cost of overages, and the expanding capabilities of smartphones made a service price hike inevitable for Americans who wanted what they signed up for. The only truly unlimited data service was therefore available solely through capped plans with expensive overages.

AT&T’s bait-and-switch scam is a good window into the many harms that result from dominant companies operating without the discipline of meaningful competition. Their market power, financial resources, and one-sided information gives them license to ignore their own contractual obligations while aggressively enforcing every little clause in the fine print. Consumers can accept the bad deal, walk away, or fight it, but each choice carries a cost, with dominant firms prevailing almost every time.

In my view, AT&T profited by using its dominance to force customers to keep their end of the deal even as the company failed to deliver and then changed the terms. AT&T’s unlimited data subscribers could have kept paying for limited, unreliable service, paid the penalty to switch to a carrier with better service, or paid a price hike to get the unlimited data service they had been promised. But none of those are good options.

Wireless companies are spending more money on stock buybacks than they are investing in their networks.

AT&T’s broken promises were not inevitable. The company could have upheld its obligations to its customers by making the right infrastructure investments. It certainly had the money to do so. From 2011 to 2015, AT&T paid tens of billions of dollars in dividends and share buybacks. In 2012, as the company boasted to investors that customers were fleeing its unlimited plan for tiered plans, it spent more on share buybacks than it invested in its wireless network. The bottom line is that AT&T fleeced its customers to enrich its executives and its investors.

Scrutiny for Scammers of All Sizes

The FTC sued AT&T in 2014, and an exceptional group of staff litigators racked up big wins in this case. Our staff even prevailed in the Ninth Circuit Court of Appeals, when AT&T tried to sidestep accountability for this massive fraud by claiming it was immune from the FTC’s oversight. I am extremely grateful to our litigators and investigators who persisted, and I am glad to see money being returned to consumers. No settlement is perfect. While I would have liked to see AT&T pay more for the company’s scheme, I fully appreciate the risks and resources associated with litigation.

There are also important lessons from this matter that I hope the entire agency can learn.

Scammers come in all sizes. During my tenure as a commissioner, I have raised concerns about disparate treatment of small firms, where the agency is quick to call out their fraud and where resolutions can include crippling consequences and individual liability. In contrast, the agency is quick to deem large firms as “legitimate” and apply a more soft-touch approach. AT&T’s massive scam is a reminder that we must focus on the practices of a business, rather than the size of a business.

Rigorous analysis yields better results. The Commission must do more to support our litigators and investigators with rigorous analysis of the many ways that companies profit from illegal conduct.

Commission economists typically develop estimates of consumer injury, but this is just one facet of the relief we can seek in court. Economic analysis of consumer injury is not a complete financial analysis, so we must be wary of overly relying on this narrow methodological approach. To arm our litigators effectively, we must conduct rigorous financial analysis that goes beyond the out-of-pocket losses that consumers experience. We also need to ensure we conduct a comprehensive review of a firm’s business model, which can allow us to assess what led to the wrongdoing in order to inform what injunctive relief we should pursue.

It will be critical for the Commission to closely scrutinize AT&T’s moves under order. If the company violates any aspect of this settlement, the agency should seek a contempt judgment in federal court and hold both the company and any appropriate individuals responsible for flouting the order. Given AT&T’s aggressive enforcement of arbitration clauses that ban consumers from taking the company to court, it is critical to be vigilant in our oversight of AT&T under this order.

Conclusion

If consumers don’t pay up when a company fails to live up to its promises, they are often pummeled with late fees, collection calls, and negative credit reporting. Yet when dominant companies don’t deliver on their end of the bargain, too often they can turn a profit, as their customers feel powerless to do anything about it. Cheating is not competing. Without effective government and private enforcement, we will not achieve all of the benefits that competitive markets can deliver.

T-Mobile Fixed 4G Wireless Home Internet: $50/month With No Data Caps

T-Mobile is gradually expanding its new fixed wireless home broadband service, prioritizing rural areas next to major highways where the mobile provider has strong 4G LTE service.

T-Mobile Home Internet is initially being targeted to rural customers unlikely to have high speed internet access from a cable company or are stuck with low speed DSL from the phone company. It offers “unlimited service” with no data caps, but T-Mobile reserves the right to temporarily throttle speeds of users exceeding 50 GB of usage per month when their local cell tower is congested. Customers can check T-Mobile’s fixed wireless website to see if they qualify for service.

A Stop the Cap! reader in Indiana testing the service over the last month reports speeds averaging around 50/3 Mbps, with ping times often 30 ms or much more, which makes the service problematic for video games. But T-Mobile Home Internet works fine with streaming video services.

(Image: The Gadgeteer)

The service is currently available only in a few areas. T-Mobile is carefully managing the service by registering the customer’s wireless home internet equipment to a specific cell tower. Customers are not allowed to take the service on the road, such as on vacation. Since the service relies on T-Mobile’s existing 4G LTE cell tower network, it is essential to balance capacity between fixed wireless customers and T-Mobile’s existing mobile users. Pricing is comparable to Verizon’s 5G Home Internet and in most cases the price includes taxes and fees.

T-Mobile began marketing the service to its existing customers in qualified service areas over the summer. Among those enrolled, none have reported speed throttling, despite the fine print warning to heavy users.

“I consistently use over 250 GB a month and speeds have never been impacted,” our reader told us. “However, speeds can suffer around rush hour, when I suspect more people are using their cell phones. But they are still 25+ Mbps for downloads.”

Customers signing up for the service will receive:

  • a T-Mobile LTE Wi-Fi Gateway with a pre-installed T-Mobile SIM card;
  • A 5200mAh battery backup, also likely for future portability options;
  • AC Adapter;
  • Quick Setup Manual.

(Image: The Gadgeteer)

There is no charge for the equipment and start-up kit, but it remains the property of T-Mobile and needs to be returned if you cancel, otherwise T-Mobile will charge you $207.

Users plug in the equipment in an area of their home that gets the strongest T-Mobile reception. Once T-Mobile’s LTE network is detected, the service will register and activate service on the T-Mobile cell tower. Customers manage the rest of the service with a smartphone app, which configures Wi-Fi capable devices, sets streaming speeds, and allows customers to check usage. There are two LAN ports on the back of the device for Ethernet connections and a phone jack, presumably to support landline service sometime in the future. Most will be able to configure the service in less than 10 minutes.

Ironically, one service T-Mobile explicitly says won’t work with its fixed wireless offering is T-Mobile’s new TVision live TV service. But customers report no problems using AT&T TV Now and Hulu’s Live TV service.

The included backup battery provides long lasting power to stay connected during a power interruption.

Customers have reported favorable impressions of the service, assuming they have a solid signal from a nearby cell tower. T-Mobile is cautiously marketing the service only to customers where cell towers are not already congested, and only in areas relatively close to a nearby cell tower, to assure good reception. T-Mobile can also self-limit the number of fixed wireless customers signed up for each cell tower. That means most of its fixed wireless customers will be in semi-rural areas, often nearby a major road or highway where a T-Mobile tower provides service. It is not likely T-Mobile will initially market fixed wireless service in dense suburban or urban areas, because cell towers are much more likely to be congested. It also seems unlikely T-Mobile will sell the service in deeply rural areas where it lacks good cell coverage because T-Mobile is relying on its existing network of cell towers to support the fixed wireless service.

An excellent review of the service and its features has been written by The Gadgeteer.

T-Mobile explains how its fixed wireless home internet service works. (1:15)

Comcast Completes Speed Upgrade in Northeast, But Data Cap For Many Stubbornly Remains

Despite a recognition that customers are using more data than ever as they cut traditional cable television in favor of streaming, Comcast’s data cap remains stubbornly fixed at 1 TB a month.

The nation’s largest cable operator last week completed a significant speed upgrade in 14 states in its Northeast and Mid-Atlantic service areas from Maine to Virginia. Some plans are getting as much as a 60% speed boost, but Comcast is not budging a megabyte on its fixed data cap that amounts to 1,000 GB of usage per month.

Comcast acknowledges the speed upgrades are designed to meet the exponential increase in demand for high-bandwidth video streaming in households that now average at least ten devices connected to the internet. Many of those devices are now streaming 4K video, which takes double the bandwidth of traditional HD video.

The speed upgrades:

  • Performance Starter: was 15 Mbps, now 25 Mbps
  • Performance: upgrades from 60 Mbps to 100 Mbps
  • Performance Pro: up from 150 Mbps to 200 Mbps
  • Blast: A slight upgrade from 250 Mbps to 300 Mbps
  • Extreme: This premium plan used to provide 400 Mbps, but it is now 600 Mbps.

Comcast faces significant competition in this part of the country from Verizon’s FiOS fiber to the home network. That may explain why it is also the only significant part of Comcast’s service area that remains exempted from the cable company’s data caps. Verizon has no data cap of consequence, although the company has shut down some customers that were likely using their residential internet connection as a server, running up many terabytes of usage a month.

For now, Comcast’s speed upgrades come with no price hike.

The speed increases are likely to be welcomed by most customers, but Comcast’s pervasive data cap for most of its nationwide footprint is not. In November, that data cap will be tested like never before as Google launches its Stadia cloud-based video game service. Up to six million broadband customers are expected to blow through their provider’s monthly data cap while using the service, which replaces traditional home game consoles. That is because Stadia will consume an enormous amount of bandwidth — as much as 15.75 GB an hour at 4K resolution.

An article published by Vice Media warned video game enthusiasts they could easily face steep overlimit usage penalties on a future bill:

According to data from The NPD Group, America’s estimated 34 million gamers play 22 hours per week on average. Were those gamers to all shift to Stadia as their primary game platform at 4K, they’d burn through 1,386 GB of data monthly. And that’s just the bandwidth consumed by gaming; it doesn’t include music and video streaming or other activities.

The result will be an even higher broadband bill for US consumers who already pay some of the highest prices in the developed world for bandwidth. For many this will be a surprise. Of the 943 gamers surveyed by the company, only 17 percent were certain they had a broadband cap. 21 percent say they weren’t sure one way or the other whether their broadband was metered.

Most providers set their overlimit penalty at $10 per 50 GB of excess usage. Some offer to waive data caps for a monthly additional charge of $50. That makes Google’s $10 video game service much less of a bargain than many initially thought.

When questioned about the impact data caps could have on Stadia, Google vice president Phil Harrison hoped the nation’s ISPs would do the right thing by their customers.

“ISPs have a strong history of staying ahead of consumer trends and if you look at the history of data caps in those small number of markets…the trend over time, when music streaming and download became popular, especially in the early days when it was not necessarily legitimate, data caps moved up,” he said. “Then with the evolution of TV and film streaming, data caps moved up, and we expect that will continue to be the case.”

Except Harrison’s utopian world view is not accurate. In fact, most broadband providers have set data caps and left them unchanged for years, even as those same companies promote frequent speed upgrades. In effect, more and more customers are running over their usage allowances and either paying steep penalties, reducing usage, or agreeing to pay another $50 a month to dispense with the cap altogether.

Vice author Karl Bode reminds readers “broadband caps are complete nonsense.”

“Experts say the real purpose of such limits is to covertly jack up your already expensive broadband bill—and punish customers looking to cut the cord on traditional cable TV services,” Bode added.

Correction: Data cap expressed at 1,000 MB changed to 1,000 GB to reflect the correct allowance.

“Refreshed” Verizon Home 5G Will Launch In 30 Cities This Year; Improved Reception Promised

After learning from the experiences of providing a wireless 5G home broadband alternative in a handful of U.S. cities, Verizon is preparing to launch a refreshed 5G Home fixed wireless product in all 30 cities where it intends to provide mobile 5G service this year.

The biggest change will be a new emphasis on self-installs. Verizon estimates about 80% of customers pre-screened online as qualified for the service can install it themselves with an indoor antenna. That is a big change for Verizon, which used to rely on technicians installing a fixed antenna on the side of a customer’s home. A new receiver expected to be introduced in 2020 is also expected to boost reception through the use of a new high-powered chipset, likely including Qualcomm’s new QTM527 mmWave antenna module that was custom designed to enhance and extend the range of 5G fixed wireless services. Verizon’s current 5G Home equipment uses a chipset originally designed for 5G smartphones.

Ronan Dunne, CEO of Verizon Consumer Group, said Verizon Home 5G will be sold as a companion product wherever Verizon’s 5G millimeter wave network debuts.

“We’re now ready to go mass market,” Dunne told a group of investors.

U.S. cities with Verizon 5G Ultra Wideband

  • Atlanta
  • Chicago
  • Denver
  • Detroit
  • Houston*
  • Indianapolis*
  • Los Angeles*
  • Minneapolis
  • Providence
  • Sacramento*
  • St. Paul
  • Washington, D.C.
  • Phoenix

(*-These cities, except for Indianapolis, only have fixed wireless 5G Home broadband at this time.)

U.S. cities planned for Verizon 5G Ultra Wideband deployment in 2019

  • Boston
  • Charlotte
  • Cincinnati
  • Cleveland
  • Columbus
  • Dallas
  • Des Moines
  • Houston
  • Indianapolis
  • Kansas City
  • Little Rock
  • Memphis
  • San Diego
  • Salt Lake City

But where that market will exactly be is hard to tell. Verizon relies heavily on its service address qualification tool, which shows if a prospective customer can obtain the service. That tool is refined enough to ensure that over 90% of Verizon’s fixed wireless traffic stays on its 5G network, with only around 10% falling back to Verizon’s existing 4G LTE network.

Verizon uses its tool to assure “qualified” customers are well inside the radius of its 5G coverage area. An analysis found Verizon’s millimeter wave network, which operates in the 28 GHz band, has a limited range. Although Verizon predicted its network could reach 1,000 feet from each small cell location, the website only qualified those in Sacramento living within around 500 feet of each small cell. Verizon is also heavily reliant on using light poles for smart cells, and these were not always suitable for the widest coverage.

Earl Lum of EJL Wireless Research explored Verizon’s 5G network in Sacramento and found it primarily targeting 5G Home customers. If Verizon is intending to cover entire cities with millimeter wave 5G, Lum said “you’re talking about a crapload of poles.” Some analysts expect Verizon will introduce lower band 5G service to increase and compliment its millimeter wave coverage areas. The impact traffic from Verizon’s 5G Home service will have on lower band 5G networks is not known. The home broadband replacement currently markets speeds of around 300 Mbps with no monthly data cap for as low as $50, if one also subscribes to Verizon Wireless mobile service. Any low band 5G service running from traditional macro cell towers will be shared with a much larger number of customers than those sharing a small cell, potentially creating capacity problems down the road.

One other change to report: Verizon’s newest 5G Home cities will launch using the official 5G NR standard, not the unofficial 5G TF standard Verizon used in the four early launch cities.

It is too early to tell whether incumbent phone and cable companies will perceive a significant competitive threat from Verizon’s high speed fixed wireless proposition. Early reports of the service’s limited coverage in the four launch cities and fears about the high cost of expanding 5G service seemed to calm operator fears of a new competitor. But Verizon has also said for months that it purposely limited its 5G Home network rollout until the official 5G standard emerged. The wireless operator has also used this past spring and summer to learn from its early experiences with fixed 5G service and cut expenses like required truck rolls for installation out of the business. The money saved could be plowed into a more robust network of 5G small cells covering larger areas.

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