AT&T’s solution for rural Americans without access to broadband service arrived this week with the introduction of an $80/month plan bundling a mandatory wireless home landline with a 10GB usage-capped Internet plan.

AT&T Wireless Home Phone and Internet has undergone market testing in selected northeastern areas (largely outside of AT&T’s landline service territory). This week the service became available nationwide and is marketed to customers disconnected (or soon will be if regulators approve) from AT&T’s traditional landline service. AT&T is petitioning to dismantle its rural and outer suburban wired landline network and transfer customers to wireless service. But AT&T’s wireless replacement is both expensive and usage capped with an allowance that is just a fraction of what AT&T DSL offers:

• Customers start with a $20/month wireless landline phone replacement, powered by AT&T’s wireless network. Customers will keep their current phone number and home phones and will be sent a “Home Base” device that will interface between AT&T’s wireless network and up to two telephones. AT&T does not permit its device to be connected to your existing home phone wiring, so it strongly urges customers to buy cordless phones. The device is portable so it can be taken with you when traveling. The standalone service offers unlimited nationwide calling, Voicemail, caller ID and call waiting;
• Those interested in also purchasing broadband can add one of three different data plans: $60 for 10GB, $90 for 20GB and $120 for 30GB. AT&T charges a $10 overlimit fee for each extra gigabyte. You cannot buy broadband service unless you also subscribe to AT&T’s wireless landline product. That means the lowest possible price for rural broadband is $80 a month for up to 10GB of usage. Access may be over AT&T’s 4G LTE network (5-12Mbps maximum speeds) or their much-slower, but more common 3G network. In contrast, AT&T sells DSL for as little as $15 a month with a 150GB usage allowance included.

[flv]http://www.phillipdampier.com/video/ATT Wireless Home Phone Internet Intro 5-2014.flv[/flv]

AT&T introduces its new solution for rural America — wireless home phone and Internet service, at a price much higher than what urban customers pay. (1:42)

AT&T’s Home Base

AT&T’s Wireless Home Phone and Internet includes plenty of fine print and disclaimers:

• A two-year service commitment is required to avoid a $199 charge for the Home Base device;
• 911 service is not guaranteed and you will be required to give your physical location to the 911 operator so they can send help to the proper address;
• A backup battery powers the Home Base allowing up to 1.5 hours of talk time and 18 hours of standby time. However, a standard corded phone that does not need electric power to operate is required to place or receive calls (including 911) during a power outage;
• Not compatible with wireless messaging services/text messaging, home security systems, fax machines, medical alert & monitoring systems, credit card machines, IP/PBX Phone systems, or dial-up Internet service. May not be compatible with DVR/Satellite systems;
• Call quality, wireless coverage, and service reliability are not guaranteed;
• Well-qualified credit approval required;
• An activation fee (undisclosed) also applies.

There are many surcharges that also may apply, including a $35 restocking fee, federal, state, and local taxes and the universal service fee. Customers must also pay AT&T-originated fees kept by AT&T, including a $1.25 “cost recovery charge,” a gross receipts surcharge, administrative fees and any government-originated assessments that AT&T passes on to customers in various states.

[flv]http://www.phillipdampier.com/video/ATT Wireless Home Phone Internet Setup 5-2014.flv[/flv]

AT&T explains how to set up and configure its Home Base to receive phone and broadband service wirelessly. (3:16)

Comcast says you must have the option to pay more for the same broadband service you already get, only now with an allowance

Comcast has announced it is considering testing an innovative new plan in several test markets offering “unlimited Internet access” to customers for a yet-to-be-determined price. Whoever heard of such a thing?

Comcast’s executive vice president David Cohen raised eyebrows last week when he predicted all Comcast customers nationwide would see usage-based billing for their Internet access within five years.

Such statements tend to muck up things like a $45 billion dollar merger with Time Warner Cable that both companies must prove is in the public interest. The buyer wants to limit your Internet usage and the seller got its fingers burned back in 2009 when it tried its own usage cap experiment and now advertises it has no data caps.

Telling Time Warner Cable customers it is in their best interest to lose unmetered Internet plans may be too tough to sell, so Cohen has spent much of this week backtracking and claiming he was “misunderstood:”

To be clear, we have no plans to announce a new data usage policy.  In 2012, we suspended our 250 GB data cap in order to conduct a few pilot programs that were more customer friendly than a static cap.  Since then, we’ve had no data caps for any of our customers anywhere in the country.  We have been trialing a few flexible data consumption plans, including a plan that enables customers who wanted to use more data be given the option to pay more to do so, and a plan for those who use less data the option to save some money.  We decided to implement these trials to learn what our customers’ reaction is to what we think are reasonable data consumption plans.  We certainly have no interest in adopting any plans that our customers find unreasonable or disruptive to their Internet experience.

It’s important to note that we remain in trial mode only.   We’re now also looking at adding some unlimited data plans to our trials. We have always said that as the Internet, and our customers’ use of it, continues to evolve, so will Comcast and our policies.

Cohen makes a careful distinction between a strict usage limit and the kind of usage-based billing that will fill the company’s coffers with overlimit fees. But any usage allowance is a limit of how much you can use the Internet before something bad happens — either your access is shut off or your bill explodes.

Stop the Cap! has talked with more than a dozen customers in Comcast’s test markets about their experiences with Comcast’s “data usage policy.” Although the company claims it is seeking customer reactions, it never asks whether those customers want usage limits or not, only what kind.

Giving customers “the option to pay more” is exactly the type of thinking that won Comcast the dubious distinction of being the worst company in America. No usage plan tested by Comcast actually offers savings to customers. It simply places an artificial, arbitrary usage allowance on the overpriced broadband service the company offers now.

At this point, Comcast is not offering any unlimited use trials, but we have learned the value they are likely to place on “unlimited” based on what certain customers have paid all along for that privilege. Ars Technica reports some avoided the 250GB cap by signing up for business class service. The cost? $133.79 a month for 50/10Mbps. If Google Fiber was in town, you’d pay $70 for unlimited 1,000/1,000Mbps service, and the search engine giant would still be making money.

Cohen claims nothing is set in stone, but considering Comcast’s “don’t care” attitude towards its customers, it is a safe bet they will do what is best for shareholders and ignore complaints from customers that often have nowhere else to go for 21st century broadband speeds.

Cricket has relaunched its website with a new logo and service plans as new owner AT&T merges its value-conscious Aio prepaid offering under the acquired Cricket brand name.

Targeting the credit-challenged, Cricket’s new service plans are not groundbreaking, basically copying Aio’s recent offers. Swept away are the low-cost “pay when you use” plans that only levy charges on the days you actually use the phone. Instead, Cricket is looking for a longer, committed relationship with month-long service plans and loyalty discounts:

The relaunch of Cricket will bring changes for existing customers as AT&T begins to decommission Cricket’s freestanding CDMA 3G network in March 2015 in favor of AT&T’s GSM 4G LTE service. That means customers with current Cricket phones will need to eventually switch to a newer handset, a process being made easier with $50 rebates that can make some of Cricket’s smartphones available for free. Enroll in Cricket’s rewards program, stay with them a year, make your payments on time and you will also get a $50 device credit which can be used towards an upgrade next year.

Cricket’s data plans do not carry automatic overlimit charges. Instead, your data connection is throttled to 128kbps until your billing period resets. Customers can buy an extra gigabyte of data at any time for $10.

There are several other changes that probably won’t affect the majority of Cricket customers:

• There is a $5 discount for every month you are enrolled in Auto Pay to keep your phone active;
• A family plan discount provides $10 off the monthly service charge of a second line, $20 off the third line, and $30 off the fourth and fifth line, for a maximum discount of $90 a month;
• While you remain on your current Cricket service (on the CDMA network) you may keep paper billing. When you transition to the new Cricket (the 4G GSM network with nationwide coverage), you will no longer receive a paper bill;
• Customers participating in the 5 for $100 promotion can continue with this rate plan only while on the Cricket CDMA network;
• Cricket no longer offers military or friends & family discounts;
• Cricket will transition out of the wireless Lifeline program. Current Lifeline customers can use Cricket’s CDMA network until it is shut down, after which they must choose a different provider;

[flv]http://www.phillipdampier.com/video/Cricket Home New Cricket Merger Info.mp4[/flv]

AT&T keeps its name and brand completely off the relaunched Cricket and Aio combined website. This introductory video explains the merger of the two wireless brands and what customers can expect. (1:44)

“Comcast Corp.’s bid to buy Time Warner Cable Inc. may be the opening act for a yearlong festival of telecommunications deals that would alter Internet, phone and TV service for tens of millions of Americans.” — Bloomberg News, May 14, 2014

Wall Street analysts remain certain Comcast and Time Warner Cable won’t be the only merger on the table this year as the $45 billion dollar deal is expected to spark a new wave of consolidation, further reducing competitive choice in telecom services for most Americans.

While the industry continues to insist that the current foundation of deregulation is key to investment and competition, the reality on the ground is less certain.

Let’s review history:

For several decades, the cable industry has avoided head-on competition with other cable operators. They argue the costs of “overbuilding” cable systems into territories already serviced by another company is financially impractical and reckless. But that did not stop telephone companies like AT&T and Verizon from overhauling portions of their networks to compete, and in at least some communities another provider has emerged to offer some competition. Some wonder if AT&T was willing to spend billions to upgrade their urban landline network to provide U-verse, why won’t cable companies spend some money and compete directly with one another?

The answer is simple: They can earn a lot more by limiting competition.

When only a few firms account for most of the sales of a product, those firms can sometimes exercise market power by either explicitly or implicitly coordinating their actions. Coordinated interaction is especially suspect where all firms seem to charge very similar prices and few, if any, are willing to challenge the status quo.

Since the 1980s, the telecommunications industry has been deregulated off and on to a degree not seen since the pioneer days of telephone service. That was the era when waves of mergers created near-monopolies in the oil, railroad, energy, tobacco, steel and sugar industries. By the late 1890s, evidence piled up that proved reducing the number of providers in a market leads to higher prices and poor service. The abuses eventually led to the passage of the Sherman Antitrust Act of 1890 and later the Clayton Antitrust Act of 1914.

Here is what happened when the cable industry was reined in during the early 1990s, only to be deregulated again.

The generation of political leaders that dominated Washington during the 1980s developed selective amnesia about economic history and dismantled many of the regulatory protections established to protect consumers, arguing competition would keep markets in check. In the broadband and cable business, that has not proved as successful as the industry represents.

At the heart of the problem is the 1996 Telecommunications Act, signed into law by President Bill Clinton. The sweeping law is littered with lobbyist landmines for consumers and their interests. Under the guise of increasing competition, the 1996 law actually helped reduce competition by removing regulatory oversight and, perhaps unintentionally, sparking an enormous rampage of industry consolidation followed by price increases. The Bush Administration kept the war on consumers going with the appointment of Michael Powell (now the CEO of the cable industry’s lobbying group) to chair the Federal Communications Commission. Under Powell, non-discriminatory access to networks by competitors was curtailed, and Powell’s FCC gave carte blanche to the cable industry’s plan to cluster its territories into large regional monopolies and a tight national oligopoly. The FCC’s own researchers quietly admitted in the early 2000s “clustering raised prices.”

By January 2001, cable operators had settled on rate increases that averaged three times the rate of inflation. While the national inflation rate hovered around 1%, cable companies routinely raised basic cable rates an average of 7% annually. Powell declared rising cable rates were not a consumer problem and adopted the industry’s classic talking point that rate increases reflect the “value of the programming” found on cable. In fact, even as cable customers grew increasingly angry about rate increases, Powell told three different reporters he wanted to further relax the FCC’s involvement in cable pricing. (McClintock, Pamela, “Powell: No Cable Coin Crisis” Variety, April 30, 2001; Hearn, Ted. “Powell: Value Matters in Cable Rates,” Multichannel News, March 13, 2002; Powell Press Conference, February 8, 2001; Dreazen, Yochi. “FCC Chairman Signals Change, Plans to Limit Intervention,” Wall Street Journal, February 7, 2001.)

Economists reviewing data found in publicly available corporate balance sheets soon found evidence that the “increased programming costs”-excuse for rate increases did not hold water. The less competition or number of choices available to consumers in the market unambiguously lead to higher prices. It has remained true since Consumers’ Union revealed the financial trickery in 2003:

The cable industry will claim that programming costs are driving prices up. While programming costs have certainly risen, a close look at the numbers shows that rising program costs account for only a small part of the rising rates.

If costs were really the cause of rising prices, then the cable industries’ operating margins – the difference between its revenues and costs — would not be rising. The facts are just the opposite. Operating margins have been increasing dramatically since 1997. The operating margin for the industry as a whole will reach $18.8 billion per year in 2002, $7 billion more than it was in 1997. Operating revenues per subscriber have increased dramatically over that period, from $208 per year to $273. That is, after taking out all the operating costs, including programming costs, cable operators have increased their take per subscriber by over 30 percent.

[…] The ability of cable operators to raise rates and increase revenues, even with rising programming costs, stems from the market power they have at the point of sale. They would not be able to raise prices and pass program price increases through if they did not have monopoly power.

Consumers’ Union also foreshadows what will happen if another wave of industry consolidation takes hold the way it did over a decade earlier:

While the cable industry has certainly increased capital expenditures to upgrade its plants, it has actually sunk a lot more capital into another activity – mergers and acquisitions.

It is the outrageous prices that have been paid to buy each other out and consolidate the industry that is helping to drive the rate increases. Between 1998, when the first mega merger between cable operators was announced, and 2001, when the last big merger was announced, cable companies spent over a quarter of a trillion dollars buying each other out. In those four years, they spent almost six times as much on mergers and acquisitions as they did on capital expenditures to upgrade their systems. At the same time, the average price paid per subscriber more than doubled.

When a cable operator pays such an outrageous price, the previous owner is reaping the financial rewards of his monopoly power. The acquiring company can only pay such a high price by assuming that his monopoly power will allow him to continue to increase prices. Monopoly power is being bought and sold and borrowed against. The new cable operator, who has paid for market power, may insist that the debt he has incurred to obtain it is a real cost on his books. That may be correct in the literal sense (he owes someone that money) but that does not make it right, or the abuse of market power legal.

Fast-forwarding to 2014, economist and Temple professor Joel Maxcy said the same basic economic truths still exist today with Comcast’s merger with Time Warner Cable.

“My concern is the merger and the consolidation of the cable and internet delivery system for consumers and what will happen to internet and cable rates and choices,” Maxcy said, voicing his hesitancy about a deal that merges the nation’s two largest cable providers. “As that industry has gotten more consolidated over time, we have seen rates go up. The answer from them is that we’ve got more choices. Are we better off or not better off? I don’t know, but certainly rates have gone up at a much faster rate than the inflation rate. The result of more monopoly power is always higher prices and less choices and it seems that this merger moves in that direction.”

“The threat from non-network content providers is a concern for the cable industry,” Maxcy added.

“We’re moving to a situation where we don’t need cable, but we still need the internet and the cable companies are the ones that have control of that,” he said. “Consolidating them together makes them more competitive against the outside forces, but the other argument makes the whole thing less competitive so they’ll have more ability to control the access to Netflix, YouTube and the like. People that may develop other similar sorts of services will have a hard time getting the access they would like to purchase those.”

Chris Stigall spoke with economist and Temple professor Joel Maxcy on Talk Radio 1210 WPHT in Philadelphia about Comcast’s attempt to purchase Time Warner Cable and what that means for consumers. Feb. 18, 2014 (12:10)
You must remain on this page to hear the clip, or you can download the clip and listen later.

Comcast will introduce usage-based billing on all of its broadband customers nationwide within five years, whether they like it or not.

Comcast’s executive vice president David Cohen told Variety he predicts the new usage limit will likely be 350GB a month but could increase to 500GB in 2019. Cohen claims consumers in usage-capped test markets prefer a preset usage limit and an overlimit fee of $10 for each additional 50GB of usage.

But Stop the Cap! has learned at no time has Comcast surveyed customers about whether they want their Internet usage metered or capped. That question is evidently not an option.

If Time Warner Cable territories are merged under the Comcast brand, usage billing would likely immediately follow.

Usage caps will go a long way to protect Comcast’s cable television package from online video, which if viewed in significant amounts could put customers over their monthly usage limit and subject them to higher fees.

“We’re trying to go slowly, not out of a regulatory concern (but because) we have no desire to blow up our high-speed data business,” he said.

If the merger is approved, Comcast will face significantly less competition in many Verizon service areas also served by Time Warner Cable. Verizon FiOS expansion has ended and the company continues to de-emphasize its DSL service, which is the only broadband competition Time Warner Cable faces in many upstate New York and western Massachusetts communities.

An unrepentant Cohen also doubled down on paid prioritization — Internet fast lanes — declaring regardless of what the FCC decides on Net Neutrality, Comcast still has the right to offer paid prioritization to customers.

“Whatever it is, we are allowed to do it,” said Cohen, speaking at the MoffettNathanson Media & Communications Summit in New York. “We are not sure we know what paid prioritization, or what a fast lane, is. Fast lane sounds bad… (but) I believe that whatever it is, it has been completely legal for 15 or 20 years.”

The way Comcast’s lawyers read “Title II,” even if the FCC declares broadband ISPs to be common carriers, Cohen says Comcast will go right on selling prioritized access, claiming Title II doesn’t prohibit paid prioritization — indeed, he said, “the whole history” of Title II is that carriers are allowed to provide different levels of service at different prices, reports Variety.

Cohen said he expects Washington regulators will promptly approve the company’s buyout of Time Warner Cable with no delays, insisting the deal is “not that difficult” in terms of antitrust implications.