Halloween scare stories are back!

It is amazing the length some incumbent broadband providers will go to stop publicly-owned networks from getting off the ground and competing with the “good enough for you” service on offer from the local phone or cable company.

This morning, Stop the Cap! received word from a Minnesota reader who reports their dinner hour was interrupted by an unsolicited phone call from a group called “Americans for Sensible Broadband,” which as far as we can tell does not exist as a formal group. The caller used ridiculous scare tactics worthy of a bad Halloween movie:

• Did you know that fiber broadband networks are expensive to run and will increase your electric bill to pay for the high powered lasers needed to send the signal to your home?

Fiber broadband projects now expanding in Minnesota have no relation to your electric bill because most are run by independent community-owned co-ops, not electric utilities. Even if they were run by an electric provider, the cost to power a fiber network is far smaller than the network of signal amplifiers and other transmission equipment needed by traditional cable and phone companies. The only electrical expense to the homeowner is powering any set top boxes or other related equipment to make use of the service. These costs are comparable to what one would pay with cable or phone services.

• Most fiber networks are not actually fiber at all. The largest companies in America actually let you keep your current wiring, but that is not fiber, so why spend tax money on a risky fiber network?

While AT&T U-verse has chosen the route of “fiber to the neighborhood,” which still relies on existing copper wiring from nearby poles to your home, many fiber to the home projects take fiber… straight to the home. Some community networks do make use of very short lengths of pre-existing copper wiring inside your home, but this has more to do with your convenience. You don’t need a fiber connection to your landline phone, for instance. Compare the broadband speeds and services on offer from the community provider vs. incumbent cable and phone companies. Choose the one that delivers the best services for the price.

• America’s cable and phone companies are working hard for pro-growth, pro-expansion policies in Washington that will allow your community to get the benefit of billions of private investment, at no risk to you.

An in-home threat to your children or incumbent provider profits?

Incumbent phone and cable companies already enjoy a higher level of deregulation than ever before. If they have not spent money to improve broadband in your area before, there is nothing that will open their wallets to provide the service now, unless someone else subsidizes part of the cost. Guess who “someone” is? That’s right. You the taxpayer or ratepayer. Whether in the form of broadband subsidies paid for by taxpayer dollars or ratepayer subsidies from the Universal Service Fund, only subsidies or competition prod incumbents to deliver better broadband to rural Minnesota (or anywhere else). If you fail a “Return On Investment” test, you will not get broadband no matter how much deregulation gets approved in Washington.

The question for rural consumers is whether AT&T, Frontier, CenturyLink, Comcast, or Charter Cable has your best interests at heart or whether a community co-op you partly own will.

• In socialistic countries, the government runs the broadband service and can monitor your web browsing. Do you want your local community checking up on your online activities?

“Socialistic” is in the eye of the beholder. Most broadband networks are run by private telecommunications companies, some with state subsidies, others entirely on their own. The federal government’s security agencies already have access to monitor Internet traffic under warrantless wiretapping laws, and that extends to every provider in the country, private or public. That said, there is no evidence local government officials would monitor your web browsing habits, much less have the budget or technical expertise to do so.

• Fiber cables create more hazards on utility poles designed for phone, cable and electric service. Is it worth risking those services for an unnecessary and expensive fiber network?

Electric and phone companies used the same scare stories to try and keep cable television lines off utility poles more than 30 years ago. Cable operators fought for and won the right to use utility poles to no ill effect, and at fair prices. It is ironic some cable companies want to use the same argument against municipal fiber that phone and electric companies used against them.

• In these difficult economic times, do you realize your local taxes could triple to pay for unnecessary fiber Internet?

Most public broadband projects are financed by municipal bonds obtained in the private free market. Investors can decide for themselves if they represent a safe investment, and many do. If the networks fail, private investors typically take the hit.

But the most ridiculous claim of all was that “recent news reports warn that lasers could blind your children if they happen to play with the fiber cables in your home.”

The only “news report” we could find on this subject was an Engadget news story from 2011 about an S3 Krypton laser that could blind astronauts without proper safety equipment. But those lasers are not powering broadband networks.

In reality, fiber to the home networks are safer than traditional copper phone wiring, which can send a significant electric shock to anyone playing with the wiring when a telephone rings. Many fiber networks rely on Class 1, low power lasers — the lowest risk level. Even if a customer stared at the lit end of an optical fiber connector, the visible light would be diffused into a cone pattern that would be completely harmless by the time it reached the retina. Many networks also include a secondary safety mechanism that quickly shuts down the laser light once the connection has been broken. Certain higher-powered laser communications networks can have some safety risks, but almost entirely for workers working on primary cables that deliver service to dozens of homes. Those workers are well-trained to avoid those risks.

Minnesota seems to be one of the latest hotbeds of incumbent wrath over expanding community-owned broadband networks. Despite efforts to label them insidious creeping socialism, they are actually no more threatening than a traditional co-op, except perhaps to incumbent cable and phone companies that have been running to the bank cashing checks from customers enduring low broadband speeds at high prices.

Cohen

Comcast’s chief lobbyist stalled plans to unveil cheaper Internet service for the financially disadvantaged to use as bait to win regulator approval of its 2009 merger with NBC-Universal.

The Washington Post today reports David Cohen’s influence at the cable operator as its chief of lobbying has helped the cable company achieve its status as America’s largest cable operator and entertainment conglomerate.

Cohen has friends in high places thanks to his status as a Democratic Party money bundler. A self-styled “consigliere” to the Roberts family that controls the company, Cohen has overseen a transformation of Comcast from one cable operator among many into a high-powered force not to reckoned with in Washington or Silicon Valley.

Comcast’s growth into a mega-corporation with $58 billion in annual revenues came, in part, from dealmaking that won regulator approval in D.C. Maintaining good relations with those regulators is a Cohen specialty. It did not take the Post too long to find former FCC officials giving Cohen high praise:

• “Every meeting with David is incredibly substantive,” Eddie Lazarus, former chief of staff to the FCC told the newspaper. “He always comes with a willingness to find solutions.”
• “David loves politics, he loves government and he has incredible situational awareness — a 360-degree view of business,” said Blair Levin, a former senior adviser to FCC Chairman Julius Genachowski. “He’s just so good at what he does.”

Under Cohen’s leadership, Comcast has spent lavishly on its corporate lobbying and legal team. Today, 20 full time lobbyists work under Cohen’s direction, with dozens of others available on retainer. The company spent $8.3 million of its subscribers’ money solely on lobbying. The Post reports that makes Comcast the ninth biggest K Street spender, above Verizon.

The poor and disadvantaged had to wait for Comcast to seal the deal on their $30 billion acquisition of NBC-Universal before affordable Internet could become reality for them.

In 2009, Comcast insiders were hard at work on a discount program for the disadvantaged who could not afford Comcast’s regular prices for broadband service. But the program was stalled at the direction of Cohen, who wanted it to be a chip with regulators to win approval of its acquisition of NBC-Universal. The program, sure to be popular among advocates of the digitally disadvantaged, was a key part of approving the $30 billion deal.

“I held back because I knew it may be the type of voluntary commitment that would be attractive to the chairman [of the FCC],” Cohen said in a recent interview.

Regulators promoted Comcast’s “concession” to offer the discounted Internet service as a win for consumers as part of the final approval of the deal. In reality, Comcast was planning to offer the service anyway and finally introduced it in 2011 — two years after first being proposed inside the company.

That fact is a slight embarrassment to current FCC chairman Julius Genachowski, who has told audiences the discounted Internet program was partly to his credit.

“This particular program came from our reviewing of the Comcast NBC-U transaction,” Genachowski said in a speech. “Comcast embraced it as good for the country, as well as good for business. And I’m fine with that.”

Cohen defends Comcast’s lobbying expense as part of the company’s effort to combat scrutiny and challenges to its all-or-nothing video business model, denying customers access to a-la-carte programming.

Comcast’s scope has now grown so large, it has become a force few companies are willing to challenge, and those that try are quick to run into a blockade of Comcast lawyers, lobbyists, and carefully constructed contracts that protect the company’s bottom line from would-be competitors.

Deep pockets like Verizon, Apple, Netflix and Google have all tried… and failed to recast the cable television experience with on-demand programming, a-la-carte channels, and cord-cutting technology.

In response, Comcast has kept competitors tied down to the same cable packages that require subscribers to pay for everything, even if they seek only a few channels. Comcast leverages its broadband network with usage limits that effectively curtail cord-cutting among consumers looking to skip the TV package. Anyone seeking a place in today’s entertainment industry ends up dealing with Comcast sooner or later.

“They are hugely important because they can singlehandedly sink or swim multiple businesses that rely on the Internet ecosystem by virtue of controlling the dissemination of information through their pipes and now by supplying so much of the content,” said Joel Kelsey, a policy director at consumer interest group Free Press. “So many companies have come to us and ask we fight their battles for them because they are afraid of retribution.”

Cohen is well-compensated for his effectiveness. His latest three-year contract makes him one of the highest paid corporate lobbyists in Washington, with a $15 million annual compensation package and $3 million in bonuses, not including his ample stock holdings in Comcast.

His influence extends to the highest levels of the Obama Administration. Last summer, the family hosted a $1.2 million campaign fundraiser for President Obama, and the Cohens have separately contributed $877,000 to various campaigns. Comcast itself has spent $3.3 million in campaign contributions so far this year.

Telling Time Warner customers to get rid of the cable company’s phone service.

Best Buy employees in upstate New York are advising Time Warner Cable customers to dump Time Warner phone service and buy their own cable modem to completely avoid any additional monthly fees.

“We don’t have modems that will support Time Warner’s voice services, so basically any customer that has that bundle either has to make the decision to get rid of that service or deal with paying for that service every month,” said Syracuse Best Buy employee Drew Cacciola.

Cacciola told a Syracuse television station Time Warner’s supplied equipment is “old and refurbished” and that if customers purchase their own equipment, they will have the latest technology and won’t have to worry about ending up with another refurbished cable modem if the current modem fails.

“If [a new modem] breaks down you can get a new one you don’t have to send it back to them and you won’t get another refurbished one – you get a new one,” said Cacciola.

In fact, Time Warner phone customers do not have to cancel their phone service to avoid the modem fee, but they will be stuck with two pieces of equipment — a Time Warner-supplied eMTA that manages the phone service (with its Internet ports disabled) and the customer’s own purchased cable modem. For now, Time Warner is not charging customers for eMTA equipment used exclusively for its phone service.

Best Buy does not carry some of the models on Time Warner’s approved modem list, and the cheapest one WSYR reporters could find cost around $60, meaning it will take just over a year to recoup the cost of the modem.

Motorola cable modem

Time Warner Cable’s modem fee continues to create consternation for customers, especially when they learn the same piece of equipment used for both Internet and phone service costs $3.95 a month when used for broadband, but is free when used only for phone service.

Stop the Cap! reader Ben argued with a Time Warner representative trying to understand the reasoning.

“So, let me get this straight about the modem fee: If I have phone there is no fee but if I use the same modem to also get Internet, there is a fee?,” Ben asked.

Yes, came the answer. The explanation:

“About the modem fee: Our costs for Internet equipment keep increasing and unfortunately we could not continue to absorb the costs related to their purchase, maintenance and repair,” wrote a Time Warner employee named ‘Paul-E.’ “Leasing a modem ensures you have the most up to date and capable equipment to take advantage of our services as we offer faster speeds and additional functionality. These events sometimes require that we replace your current equipment to give you the best experience.”

Time Warner’s explanation for the new modem fee sounds plausible, but unfortunately for “Paul-E” (and the company),  much of it is demonstrably false.

Investors Business Daily reports the new $3.95 computer modem leasing fee could raise up to $500 million a year for the cable company.

“I would look at this as a price increase,” Bryan Kraft, an analyst at Evercore Partners, told IBD via email. “There are some questions that need to be answered before the impact on ARPU (average monthly revenue per user) can be reasonably estimated.”

Stop the Cap! took a look at Time Warner Cable’s financial reports and discovered the company’s capital expenses for its high speed Internet service (and cable modem equipment) have dropped for the third year in a row:

Time Warner Cable’s capital expenditures on customer premise equipment, including cable modems, has dropped for three years in a row.

Capital spending (as a whole) so far this year has decreased as a percentage of revenue to just 12% for residential customers. Time Warner has spent money primarily on extending service to potential business customers.

The need to charge you more for a cable modem is questionable when residential Internet service rate increases and customers gravitating to more expensive, higher speed services already deliver the company higher average revenue per customer without spiking their costs.

When the station relayed complaints about long hold times and busy signals for customers trying to activate their purchased cable modem, the response from Time Warner — don’t call on Monday or Friday or around morning or dinner time unless you are prepared to wait on hold.

[flv width=”640″ height=”380″]http://www.phillipdampier.com/video/WSYR Syracuse Time Warner Cable modem charge 10-24-12.mp4[/flv]

WSYR in Syracuse covers the ongoing controversy with Time Warner Cable’s new modem fees, and a Best Buy employee tells Time Warner customers to get rid of the company’s phone service.  (3 minutes)

Looking for new revenue opportunities

More than half (52 percent) of all U.S. consumers say Internet service is their home’s most important utility, according to a survey conducted by Verizon Communications as part of their Verizon FiOS Innovation Index project.

But Verizon’s research surveys go well beyond simply identifying who loves Internet access. Verizon’s real interest is identifying so-called “borderless consumers,” — customers who are seeking a seamless online experience and connectivity both inside and out of the home.

The convergence of wired and wireless broadband networks is a potentially enormous money-maker for Verizon, especially if you happen to be a Verizon Wireless customer.

“As the borderless consumer segment continues to grow, so will the need to identify, understand and anticipate what consumers truly want in their increasingly connected lives – today and in the future,” said Eric Bruno, vice president of FiOS strategy and development for Verizon.

Fran Shammo, Verizon’s chief financial officer, has previously told investors that monetizing data usage goes beyond text messaging and web browsing. The next frontier for enhanced revenue will come from the machine-to-machine segment. As consumers strive for a more connected future, enabling wireless connectivity for home appliances, automobiles, medical equipment, and other devices will create new revenue streams for the company.

Verizon’s new research surveys help the company target its future marketing to consumers most likely to be living the “borderless lifestyle.” Are you? Here are some key attributes:

• Above average income: Most are college educated, own their home, and nearly half earn $75,000 or more annually, so they can afford higher broadband bills;
• They are 18-34: Generation X and Millenials grew up in an increasingly connected world. Baby boomers are not far behind, but seniors are;
• Women somewhat outnumber men in their need to remain connected;
• You already have a computer, smartphone, or tablet and are connected to high speed Internet. Most of you want faster speed, if you can get it.

Verizon’s study becomes murkier over the issue of cord cutting. Verizon found that video streaming continues to drive Internet traffic growth, but at least 89% still prefer watching shows on their televisions. Verizon defines that as live TV, DVR, or on-demand from “TV/Cable service.”

But they did not ask whether consumers are watching more or less television provided by their cable, satellite, or phone company or if a larger proportion of viewing now comes from Netflix or other streamed content. That is a key indicator of whether a customer is gradually shifting viewing habits, which could ultimately make it easier to dump cable television.

With 90 percent of those surveyed looking forward to the day when every connectable device in their house can seamlessly interconnect and work together, Verizon’s potential revenue opportunities are enormous, if customers use Verizon Wireless for connectivity and not free Wi-Fi. Machine-to-machine wireless traffic can boost profits without costing the company much, especially under Verizon Wireless’ new Share Everything pricing. The impact of short data exchanges likely from home appliances and other similar devices is expected to be negligible. The profits from charging at least $10 a month to add each of those devices to a Verizon Wireless account are not.