Phillip "Of course you know this means war" Dampier

Sizing up the big winners from FCC Chairman Julius Genachowski’s latest Net Neutrality proposals is as simple as putting those praising Genachowski in column “A” and those outraged by downsized consumer protections into column “B.”  It comes as no surprise Big Telecom, the employees whose jobs depend on those companies, their trade associations and lobbyists are all living it up on the “A” side while consumers and public interest groups sit in the dark in column “B.”

Among the high-five club is Kyle McSlarrow, the outgoing head of the National Cable and Telecommunications Association, the cable industry’s top lobbying enterprise.

On the NCTA’s blog, an indication of your broadband future has been placed front and center — a meter.  Perhaps putting a coin slot on your cable modem or a credit card reader on the side of your monitor would be a bit too brazen, even for this industry.

McSlarrow, among others, heaped bountiful praise on the FCC chairman for his ‘enlightened’ views on Net Neutrality.  That hardly a surprise considering Genachowski has opened his phone line, and apparently his heart, to industry propaganda and arguments.

Genachowski’s remarks about usage-based pricing, in particular, were a breath of fresh air to Wall Street and providers clamoring to dispense with unlimited broadband service for consumers to increase profits:

Our work has also demonstrated the importance of business innovation to promote network investment and efficient use of networks, including measures to match price to cost such as usage-based pricing.

“This approach reflects a responsible and considered view of a fast-moving and highly dynamic marketplace but it doesn’t assume that there is any one ‘correct’ answer,” McSlarrow wrote.

It’s also a view consumers strongly disagree with, but those opinions are off the FCC’s radar.  Consumers don’t have the chairman’s direct phone number.  If they did, they could argue the fact “matching price to cost” would mean a dramatic reduction in pricing for today’s unlimited broadband account.  Instead, we have a lobbying effort to end “unlimited” entirely, backed by manufactured studies funded by providers expecting pre-determined conclusions.  Too bad the FCC doesn’t read provider financial reports.

Writes McSlarrow:

Some consumers don’t see the need to go online.  Others are constrained by cost.  Still others want to use the service they have in cutting-edge ways.  And the ability to pigeonhole companies and their business plans as being one thing or another is breaking down, particularly in an environment where Internet applications, content, and services change the way we behave as consumers, provide new opportunities for providers and consumers and alter how we all interact with both traditional and new devices and features.

The key point is that that we need to focus on what best serves consumers.  With all this change, it is necessary to have the flexibility to test new business models – and perhaps new pricing plans – in order to see if they make sense.

A usage-based pricing model, for instance, might help spur adoption by price-sensitive consumers at the lower end of the socioeconomic ladder.  As Sanford Bernstein analyst Craig Moffett noted in a report issued yesterday, “{u}sage-based pricing for broadband would have profound implications.  At the low end, it would allow cable operators to introduce lower priced tiers that could boost penetration and help in efforts to serve lower income consumers.”

McSlarrow

Evidently, to chase the small percentage of Americans who either don’t have an interest in going online, or think it costs too much, the NCTA wants those already online to face Internet Overcharging schemes ranging from usage caps to metered billing.  Is it flexible for consumers who face the end of broadband pricing as they’ve lived with for more than a decade or is it flexible for providers who can run to the bank with the higher profits rationed broadband delivers?

McSlarrow quotes Moffett’s quest for higher profits for his clients — Wall Street investment banks, but ignores the implications Moffett himself admits — consumer rebellions, self-rationing of usage, a stifling of online innovation from independent companies not connected with providers, and higher prices.

American providers look north for an example of Big Telecom’s pot ‘o gold — Canadian ISPs that have managed to wreak havoc on the country’s broadband rankings, forcing consumers to live with higher prices and, in some cases, declining usage allowances.  Canada’s broadband innovation graveyard is an object lesson for Americans: usage-based pricing doesn’t deliver savings to anyone except the most casual users living under constrained speeds and paltry allowances as low a 1GB per month.  For everyone else, broadband prices are higher, speeds are slower, and usage allowances deliver stinging penalties for those who dare to exceed them.  What do Canadian providers do with all of the money they earn?  A good sum of it goes towards acquiring their competitors, further reducing an already-poor competitive marketplace.

As one Ontario reader of Broadband Reports noted, “our largest cable company has the money to buy three professional sports teams but not enough to roll out DOCSIS 3 [to all of its customers.]  Our largest phone company, Bell, has the money to buy half the news stations in Canada, but cannot seem to get users off of 3Mbps DSL service.  The whole system is a scam.”

While the rest of the world is decidedly moving away from limited-use broadband, American providers have sold Genachowski that rationing the Internet is “innovation.”

Of course, you and I know real innovation means investing some of the enormous profits providers earn back into their networks to keep up with growing demand.  Providers can innovate all they like to attract price sensitive customers, so long as current unlimited plans remain available and affordable.  But as AT&T illustrated earlier this year, the first thing off the menu is “unlimited,” replaced with overpriced and inadequate wireless data plans that only further alienate their customers.

AT&T should take a lesson… from AT&T.  While it gouges its customers on the wireless side, the company has managed to solve the affordability question all by itself, without resorting to wallet-biting.  It dramatically reduced prices on its DSL services — now just $14.95 a month for its customers, which includes a free gateway and modem.  That sure sounds like a solution for budget-conscious customers and delivered all without antagonizing those who want to keep their current unlimited service plans.

AT&T seems to have managed to solve the affordability question without overcharging their customers.

Cable companies deliver their own budget broadband plans, but it comes as no surprise they barely market them, fearing their premium-paying customers could downgrade their service.

In short, Internet Overcharging is a solution chasing a problem that simply does not exist in a responsible broadband marketplace.

McSlarrow says he’s not arguing for or against any particular model.  All he is really confident about is that the marketplace is changing and that “companies will have to adapt to that change.”

But as is too often the case, McSlarrow, his industry friends and colleagues, and Chairman Genachowski have forgotten it’s ultimately consumers who have to adapt to change, and we promise it means all-out war if providers tamper with unlimited broadband service.

The Cowardly Lion is back.

Federal Communications Commission chairman Julius Genachowski believes he has a sound legal basis to implement Net Neutrality policies to protect Internet traffic from provider interference, but has stopped considerably short of implementing his own proposed enforcement mechanisms.

Genachowski outlined his ideas to implement Net Neutrality reform in brief remarks before the Commission this morning.

“Broadband providers have natural business incentives to leverage their position as gatekeepers to the Internet,” the text of the speech says. “The record in the proceeding we’ve run over the past year, as well as history, shows that there are real risks to the Internet’s continued freedom and openness.”

Genachowski praised the progress the Internet has managed to achieve over the past decade, and said his efforts would ensure that progress could continue with a minimum of regulation.  In that spirit, Genachowski announced he would not move that the Commission re-assert its legal authority to oversee broadband by a process to reclassify the service under Title II, which governs telecommunications services.

Comcast successfully sued for repeal of the Commission’s original authority, implemented by Bush FCC chairman Michael Powell, which classified broadband as “an information service.”  A DC Circuit Court discarded the legal basis for Powell’s regulatory authority in a sweeping victory for the cable giant, which was sued for throttling down speeds for broadband customers using peer to peer applications.

Genachowski argued he has “a sound legal basis” to pursue his latest vision of Net Neutrality rules in spite of the earlier court case.  But critics doubt that and charge that the FCC chairman has capitulated to America’s largest broadband providers, including Comcast, AT&T, and Verizon.

Genachowski's view of the Internet does not meet the realities consumers face without Net Neutrality protection assuring a free and open Internet.

“By not restoring the FCC’s authority, Chairman Genachowski is unnecessarily placing his Net Neutrality agenda, and indeed his entire broadband agenda, at risk,” said Free Press executive director Josh Silver.

Boiled down, Genachowski now seeks just two major principles governing provider behavior:

1. No censorship of content.
2. Full disclosure of network management techniques so consumers know what providers are doing to their broadband connections.

Consumer groups are furious that the chairman has apparently discarded many of Net Neutrality’s most important consumer protections, and accused him of caving in to lobbyist demands and abdicating his responsibility to oversee critical broadband infrastructure.

Marvin Ammori, a cyber-activist and public interest law professor said the proposal also fell well short of meeting President Barack Obama’s repeated promises to enact strong Net Neutrality policies.

“It’s make-believe Net Neutrality,” said Ammori, who called Genachowski’s proposals “garbage” and “meaningless gestures.”

Now off the table:

A ban on Internet Overcharging schemes that allow providers to limit, throttle, or overcharge consumers who use more than an arbitrary amount of Internet usage per month. This exposes home broadband users to the same kinds of bill shock that wireless customers already experience.

A ban on using “network management” to artificially slow or block traffic the provider — at its sole discretion — determines is “harmful” or “congests” their network. Under Genachowski’s new proposal, the definition of “harmful” could be made by an engineering department on technical grounds or in an executive suite as companies ponder their financial returns. So long as they manage traffic without “unreasonable discrimination,” it’s okay with the Commission.

Built-in loopholes guarantee providers need only set rates high enough to assure only “preferred partners” can afford the asking price, and that only their competitors meet the definition of “harmful” traffic worthy of speed throttling.  The proposal also reportedly only covers video and voice traffic on wireless networks.  It’s open season on everything else if you access the web from a smartphone or wireless broadband service.

Actual legal authority to implement any broadband reform policies. It was Julius Genachowski and the FCC’s General Counsel Austin C. Schlick that argued without asserting legal authority under Title II, nothing the Commission did could be assured of withstanding a court challenge.  Yet today the chairman now claims his legal team has found some legal precedents that somehow will keep his policies in force after inevitable lawsuits are filed.  Former FCC chairman Powell thought much the same thing about his own idea of reclassifying broadband as “an information service.”  The DC Court of Appeals thought otherwise, something Schlick knows personally, having fought the Comcast case before that court.  In the end, Schlick correctly guessed his case was a train wreck, and was reduced to asking the court for legal pointers about how to draft regulations that could survive a court challenge.

[flv width=”640″ height=”380″]http://www.phillipdampier.com/video/The Third Way The Future of Internet Policy in America 5-2010.flv[/flv]

This “other” Julius Genachowski from May of this year delivered remarks that carried a very different tone about the importance of restoring legal authority to oversee broadband.  But that was before AT&T put him on their speed dial, successfully reaching him personally more than a half dozen times in the last few weeks to argue their point of view.  Consumers don’t have Julius Genachowski’s phone number.  (4 minutes)

In short, Genachowski’s proposals represent near-total victory for providers, and any cable or phone company annoyed with the few scraps still on the agenda need only file suit arguing the Commission lacks the authority to stick its nose into their business affairs.  Without Title II authority in place, that lawsuit is probably going to result in a favorable ruling putting us back where we are today — with no Net Neutrality protections.  But by then, the Internet will be a very different place, loaded with toll booths from content providers and your ISP, who may ask for extra money if you want to watch Netflix or download files.  Your speeds may be reduced at any time, to any level, if a provider deems you’ve over-consumed your traffic allowance for that day, week, or month.

Worse, some providers will dispatch bills with overlimit fees that could run into the hundreds of dollars (or more) for those with a family member who left a high bandwidth application running while running out the door to catch the school bus.

Providers and their well-paid lobbyists celebrate their victory over consumers' wallets

So long as providers agree to abuse everyone more or less equally (excepting their own “preferred partners” of course), Julius Genachowski believes the next ten years of America’s online experience can be as great as the last.

In his dreams.  As Public Justice attorney Paul Bland said about dealing with ruthless companies like AT&T, assuming providers will behave favorably towards consumers puts you on the candy bridge into Rainbow Land.

Even with Genachowski’s proposed reforms, diluted to be point of being homeopathic, Republicans were moving in for the kill this morning.

Rep. Marsha Blackburn (R-Tenn.) a member of the House Energy and Commerce Committee, said she would work to topple any FCC-led Net Neutrality order.

“This is a hysterical reaction by the FCC to a hypothetical problem,” she said, adding that Genachowski “has little if any congressional support” for the action.

To overturn any order, Blackburn vowed to reintroduce her bill to prevent the FCC’s policy making process.

Robert McDowell, one of two Republican FCC commissioners, called the move to enact reforms a defiance against Congressional will.

“Minutes before midnight last night, Chairman Genachowski announced his intent to adopt sweeping regulations of Internet network management at the FCC’s open meeting on December 21. I strongly oppose this ill-advised maneuver. Such rules would upend three decades of bipartisan and international consensus that the Internet is best able to thrive in the absence of regulation,” McDowell said in a prepared statement.

All this is taking place at the same time Comcast has foreshadowed America’s future broadband experience: charging backbone provider Level 3 extra for sending Comcast customers online movies and TV shows, censored a blog run by one of its customers trying to get around Comcast’s unresponsive customer service agents, stifled innovation by independent cable modem manufacturer Zoom Modems, has achieved a fever pitch in lobbying Washington to hurry up and approve its colossal merger deal with NBC-Universal, and has a lobbying team convinced it can achieve victory on all fronts from a favorable incoming Congress.

If they and other broadband providers succeed, it’s time to get out your wallet and count your money before handing it over.  A consumer revolt is all that stands between your Internet experience today and an endless series of pay-walls and stifled speeds tomorrow.

Good News! (For the station's advertisers)

WTXL-TV’s The Good News Show fell all over themselves last week gushing about Comcast’s rebranding as Xfinity.  The noon weekday program, apparently produced by the station’s news department, managed to obliterate any firewall between journalism and the advertising & sales department at the station.

A sampling of praise from the host, in between tossing softball questions at the two Comcast representatives followed by vigorous nodding in agreement:

• “Wow, that -is- amazing.”
• “It’s so much more for less, really.”
• “I know, unbelievable!”
• “Yeah, definitely,” in response to Comcast’s community coordinator’s statement that she thinks everyone should sign up for Comcast service.
• “Yes, true — especially with the holidays coming this is something everyone’s going to want to get in on!”

The journalistic malpractice doesn’t stop with Comcast.  Other features practically evangelize local Tallahassee businesses and restaurants, a whole mess of which also turn out to be sponsors or “partners” offering discount coupons on the station’s website or “advice” to viewers.

A little exploration of WTXL’s website uncovered a page inviting those interested in appearing on the program to contact… the station’s advertising & sales department!:

Reach your potential customers in Tallahassee, Thomasville, Valdosta and beyond with the power of television and innovation of the internet.

ABC 27 can…

• reach over 290,000 households in North Florida and South Georgia
• produce your commercial in high definition
• create custom promotions to help you reach new customers
• increase traffic to your website and position your company more effectively through customized online advertising and sponsorships
• put together an advertising plan that will meet your  marketing goals and fit your budget.

Your ABC 27 account executive will be dedicated to helping you grow your business and assist you through every step in creating your advertising campaign.

Of course the last people to understand this special relationship between the station and its advertisers are the viewers, who don’t appear to be told if the guests appearing on the program are also paying clients.

This is not unprecedented.  Many small city television stations beef up their ad revenue inviting sponsors to appear on morning and interview shows.  But WTXL is among the first to package it under the moniker “news” and deliver it to Florida and Georgia viewers on a Comcast/Xfinity Silver Platter.

[flv width=”480″ height=”380″]http://www.phillipdampier.com/video/WTXL Tallahassee Comcast Introduces Xfinity 11-23-10.flv[/flv]

An excerpt from WTXL’s ‘The Good News Show,’ featuring two representatives from Comcast who received a glowing reception from the program’s host.  (4 minutes)

AT&T Mobility thinks it has a winning strategy when it took away unlimited data plans, forcing new customers to choose high-priced, usage-limited alternatives.  But a new survey from Wall Street research firm Sanford Bernstein found AT&T customers will grab, claw, and scream to keep the peace of mind that comes from having the choice of an unlimited use plan.

Sanford Bernstein’s study found a large number of customers willing to abandon any carrier that takes unlimited data away from them.  About a third of the more than 800 people responding said AT&T’s move toward usage-based billing left them with a bad impression of the wireless carrier.  That’s particularly bad for AT&T, which already scores as America’s lowest-rated wireless company according to Consumer Reports.

AT&T mitigated some of the potential damage by letting existing customers keep their unlimited data plans when they ceased selling the unlimited option this past June.  New customers are forced to choose between two limited-use plans — $15 for 200MB or $25 for 2GB of usage (a tethering option is also available.)  Existing customers will only face that hard choice if or when they change phones, presumably in the next year or two.

Had they not grandfathered in existing customers, Sanford Bernstein’s research suggests a large proportion of customers forced to give up unlimited data would quit AT&T even if it meant buying a new phone and paying a higher bill just to get the unlimited data option back.  When AT&T eventually forces these customers’ hands, Sanford Bernstein predicts trouble.

According to the study, more than 58 percent of the lowest data users said they would dump AT&T overboard and switch to another provider with an unlimited plan. For heavier users, more than two-thirds are prepared to take their business elsewhere.

But even with overwhelming evidence like that, AT&T and some Wall Street analysts think Internet Overcharging schemes do customers a favor.

AT&T's mandatory data plans

“Customers generally have strongly negative perceptions about Usage-Based Pricing, and these are often not correlated with self-interest,” Bernstein analyst Craig Moffett said in a research note analyzing the findings of the survey conducted this past summer. “It is fashionable to argue that loyalty to carriers is dead (except perhaps to Verizon Wireless, whose service level is perceived to be markedly higher than that of its competitors). The new conventional wisdom is that carrier loyalty has been replaced with loyalty to the device. But high inclination to switch carriers and phones to maintain an unlimited plan suggest that perhaps the plan itself is more important than either one.”

The Wall Street firm’s research is hardly news to consumers, who have repeatedly expressed loathing contempt for Internet Overcharging schemes like so-called “usage-based billing,” “data caps,” and speed throttles that kick in when carriers decide customers have used the service enough.

Consumers are willing to pay a higher price just knowing they will never face dreaded “bill shock” — a wireless company bill filled with hefty overlimit fees charged for excessive data usage.  They also have no interest in being penalized by arbitrary usage limits that punish offenders with speed throttles that reduce wireless speeds to dial-up or lower.

AT&T was the first major carrier to throw down the gauntlet and force customers into choosing between a “budget plan” that is easy to exceed at just 200MB of usage per month or an inadequate, overpriced 2GB tier that costs just five dollars less than the now-abandoned unlimited use plan.

Wall Street firms like Sanford Bernstein worry their investor clients may be exposed to a revenue massacre when competing carriers like Verizon Wireless, which retains an unlimited plan for now, unveils its own version of the popular Apple iPhone.  The result could be a massive stampede of departing customers headed for top-rated Verizon Wireless, even if it means paying early termination fees.

AT&T spokesman Mark Siegel sees things very differently however, telling CNET News AT&T’s new limited option plans deliver more choice and flexibility for data-hungry users.

QUBE's "revolutionary" interactive wired remote control, from 1978 (courtesy: QUBE-tv.com)

Happy Thanksgiving to all Stop the Cap! readers.

While we take a break from our usual reports, let’s turn the clock all the way back to 1978, an era before broadband (or dial-up for the most part) and even before most of the basic cable networks know today existed.  Cable television was not even an option yet in many communities, although discussions about the concept were well underway.

In Columbus, Ohio Warner Cable constructed an experimental two-way cable system called QUBE, which brought 30,000 homes in the city access to interactive, locally-produced programming.  Viewers could vote on different topics, share their opinions, answer quizzes, and order individual pay-per-view movies — a new concept for most people back then.

Cable television in 1978 didn’t deliver CNN, TNT, ESPN, or any of dozens of other cable networks that are household names today.  Instead, most delivered clear signals of broadcast television stations received over the air from a master antenna mounted high above the local cable company, supplemented with text-based information channels running newswires, sports scores, financial tickers, weather and other wire service reports.  Locally produced government, public access and educational programming covered much of the rest of the channel lineup.  Cable radio hooked up to home stereos and delivered improved FM radio reception and some privately run cable radio stations.

QUBE was no different in this respect.  The bulk of the programming people watched came from local broadcasters and imported stations from Indianapolis, Cleveland, Cincinnati, and Athens — all selected from a wired remote control.  It total, QUBE carried 30 channels, 10 of which were premium or pay per view.  The concept was so revolutionary, some folks traveled from miles around to record sample programming off the system and share copies of videotapes with other cable enthusiasts.

QUBE was not a financial success for Warner, however.  The costs to produce interactive programming, building brand new cable systems, and purchasing the equipment to run them, caused Warner to accumulate $875 million in total debt by 1983.  It abandoned the concept a few years later because new cable networks and superstations were rapidly signing on, creating a huge number of new viewing options that effectively drowned out the locally-produced interactive shows.  Cable would remain a one-way medium, at least for awhile.

Watching the enthusiasm of Ray Glasser, who produced the video included below, all over a 30-channel cable system was fascinating, as was watching the assortment of television stations sampled from more than 30 years ago.  And check out those supermarket prices listed on one of the text channels Ray previews.  After a series of sales and ownership transfers, Warner Cable still exists in Columbus.  But today, we know it better as Time Warner Cable.

[flv width=”422″ height=”327″]http://www.phillipdampier.com/video/Qube.flv[/flv]

A video tour of Warner Cable’s QUBE system in Columbus, Ohio, produced in 1978 by Ray Glasser.  (50 minutes)