Additional details about Time Warner Cable’s new TV Essentials package, which provides a more limited cable TV lineup to viewers are making their way to Stop the Cap!

So far, Wall Street appears generally unimpressed with Time Warner’s efforts to retain customers planning to depart the cable company over cost issues.  Richard Greenfield of BTIG says consumers have to give up too much to subscribe to a package that deletes many of America’s most popular basic cable networks and delivers no HD programming.

The package seems to alienate every age group.  Stop the Cap! confirmed Time Warner Cable made most of the decisions about the channel lineup themselves, and although some networks are insistent about not being excluded from such packages, many of the decisions about what channels to leave out were made by the cable company.  For example, younger viewers will miss Comedy Central despite the fact the network is hardly the most expensive basic cable channel around, and nothing prevented them from carrying it.  We’ve also learned the Essentials package deletes several more channels some consumers will consider deal-breakers to lose.  We’ve confirmed in Ohio, customers will have to give up Food Network and The Weather Channel.  No Ms. Palin’s Alaska either — TLC is also off the channel lineup.

We’ve learned from a few of our readers in Akron and Cleveland who inquired about the new package that Time Warner told them they cannot continue to get phone or Internet service with the Essentials package on their account.  We earlier heard customers were supposed to be excluded from promotional deals for these services, not banned from buying them at any price.  We’re trying to get a confirmation from Time Warner’s northeast Ohio division about this, and suspect there might be some mis-communication going on here.

Greenfield adds Time Warner is offering a lousy deal to budget-minded consumers.

“Cable subscribers looking to save money have already defected to Dish Network’s $40 package called America’s Top 120, which is better than TV Essentials,” he noted.

Meanwhile, residents in upstate New York — watch out.  Time Warner Cable is finalizing its decisions about 2011 rate increases which are likely to be announced in mailers sent just after the holidays.  A source tells Stop the Cap! the rate increases will echo the ones in North Carolina.  The biggest rate increases will hit customers only getting one or two services from the cable company.  Video customers can expect the largest increases.  Phone rates will likely remain unchanged for most.

Customers will be encouraged to avoid the rate increases by bundling services.  Time Warner Cable raised rates on western New York customers three times in 2010 for different services.  This rate increase, likely effective in February, will be similar in percentage to the one announced last winter.  The company will blame programming costs and also use the introduction of several new services, including Primetime on Demand, Look Back, and Remote DVR as  justification for the rate hikes.

We’ll have much more coverage on this in late December.

[flv width=”640″ height=”380″]http://www.phillipdampier.com/video/WFMY Greensboro TWC Rate Hike 11-22-10.flv[/flv]

You can preview the excuses for forthcoming rate hikes from Time Warner Cable by listening to a company representative in North Carolina deliver them to customers there, who will see their rates increase Dec. 3rd (from WFMY-TV Greensboro).  (2 minutes)

Studies find few surprises for cable and phone companies that pay for them.

Internet plans with term contracts, usage limits, and other pricing tricks are good for consumers and save them money over comparable unlimited usage plans.

That is the conclusion of a new study from the Technology Policy Institute, an industry front group funded by AT&T, Comcast, the National Cable & Telecommunications Association, Qwest, Time Warner Cable, T-Mobile, and Verizon.

Scott Wallsten and James Riso’s “study,”Residential and Business Broadband Prices, Part 1: An Empirical Analysis of Metering and Other Price Determinants,” claims to have taken a comprehensive look at 25,000 plans offered across North America, Europe and the Pacific to make their case that a residential service plan with a 10GB monthly usage cap would save consumers 27 percent over the price of a comparable unlimited plan, as long as data use stays below the cap.  They also suggest additional savings can be had if consumers lock themselves into term contracts with service providers (most of which carry hefty fees to exit early.)

These results suggest that the unlimited data plans typically offered by most U.S. wireline broadband providers may not be optimal for many consumers. The details of capped plans matter, and how an individual user is affected depends on the base price, allowed data usage, and consequences for exceeding the cap. Nevertheless, because capped plans are—all else equal—cheaper than unlimited plans, many consumers, particularly the low-volume users, are likely to pay less for broadband with data caps than they would for plans offering unlimited data transfer.

Wallsten and Riso make much of AT&T’s recent decision to end unlimited usage for wireless broadband, suggesting that consumers are saving money with new, low-use plans over the company’s old unlimited pricing.  The authors claim close to 70 percent of iPhone users consume less than 200 MB per month, which is the cap for AT&T’s cheaper data plan.

But the authors concede that usage is growing — rapidly in the case of online video, which sets the stage for consumers saving money today, but facing serious overlimit charges on their bills tomorrow:

Some analysts, however, remain concerned that these plans make video streaming impractical given the bandwidth it consumes, could eventually cost consumers more as they use their wireless devices more intensively, and generally make it less likely for wireless to become a viable substitute for wireline broadband. To be sure, while Figure 3 shows that the vast majority of users consume small amounts of data today, it also shows per user mobile data consumption growing quickly, so the number of people who exceed the caps could increase significantly in a relatively short period of time.

Major U.S. wireline providers have not yet introduced metered pricing successfully, though, as shown above, it is common in other countries. An experimental metered pricing plan by Time Warner Cable garnered strong reaction, prompting one group to demand that Congress ―investigate ongoing metered pricing practices to determine the impact on consumers. Some in Congress did, in fact, hold hearings on the plans. In response to this backlash, Time Warner Cable canceled its experiment.

Despite the political reaction, all consumers are not inherently worse off or better off with metered pricing. Low-volume users are likely to be better off under metered plans and high volume users worse off. The net effect on any given consumer depends on his data use, the base price, how much data the base price allows, the price of data when exceeding the cap, and how much he would have paid for an unlimited plan.

Wallsten and Riso also admit several parts of their study are “incomplete,” and “lack data.” We would also include the facts they ignored whether consumers prefer unlimited plans, how customers would feel about a bill with overlimit fees attached, or whether the usage cap levels the authors note in their study are adequate.  They also completely ignore the critical issue of bandwidth cost trends and their relationship to consumer pricing.

But of course they would, considering the same providers who want these pricing schemes are paying the costs for the study.

Welcome to the world of Hired Gun Research.

Wallsten, in particular, has been singing the same cap-happy tune for several years now, churning out the same industry-financed conclusions about broadband.  Back in 2007, he delivered a piece trumpeted by the Progress & Freedom Foundation and the Heartland Institute — two groups notorious for parroting corporate-friendly talking points.  Back then it was about Internet overloads and supporting Internet toll booths for “congestion pricing” after Comcast got caught secretly throttling broadband customer speeds.

Dave Burstein of DSL Prime notes most consumers don’t like caps, lock-in contracts, or speed throttles.

“Policymakers should normally assume that imposing caps generally results in negative consumer welfare. The small efficiency gains don’t come close to making up for a second rate Internet,” Burstein writes. “Everyone is better off with a robust, unthrottled Internet. It allows for an important form of video competition and market access for innovative new net offerings. It’s a better experience for the user and hence more people will be connected, a good thing.”

In this latest study, the two authors completely ignore some very important facts:

• Who sets the pricing for unlimited and usage-capped broadband?  Providers.  Do consumers save money from usage limited plans because of decreased provider costs passed along to consumers or pricing schemes that artificially inflate unlimited broadband pricing to drive customers to “money-saving” limited plans that teach usage restraint or expose consumers to dramatic overlimit fees?

• What are the trends for wholesale bandwidth costs and how does that trend comport with industry pricing schemes that have increased broadband pricing in the United States?  An honest study would reflect these costs are dropping… dramatically, and would introduce the very real question of whether unlimited broadband is a problem in search of a revenue-generating solution that would come from further monetizing broadband with so-called “consumption pricing.”

• What is the consumer perception of usage-limited broadband?  An important part of this equation is whether consumers want unlimited broadband service to be discontinued.  Every study to date not paid for by the providers themselves shows consumers are willing to pay today’s prices for the peace of mind they receive in not being exposed to limits or overlimit fees.  Wallsten and Riso touched on the consumer backlash, to a considerable part coordinated by Stop the Cap!, over Time Warner’s pricing scheme which would have tripled broadband pricing for an equivalent level of service.  But the authors charge on with their pro-cap conclusions regardless.

• Wallsten and Riso’s study only casually mentions the dramatically different paradigms of wireless and wireline broadband.  The former is delivered using technology that is recognized to have limitations that can only be seriously addressed with additional spectrum allocation that could take years to address.  The latter is already being mitigated by cable broadband technology upgrades, fiber optics, and improved backbone connections that often deliver much better access at a fraction of the price providers paid just a few years earlier.  Drawing comparisons between AT&T’s wireless broadband pricing and wireline broadband is dubious at best, especially since two companies largely control pricing and service for the majority of wireless customers in the United States.

• To prove its contention limited broadband service is “common in other countries,” the authors cite a Frequently Asked Questions article by Comcast trying to justify that company’s own usage cap to its customers.  So because Comcast’s PR department says it, it must be true.  In fact, in countries where usage capped broadband has been a traditional problem, consumer demand and public policy efforts have moved providers towards offering unlimited service plans to meet popular demand.  In fact, in countries like Australia, New Zealand, and South Africa, governments have cited usage caps as a serious disadvantage to growth of the digital economy.  Consumers certainly agree.

Burstein adds:

Caps or other throttling measures are almost never imposed because of actual congestion problems (on large, wired networks.)  The caps would be at far higher levels if they were, like Comcast’s 250 gigabytes. The usual explanation is bogus. The typical consumer advocate believes the caps are about preventing competition to the carriers’ own video package. That’s certainly common, but so is price discrimination to yield increased potential revenues. As Scott notes, price discrimination in a strongly competitive market can work out well for all concerned. With strong competition, the benefits flow through to consumers. Since competition in broadband is typically weak, I believe it far more often has little consumer benefit but is good for company profits.

The authors conclude that despite limitations on data available, “The policy implications, however, are clear.  Policymakers should not immediately conclude that data caps and other pricing schemes that differ from traditional unlimited plans are necessarily bad.”  Instead, the authors suggest pricing trends should be evaluated over time to identify the effects on prices, investment and usage.

Although that’s a point Burstein agrees with, we feel there is substantial evidence this debate is based not on experimental pricing to find new customers, but rather a defensive position to respond to an inevitable public backlash against Internet Overcharging schemes.  Providers are desperately looking for excuses to further monetize broadband, cut costs, and deliver an effective impediment to online video competitors using broadband networks to deliver alternative, less expensive services to consumers.

Policymakers should listen to their constituents, who are more than comfortable with today’s unlimited broadband experience.  Nobody objects to experimental low usage plans with discount pricing, but not at the expense of ending or repricing existing unlimited service into the stratosphere.  Today’s broadband industry earns billions in annual profits, even as their costs decline.  Providers have done considerable profit-taking in the last few years from their broadband divisions, slashing upgrades and other investments to keep pace with traffic demands.

Time Warner Cable is among the first cable companies in the country to recognize there is still a Great Recession for many of their middle class customers.  After major cable companies lost more video subscribers than they gained for the last two quarters in a row — a first — the nation’s second largest cable operator has developed a budget-minded basic package to meet new economic realities.

Time Warner Cable’s TV Essentials Package will deliver about 50 channels of basic networks and local broadcasters to subscribers in two test markets starting Monday — New York City and northeastern Ohio around the cities of Akron and Cleveland.  New York residents will pay $39.95 for the package, $29.95 in Ohio.  But both packages will be sold to customers for only one year as a special promotion and are missing many popular networks.  Despite that, Time Warner Cable spokeswoman Maureen Huff says the packages represent significant savings for consumers.  The retail value of the package is $50 per month.  Several cable analysts suspect the package is revenue neutral for Time Warner, which hopes to hold onto customers and put them back on traditional cable packages as economic conditions improve.

But for those contemplating Essentials, compromising over the likely loss of several networks is required.  Sports fans in particular will need to look elsewhere — all of the expensive basic cable sports networks, including ESPN and MSG are not included.  News junkies will have to live with several C-SPAN networks, CNN and Headline News.  Fox News and MSNBC are excluded.  Several Viacom-owned cable networks are also not covered, notably Comedy Central.  TNT isn’t either.

In fact, no HD networks of any kind are provided, free video on demand is not included, and customers will be banned from obtaining DVR equipment to record shows for later viewing.  Also, customers participating in this promotion are prohibited from receiving any other discounts from the cable company for broadband or phone service, so it is narrowly tailored to appear only to current analog basic/standard service customers.

Although Time Warner Cable CEO Glenn Britt said, “the public would like to have more choice and have the option of paying for less programming,” it’s clear the cable company has also developed the package in a way to protect its more expensive Standard Service from being cannibalized by customers looking to save money.  The lack of HD programming and DVR availability, in particular, will deliver a clear message to many subscribers the package involves uncomfortable sacrifices.

Some of the networks dropped from the Essentials package are not even that costly to Time Warner Cable.  Comedy Central and MSNBC are much cheaper than other networks in the package.  The loss of the former is likely to keep younger households unhappy, and Time Warner would likely have been accused of bias had it included MSNBC’s left leaning nighttime lineup while excluding right-wing Fox News (which is more expensive than CNN and MSNBC combined).

Everything about the Essentials package screams “retention offer” — marketed quietly to customers intending to depart from the cable company for economic reasons.  With 2011 rate increases forthcoming, it is logical this type of package will be offered as a last resort.  But don’t expect Time Warner to heavily advertise it to current customers, where it could trigger a downgrade avalanche.

Vinh Pham had enough trying to deal with Comcast’s impenetrable thicket of customer service confusion trying to get his broadband service from the cable company up and running again after it suddenly stopped working this past March.

I called Comcast and they gave me a really hard time. I was trying to figure out why my Internet was down, and they told me that I did not have Internet. They said my account only has TV, and that’s all I am being charged for.

This annoyed me because I ordered Internet + TV on a promotion price, not just TV, and I had called them to fix this mix up before.

The guy on the phone kept insisting that I was wrong and that I needed to upgrade to the “Triple Play” for $120. That annoyed me even more. I do not want your freaking Triple Play. Who the hell still uses landlines, let alone buy landlines through their cable company. Stop trying to sell me [something] I don’t want.

According to Pham, the Comcast representative accused him of stealing Internet service, which was the last straw for the California customer.  He asked to cancel all of his services.  Pham repeated his story to a customer retention agent and offered to share a copy of the Comcast technician’s installation work order, which showed he ordered and received Xfinity broadband service.

Evidently, Comcast did not correctly provision Pham’s account with the promotion he signed up for, and miles of red tape ensued trying to get his account updated accurately.  Each time the changes did not “take,” Pham’s Internet service would eventually stop working.

Customers using Pham's technique need to have a work order ID and account number to activate service

Pham then discovered Comcast customers could activate Xfinity broadband service themselves because the cable company provided open access to a web page intended for technicians installing service.  Pham simply entered his account number, the work order number from his receipt, and the MAC address on his cable modem, and his broadband service was back without navigating argumentative customer service agents.

Pham shared his find on his personal blog, walking existing Comcast customers step-by-step through the process he followed.

Now, months after the article was published, Comcast contacted the company that hosts Pham’s blog and demanded the entire blog be censored, accusing Pham of telling people how to steal Internet service.

Admittedly, Pham’s use of the phrase “free Comcast Internet” probably did not help, but a review of his technique makes it impossible for non-paying customers to simply activate service for nothing — a customer account number and work order number are required, and presumably Comcast won’t simply accept made-up numbers.

More importantly, Comcast’s efforts to censor one of their customers calls the cable company out for its “shoot customers first, ask questions later” policies.

It’s further evidence the cable giant cannot be trusted when it claims it will observe voluntary Net Neutrality protections against censoring Internet content.

The blowback from Comcast’s actions have provided the company a lesson in “the Streisand effect,” where companies trying to remove information from the Internet only draw bigger attention to the information they are desperate to remove.  Comcast’s censorship efforts have been made futile by hundreds of Internet users who learned of the company’s efforts.  They have republished the information from Pham’s blog, which currently remains intact.  Had the company simply (and quietly) password-protected their technician portal, nobody would have given it a second thought.  Now Comcast is in a bigger PR mess than they started with.

When cable giants like Comcast trample all over free speech (and their paying customers), it teaches a valuable lesson why giving them a chance to grow even larger through a merger with NBC-Universal is a dangerous mistake.

<

p style=”text-align: center;”>

Comcast demands the removal of Pham's blog

Not really

Back in 2002 Vincent and Liza Concepcion walked into a southern California AT&T Mobility store to purchase new cellphones for themselves.  AT&T advertised a buy one, get one “free” offer for cellphones.  What AT&T didn’t say was that the family would end up paying more than $30 in hidden sales taxes for both phones.

More than eight years later, that purchase — and the resulting class action lawsuit it launched — threatens to sweep away important consumer protections by letting corporations ban class action cases and curtail Attorneys General from enforcing state consumer protection laws.

Oral arguments in the case AT&T Mobility v. Concepcion were heard before the U.S. Supreme Court last Tuesday in one of the most important consumer protection cases in decades. At issue is this clause, inserted into the Concepcion’s service contract with AT&T that would disallow the family from participating in a class action lawsuit:

“You and AT&T agree that each may bring claims against the other only in your or its individual capacity, and not as a plaintiff or class member in any purported class or representative proceeding.”

That clause clashes with several state laws, California’s included, which basically say consumers cannot be compelled to sign away their basic consumer protection rights.  California law also says some contracts can be considered unenforceable ‘if they are built on deception, are too-one sided, or violate broader public policy.’

Hello, AT&T.

Vincent and Liza, through their attorney, argue that bringing an individual lawsuit against AT&T over $30 in sales taxes would be crazy — no lawyer would take the case and no plaintiff would front a retainer well beyond the amount in dispute.

As Justice Ruth Bader Ginsburg wrote in another class action case, “The realistic alternative to a class action is not 17 million individual suits, but zero individual suits, as only a lunatic or a fanatic sues for $30.”

The “class action” concept provides at outlet for aggrieved consumers who can attract legal representation if a company can be sued on behalf of every impacted customer.  For AT&T, that could mean facing not just the Concepcion family, but millions of Californians — each charged sales taxes for phones the company advertised as “free.”

How AT&T’s Case Has Broadened Into a Major Dispute Over Arbitration vs. Class Action Lawsuits

It's easy to navigate AT&T's terms and conditions to achieve a good outcome from arbitration, right?

But what began as a legal argument over a “free” phone has broadened into a much larger legal case before the Supreme Court: can consumers be compelled to participate in company dispute settlement schemes and give up their legal right to petition the court system for relief?  Further, what happens when those contract clauses conflict with state consumer protection laws?

Following in the footsteps of the credit card industry, AT&T inserted a clause mandating customers stay away from class action lawsuits.  By telling consumers they are forbidden to participate in such cases, AT&T pushes customers into the murky world of “arbitration” — a system where AT&T picks a private company, with whom it has a financial-business relationship, to “impartially” rule on customer complaints in secret proceedings.  Consumers have to pay their own way to attend arbitration hearings, often held in cities a thousand miles away or more.  They also must agree the decisions are binding and final.

AT&T argues, both directly and through its dollar-a-holler advocates, that class action cases are annoying, expensive, and do not typically deliver substantial benefits to class members.  The wireless carrier argues arbitration of individual cases is much faster and potentially more lucrative to would-be class action members.  Stephen J. Ware, a professor of law at the University of Kansas School of Law argues consumers have often done far better avoiding litigation and entering into arbitration programs.

But consumer advocates claim AT&T’s arbitration rules are stacked against consumers.  Arthur H. Byrant, executive director of Public Justice argues:

First, AT&T’s “agreement” bars its customers from court (except small claims court) and requires them to utilize the company’s mandatory arbitration program. Its rules say that, if a customer completes the process and recovers more than the last written settlement offer AT&T made before the arbitrator was chosen, a $7,500 premium will be paid. Second, the “agreement” bans AT&T’s customers from bringing or participating in class actions against it. Third, the “agreement” provides that, if AT&T’s class action ban is found to violate the law (as 20 states have held contractual class action bans do when they effectively immunize a company from liability), the arbitration clause “blows up” and the class action must proceed in court. Then, when the class action ban is struck down under state law (as AT&T knew it would be), the company springs its wacky trap: It argues that the Federal Arbitration Act of 1925 (FAA) pre-empts — and invalidates — that state law because (believe it or not) the state law is biased against arbitration.

AT&T’s call for pre-emption suffers from a bad connection. State law is not biased against arbitration. It allows AT&T to resolve disputes in either arbitration or court. Only AT&T’s “agreement” is biased against arbitration. Its “blowup clause” precludes class actions from proceeding in arbitration, but not in court.

<

p style=”text-align: center;”>

Using the scroll bar to the right of the player, move down and click on Attorney Paul Bland’s name and watch him argue forcefully that AT&T’s motives are plain and simple — to allow them to get away with anything they want and not face accountability from the legal system. — “Arbitration is not the Candy Bridge into Rainbow Land.”

Tapping Into Consumer Discontent With Class Action Cases for the Benefit of AT&T

What the lawyers get

Ask anyone about the merits of most class action settlements and one will often get a response that the lawyers win while consumers lose.  Just this week many owners of HP printers will get word a deal has been reached over a class action case involving printer ink.  The multiple law firms involved will split not more than $2.9 million under the terms of the proposed settlement.  Consumers will get “e-credit” worth $5, $2, or $6 redeemable at HP’s online store, which sells ink cartridges at inflated prices.  In effect, HP has little to grumble about delivering “awards” to consumers that ultimately benefit its own enterprise, the only place those awards can be redeemed.

With settlements like that all too common, it is easy for AT&T’s advocates to tap into consumer discontent with class action lawyers, proclaiming AT&T’s case is actually consumer-friendly because it would cut those money-grabbers out of disputes with the company.

But consumer advocates stress class action cases do more than deliver settlements — they deter bad behavior on the part of would-be wrongdoers, bring corporations to account fiscally when they are forced to settle, and open the door to legal discovery which can uncover patterns of extensive wrongdoing that would otherwise remain secret in arbitration.

But most important of all, class actions impact every customer, not just the handful who navigate arbitration to achieve a confidential settlement.  That can be critically important to stop unfair business practices.

What you get

Of course, reform is also desperately needed in the class action system.  Too often, judges approve class action cases that deliver maximum benefits to the law firms that bring them, leaving consumers with peanuts.  Strict limits on legal fees recouped in such cases, perhaps tied to a percentage of total recovery would be a start, as are bans on settlements that don’t provide cash refunds to consumers who choose not to conduct further business with companies that abuse them.  Coupons, low value trinkets, and donations to third party groups (non-profit or otherwise) are insufficient.  Attorneys that selfishly claim most of the proceeds for themselves have only themselves to blame when corporations use that fact against them under so-called “tort reform” proposals.

Some advocates of AT&T’s position also argue that government oversight can provide a more effective system of checks and balances against corporate overreach.  While a noble sentiment, anyone who has watched the revolving door of lobbyists going to work for such agencies, later returning to lucrative jobs with the companies they formerly regulated, knows that is a classic case of the fox overseeing the hen house.  In an era of government “oversight” that missed everything from BP’s safety lapses, salmonella-infected eggs, produce, and meat, tainted pet food ingredients from China, and indecisiveness about telecommunications reform like Net Neutrality — such proposals are not to be treated seriously.

The Supreme Court Decision

While it will be months before the Court rules, most observers suspect consumers will ultimately win the case.  Liberals on the court are skeptical AT&T’s efforts to preempt state consumer protection laws are actually for the benefit of consumers, and some of the most conservative members of the court like Justice Clarence Thomas, big believers in “states’ rights” are likely to find for the Concepcion family.

“Based on what was said during the argument, I predict a 8-1 or 7-2 vote for the consumers and California, with Samuel Alito dissenting and John Roberts a toss up. Thomas, who never speaks at oral argument, will vote for the consumers and state on federalism grounds, as he always does in [arbitration] cases,” writes Lawrence Cunningham, Argument in Class Waiver Case Favors Consumers, States, Concurring Opinions.

“[I]t doesn’t look as though there are too many votes at the high court to do away with the right of consumers to band together to sue the great American manufacturers of fine print,” said Dahlia Lithwick, Can You Hear Them Now? The Supreme Court reads the fine print on your cell phone contract, Slate.

If these two observers are wrong, it will be open season on consumers who will be forced into arbitration agreements that deliver all of the benefits to companies like AT&T.  Under such a scenario, there would be little to dissuade companies from developing new fine print to trick and overcharge consumers.  Few will be willing to buy a ticket to fly halfway across the country to sit for arbitration proceedings over a $20 dispute, especially when the arbitration firm’s income depends on fees paid by the very companies that are accused of wrongdoing.