Bigger is not better. Despite endless claims that mergers, acquisitions and consolidation brings operating efficiencies and cost savings, for most customers it means only one thing: a higher cable bill. The Wall Street Journal traced the ancestors of some of today’s largest cable operators, cobbled together in takeovers, buyouts, and in the case of Adelphia, criminal activity leading to bankruptcy and absorption by Comcast and Time Warner Cable .

Wall Street analysts are pondering what deals are coming next, with Cablevision, Suddenlink, Mediacom, and Cable ONE all top targets. Among the current players, Charter is by far the most aggressive buyer and will likely be in the market for some or all of those smaller cable systems soon enough. Just remember, someone has to pay for those blockbuster merger deals, debt financing and executive bonuses.

Anyone in their 40s probably can recall companies like Jones, TCI, Falcon, Prime and Media General. They are all long gone, much the same way Bell Atlantic, SBC, Pacific Bell, BellSouth, and Ameritech have been absorbed into the AT&T and Verizon Continuum.

A 2011 state law largely written by Time Warner Cable will likely keep Charlotte, N.C. waiting for fiber broadband that nearby Salisbury has had since 2010.

North Carolina is dominated by Time Warner Cable, AT&T and CenturyLink. Google and AT&T recently expressed interest in bringing their fiber networks to the home in several cities in the state, but neither have put a shovel in the ground.

Fibrant, a community owned broadband provider in Salisbury, northeast of Charlotte, not only laid 250 miles of fiber optics, it has been open for business since November 2010. It was just in time for the publicly owned venture, joining a growing number of community providers like Wilson’s Greenlight and Mooresville, Davidson and Cornelius’ MI-Connection. Time Warner Cable’s lobbyists spent several years pushing for legislation restricting the development of these new competitors and when Republicans took control of the General Assembly in 2011, they finally succeeded. Today, launching or expanding community broadband networks in North Carolina has been made nearly impossible by the law, modeled after a bill developed by the American Legislative Exchange Council (ALEC).

With fiber fever gripping the state, Fibrant has gotten a lot of attention from Charlotte media because it provides the type of service other providers are only talking about. Fibrant offers residents cable television, phone, and broadband and competes directly with Time Warner Cable and AT&T. Although not the cheapest option in town, Fibrant is certainly the fastest and local residents are gradually taking their business to the community alternative.

Charlotte, N.C. is surrounded by community providers like Fibrant in Salisbury and MI-Connection in the Mooresville area.

“A lot faster Internet speeds, a lot clearer phone calls,” said Sidewalk Deli owner Rick Anderson-McCombs, who switched to Fibrant after 15 years with another provider. His mother, Anganetta Dover told WSOC-TV, “I think we save about $30 to $40 a month with Fibrant and the advantages of having the speed is so much better.”

Julianne Goodman cut cable’s cord, dropping Time Warner Cable TV service in favor of Netflix. To support her online streaming habit, she switched to Fibrant, which offers faster Internet speeds than the cable company.

Commercial customers are also switching, predominately away from AT&T in favor of Fibrant.

“Businesses love us because we don’t restrict them on uploads,” one Fibrant worker told WCNC-TV. “So when they want to send files, it’s practically instantaneous.”

Fibrant offers synchronous broadband speeds, which mean the download and upload speeds are the same. Cable broadband technology always favors download speeds over upload, and Time Warner Cable’s fastest upstream speed remains stuck at 5Mbps in North Carolina.

AT&T offers a mix of DSL and U-verse fiber to the neighborhood service in North Carolina. Maximum download speed for most customers is around 24Mbps. AT&T has made a vague commitment to increase those speeds, but customers report difficulty qualifying for upgrades.

Time Warner Cable is a big player in the largest city in North Carolina, evident as soon as you spot the Time Warner Cable Arena on East Trade Street in downtown Charlotte.

Taxpayer dollars are also funneled to the cable company.

Time Warner Cable’s $82 million data center won the company a $2.9 million Job Development Investment Grant. Charlotte’s News & Observer noted the nation’s second largest cable company also received $3 million in state incentives.

When communities like Salisbury approached providers about improving broadband speeds, they were shown the door.

[flv]http://www.phillipdampier.com/video/WCNC Charlotte Fibrant Already Provides Fiber 3-5-14.mp4[/flv]

WCNC-TV reports that with Google expressing an interest in providing fiber service in Charlotte, Salisbury’s Fibrant has been offering service since 2010. (2:57)

“Our citizens asked for high-speed Internet,” says Doug Paris, Salisbury’s city manager. “We met with the incumbent providers [like Time Warner and AT&T, and that did not fit within their business plans.”

Salisbury and Wilson, among others, elected to build their own networks. The decision to enter the broadband business came under immediate attack from incumbent providers and a range of conservative astroturf and sock puppet political groups often secretly funded by the phone and cable companies.

Rep. Avila, a ban proponent, meets with Marc Trathen, Time Warner Cable’s top lobbyist (right) (Photo: Bob Sepe)

Critics of Fibrant launched an attack website against the venture (it stopped updating in March, 2012), suggesting the fiber venture would bankrupt the city. One brochure even calls Stop the Cap! part of a high-priced consultant cabal of “Judas goats for big fiber” (for the record, Stop the Cap! was not/is not paid a penny to advocate for Fibrant or any other provider).

Opponents also characterize Fibrant as communism in action and have distributed editorial cartoons depicting Fibrant service technicians in Soviet military uniforms guarding Salisbury’s broadband gulag.

In January of this year, city officials were able to report positive news. Fibrant has begun to turn a profit after generating $2,223,678 in the revenue from July through December, 2013. Fibrant lost $4.1 million during the previous fiscal year. That is an improvement over earlier years when the venture borrowed more than $7 million from the city’s water and sewer capital reserve fund, repaying the loans at 1 percent interest. The city believes the $33 million broadband network will break even this year — just four years after launching.

Fibrant is certainly no Time Warner Cable or AT&T, having fewer than 3,000 customers in the Salisbury city limits. But it does have a market share of 21 percent, comparable to what AT&T U-verse has achieved in many of its markets.

Fibrant also has the highest average revenue per customer among broadband providers in the city — $129 a month vs. $121 for Time Warner Cable. Customers spend more for the faster speeds Fibrant offers.

Some residents wonder if Fibrant will be successful if or when AT&T and Google begin offering fiber service. Both companies have made a splash in Charlotte’s newspapers and television news about their fiber plans, which exist only on paper in the form of press releases. Neither provider has targeted Salisbury for upgrades and nobody can predict whether either will ultimately bring fiber service to the city of Charlotte.

Those clamoring for fiber broadband speeds under the state’s anti-community broadband law will have to move to one of a handful of grandfathered communities in North Carolina where forward-thinking leaders actually built the fiber networks private companies are still only talking about.

[flv]http://www.phillipdampier.com/video/WSOC Charlotte Charlotte could gain from fiber optic network already in place 4-22-14.flv[/flv]

WSOC-TV in Charlotte reports Salisbury customers are happy with Fibrant service and the competition it provides AT&T and Time Warner Cable. (2:12)

Oh the humanity!

Last week, advocates for an Open Internet were up in arms over a report in the Wall Street Journal indicating FCC chairman Thomas Wheeler was about to solve his Net Neutrality problem by redefining it to mean the exact opposite of its intended goal to keep Internet traffic out of provider-established toll lanes.

Former FCC chairman Michael Powell created the current definition of the Internet as “an information service” that has been repeatedly invalidated by the courts. Today he is the president of the nation’s largest cable industry lobbying group, the NCTA. (Image: Mark Fiore)

“Regulators are proposing new rules on Internet traffic that would allow broadband providers to charge companies a premium for access to their fastest lanes,” said the report, quoting an unnamed source.

Wheeler’s proposal follows the agency’s latest defeat in the courts in its latest effort to define net policy. The D.C. Court of Appeals objects to the FCC’s rule-making powers under the current “light touch” regulatory framework introduced by former FCC chairman Michael Powell. Since the first term of the Bush Administration, the FCC has avoided reclassifying broadband as a “telecommunication service,” which would place it firmly under its regulatory authority. Instead, it has continued to define the Internet as “an information service,” under which there is little precedent to support Net Neutrality rules.

The Wall Street Journal reported Wheeler was planning to introduce a new Net Neutrality policy that would ban blatant attempts to censor or block access to Internet websites, but would allow providers to monetize access to its broadband pipes by giving preferential treatment to traffic from certain content providers. Wheeler’s proposal would allow any company to pay for faster access to customers, so long as providers charged an undefined fair price to all-comers.

Wheeler said the FCC would have the authority to deal with providers unwilling to maintain a level playing field for content companies willing to pay extra, but was much more vague about how the regulator would protect websites unwilling to pay extra for traffic guarantees.

Net Neutrality proponents contend Wheeler’s proposal is exactly what Net Neutrality was supposed to prevent – an Internet toll lane only affordable to deep-pocketed giant corporations. For everyone else, including startups and smaller companies, customers could experience the type of slowdowns Netflix users experienced earlier this year — congestion-related buffering that disappeared almost instantly once Netflix signed a paid contract with Comcast for a more direct connection.

“With this proposal, the FCC is aiding and abetting the largest ISPs in their efforts to destroy the open Internet,” said Free Press CEO Craig Aaron. “Giving ISPs the green light to implement pay-for-priority schemes will be a disaster for startups, nonprofits and everyday Internet users who cannot afford these unnecessary tolls. These users will all be pushed onto the Internet dirt road, while deep-pocketed Internet companies enjoy the benefits of the newly created fast lanes.”

“For technologists and entrepreneurs alike this is a worst-case scenario,” Eric Klinker, chief executive of BitTorrent Inc., a popular Internet technology for people to swap digital movies or other content, told the Wall Street Journal. “Creating a fast lane for those that can afford it is by its very definition discrimination.”

It’s even worse than that for consumer groups like Free Press.

Charging another fee to get content on your broadband connection represents a massive business opportunity for broadband companies. But Free Press’ Craig Aaron says it would be a bad deal for Web companies, especially those that can’t afford to pay more for premium service. National Public Radio’s Morning Edition reports. Apr. 24, 2014 (1:58)
You must remain on this page to hear the clip, or you can download the clip and listen later.

Providers love the idea of monetizing the use of their Internet pipes. (Image: Mark Fiore)

“This is not Net Neutrality. It’s an insult to those who care about preserving the open Internet to pretend otherwise,” said Aaron. “The FCC had an opportunity to reverse its failures and pursue real Net Neutrality by reclassifying broadband under the law. Instead, in a moment of political cowardice and extreme shortsightedness, it has chosen this convoluted path that won’t protect Internet users.”

Wheeler, a former industry insider that presided over both the wireless and cable industry’s largest lobbying groups had a friendlier reception from his former colleagues.

One top cable executive admitted, “I have to say, I’m pleased.”

The cable industry claims they need to attract more investment to manage upgrades of their broadband networks now coming under strain from the online video revolution.

“Somebody has to pay for this, and if they weren’t going to let companies pay for enhanced transport and delivery…it just seemed like this was going to come back to the consumer,” said the cable executive.

So far neither Wheeler or the FCC has released the draft proposal for Net Neutrality 2.0 and won’t until just before it votes on it next month.

A day after the story leaked, Wheeler wrote a damage control blog post to correct what he called “misinformation” about the proposed rules:

Wheeler is keeping the exact language of his Net Neutrality proposal to himself until just before holding a vote on it.

To be very direct, the proposal would establish that behavior harmful to consumers or competition by limiting the openness of the Internet will not be permitted.

Incorrect accounts have reported that the earlier policies of the Commission have been abandoned. Two points are relevant here:

1. The Court of Appeals made it clear that the FCC could stop harmful conduct if it were found to not be “commercially reasonable.” Acting within the constraints of the Court’s decision, the Notice will propose rules that establish a high bar for what is “commercially reasonable.” In addition, the Notice will seek ideas on other approaches to achieve this important goal consistent with the Court’s decision. The Notice will also observe that the Commission believes it has the authority under Supreme Court precedent to identify behavior that is flatly illegal.
2. It should be noted that even Title II regulation (which many have sought and which remains a clear alternative) only bans “unjust and unreasonable discrimination.”

The allegation that it will result in anti-competitive price increases for consumers is also unfounded. That is exactly what the “commercially unreasonable” test will protect against: harm to competition and consumers stemming from abusive market activity.

But Wheeler ignored one glaring change his proposal would make – permitting providers to monetize the performance of select Internet traffic. Currently, customers choose from a menu of available Internet speeds. Under Wheeler’s definition of Net Neutrality, a provider selling “up to” a certain amount of speed is under no obligation to actually deliver that speed. But that same provider could sell “insurance” to content producers promising certain network packets will have a better chance of reaching the customer on a timely basis, while non-paying content might not. That could make all the difference between a watchable streaming movie and one constantly pausing to “buffer.”

As long as everyone is free to pay Comcast, Time Warner Cable, Verizon and AT&T the same (more or less) for preferred treatment, all is well in Wheeler’s world.

Tim Wu, a law professor at Columbia University, coined the phrase “Net Neutrality.” He discusses how the Federal Communications Commission’s proposed changes could affect the average consumer and it’s not good news. From NPR’s All Things Considered. Apr. 24, 2014 (3:51)
You must remain on this page to hear the clip, or you can download the clip and listen later.

The New York Times editorial page wasn’t fooled:

Dividing traffic on the Internet into fast and slow lanes is exactly what the Federal Communications Commission would do with its proposed regulations, unveiled this week. And no amount of reassurances about keeping competition alive will change that fact.

[…] In this new world, smaller content providers and start-ups that could not pay for preferential treatment might not be able to compete because their delivery speeds would be much slower. And consumers would have to pay more because any company that agrees to strike deals with phone and cable companies would undoubtedly pass on those costs to their users.

The F.C.C. proposal claims to protect competition by requiring that any deal between a broadband company and a content provider be “commercially reasonable.” But figuring out what is reasonable will be very difficult, and the commission will struggle to enforce that standard. The rules would also prohibit broadband companies from blocking content by, for example, making it impossible for users to access a service like Skype that competes with their own products.

[…] Mr. Wheeler is seeking public comment on this option, but he is not in favor of it. Even though the appeals court has said the F.C.C. has authority to reclassify broadband, the agency has not done so because phone and cable companies, along with their mostly Republican supporters in Congress, strongly oppose it.

Michael J. Copps, a former FCC commissioner confirmed big telecommunications companies are spending millions to lobby for rules that would allow them to tilt the scales in their favor.

Wheeler’s “is a lot closer to what they wanted than what we wanted,” Copps told the New York Times. “It reflects a lot more input from them. The courts did not tell Wheeler to take the road that he is reportedly taking.”

That Wheeler would take an approach that coincidentally follows a model heavily favored by the telecommunications companies he used to represent should come as no surprise. Stop the Cap! repeatedly warned Wheeler’s appointment as FCC chairman would likely lead to disaster for consumers. A lifelong industry lobbyist (and investor) is unlikely to develop a world view that strays too far beyond the industry’s groupthink on telecom policy.

Wheeler may actually believe his policies represent the best way forward for the telecommunications industry he now oversees. A lot of supporters of Zeppelin Luftschiffbau used to believe blimps were the future of aviation, until May 6, 1937 when the Hindenburg burst into flames and crashed in Lakehurst, N.J.

[flv]http://www.phillipdampier.com/video/Fiore Goodbye Net Neutrality Hello Gilded Age Internet 2-14.flv[/flv]

Mark Fiore uses animation in his editorial cartoon explaining the demise of Net Neutrality and the beginning of the Internet’s Gilded Age. (1:53)

At least 46 percent of AT&T’s wireless customers are now paying at least $100 a month for a Mobile Share account with at least a 10GB usage allowance, a dramatic increase of more than 11 million customers during the last three months alone. AT&T customers used to pay a flat rate of $30 a month for unlimited wireless data. Now they pay much, much more for much less usage.

AT&T’s Mobile Share plans start at $20 a month (plus the cost of the device) and include just 300MB of data. Prices escalate from there (all prices don’t include the cost of the device)

• $20 for 300MB
• $25 for 1GB
• $40 for 2GB
• $70 for 4GB
• $80 for 6GB
• $100 for 10GB
• $130 for 15GB
• $150 for 20GB
• $225 for 30GB
• $300 for 40GB
• $375 for 50GB

AT&T is banking on growing mobile data use to earn the company perpetually accelerating revenue and dramatically higher average revenue per customer. The average AT&T customer does not come close to exceeding their current allowance, but the company’s sales force has proven exceptionally adept at convincing customers to upgrade to higher allowance plans whether the customer needs one or not.

One of the first lessons a good magician learns is that to best impress an audience, one has to at least show an actual rabbit going into the hat before making it disappear.

AT&T is no David Copperfield. In its latest sleight of hand, AT&T today announced a major potential expansion of its U-verse GigaPower fiber to the home network to 21 major cities across its landline service area, with future plans to expand to as many as 100 eventually.

“We are excited to bring GigaPower to 100 cities and towns,” Lori Lee, head of AT&T’s U-verse unit, said in a phone interview with Bloomberg, which accompanied a press release. “We will work with local officials as we look for areas of strong demand and pro-investment policy.”

Among the cities slated to get fiber upgrades are Austin and Kansas City — where AT&T will face competition from Google Fiber. But AT&T isn’t bothering to compete head-on with any municipal fiber providers like Chattanooga’s EPB, Wilson, N.C.’s Greenlight, or Lafayette, La.’s LUSFiber. North Carolina, Texas and California are the states with the most cities chosen to potentially get upgrades.

But AT&T has yet to fully deliver on its earlier promise to deploy fiber to the home service in Austin, where single home residential customers have usually been stymied by general unavailability of the fiber service. AT&T has consistently refused to say exactly how many customers have actually been able to sign up for AT&T GigaPower fiber service.

For customers actually able to buy GigaPower, many are already served by an existing AT&T fiber cable. It is not uncommon to find fiber hookups in new housing developments or multi-dwelling units like apartment buildings and condominiums. Most customers don’t realize they are fed service from a fiber cable brought to the back of the building that interfaces with plain old copper wiring, providing service artificially slowed by the company in an effort to provide consistently marketed broadband products.

AT&T GigaPower is easy to provide in these locations with very little extra investment. Tearing up streets and yards to replace copper wiring with fiber optics is another matter, one AT&T has avoided for years by choosing a less costly fiber to the neighborhood approach that leaves existing copper wiring on phone poles and in customer homes largely intact. Moving to fiber to the home service would require AT&T to dramatically boost capital spending to cover the cost of stringing fiber across the backyards of millions of customers.

But earlier this year, AT&T promised investors it was actually planning to cut its budget for capital expenses in 2014 to $21 billion, most of that still earmarked for its profitable wireless network. That is down at least $200 million from 2013. Unless AT&T reneges on its earlier commitment to Wall Street, even David Copperfield couldn’t make fiber to the home service from AT&T magically appear.

Welcome to Neverland. Despite exciting press releases, AT&T has indicated it won’t spend the money required for widespread fiber expansion. But then, AT&T’s own graphics only promise these communities “may” get GigaPower.

In fact, AT&T has been telling investors it is more than halfway done completing its Project VIP effort, which budgeted $14 billion over three years to further expand basic U-verse service, improve its 4G LTE network, and expand rural wireless coverage within AT&T local service areas. Project VIP is integral to AT&T’s plan to eventually walk away from its rural wired infrastructure in favor of a wireless platform providing wireless landline service and 4G wireless broadband.

To assuage investors fearing AT&T is about to pull out the credit card and go on a fiber broadband shopping spree, AT&T carefully notes towards the bottom of its press release, “this expanded fiber build is not expected to impact AT&T’s capital investment plans for 2014.”

In other words, AT&T is not committing any money not already earmarked as part of Project VIP for its fiber expansion.

Without that money, if you live in a single-family residential home and are currently served by AT&T copper wiring, it is very unlikely the company will offer fiber upgrades anytime soon.

So why is AT&T promising vaporware upgrades it cannot possibly manage on its current budget?

AT&T will work with local leaders in these markets to discuss ways to bring the service to their communities. Similar to previously announced metro area selections in Austin and Dallas and advanced discussions in Raleigh-Durham and Winston-Salem, communities that have suitable network facilities, and show the strongest investment cases based on anticipated demand and the most receptive  policies will influence these future selections and coverage maps within selected areas. This initiative continues AT&T’s ongoing commitment to economic development in these communities, bringing jobs, advanced technologies and infrastructure.

Phillip “AT&T has a larger agenda here and it isn’t fiber” Dampier

For years, AT&T’s lobbyists have promised politicians everything under the sun — telecom nirvana — if only Ma Bell can be unshackled by burdensome regulations. Some states have accepted AT&T’s deal only to find their residents’ phone bills rapidly increasing with no corresponding improvement in service. U-verse is AT&T’s effort to stay relevant at a time when mobile phones are replacing landlines and cable companies have poached a number of their customers.

But in return for that deregulation, AT&T delivered an cheaper, inferior fiber-to-the-neighborhood technology that requires hideously large infrastructure cabinets, often installed in front of customer homes, that has trouble keeping up with cable broadband speeds.

But nothing ever satisfies AT&T.

Recently, their lobbyists have been skulking around in the shadows of state legislatures ghostwriting new bills that would permit AT&T to abandon its rural landline customers altogether to focus on the far more profitable wireless business. But consumer groups have gotten wise to AT&T’s astroturf and lobbying efforts and have begun to limit their successes.

Meanwhile, along comes Google, promising groundbreaking, affordable fiber to the home gigabit broadband service to a handful of communities willing to work with them in a de facto partnership — cutting through bureaucratic red tape to facilitate infrastructure upgrades — a radical change from the traditional regulator-provider framework.

Hundreds of cities fell all over themselves competing for the privilege, and it didn’t require a penny in lobbying or campaign contributions.

Where Google has been willing to offer service, most communities have been more than thankful and have made life easier for the creative entrant.

If it worked for Google, why can’t it work for AT&T? As a result, the company that spent years telling customers fiber upgrades didn’t make any sense and that few people actually needed gigabit speeds, AT&T might appear to have reversed course. Dig a little deeper and you find a deeper agenda:

“Communities that have suitable network facilities, and show the strongest investment cases based on anticipated demand and the most receptive policies will influence these future selections and coverage maps within selected areas.”

Translation: Communities that already have considerable fiber infrastructure previously installed and are willing to bend to the business and public policy agenda of AT&T will make all the difference whether your city will be considered for a future fiber upgrade or not.

In the end, even if a community does everything AT&T asks of it, it still has no commitment AT&T will actually deliver the fiber upgrades they only promise “may” happen. But AT&T will have achieved its public policy goals of abolishing regulations and limiting oversight, all without have to install a single strand of fiber.

That is a deal community leaders should think twice about making with a company that has always looked out for its investors long before its customers.