A Facebook group has been established to oppose Clear's Internet Overcharging schemes

The clock may be running out on Clearwire, America’s “4G-WiMax” wireless broadband provider controlled by Sprint, with close investment ties to Comcast and Time Warner Cable, who both resell Clear wireless broadband under their own brands.

At issue is money — the lack of it, and the wireless company’s cash on hand has grown so perilously low, Clearwire was forced to admit to its investors it may not survive beyond the first half of next year:

Based on our current projections, we do not expect our available cash and short-term investments as of September 30, 2010 to be sufficient to cover our estimated liquidity needs for the next 12 months. We also do not expect our operations to generate positive cash flows during the next 12 months. Without additional financing sources, we forecast that our cash and short-term investments would be depleted as early as the middle of 2011.

The Securities and Exchange Commission rules governing public companies represent a public relations nightmare for anyone trying to put a positive spin on bad news, and Sprint chief Dan Hesse desperately tried to make lemonade out of the financial lemon Clearwire increasingly represents for the wireless company.

“If you get to the point where you don’t have 12 months of cash in the till, even if you’ve got negotiations going on, or what have you, you have to, from an accounting perspective, say you have a going-concern issue,” Hesse said. “That doesn’t mean that Sprint and other partners won’t continue to fund Clearwire.”

With Sprint’s 54 percent stake in Clearwire defining the entity as a subsidiary of Sprint, its demise could risk Sprint’s own financial well-being, something Sprint plans to address in 2011, potentially ending its majority stake in the company.

For Hesse and his cable partners, Clearwire’s financial problems are being spun as a result of the venture’s success.  The company says it cannot afford the rapid expansion it has undertaken to expand its WiMax network into additional cities across the country, and faces serious financial challenges from the subsidies consumers demand when buying smartphones.

Hesse particularly complains about the latest whiz-bang smartphones consumers demand, many costing upwards of $600.  Consumers in the United States don’t pay full retail price.  In return for two year contracts carrying steep cancellation penalties, carriers cut the price of most high end phones to $200 or less.

“Subsidies are going through the roof in our industry,” Hesse said. Nearly 40 percent of Sprint customers use the company’s 4G network, and that number is rising.

Revenues are up 114 percent from a year earlier to US$147 million. But Clearwire’s losses for the last quarter alone amounted to $139 million, or $0.58 per share.

As a result, Clearwire slashed 15 percent of its staff, laying off nearly 600 employees and has indefinitely suspended its expansion plans to bring the network to additional cities.  Clearwire will also shutter many of its planned retail outlets — some already built — and delay the introduction of its own branded smartphone.

But even that may not be enough.

Although Clearwire’s growth has been double the level anticipated, achieving a net gain of 1.23 million subscribers in the third quarter — reaching 2.84 million total subscribers, not all of those customers are sticking around once they begin using the service.

Complaints about the company’s poorly disclosed speed throttling continue to be a regular topic on Clear’s support forums.  At least 1,000 complaints have been logged on Clear’s own support forums and elsewhere online about the speed traps.  A Facebook group opposing the schemes has also been established.

Stop the Cap! filed a formal complaint with the New York Attorney General’s office accusing the company of false and misleading advertising and fraud for claiming customers would enjoy “blazing fast speeds” with no limits or speed throttling, despite the fact company officials later admitted they were throttling customers deemed to be “using the service excessively.”  Dozens of additional complaints from Clearwire customers have been filed with state Attorneys General across the country, as well as with the Federal Trade Commission in Washington.

Just how much is too much has never been made clear by the company, but many users report the speed throttle reduces speeds to 250kbps, often for hours at a time.

Clearwire told Electronista:

Throtting is based on the current utilization for each cell tower, and many low-use towers do not throttle speeds at all. For high-use towers, throttling occurs during peak-use times.

A customer’s maximum speed is based on the number of gigabytes of data transferred in the past seven days and the download speeds for the past 15 minutes. Speeds are recalculated every 15 minutes, at which point a throttled customer will be bumped up to a higher speed. Rather than implementing one speed for throttling, the calculations will move customers between 48 different speed brackets.

The worst offenders using peer-to-peer software on Clearwire’s network may face repeated throttling.

Clearwire advertises a faster Internet experience for their 4G service, but many report they receive speeds far slower, even if they have engaged in very little usage.

Many consumers are also unknowingly finding themselves back on Clear’s network even though they signed up with a third party provider.  Clear resells access to its network under a variety of different brands not limited to Sprint, Road Runner Mobile, Comcast Internet2Go, and Best Buy Mobile/Wireless.

[flv width=”640″ height=”380″]http://www.phillipdampier.com/video/Clear Speed Woes 11-10-10.flv[/flv]

This Clearwire customer visits a Clear hotspot location and discovers even on a Wi-Fi network, Clear’s speeds don’t match their advertising claims.  Then, he discovers just how sneaky Clearwire gets in disclosing important information about the company’s wireless speeds customers might want to know before signing up.  (5 minutes)

Chase Carey (courtesy: Forbes)

Chase Carey, President, Chief Operating Officer of Rupert Murdoch’s News Corp., has blamed the federal government and politicians for giving aid and comfort to Cablevision, the cable system serving most of suburban New York City, forcing Fox to cut off the World Series for millions of subscribers in the recent contract dispute between the two providers.

Carey told Bloomberg News that the standoff with Cablevision would have been resolved much more quickly if lawmakers hadn’t threatened to weigh in, leading the cable provider to hold out in hopes of getting better terms.

“This process would have been resolved more easily, more quickly,” Carey said. “I would actually contend we wouldn’t have gone off the air at all.”

Carey said Fox needs the feeds that it collects from cable companies because even with advertising revenue, the broadcast network loses a “few hundred million dollars” every year. Carey said he came to Washington to explain to lawmakers why Fox needed two streams of revenue and explain why public declarations of support for Cablevision from more than 50 lawmakers only helped to prolong the standoff.

“We’re not running a nonprofit,” Carey said.

Was John Kerry responsible...

If Fox is unprofitable, you wouldn’t know it from Carey’s compensation package.  The COO will earn $8.1 million this year, plus a $15 million bonus and additional compensation totaling more than 26 million dollars.

Carey is upset with Democrats for inserting themselves in private corporate matters, despite the fact the resulting dispute left millions of cable subscribers without the networks they were paying for (and forced to fight for refunds from Cablevision.)

“You’re going to bastardize every negotiation because you’re going to have this specter of arbitration,” he said.

At least 50 members of Congress, many from the northeastern United States where cable blackouts have been the most prevalent, support binding arbitration for such disputes, and criticized Fox for demanding increasing amounts of money for formerly free television signals.  Cablevision contends it was forced to pay an “unfair amount” to get the signals back on cable.

Carey especially targeted Democratic senator John Kerry from Massachusetts, who was among the most vocal opponents of cable systems and programmers putting viewers in the middle of disputes.

...or Rupert Murdoch?

Kerry intends to introduce legislation during the lame duck session of Congress to force both parties to keep programming on while negotiations are underway, especially because consumers have already paid, often in advance, for such programming.  Analysts say Republicans in the Senate will likely filibuster any such measure.  Most Republicans are inclined to share Carey’s view and let the companies duel it out amongst themselves, according to Andrew D. Lipman, a Washington-based partner with the law firm Bingham McCutchen.

Carey himself has been on both sides of the issue.  His former job was chief executive of DirecTV, the largest U.S. satellite-television provider.  Carey at the time thought the television networks and local stations were responsible for their own failing business models and were late to the table demanding payments for cable carriage.  When the Great Recession caused advertising revenue to plummet, both networks and local stations decided the concept of free, ad-supported television was no longer a viable business model.  Now stations want dual revenue streams — ad revenue and payments from the majority of Americans who watch those stations on cable, satellite, or telco-TV.

More importantly, Carey wants the government to butt out, even when consumer dollars are at stake.

[flv width=”640″ height=”500″]http://www.phillipdampier.com/video/Bloomberg Man Who Blacked Out World Series Blames Politicians 11-9-10.flv[/flv]

Bloomberg News reflects on the dispute between News Corp.’s Chase Carey and Cablevision.  (3 minutes)

Although the cable trade press reports it is business as usual at most of the nation’s largest cable companies, news that several companies are losing more cable-TV subscribers than they are adding is creating concern in boardrooms and on Wall Street.  Although the power of the perennial “rate increase” has kept revenues up, cable operators like Time Warner Cable are beginning to realize they can’t just keep raising rates expecting customers to sit still for it.

For more than 30 years, cable operators have assumed (correctly) that raising rates far in excess of inflation will bring about a lot of grumbling from upset subscribers, but few will actually resort to cutting the cord and going back to free TV (or books).  But as many cable households now routinely pay “triple-play” bills well in excess of $200 a month, that is finally starting to change:

• For many households, the switch to digital TV and an increasing number of sub-channels has proved adequate to meet the needs of many viewers, so long as they receive a decent picture and at least a handful of digital sub-channels;
• Online access to at least some cable programming, movies, and television shows on-demand has solved the problem of having too few viewing options.  If nothing of interest is running on local channels, a quick visit to Netflix or Hulu can satisfy most viewers;
• Many increasingly prefer spending their free time online instead of parked in front of the television;
• The realities of the current economy and tightened middle class budgets make many cable packages simply unaffordable, even if customers wanted them.

Time Warner Cable has recognized the growing strain on their video side of the business and has initiated some strong marketing efforts to hold onto customers who are one rate increase away from canceling.

This fall, the cable company unveiled its $33 per service promotion, charging that price for each component of their triple-play package for a year.  While Time Warner has more aggressively priced individual services in the past for new customers, this one is unique because it is open to existing customers as well.  Customers speaking to Time Warner’s retention agents are being offered this package in an effort to keep customers hooked up to the company’s video, broadband, and phone services.  Currently, many markets also include a free year of Showtime or at least six months of DVR service, and a year of Road Runner Turbo.  In highly competitive markets, informal promotions can bring even lower prices or extra add-ons.

A few weeks ago, the cable company unveiled online video streaming of ESPN Networks for existing cable subscribers, and an online remote DVR-programming application that lets subscribers set up recordings while away from home.

Now the company is further bolstering its video packages:

1. As part of its long term agreement with Disney, ABC and ESPN, this week Time Warner Cable added over 300 hours of new On Demand programming content from ABC, Disney and ESPN. In addition, the company will launch Primetime HD On Demand tomorrow, which will also be available to Digital Cable customers at no additional cost.  The new channel Primetime HD On Demand will carry primetime programming from ABC, NBC and CBS in High Definition. Subscribers will have over 100 hours of the networks’ popular primetime programs including NBC’s 30 Rock and The Office; ABC’s Grey’s Anatomy and Desperate Housewives; and CBS’ Medium and CSI.
2. Time Warner Cable Look Back will bolster the existing “Start Over” feature by archiving up to three days of programming on more than two dozen different networks and cable channels.  Now, if you missed a favorite show that aired the evening before, you can watch it on demand.  As with “Start Over,” Time Warner has disabled fast-forwarding, so no zipping through commercials is allowed.  But the service comes free of charge, and includes an impressive lineup of participating networks including ABC, NBC, Fox Cable Networks, Discovery Networks, and Scripps’ Food Network, Cooking Channel, HGTV, and DIY.
3. HBO Max and Go Max, part of TV Everywhere, will reach more than 50 million Time Warner Cable customers by the end of the month.  These services deliver online on-demand access to movies, series, and specials airing on HBO and Cinemax and will be available to customers paying for the premium channels at no additional charge.  More than 70 million customers will have access by the second quarter of 2011.
4. Time Warner Cable CEO Glenn Britt told investors on a conference call held last week that the cable company is aggressively pursuing renewal agreements with programmers that allow the cable company to begin offering smaller, budget priced packages of cable-TV programming.  While it won’t be the a-la-carte option many consumers crave, cable programming packages could begin to resemble what home satellite dish customers used to receive — a core package of two dozen channels with theme or network-based add-on “programming packs” for additional fees.  For example, customers looking for reality or educational programming might buy a “Home and Garden” package consisting of Food TV, HGTV, The Weather Channel, Discovery and The Learning Channel.  Movie fans might get a package of Encore, AMC, Turner Classic Movies, Fox Movies and MGM.  “We have negotiated some additional flexibility beyond what we had a few years ago that will allow us to begin to offer some smaller packages at lower prices. Probably not all the way where we’d like to be. But we’re moving in the right direction,” Britt told investors.

The cable company’s friendly former owner — Time Warner, Inc.,  has also helped man the barricades against cable’s competitors.  For Netflix and Redbox customers: longer waiting times for access to the latest Time Warner movies are likely.  The current delay of 28 days could be extended, according to CEO Jeff Bewkes.

“So far the 28-day window has clearly been a success versus no delay,” Bewkes told investors. “The question of whether we ought to go longer is very much under scrutiny. It may well be a good idea.”

Even local movie theaters face some potential competition, as Time Warner considers introducing a premium pay-per-view option that would allow cable customers to watch movies currently in theaters at home.  But they’ll pay a heavy price to watch — reportedly between $30-50 per title, and the cable operator will insert anti-recording technology into the signal to prevent digital recordings.

Will these new services ultimately stop the bleeding from departing cable customers?  For most it’s a matter of dollars and sense.

[flv width=”640″ height=”500″]http://www.phillipdampier.com/video/Cutting Cable’s Cord 11-9-10.flv[/flv]

The media has gotten aggressive about talking to viewers about how they can get rid of their cable-TV subscription and save plenty.  (10 minutes)

Thomas Clancy Jr., 35, in Long Beach, N.Y., canceled the family’s Cablevision subscription this spring. He said he has been happy with Netflix and other Internet video services since then, even though there isn’t a lot of live sports to be had online.

“The amount of sports that I watched certainly didn’t justify a hundred-dollar-a-month expense for all this stuff. I mean, that’s twelve hundred dollars a year,” Clancy told the Associated Press. “Twelve hundred dollars is … near a vacation.”

Customers like Clancy are comfortable with technology and well-versed on how to hook up Internet video and integrate it with the family’s TV sets.  For customers like him, online video will increasingly be an attractive alternative to high cable TV bills.

For some western New Yorkers, Wegmans' Redbox kiosk is their new "cable company."

For homes with less tech-savvy subscribers who have watched their wages fall over the past decade even as cable rates keep increasing, economic realities driven home by the Great Recession are making the decision for them.

“The price of cable TV has risen to the point where it’s simply not affordable to lots of lower-income homes. And right now there are an awful lot of lower-income homes,” Craig Moffett, a Wall Street analyst who favors the cable industry said. “The evidence suggests that what we’re seeing is a poverty problem rather than a technology phenomenon.”

For these customers, including many in the middle class, each time cable companies like Time Warner increase cable rates, they drop a service or two.

“First it was Showtime, the Movie Channel, and Starz!,” writes Stop the Cap! reader Joanne in Penfield, N.Y., a suburb of Rochester. “Then when they raised the rates again on the premium channels, we dropped them all — bye bye HBO and Cinemax.”

“When Time Warner sends us their rate increase notice right after Christmas as they’ve done for years, we’re dropping digital cable and returning our cable boxes,” she writes.  “If they keep it up, we’ll drop cable altogether — something we might have done earlier if we had some competition around here.”

“I don’t care how much they claim it’s a ‘great value,'” Joanne says. “My husband got laid off from his job at Xerox in 2009 and was just let go from his new job at Carestream.  I already work myself and we have three kids, and our health insurance premiums are skyrocketing at the end of the year.  We haven’t had a real raise in five years, so that made the decision for us.”

Joanne now rents movies from Redbox just inside the local Wegmans grocery store and has a $9 monthly subscription with Netflix, mostly for online streaming.

“It’s more than made up for the $40+ a month we used to spend on premium channels with Time Warner,” she said.

[flv width=”640″ height=”500″]http://www.phillipdampier.com/video/WISN Milwaukee Time Warner Cable Offers Start Over For WISN 12 ABC Programs 11-9-10.flv[/flv]

WISN-TV in Milwaukee introduces viewers to Time Warner Cable’s newest on-demand features.  (1 minute)

Dora Gonzales may have to explore other options for Internet service, thanks to Cable One.

Dora Gonzales sat down in front of her computer this week to check her e-mail, surf the web and play a little Tetris.

Instead of e-mail, the Albuquerque resident found a message telling her to call Cable One’s Internet security department, because her service was canceled.

“You downloaded a movie illegally and we’re shutting your service off,” came the explanation from Cable One, her local cable company.

Gonzales proclaimed her innocence, noting she doesn’t have the first clue how to download movies online.

After several minutes of conversation, Cable One figured out what was probably happening.  Gonzales not surprisingly didn’t secure the wireless network Cable One provided her with its cable modem broadband service.  Someone, possibly a neighbor, hopped on board her connection for some downloading mischief.  As a result, the illegal download was traced back not to the perpetrator, but to Gonzales — who takes the fall because it was her account.

Cable One manager told KOB-TV that Gonzales was ultimately responsible, even though the situation is not unique.

“What will happen is because they’re using your modem, it’s going to come back to you,” said Cable One manager David Gonzalez. “So the movie company or whoever is going to be trying to press charges will be looking at you because it came from your computer.”

Cable One wants to reduce the risk customers might face using the company’s wireless equipment, so effective immediately, it is requiring customers use passwords to access their wireless networks.

While a noble idea, Stop the Cap! reader Jon notes his Cable One gear only offers him the option of WEP security, a wireless security protocol that was broken back in 2005.

“Any neighbor savvy enough to run peer-to-peer traffic over the neighbor’s Wi-Fi is probably well-equipped to hack their way through WEP-based security in mere minutes,” he writes.  “Even worse, it becomes a lot harder for victims to claim innocence when they were running in a ‘secure mode’ that is anything but.”

A quick check with Cable One shows the cable company is equipping at least some of its customers with more security-conscious modems.  The company now advises customers to use WPA-PSK security, which its newer equipment supports.  Existing customers using older WEP-only modems should consider switching them out with Cable One for newer equipment.

Frontier Communications is another provider equipping some of its DSL customers with WEP-only modems.  We had one at Stop the Cap! headquarters when we tested their DSL service last year.

Consumers using wireless routers are advised to use the latest versions of WPA security, which offer better protection.  Be sure to use a password that is easy for you to remember but hard for others to guess.  Using a combination of letters and numbers and avoiding words or phrases is strongly recommended.

[flv width=”480″ height=”290″]http://www.phillipdampier.com/video/KOB Albuquerque Providers Crack Down of Wireless Pirating 11-8-10.flv[/flv]

KOB-TV in Albuquerque reports Cable One is shutting off broadband service for customers not using wireless security.  (2 minutes)

Netflix accounts for 20 percent of all broadband activity in the United States during prime time evening hours.  As expected, “Internet experts” that are really little more than paid lobbyists for the broadband industry have started to feed the media scare stories about the great Internet traffic crisis soon to befall the Internet.

Just a few years ago, it was peer-to-peer traffic responsible for Internet “brownouts,” but now Netflix offers an even better, more convenient scapegoat — especially for the broadband providers that compete with it.

Fortune magazine provides a handy dandy needle to pop the balloon of BS from the broadband industry bully boys:

Just for fun, try to guess the year in which the following warnings about the Internet’s impending meltdown were issued:

No. 1: “Over the coming six to 12 months, computer users around the planet are likely to experience the Internet equivalent of the Great Blackout, or at least frequent brownouts, as our information infrastructure staggers and struggles under the heavy onslaught of new users and new demands.”

No. 2: “Internet access infrastructure, specifically in North America, will likely cease to be adequate for supporting demand within the next three to five years.”

No. 3: “Will Netflix Destroy the Internet?  American broadband capacity might not be able to keep up.”

The answers: 1997, 2007 and this week—and that’s just a small sampling from the past 20 years. Such predictions of the Internet’s breakdown are always premised on  the arrival of a scary new device or application that will send lots of digital bits over the Net.  Back in 1995, when Internet sage Bob Metcalfe tried to explain why he foresaw “the Internet’s catastrophic collapse,” he cited a wave of new “Internet appliances,” in particular the dangerous Sony Playstation, which for the first time had Internet access!

[…]What the chicken littles often miss are the clever ways in which Netflix movies and other content get delivered.  Like most major companies that move lots of Internet traffic, Netflix contracts with companies whose job it is to deliver lots of bits, fast and cheap.  Netflix relies mainly on industry giant Akamai, which runs 77,000 servers with big hard drives that it has placed in every nook and cranny of the Internet.  When a college student downloads “Dexter Season 1” from Netflix there’s a good chance the show is already stored on campus on an Akamai box.

“That video is growing rapidly and going to be huge is true,”  says Akamai co-founder Tom Leighton. “But there’s tons of capacity out at the edges of the network….plenty of capacity in the last mile to your house.”  That capacity, he says, combined with smart delivery of Netflix content from nearby servers, means the Internet can handle Netflix just fine.  If all that traffic had to travel closer to the center of the Internet then many larger peering points would be overwhelmed, Leighton adds. (There’s reason to trust Leighton’s numbers on both counts: he’s also a professor of applied mathematics at MIT.)

[flv width=”640″ height=”380″]http://www.phillipdampier.com/video/KOCO Oklahoma City Netflix Crashing The Internet 11-4-10.flv[/flv]

Check out KOCO-TV Oklahoma City’s “Internet Panic” story, delivering the broadband industry’s talking points about Internet traffic jams in just 30 seconds.  (1 minute)