This is part one in a series of stories illustrating how telecommunications companies use a combination of public relations firms, professional lobbyists, friendly regulators, and outmaneuvered state officials to sell “improved service” to the public in return for regulatory “reform.”  Too often, that “reform” is loaded with loopholes and language that guarantees providers can break their promises, tie state and local regulators’ hands when bad service results, and ultimately stick you with the bill.

Over the past several months, several communities in New Jersey have been up in arms about Verizon’s reinterpretation of a state law originally written in the 1940s but “updated” just a few years ago, to mean it no longer has to pay telephone pole and infrastructure taxes to municipalities for using the public right of way.  Verizon’s “reinterpretation” of the state’s Business Personal Property Tax law surprised several municipalities who now face significant financial challenges as a result of the lost revenue.  New Jersey residents will likely make up the difference with a higher property tax rate.

On the surface, it might appear Verizon simply happened upon tax savings.  Verizon claims the law only requires it to pay taxes in communities where it has more than 51% of the area’s phone customers.  Despite protestations from local officials, Verizon has signaled its intent to carry on, estimating 150 communities will join the 50-60 already impacted by next year.

Changes in telecommunications public policy do not occur in a vacuum.  They happen when providers lobby for regulatory reform and bring gift baskets filled with promises for dramatically improved service.  Using a network of high priced lawyers and public relations campaign experts, companies can easily outmaneuver local and state regulators at every turn.  Unfortunately, by the time consumers (and sometimes regulators) realize they were left with a Trojan Horse filled with empty promises, it’s too late.

Some deals just bring consumers higher prices while others saddle communities with highly-leveraged, heavily indebted companies that eventually collapse in bankruptcy.

Just how did we get here?  In this series, we’ll look at New Jersey’s history with its largest resident phone company.  From New Jersey Bell to Bell Atlantic to Verizon, more than 20 years of questionable reform has left residents “touched” in their wallets.  The blame doesn’t rest entirely with the phone company, either.  Local and state officials were repeatedly won-over by professionally-run lobbying campaigns.  After repeated bad experiences, one might assume they’d know better by now.  Those communities no longer getting tax payments from Verizon can testify they haven’t.

Let’s turn back the clock to the dramatic changes in telecommunications that came with the 1984 breakup of Ma Bell and the Bell System.

Telecommunications Industry Sets the Stage for a Money Party

[flv width=”640″ height=”500″]http://www.phillipdampier.com/video/1977 The Bell System.flv[/flv]

In 1977, the overwhelming majority of Americans were served by “the phone company,” namely AT&T and its family of Bell companies providing local service. (2 minutes)

AT&T's Bell System in 1977 (click to enlarge)

For decades, telephone service was run largely as a monopoly by the enormous Bell System and several dozen smaller, non-Bell independent phone companies.  Telephone service was regulated by state and federal authorities who approved rate increase requests and made sure providers met service quality standards. Consumers did not own the telephone equipment in their homes – it was rented from the phone company.  Although often uninspired, Bell System telephones were often virtually indestructible, ranging from basic utilitarian black rotary dial phones to the flaunting Princess phone, which had a lighted dial and came in several colors.

As America began earnestly developing data transmission systems in the late 1960s and early 1970s, AT&T kept its monopoly intact there as well.  At the time, a cooperative arrangement between IBM and AT&T ensured most American businesses would probably deal with one or both companies for their data communications needs.

The eventual fall of the monopoly glory days of AT&T and its Bell System monopoly can be laid at the feet of corporate arrogance, particularly from one John D. deButts who became AT&T’s new Chairman and CEO on April 1, 1972.  deButts was AT&T born and bred, rising through the ranks over decades of employment with AT&T.  To him, anything smacking of competition was to be considered a duplication of effort and wasted resources.  AT&T, in his view, had already strayed too far from its past when Americans could go from coast to coast and deal with just one telephone system using uniform standards and practices of operations.  Consistency and quality should be the highest priority for AT&T, not squabbling with smaller competitors fighting with each other for customers.

A politically tone-deaf deButts infuriated a post-Watergate Congress hellbent on reform at a time when Americans had grown suspicious of big power players, be they political or corporate.  The confident AT&T executive delivered a speech before regulatory commissioners in the fall of 1973 that included within it, “[we must] take to the public the case for the common carrier principle and thereby implication to oppose competition, espouse monopoly.”

Not only did the speech irritate many members of Congress, it helped convince one of AT&T’s competitors, MCI to file a 22 count lawsuit against AT&T in March 1974, accusing Ma Bell of being engaged in illegal antitrust activities.

An even more important lawsuit was filed by the U.S. Justice Department on November 20, 1974.  The federal government also accused AT&T of antitrust behavior, claiming the company locked-up the telephone equipment business for itself, and was well-suited to crush any potential competitor from getting a serious foothold in the marketplace.  At the time, AT&T officials sniffed that the lawsuit was completely without merit and promised to fight back at all costs.

deButts ordered company lawyers to stall, delay, and roadblock the government’s case as much as possible, and the company enjoyed years of court delays.  The lawsuit dragged through several preliminary hearings and motions, until the then-presiding judge, Joseph Waddy, fell ill and had to reduce his caseload.  The United States v. AT&T was transferred to a newly-appointed District Judge named Harold Greene in September 1978.  The days of delay were over.  Greene quickly ordered the case to trial starting in September 1980.

While the court case saw some changes, AT&T did as well.  In February 1979, deButts was out, replaced with a far more conciliatory Charles Brown.  He changed AT&T’s tune, publicly welcoming competition into the marketplace, announcing “I am a competitor and I look forward with anticipation and confidence to the excitement of the marketplace.”

Having that attitude probably wasn’t helpful to defending AT&T’s case, and the company eventually threw in the towel, reaching a settlement with the government in 1982.  Overseen by Judge Greene, AT&T was promised it could keep its long distance service, Western Electric (which manufactured telephone equipment), and Bell Labs, the company’s research and development arm.  In return, it had to divest all 22 local phone monopolies.

America's newly independent regional telephone companies post-1984

Judge Greene, issuing a final consent decree to be effective January 1, 1984 formally broke up the Bell System.  The 22 local phone companies under AT&T were merged into seven Regional Bell Operating Companies, each to be run independently:

• Ameritech (acquired by SBC in 1999 – now part of AT&T again)
• Bell Atlantic (acquired GTE in 2000 and changed its name to Verizon)
• BellSouth (reabsorbed back into a newly reorganized AT&T in 2006)
• NYNEX (acquired by Bell Atlantic in 1996 – later to become part of Verizon)
• Pacific Telesis (acquired by SBC/AT&T in 1997)
• Southwestern Bell (changed its name to SBC in 1995, then acquired the remnants of AT&T in 2005, rechristening itself as the ‘new’ AT&T)
• US West (acquired by Qwest in 2000.)

The goal was to create several smaller regional companies not too large to face challenging competition from new independent providers entering the marketplace.

The result of all of this upheaval was competition in the long distance calling marketplace, but very little competition for local residential telephone service over phone company-provided telephone lines.

Still, for a time the post-breakup family of former Bell companies enjoyed stability and a less regulated marketplace, and several raised rates for local phone service, even while cutting long distance prices.  Customers could now buy and install their own telephone equipment, including answering machines and computer modems, and several competitors began to spring up to serve business customers.

By the 1990s, a new upstart appeared on the horizon that would potentially threaten the whole ‘arrangement.’  The cable television industry, subjected to a more regulated marketplace after years of monopoly abuse of customers, was looking for new unregulated add-on services they could provide to bring back the days of big profits they enjoyed just a few years earlier.  Two potential services: providing connectivity to the Internet and providing cable customers with telephone service.

When phone companies realized cable was planning to invade their turf, this meant war.

In part two, learn more about how the telephone companies went ‘back to the future’ and rebuilt the empire Judge Greene broke up.

Comcast Corporation has completed its offer for NBC-Universal and they accepted in an early morning press conference unveiling a deal that had been privately rumored for months.  Comcast will assume 51% control of NBC-Universal, with NBC-owner GE controlling the remaining 49% stake.

The combined entity, to be known as Comcast Entertainment Group, will bring Comcast-owned media into the home of every American, even those not served by Comcast Cable.

Although company officials said little would change immediately, Comcast has not ruled out dropping the legacy ‘NBC’ brand down the road.  Broadcasting & Cable noted the company may be hinting at its intentions through its domain name registrations.  The trade publication reported Comcast’s registrar locked ComcastNBCU.com and NBCUComcast.com in mid-October, but returned and registered ComcastEntertainment.com ten days later.

Brian Roberts, CEO of Comcast Corporation, joked that NBC’s fourth place position among the major American broadcast networks might “get in the way” of recognizing NBC-Universal’s cable networks, which he characterized as “fantastic.”  Perhaps a change of NBC, which stands for the National Broadcasting Company, to Comcast Entertainment Network might change that perception?

Changes like that, and the implication of renaming a major American network after what most Americans recognize as a cable company has brought significant unease among some examining the scope of the transaction.

Comcast CEO Brian Roberts

Comcast Entertainment Group will control a major American broadcast network, Telemundo – a major American Spanish-language broadcast network, Comcast Cable, the nation’s largest cable system operator, several cable networks, 27 GE-owned television stations in major American cities, a large number of regional sports networks, and more.  It also manages broadband service for nearly 16 million Comcast customers.

Stifel Nicolaus telcom analysts Rebecca Arbogast and David Kaut warned potential investors this deal has a lengthy and difficult regulatory review waiting for it in Washington, DC: “We would expect scrutiny of the transaction’s impact on program access, program carriage and retransmission consent, as well as local TV advertising, broadcast-network affiliate arrangements, program bundling, broadband/Internet video and network neutrality and possibly other issues, including cable pricing…broadband service, labor concerns, spectrum and privacy.”

The dealmakers recognized the challenges and started throwing voluntary concessions to concerned groups.  Unimpressed Comcast shareholders got a bone thrown their way — a surprise 40% increase in their dividend, in hopes that will quiet shareholder unease.

Comcast also sent letters to regulatory officials promising NBC will remain a free, over the air broadcast network and not be converted into a cable-only channel.

The cable operator will also add additional independently-owned cable networks to its lineup to quiet concerns it might favor its own cable networks.  Of course, whether customers want to watch and pay for those channels is another matter.

Finally, Spanish language services from Telemundo and other channels will receive enhanced free on-demand cable viewing options in cities where Telemundo is seen over-the-air.

For broadband users, the deal means Comcast gets a seat at the table of online video provider Hulu.  NBC-Universal was a major proponent of the online video service which gives broadband users free access to broadcast and cable programming.

That deeply concerns Andrew Schwartzman, president and CEO of Media Access Project.  He’s concerned about the enormous market power Comcast Entertainment will have.

“I am especially concerned about the effects the merger would have on evolving technologies for delivering video over the Internet….I also expect a great deal of opposition from the private sector, since the merger has anti-competitive implications for local TV stations, independent cable programmers, advertisers, internet video entrepreneurs and many other businesses,” he told The Hill.  Both Media Access Project and Free Press have called on regulators to reject the deal.

“The American public doesn’t want a media behemoth controlling the programming they watch and how they can access it,” said Josh Silver , executive director of Free Press. “If Washington allows this deal to go through, Comcast will have unprecedented control of marquee content and three major distribution platforms: Internet, broadcast and cable. We’ve never seen this kind of consolidated control.”

[flv width=”596″ height=”356″]http://www.phillipdampier.com/video/NBC Today Show Announces Comcast Deal 12-03-09.flv[/flv]

This morning’s Today show on NBC briefly reviewed the deal and what it means for consumers (1 minute)

[flv]http://www.phillipdampier.com/video/CNBC Parsing the Comcast NBC Deal Craig Moffett 12-03-09.flv[/flv]

Sanford Bernstein’s Craig Moffett talks with CNBC about why many telecom sector analysts are underwhelmed by the Comcast-NBC deal (3 minutes)

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GE CEO Jeffrey Immelt and Comcast CEO Craig Roberts join CNBC’s David Faber for an in-depth discussion about the transaction and the changing media business. (28 minutes)

Learn more about NBC’s broadcast operations impacted by this deal below.

… Continue Reading

Steven Shepard, president of Shepard Communications Group

Burlington Telecom, the municipally owned fiber to the home cable and broadband provider still reeling from a late fall financial scandal, must think outside of the box if it is to survive and grow its business in Vermont’s largest city.  That’s the assessment of Steven Shepard, president of Shepard Communications Group, a consulting firm based in Williston.

It comes as both city and state officials continue an investigation into a $17 million loan from city coffers to cushion the provider from substantial losses incurred over the past three years of operations.

Burlington Telecom has been criticized for underestimating the costs of wiring Burlington with fiber optics, something Shepard doesn’t think is unusual.

“I haven’t found one yet that has come it at budget, or even under budget,” Shepard told WCAX-TV news.

Burlington Telecom director, Chris Burns, says the company needed the additional money to cover capital expenses as it works to build its all-fiber network in every part of the city. He says the initial investment of $33 million dollars was not enough. “Some of the early estimates weren’t based on firm engineering quotes,” says Burns. “They were rough order magnitude estimates.”

Chris Burns, Burlington Telecom

Burns feels Burlington Telecom needs to expand its service area to bring in additional customers to help keep the provider up and running.  Some customers recognize Burlington Telecom is a unique, municipally-owned asset that can potentially provide services that Comcast, the dominant cable provider in the area, cannot.  Comcast operates a traditional hybrid fiber-coaxial cable network with more limited bandwidth than Burlington Telecom’s direct fiber optic connection to the home can provide.

But Shepard believes most consumers don’t know or care how service reaches them, and believes fiber optic networks alone do not bring instant success to providers.

Unless Burlington Telecom creates services that would be difficult for Comcast to deliver, they are just another telecommunications company, Shepard believes.

One suggestion from Shepard: an automatic file backup service.  Fiber optics can provide upstream speeds equivalent to downstream speeds, something Comcast cannot easily deliver.  Such a service would automatically send a copy of every file to a secured, encrypted off-site backup system.  If a customer needed the file restored, or an entire hard drive, Burlington Telecom could transmit the files on request.  Assuming privacy is protected, such a service would give consumers a potential reason to switch providers.

For broadband customers, providing upstream and downstream speeds faster and cheaper than Comcast will go a long way towards motivating consumers to switch.

[flv width=”368″ height=”228″]http://www.phillipdampier.com/video/WCAX Burlington Can Burlington Telecom Survive 11-05-2009.flv[/flv]

WCAX-TV Burlington interviews Steven Shepard about the ongoing viability of Burlington Telecom. (November 5, 2009 – 4 minutes)

For some Burlington Telecom customers, improving customer service is an important first step, as WCAX found:

“A few weeks ago, the whole BT was down for half hour, phone and cable. And probably internet but I don’t have that,” says Beth Cane, who lives in the city’s south end. Cane says getting through to customer service is “like trying to get into Fort Knox.”

She is not the only one complaining. Rob Lyman says he is “not happy” with Burlington Telecom’s service. “I watched a trailer for an on-Demand movie and the whole system froze up and required a reboot of BT’s box. When I called the help desk they said they’ve known about this problem for six months and didn’t know when it would be fixed,” he says.

In mid-November, a possible solution to the funding issues came from Piper Jaffray, a Minneapolis-based investment firm.  The company offered Burlington Telecom a $61.6 million dollar refinancing package that would help keep the company viable and return taxpayer funds caught up in the controversy to the city.

The proposal was met with political wrangling from the Burlington city council, which spent the last month and a half doing damage control.

“Once TelecomGate went radioactive in October, it was everyone for themselves on the city council as the finger pointing started,” Stop the Cap! reader Dwayne writes from Burlington. “The progressives are blaming the former Bush Administration’s economic catastrophe for wrecking the credit and financing markets BT needed to access, the Democrats are trying to play the role of moderates, and the Republicans are questioning why the city should compete with Comcast in the first place.  Demagoguery is universal,” he shares.

The rhetoric has grown so heated, it has stalled the city council’s approval of the loan package, to the disappointment of Mayor Bob Kiss.

[flv width=”368″ height=”228″]http://www.phillipdampier.com/video/WCAX Burlington Burlington Telecom Gets New Backing 11-13-2009.flv[/flv]

WCAX reports Burlington Telecom has the potential to secure new funding to refinance operations.  (November 13, 2009 – 3 minutes)

The Burlington Free Press has documented some of the language now a part of the debate:

“I do not believe that keeping Burlington Telecom alive during the absolute failure of our capitalist system was the wrong thing for any of us to do. We can’t afford to sit around. We have an interest payment (for BT’s current $33.5 million outside debt) that is due in February.” — Marrisa Caldwell, P-Ward 3, a Progressive Party member characterized as a fierce supporter of Burlington Telecom, is upset the city council delayed the approval of the loan package.

“The same forces that want to preserve the private insurance monopoly in health care by opposing the “public option” are now out to preserve the private corporate monopoly in Vermont telecommunications. The [Governor Jim Douglas (R)] administration is hell-bent on putting Burlington Telecom — which provides public sector competition to for-profit corporations such as Comcast and FairPoint — out of business, no matter what the consequences.” — John Franco, Vermont Progressive Party

“[Vermont Public Service Commissioner David O’Brien] is a political hack appointed by Douglas. They only want private-sector telecom in the state. He is out to get rid of the competition for the private companies. That’s very clear.” — Marrisa Caldwell

“I’m not going to engage in this kind of dialogue. It serves no purpose. We’re going to proceed with the investigation and work to resolve this situation.” — Deputy Public Service Commissioner Steve Wark, asked to comment on Caldwell’s remarks.

Caldwell also charged that the Free Press coverage of the BT issues has been influenced by advertising revenue from cable provider Comcast. She called the council’s vote to delay action on the new BT loan “disingenuous at best. It’s completely dysfunctional government,” she said. “They just tied the administration’s hands and hamstrung BT.”

“[On the city council’s lack of resolve and action] it’s erroneous and not well-founded. I never heard anyone say why they wouldn’t move forward (on the BT loan). It wasn’t leadership and (was) a lack of ability to collectively try to solve the problem.” Sharon Bushor, I-Ward 1, who generally supports Burlington Telecom.

“It seems only rational to do our homework on this (loan). I don’t think one of us is saying it isn’t feasible. All we’re saying is slow down and learn more.”  Councilman Paul Decelles, a Republican, called Caldwell’s remarks “destructive. I would challenge her to find one councilor who has thrown out the word ‘partisan,'” he said. “That word is coming from the administration and from the three Progressive councilors. We’re trying to do what is best for Burlington. This is the residents’ telecom. If acting in a slow, methodical way is unacceptable to some, so be it. It’s irresponsible of them to expect us to rubber-stamp this.” — Paul Decelles, R-Ward 7

“I am shocked and shocked again every time someone raises the partisan flag. This could have been a Republican or a Democratic blunder. The Progressives have been in office a long time. That’s just a fact. When we disagree, apparently, we’re being partisan, (but) it’s not personal, and it’s just not partisan.” — Nancy Kaplan, D-Ward 4

“No one is interested in destroying BT and the administration. Jonathan Leopold said Monday that (the council’s position on BT) was an attempt to destroy the administration. From my own perspective, that’s not the case at all. The first order is to take care of BT, but there have been missteps by the administration.” Mary Kehoe (D-Ward 6) said she has concerns about the loan proposal from Piper Jaffray, particularly the language that indicates the loan repayment will come from Burlington Telecom revenues in the form of city budget appropriations.  “If (BT is) short, what then?  How do we know BT is going to have the capacity?”  She said she voted to delay a decision on the loan, “because we want information. We’ve not been getting the information, and they want us to sign off. That’s not going to happen anymore.” — Mary Kehoe, D-Ward 6

“This is ridiculous. Burlington is starting to look more and more like Washington, with the level of partisan wrangling reaching an intensity that I’ve never seen before in my 15 years of living in Vermont.” — One resident commenting on the coverage and the back and forth.

[flv width=”480″ height=”380″]http://www.phillipdampier.com/video/WPTZ Plattsburgh Burlington Telecom Editorial Oct 28 2009.flv[/flv]

WPTZ in Plattsburgh, which is part of the Burlington television market, ran a station editorial on the Burlington Telecom matter on October 28th.  (1 minute)

Glenice Maclellan, Telstra's point person on broadband, has recently discovered Australians don't just want to browse the web and read e-mail on their broadband service.

Telstra, Australia’s largest telecommunications company, has responded to customers leaving their broadband service over its fraudband speeds and paltry usage caps by increasing both, but not nearly enough to change perceptions that Australian providers still serve up slow, overpriced and restrictive service.

Telstra’s CEO David Thodey, who replaced the oft-despised Sol Trujillo, told investors what every Australian contemplating broadband service already knows: “In some parts of the market we’ve gone too far out of line and we need to come back. We must focus on our core business and our customers, this is where we create value for shareholders. At its simplest, the next stage in Telstra’s long-term strategy is to focus on satisfying customers, invest in new capabilities, and drive growth in new businesses.”

Thodey’s approach is to do away with the company’s downright lousy “broadband” service in many rural areas of Australia.  More accurately called “fraudband,” there are still many Australians suffering with Telstra BigPond service that tops out at a ridiculously slow 256kbps.  And because company officials suspect you’ll even use that too much, they slapped a usage cap as low as 200 megabytes on the service, with a war crime overlimit fee of $0.15 per megabyte thereafter.  Your low price?  $27US a month.  For that.  But you can double your allowance to 400 megabytes for a mere $9US more per month.  Grab the bargain.

Effective December 1st, Telstra will move its rural customers to 1996-level broadband service, offering 1.5Mbps minimum to those doing their web surfing over DSL lines.  For those paying $27 a month, they’re increasing your usage allowance to a still-paltry 2 gigabytes per month, and leaving the $0.15/mb overlimit fee in place.  Most DSL customers stuck on these plans will be herded up to the $36 a month plan which is “generous” in comparison with a new download quota of 12 gigabytes per month and no overlimit fee.  Instead, once you hit your limit, they cut your speed to 64kbps for the rest of the month.

Oh but wait, there are some more gotchas:

• Unless you are bundling your molasses-slow Internet service with a phone line package that brings Telstra at least $81US per month in revenue, add $9 to these plan prices.  You wouldn’t want Telstra management to go home hungry, would you?
• Uploads are also a part of your usage allowance.
• Many of their plans lock you in with a 24-month service commitment.  They’ve got you right where they want you.

If you find Telstra’s Oliver Twistian-usage allowances leave you hungry for more, no worries.  Telstra will happily upgrade your service to a higher usage plan, with correspondingly higher prices, by the following day.  That’s good to know if Microsoft obliterated a good part of your usage allowance for the month with critical Windows updates.

Or you could always take your business elsewhere, as many budget conscious Australians have.  Thodey’s fear about out-of-touch broadband pricing is real when considering Telstra’s competitor iiNet offers 4GB (2GB peak/2GB off peak) for just about the same price Telstra charges for its $27 a month/200 megabyte plan.

The company has also recently discovered that Australians want to use their broadband service for more than just web browsing and e-mail.  That’s apparently news to Telstra management, who threw this into their PR push:

“Telstra’s new plans cater for the changing ways Australians use broadband for communications and entertainment at home.  Gone are the days when broadband was used only to check email or internet surf. Australian families now also use broadband to download videos, play online games, or check social networking sites all at the same time”. — Glenice Maclellan, the Acting Group Managing Director of the Consumer division, Telstra

Thanks, Glenice.  The only problem here is that Australians didn’t get to do those things much because of your rationed broadband plans which either overcharged them if they tried, or speed throttled them back to dial-up as a reminder not to be a naughty data hog.

Now, Australians can at least feed at the trough… for a little while.

Telstra offers other plans, which vary on whether you qualify for ADSL 1 service (original DSL) or live in an urban/suburban area upgraded for ADSL 2 or cable modem service.  All prices hereafter are in Australian dollars – $10AUD = $0.91US at time of writing):

New Broadband Pricing for full service fixed phone customers

Those prices are enough to give North American providers dreams of Money Parties in their heads forever.  Only Time Warner Cable came close with their infamous $150 unlimited usage plan they tried to stick customers with in several cities this past April.

That platinum-deluxe BigPond Liberty 200GB plan bundled with a TV package will cost you more than $4,560US over the life of the 24-month contract.

Australians continue to wait for a National Broadband Network plan that the government says should finally free Australians from a life of being told you have to spend more… a lot more, to save just a little from companies like Telstra.

A spoof on Telstra’s BigPond Internet Support Call Center (1 minute)

Clearwire this week changed their terms and conditions governing the use of their service.  The changes are sufficiently materially adverse that subscribers under contract should be able to cancel service, if they wish, without incurring any early termination fee.

The most prominent change is Clearwire’s ability to crack down on whatever they define “excessive usage” to be, and the redefining of ‘unlimited service’ as ‘limited and speed throttled service.’

All-New to the Clearwire Terms & Conditions:

Nature of the Service.The Service provided to you is intended for reasonable, periodic, non-continuous use by a person using a computing device, consistent with the type of use made by a typical individual consumer of our Internet services. Examples of allowed uses of our Service include web surfing, sending and receiving email, sending and receiving photographs, occasional on-line gaming, and the occasional non-continuous streaming of videos and downloading of files. Examples of uses that are not permitted include the continuous unattended streaming, downloading or uploading of videos or other files, maintaining an unattended or continuous uninterrupted connection to the Internet such as through a web camera or machine to machine connections that do not involve active participation by a person, or operating an Internet hosting service such as web hosting or gaming hosting. You may not use the Service in a manner that impairs the user experience of other users, or that otherwise impairs network performance. Both fixed wire-line Internet service and wireless Internet service have limited bandwidth capacity. Like fixed wire-line service, CLEAR’s Service can suffer from congestion and reduced performance when usage by some individuals exceeds the usage of typical individual consumers, thus having a negative impact on the entire network. This AUP is intended to ensure that the activities of a few users do not unfairly impair the activities of all users of the Service.

Clearwire’s unlimited use plans have always carried a clause giving the company the right to terminate or suspend service for exceptionally excessive usage, after several contacts with customers.  The old language:

Unlimited Use Plans. (Effective January 9, 2009)

While the determination of what constitutes excessive use depends on the amountspecific state of data you may download or upload during a monththe network at any given time, you shouldexcessive use will bethat such unlimited” plans are nevertheless subject todetermined by resource consumption and not by the provisionsuse of this AUPany particular application. What this means is that allWhen feasible, upon observation of the provisions described in this AUPan excessive use pattern, including those that describe how Clearwire may perform reasonable network management such as reducingwill attempt to contact you by e-mail at the data ratee-mail address on file or otherwise to alert you to your excessive use of bandwidth intensive users during periodsand to help determine the cause. Clearwire representatives also are available to explain the parameters of congestion, will applythis AUP and to yourhelp you avoid another excessive use incident or to upgrade you to a different class of the Service that comports with your usage. The term unlimited” means that we willIf you are unavailable or do not place a limit on how much datarespond to Clearwire’s attempt to contact you uploadregarding excessive use, or download during a monthif excessive use is ongoing or other particular periodrecurring, howeverClearwire reserves the right, it does not mean that we will not take stepsset forth in the “AUP Enforcement and Notice” provisions below, to reduce your data rate during periods of congestionact immediately and without further notice to restrict, suspend or take other actions described in this AUP whenterminate your usage is negatively impacting other subscribers to our Service.

The new language now permits the company to use “network management” techniques such as reducing your speed if they feel you are excessively using Clearwire’s “unlimited” service.  Although the new language sounds friendlier — deleting references to suspending or terminating your service — Clearwire’s Acceptable Use Policy (AUP) maintains those rights in another section.  When all is said and done, Clearwire still gets to limit your usage -and- can now also reduce your speed:

Unlimited Use Plans. (Effective November 22, 2009)

If you subscribe to a service plan that does not impose limitsWhile the determination of what constitutes excessive use depends on the amountspecific state of data you may download or upload during a monththe network at any given time, you shouldexcessive use will be aware that such “unlimited” plans are nevertheless subject todetermined by resource consumption and not by the provisionsuse of this AUPany particular application. What this means is that allWhen feasible, upon observation of the provisions described in this AUPan excessive use pattern, including those that describe how Clearwire may perform reasonable network management such as reducingwill attempt to contact you by e-mail at the data ratee-mail address on file or otherwise to alert you to your excessive use of bandwidth intensive users during periodsand to help determine the cause. Clearwire representatives also are available to explain the parameters of congestion, will applythis AUP and to yourhelp you avoid another excessive useincident or to upgrade you to a different class of the Servicethat comports with your usage. The term “unlimited” means that we willIf you are unavailable or do not place a limit on how much datarespond to Clearwire’s attempt to contact you uploadregarding excessive use, or download during a monthif excessive use is ongoing or other particular periodrecurring, howeverClearwire reserves the right, it does not mean that we will not take stepsset forth in the “AUP Enforcement and Notice” provisions below, to reduce your data rate during periods of congestionact immediately and without further notice to restrict, suspend or take other actions described in this AUP whenterminate your usage is negatively impacting other subscribers to our Service.

Clearwire (and the soon-to-be-launched Road Runner Mobile from Time Warner Cable and Comcast’s mobile broadband option) share the same Clearwire WiMax network.  As investors in Clearwire, the cable operators have won the right to rebrand the service to provide a mobile option for their broadband customers.

Customers considering signing up for service should carefully verify the terms and conditions of their contract, as well as the quality of service provided where you expect to use the service the most.  Several websites highly critical of Clearwire have been established with hundreds of upset customers who were promised broadband speeds and barely managed much more than dial-up speeds using the service.

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“Clearwireblows” ran a speed test illustrating serious speed problems using Clearwire in Texas this past April.  (2 minutes)

Customers who wish to end their contract without incurring a cancellation fee can do so following this procedure:

1. Contact Clearwire in writing and inform them you are exercising your right to terminate service without charge or penalty because of materially disadvantageous changes to the Clearwire Terms and Conditions effective November 22, 2009.  Under their terms, you have a right to discontinue service in accordance with the section “Revisions: Reservation of Rights.”  Namely, “…if you do not wish to continue Service after a change that is materially disadvantageous to you, you may terminate this Agreement by providing written notice to Clearwire within twenty (20) days of the effective date of the modification.”  The link above contains contact addresses you may use.
2. Contact customer service by telephone and inform them you have followed the written cancellation procedure outlined above.
3. Be certain to insist Clearwire not charge any termination fees, and that you do not agree to pay any such fees.
4. Should you experience any difficulties, contact the Better Business Bureau as this customer did.  The BBB helped facilitate an immediate cancellation with no termination fees.