When Midwest Publishing couldn't get their AT&T Internet service restored, a business neighbor allowed the company to run a cable next door and borrow theirs.

AT&T likes to think of broadband as a tool towards economic recovery, but too often service problems end up hurting small businesses.

Ask Pat Boll, business manager of Midwest Publishing.  When his company’s AT&T business broadband connection suddenly stopped working last week, much of the business activity at the company stopped with it.  Midwest Publishing, like many small businesses, depends on the Internet to conduct business, take orders, and assist customers.

Boll spent three days trying to get answers from AT&T customer service, but only managed to learn the reason why the company’s Internet service stopped working: AT&T claimed a disconnect order entered into their systems in May was processed… in late August.  That was news to Boll, because they never asked for their service to be shut off.

What was worse is that the mysterious disconnect order remained in AT&T’s computer systems preventing the telecommunications company from re-establishing the service, costing Midwest Publishing thousands in lost business and wasted time.

Like so many stories we’ve covered on Stop the Cap!, Boll turned to local media for help.  He contacted Tulsa TV station KJRH-TV.  Their “2 Works for You Problem Solvers” got in touch with AT&T and managed to do what Boll couldn’t accomplish himself — get AT&T to turn Internet service back on.

Small businesses who depend on the Internet should never have only one provider.  Having a backup service provider can make all the difference in an extended outage.  Many small businesses maintain basic DSL service or even wireless broadband as a backup in case their primary connection stops working.  The expense is well worth it if your business depends on the Internet to stay in business.

[flv width=”480″ height=”380″]http://www.phillipdampier.com/video/KJRH Tulsa Internet glitch costs small business thousands 9-2-10.flv[/flv]

KJRH-TV in Tulsa shares Pat Boll’s story with Tulsa viewers.  AT&T provides DSL service through much of Oklahoma.  (2 minutes)

Time Warner Cable subscribers are at reduced risk of losing access to Disney owned channels like ESPN, Disney and local television stations in several major cities now that the two companies are close to an agreement.  But, as usual, regardless of whether Time Warner Cable whittles down Disney’s demands or Disney secures dramatically higher pricing for its cable channels, one thing is certain: Time Warner Cable subscribers will ultimately lose, facing higher cable bills in 2011.

AT&T U-verse customers: your nail-biting has just begun, as AT&T sends home postcards announcing the potential loss of the Hallmark Channel and its companion the Hallmark Movie Channel.  AT&T’s contract expired at 12:01 AM this morning, but Hallmark said it was willing to keep the signals running on U-verse while negotiations continued.

Ultimately, it’s all about who gets a bigger piece of your money.  Be it local broadcasters, cable networks, or programming conglomerates who can darken a dozen channels on your basic cable lineup, all say the cable industry is enriching itself on subscriber fees and all these networks are asking for is a bigger share of the pie.  The cable industry says cable programming fees are the most significant part of rate increases, as the industry is unwilling to absorb most of the programming rate hikes.  Cable wants to continue its healthy returns, so programming rate hikes come out of your pocket, not theirs.

Sometimes the amounts involved come down to pocket change, other times several dollars a month can be involved.

For example, Disney-owned ESPN is typically the most expensive basic cable channels in the lineup.

SNL Kagan, a cable research firm, estimates Disney charges Time Warner $4.08 a month per subscriber to carry ESPN.  The costs are high because ESPN competes with major broadcast networks to secure increasingly expensive television rights to major sporting events.  ESPN’s early days were filled with coverage of volleyball, log-rolling, and billiard sports.  The rights to air these events were affordable.  But with the benefit of increased programming fees, the cable network successfully bid for professional football and other popular sports.  The more money ESPN charges, the more money they can use in bidding wars to secure television rights.

With most cable networks charging closer to 20 cents a month per subscriber, what ESPN charges (and demands) for contract renewals can, all by itself, trigger rate increases.

AT&T and Hallmark are currently arguing over an increase in subscriber fees that currently run around just four cents per month per subscriber.  AT&T argues it doesn’t want to pay the percentage increase Hallmark is demanding, even if it amounts to pennies per month.

ESPN’s rate increase demands often exceed 50 cents, if not higher.

This year a new issue enters the debate — online video programming fees. Disney wants to generate income from a whole new tier of sports programming – that streamed online to Time Warner Cable customers.  The sticking point in Time Warner Cable and Disney’s negotiations seems to hinge on the cable company ponying up for ESPN3, an online network.  The concept of cable operators paying programming fees for online content is highly controversial, especially when broadband customers could face ever-increasing broadband bills blamed on the same “increased programming costs” that have taken basic cable packages from under $20 a month in the 1980s to over $60 a month today.

ESPN3 reportedly wants 10 cents a month from every Time Warner Cable broadband customer, regardless if they have the slightest interest in watching ESPN3.  Some in the cable industry fear once this precedent is set, other cable programmers with online shows could start demanding payments for those as well.

While Time Warner Cable continues to resist, other major cable companies like Comcast Corp., Cox Communications Inc., Charter Communications and phone companies AT&T, Frontier, and Verizon Communications have ESPN3.com agreements with Disney.  Nearly all have also boosted their broadband prices for consumers as well.

Despite assurances from Time Warner Cable’s Roll Over or Get Tough website, the cable industry typically caves in on programming fee increases, often agreeing to split the difference.  Since they simply pass those increases along to consumers, it doesn’t impact their bottom line until customers start canceling cable service.

Subscribers on Time Warner Cable’s blog keep coming up with an innovative idea to solve these problems — allow subscribers to pick and choose (and pay for) only the channels they want to receive.  That novel a-la-carte concept invokes fear in the cable industry like garlic repels vampires.

In the end, even if Disney and Time Warner Cable can’t reach an agreement, should screens darken September 2nd, watch in amazement as a deal is achieved hours after the disruption in programming begins.  Then, just a few months later, the accompanying rate hike will surely follow.

[flv width=”640″ height=”380″]http://www.phillipdampier.com/video/WESH Orlando FL Will Bright House Customers Lose ESPN 8-26-10.flv[/flv]

WESH-TV in Orlando notes Bright House cable customers are also potentially affected because Time Warner Cable negotiates on behalf of that cable company, which has a major presence in central Florida.  (1 minute)

38 Tennessee counties are about to face AT&T price deregulation, something critics contend will bring rate hikes of up to 50 percent for many of the state's most rural residents.

Attention rural residents in 38 counties in Tennessee with AT&T landlines: Start saving your money because AT&T will come looking for more of it soon enough.

As a result of 2009 legislation heavily promoted by the state’s largest phone company, AT&T has easily managed to pass a “competition test” it helped devise, triggering total deregulation of basic phone rates across the state.

Although some of the legislation’s supporters are celebrating the end of rate oversight by the Tennessee Regulatory Authority (TRA), claims that competition has broken out across Tennessee may be an exaggeration.  Critics contend many residents will face relentless AT&T rate increases, especially for the elderly and those living in rural areas — typically the poorest regions of the state.

AT&T’s competition test only required the presence of a potential competitor to meet the definition of “competition.”  Unfortunately, for many residents in the 38 affected counties, that competing cable or wireless provider often can’t or won’t provide reliable service, either because cable lines bypass rural areas or cell phone service offers poor signals.  That leaves many consumers at the mercy of AT&T, who can now charge whatever they like.

It’s a key flaw many state legislators fail to recognize when accepting the phone company’s argument that deregulation will save consumers money.  Documentary evidence suggests the reverse is true, especially in areas not well covered by cable and wireless competition. Those choosing the most basic levels of service typically face the largest rate hikes as telecommunications companies try to drive customers into multi-service bundles often approaching $200 a month.

For now, the first step is to do away with oversight and AT&T wasted no time pulling out provider maps for the 38 still-regulated counties in the state and found cable and cell phone competitors in all of them.  Despite the fact those services are not available to every resident, AT&T lawyer Joelle Phillips demanded the TRA immediately end rate regulation.

Customer Advocacy Lawyer Mary Leigh White warned the TRA AT&T would follow their track record in other states where rates were deregulated and raise prices up to 50 percent. Phillips told the Authority it didn’t matter — the law AT&T helped write and lobby for was clear:

“When a statute includes one thing specifically and doesn’t refer to other things, that the statute must be read to have done that on purpose,” said Phillips.

With that argument, the TRA capitulated Monday and voted unanimously to end rate oversight.

Consumers in the state who do find major price hikes in their future can blame the deregulation bill’s chief sponsors:

• Sen. Paul Stanley, (R-Collierville) (Resigned last August after caught in an extramarital affair with a 22-year old intern.)
• Sen. Dewayne Bunch, (R-Cleveland)
• Rep. Gerald McCormick, (R-Chattanooga)

[flv width=”640″ height=”380″]http://www.phillipdampier.com/video/WSMV Nashville ATT Deregulated 8-23-10.flv[/flv]

WSMV-TV in Nashville covered the end of AT&T rate oversight and the implications the change will have on Tennessee phone bills.  (2 minutes)

You've used too much, and now we have to charge you more... a lot more.

No matter where you live, work or play — be it Seoul, Korea, Manchester in England, or Oklahoma City — there is one thing consumers in all three cities will readily agree on: hatred of broadband data usage caps.

Those are the findings of a brand new survey conducted by GfK NOP in association with Reuters News in Britain.

Nearly 1,000 consumers were asked what they would do if confronted with their Internet provider implementing usage limits and other Internet Overcharging schemes.  More than half said they would be shopping for a new provider.

Not surprisingly, regardless of whether a consumer uses wired or mobile broadband, few believe usage caps are anything more than price gouging by providers to rake in additional revenue.  Many of these company’s biggest-spending-customers are unhappy to learn their provider is back looking for more money in return for less service.

The survey found users of smartphones such as the Apple iPhone care more about their mobile data allowance than they do about their choice of operator or even handset brand.

The survey found that users of the iPhone, Google Android phones or Research in Motion’s BlackBerry — typically, those who spend the most — are far more likely to switch operators to find better data deals.

More than half the users of these devices said they would switch to get a higher mobile data allowance.

Adjusted to take account of the fact that consumers do not always do what they say they will, GfK NOP esimated that 24 percent of contract customers using smartphones would actually switch operators.

Such a stampede would ring panic alarms inside any wireless carrier, but one company in particular faces some serious consequences for delivering years of bad service at high prices.

According to market research firm Morpace, nearly one-half of AT&T’s iPhone customers will seriously consider jumping ship if and when Verizon offers their own version of the wildly popular Apple smartphone.

At least 34 percent of current iPhone owners are resisting upgrade offers from AT&T that require a two-year contract renewal.  They’d rather wait until the iPhone is available on any network other than AT&T.

Even worse, should Verizon introduce their version of the iPhone in the coming year, nearly a quarter of AT&T customers (including those without the iPhone) are “somewhat or very likely” to dump AT&T immediately and head for Verizon.

In addition to complaints about lousy network performance, AT&T smartphone owners who spend the most with the carrier absolutely loathe AT&T’s new data usage limits implemented this past June.

“Experienced smartphone users who understand the benefits of using the Internet on the move and use services to help them in their day-to-day lives simply can’t live without mobile data,” says GfK/NOP analyst Ryan Garner, one of the report’s authors.

“They don’t want to be thinking about their data allowance and possible costs of over-running every time they open their browser or click on an app.”

Although AT&T told their customers and the media the new data-limited plans were going to save many customers money and have no impact on the rest, that is not what AT&T’s Chief Financial Officer Rick Lindner told Wall Street bankers and shareholders on a conference call last month.

“We believe over time, based on how much data they use, they will then begin to migrate up to [more costly] higher tiered plans,” Lindner said.

AT&T is well aware customers are already packed and ready to abandon ship, which is why the wireless provider has introduced a series of impediments to keep customers anchored in place.  Waived upgrade rules permitted most iPhone owners to upgrade to the latest iPhone 4 model this summer at the promotional price, in return for a two-year contract extension.  Customers seeking an end to their relationship with AT&T will find divorce an expensive proposition.  The company nearly doubled the contract early termination fee for smartphone owners June 1st.  Your exit price: up to $350.

Why construct more of these if providers can get you to use less and pay more in the process?

Reuters notes the biggest driver towards the introduction of Internet Overcharging schemes like usage caps is the quest for additional revenue.

Most Western carriers have frozen or cut capital expenditure in the last two years as they prioritise maintaining the dividends prized by investors — meaning the modernisation of networks has been largely put on ice.

Meantime, they say they can no longer afford physically or financially to support unlimited data usage, and are banking on the fact that most consumers will barely notice data caps that are in any case far more generous than average data usage.

Stop the Cap! has been reporting that fact for at least two years now.  Usage limits are never about saving money for customers or making consumers pay for what they use.  They are about increasing profits at the same time providers continue to reduce investments to maintain and upgrade their networks.  Providers routinely report they are spending countless billions on network infrastructure, but neglect to mention those investments are not keeping up with subscriber growth and, in many cases, are actually decreasing year-by-year.  The self-perpetuating problem of network congestion that inevitably follows then becomes an excuse to charge customers more money for usage-limited service.

Reuters confirms that many western carriers have business plans that would be familiar to any neighborhood drug dealer – hand out plentiful cheap samples, get customers hooked, and then gradually reduce the supply while also raising the price.

In Europe, Scandinavian operator TeliaSonera is betting that the superiority of its next-generation LTE network, the world’s first, will allow it to offer premium services — at premium prices.

“When a service like this is entering the market, you normally more or less give it away for free, and so we did with mobile data,” Hakan Dahlstrom, the company’s head of mobility services, told investors last month.

“After a while… to meet the customer’s need for cost control; that is when you have flat rate. And then after some time the user understand how these services work and how it suits them, and you start charging for speed and volume.”

Yet not every provider has found success in alienating and overcharging their customers for increasingly important connectivity.

Reuters found Japan and Korea’s more advanced and mature data networks have already been down the road of usage restrictions, and found they didn’t solve network congestion issues — only provider investments in upgrades did:

Japanese operators NTT DoCoMo, KDDI and Softbank have stuck to flat rates — with discounts for months in which customers use less data — while encouraging them to use more Wi-Fi to take pressure off the mobile networks.

In Korea, carriers are returning to unlimited data plans because of heightened competition while investing heavily to upgrade their networks — a move that Western counterparts are unlikely to be able to avoid for much longer.

SK Telecom, South Korea’s top mobile carrier, last month said it would offer unlimited data services and free mobile Internet calls for customers paying 55,000 won ($46.40) and over in monthly service charges.

Of course, both Korea and Japan maintain more oversight by public officials over critical network infrastructure vital to both nations’ economies.  Neither government allows unregulated monopolies or duopolies in their midst — convinced they’ll deliver the least amount of service they can for the highest possible price they can get away with. In other words — today’s marketplace model in much of Europe and North America.

Phillip Dampier to Chairman Genachowski - Don't Be Verizon's Sucker

Julius Genachowski was played.

The chairman of the Federal Communications Commission hopefully just learned a valuable lesson about the corporations he’s dealing with.  Big telecom companies will be your friend and working partner until they get close enough to stick you with their knives.

Genachowski got it right in the back, betrayed by the companies he shepherded into secret backroom talks, ostensibly to find a non-regulatory solution to Net Neutrality.  While talks were underway, a few major players were quietly stalling for time to construct their own “private agreement” on Net Neutrality, threatening to up end the FCC’s Net Neutrality agenda into the toilet.  The rest were never really interested in anything less than total capitulation on the concept of Net Neutrality (I’m talking to you, AT&T).

And the merry-go-round goes round and round….

The FCC chairman was outmaneuvered from day one, even as he was willing to ignore his biggest supporters who believed he was honest about an open, pro-consumer FCC.

Stop the Cap! reader Dave noted the secret backroom talks between the bully boys and the FCC chairman’s chief of staff Ed Lazarus had collapsed late last week.  Extraordinary pressure from ordinary Americans helped torpedo those talks, as did the realization some of the participants were dealing behind the backs of their hosts.

Now that Verizon and Google have accomplished their Judas moment, the chairman of the FCC is just a tad angry in the papers:

“Any deal that doesn’t preserve the freedom and openness of the internet for consumers and entrepreneurs will be unacceptable,” Genachowski said at a recent press conference.

Some of Genachowski’s allies at the FCC hinted they were hardly surprised at the developments.

Commissioner Michael J. Copps has been around long enough to know better.  He was skeptical negotiations would deliver more than lip service and he was right.  With today’s announcement of a partnership on policy between Google and Verizon, Copps remained unimpressed, and issued a terse reaction:

“Some will claim this announcement moves the discussion forward. That’s one of its many problems. It is time to move a decision forward—a decision to reassert FCC authority over broadband telecommunications, to guarantee an open Internet now and forever, and to put the interests of consumers in front of the interests of giant corporations.”

Maybe it’s time for Chairman Genachowski to listen more to fellow commissioners like Mr. Copps and less time trying to negotiate with Verizon and AT&T.

It’s near impossible to find a consumer group not on big telecom’s payroll that likes any of these recent developments.  Their consistent message — stop trusting big corporations with America’s Internet future.  Do your job, stand up for Net Neutrality, and don’t cave in.

Public Knowledge: Google Sold You Out

Since late last year, we’ve been pushing the Federal Communications Commission (FCC) to place its authority to protect broadband consumers on firm legal ground. But faced with pressure from the largest cable and telephone companies, the agency has failed to act. Who is filling the void left by the FCC? Some of the world’s largest corporations.

Late last week, news broke that a traffic management agreement had been reached between Google and Verizon. This agreement would, among other things, allow Verizon to prioritize applications and content at whim over its mobile broadband network. In the absence of clear FCC authority, we can expect to see more deals like this in the near term. The largest telephone and cable companies and the largest web companies will carve up the Internet as they see fit, deciding who gets access to the Internet’s fast lane while the rest of us are stuck in the slow lane.

We’ve reached a critical crossroads—the time for FCC action is NOW. Private negotiations with industry players have failed. Public concern has reached a fever pitch. And some of the largest corporations on the web are lining up to put an end to the open Internet as we know it. The course of action couldn’t be more clear: the FCC needs to do the right thing and protect broadband users.

Free Press: Google – Don’t Be Evil

“Google and Verizon can try all they want to disguise this deal as a reasonable path forward, but the simple fact is this framework, if embraced by Congress and the Federal Communications Commission, would transform the free and open Internet into a closed platform like cable television. This is much worse than a business arrangement between two companies. It’s a signed-sealed-and-delivered policy framework with giant loopholes that blesses the carving up of the Internet for a few deep-pocketed Internet companies and carriers.

“If codified, this arrangement will lead to toll booths on the information superhighway. It will lead to outright blocking of applications and content on increasingly popular wireless platforms. It would give companies like Verizon, Comcast and AT&T the right to decide which content will move fast and which should be slowed down. And it will destroy the open Internet as a platform for small business innovation and job creation, cementing companies’, like Google’s, dominant market power online.

“Still worse, this deal proposes to keep the FCC from making rules at all. Instead of an even playing field for everyone, it proposes taking up complaints on a case-by-case basis, or even leaving it up to third-party industry groups to decide what the rules should be. The only good news is that neither of these companies is actually in charge of writing the rules that govern the future of the Internet. That is supposed to be the job of our leaders in Washington.

“Congress and the FCC should reject Verizon and Google’s plans to carve up the Internet for the private benefit of deep-pocketed special interests, and move forward with policies that preserve the open Internet for all. This begins with the FCC reasserting its authority over broadband to ensure it can protect the open Internet and promote universal access to affordable, world-class quality broadband.

“The Internet is one of our nation’s most important resources, and policymakers everywhere should recognize that the future of our innovation economy is far too important to be decided by a backroom deal between industry giants.” — Free Press Political Adviser Joel Kelsey (See more here.)

Newspapers  Say ‘Enough is Enough’

The San Francisco Chronicle

[…]Public interest and consumer groups didn’t feel like they had much of a say in the commission’s discussions, and they surely won’t feel like they had much of a say in whatever proposal Google and Verizon bring to the table. This is a huge problem – the future of the Internet belongs to the public, not just a few companies.

The ideal solution would be for Congress to step in and provide a framework for net neutrality – preferably one that keeps the public interest at heart, not the demands of dominant Internet companies and carriers.

That’s what the commission would prefer. It’s considering getting around the breakdown in negotiations by reclassifying broadband under a more heavily regulated part of telecommunications law, but the large cable and telephone companies will almost certainly sue. Congressional action would prevent this ugly scenario and its uncertain outcome.

And any proposal that Google and Verizon come up with will have to be approved by Congress. It would certainly serve the public interest better if Congress gathered input from more than just two companies and created a proposal of its own.

Unfortunately, Congress hasn’t shown much appetite for net neutrality legislation in the past, and we’re not optimistic about the near-term future. So it’s time for the commission to do the right thing and reclassify broadband.

Yes, that will mean lawsuits. It will mean that net neutrality has a precarious future. But it has a precarious future right now, and the public can’t afford to wait.

The Los Angeles Times

[…]Genachowski is right about the need for enforceable rules that prevent broadband providers from blocking or slowing access to websites and services they don’t favor. So far there have been only a few such incidents on DSL and cable-modem networks. But Internet service providers are itching to create a toll lane to deliver content and services from companies that have the resources to pay for better access to consumers. If that toll lane crowds out the free and open Internet that’s been a breeding ground for innovation and creativity, the whole economy will suffer.

[…]A major problem for the commission is that its authority to adopt such rules isn’t clear. Genachowski had hoped that the talks with Internet service providers and Web companies would yield a consensus on a bill Congress could quickly pass to grant the FCC clear but limited authority over broadband access. The breakdown of those talks complicates matters, and suggests that Genachowski may have to rethink his plan to enforce Net neutrality by bringing 21st century broadband providers under rules originally designed for 20th century telephone services. Whatever route it takes, though, the commission should move now.

[flv width=”480″ height=”380″]http://www.phillipdampier.com/video/Young Turks – Google Verizon Killing Net Neutrality 8-9-10.flv[/flv]

Cenk Uygur of The Young Turks show explains the implications of Google & Verizon’s deal for both progressives and conservatives if big corporations get to take control of America’s Internet.  (6 minutes)