America’s worst-rated cable company is facing an apparent customer backlash on two fronts — its introduction of usage caps and at least one disgruntled unidentified citizen who mailed Mediacom a white powdery substance that forced a temporary closure of one hospital and left two Mediacom employees and two Washington County, N.C. sheriff’s deputies quarantined Wednesday.

Deputies launched an investigation after Mediacom employees handled and opened a plain envelope that was found to contain an unknown substance. Employees unintentionally exposed two sheriff’s deputies to the material after they responded to the incident. As a precaution, Mediacom’s Plymouth office was evacuated and both employees and police were decontaminated in an area hospital also placed on lockdown.

All are reportedly doing fine and the unknown substance was sent to Raleigh for further examination. Authorities won’t release further details about the envelope or its contents as the investigation is ongoing, but did say the substance turned out not to be harmful.

Earlier this month the cable company announced it was introducing variable usage caps for customers who either add or change broadband services after August 1. Current customers will be grandfathered under Mediacom’s informally uncapped usage plans, but cannot make changes to their packages without choosing one of several new usage-limited plans. (Thanks to Stop the Cap! reader Curt for sending along the details.)

The caps range from 150GB for Mediacom’s lightest-use plan Launch, which offers 3Mbps downstream, 250GB for the popular 15/1Mbps Prime plan, to 999GB for the company’s 50/5 Ultra and 105/10Mbps Ultra Plus plans.

A Mediacom representative explained the company’s reasons for the usage caps:

“We’ve implemented the usage allowances to ensure we can deliver on our promise of Always Faster Internet,” said “Chad” — from Mediacom Social Media Relations in Gulf Breeze, Fla. “In reality, only 2% of our users exceed our usage allowances. This 2% can use over 19 times what the average household would use, and this can dramatically impact the service you experience in your home. It could cause us to raise our rates for everyone, just to accommodate the excessive use of a few.”

Unfortunately, not every Mediacom customer currently has access to a company-developed usage measurement tool. If a customer exceeds their limit, Mediacom will charge a flat $10 for every 50GB segment over that amount.

Mediacom’s need to implement usage caps is open to debate, however.

The company’s latest 10-Q report filed with the Securities & Exchange Commission, Mediacom admits it has already increased rates for its broadband customers – heavy users and otherwise. At the same time, Mediacom admits its costs to operate its broadband service have dropped 18.7%, principally due to lower connectivity costs.

In fact, the largest costs Mediacom faced included:

• Field operating costs, which grew 13.7% as the company increasingly relies on outside, third-party contractors;
• Marketing costs increased 13.8% to pay for the company’s rebranding, junk mail marketing, and advertising;
• Employee costs increased 23.5%, primarily to beef up its marketing and direct sales to potential business customers.

Nothing in Mediacom’s required declarations to the SEC show any impact by so-called “heavy users” on its broadband service costs or revenues. If they represented any potential threat to the company’s value to investors, disclosure as a “risk factor” is required by law.

[flv width=”480″ height=”380″]http://www.phillipdampier.com/video/WNCT Jacksonville Investigation continues following Mediacom Powder 8-8-12.flv[/flv]

WNCT in Jacksonville, N.C. covers a potential anthrax scare when an unidentified person mailed a plain envelope to Mediacom in Plymouth containing a white, powdery substance.  (2 minutes)

Several years ago, phone companies like AT&T and Verizon discovered providing competing cable service over U-verse and FiOS meant approaching each community, asking permission to tear up the streets and yards of local residents to deliver the service. AT&T’s U-verse requires enormous 4-6 foot ugly metal cabinets in the front or side yard of a customer every few blocks. Verizon’s FiOS network necessitates the replacement of the copper wire network with fiber optic cables in its place. More than a few yards and streets were torn up installing the new cables.

Dealing with individual town boards, city councils, and other franchising authorities became a nuisance for the companies, so both decided to invest some serious lobbying money to rip control away from local authorities. Understanding they would never get away with advocating for no oversight, they settled for the next best thing — advocating for a statewide franchise law. With that, both phone companies simply needed to obtain a single license from the state to operate.

U-verse cabinets often make the evening news when they are plunked down in your front yard. With statewide video franchise laws, you and your local community leaders no longer have a say.

AT&T has been especially successful in passing such “reforms” in their service areas. Verizon has fought less successfully in the more-skeptical northeastern states unwilling to give the company carte blanche-benefit of the doubt.

Illinois is definitely AT&T territory, and the company’s successful push for statewide franchising in 2007 was tied to promises AT&T would hurry out its U-verse service across Illinois. Instead, with many Illinois customers still without access to U-verse, the phone company recently announced its upgrade-expansion was over. But AT&T remains grateful to the Illinois legislature for keeping its end of the agreement — removing certain pesky consumer protection and local oversight laws.

AT&T also craftily defined limits on how much authority the state franchise body could have to operate. In some states, franchise authorities are little more than paper pushers issuing franchise agreements at-will to operators, leaving local communities stuck with whatever quality of service the phone and cable company is willing to offer.

While phone companies spent millions lobbying for franchise reform, the cable industry has occasionally fought their efforts, maintaining AT&T and Verizon should have to follow the same rules they do. Cable operators spent years negotiating franchise agreements with every community they service. In many cases, the cable industry lost the battle but, along with AT&T and Verizon, effectively won the war.

In Carbondale, cable customers quickly learned that statewide video franchise “reform” pushed by AT&T was no help to them. Soon after the law was passed, Mediacom closed the only local customer service center in the city, in direct violation of their local 2009 franchise agreement that required Mediacom to keep its service center open for at least a decade after signing.

In court, Mediacom argued their signed contract with Carbondale was null and void because of the changes to the Illinois Public Utility Act, which transferred franchise authority to the Illinois state government and out of the hands of local officials.

Carbondale officials sued Mediacom in 2010 over the franchise violation, and the cable company opened a temporary customer service center in a local shopping center as an interim measure.

Now two courts have found in favor of Carbondale’s carefully written franchise agreement, and have ruled Mediacom cannot simply tear up their local franchise agreement, state law or not.

What made the difference for Carbondale was language in the agreement that kept close to the consumer protection provisions now found in the statewide franchise law. Courts found that because Carbondale did not stray from the state’s standards, they were within their rights to expect Mediacom to continue operating under the terms of the franchise agreement the company signed.

“The circuit court correctly concluded that the plaintiffs and Mediacom ‘mutually agreed to contracts, both valid at the time of their formation, and valid after the enactment of the customer service and privacy protection standards of (statute),” Justice James M. Wexstten wrote in the appellate ruling.

That leaves Mediacom mulling extending its lease on their single local customer service center, at least until they decide whether or not to appeal the case to the Illinois Supreme Court.

Jackson County Assistant State’s Attorney Dan Brenner and Carbondale City Attorney Mike Kimmel, who fought Carbondale’s case in court told The Southern they would not be surprised to see Mediacom pursue the case.

“As far as we’re all concerned, they’ve got to keep that service center open in Carbondale until the contract ends or they get this thing reversed,” Brenner told the newspaper.

Beahn’s booking photo

A competitor to dominant cable provider Mediacom has been accused of stealing the cable company’s broadband service and reselling it as its own in a bizarre Georgia case that also includes a feud between Albany’s Water, Gas & Light Commission and the defendant.

Back in December, a Georgia Power representative alerted Mediacom about unauthorized equipment placed on a utility pole. When Mike Donalson, Mediacom’s regional security manager arrived at the location off McCollum Drive in Albany, he was surprised to discover a residential Mediacom cable modem powered by a standard car battery sealed in a weatherproof enclosure. Tracking the wiring that exited the box, Donalson eventually found himself at the front door of Addtran Logistics, Inc.

Mediacom immediately launched an investigation and discovered that L2Networks had allegedly contracted with Addtran to provide Internet service. Mediacom alleges in its lawsuit L2 provided the service through a cable modem originally assigned to Beahn’s mother-in-law for residential broadband service at her home.

The company called the Dougherty County Police Department, who arrested Beahn on felony charges for theft of service.

Mediacom is seeking compensatory and punitive damages in its civil suit.

Beahn first came into national prominence in May when he filed the first formal Net Neutrality complaint with the Federal Communications Commission against the Albany Water, Gas & Light Commission claiming the local authority was refusing to allow L2 employees 24-hour access to utility-owned facilities where L2 has placed equipment.

[flv]http://www.phillipdampier.com/video/WFXL Albany Mediacom Files Suit Against L2 6-8-12.flv[/flv]

WFXL in Albany, Ga. reports L2 Networks is headed to court to face charges it used to a Mediacom residential cable modem to deliver business class service under L2’s name.  (1 minute)

A bizarre allegation (and theft-of-service complaint filed with local police) that a Voice Over IP service provider was “stealing” access to its fiber network has triggered the nation’s first formal Net Neutrality complaint under new Federal Communications Commission rules.

The complaint was triggered after Albany (Ga.)’s Water, Gas, and Light Commission (WG&L) filed a report with Dougherty County Police accusing L2Networks of accessing its municipal fiber network without paying.

If the FCC finds the city was correct asserting its claims of theft of service, other broadband providers could begin assessing additional fees for consumers who wish to access Google, Facebook, and Netflix, according the VoIP provider.

The case could create an “irreversible ripple effect along with the creation of various legal challenges across nearly every national content and application provider,” L2Networks CEO Kraig Beahn said in a press release. “We are deeply concerned that the alleged claim could potentially change the landscape of the national Internet marketplace as residential and commercial consumers see it today.”

Beahn's booking photo

In the view of L2Networks, the incident represents a direct and indisputable violation of the Federal Communications Commission’s Net Neutrality policies, which forbids providers from blocking service or selectively charging competitors additional fees to reach customers.

But details about the background of the complaint remain murky and a series of past disputes between Beahn and other telecommunications companies in Albany may require further exploration by federal officials investigating the complaint.

L2Networks is a small Albany-based telecommunications company that provides service to area businesses. L2Networks CEO Kraig Beahn is, however, well-known to both WG&L and local cable operator Mediacom, both of which have previously raised questions about his business practices.

L2 counters WG&L has made life increasingly difficult for the company since the two entities had a falling out in 2011.  That year, WG&L dumped L2 from its plans to deliver a competitive cable television service for Albany residents after the utility’s general manager accused Beahn of not fulfilling the promises he made with WG&L.

In January 2012, Beahn was arrested and charged with felony theft of service after Mediacom discovered an illegal tap on their cable line, which investigators learned was being used to provide Internet and phone service to L2 customer Adtran Logistics. Beahn called the charges “frivolous” and were part of an ongoing dispute with WG&L.

Mediacom vice president of legal and public affairs Tom Larsen noted the company did learn about the suspicious connection from the local utility.

“When our local team went to investigate, they discovered a Mediacom modem connected to two car batteries that was wired into our cable plant and being used [allegedly by L2] to serve a nearby business,” Larsen said.

Won 1.1 million new customers in 2011

Comcast and Time Warner Cable collectively picked up more than 1.5 million new customers in 2011, with most of the growth coming from dissatisfied DSL subscribers seeking better broadband speeds.

Leichtman Research Group, Inc. (LRG) found the eighteen largest cable and telephone providers in the US — representing about 93% of the market — acquired 3 million net additional high-speed Internet subscribers in 2011. Annual net broadband additions in 2011 were 88% of the total in 2010.

The top broadband providers now account for 78.6 million subscribers — with cable companies having over 44.3 million broadband subscribers, and telephone companies having over 34.3 million subscribers.

Stalled growth

Despite AT&T’s position as the second largest Internet Service Provider in the country, the company only picked up 117,000 new customers in 2011.  In contrast, Time Warner Cable, with 6 million fewer customers, added almost a half-million new broadband subscriptions last year.

Frontier Communications, which made broadband a primary target for expansion, has not seen considerable growth either.  The company only added just short of 38,000 new broadband customers last year, almost all getting DSL, often at speeds of 1-3Mbps.

Other key findings include:

• The top cable companies netted 75% of the broadband additions in 2011;
• The top cable companies added 2.3 million broadband subscribers in 2011 — 98% of the total net additions for the top cable companies in 2010;
• The top telephone providers added 750,000 broadband subs in 2011 — 68% of the total net additions for the top telephone companies in 2010;
• In the fourth quarter of 2011, cable and telephone providers added 765,000 broadband subscribers — with cable companies accounting for 82% of the broadband additions in the quarter.

Now serving 10.3 million

“Despite a high level of broadband penetration in the US, the top broadband providers added 88% as many subscribers in 2011 as in 2010,” said Bruce Leichtman, president and principal analyst for Leichtman Research Group, Inc. “At the end of 2011, the top broadband providers in the US cumulatively had over 78.6 million subscribers, an increase of nearly 25 million over the past five years.”

Americans are increasingly treating broadband as an essential “utility” service, as fundamental as electricity or clean water.

The majority of consumers who lack the service either consider it irrelevant in their lives (a factor that increases with the age of the surveyed respondent), cannot obtain service from their provider because of their location, or cannot afford the service.

Sources: The Companies and Leichtman Research Group, Inc.
* LRG estimate
** Includes LRG estimates for Bright House Networks, and RCN
^ Totals prior to Time Warner Cable’s acquisition of Insight completed on 2/29/2012
^^ LRG estimate does not include wireless subscribers
Company subscriber counts may not represent solely residential households
Totals reflect pro forma results from system sales and acquisitions
Top cable and telephone companies represent approximately 93% of all subscribers