New Zealand Telecom

New Zealand’s Telecom is the latest company caught with a defective broadband usage meter that overbilled 150,000 of their 500,000 customers for Internet usage never utilized.  The problem was tracked to a “technical problem” involving the company’s network upgrade in preparation for the introduction of TiVo.  Telecom’s engineering partner Juniper was held responsible for introducing the error which resulted in more than one hundred thousand customers finding their broadband speeds reduced for “excessive usage” to near-dial-up or billed steep overlimit penalties for the months of November and December.

On December 23, Telecom sent out letters to around 150,000 customers informing them of the error.

“Our reports show us that you will have experienced slowed internet speeds earlier than expected in your billing months,” said the letter, signed by Telecom’s general manager of broadband, Ralph Brayham.

Telecom spokeswoman Emma-Kate Greer told the New Zealand Herald all customers who had been affected by over-charging or slowed internet speeds had been identified.

They had been refunded and credits had been given to “customers who may have been incorrectly slowed.”

Customers shocked by their November and December bills were initially stuck taking Telecom’s word for the overbilling, resulting in lots of finger-pointing in New Zealand households.  The Herald reported:

Sarah Broughton, from Herne Bay in Auckland, said she had been frustrated by the slow broadband, and had accused one of her flatmates of downloading too many movies.

“There are six people living in our house. We all suspected everyone else was downloading heaps,” she said.

“We were blaming other people.

“I never suspected it was Telecom. You think when you give them money they are going to use it properly.

“It’s just been so annoying.”

Usage meters, a vital component of Internet Service Providers seeking an enhanced payday from Internet Overcharging schemes that bill customers based on how much data they consume, have been controversial because of questions regarding the accuracy of their measurements.  Most providers do not permit independent verification of the accuracy of their meters, despite their accounting for a significant portion of a customer’s monthly broadband bill.

It took a concerted, organized effort by members of the Geekzone website to “out” Telecom’s erroneous billing practices and get the company to issue compensation to impacted customers.

Phillip Dampier

In a remarkable statement to the Federal Communications Commission in Washington, AT&T has joined Verizon in predicting the imminent demise of Ma Bell’s classic telephone network.

AT&T writes in its 30 page comment, “That transition is underway already: with each passing day, more and more communications services migrate to broadband and Internet Protocol (IP)-based services, leaving the public switched telephone network (“PSTN”) and plain-old telephone service (“POTS”) as relics of a by-gone era.”

AT&T claims abandoning the old legacy phone network would help the company devote its full resources into staying relevant by constructing a broadband, IP-based network that would deliver voice, data, and video to consumers, presumably over its U-verse platform.  That, according to AT&T, could help the company achieve universal broadband coverage in its service areas, but only if investment-friendly regulations are supported by Washington policymakers.

The Commission has been charged by Congress with formulating a National Broadband Plan that will result in broadband availability for 100% of the United States. That auspicious goal is within reach, but […] will not be met in a timely or efficient manner if providers are forced to continue to invest in and to maintain two networks. Broadband is dramatically changing the way Americans live, work, obtain health care, and interact with the government. Congress and the Commission have rightly made universal broadband access a core national priority. But achieving this goal will take an enormous investment of capital. Private investment from network operators has brought broadband access to over 90% of Americans, and these operators will continue to play a pivotal role in bringing broadband to the remaining 8-10% of citizens who do not currently have broadband access. It is accordingly crucial that the Commission pursue forward-looking regulatory policies that remove disincentives to private investment and encourage operators to extend broadband to unserved areas.

While broadband usage – and the importance of broadband to Americans’ lives – is growing every day, the business model for legacy phone services is in a death spiral. Revenues from POTS are plummeting as customers cut their landlines in favor of the convenience and advanced features of wireless and VoIP services. At the same time, due to the high fixed costs of providing POTS, every customer who abandons this service raises the average cost-per-line to serve the remaining customers. With an outdated product, falling revenues, and rising costs, the POTS business is unsustainable for the long run.

AT&T cites a growing number of Americans cutting their wired phone line service — 22% according to the National Center for Health Statistics.  Craig Moffett from Bernstein Research pegs it closer to 25%, with an additional 700,000 phone lines being disconnected every month.  With a shrinking customer base, the viability of companies providing only wired phone service has come into question.  Verizon and AT&T, the nation’s largest phone companies, have made the judgment it’s a dying business.  Conversely, Frontier Communications and a few other independent phone companies remain believers in rural copper wire phone networks, and are willing to buy the discarded, mostly rural regions their bigger counterparts can’t wait to exit.

But AT&T’s advocacy for an end to “plain old telephone service” is just a tad self-serving when one explores their “To-Do” list for Washington regulatory agencies and lawmakers.  AT&T suggests their future plan benefits all Americans.  Critics would contend it mostly benefits AT&T and its shareholders, especially in light of AT&T’s future revenues being directly impacted by customers disconnecting their AT&T phone lines.  AT&T themselves note collective industry revenue for basic phone service fell from $178.6 billion in 2000 to $130.8 billion in 2007, a 27% decrease.

AT&T’s Action Plan to Avoid Obsolescence Explored

At the heart of AT&T’s proposal for 21st century telephone service is an end to analog telephone service, designed more than 100 years ago to carry voice calls, and the launch of broadband-based service to every home in their service area.  From this new platform, AT&T can deliver telephone, television, and Internet service over a single network.  In fact, they already do in several cities where AT&T’s U-verse has launched. Instead of getting one revenue stream from basic phone service, AT&T can now earn from any number of services a broadband platform can support.

AT&T compares their plan with the transition from analog to digital television, except you won’t have to trade in your existing phones or attach converter boxes to every telephone in the house.  Just like the switch to digital television, AT&T wants a date certain to pull the plug on Ma Bell’s old phone network, the sooner the better.

But AT&T’s plan has plenty of strings attached.

First, the company believes the only path to private investment and a successful transition is a near-complete deregulation of the telephone industry.  It wants the federal government, specifically the FCC, to take control of oversight of phone companies across America, if only to end a patchwork of state regulations and service requirements.  Remember, the Ma Bell most Americans grew up with was a regulated monopoly.  In return for guaranteed profits, phone companies agreed to meet service obligations, provide service to any home or business that wanted it, serve the disabled, and provide discounted phone service to the economically disadvantaged.  Rural customers were assured they would have access to phone service and at reasonable prices, and if something stopped working, government oversight ensured problems would be repaired to the customer’s satisfaction.

In AT&T’s view, such requirements are quaint and outdated, and it wants to bear few of those burdens going forward.  Indeed, in a too-cute-by-half aside, the company argues that since it will design the network to operate under the same protocol the unregulated Internet uses, it should be unregulated as well.

Such deregulation could impact a myriad of policies governing phone service that most Americans take for granted — minimum service standards, requirements that telephone companies complete calls between one another – even if competitors, and reasonably priced basic phone service even in the most remote locations.  But AT&T is asking for even more – a comprehensive review and possible elimination of any regulation that could be interpreted as interfering with the transition to an all-broadband telephone network.  AT&T includes everything but the kitchen sink in this category, ranging from service quality requirements, reporting, recordkeeping, data collection, accounting, and depreciation and amortization rules governing how quickly the company can write off obsolete equipment.

Ma Bell's network is due for a retirement, advocates AT&T

Ironically, AT&T wants deregulation -and- access to public taxpayer dollars to construct their new network.  The company advocates government-funded award programs to promote universal broadband access.  One would provide money for wired broadband service, perfect for companies like AT&T that want to build those networks, and another for wireless mobile projects to expand service into unserved or underserved areas, also perfect for AT&T Mobility — the same wireless carrier slammed by Verizon Wireless for largely ignoring rural America with 3G wireless data upgrades.

While there is some justification for a review of federal and state rules that may no longer realistically apply to today’s telecommunications marketplace, AT&T goes out of its way to be self-serving in its recommendations.  It dangles the bright and shiny object of a 21st century broadband-based telephone network, but only if they get to run it essentially “no questions asked,” with little oversight and an infusion of public taxpayer dollars to compliment private investment.

AT&T may be correct that the days for Ma Bell’s “plain old telephone service” are indeed numbered.  But for a company that earns billions in profits and answers to shareholders demanding maximum return, shouldn’t their long term well-being first be a question between AT&T management and shareholders?  Are they incapable of a private course correction that makes their future relevance more secure?  AT&T’s U-verse did not require public tax dollars to be successful, and the company spent generously on lobbyists and astroturf campaigns to smooth the way forward with “statewide franchising,” bypassing local government oversight.

The real question on the table is how far does the Obama Administration and the FCC want to go to achieve universal broadband?  AT&T suggests that only massive deregulation will entice private investors to step up and make the investments required to help achieve whatever definition of “universal broadband” the Commission comes up with.  But that price is way too high to pay.  AT&T answers first and always to its shareholders.  If they want public tax dollars funding, even in part, their transition to an all-broadband future, they must also answer to the other “stockholders,” namely the American people helping to foot the bill.

Comcast blocks C-SPAN programming for those who are not Comcast customers

Public interest groups today began an offensive against the cable industry’s attempts to stave off potential online video competition with an industry dominated and controlled online video platform that guarantees consumers won’t cut cable’s cord.

Free Press, Media Access Project, Public Knowledge and Consumers Union are sending letters to the Justice Department and the Federal Trade Commission calling for a probe into the industry’s “TV Everywhere” project, designed to weed out non-cable subscribers from accessing online video programming.

The undertaking, which the industry claims will eventually rival Hulu in size and scope, seeks to provide their broadband customers with on-demand access to as much programming as possible, as long as they subscribe to a corresponding video programming and broadband service package.

Known in the industry as a “pay wall,” the system would assure pay television companies affiliated with the project that they will not lose subscribers from customers cutting the cord to watch programming online for free.  Consumer groups call that collusion, and accuse the industry of secretly meeting to outline the TV Everywhere concept and may be violating anti-trust laws in the process.

“The old media giants are working together to kill off innovative online competitors and carve up the market for themselves,” said Marvin Ammori, a law professor at the University of Nebraska and senior adviser to Free Press. Ammori’s report: TV Competition Nowhere: How the Cable Industry Is Colluding to Kill Online TV, is included in the mailing to the federal agencies.

Ammori says the industry has a long history of controlling behavior.

“Over the past decade, they have locked down and controlled TV set-top boxes to limit competing programming sources; they have considered imposing fees for high-capacity Internet use in ways that would discourage online TV viewing; and they have pressured programmers to keep their best content off the Internet,” Ammori writes.

In addition, these companies, which already dominate the Internet access market, have threatened to discriminate against certain online applications or have already been caught violating Network Neutrality. Indeed, the FCC issued an order in 2008 against Comcast for blocking technologies used to deliver online TV, noting the anti-competitive effect of this blocking. While it may be economically rational for cable, phone and satellite companies to squash online competitors, the use of anti-competitive tactics is bad for American consumers and the future of a competitive media industry.

The latest method of attack aimed at online TV, however, may be the most threatening — and is also likely illegal. Competition laws aim to ensure that incumbent companies fight to prevail by providing better services and changing with the times, not by using their existing dominant position and agreements to prevent new competitors from emerging.

TV Everywhere has a simple business plan, under which TV programmers like TNT, TBS and CBS will not make content available to a user via the Internet unless the user is also a pay TV subscriber through a cable, satellite or phone company. The obvious goal is to ensure that consumers do not cancel their cable TV subscriptions. But this plan also eliminates potential competition among existing distributors. Instead of being offered to all Americans, including those living in Cox, Cablevision and Time Warner Cable regions, Fancast Xfinity is only available in Comcast regions. The other distributors will follow Comcast’s lead, meaning that the incumbent distributors will not compete with one another outside of their “traditional” regions.

In addition, new online-only TV distributors are excluded from TV Everywhere. The “principles” of the plan, which were published by Comcast and Time Warner (a content company distinct from Time Warner Cable), clearly state that TV Everywhere is meant only for cable operators, satellite companies and phone companies. By design, this plan will exclude disruptive new entrants and result in fewer choices and higher prices for consumers.

This business plan, which transposes the existing cable TV model onto the online TV market, can only exist with collusion among competitors. As a result, TV Everywhere appears to violate several serious antitrust laws. Stripped of slick marketing, TV Everywhere consists of agreements among competitors to divide markets, raise prices, exclude new competitors, and tie products. According to published reports and the evident circumstances, TV Everywhere appears to be a textbook example of collusion. Only an immediate investigation by federal antitrust authorities and Congress can prevent incumbents from smothering nascent new competitors while giving consumers sham “benefits” that are a poor substitute for the fruits of real competition.

Ammori

The benefits of controlling the marketplace of video and online entertainment is a lucrative one, earning players billions in profits each year.  Losing control of the business model risks the industry repeating the mistakes of the music industry, which overpriced its product and alienated consumers with annoying digital rights management technology and lawsuits.  It also risks a repeat of the newspaper industry which many in the cable industry believe made the critical mistake of giving away all of their content for free.

With online video services like Hulu generating enormous online traffic from its free video programming, the cable industry fears they might already be headed down the road newspapers paved.  TV Everywhere is part of a multi-pronged defense plan according to Ammori.

Indeed, what the industry cannot control themselves, Internet Overcharging schemes like usage caps and “consumption billing” can handily manage.

Ammoni notes:

Cable and phone companies have proposed cap-and-metered pricing for Internet service that appears to target online TV. Unlike the current all-you-can-eat monthly fee-plans, cap-and-metered pricing would charge users based on the capacity used. As a result, downloading or streaming large files will be more expensive than smaller files. In March 2009, Time Warner Cable announced metered pricing trials in four cities that would have made watching online TV cost prohibitive.

AT&T is testing a metering plan on its wireline U-verse service with hopes for national expansion. Even under generous allowances for bandwidth, users could not watch high-definition programming for many hours a day.

In response to trials by Time Warner Cable, a House bill was introduced in Congress, and Time Warner Cable dropped its immediate plans under consumer pressure. The company stated the plans would be reintroduced following a “customer education process.”

“Online TV is this nation’s best shot at breaking up the cable TV industry oligopolies and cartels. Permitting online distributors to compete vigorously on the merits for computer screens and TV screens will result in increased user choice, more rapid innovation, lower prices and a more robust digital democracy,” Ammoni concludes.

Americans can look forward to additional rate increases in their monthly cable bills on top of the usual annual rate increases already underway as broadcast stations demand, and get, cash in return for cable carriage.

Just a few days after Time Warner Cable and Bright House Networks concluded their precedent-setting agreement in principle with News Corporation’s Fox network, other networks and television stations owners are lining up to get their piece of the action.

The cable operators’ agreement to pay an estimated 50-60 cents per month per subscriber for the right to put Fox-owned local broadcast stations on the cable dial will likely be used as the starting point for negotiations between other cable operators like Comcast, Cox, Cablevision, and Charter when their agreements with stations and broadcast networks come up for renewal.  If every major broadcast network and station owner gets the same 50-60 cents per month, or more, those costs will certainly be passed on to subscribers.  That’s just the beginning says David Joyce, media analyst for Miller Tabak , a Wall Street trading firm.  Joyce believes annual increases demanded by networks could easily be in the 7-8 percent range.  Bloomberg News predicts that could add up to more than $5 billion dollars a year.

[flv width=”640″ height=”500″]http://www.phillipdampier.com/video/Bloomberg Retransmission Consent Will Force Cable Bills Higher 1-4-10.flv[/flv]

Bloomberg News interviews David Joyce, a media analyst who predicts annual 7-8% increases for retransmission consent. (3 minutes)

Sinclair owns stations in these communities

There is nothing new about these kinds of disputes — just the sums involved.

Sinclair Broadcast Group owns television stations serving nearly 22% of the United States (mostly Fox affiliates), and has contentious negotiations for retransmission consent agreements with Mediacom, a cable operator serving mostly smaller cities in the midwest and south.

The two companies just agreed to an eight day extension of their negotiations over a new agreement to replace the one that expired December 31st.

“We just decided we wanted to avoid, with such important events coming up, the disruption that it would cause customers,” Sinclair General Counsel Barry Faber said. “I don’t expect there will be a further extension. We recognize we’re giving up, perhaps, a small amount of (negotiating) leverage, but we don’t think it’s very much. Our channels are worth so much more than we are asking for.”

Sinclair has been willing to force its stations off Mediacom cable systems in the past to prove its point.  But another experience with angry sports fans upset over the interruption of Fox programming was apparently sufficient to give negotiations another week.

[flv width=”640″ height=”500″]http://www.phillipdampier.com/video/Bloomberg Murdoch Bullies His Way to Agreement 1-4-10.flv[/flv]

Bloomberg News explains how Rupert Murdoch bullied his way into an agreement with Time Warner Cable and Bright House Networks that could change the landscape of broadcast television forever.  (4 minutes)

[flv width=”640″ height=”500″]http://www.phillipdampier.com/video/Bloomberg Sports a Major Factor of Cable Dispute 1-4-10.flv[/flv]

The ‘Holy Grail’ of cable programming essentially boils down to silly ball games.  Sports programming is one of cable’s biggest expenses, yet few would dare to alienate sports fans, as this Bloomberg report explores.  (2 minutes)

Cablevision, the nation’s fifth largest cable operator, yanked Food TV and HGTV from suburban New York cable systems early this morning in another fight over programming fees.

The two popular cable channels, owned by Scripps Networks, were “no longer authorized” to be shown to Cablevision customers after the two companies failed to reach an agreement over what the cable operator should pay per month for the two networks.

Perhaps overshadowed by the bigger profile Time Warner Cable-Fox dispute which impacts cable customers across the country, the fight between Cablevision and Scripps has been nasty even by the standards of knockdown, drag-out fights characterizing most of these contract spats.

Cablevision characterized Scripps as “financially troubled” in its own account for the press this morning:

“We are sorry that Scripps’ current financial difficulties are making it impossible for them to continue our relationship on terms that are reasonable for Cablevision and our customers,” the company said in a statement. “We wish Scripps well and have no expectation of carrying their programming again, given the dramatic changes in their approach to working with distributors to reach television viewers.”

That’s about as final as it gets, as the cable operator signals it’s done haggling over prices, at least for now.

Cablevision has a website of its own to explain the decision to drop the two networks

As usual, customers are caught in the middle in an advertising and PR war back and forth.

[flv]http://www.phillipdampier.com/video/Cablevision Message on HGTV Food Channels.flv[/flv]

This morning, Cablevision customers found this message running on the channels formerly occupied by HGTV and Food Network.

Scripps has set up websites for consumers to get their take on the matter, and has also taken to running some 30-second ads of its own, along with network personalities giving their testimony about why the channels are going to be missed.  I Love HGTV and I Love Food Network largely mirror each other’s content in a blog format.  Scripps argument for Food Network, which basically also applies to HGTV:

1. Food Network is among the most popular brands on television, consistently ranking among the Top 10 networks in cable and satellite. In fact, Food Network attracted record numbers of viewers in 2009.
2. Cablevision does not pay Food Network comparably to what it pays other Top 10 networks; yet it pays some networks that deliver substantially smaller audiences significantly more for their programming.
3. The rates currently paid to Food Network by Cablevision are among the lowest in the industry. In 2009, Food Network is 75^th of the 79 Nielsen-rated cable and satellite networks in terms of average rates received from distributors per subscriber. (Source: Kagan Research)
4. Cable subscribers on the whole, responding to the 2009 Beta Subscriber Study, said Food Network is worth $1.03 per month, which is considerably more than Cablevision is paying for the network’s programming and more than Food Network is asking in the current contract negotiations.
5. Cablevision customers pay an average subscription rate of $83 per month. The monthly fee Cablevision pays for Food Network is a small fraction of that figure.

[flv width=”640″ height=”451″]http://www.phillipdampier.com/video/Scripps Ad for Cablevision Customers.flv[/flv]

Scripps fires back with its own ad alerting Cablevision subscribers to call and ask for HGTV and Food Network back on their lineup.

Judging from the comments left on both of Scripps’ sites, consumers know they are stuck in the middle and many are not thrilled with either party.  Some of the comments:

Each of you blames the other, but it’s probably a lot of both, and we, the viewers, are the real losers.  Thanks a lot to both Cablevision and Scripps. You’re just like the Republicans and Democrats — neither side seems to understand the meaning of or necessity for compromise to benefit the masses. Have a wonderful New Year.

You guys are schmucks. You waited until the very last minute, on New Years Eve, to tell everyone about this before launching your stupid campaign. You are using your customers to fight your battles, and are ultimately punishing all of them at the end of the day. And that’s pathetic.

YOU guys are the scumbags! You’re so greedy, I hope Cablevision snubs you. If Cablevision picks you back up at your hiked rate, we’ll be the ones paying an even higher bill, you idiots.
Thanks loads and happy new year to you, too. Greedy morons.

Whatever the disagreement is on funding, ultimately, it is us as the consumer who are paying the bill. My wife LIVES for the Food Network and would be willing to pay for it as a Premium channel. If that’s the road both sides want to take, both will lose out. Only a few like myself would be willing to pay extra for it……there will be other subscribers that could care less either way.

I turned on my TV this morning to watch the Rose Parade at 11 am and found an obnoxious rotating statement from Cablevision instead of the channel. I then went online to the web address they provided on screen and read their say -nothing statement that put the entire blame on Scripps networks. Instead of telling the customers there was a problem and asking what we would want to pay for these networks, they just yanked them. They are the most customer-unfriendly company I have seen, and it is not just from this action where I form this opinion.

We have enjoyed the FoodNetwork and HGTV but you deserve to be off Cablevision, there is no way your combined networks are worth almost $2 a month, 25 cents is about right. My cable bill is too high now, 2 bucks for what you have? Forget it, I will have to do it the old fashion way. We lived without you before and will live without you again.

To Cablevision, I have had my rates raised countless times over the past 10 years, and have nothing to show but more CRAP channels. I can’t watch NFL channel, I don’t get my hard to find football games because I am a fan of an out of area team, and now, I can’t watch the ONE CHANNEL that I regularly follow, FOOD Network. The fact that companies like you have spurned the “a-la-carte” system that would allow me to choose and pay for the channels I want (which I would gladly do for Food Network and HGTV) and instead want to keep your profit margin as large as possible is a testament to the corporate GREED that you embrace instead of a value based system. You can talk tough and try to put all of the blame on Scripps, but the truth is, you are both to blame.

Somehow, I don’t think this was the kind of reaction either company expected from customers who have wised up to who will ultimately pay to resolve this in the end.

[flv width=”640″ height=”500″]http://www.phillipdampier.com/video/Vern Yip HGTV Cablevision.flv[/flv]

HGTV’s Vern Yip speaks to Cablevision customers about how to get HGTV back on their cable lineup.  (30 seconds)

[flv width=”640″ height=”500″]http://www.phillipdampier.com/video/Guy Fieri on Food Network Being Dropped.flv[/flv]

Food Network’s Guy Fieri is “blown away” with Cablevision’s decision to drop Food Network from the lineup. (30 seconds)