The Wrap last night reported that Comcast, the nation’s largest cable company, was deep in talks to purchase a [potentially controlling interest in NBC-Universal, a report Comcast was disputing as of late last night.

Comcast, the nation’s leading provider of cable, entertainment and communications products and services, is in talks to buy the entertainment giant NBC-Universal from General Electric, according to knowledgeable individuals.

Deal points were hammered out at a meeting among bankers for both sides in New York on Tuesday, executives familiar with the meeting said.

Two individuals informed about the meeting said that a deal had already been completed at a purchase price of $35 billion.

A spokeswoman for NBC-Universal had no comment. Comcast responded with this statement: “While we do not normally comment on M&A rumors, the report that Comcast has a deal to purchase NBC Universal is inaccurate.”

Bloomberg News also reported interest by Comcast in a deal with two of NBC-Universal’s owner-partners: GE and Vivendi of France.  But they noted that three unnamed people with knowledge of the deal claimed Comcast would acquire only a 50% stake in the company, not 100% control, contingent on Vivendi selling its 20% stake to Comcast.

If such a deal were concluded, the NBC television network, two cable news channels, The Weather Channel, and Universal Studios would effectively be under the Comcast umbrella.  Comcast, already the nation’s largest cable company, would have a major ownership interest in a large television content-producing family of companies.  Cable companies have recently feared being owners of “dumb pipes” in an increasingly concentrated entertainment marketplace, and a deal with NBC-Universal would allow Comcast to have ownership of a significant amount of the content they distribute over their cable television and broadband networks.

TV Everywhere, a pet project of Comcast and Time Warner, leverages video content from cable networks distributed to “authenticated” cable or pay television subscribers over broadband networks.  Content owners have had the liberty to govern the terms and conditions of the distribution of their content within the scope of the project.  Outright ownership or control of the content by cable companies provides a much more predictable outcome.

Who foots the bill for an estimated $35 billion dollar investment in a completed deal for NBC-Universal?  Comcast customers, of course.

Lynch

Verizon today joined the chorus of large providers looking for an enhanced payday off the backs of their subscribers when Chief Technology Officer Richard Lynch told a 2009 Fiber to the Home Conference and Expo press conference that the days of unlimited broadband may be coming to a close.

“We’re going to have to consider pricing structures that allow us to sell packages of bytes, and at the end of the day the concept of a flat-rate infinitely expandable service is unachievable,” Lynch said, adding that the broadband industry will see a paradigm shift as the Internet grows and Verizon passes on the cost to “someone.”

This is the first public comment from a Verizon executive that directly supports Internet Overcharging, although Lynch said Verizon was not announcing any pricing changes at this point in time.

Lynch’s statements came in concert with Verizon’s more immediate concerns about Net Neutrality, which the company has spent considerable amounts of money on Washington lobbyists to oppose.

Lynch doesn’t want Net Neutrality to interfere with the potential for the company to offer “premium bandwidth plans.”

Assuming Lynch is speaking about plans sold to consumers, there are no provisions in Net Neutrality legislation that address speed-based Internet service tiers.

Verizon’s statement about metered pricing and Net Neutrality may be a “divide and conquer” strategy to suggest to consumers an “either/or” proposition.  Either accept usage caps and metered service plans or Net Neutrality.  Stop the Cap! has written about this strategy in the past, and it has tripped up some public policy consumer groups in the past who were willing to support one or the other instead of objecting to both.

But Verizon’s near limitless capacity fiber optics FiOS network, and the fact the company’s “cost structure is certainly different, as a tier-one [carrier], [means] their transport costs are a fraction of the smaller operators,” according to Vince Vittore, an analyst with The Yankee Group.  That makes justifying such pricing questionable.

Verizon equates usage pricing models on its wireless mobile network with its wired fiber optic network.  Telephony Online quotes Lynch: “We have already gone this way in wireless because that is where the resource is most constrained.”

Of course, wireless mobile broadband is constrained by limits on the amount of spectrum space available to transport the data, something a fiber optic network need not contend with.

AT&T: 'Google is violating the Net Neutrality tenets we spend millions to make sure don't become law.'

AT&T sent a letter late last week to the Federal Communications Commission calling out Google Voice, the free adjunct Voice Over IP service being tested by Google, for blocking calls to certain high cost telephone numbers.  Robert W. Quinn, Jr., Senior Vice President of AT&T’s Federal Regulatory office complained that AT&T has been forced to complete those calls while Google Voice does not, suggesting that might be the equivalent of a Net Neutrality violation, if not an outright violation of call completion requirements established by the Commission.

These days, almost anything can be defined as a Net Neutrality violation.  If I was a vegetarian and I blocked meat products from my home, I’d probably get a letter from AT&T’s counsel too.

At issue here is the exploitation of a loophole that was established by telecom regulators to provide extra financial support to rural community telephone companies.  When a person places a long distance call, part of the charge is paid to the company that connects the call from the long distance network to the recipient’s telephone line.  The fees long distance companies pay vary depending on the size of the community and the length of the call.  Small rural areas enjoy a higher call completion fee than urban areas do.

Some enterprising individuals discovered the fees being paid to rural phone companies were higher than the actual costs to provide the service.  Traditionally, that extra money was used by rural phone companies, often independent or customer-owned cooperatives, to keep their service costs down and to maintain their equipment.  Long distance carriers didn’t care because the number of calls to these rural communities was comparatively small.

But what would happen if a company set up a telephone number to receive lots of calls that would otherwise never be made to such rural communities?  The result could be a financial windfall.  That possibility persuaded a few rural phone companies to let third parties offer international calling, conference calling and adult phone chat services for no charge beyond whatever the customer has to pay to make the long distance call.  In return, the phone company kicks back a significant portion of the extra income they earn from “call completion fees” to the service providers.

AT&T, among others, got wind of this arrangement and flipped out, complaining they were paying an ever increasing bill from rural phone companies hosting these services.  Anyone with an unlimited long distance plan could call these numbers for free and stay connected for hours at a time.

Unsurprisingly, AT&T blocked calls to these services for a period in 2007, refused to pay for some prior charges, and sued several phone companies.

AT&T/Cingular spokesperson Mark Siegel told Ars that the reason the company has decided to start blocking these services is because high volumes of calls to similar services are costly, and the cost of those calls aren’t passed on to the customer. “We have to pay terminating access for every minute the person is on the line,” Siegel explained. “Typically these companies run them through local exchange companies that charge high access rates, so we end up paying high access charges.”

The FCC intervened and said phone companies cannot arbitrarily block customer access to phone numbers, and the blocks were removed.  Today, the free international long distance calling services are basically gone, but free conference calling lines and adult sex chat services remain, and Google Voice has now discovered the perils of connecting calls, for free, to these services.  So now they have blocked access as well.  Google Voice beta testers report calling blocked numbers results in perpetual busy signals.

AT&T pounced in a letter to the FCC:

Numerous press reports indicate that Google is systematically blocking telephone calls from consumers that use Google Voice to call telephone numbers in certain rural communities.  By blocking these calls, Google is able to reduce its access expenses. Other providers, including those with which Google Voice competes, are banned from call blocking because in June 2007, the Wireline Competition Bureau emphatically declared that all carriers are prohibited from pursuing “self help actions such as call blocking.” The Bureau expressed concern that call blocking “may degrade the reliability of the nation’s telecommunications network.” Google Voice thus has claimed for itself a significant advantage over providers offering competing services.

But even if Google Voice is instead an “Internet application,” Google would still be subject to the Commission’s Internet Policy Statement, whose fourth principle states that “consumers are entitled to competition among network providers, application and service providers, and content providers.” This fourth principle cannot fairly be read to embrace competition in which one provider unilaterally appropriates to itself regulatory advantages over its competitors. By openly flaunting the call blocking prohibition that applies to its competitors, Google is acting in a manner inconsistent with the fourth principle.

Ironically, Google is also flouting the so-called “fifth principle of non-discrimination” for which Google has so fervently advocated (Net Neutrality). According to Google, non-discrimination ensures that a provider “cannot block fair access” to another provider. But that is exactly what Google is doing when it blocks calls that Google Voice customers make to telephone numbers associated with certain local exchange carriers. The Financial Times aptly recognized this fundamental flaw in Google’s position: “network neutrality is similar to common carriage because it enforces non-discrimination . . . Google is arguing for others to be bound by network neutrality and, on the other hand arguing against itself being bound by common carriage,” which leaves Google with an “intellectual contradiction” in its argument.

Richard Whitt, Washington Telecom and Media Counsel for Google, fired back a response on the Google Policy Blog countering AT&T’s arguments:

Google Voice’s goal is to provide consumers with free or low-cost access to as many advanced communications features as possible. In order to do this, Google Voice does restrict certain outbound calls from our Web platform to these high-priced destinations. But despite AT&T’s efforts to blur the distinctions between Google Voice and traditional phone service, there are many significant differences:

• Unlike traditional carriers, Google Voice is a free, Web-based software application, and so not subject to common carrier laws.
  
• Google Voice is not intended to be a replacement for traditional phone service — in fact, you need an existing land or wireless line in order to use it. Importantly, users are still able to make outbound calls on any other phone device.
• Google Voice is currently invitation-only, serving a limited number of users.

AT&T is trying to make this about Google’s support for an open Internet, but the comparison just doesn’t fly. The FCC’s open Internet principles apply only to the behavior of broadband carriers — not the creators of Web-based software applications. Even though the FCC does not have jurisdiction over how software applications function, AT&T apparently wants to use the regulatory process to undermine Web-based competition and innovation.

The HissyFit is on, and it’s almost entirely beside the point.  Once again, Net Neutrality is being used as a convenient flogging tool, this time by a company that spends millions to oppose it, yet sanctimoniously demands others should comply with its founding principles.  While the systematic blocking of telephone numbers may echo the kinds of concerns Net Neutrality protection is designed to address, it’s not as on point as AT&T would have you believe.

Google Voice isn’t even close to being a replacement for telephone service.  It’s not even openly available to the public.  AT&T would have had a stronger argument complaining about MagicJack, the dongle that lets you make unlimited long distance calls for $20 a year.  They go beyond just blocking some of the conference calling services — they actually redirect calls to a recording encouraging customers to instead use one of their own partners instead.

Dan Borislow, inventor of MagicJack says “it is not illegal for us to block calls to [conference calling numbers.]  We have invited other conference calling companies to interconnect to us for free, so we can complete our customers’ calls to them.”

Google’s public policy response isn’t as satisfying as it could have been either, and uses some weak arguments in rebuttal.  Much more important and on point is finding a way to address call completion fee loopholes through a change in telecommunications policy.  The telecommunications landscape has fundamentally changed in ways that existing rules could not have anticipated.  Addressing that issue would provide immediate relief to both AT&T and Google Voice without dragging consumer interests into a telecom policy cat fight.

Unfortunately, that’s a point far too fine for many media types, bloggers, and the sock puppets to understand (or desire to), and the campaign of Waving Shiny Keys of Distraction will carry on, and may have been AT&T’s intention in making such an argument in the first place.

Courtesy: vgm8383

Bay area residents are fuming over Comcast’s latest round of rate increases.  The din grew so loud, Drew Voros, the Oakland Tribune Business Editor, noted “the annual outcry over Comcast rates is louder than any rate increase for electricity or water I have come across. A possible exception being California’s energy crisis earlier this decade.”

Voros then casually dismisses consumer outrage by telling his readers “cable TV is not a utility. It is not a vital service with transparency, public input and debate. There is no recourse for poor service through regulatory bodies or the ballot box.”

We know where this is going.

Voros doesn’t suggest that the rate increases are unjustified and unwarranted, nor does he have a bad word to say to Comcast, although he does fixate on one aspect of the regulatory framework (the wrong one) that he believes is at the core of the problem of unchecked rate increases.

His suggestion is to watch free over the air television or try DirecTV, Dish Network or AT&T’s U-verse.

Let’s explore those alternatives.

For some, assuming they get reasonable reception, and many Bay Area residents do not, getting local over the air signals might be good enough, but won’t help with those pesky rate increases on broadband service, or for those channels like C-SPAN or cable news outlets residents access to get coverage of events local broadcasters ignore.

DirecTV and Dish Network are also fine alternatives, assuming you have permission from a landlord to install the reception equipment, and/or your view to the satellite isn’t obstructed by trees or buildings.  AT&T U-verse is an even better potential choice, assuming it’s actually available in your area.

For everyone else, it’s Comzilla or go without.

Voros then goes too far into the weeds and gets lost in what suspiciously looks like “blame the government” rhetoric:

What many TV viewers do not realize is that the franchise agreements are loaded with fees and payments to the cities, funded through annual rate increases. There’s give and take between cable companies and the cities they serve. It’s a business deal with you in the middle.

But consumers are not bound by any franchise agreements, and the options for television services have grown immensely since the first cable TV line was connected in the 1970s. That is why the franchise agreements are out of date. Technology has overtaken that legal document. There’s no monopoly on television content delivery.

Comzilla attacks San Francisco with rate hikes.

Ask any city official if they’d rather enjoy the incremental increase in franchise payments (which amounts to a fixed percentage, usually 3-5% of gross revenue) made possible by the annual rate hike, or the peace and quiet from constituents not upset over an industry that routinely increases rates well in excess of inflation.

Doing away with the franchise system to resolve cable rate hikes would be like using a ShamWow to deal with the after-effects of Hurricane Katrina.

Most cable companies used to include the “franchise fee” as part of the cost of the monthly service, but now routinely break that charge out onto its own line on your bill (and many never lowered the price for the original service, pocketing that as a hidden rate increase as well).  A rate increase may add a few pennies to the franchise fee on a customer’s bill, but then there is the other $3-5 dollars to consider.

Franchise agreements are negotiated for wired providers.  AT&T had to obtain one to provide U-verse.  That’s because local communities demand that a business tearing up their streets provide something in return for the community.  That usually includes: a small percentage of gross revenue, an agreement to provide free service in community centers, government offices, and public schools, and that they set aside several channels for Public, Educational, and Government access, known collectively as “PEG channels.”  It’s a very small price to pay for an industry that earns billions in profits.

Those agreements typically are renegotiated every ten years, so if consumers object to the franchise fee arrangement, they can appeal to local government to reduce or eliminate it.

Voros also suggests consumers try to obtain television programming online.  That is also sometimes possible, but as Stop the Cap! readers know, that also takes a broadband connection, and Comcast just raised the price for many of their customers for that as well.  With the industry’s new TV Everywhere project, dropping your cable subscription, as Voros suggests, will also likely cut you off from many of your favorite cable shows online — TV Everywhere is for paid television subscribers only.

The industry has every angle covered, right down to suing to remove the exclusivity ban on cable networks and programming.  Should the DC Court of Appeals agree, Voros’ contention that there’s no monopoly on television content delivery will also be thrown into doubt.

The solution is not to blame “outdated” franchise agreements.  The cable package business model is the larger problem.  Customers are expected to pay for ever-growing and more costly basic and digital cable packages filled with channels they don’t want.  Of course competition should be encouraged, but allowing consumers to choose and pay for only the channels they wish is a far better solution to runaway cable pricing.

BendBroadband introduces a new logo and tagline

BendBroadband, a small provider serving central Oregon, breathlessly announced the imminent launch of new higher speed broadband service for its customers after completing an upgrade to DOCSIS 3.  Along with the launch announcement came a new logo of a sprinting dog the company attaches its new tagline to: “We’re the local dog. We better be good.”

What some BendBroadband customers didn’t realize was that dog comes with a leash.

“The new speeds sound great, right until you read the fine print and discover the awful usage allowances they attach to them,” writes Seth, a Stop the Cap! reader.  “That’s Bend (Over) Broadband.”

BendBroadband plans range from 8Mbps service for $36.95 a month ($46.95 broadband-only), 14Mbps service for $44.95 a month ($54.95 broadband-only), and a forthcoming Gold 25Mbps plan for $54.95 a month ($64.95 broadband-only).  The 14Mbps service represents a speed increase for their current Silver plan.  All of these plans have a 100GB usage allowance, with a $1.50/GB overlimit penalty.

A new Platinum plan will offer 60Mbps service for $89.95 a month ($99.95 broadband-only), yet only incrementally bumps the usage cap up by 50GB, to 150GB per month.

BendBroadband's dog comes with a leash... 100GB Usage Caps

Company officials seemed pleased with themselves.

“Who would of believed ten years ago that we would have these types of speeds available?” said Frank Miller, the company’s Chief Technology Officer. “60Mbps…that’s one fast puppy!”

“That dog (logo) has broadband rabies and needs to be put down,” replies Seth’s wife Angelica, who telecommutes and does most of her work from home.

“Central Oregon can be wowed by the speed, but what good is it if you can’t use it without running into their usage caps and limits,” she asks.

“I’d pay for the premium tiers and get on a waiting list today if they did away with the usage caps.  There is no way I am paying to support a company that sticks usage caps on their customers and makes me waste time doublechecking how much I’ve used this month,” she said.

Seth and Angelica have taken a pass on BendBroadband’s dog show and are sticking with the local phone company’s DSL service until something better comes along.

“The speed isn’t the best, but at least you can use the service and not have to worry about it,” Seth writes.