Verizon Wireless has a problem with customers who look for the cheapest possible plans for their most capable phones.  Those days are over, as the company introduces ‘mandatory’ data plans for customers using what they define as “enhanced multimedia phones.”

Going forward, phones that meet these four qualifications will be defined as such:

Enhanced Multimedia Phone

1. “Enhanced” HTML Browser
2. REV A
3. Launched on of after September 8, 2009
4. QWERTY keyboard

The first phone to achieve this distinction is the Samsung Rogue, due for release on September 9th.

Customers who try to purchase this, or other phones that “qualify” for this status will be required to choose either a service plan that already bundles “unlimited data” (defined as 5GB per month), or choose from one of these mandatory add-on plans:

A-la-carte data – No usage allowance — $1.99/megabyte
25 megabytes per month — $9.99/month
75 megabytes per month — $19.99/month

The one option not available to customers is a block on all data services, to prevent any billing at any of these prices.

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Verizon Wireless' Data Pricing "Refresh" (Courtesy: Boy Genius Report)

What will also no longer be an option is the $15 VCAST Vpak add-on, providing streaming video and includes unlimited data.  Customers signing up for VCAST Vpak before September 8th will be grandfathered in and be able to keep this add-on.  After September 8th, customers will find a $10 VCAST Video on Demand package on offer instead.  It provides unlimited video access, but no data allowance.  Customers will have to buy one of the add-on plans mentioned above.

Verizon Wireless’ internal marketing slides, leaked to The Boy Genius Report, speak to Verizon’s motivation for making these changes — money.  One slide notes that “over 60% of new activations would require a data plan next year” if the customer wanted access to both data and video on their new phone.  Additionally, the change “alleviates HTML capable handset subsidy pressures,” which essentially means they will be able to sell a more advances handset for less money, knowing they’ll make up the difference with a mandatory data plan charged over the life of a two year contract.

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Marketing Slide Shows Verizon Pushing Customers to Unlimited Data Option as a Better Value

Verizon defends the changes by noting prior to the mandatory data plans, customers who used their browser-capable phones had to either pay the $1.99/megabyte a-la-carte rate, choose a premium unlimited data plan, or get VCAST Vpak.  The company feels the 25 and 75 megabyte options may work for customers with light usage, but enough that would bring their data usage over five megabytes per month ($10 on the a-la-carte option).

Realistically, this is another example of a data provider providing consumption billing options at ever-greater pricing.  With the loss of the VCAST Vpak option, consumers are now pushed into more expensive options, and will likely be heavily marketed bundled services that include data, just to avoid the pricey mandatory 25/75 megabyte add-ons.

Customers should anticipate marketing of bundled plans and little, if any, mention of the “a-la-carte” option that does not add a monthly fee to the customer’s bill.  Indeed, the slides obtained from BGR don’t show the a-la-carte option at all on the “Choosing the best plan” slide.  Instead, it pushes customers to the unlimited data option “for just one penny more” for customers choosing the popular second level Verizon Wireless Select plan (with the data plan add-on), which includes 900 talk minutes.

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Verizon Select's Popular 900 Minute Option, Before the $9.99+ data add-on becomes effective.

Some Verizon Wireless customers relive better days, as they remain grandfathered on truly unlimited data plans chosen before the era of usage caps.  It’s just additional evidence that when usage capped broadband hits the scene, it’s only a matter of time before prices increase, and the usage cap allowances decrease.

A federal appeals court in Washington has struck down, for a second time, a rulemaking by the Federal Communications Commission to limit the size of the nation’s largest cable operators to 30% of the nation’s pay television marketplace, calling the rule “arbitrary and capricious.”

Judge Douglas Howard Ginsburg

The 30% rule, designed to keep no single company from controlling more than 30% of the nation’s pay-TV subscribers, was originally written in 1993 by the FCC because the agency feared a concentrated cable television marketplace would stifle innovation, lock out potential new independent programmers, and discourage new forms of competition.  The cable industry immediately called the cap an overreach, and in 2001, found a friendly reception in court, with a ruling demanding the FCC reconsider the rule in light of competition from satellite television.

The FCC determined satellite competition was inadequate alone to justify reversing the 30% ownership limit, and essentially kept the limit in place, mostly at the urging of FCC Chairman Kevin Martin, who regularly tangled with the cable industry during the Bush Administration.

The decision striking down the 30% rule came in a harshly worded ruling from Judge Douglas H. Ginsburg.

“In light of the changed marketplace, the government’s justification for the 30 percent cap is even weaker now than in 2001 when we held the 30 percent cap unconstitutional,” Judge Ginsburg wrote for a three-member panel of the court.

Ginsburg wrote the FCC was egregiously derelict in its revised rulemaking because it failed to heed the court’s direction, requiring the court to vacate the rule.

The ruling is a “significant gain for cable and apparent big victory for Comcast,” said Andrew Lipman, a Washington- based partner in the media, telecommunications and technology practice at Bingham McCutchen LLP.

The Philadelphia Inquirer noted some Wall Street analysts were pleased with the court’s decision:

Wall Street analyst Craig Moffett called the decision a “moral” victory for Comcast, which contended that the market-cap rule was politically motivated by the Federal Communications Commission and wouldn’t overcome a court challenge. The rule was passed under former FCC Chairman Kevin Martin.

Speculation about what companies Comcast could likely snap up began immediately, ranging from a conceptual merger with Time Warner Cable, the nation’s second largest cable company, to quick buyouts of smaller players like Cablevision or now-bankrupt Charter Cable.

Consumer groups were alarmed by the court ruling.

“This is not the end of the fight,” Andrew Jay Schwartzmann, president and chief executive officer of the Media Access Project, a nonprofit policy advocacy group, said in a statement. “Big cable’s anti-competitive ownership structure has increased prices and limited choices for the American public. Therefore, we will consult with the FCC on whether Supreme Court review is feasible. If not, we’ll be asking Congress to pass new legislation to ensure more choice and lower prices for cable TV service.”

Ben Scott, policy director for Free Press, noted that the intent of the original 1992 Cable Act was to promote competition and consumer choice.  Yet in most cities, consumers face a cable cartel.

“Today consumers experience perpetual price hikes by large operators that already have market dominating purchasing power to decide the fate of new channels. The promises of lower prices through competition from satellite and telecom companies in the video business have never been realized. We encourage the FCC not only to revisit cable ownership limits, but to examine a variety of policy proposals to achieve Congress’s goal to bring consumers more competition and more choice in the cable industry.”

ABC News reported that while Comcast won this legal battle, it has a way to go in the court of public opinion.

Cable providers Comcast, Time Warner and Charter draw low marks on the American Customer Satisfaction Index, tracked by the University of Michigan. On a scale of 0 to 100, Comcast and Time Warner each scored 59 this year. The satellite provider DirectTV ranked first at 71, with Cox Communications cable at 66 and DISH Network at 64.

J.P. Morgan Securities likes what it sees from Comcast and Time Warner Cable, the nation’s largest cable companies.  It has begun coverage of both companies, calling them ripe for growth potential.

Analyst Mike McCormack was particularly impressed with the cable companies’ success in selling bundled products to customers — packages containing video, telephone, and broadband service.  McCormack also noted that cable companies’ capital expenditures to provide services to customers continue to decline, allowing earnings and free cash flow to increase.

In a note to investors, the Wall Street firm said both companies had great potential to increase revenue from customers signing up for voice and data services, which the firm feels has low penetration rates.  Comcast was praised for its position to expand the “average revenue per user (or subscriber)” as higher speed data products gain popularity.

McCormack was much less positive about cable’s biggest rivals — telephone companies.  McCormack said cable was in a stronger position because telephone companies are continuing to lose an increasing number of traditional wired phone line customers, and earnings from the “maturing and increasingly competitive” wireless industry are likely to be lower.

The wireless mobile phone industry, especially prepaid mobile service, continues to undergo a price war which is positive for consumers, but seen as increasingly negative by Wall Street.

Opponents of Net Neutrality regularly dismiss concerns about providers blocking, interfering with, or rejecting content as little more than scare-mongering.  Even in the case of competitors, they assure us, no provider would ever consider getting between the customer and the services they choose to use.  Therefore, we don’t need Net Neutrality provisions enacted into law.

Wouldn’t you know, Cablevision-owned Newsday, a newspaper on Long Island, just unknowingly illustrated what happens when a company puts its own competitive and ownership interests ahead of not only the customer, but also newspaper common sense.

As any newspaper reader knows, the local cable and phone companies are not shy about advertising their products.  For years, Verizon has been spending several hundred thousand dollars a year to run full page ads touting its FiOS service on Long Island.  Such regular advertisers are hard to find these days in the ailing newspaper industry.  Last year, Newsday itself was put up for sale, acquired by Cablevision for $650 million dollars.

Now that the local cable company owns Newsday, they’ve decided to reject advertising from Verizon for its FiOS service. Verizon is now Cablevision’s biggest competitor, providing fiber optic service for television, broadband, and telephone service across Long Island.

The New York Times reports that Newsday has basically told Verizon “don’t call us, we’ll call you” when the phone company inquired about advertising space.

Newsday won’t comment about the reasons why Verizon’s ads were rejected, other than issuing a generic statement:

“We do not comment on specific ads except to say that Newsday, like every other media company, including The New York Times, accepts or rejects advertising at its own discretion,” said Deidra Parrish Williams, a Newsday spokeswoman.

Eric Rabe, a senior vice president of Verizon, told the Times that was fine with him, noting that’s money from Verizon’s pockets not going to feed Cablevision’s pervasive presence across Long Island.

The Dolan family, which runs Cablevision, dominates Long Island, running the cable system, a popular news channel – News 12, and is still the primary place consumers go to acquire broadband service.  Now they also own the biggest newspaper on Long Island as well.

This hasn’t been the first instance that Cablevision-owned Newsday has gotten embroiled in ethical controversy.  The Times notes:

In January, the top three editors at Newsday did not report for work for a few days amid reports that they had been fired or had resigned in a dispute with Cablevision over the paper’s coverage of the New York Knicks basketball team, which is also owned by the company. The editors returned to duty, and neither they nor the company offered a full explanation of what had happened.

Newsday also recently rejected advertising from the Tennis Channel, which is upset with Cablevision because it will not carry the channel.  The Tennis Channel was rebuffed by Newsday when it tried to buy ads inviting viewers to find the network on Verizon FiOS or satellite.

Kelly McBride, the ethics group leader at the journalism foundation Poynter Institute, was troubled by Newsday‘s antics.

“Newspapers accept ads at their own discretion, but they generally set the bar pretty high for rejecting advertising, because they don’t want to be seen as denying access to free speech,” she said. She added that appearing to deny an ad for competitive business reasons, rejecting an ad that is not obviously offensive or failing to explain the rejection, could undermine a paper’s credibility.

Could a company that considers it has the discretion to reject competitors’ access to its properties also extend that notion to its broadband service?  If a competing video provider used broadband to deliver access to its channel lineup, would a competitive threat like that be welcome on Cablevision’s Optimum Online?  How about criticisms of the company or its assets?

Newsday has chosen loyalty to its owner over lucrative advertising revenue to help sustain the paper.  That has disturbing implications for the broadband world as well.

Enacting Net Neutrality protections into law guarantees a company never finds itself in a quandary over where loyalties lie.  These protections guarantee that providers do not hamper, block, or interfere with the online services customers want to utilize.  No “competitive reasons” need ever be used as an excuse to block service from consumers.

Cablevision has not engaged in any online bad behavior to date, but why wait around to find out what the future holds?

Shaw Communications has fired back against accusations by Novus Entertainment that it is engaged in predatory pricing by filing a defamation suit in the British Columbia Supreme Court.

Shaw president Peter Bissonnette said Novus is intentionally spreading misinformation about Shaw’s competitive promotion in the Vancouver area, which he said charged $29.85 a month for a comprehensive package including digital HD cable, high-speed broadband, and telephone service that includes free long distance calling across North America.

Novus fired the first legal shot in July, accusing Shaw Cable of engaging in predatory pricing by offering cable, broadband, and telephone service “below cost” only to residents in the high rise buildings where Novus currently offers service in the city of Vancouver.  Novus, a fiber optic-based competitor, offers service in 225 residential high rise buildings in downtown Vancouver, at prices that have traditionally been lower than those offered by Shaw, western Canada’s largest cable operator, based in Calgary, Alberta.  Novus announced it was filing a predatory pricing case with the Competition Bureau of Canada and the BC Supreme Court.

Shaw officials counter that many of those high rise buildings are owned by Concord Pacific, which also has a major ownership interest in Novus Entertainment.  Bissonnette dismisses Novus’ accusations of anti-competitive behavior, accusing Concord Pacific of blocking access to Shaw, preventing the company from wiring the buildings during their construction, which would have reduced costs significantly.

“Those buildings up until recently have never had access to our services,” he said.

February 2009 Shaw Communications Promotional Pricing (click to enlarge)

Novus’ disdain for Shaw began this past February, when Concord Pacific employees noticed Shaw was promoting special discount offers targeting their buildings’ residents with special discounts for new Shaw customer signups.  The special offers expired at the end of February, and the two companies stopped specifically targeting each other in greater Vancouver until July.

Novus co-president Doug Holman told the CBC that was when things really began to heat up.

The cable provider resumed its efforts in July with a more aggressive deal, which it promoted by slipping flyers under doors and with “street teams” that would stand in front of buildings and ask people entering and exiting whether they were Novus customers. If they were, they would get the $9.95 offer, he said.

The $9.95 offer Holman mentions was an even more aggressive promotion than the one Shaw offered in February. The July promotion offered each component of Shaw’s package — television, broadband, and phone — for $9.95 a month each, with two free months thrown in, as the promotional flyer obtained by Stop the Cap! illustrates (shown on the left).

Shaw's flyer distributed to Novus customers (click to enlarge)

Who exactly could obtain this promotional pricing became a point of contention between the two companies.  Shaw president Peter Bissonnette claims the promotion is not just available to existing Novus customers, but to any resident of West Vancouver, which he called “highly competitive” for cable and broadband service.  Novus claims the promotion is targeted specifically at their customers, and is not widely known or available outside of its own customer base.

Vancouver residents sharing their experiences with Stop the Cap! report that Novus’ version is probably closer to the truth.  When the skirmish went public with Novus’ PR and Twitter outreach campaign, many Shaw customers in Vancouver had no idea such an aggressive promotion existed.  Neither did Telus customers (British Columbia’s telephone provider).  Some Shaw customers called Shaw to complain about the wide disparity between the rates they were paying and those Novus customers enjoyed.  Some Telus customers also called Shaw in late July to inquire whether they could sign up for the promotion.  Existing Shaw customers were disqualified from the promotion because they were existing customers, and the Telus customers who shared their experiences with Stop the Cap! were told the “offer was not available in your area” by Shaw customer service representatives.

Indeed, other online forums reported some similar experiences, noting the offer was limited to a tight geographical area, notably right in the heart of Novus’ primary service areas — those high rise residential buildings.

One reader of Digitalhome.ca, one of Canada’s largest home entertainment forums, said Shaw would offer this promotion to him if he “moved downtown.”  He also noted some friends who do live downtown are trying to shovel through a blizzard of promotional mailers from Shaw received day after day, as well as personal visits from Shaw sales employees knocking on the doors of residents known to live in buildings wired for Novus, despite posted signs “clearly marked ‘No Canvassing’.”

On the CBC website, one Vancouver resident has received dozens of promotional mailers and plans to return them to Shaw at some point: “It’s insane; some friends and I are saving them up to dump on Shaw’s doorstep at some future point.”

Over on Broadband Reports, one resident looking for service outside of Vancouver was told the promotion was not available:

“I phoned up Shaw asking them to give me this offer at my residential house that is not located in Vancouver. They would not.  The closest deal that the Shaw customer service representative would give me is $70/month for six months and then $110/month after that – Citing at first that they could only offer this promotion to buildings with Novus/Telus/Bell. When I asked why I could not get the promotion at my house because I have Telus available, the CSR backtracked and told me that it was only available in multi-dwelling buildings. Eventually the CSR backed down and told me that Shaw was only offering the promotion to buildings with Novus.”

Another reader who did live in the right neighborhood and ostensibly should have qualified was told he did not:

“I called 15 minutes ago and spoke to a CSR about setting it up in my Kits apartment (moving on Aug 15, do not have an account with Shaw currently) and he came right out and told me it’s only for Novus customers. I said I understood it to be an offer to multi-dwelling buildings and that Telus was offered in my apartment as well, but he said that I don’t qualify because I’m not in a Novus building.”

Sign outside of The Concordia in Vancouver promoting Shaw Communications' special offer (click to enlarge)

One possible clue about who this promotion was intended for could be found on a signboard placed just outside the entrance of one Vancouver building heavily promoting the Shaw offer (see photo on right).

Meanwhile, both companies continue their war of words:

“They’ve publicly stated in the past that they’re going to become the bane of the life of Shaw,” Shaw’s Bissonnette said. “True to their word, they’ve embarked on this defamation campaign.”

Counters Novus’ Holman: “That number [$9.95] is way below our cost. We don’t know what Shaw’s cost is, but it’s hard to believe it could be that low and that their cost savings could be that much better than ours,” Holman said. “If we price matched on that, we’d be losing buckets of money.”

Vancouver residents have mixed reactions to the war of words (and pricing.)

Some are eager to take advantage of the competitive price war, and are dropping Novus for a year’s worth of service from Shaw at a fraction of the regular price, citing the savings during the current economic climate.

Others defend Shaw’s aggressive pricing as competition, brutal as it might appear, doing its job in reducing prices for consumers.  Some have suggested the aggressive rate cutting exposes the enormous profit margins enjoyed by the cable industry, particularly pointing to Shaw’s comments that they are not losing money, even at the low prices they are charging in certain areas of Vancouver, as clear evidence of the gouging that goes on elsewhere in cable pricing.

But some Vancouver residents are defending “the little guy,” upset that Shaw may be using its market power and presence across western Canada to put an upstart like Novus out of business.

One CBC reader summed up the views of Novus defenders:

I’m increasingly annoyed by how heavy-handed Shaw is being in this price war. I qualify for Shaw’s anti-competitive price, but have no intention of switching to get it. If I leave Novus now then I’d be playing right into Shaw’s dream of a city-wide monopoly.

And that’s before I even start to mention the aggression of Shaw’s sales tactics. Green-shirted employees on every street corner downtown, bugging me multiple times as I walk from point A to point B on a weekly basis. Two or three pieces of junk mail a week that get around the red dot I have in my mailbox that indicates I Do Not Want Junk Mail, because they’re addressed to Current Occupant.

I’m all for healthy competition, but this ain’t it.

A few Novus customers have found a happy middle ground while the war plays out in the courtroom.  They contacted Novus and asked them to match Shaw’s prices:

Novus customers who are tempted to switch should contact Novus, as they will match the deal. That is what I did, and I am now paying $10 bucks a month for 20Mbps (23.79 according to Speedtest.net) download speed. My total Internet bill over the next year will be $120 for a service that is equivalent to Shaw’s “High Speed Warp” package, a service that costs $94 a month! That’s the apples to apples comparison, and it works out to be a $1000 savings for Novus customers.

I felt really guilty asking Novus to match, since I am extremely happy with their service and was paying a very reasonable $30 a month. But it’s hard to pass up a deal like that, and I will do my best to spread the gospel about how much better value Novus is over Shaw, and especially Telus and Bell. Healthy competition is great, but I do hope the CRTC steps in to ensure Novus isn’t bullied out of the market.

Telus hasn’t gotten involved because they are more concerned with selling the worst service at the highest price, while Bell is busy pitching you on how fast their service is to your face, and then throttling your speed behind the scenes to the point where Google has come out against them. I haven’t had any bad experiences with Shaw myself, but Novus is a real gem.

So those of you who live in downtown Vancouver should do the logical thing, and stick with Novus. You have access to a service that most people across North America, let alone Canada, drool over.