While Time Warner Cable continues to ask customers if they should “get tough” with cable programmers’ price hikes, they are rolling over customers with more rate increases anyway.

The latest region facing higher cable bills is southern California.  Customers were notified rates were increasing an unspecified amount in January 2010.  Company spokesman Darryl Ryan told the Orange County Register that he can’t easily categorize the average increase since every bill will be different.

Readers managed:

• Margaret from Huntington Beach says that some price hike examples are: The All the Best goes to $122.99, from $119.95; the ‘Surf ‘n View’ increases $2.04; broadcast cable goes up $2; Internet only goes up $2.04; and DVR increases to $1.54. One decrease: the remote control drops $0.05.
• Dana from Anaheim Hills got a letter too and had to call customer service to figure out what it meant. Essentially, Dana found out basic service was going up $5 to $8 per month. To keep the existing price, customers must commit to a 2-year contract.

This price increase, with more likely to follow, comes because of programming costs according to the nation’s second largest cable operator.  The company has recently tried to engage consumers in an effort to “keep costs down” through its “Roll Over or Get Tough” campaign.  Time Warner Cable claims broadcasters and other cable programmers are demanding as much as 300% more for their programming in 2010.

[flv width=”640″ height=”380″]http://www.phillipdampier.com/video/TWC Holidays Ad.flv[/flv]

Time Warner Cable’s ‘Roll Over or Get Tough’ campaign is running this ad for the holidays.

The Parents Television Council called the marketing campaign “self serving,” said Tim Winter, the organization’s president.  The group said consumers are always put in the middle of pricing arguments, either from the cable company’s perspective or the network trying to get carriage or threatened with removal from cable lineups.  The PTC calls it posturing, and in the end prices typically get negotiated down a few pennies at most.

The PTC advocates consumers being able to pick and choose only those channels they want.  The group runs the website How Cable Should Be, which breaks down some of the estimated wholesale prices programmers charge cable companies for their programming.  Consumers can use the site to pick and choose their favorite channels and add up what their monthly bill could be if they weren’t paying for channels they don’t watch.

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p style=”text-align: center;”>[flv]http://www.phillipdampier.com/video/Bundling Bummer.flv[/flv]
The Parents Television Council’s “Bundling Bummer” message illustrates how consumers get stuck paying for channels they never wanted. (3 minutes)

Time Warner Cable claims that more than 400,000 visitors to their campaign website have been overwhelmingly positive towards the company’s “fight back” stance.

“We’re delighted with the results so far,” said Time Warner chairman, president and CEO Glenn Britt. “Over 150,000 people have left comments, and 95% of them voted for ‘Get Tough.’ Our customers clearly agree that the current programming business model is broken. One comment we’re hearing pretty consistently is that customers would like the choice to buy smaller packages of channels. As an industry, we need to listen to those kinds of concerns.”

But the company’s site doesn’t make it easy to “roll over.”  Those who try to choose “roll over” are prompted instead to choose “fight back.”

Industry observers suggest Time Warner’s campaign is an opening shot for upcoming contract extensions for a handful of programmers, most notably broadcasters.  In the very center?  News Corporation and the Fox family of cable and broadcast stations.

[flv]http://www.phillipdampier.com/video/TWC 300 Percent Pay Raise.flv[/flv]

Time Warner Cable asks if you are getting a 300% pay raise in this ad asking if customers want the company to fight back against programmer price increases.

Behind the scenes, Time Warner Cable has been taking shots at Fox over negotiations between Sinclair Broadcasting, which owns 20 Fox-affiliated TV stations, and Mediacom, a smaller cable operator.  In an ex parte comment filed December 8th, Time Warner Cable took direct aim at the network, suggesting they were demanding veto power over local negotiations with individual stations.  If the network doesn’t like the terms the local station and cable system settle on, Fox wants the right to object.  Time Warner Cable suggested that precedent is already in place based on negotiations between Sinclair and Time Warner which only resulted in one-year extensions.  The cable operator assumes Fox will be back a year from now demanding up to one dollar a month per subscriber for each Fox affiliate the cable system carries.

Why does Fox care so much?  Because they, like many other television networks, have begun asking for a percentage of the revenue earned from retransmission consent agreements.  With a weak ad market, every penny counts.

Fox called the cable operator’s tactics a “desperate campaign to mask its impressive profits and instead malign its program suppliers’ efforts to receive fair compensation.”

Regardless of who wins the fight, subscribers lose because they bear the brunt of the cable operator’s business model which forces customers to pay for dozens of channels they’ll never watch, and when prices for those networks increase, so shall the customer’s bill.

[flv width=”480″ height=”290″]http://www.phillipdampier.com/video/Canada Retrans Consent Ad.flv[/flv]

Canadians are also going through a similar battle between cable systems and local broadcasters who demand payment for carriage.  The hardball campaign plays out on Canadian TV screens with ads like this.

While Verizon Wireless and AT&T Mobility have settled their differences in the courtroom, agreeing to withdraw mutual lawsuits against one another over their advertising claims, the war on the airwaves continues.  We had some good response to the last round of ads and lots of people dropping by to watch them, so it’s time for another round of fun.  Most of the ads will appear below the page break, so be sure to select Continue Reading… to see the entire article.

In North America, the holiday season is  -the- time of the year to move mobile phone products.  They are a perennial favorite for gift giving and providers know it, so they pull out all of the stops on advertising.  Verizon Wireless upped the ante this year by vilifying AT&T’s 3G coverage areas to gain a competitive advantage.  A clearly stung AT&T has since struck back with Luke Wilson, going all out to challenge Verizon’s map claims with postcards and marbles, as well as a website to de-fang Verizon’s map comparisons.  We’re even back to AT&T taking pot shots at Verizon over those “milky minutes” that expire at the end of the month.

[flv width=”640″ height=”380″]http://www.phillipdampier.com/video/ATT Marbles.mp4[/flv]

Verizon Wireless is full of marbles in AT&T’s view.  Luke Wilson tries to do damage control over Verizon Wireless calling out AT&T’s 3G map coverage.

… Continue Reading

Anne Milgram

Verizon New Jersey has agreed to a settlement to resolve a lawsuit resulting from its marketing, sales, billing and customer service practices regarding its FiOS television, telephone and Internet services. The agreement, made by Verizon with Attorney General Anne Milgram and the Division of Consumer Affairs, requires Verizon to pay $795,000 in civil penalties to the state and reimburse attorneys’ fees and investigative costs.  Verizon will also provide 1,160 consumers who filed complaints about the company with a $50 prepaid gift card or allow consumers to terminate their FiOS service without an early termination fee.

“Companies must deliver services at the terms advertised and represented to consumers. This settlement demonstrates Verizon’s commitment to do right by its customers and to adhere to our consumer protection laws and regulations,” Milgram said.

The action, originally brought by the New Jersey Attorney General’s office this past March, came in response to complaints from state residents who failed to receive promised flat-screen televisions offered as part of a sign-up promotion the company ran last year.  The company was also accused of running advertising campaigns quoting prices that did not come close to reflecting the actual total cost of service.  The Attorney General also documented instances of setup and installation fees that were promised to be waived by Verizon representatives, but were billed anyway.

[flv width=”600″ height=”356″]http://www.phillipdampier.com/video/WABC New York Verizon FiOS Ads Deceptive 3-18-09.flv[/flv]

WABC-TV New York ran this report on March 18th exploring the Verizon FiOS problems leading to the New Jersey lawsuit. (2 minutes)

“Consumers want crystal clear television when they sign up for FiOS and they deserve a crystal clear explanation of service terms and conditions,” David Szuchman, Consumer Affairs Director, said. “This settlement ensures that consumers will get what they are promised when signing up for FiOS service.”

Verizon representatives said the debacle over the flat-panel television promotion occurred when a larger than anticipated demand for FiOS depleted their inventory.  The company indicated it is willing to work with consumers to get them the promotional products promised.  Going forward, as part of the agreement, the company will be certain the inventory levels of promotional gifts are better tied to expected demand, and substitute items of equal or greater value when necessary.

The company will also end its practice of charging consumers a different price than that quoted in advertisements or door-to-door sales. Consumers will no longer be charged an activation fee following a sales representative’s waiver of such a fee. An estimated first bill will also be reviewed with the consumer at their time of ordering. The consumer will also be advised of any estimated pro-rated amounts, one-time and monthly charges, taxes and fees.

Customers who order FiOS service through Verizon’s customer service centers will be sent a copy of their estimated first bill through email or first-class mail within seven days of ordering FiOS service and provided a toll-free telephone number for consumer inquiries as to FiOS service, FiOS promotions and promotional gifts, customer service and assistance, billing and other services.

[flv width=”600″ height=”358″]http://www.phillipdampier.com/video/WPVI Philadelphia Verizon FiOS Sending Refunds 12-08-09.flv[/flv]

WPVI-TV Philadelphia covers the settlement between the New Jersey Attorney General and Verizon New Jersey over it’s problems with FiOS service. (1 minute)

Telecom New Zealand

Telecom New Zealand, Ltd. (TNZ) has been fined $352,600US for claiming one of their broadband plans offered “unlimited data usage and all the internet you can handle,” and then promptly throttled speeds to just above dial-up for some users.  The company pled guilty in Auckland District Court to 17 charges brought against it for misleading customers. Under the New Zealand Fair Trading Act, companies must be honest with customers about what their products and services deliver, and may not engage in “gotcha” fine print that radically departs from the marketing campaign for the service on offer.

The case stems from claims made in 2006 that TNZ’s Go Large broadband plan included “unlimited data usage and all the internet you can handle.”  Customers who flocked to the Go Large plan soon discovered “unlimited” meant “limited.”  Customer complaints rolled in when subscribers discovered the plan’s broadband speed was heavily throttled by “traffic management” which dramatically reduced speeds for file sharing networks and other downloading during peak usage times.  Many complained Go Large’s throttled speeds were slower than those on their usage-capped former Telecom plans.

Customers wading through the fine print finally discovered the reason for the terrible speeds.  The company disclosed it used “traffic management” technology to artificially lower speeds during peak usage times and for certain applications that used a lot of bandwidth.  In December 2006 the company quietly expanded that fine-print to broaden the use of traffic management on certain Internet applications to lower speeds at all times of the day and night for every customer.  This for a plan that promised unconstrained speeds.

New Zealand’s Commerce Commission was not impressed and accused the company of not disclosing relevant information to customers, and failed to make sure their service lived up to its marketing hype.

Telecom stopped offering the now-infamous Go Large plan in February 2007, and rebranded it Big Time.  The latter plan continues to offer “unlimited usage” but more clearly discloses the traffic management policies that limit customer speeds.

The company has already paid $8.4 million in refunds to nearly 97,000 customers, and has agreed to an additional $44,000 in reparations to nearly 2,000 additional customers.

Company officials apologized for the misleading advertising, stating “we failed to adequately disclose various qualifications for our plans and we apologize for this.”

[flv width=”480″ height=”292″]http://www.phillipdampier.com/video/nzbroadband.flv[/flv]

Telecom New Zealand’s Big Time plan ($43US per month – add $7US per month if you do not use TNZ for home phone service) doesn’t promise any particular speed, just unlimited use. New Zealand gets two choices: usage capped or speed throttled broadband.  Watch this video and ponder what it would be like to get stuck with this kind of service from your broadband provider. (3 minutes)

This is part one in a series of stories illustrating how telecommunications companies use a combination of public relations firms, professional lobbyists, friendly regulators, and outmaneuvered state officials to sell “improved service” to the public in return for regulatory “reform.”  Too often, that “reform” is loaded with loopholes and language that guarantees providers can break their promises, tie state and local regulators’ hands when bad service results, and ultimately stick you with the bill.

Over the past several months, several communities in New Jersey have been up in arms about Verizon’s reinterpretation of a state law originally written in the 1940s but “updated” just a few years ago, to mean it no longer has to pay telephone pole and infrastructure taxes to municipalities for using the public right of way.  Verizon’s “reinterpretation” of the state’s Business Personal Property Tax law surprised several municipalities who now face significant financial challenges as a result of the lost revenue.  New Jersey residents will likely make up the difference with a higher property tax rate.

On the surface, it might appear Verizon simply happened upon tax savings.  Verizon claims the law only requires it to pay taxes in communities where it has more than 51% of the area’s phone customers.  Despite protestations from local officials, Verizon has signaled its intent to carry on, estimating 150 communities will join the 50-60 already impacted by next year.

Changes in telecommunications public policy do not occur in a vacuum.  They happen when providers lobby for regulatory reform and bring gift baskets filled with promises for dramatically improved service.  Using a network of high priced lawyers and public relations campaign experts, companies can easily outmaneuver local and state regulators at every turn.  Unfortunately, by the time consumers (and sometimes regulators) realize they were left with a Trojan Horse filled with empty promises, it’s too late.

Some deals just bring consumers higher prices while others saddle communities with highly-leveraged, heavily indebted companies that eventually collapse in bankruptcy.

Just how did we get here?  In this series, we’ll look at New Jersey’s history with its largest resident phone company.  From New Jersey Bell to Bell Atlantic to Verizon, more than 20 years of questionable reform has left residents “touched” in their wallets.  The blame doesn’t rest entirely with the phone company, either.  Local and state officials were repeatedly won-over by professionally-run lobbying campaigns.  After repeated bad experiences, one might assume they’d know better by now.  Those communities no longer getting tax payments from Verizon can testify they haven’t.

Let’s turn back the clock to the dramatic changes in telecommunications that came with the 1984 breakup of Ma Bell and the Bell System.

Telecommunications Industry Sets the Stage for a Money Party

[flv width=”640″ height=”500″]http://www.phillipdampier.com/video/1977 The Bell System.flv[/flv]

In 1977, the overwhelming majority of Americans were served by “the phone company,” namely AT&T and its family of Bell companies providing local service. (2 minutes)

AT&T's Bell System in 1977 (click to enlarge)

For decades, telephone service was run largely as a monopoly by the enormous Bell System and several dozen smaller, non-Bell independent phone companies.  Telephone service was regulated by state and federal authorities who approved rate increase requests and made sure providers met service quality standards. Consumers did not own the telephone equipment in their homes – it was rented from the phone company.  Although often uninspired, Bell System telephones were often virtually indestructible, ranging from basic utilitarian black rotary dial phones to the flaunting Princess phone, which had a lighted dial and came in several colors.

As America began earnestly developing data transmission systems in the late 1960s and early 1970s, AT&T kept its monopoly intact there as well.  At the time, a cooperative arrangement between IBM and AT&T ensured most American businesses would probably deal with one or both companies for their data communications needs.

The eventual fall of the monopoly glory days of AT&T and its Bell System monopoly can be laid at the feet of corporate arrogance, particularly from one John D. deButts who became AT&T’s new Chairman and CEO on April 1, 1972.  deButts was AT&T born and bred, rising through the ranks over decades of employment with AT&T.  To him, anything smacking of competition was to be considered a duplication of effort and wasted resources.  AT&T, in his view, had already strayed too far from its past when Americans could go from coast to coast and deal with just one telephone system using uniform standards and practices of operations.  Consistency and quality should be the highest priority for AT&T, not squabbling with smaller competitors fighting with each other for customers.

A politically tone-deaf deButts infuriated a post-Watergate Congress hellbent on reform at a time when Americans had grown suspicious of big power players, be they political or corporate.  The confident AT&T executive delivered a speech before regulatory commissioners in the fall of 1973 that included within it, “[we must] take to the public the case for the common carrier principle and thereby implication to oppose competition, espouse monopoly.”

Not only did the speech irritate many members of Congress, it helped convince one of AT&T’s competitors, MCI to file a 22 count lawsuit against AT&T in March 1974, accusing Ma Bell of being engaged in illegal antitrust activities.

An even more important lawsuit was filed by the U.S. Justice Department on November 20, 1974.  The federal government also accused AT&T of antitrust behavior, claiming the company locked-up the telephone equipment business for itself, and was well-suited to crush any potential competitor from getting a serious foothold in the marketplace.  At the time, AT&T officials sniffed that the lawsuit was completely without merit and promised to fight back at all costs.

deButts ordered company lawyers to stall, delay, and roadblock the government’s case as much as possible, and the company enjoyed years of court delays.  The lawsuit dragged through several preliminary hearings and motions, until the then-presiding judge, Joseph Waddy, fell ill and had to reduce his caseload.  The United States v. AT&T was transferred to a newly-appointed District Judge named Harold Greene in September 1978.  The days of delay were over.  Greene quickly ordered the case to trial starting in September 1980.

While the court case saw some changes, AT&T did as well.  In February 1979, deButts was out, replaced with a far more conciliatory Charles Brown.  He changed AT&T’s tune, publicly welcoming competition into the marketplace, announcing “I am a competitor and I look forward with anticipation and confidence to the excitement of the marketplace.”

Having that attitude probably wasn’t helpful to defending AT&T’s case, and the company eventually threw in the towel, reaching a settlement with the government in 1982.  Overseen by Judge Greene, AT&T was promised it could keep its long distance service, Western Electric (which manufactured telephone equipment), and Bell Labs, the company’s research and development arm.  In return, it had to divest all 22 local phone monopolies.

America's newly independent regional telephone companies post-1984

Judge Greene, issuing a final consent decree to be effective January 1, 1984 formally broke up the Bell System.  The 22 local phone companies under AT&T were merged into seven Regional Bell Operating Companies, each to be run independently:

• Ameritech (acquired by SBC in 1999 – now part of AT&T again)
• Bell Atlantic (acquired GTE in 2000 and changed its name to Verizon)
• BellSouth (reabsorbed back into a newly reorganized AT&T in 2006)
• NYNEX (acquired by Bell Atlantic in 1996 – later to become part of Verizon)
• Pacific Telesis (acquired by SBC/AT&T in 1997)
• Southwestern Bell (changed its name to SBC in 1995, then acquired the remnants of AT&T in 2005, rechristening itself as the ‘new’ AT&T)
• US West (acquired by Qwest in 2000.)

The goal was to create several smaller regional companies not too large to face challenging competition from new independent providers entering the marketplace.

The result of all of this upheaval was competition in the long distance calling marketplace, but very little competition for local residential telephone service over phone company-provided telephone lines.

Still, for a time the post-breakup family of former Bell companies enjoyed stability and a less regulated marketplace, and several raised rates for local phone service, even while cutting long distance prices.  Customers could now buy and install their own telephone equipment, including answering machines and computer modems, and several competitors began to spring up to serve business customers.

By the 1990s, a new upstart appeared on the horizon that would potentially threaten the whole ‘arrangement.’  The cable television industry, subjected to a more regulated marketplace after years of monopoly abuse of customers, was looking for new unregulated add-on services they could provide to bring back the days of big profits they enjoyed just a few years earlier.  Two potential services: providing connectivity to the Internet and providing cable customers with telephone service.

When phone companies realized cable was planning to invade their turf, this meant war.

In part two, learn more about how the telephone companies went ‘back to the future’ and rebuilt the empire Judge Greene broke up.