In the multi-million dollar game of chicken, observers are waiting and watching to see who will stop the inevitable consumer train-wreck that will occur if the nation’s second largest cable operator Time Warner Cable fails to reach an agreement with News Corporation, owner of Fox television and several Fox cable networks.

Another day, more negotiations, but still no end in sight.

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The battle between Time Warner Cable and Fox is coming down to the wire, reports CNBC’s Julia Boorstin. (2 minutes)

Time Warner Cable’s Roll Over or Get Tough campaign was tailor-made to bolster the company’s defenses as the deadline nears for the nation’s second largest cable operator and Fox to reach an agreement on carrying Fox-owned stations in the new year.

For sports fans, the relentlessly ticking 24-like clock may run out on some important football games airing on Fox on New Year’s Day, requiring viewers to pull out the rabbit ears and settle for whatever over-the-air signal they can get.  At the moment, the two companies remain far apart in reaching a settlement over exactly how much Time Warner Cable will have to pay to carry Fox affiliates in some of the nation’s top TV markets.

Fox wants a reported $1 per subscriber per month.  Time Warner Cable prefers to pay nothing for Fox broadcast stations — the cable industry typically cuts deals to carry network-owned cable channels for which they will pay.  That’s how many Time Warner Cable customers ended up with channels like Sleuth, CNBC World, and other little-watched NBC-Universal cable channels just to smooth the way for retransmission consent for NBC-owned broadcast affiliates.  Fox shoved the dismally-rated Fox Business News and several regional sports channels onto many Time Warner Cable systems to win retransmission consent deals with higher-rated Fox networks just a few years ago.

Now Fox insists on cash money for carriage.

News Corporation’s Rupert Murdoch, who runs the company that owns Fox, has been making plenty of noise this year about the “business model” of broadcast television being broken in the United States.  Murdoch wants everyone to pay for News Corporation content, be it online from the Wall Street Journal or on your local cable system where the Fox family of cable and broadcast networks occupy at least a half-dozen channels on the lineup.

The level of nastiness has approached that of last year’s vicious battle with Viacom over how much Time Warner Cable would pay for channels like Nickelodeon, Comedy Central, and MTV.  Last year the low point was achieved when Viacom ran full page newspaper ads with a crying Dora the Explorer lamenting the fact she was about to be ripped off the television screens of millions of cable customers.

Time Warner Cable hopes its preemptive strike will earn it some peace and understanding when upset subscribers call the cable company to complain about the loss of Fox on their cable dial.  After all, you did want them to “get tough” with those nasty programmers, right?  Time Warner Cable has pointed the finger specifically at Fox in the newest round of attack ads, and Fox returned fire with a new slap against Time Warner Cable.

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Time Warner Cable characterizes a missed deadline in the dispute as the equivalent of Fox taking your TV hostage.

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Fox returns fire with another direct shot at Time Warner Cable in their latest ad.

Meanwhile, local newscasts around the country are sporadically updating viewers about the fight.  Because football is involved, amazing efforts are underway to force the two to reach an agreement, or at least leave the games on.  One Orlando attorney is filing a lawsuit to get an emergency injunction to make sure Orlando’s WOFL-TV stays on Bright House Networks.  That cable company is being represented by Time Warner Cable over the Fox matter.

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Bright House Networks in central Florida is also impacted by the Fox-Time Warner Cable stalled negotiations.  WESH-TV and WFTV-TV in Orlando report on the major impact the loss of WOFL-TV – Orlando’s Fox station, would have on area sports fans. (WESH-2 minutes WFTV-3 minutes)

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Time Warner Cable’s Alex Dudley, familiar to Stop the Cap! readers from the cable operator’s effort to launch a major Internet Overcharging scheme on customers last April, is back in a decidedly pro-Time Warner piece on the cable company-owned NY1.  Dudley can’t resist taking that last shot at Fox, pointing out impacted customers can always watch a lot of Fox programming for free online, thanks to Hulu. (3 minutes)

With these kinds of battles becoming increasingly contentious, Time Warner Cable CEO Glenn Britt hinted the cable operator may look at offering customers more choice in what channels make up a subscriber’s package.  Consumers have howled for years over rate increases that outpace inflation, as cable operators keep expanding the number of channels on offer, and keep raising the rates to pay for them.

“People want more choice, and collectively, we should be responsive to that,” Britt said at a investor conference in New York City. “I haven’t been a big fan of a la carte. The economics don’t work for the programming part of the business and ultimately don’t work for consumers. They do like to buy packages, maybe not as big as the packages we offer now, but they do like packages.”

“The comments are pretty consistently saying, ‘We would like the choice to buy smaller packages,'” Britt said.

The cable industry has traditionally resisted true a-la-carte pricing, which permits customers to choose and pay for only the channels they wish to watch.  Basic cable networks depend on both advertising revenue and the subscription payments they charge every customer who can watch their channels.  With the millions of cable subscribers pooled together, the cost per subscriber for each channel is usually less than 50 cents per month.  Letting subscribers opt-out increases the prices networks have to charge to those still receiving the channel.  Many niche networks would likely not survive such a transition.  The cable industry also argues it would force every subscriber to rent a set top box or similar device for every television in the home, as every channel would have to be scrambled.  Billing costs would also be higher.

Britt’s suggestion that Time Warner Cable could look into adding more “packages” of programming could resemble how C-band satellite dish owners paid for their programming.  Before the days of DISH Networks and DirecTV, millions of Americans placed large satellite dishes (typically 10-12 feet in diameter) in their yards to receive satellite-delivered programming.  When programmers encrypted their signals, satellite dish owners purchased programming in mini-packages comprising a handful of channels.  Some packages were theme-based — news packs with CNN, Headline News, MSNBC, Fox News, and CNBC for $5 a month or company-based, such as a package containing channels formerly owned by Ted Turner or those from Scripps-Howard (HGTV, Food, Style, etc.) for a few dollars a month.  Most subscribers paid for a “basic package” of popular basic networks grouped together and then added on more expensive premium channels or sports channels individually.  It often didn’t make economic sense to purchase each channel individually because of their relative high cost, but consumers could save quite a lot excluding some of the most expensive channels from their lineup (especially sports programming).

Whether Britt would follow through with the threat of “mini packages” is open for debate.  Any savings consumers realize from such offers would reduce Time Warner Cable’s revenue per subscriber, and that’s a sure fire way to upset Wall Street.

Watch more video and learn how Time Warner Cable customers nationwide may be facing the loss of Fox-owned cable channels, even if the local broadcast affiliate stays put.  We also have a more in-depth report on why retransmission consent agreements are increasingly important to broadcasters and pay television operators, all below the page break.

… Continue Reading

Several staff members working for the Washington Utilities and Transportation Commission (WUTC), the regulatory agency reviewing the proposed Frontier purchase of Verizon territories in Washington state, have reversed their opposition to the Frontier-Verizon deal because of concessions they believe will better serve consumers impacted by the deal.  But the provisions don’t come close to protecting consumer rights and do not sufficiently protect local telephone and broadband service.

The WUTC must be told that broadband expansion from a service provider that insists on a 5 gigabyte usage limit in its Acceptable Use Policy makes such expansion barely worth the effort.  The WUTC must insist on a permanent exemption from any usage limits for Washington state consumers, especially because many may find Frontier DSL to be their only broadband option for years to come.  To allow a company with such a paltry limit to be the monopoly provider of broadband puts Washington residents and small businesses at a serious economic disadvantage in the digital economy.

Would you choose to reside or locate your business in a community with one broadband provider offering a limit so low, your broadband usage will be limited to web page browsing and e-mail?

High Speed Internet Access Service

Customers may not resell High Speed Internet Access Service (“Service”) without a legal and written agency agreement with Frontier. Customers may not retransmit the Service or make the Service available to anyone outside the premises (i.e., wi-fi or other methods of networking). Customers may not use the Service to host any type of commercial server. Customers must comply with all Frontier network, bandwidth, data storage and usage limitations. Frontier may suspend, terminate or apply additional charges to the Service if such usage exceeds a reasonable amount of usage. A reasonable amount of usage is defined as 5GB combined upload and download consumption during the course of a 30-day billing period. The Company has made no decision about potential charges for monthly usage in excess of 5GB.

Frontier will be a part of the lives of almost 500,000 state residents, including those in Wenatchee and other parts of North Central Washington.  That covers a lot of rural residents with no hope of cable competition or other broadband options.  Verizon is the second-largest local telephone service provider in Washington, serving cities such as Redmond, Kirkland, Everett, Bothell, Woodinville, Kennewick, Pullman, Chelan, Richland, Naches, Westport, Lynden, Anacortes, Mount Vernon, Newport, Oakesdale, Republic and Camas-Washougal.  Currently, Verizon has approximately 1,300 employees in Washington, who would be transferred to Frontier once the deal is complete.

Frontier’s concessions don’t come close to assuring residents they can get the kind of broadband service they need in the 21st century, especially from a company that could easily find itself swamped in debt.  Let’s look at what Frontier has offered:

• Invest $40 million to expand high-speed Internet access in Washington.
• Submit quarterly financial reports to identify merger savings.
• Branding and transition costs to be paid by stockholders, not ratepayers.
• Increase financial incentives to prevent a decline in service quality.
• Adopt Verizon’s existing rates and contracts for at least three years.

Frontier would also be required to pay residential customers $35 for missed service repairs or installation appointments. That’s $10 more than Verizon now pays. Current Verizon customers would also have 90 days after the transition to choose another provider without incurring a $5 switching fee. Low-income customers who qualify through the Washington Telephone Assistance Program will also receive a one-time $75 credit if the company fails to offer appropriate discounts or deposit waivers.

Our take:

• Investing $40 million in low speed DSL service with a 5GB usage allowance saddles residents with yesterday’s technology with a usage allowance that rations the Internet.
• Customers don’t care about merger cost reductions because they’ll never enjoy those savings, but they’ll feel their impact if they include layoffs and reduction in investment.
• Consumers will be more concerned about what happens to their phone and broadband service when the “transition” results in service and billing problems.  Will stockholders pay inconvenienced customers?
• Vague promises of increased financial incentives for a company to do… its job, without declines in service quality, exposes just how unnecessary this deal is.  Why not offer incentives for Verizon to stay?
• Freezing rates for three years doesn’t prevent massive increases to make up the difference in year four and beyond.

The WUTC staff had it right the first time when it opposed the deal.  A healthy, financially secure Verizon is still a better deal than a smaller independent company saddled with debt.  Frontier seals the fate of Washington state residents from the benefits of fiber optics wired to the home, delivering high speed broadband for the future because Frontier doesn’t do fiber to the home on its own.  With a tiny usage allowance, just waiting for the company to decide to enforce it means you won’t be using your broadband account too much anyway.

The WUTC is accepting comments and you need to start calling and writing.  Make sure to tell the Commission it must secure a permanent exemption for Washington from any Internet Overcharging schemes like consumption/usage-based Internet billing and any usage limits Frontier defines in its Acceptable Use Policy.  Better yet, tell them Frontier’s concessions don’t come close to making you feel good about Verizon turning over your phone service to a company that is traveling the same road three other companies took all the way to bankruptcy.

Customers who would like to comment on the provisions can call toll-free: (888) 333-9882 or send e-mail to [email protected]. The deadline for comments is January 10th.

Cablevision serves communities surrounding the metropolitan New York region

Despite the tight economy for most Americans, executives at some of the nation’s largest cable players will enjoy millions from their contract extensions, bonuses, and eye-popping stock options that could net upwards of $10 million more for a select few.  And you thought your rate increase was due to “increased programming costs.”

Cablevision is where the real Money Party has just gotten started.  The top three executives alone could receive a combined $50,000,000 next year… that is fifty million dollars, just for running a regional cable company with just north of three million subscribers.

Here is the breakdown:

Dolan

Cablevision CEO James Dolan: Cablevision has always been under the control of the Dolan family, who own a controlling interest in the stock.  James Dolan gets a five-year extension in his contract, with a base salary of $1.5 million per year plus a bonus of up to four times that amount.  In 2010, Dolan is also entitled to an additional bonus package in cash and equity worth around $7 million.  He is also on track to get that same bonus each of the next five years, but only if the company does well.  Dolan is also CEO of Madison Square Garden/MSG/Radio City Music Hall.  For managing those assets, he’ll receive an extra $500,000 in salary, a bonus up to four times that amount, and an extra cash and equity bonus expected to be about $1.75 million per year.

Dolan founded Cablevision in 1973.

Ratner

Cablevision Vice Chairman Hank Ratner: Ratner gets a base salary of $500,000 a year, an annual bonus up to four times that salary, $1.2 million annually for his role with MSG, and extra cash and equity around $1.4 million annually.  And just because he’s a great guy — a one-time stock award worth $1.75 million due on March 31, 2010.  But wait, there’s more.  He also deserves extra cash and equity as MSG’s chief, targeted at $5.4 million in 2010 and each year thereafter.

Ratner joined Cablevision in 1987.  Ratner helps to set corporate direction and strategy, and is the primary executive overseeing major business partnerships and transactions.  Prior to being appointed Cablevision vice chairman, he served as vice chairman of Rainbow Media Holdings, the company’s programming subsidiary.

Rutledge

Tom Rutledge, Cablevision’s chief operating officer: He’ll get $1.63 million annually in salary, plus an annual bonus up to four times that amount.  He’s a special guy, so he also gets a “special payment” of $7.75 million within ten days of putting his ‘John Hancock’ on the new contract.  Call it a signing bonus.  But he also gets extra cash and equity compensation aiming at $6.8 million in 2010.

Cablevision isn’t alone is spreading around the walking around money.

Liberty Media, one of those programmers that keeps upping the rates charged to cable and satellite providers, who in turn pass those increases on to you, have a reason for doing so.  Their salary costs keep going up for the special few on the top floor.

Maffei

Greg Maffei, prexy-CEO of the company, just got his own five year contract renewal taking effect January 1st.  He’ll earn a base salary of $1.5 million per year, with a guaranteed 5 percent raise every year and an annual bonus amounting around $3 million.  But he’ll also get more than 10 million options of Liberty’s three stocks, most in the high-tech Liberty Interactive, which is developing online applications and services.

What do you get?  A rate increase and programming you don’t want but have to pay for, and now you know why.

FCC Commissioner Mignon Clyburn

At least one FCC commissioner remains unconvinced that Verizon Wireless’ recent decision to double the fee consumers pay for service cancellation is justified.  Virtually every carrier offering discounts on handsets and other equipment tie those savings to a two year service contract, with a stinging early termination fee (ETF) if one decides to leave before the contract is up.

Commissioner Mignon Clyburn released a public statement Wednesday questioning Verizon’s logic in their explanation that doubling the cancel fee from $175 to $350 helped defray costs ranging from network expansion and marketing to paying to keep the lights on in Verizon Wireless retail stores.  Clyburn called Verizon’s answers unsatisfying at best, alarming at worst.

“I am concerned about what appears to be a shifting and tenuous rationale for ETFs. No longer is the claim that ETFs are tied solely to the true cost of the wireless device; rather, they are now also used to foot the bill for ‘advertising costs, commissions for sales personnel, and store costs.’ Consumers already pay high monthly fees for voice and data designed to cover the costs of doing business. So when they are assessed excessive penalties, especially when they are near the end of their contract term, it is hard for me to believe that the public interest is being well served,” Clyburn wrote in a public statement.

Verizon also continues to get heat over mysterious fees appearing on some Verizon Wireless customer bills.  As Stop the Cap! reported back in September, consumers with basic service plans occasionally find $1.99 “data charges” on their monthly bills, and several have obtained refunds from the carrier after pointing out they do not use data features on their phones.

The mystery was suggested solved when a purported, unnamed Verizon Wireless employee engaged in some whistleblowing at The New York Times:

“The phone is designed in such a way that you can almost never avoid getting $1.99 charge on the bill. Around the OK button on a typical flip phone are the up, down, left, right arrows. If you open the flip and accidentally press the up arrow key, you see that the phone starts to connect to the web. So you hit END right away. Well, too late. You will be charged $1.99 for that 0.02 kilobytes of data. NOT COOL. I’ve had phones for years, and I sometimes do that mistake to this day, as I’m sure you have. Legal, yes; ethical, NO.

“Every month, the 87 million customers will accidentally hit that key a few times a month! That’s over $300 million per month in data revenue off a simple mistake!

“Our marketing, billing, and technical departments are all aware of this. But they have failed to do anything about it—and why? Because if you get 87 million customers to pay $1.99, why stop this revenue? Customer Service might credit you if you call and complain, but this practice is just not right.

“Now, you can ask to have this feature blocked. But even then, if you one of those buttons by accident, your phone transmits data; you get a message that you cannot use the service because it’s blocked–BUT you just used 0.06 kilobytes of data to get that message, so you are now charged $1.99 again!

“They have started training us reps that too many data blocks are being put on accounts now; they’re actually making us take classes called Alternatives to Data Blocks. They do not want all the blocks, because 40% of Verizon’s revenue now comes from data use. I just know there are millions of people out there that don’t even notice this $1.99 on the bill.”

Verizon's new termination fee appears random and capricious, some company critics charge.

Verizon Wireless denies it charges consumers for accidental web usage that lands on their mobile phone home page, which they claim is exempt from charges.  But Clyburn isn’t buying that explanation either.

“I am also alarmed by the fact that many consumers have been charged phantom fees for inadvertently pressing a key on their phones thereby launching Verizon Wireless’s mobile Internet service. The company asserted in its response to the Bureau that it ‘does not charge users when the browser is launched,’ but recent press reports and consumer complaints strongly suggest otherwise,” Clyburn writes.

“These issues cannot be ignored. Wireless communications are an essential part of our lives, linking us to our places of business, our communities, and our loved ones. The bottom line is that wireless companies can truly earn their desired long-term commitments from consumers by focusing primarily on developing innovative products, maintaining affordable prices, and providing excellent customer service. I look forward to exploring this issue in greater depth with my colleagues in the New Year,” she adds.

Verizon Wireless is also the only carrier that has not responded to a campaign by a Times columnist to let customers get rid of the airtime-wasting 15 seconds of voicemail instructions people wait through when trying to leave messages, something the wireless industry admits is there precisely to use up airtime and maximize revenue.

Clyburn joined the Commission this year, appointed by incoming President Barack Obama.  Her father James is the third-ranking Democrat in the House behind House Speaker Nancy Pelosi and Majority Leader Steny Hoyer.

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WIVB-TV Buffalo reviewed Consumer Reports’ findings regarding the nation’s best and worst cell phone providers.  Despite Verizon’s controversial fees, it remains top-rated by the magazine’s readers. (12/7/09 – 2 minutes)