Stop the Cap! reader Jeremy received a reply to a communication he sent to his senator, Sam Brownback (R-Kansas).  Brownback has signed on for big telecom’s “nickle, dime, and dollar subscribers” project and thinks it’s great news for an Internet controlled by profit leveraging corporations charging top dollar while promising to expand services later.

Full text of letter from Sen. Sam Brownback (R-Kansas) (click to enlarge)

As you may know, several groups have sought legislation to regulate or even prohibit fees that may be sought by broadband companies from content providers for the high-speed transmission of content over the Internet. I believe that this so-called ‘network neutrality’ legislation would be anything but neutral, punishing broadband access providers for innovation and competition.

In fact, it is due to the absence of heavy-handed government regulation that the Internet has grown and innovated freely and rapidly.

Moreover, broadband access providers – our nation’s telephone, cable television, and wireless companies – are spending billions of dollars to deploy broadband, and have plans to spend billions more on the next generation of broadband networks.

These investments include new technologies that will greatly improve everyone’s Internet experience, further empowering our ability to use it for entertainment, political, religious, and educational purposes. Given the investment by broadband providers in creating and maintaining Internet infrastructure, it is reasonable for them to request that content providers pay their fair share for the services they use.

Brownback is confusing the broader argument about Net Neutrality, allowing data equal access on a network, regardless of its source, affiliation, or potential competitiveness with a provider’s own products and services, with the bandwidth Cap ‘n Tier problem Jeremy wrote about.  But Net Neutrality and Cap ‘n Tier are effectively kissing cousins: they go hand in hand.  As we’ve seen in Time Warner Cable’s Subscriber Agreement, they exclude their own Digital Phone product from Cap ‘n Tier while subjecting other competitors to it, if/when implemented.  They also reserve the right to throttle speeds, limit consumption, or impose overlimit fees for exceeding usage allowances.

Sen. Brownback (R-Kansas)

We’ve also seen a direct link between the growth of online video, the cable industry’s concern they will lose cable TV subscriptions to online free video, and attempts to charge higher prices and/or limit use of the net as a way to address the online video “problem.”  Scaring subscribers away from watching online video without fear of overlimit fees is a fine way to “keep the lid on.”

What America has come to discover in the last year is that free market competition is fine, but the absence of common sense oversight and regulation means runaway profiteering and customer abuse, often in markets that lack competitive choice on equal terms.

Brownback may also not realize that cable companies often have an ownership interest in the content producers, and they have a vested interest in retaining control over that content. Unlike content producers like Hulu, who do not charge any fees to access their content, the broadband provider itself does, raking in billions in profits using today’s broadband model.  Consumption based billing with paltry tiers of service simply guarantees a Money Party of even higher profits, leaving consumers with unaffordable broadband, limited access to innovative online content, and vague, potentially empty promises to perform those revolutionary upgrades Brownback writes about, ‘sometime later.’

Brownback, despite events in the news showing telecom companies throwing rural customers under the bus (Verizon in particular), still believes the only way rural Kansans will obtain broadband is letting the providers do whatever they want:

We must keep the Internet free of unnecessary government regulations.  Our current approach of allowing market forces to operate has benefitted all Americans with rapid broadband deployment, and Internet speeds that were unimaginable just several years ago.  The Congress and the Federal Communications Commission should not harm progress by allowing the government, rather than the competitive market, to choose business models.  Keeping the Internet free of the heavy-hand of government promotes innovation and broadband deployment by giving our nation’s cable, telephone, and satellite companies much needed flexibility to invest in their networks and meet the demands of consumers.  It is this approach that will bring broadband to rural communities and will ensure that all Americans have the best online experience possible.

Kansas is hardly the cutting edge of America’s broadband.  In Brownback’s own state, broadband backwaters are common with very slow speeds, heavily capped and expensive providers like Sunflower in Lawrence, or an attitude in most of the state’s cities that “this is good enough, they don’t need more.”  Large swaths of the state remain stuck with dial-up.  If this is the broadband celebration Brownback is throwing for his own constituents, voters should just remember he spends most of his time in Washington, which does fine online, with several competitive choices and very fast speeds.

Perhaps at the next election, should he not revise his position, voters may want to see to it that Sen. Brownback spends a lot more time at home in Kansas with 1.5Mbps DSL for $44 a month, and find someone else to represent their interests.

Craig Moffett, cable and telecom analyst at Sanford C. Bernstein & Company, is back rallying for consumption based billing, dismissing accusations it represents a stealth rate increase.  Moffett characterized Time Warner Cable’s negative experience as only a temporary setback.

Moffett told The Wall Street Journal:

“Look, there’s a real argument for some form of consumption-based billing, and it’s going to happen,” he said. “Time Warner got the pricing wrong, it got the P.R. wrong, but this is not some kind of stealth price increase. They’ve been clear – they don’t want to discourage the use of the [broadband] product, but they have be able to manage the increased use of bandwidth that goes with Web-based video.”

In the same article, however, Moffett had nothing but praise for attempts to control web video so that only authenticated cable TV subscribers get access, for a price.  Bandwidth caps and limits help discourage online video consumption among subscribers concerned about exceeding monthly limits, particularly those set at paltry levels that virtually assure video watchers exceed them.

One topic addressed at the Bernstein conference was “TV Everywhere,” the initiative spearheaded by Time Warner Cable to make sure that online viewing of cable programs is only available to consumers who subscribe to video service provided by a cable, satellite or telephone company.

Cable operators say that if they’re going to pay millions of dollars in fees to film and TV studios in exchange for the right to air their programs, those studios shouldn’t turn around and offer the same shows over the Web for free.

Moffett says that while there “are a lot of specifics” to be worked out, including how to authenticate paid video subscribers on the Web without hassle, “TV Everywhere” is a “very positive step for operators and programmers, because it’s at least some attempt at a strategic alignment, rather than for each side to go it alone, which is what they’ve done traditionally.”

The broader scope of the Journal article was to measure Wall Street’s reaction to cable stocks in general.  Investors are looking for assurances of significant returns, something more difficult to achieve in a problematic economy.  Stop the Cap! contends that changing the business model of cable broadband with Cap ‘n Tier billing like Time Warner Cable tested, is precisely aimed at increasing those returns, particularly in markets where limited or insufficient competition holds customers virtually hostage to the cable provider.

This series comes at a time when another independent telephone company, Frontier Communications, is trying to take on millions of Verizon customers also being shed for business purposes.  The lessons learned from this cautionary tale regarding FairPoint should be taken to heart by affected customers, local communities, and regulatory authorities to make sure any transaction benefits customers more than the balance sheets of the companies involved.  Mistakes were made, too much trust was given, and as readers will come to understand, unacceptable customer nightmares over bad service are still a problem today.

This is a good point to summarize where we’ve come in this series over the last week or two.  Verizon customers in Maine, New Hampshire, and Vermont awoke one day to discover that Verizon had decided they were no longer worth the trouble to service, and sold their business to an independent upstart telephone company from North Carolina, FairPoint Communications.  It was a concerning prospect, because FairPoint was a relatively tiny telephone company serving only a few hundred thousand customers in rural communities here and there.  Now they were taking on the telephone needs of three New England states.  Plenty of concern was raised about whether FairPoint had bitten off more than it could chew.

After much contention, a deal was hammered out between state regulators and the company to approve the sale, as long as the company kept its promise to expand broadband offerings, clean up some of Verizon’s sloppy practices (particularly the ‘double pole’ problem where replacement telephone poles were erected that Verizon never used), and that FairPoint had enough funding available to cover its debt load from the transaction through any economic downturns, which turned out to be particularly relevant considering where our economy has gone in the last 10 months.

Throughout 2008, the company was expected to make the final transition from Verizon to FairPoint by fall.  A lot of speed bumps hampered their progress, including major failures of the emergency 911 system in Maine in spring and summer of that year, resulting in a $25,000 fine.  By late June, a consulting group hired to monitor the transfer reported that FairPoint had not yet adequately prepared for the transition, lacked sufficient staff, and recommended delaying the transfer.  FairPoint announced in late June the original scheduled target date of September was being pushed back to November.  Then, in mid-September, the company was back with a second delay announcement, now pushing the transition from November to January 2009.  FairPoint blamed concerns about staff training and that “data transfer and testing be done properly.”

We pick up the story in January, when customers learned that FairPoint’s culmination of its year-long adventure to finalize the transition would mean a “blackout in service,” a delay for a minimum of two weeks before the company would process service calls, new installations, or make other changes to customer accounts.  FairPoint’s unprecedented announcement would mean a backlog of calls that could bring about delays of “30-45 days” before service requests would be answered, as WCAX in Burlington warned on January 15th:

[flv width=”368″ height=”208″]http://www.phillipdampier.com/video/WCAX Burlington FairPoint Installations On Hold 1-15-09.flv[/flv]

Customers weren’t happy one bit.  Despite rosy scenarios and downplaying the impact of this event by Vermont Public Service Commissioner Dave O’Brien, many residents depend on their telephone service, particularly for those with health-challenged family members.  Over in Maine, WCSH covered the story of one woman who was forced to rely on her cell phone in a rural area while she waited, and she has a son with severe asthma:

[flv width=”480″ height=”360″]http://www.phillipdampier.com/video/WCSH Portland FairPoint Tells Customers to Wait Up to 6 Weeks for Service 01-21-09.flv[/flv]

Tomorrow: The anger level rises to the temperature of a red hot poker, as FairPoint not only drops the ball, it loses it.

Although Time Warner Cable has downplayed the impact of deploying DOCSIS 3 upgrades to their broadband network outside of New York City, other cable operators making the switch are now enjoying the benefits of bragging rights, higher returns from “heavy users,” and a whole lot of happy customers.

Cablevision delighted the cutting edge crowd when it announced the launch of the fastest residential broadband service in the country — 101Mbps for $99 a month, and absolutely no cap on usage.  Now other players are maneuvering to follow their speed lead.  Broadband Reports noted this morning it had a source claiming that the nation’s largest cable operator, Comcast, was cutting prices on its 50Mbps tier by $40 a month to $99.95 for customers taking a product bundle.    The website earlier noted the company may have a 100Mbps plan in place shortly as well.  Comcast’s cap at 250GB per month does seem to apply.

Even bankrupt Charter Cable is enjoying the benefits of their super premium 60Mbps broadband service in the St. Louis area.

Heavy broadband users, as these companies have learned, often turn out to also be the “early adopters” that will readily respond to marketing for higher priced tiers of service offering higher speeds, as long as those companies don’t also bring along draconian usage caps which completely devalue the deal.  Cable operators enjoy the extra revenue they earn from these customers, retain customer loyalty, and earn praise from customers.

When Time Warner Cable proposed a 50Mbps/5Mbps service for $99 a month, we heard from several readers who were interested in the offer, right up until they learned it would come with a usage cap starting at 150GB per month, which meant customers would pay a whopping 67c per gigabyte, which represents an enormous markup.  Interest evaporated immediately.

The contrast could not be more clear — Cablevision gets industry and customer praise for offering an uncapped premium plan at twice the speed proposed by Time Warner Cable for $100 a month, while Time Warner Cable  dangled a 50/5 tier for the same price, but only after customers supported a consumption billing system and a vague, non-specific timeline for the eventual deployment of DOCSIS 3 which would make that possible.

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UPDATE 6/2: I believe I have tracked the browser crash issue in Safari to the introduction of our new Flash video player.  It may throw an error message your way, but it should no longer crash your browser.  Please continue to report any errors you see.  You can append them as a comment.  I am going to try and make changes to the Flash player to fix this.  If you cannot play the videos, please let me know, and also check to make sure you are running the latest version of Flash.