Here we go again.  Stop the Cap! reader Oscar noticed a tiny message on his most recent bill from Time Warner Cable stating the company had ‘updated’ their Subscriber Agreement.  Oh yes they did:

6. Special Provisions Regarding HSD Service

(ii) I agree that TWC or ISP may change the Maximum Throughput Rate of any tier by amending the price list or Terms of Use. My continued use of the HSD Service following such a change will constitute my acceptance of any new Maximum Throughput Rate. If the level or tier of HSD Service to which I subscribe has a specified limit on the amount of bytes that I can use in a given billing cycle, I also agree that TWC may use technical means, including but not limited to suspending or reducing the speed of my HSD Service, to ensure compliance with these limits, and that TWC or ISP may move me to a higher tier of HSD Service (which may result in higher monthly charges) or impose other charges and fees if my use exceeds these limits.

(iii) I agree that TWC may use Network Management Tools as it determines appropriate and/or that it may use technical means, including but not limited to suspending or reducing the Throughput Rate of my HSD Service, to ensure compliance with its Terms of Use and to ensure that its service operates efficiently. I further agree that TWC and ISP have the right to monitor my bandwidth usage patterns to facilitate the provision of the HSD Service and to ensure my compliance with the Terms of Use and to efficiently manage their networks and their provision of services. TWC or ISP may take such steps as each may determine appropriate in the event my usage of the HSD Service does not comply with the Terms of Use.  I acknowledge that HSD Service does not include other services managed by TWC and delivered over TWC’s shared infrastructure, including Video Service and Digital Phone Service.

This language, for the first time, creates the foundation for TWC to introduce usage caps, tiered usage rate plans, overlimit fees, disconnecting and/or throttling the speeds of those the company determines exceed their internal limits, and exempts their Digital Phone Service from any usage/metered billing.

The impact of this legalese is profound, because it now also closes the window for new customers to avoid Cap ‘n Tier plans by signing on to a price protection agreement.  Since the terms and conditions have now fundamentally changed, new customers must now agree to these new terms, allowing the company to force you into any metered billing scheme even if your current level of service doesn’t provide for that.  Formerly, price protection contracts would protect you from being forced into such plans until your contract expired.

It compels subscribers to retroactively agree to whatever overlimit fees the company may choose to impose.  It permits the company to suspend or reduce your speed, at their discretion, if you exceed any given cap.  It permits the company to automatically bill you for a higher tier of broadband service at their discretion, and is silent about your right to downgrade back to a lower level.

It specifically exempts their phone service from any metered billing, which now gives the company’s voice-over-IP phone service an automatic competitive advantage, because using one of their competitors may be counted against your usage allowance.

As Stop the Cap! has predicted since TWC temporarily shelved their scheme, they’d be back with more, and here is another piece of evidence to prove that contention.

(image courtesy: B Tal)

[Update: June 7 2009 — The Los Angeles Times’ Business columnist David Lazarus covered the Time Warner Cable cap issue suggesting Stop the Cap!’s reports about their contract language changes represented a “bum rap” for TWC.  Lazarus contends that the “Time Warner tips, tweets and blog posts illustrate how easily bogus information can be passed off as legitimate online — and how quickly the brush fire can spread across the electronic ether.”  He then pointed to several additional reports about the Subscriber Agreement changes and decided: “Problem was, nobody had it right.”  Lazarus then printed TWC’s position, which claims Cap ‘n Tier language has been a part of TWC’s Subscriber Agreement for “several years,” a premise he seems to accept at face value. His piece then moved into how online companies deal with “brush fires” once they get started online by quoting a “leader in corporate crisis management.”

Lazarus ignores the fact it was Time Warner Cable in San Antonio that specifically notified customers that “Your Subscriber Agreement with Time Warner Cable has been amended.  The new version is available at http://help.twcable.com/html/policies.html” Nobody here made this up.

Although he tells readers the story of the premise of our article, namely Stop the Cap! reader Oscar finding the aforementioned notification on the bottom of his May 2009 bill, he never bothers to challenge TWC’s representative about why that notice would appear on customers’ bills, and essentially dismisses the impact and scope of those changes.  If my bill had language like that on it, I’d certainly explore the “amended” Agreement.  Why tell subscribers in at least one city that a “new” Agreement is up and available for consideration they now claim isn’t new at all?

The opinion piece also edited the one line from our original report detailing what this contract language introduces for the first time.  That seems unwarranted, particularly when his piece seeks to dismiss those changes as “bogus.”

His edited version: “…warned that “for the first time” the company had laid the groundwork “to introduce usage caps, tiered usage rate plans, overlimit fees” and other customer-unfriendly moves.”

Our original: “This language, for the first time, creates the foundation for TWC to introduce usage caps, tiered usage rate plans, overlimit fees, disconnecting and/or throttling the speeds of those the company determines exceed their internal limits, and exempts their Digital Phone Service from any usage/metered billing.“

Readers can decide for themselves whether or not this kind of language has been part of past Subscriber Agreements for “several years.”  The prior one is still linked at the bottom of the page on the Oceanic division of TWC’s Around Hawaii website.  Another version prior to the transition to the centralized Road Runner website is also available for review in PDF format.

The scope of the changes in the latest TWC Subscriber Agreement is unprecedented.  No earlier Agreement I am aware of addresses all of these important issues: usage caps, tiered usage rate plans and the implications for exceeding them (including their right to move you into a new tier automatically), the specific exemption of their digital phone product from them, and throttling speeds for consumers who exceed the company’s internal limits.

Although he acknowledges our willingness to amend original stories as new information comes to light (several updates in reverse order appear below), the premise of an accompanying poll, entitled, “Is there any way to separate fact from fiction online?” is part of the traditional media’s challenge to the web they rarely impose on themselves.

My view is that honest online sites are prepared to allow updated information, even if it challenges an assertion within a piece, to be included. Nobody here has any fear or second thought about amending the record, adding the findings of others, including Lazarus’ own piece.  We trust readers to be intelligent enough, looking at the entire record, to decide for themselves who has really gotten the “bum rap.”  In our view, none of this changes the fact it will be the consumer that ultimately gets it in the end.

[Update: June 3 2009 — Alex Dudley (a/k/a our old friend, TWCAlex) told Information Week today that the Terms & Conditions on TWC’s website were last changed in “August 2008” and that customers are notified when they are changed.  I don’t recall seeing any notice last summer/fall on my TWC bill.  Another Time Warner Cable spokesperson in the same article said that “that the company’s terms are always changing and they are updated regularly.”  The confusion continues. Also, why are customers in San Antonio being notified they have been amended on a bill for May 2009?  Regardless of all of this, the real issue remains the wording and its implications.]

[Update: June 1 2009 — It’s always the policy of Stop the Cap! to bring you as much information and detail as we can find, as well as issue clarifications, corrections, and any additional details we receive, even if it might call into question one of the facts originally published in an article.  Earlier today, I began to receive word that there was a dispute regarding the exact timing of the introduction of the revised language on TWC’s website.  Time Warner Cable representatives told another reporter that the language we reported on was published earlier than “implied” in this article.  In their eyes, this represented “nothing new.”  Our emphasis has always been about the language itself, and it certainly was new to our readers.  The timing issue, while not unimportant, was not the primary focus of this article.  What was the focus?  More evidence the company is marching full speed ahead to consumption based billing, and have made sure to lay the legal groundwork to implement it.

To help readers understand how this piece was assembled, I am going to walk you through the “process,” as well as bring you the latest information, including TWC’s positions, so you may have a clearer picture and draw your own conclusions.

Stop the Cap! Reader Oscar finds this notification that his Subscriber Agreement had been amended on his latest bill. (Click to enlarge)

The original idea for this article came from our reader Oscar in San Antonio who was prompted to visit TWC’s website because of a message printed on his May 2009 bill:

Your Subscriber Agreement with Time Warner Cable has been amended.  The new version is available at http://help.twcable.com/html/policies.html

To our readers, the new language which we reprinted above, was hardly a shocking surprise. The old language it replaces is still online. Our position has always been that TWC has a very clear agenda, which they have been public about, to “educate” customers about usage and move back towards a consumption billing system.  It’s something CEO Glenn Britt vocalized just last week in his preference for this kind of billing.

Our focus, therefore, was on the language of the Subscriber Agreement.  Our assumption has never been that this was introduced just a week ago on the website.  The lead time alone for a revision announcement to appear on a bill precludes that.  Our assertion was that TWC changed the Agreement, and Oscar was among the first to notice the changes and report them.

After our report, several other blogs and websites picked up this story.  Some of them emphasized the timing of the changes, not the wording of the changes.  That planted the seeds for a side dispute about the exact date these revisions went online.  It has been a matter of debate apparently within the company as well, because there were three different contentions shared with me today:

• “the changes were made ‘months ago’ and there is nothing new here”;
• “the changes were made awhile ago at an undetermined time;”
• the changes were made and here is why…

When we called TWC about the Subscriber Agreement for our area, we were told what was online was written by the national corporate office and accurate after the termination of the “experiment.”  Earlier today, Chloe Albanesius writing for AppScout got a confirmation the Subscriber Agreement was changed as well, and why:

Time Warner said the update was simply a means of keeping its customers in the loop.

“Time Warner Cable believes that our terms of service should be a document that allows a customer to decide whether or not they’d like to purchase our service based on full disclosure of the techniques we are or may use to manage our network and improve service,” the company said in a statement. “In a dynamic and constantly changing business like high speed internet access, we believe that, while we are not legally obligated to provide such detailed terms before we implement a new technique or product structure, it is the best way to ensure that customers have all of the facts before they purchase the product.”

Do those facts include consumption-based billing in the future? “We have announced no change to our plans surrounding consumption based billing at this time,” the company said.

Bottom line, there is an open question about the exact date the changes were made, but not about the substance of those changes and their implications.  TWC doesn’t time stamp their Subscriber Agreement revisions either.  Although the latest developments today illustrate we have some room for improvement in trying to tie down these side issues with more clarity, we stand by our report regarding the language itself, its implications for metered billing, competition, and net neutrality issues.]

Concluding that all rural Americans must have the opportunity to reap the full benefits of broadband services, Acting Federal Communications Commission Chairman Michael J. Copps released a report today providing a starting point for the development of policies to deliver broadband to rural areas and restore economic growth and opportunity for Americans residing and working in those areas.

Recognizing that the need for broadband in rural America is becoming ever-more critical, Congress in the 2008 Farm Bill required the FCC Chairman, in coordination with the Secretary of the Department of Agriculture, to submit a report to Congress describing a rural broadband strategy. Entitled “Bringing Broadband to Rural America: Report on a Rural Broadband Strategy,” the report by Acting Chairman Copps identifies common problems affecting rural broadband, including technological challenges, lack of data, and high network costs, and offers some recommendations to address those problems.

Broadband “is the interstate highway of the 21st century for small towns and rural communities, the vital connection to the broader nation and, increasingly, the global economy,” Acting Chairman Copps said in the report. “Our nation as a whole will prosper and benefit from a concerted effort to bring broadband to rural America.”

According to Secretary of Agriculture Tom Vilsack, “Providing broadband access to rural communities will not only enhance farmers and ranchers’ ability to market goods and enhance production, it will help residents in rural communities obtain needed medical care, gain access to higher education, and benefit from resulting economic activity and job growth.”

Consistent with the statute’s provisions to make recommendations concerning improving inter-agency coordination, the report includes a number of recommendations, including: enhancing coordination among and between federal, Tribal, state, and community agencies, governments and organizations; reviewing existing federal programs to identify barriers to rural broadband deployment; coordinating broadband program terminology consistent with current laws; coordinating data collection and mapping efforts at the federal, Tribal, and state levels to better inform the public and policymakers; supporting consumer education and training initiatives to stimulate and sustain broadband demand; and identifying important policies and proceedings that support further broadband deployment such as universal service and network openness. The report also recognizes that the new administration has already taken important steps to improve coordination efforts and to prioritize broadband initiatives.

In the report, Acting Chairman Copps notes that Congress has provided new direction and support for federal broadband policies and initiatives, in particular through the American Recovery and Reinvestment Act of 2009. In addition to providing $7.2 billion for broadband grants, loans and loan guarantees administered by the Agriculture and Commerce departments, that law charges the FCC with developing a national broadband plan by next February.

“I view this report as a prelude to, and building block for, the national broadband plan, which will address in greater detail and on a vastly more complete record, the input of all stakeholders and the steps the nation must take to achieve its broadband goals,” Acting Chairman Copps said in the report. Although the national plan will be broader in scope and will focus on bringing broadband to all Americans regardless of where they live, the Rural Broadband report released today “provides another, critical step in the Commission’s efforts to develop an effective, efficient and achievable national broadband plan.”

If you’re a broadband provider throwing a money party by charging top dollar for usage based Cap ‘n Tier rationing plans, why not spread some of that money around?  One company that wants a piece of the action is Highdeal, a German owned company that wants to sell providers the billing system to extract pay-per-byte-bucks from customer wallets.

Highdeal’s chief technology officer, Fergus O’Reilly talked to Telephony Online about how they’re going to market their products for usage based billing.

On moving beyond flat-rate broadband: Operators are realizing that the flat-rate model we had for broadband is no longer tenable. It’s hard to roll out [usage-based models] when subscribers don’t know how much a gigabyte is or what the term bandwidth means. Some [providers] have done better than others. In the Canadian market, for example, it’s getting to be accepted. Rogers has done a good job informing customers about their usage and charging them for overage with cap-and-overage-type schemes. In the US, it’s been a little more difficult. Time Warner Cable let slip that they were doing something and got negative press for it. It became difficult for them to roll that out — one step forward, two steps back. But overall throughout the market, pretty much everyone is equipping themselves with the policy management systems they need to measure and qualify bandwidth usage. The flat-rate model for broadband will change, and we will pay depending on usage, whether that’s measured in [quality of service], absolute bandwidth or a number of those factors.

The system that exists today (that is already very profitable) is always defined as ‘yesterday’ and something ‘we need to move beyond,’ while the highway robbery of overpriced tiers and overlimit fees is the ‘only tenable way forward.’  Not really, of course.  But this is an example of a company with a vested interest in that outcome — namely, a product/solution to sell that would not exist without these kinds of billing schemes.  They garner favor in industry circles by helping to throw the ball around, hopefully establishing the premise that usage based billing is conventional wisdom.

It’s tougher to sell cap-and-overage schemes. Unfortunately many of the charging systems operators have in place are relatively simplistic. And moving to these more sophisticated schemes — time-shifting and proposing a bandwidth boost — many times the blocking factor is, ‘Well, I don’t know how to do that.’ So we propose a very flexible charging system that makes that easy so you can have these dynamic business models that will make more sense for the consumer.

Actually, developing a billing system that pilfers the wallets of consumers, no matter how complex or simple, will not make any sense for customers.  What Highdeal proposes is a billing system that allows providers to rob customers in a sophisticated way, instead of the street mugging wallet extraction approach.  But whether it’s the Bernie Madoff system of billing, or the guy with the bat in the dark alley, consumers are still going to be victimized, and they’ll know it every time they get the bill.

Is Highdeal a raw deal entirely?  No.  Some of their models might actually represent some real world solutions to network congestion, particularly one that could communicate with bandwidth providers and software to schedule bandwidth intensive, but non-critical applications during off-peak usage times.  One such proposal would signal an online backup program to launch when network congestion is reported low by a provider.  Another model might allow consumers to pay more for faster connections to complete individual tasks.  Paying reasonable prices for reasonably faster speeds is not an issue for Stop the Cap!

But companies that buy into industry theories and claims in order to help score a sale have a considerable conflict of interest in being considered a credible source on what consumption and billing models are workable and which are not.

'If you give us exactly what we want, we might wire your town with fiber optics. If not, there is always Wisconsin.'

The Trojan Horse of the 2000’s apparently comes in the form of spools of fiber optic cable.  Verizon assumes the attractive notion of FiOS, fiber to the home for broadband, telephone, and video programming, is worth sacrificing local oversight.  The company has made it known it does not enjoy what they consider a cumbersome franchising application procedure in Massachusetts.  In a public relations push, Verizon has suggested that giving them quicker approval will guarantee state residents the golden promise of fiber optics.  If the company doesn’t get what it wants, maybe Wisconsin or another state where Verizon is deploying FiOS will:

Ellen M. Cummings, a spokeswoman for Verizon, said that with the struggling economy, the company has to choose where to commit its financial resources. Therefore, it is looking for the quickest return on its investment.

“Here in Massachusetts, it puts us in a predicament. If the company is trying to decide how to deploy money, and Massachusetts is vying against other states, like Wisconsin, where the wait is as little as five days, it definitely puts Massachusetts at a disadvantage,” she said.

Every wired provider is subject to local community licensing, in the form of a franchise, which permits companies to string wires through towns and cities, on poles as well as underground, in return for oversight and a small piece of the action.  Local governments justify franchising to regulate companies tearing up local streets and neighborhoods to maintain their networks, as well as making sure that all citizens within a community are served equitably and that the community benefits from the service.

The cable industry has lived under the franchise system since its inception.

Verizon decided it can’t be bothered dealing with individual municipalities in Massachusetts, and last year tried,  but failed, to replace the local franchising system with a single statewide franchise.  This year they’ve returned with a Verizon-friendly bill that would dramatically tip the scales in their favor, limiting local oversight and reducing their public service commitments.

The companion bills, (S. 1531) by Sen. Steven Panagiotakos of Lowell in the Senate, and House bill (H. 3765) by Rep. Michael Rodrigues of Westport, would mandate that each municipality limit consideration of Verizon’s franchise applications to no more than 90 days, and opens up a number of loopholes that Verizon could use to do an end run around a community and run the clock out, assuring quick approval without making concessions.

At worst, a provision in the bill setting a strict 90 day window for consideration of a franchise application, even if incomplete, ties the hands of municipalities.  Language that restricts the right of municipalities to deny applications gives the upper hand to Verizon, and the back of the hand to consumers.

One of the most common promises local communities extract from any wired provider is a guarantee they will establish wiring policies to equitably reach people throughout the franchise area, not simply the wealthiest neighborhoods, or easiest to wire.  While it has never been practical to insist on 100% wiring coverage, particularly in more isolated, rural communities, most franchise agreements insist on a uniform policy that says if there are a certain number of homes within an area, it must be wired.  Without that assurance, prior experience has shown operators would often “redline” communities, wiring prosperous streets while ignoring others.  Municipalities in Massachusetts want to guarantee that Verizon doesn’t engage in that kind of behavior, particularly after witnessing the company jettisoning “undesirable” customers in three nearby states — Vermont, New Hampshire, and Maine, which were sold off to FairPoint Communications.  No FiOS for them.

In general, more competition is good news, especially when Verizon comes to town with FiOS, which is sure to give the incumbent cable operator a real headache.  But Verizon’s complaints ring a little hollow when considering the company has managed to already obtain franchises in 93 communities across the state, and is literally obtaining new agreements faster than wiring crews can get into communities and start the upgrades.  While there may be a few towns that drag their feet for a variety of reasons, customer demand for FiOS is sure to light fires under elected officials to get a move on.  Doing it fast is not necessarily the same as doing it right.  As our readers are coming to learn, promises made by telecom providers that at first glance sound consumer-friendly turn out to be anything but.

One more reason to believe that:  the state’s incumbent cable operators are also opposing the bills, claiming they extend special benefits to Verizon that they, themselves, have never received. Cable companies on the same side as municipalities on questions of competition?  Of course most of the state’s cable operators are already past the franchising process, and merely return every decade or so for perfunctory rubber-stamp renewals, so green-lighting Verizon’s proposed bills would only expose them to FiOS competition sooner.

Paul R. Cianelli, the president of the New England Cable and Telecommunications Association, which represents the cable companies Comcast, Charter Communications, Time Warner and Cox, but not Verizon, said, “We oppose this legislation.”

“It’s another attempt by Verizon to get a special deal. They are pushing for legislation that would give them an advantage over existing cable providers. And they are attempting to chip away at the authority and powers of the municipalities to grant franchises,” he said.

In the end, we believe Ellen Cummings at Verizon who said it best: “[Verizon] is looking for the quickest return on its investment.”  Unfortunately, that’s not always compatible with the best interests of consumers.

Yesterday, Stop the Cap! examined the rationale for Verizon to spin away hundreds of thousands of customers to a small independent telephone company, FairPoint Communications.  In today’s report, the utility commissions that protect ratepayers in three New England states ponder the proposal.  WMUR-TV in Manchester offers a nice summary of the issues involved, and the Josiah Bartlett they reference isn’t the one from NBC’s The West Wing, but rather the sixth governor of New Hampshire!

1. Would the merger improve the chances for New England’s smaller communities to enjoy better service, particularly with high speed broadband that Verizon never rolled out;
2. Was FairPoint financed sufficiently to handle the dramatic increase in its customer base?

Vermont decided the FairPoint takeover in their state was likely to be unsustainable, with insufficient guarantees that the company would have the money to get the job done.  WPTZ-TV, which serves Vermont, covered the announcement on December 21, 2007:

Unfortunately, as Stop the Cap! readers have come to learn again and again, one defeat doesn’t mean the end of the war. FairPoint had the opportunity to digest the input from state regulatory bodies and return with a new proposal. The question is, would that proposal simply put out small fires started by state authorities concerned about a few isolated factors, or would it be a complete overhaul to provide better guarantees that a FairPoint taking over phone service in three states in 2008 would still be in business in 2009.

Tomorrow, FairPoint has a new plan.