Time Warner CEO Glenn Britt just can’t get his mind off overcharging customers for their broadband service.

Despite increasing broadband rates twice in the past two years, Britt is still convinced slapping usage limits and so-called “usage-based billing” is inevitable for the nation’s second largest cable operator.

“I think you will naturally see evolve a world where people who use very little broadband expect to pay less and people who use a whole lot, may complain, but in their hearts know they are going to pay more than somebody who reads email once a week,” Britt told investors at the Deutsche Bank Securities Media & Telecom Conference in Palm Beach, Fla. “I think there will always be an unlimited tier, but I think you’ll see the element of consumption introduced over time.”

Time Warner Cable attempted to impose an Internet Overcharging experiment in the communities of Rochester, N.Y.,  Greensboro, N.C., Austin, San Antonio, and Beaumont, Tex., in April 2009.  Customer backlash over a tripling in price of unlimited broadband service — to $150 a month, forced those plans to be shelved.

But Britt has continued to make positive statements about the practice of raising rates on broadband customers ever since, claiming a small percentage of heavy users were increasing costs.

But Time Warner’s own financial reports tell a different story.  While the company increasingly depends on broadband profits to impress investors in its quarterly reports, the costs (and investment in) broadband has been declining for several years.  Broadband is Time Warner’s single best performing product, and the company has raised rates from $39 a month to as much as $58 — a $19 monthly increase, over the past few years in many communities.  The highest prices are reserved for customers who only take broadband from the cable company and ignore their cable TV and phone services.

Britt also expressed increasing concern over cable TV cord-cutting, the practice of dropping cable television service, to investors as the company continues to lose more subscribers than it gains.

“We need to really to focus on that with a renewed intensity,” Britt said . “It is not acceptable to me to continue to slowly lose video customers every year. That has been going on for too long. We’re going to put renewed energy against that both in the product space and in marketing, to see if we can slow that down.”

To that end, Britt has hired a pricing expert to develop different prices for different types of customers.  The disparity in pricing is already widely apparent.  With some promotional customer retention offers now providing the company’s triple play package of Internet, phone and television service (with DVR) for as low as $79 a month, that is less than half the regular price of up to $163.85/mo charged to customers in states like California, without DVR service.

A bare bones basic package of a handful of national cable networks combined with local stations is selling for as low as $29.99 in northeast Ohio in a last ditch effort to hang on to economically challenged TV-only customers.

Although more than 30 million Americans have experienced getting bill shocked with a cell phone bill loaded with overlimit fees and penalties, a wireless industry group says 19 out of 20 of these customers are economically better off getting those high bills, and any plan to notify customers in advance when their usage limits are reached would “harm innovation, limit consumer choice, and impair the potential for competitive differentiation.”

These incredible conclusions come in a filing from the Wireless Communications Association International, an industry group funded by AT&T, Sprint, Clearwire, and Time Warner Cable.

The WCAI just released a new white paper claiming Americans facing Internet Overcharging from usage-capped wireless data plans are actually saving money when carriers impose overlimit fees.  Their reasoning for this new math?  You might overpay for a usage plan that delivers a higher usage allowance than you need.

"And to think they actually believed us when we said Internet Overcharging saved people money!"

The wireless industry is heavily lobbying the Federal Communications Commission to stop the agency from imposing new rules to deal with the bill shock problem.  The FCC favors an advance warning system, which would force providers to notify customers by e-mail or text message when they near their usage allowance.  Letting customers know when they are about to pay enormous penalty usage rates before they are reflected on a future bill could save Americans millions annually.

The WCAI-funded study says consumers don’t need the agency’s help, going as far as to claim the majority of Americans are already well aware they are exceeding their plan limits, and are better off paying short-term penalties.

“The FCC is weighing new regulations that it says will eliminate so-called ‘bill shock,’ but this analysis makes plain that consumers don’t need regulators’ help,” WCAI President Fred Campbell said. “If you give them the right information, they know how to pick the best deal.”

But critics charge providers fighting this provision want to hide the most basic information of all — when consumers are on the verge of running up huge bills.

“The FCC’s effort on bill shock is long overdue in a wireless environment where today’s heavy user is tomorrow’s average user, and where the wireless Web is more and more important to commerce and to society,” Free Press Policy Counsel M. Chris Riley said. “It is vital that consumers are empowered with the information and the tools needed to make decisions about their own wireless usage so they can avoid outrageous charges.”

The WCAI white paper suggests that if providers are forced to issue advance warnings, companies may have to raise rates to compensate.  The paper’s author suggests consumers would find that worse than just paying the bills with overlimit fees:

The Nielsen Study indicates that many consumers incurring overages do so willfully and repeatedly. Their behavior suggests it is unlikely that usage notifications or usage controls would change their behavior because they are either indifferent to the overage charges or have determined that the occasional overage charge is more economical for them than choosing a more expensive plan. Notwithstanding that these overage-incurring consumers may not want or need additional notifications or controls, the adoption of the FCC‘s regulatory proposals would impose on all consumers the financial burden of ―protecting this one small group.

The WCAI dismisses the huge number of complaints that arrive at the FCC each year over this issue as simply “opinions” from consumers, not nearly as credible as their own analysis of actual customer bills.

The paper even argues with the definition of ” bill shock,” suggesting that the nearly 7 percent of wireless customers who blow past their voice allowances only face an average penalty of around $18.  That is “surprising or inconvenient; but it is unlikely to be shocking.”

Bill Shock

The WCAI study admits the dollar amounts for data-usage bill shock can be considerably higher, sometimes $100 or more.  The charges occur more frequently, too — impacting nearly 18 percent of customers.  But the group dismisses it as a rare occurrence anyway and that carriers will issue credits for astronomical surprise bills.  Besides, the paper concludes, when it was written most consumers were enrolled in increasingly-rare “unlimited use” plans.  Since the raw data was collected largely before AT&T abandoned its flat rate data pricing in 2010, statistics regarding bill shock for AT&T’s new limited use plans were not available.  The white paper inaccurately dismisses that major rate change, claiming it “had no impact on the data analyzed.”  That leaves readers believing the rate changes made no difference.

But the group’s logic completely derails when it concludes there are “consumer benefits to overages.”  Namely, providers “simplified” rate plans to reduce choice which was causing “customer confusion.”  The paper concludes “there is substantial evidence that consumers make deliberate choices to incur overages rather than upgrading to a more expensive monthly rate plan, and that they overwhelmingly benefit from such choices.”

The white paper ignores several important factors:

1. The diminishing number of unlimited access plans which give consumers a way to avoid overlimit fees, especially for data;
2. Carriers themselves arbitrarily set the arbitrary rules for the playing field – calling plan allowances, data allowances, limits, overlimit fees and penalties, and roaming rates;
3. The study ignores the record number of consumers complaining about surprising bills and the true economic impact providing simple text message or e-mailed notifications would have, and doesn’t give any reason why a consumer can’t simply shut off services once limits are reached, to prevent excess charges.

The white paper notes that 736,000 Americans annually are getting surprisingly high bills.  Assuming they are an average of $20 higher than anticipated, that represents nearly $15 million dollars in extra revenue for carriers — ample reason to hire dollar-a-holler groups to produce nonsensical reports that conclude a system to notify consumers they are about to be one of those 736,000 customers is actually bad for them and their wallets.

The FCC’s Consumer Task Force recommends these strategies to avoid bill shock:

•    Understand your calling pattern for making voice calls, and ask your carrier for a plan that would be best for your kind of use.
•    If you are an infrequent phone user, consider a pre-paid plan. Because you “pre-pay” for all your minutes, these plans make it impossible to go over your set limit.
•    Understand what your roaming charges are and where you will incur them.
•    Understand your options for data and text plans.
•    If you are going to use your mobile phone outside the U.S. for voice, email, and other services, make certain to find out beforehand what charges may apply. (Visit Wireless World Travel for more information about using a wireless phone in other countries.)
•    Ask how your carrier can help you avoid bill shock – with phone or text alerts, by letting you monitor your account online, or by giving you other information.
•    If you have tried to resolve a billing issue with your carrier and can not reach an acceptable resolution, complain to the FCC. You can call our Consumer Center, toll-free, at 1-888-CALL FCC (1-888-225-5322), or file a complaint here.

To learn more, read the FCC’s White Paper on Bill Shock.

[flv width=”640″ height=”380″]http://www.phillipdampier.com/video/FCC Bill Shock.flv[/flv]

The Federal Communications Commission discusses the problem of “bill shock.”  (1 minute)

Rep. Avila (left) with Time Warner Cable's top lobbyist (right, back turned). Photo by: Bob Sepe of Action Audits

Rep. Marilyn Avila (R-Time Warner Cable) is living up to her much-deserved reputation as a shill for North Carolina’s largest cable company as she continues her campaign to wreak havoc on community-owned broadband networks and services.

Well-placed sources tell Stop the Cap! either Avila has an evil twin running around impersonating her, or she is saying one thing to a public audience while doing something completely different in private.

In a closely coordinated effort with the state’s top cable lobbyists, Avila met last Friday to negotiate promised protections for existing community-owned broadband networks that would otherwise be destroyed by her bill, H129, written by the state’s Big Telecom companies.

Both Reps. Avila and Julia Howard told us their word was their bond.  “The last thing that we want to do as a state is to harm one of our cities after they entered into the business,” Avila said to members of the Public Utilities Committee.

Howard expanded on her own promise: “The objective is to protect the cities that have already gone into the business.  It is our intent to carve out these cities and hold them harmless.  My word is my bond, and I don’t hear anybody snickering.  But when I say it I mean it, as the senior chair of finance, that is my pledge.  Before it heads into finance there will be a PCS that is satisfactory to everybody.”

Apparently those bonds were issued by Lehman Brothers, because they have lost all of their value to the people of North Carolina.  Nobody feels like snickering over such a serious betrayal of trust, especially when Howard’s definition of “everybody” is limited to lobbyists for the telecommunications industry.  Your consumer needs are irrelevant.

Last Friday’s meeting was once again a stage play from Time Warner Cable and their sidekick, the much-smaller CenturyLink.  After the cable company laid down the law to a stunned audience of representatives from communities across the state, fooled into thinking they were there to discuss an honest compromise, things went from bad to worse.

“It literally got down to the point where the cable company was dictating terms about what cities can and cannot do with their networks, even discussing which streets the networks would be allowed to serve,” our source tells us.

Avila’s stubborn streak was on full display, as she rejected proposal after proposal.

What about public private partnerships with full exemptions for pre-existing networks?

Rep. Avila's Message to North Carolinians: Live with what you've got or go without.

Not on Big Telecom’s approved list, so rejected out of hand, even after offering that she agreed with the concept.  Her reasoning?  She wants to go with her original bill.

The result of the one-sided discussion was two pages of legislative word jumbling in the form of a substitute amendment.  The word salad delivers substantially no real change to Avila’s original bill.  It contains virtually all of the same onerous provisions guaranteed to destroy community broadband networks, taking the state’s reputation for being a good credit risk with it.  It also delivers red meat to an industry meme “community broadband networks are business failures.”  Now you know why.

We predict Avila will use the farcical affair to claim her substitute amendment was the product of a “hard-fought compromise” with cities and providers.

In fact, it represents nothing more than a shameful broken promise to the citizens of North Carolina.  Their interests are completely secondary to Avila and her legislative allies, willing to listen to a telecommunications industry prepared to hand out campaign contributions to enact their agenda.

The collateral damage of Avila’s struggle to eliminate better broadband and keep competition to a bare minimum cannot even be measured yet. Should Avila’s bill become law, the clear message sent to would-be entrepreneurs is that North Carolina values their cable and phone companies over the needs of entrepreneurs contemplating the next generation of digital economy businesses.  Ms. Avila’s message to them, and to residents who want better broadband: live with what you’re getting from my friends or go without.

Many will choose a third option — avoiding setting up shop in a state where a handful of providers maintain a comfortable duopoly delivering the least amount of service for the highest possible price.

And then there were three?

Deutsche Telekom has held talks about a possible merger with Sprint in exchange for a major stake in the combined entity, according to people with knowledge of the matter.

The German phone company, owner of T-Mobile, America’s fourth-largest cell phone company, has been pounded by analysts after revealing its earnings for 2011 were likely to be below expectations.  T-Mobile, DT’s American brand, has faced harsh criticism for its stagnant performance, declining earnings, and bleak future.

Michael Kovacocy, director of Equity Evolution Securities, told CNBC T-Mobile is essentially in last place among America’s major national carriers and is going to stay there so long as it targets value-conscious customers who care more about a lower bill than a robust network.

“We think in the long term, perhaps, their position is unsustainable,” Kovacocy said.

Deutsche Telekom, the German phone company, does considerably better in Europe than in the United States.

The analyst predicts T-Mobile will always be relegated to #4 status in an American market dominated by Verizon and AT&T, with Sprint behind in third place.  T-Mobile is further back than that and has stagnated.  Unless they make radical changes — changes Kovacocy feels will be destructive to shareholder value — such as price cuts or major infrastructure improvements, T-Mobile will remain an also-ran.

“They have the wrong customers, the wrong network, and we think their spectrum is very difficult because it’s uncompetitive versus some of the spectrum AT&T and Verizon has,” Kovacocy said.

T-Mobile saw the departure of at least 150,000 customers during the last quarter — most heading for other carriers.

Talks between the two companies have reportedly been difficult, however, over Sprint’s willingness to meet DT’s price.  Sprint has seen losses erode the value of its competitor, and may want to pay less than the $25 billion estimated value of T-Mobile’s network and operations.

Sprint has experience trying to integrate customers from two incompatible networks together, with less than spectacular results.

Another problem:  the two networks rely on different and incompatible standards — CDMA for Sprint and GSM for T-Mobile.  Sprint experienced major integration problems once before, when it acquired Nextel from Craig McCaw in 2005.  Nextel’s iDEN network enabled the popular “push-to-talk” feature beloved by construction workers and contractors, but made integrating the Nextel family into Sprint a hellish nightmare.  After initially promising to phase out the iDEN network by 2009, Sprint recently announced it had pushed back the date of decommissioning to 2013.

A buyout of T-Mobile could leave Sprint serving customers on three different networks — its own customers, those still on Nextel’s network, and T-Mobile.

Although predictions are already being made the merger would pass muster in Washington, public policy groups concerned about the ongoing loss of competition in the wireless marketplace will have a major example to show this practice at work.  Americans continue to face some of the most expensive cell phone service in the world, and T-Mobile’s aggressive pricing helped keep other carriers from raising prices much further.

[flv width=”640″ height=”500″]http://www.phillipdampier.com/video/Bloomberg Deutsche Telekom May Sell T-Mobile USA Unit to Sprint 3-8-11.flv[/flv]

Bloomberg News covers the possible sale of T-Mobile to Sprint.  (6 minutes)

[flv]http://www.phillipdampier.com/video/CNBC Sell Deutsche Telekom 2-25-11.flv[/flv]

Back on Feb. 25, CNBC  interviewed one of several analysts who were upset with T-Mobile’s likely performance in 2011.  (4 minutes)

AT&T stands to benefit enormously from the latest attempt to deregulate telecommunications services that could leave rural Michigan residents without a phone line, strips consumer protection and oversight rules to protect ratepayers, and wipes out the state Public Service Commission’s (PSC) traditional role of arbitrating telephone service and billing disputes.  In short, it delivers all of the benefits to AT&T and hangs up on Michigan consumers when their telephone service goes wrong.

AT&T  has found a real friend in Rep. Ken Horn (R-Frankenmuth), who introduced H.4314, a bill to overhaul Michigan’s telecommunications law.  Horn is AT&T’s top recipient of political contributions made by the company (and its employees) in the Michigan House.  He’s the third largest recipient of phone company money in the state, according to records from Project Vote Smart.  Horn’s bill delivers absolutely no discernible benefits to Michigan ratepayers.  Instead, Christmas comes early for big phone companies as Horn’s bill fulfills a wish list drawn up to eliminate decades of consumer-friendly protections:

1. Eliminates the PSC’s annual report on telecom competition and rate fairness in Michigan;
2. Allows AT&T to stop cooperating with the PSC in supplying information to help produce said report;
3. Strips away the requirement that companies like AT&T keep proper records that show the costs of delivering their services to customers;
4. Allows companies to keep secret the rates for services delivered by contract;
5. Eliminates the requirement that companies like AT&T deliver “high quality basic local service” to all residents in the state;
6. Expires all service quality standards established by the Commission on June 30, 2011;
7. Allows companies to escape punishment by eliminating the PSC’s authority to issue fines, cease and desist orders, or revocation of service licenses when a company has violated state law;
8. Requires all parties in a mediated dispute to keep the outcome secret;
9. Eliminates state-mandated fair billing practices;
10. Permits AT&T and other companies to sell, lease, or otherwise transfer assets and sell service to an affiliate below cost;
11. Allows companies to discriminate in favor of an affiliated burglar and fire alarm service over a similar service offered by another provider;
12. Eliminates the requirement that companies provide each customer a clear and simple explanation of the terms and conditions of services purchased by the customer and a statement of all fees, charges, and taxes that will be included in the customer’s monthly bill.
13. Allows AT&T and other providers to market products and services without giving the customer a true and fair estimate of the real “out the door” price for service — after taxes, fees, and surcharges.
14. Allows AT&T and other phone companies to discontinue service in any area provided with anything resembling a two-way telecommunications service including wireless, radio, or Voice Over IP service;
15. Eliminates the telecommunication relay service advisory board, which ensures quality service to the hard of hearing and deaf communities;
16. Reduces privacy guideline requirements protecting customers.

In tandem with Horn’s bill, AT&T released a congratulatory brochure reminding legislators they got the first half of their agenda enacted six years ago, now it is time for the rest of their dreams to come true.

Calling the proposed bill part of  “an innovation agenda to ‘modernize’ Michigan’s Telecommunications Act,” AT&T characterized the legislation as the ultimate red tape cutter, eliminating “a rotary phone mentality in a Smartphone, Wi-Fi world.”

Innovation, AT&T Style

But the proposed bill goes well beyond eliminating what AT&T considers outdated regulations and old phones — it could also eliminate phone service to Michigan’s most rural communities.

President Barack Obama was in Michigan last month to promote expanding broadband service, particularly in sparsely covered communities in the upper peninsula.  Large sections of Michigan remain underserved by AT&T, who does not extend DSL service into many rural areas.  Nothing in AT&T’s reform measure will bring broadband to these areas.  In fact, the bill grants AT&T permission to abandon landline service to these areas altogether, taking the prospects for DSL with it.

By winning an unrestrained playground for its products and services, for which it can charge whatever it likes — AT&T will follow Verizon’s lead and enhance service through its U-verse platform in urban and wealthy areas of the state at the expense of rural areas which are deemed unprofitable to serve.  While that’s great news for AT&T’s profit and loss statement, it hardly benefits the residents of Michigan who have helped build AT&T’s enormous network with decades of bill payments.

AT&T has a different position, of course. The phone company claims the bill will “better serve consumers” by eliminating “non-productive investments,” which really means investments in a landline network many Americans in more urban areas don’t care about anymore.  AT&T has focused much of its attention on its wireless network, which can deliver benefits to residents in Ann Arbor, Detroit, Saginaw and Grand Rapids, but is hardly a broadband replacement for Marquette or Elk Rapids — not with that 2GB monthly usage cap.  For urban dwellers, the promise of AT&T U-verse replacing AT&T DSL makes the phone company relevant in the broadband marketplace once again, but at the potential price of rural Michigan, who will never see the service in their neck of the woods.

AT&T claims their telecom reform agenda “means putting up a sign that says we are a state that gets it and will welcome and not restrain innovation,” the company says. “20th century regulations stand in the way of 21st century technology. Now is the opportunity to clear these roadblocks to investment and innovation.”

But AT&T’s policy bulldozer does far more than just sweeping away so-called “outdated” regulations.  It strips away fundamental consumer protection from unfair rate hikes, deteriorating phone service, billing errors, privacy protection, and the most basic right Americans have counted on for decades — the opportunity to purchase affordable landline service in even the most rural parts of the state.

Unfortunately, AT&T’s “innovation agenda” is deregulation at a price.  In Ohio, after similar legislation was passed, AT&T promptly raised rates on consumers last summer.  They did the same thing in California.  And Illinois.  Even U-verse, while delivering a second option for urban residents, simply does not save most subscribers money, especially after the introductory promotional rate expires.  It comes with rate hikes itself.

The Michigan Telephone Blog analyzes most of the bill’s outcomes with the same skeptical eye we have, and delivers a warning to other phone companies and businesses that could pay the price for AT&T’s version of “reform”:

If you are with a CLEC, an alarm company, or really any business that depends on telecommunications service in Michigan, you probably should have your legal department and/or your tariff guys looking at this bill.  If you belong to any type of consumer or business organization, especially one that protects senior citizens (who often hang onto the older technology, including the phone service they’ve always used) or small businesses (that often can’t move to other technologies for various reasons, particularly when they are located in less densely-populated areas), you should probably take a close look at this bill as well.