Hobbs

Landel Hobbs tendered his resignation today, leaving as Time Warner Cable’s chief operating officer after serving nine years at the cable operator.

The Wall Street press is characterizing Hobbs’ departure as a leadership shakeup created as the company explores who will eventually succeed CEO Glenn Britt.

Hobbs lost out to Rob Marcus, the company’s current chief financial officer.  Marcus joined Time Warner Cable in 2005 from then-parent company Time Warner Inc., where he led mergers and acquisitions.

Marcus will assume Hobbs’ former position almost immediately, also becoming Time Warner Cable’s president.

Marcus

Hobbs was deeply involved in Time Warner’s 2009 attempt to impose Internet Overcharging schemes on its broadband customers.  Hobbs was a major defender of the company’s plans to charge customers up to three times more for their existing level of broadband service, telling customers the need to impose such pricing was “urgent.”

“If we don’t act, consumers’ Internet experience will suffer,” he wrote. “Sitting still is not an option.”

Time Warner Cable shelved those plans and has since embarked on a broadband upgrade program, introducing DOCSIS 3 technology which provides a much larger broadband pipeline to customers.  The company is expected to upgrade most of its service areas, including the cities where it tested its Internet Overcharging scheme, by the second quarter of 2011.

Marcus’ primary task is expected to be addressing the ongoing loss of Time Warner Cable customers, who have been disconnecting service at a greater rate than the company is adding customers to replace them.

HP's Snowjob: The company that brought you the $70 ink cartridge supports an end to flat rate Internet service to "save" you money.

HP’s Joe Weinman argues consumers are behind the drive to abandon flat rate, “all you can eat” broadband pricing.

Weinman, whose company sells products and services to some of America’s largest broadband providers, has taken up their position that flat-rate Internet service is bad for you, claiming many are paying too much for Internet service they use too little.

In an essay posted on GigaOM, Weinman brings back the all-y0u-can-eat buffet metaphor:

For the record, I like unlimited Internet access just as much as anyone else. However, such plans appear to be on their way out, and here’s why. As I’ve explored in ”The Market for Melons” (PDF), pay-per-use is not an evil plot by greedy robber barons, but a natural outcome of independent, rational consumer choice. Consider a town with an all-you-can-eat (flat rate) buffet and an a la carte (pay-per-use) restaurant. Smart shoppers on diets will save money by patronizing the a la carte restaurant, whereas heavy eaters will save money by visiting the buffet. As patrons switch, the average consumption of the buffet will increase, driving price increases for the luncheon special, causing even more users to switch to pay-per-use.

Bottom line: it is not the proprietors driving this dynamic, but the customers themselves acting out of pure, rational self-interest—light users, by deciding not to subsidize the heavy ones, foster the vitality of the pay-per-use model.

Unfortunately for Weinman, most American broadband customers don’t believe a word of this, and even he was forced to admit as much when he noted consumers “often prefer to overpay for flat-rate rather than save money but risk bill shock.”

Karl Bode at Broadband Reports wasn’t suckered for a moment either, noting:

[…]Cable industry lobbyists would like the public to believe that such a shift isn’t about making more money, it’s about helping the poor. Not only is the metered billing push absolutely about making money, it’s about artificially constricting the pipe to protect uncompetitive carriers and TV revenues from Internet video. But instead, there’s a very concerted effort afoot to portray this shift as necessary, inevitable, and even altruistic.

Most consumers prefer the simplicity of flat rate pricing, and understand that ISPs are perfectly profitable under the flat-rate pricing model. They also understand that this is a pipe dream forged by never-satisfied investors, and once implemented ends with ever soaring per gig fees and ever shrinking usage caps.

Weinman’s essay completely ignores the reality his preferred pricing model already delivers to those who live under it in Canada.  Canadian broadband rankings continue to decline as customers there pay higher prices for a lower level of service, with usage caps that actually decline when new competitive threats from online video emerge.

Just what the doctor ordered: HP's Rx for American Broadband

We had to take time out to respond directly to Weinman and his cheerleading friends (see the comments section), some who wrote comments below the piece and couldn’t be bothered to disclose they owe their day jobs to industry-backed dollar-a-holler groups that are committed to delivering on behalf of their provider benefactors:

When Big Telecom comes ringing with promises of savings from metered or capped broadband, hang up immediately.

These plans save almost nobody money and expose dramatic overlimit fees to consumers, creating the kind of bill shock wireless phone users endure.

The OPEC-like Internet price-fixing on offer from big players delivers broadband rationing and sky high prices, while retarding Internet innovations that providers don’t own or control.

Consumers are forced to double check their usage and think twice about everything they do online out of fear of being exposed to huge overlimit fees up to $10 a gigabyte for exceeding an arbitrary limit ranging from 5-250GB.

Americans already pay too much for Internet service and now the providers want more of your money. The rest of the world is moving AWAY from the pricing schemes Weinman would have us embrace. It’s such a serious issue in the South Pacific, the governments of Australia and New Zealand are working to address the problem themselves.

Providers are already earning BILLIONS in profits every quarter from their lucrative broadband businesses. Now the wallet biters are back for more, with the convenient side benefit that limiting consumption is a great way to prevent Internet-delivered TV from causing cord-cutting of cable TV packages.

As far as consumers are concerned, and Weinman admits as much, people are happy with today’s unlimited price models. When Big Telecom complains people are overpaying for broadband, wouldn’t their shareholders be telling them to shut up and take the money? There is more to this story.

Weinman defends the extortion proposition Big Telecom would visit on us: either give us limited use pricing or we’ll raise all of your prices.

But as consumers have already figured out, these providers never reduce prices for anyone. When was the last time your cable bill went down unless you dropped services?

Don’t be a sucker to Big Telecom’s “broadband shortage” or pricing myths. Broadband is not comparable to water, gas, or electric. The closest comparison (and the one they always leave out) is to telephone service, and as we’ve seen, that business is increasingly moving TOWARDS flat race, unlimited pricing.

Want to know what metered pricing does to the wallets of consumers? Just ask Time Warner Cable customers in Rochester, Greensboro, San Antonio, and Austin what they thought about the cable company’s “innovative” pricing experiment that tripled the price for the same level of broadband customers used to get for $50 a month. After the torches and pitchforks were raised over $150 a month broadband service, Time Warner backed down.

Either with or without metered pricing, the cable company raised its prices three times last year alone.

The industry’s meme that “usage-based pricing” in inevitable is only true if consumers allow it to happen.  The parade of Internet Overcharging advocates all share one thing in common — they earn a living from the providers that dream about these pricing schemes.  Always follow the money.  As we’ve exposed repeatedly, the vast majority of defenders of these kinds of pricing schemes are not consumers.  They are:

• The providers themselves;
• Wall Street banks, investors, and the business media catering to them;
• Non-profit groups receiving substantial contributions from providers;
• Industry-funded “think tanks” and research that can carry the industry’s public policy agenda, hoping the media that quotes them are too lazy to follow the money;
• Equipment and service vendors, unions, and other groups who depend on the business or jobs they get from providers.

If you are a Frontier DSL customer, your unlimited Internet service is at risk of being arbitrarily limited by a company that wants to cut costs and increase revenue… at your expense.

Suburban Sacramento residents deemed to be “using too much” Frontier Internet service are being told they have to ration their Internet usage or pay more — a lot more — for the same speed service.  Even worse, many customers are paying extra for a “Price Protection Agreement” from Frontier that protects Frontier’s profits while your Internet bill doubles.  That’s a price protection racket only the Sopranos could love.

Frontier’s own representatives are literally at a loss for words when told it’s easy to exceed their “5GB” limit just by web browsing and checking e-mail.  But they are even quieter when customers report Frontier’s own video website – my fitv, a “free online video service” heavily promoted by Frontier, is ultimately responsible for their looming $99.99 monthly Internet bill.

Frontier wants to get tough with some of their best customers.  As a result, many are exploring disconnecting service for a cable competitor.  The best way to fight these Internet Overcharging schemes is to make it clear to Frontier you will not submit to them.  The first step is to bring wider media attention to the issue.

Sacramento-Elk Grove Customers

• Contact the Sacramento Bee, the Elk Grove Citizen and other local newspapers and ask them to write a story about this;
• Contact KOVR-TV’s consumer reporter and ask him to do a story;
• Contact other stations and local call-in shows and draw attention to Frontier’s abuse of its customers;
• If you are on a “price protection agreement” contact the California Public Utilities Commission and file a complaint.

Points to consider raising:

• Frontier’s usage caps are easily broken using the company’s own video website, my fitv;
• What the company suggests most people will not exceed today is not reasonable tomorrow.  Besides, how much customers actually use is considered proprietary and we have to take their word on it;
• Customers on price protection agreements are being asked to pay more than double for the exact same quality of service they used to receive for less.  Where is the price protection?;
• Frontier is generous with their shareholders, paying outrageously high dividends out of step with their earnings, but are notoriously stingy with the customers that deliver them that revenue;
• Where’s the fire?  This is the same company that said it had more than enough capacity to take on millions of ex-Verizon broadband customers, but now suddenly can’t deliver the same level of service to existing customers in Elk Grove without doubling the monthly price?;
• Customers are being asked to pay $1 a gigabyte for a service that costs Frontier far less to actually provide;
• At a time when Frontier continues to lose landline customers, can they afford to alienate more, who take all of their business elsewhere?

Frontier alienating its own customers who pay for their landline and broadband DSL service does not sound like a winning business strategy.  Let Frontier know you will not do business with a company that abuses its big-spending customers.  Let them know in clear terms you will cancel all of your services if the company maintains its Internet Overcharging practices and you will encourage your friends and family to take their business elsewhere as well.

Frontier Communications is trying to enforce an Internet Overcharging scheme it deleted from its Acceptable Use Policy months earlier, telling customers the company generously extended them an allowance “well above our usual 5GB monthly limit,” but using 100GB per month is “just too much.”

Customers in suburban Sacramento are the latest recipients of letters some are calling “extortion,” giving them seven days to call the company with a promise to cut back or move up to “the next price tier,” priced at $99.99 per month.

Ironically, some of Frontier’s customers receiving the letter say it’s the company’s own fault — they’ve been watching Frontier’s heavily promoted online video website, ‘my fitv.’

“You may not be aware that your specific usage has consistently exceeded 100GB over a 30-day period.  This is excessive for residential usage and more represents the amount of bandwidth usage of a typical business,” the letter says.  “If you wish to maintain your current pricing plan, you may work with us to reduce your Internet usage.  Another option is to move to the next price tier of $99.99 per month, which reflects your current average monthly usage.”

The letter adds if the customer does not make a decision, the company will terminate the account in 20 days.  No word if the customer is on the hook for an early termination fee amounting to more than $100 in most cases.

The customer who received the letter, who lives in Elk Grove and wishes to remain anonymous, was highly annoyed.  He sent Stop the Cap! a screenshot of Frontier’s new “Flexnet/Account Editor,” poorly documented on Frontier’s own website, which shows over the last three months, he only broke the invisible 100GB Frontier barrier once, by just 38GB.  For that, Frontier wants to more than double his monthly Internet rate for its DSL service.

The monthly usage limit was news to him… and us… and everyone else.

A well-placed source at Frontier tells Stop the Cap! the company is making the rules up as it goes.

“There is no set plan here — Frontier’s corporate office is testing the waters in different communities to see what kind of response they get,” our source says. “We have been quietly collecting usage statistics on our customers for a year now, and here and there we are chasing those outliers using far above the norm in order to keep our costs as low as possible.”

Our source adds the company wants to keep bad publicity to a minimum, so these kinds of Overcharging schemes are not publicized, and unless customers make a federal case out of it, most will simply reduce usage to avoid the overlimit rates.

“They absolutely do not want a big political stink over this, because it creates headaches and leaves customers with a negative impression about the company and that usually means a disconnect order will follow, usually taking all of their business somewhere else.  That’s why we usually are strictest in places where the customer has nowhere else to go.”

Our reader was perplexed by the letter, the policy, and his options, especially since Frontier does not disclose either a usage limit or a $99.99 plan on their website.

“The [representative] from Frontier told me that the monthly usage limit is 5GB. I told him this is not enough for checking e-mail and surfing the web and reading news.” our reader writes. “He did not answer [when I challenged him about this].”

But no worries, the representative told the Elk Grove customer. If he exceeded 100GB of usage again, he’d automatically be billed the $99.99 rate — no decision needed.

Our reader adds when he signed up, nobody told him about a monthly limit, and there is none disclosed on the website.  Stop the Cap! fought to remove Frontier’s 5GB usage limit from its Acceptable Use Policy for more than a year, finally succeeding earlier this year.  But now it appears Frontier wants to enforce limits anyway, with no disclosure and little recourse for customers who don’t have access to a competing provider.

Before our reader started watching online video, he used about 16GB per month just web browsing, checking e-mail, and downloading the usual software updates.

Didn’t that put him over Frontier’s invisible 5GB cap already?

“The representative told me if I kept it under 50GB a month, I’d be safe,” our reader writes.

So is the usage cap 50 or 100GB per month?

Our customer exceeded Frontier's arbitrary, unpublished usage cap just once in the last three months (click to enlarge)

Stop the Cap! called Frontier customer service three times this morning as a potential new customer.  The responses we received:

• “There is no usage cap I am aware of.”
• “We don’t limit your Internet service.”
• “I don’t understand what you mean when you say limit?  We don’t censor websites.”

Sandy, who also contacted Stop the Cap! also received a letter, and ironically blames Frontier for the usage.

Frontier's own video website was responsible for one customer using "too much" Frontier Internet service.

“I received a warning letter from Frontier for using too much Internet, but get this — all of the growth in my usage came after the company started promoting its new online video website, which my family has fallen in love with,” Sandy writes. “We hooked up a video box on our television, something Frontier helped us with, and we’ve been streaming my fitv a lot.”

“That is extortion plain and simple and is illegal under California state law, especially because the representative told us we’d be charged $99.99 the moment we went over the limit again, and we are on a two-year ‘price protection agreement’ Frontier says locks in our price, which is a lie,” Sandy says.

Her next call was to the California State Attorney General.  Sandy was told the office has already received more than a dozen complaints from Frontier customers in the Sacramento area alleging violations of California contract law.

Jeff, a Broadband Reports reader, also received a letter from Frontier and was told the company was getting plenty of pushback from angry customers.

“The tech guy said they just started metering and have been getting a ton of calls regarding the letters being sent out. He then asked if I got the 100GB or the 250GB letter, as apparently the 250GB warning letters were more severe stating to pay up or get cut off.  The 100GB letter stated they’d work with you to help ease usage or recommended a business plan. They said the “work with you to help with usage” was new and just added if you call within 7 days or else get cut off after 20 days.”

Jeff’s response to all this?

“Comcast is looking better every day now.”

So far, Frontier has not imposed its usage cap on its ex-Verizon FiOS customers.

“Putting a 5, 100, or even 250GB cap on a fiber optic connection would just be plain greed,” says our reader Ajai. “But of course, Frontier needs as much cash as possible to pay out those high dividends to shareholders that often exceed the company’s earnings.  There is nothing to like about this company, period.”

Frontier’s letters sound suspiciously similar to the enforcement letters sent to some of their customers in Mound, Minn. Those letters stopped after Stop the Cap! distributed copies to a wider national audience.  Our source at Frontier says the company doesn’t appreciate our help one bit.

“The higher ups on the corporate level despise your website, but they also pretend to dismiss you as an angry blogger that nobody reads,” our source says.  “I get a laugh out of that whenever I get another memo from the executive office basically delivering talking points to counter your arguments, so they very much do care what you and your readers say and apparently read Stop the Cap! regularly.”

For our source, it’s all “so stupid.”

“Trust me, a lot of guys who deal with customers every day want nothing to do with their usage caps which do nothing but infuriate customers,” he says. “They wonder why people are disconnecting Frontier landlines and taking their Internet business elsewhere — it’s policies exactly like these combined with pretty low speed DSL service which makes our customers easy pickings for our competitors.”

But not every customer has a choice.

“Where we own the broadband market, it’s too bad for customers — either ration your use, pay us double, or go without.  It is as simple as that.”

The Federal Reserve comes to the rescue of Big Telecom

Credit crisis?  What credit crisis?  That’s for little people.

While “challenging economic times” and “a difficult business environment” were among the reasons cited by banks for raising consumer credit interest rates, closing accounts, and slashing credit lines, some of America’s largest corporations received special credit favors from the Federal Reserve — cheap and easy money with little collateral required.

Among the companies that feasted on $3.3 trillion dollars of bailout credit largess — Verizon Communications, which had its $1.5 billion in debt picked up by the Fed — easy credit accessed twice during a major credit crisis.

The Washington Post uncovered Verizon’s Federal Reserve “Platinum Card” while reviewing more than 21,000 recently released loan records, forced into the open by new financial regulatory legislation.

Most of Verizon’s credit came in the form of covering the company’s “short term paper” — temporary debt taken on to fund daily business activities.  Although the Federal Reserve got the loan money back, the fact only major corporations, Wall Street banks, and other inside players got access burns many Americans, especially small business owners forced into hardship or out of business when their credit lines dried up at the height of the credit crisis.

While banks like Advanta, popular with small businesses, shut down all of its credit operations and raised interest rates to 30 percent or more on current balances, large companies like Verizon never had a thing to worry about thanks to the federal government.

“The American people are finally learning the incredible and jaw-dropping details of the Fed’s multitrillion-dollar bailout of Wall Street and corporate America,” said Sen. Bernard Sanders (I-Vt.), a longtime Fed critic whose provision in the Wall Street regulatory overhaul required the new disclosures. “Perhaps most surprising is the huge sum that went to bail out foreign private banks and corporations. As a result of this disclosure, other members of Congress and I will be taking a very extensive look at all aspects of how the Federal Reserve functions.”

Verizon spokesman Robert A. Varettoni said that it was “an extraordinary time,” adding that there was no credit available otherwise at the time.

Ordinary Americans already knew that, of course.  But they didn’t get the same kind of help companies like Verizon received.

As far as Sanders is concerned, banks and large American corporations did splendidly during The Great Recession — some like Goldman Sachs are paying record-busting bonuses for the second year running — all thanks to the special favors given by the federal government during the last months of the Bush Administration.

Sanders told the Post the federal government could have made demands on those accessing easy credit to help ordinary Americans, such as requirements to lend to small businesses, modify mortgages of homeowners, or agree to hire more workers.

“We bailed these guys out, but the requirements placed upon them had very little positive impact on the needs of ordinary Americans,” Sanders said.