Governor Walker

You have to hand it to Wisconsin Gov. Scott Walker.  He wants to push through his legislative agenda come hell or high water.  After creating a national controversy about his battles with the state’s public unions, Walker and his Republican colleagues are in a hurry to ram through their laundry list of legislative initiatives before Wisconsin voters have a chance to potentially recall a number of them.

Among Gov. Walker’s favorites — a telecommunications deregulation bill ghost-written by AT&T.  If such legislation seems familiar to you, it is.  It’s largely the same bill written by and for telecommunications companies that withered in the Democratic-controlled legislature last year.  Now the Republicans hold the majority, and they see measures to strip out rate protection for basic landline service, investigations of consumer complaints, and holding low-rated companies’ feet to the fire as “anti-business and anti-competitive.”

Somehow, bill proponents claim, all of this deregulation will inspire AT&T and other companies to wire rural Wisconsin for broadband service, which would be a remarkable feat considering they’ve not done so in other states where they’ve passed nearly-identical deregulation bills several years ago.  In fact, the bill eliminates any state oversight of broadband matters period, end of story.

Perhaps AT&T’s goodwill will bring broadband to the rural masses.  What are the chances?  Not good, considering the proposed legislation also allows AT&T the right to abandon providing basic telephone service in the same rural areas still waiting for broadband.  Your chances of getting DSL from AT&T are markedly diminished if the company decides to disconnect your phone line, permanently.

“What’s in it for the citizens of Wisconsin?” asked Rob Boelk, president of one Wisconsin chapter of the Communications Workers of America that represents AT&T workers. “If you want to give away the farm, what will you get in return?”

Why campaign contribution checks, of course.

AT&T and other telecommunications companies have donated heavily to legislators in the state, particularly those sponsoring their legislative wishlists.  Walker has made serving the interests of AT&T and the Wisconsin State Telecommunications Association one of his top priorities this spring.

AT&T is delighted.  In fact, they are so confident in their friendship with Walker and the Republican-controlled legislature, they are willing to throw their usual deregulation allies overboard in the bill.  Verizon and Sprint are fiercely opposing AT&T’s bill, despite promoting it in prior years.  At issue are new provisions requiring wireless and VoIP providers to pay higher government fees and also pay access charges for using other companies’ broadband networks (AT&T’s) to complete calls.

At a recent hearing, telecom company executives told members of the state Senate’s Information Technology Committee Senate Bill 13‘s deregulation would bring competitive balance in the industry, wider broadband access and create tens of thousands of jobs.

They didn’t bring any evidence to back up those claims, but bill sponsor Rich Zipperer, (R-Pewaukee) was ready to deliver AT&T’s talking points anyway.  He’s a helper.

“Today’s smart phone world is governed by rotary phone regulations,” Zipperer said. “We have to ensure our telecommunications infrastructure can keep up with market demands.”

Evidently that means upgrading wireless networks, something AT&T is preoccupied with these days judging from their television ads, while ignoring Wisconsin’s rural consumers.

In fact, when similar bills passed in other AT&T states, basic telephone service rates began increasing, sometimes repeatedly.  AT&T wants to push customers into pre-packaged bundles of services, so most of the savings go to those who take all of their telecommunications business to AT&T.  But if all you want (or can afford) is a basic telephone line, price increases are in your future.

The dollar-a-holler groups are out and about

Zipperer called copper wire landlines “ancient technology,” a relevant point if AT&T was delivering something better to every Wisconsin resident.  They are not.  Instead, while their landline network languishes in rural areas, the company is investing in U-verse upgrades in larger cities, setting up the potential for telecommunications have’s and have-no-longer’s.

Some of the accompanying documentation supporting the deregulation bill is also suspect.

We were particularly struck with broadband map data provided by bill proponents showing a bountiful supply of competitive choice for broadband service in Wisconsin. Ironically, their bill also bans the state from getting involved in broadband mapping in the future.  Those who control the maps control the debate over broadband availability.  As usual, provider-influenced maps promise service where none exists or comes with strings attached.

Providers equate wireless broadband as identical to DSL, fiber, and cable Internet service.  Because of that, customers even in “one-bar” towns can “enjoy” wireless broadband from AT&T and Verizon (as long as they keep it under 2-5GB a month with AT&T or under 10GB on Verizon’s mobile broadband plans.)  Sprint, which barely covers rural and suburban Wisconsin, is also considered a player.  So is T-Mobile, despite the fact AT&T wants to buy it.  For most of Wisconsin, the broadband reality is far different.  AT&T is the dominant provider of DSL and U-verse service, Time Warner Cable delivers most of the cable broadband.  In rural areas, a handful of Wireless ISPs deliver service to some areas, but many others have no access at all.

Robust competition?  No.  Will this bill change that?  No.

Wired Wisconsin is wired into AT&T's cash machine.

Deregulation only enhances the trend of landline providers like AT&T allowing their aging landline networks to go to pot.  Providing DSL or wireless broadband to rural Wisconsin requires the same return on investment with this bill as it does without, and these companies have refused to deliver either, using that reasoning, for years.

Despite common sense reality, the dollar-a-holler groups are working overtime with AT&T to push this bill.  Take “Wired Wisconsin,” a group particularly ‘burdened’ with its corporate sponsors (namely AT&T).  Wired Wisconsin is all for the deregulation bill, which they like to call “modernized telecom rules.”  The group’s leader Thad Nation, is a lobbyist who has run several campaigns promoting AT&T’s agenda, including the ironically-named Midwest Consumers for Choice and Competition, TV4Us and Technology for Ohio’s Tomorrow, all creatures of AT&T.

Nation’s lobbying firm explains how it works:

Getting government officials or bodies to do what you want isn’t easy. Government is inherently a slow, bureaucratic entity. When you want elected or appointed officials to change policy, you need a comprehensive plan – and the resources, relationships and quick-thinking to implement that plan.

We come to you with decades of experience in advocacy, moving legislators and engaging state agency leaders to action. Let us help you build and drive an aggressive advocacy agenda.

It’s a tough job, and Nation can be glad he isn’t doing it alone.  The Discovery Institute, which has turned pay-for-play research into an art form, was linked by Wired Wisconsin to “negate the myths and false assumptions” deregulation will bring.  They quote from Connected Nation, another industry connected group.  The only false assumption is that these people do this work for free and their results represent actual independent analysis.

Even if one were to believe AT&T’s claims, fact-checking them is just a few states away, in places like Arkansas, Kansas, or Texas.  None of them are bastions of rural broadband.  They weren’t before AT&T’s lobbying circus came to town and they still aren’t after they left.

On January 27, 1878 America witnessed the establishment of its first telephone exchange run by the District Telephone Company of New Haven, Conn. In addition to bringing the first phone service to Connecticut, District Telephone also published the world’s first telephone directory.  By the early 1920s, when America’s Bell System was taking hold in most cities, the company — now named Southern New England Telephone, had spread its network across most of the state.  SNET prospered for decades until Southwestern Bell (SBC) bought the company in 1998.  SBC rechristened itself AT&T in 2005.  It has been all downhill from there for many customers.

Today, AT&T Connecticut is the dominant phone company across the state, an unusual anomaly in the northeast, presided over mostly by Verizon Communications.  They also dominate the inbox at the office of the state Attorney General, who receives regular complaints about the phone company’s performance in the state:

In 2008, AT&T began installing refrigerator-sized cabinets on telephone poles and in right-of-way locations, often within feet of homes.  These Video Ready Access Devices (VRADs) connect AT&T’s U-verse fiber to copper wire telephone lines going to individual customers.  Dubbed “lawn refrigerators” by critics, the boxes are not only an unsightly 4-6 feet tall, they are also often noisy because of internal cooling fans.  More than one has burst into flames, thanks to malfunctioning power backup batteries found inside.

The perfect addition to any front yard... new boxes from AT&T. (Courtesy: Stopthebox.org)

AT&T’s often careless placement alienated residents, who complained they impeded views of turning drivers and pedestrians navigating sidewalks.  Many suggested the boxes reduced property values, especially when installed in front yards without screening or shrubbery to partly hide them from view.

One Trumbull man took his ire all the way to the state Department of Public Utility Control (DPUC), eventually winning noise dampening and two AT&T-supplied pine trees for the box in his backyard.

By 2009, AT&T was realizing “cost savings” promoted in the deal to merge with SBC — by laying off engineers and technicians responsible for maintaining the company’s landline network.  Service complaints soared, leading then-state Attorney General Richard Blumenthal to charge AT&T was cutting accountability for faulty phone lines and flimsy service.  In fact, even as service quality deteriorated, AT&T was lobbying to dispense with service standards altogether, arguing disappointed customers had other choices.

“AT&T is literally hanging up on consumers — slashing jobs and service quality, even after violating state customer service standards,” said Blumenthal. “Our message to the DPUC: don’t let AT&T off the hook. Preserve customer service standards to protect consumers.”

In 2010, service complaints had grown so bad the DPUC finally acted, by fining AT&T the maximum amount possible — $1.2 million.  Blumenthal called it a ringing wake-up call for AT&T.

But by December of last year, AT&T had still not paid the fine, and was caught by Blumenthal trying to negotiate a secret discounted settlement directly with the DPUC, cutting the state Attorney General out of the negotiations.  Blumenthal released a statement blowing the whistle on the reported talks:

Blumenthal

“AT&T’s stalling should be stopped — and the fine enforced,” Blumenthal said. “This multibillion dollar company sought secret negotiations — cutting out my office and the public — to reduce its fine for failing to meet legally required service standards. We halted its concealment; and now AT&T should stop its delay in paying taxpayers the fine that it owes.”

“AT&T was fined for failing consistently, year after year over a decade, to fix phone lines in a timely manner. Failure to repair lines quickly endangers public health and safety, especially seniors and the handicapped for whom a working line is literally a lifeline.”

Richard Blumenthal went on to represent the state in the U.S. Senate, but his successor, George Jepsen is proving to be every bit as tenacious as the state’s new Attorney General.  In March 2011, the DPUC formally imposed a fine of $745,000 on AT&T after negotiations with the phone company, which also required AT&T to meet its service standards.  The fine was reduced because AT&T had previously made refunds and settlements with customers independent of the fine.  The company is appealing it anyway.

“While I believe the full, $1.2 million penalty was warranted, the $745,000 fine sends a clear message to AT&T that it needs to improve its response to out-of-service customers.” Jepsen said. “The company’s responses in the future will be closely monitored.”

But has AT&T fixed the problems in the state of Connecticut?  Judging from press accounts, the answer may be no.

James Bruni, who lives in Hamden, had U-verse installed in his new home back in December, and there has not been a day since when the service has worked properly.

“We have had tech after tech come into our home, each one telling a different story,” Bruni says. “When our TV [picture] freezes, our phone and Internet go out as well.”

When that happens, Bruni’s home alarm, connected to his U-verse phone line, is subject to going off as well.  Many home alarm systems signal an alert if they detect a phone line has gone out of service, a possible sign of a robbery in progress.

Bruni has kept a log of AT&T’s comings-and-goings since December.  He counts 23 technician visits, working both inside and outside of the home.  When calling customer service, he is left on hold for extended periods, and often has to explain his issues repeatedly to technical support each time he calls.  He takes virtually every service AT&T offers, but not for long.

“I have had it with how I have been treated as a customer.”

Former Bridgeport city councilman Gilberto Hernandez proves AT&T doesn’t treat the well-connected any better than anyone else in the state.  Hernandez, now over 75, was so desperate to get repeating service outages fixed, he took his case to the consumer reporter at the Connecticut Post.

Hernandez’s wife is very ill, but he can’t depend on his AT&T landline to summon help in case of an emergency because it is always out of service.

Hernandez says the answer to his problem is a new overhead line installed through the neighborhood.  But AT&T won’t pay for that.  Instead of making an investment to correct long-term problems, the company prefers short-term fixes, which often fail within days. Performing short term repairs may help boost on-time appointment and service repair requirements, but when not followed up with more extensive repairs and upkeep, the problems just keep coming back.

The Post reporter sought an explanation from AT&T about Hernandez’s problems, and the phone company forwarded the matter to the company’s hired gun — the public relations firm of Fleishman-Hillard.  After a delay, the firm told the reporter Hernandez signed off on AT&T’s repairs… four days before Hernandez called to report there was a problem.

The reporter summarized AT&T’s performance in Connecticut as spotty:

During the hearing [over AT&T’s quality of service], AT&T defended its record, saying it already paid people off for the rotten service by not charging them for the time their phones were out and for crediting them and paying other penalties to the tune of $5.3 million between 2001 and 2008.

The DPUC did find AT&T was particularly good at reducing the number of troubles reported per 100,000 customers and showing up for maintenance appointments. AT&T has met appointments for repair work more than 90 percent of the time. Installation of new service is also a strong suit for AT&T, where it showed up for more than 99 percent of appointments. The company also installed new service within five days of ordering more than 95 percent of the time.

But repairing stuff, at least within 24 hours, is not AT&T’s bag. The company never managed to put better than 72 percent of repairs back in service within 24 hours between 2001 and 2008.

Soldiers starting basic training or preparing to deploy overseas have a lot on their minds.  Worrying about their AT&T cell phone service isn’t supposed to be one of them.

Stop the Cap! has been hearing from soldiers in several states who are sharing similar stories about AT&T insisting on hefty early termination fees when calling to suspend or cancel service because of military training or deployment abroad.  Cell phones are prohibited during basic training, which lasts 10 weeks.  So why pay for a service you cannot use for two and a half months?

The Chicago Tribune shared the story of Nathaniel Jungheim, of Chicago, who faced an intransigent AT&T when he called to put his account on hold during basic training.

“They informed me that they have recently changed how they handle military accounts and said I would have to pay $10 a month plus taxes to keep my account in suspension,” he said.

Jungheim said he complained and was told he would either have to pay the monthly fee or $275 to terminate his contract.

“I asked to speak to a supervisor but was told they would say the same thing,” Jungheim said.

Those “changes” are likely illegal under the Service Member Civil Relief Act, a federal law which protects America’s soldiers from predatory practices from bankers, property management companies, insurance companies, and yes, cell phone companies.

Text of S. 3023 [110th]: Veterans’ Benefits Improvement Act of 2008
Oct 10, 2008: Became Public Law No: 110-389

SEC. 805. TERMINATION OR SUSPENSION OF CONTRACTS FOR CELLULAR TELEPHONE SERVICE FOR CERTAIN SERVICEMEMBERS.

(a) In General- Title III of the Servicemembers Civil Relief Act (50 U.S.C. App. 531 et seq.) is amended by inserting after section 305 the following new section:

SEC. 305A. TERMINATION OR SUSPENSION OF CONTRACTS FOR CELLULAR TELEPHONE SERVICE.

(a) In General- A servicemember who receives orders to deploy outside of the continental United States for not less than 90 days or for a permanent change of duty station within the United States may request the termination or suspension of any contract for cellular telephone service entered into by the servicemember before the date of the commencement of such deployment or permanent change if the servicemember’s ability to satisfy the contract or to utilize the service will be materially affected by such deployment or permanent change. The request shall include a copy of the servicemember’s military orders.

(b) Relief- Upon receiving the request of a servicemember under subsection (a), the cellular telephone service contractor concerned shall–
(1) grant the requested relief without imposition of an early termination fee for termination of the contract or a reactivation fee for suspension of the contract; or
(2) in the case that such servicemember is deployed outside the continental United States as described in subsection (a), permit the servicemember to suspend the contract at no charge until the end of the deployment without requiring, whether as a condition of suspension or otherwise, that the contract be extended.

AT&T doesn’t feel the law applies to them, however, judging from complaints we’ve been receiving from readers.

Stop the Cap! came up on a private military forum open to service members, and ever since, we’ve heard some stunning complaints about AT&T and suspicions the phone company is hoping to rely on soldiers not fully understanding their rights.  Remarkably, all of the complaints have been about AT&T.  Verizon and Sprint reportedly treat the troops with considerably more respect.

“I was ordered to Europe last November and wanted to call and cancel my AT&T service and ran straight into a brick wall with those people,” shares Elizabeth.  “They told me they don’t suspend accounts for anyone, only cancel them, and demanded $200 in early cancel fees to be paid immediately on my credit card or they would ruin my credit.”

Nathan, who is now serving in rural Alaska, shared a similar story.  On his third call to AT&T, the representative offered him just one choice — a $10 a month suspended plan, if he agreed to extend his service contract when he got back.

“I was reading off of AT&T’s own website stating the company would cancel my service with no penalty, but the operator could have cared less,” Nathan writes.  “If I didn’t like it, he would charge me $300 to immediately cancel my contract and that was that.”

Nathan got the distinct impression the representative was accusing him of ripping off AT&T for a new phone he wanted to “walk away” with free and clear.

JJ managed to get a supervisor to “do him a favor” and cancel his contract with no penalty, but only if he faxed over his military ID, birth certificate, driver’s license, orders of deployment, and a copy of a major credit card for “verification purposes.”

“I told them to forget it — I was not about to send some low paid AT&T call center guy every form of ID I had so I could discover my identity stolen when I got back,” JJ said.

“AT&T cares less about the troops who defend their right to exist in a free United States; they only care about money and that is disgusting and unpatriotic,” JJ shares.

Another customer, deployed overseas, was told to report to an AT&T store in the United States to discontinue service — there was no other way to cancel penalty-free.

As has been so often the case, when media attention shines a bright light on potentially illegal business practices or bad service, relief is soon in sight, for at least a few people.

The Problem Solver called Brooke Vane, a spokeswoman for AT&T, and described Jungheim’s situation.

Vane emailed Thursday to say AT&T adheres to the federal Service Member Civil Relief Act, which provides guidelines for how companies deal with those who are called to duty.

Vane instructed Jungheim to call AT&T’s customer care phone number again and go through the process of suspending service.

“Once he meets the requirements, including providing us with his orders, as required by law, we can process this request,” Vane said.

Thursday evening, Jungheim called AT&T and spoke to a representative.

“I faxed over my deployment orders … so I should be a go,” he said.

He will not be charged the $10 a month.

AT&T's website for servicemembers makes it easy to buy more of their products and services, but doesn't deliver much help to those who want to put their accounts on hold or leave. (Click image to visit site.)

Stop the Cap! recommends you arrange to cancel or suspend service as soon as you have a date in hand for basic training or deployment abroad.  Then call AT&T at 1-800-331-0500 and notify them you need to fax your written request to discontinue service, penalty-free, and are including a copy of your military orders.  By declaring your intent, you will present yourself as knowledgeable about your rights, and are less likely to encounter resistance from AT&T.

Do not fax or mail copies of any forms of personal identification.  They are not required under the law and there is no reason to expose yourself to identity theft.  We recommend you consider service cancellation over service suspension, because it lets you walk away from AT&T free and clear.  You will lose your cell phone number, but when you return, you can sign up as a new customer and receive a new phone discount.

Always write down the name and extension of the person you spoke with along with the time and date of your call and keep it in a file until you are assured the request was processed properly.

If you encounter problems, insist that your call be escalated to a supervisor.  If that fails, two of our readers reported they had near instant resolution to their ongoing problems with AT&T by calling their member of Congress or two Senators.

Among the public interest groups that have historically steered clear of the fight against usage caps and usage based billing is Public Knowledge.

Stop the Cap! took them to task more than a year ago for defending the implementation of these unjustified hidden rate hikes and usage limits.  Since then, we welcome the fact the group has increasingly been trending towards the pro-consumer, anti-cap position, but they still have some road to travel.

Public Knowledge, joined by New America Foundation’s Open Technology Initiative, has sent a letter to the Federal Communications Commission expressing concern over AT&T’s implementation of usage caps and asking for an investigation:

[…] Public Knowledge and New America Foundation’s Open Technology Initiative urge the Bureau to exercise its statutory authority to fully investigate the nature, purpose, impact of those caps upon consumers. The need to fully understand the nature of broadband caps is made all the more urgent by the recent decision by AT&T to break with past industry practice and convert its data cap into a revenue source.

[…] Caps on broadband usage imposed by Internet Service Providers (ISPs) can undermine the very goals that the Commission has committed itself to championing. While broadband caps are not inherently problematic, they carry the omnipresent temptation to act in anticompetitive and monopolistic ways. Unless they are clearly and transparently justified to address legitimate network capacity concerns, caps can work directly against the promise of broadband access.

The groups call out AT&T for its usage cap and overlimit fee model, and ponder whether these are more about revenue enhancement than network management.  The answer to that question has been clear for more than two years now: it’s all about the money.

The two groups are to be commended for raising the issue with the FCC, but they are dead wrong about caps not being inherently problematic.  Usage caps have no place in the North American wired broadband market.  Even in Canada, providers like Bell have failed to make a case justifying their implementation.  What began as an argument about congestion has evolved into one about charging heavy users more to invest in upgrades that are simply not happening on a widespread basis.  The specific argument used is tailored to the audience: complaints about congestion to government officials, denials of congestion issues to shareholders coupled with promotion of usage pricing as a revenue enhancer.

If Bell can’t sell the Canadian government on its arguments for usage caps in a country that has a far lower population density and a much larger rural expanse to wire, AT&T certainly isn’t going to have a case in the United States, and they don’t.

The history of these schemes is clear:

1. Providers historically conflate their wireless broadband platforms with wired broadband when arguing for Internet Overcharging schemes.  When regulators agree to arguments that wireless capacity problems justify usage limits, extending those limits to wired broadband gets carried along for the ride.  Dollar-a-holler groups supporting the industry love to use charts showing wireless data growth, and claim a similar problem afflicts wired broadband, even though the costs to cope with congestion are very different on the two platforms.
2. Providers argue one thing while implementing another.  Most make the claim pricing changes allow them to introduce discounted “light user” plans.  But few save because true “pay only for what you use” usage-based billing is not on offer.  Instead, worry-free flat use plans are taken off the menu, replaced with tiered plans that force subscribers to guess their usage.  If they guess too little, a stiff overlimit fee applies.  If they guess too much, they overpay.  Heads AT&T wins, tails you lose.  That’s a clear warning providers are addressing revenue enhancement, not network enhancement.
3. Claims of network congestion backed up with raw data, average usage per user, and the costs to address it are all labeled proprietary business information and are not available for independent inspection.

There are a few other issues:

In the world of broadband data caps, the caps recently implemented by AT&T are particularly aggressive. Unlike competitors whose caps appear to be at least nominally linked to congestions during peak-use periods, AT&T seeks to convert caps into a profit center by charging additional fees to customers who exceed the cap. In addition to concerns raised by broadband caps generally, such a practice produces a perverse incentive for AT&T to avoid raising its cap even as its own capacity expands.

In North America, only a handful of providers use peak-usage pricing for wired broadband.  Cable One, America’s 10th largest cable operator is among the largest, and they serve fewer than one million customers.  Virtually all providers with usage caps count both upstream and downstream data traffic 24 hours a day against a fixed usage allowance.  The largest — Comcast — does not charge an excessive usage fee.  AT&T does.

Furthermore, it remains unclear why AT&T’s recently announced caps are, at best, equal to those imposed by Comcast over two years ago.  The caps for residential DSL customers are a full 100GB lower than those Comcast saw fit to offer in mid-2008. The lower caps for DSL customers is especially worrying because one of the traditional selling points of DSL networks is that their dedicated circuit design helps to mitigate the impacts of heavy users on the rest of the network. Together, these caps suggest either that AT&T’s current network compares poorly to that of a major competitor circa 2008 or that there are non-network management motivations behind their creation.

AT&T has managed to create the first Internet version of the Reese's Peanut Butter Cup, combining Comcast's 'tolerated' 250GB cap with AT&T's style of slapping overlimit fees on data plans from their wireless business.

As Stop the Cap! has always argued, usage caps are highly arbitrary.  Providers always believe their usage caps are the best and most fair around, whether it was Frontier’s 5GB usage limit or Comcast’s 250GB limit.

AT&T experimented with usage limits in Reno, Nevada and Beaumont, Texas and found customers loathed them.  Comcast’s customers tolerate the cable company’s 250GB usage cap because it is not strictly enforced — only the top few violators are issued warning letters.  AT&T has established America’s first Internet pricing version of the Reese’s Peanut Butter Cup: getting Comcast’s tolerated usage cap into AT&T’s wireless-side overlimit fee.  The bitter aftertaste arrives in the mail at the end of the month.

Why establish different usage caps for DSL and U-verse?  Marketing, of course.  This is about money, remember?

AT&T DSL delivers far less average revenue per customer than its triple-play U-verse service.  To give U-verse a higher value proposition, AT&T supplies a more generous usage allowance.  Message: upgrade from DSL for a better broadband experience.

Technically, there is no reason to enforce either usage allowance, as AT&T DSL offers a dedicated connection to the central office or D-SLAM, from where fiber traditionally carries the signal to AT&T’s enormous backbone connection.  U-verse delivers fiber to the neighborhood and a much fatter dedicated pipeline into individual subscriber homes to deliver its phone, Internet, and video services.

A usage cap on U-verse makes as much sense as putting a coin meter on the television or charging for every phone call, something AT&T abandoned with their flat rate local and long distance plans.

Before partly granting AT&T’s premise that usage limits are a prophylactic for congestion and then advocate they be administered with oversight, why not demand proof that such pricing and usage schemes are necessary in the first place.  With independent verification of the raw data, providers like AT&T will find that an insurmountable challenge, especially if they have to open their books.

[flv width=”640″ height=”368″]http://www.phillipdampier.com/video/Bell’s Arguments for UBB 2-2011.flv[/flv]

Canada’s experience with Usage-Based Billing has all of the hallmarks of the kind of consumer ripoff AT&T wants Americans to endure:

• A provider (Bell), whose spokesman argues for these pricing schemes to address congestion and “fairness,” even as that same spokesman admits there is no congestion problem;
• Would-be competitors being priced out of the marketplace because they lack the infrastructure, access, or fair pricing to compete;
• Big bankers and investors who applaud price gouging and are appalled at government checks and balances.

Watch Mirko Bibic try to rationalize why Bell’s Fibe TV (equivalent to AT&T U-verse) needs Internet Overcharging schemes for broadband, but suffers no capacity issues delivering video and phone calls over the exact same line.  Then watch the company try and spin this pricing as an issue of fairness, even as an investor applauds the company: “I love this policy because I am a shareholder.  That’s all I care about.  If you can suck every last cent out of users, I’m happy for you.”  Finally, watch a company buying wholesale access from Bell let the cat out of the bag — broadband usage costs pennies per gigabyte, not the several dollars many providers want to charge.  (11 minutes)

Click to enlarge

Your cable company has a problem.  Collectively, the cable industry has lost more than 2 million video customers over the past year, and the problem may be getting worse.  Some of the largest cable companies in the United States are making excuses for the historic losses:

• The bad economy
• Housing and foreclosure crisis
• High unemployment
• Family budget-cutting

But cable companies should be rethinking their excuses, according to a new report from Strategy Analytics.

“Throughout the past seven consecutive quarters of subscriber losses, the inclination of cable has been to point the finger at various external factors,” said Ben Piper, Director of the Strategy Analytics Multiplay Market Dynamics service. “Our analysis shows that neither the economy nor the housing market is to blame for these subscriber defections. The problem is one of value perception.”

Value perception.  That’s a measurement of whether or not one feels they are getting good value for the money they pay for a product or service.  Value comes in several different forms, starting with emotional — do I feel good, safe, secure, or nostalgic using the service?  Can I imagine life without it?  What about my friends and family — will I stand out if I am not buying this product?  It’s also practical — Can I afford this?  Can I find a cheaper or better alternative?  Do I really need this service anymore?

Tied into value perception is customer goodwill.  If you have an excellent experience with a company, letting go of their products comes much harder.  If you feel forced to deal with a company that has delivered poor and expensive service for years, pent up frustration will make it much easier (and satisfying) to cut them loose at the first opportunity.

Embarq used to be Sprint's pathway to prosperity in the local landline business, until cord cutting put landlines into a death spiral.

In the telecommunications industry, value perception is a proven fact of life.  It began with phone companies.  Formerly a monopoly, landline providers have been forced to try and reinvent themselves and become more customer-friendly.  First long distance companies like Sprint and MCI moved in to deliver cheaper (and often better quality) long distance service.  Sprint even got into the landline business themselves, forming EMBARQ, which at its peak was the largest independent phone company in the United States.  When Voice Over IP providers like Vonage and the cable industry’s “digital phone” products arrived, they promised phone bills cut in half, and introduced the concept of unlimited long distance calling.

The value perception among consumers became clear as they began disconnecting their landlines.  The alternative providers offered cheaper, unlimited calling services, often bundled with phone features the local phone company charged considerably more to receive.  Even though VOIP is technically inferior in call quality in many instances, the value the services provided made the decision to cut the phone cord easier.

But local phone company landline losses would only accelerate with the ubiquity of the cell phone, but for different reasons.  What began with high per-minute charges for wireless calls evolved into larger packages of calling allowances, with plenty of free minutes during nights and weekends, and often free calling to those called the most.  Most Americans end the month with unused calling minutes.  As smartphones gradually take a larger share of the cell phone market, the accompanying higher bills have forced a value perception of a different kind — ‘I can’t afford to keep my landline –and– my cell phone, so I’ll disconnect the landline.’

The cable industry has traditionally faced fewer competitive threats and regularly alienates a considerable number of customers, but still keep their business despite annual rate increases and unwanted channels shoveled into ever-growing packages few people want.

This pent up frustration with the cable company has led to perennial calls for additional competition.  That originally came from satellite television, which involved hardware customers didn’t necessarily like, and no option for a triple play package of phone and broadband service.  The cable industry offers both, and by effectively repricing their products to discourage defections from bundled packages, customers soon discovered the resulting savings from satellite TV were often less than toughing it out with the cable company.

As a result, satellite television has never achieved a share of more than 1/3rd of the video market.  Many satellite customers are in non-cable areas, signed up because of a deeply discounted price promotion, were annoyed with the cable company, or didn’t care about the availability of broadband or phone service.  When the price promotion ends or technical issues arise, many customers switch back to cable.

More recently, researchers like Strategy Analytics have discovered some potential game-changers in the paid video marketplace:

• The impact of broadband-delivered video content
• The Redbox phenomena
• Competition from Telco TV
• The digital television conversion

Strategy Analytics studied consumer perceptions and found customers braver than ever before about their plans to cut cable’s cord.  According to the consumers surveyed, nobody scores lower in value perception than cable companies.  Citing “low value for money,” over half of the cable subscribers surveyed told the research firm they intended to disconnect their cable TV package in the near future.

While other researchers dismiss those high numbers as bravado, there are clear warnings for the industry.

“Much ink has been spilled on the topic of cord cutting and even skeptics are now admitting that it can’t be ignored,” said Piper.

Indeed, Craig Moffett, an analyst with Sanford Bernstein who almost never says a discouraging word about his beloved cable industry, told Ad Age Mediaworks the issue of cord-cutting was real.

“It’s hard to pretend that cord cutting simply isn’t happening,” Moffett said.

Craig E. Moffett, perennial cable stock booster, even admits cord-cutting is real.

The most dramatic impact on the cable industry has been in the ongoing erosion of the number of premium channel subscribers, those willing to pay up to $14 a month for HBO, Cinemax, Showtime, or Starz!.  The reason?  Low value for money.  As HBO loses subscribers, Netflix and Redbox gain many of them.  Netflix still delivers a considerable number of movies by mail, but has an increasingly large library of instant viewing options over broadband connections.  Strategically placed Redbox kiosks deliver a convenient, and budget-minded alternative.

The loss of real wage growth, the housing collapse, and the down-turned economy do put pricing pressures on the industry, but some cable executives hope the time-honored tradition of customers howling about rate increases without ever actually dropping cable service continues.

But as new platforms emerge, some delivering actual pricing competition to the cable TV package, increasing numbers of customers are willing to take their video business somewhere else.  Some are stopped at the last minute with a heavily discounted customer retention pricing package, but that doesn’t keep them from sampling alternative online video options.  Among those who actually do leave, some are satisfied with the increased number of channels they get for free over-the-air after America’s digital television conversion.

Many others are switching to new offerings from telephone companies.  Both AT&T and Verizon deliver video packages to many of their customers, often at introductory prices dramatically lower than their current cable TV bill.  When considering a bill for $160 for phone, video, and broadband from the cable company or $99 for the same services from the phone company, $60 a month in savings for the first year or two is quite a value perception, and the inevitable disconnect order is placed with the cable company.

Ad Age‘s own survey, more skeptical about cord-cutting, confirmed that many former cable TV customers left for budgetary reasons, but many also kept their triple play packages.  They just bought them from someone else.

Also confirmed: a dramatic upswing in online viewing, sometimes paid but often ad-supported or free.

Strategy Analysts concludes in its report, available for $1,999, that the ongoing erosion of cable TV subscribers isn’t irreversible, but it requires urgency among providers to become more customer-friendly and increase the all-important value perception.

In other words: respecting the needs and wishes of your customers.

Thankfully, the cable industry is dealing with competitors like AT&T, who are willing to assassinate their current lead in value perception by slapping Internet Overcharging pricing schemes on their broadband service.  That will certainly raise the ire of their DSL and U-verse customers, many who are treating the customer unfriendly usage limits as an invitation to leave.  Their former cable companies are waiting to welcome them back.  The real question remains, will cable customers now be treated better?