Despite the loss of more than 128,000 video subscribers, Time Warner Cable more than made up the difference with rate increases on equipment, programming, and broadband to score a 23 percent increase in earnings in the second quarter of 2011.  For the period of April-June, Time Warner earned a profit of $420 million, nearly $80 million more than the same quarter last year.

Cable Television

Time Warner CEO Glenn Britt continued to blame the loss of video subscribers on the housing crisis and economy, suggesting the cable operator’s prices have gotten too high for some customers to handle, and they’ve disconnected cable television service as a result.  Britt also continues to downplay the impact of online video allowing for consumer cord-cutting, suggesting instead that increased competition from phone companies and satellite providers are creating a problem online video isn’t.

As a result, Time Warner is refocusing its efforts on marketing packages to three segments it particularly wants to attract — the very well-to-do, the Latino community, and the income-challenged.

Time Warner officials noted that many of their customers have continued to pare back their packages to cushion against the company’s rate increases.  For the last few years, consumers have cut premium movie channels and extra tier add-ons.  Now customers are targeting Time Warner’s DVR service as a route to a lower cable bill.  Many are returning their DVR boxes to save money, or are not keeping the service as a promotion expires.  Time Warner often bundles DVR service into new customer promotions for no additional charge.

For these income-challenged consumers, Time Warner is promising to develop new packages of services at reduced prices.  That likely means the expansion of the company’s “budget tier” — a package of selected basic cable networks, excluding expensive sports programming, currently testing in two markets for around $50 a month.

But the company is also reporting success with its wealthier customers, many who are adopting Time Warner’s super premium Signature Home service, from which the company collects an average of $220 per month per customer.  Time Warner is also ramping up promotion of its cable services to Spanish-speaking audiences in the Latino community — customers it may have under-served in the past.

The company also reported declines in video-on-demand revenue, principally adult pornography pay-per-view content consumers are now watching on the Internet for free.

Broadband

Among the brightest stars for Time Warner Cable continues to be broadband service, which is increasingly important… and profitable for the nation’s second largest cable operator.  With “pricing strength,” Time Warner has successfully adopted a series of rate increases for Road Runner service, increasing revenues along the way.  The company also reports success with its DOCSIS 3 rollouts, now reaching 60 percent of its cable subscribers.  CEO Britt says the cable company expects to complete DOCSIS 3 upgrades nationwide by the end of 2012.  A noticeable percentage of customers are upgrading to premium-priced, faster speed tiers as a result.

Despite the investment in DOCSIS 3, Time Warner Cable continues to slash the amount of capital it is investing in its network.  So far this year, capital expenditures are down 7.4 percent to $1.36 billion.  Chief Operating Officer Rob Marcus predicts Time Warner will spend no more than $3 billion on its systems in 2011, despite plans to continue broadband upgrades and convert their cable systems to all-digital operations.  So far this year, Time Warner has earned over $2.2 billion from its broadband division alone, up 9 percent from last year.  The company attributes most of that growth to rate increases and customers upgrading their service.

Other facts:

• Time Warner’s wireless mobile broadband has failed to spark much interest from consumers, perhaps because they realize it comes from Clearwire, a company Time Warner CEO Glenn Britt seemed unimpressed with in today’s conference call.  He made a point of telling investors the cable company is under no obligation to invest anything else in the venture;
• Time Warner Cable is taking a new interest in Wi-Fi, deploying networks in New York and Los Angeles, in the hope the company can boost interest in a “quad-play” of cable, phone, Internet, and wireless broadband/Wi-Fi that consumers have taken a pass on thus far;
• The company’s new super data center in Charlotte, N.C., will provide a national “head-end” for IPTV video, currently supplied from a facility in Denver.  This will principally benefit iPad users using the company’s app to stream online video.  The company hopes to eliminate regional and local distribution efforts as a cost-savings measure, consolidating national distribution through Colorado and North Carolina;
• The company’s next version of TWCable TV — the aforementioned iPad app, is due out in a few weeks and will include text searching for individual shows.  Whether it corrects the ludicrous inability for the app to consistently stream video is another question;
• Competition for new customers has been responsible for a number of disconnects.  One satellite provider is pitching Time Warner customers on a $30 a month video package that includes the NFL Sunday Ticket for free.  Verizon FiOS has increased its marketing of Time Warner customers, offering its own triple-play package for $99 a month.  AT&T U-verse has their own triple play packages as low as $89 a month, with a substantial mail-in rebate offer good for over $100.  But Britt warns the lack of change in the “average revenue per subscriber”-numbers from competitors probably means consumers are paying substantially more thanks to fine print-surcharges and fees;
• Time Warner is still trying to sign agreements for its TV Everywhere project, particularly for HBO Go, but the terms are evidently still not acceptable to the cable company.

Our earlier coverage, seen below, covers Britt’s remarkable comments about usage-based pricing.  He was certainly off the usual industry playbook today, even going as far as telling investors what we knew all along: bandwidth costs bear almost no relationship to the prices charged for broadband service.  That’s one we’ll tuck away and remember.

Time Warner Cable CEO Glenn Britt highlights the results from the second quarter, covering cable-TV, broadband, and other products. July 28, 2011. (6 minutes)
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Another remarkable admission from Time Warner CEO Glenn Britt came at the end of today’s investor conference call.  In response to claims by some cable companies of incremental bandwidth costs running 40-50 cents per gigabyte (a number we strongly dispute at Stop the Cap! for being at least ten times too high), Britt made the debate over bandwidth costs moot by saying they really don’t have anything to do with how Time Warner Cable prices its broadband service.

“I think that the conversation about usage based pricing should not be tied to a conversation about costs,” Britt said.  “This is not a rate of return regulated monopoly industry like AT&T was before 1984.  We have a lot of different products, a lot of different offerings and we’re aiming at different segments and different combinations and the pricing will relate to that.  This is not a strict cost-base thing so those facts are interesting but not terribly relevant to pricing.”

That clears that up quite nicely.  We’ll be sure to remember that should the cable company revisit its customers with another Internet Overcharging scheme blamed on bandwidth hogs.

Time Warner Cable CEO Glenn Britt is asked what Time Warner Cable is paying for bandwidth costs. Britt said the question is largely irrelevant, because those costs have almost nothing to do with how the company prices its broadband service. July 28, 2011. (1 minute)
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Britt

On this morning’s conference call for investors, Wall Street continued to pound Time Warner Cable CEO Glenn Britt about when the company would introduce an Internet Overcharging scheme for broadband customers in the form of so-called “usage based billing.”

This quarter, the pressure came from Deutsche Bank’s Doug Mitchelson, who used the occasion to remind Britt he called usage pricing “inevitable” and wanted to know when the company was going to get the ball rolling on the pricing scheme.

Britt was unprepared to answer, other than to make comparisons about his “inevitable” remark with wireless carriers, who have said the same thing about the end of unlimited use plans in wireless, a different technology.

After following Britt’s public statements for more than two years about this subject, we detected a moderating view.  Britt told investors he believes “there should remain an unlimited plan for those who want to buy that,” and suggested Time Warner Cable might not be interested in applying usage pricing on every level of its broadband service.  That could be good news, so long as Britt doesn’t believe the price of “unlimited” should be the $150 a month the company proposed in 2009.

“We’re more focused on affordability and lower income people who might be light users and might seek to pay less because they use less,” Britt said. “That’s a much better context than the usual ‘oh those people using all the bandwidth’ and caps and all that stuff.”

Britt added he doesn’t anticipate having caps across the board.

Mitchelson explained in a follow-up question why Wall Street is interested in the adoption of usage pricing – an increase in “ARPU growth” — the average revenue earned from each broadband customer in the form of more expensive usage plans.

Britt acknowledges what Stop the Cap! has predicted all along — ARPU growth can be realized instead from subscribers upgrading to faster speed tiers, which carry higher costs.  Britt told Mitchelson he, and other investors, can get the ARPU growth they crave by looking at those numbers instead of earnings from usage based pricing.

How long before Wall Street demands both speed-related ARPU growth and extra earnings from usage pricing is an open question, but Britt’s latest remarks represent a significant shift in attitude about pricing broadband, potentially because the company has a new found appreciation for the limited capability of customers to keep opening their wallets to pay higher and higher cable bills.  That was clearly in evidence as the company tried to explain another quarter of declining cable TV customers, many forced out of the service because of its high cost.

Time Warner Cable CEO Glenn Britt answers a question about usage-based pricing from Deutsche Bank’s Doug Mitchelson, just one of a parade of Wall Street banks pushing broadband providers to adopt Internet Overcharging to increase profits. July 28, 2011. (2 minutes)
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Frontier Communications claims its expansive broadband deployment efforts in West Virginia will take the Mountain State from the bottom of the broadband barrel to the very top within a few years.

Dana Waldo, Frontier’s senior vice president and general manager, said the company has completely turned around landline and broadband service in West Virginia just over a year after Verizon Communications left the state.

In a wide-ranging radio interview with MetroNews, Waldo claims complaints are way down while DSL broadband deployment is way up.  In just about a year, Frontier has expanded broadband to 76 percent of its West Virginia service area, adding 85,000 additional homes and businesses that previously had no access to wired broadband.

“We made a commitment to spend about $310 million, from the time of the transaction through 2013, to improve the network, to expand broadband across the state and for other capital improvements,” Waldo told MetroNews Talkline.

Frontier Communications’ Dana Waldo talks with MetroNews Talkline about phone and broadband service in West Virginia. July 19, 2011. (11 minutes)
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Currently, West Virginia ranks 47th in the United States for broadband access, mostly because large sections of the rural, mountainous state simply don’t have access to any provider.  What access most do have, outside of major cities like Charleston, Huntington, Wheeling, and Parkersburg comes from telephone company-provided DSL.  Verizon used to be the dominant provider in West Virginia, with Frontier providing service in limited areas.  But after Verizon sold its operations in the state to Frontier, the independent telephone company is now the only telecommunications provider for many rural communities.  For the majority of customers outside of the largest cities, Frontier markets DSL at speeds up to 3Mbps, hardly cutting-edge.

Frontier’s backbone network is deemed the worst in the nation for a wired provider, according to statistics collected and analyzed by Netflix.

“When comparing broadband in states like New York or New Jersey with West Virginia… there is no comparison,” shares Stop the Cap! reader Steve who lives in Hempstead, N.Y., but owns a cabin outside of Beckley, W.V.  “You can get Cablevision’s cable broadband at rocket ship speeds or Verizon FiOS fiber-to-the-home, which is even faster, in New York.  For my neighbors and me in West Virginia, there is one choice – Frontier Communications’ DSL, which can manage 800kbps on a good day.”

“I almost drove off the road laughing as I listened to the sheer nonsense of Mr. Waldo’s empty promises,” Steve shares. “This company’s idea of broadband access is up to 3Mbps DSL while nearby states like Virginia and Pennsylvania are getting fiber or cable broadband speeds ten times faster.  How he expects to make West Virginia a top-5 broadband state with their obsolete DSL is a question the gushing host never bothered to ask.”

Steve doesn’t think too many of his Mountain State neighbors are as excited as Mr. Waldo by Frontier.

“God help you if your line goes out, because they can take days to get around to fix it,” Steve says. “Waldo tries to sell you his possum pie with claims the company takes longer to effect repairs so they are ‘done right the first time,’ which is a real hoot considering all of the repeated outages customers experience.”

Steve doesn’t lay the blame entirely at Frontier, however, claiming Verizon fled the state after mangling their outdated landline network and keeping it running with electrical tape.

“Frontier bought into a real mess, and I’m sure they will eventually fix a lot of the problems Verizon didn’t ever care to fix, but that doesn’t make West Virginia a broadband nirvana — certainly not with Frontier’s DSL.”

A major scandal in one of the nation’s most important gay civil rights organizations has inadvertently exposed AT&T’s public policy skunkworks — a dollar-a-holler operation to advocate for the company’s merger with T-Mobile, complete with pre-written advocacy letters, traded favors and promises of support from other board members, paid for with big financial contributions.

When it was all over, the president of Gay & Lesbian Alliance Against Defamation (GLAAD) resigned, his ties to a Republican operative board member connected with AT&T were exposed, and the progressive gay and lesbian media outed the whole sordid affair — painting one of the clearest pictures yet of how civil rights groups get into the unenviable position of trading their good name for a piece of big business action.

As Stop the Cap! has reported for nearly three years now, there is a cottage industry in the non-profit sector collecting favors and contributions in return for letters on organization letterhead supporting the public policy agendas of their corporate sponsors.  Honest non-profit groups won’t engage on issues that have little or no connection to their mission statements, but other groups have relaxed those standards to meet fundraising goals or to deal with internal board politics.

The latter appears to be the most prominent reason for GLAAD’s poorly managed entry into the debate on Net Neutrality and AT&T’s merger targets — the first time the group has ever spoken up about a corporate merger.  Because so many in the gay, lesbian, and transgendered community are politically aware, it came as quite a shock when GLAAD suddenly dove into two issues most assumed were not relevant to the group’s mission:

GLAAD Net Neutrality Intrigue: On January 4, 2010, GLAAD President Jarrett Barrios signed a letter to the Federal Communications Commission expressing “concern” about the implementation of formal protection of the open Internet through Net Neutrality.  At the time, nothing about Barrios’ letter seemed suspicious.  In fact, it was typical of the type and tone of concern trolling by certain groups that could pay a stiff price if rank and file members ever found out.  But several members did and raised hell with GLAAD’s leadership over the issue.  Barrios evidently panicked, quickly sending a follow-up letter to the FCC claiming his signature was forged and begging the ‘fake’ submission be withdrawn.  Ironically, he added the views in the original letter, unclear as they were, did not represent GLAAD’s position on Net Neutrality, whatever it was.

GLAAD Loves AT&T and T-Mobile’s Merger: On May 31st, Barrios joined the National Gay & Lesbian Chamber of Commerce in penning a joint letter advocating the merger because, apparently, gay people love 4G, artistic use of the Internet, and telemedicine.  Gay groups immediately pounced, some describing the letter bizarre, others potentially offensive.  The second letter ignited an all-out firestorm against GLAAD’s leadership, particularly considering AT&T has donated profusely to GLAAD over the years, and gay people have no more love towards AT&T and its business agenda than anyone else.

Signorile

Head scratching over why GLAAD was obsessed with delivering a helping hand to AT&T was soon followed by detailed investigations which began to uncover the important underlying facts.

One pivotal moment came from Michelangelo Signorile, a long-time gay activist and radio talk show host, who interviewed GLAAD’s former board co-chair, Laurie Perper.  Perper left GLAAD suggesting its board was in turmoil under the leadership of Barrios.  In her words, Barrios’ efforts to shore up his presidency included trading an AT&T advocacy letter for a company-connected board member’s continued support.

Perper also dismissed Barrios’ suggestion that the letter to the FCC about Net Neutrality was forged.  Instead, she claims, Barrios tried to blame it on his administrative assistant, Jeanne Christiano, who he claimed ambitiously sent the letter without his authorization.

Former GLAAD board co-chair Laurie Perper talks with Michelangelo Signorile about the connection between AT&T and GLAAD’s president. June 7, 2011. (11 minutes)
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Since that interview, Barrios’ has come clean about who wrote the Net Neutrality letter.  According to Barrios, AT&T sent the talking points to include in the letter and he authorized it:

The letter’s origins lay with AT&T; the telecom giant sent Barrios suggested wording for another letter to the FCC. Barrios’ special assistant used the language verbatim to create the letter, signed his name to it, and sent it in.

Barrios recounts that he was at an airport when his assistant called him to go through some items on his agenda. In a hurry to board his plane, when she told him that “they” wanted him to send in the letter to the FCC, Barrios assumed he needed to resend his first letter again. He authorized her to send the letter without any oversight.

[…] “This was from a letter with language from AT&T suggesting that we support this, and at the time, it was not something I had seen,” Barrios said. “When I saw it, we withdrew it to reflect our perspective.”

Barrios: Now updating his resume

Further investigations uncovered AT&T-connected board member Troup Coronado. Many activists were surprised to learn learn Coronado is or was a paid consultant for AT&T and a Republican operative who used to work for Sen. Orrin Hatch (R-Utah).  While involved in Congress, Coronado worked to install judges hostile to gay and lesbian rights on the federal bench.  Today, he is a board member overseeing one of the nation’s most important gay and lesbian rights groups.

That revelation went over about as well as one could expect, and within a week, Barrios submitted his resignation, and calls for Coronado to leave are growing louder by the hour.

The intrigue has thrown GLAAD into full scale damage control mode, even as former board members like Perper call the group hopelessly brand tarnished and advocate its disbanding.  It also embarrasses AT&T by further exposing the sock-puppetry operations it runs to build phantom support for its business and policy agenda.

How Former and Current FCC Employees Helped Other Gay Groups (Heart) AT&T

GLAAD is not the only LGBT group in the chorus conducted by AT&T.  The National Gay & Lesbian Chamber of Commerce is no more friendly to consumer interests than any other Chamber of Commerce, and their participation in fronting for AT&T was to be expected.  But the National Gay & Lesbian Task Force is now repenting for their own involvement in AT&T’s bought and paid for parade:

“The National Gay and Lesbian Task Force submitted a letter to the Federal Communications Commission on Jan. 5, 2010, about rules and regulations regarding net neutrality. The letter was a response to a request by AT&T,” she said. “However, we quickly realized that we had not gone through an appropriate internal process on such policy matters and that the Jan. 5 letter did not accurately reflect our views and was a mistake. As a result, on Jan. 14, the Task Force submitted an additional letter to the FCC clarifying the organization’s position on net neutrality.”

“The Task Force has established a clearer internal review process that applies to any request for sign-on or policy endorsement from any group, organization or corporate partner. We have not issued any additional letters on net neutrality. Additionally the Task Force has declined requests from our corporate partner AT&T for further action regarding this issue and declined requests to write a letter regarding the proposed merger between AT&T and T-Mobile.”

Perhaps even more disturbing, new evidence is emerging that the FCC itself may be encouraging some of these civil rights groups to participate in discussions about controversial industry events.  The Bilerico Project discovered FCC chief Bill Lake meeting with GLAAD to talk specifically about how the group could become involved in public policy debates:

What’s not disclosed, however, is that Robinson, Barrios and board member Anthony Varona met with FCC chief Bill Lake and Deputy Director Bob Radcliffe in mid-May of last year. Varona is a former FCC attorney.

“Rashad, Jarrett and Tony met with the FCC in May 2010 to discuss GLAAD’s involvement in present and future FCC proceedings (including broadband proliferation items, public interest programming initiatives, etc.),” according to Rich Ferraro, GLAAD’s Director of Communications. The group denies that they took a formal position on any matter pending before the FCC at the time.

If true, this could link corporate astroturfing and dollar-a-holler advocacy to FCC insiders currently at the agency, as well as those who used to work there.

A word to the wise: if your non-profit needs cash, ask for contributions from your members.  Don’t sell out your good name for a billion-dollar corporate merger.  The position you protect may turn out to be your own.