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Chattanooga Comcast and AT&T U-verse customers will need to open their wallets a bit more in 2013 as both the cable and phone company have announced new rate hikes that are now taking effect. But not everyone will pay more. Customers of EPB Fiber, which offers up to 1,000/1,000Mbps broadband and is a service of the publicly-owned electric utility is keeping prices stable until further notice.

Comcast customers face new increases averaging 4% in 2013 — $5 a month for Triple Play customers, several dollars more for broadband, and around $1 for basic cable service. Customers on promotions are unaffected until the temporary pricing expires.

AT&T U-verse customers will see price increases as much as $9 a month for television and broadband service.

Chattanoogans who ditched both private providers for the public option are sitting pretty with absolutely no rate increases to pay at this time. Although negotiations with programmers are ongoing, and costs are rising, EPB says it won’t raise any rates unless it becomes absolutely necessary. The utility takes rate increases very seriously, bringing them directly to its board of directors for approval.

Comcast and AT&T said the introduction of new services and increased programming costs contributed to their need to increase rates. Comcast says it has kept rates for its Xfinity service stable since 2010, a claim that doesn’t explain away its 4% rate hike in January 2012. AT&T said its supplier and labor costs also contributed to price increases, which also includes a broadband television surcharge.

If this seems like déjà vu, it could be because both AT&T and Comcast raised rates exactly one year ago this month. AT&T was the worst offender last year, boosting TV prices between $2-5 a month, equipment fees by $4-7 a month for broadband, and a $3 rate hike for its unlimited calling landline service. In comparison, EPB said it had no immediate plans to raise TV, broadband, or phone prices last year either.

EPB Fiber is the only Chattanooga telecom provider not raising its prices.

Customers facing rate increases can find an easy way to avoid them: threaten to take your business somewhere else. Retention agents are on the lookout for customers considering moving to another provider, and will usually slash rates to keep your business. Don’t want to argue your way to a lower rate or just want to say goodbye to Comcast and AT&T? Stop the Cap! highly recommends EPB Fiber, the most technologically advanced option in Tennessee, priced fairly with a proven track record of reliability.

A lot of Chattanooga area residents have already considered their options:

“Comcast is complete garbage,” writes one former customer. “Horrible product, even worse customer service. My Internet went out daily. I switched to EPB as fast as I could and have never been happier. I wouldn’t have Comcast again if it was free for the rest of my life.”

Another former cable customer reminds Comcast competition makes all the difference. He switched to EPB as well:

“Keep your Xfinity Comcast, you treated me like dirt when there was no other choice for cable. Now that I have that choice, I’ll never consider you again.”

At least 95 percent of Vermont residents will have access to broadband by the end of today, because of a combination of private investment, public funding, and innovative service solutions for some of the state’s most rural areas.

State officials say 2012 was an important year for broadband availability in Vermont, as dominant phone company FairPoint Communications made inroads in expanding its DSL service in areas that never had access before.

In 2011, Governor Shumlin set an ambitious goal to see 100 percent of Vermont covered by broadband by the end of 2013, and the state appears on track to achieve that target in the coming year.

[flv width=”640″ height=”380″]http://www.phillipdampier.com/video/Ask The Governor Broadband 2-3-11.flv[/flv]

Gov. Shumlin answered questions from state residents regarding his plan to see 100% broadband coverage in Vermont by the end of 2013. (Feb. 3 2011) (3 minutes)

Vermont’s small size would seem to make it an easy target for total broadband coverage, but significant rural areas have made it unprofitable for commercial phone and cable companies to make inroads.

Comcast, the state’s largest cable operator, has not grown much geographically over the past five years. FairPoint, which took control of much of the state’s landline network from Verizon in 2008, has been compelled to achieve broadband expansion as part of an agreement that approved the sale.

Karen Marshall, who heads a state effort to expand both cell phone and broadband access in Vermont says the remaining areas without coverage will be a difficult challenge, but one that can be achieved with the help of private and public investment.

“The last 5 percent are the needle in the haystack,” Marshall told Vermont Public Radio. “They are the most far-flung, probably the most expensive and sometimes even the most physically challenging to get to.”

Wireless is often the most cost-effective solution, both for broadband and cell expansion, and Marshall suggested Vermont would use microcell technology along Vermont’s rural roadways.

“I think we will be one of the first places in the country that is deploying microcell technology for example, on the top of telephone poles or utility poles, kind of like a daisy chain,” Marshall said.

The rural Vermont Telephone Company won a $5 million state grant to cover Vermont’s southernmost counties with a combination of wireless phone and broadband service.

While areas of rural Vermont will likely have broadband access for the first time, improvements have also been available to those who already have the service.

Marshall estimated the average broadband speed in the state has increased from 5.5 to 9.7Mbps, which is above the national average.

Vermont Public Radio surveys how the state is doing meeting Gov. Shumlin’s goal to see broadband service available to every Vermonter. (December 28, 2012) (2 minutes)
You must remain on this page to hear the clip, or you can download the clip and listen later.

This FCC broadband coverage map depicts broadband service gaps in orange.

According to broadband coverage maps drawn from data provided by telecommunications companies across Mississippi, high speed Internet service is available just about everywhere in the state.

Only it isn’t.

Now one Public Service Commissioner is going public warning broadband expansion funding is in jeopardy because the Federal Communications Commission is relying on faulty map data.

Northern District Commissioner Brandon Presley told the DeSoto Times-Tribune things are not nearly as rosy as some providers would have you believe.

“The maps the FCC have are just plain wrong,” Presley said. “Their maps show that Mississippi is almost completely covered and that is certainly not the case. Getting this corrected is a top priority so that Mississippi can get its fair share of funding to cover these areas for residents and businesses.”

The implications for DeSoto County, Mississippi’s fastest growing county, are profound.

Thanks to map data volunteered by service providers that suggest virtually the entire state already has access to broadband, federal assistance funding for expanding Internet access may be off-limits. Most assistance programs require that areas be unserved to avoid duplicating existing service.

“Currently, the map vastly overstates the broadband coverage in the state,” Presley said. “While the map shows neighboring states with extensive underserved areas, Mississippi appears with nearly universal coverage.”

The FCC’s map of unserved areas depicts Mississippi as a broadband outlier in the southern United States, with far more service options than other nearby southern states. Digging deeper reveals major problems with the FCC’s data.

For instance, the state’s map reveals much of Mississippi is covered by wireless providers like AT&T, C-Spire, and Verizon. But those companies offer only limited data plans at high prices that are not equivalent to traditional wired broadband from a cable or phone company. A company called Callis Communications is depicted as providing a large part of the state with DOCSIS 3 cable modem service, when in fact Callis markets cloud-services to business customers and does not operate a cable company.

Most of Mississippi’s broadband connections from cable companies and AT&T are in larger communities including Tupelo, Jackson, Meridian, Gulfport, Hattiesburg and Biloxi. That leaves large sections of central and western Mississippi with significant service gaps.

Presley said his office is working to correct the FCC’s National Broadband Map, but with federal spending cutbacks looming, it may already be too late.

“Without this assistance, rural communities will continue to be left behind as small businesses, health care and emergency services will be left without necessary access to the Internet,” Presley told the newspaper.

[flv width=”640″ height=”380″]http://www.phillipdampier.com/video/WLOX Biloxi Broadband map could cost the state millions 12-21-12.mp4[/flv]

WLOX in Biloxi reports Mississippi officials are scrambling to correct faulty broadband map data with the FCC so the state can qualify for broadband expansion funding.  (2 minutes)

A new report critical of broadband providers’ implementation of usage-based billing and data caps finds providers are not using them to handle traffic congestion, instead implementing them to monetize broadband usage and protect pay television from online video competition.

The New America Foundation and the Open Technology Institute today released its report, “Capping the Nation’s Broadband Future?,” which takes a hard look at the increasingly common practice of limiting subscribers’ broadband usage.

The paper finds that provider arguments for limiting broadband traffic don’t make sense, but do earn more dollars from customers forced to upgrade their service to win a larger monthly usage allowance.

“Although traffic on U.S. broadband networks is increasing at a steady rate, the costs to provide broadband service are also declining, including the cost of Internet connectivity or IP transit as well as equipment and other operational costs,” the reports argues. “The result is that broadband is an incredibly profitable business, particularly for cable ISPs. Tiered pricing and data caps have also become a cash cow for the two largest mobile providers, Verizon and AT&T, who already were making impressive margins on their mobile data service before abandoning unlimited plans.”

The study finds providers are attempting to invent a climate of broadband scarcity, particularly on the nation’s wired networks, to defend the introduction of various forms of Internet Overcharging, including data caps, usage-based billing, and overlimit fees.

The New America Foundation is calling on policymakers to take a more active role in defending online innovation and controlling provider zeal to cap the nation’s broadband future.

The False Argument of Network Congestion

Providers’ tall tales.

The most common defense for usage caps providers put forward is that they curb “excessive use” and impact almost none of their customers. The report points out many of the providers implementing usage caps have left them largely unchanged, despite ongoing usage growth patterns. In 2008, the report notes Comcast measured the average monthly usage of each broadband customer at around 2.5GB. Just four years later that number has quadrupled to 8-10GB. While many customers rely on Comcast’s broadband service for basic e-mail and web browsing, the cable operator has begun to entice customers into utilizing its online video platform, which in certain cases can dramatically eat into a customer’s monthly usage allowance, which remained unchanged until earlier this year.

Many broadband providers are less generous than Comcast, some imposing caps as low as 5GB of usage per month.

“Data caps encourage a climate of scarcity in an increasingly data-driven world,” the report concludes. “Broadband appears to be one of few industries that seek to discourage their customers from consuming more of their product. Thus, even as the economic and engineering rationale for data caps on wireline broadband does not hold up given the declining costs of providing service and rapid technological advancement, the proliferation of data caps is increasing. The trend is driven in large part by a woefully uncompetitive market that allows the nation’s largest providers to generate enormous profits as well as protect legacy business models from new services and innovators.”

The argument that increased usage puts an undeniable burden on providers is untenable when one examines the financial reports of providers.

The study found, for example, Time Warner Cable’s latest 10-K report shows that connectivity costs as a percentage of revenue have decreased by half, from an already modest 1.20% in 2008 to a little over 0.60% in 2011.

In 2012, the company is again exploring ways to introduce usage caps on at least some of its customers, in return for a modest discount.

Upgrade? Spend Less and Charge Customers More Instead!

The report notes cable companies like Time Warner Cable and Comcast, whose networks were originally built for television services and have now been repurposed for broadband as well, are enjoying lucrative profits on
networks that have long been paid off. In fact, Time Warner Cable recently disclosed it earns more than 95 percent in gross margins on its broadband service, with additional rate increases for consumers likely in the near future. The company recently began charging its customers a modem rental fee as well.

Shammo

At these margins, the report concludes selling broadband service to “data hogs” who consume hundreds of gigabytes of traffic per month are still profitable for providers.

As financial reports disclose capital spending on network upgrades continue to fall, operators are instead content imposing usage limits on customers to control traffic growth and further monetize an already enormously-profitable business.

The nation’s largest phone companies also come in for criticism. The report quotes from Stop the Cap!’s coverage of Verizon’s chief financial officer openly admitting it is investing most of its available capital in the highly profitable wireless sector.

“It is clear that in shifting a greater percent of their overall capital expenditures to their wireless segments, Verizon and AT&T are more interested in expanding their dominance in the wireless industry than they are in upgrading DSL or expanding fiber connectivity to provide aggressive competition for residential broadband service,” the report found.

Verizon’s chief financial officer recently made the following statement at an investor relations event:

“The fact of the matter is wireline capital — and I won’t give the number but it’s pretty substantial — is being spent on the wireline side of the house to support wireless growth,” [Verizon CFO Fran Shammo] said. “So the IP backbone, the data transmission, fiber to the cell, that is all on the wireline books but it‖s all being built for the wireless company.”

Wall Street Educates Providers on How to Lead the Way With Data Caps

Although the majority of subscribers loathe usage restrictions on their already-expensive broadband accounts, a vocal group on Wall Street strongly favors them, and routinely browbeats providers on the issue.

Helping educate cable companies how usage caps can protect against cord cutting and further monetize broadband.

The report’s authors discovered some Wall Street banks even invest time and money developing presentations advocating usage caps and consumption billing to protect video revenue. A 2011 Credit Suisse presentation outlined ways usage-based billing can protect cable operators’ video revenues:

“…over the longer term, consumption based billing could reduce the attractiveness of over the top video options (e.g., Netflix and Hulu), as the economic attractiveness of such over the top options could be partially offset by a [broadband] bill that is higher, due to [broadband] overage charges that would be driven by large amounts of data being streamed via a customer’s [broadband] connection.”

Yet most cable operators vehemently deny usage caps and consumption billing are designed to decrease usage or protect video revenue. Credit Suisse and other Wall Street banks and analysts say otherwise, and express little concern over network congestion.

The report finds compelling evidence that data caps have effectively stopped new competitors and online innovation already, noting a Sony executive stated that the company was putting the development of its own online video service on hold, citing Comcast’s monthly usage cap.

The Wireless Cap Shell Game: Caps Protect Scarce Airwaves While Companies Promote More Usage, For a Price

The report also found suggestions of a forthcoming wireless traffic tsunami are greatly exaggerated. AT&T and Verizon Wireless have issued repeated alarmist rhetoric claiming that wireless data’s exponential growth is threatening to overwhelm available network capacity.

But both carriers recently changed pricing models to encourage consumers to bring more devices to their networks, along with suggestions customers upgrade to higher allowance plans to handle the additional traffic generated by those devices. In fact, both AT&T and Verizon Wireless see profitable futures in forthcoming “machine to machine” wireless traffic that will allow cars, appliances and medical devices to communicate over their respective mobile networks. AT&T’s security and home automation system also relies on its own wireless network, offering customers remote access to their homes, chewing up wireless bandwidth as they go.

Despite suggestions from both providers their new wireless data plans would save customers money, it has brought overall increases in the average revenue earned from each subscriber instead.

Phillip “It’s hard to trust a group that so spectacularly flip-flopped on Internet policies when its benefactor AT&T changed its tune” Dampier

When Republican FCC Commisioner Ajit Pai turned up last week at a telecom symposium to warn a more activist FCC could ruin broadband providers’ efforts to charge consumers more money for less service, he was speaking to a very friendly audience.

The conservative Phoenix Center, which ran the event, has been spewing out industry-friendly “research reports” for years that attempt to justify the country’s sky-high broadband pricing. It also promotes a “hands-off” mindset on industry oversight, calling it common sense and consumer-friendly.

Unfortunately for the group and its supporting authors, it has a serious credibility problem — exposed as an industry-funded “think tank” operating as a mercenary research arm for AT&T and other phone companies. In fact, the same group that today generates endless research condemning Net Neutrality had a very different position in 2004 when it published an Op-Ed entitled, “Net Neutrality: Now More Than Ever.”

What changed? Its benefactor. In 2004, AT&T was a competing long distance carrier fighting local phone companies. Today it –is– one of those phone companies. With its Baby Bell owners controlling AT&T’s purse-strings starting in 2006, the Phoenix Center dutifully flip-flopped to maintain continuity with the ‘new AT&T,’ strongly opposed to most forms of broadband regulation.

So it comes as no surprise the Phoenix Center continues pumping out cheerleading “research reports” that attempt to bolster credibility to forces opposing Net Neutrality and supporting an Internet Overcharging free-for-all with the help of usage billing and caps.

One particular bit of nonsense that completely ignores marketplace reality came in Phoenix Center Chief Economist Dr. George Ford’s report, “A Most Egregious Act? The Impact on Consumers of Usage-Based Pricing.”

For example, Ford argues:

A prohibition of differential pricing renders a single price that lies between the low price for the restricted service and the high price for the unrestricted service. Therefore, prohibitions against usage based pricing forces some consumers to pay more for services they do not want or use, while others are allowed to pay less for services they do. The prohibition, in effect, results in a transfer of wealth from one group of consumers to another, and profits are also reduced. Overall consumer welfare is diminished, even though some consumers are better off.

We’re number one… in prices, even with the increasing prevalence of usage-based pricing Ford believes benefits consumers. (Image: CRTC)

But Ford completely ignores the current conditions in today’s broadband market that have made it easy for providers to promulgate an unpopular end to flat rate, unlimited broadband in favor of a highly-flawed, usage-based billing policy:

1. Ford ignores the broadband market is essentially a duopoly for most consumers and effectively a monopoly in rural America. That gives providers what they call “pricing power,” the ability to increase prices at will and change pricing models because consumers are dependent on the service and have limited options to take their business elsewhere;
2. The only “transfer of wealth” involved here is from consumers to providers. While profits soar and costs drop, Ford complains that those using the service more are somehow subsidized by lighter users, when it fact providers enjoy a 90-95% gross margin on broadband. As Time Warner Cable CEO Glenn Britt admitted, the most significant cost attributed on the cable company’s balance sheet for broadband comes from its backbone traffic costs, which are minuscule in contrast to the increasing prices the cable company charges for its broadband service;
3. Consumer welfare is reduced primarily from the high costs charged by providers, made possible by scant competition that would otherwise drive prices downwards, not from expenses associated with broadband traffic;
4. Ford is careful not to advocate for a true usage-based billing system that would be a revenue nightmare for his benefactors. In a strict usage-based pricing model, customers would pay a small fee for infrastructure, support, and equipment expenses and a variable charge based on actual usage. But no provider in the United States advocates for this system. Instead, providers force consumers into tiered broadband plans that include different usage allowances the vast majority of customers will either not exhaust or will exceed, which raises profits even higher with usage overlimit penalties. With no unused usage rollover, most customers are in the same position Ford claims will diminish consumer welfare: paying for service they do not want or use;
5. Most consumers favor unlimited, flat use plans even if they could save money with a usage-constrained pricing model. Since keeping customers happy with a more expensive unlimited plan they like instead of a lower priced plan they don’t want would seem to enhance provider profits. But Ford ignores this reality, perhaps understanding providers are actually laying the groundwork to broadly monetize Internet usage. Whether a provider adopts usage-based billing or a strict cap on usage, which is growing in most households, the inevitable result is still the same: more profits, less cost from constrained usage. Inevitably this will force customers into higher-priced, higher-profit upgrades that deliver a higher usage allowance, again something consumers simply do not want. This is already a reality in the wireless marketplace, and is well-acknowledged by both AT&T and Verizon Wireless.