The mouthpiece of Big Telecom.

The Information Technology and Innovation Foundation has looked and looked, and just does not see America’s broadband problems aptly described by industry critics including Susan Crawford, David Cay Johnston and Tim Wu. As far as the ITIF is concerned Americans have little to complain about with respect to broadband availability, speeds or pricing.

That finding is part of a new research paper, “The Whole Picture: Where America’s Broadband Networks Really Stand,” authored by Richard Bennett, Luke Stewart, and Robert Atkinson.

The report sniffs at critics complaining about uncompetitive, high-priced service, dismissing them as misguided “holders of a particular ideology or economic doctrine, which is Neo-Keynesian, populist economic thinking in this instance.”

Bennett, Stewart, and Atkinson, who have all penned pro-industry reports for years, prove another economic doctrine: the free market for industry bought-and-paid-for-“research” is alive and well.

The summary finding of the report:

Taking the whole picture into account, this report finds that the United States has made rapid progress in broadband deployment, performance, and price, as well as adoption when measured as computer-owning households who subscribe to broadband. Considering the high cost of operating and upgrading broadband networks in a largely suburban nation, the prices Americans pay for broadband services are reasonable and the performance of our networks is better than in all but a handful of nations that have densely populated urban areas and have used government subsidies to leap-frog several generations of technology ahead of where the market would go on its own in response to changing consumer demands.

Although the report is extensively footnoted to bestow credibility, once a reader begins to check out those footnotes, trouble looms:

1. Some footnotes lead the reader to business or Wall Street media reports, which can favor an industry point of view or extensively quote from executives and insiders;
2. Several certain critical assertions include footnotes that link only to the home page of the source, making it impossible to find the exact source material used;
3. Many footnotes come from earlier articles, position papers, and statements from the authors or others affiliated with the ITIF — hardly independent sources of information.

Bought and paid for research.

ITIF’s report is riddled with customized benchmarks the ITIF appears to have invented itself. Ars Technica caught one in the executive summary and questioned the relevance of measuring broadband adoption among “computer-owning households” at a time when an increasing number of Americans use broadband for video streaming on televisions, use smartphones, or rely on tablets for access.

We also noted the authors making several assertions without facts in evidence to support them. Among them is the unsupported notion that “the high cost of operating and upgrading broadband networks in a largely suburban nation” makes today’s broadband pricing understandable and fair.

In fact, the most significant costs borne by cable operators came during the early years of their initial construction — one, even two decades before broadband over cable was envisioned. When cable Internet service was introduced, it was praised for its relatively inexpensive start-up costs and its ability to deliver ancillary, unregulated revenue for cable operators. Those cable networks over which broadband is delivered have been paid off for years.

The authors avoid the actual financial reports of the largest phone and cable companies in their study, because as public shareholder-owned companies, they are obligated to disclose reality. Those financial reports show a consistent drop in capital expenses and infrastructure investment and a major increase in revenue and profits from broadband service. Cable industry executives have repeatedly asserted the reason they raise broadband prices is not because the costs to run their networks are very high, but rather because “they can.”

From there, Bennett, Stewart, and Atkinson play endless rounds of Statistics Scrabble.

Claim: America enjoys robust competition for broadband.

Phone Company

Fact: The cable industry has declared itself the victor for delivering high-speed broadband in the United States. DSL has long since given up competing on speed, and even AT&T’s hybrid fiber-copper U-verse platform is rapidly losing ground in the broadband speed race. Wireless and satellite plans are almost all slower and routinely cap usage, often to levels of just a few gigabytes per month.

The cable industry also won the right to keep its network to itself, not allowing third-party wholesalers on-demand access to resell broadband over those networks. Phone companies have been able to charge discriminatory wholesale pricing to access their networks, and only for certain types of connections.

Abroad, most networks are open to third parties on non-discriminatory terms. In places like the United Kingdom, customers have their choice of ISPs available over a traditional BT DSL line. In Asia, public subsidies and incentives helped push providers to construct fiber to the premises networks, but those networks are open access, helping spur competition and lower prices.

Domestically Time Warner Cable permits competitors like Earthlink on its network on a voluntary basis, but unsurprisingly Earthlink charges the same or higher prices for service that Time Warner charges once a six month promotion ends. That represents “competition” in name-only.

Claim: Most speed-test-based research rankings on broadband speeds around the world are wrong.

Cable Company

Fact: ITIF at one point makes the unfounded assertion that since many people only test their broadband speed when something seems wrong with their connection, most speed-test-sourced “actual speed” data is not very useful because there often is something wrong with a broadband connection when testing it, resulting in flawed data. This ‘picked out of the sky’ claim is one of the primary arguments ITIF makes about why broadband rankings (produced by those other than themselves) are irrelevant.

ITIF’s press release about its report makes the completely unsubstantiated assertion that “the average network rate of all broadband connections in the United States was 29.6Mbps in the third quarter of 2012; in the same period, we ranked seventh in the world and sixth in the OECD in the percentage of users with performance faster than 10Mbps.”

DSL customers may find a statistic rating America’s broadband speeds as better than one might expect to be less than useful when it only counts broadband connections faster than the average DSL user can buy themselves.

This cherry-picking may help the ITIF’s arguments look more credible, but it does nothing to improve your broadband speeds at home or at work.

Claim: Broadband provider profits average less than 2% annually.

Fact: Another clever statistic (poorly sourced as ‘from the home page of Bloomberg.com’ — check back with us when you find the original article yourself) that fails to tell the whole story.

We aren’t THAT profitable, really.

First, ITIF defines net profits specifically as “simply the difference between revenue and expenses.” But that definition may not account for a range of corporate accounting activities which can diminish net profits but still let the company walk away with high fives from Wall Street. Share buybacks or dividend payouts, acquisitions, costs and expenses from other divisions not related to broadband, etc., can all affect the bottom line and mask the enormous earnings and profit potential of American broadband.

Take Time Warner Cable, which has a 95 percent gross margin selling broadband. Broadband service is just one of three primary services sold by the cable operator. Broadband does not suffer from landline losses in the phone business or from escalating TV programming expenses. Broadband is clearly the most profitable service in Time Warner’s product arsenal because it occupies only a small part of the company’s wired infrastructure. Supplying broadband service also costs Time Warner relatively little money as a percentage of their earnings and has helped offset revenue loss from the television side of the business. Bandwidth costs have also declined year after year. Infrastructure upgrades are more than covered by pricing that has begun to creep up over the last few years. In effect, broadband earnings are covering for other products that are not selling as well.

ITIF’s claim that supplying broadband is costly and that current rates are justified just isn’t true.

Claim: Europe is behind the United States in broadband.

Fact: The one legacy network that both Europeans and Americans share in common is the copper wire basic telephone service. From there, telecommunications service diverged.

North Americans embraced cable television while much of western Europe (especially the UK) preferred direct-to-home satellite service. That difference set the stage for some significant broadband disparity. Cable broadband technology has proved more robust and reliable than DSL service. Phone companies that rely on basic DSL are falling behind in broadband speeds. Investment to bring fiber online is the only way these phone companies can stay competitive with cable broadband. Some countries with particularly decrepit telephone networks, especially those left over from the Communist era in eastern Europe, are being scrapped in favor of fiber to the home service. Many western European countries are incrementally introducing fiber to the cabinet or neighborhood service, which leaves the last mile copper phone wire connection in place.

This is why speeds in many eastern European countries and the Baltic states with full fiber networks are so high. Advanced forms of DSL are more common further west, using technologies like VDSL2+. But DOCSIS 3 cable upgrades (and those to follow) continue to leapfrog over telephone company DSL advancements. Speed disparity is often the result of fewer cable systems in Europe as well as the amount of fiber optics replacing basic telephone service infrastructure.

Despite that, many Europeans pay less, particularly for faster service, than we do. Plus, fiber optic upgrades are within the foreseeable future in many European countries. In the United States, fiber deployments are now crawling or stalled in areas served by AT&T and Verizon. Neither company shows much interest in spending money on further wired upgrades and no competitive pressure is forcing them to, especially as both phone companies increasingly turn attention to their wireless divisions for most of their earnings.

The kind of research produced by the ITIF is tainted as long as they don’t reveal who is paying for these research reports. As Stop the Cap! readers have learned well, following corporate money usually helps expose the real agenda of these so-called “think tanks,” which are created to distort reality and quietly echo the agenda of their paymasters with a veneer of independence and credibility.

Residents in mountainous western North Carolina have been frustrated by broadband availability maps from the Federal Communications Commission that suggest broadband service is plentiful and fast. But on the ground, customers trying to sign up for Internet access the FCC says is readily available is anything but.

The FCC’s National Broadband Map has been repeatedly criticized by broadband advocates for relying on voluntary data supplied by Internet Service Providers — data that has often proved incomplete, exaggerated, or just plain inaccurate.

Wally Bowen, executive director of Asheville’s Mountain Area Information Network (MAIN), wants to show the FCC its broadband map is out of touch with the real world. MAIN has announced a new website that will let western North Carolina residents test and report the real broadband speeds they are getting from providers to the FCC. If no broadband service is available at all, residents can report that as well.

“Based on our experience, we believe the FCC is underestimating the scope of this problem,” said Bowen, an advocate for Internet access in rural areas. “The FCC’s estimate is based primarily on data provided by the cable and telephone companies.”

With a growing amount of federal money available to wire unserved areas, phone and cable companies may have a vested interest exaggerating their coverage areas and Internet speeds to stop would-be competitors from entering their territories and building new networks. New providers could find a very enthusiastic customer base of more than 48,000 aggravated residents in 16 counties in western North Carolina that have no broadband options at all.

“This new website empowers citizens to compare their real-life experience with the FCC data, but more importantly, it dissects the broadband problem, provides ideas for solving it, and shows citizens how to add their voices to the policy debate,” said Bowen.

Bowen believes profit-minded private companies are unlikely to ever be enthusiastic about wiring rural communities when larger profits can be earned in larger cities.

“Solving this problem isn’t rocket science,” said Bowen. “We’ve seen this movie before. Seventy-five years ago, for-profit electric utilities left rural America in the dark, so Congress passed the Rural Electrification Act and allowed local communities to solve the problem themselves by creating nonprofit electric cooperatives.”

But federal funds are off-limits if another provider already claims to offer service in an area, no matter how poorly they deliver it. Many large cable and phone companies have also worked to ban community-owned broadband networks from ever getting off the ground with the passage of corporate-sponsored bills passed by state legislatures. That leaves rural residents waiting endlessly for the telephone company to get around to providing some level of broadband service.

Problems with Frontier Communications’ DSL in the region tells the story:

Paul Manogue lives in an area considered “served” by Frontier Communications. The phone company sold him 3Mbps service, but after installation, Manogue found Frontier locked down his DSL modem to 1.5Mbps, the fastest speed his telephone line could comfortably handle. Today, Manogue pays $60.98 for 1.5Mbps service that has since further degraded. Today his top speed is 1Mbps or less, even though his monthly bill remains the same. His broadband connection does not come close to the 4/1Mbps minimum speed the FCC expects from today’s rural broadband networks.

“We have been bluntly told [by Frontier] that the level of service we receive is what we pay for,” Manogue told MAIN. Manogue has no other options.

Bill Duffell of Burningtown thinks Frontier broke its promise to deliver broadband where Verizon, his old provider, refused. He is still waiting, along with a number of other residents, for even basic DSL.

“Frontier promised to bring high-speed Internet access to remote areas of western North Carolina within three years,” he said. “They have not done this and now tell me there are no plans to bring high-speed Internet to the area. Internet access via satellite costs me $129.99 per month with Exede/WildBlue and is weather dependent.”

Allen in Madison County says Frontier delivered tolerable service until six months ago, when his speeds began to drop.

“The breaking point was when I was going to upload a 30 minutes video and found out it was going to take over 13 hours to upload.” Allen says. “I called Frontier and they [told me I was] ‘in a high volume area.'”

Anyone considering launching a competitive broadband service to improve the online experience of Manogue, Duffell, Allen and others will not qualify for any federal assistance because Frontier, the incumbent provider, already provides DSL broadband. Frontier also receives significant aid from the Connect America Fund — up to $775 to extend broadband to each individual home or business it earlier deemed unprofitable to serve. Each additional connection risks slowing down every other connection in the immediate area if Frontier does not maintain regular upgrades.

Two of the largest phone companies in the country — AT&T and Verizon — have both refused CAF money altogether. AT&T sees a bigger financial opportunity disbanding their wired telecommunications networks in rural America and forcing customers to switch to more costly (and much more profitable) wireless data services.

“The refusal of Connect America funding by the big carriers, plus their plans to abandon their wired networks in rural areas, is a policy earthquake that’s been ignored by corporate media,” Bowen said.

Time Warner Cable is sending apology letters to former customers acknowledging the company’s cable service has not always lived up to expectations, but improvements have been made that ex-subscribers should consider.

The effort is part of a $50 million marketing campaign that will push a 30-day money back guarantee and claims their competitors’ promised savings have not materialized.

“The Better Guarantee”-campaign will target customers who have dropped the cable operator in favor of competitors that include AT&T U-verse and Verizon FiOS.

Although both AT&T and Verizon offer attractive introductory rates, Time Warner Cable says the savings disappear after the promotion expires. The company’s new ad campaign will attempt to entice customers back with offers of lower rates, a $200 reward card, and better service, including faster broadband speeds and new products like online apps for video streaming and home security services.

The New York Times reports the campaign was announced one week before the cable operator releases its latest fourth quarter earnings, which may show a growing number of customers canceling their cable television service. Jeffries & Company forecast Time Warner will report 140,000 subscribers lost during the last quarter, up from 129,000 in the same quarter of 2011.

Customers are invited to sample Time Warner’s offerings for 30 days. If they don’t like the service, the company will send their money back.

That may not be enough. The American Consumer Satisfaction Index has top-rated Verizon FiOS for three years in a row. Time Warner Cable received a below average, but improving rating.

[flv width=”640″ height=”380″]http://www.phillipdampier.com/video/TWC The Better Guarantee 1-21-13.flv[/flv]

Time Warner Cable’s new television ad promoting its “Better Guarantee.”  (1 minute)

A CenturyLink official made a remarkable concession in the state of Minnesota last week when he admitted the state’s community-owned broadband networks are better equipped to deliver 21st century broadband speeds that CenturyLink simply cannot provide.

Duane Ring, midwest region president for CenturyLink publicly told an audience at a Minnesota High Tech Association-sponsored discussion in Minneapolis that community-owned networks don’t have to meet shareholder demands for return on investment and other corporate metrics that have left CenturyLink broadband customers with far lower speeds than municipal broadband customers. Minnesota Public Radio was on hand:

Noting that CenturyLink wants every customer it can find, Ring pointed out that the company nonetheless needs a return on investment that satisfies shareholders and meets the demands of larger commitments and fiduciary responsibilities.

The small phone companies that have laid high-speed fiber networks, some of whom are cooperatives whose customers are the owners “can make decisions that maybe the economic return is 25 years,” Ring said. “They can do that.”

CenturyLink concedes Paul Bunyan offers better speeds over a superior network.

Only 62 percent of Minnesotans can today purchase what qualifies as broadband service. Those lucky enough to be served by public providers like Paul Bunyan in the Bemidji area and Farmers Mutual Telephone in western Minnesota benefit from some of the fastest broadband speeds in the state. That is because those cooperatives and public ventures laid fiber optic cables connected to individual homes. Those in rural Minnesota served by CenturyLink or Frontier get much less from slow speed, copper-based DSL, if they can get broadband at all.

CenturyLink has proven itself an obstacle for community broadband, opposing the construction of improved networks in areas they already service, condemning rural customers to substandard broadband speeds indefinitely. While the company says it is not opposed to public-private partnerships, any attempt to bypass them will result in a hornet’s nest of legal protests and blocking actions.

While community-owned networks struggle for financing and approval in a hostile atmosphere created by incumbent providers, the government is handing out money to companies like CenturyLink to get them to extend their slow speed DSL network. CenturyLink is spending $11 million in Connect America funds in Minnesota alone.

In other areas, residents have no interest in waiting around for single digit DSL speeds. In Lac qui Parle County in western Minnesota, local officials have joined Farmers Mutual Telephone to build a fiber network.

CenturyLink’s admission proves it answers first to shareholders, much later to customers.

Top-rated WOW! only delivers service in a handful of cities in the midwest, but is getting larger after acquiring Knology.

Lawrence, Kansas can’t catch a break. While their neighbors in Kansas City are preparing for Google’s unlimited-use gigabit broadband, the three different owners of the area’s cable operation in the last three years have stuck local residents with usage caps as low as 5GB per month.

What began as Sunflower Broadband, formerly owned by the The World Company, which publishes the daily Lawrence Journal-World, has now been sold to a new owner that plans to leave the current caps in place.

Knology of Kansas Inc., a division of West Point, Ga.-based Knology acquired the Sunflower operation for $165 million in 2010. This week, WideOpenWest (WOW) announced it had completed a system-wide acquisition of Knology, including the former Sunflower system for $1.5 billion.

Consumers in Lawrence hoping for something better from one the nation’s top-consumer-rated cable operators will apparently have to wait. The company announced it was planning no immediate changes to its services or rates, said Rod Kutemeier, who currently remains general manager of the operation.

“Which means while Kansas City becomes a gigabit broadband city with unlimited-use broadband ranging in price from free to $70 a month, we’re stuck with this lousy cable operation that wants $53 a month for 18/2Mbps service with a nasty 50GB data cap and up to $1/GB overlimit fee,” says former Knology customer Sam. “I switched to U-verse, which is only mildly less criminal with their 250GB cap.”

Sam’s price represents standalone broadband service and includes Knology’s $5 monthly modem rental fee. If he purchased video service from the company, his broadband rate would be $10 lower.

Sunflower Broadband introduced one of the country’s first broadband Internet Overcharging schemes, limiting customers on the company’s lowest speed tier to 5GB of usage per month. The company later introduced devotees of unlimited, flat rate access to a reduced priority unlimited option for just shy of $60 a month, with no quoted speed or promise of performance.

Lawrence cable subscribers were hopeful the new owners would adopt pricing and service similar to what WOW offers elsewhere. WOW tells its other customers it does not impose usage limits or consumption-based billing of any kind. But that doesn’t hold true in Lawrence.

“They need to get rid of the current management which continues this ripoff scheme and bring in the same WOW mindset that gave them top ratings in magazines like Consumer Reports,” shares Stop the Cap! reader Sam.

WOW currently offers most customers broadband speeds of 2/1, 15/1, 30/3, and 50/5Mbps. Knology of Kansas offers service at speeds of 5/1, 18/2, and 50/5Mbps — all usage capped.

Pricing and packages for Lawrence, Kansas’ local cable company will remain the same… for now.