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Cable Stock Fluffer Craig Moffett Encourages Cable Operators to Add Usage Caps Before Title II Takes Effect

"More Caps" Moffett

“More Caps” Moffett

If you are a cable executive looking to further gouge customers captive to your “only game in town” broadband speeds, now is the time to slap around customers with usage caps and overlimit fees, because your company may no longer be able to do that after June 12, when the FCC’s new Title II regulations officially take effect.

“If you’re a cable operator, you might want to strike while the iron is hot,” said MoffettNathanson principal and senior analyst Craig Moffett, who has shared his love for all-things-cable with investors for years.

Moffett regularly asks cable industry executives about when they plan to introduce usage limits or usage-based billing for customers who often have no other choice for 25Mbps service, the lowest speed that now qualifies as broadband.

But tricking customers into accepting industry arguments about “fair pricing” must be handled carefully, because making a mistake with customers could cost your executives their summer bonuses if the pocket-picking policies cause a revolt.

Multichannel News reminds its cable industry readers Time Warner Cable failed to start their usage cap experiment in 2009 due to a “furor” by customers (often led by us). Instead of filling their coffers with the proceeds of overlimit fees, “the cable giant [was forced] to rethink its pricing strategy, keeping prices the same for heavy users of bandwidth but offering discounts to customers whose usage was lighter.”

Image: schvdenfreude

Image: schvdenfreude

Unable to get its definition of “fairness” across to customers, Time Warner Cable never had to look back, raking in greater and greater unlimited broadband profits quarter after quarter, even as their costs to deliver service continued to drop.

Faced with the prospect of a newly empowered FCC to keep cable industry abuses in check, Multichannel News tells cable executives the money party may be over before it begins if they wait too long:

Title II regulations, which reclassify broadband as a common- carrier service, are about to take effect June 12, and the Federal Communications Commission has said it would look closely at any usage-based pricing plans to determine if they discriminate against online video providers. That could force some Internet service providers to move to implement their version of usage-based pricing before the deadline.

To “soften the blow,” the trade journal reported Cox significantly increased usage caps and are setting the overlimit fee at $10 for each 50GB of excessive usage, much lower than wireless plan overlimit fees. Multichannel News suggests this will help customers “get accustomed to overage charges.”

But Cox customers in the Cleveland area may be able to turn the table on Cox.

“Let them get accustomed to the fact I am dumping them for WOW! the moment I receive official notification about the caps,” said Stop the Cap! reader Dave, who has a choice between Cox, AT&T, and WOW! — a competing cable operator without usage caps. “AT&T isn’t enforcing its cap around here either, so I am definitely canceling my service and have two other choices. People have to be willing to send a clear message usage caps are an absolute deal-breaker.”

Although usage caps are not affected by Net Neutrality regulations, the fact the cable industry faces added regulator scrutiny under Title II allows the FCC to put an end to practices it considers to be anti-competitive. Introducing usage caps for customers trying to find an alternative to Cox’s cable television package by watching online video instead may qualify.

Verizon Broadband Customers: Your Security May Have Been Compromised

Phillip Dampier May 14, 2015 Consumer News, Verizon Comments Off on Verizon Broadband Customers: Your Security May Have Been Compromised
Tell me everything about me.

Tell me everything about me. (Image: BuzzFeed)

Since April 22, a website programming error has been responsible for exposing the personal information of up to nine million Verizon broadband customers.

BuzzFeed News reported a vulnerability in Verizon’s account portal allowed anyone capable of spoofing an IP address of a current customer to get instant access to account information and arrange a password reset to take full control of the customer’s account.

BuzzFeed was able to verify the vulnerability with the help of cooperating Verizon customers and immediately notified Verizon about the problem before publishing the story. The vulnerability has since been corrected, but not before three weeks of ‘open access’ to Verizon customer account information to those proficient at manually changing their IP address:

Within a few hours of the tip, and despite having no technical background, with the explicit permission of several Verizon account holders, I was able to convince Verizon customer service to reset an account password, giving me total control of a Verizon account. It was surprisingly easily done.

It took me only two downloads, copy and pasting some information from an email, and a few interactions with Verizon customer support. It was just a matter of following step-by-step instructions. In other words, if you can follow a recipe, you could have probably gotten a Verizon password reset.

[…] These pieces of information — name, telephone numbers, and email — were all I needed (and more frighteningly, all a malicious hacker would have needed) to convince Verizon customer service that I was a customer in need of a password reset.

Even worse, customer support gave me that reset information despite the customer having a security PIN set up.

With that information, a hacker could gain enough personal insight to trick other businesses into giving up additional personal information.

“Once it was brought to our attention, our experts immediately investigated the issue and repaired the error within hours,” a Verizon spokesperson told BuzzFeed. “We appreciate the responsible manner in which Buzzfeed brought this matter to our attention. Addressing issues like this collaboratively is a constructive addition to our continuous actions to safeguard the security of customers’ information.”

Verizon hoped to reassure customers the security damage was minimal, telling BuzzFeed. “We have no reason to believe that any customers were impacted by this, other than those who’s information was used by Buzzfeed. If we discover that any were, we will contact them directly.”

85% of Italy Will Get Fiber to the Home Broadband Service Within Six Years

Phillip Dampier May 14, 2015 Broadband Speed, Competition, Consumer News, Public Policy & Gov't Comments Off on 85% of Italy Will Get Fiber to the Home Broadband Service Within Six Years

enelItaly’s power utility Enel has offered to help the country build a massive fiber to the home broadband network capable of bringing ultrafast Internet speeds to 85% of the country within six years if it can sort out a potential conflict with Telecom Italia, the country’s largest telecom company.

Enel, still controlled by the Italian government, volunteered its domestic network infrastructure to help install fiber optics more cheaply than Telecom Italia could manage on its own, especially in rural and industrial areas.

The offer is controversial because it could put the new fiber network under public control by using Enel, whereas Telecom Italia is a publicly traded company now majority controlled by Spain’s Telefónica and several Italian banks.

Enel, which is focusing much of its domestic strategy on developing its power distribution grid and smart digital technology, has about 1.2 million kilometers of power lines and 450,000 power distribution cabinets across Italy. Smart grid technology is often dependent on fiber optic communications, so making room for Italy’s Metroweb fiber network seemed easy enough.

Prime Minister Matteo Renzi is backing the $13.35 billion project under the Metroweb brand, a company partly owned by state lender Cassa Depositi e Prestiti (CDP).

telecom italiaSuch a deal could potentially lock out Telecom Italia, which is already upset with the government over ownership issues, technology and its inability to buy into the Metroweb project.

Enel insists their involvement would be “synergistic with what the telecom operators have done and planned,” not in competition with those efforts. But Telecom Italia remains concerned it could be left behind by a project that would likely dominate Italian telecommunications for decades.

This isn’t the first venture into telecommunications Enel has made. The power company earlier launched Wind, the third biggest of Italy’s four mobile network operators, which is today owned by Vimpelcom.

Telecom Italia is widely blamed for Italy’s lagging broadband rankings, having failed to invest in up-to-date network technology because of the company’s high debt and falling revenues. Fewer than 1 percent of Italians with an Internet subscription receive connection speeds of at least 30 megabits per second, according to the Agcom communications authority. That compares with the European average of 21 percent. The Italian government considers anything short of a modern fiber optic network a drag on the country’s competitiveness and wants the network built as fast as possible.

Comcast Deletes Ogden, Ill., Local Government Website

delThe village of Ogden, Ill., no longer has an official website. Comcast deleted it without warning.

Like many of America’s smallest towns and villages, Ogden relies on web space from its Internet Service Provider to host the community government’s website.

Except, as Mayor Jack Reiner reports, Comcast no longer supports business or government websites hosted through a broadband account and it simply disappeared one day.

The village is now attempting to reconstruct the site and considering the cost of alternative providers.

Cox Cracking Down on Internet Customers With Hard Usage Caps and Overlimit Fees: Let the Gouging Begin!

cox say noCox Communications will begin testing overlimit fees this summer starting in its Cleveland, Ohio service area with plans to introduce hard usage allowances and excess usage violation charges nationwide if customers tolerate the market test in Cleveland.

DSL Reports learned that Cox will formally notify customers beginning May 19 it has increased broadband usage allowances and will introduce an overlimit fee of $10 for each 50GB allotment a customer exceeds their limit starting this fall.

Cox’s marketing machine is attempting to justify its usage based pricing scheme with a pre-written script to appease anticipated customer complaints:

A draft customer support script obtained exclusively by DSLReports states that this lead-in period will “give customers the opportunity to familiarize themselves with their typical data usage and take action, such as secure their WiFi network or change service plans, if they exceed their limit.”

The script also notes that customers will be notified via e-mail and a browser popup when they’ve reached 85% and 100% of their monthly data allotments. Cox services like Cox TV Connect, Cox Digital Telephone and Cox Home Security will not count toward the usage cap, a Cox insider claims.

To make the idea of potential bill shock more palatable to their customer base, Cox generously increased usage allowances last week:

  • Starter: 150 GB/month
  • Essential 250 GB/month
  • Preferred 350 GB/month (the most popular plan)
  • Premier 700 GB/month
  • Ultimate 2 TB/month

Exceed those limits and the company will slap penalty fees on your bill as a matter of “fairness.” Customers will get a preview of any specific overlimit fees they would incur starting in June, but the company will not begin to actually charge them until October.

price-gouging-cake“Data usage plans promote fairness by asking the high-capacity Internet users to pay a greater share of network costs,” argues Cox. “Some critics of data usage plans push a flat fee pricing model, meaning that users would pay a flat fee whether they simply use the Internet to surf the web and check email or if they are a ‘super user’ and consume copious amounts of bandwidth. Data usage plans are a far more fair approach, giving consumers a choice based on their personal needs rather than forcing all customers to absorb the network costs incurred by the 5% of customers who exceed their allowance.”

Stop the Cap! would point out we’ve heard those same talking points since 2009 and they were not credible then and are even less so today.

First, we’d note Cox is attacking the business plans of some of the most successful broadband providers in the United States. Time Warner Cable, Cablevision, Google, and a myriad of other phone and cable operators not only deliver on their commitment to offer unlimited use Internet, they actually market it as a good reason to buy Internet access from them.

Cox’s concerns for fairness might be a bit less hypocritical had Cox not sold customers unlimited use plans for years. Were they being unfair to their customers then, now, or both?

Second, the company’s claimed noble intentions for keeping the cost of broadband down might be more believable if it didn’t charge its base customers a whopping $34.99 a month for “up to 5Mbps” Internet that it now wants to limit. Five years ago it charged customers just $21.99 a month for that service. By 2015, it had raised the price more than 59%.

In comparison, Time Warner Cable charges less than half that for unlimited “$14.99 Everyday Low Price Internet” – a tier that has not increased in price since its introduction. Time Warner has also offered its light users an optional plan to win a discount if they keep their usage down. As a reflection of customer interest in plans that place limits (even optional) on broadband service, out of some 11 million Time Warner Cable customers, only a few thousand have shown any interest in plans that introduce a usage allowance component.

coxThird, Cox’s excuses are very similar to those given by Time Warner Cable when it tried (and failed spectacularly) to impose usage allowances on its broadband customers in 2009. Time Warner officials promised it would represent greater fairness and would help pay for network improvements, while only a small percentage of customers would face higher charges. In fact, none of those claims were true. Customers seeking to keep unlimited access faced a tripling of the cost of broadband, Time Warner Cable only committed to network improvements in their most-populous service areas (which were excluded from the usage cap market trials and had significant competition), and at the usage caps Time Warner proposed in 2009 – 5, 10, 20, and 40GB, more than half of today’s Time Warner customers would be subject to overlimit fees. At the time, Time Warner claimed their proposed usage allowances were generous and fewer than 5% of customers would exceed them. That is eerily familiar to the “5% of customers” Cox refers to today.

The real money is to be made selling broadband, already amazingly profitable.

The real money is to be made selling broadband, already amazingly profitable.

Cox’s need for strict usage allowances comes at a time when other Internet Service Providers in competitive markets are either abandoning or not strictly enforcing them. Alienating customers has proven bad for business, and there is still plenty of money to be made selling unlimited access. Both broadband and telephone service is declining in cost for the operator to offer, particularly when examining bandwidth expenses.

Cox Communications is a privately held company and does not disclose specific financial data to the public, but similarly sized Charter Communications is publicly held and revealed in 2014 it had revenue of $9.1 billion and Adjusted EBITDA of $3.2 billion – each rising 8.2% on a pro forma basis, year over year. In plain English, broadband is already a real moneymaker for the cable industry, with revenue boosts recorded across the board. In comparison, cable television expenses have taken a toll on the profitability of offering television service. Charter is making so much money on broadband it dropped its usage caps recently.

Because the cable industry relies almost exclusively on existing hybrid fiber-coax networks to deliver products and services, the capital costs of providing Internet access have continued to drop for years. The industry’s decision to invest in and adopt DOCSIS 3 was considered a “no brainer” because it did not need major upgrades to network infrastructure and could recoup its cost by allowing companies to market higher-profit, higher-speed tiers.

In contrast, new entrants like Google Fiber are constructing new all-fiber network infrastructure at an enormous cost, but remain comfortable marketing broadband service with no usage allowances. So do many community-owned providers, including EPB in Chattanooga, GreenLight and Fibrant in North Carolina, among many dozens of others. Even Comcast has committed to not imposing usage caps for its premium 2Gbps fiber service, on which residential customers will be capable of racking up enormous amounts of usage.

In short, Cox’s usage cap regime is completely unjustifiable under current marketplace conditions and represents little more than an effort to raise prices and block online video competition, which Cox customers may decide will eat too much into their usage allowance.

Time Warner Cable goes out of its way to advertise "No Data Caps."

Time Warner Cable goes out of its way to advertise “No Data Caps.”

There are a number of questions Cox customers should ask:

  1. Why did nobody ask us whether we thought usage allowances and overlimit fees were fair?
  2. Why not offer optional discounts for low-usage customers and see how many actually enroll in such a program?
  3. Why has Cox removed the option of an unlimited use tier for customers that want unlimited service?
  4. Why won’t Cox commit to a price freeze on its broadband service if usage caps are really about controlling costs?
  5. How is it fair to offer a more generous allowance to a customer sold a higher speed tier that can easily chew through more data than customers on lower speed tiers?
  6. Why do low-speed customers get a smaller usage allowance when they cannot effectively use the highest bandwidth web applications?
  7. Why can’t customers roll unused portions of their usage allowance over to future months?
  8. How many customers, if any, actually asked for this type of pricing?
  9. Why can Google, Time Warner and other operators provide unlimited access for the same or less than Cox charges and your company can’t?

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