Time Warner Cable’s new $3.95 monthly cable modem fee applies to customers signed up for broadband service, but if you are a Time Warner “digital phone” customer and don’t subscribe to broadband, the fee does not apply even though the same equipment can sometimes be used for either service.

Time Warner Cable claims the new modem fee was needed to cover the cost of repairing and replacing cable modems over time. But New York City customers have been asking why Internet customers have to buy their own modem to avoid the fee while those using the same modem only for telephone service do not.

The New York Times reached out to Time Warner Cable’s director of public relations Justin Venech, who had to acknowledge the logic disconnect between “digital phone” and Internet customers, but could only offer this weak explanation:

“The way we have decided to charge this fee is, we’re charging it for use of the Internet portion of the modem,” Venech explained. “It’s a business decision. It’s a matter of starting to treat this equipment the same way we treat our other equipment.”

That explanation did not seem to fly… with Time Warner Cable’s own customer service representatives.

When Manhattan resident Tom Arana-Wolfe demanded an explanation for the inconsistent fees, the representative put his call on hold to transfer him to a supervisor, but forgot to hit the mute button.

“She was discussing our conversation with a co-worker and said that they have to come up with something better, because ‘He has a valid point,’” Arana-Wolfe said.

Arana-Wolfe is considering starting a class action lawsuit against the cable operator relating to the modem fee, but is also considering switching his service to Verizon FiOS, which charges no modem fees.

Property values in the historic neighborhood of Hanover Heights (Kansas) are ticking up as tech businesses relocate to follow Google’s roll-out of gigabit fiber service, coming in a matter of weeks.

Only one problem: Google is not officially selling fiber service to businesses just yet. Answer? Buy residential property in the area and move workers who could deliver increased productivity with faster Internet speeds.

That was the answer for Local Ruckus LLC, which is opening its new headquarters in a 2,500-square foot home in the first neighborhood scheduled to receive Google Fiber service.

“It just makes life easier,” CEO Adam Arredondo told the Kansas City Star.

The company says it needs the faster speeds to facilitate transferring files back and forth more quickly.

RareWire, a local developer of apps for mobile devices has decided it can best leverage 1,000Mbps broadband speeds launching a new startup – App Creation Studio, which will assist developers with testing and marketing apps.

Tech start-ups are exactly what Google hoped to see from its experimental fiber network, which is still barely operational. City officials see fiber broadband infrastructure and Business Hosted Voice Solutions as the foundation for energizing the local digital economy.

KCMO mayor Sly James last month unveiled Launch KC — an effort to attract technology companies to Kansas City, particularly start-ups.

James announced five companies and Union Station were prepared to offer free or “very affordable” office space in the city’s Crossroads district, the West Bottoms, and downtown. Office space is even available at the Kansas City International Airport.

Other initiatives would stimulate businesses with attractive sale-and-leaseback offers and exemptions for sales and property taxes. Officials specifically targeted city neighborhoods they felt would be attractive to young entrepreneurs in their 20s and 30s looking for office space. Nearby renovated rental property in neighborhoods officials call “funky without being phony” and “organic” should prove attractive to those relocating to Kansas City, according to project representatives.

City officials are also working on developing free Wi-Fi service in the neighborhood and attracting a data center that would offer attractive cloud storage and other web hosting services.

Most of the incentives represent a fundamental shift away from traditional economic development initiatives, mostly targeted to traditional brick and mortar projects for large manufacturing, retail, or service companies that employ hundreds or thousands of workers. Instead, Kansas City officials are targeting small digital economy businesses that often employ fewer than 20 workers. Launch KC believes the sheer number of potential start-ups, and the modest cost of the program, could pay dividends.

With Google Fiber and the city’s cooperation, the Mayors’ Bistate Innovations Team Task Force believes it has a winning combination.

“We’re in a great position right now,” Burke said, “and we need to take advantage of it.”

Phillip “You Guys Need a Timeout” Dampier

AT&T and Time Warner Cable are complaining they have gotten a raw deal from Kansas City, Mo. and Kansas City, Ks., in comparison to the incentives Google was granted to wire both cities with gigabit fiber broadband.

“It’s time to modernize our industry’s rules and regulations…so all consumers benefit from fair and equal competition,” read a statement from AT&T.

“There are certain portions of the agreement between Google and Kansas City, Kan., that put them at a competitive advantage compared with not just us but also the other competitors in the field,” said Alex Dudley, a Time Warner Cable spokesman. “We’re happy to compete with Google, but we’d just like an even playing field.”

The Wall Street Journal seemed to suggest Google was getting the keys to both cities, with grants of free office space and free power for Google’s equipment, according to the agreement on file with the cities. The company also gets the use of all the cities’ “assets and infrastructure”—including fiber, buildings, land and computer tools, for no charge. Both cities are even providing Google a team of government employees “dedicated to the project,” says the Journal.

The Google Fiber project was so desired that the local governments rolled out the red carpet. In Kansas City, Mo., for instance, the city is allowing Google to construct “fiberhuts,” small buildings that house equipment on city land at no cost, according to a person familiar with the matter.

The cities are discounting other services, as well. For the right to attach its cables to city utility poles, Google is paying Kansas City, Kan., only $10 per pole per year—compared with the $18.95 Time Warner Cable pays. Both cities have also waived permit and inspection fees for Google.

The cities are even helping Google market its fiber build-out. And both are implementing city-managed marketing and education programs about the gigabit network that will, among other things, include direct mailings and community meetings.

Several cable executives complain that the cities also gave Google the unusual right to start its fiber project only in neighborhoods guaranteeing high demand for the service through pre-registrations. Most cable and phone companies were required by franchise agreements with regional governments to build out most of the markets they entered, regardless of demand.

But the Journal missed two key points:

1. Time Warner Cable has been granted the same concessions given to Google on the Missouri side, and AT&T presumably will also get them when it completes negotiations with city officials on the matter.
2. Both cable and phone companies have the benefit of incumbency, and the article ignores concessions each had secured when their operations first got started.

The Bell System enjoyed a monopoly on phone service for decades, with concessions on rights-of-way, telephone poles and placement. AT&T was a major beneficiary, and although the AT&T of today is not the same corporation that older Americans once knew, the company continues a century-long tradition of winning the benefit of the doubt in both the state and federal legislature. AT&T has won statewide video franchise agreements that give the company the power to determine where it will roll out its more advanced U-verse platform, and enjoys carefully crafted federal tax policies that helped them not only avoid paying any federal tax in 2011 — the company actually secured a $420 million “refund” subsidized by taxpayers.

Cable operators also won major concessions from local governments under pressure from citizens eager to buy cable television. At the time, cable companies were granted exclusive franchises — a cable monopoly — to operate, an important distinction for investors concerned about the value of their early investments. Local zoning and pole attachment matters were either negotiated or dealt with legislatively to allow cable companies the right to hang their wires on existing utility poles. Franchise agreements permitted the gradual roll-out of cable service in each franchise area, often allowing two, three, or more years to introduce service. It was not uncommon for neighborhoods on one side of town to have cable two years before the other side could sign up. That sounds awfully familiar to AT&T U-verse today.

Google’s proposal to build a revolutionary broadband network delivering 1Gbps deserved and got the same type of treatment then-revolutionary phone and cable service won back in the day.

Time Warner Cable also won much the same treatment Google is now getting, and the cable operator has gotten $27,000 in fees refunded and will avoid another $100,000 in permit fees going forward. Time Warner Cable and Google will both receive free traffic control services during network construction — not that Time Warner Cable plans much of a change for customers in either Missouri or Kansas.

AT&T will likely also receive the same treatment, although it would be hypocritical of them to complain that Google gets to pick and choose where it provides service. Large swaths of Kansas City and suburbs are still waiting for U-verse to arrive, and many areas will never get the service. Cable operators had to wire a little further, but also benefited from years of monopoly status and network construction expenses paid off years ago when there literally was no competition.

Those paragons of virtue at Goldman Sachs are appalled Google has such a good relationship with Kansas City officials more than happy to have the gigabit speeds neither AT&T or Time Warner Cable would even consider providing.

Google’s rights “appear to be significantly more favorable than those cable, Verizon or any other fiber overbuilders achieved when striking deals with local governments in the past,” Goldman Sachs analyst Jason Armstrong told the Journal. “We’re surprised Time Warner Cable hasn’t been more vocal in its opposition.”

But then the cable company has secured most of the same benefits Google has, so why complain at all?

In fact, city officials had to browbeat Time Warner to modernize its network in ways it would have not done otherwise without the new agreement.

Both AT&T and Time Warner have every right to be concerned. Their substandard networks and high prices (along with a lousy history of customer service, according to national surveys) put them at a competitive disadvantage if Google does not make any major mistakes. Neither cable or phone company has made any noise about upgrading service to compete, and should customers begin to leave in droves, then both companies may actually have something to cry about.

The Wall Street Journal’s report on the concessions granted to Google wanders off into the Net Neutrality debate for some reason, and misses several important facts reviewed above.  (3 minutes)

Copps

Americans need to stand up and say “no” to more telecom mergers and lobbying efforts that push for additional deregulation and corporate protectionism in the telecommunications sector. Unfortunately, we are in for a fight, thanks to Washington’s problem disappointing a multi-billion industry that lavishly finances political campaigns, conventions, and vacation outings.

Michael Copps, former commissioner on the Federal Communications Commission from 2001-2011 and acting chairman for the first six months of the Obama Administration ought to know.

“The consolidated world of telecom broadband did not evolve from the hand of God, the mysterious workings of natural law, or the inevitability of market-based dynamics,” Copps wrote in his essay, “Why Give Up on Competition?” “It was enabled by conscious decision-making at the federal level, largely through the abdication of its oversight responsibilities by the Federal Communications Commission over the better part of 30 years.”

In short, it did not have to turn out this way, no matter what the telecom industry and their astroturf friends have to say.

“Go to just about any telecom conference these days, and some industry maven will make the case that restoring competition to the telecom world is so 1990s,” Copps writes. “Why don’t we all just recognize the inevitable, they ask: telecom is a natural monopoly, competition is a chimera, and the sooner we flash a steady green light for more industry consolidation and less government oversight, the better off we’ll all be.”

Provider-backed ALEC advocates for the corporate interests that fund its operations.

Too many in Washington are already true believers, according to Copps, and the result is two companies controlling over 2/3rds of the wireless marketplace and a broadband duopoly for most Americans. This did not happen overnight. Enormous and expensive lobbying campaigns run for over a decade have convinced lawmakers that less is more when it comes to telecom regulation and oversight. Regulators ringing alarm bells about deregulation without sufficient competition have been picked off, says Copps, by the telecom industry-backed American Legislative Exchange Council (ALEC), which has convinced at least 19 state legislatures to wipe away authority from state public service commissions that for years have been trying to protect consumers and preserve competition.

The Telecommunications Act of 1996 was originally designed to open the telecommunications marketplace to increased competition, but also ensure a level playing field for competitors by charging the FCC to implement and enforce strong rules to keep incumbent telecommunications companies from steamrolling new competitors.

No surprises here: Michael Powell was FCC chairman during the deregulation frenzy of the first term of George W. Bush. Today, he’s the president of the National Cable & Telecommunications Association, the largest cable industry lobbying group in the country.

With the arrival of President George W. Bush, the new Republican majority at the FCC promptly began obliterating checks and balances at the behest of some of the nation’s largest phone and cable companies. The results:

• Reselling rights and wholesale leasing of facilities to competitors were wiped away, guaranteeing monopoly control of already-established networks;
• Opening up the long distance and local market to Baby Bell competition with their promise they would compete nationwide failed. Like Big Cable, the Baby Bells sold local and long distance only to their own customers, not to those located in another Baby Bell’s service area;
• Instead of competing, phone companies simply bought each other. “As soon as one transaction was approved, another one came through the door,” Copps reported. “Sometimes it seemed like the merger approval business was our only business.”;
• ” The FCC voted, over the strenuous objections of Commissioner Jonathan Adelstein and me, to remove advanced telecommunications (broadband) from the purview of Title II of the Telecommunications Act—where consumer protections, competition, privacy, and public safety are clearly mandated—and placed them instead in the nebulous and uncharted land of Title I, where regulatory authority is uncertain, consumer protections are virtually non-existent, and where the huge companies are better positioned to wreak havoc on the promise of competition,” Copps said.

To right the wrongs, Copps wants some major changes to reignite competition and return to telecom innovation, eliminating the stagnation we have from today’s cozy, barely competitive marketplace:

1. Learn to say “no” to more industry mergers. Consolidation has not brought communications nirvana for consumers, just higher prices and fewer choices, often from a monopoly provider;
2. Encourage innovative approaches like municipal broadband. Copps: “‘My way or nothing’ may be the mantra of the big guys, but that means no broadband in places they don’t wish to serve.” Copps wants to see the federal government pre-empt state bans on public broadband laws provider-backed ALEC has gotten through legislatures across the country;
3. Smarter stewardship of wireless spectrum, including unlicensed spectrum use, shared spectrum, smarter technology, and a “use it or lose it” policy that pulls back unused/warehoused spectrum held by some of the nation’s largest wireless carriers.

Even as DOCSIS 3 cable technology continues to roll-out across cable systems now offering faster Internet speeds, the next generation of cable broadband is on the way, reportedly capable of delivering up to 10/2Gbps service.

CableLabs’ DOCSIS 3.1 project will be the subject of a special panel at an upcoming cable engineer conference later this month.

“DOCSIS 3.1 specification development is a significant milestone on the industry’s road map to next-generation services,” said CableLabs chief technology officer Ralph Brown. “Our SCTE Cable-Tec Expo panel will identify the motivations, requirements and key technology building blocks under development with the collaboration of the vendor community.  DOCSIS 3.1 solutions will provide both residential and commercial cable customers with faster data rates — both upstream and downstream — that support increasingly compelling broadband services.”

The DOCSIS 3 standard allows cable operators to bond multiple channels to support faster speeds.

The new standard will incorporate changes in how cable spectrum is utilized for broadband, vastly expanding potential bandwidth. Although the standard can support gigabit broadband speeds, nobody expects cable companies to offer those speeds in the near term.

Instead, providers are more interested in addressing their upstream speed limitations. From the earliest days of cable broadband, the assumption was that customers would care far more about downstream speeds and consider uploading an afterthought. The result was a network that prioritized download speed. But as users continue to upload more multimedia content and embrace cloud storage, slow upload speeds are starting to aggravate customers.

DOCSIS 3.1 is rumored to de-emphasize the current QAM modulation cable operators use for broadband in favor of more robust technologies such as orthogonal frequency-division multiplexing (OFDM), already used by the wireless industry. Unlike interference/noise-prone QAM, OFDM uses much smaller subcarriers that work better in noisy signal conditions. Although coaxial cable is capable of delivering a large amount of spectrum to cable operators, all of it cannot be practically used because of external interference from electrical equipment, broadcast radio and television signals, and other sources. Error-correcting technologies can let operators use more of their available spectrum without reducing the quality of service to customers.

The study group working on DOCSIS 3.1 is also reviewing the incorporation of “low density parity-check” (LDPC) error correction that would efficiently improve noise rejection over today’s Reed-Solomon approach. Combining OFDM and LDPC could improve spectral efficiency up to 25 percent.

The cable industry is pressuring the study group to preserve backwards compatibility with the older DOCSIS 3.0 standard just now coming into widespread use. Some industry insiders predict cable operators will keep today’s QAM modulation for downstream speeds while boosting upstream speeds using OFDM.

Cable operators across the country are gradually moving away from analog service in favor of digital with the ultimate goal of an entirely IP-based network for television, phone, and broadband. The pressure is on for DOCSIS 3.1 to help accelerate that transformation, but most industry experts don’t believe the new standard will be finalized until at least the middle of 2013, with at least 6-12 months before equipment shows up supporting the finalized standard.