"DVD's are so five years ago!"

Netflix, which has seen its Canadian streaming-only video service welcomed with usage cap reductions by Rogers Cable, has finally started to wake up to the threat its online video business model is one speed throttle or usage cap away from oblivion.

As the video rental company now contemplates launching a streaming-only version of its service in the United States, it has now firmly waded into the Net Neutrality debate.  In a filing earlier this month, Netflix impressed upon the Federal Communications Commission the importance of prohibiting providers from establishing blockades to keep its competing video service from threatening cable-TV revenue:

“The Commission must assure that specialized services do not, in effect, transform the public Internet into a private network in which access is not open but is controlled by the network operator, and innovative Internet-based enterprises are permitted effective access to their consumers only if the enterprises pay network operators unreasonable fees or are otherwise seen by such network operators as not threatening a competitive venture.”

Netflix online video packs a real wallop, as Americans embraces the service as a suitable and cheaper replacement for premium cable movie channels.

Sandvine, which pitches “network management” products to the broadband industry, reported Netflix now represents more than 20 percent of all downstream broadband traffic in the United States during peak usage times between 8-10pm.

The company’s financial results seem to affirm its growing impact as an online video entertainment player.  The Washington Post reports in the third quarter, Netflix saw a 52 percent gain in subscribers to 16.9 million. Revenue increased 31 percent to $553 million. But most interesting: 66 percent of subscribers watched more than 15 minutes of streaming video compared with 41 percent during the same period last year. The company predicted Wednesday that in the fourth quarter, a majority of Netflix subscribers would watch more content streamed from the Web on Netflix than on DVD.

That prompted CEO Reed Hastings to say Netflix should now be considered a streaming company that also offers DVD-by-mail service.

If providers launch Internet Overcharging schemes that limit broadband usage or throttle their competitors to barely usable speeds, that growth could come to an end quicker than the introduction of the next “unfair usage policy.”

Sandvine’s research confirmed something else.  As broadband speeds increase, so does usage.  In Asia where broadband speeds are dramatically higher than in the United States, Sandvine found median monthly data consumption is close to 12 gigabytes per household compared to 4 gigabytes in North America.  And Asians stay very close to their broadband connections, using them on average for almost 5.5 hours per day, compared to just three hours for North Americans.

When one considers the majority of broadband users are only starting to discover online video, those numbers are headed upwards… fast.

Bigpond is Telstra's broadband service

Telstra, Australia’s dominant telecommunications company, is openly concerned about the prospect of Australians finally shedding themselves from Internet Overcharging schemes like low usage caps and throttled speed.  But instead of doing away with these profit-boosting schemes themselves, they’ve decided to argue that consumers don’t need the country’s newest 1TB usage allowance plans, calling them publicity gimmicks.

Of course, Telstra doesn’t offer a 1TB plan.

Heath Gibson tries to explain away Telstra’s Internet Overcharging in a company blog post:

A terabyte is a lot of data. One provider claimed it’s enough to download about 200 DVD quality movies and still have quota left over.  Whilst my inner geek is salivating at the possibilities, the analyst in me is questioning just how many people currently need, or could even use, a terabyte of data each and every month.

Gibson

Gibson believes the average Australian is better off plans like Telstra’s 50GB DSL service, running $49.30US per month on a two-year contract.  When all the charges and fees are totaled, Australians will pay Mr. Gibson’s company $2,364.50US for two years of service that slows to 64kbps once your monthly 50GB allotment is used up.

“Terabyte plans will have appeal to a special niche and demand for these plans will no doubt grow over time,” Gibson wrote. “But for now my advice to most people would be to look past the attention grabbing headline, check how big a plan you really need and keep in mind all the other things that go in to making a great ISP.”

Australians have already made that decision and they have been voting with their feet to other providers.  On the same day Gibson was dismissing the competition, Telstra CEO David Thodey was responding to it, recognizing the company has lost significant market share because of high prices and poor customer service.

He told The Advertiser improvements were underway.

“The focus on customer service is something that is innate within Telstra, but our delivery leaves a lot to be desired,” he said.

So is their pricing.  Gibson’s views defending rationed Internet service are similar to the arguments broadband providers in the States use to defend their failure to keep up in the global broadband speed race.  Only instead of dismissing the need for unlimited service, American providers try and convince customers they don’t need the faster speeds they don’t deliver.

Big Apple Day

New York City officials are sick and tired of taking complaints about missed cable appointments and other service problems on its 311 city help line.  Nearly 1,200 calls about cable have been made so far this year alone, with fed up New Yorkers annoyed they took a day off work to wait for a cable technician that never arrived, or one who never solved the problem they were called to fix.

Now city officials are forcing the area’s two incumbent cable operators — Time Warner Cable and Cablevision, to pay for their mistakes.

As part of franchise renewal negotiations, both cable companies have agreed to credit subscribers the full amount of that month’s cable bill if the cable guy arrives late, or not at all.

The penalty decreases to $25 after 2012, when Verizon FiOS service is expected to blanket most of the city.

But consumer reforms extend beyond financial penalties for missed appointments.

Customers will soon be able to request notification by e-mail, phone or text message when a technician is heading to their home.  And calls to either cable company should be answered by a real person no more than 30 seconds after dialing.

Many of these reforms are already a part of the franchise agreement New York City’s Office of Information Technology & Telecommunications worked out with Verizon, allowing the phone company to provide cable television in the city.

Time Warner Cable spokesman Alex Dudley didn’t miss the opportunity to turn the challenging new requirements into an opportunity.  He told area reporters Time Warner welcomes the new customer service standards and appreciates the opportunity to compete for customers in the metropolitan New York area.

As Robert Porto, 38, a Time Warner Cable customer in Boerum Hill, Brooklyn, told the New York Times, the new contract will be “the ultimate revenge for the little guy.”

Importantly, none of these consumer-focused reforms would have been possible had New York adopted the kind of “reform” companies like AT&T and Verizon have advocated in other states — statewide video franchising.

Brodsky

New York’s legislature has rejected previous attempts to eliminate local cable and video franchise agreements, citing the loss of control by local municipalities to deal with provider issues that would sail over the heads of a statewide committee in Albany.  New York has been generally hostile to Big Telecom’s deregulation agenda.  One state assemblyman, Richard Brodsky (D-Westchester), even introduced a bill requiring phone companies like Verizon to split the proceeds of asset sales with ratepayers.

Other provisions of the franchise agreements include:

• The right to terminate franchise agreements with Time Warner Cable and Cablevision Systems if broadband-delivered video significantly erodes cable TV revenue over the next 10 years;
• Time Warner Cable and Cablevision are required to invest about $10 million to install Wi-Fi access in 32 public parks in all five boroughs, to be operated and maintained by the companies until 2020;
• At least five new Public, Educational and Government (PEG) community access channels will be added, up from the four that currently exist, by 2012.  At least one must be in HD.  The operators also agree to pay a combined total of more than $9 million, payable in annual installments, plus an additional $2 million of “in-kind” services to pay for equipment and operation expenses;
• More than $20 million to help finance the upgrade of CityNet, the city government-dedicated network;
• Time Warner Cable will establish four community broadband access centers per year (40 total), in collaboration with nonprofits, over life of franchise;
• Time Warner Cable will install 20 miles of fiber per year in underserved commercial/industrial areas over franchise term; and will build-out Brooklyn Navy Yard. Cablevision already serves the commercial blocks in its service areas. Companies will commit to expend $1.8 million per year to bring fiber to commercial buildings of city’s choice.

[flv width=”640″ height=”380″]http://www.phillipdampier.com/video/WABC New York New Yorkers could get money if cable guy stands them up 9-15-10.mp4[/flv]

WABC-TV covers the introduction of pro-consumer cable service reforms for metropolitan New York residents.  (2 minutes)

Phillip "Darn, they didn't pick my essay" Dampier

Time Warner Cable paid $20,000 for a report that concludes, “policymakers not only need to focus on the oft-stated long-term goal of encouraging Fiber-To-The-Home but also on the more immediate need to bring fiber significantly closer to the customer.”

That declaration was included in one of five essays released this week by Time Warner Cable’s Research Program.  When we first wrote about this program in February, we were convinced that the resulting essays would parrot the cable company’s public policy agenda.  We were largely right, especially in those that delved into public policy matters.  They stayed safely inside the company’s policy boundaries.  Even those who focused on technical matters avoided directly challenging the company writing the check.

The cable company earlier announced it would pay $20,000 stipends to essayists that wrote research reports on these questions:

• How are broadband operators coping with the explosive growth in Internet traffic? Will proposed limits on network management practices impede innovation and threaten to undermine consumers’ enjoyment of the Internet?
• How can policymakers harmonize the objectives of preventing anticompetitive tactics and preserving flexibility to engage in beneficial forms of network management?
• Regarding these issues, describe a vision for the architecture of cable broadband networks that promotes and advances innovation for the future of digital communications.
• How might Internet regulations have an impact on underserved or disadvantaged populations?

The winners:

• Dale N. Hatfield, executive director, Silicon Flatirons Center for Law, Technology and Entrepeneurship, University of Colorado, “The Challenge of Increasing Broadband Capacity.”
• John G. Palfrey, Jr., Henry N., Ess III professor of Law, Harvard Law School, “The Challenge of Developing Effective Public Policy on the Use of Social Media by Youth.”
• Nicole Turner-Lee, vice president and director, Media and Technology Institute, Joint Center for Political and Economic Studies, “The Challenge of Increasing Civic Engagement in the Digital Age.”
• Scott J. Wallsten, vice president for Research and Senior Fellow, Technology Policy Institute, “The Future of Digital Communications Research and Policy.”
• Christopher S. Yoo, professor of Law & Communciations, University of Pennsylvania Law School, “The Challenge of New Patterns in Internet Usage.”

Among the reports were a few that echoed the cable industry’s public policy agenda, particularly Scott Wallsten’s policy essay, “The Future of Digital Communications Research and Policy.” Wallsten is an industry favorite.  He works for the Technology Policy Institute, an industry front group funded by AT&T, Comcast, the National Cable & Telecommunications Association, Qwest, Time Warner Cable, T-Mobile, and Verizon.

Scott Wallsten's essay parrots the cable industry's agenda

Wallsten argues worrying about residential broadband service is far less important than delivering broadband improvements to businesses to spur economic growth.  Part of the money to do that might come from raising residential broadband prices.  Wallsten points out consumers are willing to pay far more than they do today for their broadband accounts — up to $80 a month for today’s typical access speeds.  That’s music to an Internet Overcharger’s ears.

Wallsten’s essay hints that broadband expansion to the unserved, and Washington’s focus on broadband competition, might be misplaced if they are looking for the biggest economic bang for the buck.  His overall conclusion?  Worry about business broadband, not home residential use.

This is hardly new territory for Mr. Wallsten, who in 2007 wrote a piece warning of the perils of flat rate, unlimited use broadband pricing for the Progress & Freedom Foundation and the Heartland Institute, both great friends of large industry players. Only this time, he got a nice chuck of change from Time Warner Cable ratepayers.

More remarkable was Dale Hatfield’s essay, “The Challenge of Increasing Broadband Capacity.” Unlike Mr. Wallsten’s cable industry public policy echo chamber, Hatfield tries to keep things technical, but also safely made sure he didn’t stray too far off Time Warner’s broadband plantation.

Hatfield discusses the challenges of different broadband technologies ranging from twisted-pair copper wiring that delivers DSL to cable’s hybrid coaxial-fiber networks and the latest generation wireless and fiber optic technologies.  Hatfield largely calls them as he sees them, noting DSL’s inherent distance limitations and maximum supportable speeds, cable’s potential for last-mile/neighborhood congestion, wireless spectrum inadequacy, and the promises fiber optics can bring to the broadband revolution if costs can be reduced.

Hatfield avoids embarrassing his benefactor too much by spending the least amount of time and space on the benefits fiber brings to the broadband expansion question:

The fourth technology, fiber optic cable, is generally regarded as the “gold standard” in terms of increasing broadband digital access capacity because of its enormous analog bandwidth and its immunity to natural and man-made forms of electrical noise and interference. The actual digital transmission rate delivered to or from a customer depends upon the details of the architecture employed, but the ultimate capacity is limited more by economic factors rather than by the inherent technical constraints on the underlying technology imposed by Shannon’s Law. In this regard, fiber optic cable is often referred to as being “future-proof” because the maximum digital transmission rates are governed more by the electronic equipment attached to the cable rather than by the actual fiber itself. It is future-proof in the sense that the capacity can be increased by upgrading the associated electronic equipment rather than by taking the more expensive step of replacing the fiber itself.

Hatfield

While Time Warner Cable does market itself as having an “Advanced Fiber Network,” it is, in reality using the same technology the cable industry has used for a decade — fiber distribution into individual towns and large neighborhoods, coaxial cable the rest of the way.  Hatfield believes that simply isn’t good enough:

[…]Both DSL and cable modem technology benefit from the shorter distances that are associated with a more dense deployment of their access nodes. This suggests the growing need to extend fiber optic cable capacity closer to the customer—either fixed or mobile—to minimize the distance between the customer and the access nodes.

Hatfield’s subtle conclusion is that broadband expansion is ultimately best served by delivering fiber-optic connections straight to the home, something Time Warner Cable has argued against and refused to provide for years, but has now paid $20,000 to put on their website:

[…]Policymakers not only need to focus on the oft-stated long-term goal of encouraging FTTH but also on the more immediate need to bring fiber significantly closer to the customer to support a vastly increased number of access nodes. This is particularly important in the wireless case, where the capacity added through frequency reuse is critical to facilitating wireless competition with the two major suppliers of fixed broadband capacity—the incumbent telephone and cable television companies.

Color of Change needs everyone to take a moment and let members of the Congressional Black Caucus know we need them to stand up for Net Neutrality and broadband reform to help Black communities harness the political, economic, educational, and cultural power of the Internet.

While several members are already on board, there are many who either haven’t gotten the message or are on the wrong side of consumers.  Color of Change writes:

Most on the wrong side have simply been taken in by the lies of telecommunications industry lobbyists. But others have taken large financial contributions from telecoms and appear to be willingly carrying water for their biggest donors.

It’s unacceptable, whatever the reason. The CBC needs to understand that Internet freedom is in the vital interest of Black communities. Please join us in calling on the Congressional Black Caucus to support a free and open Internet, and then ask your friends and family to do the same.

Meeks

First, please thank these members who are strong advocates of Net Neutrality and broadband reform that favors consumers:

• Rep. Barbara Lee (D-California)
  
• Rep. Maxine Waters (D-California)
  
• Rep. John Conyers (D-Michigan)
• Rep. Donna Edwards (D-Maryland)
• Rep. Keith Ellison (DFL-Minnesota)
• Rep. Donald Payne (D-New Jersey)

Second, take note of these two Big Telecom bad actors effectively on AT&T and Verizon’s payroll:

• Rep. Greg Meeks (D-New York) – For years, AT&T and Verizon have been among Meeks’ biggest donors. In October 2009, he collected 70 signatures from his colleagues on an industry-backed letter — written after consulting AT&T — designed to weaken support for Internet freedom.  Meeks may claim that his major motivation is protecting jobs. But there’s no credible evidence that protecting Internet freedom will lead to job losses or decreased investment — in fact, evidence suggests the contrary. But in the face of massive support from telecoms, it appears that Meeks has only truly considered one side of the argument — the one that earns him fat checks.
• 

  Rush

  Rep. Bobby Rush (D-Illinois) – AT&T has long been one of Rush’s largest donors. Then, from 2001 – 2004, they donated $1 million to a community center Rush founded in Chicago. Since then, Rush has been a leader in the effort to eliminate Internet freedom. In 2006, Rush helped convince many members of the CBC to kill a measure that would have enshrined Internet freedom into law. And since that time, he has supported other efforts to weaken Internet freedom protections.  It’s wonderful AT&T donated the money to a community center Rush started, but that doesn’t mean AT&T is his only constituent.  Or does Congressman Rush need at least a million dollars from you to represent -your- interests before he’ll vote your way.

By signing the online petition and contacting members of the Congressional Black Caucus on these issues, you are delivering a wake-up call that lets Congress know these issues are critically important to you and they need to pay attention.  More importantly, it will expose those who feel safe taking big checks from phone and cable companies as a reward for voting against your interests.  If they know you are watching and their votes can make a difference in how you will vote in the next election, many will have the courage to leave Big Telecom’s money on the table and walk away.