Broadband providers love to tout their Internet services as “unlimited, always on access at blazing fast speeds.”  Increasingly, their service isn’t unlimited, it’s not always working, and those blazing fast speeds are doused in a shower of asterisks leading to fine print indicating “speeds are not guaranteed.”

Take Comcast, for example.

The Consumerist‘s reader Matt received a brochure from America’s largest cable operator filled with inaccuracies, falsehoods, and fine print.  In order of appearance, let’s fact check:

Source: The Consumerist

Fiber Fiction: “Comcast High Speed Internet is delivered to your computer through the same fiber-optic network that delivers all those great channels to your television.”

Fiber Fact: Comcast does not operate an all-fiber network.  Their distribution system uses a mix of fiber and standard copper coaxial cable.  The fiber network is only a backbone, which connects to the same coaxial cable companies like Comcast have used since the 1970s.  If you want a true fiber-optic network, you’ll need to sign up with Verizon FiOS or a municipally-run fiber provider.  No national cable operator runs one.  It’s part of their marketing rhetoric to try and capitalize on the benefits of fiber without actually spending the money to actually build a fiber system.

Speed Trap: “Download speeds up to 100 times faster than a 56K phone modem.”

Autobahn: This one has one of those asterisks attached — “actual speeds may vary.”  Comcast doesn’t guarantee speed, and relies on the familiar “up to” disclaimer that phone companies love to use with their DSL service.  If your neighborhood is clogged with users, the websites you visit run slowly, or Comcast has a problem somewhere, your speed will suffer.

Unlimited That Isn’t: “Unlimited usage for a flat, monthly fee.”

Unlimited Reality: Comcast has a usage limit of 250 GB per month.  Exceed it and you potentially will get a call from Comcast lecturing you about your usage.  Ignore them and you may be without your broadband service for a year.

Consumerist reader Matt was a victim of Comcast’s marketing doublespeak when he exceeded the limit and got a phone call from the company.  Instead of being browbeaten by Comcast customer service, he was ready and armed with the brochure the company sent him:

I was told I used more data than they allow (250GB). I do not argue that I used over 250GB, in fact I went quite a bit over. Though I did want to ask for proof that affected their network, I figured it wasn’t the nicest way to start the interaction. I informed them that I used this because it was sold as “Unlimited usage for a flat, monthly rate.” He then told me it said “access.”

I had the brochure right next to me and quoted, “Unlimited usage for a flat, monthly rate.” He told me their website says something different, and my local franchise overstepped its bounds, and their website overrules the “Important Information about our services, Charleston SC” sales brochure sent to me. If I went over again (It goes by calender month, not billing cycle) I would be disconnected for 1 year without giving me a call.

I asked if Comcast had a tool to help me monitor bandwidth. “Not in your market” he told me. “Download something from Google that will do it for you.”

As consumers continue to expand their broadband usage to take advantage of services like online video and file backup, services Comcast itself offers, more and more will run up against Comcast’s monthly usage limit.  Although your Comcast bill increases year after year, their usage limit has not.  It was 250 GB in 2008 and remains the same in 2010. Thanks to Stop the Cap! readers Dave and Michael who sent word our way.

It’s not just the big players that are trying to game the broadband stimulus system.

Tiny Pine Telephone Company of Broken Bow, Oklahoma was the only ACA member to secure a $9.5 million stimulus grant

One way to assure the winners and losers of broadband stimulus funding is who gets to write the application rules. The broadband stimulus program includes a scoring system, assigning points of merit to applicants who meet certain criteria. Provide proof of community support, earn a few points. Demonstrate a commitment to serving broadband to the unserved, earn some more points. Offer 21st century broadband speeds of 20Mbps or more, earn a lot more points.

The American Cable Association (ACA), a trade association for smaller independent cable companies, feels the point system has been weighted to favor phone company projects. Both cable and telephone company lobbyists offered their “suggestions” for criteria to be scored. The rural telephone company lobbies won.

Fierce Telecom notes a key criterion is whether the applicant borrowed funds under Title II of the 1936 Rural Electric Act, and it appears that telcos led that charge. Anyone that did borrow the funds under that program got five points so ACA asked the grant makers to reduce the emphasis of that criteria from five to one. Apparently, ACA not only didn’t get their wish, the grant makers upped the points on that issue from five to eight.

With federal funding programs, it’s not uncommon for the rules to be written in such a way that helps politically-connected applicants in the qualification process. ACA was simply outgunned during this round, and after the first round of projects to be funded was announced, only one rural phone company, Pine Telephone, was deemed a winner.

“The American taxpayer will be disappointed to learn that the program was changed to give greater priority to awarding particular segments of the telecommunications industry with broadband funding over equally or better-qualified applicants, including ACA members, that could provide the same broadband service at a lower cost,” ACA President and CEO Matthew Polka said.

Had the reverse been true, the press release from the rural telephone trade association would say the same thing — only the names would have changed.

Coming up…

Sticking it to Frontier Communications — “Just Say No” Applies to America’s ‘Rural Phone Company’ As Well

Consumers are increasingly cutting down their cable packages to keep their monthly bill down

Cable television customers have finally reached their limit.  For years, annual rate increases well in excess of inflation have annoyed customers, but beyond complaining, few actually dropped service.  That has begun to change as the economy, consumer debt, job fears, and other expenses have finally provoked customers to begin paring back on their cable package.

According to research from Centris, a consumer research organization, a virtual ceiling of tolerance for cable rate increases appears to have been reached for many subscribers.  Although consumers are not dropping cable en masse, they are not simply accepting a higher bill either.  They are dropping services from their cable package.  In 2008 and 2009, premium movie channels and pay per view suffered most from customer downgrades.  Consumers with multiple premium movie channels started by dropping one or two of them, and their use of pay per view service also dropped.  As the financial impact of the recession wore on, the next round of rate increases caused additional erosion — by late 2009 many consumers discontinued all of their premium services.

The goal?  To reduce or at least maintain a consistent monthly bill.  The average amount consumers are paying for digital cable dropped from $79 a month in the third quarter of 2008 to $70 in the third quarter of 2009.  That decline didn’t come from discounts from the industry — it came from dropping channels and services. In 2010, consumers are still pruning away, now impacting digital basic cable and smaller add-ons like sports and movie tiers.  They are also phoning their provider threatening to cancel service altogether if additional discounts cannot be found.  Cable operators, not surprisingly, have managed to find plenty of savings for consumers who ask and stand their ground, ready to walk away from cable.

The cable industry has sought to promote bundled services as an anti-erosion measure.  It’s much harder to walk away from a provider supplying your television, Internet, and phone service, especially if they lock you into a multi-year service agreement with a cancellation fee.  The savings promoted from bundled services come largely as a result of steeper price increases on standalone products and services, manufacturing “added value” for so-called “triple play” packages.

Some customers have divorced from pay television service altogether, deciding relentless price increases and the 500 channel universe shoveled in their direction just isn’t worth the price.  For many American families, however, such drastic cord cutting would border on traumatic, and they haven’t managed such a drastic step.

Luckily, a growing number of consumers have discovered taking the Luddite approach to television entertainment isn’t a requirement any longer.

Cutting the Cord With Online Viewing

With the growing penetration of fast broadband service in homes across the country, online video has rapidly become one of the most popular online services, particularly when it’s available for free.  The benefits don’t stop at the cost — programming catalogs are becoming increasingly deep and diverse allowing fans to watch entire seasons of shows on-demand, with a limited commercial load.  A consumer looking for something to watch might easily find more entertainment online than wading through hundreds of cable channels of niche and re-purposed programming (and program length commercials).

Cable companies are well aware of the trend towards online video.  First considered part-curiosity, part-piracy, today online video is provided by the major American networks, cable programmers, independent filmmakers, YouTube, and of course, Hulu.  It isn’t just for those torrent sites anymore.  And there is plenty of room for online video to grow.

The industry uses research companies like Centris to carefully track subscriber trends.  They want to be out in front of any sea change in viewing practices that could impact their business model and their revenue, and avoid repeating the mistakes others made in ignoring a potential threat for too long.

Wall Street is well aware of the potential threat as well.

Craig Moffett, a cable industry analyst with Sanford C. Bernstein is among the most prominent trend-watchers for the cable industry.  He sees some warning signs for the future.

“Still no evidence of cord-cutting, but as prices spiral higher, the stresses on the system are unquestionably growing,” Moffett said.

So far, the cable industry has decided the best way to fight potential losses is to get into the game themselves on their terms.  Comcast and Time Warner Cable, the nation’s largest cable operators, are launching their TV Everywhere concepts, which provide their broadband customers with online access to a myriad of cable programming, on demand, and currently for free.  The catch?  You must be a verified, current pay television customer.  If you want to watch a basic cable show, you need a basic cable subscription.  Want to watch Bill Maher online?  You can, assuming you are a verified HBO premium television subscriber.

Comcast’s system is already up and running.  Time Warner Cable is expected to roll out their system sometime this year.

The industry is even selling the public they applaud the online video experience as a win for customers.  Time Warner Cable president and CEO Glenn Britt said, “TV Everywhere is an all-around win for those of us who love television. It will give our customers more control over content and allow them greater access to programs they are already paying for, while enhancing the distributors’ and networks’ robust business model that encourages the creation of great content.”

He didn’t say it also protects Time Warner Cable’s flank from cord-cutting.  Lose the cable subscription and your access to online cable programming goes with it.

But the question remains, is that enough to protect cable television revenue?

The answer might be no.

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Bloomberg News reported on ‘The Invasion of the Cable Killers’ — new hardware that lets you bypass cable, back on September 15, 2009.  (2 minutes)

The Coming Online Viewing War: The Players Assemble

Who owns and controls programming ultimately controls the distribution of it.  Time Warner Cable took several shots at Fox a few weeks ago when threatened with the loss of Fox programming over a contract dispute.  Alex Dudley, spokesman for Time Warner Cable, told NY1 viewers much of Fox’s programming is available online for the taking, so even if the network was thrown off the cable company’s lineup, viewers could simply bypass the dispute and watch online… for free.  His message – the dollar value Fox places on its programming is diminished when it gives it away for free online.

The fact so much of network programming is available online for free is part of the dispute over how much cable operators should pay to carry networks on their cable systems.  When the industry passes along those carriage fees to consumers, will that be the last straw for some who will drop their cable subscription and simply watch everything online?

“They’re the ones who are going to resist these price increases that the programmers are trying to push,” said Dudley. “One need look no further than the music industry for an example of what happens when consumers feel taken advantage of by an entire industry.”

Dudley’s remark is more telling than he realizes.  The cable industry is well aware of what happened when the music and newspaper industry ignored nascent challenges to their business models like piracy or free access to their content.  To cable operators, the music and newspaper industries’ online experiences are lessons to be learned and not repeated.  The music industry waited too long to crack down on piracy and lost pricing power as consumers simply stole what they rationalized was overpriced.  The newspaper industry failed to erect pay walls to control access to their content, and newspaper subscribers dropped print subscriptions to read everything online for free.  Cable industry control of content and distribution is key to protecting their business model for pay television.  More on that in a moment.

Now two other parties want to be heard on this matter — consumer electronics manufacturers and advertisers.

The Roku box is popular among Netflix subscribers who want to stream TV shows and movies to their television sets

This week, Advertising Age is running a story on the implications of cord-cutting.

The magazine takes note that online viewing doesn’t require a computer any longer.  Samsung, Boxee, Apple TV, and even Microsoft, manufacturer of the XBox, are now selling devices that bypass cable television and grab online video for users, often for free.

Netflix has already managed that for a monthly fee, and is rolling out service on all sorts of devices, from a set top box that streams content from the web to your television to video game consoles, and now even builds-in the service to some televisions and Blu-Ray DVD players.  Microsoft’s XBox Live service could be germinating a cable television service of its own, as it seeks to license content from programmers starting with Disney’s ESPN.

All of these services, along with traditional laptop or home computer viewing, could evolve into formidable challengers for the pay television industry.  Oh, and some new televisions on offer at this year’s Consumer Electronics Show build in support for Skype, a Voice Over IP telephone service, so phone revenue could be at risk as well.

Advertising Age believes this could be one of the entertainment industry’s biggest business battles of the next few years as millions, if not billions of dollars are at stake.

For the moment, the public face of the debate is a combination of downplaying its potential impact while the players quietly position themselves and their assets for the fight certain to come.

Both Dudley and Britt at Time Warner Cable call the potential trend towards online viewing interesting, but not much of a threat at the moment.

“We see some interesting stuff out there, but right now people are watching more TV than ever; cable-cutting is largely on the fringe,” said Dudley.

“A lot of manufacturers have come out and made announcements, but I don’t think they really are in a position to erode the pay-TV subscriptions that the cable industry has today,” said Park Associates research analyst Jayant Dafari.

“For many people, cable works just fine; the quality is great; the DVR functionality is great; the only gripe they have is that they’re paying for it,” Boxee’s founder and CEO Avner Ronen told Advertising Age. But “there is a growing generation out there where the whole definition of entertainment is changing, and their main source of entertainment is the internet.”

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CNBC covered last week’s announcement of a partnership between Nintendo and Netflix to provide Netflix on the popular Nintendo Wii, in this exclusive interview with Reed Hastings, chairman and CEO of Netflix and Reggie Fils-Aime, Nintendo of America president & COO (January 13, 2010 – 5 minutes)

‘If It Becomes A Problem, We’ll Just Cut Them Off‘

The cable industry is in a comfortable position to leverage its control over programming and distribution to ultimately limit any competitive threat from online viewing.  In addition to mega-deals like Comcast’s acquisition of content-rich NBC-Universal (a partner in Hulu), the cable industry owns, controls, or can leverage carriage of its cable lineup contingent on programmers not giving away too much for free.  Advertising Age:

One tech exec, who asked not to be named, predicted that the minute cable operators start to feel the disruption, they will clamp down and use their market power to keep TV and films from seeping into next-generation devices. They’re already putting the squeeze on networks; any free distribution is an argument for lower cable distribution fees.

Stop the Cap! is also a player in this struggle, because a key component of the cable industry’s control of programming is the means it is distributed to consumers, and cable modem service representss one half of the duopoly most Americans find when shopping for broadband.  One potential strategy to eliminating the cord-cutting option is to enact Internet Overcharging schemes like usage limits and consumption billing that effectively makes it impractical for a consumer to “switch” to broadband for all of their online viewing.  Switching to the other half of the duopoly may not be an alternative. As online video projects like TV Everywhere will also be available to telco TV partners who wish to participate, there is every incentive to also limit video consumption on Verizon’s FiOS or AT&T’s U-verse systems.

Effective competition against entrenched players in the marketplace is impossible if those players control the content, the means of its distribution, and the ability to cut you off if you watch too much or switch to an independent competitor.

But this is history repeating itself.  Many of the same players and interests followed the same protectionist path against another competitor – satellite television.  It took strong regulatory policy from Washington to force a fair and level playing ground for an industry that didn’t want to sell content to its competitors, overcharged for access, and kept effective competition at bay for years, all while happily increasing rates for beleaguered consumers.

Here we go again.

Cox has a Facebook page devoted to asking customers what they think would be fair in wireless products and pricing.

The cable industry’s definition of “fair” doesn’t always seem to connect with average consumers, who too often discover what sounds like a good deal to the local cable company isn’t a good deal for them.  Despite the skepticism, Cox Communications thinks it has a deal for you… an “unbelievably fair deal” for consumers looking for wireless service.

Cox already has a website up and running, unbelievablyfair.com where Cox Cable customers can register with their e-mail address and get updates on service availability.  They also get a free OnDemand movie coupon.

If you’re wondering what Cox is up to, here’s the scoop.

Back in 2006, Cox and several other cable companies bid for and won several frequency blocks suitable to support wireless services.  Those frequencies, along with a partnership with Sprint Nextel, are expected to serve Cox’s entry into the wireless business.  Initially launching in Hampton Roads, Virginia, Omaha, Nebraska, and Orange County, California, Cox will use Sprint’s CDMA 3G network to support its wireless service at the outset.

The company hasn’t revealed exactly how “unbelievably fair” their pricing actually is, but based on the company’s advertising campaign, it’s a safe bet it will be free from the tricks, traps, and gotchas bigger players in the market stick to their customers.  Minute plans would likely provide “rollover” of unused minutes, if not kicking the minutes bucket right out of the equation with flat rate service.  Hidden extra fees and surcharges are also unlikely to be a part of Cox Wireless’ service plans.  That could ultimately mean a plan priced competitively with Boost Mobile or Tracfone Wireless’ Straight Talk.

Cox will eventually enhance Cox Wireless and provide it in other Cox Cable service areas, as well as building out its own wireless network.

“Our research found that value and transparency are very important to consumers when choosing a wireless service plan, but they are not finding these qualities in the wireless plans offered today,” said Stephen Bye, vice president of wireless. “Total loss of unused minutes as well as unforeseen overage charges on bills are just two examples of what our customers have told us is just unfair.”

Customers have been following Cox’s invitation to join in a discussion about wireless pricing fairness on the company’s Facebook page (click the logo above to access).  From a quick review of comments, customers want lower pricing, more bundled discounts, a better handset selection, better speed, and our personal favorite – no Internet Overcharging schemes like usage caps and limits on their data network.

Cox is rolling out a major marketing campaign to promote Cox Wireless, including advertising and discussions on company-produced programs airing on Cox Cable systems in the communities where service will arrive this spring.

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Cox Wireless’ marketing campaign includes three ad spots and a website intro. (2 minutes)

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Cox Cable in Hampton Roads, Virginia briefly mentions Cox Wireless in ‘Cox Connections,’ a company-produced program airing on Cox Cable.  (6 minutes)

Negotiations between Scripps and Cablevision continue to drag on in the northeast as New York, Connecticut, and New Jersey Cablevision cable subscribers go without their HGTV and Food Network.

Progress has been incremental at best as Cablevision continues to refuse to accept paying the increased fees Scripps wants.  Cablevision’s declaration that is expects to never carry Scripps programming again doesn’t help.

Meanwhile, Food Network president Brooke Johnson has been running from one news channel to another to talk about Scripps’ position on the dispute, and that “hundreds of thousands” of viewers have complained about the loss of their two networks, a number Cablevision disputes.

Pali Research analyst Richard Greenfield, who covers the cable industry, defended Cablevision, giving credit to the Dolan family that owns Cablevision for standing up to Scripps’ rate increase request.

Greenfield accused Comcast and Time Warner Cable of “essentially rolling over” in their negotiations with Scripps, agreeing to price hikes for their networks, an allusion to Time Warner Cable’s campaign to fight back against programmer price increases.

If those cable companies “had taken a far harder stance with Scripps, Cablevision’s pushback may actually have forced Scripps’ hand,” Greenfield wrote.

Still, most viewers could care less about the power plays between cable and the programmers.  They just want their HGTV and Food Network back.

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WCBS-TV New York ran these two reports during their 6pm and 11pm newscasts describing the battle between Scripps and Cablevision, and consumer reaction.  (4 minutes)

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Same story, different city as WTNH-TV viewers in New Haven, Connecticut share their views on the dispute.  (2 minutes)

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Food Network president Brooke Johnson appeared on CNBC to take questions about the dispute and changing business model of cable TV and programmers.  (5 minutes)

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Johnson also turned up on Fox Business News to discuss the dispute, how negotiations are going, and how viewers are reacting.  (6 minutes)

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…And Johnson also appeared on Bloomberg News accusing Cablevision of paying themselves top dollar for AMC, a network they own, while refusing to negotiate over a price increase for the “more popular” HGTV and Food Network amounting “to pennies per subscriber.”  (6 minutes)