Rep. Calfee

“The sheer audacity of Charter Communications’ offer of free airtime to legislators following the defeat of a broadband access bill is breathtaking,” wrote the editors of the Knoxville News Sentinel in a heated editorial this week. “The spectacle of lawmakers accepting the offer would be revolting.”

The newspaper was responding to the optics of Charter Communications’ generous offer of free airtime for politicians willing to record “public service announcements” just a day after the Tennessee House Business & Utilities Subcommittee killed a bill that would have allowed public utilities to expand fiber broadband service outside of their current electric service area. If that bill became law, it had the potential of giving Charter the formidable competition AT&T, Frontier Communications, and CenturyLink have failed to deliver in Tennessee.

In an election year, anything that gives politicians exposure to voters is worth its weight in gold, which is why taxpayer-sponsored “newsletters” and “voter updates” fill voters’ mailboxes a few months before Election Day. Charter’s plan to saturate subscribers with dubious “PSAs with Politicians” during ad breaks is harder to ignore than another piece of campaign junk mail destined for the recycle bin.

Rep. Daniel

Charter’s vague explanation it was going to offer the airtime before the Subcommittee vote only makes the scandal worse, because it means lawmakers were given advance notice they could be as well-recognized as Henry “The Fonz” Winkler selling reverse mortgages, circus animals and cheerleaders drumming up business for local car dealerships, and kids night at the local family restaurant — all too common tenants of the “local ad insertion” space cable companies get to make more money (or in this case win/reward influence) on the side.

But Charter’s plan appears to be backfiring, drawing unwanted attention on a cable operator Tennessee loves to hate. But more importantly, it gave the Knoxville press an opportunity to remind voters who the real villains of competition are: Republican Reps. Kent Calfee of Kingston and Martin Daniel of Knoxville — two local lawmakers on the Subcommittee voting with Charter, AT&T, and Comcast against their constituents pleading for more cable competition.

The local hero? Rep. Art Swann (R-Maryville) who voted yes (e-mail him a thank you note). He predicts the bill will be back.

The News Sentinel regards the love affair between Charter and lawmakers as compelling as a lunch date with Limburger cheese:

Actually, the stench emanating from the Capitol would indicate something worse than just bad appearances. Tempting lawmakers with free airtime during an election year — even if the commercial technically would not be a campaign ad — is like waving a treat above the snout of an obedient dog.

Charter has not commented on the matter, but its offer certainly gives at least the appearance of trading airtime for votes; surely legislators know better than to take him up on the offer. Tennesseans must hold lawmakers accountable if they do.

Readers can start by telling Reps. Calfee and Daniel they are watching them very closely on this issue and expect them to support public utility broadband expansion when the issue comes before them next time:

A Dutch telecommunications regulator is warning mergers and acquisitions rarely turn out well for competition or consumers, and admits mistakes were made when regulators allowed John Malone to create an effective cable monopoly in Holland.

Chris Fonteijn, board chairman of the Netherland’s Authority for Consumers and Market (ACM) told fellow regulators at a conference in London that two wired broadband providers are not enough to foster real competition, because the competitors are likely to collude on pricing and have a built-in incentive to limit costly upgrades.

Fonteijn

“Two telecom companies [in an area] is not sufficient to ensure that consumers get the best deals on price and quality,” Fonteijn said. “Two dominant operators can lead to coordination between the main players and less investment and innovation, disadvantaging consumers.”

Fonteijn confessed ACM may have made a mistake allowing John Malone’s UPC — a European cable conglomerate — to acquire its larger competitor Ziggo, establishing an effective monopoly in cable broadband in most parts of Holland. The merger has left most Dutch broadband users with two choices for broadband: telephone company KPN or  cable company Ziggo.

After the merger, Fonteijn believes the two companies reduced investment and innovation. Dutch regulators required KPN to open its network to wholesale customers who resell services over the telephone network. But UPC/Ziggo escaped any wholesale access requirement, further limiting potential competition. Fonteijn said ACM was revisiting that discrepancy and may force Ziggo to open up its cable system.

At the very least, Fonteijn suggests multiple wired operators competing with at least three nationwide mobile carriers to protect competition and innovation.

John Malone’s Liberty Global has bought out Puerto Rico’s second biggest cable television operator — Choice Cable TV — and will convert its customers to Liberty Cablevision of Puerto Rico.

Liberty joined Searchlight Capital Partners to close the $272.5 million purchase, which will make Liberty Puerto Rico’s largest cable company, passing more than one million homes and serving about 750,000 customers.

Liberty put $267.5 million of the purchase on its credit card, using debt borrowing from another Malone-controlled entity — Liberty Cablevision — to fund most of the deal. Liberty Global contributed just $10.2 million in equity and its partner Searchlight kicked in $6.8 million in equity.

The deal gives Malone’s company a total cable monopoly on the island. Choice Cable was the last standing cable operator not owned by Liberty, and served customers in western, southern, and central Puerto Rico. Choice itself consolidated several independent cable operators, including Cable TV Northwest (Aguadilla), Dom’s Cable TV (San Germán), Cablevision Mayaguez and TelePonce Cable TV. Now it has been consolidated itself.

Choice Cable used to offer service in these Puerto Rican communities. Most of the rest of the island is served by Liberty Cablevision, which will now have a total cable monopoly across the unincorporated U.S. territory.

According to Liberty Global, the combined cable company will be expected to generate at least $390 million in annual revenue. If it doesn’t, rate increases could be on the way. Channel changes have already been introduced.

Liberty Puerto Rico added 18 new channels to the Choice Cable lineup at no extra cost. The Choice Pak package includes the new channels: AMC, AXS TV, beIN in Spanish and English, Cablevision, Disney Jr., Fox Sports 1, FX, Lifetime Real Women and PBS Kids. The Top Choice package will include: Crime & Investigation, DIY, Esquire, Fox Sports 2, History in Spanish, IFC, Military History and NBA TV.

But several other channels will be dropped: MTV, VH1 and Nickelodeon, Comedy Central, Spike, TV Land and Palladia HD. These Viacom-owned channels were discontinued last year by Liberty in a dispute over programming fees.

Liberty intends to offer up to 120/4Mbps Internet speeds, over 100 HD channels (352 channels total), and a “better balance of English and Spanish language networks” to current Choice customers.

Bad enough

A big company needs a big name, and so what if you can’t say it out loud, so long as your check reaches the cable cartel on time to avoid those inconvenient late fees.

The shock waves of the $45 billion dollar proposed merger of Comcast and Time Warner Cable (not to mention AT&T and DirecTV) have reached as far as Great Britain where appalled editorial writers in the British press are pondering whether Washington has lost its mind or just its integrity… or a combination of both, by actually contemplating the unthinkable rebirth of the American Robber Baron.

Only instead of railroads powering America’s early 20th century economy, today its broadband. Overseas, broadband is plentiful, fast, and cheap. Back home, cable operators are hard at work in a comfortable monopoly/duopoly working on excuses to justify Internet rationing with usage caps, outrageous equipment rental fees, rate hikes, and usage billing for a product about as cheap to offer as a phone call on one of those unlimited calling plans you probably already have.

From The Economist:

“On “OUTLAW”, a drama that aired on NBC, a Supreme Court justice leaves the bench to join a law firm. In real life he might have begun working for Comcast, America’s largest cable company, which owns NBC. Many of Washington’s top brass are on Comcast’s payroll, including Margaret Attwell Baker, a former commissioner of the Federal Communications Commission (FCC), America’s telecoms regulator, who in government had helped approve Comcast’s takeover of NBCUniversal in 2011. Even Barack Obama has Comcast ties. “I have been here so much, the only thing I haven’t done in this house is have seder dinner,” he quipped at a fundraiser hosted last year at the home of David Cohen, Comcast’s chief lobbyist.

“It helps to have influential friends, especially if you are seeking to expand your grip on America’s pay-TV and broadband markets.

“[…] The deal would create a Goliath far more fearsome than the latest ride at the Universal Studios theme park (also Comcast-owned). Comcast has said it would forfeit 3m subscribers, but even with that concession the combination of the two firms would have around 30m—more than 30% of all TV subscribers and around 33% of broadband customers. In the cable market alone (ie, not counting suppliers of satellite services such as DirecTV), Comcast has as much as 55% of all TV and broadband subscribers.

Worse

“Comcast will argue that its share of customers in any individual market is not increasing. That is true only because cable companies decided years ago not to compete head-to-head, and divided the country among themselves. More than three-quarters of households have no choice other than their local cable monopoly for high-speed, high-capacity internet.

“For consumers the deal would mean the union of two companies that are already reviled for their poor customer service and high prices. Greater size will fix neither problem. Mr Cohen has said, “We’re certainly not promising that customer bills are going to go down or even that they’re going to increase less rapidly.” Between 1995 and 2012 the average price of a cable subscription increased at a compound annual rate of more than 6%.”

Before blaming it all on President Obama’s close relationship with Comcast’s top executives, it was the Republicans in Washington that set this tragic monopolistic farce into motion. Michael Powell, President George W. Bush’s idea of the best man in America to protect the public interest at the FCC, represented the American people about as well as ‘Heckuva Job Brownie.’ Instead of promoting competition, Powell used his time to beef-up his résumé for a very cushy post-government job heading America’s top cable lobby – the National Cable & Telecommunications Association. Attwell-Baker was even more shameless, departing the FCC for her sweet new executive digs at Comcast just a short time after enthusiastically voting in favor of its NBCUniversal merger deal.

Powell and others made certain that Internet Service Providers would not be classified as “common carriers,” which would require them to rent their broadband pipes at a reasonable wholesale rate to competitors. The industry and their well-compensated friends in the House and Senate argued such a status would destroy investment in broadband expansion and innovation. Instead it destroyed the family budget as prices for mediocre service in uncompetitive markets soared. Today, consumers in common carrier countries including France and Britain pay a fraction of what Americans do for Internet access, and get faster speeds as well.

Letting Comcast grow even larger, The Economist argues, will allow one company to dominate not just your Internet experience, but also the content consumers access and at what speed.

“There is plenty for Mr Obama and Mr Cohen to discuss at their next dinner,” concludes the magazine. “But better yet, officials could keep their distance from Comcast, and reject a merger that would reduce competition, provide no benefit to consumers and sap the incentive to innovate.”

Considering the enormous sums of money Comcast has shown a willingness to spend on winning over supporters for its business agenda, restraint on the part of Washington will need voter vigilance, much the same way calling out non-profits who gush over Comcast while quietly cashing their contribution checks must also be fully exposed to regulators who will ultimately decide the fate of the merger.

[flv]http://www.phillipdampier.com/video/Antitrust Us.mp4[/flv]

Antitrust Us: Cartoonist Mark Fiore takes on the corporate idea that merging cable companies together creates more competition. (1:50)

Phillip “Free Trade in Bad Broadband” Dampier

Sure we’ve had our cultural skirmishes in the past,  but on one thing we can all mostly agree: our largest cable, phone, and broadband providers generally suck.

Outside of hockey season, Canada’s national pastime is hating Bell, Rogers, Vidéotron, Telus, and Shaw. The chorus of complaints is unending on overbilling, bundling of dozens of channels almost nobody watches but everybody pays for, outrageous long-term contracts, and bloodsucking Internet overlimit fees. In fact, dissatisfaction is so pervasive, the Conservative government of Stephen Harper spent this past summer waving shiny keys of distraction promising Canadians telecom relief while hoping voters didn’t notice their tax dollars were being spent by the country’s national security apparatus to spy on Brazil for big energy companies.

The Montreal Gazette is now collecting horror stories about dreadful service, mysterious price hikes, and promised credits gone missing on behalf of readers fed up with Bell and Vidéotron.

Rogers Cable, always thoughtful and pleasant, punished a Ottawa man coping with multiple sclerosis and cancer with a $1,288 bill, quickly turned over to a collection agency after his home burned to the ground. It took headlines spread across Ontario newspapers to get the cable company to relent.

Things are no better in the United States where the American Customer Satisfaction Index rates telecom companies worse than the post office, health insurers airlines, and the bird flu. National Public Radio opened the floodgates when it asked listeners to rate their personal satisfaction with their Internet Service Provider — almost always the local cable or telephone company.

The phone company Canadians love to hate.

Many responded their Internet access is horribly slow, often goes out, and is hugely overpriced. In response, the cable industry’s hack-in-chief did little more than shrug his shoulders — knowing full well American broadband exists in a cozy monopoly or duopoly in most American cities.

Breann Neal of Hudson, Ill., told NPR she has one choice — DSL, which is much slower than advertised. Hudson is Frontier Communications country, and it is a comfortable area to serve because local cable competition from Mediacom, America’s worst cable company, is miles away from Neal’s home.

“There’s no incentive for them to make it better for us because we’re still paying them every month … and there’s no competition,” Neal says.

Samantha Laws, who gets her Internet through her cable provider, says she also only has one option.

“It goes out at least once a day, and it’s been getting worse the last few months,” Laws says. She works with a pet-sitting company that handles all of its scheduling through email and the company website. At times she can’t do her job because of the unreliable connection.

Chicago is in Comcast’s territory and the company is quite comfortable cashing your check while AT&T takes its sweet time launching U-verse in the Windy City. AT&T isn’t about to throw money at improving DSL while local residents wait for U-verse and Comcast doesn’t need to spend a lot in Chicago when the alternative is AT&T.

Where there is no disruptive new player in town to shake things up, there is little incentive to speed broadband service up. But there is plenty of room to keep increasing prices for a service that is becoming as important as a working telephone. Companies are using broadband profits to cover increasing losses from pay television service, investing in stock buybacks, paying dividends to shareholders, or just putting the money in a bank, often offshore.

NPR’s All Things Considered:

“[For] at least 77 percent of the country, your only choice for a high-capacity, high-speed Internet connection is your local cable monopoly,” says Susan Crawford, a visiting professor at Harvard Law School. She is also the author of Captive Audience: The Telecom Industry and Monopoly Power in the New Gilded Age.

Crawford says that today’s high-speed Internet infrastructure is equivalent to when the railroad lines were controlled by a very few moguls who divided up the country between themselves and gouged everybody on prices.

She says the U.S. has fallen behind other countries in providing broadband. At best, Crawford says, the U.S. is at the middle of the pack and is far below many countries when it comes to fiber optic penetration. Given that the Internet was developed in the U.S., she says the gap is a result of failures in policy.

“These major infrastructure businesses aren’t like other market businesses,” Crawford says. “It is very expensive to install them in the first place, and then they build up enormous barriers of entry around them. It really doesn’t make sense to try to compete with a player like Comcast or Time Warner Cable.”

So Crawford is calling for is a major public works projects to install fiber optic infrastructure — a public grid that private companies could then use to deliver Internet service.

Powell

That’s an idea met with hand-wringing and concern-trolling Revolving Door Olympian Michael Powell, who made his way from former chairman of the Federal Communications Commission during the first term of George W. Bush’s administration straight into the arms of Big Cable as president of their national trade association, the NCTA.

Powell, well compensated in his new role representing the cable industry, wants Americans to consider wireless 3G and 4G broadband (with usage caps as low as a few hundred megabytes per month) equivalent competitors to the local cable and phone company.

“I think to exclude [wireless] as a substitutable, competitive alternative is an error that leads you to believe the market is substantially more concentrated that it actually is,” Powell says.

Of course, Powell’s new career includes a paycheck large enough to afford the wireless data bills that would shock the rest of us. All that money also apparently blinds him to the reality the two largest wireless providers in America are AT&T and Verizon — the same two companies that are part of the duopoly in wired broadband. It’s even worse in Canada, where Rogers, Bell, and Telus dominate wired and wireless broadband.

Although America isn’t even close to having the fastest broadband speeds, Powell wants you to know the speeds you do get are good enough.

“I think taking a snapshot and declaring us as somehow dangerously falling behind is just not substantiated by the data,” he says. He says it is like taking a snapshot of speed skaters, where there might be a few seconds separating the leaders, but no one is “meaningfully out of the race.”

That is why we still celebrate and honor Svetlana Radkevich from Belarus who competed in the speed skating competition at the Vancouver 2010 Winter Olympics. She made it to the finish line and ranked 33rd. Ironically, South Korea ranked fastest overall that year, taking home three gold and two silver medals. In Powell’s world, that’s a distinction without much difference. You don’t need South Korean speed and gold medals when Belarus is enough. That argument always plays well in the United States, where Americans can choose between Amtrak or an airline for a long distance trip. Who needs a non-stop flight when a leisurely train ride will get you there… eventually.

There are a handful of providers uncomfortable with the mediocre broadband slow lane. Google is among them. So are community broadband providers installing fiber broadband and delivering gigabit Internet speeds. EPB in Chattanooga is among them, and it has already made a difference for that city’s digital economy neither AT&T or Comcast could deliver.

Unsurprisingly, Powell thinks community broadband is a really bad idea because private companies are already delivering broadband service — while laughing all the way to the bank.

If a community really wants gold medal broadband, Powell says, they should be able to have it. But Powell conveniently forgets to mention NCTA’s largest members, including Comcast and Time Warner Cable, spend millions lobbying federal and state governments to make publicly owned broadband illegal. After all, cable companies know what is best.

All Things Considered recently asked its fans on Facebook, “How satisfied are you with your Internet service provider?” Many responded that they didn’t like their Internet service, that it often goes out and that their connection was often “painfully slow.” Listen to the full report first aired Jan. 11, 2014. (11:30)
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