QUBE's "revolutionary" interactive wired remote control, from 1978 (courtesy: QUBE-tv.com)

Happy Thanksgiving to all Stop the Cap! readers.

While we take a break from our usual reports, let’s turn the clock all the way back to 1978, an era before broadband (or dial-up for the most part) and even before most of the basic cable networks know today existed.  Cable television was not even an option yet in many communities, although discussions about the concept were well underway.

In Columbus, Ohio Warner Cable constructed an experimental two-way cable system called QUBE, which brought 30,000 homes in the city access to interactive, locally-produced programming.  Viewers could vote on different topics, share their opinions, answer quizzes, and order individual pay-per-view movies — a new concept for most people back then.

Cable television in 1978 didn’t deliver CNN, TNT, ESPN, or any of dozens of other cable networks that are household names today.  Instead, most delivered clear signals of broadcast television stations received over the air from a master antenna mounted high above the local cable company, supplemented with text-based information channels running newswires, sports scores, financial tickers, weather and other wire service reports.  Locally produced government, public access and educational programming covered much of the rest of the channel lineup.  Cable radio hooked up to home stereos and delivered improved FM radio reception and some privately run cable radio stations.

QUBE was no different in this respect.  The bulk of the programming people watched came from local broadcasters and imported stations from Indianapolis, Cleveland, Cincinnati, and Athens — all selected from a wired remote control.  It total, QUBE carried 30 channels, 10 of which were premium or pay per view.  The concept was so revolutionary, some folks traveled from miles around to record sample programming off the system and share copies of videotapes with other cable enthusiasts.

QUBE was not a financial success for Warner, however.  The costs to produce interactive programming, building brand new cable systems, and purchasing the equipment to run them, caused Warner to accumulate $875 million in total debt by 1983.  It abandoned the concept a few years later because new cable networks and superstations were rapidly signing on, creating a huge number of new viewing options that effectively drowned out the locally-produced interactive shows.  Cable would remain a one-way medium, at least for awhile.

Watching the enthusiasm of Ray Glasser, who produced the video included below, all over a 30-channel cable system was fascinating, as was watching the assortment of television stations sampled from more than 30 years ago.  And check out those supermarket prices listed on one of the text channels Ray previews.  After a series of sales and ownership transfers, Warner Cable still exists in Columbus.  But today, we know it better as Time Warner Cable.

[flv width=”422″ height=”327″]http://www.phillipdampier.com/video/Qube.flv[/flv]

A video tour of Warner Cable’s QUBE system in Columbus, Ohio, produced in 1978 by Ray Glasser.  (50 minutes)

Additional details about Time Warner Cable’s new TV Essentials package, which provides a more limited cable TV lineup to viewers are making their way to Stop the Cap!

So far, Wall Street appears generally unimpressed with Time Warner’s efforts to retain customers planning to depart the cable company over cost issues.  Richard Greenfield of BTIG says consumers have to give up too much to subscribe to a package that deletes many of America’s most popular basic cable networks and delivers no HD programming.

The package seems to alienate every age group.  Stop the Cap! confirmed Time Warner Cable made most of the decisions about the channel lineup themselves, and although some networks are insistent about not being excluded from such packages, many of the decisions about what channels to leave out were made by the cable company.  For example, younger viewers will miss Comedy Central despite the fact the network is hardly the most expensive basic cable channel around, and nothing prevented them from carrying it.  We’ve also learned the Essentials package deletes several more channels some consumers will consider deal-breakers to lose.  We’ve confirmed in Ohio, customers will have to give up Food Network and The Weather Channel.  No Ms. Palin’s Alaska either — TLC is also off the channel lineup.

We’ve learned from a few of our readers in Akron and Cleveland who inquired about the new package that Time Warner told them they cannot continue to get phone or Internet service with the Essentials package on their account.  We earlier heard customers were supposed to be excluded from promotional deals for these services, not banned from buying them at any price.  We’re trying to get a confirmation from Time Warner’s northeast Ohio division about this, and suspect there might be some mis-communication going on here.

Greenfield adds Time Warner is offering a lousy deal to budget-minded consumers.

“Cable subscribers looking to save money have already defected to Dish Network’s $40 package called America’s Top 120, which is better than TV Essentials,” he noted.

Meanwhile, residents in upstate New York — watch out.  Time Warner Cable is finalizing its decisions about 2011 rate increases which are likely to be announced in mailers sent just after the holidays.  A source tells Stop the Cap! the rate increases will echo the ones in North Carolina.  The biggest rate increases will hit customers only getting one or two services from the cable company.  Video customers can expect the largest increases.  Phone rates will likely remain unchanged for most.

Customers will be encouraged to avoid the rate increases by bundling services.  Time Warner Cable raised rates on western New York customers three times in 2010 for different services.  This rate increase, likely effective in February, will be similar in percentage to the one announced last winter.  The company will blame programming costs and also use the introduction of several new services, including Primetime on Demand, Look Back, and Remote DVR as  justification for the rate hikes.

We’ll have much more coverage on this in late December.

[flv width=”640″ height=”380″]http://www.phillipdampier.com/video/WFMY Greensboro TWC Rate Hike 11-22-10.flv[/flv]

You can preview the excuses for forthcoming rate hikes from Time Warner Cable by listening to a company representative in North Carolina deliver them to customers there, who will see their rates increase Dec. 3rd (from WFMY-TV Greensboro).  (2 minutes)

Time Warner Cable is among the first cable companies in the country to recognize there is still a Great Recession for many of their middle class customers.  After major cable companies lost more video subscribers than they gained for the last two quarters in a row — a first — the nation’s second largest cable operator has developed a budget-minded basic package to meet new economic realities.

Time Warner Cable’s TV Essentials Package will deliver about 50 channels of basic networks and local broadcasters to subscribers in two test markets starting Monday — New York City and northeastern Ohio around the cities of Akron and Cleveland.  New York residents will pay $39.95 for the package, $29.95 in Ohio.  But both packages will be sold to customers for only one year as a special promotion and are missing many popular networks.  Despite that, Time Warner Cable spokeswoman Maureen Huff says the packages represent significant savings for consumers.  The retail value of the package is $50 per month.  Several cable analysts suspect the package is revenue neutral for Time Warner, which hopes to hold onto customers and put them back on traditional cable packages as economic conditions improve.

But for those contemplating Essentials, compromising over the likely loss of several networks is required.  Sports fans in particular will need to look elsewhere — all of the expensive basic cable sports networks, including ESPN and MSG are not included.  News junkies will have to live with several C-SPAN networks, CNN and Headline News.  Fox News and MSNBC are excluded.  Several Viacom-owned cable networks are also not covered, notably Comedy Central.  TNT isn’t either.

In fact, no HD networks of any kind are provided, free video on demand is not included, and customers will be banned from obtaining DVR equipment to record shows for later viewing.  Also, customers participating in this promotion are prohibited from receiving any other discounts from the cable company for broadband or phone service, so it is narrowly tailored to appear only to current analog basic/standard service customers.

Although Time Warner Cable CEO Glenn Britt said, “the public would like to have more choice and have the option of paying for less programming,” it’s clear the cable company has also developed the package in a way to protect its more expensive Standard Service from being cannibalized by customers looking to save money.  The lack of HD programming and DVR availability, in particular, will deliver a clear message to many subscribers the package involves uncomfortable sacrifices.

Some of the networks dropped from the Essentials package are not even that costly to Time Warner Cable.  Comedy Central and MSNBC are much cheaper than other networks in the package.  The loss of the former is likely to keep younger households unhappy, and Time Warner would likely have been accused of bias had it included MSNBC’s left leaning nighttime lineup while excluding right-wing Fox News (which is more expensive than CNN and MSNBC combined).

Everything about the Essentials package screams “retention offer” — marketed quietly to customers intending to depart from the cable company for economic reasons.  With 2011 rate increases forthcoming, it is logical this type of package will be offered as a last resort.  But don’t expect Time Warner to heavily advertise it to current customers, where it could trigger a downgrade avalanche.

AT&T's "Fair Deal" website claims the company is fighting for lower programming costs.

Programmers trying to play hardball over fees paid by cable, satellite, and phone company providers occasionally get the ball thrown back at them, which is precisely what happened Friday when Scripps-Howard found their popular networks thrown off of AT&T’s U-verse, even though the companies had agreed on financial terms.

At issue — AT&T wants to distribute programming it pays for over new mediums, ranging from video on demand, online viewing, and even wireless watching through smartphone applications.  If programmers want more money, AT&T argues, they’d better also be willing to deal on how that programming gets watched.

When Scripps’ officials demurred Friday morning, AT&T simply pulled the plug on Food TV, HGTV, the Cooking Channel, as well as lesser-watched Great American Country and DIY Networks.

Scripps’ officials hurried out a statement:

“Let me start by saying this impasse is not about money,” said John Lansing, president of Scripps Networks. “We reached an agreement in principle with AT&T U-verse on the distribution fees we would receive for these networks well in advance of last month’s contract deadline.”

“AT&T U-verse demanded unreasonably broad video rights for emerging media where business models have not even been established,” Lansing said. “Accepting their demands would have restrained our ability to deliver our content to our viewers in new and innovative ways.”

Food Network President Brooke Johnson threw a HissyFit, claiming AT&T yanked the channels while the two sides were still at the negotiating table.

As Friday wore on, both sides defended their respective positions.  Scripps’ saw AT&T’s actions as nothing short of a Pearl Harbor sneak attack.  AT&T claimed Scripps was pulling a flim-flam — trying to stick the phone company with an inferior deal that restricted how they can use the basic cable networks, all at prices higher than their cable competitors were paying.

But when Lansing claimed the dispute was not about money, reality was also yanked from the lineup.  When a cable company or programmer tells you it is not about the money, it is all about the money.

Scripps reactivated their "Keepmynetworks.com" website to fight another programming fee battle

Johnson told the Chicago Tribune AT&T was trying to negotiate for broad usage rights of their programming for services that don’t even exist yet.

“They are asking for broad, unlimited distribution on non-linear platforms that go well beyond emerging media technologies. It’s anticipatory and it’s without a business model,” Johnson said.

Such agreements could end up haunting Scripps if a new money-making distribution scheme evolves that AT&T can use -and- get to keep all of the profits.

Cable companies might also be unhappy if AT&T won concessions they themselves don’t have.

Re-purposing video content into on-demand or portable viewing could evolve into a multi-million dollar business, especially if consumers begin deserting cable TV packages that include dozens of unwatched channels.  Cable cord-cutters could end up watching Food TV shows online, and who benefits financially from that is ultimately the issue here.

A weekend without the networks on U-verse was apparently enough for both sides, who pounded out an agreement announced yesterday evening, restoring the networks.

It was all-smiles for both sides:

Brian Shay, senior vice president of AT&T U-verse, said, “It was important to us on behalf of our customers to come to a positive resolution as quickly as possible. We appreciate everyone’s willingness to make that happen, working diligently over the weekend, so the situation wasn’t prolonged, and we thank our customers for their support and patience while we reached a fair deal.”

From Scripps:

“AT&T U-verse customers, we have been overwhelmed by your loyalty and support of HGTV and our other networks – DIY, Food Network, Cooking Channel and GAC. Your voice has been heard and we are very close to getting our networks back on AT&T U-verse.  We hope to have more good news for you soon.”

Terms of the new agreement were not disclosed, but you can be certain it includes a higher price tag for the bouquet of Scripps’ networks that will eventually appear on future AT&T U-verse bills.  But at least the cable networks avoided the fate of the Hallmark Channel, kicked off U-verse Sept. 1st and is still off as of today.

[flv width=”512″ height=”308″]http://www.phillipdampier.com/video/WDAF Kansas City Cable Customers Lose Channels 11-8-10.flv[/flv]

WDAF-TV in Kansas City covers the weekend loss of Food TV and other cable networks on AT&T U-verse over another programming fee dispute.  (2 minutes)

You can’t blame a guy for trying.  As the Cablevision-Fox dispute continues to drag on — keeping several Fox-owned cable networks and two New York stations off Cablevision screens, Hamilton Mayor John Bencivengo decided it was time to start shopping for some cable competition.

Bencivengo wrote thoughtful letters to executives of Comcast and Time Warner Cable trying to sell the two cable companies on coming to Mercer County.

“I am writing to inquire as to any interest your company may have in entering into Hamilton Township (Mercer County), NJ as a cable television provider,” Bencivengo’s letter reads. “I understand that any business decision would be predicated on the economic feasibility of entering into a new market, either through a franchise agreement with Hamilton Township or through a statewide franchise agreement available from the State of New Jersey through the BPU (Board of Public Utilities),” the letter reads. “It is a vibrant market that seems ripe for picking at this time.”

He’s also reminding both cable companies they are free and clear to deliver service just by signing a franchise agreement — the one Hamilton Township had with Cablevision expired back in 2005.

The New Jersey Times notes the area is not well-served by cable competition.  Verizon FiOS is an option for only about half of the residents of Hamilton, and only a quarter of residents in nearby Robbinsville.  The only other alternative is attaching a satellite dish to the roof.

Hamilton Township is part of Mercer County, N.J.

“Here we are again with stations that are pretty popular off the cable network without any reimbursement to the cable customers, and that’s unfortunate,” Bencivengo told the New Jersey newspaper. “I want to be proactive to try to woo these people to Hamilton Township.”

Unfortunately, the cable industry in the United States resembles an organized crime network (their prices sure are a crime), each with their own respective territories companies have quietly agreed never to cross.  Comcast and Time Warner Cable are the Godfathers of their respective service areas, and neither will compete head-to-head.  Even though many residents affected by the Fox blackout may think of Cablevision as the Fredo of the cable industry, the chances of another cable company arriving in town to compete with them is next to zero.

Verizon offers the most immediate opportunity for cable competition, but consumers will find pricing generally comparable to what Cablevision charges.

The mayor of Hamilton need not tilt at windmills, however.  There is another way.

If Hamilton Township is fed up with Cablevision’s HissyFits and Verizon’s high prices, the alternative is to build support for a community-owned municipal system that can deliver video, phone, and broadband service to residents.  That’s what communities ranging from Wilson and Salisbury, North Carolina to Opelika, Alabama are doing, among many others.

They’ve decided the future of their communities’ telecommunications needs can no longer be entrusted to a handful of bully boys who put customers in the middle of every dispute over the money those customers will ultimately have to pay no matter who wins.

It’s a far better long term solution than replacing one bad cable company with another.