Time Warner Cable’s approval of its request to offer regulated “digital phone” service in New York has been quickly followed by an appeal for deregulation to loosen rules covering disconnection for non-payment and reduced service quality standards.

The cable operator now qualifies — as a designated Eligible Telecommunications Carrier (ETC) — for significant federal and state subsidies in return for providing discounted Lifeline telephone service for the state’s poorest residents.

The cable industry has traditionally escaped regulation and oversight with claims “digital phone” Voice over IP (VoIP) products are “unregulated information services.”

In March, the New York Public Service Commission approved a petition filed by subsidiary Time Warner Cable Information Services (NY) LLP (TWCIS-NY), to begin offering regulated telephone service to the company’s 1,235,710 phone customers in New York.

As a result, Time Warner agreed to a range of oversight and service standard requirements. But on May 1 — less than two months later — Time Warner filed a new petition with the PSC requesting deregulation and exemption from several provisions the company initially agreed to follow.

“Now that it is concededly a regulated telephone service provider, Time Warner is acting like other regulated phone companies, in that it immediately is seeking to relax the rules designed to protect customers,” writes Gerry Norlander from the Public Utility Law Project of New York (PULP), a consumer protection group.

Not so, says the cable company.

“In order to offer the best telecommunications service to its customers and expand this customer base, TWCIS-NY respectfully requests that the Commission grant the waivers discussed in this Petition,” the company writes.

The changes Time Warner requests would make it easier for the cable company to disconnect service for late or non-payment, allow Time Warner to avoid distributing unwanted paper telephone directories, and escape oversight of its phone service for all but the most critical “core” customers with special needs.

Your Partial Payment Will Not Necessarily Prevent Us From Cutting Off Your Phone Line

The Telephone Fair Practices Act (TFPA), prohibits regulated phone companies from shutting off phone service for late/non-payment outside of normal business hours, Fridays after 1pm, weekends, and holidays:

(d) Suspension or termination of service–time. A telephone corporation complying with the conditions set forth in this section may suspend or terminate service to a residential customer for nonpayment of bills only between the hours of 8 a.m. and 7:30 p.m., Monday through Thursday, and between 8:00 a.m. and 3:00 p.m. on Friday, provided such day or the following day is not:
(1) a public holiday, as defined in the General Construction Law;
(2) a day on which the main business office of the telephone corporation is closed for business; or
(3) during the periods of December 23rd through December 26th and December 30th through January 2nd.

Time Warner Cable claims those limitations are too much, and “for its customers’ convenience, TWCIS-NY respectfully requests […] to extend these hours.”

If approved, Time Warner claims it will make your life easier if they can cut you off at their convenience — between the hours of 8:00am and 9:00pm, Monday through Friday, and between 8:00am and 5:00pm on Saturday.

Those times coincidentally match the hours technicians are now dispatched to collect equipment and shut off service for deadbeat customers.

Time Warner says people are often busy or not at home during the day and it would make more sense to coordinate the surrender of service when people are available to hand over equipment. Unfortunately, Time Warner’s preferred hours often fall outside of the calling hours at the Public Service Commission, which maintains a ‘last resort hotline’ for customers about to have their service disconnected.

‘Time Warner Cable Punishes Late Payers With Telephone Service Suspensions and Terminations on a “Massive” Scale’

Unlike cable television and broadband, New York designates telephone service as an essential utility, and regulators take every step to maintain service wherever possible.

Under rules originally adopted when consumers chose both a local and long distance phone company that put all of your charges on a single monthly invoice, regulators sought to protect landline service when customers did not pay the full amount due. Under those rules, partial payments are allocated first to past due charges from the local phone company, then past due charges for regional long distance or local calling, then charges billed by your long distance carrier, and then everything else.

Since your local phone company has the power to cut off your dial tone for late payment, making sure they were first in line to get paid usually kept your phone line working.

“It Appears that Time Warner Has Increased its Reliance Upon Telephone Service Suspensions and Terminations as a Tool to Enforce Customer Payment Obligations.”

According to data provided by Time Warner Cable in response to PULP information requests, during the month of March, 2012 Time Warner Cable sent 68,134 shutoff notices to Time Warner phone customers in New York. The threats worked for the majority of those customers. Only 17,218 were eventually disconnected after the shutoff deadline passed.

Since then, shutoffs and suspensions have soared. By July 2013, Time Warner mailed 146,026 shutoff notices and followed through with 42,777 disconnects, increases of 114% and 148%, respectively.

“As a consequence, interruption of phone service for bill collection purposes has reached massive proportion,” says PULP. “It appears that Time Warner has increased its reliance upon telephone service suspensions and terminations as a tool to enforce customer payment obligations. In the 12 months ending July 2013, Time Warner terminated or suspended telephone service on 592,250 occasions for bill collection purposes. Of that number, telephone service was reinstated after an interruption for collection purposes on 461,268 occasions. Thus, 130,982 or 22% of the customers terminated were not promptly reinstated.”

Those figures concern PULP because it suggests many disconnected customers are now without phone service, swelling the “unacceptably large number of New York households lacking telephone service.”

New York now ranks fourth from the bottom of all states in the most recent FCC Universal Services Monitoring Report of telephone subscribers.

Verizon’s Request to “Streamline” the Payment Process Gives Time Warner Cable the Same Idea

In 2010, Verizon New York successfully petitioned the PSC to streamline that payment allocation system. Few people bother with choosing a long distance carrier these days because most phone companies now offer unlimited long distance as part of a bundled service package. Verizon asked to simplify things so that Verizon New York got paid first and everything else came second.

Time Warner is seeking a variation on that same theme, requesting the PSC allow it to allocate partial payments first to telephone service, with the rest distributed to cover charges for broadband and cable television service.

While that is good news for your Time Warner phone line, it is bad news for your broadband and television service which can still be interrupted for non-payment because your partial payment was applied to phone service above all else.

Customers are unlikely to be aware of this, however. Time Warner Cable bills include a regular notice that if a customer is in arrears for any Time Warner Cable service, telephone service may be shut off.

PULP argues the cable company should let customers decide which services are most important to keep up and running during an emergency.

“For example, a customer might want to jettison cable TV and keep the Internet on to hunt for jobs during a spell of unemployment or other household financial crisis,” writes Norlander. “While the bills include separate items for cable TV, broadband, and telephone services, there is no information given in the bills on how customers can, if they are in arrears, keep the service they pay for with a partial payment.”

Indeed, there is no provision on Time Warner’s website or on its paper bill payment coupon to allocate which services a customer wishes their partial payment to be applied to first.

Time Warner Cable argues it gives late paying customers every opportunity to either make up past due payments or negotiate a payment plan before any service is interrupted.

“Customers have the opportunity to walk into the local [cable] office and make a payment during these extended hours,” Time Warner argues. “They also have the opportunity to pay online and over the phone 24 hours a day, as well as paying cable representatives directly when they arrive at the customer’s premises to disconnect service. TWCIS-NY believes that streamlining of the rules for disconnection of phone and cable services will make the Commission’s rules more consistent across the board and less confusing for customers.”

We Shouldn’t Have to Provide Printed Residential Phone Books We Didn’t Offer Anyway

Time Warner Cable wants to opt out from distributing printed copies of residential telephone directories it doesn’t publish.

When the company provided unregulated telephone service, it never had to offer customers a phone book. But in its new life as a regulated provider, New York requires phone companies to offer, upon request, a printed telephone directory:

Each service provider shall distribute at no charge to its customers within a local exchange area, a copy of the local exchange directory for that area, and one additional copy shall be provided for each working telephone number upon request. A copy shall be filed with the Commission.

Nobody has formally opposed Time Warner Cable’s proposed alternative: distributing residential listings only to customers who specifically request them in print or on CD-ROM.

Most customers don’t realize Time Warner Cable used to outsource most of its telephone service operation to Sprint. In addition to providing VoIP service, Sprint relied on dominant local telephone companies to provide phone books to Time Warner phone customers. In return, Sprint passed along customers’ names, addresses and phone numbers to phone companies like AT&T, Verizon, Frontier, CenturyLink and Windstream to be incorporated into those directories.

In 2010, Time Warner announced a four-year transition project to take its telephone service “in-house.”

Will All of This Competition, Oversight Rules Should Be Relaxed; If Customers Don’t Like Us, They Can Go Somewhere Else

Virtually every telephone company in New York agrees with the assessment Verizon has made for years — if a phone company does not provide excellent service, subscribers will simply switch to a competitor, negating the need for oversight of service quality standards.

Verizon paved the road Time Warner Cable is driving down to offer NY’ers less-regulated phone service.

The PSC agreed, reducing requirements for service outage reporting and other documented service issues. Today, Verizon only reports incidents involving “core” customers — low-income Lifeline subscribers, “special needs” customers including the elderly, those with serious medical conditions, the disabled and the visually impaired. Core customers also include those with no competitive service providers available to them.

Time Warner Cable wants a modified version of the Verizon “core customer” standard applied to its cable phone service — one that defines core customers as those with Lifeline service or special needs.

Time Warner does not want to include those without competitive alternatives and seeks an exemption from any reporting requirements until it signs up at least 5,000 accounts designated as “core customers.” That could take a while. PULP obtained records from Time Warner Cable showing as of Aug. 7 the company has only signed up 149 telephone customers it defines as “core customers.”

The cable company may be thinking of the future. Verizon Communications has made its intentions clear it wants to abandon rural landline service in favor of questionably regulated wireless Voice Link service. The idea that a cable company provides landline service in an area the local phone company no longer does is unprecedented in New York, but perhaps for not much longer.

If Time Warner Cable successfully argues “core customers” need not include those without competing alternatives, the PSC may unintentionally hand the cable operator a rural telephone monopoly without quality of service oversight in some communities.

At least 11 percent of Time Warner Cable phone customers nationwide are into their second day without phone service due to an unspecified outage.

The problem began at around 3pm EDT on Sunday and temporarily knocked out Internet service in some areas for several minutes. The Internet service came back, but for many the phone service did not.

Time Warner Cable says calls may not be completed successfully and incoming calls may be blocked. Caller ID information has also proven spotty even for customers who still have service, and voicemail access is sporadic. Anecdotal reports from upstate New York residents received by Stop the Cap! report fast busy signals, no dial tone, or blinking lights on the company-supplied MTA.

Some customers regained service late Sunday night while others are slowly getting service restored today.

No automatic credits for interrupted phone service will be issued by Time Warner, but customers can use the company website’s contact form or call their local Time Warner Cable office for service credits.

Just a week after exposing serious insufficiencies in a 911 emergency services database, a report from a Syracuse, New York television station finds Time Warner Cable’s “Digital Phone” service has a new problem — incoming calls increasingly are not getting through.

Callers using Verizon, Frontier, or cell phone lines are getting recorded messages indicating “all circuits are busy” when trying to reach customers using the cable company’s Voice Over IP phone service.  Time Warner officials are well aware of the problem.

The cable company tells WSYR-TV the problem is on inbound calls only, and is being caused by an unusual spike in the volume of calls to the company’s customers.  When all incoming lines are in use, callers will hear a recorded message.

The company says it is working to expand incoming call capacity in the next week to ten days, and until then advises callers to simply keep trying — once another customer hangs up, a line will be available for your call.

Time Warner says they routinely expand call capacity based on predicted call volumes, but this winter the number of inbound calls went beyond expectations.  Time Warner bundles its “digital phone” service with cable and broadband packages, and has picked up a significant percentage of customers who have cut the cord of their traditional phone company.

[flv width=”480″ height=”380″]http://www.phillipdampier.com/video/WSYR Syracuse Time Warner Cable Phone Problems 1-13-11.flv[/flv]

WSYR-TV in Syracuse covers Time Warner’s latest glitch — problems with their ‘Digital Phone’ service.  (Warning: Loud Volume) (2 minutes)

Seconds count. If your house was on fire, would you wait a minute or more for Time Warner to handle your 911 call?

Time Warner Cable’s digital phone service may be risking lives of the customers who use it to call 911 for emergency services.

That statement from Madison County, N.Y. 911 Director Paul Hartnett comes after the cable company bungled the handling of an emergency call reporting a house fire in the town of Clayton, Jefferson County, causing delays for emergency responders.

Even worse, the problems could be wider in scope, potentially putting many Time Warner Cable phone customers at risk of a delayed 911 response when seconds count.

At issue is an ongoing upgrade of the cable company’s E-911 database, begun after Time Warner dropped Sprint as their 911 vendor in favor of Intrado.  As the slow upgrade continues, customers dialing 911 could end up having their calls routed to a national 911 call center Intrado runs in Colorado.  The process often takes several minutes from the time the caller dials 911, someone in Colorado answers, and the call is eventually transferred back to the originating county, at which point the caller has to repeat information to a local 911 operator they could not reach directly.

Jefferson County’s 911 Director John Pumber told WSYR-TV news they first noticed the problems about a week ago. “I can see this thing escalating extremely fast, in talking to other cohorts around the state, some of the other centers, it’s becoming more and more of a problem,” he said.

Monday, a 911 call reporting a house fire in the Jefferson County town of Clayton was re-routed to the call center in Colorado. The call was eventually forwarded back to Jefferson County’s 911 center, 44 seconds later. By the time the nature of the emergency was given to the local operator, the house was fully involved in fire.

“If your house is on fire, and especially this individual was calling from his house, so we are leaving him in harms way to get the information and get him help [for] whatever the amount of time it took to get through the call center in Colorado and then through our procedures here,” said Plumber.

“Whether it’s medical, fire, law enforcement related – seconds do make a difference,” said Hartnett. “They’re putting public safety in jeopardy because they’re delaying calls. We’ve had medical calls, and other calls. We’ve dodged a bullet so far.”

This call, recorded by Madison County 911 last week, illustrates the problem:

911: Police communication?

Intrado: I’m calling from Intrado, a call center for Time Warner Cable, I have a subscriber on the line that dialed 911. They’re trying to get through to you, they have a medical emergency.

911: Okay, what’s the address madam?

Intrado: They need an ambulance at 4289 Canal Street.

911: Could I speak with them, or?

Intrado: You sure can, it’s going to be a female with difficulty breathing. Do you want their call back or mine?

911: If I’m going to talk to her, I’ll get it from her.

Intrado: You’re going to talk to her husband, his name is John. John your dispatcher is on the line.

911: Hi Sir, how are you?

Caller: Not good, you need to get a f***ing ambulance here right now!

Time Warner Cable Regional Communications Manager Stephanie Salanger released a statement last week addressing the issue:

“TWC has deployed a state-of-the-art E-911 system that offers several key advantages over more traditional systems, including real-time address validation. Our solution complies fully with FCC rules and industry standards, and it also is based on the same technology the federal government is considering mandating for “Next Generation 911″ services, so we will be well-positioned to comply with any new rules as soon as new standards are implemented.

In the very rare cases where errors in routing 911 calls or when errors in the 911 address database occur-which happens from time to time under any 911 system-calls are routed to the Emergency Call Relay Center managed by TWC’s E911 partner in Colorado, rather than to the default or incorrect 911 answering location. This call center allows TWC to determine the customer’s location and route the call to the appropriate emergency answering center. This has happened only in a extremely small number of cases since TWC began transitioning to its new 911 system. TWC has been continually working with local 911 authorities to ensure they understand the details of TWC’s 911 system and will continue to do so.

TWC has always been and remains committed to providing the highest quality E-911 services for its customers. We will continue to work with local E-911 officials and agencies to ensure they are aware of, understand and are satisfied with TWC’s E-911 system and all of its functionalities.”

[flv width=”480″ height=”380″]http://www.phillipdampier.com/video/WSYR Syracuse TWC phone glitch delays emergency responses 1-4-11.flv[/flv]

WSYR-TV in Syracuse ran two reports over two nights documenting more than 40 recent incidents where Time Warner Cable dropped the ball in properly managing 911 calls from their customers.  Warning: Loud Audio! (8 minutes)

Residents of these Virginia homes are required to pay $146 a month for Cox Cable, Broadband, and Phone service whether they want it or not.

Marilyn Castro decided she did not need her landline phone any longer.  The Virginia Beach resident learned her provider would be happy to oblige her request to disconnect service, but she is still required to pay her phone bill, even without the service, for at least the next 25 years.

Woodland Park, Virginia resident Allan Pineda got a similar story when he wanted out of Cox Cable’s landline service.  Yes, Cox will schedule a visit to disconnect service at his convenience, but he’ll still have to pay his cable bill, including landline charges, every month.

Frederic Martin, who lives at a Mid-America Apartment Communities-owned complex in Dallas, learned he was on the hook for cable-TV service, even though he has not owned a television set for more than a decade.

In Weston, Florida, some 15,000 homeowners pay for cable television whether they want it or not and if they don’t pay, their homes are at risk from foreclosure.

It’s all thanks to the concept of “bulk billing,” a practice growing in popularity that delivers mandatory cable, phone, and broadband service to renters and homeowners whether they want the services or not.  It’s a multi-million dollar racket, and thanks to the Federal Communications Commission, it may be coming to your community or apartment complex soon.

Castro

For almost five years, mandating cable service has become a growing problem in many parts of the country, especially in Florida and Virginia.  Most of the controversy comes when large housing management and homeowner associations, builders, and corporately-owned apartment complexes cut “discount deals” with a cable company to wire a community or complex for service.  Their mission is not always altruistic.  Many builders receive generous signing bonuses and ongoing kickbacks earned from condemning residents to mandatory cable service contracts that may not expire in their lifetime.

Some apartment complexes have added charges for cable-TV service to the rent. Many earn ongoing compensation from grateful cable companies who pay 3-5 percent of revenue back to the complex.  Even homeowner associations have gotten into the act, adding cable-TV costs to required association dues for upkeep and maintenance.  For those who can’t or won’t pay, liens and even foreclosure can soon follow.

LM Sandler of Virginia Beach, a Virginia builder, is a typical player.

Sandler has built entire neighborhoods of new homes across Virginia, most of which are covered by a “bulk billing” contract with Cox.  When residents buy or rent a Sandler-built property, a triple-play package of phone, cable, and Internet service comes along with the deal.  It’s not cheap, running $146 a month.  Even worse, your grandchildren could still be paying Cox Cable if they stayed in the family home, because Sandler’s contract with Cox runs up to 75 years.

Although residents are not required to take service from Cox, they are required to pay for it, in full, every month.

It gets worse for residents in Florida.  Most contracts with cable operators include provisions that can terminate service for entire communities if even a single homeowner is 60 days past due.  To keep that from happening, homeowner associations aggressively pursue slow-paying residents.  JMB Partners, who built much the residential housing in Weston, and the governing bodies in Weston committed residents to an agreement that has enormous implications if they miss a payment:

Between Jan. 1 and Dec. 17, 2004, the Town Foundation, Weston’s homeowner association, filed liens against more than 200 homes in the city. Most of these, according to Broward County court records, are for unpaid cable TV bills, which until 2003 were collected by the foundation. The city utilities department now handles that task.

One of the upset residents is Vincent Andreano, whose mother, Lita Andreano, was faced with the predicament of losing her Weston Country Club Home for a $109 cable bill that he said had been left outstanding by the previous owner.  The Andreanos said that when closing on the home about a year and a half ago, they came upon the outstanding debt and sent a check.

”No one ever contacted me or my mother afterwards to tell us they had not gotten the check or that the debt was still outstanding,” said Andreano, an attorney. “Then a year and a half later, they slap my mother with a foreclosure lawsuit. It’s legal brutality.”

Andreano said he tried to reason with Town Foundation attorney Douglas Gonzales, whose signature appears in the lawsuit paperwork, to no avail. He said he was told to pay the debt, plus legal fees billed at a little more than $200 per hour, in addition to court filing fees and other miscellaneous charges. The final tab: more than $1,500.

In the Tampa area, mandatory cable service bills for some neighborhoods and planned communities have increased by an eye-popping 44 percent because of the foreclosure crisis.  That’s because of mandatory payment clauses many have with providers like Bright House that demand full payment even when homes are unoccupied.  When a resident’s home is in foreclosure or a resident refuses to pay, all of the remaining area residents pick up the tab for unpaid cable bills.  This wreaks havoc with homeowner association budgets, who must find the money to pay the cable company, in full, every month.  Many have slashed security, road maintenance, refuse collection, landscaping, and other quality-of-life expenses just to keep the cable company happy.

Back in 2008, when Florida first began a downward housing spiral, the impact was already being felt:

The Chapel Pines subdivision in Wesley Chapel found itself stuck in a cable contract that requires $15,000 a month payment to Bright House, and is seeing the strain of foreclosed homes no longer paying their fees. That payment represents nearly half their total association budget.

The South Fork 1 development in Riverview has a 15-year contract with Bright House that requires a $9,700 a month payment, roughly one-third of the neighborhood’s total budget.

“We still have to foot the bill whether people live in those homes or not,” said Fred Perez, the former president of the South Fork association. “You end up with a big, bad debt line item on the budget.”

With the problem worsening, that homeowner’s association even contemplated bankrupting itself just to free it from obligations to Bright House.

Other communities are levying “special assessments” on homeowners to cover cable bills in high foreclosure areas:

To cement a good deal, the community, South Bay Lakes in Gibsonton, years ago signed a bulk contract with Bright House Networks to provide cable TV in the neighborhood, in exchange for a regular fixed payment.

That arrangement worked out fine when the neighborhoods filled up and residents paid their association fees – and the association turned over the cable TV payments to Bright House. The problem occurs when neighbors go into foreclosure and stop paying their fees.

The South Bay Lakes homeowners association still must pay about $140,000 a year to Bright House, even though there’s less money coming in from homeowners.

Because about numerous homes in the 300-home development are in foreclosure, South Bay Lakes had to issue “special assessments” on residents.

Fees rose from $150 a quarter to $216, and that probably won’t cover the shortfall, according to association officials. The Bright House bill represents almost half of the association’s annual budget of $261,000.

To make matters tougher, the community is locked into that deal with Bright House until 2019, with cable rates that rise “from time to time” according to the contract.

The city of Weston collects cable payments from residents forced to pay for service from Advanced Cable Communications.

Earlier this year, Stop the Cap! covered the story of residents in Tennessee and Texas who discovered the corporate owners of their apartment complexes were making cable-TV mandatory and adding the resulting charges to lease agreements.

Defenders of these bulk billing arrangements claim they deliver savings residential customers could not obtain on their own and ensure that complexes and planned living communities are fully wired for service.  Besides, they claim, there is no obligation to use the services provided and customers can obtain service from another provider.

But they still face paying for service they don’t use.  In some communities, it is service many don’t want to use.

John Carter, who lives in Weston, told the FCC as a senior on a fixed income he cannot afford to pay a second cable bill, even though his existing service is terrible.

“I am stuck with poor programming options, outages during stormy weather, slow Internet speeds of 15kbps and poor customer service,” he wrote the agency.

In other instances, sweetheart deals fuel incentives for builders to sign lucrative contracts with providers even before a homeowner’s association is formed.  In some cases, the provider turns out to be a family member or associate of the developer.  In many others, perpetual kickbacks through “royalties” and fees are paid to the builder or complex owner as long as the agreement remains in place, even long after the builder is no longer on scene.

For impacted residents like Castro stuck with landline service she didn’t want, it was time to fight back.  She launched Ban Bulk Billing, an online forum for those who oppose mandated cable-TV service. Castro asked consumers to join her in protesting the fees with the FCC.  But it’s hard to keep a movement going when giant corporate providers and other special interests have the resources to shout down consumers.

In March, the FCC collected its thoughts and submissions from property owners, apartment complex management companies, cable and phone companies, and consumers and rendered its decision — which threw consumers under the bus:

We conclude that the benefits of bulk billing outweigh its harms. A key consideration for us is that bulk billing, unlike building exclusivity, does not hinder significantly the entry into an MDU by a second MVPD and does not prevent consumers from choosing the new entrant. Indeed, many commenters indicate that second MVPD providers wire MDUs for video service even in the presence of bulk billing arrangements and that many consumers choose to subscribe to those second video services. We find it especially significant that Verizon, which more than any other commenter in the earlier proceedings argued that building exclusivity clauses deterred competition and other proconsumer effects, makes no claim in its filings herein that bulk billing hinders significantly or, as a practical matter, prevents it from introducing its service into MDUs. Bulk billing, accordingly, does not have nearly the harmful entry-barring or -hindering effect on consumers that exists in the case of building exclusivity.

In other words, because Verizon didn’t have a problem with these bulk billing arrangements, they’re fine by the FCC.  Verizon wants into this arrangement themselves, so it’s hardly a surprise they are not objecting.  The significance of Verizon’s change in position is hardly a mystery — the earlier barriers the FCC wrote about were designed to keep Verizon out of apartment complexes and condos.

The incentives for providers earned from these bulk billing contracts are enormous:

• The cost of collections and billing are passed on to local government, homeowner associations, rental companies, or other agents.  The risk of non-payment by a homeowner’s association or city government is nearly non-existent;
• Marketing expenses and customer promotions can be slashed because customers already have the service when they move in;
• Competition is diminished, especially from capital-intensive wired competitors.  Would you contemplate wiring a community for competitive service knowing existing residents are held captive by mandatory cable contracts?;
• Innovation expenses can be curtailed because the customer is already captive to the existing level of service;
• Rate increases are built-in, allowing companies to raise rates and still keep all of their existing customers.

Residents of Staples Mills Townhomes in Richmond, Virginia understand this only too well.  When the new corporate owner, PRG Real Estate moved in a few years ago, they brought Comcast with them, mandating every resident pay for basic cable service as part of their rent.

PRG’s website highlights Staples Mills as an example of “an institutional equity partnership:” (underlining ours)

The PRG model for improvement is two-pronged — pay close attention to the details of management with a well thought out capital improvement plan. Imbedding [sic] PRG’s professional management structure would mean the implementation of aggressive PRG policies and procedures, taking virtually all contract services in-house to save the profit margin being captured by contractors. The upgrade to PRG-trained site personnel would particularly enhance the marketing effort. Although the property was 97% occupied we anticipated that, after the capital improvements, the same occupancy rate would be maintained with significantly higher rents.

[…]It was crucial that we succeed, not only in terms of return to our investor, but in terms of building our relationships and profile with other institutional investors. We needed to hit this one out of the ballpark.

New and improved Staples Mills?

Residents called a foul ball, one writing, “Residents were slapped in the face with the news that they will be forced to pay for mandatory cable (an extra $34 per month on the rent) from Comcast regardless if they don’t want it, already have satellite, or don’t even have a TV under the guise of ‘lowering cable rates.’ It’s called subsidizing the people who want it by juicing those who don’t.”

PRG may have succeeded in making their investors happy, but they alienated a number of tenants in the process, most of whom assumed Comcast was their only choice and wouldn’t contemplate paying another cable bill from a competitor.

The FCC’s decision recognized that competitors could enter a bulk-billed service area, but ignored the reality most won’t.

Indeed, the FCC itself recognized the impact of these bulk-billing arrangements on the competitive landscape in their own decision, quoting from a submission:

One bulk billing cable operator states that fewer than 5% of an MDU’s residents subscribe to another video provider. It estimates that if it lost its bulk billing contract, it would raise its prices substantially for the remaining 95% because of higher programming and labor costs per customer. The combined savings for 5% of the MDU’s residents would be dwarfed by the increased expenses for the 95%, making the MDU’s residents significantly worse off than they were before as a whole.

The Cowardly Lion is still working for the FCC.

This proves two points:

1. The FCC still cowers in fear from threats issued by providers that any attempt to rein them in will do everything from raising prices to killing jobs and innovation, despite the fact only five percent of customers in the cited case took service from a competitor.  A five percent loss of customers would create conditions for a “substantial” rate hike only in their minds.  AT&T U-verse has captured far more than 5 percent of cable customers in markets where it competes with cable, yet somehow cable manages to keep the lights on and their doors open;
2. The FCC pretends that these agreements don’t impact the marketplace when the 95 percent “take rate” for service plainly indicates otherwise.  Do 95 percent of residents in non-bulk-billed neighborhoods also take cable service?  Of course not.

Despite the FCC’s industry-friendly ruling, many impacted consumers are not giving up.

Martin, the Dallas renter paying for cable-TV even though he doesn’t own a television, is taking the fight to state Attorneys General, hoping a group effort on the state level will dislodge at least some consumers from being forced to pay for something they don’t want or need.

Martin believes it’s manifestly unfair to deliver mandated “discounted service” to some on the backs of others who don’t want a cable bill at all.

“No one should have the right to force you to buy what you don’t want from someone you don’t like,” Martin says.

He points out under Mid-America’s terms, even blind and deaf residents are forced for pay for cable service.

The only thing cheaper than a discounted cable bill is no cable bill at all.  Now that represents real savings.

Martin’s vociferous objections and intervention from his Texas state representative eventually managed to get him off the hook with Mid-America’s mandatory cable bill.  His rent was lowered by an amount equal to the monthly cable fee, but the cable company is still getting paid on his behalf.

Martin's petition to stop mandatory cable service

For Martin, that’s just plain wrong.

“I am still subsidizing an industry of which I do not wholeheartedly approve,” he writes.

Martin is now coordinator for Tenants United for Fairness and has launched an online petition demanding an end to mandatory cable-TV charges.

He has gathered more than 100 signatures from 13 states so far, and the petition is open for everyone to sign, even if they are not currently impacted.

Martin says getting signatures has proved challenging in some cases.

“It has been very hard to get tenants to sign my petition because they’re in fear of the landlords,” Martin says. “Very few of those who have signed have gone further and contacted their elected officials or the FCC to complain.”

The impact of the March decision by the FCC has given providers a green light to expand mandatory service even further.  Some communities are now finding mandatory broadband service fees being added to cable-TV charges.

The FCC’s response?  “Consumers complaining about these latest new fees are sent an unsigned form letter from the FCC advising them to “talk to your landlord,'” says Martin.

[flv width=”432″ height=”260″]http://www.phillipdampier.com/video/WVEC Virginia Beach Residents fight mandatory bundle agreement 3-16-10.mp4[/flv]

WVEC-TV in Virginia Beach covered the plight of residents struggling to understand why they should be forced to pay $146 a month to Cox for cable, broadband, and landline phone service.  (3/10/2010 — 4 minutes)