Armstrong

A Wall Street analyst that maintained a “buy” rating on Comcast stock for most of the past four years is leaving Goldman Sachs after 13 years to become Comcast’s head of investor relations.

Jason Armstrong, often heard on earnings conference calls of major telecommunications companies, will start his new job in January, although his job change has not been publicly announced.

Armstrong served as the investment bank’s lead analyst for the cable, telephone and satellite sector. He arrived at Goldman Sachs in 2000 after leaving Ernst & Young, LLP in Chicago.

Officials from both Goldman Sachs and Comcast declined to comment.

The cable industry believes the majority of America not using the Internet remain offline by choice.

The National Cable Telecommunications Association (NCTA) says the digital divide is not their fault. Price have very little to do with it, according to an NCTA infographic showing just 6% cite “cost” as the main reason they are not signed up for Internet service.

“Cable has made extensive efforts to connect all Americans to the Internet. And while high-speed Internet adoption has rapidly increased in the United States, still too many low-income families remain unconnected and are at risk of falling behind in the global information economy,” writes NCTA blogger John Solit. “Connecting all Americans in order to bridge the digital divide and expand the availability of broadband service remains a national goal embraced by cable companies. In a recent blog post, David L. Cohen, Comcast Executive VP & Chief Diversity Officer said, “[I]n just over two years through our Internet Essentials program, Comcast has connected an estimated 1 million low-income Americans, or more than 250,000 families, to the Internet at home.”

The “digital divide” — broadband have’s and have-nots — has been a regular topic among regulators and legislators for more than a decade. A suspicion that cost is a major factor keeping people from signing up could result in legislation compelling providers to offer low-cost Lifeline broadband service to the income-disadvantaged. In the last three years, the cable industry has tried to fight off that type of approach with voluntary programs that selectively target non-customers.

Comcast’s Internet Essentials provides 5/1Mbps service for $9.95 a month, but signing up isn’t easy.

The discounted service is available only to families with school-age children that qualify for the school lunch aid program. Comcast often promotes its discount program to legislators and others in the industry as an example of the voluntary effort the cable industry is making to solve the digital divide. Target customers who most likely qualify for the service are not going to learn about it through television ads or cable company mailers targeting low-income zip codes. Most of Comcast’s marketing effort is in cooperation with area schools.

Ironically, Comcast’s Internet Essentials actually forces some people to temporarily give up Internet access if they want to participate.

Customers must be current on their Comcast bills and must not have a subscription to any Comcast Internet service for the last 90 days to receive consideration. If you already have Comcast broadband service, you must disconnect it for at least three months before you can apply for Internet Essentials.

This requirement is designed to protect Comcast’s bottom line. Why offer a discount to customers already willing to sacrifice for home Internet service at Comcast’s regular price?

“How is this helping me and my family out,” asks one Tennessee customer who tried to sign up for Internet Essentials but couldn’t because they were already paying for Comcast Internet service. “The Comcast representative said that if I wanted to be enrolled in the program I would have to discontinue my Internet service for 90 days and then reapply. We have the Economy Internet Promotion and pay $19.95 per month. After the promotion ends our fee will increase to $26.95 a month. In our current economy and financial situation saving $17 per month would greatly help our family to keep our service. I will not rest until I find a solution to this problem. My children at least deserve that.”

Comcast also makes it its business to check your household to make sure at least one child still qualifies for the National School Lunch Program. The company reserves the right to immediately cancel service if you miss a payment or move. Participants also must not upgrade, alter or change Comcast service for any reason or risk being removed from the program.

Comcast’s Wi-Fi Ban

Shapiro

One of the most annoying conditions of the Internet Essentials program is that it does not allow Wi-Fi access.

Phil Shapiro, who refurbishes donated computers and distributes them to needy families regularly runs into Comcast’s Wi-Fi ban — a significant issue for larger families that need to be online concurrently.

“I’ve taken three donated computers to [one] family and I was expecting to get them all online with this cable modem service,” Shapiro tells The Hechinger Report.  “But not so fast. Comcast’s telephone tech support tells me that Internet Essentials users cannot use Wi-Fi with their cable modems. Nowhere in Comcast’s printed literature or on the website is this limitation mentioned. Naturally, families who sign up for Internet Essentials get confused about this, but they are not well positioned to advocate for their needs.”

Charlie Douglas, a Comcast spokesperson, confirms that Internet Essentials does not offer Wi-Fi service, although he noted a customer could theoretically buy a wireless router themselves and use that to provide wireless connectivity. But that isn’t what Comcast’s technical support team recommends. Any deviation from the terms of the service offered to Internet Essentials customers could lead to an immediate disqualification. Comcast defines Internet Essentials as a wired service, including one outlet and a basic (not wireless) modem.

“The family that I was helping patiently waited for me while I talked on the phone,” said Shapiro. “They could see that I spoke very politely with the tech support person. They also saw that I had reached the end of my patience.”

A representative told Stop the Cap! Internet Essentials accounts have insufficient bandwidth and speed for Wi-Fi service, so it is not offered.

Shapiro dismisses Comcast’s explanation. Many public Wi-Fi networks offer even slower service than Comcast.

Douglas defended Comcast’s policy noting families served by the program don’t miss Wi-Fi and don’t need it.

But those using tablets might disagree, and with an increasing number of students using them as school textbooks are gradually phased out, Wi-Fi will only grow in importance.

Many large school districts, including Los Angeles, are introducing Wi-Fi only tablets for student use because they are cheaper and easier to support. When Internet Essentials participants ask about Wi-Fi access with the discounted broadband service, Comcast representatives are trained to up sell customers out of the program and sign them to a more costly plan than includes built-in Wi-Fi support.

Customers can successfully, if covertly, connect a router with Wi-Fi capability to the basic cable modem supplied by Comcast and configure wireless Internet Essentials service. But there are no guarantees Comcast will not give customers grief about it, if they wish.

[flv width=”640″ height=”380″]http://www.phillipdampier.com/video/Comcast Internet Essentials Key Milestones 11-13.mp4[/flv]

Comcast produced this video marking the start of the second year of its Internet Essentials program. Chicago Mayor Rahm Emanuel gushed Internet Essentials was “top of the line” Internet access. He was joined by other recognizable political leaders and the former chairman of the Federal Communications Commission Julius Genachowski. (2:47)

Comcast’s Wireless Gateway is part of the company’s plans to further monetize broadband.

Comcast wants investors to believe customers slightly prefer losing access to unlimited broadband in return for a 300GB usage cap and $10 overlimit fees.

Neil Smit, president and CEO of Comcast Cable Communications this morning told Wall Street analysts Comcast plans to further monetize its broadband product after testing usage caps, consumption billing, and collecting increased in-home Wi-Fi fees collected from a growing number of customers with an XFINITY Wireless Gateway.

Phil Cusick from JPMorgan asked Smit about how broadband tiering trials now underway primarily in southern states were going for Comcast.

“We have a number of trials in place in markets,” Smit responded. “We’re testing different types of usage-based pricing offerings. Thus far the consumer response has been neutral to slightly positive. We’ll continue to monitor it.”

Customers in the affected areas tell Stop the Cap! they have never been asked what they think about Comcast’s usage caps and consumption billing, so they are unsure how Smit can draw conclusions about customer preference.

“I’m canceling Nov. 1 when the caps arrive in South Carolina,” says Dennis Johnson. “I’m heading to U-verse because AT&T isn’t enforcing any caps here. I plan to tell Comcast why they lost me, but it sounds like the company really isn’t interested in what customers think.”

Every research study done on broadband usage caps show customers loathe them and up to 50% are prepared to switch providers if they can find a competitor providing comparable service.

Comcast is also moving forward with plans to share your in-home Wi-Fi with other customers, configuring company-supplied gateways to offer a second, open access Wi-Fi channel. Comcast currently charges customers $7 a month for the XFINITY Wireless Gateway, combining a DOCSIS 3 cable modem, a telephone eMTA, and a wireless router.

Despite the fact Comcast customers regularly complain about the poor Wi-Fi range of the XFINITY Wireless Gateway and the monthly rental fee, Smit believes they are key to further monetizing broadband.

“We’ve rolled out about six million Gateway devices which increased the in-home Wi-Fi fees and we think there’s going to be more people hanging more devices off of their Wi-Fi,” said Smit.

The more devices, the higher the usage. The higher the usage, the closer customers get to exceeding their cap and charged overlimit fees.

More drive-by reporting on Comcast’s usage caps.

When the media covers Internet Overcharging schemes like usage caps and consumption billing, it is often much easier to take the provider’s word for it instead of actually investigating whether subscribers actually need their Internet usage limited.

Comcast’s planned reintroduction of its usage caps on South Carolina customers begins Friday. Instead of the now-retired 250GB limit, Comcast is graciously throwing another 50GB of usage allowance to customers, five years after defining 250GB as more than generous.

The Post & Courier never bothered to investigate if Comcast’s new 300GB usage cap was warranted or if Charleston-area customers wanted it. It was so much easier to just print Comcast’s point of view and throw in a quote or two from an industry analyst.

In fact, the reporter even tried to suggest the Internet Overcharging scheme was an improvement for customers.

The newspaper reported Comcast was the first large Internet provider in the region to allow customers to pay even more for broadband service by extending their allowance in 50GB increments at $10 a pop. (Actually, AT&T beat Comcast to the bank on that idea, but has avoided dropping that hammer on customers who already have to be persuaded to switch to AT&T U-verse broadband that tops out at around 24Mbps for most customers.)

Since 2008, the company’s monthly limit has been capped at 250 GB per household. When customers exceeded that threshold, Comcast didn’t have a firm mechanism for bringing them back in line, other than to issue warnings or threaten to cut off service.

“People didn’t like that static cap. They felt that if they wanted to extend their usage, then they should be allowed to do that,” said Charlie Douglas, a senior director with Comcast.

Charleston is the latest in a series of trial markets the cable giant has used to test the new Internet usage policy in the past year. As with any test period, the company can modify or discontinue the plan at any time.

During the trial period in Charleston, customers will get an extra 50 GB of monthly data than they’re used to having. If they exceed 300 GB, they can pay for more.

“300 GB is well beyond what any typical household is ever going to consume in a month,” Douglas said. “In all of the other trial markets with this (limit), it really doesn’t impact the overwhelming super-majority of customers.”

The average Internet user with Comcast service uses about 16 to 18 GB of data per month, Douglas said.

Customers who use less than five GB per month will start seeing a $5 discount on their bills.

“We think this approach is fair because we’re giving consumers who want to use more data a way to do so, and for consumers who use less, they can pay less,” Douglas said.

Data caps are designed to stop content piracy?

The Charleston reporter asserts, without any evidence, “data-capping is a trend many Internet service providers are expected to follow in the next few years as the industry aims to reduce network congestion and to find safeguards against online piracy.”

Suggesting data caps are about piracy immediately rings alarm bells. Comcast and other Internet Service Providers fought long and hard against being held accountable for their customers’ actions. The industry wants nothing to do with monitoring online activities lest the government hold them accountable for not actively stopping criminal activity.

“It’s not about piracy, per se,” said Douglas. “We don’t look at what people are doing. The purpose is really a matter of fairness. If people are using a disproportionate amount of data, then they should pay more.”

Comcast’s concern for fairness and disproportionate behavior does not extend to the rapacious pricing and enormous profit it earns selling broadband, flat rate or not.

MIT Technology Review’s David Talbot found “Time Warner Cable and Comcast are already making a 97 percent margin on their ‘almost comically profitable’ Internet services.” That figure was repeated by Craig Moffett, one of the most enthusiastic, well-respected cable industry analysts. That percentage refers to “gross margin,” which is effectively gravy on largely paid off cable plant/infrastructure that last saw a major wholesale upgrade in the 1990s to accommodate the advent of digital cable television and the 500-channel universe. Broadband was introduced in the late 1990s as a cheap-to-deploy but highly profitable, unregulated ancillary service.

How things have changed.

Just follow the money….

Customers used to being gouged for cable television are now willing to say goodbye to Comcast’s television package in growing numbers. Today’s must-have service is broadband and Comcast has a high-priced plan for you! But earning up to 97 percent profit from $50+ broadband isn’t enough.

A 300GB limit isn’t designed to control congestion either. In fact, had she investigated that claim, she would have discovered the cable industry itself disavowed that notion earlier this year.

In fact, it’s all about the money.

Michael Powell, the head of the cable industry’s top lobbying group admitted the theory that data caps are designed to control network congestion was wrong.

“Our principal purpose is how to fairly monetize a high fixed cost,” said Powell.

Powell mentioned costs like digging up streets, laying cable and operational expenses. Except the cable industry long ago stopped aggressive buildouts and now maintains a tight Return On Investment formula that keeps cable broadband out of rural areas indefinitely. Operational expenses for broadband have also declined, despite increases in traffic and the number of customers subscribing.

[flv]http://www.phillipdampier.com/video/CNBC Internet v. Cable 8-20-10.flv[/flv]

Don’t take our word for it. Consider the views of Suddenlink Cable CEO Jerry Kent, interviewed in 2010 on CNBC. (8 minutes)

“I think one of the things people don’t realize [relates to] the question of capital intensity and having to keep spending to keep up with capacity,” said Suddenlink CEO Jerry Kent. “Those days are basically over, and you are seeing significant free cash flow generated from the cable operators as our capital expenditures continue to come down.”

Unfortunately, Charleston residents don’t have the benefit of reporting that takes a skeptical view of a company press release and the spokesperson readily willing to underline it.

If Comcast seeks to be the arbiter of ‘fairness,’ then one must ask what concept of fairness allows for a usage cap almost no customers want for a service already grossly overpriced.

Broadband in the United States costs far more than in other countries — nearly three times as much as in the UK and France, and at least five times more than South Korea, according to BBC News.

The New America Foundation compared hundreds of available packages around the world and found customers in America’s largest cities are getting the biggest bills.

Customers in San Francisco with a discounted low-medium speed bundle including broadband pay $99 a month. A near-equivalent package costs London residents $38. New Yorkers get some savings from Time Warner and Cablevision facing down Verizon FiOS. But it isn’t enough. In the Big Apple, a promotional bundle averages $70 a month. “C’est la vie,” say Parisians. They only pay $35 for about the same. Even Washington, D.C. residents, which include the country’s most powerful politicians, pay Comcast its $68 asking price. In Seoul, South Korea, a comparable offer costs $15 a month.

High asking prices don’t buy better service. According to a report by the OECD issued over the summer, the United States ranks among the worst in terms of broadband-only pricing. With an average price of $90 a month for 45Mbps service, the U.S. ranked 30th out of 33 countries. Add phone and television service and the price spikes to around $200.

The BBC pondered why there is such a disparity in pricing. The answer was easy to spot: the lack of true competition.

“Americans pay so much because they don’t have a choice,” said Susan Crawford, a former special assistant to President Barack Obama on science, technology and innovation policy. “We deregulated high-speed Internet access 10 years ago and since then we’ve seen enormous consolidation and monopolies, so left to their own devices, companies that supply Internet access will charge high prices, because they face neither competition nor oversight.”

Although Americans can name the largest and deep pocketed providers — Comcast, AT&T, Time Warner Cable, Verizon, Cablevision, CenturyLink, Cox, and Frontier — most cannot choose from more than one cable provider and one telephone company. Comcast does not compete against Time Warner and AT&T does not compete against Verizon, except in the wireless world where both companies offer near-identical plans and pricing.

Comcast is quite the gouger in San Francisco.

Bay area customers told the BBC they get bills ranging from $120 a month for television and broadband (not including a $7 modem rental fee) to $200 a month for phone, TV, and Internet access. That same cable company is now testing a 300GB monthly usage cap on broadband in several American cities.

In contrast South Korea offers ubiquitous free Wi-Fi letting customers avoid usage charges. Home broadband is fast and cheap. Most pay $20 a month for 100Mbps.

Digging deeper, the BBC found clues why robust broadband competition delivers savings for consumers in Europe and Asia while Americans pay more.

Rick Karr, who made a PBS documentary in the UK comparing broadband costs at home and abroad, said the critical moment came when the British regulator Ofcom forced British Telecom to open its network and allow other companies to sell broadband over its copper telephone wires. In the United States, regulators never forced cable operators to open their networks, and after a 6-3 Supreme Court decision upheld the cable industry’s insistence it need not share access with competitors, telephone companies quickly called for parity.

A 2005 Supreme Court decision upheld the cable industry’s right to keep competitors off its cable broadband network.

Some argue the ruling promotes more competition by provoking competitors to build their own networks. But current conventional wisdom among the investment community teaches one cable and one phone company is considered good enough. Additional providers would erode the standing of all and force price cutting to compete.

There are exceptions. Although Google’s fiber to the home service has drawn national attention for its inexpensive gigabit fiber broadband network ($70 for broadband-only service), at least 150 cities are served by the public sector — co-op or publicly owned utility companies that offer broadband, often delivered over fiber optic networks.

Those networks often charge considerably less than the incumbent cable operator or phone company, a fact that has driven many privately run operators to seek legislative bans on community broadband.

In response to the report, telecommunications companies avoided the topic of prices and focused instead on value for money and the future.

Lowell McAdam, CEO of Verizon Communications, said Europe was replete with a decade of underinvestment, leaving many with less than 30Mbps service. The National Cable and Telecommunications Association said it was difficult to make international comparisons on price and Scott Cleland, part of the industry-funded NetCompetition website claimed although people may pay higher bills, they can at least choose among phone, cable, wireless or satellite.

“We may be paying more in your eyes today but we are building for tomorrow and the long-term,” said Cleland.