Our friends at Broadband Reports have managed to get at least one confirmation of a leaked slide from an internal company presentation outlining major changes in Comcast’s broadband service and speeds, but initially only in areas where Verizon’s fiber to the home network FiOS has given the cable operator a run for the money.

The biggest changes will be price reductions for customers signed to triple play packages and fast speeds from the cable company. Comcast sees an opportunity to exploit Verizon’s recent price increases for its FiOS broadband offerings, and hopes new, lower-priced broadband will hold and possibly even win back customers.

The new pricing is anticipated to take effect in early 2013 in FiOS areas, but “most of Comcast’s markets” will see these prices by the end of next year. Customers who do not bundle other services will pay a $15 surcharge.

As Karl Bode points out, Verizon’s rate increases have made FiOS a difficult sell for standalone basic broadband. Verizon FiOS’ entry level 15/5Mbps service is now priced at $70 a month.

The new pricing information does not include references to usage caps. Comcast has announced it is testing 300GB usage caps with overlimit fees in some markets.

• Comcast Basic (5/2Mbps): $29/month
• Comcast Performance (25/5Mbps): $49/month
• Comcast Preferred (50/10Mbps): $69/month
• Comcast Extreme (100/25Mbps): $99/month
• Comcast Premier (300/75Mbps): $119/month

The CWA’s Verizon-Cable Company Deal Monster

While Verizon customers in more than two dozen towns and communities around Boston can enjoy fiber optic broadband service today, residents inside the city of Boston cannot buy the service at any price. It is largely the same story in Syracuse, Buffalo, and Albany, N.Y., and Baltimore, Md.

With Verizon’s fiber network FiOS indefinitely stalled, local community leaders and union workers are more than a little concerned that Verizon is spending time, money and attention promoting a deal with the cable industry — its biggest competitor.

The Communications Workers of America is stepping up its protest of a proposed deal between Verizon’s wireless division and large cable operators including Comcast and Time Warner Cable that would result in cross-marketing agreements that sell cable service to Verizon Wireless customers and wireless service to cable customers.

The union is urging the Federal Trade Commission and the Federal Communications Commission to stop the deal because, in their view, it will destroy any further expansion of fiber optic-based FiOS, reduce competition, and raise prices for consumers.

The union notes that cable operators are not being asked to promote Verizon’s FiOS network, only Verizon Wireless’ phone services. Verizon Wireless, which barely mentions FiOS service in many of its wireless stores, would suddenly be promoting Comcast and Time Warner Cable instead.

The odd-network-out is clearly Verizon’s fiber optic FiOS service, which was originally envisioned as a competitor against dominant cable operators. But when the economy tanked, Verizon stalled fiber deployment, agreeing only to wire areas where the company already concluded negotiations with local officials. That leaves urban population centers in the northeast (except New York City) stuck with the cable company or Verizon’s DSL service, which has been become increasingly difficult to buy.

Verizon countered the deal would be good for consumers, especially those buying cable packages.

“We believe these agreements will enhance competition, allowing Verizon Wireless to take market shares from other wireless companies, while allowing cable companies to more vigorously compete by enabling them to offer wireless services as part of a triple or quad-play package of services,” the company said in a statement.

[flv width=”640″ height=”380″]http://www.phillipdampier.com/video/CWA TV Ad Behind Closed Doors.flv[/flv]

The Communications Workers of America launched this new ad — “Behind Closed Doors” — last week in Washington, D.C., Virginia, and Pennsylvania media markets. (1 minute)

But union workers in FiOS-bypassed communities like Binghamton, N.Y. suggest customers will simply be on the short end of Verizon’s stick. They note the nearest city where Verizon is deploying fiber optics is suburban Syracuse — more than 70 miles to the north.

BALTIMORE: Left behind as FiOS spreads to six surrounding counties

BOSTON: No Internet revolution

ALBANY: The Empire State’s capital city has no FiOS

BUFFALO: Hit hard by the digital divide

SYRACUSE: Surrounded by high speed—but none for the city

[flv width=”580″ height=”380″]http://www.phillipdampier.com/video/WBNG Binghamton Union Fights Verizon Deal 8-8-12.mp4[/flv]

WBNG reported on a CWA-sponsored protest against Verizon’s deal with cable companies in FiOS-deprived Binghamton, N.Y.  (1 minute)

Comcast faces $2.4 million in lost sales after a Philadelphia area crime ring sold nearly 6,000 cable customers discounted cable service and free premium channels in return for a one-time fee they pocketed themselves.

Authorities have arrested five men and are looking for 18 others after uncovering the scheme. Prosecutors have been pouring over streams of text messages sent back and forth between members of the “sales crew” referencing strippers, weapons, and luxury goods. One exchange advised one alleged member to destroy “the book” naming customers as police closed in.

Despite pleas to stay “off the map” to avoid attracting attention, at least some of the alleged crooks could not help themselves, some splurging on top dollar luxury watches, autos, technology, and weekends in Atlantic City and Miami Beach.

Prosecutors dubbed the busting of the alleged crime ring “Operation Out of Service.” (Image: Montgomery County District Attorney)

Authorities have since learned the scam was run through “a secret computer” installed in a Comcast subcontractor’s office in Upper Moreland. Customers were approached on the street or in area establishments and offered discounted cable service with free premium movie channels in return for $150.

After payment, the alleged perpetrators logged into Comcast’s account management system and activated channels and changed customer records.

Comcast did not catch on until one of their own employees was solicited while she sat in a beautician’s chair. The employee reported it to Comcast’s security department.

Prosecutors have since released many additional sordid details, primarily focused around another Comcast subcontractor, which appears to be the cable company’s latest weak link:

This corrupt organization was headed by Alston Buchanan of Philadelphia, PA (DOB 10/07/1983). Buchanan designed, implemented and controlled the organization that utilized compromised Comcast technician identifications (IDs) to apply promotional discounts onto Comcast customer accounts.  When used legitimately, the IDs allow Comcast personnel to authorize services, such as premium cable channels or other promotions, to new or existing customers.  Buchanan obtained these unique IDs from a number of sources, including from a terminated employee and an employee on disability. In one instance, Buchanan paid a Comcast subcontractor $5,000 in exchange for her user ID.  This arrangement was brokered by Leighton Harrell of Philadelphia, PA (DOB 1/17/1986).

Once Buchanan had the IDs, he could access the billing accounts for Comcast customers and lower their payments and/or provide them with additional services without Comcast’s knowledge. Those involved in the scheme paid various amounts to Buchanan and his agents ranging from $100.00 – $200.00 to manipulate the billing and services of their Comcast accounts.  The investigation determined there were 5,795 accounts affected over the course of a year from April 2011 to April 2012, with a revenue loss to Comcast Cable of $2,401,673. The effected Comcast accounts were located throughout the Delaware Valley with the majority in Montgomery, Philadelphia, Delaware and Bucks counties.

Buchanan was familiar with Comcast’s billing system, because he was employed by Comcast as a dispatcher from May 2007 through March 2008 and as a dispatcher for Advanced Communications, Incorporated (ACI), a Comcast subcontractor, from October 2009 to July 2010.  In 2010, Comcast began investigating an identical scheme of billing manipulation through unauthorized promotions and believed that Buchanan was responsible.

Earlier this year, Comcast learned this same scheme was being perpetrated when a Comcast employee reported the fraudulent use of IDs to obtain services.  An internal investigation by Comcast revealed that Nicholas Caputo of Virginia Beach, VA (DOB 5/28/1981) was soliciting customers to provide one-time payments in exchange for a reduction of their Comcast bills.  Comcast Security, working with ACI, determined that the account manipulations were originating from the ACI Business Services Router located in the local office for ACI in Hatboro, Upper Moreland Township.

On April 9, 2012, ACI searched the data closet where the Business Services Router was stored.  Upon checking the closet, an unauthorized computer tower was discovered secreted in the corner.   This unauthorized computer tower was hardwired to the modem in the data closet which, in turn, was connected to the Business Services Router in the closet.  Accordingly, the hidden computer tower provided unauthorized access into the Comcast billing accounts.  The investigation revealed that the website “LogMeIn” was used to gain remote access to the unauthorized computer tower.  Ultimately, the computers located in Buchanan’s apartment were found to have accessed the “LogMeIn” accounts associated with the hidden computer tower.

“The Book” the alleged ringleaders wanted destroyed at all costs. (Image: Montgomery County District Attorney)

Comcast’s investigation revealed that Buchanan had an inside connection to ACI through Kendall Singleton of Philadelphia, PA (DOB 7/03/1986), an ACI employee.  On April 9 2012, an unrelated power outage occurred at the ACI office which caused the shutdown of the unauthorized tower.  Knowing that the unauthorized tower would have to be turned-on, Comcast Security installed a hidden camera to monitor the closet.  The next day, Singleton was seen on the camera entering the area of the closet and stooping down in the area of the unauthorized computer tower.  After the computer was re-booted, 96 customer billing accounts were accessed and manipulated within the following hour.

During the course of the investigation, Montgomery County Detectives served search warrants in several locations including the Philadelphia home of Buchanan and Richard Justin Spraggins (DOB 5/22/1983), resulting in the recovery of $103,000.00 cash in an attaché case, computers, cell phones and handwritten ledgers that contained records of the theft scheme, including the agents working for them.  Both Buchanan and Spraggins were in possession of these ledgers.  Analyses of the phones, computers and ledgers revealed the depth and scope of this corrupt organization, and extensive internal communications within the organization pertaining to the illegal scheme.

An investigation into the bank accounts of Buchanan and Spraggins revealed additional evidence of the profitability of the organization’s illegal scheme.  For example, a review of Buchanan’s checking account from December 2010 through April 2012 revealed 748 deposits totaling $221,133.29.  Of these 748 deposits, only 175 were not deposits of $150.00 or increments thereof.  Notably, $150.00 was the usual fee charged for the illegal billing manipulation.

Buchanan, Spraggins, Caputo, Harrell, Irving and Singleton are charged with Corrupt Organizations, Dealing in Proceeds of Unlawful Activity, Criminal Conspiracy, Theft of Services, Theft by Unlawful Taking, Receiving Stolen Property, Unlawful Use of Computer, Computer Theft, Computer Trespass, Criminal Use of Communication Facility and Possessing Instruments of Crime.  Arrest warrants have been issued for more than a dozen others who served as agents in this corrupt organization.

Preliminary hearings are scheduled for September 14, 2012 at 9:30 AM before Magisterial District Judge Jay S. Friedenberg in Willow Grove, Upper Moreland Township.  These cases will be prosecuted by the Captain of the Economic Crimes Team, Assistant District Attorney John F. Walko.

Comcast has obtained a complete list of customers who paid for the discounts or free channels, but does not expect to pursue charges or retroactive payments. The company said it would work with customers to transition them to “authorized packages” in the coming weeks.

[flv width=”640″ height=”380″]http://www.phillipdampier.com/video/KYW Philadelphia Cable TV Conman 8-8-12.mp4[/flv]

KYW in Philadelphia managed to score a short interview with alleged ringleader Alston Buchanan, who called himself a modern day Robin Hood. Of course, Robin Hood didn’t splurge on cars, hookers, and fancy watches, as prosecutors allege members of the cable crime ring did.  (2 minutes)

Comcast last week told Wall Street three important facts:

1. They have plenty of capacity to handle increasing broadband traffic and can deliver faster speeds;
2. They are reducing the amount of money they invest in broadband;
3. They are still moving forward on usage caps and usage billing experiments.

Comcast CEO Brian Roberts told investors the company was well positioned to handle increasing broadband traffic and monetize its usage.

Wall Street liked what it heard. Valuentum Securities Inc., called themselves “big fans of Comcast’s cash flow generation.”

“We’re big fans of the firm’s Video and High-Speed Internet businesses because both are either monopolies or duopolies in their respective markets,” Valuentum concludes. “Further, we believe that both services have become so sticky and important to consumers that Comcast will be able to effectively raise prices year after year without seeing too much volume-related weakness.”

An other way to raise prices is to cap broadband usage and charge customers extra for exceeding their allowance, a plan Comcast has begun testing.

“As you know we announced two different flavors of plans,” Roberts said. “One was capacity linked with the tier that subs are buying and [the other] was just being able to buy blocks of capacity.”

Roberts is referring to Comcast’s pricing experiments now being rolled out in markets like Nashville. The tests will determine whether customers will pay higher prices for different tiers of broadband based on variable speed and usage allowances or whether a flat cap with an overlimit fee is the better way to go.

Roberts

“[Hard] caps are gone,” Roberts said. “We raised the amount people could consume to 300 gigabytes as a base limit. We have not announced the markets for the roll outs yet but I would expect something shortly.”

Comcast used to have a 250GB hard cap which, if exceeded, could result in termination of a customer’s account. Now the company is pondering whether a consistent 300GB cap with an overlimit fee is a better choice.

But Roberts also acknowledged Comcast has plenty of capacity and flexibility to adjust its broadband offerings to compete.

“[…] We have a great network that has tremendous flexibility and capacity to offer more speeds than we offer today and we’re constantly hoping that new applications and needs develop,” Roberts said in response to a question regarding potential competition with Google Fiber.

Comcast added 156,000 new high speed data customers, an 8% increase, over the last quarter. At the same time, the company lost 176,000 video subscribers.

The importance of Comcast’s broadband service was underlined by the fact broadband revenue was the largest contributor to cable revenue growth in the second quarter, with revenue increasing 9%. Comcast attributes that to rate increases, a growing number of new broadband customers, and the 27% of current subscribers upgrading to higher speed services.

Comcast does not and will not have to spend a growing amount of its capital on its broadband service. Comcast cut spending on its network by 5% in the second quarter to $1.1 billion. That represents 11.4 percent of cable revenue earned by Comcast. So far this year, capital expenditures have dropped 2.4% to $2.2 billion — 11.2% of its total revenue.

These days, much of Comcast’s capital expenses support the company’s expansion into business services. The company also expects considerable reductions in spending from completion of its transition to digital — freeing up capacity on existing cable systems instead of spending money to upgrade them. For the full year, including its business services expansion, Comcast expects spending on its own network to be flat.

Comcast’s new X1 platform (Image courtesy: BWOne)

In other Comcast developments of note:

• In June Comcast rolled out its new X1 cloud based set top platform in Boston and is currently launching X1 in Atlanta. Comcast is marketing the upgraded platform first to HD Triple Play customers, who can upgrade for a one-time installation fee. The company plans to roll out the new upgraded platform in five major markets by the end of this year, with a greater expansion in 2013;
• Comcast has increased broadband speeds, particularly in competitive markets, for no additional charge;
• Streampix now offers twice as many titles as the product offered at launch in February;
• Comcast has rolled out its marketing partnership with Verizon Wireless to 22 markets nationwide;
• The company’s ongoing rebranding under the Xfinity name now has a new catchphrase: Xfinity — The Future of Awesome;
• Nearly 75% of Comcast’s customers now take at least two products and almost 40% are signed up for the company’s triple play package;
• Comcast has saved more than $8 million by reducing the number of occasions the company will send technicians to customer homes. The cable company is heavily promoting self-install kits, which has brought a 65% increase  in the number of customers who install Comcast equipment and services themselves.

While perusing the latest investor conference call with Time Warner Cable executives, this question from the always-admiring Craig Moffett at Sanford Bernstein & Associates popped up, directed at Rob Marcus, president and chief operating office (underlining ours):

Craig Moffett – Sanford C. Bernstein & Co., LLC., Research Division

[…] Rob, I know how competitive you are. As you look at the results at Comcast and their greater success in — particularly in the video product, I’m sure it has to sort of get the competitive juices flowing. Can you talk more about where that is on your priority list? And what are the levers that you think you can pull to improve the results in basic video?

Robert D. Marcus – Time Warner Cable

Yes. So let me start by saying, I don’t really want to take anything away from Comcast performance, they had a nice quarter. And I think the fact that both we and they posted really good results this quarter probably speaks most to the fact that we’re in a terrific business, so that’s point number one. Second, I always sort of shy away from these comparisons between the two of us on any particular metrics given that there are differences in our disclosure practices.

[…] The truth is, I want to win, but I want to win relative to the guys we’re facing in the markets that we’re competing with. So all of the initiatives I described in my prepared remarks really relate to our performing even better than we have been, independent of any comparisons you might make to Comcast. So we’re hard at work on product, we’re hard at work improving our marketing. I think we’ve made great strides there. We’re definitely doing things on the customer service side to make doing business with us easier and better. And we’re always trying to improve on logistical things like improving sales processes and retention processes. So you’re right in characterizing me as competitive. I absolutely want to win. And I think we’re initiating the right processes to get there.

It’s just one more fact of life for American cable subscribers — cable companies never compete against each other. Comcast has carved out its territory, Time Warner Cable has theirs. The two will never meet in head-on competition.

So we’re wondering just how “competitive” Time Warner Cable (and Comcast) really are. Apparently not much, based on the hearts and flowers moment cable executives have praising the financial performance of each other.