When the FCC delivers for Big Telecom's agenda, stocks soar. Comcast shares exploded on news the company could largely do as it pleases with its broadband service. (CNBC)

Comcast’s stock price soared today as Wall Street was cheered by news America’s largest cable operator would likely face little regulatory restraint from consumer protection policies designed to keep broadband providers from meddling with Internet traffic.  But investors were also excited by the green light signaled by Federal Communications Commission chairman Julius Genachowski that launching Internet Overcharging schemes like “usage-based” billing, speed throttles and hard usage caps on broadband consumers was also acceptable marketplace behavior.

Craig Moffett, a Wall Street analyst with Sanford Bernstein said Genachowski’s remarks left the marketplace with little doubt it can get away with price increases and new limits on broadband consumption.

“The FCC here is expressly acknowledging the need to ration broadband, and that’s a really big deal,” said Moffett, appearing on CNBC this afternoon.  “I think you are going to start to see usage-based pricing plans from the broadband providers pretty quickly.”

Moffett also acknowledged his firm’s own research showing consumers despise such pricing schemes and admits the impact on America’s broadband landscape is likely to include a dramatic shift in how customers use their Internet accounts.

“When customers think they are going to be charged when they click on that link and watch a movie, they are going to be inclined to watch fewer movies,” Moffett said.  “You can’t expect linear progression of online video because there are going to be feedback loops like usage-based pricing that are going to limit usage.”

Moffett says cable operators are benefiting from Chairman Genachowski’s new approach because it opens the door to repricing wired broadband accounts to limit broadband consumption.  Since most analysts guessed regulators would allow usage-based pricing to remain on wireless broadband, the unexpected green light for similar rationing plans on cable broadband, DSL, and other wired services was welcome news, at least for providers and Wall Street.

Consumers that don’t deliver a resounding negative response to elected officials, the FCC, and the White House better start thinking twice about clicking that YouTube video, because that few minutes could cost plenty if providers slap higher prices and limits on broadband service in the coming year.

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A Wall Street telecom analyst predicts the end of unlimited home broadband accounts is going to come quickly, now that the FCC has capitulated on Net Neutrality policies.  (3 minutes)

Comcast wants to be paid twice for carrying Netflix online video content to its customers: once from customers themselves and a second time from Level 3 Communications, Inc., the company providing much of Netflix’s streamed video traffic.

“On Nov. 19 Comcast informed Level 3 that, for the first time, it will demand a recurring fee from Level 3 to transmit Internet online movies and other content to Comcast’s customers who request such content,” said Level 3’s chief legal officer, Thomas Stortz, in a statement. “By taking this action, Comcast is effectively putting up a toll booth at the borders of its broadband Internet access network, enabling it to unilaterally decide how much to charge for content which competes with its own cable TV and Xfinity delivered content.”

The backbone and content distribution company accused Comcast of threatening the open Internet and of abusing its market position as America’s largest cable broadband provider.  Comcast disageed, calling Level 3’s position “duplicitous” and accused the company of sending far more traffic from its content partners than the cable giant sends in the other direction.

Joe Waz, senior vice president of External Affairs and Public Policy Counsel at Comcast posted a response on the company’s blog claiming Level 3 was trying to have it both ways, running a lucrative content delivery business for clients like Netflix while also acting as a major Internet backbone provider.  Waz claims Level 3 is purposely confusing the fair exchange of backbone traffic with the commercial content delivery business it also runs:

Comcast has long established and mutually acceptable commercial arrangements with Level 3′s Content Delivery Network (CDN) competitors in delivering the same types of traffic to our customers. Comcast offered Level 3 the same terms it offers to Level 3′s CDN competitors for the same traffic. But Level 3 is trying to gain an unfair business advantage over its CDN competitors by claiming it’s entitled to be treated differently and trying to force Comcast to give Level 3 unlimited and highly imbalanced traffic and shift all the cost onto Comcast and its customers.

To quantify this, what Level 3 wants is to pressure Comcast into accepting more than a twofold increase in the amount of traffic Level 3 delivers onto Comcast’s network — for free. In other words, Level 3 wants to compete with other CDNs, but pass all the costs of that business onto Comcast and Comcast’s customers, instead of Level 3 and its customers.

Level 3′s position is simply duplicitous. When another network provider tried to pass traffic onto Level 3 this way, Level 3 said this is not the way settlement-free peering works in the Internet world. When traffic is way out of balance, Level 3 said, it will insist on a commercially negotiated solution.

But Level 3 claims Comcast threatened to pull the plug if they didn’t agree to the cable company’s demands, which would have cut off Comcast customers from a wide range on content.  The company agreed to pay Comcast under protest, and took the issue public just as attention has become re-focused on Net Neutrality at the Federal Communications Commission.

The dispute increasingly resembles cable TV carriage fights where programmers threaten to yank programming if their terms are not met.  Had Comcast delivered on its alleged threat to cut ties to Level 3, widespread disruptions of content delivery could have been the result, starting with a blockade against Netflix streaming video.  That would leave Comcast broadband customers paying for a hobbled Internet experience, missing popular websites because of Comcast’s roadblocks wherever Level 3 traffic was involved.

It’s a classic case of a Net Neutrality violation, with money being the motivating factor.  Pro-consumer public policy groups immediately pounced on the news.

“Comcast’s request of payment in exchange for content transmission is yet another example of why citizens need strong, effective network neutrality rules that include a ban on such ‘paid prioritization’ practices,” said Andrew Jay Schwartzman, senior vice president and policy director of Media Access Project. “It is also yet another clear demonstration of why Comcast should not be permitted to acquire NBC Universal, given its clear tendency to exercise control in the video marketplace.”

“On its face, this is the sort of toll booth between residential subscribers and the content of their choice that a Net Neutrality rule is supposed to prohibit,” said Harold Feld, legal director of Public Knowledge. “In addition, this is exactly the sort of anticompetitive harm that opponents of Comcast’s merger with NBC-Universal have warned would happen — that Comcast would leverage its network to harm distribution of competitive video services, while raising prices on its own customers.”

Although Netflix and officials at the Federal Communications Commission both refused comment, analysts predict consumers will ultimately pay the price for Comcast’s newest fees in the form of higher prices for online content.  Comcast does not impose these fees on its own TV Everywhere online video service, Xfinity Fancast.  Waiving expensive content delivery fees for “preferred content partners” could leave independent competitors like Netflix vulnerable to the whims of the broadband providers charging extra to deliver traffic to paying customers.

The FCC is rumored to be considering enacting some broadband reforms before new Republican members of Congress take their seats in January.

(Thanks to several of our readers, including Terry and ‘PreventCaps’ for sending word.)

[flv]http://www.phillipdampier.com/video/Bloomberg Comcast Internet Toll Booth 11-30-10.flv[/flv]

Bloomberg News briefly covered the dispute in this morning’s Business Briefs segment.  (1 minute)

Good News! (For the station's advertisers)

WTXL-TV’s The Good News Show fell all over themselves last week gushing about Comcast’s rebranding as Xfinity.  The noon weekday program, apparently produced by the station’s news department, managed to obliterate any firewall between journalism and the advertising & sales department at the station.

A sampling of praise from the host, in between tossing softball questions at the two Comcast representatives followed by vigorous nodding in agreement:

• “Wow, that -is- amazing.”
• “It’s so much more for less, really.”
• “I know, unbelievable!”
• “Yeah, definitely,” in response to Comcast’s community coordinator’s statement that she thinks everyone should sign up for Comcast service.
• “Yes, true — especially with the holidays coming this is something everyone’s going to want to get in on!”

The journalistic malpractice doesn’t stop with Comcast.  Other features practically evangelize local Tallahassee businesses and restaurants, a whole mess of which also turn out to be sponsors or “partners” offering discount coupons on the station’s website or “advice” to viewers.

A little exploration of WTXL’s website uncovered a page inviting those interested in appearing on the program to contact… the station’s advertising & sales department!:

Reach your potential customers in Tallahassee, Thomasville, Valdosta and beyond with the power of television and innovation of the internet.

ABC 27 can…

• reach over 290,000 households in North Florida and South Georgia
• produce your commercial in high definition
• create custom promotions to help you reach new customers
• increase traffic to your website and position your company more effectively through customized online advertising and sponsorships
• put together an advertising plan that will meet your  marketing goals and fit your budget.

Your ABC 27 account executive will be dedicated to helping you grow your business and assist you through every step in creating your advertising campaign.

Of course the last people to understand this special relationship between the station and its advertisers are the viewers, who don’t appear to be told if the guests appearing on the program are also paying clients.

This is not unprecedented.  Many small city television stations beef up their ad revenue inviting sponsors to appear on morning and interview shows.  But WTXL is among the first to package it under the moniker “news” and deliver it to Florida and Georgia viewers on a Comcast/Xfinity Silver Platter.

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An excerpt from WTXL’s ‘The Good News Show,’ featuring two representatives from Comcast who received a glowing reception from the program’s host.  (4 minutes)

Verizon's Home Phone Connect base station

Verizon Communications has announced a new option for landline customers to ditch their local phone company with a new device that routes home phone calls over Verizon Wireless’ cellular network.

Verizon has chosen two test markets for its new Home Phone Connect service — Rochester, N.Y., serviced by Frontier Communications and Time Warner Cable and Connecticut, which is served by AT&T and Comcast.  (Thanks to our reader Bob for sharing the news with us.)

The service works with your existing home wired and cordless phones.  Customers signing up under a one or two year service contract will receive the base unit free of charge.  Installation is as easy: Just unplug the phone cord from the wall and plug it into the back of the Home Phone Connect device.  The unit supports up to two hard wired (non-cordless) phone lines and a cordless phone base station.  When you pick up any phone around the house, the base station will deliver a familiar dial tone, but all calls are made and received over the Verizon Wireless cell phone network.  You can download an read a copy of the installation manual here.

The service is priced at $9.99 per month for existing Verizon Wireless customers with any existing Family SharePlan that has two or more lines with at least a 700 minutes calling allowance per month.  Customers using Home Phone Connect under this plan will use minutes from their existing wireless service plan.  But since calls to and from Verizon customers and all calls placed during nights and weekends do not eat minutes, this may be a viable option for many customers.

For heavy talkers, or those without a qualifying Verizon Wireless service plan, an unlimited talk time plan is available for a flat $19.99 per month.

All local and domestic long distance calls are included, and the service also comes with these features:

• Call Waiting
• Call Forwarding
• Caller ID (not currently compatible with Caller ID + Name)
• International Dialing (charged at prevailing Verizon long distance rates)
• 3-Way Calling
• Basic Voice Mail (*86)
• Account Balance (*225)
• Device Provisioning, (*228)
• Account Payment (#786)
• 311, 411, 511, 611, 711 & 911 (some services not available in all areas)
• Last Number Callback (*69)
• National Domestic Hope Line (#4673)

The base unit includes a backup battery to power the unit for up to 36 hours idle time/2 hours talk time in the event of a power failure.  Customers relying on landline service that works with a monitored alarm system should check with their alarm company to ensure compatibility with cell network technology.

Michael Murphy, Verizon’s public relations manager for the New England Region, said consumers have the option of keeping their existing home phone number or requesting a new one.  Customers who do switch their current home phone number to Verizon will automatically cancel their existing landline service.  Frontier customers should carefully check their bills to make sure they are not on a Frontier “Peace of Mind” contract before switching.  Any expiration dates adjacent to the type of home phone service described on your bill likely means you are on a term contract.

Customers dumping Frontier before their contract expires could be exposed to early termination fees of up to $300 or more, which will appear on a customer’s final bill.  If you did not authorize a service contract, demand that Frontier drop it from your bill before you switch, and follow up with a complaint to the New York Attorney General’s office if the company fails to comply.

The device is intended to be portable, so you can take your “home phone” with you to any area served by a Verizon Wireless signal.  Just pack the Home Phone Connect base station and take it along.

Verizon carefully chose test markets outside of Verizon landline service areas.  That allows them to pick up new “landline” customers without harming their own landline business.

Verizon Wireless has a very large share of the Rochester, N.Y., market because of its ownership of the legacy Rochester Telephone cellular network.  Verizon delivers far more robust coverage than any other regional cellular provider in western New York.  With a built-in customer base wide open to Verizon’s marketing machine, the phone company could grab a significant number of Frontier landline customers who will see significant savings over Frontier’s comparable landline feature plans that run close to $50 a month after taxes and fees.  The company could also poach a number of Time Warner Cable’s Digital Phone customers, especially those whose first year promotional discount has expired.

In Connecticut, Verizon is challenging AT&T, which provides most of the state with its landline service.  Comcast is the dominant cable operator.

Comcast seemed unimpressed with the challenge being raised by Verizon in its service area.  The cable company hinted Verizon’s lack of a bundled service option including phone, cable, and broadband would hurt its chances of success.

Indeed, Verizon will have to develop some creative marketing to make its Home Phone Connect stand out.  Younger customers have no landlines to switch.  Most of those eager to cut their home phone line have already moved to cellular or Voice Over IP services from their local cable company or other providers like Vonage.  Existing Verizon Wireless customers may be hesitant about using a service that burns their wireless minutes away.  Older customers are unlikely to understand the product and have a built-in resistance to dropping traditional phone service.  Many may resist the notion of being stuck with at least a one year contract for an untested service.

T-Mobile attempted to market an almost identical service under its @Home brand, but judged it a failure and disconnected it earlier this year.

Because the service is being test marketed, its availability is limited to selected Verizon Wireless stores:

[flv width=”640″ height=”380″]http://www.phillipdampier.com/video/Verizon Home Phone Connect 11-23-10.mp4[/flv]

The New Haven Register set up a video interview with a Verizon representative to demonstrate its new Home Phone Connect service. (1 minute)

Mona Shaw - The "Comcast Hammer Lady"

Up to 60 percent of callers to America’s big telecom companies experience rage when their calls go unanswered, their problems go unresolved, or they literally cannot get past the language barrier of today’s outsourced customer service agents working half a world away.

Cable and phone companies are among the worst at delivering quality customer service, with Comcast in particular causing enough frustration to bring a Virginia woman into a local Comcast office armed with a hammer, smashing company computers to get attention.

Only credit card companies have a worse reputation.

[flv width=”352″ height=”308″]http://www.phillipdampier.com/video/Peggy Ads.flv[/flv]

A compilation of six different “Peggy” Ads from Discover Card lampoon poor customer service among many credit card companies (2 minutes)

Unconscious Comcast employee

“When we call, what we want is ‘yes’ — that’s it,” says Emily Yellin, author of the book Your Call Is (not that) Important to Us, chronicling corporate America’s quest for cheaper customer service, usually alienating customers along the way.

Too often, American hear “no” or nothing at all, thanks to customer service representatives that lack the authority to solve problems or simply don’t care.

For many years, customers either took it or left.  But the Internet has changed everything, allowing customers to take their complaints to a wider audience, often embarrassing bad acting companies and creating tremendous damage to corporate reputations along the way.

An infamous example was the case of the Comcast employee who literally fell asleep waiting more than an hour to talk to co-workers about a customer’s problem.  A video of the sleeping worker became an online sensation.

Women like Mona Shaw, dubbed the Comcast Hammer Lady, also come away as folk heroes when customers can relate to the level of frustration she experienced from a company that only cared if she was a few days late paying her cable bill.

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