Should this merger be approved, Comcast will control 40-50 percent of all broadband access nationwide.[1] That offers Comcast market power that can be used to discriminate against others.

Comcast paid homeless people to “hold their seats” at an FCC hearing in 2008. (Image: Free Press)

Comcast’s recent past contains several disturbing incidents that came as a result of its market power and its vast resources to influence telecommunications public policy debates:

• In 2008, Comcast admitted to paying homeless people in Boston to pack an FCC meeting on Net Neutrality, keeping company critics out of the room.[2]
• The company that now promises to abide voluntarily to Net Neutrality regulations is also one of the few found culpable for violating the principle. In mid-2008, the FCC ruled that Comcast’s policy of interfering with peer-to-peer file traffic was a violation of Net Neutrality rules. When customers found out, the company voluntarily ended the speed throttling, imposing usage caps instead.[3]
• This month, Comcast reportedly stepped in and ordered the removal of news content critical of its Net Neutrality policies from a publication in which it has an ownership interest.[4]
• In May 2011, a Comcast manager threatened to pull funding from a Seattle-based media advocacy group that criticized the company for hiring a former Republican FCC official, Meredith Attwell Baker, just after she supported the NBC Universal deal.[5]
• Comcast has aggressively pursued agreements with over-the-top (online video) competitors that effectively force them to sign special connection agreements that mitigate the deteriorating quality of streamed video Comcast customers receive from services like Netflix.[6] Comcast’s size gives it de facto control over its customers’ online experiences.

While we note Comcast has agreed to temporarily abide by Net Neutrality principles, the Commission should know Comcast has a long record lobbying against Net Neutrality on philosophical grounds.[7]

Comcast agreed to abide by Net Neutrality principles as a condition to win approval of its acquisition of NBCUniversal, approved by the FCC in 2011. But as Brian Fung from the Washington Post noted, its agreement with the government will expire just four years from now[8]:

But what Comcast doesn’t say is that its commitment to “full” net neutrality expires in 2018. After that, it will no longer be legally bound to follow the 2010 rules, and it’ll be free to abandon that commitment literally overnight.

Just one year earlier, Comcast was before the United States Court of Appeals – D.C. Circuit suing the FCC over its authority to enforce Net Neutrality policies. Comcast won its suit.[9]

If Comcast now feels favorable towards Net Neutrality, it should voluntarily agree to abide by its guiding principles in perpetuity.

—

[1]http://www.broadcastingcable.com/news/washington/judiciary-raises-programming-broadband-control-issues-comcasttwc/130396

[2]http://www.adweek.com/digital/homeless-comcast-will-pay-to-attend-fcc-hearings/?red=ny

[3]https://www.dailydot.com/layer8/net-neutrality-violations-history/

[4]http://www.republicreport.org/2014/comcast-affiliated-newsite-censored-my-article-about-net-neutrality-lobbying/

[5]https://www.washingtonpost.com/blogs/post-tech/post/comcast-yanks-funds-for-nonprofit-after-tweet-about-fcc-bakers-jump/2011/05/19/AF7aGG7G_blog.html

[6]http://dr.marketwatch.com/dr/

[7]http://dr.marketwatch.com/dr/

[8]https://www.techdirt.com/articles/20140724/13525627992/comcast-ramps-up-ad-campaign-claiming-to-support-net-neutrality-even-as-it-really-supports-killing-it.shtml

[9]https://www.cadc.uscourts.gov/internet/opinions.nsf/EA10373FA9C20DEA85257807005BD63F/$file/08-1291-1238302.pdf

The French Revolution in wireless could be spreading across the United States if Paris-based Iliad is successful in its surprise $15 billion bid to acquire T-Mobile USA (right out from under Sprint and Japan-based Softbank). Wall Street hopes it isn’t true.

If you named one wireless carrier in the world guaranteed to provoke groans, sweat, and Excedrin headaches from powerful wireless industry executives living high on 40%+ annual margins, Iliad and its notorious Free Mobile would be the chief provocateur. Initially dismissed as an irrelevant upstart (much like T-Mobile itself) when it announced service on a less-robust network in 2012, as soon as Free Mobile announced its groundbreaking prices, panic was rife in the boardrooms and executive suites of competitors Orange, SFR and Bouygues Telecom, who couldn’t slash their own prices fast enough.

As one wireless executive in Paris put it, when Free Mobile launched, “the tsunami hit.”

In short order, Free Mobile has taken nearly five million of their competitors’ very profitable customers in France, mostly from its vicious price-cutting that results in rates half that of any other competitor.

Orange and other carriers promptly announced slashed shareholder dividend payouts and implemented cost-saving measures after being forced to cut pricing.

American wireless executives visiting Europe were aghast at the prices charged by the French upstart, suggesting they were reckless and would eliminate necessary investment in upgrades. Although France has been behind the United States in launching 4G service upgrades, French customer satisfaction with their wireless service is higher than in the U.S., and Free Mobile has the lowest customer loss (churn) rate of any carrier in France.

Iliad’s reputation as a nasty competitor is fine with self-made billionaire CEO Xavier Niel, who has become extremely wealthy selling cutting edge, yet affordable, telecommunications products without losing touch of his more modest roots. But he is reviled by most of his competitors for disrupting the comfortable wireless service business models his competitors have maintained for years. Niel has thrown marketing bombs into every sector of the French telecom market, ruthlessly cutting prices for customers while relying on in-house innovations to keep costs low.

[flv]http://www.phillipdampier.com/video/Euronews Telecoms turmoil in France 2012.mp4[/flv]

Euronews reported on the turmoil Iliad caused incumbent wireless carriers when it forced them to respond with major price-cuts to stay competitive. (0:44)

Free’s customer care center is run on Ubuntu-based, inexpensive notebook and desktop computers. Free’s wired broadband, television, and phone service is powered by set-top boxes and network devices custom-developed inside Iliad to keep costs down. Its creative spirit has been compared to Google, much to the chagrin of its “business by the book” competitors.

“It’s not done like this,” is a common refrain heard when Free Mobile announces more price cuts, an easing of usage caps, or completely free add-ons.

Today, a typical Free Mobile customer pays $26.75US a month for wireless service which includes:

• Unlimited calls to France and 100 other destinations, including the U.S., Canada, China, and all French overseas departments (eg. Guadeloupe, Tahiti, Mayotte, etc.);
• Unlimited SMS/text messages;
• Unlimited MMS messages to French numbers;
• 20GB of 4G access before the speed throttle kicks in;
• Unlimited free Wi-Fi on Free’s extensive Wi-Fi network.

A Free Mobile customer that also subscribes to Free’s wired broadband or television service gets an even bigger discount. Their monthly wireless bill for the same features? $21.40US a month.

Niel said the reason he has not brought the Free Mobile brand to the United States is because the wireless industry here is highly anti-competitive. The fact T-Mobile USA is now up for sale represents ‘the opportunity of a lifetime,’ a “one-time opportunity to enter the world’s-largest telecoms market,” a person familiar with the matter said prior to the announcement.

“The competitive landscape in the U.S. is a lot less aggressive than what we are used to in France,” added Niel. “There is enormous potential. It is almost too good to be true.”

A number of Wall Street analysts who prefer the current business model of high cost/high profits are keeping their fingers crossed the Iliad offer is just a pipe dream. Some, including analysts on Bloomberg TV, dismissed Niel as a former pornographer and suggested “for the guppies, it is whale season,” a reference to Iliad’s small size relative to T-Mobile USA.

“To say this is surprising is something of an understatement; it is one of the most bizarre bits of potential M&A we have ever witnessed in the sector,” said analysts from Espirito Santo in a note to investors.

[flv]http://www.phillipdampier.com/video/Bloomberg Who Is T-Mobiles New French Suitor 8-1-14.flv[/flv]

Some on Wall Street are mocking the deal as a guppy hoping to swallow a whale. T-Mobile is considerably larger than Iliad, says CNBC. “It’s preposterous. Who put them up to it?” (6:18)

“Iliad is about a third of the size of T-Mobile US, and we don’t think there would be synergies from the deal,” said Jonathan Chaplin, an analyst at New Street Research, in a note. “It would be tough to finance without Xavier Neil relinquishing control. Sprint and anyone else with synergies should be able to outbid them.”

Should Free Mobile enter the United States, its cutthroat pricing would make CEO John Legere’s “bad wireless boy” campaign to make T-Mobile the “uncarrier” quaint in comparison. Every wireless carrier in the U.S. could be forced to cut rates by one-third or more to stay competitive should Niel adopt a similar business model for Free Mobile in the U.S. market.

Some worry that Softbank’s bid to merge Sprint and T-Mobile together has just become even less likely with the possibility of a new player in the U.S. market, competing against three other carriers, not two as the Softbank deal proposes.

[flv]http://www.phillipdampier.com/video/CNBC Sprint Deal with T-Mobile Has Little Chance 8-1-14.flv[/flv]

CNBC spoke with Nik Stanojevic, equity analyst at Brewin Dolphin, who was surprised Iliad threw in a bid for T-Mobile, but believes Softbank/Sprint’s deal to acquire T-Mobile has very little chance getting by regulators. (2:40)

When the community of Batavia, Ill., a distant suburb of Chicago, decided they wanted something better than the poor broadband offered by Comcast and what is today AT&T, it decided to hold a public referendum on whether the town should construct and run its own fiber to the home network for the benefit of area residents and businesses. A local community group, Fiber for Our Future, put up $4,325 to promote the initiative back in 2004, if only because the town obviously couldn’t spend tax dollars to advertise or promote the idea itself.

Within weeks of the announced proposal, both Comcast and SBC Communications (which later acquired AT&T) launched an all-out war on the idea of fiber to the home service, mass mailing flyers attacking the proposal to area residents and paying for push polling operations that asked area residents questions like, “should tax money be allowed to provide pornographic movies for residents?” The predictable opposition measured in response to questions like that later appeared in mysterious opinion pieces published in area newspapers submitted by the incumbent companies and their allies.

Comcast spent $89,740 trying to defeat the measure in a community of just 26,000 people. SBC spent $192,324 — almost $3.50 per resident by Comcast and just shy of $7.50 per resident by SBC. Much the same happened in the neighboring communities of St. Charles and Geneva. 

According to Motherboard, the scare tactics worked, cutting support for the fiber network from over 72 percent to its eventual defeat in two separate referendums, leaving most of Batavia with 3Mbps DSL from SBC or an average of 6Mbps from Comcast.

Much of the blizzard of mailers and brochures Comcast and SBC mailed out were part of a coordinated disinformation campaign. Both companies also knew their claims would go largely unchallenged because Fiber for Our Future and other fiber proponents lacked the funding to respond with fact check pieces of their own mailed to residents to expose the distortions.

When it was all over, it was back to business as usual with Comcast and SBC. The latter defended its reputation after complaints soared about its inadequate broadband speeds.

Kirk Brannock, then midwest networking president for SBC, told city council members in the area that “fiber is an unproven technology.”

“What are you going to do with 20Mbps? It’s like having an Indy race car and you don’t have the racetrack to drive it on. We are going to be offering 3Mbps. Most users won’t use that,” he said.

“All the subscribers got these extraordinary fliers. Ghosts, goblins, witches. I mean, this is about a broadband utility. Very scary stuff. This is real. This is comical, but this is very real,” Catharine Rice of the Coalition for Local Internet Choice said of the fliers at an event discussing municipal fiber earlier this year. “They have this amazing picture, and then they lie about what happened. They’re piling in facts that aren’t true.”

In communities that won approval for construction of publicly-owned fiber networks, the battle wasn’t over. Tennessee’s large state cable lobbying group unsuccessfully sued EPB to keep it out of the fiber business. In North Carolina, Time Warner Cable effectively wrote legislation introduced and passed by the Republican-dominated General Assembly that forbade community broadband expansion and made constructing new networks nearly impossible. In Ohio, another cable industry-sponsored piece of legislation destroyed the business plan of Lebanon’s fiber network, forcing the community to eventually sell the network at a loss to Cincinnati Bell.

The larger Comcast grows, the more financial resources it can bring to bare against any would-be competitors. Even in 2004, the company was large enough to force would-be community competitors to steer clear and stay out of its territory.

Comcast and Time Warner Cable want New York State regulators to believe disclosing the locations of their customer care centers, revealing the prices they are charging, and describing exactly what Comcast will do to Time Warner Cable employees and customers post-merger are all protected trade secrets that cannot be disclosed to the general public.

New York Administrative Law Judge David L. Prestemon found scant evidence to support many of the claims made by the two cable companies to keep even publicly available information confidential, despite an argument that disclosure of the “trade secrets” would cause substantial competitive injury. His ruling came in response to a detailed Freedom of Information Law request from New York’s Utility Project which, like Stop the Cap!, is having major problems attempting to find any public interest benefits for the merger of the two cable companies.

The information Comcast and Time Warner Cable want to keep off-limits is vast, including the prices the companies charge for service, their licensed franchise areas, the locations of their call centers and walk-in customer care locations, and what exactly Time Warner Cable is doing with New York taxpayer money as part of the state’s rural broadband expansion program:

“In general, the redacted trade secret information and the Exhibits identified below include, without limitation, information and details concerning (i) the current operations and future business plans of the Companies, (ii) strategic information concerning their products and services, (iii) strategic investment plans, (iv) customer and service location information, and (v) performance data. This highly sensitive information has not been publicly disclosed and is not expected to be known by others. Moreover, given the highly competitive nature of the industries in which Comcast and Time Warner Cable compete, disclosure of these trade secrets would cause substantial injury to the Companies’ competitive positions– particularly since the Companies do not possess reciprocal information about their competitors.”

That’s laughable, declares the Public Utility Law Project.

Norlander (Photo: Dan Barton)

“The ‘competition’ for TV, broadband, and phone business in New York generally boils down to a duopoly (phone company or cable ) or at best oligopoly (maybe phone and cable companies plus Dish or wireless), in which  providers are probably able to deduce who has the other customers and likely know, due to interconnection and traffic activity, what their ‘rivals’ are doing,” said Gerald Norlander, who is aggressively fighting the merger on behalf of the Public Utility Project.

Stop the Cap! wholeheartedly agrees and told regulators at the Public Service Commission’s informational meeting held last month in Buffalo that Comcast’s promised merger benefits are uniformly vague and lack specifics. Now we understand why. The public does not have a right to know what Comcast’s plans are.

“When it comes to divulging their actual performance and actual intentions regarding matters affecting the public interest, such as Internet service to schools, extension of rural broadband, service quality performance, jobs in the state, universal service, and so forth, well, that is all a ‘trade secret’ justified by nonexistent competition,” said Norlander. “Thus, the situation remains the same, there is insufficient available evidence to conclude that the putative incremental benefits of the merger outweigh its risks.”

Here is a list of what Comcast and Time Warner Cable believe is none of your business. Judge Prestemon’s rulings, announced this morning, follow. He obviously disagrees. But his decisions can be appealed by either company:

• “Details of Time Warner Cable’s current broadband deployment plans in New York. In particular, the information contains the specific details about such plans, including the franchise area, county, total miles of deployment, number of premises passed and the completion or planned completion date. Such information is kept confidential by Time Warner Cable” (ruled against Comcast/Time Warner Cable)
• “information regarding the Companies’ promotional rates for service in various locations within their respective footprints – as well as competitive intelligence concerning competitor offerings. This compilation and competitive analysis are not publicly available.” (ruled for Comcast/Time Warner Cable)
  
• “specific details of Time Warner Cable’s current build-out plans to rural areas of New York, as well as Comcast’s future business plans in this area. The information also contains anticipated financial expenditures for Time Warner Cable’s build-out plans. Such information has not been publicly disclosed.” (ruled against Comcast/Time Warner Cable)
  
• “information concerning the New York schools and libraries served by Time Warner Cable, as well as information concerning Comcast’s future business plans to serve such entities. This information is kept confidential by Time Warner Cable and has not been disclosed to the public.” (ruled against Comcast/Time Warner Cable)
  
• “information concerning the number of Comcast’s “Internet Essentials” customers in New York, as well as Comcast’s future business plans for the “Internet Essentials” program.” (ruled against Comcast/Time Warner Cable)
  
• “the Companies’ detailed customer and service quality data.” (ruled for Comcast/Time Warner Cable)
  
• “information concerning the Companies’ current operations and staffing levels in New York, as well as Comcast’s future business plans concerning post-merger operations and employee levels.” (ruled against Comcast/Time Warner Cable)
  
• “information setting forth the number of subscribers to Time Warner Cable’s “Everyday Low Price” broadband service.” (ruled for Comcast/Time Warner Cable)
  
• “Comcast’s handling of customer requests for an unlisted service, and how Comcast handles customer inquiries related to this subject matter.” (ruled for Comcast/Time Warner Cable)
  
• “Comcast’s future business plans with respect to particular subject matters.” (ruled against Comcast/Time Warner Cable)
  
• “information and performance statistics relating to the Companies’ call centers in New York and the Northeast.” (ruled for Comcast/Time Warner Cable)
  
• “information concerning Time Warner Cable’s operations as they relate to projects funded by federal or state [energy efficiency or distributed energy resource] programs.” (ruled against Comcast/Time Warner Cable)
  
• “information concerning Comcast’s operations and future business plans relating to avoidance of truck rolls and vehicle fleets.” (ruled for Comcast/Time Warner Cable)
  
• “information relating to the number of Wi-Fi hotspots that Time Warner Cable has deployed in New York, as well as Comcast’s future business plans in this area.” (ruled against Comcast/Time Warner Cable)
  
• “information concerning Comcast’s handling of cyber-security issues associated with its Xfinity Home service.” (ruled against Comcast/Time Warner Cable)
  
• “information concerning the Companies’ operations and customers in relation to cellular backhaul service.” (ruled for Comcast/Time Warner Cable)
  
• “information concerning Time Warner Cable’s projects funded by NYSERDA” (ruled against Comcast/Time Warner Cable)
  
• “projects developed in conjunction with New York State” (ruled against Comcast/Time Warner Cable)
  

“Hey look, is that the Verizon FiOS truck?”

New York City comptroller Scott Stringer is lukewarm at best about the idea of Comcast taking over for Time Warner Cable. In a letter to the New York Public Service Commission released today, Stringer says the deal needs major changes before it comes close to serving the public interest.

“As New York City residents know all too well, our city is stuck in an Internet stone age, at least when compared to other municipalities across the country and around the world,” Stringer wrote. “According to a study by the Open Technology Institute at the New America Foundation, New Yorkers not only endure slower Internet service than similar cities in other parts of the world, but they also pay higher prices for that substandard service. Tokyo residents enjoy speeds that are eight times faster than New York City’s, for a lower price. And Hong Kong residents enjoy speeds that are 20 times faster, for the equivalent price.”

Stringer should visit upstate New York some time. While the Big Apple is moving to a Verizon FiOS and Time Warner Cable Maxx or Cablevision/Optimum future, upstate New York is, in comparison, Raquel Welch-prehistoric, especially if your only choice is Verizon “No, We Won’t Expand DSL to Your House,” or Frontier “3.1Mbps is Plenty” Communications. If New York City’s speeds are slow, upstate New York speeds are glacial.

“The latest data from the FCC shows that, as of June 30, 2013, over 40 percent of connections in New York State are below 3Mbps,” Springer added.

Come for the Finger Lakes, but don’t stay for the broadband.

Should the merger be approved, Comcast would be obligated to comply with the existing franchise agreement between Time Warner Cable and the City of New York. However, in order for the proposed merger to truly be in the public interest, Comcast must have a more detailed plan to address these ongoing challenges and to further close the digital divide that leaves so many low-income New Yorkers cut off from the information superhighway. To date, Comcast’s efforts to close the digital divide have focused on its “Internet Essentials” program, which was launched in 2012.iii The program offers a 5 megabit/second connection for $9.95/month (plus tax) to families matching all of the following criteria:

• Located within an area where Comcast offers Internet service
• Have at least one child eligible to participate in the National School Lunch Program
• Have not subscribed to Comcast Internet service within the last 90 days
• Does not have an overdue Comcast bill or unreturned equipment

While the aim of the program is laudatory, its slow speed, limited eligibility, and inadequate outreach have kept high-quality connectivity beyond the reach of millions of low-income Americans. Not only are the eligibility rules for Internet Essentials far too narrow, but the company has done a poor job of signing up those who do meet the criteria. In fact, only 300,000 (12 percent) of eligible households nationwide have actually signed up since the program was launched in 2011.

It is critical that the PSC not only press Comcast to significantly expand the reach of Internet Essentials, but also that it engage in appropriate oversight to ensure that the company is meeting its commitments to low-income residents of the Empire State.

Phillip “Comcast isn’t the answer, it’s the problem” Dampier

In fact, the best way New York can protect its low-income residents is to keep Comcast out of the state. Time Warner Cable offers everyday $14.99 Internet access to anyone who wants it as long as they want it. No complicated pre-qualification conditions, annoying forms, or gotcha terms and conditions.

When a representative from the PSC asked a Comcast representative if the company would keep Time Warner’s discount Internet offer, a non-answer answer was the response. That usually means the answer is no.

“We have seen how telecommunications companies will promise to expand access as a condition of a merger, only to shirk their commitments once the merger has been approved,” Springer complained. “For instance, as part of its 2006 purchase of BellSouth, AT&T told Congress that it would work to provide customers ‘greater access and more choices for broadband, no matter where they live or work.’ However, later reports found that the FCC relied on the companies themselves to report their own merger compliance and did not conduct independent audits to verify their claims.”

Big Telecom promises are like getting commitments from a cheating spouse. Never trust… do verify or throw them out. Comcast still has not met all the conditions it promised to meet after its recent merger with NBCUniversal, according to Sen. Al Franken (D-Minn.).

Stringer also blasted Comcast for its Net Neutrality roughhousing:

While the FCC has not declared internet providers to be “common carriers”, state law has effectively done so within the Empire State. Under 16 NYCRR Part 605, a common carrier is defined as “a corporation that holds itself out to provide service to the public for hire to provide conduit services including voice, data, or video by electrical, electronic, electromagnetic or photonic means.”

Importantly, the law requires these carriers to “provide publicly offered conduit services on demand to any similarly situated user on substantially similar terms, subject to the availability of facilities and capacity.”

In recent months, Comcast has shown that it is willing to sacrifice net neutrality in order to squeeze additional payment out of content providers, such as Netflix. As shown in the chart below, Netflix download speeds on the Comcast network deteriorated rapidly prior to an agreement whereby Netflix now pays Comcast for preferential access.

Consumers have a legitimate fear that if access to fiber-optic networks is eventually for sale to the highest bidder, then not only will it stifle the entrepreneurial energy unleashed by the democratizing forces of the Internet, but will also potentially lead to higher prices for consumers in accessing content. Under that scenario, consumers are hit twice—first by paying for Internet access to their home and second by paying for certain content providers’ preferred access.

Internet neutrality has been a core principle of the web since its founding and the PSC must examine whether Comcast’s recent deal with Netflix is a sign that the company is eroding this principle in a manner that conflicts with the public interest.

Stringer may not realize Comcast also has an end run around Net Neutrality in the form of usage caps that will deter customers from accessing competitors’ content if it could put them over their monthly usage allowance and subject to penalty rates. Comcast could voluntarily agree to Net Neutrality and still win by slapping usage limits on all of their broadband customers. Either causes great harm for competitors like Netflix.

“I urge the Commission to hold Comcast to that burden and to ensure that the merger is in the best interest of the approximately 2.6 million Time Warner Cable subscribers in New York State and many more for whom quality, affordable Internet access remains unavailable,” Stringer writes. “And I urge Comcast to view this as an opportunity to do the right thing by introducing itself to the New York market as a company that values equitable access and understands that its product—the fourth utility of the modern age—must be available to all New Yorkers.”

If Comcast’s existing enormous customer base has already voted them the Worst Company in America, it is unlikely Comcast will turn on a dime for the benefit of New York.

The best way to ensure quality, affordable Internet access in New York is to keep Comcast out of New York.

No cable company has ever resolved the rural broadband problem. Their for-profit business model depends on a Return on Investment formula that prohibits expanding service into unprofitable service areas.

These rural service problems remain pervasive in Comcast areas as well, and always have since the company took over for AT&T Cable in the early 2000s. Little has changed over the last dozen years and little will change in the next dozen if we depend entirely on companies like Comcast to handle the rural broadband problem.

A more thoughtful solution is encouraging the development of community co-ops and similar broadband enterprises that need not answer to shareholders and strict ROI formulas.

In the meantime, for the good of all New York, let’s keep Comcast south (and north) of the border, thank you very much.