H.129 will insure rural North Carolina's broadband will resemble the backwaters of the Great Dismal Swamp.

Despite promises to protect North Carolina’s existing community-owned broadband providers, Reps. Julia “My Word is My Bond” Howard and Marilyn “I Do What Time Warner Tells Me” Avila have reneged and intend to ram through their anti-community-broadband bulldozer bill.

Stop the Cap! learned this evening that Avila has no intention of meeting with North Carolina communities again, even as resolutions continue to pile up in Raleigh condemning their special interest legislation.

Asheville and Rockingham County have joined the city of Raleigh issuing resolutions opposing H129 and are openly wondering why state legislators are so contemptuously overruling the interests of North Carolina communities for the benefit of out-of-state corporations.

The answer, clearly, is money.

Rep. Howard apparently answers to the interests of companies like AT&T, which has donated more than $1,500 to her campaign, CenturyLink — $4,000, and Time Warner Cable, which so far has shorted her with just $750.  It evidently doesn’t take much to influence a legislator these days, and we anticipate her telecommunications contributions will spike in the near future for a job well done.  That enormous contribution from CenturyLink is telling, considering they are not the primary phone company in Howard’s district.

As a result of the sellout, H129 will likely move to the Finance Committee as early as next Thursday, effectively unchanged from its original.  The implications for the state are staggering, particularly if it drives existing community networks out of business.  That will take the state’s bond rating with it.

Howard accepted $4000 from CenturyLink.

The sad part of all this is that both representatives were elected to serve the interests of their districts, and instead they are paying more attention to the well being of big cable and phone companies who honestly don’t need their help to earn enormous profits in the state.

While unserved communities and those stuck with dismal, antiquated DSL service have their pleas for better broadband ignored, Avila and Howard are doing all they can to sabotage the networks that do provide 21st century broadband to their residents.

With this kind of hostility, don’t look for Google to bring Gigabit broadband to the Tar Heel State anytime soon.  With all of the impediments and roadblocks these two legislators have thrown up on behalf of their friends at the cable and phone company, can Google expect to be treated any better?  The search giant even signed a letter strongly opposing H129, to no avail.

It’s not too late for Rep. Howard to prove us wrong.  She can turn this around in a second by demanding real exemptions for existing municipal networks — and I mean real exemptions, not the fake passes contained in the so-called substitute amendment.  Better yet, she can distance herself altogether from this disaster.

North Carolina residents must get on the phone and call Finance Committee members and tell them this broadband train wreck needs to stop in their committee with a resounding NO vote.

Let them know H129 will not only deliver years of sub-standard broadband service in the state, it will also ruin two showcase fiber networks, harm the state’s bond rating, and make North Carolina an also-ran in broadband innovation.

At a time when the state needs to move towards digital economy jobs, thumbing your nose at the likes of Google, Alcatel-Lucent, and Intel is a giant mistake — adding insult to injury to the potential loss of community broadband networks the cable and phone companies will stop at nothing to eliminate.

Finance Committee Members

(click each name for contact information)

Jenkins

The Wall Street Journal attempted to attach its own conventional wisdom in an opinion piece about cloud-based streaming that suggests Canada “is just ahead of the U.S. in introducing usage-based pricing [and] has bloggers and politicians accusing Bell Canada of unconscionable ‘profiteering’ from usage caps. The company, they rage, is reaping huge fees for additional units of bandwidth that cost Bell Canada virtually nothing to provide.”

The author, Holman Jenkins, is a regular on the ultra-business friendly editorial page of the Journal, and has been raging against Net Neutrality and for higher Internet pricing for several years now.

Jenkins’ latest argument, just like his earlier ones on this subject, falls apart almost immediately:

This critique, which is common, could not more comprehensively miss the point. Another car on the roadway poses no additional cost on the road builder; it imposes a cost on other road users. Likewise, network operators don’t use overage penalties to collect their marginal costs but to shape user behavior so a shared resource won’t be overtaxed.

Jenkins needs to spend less time supporting his friends at companies like AT&T and Bell and more time exploring road construction costs.  If you are going to try and make an analogy about traffic, at least get your premise straight.

Before debunking his usage-based billing meme, let’s talk about road construction for a moment.  In fact, the kind of traffic volume on a roadway has everything to do with what kind of road is constructed.  In the appropriately named “Idiots’ Guide to Highway Maintenance,” C.J.Summers explores different types of road surfaces for different kinds of traffic.  Light duty roads in rural areas can get results with oil and stone.  Medium duty side streets and avenues are frequently paved with asphalt, and heavy duty interstates routinely use concrete.  Traffic studies are performed routinely to assist engineers in choosing the right material to get the job done.

Digital information doesn’t wear down cables or airwaves.  If broadband traffic occupies 5 or 95 percent of a digital pipeline, it makes no difference to the pipeline.  Jenkins is right when he says Internet Overcharging schemes are all about shaping user behavior, but for the wrong reasons.

Jenkins thinks Netflix and other high bandwidth applications face usage-based pricing to allow providers to keep their broadband pipes from getting overcongested:

Netflix is one of the companies most threatened by usage-based pricing, and it has quickly geared up a lobbying team in Washington. In a recent letter to shareholders, CEO Reed Hastings downplayed the challenge to Netflix’s video-streaming business. In the long run, he’s probably right—the market will settle on flat-rate pricing once the video-intensive user has become the average user.

In the meantime, however, Netflix shareholders had better look out.

In fact, providers are reaping the rewards of their popular broadband services, but almost uniformly are less interested in investing in them to match capacity.  It is as if the AT&Ts of this world assumed broadband users would consume    T H I S    M U C H   and that’s it — time to collect profits.  When upgrade investments don’t even keep up as a percentage of revenue earned over past years, the inevitable result will be a custom-made excuse to impose usage limits and consumption billing to manage the “data tsunami.”

Canadian providers did not slap usage caps on broadband users because Netflix arrived — they lowered them. Telling users they cannot consume the same amount of bandwidth they used a month earlier has nothing to do with managing traffic, it’s about protecting their video businesses by discouraging consumers from even contemplating using the competition.  Jenkins works for a company that understands that perfectly well.  News Corp., has a major interest in Hulu as well as satellite television services in Europe and Oceania.

The rest of Jenkins’ piece is as smug as it is wrong.  In attacking Net Neutrality supporters as “crazies” trying to defend their “hobby horse,” Jenkins claims public interest groups are pouting about usage-based billing, too:

All along, what the net neut crazies have lacked in intellectual consistency they’ve made up in fealty to the business interests of companies that fear their services would become unattractive if users had one eye on a bandwidth meter. That’s why opposition to “Internet censorship” morphed into opposition to anything that might price or allocate broadband capacity rationally. But such a stance is rapidly becoming untenable, whether the beneficiary is Google, with its advertising-based business model, or Netflix, Apple, Amazon and others who hope to capitalize on the entertainment-streaming opportunity.

All are betting heavily on the cloud. All need to start dealing realistically with the question of how the necessary bandwidth will be paid for.

Part of Jenkins’ theory calls back on his usual Google bashing — he perceives the company as a parasite stealing the resources bandwidth providers paid for, while forgetting the success of their businesses ultimately depends on content producers (who indeed pay billions for their own bandwidth) making the service interesting enough for consumers to buy.

But there is nothing rational about Jenkins’ support for Internet Overcharging.  North Americans already pay some of the highest prices in the world for the slowest service.  While providers attempt to lick the last drop of profits out of increasingly outdated networks (hello DSL!), their future strategy is less about expanding those networks and more about constraining the use of them.

Jenkins is ignorant of the fact several of Net Neutrality’s strongest proponents, Public Knowledge being a classic example, have not historically opposed usage-based pricing, much to my personal consternation.  As we’ve argued (and I submit proved), Net Neutrality and Internet Overcharging go hand in hand for revenue hungry providers.  If they cannot discriminate, throttle, or block traffic they consider to be costly to their networks, they can simply cap demand on the customer side with usage limits or confiscatory pricing designed to discourage use.  That is precisely what Canadians are fighting against.

It’s all made possible by a broken free market.  Instead of hearty competition, most North Americans endure a duopoly — a phone company and a cable company.  Both, particularly in Canada, have vested interests in video entertainment, television and cable networks, and other entertainment properties.  As long as these interests exist, companies will always resist challenges to their core business models, such as cable TV cord cutting.  It’s as simple as that.

The “realistic” way bandwidth will be paid for escapes Jenkins because his quest for condescension takes precedence over actual facts.  Content producers already pay enormous sums to bandwidth providers like Akamai, Amazon, and other cloud-based distribution centers.  Consumers pay handsomely for their broadband connections, part of which covers the costs of delivering that content to their homes and businesses.  AT&T and other providers don’t deserve to get paid twice for the same content.  Indeed, they should be investing some of their enormous profits in building a new generation of fiber-based broadband pipelines to keep their customers happy.  Because no matter how much data you cram down a glass fiber, the ‘data friction’ will never cause those cables to go down in flames, unlike Jenkins’ lapsed-from-reality arguments.

Frontier attempts to dig themselves out.

The Oregonian has been covering the plight of Frontier customers in the Pacific Northwest who signed up for Verizon’s fiber to the home service — FiOS — and are now facing down the new owners who want to raise the price by $30 a month.

Frontier has done itself no favors in the media with an ongoing series of reports of service problems, rate increases, and now the latest signs it wants out of the television delivery business altogether.

In a letter dated March 4th, Steven Crosby — senior vice president of government and regulatory affairs, told the city administrator in Dundee, Ore., Frontier FiOS TV has been a flop.

Since Frontier Communications Northwest, Inc., acquired Verizon’s operations on July 1, 2010, it has built on Verizon’s prior actions and continued to offer a robust and aggressively priced video product to attract Dundee subscribers.  Despite these efforts, however, customer growth has been disappointing and stagnant and Frontier has not achieved a commercially reasonable level of subscriber penetration.

Frontier also admits it has been under-pricing its video service to stay competitive and attract new customers, but those days are over.  The company earlier announced its intention to raise rates by $30 a month for its standard cable TV service, making it more costly than its nearest competitor, Comcast.

Frontier recognizes the impact its enormous rate increase will have on its subscriber base, soberly noting it is likely to “further depress subscriber penetration.”

With this in mind, Frontier is exercising its right under the franchise agreement it has in Dundee to provide notice it intends to terminate its video service at a future date, after providing subscribers with 90 days advance notification.

Similar letters went to city administrators in Newberg, McMinnville, and Wilsonville.  City officials had no reservations about interpreting the meaning of the letters and plans to implement a $500 installation fee for future FiOS TV installations.

“Looking at it, you expect there will be no new customers,” Dan Danicic, Newberg’s city manager told The Oregonian. “Getting this opt-out notice is not a huge surprise to me, but we are disappointed.”

Frontier's rate increases are driving many consumers back to Comcast for their television service.

Sources tell Stop the Cap! there was considerable debate inside Frontier’s offices last week on how to implement directives from executives to shut down FiOS installations as quickly as possible.  Initial efforts to quietly raise the installation price — without giving subscribers’ advance notice — were on track until Frontier’s legal department quashed the plan.  Concerns were also raised inside the customer support units responsible for taking orders and handling customer billing inquiries over how to deal with the inevitable subscriber backlash when the first bills arrived in the mail.

“Frontier hates dealing with FiOS and they can’t wait to be rid of it — they claim that the product is at least 10 years away from really returning any investment from its original deployment,” a well-placed source told Stop the Cap! late last week.

Frontier FiOS is an anomaly for the rural phone company, which delivers the vast majority of its broadband customers DSL service over copper wire phone lines, usually at speeds approaching 3Mbps.  Frontier FiOS “came along with the deal,” one Indiana Frontier official told local media there in response to rate hikes there.

Still, media reports that the company plans to ditch its TV customers created a small panic inside Frontier by the weekend.

“Getting customers switched over to satellite TV service in an orderly manner was the original plan, but reports the company was abandoning the service altogether risks we’ll lose our customers to Comcast, and many will take their phone lines to the cable company, too,” a second source informed Stop the Cap! this morning.  “We were told ‘orderly transition’ over and over again, so reassuring customers is today’s top priority.”

Dundee, Oregon

Evidence of this campaign was not difficult to find over the weekend, as The Oregonian amended its original story claiming Frontier does not have immediate plans to exit the video business.

Crosby told the newspaper: “Our actual implementation decisions will be business driven. At this time, there is no change in our FiOS video offerings or in our FiOS video service delivery to our customers. And this filing does not affect our FiOS high speed service.”

Stephanie Schifano, identifying herself as an employee of Frontier Communications, attempted to spin the letters sent to several Oregon communities as a simple matter of business and not a foreshadowed abandonment of television service.

“Frontier is exercising our right under the franchise agreements to terminate the franchises. The right to terminate soon expires, and if Frontier didn’t give notice now we may have been required to provide this service, with these franchises, for another 12 years. This notice offers Frontier the flexibility to continue to analyze the FiOS Video/TV business and continue to service our customers,” Schifano wrote.

But both of our sources well-familiar with Frontier FiOS say the company’s actions speak louder than its words.

“When you increase the installation fee to $500 and raise your prices nearly $30 higher than Comcast, you would be crazy not to interpret the message Frontier is trying to send — go get your satellite dish from us and get off FiOS,” our second source told us.

Telecompetitor read into some of the company’s comments about utilizing the acquired fiber network in a new way, perhaps for over-the-top Internet video content.

“That’s wishful thinking,” our second source says.  “Frontier’s only online video efforts surround its rebranded Hulu service, relabeled myfitv.”

Frontier's online video platform serves up mostly repurposed Hulu content.

“The company has no plans I am aware of for a grand video strategy — FiOS covers far too small a service area and there is no way Frontier will spend more money to increase that fiber footprint,” our source adds. “Frontier wants to meet its general obligations made as part of its deal with state regulators when it bought Verizon FiOS with the landline deal, and little else.”

Frontier will continue to offer FiOS to broadband customers for the time being, regardless of what it does with its video package.

“If it’s already there and not costing a lot of money to maintain for broadband, why not?” our source says.

One direct sales contractor for competitor Comcast suspects that train may have already left the station.

Calling Frontier’s customer service operation “a circus,” the salesman says Comcast is benefiting from Frontier’s ball-dropping.

“Many Frontier customers are unhappy with the customer service side while stating they do enjoy their phone, Internet, and video services provided by the FiOS network, but lose the business on the practically non-existing customer service side.”

The contractor says he hears stories from Frontier customers all day who are fed up with the frustration of extended hold times, inaccurate or missing bills, online account access problems, excessive call transfers to deal with service issues and high fees.

For regulators, the aggravation is much the same.

After being promised by CEO Maggie Wilderotter that Frontier would be an aggressive competitor in a barely competitive marketplace, Frontier has raised rates by 46 percent, irritated their customers with customer service problems and outages, and now has served notice it intends to flee the TV business at an undetermined point in the future.

An endangered species?

[Update: 7pm ET — Shortly after we went to press with this story, The Oregonian published its version confirming our story — the install fee is up from $79 to $500.]

A Frontier customer service representative e-mailed Stop the Cap! yesterday informing us Frontier has plans to boost the installation fee for Frontier FiOS TV service to a whopping $500 per household.

“If that’s not a big enough shock, they were originally not even going to tell customers about it,” the source tell us. “They were trying to get this started on March 1st but the legal department has put a kibosh on the whole ‘not notifying the customer thing’.”

Now, the installation fee has been pushed back pending appropriate customer notification.

Stop the Cap! contacted Frontier yesterday and today looking for a statement regarding this, but we’ve received no response from representatives in the midwest and western regions despite multiple requests.

A Google search for Frontier FiOS instead turns up Frontier's paid advertising for free satellite TV.

Frontier’s FiOS service, adopted from the sale of Verizon landlines last year, has certainly seen a dramatic decline in visibility over the past several weeks.  Google users searching for “Frontier FIOS” will find paid advertising from Frontier directing them instead to a free satellite dish offer.

Frontier’s website buries all mentions of FiOS in fine print at the bottom of web pages promoting DirecTV instead.  In fact, we cannot find any Frontier FiOS website or an invitation to order the service directly from Frontier.

Slapping an enormous installation fee on customers would be one way to discourage customers from signing up for the service, which was rocked by a $30 monthly rate increase announcement earlier this year.  Frontier officials claim to remain undecided about how they intend to handle the fiber-to-the-home service as late as last week’s 4th quarter earnings conference call.

But should a $500 installation fee become reality, it’s clear the company doesn’t want customers beating down their doors to sign up.

Frontier officials have noted the number of customers served is too small for the company to earn volume discount pricing.

North Carolina Legislature

Stop the Cap! has obtained the audio from Wednesday’s Public Utilities Committee meeting that quickly pushed through H129, Time Warner’s custom-written, anti-competition and community broadband destruction bill.

Listening to the 44 minute hearing will be disturbing to anyone who supports open government and the concept of voting for or against a complete bill, not one Rep. Marilyn Avila (R-Time Warner Cable) openly admits is going to be changed.  For her, that represents no reason to delay the bill — her good friends at Time Warner need this legislation passed today, not tomorrow or next week.

As you listen, we’ve included a voter’s guide with time-indexed comments to help draw your attention to some critical points, and some much-needed fact checking.  It will also help you identify the members of the legislature that need to stay, and those that need to go.

Our apologies for the distorted audio at times.  When a member leans into the microphone, as some clearly do, it creates significant audio distortion.  It gets worse in the last 10 minutes, so watch your volume.

North Carolina’s House Public Utilities Committee Meeting on H129 – Wednesday, March 2, 2011. (44 minutes)
You must remain on this page to hear the clip, or you can download the clip and listen later.

Your Audio Guide to The Committee Meeting

The shocking conclusion of this legislative travesty is the chairman adjourning before a recorded vote can be taken.  Without it, constituents can’t identify how their member voted and hold them accountable at the next election.

[Update 3:05pm Monday — Stop the Cap! misidentified Rep. Warren as Rep. Rowan at the 40:00 mark.  We have corrected the audio log above and regret the error.]