Staff at the New York regulator overseeing the state’s telecommunications companies have determined that some Time Warner Cable customers will see their largest rate increase in New York history — more than double their current rate — if Comcast is successful in its bid to acquire Time Warner Cable.

At issue is Time Warner Cable’s heavily promoted ‘buy only what you need’ Every Day Low Price Internet service, which offers 2Mbps service for $14.99 a month.

Comcast has no plans to continue the discount offering, which means Internet customers will pay more than twice as much for Comcast’s cheapest Internet package available to all customers — Economy Plus (3Mbps), priced at $39.99 a month and only available at that price if you also subscribe to Comcast telephone or television service.

Time Warner Cable’s cheapest television package is priced at $8-20 a month. Comcast’s least-expensive TV package costs $17-20 a month.

“Time Warner’s lowest-priced offerings… represent choices for New York consumers,” Public Service Commission staff wrote in an Aug. 8 filing in the case, noted Albany’s Times-Union. “Any loss of these services would likely result in consumers paying more.”

Comcast denies it will raise prices for New Yorkers or any other Time Warner Cable customer, but noted it needs to study the “significant competition that it faces” before making any decisions on prices. When Comcast discovers Verizon FiOS isn’t providing much of a competitive threat in areas unreached after Verizon stalled its expansion efforts and AT&T U-verse and other telco broadband offerings cannot keep up with cable broadband speeds, they might assume they don’t face that much competition after all.

Frontier used Time Warner Cable’s usage cap experiment against them in this ad to attract new customers in the spring of 2009.

Frontier Communications has filed a rare objection with the Federal Communications Commission opposing the merger of Comcast and Time Warner Cable, citing concerns the merger would further harm competition and prevent Frontier and other competitors from getting fair access to programming owned by the combined cable companies.

“Comcast’s appetite for market control threatens the competitiveness of the video market,” wrote Frontier. “Comcast is already the largest Internet provider and largest video provider in the United States. If approved, Comcast’s video subscriber base would be approximately 52-times the size of Frontier’s video subscriber base.”

As Stop the Cap! wrote in its own objections to the merger, would-be competitors can and will be deterred from competing for video subscribers if they cannot obtain reasonable wholesale rates for popular cable programming. Currently, the largest providers extend the best volume discounts to the country’s largest satellite and cable operators. They make up those discounts by charging smaller customers higher rates. Frontier, as we noted in our filing, has already experienced the impact of volume discounting in its adopted FiOS TV areas in Indiana and the Pacific Northwest. Losing volume discounts originally obtained by Verizon, Frontier faced substantially higher programming costs as an independent provider — costs so great the company began asking customers to drop its own fiber television product in favor of third-party partner DISH, a satellite provider.

“Small multichannel video programming distributors (MVPDs) like Frontier cannot achieve the scale necessary to drive down programming costs, which are based upon an MVPD’s subscriber totals, to the same levels that Comcast can with this transaction,” noted Frontier. “Further, Comcast would own an enormous share of the “must have” programming that customers demand and could exercise its market dominance to either outright deny such programming to its competitors or to functionally deny the programming by charging exorbitant rates for content.”

“While Frontier continues to grow its subscriber base organically by delivering a quality product in its markets and also by acquiring AT&T’s wireline assets in Connecticut, the cost of content for video programming remains staggering for new entrants that lack the scale and scope of cable companies like Comcast and Time Warner Cable individually, let alone that of the merged entity,” said Frontier. “It is no mere coincidence that AT&T announced its proposed acquisition of DirecTV shortly after Comcast announced its intention to purchase Time Warner Cable. AT&T recognized the need to improve its subscriber scale in order to compete with Comcast on video programming pricing.”

Frontier noted the Federal Communications Commission also expressed grave concerns over Comcast’s ability to affect video competition during its acquisition of NBCUniversal. That merger was approved only after Comcast agreed to several conditions to avoid anticompetitive abuse in the marketplace. But Frontier complained a further acquisition of Time Warner Cable would only exacerbate competition concerns, even as Comcast argues the FCC should not contemplate any further investigation of the subject during its current merger review.

Frontier’s “High Speed” Fiber Fantasies

Frontier Communications has jumped on the gigabit broadband promises bandwagon with an announcement to investors the company will make available 1,000Mbps broadband speeds available later this year to a small handful of customers.

“I want to note that nearly 10% of our households are served through a fiber to the home architecture,” said Frontier’s chief operating officer Dan McCarthy. “Over the next several quarters we will introduce expanded speed offerings in select markets including 50-100Mbps services. Some residential areas will also be able to purchase up to 1Gbps broadband service. We are excited to bring these new products to market and look forward to making these choices available to our customers.”

Most of Frontier’s fiber customers are part of the FiOS fiber to the home infrastructure Frontier adopted from Verizon in Fort Wayne, Ind., and in parts of Oregon and Washington. The rest of Frontier customers accessing service over fiber are in a few new housing developments and some multi-dwelling units. The majority of customers continue to be served by copper-based facilities.

Despite the speed challenges imposed by distance-sensitive DSL over copper networks, Frontier customers crave faster speeds and more than one-third of Frontier’s sales in the last quarter have come from speed upgrades. As of this month, 54% of Frontier households can receive 20Mbps or greater speed, 75% can get 12Mbps and 83% can get 6Mbps. Here at Stop the Cap! headquarters, little has changed since 2009, with maximum available Frontier DSL speeds in this Rochester, N.Y. suburban neighborhood still maxing out at a less-impressive 3.1Mbps.

Frontier’s plans for the next three months include a growing number of partnerships with third-party equipment manufacturers and software companies, as well as integrating former AT&T service areas in Connecticut into the Frontier family:

Sale of AT&T Connecticut Assets to Frontier Communications Wins Approval from State Attorney General

Connecticut’s Attorney General has announced a deal with Frontier Communications to approve its acquisition of AT&T’s wired assets in the state. The office asked for and got a three-year rate freeze on basic residential telephone rates and a commitment to keep selling standalone broadband at or below Frontier’s current rates. Low-income military veterans would receive basic broadband service for $19.99 per month, a substantial discount off the regular price of $34.99. The first month of service is free.

Frontier will make $500,000 in donations annually to various Connecticut charities, give $512,500 to the University of Connecticut basketball teams, and commit $75,000 to sponsor the Connecticut Open tennis tournament in New Haven.

The phone company has also committed to invest $64 million on network upgrades between 2015-2017, primarily to expand DSL broadband and U-verse service. The company also must undertake to inspect the wireline network it is buying from AT&T and replace deteriorating infrastructure including lines and telephone poles as needed.

Frontier announced it was buying AT&T’s wired assets in December for $2 billion. AT&T will continue to own and operate its wireless network assets in the state. Connecticut was home to AT&T’s only significant landline presence in the northeast. The Southern New England Telephone Company of Connecticut was originally bought by SBC Communications for $4.4 billion in 1998. After SBC purchased AT&T, the telephone company changed its name to AT&T Connecticut. Its primary competitor is Cablevision Industries, which also serves eastern New York and parts of New Jersey. AT&T has aggressively deployed its U-verse platform in Connecticut. Frontier will continue to run and expand U-verse in the state.

Frontier Services and Partnerships Expand

• Customers may have already received marketing for Frontier’s Emergency Phone, a $4.99/mo landline that can only reach 911. Frontier CEO Maggie Wilderotter told investors that global climate change has made weather patterns more unpredictable, making the reliability and resiliency of traditional landlines a “true life line” in the event of an emergency knocking out Voice over IP lines or cell phone service;
• Frontier Texting, powered by Zipwhip, allows customers send and receive text messages using their existing landline numbers. The service appears most popular with business customers, with more 800 signed up so far;
• Frontier third-party technical and security support offers a large range of computer security, home automation, and support services for both hardware and software. Frontier added the Nest thermostat during this quarter, as well as tech support for Intuit QuickBooks and Dropcam remote video monitoring.

Wilderotter Flip-Flops on Gigabit Broadband: You Don’t Need a Gig

Less than three weeks ago, Wilderotter told the Pacific Northwest readers of The Oregonian they didn’t need gigabit broadband speeds:

“Today it’s about the hype, because Google has hyped the gig,” said Wilderotter, in Portland this week for a meeting of her company’s board. She said Google is pitching something that’s beyond the capacity of many devices, with very few services that could take advantage of such speeds, and confusing customers in the process.

“We have to take the mystery and the technology out of the experience for the user because it’s a bit disrespectful to speak a language our customers don’t understand,” said Wilderotter, in Portland this week for a meeting of her company’s board.

Frontier’s pitch: Better prices for more modest speeds. For most people, Wilderotter said, 10 to 12 megabits per second will be perfectly adequate for at least the next couple years. She said Frontier is upgrading its networks in rural communities where it doesn’t offer FiOS to meet that benchmark.

Now that Frontier proposes to offer those speeds, company officials are excited they will be available. Customers shouldn’t be. Most won’t have access for some time to come, if ever.

Downtown Syracuse (Image: Post-Standard)

The city of Syracuse is facing an unpleasant broadband reality: the current cable company is about to be bought out by Comcast (which has usage caps in store for broadband customers) and the phone company has thrown in the towel on further expanding FiOS — fiber to the home broadband.

Mayor Stephanie Miner isn’t willing to let the city get trapped by a lack of broadband options from Comcast and Verizon, so she’s developing a plan to build a publicly owned alternative.

“I’m putting together a plan that we can do it ourselves, as a community,” Miner told the Post-Standard. 

If approved, Syracuse would join Chattanooga, Lafayette, La.,  Wilson and Salisbury, N.C., and several other cities providing local citizens with broadband speeds up to 1,000/1,000Mbps.

“Would we have to do that in phases? What would that look like? How would we pay for it? What would the model be? Those are all things that we are currently looking at, ” Miner noted.

Many of those questions have already been worked out by the best clearinghouse Stop the Cap! knows for excellent community broadband project development: the team at the Institute for Local Self Reliance.

The Community Broadband Networks Initiative of the Institute for Local Self-Reliance, works with communities across the United States to create the policies needed to make sure telecommunications networks serve the community rather than a community serving the network. The Institute for Local Self-Reliance is a non-profit organization that started in Washington D.C. in 1974.

ILSR’s Mission:

The Institute’s mission is to provide innovative strategies, working models and timely information to support environmentally sound and equitable community development. To this end, ILSR works with citizens, activists, policymakers and entrepreneurs to design systems, policies and enterprises that meet local or regional needs; to maximize human, material, natural and financial resources; and to ensure that the benefits of these systems and resources accrue to all local citizens.

No community should attempt to build a community broadband network without first consulting with ILSR. They are particularly effective at helping combat the misinformation campaigns that often arise when an incumbent duopoly discovers they are about to get serious competition for the first time.

If your community wants something better than the local cable and phone company, have your local official(s) E-mail or call Christopher Mitchell at ILSR: 612-276-3456 x209

With entrenched providers unwilling to meet the needs of communities for affordable fast Internet, more American communities are providing the service themselves, much as they take care of local roads, bridges, and other public infrastructure. Comcast’s toll information superhighway may work wonders for shareholders, but it leaves most customers cold. Syracuse, like most upstate New York cities, has also watched Verizon flee from investments in FiOS expansion beyond a handful of wealthy suburbs. Verizon has diverted much of its investment away from wired networks in favor of wireless, a much more profitable business.

You can still read a book instead of everything else.

Allowing Comcast to dominate New York’s cable television marketplace will deter future competitors from entering the market, particularly for television programming.

One of the arguments made by proponents of the merger is the possibility of decreased wholesale television programming costs won through volume discounts available to the largest nationwide providers. Unfortunately for consumers, Comcast has already declared customers will not benefit from those discounts in the form of lower cable bills.

A prospective new entrant considering providing cable television service will face competition with Comcast without any benefit of volume discounts on programming.[1] That makes it unlikely a provider will offer a competing television package.

This is not a theoretical problem.

In Ohio, independent cable company MCTV discovered that while large cable operators like Comcast were benefiting from volume discounts, it faced contract renewal prices more than 40 times the rate of inflation.[2] Cable ONE, owned by the Washington Post, had to drop more than a dozen Viacom owned channels for good because it could not afford the asking price.[3]

MCTV president Bob Gessner reminds us of just how concentrated the entertainment business has become, noting that nine media companies (Comcast is one of them) now control 95% of all paid video content consumed in the United States.[4]

MCTV’s survival plan includes membership in the 900-member National Cable Television Cooperative, the only way smaller providers can pool resources and win discounts of their own. It is no longer effective as mergers and acquisitions continue to consolidate the cable and telco-TV business. All 900 NCTC members serve a combined five million customers. Comcast has 21 million, DirecTV: 20 million, Dish Networks: 14 million, and Time Warner Cable: 11 million.[5]

AT&T confesses it cannot compete effectively with Comcast and other larger competitors for the same reason. AT&T’s solution, like Comcast, is to buy a competitor, in this case DirecTV.[6]

Frontier Communications faced a similar problem after adopting Verizon FiOS franchises in Indiana and the Pacific Northwest after purchasing Verizon landline networks in several states. When Frontier lost Verizon’s volume discounts on programming, Frontier’s solution was to begin a marketing campaign to convince its fiber customers to abandon the technology and switch to one of its satellite television partners.[7]

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[1]https://www.fiercecable.com/cable/comcast-twc-deal-will-squeeze-programming-and-technology-vendors

[2]http://stopthecap.com/2014/06/05/independent-cable-companies-unify-against-cable-tv-programmer-rate-increases/

[3]http://online.wsj.com/articles/viacom-60-cable-firms-part-ways-in-rural-u-s-1403048557

[4]http://stopthecap.com/2014/06/05/independent-cable-companies-unify-against-cable-tv-programmer-rate-increases/

[5]http://stopthecap.com/2014/06/05/independent-cable-companies-unify-against-cable-tv-programmer-rate-increases/

[6]http://www.bloomberg.com/news/2014-05-02/dish-or-directv-need-deal-most-in-at-t-love-triangle-real-m-a.html

[7]http://stopthecap.com/2011/08/16/frontiers-fiber-mess-company-losing-fios-subs-landline-customers-but-adds-bonded-dsl/