Comcast announced this week it is expanding its $9.95 discount internet access program Internet Essentials to qualified low-income veterans.

“Veterans have stood up for our country, and for our way of life, and we believe it’s time for all of us to stand up for those veterans,” said David L. Cohen, Comcast’s senior executive vice president and chief diversity officer, speaking at a news conference Monday at a veterans housing complex under construction in Philadelphia. Cohen claimed the program’s expansion “will enable us to reach about a million low-income veterans.”

Comcast’s Internet Essentials

• $9.95/month
• 15/2 Mbps service
• No activation fees and no equipment rental fees
• Option to purchase laptop/computer for $149.99 + tax
• Access to free internet training online, in print and in person
• A free Comcast Wireless Gateway, delivering in-home Wi-Fi at no additional cost

Comcast requires all applicants, including veterans, to pre-qualify for the service with an application and agree to submit re-qualification paperwork annually. The cable company has carefully shielded its program from cannibalizing existing internet revenue by excluding almost everyone who currently subscribes to Comcast internet service or has a pre-existing past due balance. Applicants have to certify they have not had Comcast internet service for at least 90 days before submitting an application (not applicable to customers in the city of Philadelphia), must prove their low-income status by sending proof they are enrolled in one of several federal assistance programs, and prove their veteran status.

Qualified Assistance Programs

In the seven years of its existence, Comcast has only managed to enroll six million people in the program, a fraction of those that would otherwise qualify who live in Comcast service areas. Most critics blame Comcast’s onerous qualification requirements for the relatively low enrollment.

Bryan Mercer, executive director of West Philadelphia’s Media Mobilizing Project, told The Inquirer Internet Essentials offers “speeds that don’t even meet the FCC definition of broadband” and a “series of restrictions” that disqualify those who already manage to scrape enough money together to buy Comcast internet access without the benefit of the Internet Essentials discount program. Mercer says the restrictions that insist customers go without Comcast internet for at least three months and never have an outstanding bill are particularly hard for many low-income people to meet.

“That is a real roadblock to someone trying to keep their utilities affordable and their families online,” Mercer told the newspaper.

About 70 percent of low-income veterans presently lack internet access. In Philadelphia, the nation’s poorest large city, the contrast between super-wealthy Comcast and the thousands of poverty-level residents is striking. Because of its large low-income population, only about 75% of Philadelphia’s residents have internet access. Detroit, which has seen major depopulation and is no longer deemed a “large city,” is even worse, with only 60.9% of city residents signed up for internet.

Nearly half of all adults with an income below $30,000 don’t have home broadband service or a traditional computer, a 2017 Pew Research study found.

Comcast has been testing expansion of its Internet Essentials program, which originally only targeted families with school-age children, with new qualifying groups to boost subscriber numbers:

• Low-Income Seniors: (SSI, Medicaid, and other low-income program participation required). Only available in: Atlanta, Boston, Detroit, Fresno County, Calif., Hartford County, Conn., Houston, Miami-Dade County, Fla., Palm Beach County, Fla., Philadelphia, San Francisco, Santa Clara County, Calif., and Seattle.
• Housing Assistance: Everywhere Comcast is available. Enrollees have to prove they receive qualifying housing assistance.
• Internet Essentials Philadelphia: Only available in Philadelphia, this program offers less pre-qualification restrictions, but maintains proof of low-income requirements to enroll.
• Community College: Available only to those enrolled in a participating two-year community college in Illinois or Colorado, and receive a Pell Grant.

Comcast was required to offer and finance Internet Essentials as a deal condition for approval of is 2011 acquisition of NBCUniversal. Although that deal commitment expired in 2014, Comcast has voluntarily extended it since then, but reserves the right to change or discontinue the program at any time.

Comcast claims 93% of families participating in its affordable internet service for the income-challenged report an improvement in their children’s grades at school.

That result is not surprising, according to research cited by FCC Commissioner Jessica Rosenworcel, who told the New York Times last year that one-third of students from kindergarten through 12th grade who live in low-income or rural households either have no access, or cannot afford access to the internet at home.

A 2015 Pew Research report found that with approximately 29 million households in America having children between the ages of 6 and 17, five million households with school-age children do not have high-speed internet service at home. Low-income households – and especially black and Hispanic ones – make up a disproportionate share of that number:

Pew Research analysis of the Census data finds that the lowest-income households have the lowest home broadband subscription rates. Roughly one-third (31.4%) of households whose incomes fall below $50,000 and with children ages 6 to 17 do not have a high-speed internet connection at home. This low-income group makes up about 40% of all families with school-age children in the United States, according to the bureau’s American Community Survey. (The survey asked questions on home internet use for the first time in 2013.)

There are fewer studies measuring how a lack of internet access impacts on academic performance. With ongoing budget constraints now forcing seven out of 10 teachers assigning homework that requires students to set aside outdated textbooks and do research online, a significant number of students from income-disadvantaged or rural homes are struggling to keep up with their richer peers.

Concerns about fraud in the Lifeline program are stalling aggressive efforts to get affordable internet into poor and rural family homes.

In Coachella, Calif., and Huntsville, Ala., school districts report the problem has become so bad, many students are now depending on buses equipped with Wi-Fi to function as mobile study halls, where students sometimes ride for hours frantically trying to complete homework they cannot do at home. Some school buses are now parked in neighborhoods overnight with Wi-Fi service left on continuously where few families can afford a home internet connection at the prices demanded by the local phone and cable companies.

“This is what I call the homework gap, and it is the cruelest part of the digital divide,” said Rosenworcel, a Democratic member of the FCC who has tried to adapt the Lifeline program to include home internet access.

Rosenworcel and others in favor of subsidizing internet access for the poor are up against two powerful groups in Washington — the providers themselves, which have launched a PR blitz designed to promote their own voluntary low-cost internet programs like Comcast’s Internet Essentials and Charter Communications’ Spectrum Internet Assist. The other obstacle comes from a number of Republicans in Congress who frequently demagogue Lifeline as a rat hole of waste, fraud, and abuse and are reticent about expanding it to cover broadband.

In a hearing held this morning by the Senate Commerce Committee, senators questioned a representative of the Government Accountability Office that released a report in May that found “extensive problems” with the Lifeline program. The report targeted 12 phone companies for approving Lifeline applications with fake eligibility information 63% of the time, potentially exposing taxpayers to millions of dollars in losses for non-qualified or deceased applicants.

Attempts to strengthen verification procedures are ongoing, first initiated by former FCC Chairman Thomas Wheeler, who approved a national verifier system for providers to ensure compliance. But for current FCC Chairman Ajit Pai, who voted against Wheeler’s compliance program, complaining that states did a better job of combating fraud, the results of the GAO study confirmed his own skepticism about the Lifeline program. Earlier this year, he blocked the approval of nine companies from joining the program to offer affordable internet access and shows no signs of relenting.

That leaves private telecom companies to continue expanding their own affordable internet programs. Comcast recently reported it had enrolled almost 20,000 families in its program in New Jersey alone. Its Internet Essentials program offers internet access to families qualified for the National School Lunch Program for $9.95 a month and offers a modest computer for $150. Comcast’s program now in its sixth year and recently increased its offered broadband speed to 15/2Mbps and offers 40 free hours a month to XFINITY Wi-Fi hotspots.

Staffers at the New York State Department of Public Service have recommended the Public Service Commission reject the merger of Charter Communications and Time Warner Cable unless significant concessions are made, largely because the alleged benefits are insufficient for New York cable customers.

Although cable operators are largely deregulated under federal law, state and local governments retain control over cable franchise agreements, which permit operators to sell cable television programming. To complete its merger, Charter Communications must win approval to transfer Time Warner Cable franchise agreements to the merged entity, dubbed “New Charter.” That gives state regulators leverage to win concessions and oversight mostly eliminated after the cable industry was deregulated by the federal government.

New York law requires cable operators seeking to join forces to prove the merger is in the public interest and that ratepayers will obtain a “net positive benefit” from the merger. In plain English, Charter must share the benefits of the merger with cable customers in New York, either from lower prices, better service, or both. Charter proposes to offer those benefits in the form of improved service:

• Additional investments in all-digital systems in Time Warner’s service areas by completing digitization within 30 months of the close of the proposed transaction. This would include faster (60 megabits per second (Mbps) minimum) broadband speed offerings;
• Merger-specific efficiencies, which would generate savings in a number of areas including combined purchasing power, overhead, product development, engineering, and information technology;
• Merging Charter’s New York assets, now isolated from the rest of its service territories, to create efficiencies through reduced costs, improved customer service and additional service offerings;
• Bringing overseas Time Warner jobs back to the United States and adding in-house positions;
• Expanding to New York, within three years of the close of the proposed transaction, Bright House Networks’ low-income broadband option (Connect2Compete) which partners with schools to provide a $9.95 low-cost Internet service, discounts on Internet-capable devices, and innovative digital literacy training;
• Promoting the deployment of advanced voice services and enhancing competition in the voice marketplace by creating a more robust competitor;
• Pledging not to block or throttle Internet traffic or engage in paid prioritization, whether or not the Federal Communications Commission’s (FCC) Open Internet Order is upheld. This commitment would continue for three years, without regard to the outcome of the ongoing litigation challenging federal reclassification.

The Public Service Commission staff looked at the reported annual “synergy savings” of $800 million anticipated by New Charter from streamlining operations and winning enhanced volume discounts to determine the “net positive benefit” for New York consumers from the merger. Here is the formula the PSC used:

• New York customers represent 10.879% of New Charter’s customer base — 2.6 million of New Charter’s 23,900,000 combined Charter and Time Warner Cable customers;
• The agency presumes customers and shareholders nationwide should each receive 50% of the $800 million in savings;
• Knowing New York deserves roughly 11% of that $800 million, divided equally between customers and shareholders, New Charter owes New Yorkers $43.5 million in benefits annually.

Staffers at the PSC prefer to deal in hard numbers and solid commitments when determining how New Charter intends to meet its obligation to New Yorkers, and all signs indicate the cable company was less than forthcoming. In colloquial terms, New Charter’s response to the PSC’s math can be summed up, ‘Whatever, you can trust us to work out the details after the merger.’

Alleged Deal “Benefits”

New Charter’s promises to invest more capital in New York than Time Warner Cable came with no specific investment commitments, despite repeated efforts to pin New Charter down on its spending plans. Some of the details about New Charter’s spending proposals are redacted in the document, but it isn’t difficult to discern reading between the lines New Charter has no plans to continue Time Warner Cable’s Maxx upgrade program beyond commitments already made, which in New York is limited to New York City, leaving all of upstate New York off the Maxx upgrade list. PSC staffers believe if Time Warner Cable remained independent, some or all of upstate New York would receive those Maxx upgrades in the near future.

New Charter claims another merger benefit is their plan to upgrade Time Warner customers with new and improved IP-capable ‘Worldbox’ equipment and DVR’s offering more recording capacity. While conceding there were some minor benefits from offering customers more capable equipment, PSC staffers were skeptical New Charter’s plan represented much of a “consumer benefit,” because the equipment is not cheap and New Charter’s plan to eliminate analog television signals will mean every customer will have to rent one of Charter’s new boxes or a near equivalent.

New Charter’s promises of faster Internet speeds and upgraded cable systems would normally be seen as a direct consumer benefit, except Time Warner Cable already committed to its own Maxx upgrade effort that often outperforms what New Charter is promising. “Digitalization and associated speed increases can only truly be considered a benefit if [New Charter] can adequately demonstrate that Time Warner would not have otherwise completed a similar transition to an all digital, faster network in a similar timeframe [roughly 30 months],” PSC staffers concluded.

New Charter’s promise to expand low-income Internet access to Time Warner Cable customers, utilizing Bright House Networks’ Connect2Compete program, comes with many of the same restrictions Comcast’s own Internet Essentials program include. That issue was hotly debated during Comcast’s attempt to acquire Time Warner Cable, and many public interest groups opposed the merger for that reason. New Charter has also made no commitments to continue Time Warner’s no-restriction/no-contract/no-prequalification affordable $14.99 Internet service. In fact, the merger may worsen the affordable Internet problem, not improve it.

New Charter’s proposed expansion of Time Warner Cable’s Wi-Fi hotspot program is vague and mostly undefined beyond a general commitment to deploy at least 300,000 new out-of-home Wi-Fi access points across its national footprint within four years. New York regulators want to know how many of those would be in New York. Using the same formula to find how many New Charter customers are located in New York, it seems reasonable that redacted sections regarding the Wi-Fi hotspot program included an inquiry if New Charter planned at least 30,000 new access points for New York. New Charter did mention that once the proposed transaction is complete, it expected to evaluate the merits of leveraging in-home routers as public Wi-Fi access points, much like Comcast is doing today. Because Time Warner Cable has no firm plans about its Wi-Fi hotspot deployment program beyond this year, PSC staffers found it difficult to determine which company had the better Wi-Fi proposal for New Yorkers.

New Charter’s plans for expanded business broadband were also found to be vague, making it difficult to measure how much benefit New Charter would bring commercial clients in New York.

Status Quo

Time Warner cable systems will become indirect, wholly owned subsidiaries of New Charter. New Charter states that they are not seeking authority for the transfer of customers or for any changes in rates, terms or conditions of service and New Charter will also continue to provide Lifeline Discounted Telephone Service (Lifeline).

The PSC expects that customers will keep the same digital phone number they had with Time Warner; will have the same billing account information; and, other technology will continue to work seamlessly. In other words, the transaction should be technologically transparent for consumers.

The regulator also acknowledges that, after the proposed transaction, there should be no diminution in the number of service provider options available to consumers in the video market because Charter and Time Warner do not have overlapping service areas in New York. Since the potential for direct competition no longer exists, this assertion is in no way a benefit of the proposed transaction, it simply maintains the status quo.

The Bad and the Ugly

Despite claims from both cable companies there will be no negative impact as a result of the proposed transaction, PSC staff identified a number of serious issues that are likely to result if the merger is approved without any enforceable conditions or commitments:

Charter will be among America’s top junk bond issuers. (Image: Bloomberg News)

New Charter intends to load itself with massive debt to pay for the merger. As a result, the combined company’s credit rating will take a significant hit. PSC staffers fear New Charter will be vulnerable if economic conditions decline, even to the point of default or bankruptcy. But before that happens, New Charter’s need to cope with its debt could result in reduced investment in system upgrades.

“If the operating environment declines for cable companies […] New Charter will have more difficulty maintaining the investments necessary to bring expanded products and provide good service quality to its customers and, thus, this represents the single most substantial risk of the proposed transaction,” the PSC staff warns. “Accordingly, the Commission should seek to mitigate this risk and ensure that New York receives net benefits that are sufficient to offset this and the other potential harms.”

After requesting Charter disclose its often hidden regular, non-promotional prices most cable customers eventually pay, the PSC discovered contrary to Charter’s claims its prices are lower than Time Warner Cable, in fact they are often higher. Time Warner Cable customers typically also receive more cable television channels for their dollar than Charter customers do. Consumers who bundled multiple services together got the best savings, but even those deals were priced comparably to what Time Warner Cable charges. In short, promises of savings are illusory.

Time Warner Cable offers $14.99 to anyone without paperwork. Charter does not.

Broadband customers will also lose less-expensive broadband options they receive from Time Warner Cable. New Charter will drop Time Warner’s $14.99 “Everyday Low Price” 2Mbps Internet package, along with its Basic 3Mbps ($29.99) and Standard 15Mbps ($34.99) plans. New Charter’s least expensive broadband option for all consumers will be its Spectrum Internet 60Mbps plan, which carries an initial promotional price of $39.99 a month and a regular price just under $60.

“Time Warner’s lower priced offerings represent choices for New York consumers,” PSC staff concluded. “Any loss of these services would likely result in consumers paying more to ensure they have access to the same level of high-speed Internet service and its important resources.”

Jobs: New York is at risk of losing Time Warner Cable’s five call centers employing about 1,996 staff, 61 retail/walk-in centers employing 2,674 staff, nine corporate offices employing around 1,257 staff, nine service/maintenance locations employing approximately 1,687 staff, two media offices employing 435 staff, and 11 other service related functions employing about 1,003 staff, with total employment in the state of nearly 9,052.

PSC staffers have only received a commitment New Charter will not reduce the number of “customer facing” jobs in New York, but has said nothing about where the rest of its New York employees might be heading.

“There is a real danger that New Charter will look to gain operational efficiencies by moving/consolidating customer-facing jobs and other positions to out-of-state locations, despite any claims to the contrary,” the PSC staff reports. “Out-of-state service centers would make it difficult for it to maintain its current level of customer service. Longer wait times and lack of local knowledge could lead to increased frustration and dissatisfaction on the part of New York customers, and a significant decline in the overall level of service provided.”

What New York Regulators May Demand from New Charter to Approve a Merger

The PSC wants Charter to develop gigabit broadband for New York’s top-five cities.

When the PSC staffers added everything up it found the proposed merger offered little benefit to New Yorkers and would not result in a net positive benefit for New York. The staff recommended the merger be denied unless specific commitments are made to sweeten the deal for New York customers.

First, New Charter should be required to develop a strategic implementation plan to build-out its all-digital network to every remaining unserved or underserved Charter and Time Warner franchise area in New York. This would mean that any resident in a town serviced by either cable company would be able to buy service even if the company does not now offer it. Currently, areas considered unprofitable to serve within a franchise area are often bypassed. This would no longer be permitted, and New Charter would have to wire any commercial building, business, school, or home.

Second, Charter’s record of performance in New York is already less than impressive. In Columbia County, Charter operates an ancient one-way video service-only cable system serving Chatham, N.Y. The PSC staff recommends Charter be required to bring that cable system up to date. More broadly, the staff recommends Charter be forced to spend more money on system upgrades and improved service than Time Warner Cable would have on its own.

Third, qualifications to subscribe to Charter’s proposed $9.95 discount Internet program should be broadened to exclude fewer customers. Its speed should also be raised to at least 10Mbps. For everyone else not qualified to subscribe to Connect2Compete, the PSC staff recommends requiring New Charter to continue offering Time Warner’s Everyday Low Price $14.99 Internet tier at an enhanced speed of 3Mbps for a minimum of five years.

Fourth, Time Warner customers in New York should be granted promotional broadband pricing without modem fees for a minimum of three years, making New Charter’s ongoing price of its 60Mbps tier $39.99 a month, not the $59.99 a month Charter typically charges after one year.

Fifth, New Charter should be required to offer broadband service at speeds up to 100Mbps throughout its New York footprint within 30 months of the close of the proposed merger. New Charter should also be compelled to install infrastructure capable of offering 1,000Mbps (1Gbps) service in New York City, Buffalo, Rochester, Syracuse and Albany by 2020.

Six, New York should require New Charter to change its current merger proposal to decrease leveraged debt and present a plan to restore the company’s credit rating to a level more comparable with Time Warner Cable.

Seven, New Charter should submit to oversight of its customer service performance by New York regulators, which will monitor how New Charter treats its customers. If the company falls below acceptable service standards, the PSC will have the authority to intervene based on an agreement with New Charter.

Finally, New Charter will agree to limit any significant changes to its New York call center or other customer-facing positions for at least two years and provide 90 days notice of any significant job relocations or reductions.

After years of complaints that Comcast’s discount Internet program for the poor came with a byzantine application process and was too limited to attract enough qualifying customers, the cable company is making it easier to sign up.

Comcast today announced Internet Essentials was getting a back-to-school makeover, with a doubling of download speed (10/1Mbps) and a free Wi-Fi router for new and existing customers.

Comcast’s application procedure for the service has also been streamlined.

Cohen

“Now, if a child attends a school where at least 50 percent of the students are eligible to participate in the National School Lunch Program, all student families in that school are automatically eligible for Internet Essentials,” David Cohen, Comcast’ executive vice president and chief diversity officer wrote in a blog post.

Internet Essentials offers discounted Internet access for $9.95 a month as well as budget-priced computer equipment priced below $150 and free training classes to use both.

But Comcast has still not changed two provisions that effectively lock many income-challenged residents out of its program:

• Participants may not have any outstanding debt to Comcast less than a year old. Those with debt more than a year old may qualify, but will likely have to arrange a payment plan to pay off the debt;
• Participants must not be current Comcast Internet subscribers and will have to cancel their current broadband service for at least 90 days before they can qualify for Internet Essentials.

The latter requirement is designed to protect Comcast from losing revenue earned from poor customers who manage to scrape together enough to pay for Comcast’s regular-priced Internet. Comcast has remained defensive about the limitations of its Internet Essentials program, offered as a condition for approval of its merger with NBCUniversal. Comcast publishes glowing testimonials about the merits of the project written by third party groups without disclosing Comcast financially supports most, if not all the groups providing the testimonials.

Qualified customers can apply online to get the process started. Current customers can also request and receive free delivery of their Wi-Fi router from the same website.

Comcast also announced it will be testing a pilot program offering discounted Internet service for low-income senior citizens, starting in Palm Beach County, Fla., with other trial cities to be announced later. Details about the senior program were not yet available. Appearing with Comcast to announce the program was a representative from the Urban League, which also receives extensive financial support from Comcast and supported its merger effort with Time Warner Cable.

As regulators ponder Comcast’s application to acquire Time Warner Cable, the issue of affordable Internet has been a hot topic as part of the merger review. So it is no surprise Comcast has announced it is extending its recent offer of six free months of Internet Essentials service to income-challenged families with school age children an extra 10 days.

“On August 4^th, we made a special announcement: we are offering any family that has not yet signed up for Internet Essentials, up to six months of free service, if they apply before September 20th,” said Comcast executive vice president David Cohen on Comcast’s blog.  “Today, I’m thrilled to announce we’re going to extend that offer through Tuesday, September 30th.”

Comcast admits that only families that have never applied for Internet Essentials in the past can receive free service. Those already enrolled or who attempted to enroll in the past do not qualify.

The cable company does not make participation easy and is intent on protecting the revenue it earns selling regularly priced Internet service by keeping current customers out of the Internet Essentials program.

Just qualifying for Internet Essentials requires navigating an obstacle course:

The program is only available to households:

• that have at least one child who is eligible to participate in the National School Lunch Program (the “NSLP”) and as confirmed annually while enrolled in the program;
• do not have an overdue Comcast bill or unreturned equipment; and
• have not subscribed to any Comcast Internet service within the last ninety (90) days.

Internet Essentials promises no price increases, but the fine print suggests otherwise.

The program will only accept new customers for three full school years. After that, if Comcast decides it doesn’t want to offer the service any longer, customers are out of luck. Comcast can also restrict enrollment periods when it accepts new participants and requires annual verification paperwork demonstrating continued participation in the NSLP.

Comcast can throw families out of the program: if a child relocates outside of the household, loses NSLP eligibility, if a bill is paid late, if Comcast decides to stop offering the program, or if your account is closed. If you move, your account will be closed even if you choose to continue Comcast service at your new address, so don’t plan on going anywhere.

If and when Comcast determines your participation in Internet Essentials is over, your rates will automatically reset to standard Internet pricing without further notice. So much for promises of no rate increases. Those regular prices start at around $40 a month + a monthly modem rental fee of around $8 — quite a difference from $9.95.

Although the terms and conditions do not reflect it, Comcast claims to be continuing an “amnesty program” for would-be applicants with past due balances:

If customers have an outstanding bill that is more than one year old, then as long as they meet all the other eligibility criteria, they can apply to the program and we will provide amnesty for that back due bill for the purpose of connecting to Internet Essentials. If customers’ outstanding bills are less than a year old, however, then we would like them to settle that debt with us before they can be eligible to apply for the program. We are willing to work with families whose debt is reasonable enough that that they could pay us back in installments.

For more information, visit www.internetessentials.com or, for Spanish, www.internetbasico.com. You can also call 1-855-8-INTERNET or, for Spanish, 1-855-SOLO-995.