Hobbs

Landel Hobbs tendered his resignation today, leaving as Time Warner Cable’s chief operating officer after serving nine years at the cable operator.

The Wall Street press is characterizing Hobbs’ departure as a leadership shakeup created as the company explores who will eventually succeed CEO Glenn Britt.

Hobbs lost out to Rob Marcus, the company’s current chief financial officer.  Marcus joined Time Warner Cable in 2005 from then-parent company Time Warner Inc., where he led mergers and acquisitions.

Marcus will assume Hobbs’ former position almost immediately, also becoming Time Warner Cable’s president.

Marcus

Hobbs was deeply involved in Time Warner’s 2009 attempt to impose Internet Overcharging schemes on its broadband customers.  Hobbs was a major defender of the company’s plans to charge customers up to three times more for their existing level of broadband service, telling customers the need to impose such pricing was “urgent.”

“If we don’t act, consumers’ Internet experience will suffer,” he wrote. “Sitting still is not an option.”

Time Warner Cable shelved those plans and has since embarked on a broadband upgrade program, introducing DOCSIS 3 technology which provides a much larger broadband pipeline to customers.  The company is expected to upgrade most of its service areas, including the cities where it tested its Internet Overcharging scheme, by the second quarter of 2011.

Marcus’ primary task is expected to be addressing the ongoing loss of Time Warner Cable customers, who have been disconnecting service at a greater rate than the company is adding customers to replace them.

HP's Snowjob: The company that brought you the $70 ink cartridge supports an end to flat rate Internet service to "save" you money.

HP’s Joe Weinman argues consumers are behind the drive to abandon flat rate, “all you can eat” broadband pricing.

Weinman, whose company sells products and services to some of America’s largest broadband providers, has taken up their position that flat-rate Internet service is bad for you, claiming many are paying too much for Internet service they use too little.

In an essay posted on GigaOM, Weinman brings back the all-y0u-can-eat buffet metaphor:

For the record, I like unlimited Internet access just as much as anyone else. However, such plans appear to be on their way out, and here’s why. As I’ve explored in ”The Market for Melons” (PDF), pay-per-use is not an evil plot by greedy robber barons, but a natural outcome of independent, rational consumer choice. Consider a town with an all-you-can-eat (flat rate) buffet and an a la carte (pay-per-use) restaurant. Smart shoppers on diets will save money by patronizing the a la carte restaurant, whereas heavy eaters will save money by visiting the buffet. As patrons switch, the average consumption of the buffet will increase, driving price increases for the luncheon special, causing even more users to switch to pay-per-use.

Bottom line: it is not the proprietors driving this dynamic, but the customers themselves acting out of pure, rational self-interest—light users, by deciding not to subsidize the heavy ones, foster the vitality of the pay-per-use model.

Unfortunately for Weinman, most American broadband customers don’t believe a word of this, and even he was forced to admit as much when he noted consumers “often prefer to overpay for flat-rate rather than save money but risk bill shock.”

Karl Bode at Broadband Reports wasn’t suckered for a moment either, noting:

[…]Cable industry lobbyists would like the public to believe that such a shift isn’t about making more money, it’s about helping the poor. Not only is the metered billing push absolutely about making money, it’s about artificially constricting the pipe to protect uncompetitive carriers and TV revenues from Internet video. But instead, there’s a very concerted effort afoot to portray this shift as necessary, inevitable, and even altruistic.

Most consumers prefer the simplicity of flat rate pricing, and understand that ISPs are perfectly profitable under the flat-rate pricing model. They also understand that this is a pipe dream forged by never-satisfied investors, and once implemented ends with ever soaring per gig fees and ever shrinking usage caps.

Weinman’s essay completely ignores the reality his preferred pricing model already delivers to those who live under it in Canada.  Canadian broadband rankings continue to decline as customers there pay higher prices for a lower level of service, with usage caps that actually decline when new competitive threats from online video emerge.

Just what the doctor ordered: HP's Rx for American Broadband

We had to take time out to respond directly to Weinman and his cheerleading friends (see the comments section), some who wrote comments below the piece and couldn’t be bothered to disclose they owe their day jobs to industry-backed dollar-a-holler groups that are committed to delivering on behalf of their provider benefactors:

When Big Telecom comes ringing with promises of savings from metered or capped broadband, hang up immediately.

These plans save almost nobody money and expose dramatic overlimit fees to consumers, creating the kind of bill shock wireless phone users endure.

The OPEC-like Internet price-fixing on offer from big players delivers broadband rationing and sky high prices, while retarding Internet innovations that providers don’t own or control.

Consumers are forced to double check their usage and think twice about everything they do online out of fear of being exposed to huge overlimit fees up to $10 a gigabyte for exceeding an arbitrary limit ranging from 5-250GB.

Americans already pay too much for Internet service and now the providers want more of your money. The rest of the world is moving AWAY from the pricing schemes Weinman would have us embrace. It’s such a serious issue in the South Pacific, the governments of Australia and New Zealand are working to address the problem themselves.

Providers are already earning BILLIONS in profits every quarter from their lucrative broadband businesses. Now the wallet biters are back for more, with the convenient side benefit that limiting consumption is a great way to prevent Internet-delivered TV from causing cord-cutting of cable TV packages.

As far as consumers are concerned, and Weinman admits as much, people are happy with today’s unlimited price models. When Big Telecom complains people are overpaying for broadband, wouldn’t their shareholders be telling them to shut up and take the money? There is more to this story.

Weinman defends the extortion proposition Big Telecom would visit on us: either give us limited use pricing or we’ll raise all of your prices.

But as consumers have already figured out, these providers never reduce prices for anyone. When was the last time your cable bill went down unless you dropped services?

Don’t be a sucker to Big Telecom’s “broadband shortage” or pricing myths. Broadband is not comparable to water, gas, or electric. The closest comparison (and the one they always leave out) is to telephone service, and as we’ve seen, that business is increasingly moving TOWARDS flat race, unlimited pricing.

Want to know what metered pricing does to the wallets of consumers? Just ask Time Warner Cable customers in Rochester, Greensboro, San Antonio, and Austin what they thought about the cable company’s “innovative” pricing experiment that tripled the price for the same level of broadband customers used to get for $50 a month. After the torches and pitchforks were raised over $150 a month broadband service, Time Warner backed down.

Either with or without metered pricing, the cable company raised its prices three times last year alone.

The industry’s meme that “usage-based pricing” in inevitable is only true if consumers allow it to happen.  The parade of Internet Overcharging advocates all share one thing in common — they earn a living from the providers that dream about these pricing schemes.  Always follow the money.  As we’ve exposed repeatedly, the vast majority of defenders of these kinds of pricing schemes are not consumers.  They are:

• The providers themselves;
• Wall Street banks, investors, and the business media catering to them;
• Non-profit groups receiving substantial contributions from providers;
• Industry-funded “think tanks” and research that can carry the industry’s public policy agenda, hoping the media that quotes them are too lazy to follow the money;
• Equipment and service vendors, unions, and other groups who depend on the business or jobs they get from providers.

If you are a Frontier DSL customer, your unlimited Internet service is at risk of being arbitrarily limited by a company that wants to cut costs and increase revenue… at your expense.

Suburban Sacramento residents deemed to be “using too much” Frontier Internet service are being told they have to ration their Internet usage or pay more — a lot more — for the same speed service.  Even worse, many customers are paying extra for a “Price Protection Agreement” from Frontier that protects Frontier’s profits while your Internet bill doubles.  That’s a price protection racket only the Sopranos could love.

Frontier’s own representatives are literally at a loss for words when told it’s easy to exceed their “5GB” limit just by web browsing and checking e-mail.  But they are even quieter when customers report Frontier’s own video website – my fitv, a “free online video service” heavily promoted by Frontier, is ultimately responsible for their looming $99.99 monthly Internet bill.

Frontier wants to get tough with some of their best customers.  As a result, many are exploring disconnecting service for a cable competitor.  The best way to fight these Internet Overcharging schemes is to make it clear to Frontier you will not submit to them.  The first step is to bring wider media attention to the issue.

Sacramento-Elk Grove Customers

• Contact the Sacramento Bee, the Elk Grove Citizen and other local newspapers and ask them to write a story about this;
• Contact KOVR-TV’s consumer reporter and ask him to do a story;
• Contact other stations and local call-in shows and draw attention to Frontier’s abuse of its customers;
• If you are on a “price protection agreement” contact the California Public Utilities Commission and file a complaint.

Points to consider raising:

• Frontier’s usage caps are easily broken using the company’s own video website, my fitv;
• What the company suggests most people will not exceed today is not reasonable tomorrow.  Besides, how much customers actually use is considered proprietary and we have to take their word on it;
• Customers on price protection agreements are being asked to pay more than double for the exact same quality of service they used to receive for less.  Where is the price protection?;
• Frontier is generous with their shareholders, paying outrageously high dividends out of step with their earnings, but are notoriously stingy with the customers that deliver them that revenue;
• Where’s the fire?  This is the same company that said it had more than enough capacity to take on millions of ex-Verizon broadband customers, but now suddenly can’t deliver the same level of service to existing customers in Elk Grove without doubling the monthly price?;
• Customers are being asked to pay $1 a gigabyte for a service that costs Frontier far less to actually provide;
• At a time when Frontier continues to lose landline customers, can they afford to alienate more, who take all of their business elsewhere?

Frontier alienating its own customers who pay for their landline and broadband DSL service does not sound like a winning business strategy.  Let Frontier know you will not do business with a company that abuses its big-spending customers.  Let them know in clear terms you will cancel all of your services if the company maintains its Internet Overcharging practices and you will encourage your friends and family to take their business elsewhere as well.

Verizon’s chief operating officer thinks industry calls for Internet Overcharging schemes like metered billing and usage capped-broadband will harm providers trying to convince customers their multi-service packages represent the best value.

Bob Mudge told Bloomberg News Verizon has little interest heading down the road to charge customers based on what they use, particularly on its FiOS fiber to the home network.  Although Verizon does limit usage on its wireless network, to enforce limits on its fiber network could harm the company’s “value proposition” to consumers.

“The way we’ve structured our pricing is we have a great value proposition with the best speeds in the industry,” Mudge said.  “What we’re thinking about here is to make sure that if you are an Internet user, the total triple or quad play will have so much value and flexibility to you it will prevent you from becoming a niche buyer or seeking to cut the cord.”

Mudge believes customers want to be able to access content across several different device platforms, from home-based televisions, to computers around the home, to wireless devices while out on the go.

Despite Verizon’s enthusiasm for FiOS, the company has continued to put further expansion to new areas on hold.  Only communities already holding signed franchise agreements from Verizon will see fiber to the home from the company anytime soon.

[flv width=”640″ height=”500″]http://www.phillipdampier.com/video/Bloomberg Mudge Says Verizon Is Expanding Its Fios Service 12-7-10.flv[/flv]

Bloomberg News interviews Bob Mudge from Verizon about FiOS and Verizon’s future plans.  (5 minutes)

While some American broadband providers continue to dream of Internet Overcharging schemes for American customers, one of the world’s most usage-capped countries continues its march forward to abolish them.  Australia’s Optus, a major broadband provider, today announced it was dramatically increasing usage allowances on customers, effective immediately.

The Fusion 99 plan, which bundles telephone and broadband service, sees its data allowance increased from just 15GB of usage per month to 500GB (twice that of American cable giant Comcast).  Ditto for the Fusion 109 plan, which originally doubled the 15GB limit to 30.  Now it offers a 500GB allowance of usage.

If 500GB isn’t enough, Optus has announced its Fusion 129 plan includes 1000GB — a terabyte — of usage per month, which includes unlimited long distance calling and calls to Australia’s mobile phone customers (most countries outside of North America require the calling party to pay mobile rates when calling a mobile customer).  Even customers on Optus’ budget-minded standard and “naked” (standalone) broadband plans will benefit from new 500GB allowances.  Those who manage to exceed their allowance will find broadband speeds reduced to 250kbps until the end of the billing cycle.

Some Australian ISP’s take all limits off during off-peak usage hours.  The country has traditionally suffered from usage caps because of international undersea cable capacity problems which restrict how much traffic can be sent and received between the South Pacific and North America and Europe.  Increased undersea fiber capacity is tempering those traffic restrictions, and momentum towards unlimited use plans (or those with ridiculously high allowances) is the result.

Lifehacker produced a broadband plan breakdown showing the dramatically increasing usage allowances for Australian broadband customers. Traffic shaping continues to be an issue, however. Such speed control measures traditionally target peer-to-peer traffic. Total cost is the total price of the service over the length of the term contract. This chart represents high end plans, typically offering the highest speed tiers. All dollar amounts are in Australian dollars.

[flv]http://www.phillipdampier.com/video/ABC The Gruen Transfer Telco Ads 11-2010.flv[/flv]

The Australian Broadcasting Corporation’s ‘The Gruen Transfer’ takes a humorous look at how phone companies Down Under advertise their services, including a reference about how “capped” services represent revenue gold to service providers.  (15 minutes)