[flv width=”512″ height=”298″]http://www.phillipdampier.com/video/WSJ Studios disarming cable in battle with Netflix Media Report 6-20-11.flv[/flv]

Wall Street Journal: Top execs of some media behemoths are shifting their public stances toward Netflix Inc. of late. They’re now trying to persuade investors that the video streaming service will expand their business rather than destroy it. (4 minutes)

You are forgiven if you are confused about the love-hate relationship the cable industry has with online video streamers like Netflix — one that the Wall Street Journal likens to manic bipolar episodes.  Weeks after blaming Netflix for getting video programming too cheaply and threatening cable subscriptions, cable industry executives were hugs and kisses about online video at the recent Cable Show in Chicago.

“The reason why there’s interest in these Internet video providers that is that they’re deploying technology that’s making the experience better for consumers,” Time Warner Cable CEO Glenn Britt said in an interview with MarketWatch during the National Cable & Telecommunications Association’s annual Cable Show last week.

“There’s nothing about [cable companies] that stops us from doing that. So I would say … we as an industry just need to pay attention and give consumers what they want. Then there’s no room for these other guys. I don’t mean to say that in a negative way, but it’s true.”

Britt

Of course, this is the same man that has earplugs firmly implanted to help resist another rejection of his Internet pricing schemes that Time Warner Cable customers loathed in 2009.  Britt’s desire to give “consumers what they want” just doesn’t play in this part of town while the cable company is installing software to measure and potentially meter broadband usage.

What is different in the online video spectrum is consumers have choices.  They can adopt Time Warner Cable’s glacially-slow rollout of its TV Everywhere concept, watch Hulu, use Netflix, or simply steal content providers don’t want them to watch.  For customers of Time Warner Cable facing competition from AT&T, there is potentially nowhere to run to avoid an Internet Overcharging scheme which could bring the online viewing party to a rapid conclusion when your viewing allowance is used up.

Britt says he is struggling with rights holders to provide more accessibility to online video streaming of popular shows.  He’s also thinking about how many restrictions to slap on subscribers.

MarketWatch talked with Britt and found him dealing with nagging questions about how many devices each user account should be authorized to use for viewing. “Should it be three, should it be 10? If I make [that number] too small, you’re not going to be happy as a customer,” Britt philosophized. “If I make it too big, you’re going to give the password to all of your friends, and they won’t have to buy a subscription to begin with.”

Cerf

Vint Cerf understands the Internet.  Widely recognized as one of the two “fathers” of what eventually grew into today’s Internet, Cerf has watched a network launched by the United States Department of Defense grow into an economic powerhouse driving a knowledge-based economy.

Today, Cerf works as an Internet evangelist for Google, promoting the company’s innovation in the next generation of the broadband experience.  He brings decades of advice to Internet Service Providers the world over: upgrade your networks.  But more importantly, he told attendees of Juniper Network’s Nextwork conference, upgrade exponentially, not incrementally.

Cerf’s remarks Wednesday targeted the conundrum of coping with increasing video traffic on the Internet.  Cerf pointed to his employer’s construction of a gigabit fiber to the home network in Kansas City as the best antidote to traffic congestion.

Simply put, Cerf believes bandwidth must be increased exponentially and not through incremental upgrades that try and stay one step ahead of demand.  Google intends to prove gigabit fiber broadband is cost-effective and within reach of providers.  A side benefit of building next generation networks is the opportunity for innovating new online applications.  Many of tomorrow’s online innovations are simply impossible on a constrained, incrementally upgraded network that often requires accompanying traffic limiting schemes.

“When you are watching video today, streaming is a very common practice. At gigabit speeds, a video file [can be transferred] faster than you can watch it,” Cerf said. “So rather than [receiving] the bits out in a synchronous way, instead you could download the hour’s worth of video in 15 seconds and watch it at your leisure. It actually puts less stress on the network to have the higher speed of operation,” he said. 

Wu

So far, many providers are considering Netflix and other video traffic a threat to their networks, and are attempting to collect tolls to allow Netflix content to reach subscribers (Comcast), or are considering Internet Overcharging schemes that combine usage caps with overlimit fees to discourage customers from watching too much (AT&T, Time Warner Cable).

At another session held Tuesday, Tim Wu, Columbia University law professor noted efforts by several U.S. providers to do away with all-you-can-use broadband.

Wu said phone companies like AT&T are ideally looking towards replicating the cell phone model on broadband — leaving users to guess how much usage they will rack up over a month, knowing most will be wrong.  As the consumer, he noted, you end up buying too much or you face steep overlimit fees for underestimating usage — either way “you are screwed.”  Wu called consumption-oriented pricing “abusive.”

Wu also said wireless carriers in particular are uneasy with the open, “ownerless” concept of the Internet.  Their instinct is to own, control, and manage networks.  Their only success so far is trying to advocate for fast, premium-priced traffic lanes, and slow “free lanes” for everything else — a key reason why many consumers advocate to preserve the open model of the Internet through enforced Net Neutrality.

Wu called these efforts by phone companies to control traffic “dangerous.”

Time Warner Cable CEO Glenn Britt says the cable company is once again testing technology to allow it to implement the same type of Internet Overcharging system consumers immediately rejected in 2009.

Speaking at the Cable Show in Chicago Thursday, Britt said the company has not yet decided whether it will actually introduce the system, but will have the technology in place to quickly implement it.

Unlike some other cable companies with a fixed bandwidth limit, once again Time Warner is considering a combination cap and tier system with fixed allowances for different levels of service.  In 2009, Time Warner Cable proposed a usage allowance of just 40-60GB per month for their Standard Service customers.  Customers seeking unlimited use service faced broadband bills as high as $150 a month.

Customers overwhelmingly rejected the pricing scheme in test markets in 2009, and political pressure only hastened the shelving of the test.  But Britt remains undeterred, telling Wall Street investors he remains a true believer in usage-based billing

Wall Street analysts told Bloomberg News they didn’t have a problem with it.  Bloomberg also quoted Netflix CFO David Wells as saying he had no objection to Internet providers covering the cost of increasing bandwidth capacity.  But Bloomberg quoted Wells speaking on a June 1 conference call, not in reaction to Britt’s specific announcement yesterday.  Further, Wells clarified his comments were directed towards network optimization and traffic shaping, not broadband usage caps.

Netflix is among the most likely online services that would expose broadband customers to potential overlimit fees, especially if Time Warner Cable brings back the same usage allowances it proposed in 2009.

As political pressure over Usage Based Billing continues to keep providers from gravitating towards more stringent Internet Overcharging schemes, western Canadians are enjoying significant victories as providers relax usage caps and increase speeds for broadband service.

Weeks after Shaw Communications announced new packages with increased usage allowances and a few unlimited use plans, Telus has now followed Shaw’s lead and doubled usage caps on many of its Internet plans, slashed overlimit fees by more than half for some, and plans to increase upload speeds for one of its premium plans:

Among the major changes are dramatically increased usage allowances and the reduction of overlimit fees.

Telus customers receive their service from the phone company in various flavors of DSL.  Some older suburban and rural areas still receive speeds averaging 3Mbps, but those lucky enough to be served by VDSL can comfortably achieve the company’s fastest broadband speeds.  The increased usage allowances are welcome news, even if Telus has never strictly enforced any of them:

• High Speed Turbo 25 increased to 500GB, was 250GB;
• High Speed Turbo increased to 250GB, was 125GB;
• High Speed increased to 150GB, was 75GB;
• High Speed Lite increased to 30GB, was 13GB;
• The overlimit fee for High Speed Lite has been reduced from $5/GB to $2/GB;
• Unofficial reports suggest upload speed for Turbo 25 is being increased from 2Mbps to 3Mbps, to be rolled out gradually.

Is Telus following Shaw's lead?

The reduction in the overlimit fee for High Speed Lite was predictable in light of recent political events.  It is difficult to sustain the argument that overlimit fees and usage caps are priced to control network congestion when the lightest users face the most draconian limits and penalty fees.

But unlike their cable competitor Shaw Communications, Telus has not seen fit to offer customers a truly unlimited plan, which presents a problem for some.

“Telus needs to remember they cannot win a speed race with Shaw so they should be lowering prices, taking the usage caps off, and competing with something they can actually win — delivering customers the unlimited service they want at a reasonable price,” says Stop the Cap! reader Abel from Burnaby, B.C.

Separately, Telus also quietly introduced a rate increase for basic home telephone service.  What used to be $21 a month is now $25, an increase of four dollars.

The dramatic plan changes underway in western Canada come in response to political pressure and consumer ire against Usage Based Billing (UBB).  Bell, which provides much of Canada with wholesale broadband access, was seeking to force independent providers to abandon unlimited, flat rate pricing in favor of ubiquitous UBB.  The provocation brought a half million Canadians to sign a petition against metering broadband.

For eastern Canada, thus far little has changed as Bell, Rogers, and Videotron continue with business as usual.

The U.S. Cattlemen’s Association this week took some time out to go all out for AT&T’s proposed merger with T-Mobile.  In addition to successfully navigating the FCC’s arcane comment filing system to submit their comments in favor of the merger, the group also penned a lengthy, favorable guest blog for Washington, D.C. inside-the-beltway-favorite, The Hill newspaper:

The expansion of next-generation wireless broadband envisioned by the T-Mobile and AT&T merger, for example, is critical for the next stage of rural America’s evolution and success. It will allow ranchers, farmers, and all rural residents who have been traditionally underserved to finally gain access to the best that mobile broadband has to offer, including faster and more reliable connections. We strongly encourage the Federal Communications Commission to support these developments as an investment in both the current and future generations of agricultural producers and small communities across rural America.

The cattlemen’s group has had a lot to say about telecommunications issues, especially mergers and acquisitions.  It was cited by Verizon as a supporter of its merger with Alltel in 2008, signed a joint letter in 2008 from industry-connected Connected Nation for a broadband plan compatible with the interests of the nation’s largest cable and phone companies, wrote a letter to the FCC opposing Net Neutrality in 2009, and submitted two pages of comments in May favoring the merger between AT&T and T-Mobile.

Apparently there is plenty of free time on the ranch to ponder billion dollar telecommunications mergers.

The argument from the group is that permitting mergers and blocking open net policies like Net Neutrality will convince carriers to provide enhanced service in rural areas where cattle ranches predominate.  But facts in evidence illustrate how wrong-headed that argument is:

• Verizon’s merger with Alltel has done nothing to bring its LTE network to rural America.  Verizon is focusing LTE upgrades on the markets where it makes the most business sense, and that does not include rural Texas or Oklahoma;
• The National Broadband Plan has directed stimulus funding for rural projects that are most likely to reach their ranch members — wireless ISPs and rural DSL.  The cattlemen’s group has nothing to say about either provider;
• Net Neutrality and the policies of an open and free Internet have no real impact on rural broadband deployment.  The same companies refusing to provide service yesterday are still refusing to provide service today, and that includes completely exempted wireless providers;
• T-Mobile’s urban-suburban focus is a mainstay of its business plan.  T-Mobile has never prioritized rural America as a viable service area, relying on roaming agreements to fill in service gaps.  Combining its urban-focused wireless infrastructure with AT&T will add nothing to the rural wireless experience.

The Washington Post finds financial connections between AT&T and the cattlemen group.

Advocating for a merger with T-Mobile makes about as much sense as the group advocating for a T-Mobile merger with Leap Wireless’ Cricket or MetroPCS.  All have a record of indifference about providing service in rural areas themselves.

So why does the group persist in fronting for AT&T’s public policy agenda?  Cecilia Kang at the Washington Post tweeted the obvious answer — they receive support from AT&T.

The piece for The Hill was penned by Jess Peterson, the cattlemen group’s executive vice president.  But Peterson has a second career: president of Washington, D.C.-based Western Skies Strategies, a lobbying firm that promises “success and profitability to our valued clients every time.”

The concept of dollar-a-holler public advocacy is not new, but AT&T is the Master of the Astroturf Universe.  The Center for Responsive Politics notes that from 1989 to 2010, no single company spent more on campaign contributions than AT&T.  Since 2008, more than $1.25 million has been “donated” to politically-connected charities and those willing to lend their name and reputation to back the company’s public policy agenda.

Facts have a hard time penetrating piles of cash, but here are some anyway:

1. T-Mobile’s combination with AT&T may create additional capacity for the combined company, but almost entirely in urban and suburban areas that will do nothing to help rural wireless.
2. No telecommunications company has a track record of providing service in areas unprofitable to serve or fail return on investment demands.  No merger will change that.
3. Promises for network upgrades already committed in long-range business plans do not sweeten a bitter deal for Americans concerned about competition in the wireless marketplace.
4. T-Mobile’s track record as being the most market-disruptive in pricing and innovation will be eliminated in a merger with America’s lowest rated wireless carrier.
5. Any excitement for rural wireless broadband from AT&T is tempered when would-be customers realize the company enforces a 2GB usage cap with an overlimit fee on their smartphone data plans — an Internet Overcharging scheme more punishing than either Verizon or Sprint.