Time Warner Cable’s ruminations about charging usage-based pricing in 2012 has Wall Street all excited about the fatter profits made possible by nickle-and-diming broadband customers for their Internet use.  Forbes magazine tells investors the easy money earned from Internet Overcharging could boost the company’s profits and stock price:

We estimate that Time Warner Cable’s broadband business is single-most important business for the company, constituting about 42% to its value. The company’s management’s words essentially echo our estimates.

The company sees itself primarily as a broadband provider, bundling some extra services such as pay-TV for customer convenience. That said, any change to the pricing is likely to have notable impact on the company’s value, and therefore to its stock. Assuming that a tiered pricing is implemented and brings in more revenue per broadband subscriber, the company’s results could improve.

We believe that our fee per broadband subscriber forecast incorporate increasing penetration of high speed packages, but it could change if the company was to charge higher or implement a tiered pricing for high usage.

These kinds of earning estimates are what makes raising prices for Internet service so popular among the Wall Street crowd.  It fattens their portfolios, even if it increases cable bills which already routinely rise well beyond the national inflation rate.  The only caveat?  Customers could leave for other providers or eventually find the service too expensive to make it worthwhile.  Trefis, a business analysis firm, created an analysis tool (seen above) that allows readers to raise and lower the current estimates for Time Warner’s broadband pricing, add and remove competitors, and check out the impact on the company’s predicted stock price.  The results couldn’t be clearer.  The more you gouge consumers for expensive broadband, the bigger the Money Party, particularly if you live in an area with anemic DSL competition.

Time Warner Cable has quietly boosted the upload speed for Road Runner Turbo customers in Rochester, N.Y., from 1Mbps to 2Mbps.  Stop the Cap! reader Michael was the first to inform us about the free upgrade, and we’ve since been able to confirm it.  Road Runner Turbo customers need to reboot their cable modems for the speed increase to take effect.

Road Runner Turbo is available for an additional $5-10 a month on top of Standard Road Runner service pricing (ask about available promotions to receive a lower price).  It brings Turbo service speeds in this area to 15/2Mbps.

Michael is happy with the speed upgrade now that it finally arrived.

“It only took years to go from 1 to 2Mbps,” he says.

Update 9:27pm ET:  Kevin writes to inform us the download speed for Turbo has also increased — to 20Mbps.  Road Runner Basic is now 3/1Mbps, Road Runner Lite is 1/1Mbps.  The only speed remaining unchanged is for the most popular tier — Standard, which remains 10/1Mbps. We use Time Warner’s 30/5Mbps service here, which makes it difficult to test some of these speeds ourselves.

Sometimes you can’t please some people no matter what you do.

Kit Carson Electric Cooperative’s $64 million fiber-to-the-home expansion project will finally bring 21st century broadband speeds to northern New Mexico. The electric co-op intends to deliver broadband speeds up to 100Mbps to 20,000 largely rural residents and businesses in Taos, Colfax, and Rio Arriba counties who have had limited access to cable broadband or live with speeds often less than 1Mbps from CenturyLink-delivered DSL.

“It’s a whole new ballgame for rural New Mexico,” shares Stop the Cap! reader Raul. “But the pinheads at the local weekly newspaper are ringing their hands over the project, suggesting only businesses deserve 100Mbps while the rest of us should be satisfied with speeds under a megabit per second.”

Indeed, editors at the Sangre de Christo Chronicle are wringing their hands over the project:

But many of us in the Kit Carson service area already have Internet service — and we’re completely happy with it. Kit Carson CEO Luis Reyes, Jr. said a large portion of the organization’s electric customers are currently under-served by other providers with Internet speeds of less than one megabit (1,000 kilobits) per second.

We have no reason to doubt that, but many of these customers probably don’t need the higher speeds. For the Internet customers who use the Internet for email, Facebook, news and other basic functions, Kit Carson’s prices will be most important. Most of us will not pay more for faster Internet speed we don’t need, but we will consider switching to a local provider if it offers identical or better service and prices.

“CenturyLink barely delivers DSL today, and has shown no interest in investing substantially in northern New Mexico, and outside of concentrated built-up areas there is no cable competition,” Raul says. “Kit Carson is the only local concern that has shown any real interest in making our community better, and the local newspaper is complaining about it.”

Proposed service area for Kit Carson Electric's new fiber to the home network serving northern New Mexico.

Kit Carson Electric’s project will provide a true fiber-to-the-home service bundling television, telephone, and broadband service — a substantial upgrade over what the telephone company has on offer.  With speeds far beyond what cable and phone providers in New Mexico are accustomed to providing, the region stands to benefit from entrepreneurs building digital economy businesses over a broadband network that can actually help, not hinder online development.

Currently, area residents pay CenturyLink up to $55 a month for 1.5/1Mbps DSL service.  Residents are so excited by the prospects of much faster speeds at significantly lower prices, Kit Carson Electric has developed an innovative stop-gap service for residents still waiting for direct fiber connections — fiber-to-wireless service.  New and existing customers can sign up for the service for a $100 installation fee and choose from three service tiers:

• 3Mbps — $29.95/month
• 7Mbps — $39.95/month
• 10Mbps — $49.95/month

A three year contract is required (early termination fee is $200).  But customers who eventually obtain Kit Carson Electric’s fiber service will automatically satisfy their contract requirement.

“Kit Carson’s wireless project already blows away CenturyLink’s speeds and pricing, and that is for inferior wireless,” Raul argues. “The Chronicle doesn’t have a clue.”

We can’t understand the newspaper’s concerns either.  Kit Carson Electric has already demonstrated their prices (and interest) in northern New Mexico is superior to that of CenturyLink, owner of former Baby Bell Qwest, which serves New Mexico.

Republican Sen. Jeff Bingaman is thrilled with Kit Carson’s broadband initiative.

“This major investment in broadband technology is exactly the kind of project I had envisioned when I voted for the American Recovery and Reinvestment Act,” U.S. Senator Jeff Bingaman said. “This grant is not only creating jobs now in northern New Mexico, it is laying the groundwork to attract new businesses, improve healthcare services and create new education opportunities in the future.”

The electric co-op has been successful operating non-profit businesses selling propane, telecommunications, and economic development space.  The fiber project will also allow the electric utility to deploy “smart grid” technology to increase the efficiency of their electric service.

A groundbreaking ceremony at the broadband project’s command center held this past summer also coincided with a public emergency communications network upgrade which will increase the efficiency and reliability of first responders and other emergency and public safety agencies.

The Federal Communications Commission has concluded allowing AT&T and T-Mobile to merge will cause huge job losses and knock out a vital wireless competitor in an increasingly concentrated U.S. wireless marketplace.

The new 266-page document, produced by FCC staffers, directly challenges AT&T’s contention that the merger will bring about job creation and an improved mobile broadband network for millions of rural Americans.

The report comes on the heels of news the Commission will allow the FCC to withdraw its pending application before the FCC to win approval of the merger.  That allows the company to resubmit the merger request at a later date.

The FCC determined prices will increase an average of 6-7% in these cities if the merger deal gets approved.

The new report, occasionally redacted to remove competitive information, found AT&T vastly exaggerating the benefits of the deal, questioning whether it would indeed lead to lower prices for consumers, bring about enhanced service, and create new jobs.

Overall, the agency concludes, AT&T and T-Mobile have failed to meet their burden of proof that the merger is in the public interest.  The FCC staffers found no compelling reason why AT&T needed T-Mobile to build out its 4G network to the majority of the country.  Indeed, memos accidentally leaked to the Commission by AT&T’s legal team suggested AT&T executives rejected expansion plans as too costly.  Instead, they proposed a $39 billion dollar merger with T-Mobile with a $6 billion deal cancellation clause.  That penalty exceeds the $3.8 billion AT&T rejected spending to pursue 4G upgrades on its own.

Among the Commission report’s findings:

• The merger would increasingly concentrate the U.S. wireless marketplace, leading to unilateral and coordinated efforts to raise prices by remaining carriers;
• Roaming agreements for remaining smaller and regional carriers could become more difficult and expensive to reach with fewer players in the marketplace;
• Pricing innovation, a hallmark of T-Mobile, would be lost.  T-Mobile is cited by the FCC as one of America’s most-disruptive carriers, forcing other companies to match their aggressive offers;
• Despite AT&T’s promises to grandfather existing T-Mobile customers to their existing plans, customers would be unable to upgrade to an equally innovative plan T-Mobile probably would have offered on its own.  Instead, customers would be forced to choose one of AT&T’s more expensive, traditional plans;
• AT&T is overstating the importance of remaining competitors, especially regional carriers and Leap Wireless’ Cricket and MetroPCS, which all have a negligible market share and depend heavily on roaming agreements with companies like Verizon, Sprint, and AT&T to survive;
• Substantial evidence exists to believe without T-Mobile, AT&T and Verizon Wireless would likely raise prices and mimic each others’ respective service plans, pricing, usage allowances, and network policies;
• Sprint will probably be forced to raise prices as a consequence of the merger to pay for increasingly expensive backhaul and roaming services, often purchased from AT&T or Verizon.  Sprint would also be pressured by market forces into pricing its services closer to AT&T and Verizon, if only to pay for handset and subscriber acquisition costs.  Sprint’s new customers often come from T-Mobile or smaller providers — less often from AT&T and Verizon.
• AT&T did not submit sufficient evidence to demonstrate the combination of T-Mobile and AT&T’s cell sites would substantially relieve congestion issues, especially in America’s largest cities where AT&T’s network issues are the worst;
• AT&T’s own documents suggest the company will fire most of T-Mobile’s customer service staff post-merger, leading ironically to the loss of a customer service support unit that has a higher customer satisfaction rating than AT&T itself.  Not only would T-Mobile customers be forced to deal with AT&T’s customer service, AT&T customers will have to compete with millions of T-Mobile customers for the time and attention of AT&T’s existing customer service representatives — a recipe for a congestion of a different kind;
• Much of the cost savings realized from the merger, earned from laying off T-Mobile workers, closing T-Mobile retail stores, terminating reseller agreements, and unifying billing, administration, and network technologies, will be realized by AT&T (and its shareholders), not average customers.  The end effect for consumers will be higher prices and a deteriorating level of customer service.

Smaller, scrappier carriers with aggressive pricing have historically forced larger companies like AT&T and Verizon to compete by lowering prices and offering more generous calling and data plans.

The report angered AT&T’s chief lobbyist, Jim Cicconi, who called its release “troubling” because, in his words, it represents a “staff draft” not voted on by the Commission as a whole.

“It has no force or effect under the law, which raises questions as to why the FCC would choose to release it,” Cicconi said in a statement. “The draft report has also not been made available to AT&T prior to today, so we have had no opportunity to address or rebut its claims, which makes its release all the more improper.”

But the report’s substantial research suggests FCC staffers have taken a very close look at the arguments and the evidence submitted by AT&T, T-Mobile and opponents of the deal.  The findings only favor AT&T and T-Mobile with a mild agreement that combining resources in certain markets where both compete might reduce network redundancy.  But the cost to consumers is way too high, the report concludes.

Sprint couldn’t be happier with the report’s findings, saying in a statement:

“The investigation’s findings are clear. Approval of AT&T’s bid for T-Mobile would lead to higher prices for consumers, eliminate jobs, harm competition, and dampen innovation across the wireless industry.”

An unredacted copy of the findings will be available to the U.S. Department of Justice for its consideration as it presses its own legal case against AT&T to derail the merger on anti-competitive grounds.

Should T-Mobile remain independent, the FCC says wireless prices will decline.

AT&T pays a lot of money — millions annually — to make sure its business agenda does not run into political or legislative roadblocks in Washington, D.C.  With dozens of members of Congress effectively on AT&T’s campaign contribution payroll and the company’s unparalleled skill at convincing non-profit organizations to advocate for its interests, worrying about the government’s antitrust views on its proposed buyout of Deutsche Telekom’s T-Mobile was the least of its troubles.

“It’s a done deal,” several analysts predicted shortly after the deal was announced, especially after AT&T demonstrated its confidence level in the merger was as high as the enormous $6 billion dollar breakup concession payable to Telekom if it ever fell apart.

Then the government dared to put its two cents in, in the form of a “are you kidding me?”-lawsuit courtesy of the U.S. Department of Justice.  It seems, in the words of some Beltway cynics, the Obama Administration can manage to see a clear cut case of anti-competitive behavior when given enough time.

Since the lawsuit was announced on Aug. 31, it has been “all-hands-on-deck” for the company’s government relations division, packed full of the company’s top lobbyists.  While company lawyers desperately attempt to block what it sees as “pile on” objections and lawsuits from worried competitors, Sprint-Nextel in particular, AT&T lobbyists are trying to compromise away the Justice Department case with proposals of concessions and giveaways to make approval more palatable.

Further north, as fall turns into winter in New York’s financial district, Wall Street analysts are cold on the troubled deal themselves.

The Financial Times reports most analysts think there is now less than a 50-50 chance the merger will be completed unless the two companies agree to disgorge themselves of market share, territories, and increasing “shareholder value” that will come from eventual rate increases a wireless duopoly would inevitably bring.

Some are even less sanguine, predicting AT&T has only a 20 percent shot, and only if it sells off considerable chunks of valuable spectrum to competitors other than Verizon Wireless.

AT&T is retuning its “message” for the times, downplaying the original, ludicrous notion that urban-focused T-Mobile would be the keystone of a new era in 4G wireless service for rural America.  There is a reason T-Mobile isn’t the first choice for small town America’s cell phone buyers.

Instead, AT&T is now positioning the merger deal as a lifeboat for its troubled competitor.  AT&T suggests the number four carrier is in immediate peril — hemorrhaging customers, caught without a coherent 4G strategy, and an exodus of interest by its increasingly neglectful parent — Deutsche Telekom.

Could Time Warner Cable be an eventual part-owner of T-Mobile USA?

“Over the past two years, T-Mobile USA has been losing customers despite explosive demand for mobile broadband,” AT&T said in a statement this week. “T-Mobile USA has no clear path to 4G LTE, the industry’s next generation network, and its German parent, Deutsche Telekom, has said it would not continue to make significant investments in the United States.”

With AT&T predicting the demise of its smaller would-be cousin, consumers may not be in the mood to sign a two-year contract with a company that could soon be rechristened AT&T, especially those leaving AT&T for T-Mobile.

But don’t tell T-Mobile’s marketing department it’s a phone company on life support.  T-Mobile has beefed up its advertising and continues to irritate its larger competitors, particularly AT&T, with very aggressive pricing on its prepaid plans.

T-Mobile recently unveiled two disruptive $30 4G prepaid plans that offer either 1500 shared minutes/text messages and 30MB of data usage -or- 100 voice minutes combined with unlimited texting and up to 5GB of mobile data before the speed throttle kicks in.  Those prices are too low for AT&T and Verizon to ignore, especially when offered on a 4G network.

So far, the Justice Department shows no signs of backing down from their resolute opposition to the deal, minor concessions or not.  Shareholders may not appreciate giving the government too much of what it wants in order to win approval.  Washington lawmakers are split — virtually every Republican favors the merger, Democrats are less absolute, with most opposed.  Among those in favor, by how much is often a measure of what kind of campaign money AT&T has thrown their way.

AT&T absolutely denies they have a “Plan B” in case the merger eventually fails.  But the Times doubts that, reporting as time drags on, an alternative deal might emerge.  Some of the possibilities:

• T-Mobile USA could merge its spectrum with Dish Network, the satellite TV company, to launch a new 4G mobile operator in the USA;
• Combine forces (and spectrum) in a deal with leading U.S. cable companies like Cox, Comcast, and Time Warner Cable to launch a new cable-branded mobile operator;
• Sell or merge operations with MetroPCS, Leap Wireless’ Cricket, or one of several regional cell companies.

Perennial cable booster Craig Moffett from Sanford Bernstein predictably favors the cable solution, which would let companies offer a quad or quint-play of cable TV, wireless mobile broadband, wired broadband, phone, and cell phone service all on one bill.  It would also get the FCC off the backs of cable operators Time Warner and Comcast, who both control a total of 20MHz of favored wireless spectrum they have left unused since acquiring it at auction.  The Commission is increasingly irritated at companies who own unused spectrum at a time when the agency is trying to find additional frequencies for wireless providers.

[flv width=”640″ height=”380″]http://www.phillipdampier.com/video/Bloomberg ATTs 96000 Job Claim in T-Mobile Deal Questioned 11-8-11.flv[/flv]

Bloomberg News questions AT&T’s claim its merger deal with T-Mobile will create 96,000 new jobs. [Nov. 8] (3 minutes)