When the FCC delivers for Big Telecom's agenda, stocks soar. Comcast shares exploded on news the company could largely do as it pleases with its broadband service. (CNBC)

Comcast’s stock price soared today as Wall Street was cheered by news America’s largest cable operator would likely face little regulatory restraint from consumer protection policies designed to keep broadband providers from meddling with Internet traffic.  But investors were also excited by the green light signaled by Federal Communications Commission chairman Julius Genachowski that launching Internet Overcharging schemes like “usage-based” billing, speed throttles and hard usage caps on broadband consumers was also acceptable marketplace behavior.

Craig Moffett, a Wall Street analyst with Sanford Bernstein said Genachowski’s remarks left the marketplace with little doubt it can get away with price increases and new limits on broadband consumption.

“The FCC here is expressly acknowledging the need to ration broadband, and that’s a really big deal,” said Moffett, appearing on CNBC this afternoon.  “I think you are going to start to see usage-based pricing plans from the broadband providers pretty quickly.”

Moffett also acknowledged his firm’s own research showing consumers despise such pricing schemes and admits the impact on America’s broadband landscape is likely to include a dramatic shift in how customers use their Internet accounts.

“When customers think they are going to be charged when they click on that link and watch a movie, they are going to be inclined to watch fewer movies,” Moffett said.  “You can’t expect linear progression of online video because there are going to be feedback loops like usage-based pricing that are going to limit usage.”

Moffett says cable operators are benefiting from Chairman Genachowski’s new approach because it opens the door to repricing wired broadband accounts to limit broadband consumption.  Since most analysts guessed regulators would allow usage-based pricing to remain on wireless broadband, the unexpected green light for similar rationing plans on cable broadband, DSL, and other wired services was welcome news, at least for providers and Wall Street.

Consumers that don’t deliver a resounding negative response to elected officials, the FCC, and the White House better start thinking twice about clicking that YouTube video, because that few minutes could cost plenty if providers slap higher prices and limits on broadband service in the coming year.

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A Wall Street telecom analyst predicts the end of unlimited home broadband accounts is going to come quickly, now that the FCC has capitulated on Net Neutrality policies.  (3 minutes)

If you have nearly $200 a month burning a hole in your pocket that you’d be willing to give Time Warner Cable for a cable-TV, phone and broadband package, have we got a deal for you.

Time Warner Cable is completing a test of its Cadillac cable plan for ultra-premium customers in Charlotte, N.C.  Dubbed “Signature Home,” the plan targets the cable company’s biggest spenders with a deluxe package of cable television, phone, Road Runner Wideband high speed Internet, two premium whole-home DVR units, and a wireless home network.  Customers in Charlotte paid $179.95 a month for the service during the test.  One of the conclusions apparently reached — Time Warner was not charging enough.  As the service goes national, its price will increase by $10 a month for some, $20 for others, topping out just a nickel shy of $200 a month before taxes and fees.

For that price, customers get just about everything Time Warner Cable offers, except premium movie channels:

Time Warner Cable expects to unveil the service in other areas of the country in a matter of weeks.

CEO Glenn Britt told Bloomberg News the targeted packages of services are designed to retain different classes of customers.

“If this were a BMW this would be the 750 IL, with all the whiz-bang things,” said Britt. “It’s our package with everything we have to offer and a different service experience all wrapped up in one.”

[flv width=”640″ height=”380″]http://www.phillipdampier.com/video/Signature Home Time Warner Cable East.flv[/flv]

Time Warner Cable produced a brief promotional video for Charlotte customers explaining the benefits of its new Signature Home service.  (2 minutes)

AT&T Mobility thinks it has a winning strategy when it took away unlimited data plans, forcing new customers to choose high-priced, usage-limited alternatives.  But a new survey from Wall Street research firm Sanford Bernstein found AT&T customers will grab, claw, and scream to keep the peace of mind that comes from having the choice of an unlimited use plan.

Sanford Bernstein’s study found a large number of customers willing to abandon any carrier that takes unlimited data away from them.  About a third of the more than 800 people responding said AT&T’s move toward usage-based billing left them with a bad impression of the wireless carrier.  That’s particularly bad for AT&T, which already scores as America’s lowest-rated wireless company according to Consumer Reports.

AT&T mitigated some of the potential damage by letting existing customers keep their unlimited data plans when they ceased selling the unlimited option this past June.  New customers are forced to choose between two limited-use plans — $15 for 200MB or $25 for 2GB of usage (a tethering option is also available.)  Existing customers will only face that hard choice if or when they change phones, presumably in the next year or two.

Had they not grandfathered in existing customers, Sanford Bernstein’s research suggests a large proportion of customers forced to give up unlimited data would quit AT&T even if it meant buying a new phone and paying a higher bill just to get the unlimited data option back.  When AT&T eventually forces these customers’ hands, Sanford Bernstein predicts trouble.

According to the study, more than 58 percent of the lowest data users said they would dump AT&T overboard and switch to another provider with an unlimited plan. For heavier users, more than two-thirds are prepared to take their business elsewhere.

But even with overwhelming evidence like that, AT&T and some Wall Street analysts think Internet Overcharging schemes do customers a favor.

AT&T's mandatory data plans

“Customers generally have strongly negative perceptions about Usage-Based Pricing, and these are often not correlated with self-interest,” Bernstein analyst Craig Moffett said in a research note analyzing the findings of the survey conducted this past summer. “It is fashionable to argue that loyalty to carriers is dead (except perhaps to Verizon Wireless, whose service level is perceived to be markedly higher than that of its competitors). The new conventional wisdom is that carrier loyalty has been replaced with loyalty to the device. But high inclination to switch carriers and phones to maintain an unlimited plan suggest that perhaps the plan itself is more important than either one.”

The Wall Street firm’s research is hardly news to consumers, who have repeatedly expressed loathing contempt for Internet Overcharging schemes like so-called “usage-based billing,” “data caps,” and speed throttles that kick in when carriers decide customers have used the service enough.

Consumers are willing to pay a higher price just knowing they will never face dreaded “bill shock” — a wireless company bill filled with hefty overlimit fees charged for excessive data usage.  They also have no interest in being penalized by arbitrary usage limits that punish offenders with speed throttles that reduce wireless speeds to dial-up or lower.

AT&T was the first major carrier to throw down the gauntlet and force customers into choosing between a “budget plan” that is easy to exceed at just 200MB of usage per month or an inadequate, overpriced 2GB tier that costs just five dollars less than the now-abandoned unlimited use plan.

Wall Street firms like Sanford Bernstein worry their investor clients may be exposed to a revenue massacre when competing carriers like Verizon Wireless, which retains an unlimited plan for now, unveils its own version of the popular Apple iPhone.  The result could be a massive stampede of departing customers headed for top-rated Verizon Wireless, even if it means paying early termination fees.

AT&T spokesman Mark Siegel sees things very differently however, telling CNET News AT&T’s new limited option plans deliver more choice and flexibility for data-hungry users.

A new report proves what Stop the Cap! has advocated for more than two years now — communities seeking the fastest, most-modern, and most aggressively priced broadband can get all of that and more… if they do it themselves.

The concept of community self-reliance for broadband has been dismissed and derided for years among small government conservatives and corporately-backed dollar-a-holler groups who claim government can’t manage anything, but when it comes to broadband in the state of North Carolina, the evidence is in and it is irrefutable — Tar Heel state residents are getting the most bang for their broadband buck from well-managed and smartly-run community-owned broadband networks.

Christopher Mitchell from the New Rules Project — part of the Institute for Local Self-Reliance, gathered evidence from North Carolina’s different broadband providers and found the best broadband services come from local communities who decided to build their own fiber networks. instead of relying on a handful of cable and phone companies who have kept the state lower in broadband rankings than it deserves.

North Carolina is undergoing a transition from a manufacturing and agricultural-based economy that used to employ hundreds of thousands of workers in textile, tobacco, and furniture manufacturing businesses.  In the last quarter-century, the state has lost one in five jobs to Asian outsourcing and America kicking the tobacco habit.  Its future depends on meeting the challenges of transitioning to a new digital economy, and major cities like Charlotte, Raleigh, and Greensboro have risen as well-recognized leaders in engineering, biotech, and finance.

But for rural and suburban North Carolina, success has been hindered by a lack of necessary infrastructure — particularly broadband for small businesses and entrepreneurs.  It becomes impossible to attract high tech jobs to areas that are forced to rely entirely on low speed DSL service, if that is even available.

In communities like Wilson and Salisbury, long frustrated by area providers not delivering needed services, a decision was reached to build their own broadband infrastructure — modern fiber to the home networks worthy of the 21st century.

Mitchell’s report charts the benefits available to every resident, as communities with state-of-the-art fiber networks consistently deliver the most robust service at the lowest prices, all without risk to local taxpayers.  Better still, when the network construction costs are paid back to bondholders, future profits generated by the community-owned systems will be plowed back into local communities to reduce tax burdens and keep service state-of-the-art.

“Comparing the tiers of residential service from Wilson or Salisbury against the providers in the Raleigh area shows that the communities have invested in a network that offers far faster speeds for less money than any of the private providers,” Mitchell concludes.  “Whether communities in North Carolina are competing against other states or internationally for jobs and quality of life, they are smart to consider investing in a community fiber network.”

Mitchell’s report arrives just a few weeks after voters handed North Carolina’s General Assembly to GOP control for the first time in more than a century.  Both cable and phone companies in the state modestly suggest that is good news for their legislative agenda, which is an understatement equal in proportion to the historic handover of control of both the House (67-52) and the Senate (31-19).  The top items on the agenda of incoming members is a checklist of conservative activist favorites, including a war on unions, mandatory ID cards for voting, opting the state out of recently enacted health care reform, an eminent domain constitutional amendment, sweeping deregulation reform to favor business interests, and redistricting to “restore fairness” in future elections.

The state’s big cable and phone companies are convinced with a list like that, they can come along for the legislative ride and get their agenda passed as “pro-business reform.”  That means a much larger fight in 2011 for the inevitable return of corporate protection legislation banning exactly the kinds of municipal networks that are delivering North Carolina better, faster, and cheaper broadband.

Studies find few surprises for cable and phone companies that pay for them.

Internet plans with term contracts, usage limits, and other pricing tricks are good for consumers and save them money over comparable unlimited usage plans.

That is the conclusion of a new study from the Technology Policy Institute, an industry front group funded by AT&T, Comcast, the National Cable & Telecommunications Association, Qwest, Time Warner Cable, T-Mobile, and Verizon.

Scott Wallsten and James Riso’s “study,”Residential and Business Broadband Prices, Part 1: An Empirical Analysis of Metering and Other Price Determinants,” claims to have taken a comprehensive look at 25,000 plans offered across North America, Europe and the Pacific to make their case that a residential service plan with a 10GB monthly usage cap would save consumers 27 percent over the price of a comparable unlimited plan, as long as data use stays below the cap.  They also suggest additional savings can be had if consumers lock themselves into term contracts with service providers (most of which carry hefty fees to exit early.)

These results suggest that the unlimited data plans typically offered by most U.S. wireline broadband providers may not be optimal for many consumers. The details of capped plans matter, and how an individual user is affected depends on the base price, allowed data usage, and consequences for exceeding the cap. Nevertheless, because capped plans are—all else equal—cheaper than unlimited plans, many consumers, particularly the low-volume users, are likely to pay less for broadband with data caps than they would for plans offering unlimited data transfer.

Wallsten and Riso make much of AT&T’s recent decision to end unlimited usage for wireless broadband, suggesting that consumers are saving money with new, low-use plans over the company’s old unlimited pricing.  The authors claim close to 70 percent of iPhone users consume less than 200 MB per month, which is the cap for AT&T’s cheaper data plan.

But the authors concede that usage is growing — rapidly in the case of online video, which sets the stage for consumers saving money today, but facing serious overlimit charges on their bills tomorrow:

Some analysts, however, remain concerned that these plans make video streaming impractical given the bandwidth it consumes, could eventually cost consumers more as they use their wireless devices more intensively, and generally make it less likely for wireless to become a viable substitute for wireline broadband. To be sure, while Figure 3 shows that the vast majority of users consume small amounts of data today, it also shows per user mobile data consumption growing quickly, so the number of people who exceed the caps could increase significantly in a relatively short period of time.

Major U.S. wireline providers have not yet introduced metered pricing successfully, though, as shown above, it is common in other countries. An experimental metered pricing plan by Time Warner Cable garnered strong reaction, prompting one group to demand that Congress ―investigate ongoing metered pricing practices to determine the impact on consumers. Some in Congress did, in fact, hold hearings on the plans. In response to this backlash, Time Warner Cable canceled its experiment.

Despite the political reaction, all consumers are not inherently worse off or better off with metered pricing. Low-volume users are likely to be better off under metered plans and high volume users worse off. The net effect on any given consumer depends on his data use, the base price, how much data the base price allows, the price of data when exceeding the cap, and how much he would have paid for an unlimited plan.

Wallsten and Riso also admit several parts of their study are “incomplete,” and “lack data.” We would also include the facts they ignored whether consumers prefer unlimited plans, how customers would feel about a bill with overlimit fees attached, or whether the usage cap levels the authors note in their study are adequate.  They also completely ignore the critical issue of bandwidth cost trends and their relationship to consumer pricing.

But of course they would, considering the same providers who want these pricing schemes are paying the costs for the study.

Welcome to the world of Hired Gun Research.

Wallsten, in particular, has been singing the same cap-happy tune for several years now, churning out the same industry-financed conclusions about broadband.  Back in 2007, he delivered a piece trumpeted by the Progress & Freedom Foundation and the Heartland Institute — two groups notorious for parroting corporate-friendly talking points.  Back then it was about Internet overloads and supporting Internet toll booths for “congestion pricing” after Comcast got caught secretly throttling broadband customer speeds.

Dave Burstein of DSL Prime notes most consumers don’t like caps, lock-in contracts, or speed throttles.

“Policymakers should normally assume that imposing caps generally results in negative consumer welfare. The small efficiency gains don’t come close to making up for a second rate Internet,” Burstein writes. “Everyone is better off with a robust, unthrottled Internet. It allows for an important form of video competition and market access for innovative new net offerings. It’s a better experience for the user and hence more people will be connected, a good thing.”

In this latest study, the two authors completely ignore some very important facts:

• Who sets the pricing for unlimited and usage-capped broadband?  Providers.  Do consumers save money from usage limited plans because of decreased provider costs passed along to consumers or pricing schemes that artificially inflate unlimited broadband pricing to drive customers to “money-saving” limited plans that teach usage restraint or expose consumers to dramatic overlimit fees?

• What are the trends for wholesale bandwidth costs and how does that trend comport with industry pricing schemes that have increased broadband pricing in the United States?  An honest study would reflect these costs are dropping… dramatically, and would introduce the very real question of whether unlimited broadband is a problem in search of a revenue-generating solution that would come from further monetizing broadband with so-called “consumption pricing.”

• What is the consumer perception of usage-limited broadband?  An important part of this equation is whether consumers want unlimited broadband service to be discontinued.  Every study to date not paid for by the providers themselves shows consumers are willing to pay today’s prices for the peace of mind they receive in not being exposed to limits or overlimit fees.  Wallsten and Riso touched on the consumer backlash, to a considerable part coordinated by Stop the Cap!, over Time Warner’s pricing scheme which would have tripled broadband pricing for an equivalent level of service.  But the authors charge on with their pro-cap conclusions regardless.

• Wallsten and Riso’s study only casually mentions the dramatically different paradigms of wireless and wireline broadband.  The former is delivered using technology that is recognized to have limitations that can only be seriously addressed with additional spectrum allocation that could take years to address.  The latter is already being mitigated by cable broadband technology upgrades, fiber optics, and improved backbone connections that often deliver much better access at a fraction of the price providers paid just a few years earlier.  Drawing comparisons between AT&T’s wireless broadband pricing and wireline broadband is dubious at best, especially since two companies largely control pricing and service for the majority of wireless customers in the United States.

• To prove its contention limited broadband service is “common in other countries,” the authors cite a Frequently Asked Questions article by Comcast trying to justify that company’s own usage cap to its customers.  So because Comcast’s PR department says it, it must be true.  In fact, in countries where usage capped broadband has been a traditional problem, consumer demand and public policy efforts have moved providers towards offering unlimited service plans to meet popular demand.  In fact, in countries like Australia, New Zealand, and South Africa, governments have cited usage caps as a serious disadvantage to growth of the digital economy.  Consumers certainly agree.

Burstein adds:

Caps or other throttling measures are almost never imposed because of actual congestion problems (on large, wired networks.)  The caps would be at far higher levels if they were, like Comcast’s 250 gigabytes. The usual explanation is bogus. The typical consumer advocate believes the caps are about preventing competition to the carriers’ own video package. That’s certainly common, but so is price discrimination to yield increased potential revenues. As Scott notes, price discrimination in a strongly competitive market can work out well for all concerned. With strong competition, the benefits flow through to consumers. Since competition in broadband is typically weak, I believe it far more often has little consumer benefit but is good for company profits.

The authors conclude that despite limitations on data available, “The policy implications, however, are clear.  Policymakers should not immediately conclude that data caps and other pricing schemes that differ from traditional unlimited plans are necessarily bad.”  Instead, the authors suggest pricing trends should be evaluated over time to identify the effects on prices, investment and usage.

Although that’s a point Burstein agrees with, we feel there is substantial evidence this debate is based not on experimental pricing to find new customers, but rather a defensive position to respond to an inevitable public backlash against Internet Overcharging schemes.  Providers are desperately looking for excuses to further monetize broadband, cut costs, and deliver an effective impediment to online video competitors using broadband networks to deliver alternative, less expensive services to consumers.

Policymakers should listen to their constituents, who are more than comfortable with today’s unlimited broadband experience.  Nobody objects to experimental low usage plans with discount pricing, but not at the expense of ending or repricing existing unlimited service into the stratosphere.  Today’s broadband industry earns billions in annual profits, even as their costs decline.  Providers have done considerable profit-taking in the last few years from their broadband divisions, slashing upgrades and other investments to keep pace with traffic demands.