Time Warner Cable and other Texas cable operators are now free from their obligations to Texas towns and cities after winning a victory by default in the U.S. Supreme Court that invalidates local cable franchise agreements across the state.

By refusing the hear a case filed by the Texas Public Utility Commission, the court let stand a lower court ruling that found Texas franchise laws discriminated against cable operators by holding them to local agreements its competitors never had to sign.

At the behest of AT&T, in 2005 the Texas state legislature passed a statewide franchise law that would allow the phone company to apply at the state level for permission to operate its U-verse cable system anywhere in Texas. But the law also compelled incumbent cable operators to remain committed to their existing local franchise agreements until they expired.

The Texas Cable Association, a statewide cable lobbying group, and Time Warner Cable filed suit in federal court challenging the law, winning their case when it reached a federal appears court in New Orleans. The appeals court judge ruled the Texas law discriminated against “a small and identifiable number of cable providers.”

Under the court’s ruling, Time Warner and other cable operators are free to tear up their franchise agreements in cities like Irving, Dallas, and Corpus Christi. In practical terms, the court ruling could allow cable operators to stop supporting local public, educational, and government access channels, reduce franchise fee payments to local communities, and stop providing discounted service to public institutions.

The “statewide video franchise” is a concept heavily pushed by both AT&T and Verizon because it reduces the number of communities phone companies have to negotiate with to provide video service. It also allows company lobbyists to specifically target a handful of state officials that end up with the responsibility of monitoring cable systems in the state. That is much easier to manage than dealing with dozens, if not hundreds, of individual community governments to win permission to serve different areas on different terms.

Unfortunately, critics contend the agreements remove local control and oversight of cable operations, and also cuts into franchise fee payments to local communities, because many states routinely keep up to half of all franchise fees for state government coffers.

The cable operators involved in the case did not blame the state for the provision in the law that kept them “hobbled” under their pre-existing local franchise agreements. Their court papers instead put the blame at the feet of lobbyists for AT&T, which they say has continued to heavily lobby officials to enact policies that disadvantage cable companies like Time Warner Cable in Texas.

Vranish says the community's free Wi-Fi has to go because of a "complaint-happy climate." (Image: KVIA-TV)

A bizarre political dispute involving board members of the Tornillo, Tex. Independent School District threatens to shut off community-owned Wi-Fi service for more than 500 subscribers.

The Tornillo school board is no stranger to controversy, and evenly divided factions often create at atmosphere some local residents describe as the best political theater in town.

Unfortunately, the town’s Internet access may be a casualty of the school board’s latest dispute.

Tornillo, a small community of 1,600 in southeast El Paso County, needs Internet access.  With 36.8% of the population below the poverty line, commercial providers have shown little interest in selling broadband to the community, more than 99% of which are Latino-American.

Since 2004, the local school district has provided free wireless access for a one-time setup fee of $275.

Now school Superintendant Paul Vranish has said he will shut off the service because a majority of the school board failed to vote for a resolution that would pay for any legal fees incurred by school district employees respecting any potential complaints about the service.

Vranish blamed a local “complaint-happy climate” for necessitating legal protection, but some local residents suspect the real issue is a political dispute between Vranish, the rest of the school board, and Tornillo resident Ricardo Hernandez, who separately filed an unrelated complaint against Vranish with the Texas Education Agency.  Two state agencies are presently conducting investigations into allegations Vranish misused district funds for personal gain.

Hernandez, according to the resolution, has “questioned a former employee as to the legality” of the Wi-Fi service. Vranish apparently is unwilling to find out whether the service is legal or not, declaring he would simply terminate the service at an unspecified future date.

“It’s a simple personal and political dispute that may well cost Tornillo its Internet access and leave 500 residents in the dark, all because Mr. Vranish thinks the community will turn against Mr. Hernandez if the service does close down,” writes Maria, a local Tornillo resident. “What are these people hiding because this is certainly not about Wi-Fi.”

[flv width=”480″ height=”290″]http://www.phillipdampier.com/video/KVIA El Paso Tornillo ISD To Discontinue Free Community Wireless Internet 4-4-12.mp4[/flv]

El Paso’s KVIA sought answers to the Wi-Fi dispute, but found themselves chasing the school district superintendent down a hallway, unwilling to address questions about the matter.  (3 minutes)

Inmates at the Liberty County Jail in Texas managed to outwit Comcast’s set top boxes to watch “hours on end” of soft-core pornography for free, courtesy of the cable company.

Jail Warden Tim New claimed he spent weeks trying to get Comcast technicians out to the county facility to fix the problem — one that Comcast denied could be happening.

“4 Dorm watching porno channel again,” read one February security log obtained by ABC News. Just three days later, a guard wrote, “One of the TV’s had porn on it. Told them to change the channel.”

“I believe that Comcast just couldn’t believe that their system had been manipulated,” Capt. Rex Evans with the Liberty Count sheriff’s office told ABC.

It turns out bypassing the cable boxes effectively opened every channel up for viewing.

It finally took a threat from County Judge Craig McNair to cancel Comcast service in the jail to get the cable company to dispatch a technician.

“Once Liberty County made us aware the inmates had access to Cinemax, we took the necessary steps to block access to the channel,” a representative for the cable company said.

Inmates told KPRC that there would be “a lot of fights” because of the porn sessions and that showers had become “hell” because of Cinemax.

[flv width=”624″ height=”372″]http://www.phillipdampier.com/video/KPRC Houston Nightly porno TV shows for inmates prompt action by county leaders 2-29-12.flv[/flv]

KPRC-TV in Houston covers a porn scandal inside Liberty County jails.  Public safety officials blame Comcast for not pulling the plug on the adult programming.  (3 minutes)

Time Warner Cable's usage meter.

Time Warner Cable today relaunched usage-based billing, offering customers a $5 monthly discount off Internet access when they confine their usage to a maximum of 5GB per month.

Stop the Cap! was at the forefront of protesting Time Warner’s last Internet Overcharging experiment in 2009, which would have allowed unlimited access for $150 a month — a major rate increase to be sure.  Other customers had usage allowances that originally would have ranged from 40-60GB per month, with overlimit fees of $1/GB or more.

Time Warner Cable’s Jeff Simmermon, director of digital communications, admitted the 2009 experiment attempted in Beaumont, San Antonio, and Austin, Texas, Greensboro/Triad, N.C., and Rochester, N.Y. was unsuccessful.

“Yes, we did try this before, a few years ago,” Simmermon said. “And yes, pretty much everyone agrees that it didn’t go so well. So we listened to customer complaints. A lot.”

The cable company is trying again in southern Texas, including the cities of San Antonio, Laredo, Corpus Christi, the Rio Grande Valley and the Border Corridor.

This time Simmermon says the usage-based pricing program for Time Warner Cable customers will be optional. He also promised Time Warner Cable customers will always have access to unlimited broadband at a flat monthly rate.

This is a major change for the cable company, because earlier statements from both CEO Glenn Britt and the chief financial officer Irene Esteves called usage based billing inevitable.

Simmermon admitted Time Warner Cable is making plenty of money selling unlimited access to customers today.

Simmermon

“We profit from unlimited consumption, and a free, open Internet is the sort of Internet that has gotten us this far,” Simmermon wrote on the company’s blog.

“All participation in the Essentials plan is opt-in, with the opportunity to save a few dollars each month,” Simmermon said. “It’s not going to be for everybody, and that’s fine — all Time Warner Cable customers will still have the option of selection an unlimited broadband plan.”

The details:

1) Up to 5GB/month of data transmission for a $5/month discount from one’s current monthly bill. All Standard, Basic and Lite broadband customers will be eligible. Turbo, Extreme and Wideband customers will continue as always, with access to unlimited broadband and no optional tiered plan or discounts.

2) The ability to opt-in and opt-out of a tiered package at any time.

3) A “meter” that tracks usage on a daily, monthly, weekly or even hourly basis, enabling customers to accurately gauge usage.

3) A 60 day/2 billing-cycle grace period to allow customers to adjust usage patterns. During this time the company will notify customers of overages but won’t charge for them.

4) Overages will cost $1 per GB, not to exceed a maximum of $25/month.

This presents the opportunity to save $5/month from a monthly broadband bill.

Time Warner already has the TV Essentials plan for $39.99/month that offers low-income households to have access to cable, in a stripped down package. Simmermon says this is meant to be the broadband equivalent.

[Stop the Cap! will publish our own views on this development in a separate editorial.]

A summary of recent quarterly earnings reports from America’s wireless companies:

Verizon Wireless: Verizon has been uncompetitive in the prepaid market for the last several years, as it focused on its postpaid/contract customers.  No more.  Recent price cutting and the introduction of new contract-free plans that offer unlimited calling or packages of features comparable to contract plans are starting to win Verizon a bigger share of the prepaid market.  But Verizon also successfully picked up 1.2 million new contract customers as well, many switching from AT&T or smaller providers.  That’s the second best result the company has had in the last two years.  Verizon has a whopping 87.4 million people on two-year contracts and 21.3 million prepaid customers — 108.7 million total.  Verizon’s iPhone remains popular with 4.3 million activations last quarter.

AT&T: Growth at AT&T achieved its best results in the last quarter of the year, but the company continues to trail Verizon Wireless.  AT&T added 717,000 contract customers last quarter, and has been behind Verizon adding new customers for more than a year.  The company’s reputation for lousy service and policies that antagonize their customers have driven people to look elsewhere — mostly to Verizon.  But iPhone devotees are remaining loyal to AT&T, with one of every five new iPhone activations happening on AT&T’s network.  The company picked up 7.6 million new iPhone activations last quarter.

Sprint: The iPhone is killing Sprint’s balance sheet, but is bringing the company new contract customers.  Historically, Sprint’s most predictable growth has come from its resale agreements with third party providers and its various prepaid service divisions (Boost/Virgin Mobile).  But with the introduction of the Sprint iPhone (1.8 million new activations last quarter), customers looking for unlimited data or a cheaper plan are finding both at Sprint.  Unfortunately for the company, the wholesale cost of the iPhone is eating heavily into the company’s cash on hand.

Leap Wireless/Cricket and MetroPCS: Both companies are facing increasing challenges sustaining their prepaid service business models because of growing competition from larger providers.  Just about everyone who wants a two year contract-cell phone plan already has one, limiting new growth opportunities.  That is forcing AT&T, Verizon, Sprint and T-Mobile to turn their attention to the still-growing prepaid market, which is attractive for the credit-challenged, occasional users, travelers, and those with lower incomes.  Both Cricket and MetroPCS have traditionally targeted urban markets, where their networks are focused, to sell customers inexpensive service plans with convenient payment options.  But their networks don’t extend outside of suburban and urban areas, so roaming expenses can be higher for customers on the go.  Customers of both companies are increasingly looking to larger providers with more robust network coverage and increasingly aggressive pricing.

That has left Cricket with anemic, but acceptable growth, picking up 179,000 new customers in the fourth quarter.  MetroPCS, however, failed to meet expectations with just 197,410 new customers in the fourth quarter.  Existing MetroPCS subscribers are also leaving at a higher rate.

Verizon Buying Portion of Plateau Wireless’ New Mexico Operations

Plateau Wireless serves eastern New Mexico and portions of western Texas.

The consolidation of America’s wireless market continues with this week’s announcement Verizon Wireless intends to acquire a portion of Plateau Wireless’ network operations in southwest New Mexico.

Verizon will take over Plateau’s 259,000 mostly rural customers in portions of Roswell, Carlsbad, Artesia, Hobbs, and Ruidoso, N.M.

The acquisition covers a service territory of 26,100 square miles.

Plateau says the decision came down to money.  The wireless company needs the infusion of cash a Verizon purchase would bring to help finance high speed wireless upgrades.

The FCC will have to review the transaction before it can be approved.