Waiting for Comcast and Verizon to offer cutting edge broadband to 620,000 Baltimore city residents and businesses appears to be going nowhere, so the city is hiring an Internet consultant to consider whether to sell access to its existing fiber network.

Baltimore officials spent at least a year trying to convince Google to launch its fiber network in the city only to be bypassed in favor of Kansas City, Austin, and Provo, Utah. Local unions and community groups have also attempted to embarrass the local phone company by publicly protesting Verizon’s lack of interest in expanding its fiber optic network FiOS in Baltimore. Comcast has proved a disappointment for many, with the latest technology going to other cities well before Baltimore gets improved service.

Baltimore’s Board of Estimates voted to spend $157,000 to hire Magellan Advisors to produce a cost-benefit analysis of expanding the city’s current fiber infrastructure to deliver better Internet access.

“I’m paying more here for lesser service, so I think one of the things we want to try to do is look at that, look at what [current companies] offer and try to incentivize people to offer more,” Baltimore’s chief information officer Chris Tonjes told the Baltimore Business Journal. “In the short term, we’re going to do a study. In the medium run, we’re going to try to renegotiate the cable franchise agreement. In the longer run we want to make it more profitable for providers to come in here and offer the expanded service.”

Like many cities, Baltimore already owns and operates its own fiber ring, built with public funds to support the city’s public safety radio system. Like many municipal institutional fiber networks, Baltimore’s fiber ring is underutilized. Public safety and other institutional users often use just a fraction of available capacity. Despite the fact such networks are often oversized, they are rarely controversial because they do not typically compete with commercial providers and are usually off-limits to the public.

As Baltimore prepares to update their existing fiber infrastructure, Magellan will study the implications of leasing excess capacity to third-party providers that can sell broadband access to private businesses and individuals. Even Comcast and Verizon would be welcome to lease capacity.

Neither company has shown much interest, and the proposal received a strong rebuke from Maryland Sen. Catherine Pugh (D-Baltimore City):

Pugh

For the most part, municipally-built broadband networks have the economic chips stacked against them and, where tried, have saddled local taxpayers with a mountain of debt and half-built networks that are then sold at fire-sale prices to vulture investors. Taxpayers in Provo, Utah, for instance, spent $40 million to build a relatively small and modest network only to sell it for $1 a few years later because they underestimated the massive costs of operating, upgrading and maintaining it.

But Provo is just the latest exhibit in a long pantheon of such failed initiatives that include Groton, Conn., ($38 million taxpayer loss) and Marietta, Ga., ($35 million taxpayer loss). Cities as large as Philadelphia, New York and Chicago and as small as Lompoc, Calif., and Acworth, Ga., have also tried and failed to launch their own broadband networks — or simply gave up.

Pugh’s editorial, published in both the Wall Street Journal and The Baltimore Sun, failed to disclose Pugh has received political campaign contributions from both Comcast and Verizon. More importantly, Pugh did not bother to mention she is the president-elect of the National Black Caucus of State Legislators, a group with close ties to both Comcast and Verizon Communications.

Among the “member corporations” of the NBCSL — companies who “weigh in” on the policies promoted by the group: AT&T, Comcast, CTIA – The Wireless Association, the National Cable & Telecommunications Association, Time Warner Cable, and Verizon.

Among the NBCSL’s roundtable members: AT&T, Comcast, Time Warner Cable, and Verizon

For the fourth consecutive year, Verizon hosted its Black History Month open house at the Reginald F. Lewis Museum in downtown Baltimore. This year, among Verizon’s special guests: Maryland Senator and president-elect of the National Black Caucus of State Legislators Catherine Pugh. Comcast has also opened its checkbook to the NBCSL. Among the contributions — $50,000 to form the “NBCSL/Comcast Broadband Legislative Fellowship” to “increase efforts to conduct research and develop solutions regarding broadband adoption among African Americans.”

Opening up a competitive, lower-priced broadband alternative owned by the citizens of Baltimore is not one of Pugh’s favored solutions to be sure.

The NBCSL has been more than a little preoccupied with the business agendas of its corporate members. The group’s glowing endorsement of the Comcast-NBCUniversal merger was so positive, Comcast continues to present the group’s submission urging approval of the merger on its website. In 2011, the NBCSL signed on to the campaign to get government approval of the now-dead merger of AT&T and T-Mobile USA, claiming it was in the best interests of African-Americans. Just this month, Time Warner Cable quoted the group’s comments on the dispute between the cable company and CBS on its website.

Stop the Cap! has refuted claims that public broadband is a financial failure in the past. Read our fact check here.

Although Comcast has been the dominant cable provider in Baltimore for years, its monopoly status is “de facto” only, because federal law prohibits exclusive cable franchise agreements. That being said, no other well-known cable provider will agree to offer service in competition with another. Overbuilders — small private entities that have business plans that depend on competing with incumbent operators, are few and far between. For most Americans, the only cable competition comes from satellite providers or the phone company. Satellite television lacks a broadband option and Verizon’s local broadband infrastructure is limited to providing DSL service.

Tonjes

Tonjes hopes the possibility of a public broadband alternative might shake up the city’s broadband landscape, but not every neighborhood is now passed by the city’s fiber ring.

The average owner of a large home that wants an alarm system, the ability to observe everything indoors and out, and remotely control doors, thermostats and electric outlets will pay AT&T $1,740 in installation fees and a recurring monthly charge of $69.95 a month for deluxe peace of mind.

AT&T’s “Digital Life” service, available in U-verse equipped areas, is just the latest revenue-booster for the telephone company. The new service will compete directly against similar offerings from cable operators and traditional home security vendors including ADT.

AT&T can claim some superiority for its offering, because it offers water damage sensors most others don’t. That add-on can detect a basement water heater on the way out or give an early warning of a sewer backup.

AT&T’s deluxe offer — headlined above — includes the water control add-on, three indoor pan-and-scan cameras, one outdoor security camera, sensors for six windows and a variety of home automation features. For the middle class, AT&T offers less tony packages, letting customers customize features most valuable to them.

Home security and automation is a growth industry, particularly since the cable and phone companies have gotten into the act. The Boston Herald reports 90 million homes worldwide will have some form of home automation system in place by 2017.

Although home security systems have been available for years, they require separate contracts, installation, and monitoring from alarm providers most Americans are barely familiar with. The cable and phone companies hope their packages, offered as “add-ons,” will attract more customers that would not normally consider a home security system. Maintaining broadband service is also often a prerequisite for the cable/telephone company systems. As customers are already accustomed to seeing the cable or phone guy and a large, multi-product monthly telecommunications bill, adding another service like home automation and monitoring is not a big stretch.

“Offering security services in the past was basically a separate offering,” said Mitchell Christopher, vice president of technical operations at  Time Warner Cable. “Security wasn’t tied to the existing products or network. With the new products we have now, it is fully integrated into our existing network. It is just an extension of what we are doing versus a departure.”

Unlike traditional intrusion alarms, services like AT&T’s “Digital Life” promote home automation and monitoring features above basic home security.

The Herald:

A few real life-examples: Turn on the lights and unlock your front door when you see your cleaning crew arrive. Lock it behind them when they leave — no need to give them a key. Set programs that make life easier, such as one that triggers your back door to open and your kitchen lights to turn on when your garage door opens each night as you arrive home. View a log of each time your front door has opened or closed to know whether your child has kept his or her word about staying in to do homework. Simply press a button on your smartphone or tablet for “police” or “fire” in the event of an emergency. Be alerted if the service detects a water leak, smoke or carbon monoxide. And if a leak is detected, have the water supply cut automatically.

[flv width=”640″ height=”380″]http://www.phillipdampier.com/video/ATT Digital Life 8-2013.flv[/flv]

AT&T produced this introductory video for its Digital Life home security and automation suite. The most basic home security packages start at $150 for equipment and $30 a month with a 2-year contract. (1 minute)

If Time Warner Cable is concerned about the rising cost of cable television, it sure didn’t show it after sources revealed the cable company quickly accepted CBS’ demands for more compensation but is refusing to budge until it wins rights to show CBS programming on mobile platforms.

Sources tell the Daily News Time Warner quickly agreed to a major increase from 50 cents a month per subscriber to $2 a month for CBS content, but is keeping CBS-owned stations and cable networks off the dial until the network agrees to let the cable company distribute on-demand and live programming on cell phones, tablets, and personal computers.

Earlier this week, Time Warner Cable CEO Glenn Britt made an offer CBS couldn’t wait to refuse: the cable company would put CBS programming back on the lineup if it could be sold to customers a-la-carte instead of bundling it with other channels.

That would “allow customers to decide for themselves how much value they ascribe to CBS programming,” Britt said in a letter to CBS CEO Leslie Moonves that was promptly posted online.

CBS called the idea a sham, noting a-la-carte runs contrary to the economic model the cable industry itself regularly and loudly defends. Try telling ESPN, which costs every cable subscriber more than $5 a month, it will now be offered only to customers that want to pay for it.

Phillip “Capitulation Corner” Dampier

In fact, for most cable operators, the concept of selling customers only the channels they want is the nightmare scenario. Average revenue per subscriber would tumble as consumers rid themselves of networks with three digit channel numbers they didn’t even know they had. Goodbye ‘Yarn Creations’ on Generic Home Shopping Channel 694, Bosnian music videos, reruns of Simon and Simon, mysterious networks showing episodes of Law & Order that USA Network already burned into your permanent memory, and that “fine arts” network that shows endless hours of Antiques Roadshow dating back to 1998.

Digital rights is an important issue for both cable companies and programmers. Although both sides deny “cord cutting” is real, the intensity of the fight allowing online viewing says otherwise. If CBS gives away rights to Time Warner Cable to show live and on-demand programming to subscribers, CBS can’t make as much money offering shows on its own website (with its own ads), much less sell programming to customers. Time Warner fears if CBS only offers online programming through its own website, customers might decide they don’t need the cable company to watch those shows any longer.

“At the moment the cable operators have the leverage because the more that CBS is off the cable, the more that they realize the viewers don’t need it,” said media expert Michael Wolf, former Yahoo! board member and president of Viacom-owned MTV Networks.

For now, many viewers are turning to pirate video sites to catch the CBS shows they are missing. TorrentFreak reports huge spikes in illicit download traffic of CBS content over the weekend. Under the Dome was the source of much of the spike, although customers are also downloading pirated copies of Showtime programming. The evidence is clear: take away popular programming and customers will simply download it illegally from third-party websites.

As summer wanes and the fall football season approaches, just about everyone expects the war will quickly end, because football fans are more than willing to drop a provider if they can’t spend several hours in front of the television Sunday afternoon. Considering Time Warner has reportedly already caved in on CBS’ money demands, it is likely CBS will be able to eventually extract even more money from the cable company to secure digital distribution rights. Subscribers will pick up the tab for both during the next round of rate increases beginning this fall in the south and by January in the northeast.

Time Warner Cable’s latest regulatory notice admits current deals with more than 50 networks are due to expire soon, and the company may cease the carriage of one or more of the networks. They include: Lifetime, E!, Style, Turner Classic Movies, and the NHL Network. So just like Law & Order reruns, we will see this episode again in the near future.

The PGA is offering a way for golf fans to watch some of the PGA Championship online, bypassing the CBS-TWC dispute.

[flv]http://www.phillipdampier.com/video/CNBC PGA Time Warner 8-8-13.mp4[/flv]

Perhaps the biggest loss viewers without CBS will experience this weekend is the PGA Championship. CNBC talks with tournament officials in Rochester, N.Y., about the possibility of viewing alternatives. But golf fans can watch parts of the tournament for free from the PGA’s website. (3 minutes)

[flv width=”640″ height=”380″]http://www.phillipdampier.com/video/Bloomberg The Future of Cable Post CBS-TWC Battle 8-6-13.flv[/flv]

Bloomberg News reports that while many cable viewers could care less about the loss of CBS and Showtime, broadband customers may care very much when cable operators start charging extra for Netflix or add punitive usage caps to make sure customers don’t cut cable TV’s cord. (3 minutes)

Time Warner Cable broadband customers who briefly unplug their modems to reset them will discover slightly improved download and upload speeds from the cable company.

Multiple customers from around the country have reported to Stop the Cap! Internet speeds have been over-provisioned by at least 10 percent as of this week and the PowerBoost feature that delivered a short burst of faster speed during the first few seconds of a download appears to be discontinued.

Before

On average customers can expect the following speeds:

• Standard (was 15/1Mbps) is now 16.5/1.2Mbps
• Turbo (was 20/2Mbps) is now 22/2.2Mbps
• Extreme (was 30/5Mbps) is now 34/5.6Mbps
• Ultimate (was 50/5Mbps) is now 55/5.6Mbps

We have also heard from four different customers that Time Warner Cable has started providing a DOCSIS 3 modem for Turbo customers, which means those considering Turbo service and planning to buy their own modem will best be served choosing a DOCSIS 3 compatible unit. We continue to highly recommend the Motorola SB6141.

After

We do not expect Time Warner Cable to advertise the speed increases. They are likely a result of the discontinuation of the PowerBoost feature which was first offered to Time Warner Cable customers in New York City in 2008 and became available nationwide a year later for Standard and Turbo tier customers.

The Federal Communications Commission’s ongoing verification of the nation’s largest ISPs advertised speeds would have registered a broad-based speed decline had Time Warner simply discontinued the temporary speed boost technology. PowerBoost does affect speed test results because it provides a temporary speed bump during the download speed verification process. By “over-provisioning” customers’ broadband speeds, the company can compensate for the change and likely even see an improvement of its speed ranking by the FCC’s testing program.

Time Warner Cable increased broadband rates by $3.00 this summer and raised its monthly modem rental fee to $5.99 this month.

A Wall Street analyst has urged Time Warner Cable’s competitors to deny promotional pricing to new customers switching providers because of the CBS blackout.

“While Time Warner Cable’s competitors appear to be resisting predatory marketing campaigns to take advantage of the CBS blackout, at least so far, we believe they need to go even further to cause real industry change,” wrote BTIG Research’s Richard Greenfield. “While TWC’s competitors cannot stop consumers from switching their video service provider due to the loss of CBS, they could make it less appealing to switch due to a programming dispute blackout.”

Greenfield wants providers to support solidarity against programmers like CBS by not taking advantage of the situation to poach subscribers away from Time Warner with attractive promotional packages and pricing. He believes it will ultimately lead to lower prices for consumers.

“The only way to begin to shift leverage in these content negotiations is for [providers] to start supporting each other in programming disputes, rather than try to steal each others’ subscribers,” said Greenfield. “We believe it would make strategic sense for all major [providers] to add a script to their website and call-center new customer acquisition process that asks whether a customer is switching due to the Time Warner CBS dispute (or whatever disputes are currently on-going in the country).  If the answer is ‘Yes’ we believe that consumer should not be offered promotional pricing and should be informed that these types of disputes are becoming a problem for all video providers — essentially teaching consumers that ‘switching won’t help’ during these short-term programming battles.”

DirecTV is among the first to express solidarity with its cable competitor, issuing a statement last weekend:

DirecTV has certainly had its share of these battles, so we applaud Time Warner Cable for fighting back against exorbitant programming cost increases. We are also appalled to learn that CBS is now punishing DirecTV customers, who may happen to have Time Warner as their Internet provider, by denying them access to CBS content online.

Greenfield’s suggestion essentially asks that cable operators and telephone companies agree not to compete. His idea also penalizes consumers caught in the middle of programming disputes that customers ultimately pay for in the form of higher bills. We think it comes dangerously close to illegal, anti-competitive behavior. Even Greenfield seems to understand his suggestion comes close to the line.

“It is obviously illegal for MVPD’s to collude,” Greenfield concludes. “However, it is not illegal for each to do what is right for the future of their business, even if it means passing on short term opportunity.  Tacit cooperation is the best strategy we see available, barring government intervention.”

What is right for business is not right for consumers. Stop the Cap! strongly recommends those signing up with a competitor over programming blackouts avoid explaining their reasons for switching. As well as being none of their business, being candid could cost consumers valuable money-saving discounts and promotions that other new customers receive.

We believe the most effective “game-changer” in the fight between providers and broadcasters demanding 600% rate increases for programming available for free on any television is technology like Aereo, which picks up over-the-air stations with dime-sized antennas and provides customers with online streams of those channels. This technology, if found legal, could eventually be adopted by cable operators to avoid retransmission consent payments altogether or use as effective leverage in negotiations. Aereo is a win-win for providers and consumers. Telling providers to deny consumers new customer pricing just because someone wants to get missing programming back is not.

We’d remind Greenfield of this universal truth: cable bills never go down unless a customers downgrades or threatens to leave.