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.

Holder

The Justice Department has been quietly conducting a wide reaching investigation into whether cable operators are using Internet Overcharging schemes like usage caps and metered billing to squash online video competition, according to a report in this morning’s Wall Street Journal.

The Antitrust Division has spoken to major online video providers like Netflix and Hulu as well as cable operators, including Time Warner Cable and Comcast.

At issue are data caps — limits on how much a subscriber can use their broadband account.  Justice officials are exploring whether major broadband providers like Comcast and AT&T are using usage limits to protect their video businesses from cord-cutting — canceling a cable subscription to watch shows online.

Providers of online video like Netflix are particularly concerned about operators showing favoritism to their own video platforms. Comcast, for example, exempts partnered content from its usage allowance while continuing to count Netflix viewing against its cap. Comcast’s Xbox “free pass” is attracting particular attention in the Justice probe, in part because it could violate the merger agreement with NBC-Universal which requires the company to not discriminate against third party video content.

Some cable operators claim usage caps protect their networks from heavy users overwhelming their facilities. Comcast claimed its decision not to count Xbox video traffic against the operator’s monthly usage cap was fair because the video content did not travel across the Internet. Now the company has temporarily suspended  usage caps altogether in preparation for testing a new usage limit that also carries overlimit penalty fees.

Federal Communications Chairman Julius Genachowski last month publicly announced his support for usage limits and metered billing, describing both as innovative and enabling customer choice. The Justice Department probe would indicate otherwise, because it suggests customers are finding their options increasingly limited, possibly in violation of federal antitrust laws.

The Justice Department is also investigating the industry’s TV Everywhere project, which provides access to cable network online video exclusively to those with an existing cable television package. Most cable networks specifically prohibit online streaming of their live content, which itself might run afoul of antitrust rules.

The Journal notes Attorney General Eric Holder on Tuesday suggested he would like to be a cord-cutter himself, picking and choosing only the channels he wants to watch. At a recent Senate hearing, Sen. Al Franken (D-Minn.) said cable bills were “out of control” and consumers want alternative options to watch shows online. Holder responded, “I would be one of those consumers.”

Time Warner Cable and Comcast are facing class action lawsuits filed in California federal court alleging both cable operators retain Social Security numbers, credit card information and contact information after customers stop doing business with the companies.

The two lawsuits claim Comcast and Time Warner Cable are in violation of the 1984 Cable Communications Policy Act which, among other things, requires cable operators to “destroy personal information when it is no longer needed for the purposes for which it was collected (and there are no pending requests for access).”

According to the plaintiffs, both companies are retaining personal information about their ex-customers indefinitely, and are not sending required annual privacy notices to former customers disclosing this fact.

The CCPA allows individuals to collect $100 for each day the cable company is in violation of the law.

The lawsuit argues that this non-essential information exposes former customers to possible identity theft or illicit action by company employees that could potentially lead to unauthorized charges or account withdrawals.

That fear is not far-fetched. Just two weeks ago, GCI — a cable company in Alaska, found itself contacting at least 400 customers who had their personal financial information stolen by an employee.  Some customers were also contacted by their credit card issuers over incidents of unauthorized credit card charges.

[flv width=”512″ height=”308″]http://www.phillipdampier.com/video/KTUU Anchorage GCI Warns Customers of Fraud 5-24-12.mp4[/flv]

KTUU in Anchorage reports a GCI employee accessed cable customer account information to commit identity theft and credit card fraud.  (3 minutes)

Time Warner Cable is rolling out a new look to its online program guide and set top box menus after ongoing criticism from customers who found the old look hard to read and software cumbersome to use.

Central New Yorkers woke up this morning to the upgraded look, which the company says now features a sleeker and more modern appearance. It also adjusts the color scheme to make on-screen text easier to read and channels easier to find.

Set top box software is criticized even by cable executives, who call the often-proprietary software outdated and difficult to update and manage. Some cable operators have licensed set top box software from TiVo, while others are switching to an IP-based “web”-like experience that can offer viewers more detail and a customized appearance.

Ultimately, some cable executives would like to see the back of set top boxes altogether, hoping future technology upgrades will let viewers access cable programming and features from hardware built-in to modern televisions.

Time Warner Cable CEO Glenn Britt is among them.

“I hate set-top boxes,” Britt said in a recent interview.

[flv width=”432″ height=”260″]http://www.phillipdampier.com/video/YNN Syracuse Time Warner Cable makes changes to onscreen guide 6-4-12.mp4[/flv]

YNN Central New York reports on the latest update to Time Warner Cable’s Navigator set top box software, unveiled early this morning in the Syracuse area. (1 minute)