Again with the domination and control thing.

Dr. John Malone is wasting no time reacquainting the cable industry with the kinds of classic power plays he used while running Tele-Communications, Inc. (TCI), then America’s largest and most powerful cable operator. Malone’s latest salvo: proposing new broadband pricing schemes that run afoul of Net Neutrality by charging consumers higher broadband prices if they watch online video services like Netflix.

Malone, increasing his influence over Charter Communications before launching the next wave of cable company consolidation, implied the industry is hurting from the lack of power and dominance it used to enjoy when it had an unfettered, territorial monopoly back in the 1980s. Malone told an audience at the annual shareholder meeting of Liberty Global he advocates getting the industry’s mojo back by returning to “value creation” pricing models — code language for new ways to charge customers higher prices or add-on fees.

Malone sees raising prices for Internet service key to bringing the industry back to the golden profits it used to enjoy selling television subscriptions, even as customers faced massive rate increases that doubled, tripled, or even quintupled rates for certain services.

Malone’s assessment of the eight current largest cable operators wiring the country: Snow White (Comcast) and the Seven Dwarfs (Everyone Else). The disorganized agendas of various cable operators are troublesome to Malone, who wants the industry to act in lock step with a unified, cooperating voice. Consumer groups call this kind of friendly cooperation “collusion.”

Malone also thinks it is time to discard reliance on cable television to bring home the revenue and profits Wall Street expects. The industry should instead turn its earning attention to broadband, a product few Americans can live without. Malone believes the cable industry is not only positioned to control content distributed on its TV Everywhere online video platform for authenticated cable subscribers, but also have a say in competing content from Netflix, among others, which are totally reliant on the broadband pipes provided by ISPs.

With Netflix consuming a growing percentage of cable broadband resources, and possibly contributing to cable TV cord cutting, Malone does not advocate crushing its competition. Instead, he wants a piece of the action. How? By demanding online video providers pay for using cable broadband infrastructure. Consumers also face surcharges on their broadband accounts if they watch online video services like Netflix, Amazon, YouTube and other over-the-top-video. Malone also advocates the implementation of Internet Overcharging schemes like consumption billing and usage caps.

Malone’s “world of the future,” is, in reality, not much different from AT&T’s 2005 proclamation that use of AT&T’s broadband pipes should come at a cost to content producers.

Then-CEO Ed Whitacre’s public statements fueled support for Net Neutrality, which forbids broadband providers from traffic discrimination techniques like charging extra for certain content or artificially degrading service for producers who refuse to pay.

Malone’s incendiary ideas may be letting too much of the cat out of the bag, say some observers worried Malone’s rhetoric will remind people he was once labeled “the Darth Vader of Cable.” His statements could attract unnecessary attention that could be used to organize opposition.

Last week, the Wall Street Journal reported that broadband providers and content producers were already secretly cutting deals to exchange bandwidth for money without the public scrutiny Malone’s comments will generate.

The newspaper reports some of the biggest Net Neutrality proponents around, particularly Google, are quietly paying millions to large cable companies to guarantee their content reaches customers as quickly and smoothly as possible.

Among the top recipients: Comcast, which collects $25-30 million a year and Time Warner Cable, which nets “tens of millions of dollars” from Google, Microsoft, and Facebook.

The payments are buried in the murky world of “interconnection agreements” governing the backbone pipes carrying huge amounts of web traffic from popular websites and those owned by large telecom providers. Originally, content and broadband providers agreed to peering arrangements that would trade traffic without payment to each other. But as bandwidth-heavy online video began to turn those shared connections into lopsided floods of movies and TV shows headed into subscriber homes against a trickle of content coming back from broadband customers, the cable and phone companies began crying foul.

Netflix has so far navigated around paying Internet Service Providers directly to support their video content. Instead, it is building its own specialized content distribution network intended for ISPs to more effectively and efficiently deliver high bandwidth video. Connections to the Netflix network are free of charge to participating providers, but many ISPs are demanding to be paid.

Some content providers are fearful if they don’t pay, the free “peering” links will become hopelessly overcongested and slow web pages and services to a crawl.

For Verizon customers, that may have already happened as Netflix streams began stuttering and buffering earlier this month.

Cogent, which supplies Verizon with a considerable amount of Netflix traffic, immediately pointed the finger at the phone company for artificially degrading the Netflix viewing experience. Verizon promptly shot back:

Cogent is not compliant with one of the basic and long-standing requirements for most settlement-free peering arrangements: that traffic between the providers be roughly in balance. When the traffic loads are not symmetric, the provider with the heavier load typically pays the other for transit. This isn’t a story about Netflix, or about Verizon “letting” anybody’s traffic deteriorate. This is a fairly boring story about a bandwidth provider that is unhappy that they are out of balance and will have to make alternative arrangements for capacity enhancements, just like any other interconnecting ISP.

Cable giants like Malone see the battle as one the cable industry will have a hard time losing, because it is the only technology present in most communities that can handle the traffic and the growing demand for faster speeds.

Cable operators think content companies have a license to print money, especially since their success is built partly on broadband networks they don’t own or pay for delivering content to customers. At the same time, content companies fear they could be forced out of business if the cable industry decides to give itself preferential treatment.

[flv width=”504″ height=”300″]http://www.phillipdampier.com/video/WSJ Paying ISPs to Move Content 6-20-13.flv[/flv]

Reporters from The Wall Street Journal discuss the secret payment arrangements between content producers and some of America’s largest ISPs. (4 minutes)

Cable companies, including Time Warner Cable, are offering a mix of threats and financial incentives to keep popular cable programming away from online video competitors.

Bloomberg News today reported the private discussions primarily target upstart streaming video services from companies like Intel, Apple, and Google, which are all proposing multichannel streaming video services that could one day replace the local cable company.

All three would-be competitors have been stymied, some for years, from signing contracts with popular cable networks like HBO, USA, ESPN and Comedy Central. If a viewer wants to watch those networks, they usually have to authenticate themselves as existing cable, satellite, or telco-TV customers to get access to live and recorded programming. The cable industry prefers it that way as a customer retention tool.

Time Warner Cable CEO Glenn Britt admitted to Wall Street analysts attending this week’s Cable Show his company probably insists on contract language that bars programmers from providing content to online video services.

“We may well have ones that have that prohibition,” Britt said at the conference in Washington. “This is not a cookie-cutter kind of business.”

Some cable company contracts are more benign, only requiring programmers to license content on the same terms offered to their online competitors. Britt said some of Time Warner Cable’s contracts fall into this category.

Britt

Britt has repeatedly emphasized Time Warner wants to license content more broadly to allow the company to include it in its TV Everywhere platform, which streams video content to wireless devices. The cable operator adopted a policy in 2009 that sought to deliver content to customers on any device they wish. Restrictive contracts have kept that policy from being fully implemented.

AT&T U-verse says it won’t pay full price for cable programming sold to its online competitors.

“If they’re going to go over-the-top, then that’s a very different conversation and a very different value for our customers,” Jeff Weber, president of content, said last month at an investor conference. “Exclusive versus non-exclusive has materially different value for our customers. And I think we would want that reflected.”

Restrictive contracts are all about protecting the existing pay television ecosystem, according to Charter’s chief financial officer, Chris Winfrey.

“It’s in everybody’s mutual interest that we are protecting the ecosystem in a way that continues to keep the value of that programming that we have and the way it’s delivered to our subscribers today,” Winfrey said added.

Consumer groups say restrictive contracts are the epitome of anticompetitive industry behavior that should be examined by the Justice Department.

“Is it anticompetitive generally? Of course it is, they are keeping programming from their competitors,” said Gigi Sohn from Public Knowledge.

Satellite companies were originally in this same position, unable to carry popular cable networks on reasonable terms at fair prices until the 1992 Cable Act mandated reforms that required non-discriminatory access to cable programming. Online video providers have not yet been able to demand the same terms for their competing services.

More than two years after the cable industry began promoting the concept of TV Everywhere, offering paying subscribers access to cable networks and shows online and on-demand, Time Warner, Inc. is finally moving to introduce live streaming of its TBS and TNT networks 24 hours a day to authenticated cable, satellite, and telco-TV subscribers.

The move comes just a few days after ABC announced its own Watch ABC service, which will also only be available to customers with a pay television subscription.

The move is designed to increase viewing and advertising opportunities for the Time Warner cable networks. Since online viewers will need credentials supplied by their pay-TV provider to reach the streams, non-paying viewers will be kept away.

A number of providers have their own implementation of TV Everywhere, introducing apps and viewing portals where paying customers can scroll through and watch cable channels without having to visit the website of each network.

Since introducing its version of TV Everywhere more than a year ago, one of the most frustrating aspects of Time Warner Cable’s video streaming service has been it only works within your own home over the cable company’s own broadband service. As of tomorrow morning, that will change. If you own an Apple iOS tablet or smartphone, the cable company’s new version of its TWC TV app (free) will bring streamed and on-demand programming from a handful of cable networks regardless of where you happen to be.

There are several limitations however:

1. Having access to a Wi-Fi network while on the go will be a big help. Streaming access over 3G/4G service will initially be limited to Verizon Wireless customers, perhaps a fringe benefit of the agreement between Verizon and Time Warner Cable to collaborate in cross-marketing services;
2. Only nine cable networks and one Time Warner Cable-owned news channel will be available for live streaming when the service launches. None of them are particularly compelling. Programmers are fearful that streaming access outside of the home may open up cable programming to non-paying customers with access to a shared password;
3. Fox News Channel and Fox Business were reportedly going to be available as of tomorrow, but Time Warner Cable’s official blog post omits the two networks;
4. Android and desktop users will have to wait until summer to get the upgrade, an annoying prospect considering Android users now outnumber Apple iOS users, who have to wait.

The online programming guide is also being revamped to help users find TV channels and online on-demand content more quickly.

The initial out-of-home On Demand library offers over 1,100 hours of programming from the following providers:

BBC America
BET
CBeebies
CMT
Comedy Central
Cooking Channel
DIY
FEARnet
Food Network
Hallmark
HGTV
Logo
MTV
MTV2
Nick Jr.
Nickelodeon
Palladia
Spike
TeenNick
Travel Channel
Tr3S
TV Guide Network
TV Land
UniMas
Univision
VH1
VH1 Classic

Live TV streaming will be available from the following national networks:

Aspire
BBC America
beIN Sports (English/Spanish)
FearNet
GMC
Pac-12
TVGuide Network

Additionally, all Time Warner Cable local news channels will eventually be available out of home, though all local news, traffic and weather channels may not be available immediately. The following news channels will be available at launch:

NY1
NY1 Noticias
News 14 Carolina
YNN (New York and Texas)

Rogers Communications, Canada’s largest cable operator, told investors at an investment bank conference it intends to accelerate plans to monetize wireless and broadband data usage this year.

Anthony Staffieri, chief financial officer of Rogers Communications told attendees at Morgan Stanley’s Technology, Media & Telecom Conference that Rogers’ future revenue outlook was going to be data-centric.

“We think data, monetizing data, is going to be a key aspect of that, both on the wireless side, as well as on the cable side of things,” Staffieri said.

Staffieri

Key to Rogers is the development of data plans that maximize revenue potential by exploiting the customer’s discomfort with overlimit fees. Staffieri admits the company has plans that can cost the company revenue if customers downgrade to a usage bucket that brings them very close to their usage limit.

But most customers do not choose those “exact fit” data plans. They typically select more expensive, larger-bucket plans so they can rest easy knowing they will not get slapped with a overlimit fee.

“And so they’re coming into data plans that are probably more than they need,” Staffieri said. “But for most users, what they’re looking for is comfort in usage. And so what we found is there’s a preponderance to buy more than what you need. So there’s no surprise at the end of the month in terms of billing. And so it’s all about that comfort in usage that we’re focused on in the price plans.”

In wireless, Rogers is also counting on the explosive growth of usage that comes after introducing 4G LTE coverage.

“Simply on 3G to LTE, you see an immediate growth in data usage,” Staffieri said. “Same users, but if you were to look at the data set, it’s just within a defined period of time, they can just access more. And so for whatever reason, whatever they’re doing with it, it’s just driving more usage, more efficiency and they’re using it in the business context.”

Staffieri says Rogers is experiencing 30-50% increases in data usage year over year. Rogers introduced new wireless plans in the fall of 2012 that refocus customers on their anticipated data usage, with gradually more expensive wireless plans to match.

“That really gets the customer focused on choosing something that continues to drive data growth,” Staffieri noted.

Rogers Cable broadband customers have also faced data caps and consumption-oriented billing for years. Although Rogers competitively responded to a Bell offer introduced in January that includes unlimited use service for customers who want it, that option comes at an added cost — one that can be priced up or down according to marketplace conditions.

Rogers primary focus is on encouraging its cable broadband customers to move towards higher-speed, more expensive data plans.

MONETIZED: Rogers sells a 25/2Mbps broadband plan for $52 a month that includes only an 80GB monthly usage allowance. A $2/GB overlimit fee applies, up to a maximum of $100 per month. Taxes, a modem rental fee or purchase, a one-time activation fee of $14.95 and up to a $99.99 installation fee also apply.

“On the cable side, making sure we have the best Internet experience was the other piece of it,” Staffieri said. “We ended the year with 90% of our footprint able to get 150Mbps data speed ($122.99/mo with 250GB usage allowance). And so to the extent that we continue to lead on Internet, we think that’s going to be important ingredient for the top line [revenue] growth.”

On the wireless side, Rogers is following the lead of big providers in the United States and gradually shifting the cost of new smartphones away from itself and onto its customers by adjusting its subsidy program.

“As we see data [usage] pulling [revenue] growth, overall, that bodes well for a continuation of the subsidization,” Staffieri said. “For us, it’s really been about making sure that we give the customer choice. And so when we combine that with the introduction of the Flex Plan, which we did in 2012, what we’re seeing is more and more customers opting into new handsets. But more and more, it’s on the customer’s nickel as opposed to our nickel on the Flex Plan programs.”

Rogers Wireless’ Individual plans. Rogers’ customers have to pay extra for long distance calling — most plans only cover local calls. Data plans are stingier and more expensive than what most Americans pay, and steep overlimit fees up to $0.02 per megabyte ($20/GB) apply. Like in the United States, Rogers is moving to bundle unlimited calling and texting into more of their plans. What differentiates more plans today is how much data usage is included.

Staffieri admitted Bell is giving Rogers the most competitive headaches in Ontario because of their aggressively priced promotions.

“Certainly, [Bell’s Fibe IPTV] has been competitive for us. In the short-term, we continue to deal with what I would consider to be aggressive pricing in terms of acquisition and retention offers by our IPTV competitor,” said Staffieri. “We’ve always been competing with their satellite product and so that competition has always been there. But I would describe it as certainly having picked up and continuing to pick up. And it’s largely been through pricing offers as opposed to product.”

Staffieri says Rogers is competing with improved set-top equipment like the NextBox 2.0 — a whole-home DVR with an improved user interface. It also offers customers Anyplace TV, a TV Everywhere service that allows customers to watch the Rogers’ TV lineup on tablets inside the home.

The Toronto Maple Leafs, the National Hockey League’s most valuable sports franchise, is today 75% co-owned by Bell Canada Enterprises (BCE) and Rogers Communications.

As is the case in the United States, Canadian cable companies are also facing dramatically increasing programming costs, particularly for sports programming.

But to a greater degree than in the U.S., Canadian media conglomerates own and control a larger share of cable and broadcast networks, programming producers, would-be competitors like satellite television, and even sports teams and the networks that show their games.

That positions them to negotiate with themselves over content costs, because they own or control the sports franchise, the cable or broadcast network that televises their games, and the cable, satellite, or telephone provider through which most Canadians watch.

“We’ve tried to be disciplined on the extent that content price increases are there because consumers want it, then we want to make sure we’re disciplined in passing on that cost to the customer,” Staffieri said. “And so we strive to make sure that in the TV and video business our gross margins are consistent.”

“So if you were to look at how that’s played out over the last several quarters and several years, it’s been fairly consistent. And so that’s what we strive to do is to make sure that those programming costs ultimately are passed on to the consumer, which is ultimately driving up the cost through their demand.”