Time Warner Cable customers in southern California face substantial rate increases in 2012, including a budget-busting $49.99 service call fee to install increasingly expensive cable service.

The bad news is arriving in customer bills this month, with substantial price hikes for cable television —  including a 27.4% increase for the package that only includes local broadcast channels.  Time Warner Cable blames increasing programming costs for the rate increases, which are several times higher than the official rate of inflation — 3.5%.  Most customers with bundled television, telephone, and Internet service will see a smaller increase on the magnitude of a few dollars, but for those picking and choosing only a few items from Time Warner’s menu, the price tag for individual services will be higher.

The largest rate increase comes when the cable company sends a truck to a home or business.  Time Warner was charging $32.99, but will now charge $49.99 — a 51.5% increase.  The cable company has also been pushing its home networking Wi-Fi option, and will now charge $69.99 to install it, up from $49.99.

Time Warner Cable spokesman Jim Gordon tells the Los Angeles Times not everyone will pay those prices.  Certain promotions may lower those rates, or waive them altogether.  But the company offered little explanation to justify such a major price hike.

One of the cable company’s competitors, DirecTV, scoffed at Time Warner’s rate increase, noting the satellite company only raised prices an average of 4% earlier this year, and anticipates a similar increase in 2012.

The effect of the latest round of rate hikes is likely to drive even more customers to cancel or cut back on cable services.  An increasing number are dropping cable television service altogether, relying on broadband for video entertainment.  The cable industry’s response to cord-cutting has been a combination of increased online viewing options for cable-TV customers and usage caps and overlimit fees on broadband that either discourage online viewing or attempts to profit from it.  Time Warner Cable executives said as recently as December they plan to eventually introduce “usage based billing” of Internet service “the right way rather than quickly.”

As long as your life stops after 5GB per month.

Asian wireless operators are learning from their North American counterparts that artificially limiting wireless broadband consumption with usage caps and metered pricing can deliver enormous new profits companies can use to satisfy shareholders and attract higher dividend-seeking investors.

DoCoMo, Hong Kong’s CSL, and South Korea’s SK Telecom have all announced a shift towards usage-limited plans even as they launch new 4G networks that have at least three times the capacity of the older 3G networks they will eventually replace.  In fact, as Dow Jones reports, usage capping 4G wireless Internet access has little to do with congestion.  Instead, it’s a “revenue booster.”

Limiting data use and charging subscribers for excessive Web browsing on mobile devices may help boost carriers’ return on their investment at a time when many operators in the region have seen their earnings pressured due to falling voice revenue and hefty smartphone subsidies.

With the shift to charging subscribers for extra data usage, the region’s carriers are hopeful that they can boost their revenue.

While last generation 3G wireless broadband networks do face congestion issues, providers have maintained unlimited data plans until very recently.  But solving the 3G capacity crunch by upgrading to 4G has not removed the excuse to engage in Internet Overcharging.  It has only shifted the rationale for usage based pricing towards attracting increased revenue and investment.

Hong Kong-based CSL began offering 4G services in November last year for $44.85 for 5GB with an overlimit fee of $12.72/GB. At least CSL retains an unlimited use option, charging customers $60 a month for all-you-can-eat wireless broadband, a much better deal if you expect to exceed CSL’s 5GB limit.

While AT&T endures zoning-related delays to build out its fiber-to-the-neighborhood service U-verse, a scrappy anti-cap, pro-speed Internet provider in Santa Rosa has announced its intention to deliver gigabit speeds to San Franciscans over a fiber-to-the-home network that will begin construction early next year.

Sonic.net has been providing broadband services for years in northern California, using AT&T’s network of phone lines to deliver unlimited 20Mbps DSL service (including a phone line) for $40 a month.

Sunset District, San Francisco, Calif. (Courtesy: Stilfehler)

Now the company is branching beyond traditional DSL into fiber optics.  Sonic.net has already completed the first phase of its gigabit fiber network in Sebastopol, where it advertises 100Mbps service for $40 a month and 1000Mbps for $70 a month, both including phone service at no extra charge (two lines for the 1Gbps plan).

In San Francisco, Sonic plans to start with 2000 homes in the Sunset District, expanding its network to fully cover the city within five years.

Such a network could deliver serious competition to Comcast and AT&T, the currently-dominant providers.  AT&T’s U-verse buildout has been stalled over the need to install 768 large, unsightly metal cabinets on San Francisco street corners.  The company, as late as this summer, remains mired in zoning disputes and public protests.  Sonic’s fiber network will require similar equipment, and the San Francisco Chronicle reports Sonic filed its own application with the city Department of Public Works to install 188 cabinets, measuring 5 feet tall, starting next year.

Sonic may have a better chance if only because it does not have AT&T’s less-than-stellar reputation among some residents and customers who have been upset with the company’s wireless performance, and ongoing battles over cell tower placement.  Sonic.net CEO Dane Jasper tells the Chronicle:

“There is a huge demand in San Francisco for higher bandwidth services, and fiber is the only long-term way to meet this demand,” he said.

Given the fact that the company’s all-fiber network will bring “the fastest and cheapest” broadband service to the city, Jasper says he thinks the chances of overcoming the obstacles experienced by his larger rival are “pretty good.”

Sonic.net has gained a reputation for excellent customer service and vociferously opposes usage caps and other Internet Overcharging schemes.  The company has attracted the support of Google, which is using Sonic to manage its gigabit fiber network on the campus grounds of Stanford University in Palo Alto.

AT&T has previously dismissed fiber to the home service as too costly to provide, and has adopted in its place a fiber-to-the-neighborhood system that relies on traditional home phone wiring for the last part of its network.

Rogers Communications has mailed letters to rural Canadians announcing it will cease operation of its Portable Internet wireless broadband service effective March 1, 2012.

The service, which uses the Inukshuk Wireless network, delivers Internet access to over 150 communities across mostly rural-northern Canada, where DSL and cable broadband is simply unavailable.  Customers were paying $45 a month for up to 3Mbps service with a 30GB usage cap.

Rogers’ decision will now force most of those customers to use the company’s far more expensive 3G wireless network, which runs far slower and has substantially lower usage allowances.  How much more expensive?  Rogers’ 3G customers choosing the company’s 3G Flex data plan will pay between $94-104 a month (depending on speed), for a plan with a 15GB usage allowance.  Overlimit fees run $10/GB. Customers using 20GB on Rogers’ 3G Flex will pay the company $144-154 a month for slower service.

“The price disparity is absolutely enormous,” says Stop the Cap! reader Ted who uses Rogers Portable Internet service in Val Caron, Ont., located north of Sudbury.  “You might as well not bother using the Internet at all at these prices.”

Ted says Rogers Portable Internet was never a perfect solution, but it was priced similarly to what larger city residents pay for broadband.

“It’s not really WiMax, which came after Rogers introduced the service, and the speeds and ping times can be appalling if you don’t have good reception, but it was affordable,” Ted says.  “Using 3G service means even slower speeds and lower caps at double the price, which is typical for Rogers.”

Ted points out the 30GB one receives on the Portable Internet service for $45 would correspond to a bill for $25o on 3G — five times the price for worse service.

“I am talking to my wife about buying the Rocket Hub [Roger’s device for mobile broadband] so we have something, because Bell has told us not to expect DSL anytime soon,” Ted notes. “Rural Canada cannot catch a break.”

The other option rural Canadians have is satellite Internet access, but providers like Xplornet have faced withering criticism from customers for poor speeds, network speed throttling, and usage caps.

"Hey, we're #19!"

The United States may be a leader in many things, but broadband isn’t one of them. The country has now fallen two more positions — to 19th place, behind South Korea, Sweden, Denmark, the United Kingdom, and even Iceland, since the Berkman Center for Internet and Society released its last rankings in 2009.

In 2004, President George W. Bush complained about the U.S. falling to 10th place, which he declared was “ten spots too low.”

Now eastern Europe and former Soviet Republics in the Baltics threaten to overtake the United States, and countries in southeast Asia already have.  Innovation in the United Kingdom, Australia and New Zealand means deploying fiber to the home service to the vast majority of the population.  Innovation in North America means conjuring up new pricing schemes to raise prices on broadband service and engage in competition-busting mergers and acquisitions.

But a USA Today editorial this week also places much of the blame on corporate influence inside Washington, which has promulgated legislative policies that favor telecommunications companies and throw customers under the bus.

“The simple answer is that other countries have policies that promote competition and innovation,” the editors write. “In contrast, policies here have allowed a few dominant players that control the least interesting parts of the broadband landscape (the cables and the wireless spectrum) to dominate.”

Indeed, a series of telecommunications laws enacted by Congress, combined with short-sighted policies at the Federal Communications Commission, have allowed a handful of super-sized players to own and control broadband service in America, resulting in providers establishing non-competing fiefdoms that avoid head-on competition.

The worst policy of all allowed broadband providers to keep competitors from reaching customers over existing broadband networks.  During the days of dial-up, you could purchase Internet access from the phone company, a large provider like MSN or AOL, or thousands of smaller regional and local service providers.  Simply dial a local access number and you were connected to the provider of your choice.  Now, U.S. law gives broadband network operators the right to restrict these independents from selling service over their networks.  Comcast need not sell anything other than Comcast Internet.  Frontier Communications can make a killing selling its own DSL service, while protecting that revenue from other Internet Service Providers who might sell the service over Frontier’s network for half the price.  Time Warner Cable voluntarily allows Earthlink and a handful of other companies to sell cable broadband service over its infrastructure, but at prices equal to or higher than what Time Warner charges itself.

Broadband providers argue that allowing competitors to sell service on their network would discourage future investment and rob shareholders a return on investments already made.  Today, major cable operators and phone companies are falling all over themselves denying they are in anything but the broadband business.  It has become an enormously lucrative enterprise, more profitable than television or telephone service.

USA Today compares the broadband landscape back home with that in South Korea — perennially the world’s fastest, and considerably less expensive than what North Americans pay for service:

South Korea has made broadband a national priority, mandating deployment and in some cases giving private companies incentives to build out. It has also prevented major players from monopolizing their businesses, encouraging competition and innovation. In South Korea, consumers can get broadband service from a cable or telecom company. But they may also choose among myriad independent providers that are given access to the physical infrastructure. This competition keeps prices down and the quality of service high.

[…] But over time, cable and telecom companies worked the courts and Congress to make sure that this competitive world would never come to be [in the United States]. […] Wireless is a bit better. But the market has remained a near duopoly, with none of the smaller players emerging as a strong competitor to AT&T and Verizon.

The same open network concept has fought its way forward in Canada (where Bell has worked furiously to sabotage the business plans of independent providers) and in the United Kingdom, Australia and New Zealand where all three governments have decided the best solution would be to scrap the ancient landline network and start fresh with an open-to-all-comers fiber to the home service.

Back home in the States it is business as usual with increasing broadband prices and the looming prospect of usage-limiting schemes designed to cut capital costs, monetize broadband usage, and stop cord-cutting.

The opposing point of view comes courtesy of dollar-a-holler, corporate-backed think tank The Heartland Institute, who is stuck quoting notorious industry-funded studies and think tanks like the Discovery Institute and the Technology Policy Institute:

The idea that European and Asian countries are lapping America in the race for broadband speed and penetration is a fallacy created with statistics comparing “persons” instead of “households.” Once you make that correction, the USA is firmly planted among the top of industrialized nations, as economist Scott Wallsten pointed out when he was a staffer at the Federal Communications Commission in 2009.

And as tech researcher Bret Swanson of Entropy Economics points out, if you measure Internet usage by gigabytes used per month — a better measure of the speed and utility of networks — the USA has nearly lapped Western Europe once and Asia twice.

Heartland Institute: "By not disclosing our donors, we keep the focus on the issue."

If you measure how many mouse clicks customers in New York make on a Thursday afternoon, we could be number one as well!  Gigabytes used per month does not measure the speed or price of service on broadband networks, considerations that actually do impact broadband rankings.

Mr. Wallsten is a familiar favorite go-to-guy for The Heartland Institute.  He’s also the choice of Time Warner Cable, who paid him $20,000 for a 2010 essay: “The Future of Digital Communications Research and Policy.”

There is big money to be made writing corporate-funded research reports.  Bret Swanson knows that very well, having been involved with the Discovery Institute, a “research group” that delivers paid, “credentialed” reports to telecommunications company clients who waive them before Congress to support their positions.  Swanson is also a “Visiting Fellow” at Arts+Labs/Digital Society, which counted as its “partners” AT&T and Verizon.

The gentleman from Heartland also quotes from the misnamed “Progressive Policy Institute,” which counts among its funding partners, AT&T.

It would have been probably easier (but ineffectively transparent) to simply quote from AT&T and Comcast directly.

The Heartland Institute, unsurprisingly, believes letting existing broadband providers deliver service exactly the way they want is the best option:

The digital economy — one of the only vibrant economic sectors left — doesn’t need more government “investment” or regulation. It needs only for government to butt out and let the market work the magic that continues to bring us the marvels of the modern age.

That magic will cost you $50 a month and rising.  If some providers have their way, while the rest of the world abandons usage caps, American providers can’t wait to slap them on, reducing the value of your service even further.