An expert hired by Charter Communications to offer “qualified” views on the competitive impact of a merger involving Charter, Bright House Networks, and Time Warner Cable got his facts wrong about Charter’s data cap policy, a mistake that calls into question his analysis about the company’s potential to abuse broadband customers by imposing data caps after its three-year commitment not to expires.

Theodore Nierenberg, a professor of economics at the Yale School of Management, among other things, offered an expansive rebuttal to opponents of the Charter merger deal, arguing that it would enhance competition and deliver consumers enhanced benefits.

Nierenberg does not believe Charter has any interest in imposing data caps on customers, despite the fact Charter quietly shelved existing caps on Oct. 1, 2014, several months before unveiling a bid for both Time Warner and Bright House, neither of which have capped customer usage.

“I conclude that actions such as charging interconnection fees, imposing usage based billing or data caps, or degrading network performance are very unlikely, both because New Charter has no incentive to undertake them, and because the FCC will enforce New Charter’s commitments,” Nierenberg wrote.

But his facts are in error. The same company that believed usage caps were an essential part of its broadband service between early 2009 until October 2014 has suddenly turned over a new leaf? Nierenberg claims there was effectively no leaf to turn, claiming Charter had no “active data cap” since January 2012¹:

For 3 years, New Charter will not charge consumers additional fees to use specific third-party Internet applications, or engage in zero-rating (discriminatory exemptions from a data cap).

These binding commitments provide further assurance beyond the economic reasoning I describe below — assurance that New Charter will not engage in these types of conduct: charging higher interconnection fees, using discriminatory data plans, or reducing the quality of OVD signals. (Note that Charter already does not have data caps for its residential broadband customers. Notwithstanding the dramatic but welcome rise in data usage by broadband customers, Charter has not had an active data cap since January 2012.)

Customers in some areas were called by Charter for exceeding their usage allowance, and usage rationing remained a fact of life in Charter’s Acceptable Use Policy until late last year, not January 2012 as Nierenberg claims.

So what assurance should a customer take from a company that believed strongly in usage caps for more than five years? Surely not that Charter will never consider engaging in data capping yet again three years from now.

Charter can assure consumers of its good intentions by declaring it will always offer affordable unlimited access Internet without a three-year expiration date. Quietly dropping a cap several months before executing a well-planned buy of Time Warner Cable and Bright House doesn’t inspire confidence. Too often short term rate freezes are followed by accelerated rate hikes once the deal conditions expire.

¹ Page 48

Comcast is accelerating its rollout of compulsory usage caps, adding new markets in the southern U.S. to its three-year old “trial” of what it calls its “data usage plan.” DSL Reports received a tip Comcast is now sending e-mail to affected customers.

Little Rock, Ark., Houma, LaPlace, and Shreveport, La., as well as Galax, Va., will be treated to Comcast’s 300GB usage cap with a $10 per 50GB overlimit fee beginning Dec. 1. These three states join Florida, Alabama, Kentucky, Georgia, Maine, Mississippi, South Carolina and Arizona, which now face Comcast’s form of usage rationing.

In Tennessee, Comcast is introducing its 300GB cap in Johnson City, Gray, and Greenville. The cable operator is also risking customers by introducing caps in Chattanooga, where it already faces serious competition from gigabit provider EPB, which has no usage limits, and AT&T U-verse, which doesn’t dare enforce its own 250GB cap.

Comcast began rapidly expanding its usage cap trial this fall, with new markets being announced for usage limits about once a month.

Chattanooga resident Ron Rogers called to cancel his Comcast service this afternoon. He’s giving up a good promotional discount Comcast offered to keep him a customer back in January and is headed to EPB Fiber.

“This was the last straw for Comcast,” Rogers tells Stop the Cap! “I am tired of being abused by these people. They must be crazy to think anyone who seriously uses the Internet is going to tolerate this when there are two other providers smart enough to realize usage caps are ridiculous in this day and age. Comcast can shove it.”

Comcast’s spreading usage caps are not popular with customers. Within hours of the news Comcast would be expanding its cap “trial,” more than 900 negative comments appeared on Reddit slamming the company.

“It is just staggering that despite all the bad press, publicity and truly awful service, Comcast is actually taking calculated measures to make things worse,” wrote one Reddit commenter.

Comcast’s frequent defense of its usage plan is that the majority of its customers will never be affected by it, consuming less than 40GB a month. But those with experience living under Comcast’s cap tell Stop the Cap! anyone playing downloadable video games or using online video are at serious risk of being charged penalty overlimit fees.

“It is very easy to hit 100GB just downloading game updates and if you watch your shows online, you will come uncomfortably close to the cap,” said Pat Kershaw in Kentucky. “Leaving a live video stream running overnight one night by mistake after I fell asleep meant a Netflix-free weekend for me last month, because it would have put me past my allowance. Hulu’s autoplay feature is also very dangerous.”

Hans says any household with kids will quickly learn Comcast isn’t being honest claiming usage caps only affect a “few customers” after they start getting warning messages injected into their web browser.

“What is worse is every time I call support about the messages that I am getting on the 18th of the month because I have already burned through my limit with my kids watching all their online content, support keeps putting me back on the queue for the next person or dropping the line,” Hans writes. “No one wants to deal with it!”

Those web warning messages also become intrusive for many customers, because some claim they never go away until the end of the billing cycle.

“I made sure to go over the 300GB cap this month to see what would happen and I received a phone call telling me I’ve went over and now I receive a popup from Comcast on my computer about every 30 seconds telling me I’ve went over as well,” writes Gldoorii. “The popups never stop. I have to deal with them until the end of the month as they keep interrupting my work.”

Other Comcast customers have grown suspicious about the company’s usage measurement tool, which in some cases reported spikes in usage only after the cap began to be enforced.

“I checked my data usage on Oct. 21 and it said I only used 162GB,” writes Sharon. “I even have [a screenshot] and saved it as I had a feeling Comcast would pull something. [On] Oct. 23, I had a pop-up on my computer that says ‘you have used 292 of 300GB’ and I went to the data usage and it shows that. Nobody in my house downloaded any huge files the past two days. So, is Comcast artificially pumping up our usage to make us go over or what? It is impossible that I only used 162GB for 21 days and then used 130GB the past two days.”

Sharon is lucky her usage meter is working. Other customers report Comcast’s meter often stops working for weeks.

“My data usage meter still does not work and it has been 19 days,” says Gldoorii. “No chat or support person has been able to figure out why it doesn’t work and that I need to call or chat whenever I want to ask what my usage is.”

Customers who want out also get the Comcast treatment as they head for the exit.

“We were charged a $150 early termination fee because Comcast does not consider imposing a usage cap to be a material change to our contract, which is unbelievable,” writes Anna Lu in Ft. Lauderdale. “These guys are nothing less than crooks and they only forgave it after my roommate complained to the Better Business Bureau. They said they were doing us a favor forgiving the charge. No wonder everyone hates Comcast.”

But not everyone is unhappy about Comcast’s usage caps.

“Our call center volumes are way up ever since Comcast brought caps to Atlanta and Florida,” reports an AT&T sales representative who agreed to talk to Stop the Cap! if we kept his identity private. “It’s common knowledge we do not enforce any caps on U-verse although we cannot tell customers that officially, but most never even ask. We’re signing up ex-Comcast customers right and left. They are not happy we cannot give them the same speeds Comcast does, but they won’t have to worry about a cap from us, at least for now.”

Other customers are waiting impatiently for Google Fiber or other competitors.

“In Atlanta Comcast now offers an unlimited data option add on to your plan for additional $35,” writes a customer on Comcast’s support forum. “So now we get to pay over $100 for 25Mbps service whereas Google Fiber [in] Atlanta [charges] $70 for one gigabit service and no data cap.”

In July, Comcast CEO Brian Roberts downplayed the impact of the company’s usage caps with investors, suggesting some customers actually supported the usage plans.

“We do have a few trials going on in different markets,” Roberts said. “The responses have been neutral to slightly positive. We don’t have any plans on expanding that to other market/bases anytime soon.”

Frontier Communications continues to face challenges keeping customers in its legacy copper wire service areas, where only modest investments in network upgrades have proved insufficient to stop customers shopping around for better service.

Company officials reported a loss of about 30,000 residential customers during the last quarter, a drop of nearly 1% of its total customer base. Nearly 2% of Frontier’s business customers also took their business elsewhere, leaving the company with 3.1 million remaining residential customers and 294,000 business customers.

Frontier CEO Dan McCarthy blamed many of the customer losses on customers moving.

“During the summer, we do tend to see an uptick in customer [losses] that might have double play and in some cases triple play, as they move or make their decisions about moving their homes to a different location,” McCarthy said, claiming that most of Frontier’s losses overall came from voice-only customers.

As Frontier expands rural broadband opportunities, the phone company is still adding Internet customers, picking up a net gain of 27,200 broadband accounts. The company depends heavily on broadband to replace revenue lost from landline disconnects.

“We continue to see more customers choose higher-speed broadband products,” McCarthy said on a conference call to investors earlier today. “In the third quarter, 47% of the broadband activity was above the basic speed tier of 6Mbps. More than 70% of our residential broadband customers are still utilizing our basic speed tier, so we have substantial opportunity to improve our average revenue per customer as they upgrade their service.”

McCarthy offered no statistics about how many of Frontier’s DSL customers can substantially upgrade their speeds using Frontier’s existing infrastructure. Many Frontier broadband customers have complained their speeds reflect the maximum capacity of Frontier’s network in the immediate area, and many claim they do not consistently receive the speed level Frontier advertises.

Service is appreciably better in areas upgraded before being acquired by Frontier. McCarthy said some areas of Connecticut, acquired from AT&T, are now able to get speed “in excess of 100Mbps over our copper infrastructure.”

“Over time, we will be expanding the technology we use for 100Mbps in Connecticut to more of our markets elsewhere,” McCarthy promised. “In our FiOS markets, we already offer speed up to one gigabit and we have seen the benefit of offering these higher speeds as customers choose speed tiers to match their lifestyle choices.”

Frontier also separately notified the Federal Communications Commission it has no immediate plans to slap usage caps or metered service on customers.

“Frontier does not apply usage-based pricing to any of its broadband offerings,” Frontier said in an FCC filing. “Frontier has no plans at this time to offer a metered broadband service. We continue to monitor the market and continue to consider a usage-based offering as an option.”

Frontier suggested several factors would be considered when discussing usage-based billing: “the FCC’s Open Internet rules, policies of other companies, consumer demand, network capacity, and cost, among other factors.”

Broadband prices in the United States are far too low and it is long past time to “significantly” boost prices and introduce usage caps/consumption-based billing to put an end to the threat of online video competition once and for all.

Those are the views of Jonathan Chaplin, a research analyst for New Street Research LLP, and he made sure to share them with Robert Marcus, CEO of Time Warner Cable on a morning conference call with investors.

“Our analysis suggests that broadband as a product is underpriced,” Chaplin told Marcus, and it is hardly the first time he has beat the drum for higher Internet pricing.

In June, Chaplin wrote a note to investors that pulled no punches about what usage billing is really all about.

“Our work suggests that cable companies have room to take up broadband pricing significantly and we believe regulators should not oppose the re-pricing (it is good for competition & investment),” Chaplin wrote. “The companies will undoubtedly have to take pay-TV pricing down to help ‘fund’ the price increase for broadband, but this is a good thing for the business. Post re-pricing, [online video] competition would cease to be a threat and the companies would grow revenue and free cash flow at a far faster rate than they would otherwise.”

Chaplin pestered Marcus this morning about why Time Warner Cable has remained steadfast in keeping compulsory usage caps or usage-based pricing away from their broadband customers.

Marcus

“As part of the merger conditions, you made a concession to not moving towards usage-based pricing for a number of years,” Chaplin asked. “I’m wondering if that’s something that you felt the FCC required, or that came up during the course of the Comcast, Time Warner Cable discussions and why you needed to offer that up as a condition.”

Ironically, it was Marcus who schooled Chaplin on the realities of a marketplace where cap-free competitors like Google, Verizon, and AT&T U-verse (their stated cap is not enforced) exist and are more than capable of stealing Time Warner Cable customers if the cable company gets too greedy. Time Warner’s best chance of earning more broadband revenue is to sell faster service, Marcus noted.

“I can’t give you an outlook on where broadband pricing is going, except to say we’re going to continue to deliver more and more utility to customers,” Marcus said. “Generally speaking, where customers get more value out of your products, they’re willing to pay more. But what we actually charge is going to be a function of what the marketplace dictates. It’s a very competitive market out there and we’re going to have to continue to price our products in a way that allows us to acquire and retain them.”

Chaplin’s remarks tying usage pricing to curtailing online video competition are no surprise to consumer advocates, who believe usage-based billing is an obvious weapon cable and phone companies can use to protect their cable-TV revenue. Sling’s CEO considers usage pricing a serious threat to the viability of alternative video providers like Sling TV.

Charter Communications and Time Warner Cable believe they can win the war against cord-cutting by offering broadband-only customers a less expensive video package with a free Roku 3.

Charter Communications has been quietly testing a subscription service called Spectrum TV Stream that’s aimed at broadband-only customers, starting at $12.99* per month and includes a free Roku 3 streaming player.  Customers can start with a package of around 15-20 local/over the air, home shopping, religion, and weather channels, along with the option of adding Showtime or HBO for an extra $12.99 a month. Several extra cable channels, including: ABC Family, ESPN, Food Network, Hallmark, HGTV, LMN, Nat GEO, AMC, Discovery, History, FX, History 2, TBS and TLC are also available as an option for an extra $7 a month.

Because it’s Charter, there are some gotchas, as indicated by our *asterisk. The most disappointing is Charter’s insistence on applying its usual $5-8/month Broadcast TV Surcharge fee (it varies by market) to the streaming service. Other taxes, fees and surcharges also apply, which means most will pay at least $20 a month for a service Charter is advertising for $12.99. The Charter-supplied Roku 3 ($99 value, which includes a remote and headphones) is required to use the service and comes pre-activated. Customers can also access the service through Charter’s phone/device app, but out of home viewing does not function for some networks for contractual reasons.

Because the service is so new, Charter’s sales representatives have offered inconsistent information about the service. One current Charter customer was charged a $29.99 service change fee to transition to Spectrum TV Stream while several others were told they could not drop existing cable TV service and sign up for streaming without first canceling and disconnecting all Charter services for at least 30 days. To be fair, some representatives offered to open a new account in the name of another household member to avoid the 30 day waiting period and another used the opportunity to offer the customer a retention discount to encourage him not to change his service.

Gotcha with that $30 change of service fee, which may turn out to be a billing mistake. Also notice the out-the-door price of Spectrum TV Stream is higher than advertised.

Based on these experiences, it seems likely Charter is using revenue protection measures to discourage current cable television customers from switching to a less-costly plan.

You need Charter’s Internet service to subscribe.

Charter’s flyer about the service has been sent to cord-cutters, cord-nevers, and broadband-only customers with satellite TV subscriptions. But since a copy landed in our hands, we’re sharing the details with everyone.

To ask if the service is available in your area or to subscribe, customers need to call a special toll-free number: 1-844-560-5730. You will need Charter broadband service to qualify for the streaming TV service. The Roku 3 device is shipped to arrive within one week, and requires a customer signature or waiver on file for FedEx delivery. Although Charter claims the offer of the free Roku 3 expires Nov. 15, 2015, it is likely to be extended. Customers signing up will be considered qualified cable TV subscribers, allowing authenticated access to on-demand content from cable programmer websites, including premium services like HBO Go (if you subscribe). Up to 15 devices can be registered for viewing, five in simultaneous use. There is a 30-day money back guarantee and customers can cancel and keep the Roku 3 with no further obligations to Charter.

Quality and performance was rated fair by beta testers already signed up. The service works over Charter’s broadband network, which may be another reason the company dropped usage caps several months ago. Regular viewing will run up your usage numbers, but not as much as high-definition streams from Netflix or Amazon.

Charter’s Spectrum TV Stream apparently uses MPEG-2 compression and video quality is reportedly not comparable to traditional satellite TV or cable. Some claim it performs about equal to Netflix’s lowest resolution stream setting. Others complain it can take 3-4 seconds to change channels and streaming quality can dynamically change based on Charter’s broadband performance. Cable customers will also likely miss functionality they get with a DVR to pause, rewind, and start-over television programs — features all absent from Charter’s streaming service.

But even those disappointed with the service are welcoming the consolation prize of an effectively free Roku 3, which Charter allows you to keep with cancellation just for trialing the service.

Time Warner Cable is reportedly planning to launch its own streaming television package today for its broadband-only customers, starting with those in New York City. Usually reliable sources tell Engadget Time Warner Cable will launch a beta test of a new version of its TWC TV service. As with Charter, Time Warner Cable will supply a free Roku 3 tied to the customer’s Time Warner Cable broadband account.

Time Warner will offer its “Starter TV” package as a broadband add-on for $10 a month. That package offers viewers (in NYC): WABC, WCBS, C-SPAN, C-SPAN 2, C-SPAN 3, WWOR, WPXN, WLNY, WMBC, UniMas, WRNN, RISE, WYNJ, Educational Access, EVINE Live, WNYW, Galavision, Government Access, HSN, Music Choice, WNBC, WNET/WLIW, Public Access, QVC, SHOP NBC, TBN, TBS, Telemundo, TWC News, Univision, WGN America, WPIX, and several international/special interest channels.

Showtime and Starz will also be available in an optional package priced at $20 a month. If you want all of Time Warner’s channels and those premiums, they are bundled together for an extra $50 a month. We are not certain if the $50 bundle covered Time Warner’s “Standard” or “Preferred” TV lineup as of press time.

In essence, the package will look a lot like what current Time Warner Cable customers can access over the company’s TWC TV app. The difference is this is the first time Time Warner will sell IPTV service to consumers who now avoid cable television. These streaming-only customers will also never have to lease a cable set top box.

As with Charter’s service, Time Warner Cable customers will have to give up DVR services like pause, fast-forwarding, rewind, and start-over. The service offers no recording capability either, and maintains the same contractual restrictions that limit the number of channels you can watch on devices outside of the home.

Customers can stream video on up to four registered devices, including the Xbox One/Xbox 360, Android, iOS, Fan TV, Kindle Fire and Samsung’s Smart TVs.

It’s our contention these IPTV services are the likely future of cable television. It’s inevitable cable operators will eventually use their fiber/coax networks to deliver one platform — broadband, on which it will sell Internet access, television, and phone service. This could mean the eventual end of the set top box, replaced with inexpensive devices like a Roku. DVR’s can be replaced with cloud-based DVR-like services to manage time shifting and similar conveniences. That would be welcomed by many cable subscribers who detest the current generation of power hungry devices and their monthly rental costs, especially as cable systems continue to move to all-digital service, necessitating a box on every connected television in the home.

The current TWC TV app offers both good and bad to users. The alphabetic channel lineup is a welcome change from trying to find a channel by its number. The app is also ready-made for out of the home viewing, at least when programmers allow Time Warner the ability to offer that option. But TWC TV has also suffered from regular buffering glitches, service or channel outages, video quality degradation at peak usage times, and in our experience runs up to a minute behind live television.