KMBC's helicopter got a visual overview of the devastating Lenexa fire than left one man dead.

Bahtier Hashimov and his fiancée lost nearly everything in a massive apartment fire that took one man’s life and left 60 people homeless.  As the former residents of Oak Park Village tried to piece their lives back together, Hashimov discovered one company standing in the way.

Time Warner Cable made a bad situation worse for the couple, demanding immediate payment of $438 for a cable box and modem destroyed in the fire, still under investigation by Lenexa, Kansas fire investigators.

“I was really in shock,” Hashimov told KSHB-TV in Kansas City.  “It was really disappointing.”

Cable companies like Time Warner Cable, Charter Cable, and Bright House Networks have brought bad publicity on themselves over the past year demanding hundreds of dollars from victims of tornadoes, floods, fires, and other natural disasters.  Most cable companies claim they are entitled to the full value of lost cable equipment, typically recouped from insurance claims filed by homeowners or renters after disaster strikes.  But renters frequently don’t buy renter’s insurance, falsely believing property owners’ own insurance will cover their losses.

Some insurance policies also do not cover the full value of cable equipment, depreciating its value based on age and the fact most cable equipment provided to customers is not new.  But some cable companies demand full repayment anyway, even if it exceeds compensation provided by insurance settlements.

When tragedies lead to unseemly collection efforts by providers, local news coverage usually embarrasses them enough to moderate their policies, often waiving charges.

In Hashimov’s case, a local Time Warner Cable representative quickly claimed the charges “must have been a mistake,” claiming Time Warner Cable does not hold customers accountable for natural disasters.  Company policy is to deal with insurance companies to secure compensation, and when that fails “they work something out.”  A company spokesperson told the Kansas City station they never want the customer to feel the impact of something that was not their fault.

Cable companies could save themselves considerable bad publicity and embarrassment if they immediately waive equipment charges for customers who are victims of these types of tragedies.

Instead, Time Warner Cable had Hashimov jumping through hoops, first telling him to get a letter from the fire department to bring to a local Time Warner Cable office to get the unreturned equipment fees waived.  When he arrived, a representative told him the letter was no good and he owed the money.

Although the company is now negotiating with Hashimov, the matter has still not been resolved.

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KSHB-TV in Kansas City talked with Bahtier Hashimov and his fiancée Victoria — victims of a devastating apartment complex fire and a $438 bill from the cable company for a lost cable box and modem.  (2 minutes)

Independent phone company Windstream this morning announced its intention to acquire business telecommunications provider PAETEC Holding Corp., in a transaction valued at nearly $2.3 billion.

“This transaction significantly advances our strategy to drive top-line revenue growth by expanding our focus on business and broadband services,” said Jeff Gardner, president and CEO of Windstream. “The combined company will have a nationwide network with a deep fiber footprint to offer enhanced capabilities in strategic growth areas, including IP-based services, data centers, cloud computing and managed services. Financially, we improve our growth profile and lower the payout ratio on our strong dividend, offering investors a unique combination of growth and yield.”

PAETEC, based in suburban Rochester, N.Y., has been a business telecommunications provider since 1998, and many of its founding employees joined the company from locally-based Rochester Telephone Corporation, its long distance subsidiary RCI, and a competing long distance competitor ACC — today all long-gone.

For residents of Rochester, the implications of the merger could literally leave a hole in the center of downtown, where construction of PAETEC’s pre-merger headquarters was just getting underway.  With the recent demolition of Midtown Plaza, what local residents today call “the big hole in the ground” could be there a long, long time if Windstream abandons construction plans.

In December, then-mayor Robert Duffy (now New York’s Lieutenant Governor) took PAETEC founder and CEO Arunas Chesonis at his word that the company’s new headquarters would be built in downtown Rochester — a project that would never have been started without substantial tax credits, loans and grants backed by New York taxpayers.

“More than three years ago, Arunas Chesonis called me on the phone and said if the City and State would demolish Midtown Plaza, he would build the corporate headquarters of PAETEC on that site,” said Mayor Duffy late last year. “Despite the worst economic downturn since the Great Depression and having endless options to locate his company, Arunas Chesonis stayed true to his word. The rebirth of downtown Rochester now has a key cornerstone to build on.”

Now those plans may be gone with the Windstream.

Midtown Plaza was demolished to make room for PAETEC's new downtown Rochester headquarters, a project which may now be up in the air. (Picture courtesy: YNN)

The all-stock deal is expected to close in six months, and Windstream hopes to capitalize on PAETEC’s extensive fiber network and data centers to bolster service to its own business customers.  The increased capacity would also deliver improved service for the company’s residential DSL customers with a more robust Internet backbone.

Windstream, based in Little Rock, Ark., has been transforming itself away from its roots as a residential landline provider into a business and broadband services company, and today’s deal is an extension of that.

The company expects to win at least $100 million in new synergies from the merger, based on reduced capital expenditures required to build out Windstream’s own network, and from reduced costs from being a larger volume player.

But Windstream is also well-known for other cost-savings, through massive job cuts at the firms it acquires.  Last June, hundreds of workers at Iowa Telecom learned that.  After Windstream’s acquisition of D&E Communications in Pennsylvania, nearly 80% of D&E’s employees were shown the door.

For nearly 5,000 PAETEC employees, almost 900 of which live and work in Rochester, updating resumes may have just become job number one.

That’s ironic for a company whose founder wrote his own book: It Isn’t Just Business, It’s Personal: How PAETEC Thrived When All the Big Telecoms Couldn’t.

The first chapter is called “Putting People First,” and explains how the management of PAETEC recognizes the value its employees bring to the company: “Success in business begins and ends with people: the people you hire, the ones you partner with, and the ones you serve as your customers.”

Employees this morning may be wondering if Windstream shares Chesonis’ philosophy.

On this morning’s conference call, Windstream executives spoke about efforts to identify and preserve talented members of PAETEC’s executive management team as part of the newly-expanded company.  They had nothing to say about rank and file employees.

[flv width=”640″ height=”380″]http://www.phillipdampier.com/video/WHAM Rochester PAETEC Deal 8-1-11.mp4[/flv]

WHAM-TV spoke with George Conboy of Brighton Securities about this morning’s merger announcement, and the major implications the deal will have on PAETEC’s home base — Rochester, N.Y.  (5 minutes)

Phillip "Try the Gouda" Dampier

Welcome to the Broadband Usage Whine & Cheese Festival

Midcontinent Communications earlier this month announced a big boost in broadband speeds for more than 250,000 customers in the Dakotas and Minnesota, bringing up to 100/15Mbps service to customers who wanted or needed that speed.

MidcoNet Xstream Wideband, made possible with a DOCSIS 3 upgrade, delivers 1/1Mbps ($30.95), 30/5Mbps ($44.95), 50/10Mbps ($64.95), or 100/15Mbps ($104.95) service.  Those are mighty fast speeds for an upper midwestern cable company, especially in states where 1-3Mbps DSL is much more common.

The cable provider was excited to introduce the speed upgrades earlier this month, telling customers:

At up to 100 Mbps, MidcoNet Xstream^® Wideband is fast. But today’s online experience is about more than speed. It’s about the power and capacity to run every streaming, blogging, downloading, surfing, gaming, chatting, working, playing, connected device in the house. All at the same time. MidcoNet Xstream Wideband delivers…it’s everyone in your entire family online at once, doing the most intense online activities, no problem.

But now there is a problem.  Customers spending upwards of $105 a month for the fastest Internet speeds are actually using them to leverage the Internet’s most bandwidth-intensive services, and evidently Midco isn’t too happy about that.  Todd Spangler, a columnist for cable industry trade magazine Multichannel News, was given a usage chart by Midco, and used it to lecture readers about the need for usage caps: “One thing is clear: Broadband service providers will all need to do something to contain the rapidly rising flood of Internet data.”  The implication left with readers is that limiting broadband usage is the only way to stem the tide.

Midco's not-so-useful chart looks mighty scary, showing usage growth on their 100Gbps backbone network, but leaves an enormous amount of information out of the equation. (Source: Midcontinent Communications via Multichannel News)

Spangler quotes Midco’s vice president of technology Jon Pederson: “Like most network providers we have evaluated this possibility, but have no immediate plans to implement bandwidth-usage caps,” he said.

So Midco is more than happy to pocket up to $105 a month from their customers, so long as they don’t actually use the broadband service they are paying top dollar to receive.  It’s an ironic case of a provider desiring to improve service, but then getting upset when customers actually use it.

We say ironic because, from all outward appearances, Midco is well-aware of the transformational usage of broadband service in the United States these days:

If you have ever once said “my Internet is too slow,” then you need MidcoNet Xstream Wideband. With it, you can do all the cool things you’ve heard people are doing online. Explore all the great stuff your online world has to offer. Play the most intense games. Try things you could never do before, from entertainment to finance, video chat or video streaming. Like we said, MidcoNet Xstream Wideband is all about speed, capacity, choice and control.

What this means for you is that you’ll be able to do things like:

• Download and start enjoying entire HD movies in seconds, not minutes.
• Stream video and music without a hitch while you simultaneously perform other intense online tasks.
• Choose from three different pipelines, from 3.0 to 1.0, for the capacity and price your family needs.
• Monitor your bandwidth use to determine if you need more capacity or can do what you want with less.
• Upload files or signals, such as webcam footage, faster than ever before possible for a better online experience.
• Watch ESPN3.com. Your Favorite Sports. Live. Online.

Just don’t do any of these things too much.  Indeed, when providers start toying with usage caps, it’s clear they want you to use your service the same way you did in 2004 — reading your e-mail and browsing web pages.  Real Audio stream anyone?

Let’s ponder the facts Mr. Spangler didn’t entertain in his piece.

Midco upgraded their network to DOCSIS 3 technology to deliver faster speeds and provide more broadband capacity to customers who are using the Internet much differently than a decade ago, when cable modems first became common.  Some providers and their trade press friends seem to think it’s perfectly reasonable to collect the proceeds of premium-priced broadband service while claiming shock over the reality that someone prepared to spend $100 a month for that product will use it far more than the average user.

Part of the price premium charged for faster service is supposed to cover whatever broadband usage growth comes as a result.  That’s why Comcast’s 250GB usage cap never made any sense.  Why would someone pay the company a premium for 50Mbps service that has precisely the same limit someone paying for standard service has to endure?

Cringely

Midcontinent Communications is a private company so we do not have access to their financial reports, but among larger providers the trend is quite clear: revenues from premium speed accounts are being pocketed without a corresponding increase in investment to upgrade their networks to meet demand.  Inevitably that brings the kind of complaining about usage that leads to calls for usage caps or speed throttles to control the growth.

We’re uncertain if Midco is making the case for usage caps, or simply Mr. Spangler.  We’ll explain that in a moment.  But if we are to fully grasp Midco’s broadband challenges, we need much more than a single usage growth chart.  A “shocking” usage graph is no more impressive than those showing an exponential increase in hard drive capacity over the same period.  The only difference is consumers are paying about the same for hard drives today and getting a lot more capacity, while broadband users are paying much more and now being told to use less.  Here is what we’d like to see to assemble a true picture of Midco’s usage “dilemma:”

1. How much average revenue per customer does Midco collect from broadband customers.  Traditional evidence shows ARPU for broadband is growing at a rapid rate, as consumers upgrade to faster speeds at higher prices.  We’d like to compare numbers over the last five years;
2. How much does Midco spend on capital improvements to their network, and plot that spending over the last 10 years to see whether it has increased, remained level, or decreased.  The latter is most common for cable operators, as the percentage spent in relation to revenue is dropping fast;
3. How many subscribers have adopted broadband service over the period their usage chart illustrates, and at what rate of growth?
4. What does Midco pay for upstream connectivity and has that amount gone up, down, or stayed the same over the past few years.  Traditionally, those costs are plummeting.
5. If the expenses for broadband upgrades and connectivity have decreased, what has Midco done with the savings and why are they not prepared to spend that money now to improve their network?

While Midco expresses concern about the costs of connectivity and ponders usage caps, there was plenty of money available for their recent purchase of U.S. Cable, a state-of-the-art fiber system serving 33,000 customers — a significant addition for a cable company that serves around 250,000 customers.

A journey through Midco’s own website seems to tell a very different story from the one Mr. Spangler is promoting.  The aforementioned Mr. Pederson is all over the website with YouTube videos which cast doubt on all of Spangler’s arguments.  Midco has plentiful bandwidth, Mr. Pederson declares — both to neighborhoods and to the Internet backbone.  Their network upgrades were designed precisely to handle today’s realistic use of the Internet.  They are marketing content add-ons that include bandwidth-heavy multimedia.  Why would a provider sell customers on using their broadband service for high-bandwidth applications and then ponder limiting their use?  Mr. Pederson seems well-aware of the implications of an increasingly connected world, and higher usage comes along with that.

That’s why we’d prefer to attack Mr. Spangler’s “evidence” used to favor usage caps instead of simply vilifying Midco — they have so far rejected usage limits for their customers, and should be applauded for that.

Robert X. Cringely approached Midco’s usage chart from a different angle on his blog, delivering facts our readers already know: Americans are overpaying for their broadband service, and the threat of usage caps simply disguises a big fat rate hike.  He found Midco’s chart the same place we did — on Multichannel News’ website.  He dismisses its relevance in the usage cap debate.  Cringley’s article explores the costs of broadband connectivity, which we have repeatedly documented are dropping, and he has several charts to illustrate that fact.

You’ll notice for example that backbone costs in Tokyo, where broadband connections typically run at 100 megabits-per-second, are about four times higher than they are in New York or London. Yet broadband connections in Tokyo cost halfwhat they do in New York, and that’s for a connection at least four times a fast!

So Softbank BB in Tokyo pays four times as much per megabit for backbone capacity and offers four times the speed for half the price of Verizon in New York. Yet Softbank BB is profitable.

No matter what your ISP says, their backbone costs are inconsequential and to argue otherwise is probably a lie.

Cue up Time Warner Cable CEO Glenn Britt, who said precisely as much Thursday morning when he admitted bandwidth costs are not terribly relevant to broadband pricing.

We knew that, but it’s great to hear him say it.

Cringely’s excellent analysis puts a price tag on what ISP’s want to cap for their own benefit — their maximum cost to deliver the service:

That 250 gigabytes-per-month works out to about one megabit-per-second, which costs $8 in New York. So your American ISP, who has been spending $0.40 per month to buy the bandwidth they’ve been selling to you for $30, wants to cap their maximum backbone cost per-subscriber at $8.

[…] IP Transit costs will continue to drop. That $8 price will most likely continue to fall at the historical annual rate of 22 percent. So what’s presented as an ISP insurance policy is really a guaranteed profit increase of 22 percent that will be compounded over time because consumption will continue to rise and customers will be for the first time charged for that increased consumption.

This isn’t about capping ISP losses, but are about increasing ISP profits. The caps are a built-in revenue bump that will kick-in 2-3 years from now, circumventing any existing regulatory structure for setting rates. The regulators just haven’t realized it yet. By the time they do it may be too late.

Unfortunately, even if they knew, we have legislators in Washington who are well-paid in campaign money to look the other way unless consumers launch a revolution against duopoly broadband pricing.

Cringely believes usage caps will be the form of your provider’s next rate increase for broadband, but he need not wait that long.  As the aforementioned CEO of Time Warner Cable has already admitted, the pricing power of broadband is such that the cable and phone companies are already increasing rates — repeatedly — for a service many still want to cap.  Why?  Because they can.

Consumers who have educated themselves with actual facts instead of succumbing to ISP “re-education” efforts designed to sell usage limits under the guise of “fairness” are well-equipped to answer Mr. Spangler’s question about whether bandwidth caps are necessary.

The answer was no, is no, and will always be no.

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Jon Pederson’s comments on Midcontinent’s own website promoting its new faster broadband speeds can’t be missed.  He counts the number of devices in his own home that connect to the Internet, explains how our use of the Internet has been transformed in the past several years, and declares Midco well-prepared to deliver customers the capacity they need.  Perhaps Mr. Spangler used the wrong company to promote his desire for Internet usage caps.  Pederson handily, albeit indirectly, obliterates Spangler’s own talking points, which makes us wonder why this company even pondered Internet Overcharging schemes like usage caps in the first place.  (10 minutes)

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Verizon’s home control and automation system is set to debut in Pittsburgh where Verizon FiOS is available.  WPXI-TV was invited to a training session for Verizon employees, where they were taught about the new service with the help of Verizon-hired actors.  Suffice to say, the new technology was more impressive than the actors hired to promote it.  (2 minutes)

Over the air television in Detroit if the NAB is correct.

The National Association of Broadcasters is warning a Congressional plan proposed on behalf of the wireless industry could force every broadcast station in Detroit off the air, and drive at least one network affiliate in many northern U.S. cities along the Canadian border to “go dark” if the plan is adopted.

The FCC’s National Broadband Plan contains provisions now on Capitol Hill to recapture spectrum currently used by free over-the-air television stations and provide it to wireless providers to bolster mobile broadband and cell phone networks.  Lawmakers expect the wireless industry will pay up to $33 billion for the lucrative spectrum, to be shared with vacating broadcasters and the U.S. Treasury.

But the NAB says the FCC plan goes too far, forcing stations to vacate UHF channels 31-51 to crowd into the remaining channel space of 11 VHF channels (2-13) and 17 UHF channels (14-31).  According to a study conducted by the broadcasting lobby, there is simply not enough remaining channel space to accommodate 1,735 U.S. stations, forcing at least 210 to sign off, permanently.

Because of agreements with the Canadian government to protect American and Canadian stations from mutual interference, the results could be devastating for northern cities along the U.S.-Canadian border.  The worst impact would be in Detroit, Michigan where the NAB predicts every local station would have to leave the airwaves.

The cities of Buffalo, Seattle, Syracuse, Cleveland, Spokane, Rochester and Watertown, NY and Flint, Mich. would likely lose at least one major network affiliated-full power station each.  At least 73 stations in the top-10 largest television markets would be forced off the air, unable to find appropriate channel space in the remaining available spectrum.  Hundreds of stations would be forced to change channels and potentially reduce power and coverage areas to protect stations sharing the same channel number in adjacent cities.

“If the FCC’s National Broadband Plan to recapture 20 more TV channels is implemented, service disruption, confusion and inconvenience for local television viewers will make the 2009 DTV transition seem like child’s play,” said NAB President Gordon Smith. “NAB endorses truly voluntary spectrum auctions. Our concern is that the FCC plan will morph into involuntary, because it is impossible for the FCC to meet spectrum reclamation goals without this becoming a government mandate.”

Broadcasters are feeling a bit peeved at the federal government for repeatedly returning to sell off a dwindling number of channels for other uses.  The original UHF dial included channels 14-83, but over the years the highest channel number has dropped to 51, mostly for the benefit of the cell phone industry.  Now they’re back for more, seeking channels 31-51 for wireless broadband and mobile telephony.

The cell phone industry wants broadcasters to “voluntarily” give up their channel space and reduce transmitter power so more stations can share the same dial position in nearby cities.  But that could leave fringe reception areas in rural communities between cities without over-the-air television reception, and make free television more difficult to watch without a rooftop antenna.

The NAB called on the FCC to immediately make public its analyses of the broadband plan’s potential negative impact on viewers of free and local television.

“We’ve waited patiently for over a year for FCC data on how the Broadband Plan impacts broadcasters, and more importantly, the tens of millions of viewers who rely every day on local TV for news, entertainment, sports and lifeline emergency weather information,” said the NAB’s Smith. “Even Congress can’t get information from the FCC. All we are seeking is more transparency. We have but one chance to get this right if we are to preserve future innovation for broadcasters and our viewers.”

[flv width=”512″ height=”308″]http://www.phillipdampier.com/video/NAB Free TV Spot.f4v[/flv]

The National Association of Broadcasters is distributing this ad to local broadcasters to air on their stations to inform viewers about the spectrum controversy.  (1 minute)

The consumer wireless handset lobby does not deny the plan will leave Americans with fewer channel choices, but they believe that will come from corporate station owners voluntarily shutting down stations for profit.

“The study presumes an unrealistic scenario in which every single existing TV station continues to operate over-the-air. However in the event of incentive spectrum auctions, it is highly likely numerous stations will capitalize on their spectrum assets by exiting the business or sharing resources,” said Consumer Electronics Association senior vice president for government affairs Michael Petricone.

Petricone believes the number of Americans spending time with broadcast television is dwindling, and less important than the wireless industry’s spectrum woes.

“Our nation faces a crisis as demand for wireless spectrum will soon outstrip supply,” said Petricone. “Meanwhile, the number of Americans relying purely on over-the-air TV is less than 10 percent, according to both CEA and Nielsen market research. Incentive auctions would be a financial windfall for broadcasters, free up the spectrum necessary for the next generation of American innovation to move forward and bring in $33 billion to the U.S. Treasury.”

The cellular industry’s top lobbying group CTIA was more plain: it’s survival of the fittest.

“Since spectrum is a finite resource, it is vital that the U.S. government ensures the highest and best use of it,” said CTIA vice president Chris Guttman-McCabe.

[flv width=”512″ height=”308″]http://www.phillipdampier.com/video/NAB Explains Spectrum.flv[/flv]

The NAB explains the concept of “spectrum” — or ‘the airwaves’ to consumers and what a major reduction in UHF channel space would mean for “free television.”  (3 minutes)