The Federal Trade Commission on Monday issued new guidelines to stem the growing trend of product and service endorsements on web-based blogs that do not disclose the cozy relationship some bloggers have with the companies they write about.  For the first time, new FTC guidelines will require bloggers to confess any payments or free products or services they receive in return for their writings.  Waiting and Watching, one of our regular readers, wrote asking if these guidelines would affect telecommunications-related sites like Stop the Cap!

The revised FTC rules add new examples to illustrate the long standing principle that “material connections” (sometimes payments or free products) between advertisers and endorsers – connections that consumers would not expect – must be disclosed. These examples address what constitutes an endorsement when the message is conveyed by bloggers or other “word-of-mouth” marketers. The revised rules specify that while decisions will be reached on a case-by-case basis, the post of a blogger who receives cash or in-kind payment to review a product is considered an endorsement. Thus, bloggers who make an endorsement must disclose the material connections they share with the seller of the product or service. Likewise, if a company refers in an advertisement to the findings of a research organization that conducted research sponsored by the company, the advertisement must disclose the connection between the advertiser and the research organization. And a paid endorsement – like any other advertisement – is deceptive if it makes false or misleading claims.

Unfortunately, in the marketplace of ideas, astroturf groups which pretend to represent consumer interests that receive direct financial support from the industry they write about do not appear to be covered by the new FTC guidelines.

Several marketing firms specializing in “word of mouth” marketing or social media campaigns are paid to put free samples in the hands of bloggers who agree to write a review of the product or service (or at least write about it generally).  In return, they get to keep the product at no charge.  Some bloggers belong to marketing programs that pay them directly for positive reviews, mentions, or links to a product or service.

The new regulations will not punish bloggers who violate the FTC guidelines — the Commission will instead go after the marketing company, the manufacturer or provider.

Jack Gillis

Some consumer groups think that is a mistake, and that bloggers should also be accountable.

Jack Gillis, a spokesman for the Consumer Federation of America, told the Associated Press he thinks the FTC doesn’t go far enough to protect consumers from unethical bloggers.

“Consumers are increasingly dependent on the Internet for purchase information,” he said. “There’s tremendous opportunity to steer consumers to the wrong direction.”

The consumer advocacy group said lack of disclosure is a big problem in blogs. To mainly crack down on companies that give out freebies or pay bloggers won’t always solve the problem. By going after bloggers as well, “you put far more pressure on them to behave properly,” Gillis said.

For the record, Stop the Cap! receives no compensation of any kind from this industry or any other.  This website is supported entirely by myself and consumer contributions made through the Paypal link on the right.  Further, none of our authors are employed by or contracted with any company or provider with an interest in our issues, including Google (for the few who have made that baseless accusation in the past.)

I believe that bloggers should be held to fully disclosing their industry and/or financial connections so consumers may be fully informed about any potential conflict of interest or bias.  Fake website reviews and promotions have been a perennial problem on the Internet, some written by consumers who earn money or free service whenever a new customer signs up using a special link he or she provided.

Some reviews on big sites like Amazon have been written by company employees under pseudonyms which praise their own products and trash the competition.  The “word of mouth” marketing industry takes this to a new level, by leveraging social media networks to hype a product, with a direct incentive for the writer to provide glowing reviews if they want to remain on the “free goodies” mailing list.  An even stronger incentive to write “pay for say” articles comes when actual cash payments are provided for reviews.  Bloggers instinctively would suspect the gravy train would derail if they turned in a series of negative honest reviews, leading to the marketing company to drop them from the program.

Having full disclosure for sites engaged in public policy debates is an even better idea, especially when members of Congress routinely quote from material provided to them by what they assume are consumer groups, but are actually little more than industry-sponsored megaphones.

[flv width=”480″ height=”360″]http://www.phillipdampier.com/video/WWLP Springfield Bloggers Must Confess 10-5-09.flv[/flv]

WWLP-TV in Springfield reports on the new rules for bloggers.  Note the report is inaccurate about fining bloggers — FTC enforcement will not target bloggers. (1 minute)

A Fox News video report about “blogger mommies” that advocates self-regulation is also included below.

… Continue Reading

Verizon FiOS today adds television to its lineup of services in several suburban towns in the Syracuse area, as competition heats up in central New York for cable, telephone, and broadband service.  But the incumbent cable operator, Time Warner Cable, says it’s not worried by Verizon’s arrival, and a company spokesman predicts no price war will result.

Eight communities in the Syracuse area will now be able to choose Verizon FiOS television service in addition to broadband and phone service: Camillus, Clay, Cicero, DeWitt and Salina, and the villages of East Syracuse and North Syracuse in Onondaga County, and the town of Fleming in Cayuga County.

The arrival of television service is important for Verizon, because it lets them compete head-on with incumbent cable operator Time Warner Cable that already offers bundled packages of services, typically known as a “triple play” in the industry — telephone, cable-TV, and broadband.

Chris Creager, Verizon’s president of Northeast operations, claims competition for cable television in central New York will result in better service at lower prices.

“When we enter a market, customers win,” Creager said. “Usually, cable companies are more receptive to looking at prices.”

Time Warner Cable downplayed the competitive threat Verizon could pose to their operations in the region.

In a statement echoing the sentiment Time Warner Cable has expressed in most of the communities where FiOS competes with them, spokesman Jeff Unaitis said Time Warner Cable already has an advanced cable network and has experience delivering cable television service to Syracuse-area residents that Verizon lacks.  Competition is nothing new to Time Warner Cable, he said, noting the company has faced satellite television competition for years.  Unaitis also predicts no significant price cuts as a result of Verizon’s all-fiber FiOS system arriving in town.

Indeed, evidence suggests that Verizon’s FiOS service does not result in dramatic savings for consumers, with one significant exception.

New customer promotions often offer significant price savings, particularly for customers who sign contracts to remain with providers for one or two years, and choose bundled packages of multiple services.  Central New York customers signing up for Verizon FiOS for at least two services can receive a $150 gift card.  Customers choosing their “triple play” will receive $30 off their monthly bill for six months.

Once the promotional offers expire, so do most of the savings, unless a customer threatens to switch providers.  That often brings a renewal of their promotional package price for an extended period, although some providers limit the number of times a customer can take advantage of a promotion.  For consumers trying to optimize savings, that can start a ping-pong relationship with providers, as customers sign up for a promotion and then cancel service when it expires, taking their business to the other player in town.

Competition does often bring improved service, even when savings are elusive.  Broadband service in particular often benefits, as consumers enjoy faster speeds with fewer limitations in communities with FiOS as one of the competitors.

In Syracuse, Time Warner Cable has adjusted speeds upwards for its Road Runner service, in advance of Verizon FiOS’ arrival.  In contrast, speeds in Rochester, a city with no prospect for Verizon FiOS competition, has not seen a speed increase for standard service in several years.  In New York City, a system upgrade to DOCSIS 3 technology has allowed the cable company to offer a premium 50Mbps service tier.  The Syracuse Post-Standard explored the competition angle, and what central New York residents might expect to come from it:

Competition from FiOS, which offers Internet download speeds of up to 50 megabits per second, may push Time Warner Cable to deploy available technology to match those speeds, said Thomas W. Hazlett, a law and economics professor at George Mason University and former chief economist of the Federal Communications Commission. Time Warner Cable recently upgraded its New York City network to offer a 50-megabit option, compared with the maximum 15-megabit speed in Syracuse.

“If it’s like elsewhere, you’re going to see Time Warner respond,” Hazlett said. “They will increase speeds.”

Likewise, Verizon and Time Warner Cable will push each other to offer better channel lineups, better picture quality, on-demand programming and novel services, said Jeffrey Kagan, an independent telecommunications analyst in Atlanta. Prices also will be lower that they would be without competition, but don’t expect a big drop, he said.

The newspaper explored what each company offers customers:

$110 per month: Includes unlimited phone calls in North America; Internet at 15 megabits per second for downloads, 5 megabits for uploads; 255 standard-definition TV channels and seven high-definition channels.

$120 per month: unlimited phone calls in North America; Internet at 25 MBPS for downloads, 15 MBPS for uploads; free Wi-Fi access on nationwide network of hotspots; 275 standard-definition TV channels and 70 high-def channels.

$130 per month: Same package as $120, but with Showtime, 16 more standard-def channels and eight more high-def channels.

Creager said Verizon will lock in the price for two years.

Time Warner Cable’s regular rate for its “All the Best” triple play is $135.50. But new customers can get an introductory rate of $115 for a year, including free use of a digital video recorder for six months, according to the company’s Web site. The service includes unlimited phone calls in North America; Internet downloads at 10 megabits per second, uploads at 1 MBPS; 214 standard-def TV channels and 70 high-def channels.

Time Warner also offers a $100-per-month introductory package that includes fewer TV channels — 154 standard-def and seven high-def.

Several TV news video reports, and a Verizon video press release can be found below the page break.

… Continue Reading

One of the more far out there arguments against Net Neutrality has consistently come from conservative astroturf groups, who receive plenty of corporate funding to advocate a pro-business agenda using arguments that appeal to a conservative audience.

Newsmax, one of the more widely-read conservative websites, has gone all out on the theory that Net Neutrality is an attempt by President Barack Obama to take control of the Internet, potentially even leading to censorship.  In an unconvincing video segment, Newsmax.TV reporter Ashley Martella interviews Ryan Radia, an Information Policy Analyst at the Competitive Enterprise Institute, a pro-business think tank.

Newsmax TV: Net Neutrality is a "regulatory power grab" (4 minutes)

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p style=”text-align: center;”>(Note: Because Google video ads auto-play without your consent, which we do not agree with at Stop the Cap!, clicking the image will launch a new browser window to take you to Newsmax’s site to play the video there.)

A number of conservative blogs and news sources have latched onto one echo chamber claim: “CBS News recently reported that a cyber security bill would give Obama the emergency powers he’d need to control the Internet.”  When a link to the actual report is not provided, that should ring warning bells in your head.  Unfortunately, too many people simply accept statements as fact and never bother to check them out.  If Katie Courac is warning the country about an Obama power grab online, I want to know about it.

Stop the Cap! is one of the few, the proud, the fact checkers.

As with most of the memes attacking Net Neutrality on political grounds, there is considerable exaggeration at work here.  We could find two references on CBS News’ website to the aforementioned claim, and both turned out not to be news reports, but one blog entry and a reprinted news article from a conservative news site¹:

• Senate Proposal Gives President Authority Over Internet, by Declan McCullagh, a senior correspondent for CBS News’ Web site.  (August 28, 2009)
• An Unconstitutional Internet Power Grab, by Bruce Henderson, reprinted with permission from The New Ledger, a conservative news site founded by Ben Domenech of RedState blog fame. (September 1, 2009)

An Associated Press wire story this past weekend covering proposed legislation also appears on CBS News (and thousands of other websites).

At issue is S.773, The Cybersecurity Act of 2009, a Senate bill introduced by Sens. Jay Rockefeller (D-West Virginia) and Olympia Snowe (R-Maine) to establish an effective defense against cyber attacks on the United States.  Some early drafts of the proposed bill had some language, long since discarded, that could have raised privacy concerns, but it’s disingenuous at best to suggest this bill’s language, known to Newsmax and others propagating these near-hysterical conspiracy theories, would give any power to the Obama Administration to silence dissent and “control the Internet.”

In fact, this legislation does not even originate with the White House.  Jena Longo, deputy communications director for the Senate Commerce committee, de-fanged the hysteria back in late August in a statement:

The President of the United States has always had the Constitutional authority, and duty, to protect the American people and direct the national response to any emergency that threatens the security and safety of the United States. The Rockefeller-Snowe Cybersecurity bill makes it clear that the President’s authority includes securing our national cyber infrastructure from attack. The section of the bill that addresses this issue, applies specifically to the national response to a severe attack or natural disaster. This particular legislative language is based on longstanding statutory authorities for wartime use of communications networks. To be very clear, the Rockefeller-Snowe bill will not empower a “government shut down or takeover of the internet” and any suggestion otherwise is misleading and false. The purpose of this language is to clarify how the President directs the public-private response to a crisis, secure our economy and safeguard our financial networks, protect the American people, their privacy and civil liberties, and coordinate the government’s response.

Radia, for his part, illustrates the effort to co-opt conservatives who distrust the Obama Administration into coming along for the ride for an industry friendly snowjob opposing Net Neutrality, with helpful prodding from Martella:

Martella: Could this lead to censorship?

Radia: There is the possibility of that.  What we have seen lately is the Obama Administration and agency officials attempt to increase their power over government networks.  Just a few weeks ago, CBS News reported that a cyber security bill would give Obama emergency powers to control the Internet.  Under a Net Neutrality regime, we could see the FCC tell companies what data they can and cannot prioritize.

Martella’s wild “censorship” reference was jarring because it comes out of the blue with no supporting preposition.  In fact, it’s pro-Net Neutrality advocates that fear providers could engage in censorship, because there have been instances where providers have done just that.  Net Neutrality impacts private Internet providers by demanding they do not block, impede, or interfere with third party website content.

Radia plays mix ‘n match with two different issues to create a magical blend of nonsense — the cyber security bill which conservatives fear is an Obama power grab and Net Neutrality’s consumer protections against abusive broadband network management.

The Obama Administration’s advocacy of Net Neutrality is not about increasing power over government networks.  CBS News did not report that a cyber security bill would give Obama emergency powers to control the Internet — it printed a blogger’s opinion and a reprint from a conservative news site that hypothesized such a bill, if it existed, would do that.  Radia defines Net Neutrality as the FCC telling companies what data they can and cannot prioritize.  Actually it just preserves the open network that has made the Internet so unique.  But on behalf of his provider friends, that issue is force-merged into the Obama “Internet takeover” theory, with the hope it will energize conservatives to also oppose Net Neutrality.

Radia’s arguments are hardly convincing.  He repeats the unpersuasive and undocumented fears that “Net Neutrality … is a rule that would stifle innovation, would reduce network investment, and it would decrease consumer choice in the broadband market.”  It sounds like he also bought a ticket to OppositeLand, where reality is defined as the exact opposite of the truth.  As is the case in Canada, it is the lack of Net Neutrality protection which stifles innovation from new high bandwidth applications that cannot succeed in a marketplace rich with Internet Overcharging schemes and speed throttles.  Online video for Canada is just one of several applications that have been stifled by provider controls.  There is no evidence Net Neutrality would reduce investment in networks.  Customers clamoring to use those networks and the diversity of online content is much more likely to stimulate network upgrades to maintain quality of service.  How consumer choice in the broadband market (which most consumers believe is hardly robust) would be impacted negatively is never explained.

Radia accidentally justifies why FCC policy alone is not enough to guarantee Net Neutrality protection when he points out Congress has not specifically authorized the FCC to get involved in the network management of service providers.  A bill in the House of Representatives would do just that, however.

Radia’s assumptions that consumers are pleased with the competitive marketplace, particularly for wireless, are dubious at best, particularly when he makes this stunning statement:

“If you want a walled garden, a device where a company controls and helps guide the user experience, you can get an iPhone.”

Of course, many iPhone users have complained openly and loudly about the fact they are stuck with AT&T — AT&T retains an exclusive arrangement with Apple in the United States to sell the phone for use on AT&T’s network.  They also aren’t too happy being limited by both companies in selecting applications to run on the phone, something managed by Apple and AT&T unless the customer “jailbreaks” the phone to bypass the restrictions.  The result is a stifled iPhone user experience on an overloaded AT&T wireless network, higher pricing on service plans for the iPhone, and consumer choice limited to deciding whether to live with these restrictions or go without.

Radia suggests Net Neutrality is being pushed just by a handful of “so-called consumer groups that believe that since their preferences are not being matched in the market, that they should use the hand of government to force these rules upon the private sector.”  His problem with that is that he believes (along with the providers who spend millions lobbying) that consumers are well served by today’s marketplace filled with proprietary business models.

Of course, real consumer groups can’t exist without consumers that actually support them, and as we’ve documented since this site launched, consumers are not well served by the limited competitive marketplace, and the abuses that come from that, and they’ve complained loudly and regularly to those providers about those practices.  They aren’t listening.  So consumers are turning to the public officials who regulate and oversee such markets to attempt to force them to listen.

Newsmax’s efforts to give mainstream media credibility to a sensationalized claim was only outdone by Radia himself on his own bio page:

Ryan is a frequent contributor to the Technology Liberation Front, the technology policy blog dedicated to preserving freedom and liberty in the information age. His ideas have been referenced by technology writers including Andrew Sullivan of The Atlantic’s Daily Dish, Karl Bode of Broadband Reports, and Mike Masnick of Techdirt.

Karl Bode found it ironic Radia would reference a piece he wrote, because Bode’s article trashed Radia and his friends for claiming a cable price war was resulting in consumer savings.  The Techdirt piece Radia links to didn’t exactly give him a seal of approval either:

Last month, we mocked some mainstream press reports claiming both a broadband price war and the fact that broadband prices were rising. There doesn’t really seem to be much of either, as broadband prices have remained pretty constant, even accounting for promotional pricing. However, with Comcast getting ready to significantly boost speeds (yes, with its broadband caps, Ryan Radia is wondering if the actual “price war” is hidden by the fact that it’s in price per megabit.

In other words, if prices remain constant, but your speed doubles, isn’t that something of a price decrease? Radia chalks this all up to competition in the market, but it should at least be admitted that the speeds (even these higher speeds) still pale in comparison to other countries where there is much greater competition than in the US, where most people still are limited to only two real choices. Either way, as someone who’s still stuck on a home connection that runs around 500k (below the new 768k cutoff for “real” broadband) despite being in the center of Silicon Valley, I’m still not convinced that these greater speeds are so readily available yet.

We invite Radia to link to our spanking as well.

¹Using search terms “obama emergency internet” and “emergency internet” on the CBS News website.

HK Broadband offers 100% Fiber Optic service to residents of Hong Kong

Hong Kong remains bullish on broadband.  Despite the economic downturn, City Telecom continues to invest millions in constructing one of Hong Kong’s largest fiber optic broadband networks, providing fiber to the home connections to residents. City Telecom’s HK Broadband service relies on an all-fiber optic network, and has been dubbed “the Verizon FiOS of Hong Kong” for its dramatically faster broadband speeds.

Hongkongers have had several choices for broadband service over the years, most offering traditional DSL service throughout the Hong Kong Special Administrative Region (Hong Kong is a territory of the People’s Republic of China). Priced around $32 a month, the most popular service choice offers residents 6Mbps downstream speeds and 0.6Mbps upstream. Some modern residential multi-dwelling units have a more advanced from of DSL service offering up to 18Mbps downstream and 1Mbps upstream.

HK Broadband represents a major competitive threat for traditional DSL service in Hong Kong, because the fiber optic network provides customers with faster speeds ranging from 25Mbps-1000Mbps.  The company also offers a bundle including broadband, a Voice Over IP telephone service, and IPTV (cable television) service with 80+ channels. HK Broadband offers symmetrical speeds on their network, which means your upload speed is as fast as your download speed. The company has pummeled its telephone network-reliant competitors with humorous ads that call out DSL’s slower speeds, particularly for uploads.

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p style=”text-align: center;”>[flv width=”450″ height=”360″]http://www.phillipdampier.com/video/HKBN Ad – Ants.flv[/flv]
HK Broadband “Ants” Advertisement: Ten Kung-Fu-Fighting-Ants, representing the downstream speed of a traditional DSL broadband connection, are shown ganging up on a single helpless ant, who represents the weaker upstream speed, demonstrating how traditional DSL services typically offer upload bandwidth that is only a 10th of the download speed.

HK Broadband offers 100Mbps service for $35 per month, just a few dollars more than DSL. But there is an interesting catch. HK Broadband, like other providers in Hong Kong, cope with inadequate international broadband connections. Instead of engaging in Internet Overcharging schemes like usage caps, such as those found in Australia and New Zealand, the company has instead capped the speed for websites located abroad at 20Mbps for both uploads and downloads. The 100Mbps speed is reserved for domestic websites. Some subscribers note they couldn’t get speeds much faster than that when accessing overseas sites regardless of the cap, so it has not presented a major problem. As connectivity improves, so should the speeds, according to company officials.

The company also has a unique residential service guarantee — they promise that you will receive at least 80% of the speed you subscribe to, or they refund double your money back. Of course, this applies only to connections made to websites within Hong Kong.

When you’ve got it, flaunt it, and HK Broadband’s fiber speeds are the hallmark of their marketing campaigns.

[flv width=”480″ height=”284″]http://www.phillipdampier.com/video/HKBN 100Mbps Ad.flv[/flv]

HK Broadband “Fat Pipe” Advertisement: Real life characters representing Internet content force themselves into a tiny pipeline, representing DSL, but are later liberated by a wide open fiber optic pipeline they can run through with room to spare.

The investment by City Telecom in their fiber optic broadband network has brought impressive financial results to the company, with customers taking more of their telecommunications business in HK Broadband.  That increases the average revenue per subscriber.  The company has also aggressively increased the level of investment to build out its network, producing an economy of scale that has reduced the costs to wire new subscribers.

Traditional Wall Street investors have often been unimpressed with expensive technology upgrades undertaken by telecommunications companies.  Notably, Verizon Wireless’ FiOS fiber to the home network was pummeled by several investor groups who complained Verizon was spending too much on their fiber network, even though their costs to wire each new customer has dramatically decreased with time.  City Telecom has turned that criticism on its head.  Among many of its competitors, City Telecom is the second most profitable, earning an 11% profit margin.

China Securities has showcased the company, noting it enjoys subscriber growth at levels greater than industry growth, is positioned with technology that assures it of long term stability in revenue and income growth, and despite all of the investments the company has made, retains a strong free cash flow.  Most of all, it has very happy subscribers who enjoy a well regarded broadband service, available at fast speeds and a reasonable price.

The incumbent telephone company’s network of copper wire, supporting lower speed DSL service, is not in the same position.  HK Broadband brought Alexander Graham Bell back to life to chastise the notion that a network more than 100 years old is appropriate for 21st century broadband.

[flv width=”480″ height=”360″]http://www.phillipdampier.com/video/HK Broadband Bell Ad.flv[/flv]

HK Broadband “Alexander Graham Bell” Advertisement: The inventor of the telephone makes a “special-guest” appearance pointing out the fact that the 100 year old telephone network wasn’t designed for today’s broadband connections. This is set in a traditional Chinese Hell-like environment to imply the hellish experience of surfing the Internet with a slow connection.

<

p style=”text-align: left;”>HK Broadband has not escaped the attention of its competitors, of course.  PCCW Limited, Hong Kong’s dominant telephone company, has been aggressively marketing its own fiber, DSL, and wireless broadband products, not allowing HK Broadband to win without a fight. PCCW has had to play catch-up with HK Broadband’s aggressive fiber deployment, which focused on residential and business customers from the outset.  PCCW’s fiber network was primarily intended for business customers, and now the company has been rapidly expanding their fiber network to residential customers.  Today, where PCCW fiber is available, customers can choose from 18Mbps, 30Mbps, 100Mbps, or 1000Mbps service plans.  Many PCCW customers will also be aggressively marketed a wireless mobile Netvigator add-on, one of PCCW’s more successful product lines.

[flv width=”294″ height=”240″]http://www.phillipdampier.com/video/PCCW Fiber Optics Ad.flv[/flv]

PCCW “Fiber Optics” Advertisement: Lampooning HK Broadband’s fiber optic network, PCCW says it had their own extensive fiber optic network laid before HK Broadband came around.  Its tagline, “…the real fiber optics broadband.”

A detailed presentation of HK Broadband and its potential attractiveness to investors was produced by China Securities and features an interview with NiQ Lai, the Chief Financial Officer of City Telecom.

[flv width=”640″ height=”480″]http://www.phillipdampier.com/video/Chinasecurities-City Telecom Presentation September.flv[/flv]

[13 minutes]

FCC Chairman Julius Genachowski

FCC Chair Julius Genachowski announced a proposal that would prevent cable, wireless and telecommunications companies from blocking certain information on the Internet. A panel of industry analysts then discussed the concept called “net neutrality,” along with their ideas for improving broadband access.

Event Information

When

Monday, September 21, 2009
10:00 AM to 12:00 PM