Karl Bode is a freelance writer living in New York that has been babbling, jabbering and prattling about technology, politics and culture professionally for more than fifteen years. Follow me on Twitter @KarlBode
We've long noted how ISPs have convinced (read: paid) more than twenty states to pass protectionist broadband laws that prohibit towns and cities from improving their own broadband infrastructure. The bills not only saddle community broadband with onerous restrictions to make them less viable, they often even block towns and cities from striking public/private partnerships with companies to improve broadband. Last year, the FCC voted to take aim at two such laws in Tennessee and North Carolina, arguing the laws do little but protect the status quo, hindering the development of alternative broadband delivery options.
Pressured by ISPs, both states quickly rushed to sue the FCC, saying that the agency was violating "states rights" (ignoring the rights violated by letting ISPs write awful state law). The FCC, in contrast, says its Congressional mandate to ensure "even and timely" broadband deployment under the Communications Act gives it full legal authority to take aim at such restrictions.
Enter Presidential hopeful Ted Cruz, who is now pushing amendments alongside Nebraska Senator Deb Fischer that would make a few changes to the FCC Process Reform Act. According to an early version of the proposal provided to industry trade magazines, the bill would tie the FCC's hands when it comes to trying to eliminate state broadband protectionism:
"FCC Chairman Tom Wheeler says those laws are pushed by incumbents to prevent price and service competition and the FCC has stepped in to preempt state laws in Tennessee and North Carolina. The FCC is currently in a court battle over that decision. The amendment, according to the amendment list obtained by Multichannel News/B&C, "Prohibits the FCC form preventing states from implementing laws relating to provision of broadband Internet access service by state and local governments."
This is far from the first effort of this kind. Tennessee Representative Marsha Blackburn pushed a similar measure last year. Usually, the measures try to sow partisan discord by claiming the FCC has just gone power mad, again hoping nobody notices giants like Comcast and AT&T performing state lawmaker puppetry in the periphery to the detriment of local communities.
Note these towns and cities aren't getting into the broadband industry because they think it's fun; they're exploring alternative options because the private sector has failed across huge swaths of the country. Unfortunately, large ISPs like Comcast, AT&T, and Time Warner Cable quite literally control most state legislatures, ensuring things stay that way. ISPs could prevent these kinds of efforts by providing better, cheaper broadband -- though obviously lobbying our compromised state legislative systems is notably less expensive than deploying new fiber -- or lowering prices to compete.
The problem for Cruz is that while ISPs have historically tried to frame municipal broadband as a partisan debate to sow discord, that has been less effective over time as public/private efforts from the likes of Google Fiber or Tucows have highlighted the need for some bigger picture thinking. The majority of such networks are now being built in more Conservative leaning areas, and the idea of municipal broadband tends to have broad, bipartisan support. Apparently, disdain for duopoly apathy and high prices is one of the few things most Americans can agree on.
As such, rushing to defend giant telecom providers from competition doesn't seem like the brightest bet for somebody trying to win hearts and minds ahead of a national election.
from the you-see,-we-don't-really-do-competition dept
Back in February the FCC voted on a new plan to open up the traditional cable box to competition. According to a fact sheet being circulated by the agency (pdf), under the FCC's plan you'd still pay your cable company for the exact same content, cable operators would simply have to design systems -- using standards and copy protection of their choice -- that delivered this content to third-party hardware. The FCC's goal is cheaper, better hardware and a shift away from the insular gatekeeper model the cable box has long protected.
Given this would obliterate a $21 billion captive market in set top box rental fees -- and likely direct consumers to more third-party streaming services -- the cable industry has been engaged in an utterly adorable new hissy fit. This breathless hysteria has primarily come in the form of an endless stream of editorials -- most of which fail utterly to disclose financial ties to cable -- claiming that the FCC's plan will boost piracy, hurt privacy, "steal the future," and even harm ethnic diversity.
And now, the industry is also threatening a lawsuit. As the industry argued with Title II, net neutrality, and everything else, former FCC boss turned top cable lobbyist Michael Powell is arguing that the FCC has once again overstepped its regulatory authority:
"An agency of limited jurisdiction has to act properly within that jurisdiction," Powell said, making it abundantly clear the NCTA does not believe the FCC has not done so in this case. He said that the statute empowers the FCC to create competition in navigation devices, not new services. "Every problem does not empower an FCC-directed solution. The agency is not an agency with unbridled plenary power to roam around markets and decide to go fix inconveniences everywhere they find them irrespective of the bounds of their authority.
Except unlike net neutrality, telecom policy wonks like Public Knowledge's Harold Feld (who probably spends more time wading through FCC policy and legal issues than anybody on earth) notes there's absolutely no doubt the FCC has the authority to act here:
"First, it’s important to recognize that the cable folks were already in front of the D.C. Circuit three times on this issue, and lost each time. See General Instrument Corp. v. FCC, 213 F.3d 724 (D.C. Cir. 2000); Charter Communications Corp. v. FCC, 461 F.3d 31 (D.C. Cir. 2006); and Comcast Corp. v. FCC. In each of these cases, the cable industry made similar statutory arguments about the limits of FCC authority in Section 629. On each occasion, the D.C. Cir. — which was a lot more pro-business and anti-FCC back then, rejected them.
So if the cable industry's lawsuit goes nowhere, its only other hope is that it can convince the public via editorials, sockpuppetry and astroturfing that the FCC's plan isn't actually about helping consumers, it's just a power-crazed attempt by "big tech" (read: Google, Amazon) to treat poor, under-appreciated cable companies unfairly. The problem with this effort, as usual, is that the cable industry remains the least liked industry in America thanks to a generation of anti-competitive behavior. Therefore the only folks likely to buy the cable industry's argument here are those with a political axe to grind (conflating government over-reach in other areas with the FCC's attempts to fix a broken telecom market), or those that tend to profit from said broken telecom and TV market.
If there's any question at all about the FCC's effort, it's whether or not the agency would find its time better spent focusing its regulatory calories on shoring up broadband competition, since the rise of Internet video is inevitably destined (even though it may take another decade) to put the lame old cable box out to pasture without government intervention.
After taking a PR beating for several years on the matter, Comcast has announced that it's significantly bumping the company's usage caps. Since 2013 Comcast has been conducting a "trial" in many of the company's less competitive markets, capping usage at 300 GB per month, then charging users either $10 per each additional 50 gigabytes, or providing users the option of paying $30 to $35 per month extra to avoid the cap entirely. But according to a new blog post by the cable giant, the company will be bumping that usage allotment to one terabyte per month starting June 1.
Users will still need to pay $10 per each additional 50 gigabytes of data consumed should they go over the cap. And they still have the option of paying a penalty should they want to avoid usage caps entirely, though Comcast has bumped the price of such an option to an additional $50 per month. Comcast's quick to insist that the terabyte cap is so generous, few consumers will ever find themselves running into the limit:
"A terabyte is an enormous amount of data. It’s far more than most of our customers will ever use in a month. Today, more than 99 percent of our customers do not come close to using a terabyte. Our typical customer uses only about 60 gigabytes of data in a month – that’s far less than a terabyte (in fact, 940 gigabytes less), or less than six percent of a terabyte."
Of course, while that's true today, that doesn't mean it will be true tomorrow. And while the increase is certainly welcome, that doesn't change the fact that usage caps on fixed-line networks still aren't necessary. As we've repeatedly noted, Comcast's cost to provide broadband service remain fixed or in decline, and the company's own support documents and engineers have suggested the caps have nothing to do with congestion or network necessity. That's because they have everything to do with protecting TV revenues from Internet video competitors.
While Comcast's announcement implies Comcast is graciously responding to consumer feedback, the origins of the company's decision lie elsewhere.
With the FCC imposing a seven year ban on usage caps as a Charter merger condition this week, many believe the FCC is signaling it intends to finally crack down on usage caps. The agency has tap-danced around the issue for years, but with a growing number of companies exploring the option -- and a growing number of companies (including Comcast and Verizon) exempting their own content from such caps, pressure has mounted steadily on the FCC to wake up from its regulatory coma on the subject. If that's to happen, it will likely happen after the industry's lawsuit against the agency over net neutrality is settled.
Comcast's also responding to the fact that AT&T is planning to impose its own usage caps starting May 23. AT&T plans to begin imposing usage caps ranging from 300 GB to 1 terabyte, and, like Comcast, charge $10 per each additional 50 GB consumed. Also, like Comcast, AT&T intends to begin charging customers a $30 premium should they want to avoid the charges, effectively charging customers significantly more money for the same service they had yesterday. Comcast bumping its cap to more closely match AT&T's is the U.S. broadband market's rather twisted version of competition.
It seems likely that some news outlets will frame what Comcast's doing as "generous." And while a definite improvement, it shouldn't overshadow the fact that these caps are little more than glorified price hikes on uncompetitive broadband markets, and an anti-competitive weapon against the threat of Internet video disruption.
from the rooting-against-your-best-self-interests dept
As we've been discussing, the FCC is cooking up a plan to open up the closed cable set top box to third party competition. As we've also been pointing out, the cable industry has been throwing an absolutely epic hissy fit about this plan, given it would destroy the $21 billion in annual revenues cable operators make off of cable box rental fees. Since it can't just admit this is all about protecting set top rental fees, the cable industry has been pushing an endless wave of editorials in newspapers and websites nationwide, claiming more set top box competition will hurt consumer privacy, increase piracy, harm diversity, and rip the very planet from its orbital axis.
Most of these editorials are being penned by the usual assortment of entertainment industry and telecom hand-wringers, the majority of whom have a vested financial interest in the status quo and as such have been happy to repeat the talking point that the FCC's well-intentioned plan is just a secret plan by "big Tech" (aka Google) to treat the noble and ultra-innovative cable industry unfairly.
Back in March we noted that despite the fact that such rules would obviously help streaming set top vendors, Roku had come out in defense of the cable industry, rather timidly saying it wouldn't be supporting the FCC's plan because it has been trying to secure new, semi-exclusive deals with cable providers:
"We have not been advocating for a rule making in this area at this time,” Tricia Mifsud, a Roku spokeswoman, told IBD. “While we are known for selling streaming players, it is only one area of our business. Customers also access our platform through smart TVs and streaming players that operators deploy."
Roku's opposition to the FCC's plan became a little clearer last week, when Comcast (trying to preempt the FCC's plan), announced it was launching an initiative to let some Comcast customers access cable content via Comcast apps on third party devices. Comcast's partners in this new initiative? Samsung and Roku, who'll be offering the Comcast Xfinity app on smart TVs and streaming devices. And while Comcast's plan is certainly a step in the right direction, Comcast being Comcast you can be fairly certain that there will be caveats when the program launches to ensure the impact to set top box revenue is minimized. Comcast's plan obviously also doesn't impact other pay TV operators, so it doesn't really change things for the overall industry.
Trying to defend the company's self-immolating position, Roku CEO Anothony Wood decided last week to write an editorial over at the Wall Street Journal, breathlessly insisting the FCC's plan would hurt consumers. And, as with every editorial of this type, Google is trotted out as the bogeyman pulling the FCC's strings in a plan to somehow treat cable companies unfairly:
"...With prodding from Google and TiVo, the FCC is proposing new “set-top-box” rules that would force cable companies to make their video services available as an “open” set of streams. In other words, companies like Comcast or DirecTV would be required to provide their video, guide data and encryption for use by other companies who could then create their own hardware and software to deliver cable content. As Google argued in an FCC filing last year, the intent is to “unleash competition in the retail navigation-device market” and drive down costs.
This might seem like a great deal for consumers and companies like mine, but once you start peeling back the layers, the picture changes. The proposed regulation would—as we say in the industry—“decouple the user interface” from the video and data itself. This would allow a company like Google to do to the TV what it did on the Web—build an interface without the “inconvenience” of licensing content or entering into business agreements with content companies such as ABC, FOX, HBO, or video distributors like pay TV operators. The unintended consequences of circumventing these kinds of arrangements are likely to include increased costs for consumers, reduced choices and less innovation."
But if you actually read the FCC's proposal so far (pdf), you'll notice the plan does nothing of the sort. In short, customers will still have to pay their cable provider to access cable content, it will just be delivered to additional hardware platforms -- using copyright protection standards determined by the cable industry. The content can't just be repackaged without cable companies getting compensation. How letting consumers have access to more, better and cheaper methods to access the same content results in "reduced choice and less innovation" is a logical leap that makes no coherent sense whatsoever. Similarly, this repeated claim that this is some secret cabal by Google -- when the quest for clunky cable set top box reform is decades old -- remains a bizarre narrative unsupported by reason. Would Google benefit from open set top boxes? Yes. So would countless other hardware vendors and developers.
Woods also tries to argue that regulation isn't necessary, because we're already seeing innovation in the streaming set top box market:
"Regulating the set-top box is unnecessary in the modern age of Internet streaming. Consumers now have tremendous choice for their TV operating system and interface. Robust competition among companies like Roku, Apple, Amazon and Google is already driving rapid innovation and pushing costs down.
Right, but we're not talking about streaming players and services, we're talking about the traditional cable set top box. You know, the cable boxes that consumers, on average, pay $231 to rent annually (and thousands of dollars for over the life of the hardware) despite most boxes being worth a fraction of that? And while we have seen some innovation in recent years on the set top box front (voice search, marginally less archaic GUIs), by and large the cable box remains a clunky relic of a bygone era and a cornerstone of the cable industry's antiquated and uncompetitive walled garden approach to customer services.
The thing is that if anybody should know better, it's Roku. The company had to file a complaint with the FCC (pdf) after Comcast spent years refusing to let its customers access HBO Go on Roku devices (in order, of course, to push those users toward Comcast's own Xfinity set top boxes and apps). Roku also expressed concerns in net neutrality filings with the FCC that Comcast was using TV Anywhere authentication as yet another way to inhibit Internet video competitors; Roku included:
"A large and powerful MVPD may use this leverage in negotiations with content providers or operators of streaming platforms, ultimately favoring parties that can either afford to pay for the privilege of authentication, or have other business leverage that can be used as a counterweight to discriminatory authentication. Additionally, MVPDs with affiliated ISPs can abuse their power over authentication by choosing to authenticate only their own or affiliated offerings."
Yet here we are, with Roku's CEO now playing kissy face with that same company because they've struck a new deal that will give Roku its own, special advantage in the pay TV market.
It should be noted that Woods wasn't entirely willing to pledge unwavering fealty to Comcast. Nor is his editorial entirely devoid of good points. Though Woods isn't willing to mention his new BFF by name, he does make some vague references to Comcast's decision to give its own content an unfair advantage via usage caps and zero rating:
"...the FCC proposal is distracting from the leading risk to the continued evolution of TV—open and fair broadband Internet access for all consumers. In particular, cable companies often control their customers’ broadband access and can take measures against competing streaming services and devices to give their own streaming services and devices an advantage. FCC regulations banning the discriminatory use of data caps and “zero-rating” schemes that selectively exempt certain content from data limits are far more important to the future of TV than “opening” the cable box.
If broadband Internet services are accessible and affordable to consumers and there is a level playing field for content providers and devices makers, then consumers will benefit from a revolutionized television experience. Let’s not bog down the revolution with an unnecessary government intervention in a dynamic marketplace.
In other words, while Woods is perfectly happy to blow a few kisses to protect his new business relationship with the Philadelphia-based cable giant, he's not willing to entirely sell himself and his company down river by ignoring the problems Comcast is causing on the net neutrality and zero rating fronts. And this is actually the one area I don't disagree with Woods on. With Internet video disrupting traditional cable anyway, it might make more sense for the FCC to focus its efforts on improving broadband competition. And, more specifically, the telecom industry's use of usage caps and zero rating to protect legacy TV from Internet video.
By the FCC's logic however, the glacial pace of cord cutting means that traditional cable and ye olde cable box will still be a dominant force for much of the next decade -- and consumers could still benefit from increased cable set top box competition during that period. The problem is that the cable industry clearly intends to fight this proposal tooth and nail, by dragging the FCC's effort out via lawsuit, and funding a major PR offensive in the hopes of convincing the public the FCC's gone power mad. With so many efforts on its plate (from municipal broadband to new broadband privacy rules), the FCC may have to seriously consider just which battles are truly worth fighting, and which problems, like the cable box, may be resolved organically by the market.
All of that said, it remains more than a little embarrassing that Woods and Roku are so eager to sell their longer-term success -- and the overall viability of the broader streaming industry -- downriver just to snuggle up a little closer to one of the most anti-competitive companies in the television industry.
For several years now, broadband providers have been taking full advantage of the lack of competition in the broadband market by expanding usage caps and overage fees. More recently, companies like AT&T, Comcast and Suddenlink have taken this practice one step further by charging users a $10 to $35 per month surcharge if consumers want to avoid usage caps. In other words, consumers are paying more money than ever for a service that costs less and less to provide, thanks again to limited competition in the broader broadband market.
And while companies like Comcast have used the same approach seen in the boiling frog metaphor to slowly expand its usage cap "trials" and hope nobody notices, people are definitely noticing the rising temperatures. The Wall Street Journal filed an FOIA request with the FCC, and has found that consumer complaints about broadband caps have been skyrocketing over the last year:
"Fearful of crossing data limits, some customers say they are canceling the streaming services, including Netflix, Sling TV and Sony PlayStation Vue. Consumer complaints to the Federal Communications Commission about data caps rose to 7,904 in the second half of 2015 from 863 in the first half, according to records reviewed by The Wall Street Journal under the Freedom of Information Act. As of mid-April, this year’s total was 1,463."
Though we've warned about this for years, the Journal almost-but-not-quite comes to the realization that usage caps have nothing to do with congestion or financial necessity, and everything to do with hamstringing Internet video and protecting legacy TV revenues. Companies like SlingTV and Netflix make that abundantly clear in their comments to the Journal, though Comcast clings to a familiar narrative in trying to justify why it's charging more money for the same service:
"Comcast says its aim is to ensure the heaviest users are paying more than lighter ones, since 50% of its bandwidth is consumed by just 10% of its customers. Comcast set up the trials to show “people who are consuming the most should carry more of the bill rather than raise everybody’s bill by the same amount,” says Marcien Jenckes, executive vice president of consumer services at Comcast."
But we've long noted how that justification is nonsense. The cable industry itself admitted years ago that congestion had nothing to do with usage caps. Comcast's own leaked support documents and comments from company engineers have also acknowledged as much. Meanwhile, if a small fraction of your customers are consuming an "excessive" amount of bandwidth (and ISPs never provide hard data on this front), you could easily push them to business-class tiers without having to impose a draconian and confusing new pricing paradigm on your entire customer base.
No, Comcast is imposing usage caps to simultaneously cash in on, and thwart, Internet video. Granted the company can't just come out and admit that, so we often see flimsy claims that imposing huge new rate hikes on its entire userbase is about fairness, even if Comcast's cost to deliver broadband services remains fixed or declining. Not too surprisingly, Comcast tells the Journal that the company's a gift to the Internet and would never, ever behave anti-competitively:
"We everyday contribute to the use and the growth of the Internet,” Mr. Jenckes says. “There is absolutely no anticompetitive belief or objective."
The reality is that when it comes to complaints about caps, we're only starting to see the tip of the consumer annoyance iceberg. Not only are companies expanding usage caps, companies like Comcast are now exempting their own content from these caps -- a fantastic way to give their otherwise underwhelming Netflix alternatives an unfair advantage in the market. Other companies like AT&T are using usage caps to attack cord cutters in another way, by socking them with overage fees unless they sign up for traditional TV services they may no longer even want (something AT&T tells the Journal is just a "really compelling" offer).
And despite the soaring complaints, and the broad anti-competitive implications of such arbitrary limits, the FCC has remained largely mute about usage caps -- often supporting the industry narrative that this is just "creative pricing experimentation." The hope at the FCC has been that its policies to encourage broadband competition will make a specific crackdown on usage caps unnecessary, but so far it certainly hasn't worked that way. Though less talked about, it's also a problem that the FCC has failed to ensure that ISP usage meters are accurate; as a result they often aren't, with some consumers being billed for usage when their modem is off or the power is out.
Broadband competition isn't going to magically fix itself, and outside efforts like Google Fiber or community broadband are only helping a fraction of the market. As such, complaints submitted to FCC systems will only grow as more and more consumers realize that usage caps and overage fees are a giant con perpetrated on an already annoyed and captive market.
For several years now we've noted how instead of adapting to the cord cutting age, many in the cable and broadcast industry have responded with the not-so-ingenious approach of aggressive denial, raising rates as fast as humanly possible, and stuffing even more ads into every television hour. And when broadcasters can't get the ads to fit, they'll just resort to speeding up or editing programs to ensure that they're hammering paying customers with more ads than ever. Given the rise in alternative viewing options, this obviously isn't the most ingenious form of market adaptation.
But in a sign that somebody over at the Comcast NBC Universal media empire is at least making a fleeting attempt at sector evolution, the company has announced that it will be dramatically reducing ad loads in some programs. More specifically, the company says it will be reducing the advertising load in each episode of "Saturday Night Live" by around 30%:
"NBC's "Saturday Night Live" is paring down its commercial load, with plans to cut about 30% of ads out of the sketch comedy show next season. It will do this by removing two commercial breaks per episode, giving viewers more content, said Linda Yaccarino, chairman-advertising sales and client partnerships, NBC Universal."
The catch? The company's going to be experimenting with more native, sponsored, and product placement advertising as part of the attempt to combat cord cutting and ad-skipping simultaneously:
"And for advertisers, NBC will also be offering a limited opportunity to partner with "SNL" to create original branded content. These native pods will only occur six times a year, Ms. Yaccarino said. "As the decades have gone by, commercial time has grown," Lorne Michaels, creator and executive producer, "Saturday Night Live," said in a statement. "This will give time back to the show and make it easier to watch the show live."
While it's not entirely clear what these "native pods" will exactly look like, it's not so much an evolution in advertising as it is a return to the bygone era of fifties TV sponsored product placement:
This isn't NBC's first flirtation with making a 180 industry turn back to content of this type, and the company has previously stated that advertisers can pay $300,000 or more just to get their feet in the door with product placement and native ads. And while quality and humor are certainly subjective, the problem is NBC's past experiments on this front really aren't that funny, and occasionally stumble into what feels like desperation. That opens the door to damaging your brand if your attempt to pitch laundry detergent or pharmaceuticals during a sketch is too ham-fisted.
NBC and advertisers are responding to the fact that prime time ratings and traditional cable TV subscribers continue to drop. Nielsen (the same company that used to call cord cutting "purely fiction") notes that most broadcasters continued to see up to a 4.1% decline in the number of homes tuning in to traditional television last month. That's again thanks to both cord cutting and "cord trimming," or the act of cutting back on the number of channels or premium networks a users subscribes to -- both in turn a response to high prices, restrictive viewing options, and flagging quality.
And while creatively experimenting with how ads get delivered is certainly part of the solution, it's not going to be a substitute for the one thing broadcasters (and by proxy cable companies) have been totally unwilling to do: offer the same content at a lower price. Ultimately the sector's going to have to take it on the chin, lose significantly more money, and begin seriously competing on channel bundle flexibility and price. That's an utterly unappealing proposition for an industry used to raising prices at four-times the rate of inflation, but the alternative is letting pesky, innovative upstarts walk away with legions of younger, disenfranchised television viewers.
If you recall, the FCC and DOJ blocked Comcast's acquisition of Time Warner Cable, in large part because of the sheer volume of nonsensical benefits Comcast tried to claim the deal would bring consumers. When Charter Communications subsequently announced its own acquisition of the company, it decided to take a different tack; most notably by taking a more congenial tone with regulators, dialing back the tone-deaf rhetoric and astroturf, and even hiring long-time net neutrality and consumer advocate Marvin Ammori to help seal the deal.
And it's now apparent that Charter's approach paid off. After months of meetings with regulators, both the FCC and the DOJ have announced they intend to approve the deal -- with a few conditions. After Bloomberg leaked word of the looming approval, FCC boss Tom Wheeler issued a statement saying (pdf) that most of the conditions being attached to the deal will focus on preventing Charter from harming Internet video competitors.
According to Wheeler, Charter won't be able to impose caps, engage in interconnection shenanigans, or bully broadcasters into withholding content from streaming providers (something Dish complained about) for a period of seven years:
"In conjunction with the Department of Justice, specific FCC conditions will focus on removing unfair barriers to video competition.
First, New Charter will not be permitted to charge usage-based prices or impose data caps. Second, New Charter will be prohibited from charging interconnection fees, including to online video providers, which deliver large volumes of internet traffic to broadband customers. Additionally, the Department of Justice’s settlement with Charter both outlaws video programming terms that could harm OVDs and protects OVDs from
retaliation– an outcome fully supported by the order I have circulated today. All three seven-year conditions will help consumers by benefitting OVD competition. The cumulative impact of these conditions will be to provide additional protection for new forms of video programming services offered over the Internet."
The FCC's ban on usage caps is probably the most interesting or the proposed conditions. The agency has by and large turned a blind eye to usage caps and zero rating of content so far. In part because it was unsure whether or not the courts would uphold the regulator's new net neutrality rules (which should be settled any day now), but also because the FCC has been hesitant to engage in broadband rate regulation. Like net neutrality, usage caps are a sign of a lack of competition in the broadband market, and streaming competitors like SlingTV worried that the Charter merger would simply result in yet another giant like Comcast -- with a vested interest in using the lack of broadband competition to hammer emerging streaming TV evolution.
Granted the conditions aren't all that revolutionary in that while Charter has flirted with usage caps, it currently doesn't impose them anyway. And on the interconnection front, the devil will be in the condition details (the threat of neutrality rule enforcement appears to have solved many of these disputes, for now). Meanwhile, consumer groups like Free Press say they aren't impressed, arguing the debt created by the deal will be passed on to Charter customers in still-uncompetitive markets, one way or another:
"Customers of the newly merged entity will be socked with higher prices as Charter attempts to pay off the nearly $27 billion debt load it took on to finance this deal. The wasted expense of this merger is staggering. For the money Charter spent to make this happen it could have built new competitive broadband options for tens of millions of people. Now these billions of dollars will do little more than line the pockets of Time Warner Cable’s shareholders and executives. CEO Rob Marcus will walk away with a $100 million golden parachute."
And while it's probably true that Charter will just find some other way to impose rate hikes on these subscribers, the conditions are at least an interesting signal from the FCC (and the DOJ, that issued its own statement on the approval) that it recognizes the growing threat usage caps are posing to the future of innovative services. Still, the conditions will be no substitute for real broadband competition, the lack of which a bigger, badder Charter will simply have to find new and creative ways to abuse.
Last year, we noted that Comcast was refusing to let the company's customers access HBO's streaming video service on certain platforms. In order to watch a service like HBO Go on your Roku or, say, gaming console, you need to log in using your cable credentials, as with most "TV Everywhere" type services. Most cable operators had no problem quickly enabling this authentication, but when it came to say -- HBO Go on Roku or the Playstation 3 or 4, Comcast refused to let the services work. Why? If users can't access this content via a third-party app, they're more likely to watch the content on Comcast's own apps, devices, and services.
"With every new website, device or player we authenticate, we need to work through technical integration and customer service which takes time and resources. Moving forward, we will continue to prioritize as we partner with various players."
Right. The problem is that nearly every other cable operator has made this kind of authentication work without problems nearly instantaneously. For example if you head to the HBO Go activation page and select Playstation 4, you'll note that no other cable operator appears to be having these kinds of problems. Roku actually needed to file an FCC complaint to get Comcast to stop doing this (years after customers started complaining). But it's still a problem for Playstation 3 or 4 users trying to use HBO Go; those annoyed users are now being told over at the Comcast forums that the apps won't work due to some unspecified "business terms" that have yet to be agreed upon:
"HBO Go availability on PS3 (and some other devices) are business decisions and deal with business terms that have not yet been agreed to between the parties. Thanks for your continued patience."
Again though, these ambiguous "business disputes" are apparently specific to Comcast's unique way of doing business, since no other major cable operator appears to be having them when it comes to third-party authentication.
And this is a problem that just keeps happening. Starz recently announced that it was launching its own, shiny new streaming video service. According to the Starz announcement, non-cable customers can pay $9 a month to access the app, but cable customers can access the application for free. Well, once again, except for Comcast customers, who are being "blocked" from accessing the app:
"Comcast disagrees with Starz's one-app-fits-all approach. The biggest U.S. cable operator and a key Starz affiliate has opted not to participate in the TV-everywhere aspect of Starz's new app. For now, at least, Comcast is declining to enable the authentication (or verification) of Starz subscribers on Comcast Xfinity who want to use the new app. Representatives of Comcast and Starz both say they are "great partners" and hope something can be worked out to resolve the situation, though it is unclear what might cause Comcast to change its view on the matter.
But because this exists in the murky periphery of telecom and television services and not the general Internet, it's not technically a net neutrality violation. It's just another, vanilla example of Comcast behaving anti-competitively in the hopes of herding its customers away from alternative content access methods and toward its own services. And that's par for the course for Comcast, which is now using usage caps to exempt its own streaming video services, giving them yet another leg up in the marketplace.
How outrageous you'll find Comcast's latest crippling of a third-party app appears to vary from person to person. I've seen more than a few people argue it's Comcast's prerogative to engage in these kinds of ambiguous business disputes, though I've seen just as many argue that if the Starz app offers paying customers a better way to access the same content -- it should be up to the consumer to make that decision, not Comcast. Either way, it's this kind of behavior that not only contributes to Comcast's historically-bad customer service rankings, but also the slow but steady rise in traditional cable cord cutting.
When Netflix recently expanded into 190 different countries, we noted that the company ramped up its efforts to block customers that use VPNs to watch geo-restricted content. More accurately, Netflix stepped up its efforts to give the illusion it seriously cracks down on VPN users, since the company has basically admitted that trying to block such users is largely impossible since they can just rotate IP addresses and use other tricks to avoid blacklists. And indeed, that's just what most VPN providers did, updating their services so they still work despite the Netflix crackdown.
Netflix's frankly over-stated "crackdown" is an effort to soothe international broadcasters, justly worried about licensing content to a company that is demolishing decades-old broadcasting power centers. But even superficial as it may be, Netflix's crackdown on VPNs still managed to erode user privacy and security, since obviously there are countless people using VPNs for reasons other than engaging in global Netflix tourism.
There was uproar from customers, some of which simply use VPNs to protect their privacy, with a petition calling for the ban to be lifted attracting over 40,000 signatures. But it seems Netflix, which generally cherishes its user experience, doesn’t seem fussed by this uprising.
“It’s a very small but quite vocal minority,” CEO Reed Hastings said during this week’s earnings call. “So it’s really inconsequential to us, as you could see in the Q1 results.”
And, if looking solely at growth, he's not wrong; the company reported that it now serves 81.5 million members, 42% of whom are now outside of the United States. That's 44,740,000 TV subscribers in the States alone, double Comcast's latest tally of 22,347,000 TV customers. While investors are worried about growing competition from Amazon and grandfathered customers' reaction to next-month's price hike (actually announced two years ago), most customers, VPN or otherwise, aren't leaving.
And while Netflix may be annoying some VPN users now, the company has repeatedly stated that its ultimate goal is to eliminate geographic broadcast restrictions entirely. That not only makes it so Netflix tourism is unnecessary, but it should reduce piracy -- something Netflix Chief Product Officer Neil Hunt reiterated earlier this year at CES:
“Our ambition is to do global licensing and global originals, so that over maybe the next five, 10, 20 years, it’ll become more and more similar until it’s not different”... “We don’t buy only for Canada; we’re looking… for all territories; buying a singular territory is not very interesting any more.... When we have global rights, there’s a significant reduction in piracy pressure on that content. If a major title goes out in the U.S. but not in Europe, it’s definitely pirated in Europe, much more than it is if it’s released simultaneously,” Mr. Hunt says.
In other words Netflix's long-term vision may be to eliminate fractured broadcast licensing so users don't need to use VPNs. But in the short term Netflix should probably try a little harder to avoid alienating its more technically savvy customers. They may be "inconsequential" now during Netflix's heyday, but may prove important once Netflix's streaming battle against Amazon, Hulu, Apple, and countless other companies starts to heat up.
"We all know that what they'd like to do is regulate the Internet so they can tax the Internet, so they could then come in and set all the rates," said Rep. Marsha Blackburn, R-Tenn."
With most people still not really even understanding what the Internet is, House supporters of the bill have great success in framing net neutrality as an attempt to tax the Internet. The primary pusher of the bill, Illinois Representative Adam Kinzinger, proudly proclaimed at his website that the net neutrality-killing bill would actually foster greater innovation and "better services" for consumers:
"Since its inception, the Internet has been free from rate regulation and has thrived under that model. Both Chairman Wheeler and President Obama assured Congress and the public that any regulations that were adopted under the open Internet order would refrain from allowing the federal government to regulate rates of broadband Internet access. H.R. 2666 codifies both the President’s and Chairman Wheelers’ past promises and will allow innovative companies to do what they do best: create new products and better services to benefit consumers."
Of course by gutting FCC authority over an un-competitive broadband market you'd obviously be doing the exact opposite, though given that AT&T is a top Kizinger donor, he's apparently willing to overlook any concerns on that front. Fortunately the White House has stated it intends to veto this latest bill should it wind its way through the Senate, making the effort an entirely empty gesture -- outside of it being a public oath of fealty to telecom campaign contributors.
As the EFF is quick to note, those who thought the neutrality fight was over last February when the FCC voted to approve the rules need to realize it's going to take constant fighting and public attention to keep those rules in place. The Presidential election and the ongoing industry lawsuits against the FCC remain the biggest threat to the rules, though no limit of bills continue to be introduced that aim to cut neutrality off at the knees, usually under the guise of trying to save the Internet from "Internet populists" and a power-mad FCC.
From net neutrality to municipal broadband, to new broadband privacy rules and a quest to open up the cable set top box to competition, we've noted repeatedly that the FCC under Tom Wheeler isn't the same FCC we've learned to grumble about over the years. For a twenty-year stretch, regardless of party control, the agency was utterly, dismally apathetic to the lack of competition in the broadband space. But under Wheeler, the FCC has not only made broadband competition a priority, but has engaged in other bizarre, uncharacteristic behaviors -- like using actual real-world data to influence policy decisions.
Obviously, this doesn't please incumbent telecom operators like AT&T, Verizon and Comcast, who grew pretty comfortable with an FCC that asked "how high" when commanded to jump. The reality is that this is just what it looks like when a regulator does its job and tries to fix a very broken market. But incapable of admitting the broadband market's horribly broken, the telecom industry instead seems intent on pointing fingers elsewhere. In a strange story over at Politico, broadband providers blame Google for absolutely everything the FCC has been up to.
The quest to open the set top box, the quest for more unlicensed spectrum, and the quest for better consumer privacy controls? All the fault of Alphabet and Google:
The cable industry-led Future of TV Coalition earlier this year suggested Google had "a sneak preview" of the FCC’s February plan to open up the set-top box market to new competitors. The move would require pay-TV companies to make their content streams available to third parties that want to build and sell their own boxes — a move that cable firms say is designed to benefit Google, which has already demonstrated a prototype cable box to regulators.
AT&T, meanwhile, has charged that the agency is placing its "thumb on the scale" in favor of Google via Wheeler's March proposal to impose strict privacy rules on broadband companies. The plan, according to AT&T and others, would put telecom firms at a disadvantage compared with Internet companies like Google, which wouldn't fall under the FCC rules. Internet firms' privacy practices are policed by the Federal Trade Commission, which is seen as less prescriptive.
On another front, the National Association of Broadcasters argued that Google led a behind-the-scenes push at the FCC to set aside more unlicensed airwaves — something that could boost Wi-Fi networks that support the company's products and services. NAB says this FCC set-aside allows Google to avoid having to pay for spectrum during the FCC's current incentive auction.
The telecom industry taking pot shots at Google is certainly nothing new; in fact the net neutrality debate basically began in 2005 when then AT&T CEO Ed Whitacre proudly proclaimed that Google wouldn't be able to "ride his pipes for free." Traditionally though, the telecom industry has used third-party consultants, think tanks, and other policy tendrils to hurl strange attacks at Google. These new, more direct attacks are a sign of increased desperation.
This desperation originates with two things, one of them being Google Fiber. Though admittedly still limited in reach, Google Fiber has managed to light a fire under the apathetic posteriors of telecom giants that previously had little to no impetus to upgrade networks. It has managed to generate a national conversation about the sorry state of broadband competition, and even managed to illuminate the telecom sector's love of state protectionist laws that prevent community broadband and even public/private partnerships. In short, the broadband industry's mostly just pissed that they're now facing some competition (which is why they've resorted to lawsuits to slow Google Fiber's expansion).
The other thing on telecom executives' minds is the fact that with the broadband market saturated, they're turning to advertising and content to try and attain quarterly growth. That's why Verizon's been gobbling up companies like AOL and blowing kisses at Millennials in a quest to magically become the new Facebook or Google. But these ISPs face new neutrality and privacy regulations that Google doesn't have to worry about, solely because there's no competition in the broadband space (read: you have a choice in search engines, but often not in ISPs). This lack of competition isn't Google's fault. It's the fault of the carriers themselves and generations of lobbying.
The telecom industry has invited the wrath of regulators for years with a laundry list of bad behavior. The FCC's privacy rules weren't driven by Google, they were driven by Verizon's decision to use stealth cookies users couldn't opt out of to covertly track customers around the Internet. Net neutrality wasn't created by Google, it was created thanks to AT&T threatening to charge Google a "just because we can" toll. And while Google has lobbied to open up the cable set top box to competition, this idea is actually more than a decade old, driven primarily by the fact that the industry enjoys $20 billion in captive revenue thanks to absolutely no serious cable set top hardware competition whatsoever.
Yes, Google and Alphabet have become lobbying behemoths since Google first started ramping up its lobbying apparatus around 2007. And yes, like any large company, Google spends a good amount of its time lobbying to saddle the other guy with additional regulations -- something that will only increase as the company inevitably shifts from innovation to turf protection. And we've already started to witness this turn; most notably in the way Google turned its back on net neutrality in the States and abroad the last few years.
A saint Google isn't, but to suggest that the FCC is suddenly doing its job entirely because of Google lobbying borders on the comical, especially coming from an industry that has had its lobbying talons deep in the federal government for more than a generation. It's much the same way that ISPs and their loyal politicians have taken to attacking Netflix for daring to criticize usage caps and standing up for net neutrality. It's snide hubris from a sector that can't come to terms with the fact that a generation of telecom regulatory capture is finally starting to crumble. Instead of adapting to shifting markets, the telecom sector would rather blame "big tech" for a firestorm of regulatory activity it brought down upon itself.
As we just noted, the House has been pushing yet another bill that attempts to punish the FCC for its uncharacteristic new habit of actually standing up to giant ISPs. The "No Rate Regulation of Broadband Internet Access Act" (pdf) professes to be a bill focused on curtailing government run amok; with a particular eye on preventing the FCC from being able to regulate broadband rates (not-coincidentally just as ISPs begin heavily pursuing usage caps). But the bill uses a unique definition of "rate regulation" to, in reality, ban the FCC from doing, well, pretty much anything.
Bills like this one do a great job riling up those upset about numerous, other instances of actual government overreach -- especially folks that don't understand the broken telecom market or the nuances of net neutrality, or that the FCC under Tom Wheeler has actually been doing some non-idiotic things for arguably the first time in twenty years. But such bills are empty showmanship in that they require a President's signature to pass.
"H.R. 2666 is overly broad and extends far beyond codifying the FCC's forbearance from applying provisions of the Communications Act related to tariffs, rate approval, or other forms of utility regulation. Even as amended, H.R. 2666 would restrict the FCC's ability to take enforcement actions to protect consumers on issues where the FCC has received numerous consumer complaints. The bill also would hamstring the FCC's public interest authority to review transactions....If the President were presented with H.R. 2666, his senior advisors would recommend that he veto the bill."
There remains only a few ways to defang the FCC and/or truly gut net neutrality.
ISPs could get Congress to pass a new law that enshrines net neutrality rules that are weaker than what the FCC has proposed, though Senators John Thune and Representative Fred Upton tried this and it went nowhere. ISPs could also still win the ongoing lawsuit against the FCC, which would gut some or all of the rules (a ruling is expected shortly). Or ISPs could work to elect a President who opposes net neutrality and will set about making sure the FCC returns to its more traditional role of being a toothless, gutless, shell of a regulator dedicated to protecting the telecom status quo.
The House, of course, knows their options are limited, and that bills like this -- and the constant parade of taxpayer-funded FCC "fact finding" hearings -- don't actually accomplish anything. They do, however, rile up the uninformed, and do a fine job reminding giant telecom companies that Congress is ready and willing to dance on command for continued telecom campaign contributions.
With the FCC glacially pondering whether or not zero rating (exempting some content from usage caps) is a bad idea, the wireless industry has decided to try and settle the argument. According to a new study by the wireless industry, 94% of Millennials are more likely to try a new online service if it's part of a free data offering, 98% are more likely to stay with a carrier that offers such services, and 94% of Millennials are likely to use more data if it doesn't count against their data plan. As intended, the survey resulted in a lot of varied news headlines insisting that "consumers actually like ISPs to play favorites on mobile data caps."
The study is, the CTIA proceeds to claim, proof positive that zero rating is a great thing for everybody, from companies to consumers. Just ask Meredith Attwell Baker, former FCC Commissioner, former Comcast lobbyist, and now the top lobbyist for the nation's biggest wireless operators:
"It is no surprise that Americans embrace free data services that offer wireless consumers more data, more competitive choices and more flexibility to try new mobile applications and content. Free data services empower consumers with the freedom to choose what works for their mobile life, and that’s an outcome that everyone should support,” said CTIA President and CEO Meredith Attwell Baker."
If a revolving-door telecom lobbyist saying it's true doesn't convince you, here's an accompanying graphic of stock photo Millennials thrilled at the very idea of zero rating:
So, yeah, some problems. I requested and received the methodology (pdf) used in the commissioned Harris poll, and you'll be shocked to learn that the questions asked weren't particularly nuanced. After asking survey participants whether they were familiar with such terms as zero rating or sponsored data (the results of that inquiry weren't shared), the survey basically just consists of asking consumers whether or not they like "free stuff." If somebody's unaware of the current zero rating net neutrality debate and is asked if they like "free stuff," it seems pretty clear what kind of answer they're going to give.
And therein sits the problem with zero rating. The majority of consumers still don't really understand what zero rating is, much less that there's some obvious hidden costs involved. As such, when approached with "free" services, they're thrilled.
They generally don't understand that the usage caps selected by their ISP are an arbitrary, artificial construct to begin with, untethered to financial or network congestion reality. Or that the very practice of giving wealthier, bigger companies cap-exempt status puts other smaller companies (and non-profits and educational efforts) at a very real disadvantage in the market. Or that over the years, data has shown that caps aren't an effective way to target network congestion, can hinder innovation, hurt competitors (especially if an ISP's exempting only its own services), and confuse consumers, many of whom aren't even sure what a gigabyte is. So yes, it's complicated, and requires some education.
Sure, even after being informed there's surely many people who simply adore the idea of getting anything for "free." But had the CTIA made the slightest effort to inform survey participants or explore zero rating more deeply, the survey's results would have been dramatically different.
ISPs and cable companies already track and sell your online behavior, your location data, and effectively everything you do on the Internet (to the second). Now broadcasters and app developers are cooking up a new technology that uses so-called "smart audio beacons" emitted during television programs to help track user viewing habits. These tones, inaudible to the human ear, are picked up by applications which use your smartphone or tablet microphone to listen and record them. That data can then be used to build a profile that potentially matches your existing online data with your viewing habits.
While the technology appears to currently only be in use overseas right now, the FTC felt the need to issue a press release recently warning companies using the technology that they too are being watched. The warning accompanied a letter the FTC sent to 12 app developers (pdf) that informs devs that if they use the technology and don't inform consumers, they're potentially violating Section 5 of the FTC Act. The FTC's attention was grabbed after they realized that the apps in question failed completely to inform users they were being tracked, or that they were even using the device microphone:
Two days later, the company pioneering this new snooping tech, Silverpush, announced that it had "exited from all UAB (Unique Audio Beacon) based business and shifted to a newer product line" and that it would "appreciate if SilverPush is not associated with UAB based business going forward." The company also seems to be claiming in conversations with the media that this sudden departure had absolutely nothing to do with the FTC's warning:
"When asked by Motherboard why it pivoted away from audio beacons, a SilverPush spokesperson would only say its decision was “a natural process to move to a more evolved product as a part of our business plan” that began almost a year ago, and again insisted that it wasn't responding to privacy concerns. The company spokesperson also said that SilverPush has never partnered with US app developers in the past, and claimed that any apps that integrate its audio beacon tracking code explicitly ask for permission before accessing a device's microphone through a pop-up message within the app itself.
Motherboard was not able to verify these claims, because SilverPush will not identify which apps and companies are using its code. As of April 2015, the company claimed that 67 apps were using its code, allowing it to monitor around 18 million devices."
Much like the boiling frog metaphor, online privacy is eroded one degree at a time, without most people noticing the temperature shift. For example while it would have been controversial fifteen years ago, most people are currently ok with letting companies track absolutely everything we view (ISP deep packet inspection) and everywhere we go (location data tracking and sales). Still, the marketing industry occasionally pushes into territory that just creeps everybody out (like cable boxes that watch you). But what creeps everybody out today can and usually does become the new normal of tomorrow.
Poor Sprint. Ever since T-Mobile became the darling of the wireless industry simply for treating consumers well (ingenious!), Sprint hasn't quite known what to do with itself. After T-Mobile leap-frogged Sprint to become the nation's third-largest carrier last year, Sprint has been trying desperately to convince customers that hey, it's really cool too. But Sprint has found it hard to shake the image that it's little more than a decidedly unhip copycat with a less competent network. A lot of Sprint's PR struggles have been thanks to the fact that it hasn't been easy keeping up with T-Mobile's foul-mouthed, hipster-esque CEO, John Legere.
Sprint's latest effort was to involve a series of ads featuring Sprint CEO Marcelo Claure sitting down with hundreds of "normal folk" in 10 different cities to, apparently, make fun of T-Mobile. Unfortunately the company's very first ad in the series has ruffled more than a few feathers for being little more than thirty seconds of people laughing at the idea of T-Mobile as a "ghetto":
So yes, the idea of an ad in which a group of mostly white people sit around laughing at the idea of ghettos just isn't something most PR departments would sign off on. Sprint unsurprisingly had to pretty quickly pull the ad, and Claure headed to Twitter to insist that the company was just trying to have a conversation with regular folk:
We're sharing real comments from real customers. Maybe not the best choice of words by the customer. Not meant to offend anyone.
And Sprint's adventures in bad PR could have ended there, were it not for a follow up exchange between one annoyed customer and Claure, in which the CEO lectured a Latino man on just how he should behave while being offended:
@luism1023 that I won't take. I am as Latino as you are so don't try to pull that card.
Right, except that as a CEO you made $21.8 million in fiscal year 2014, making your life experiences notably...different. You're also supposed to be conducting a customer listening tour, remember? So even if your intentions were good and you don't agree with your customers being offended, you were supposed to be listening to them. Not giving them a lecture on how or when they're allowed to be offended. All in all it's another example of how, even with funding from Japan's SoftBank propping up its sagging reputation, Sprint just can't seem to get out of its own way and find a path to consumers' hearts.
Maybe next time just try lower prices and a better network?
As we've been discussing, the FCC has started working more seriously on opening the cable set top box to real competition. As it stands, 99% of consumers currently pay about $231 annually in rental fees for aging hardware that's often worth about half that much. The FCC's goal is ultimately to let consumers access cable content using the hardware of their choice, creating a healthy new competitive market, and by proxy better hardware at lower prices. But monthly set top box rental fees represent $20 billion in annual revenue to cable providers, which is why they've been having a hissy fit about the FCC's plan.
This manufactured outrage has involved claiming that more set top box competition will somehow hurt diversity (despite the plan providing access to a more diverse array of content than ever before). Or claiming that consumers having a choice of hardware will harm children's safety and user security. The latest attack on the FCC's plan? Having The Walking Dead producer and Producers Guild of America secretary Gale Anne Hurd pen a missive over at USAToday claiming that more set top box competition somehow automatically means a huge spike in piracy:
"If the Federal Communications Commission (FCC) approves Chairman Tom Wheeler’s regulatory proposal to “open” set-top boxes, it will make piracy as easy and dangerous in the living room as it is on laptop and mobile devices. Wait, you didn’t know piracy was rampant on the Internet? Well, the figures shocked even me, and as a producer of horror and science fiction, I’m not easily scared. The season five premiere of my show, The Walking Dead, was illegally downloaded by roughly 1.27 million unique IP addresses worldwide within 24 hours of its debut."
Right, people pirate content. No debate there. That's in part because despite some notable progress, finding legitimate content online remains a bit of an expensive mole hunt (made worse by exclusive streaming arrangements), making piracy just cheaper and easier. But it's also because while copy protection on cable hardware (including the latest HDCP 2.2 standard for 4K) does a great job in annoying paying customers, it repeatedly fails to actually secure content. That's not going to change under a system where users have access to cheaper, better hardware. What will change is that users will no longer be trapped in the cable industry's set top box walled garden, and will have access to more ways to buy and watch legitimate content than ever before, including AMC's own website and streaming service. Outrageous!
Hurd doesn't appear to understand this, or how the FCC's plan actually works, since the outline the FCC has provided (pdf) notes that the FCC's plan leaves it up to cable providers to still "determine the content protection systems it deems sufficient to prevent theft and misuse" and "will not impede the introduction of new content protection systems." In other words, from a copy protection perspective, nothing will really change (unfortunately). But Hurd somehow tries to claim that the FCC's plan means that Google would somehow be driving users to pirated content:
"It would also allow Google — and for that matter set-top box manufacturers from all over the world, including China (where rogue boxes are being built by the millions) — to create and market applications or boxes with software that will treat legitimate and stolen material exactly the same, and may in many cases help to steer consumers to piracy."
Note again how Hurd just ignores the fact that set top box competition would also drive users to more legitimate options than ever before. No, apparently Hurd is worried that because these new set top boxes might actually connect people to the Internet (which is already happening in streaming boxes and game consoles), they'll be more likely to pirate:
"This is a real threat. Google's search engine does this today. Here’s what happens when I search “watch Fear the Walking Dead." After the paid results, the first option is AMC and the second is a pirate site — literally, side by side. Chairman Wheeler’s set-top box proposal places no restrictions on search results. If approved, it would allow device-makers to prominently display pirated content from the Internet alongside legitimate options — just like in my "watch Fear the Walking Dead" Google search.
So wait, because The Walking Dead shows up in a Google search result we shouldn't support the push for more set top box competition? Kind of throwing the baby away with the bathwater, aren't we? The FCC is proposing a system whereby users will have access to more content and cheaper, better content than ever, but because these set tops might have a browser we should run in terror? Hurd basically just takes some vague fear about piracy and uses it to villainize a reform effort that could potentially drive more legitimate viewers her direction than ever before.
Of course the idea that set top box reform is some kind of villainous Google plot to ruin the cable industry's day has been a cable industry industry narrative since the FCC's plan was unveiled. The fact that you'll see a huge number of editorials just like Hurd's popping up in newspapers and various websites nationwide isn't mystical coincidence, it's a concerted cable industry PR stunt. Given Comcast is playing a starring role in this PR offensive, Comcast's top spokesperson was quick to applaud Hurd's editorial on Twitter:
Make no mistake though. Opposition to the FCC's plan isn't about piracy, or a love of diversity, or Google, or privacy and security. It's about protecting $20 billion in captive rental fee revenue from competition. And because the cable industry can't just come out and say this fight is all about money (because we'd all just laugh at them), they're pushing an army of editorials that try to claim real set top box competition will be notably worse than a zombie apocalypse.
from the stripping-the-fcc-of-its-power-to-protect-consumers dept
In recent weeks, we've noted how ISPs are now moving beyond broadband usage caps and overage fees, and have begun charging users a $30-$35 premium if they want to avoid usage caps entirely. While the industry often dresses this up as everything from "improved flexibility and choice" to something necessary for the sake of fairness, it is, quite simply, an aggressive rate hike on uncompetitive markets. Users are being socked with dramatic new limits and fees -- simply because most have no real competitors to flee to.
Entirely uncoincidentally, the House is now pushing for new legislation that would hamstring the FCC's ability to regulate broadband rates. The "No Rate Regulation of Broadband Internet Access Act" (pdf) is set to be debated this week in Congress, and would, according to a press release by the Energy and Commerce Committee, prevent the FCC from regulating rates charged for broadband Internet, "just as the administration promised when they reclassified access to the Internet as a utility under Title II of the Communications Act."
"H.R. 2666’s language would protect broadband providers from any “review” or “enforcement” of their prices, and prevent the FCC from even “declaring” — let alone addressing — any broadband prices or fees as even “unreasonable.” To make this even more clear, the bill prohibits the FCC from reviewing any prices, fees, or overages “regardless of any other provision of law.” That goes way beyond the FCC’s traditional rate setting authority. “Any other provision of law” includes the FCC’s mandate to promote competition and its consumer protection authority."
So basically, the House, at the behest of large ISPs, is looking to further neuter the FCC. Not only so it can't protect consumers from usage caps and price gouging, but to try and derail the FCC's plan to expand consumer broadband privacy protections, or say, open up the cable set top box to additional competition.
It should probably be reiterated that while the FCC says it does have the authority to regulate some rates under Title II and its net neutrality rules (preventing "paid prioritization," for example), the agency so far has shown no interest in really doing so. Whether it's a $300 million national broadband map that fails to show broadband prices (at industry behest), to the agency's continued blind eye to hidden fees, usage caps and zero rating, the FCC has made it abundantly clear that it finds a large amount of the broadband industry's current price gouging just "creative experimentation."
But while the FCC hasn't done much about broadband prices directly, it has tried to shore up competition in the market so prices drop organically, including support for municipal broadband. Between this, the agency's push for privacy rules, and net neutrality, the House has made it abundantly clear it plans to punish the FCC for standing up to giant ISPs like AT&T, Verizon and Comcast. As such, if it isn't a series of pointless, FCC "fact finding" hearings, it's yet another bill like this one that aims to tie the FCC's arms securely behind its back.
As it stands, there remain just two serious ways to roll back net neutrality and the FCC's decision to reclassify ISPs as common carriers under Title II: win the election and gut the FCC and its decision, or win the ongoing lawsuits against the FCC (a ruling on that front is expected soon). The House likely knows this, but is apparently keen to try and earn its telecom campaign contributions by putting on one hell of a taxpayer-funded show.
We've noted how Tennessee is one of twenty states that has passed state laws, quite literally written by companies like AT&T, prohibiting towns and cities from wiring themselves with broadband -- even if nobody else will. When the FCC announced it would be taking aim at these protectionist broadband laws last year, Tennessee politicians threw a hissy fit, suing the FCC for "violating states rights." That incumbent ISPs are being allowed to write awful state law that's hampering a generation of business development in the state? Not apparently much of a concern.
As an unsurprising result, Tennessee remains one of the least connected broadband states in the nation, and state residents have increasingly been giving beholden state politicians an earful. Those who can, like Tennessee developer John "Thunder" Thornton, have started taking matters into their own hands and building their own gigabit networks. To do so, Thorton had to get the aid of a power cooperative in Alabama, a state that has a slightly less restrictive municipal broadband law in place:
"Unable to gain high-speed broadband at what he deemed an affordable price from AT&T or Charter Communications and limited from service extensions from EPB's ultra-fast Internet in Chattanooga, Thornton created his own Internet service provider last year. The private developer spent more than $400,000 to build his own fiber network and link it with a power cooperative in Stevenson, Ala., where fast broadband is available."
According to Thorton, the money he spent to wire his hilltop development cost a third of what AT&T was charging:
"Thornton said when he approached AT&T about providing Gig service to Jasper Highlands he was quoted a price of $1.3 million to serve his mountaintop development — more than three times what it ended up costing Thornton to build his own network connected to Alabama.
"Our costs are much less, but then I don't have to pay for 27 lobbyists in Nashville like AT&T does," Thornton quipped.
So yeah, Tennessee lawmakers have done such a bang up job letting AT&T write awful state telecommunications law, state residents are being forced to spend their own money to get broadband at a relatively sane price. Sadly, most of the people that can't get decent broadband can't afford to go Thorton's route. And while you'd think the cacophony of complaints from Tennessee residents would be enough to get some movement in the state legislature after a decade, all recent efforts to overturn the state's protectionist law have gone nowhere.
Tennessee's law prevents a popular Chattanooga-based utility-run ISP, EPB, from expanding its up to 10 Gbps offerings into any more markets. But attempts to repeal the law earlier this year went nowhere after mammoth pressure from incumbent ISP lobbyists. When that didn't work, one lawmaker tried to pass a compromise bill that would have allowed EPB to expand into just one neighboring county. That proposal was shot down as well, one of the dissenting votes being that of Rep. Patsy Hazlewood, a former AT&T executive.
That leaves the FCC as the best, current option in getting some of these miserable laws overturned.
As it stands, the FCC is arguing that Section 706 of the Telecommunications Act allows it to preempt state laws that conflict with the agency's Congressional mandate to guarantee "reasonable and timely" broadband deployment. While there's twenty such laws, the FCC is currently trying to overturn just two: in Tennessee and North Carolina; the hope being the legal precedent then rolls downhill. But both states have taken the FCC to court, bravely defending their right to take campaign contributions -- in exchange for protecting incumbent broadband providers from necessary and inevitable evolution.
A report last year by the GAO (pdf) found that most consumers have no real idea what kind of a broadband connection they're buying. The report argued that caps, interconnection squabbles, throttling, and other line limitations make it virtually impossible for many consumers (especially the more Luddite-inclined among us) to understand what they're buying, or compare it with competing services. As a result, the FCC this week proposed a new "nutrition label" (pdf) for broadband that would include not only connection speed -- but any network management, latency, usage caps, overage fees, or other conditions impacting the line.
They should, according to some samples provided by the FCC, look a little something like this:
Interestingly, the FCC"s push for improved labeling includes some renewed attention on the disclosure of sneaky, below-the-line fees, which many ISPs use to jack up the advertised rate post sale. We've noted how many of these fees are simply pulled out of thin air and are pure profit, a practice the FCC (after fifteen years of apathy) is now showing some interest in:
"The FCC receives more than 2,000 complaints annually about surprise fees associated with consumers’ Internet service bills. The actual prices paid for broadband-related services can be as much as 40 percent greater than what is advertised after taxes and fees are added to a bill, according to consumer complaints to the Commission. With the average monthly cost of broadband service ranging between $60 and $70, consumers deserve to know what they are going to get for their money."
While well intentioned, it's not exactly clear if ISPs will actually use the new labels. According to the FCC announcement, the labels are only "recommended" by the agency for ISPs concerned that they're not meeting the FCC's transparency requirements, which were part of last year's still-contested net neutrality rules:
"The FCC’s Open Internet transparency rules require broadband Internet access service providers to disclose this information to consumers in an accurate, understandable and easy-to-find manner. These formats, while not mandated by the agency, are recommended by the Commission and will serve as a “safe harbor” to meet those requirements."
Knowing ISPs as most of you do, you'll probably know their definition of "accurate, understandable and easy to find" may not exactly match your own. The labels have the approval of the FCC's Consumer Advisory Committee, which includes companies like Verizon and CenturyLink. That these two companies find the labels acceptable could very well mean they have no intention of actually using them (possibly pointing to their existing website structure as good enough). Both companies also are busy trying to scrap the FCC's net neutrality rules entirely, which if successful would mean a quick death to the rules -- and these labels.
Another problem is that the use of hidden, manufactured fees to jack up the advertised price is considered false advertising and fraud by many. Many ISPs are so un-frightened of regulatory enforcement on this front they're barely trying any more. CenturyLink, for example, charges millions of its DSL customers a $2 "Internet Cost Recovery Fee" that its website explains as such:
"This fee helps defray costs associated with building and maintaining CenturyLink's High-Speed Internet broadband network, as well as the costs of expanding network capacity to support the continued increase in customers' average broadband consumption."
And here you were thinking that's what your advertised existing monthly broadband bill was for. As such, given the obvious fraud on the hidden fee front, it may take a little more than a few labels to meaningfully improve ISP behavior and transparency.
For some time now Verizon's made it very clear it wants nothing to do with its core fixed-line broadband business. Instead, Verizon's taking a huge bet that it can transform ye olde phone company into a huge advertising and streaming media empire, with a focus on wooing (read: selling ads to) Millennials. To that end Verizon acquired AOL and its ad technology for $4.4 billion last year. It developed a highly-controversial stealth ad tech that can track these youngsters around the Internet without their consent, and it created its own "Go90" streaming video service specifically aimed at Millennials.
More recently, Verizon announced it would be spending $650 million on a 25% stake in AwesomenessTV, a streaming venture aimed at, you guessed it, Millennials. AwesomenessTV was sold to Dreamworks for $33 million just three years ago, but Verizon believes the mark up is worth it, and the acquisition will be the cornerstone of the company's new Millennial sexification efforts:
"We are capitalizing on the emergence of these strong media brands that can reach millennials and Generation Z,” said Brian Angiolet, Verizon’s senior vice president for consumer product and marketing. “It’s like we’re in the early days of cable, and we want to participate more fully in the economics of that trend.”
AwesomenessTV will, moving forward, help feed exclusive content into Verizon's Go90 platform. The problem is that by all appearances, Verizon's Go90 rebranding efforts (which remove the Verizon name entirely in ads) aren't going all that well. Despite Verizon giving away some free, extra wireless gigabytes of data to users that try the service, Go90's ranking on most app stores appears to have only floundered since the initial launch last year. Analysts at firms like UBS aren't impressed either, noting that most Millennials are already getting their video content elsewhere:
"We believe Go90 will be hard-pressed to mount a meaningful challenge to mobile video and social networking leaders YouTube, Facebook, Instagram, Snapchat, Netflix (NFLX) and Hulu,” wrote UBS analyst John Hodulik in the report. “That said, Verizon is pulling various levers to ramp up interest in and usage of Go90, including more live and exclusive content and free data for Verizon Wireless customers."
Even the company's plan to abuse its position as an anti-competitive gatekeeper hasn't really helped. The company gave the FCC and its net neutrality rules a giant middle finger recently by exempting Go90 content from company usage caps, but even this unfair advantage doesn't appear to have lit much of a fire under the initiative. As a result the effort has been mocked by T-Mobile CEO John Legere, who called Go90 a "debacle," that will in time be spoken of alongside things like Amazon and Facebook's failed attempts to sell their own phones.
Keep in mind that Verizon executives, after the departure of former Verizon CEO Ivan Seidenberg, decided to effectively give up on fixed line broadband -- something it was actually marginally good at -- to pursue this new initiative. As such, Verizon stopped expanding FiOS (despite billions in subsidies and tax breaks for fiber never delivered) and began trying to offload or otherwise ignore the company's DSL customers. In some instances, this even meant outright refusing to repair DSL customers hit by natural disasters, citing expense.
Many of these resources were instead diverted to wireless (which makes sense from a ROI and future-proofing perspective). But Verizon executives honestly believe that if they spend enough money they can become an ad empire akin to Facebook or Google. But not even Verizon's experience with shady privacy violations, notably anti-competitive behavior and PR distortion fields appears capable of turning the company's legacy telecom empire into a sexy new media brand. Still, it should prove entertaining to watch Verizon spend billions trying.
They never take action on broadband pricing or false advertising. Which is why you'll see ISPs consistently crow about how this sort of thing should be left to the FCC. But as the FCC has noted they do have some rate regulation authority under Title II.
Correct. On a per household level (streaming, patches, steam game downloads) we're not talking a huge allotment.
And one also needs to ask if ISPs will grow those caps alongside usage, or if they'll squeeze to make more profit from more people. As companies that need improved quarterly earnings bumps, I think the answer to that should be pretty obvious.
Brain fart, sorry. Was thinking "former Verizon regulatory lawyer" and wrote former commissioner instead. Or maybe it's wishful thinking, since I think the guy's an absolute revolving door regulation embarrassment.
With a few exceptions where their hand has been forced by muni or other operations (parts of North Carolina), they're primarily offering gigabit speeds to places where fiber was already in the ground and no real cost or work is involved. Read: housing developments, campus condos.
I think they'll probably hang on to these customers for a while, but by and large they're just cherry picking the places where there's minimal effort and expense involved.
They want the public to believe they're engaging in full city builds, they're just not.
Raising the definition of broadband from a pathetic 4 Mbps is dishonesty? I think it makes perfect sense, and it's not the FCC's fault that AT&T refuses to upgrade technology operating on roughly half of the company's network after receiving billions in subsidies to build and maintain it.
The biggest problem to me (aside from the fact this is an obvious and aggressive cash grab) remains how nobody in government gives two shits that companies like AT&T and Comcast, with an indisputable history of fraud, are metering usage with no objective third party confirming whether the meters are accurate.