In an interesting turn of events, industry analyst Craig Moffett takes a look at the growth of cable broadband and overall subscriber growth, as compared with that of telcos and satellites, and comes to this interesting conclusion: Cable is a natural monopoly in the making — and has been on course to do so since about 2005.

What is interesting to me is this is the same Craig Moffett who, during the fight last year on whether cable penetration had triggerred the 70/70 rule that would enable the FCC to significantly regulate cable by reaching 70% penetration, rushed to Commissioner Adelstein (the swing vote in last year's fight) to explain that cable penetration remained stuck at 60% and would never reach 70% because of all the amazing competition.

Mind you, we all make bad predictions (I still remember with considerable heartbreak my Great Google Prophecy). But Mr. Moffett has a habit of telling Wall St. what a great investment cable stocks are while telling Washington how wildly competitive the market is, how cable can't possibly exercise market power, and how in no way shape or form should anyone even think about regulating this market.

With Kevin Martin repeatedly saying he is unlikely to act on a proposal by small cable operators to unbundle expensive cable programming and retransmission rights for broadcast signals at the wholesale level, the coast no doubt looks clear to start explaining why cable is such a great investment and will crush its competition. But I will be curious to see what happens if, for example, Congress holds hearings on the FCC's decision in the Comcast complaint and asks whether we need to regulate broadband. Will Mr. Moffett stand by his “natural monopoly” analysis — even if he argues for deregulation for other reasons? Or will he suddenly discover new life in FIOS, WiMax, and other potential broadband competitors?

Stay tuned . . . .

Comcast has certainly had some lousy luck with contractors. Most recently, a Comcast contractor got all nasty on 74 year old trying to get broadband service. Before that, Comcast contractors were caught literally torturing kittens. And who can forget the unfortunate overworked Comcast tech who famously fell asleep on someone's couch while on hold with Comcast's repair center.

I don't think Comcast actually wants these results. To the contrary, I think they are horribly embarrassed about them and really are doing what they can to weed out bad contractors and hire good contractors.

But Comcast needs to learn a basic lesson here. Having a quality work force is not compatible with cutting costs by hiring the cheapest contractors available. To have a quality work force, you need to invest in your workforce, make long term commitments to provide a good wage and good living conditions and, dare I suggest it, permit workers to come together in collective bargaining units so that workers and management can negotiate realistic contracts that meet everyone's needs?

Meanwhile Verizon just averted a strike by reaching a tentative new contract with Communications Workers of America and the International Brotherhood of Electrical Workers. The contract, as usual, provides concessions on both sides, but will certainly cost Verizon a bundle more in pay raises and in future benefits than Comcast's labor force, which depends largely on hiring local contractors and non-union labor.

But in exchange for its financial concessions, Verizon is preserving a skilled and experienced workforce with a proven track record. A workforce that, because of its union-negotiated benefits, will likely remain relatively stable and dedicated even during difficult economic times. Rather like buying itself a large bundle of wireless minutes so it doesn't run over and pay huge charges, Verizon has ended up paying more in salary and benefits to avoid a boatload of customer service headaches.

Comcast already missed the boat once by opting to build a crappy network that can't handle broadband capacity like Verizon can handle with FIOS — even though FIOS cost more to build. Perhaps Comcats should consider a similar lesson in its labor practices and encourage, rather than resist, efforts to unionize its workforce.

Stay tuned . . . .

Lest it be said that I refuse to acknowledge a virtue when I see it, allow me to voice my agreement with Mehan Jayasuriya over at Public Knowledge on Comcast's efforts to track down problems on Twitter and elsewhere.

Mehan refers to this NYTimes piece, which discusses how Comcast customer service folks are looking for complaints about Comcast or its services on open blogs or social network sites and trying to reach out to disaffected customers. Frankly, I see nothing “creepy” about it. I actually think this is a pretty good idea for a number of reasons.

First and foremost, if I am complaining about the service I am getting, I would actually like someone to fix the problem. Most companies have laid off workers and have you go through endless phone trees before you can confirm for someone that yes, I've already tried the obvious and would like to get someone who can move past the script and help me with my actual problem. Even sending an email can take a few days for response. I had one incident where I was having difficulty with my cell phone service, sent an email, then resolved the problem, and got a call back two days later (at my work number as requested — they were not completely stupid, just way too slow). This is not useful response time for a service on which I rely pretty heavily.

So I think it's actually a smart idea to have people monitoring publicly available info to see if you can reach out and solve problems. It may save the company major publicity headaches and help users get their problems resolved.

The other thing is I think it's a good thing to remind users that what they write on social networking sites or blogs is open to everyone unless they take action to make it private. In this case, the reminder is harmless, perhaps even beneficial. But if you find it “creepy” that a Comcast customer care agent found your complaint about a billing glitch on your personal blog, consider what happens if your boss or coworker discovers your post about what you think of your current assignment and team workers. Heck, even a sophisticated Federal judge can sometimes be surprised with what goes public on the web.

My one caveat is that this works great as long as Comcast, or any other company, identifies itself honestly when making contact just as they do one the phone. For example, if I get a follow up call from my Saturn dealer after my nth gajillionth mile check up, the person identifies himself or herself as calling from Saturn and wanting to know how my service appointment went. From the article provided, it would appear that Comcast staff are identifying themselves as Comcast staff and generally offering help as Comcast customer service staff. Go them.

But it doesn't take a genius to guess that folks may well begin to wonder whether they can start to use this for direct marketing. Perhaps when you gripe about Comcast on your blog the person that responds won't be from Comcast but will be from AT&T, offering you a better deal. No problem with that, as long as you remember to change your defaults if you don't want to be relentlessly market to in this manner. But the real problem is when folks selling products will disguise themselves or their identities. If the helpful commentor that points you to a promotional on DISH is actually working for DISH, but doesn't identify himself or herself as working for DISH, it starts to get into some very dicey territory.

But again, Comcast actually seems to have a bright idea here. Good for them.

Stay tuned . . .

The Sixth Circuit has denied the Petitions for Review filed by local franchise authorities (LFAs) and PEG programmers challenging the FCC's December 2006 Order limiting the ability of LFA's to negotiate with telco video overbuilders. (You can read a copy of the decision here.)

I am rather disappointed with the decision, as readers might imagine. Not only do I think limiting the authority of LFA's to protect their residents is a phenomenally bad idea, I think the court takes a very expansive view of FCC authority over LFAs given the legislative history and the statute in question.

On the other hand, the decision potentially provides a substantial boost both the FCC's ancillary authority and to its leased access reform order, currently pending before the Sixth Circuit. While I find this rather cold and uncertain comfort at the moment, it's the best I can do in the face of what has become an utter rout for LFAs and PEG programmers. God willing, a future FCC will conduct the inquiry into strengthening PEG programming Commissioners Adelstein and Copps have repeatedly urged.

Some further analysis of the decision and what it might mean below... [Read More!]

I had hoped to be able to tell all my friends at the National Conference on Media Reform in the beginning of June about the fantastic opportunity to put independent progressive programming, minority-oriented programming, and local programming on cable when the new rates and improved rules for cable leased access became effective June 1. Unfortunately, due to a decision by the Federal Court of Appeals for the Sixth Circuit granting the cable request for a stay pending resolution of the challenges to the rules, that won't happen. While not a total loss (the Sixth Circuit rejected the NCTA's motion to transfer the case to the D.C. Circuit) and not preventing programmers from trying to take advantage of leased access now, this is a serious bummer for a lot of reasons — not the least of which is the anticipated crowing by the cable guys (ah well, we all endure our share of professional hazards).

But mostly, I am disappointed that the cable operators will continue to withold the real rates under the new formula. As part of the stay request to the FCC (and subsequently to the 6th Cir.), the cable operators had submitted affidavits claiming that under the leased access rate formula adopted by the Commission, the new rate would be FREE!!! and they would have to drop C-Span and any other programming you like as a result. Since the cable operators always claim that the impact of any regulation is that they will need to charge higher rates, drop C-Span, stop deploying broadband, etc., etc., I am not terribly inclined to believe them this time and had looked forward to either their releasing real rates or putting programmers on for free. But since cable operators uniformly refuse to make the new rates available before the new rules go into effect (another reason I disbelieve the “the rate will be zero” claim), and because they control all the information relevant to the rate calculation, I can't actually prove they are blowing smoke. Now it looks like we will have to win the court case (which will likely take a year or more) before we find out the real leased access rates.

Mind you, leased access had already hit a few roadblocks, owing to the inexplicable delay in sending the rules to the Office of Management and Budget (OMB). Although the rules were approved in November '07, released on February 1, 2008, and published in Fed Reg on February 28, the order was not sent to OMB for the mandatory review under the Paperwork Reduction Act until April 28. I might almost think the cable folks in the Bureau were less than enthusiastic about supporting leased access reform. OTOH, since it also took the broadcast enhanced disclosure rules a a few months to get to OMB, it may just be the natural slowness of the process. After all, by federal law, the carrier pigeons used to take the text in little scraps from FCC across town to OMB can fly no more than two flights a day.

But to return to the critical point, what does the court ruling mean for leased access reform and the hope that local programmers, progressive programmers, minority programmers and others could have an effective means of routing around the cable stranglehold on programming?

See below . . . . [Read More!]

As I discussed in the context of the Sprint/Clearwire/Etc. spectrum menage (and discussed a bit more with Gordon Cook on his blog), the reality of the post-700 MHz auction world makes it necessary for cable operators to have some kind of wireless strategy if they want to meet the potential next generation competitive threat from either AT&T and Verizon or possibly from newly en-spectrumed DISHTV. At the same time, cable operators are desperate to avoid the downdrag on the their stock that would come from a heavy investment in wireless licenses and further nvestment in infrastructure — especially when analysts don't give them a prayer of taking on the wireless carriers in what has become a reasonably mature market. How to resolve this difficult dilemma?

Those cable systems with the combination of resources and forethought to address this have opted for different solutions. Comcast, Time Warner and Brighthouse --through their new partnership with Sprint/Clearwire etc. — have flopped back to the old cable standard of joint ventures and strategic investment. (Anyone else remember @Home Network?) Cox went out and won its own set of licenses covering its cable service area, as did Charter parent Vulcan Enterprises (as have a few lesser systems, such as Washington Post owned CableOne, which captured a bunch of licenses in the AWS auction).

Cablevision tried twice to acquire its own set of licenses: first in the AWS Auction in 2006, and again in the 700 Mhz Auction. Both times Cablevision went home empty-handed, outbid by the wireless giants. With no new spectrum on the horizon, and apparently no invite into the Sprint/Clearwire Happy House 'o WiMax partnership, Cablevision found itself in need of a spectrum “Plan B.” Happily for Cablevision, there is also such a thing as “unlicensed spectrum” which — as I and other boosters of the competitive power of open spectrum continually point out — is available to everyone and cheap to deploy (relative to building a licensed network from scratch).

Hence the recent Cablevision announcement that it will deploy a wifi network in conjunction with its cable network. As a Plan B, it has some real advantages over using licensed spectrum, as well as some potential disadvantages. But given Cablevision's unique deployment situation — it is primarily located in New York City and Long Island which gives it incredible population density for its relatiely small footprint — this fall back position may work for it where it would not work for other cable companies.

A bit more analysis below . . . . [Read More!]

When an industry challenging agency action loses the sympathy of the D.C. Cir., it is a good sign that someone overreached just a tad. In apparent preparation for the The Big Cable Show in New Orleans this week, the D.C. Circuit issued this opinion denying Comcast's insistence that it deserves a waiver of the FCC's cable set-top box interoperability rules.

The case actually has an interesting precedential aspect I shall discuss below, but the primary reason I am noting it is because this is the first in a series of cases in which Comcast and the rest of the cable industry have actually pleaded that they should be excused from the law because enforcement is all part of an evil vendetta by Kevin Martin against the cable industry. Really. Because while people may accuse Hilary Clinton of having a “sense of entitlement” about the Democratic Nomination, she has the humility of a saint with zero self-esteem compared with the ravening sense of entitlement of the cable industry.

Mind you, the cable industry won won so much for so long at the FCC that a Chairman willing to enforce the law against the cable industry, with 2 other Commissioners willing to vote with him, is quite the shock to the system. And of course, when you have a paid chorus of wholly owned subsidiaries in Congress and captive industry press (combined, I'm sad to say, with a boatload of easily manipulated public interest groups that should know better but hate Kevin Martin for other reasons), it becomes easy to believe your own press releases. Which is why not merely the cable industry, but their allies as well, have started to put some genuinely stupid and insulting things in their filings that make you shake your head and go “whoa! I can't believe they actually said that!”

And neither could the D.C. Cir. Not only did the panel hearing the case dryly reprimand the cable industry a few times, but they gave Comcast 'n friends a very thorough bitchslap in the opinion.

More fun details, and the actual useful legal point, below . . . . [Read More!]

As reported on BroadbandReports.com, Comcast has greeted former Insight customers transferred to Comcast as part of unwinding a partnership with a 6% rate hike. Thanks to all the delightful cover given to Comcast by Congressional Republicans, who declare that all is “A OTAY” in Cableland, the Comcast guys are no longer even pretending that the rise in rates has anything to do with cost. Rather, as Comcast rep Libbie Steh told the Springfield Journal Register in a rare attack of honesty: “increased costs are not a factor this year.” Rather:

“Comcast periodically reviews prices and adjusts them to reflect what’s in the marketplace,” Stehn said.

More below . . . . [Read More!]

So the judge heard the motion for a restraining order by Dearborn and Meridian to keep Comcast from migrating PEG channels to digital. The court issued the restraining order, finding that the towns were more likely than not to prevail on several of their issues, that Comcast would suffer no harm from the delay, but that the cities would potentially suffer irreparable harm if Comcast migrated the PEG channels to where most citizens couldn't see them. (You can find the opinion, the pleadings, and other useful information here.)

On the question of the definition of “basic tier” I raised in yesterday's post, the court found:

1) Nothing requires a cable operator to offer the basic package as all digital or all analog, so it is more likely than not that Comcast can migrate PEG to digital while keeping broadcast channels analog.

2) However, cable operators must offer the basic tier on equal terms. Requiring rental of additional equipment to get part of the basic tier therefore is more likely than not a violation of law.

A preliminary restraining order is not a final judgment. The court must make a determination on what arguments are “likely to prevail.” But the court may rule otherwise once the questions are fully briefed and argued. Hence, the “more likely than not” language.

But the courts findings produce some oddball results. By implication, at least so far, the court accepts that the obligation to offer a “basic tier” persists even after the FCC finds “effective competition.” But despite what I would think is fairly straightforward legislative language and strong legislative language, the court thinks it more likely than not that cable operators can treat the elements of the basic package in a different way from each other.

I expect fights over the basic package and the meaning of Section 623(b)(8) to become much more common, as cable operators try to migrate more popular programming to digital and look to stop carrying analog after the digital transition. For me, the real question is: “Will the FCC weigh in?” If so, when, and how? Under NCTA v. Brand X (yes, that Brand X), the FCC can weigh in at any time, since a decision by a court deciding the issue does not alter the deference due to the agency. So there's no rush for the FCC to assert jurisdiction on its own. Cable operators are rather unlikely to rush in and ask the FCC to start a rulemaking to preempt the states on this issue. So will someone else go to the FCC and ask them to resolve the issue? PEG supporters or local governments would be a logical choice, but they don't exactly have warm fuzzy feelings about this FCC Chairman given his willingness to preempt local franchise authorities to the detriment of PEG and local consumer protection. Especially given the outcome in Michigan (which buys time) and the possibility of Congressional help, I expect the PEG folks to wait and see what the new FCC looks like before going to the FCC.

Broadcasters might also look to get the FCC involved early, rather than wait for a situation to develop. But that seems unlikely. Still, if folks at PBS or folks representing the independent affiliates get spooked, or if problems develop in the field, we may see the broadcasters come in.

Finally, the FCC itself could wake up and notice the issue. But that also strikes me as unlikely.

Stay tuned . . . .

Compared to the primary battles in Michigan, the fight between Comcast and local governments about Comcast's decision to migrate Public Educational and Government (PEG) channels to digital seems like small potatoes. But potentially, the lawsuit filed by the cities of Dearborn and Meridian in local federal court could have huge impact on how cable operators carry broadcast television and even how they bundle video services with their voice and broadband offerings.

For those just tuning in: Comcast has decided take advantage of Michigan's franchise reform law and forcibly migrate PEG channels to digital tier, which will require anyone who wants to see PEG channels to get a digital box and will put the PEG channels waaaay up the dial where channel surfers rarely tread. This has prompted angry protests by city officials, and even a reprimand from House Commerce Chair Rep. John Dingell (D-MI). While other cable operators have used such tactics in the past, Comcast appears to be the first operator to do this for an entire state at once.

As a result, Dearborn and Meridian challenged Comcast's right to move the PEG channels without consent by the localities in federal court. But while this focus remains on PEG, it goes much further. In 1992, Congress mandated that cable operators must offer subscribers a “basic tier” that consists of the broadcast channels and PEG channels. Congress also prevented cable operators from bundling this “basic tier” with any other service or “buy through.”

For reasons having to do with the Telecommunications Act of 1996, cable operators may no longer need to offer a “basic tier.” But if that's true, what does that mean for broadcasters? Can cable operators forcibly migrate broadcast channels in the same way they claim they can forcibly migrate PEG? And — looking ahead — does that mean that cable operators will have the freedom to change how they bundle packages? Right now, cable operators generally offer their basic video product and then offer all manner of additional services. But what happens if the “basic tier” requirement is really dead? Will we see cable operators get more aggressive, forcing customers to take additional services if they want video programming?

From where I sit (which is really just looking at the plain language of the statutes), it's a real muddle. I'm glad I'm not litigating. But if I were the NAB and PBS, I'd start paying real close attention here. Otherwise, they may wake up and discover that they are also going on a forced march migration to digital, even if they can keep their channel position and not end up in the 900s.

Analysis below . . . . [Read More!]