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Process Matters: Harold Feld's Guide to the Time Warner Cable/Comcast Merger

The proposed Comcast/Time Warner Cable deal will be on everyone's mind for many months to come. Thanks to Harold Feld, it is now possible to follow the process as it moves forward. Feld began a series of posts earlier this month that map out the review as it moves from the Department of Justice Antitrust Division to the Federal Communications, and finally to Congress. As Feld notes, the entire process will last six months at least and could run for more than a year. 

In addition to drawing a process map, Feld provides insightful subtleties on the purpose behind each step in the review. He also offers political analysis that may influence the outcome. Feld gets into the unique review process, burdens of proof, and relevant definitions at each stop along the way. Highly recommended, especially for law students.

Part I - Introduction

Part II - Antitrust Review at the DOJ

Part III - Federal Communications Commission analyzes public interest

Part IV - The proposal moves through the committee process and the public has a chance to express themselves to their elected officials (including lobbyists)

 

Lexingtonians Consider Municipal Network Options in Kentucky

Community leaders in Lexington are the latest to stand at a fork in the broadband road. In September, the franchise agreement between the Lexington-Fayette Urban County Government (LFUCG) and Time Warner Cable expired, resulting in a month-to-month agreement continuation. As they negotiate a new contract, local citizens have called for consideration of a municipal network.

When the contract was originally negotiated in the 1990s, the community was primarily interested in cable TV servce. As broadband has become critical infrastructure for residents, businesses, and government, the community's focus shifted. Lexington customers have complained repeatedly about Internet and cable TV service from Time Warner Cable. A February Kentucky.com article noted that local consumers complained over 300 times to Lexington's Urban County Government, the entity responsible for contract negotiations. According to the article:

The biggest single category of complaints was about price and the volatility of monthly rates. Other complaints were that the cable TV service "repeatedly fails, resets or freezes"; that there was an extended wait time and/or "unhelpful responses" in customer service; and that email and Internet "had declined in service" and showed "significantly slower service."

The City Council considered the situation bad enough to debate whether or not to appoint an ombudsman to advocate for Lexington consumers.

The community wonders how the proposed merger between Time Warner Cable and Comcast will impact their current service. While the Vice Mayor seems to think it is an "almost golden opportunity" to deal with a different provider, local citizen Roy M. Cornett has a different perspective. He wrote for Business Lexington.com:

We can choose to maintain the status quo and allow out-of-state corporations to continue to control our access to the Internet, or we can rescind the franchise agreements to the copper and fiber lying in the ground around our community and treat the Internet as the piece of infrastructure essential for our future economic growth that it is. 

We would just note that this is not an either/or proposition. They can both develop a new franchise or not separately from deciding to move forward with some smart municipal investments.

As the LFCUG has moved forward with franchise negotiations, they opened up the discussion at City Council meetings. Cornett attended a Cable Franchise Workshop to learn about the process. What he learned is that the LFCUG possesses very little power in negotiations, due to federal law. In fact, if Time Warner Cable meets a very low standard, the LFCUG has no option but to renew.

Lexington Kentucky Logo

Cornett and others in the community wonder if Lexington wants to go down the same Internet road again - expensive, unreliable, and ruled from a far off corner office. He addresses the question in another article on the Barefoot and Progressive site:

If the Time Warner [Cable] and Comcast merger goes through, Lexington will not only have piss poor download speeds, but caps on the amount of data you can use in a month. Comcast currently has a cap of 300 gigabytes per month for customers in Elizabethtown and Campbellsville, Kentucky. To put this in perspective, my family’s usage as of February 15, was 99 gigabytes for the month and we still have two weeks to go. I am terrified of what it will be in a few years when my youngest kids become teenagers. 

Cornett reached out to us when he wanted to learn more about the possibilities of a muni for Lexington:

The City of Chattanooga just recently built a municipal ISP to provide gigabit service to 147,000 homes at a cost of $330 million (of which $111 million was provided by the feds). Christopher Mitchell, the director of Telecommunications as Commons Initiative for the Institute for Local Self-Reliance, did some very rough back-of-the-envelope calculations for the City of Lexington and estimates that a full gigabit fiber network to every resident and business would be somewhere in the $200 million range. 

Those are huge numbers and should give anyone pause, but consider that we are spending $1.6 million on sidewalks for Tates Creek Road, $17 million for resurfacing a few blocks of South Limestone and $310 million dollars renovating Rupp Arena. Ask yourself if any of the above projects could come close to offering the economic impact that gigabit internet service would bring. It isn’t even close.

In his Business Lexington.com article, Cornett encourages a new coalition, the Bluegrass Economic Advancement Movement (BEAM), to take up the muni possibility. The group is a collaboration between Louisville and Lexington with support from the Brookings Institute. The goal of BEAM is to bring quality jobs to the Bluegrass and increase export activity.

Cornett, who we expect to hear more from, writes in his Barefoot and Progressive article:

I won’t speculate on the motives of the corporations for attempting to kill competition, but the issue of our city possessing a modern, reasonably priced, continually upgraded network is essential to our future.

This is not a fight we should shy away from. On the contrary, this is a fight we need to embrace, and it can be the lynchpin that takes the BEAM super region from a good idea to a shining success. I urge Mayors Gray and Fischer to – at the very least – explore the option of retaking control of this vital component of our infrastructure.

On the Media Talks Cable Consolidation, Municipal Networks With Crawford and Baller

The possible merger between Comcast and Time Warner Cable and the FCC's recent announcement to review state barriers have created a significant buzz in the world of telecommunications. Two recent NPR interviews with Susan Crawford and Jim Baller provide insight into how the merger may affect consumers and why a new light is shining on municipal networks.

Crawford spoke with Brooke Gladstone for a recent interview for On the Media. The two addressed some of the consequences of the potential merger. Crawford also discussed the option of municipal broadband investment is an alternative gaining traction. As our readers know, Crawford authored Captive Audience: The Telecom Industry and Monopoly Power in the New Gilded Age. Crawford joined us in a past episode of the Communiy Broadband Bits podcast.

Jim Baller, President of the Baller Herbst Law Group, also joined On the Media when he spoke with Bob Garfield. Baller and Garfield talked about the cable and telecom lobby's efforts to block municipal authority to build networks. Baller supplied a few of the many examples of successful communities that have blossomed as a result of their investment. We have interviewed Baller three times for our podcast.

 

Each interview is a little over six minutes.

Being a Gig City: It's All About the Upload

This is the second in a series of posts examining a premier Gigabit Community - Wilson, North Carolina. The first post is available here.

It's all about the Upload. If you are the owner of a small engineering business with dense blueprints to send to your European clients, or a specialized country doctor who depends on the quick transmission of x-rays, a digital film effects company, a photographer or a local broadcaster, your ability to upload your dense information to your colleagues, clients, and residents means business. For Gig City, Wilson in North Carolina, offering gigabit upload speeds to its community is essential to ensure local businesses thrive.

According to a recent Speed.Net report, upload speeds in the United States compared to the rest of the world are dismal. If you live in Hong Kong (60 Mbps), Singapore (47Mbps) and South Korea (44Mbps), you are in the drivers' seat with the fastest upload speeds in a world where time wasted means money. If you are in the U.S., as of February 2014, you're in the slow lane. We rank 41st at 6.69 Mbps. But not if you live in Wilson. With access to Greenlight's gigabit residential upload speeds, living in Wilson means being competitive and working easily with the world's top achievers.

The owners of Wilson-based Exodus FX know this. Digital artists Brad Kalinoski and Tinatsu Wallace found Wilson in their nearly impossible search for small-town affordability but world-class broadband infrastructure. Two years ago, they started a small growing boutique that caters to the visual effects needs of global film and television production companies. When their broadband rates in West Virginia skyrocketed despite the local broadband infrastructure seriously underperforming, the company's survival depended on relocating.

Exodus FX logo

"We had to choose an area that could offer a low cost of doing business, while delivering an infrastructure better than that of other states and countries," wrote Mr. Kalinoski, a three-time, award nominee for his special effects contributions to Black Swan and LOST, the Final Season. "We even considered places like Seattle, Japan, Austin and Kansas City for its Google fiber. But when weighing the cost of living, cost of doing business, diversity and broadband infrastructure, it really wasn't much of a debate." They moved to Wilson."In less than an eight hour period, we pushed almost 18 Gigabyte of data to and from New York, Los Angeles, Canada and to other states. We are finding that the bottleneck is no longer us, it's the client's bandwidth."

"Timing out" and "that bottleneck" drew web-designer and digital musician, Dave Baumgartner, to Wilson as well. "I was doing consulting web design work from my home in Raleigh using Time Warner Cable's "Turbo boost" Internet access, but could not get my file uploads to clients on the west coast to complete because they would time out." This was the fastest residential internet access available in Raleigh. "I would start an upload before dinner, it was still going when I went to sleep, and failed by the next morning."

Dave moved to Wilson which allowed him to serve and provide innovative web design to clients anywhere in the country. "Having a fast and reliable connection also allowed me to test bandwidth-intensive technologies like embedded HD video and audio, and various streaming technologies." (Greenlight does not data cap the way other large incumbents are known to do.) Dave recently recorded a vocal drum track in Wilson for a group based in another state, and then sent the files to their producer in California in what seemed like fractions of a second. He is now in talks to be involved in a recording project where no two performers are in the same state, and a few of them are in Europe. In between all that, Dave and Wilson's Greenlight operations found each other. He is now Greenlight's web designer.

Designing the future is what also attracted Wake Forest fiber optic entrepreneur, and aviation photographer, Dan Holt, to Wilson. He can't move to Wilson because he owns his home in Wake Forest, so he commutes 30 minutes each way to access Wilson's gigabit symmetrical speeds from his satellite office at the City's local business incubator. His vision for the Wake Forest Fiber Optic Initiative started years ago "even before Time Warner Cable released their 30/5 and 50/5 tiers." "I am an aviation photographer, and rely on service like flckr and smugmug (and more recently Google+ and Google drive) to backup my photos. More often than not, each one of my photos averages about 25 Mb each." A couple of thousand of these after a weekend shoot and you have a multi-gigabyte upload. "This would take days to upload... you can only do partial uploads." So Holt found himself juggling his work schedule so he could upload his photos, and projects would sit for six months "Having access to gigabit fiber allows me to upload everything I have in one sitting, allowing me to focus more on editing and selling photos."

Holt has hooked up four servers to Greenlight's gigabit speed, which virtualize the home of the future with multiple, simultaneous, Netflix video streams and dense file upload exchanges for his Wake Forest Fiber Optic Initiative. "The future is about video," he stated, citing a study showing 50.2% of internet traffic is video -- Netflix and YouTube - not Bit Torrent." His Town officials now have been able to physically see through Wilson's Greenlight capacity, the economic vision he has for his own community.

Photo courtesy of www.Whirligigpark.org

An economic vision driven by bits of gigs, Whirligigs exactly, means something to Jeffrey Currie, Repair and Conservation Manager of the City's new world-renowned Vollis Simpson outdoor Whirligig Park, Currie drives into Wilson every day from Nash County to manage the taking apart and rebuilding of thirty, sometimes, fifty-foot wind-driven sculptures from a farm in the county to the City's downtown. The vision is to use this wind powered art to help drive the city's economic future with STEAM (Science, Technology, Engineering, ARTS and Mathematics).

"Yeah, we like to use that word STEAM more and more." laughed Currie, as he displayed the hand-held tablets that record the intricate pieces of this gargantuan move. "We needed to know what the Whirligigs looked like before they were taken apart." Greenlight connected the warehouse to its Gigabit network. "We take high-resolution photographs of the sculptures before they are disassembled, scan older images of Vollis' work and just upload them to Dropbox. This lets the artisans have a clear picture of how they should be restored, assembled and painted, because often there is little paint left after 30 years out in Vollis' field."

What was amazing is that Currie described these large uploads like he was flipping a switch. "It's quick," he said, without thinking about it. "We're burning out the computers, not the internet," quipped Don Davis, who takes photographs and who does much of the uploading for the collections section. Greenlight's upload speeds facilitate the rebuilding of this important economic driver in seconds instead of months.

"The media consistently focuses on the download part of the broadband equation, but if your business handles information at any level, your business is really all about the upload. If you can't get your information out, whether it's your quarterly insurance reports to your corporate office, engineering blueprints to your China clients, or your latest digital art creation to New York, you simply can't compete. We are living in an information economy now," said Will Aycock, General Manager of Wilson's Greenlight system.

"The thrust of Greenlight is captured by our three guiding principles,' said Aycock. ‘Supporting the economic health of the community, improving the delivery of city services, and enhancing the quality of life for the citizens of Wilson. This is our gig in Wilson."

Whirligig photo courtesy of www.whirligigpark.org

Krugman Calls out the Barons of Broadband

We should probably be thanking Comcast for its attempt to take over Time Warner Cable. It has inspired a shocking amount of vitriol against the cable monopolies, including an entertaining but NSFW video with strong language from Funny or Die.

Whereas people were largely content to mostly silently hate Comcast and Time Warner Cable separately, the idea of them officially tying the knot to screw consumers even more has apparently hit a tipping point. As I noted a few days ago, we are seeing a more communities considering their own networks to avoid being stuck with a Wall Street monopoly forever.

Paul Krugman was inspired to write "Barons of Broadband," which accurately reflects the modern dynamic:

The point is that Comcast perfectly fits the old notion of monopolists as robber barons, so-called by analogy with medieval warlords who perched in their castles overlooking the Rhine, extracting tolls from all who passed. The Time Warner deal would in effect let Comcast strengthen its fortifications, which has to be a bad idea.

Krugman talks about monopoly as well, reminding me of one of our most important podcasts - Barry Lynn, Monopoly Expert.

And the same phenomenon may be playing an important role in holding back the economy as a whole. One puzzle about recent U.S. experience has been the disconnect between profits and investment. Profits are at a record high as a share of G.D.P., yet corporations aren’t reinvesting their returns in their businesses. Instead, they’re buying back shares, or accumulating huge piles of cash. This is exactly what you’d expect to see if a lot of those record profits represent monopoly rents.

It’s time, in other words, to go back to worrying about monopoly power, which we should have been doing all along. And the first step on the road back from our grand detour on this issue is obvious: Say no to Comcast.

There is no public benefit to this merger - none. Meanwhile it will give even more power to a corporation already slowing our economy by refusing to invest in communities that desperately need better connections so businesses can remain competitive. Allowing this merger will be just another step in the direction of powerful corporate lobbyists officially running the country rather than unofficially.

In Fear of Comcast Warner Cable

It is hard to say just how bad of an idea it is for us to allow Comcast to buy Time Warner Cable. This is not just about consumers having to pay more, which they do every time we allow massive consolidation, but about access to information.

I can't help but think back to our conversation with Barry Lynn on monopoly a few weeks ago. People get so focused on consumer prices and a narrow view of competition that they miss important impacts of consolidation.

One impact is moving Comcast from the seventh biggest DC lobbyist to the fourth.

This consolidation is a recognition that the private sector simply will not provide meaningful competition for Internet access. Communities need to recognize what a do-nothing approach means: relying on a distant cable monopoly for the most important services of the 21st century.

If I had to guess what will happen - Comcast will buy Time Warner Cable but have to sell off some pieces to get approval. Comcast will grow larger and more powerful, making future mergers even more difficult to stop despite more and more evidence that these firms are strangling our economy. We can stop it - but will we? Specifically, will we force our representatives in DC to stop it?

Stay tuned to the organizations that are covering it well - Free Press, Karl Bode, Public Knowledge, Common Cause, and many others.

Kansas Community Benefits from Community Owned Networks

Even though the Kansas cable lobby have temporarily retracted their competition-killing telecom bill, we still want to highlight the benefits of preserving full home rule, local authority by focusing on a number of communities, including Chanute, Ottawa, and Erie.

Chanute

We have reported on Chanute's municipal network for years. The community leveraged its electric utility assets and incrementally built an extensive publicly owned gigabit fiber network. Over several decades, the community expanded its network to serve schools, libraries, local government, and businesses. Chanute took advantage of every opportunity and created a valuable asset with no borrowing or bonding.

Several business, including Spirit AeroSystems, chose to locate in Chanute because of its incredible fiber network. Spirit brought approximately 150 new jobs. The network also retained jobs when incumbents refused to provide needed upgrades to local businesses. Rather than leave town, the businesses connected to the City's network and increased their productivity. 

Former City Manager J.D. Lester referred to municipal broadband as “the great equalizer for Rural America,” saying: “You don’t have to live in Kansas City to work there.” (See our case study Chanute's Gig: One Rural Kansas Community's Tradition of Innovation Led to A Gigabit and Ubiquitous Wireless Coverage [PDF])

Kids in Chanute have access to connectivity other schools can only dream about. The local community college has expanded its distance learning program with higher capacity broadband. Free Wi-Fi hotspots are all over town; money otherwise sent to distant providers stays in the community. Chanute has invested in a WiMAX wireless system that serves public safety all over the region, not only in town. Their other utilities use the network for automatic metering and SCADA applications, saving energy and allowing customers the chance to reduce utility bills.

Chanute Logo

In addition to savings public dollars by reducing the cost of municipal connectivity, the broadband utility generates $600,000 and contributes 5 percent of that to the general fund.

Community leaders recently began planning for a FTTH expansion to bring fiber Internet to every home in town. If SB 304 finds its way into the books, those plans will be derailed and residents will be left with slow cable and DSL access.

Erie

Erie, southeast of Chanute, also utilizes Chanute's extensive fiber network for affordable school connectivity. When it was time to upgrade, Erie approached incumbent Cox. Cox's proposal for 100 Mbps to the high school alone was $5,000 per month. With its microwave network, Chanute is able to provide Internet service to the Erie community where already fiber connects the school facilities. Chanute serves Erie's high school, grade school, administration offices, and the bus barn where students learn auto mechanics. Like Chanute schools, Erie is guaranteed 100 Mbps but able to burst up to 300 Mbps when capacity allows. Erie pays only $5,100 per month and 80% of its connectivity fee is reimbursed by the federal E-rate program.

Ottawa

Inspired by Chanute's success, nearby Ottawa launched its fiber network in 2013. Ottawa joined forces with its school district and county government. Ottawa used an existing patchwork school district and county fiber, linking them together as a community network backbone. Each entity retained ownership of their resources but shared fiber strands with the City.

Ottawa businesses were dissatified with services from incumbents who were not interested in upgrading. Choices were expensive and slow T1s or an uber expensive DS3. Multiple appeals to incumbent AT&T yielded no results.

Schools, the area community college, and a farmers' cooperative connect to the network for better capacity and lower prices than AT&T will offer. The school district has cut its connectivity fees in half from $6,000 per month to $3,000 per month, by switching to Ottawa as a service provider. They now receive double the speed they used to purchase because the community network takes a much different approach than AT&T. From our April 2013 article on Ottawa:

Ottawa followed Chanute's example by providing a floor instead of a ceiling as the foundation for service. In other words, customers contract for minimum capacity but are allowed to burst to whatever capacity is available at any given time. For example, the School District will soon connect with a minimum 250 Mbps with the ability to burst to 500 Mbps.

Kansas Anti-Competition Bill Authored by Cable Lobbyists

We learned a lot today about the anti-competition bill (SB 304) in Kansas to limit Internet network investments. Ars Technica's Jon Brodkin discovered the source of the bill, the Kansas Cable Telecommunications Association:

That's a lobby group with members such as Comcast, Cox, Eagle Communications, and Time Warner Cable. The bill was introduced this week, referred to the Committee on Commerce, and scheduled for discussion for Tuesday of next week.

That hearing will now be delayed as the cable lobbyists strategize on a bill that less transparently serves only their interests. As usual, we see the cable lobbyists claiming that municipal networks use taxpayer dollars, despite the reality that most do not.

Much of what I see in Kansas points to Time Warner Cable being behind this - a lame attempt to stop Google Fiber using lobbying power rather than innovating and investing. However, the bill has tremendously negative implications for rural Kansas because local governments are often the only entities that care if their communities have the Internet access they need in the modern economy.

It stretches credulity to think Kansas would pass a bill that would prevent Google from expanding its network in the region. But we have seen a number of states (ahem, North Carolina) pass cable-authored bills that prevent communities from building fiber optic networks if they have anything faster than dial-up available in even part of town.

The cable lobby would consider it a win if they can still push a bill through that would kill municipal networks while allowing approaches like Google Fiber and Wicked (in Lawrence) to expand.

Fortunately, Google has a history of opposing restraints on local authority to build networks and it is part of a business coalition opposing this bill. As with most Americans, that coalition believes any decision on whether a network is a wise investment should be made locally, not in Topeka or in DC.

Craig Settles' had a Chanute official on the Gigabit Nation audio show to discuss the bill and impact on rural Kansas:


Online Internet Radio at Blog Talk Radio with cjspeaks on BlogTalkRadio

Others writing about this bill and negative impact on Kansas included Karl Bode at Broadband Reports, the Consumerist, Newspoodle, and Daily Kos.

And finally, Chanute created a video about this bill:

Video: 
See video

Network Neutrality Decision and Importance of Community Owned Networks

In a decision announced a few hours ago, the DC Circuit of Appeals has largely ruled against the Open Internet, or network neutrality. These are rules established by the Federal Communications Commission to prevent massive ISPs like Comcast and AT&T from degrading or blocking access to certain sites on the Internet. Decision here [pdf].

The goal is to prevent these big firms from being able to discriminate - to pick winners and losers. For instance, Comcast could charge subscribers an extra $10 per month to access Netflix while not charging to visit similar sites that it owns. The rules were intended to prevent that.

However, the FCC has a history of decisions that have benefited big telecom corporations more than citizens and local businesses. Those decisions limited how it can protect the public interest on matters of Internet access.

This court decision decided that the way the FCC was attempting to enforce network neutrality was not allowed because of how it has decided to (de)regulate the Internet generally. In essence, the FCC said that it didn't want to regulate the Internet except for the ways it wanted to regulate the Internet. And the Court said, somewhat predictably, that approach was too arbitrary. Moving forward, the FCC has the power to enforce this regulation, but it will have to change the way the Internet is "classified," in FCC lingo - which means changing those historic decisions that benefited the big corporations.

Groups like Free Press are pushing to make this change because it will ensure the FCC has the authority it needs to ensure everyone has access to the open Internet.

The lesson for us is that communities cannot trust Washington, DC, to ensure that residents and local businesses have universal, fast, affordable, and reliable access to the Internet. Communities should be investing in themselves to build networks that are accountable to the public and will not engage in anti-consumer practices merely to maximize their profits. Such behavior is inappropriate on matters of essential infrastructure.

Even if the FCC now gets this right and protects the public interest, that may last only as long as this FCC is in power. Communities that trust the FCC to protect them in this matter of incredible importance to their local economy may find that with a new administration, companies like Comcast have a free hand to again insert themselves as a tollbooth between subscribers and the Internet.

As a final word, this is nothing new. In putting together the Standard Oil monopoly, Rockefeller knew the value of cutting special deals with the railroads to benefit his firm at the expense of any potential competitor. When the Schuylkill Canal was built in Pennsylvania, the state decreed that the canal owner could not have an interest in mining, because the ownership of the canal meant it could disadvantage any competitors that needed to use it to ship their materials.

Network neutrality is a common sense regulation so long as we have to deal with monopolies like Comcast - we cannot stand to let Comcast or any other firm impose itself as a gatekeeper between us and anyone with whom we want to communicate or do business.

Addendum: Thanks to Harold Feld for noting that the opinion reinforced the FCC's Section 706 authority, which we believe could be used by the FCC to strike down state laws that limit local authority to build networks:

As we explain in this opinion, the Commission has established that section 706 of the Telecommunications Act of 1996 vests it with affirmative authority to enact measures encouraging the deployment of broadband infrastructure.

Read our further coverage of how this decision impacts muni networks.

Responding to "Crazy Talk" Volume 4 - Community Broadband Bits Episode #72

We are back with the fourth volume of our responding to "Crazy Talk" theme on the Community Broadband Bits podcast. The source of this week's crazy talk is a public relations executive for Time Warner Cable, following an interview I did on WUNC in North Carolina.

Lisa Gonzalez, myself, and our colleague John Farrell react to some of the claims made to discuss what you should know about community owned networks and broadband policy more generally.

We talk about misleading statistics, lies about how local governments fund networks, and whether Time Warner Cable or local utilities pay more in taxes.

We want your feedback and suggestions for the show - please e-mail us or leave a comment below. Also, feel free to suggest other guests, topics, or questions you want us to address.

This show is 23 minutes long and can be played below on this page or via iTunes or via the tool of your choice using this feed.

Listen to previous episodes here. You can can download this Mp3 file directly from here.

Thanks to Mudhoney for the music, licensed using Creative Commons.