Shareholders Love The Nats

Last week, I mentioned how Councilmember Howie Denis had used his rhetorical moment during a quarterly franchise review to complain about the failure of Comcast to carry the Nationals games here in Montgomery MD (and throughout the DC region).

At the time, I observed that it was pointless given that Comcast and MASN had entered arbitration over the matter. That arbitration has now concluded. It looks like Comcast won and subscribers also won. Or lost. Depends on your point of view.

Somehow omitted from the Comcast press release about the good news was the bad news: Comcast plans to increase their rates $2 per subscriber (plus additional franchise fees and taxes) to pay for the coverage of the Nats games. Ok, not all subscribers - just those subscribing to Comcast's enhanced basic - in other words, anyone getting more than the lowest-numbered 30 or so channels (which includes such gems as the Home Shopping Network, QVC, and the TV Guide Channel).

Put bluntly, most subscribers will be hit with the $2 surcharge.

Who Would Willingly Pay For QVC?

This raises the obvious question: Why should subscribers who have no interest in Nats games be forced to pay for them?

Putting aside the conflicting studies showing whether a la carte packages are more expensive (FCC, 2004) or less expensive (FCC, 2006) and whether they improve or hinder diversity of programming, the answer is more likely that enough people will watch whatever sports are put on TV, and that a few dollars here and a few dollars there aren't large enough increases to hit people hard enough to change their behavior - to sit up and question the status quo. (Curiously, it is much harder to find the later report on the FCC website than their earlier report.)

Another significant factor is that the bulk of Comcast's broadband customers still believe they are getting a better deal by subscribing to Comcast's video service to get the package discount. I've previously shown that isn't true but habit, effective advertising, and automatic billing are hard to overcome.

PS: Join me in thanks that we don't live in DC and have to pay for yet another stadium boondoggle!

Shareholders Should Be Happy

The details of the arbitration have not been made public but the August 12 2006 Washington Post quotes a MASN spokesperson as saying the true cost is $1.25 per subscriber. Simple subtraction (2.00 - 1.25) suggests that Comcast is using this hike to raise their profit (after lawyers fees) by .75 per subscriber. With roughly 200,000 subscribers in MC that equates to $150K a month in additional profit or $1.8M per year. Nice.

According to the Post article, Comcast denies this, indicating that "MASN's statements . . . show a lack of familiarity with the provisions of the carriage agreement and with the basics of the cable television marketplace." If anyone knows what she's referring to, I'd like to hear. And so would Cox, DirectTV, RCN, and Verizon. They all carry the Nats games and have not raised rates either.

Festina Lente

On August 8, 2006, I attended a preliminary hearing on Verizon Maryland, Inc. v. Montgomery Co., MD.

As a reminder, Verizon's lawsuit asked for:

... a preliminary injunction invalidating Montgomery County's current cable franchising law and directing the county to negotiate a franchise with Verizon on lawful terms within 60 days. At the same time - in an effort to help speed the negotiations to resolution - Verizon is asking the court to invalidate the numerous unlawful requirements the county is attempting to impose on the company.

As I looked around the courtroom, I concluded that were this a simple guilty / not guilty case, I'd have had to bet on Verizon based on the number of people alone. I counted 13 people representing VZ versus 6 from the county. But except for lawyer's bills, things are never that predictable.

Fere Libenter Homines Id Quod Volunt Credunt

Despite my fear that the judge would make some superficial action such as throwing the whole thing out or granting a continuance, the judge dived right in to the meat of the case. Although he didn't appear to be up to speed on everything, he at least recognized the basic positions of the two parties and why agreements were not fast in coming.

As I munched my popcorn, the lawyers brought up various precedents (which they proceeded to misinterpret or otherwise abuse) that, while interesting seemed, to me at least, to demonstrate why so much law is just garbage and why English is a terrible way of expressing anything definitively. (And, de facto, Latin doesn't help.)

I'm not going to go through the individual arguments except to say that the judge listened to a few of the disagreements and in each case pointed out that, at least in spirit, there was agreement but for the sloppy language in the existing franchise or the federal cable act.

And with that ("that" having taken several hours), the judge denied the preliminary injunction but ordered that the court will appoint a mediator (a magistrate judge who is not a resident of Montgomery County or Baltimore) and that Verizon will be directed to file its application immediately, in parallel, and without a negative impact on the case.

Rather than mediating all issues simultaneously, the judge specified that issues would be mediated one at a time - or however would best make progress. The mediator would have no specific power (i.e., not binding arbitration); however, if the mediation failed, the parties would then return before the judge who could make a definitive ruling, even potentially throwing out sections of MC's cable-related code or taking some action that would cause Verizon to forfeit its $450K filing fee. Given what each side has to lose, it makes sense for the parties to work cooperatively and a neutral mediator could be helpful.

I said "could" because while the proceedings appeared to go smoothly, the judge chose only to discuss some of the more easily resolvable differences. For example, the judge got basic agreement on the franchise acceptance fee. But there was no discussion on some of the thornier issues such as cable modem regulation and transitive regulation of Verizon's existing infrastructure and phone service.

And even in places where the judge seemingly had the parties nodding their heads in agreement, I have to express doubt as to whether they can really get it in writing. For example, the lawyers conceded that 5% of gross revenues applied only to video-related service, no matter what the franchise said. But I question whether the lawyers and the judge really understand the implications of convergence (i.e., the future melding of video and internet technology). As a trivial example, when Verizon delivers video to your computer over the internet, will this be subject to a 5% franchise fee because it's video or 0% because it's internet? It's important to realize that the distinction between the two is very loose despite the traditional notion that we have over them today.

So I think that the mediation process sounds great but may turn out to solve none of the serious areas of disagreement, forcing things back in the judge's hands in 60 days or whenever the mediator's time runs out. (A timeline was established behind closed doors and I don't know if this will be made public.) While this process could induce additional delays, the judge has the authority to settle things definitively - at least until one of the parties appeals the outcome. Appeals would be the worst possible outcome and surely neither Verizon nor MC wants to go that route.

In the short term, action yesterday potentially paves the way for a peaceful and (here I'd love to say "swift" but almost anything is swift relative to a year of non-) forward progress. As long as it can be done equitably, both MC and Verizon have strong motivation to settle and sign a franchise. Let's hope they do.

Rideo, Ergo Sum

In the spirit of painful humor, this flash video has been circulating around. It's sad the depths we've sunk to. On the other hand, I do agree that Go Montgomery! was a political gimmick in the first place. (And is now a failed political gimmick.) So in that sense, the video and the program deserve each other.

Acta Est Fabula Plaudite

The first person to post a comment with correct translations of all the Latin phrases I've used gets a coupon for a free pizza (coupon courtesy of Comcast). And after this, I promise - no more Latin!

CDV Complaints Commence

This past Monday (July 31, 2006), I attended the quarterly county review of video franchise holders in Montgomery County, Maryland.

Contrary to my earlier prediction of a rollicking good time, it was anything but. Did I fail to get the memo? There were only about six people in the audience, a big difference from past meetings when the house was packed. This was even more surprising given that we've gone half a year without one of these things. So the meeting was really to review two quarters worth.

We started with a review of how well Comcast and RCN have been meeting their franchise requirements. Some complaints levels were up a little, some were down a little. The Cable Office received 263 complaints about Comcast in Q1 and another 387 in Q2. The Q2 complaint levels are down from last year's but recall that last year's were unusually high (which Comcast blamed on Verizon). For both quarters, more than half of Comcast's complaints (438 of 650) were for service. For RCN, more than half (17 of 28) were for billing.

There were 2150 and 2199 construction violations by Comcast in Q1 and Q2 respectively. RCN figures were 478 and 715 for the same periods. Is it that hard to install and maintain cable plants? Do other jurisdictions get these high figures?

Jane Lawton, MC Cable Administrator, presented these statistics along with notices of fines and warnings that both franchisees keep getting. Jane extolled Comcast's new General Manager Sanford Ames in one breath and in the next breath went on with her recitation of continuing problems.

Although the county can assess fines for some things, it has a tougher problem with other issues. For instance, the county must approve Comcast's privacy policy and they rejected yet another one. It's been at least two years now that Comcast has violated this provision of the franchise. But short of yanking the entire franchise, I'm not sure what recourse the county has. Why do we have a franchise with provisions that aren't enforceable?

CDV Complaints Commence

I hate when the Cable Office swallows the corporate cool-aid - witness their willness to use Comcast-speak while describing Comcast's new family tier as family friendly. Don't get me wrong - I have a great deal of respect for the Cable Office. And sympathy. They don't have a lot flexibility in the tools at their disposal. And I like that they track things that they aren't even required to track. Yet a new category of complaints they've begun tracking is for telephone service offered by the franchises. Well, maybe they have been tracking this for RCN (which has offered phone service in the past) but it has never come up before. However it certainly came up at this meeting.

The Cable Office reported having received 80 complaints for Comcast Digital Voice (CDV) with some outages of "2 to 3 weeks" according to testimony. That's 80 complaints to the Cable Office. (Angela Lee, Comcast's Director of Government Affairs, naturally refused to say how many complaints Comcast got directly.) It was at this point that the participants seemed to leave all knowledge behind because CDV was repeatedly referred to as VoIP and relying on the internet, both of which are misleading. The council didn't seem to understand nor did Angela how CDV is unlike traditional VoIP. I'm not sure that anyone did because no one else in attendence made any attempt to clear it up either. (Members of the public are not permitted to interrupt at these meetings, even if it's to correct blatant mistakes. Instead we do a lot of teeth gritting.)

I was left wondering if the reported 2 to 3 week outages were simply for internet service or really were for CDV. Nonetheless, it was clear from the complaints that consumers were extremely surprised (not to mention unhappy) at the unreliable nature of Comcast's phone service. Councilmember Marilyn Praisner asked what kind of statements Comcast was making about the reliability of the service and Angela responded that customers are told about various conditions (such as limited battery life during power outages) that can affect service. Praisner restated the question thusly: What are customers told about the reliability of the service BEFORE they sign up and BEFORE they sever the relationship with their previous phone company. I didn't get Angela's exact words because I was so stunned after she said it but it was pretty close to this: Many of our customers are experienced and already know about the unreliability of VoIP. Oh really!

And the misleading (or bizarre) statements continued. At one point, the council started asking about complaints regarding pixellation in the digital channels. I was surprised to hear Angela give a lengthy reply which amounted to It's complex but which also implied that she hadn't a clue but was prepared to talk as long as it took for the councilmembers to get tired of asking questions. At one point, she said (paraphrase) Pixellation in the digital channels is much harder to debug than snow in the analog channels. C'mon Angela. If you don't know what you're talking about, just say you don't know. Alas, the councilmembers accepted her blather and moved on to other items.

Verizon

To my surprise, there was no review of Verizon performance at the meeting. Not even an update on FIOS construction. Marilyn uttered only one sentence - that there would be no comments pending the litigation.

Meanwhile Verizon has put up a petition for MC residents to express their desire for cable video competition. It intends to present the petition to the county at some point. I'm not sure how compelling that will be compared to a lawsuit though! Isn't this like following a bomb with a flyswatter? Is this the backup in case the bomb is a dud? Could Verizon be worried that the lawsuit will be dismissed? (I signed it anyway.)

We might find out soon. On August 7 2006 at 10am, motions will be heard on Verizon Maryland, Inc. v. Montgomery Co., MD MJG-06-1663 in Courtroom 5C at the US District Court for the District of Maryland. The address is 101 W. Lombard Street, Baltimore, MD 21201. As one poster to dslreports.com dryly noted: "I understand it will not be catered." Anyone interested in going anyway?

RCN

A few last notes about RCN. RCN seems to be having some problems. They are having cable plant maintenance problems. And their complaint numbers are up significantly. (It's a bit strange to consider numbers in the teens as "significant" but then we're using to seeing their complaint numbers in the ones!) As I said earlier, most of the RCN complaints were regarding billing (in comparison most of Comcast's complaints were about service).

So why the spike? RCN says there were two reasons. First, they had growth in subscribers they didn't have enough staff to deal with! Second, it appears that the growth was due to new packages they offered. But don't worry ... We got rid of the marketing guy who came up with the new packages! Huh? I must've misinterpreted their explanation but that's what it sounded like!

Showmanship

Finally, I can't help noting that the Councilmembers each enjoyed a bit of posturing for the cameras undoubtedly due to the the upcoming elections that the three members of the MFP committee are facing. Councilmember Marilyn Praisner repeatedly spoke to the cameras. For instance, when Jane made reference to some FCC forms, Marilyn asked Jane to explain the form names for the benefit of people watching on TV. I'm figuring that Marilyn didn't remember the cryptic numbers. I don't hold this against her. Who does remember all those numbers?! But to ask for the explanations this way is unseemly and transparently so.

After all, the entire meeting is filled with jargon and subtle concepts that go unexplained (and frequently misunderstood by many of the attendees themselves). If Marilyn really wanted the audience to understand all the obscure references, the meeting would take an entire day.

Admittedly, I did enjoy when she quoted something right out of one of my earlier postings when she started her line of questioning over the policy for getting a hold of a supervisor, finally ending with the rhetorical question: Is it possible that there are no supervisors?

Councilmember Phil Andrews also got his opportunity to pose for the cameras. He went on for awhile about how customers are regularly frustrated in their dealings with Comcast and how it has been this way for years. And in the middle of his turn at rhetorical questioning, he "accidentally" let slip how competition would help. If that's not playing to the constituency, I don't know what is.

Don't get me wrong. I agree with Marilyn and Phil on most of their positions and would be glad to see them back on the council next term. It's just that I wonder where they're going with their lines of questioning at these meetings. An an example, Phil asked what kind of training is received by the Comcast phone people. (Comcast calls these people CAEs for Customer Account Executives. Don't you want to be an executive, too?)

So he and Angela got into a fascinating but ultimately useless discussion - because whatever the training is, IT'S CLEARLY NOT ENOUGH! Angela could've said they're trained for 6 years (actual amount: 6 weeks) but so what? I get frustrated with at least 50% of the calls I make to Comcast. Phil could ask me for several stories from this month alone. Instead, he dragged out some letter he received a YEAR AGO complaining about Comcast closing out complaints without first checking with the customer to see if the problem really had been solved. To be sure, Comcast's practice of closing complaints prematurely hasn't gone away BUT THAT'S THE POINT. It's been a year since the MFP Committee excoriated Comcast for this practice and nothing's changed. It's all for naught. Why does the MFP committee bother?

As if Phil still hadn't caught on, he also talked about another letter he received from a Silver Spring resident complaining about four missed appointments and a litany of other Comcast problems encountered along the way). Angela did a very imaginative job coming up with rationalizations as to how it could happen. Phil got no traction and ultimately Angela got the last word: We're looking into this. And I'm sure she will be - or whoever her replacement is - a year from now.

I must admit I did find one interchange between Phil and Angela interesting. He asked what the turnover was in CAEs and to my astonishment, she answered.

Angela: Our attrition rate is 7.5%
Phil: Is that 7.5% a quarter or a year?
Angela: That's per quarter.
Don (silently): That explains a lot!

My last example is Councilmember Howard ("Howie") Dennis. Howie is truly an asset to the committee. By keeping his mouth closed, the meetings go much quicker then they otherwise might. But I guess he wants to get re-elected too so he opened his mouth despite my fervent prayer. His 1st question: Why can't I get the Nats games?! I was stupified as he noted that he was aware that the issue had gone to arbitration because, despite admitting this, he went on to brilliantly suggest that Comcast "split the difference" with MASN (the network that holds the cable rights to the Nats games). Howie, what's your point here? Showing that you understand something that happened in the past and over which you have no control now? Do you really think voters find this compelling?

Howie went on to ask some absurd question about the customer service requirements of the franchise (such as the requirement that phones be answered within 30 seconds 90% of the time). I don't recall who (I think it was Marilyn) gently explained that these provisions come right from the FCC regulations. If she had really wanted to go to town, she could've pointed out that they had already reviewed the figures an hour earlier and WHY WAS HE ASKING ABOUT THEM NOW?! Not to mention, they've been discussed at every quarterly review he's attended as well as during council meetings. Howie, that's really great that you're interested in understanding what you're supposed to be legislating NOW THAT YOU'RE AT THE END OF YOUR TERM!!

Conclusion

And with that, thankfully, the meeting was adjourned. If you'd like more information, you can read the council's briefing packet which contains all the statistics, the inspection reports, and the letters to which I've referred here. And if anyone has any corrections, please let me know. The county hasn't made this session available on streaming video for some reason, so I'm relying on my notes and memory. (Curiously, there was a Gazette reporter taking notes as well but I've seen no article from the Gazette about the meeting.)

Incidentally, I also listened to the prior item on the agenda which was a review of a request for a non-video franchise to allow Fiber Technologies to lay fiber in the MC rights-of-way. As is the case with all of these that I've seen, MC extracted its pound of flesh. In this case, the company is obligated to provide the county:

• 5% of gross receipts,
  
• users' tax,
  
• cost of permits,
  
• 4 strands of lit fiber,
  
• and up to $2000 to cover miscellaneous costs.

As to what the government does with all these strands (that all go nowhere particularly useful if you're not a business), I have no idea. One of these days, I'll have to track down who in the county government even knows so I can ask and find out.