Tuesday, April 18, 2006

Cox Returns to Peddling Disinformation

Sharon Kleinpeter (based in Baton Rouge, not Lafayette--a claim Cox employees should learn not to make.) has a letter in this morning's Advertiser. In it she returns to Cox's failed strategy of trying to scare Lafayette into submission with what can, sadly, only be called lies. The real question is what exactly is it that so scares Cox Communications that it will risk returning to methods that have backfired on it so badly in the past. Could it be real competition unfettered by the state restrictions and regulations imposed on LUS but not on Cox?

It really is pretty astonishing the lengths to which Ms Klienpeter will go. Let us start with the most dramatic falsehoods and advance to the minor bits of misdirection.
In Bristol, Va., where a fiber network was recently constructed, residents experienced rate increases of 40 percent in electric, 22.4 percent in water and 4 percent in sewer. Without cross-subsidization protections, Lafayette could see similar increases.
That's just dishonest and, frankly with the reams of material that have been published on this question, I have to believe Ms Kleinpeter knows that its not true--or she should start doing a little fact-checking of her own before signing her name. Virginia, like Louisiana, has a law which prohibits public telecommunications utilities (but not private ones) from using income derived from one branch of the business to "cross-subsidize" its telecom business. That's not the end of the similarity: the local phone incumbent in Virginia, Sprint, sued alleging cross-subsidization when Bristol Utilities undercut their phone prices. The ensuing, costly battle resulted in Bristol being cleared of the charges more than a year ago. This is a matter of easily accessible public record and Ms Kleinpeter does her reputation (and credibility with those of us across the basin) no good in repeating a disproven charge in a transparent attempt to make us distrust our local utility.

The specific numbers she site, 40%, 22.4% and 4% sound solidly factual but are similarly deceptive and are just as easily shown to be unrelated to Bristol's fiber project. For instance, the dramatic 40% jump in electricity prices was a cause for concern locally, as you might imagine. But the Bristol paper reports a story that has no fiber involvement:

Bristol Virginia Utilities' 38 percent power rate increase may be a significant spike for its customers, but the new charges will be more in line with those of other electric systems.

BVU's seven-year contract with Cinergy ends Dec. 31, and the utility has entered into a three-year wholesale supply agreement with American Electric Power, effective Jan. 1. The switch is costing BVU 81.81 percent more, half of which it's absorbing and the other half it is passing on to customers.

So the truth is that the local utility, which had negotiated an unusually favorable rate for its customers couldn't get as good a rate when it had to look for a new supplier. It absorbed half the cost of the increase with the net result that its customers, who had enjoyed years of unusually low rates, now paid something much closer to, though apparently still a little lower than, the going regional rate. Relationship of this issue to the utility offering competitive, inexpensive, phone, cable, and internet over fiber to its citizens? None at all.

So Bristol has not been cross-subsidizing its telecommunications division and local increases in utility costs have nothing to do with the cheaper services the telecommunications division is offering the community. Regardless of what the competition would have you believe is true.

Now on to mere misdirection:

First, It's LUS, a local public utility, not "the local government" that will be competing with Cox and offering lower cable prices to Lafayette citizens; something Kleinpeter well knows. She just doesn't think it would get her company as much sympathy to try and stir up resentment against a local utility if she used the more accurate terms.

Second, I don't think that Mr. Huval has ever said that "government" (or even LUS) needs cross-subsidization. After all, though admittedly under duress, LUS agreed to the law that includes that clause. I do think that Huval and LUS have asked for the same rules applied to LUS by the "Fair" Competition Act apply to private providers. That's what one of the bills Ms. Kleinpeter lumps together and dismisses would do. Cox is opposed. Why? Is it because the Cox conglomerate would like to retain its freedom to be able to cross-subsidize its business in Lafayette on the backs of millions of rate-payers across the US and to use the proceeds of any of its other newspaper and media business to fund its (un)Fair Competition in Lafayette?

Third, Cox -- who used to tell us that fiber was like an unnecessary luxury car -- is now playing little games of misdirection in implying that its "state-of-the-art fiber network" is desirable. Of course Cox has the same hybrid fiber-coax system that it had before it started billing itself a fiber network and handing out little flashlights with a bunch of plastic fibers attached to one end at community events. At least Cox understands now that we want fiber--but what we actually want is Fiber To The Home. And that is what we voted for.

Fourth, it is Fiber to the Home (FTTH) that we voted for on July 16th last year. Nobody that voted for the FTTH initiative was voting to support the restrictions that Cox and BellSouth put on our local project with the help of the legislature. They were voting to support the project. It was the people who voted against the project, and lost 62 to 38%, that were worried about such issues. Cox isn't worried about "fair play" or your utility rates. Implying that the peoples' vote somehow supported Cox and BellSouth's position must rank as some sort of new high in the art of corporate misdirection and misinformation.

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All in all, this letter does Ms Kleinpeter and Cox no credit. It reawakens the judgment that you can't trust anything the incumbents say. I had thought they had learned from previous mistakes. What Cox is offering here is what Cox offered the community during the initial months of the fiber fight: Fear, Uncertainty, and Doubt. This is not merely a failed political tactic that will lose them points with our community. It is also lousy business practice. People have a hard enough time trusting their Cable company as it is. People don't want half the channels they are forced to buy just to get the few they actually watch. They really don't like that they almost never see the rated cable speed that was advertised for the tier they bought. Giving the public an objectively verifiable reason to believe that Cox will lie to you and that it will mislead you is not just dangerous politically; it is a really bad business practice. It's hard to think of a better way to ensure LUS' success.

10 comments:

Anonymous said...

do we know what speeds and pricing LUS is going to offer?

Anonymous said...

To a buisness, LUS will not sell more than 1.2 megs, period. If you want more you must go through a retailer, and that is $550 per month for 1.2 megs. 3 megs is around $900 per month. Check it out, call them.

Anonymous said...

All that being said, the truth of the matter is LUS and LCG want to repeal the law because they need the cross subsidy to sell the bonds. Without the cross subsidy, the bond market will not buy the bonds. It's that simple. The rest of the discussion is the pot calling the kettle black.

John said...

In response first anonymous post:
Nobody knows yet. The system isn't built and the demand and the competitive environment isn't known. What is clear is that LUS will be able to offer much more bandwidth than its competitors.

In response to the second anonymous post:
You're not answering the question posed. Note the future tense in Anon #1.

Beyond that you are wrong that LUS will sell you any bandwidth at all directly. You always go through a reseller and those folks tiering and pricing scheme is their own.

That's why its called "wholesaling."

In response to the third annoyingly anonymous post:
They don't need the cross-subsidization to sell the bonds. We could argue legalities and economics but the continued assault on multiple bond ordinances (not actual business practices when they are actually in use) should demonstrate that BellSouth at least think that they need to block the bond sale.

The 24th is the drop dead date for BellSouth to try and block the bond ordinance. Let's wait and see. If they don't sue to block again I predict that we'll see a bond sale. Then you can come back and admit that wasn't true.

I do think that BellSouth and Cox imposed the cross-subsidization bit for two related reasons:

1) that it would reduce the flexibility of the new LUS business. Cox knows quite well that one of the advantages of being in several different business (as Cox IS) is that you can use the one to tide over the other. Keeping LUS from following its own practices will, Cox and BS hope, increase the likelihood that LUS will fail.

2) As a nice side effect it probably will result in some additional cost to the project the people have voted in. Cox and BellSouth are happy with that too. After all, they've managed to use the state to raise the costs to the consumers of their competitor's product without effecting their own. A great business move--for a monopolist.

Anybody who really thinks that Cox and BellSouth insisted on this silly cross-subsidization rule either because they are worried about Boudreaux and Thibodeaux's taxes or believes the incumbents fear that the intimidating fiscal power of LUS' electrical, water and especially sewer utilities in the city of Lafayette will put them at a serious financial disadvantage is smoking something that they hadn't ought to.

Anonymous said...

I don't understand. Cox is $180 per month for 3 megs, and LUS, through its retailers is $550 for 1.2 megs. Now your saying LUS will not sell any bandwidth to businesses, but they will sell 100 megs, telephone and TV to residences for $85 per month. I don't get how this is will help businesses in Lafayette. Can you explain it?

John said...

Anono,

With all respect, I don't think you've been following the debate very closely.

I said that LUS is not currently retailing bandwidth. Apparently you now understand that. But I am not saying that LUS won't retail bandwidth in the future. In fact, that is just what all the hoorah for the last two years has been about: building fiber in order to offer fast, cheap, retail services to every home and business.

Up to this point LUS has followed a very conventional business plan--offering an industry-standard set of services for a nice discount. They have declared that they'll sell into the business sector in the same way that Cox or BS does. They haven't given details but I suspect that they'll follow the pattern they've already established and offer business packages that are faster and cheaper to businesses that echo the established industry pattern.

The immediate benefit is obvious and just the same as it is for residential accounts: competition and faster, cheaper services.

A caveat: the 100 meg promise you refer to is only for between subscribers...its like free in-network minutes for some cellphone providers. Otherwise you'll have the same sort of tiered arrangement (x dollars for x speed) you see from Cox and BS.

Anonymous said...

wow! i didn't realize that the 100 meg was a limitation to just "in-house". Guess I haven't been listening close enough becasue I thought it was 100 meg connection to the Internet. Is this common knowledge and I just missed the bus? gotta say i'm suprised we may not get any speeds faster than whats available now.

John said...

Anono,

Got to listen closer yet. :-)

I do suspect that we will get speeds that are faster than available now even to the internet. It will be technically easy for LUS to offer faster speeds like 100 megs to the internet. What's hard is paying for it.

Using in-system bandwidth is all but free. With a very big pipe LUS can easily allow folks to communicate at the rated speed of the network. But LUS will pay for every bit that transits the internet and it is a large expense. That can't be free.

If I were LUS I'd offer the high-priced 100 meg flavor just for bragging rights--but wouldn't expect many to take it.

Anonymous said...

John:

I just can't read this JUNK! You have the most arrogant, condescending writing style of anyone I have ever read! Not to mention the fact that you never directly answer ANY question posted to you without beating around the bush ten times!!

I thought that Breakfield and that Supple guy were bad, but at least they SAY SOMETHING. Nobody has the patience to distill what you say into something meaningful. I used to try to get something out of this web site as information, but I just don't have the time. It's obvious that you write this for your own satisfaction, and you don't care if anyone reads it or not.

So, here come the insults. You are certain to say something about my intellectual capacity being inferior... something else about my motivations. You will try to malign me personally to avoid the meat of the matter... just like you always do. Don't forget to triviallize all that I have said as untrue or immaterial.

Actually, the smartest thing to do would be to not reply at all, otherwise you will prove me right... but you can't help it. You will reply and it will be in your trademark "superior" tone.

A word of advice to the two other people who read this mess... nevermind... you get it.

Regards,

Audi
(as in I'm aud-a-here)

John said...

Anono,

This must all be very frustrating to you. People ask questions, People ask questions with no apparent connection to the post they comment on. I try and answer honestly. If they ask them anonymously it is impossible for me to know whether I am having one conversation or more. So I have to go through the whole thing.

I find that frustrating.

The current anonymous person (the same as the others? who knows.) complains about lack of info while not adding any of his or her own. Comments on the real meat of the current post: none. Was Kleinpeter right about the 40% or was that deceptive? Was Bristol cross-subsidizing or was it not? I try and give actual references. If I'm wrong then let me know how.

If we've gotten to the point where insisting on evidence and accuracy is considered rude...well that's not behavior I consider rude.

I have no doubt you'll think this reply superior in tone. I can't do anything about that.

Come back some time. Use your name. Ask questions or dispute the meat of the post. Respond to inaccuracies pointed out in your own remarks in some way beside ignoring them and moving on to the next assertion.

I think you'll be happier with the interaction.

I know I would be.

(Do I overexplain..way too often. ;-) This is probably a good example.)