The Time Warner cable-box lawsuit: How one PO'd customer could win even if he loses

To hear the attorney for Matthew Meeds tell it, Meeds v. Time Warner Cable is going to be the Carterfone case of the new millennium.

I had to look it up, too: In 1968 the Federal Communications Commission ruled that AT&T could not keep competitors (like Carterfone) from selling telephone equipment to AT&T customers.

Breaking the iron grip of Ma Bell was the beginning of the end of its monopoly, and John F. Edgar, the Kansas City lawyer who's filed suit against Time Warner in Missouri, Kansas and California, sees this as a similar moment.

Meeds, his client, is tired of renting of a cable box for 10 bucks a month -- but Time Warner gives him no other choice. His would-be class action lawsuit seeks to change that. (A judge has to decide whether to classify it as class-action; that will take a few months. Here's the Kansas filing and here's the California one.)

"Folks just simply aren't allowed to purchase those boxes," says Edgar. "Time Warner Cable will not allow it. ... It is just an absolute atrocity, the amount of money they're making off these cheap boxes. I can't wait to find out how little they pay for them."

Even if Edgar loses, even if a court ultimately refuses to grant the case class-action status, it could be a victory if Time Warner is forced to reveal the financials of cable set-top devices, the manufacture of which is controlled by two large companies, Motorola and Scientific Atlanta (now a subsidiary of Cisco).

Edgar thinks the boxes can't cost Time Warner more than $30 or $40, which means even if they must be serviced often (because they're cheaply made), the cable company still prints money.

Mad as hell

What's interesting to me about this story -- other than the fact that Meeds lives three miles from my house -- is that I doubt it would happen if he were a customer of a smaller cable company like SureWest (formerly Everest) or Sunflower. (Unfortunately, we may never know. When I called Meeds at his house he said, "I have no interest in talking about this," and referred me to his lawyer. Really? No interest at all?)

I receive email every week from customers of Time Warner Cable and Comcast in my area. The complaints they bring up are legitimate, and in many cases longstanding. Yes, I understand that technology challenges and the explosion in the number of cable channels has put these big operators to the test. But schools get evaluated every year and are expected to show something called "adequate yearly progress." Speaking as a longtime customer, Time Warner Cable has failed to make adequate yearly progress. Their Navigator system is a joke, their HD-DVRs often barf a few minutes into recording high definition shows, and now it is leaving its small but empowered group of CableCARD customers behind as it adds a raft of channels we can't get. (Yes, I'm one of them; more abotu CableCARDs later.)

And then there is customer service. I think that failure is the one that puts people over the edge into Howard Beale, mad-as-hell paroxysms. Here are some samples from actual readers.

Customer J.T.:

"Three times we've missed big Olympics swimming relays because we've rewound (on DVR) the events and then tried to watch them. Three times we've had the DVR re-boot (the Mystro software) and have been unable to watch or recover the broadcasts. When I called to talk to Time Warner about the problem, the customer service number was busy (!?). I e-mailed them five days ago and haven't heard a word. What are consumers supposed to do if they can't reach the company? I am e-mailing you out of complete frustration."

Bill emailed me after being on hold for an hour:

"Does anyone in KC care about the impression the city makes to returning residents? I'm thrilled with the improvements to the Metro system in the last twelve years and Brush Creek looks so clean that I might launch my kayak there next month. But TWC service dost seem to stink too much."

Dennis:

"I just stumbled across your blog entry regarding Time Warner Cable's switch to SDV on certain channels from early July. Sadly, I'm just now learning about the issue after trying to setup CableCARD service in my Tivo HD. I swear, the cable companies are going to try to cut out competition at every turn!"

And those are just from August. And it ain't just Time Warner.

The CableCARD mess

Then there is Jeff Cohen of Flushing, Queens, New York City. Jeff is a pioneer. A bold experimenter. And in the culture of Big Cable, that means he is a dupe. I'll let him tell the story:

"I recently concluded a nightmare experience with Time Warner Cable of NYC. I wanted to avoid the digital switchover next February as well as own my own equipment instead of paying Time Warner NYC $11 per month for another cable box that would not even be used on a daily basis.

"I purchased an Explorer 3250 cable box from eBay. This is the equipment I currently rent from Time Warner, so I bought what I already have. I brought it in so they could enter the serial number into their system to activate. At the service center, they told me I could only own a cable modem. So they were unaware of the change in the law. ...

"Upon further online reseach, I needed an Explorer 4250 HDC (High Def CableCARD) box...which are scarce online and are not sold directly to consumers from Scientific Atlanta. But I found an Explorer 8300 HDC - and when I called Time Warner, they said it could be activated! ... Unfortunately, the unit was "binded" to Comcast, and the serviceman (I waited 3 hours for his arrival) took his CableCARD and split. I subsequently resold the unit on ebay, losing $15.

"The serviceman said NOT to get a TV with CableCARD technology because it was being phased out. ... Now I'm in limbo. I haven't looked into purchasing anything because I never get a consistent answer from Time Warner about what will or won't be serviced. I have no idea if I should take a serviceman's word over that of their Web site. It's a big clusterf#!k and unfortunately it's us, the cable consumers, who continue to get f@#ked."

Jeff actually went out and did something few people (including, I'm guessing, the plaintiff in this lawsuit) bothered to do -- actually own a cable box. And got his hand slapped.

So what about those CableCARDs? Well, contrary to what Jeff's service guy said, they are not being phased out. In fact, the F.C.C. required cable manufacturers to start providing as an alternative to the big black box. But as I have noted before, the CableCARD is currently crippleware. It only allows for one-way communication. When I bought my TiVo Series 3 HD recorder, it was with that understanding. I knew I would not be able to get video-on-demand. But I don't use VOD that much, so that was OK.

In recent weeks, however, I and every other CableCARD customer in America have learned the hard way about Switched Digital Video. With SDV, the cable company no longer has to deliver every single channel to you at alltimes. It reserves a certain chunk of bandwidth for lesser-watched channels. Those sit back at the plant until you decide you want to watch one of those channels -- then SDV goes and gets it for you.

This is video on demand by another name, and so, needless to say, it is one more thing a CableCARD can't do. As a result, no Sundance Channel for me -- it's one of those "lesser-watched channels" Time Warner has designated for assignment to SDV -- until this "tuning adapter" workaround that TiVo is promising on its Guided Setup is not just something you can Google but something you can buy. OK, or rent.

(There's also a burgeoning technology called tru2way that is on the fast track to the marketplace. As the title suggests, it will give customers 2-way capability. But it won't mean the end of set-tops. Here's a good backgrounder on tru2way's role in the whole CableCARD-SDV-digital cable mess.)

Does he have a case?

Back to our muted main man, Matthew Meeds. You wouldn't have read this far if you weren't curious to know whether I thought he had a case.

I spoke with two people, both friends, who I thought could give me a balanced look at the issue. Paul Rodriguez works in the communications department of the National Cable & Telecommunications Association, an industry trade group. He also contributes deeply-linked and well reasoned articles to the NCTA's CableTechTalk blog. And he was a Friend of Higgins, a fraternal order I also belong to.

"Those are not $30 or $40 boxes," said Rodriguez. "Just recently, I heard a ballpark figure of $400 for a HD-DVR box. Clearly if someone has a digital box without the DVR, that's probably cheaper, but not $30 or $40."

So that's the first problem he sees with the lawsuit -- discovery will reveal a higher sticker price than counsel had bargained on. Second, there are alternatives.

"If you don't want a set-top box, you can get a unidirectional device and drop the box." Unidirectional devices, like a Digital Cable Ready television or a TiVo, use a CableCARD for authorization of scrambled services. But that wouldn't make the plaintiff happy. "He complained, 'Well, it's not as good.' Well, that's right. We've been clear for five years that this is not the same." For example, because such devices are not two-way, customers can't order video-on-demand.

Rodriguez added, "If you switched to DirecTV or Dish, you have to have a new box. If you switch to Verizon FiOS or AT&T's U-verse, you have to have a new box. It baffles me to no end why there are four companies competing with cable and nobody has ever complained that you have to have a set-top box for them."

Two words, Paul: Customer. Service.

Rodriguez, though, I think does poke two pretty good-sized holes in the Meeds case. Premium cable is called premium for a reason, and if Time Warner wants to make you jump through hoops to get it, within broad limits it can do that.

He also explained to me, pretty persuasively, that the issue of switched digital video didn't come up at the time of the original Plug & Play negotiations that led to CableCARD technology and it was also acknowledged at that time that new technologies would eventually arise. That doesn't explain the failure to work with customers on existing CableCARD problems.

"A future without set-top boxes would be paradise," Rodriguez said. "You don't have to repair them. Every time you roll out new services, you could just flip a switch to deliver them. ...It's just getting from where we are today to our digital future.

"Different companies are dealing with it differently. Those fees for set-top boxes are all regulated. The idea that companies are making money of them? Not a chance."

Another view

For now, we'll give the last word to Nicholas Johnson, an old friend and one of the rarest of creatures in American politics: a gadfly who had power. Nick served on the F.C.C. after being appointed by President Johnson. He was young, he was unknown, and Congress waved him in, having little idea how much grief it would take from its corporate constituents for it.

He served from 1966 to 1973, and has been reflecting on his time on the F.C.C., as well as media policy (which he teaches at Iowa Law School), ever since. Here's his new book, which I recommend to anyone interested in the history of media policy as well as insights on every major issue facing the Commission today.

Perhaps the most famous thing Johnson did while on the F.C.C. was kill the ABC-ITT merger. He did that just by asking pesky questions in public hearings. As a vote, he had no power to stop the merger (which was actually approved by the Commission with his dissent). But he could undermine it in that simplest of ways: by questioning the legitimacy of it.

I called up Nick to ask him if he had much memory of the Carterfone case, the one that gave companies the right to compete with AT&T on telephone equipment.

Turns out, HE WROTE IT.

"I was only permitted to write two majority opinions while I was there" on the F.C.C., Johnson said. The other one? It led to the creation of MCI. Well, then.

"I worked as a clerk at Iowa-Illinois Gas & Electric in Iowa City as a kid," said Johnson. "They didn't have a monopoly on equipment. As long as you could plug it into the wall you were OK. And I always though that's the way things should be.

"But AT&T took the position that anything that connected to the network that they didn't own was, in their jingoistic term, a foreign attachment, up to and including the plastic cover on the telephone book, which they took the position that this could bring the entire network down.

"Well, I thought this was all bullshit. I thought if you could plug something in the wall and it didn't blow out anything" -- and recall that the F.C.C. currently certifies wireless devices as safe -- "then you should be allowed to use it."

Somehow, he got enough commissioners at the time to agree with him, and thus began the end of the monopoly power of telephone service. And what about cable TV companies?

"The customer ought to have the option to either rent the box by the month forever, or buy it outright. For instance, I have a little device that connects you to the Internet by wi-fi. You pay once -- that's it. I always say people should be allowed to rent. And the companies should hire wheelbarrows to take the money to the bank every month."

Just as Nick Johnson was able to stop what was at the time a major media merger just by opening his mouth, you wonder if Matthew Meeds has tapped into something, and could score a victory in the court of public opinion even if his case goes nowhere in a court of law. It would be nice if Meeds would open his mouth, but even if he doesn't, it seems there are a lot of frustrated customers like him who will be more than happy to take his place.

Comments

[CableTechTalk]

There's a few key technical issues to raise in this phone/STB comparison. In comparison to a set-top box, a phone is a relatively dumb device. You pick it up, it goes off-hook and requests a dial-tone. You dial the number. There's no authorization taking place in the phone; no services are be de-scrambled; it's not enabling the phone company to identify you for billing purposes.

A set-top box has to be plugged into the network that it is designed to work with. You buy a box off of eBay, but does your local system support that box? Is it S-A or Motorola? What model is it?

Is the box able to tune to the correct return path frequency to communicate with the headend? Is it properly shielded to prevent ingress? Will it make the correct security handshake to connect with the billing and customer care system, so that you can be charged appropriately and technical problems can be addressed over the phone?

The key issue with boxes is the security issue. With CableCARDs, the security function is separated, but otherwise, if you could buy a box online and plug it in, signal theft could not be prevented.

New technologies are coming in the future, but any such devices will have to be built according to specific standards in order to work.

[thorswitch]

I hate Navigator in so many ways. It's complete crap compared to Passport. For the first few weeks after the changeover, I had the random reboot problem, but was too lazy to worry about getting it fixed. It happened maybe a couple times a day. Interestingly, it resolved itself, but then a new annoyance developed.

Because I'm almost always typing or reading or playing a game at the same time I'm watching TV, I've started using the closed captioning so if I don't catch something, I can usually just look up and see it typed out - reducing the ridiculous amount of time I used to waste rewinding scenes to catch what was being said. The thing is, now 3 or 4 times a day, for no reason I can figure out, the closed captioning either starts missing about every other line or just disappears all together.

The BIGGEST problems I have with Navigator, though, aren't the result of technical weirdness - they're problems with the actual "features" of the damn thing. I like watching Jay Leno's "Headlines" feature - but I really couldn't care less about the rest of his show, so I only want to record it on Monday nights. With Passport, I could set it to do just that because it let you choose to record episodes shown on each individual day of the week, Monday thru Friday inclusive or Saturday & Sunday inclusive. No such option with Navigator, so I have to keep going through my "Scheduled Recordings" lists and cancel all the episodes I *don't* want. And I have to do this every time the thing reboots because after each reboot, it recreates the "Scheduled Recordings" list.

Also, you know how new episodes of cable shows are often rebroadcast several times throughout the week? Well, with Passport, I could tell it which time slot I wanted it to tape, so that if I had 3 shows on at the same time I wanted to record, I could tell it to just tape a later rebroadcast for one of them to resolve the conflict. Can't do that anymore, either. I can control SOME of the problem using the Show Manager feature to prioritize shows, but I still frequently end up having to delete multiple airings of the same episode or manually telling it which airing to choose by finding it on the schedule and setting it up there.

Other peeves: If I'm watching a show live and decide I want to record the whole series, I either have to wait until the broadcast is finished, then open the guide, navigate *back* to the show that just finished and hit record to get the menu, OR I have to find a *later* airing and get the record menu from there. I can't just hit the record button on the show I'm watching and have it give me the options.

Also? It used to be that if I wanted to look up other episodes of a show, when I had the show selected in the guide, I could choose the "sort by title" option and, voila, there were all the other episodes scheduled during the time period the guide had info available on. Now? I have to go to the Settings option, select the find shows option, type the name of the show in using their "keyboard" and then pick the episode from a list - just so much more complicated than it was.

Sorry this is so long - apparently, I've needed to vent about it for a bit :D I just really, really, really hate Navigator. The only reason we haven't changed companies is that when we used to have DirecTV, there were far too many times we got bad pixelization from rain, and I we haven't heard anything much good about Everest. It just a really screwed up mess.

[Joel]

This story is just sad. It is one more example of how grossly spoiled we have become. I purchased my last new TV 10 years ago. A top of the line tube TV - 37" that cost a whopping $700! Guess what - it still works great!

Just 5 years ago, would you really have spent more than $1000, 2000. 2500 or more for a television? I wouldn't have, but their are too many that would! These are the same people who were busy leasing a $25,000 SUV for $300 a month, and buying their unaffordable homes with an adjustable mortgage to post the monthly payments. The same people that were shocked to find out that they were upside down in that 5 year lease when they tried to trade it 2 years later. The same people who have refinanced that expensive house twice, and are up to their ears in 2nd and 3rd mortgages.

Let me tell those people something: "Just because the kid at Best Buy told you your TV doesn't need a cable box - doesn't mean YOU don't need a cable box"! Sony, Samsung, and Steve at Best Buy don't make up the rules regarding your cable service. Your cable provider does! Vtech and Motorola don't make up the rules regarding your long distance service. Your phone company does! Does this make sense?

Just because my cell phone is capable of sending and receiving text messages, doesn't mean my wireless provider is obligated to just give me that service. We pay for premium services, and if the terms change - deal with it. Last time I checked, cable companies didn't require a commitment of service. They also didn't charge for service calls. That makes it real easy to switch if there are problems!

[John McCain]

YKGOML

[Chris]

I was one of those "dupes" who dove into the CableCard mess about 18 months ago when we bought a new TV. The TV we bought had a DVR built into it (LG brand) so we really didn't need or want the cable box from Time Warner. The LCD television was built FOR a cablecard.

However, LG (who was great throughout my 6 month experiment, including a high ranking LG person from Japan coming TO MY HOUSE) had an incorrect assumption that they could work with the CableCard manufacturers and the Cable companies to get it all correct. Nope. Bad idea. These companies leak out technology in drips and drops and they wouldn't make a fully functional CableCard (even though the government has required them to do so) because it would undermind that whole fleecing money thing.

It's a monopoly and I hope that DirectTV or someone can come along that can, in an instant, change the landscape.

Rarely have court cases changed the playing field for an entire country, but I, for one, am rooting for this one to take hold.

Good luck!

[Peter Bartholumeau]

digital cable boxes cost $300 to $750 (HD/DVR)

do a little research before printing unsubstantiated rubbish

[I think you meant to say, "I plan to read the rest of your story before I post a comment that makes me look like a jackass."--AB]

[Jeffrey]

Thanks for getting around to "my story."

Here's another tidbit about Time Warner Cable...
They started offering a deal where you could lock your cable service and receive 5 percent off your monthly bill. The catch? You had to lock it in for a full year and pay a penalty if you cancelled the service.

I called because one of our cable boxes just stopped working. And the service rep noticed that our "lock-in" was expiring. Did I want to renew and continue to save 5 percent? Sure! The new catch - a TWO-YEAR guarantee, or a $200 penalty if we changed or cancelled our cable contract within the next 24 months (apparently the one-year lock-in was too successful).

What's my savings per month, I asked. Ten dollars, they told me. I took the new lock-in. And now we just can't move until late next year, or the penalty will negate everything we've saved.

And I still haven't gone back to investigating ways to own a third cable box.

[Wes]

Something I've always been curious about. Why can't the cable lines be opened up like the phone lines were for competition? I'm so sick of only having one choice for a cable company depending on where I live. Make the cable lines publicly controlled and regulate them like the telephone lines.
I'm in the process of moving 4 miles from my present location and the new location has Comcast as a cable provider (not my current provider). The prices they charge are unreal and the internet much slower. I'll be changing to satellite service but not everyone has this option. If true competition was implemented with the cable companies, problems like the cable card and set top boxes would be solved quickly. Perhaps I'm naive as to why this can't be done though, technical reasons, not lobbyists I hope. Perhaps those more educated on the topic can explain.

[Mark Jeffries]

There is cable competition, but mostly in the bigger cities. RCN has staked out a business based on being a competitor in the biggest markets and in Chicago either RCN or Way Out West competes with Comcast. You'll have to ask your local government why their cable license is exclusive to one company.

[CableTechTalk]

Wes asks why cable lines can't be opened up. Holy smokes. The "open access" issue must be a decade old.

Besides phone service, public utilities include electricity & gas or water & sewerage. These are essential services. These utilities are guaranteed a rate of return and have certain responsibilities they have to fulfill, such as offering universal service.

Cable companies are not utilities. All their plant was paid for through private capital. Your tax revenue didn't go to cable.

So your phone lines could carry multiple services and you could switch long distance companies, carried over the same wire. But when Verizon and AT&T wanted to offer TV service, they had to build their own plant.

[Wayne]

I live in Canada where you can buy your cable box. Scientific Atlanta box prices, the exact same boxes that are used in many parts of the US, are the following: an SD is $100, HD is $270 and HD-PVR is $500 .

[mojo]

cablecards are actually two-way. it's the host that determines if the setup is two-way or one-way. if you have a two-way host, then you can get interactive services with a cablecard.

as to the OP, i'd like to see the follow-up on this story. the plaintiff didn't seem to do much research on the issue before going and filing a lawsuit. he just knows that it's expensive and is mad about it.

eh, i'm mad too. but the cable company is in the business to make money, not give away the farm. i wonder how many of his services mr meeds gives away for free?

[j.h.]

Everything would be fine if these companies would invest for legit software engineers and stop outsourcing to offshore development farms. Nothing ever works right when you try to produce software this way. DVR technology is not that complicated. But when two hundred different guys with no real direction are involved in writing the code, of course there will be overwhelming bugs.

[LA]

just a quick responce to those who say that "cable is not the same as a phone, which is a utility.....cable had to invest to bring the product to your home..."

you're absolutely right, but according to the Deregulation act the cable companies pushed for it saying that it would allow choise by the consumer improving products and containing prices. Well most cable companies still have monopolies in most places.
If we had true "choice" then they could charge whatever they want and we'll just choose, but we don't have that option.

PS
for those who say that the dish is an optio. Thats only partiall true. If you rent, you legally have the right to have a dish or antenna, but the landlord has the right to not let you install it by not givin the premission to drill or whatever into the house to install it, and without landlord ok, no company will install dishes or anything else.

[Robert]

I figure I should add my two cents.

First of all, cable companies are not a monopoly, there are other options to view TV, Dish being one, off the air antenae being another. For a long time I used the rabbit ears and for anything that was from cable, I would just hop on one of the many bit torrent sites the day after the show was on so I could down load it. Perhaps that is more trouble than some people want to go through, but a monopoly cannot exist if there are choices, even if other choices aren't the most convenient.

As for the competition of cable companies amongst themselves. The cable industry tends to be less interested in competing with other cable companies and more interested in competing against their common rival, satelite TV. This however doesn't prevent cable companies from moving into areas where a cable company already exists. The thing that generally prevents this is the fact that the new company has two options. The first is to put down a huge amount of capital to build a system from the ground up (Headends, Hubs, Nodes, Fiber optic trunk lines etc etc.) in larger urban areas this could cost millions if not getting close to a billion. Few companies have that kind of money kicking about. Second option which is generally the way it goes when it happens is that the new company moves in and rents the resources of the pre-existing company which means that either a, service is more expensive through the new company, or less profitable due to them internalizing the costs of providing the services.

That is my two cents for the moment.

[Theo]

I'm having trouble with Time Warner Cable. They have their big cable box installed into my sidewalk. The installation of this box has uplifted a section of the sidewalk right near it. The city is trying to pin this repair on me, but I know that if anything happens to that box while I'm trying to repair my own sidewalk then Time Warner will sue my ass for damaging their equipment. If anything Time Warner Cable and The City (that gave Time Warner permission to install this box... NOT ME) should repair the damaged sidewalk. If you feel Time Warner should repair the sidewalk that is around their box e-mail gary.ordway@twcable.com with the subject: "Fix the sidewalk on Louise Dr." I want his inbox to be filled with messages like that so they know that others in the nation feel it's their problem and not mine.

[Ross]

Another interesting topic of discussion, that breeds a national theme as energy matters are becoming more stressful on the economy, is the power-usage-rating of these Time-Warner Cable Boxes. It'd be interesting to see further, if beyond poor manufacturing conditions (result of monopolistic or anti-competitive practices), there is a markedly high power rating. I can't confirm, but I am under the impression that one of these Cable Boxes on top of your TV set is using more energy (hourly) than new Energy Star Refrigerators!

Could this be precedence for possible collusion of Time-Warner with Energy Producing Companies and Electric Utilities? Maybe under the table?

[Johng]

My problem with T-W and my HDTV makes sense now.
About once a quarter, the only HDTV in the house, loses reception on about 1/3 of the channels. I call TW and they tell me to unplug the TV, remove the CableCard, dance around the house rattling bones, and finally set up a service call. The service calls answer is to get a STB. By that evening the problem clears up, whether I do anything or not.
I suspect now that the problem is with the Switched Digital Video and is entirely under their control.
Are they a monopoly? They sure act like one.