fees – Techdirt (original) (raw)

Your ISP Now Requires A Broadband ‘Nutrition Label’ To Clearly Show You You’re Being Ripped Off

from the transparently-terrible dept

After countless years pondering the idea, the FCC in 2022 announced that it would start politely asking the nation’s lumbering telecom monopolies to affix a sort of “nutrition label” on to broadband connections. The labels will clearly disclose the speed and latency (ping) of your connection, any hidden fees users will encounter, and whether the connection comes with usage caps or “overage fees.”

Initially just a voluntary measure, bigger ISPs had to start using the labels back in April. Smaller ISPs had to start using them as of October 10. In most instances they’re supposed to look something like this:

As far as regulatory efforts go, it’s not the worst idea. Transparency is lacking in broadband land, and U.S. broadband and cable companies have a 30+ year history of ripping off consumers with an absolute cavalcade of weird restrictions, fees, surcharges, and connection limitations.

Here’s the thing though: transparently knowing you’re being ripped off doesn’t necessarily stop you from being ripped off. A huge number of Americans live under a broadband monopoly or duopoly, meaning they have no other choice in broadband access. As such, Comcast or AT&T or Verizon can rip you off, and you have absolutely no alternative options that allow you to vote with your wallet.

That wouldn’t be as much of a problem if U.S. federal regulators had any interest in reining in regional telecom monopoly power, but they don’t. In fact, members of both parties are historically incapable of even admitting monopoly harm exists. Democrats are notably better at at least trying to do something, even if that something often winds up being decorative regulatory theater.

The other problem: with the help of a corrupt Supreme Court, telecoms and their Republican and libertarian besties are currently engaged in an effort to dismantle what’s left of the FCC’s consumer protection authority under the pretense this unleashes “free market innovation.” It, of course, doesn’t; regional monopolies like Comcast just double down on all of their worst impulses, unchecked.

If successful, even fairly basic efforts like this one won’t be spared, as the FCC won’t have the authority to enforce much of anything.

It’s all very demonstrative of a U.S. telecom industry that’s been broken by monopoly power, a lack of competition, and regulatory capture. As a result, even the most basic attempts at consumer protection are constantly undermined by folks who’ve dressed up greed as some elaborate and intellectual ethos.

Filed Under: broadband, consumers, fcc, fees, high speed internet, nutrition label, telecom, usage caps

Peloton Combats Sagging Bike Sales By Making Them Less Valuable On The Secondary Market

from the great-plan dept

It’s no secret that Peloton, one of the corporate darlings of the pandemic, has since been viewed as a company in serious decline. While the company has had to contend with several IP disputes, it has also been subject to cybersecurity incidents and product safety recalls due to its treadmills occasionally deciding to eat human beings. Hardware sales have sagged significantly, leading to a precipitous drop in its stock value from its peak in 2020 when it was at 162persharetoitscurrentvalueofjustunder162 per share to its current value of just under 162persharetoitscurrentvalueofjustunder5 per share. Stock prices like that are not the way that corporate leadership keeps its jobs.

And, following something of the Cory Doctrow “enshittification” process for technology companies, Peloton has come up with a new way to attempt to extract more money from existing inventory while providing no additional value. And that way is by making its new hardware even less attractive by kneecapping the ability to sell used Peloton’s on the secondary market. How? Fees, of course!

Peloton will start charging people a one-time $95 “used equipment activation fee” for used bikes purchased from outside of Peloton and its official distribution partners. The fee will apply in the US and Canada. As pointed out by The Verge, Peloton confirmed in its fiscal Q4 2024 earnings call today that people who buy a used bike directly from Peloton or one of its third-party partners will not be subject to the fee.

During the call, Peloton’s interim CEO, Christopher Bruzzo, said that the activation fee “will be a source of incremental revenue and gross profit” and support Peloton’s “investments in improving the fitness experience for our members.”

Peloton also claimed in a letter to shareholders [PDF] that the fee is related to ensuring that the subscription customers that Peloton gains through used bike sales “receive the same high-quality onboarding experience.”

Now, just so there is no misunderstanding: this is bullshit. There is very little value on offer for this roughly $100 fee. Here is the total context in which Bruzzo made this statement.

Although these secondary market sales are not from Peloton-owned channels or any of our third-party distribution partners, we want to ensure these new Members receive the same high-quality onboarding experience Peloton is known for. With that in mind, we’re initiating a new, one-time 95USD/95 USD / 95USD/125 CAD used equipment activation fee in the US and Canada. For Peloton Bike and Bike+ purchasers, we offer a virtual custom fitting so Members can get the most out of their first ride. These subscribers also have access to a history summary on their pre-owned hardware. We’re also offering these new Members discounts on accessories such as bike shoes, bike mats and spare parts. We view the secondary market as an important channel and will continue to improve the member experience.

So the value for that activation fee is a fitting people may not want or need, a history summary on the bike from back when they were not using it, and discounts on accessories that are likely high margin products? This is the sort of incremental strategy designed to placate worried shareholders, not provide value to any segment of the customer base.

And it certainly can’t be designed to drive more purchases of new Peloton bikes. Because those bikes just got more risky to own and of slightly less value. Prior to this fee, part of the total cost of ownership included the ability to potentially sell the device in the future on the secondary market. Those secondary market bikes just got more expensive for anyone looking to buy them, as they will have to pay this fee to do so, making them less attractive.

Peloton gear is already known for being expensive (its Bike+, for example, is $2,500 as of this writing). The used market makes Peloton’s products more accessible and allows people to recoup some of their losses from unwanted equipment while also avoiding connected gym equipment becoming e-waste. A $95 fee takes away some of the savings people have been enjoying for years by opting for a secondhand Peloton.

The fee is also a standout from most the secondhand market (imagine paying Toyota a “reactivation fee” to drive a used car you purchased, or having to pay Lenovo a separate fee in order to use the refurbished laptop you just got).

I can also promise you that we will start seeing stories of people who bought used Peloton bikes not knowing about this fee and who are suddenly going to be very publicly angry with Peloton.

In the end, this just doesn’t seem like the sort of move you see from a healthy, innovating, thriving company. Which is why I imagine, no matter the short term happiness of the investor class regarding this move, it will do nothing to quell the rumors of Peloton’s forthcoming demise.

Filed Under: activation fee, enshittification, fees, secondary market
Companies: peloton

FCC Outlaws Sleazy And Misleading Cable TV Fees

from the false-advertising-by-another-name dept

Fri, Mar 22nd 2024 05:19am - Karl Bode

For decades, U.S. cable and broadband giants have advertised one price, then socked consumers with a much higher price once the bill actually arrives. This is usually accomplished via a bevy of bullshit below the line fees specifically built for the purpose.

Like “regulatory recovery fees,” which ambiguously blame government for prices hikes due to regulation that largely no longer exists. Or “broadcast TV surcharges,” which take some of the cost of programming and misleadingly bury it below the line. And then there’s stuff like Centurylink’s “Internet Cost Recovery Fee,” which the company’s website explains as such:

“This fee helps defray costs associated with building and maintaining CenturyLink’s High-Speed Internet broadband network, as well as the costs of expanding network capacity to support the continued increase in customers’ average broadband consumption.”

That is, of course, what your full bill is supposed to pay for.

For decades U.S. regulators turned the other cheek, treating this kind of stuff as little more than creative marketing. The Biden administration has taken a slightly harder stance against such “junk fees,” which are pretty much pervasive across all industries (especially banks, airlines, hotels, and telecom).

Case in point: the FCC last week released new rules for satellite and cable TV providers requiring that they advertise the “all in” cost of service, without playing obfuscation patty cake:

“These new rules require cable operators and direct broadcast satellite (DBS) providers to state the total cost of video programming service clearly and prominently, including broadcast retransmission consent, regional sports programming, and other programming-related fees, as a prominent single line item on subscribers’ bills and in promotional materials.”

It’s great to see, but the fact it took the agency thirty years to accomplish this kind of speaks for itself. Republican FCC Commissioners Brendan Carr and Nathan Simington voted against the proposal, which is par for the course given the tight alliance between shitty telecom and cable companies and the GOP.

A 2019 study by Consumer Reports found that 24 percent of your monthly cable bill is comprised of said bullshit fees, gleaning the cable sector $28 billion every year in additional revenue.

The cable industry is already pouting about the changes, threatening to sue, and complaining that the FCC is “micromanaging” a “highly competitive industry” and that it (an agency custom built to regulate telecom and cable) somehow lacks the authority to do its job. This industry is also mad about the agency’s plan for a “nutrition label for broadband” that requires transparency on pricing and service.

Granted one thing the FCC seems intent on not touching is the consolidation and monopoly problems that cause high prices in the first place. Entrenched broadband and cable providers still enjoy monopolies across vast swath of the country after working endlessly to undermine competition at every turn. The FCC can’t even admit this problem exists, much less propose meaningful policy solutions for it.

Instead of hard rhetoric against monopolization and mindless consolidation, or aggressive pro-competition policies (like overt support for community broadband projects) we tend to get performative regulatory theater: solutions that sort of nibble around the edges of the problem, often arrive decades late, and usually aren’t consistently enforced. But hey, it’s a start.

Filed Under: biden, competition, consolidation, consumer protection, fcc, fees, monopoly, tv

Cable Companies Tell The Government That Bullshit Fees Are Good, Actually

from the this-is-why-we-can't-have-nice-things dept

Thu, Feb 22nd 2024 05:29am - Karl Bode

Last December, the Biden FCC proposed a basic plan to ban some of the shitty fees cable and broadband companies use to falsely advertise a lower price and jack up the cost of service. Despite the fact your cable TV and broadband bills are packed with bullshit fees, the FCC was only taking specific aim at banning early termination fees (ETFs) and restrictive long-term contracts.

Despite this being a belated, bare minimum effort, telecom industry loyal Republicans had an immediate hissy fit, insisting that the FCC was engaged in “rate regulation” (it wasn’t) of an incredibly healthy and competitive market (it isn’t).

And now policy groups representing Comcast and Charter have filed complaints with the FCC, insisting that punitive surcharges are actually a good thing, resulting in more loyal customers and lower prices:

The NCTA claimed that banning early termination fees would hurt consumers. “Discounted plans with ETFs are an advantageous choice for some consumers,” the lobby group said. The NCTA said the video industry is “hyper-competitive,” and that it is easy for customers to switch providers.

“In response to these marketplace realities, some cable operators offer discounts for consumers who choose to agree to remain customers for a longer term,” the NCTA said. “Longer subscriber commitments decrease a cable operator’s subscriber acquisition costs and provide a more predictable revenue stream, which in turn enables a cable operator to offer discounted monthly rates.”

While streaming has brought some added and welcome competition to the TV space, most users are still generally locked into cable TV via triple play cable bundles. The broadband market component of that bundle remains very uncompetitive in most U.S. markets.

When you drop the cable part of the bundle, a company like Comcast will just charge you significantly more for broadband service. They also lock users into long-term contracts with ETFs to keep users from switching to competitors (assuming there are any). There’s also a long list of dumb additional fees the FCC isn’t touching that basically let these companies routinely engage in false advertising on pricing.

The idea that any of this is actually good for users is bullshit.

U.S. broadband and TV consumer protection usually goes something like this: Democrats will do some feckless, bare minimum, years overdue effort to protect consumers from getting ripped off so they can show that they’re doing something. See: this FCC effort on ETFs, the FTC attempt to finally make service cancellations easier, and the FCC’s recent 30-year late acknowledgment that discrimination has historically occurred in broadband deployment (they didn’t fix the problem, they just acknowledged it).

Republicans will work in lockstep with giant telecom monopolies like AT&T and Comcast to pretend that whatever bare bones bullshit Democrats are attempting is akin to extremist socialist puppy torture, ensuring the effort is either blocked or weakened to the point of uselessness. Press outlets will then “both sides” the issue, giving corrupt telecom industry earlobe nibblers policy credibility they don’t deserve.

It’s why it’s 2024 and U.S. regulators still haven’t protected consumers from even the most basic of anti-competitive behaviors by the likes of AT&T and Comcast. It’s corrupt fecklessness dressed up as reason and “free markets.” It’s why U.S. broadband is expensive and uncompetitive; it’s why cable TV and broadband customer service sucks; it’s why U.S. broadband is so profoundly spotty and mediocre; and it’s why your 80cablebillsomehowturnsintoa80 cable bill somehow turns into a 80cablebillsomehowturnsintoa130 cable bill when the check finally comes due.

But the corruption at the heart of this dysfunction goes well beyond telecom and dumb cable fees. And once the Supreme Court axes Chevron (which will limit regulatory independence to make informed policy choices based on the law), pretty much any regulatory reform effort will get bogged down in the courts, quite by design. It’s a 40+ year plan for near-zero federal accountability by corporate America.

I’m not sure people have generally woken up to how badly looming Supreme Court rulings are going to break U.S. consumer protection, environmental reforms, labor protections, and U.S. public safety, but I don’t expect it will take too long before the impact becomes abundantly clear. At which point, annoying cable TV fees will be the least of your families’ worries.

Filed Under: broadband, consumer protection, early termination fees, etf, fees, ftc, long term contracts, prices, rate regulation

Carmakers Push Forward With Plans To Make Basic Features Subscription Services, Despite Widespread Backlash

from the breathing-clean-air-will-now-cost-extra dept

Tue, Dec 5th 2023 05:26am - Karl Bode

Automakers are increasingly obsessed with turning everything into a subscription service in a bid to boost quarterly returns. We’ve noted how BMW has embraced making heated seats and other features already in your car a subscription service, and Mercedes has been making better gas and EV engine performance something you have to pay extra for — even if your existing engine already technically supports it.

And despite widespread backlash (BMW had to backtrack on many of its plans), the auto industry shows absolutely no indication they’re going to back away from their plan, with numerous automakers currently working on efforts to “subscriptionize” basic functions and features. And now they’re apparently trying to pretend that this shift is necessary to finance the shift to EVs:

Alistair Weaver, editor-in-chief at Edmunds, says automakers are counting on the new revenue stream to pay for the expensive transition to electric cars.

“So if your car payment is 600 bucks a month, it’s now $675,” Weaver said.

There are several problems here. One, most of the tech they want to charge a recurring fee to use is already embedded in the car you own. And its cost is already rolled into the retail cost you’ve paid. They’re effectively disabling technology you already own, then charging you a recurring additional monthly fee just to re-enable it. It’s a Cory Doctorow nightmare dressed up as innovation.

The other problem: nobody genuinely wants this shit. Surveys have already shown how consumers widely despise paying their car maker a subscription fee for pretty much anything, whether that’s an in-car 5G hotspot or movie rentals via your car’s screen. Other studies indicate that consumers are generally opposed to making functions subscription based, unless they wind up paying less overall:

Alix Partners, a global consulting firm, found that more than 60% of consumers are willing to consider subscribing for enhanced safety and convenience features as long they don’t feel like they are being charged for something they already paid for.

“A lot of people in the auto industry certainly use Apple as a shining light on the hill,” said Mark Wakefield, Alix Partners CEO.

“The car has to be cheaper, plus this option of subscribing,” Wakefield added.

But there’s zero chance that consumers will ever pay less. I’ve often seen carmakers like BMW try to pretend that turning heated seats and other features into recurring subscriptions lowers the vehicle retail cost, but I’ve not seen any evidence to indicate that’s actually true.

The entire point of integrating subscription systems like these is to please Wall Street’s insatiable, often myopic desire for consistent, upwardly scaling, improved quarterly returns. Once implemented, the subscription costs will inevitably be jacked steadily skyward to please Wall Street. It’s simply how these things work. The end result is higher overall costs, and annoying new subscription systems to manage.

There’s a whole bunch of additional unintentional consequences of this kind of shift. Right to repair folks will be keen on breaking down these phony barriers, and automakers (already busy fighting tooth and nail against right to repair reform) will increasingly respond by doing things like making enabling tech you already own and paid for a warranty violation.

The shift toward endless subscriptions for basic functions may not annoy folks with endless piles of disposable income, but for the majority of Americans that struggle to even afford new vehicle costs already, it’s hard to not see this impacting new car sales — or driving more users to older, used cars with dumber tech.

Filed Under: automobiles, cars, consumer rights, fees, heated seats, right to repair, subscription service

FTC Pushes New Rule To Try And Kill Bullshit ‘Junk Fees’

from the *prices-may-be-significantly-higher-than-they-initial-appear dept

Thu, Oct 12th 2023 05:22am - Karl Bode

As a reporter who has covered telecom for the better part of two decades, I’ve spent much of that time watching broadband giants like AT&T and Comcast sock their captive customers with a wide variety of bullshit, sneaky fees designed to help them advertise one price, then charge you with a higher rate. It’s a practice that nets them billions of dollars annually.

At the same time I’ve watched the agency purportedly in charge of telecom and media issues (the FCC) stumble around like a drunken halfwit when it comes to holding anybody accountable for the practice. Most of the FCC’s focus has been on demanding transparency; as in, they think it’s ok for companies to rip you off, companies just have to be clear about the fact they’re ripping you off at the point of sale.

That’s treating the symptom but not the underlying disease, which is usually market failure, a lack of competition, mindless consolidation, and monopoly power. You generally can’t get away with socking your customers with a bunch of nonsensical surcharges if those customers have competitive alternatives.

Of course the practice of bullshit fees isn’t isolated to the telecom industry. The airline, hotel, concert, and real estate rental industries also routinely sock you with such bogus surcharges. Occasionally agencies like the FTC will take a swing at the practice under the “unfair and deceptive” component of the FTC Act, which requires a fairly high burden of proof and is a little vague when it comes to onerous fees.

So the FTC says it’s considering a new rule specifically designed to attack junk fees:

You’ll want to read the proposed Rule for the specifics, but a central focus of the rulemaking is to prohibit hidden or falsely advertised fees by requiring advertised prices to include mandatory charges and by expressly prohibiting misrepresentations about the nature, purpose, or amount of fees.

For example, the rule the FTC is proposing would state, “It is an unfair and deceptive practice and a violation of this part for any Business to offer, display, or advertise an amount a consumer may pay without Clearly and Conspicuously disclosing the Total Price.” (The capitalized words have specific definitions in the FTC’s proposal.) Is that proposed prohibition clear and understandable? Is it ambiguous in any way? What do you think?

It’s a good start. If you want to share your thoughts with the FTC, you can find instructions here.

But just cracking down on junk fees isn’t enough. In telecom and broadband, big ISPs like Comcast can get away with bullshit fees because their captive customers have no competitors to flee to. That means this kind of crackdown needs to be accompanied with the kind of meaningful, cross-sector antitrust reform our corrupt Congress isn’t interested in (despite many recent political performances on this front).

Without it, your airline or broadband provider can just roll these glorified price hikes back into the advertised rate. They’re still ripping you off with inflated prices thanks to industry consolidation, they’re just being slightly more honest about it at the point of sale. So you also need both antitrust reform, and the kind of competent, thoughtful merger review that’s uncharacteristic for U.S. regulators who increasingly see their authority chipped away by a radically rightward lurching Supreme Court.

Still, just the fact that we have regulators actually thinking about how to tackle this problem is a step in the right direction. For decades U.S. regulators have made it abundantly clear that it’s fine if companies rip you off with obnoxious surcharges and nonsensical fees — provided they’re modestly creative about it. Asking them to illustrate up front just how badly you’re going to be screwed is the least we can do.

Filed Under: antitrust reform, consumer protection, fees, ftc, junk fees, surprise fees, unfair and deceptive

Unity Fallout Continues: Dev Group Shuts Down While Developers Refuse To Come Back

from the the-book-of-exodus dept

The fallout from game engine Unity’s decision to try to cram a completely new and different pricing structure down the throats of game developers continues. Originally announced in mid-September, Unity took a bunch of its tiered structures of its offerings and suddenly instituted per-install fees, along with a bunch of other fee structures and requirements for its lower-level tiers that never had these pricing models. The backlash from developers and the public at large was so overwhelmingly one-sided and swift that the company then backtracked, making a bunch of noise about how it will listen better and learn from this fiasco. The backtracking did make a bunch of changes to address the anger from its initial announcement, including:

You can see the table below provided by Unity for the details mentioned above:

Is this better? Yes! And some developers have even come back with positive comments on the new plan. Others, not so much.

“Unity fixed all the major issues (except trust), so it’s a possibility to use again in the future,” indie developer Radiangames wrote. “Uninstalling Godot and Unreal and getting back to work on Instruments.”

Others were less forgiving. “Unity’s updated policy can be classified as the textbook definition of, ‘We didn’t actually hear you, and we don’t care what you wanted,'” Cerulean and Drunk Robot Games engineer RedVonix wrote on social media. “We’ll never ship a Unity game of our own again…” they added.

That “except trust” parenthetical is doing a lot of work, because that’s the entire damned problem. If Unity came out with this plan initially, and had actually worked constructively with its customers, the blow up about this almost certainly would have been far more muffled. But trust is one of those things that takes forever to build and only a moment to destroy.

Along those lines, we’ve learned subsequently both that some community groups that have sprung up around Unity are disbanding out of disgust for the company’s actions and that plenty of developers aren’t coming back to try this second bite at the pricing model apple that Unity wants to offer them.

As to the first, the oldest Unity dev group that exists, Boston Unity Group (BUG) has decided to call it quits, putting its reasons why in no uncertain terms.

“Over the past few years, Unity has unfortunately shifted its focus away from the games industry and away from supporting developer communities,” the group leadership wrote in a departure note. “Following the IPO, the company has seemingly put profit over all else, with several acquisitions and layoffs of core personnel. Many key systems that developers need are still left in a confusing and often incomplete state, with the messaging that advertising and revenue matter more to Unity than the functionality game developers care about.”

BUG says the install-fee terms Unity first announced earlier this month were “unthinkably hostile” to users and that even the “new concessions” in an updated pricing model offered late last week “disproportionately affect the success of indie studios in our community.” But it’s the fact that such “resounding, unequivocal condemnation from the games industry” was necessary to get those changes in the first place that has really shaken the community to its core.

“We’ve seen how easily and flippantly an executive-led business decision can risk bankrupting the studios we’ve worked so hard to build, threaten our livelihoods as professionals, and challenge the longevity of our industry,” BUG wrote. “The Unity of today isn’t the same company that it was when the group was founded, and the trust we used to have in the company has been completely eroded.”

Ouch. That’s about as complete a shellacking as you’re going to get from what, and I cannot stress this enough, is a dedicated group of Unity’s fans and customers. And while these organically created dev groups quitting on Unity certainly is bad enough, there are plenty of developers out there chiming in on these changes, essentially stating that the trust has been broken and there isn’t a chance in hell that they’re coming back on board the Unity train.

Vampire Survivors developer Poncle, for instance, gave a succinct “lol no thank you” when asked during a Reddit AMA over the weekend if their next game/sequel would again use the Unity Engine. “Even if Unity were to walk back entirely on their decisions, I don’t think it would be wise to trust them while they are under the current leadership,” Poncle added later in the AMA.

“Basically, nothing has changed to stop Unity from doing this again in the future,” InnerSloth (Among Us) developer Tony Coculuzzi wrote on social media Friday afternoon. “The ghouls are still in charge, and they’re thinking up ways to make up for this hit on projected revenue as we speak… Unity leadership still can’t be trusted to not fuck us harder in the future.”

Other developers chimed in that they did have discussions with Unity about the new pricing structure… and were summarily ignored. In those cases, those developers appeared to be solidly in the camp of “Fool me once shame on you…”.

There are certain things that are just really difficult to walk back. And breaking the trust of your own fans and customers, where loyalty is so key to the business, is one of them. The picture Unity painted for its customers is one where it simply does not care and is now pretending to, only because it landed itself in hot water.

Filed Under: development, fees, trust, video games
Companies: unity

Comcast, AT&T Try To Kill New Requirements To Be Transparent About Their Shitty Pricing

from the this-is-why-we-can't-have-nice-things dept

Thu, Aug 17th 2023 05:34am - Karl Bode

The 2021 infrastructure bill did some very good things for broadband. Not only did it include a massive, $42 billion investment in broadband deployment and require better mapping, it demanded that the FCC impose a new “nutrition label for broadband,” requiring that ISPs be transparent about all of the weird restrictions, caps, fees, and limitations of modern broadband connections.

It’s 2023 and there’s still no label. And big broadband providers including Cox, AT&T, Comcast, and Charter are, unsurprisingly, trying to have the entire requirement killed. After whining for two years that it was too hard to comply with the requirement, industry trade groups and lobbying organizations have been petitioning to have the new rule killed entirely:

The US broadband industry is united in opposition to a requirement that Internet service providers list all of their monthly fees. Five lobby groups representing cable companies, fiber and DSL providers, and mobile operators have repeatedly urged the Federal Communications Commission to eliminate the requirement before new broadband labeling rules take effect.

To be clear, requiring that these regional monopolies be clear about pricing is pretty much the bare minimum when it comes to regulatory oversight. Big ISPs for decades have advertised one price, then saddled your bill with spurious below the line surcharges to hit you with a higher rate.

The FCC, lobotomized after decades of lobbying, routinely engages in regulatory theater when it comes to big telecom. As in they’ll implement some fairly tepid efforts to demand “transparency” by big monopolies, but they routinely lack the courage to actually take aim at the underlying monopoly power and lack of competition (lest it upset campaign contributors and domestic surveillance allies).

And even the transparency efforts are routinely undercooked. Activists and consumer groups were already annoyed at the Rosenworcel FCC’s implementation of these new rules, noting that the agency didn’t really require that ISPs put the label anywhere conspicuous, defeating the whole purpose, and wasn’t doing a good job illustrating real world speeds.

It’s not particularly clear where this goes from here. The Rosenworcel FCC has generally been fairly feckless when it comes to standing up to predatory monopolies. And the telecom industry just successfully scuttled the nomination of popular reformer Gigi Sohn, leaving the FCC without the voting majority needed to do much of anything “controversial” — even if it was actually inclined to do so.

A reformer like Sohn would have likely pushed the FCC staff to try a little harder. I’d imagine that once Sohn’s less “controversial” replacement (Anna Gomez) is confirmed by Congress there will be some kind of label eventually, but it’s far from clear that the actual implementation will hold much value once big ISPs get done watering it down.

And this is the “best case” scenario under feckless Democratic leadership. If Trump or DeSantis win the presidency, control of the FCC will revert to Republican “leadership,” which in telecom historically involves simply doing whatever Comcast and AT&T tell them to.

Filed Under: broadband, broadband label, fcc, fees, high speed internet, telecom, transparency, usage caps
Companies: at&t, charter, comcast, cox

Twitter Sues The Law Firm That Made Elon Live Up To The Contract He Signed To Buy Twitter

from the penny-pinching dept

Elon Musk’s Twitter is apparently really hard up for cash. In addition to not paying rent or other important bills, it is now trying to claw back bills that were paid just prior to Elon getting the keys to Twitter. As you may have heard, last week, Twitter sued Wachtell, Lipton, Rosen & Katz, well known powerhouse law firm for dealing with mergers and acquisitions, which very successfully represented Twitter in court to force Elon to actually complete the deal he had signed, which he then tried to get out of.

The full complaint is massive (though the actual complaint is just 32 pages, and then there are over 100 pages of exhibits) but can be summarized as Elon claiming that right before he completed the purchase, Twitter’s top execs signed off on sending tens of millions of dollars to Wachtell for… successfully getting Elon to buy the company. Twitter is now basically claiming that the company overpaid the lawyers (who are famously expensive) in breach of fiduciary duty.

In the days and hours leading up to the closing of the sale of Twitter on October 27, 2022, Wachtell and its litigation department led by Bill Savitt were at the center of a spending spree by Twitter’s departing executives who ran up the tab at Twitter by, among other things, facilitating the improper payment of substantial gifts to preferred law firms like Wachtell on top of the firms full hourly billings by designating tens of millions of dollars in hand outs to the firms as success or project fees. Despite having previously agreed to work on an hourly fee basis and subsequently charging millions in hourly fees under that arrangement, Wachtell disregarded both California law and its ethical and fiduciary duties in the final days of its four-month Twitter engagement to improperly solicit an unspecified clearly gargantuan success fee, as part of a 90milliontotalfeethatalsopurportedtosatisfyWachtell’searlierinvoicesthattotaled90 million total fee that also purported to satisfy Wachtell’s earlier invoices that totaled 90milliontotalfeethatalsopurportedtosatisfyWachtell’searlierinvoicesthattotaled 17,943,567.49. The 90millionfeecollectedfromTwitterforafewmonthsofworkonasinglematterrepresentednearly1090 million fee collected from Twitter for a few months of work on a single matter represented nearly 10% of Wachtell’s gross revenue in 2022, and over 90millionfeecollectedfromTwitterforafewmonthsofworkonasinglematterrepresentednearly101 million per Wachtell partner.

Mere hours before the October 27 closing, Twitter’s Chief Legal Officer Vijaya Gadde signed anew letter agreement that Wachtell had drafted (the Closing Day Letter Agreement), which purported to award Wachtell the success fee and required payment of the balance of the $90 million total fee on incredibly accelerated terms prior to closing. Fully aware that nobody with an economic interest in Twitter’s financial well-being was minding the store, Wachtell arranged to effectively line its pockets with funds from the company cash register while the keys were being handed over to the Musk Parties. By this action, Twitter’s successor-in-interest, X Corp., seeks to void the unconscionable Closing Day Letter Agreement and disgorge the excess fees paid to Wachtell under the unenforceable contract and in violation of Wachtell’s, and Twitter’s then- leadership’s, fiduciary duties and California law.

No doubt, there are some bits here that seem fishy. A massive payout right before ownership changes hands is certainly going to raise some eyebrows. However, there is at least some evidence that this is just how Wachtell works. For much of the last decade, there was a lawsuit between Carl Icahn and Wachtell regarding the firm’s fees in trying to help CVR resist a takeover from Icahn. And, as securities and corporate law expert Ann Lipton pointed out on social media, this lawsuit resulted in the revelation of a Wachtell engagement letter, in which the company makes clear that if it succeeds, it expects a negotiated success fee upon reaching “achievement of major milestones.”

As that notes:

Our expectation is that upon conclusion of the matter or from time to time upon achievement of major milestones, our final compensation will be agreed with you, mutually and reasonably, and will reflect the fair value of what we have accomplished for the company.

That said, the complaint here suggests that this kind of arrangement was not in place with Twitter, and that it was basically a last minute raiding of the bank account. The complaint notes that while there was some discussion of a potential success fee, the eventual engagement letter was just for hourly fees, and does not mention a success fee.

That said, there are other things in the complaint where I’d argue that Twitter’s claims are just laughably false, so I’m not sure how much to trust the rest of it. For example:

Beginning in early May 2022, the Musk Parties sought information from Twitter concerning the prevalence of spam bot or fake accounts on the platform, information the Musk Parties noted they were entitled to under the Merger Agreement. Twitter resisted providing the information the Musk Parties requested. The dispute played out publicly with each round of letters filed as part of regulatory disclosures. On June 6, 2022, counsel for the Musk Parties sent a letter to Gadde and Twitter reiterating the information request and indicating that Twitter’s efforts to thwart the Musk Parties information rights was a clear material breach of Twitter’s obligations under the merger agreement and Mr. Musk reserves all rights resulting therefrom, including his right not to consummate the transaction and his right to terminate the merger agreement.

I mean, sure that’s what Musk claimed, but, as (1) was obvious at the time and (2) came out much more clearly during the lawsuit, this was all bullshit. It was a pretextual excuse for Musk to pretend he could get out of the deal when the terms of the deal did not allow that. Indeed, as became clear, Twitter had, in fact, handed over the necessary information to Musk, which only covered information necessary to close the deal (and even there, the company went above and beyond, providing him more information regarding spam, which Musk continued to misrepresent publicly).

So, forgive me for not necessarily believing the version of events described here.

There are some other eyebrow raising claims in the complaint, including the lack of details in the hourly timesheets that Wachtell submitted, but it feels kinda like this is Wachtell’s standard practices, when it is billing hourly. There is also a claim that Wachtell billed Twitter for work on other matters, unrelated to the Twitter case for other clients. That seems… not great?

But the rest of the discussion does look like Wachtell negotiating a success fee from the existing Twitter executives and board. And, for all the talk of fiduciary duties, their fiduciary duty was to get Musk to pay the ridiculous sum he agreed to pay in the first place, and Wachtell certainly played a role in making that happen. Therefore, the success fee doesn’t seem that crazy. Basically, Wachtell just helped Twitter’s shareholders (for whom Twitter execs were working for at the time) get 44billion.Assuch,a44 billion. As such, a 44billion.Assuch,a90 million fee doesn’t seem so crazy.

Now, in general, I would say it is… kinda weird… to see a law firm not detail out all of the fees, and then negotiate a multi-million dollar fee in what seems like a somewhat informal manner. But, as a counterpoint:

It seems that, sometimes, the ultra wealthy make informal agreements for staggering amounts of money.

Filed Under: elon musk, fees, lawyers, success fee
Companies: twitter, wachtell

Biden Urges FCC To Police Bullshit Cable Fees, But It Can’t Because His Staffers Screwed Up The Gigi Sohn Nomination Process

from the regulatory-theater dept

Thu, Jun 29th 2023 01:26pm - Karl Bode

For years we’ve noted how cable companies routinely screw you over with all manner of bullshit fees. One Consumer Reports study found that roughly 25 percent of your cable bill is made up of completely nonsensical fees, designed to let companies advertise one rate, then sock you with a much higher bill. It’s estimated this false advertising nets the cable industry an extra $28 billion in additional revenue annually.

Generally speaking, as it is across the airline, hotel, and banking industries, federal and state government leaders are perfectly fine with this kind of fraud, provided companies are relatively clever about it. Ripping off U.S. consumers at scale is basically treated as little more than creative marketing.

Though last week, the Biden administration came out of nowhere with a formal press statement urging the FCC to crack down on bullshit cable fees; a welcome change of pace for a government that’s usually too afraid to directly criticize politically powerful telecom and media giants like Comcast:

Today, the Federal Communications Commission (FCC), under the leadership of Chairwoman Jessica Rosenworcel, proposed a new rule that would require cable and satellite TV providers to give consumers the all-in price for the service they’re offering up front. Too often, these companies hide additional junk fees on customer bills disguised as “broadcast TV” or “regional sports” fees that in reality pay for no additional services. These fees really add up: according to one report, they increase customer bills by nearly 25% of the price of base service.

The problem: the FCC can’t actually do that, in part thanks to strategic bumbling by Biden staffers and advisors.

If you recall, the Biden administration was an historic nine months late in nominating popular reformer Gigi Sohn to the FCC, giving the telecom industry and GOP ample runway to launch a multi-year long homophobic smear campaign that ultimately derailed her nomination. Biden’s team (and her would be future colleagues at the FCC) provided zero meaningful messaging support as the industry spread lies about Sohn’s track record and policy positions in the press.

From what I understand Biden personally supported Sohn, but his team showed none of the strategic urgency they showed in the rush appointment and subsequent promotion of FTC boss Lina Khan. Democratic staffers also failed to schedule Sohn confirmation votes with any urgency, and buckled repeatedly to bad faith Republican demands for additional, unnecessary show hearings.

As a result, we’re now several years into the Biden administration and the FCC still lacks the voting majority to do anything deemed even controversial by industry, including policing bullshit cable fees.

Biden’s safer replacement FCC nominee, Anna Gomez, may not be seated until late this year or early next, giving the agency very little time to implement any actual policy reform ahead of the next presidential election, at which point control of the agency could revert to Republican leadership that routinely coddles telecom monopolies and lobotomizes the key regulator tasked with overseeing them.

Even when the existing, relatively feckless FCC does act on issues like predatory fees (decades after the fact), the solution is always “transparency.” As in, they’ll push for rules requiring that cable and broadband companies be more transparent about how they’re ripping you off, but they won’t actually stop them from ripping you off, and often won’t implement policies bringing more competition to bear.

Actually stopping cable and broadband monopolies from ripping you off would teeter to closely into the realm of rate regulation, which has generally been ranked somewhere right below devil worship by US policymakers. But the problem is agencies like the FCC rarely embraces pro-competitive policies to drive market-based solutions either, so what you wind up getting is dumb regulatory theater.

It’s great the Biden administration is taking aim at fee-based industry fraud in public messaging, but the administration’s strategic incompetence related to the Sohn appointment still speaks volumes.

Filed Under: biden, broadband, broadcast tv fee, cable bill, cable fees, cable tv, fcc, fees, gigi sohn, regional sports fee