Open Band pushes back on complaints, lawsuits

By Dusty Smith

Ashburn Patch

Sept. 8, 2011

This week, representatives for OpenBand Communications responded to criticism of the company that has grown over the past two years while it has attempted to renew its franchise agreement in Loudoun County.

The Loudoun Board of Supervisors voted Aug. 7 to reduce the term of the pending franchise agreement from 12 years to 2, essentially tossing to the next board of supervisors the ultimate decision about whether OpenBand continues to operate in Loudoun. An Oct. 11 public hearing offers residents another chance to voice their opinions about the franchise.

Supervisors also voted to add a termination clause to the franchise agreement that permits the county to dissolve it if OpenBand loses two pending court cases or is found by the Virginia Attorney General to be in violation of antitrust laws. If such a legal issue is triggered, the company would have the option of opening up the communities its serves to all competitors, including wire-line-based Verizon and Comcast, to avoid termination of the franchise agreement.

Jim Burton (I), the Blue Ridge District supervisor, said the conditions proposed on the new agreement “should help make the provider perform better.”

However, he also said company probably would not commit to the new requirements, and an OpenBand spokesman confirmed as much Wednesday afternoon.

“The company is not inclined to accept those provisions,” said Ben Young, an M.C. Dean spokesman, speaking for OpenBand. “They’re not fair.”

That means supervisors may have to go back to the drawing board because the proposed changes can only be made if OpenBand agrees to them.

“OpenBand is kind of in the driver’s seat along that line,” Burton said. “We cannot dictate to them the provisions. This is going to be somewhat of a negotiation.”

Other supervisors, however, suggested the board should take a more solid stand.

“This is a highly volatile situation,” said Supervisor Stevens Miller (D-Dulles), suggesting the board should be prepared to act in whatever manner is necessary. “I think this is a very sensible agreement. If OpenBand isn’t happy with it, that’s too bad.”

While board members are poised to send the final decision to the next board two years from now, they disagreed about what rejecting the franchise now would mean.

“If we deny the franchise, that does not guarantee that other providers will be able to come in,” Burton said. “I think there is a reasonable argument that [OpenBand] could operate without a franchise.”

Supervisor Lori Waters (R-Broad Run) disagreed.

“They cannot operate in perpetuity,” she said. “I hope that by the motions today the company will see … we are serious about stepping up.”

Erika Hodell Cotti, president of the Southern Walk homeowners association, one of two communities with lawsuits filed against OpenBand, said she believes service could be provided without a franchise agreement, but questioned whether it’s the type of service and infrastructure – satellite ­– the county wants. Other wire-based services say they cannot access homes in Southern Walk or Lansdowne on the Potomac, the other community suing OpenBand in federal court. Together, Southern Walk and Lansdowne comprise 3,255 of 4,400 OpenBand customers in Loudoun.

“Does Loudoun County want to be the county that has 4,000 satellite dishes installed overnight?” she asked, wondering why the county doesn’t condemn the easements OpenBand holds that bar competitors. Cotti said she believes OpenBand’s contract with Southern Walk permits the HOA to dissolve the video portion of its agreement with OpenBand, but only to satellite. Satellite providers, she said, could offer video service for about 20 percent of the cost of OpenBand. However, the community’s not sure it wants a satellite dish on every home.

OpenBand’s Young disputes assertions by vocal critics that find OpenBand’s service lacking. He points to a third-party evaluation of OpenBand’s system as well as a customer service survey taken in December 2009. OpenBand paid for the evaluation.

“We were basically put through an unprecedented self-funded review,” Young said, adding that the result showed OpenBand is at least on par with Verizon and Comcast.

But Cotti, who represents Southern Walk’s 1,100 homes and formerly sat on the Loudoun County Cable Commission that developed the proposed franchise renewal – the initial franchise expire more than two years ago – said service complaints are vast and questioned the validity of the review.

Young said the customer survey showed roughly 96 percent of customers found OpenBand’s service average or above average. In addition, he said fees have not increased since January 2006 when the company raised rates by 1.3 percent, followed in January 2007 with a 4 percent reduction. Overall, he said, OpenBand services costs one-quarter to one-third less than its competitors.

“We’ve not raised rates in nearly six years,” he said, adding that he believes a very vocal minority with service problems has caught the attention of supervisors. “Yes there’s a lot of noise being made. That’s anecdotal.”

Cotti disputed many of those assertions.

“It’s curious to see that OpenBand would point to a 2 ½-year-old survey, considering their technology is five years out of date,” she said, adding that when OpenBand solicited survey responses, it also gave away 2 televisions with 48-inch screens and HD for life.

Southern Walk conducted its own survey, she said, which found “overwhelming dissatisfaction with OpenBand’s service and pricing.” Nearly 600 of Southern Walk’s 1,100 households responded, resulting in 499 valid responses.

“The Southern Walk survey was truly an attempt to get an accurate sampling,” Cotti said.

In the survey, most residents said the were unhappy with all three services provide by OpenBand – phone, 57.1 percent not satisfied; cable, 78.8 percent; Internet, 53.7.

Cotti points out the contrast with the evaluation of the system by Columbia Telecommunications Corporation, which found it to be sufficient.

“Our examination of the picture quality of the individual cable channels at the Loudoun County headend and at selected test points within the community found that the cable system provided good picture quality on the satellite-delivered analog and digital video services,” the Columbia report stated. “Furthermore, we found the cable network transmission signals to the subscribers at our test points to be comparable in quality to the signals received at the headend.”

While the majority of the cable commission recommended a franchise agreement, Cotti has criticized information the commission relied upon to makes its determinations, including the Columbia evaluation that show comparable service quality when looking at Verizon and OpenBand. Cotti said she did not feel the scope of the study was adequate.

“As a former commissioner, there was zero input for the statement of work,” she said, adding that she believes it was “irresponsible” to allow OpenBand to help determine the scope of teh evaluation.

Of 4,500 customers, just 10 homes were tested, a number Cotti considers very low. The rest of the testing was done farther up the cable chain at what is called the OpenBand headend, the main conduit in to the community.

“Even 40 would be acceptable,” she said, adding that a sample of 400 homes would be idea. The low number of samples does not adequately demonstrate that many customers have “serious signal issues,” she said.

OpenBand pointed out that when it began providing its service to Loudoun communities, Adelphia was struggling to improve its service, while Verizon and Comcast were not operating cable service in Loudoun. Eventually Comcast took over for Adelphia and brought its services to the county, while Verizon began building its FiOS network.

“This is another area where they are obfuscating the facts,” Cotti said. “In 2001, OpenBand’s technology was cutting edge. Fast forward a decade later and they have now become archaic.”

Young said the company has improved its HD offerings and plans to roll out Video On Demand soon.

Significant changes have been made or are in the works, including expanded HD and Video on Demand, Young said, which “we’re hoping to initiate by October. We’re listening to the customers,” he said.

The agreement between OpenBand and Southern Walk calls for mediation, Young explained, meaning the company believes the community did not take advantage of its options before filing the lawsuits in federal court.

“We would understand if they had exhausted their options,” he said. “The contract empowers the homeowners association to seek mediation. They did not do that.”

Cotti, to the contrary, said the company has declined to meet with community representatives.

“We made multiple attempts to reengage with OpenBand in November 2010 up to the day prior to filing our lawsuit,” she said.

The Southern Walk and Lansdowne lawsuits allege OpenBand devised a scheme with developers of the respective communities it serves to monopolize video, Internet and cable service for decades.

OpenBand obtained service agreements with the HOAs while the developers obtained access easements that bar wire-based competitors. OpenBand then obtained service agreements with then-developer-controlled HOAs, meaning resident-controlled boards would have no option to disengage without OpenBand’s approval. The developers receive a portion of OpenBand’s revenue.

In addition to the lawsuits, the county has asked the Virginia Attorney General to investigate the company for possible antitrust violations.

The county’s outside counsel, Matt Ames, said OpenBand’s service would remain a sore spot for residents as long as such easements and agreements remained in place to bar outside competition.

“As long as those remain in place there’s going to be controversy and there are going to be problems,” Ames said. “If those are removed, then I think most of the public concerns will be resolved because a competitor could come in.”

Young said all of the agreements and easements are valid.

“The agreements with the HOAs are proper,” he said, pointing out that Southern Walks lawsuit was dismissed once. “The FCC knew about all of these facts.”

Southern Walk’s initial suit was dismissed without prejudice, meaning Southern Walk was able to re-file it, which the community has done.

Separate from the easements – which Young said do not involve OpenBand, but rather the community developers – Young said the long-term agreement to serve the community through a bulk-billing arrangement “is lawful by the FCC.”

He questioned whether either community had filed complaints in the proper venue – state rather than federal courts – and further questioned whether the issues are relevant issues in Virginia courts.

At some point after OpenBand established its agreements in Loudoun, the FCC banned bulk-billing agreements in certain types of communities, but Young said that the ban would not apply to its service.

“The notion that OpenBand did anything illegal in 2001 is nonsense,” Young said.

Cotti wondered why competitors do not require “multi-generational service and pricing agreements” to provide service to a community.

Young said that without such agreements it would be impossible for a startup video service to ultimately compete with large competitors, such as Verizon and Comcast, as they enter a market. OpenBand offers a service Young described as “cable-light,” which falls under different regulations than the larger provider in an attempt to level the playing field.

Young said large competitors tend to come in and overbuild, which they can afford to do, and then create an environment in which the startup cannot compete.

Members of the county staff said they were awaiting a report from the Virginia Attorney General about the antitrust investigation supervisors requested. The report is expected at the end of the month.

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