Verizon Wireless has defended their decision to double the early cancellation fee (ETF) for consumers purchasing “smartphones” and netbooks from the wireless carrier.  In a letter from Kathleen Grillo, Senior Vice President of Federal Regulatory Affairs, Verizon claims the new $350 fee is justified and actually benefits consumers by providing them with a substantial discount on the cost of the equipment they might not otherwise be able to afford.

“The higher [cancel fee] associated with Advanced Devices (click link to see a list of impacted equipment) reflects the higher costs associated with offering those devices to consumers at attractive prices, the costs and risks of investing in the broadband network to support these devices, and other costs and risks,” Grillo wrote as part of a 77-page submission to the Federal Communications Commission, which demanded an explanation for the price increase.

Grillo claims Verizon’s fees are actually good for consumers:

Verizon Wireless’ term contracts with ETFs promote consumer choice and broadband deployment. This pricing structure enables Verizon Wireless to offer wireless devices at a substantial discount from their full retail price. By reducing up-front costs to consumers, this pricing lowers the barriers to consumers to obtaining mobile broadband devices. It thus enables many more consumers, including those of more limited means, access to a range of exciting, state of the art broadband services and capabilities. The company’s pricing structure therefore promotes the national goal of fostering the greater adoption and use of mobile broadband services. At the same time, consumers are protected by Verizon Wireless’ detailed disclosure practices described in this response, by the Worry Free Guarantee, which allows customers to terminate within 30 days of activation without an ETF, and by the monthly reduction in the ETF amount.

Grillo claims Verizon customers can also purchase a phone at the retail price and avoid a service contract.  Verizon Wireless, for example, charges contract customers $199.99 for the Motorola Droid.  But customers who do not want a contract can purchase the phone from Verizon for $559.99.

In North America, most major cell phone companies subsidize the cost of wireless handsets and make up the difference over the life of a typical two-year service contract.  Cell phone companies claim consumers benefit from the arrangement because they are able to acquire a new phone every two years at a substantial discount.  Some consumer advocates and members of Congress disagree, suggesting carriers more than earn back the cost of the subsidized phone over the life of the contract.  Although customers purchasing a retail-priced phone don’t have to worry about a two year contract, they pay artificially higher prices for service plans designed to recoup the costs from those who did take discounted phones.  The result is a strong incentive to commit to a contract and take the phone, since you will essentially be paying for it anyway.

The Government Accountability Office found early termination fees to be among the top four consumer complaints filed with the FCC about wireless carriers.  Sen. Amy Klobuchar (D-Minnesota) re-introduced legislation December 3rd to try and limit early termination fees.

Senator Amy Klobuchar

“Changing your wireless provider shouldn’t break the bank,” Klobuchar said in a Dec. 3 statement. “Forcing consumers to pay outrageous fees bearing little to no relation to the cost of their handset devices is anti-consumer and anti-competitive.”

The Cell Phone Early Termination Fee, Transparency and Fairness Act would prevent wireless carriers from charging an ETF that is higher than the discount on the cell phone that the company offers consumers for entering into a multi-year contract. For example, if a wireless consumer enters into a two-year contract and receives a $150 discount with the contract, the ETF cannot exceed $150.

The legislation would also require wireless carriers to prorate their ETFs for consumers who leave their contracts early so that the ETF for a two-year contract would be reduced by half after one year and to zero by the end of the contract term. In addition, the bill would mandate that wireless carriers would provide “clear and conspicuous disclosure” of the ETF at the time of purchase.

Co-sponsoring the bill with Klobuchar are Sens. Russ Feingold, Jim Webb and Mark Begich.

Back in 2007, Sen. Klobuchar introduced nearly identical legislation to deal with mobile phone providers charging high termination fees.  CNBC ran this debate between Klobuchar and the cell phone trade association.  Klobuchar found herself in a 2-against-1 debate when the CNBC anchor defended the wireless industry.  (9/13/07 – 5 minutes)

Wind Mobile uses "home zones" as their version of "in network" calling. Placing calls outside of your home zone is akin to "roaming" and can incur additional costs. Here is their service area in the metro GTA (Toronto-Hamilton).

The Canadian Radio-television and Telecommunications Commission has been overruled in an upset decision by the Harper government to admit new competition into Canada’s mobile phone marketplace.  Earlier this fall, the CRTC denied a license to Globalive to begin mobile service under its Wind Mobile brand, agreeing with objections from incumbent providers Bell, Rogers, and Telus that the company was not sufficiently “Canadian enough” in its ownership to operate legally in the country.  The CRTC decision upset many consumers who saw the regulatory body overprotecting the interests of the country’s three large mobile providers, effectively keeping competition out of Canada.

Canada’s version of the FCC ruled that because the Toronto-based company received most of its funding from Naguib Sawiris, an Egyptian billionaire that runs Egypt’s telecommunications provider Orascom, it disqualified Globalive from doing business in Canada.  Cell phone providers in Canada must be majority owned by Canadian citizens.

Apparently the decision was so egregiously wrong, the Harper government overturned it on December 11th.  Industry Minister Tony Clement said a government review of Globalive found the company did meet Canadian ownership requirements and reversed the CRTC decision effective immediately.

The Harper government’s direct intervention in the Globalive matter rocked Canada’s existing mobile providers.

“If Wind is Canadian, then so was King Tut,” Michael Hennessy, head of regulatory affairs for Telus, wrote on his Twitter page. “When you have no effective opposition party, you can make the rules you want.”

Rogers has repeatedly insisted there is no room for a fourth player in Canadian mobile, claiming there isn’t enough business to go around.  Stockholders apparently agreed and shares of all three incumbents dropped when the news broke that Wind Mobile was on the way in Toronto and Calgary in as little as a week.  Indeed, some analysts predict Globalive’s entry could force two of the existing carriers to merge — most likely Bell and Telus.

Rogers CEO Nadir Mohamed: “There’s no question in my mind that Canada cannot support more than three national facilities-based players,” he said in an interview with Bloomberg News the day before the government decision. “It’s inconceivable to me.”

“We think Globalive clearly does not meet the requirements for Canadian control,” Bell officials said in a statement. “We’ll be taking a close look at the reasoning behind this decision.”

Canadian consumers are excited about the arrival of competition in a marketplace with three providers charging essentially identical high pricing for mobile service.

Wind Mobile could dramatically change the the entire business model of Canada’s cell phone marketplace because most of its plans offer flat rate service for Canadian customers with no overage fees.  It also does away with the nickle-and-dime fees consumers hate, with no charges for “system access,” “911,” and other non-government-imposed fees and surcharges.  Wind doesn’t even charge for incoming text messages or received long distance phone calls.  That means text spam doesn’t cost you anything beyond irritation.

In return for not subsidizing the cost of your phone, the company doesn’t compel subscribers to remain on lengthy service contracts.  That Blackberry Bold 9700 that costs $199 on AT&T or T-Mobile’s network in the United States costs $450CDN from Wind Mobile, but no two year contract is required.

The only downside?  Wind Mobile’s network is very limited at present to Toronto and Calgary, and while service is available throughout Canada, using it will incur roaming charges around 25 cents per minute.  Most early Wind Mobile customers will likely be those who don’t roam too far from home because of these limitations.

CBC Television ran extensive coverage of the government decision to admit Globalive into the Canadian mobile marketplace.  We’ve combined several reports into a single clip that explores consumer reaction, the government’s logic in permitting Wind Mobile to start service, as well as the discontent from existing providers who feel the decision is unfair.  (12/11/09 – 21 minutes)

http://www.phillipdampier.com/video/CTV Coverage Wind Mobile 12-11-09.flv

CTV News also covered the story, and included a more extensive review of what consumers can expect from the deal.  (12/11/09 – 5 minutes)

http://www.phillipdampier.com/video/Global CRTC Decision Lets Wind Mobile In 12-11-09.flv

Global Television led its newscast with the story on December 11th, and included a pouting Telus representative.  (2 minutes)

More video coverage can be found below.

Wind Mobile Pricing & Features (provided by Wind Mobile, all prices in Canadian dollars)

Handsets / Devices:

BlackBerry Bold 9700 …… $450
HTC Maple ………………….. $300
Samsung Gravity 2 ……….. $150
Huawei U7519 ……………… $130
Huawei E181 data stick…….$150

Here’s what we don’t have:

• No system access fees
• No 911 fees
• No activation fee
• Never a charge for incoming texts
• No charge for incoming long distance calls
• No difference between plans for postpaid and prepaid
• No contracts. Our Customers stay with us because they want to, not because they have to.

What we do have:

• Nation-wide coverage with a domestic roaming partner
• Unlimited calling (incoming and outgoing) in the GTA and Calgary to start, followed by Edmonton, Vancouver and Ottawa in early 2010
• Unlimited WIND to WIND calling across Canada included on all plans
• Unlimited province-wide calling on the $35 plan
• Unlimited Canada-wide calling on the $45 plan
• Call control included on all plans (missed call alerts, caller ID, call forward, call waiting)

Wind Mobile's Voice & Text Plans

Wind Mobile's data plan has a 5GB per month "fair access policy" limit, similar to that offered by Cricket Wireless. Exceed it, and the company reserves the right to throttle your speeds until the month is up.

Watch more video coverage below.

… Continue Reading

Windstream Corporation has agreed to acquire Newton, Iowa-based Iowa Telecom for $530 million in stock and cash, making it the fourth acquisition for the rural-focused Windstream in 2009.  It will also take on $600 million of Iowa Telecom’s debt as part of the transaction, which caused Standard & Poors to reduce Windstream’s credit rating to junk status – BB.

Like Frontier Communications, Windstream is engaged in aggressive expansion to stake out its position serving rural America.  The company has spent $1.3 billion on acquisitions in just the last six months, trying to keep up with other large independent providers like Frontier and CenturyLink.

“Our whole investment thesis was to grow scale in rural America,” Windstream Chief Executive Jeff Gardner told the Wall Street Journal. “I still think there’s a great deal of consolidation left with smaller players, where the pressure is the most obvious.”

Windstream, based in Little Rock, Arkansas, serves customers in 16 states, mostly in the midwest and south.  Iowa Telecom serves former GTE service areas in Iowa and Minnesota.

For employees in Newton, east of Des Moines, the purchase brings fear of significant job reductions.  Iowa Telecom has 800 employees, and comments by Windstream’s Gardner suggest downsizing is forthcoming.  Windstream expects $35 million in cost savings annually, and some of that will be achieved by dispensing with unneeded Iowa Telecom workers post-merger.  Windstream has only promised to maintain a call center in Iowa.

WHO-TV Des Moines reported Windstream’s buyout of Iowa Telecom was like “lightning striking twice” for Newton residents, leaving an economically-challenged community in fear. (11/25/09 – 2 minutes)

Iowa Telecom provides customers with a familiar bundle of services common among independent phone companies.  As well as providing traditional wired phone lines, Iowa Telecom markets Xstream DSL at speeds up to 15Mbps in some areas, and resells DISH Network satellite service for customers looking for a video option.

Lexcom's DSL price chart shows budget-busting prices for relatively slow DSL service

Windstream provides DSL service up to 12Mbps in some areas.

Before Iowa Telecom, Windstream’s earlier acquisitions included:

• D&E Communications of Pennsylvania — Windstream fetched the independent provider in a stock and cash transaction that added about 150,000 additional telephone lines to Windstream’s portfolio in Pennsylvania.
• Lexcom — Windstream picked up this Davidson County, North Carolina independent for $141 million.  Lexcom needs serious technology upgrades to improve service.
• NuVox — A Greenville, South Carolina-based business services provider.

Windstream has hinted they’re not done with acquisitions yet, fueling some speculation their next targets may be Consolidated Communications, which provides service in Illinois, Pennsylvania, and Texas or Alaska Communications Systems, another business service provider.

KCCI-TV Des Moines reported residents of Newton were “shocked” and “disturbed” about the Iowa Telecom buyout, because of potentially staggering layoffs to come after Windstream closes the deal.  (11/24/09 – 2 minutes)

Not everyone is singing the blues about Windstream’s buyout of Iowa Telecom.  Despite the transaction’s impact on Windstream’s credit rating, Wall Street has supported Windstream with a strong stock price, owing to the company’s relentless desire to deliver dividends to stockholders.

http://www.phillipdampier.com/video/CNBC Cramer on Windstream 12-7-09 1025.flv

CNBC’s Jim Cramer loves the “massive dividends” Windstream provides to stockholders.  But Cramer also issues some caveats, reminding viewers of FairPoint Communications, another former high-dividend stock… until it went bankrupt.  Cramer interviews Windstream CEO Jeff Gardner about the company and the future of independent phone companies in general.  (12/7/09 – 10 minutes)

http://www.phillipdampier.com/video/CNBC Windstream Profile NASDAQ 12-10-2009 222.flv

CNBC reports on Windstream’s move to the NASDAQ and interviews CEO Jeff Gardner about the future for the telecom industry in general.  (12/10/09 – 2 minutes)

One way or another consumers will pay more for their Mediacom cable service in 2010.  The undecided question is will Sinclair-owned television stations get a chunk of your wallet or will Mediacom keep it all for themselves.

Weary Mediacom customers have been through this battle before.  For the second time in three years, residents of Des Moines, Iowa face the prospect of losing access to their local Fox station, owned by Sinclair.

The ads are up and running.

Mediacom is running this spot, customized for each city impacted by the dispute, comparing Sinclair’s demands as another “bailout.”  This one is running in the Pensacola-Mobile market, where station WEAR is threatened with removal from Mediacom’s lineup.

Sinclair is demanding another price increase from the cable operator and Mediacom has a history of playing hardball and refusing to pay.  If the two sides don’t reach agreement by December 31st, 22 Sinclair-owned stations in communities served by Mediacom will be taken off the cable lineup.

Viewers aren’t happy, especially because they do not get a reduced bill from the cable company for the reduced channel lineup that results.

Both sides are waging campaigns to try and get viewers into the fight.  But in the end, it’s a battle of two corporate titans fighting over their portion of your money.

http://www.phillipdampier.com/video/KCCI Des Moines Mediacom Sinclair Exchange Strong Words 1-23-07.flv

Back in January, 2007 Mediacom customers spent five weeks without Sinclair-owned television stations on their cable dial.  A nasty exchange between Sinclair and Mediacom was documented in this report aired by KCCI-TV Des Moines back on January 23, 2007.   (3 minutes)

http://www.phillipdampier.com/video/KCCI Des Moines Mediacom Loses Customers 5-4-07.flv

The fallout from the 2007 dispute could be measured by disgusted customers who fled Mediacom for other providers, as KCCI found on May 4, 2007. (2 minutes)

http://www.phillipdampier.com/video/WHO Des Moines Sinclair vs Mediacom 12-15-09.flv

WHO-TV Des Moines covers today’s dispute impacting Mediacom and the city’s Fox affiliate. (2 minutes)

http://www.phillipdampier.com/video/KDSM Des Moines Mediacom vs Sinclair 12-17-09.flv

KDSM-TV Des Moines is the Sinclair-owned Fox affiliate.  The station covers its own dilemma, warning viewers they might lose the station for the second time in three years.  (3 minutes)

http://www.phillipdampier.com/video/KFXA Cedar Rapids Mediacom Sinclair Dispute in Iowa 12-17-09.flv

In Cedar Rapids, Sinclair’s KFXA-TV covers the dispute with a decidedly pro-Sinclair point of view. (3 minutes)

http://www.phillipdampier.com/video/WEAR Pensacola Sinclair Mediacom Dispute 12-16-09.flv

WEAR-TV in Pensacola, Florida spends a great deal less “news time” covering the dispute. WEAR is the Sinclair-owned ABC affiliate for the Florida Panhandle. (30 seconds)

Redefining their "new position" to basically mean their "old position"

AT&T’s all-new position on Net Neutrality suspiciously sounds like its old position on Net Neutrality.

In a three-page letter addressed to FCC Chairman Julius Genachowski, James W. Cicconi, AT&T’s senior vice president for external and legislative affairs wrote in glowing terms about the Obama Administration’s efforts to expand broadband service and preserving the “open Internet.”  Those goals are shared by AT&T, according to Cicconi.  But are they?

AT&T has spent millions fighting Net Neutrality policies, calling them unnecessary and harmful to broadband innovation and investment.  Ed Whitacre, Jr., AT&T’s former chairman and CEO infamously kicked off a contentious debate when he declared content producers shouldn’t be allowed to use AT&T’s “pipes for free.”

Little has changed.

Yesterday’s letter to Genachowski brings nothing new to the table from AT&T.  In short, they still feel broad-based Net Neutrality regulations will be harmful to investment.  AT&T wants the FCC’s definition of Net Neutrality to be “flexible enough to accommodate the types of voluntary business agreements that have been permitted for 75 years.”  Flexible, in this instance, means gutting the clear, unambiguous prohibition against fiddling with Internet traffic and inserting loopholes that gut the policy’s effectiveness.  AT&T’s “voluntary agreements” never include consumers.

AT&T wants to provide “value-added” services to content producers who agree to pay more to obtain them.  That typically means additional speed or a guarantee of prioritized service.  Unfortunately, on a finite broadband network, those getting preferential treatment can reduce the quality of service for those who don’t pay.  By trying to refocus the FCC’s attention on obsessing over subjective interpretations of “unreasonable and anti-competitive” content discrimination, AT&T gets a free pass to configure a broadband protection racket and rake in money from content producers afraid to be stuck in the slow lane.

Cicconi

AT&T also continues to complain that such regulations would prevent the company from offering consumers “value-added” broadband services.  As long as those services do not discriminate, providers can freely provide network enhancements like faster speed tiers, “Powerboost” technology which temporarily speeds up connections, and even network management which keeps viruses, malware, and other junk traffic away from subscribers.

Ben Scott at Free Press, a consumer advocacy group, read between AT&T’s latest lines and saw a naked effort to gut Net Neutrality before being enacted:

“After leading a rabid anti-net neutrality lobbying campaign for years, AT&T now submits a letter to the Federal Communications Commission purporting to offer common ground,” Scott said. “What they are proposing would allow them to violate the core principle of Net Neutrality — letting them control the Internet by picking winners and losers in a pay-for-play scheme. That would destroy the free and open Internet, and the FCC should reject this false compromise out of hand.”

“Make no mistake, AT&T opposes Net Neutrality. Their proposed solution is a bait and switch. As bait, they ask to return to a standard of nondiscrimination that was long applied to the telephone network. But they fail to mention that this standard was part of a system of pro-competitive common carriage rules that they have railed against applying to broadband networks for years. They haven’t changed their mind about common carriage. They are simply cherry-picking one piece of the old rules and calling it a compromise. The entire Net Neutrality debate is about the creation of a new system of nondiscrimination that fits broadband networks, not telephone networks –a debate the telephone companies forced by stripping away consumer protection rules from broadband under the Bush administration,” Scott added.

Public Knowledge also called out AT&T in a statement from Gigi Sohn.

AT&T has tried to draw what is an imaginary line among types of discrimination. The company advised the FCC that while ‘unreasonable’ discrimination can be banned, any discrimination caused by ‘voluntary commercial agreements’ is just fine because the parties involved agreed to it. That is nonsense.

As we have said consistently, the Internet has functioned as well as it has because control of the crucial roles at each end of the network. Side deals made by a carrier like AT&T and a content provider or other company take that control out of the hands of the consumer.

Similarly, it is unfortunate that AT&T has resorted to the old tactic of threatening not to invest in its network if the company does not get what it wants in a rulemaking. The growth of the Internet will be driven by consumer demand, not by gimmicks. If the company is truly interested in consumers, it will allow consumers to remain in control.

GVTC Communications yesterday launched 40Mbps service across its service area — the Hill Country north of San Antonio — marking a new broadband speed achievement for south Texas.

The company providing the service is about to reap the rewards of a $35 million investment in a fiber-to-the-home network reaching 80 percent of customers in North San Antonio and the Hill Country.  The new premium speed tier bests the company’s current 20Mbps service, and also includes 10Mbps upstream speed for $89.95 a month with a contract.

GVTC says it can deliver even faster speeds, upwards of 100Mbps, but wants to see what kind of demand they have for 40Mbps service first.

GVTC’s speeds will leave San Antonio’s Time Warner Cable and AT&T U-verse customers drooling.  GVTC speeds achieve nearly twice the speed of either provider, and leaves them in the dust when comparing upload speeds.  The company provides true fiber connections straight to customer homes, not the fiber-copper systems both cable and AT&T rely on.

GVTC Communications explains the benefits of fiber to the home service.  (4 minutes)

GVTC believes upstream speeds are particularly important for the area’s small businesses, as well as families with multimedia to share.

AT&T U-verse last week announced a speed upgrade to 24Mbps service in San Antonio, but their upstream speed tops out at 3Mbps.  Time Warner Cable currently provides San Antonio customers up to 15Mbps service with 2Mbps upstream speeds.

Time Warner Cable spokesperson Jon Gary Herrera said the company will respond with an upgrade to DOCSIS 3 in San Antonio as soon as the first half of 2010.  The upgrade, dubbed “Wideband” in marketing materials, will provide connections up to 50Mbps downstream and 5Mbps upstream.

On September 13, 2007 KSAT-TV San Antonio ran this report about Boerne getting new fiber optic access through GVTC.  (2 minutes)

That GVTC Communications was able to handily beat both AT&T and Time Warner Cable in both product offerings and fiber optic deployment may be a result of the company’s status as a non-profit cooperative.  The more revenue the company brings in, the more the company returns to its customers in the form of Capital Credits.  GVTC has always been a major innovator in Texas, being the first phone cooperative in Texas to launch cable television service in the 1980s and the company began using fiber in the 1990s.  The company’s service area spans 2,000 square miles and eleven counties, some rural.  Despite questions about whether wiring rural customers would provide sufficient return, the company went ahead with the project anyway, which today permits the cooperative to enjoy revenue from telephone, television, and broadband service.  It also permits many of their less-urban customers to enjoy the same level of service as the “big city folks.”

Comcast has formally announced their version of TV Everywhere is now online.  Fancast XFINITY TV “is available to any Comcast customer with a digital cable and Internet subscription.”  There is no additional charge for the service.

Comcast customers can access the service after logging in through Comcast.net or Fancast.com with their account username and password.  Once “authenticated” as a confirmed Comcast cable subscriber, customers can watch approximately 2,000 hours of programming from more than 30 cable networks, including premium channels HBO, Cinemax, and Starz.  A demonstration showed Comcast had complete seasons of series like The Sopranos and Big Love.

Some programmers are exploring whether Nielsen can count online viewing as part of its ratings measurements.

Initially, Comcast will restrict access to customers who are confirmed digital cable and broadband customers, but will extend the service to those who only subscribe to Comcast cable programming in approximately six months once security and authentication issues have been resolved, according to company officials.

The service should be accessible by subscribers on-the-go through mobile broadband or other connections, as long as customers log in.  Access is not allowed outside of the United States for copyright clearance reasons.

Customers should be aware any video accessed by the service counts against Comcast’s 250GB monthly usage limit.  Advertising on the service also counts.  Unlike Hulu which typically provides just one advertisement for every break, Comcast’s program partners have tested full commercial loads, up to seven minutes worth in a 30-minute program.  That’s 14 ads to sit through, each eating into your usage allowance.  Comcast says programmers are individually testing different amounts of advertising to learn how viewers react.  The prevailing view is that online viewers are less tolerant of advertising than typical television viewers.

While Time Warner Cable continues to ask customers if they should “get tough” with cable programmers’ price hikes, they are rolling over customers with more rate increases anyway.

The latest region facing higher cable bills is southern California.  Customers were notified rates were increasing an unspecified amount in January 2010.  Company spokesman Darryl Ryan told the Orange County Register that he can’t easily categorize the average increase since every bill will be different.

Readers managed:

• Margaret from Huntington Beach says that some price hike examples are: The All the Best goes to $122.99, from $119.95; the ‘Surf ‘n View’ increases $2.04; broadcast cable goes up $2; Internet only goes up $2.04; and DVR increases to $1.54. One decrease: the remote control drops $0.05.
• Dana from Anaheim Hills got a letter too and had to call customer service to figure out what it meant. Essentially, Dana found out basic service was going up $5 to $8 per month. To keep the existing price, customers must commit to a 2-year contract.

This price increase, with more likely to follow, comes because of programming costs according to the nation’s second largest cable operator.  The company has recently tried to engage consumers in an effort to “keep costs down” through its “Roll Over or Get Tough” campaign.  Time Warner Cable claims broadcasters and other cable programmers are demanding as much as 300% more for their programming in 2010.

Time Warner Cable’s ‘Roll Over or Get Tough’ campaign is running this ad for the holidays.

The Parents Television Council called the marketing campaign “self serving,” said Tim Winter, the organization’s president.  The group said consumers are always put in the middle of pricing arguments, either from the cable company’s perspective or the network trying to get carriage or threatened with removal from cable lineups.  The PTC calls it posturing, and in the end prices typically get negotiated down a few pennies at most.

The PTC advocates consumers being able to pick and choose only those channels they want.  The group runs the website How Cable Should Be, which breaks down some of the estimated wholesale prices programmers charge cable companies for their programming.  Consumers can use the site to pick and choose their favorite channels and add up what their monthly bill could be if they weren’t paying for channels they don’t watch.

http://www.phillipdampier.com/video/Bundling Bummer.flv
The Parents Television Council’s “Bundling Bummer” message illustrates how consumers get stuck paying for channels they never wanted. (3 minutes)

Time Warner Cable claims that more than 400,000 visitors to their campaign website have been overwhelmingly positive towards the company’s “fight back” stance.

“We’re delighted with the results so far,” said Time Warner chairman, president and CEO Glenn Britt. “Over 150,000 people have left comments, and 95% of them voted for ‘Get Tough.’ Our customers clearly agree that the current programming business model is broken. One comment we’re hearing pretty consistently is that customers would like the choice to buy smaller packages of channels. As an industry, we need to listen to those kinds of concerns.”

But the company’s site doesn’t make it easy to “roll over.”  Those who try to choose “roll over” are prompted instead to choose “fight back.”

Industry observers suggest Time Warner’s campaign is an opening shot for upcoming contract extensions for a handful of programmers, most notably broadcasters.  In the very center?  News Corporation and the Fox family of cable and broadcast stations.

Time Warner Cable asks if you are getting a 300% pay raise in this ad asking if customers want the company to fight back against programmer price increases.

Behind the scenes, Time Warner Cable has been taking shots at Fox over negotiations between Sinclair Broadcasting, which owns 20 Fox-affiliated TV stations, and Mediacom, a smaller cable operator.  In an ex parte comment filed December 8th, Time Warner Cable took direct aim at the network, suggesting they were demanding veto power over local negotiations with individual stations.  If the network doesn’t like the terms the local station and cable system settle on, Fox wants the right to object.  Time Warner Cable suggested that precedent is already in place based on negotiations between Sinclair and Time Warner which only resulted in one-year extensions.  The cable operator assumes Fox will be back a year from now demanding up to one dollar a month per subscriber for each Fox affiliate the cable system carries.

Why does Fox care so much?  Because they, like many other television networks, have begun asking for a percentage of the revenue earned from retransmission consent agreements.  With a weak ad market, every penny counts.

Fox called the cable operator’s tactics a “desperate campaign to mask its impressive profits and instead malign its program suppliers’ efforts to receive fair compensation.”

Regardless of who wins the fight, subscribers lose because they bear the brunt of the cable operator’s business model which forces customers to pay for dozens of channels they’ll never watch, and when prices for those networks increase, so shall the customer’s bill.

Canadians are also going through a similar battle between cable systems and local broadcasters who demand payment for carriage.  The hardball campaign plays out on Canadian TV screens with ads like this.

Keyser, West Virginia

Frontier Communications’ West Virginia roadshow continued this week as company officials continue to sell the company’s plan to take over telephone service from Verizon across much of the state.  But have they stretched the truth to sell state officials on the deal?

Paul Espinosa, general manager of Frontier, told a West Virginia newspaper the company “prides ourselves in taking good care of our customers,” claiming 95 percent of their current residential customers have broadband Internet.

“In some areas it’s DSL. In other markets we do offer fiber,” he told the Mineral Daily News-Tribune in Keyser.

Keyser, a community of just over 5,000, considers broadband high on its list of concerns.  They want it, but they also want to know it is the kind of broadband that will keep Mineral County competitive, particularly for small businesses that depend on it to reach customers.  The county created a Communications Infrastructure Council (CIC) to review broadband communications options considered vital to the community’s economic development.

Rick Welch, who serves on the CIC,  said the economic future of Mineral County depends upon high speed or fiber-optic Internet and not DSL, or Internet service which utilizes existing telephone lines.

Verizon West Virginia has bypassed the state for FiOS development, which provides a fiber-optic connection to the home, claiming the infrastructure costs are too high at today’s prices to satisfy Return On Investment requirements.  Frontier has never had an ambitious broadband agenda centered on fiber optics.

Frontier traditionally offers 1-3Mbps DSL service in most of the smaller communities they serve.  Frontier’s claim that they are currently providing customers in “other markets” with fiber broadband brings these questions:

• Exactly where?
• Under what terms?
• Is this true fiber-to-the-home service, or simply fiber connected central offices?
• Are advanced levels of service are provided to these fiber customers, or are the plans, terms, and speeds identical to traditional DSL plans?

If the deal goes through, Frontier would assume ownership of pre-existing Verizon FiOS deployments, but those were proposed and planned by Verizon, not Frontier.

“DSL will not bring anything to Mineral County as far as economic development is concerned,” he said, noting that high technology businesses require far faster speeds than DSL traditionally provides.

A Verizon representative tasked with trying to sell the deal that gets the company out of the West Virginia’s phone business said that something is better than nothing.

“To hear you say that DSL is not the future is troubling,” Verizon’s John Golden said. “If you are without broadband, DSL would be the future.”

The Mineral County Commission was unimpressed with Golden’s statement.  Commission president Wayne Spiggle told the News-Tribune a lot of businesses and those who work from home would not consider coming to Mineral County when they discovered only low speed DSL service available, commonplace more than a decade ago in other areas. Spiggle said real broadband service was essential to attract the kind of businesses Mineral County needs to succeed.

“Our mission and responsibility to Mineral County is to create an entrepreneurial garden, and high-speed broadband is essential to that,” he said.

The Communications Workers of America are also been fighting to warn state and local officials about the gamble West Virginia will take with Frontier Communications.  Considering the last three deals resulted in bankruptcy for all three, it’s a risk the CWA doesn’t think is worth taking.

“Frontier will wind up taking on at least $3.4 billion in debt from Verizon,” said John Johnston, speaking on behalf of the CWA. “Frontier has said they’ll expand broadband, but will they? With $3.4 billion in debt, that’s a lot of money,” he said.

Chuck Fouts, who serves as local CWA president said bankruptcy brings job losses.  “If you go bankrupt, the first thing that goes is people,” he said.

The union says the state should join their efforts to force Verizon to “do what they said they were going to do” and provide a plan to upgrade the state’s telecommunications system to fiber optics.

As it stands, Verizon sees higher returns from cherry-picking more urban areas for its FiOS service, and isn’t willing to provide the kind of universal service throughout its service areas that phone companies have traditionally provided for decades.

“How can Frontier provide the fiber they claim to offer in “other markets” when Verizon’s deeper pockets have thus far been turned out empty for residents in West Virginia?” asks Stop the Cap! reader Hyatt.

Investment firm D.A. Davidson downgraded Frontier’s stock last week, reporting they felt the deal would be bad for Frontier shareholders.

Moving the stock rating back to “underperform,” the firm was skeptical Frontier would be able to pull off the cost-savings it promised as part of the deal.  They also anticipated Frontier will have to finance as much as $3.3 billion of the debt (at 8-9%) it will take on as part of the transaction.  Perhaps more revealing is their prediction that Verizon shareholders who receive distributed shares of Frontier stock will likely dump them as fast as possible, remembering earlier Verizon deals that quickly led to falling stock prices and eventual bankruptcy.  D.A. Davidson warned potential Frontier investors to “at least move to the sidelines” during the anticipated grand sell-off, moving back into the stock only when it bottoms-out.

Sometimes the marketing hype associated with broadband products goes just a tad too far.

Michael is a Verizon DSL customer living with Verizon’s $34.99 3Mbps DSL service.  He reported to The Consumerist that a nearby friend in the same zip code was able to get Verizon’s 7Mbps service for $42.99 a month, so he called Verizon to see if he could obtain the same service.

I was told that it wasn’t available at my address, which is in the same zip code, but they sure can offer me 5MB for $49.99. After the run around, I politely declined and left everything be.

[Upon further checking their website] 7MB is available for my address, and for $42.99 with contract! Call #1 ended up me being told that I can in fact get 7MB but for $49.99. I declined and said no thank you. Call #2 told me that 7MB was not available, only 5MB, and it also was $49.99. I declined and called back a third time. Call #3 told me I can upgrade to 7MB but only online as “they have different specials we don’t honor over the phone.” The problem? My address states it has 7MB available… as a NEW account. If I log in my account and choose to upgrade, I can only order 5MB. I call back again, and a couple calls routed me to either the Philippines or India, and I politely hung up in frustration even before I started a conversation.

[...]

At this point I was livid and called to cancel my service.  The woman told me 7MB is absolutely 100% definitely not available for my address. She couldn’t explain why I could order it as a new account but not as an existing customer. The next part takes the cake from every reply I’ve ever heard. I directly asked “why is it I can open a new account with 7MB but I cannot order it as an existing customer?” Her response: “Your home cannot handle the 7MB speed. If I put in the order for 7MB, it will burn your house down.”

Michael was, of course, flabbergasted.  Besides, it’s usually cable installers that set your house on fire.

Verizon’s rate plan shell game guarantees they are always the winner:

“Last night surprisingly I get an email about my Verizon account. My rates are being raised to $36.99 for my current 3MB service.”  Presumably Verizon needs to purchase fire insurance to protect customers from the blazing fast speeds.  Or is that red hot glow coming from customers?

The Consumerist recommends an e-mail carpet bombing of Verizon executives’ e-mail accounts to get someone to resolve his problems.  Here’s a better answer for unresolved complaints regarding Verizon: Call the Verizon Executive Customer Relations office at 1-800-483-7988 and press 3.