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The Great Telecom Merger Carousel: Altice <-> Sprint <-> T-Mobile <-> Charter

A last-ditch effort last weekend by executives of SoftBank and Deutsche Telekom to overcome their differences in merging Sprint with T-Mobile USA ended in failure, killing Wall Street’s hopes combining the two scrappiest wireless carriers would end a bruising price war that had heated up competition and hurt profits at all four of America’s leading wireless companies.

Now Wall Street, hungry for a consolidation deal, is strategizing what will come next.

Sprint/T-Mobile Merger

In the end, SoftBank’s chairman, Masayoshi Son, simply did not want to give up control of Sprint to Deutsche Telekom, especially considering Sprint’s vast wireless spectrum holdings suitable for future 5G wireless services.

The failure caused Sprint Corp. shares and bonds to plummet, and spooked investors are worried Sprint’s decade-long inability to earn a profit won’t end anytime soon. Sprint’s 2010 Network Vision Plan, which promised better coverage and network performance, also helped to load the company with debt, nearly half of which Sprint has to pay back over the next four years before it becomes due. Sprint’s perpetual upgrades have not tremendously improved its network coverage or performance, and its poor performance ratings have caused many customers to look elsewhere for wireless service.

Investors are also concerned Sprint will struggle to pay its current debts at the same time it faces new ones from investments in next generation 5G wireless technology. Scared shareholders have been comforted this morning by both Son and Sprint CEO Marcelo Claure in an all-out damage control campaign.

Son has promised the now-orphaned Sprint will benefit from an increased stake in the company by SoftBank — a signal to investors SoftBank is tying itself closer to Sprint. Son has also promised additional investments to launch yet another wave of network upgrades for Sprint’s fourth place network. But nothing is expected to change very quickly for customers, who may be in for a rough ride for the immediate future. Son has already said his commitment to raise Sprint’s capital expenditures from the current $3.5-4 billion to $5-6 billion annually will not begin this year. Analysts claim Sprint needs at least $5-6 billion annually to invest in network improvements if it ever hopes to catch up to T-Mobile, AT&T, and Verizon Wireless.

Masayoshi Son, chairman of SoftBank Group

“Even if the next three-four years will be a tough battle, five to 10 years later it will be clear that this is a strategically invaluable business,’’ Son said, lamenting losing control of that business in a deal with T-Mobile was simply impossible. “There was just a line we couldn’t cross, and that’s how we arrived at the conclusion.”

During a call with analysts on Monday, Sprint’s chief financial officer Tarek Robbiati acknowledged investors’ disappointment.

Investors were hoping for an end to deep discounting and perks given to attract new business. T-Mobile’s giveaways and discounting have reduced the company’s profitability. Sprint’s latest promotions, including giving away service for up to a year, were seen by analysts as desperate.

Son’s own vision plan doesn’t dwell on the short-term, mapping out SoftBank’s progress over the next 300 years. But for now, Son is concerned with supporting the investments already made in the $100 billion Vision Fund Son has built with Saudi Arabia’s oil wealth-fueled Public Investment Fund. Its goal is to lead in the field of next generation wireless communications networks. Sprint is expected to be a springboard for those investments in the United States, supported by the wireless company’s huge 2.5GHz spectrum holdings, which may be perfect for 5G wireless networks.

But Son’s own failures are also responsible for Sprint’s current plight. Son attempted to cover his losses in Sprint by pursuing a merger with T-Mobile in 2014, but the merger fell apart when it became clear the Obama Administration’s regulators were unlikely to approve the deal. After that deal fell apart, Son has allowed T-Mobile to overtake Sprint’s third place position in the wireless market. While T-Mobile grew from 53 million customers to 70.7 million today, Sprint lost one million customers, dropping to fourth place with around 54 million current customers.

Son’s answer to the new competition was to change top management. Incoming Sprint CEO Marcelo Claure promptly launched a massive cost-cutting program and layoffs, and upgrade-oriented investments in Sprint’s network stagnated, causing speeds and performance to decline.

Claure tweetstormed damage control messages about the merger’s collapse, switching from promoting the merger’s benefits to claims of relief the merger collapsed:

  • “Jointly stopping merger talks was right move.”
  • Sprint is a vital part of a larger SoftBank strategy involving the Vision Fund, Arm, OneWeb and other strategic investments.”
  • “Excited about Sprint’s future as a standalone. I’m confident this is right decision for our shareholders, customers & employees.”
  • “Sprint added over 1 million customers last year – we have gone from losing to winning.”
  • “Last quarter we delivered an estimated 22% of industry postpaid phone gross additions, our highest share ever.”
  • “Sprint network performance is at best ever levels – 33% improvement in nationwide data speeds year over year.”
  • “We are planning significant investments to the Sprint network this year and the years to come.”
  • “In the last 3 years we’ve reduced our costs by over $5 billion.”
  • “Sprint’s results are the best we’ve achieved in a decade and we will continue getting better every day.”

In Saturday’s joint announcement, Claure said that “while we couldn’t reach an agreement to combine our companies, we certainly recognize the benefits of scale through a potential combination. However, we have agreed that it is best to move forward on our own. We know we have significant assets, including our rich spectrum holdings, and are accelerating significant investments in our network to ensure our continued growth.”

“They need to spend (more) money on the network,” said William Ho, an analyst at 556 Ventures LLC.

CNBC reports Sprint’s end of its T-Mobile merger deal has hammered the company’s stock. What does Sprint do now? (1:30)

Sprint/Altice Partnership

Sprint executives hurried out word on ‘Damage Control’ Monday that Altice USA would partner with Sprint to resell wireless service under the Altice brand. In return for the partnership, Sprint will be able to use Altice’s fiber network in Cablevision’s service area in New York, New Jersey, and Connecticut for its cell towers and future 5G small cells. The deal closely aligns to Comcast and Charter’s deal with Verizon allowing those cable operators to create their own cellular brands powered by Verizon Wireless’ network.

An analyst at Cowen & Co., suspected the Altice deal may be a trial to test the waters with Sprint before Altice commits to a future merger between the two companies. Altice is hungry for expansion, currently owning Cablevision and Suddenlink cable operators in the U.S. But Altice has a very small footprint in the U.S., leading some analysts to believe a more lucrative merger might be possible elsewhere.

Sprint/Charter Merger

Charter Communications Logo. (PRNewsFoto/Charter Communications, Inc.)

Charter Communications stock was up more than 7% in early Monday morning trading as a result of speculation SoftBank and Charter Communications were restarting merger talks after a deal with T-Mobile collapsed.

CNBC reported that Mr. Son was willing to resume talks with Charter executives about a merger between the cable operator and Sprint. Charter executives have shown little interest in the deal, still distracted trying to merge their acquisitions Time Warner Cable and Bright House Networks into Charter’s current operation. Charter’s entry into wireless has been more tentative, following Comcast with a partnership with Verizon Wireless to resell that considerably stronger network under the Charter brand beginning sometime in 2018.

According to CNBC, John Malone’s Liberty Media, which owns a 27% stake in Charter, is now in favor of a deal, while Charter’s top executives are still opposed.

CNBC reports Charter and Sprint may soon be talking again about a merger between the two. (6:33)

Dish Networks <-> T-Mobile USA

Wall Street’s merger-focused analysts are hungry for a deal now that the Sprint/T-Mobile merger has collapsed. Pivotal Research Group is predicting good things are possible for shareholders of Dish Network, and upgraded the stock to a “buy” recommendation this morning.

Jeff Wlodarczak, Pivotal’s CEO and senior media analyst, theorizes that Sprint’s merger collapse could be good news for Dish, sitting on a large amount of unused wireless spectrum suitable for 5G wireless networks. Those licenses, estimated to be worth $10 billion, are likely to rise in value as wireless companies look for suitable spectrum to deploy next generation 5G networks.

Multichannel News quotes Wlodarczak’s note to investors:

“In our opinion, post the T-Mobile-Sprint deal failure there is a reasonable chance that T-Mobile could make a play for Dish or Dish spectrum as it would immediately vault the most disruptive U.S. wireless player into the leading U.S. spectrum position (w/ substantially more spectrum than underpins Verizon’s “best in class” network),” Wlodarczak wrote. “This possible move could force Verizon to counter-bid for Dish spectrum (or possibly the entire company) as Dish spectrum is ideally suited for Verizon and to keep it out of T-Mobile’s hands.”

AT&T/DirecTV Buyout of Dish Network

Wlodarczak has also advised clients he believes the deregulation-friendly Trump Administration would not block the creation of a satellite TV monopoly, meaning AT&T should consider pairing its DirecTV service with an acquisition of Dish Networks’ satellite TV business, even if it forgoes Dish’s valuable wireless spectrum.

“AT&T, post their Time Warner deal, could (and frankly should) be interested in purchasing Dish’s core DBS business taking advantage of a potentially more laissez faire regulatory climate/emergence of V-MVPD’s, to significantly bolster their DirecTV business (and help to justify the original questionable DirecTV deal) by creating a SatTV monopoly in ~10-15M US households, increased programming scale and massive synergies at a likely very attractive price.”

Such a transaction would likely resemble the regulatory approval granted to merge XM Satellite Radio and Sirius Satellite Radio into SiriusXM Satellite Radio in 2008. Despite the merger, just months after its approval, the combined company neared bankruptcy until it was bailed out with a $530 million loan from John Malone’s Liberty Media in February 2009. Liberty Media maintains an active interest in the satellite radio company to this day.

Cable Operators Talk Broadband Capacity and Upgrades

With many cable operators reporting a need to double network capacity every 18-24 months to keep up with customer traffic demands, the industry is spending time and money contemplating how to meet future needs while also finding ways to cut costs and make networks more efficient.

Top technology executives from five major cable operators answered questions (sub. req’d.) from Multichannel News about their current broadband networks and their plans for the future. Some, like Mediacom, are aggressively adopting DOCSIS 3.1 cable broadband upgrades for their customers while companies like Cox and Comcast are deploying multiple solutions that use both traditional hybrid fiber-coax network technology and, on occasion, fiber-to-the-home to boost speed and performance. But at least one cable company — Charter Communications — thinks it can continue operating its existing DOCSIS 3 network without major upgrades for several years to come.

Cable Broadband Traffic Can Be Handled

“We’ve been on a pretty steady path of doubling our network capacity every 18-24 months for several years, and I don’t see anything that makes me think that will change,” said Tony Werner, president of technology and product at Comcast. “We’ve been strategically extending fiber further into our network to meet customer demand, and that effort, combined with our commitment to deploying DOCSIS 3.1 has given us a network that’s powerful, flexible, and ready for what’s next.”

J.R. Walden, senior vice president of technology at Mediacom was more aggressive.

“We have completed the removal of all the analog channels. That was the big step one,” Walden said. “Step two was to start transitioning high-speed data over to DOCSIS 3.1, so we’re not adding any more 3.0 channels, and reuse spectrum for 3.1, which is a bit more efficient. The whole company is 3.1, all the modems we’re buying since June have been 3.1, so we’ve begun that next transition.”

Walden added Mediacom is also trying to improve broadband performance by reducing the number of customers sharing the same connection.

“We average about 285 homes to 290 homes per node as an average,” he said.

Mediacom is also scrapping older technology on the TV side to open new bandwidth. The cable company is getting rid of MPEG-2-only set-top boxes so the company can transition its video lineup to MPEG-4. But even that won’t last long. Walden admits the company will then quickly start moving less-viewed channels and some premium networks to IP delivery.

Traditional cable broadband service relies on a hybrid fiber-coax network.

In its European markets, Liberty Global has adopted Converged Cable Access Platform (CCAP) equipment across its footprint. CCAP technology saves cable operators space and operates more efficiently, and supports future convergence of technologies that cable operators want to adopt in the future. CCAP has helped Liberty Global deal with its 45% traffic growth by making upgrades easier. The company is also using advanced features of CCAP to better balance how many customers are sharing a connection. The next step is adopting DOCSIS 3.1.

“Seventy to 80% of our plant will be DOCSIS 3.1 ready by the end of next year, giving us a path to even greater capacity expansion allowing us to continue to increase the available capacity across our access network, upstream and downstream,” said Dan Hennessy, chief architect of network architecture for Liberty.

Charter is prioritizing maximizing performance on the network it already has.

“Our priority is to constantly balance capacity against demand. It’s a never-ending quest,” said Jay Rolls, Charter’s chief technology officer. “We watch it very closely, and we’re very pragmatic about it — the volume of tools, metrics and ways to see what’s really happening, and invest accordingly, is really deepening in ways that matter.”

Is Fiber-to-the-Home in Your Future?

While some cable operators like Altice’s Cablevision are scrapping their existing hybrid fiber-coax networks in favor of fiber-to-the-home (FTTH), America’s largest cable operators are not in any hurry to follow Altice.

Comcast has expanded its fiber network closer to customers in the last few years, but sees no need to convert customers to FTTH service.

“I feel pretty strongly that the best path ahead is to leverage the existing coaxial network and DOCSIS resources to the fullest, then inch towards FTTH, over time Why? Because we can. We don’t have to build an entire network just to turn up one customer.”

The next generation of cable broadband service may depend on CCAP – technology that will cut operator costs and lay the foundation for changing the way video and other services are delivered to customers.

Cox has a 10-year Network 2.0 plan that will bring fiber closer to customers, but not directly to every home. More important to Cox is having the option to support symmetrical speeds, which means delivering upload speeds as fast as download speeds.

“We’re also thinking about the fiber investment and fiber deep as it relates to our wireless strategy, enabling some of our customers with a small cell strategy but also positioning ourselves to take advantage of that in the future, as well as thinking about fiber deep to benefit both residential and our commercial customers simultaneously,” said Kevin Hart, Cox’s executive vice president and chief product and technology officer.

Liberty/Virgin Media’s Project Lightning is bringing cable broadband and TV service to places in the UK that never had cable service before.

In Europe, Liberty Global’s “Project Lightning” network expansion initiative is building out traditional cable service in the United Kingdom. Most of the UK never adopted cable service, favoring small satellite dish service instead. Now Liberty Global is putting cable expansion on its priority list. But decades after most North Americans got cable service for the first time, today’s new buildouts are based largely on fiber optics — either fiber to the home or fiber to the neighborhood, where coaxial cable completes the journey to a customer’s home.

Charter admits the technology it will use in the future partly depends on what the competition is offering. Rolls says the company can eventually roll out DOCSIS 3.1, take fiber deeper, or offer symmetrical download/upload speeds presumably targeted towards its commercial customers. But he also suggested Charter’s existing network can continue to deliver acceptable levels of service without spending a lot on major upgrades.

“It’s a rational approach, where we’re trying to balance the needs, the available technologies, and the costs,” Rolls said. But he also suggested DOCSIS 3.1 isn’t always the answer to upgrades. “DOCSIS 3.1 has some pretty remarkable capabilities, but it’s not necessarily a hard-and-fast reason to not take fiber deeper, for instance [allowing for additional DOCSIS 3 node splits]. Different situations drive different capacity decisions.”

Walden agreed, and Mediacom customers should not expect more than DOCSIS 3.1 upgrades for the near future.

“[Fiber deep] is a bit further out, at least as a large-scale type of project,” Walden told Multichannel News. “I think fiber deep for multi-dwelling units, high-density areas and some planned higher end communities doing deeper fiber or fiber-to-the-home [is happening]. But as a wholesale [change] and going to node+0 kind of architecture, I don’t see that in the next two years.”

Are Symmetrical Speeds Important for Customers?

Verizon’s fiber to the home service FiOS uses symmetrical broadband speeds to its advantage in the marketplace.

Many fiber to the home networks offer customers identical upload and download speeds, but cable broadband was designed to favor downstream speeds over upstream. That decision was based on the premise the majority of users will receive much more traffic than they send. But as the internet evolves, some are wondering if cable broadband’s asymmetric design is now outdated and some competitors like Verizon’s FiOS fiber to the home service now use its symmetrical speed advantage as a selling point.

Cox Communications does not think most customers care, even though its network upgrades are laying the foundation to deliver symmetrical speeds.

“It’s a little but further out on the horizon,” said Hart. “The upstream growth rate is ticking up a couple of notches, but not to the tune that we would need significant additional capacity and/or a complementary need for symmetrical bandwidth. [A]t this stage, the symmetrical is a nice-to-have for residential and definitely will be a good option for our commercial customers.”

Rolls isn’t sure if symmetrical speeds are important to customers either and Charter has no specific plans to move towards upload speed upgrades.

“The world of applications and services continues to evolve, obviously, but so far we’ve been able to meet those needs with an asymmetrical topology,” Rolls said. “That said, things like real-time gaming, augmented and virtual reality, and the Internet of Things — some of those will likely drive more symmetry in the network. It remains to be seen.”

Despite Net Neutrality, Providers Launch Fiber Spending Spree

Despite claims from some industry-backed researchers and former members of Congress that Net Neutrality has reduced investment in telecommunications, a new research note from Deutsche Bank shows America’s top telephone and cable companies are spending billions on fiber upgrades to power wireless, business, and consumer broadband.

“Telecoms have become much more public signaling their intent to increase fiber investment, with AT&T and Verizon leading the spending ramp,” reports Deutsche Bank Markets Research.

Verizon has been on a fiber spending spree in the northeastern United States, signing contracts with Corning and Prysmian worth $1.3 billion to guarantee a steady supply of 2.5 million miles of fiber optic cable Verizon plans to buy over the next three years. Much of that spending allows Verizon to lay a foundation for its future 5G wireless services, which will require fiber to the neighborhood networks. But in cities like Boston, Verizon is also once again expanding its FiOS fiber to the home service to consumers.

AT&T is committed to connecting 12.5 million homes to gigabit-ready fiber broadband by 2019 — part of a deal it made with the FCC to win approval of its acquisition of DirecTV. AT&T claims it has already connected 5.5 million homes to its gigabit AT&T Fiber network, expected to reach 7 million by the end of this year.

Deutsche Bank thinks providers’ future drive towards 5G service will also simultaneously benefit fiber to the home expansion, because the same fiber network can power both services.

“To support the upcoming innovations such as autonomous driving, IoT, smart cities, the US needs to densify its fiber network,” Deutsche Bank said. “The U.S. fiber penetration rate is 20% vs. 75% for leading OECD countries, which suggests a large gap needs to be closed.”

Altice founder Patrick Drahi (second from left) and Altice USA CEO Dexter Goei (center) visit a Cablevision fiber deployment on Long Island, N.Y.

The bank predicts companies will spend around $175 billion over the next 10 years building out their fiber networks, with most of the spending coming from the phone companies, who may see fiber buildouts as their best attempt to level the playing field with cable operators’ hybrid fiber-coaxial cable networks. As cable operators expand their networks to reach more business parks, they have been gradually stealing market share for phone and data services from phone companies. Consumer broadband is also increasingly dominated by cable operators in areas where phone companies still rely on selling DSL services.

FierceCable notes Comcast and Altice have stepped up aggressive spending on fiber networks for their consumer and business customers. Altice is planning to decommission Cablevision’s existing coaxial cable network and move customers to fiber-to-the-home service. Comcast is deploying fiber services while still selling traditional cable broadband upgraded to DOCSIS 3.1, which supports substantially faster broadband speeds. The two networks co-exist side-by-side. Customer need dictates which network Comcast will use to supply service.

Customers benefit differently in each state, depending on what type of service is available. Comcast’s large footprint in Pennsylvania, outside of Philadelphia, is usually served by traditional coaxial cable. Verizon still sells DSL in much of the state. In Massachusetts, Verizon is building out its FiOS network to serve metro Boston while Comcast will depend on DOCSIS 3.1 upgrades to speed up its internet service. In New Jersey, long a battleground for Verizon’s FiOS service the company stopped aggressively expanding several years ago, Comcast has announced DOCSIS 3.1 upgrades for the entire state.

Independent phone companies are also seeing a bleak future without fiber upgrades. Both CenturyLink and Windstream are planning moderately aggressive fiber expansion, particularly in urban service areas and where they face fierce cable competition. Frontier continues its more modest approach to fiber expansion, usually placing fiber in new housing developments and in places where its copper facilities have been severely damaged or have to be relocated because of infrastructure projects.

None of the companies have cited Net Neutrality as a factor in their future broadband expansion plans. In fact, fiber networks have opened the door to new business opportunities to the companies installing them, and the high-capacity networks are likely to further reduce traffic/transit costs, while boosting speeds. That undercuts the business model of selling digital slow and fast lanes.

Verizon Abandoning Copper Network in Multiple Northeastern/Mid-Atlantic Cities

Phillip Dampier September 21, 2017 Consumer News, Public Policy & Gov't, Verizon No Comments

Verizon Communications will decommission its existing copper wire facilities in multiple markets in Delaware, Maryland, Massachusetts, New Jersey, New York, Pennsylvania, Rhode Island, and Virginia starting in 2018.

In a series of requests filed with the Federal Communications Commission, Verizon is asking to compel customers to switch service to Verizon’s FiOS optical fiber network or find another provider. While Verizon’s fiber network has a better reliability record than Verizon’s deteriorating copper facilities, some residential customers may be compelled to pay more for FiOS service than they used to pay for landline and DSL service over Verizon’s copper network. Their phone service may also no longer work in the event of a power failure.

“We will offer the service at a special rate for customers who migrate from copper to fiber as a result of the retirement of our copper facilities,” Verizon said, but the company did not guarantee that rate would not reset to regular priced FiOS service down the road.

Businesses may also have to invest in technology upgrades to switch to fiber optic service when Verizon pulls the plug on copper-delivered services.

The wire centers (central offices) where copper decommissioning is planned are disclosed in these company documents (click on links below to see if you are affected):

DELAWARE

MARYLAND

MASSACHUSETTS

NEW JERSEY

NEW YORK

PENNSYLVANIA

RHODE ISLAND

VIRGINIA

 

Verizon Wireless Pushes Customer to Upgrade Data Plan Before Closing His Account

Danny, who lives in eastern Hancock County, Me., was more than a little confused by his September Verizon Wireless bill.

“You haven’t had an overage yet, but you recently cut it close,” warned the wireless company. Verizon’s definition of “cutting it close” was using 7.3GB of data in June, 7GB in July, and 7.4GB in August. His data plan includes an allowance of 12GB a month, and he only used just over half of that. Despite that, Verizon Wireless recommended he “get on the right plan.” For Danny, who already spends nearly $250 a month with Verizon, that would mean an upgrade to “Beyond Unlimited,” which offers “unlimited” 4G LTE data (subject to throttling once you head north of 22GB of usage a month) and 15GB of hotspot usage. The added cost? Another $52.99 a month, taking Danny’s bill to $300 a month.

A $300 cell phone bill might be a subject of a story all on its own, but what really got Danny’s attention was a billing notice (and letter mailed separately to his home), telling him his family was being kicked off Verizon Wireless and his account would be closed Oct. 17. The reason? He was “using a significant amount of data while roaming off the Verizon Wireless network:”

The same company inviting him to spend $52 more on an unlimited data plan has now dis-invited him as a customer because it didn’t like how and where he used the existing data plan that came with his account.

“I checked all of my data usage for the past 12 months,” Danny tells Stop the Cap! “Data usage was anywhere from 3.5GB (for three lines), up to 8.5GB.  We have rollover data as part of our plan (previous month of unused data rolls over to the next month). One month we used 16GB (that was the month that we drove to Texas and back), but still never went over the data we had available.”

Danny’s family uses their phones primarily in eastern Hancock County, a well-recognized trouble spot for cell phone dead zones until Wireless Partners, an independent cell tower owner/operator, partnered with Verizon Wireless to construct new cell towers using spectrum acquired by Verizon. Many of the cell sites were specifically designed to reach Downeast Maine, home to a number of small communities — some drawing tourists in the summer and others not. Wireless Partners’ new towers concentrated improved coverage along the Route 1 corridor between Ellsworth and Calais, and the Route 9 corridor known to the locals as the Airline — from Calais to Aurora, communities mostly east of Bangor on roads that take visitors to communities like Bar Harbor, right on the coast, or all the way to the New Brunswick border.

Downeast Maine

In this part of Maine, customers have to choose their cellular provider carefully because no company offers solid coverage in every community in the region. Those living in more tourist-focused communities or cities on the coast or one of the offshore islands often select U.S. Cellular, a regional carrier that has accepted millions of federal dollars from the Universal Service Fund to expand service. U.S. Cellular has added towers in communities like Bangor, Lewiston-Auburn, Ellsworth and the Presque Isle-Houlton area. But in many smaller towns, U.S. Cellular reception often disappears. The other two providers — Verizon Wireless and AT&T — focus most of their attention on cities like Portland, Augusta and Bangor, and along I-95 and in popular tourist areas on the coast.

“Unlike in many other states, if you choose the wrong carrier in Maine, you get absolutely no reception at home and perhaps one bar, if you are lucky, while on the road going to work or doing errands,” said Mike Fastler, a lifelong resident. “More than anywhere else I know, people here talk to their neighbors about what cell company works for them, and in a lot of towns almost everyone relies on the same company because it is the only one that delivers good reception.”

Fastler says in large parts of Downeast Maine east of I-95, Verizon Wireless has recently been the most solid, primarily because its network has been supplemented with towers built by Wireless Partners, which has prioritized improving cell reception around the inland areas of Washington and Hancock counties. The customers most likely of being booted by Verizon Wireless are customers that live and/or work in these two counties.

Customers like Danny have no idea Verizon considers them roaming abusers because when using cell towers run by Wireless Partners, Verizon devices show reception as part of Verizon’s home LTE network. No roaming indicators appear at all. But Verizon must still pay Wireless Partners when their customers use the third-party company’s cell towers. Verizon’s interpretation of its customer agreement allows it to terminate customers found roaming excessively. The question is, is 7GB of usage on a cell tower network built to augment Verizon Wireless’ coverage area be defined as “excessive.”

Verizon thinks so, telling Ars Technica:

“These customers live outside of areas where Verizon operates our own network,” Verizon said. “Many of the affected consumer lines use a substantial amount of data while roaming on other providers’ networks and the roaming costs generated by these lines exceed what these consumers pay us each month.”

But Danny and many other affected readers tell us their usage is well below 10GB a month. Some customers received termination notices and use an average of only 3GB a month and live near a Wireless Partners tower.

“It seems highly unlikely Verizon Wireless is incurring costs that are exceeding customers’ bills,” adds Fastler, who is also scheduled to be canceled on Oct. 17. “I used 1.5GB in August and never came close to hitting 5GB on our account over the last two years and I am being shut off.”

Fastler tried to sign up as a new Verizon Wireless customer with his wife to escape the account closure, but Verizon Wireless’ crackdown is complete and the company has at least temporarily stopped accepting new customers in areas where its third-party cell tower operators provide service.

“Give them your zip code and if it is in an affected area the system kicks the order out and won’t accept it,” reports Fastler.

Jason Sulham, a spokesperson for Wireless Partners confirms Verizon’s order lockdown on Maine Public Radio in response to questions about just how many customers are being removed from Verizon’s network.

“Verizon is restricting any new customers in those areas, so when you talk about what that final number is, what they have indicated is a final number of current customers who have received a termination letter. However, that doesn’t take into account the number of people who are in that area that can’t even sign up as new customers for the service, which is certainly not what was part of the original intent of building this network,” Sulham says.

The crackdown on rural coverage will make life exceptionally difficult for affected customers. Maine is America’s most rural state, according to the 2010 U.S. Census, with more than 61% of the population living in communities of less than 2,500. Many of those communities are spread far apart, making cell towers difficult to place to reach the largest number of customers. Some communities have access to just one tower. Others are only partly serviced, requiring users to go outside, run up nearby hills, or take a short drive to get a single bar of reception. That is why Verizon’s news has hit this part of Maine so hard.

For many locals, Wireless Partners solved a problem Verizon itself wouldn’t solve, and stronger cell coverage came as a result. Now Verizon threatens to recreate the original problem, and by limiting access to its partner networks, it could throw those companies’ business plans into the air and make them financially untenable.

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