Data provided by OSHA statistics

A new joint investigation by Frontline and ProPublica reveals serious lapses in safety for America’s cell tower workers, a career now considered one of the most hazardous and life-threatening in America.

In the last eight years, 50 climbers have died, with many more injured installing and servicing cell sites for AT&T, Verizon Wireless, Sprint, and T-Mobile. The investigation finds many of these deaths and injuries were preventable, but as America’s profitable cell phone companies outsource jobs to cut-rate subcontractors (and the sub-contractors they often use themselves), safety measures take a back seat to low-ball bidding and profits.

Efforts to hold companies accountable are stymied by the byzantine layers of third party companies hired to do the work, an under-equipped federal safety agency, and difficulty assessing where the responsibility lies when things go wrong.

From ProPublica and Frontline:

From their perch atop the contracting chain, carriers typically set many of the crucial parameters for work on cell sites, including deadlines, pay rates and even technical specifications, down to the exact degree an antenna should be angled. An analysis of cell tower deaths by ProPublica and PBS “Frontline” showed that tight timetables and financial pressure often led workers to take fatal shortcuts or to work under unsafe conditions.

“We’ve had a number of situations where we think that accidents were caused by companies trying to meet deadlines and … cutting corners on safety in order to meet those deadlines,” said Jordan Barab, OSHA’s deputy administrator.

But Barab said it’s difficult for the agency to hold cell companies responsible for safety violations involving subcontractors. In most cases, federal officials have interpreted OSHA regulations to mean that carriers can be held accountable only if they exercised direct control over subcontractors’ work or were aware of specific unsafe conditions.

OSHA has not sanctioned cell carriers for safety violations implicated in any subcontractor deaths on cell sites since 2003, a review of agency records by ProPublica and PBS “Frontline” found.

Most of OSHA’s enforcement efforts have focused on a transient cast of small subcontractors, though they, too, typically have eluded significant penalties. Over the last nine years, the median fine levied for safety violations linked to a fatal tower accident was $3,750, an analysis by ProPublica and PBS “Frontline” showed.

Watch this segment from PBS Frontline exploring ‘Cell Tower Deaths,’ and what can be done to stop them.  (30 minutes)

Northern Minnesota's Paul Bunyan Communications is threatened by FCC reforms that they claim favor larger phone companies.

Northern Minnesotans will have to wait longer for broadband after a telephone co-op announced it was suspending its $19 million broadband expansion project because funding is being diverted to more powerful phone companies like AT&T and Verizon — neither of which have any concrete plans to improve rural wired broadband.

Bemidji-based Paul Bunyan Communications, which serves 28,000 hearty Minnesota customers, has been working on broadband expansion for several years, bringing broadband to customers who have known nothing except dial-up since the Internet age began. Only now the project is threatened because of well-intentioned plans by the Federal Communications Commission to expand rural broadband, but in ways that cater primarily to larger phone companies that lobbied heavily for the changes.

At issue is Universal Service Fund reform, which plans to divert an increasing share of the surcharge all telephone customers pay away from rural basic phone service and towards broadband expansion in rural America.

Paul Bunyan used their share of USF funding to scrap the company’s existing, antiquated copper-wire network in favor of fiber optics. Other phone companies have traditionally used the money to keep their existing networks running. Now the independent phone company says large phone companies like Verizon and AT&T have successfully changed the rules in their favor, and will now benefit from a larger share of those funds, ostensibly to expand broadband to their rural customers.

Bissonette (Courtesy: MPR)

But neither AT&T or Verizon have shown much interest in rural broadband upgrades. AT&T, which recently announced it concluded its U-verse rollout in larger cities, has also thrown up its hands about how to deal with the “rural broadband problem” and plans no substantial expansion of the company’s DSL service.

Verizon also announced it had largely completed the expansion of FiOS, a fiber to the home service. Verizon has also been discouraging customers from considering its DSL service by limiting it only to customers who also subscribe to landline phone service.

Verizon Wireless has introduced a wireless home broadband replacement that costs considerably more than traditional DSL, starting at $60 a month for up to 10GB of usage.

As a result of the funding changes, Paul Bunyan is reconsidering plans to expand its broadband, phone and television services to Kjenaas and about 4,000 other residents in rural Park Rapids and a township near Grand Rapids.

It may also have to cut workers.

“It’s kind of ironic,” Paul Bunyan’s Brian Bissonette tells Minnesota Public Radio. “The mantra of these changes is to create jobs. It’s killing jobs.”

Minnesota Public Radio explores how rural Minnesota broadband is being threatened by a telecom industry-influenced plan to divert funding to larger companies like AT&T and Verizon for rural broadband expansion those companies have no plans to deliver. (May 23, 2012) (4 minutes)
You must remain on this page to hear the clip, or you can download the clip and listen later.

Verizon has a moratorium on further expansion of its fiber to the home service except in areas where it has existing agreements to deliver service.

Virtually every mayor in the urban centers of upstate New York is accusing Verizon Communications of redlining poor and minority communities when deciding where to provide its fiber-to-the-home service FiOS.

Now they are telling the Federal Communications Commission and Department of Justice to become more closely involved in reviewing a proposed anti-competitive marketing partnership between the phone company and some of the nation’s largest cable operators.

The mayors are upset that Verizon has chosen to target its limited FiOS network primarily on affluent suburbs surrounding upstate New York city centers.

“Verizon has not built its all-fiber FiOS network in any of our densely-populated cities. Not in Albany, Buffalo, Syracuse, Binghamton, Kingston, Elmira or Troy,” the mayors say. “Yet, Verizon has expanded its FiOS network to the suburbs ringing Buffalo, Albany, Troy, and Syracuse, as well as many places in the Hudson Valley, and most of downstate New York. As a result, the residents and businesses in our cities are disadvantaged relative to their more affluent suburban neighbors who have access to Verizon’s FiOS, providing competitive choice in high-speed broadband and video services.”

The mayors fear the reduced competition that will come from the marketing partnership between the phone and cable industry will eliminate any pressure on Verizon to expand its fiber optic network into more New York cities. The agreement allows Verizon Wireless customers to received significant bundled discounts when they sign up for cell phone service and a cable package from Comcast, Time Warner Cable, Cox, or Bright House Networks. No corresponding discount is available to a Verizon Wireless customer choosing to bundle Verizon FiOS, putting the fiber service at a competitive disadvantage.

“These commercial agreements appear to eliminate any incentive that Verizon might have had to expand its all-fiber network to our high-density urban centers,” the mayors say. “After all, Verizon Wireless, a subsidiary of Verizon Communications, will now be able to sell Time Warner’s video and broadband service as part of their bundled package in our communities.”

That leaves most with Verizon’s DSL service, a product Verizon has been marketing less and less to its customers. The company recently announced it would no longer sell standalone DSL broadband, another point of contention for the mayors.

The mayors are concerned that Verizon’s deteriorating landline network will have profound implications for city centers, where tele-medicine, education, business, and entertainment services will all be left lacking if the fiber network is not extended.

“As you are well aware, high-speed broadband is critical to economic development and job creation, as well as improvements in health care, education, public safety, and civic discourse which is so essential to communal life,” say the mayors. “The economic health of our cities and our upstate region depends upon access to the same first-rate communications infrastructure available to the New York City metropolitan region and the suburban communities that ring our cities.”

The nine mayors are also questioning whether Verizon executives misled them when they claimed Verizon’s strong financial performance would allow the company to reinvest profits into further expansion of its FiOS network. Verizon executives have since admitted the company is indefinitely finished with FiOS expansion, except in areas where it already committed to build the fiber network.

Signing the letter were:

• Byron W. Brown – Mayor, City of Buffalo
• Stephanie A. Miner – Mayor, City of Syracuse
• Gerald D. Jennings – Mayor, City of Albany
• Matthew T. Ryan – Mayor, City of Binghamton
• Shayne R. Gallo – Mayor, City of Kingston
• Susan Skidmore – Mayor, City of Elmira
• Brian Tobin – Mayor, City of Cortland
• Robert Palmieri – Mayor, City of Utica
• Lou Rosamilla – Mayor, City of Troy

(The city of Rochester is served by Frontier Communications, which has no plans to deliver a fiber to the home network within its local service area.)

Verizon encourages customers to pig out on wireless-delivered streaming video.

Despite claims of a looming data usage crisis created by insufficient wireless spectrum, Verizon Wireless is introducing a new app that will encourage customers to find and watch streaming video on their mobile devices.

Viewdini premiers today on the Android platform, and Verizon hopes customers will use it to hunt down their favorite videos from Netflix, Hulu Plus, mSpot, and Comcast Xfinity, all from the Verizon Wireless app.

“We are just seeing a hunger for people wanting to watch video,” Verizon Wireless CEO Dan Mead said in an interview with AllThingsD. “I think this will capture the audience’s imagination.”

If customers use it to stream bandwidth heavy video on a tiered data plan, Verizon will also have the customer’s attention when the bill arrives.

Viewdini, considered one of Verizon’s “key product launches” for the year, does not amount to much on examination. The service does not host videos, it merely indexes them from other videocentric websites. The app will be exclusive to Verizon Wireless, but is not the company’s first foray in the competitive video streaming marketplace.

The Verizon Video app offers streamed video entertainment, but with a twist. Many titles offered by Verizon Video cannot be accessed while on Wi-Fi and require the company’s 3G or 4G network to watch, which counts against your usage allowance.

Mead

There is no indication yet whether Viewdini will have similar restrictions.

While Mead claims the company has several early warning indicators for customers approaching their monthly usage cap, he admits the company hopes to make additional revenue from customers who choose to exceed their allowance and buy additional data.

“We look at it as great flexibility for customers,” Mead called that choice.

While Verizon joins other wireless carriers in calling urgently for additional wireless spectrum, its marketing department does not recognize any wireless data shortage, and continues to introduce new products that encourage their customers to use an increasing amount of data, from which Verizon admits it will earn an increasing percentage of its revenue.

What capacity crisis? This is about the money.

Yesterday’s news that Verizon Wireless plans to terminate the grandfathered unlimited data plans of their existing customers, forcing them to choose from a range of potentially more expensive shared data plans, would seem to be part and parcel of the cell phone industry’s need to move away from all-you-can-eat data to preserve what little spectrum they have to handle wireless data growth.

AT&T’s Randall Stephenson is on record stating AT&T has been hiking prices because of the imminent spectrum crisis and its inability to manage it with a buyout of T-Mobile:

“We’re running out of the airwaves that this traffic rides on,” Stephenson said. “There is a shortage of this spectrum. The more competitors you have, the less efficient the allocation of spectrum will be. It’s got to change. I don’t think the market’s going to accommodate the number of competitors there are in the landscape.” Stephenson noted AT&T’s data prices have increased 30% since the deal was killed.

“In a capacity-constrained environment we will manage usage-based data plans, increased pricing and managing the speeds of the highest volume users. These are all logical and necessary steps to manage utilization,” Stephenson said about AT&T’s rationing plans.

Over at Verizon Wireless, the announced end of unlimited data carried no such warnings of imminent wireless spectrum doom.  In fact, chief financial officer Fran Shammo on Wednesday said Verizon was just fine with spectrum and capacity for at least the next two years, if not longer (underlining ours):

“Well, I think prior to the deal that we announced with the cable companies and the acquisition of spectrum, we were saying that we were going to need a spectrum — we were going to need more spectrum by 2015. With the approval of this deal now, with the AWS, we think we are in very good shape here beyond 2015.

“In addition, the way our 3G spectrum is in individual slices, it is going to be very efficient for us to take slices out and re-appropriate that to the 4G technology. So I think that through that spectrum efficiency, also I think that there will be some help from the manufacturers in getting more equipment out there that utilizes spectrum more efficiently, although I don’t think that solves the problem, the industry is going to need more spectrum in the future because of the way that we see the guide path of consumption. But I think right now, we are in pretty good shape for at least the next several years.

[...] “So from a spectrum perspective, I think we are absolutely fine.”

Verizon's banking on more revenue when "unlimited data" is banished for good.

In fact, Verizon Wireless plans to reduce its spending on infrastructure projects designed to expand and enhance its wireless network, starting with its 3G service. Frammo (underlining ours):

“And now what you’re seeing is, if you will, a discontinued investment in 3G. Now we will have to continue to invest in that 3G from a maintenance and reliability perspective because we still have 90 million customers on that, but no more capacity or expansion of the 3G network. Our effort is going into 4G now and what I would say to you is look at Verizon on a total capital basis and I would say flat to slightly down. If you look at the components, what you will see is wireless decreased $850 million in the first quarter and that was because of the 3G buildout last year and not this year. But I think on a year-over-year basis, you could look to flat to down and that trend should continue.”

So what are Verizon’s primary goals in the near future? Increasing revenue. Frammo (underlining ours):

“So obviously, our goal is to increase cash flow. We came out of the first quarter with a $1.7 billion increase in our cash flow year-over-year, managing that CapEx. Our dividend policy is extremely important to us.“

Verizon Wireless handed out this statement this morning regarding the imminent demise of unlimited data:

“As we have stated publicly, Verizon Wireless has been re-evaluating its data pricing structure for some time, Customers have told us that they want to share data, similar to how they share minutes today. We are working on plans to provide customers with that option later this year.

“We will share specific details of the plans and any related policy changes well in advance of their introduction, so customers will have time to evaluate their choices and make the best decisions for their wireless service. It is our goal and commitment to continue to provide customers with the same high value service they have come to expect from Verizon Wireless.”

WWLP in Springfield, Mass. explains to viewers the end of “unlimited data” from Verizon Wireless is near.  (1 minute)

Waiting for FiOS

For those who admire the apparent pervasiveness of competition between Time Warner Cable and Cablevision Industries vs. Verizon Communications’ FiOS, the idea the Big Apple has a broadband problem seems a bit ridiculous, particularly if you can’t get your local cable company to pick up their phone and AT&T will only hand you a 1.5Mbps DSL line, if you can get it.

But according to the Village Voice, New York City broadband “sucks,” and it will continue to suck for at least the next eight years.

“Though entrepreneurs in most parts of the city can access a fast broadband connection today, many of those we interviewed said that New York’s telecom infrastructure is well behind where it should be for a city vying to be one of the nation’s two leading technology hubs,” the study notes.

What it comes down to is that New York — despite being the world’s media capital — does not have adequate access or bandwidth to support tech companies’ needs.

For example, some companies might be able to get either FiOS or Time Warner Cable, but not both, which means they can’t have broadband backup.

“It’s like the elephant in the room is that bandwidth here sucks,” one entrepreneur told the researchers. “You should be able to walk into any building and have at least 150 megabit connection available to you. There has to be ways for the city to construct much better bandwidth availability for start-ups.”

Many cited told the researchers that their internet routinely goes down. And startups who want to set up shop in cheaper, industrial districts often can’t, because the cable companies would rather provide service to more lucrative residential areas. Sometimes, telecom concerns are willing to dig up streets and lay cable, but at a hefty price — around $80,000.

That $80,000 bill is handed to a prospective customer and does not come from cable operators’ capital expense fund.

Researchers gave New York a broadband grade of B to B-, which isn’t too bad considering what broadband is like in the mid-south, the midwest, and the rural west. But it doesn’t cut it for helping New York become a bigger tech city.

Waiting for "Business Class"

While Time Warner Cable and Cablevision have wired multi-dwelling units and homes across New York City, cable operators have only recently started to turn their serious attention to corporate business customers.  Time Warner Cable agreed, as part of its franchise renewal deal with the city, to invest $1.2 million per year for fiber connections to commercial buildings yet to be wired for cable. Cablevision, which can be found in boroughs like Brooklyn and out on Long Island, agreed to spend a more modest $600,000 a year for the same purpose.

Time Warner Cable has already warned investors its capital spending on wiring commercial office buildings across the country is increasing as the company sees lucrative new revenue opportunities competing with their usual nemesis — the phone company.

Verizon treats FiOS deployment in New York City as a long, long-term project. There are neighborhoods in Manhattan that can’t wait much longer for the fiber optic network as Verizon increasingly lets its old copper wiring go to pot, leaving some New Yorkers without phone service for weeks.  The city of New York has given Verizon until 2014 to wire the city, and the company appears likely to need those two additional years at their current pace, and that agreement only covers residential properties, not commercial ones.

Robust broadband is essential for many high technology startups and the multi-million dollar data centers that support them. New York mayor Michael Bloomberg considers it a top priority to reduce the city’s economic dependence on Wall Street, which generates considerable tax revenue for both the city and state. High tech enterprises fit that bill. But the city’s broadband grades do not.

“For a city that’s trying to be a tech powerhouse, we need to have an A,” said Jonathan Bowles, the author of the study, “New Tech City.”

Verizon Wireless will force customers off of their grandfathered unlimited data plans when they reach the end of their current two-year service contracts, according to the company’s chief financial officer.

It is all part of the cell phone company’s strategy to boost the average bills of customers with new, more expensive tiered family-shared data plans. With a significant number of current customers grandfathered on unlimited data plans that users likely will not forfeit voluntarily, Verizon will force the issue as customers come up for contract renewal.

The plan received considerable approval at today’s JPMorgan Chase TMT conference, a gathering for Wall Street investors and tech companies like Verizon.  Executive vice-president and chief financial officer Fran Shammo laid out the plan to switch customers to forthcoming family “data share” plans that are priced based on anticipated usage:

As you come through an upgrade cycle and you upgrade in the future, you will have to go onto the data share plan. And moving away from, if you will, the unlimited world and moving everybody into a tiered structure data share-type plan.

So when you think about our 3G base, a lot of our 3G base is unlimited. As they start to migrate into 4G, they will have to come off of unlimited and go into the data share plan. And that is beneficial for us for many reasons, obviously. So as you pick what tier you want to be and we think that there will be some price up in those tiers.

“Price up” is code language for bill hiking. Customers adopting family share plans may be able to share data across a larger number of devices, but at consumption pricing, many customers will find their Verizon bills substantially higher than before.

Shammo

“And the important part of that is we want the connections to come in and the way we have designed our plan, this plan is built on tiers and as we look at the future growth of LTE consumption because of the speeds and video consumption and consumption of other M2M-type devices, it is going to be more important that people will start to upgrade in their tiers as they start to really realize the benefits of the LTE network,” Shammo said. “As [customers] add more devices, they are going to have to buy up into tiers. So again, you will see the revenue increase there.”

Those revenue predictions were not sufficient to satiate Phil Cusick, an analyst at JPMorgan Chase. He questioned Shammo about the prospects for Verizon further increasing revenue with across-the-board rate increases on service plans.

Shammo would not commit to that, but was pleased with the lack of customer protests over their recent introduction of a $30 equipment upgrade fee. He called the new fee “the right thing to do.” More fees and surcharges are likely, according to Shammo.

“I think implementing these additional fees is probably where we are at,” he said. “With the construct that we have dealt with around data share and where we see consumption of LTE going, when you put the combination of them together, we are fairly confident that we will see people start to uptake in the tiers, which is really where we will get the revenue accretion in the future.”

Shammo also said Verizon’s fiber to the home network FiOS has gotten such rave reviews, it almost sells itself. That means the company will pull back on promotional offers and plans a general rate increase for all customers in the coming months, if only to bolster company profits.

“We have to do a better job in discipline of price increases and I think that you’ll see us do some price increases here over the next two quarters to offset the content increase and that will also contribute more profitability to the bottom line,” Shammo said. “You are going to have to concentrate more on reducing the amount of promotions, reducing the amount of retention that you put on the table to retain a customer and then also you are seeing that the industry is pricing up.”

Verizon FiOS customers will find rate increases applying both to equipment rental and service pricing nationwide, according to Shammo.

“We were actually below-market compared to our competitors on the amount of fee that we charge on the rental of a set-top box or a digital converter box,” Shammo explained. “We are switching around our bundles and the customers that are coming out of the current bundles will be priced up to the newer bundles. So you are going to see really a shift over the next two to three quarters in price-ups coming out of FiOS.”

As far as FiOS expansion goes, the company does not expect any major expansion in the service for the next several years.

“If we can penetrate the market and really turn the wireline profitability, could we potentially build out to other areas? Yes, but that is a decision that will be made in years out, not right now,” Shammo said. “So from a capital perspective, we are being very disciplined with where we are going to put that capital.”

Your contract with Sprint ends in June, but why wait, beckons the cell phone company, when you can upgrade your phone today (with a new two-year service agreement).

Two years earlier, providers wheeled and dealed upgrade-reluctant customers, particularly those considering their first smartphone, thanks to the bill shock that results when customers see a $30 mandatory data plan added to their monthly bill.  Sprint went one step further, handing 4G-capable customers Clearwire WiMAX — a technology even Russian cell phone companies can’t wait to abandon — and added a $10 premium data surcharge for the privilege.

In Sprint’s favor: their willingness to deal discounts on phone upgrades and their truly unlimited data plans. But while Sprint continues to bank on unlimited data, the bill on cheap phone upgrades may now be coming due.

The American wireless industry is increasingly taking a page from the airlines, adopting irritating fees and surcharges while curtailing the perks and rewards that used to come with customer loyalty and family plans that routinely run into the hundreds of dollars.

Equipment Upgrade Fees

Sprint, Verizon, AT&T, and T-Mobile all have a nasty surprise in store for customers who have not upgraded their smartphones in the last year or so: the equipment upgrade fee.  Sprint and AT&T both charge $36 per phone, Verizon Wireless now charges $30, T-Mobile $18.

Verizon customers are especially peeved because that wireless company used to reward loyal customers with a $50 credit off any new phone at contract renewal time. Today, instead of getting “New Every Two” discounts, Big Red will charge you $30 for every new phone when you renew your contract.

Verizon’s excuse is that the new fee will be used to offer customer “wireless workshops” and “online educational tools,” according to Verizon spokeswoman Brenda Rayney. The company also claims the fees will cover more sophisticated consultations with “company experts” that are trained to provide advice and guidance on today’s sophisticated smartphones. In other words, these fees are supposed to compensate Verizon’s store and kiosk employees.

For people like my cousin, upgrading to a new Sprint phone at contract renewal time is an exercise in frustration. In addition to the $149-199 subsidized equipment price, Sprint now tacks on a $36 upgrade fee (per phone).  What miffs him is that Sprint is treating new customers better than existing ones, willing to waive one-time activation fees (coincidentally the same $36) for new customers, but steadfastly refusing to credit equipment upgrade fees for existing loyal customers.

Sprint will tell you they are not alone charging upgrade fees, and they would be right. All four major national carriers now charge the fees, effectively a penalty when customers decide to upgrade their phones.

Many also find it nearly impossible to get companies like Verizon Wireless to waive the fees, even when some of their best customers ask.

“Verizon Wireless was willing to throw away my 12 year account, earning them more than $500 a month in revenue, over the upgrade fee issue,” reports Stan Dershau. “Our contract expired this month and it was time for new phones, and Verizon absolutely insisted that we pay $150 in upgrade fees for new equipment on our account, even after the $600 they’ll collect from the smartphones we intended to buy.”

Dershau found absolutely nobody willing to relent on Verizon’s upgrade fees. Even supervisors told him the company has a no-waiver policy that is strictly enforced, and they could do little more than offer a token service credit even if Dershau threatened to take his business somewhere else.

“I haven’t decided what to do yet, but I canceled my upgrade plans for now,” he reports.

Dershau was always able to get Verizon to waive earlier fees because of the monthly business he brings them, but those days are over.

“It’s a whole different attitude with them now,” Dershau says. “They just want money.”

AT&T's fine print.

Ben Popken recently wrote about his efforts to avoid Verizon’s $30 upgrade fee, with mixed results.

Verizon’s suggested solution is to sell your old phones back to the company through their trade-in program, using the money to offset the equipment upgrade fee. But unless you own an iPhone, Verizon’s trade-in offers are strictly low-ball, often under $30 on non-Apple phones. That leaves you with a slightly lower upgrade fee and the loss of your old phone, which Verizon may recycle or resell refurbished to someone else.

Popken explains he found one convoluted way around Verizon’s fees:

First, start a new line of service with the new phone you want. Then, port your old phone number to a 3rd party service, like Google Voice (here’s a guide from Lifehacker on doing so). Lastly, cancel the line with the old phone and port the old phone number back onto the new phone, thus keeping the new phone, the old number, and dodging the fee. But there’s a catch. It only works if you wait three months to port the number back. If you do it before then, Verizon’s system treats it like you’re continuing the same service, and they hit you with the $30 upgrade fee. Curses.

Popken forgets, however, that Google itself charges a $20 fee to port cell phone numbers to Google Voice, eliminating 2/3rds of your potential savings.

In fact, outside of purchasing a phone at the full, unsubsidized price from a third party, Verizon’s $30 fee will be visiting your phone bill sooner or later, if you decide to upgrade.

The Phone Subsidy: Slaying North America’s Sacred Cow Wireless Business Model

Consumers who crave the newest smartphones should thank their lucky stars they live in Canada or the United States, where the wireless industry heavily discounts the upfront cost of the phone when customers sign a service contract. But phone companies like AT&T and Verizon are not giving you a gift. In return for fronting a discount of as much as $400, companies set their monthly rates higher to recoup that subsidy over the life of your two-year contract.

That worked fine when cell phone companies only paid a few hundred dollars for basic phones. But today’s most popular smartphones can cost companies $400 each, and that upfront revenue hit has annoyed Wall Street for years. Even worse, while providers hand you a discounted phone, they’ve already paid the asking price to companies like Apple and Samsung, who book that revenue immediately and never have to worry about a customer skipping out on their contract.

Wall Street has been putting pressure on companies to do something about the expensive phone subsidies, and companies are responding. The equipment upgrade fee, increased activation fees, and rising monthly service charges are all a part of a greater plan to discourage customers from upgrading their phones and increase profits.

Wall Street analysts love every part of it, especially if companies can do away with equipment subsidies -and- maintain today’s pricing:

“Optimism has increased that we are witnessing the leading edge of a more disciplined, and more profitable, future,” Craig Moffett, a telecom analyst at Bernstein Research, wrote in a recent research note. The question now, he wrote, is how much carriers can increase their profits thanks to “increased discipline and pricing power.”

The answer could be quite a lot. A marketplace experiment in Spain is being closely watched by wireless phone companies worldwide and could be coming to Canada and the United States before your next two-year contract is up for renewal.

In March, Telefónica SA, Spain’s largest cell phone company, stopped subsidizing smartphones for new customers. Vodafone, which co-owns Verizon Wireless, quickly followed.

As a result, Spanish customers looking for an iPhone will now pay $800 to purchase the phone at full price, or they can sign up for an “installment plan” that will add $45 a month to their cell phone bill for the next 18 months. Both companies say the new policy won’t apply to existing customers, in an effort to discourage them from switching companies.

Telefónica anticipates the changes will slash as least 25% off of their spending. Instead of fronting subsidies to attract new customers, the phone company will increase subsidies for existing customers who agree to stay. Unfortunately for Telefónica, early results are not promising. More than 500,000 customers left the same month the new policy was announced.

A handful of smaller Spanish players see the move by both major companies as a competitive opportunity to win over new customers. Orange, for example, has not stopped offering subsidies and as a result Telefónica has lost potential new customers who signed with Orange instead. The “churn rate” of customers coming and going remains a concern for company executives. But so far, Telefónica considers getting rid of phone subsidies more important than the customers they have forfeit over the new policy.

“We are pretty firm on our strategy of trying to change the paradigm of the sector, [...] devoting the bulk of our efforts to our existing customers and, therefore, trying to move away from incentivizing churn of our customers either from us or from the others,” said company CEO Cesareo Alierta Izuel. “We are very firm on this new handset strategy. We need to fight to see if the trend is going to the right direction. And again, we think it is.”

The Wall Street Journal reports Telefónica’s bold plan has caught the attention of Verizon CEO Lowell McAdam, who sees it as a potential profit booster, and McAdam expects Verizon may cautiously follow the Spanish company’s lead.

“We’ll probably offer some things like that, and then we’ll see what the adoption is like,” McAdam said. “You can’t push this on customers before customers are ready for it.”

For now, some customers are not even ready for equipment upgrade fees. My cousin’s upgrade plans remain on hold for now, as are those of the Dershau family.

“I am not going to be browbeaten into paying these unjustified fees,” Dershau said. “Where does it stop?”

Ben Popken talks about trying to avoid Verizon’s $30 equipment upgrade fee.  (3 minutes)

Thousands of Verizon Wireless customers are getting phony e-Bills that claim to be from the wireless phone company, but in fact come from one of the most sophisticated phishing scams seen yet. The Better Business Bureau reports scores of complaints from across the country, with bills looking nearly identical to e-mails sent directly from Verizon Wireless.  Only the amounts have been changed — boosted in some cases to more than $1,200.  Unwitting customers who click on the e-mail link are invited to make payment arrangements with any major credit card, which ends up in the hands of the scammer. WCPO in Cincinnati reports this scam almost fooled some Verizon Wireless customers. If the scammer was a little less greedy, it might have worked. (2 minutes)

After intense lobbying, wireless phone companies won a significant reprieve from the watered-down 2010 Net Neutrality policies introduced by Federal Communications Commission chairman Julius Genachowski.

Now some of America’s largest cell phone companies are considering plans that would offer special “toll-free” access to favored partners’ content, while leaving everyone else subject to the companies’ usage capped data plans.

Much of the discussion about exempting certain content from data allowances is taking place at this week’s CTIA Wireless trade show in New Orleans.

Some highlights:

• T-Mobile USA is planning to expand video streaming services offered to subscribers, but with a twist. Content creators could pay to have their shows streamed to customers, and in turn, T-Mobile would not charge that traffic against the customer’s monthly usage allowance. Whether T-Mobile would maintain an ownership interest in the content is unknown, but “preferred partners” would receive exceptional visibility through aggressive promotional campaigns T-Mobile would launch.  So would T-Mobile, which plans advertising and promotional messages inside that content;
• Verizon Wireless said it was looking to create “toll-free” data services that would be subsidized by content providers. Video, games, and even apps could be promoted to consumers as “data usage”-free, meaning it won’t count against your monthly usage allowance. But Verizon recognizes the concept would be controversial and run afoul of Net Neutrality concerns.
• AT&T has already signaled its interest in creating a “content-provider-pays” model where users get free access to content if content providers pay AT&T’s traffic charges.

All three carriers earlier abandoned all-you-can-eat flat rate data plans, and Net Neutrality proponents claim these latest moves are attempts by wireless phone companies to further monetize data traffic.

The Wall Street Journal reports the plans, in some cases, fly in the face of rhetoric about spectrum shortages and a wireless data traffic crisis (underlining ours):

T-Mobile’s Mr. Duea said the goal of new video offerings that don’t count against data plans would be to get customers interested in consuming more data, and set T-Mobile’s plans apart from those of other carriers.

"Data floods" and "spectrum shortages" don't stop T-Mobile.

Current FCC Net Neutrality rules require wireless carriers to not block competing services from companies like Skype and Google, nor censor content. Both Verizon and MetroPCS are challenging those rules in federal court. But wireless carriers are already exempt from giving preferential treatment to certain types of data or traffic, which opens the door to “toll-free” data services.

Net Neutrality supporters believe these practices will uneven the playing field for content creators and innovative new online start-ups, who may not be able to afford the prices carriers charge for first class treatment. It also influences consumer decision-making by encouraging customers to use the “toll-free” services to preserve their monthly data allowance.

Companies like Ericsson and Cisco have plans to market technology that will allow carriers to divide up data traffic into different traffic lanes, some fast and free to use, others subject to a customer’s monthly data allowance, and certain undesirable traffic shunted to low priority slow lanes.

A Verizon Wireless executive ironically blamed the need for “toll-free” pricing partly on the wireless industry itself, which has almost universally abandoned unlimited data plans.

“As we move away from flat rate pricing, there is room for an 1-800-type of service where certain destinations could offset the cost of the network to get customers to those destinations,” said Verizon’s chief technology officer Tony Melone. “There are Net Neutrality issues that have to be addressed, too.”

Melone added the company wasn’t quite ready to launch the “toll-free” traffic lanes just yet, but claimed certain content providers were discussing deals with the company to participate if and when the new toll booths are opened for traffic.