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Frontier CEO Blames Employees for Company’s Poor Performance; Bonuses Cut, Investigations Begin

The second half of 2016 shows losses in broadband and television customers.

Frontier Communications CEO is blaming employees for the company’s deteriorating financial condition and operating performance and has allegedly dropped bonuses and merit pay increases for lower-level employees.

Sources inside Frontier Communications tell Stop the Cap! Frontier CEO Dan McCarthy notified employees in email on March 2 — one week before employees were expecting to receive their annual bonus — the company would no longer be providing bonus compensation for “lower banded management employees.”

“He implied that he too was affected but I highly doubt that is the case,” one source tells us. “We weren’t notified via a ‘Town Hall’, no conference call, no face to face with our managers, only a cowardly e-mail sent from behind a desk thousands of miles away. Keep in mind that people use that to pay house taxes, medical bills, pay off other bills, pay college tuition, etc, and a week before we were slated to get it we’re told that it isn’t coming.”

McCarthy has been on the hot seat with Wall Street for weeks after reporting yet another quarter where many of Frontier’s most profitable customers are fleeing faster than the company can replace them with new ones. McCarthy also told investors that many of Frontier’s losses in the last quarter were due to the company finally disconnecting service and writing off customers who haven’t paid their Frontier phone bills for as long as a year in acquired former Verizon territories in Florida, Texas, and California.

McCarthy

“There was certainly no suggestion that the big acquisition would pay off in the company’s Q4 earning report when subscriber counts, average revenue per residential user, and quarter-over-quarter revenue all fell,” wrote Daniel B. Kline of TMFDankline. “That has been the pattern in all three quarters since the Verizon deal closed, and while McCarthy has done an excellent job controlling expenses, his excuses for the drop in subscribers have started to sound a bit hollow.”

That effort to “control expenses” may be coming at the expense of customers that Frontier is depending on to stay in business.

New York Attorney General Eric Schneiderman last month announced the state was reviewing Frontier’s performance in western New York. A Rochester television station has aired more than a half-dozen stories about deteriorating service quality at Frontier since last summer. After airing the first few stories, the station was inundated with hundreds of complaints about Frontier’s spotty broadband and phone service.

News10NBC (WHEC-TV) reported it can take weeks for a Frontier technician to show up on a service call. Customer service is no help and customers are not getting the services they paid to receive.

Frontier was also implicated last month in knocking a Rochester area radio station off the air. After the company first blamed the radio station’s equipment for the problem, Frontier eventually admitted its own “old infrastructure” was responsible for outages that interrupted broadcasts for hours at a time.

Frontier’s stock continues its descent.

Schneiderman has been focused on keeping New York’s ISPs honest about their speed claims and performance, but service reliability is also increasingly an issue, especially after high winds in a recent storm in western New York left nearly half of the Rochester metro area without essential utilities for several days. Infrastructure upkeep, particularly aging utility poles, is now under investigation by the state’s Public Service Commission. Early evidence revealed local utilities may have underinvested in pole maintenance for years due to cost cutting. Some utility poles in western New York are well over 50 years old, originally placed in the 1950s and 1960s. Hundreds failed in the high winds.

Frontier’s track record of blaming others for their own problems has not been well-received by employees.

“Maggie Wilderotter [former CEO of Frontier Communications] was bad but McCarthy’s leadership is erratic and catastrophic,” shares another Frontier middle management employee wishing to stay anonymous. “McCarthy was defending the regional management autonomy approach as a unique strength for Frontier last summer, now he’s declared that is inefficient and is centralizing management decisions at corporate headquarters. He was selling Wall Street on Frontier’s IPTV project in 2016 by promoting expanded service territories. Now that project is on hold and there are signs Frontier is pulling back on meaningful and long overdue broadband speed upgrades. He recently announced he was reorganizing residential and commercial sales units, something our competitors did long ago and will only disrupt things at Frontier even more. Poor customer service was the result of “on-shoring” our call centers? Not exactly. Poor training and inadequate support have left our call center employees unable to properly handle customer concerns. He also consistently downplayed how nightmarish the Verizon conversion was for our new customers in Florida, Texas, and California. It was bad planning, bad vision, and poor execution and the buck stops with our CEO.”

Another source tells us:

“We worked 60-80 weeks, late nights, weekends, countless hours away from our families to push forward with projects that were horrible for our customers and senior leadership was told to get the job done regardless any way they could. We worked through the AT&T and Verizon conversions. We performed as employees of Frontier. Who did not perform? Those making these horrible financial and planning decisions that caused major outages to former Verizon customers when they finally cut over. Some problems were so severe that many customers decided to leave.”

Frontier insiders tell us the company is on a mission to slash expenses across the board to turn in better financial results that can protect the company’s dividend payout to shareholders and, in turn, executive pay and bonuses. The company is reportedly considering allowing more employees to work from home to cut facilities costs, utilities, and maintenance expenses.

“There have been numerous resignations over this and morale is at an all-time low within the company,” a source tells us.

One of the employees sharing the latest developments reports he has turned in his resignation this month and accepted a position in middle management at the area’s cable competitor Charter Communications.

“I figure I should follow so many of our customers to a company that isn’t great, but at least makes an effort delivering what it promises.”

Frontier’s Problems Afflict Hundreds of Customers in Western N.Y.

WHEC-TV Rochester has been following problems with Frontier Communications since last summer. Until the acquisition of former Verizon customers in Texas, Florida, and California, the Rochester, N.Y. metropolitan area was considered Frontier’s largest legacy city service area. But just like in smaller rural communities, service problems have plagued Frontier, with complaints rolling in about slow or non-existent broadband, landline outages, poor billing and customer service practices, and service calls that take weeks before anyone shows up.

WHEC-TV Rochester began covering problems with Frontier on Aug. 22, 2016 with an investigation into internet woes at a Geneseo insurance agency. (2:21)

One day later (Aug. 23, 2016) complaints from other Frontier customers poured into WHEC-TV’s newsroom because of outages and bad service. (2:54)

In September, 2016 WHEC-TV was back with another story from frustrated and angry customers who can’t get suitable service from Frontier Communications, but found a $200 early termination fee on their bills when they tried to cancel. Now the Attorney General is getting involved. (3:18)

In late December, WHEC reported it had asked the N.Y. Public Service Commission to start an investigation into Frontier Communications over its broadband service. (2:20)

In February, when N.Y. Attorney General Eric Schneiderman came to town to discuss the honesty of ISP speed claims, WHEC reporter Jennifer Lewke instead questioned him about the hundreds of complaints the station had received about Frontier Communications. (3:03)

About one week after the Attorney General visited Rochester, WHEC reported Frontier Communications’ “old and outdated” equipment was directly responsible for taking a local radio station off the air for hours at a time. (1:10)

Several days after a windstorm in the Rochester area took away power to nearly half the metropolitan area, WHEC reports residents are frustrated waiting for cable and phone service to be restored. An investigation into utility infrastructure is now underway. (3:17)

Corporate/Koch Brother-Linked Group Asks FCC to Repeal Charter/Spectrum’s Data Cap Prohibition

A conservative group funded by corporate interests and the Koch Brothers has asked FCC chairman Ajit Pai to answer its petition and move expeditiously to cancel the prohibition of data caps/usage-based pricing as a condition for FCC approval of Charter Communications’ acquisition of Time Warner Cable and Bright House Networks.

A number of pro-consumer deal conditions were included as part of the merger transaction’s approval, and won the support of a majority of FCC commissioners under the leadership of former FCC chairman Thomas Wheeler, appointed by President Barack Obama.

The Competitive Enterprise Institute (CEI) is hopeful that with Wheeler out of office and a new Republican majority at the FCC under the Trump Administration means the FCC will end requirements that Charter offer unlimited data plans, discounted internet access for low-income consumers, and start allowing Charter to charge fees to Netflix and other content providers to connect to its broadband customers. CEI has every reason to be hopeful, pointing out Chairman Pai is a fan of data caps on residential broadband service, opposes Net Neutrality, and recently effectively killed a Lifeline program that would have extended inexpensive internet access to the poor.

CEI:

As then-Commissioner Pai wrote in 2016, this condition is neither “fair” nor “progressive.” Instead, he called this “the paradigmatic case of the 99% subsidizing the 1%,” as it encourages Charter to raise prices on all consumers in response to costs stemming from the activities of a “bandwidth-hungry few.” Other problematic conditions include the ban on Charter charging “edge providers” a price for interconnection and the requirement that the company operate a “low-income broadband program” for customers who meet certain criteria.

The group is optimistic Pai will oversee the unwinding of Charter’s deal conditions largely pushed by former FCC chairman Thomas Wheeler, after Pai recently led the charge to revoke another condition required of Charter in return for merger approval – a commitment to expand its cable network to pass at least one million new homes that already receive broadband service from another provider.

Pai also opposed the low-income internet program, calling it “rate regulation.” The CEI claimed the requirement will “undermine Charter’s ability to price its services in an economically rational manner.”

“Hopefully, the FCC’s new leadership will seize this opportunity to take a stand against harmful merger conditions that have nothing to do with the transaction at hand—by granting CEI’s petition,” the group wrote on its blog.

Earthlink Kills New Customer Promotion for Existing Charter/Spectrum Customers

Nine years after Earthlink began promoting its $29.99 six-month offer for alternative broadband service for Time Warner Cable customers, the completion of Charter Communication’s takeover of Time Warner Cable has eliminated a clever way for customers to get broadband rate relief.

For almost a decade, savvy broadband-only Time Warner Cable customers have been able to bounce between new customer promotions at Time Warner Cable and Earthlink. When a year-long promotion with Time Warner Cable ended, a customer could switch seamlessly to Earthlink for six months and pay just $29.99 a month — charged to their Time Warner Cable bill. When the Earthlink promotion ended, customers were entitled to enroll as a new Time Warner Cable broadband customer and pay a lower rate for up to one year. After that, back to Earthlink.

No more.

Charter Communications closed that loophole this month and now prohibits existing Charter/Spectrum customers from getting promotional rates from Earthlink.

Once Charter customers end a broadband-only new customer promotion, currently $44.95 a month for one year, the rate jumps to $64.99… and stays there indefinitely.

The new restrictions appear in fine print on Earthlink’s website:

Charter Communications eliminated lower-cost broadband options for its customers, but claims its single remaining advertised offer (60Mbps in non-Maxx areas, 100Mbps in former TWC Maxx cities) offers a greater value because it is faster than Time Warner Cable’s Standard Internet 15Mbps plan and ends Time Warner’s practice of charging a $10 modem rental fee.

But it also costs more than earlier promotions at Earthlink ($29.99) and Time Warner Cable ($34.95).

Charter has junked Earthlink’s former promotion for Time Warner Cable customers.

“My broadband bill is now double what it used to be because I cannot switch to a broadband promotion with Charter as my Earthlink promotion ends this month,” reports Jim Deneck, a former Time Warner Cable customer in South Carolina. “I was paying $30 a month and now Spectrum wants to charge me $65 a month. The modem fee savings is irrelevant to me because I bought my modem years ago.”

Charter/Spectrum customers hoping for a better promotion from Earthlink are now also out of luck.

“After Spectrum pricing took effect in my area, my bill went up $30 a month,” writes Stop the Cap! reader Gennifer in Maine. “I was hoping to switch back to Earthlink but after placing an order with Earthlink, a representative from Charter/Spectrum called me and denied my request. It’s false competition. Since when is it okay to sign up with one company and then get a call from another telling me I am not allowed to take my business elsewhere. It’s monopoly abuse!”

Earthlink is entirely dependent on Charter Communications allowing them to resell service over Charter’s cable lines. Earthlink has been cautious not to outcompete either Charter or its predecessor Time Warner Cable, and charges roughly the same rates as a customer would get direct from either cable operator. The only benefit of the arrangement for customers was the ability to bounce between new customer promotions to pay the new customer rate indefinitely, but Charter has made sure that practice stops.

Gennifer did manage to ultimately outwit Charter, but at the cost of time and inconvenience.

“I called Spectrum and canceled my service and we signed up as a new customer under my husband’s name,” Gennifer writes. “Unfortunately, Charter won’t process an order at an address with existing service so you have to cancel and turn in equipment first and then place an order under a different name to qualify for a promotion. They really don’t want to give their customers a break or a discount. I wish we had other options.”

Competition: UK Sees Broadband, TV, and Phone Costs Decline 9% While Prices Way Up in USA

Phillip Dampier March 20, 2017 Competition, Consumer News No Comments

The average household in the United Kingdom pays 9% less for broadband, phone, and television service than a decade ago, even though data usage has exploded and the country is embarked on a massive broadband upgrade effort. Contrast that with reports the average household in the United States is facing rate increases averaging 8-10% annually, even though the costs to deliver service have been declining for years.

According to a Ofcom report reviewing price trends, the average British resident today pays an average of $164.35 a month for broadband, television, landline and mobile phone services. Many U.S. households spend close to that amount before including their mobile phone bill.

In Great Britain, where competing companies have open access to the country’s telephone network, the average price of an entry-level broadband and landline package dropped at least 25% to $42 a month. A similar package from Charter Communications costs $64.98 a month for the first year, before prices rise to over $80 a month in year two. In the United Kingdom, a triple play package of phone, TV, and internet access now averages $53.14 a month. In the United States, it averages well over $100 a month.

The British, like their North American counterparts, are voracious consumers of internet data, consuming 132GB per household in 2016, up from 8GB in 2008. But despite increased usage, the cost of internet service in Britain has dropped, even with heavy investment in fiber optic network upgrades.

In Great Britain, multiple providers compete by offering services over existing telecom networks. In the last three years, customers have been able to choose from 551 different dual and triple play offers from several different companies, up from 294 just three years ago. Most now choose discounted bundles of multiple services under a single provider. But customers can still choose a plan that most closely fits their needs. In the United States, some providers like Charter Communications are eliminating most ions for customers, preferring to sell a more-costly, one-size fits all broadband and phone option.

Charter CEO Wins a Full Spectrum Pay Package: $98.5 Million for 2016

Rutledge is rich.

Thomas Rutledge, CEO of a greatly enlarged Charter Communications, was awarded a greatly enlarged pay package worth $98.5 million in 2016 – a 500% pay rise.

Rutledge won a compensation boost, in part, because of his willingness to continue taking Charter’s money for at least five additional years, until 2021.

Charter disclosed the pay package as part of a regulatory filing. One year earlier, Rutledge’s salary was $16.4 million.

Bloomberg News reports the person likely responsible for the considerable pay boost was John Malone, Charter’s largest individual investor and board member. His associate and confidant — Greg Maffei, CEO of Liberty Media, sits on Charter’s compensation committee.

Rutledge’s stock options, valued at $78 million last year, will vest if Rutledge can adequately please Wall Street and shareholders by getting Charter’s stock price up. Various hurdles are in place that will give Rutledge more options as the share price moves higher.

Rutledge’s 2016 compensation also includes $2 million in salary and up to $10.1 million in stock awards, plus a $7.65 million bonus.

Charter customers got a $5 rate increase for broadband packages that will eventually reach all customers.

In 2016, Charter Communications closed on its acquisition of both Time Warner Cable and Bright House Networks.

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Recent Comments:

  • Cindy: How has class action lawsuits never been filed against them? I dumped them 2 weeks ago, it's so nice to actually have internet again! Frontier would s...
  • Arlene Hughes: the plans are the amts for new signed up customers, the loyal customers get nothing and they pay for all the perks for the new customers. i for one i...
  • David Bystrack: What about all the problems in Ct ??? They still can't get my bill fixed and billed me $476.00 for there mistake.They just took the money from my cred...
  • Disagree with McCarthy: I was an employee of a real Telco corporation and my state was sold to Frontier. There is no training for employees. We have to teach ourselves and ...
  • Smith6612: Compared to Time Warner Cable, some people may actually be saving $10 here if they use the Rental Gateway. In my market, TWC would charge $10 for the ...
  • phychic99: Surely you jest on the Secure Connection Fee :) If not I just spit out my coffee......
  • Lee: I have Frontier and my lines going back to the dslam are all underground. I doubt they would go back to hanging new lines on the electric poles, and t...
  • Somewhat Perplexed: "Frontier CEO Blames Employees" I didn't see anything supporting that, anywhere in the article. Implying that's the case because bonuses were cut i...
  • Elbert Davis: Armstrong Cable pulls a similar scam,calling their router rental fee "Zoomshare." At least Charter allows you to use your own modem. Armstrong only ...
  • Newer Employee: Frontier is a joke but I'm getting $20 an hour to sit on Reddit while turning off people's internet. The training is almost non-existent and we aren'...
  • Upset employee: Wow it hurts to see that you blame the employees for the downfall we are the ones sitting there and having to explain and fix the customers service. D...
  • Josh: I'm on "Performance Plus" in Illinois...25Mb/s. Will be interesting to see if it goes up......

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