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AT&T Gets Stingy With DirecTV Promotions for Existing Customers; $100+ for TV-Only Service

directvDirecTV under AT&T’s ownership is turning out to be no bargain for customers finding it increasingly tough getting a promotional rate package with the satellite provider.

Fred Johnson has been a DirecTV customer in rural Iowa for almost six years and has had to call DirecTV every time his on-contract promotion nears an end. Off-contract customers generally do not receive the best promotions and DirecTV’s regular prices can make the average cable company blush.

“It is not unusual for DirecTV customers to get quoted rates of $80 a month for satellite television and then receive a bill for over $100 once the surcharges, rental fees, taxes, and other hidden fees are added to your bill,” Johnson tells Stop the Cap! “There are months when the bill can go up even higher with no explanation, and even the customer service department cannot explain all the mysterious charges.”

At the end of the usual two-year contract, it has become customary for many long time DirecTV customers to call and threaten to cancel if they cannot get a renewed promotional rate, and for years DirecTV had been happy to oblige.

In 2015, AT&T bought the satellite provider and is in the process of integrating it as part of the AT&T family of services, next to U-verse, AT&T Mobility, and traditional landline service. That is the year the discounts seemed to evaporate for customers like Johnson and Evelyn Wiedmer, who subscribes to DirecTV for the family’s recreational vehicle.

Recreational vehicle owners are among the most loyal to satellite television.

Recreational vehicle owners are among the most loyal to satellite television.

“We were just told our bill was going to increase $45 a month starting in February and there is little we can do about it,” Wiedmer tells us. “The call center lady mentioned that the new owner of DirecTV is going in a different direction with promotions and we no longer qualify for any specials, unless we also want to get an AT&T cell phone.”

Wiedmer and her husband are retired and travel the country in their RV and do not have room in the budget to pay AT&T an extra $540 a year for the same package of channels they used to get for about $65 a month.

“They apparently do not want us to be customers anymore because DISH Networks will sell us a comparable package for about $60 a month, which is much less than the $105 DirecTV is charging us starting next month,” Wiedmer writes. “It looks like DirecTV won’t be competing with AT&T U-verse and the cable company anymore at their prices.”

Critics charge that is exactly the point. Adam Levine-Weinberg called the AT&T-DirecTV merger “one more step towards oligopoly,” warning approval of the merger would remove a serious competitor for tens of millions of customers also served by AT&T U-verse.

“That means there [were] tens of millions of people who [had] a choice between AT&T and DirecTV (as well as the local cable company and satellite TV rival DISH Networks,” said Levine-Weinberg. “The merger [reduced] many consumers’ pay-TV options from four to three, giving the remaining companies more pricing power.”

AT&T is flexing that pricing power by pulling back on promotions and discounts. In addition to curtailing retention plans and promotions for existing customers, AT&T also announced rate increases for DirecTV that take effect tomorrow:

The monthly pre-tax price of DirecTV’s “Select” and “Entertainment” programming tiers will go up by $2, to $51.99 and $61.99, respectively. The “Choice” and “Xtra” bundles will increase $4 to $74.99 and $81.99, respectively; the “Ultimate” pack will go up $5 a month to $91.99; and the “Premier” bundle will grow by $8 to $144.99. That is well over $150 a month after taxes and fees are added, just to watch television. AT&T is also applying a 50 cent increase to a fee DirecTV charges for… selling television service. The so-called “TV Fee” will now cost $7.00 a month.

(Courtesy: zidanetribal17)

(Courtesy: zidanetribal17)

“You used to switch to satellite to save money, but now cable companies offer returning customers lower prices than what DirecTV will offer,” notes Johnson. “It’s almost like they want to drive customers away. It worked. Our neighbors are now collecting money to convince Mediacom to extend their cable down our rural street and after these price increases we finally have enough willing to contribute to switch to cable television and remove the satellite dishes from our rooftops.”

Wiedmer has also canceled her DirecTV service this week, switching to DISH Networks.

“Would you sign another two-year contract agreeing to pay $540 more a year for two years with nothing in return for the extra money?” Wiedmer asks. “AT&T and DirecTV can take a hike.”

AT&T Brings Back Unlimited Wireless Data Plan… If You Have U-verse TV or DirecTV

att-logo-221x300Building in protection from cord-cutting, AT&T today announced it was bringing back its unlimited data wireless plan for customers that subscribe to U-verse TV or DirecTV.

The new AT&T Unlimited Plan claims to offer unlimited data, talk and text for $100 a month. Additional smartphones are $40 per month each, with a fourth smartphone free to add at no extra charge.

“Video traffic continues to grow on our network as fast as ever because people enjoy viewing their favorite video content on their favorite devices,” said Ralph de la Vega, CEO of AT&T Mobile and Business Solutions. “And, they will get a high-quality video streaming experience from the start. No compromises in video quality.”

Except that AT&T discloses in its fine print, “After 22GB of data usage on a line in a bill cycle, for the remainder of the bill cycle AT&T may slow data speeds on that line during periods of network congestion.”

Speed throttles often affect video quality and can stall playback.

It’s the first time in five years AT&T has offered an “unlimited data” wireless option to its mobile customers. Analysts suspect the offer is designed to compete with T-Mobile’s free video streaming “BingeOn” promotion, while also protecting AT&T’s video platforms from cord-cutting. AT&T also gets an opportunity to add new video customers to its recently acquired DirecTV service, because only customers with a qualifying video subscription are allowed to buy the unlimited data plan.

AT&T is tying the unlimited data promotion to its satellite offering DirecTV, not U-verse, with a promotional satellite TV package for new video customers beginning at $19.99 per month for 12 months, with a 24 month agreement. After one year, the base TV package increases to $49.99 a month.

To bring back AT&T wireless customers that left for another carrier, AT&T is offering up to $500 in incentives when customers switch to the AT&T Unlimited Plan with an eligible trade-in and buy a new smartphone on AT&T Next. Customers who combine their U-verse or DirecTV account with AT&T Wireless on a single bill will also get an extra $10 off per month.

AT&T is effectively selling its Unlimited Plan for $60 a month, double AT&T’s original rate for unlimited data of just under $30. With a video subscription pre-qualifier, customers enrolling in the plan can expect a substantial bill.

AT&T Unlimited Plan
Device Type Monthly Access Fee Per Device
1st Smartphone $100
Additional Smartphones  (Fourth line free after bill credit) + $40
Tablets + $40 (or $10 for 1GB)
Watches + $10
Basic/messaging phones + $25
Select connected devices + $10

On the mobile side, customers will be initially expected to pay up to $220 a month for four active lines. The $40 credit for the fourth smartphone only begins after two billing cycles, finally reducing the bill to $180 a month before taxes and surcharges. A required video package will range from $19.99 for a basic DirecTV plan ($49.99 in year two) to as much as $80 or more for U-verse TV, bringing a combined television and wireless bill to more than $300 a month.

Those with 4G tablets can save some money dropping the $40 unlimited data device access fee and choosing a $10 1GB data plan for tablets instead.

AT&T Whistleblower: Our Successful CSR’s are “Liars and Sleaze”; Many Others on Anti-Depressants

Phillip Dampier January 4, 2016 AT&T, Consumer News 55 Comments

repeating mistakesAT&T customers reaching out for customer service are likely to encounter dysfunctional call center employees that will lie, cheat, and scam customers just to meet their monthly targets, while three-quarters of the rest rely on high-powered antidepressants and anxiety medication just to get through the day.

Those shocking allegations come directly from a 17-year AT&T insider that has blown the whistle on “the catastrophe” that is AT&T’s customer service.

“For 10 years, The [Dallas Morning News‘] Watchdog has received a steady flow of complaints about AT&T,” writes consumer reporter Dave Lieber. “Hundreds upon hundreds. More than any other company by far.” (Dallas isn’t served by Comcast.)

Lieber writes that the newspaper’s embarrassing publicity about unresolved consumer complaints always gets the problems he writes about fixed, but the company never seems to correct the chronic problems that bring readers to the newspaper in droves as a last resort.

“I don’t know why this continues to happen, but a recent letter I received may help us understand,” Lieber explains.

Last fall, a career employee at an AT&T call center with 17 years of history with AT&T and its predecessor decided to blow the whistle. She signed the letter, but the newspaper felt it prudent to withhold her name from publication for obvious reasons.

The letter details several customer service practices that are now routine at AT&T call centers — practices that could interfere with a customer’s ability to argue for a better deal or cancel service. Recent belt-tightening by AT&T on promotional spending has left call center workers almost no chance to “delight” customers with a good experience saving their business. In fact, the employee alleges, those not on medication to manage the depression and anxiety that comes from dealing with angry and disappointed customers are capable of thriving at work only by checking their conscience at the door.

“Dear Watchdog, I’ve worked 17 years for AT&T. I have never, in all my years, imagined it would become the catastrophe it is now.

“As retention reps, we are told to not only retain existing customers after their promotions expire, but to also sell more to these people.

“In most cases, a customer’s bill will jump up $83 a month after the ‘intro’ pricing ends. We as reps are allotted at the beginning of week 5 ‘limited use’ promotions, giving folks the maximum of $40 off.

“By Monday afternoon, these are generally depleted as we take about 40 calls a day.

“This has created a culture of reps promising promos, but not adding them. Or telling the customer they are disconnecting the service, but just not doing it. Reps do not want to disconnect a customer, as this counts against the rep.

“You are right to request a user ID [of the rep]. However, it does not help, as every account is noted with the ID of the rep, and management does nothing to discourage the reps’ behavior (as the manager’s pay also is negatively affected by each disconnect their rep does).

“This goes all the way up to sales center manager, general manager and VP. None of the higher-ups care or do anything to stop it.

“They also turn a blind eye to ‘cramming’ by reps (mostly nonunion employees overseas) and erroneous misquotes.

“It’s very frustrating to be an ethical rep there anymore, as you are constantly under their scrutiny for not meeting numbers. The only way to meet these numbers is to be a liar and a sleaze. Three-quarters of my call center is on antidepressants and anti-anxiety medicine just to deal with the company. It shouldn’t be like that.

[…] “The problem with this is none of these general managers communicate. Each state is covered by different laws and regulations. You in Texas may call and get a rep in California. In California, I do not have to let you record the call. You also have the option not to be recorded.

“Now that we are national, you have GMs in charge of call centers in California, Missouri, Texas and Georgia. They don’t train you, don’t care about you, don’t care about the customer as long as they are getting commission off your work.

“They know nothing of government regulations, and frankly, do not care.

“I’ve been through so many GMs and vice presidents. However, this is by far the most inept. We should be helping our customers, not forcing products on them they do not want. … I really don’t think anyone in the government cares.”

att_logo“Unfortunately, we have no way of knowing if this is an employee of our company,” AT&T’s response begins. “But the picture painted is not the experience we create, promote or endorse. We have some of the best call center employees in the industry. We set expectations and limit the offers they can use. But we also provide new agents with 12 weeks of intensive training — with a focus on keeping customers with integrity and with offers based on needs determined during the conversation.”

AT&T’s reaction to the letter missed the point, Lieber wrote, only addressing the identity of the author, not the specific complaints.

In practical terms, many of the allegations raised by the employee seem borne out in AT&T’s own customer support forum, where customers routinely complain about promotions promised but never delivered, billing errors, bills higher than originally quoted, and service never cancelled despite repeated customer requests.

In just the last few weeks, one customer was misled about a U-verse promotion that turned out to last only 90 days, after which the bill soared to $180 a month (with six months still remaining on a one-year contract). Another cancelled U-verse service on Nov. 16, but the service, and the bills… keep on coming. Another customer was promised a retention offer that AT&T reneged on, increasing his bill $80 a month.

Corporate Welfare: Congress Gives Big Telecom Accelerated and Bonus Depreciation Extensions

Phillip Dampier December 16, 2015 AT&T, CenturyLink, Consumer News, Public Policy & Gov't, Verizon 10 Comments

corporatewelfareIn the darkness of night, Congress on Tuesday handed some of America’s largest telecom companies a huge tax windfall allowing many to continue taking a special 50% depreciation bonus that slashes their tax bills on new equipment purchases, winning substantial reductions in their federal tax bills.

CenturyLink had been heavily lobbying House Speaker Paul Ryan (R-Wis.) and other House leaders to extend a “temporary tax provision” that was designed to stimulate corporate spending on capital investments during the height of the Great Recession. Stimulus programs like these have allowed corporations like AT&T and Verizon to pay virtually no federal taxes at all for multiple years in a row. AT&T was the second biggest tax provision/corporate welfare recipient in the country, Verizon was fifth according to Citizens for Tax Justice. Between 2008-2012 taxpayers effectively covered the $19.2 billion in federal tax not paid by AT&T and $11.1 billion not paid by Verizon.

The two words that make it possible are: Accelerated Depreciation

Telecom companies, particularly those with wireless assets, are benefiting from the “temporary” stimulus program introduced by President George W. Bush in the last year of his second term because most are capital-intensive, spending regularly to expand, maintain, and upgrade their networks. CenturyLink has taken advantage of accelerated depreciation to invest billions in fiber network expansions to reach cell towers and businesses and on residential broadband speed upgrades the company claims would not have come so quickly without the tax savings.

Mobile companies like AT&T and Verizon Wireless are some of the largest beneficiaries of the stimulus program, using accelerated depreciation to write off expenses for cell tower expansion, network densificiation, and deployment of services like 4G LTE. In most cases, “accelerated depreciation” is technically a tax deferral, but because these companies maintain constant investment in network development and upkeep, the tax man never actually arrives at the door to collect.

Heavy lobbying from beneficiaries not only succeeded in getting the program’s expiration date extended, the Obama Administration agreed to expand it at the end of 2013. Companies slashed tens of billions off their tax bills as a result. A report from the Congressional Research Service, reviewing efforts to quantify the impact of depreciation breaks, found that “the studies concluded that accelerated depreciation in general is a relatively ineffective tool for stimulating the economy.”

Citizens for Tax Justice added:

Combined with rules allowing corporations to deduct interest expenses, accelerated depreciation can result in very low, or even negative, tax rates on profits from particular investments. A corporation can borrow money to purchase equipment or a building, deduct the interest expenses on the debt and quickly deduct the cost of the equipment or building thanks to accelerated depreciation. The total deductions can then make the investments more profitable after-tax than before-tax.

The latest budget bill, passed Dec 15-16, extends the tax breaks until 2018 when the bonus drops to 40%, 30% in 2019, and zero in 2020.

AT&T U-verse’s Magical Morphing Modem Fee: Your Modem or Theirs, It’s Still $7 a Month

Phillip Dampier December 15, 2015 AT&T, Competition, Consumer News, Internet Overcharging 1 Comment
Motorola NVG589 gateway

Motorola NVG589 gateway

AT&T customers offered free broadband service upgrades are discovering “free” means at least $7 a month in new equipment charges for some, even when the customer owns the equipment.

Jim Grant has been an AT&T ADSL 2+ customer for almost a decade, happy to get 12Mbps broadband service from the phone company while maintaining an account with DISH Network for satellite television. As part of AT&T’s expansion effort, Grant’s neighborhood recently became U-verse capable, which led to an onslaught of new customer promotions offering upgrades for broadband-only customers and packages of television, telephone, and broadband service for everyone else.

“An AT&T salesman offered me 18Mbps VDSL service for the exact same price I’ve been paying for 12Mbps, claiming the newer single-pair circuit would work more reliably than the bonded pair service I receive today,” Grant tells Stop the Cap! “What he and the installation guy failed to mention is that this ‘free upgrade’ would cost me $7 a month in equipment fees, even though I bought and own the RG (residential gateway) they now want to charge me for using.”

Grant’s Motorola-manufactured router/modem did not need to be replaced. It was always capable of supporting ADSL2+ and VDSL broadband service. Only his bill has changed.

It turns out AT&T changed its policies that used to allow certain customers to avoid modem fees by buying their own equipment. Starting Jan. 11, 2015, AT&T’s modem rental fee for customers using the company’s equipment remained $7 a month. But customers who own their own equipment in a U-verse upgraded area are also charged the same $7, only AT&T doesn’t consider it a modem rental fee. Instead, it is a combination equipment charge and extended warranty.

AT&T claims this change actually saves customers money once their purchased modems go out of warranty. AT&T used to charge $99 for a service call to a home with customer-owned equipment and a $100 replacement charge if the modem turned out to be defective. AT&T says the $7 monthly equipment and warranty fee protects customers from both charges if something goes wrong.

Modem fees apparently don't apply if you are lucky enough to qualify for a promotion like this one in Austin for AT&T's GigaPower service.

Modem fees apparently don’t apply if you are lucky enough to qualify for a promotion like this one offered in Austin in 2013 for AT&T’s GigaPower service.

AT&T’s explanation didn’t go over well with Grant, who only found out about the charge once the bill arrived.

“I was promised repeatedly my bill would be exactly the same and since I owned my own equipment, there was no way I should be charged a fee like this,” Grant explained. “AT&T is charging me the same $7 it would any customer using AT&T-supplied equipment.”

fat cat attMost customers affected by this charge discover it after upgrading their service or when technicians replace older equipment, often accompanied by a promise there would be no extra charges or fees, something customers learn isn’t always true after their next bill arrives.

Abhijit accepted an AT&T offer to boost his U-verse Internet speed to 24Mbps. Along for the ride was a brand new U-verse gateway.

“I was told specifically that there would be no additional charge,” Abhijit complained on AT&T’s customer support forum. “After first month’s bill, I am seeing an additional $7.00 Internet equipment fee.”

Another customer in Texas was also misinformed by AT&T’s salespeople about the modem fees.

“I was informed that this $7 fee was for leasing a modem/wireless Router/Residential Gateway (RG),” wrote the customer. “However, if I have my own compatible modem, there will be no additional charge. I have purchased my own compatible modem and now AT&T service says [it will charge a] ‘$7 service fee’ instead of [the $7] equipment rental.”

Modem fees are a lucrative source of revenue from AT&T, earning the company potentially more than $84 million a month.

Some customers report success receiving service credits or other fee waivers after complaining about the undisclosed fees in complaints to the FCC.

AT&T Announces 38 New Markets for Gigabit U-verse, Omits Availability Numbers

Phillip Dampier December 8, 2015 AT&T, Broadband Speed, Competition, Consumer News 6 Comments

uverse gigapowerOn Monday, AT&T announced 38 additional cities that will eventually have access to its gigabit broadband offering – AT&T U-verse with GigaPower, but the company remains coy about the number of customers that can actually order the service today across the 56 metro areas that will eventually be served by AT&T’s fiber to the home network.

“Nearly two years ago, we successfully launched the first AT&T GigaPower metro in Austin, Tex.,” AT&T wrote in its press release. “This launch led to a major expansion in multiple metros beginning in 2014. Recently we marked a major milestone deploying the AT&T GigaPower network to more than 1 million locations, and we expect to more than double availability by the end of 2016.”

Stop the Cap! asked AT&T for information about its claim of offering service to more than “one million locations” and received a response that this number may not reflect strict availability of the gigabit service, but rather the likely number of potential customers served by a central office/exchange where GigaPower was enabled. In reality, not every customer within a central office immediately qualifies for U-verse service, as many customers have complained.

At the current rollout rate of about one million customers per year, it will take AT&T at least 12 years to achieve its goal of more than 14 million residential and commercial locations, probably in the year 2027.

The 38 metro areas that AT&T will be entering, starting with the launch of service in parts of the Los Angeles and West Palm Beach metros today, are:

  • Alabama: Birmingham, Huntsville, Mobile and Montgomery
  • Arkansas: Fort Smith/Northwest Arkansas and Little Rock
  • California: Bakersfield, Fresno, Los Angeles, Oakland, Sacramento, San Diego, San Francisco and San Jose
  • Florida: Pensacola and West Palm Beach
  • Georgia: Augusta
  • Indiana: Indianapolis
  • Kansas: Wichita
  • Kentucky: Louisville
  • Louisiana: Baton Rouge, ShreveportBossier, Jefferson Parish region and the Northshore
  • Mississippi: Jackson
  • Missouri: St. Louis
  • Michigan: Detroit
  • Nevada: Reno
  • North Carolina: Asheville
  • Ohio: Cleveland and Columbus
  • Oklahoma: Oklahoma City and Tulsa
  • South Carolina: Charleston, Columbia and Greenville
  • Tennessee: Memphis
  • Texas: El Paso and Lubbock
  • Wisconsin: Milwaukee

For more information on where the AT&T GigaPower network is and will become available, visit att.com/gigapowermap.

The Stage Is Set to Kill Telco ADSL: Cable Operators Prepare for DOCSIS 3.1 Competitive Assault

docsis 30 31

Next year’s upgrade to DOCSIS 3.1 will support cable broadband speeds up to one gigabit shortly after introduction.

Telephone companies relying on traditional ADSL service to power their broadband offering will likely face a renewed competitive assault in 2016 that will further reduce their already-challenged market share in areas where cable companies compete.

Cable operators are hungry for profitable broadband customers and the best place to find new prospects is at the phone company, where DSL is still a common technology to deliver Internet access. But while cable Internet speeds have risen, significant DSL speed hikes have proven more modest in the residential market.

In 2016, the cable industry intends to poach some of the remaining price-sensitive holdouts still clinging to DSL with revised broadband offers promising more speed for the dollar.

Cable broadband has already proven itself a runaway success when matched against telephone company DSL service. Over the last year, Strategy Analytics found Comcast and Time Warner Cable alone signed up a combined 71 percent of the three million new broadband customers in the U.S.

“Cable operators continue to increase market share in U.S. broadband,” said Jason Blackwell, a director at Strategy Analytics. “Over the past twelve months, Comcast has accounted for 42 percent of new subscribers among the operators that we track.  Fiber growth is still strong, but the telco operators haven’t been able to shake off the losses of DSL subscribers.  In 2016, we expect to see a real battle in broadband, as cable operators begin to roll out DOCSIS 3.1 for even higher speed offers, placing additional pressure on telcos.”

That battle will come in the form of upgraded economy broadband plans, many arriving shortly after providers upgrade to the DOCSIS 3.1 cable broadband platform. Currently those plans offer speeds ranging from 2-6Mbps. Starting next year, customers can expect economy plan prices to stay generally comparable to DSL, with promises of faster and more consistent speeds. A source tells Stop the Cap! at least two significant cable operators are considering 10Mbps to be an appropriate entry-level broadband speed for 2016, in keeping with FCC chairman Thomas Wheeler’s dislike of Internet speeds below 10Mbps.

slowJust a few years earlier, most providers wouldn’t think of offering discounted 10Mbps service, fearing it would cannibalize revenue as customers downgraded to get lower priced service. Increasing demands on bandwidth from online video and multiple in-home users have gradually raised consumer expectations, and their need for speed.

Unfortunately for many phone companies that have neglected significant investment in their aging wireline networks, the costs to keep up with cable will become unmanageable unless investors are willing to tolerate significant growth in capital expenses to pay for network upgrades. Frontier Communications still claims most of their customers are satisfied with 6Mbps DSL, neglecting to mention many of those customers live in areas where cable competition (or faster service from Frontier) is not available.

Where competition does exist, it’s especially bad news for phone companies that still rely on DSL. Earlier this year, Frontier’s former CEO Maggie Wilderotter admitted Frontier’s share of the residential broadband market had dropped to less than 25% in 26 of the 27 states where it provides service. In Connecticut, the one state where Frontier was doing better, its acquired AT&T U-verse system has enabled the phone company to deliver broadband speeds up to 100Mbps. But even those speeds do not satisfy state officials who are seeking proposals from providers to build a gigabit fiber network in a public-private partnership.

DSL speed upgrades have been spotty and more modest.

DSL speed upgrades have been spotty and more modest.

Frontier’s recent experiments with fiber to the home service in a small part of Durham, N.C., and the unintentional revelation of a gigabit broadband inquiry page on Frontier’s website suggests the company may be exploring at least a limited rollout of gigabit fiber service in the state. But company officials have also repeatedly stressed in quarterly results conference calls there were no significant plans to embark on a major spending program to deliver major upgrades across their service areas.

Some phone companies may have little choice except to offer upgrades where cable operators are continuing to rob them of customers. In the northeast, where Frontier has a substantial presence, cable operators including Charter, Comcast and Time Warner Cable are committing to additional speed upgrades. Time Warner Cable’s current standard speed of 15Mbps will rise to 50-60Mbps in 2016, up to ten times faster than Frontier’s most popular “up to” 6Mbps DSL plan.

Most of the broadband customer gains won by Comcast and Time Warner Cable come as a result of DSL disconnects. AT&T said goodbye to 106,000 customers during the third quarter. Verizon managed to pick up 2,000 new subscribers overall, almost all signing up for FiOS fiber to the home service. No cable operator lost broadband market share, reported analyst firm Evercore. Leichtman Research offered additional insight, finding AT&T and Verizon were successful adding 305,000 U-verse and FiOS broadband customers, while losing 432,000 DSL customers during the same quarter.

The message to phone companies couldn’t be clearer: upgrade your networks or else.

Wireless Carriers’ Ho-Hum Economics of Wi-Fi Calling; The Real Money is Still in Data

telecom revenueThe year 2013 marked a significant turning point for phone companies that have handled voice telephone calls for over 100 years. For the first time, the volume of domestic telephone calls and the revenue generated from them was nearly flat. For the last two years, both are now in decline on the wireless side of the business as North Americans increasingly stop talking on the phone and text and message instead.

The U.S. wireline business peaked in the year 2000 with 192 million residential and office landlines. Over the next ten years, close to 80 million of those — 40 percent, would be permanently disconnected, replaced either by cell phones, cable telephone service, or a Voice over IP line. Wireless companies picked up the largest percentage of landline refugees, most never looking back.

Over one-third of more than $500 billion in annual revenue generated by telecom companies in 2013 came from voice services. Although that sounds like a lot, it’s a pittance of a percentage when compared to 2005 when AT&T, Sprint, T-Mobile, and Verizon Wireless earned most of their revenue from voice calls. Ten years ago, wireless companies principally sold plans based on the number of calling minutes included, and many customers often guessed wrong, paying per minute for calls exceeding their allowance.

At first, this represented a revenue bonanza for the wireless industry, which earned billions selling customers minute-based calling plans that came with built-in cost-controlling deterrents for long-winded talkers — the concern of using up their calling allowance.

attverizonStarting in 2008, wireless industry executives noticed something peculiar. While revenue from texting add-on plans was surging, the growth in calling began to level off. Wireless voice usage per subscriber peaked at an average of 769 minutes in 2007 and began falling after that year. By 2011, the average customer was making 615 minutes of calls a month. As customers began downgrading calling plans, wireless carriers shifted their quest for revenue towards text messaging.

For awhile, texting earned wireless companies astounding profits that required little extra investment in their networks. SMS service at most carriers was effectively priced at $1,250 per megabyte, broken up into 160 byte single messages. In 2011, over 2.3 trillion text messages were exchanged. A message that cost a wireless carrier an infinitesimal fraction of a penny to send and receive cost consumers up to 20 cents or more apiece if they lacked an optional texting plan. To further boost revenue, some carriers like Verizon Wireless began to pull back offering customers a variety of tiered texting plans with different messaging allowances, switching instead to a single, more expensive unlimited texting plan. Many customers balked at the $19.95 a month price and began exploring other forms of messaging each other.

chetan sharmaThe industry’s demand for profit eventually threatened to kill the goose that laid the golden egg. At the same time wireless carriers were raising prices on text messages and forcing customers into expensive texting add-on plans, free third-party messaging apps began eating into texting volume. By 2012, the use of SMS declined for the first time, with 2.19 trillion text messages sent and received, down 4.9 percent from a year earlier.

It took little time for the wireless industry to realize the days of offering plans based on calling minutes and texting were quickly coming to an end. Younger users began the cultural trend of talking less, texting more — but using a growing number of free alternative apps to do so. As a result, both AT&T and Verizon shifted their plans away from focusing on revenue from calling and texting and instead moved to monetize data usage. Today, both carriers offer base plans featuring unlimited voice calling and texting almost as an afterthought. The real money is now made from selling packages of wireless data.

Wi-Fi calling allows customers to make and receive voice calls over a Wi-Fi connection, not a nearby cell tower. The prospect of bundling that option into a cell phone just a few years ago would have been unlikely at some providers, unthinkable at others. It was never considered a high priority at any traditional carrier, although T-Mobile began offering the service all the way back in 2007.

Since most calling plans now bundle unlimited calling, letting calls ride off the traditional cellular network is no longer much of an economic concern.

wifi callingSome even expect carriers to eventually embrace Wi-Fi calling, declaring it superior to alternatives like Hangouts and Skype, which require an app to handle the call. A Wi-Fi call can be received by anyone with a phone.

This month, the last holdout, Verizon Wireless, capitulated and announced it had won approval from the FCC to introduce Wi-Fi calling to customers, joining Sprint, T-Mobile, and AT&T. But Verizon plans to initially limit that service, offering an app that must be installed to make and receive Wi-Fi calls. The other three carriers integrate Wi-Fi calling directly into the primary phone call app already on the phone.

The introduction of the service is unlikely to have a significant economic impact on any wireless carrier. Most have ample room on their networks to handle cell call volumes. Whether a call is placed over Wi-Fi or traditional cellular service, it will ultimately end up on the same or a similar IP-based phone switch as it makes its way to the called party.

With little revenue-generating opportunities for voice calling or SMS messaging, companies have nearly stopped the practice of monetizing individual telephone calls, preferring to offer unlimited, all-you-want calling and texting plans that used to cost consumers considerable amounts of money.

Now wireless carriers see fortunes to be made slicing up and packaging gigabytes of wireless data, sold at prices that have little relation to actual cost, just as carriers managed with text messaging for the last 20 years. A Verizon Wireless customer using 12GB of data in October that kept a now-grandfathered unlimited data plan paid just under $30 for that usage. (This month Verizon raised the price of that coveted unlimited plan by $20 a month.) Verizon charges $80 for that same amount of data on its new “XL” data plan. Verizon’s cost to deliver that data to customers is lower than it was five years ago, but customers wouldn’t know it based on their bill. As always with the wireless industry, costs often have no relationship to the price ultimately charged consumers.

Vandals Cause $1 Million in Damages Collapsing AT&T Cell Tower in Texas

att_logoOne of AT&T’s cell towers in Denison, Tex. went missing last Thursday in the 1900 block of West Crawford St. after vandals cut the tower’s supporting guy wires, causing it to collapse.

Nearby residents woke up to find the remains of the tower crumpled on the ground, with dramatically poorer cell service the result for AT&T, Sprint, and T-Mobile customers in the immediate vicinity. All three mobile providers maintained antennas on the affected tower.

Denison Police say the incident was a clear case of vandalism. After the guy wires were intentionally cut, the tower lacked sufficient support to stay standing on its own.

Nobody was injured during the collapse, but AT&T says the vandals caused $1 million in damages. A temporary cell tower is now in place. It will take three months to permanently replace the cell tower.

AT&T is offering at least a $7,500 reward for information that leads to an arrest.

http://www.phillipdampier.com/video/KXII Sherman ATT cell tower felled in Denison 11-22-2015.mp4

KXII in Sherman, Tex. reports Denison authorities are looking to arrest the vandal(s) that destroyed an AT&T cell tower. (1:30)

Four Red States Launch Coordinated Attack on Municipal/Public Broadband in Advance of FCC Hearing

Gov. Haslam

Gov. Haslam

Top officials of four southern states are coordinating efforts with Republican House members to oppose the Federal Communications Commission’s preemption of state laws that restrict or prohibit municipal/public broadband competition.

South Carolina Governor Nikki Haley, Tennessee Governor Bill Haslam, Alabama Attorney General Luther Strange, and Tennessee Attorney General Herbert Slattery have all backed efforts by House Republicans to curtail the regulatory powers of the FCC, claiming states’ rights should have precedence over the federal regulator. All four have sent letters to the House Energy & Commerce Committee putting their opposition on paper.

In 2014, FCC chairman Thomas Wheeler announced the FCC would seek to preempt state laws in North Carolina and Tennessee that severely restrict the development of broadband networks owned or controlled by municipalities and public utilities. The laws typically allow existing municipal networks to continue operating, but prohibit expansion beyond a pre-defined service area. Networks planning to launch after the laws took effect usually face onerous conditions and disclosure requirements that make many untenable. Large incumbent cable and phone companies were exempted from the law.

Wheeler’s efforts came in response to requests from community broadband providers seeking to deliver service to expanded service areas. The debate has put several local governments and utilities in an uncomfortable position of opposing their colleagues in state government.

In North Carolina, Attorney General Roy Cooper has taken the FCC to court in a petition to the U.S. Court of Appeals for the Fourth Circuit.

“Despite recognition that the State of North Carolina creates and retains control over municipal governments, the FCC unlawfully inserted itself between the State and the State’s political subdivisions,” Cooper wrote to the court. Cooper says the FCC’s actions are unconstitutional and exceeds the commission’s authority; “is arbitrary, capricious, and an abuse of discretion within the meaning of the Administrative Procedure Act; and is otherwise contrary to law.”

comcast attMuch of the opposition to municipal broadband comes from Republican politicians on the state and federal level. Most claim municipal providers represent unfair competition to the private sector. The American Legislative Exchange Council (ALEC) considers municipal broadband a significant issue. The corporate-funded group offers state legislators the opportunity to meet with telecom company lobbyists. Legislators are also provided already-written sample legislation restricting municipal broadband developed by ALEC’s telecom company members, including AT&T, Comcast, and Time Warner Cable. In states where Republicans hold the majority in the state legislature, such bills often become law.

The FCC represents a serious threat to the telecom company-sponsored broadband legislation. Instead of debating the impact of the law on unpopular phone and cable companies, the four state officeholders claim the dispute is a battle pitting states’ rights against the powers of the federal government.

Haslam, who also serves as the national chairman of the Republican Governors Association, formally asked Congress to intervene against the FCC to protect state sovereignty. In a separate appeal to the FCC, Tennessee officials argued the FCC violated the country’s founding concept of separation of state and federal power, citing the 10th Amendment to the Constitution reserving power not delegated to the United States for the states respectively, or to the people.

Haslam’s critics contend the governor has delegated his own power to protect the interests of large telecommunications corporations operating in his state — companies the critics claimed wrote and lobbied for a state law that established anticompetitive broadband corporate protectionism in Tennessee. Among Haslam’s top campaign contributors are AT&T and Comcast — Tennessee’s two largest telecommunications companies.

Gov. Haley

Gov. Haley

Slattery, appointed by the Tennessee Supreme Court, argued in his letter to Congress the FCC lacked any authority to circumvent Tennessee state law.

The FCC has consistently claimed it is not overturning any state laws. Instead, it is performing its duties under its mandate.

The FCC cites Section 706 authority to regulate when broadband is not being deployed in a reasonable and timely manner, something that cannot happen if a state law impedes new competitors and entrants.

Alabama’s attorney general joined the fight in a brief to the Sixth Circuit opposing preemption, with a copy sent to the House Subcommittee on Communications and Technology, which is planning to hold a hearing on the matter. Alabama has several municipal and public utility networks operating in the state. AT&T and Comcast also serve large parts of Alabama. AT&T gave $11,000 to Strange’s campaign, Comcast sent $8,500. The Koch Brothers, fierce opponents of community broadband, also donated $10,000 to Strange through Koch Industries.

South Carolina Governor Nikki Haley told legislators she strongly opposes external entities like the FCC overreaching into her state’s business. She did not mention AT&T is her fifth largest contributor, donating more than $16,000 to her last campaign. South Carolina’s largest cable operator is Time Warner Cable. It donated $9,900 to the governor’s campaign fund.

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