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Finding The Truth About West Virginia’s Bad Broadband; Here’s How You Can Help

If advertised claims of lightning fast DSL internet don’t match reality, it never hurts to bring evidence to the table if you want to prove your state’s biggest telecom company is lying through its teeth.

West Virginia’s Broadband Council wants to understand just how awful broadband is in the state, despite glowing rhetoric from cable and phone companies that promise fast connections that rarely deliver to beleaguered broadband users. The Council has created its own Speed Test Portal for the state’s broadband users to test their internet speed. The results will also provide data about real world broadband performance to generate a new statewide broadband map that will clearly identify where broadband performs, where it doesn’t, and where it doesn’t exist.

“The speed test is really important,” Commerce Secretary Woody Thrasher said. “This is one of those things where before you know where you’re going to go, you have to know where you are. So we’re trying to identify what type of broadband service we have. That’s what the speed tests do for us. We want people to take the speed test, send it in and from there, we will create a map of where we are in the state of West Virginia and identify where our priorities should be. From that, we can identify where we are strong and where we are weak. We can identify where to prioritize areas to put funding and resources to generate broadband connectivity.”

The Council wants residents to test early, test often, and test on every computer they can find to make the data as meaningful as possible.

“With this information, the Broadband Council will work with local governments to help bring affordable broadband service to underserved and unserved areas of the state,” Council Chairman Robert Hinton said in a recent Department of Commerce news release.

One of the responsibilities of the Council is determining whether providers are delivering the speeds they advertise to state residents. West Virginia is ranked 48th worst out of the 50 states for the percentage of residents without access to broadband service. The state’s incumbent phone company, Frontier Communications, controls virtually all the state’s telephone lines. Its DSL service is not well regarded by customers and its poor performance led to a $150 million settlement with West Virginia’s Attorney General Patrick Morrisey in 2015 for deceptive claims about its DSL service.

Behind the scenes, the Broadband Council is also attempting to build an evidentiary record of “discrepancies between the service the incumbent has claimed to provide and the service the incumbent has actually provided.” If the Council can show Frontier is failing to meet its service requirements, it is hoping the FCC will open broadband funding to other providers in unserved and underserved areas in the state, some potentially offering fiber optic broadband. That would, they argue, be a better use of limited Connect America Fund resources than funding further expansion of Frontier’s DSL service.

In a filing with the FCC in response, Frontier said the Council’s solution is “misplaced and inappropriate.” It asked the FCC to reject the proposal and instead increase funding available to Frontier for rural broadband expansion in West Virginia. For Frontier, the metric that matters the most is that the company “well ahead of schedule” to meet the federal program’s requirements.

“Because Frontier is often alone in undertaking the challenge of providing any landline internet service to the most rural and remote areas in the state, Frontier is often the brunt of dissatisfaction, as expressed in the Council’s letter, with the available speeds and technologies in those areas,” Frontier said.

In October, Frontier waived away a demand to return $4.7 million in funds an inspector general claimed were the result of padded invoices with phony extra charges and improper reimbursements for “unreasonable and unallowable” fees.

In a letter to West Virginia Chief Technology Officer John Dunlap, Frontier made it clear that West Virginia taxpayers were effectively on the hook for the money, noting any funds the state might return to the federal government “are, of course, not recoverable from Frontier.”

Frontier: Nothing to See Here; 3rd Quarter Results Cause Share Price to Plummet to New Low

Phillip Dampier November 1, 2017 Broadband Speed, Competition, Consumer News, Frontier No Comments

Frontier’s stock has reached the lowest level of the year after another disappointing earnings report.

Frontier Communications turned in lackluster numbers for the third quarter of 2017, resulting in a wide selloff of Frontier’s stock, driving it to the lowest level it has seen in a year.

Investors are reacting to news the company missed earnings estimates once again, and many are losing confidence in Frontier’s CEO Daniel McCarthy, who has promised better results for more than a year. Frontier is rare among broadband providers, losing customers in virtually every segment of its business, including in its acquired FiOS service areas.

Frontier’s stock has lost more than 80% of its marketplace value so far this year — a stunning decline for a company selling broadband service in many areas where it maintains a monopoly.

McCarthy once again made a commitment his efforts will “stabilize” customer losses, but spent most of his time trying to reassure investors on a Tuesday conference call that those stabilization efforts will primarily target areas where Frontier sells FiOS fiber to the home service. Customer churn continues to be a problem, with many customers leaving either because the company alienated them or dramatically raised their rates after a discounted promotion expires. Either way, many of those customers switch back to a cable provider. McCarthy claimed Frontier plans to adjust promotional pricing to soften the blow of a steep rate hike after a promotion expires.

McCarthy said almost nothing about Frontier’s legacy service areas, where Frontier still sells copper-based DSL service. Some of the company’s biggest losses have been in areas where it cannot compete effectively with cable broadband. McCarthy offered to enhance customer retention efforts and increase marketing to reduce losses, but there are no indications Frontier plans to spend significantly on major network upgrades in these areas anytime soon.

Frontier declared an unexpected dividend of $0.60 a share, which some analysts consider excessive and represents a “red flag atop this toxic value destroyer.”

One analyst remarked, “I’m not buying it; Frontier is a business in free fall.”

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

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

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

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

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

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

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

DELAWARE

MARYLAND

MASSACHUSETTS

NEW JERSEY

NEW YORK

PENNSYLVANIA

RHODE ISLAND

VIRGINIA

 

Even Frontier Hints Without Major Broadband Upgrades, It’s Dead

Phillip Dampier September 18, 2017 Consumer News, Frontier 9 Comments

Frontier Communications spent $2 billion in 2014 to purchase AT&T’s Connecticut wireline business, believing it could make a fortune selling internet and cable television service to wealthy Nutmeg State residents over a network AT&T upgraded to fiber-to-the-neighborhood service several years earlier.

But thanks to a combination of management incompetence, cord-cutting, and Frontier’s competitors, the phone company’s dreams have turned bad in Connecticut, where the company lost hundreds of millions in the last three years along with at least 22% of its customers in the state. As a result, Frontier has turned a business that made AT&T $1.3 billion four years ago into one that earned Frontier $901.9 million last year.

Hartford Business notes Frontier’s biggest challenge is holding on to customers once they disconnect their landline service. In Connecticut between 2014 and 2016, Frontier lost 154,000 landline customers in the state, leaving just under 522,000 remaining landline customers. That is way down from the 675,000 customers AT&T had just before it sold the service area to Frontier. AT&T struggled with a similar problem, having more than one million landline customers in 2011, according to numbers from Connecticut’s Public Utilities Regulatory Commission (PURA). What made AT&T different is its investment in U-verse — AT&T’s answer to the challenge of lost landline customers. AT&T invested in a new fiber to the neighborhood network to boost broadband speeds and sell television service, giving departing landline customers a reason to continue doing business with AT&T.

For millions of Frontier Communications customers in its “legacy service areas” — owned and operated by Frontier for years, if not decades, those upgrades have been slow to come, if they have come at all. As a result, dropping Frontier service in favor of a wireless or cable company is not a difficult decision for many customers, and cable operators report significant growth where their only competition is DSL service from Verizon or Frontier.

Frontier’s own executives admit broadband upgrades are essential if Frontier is to survive the challenges of landline disconnects.

Customers are increasingly taking a pass on landline service.

“It’s a surprise to no one that we have voiceline declines in Connecticut,” Mark Nielsen, Frontier’s general counsel and executive vice president told the business newspaper. “The challenge is to build our internet and video business so as to offset the declines in voice. We are very committed to the Connecticut operation, we see great potential in it.”

That commitment is coming in the form of internet speed upgrades. Frontier’s primary competitors in the state are cable operators Comcast, Charter, and Cox, some offering speeds as high as a gigabit. Frontier is trying to compete by introducing speeds at or greater than 100Mbps, but so far only in a few parts of the state.

According to Nielsen, Frontier’s profitability is less important to investors than maintaining positive cash flow, which means assuring more money is coming into the operation than going out.

“Cash is what’s available to make investments to return capital to shareholders,” Nielsen said.

But that represents a conflict for Frontier, because many shareholders are attracted to the stock’s long history of returning money to shareholders in the form of dividend payouts. If Frontier has to invest more of its capital on upgrades and network upkeep, that can result in a dividend cut, which usually causes the share price to decline, sometimes dramatically. If Frontier can manage to invest less and cut costs, that frees up more money that can be paid to investors.

For the past several years, Frontier’s business plan has been to avoid spending large sums on network upgrades. But the company was willing to spend handsomely to acquire more customers from a three-state deal with Verizon that cost $10.5 billion. Frontier’s acquisition of Verizon landline customers in Florida, California, and Texas made sense for many shareholders because it would dramatically increase the number of customers served by Frontier, and that in turn would boost revenue and cash flow, from which Frontier’s dividend to shareholders would be paid. Frontier acquired a fiber rich, FiOS service area in all three states, which automatically meant the company would not need to undertake its own significant and costly upgrades.

But Frontier did have to transfer its newest customers from Verizon’s systems to those operated by Frontier. If a company spends enough time and money to protect customer data during such “flash cutovers,” they are usually successful. A company that attempts it without careful planning causes service to be disrupted, sometimes for weeks, which is exactly what happened after Frontier switched customers in the three states to its systems. Customers have never forgotten, and have left every quarter since the deal was first announced.

Financial analysts see where this is headed.

“Each and every quarter their revenues decline, and each and every quarter their customer totals decline,” David Burks, a financial analyst at Hilliard Lyons, told the newspaper. He called Frontier a company that is struggling. He added Frontier needs to stem revenue erosion. He downgraded Frontier’s stock last month after the company reported a second-quarter net loss of $662 million. He could not ignore what he called “disturbing trends,” such as an 11.5 percent year-over-year decline in total customers across Frontier’s entire operation.

 

To win new customers Frontier must improve its network with upgrades that will cost the company billions — spending that is certain to affect Frontier’s shareholder dividend. Even if it does spend money to upgrade, some analysts are wondering whether it is too late.

“The time to play catch up has passed, given the time to market advantage that cable has, and we expect continued pressures from cable as DOCSIS 3.1 steps up the speed advantage that cable already enjoys,” wrote Jeffries in a a report written about by FierceTelecom. “In our view, it is far too late for the ILECs to ramp spend to compete, particularly given high leverage and the significant cost required to expeditiously play catch up.”

Deutsche Telekom: We’ll Build a Nationwide Fiber Network If You Let Us Monopolize It

German Chancellor Angela Merkel examines fiber optic telecommunications cables.

Germany has an internet access problem not very different from the one afflicting the United States and Canada. The national phone company, still partly owned by the government, remains mostly dependent on a decades-old wireline telephone network to deliver landline and DSL broadband service. The only way Deutsche Telekom will invest adequately to replace it with optical fiber is if they get assurances from the federal government they will be allowed to monopolize access to it.

According to the business weekly WirtschaftsWoche, a sister publication of Handelsblatt, Telekom executives have agreed to build a fiber-optic network everywhere in Germany provided that it is excluded from European anti-monopoly rules so that Deutsche Telekom wouldn’t be forced to open its network to competition.

The proposal from the German telecom giant was particularly audacious because many in the country blame it and its uncompetitive behavior for creating Germany’s slow broadband problem, but that did nothing to stop the company from asking to be shielded from competition.

“A fundamental departure from the kind of logic that viewed regulation of Deutsche Telekom (DT) as the normal state in the last 20 years is urgently needed,” the company said in a filing with the German Federal Network Agency, which regulates the internet in the country.

For most Germans, DT is the problem. The phone company has proven itself a formidable competitor across many parts of eastern Europe, where it bought control of privatized telecommunications companies that used to operate as government monopolies. But back home in Germany, it has been happy to continue offering DSL service that the rest of Europe cannot get rid of fast enough. In certain larger cities like Munich and Cologne, upstart fiber to the home providers have filled the broadband gap and have wired significant parts of both cities, and DT has responded with a fiber offering of its own without complaining about the cost of building a fiber network or the return on its investment.

Oberbürgermeister Wolff

But in smaller towns and villages across Germany — particularly in the eastern states, broadband has been terrible for years and under DT’s “leadership” it has not gotten much better, allowing other countries in the EU to sail past Germany in broadband rankings. Like AT&T and Verizon in the U.S., DT claims that where it has not upgraded its network, there is either no demand for fiber fast internet speed or inadequate return on investment. Also like in the U.S., DT has spent its money on other technologies, notably wireless, while investment in landline networks has not kept up.

Some German communities like Bretten, fed up with inaction, have taken charge of their own broadband future and are building their own fiber to the home networks. Martin Wolff has dreamed of a digital economy boost for his town of 28,000 located near Karlsruhe in western Germany.

As mayor, he has begged and pleaded with DT to give Bretten something beyond lackluster DSL service, which is now too slow to handle the kind of 21st century internet applications that better wired communities take for granted. Mayor Wolff wants Bretten known as a gigabit city. DT, in contrast, wants to leave Bretten as a forgotten digital backwater. The phone company had repeatedly told the community the broadband it gets now is more than good enough and nobody should hold their breath waiting for something better. DT’s few competitors, including Britain’s Vodafone, weren’t interested either. Bretten is too small… too… irrelevant to matter to their investors.

“They are only interested in serving the cream of the crop in the cities and don’t come to rural areas,” the mayor said.

Like in North America, Germans are asking themselves who should be in charge of their digital future — investor-owned telecom companies or the community itself. The country’s continued embarrassing showing in European broadband rankings has become an issue of national pride and has sparked a loud debate between established telecom companies and the public that wants faster and better broadband.

The noise of the debate has attracted the politicians, and the issue of German broadband has now taken center stage in the parliamentary elections, which will be held Sept. 24. Handelsblatt reports the issue of inadequate broadband now interests German voters more than the latest economic policy position paper or how Germany will manage to deal with U.S. President Donald Trump for the next three years. Many Germans have plenty of time for these kinds of offline debates, because online, it can take a minute to load a webpage on some of the country’s dial-up like DSL connections.

“Germany is one of the most under-supplied countries in Europe, especially in terms of rural coverage,” wrote Bernd Beckert, an internet expert at the Fraunhofer Institute for Systems and Innovation Research, in a recent study of European broadband. He said countries such as Switzerland, Spain and even tiny Estonia are far ahead of Germany. In fact, the Baltic states and many former Eastern bloc countries are moving towards a fiber future while Germany considers wrapping itself even tighter in copper wiring installed in the 1960s. More than 70% of German internet users get internet access through a DT-provided, ADSL-equipped landline. Many connect at just 1-6Mbps, about the same speed users were getting in the late 1990s when DT’s internet monopoly was abolished.

Since then, DT has done everything possible to encourage “competitors” to not build competing networks. In fact, most competing ISPs like 1&1, Versatel, Telefonica Deutschland, and Vodafone rent DT DSL-capable landlines to provision service to their customers. That means they cannot compete on speed and they are forced to rely on DT to maintain its wireline network. It is no accident that German adoption of fiber optics is stuck at only 1.8%, fifth from last place among the 35 member states of the Organization of Economic Cooperation and Development (OECD). In comparison, Japan and South Korea have more than 70 percent of their customers on fiber to the home connections.

Germany’s largest political parties that have been in government since 2005, the Christian Democratic Union (CDU) and the Christian Social Union in Bavaria (CSU) have tolerated DT and its anemic upgrade policies. Broadband stagnancy, many believe, would not be possible without acquiescence and appeasement by those in control of the country. That conspiracy theory is backed by many of Germany’s smaller political parties which believe it is time to change the government’s involvement with DT.

The Left Party’s platform supports nationalizing DT and returning it to a state-owned enterprise that will answer to the public policy priorities of the next government. The capitalist, pro-business Free Democratic Party wants to get the government completely out of its 32% remaining stake in DT and hope that free market solutions will emerge. In the meantime, that party proposes to use the proceeds of any sale to fund a national broadband subsidy fund to convince private telecom companies to upgrade their networks in underserved areas.

DT has not stayed quiet in the public policy debate either. After disappointing the German public by rejecting a proposal to build an open, nationwide fiber to the home network, the company has instead promised to upgrade existing DSL lines to newer technologies like VDSL and vectoring, which DT claims could deliver up to 100Mbps service. American phone companies like Verizon have been reluctant to head in a similar direction, admitting many of the next generation DSL technologies work better in the lab than in the field. Many of the technologies promoting the most dramatic speed improvements have also proved to be vaporware so far.

Deutsche Telekom HQ Bonn, Germany

“We are committed to vectoring, because it is the only way to provide people in rural areas with faster lines quickly,” Deutsche Telekom said in a blog post published in August. “If we are fixated on [fiber to the home], those in the countryside will remain left behind for years. It is simply impossible to roll out fiber lines to homes everywhere in the country. Neither the construction capacity nor the funding is available for that. Plus, there is quite simply no demand for it.”

Some of the other competitors in the market seem to agree with DT.

“No provider can achieve fiber optic expansion on its own,” said Valentina Daiber, a member of the board of Telefonica. Daiber said DT was already nearly $60 billion in debt. Daiber said she hoped a solution could be found after the election.

But just a week after Daiber made that claim Vodafone announced it will spend $2.4 billion on a new fiber to the premises network targeting 100,000 companies in 2,000 German business parks. The company will also spend up to $450 million partnering with municipalities to extend the network to about one million rural homes, in addition to boosting its current broadband speeds delivered to German cable customers to 1Gbps.

That announcement could cause DT’s DSL plans to eventually collapse, if Vodafone follows through on its fiber buildout.

Mayor Wolff has no intention of waiting to see how it all plays out. Wolff has convinced private fiber optics company BBV to install the fiber infrastructure and has a Dutch investor partner arranging $12 million in financing, which is always the biggest stumbling block to get fiber buildouts underway. Upfront construction costs often deter many municipalities and would-be competitors from launching. But for Wolff, where there is a will, there is a way to deliver fiber fast broadband, and he is making certain it happens sooner rather than later.

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