In Maine, bankrupt FairPoint Communications managed to scrape up enough cash to launch a lobbying effort to get a bill introduced, tailor-written to prohibit stimulus award winners from… helping provide improved broadband service to Maine residents.
Marrache
Incredibly, Sen. Lisa Marrache, D-Waterville, the assistant Senate majority leader, has introduced a bill that would ban the system from using any tuition money to help pay for efforts to expand broadband access. Marrache mouthed FairPoint’s talking points as she suggested poor college students’ tuition money would be diverted for broadband projects. She claimed the bill was introduced because constituents FairPoint’s lobbyists and employees were calling her about it.
The fact Marrache so misunderstood a public-private partnership between the University of Maine, Great Works Internet, and two private investors to improve the Internet “backbone” in Maine should be of grave concern to her constituents. Unless some campaign contributions from FairPoint and its executives make their way to Marrache’s next campaign, voters must be wondering whether the majority leader has a grip on the technology matters before her.
Indeed, the University of Maine explained the “middle mile” improvement program was not going to steal students’ lunch money, but rather dramatically improve broadband capacity for all comers — something FairPoint couldn’t be bothered with while breaking promises to expand broadband service themselves.
Jeff Letourneau, associate director of information technology at UMS, told the Bangor Daily News, “as for tuition subsidizing our broadband efforts, that does not happen and will not happen.”
WABI-TV in Bangor reported on the announced funding of broadband projects in Maine designed to improve rural broadband service statewide (12-17-2009 — 2 minutes)
Ironically, the network that will be built with the help of the broadband stimulus program will be open to any and all providers, including FairPoint, on a wholesale cost basis. But of course FairPoint would not own and control it, so it’s bad for them, and they’re trying to convince Maine lawmakers it’s bad for Maine residents as well.
Great Works Internet has had a running dispute with FairPoint
But then, FairPoint has had a vendetta of sorts against Great Works Internet for months, trying to overcharge the independent ISP for connectivity it obtained under provisions established in the Communications Act of 1996.
Also running interference for FairPoint is Rep. Stacey Fitts, R-Pittsfield, who serves on the Legislature’s Utilities and Energy Committee. His bill prevents any “undue” competition by UMS with existing broadband providers. In other words, he has written the FairPoint Entrenched Provider of Mediocre Broadband Protection Act. Fitts said he has concerns that the university’s efforts could have unintended consequences on private companies (read that FairPoint) that “already provide access.” It will have directly intended consequences on GWI by further disadvantaging them and potentially sinking their efforts to provide better service in Maine.
“If the university is able to bypass some of the competitive markets, and cherry pick, it could affect the ability to deliver broadband to others,” he said.
Exactly how it affects the ability of FairPoint to deliver what it has failed to demonstrate it is capable of delivering is a question Fitts doesn’t answer.
Fitts
“I know this will cause a lot of discussion in committee,” he told the newspaper. “But we need to have that discussion.”
Maine Public Radio covered the introduction of Rep. Fitts’ bill, and the debate swirling around it. (3 minutes)
You must remain on this page to hear the clip, or you can download the clip and listen later.
Constituents need to have a discussion with him. Unless he wants to be known as the representative from FairPoint, he might want to get out of the way of a project that has a chance of improving broadband in his state, as opposed to the empty promises from a bankrupt provider. If he wants to tie himself to FairPoint’s record of failure, voters can choose someone else to represent them at the earliest possible opportunity.
Those with a need for high speed broadband have tried, and failed, to obtain better service from FairPoint. As Stop the Cap! has reported in exhaustive detail, FairPoint was preoccupied in delivering third world phone service at the time, finally collapsing on the courthouse steps under the weight of its bankruptcy filing.
Bills like these in Maine are further evidence that Congress needs to act on the federal level to pass the Community Broadband Act, which would overturn these kinds of bought-and-paid-for protectionist bills passed in several states. Communities must have the right to bypass companies in the broadband shortage business.
MaineBiz Sunday spent nearly an hour going in-depth into broadband challenges in Maine, the problems with FairPoint Communications, the dispute with GWI, and more. Appearing on the show, which originally aired last November: Fletcher Kittredge CEO of GWI, Phil Lindley of the ConnectMaine Authority, Steve Hand of Know Technology and Rep. Cynthia Dill of District 121 in Cape Elizabeth. (36 minutes)
Coming up…
Comcast Is Allergic to the Word “Free” Except When They Are the Recipient
Hawaii’s landline telephone company, Hawaiian Telcom (HawTel), is awaiting approval from the state’s Public Utility Commission for its $460 million, stand-alone reorganization plan. The company, launched in 2005 from assets acquired from Verizon Hawaii, Inc., by the politically connected global private equity investment firm The Carlyle Group, lasted less than four years before declaring bankruptcy.
KITV-TV in Honolulu introduced Hawaii to Hawaiian Telcom in this report from May 3, 2005 (1 minute)
The downfall of Hawaii’s dominant landline provider, despite decades of stable service from its progenitors — GTE/Hawaiian Telephone Company and Mutual Telephone came as no surprise to telecommunications analysts and consumer advocates who saw trouble right from the start. The Carlyle Group and Verizon structured a deal that loaded $1.2 billion in debt onto Hawaiian Telcom’s balance sheet. Critics of the deal weren’t impressed by the fact Carlyle had no experience running a telephone company either, and was likely to dump the company after “dressing up the pig” to inflate the company’s value and walk away with big profits from the sale, as one analyst predicted.
Long time Stop the Cap! readers know how this works only too well. Anyone who followed the exhaustive coverage of the downfall of FairPoint Communications this past year will see plenty of familiar warning signs — piling enormous debt on the buyer, lots of promises made and broken, and plenty of billing and customer service problems that cause customers to flee to other providers. By 2008, 21 percent of the company’s 700,000 customers did just that. Remarkably, the only people who suffered from the failing business plan Hawaiian Telcom subjected on the islands were customers, lower-level employees, and company vendors. The top management that made all of the bad decisions were insulated from the impact with fat bonuses, even as other employees were terminated.
A year later, still more billing problems from HawTel, this time impacting more than 10,000 customers who can never sure what their monthly bill will look like. (March 21, 2007 – 2 minutes)
It’s all a word to the wise as Frontier Communications journeys down the same road FairPoint and Hawaiian Telcom have already paved.
On the business side, Hawaiian Telcom’s future foreshadowed its post-mortem if only based on the players who far too often have been rewarded for failure:
The Carlyle Group: Attacked by incumbent competitors in Hawaii when it sought to purchase Verizon’s assets in the state. Both Time Warner Telecom and Pacific LightNet warned Carlyle had little, if any experience running a telecommunications business, was going to mine the company for profits for its investors from rate increases, slash costs by reducing investment in their network and firing employees, and then try and resell the business at a profit just a few years later.
BearingPoint: Hired by Hawaiian Telcom to manage billing post-Verizon, the troubled firm managed to botch thousands of customer bills, double-charging them, crediting their accounts only to rebill them months later, and other irregularities. In the end, BearingPoint had to pay $52 million to Hawaiian Telcom and drop an additional $30 million in outstanding invoices. Like birds of a feather, BearingPoint itself collapsed in bankruptcy in 2009.
Ruley
Michael Ruley: Hawaiian Telcom’s CEO from October 2004 through February 2008, Ruley oversaw HawTel operations during the post-transition customer service nightmares. During his last quarter at the company, HawTel lost $29.5 million, and his prescription was a massive cost-cutting program that accelerated company layoffs that began in 2007, resulting in the dismissal of more than 100 employees, 50 of which were cut during his last full month at the company.
Stephen F. Cooper: A so-called “turnaround expert,” Cooper was hired as a ” permanent interim” CEO on February 4, 2008. His previous “success stories” included succeeding Kenneth Lay at the infamous Enron, and a stint as CEO of Krispy Kreme, which then promptly collapsed as a success story, with store closings and bankruptcies among its franchisees. His “permanent interim” position as CEO of HawTel ended after three months. “In my view, Hawaiian Telcom is financially stable and has ample liquidity available,” Cooper said less than a year before the company went bankrupt.
KITV has three reports telling viewers HawTel has filed for bankruptcy, the first time in Hawaii’s history a major utility has sought bankruptcy protection. (12/1 – 12/3 – 2008 – 7 minutes)
Bankruptcy As a Business Tool
The sale of Verizon Hawaii’s assets to Carlyle and its creature HawTel likely doomed the company from the start. Saddled with massive debt from the $1.6 billion dollar sale in May 2005, HawTel had to manage its 700,000 customers, protect its flank from increasing wireless competition from Verizon Wireless and T-Mobile, and constant customer poaching by Oceanic Cable. The cable operator offered “digital phone” service at prices lower than HawTel charged and broadband service far faster than the “up to 7Mbps” DSL service the phone company provided.
As customers continues to leave, the company’s bond values lost 65 percent of their value by the start of 2008.
The Wall Street Journal itself began to notice (subscription required) these telecommunications deals had enormous implications for consumers, particularly for those who depend on landline service:
Because major phone companies are reducing their exposure to the shrinking landline phone business, phone services in a growing number of U.S. states are being taken over by private-equity firms like Carlyle or by tiny telecom companies.
Verizon, for instance, has agreed to spin off its landline business in Maine, Vermont and New Hampshire to a small phone company, FairPoint Communications Inc. Alltel Corp., which services the Midwest, was recently taken private by private-equity firms TPG Capital and Goldman Sachs Capital Partners.
Many of these deals are raising concern among local regulators and consumer advocates, who are worried about the telecom savvy of the new buyers. “Why would a company one-10th the size and not nearly as deep of pockets as Verizon be able to make a success where Verizon hasn’t,” asks Rand Wilson, a spokesman for Verizon’s unionized workers, speaking of the Verizon-FairPoint deal, which is expected to close next week. A FairPoint spokeswoman says the company has plenty of experience taking over landlines in less dense regions of the U.S. and plans to offer new technologies and services to New England customers.
Yeaman
By December 2008, it was time to get HawTel’s lawyers in Delaware to walk into Bankruptcy Court. At the time of the filing, the company said it had about $1 billion in debt, which includes $574.6 million in bank loans as well as about $500 million in bonds.
The company sought bankruptcy to reduce the debt load, and in a remarkable concession, HawTel president and CEO Eric Yeaman spoke prophetic words not heard when the original deal was on the table:
“Our lenders all recognize that this business can’t support its debt load,” Yeaman said. “But they’re still figuring out what the magic number is. Whatever it is, it will affect different parties, especially investors who won’t get their initial investment back. That’s why it’s important that we increase in value going forward.”
In the nine months ending in September 2008, Hawaiian Telcom paid $68.2 million in interest to lenders, on top of a $35.7 million operating loss. The company has lost $425 million since it began operations in 2005.
KHON-TV Honolulu covers the bankruptcy proceedings in this report from November 9, 2009. (1 minute)
BonusGate
Adding insult to injury, Hawaiian Telcom may have been bankrupt, but senior management were assured of being kept whole. KITV-TV in Honolulu reported that three days before the company filed for bankruptcy, Hawaiian Telcom’s board of directors approved a financial incentive plan for 20 of its top executives for up to $2.3 million in retention bonuses and other benefits. The executives were eligible for amounts ranging from $57,000 to $2.3 million, if the company met certain earning and revenue targets.
Regular employees were eligible to use a secluded back door to exit the company after being notified they were being laid off to “reduce costs.”
Just three months after declaring bankruptcy, HawTel officials were back asking for approval for even bigger bonuses.
Gov. Linda Lingle was outraged to learn HawTel was planning on paying bonuses to employees despite being mired in bankruptcy.
In a filing with the U.S. Bankruptcy Court, Hawaiian Telcom said it was seeking authorization to pay 1,418 employees a total of $6 million, a reduction of 24 percent from their original proposal to pay $7.9 million. Understanding how bad it would look for a president and CEO overseeing a company into financial failure, Yeaman gave up his $609,000 bonus and elected not to participate in the special compensation program. Six of the company’s senior vice presidents were less generous, agreeing only to defer half of their scheduled bonuses.
Hawaii’s governor was outraged.
“The decision by Hawaiian Telcom to ask the bankruptcy court to approve $6 million in bonuses for its employees is unconscionable, and we will oppose it in court,” Gov. Linda Lingle said on March 19th. “Hawaiian Telcom is the critical communications backbone for our state, and its action to pay millions in bonuses puts the company in a precarious position that jeopardizes its long-term viability, as well as threatens Hawaii’s economic recovery.”
Bankruptcy can be a profitable business for more than just bonus recipients.
Fees billed by companies working on the bankruptcy reorganization also angered creditors and the U.S. trustee appointed to oversee the company’s restructuring:
Lazard Freres & Co. was being paid $2,527.38 per hour for its work in Hawaiian Telcom Communications Inc.’s bankruptcy case. The company billed for 237.4 hours of work between April 1 and June 30 totaling an astonishing $600,000, an amount Acting U.S. Trustee Tiffany Carroll said was way out of line. “Simply put, the amount of time Lazard is devoting to this case is not commensurate with its interim compensation,” she wrote in papers filed with the Honolulu bankruptcy court.
The Carlyle Group, despite its losses from piling on debt from the Verizon sale did manage a legislative win when it lobbied for and got passage of a nice deregulation package in the form of SB603, a state bill providing a deregulatory advantage to Hawaiian Telcom, now able to charge higher prices for competitors that connect with HawTel’s network to complete calls to customers. Better yet, SB603 provides for no oversight or justification for the rates HawTel chooses to charge. Hawaii’s legislature bowed to the lobbyists to deregulate a company that lost more than $1 billion dollars in bankruptcy.
Ernst & Young, LLP, a financial advisor hired by Hawaiian Telcom to advise on tax matters, would receive payment for services without as much scrutiny from the bankruptcy court, owing to HawTel’s lawyers seeking to have E&Y’s fees be subject to review only under the “improvident” standard, which would make it much harder to protest unreasonable fees.
The more money paid out to consultants, lawyers, secured creditors, and other advisors, the less money remains available to pay unsecured creditors — mostly suppliers and smaller companies hired as subcontractors to do the work HawTel farmed out.
What The Future Holds for HawTel & Customers
As the company works its way towards an exit to bankruptcy, it’s betting the company’s survival on Next Generation Television (NGTV), an “IPTV” service that delivers Internet, television, and phone service over a broadband network. HawTel seeks to construct a faster broadband network using a fiber-optic based backbone network and integrate it with the ordinary phone lines that string through neighborhoods across the islands. Similar to AT&T’s U-verse system, by reducing the length of copper wiring, HawTel can boost broadband speeds to at least 25Mbps, the bare minimum required to deliver a “triple play” package of phone, Internet, and cable-TV service to Hawaiians. Relying on less than that can seriously degrade parts of the package if customers try to use them all at once (try making a phone call, download a file, and watch two different channels at the same time on a network with reduced bandwidth.)
HawTel realizes without being able to sell all three services to consumers, they have little hope of surviving in a state where consumers are dropping landline phone service in favor of Oceanic Cable’s own “triple play” service, or relying on one of the cell phone providers serving Hawaii.
Of course, such an undertaking will require millions of dollars of investment, something The Carlyle Group may not exactly be enthusiastic to provide. Company observers suspect HawTel will instead come hat in hand to Washington looking for broadband stimulus funding so the company need not invest as much of its own money.
Why This Is Important To Millions of Potential New Frontier Communications Customers
Detailing the history of broken promises, bad customer service, billing problems, and the impact of more than a billion dollars of crushing debt, all hallmarks of two previous deals with Verizon — one with HawTel, the other with FairPoint Communications — illustrates just how risky the latest Verizon-Frontier deal could be to customers, suppliers, employees, and other creditors. HawTel’s debt hampered the company’s potential and kept it from providing the kind of enhanced services it speaks of today. What was once $1.1 billion in debt has been dramatically reduced by a Bankruptcy Court judge to just $300 million. The better-looking balance sheet frees the company to invest in the services it will be required to provide to protect it from future obsolescence.
Why state utility commissions are willing to risk rolling the dice on another risky deal, and one that is largely tax-free thanks to loopholes in the law, is a question that must be asked. Consumers, small businesses, and individual employees pay the price for the wrong decisions others make, all while those handful of executives who run the show have built-in insulation from the impact, earning bonuses and benefits that come regardless of their performance or lack thereof.
Bray Cary, president and CEO of a group of West Virginia television stations enjoying advertising revenue from Frontier Communications, was back on his Decision Makers program to allow an opposing viewpoint to the puff piece interview he held earlier with Frontier’s Ken Arndt, Frontier’s Southeast region chief. This time, he invited Ron Collins, vice-president of the Communications Workers of America to give the CWA side. Cary’s Tea-’N-CookiesBreakfast Club With Ken this was not. Cary decided to play hardball with Collins, leaving no viewer in doubt where Cary stood on the question of Frontier’s proposed purchase of West Virginia’s phone lines from Verizon.
Unfortunately, Collins was not completely prepared to rebut Cary’s pro-Wall Street, pro-deal propaganda and looked ill at ease at times during the interview. We’re not, and Cary’s “facts” deserve some investigation. After all, how hard should it be to rebut a guy who believes Wall Street and the banks have all the right answers for West Virginians’ phone service?
Right from the outset, Cary wants to play “devil’s advocate” with Collins, asking why in the world the CWA is opposed to this deal. That was a major departure from his cheerleading session with Arndt.
Bray Cary, Host of Decision Makers
“I’ve looked at this [...] their stock has been extremely stable. Wall Street appears to be signaling their financial viability is okay. Why is the stock market not reacting negatively? If it’s good for stockholders, how can it be bad for their financial stability. Stockholders want financial stability,” Cary said in a series of statements about the deal, including mentioning a Moody’s report on the deal.
The Moody’s report Cary talks about is for shareholders who will reap the rewards or suffer the losses based on the success or failure of the deal. Moody doesn’t rate the deal’s impact on consumers who have to live with the results. What’s good for Wall Street is not necessarily what’s best for customers.
“What you don’t have is anyone in the financial community suggesting this is a bad financial deal,” Cary said December 13th.
Wrong. Almost a week earlier, on December 7th, D.A. Davidson, a respected Wall Street analyst said the opposite. In a story published in Barron’s: “Frontier Communications’ Shares Not Wired for Success,” the analyst firm argued the regional telecom’s acquisition of Verizon’s rural lines will be… wait for it… bad for the stock.
Cary’s claim that Wall Street is concerned with the long term viability of companies belies the growing reality that much of the investment culture in America has a long term obsession with short term results. Your company is only as good as your last quarter’s financial earnings statement, and several bad ones in a row are usually enough to bring a recommendation to dump shares. Frontier has kept its stock value stable largely as a result of their steady dividend payment. Collins claims Frontier has gone beyond reason, paying 125% of earnings in dividends. That may make the stock a popular choice for income investors, but is also eerily familiar.
FairPoint Communications also enjoyed a healthy stock price because of its high dividend payout. Wall Street only got concerned when they thought that deal might not go through. Morgan Stanley issued a report in 2007 suggesting the deal between FairPoint and Verizon to take control of landline customers in Vermont, New Hampshire, and Maine, was itself helping to prop up the stock’s value. We saw how far that got FairPoint when the company declared bankruptcy a few months ago.
Ron Collins, CWA's vice president
Indeed, smaller independent phone companies commonly use high dividends to remain attractive to investors and stay viable in a tough market. Windstream is another such company and even CNBC’s Jim Cramer gave due diligence to the fact high dividends and stock value by themselves don’t necessarily predict the company’s long term success or failure.
Make no mistake, Frontier has sold this deal to investors based on dividend payouts, claimed cost savings, and a safe bet that any broadband in rural America will earn them increased revenue, especially where consumers have no other place to go for service.
Frontier will take on massive additional debt to finance the deal, but on paper it actually appears to reduce their debt ratio. That’s because when you add millions of new customers, the debt doesn’t look so big next to the increased revenue those additional customers will bring, assuming they stay with Frontier. Should Frontier’s performance underwhelm customers, they’ll drop service if they can. If mobile phone networks do a better job of reaching these rural customers, many will drop landline service anyway. When wireless broadband service becomes a more realistic option, customers might toss Frontier’s slow speed DSL overboard.
AT&T and Verizon have read the writing on the wall — an ongoing decline in landline service and the eventual death of the kind of service Frontier is providing its customers on its legacy network. Would you be better off with a company that recognizes the truth about the future of wired basic phone service, or the one that wants to buy up obsolete networks and hang on until the last customer leaves?
Cary’s concern starts and stops with shareholder value, not the individual long term needs of consumers across West Virginia.
“All of the bankers and all of Wall Street are saying financially this is a good deal financially for Frontier,” Cary argued.
“Good for Wall Street, bad for West Virginia,” Collins replied.
“Well, see I disagree… that has been a myth put out there, and the reason we don’t have any jobs in this state is companies don’t want to come here just because of that mentality. People need to make money. You look at where companies are flourishing, the workers flourish when they do,” Cary said.
Really. Then why are several of these telecommunications companies awash in revenue also continuing to reduce their workforce in their relentless effort to obtain “cost savings.” Someone is making money, just not the average employee. Every state has pro-business acolytes claiming businesses don’t want to come to their state because of regulation and a hostile business climate, even those with the fewest regulations, lowest taxes, and little protection for employees and consumers.
Cary does make one valid point: Verizon wants out of West Virginia and refuses to invest a dime in the state as it looks for a quick exit. Instead the company has diverted resources from serving smaller states’ phone service needs into its larger city FiOS fiber to the home system where it believes it can reap more revenue. Whether that disinvestment should be permitted in the first place is a question that needs to be asked.
Verizon is a regulated utility that is required to meet certain performance standards, and the company’s long history of operations under that framework, under which it profited handsomely, does require consideration. But the state can also provide additional incentives to make it more attractive for Verizon to commit more resources in the state, ranging from tax credits, public-private investment, rewards for performance and service improvements, etc. It can also find someone else to provide the service, or let local communities band together into cooperatives to run their own networks, should customers find that could deliver better service.
At the very minimum, Frontier should he held to strict conditions that require a fiscally responsible transaction for ratepayers, not just for shareholders and management. Verizon’s workforce, already cut to the bone, should not bear the brunt of “cost savings” either, both now and into the future. If Frontier wants to deliver broadband, they should commit to offering 21st century speed (not the 1-3Mbps service typical for their smaller service areas) without their draconian 5GB usage limit in their Acceptable Use Policy.
Cary doesn’t concern himself with those kinds of details, but consumers and small businesses in his state sure do.
Cary wants more jobs and more earnings for West Virginia. In the changing digital economy, high speed broadband isn’t an option — it’s a necessity. Verizon has a proven track record of being able to provide 21st century broadband — Frontier does not (sorry, 1-3Mbps DSL is more 1999, not 2010).
Cary makes an astonishing statement in the third segment of the interview which makes me question his ability to grasp the reality-based community most Americans live in today.
“I have great faith in the banking system in America, in Wall Street, to evaluate these things.”
That stunned Collins, who asked, “even after the 2008 crash?”
Cary seems to think “everything is back to normal.” Unfortunately, after the bailouts and big lobbying dollars being spent in Washington to preserve the status quo as much as possible, everything is back to normal… for Wall Street and the banks. The rest of the country, including West Virginia, is another matter.
FairPoint's Stock Price from 2007, when it announced the deal with Verizon, to late 2009 when the company declared bankruptcy. By late 2008/early 2009, what seemed like a great deal for investors was apparently not, as the panicked rushed for the exits.
I’ll put my trust in the wisdom of West Virginians who want good service and reasonable prices. If Cary wants to read from the Good Book of the “paragons of virtue” like AIG, Bear-Stearns and Goldman Sachs, let him sell his TV stations to help finance the bailouts. Remember that when we went through this before with Hawaii Telecom and FairPoint Communications, the cheerleading session on Wall Street lasted only as long as the quarterly balance sheets looked good. At the first sign of trouble, they bailed on the stock and both companies ended up in bankruptcy.
For them, it represented just another roll of the dice in the giant financial casino we call Wall Street.
For the rural residents of states like West Virginia who ultimately have to live with the results, this is their phone and broadband service we are talking about. Before all bets are placed and the dice are thrown, isn’t it worth considering them?
Frontier customers are advised to recycle their directories after November, but the new books won't arrive until March.
The dead tree format telephone directory lives on, dropped on the front doors of millions of Americans each year, often whether they want them or not. The ubiquitous “phone book” has been with us for 100 years, and continues to be the source of controversy, anger, and irritation for those who advertise in it, want either to be listed or unlisted from it, or simply want to stop killing trees to print it.
Now two phone companies have riled up their customers over the books — Frontier Communications for changing the printing schedule of the Yellow Pages, forcing businesses trying to economize to continue to pay for advertising they no longer want, and FairPoint Communications for omitting a large number of customers from their 2010 White Pages.
Coincidentally, the controversies impact two communities sharing the same name – Rochester, New York and Rochester, New Hampshire.
Even though this coupon expires in December 2009, Agatina's Restaurant will still be paying for their advertising until March, 2010.
In Frontier’s largest service area in western New York, businesses are confronting the fact they’ll be forced to pay up to four additional months for Yellow Pages advertising, including for coupons that expire in December. That’s because Frontier has decided to change the publishing schedule for telephone directories from the traditional month of November, in place in Rochester for decades, to next March. Residential customers may also accidentally discard their phone books, which indicate they should be recycled in November, assuming new directories are on the way.
The change impacts existing businesses who want to reduce or stop their Yellow Pages ads, as well as new area businesses that will have to wait until spring before their listings appear in the printed directories.
Although many customers now look up telephone numbers online and don’t use the White Pages print edition, many consumers still rely on the Yellow Pages to size up businesses, look for coupons, or learn more about businesses from their advertising.
WHEC-TV Rochester’s I-Team 10 reporter visits with the owner of Agatina’s Restaurant, who is upset to discover he’s going to be paying for his Yellow Pages ad longer than he thought. (2 minutes)
In southern New Hampshire, scores of customers receiving new directories from FairPoint are discovering they are not in the book, or have outdated addresses listed, some nearly 19 years old.
“Basically, they left a lot of our numbers out of the phone book,” said Rochester City Manager John Scruton.
“My main concern is we want to provide good service to the city of Rochester, and it is difficult for people if they cannot find key phone numbers using the phone book,” he said.
“Hopefully, they’ll correct it in the next generation of books, but that’s not going to help people who have trouble finding them right now,” he said.
Plaistow Town Clerk Maryellen Pelletier said, “We didn’t even get the right directory.” After years of getting the Haverhill, Mass., directory, the town suddenly was delivered the Manchester-Derry book.
In that same book, Union Leader-New Hampshire Sunday News, a reference to the company that publishes the statewide newspaper and this web site, is listed twice in succession, once with its current address, once with an address it left 19 years ago.
Ironically, FairPoint’s phone books are printed by another Verizon castoff that declared bankruptcy earlier this year: Idearc.
Customers are outraged by the latest FairPoint foul-up.
Jim in Hillsboro: “Other than hoodwinking the Public Utilities Commission, name me one thing FairPoint has done right. Anybody?”
Mo in Plymouth: “Is this strike three and out of business? I hope so. Maybe we can get some company who will at least tell us the truth.”
Doris in Manchester: “Good ole FairPoint. What else would you expect from this fine outstanding company? I have never seen such a screw-up company as FairPoint.”
Frank in Bedford: “Waste of paper = phone book. When everyone has a computer there should be no more phone books allowed. Speaking of being allowed, FairPoint is another thing that shouldn’t be allowed to screw up anymore in New Hampshire. Give them the boot.”
DL in Nottingham: “In Nottingham, we keep getting new phone books every week for all different sections of the state. They just keep showing up.”
Chris in Bow: “Let’s all hope FairPoint managed to print the correct home telephone numbers for members of the Public Utilities Commission.”
Bren in Manchester: “Three months running now my home phone has been disconnected for “non-payment.” Three times I’ve called, spent my lunch hour giving the date that my payment was processed, waited while they figured out where it was misapplied and then had to wait several hours for the service to be reinstated. Then the insult of a phone book that isn’t going to be used, delivered into a rain puddle – the result is a wasted tree.”
FairPoint Communications’ performance in New England, finally leading to bankruptcy, harms not only itself but also smaller local Internet companies providing jobs and service across the region. That’s the gist of a report in this morning’s Kennebec Journal outlining a dispute between FairPoint and Great Works Internet, a Biddeford, Maine Internet Service Provider caught between FairPoint’s fiber optic network and a billing dispute that demands GWI pay more than $3 million dollars by December 19th, or face service termination by FairPoint.
GWI leased fiber optic cables with FairPoint’s predecessor Verizon back in 2005. As part of the Communications Act of 1996, designed to spur competition, GWI obtained access at special interconnection rates, lower than the prices charged for retail customers. Verizon felt the price was too low, and went to court in 2005 to seek the right to charge “market rates” for access, but the issue was never settled before Verizon sold its landline network to FairPoint last year. In March of this year, FairPoint stopped accepting new orders from GWI for fiber service, which has kept the company from growing beyond its current fiber network agreements, costing the company plenty in new business. Then, in September, FairPoint back-billed GWI for $3,085,025, representing the price FairPoint felt GWI should have been paying since 2006. If the Maine-owned ISP doesn’t pay up, it has been threatened with having its service cut off altogether.
Fletcher Kittredge, GWI’s founder and chief executive officer, has been around the ISP business a long time. The company was founded in 1994, before Internet access became common, and he has grown the company into a locally owned business serving 18,000 customers with phone and Internet connections. At risk are the loss of up to 75 local jobs and a significant part of $13 million in annual revenues earned by what the Journal calls one of Maine’s leading Internet providers.
“For us, it’s vital that this be settled soon,” Kittredge told the newspaper. “FairPoint has been threatening us with some pretty draconian action.”
FairPoint’s threat has already cost the company customers, Kittredge said, and the uncertainty makes it hard to go after new business accounts.
But growth has been trimmed by FairPoint’s actions, according to Kittredge. For instance: The company signed a contract with the Skowhegan school system for high-speed access and set up equipment. But the connections it needed from FairPoint were never made, Kittredge said, and he had to cancel the school contract. That has had a chilling effect on efforts to go after new accounts.
“We can’t go out and solicit new businesses,” he said. “We can’t say, ‘This is going to be great, but we may not be able to deliver it to you.’ ”
Great Works hasn’t wanted to make a big deal in public of its fight with FairPoint. It’s concerned that the news will cause existing customers to worry that they could lose their Internet connections.
“It’s a threat I’m going to watch,” said Mitch Davis, chief information officer at Bowdoin College in Brunswick.
Bowdoin gets phone service from FairPoint, but most of its Internet access is from Great Works. Davis was aware of the initial court dispute, but didn’t realize FairPoint was threatening to cut line access. He hopes the bankruptcy judge will let the case go forward and get settled.
GWI told the Journal the company may just be trying to steal Great Works’ lucrative business customers. That might come to pass if the circuits are cut. Despite Davis believing FairPoint probably wouldn’t make good on their threat because of the bad publicity it would generate, he admits if they do, he might be forced to transfer the college account to FairPoint.
“I would do what I need to do to keep the college running,” Davis said.
One Journal reader characterized the dispute as just one more consequence of approving FairPoint Communications’ takeover of Verizon service in Maine.
“I would like to thank the governor of Maine for letting such a strong stable company like FairPoint in this state. You really did your homework. I thought we had a Public Utilities Commission that watched out for public interest. Boy are they on the ball. I am glad to see [...] they are not running my business.”
A network of West Virginia television stations spent 20 minutes this past Sunday airing a puff piece that could have been a video press release straight out of Frontier’s public relations department. Decision Makers, a self-described “agenda setting” public affairs program ostensibly puts important people on the “hot seat” to answer “tough questions about where West Virginia is heading and how it will get there.”
Hardball this was not. Host Bray Cary, who also happens to serve as president and CEO of the television station group, presided over a one-sided softball tournament for Ken Arndt, Frontier’s new Southeast region chief in a 20 minute interview where the hardest question was likely posed off camera – ‘where would you like to do lunch?’
Decision Makers is seen across West Virginia on Cary’s statewide network of television stations — WOWK in Charleston-Huntington, WBOY in Clarksburg-Morgantown, WTRF in Wheeling and WVNS in Beckley-Bluefield.
The appearance of Arndt on the program comes the same week Frontier reportedly committed to purchasing significant advertising time on the stations, leading a Stop the Cap! reader who informed us about the program to ponder whether this Fluff-Fest was part of the ad deal.
Viewers on the public comment section for the show were unimpressed.
“I can’t believe Mr. Cary didn’t ask the Frontier guy any hard questions. It was like a 20 minute commercial for Frontier, is that what you get for buying advertising with the station,” asked one. “I believe that we would all like to hear and understand Frontier’s direct response to challenging questions from an involved, and knowledgeable speaker. We need to hear more then a branding speech,” said another.
The interview was loaded with misleading and occasionally false statements, often coming from the program host, who served as presiding cheerleader. You can watch the program’s two segments, and then take a look at our reality check (and if an all-consumer volunteer website can manage this, why can’t Mr. Cary?)
Now that you’ve watched, let’s review the misleading statements, some made by Arndt, some by the host:
“You guys are serving 35% of West Virginia – that’s a third of the phones.”
Frontier may serve 35% of the landmass of West Virginia, but not 35% of the population, which is a very important distinction. Verizon has the overwhelming majority of customers in the state, not the tw0-thirds this statement suggests.
“I guess the only guys fighting you all right now are the Communications Workers of America union workers.”
Ken Arndt - Frontier Communications
That, along with other dismissive comments made by Cary represent just how biased his interview was. In many communities, citizens, businesses, utility commission staff, and yes – company workers are fighting this deal, because it’s bad news for every community facing a Frontier takeover. Of course, Cary doesn’t have anyone on his program to refute his guest (or him for that matter.)
“From a timelime perspective, and we’re actually finishing our [broadband expansion] engineering plan right now — by December 15th, my expectation is within the first 18 months we will make a substantial increase raising that 60% (of Verizon broadband penetration) exponentially and making a large investment and bringing in the individuals — the engineering and construction talent to be able to get it done as quickly as possible.”
Frontier anticipates cutting $500 million in costs per year if the deal consummates, according to Bloomberg News. Job cuts at both Frontier and Verizon will create some of that savings, according to Maggie Wilderotter, Frontier’s CEO. Customer service and field-technician jobs won’t be eliminated, she claims, but with a need for that level of cost savings, combined with the enormous debt Frontier will assume, where the resources to accomplish this expansion will come from is not explained.
Frontier’s broadband expansion targets so-called “middle-mile” expansion. That was precisely what was done in Rochester. Fiber optics are used to connect various central offices and some remote network extenders (known as DSLAMs) to try and extend DSL service into more distant areas further away from the central office. DSL speed is highly dependent on distance. The further away you get, the lower the speed you can obtain. Frontier plans to install limited amounts of fiber linking their offices in hopes of providing DSL service in areas that do not have access to it currently. Unfortunately, every indication is that Frontier’s DSL in most parts of West Virginia will provide a maximum of 3Mbps, if you’re lucky. In communities like Rochester, DSL service is marketed at 10Mbps, but as I’ve experienced myself, that speed really turned out to be 3.1Mbps living less than one-half mile from the city line.
To many consumers, hearing talk about fiber optics may leave the impression they’ll have this type of connection in their home or business. That’s highly unlikely. Frontier fiber serves their own internal network. Verizon FiOS serves you directly on a fiber optic cable.
‘In West Virginia in 2007 Frontier lost 2.7% of our access lines. In Verizon’s footprint they lost 6.7%. In 2008, Frontier’s lost just 2% while Verizon increased [their loss] to over 8%. Frontier has put together unique packages that continually add value to landlines. It’s through [Frontier's] packaging, providing unique services and unique technologies [that the company limits losses].’
Frontier is in the enviable position of focusing on rural markets long bypassed by the phone company’s biggest threats: cable and wireless competition. Verizon is not. The real reason for the dramatic difference in line loss is that Frontier customers often have no other choices for telecommunications services. In West Virginia, cable does not serve many rural communities, so there is no “digital phone” competition to worry about. Mobile phones in the most mountainous regions of the state can offer problematic service if it’s the only phone you have. Verizon, which does face relentless cable television competition, pays the price in greater line loss. Rural West Virginia has a much higher population of elderly residents, who are usually the least likely to drop traditional phone service. In fact, no state has a higher population of the rural elderly except Florida.
These factors afford Frontier more protection from line loss, not the so-called “unique services and unique technologies” the company only speaks about generally.
Arndt also responds to a question about Frontier’s plans for fiber and other forms of “telco-TV” such as that provided by Verizon FiOS. After noting the company does plan to move forward on an extremely limited basis by finishing FiOS projects already under construction, Arndt signals Frontier believes its status as a simple reseller of DISH satellite service somehow provides a superior solution to telephone company provided television.
Not really.
Who needs Frontier to sign up for DISH? Customers can sign up directly themselves. The advantage of “telco TV” really comes from the construction of the network to support it. Both AT&T and Verizon have built television-ready networks which not only compete with cable, but also give their customers more and better broadband choices that Frontier cannot and will not offer consumers. Frontier tries to valiantly spin its copper cable future by saying satellite television offers a better service, but in reality, being a DISH Network reseller hardly is in the same class as FiOS or U-verse.
Residents in the affected areas need to consider whether they are tying themselves to a company that believes copper wire slow speed DSL is good enough for now and into the indefinite future, has no plans to directly compete with cable and other providers in delivering a wired telephone company cable service, will not build FiOS-like fiber optic networks in areas that one day could have been wired by Verizon, and will live with a company content with delivering “ubiquity” of service across all of its service areas, which in reality means large communities will suffer with lowest common denominator service, and rural communities will be lucky to get “good enough for you” broadband.
Arndt’s comments about fiber connectivity in selected portions of their service area refer mostly to multi-dwelling units and new housing developments where service was provided more cost effectively through a shared fiber connection. That’s not FiOS either.
Color us unexcited about the prospect of Frontier’s ‘unique cable television via broadband service’ Arndt hints at. That is almost certainly the new DISH set top box that can connect to your Frontier DSL service to stream on-demand television shows. With Frontier’s 5GB Acceptable Use Policy for broadband, don’t expect to watch too much if and when they enforce the limit.
Among the most shameful segments of the 20 minute video press release Cary presides over is in the second half, when he asks and answers his own questions, spun in Frontier’s direction, about their ability to digest Verizon’s operations that dramatically dwarf Frontier’s current size and scope. He’s even done “his research,” which suspiciously appears to be surfing through Frontier’s own talking points from their website and public relations efforts. As far as Cary is concerned, Wall Street says they “like” the deal, and opposition to it is “a lot of noise.”
Arndt responds that the opposition to the deal comes because of FairPoint Communications, which he says failed because of the complexities of integrating their billing systems. As Stop the Cap! readers already know, FairPoint’s troubles went well beyond computer integration problems. Arndt’s reasoning is akin to saying New Orleans drowned in Hurricane Katrina because a storm sewer up the street was clogged. More than 20 news reports on this site alone document the entire sordid story. On every level, FairPoint failed New England for a range of reasons:
The enormous debt FairPoint was saddled with made it difficult for the company to spend the money necessary to maintain and grow their network and survive an economic downturn. Frontier will also take on enormous debt during a challenging economy and claims it will spend millions to expand broadband service into rural areas where fewer potential customers mean a longer Return On Investment;
FairPoint’s acquisition of Verizon New England involved more customers than FairPoint served nationwide before the buyout. The exact same thing is true of Frontier in this deal;
FairPoint’s earlier acquisitions were small, independent phone companies run with limited bureaucracy. Verizon, and its predecessor Bell System businesses, have done things their own way for decades, making theoretical transitions doable on paper and chaotic in reality. The exact same scenario exists with Frontier’s purchase of Verizon service areas;
Poor service, unresponsive and overwhelmed customer service centers, insufficient investment, and broken promises plagued FairPoint’s New England adventure from day one. Frontier risks repeating FairPoint’s mistakes, putting customers with no other options for telecommunications service at serious risk.
Cary doesn’t have the insight or the interest in digging down into Arndt’s claims. Maybe he forgot. As far as Cary is concerned, everyone in West Virginia should just get familiar with the Frontier name.
Of course, actual consumers aren’t invited on Decision Makers. Nor are any groups opposed to the deal. But West Virginians and others can be “decision makers” and choose a different path for their telecommunications future. They can get on the phone and call their state representatives and tell them to oppose the deal. They can also contact the state utility commission and file their own comments telling them this deal isn’t worth the risk — three bankruptcies out of three earlier deals.
Even when playing this kind of softball, three strikes should mean you are out.
Charleston, West Virginia is just one of many cities potentially served by Frontier
Frontier Communications has won approval from state utility commissions in California, South Carolina, and Nevada to take over telephone service currently provided by Verizon Communications. The decisions were unanimous in all three votes by Commission members, and involve telephone service in several small communities in all three states.
Circles represent Verizon service areas transferred to Frontier in Nevada and California
Verizon’s castoffs serve a small percentage of customers, which made the transaction fly under the media radar in most cases. In California, Verizon dumps customers in a small section on the northwest border with Oregon. In Nevada, several small communities south of Reno are involved. In South Carolina, Verizon drops scattered groups of customers in small clusters across the state.
These state regulatory approvals follow an October 27 announcement by Frontier that its shareholders have approved the transaction, which will result in Frontier owning Verizon’s wireline operations in all or parts of 14 states.
While the approval appeared pro forma in those three states, West Virginia is another matter. Strong employee union and consumer group protests continue across the state, with many consumers concerned about the implications of Frontier controlling nearly all wired phone lines in the state. The Communications Workers of America held a conference call with the media Wednesday to outline its opposition to the deal.
The CWA has been a vocal opponent of the deal, claiming it will risk West Virginia’s telecommunications future with a company without the financial capacity to provide the type of advanced services Verizon is providing in other states. Kenneth Peres, an economist with the Communications Workers of America, said the deal was extremely risky for consumers, workers and the affected communities.
Peres pointed to the perfect record of three out of three failures for earlier Verizon spinoffs. FairPoint Communications declared bankruptcy early this week after trying to take on the service needs of three New England states.
Peres told the Charleston Daily Mail that if the deal goes through, Frontier “will find it extremely difficult” to meet its $8 billion in debt obligations while simultaneously investing enough capital to maintain its physical plant, improve service quality, set up a new system in West Virginia, lease systems from Verizon in 13 other states, provide video service for the first time (in Indiana), and ensure adequate staffing “while paying out a lot more in dividends than it makes in profits.”
Frontier went on the attack Thursday, accusing the union of interfering just to grab concessions for itself.
Verizon service areas sold off to Frontier in South Carolina
Steve Crosby, Frontier spokesman, said, “They’re just throwing stuff up against the wall. They know this is a good transaction and they’re trying to extract their pound of flesh. They want more concessions. This is their opportunity to ask for more money for their union membership and more benefits. That’s what they want. Union membership across the country is declining. This is how they’re trying to extract as much as they can from either Frontier or Verizon.”
As for Frontier’s debt load, “This is actually a de-leveraging transaction,” Crosby said. “We’re taking on debt but we’re taking on a whole lot more revenue. We’re currently at a 3.8 times revenue-to-debt ratio, going down to 2.6. So we actually get better in terms of revenue to debt. And today we’re fine. We’re able to pay a nice dividend. The day the transaction closes, we are approaching investment-grade borrowings.
“Our board of directors made the decision to lower our dividend by 25 percent when the transaction closes to give us even more cash to invest in infrastructure and to give us even more financial flexibility,” Crosby said.
“Every time we have an argument we win and they bring up other stuff,” Crosby said. “They never bring up the de-leveraging because it undermines their argument. They never bring up the fact that we will reduce our dividend because it undermines their argument.
“We have said we will maintain employment levels for 18 months” after the transaction closes, Crosby said. Because of required regulatory approvals and other factors, the deal can’t close before April 2010.
“So you can figure that’s two years,” Crosby said. “Who nowadays has that kind of job security? I think we’re bending over backwards. I wish I had the pension plan, the job security the CWA has. They’re looking at extracting more from Verizon and Frontier.”
When asked by the newspaper why Frontier shareholders would approve a deal that was destined for failure, Peres told the newspaper:
Frontier’s business model is built on acquisitions. Frontier bought a portion of Global Crossing’s business which increased revenue and access lines “but that began to decline,” he said. “They bought Commonwealth Telephone but that’s flat-lining. What’s the next step? What were they going to do – improve infrastructure or go through the acquisitions route again?” Continuing with acquisitions “postpones the day of reckoning,” he said.
Commentary: Our Take
Crosby’s comments seem more suited for a talk show audience that hates unions. Obviously the union does not think this is a good deal for West Virginia, and considering the track record of earlier Verizon deals, and the correct predictions from employee unions on their inevitable outcomes, they have every right to oppose the deal on its face. Crosby apparently has time to address declining union membership, but not the much more relevant decline in the traditional phone company’s bread and butter business – landlines. Frontier, like other phone companies, continues to see disconnect requests coming from coast to coast as customers dump the phone company for a cable digital phone product, Voice Over IP line, or rely on their cellphone.
West Virginia would be solidly Frontier territory if the state approves the sale
Verizon recognizes their traditional business is a dying one, which is why they are in a hurry to diversify into competitive broadband and video services over their fiber optic FiOS network. Where it doesn’t make economic sense (under their current business plan) for Verizon to deploy FiOS, decisions are being made about whether to keep those smaller phone operations within the Verizon family, or sell them off to companies like Frontier. What Frontier acquires today from the standpoint of customers and revenues could represent the high water mark, and without offering robust options for a digital future, Frontier will likely continue to see customer erosion.
FairPoint acquired seemingly healthy Verizon companies serving the entire states of Maine, New Hampshire, and Vermont. When their efforts to seamlessly combine Verizon’s legacy systems with FairPoint’s own systems failed, that along with an inability to properly service customers, caused a death spiral as customers dropped service, which led FairPoint straight into bankruptcy.
Frontier’s record of investment and service in western New York speaks for itself. Time Warner Cable eats Frontier for lunch, with less expensive “digital phone” service, much faster and more reliable broadband, and a video package that Frontier doesn’t offer (reselling DISH Network is hardly the same as providing video service that doesn’t come from a third party company’s satellite dish nailed to the roof). Frontier is ready and willing to stick with DSL service at speeds that are basically maxed out. Time Warner Cable evidently doesn’t even consider Frontier a significant enough player to deploy upgrades in this area while they are in a hurry to provide them where Verizon FiOS is under construction.
When a company isn’t prepared to keep up with the rest of New York with fiber deployment to the home, the chances of that kind of service reaching West Virginia anytime soon are near zero.
But Frontier’s unique position as a specialist in “rural service” allows it to eke out an existence in areas where cable isn’t a big competitive threat, and where *any* broadband is better than no broadband at all, at least for now. But without a plan for keeping up with the fast changing broadband world, customers happy with 3Mbps service today will despise the company for being stuck with those speeds later. A lot of people in Rochester sure aren’t happy being stuck with Frontier DSL, and that nasty 5GB “reasonable use” language in the Acceptable Use Policy.
Crosby’s comments about CWA member job security, which he evidently envies, says more about the union’s commitment to its members than Frontier has to him. Perhaps Crosby can quit his spokesman job and switch to a position that gets him CWA membership with a pension and job security. Perhaps if the people of West Virginia say thanks, but no thanks, Frontier will be in a better economic state than it would be if this mega-deal collapses under the weight of debt and integration challenges. Then Crosby can keep his job with the evidently lousy benefits.
Peres’ assumption that Frontier lives only through acquisitions isn’t the complete story. Just like the myth sharks must constantly swim to survive, Frontier doesn’t constantly have to acquire to survive either. It does have to concern itself with an ever-consolidating telephone line industry, where the smaller independent companies continue to be snapped up by a dwindling number of players. If a Windstream or CenturyTel comes along with a great offer, Frontier itself may have a new name — Windstream or CenturyTel.
The economies of scale and cost savings are routinely cited by investors promoting consolidation. It’s no surprise Frontier shareholders voted for the deal. Bigger is often better for many investors, as long as the quarterly financials play to their interests. Listening to Frontier investor conference calls, the Wall Street bankers, and the media that support them, are constantly concerned with keeping costs cut to the bone, customer defection limited, risk reasonable, and that dividend being paid. They are satisfied with Frontier’s rural, less competitive market focus, even if the customers that end up served by them are not.
Barely 18 months after taking control of telephone and broadband service from Verizon Communications, FairPoint Communications collapsed under the weight of enormous debt and an economic downturn, announcing they would declare Chapter 11 bankruptcy this morning.
As Stop the Cap! reported Friday afternoon, sources told us the company had quietly notified key employees of the impending filing, which was expected as early as this weekend. On Monday morning, the announcement of the filing was made to the media and to an unsurprised customer base of several million dissatisfied customers in Maine, New Hampshire, and Vermont who lived through a never-ending nightmare of bad service and broken promises from a company many believe “bit off more than they can chew.”
Today’s announcement may bring additional scrutiny to the next telecommunications deal Verizon has planned for customers in 13 states. Frontier Communications, much like FairPoint, wants to take on the operations of a departing Verizon, who wants to disengage from smaller communities to focus on providing fiber optic telecommunications service in larger cities. Today’s bankruptcy announcement marks three out of three failures for companies assuming control of Verizon’s discarded operations. Hawaii Telcom declared bankruptcy last December, three years after being sold to The Carlyle Group, a politically well-connected private equity investment firm. Idearc Media, a Verizon spinoff of the phone company’s print and online yellow pages business declared bankruptcy on March 31st, and FairPoint Communications, which took over Verizon’s northern New England phone operations made its bankruptcy known this morning.
FairPoint executives admit the downturn in the economy and much larger than anticipated conversion problems contributed to the declaration. FairPoint has accumulated more than $2.7 billion in debt, mostly from the Verizon transaction, and faced difficulty making payments on that debt as credit markets froze and customers fled the terrible service problems that developed when the company tried to integrate 600 Verizon computer systems and software to 60 FairPoint systems on January 30th.
“Those two things contributed to FairPoint having too much debt, at the end of the day,” said David Hauser, chairman and CEO of FairPoint.
Creditors now effectively control FairPoint Communications, and they’ve agreed to forgive $1.7 billion dollars in debt and reduce the company’s interest payments to keep service operational. Company officials are also looking for savings from cost-cutting measures. Union officials are extremely concerned that could mean significant job losses for a company already stressed to provide service. Although company officials characterized today’s announcement as a “non event” for FairPoint customers, many are not so sure.
“There have been a lot of promises made by FairPoint,” one customer told a Maine television station. “Services that were promised are not being delivered,” said another.
Skepticism was rampant that today’s bankruptcy announcement would be the start of a new beginning for a restructured FairPoint.
“On the news they said that the services would go on as usual, which means crappy,” said one Maine customer in Portland.
Perhaps to underline that sentiment, FairPoint spokeswoman Jill Wurm reported FairPoint broadband’s e-mail service is out of order this evening. Wurm said anyone with a fairpoint.net e-mail address has been without service since 6pm. The company was unable to project an estimated time when service will be restored. It was also not known how many customers were affected.
Union leaders said they take no pleasure in the fact their predictions were all-too-accurate about the ultimate outcome of the FairPoint-Verizon deal.
“What good does it do us? We can say it, but we’re left here to deal with it,” Pete McLaughlin of the International Brotherhood of Electrical Workers, which represents FairPoint employees, told the Associated Press.
State regulators across all three New England states plan to keep a watchful eye on reorganization proceedings. Special consultants and attorneys have been hired to give the states input and guidance as the restructuring commences. For some consumers, that doesn’t provide much comfort because many of these same regulatory agencies approved the deal in the first place.
Stop the Cap! has extensive coverage of today’s developments from across all three states’ local newscasts. We’ve also been notified representatives of utility boards now considering a similar spinoff with Frontier have also arrived here to gain our perspective on the sales deal now before them. For that reason, we will continue covering FairPoint’s final months before today’s announcement to complete the record on FairPoint and its impact on customers, state regulators, and public safety officials.
Our coverage begins with today’s announcement, starting in Maine, where it was a lead story across the state.
WGME-TV in Portland leads their 6pm newscast this evening with the news of FairPoint’s bankruptcy and what it means for customers, some of whom remain skeptical. (5 minutes)
Phillip Dampier resides in Frontier's largest service area: Rochester, New York
Consumers across 13 states impacted by the proposed Verizon sale to Frontier Communications, as well as existing Frontier customers, should tell regulators to reject the deal.
Those of us living and working in Rochester, New York are extremely familiar with Frontier Communications. For more than 100 years, Rochester Telephone Corporation provided excellent, independent telephone service to Rochester and a significant part of the Genesee Valley. The company had a reputation for excellent reliability and charged rates considerably lower than New York Telephone, a Bell subsidiary, in other upstate cities like Buffalo and Syracuse. In 1995, Rochester Telephone was renamed Frontier Communications, because the company wanted to position itself as something more than just a phone company.
Frontier was acquired in 2001 by Citizens Communications of Stamford, Connecticut, who has provided service ever since. Ironically, that company thought Frontier was a better name than the one they had used for decades, and Citizens renamed themselves Frontier Communications in 2008.
Today, Frontier Communications serves just under three million customers, primarily in suburban and rural communities in 24 states.
Since Citizens acquired Frontier, and its largest operating service area in metropolitan Rochester, the company has made some changes to the local telephone network. Fiber optic connections are now common between their central offices and smaller “satellite” central offices. A local wi-fi network was installed in association with Monroe County, in part as a political maneuver to stop municipally owned and operated affordable wi-fi networks from getting off the ground. As a concession to the county, a much smaller “free” wi-fi network was also included. (See below the jump for video news coverage of Frontier’s promises vs. reality)
The company’s broadband service relies on ADSL technology delivered by traditional copper telephone wiring, providing service in Rochester at speeds up to a theoretical 10Mbps. Actual speeds vary tremendously depending on the distance between your home or business and the telephone company central office serving it. In most smaller communities, speeds are far lower. In Cowen, West Virginia, Frontier markets broadband service at just 3Mbps, a typical speed for Frontier’s smaller service areas.
Unfortunately, Frontier has shown no initiative to move beyond offering traditional DSL service to its customers, including those in western New York. Across other New York State cities, Verizon is taking a far different approach. In larger communities, it is aggressively installing fiber optic wiring to both homes and businesses. Verizon FiOS positions the company to effectively compete against their traditionally closest competitor – cable television. For several years, cable operators have offered a better deal for its “digital phone” service, which works with existing home phones but delivered over cable TV lines, often charging less than a traditional phone line, and cable throws in free long distance on many of its plans.
The ubiquitous cell phone has not helped. Many younger Americans can’t understand why they would want to bother getting a traditional phone line, when the mobile phone in their pocket works just fine, and they can take it with them wherever they go. The result has been a steady erosion of traditional “wireline” phone lines, and a corresponding decline in the revenue earned from the service in many areas.
The Communications Workers of America contract Verizon promises with reality for consumers impacted by earlier deals. (click to enlarge)
In September Verizon CEO Ivan Seidenberg told a Goldman Sachs investor conference that the wired phone line business was effectively dead. Seidenberg recognized that trying to guess when the company would stop losing “landline” customers was like guessing when a dog will stop chasing a bus. In other words, the future of Ma Bell is not delivering phone service — it’s deploying advanced networks that are capable of providing customers with video, broadband, and phone service across one wire, preferably a fiber optic one. Those that can manage the transition will succeed, those who cannot or won’t will face a steady decline to obsolescence.
There is only one major problem — it costs a lot of money to rewire entire communities, much less states, with fiber optic wiring. It’s like building a phone network from scratch. A company contemplating such a challenging undertaking starts by asking how much it is going to cost and when will it profit from its investment. Many on Wall Street don’t like either question because of the up front cost, and are even less happy with the prospect of taking the long view waiting for those costs to be recouped from customers.
To date, Verizon is the most aggressive major phone company in the nation building a pure fiber optic system in its larger service areas. AT&T, which provides phone service in many states, has taken a more cautious approach using a hybrid fiber-copper wire design they market as U-verse. A handful of independent phone companies and municipally owned providers have undertaken to wire fiber optics to the home as well, so they can sell video, telephone and broadband service to their customers.
A major challenge confronts phone companies servicing more distant suburban and rural phone customers, often living far apart from one another in sparsely populated regions. It costs more to service these customers, and the potential revenue gained is often not as great as what can be earned from their urban cousins. Verizon doesn’t see many rural customers as part of their future business plans and have begun to systematically sell some areas off to other phone companies, usually in tax-free transactions. One company that sees an ambitious future in serving rural America is Frontier Communications. For them, finding a niche among the big boys gives them safety and security, particularly in areas that don’t have a cable competitor (or any competitor at all).
Frontier’s acquisition strategy is to sell regulators and the public on the idea that allowing Frontier in guarantees a much better chance for broadband service to reach the communities Verizon skipped over. Their argument for success in a business seeing steady declines in customers is that broadband service will stem the tide, and help them remain profitable. More than doubling their size with the acquisition of Verizon’s latest castoffs means more opportunity to market broadband service to those underserved communities. Frontier argues it can be a more nimble player than Verizon because it has marketing and service experience in rural communities previously ignored by Verizon.
Frontier’s ability to provide broadband service is not the most important question. More important is how Frontier will define broadband and at what speed. Also critically important is how Frontier will be prepared to deliver the next generation broadband platform that other communities will see with speeds up to 100Mbps, often on fiber optic networks.
Frontier’s reliance on ADSL technology, which worked fine for 1990s Internet connectivity, is increasingly falling behind in the speed race, and for much of the next generation of online content, speed will matter very much.
Unfortunately, the track record for the success of these spinoffs has been universally lousy for consumers and for many employees who live and work in the impacted communities. Promises made quickly become promises delayed, and later broken as companies like Hawaii Telecom and FairPoint tried to integrate former Verizon operations into their own. Service outages, billing errors, confusion, and finally a mass exodus by customers looking for better alternatives has been the repeated result. The faster customers depart, combined with the enormous debt these transactions create for the buyer, the faster the journey ends in Bankruptcy Court. There is nothing about the Frontier deal proposal that suggests their experience will be any different.
Shouldn’t Three Strikes Mean You Are Out?
Consumers should tell state regulators they should pay careful attention to the failures Verizon has left in its wake from previous deals:
FairPoint Communications, which assumed control of phone service in Maine, New Hampshire and Vermont just last year declared bankruptcy this morning, even now still plaguing customers with billing and service problems. The company choked on the debt it incurred from financing the deal. Before this morning’s bankruptcy, their stock price had lost 95% of its value, and customers were leaving in droves, only accelerating the company’s demise. FairPoint thought it could integrate Verizon’s byzantine billing system into its own. Thinking and doing turned out to be two entirely different things. Frontier has experience integrating other small independent phone companies into its billing system, but now faces the same prospect of dealing with Verizon’s own way of doing everything, and for twice the number of customers Frontier serves today.
Hawaii Telecom and its 715,000 customers were dumped by Verizon in 2005. Once again, transition issues plagued the post-sale experience for those customers, and almost a quarter fled the company over three years. Last December, Hawaii Telecom declared bankruptcy.
Verizon’s yellow pages unit was also thrown overboard by the company to Idearc in November 2006. Saddled with $9.5 billion in debt and interest payments representing almost one quarter of the entire company’s revenues, Idearc finally had enough in March 2009 when it also declared bankruptcy.
The deal between Verizon and Frontier could easily follow the same path, as Frontier gets loaded down with massive debt financing the purchase, and has to immediately provide better service than Verizon did, or face a stampede of customers heading for the exit. The impact of a debt-laden Frontier could be felt by more than just the newcomers. Existing Frontier customers could also be impacted as the company turns its attention to a potentially lengthy integration process.
The Promise of Anemic Broadband, The Fiber Myth & The 5GB Acceptable Use Policy
Time Warner Cable competes effectively against Frontier DSL in the phone company's largest service area
Frontier’s plan to bring broadband to a larger number of customers is a noble gesture, particularly for households that currently do not receive any broadband service. Unfortunately, a short term gain of what will likely be 1-3Mbps DSL service will leave these communities behind in the next few years as broadband speeds accelerate far faster than what Frontier is prepared to provide.
Some press accounts in West Virginia have left residents with the impression fiber optic service will reach their individual homes should Frontier be successful in purchasing Verizon’s assets. There is no evidence to suggest this is true.
In earlier deals, these kinds of rumors started when companies advocating the sale staged press-friendly events announcing a fiber connection between hospitals, schools, or community centers, allowing the media to give the impression there would be fiber upgrades for all… if the deal gets approved. In the case of Frontier, they have suggested they will continue work on Verizon’s FiOS system in the communities where construction was already underway. That’s an important distinction for the millions of customers who don’t live in those communities. Verizon’s FiOS network that is part of this transaction serves less than 70,000 residents.
Residents should consider what possibility their community has of obtaining this type of advanced service when Frontier refuses to provide anything comparable in their largest service area – Rochester, New York.
If they are not doing it in Rochester, do you really believe they will do it in your community?
The company certainly has a competitive need to provide such service in our city where Time Warner Cable has accelerated speeds beyond what Frontier is capable of providing. Indeed, Time Warner Cable officials tout their largest number of new Road Runner broadband sign-ups comes from departing DSL customers who are fed up with the anemic, inconsistent speeds offered by this aging technology.
In the town of Brighton, I gave Frontier DSL service a try this past spring. The company promises up to 10Mbps of service to my area, which is less than 1/2 mile from the city of Rochester, and literally just a few blocks from the town’s business center. After installation, the company was only able to provide me with service at 3.1Mbps, just less than one-third of the speed marketed to local residents. Even more surprising was the fact they charged a higher price for that service (including taxes, fees, and modem rental charge) than their competitor, Time Warner Cable.
This website was founded after Frontier inserted language into its Acceptable Use Policy defining “reasonable” broadband usage at just five gigabytes per month. That’s right, the same limit your mobile phone provider applies to their wireless broadband service. Viewing one HD movie over Frontier’s DSL service would put you perilously close to unreasonable use.
Are consumers willing to give up unlimited Verizon DSL service for a company that refuses to drop a 5GB acceptable usage definition from their terms and conditions?
America is on the threshold of 50-100Mbps broadband service, with some communities already enjoying those speeds. If your community isn’t served by a competing provider, do you want to limit your future to yesterday’s DSL technology, and then told it is inappropriate for you to actually use it beyond five gigabytes per month?
The Billing and Customer Service Nightmare
The days of local customer service are over with Frontier. Back during the days of Rochester Telephone, there were several occasions when a local customer service representative would recognize me by name. Those days are long gone. Now, a good deal of Frontier’s customer service is handled by a call center in DeLand, Florida. While the representatives mean well, experiences with them suggest many are not well equipped to understand and consistently market Frontier’s products to existing customers. Pile on more than double the number of new customers, and the problems are likely to become much worse.
Frontier has personally plagued me with billing errors this past year, gave inconsistent and inaccurate answers to pricing and service inquiries, and created major runaround hassles to correct them. From the DSL self-install kit that never arrived (requiring me to visit a local office to pick one up myself), to the impenetrable and inaccurate bills that resulted, the company could not correct the problems without consulting someone with supervisor status. I canceled service within the month.
Customers signing up for service have been pressured into “peace of mind” agreements that lock customers into long term contracts that automatically renew unless the customer actively cancels them (and is certain the request to cancel was processed correctly.) Frontier has been fined twice by the New York State Attorney General for “misleading advertising and marketing tactics,” once in 2006 and again just a few weeks ago. Some customers are now waiting for substantial refunds ranging from $50-400 dollars for “early termination fees” charged when they tried to cancel service.
Are you comfortable knowing some customers have been inappropriately placed on a one to three year contract without their full informed consent, and billed hundreds of dollars when they tried to cancel?
The Art of the Deal
By no means will a Verizon-Frontier transaction be the last. As the industry continues to consolidate around a dwindling number of wired phone line customers, it’s a safe bet there will be more phone customers thrown away by the bigger players. Nothing guarantees Frontier itself will be freestanding when the consolidation wave ends. While these deals may make sense for some shareholders and company executives, they often don’t for local experienced employees who know the network and how to provide quality service. They never have for consumers who will always have to foot the bill to pay off these transactions and have to live with the company trying to integrate Verizon’s bureaucracy with their own.
Some consumer groups and local workers correctly predicted, in each instance, the horrific outcome of these kinds of deals. Their uncanny knack to correctly predict disaster contrasts with company marketing, lobbying, and astroturf efforts that promise the sky and tell each successive news reporter covering the latest atrocity that “things are getting better” and “will be fixed soon.” Unfortunately for too many customers, the fix has to come from a judge in Bankruptcy Court.
The International Brotherhood of Electrical Workers who repeatedly warned about the perils of FairPoint, now warns state regulators about Frontier, and direct attention to the numbers:
If the transaction is approved, Frontier management will have to deal with a 300% increase in access lines (from 2.2 million access lines now to 7 million after the sale) and a 200% increase in employees (from 5,700 employees now to 16,700 after the sale).
Frontier’s debt will increase from $4.55 billion to $8 billion—an increase of over $3.4 billion. Servicing this debt will mean less money for infrastructure, service quality, and high-speed internet build out.
While Frontier argues that somehow this deal will make it stronger, the issue for the states being sold is how much weaker it will make the operations in those states.
The leverage ratio is one way to measure the financial health of a company. The leverage ratio is calculated by taking net debt and dividing it by earnings (before interest, taxes, depreciation and amortization). The leverage ratio for the states being sold will increase from 1.7 immediately before the transaction closes to 2.6 after the sale. The entire deal revolves around Frontier’s ability to cut its operational expenses by $500 million or 21%.
This is significantly greater than the 8-10% cut that FairPoint hoped to achieve—and much of these savings were to be generated from replacing Verizon’s network and back-office systems. Yet, Frontier states that all of the operations except for West Virginia will continue on Verizon’s existing systems—for which Frontier will pay a fee.
Where will Frontier generate the savings—from reduced service quality, workforce, or maintenance of the communications infrastructure? In spite of brave talk from Verizon and Frontier, as recent events have demonstrated, obtaining financing for a transaction this size can be difficult. Frontier does not currently have financing for the additional debt it will take on for this transaction.
As an existing Frontier customer, I’d like an answer myself.
Watch these two Wall Street guys talk about the previous Verizon deals that threw customers under the bus. Plenty of praise for the skilled deal maker Verizon CEO Ivan Seidenberg, and no concern for you, the consumer and telephone customer impacted by a deal that got a few people very rich and left you with a bankrupt phone company. (3 minutes)
It’s Not Worth the Risk
Unfortunately, for too many rural Americans impacted by this deal, there is only one phone company. Cable television is not in their future, and in mountainous regions like West Virginia, wireless phones may not be suitable as a phone line replacement. Risking 100 years of solvent phone service on a deal that could ultimately follow earlier deals into bankruptcy is not worth the risk. The nightmares of converting operations from one provider to another is a hassle consumers should not have to face.
For decades, you faithfully paid your Verizon telephone bill and made the company the telecommunications powerhouse it is today. Now they want to abandon you because, frankly, you just aren’t important enough to them anymore. It doesn’t have to be this way. State regulators can tell Verizon they need to make different plans — by forgetting about trying to cash in on a deal that is good for them and bad for you, and by staying put and providing consumers with the same kinds of network upgrades they are building in communities across the country.
Unfortunately, Frontier before this deal was ill-equipped to embark on the kind of investment necessary to provide fiber optic broadband connectivity to its customers. Now pile on billions of additional debt and the challenge of trying to more than double their size and integrate diverse phone networks in 13 different states and ponder what the chances will be for fiber service after the deal is done. Far more likely for residents is a company that will rely on slow speed DSL service, providing “good enough for them” broadband for the indefinite future.
Take Action!
As has been the case with Hawaii Telecom and FairPoint, naive regulators believed the false promises and approved earlier deals, and are frankly responsible for part of the blame. Face-saving telecommunications regulators in New England initially even tried to cheerlead for FairPoint as they stumbled through one customer service nightmare after another. Too late, they realized the grim reality that their approval saddled their states with a phone company totally unequipped to do the job.
Consumers who do not want a repeat performance can contact their state representatives and tell them to put pressure on each state’s public utility commission to reject the deal. You should also contact your state’s public utility commission yourself.
No amount of concessions and written agreements will make a difference if that phone company ends up in financial distress and takes a walk to Bankruptcy Court. Regulators should not even bother trying, after witnessing the debacle with FairPoint.
In your polite, persuasive and persistent communication with state officials, let them know:
We’ve been down this road with Verizon before, with FairPoint Communications and Hawaii Telecom, leaving a litany of broken service promises, unfulfilled broadband commitments, unacceptable billing mistakes, and poor quality customer service. In both instances, customers fled and the companies ended up in bankruptcy;
Frontier has been unable or unwilling to wire its largest service area, Rochester, New York, with the advanced fiber connectivity that Verizon is wiring throughout the rest of upstate New York. If the company cannot meet the needs of customers in their largest service area, what in the world makes you think they’ll do it for us?
The company has been fined twice by the New York State Attorney General for dubious business practices, costing consumers hundreds of dollars the company has now agreed to return to those customers;
A broadband service for our community’s future should not come with a 5 gigabyte monthly limit attached in the fine print. How can our community compete in the digital economy if you have to ration your broadband usage to an unprecedented level in wired broadband?
The devil is always in the details. Verizon has an aggressive plan to stay relevant in a digital future, with video, telephone, and Internet service running across advanced fiber optic lines. Frontier has a plan to serve rural communities with yesterday’s technology. Frontier’s vision for video is to “get a satellite dish” and rely on the existing aging copper wiring to do everything else.
What kind of service and growth can we expect from a company mired in debt? As seasoned Verizon employees in our community start retiring, understanding the writing on the wall, what do they know that you and I don’t?
Phone companies are a regulated utility, essential to the public interest. Why permit a risky deal that could ultimately lead to a taxpayer bailout to keep operations running if Frontier follows its predecessors into bankruptcy, all while Verizon walks away with billions in proceeds?
You can locate the names and contact information for your state representative(s) on Congress.org simply by entering your zip code. When calling or writing, always be courteous, and request that your representative respond in writing to your concerns, and share with Stop the Cap! any correspondence you receive in reply. As always, we’ll be holding elected officials accountable.
Your next contact must be with your state public utility commission. If a hearing is planned in your community, share your views in person and feel free to point them here if they want to watch how bad telecommunications deals have unfolded in the past. We have countless hours of news reports archived for their viewing pleasure. Each state has a different procedure for contacting them. In West Virginia, for example, consumers can call the Commission at 1-800-642-8544. Ohio residents can fill out an online form.
Perhaps Frontier can one day take on a transaction like this, but only after it can demonstrate it has the resources and willingness to provide customers with better options for service. Had they done that in our community, local residents would not have taken to signing a petition for Verizon to overbuild, or buyout Frontier’s Rochester operation. Local residents want the advantage fiber optic service can bring our community and its local economy, some even expressing a willingness to send $10 and $20 checks to Verizon for an acquisition fund to get the sale done. When consumers give money to the phone company when they don’t owe anything, that should be a clear signal consumers are dissatisfied and want a change Frontier, thus far, has not provided.
Sources tell Stop the Cap! FairPoint Communications will likely declare bankruptcy as early as this weekend, having failed to survive the crushing debt load it took on over its purchase of Verizon service in three New England states – New Hampshire, Vermont, and Maine.
The catastrophic failure of FairPoint to provide customers with quality service while saddled with enormous debt was never a surprise to those that warned about the perils of approving the transaction at the outset.
The employees of FairPoint are now working on a recovery plan to maintain service and bring back stability to FairPoint customers. Unlike the senior corporate management of FairPoint, who live in North Carolina far away from the New England nightmares, local employees are committed to bringing their families, friends, and neighbors the service they feel should have been provided by the outset.
What will prevent such a recovery plan from working? The lenders who hold the paper on FairPoint’s colossal debt and some in FairPoint management who want employee concessions for bad management mistakes. Wall Street could also move in and demand massive cuts in employees and the infrastructure they need to bring quality service back to northern New England as part of a bankruptcy reorganization.
Once victimized by Verizon, then by FairPoint, and next by Wall Street bankers, the residents of northern New England just can’t win.
The International Brotherhood of Electrical Workers, who were exactly right when they predicted the outcome of the Verizon-FairPoint deal, now could face paying the biggest price for bad management — a loss of their jobs or a cutback in their wages.
Pete McLaughlin Chairman of IBEW SCT-9. “Demanding cuts in labor costs from employees who aren’t in any way to blame for the company’s woes is the wrong way to go. The overwhelming burden of billions of dollars in crushing debt cannot be solved by ‘nickel and dime-ing’ our union contracts. And such attacks will be counter-productive to any attempt to improve operations and the quality of service for our customers.”
Some FairPoint customers want to know, “will those who profited handsomely from the original transaction pay a price?”
Jason: Quality journalism by reporters like Al Fasoldt is exactly why no tears are being shed as the news/print media dies a slow death....
Tyler Leeds: Hooray for Fibe.. Bell has created an internet connection that can exhaust its usage cap in 7hrs if used to potential.. Enjoy that speed for less th...
Phillip Dampier: Not sure.... If that is defined as the "Ultra" tier, then it looks like the deadline to sign up is 4/1. All I could find is a graphic from DSL Repor...
Ian L: Tried it?
Also, will Comcast's 22/5 tier really be going away on 4/1? If so, what will replace it?...
Ian L: FiOS sits at 50 Mbps down, 20 Mbps up. They also have a 25 Mbps symmetric tier for $70, which I'd take any day over $100 50/5.
Also, DSLExtreme wil...
john: if anyone ever gets a call from comcast saying they have gone over the cap and if it happens again they will cut you off all you have say is you cu...
Tim: FIOS though probably has a higher upload speed though compared to TW's. All the tiers I have seen look like 50/50, 50/20, 20/20, ect.. TW's upload spe...
jr: Another columnist memory holing CEO salaries and pitting consumer against consumer...
Charlie Dennett: The local Rochester, NY channel 13 new had something about this last night (3/8/10) on the 6 PM news. They focused on Verizon but said most wireless ...
Phillip Dampier: Thanks... finally figured it out. I had "AT&T" in the filename, and the "&" messes things up. Renamed the file and it works again. The trackback li...
Smith6612: Hey Phil, I thought I'd mention that I cannot play the video in this article. It seems to have errored with the play button being a Caution sign inste...
Be Sure to Read Part One: Astroturf Overload — Broadband for America = One Giant Industry Front Group for an important introduction to what this super-sized industry front group is all about.
Members of Broadband for America
Red: A company or group actively engaging in anti-consumer lobbying, opposes Net Neutrality, supports Internet Overcharging, belongs to an astroturf [...]
Astroturf: One of the underhanded tactics increasingly being used by telecom companies is “Astroturf lobbying” – creating front groups that try to mimic true grassroots, but that are all about corporate money, not citizen power. Astroturf lobbying is hardly a new approach. Senator Lloyd Bentsen is credited with coining the term in the 1980s to [...]
Hong Kong remains bullish on broadband. Despite the economic downturn, City Telecom continues to invest millions in constructing one of Hong Kong’s largest fiber optic broadband networks, providing fiber to the home connections to residents. City Telecom’s HK Broadband service relies on an all-fiber optic network, and has been dubbed “the Verizon FiOS of [...]
BendBroadband, a small provider serving central Oregon, breathlessly announced the imminent launch of new higher speed broadband service for its customers after completing an upgrade to DOCSIS 3. Along with the launch announcement came a new logo of a sprinting dog the company attaches its new tagline to: “We’re the local dog. We better be [...]
Stop the Cap! reader Rick has been educating me about some of the new-found aggression by Shaw Communications, one of western Canada’s largest telecommunications companies, in expanding its business reach across Canada. Woe to those who get in the way.
Novus Entertainment is already familiar with this story. As Stop the Cap! reported previously, Shaw launched [...]
The Canadian Radio-television Telecommunications Commission, the Canadian equivalent of the Federal Communications Commission in Washington, may be forced to consider American broadband policy before defining Net Neutrality and its role in Canadian broadband, according to an article published today in The Globe & Mail.
[FCC Chairman Julius Genachowski's] proposal – to codify and enforce some general [...]
In March 2000, two cable magnates sat down for the cable industry equivalent of My Dinner With Andre. Fine wine, beautiful table linens, an exquisite meal, and a Monopoly board with pieces swapped back and forth representing hundreds of thousands of Canadian consumers. Ted Rogers and Jim Shaw drew a line on the western Ontario [...]
Just like FairPoint Communications, the Towering Inferno of phone companies haunting New England, Frontier Communications is making a whole lot of promises to state regulators and consumers, if they’ll only support the deal to transfer ownership of phone service from Verizon to them.
This time, Frontier is issuing a self-serving press release touting their investment of [...]
I see it took all of five minutes for George Ou and his friends at Digital Society to be swayed by the tunnel vision myopia of last week’s latest effort to justify Internet Overcharging schemes.
Until recently, I’ve always rationalized my distain for smaller usage caps by ignoring the fact that I’m being subsidized by the [...]
In 2007, we took our first major trip away from western New York in 20 years and spent two weeks an hour away from Calgary, Alberta.
After two weeks in Kananaskis Country, Banff, Calgary, and other spots all over southern Alberta, we came away with the Good, the Bad, and the Ugly:
The Good
A federal appeals court in Washington has struck down, for a second time, a rulemaking by the Federal Communications Commission to limit the size of the nation’s largest cable operators to 30% of the nation’s pay television marketplace, calling the rule “arbitrary and capricious.”
The 30% rule, designed to keep no single company from controlling more [...]
Less than half of Americans surveyed by PC Magazine report they are very satisfied with the broadband speed delivered by their Internet service provider.
PC Magazine released a comprehensive study this month on speed, provider satisfaction, and consumer opinions about the state of broadband in their community.
The publisher sampled more than 17,000 participants, checking their actual [...]
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