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Surprise: Some Alabama Customers Unhappy About AT&T’s Experiment Ending Landline Service

att-logo-221x300AT&T customers in Carbon Hill, Ala. received an unwelcome surprise in their mailbox recently when AT&T informed them they will be part of an experiment ending traditional landline service in favor of a Voice over IP or wireless alternative.

Affected customers are involuntary participants in what AT&T calls an “exciting opportunity for our customers and for our company,” but many residents want no part of it.

The Wall Street Journal reports Carbon Hill city clerk Janice Pendley says some people in the former mining town are not pleased.

“Some of them like their landline, and they like it just the way it is,” she says.

AT&T’s experiment will force new and existing customers to switch to its more-expensive U-verse broadband platform, use a mobile phone, or a home landline replacement that works over AT&T’s cellular network. The FCC has granted AT&T permission to impose its experimental plan to end traditional landline service in two communities where regulatory protections for landline customers are weak to non-existent — Alabama’s Carbon Hill and Delray Beach, Fla.

Carbon Hill is a small town of around 880 households in extreme western Walker County. It is the kind of rural town AT&T would likely never consider for a U-verse upgrade. AT&T embarked on a second major push to extend U-verse into more communities last year, but also indicated it would strongly advocate for a wireless replacement for its landline network in the rest of its service areas. Because Carbon Hill is an experiment, AT&T will offer U-verse to at least part of the community regardless of the usual financial Return on Investment requirements AT&T usually imposes on its U-verse expansion efforts.

carbon hillAT&T is pushing forward despite the fact it  has no idea how it will offer service to at least 4% of isolated Carbon Hill residents not scheduled to be provided U-verse and not within an AT&T wireless coverage area. There are also no guarantees customers will be able to correctly reach 911, although AT&T says the technology “supports 911 functionality.” Serious questions among consumer advocates remain about whether the replacement technology will support burglar alarms, pacemakers and even systems used by air-traffic controllers.

The difficulties service Carbon Hill relate to its rural makeup and income profile. In Delray Beach, it is all about customer demographics. Half of the city is home to residents over 65 years old — the group most likely to prefer their existing landline service. Many are likely to be unhappy about a transition to new technology that will not work in the event of power interruptions, will require the installation of new equipment, or will be tied to a wireless platform that some say reduces the intelligibility of telephone conversations and often introduces audio artifacts like echo, background noise, and dropouts.

In both cities, customers only offered wireless-based service will no longer have access to DSL or wired broadband service of any kind. The wireless alternative from AT&T comes at a high cost and a low usage allowance.

The benefits to AT&T are unquestionable, however. The company will win almost universal deregulation as a Voice over IP or wireless telephone provider. Legacy regulations on customer service requirements, pricing, and obligations to provide affordable phone service to any customer that requests it are swept away by the new technologies. Competitors are also worried AT&T will be able to walk away from regulations governing open and fair access to AT&T’s network.

ip4carbon hillThe Wall Street Journal reports:

The all-Internet protocol “transition holds many promises for consumers, but losing access to affordable voice and broadband services cannot be part of that bargain,” wrote Angie Kronenberg, general counsel of Comptel, in a letter to the FCC last month on behalf of the small-carrier trade group, several companies and public-interest groups.

AARP said it believes AT&T’s plan has “numerous problems.” The technology might not be reliable enough or fail when calling 911 in an emergency, the advocacy group for seniors told regulators in its comment letter. The FCC is reviewing hundreds of comments received in response to AT&T’s request.

EarthLink piggybacks on the “incumbents as little as economically possible” and has laid nearly 30,000 miles of fiber-optic cables throughout the U.S. to help it reach more than a million customers, says Rolla Huff, a former EarthLink chief executive. Still, the company needs access to the connections built by AT&T and Verizon into buildings.

Telecom carriers such as Windstream in Little Rock, Ark., and sellers of broadband data services like EarthLink and XO Communications LLC, of Herndon, Va., have had the right to buy last-mile access at regulated prices since the last major overhaul of federal telecom laws in 1996.

tw telecomIf AT&T ends its traditional network, those competing service providers will have to negotiate with AT&T for access at whatever price AT&T elects to charge.

A preview of what is likely to happen has already been experienced by TW Telecom, an independent firm selling phone and Internet services to businesses over more than 30,000 miles of fiber lines. But that fiber network means nothing if a customer’s last mile connection is handled by a local phone company no longer subject to regulated pricing and access rules.

In Tampa, where Verizon has deployed FiOS as an unregulated replacement for its older, regulated copper-based network, TW Telecom learned first hand what this could ultimately mean:

Rochester Telephone Corporation was born in 1921 after a merger between the Rochester Telephonic Exchange, a branch of the Bell Company of Buffalo and locally-owned independent Rochester Telephone Company, which was not allowed to use Bell's long distance network.

Rochester Telephone Corporation was born in 1921 after a merger between the Rochester Telephonic Exchange, a branch of the Bell Company of Buffalo and locally owned independent Rochester Telephone Company, which was not allowed to use Bell’s long distance network.

TW Telecom approached Verizon in 2012 to seek last-mile access to a Tampa, Fla., building being converted into a bank from a restaurant. Verizon had installed only FiOS at the building.

Verizon said no, telling TW Telecom to build its own connection or pay Verizon thousands of dollars to do the job. TW Telecom declined to pay and lost the customer’s business.

“When it happens, it’s devastating,” says Kristie Ince, who oversees regulatory policy at TW Telecom. Similar snarls have cost the company at least six customers since then. Other carriers say they have had similar clashes.

In Illinois, Sprint’s business phone network has run into a barricade manned by AT&T. Sprint needs AT&T to interconnect calls placed on Sprint’s network intended for AT&T’s customers. The two companies cannot agree on an asking price under the deregulation scheme so Sprint converts its Voice over IP calls to older technology still subject to regulation just so calls will successfully reach AT&T’s customers. AT&T promptly converts those calls back to Voice over IP technology as it completes them.

AT&T said it has “no duty” to connect its Internet protocol traffic with Sprint’s.

If the FCC keeps IP-based traffic deregulated, if and when the old landline network is decommissioned, AT&T will have the last word on access, potentially putting competitors out of business.

Our great-great grandparents experienced similar problems in the early days of telephone service, when high rates from the local Bell telephone subsidiary provoked local competition. But Bell companies routinely refused to handle calls placed on competitors’ networks, forcing customers to maintain a telephone line with both companies to reach every subscriber. Additionally, only Bell-owned providers had access to the long distance network – a competitive disadvantage to competing startups.

Regulatory changes, a handful of mergers and the eventual establishment of the well-regulated Bell System eventually solved problems which threaten to return if AT&T has its way.

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Google Fiber Threat Cited in Cincinnati Bell’s Decision to Sell Wireless Division to Verizon Wireless

cincinnati bellCincinnati Bell threw in the towel on its wireless mobile business Monday when it decided to sell its wireless spectrum licenses, network, and 340,000 customers for $210 million to its larger rival Verizon Wireless.

While most analysts say the transaction is the inevitable outcome of a wireless industry now dedicated to consolidation, at least one analyst said the threat of Google Fiber eventually entering the Cincinnati market may have also contributed to the decision to sell.

The future of Cincinnati Bell’s wireless division had been questioned for more than a year, ever since the arrival of the company’s newest CEO Ted Torbeck in January 2013. Cincinnati Bell, one of the last independent holdouts of the Bell System breakup that have not been reabsorbed by AT&T or Verizon, had struggled since Torbeck’s predecessor made some bad bets on acquisitions, including an investment in microwave communications provider Broadwing that left the company with more than $2 billion in debt in 2004. Another $526 million acquisition of data center Cyrus One left the company further in debt.

Torbeck

Torbeck

Torbeck promised a frank evaluation of Cincinnati Bell’s operations last year and keeping its declining wireless division no longer made sense with Torbeck’s focus on replacing the company’s aging copper wire network with fiber optics.

For years, Cincinnati Bell’s biggest competitor has been Time Warner Cable, which has taken away many of its landline customers. Cincinnati Bell’s mobile phone division was created to protect its core business, picking up wireless subscribers as customers dropped their landlines. But the cable company’s bundled service packages made landline service much less expensive than sticking with the phone company, and many wireless customers prefer a national wireless phone company offering better coverage and a wider selection of devices.

Rampant wireless industry consolidation has concentrated most of the cell phone market in the hands of AT&T and Verizon Wireless, giving those two companies access to the most advanced and hottest devices while regional carriers made do offering customers less capable smartphones. Its competitors’ march towards 4G LTE network upgrades also challenged Cincinnati Bell with costly capital investments in a 4G HSPA+ network that Torbeck recently decided no longer made economic sense.

Cincinnati Bell’s wireless revenue for 2013 was $202 million, a decrease of 17 percent from 2012. The company also lost 58,000 subscribers last year, an unsustainable drop that showed few signs of stopping.

610px-Verizon-Wireless-Logo_svg“Our business has been in decline for five or six years,” Torbeck told the Cincinnati Business Courier. “This is absolutely the right time to make this deal. It was probably the highest value we could get at this point in time.”

Torbeck believes Cincinnati Bell’s best chance for a future lies with with fiber optics, capable of delivering phone service along with a robust broadband and television offering that can effectively compete with Time Warner Cable.

“We’ve got to grow market share in Cincinnati and fiber optics is the way to do it,” Torbeck said in 2013. ”We have about 25 percent of the city covered and we think from a financial perspective we can get to 65 or 70 percent so we’ve got significant growth opportunity there.”

fiopticsLast year, Cincinnati Bell had passed 184,000 homes with fiber optics – a 28 percent market share. But only 52,000 homes subscribed to Fioptics — Cincinnati Bell’s fiber brand. Time Warner Cable had managed to keep many of its wavering 446,000 customers loyal to the cable company with aggressive discounting and customer retention offers. But now that many of those discounts have since expired, Torbeck wants to reach 650,000-700,000 homes in its service area covering southwestern Ohio and northern Kentucky and convince 50% of those customers to switch to fiber optics.

Torbeck isn’t interested in limiting his business to just greater Cincinnati either.

“At some point in time, we’d like to expand regionally into Indianapolis, Columbus,” Torbeck said. “Louisville is another opportunity. But that’s probably a little down the road. From a fiber standpoint, we could look at acquisitions and get into metro fiber. These are things we’re looking at, but these are things that are down the road. We got a lot of room for growth just here in Cincinnati.”

But financial analysts warned Cincinnati Bell’s enormous debt load limits the company’s potential to invest in expansion. Torbeck’s decision to sell off the company’s wireless unit is another step in reducing that debt and further investing in fiber optics expansion.

google fiberThe company’s unique position as the last remaining independent phone company that still bears the name of the telephone’s inventor may make the company a target for a takeover before Torbeck’s vision is realized. One analyst thinks Cincinnati Bell would be a natural target for Google, which has a recent record of repurposing fiber networks built by other companies as a cost-saving measure to further deploy Google Fiber.

“They are a small and cheap company with the infrastructure that Google could use,” said Brian Nichols. “My theory is that Google will buy undervalued companies like Cincy Bell to save on the mounting costs of buildouts, which could top $30 billion,“ Nichols wrote in an email to WCPO-TV.

Google did exactly that in Provo, Utah, acquiring struggling iProvo from the city government for $1 in return for agreeing to expand the fiber network to more homes.

Cincinnati’s local phone company would sell for considerably more than that, but it would still prove affordable for Google, which has a market value of $361 billion, about 470 times that of Cincinnati Bell.

cincCincinnati Bell has already spent about $300 million on Fioptics and plans to spend an extra $80 million this year on expansion. Before the network is complete, the phone company is likely to spend as much as $600 million on fiber upgrades. But the payoff has been higher revenue — $100 million last year alone, and a stabilizing business model that has reduced losses from landline cord-cutting. Telecom analyst Nicholas Puncer offers support for the investment, something rare for most Wall Street advisers.

“It’s a reasonable strategy,” Puncer said. “There’s only going to be more data going through networks in the future, not less. The way we consume content is going to be a lot different 10 years from now than it is today. This is their effort to be on the right side of that, giving people more options to receive that content.”

But if Google Fiber comes to town, it may not be enough.

“Google has an unprecedented luxury,” Nichols said in his email to WCPO. “They are [attaching] fiber to existing poles owned by AT&T (and other telecom companies), and then targeting areas where consumers agree for service before the network is even built. Given this demand, and its mere ability to operate in such a manner, I do think Cincinnati Bell will have major problems once that day comes (likely sooner rather than later). In fact, I don’t think they stand a chance of competing against Google.”

Cincinnati Bell said it will continue to offer wireless service for customers for the next 8 to 12 months. The company will notify customers with further details regarding transition assistance around the time of the closing, which is expected to be in the second half of 2014.

It was not immediately clear on Monday if the sale will impact jobs. Cincinnati Bell Wireless employs about 175 people, including retail store employees.

http://www.phillipdampier.com/video/WKRC Cincinnati Cincinnati Bell selling wireless spectrum to Verizon 4-8-14.flv

WKRC in Cincinnati reports on what the sale of Cincinnati Bell Wireless to Verizon Wireless means for customers. (1:24)

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Non-Profit Supporters of N.J.-Verizon Broadband Settlement Have a Relationship With Verizon

TeleTruthVerizon has been upset with the tone and accuracy of many New Jersey residents who have written the state’s Board of Public Utilities urging them to reject a settlement offer than would allow Verizon to walk away from its commitment to deliver high-speed broadband to 100% of the state.

While calling many of its opponents misinformed about the company’s original commitments, a Verizon spokesperson targeted a particularly nasty response to one of its strongest critics — Teletruth’s Bruce Kushnick, who has accused Verizon of breaking its promises in New Jersey and substituting outdated DSL and expensive, usage-capped 4G wireless broadband as a broadband equivalent.

Northwest, central and southern New Jersey all lack solid broadband coverage. (Map: Connecting NJ)

Northwest, central and southern New Jersey all lack solid broadband coverage. (Map: Connecting NJ)

Kushnick has argued that Verizon has cooked the books, diverting funds that should have been spent on FiOS expansion into its more profitable wireless subsidiary Verizon Wireless instead. He wants New Jersey to conduct a thorough investigation of Verizon’s financial reporting and learn why the company has reneged on a broadband commitment that originally promised a minimum of 45/45Mbps high-speed broadband for 100% of the state by 2010 in return for rate deregulation and tax breaks. Verizon got the deregulation and tax breaks but much of the state is still waiting for the faster broadband it was promised.

Now Verizon wants the state to approve a settlement that will redefine its commitment from 45/45Mbps to 4Mbps DSL or wireless 4G broadband.

Verizon spokesman Lee Gierczynski said criticisms about the company’s performance in New Jersey are “way off base.” He said there never was any commitment to deploy FiOS across all of New Jersey because FiOS did not exist at the time of the original agreement.

“Nobody knew what FiOS was 20 years ago,” Gierczynski said. “It wasn’t until 2004 when FiOS came on the scene.”

What about the 45/45Mbps speed commitment?

“[The agreement] didn’t say a minimum of 45Mbps,” Gierczynski said, “it just says ‘up to’.”

Gierczynski particularly bristled over Kushnick’s ongoing criticisms of Verizon.

“For nearly two decades, he has made the same, tired baseless allegations over and over again about Verizon and its predecessor companies — not only in New Jersey but in other states as well,” Gierczynski told The Record in an email. ”His specious arguments are devoid of fact, relying on misinformation and myths to prop up his claims. This filing is no different.”

With more than 1,000 comments on file with the BPU, Verizon invited the regulator to dismiss critics that demanded Verizon live up to its original commitments:

“The vast majority of comments opposing the Stipulation that have been posted by the Board to date were submitted via a standard form letter generated by the New Jersey State AFLCIO with the subject line “Tell Verizon to Live Up to the Opportunity New Jersey Agreement.”

“Other comments opposing the Stipulation offer inaccurate claims about what was contemplated by Opportunity New Jersey or what is in the Stipulation.”

AFL-CIO Letters:  These letters opposing the Stipulation appear less convincing when the locations of senders are examined— More than 25 are from people located outside of New Jersey and some appear to be from municipalities not in Verizon’s service territory. “

Verizon did not bother to mention the circulation of a pro-Verizon form letter that was submitted by hundreds of people, many Verizon employees and retirees, as reported last week by Stop the Cap!

Two of those letters were signed by Paul A. Sullivan, Verizon’s regional president of consumer and mass business markets in New Jersey and Tracy Reed, a Verizon manager… in Atlanta. Neither identified themselves as Verizon management.

Further concerns were raised by Kushnick when he found that the people and businesses Verizon touts as supporting Verizon’s position all have some relationship with Verizon:

  • New Jersey Technology Council — Board member,  Douglas Schoenberger, VP, Public Policy, Verizon NJ, Inc
  • The Meadowlands Chamber of Commerce — Donnett Barnett Verley, Director of Public Policy and Corporate Responsibility, for Verizon New Jersey.  “I am responsible for Verizon’s philanthropic and community outreach efforts throughout the state. I serve as an active board member of …the Meadowlands Chamber of Commerce.”
  • Greater Paterson Chamber of Commerce — “Hi. I’m Rick Ricca, Director – External Affairs. I am responsible for the company’s relationship and interaction with municipal and county governments… I also serve on… Greater Paterson Chamber of Commerce.”
  • The Commerce and Industry Association of New Jersey (“CIANJ”), Member of the Board, Sam Delgado V.P. Community & Stakeholder Affairs Verizon
  • Greater Elizabeth Chamber of Commerce — “Verizon, a telecommunication company received the Member-to-Member Award for its important contribution to Elizabeth’s business.”
  •  Cooper’s Ferry Partnership —Verizon is on the Board of Directors. “The organization’s operational budget is currently divided into three main categories: board membership… investments from these valued partners that has allowed CFP to grow its mission and expand throughout the city of Camden.”
  • Puerto Rican Association for Human Development —“Verizon Presents $20,000 to PRAHD”
  • Latino Institute  — Our Partners and Funders, Verizon
  • Gudino, David Joseph — Associate General Counsel, Verizon Wireless
  • NJ SHARES —“Verizon New Jersey partners with NJ SHARES for Communications Lifeline outreach and enrollment efforts.”

“In fact, it’s hard to identify any legitimate group that supports the Verizon stipulation and is not funded by Verizon,” said Kushnick.

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Verizon’s Curious Allies, Employees Urge N.J. Regulators to Forget About FiOS Fiber Expansion

Verizon's FiOS expansion is still dead.

Verizon’s FiOS expansion is still dead.

New Jersey’s Board of Public Utilities has heard from hundreds of New Jersey residents about a settlement proposal that would let Verizon off the hook for failing to keep a commitment to provide high-speed broadband service statewide no later than 2010.

Curiously, hundreds of those comments were identical e-mails originating from AOL, Hotmail, MSN and Yahoo mail accounts urging the state to show lenience to Verizon — to forgive and forget the company’s broken promises. No mailing addresses were included. But the attached names and e-mail addresses were enough for Stop the Cap! to discover many of those submitting comments used non-working e-mail addresses or claimed their names were submitted without their knowledge or permission. Many others were actually employed by Verizon or were retirees.

“The proposed stipulation is fair and balanced and under your guidance, will build on the success that the Board and Verizon have achieved in making the Garden State one of the most wired broadband states in the country,” writes David Gudino, who doesn’t disclose in his correspondence with the BPU that his name is included in a list of attorneys working for Verizon Wireless.

“I would like to declare my support for the proposed stipulation between your Board Staff and Verizon as it relates to Opportunity New Jersey,” says another on behalf of an organization getting contributions from Verizon. “The stipulation will help ensure continued deployment of advanced communications services. Access to these services will not only benefit New Jersey’s businesses and nonprofits, but consumers of all ages as well.”

new-jerseyBy “advanced communications services,” the letter’s signers should know very well that means more 4G LTE wireless broadband with stingy usage caps and high prices, not more FiOS fiber to the home service.

What proved especially surprising was finding so many customers claiming to be happy with Verizon’s broadband performance in New Jersey who are still relying on AOL dial-up accounts. Stop the Cap! contacted a random 150 signers of the identical letters by using their attached e-mail addresses, which are part of the public record. We asked the writers to expand on their views about Verizon’s performance in New Jersey, whether they were satisfied with their current Internet provider, whether they have broadband service, and where they learned about this issue.

Remarkably, 35 of the e-mail addresses turned out to be invalid, so we contacted an extra 35 and 12 of those e-mail addresses were invalid as well. We found this unsettling because the only identifying information attached to the pro-Verizon correspondence was a name and e-mail address. We couldn’t be sure the authors were New Jersey residents much less real people.

We received 18 replies. Several were Verizon retirees asked to sign letters of support for Verizon. Another five had no idea what we were talking about and denied they submitted any views, pro or con, about Verizon. Three of those were Comcast customers that said goodbye to Verizon more than a decade earlier. Many others were associated with groups that happen to receive financial support from Verizon. Several  had no broadband access and were using dial-up.

Stop the Cap! did not receive a single reply from any person ready to articulate informed views about the terms of the settlement offer. They were simply asked to lend their names and e-mail addresses to Verizon’s campaign and had never seen the settlement proposal or heard much about it.

bpuJudith Stoma’s family has worked for Verizon/NJ Bell since 1958. She’s 71 years old today and she supports Verizon, at least in its efforts to “lead the way with N.J. at the forefront of technology.” Abdicating on FiOS expansion in favor of the same old DSL service Verizon proposes in its settlement seems to run contrary to that goal.

In several other instances, some of Verizon’s “supporters” actually used a space provided in the form letter to vent their frustration with Verizon!

Michael DeNude was irritated he never got FiOS: “We live in Riverdale and have not benefited by any upgrade.”

Paula Thomas was annoyed that Verizon outsources its workforce: “Verizon already outsources their telephone [operator] service. They should also guarantee that U.S. Citizens are given preference in the ‘job growth’ they ensure will happen.”

William Barlen thinks it’s a shame the current state of broadband in the U.S. is lacking: “It is sad that we have dropped behind over 50 countries on broadband speed and deployment. If you do not support this work exactly what are you doing?”

Paul Minenna is concerned that without FiOS broadband, speedier Internet access is not forthcoming: “Please make sure that you keep NJ moving forward with top-notch technology access. This is not the time to slow down Internet access.”

John Zilg’s letter is the same as nearly every other in support of Verizon, until he was given the opportunity to include his own remarks, which are completely contrary to everything else in the letter: “It is critical to continue supporting what has already been put into place. I urge you to not change direction.”

It is easily apparent that among the letters in support of Verizon, more than a few were not at all informed about what they were signing, and in many cases actually held completely different views when someone took the time to inquire in more detail. We are also very concerned about the number of invalid e-mail addresses attached to letters that carried no mailing address. On an issue of this importance, it is disturbing to not be certain those communications represent the legitimate views of actual New Jersey residents.

These factors must be taken into consideration as the Board of Public Utilities ponders the public input.

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Math Problem: The Telecom Industry’s Bias Against Fiber-to-the-Home Service

Phillip "Spending $6k per cable customer is obviously a much better deal than paying half that to build a fiber to the home network" Dampier

Phillip “Spending $6k per cable customer is obviously a much better deal than paying half that to build a fiber to the home network” Dampier

Math was never my strong subject, but even I can calculate the groupthink of American cable and telephone companies and their friends on Wall Street just doesn’t add up.

This week, we learned that cable companies like Bright House Networks, Suddenlink, and Charter Communications are already lining up for a chance to acquire three million cable customers Comcast intends to sell if it wins approval of its merger with Time Warner Cable. Wall Street has already predicted Comcast will fetch as much as $18 billion for those customers and pegged the value of each at approximately $6,000.

But for less than half that price any company could build a brand new fiber to the home system capable of delivering 1,000Mbps broadband and state-of-the-art phone and television service and start banking profits long before paying off the debt from buying an inferior coaxial cable system. Yet we are told time and time again that the economics of fiber to the home service simply don’t make any sense and deploying the technology is a waste of money.

Let’s review:

Google Fiber was called a boondoggle by many of its competitors. The folks at Bernstein Research, routinely friendly to the cable business model, seemed appalled at the economics of Google’s fiber project in Kansas City. Bernstein’s Carlos Kirjner and Ram Parameswaran said Google would throw $84 million into the first phase of its fiber network, connecting 149,000 homes at a cost between $500-674 per home. The Wall Street analyst firm warned investors of the costs Google would incur reaching 20 million customers nationwide — $11 billion.

“We remain skeptical that Google will find a scalable and economically feasible model to extend its build out to a large portion of the U.S., as costs would be substantial, regulatory and competitive barriers material, and in the end the effort would have limited impact on the global trajectory of the business,” Bernstein wrote to its investor clients.

dealSo Google spending $11 billion to reach 20 million new homes is business malpractice while spending $18 billion for three million Time Warner Cable customers is confirmation of the cable industry’s robust health and valuation?

Bernstein’s firm never thought highly of Verizon FiOS either.

“If I were an auto dealer and I wanted to give people a Maserati for the price of a Volkswagen, I’d have some seriously happy customers,” Craig Moffett from Bernstein said back in 2008. “My problem would be whether I could earn a decent return doing it.”

Back then, Moffett estimated the average cost to Verizon per FiOS home passed was $3,897, a figure based on wiring up every neighborhood, but not getting every homeowner to buy the service. Costs for fiber have dropped dramatically since 2008. Dave Burstein from DSL Prime reported by the summer of 2012 Verizon told shareholders costs fell below $700/home passed and headed to $600. The total cost of running fiber, installing it in a customer’s home and providing equipment meant Verizon had to spend about $1,500 per customer when all was said and done.

Moffett concluded Verizon was throwing money away spending that much on improving service. He wasn’t impressed by AT&T U-verse either, which only ran fiber into the neighborhood, not to each home. Moffett predicted AT&T was spending $2,200 per home on U-verse back in 2008, although those costs have dropped dramatically as well.

Moffett

Moffett

Moffett’s solution for both Verizon and AT&T? Do nothing to upgrade, because the price wasn’t worth the amount of revenue returns either company could expect in the short-term.

It was a much different story if Comcast wanted to spend $45 billion to acquire Time Warner Cable however, a deal Moffett called “transformational.”

“What we’re talking about is an industry that is becoming more capital intensive,” Todd Mitchell, an analyst at Brean Capital LLC in New York told Bloomberg News. “What happens to mature, capital-intensive companies — they consolidate. So, yes, I think the cable industry is ripe for consolidation.”

Other investors agreed.

“This is definitely a bet on a positive future for high-speed access, cable and other services in an economic recovery,” said Bill Smead, chief investment officer at Smead Capital Management, whose fund owns Comcast shares.

ftth councilBut Forbes’ Peter Cohan called Google’s much less investment into fiber broadband a colossal waste of money.

“Larry Page should nip this bad idea in the bud,” Cohan wrote.

Cohan warned investors should throw water on the enthusiasm for fiber before serious money got spent.

“FTTH authority, Neal Lachman, wrote in SeekingAlpha, that it would cost as much as $500 billion and could take a decade to connect all the houses and commercial buildings in the U.S. to fiber,” Cohan added.

Cohan was concerned Google’s initial investment would take much too long to be recovered, which apparently is not an issue for buyers willing to spend $18 billion for three million disaffected Time Warner Cable customers desperately seeking alternatives.

An investment for the future, not for short term profits.

An investment for the future, not short term profits.

Municipal broadband providers have often chosen to deploy fiber to the home service because the technology offers plenty of capacity, ongoing maintenance costs are low and the networks can be upgraded at little cost indefinitely. But such broadband efforts, especially when they are owned by local government, represent a threat for cable and phone companies relying on a business model that sells less for more.

The American Legislative Exchange Council (ALEC), funded by Comcast, Time Warner, AT&T, Verizon, and other large telecom companies is at the forefront of helping friendly state legislators ban community fiber networks. Their excuse is that the fiber networks cost too much and, inexplicably, can reduce competition.

“A growing number of municipalities are [...] building their own networks and offering broadband services to their citizens,” ALEC writes on its website. “ALEC disagrees with their answer due to the negative impacts it has on free markets and limited government.  In addition, such projects could erode consumer choice by making markets less attractive to competition because of the government’s expanded role as a service provider.”

The Fiber-to-the-Home Council obviously disagrees.

“Believe it or not, there are already more than a thousand telecom network operators and service providers across North America that have upgraded to fiber to the home,” says the Council. “The vast majority of these are local incumbent telephone companies that are looking to transform themselves from voice and DSL providers into 21st century broadband companies that can deliver ultra high-speed Internet and robust video services, as well as be able to deliver other high-bandwidth digital applications and services to homes and businesses in the years ahead.”

Stephenson

Stephenson

In fact, a good many of those efforts are undertaken by member-owned co-ops and municipally owned providers that answer to local residents, not to shareholders looking for quick returns.

The only time large companies like AT&T move towards fiber to the home service is when a competitor threatens to do it themselves. That is precisely what happened in Austin. The day Google announced it was launching fiber service in Austin, AT&T suddenly announced its intention to do the same.

“In Austin we’re deploying fiber very aggressively,” said AT&T CEO Randall Stephenson. “The cost dynamics of deploying fiber have dramatically changed. The interfaces at the homes, the wiring requirements, how you get a wiring drop to a pole, and the way you splice it has totally changed the cost dynamics of deploying fiber.”

Prior to that announcement, AT&T justified its decision not to deploy fiber all the way to the home by saying it was unnecessary and too costly. With Google headed to town, that talking point is no longer operative.

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CenturyLink to Idaho Residents: You Don’t Need 1Gbps, DSL is Good Enough for You

centurylinkCenturyLink’s philosophy about offering gigabit fiber broadband speeds in Idaho can be summed up simply as “for business-use only.”

Jim Schmit, Idaho CenturyLink’s vice president and general manager, believes super fast broadband connections are overkill for homes and most businesses in the state.

“It’s like having a fancy sports car,” Schmit told the Idaho Statesman. “It might go 200 miles per hour, but what good does that do if the speed limit is 60?”

Schmitt’s attitude of broadband a-plenty is nothing new. In 2007, he told attendees of the Emerging Directions in Economic Development conference in Boise that “virtually all” Idahoans already had access to high-speed broadband. That was news to the audience, with about a quarter of the economic development professionals attending stating they represented a community that didn’t have it yet. Most of the questions related to how their communities could get the access they’d been told wasn’t available.

Seven years later, the Statesman reports more than a few homes and businesses in the region still rely on slow DSL, satellite and even dial-up access because faster options are just not available.

idahoIdaho could find itself a bystander in the growing movement to deploy gigabit fiber to the premise broadband, despite the fact CenturyLink already has fiber infrastructure available nearby.

“We’re getting to the point where, for businesses in most places, we’re within last-mile connections for most locations,” Schmit says.

CenturyLink is willing to extend its fiber, but only if that fiber line reaches businesses needing gigabit speeds. Residential customers need not apply.

Fiber optics can be found in several office buildings in downtown Boise, which has been good news for established tech companies that need more bandwidth. Three data centers are operational in the city and would likely not be there without fiber.

But for home-based entrepreneurs of future Internet startups, most will be forced to choose between CenturyLink DSL or cable broadband from providers like Cable ONE, which offer slower speeds.

Smaller broadband providers have begun to fill the gap left open by the lack of interest from cable and phone companies. While Google is showing interest in building fiber networks in a handful of U.S. cities, many more communities are realizing they will not get gigabit speeds anytime soon unless they build a publicly owned broadband network themselves or rely on much smaller-scale projects under development in the private sector.

Patrick Lawless, founder and CEO of Boise voice recognition software developer Voxbright Technologies Inc., sees opportunity providing a limited fiber network in Boise. Lawless has plans to build a 2.6-mile fiber-optic loop and deliver television, phone and broadband service to apartment and office buildings in a manner similar to Google’s. It’s a small early effort, limited to a handful of businesses and new residential buildings — mostly apartments and renovated former office buildings or hotels. He plans to charge $99 a month for a package including television, 100Mbps broadband, and phone service.

With the project’s small scope and uncertain cost, CenturyLink says it isn’t too worried about the competition. For now they will continue to bank on offering only the broadband speed they believe customers actually need, and it will be up to a competitor to prove them wrong.

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Time Warner Cable, Comcast Crash, Burn in Consumer Reports’ 2014 Ratings

consumer reportsDespite claims of improved customer service and better broadband, Comcast and Time Warner Cable’s customer satisfaction scores are in near-free fall in the latest Consumer Reports National Research Center’s survey of consumers about their experiences with television and Internet services.

Although never popular with customers, both cable operators plummeted in the 2014 Consumer Reports ratings — Time Warner Cable is now only marginally above the perennial consumer disaster that is Mediacom. Comcast performs only slightly better.

In the view of Consumers Union, this provides ample evidence that two wrongs never make a right.

“Both Comcast and Time Warner Cable rank very poorly with consumers when it comes to value for the money and have earned low ratings for customer support,” said Delara Derakhshani.  “A merger combining these two huge companies would give Comcast even greater control over the cable and broadband Internet markets, leading to higher prices, fewer choices, and worse customer service for consumers.”

These ratings reflect Internet service only.

These ratings reflect Internet service only.

Comcast ranked 15th among 17 television service providers included in the ratings and earned particularly low marks from consumers for value for the money and customer support.  Time Warner ranked 16th overall for television service with particularly low ratings for value, reliability, and phone/online customer support.

Another ratings collapse for Comcast and Time Warner Cable

Another ratings collapse for Comcast and Time Warner Cable

Comcast and Time Warner Cable were mediocre on overall satisfaction with Internet service.  Both companies received especially poor marks for value and low ratings for phone/online customer support.

“In an industry with a terrible track record with consumers, these two companies are among the worst when it comes to providing good value for the money,” said Derakhshani.  “The FCC and Department of Justice should stand with consumers and oppose this merger.”

For as long as Stop the Cap! has published, Mediacom has always achieved bottom of the barrel ratings, with satellite fraudband provider HughesNet — the choice of the truly desperate — scoring dead last for Internet service. We’re accustomed to seeing the usual bottom-raters like Frontier (DSL), Windstream (DSL), and FairPoint (DSL) on the south end of the list. But now both Comcast and Time Warner Cable have moved into the same seedy neighborhood of expensive and lousy service. Comcast couldn’t even beat the ratings for Verizon’s DSL service, which is now barely marketed at all. Time Warner Cable scored lower than CenturyLink’s DSL.

Breathing an ever-so-slight sigh of relief this year is Charter Communications, which used to compete with Mediacom for customer raspberries. It ‘rocketed up’ to 18th place.

If you want top-notch broadband service, you need to remember only one word: fiber. It’s the magical optical cable phone and cable companies keep claiming they have but largely don’t (except for Verizon and Cincinnati Bell, among a select few). If you have fiber to the home broadband, you are very happy again this year. If you are served by an independent cable company that threw away the book on customer abuse, you are relieved. Topping the ratings again this year among all cable operators is WOW!, which has a legendary reputation for customer service. Wave/Astound is in second place. Verizon and Frontier FiOS customers stay pleased, and even those signed up with Bright House Networks and Suddenlink report improved service.

Ratings are based on responses from 81,848 Consumer Reports readers. Once again they plainly expose Americans are not happy with their telecom options. The average cost of home communications measured by the Mintel Group is now $154 a month — $1,848 a year. That’s more expensive than the average homeowner’s clothing, furniture or electricity budget. The same issues driving the bad ratings last year are still there in 2014: shoveling TV channels at customers they don’t want or need, imposing sneaky new fees along with broad-based rate increases every year, low value for money, and customer service departments staffed by the Don’t Care Bears.

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Cable Industry Has Charts to Prove Your Broadband is Screaming Fast

Tracking Cable’s Top Internet Speeds
NCTA-Charts_2_tracking broadband speeds

The National Cable & Telecommunications Association (NCTA) offers this infographic to suggest the deregulated cable broadband industry works well without any interference from meddling politicians.

Their claim: “Ongoing investments have enabled cable providers to continue boosting broadband speeds with top tiers increasing 50% every year.”

The reality: Cable’s broadband speed comes at a very high cost. The majority of Americans cannot buy 505Mbps residential broadband service from Comcast and even if you could, the price tag hovers around $300 a month, with a nearly-$1,000 early contract termination penalty, a $250 installation and $250 activation fee. Customers at other cable providers often find their maximum speed is just 50Mbps and/or their Internet usage is limited by a usage cap.

Google Fiber and some other gigabit fiber to the home providers are offering unlimited 1,000Mbps service for $70 a month with no installation or activation fee if a customer agrees to stick around.

Verdict: The cable industry could do better for much less.

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New Jersey’s Fiber Ripoff: Verizon Walks Away from Fiber Upgrades Customers Already Paid For

Bait and switch broadband

Bait and switch broadband

Since 1991, Verizon telephone customers in New Jersey have paid at least $15 billion in surcharges for a promised high-speed broadband network that would reach every home in the state by 2010. But now critics charge Verizon diverted much of that money to shareholder dividend payouts and building infrastructure for its highly profitable wireless network, leaving almost half the state with slow speed DSL or no broadband at all.

In the early 1990s, Verizon’s predecessor — Bell Atlantic — launched “Opportunity New Jersey,” a plan promising the state it would have the first 100% fiber telecommunications network in the country. In return, the company enjoyed more than two decades of generous tax breaks and collected various surcharges from customers to finance network construction. But a review of Verizon’s promises vs. reality suggest the company has reneged on the deal it signed with the state back when Bill Clinton was beginning his first term as president.

Verizon promised at least 75 percent of New Jersey would have a fiber service by 1996 offering 384 television channels and 45/45Mbps broadband service for $40 a month. The network would be open to competitors and be deployed without regard to income or its potential customer base.

The state suspected trouble as far back as 1997, when the Division of the Ratepayer Advocate with the New Jersey Board of Regulatory Commissioners blasted the company’s progress five years into the project:

Bell Atlantic-New Jersey (BA-NJ) has over-earned, underspent and inequitably deployed advanced telecommunications technology to business customers, while largely neglecting schools and libraries, low-income and residential ratepayers and consumers in Urban Enterprise Zones as well as urban and rural areas.

Verizon's wired success story

By 2006, New Jersey was being introduced to FiOS, which some believed was part of Verizon’s commitment to the state. But a decade after Verizon’s target dates, customers were still waiting for FiOS video service, the maximum broadband speeds offered at that point were 30/5Mbps and the cost of the package ranged from $180-200 a month. Most of Verizon’s FiOS deployments were in the northern half of the state, leaving southern New Jersey with few, if any service improvements.

Despite Verizon’s repeated failures to meet its target dates, that same year New Jersey made life even easier for the phone company by passing a statewide video franchise law allowing Verizon to bypass negotiating with each town and city regarding its video services and instead run FiOS TV as it pleases anywhere in the state. The company argued a statewide video franchise would allow for more rapid deployment of Verizon’s fiber network. In reality, the company was falling further and further behind. By 2013, when Verizon sought renewal of its statewide franchise, Verizon only offered FiOS TV to 352 of the 526 communities hoping for service. At least 174 communities still waiting for FiOS are likely never going to get the fiber service, despite paying Verizon’s surcharges for more than 20 years. Verizon suspended its FiOS expansion project more than two years ago.

Bait and Switch Broadband

From promises of a cutting edge fiber future to good-enough DSL....

From promises of a cutting edge fiber future to good-enough DSL.

Despite early commitments of providing New Jersey with advanced fiber broadband speeds unheard of elsewhere in the country in the 1990s, Verizon changed its tune when it became clear the company wanted to prioritize investment in its more lucrative wireless network. Instead of a commitment of 45/45Mbps, providing basic DSL broadband at any speed was now seen as adequate. Verizon spokesman Lee Gierczynski told both Newsweek and the Inquirer the company never promised a statewide deployment of FiOS.

“Nobody knew what FiOS was 20 years ago,” Gierczynski said. “It wasn’t until 2004 when FiOS came on the scene.”

Forget about that commitment for 45/45Mbps speed as well.

“It didn’t say a minimum of 45mbps,” Gierczynski said, “it just says ‘up to’.”

That means DSL service will be a part of southern New Jersey for the near future. Customers unimpressed with the 5Mbps DSL service they get from Verizon can always pay substantially more for access to Verizon Wireless’ usage capped LTE 4G network that Gierczynski believes can be used to download movies.

In effect, ratepayers that wrote checks to pay artificially higher phone bills to help subsidize a promised 100% fiber optic future have instead funneled working capital to Verizon Wireless’ network expansion and helped enrich shareholders with generous dividend payouts.

Opportunity New Jersey Verizon: Christie Administration Proposes Letting Verizon Off the Hook Permanently

Gov. Christie

Gov. Christie

Most victims of costly bait and switch schemes get angry and demand justice. In New Jersey, the Christie Administration believes Verizon is the victim of unreasonable expectations and has proposed a sweetheart deal to both let the company off the hook and keep the surcharges it collected from New Jersey ratepayers for the last 21 years.

While the rest of the country clamors for better broadband, Governor Christie’s State Commission, his Attorney General’s Office and the state Consumer Rate Counsel believe that basic DSL is good enough, and making life difficult for Verizon by insisting it live up to its part of a mutual agreement just isn’t very nice.

All eyes were on incoming president of the Board of Public Utilities Dianne Solomon, wife of close Christie associate Lee Solomon. The BPU has direct authority over Verizon’s compliance with its promises to the state. But Dianne’s only apparent experience is as an official with the United States Tennis Association. Critics immediately pounced on the odd nomination, accusing the governor of using the BPU as a lucrative parking lot for political patronage. Three of the four current commissioners are all politically connected and their experience navigating telecommunications law is questionable.

Instead of demanding that Verizon be held to its commitment to the state, government officials are bending over backwards to let Verizon walk away from its promises forever.

A stipulation proposal would allow the company to shred its commitment to upgrade New Jersey with fiber optics. Instead, Verizon gets permission to discontinue service if you have any other option for service — including cable or wireless. Not only would this stipulation eliminate any hope bypassed communities have to eventually get Verizon FiOS, it would also let Verizon scrap its rural landline network and kill DSL, forcing customers to its lucrative wireless broadband product instead.

Solomon

Solomon

The agreement also eliminates any commitment Verizon had to deliver fiber-fast speeds. Instead, Verizon will be considered in good standing if it matches the slowest speed on offer from Verizon DSL.

“Broadband is defined as delivering any technology including Verizon’s 4G wireless, fiber, copper or cable, data transmission service at speeds no less than the minimum speed of Verizon New Jersey’s Digital Subscriber line (DSL) that is provided by Verizon New Jersey today.”

New Jersey customers can file comments about the proposed agreement until March 24, 2014 with the Board of Public Utilities.

We have found a good sample letter you should edit to make your own. You can e-mail the secretary directly and/or send your message to the general e-mail address: [email protected] (be sure to include “Verizon New Jersey, Docket No. TO12020155″ on the Subject line):

New Jersey Board of Public Utilities
Kristi Izzo, Secretary
44 South Clinton Avenue, 9th Floor
P.O. Box 350 Trenton, NJ 08625-0350

Email: [email protected]

Re: In the Matter of Verizon New Jersey, Inc. Docket# TO 12020155

Dear Secretary Izzo:

I want to alert you to an urgent matter pending before the New Jersey Board of Public Utilities. Pursuant to a 1993 law called Opportunity New Jersey, Verizon NJ was obligated to upgrade New Jersey’s “copper wire” network by 2010. To fund the Opportunity New Jersey expansion, Verizon NJ was permitted to collect excess charges from their customers and received lucrative tax breaks from the State. These charges and tax breaks began in the 1990s and are still being collected today.

Verizon failed to meet its timeframe requirements under the Opportunity New Jersey agreement to New Jersey residents. As a result of Verizon’s failures, on March 12, 2012, the New Jersey Board of Public Utilities initiated a legal action against Verizon NJ. The Board and Verizon NJ have now entered into a proposed settlement agreement which I believe is inadequate and not in the best interests of myself and other New Jersey residents who have paid for this service that was not fully delivered.

I oppose the Board’s proposed settlement agreement and demand that The Board of Public Utilities hold Verizon to the original Opportunity New Jersey agreement which requires Verizon to expand broadband services to every customer in the State. The proposed settlement has the potential of costing myself and other residents even more money than I have already paid for the last 21 years. The Board of Public Utilities should not allow Verizon to flagrantly disregard the stipulations which are the framework for the charges and tax breaks that Verizon has enjoyed for 21 years.

I am asking the Board of Public Utilities to be my advocate and investigate where our dollars were spent and to require Verizon to give me what I was originally promised under Opportunity New Jersey agreement of 1993.

Sincerely,

[Your Name, Address, Phone Number]

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Bright House Networks to Build Limited 1Gbps Fiber to the Home Network in Tampa

ultrafiDespite the fact cable companies routinely claim customers don’t want or need gigabit broadband speeds, property developers seeking an edge in the real estate market do.

A planned community of 6,000 homes under construction by Metro Development Group (MDG) in Tampa has signed a deal to commit Bright House Networks to install a 1Gbps fiber-to-the-home network within the development. MDG said the first homes wired for the new service will be ready for residents this summer, but the entire project will take three years to finish.

“MDG hopes the fast Internet speeds will attract would-be buyers for the new homes,” said MDG president Greg Singleton.

brighthouse_logoMDG is branding the fiber service as ULTRAFi. It will be accompanied by a gigabit Wi-Fi network accessible throughout the community. In addition to providing fast broadband, the service will include home automation and security services.

The driver for the gigabit broadband project isn’t Bright House Networks, it is the property developer. Even though Bright House has committed to the project, it still denies consumers need super fast Internet speeds offered by providers like Google Fiber.

mdgBright House president Nomi Bergman acknowledged the project is a special deal with MDG and it will be years before average consumers need anything close to gigabit broadband speeds. Bergman said there is insufficient demand to justify upgrading Bright House Networks’ broadband speed offerings to other customers.

MDG obviously disagrees, because it hopes to extend fiber-to-the-home gigabit service to its other new communities. That could mean 20,000 more homes could eventually get gigabit broadband.

“In five or 10 years, I think communities that are not doing this” will be “obsolete,” Singleton said.

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