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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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Wireless ISP Fends Off Frontier’s DSL Expansion in Indiana; Telco Denied Expansion Money

onlyinternetA wireless Internet Service Provider serving rural northeastern Indiana has successfully challenged Frontier Communications’ application for federal funds to introduce DSL service in the region.

Great American Broadband (GAB) challenged Frontier’s request for funds from the Connect America Fund to wire homes in the Wells County community of Uniondale. It turns out the Bluffton-based wireless ISP already provides service to the community, making Frontier’s request redundant.

uniondaleGAB’s OnlyInternet serves around 3,000 customers in Adams, Allen, Blackford, Delaware, Elkhart, Grant, Howard, Huntington, Jay, LaGrange, Madison, Randolph, Tipton, Wabash, Wells and Whitley counties. Founded in 1995, the wireless ISP uses a network of towers to offer a high-speed service comparable to Wi-Fi to residents who generally cannot get broadband from any cable or telephone company.

The FCC found Uniondale was already sufficiently served by OnlyInternet and denied funds earmarked for Frontier’s proposed expansion into the community of about 300. Wireless ISPs have had a hard time successfully defending their turf from phone companies that can subsidize expansion of their DSL service with federal tax money or funds provided by other telephone ratepayers. Many wireless ISPs are family owned and financed by private bank loans and small investors. They do not appreciate subsidized competition, particularly from the Connect America Fund, which is generally only available to telephone companies.

Frontier“We have to look out for the interests of our members,” Rick Harnish, executive director of the Wireless Internet Service Providers Association in Ossian, told the Journal Gazette. The group alerted OnlyInternet of Frontier’s FCC filing for rural dollars. “The Connect America Fund is a subsidy program set up for phone companies, which is why wireless providers are left out. We continue lobbying for equitable treatment, but we’re a small voice compared to the bigger companies.”

Rural ISPs have taken about a $10 million chunk out of Frontier’s application for $71.5 million in Connect America Funds by successfully challenging the phone company’s applications around the country. In general, Connect America Funding for broadband expansion is available only to unserved areas where customers cannot get broadband service.

In northern Indiana, Frontier can use the federal money to offer services in parts of Huntington, Jay and Wells counties.

Frontier is still free to use its own funds to wire Uniondale for DSL service, and customers might welcome the competition.

OnlyInternet currently provides wireless service at speeds ranging from 512/128kbps ($24.95) to 3Mbps/768kbps ($64.95). Until last year, Frontier generally provided most rural communities with up to 3Mbps broadband, but has upgraded service to speeds ranging from 6-40Mbps. Most of the higher speeds are available only in urban areas.

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Time Warner Cable Phone Customers May See Their Phone Numbers Go Unlisted

Phillip Dampier March 10, 2014 Competition, Consumer News, Frontier, Time Warner Cable No Comments

digital phoneTime Warner Cable telephone customers may find their phone numbers missing from directory assistance records and residential phone books.

This year, the cable company began charging directory publishers for its residential customer listings and some, including Frontier Communications, have refused to pay.

As a result, customers are likely to find their next copy of the White Pages thinner than it used to be.

The usefulness of telephone directories and directory assistance services have both been in decline for years as customers migrate to unlisted cell phones. But the loss of cable phone customers from phone books is a new trend. In the past, cable companies provided the listings for free to most directory publishers as a service to customers who wanted to keep their phone numbers in the directory. But now those listings are a money-maker, only available for sale.

Phil Yawman, Frontier Communications vice president and general manager for the Rochester, N.Y. area — Frontier’s largest urban market — told WXXI News the phone company opted not to buy the listings. 

Time Warner Cable spokesperson Joli Plucknette-Farmen said charging a fee for residential directory listings is accepted by the Federal Communications Commission.

Frontier, like many other phone companies, also no longer provides automatic delivery of residential White Pages listings, although the lucrative Yellow Pages will still appear on customer doorsteps. 

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Peer Wars: Netflix SuperHD Streaming May Explain Video Traffic Slowdowns for Some Customers

The largest drops in streaming speeds are coming from ISPs that may be stalling necessary upgrades at the expense of their customers' online experience.

The largest drops in Netflix streaming speeds are coming from ISPs that may be stalling necessary upgrades at the cost of their paying customers’ online experience.

Netflix performance for Verizon customers is deteriorating because Verizon may be delaying bandwidth upgrades until it receives compensation for handling the growing amount of traffic coming from the online video provider.

Verizon customers have increasingly complained about Netflix slowdowns during prime-time, especially in the northeast, and Netflix’s latest statistics confirm FiOS customers have seen average performance drop by as much as 14% in the last month alone.

Verizon told Stop the Cap! a few weeks ago the company was not interfering with Netflix traffic or degrading its performance, but there is growing evidence that may not be the whole story. The Wall Street Journal reports Netflix and at least one bandwidth provider suspect phone and cable companies are purposely stalling on upgrading connections to handle traffic growth from Netflix until they are compensated for carrying its video traffic.

The dispute involves the plumbing behind parts of the Internet that are invisible to consumers. As more people stream movies and television, that infrastructure is getting strained, intensifying the debate over who should pay for upgrades needed to satisfy America’s online-video habit.

Netflix wants broadband companies to hook up to its new video-distribution network without paying them fees for carrying its traffic. But the biggest U.S. providers—Verizon, Comcast, Time Warner Cable and AT&T Inc. —have resisted, insisting on compensation.

The bottleneck has made Netflix unwatchable for Jen Zellinger, an information-technology manager from Carney, Md., who signed up for the service last month. She couldn’t play an episode of “Breaking Bad” without it stopping, she said, even after her family upgraded their FiOS Internet service to a faster, more expensive package. “We tried a couple other shows, and it didn’t seem to make any difference,” she said. Mrs. Zellinger said she plans to drop her Netflix service soon if the picture doesn’t improve, though she will likely hold on to her upgraded FiOS subscription.

She and her husband thought about watching “House of Cards,” but she said they probably will skip it. “We’d be interested in getting to that if we could actually pull up the show,” she said.

Netflix relies on third-party traffic distributors to deliver much of its streamed programming to customers around the country. Cogent Communications Group is a Netflix favorite. Cogent maintains two-way connections with many Internet Service Providers. When incoming and outgoing traffic are generally balanced, providers don’t complain. But when Cogent started delivering far more traffic to Verizon customers than what it receives from them, Verizon sought compensation for the disparity.

“When one party’s getting all the benefit and the other’s carrying all the cost, issues will arise,” Craig Silliman, Verizon’s head of public policy and government affairs told the newspaper. The imbalance is primarily coming from the growth of online video, and as higher definition video grows more popular, traffic imbalances can grow dramatically worse.

A spat last summer between Cogent and some ISPs is nearly identical to the current slowdown. Ars Technica reported the traditional warning signs providers used to start upgrades are increasingly being ignored:

“Typically what happened is when the connections reached about 50 percent utilization, the two parties agreed to upgrade them and they would be upgraded in a timely manner,” Cogent CEO Dave Schaeffer told Ars. “Over the past year or so, as we have continued to pick up Netflix traffic, Verizon has continuously slowed down the rate of upgrading those connections, allowing the interconnections to become totally saturated and therefore degrading the quality of throughput.”

Schaeffer said this is true of all the big players to varying degrees, naming Comcast, Time Warner, CenturyLink, and AT&T. Out of those, he said that “AT&T is the best behaved of the bunch.”

Letting ports fill up can be a negotiating tactic. Verizon and Cogent each have to spend about $10,000 for equipment when a port is added, Schaeffer said—pocket change for companies of this size. But instead of the companies sharing equal costs, Verizon wants Cogent to pay because more traffic is flowing from Cogent to Verizon than vice versa.

Cablevision, which participates in Netflix's Open Connect program experiences no significant speed degradation during prime time. The same cannot be said with Time Warner Cable, which refuses to participate.

Cablevision, which participates in Netflix’s Open Connect program, experiences no significant speed degradation during prime time. The same cannot be said of Time Warner Cable, which refuses to take part.

Netflix offered a solution to help Internet Service Providers manage its video traffic. Netflix’s Open Connect offers free peering at common Internet exchanges as well as free storage appliances that ISPs can connect directly to their network to distribute video to customers. Free is always good, and Netflix claims many ISPs around the world have already taken them up on the offer, slashing their transit costs along the way.

A few major North American ISPs have also agreed to take part in Open Connect, including Frontier Communications, Clearwire, Telus, Bell, Cablevision and Google Fiber. Open Connect participating ISPs also got an initial bonus for participating they could offer customers – exclusive access to SuperHD streaming.

But most Americans would not get super high-resolution streaming because the largest ISP’s refused to participate, seeking direct compensation from content providers to carry traffic across their digital pipes instead.

On Sep. 26, 2013 Netflix decided to offer SuperHD streaming to all customers, regardless of their ISP. As a result, one major ISP told the newspaper Netflix traffic from Cogent at least quadrupled. ISPs taking Netflix up on Open Connect saw almost no degradation from the increased traffic, but not so for Verizon, AT&T, Time Warner Cable, and Comcast customers.

Net Neutrality advocates fear the country’s largest phone and cable companies are making an end-run around the concept of an Open Internet. Providers can honestly guarantee not to interfere with certain web traffic, but also refuse to keep up with needed upgrades to accommodate it unless they receive payment. The slowdowns and unsatisfactory performance are the same in the end for those caught in the middle – paying customers.

“Customers are already paying for it,” said industry observer Benoît Felten. “You sell a service to the end-user which is you can access the Internet. You make a huge margin on that. Why should they get extra revenue for something that’s already being paid for?”

Some of the web’s biggest players including Microsoft, Google and Facebook may have already capitulated — agreeing to pay major providers for direct connections that guarantee a smoother browsing experience. Netflix has, thus far, held out against paying ISPs to properly manage the video content their subscribers want to watch but in some cases no longer can.

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From the Frying Pan Into the Fire: Time Warner Customers to Be Burned by Comcast Buyout

Phillip "Ouch!" Dampier

Phillip “Ouch!” Dampier

Spending the day watching cable business news channels gush approval of last night’s surprise announcement that Comcast would acquire Time Warner Cable is just one excellent reason this deal should never be approved.

CNBC, owned by Comcast, particularly fell all over itself praising the transaction. Some of the reporters — many Time Warner Cable customers — actually believed Comcast would be a significant improvement over TWC. It is, if you want higher modem rental fees, higher cable TV bills, and faster broadband speeds you can’t use because of the company’s looming reintroduction of usage caps. CNBC didn’t bother to mention any of that, and why should they? CNBC reporter David Faber was the first to break the story of the merger last evening and among the first this morning to score an extended, friendly interview with the CEOs of both Comcast and Time Warner Cable, pitching softball questions to the two of them for nearly 15 minutes.

That’s a problem. How often do you hear news reports that include the fact the parent company of the channel has an ownership interest in one of the players. Do you think you are getting the full story when a Comcast employee asks Comcast’s CEO about a multi-billion dollar deal on a network owned and operated by Comcast. Incorporating Time Warner Cable and its news operations into Comcast only makes the problem worse.

As far as cable business news networks and the parade of Wall Street analysts are concerned, this is a fine deal for shareholders, consumers, and the cable business. Ironically, several on-air reporters and commentators defended the merger claiming it isn’t an antitrust issue because Comcast and Time Warner Cable never compete with each other. They never asked why that is so.

They're here!

They’re here!

Comcast is hoping the government will give its merger a pass with few conditions for the same reason, without bothering to note the cable industry has existed as a cartel in the United States for decades, each company with a territory they informally agree not to cross. With this deal, Comcast’s fiefdom will now cover about half of all cable subscribers in the U.S., covering 43 of the 50 largest metropolitan markets, and have about a 30% total market share among all competing providers — by far the largest. An 800 pound gorilla is born.

Three million current Time Warner Cable subscribers will not be coming along for the ride and will likely be auctioned off to Charter or another cable operator in a token gesture to keep Comcast’s total market share at the 30% mark the FCC formerly insisted on as an absolute ownership limit — before Comcast successfully sued to have that limit overturned.

The rest of us can say goodbye to our unlimited broadband plans and get ready to pay substantially more for cable and broadband service. Despite claims from remarkably shallow media reports, an analysis of Comcast and Time Warner Cable’s rates clearly show TWC charges lower prices with fewer “gotcha” fees.

Reviewing some recent promotional offers for new customers, Comcast customers pay nearly $35 more for a triple play package than Time Warner customers pay:

Time Warner Cable's Rob Marcus gets a $56.5 million golden parachute after 43 days on the job as CEO.

Time Warner Cable’s Rob Marcus gets a $56.5 million golden parachute after 43 days on the job as CEO.

The Comcast Starter plan costs $99 per month for the first 12 months with a 2-year agreement that includes a nasty divorce penalty. After 12 months, your price increases to $119.99 for the remaining year. The $99 plan accidentally doesn’t bother to mention that customers renting a Comcast cable modem/gateway will pay an extra $8 a month, which raises the price. Since many cable subscribers also want HD DVR service, that only comes free for the first six months, after which Comcast slaps on a charge ranging from $16-27 a month for the next 18 months. Assuming you are happy with the limited channel lineup of the Starter package (and many are not), you will pay up to $154 a month. Oh, we forgot to mention the Broadcast TV surcharge just introduced that increases the bill another $1.50 a month.

Time Warner Cable’s new customer promotions typically cost around $96 a month, including their annoying modem rental fee. DVR service can range from free to $23 a month depending on the promotion, making your monthly rate around $119 a month for 12 months, with no contract and no penalty if you decide to cancel.

“It is pro-consumer, pro-competitive, and strongly in the public interest,” said Comcast CEO Brian Roberts, defending the deal.

Actually, it is in Comcast’s interest. If approved, the biggest investment Comcast will make is spending $10 billion — not to upgrade Time Warner Cable systems — but to launch a major stock buyback program that will directly benefit shareholders.

“On a personal level, it’s never easy to cede control of a company,” said Rob Marcus, Time Warner Cable’s chief executive. “However in this case, it just makes too much sense.”

Before reaching for a Kleenex to wipe any tears away, consider the fact Marcus will do just fine giving up his leadership of TWC just over a month after taking over. His generous goodbye package is worth $56.5 million, not bad for 43 days of work. Time Warner Cable employees won’t share that bounty. In fact, with $1.5 billion in promised savings from the deal’s “synergies” — code language for layoffs, among other things — a substantial number of Time Warner Cable employees can expect to be fired during the first year of the combined company.

The biggest impact of this deal is a further cementing of the duopoly of cable and phone companies into their cozy positions. Instead of encouraging competition, Comcast’s new size-up will guarantee fewer competitors thanks to the concept of volume discounts. The largest providers get the best prices from cable programmers, while smaller ones pay considerably more for access to CNN, ESPN, and other popular channels. Comcast will benefit from reduced pricing for cable programming, which we suspect will never reach customers through price reductions. But any potential startup will have to think twice before selling television programming at all because the prices they will pay make it impossible to compete with Comcast.

Another satisfied customer

Another satisfied customer

Frontier discovered this problem after acquiring FiOS systems from Verizon in Indiana and the Pacific Northwest. When Verizon’s volume discount prices expired, Frontier’s much smaller customer base meant much higher programming costs on renewal. They were so high, in fact, Frontier literally marketed FiOS customers asking them to give up fiber optic television in favor of satellite.

Unless you have pockets as deep as Google, offering cable TV programming may be too expensive for Comcast’s competitors to offer.

Broadband is already immensely profitable for both Time Warner Cable and Comcast, but now it can be even more profitable as Comcast persuades customers to adopt their wireless gateway/modems (for a price) and imposes a usage cap of around 300GB per month. Yes, Comcast will deliver speed increases Time Warner Cable couldn’t be bothered to offer, but with a pervasive usage cap, the value of more Internet speed may prove limited. It’s a case of moving away from Time Warner’s argument that you don’t need faster Internet speed to Comcast’s offer of faster speed that you can’t use.

Customers hoping for a better customer service experience may have been cheered by this misleading passage in today’s New York Times:

Nonetheless, about 8 million current Time Warner Cable customers will become Comcast customers. That may be a good thing for those customers, as Comcast is seen as an industry leader in terms of providing high-quality television and Internet services, while Time Warner Cable has a reputation for poor customer service.

It may be seen as an industry leader by Comcast itself, but consumers despise Comcast just as much as they hate Time Warner Cable. In fact, the American Consumer Satisfaction Index found Comcast was hardly a prize:

  • ACSI’s lowest rated ISP
  • Second-lowest ranked TV service
  • Third-lowest ranked phone service

Comcast consistently scores as one of the lowest rated companies across all the segments it participates in. It has the dubious description of being the lowest rated company in the lowest rated industry.

So why the near universal disdain for ISPs? Even cable companies have to compete with satellite providers. That’s not the case here. Add to that the relatively few companies, regional near-monopolies, high costs, and unreliable service and speed and you have a recipe for bad customer service and little incentive to improve it.

Customers particularly dislike their experiences with call centers, and the range and pricing of available plans.

Higher prices, usage caps, surcharges, and fewer channels for more money. What’s not to love about that?

Just about a week ago, Rob Marcus unveiled his vision of an upgraded Time Warner Cable that looked good to us, and retained unlimited use broadband service. Apparently this is all a case of “never mind.”

The fact is, a merger of Comcast and Time Warner Cable will only benefit the companies, executives, and shareholders involved, while doing nothing to improve customer service, expand broadband, increase speeds, cut prices, and give customers the service they want. It is anti-consumer, further entrenches Comcast’s enormous market power (it also owns NBC and Universal Studios), and gives one company far too much control over content and distribution, particularly for customers who don’t have AT&T U-verse or Verizon FiOS or a community-owned provider as an alternative.

This deal needs to be rejected. When T-Mobile found itself out of a deal with AT&T, it survived on its own even better than expected. So can Time Warner Cable, with the right management team.

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US & Canada Agree: Our Internet Providers Are Bad for Us and We’re Falling Behind

Phillip "Free Trade in Bad Broadband" Dampier

Phillip “Free Trade in Bad Broadband” Dampier

Sure we’ve had our cultural skirmishes in the past,  but on one thing we can all mostly agree: our largest cable, phone, and broadband providers generally suck.

Outside of hockey season, Canada’s national pastime is hating Bell, Rogers, Vidéotron, Telus, and Shaw. The chorus of complaints is unending on overbilling, bundling of dozens of channels almost nobody watches but everybody pays for, outrageous long-term contracts, and bloodsucking Internet overlimit fees. In fact, dissatisfaction is so pervasive, the Conservative government of Stephen Harper spent this past summer waving shiny keys of distraction promising Canadians telecom relief while hoping voters didn’t notice their tax dollars were being spent by the country’s national security apparatus to spy on Brazil for big energy companies.

The Montreal Gazette is now collecting horror stories about dreadful service, mysterious price hikes, and promised credits gone missing on behalf of readers fed up with Bell and Vidéotron.

Rogers Cable, always thoughtful and pleasant, punished a Ottawa man coping with multiple sclerosis and cancer with a $1,288 bill, quickly turned over to a collection agency after his home burned to the ground. It took headlines spread across Ontario newspapers to get the cable company to relent.

Things are no better in the United States where the American Customer Satisfaction Index rates telecom companies worse than the post office, health insurers airlines, and the bird flu. National Public Radio opened the floodgates when it asked listeners to rate their personal satisfaction with their Internet Service Provider — almost always the local cable or telephone company.

The phone company Canadians love to hate.

The phone company Canadians love to hate.

Many responded their Internet access is horribly slow, often goes out, and is hugely overpriced. In response, the cable industry’s hack-in-chief did little more than shrug his shoulders — knowing full well American broadband exists in a cozy monopoly or duopoly in most American cities.

Breann Neal of Hudson, Ill., told NPR she has one choice — DSL, which is much slower than advertised. Hudson is Frontier Communications country, and it is a comfortable area to serve because local cable competition from Mediacom, America’s worst cable company, is miles away from Neal’s home.

“There’s no incentive for them to make it better for us because we’re still paying them every month … and there’s no competition,” Neal says.

Samantha Laws, who gets her Internet through her cable provider, says she also only has one option.

“It goes out at least once a day, and it’s been getting worse the last few months,” Laws says. She works with a pet-sitting company that handles all of its scheduling through email and the company website. At times she can’t do her job because of the unreliable connection.

Chicago is in Comcast’s territory and the company is quite comfortable cashing your check while AT&T takes its sweet time launching U-verse in the Windy City. AT&T isn’t about to throw money at improving DSL while local residents wait for U-verse and Comcast doesn’t need to spend a lot in Chicago when the alternative is AT&T.

comcast sucksWhere there is no disruptive new player in town to shake things up, there is little incentive to speed broadband service up. But there is plenty of room to keep increasing prices for a service that is becoming as important as a working telephone. Companies are using broadband profits to cover increasing losses from pay television service, investing in stock buybacks, paying dividends to shareholders, or just putting the money in a bank, often offshore.

NPR’s All Things Considered:

“[For] at least 77 percent of the country, your only choice for a high-capacity, high-speed Internet connection is your local cable monopoly,” says Susan Crawford, a visiting professor at Harvard Law School. She is also the author of Captive Audience: The Telecom Industry and Monopoly Power in the New Gilded Age.

Crawford says that today’s high-speed Internet infrastructure is equivalent to when the railroad lines were controlled by a very few moguls who divided up the country between themselves and gouged everybody on prices.

She says the U.S. has fallen behind other countries in providing broadband. At best, Crawford says, the U.S. is at the middle of the pack and is far below many countries when it comes to fiber optic penetration. Given that the Internet was developed in the U.S., she says the gap is a result of failures in policy.

“These major infrastructure businesses aren’t like other market businesses,” Crawford says. “It is very expensive to install them in the first place, and then they build up enormous barriers of entry around them. It really doesn’t make sense to try to compete with a player like Comcast or Time Warner Cable.”

So Crawford is calling for is a major public works projects to install fiber optic infrastructure — a public grid that private companies could then use to deliver Internet service.

Powell

Powell

That’s an idea met with hand-wringing and concern-trolling Revolving Door Olympian Michael Powell, who made his way from former chairman of the Federal Communications Commission during the first term of George W. Bush’s administration straight into the arms of Big Cable as president of their national trade association, the NCTA.

Powell, well compensated in his new role representing the cable industry, wants Americans to consider wireless 3G and 4G broadband (with usage caps as low as a few hundred megabytes per month) equivalent competitors to the local cable and phone company.

“I think to exclude [wireless] as a substitutable, competitive alternative is an error that leads you to believe the market is substantially more concentrated that it actually is,” Powell says.

Of course, Powell’s new career includes a paycheck large enough to afford the wireless data bills that would shock the rest of us. All that money also apparently blinds him to the reality the two largest wireless providers in America are AT&T and Verizon — the same two companies that are part of the duopoly in wired broadband. It’s even worse in Canada, where Rogers, Bell, and Telus dominate wired and wireless broadband.

Although America isn’t even close to having the fastest broadband speeds, Powell wants you to know the speeds you do get are good enough.

“I think taking a snapshot and declaring us as somehow dangerously falling behind is just not substantiated by the data,” he says. He says it is like taking a snapshot of speed skaters, where there might be a few seconds separating the leaders, but no one is “meaningfully out of the race.”

last placeThat is why we still celebrate and honor Svetlana Radkevich from Belarus who competed in the speed skating competition at the Vancouver 2010 Winter Olympics. She made it to the finish line and ranked 33rd. Ironically, South Korea ranked fastest overall that year, taking home three gold and two silver medals. In Powell’s world, that’s a distinction without much difference. You don’t need South Korean speed and gold medals when Belarus is enough. That argument always plays well in the United States, where Americans can choose between Amtrak or an airline for a long distance trip. Who needs a non-stop flight when a leisurely train ride will get you there… eventually.

There are a handful of providers uncomfortable with the mediocre broadband slow lane. Google is among them. So are community broadband providers installing fiber broadband and delivering gigabit Internet speeds. EPB in Chattanooga is among them, and it has already made a difference for that city’s digital economy neither AT&T or Comcast could deliver.

Unsurprisingly, Powell thinks community broadband is a really bad idea because private companies are already delivering broadband service — while laughing all the way to the bank.

If a community really wants gold medal broadband, Powell says, they should be able to have it. But Powell conveniently forgets to mention NCTA’s largest members, including Comcast and Time Warner Cable, spend millions lobbying federal and state governments to make publicly owned broadband illegal. After all, cable companies know what is best.

All Things Considered recently asked its fans on Facebook, “How satisfied are you with your Internet service provider?” Many responded that they didn’t like their Internet service, that it often goes out and that their connection was often “painfully slow.” Listen to the full report first aired Jan. 11, 2014. (11:30)
You must remain on this page to hear the clip, or you can download the clip and listen later.

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AT&T Sells Landlines in Conn. to Frontier; U-verse TV Available to Frontier Customers Nationwide?

frontierAT&T today announced it was selling off its residential wireline network in Connecticut to Stamford-based Frontier Communications for $2 billion in a deal that includes an expanded license for U-verse TV that could eventually be available to Frontier customers nationwide.

Frontier will assume control of the Southern New England Telephone Co. (SNET), a wholly owned subsidiary of AT&T, and its 2,700 employees and 900,000 telephone lines. Included in the deal is AT&T’s U-verse network in the state and the right to expand U-verse TV into all 27 states where Frontier provides service. The deal comes three years after Frontier paid $8.6 billion in stock and cash to buy landline operations in 14 states from Verizon Communications.

In a Stop the Cap! exclusive story published last year, we reported Frontier was interested in acquiring licensing rights to the U-verse brand to potentially offer its customers a unified product suite of television, broadband, and phone service over a fiber to the neighborhood network. Maggie Wilderotter, CEO of Frontier Communications, told the Wall Street Journal the deal between AT&T and Frontier had been on the table for years waiting to be finalized. With today’s announcement, AT&T New England president Patricia Jacobs acknowledged Frontier will use the U-verse name at a secondary brand for video service. Frontier now relies on satellite reseller agreements to bundle video service into its packages for consumers.

frontier u-verseFrontier’s acquisition will give the company hands-on experience with AT&T’s U-verse network in Connecticut and offer a path to bring improved service to Frontier customers elsewhere. Company officials also acknowledged a key reason for the transaction was boosting Frontier’s lagging dividend, a critical part of its share price. By taking on nearly 1,000,000 new customers, Frontier will boost its cash flow, returning some of that new revenue in a higher dividend payout to shareholders. But the company will take on an extra $2 billion in debt to manage higher dividend payouts.

JPMorgan Chase & Co. arranged the financing for the acquisition and Frontier will likely raise about $1.9 billion from debt markets by selling bonds. Frontier already has $8.13 billion in debt on the books, much of it acquiring landlines originally owned by Verizon.

AT&T’s departure from Connecticut was no surprise to analysts. AT&T operates most of its landline network in the midwest, south, and in the state of California. The company has focused primarily on serving business customers and its wireless network in the northeast, not residential landlines. Frontier described the deal as a perfect fit for Connecticut residents, because Frontier specializes in residential phone and broadband service.

“AT&T has been trying to sell its rural wireline businesses for some time,” Gerard Hallaren, an analyst with Janco Partners Inc., told Bloomberg News. “It looks to me like Frontier cherry-picked a nice asset at a nice price from AT&T.”

att_logoSNET began operations in 1878 as the District Telephone Company of New Haven and pre-dated the Bell System. The company founded the first exchange and printed the world’s first telephone directory. It remained independent of Bell System ownership until 1998, when SBC Communications (formerly Southwestern Bell) acquired the company. In late 2005, SBC purchased AT&T and AT&T Connecticut was born.

Over the past seven years, AT&T has watched customers decline from more than two million customers to fewer than one million. AT&T introduced U-verse to improve its position in the market to mixed results. The company’s investments in fiber upgrades have not been as profitable as its wireless network, likely leading to today’s sale.

AT&T says it is not leaving Connecticut altogether. The company plans to keep business and wireless customers in the state.

Much of the proceeds from the deal will be invested by AT&T in its wireless network, mostly to help pay for 4G LTE upgrades. The rest will be spent bringing U-verse to more customers in the midwest and southern U.S.

The acquisition faces regulator approval from both the Federal Communications Commission and Department of Justice, likely to be forthcoming in the first half of 2014.

Frontier executives promised shareholders the deal will result in $125 million in cost savings over the next three years — code language for layoffs. Some of them are likely to be among the 2,400 workers represented by the Communications Workers of America, which has had a contentious relationship with AT&T Connecticut over job cuts in the past.

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HissyFitWatch: Frontier Executive Angrily Departs W.V. Broadband Meeting Under Questioning

A Frontier executive in West Virginia had a bad day at Wednesday's Broadband Council meeting in Charleston.

HissyFitWatch

A senior executive at Frontier Communications stormed out of a public meeting in Charleston Wednesday after being questioned about Frontier’s DSL broadband speeds that critics claim are below state standards.

Dana Waldo, senior vice president and general manager of Frontier’s West Virginia operations, got up and left the meeting after Citynet CEO Jim Martin began questioning Waldo about Frontier meeting the minimum broadband speed requirements mandated by the state legislature. It was not the first time the two have sparred.

Martin has been a frequent critic of the way the state has spent broadband stimulus funding. Much of it, Martin alleges, paid for the construction of a Frontier-owned and controlled statewide fiber network that will benefit the company more than the state and its residents.

frontier wvFrontier and the State of West Virginia received more than $126 million of taxpayer money to subsidize the fiber network and the expansion of broadband service into rural areas of the state. Frontier agreed to offer a minimum of 4/1Mbps service to each home connected through the subsidy program.

Martin alleges Frontier has failed to offer consistent access to at least 1Mbps upstream speed, a charge Waldo vehemently denied.

“That is not correct, Jim,” Waldo said. “I wasn’t going to bring this up, but I am absolutely beside myself. I feel so sorry for you, that you are so desperate to make you and Citynet relevant and, apparently, keep it afloat. You make all these characterizations about us and everybody else.”

Waldo also accused Martin of making “misleading and defaming” comments about “my company and myself.”

Waldo

Waldo

“My God,” Waldo added, “every allegation you make and everything you said, [federal officials] dispute, and you still bring up these allegations. I’m tired talking to you about this stuff. I’m tired of the misrepresentations you make. Jim, it’s over. I’m done talking to you. I’m done wasting my time responding to your mischaracterizations. I’m not going to sit here and waste my time and hear more of his nonsense. I’ll excuse myself.”

Martin said nothing in response as Waldo picked up his papers and left the Broadband Deployment Council meeting room.

Martin later told The Charleston Gazette he was just asking a question and repeated his assertion Frontier’s rural DSL service does not offer rural West Virginians at least 1Mbps upload speeds across the state. Martin added Waldo’s defense relied on news articles and documents now three years out of date.

“Both an independent consultant hired by the Governor’s Office, and the legislative auditor have confirmed what I said was true,” Martin said.

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Malone Has Another Billion Towards a Liberty/Charter Buyout of Time Warner Cable, Cablevision

Malone

Malone

Dr. John Malone’s Liberty Global has picked up an extra billion dollars it can use towards any plan to combine Time Warner Cable and/or Cablevision under Charter Communications.

Liberty has sold off some of its assets to build an enormous financial war chest it could use to launch a new wave of cable consolidation in the United States, potentially leaving Charter Cable as the country’s second biggest cable operator, just behind Comcast.

AMC Networks announced it will pay $1 billion to buy Liberty-owned ChelloMedia, a major international programmer and content distributor that operates 68 channels and networks available to more than 390 million households in 138 countries. Chellomedia is not well-known in North America but its networks are household names overseas. The deal includes Chello Multicanal, Chello Central Europe, Chello Zone, Chello Latin America and Chello DMC. In addition, Chellomedia’s stakes in its joint ventures with CBS International, A+E Networks, Zon Optimus and certain other partners are also part of the sale.

Liberty Global logo 2012That $1 billion could be a key part of any blockbuster buyout deal because Malone can leverage that and other money with an even larger infusion from today’s easy access capital market. He has done it before, leveraging countless buyouts of other cable operators that built Malone’s Tele-Communications, Inc. (TCI) into the country’s largest cable operator by the early 1990s.

According to Shahid Khan, a media and cable industry consultant with Mediamorph, by this time next year Charter Communications could be just two million subscribers away from beating Comcast as the nation’s biggest cable operator.

twcGreenKhan believes Malone laid his consolidation foundation with Liberty’s significant ownership interest in Charter Communications, from which he can build a new cable empire.

The most likely targets for consolidation are Time Warner Cable and Cablevision. According to Leichtman Research, as of this summer Comcast is the nation’s largest operator with 21.7 million subscribers. Regulators are unlikely to approve any deals growing Comcast even larger. But combining Charter, Time Warner Cable, and Cablevision would deliver 19.1 million subscribers under the Charter brand. A handful of smaller deals with minor operators like SuddenLink, Cable ONE, Mediacom, or Bright House Networks would quickly put Charter over the top of Comcast.

cablevisionMalone’s public argument is that larger cable operators have more leverage to secure better deals and rates for cable programming, equipment vendors, and suppliers. It also delivers “cost savings” mostly through layoffs and cutting back on redundant operations like customer care call centers.

But Malone could also use the combined market power of the supersized cable company to keep competitors non-viable, especially for cable television programming. Frontier Communications learned what it is like to be a small player when its inherited FiOS networks in Washington, Oregon and Indiana lost Verizon’s volume discounts for cable programming. Frontier quickly found the programming rates it could negotiate on its own were so dramatically higher, it tried to convince FiOS TV subscribers to switch to satellite television instead.

Charter could also raise prices for broadband services in areas where its potential partners have not increased them quickly enough.

Ironically, AMC Networks’ one billion dollar buyout of Chellomedia could ultimately become the catalyst for a Malone-driven buyout of AMC’s former owner — Cablevision.

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Frontier Has Capacity to Spare for Broadband Users; Grabbing Customers from Cable Operators

frontierFrontier Communications’ new simplified pricing with no equipment fees or surprise contracts was well-timed for the phone company as it picked up a growing number of disgruntled Comcast and Time Warner Cable customers fed up with increasing modem rental fees.

Frontier depends a great deal on its residential broadband service to win back revenue the company has lost from years of landline cord-cutting. The company reported slowing revenue losses, now down to less than one percent for the quarter ending Sept. 30. Frontier’s profits reached $35.4 million this quarter, reduced by increased investment in broadband upgrades and pension fund-related expenses.

The independent phone company is still losing residential and business phone customers, but those losses have begun to stabilize. Frontier has 2.82 million residential customers and 275,000 business customers. While Time Warner Cable lost customers during the recent quarter, Frontier picked up 27,000 new ones. For all of 2013, Frontier added 84,500 new broadband customers. Nearly 84 percent of them added broadband as part of a bundle, which leads analysts to suspect most of Frontier’s new broadband customers are located in rural areas that never had access to broadband speeds before.

Frontier’s greatest opportunity is in the rural residential broadband business, and the company’s investment in improved broadband speeds has made a major difference in growing market share especially where it has a cable competitor. Currently, Frontier has 20-25 percent market share in most of its service areas. It wants 40%, but is unlikely to achieve it selling broadband speeds that often top out at around 10Mbps. Winning customers back to a landline provider has also proved difficult without an attractive bundled offer. In all but a few cities, Frontier bundles landline service with DSL broadband and a satellite television package.

Wilderotter

Wilderotter

In rural markets, Frontier has had better success, particularly in areas formerly served by Verizon.

With help from the federal government’s Connect America Fund (CAF), Frontier invested over $21 million to expand rural broadband service in 2013. In the third quarter, the company expanded service to another 37,000 possible homes and businesses, with 30,000 more on the way in the fourth quarter. The company applied for $71.5 million in CAF funding for 2014.

Broadband speeds have also gradually increased in an expanding number of communities. As of today, 45 percent of homes can receive 20Mbps or better, 58 percent are capable of 12Mbps. A year-end commitment to offer at least 3Mbps speeds to 85% of customers in the most rural areas also appears within reach. Customers can upgrade to the next speed level in $10 increments.

But not every customer has gotten speed upgrades. In their largest legacy market — Rochester, N.Y., DSL speeds have remained unchanged in many areas. At the headquarters of Stop the Cap!, Frontier pre-qualified us this afternoon for the same 3.1Mbps DSL speed they offered in 2009, despite being blocks away from the city line.

Those increasing speeds have led to more traffic on Frontier’s broadband network, but the company says it has enough capacity to handle it.

“The average usage of all our customers across both fiber and the copper has grown to about 24GB per month at this point, and we see that increasing and people are comfortable with [our] facilities as well as our backhaul to support that growth,” said chief operating officer Dan McCarthy. “We’ve seen that grow virtually every month as we move forward.”

Frontier analyzes what customers do with their broadband connection and found 30 percent of customer usage is online video. That number is growing. Customers upgrading to the fastest speeds are often telecommuters or have a home full of avid broadband users.

“On the residential side [these high-end customers] are usually working at home, they are VPNing, they are gamers, and they are very active on video services and social media as well,” said CEO Maggie Wilderotter.

The average Frontier DSL customer still subscribes to 6Mbps service, which Wilderotter said was adequate for Netflix, web surfing, and e-mail. But the company is preparing to market speed upgrades to these customers to earn extra revenue.

So far, Frontier’s broadband growth has gone relatively unnoticed by their cable competitors.

“We really haven’t seen any sustainable programs that cable has put against us in the market and we do know that several cable operators have said they’re going to do more in those areas,” said Wilderotter. “We are very well prepared for that. We are giving everyday low pricing to the customer that’s simple and predictable and there are no add-on fees or modem rental costs.”

Most Frontier customers are offered $19.99 or $29.99 broadband pricing that can be bundled with other products for discounts. There is no term contract.

“Time Warner Cable has increased their modem fees [to] between $6 and $9 a month,” said Wilderotter. “That’s a huge price increase for a lot of customers. You compare that with Frontier which has no modem cost and customers understand where price value lies.”

Wilderotter noted Comcast has raised rates as well. Frontier intends to remind cable customers they have a choice, and will tailor offers to continue to increase market share.

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