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Verizon Commits to Spend $1 Billion on New Fiber Buildout for Its 5G Network

Verizon Communications announced a deal Tuesday with a leading optical fiber manufacturer to supply up to 12.4 million miles of fiber cable annually for a large buildout of Verizon’s fiber network to power its forthcoming 5G wireless service.

Verizon’s $1.05 billion agreement with Corning, Inc., of Corning N.Y., will guarantee Verizon will have an ample supply of optical fiber available from 2018-2020 at a time when the company noticed a fiber cable shortage was causing problems for its current FiOS/5G fiber buildout now underway in Boston.

“This new architecture is designed to improve Verizon’s 4G LTE coverage, speed the deployment of 5G, and deliver high-speed broadband to homes and businesses of all sizes,” Verizon said in a statement. But Verizon did not make it very clear the expansion will primarily benefit Verizon Wireless, not Verizon Communications’ FiOS fiber to the home service.

Verizon CEO Lowell McAdam, appearing exclusively on CNBC this morning, rejected the notion that the fiber buildout would represent a restart of Verizon’s long-suspended expansion of its FiOS fiber to the home service.

“When we deployed FiOS we would run a fiber cable into a neighborhood with six or eight strands in it,” McAdam said. “Now we’re going to drop off six or eight strands to every street light in every neighborhood so that allows you to deliver a gigabit of thruput into the home and allows you to do things like intelligent transportation, electric grid management, and water system management. You hear a lot about autonomous cars and things like that today that don’t work without 5G.”

Verizon’s Boston project represents the current CEO’s vision: a wireless-based network supported by an extensive fiber network. But instead of connecting fiber to homes, McAdam’s network connects fiber to tens of thousands of palm-sized “small cells” and other wireless infrastructure that will deliver services to individual neighborhoods instead of individual homes.

Critics still question whether Verizon’s 5G network will be able to sustain its speed and capacity claims outside of testing labs, especially as shared wireless network infrastructure faces future usage demands. Fiber to the home service does not require customers to share bandwidth the same way a wireless connection would and can manage much higher capacity.

Verizon CEO Lowell McAdam and Corning chairman and CEO Wendel Weeks appeared jointly on CNBC to discuss Verizon’s $1.05 billion agreement with Corning to guarantee up to 12.4 million miles of optical fiber a year from 2018-2020. (11:24)

Here’s What You Need to Know About Comcast’s Xfinity Mobile

Comcast, the nation’s largest cable television operator, will compete for wireless customers with a new no-contract wireless plan that combines Verizon Wireless’ mobile network with Comcast’s installed base of 16 million hotspots installed in customer homes and businesses.

Xfinity Mobile will offer two plans — a pay as you go option for $12/GB and an unlimited calling, texting, and data plan that ranges from $45-65 a month. Customers spending about $150 or more on a Comcast X1 bundle of services will pay the lesser amount, while those with a more basic package will pay more. Customers must at least subscribe to Xfinity Internet service to qualify for the new wireless plan and live in a Comcast service area.

Comcast is powering its cell phone service with its MVNO agreement with Verizon Wireless, which grants the cable company the right to resell Verizon’s wireless network under the Xfinity brand. But Comcast hopes customers will use their devices the most while connected to an Xfinity Wi-Fi hotspot, available in most Comcast customer homes and an extensive network of businesses. To make sure that happens, devices acquired from Comcast will come pre-configured to automatically connect to Comcast’s Wi-Fi, where available.

Comcast’s “unlimited” $65 plan — likely to be the most popular option, is between $15-25 less than what Verizon and AT&T charge their customers for a comparable plan, at least for accounts with just a single device attached. Like other “unlimited” plans, Comcast has a fine print data cap: 20GB of wireless data usage per month, after which it will throttle the customer’s connection until the next billing cycle begins. Comcast intends to always impose the speed throttle once 20GB is reached, not just in areas with congested cell towers. But throttled speeds will be a less maddening 1.5Mbps instead of the usual 128kbps most carriers use to punish their data-heavy users.

Overall, the plan may deliver some savings to current Comcast customers unfazed by signing up for a “quad play” bundle of wireless, phone, TV, and internet access, especially for those bringing a single wireless line to Comcast. Customers with multiple wireless devices on a family plan may want to do the math before signing up with Comcast. Unlike other wireless carriers, Comcast does not offer a discount for additional lines. For most, the price will be $65 a month for each line. For an account with four lines, that would amount to $260 a month — $75 more than what AT&T charges for a similar four-line plan.

Comcast may also attract some interest from light users or those with devices like tablets. Comcast’s $12/GB data plan has no limits or minimum charges. If a customer doesn’t use the plan, there are no charges. If a customer on this plan approaches 4GB of usage in a billing cycle, they can upgrade to Xfinity’s unlimited wireless plan ($45-65) mid-month and then use up to 20GB of data with no extra charges or speed throttles. Customers can put some devices on an unlimited plan and others on a pay-as-you-go plan on the same account.

Early adopters ready to sign up when the service launches this May or June will need to buy new devices from Comcast. The company will sell current generation Apple iPhones, Samsung Galaxy smartphones, and a budget option from LG Electronics. Customers can pay for devices upfront or receive interest-free financing.

Comcast’s interest in entering the wireless business represents the latest effort to keep customers locked into Comcast’s suite of products and services. The more services a customer bundles with Comcast, the more disruptive it will be to switch to another provider.

“The economics really work,” Comcast CEO Brian Roberts said in January. “The goal of the business is to have better bundling with some of our customers who want to save on some of their bill and get a world-class product.”

Because Comcast will rely entirely on Verizon Wireless to provide cellular connectivity, the cost of getting into the mobile business is relatively low. Comcast struck a deal with Verizon several years ago giving the cable company “perpetual” access to Verizon Wireless, as well as any upgrades Verizon makes to its network in the future. However, Verizon still has the right to raise prices on Comcast, potentially slowing or stopping Xfinity Wireless from ever growing large enough to threaten Verizon’s profits.

Charter Communications is planning to introduce a similar wireless product in 2018.

Verizon Sued for “Knowingly Billing Customers for Fraudulent Charges”

Verizon will conveniently add fraudsters’ phone and service orders to your wireless bill until you catch the illegitimate charges and complain.

That is the basis of a new class action lawsuit filed in New York accusing the wireless company of billing customers for fraudulently obtained equipment and service.

Brooklyn lawyer Lowell Sidney told the New York Post it took five months of “autopay” charges almost $100 higher than normal before he noticed someone had obtained a new smartphone and service and billed it to his Verizon Wireless account.

“[Verizon] Fraud Services said that on Oct. 22, 2016, an unknown person entered a Best Buy store in Wesley Chapel, Florida, claimed to be [Sidney], and ordered a cellphone and phone service from Verizon,’’ the suit said. When Best Buy asked for ID, the imposter ran out of the store.

But that did not stop Verizon from running up Sidney’s bill for several months of phone financing installments and service charges.

Sidney’s lawyer told the newspaper it was clear the guy was a crook, but that did not stop Verizon from collecting money it knew didn’t belong to them.

Verizon’s fraud department confirmed Verizon’s corporate policy is not to notify customers about potential, suspected, or actual fraud. It is entirely up to customers to identify suspicious charges and prove to Verizon’s satisfaction those charges are illegitimate.

“The woman I spoke to was very candid — ‘That’s our policy,’” reported an outraged Sidney, and he’s suing to make the point Verizon should be doing a better job of protecting customers and should not be collecting money to which it is not entitled. He wants at least $75,000 in damages and wants other Verizon customers affected by fraud to receive settlements as well. He is also taking his business elsewhere after 17 years with Verizon.

“I am not sure if the competition provides comparable service, but to my knowledge, they don’t actively engage in defrauding their own customers,” Sidney said.

Sidney warns that “autopay” and electronic billing make it more difficult for consumers to scrutinize their bills and catch fraudulent charges because they have to seek out a monthly statement instead of getting one sent directly to them.

Wall Street Panic Attack: Verizon’s Unlimited Plan Will Destroy Profits, Network Reliability

Verizon Wireless’ new unlimited data plan threatens to destroy everything, fear Wall Street analysts in an open panic attack over the prospects of value destruction and network reliability damage.

“An unlimited offer is dangerous,” Roger Entner, an analyst at Recon Analytics LLC, told Bloomberg News. “If they sign up a lot of people, it will congest the network, and they run the risk of people saying ‘the network sucks’.”

The return of unlimited data at Verizon (with a protective right to throttle customer speeds after they consume 22GB of data during the month) seems to have triggered anxiety on Wall Street because Verizon was the most adamant about never offering unlimited plans again after dropping them in July, 2011. Part of that fear may have come from Verizon’s own former chief financial officer Fran Shammo who warned investors last fall:

“The majority of people don’t need unlimited plans. But the people who use unlimited plans can be abusive, they can really wreak havoc to your network. And at the end of the day, I continue to say you cannot make money in an unlimited video world. You just can’t do it because you need to generate the cash flow to keep up with your demand.”

What also concerns Wall Street is the increasing evidence an all-out price war provoked by T-Mobile and Sprint will threaten to close some doors on network monetization. Charging customers for data consumption has a growth prospect that would have guaranteed increasing average revenue per customer indefinitely. But unlimited plans mean consumers pay one flat price for data no matter how much they consume. Consumers love it. Wall Street analysts generally don’t.

Other analysts are concerned that Verizon, deemed the Cadillac Network because of its premium price and reputation, also happens to have the least amount of deployed wireless spectrum of all the four national carriers. As the nation’s largest carrier with 114 million users, a big spike in data consumption could affect Verizon’s network performance, some speculate.

Unlimited data plans promote usage and total wireless traffic is expected to grow between 70-80% annually, up from 50-60% under today’s tiered data plans, according to wireless analyst Chetan Sharma.

In response Verizon has rushed out executives to reassure Wall Street and investors Verizon’s network was built to take it.

“Our goal is to always offer a better performance, and I see a path to that,” Mike Haberman, Verizon’s vice president of network support, said in an interview with Bloomberg:

“Spectrum is only one element of a network,” he added. “How you put the network together is far more important.” In advance of its decision to start selling an unlimited data package, Verizon was busy with upgrades. The company just boosted network capacity by 50 percent with new systems that take separate radio frequencies and combine them into one large pathway, Haberman said. The company has also been adding more cell sites and transmitters in cities and connecting those sites with high-capacity fiber-optic lines.

CNBC reported Verizon’s new unlimited data plan is a “sign of weakness” for Verizon, which is facing challenges to its core wireless business. (4:30)

Sprint a Pawn in Masayoshi Son’s U.S. Investment Scheme

President Trump met with Softbank’s Masayoshi Son in December, 2016.

Japan’s Softbank has a deal tailor-made for President Donald Trump’s desire to inspire companies to invest more in the United States and hire more workers, and all the president has to do is get Washington regulators concerned with mergers, acquisitions, and competition out of Softbank’s way.

Softbank’s Masayoshi Son has delivered a lot of speeches and made a lot of promises since acquiring Sprint in 2013 for $21.6 billion, originally promising to rebuild the struggling wireless company into a potential competitive juggernaut, capable of beating Verizon and AT&T and even take on cable operators. Now he’s offering to invest another $50 billion in the U.S., and create 50,000 new jobs, assuming the business climate is right.

Before accepting such a deal, one should take a closer look at how Sprint is doing three years under Softbank’s ownership. Few would argue with the fact Sprint has languished and fallen to last place among the four national carriers, now behind T-Mobile. Despite Son’s commitment to Donald Trump to invest and hire, Sprint has severely cut investment by more than 60% between 2014 and 2016 and has laid off more than 4,000 employees, most in the United States. Customers continue to complain about the perpetual ‘massive upgrade’ undertaking the company embarked on years ago that never seems to be finished and hasn’t helped service quality as much as customers expected.

In January 2016, BusinessWeek reported SoftBank has “plowed more than $22 billion into Sprint, and yet all of Sprint is now valued at $11.8 billion. The company’s $2.2 billion in cash is about the same as its 2016 debt obligations.”

Ten years earlier, Sprint was worth $69 billion and was prepared to dominate the U.S. wireless industry, but drove customers off with very poor customer service and inadequate investment in its network, allowing competitors like AT&T and Verizon Wireless to leap ahead. Sprint also embarked on an executive-inspired fantasy: a disastrous merger with Nextel that preoccupied the company for years. Softbank taking the lead has done little to change customer perceptions, nor those of some Wall Street analysts who fear Sprint is a bottomless money pit that always promises better times and profits are coming, but never seems to get there.

“You’ve watched a once-great institution deteriorate to the point that it is now a badly, badly compromised asset,” said Craig Moffett, an analyst at MoffettNathanson. “They’ve been living from hand-to-mouth for years, constantly making short-term decisions in order to live to fight another day.”

It calls into question Softbank’s vision to use technology “to reduce loneliness and ease the sadness of people as much as possible.” There are a lot of sad Sprint customers, churning away into the arms of competitors like T-Mobile faster than Sprint can sign new customers up.

Son’s dream depended on his business plan that reduced the number of U.S. competitors to three by merging Sprint and T-Mobile together, something federal regulators under the Obama Administration failed to accept despite Son’s argument the combined resources of the two companies would theoretically make a super-sized Sprint more competitive with AT&T and Verizon.

In contrast to Son’s plan to consolidate the wireless industry to improve Sprint’s financial health, T-Mobile instead decided to boost investments in network upgrades and improved coverage to attract new customers. Ironically, some of the money to pay for those upgrades came from AT&T after it paid a reverse breakup fee of $3 billion in cash and $1–3 billion in wireless spectrum after its merger proposal with T-Mobile collapsed.

While Son promises he will invest billions in the United States, he is already spending much less on Sprint. In 2017, Verizon planned to spend $9.12 per subscriber (adjusted spending per monthly phone-equivalent subscriber), AT&T will spend $9.67 and T-Mobile will spend $9.04. Sprint will lag behind with $6.78 per subscriber in network investments. Moffett predicted of the $22 billion Verizon has committed for capital spending this year, about $11.3 billion will go toward wireless. By contrast, Sprint will spend $2.97 billion, excluding costs of leased phones. T-Mobile is spending just over $5 billion.

In the last two years, customers have delivered a new paradigm to wireless companies: bigger isn’t necessarily better. The only bright spot among all four national carriers in 2016 was the scrappy T-Mobile, once destined for a fire sale by owner Deutsche Telekom. But under the “Uncarrier” leadership of CEO John Legere, T-Mobile USA is worth pure gold in Deutsche Telekom’s global wireless portfolio. The turnaround came not from trying to consolidate the industry but rather giving customers what they have asked for — more data, unlimited data, better deals, and better service. T-Mobile’s network investments paid off, giving the company very competitive 4G LTE speeds and comparable urban and suburban coverage to its larger competitors. Legere has been so successful, the German owners of T-Mobile no longer seem to be interested in selling T-Mobile USA.

Softbank’s record of achievement with Sprint in the last two years has been much less of a success story.

Customer Gains and Losses by Carrier – 2016-Q4 Phone Activators

Investments by Sprint in its wireless network have plummeted 62.7% under the leadership of Softbank from 2014-2016. (Chart: Hal Singer)

In 2015, Sprint’s capex was $3.958 billion. Last year, it was $1.421 billion — less than half the previous year. Mr. Son seems reticent about maintaining the kind of investment necessary to grow Sprint’s network over the long term to keep up with customer demand, instead willing to compete short term on price and promotions. Sprint’s past reputation for poor customer service, a slow data network, dropped calls, and coverage dead zones makes attracting former customers back to Sprint a hard sell, especially considering T-Mobile exists as a credible alternative to Sprint for those seeking cheaper service plans.

Son’s argument to the new administration depends on President Trump and FCC Chairman Ajit Pai being more friendly to the idea of less competition than the Obama Administration. Son may have an uphill battle, considering the former Obama Administration’s opposition to earlier mergers, including T-Mobile and AT&T and T-Mobile and Sprint seems to have paid off for consumers in the form of today’s fiercer competition and a price war.

Convincing President Trump to loosen merger standards to allow Softbank a stronger position in the U.S. market in return for vague and illusory investment and job creation promises is ridiculous considering Mr. Son’s performance with Sprint has not been as rosy as his rhetoric. No president should agree to a de facto bailout deal for Softbank that reduces competition and guarantees higher prices. Mr. Son should instead direct some of the $50 billion he apparently has stashed in waiting to improve Sprint’s network to more effectively compete. If he cannot or will not, the entire country should not pay for his investment mistake by watching more wireless competition get eliminated in yet another merger.

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  • Mike D.: And for those who are planning to "cut the cord" after a promotion expires, be aware that Charter is lobbying the new administration and FCC chairman ...
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