SubscribeA death in the family has kept me away from adding new articles during the past week, but coverage of several important stories, including the Comcast usage cap and some updates on other providers’ plans, as well as more on the Frontier matter, will be forthcoming shortly.
I appreciate your understanding for the delay. I will be adding additional editors and writers to Stop the Cap! in September to increase our coverage and frequency of reports.
Stay tuned!
By PETER SVENSSON, AP Technology Writer
Fri Aug 22, 10:36 AM ET
NEW YORK – Three months ago, Guy Distaffen switched Internet providers, lured from his cable company to his phone company by a year of free service on a two-year contract. But soon the company quietly updated its policies to say it would limit his Internet activity each month.
“We felt that were suckered,” said Distaffen, who lives in the small village of Silver Springs in upstate New York.
The phone company, Frontier Communications Corp., is one of several Internet service providers that are moving to curb the growth of traffic on their networks, or at least make the subscribers who download the most pay more.
This could have consequences not just for consumers, who would have to learn to watch how much data their Internet use entails, but also for companies that hope to make the Internet a conduit for movies and other content that comes in huge files.
Cable companies have been at the forefront of imposing and talking about usage caps, because their lines are shared between households. Frontier’s announcement is noteworthy because it is a phone company and it is matching a seemingly low ceiling set by a main cable rival: just 5 gigabytes per month, the equivalent of about 3 DVD-quality movies.
“We go through that in a week,” Distaffen said. “If they start enforcing the caps we’re going to have to change service.” Other subscribers on Broadbandreports.com, where the cap was first reported, echoed his feelings.
But since the other option for wired broadband in the village is Time Warner Cable Inc., switching providers isn’t necessarily going to get Distaffen away from a bandwidth cap. The cable company is trying out a 5-gigabyte traffic cap for new users in Beaumont, Texas. Every gigabyte above that costs $1. More expensive plans have higher caps at $54.90 per month, the allowance is 40 gigabytes. Depending on the results of the trial, Time Warner Cable may apply the same pricing structure elsewhere.
Frontier’s biggest market is in Rochester, N.Y., where it competes with Time Warner Cable.
“This isn’t really an issue that’s just going to be about Frontier,” said Philip Dampier, a Rochester-based technology writer who is campaigning to get Frontier to back off its plans. “Virtually every broadband provider has been suddenly discovering that there’s this so-called ‘bandwidth crisis’ going on in the United States.”
In a sense, caps on Internet use are no stranger than the limited number of minutes a cell phone subscriber gets each month. Internet use varies hugely from person to person, and service providers argue that the people who use it the most should pay the most. But the industry hasn’t worked out where to set the limits, or how much to charge users who exceed them. Fearing a customer backlash, most providers are setting the limits at levels where very few would bump into them. Comcast Corp. has floated the idea of a 250-gigabyte monthly cap.
Frontier says it plans to start enforcing its 5-gigabyte cap next year. First, it will let customers know how much data they use each month, a figure that most people don’t know how to track on their own (the tech-savvy Distaffen gets it from his Internet router). Then it will offer premium plans with higher caps to those who use more data.
Frontier says most of its 559,300 broadband subscribers consume less than 1.5 gigabytes per month. But in an e-mail to Frontier employees, Chief Executive Maggie Wilderotter said traffic is doubling every year, which means that by the time the caps would be put in place, a lot more users will exceed them. In two years, the average user could be consuming 6 gigabytes of traffic per month if the current growth rate holds up.
The growth of traffic means the company has to invest millions in its network and infrastructure, threatening its profitability, according to the e-mail.
Dampier disagrees, saying the costs of network equipment and connecting to the wider Internet are falling.
“If they continue to make the necessary investments … there’s no reason they can’t keep up” with increasing customer traffic, he said.
Reuters reported this week that a wave of consolidation in the rural telephone marketplace is about to begin as telephone companies fight continued declines in the telephone access line business.
The biggest target for a takeover? “Frontier Communications,” says Stanford Group analyst Michael Nelson. “They’re really the only one that would move the needle significantly,” he said.
Frontier targeted for takeover?
Frontier, based in Stamford, Connecticut, is the nation’s fourth largest independent largely-rural telephone company, with 2.3 million telephone lines.
In the market for merger opportunities, and speculated to be looking closely at Frontier, is Little Rock, Arkansas-based Windstream Communications. Windstream, the nation’s second largest rural telephone company, announced it was aggressively interested in pursuing merger opportunities.
Little Rock-based Windstream Communications seen as likely suitor for Frontier Communications
Windstream’s takeover of Frontier is seen by some industry observers as practically a done deal.
Nelson sees a Frontier deal in about six months, costing Windstream $9 billion, including the assumption of about $4.6 billion in debt.
Big deals that maximize cost savings would make sense for Windstream, according to Jefferies analyst Jonathan Levine, who said closing even small deals require a lot of money and time as they involve reviews from the regulators of each state where the target companies have operations.
“I think they’re going to probably look at some of the larger players,” Levine told the Reuters wire service.
Windstream's Broadband Promotional Pricing for 12 Months
Such a merger would likely leave Windstream in charge of the merged company. Windstream has aggressively deployed broadband DSL services into their rural service areas, with speeds dependent on the infrastructure available in different areas.
Windstream has no plans to implement usage caps on broadband customers at this time, nor does it charge customers for company-supplied modems. It is too early to speculate about the impact a merger would have on existing Frontier employees. Windstream already provides customer and technical support from call centers in India and Georgia and has a track record of eliminating or reducing staff at call centers formerly run by its acquisition targets.
Windstream's coverage area, providing local phone service in 16 states
Windstream was created primarily from the old Alltel network of local telephone companies, mixing in customers from VALOR/GTE Southwest, GTE Georgia, Standard Group, Aliant, and CT Communications. From a series of acquisitions, it rebranded itself as Windstream Corporation in 2006, dropping the Alltel name.
Consolidation is expected to become a growing factor in the independent telephone company marketplace, as companies face significant challenges from cable systems and wireless phone companies.
The nation’s number three independent telephone company, CenturyTel of Monroe, Louisiana, may also be interested in Frontier, and could spark a bidding war for Frontier’s assets. CenturyTel is also reportedly looking at Iowa Telecom or Consolidated Communications as potential merger targets.
Only one independent telephone company, the nation’s largest, Embarq, spun off by Sprint-Nextel, is not likely to be in a position to begin a shopping spree. Analysts report the company’s poorly positioned to embark on a merger adventure because of the company’s perceived lower value. Analysts have urged Embarq to begin cost-cutting and improve earnings.
Frontier Communications stock has been progressively increasing in value since merger speculation began. The company is currently trading at 12.72 per share.
Frontier to limit Internet usage
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p class=”storyheadline”>By Tom Grace
Cooperstown News Bureau
The Daily Star (8/16/08)
Beware, downloaders: Frontier Communication Inc. plans to meter your Internet usage.
Company spokeswoman Karen Miller said Friday that the telecommunication firm plans to limit its customers’ free Internet usage to five gigabytes a month in 2009.
If you download more, you’ll pay more.
“As it stands now, five gigabytes will be free and there will be a tiered system for those who use more,” she said.
Miller said the company, which has many customers in Chenango County, is going to charge for usage “to make the heavy users pay their fair share.”
Asked if five gigabytes a month made one a “heavy user,” Miller said, “Our customers, on average, use 1.5 gigabytes a month.”
Those who use the Internet a lot are a source of concern because they force the company to spend money on its infrastructure to expand its capabilities, she said.
Frontier, a communications giant that operates in 24 states, is now notifying its customers of the coming change: Paying by the gigabyte.
One such customer is Elizabeth Ramsey of Treadwell, who has opted to drop Frontier’s DSL service in protest.
“Five gigabytes is ridiculous; it’s really a backdoor way of ending ‘Net Neutrality,”’ said Ramsey, a retired Time Warner employee.
Ramsey, who has no television, likes to use her computer to watch movies downloaded from the Internet.
“With five gigabytes, they’re limiting you to watching four two-hour movies a month,” she said. “And then, they’re going to charge you more, even though you’re already paying $88 a month for phone and Internet?”
Ramsey said she’s decided to downgrade to dial-up service and get her classic movies another way until the company relents and maintains the value of its DSL service.
The issue of limiting free Internet usage by American Internet service providers has led to the formation of consumers’ groups such as Stop The Cap, at www.Stopthecap.com, and international media coverage.
Read more…
It has been quiet here the last few days as work continues on our expanded Resources section. Some sample Letters to the Editor are online already, but additional writing is underway to help people do more than just read about usage caps, but also fight them. Keep an eye out for developments.
I am also contacting many of those who have written in who want to get more actively involved in fighting the cap issue, in addition to joining a team of writers to post articles, news, and links to other stories on this issue. We welcome anyone who wants to help join the fight. Just use the Contact form or reply with a Comment and I’ll be in touch.
Some important articles are in the works on the issue of usage caps, including at least one major wire service report which should land in newspapers around the country which should appear in the next few days.
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