If you’re a broadband provider throwing a money party by charging top dollar for usage based Cap ‘n Tier rationing plans, why not spread some of that money around?  One company that wants a piece of the action is Highdeal, a German owned company that wants to sell providers the billing system to extract pay-per-byte-bucks from customer wallets.

Highdeal’s chief technology officer, Fergus O’Reilly talked to Telephony Online about how they’re going to market their products for usage based billing.

On moving beyond flat-rate broadband: Operators are realizing that the flat-rate model we had for broadband is no longer tenable. It’s hard to roll out [usage-based models] when subscribers don’t know how much a gigabyte is or what the term bandwidth means. Some [providers] have done better than others. In the Canadian market, for example, it’s getting to be accepted. Rogers has done a good job informing customers about their usage and charging them for overage with cap-and-overage-type schemes. In the US, it’s been a little more difficult. Time Warner Cable let slip that they were doing something and got negative press for it. It became difficult for them to roll that out — one step forward, two steps back. But overall throughout the market, pretty much everyone is equipping themselves with the policy management systems they need to measure and qualify bandwidth usage. The flat-rate model for broadband will change, and we will pay depending on usage, whether that’s measured in [quality of service], absolute bandwidth or a number of those factors.

The system that exists today (that is already very profitable) is always defined as ‘yesterday’ and something ‘we need to move beyond,’ while the highway robbery of overpriced tiers and overlimit fees is the ‘only tenable way forward.’  Not really, of course.  But this is an example of a company with a vested interest in that outcome — namely, a product/solution to sell that would not exist without these kinds of billing schemes.  They garner favor in industry circles by helping to throw the ball around, hopefully establishing the premise that usage based billing is conventional wisdom.

It’s tougher to sell cap-and-overage schemes. Unfortunately many of the charging systems operators have in place are relatively simplistic. And moving to these more sophisticated schemes — time-shifting and proposing a bandwidth boost — many times the blocking factor is, ‘Well, I don’t know how to do that.’ So we propose a very flexible charging system that makes that easy so you can have these dynamic business models that will make more sense for the consumer.

Actually, developing a billing system that pilfers the wallets of consumers, no matter how complex or simple, will not make any sense for customers.  What Highdeal proposes is a billing system that allows providers to rob customers in a sophisticated way, instead of the street mugging wallet extraction approach.  But whether it’s the Bernie Madoff system of billing, or the guy with the bat in the dark alley, consumers are still going to be victimized, and they’ll know it every time they get the bill.

Is Highdeal a raw deal entirely?  No.  Some of their models might actually represent some real world solutions to network congestion, particularly one that could communicate with bandwidth providers and software to schedule bandwidth intensive, but non-critical applications during off-peak usage times.  One such proposal would signal an online backup program to launch when network congestion is reported low by a provider.  Another model might allow consumers to pay more for faster connections to complete individual tasks.  Paying reasonable prices for reasonably faster speeds is not an issue for Stop the Cap!

But companies that buy into industry theories and claims in order to help score a sale have a considerable conflict of interest in being considered a credible source on what consumption and billing models are workable and which are not.

'If you give us exactly what we want, we might wire your town with fiber optics. If not, there is always Wisconsin.'

The Trojan Horse of the 2000’s apparently comes in the form of spools of fiber optic cable.  Verizon assumes the attractive notion of FiOS, fiber to the home for broadband, telephone, and video programming, is worth sacrificing local oversight.  The company has made it known it does not enjoy what they consider a cumbersome franchising application procedure in Massachusetts.  In a public relations push, Verizon has suggested that giving them quicker approval will guarantee state residents the golden promise of fiber optics.  If the company doesn’t get what it wants, maybe Wisconsin or another state where Verizon is deploying FiOS will:

Ellen M. Cummings, a spokeswoman for Verizon, said that with the struggling economy, the company has to choose where to commit its financial resources. Therefore, it is looking for the quickest return on its investment.

“Here in Massachusetts, it puts us in a predicament. If the company is trying to decide how to deploy money, and Massachusetts is vying against other states, like Wisconsin, where the wait is as little as five days, it definitely puts Massachusetts at a disadvantage,” she said.

Every wired provider is subject to local community licensing, in the form of a franchise, which permits companies to string wires through towns and cities, on poles as well as underground, in return for oversight and a small piece of the action.  Local governments justify franchising to regulate companies tearing up local streets and neighborhoods to maintain their networks, as well as making sure that all citizens within a community are served equitably and that the community benefits from the service.

The cable industry has lived under the franchise system since its inception.

Verizon decided it can’t be bothered dealing with individual municipalities in Massachusetts, and last year tried,  but failed, to replace the local franchising system with a single statewide franchise.  This year they’ve returned with a Verizon-friendly bill that would dramatically tip the scales in their favor, limiting local oversight and reducing their public service commitments.

The companion bills, (S. 1531) by Sen. Steven Panagiotakos of Lowell in the Senate, and House bill (H. 3765) by Rep. Michael Rodrigues of Westport, would mandate that each municipality limit consideration of Verizon’s franchise applications to no more than 90 days, and opens up a number of loopholes that Verizon could use to do an end run around a community and run the clock out, assuring quick approval without making concessions.

At worst, a provision in the bill setting a strict 90 day window for consideration of a franchise application, even if incomplete, ties the hands of municipalities.  Language that restricts the right of municipalities to deny applications gives the upper hand to Verizon, and the back of the hand to consumers.

One of the most common promises local communities extract from any wired provider is a guarantee they will establish wiring policies to equitably reach people throughout the franchise area, not simply the wealthiest neighborhoods, or easiest to wire.  While it has never been practical to insist on 100% wiring coverage, particularly in more isolated, rural communities, most franchise agreements insist on a uniform policy that says if there are a certain number of homes within an area, it must be wired.  Without that assurance, prior experience has shown operators would often “redline” communities, wiring prosperous streets while ignoring others.  Municipalities in Massachusetts want to guarantee that Verizon doesn’t engage in that kind of behavior, particularly after witnessing the company jettisoning “undesirable” customers in three nearby states — Vermont, New Hampshire, and Maine, which were sold off to FairPoint Communications.  No FiOS for them.

In general, more competition is good news, especially when Verizon comes to town with FiOS, which is sure to give the incumbent cable operator a real headache.  But Verizon’s complaints ring a little hollow when considering the company has managed to already obtain franchises in 93 communities across the state, and is literally obtaining new agreements faster than wiring crews can get into communities and start the upgrades.  While there may be a few towns that drag their feet for a variety of reasons, customer demand for FiOS is sure to light fires under elected officials to get a move on.  Doing it fast is not necessarily the same as doing it right.  As our readers are coming to learn, promises made by telecom providers that at first glance sound consumer-friendly turn out to be anything but.

One more reason to believe that:  the state’s incumbent cable operators are also opposing the bills, claiming they extend special benefits to Verizon that they, themselves, have never received. Cable companies on the same side as municipalities on questions of competition?  Of course most of the state’s cable operators are already past the franchising process, and merely return every decade or so for perfunctory rubber-stamp renewals, so green-lighting Verizon’s proposed bills would only expose them to FiOS competition sooner.

Paul R. Cianelli, the president of the New England Cable and Telecommunications Association, which represents the cable companies Comcast, Charter Communications, Time Warner and Cox, but not Verizon, said, “We oppose this legislation.”

“It’s another attempt by Verizon to get a special deal. They are pushing for legislation that would give them an advantage over existing cable providers. And they are attempting to chip away at the authority and powers of the municipalities to grant franchises,” he said.

In the end, we believe Ellen Cummings at Verizon who said it best: “[Verizon] is looking for the quickest return on its investment.”  Unfortunately, that’s not always compatible with the best interests of consumers.

Yesterday, Stop the Cap! examined the rationale for Verizon to spin away hundreds of thousands of customers to a small independent telephone company, FairPoint Communications.  In today’s report, the utility commissions that protect ratepayers in three New England states ponder the proposal.  WMUR-TV in Manchester offers a nice summary of the issues involved, and the Josiah Bartlett they reference isn’t the one from NBC’s The West Wing, but rather the sixth governor of New Hampshire!

1. Would the merger improve the chances for New England’s smaller communities to enjoy better service, particularly with high speed broadband that Verizon never rolled out;
2. Was FairPoint financed sufficiently to handle the dramatic increase in its customer base?

Vermont decided the FairPoint takeover in their state was likely to be unsustainable, with insufficient guarantees that the company would have the money to get the job done.  WPTZ-TV, which serves Vermont, covered the announcement on December 21, 2007:

Unfortunately, as Stop the Cap! readers have come to learn again and again, one defeat doesn’t mean the end of the war. FairPoint had the opportunity to digest the input from state regulatory bodies and return with a new proposal. The question is, would that proposal simply put out small fires started by state authorities concerned about a few isolated factors, or would it be a complete overhaul to provide better guarantees that a FairPoint taking over phone service in three states in 2008 would still be in business in 2009.

Tomorrow, FairPoint has a new plan.

This is the first in a series of articles documenting the trials and tribulations of residents in New Hampshire, Vermont, and Maine when their incumbent telephone company Verizon abandoned them, leaving them at the mercy of an inexperienced, financially shaky, and downright lousy replacement — FairPoint Communications.  This are many lessons to be learned, and we’ll be following what was promised, what went wrong, and why it creates a nightmare for rural and small town America.  Some may wonder why focusing on this story is relevant to our issues.  The reasons:

• Broadband service in rural America is either unavailable, expensive, slow, and/or capped.  Smaller players in the broadband market often lack the financial resources to provide high quality, fast, and flexible broadband service to residents and businesses.
• The hope for competition from Verizon’s advanced fiber to the home FiOS network is dashed when the company abandons the smaller communities it once served to concentrate on more urban service areas.  Those communities will be stuck with second-rate copper or wireless “broadband” options for years to come.  In many of these communities, there is no cable service available.
  
• Some of the astroturfing political groups on the right decry public taxpayer funding of broadband, and accuse municipal networks of being subsidized by taxpayer dollars.  But as you’ll learn, private companies are receiving favorable tax breaks, and FairPoint in particular is being permitted to access $50 million dollars in funding that was originally intended by New Hampshire to be used for improvements in service.  Now that money will go to repay debts incurred by FairPoint at the same time the company paid enormous bonuses to company executives.  Strangely, these astroturf groups are silent about diverted funds finding their way into the private sector.

The sordid story of FairPoint in New England is a timely one, coming just a few weeks after Frontier Communications announced it would be taking on Verizon customers in several states, in numbers that dwarf the existing customer base of Frontier.  Shouldn’t public utility regulators carefully consider the implications for these customers before it gets approval?  What guarantees for broadband will be included, and at what speeds?  Will Frontier’s “acceptable use policy” provision of 5GB of usage per month, currently unenforced, come back to haunt customers later?

We’ll be covering the story in chronological order with lots of video over the coming days.  Pay special attention to the promises made, the realities that would come later, and the current nightmares that have cut off communities from 911 service, forced some businesses to relocate out of state just to obtain telephone service, six week delays for installations, Internet accounts that lost e-mail, and the tale of one woman who literally lives next to the telephone company, but cannot get a service call completed because FairPoint claims they cannot find her address!

When it’s all over, isn’t it well past the time Americans should be asking more from the telecommunications providers that deliver service?  For millions of Americans, when the phone company is your only choice, is this the best we can do?

… Continue Reading

“Broadband is a highly competitive industry in the United States, with many options for customers.”

Despite that mantra from the cable and telephone industry, large sections of the country have two options for broadband service – satellite or nothing.  For an estimated 80,000 Californians, nothing may be a better option.  That number represents the estimated number of state residents locked into a contract with HughesNet for satellite-delivered “broadband” service.  For several years, many customers have been appalled at just how bad HughesNet is at delivering that service, and now several have had enough.

Filed in the Northern District of California federal court in Oakland, a class action lawsuit alleges that HughesNet falsely advertises the quality of its service, particularly regarding speeds it promises but doesn’t deliver, and does not disclose the full extent of the company’s throttling and cap policies.

HughesNet limits customers to a daily limit starting at just 200MB of consumption, and then throttles speed to dial-up or slower for at least 24 hours for anyone who exceeds it.  Repeated instances of exceeding the cap extends a customer’s time in the throttled speed penalty box or can lead to service suspension.

Customers who find they no longer wish to live under this kind of “broadband regime” find escaping the two year service contract expensive, requiring a $400 early cancellation fee.

For millions of Americans, well beyond cable lines or too far away for DSL service, broadband under any terms is an extremely expensive proposition.  HughesNet requires customers to purchase equipment, costing around $300 up front (after a $100 mail-in rebate), including mandatory installation fees.  For just 1.0Mbps service, the monthly cost is around $60 with a 200MB daily limit.  If you want to attempt service at 5Mbps, that will cost $350 a month with a 500MB daily limit.

For HughesNet customers Tina Walker and Christoper Bayless, who instigated the class action suit, even pricing this high wasn’t the reason for filing the suit on behalf of California residents.  It is because speeds promised are speeds rarely delivered.  Many independent reviews of the service agree, with many finding download speeds at 200-300Kbps more typical.

Walker and Bayless also allege the company throttles more than the “few” customers HughesNet claims exceed the daily limits.

By the time customers decide they’ve had enough, they have to spend several hundred dollars to get away from the company, and many are also stuck with useless equipment they had to buy up front.

They are asking for a refund of any early cancellation fees paid in California, an end to the policy that charges them, and more truthful disclosure about the actual level of service HughesNet is capable of providing.

HughesNet defends their service, pointing to a 30 day window for customers to sample the service and decide whether it is right for them, and having the option to cancel during that window with no early termination fee.  Customers are still out the initial investment for equipment and installation, however.  The company does claim that many customers can return their HughesNet equipment and receive a $200 discount off their early termination fee, if they qualify.

But the company also charges an early termination fee for customers it throws off their network.  If you exceed their usage limits too often, they can cancel service and immediately charge your credit or debit card a $400 fee.  If you agree to return the equipment, they will refund $300 of that fee, charging you $100 for making them get rid of you as a customer.

Beyond that, HughesNet does not comment on the specific merits of any lawsuit filed against it.

For rural Americans, any concept of “broadband” service is slow and expensive, with long term contracts, usage caps, and in some cases, expensive overlimit fees.  The three satellite competitors in the United States all require term commitments, and sell their least expensive broadband service at prices urban and suburban residents pay for the fastest levels of service:

StarBand: $299 equipment fee/$50 installation  1Mbps service $69.99/mo – $79.99/mo (1-2 year commitment) — 1,600MB download/400MB upload 7-day rolling limit

Wildblue: $150 equipment fee/$50 installation  512kbps service $49.99/mo (1 year commitment) — 7,500MB download/2,300MB upload 30-day rolling limit

HughesNet: $299 equipment & installation fee, after rebate  1Mbps service $59.99/mo (2 year commitment) — 200MB daily download limit