Company-owned store or third party reseller?

Customers who see the logo of their favorite wireless phone company on a storefront might do better to look a little closer to determine if they are doing business with a company-owned store, or a third-party reseller.  A Bakersfield, Calif., man quickly learned the difference when he bought a mobile broadband service plan from Go Wireless that Verizon says no longer exists.

Allan Fox found out the hard way when his first bill arrived with a steep overlimit fee attached, and without the broadband plan he signed up for.

Fox purchased the discontinued plan from Go Wireless, a third party reseller of Verizon Wireless services.  Fox thought he was purchasing a 3GB plan for $35, with a two-year service contract.  Verizon thought otherwise, and so began weeks of a runaround between Fox, Go Wireless, and Verizon.

It turned out that Verizon no longer offered the plan Fox bought from what he thought was Verizon Wireless itself.  Go Wireless is one of several independent third party companies that resell Verizon Wireless service, often with their own terms and conditions that include early termination fees owed not just to Verizon, but also to Go Wireless.

Go Wireless’ retail stores prominently feature Verizon Wireless’ logo, with their own logo appearing in reduced size, next to a message indicating they were a “premium retailer.”  That presumably sounds better than “third party reseller.”

After several attempts to straighten out the mess, Fox wanted to cancel his contract and just move on.  But then he discovered Go Wireless would charge him a $175 early cancellation fee, even though Fox’s predicament was their fault.  That’s when Fox called a local television newscast for help.

Wirefly is a major online reseller of Verizon Wireless

KBAK-TV news waded into the middle of the dispute that had gone on for nearly six weeks.  Verizon Wireless told the station it was willing to cancel Fox’s service penalty-free, but since Fox purchased the phone from a third-party reseller, and not from a company-owned store, Go Wireless would have to credit their own cancel fee.  Go Wireless, experiencing some turnover in local management, finally agreed to waive the fee, but only after the TV station got involved.

Customers must be careful when purchasing phones or signing contracts with third party sellers — both online and in traditional stores.  Most company-owned stores display their respective carrier logos and nothing else.  Words that usually provide a clue you are dealing with a reseller include: “authorized retailer,” “authorized dealer,” “Service provided by: (name of third party company),” “authorized agent,” and a dead giveaway is a signed contract with anyone other than the cell phone company you are using for service.

Third party resellers make their money on generous commissions earned when a customer signs a new contract or renews an existing one.  That commission can be forfeit if a customer returns the phone or cancels service early, which is why third party dealers protect themselves with their own contracts that include early termination or cancellation penalties owed to them, not the wireless provider.  Some customers can find themselves exposed to $500 or more in total cancellation penalty fees owed between the wireless phone company and the reseller.

So why do people purchase phones from these resellers?  Convenience and savings.

In smaller communities, company-owned stores may be few in number (or non-existent), and in-person help can be a godsend for customers who need to figure out their phone or obtain a warranty replacement.  Online, resellers like Amazon.com, Newegg, Wirefly, and others often charge substantially less than wireless carriers charge themselves for phones.  That savings can often be more than $100.  But these resellers are not for those who are unsure about the phone they want (or the provider).  Returning a phone or canceling service means dealing with two parties — the carrier and the reseller, to end service.  The cost of doing so can be very steep, so always read the terms and conditions before buying.

[flv]http://www.phillipdampier.com/video/KBAK Bakersfield Man has Internet billing trouble 9-26-11.mp4[/flv]

KBAK-TV’s Investigation Bakersfield unit helped a local man untangle a major billing mess that began when he was sold a mobile broadband plan that no longer existed.  (3 minutes)

Canadians looking for more competitive wireless prices and faster service may think they’re going to get them if they sign on to a new campaign sponsored by Rogers Communications that calls on the Canadian government to eliminate spectrum “set-asides” for the country’s smaller wireless competitors.  Rogers wants those frequencies for itself, critics charge, and they have the resources to outbid any new player in the country’s wireless market.

From Rogers’ “I Want My LTE” Website:

[…] There are some who are supporting a Federal Government regulation that would limit who can have access to the spectrum. Such regulation would exclude select companies from the upcoming auction to license the 700 MHz spectrum band. The outcome of this auction will have a major impact on deploying LTE across Canada. If a decision is made that prevents certain companies, including Rogers, from participating in the spectrum auction, it would be a recipe for leaving Canada behind the rest of the world, stalling Canadian innovation and limiting who can access LTE.

The website offers a pre-written plea to policymakers in government to allow for an open bidding process for the forthcoming 700MHz frequencies many wireless companies crave for their robust performance.

The problem is, according to industry observers, if a wide-open, no-limits auction takes place, it’s a virtual certainty Canada’s largest wireless companies — Bell, Telus, and Rogers, would walk away with most, if not all of the auctioned spectrum.  Even worse, it will stall competition that will lead to lower prices.

“The future of affordable wireless rates is at risk, not the future of long-term evolution (LTE) networks,” said Chief Operating Officer Stewart Lyons. “Mobilicity has helped bring down the cost of wireless in Canada significantly and we need to augment our limited amount of spectrum to ensure affordable pricing continues.”

“[The] big 3 wireless carriers have more spectrum than they need and will stop at nothing to dress up and misrepresent their hidden agenda of eliminating competition so they can raise their rates back up again,” he added.

The government is not planning to ban Rogers and the others from the spectrum sale.  They just want to set aside some frequencies for bidding among the smaller, newer competitors.  But even that is too much for Rogers, who has bad memories from the last spectrum auction that allowed those competitors to become established in the first place.

Today, new cell service providers like Wind Mobile, Mobilicity and Quebecor’s Videotron are forcing larger carriers to reduce prices or lose business.

Fido is actually Rogers under a different name.

For some Canadians, wireless bills have dropped a lot since the competition arrived.  Some are leaving Rogers in favor of better prices elsewhere.

Andy Lehrer from Toronto had a cellular plan with Fido, an ostensibly independent cell phone company that is, in fact, owned outright by Rogers Communications.  Lehrer was paying Fido $150 a month for his Blackberry voice and data plan.  Today, with one of the new competitors, he pays $44 a month for a plan that offers more data and talk time.

Although new competitors still have just under 5 percent of the Canadian market, the price differences have become too enormous to ignore in many cases, especially if a customer is willing to give a new carrier a break as it works through growing pains.

Lehrer told the Globe & Mail his cellular reception is poorer, but not bad enough to make him switch back to Rogers’ Fido.

Convergence Consulting Group Ltd. notes the price disparities mean savings as much as 58 percent with new competitors’ combined voice and data plans.  For data services alone, new providers charge as much as 83 percent less.

If Rogers and the two others head home from spectrum auctions with everything up for bid, it will assuredly stall competition and help protect today’s high wireless prices.  Rogers, Bell, and Telus have never seen fit to undercut each other, adopting a rising prices raise all balance sheets-approach at doing business.  But scrappy new entrants like Wind and Mobilicity are willing to slash prices to attract customers.  But nobody will buy service if those companies cannot obtain necessary spectrum to actually compete.

Regardless of the outcome, North America in general has a long way to go to find the lower wireless prices commonplace abroad.

Just over one year ago, Stop the Cap! introduced readers to Sezmi, a cable-TV alternative that delivered a package of selected cable networks, on-demand movies, video podcasts, YouTube content and local broadcast stations with a 1TB DVR set top box for $19.99 a month. Subscribers that decided to forgo the cable networks paid even less — $4.99 a month for service.

But no more.

As of this morning, Sezmi has discontinued its service, leaving customers with a nearly-worthless set top DVR box they spent $149.99 to acquire, and a number of questions about the company’s sudden change of direction.

The company issued a statement telling customers it has ceased monthly billing and giving customers until later this year to use some of the features Sezmi operates in-house:

We regret to inform you that Sezmi is discontinuing its consumer service. As of Monday, September 26, 2011, you will no longer be able to view or record broadcast TV programming through your Sezmi System. However, you will still be able to view movies and shows you have already saved to your Sezmi media recorder. To help ease the transition, you may also rent movies and shows if available at no charge from Sezmi’s On Demand catalog through November 1, 2011.

Why do you have to discontinue your consumer service?
Sezmi has changed its business focus to providing our product and technology platform to service providers, internationally and in the U.S., who are interested in providing broadband video services to their customers. As a result, we are no longer supporting our direct-to-consumer service.

What does this mean for me?
You will no longer be billed for Sezmi service. As of September 26th, you will no longer be able to utilize the programming guide and your digital media recorder will no longer operate as a recorder. You will be able to view movies and shows you have already saved to your recorder and YouTube access will not be affected. Between now and November 1st, you may rent any movies or shows at no charge to you. After November 1, Sezmi’s On Demand catalog will no longer be available but you will be able to use your Sezmi system to view all programming you have saved to the media recorder.

No Service After Sept. 26, 2011 didn't make the list.

What it also means is customers are stuck with a proprietary DVR box that won’t work with other services.

Sezmi’s business model was most operational in the Los Angeles market, where it leased unused spectrum from several LA-area television stations to carry its lightweight cable package.  In other markets, Sezmi simply wedded over the air digital free television stations with its online lineup of on-demand programming and charged $4.99 a month to watch.  It was never a compelling offer outside of Los Angeles, and even in that city, trouble brewed when Sezmi discontinued the cable package in December.

Among the difficulties Sezmi encountered:

1. Finding cooperative local broadcasters willing to lease unused digital spectrum to Sezmi proved to be a difficult proposition.  Broadcasters are zealously guarding the frequencies they control now and do not want to get into long-term contracts with third parties.  Network owned stations in major cities may have already committed significant spectrum to their own sub-channels and other projects, or want to hold them in reserve for future use.  Besides, why lease spectrum to a company for a cable package large networks could theoretically build themselves.
2. Sezmi lacked access to many popular cable channels, notably ESPN and HBO.  It’s difficult to get consumers to drop a cable or telco-TV subscription in favor of one that is limited to two dozen cable channels, some of which were hardly deal-sealers.  Efforts to move cable channel programming to online distribution were met with difficulty because content owners increasingly want a piece of the action.  Deep pockets are required to sustain video streaming businesses.
3. Consumers never really understood the product and were not convinced to choose it over better known alternatives that included satellite TV.

Sezmi’s new focus on working with larger players could meet with some success, but Sezmi’s best chances of all could be developing the technology for ethnic audiences or other narrowcast opportunities where the lack of a hundred plus channel cable package would not be a factor.

For Sale?

A Wall Street analyst predicts Netflix’s recent announcement to separate itself from its DVD-by-mail rental service (now run independently as ‘Qwikster’) is the first step in selling its online streaming business to Amazon.com.

Michael Pachter, of Wedbush Securities raised his buy rating on Netflix stock, claiming the company could be on the verge of a lucrative sale of its increasingly-important streaming business to the online retailer:

Pachter said that Amazon has always wanted to be in the video-streaming business, but has been hampered by tax considerations due to state sales tax issues. Most states require companies that have physical operations in those states to collect sales taxes on transactions done within those states.

Amazon has so far been able to get around most of those sales-tax issues by virtue of its being an online retailer. Pachter said Amazon would likely have had to begin collecting state sales taxes had it purchased Netflix outright because that company has a wide network of distribution centers across many states.

However, Pachter said a separate video-streaming business from Netflix is more appealing to Amazon, as the company could still avoid enforcing the state sales taxes, and dramatically increase its own video offerings.

“If Amazon were to acquire only Netflix’s streaming business, it could triple the size of its content library, and gain traction as an industry leader,” Pachter said. “Netflix’s streaming has current content deals that provide it with access to movie content during the premium cable TV window, and Amazon has the financial resources to secure additional streaming rights.”

But not every analyst is convinced Pachter is on the right track.

Brett Harriss, an analyst with Gabelli & Co. in Rye, New York, told Bloomberg News that potential buyers are more likely to wait until Netflix gets cheaper before making a bid.

“At some point, this does get cheap,” Harriss said in an interview. “But I don’t think we’re down there yet.”

Other analysts think the concept of a sale is correct, but the buyer is all-wrong.

“The name that would pop in my mind first is Google,” Tim Ghriskey, who oversees $2 billion as chief investment officer of Solaris Group LLC in Bedford Hills, New York, told Bloomberg. “Google loves to throw money at ideas and companies that they think have the potential to be game changers and become major players.”

[flv]http://www.phillipdampier.com/video/CNBC Netflix Feeding Frenzy 9-21-11.flv[/flv]

Netflix Feeding Frenzy: The vultures are circling as analysts on CNBC pound Netflix’s recent price and service plan changes as this compilation of reports illustrates.  (18 minutes)

The network envisioned with the help of a $30 million federal broadband grant, now in jeopardy.

A consortium of 15 rural north Florida counties awarded a $30 million federal broadband grant to provide a “middle-mile” wireless broadband network for the region has spent almost $7 million of its federal grant on consultants, design engineers, land acquisition and staffing without breaking ground on a single construction project.

In February 2010, the Obama Administration announced the broadband grant to deliver rural Florida residents a way to finally obtain high-speed access to the Internet within three years.  Now, a year-and-a-half later, not a single tower of the wireless network has been built, residents have been told they will never receive Internet service directly from the project, and one of the key members of the North Florida Broadband Authority charged with constructing the network has called one of the major contractors “incompetent.”

Last week, federal officials suspended the grant amid growing accusations of wasteful spending and lack of oversight.

NFBA was supposed to be building a wireless wholesale-access network across 15 counties that would deliver ISPs, government agencies, libraries, and other institutional users packages of 6, 12, 25, 60, 150Mbps or faster service, linked with fiber to Orlando and Tampa.

Although media coverage touted the project as delivering improved access to residential customers in Baker, Bradford, Columbia, Dixie, Gilchrist, Hamilton, Jefferson, Lafayette, Levy, Madison, Putnam, Suwannee, Taylor, Union and Wakulla counties, the NFBA project will not directly make broadband service available to consumers.  Would be residential customers will have to hope an incumbent Internet Service Provider chooses to participate and resells access to the network across the region.  Otherwise, those taxpayers will only be able to use the network they paid for at a local library.

That is, if the project ever gets completed.

To date, financial statements from the NFBA reflect the biggest checks paid to-date have gone to architecture and design consultants, which have received a total of more than $3.37 million dollars.  In contrast, NFBA has paid $0.00 for on-site construction and site work as of the end of the last quarter.  Money has also been spent on “Administrative and Legal Expenses” amounting to more than $863,000, and $1.54 million has been spent on property appraisal, acquisition, and expenses related to establishing rights-of-way.

When questions began to be raised about why the project had spent so much on so little, the fur began to fly, according to the North Florida Herald:

Christopher Thurow of Bradford County, accused [contractor] Government Services Group of being “incompetent.” Government Services Group answers to the Authority and is in charge of managing the project.

Then Rapid Systems, one of the project’s engineering companies, began making accusations of not getting paid. But GSG pointed to what it said was inadequate documentation by Rapid Systems and not following payment procedures.

Adding to the controversy was that GSG had been let go from managing the Florida Rural Broadband Authority (FRBA), a program similar to the North Florida Broadband Authority.

Multiple FRBA meetings were canceled, and the project was behind schedule, said Rick Marcum, chairman of FRBA.

“We felt like we needed to move in a different direction,” he said.

Since then, Government Services Group has filed a lawsuit against FRBA, saying there is a breach of contract.

At the North Florida Broadband Authority, some members allege a conflict of interest between GSG and Capital Solutions, which was contracted by GSG to oversee the administration of the grant money.

The apparent conflict comes from the accusation that Government Services Group CEO Robert Sheets is 25-percent owner of Meridian Services group, where Lisa Blair is CEO and president. Blair also is the CEO of Capital Solutions.

NFBA project members seem content to blame most of the problems on others, as well as on a sudden discovery their initial network design would not meet the performance requirements of potential wholesale customers.  That meant a wholesale re-design of the project into a “interconnected-ring network” design topology.  The rest of the delay, according to the NFBA, was because the project was sitting around waiting for government approvals:

This entire process (which included design re-evaluation, engineering services procurement, and network redesign) was carried out over a period of two to three quarters, which was the period of time designated in the original Baseline Plan for the turnkey link design phase as well as for subsequent equipment procurement, site acquisition, and pre-deployment activities. Additional variance from the Baseline Plan resulted substantial delays that were incurred awaiting wage-rate determinations (more than 3 months), awaiting a response to a waiver request to allow eligibility of Long term Operational leases (requested process in December, 2010, AAR submitted in April 2011, received in June, 2011); and comments from the Program Office on a Route Change Request (2 months).

That explanation did not pass muster with grant administrators at the National Telecommunications and Information Administration, the federal agency overseeing broadband grants.

“NFBA has experienced a number of external and internal delays on its project and, as a result, NTIA has serious concerns regarding the project’s long-term viability and, in the short-term, its ability to implement and deploy the proposed project during the grant award period,” the NTIA wrote in a statement.

As a result, the NTIA has suspended the program, ending all work, pending some sort of oversight agreement with the NFBA being concluded before Oct. 10.

The NTIA wants all invoices and disbursements from the $30 million grant approved directly by them before any more money is spent on the project.

To date, filings indicate the project has no signed customers of any kind, institutional, commercial or otherwise.  NFBA anticipates it will “outline service to 308 anchor institutions by project closeout,” with “outline” at this point defined as “offer.”

However, NFBA claims to have received a “Commitment Letter for a substantial monthly service commitment from one of our last mile partners, and we expect to receive additional Commitment Letters over the next quarter as we continue to actively engage last mile providers in the network region.”

Last-mile partners are the ones that will ultimately deliver service to residential and business customers.

Dixie County resident and Stop the Cap! reader Jimmy Dixon, who alerted us to the latest developments, calls it “a good government program hijacked by greedy consultants and incompetent local officials.”

“This was supposed to be about serving the unserved — we the people — and instead the project will only sell to government buildings and libraries, and whatever ISPs choose to buy access,” he writes. “But when an ISP won’t sell DSL to your home today, nothing about this grant will make them sell it tomorrow.”

Indeed, Dixon says the local phone company in his area continues to have no plans to wire his neighborhood for DSL, grant or no grant.

“They frankly told me it did not make economic sense to extend DSL here, and unless the government directly defrayed those expenses, they never will service us,” Dixon shares. “But I guess until recently it was just fine to line the pockets of consultants with millions in taxpayer dollars to not deliver service to anyone else, either.”

“We’re all in the same boat, and it’s sinking fast.”

Read the special investigative report published by the North Florida Herald here.