TDS Telecom, the Madison, Wisc. independent telephone company serving about 1 million landline customers in rural and suburban communities in 30 states, is losing 5.5 percent of those customers every year, as consumers increasingly drop their landline telephone service.
In second quarter financial results reported to investors this week, TDS noted it is increasingly dependent on selling DSL broadband and managed data services to stabilize long term revenues and minimize line losses. Like many independent phone companies, TDS’ largely rural service areas offer the opportunity of delivering broadband service to areas unserved by cable broadband, and unlikely to find robust cell phone or wireless data coverage.
Vicki Villacrez, TDS’ chief financial officer, reports the phone company now has a 60 percent penetration rate for residential landline customers taking DSL service.
TDS is losing more than 5% of their landline customers a year, which limits potential growth.
“High speed data subscribers grew 6% year-on-year.” Villacrez said. “We continue to attract healthy levels of new customers and they are taking higher speed. Over 80% of our data subscribers are taking speeds of three megabits or greater and 16% are taking greater than 10 megabit speeds.”
Because TDS customers are migrating to faster speeds, where available, the company’s average revenue per subscriber has remained stable at $37 per month. That comes from a combination of the higher prices some customers pay for better service minus line losses, customer defections and retention offers delivering discounts to those threatening to switch providers.
TDS is also adopting similar strategies other phone companies are trying to hang onto customers: marketing their own triple play package of voice, broadband, and television service. Like most smaller phone companies, TDS delivers voice and data over their existing copper wire network and relies on a resale arrangement with DISH Network to provide satellite television.
About 26 percent of TDS customers are enrolled in the company’s triple play package, up 2,700 customers in the quarter.
But the company’s cost control measures also signal TDS’ unwillingness to invest noticeably in expanding their DSL footprint to additional customers, or dramatically improve their existing network. The company admits it plans to limit investment in new residential customers, and consolidated cash expenses were down 2.1% for the period, reflecting reduced spending.
Where is TDS willing to invest? In data center assets and future acquisition opportunities. TDS intends to broaden its presence in managed hosting and will continue to explore mergers and acquisition opportunities with other small, independent phone companies.
Customers who flee Bell Canada’s products and services for lower prices and less abusive Internet Overcharging are being encouraged to visit what Bell internally calls its “customer winback” website. It’s Bell Canada’s place to extend special pricing and promotional offers to those considering a return to the telephone company. But Stop the Cap! found the offers less than compelling and some of the company’s claims a real stretch:
There are many reasons to switch to Bell.
Switch to Bell for the most reliable home phone service1. We’ve made many enhancements and are so confident you’ll enjoy our services, they come with a complete 30-day satisfaction guarantee, or your money back2.Switching is easy. You can keep your existing home phone number3 and we’ll take care of the details with your current service provider.
With Bell Home phone you’ll enjoy:
The most reliable service
No reconnection fees
Plus, take advantage of savings on more great Bell services for your home.
Bell Internet – Perfect for sharing
The largest fibre optic network in Canada
Upload speeds up to 3x faster than cable4
Free Wireless Home Network
Bell Satellite TV- Over 100 HD channels
Stunning HD picture quality – 10x better than regular cable
Canada’s best HD PVR5 – set and manage recordings from anywhere
On Demand movies in 1080p HD – the highest quality of any provider
With Bell Install, you get a complete and customized installation at no charge6. Sit back, relax and we’ll set everything up for you.
Join the thousands of customers switching to Bell every week and start saving.
With six footnotes to the fine print in as many paragraphs, warning bells begin to ring almost immediately. Those footnotes can cost customers some real money:
1. Applies to traditional copper-based (excluding fibre-based) wireline telephony; compared to cable telephony and based on continued service during extended power outages at customer’s home.
In other words, Bell phone service is more reliable because it works when the power goes out, unless it’s from Bell’s Fibe TV. When power drops, your Bell Fibe phone line goes with it. But if your phone lines are rotten, nothing will save you from a phone service outage, whether you are a wireline or “fibre-based” customer. By the way, although Fibe is fibre part of the way, it ultimately arrives for most customers on the same copper wire phone line technology you’ve had for decades.
2. Credit offered on service fees for TV, Internet, Home phone (excluding Mobility), and applicable installation, activation or equipment fees; does not apply to usage fees (such as long distance, additional Internet usage capacity, On Demand TV programming). Client must call within 30 days of activation. Conditions apply, see bell.ca/satisfaction.
Among the other terms and conditions not immediately disclosed:
No refunds will be issued to customers modifying or upgrading any existing Eligible Services;
Prior to issuing a refund for equipment purchased directly from Bell, the equipment must be returned to Bell in the same condition as when it was purchased, with all original packing materials, manuals, accessories and associated equipment, along with proof of purchase;
You may claim no more than one (1) refund under the Bell Satisfaction Guarantee in any 12 month period;
You must be fully compliant with the terms and conditions applicable to your Eligible Services, and
All accounts for Bell services must be in good standing.
3. Within same local calling area
A no-brainer.
4. Current as of May 1, 2011. Comparison between Bell Fibe Internet 25 (upload up to 7 Mbps) and Rogers Ultimate Internet (upload up to 2 Mbps).
Bell apparently doesn’t think Quebec’s Videotron is worth mentioning. They upgraded to 3Mbps upload speeds for their highest tiers last February. Like AT&T’s U-verse, “fiber to the neighborhood” networks simply cannot deliver the fastest download Internet experience that fiber to the home or cable DOCSIS 3 providers can deliver, although the upload speed for Fibe (when you actually achieve 7Mbps) is a nice change from the neutered speeds cable companies provide for “the up side.” But Bell counts your upload traffic against the usage allowance.
5. Based on a combination of 30-second skip function, 9-day programming guide, expandable recording capacity and remote PVR feature. Additional equipment required.
Additional equipment costs additional money.
6. Conditions apply; see bell.ca/fullinstall for Bell Internet and bell.ca/installationincluded for Bell TV. For Home Phone, available to customers with Home Phone Choice or Complete, or with Unlimited Canada/US long distance plan, or the Bell Bundle; one-time activation fee (up to $55/line) applies, credited on the account before taxes, and additional charges may apply for installation of a new phone jack.
A complete and customized installation “at no charge,” except for that pesky $55 “activation fee” eventually credited on the account (but you still pay GST/PST on the ‘rebated’ amount). Some of our readers have complained to us that they’ve had to call Bell, sometimes repeatedly, to get that activation fee credited back. Bell sometimes forgets.
Unfortunately, for too many in suburban and rural Canada, it’s Bell telephone infrastructure or nothing — no cable provider exists to offer a competitive alternative. They are the company that charges more for less.
Considering Bell is Canada’s number one advocate for Internet Overcharging, you can do better with almost any other provider. Let Bell know they can “win you back” when they deliver scheme-free service at a fair and reasonable price. Until then, tell them they can swing alone.
Verizon employees rally in New York. (Photo: Gary Schoichet)
More than 45,000 Verizon landline workers are on strike this morning after union workers overwhelmingly rejected a proposed contract from Verizon Communications that could result in as much as $20,000 in reduced benefits per employee, per year.
Workers employed by Verizon East, which serves the company’s northeastern and mid-Atlantic regions from Massachusetts to Virginia, left their jobs as their contract with the company expired over the weekend. Two unions — the Communications Workers of America and the International Brotherhood of Electrical Workers, are pitting the dispute as part of a corporate war on the middle class.
Verizon has been demanding serious concessions from union workers in negotiations for a new contract agreement. But employees are expressing serious concern over draconian salary and benefit concessions that could drastically reduce their pay and benefits package. According to William Huber, president of IBEW Local 827:
Verizon is seeking to tie pay increases to company-defined performance reviews;
Employees would pay significant sums towards health care premiums;
Pensions would be frozen at the end of 2011;
Sickness and death benefits would be eliminated;
Disability benefits would be slashed from 52 to 26 weeks and authorized “sick time” curtailed.
Verizon officials claim the benefit and pay concessions are part of the reality of today’s landline telephone business, which has been in decline for several years.
“We need to reach a contract that addresses economic realities,” said Lee Gierczynski, a Verizon spokesman. “The wireline business is constantly in decline. In order for Verizon to compete, Verizon and the unions need to make some difficult decisions.”
That contention is seriously disputed by the two unions and employees. The CWA called Verizon one of the most profitable companies in the U.S., noting the company earned $19.5 billion in profits in the last four years and paid over $258 million in compensation to just five top executives.
“So tell me, where is their loss?” said Dino Cantillo, a facilities technician and 17-year employee. Cantillo told the Star-Ledger that Verizon’s CEO, Ivan Seidenberg, earned more than $18 million in total compensation in 2010 – roughly $49,000 every day.
“It takes these guys a year to make that,” said Cantillo, pointing at the two dozen or so protesters who picketed in Howell, N.J.
“They are trying to get rid of the working class,” said Bill Gebhart, a lineman who has worked for Verizon for 15 years. “They are totally annihilating it.”
The unions are especially upset Verizon has been aggressively trying to contract work out of the region, hiring workers offshore in Mexico, the Philippines, and other countries to perform tasks formerly done by regional employees. The unions also point to significant corporate welfare Verizon received recently — a $1.3 billion federal tax rebate paid for by taxpayers.
“These negotiations are all about good jobs,” said CWA District 1 Vice President Chris Shelton. “Companies like Verizon should be investing in rebuilding the American economy, not contributing to the destruction of good, middle-class jobs.”
Verizon appears to be in no hurry to negotiate, cancelling several bargaining sessions last weekend.
During the last strike by Verizon employees in 2000, requests for repair service, installation, and other construction work languished for weeks, so it is very likely consumers with phone or Internet service problems or new order requests will face growing delays the longer the strike lasts. Union officials plan to move against company plans to reassign managers and workers from other regions with strike protests and what one union official said would be a “blizzard of paperwork.”
Union workers also suggest the quality of repairs and installations done by those pressed into service with little experience may be below standard.
The CWA recommended that union workers and supporters retaliate against Verizon by canceling their phone, Internet, and cell phone service. That could be an expensive proposition, particularly for wireless customers who would certainly face the prospect of early termination fees.
Visible strike actions by Verizon workers have served as catnip for local reporters, who are extensively covering the strike up and down the eastern seaboard. Stop the Cap! has assembled coverage from stations all across the region. (28 minutes)
“We’ve been talking for some time that broadband for us is not just about customer growth… it’s about revenue growth.” — Anthony Thomas, Windstream’s Chief Financial Officer
For the first time in some time, Windstream reported revenue growth during the second quarter of 2011. The independent landline telephone company that last week acquired Rochester-based PAETEC Corporation managed to win new revenue from its business services unit and equipment sales, even as it continues to lose core landline customers, who are disconnecting service in favor of cell phones or cable telephone products.
It added up to a measurable, but meager growth of 0.1 percent for the company year-over-year during the second quarter.
Like many traditional wireline phone companies, Windstream is betting the farm in their largely rural and suburban service areas on selling broadband and maintaining the allegiance of their business customers, challenged in larger cities by increasingly aggressive “Business Class” products from competing cable companies.
Windstream executives responded to questions from Wall Street bankers during their second quarter conference call held last Friday.
While several investment firms were happy to see Windstream manage some revenue growth, several zeroed in on the company’s increased capital expenditures. Windstream reports the company will continue major investments in fiber and broadband services, but not primarily for their residential retail customers. Instead, Windstream hopes to capitalize on the “high margin” business of selling fiber-based cell tower services, primarily to support forthcoming 4G deployments.
Windstream officials faced some hesitancy from Wall Street about the company’s spending during Friday’s conference call, particularly from Bank of America and Goldman Sachs.
Anthony Thomas, chief financial officer for Windstream, defended the investments.
“The most important part of fiber-to-the-tower projects are the initial investments. Those are very high-margin businesses,” Thomas said. “But you have be comfortable with the upfront capital and be patient at recognizing those are 6-to 12-month investment time horizons. But once you start bringing those revenues in, the actual cost of operating a tower is low.”
Wall Street also expressed concerns about consumer broadband traffic growth, but did not broach the subject of usage control measures like usage caps or metered billing. Windstream acknowledged the growth, primarily from online video, and said it had well-equipped data centers to handle the traffic.
Windsteam’s Consumer Strategy: Bundle Customers & Keep Them Away from Cable TV
It's all about the bundle.
Online video may be an asset for Windstream, which is facing increasing challenges retaining landline customers and up-selling them other products like broadband. That competition comes primarily from cable companies, who are targeting Windstream customers with invitations to cut their landline service and bring all of their telecommunications business to cable.
Traditional phone companies have a major weakness in their product bundle: video. Independent phone companies, in particular, are usually reliant on satellite TV partners to support the television component of a traditional “triple play” bundle. Windstream’s network is capable of telephone and slow speed broadband in most areas, but the company’s involvement in video is largely left to a third party satellite-TV provider.
Customers who do not want satellite TV service may be easily attracted to a local cable provider. But as an increasing amount of video viewing is moving online, Windstream may find customers increasingly tolerant of doing their viewing online, reducing the importance of a video package.
Windstream’s strategies to keep customers:
Sell customers on product bundles, now enhanced with online security/antivirus options and on-call technical support for computer-related technical issues;
Pitch Windstream’s Lifetime Price Guarantee, which locks in a single price for basic services, good as long as you remain a customer;
Challenge cable competitors head-on with its “Quitter Campaign,” which tries to convince cable customers to “quit cable” in favor of Windstream;
Offer faster broadband speeds in limited areas to satisfy premium customer demand.
Windstream Tries to Convince Customers the Broadband Speeds It Doesn’t Offer Do Not Matter for Most
Windstream’s efforts at winning over new broadband customers have been waning as of late. One of the primary issues Windstream faces is the cable industry’s effective portrayal of DSL as “yesterday’s” technology, incapable of delivering the broadband speeds consumers crave.
Instead of investing in improved broadband speeds for everyone, Windstream spends its time and efforts trying to convince most customers they don’t need the faster speeds being pitched by most cable companies in the first place.
Windstream tries to convince customers they can make do with less speed (as low as 1.5Mbps), and there is no difference in speed between different providers — both questionable assertions. (4 minutes)
The COO says 3Mbps is Windstream's biggest seller -- their website says something else.
Windstream chief operating officer Brent Whittington says his customers “don’t want to pay for incremental speed,” but is expanding their capacity to offer somewhat faster speeds.
“We still see that long term as [an increased revenue opportunity] because we know the demand is going to be there,” Whittington told investors. “As we’ve rolled it out currently, it’s largely to — from a marketing benefits standpoint to talk about our competitiveness relative to our cable competition, but [consumers] are largely buying at 3Mbps.”
Either Whittington is mistaken, or Windstream’s website is, because it promotes the company’s 6Mbps $44.99 option as its “top seller.” Many of Windstream’s cable competitors charge less for almost twice the speed, which may be another reason why Windstream’s broadband signup numbers are lagging behind.
Finding More Revenue: Universal Service Fund Reform & Business Services
Among the most important components of Windstream’s strategy for future growth are reform efforts underway in Washington to overhaul the Universal Service Fund. Rural, independent phone companies like Windstream have reaped the rewards of this subsidy for years in its rural service areas. But now Washington wants to transform the program away from simply underwriting rural landline phone service and redirect revenues to enhancing broadband access in areas too unprofitable to service today.
Windstream sees the reform as a positive development.
“It focuses USF on high-cost areas,” said Windstream CEO Jeff Gardner. “If you were a customer in a rural area of Windstream versus a customer in a rural area of a small carrier, your subsidy would much be higher, and we would get very little USF for that going forward. In this proposal, USF is really targeted towards those high-cost areas, so we kind of deal with this issue that we refer to as the rural-rural divide.”
Gardner says USF reform will end disparity of access.
“All rural customers are going to have the opportunity to get broadband out to them under this plan,” he said. The more customers paying monthly service fees, the higher the company’s revenues, assuming nothing else changes.
While redirected subsidies may help rural broadband customers, Windstream’s capital investments in expanding their network are going primarily to benefit their business clients, not consumers.
“On the small business side, our service there is very superior to our cable competitors,” said Windstream’s chief financial officer Anthony Thomas. “We’ve made investments in our network to offer VDSL and higher-speed data services. That’s going to be directed predominately toward those small business customers.”
Whittington added most of the company’s efforts at deploying VDSL technology are focused on the company’s small business segment to bring faster speeds to commercial customers. For consumers, Windstream’s efforts are targeted primarily at keeping up with usage demands.
“Like a lot of folks in the industry, we’ve definitely seen increases in network traffic really due to video consumption,” Whittington said. “No question Netflix and other related type services are driving some of that demand. We continue to invest in broadband transport like we have in years past. And the good thing with a lot of things we’ve been doing from just a network perspective like rolling out as I mentioned before, VDSL technology in our larger markets. That’s really all about fiber deployment, which helps solve some of those transport issues. So we feel like we’ve been in good shape there, but it’s certainly something we’ve been very focused on operationally so our broadband customers don’t see a degradation in the quality of their experience.”
Despite the ongoing loss of cable television subscribers who are dropping video packages, broadband remains an incredibly important, and profitable component of today’s telecommunications industry. Comcast, America’s largest ISP, now has 17.55 million customers, earning the company $2.2 billion dollars every quarter, which amounts to nearly $9 billion a year. That amounts to an addition of 418,000 broadband customers for Comcast during the last quarter alone, the most Comcast has ever added since the first quarter of 2008.
For the second quarter of 2011, Comcast’s capital expenditures increased 5.5%to $1.2 billion, reflecting increased investment in network infrastructure to enable product enhancements, including faster speeds in high-speed Internet, as well as increased investment to support expansion in business services. Cable capital expenditures equaled 12.6% of Cable revenue in the second quarter of 2011.
For the six months ended June 30, 2011, Cable capital expenditures increased 10.0%to $2.2 billion, representing 12.1% of Cable revenue.
Time Warner Cable scores a distant second among cable companies with 9.99 million subscribers; Cox is third with 4.4 million.
Among the phone companies, AT&T remains the largest with 16.48 million customers. Verizon is a distant second with 8.49 million customers.
Leichtman Research Group, Inc. found nearly 77 million Americans have broadband service from the 19 largest providers, which represent about 93 percent of the broadband market.
Almost every customer had the choice of two or fewer providers — a cable company and/or a telephone company.
Broadband Internet Provider
Subscribers at End of 1Q 2011
Net Adds in 1Q 2011
Cable Companies
Comcast
17,406,000
418,000
Time Warner
9,992,000
189,000
Cox*
4,400,000
30,000
Charter
3,334,000
87,900
Cablevision
2,927,000
32,000
Suddenlink
857,100
30,800
Insight
535,700
11,200
Cable ONE
440,215
14,813
Other Major Private Cable Companies**
2,247,000
39,000
Total Top Cable
42,639,015
852,713
Telephone Companies
AT&T
16,485,000
175,000
Verizon
8,490,000
98,000
Qwest^
2,965,000
51,000
CenturyLink^
2,446,000
52,000
Frontier
1,707,678
10,511
Windstream
1,331,700
28,800
FairPoint
297,491
7,746
Cincinnati Bell
258,500
2,400
Total Top Telephone Companies
33,981,369
425,457
Total Broadband
76,620,384
1,278,170
Sources: The Companies and Leichtman Research Group, Inc.
* LRG estimate
** Includes LRG estimates for Bright House Networks, Mediacom, and RCN
^ CenturyLink acquired Qwest on 4/1/11
Company subscriber counts may not represent solely residential households
Totals reflect pro forma results from system sales and acquisitions
Top cable and telephone companies represent approximately 93% of all subscribers
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