"If you have to ask how much, you can't afford it."

Knology, which bought out Sunflower Broadband last year, has elected to carry forward the old owner’s Internet Overcharging schemes, charging broadband customers penalty rates for exceeding their usage allowances.

The company’s explanation for their overpriced bandwidth comes with a tall tale about their competitors they simply made up out of thin air:

Data transfer allotments allow Knology to offer higher speed service with lower prices. Unlimited, open usage plans offered by other providers typically employ network controls to slow down the high usage customers.

That’s news to us, and to their nearest competitor AT&T.  They deny speed throttling any of their U-verse or DSL customers.

While the company’s download speeds are impressive — up to 50Mbps — their upload speeds are not, topping out at a paltry 1Mbps.

Knology's pricing is nearly identical to its predecessor Sunflower Broadband, except for the $5 rate hike for its most popular Silver plan.

Knology claims they expand usage allowances based not on network capacity, but by the percentage of customers they gouge with overlimit fees:

Data transfer allotments: Each level of internet above includes the amount of data transfer indicated measured in Gigabytes (GB). The data transfer allotments are increased regularly, based on usage patterns, to ensure the number of customers who go over their allotments remains under 10%. Additional GB of data transferred beyond the allotment is billed at $1.00 per GB if not purchased at a discount before the end of the billing period. The percentage of Knology customers charged for extra data transfer beyond their allotment was 6.1% in April 2009.

Paul Bunyon, Knology's new director of marketing

Bemusingly, customers with time machines who can travel into the future and determine they will exceed their allowance for the month can pre-purchase an increase in their usage allowance at a discount.

No time machine?  Then you either pay the standard overlimit rate, watch your usage like a hawk, or potentially over-buy excess usage that expires at the end of the month.

Customers tell Stop the Cap! the company’s single, unlimited use package is “the same piece of garbage it always was,” writes Larry who lives in Lawrence.  He had high hopes Knology would do the right thing and abandon Sunflower’s overcharging schemes.

“Apparently not, and after a month with their unlimited service, I have scheduled my U-verse installation with AT&T,” Larry writes. “Even on Knology’s limited packages, they don’t provide the speeds they promise.”

Larry also says the higher speed tiers Knology offers deliver diminishing returns.

“If their uplink is congested, or the web sites you visit are busy, it won’t matter if you have 10Mbps or 50Mbps — the speed is effectively the same,” he says. “Besides, upload speed is more important these days and 1Mbps is just plain lousy in 2011.”

“Bye, bye SunKnology.”

Sunflower's Old Broadband Plans & Pricing (February 2010)

Last year, Stop the Cap! told you the story of Mark Williams, the Lee, Massachusetts resident that was quoted an installation fee of $12,000 from Time Warner Cable.

The town intervened, claiming the cable company was violating its franchise agreement by not providing standard cable installation for any customer who also received electric and phone service.  Time Warner agreed to reduce the fee to $4,000 — still unacceptable to Williams.  Months later, and after a threat of sanctions from the Board of Selectmen, Williams got his cable-TV, broadband, and phone service installed for $35 — the same rate other Berkshire customers pay.

Williams did have to spend around $1,500 to bury an underground cable that runs some 600 feet from the nearest utility pole to his home.  Williams wasn’t interested in overhead wiring and didn’t mind paying the additional fee to have the cable buried where he wanted it.

Lee, Massachusetts is located in broadband sparse western Massachusetts

Cable companies routinely deny cable television services to customers who live in sparsely populated areas, where the company is not expected to earn back its wiring investment within a short period of time.  In such cases, either the customer (and other interested neighbors) split the wiring costs or they go without service.  But Lee’s franchise agreement insisted the cable company wire any customers in its franchise area who also have access to other utilities, which includes nearly everyone.

Other communities trying to get their outlying residents cable service could find providers amenable if they insist on similar clauses during franchise renewal negotiations.

Williams tells The Berkshire Eagle he is grateful for the support of his town government, especially patent attorney Malcolm Chisholm of the Lee Cable Advisory Committee for taking on Time Warner on his behalf.

“He’s a real terrier and sinks his teeth into something until it’s done right,” Williams told the newspaper.

Kent Carper says magicJack has been stiffing Kanawha County for 911 fees the Florida-based phone company has refused to collect from its customers in West Virginia.

Carper, who serves as president of the County Commission, is taking his case to the West Virginia Public Service Commission (PSC) with the hope they’ll order the West Palm Beach-based YMax Communications, which owns the service, to start paying up.

“There’s nothing ‘magic’ about magicJack,” Carper told the Charleston Gazette. “It erodes the ability of the 911 center to pay for the services it’s being mandated to provide. MagicJack is not paying a penny, and their position is they don’t have to.”

Kanawha County currently collects a surcharge of $3.34 a month from landline and “digital phone” customers, $3 a month from those with cell phones.  If the county wins its dispute, the costs for 911 service will far outweigh the $19.95 a year magicJack charges for its own service.

Even Carper admits, “They’re practically giving away telephone service.”

It’s a high stakes battle for magicJack, because if it loses, other counties will surely follow with demands for 911 surcharges of their own.  magicJack officials argue they cannot collect the fees Kanawha County wants because of the way the product is marketed — typically through annual subscriptions.

magicJack’s lawyers also argue the company is not selling a true “voice-over-IP” (VoIP) service, comparable to Vonage, cable’s “digital phone” products, or other similar services.

The Federal Communications Commission partly defines VoIP as a single service for making and receiving phone calls over the public telephone network.  That’s a distinction that allows most Skype customers to avoid getting hit with fees and surcharges — Skype has a business firewall between their incoming and outgoing services. SkypeOut, which allows callers to connect with non-Skype customers, is a subscription service and does not support 911 calls.  SkypeIn service requires most users to dial from their computer, not a traditional phone line, unless a customer optionally rents a phone number from Skype.

The inventor of magicJack, Dan Borislow, said in legal filings with the PSC that customers are only buying a license for the device and the accompanying software — making and receiving calls are handled by two different services that customers get for free as part of the annual license:

The magicJack is a portable device that can be used by a customer anywhere in the world by plugging the device into a computer USB port, provided the computer has a broadband connection.

Upon purchasing a magicJack device, a customer receives a one year license, with the option to renew for an additional year or years, of software commonly known as a “softphone”. The software allows the magicJack device to operate.

The softphone operating software license gives the customer the option to subscribe to magicIn, which is a service offered by YMax. MagicIn permits a customer to obtain a phone number and to receive phone calls via his or her magicJack device.

The softphone license also permits a customer to subscriber to a service offered by magicJack known as magicOut. Subscription to the magicOut service allows a customer to make outgoing calls to the United States, Canada, Puerto Rico and the Virgin Islands through his or her magicJack device.

A magicJack purchaser who subscribes to magicOut or magicIn is not charged for either subscription, and the purchaser is also not billed for incoming or outgoing calls made or received through the magicJack device.

Kenawha County is West Virginia's most populous, home to Charleston, the state capital.

Billy Jack Gregg, the PSC’s former consumer advocate who was hired as a consultant by the Kanawha County Commission, thinks that’s nonsense. Gregg suspects magicJack is trying to avoid being designated as a VoIP provider because of mandated fees and surcharges that could come along for the ride.  Gregg testified few, if any magicJack customers are aware of “magicIn” or “magicOut,” and they don’t have the option of choosing one or the other anyway.

Gregg left Wal-Mart employees scratching their heads when he proved his point trying to only purchase the magicOut outgoing call service.  They had no idea what he was talking about.

Presumably, neither does the PSC which has rejected repeated attempts from magicJack and YMax to dismiss the case using those arguments.  Hearings are scheduled for March 1-2.

Carper says he has nothing personal against magicJack — he just wants the company to realize its refusal to collect and pay 911 fees affects the county emergency operations center’s ability to serve the public.

“Simply put, the failure of any provider to collect and remit fees impacts public safety and the ability of Metro 911 to serve the citizens of Kanawha County,” he said. “It erodes our ability to afford these emergency services.”

Some outside observers have zeroed in on a related matter — the very steep $3+ monthly 911 fees demanded by the county, West Virginia’s most populous and home to the state capital, Charleston.

Most 911 surcharges in the United States range between $0.35-0.50, with some larger cities across the country charging one dollar.  Some state laws prohibit fees in excess of $2 per month.

In earlier filings, magicJack’s lawyers appeared amenable to negotiating smaller payments, but not the $3+ county officials are demanding.

[flv width=”576″ height=”344″]http://www.phillipdampier.com/video/Boston Globe MagicJack Review.flv[/flv]

The Boston Globe’s video review of magicJack was more charitable than the accompanying write-up, which called its marketing “gaudy,” “sleazy,” and “crude.”  Author Hiawatha Bray also didn’t think that highly about the quality of the service he received, saying the product doesn’t inspire confidence and is not suitable as a home phone replacement.  Still, for long distance calls, a second line, or for travelers, magicJack can save you money.  (2 minutes)

Verizon's iPhone Herd Mentality: Pay, pay more, and pay again.

We’re still trying to wrap our heads around this “deal” spotted in the Verizon iPhone FAQ by Gadgetell (underlining ours):

I just purchased a new smartphone during the holiday season, but if I knew that iPhone 4 was going to be available soon I would have waited. What are my options now?

Current Verizon customers who purchased and activated new smartphones, feature phones or certified pre-owned phones between 11/26/2010, and 01/10/2011, are eligible to receive up to a $200 Visa debit card when they purchase an iPhone 4 at full retail price by 02/28/2011 and return their existing phone. Note: This offer is only available on consumer accounts with five lines or less, who are purchasing iPhone 4 through Verizon Wireless retail stores, telesales, or through verizonwireless.com.

So, if you have recently bought a new Android or Blackberry phone during the holiday season, you can turn it in and essentially get your money back.  But Verizon isn’t giving you $200 — it is paying only as much as you spent on the phone to be returned, up to $200.

Verizon says that earns you the right to go and get in line to pay full retail price for a new iPhone in February.  No discounts or subsidies for you!  The 16GB iPhone runs $649.99 and the 32GB iPhone costs $749.99.

We’re basking in the savings.  Gosh, thanks Verizon!

Not only are customers giving up Verizon’s “new handset subsidy” — often worth hundreds of dollars, they also lose their New Every Two discount and other savings from promotions like Verizon’s Smartphones Talk Free $9.99 monthly discount for 24 months.

For those who simply must have the iPhone, Verizon will make you pay dearly for not waiting.

Having owned the iPod Touch (essentially the iPhone without the phone) and Motorola’s Droid X, I can testify the price penalty Verizon wants you to pay for the iPhone isn’t worth the asking price.  Move on, there is nothing to see here.  This is even more true considering the next generation of the iPhone will likely be introduced in just four months.  What will you do then, and how much do you think Verizon will extract from you all over again to get that phone?

There is no doubt Apple’s iPhone is a fine phone, but there are cheaper ways to get one, ranging from opening a new line on your Verizon account and passing your old phone down to a family member, to finding one on eBay, subsidized in part by selling your existing phone.

Frontier used Time Warner Cable's usage cap experiment against them in this ad to attract new customers in the spring of 2009. Now they're no better.

Stop the Cap! reader Mike in Elk Grove, California reports his departure from Frontier Communications carried a goodbye kiss he’ll not soon forget: a $680 final bill made up primarily of early termination fees:

“I just got my Frontier bill after canceling (they canceled me because I ported my number to another provider),” Mike writes.  “The bill cycle was through 2/14/2011 (my contract ends on March 6, 2011).”

The bill was for $679.72.

More than 22 months into his 24 month contract, Frontier charged him early termination fees at the same rate he would pay if he departed 14 days into his term:

• High Speed Internet Loyalty Fee: $200
• Netbook Term Fee: $300
• California Unlimited Term: $200

The only reason his final bill was not higher is that he received some service credits for the partial month he was not their customer.

Needless to say, Mike is livid.  He is one of several Sacramento-area customers who received letters from Frontier threatening to terminate his Internet service if he did not reduce his usage.  When Mike ultimately decided to reduce his usage to zero and switch providers, Frontier dumped every termination fee it could find on Mike’s final bill.

But before Mike opens his checkbook, he (and any other customer gouged with early termination fees) should remember this:

Frontier cannot bill you early termination fees and expect to be paid when they unilaterally changed the terms of the contract.

From Frontier’s Terms and Conditions for High Speed Internet:

Our Right To Make Changes

UNLESS OTHERWISE PROHIBITED BY LAW, WE MAY CHANGE PRICES, TERMS AND CONDITIONS AT ANY TIME BY GIVING YOU 30 DAYS NOTICE BY BILL MESSAGE, E-MAIL OR OTHER NOTICE, INCLUDING POSTING NOTICE OF SUCH CHANGES ON THIS WEB SITE, UNLESS THE PRICES, TERMS AND CONDITIONS ARE GUARANTEED BY CONTRACT. YOU ACCEPT THE CHANGES IF YOU USE THE SERVICES AFTER NOTICE IS PROVIDED.

When Mike (among others) signed up for Frontier service, their broadband service did not carry any usage limits.  Frontier’s “price protection agreement” claims it will “lock in” your current price.  But Frontier violated their own contract when they sent letters to customers threatening to terminate their broadband service for using Internet service that had no specified usage limit and demanding they pay a higher price of up to $250 a month to continue service.  So much for “price protection.”

You are not obligated to accept Frontier’s unilateral action and can notify the company they have made a “materially adverse” change to your contract by specifying that you exceeded a never-defined usage limit (100GB), and that the company sought a price increase ranging from $99-250 to continue service with them.  If you exceeded 100GB a year ago, you would not have received this letter.  Today you will — and that is a change you need not accept.

Frontier defaulted on their obligations to you as a customer, and your recourse is to cancel the contract, penalty-free.

Frontier Communications’ outrageous term contract fees were precisely what got the company in hot water with the New York State Attorney General in 2009, and the company settled charges with refunds and waivers for those unjustly billed cancellation fees Frontier was not entitled to receive.  Apparently they have not learned their lesson.

Your response:

1. Send a registered, return receipt requested letter to Frontier notifying them under the terms of their own contract, you do not accept the changes outlined in their letter limiting your broadband service.  Your original contract with Frontier did not include a specified usage limit and now using more than 100GB results in a request to pay more or reduce usage.  That represents a “materially adverse change” in your agreement.
2. Under these conditions, you are exercising your right to depart, penalty-free, from your term contract with Frontier Communications.
3. Warn Frontier that any attempt to collect early termination fees or other cancellation fees will result in civil action appropriate to protect your credit rating and will trigger a complaint with the California Attorney General’s office.
4. Keep copies of all correspondence and record dates, times, and names of any representatives you speak with, as they will be helpful in any official investigations that follow.
5. Also be sure to proceed with the terms found on the back your Frontier bill to protest erroneous charges, preferably in writing.  You want a paper trail and you want to protect your credit rating from any adverse collection activity.

Mike has already contacted local media about his case, which is a smart idea.  Warning other consumers about the potential costs of doing business with Frontier is likely to only further deteriorate their reputation in the Elk Grove area.  Alienating and overcharging your customers is a great way to get them to share their story with as many people they can find, and that only makes a bad company look worse.

[flv width=”360″ height=”240″]http://www.phillipdampier.com/video/WROC Rochester Frontier Flagged for Not Telling Customers About Fees 10-5-09.flv[/flv]

WROC-TV Rochester reported back in October, 2009 that Frontier was on the hook for hundreds of dollars in refunds to some customers. (2 minutes)