CenturyLink is having a tough time competing against Tacoma, Wash.-based Click! Network, so the phone company hired third party vendors who are spreading lies about its community-owned competitor.

Click!, a division of Tacoma Power, recently upgraded its network to begin selling 100Mbps broadband to Tacoma residents. That proved a problem to CenturyLink’s outsourced sales force who cannot begin to offer those kinds of speeds to Tacoma residents over CenturyLink’s copper-wire facilities. So when you can’t compete, the next best thing is to lie.

The News Tribune reports CenturyLink’s door-to-door sales force is misinforming current Click! customers the service is shutting down and offering to transfer their service to CenturyLink.

“Customers have been told that Click! Cable TV is going out of business in the next couple of months,” said Tenzin Gyaltsen, Click! Network general manager. “That is not true. Click! Cable TV is still in business, offering competitive pricing – and will continue to do so for many years to come.”

A complaint will be filed with the Office of the State Attorney General against CenturyLink accusing them of an apparent violation of state law – RCW 19.86.020 – which states, “Unfair methods of competition and unfair or deceptive acts or practices in the conduct of any trade or commerce are hereby declared unlawful.”

“It’s a vendor we’re using,” Meg Andrews from CenturyLink admitted. “When we were made aware of the situation the vendor was told it is not in our best interest. It’s not really in our voice, or tone. It’s not a good thing for us. We’ve never had this type of experience before.”

Although the salespeople are not CenturyLink employees, the phone company hired the firm that employs them.

Tacoma residents enjoy the competition. Prices are lower than in nearby Seattle, and residents can choose from CenturyLink, Comcast, or one of three independent ISPs that provide service over the Click! Network.

One Tacoma resident told Community Broadband Networks the competition can’t afford to charge the usual prices other Washington residents pay:

I have Comcast in Tacoma and all I know is since there is competition down here Comcast is about half the cost as it is in Seattle. They give you a rate good for a year. When your year is up you call up and just say Click! and bam back down you go. A friend in Seattle once called Comcast with both of our bills with similar service and mentioned my price and they said I must live in Tacoma and they wouldn’t match the price.

The city asks anyone who hears a CenturyLink sales representative misrepresent Click! call 253-502-8900 to report it.

Pricing for broadband on Tacoma’s Click! Network

TekSavvy, an independent Canadian Internet Service Provider, just announced some speed upgrades, changes, and some price adjustments for DSL customers in Quebec and Ontario:

Ontario

• The 12Mbps tier is being downgraded to 10Mbps with no price change;
• Current customers on the 12Mbps tier are being upgraded to 15Mbps free of charge;

Quebec

• Quebec customers who were on the 10Mbps/300 GB package will receive a price decrease to $41.99;

General Changes

• Customers subscribed to 25Mbps service will now have 10Mbps upload speed free of charge (up from 7Mbps);
• Packages at 640kbps & 2Mbps speeds have been discontinued;
• The 16Mbps package is being converted to 15Mbps with existing customers grandfathered at the higher speed.

The speed changes will take effect by Monday, Aug. 27.

TekSavvy uses phone lines from Bell and Telus for DSL service and also uses cable broadband networks owned by Rogers, Shaw, and Vidéotron. Unlike most Canadian providers, TekSavvy sells packages with generous usage allowances or, for a few dollars more, unlimited service.

TekSavvy Solutions, Inc., is one of the leading independent providers of telecommunications services in Canada. Founded in 1998, TSI provides residential, business and wholesale Internet and phone services in Canada.

Spending money to earn more money is a fiscally sound principle of doing business, but short term investors often decry increased spending as harmful to the value of a company’s stock and dividend payout. That is why Hawaiian Telcom (HawTel) earns mixed reviews from Wall Street about the company’s aggressive infrastructure improvement project, a fiber to the neighborhood network that intends to bring television, phone, and faster broadband service to an increasing number of Hawaiians.

HawTel’s stock price has bounced up, down, up, and then down again as investors digest the company’s ongoing effort to reinvent itself as a 21st century telecom company.

The Old HawTel

HawTel’s fiber buildout began on the island of Oahu in 2011, eventually passing 27,400 homes on the island. At the end of 2011, 1,600 (6%) of those homes signed up for the service. That’s an acceptable number, especially for a service barely promoted. HawTel does not mention the television service on its primary website, and approaches potential customers one-on-one with in-person and targeted mail marketing.

At the end of the second quarter or 2012, HawTel TV had 6,400 subscribers. The company hopes to have an additional 50,000 homes enabled for its TV service by the end of 2012, with the goal of enabling 240,000 households across Hawaii over the next five years. HawTel hopes to eventually capture 30% of the Hawaiian market.

HawTel’s principal competitor is Oceanic Time Warner Cable, which provides traditional cable service across the Hawaiian Islands. HawTel had been at a substantial disadvantage competing with Time Warner’s television package and faster broadband service. But the fiber upgrades are allowing at least some customers to purchase speeds up to 50/10Mbps, slightly faster than what the cable operator offers.

Time Warner has taken note of the phone company’s re-emergence as a strong competitor, targeting Oahu with special promotional offers that lock customers in place with triple play discounts designed to make it inconvenient to switch providers.

The New HawTel

Unfortunately for HawTel, fiber upgrades do not come cheap, and the company’s earnings have taken a hit.

Capital expenditures totaled $41.2 million for the six-months ended June 30, 2012, up from $35.4 million for the six-month period a year ago due primarily to investments in broadband network infrastructure and expansion of video enabled households.

Hawaiian Telcom reported an 18 percent decline in second quarter earnings, which it blamed primarily on broadband network expansion.

The company also announced it lost another 6% of traditional landline customers during the second quarter, but that was offset by expansion in its broadband and television service. For HawTel, the solution to ending landline losses is to upgrade their network to compete with the types of communications services consumers are interested in buying today.

But those plans can and do conflict with at least some stock traders who are interested primarily in short term financial results. Spending can cut into profits, so some analysts downgrade stocks of companies spending the most, even if only to compete more effectively down the road.

So far, HawTel executives have not been discouraged carrying their network expansion plans forward. In July, Hawaiian Telcom announced it would acquire Wavecom Solutions Corporation’s local exchange carrier business in a stock purchase transaction valued at $13 million.

Wavecom’s undersea fiber network

The acquisition would give Hawaiian Telcom access to Wavecom’s fiber optic network connecting the main Hawaiian islands. Wavecom, formerly known as Pacific Lightnet, Inc., serves more than 1,700 customers across Hawaii.

In an application with the Federal Communications Commission, HawTel officials said access to Wavecom’s 400-mile undersea telecommunications cable network will permit the company to expand and enhance its broadband and television services beyond Oahu to other Hawaiian islands, and help position the company to effectively compete with Time Warner.

[flv width=”640″ height=”380″]http://www.phillipdampier.com/video/Hawaiian Telcom TV Tour.flv[/flv]

Watch a HawTel-produced video tour of the company’s new TV service.  (4 minutes)

Dish Network is planning to introduce 5Mbps nationwide satellite broadband service after its partner company EchoStar successfully launched the satellite that will host the new service.

Bloomberg News reports Dish will introduce the service in late September or October this year and intends to market it in areas where DSL or cable broadband has been spotty or unavailable.

Dish’s broadband service will use its new EchoStar 17 satellite launched in July. The satellite can technically support download speeds up to 15Mbps, but Dish wants to start with slower speeds to maximize the number of potential customers the satellite can accommodate, which the company estimates can be as high as two million.

With an estimated 8-10 million Americans currently bypassed by broadband, Dish may have little trouble establishing a substantial customer base, if the service works as advertised. Past satellite broadband ventures have traditionally offered slow speeds and draconian “fair usage policies” which strictly limit how much customers can use the service.  The services are not cheap either.

EchoStar’s vice president of investor relations Deepak Dutt said the newest generation of satellite broadband services offer much faster service and higher capacity by an order of magnitude. But average usage per subscriber has also risen, providing a challenge for satellite broadband providers that may lack the capacity to sustain high bandwidth content, especially streaming video.

Dish already offers up to 12Mbps satellite broadband through a marketing partnership with Carlsbad, Calif.-based ViaSat, Inc. But ViaSat’s service is limited to certain geographic regions in the United States. Dish insiders say their service with EchoStar will compliment, not replace their deal with ViaSat, and will expand coverage nationwide.

The combination of broadband and satellite television may make it possible for Dish to sell new bundled packages that can compete with phone and cable companies. Dish also claims to be waiting for Federal Communications Commission approval to use its wireless spectrum to offer mobile Internet and phone service, which could also be included in a future bundled offer.

Phillip Dampier

While tech fans in Kansas City rejoice over 1Gbps broadband for $70 a month, the average broadband user will think long and hard about the prospect of paying $840 a year for broadband at any speed.

That is why Google Fiber-delivered broadband in and of itself is not a cable/phone company-killing proposition.

We too easily forget our friends and neighbors that seem clueless satisfied with their 3Mbps DSL account from AT&T that they were sold with a phone line package for around $60 a month. Web pages slow to load and constantly-buffering multimedia? In their world, that means “the Internet is slow today,” not their provider.

Phone and cable companies have the internal studies to back up their claims that price matters… a lot. Those who treat the Internet as a useful, but not indispensable part of their life are going to be a tough sell at $70 a month. In fact, it is my prediction many future income-challenged and older customers will splurge on Google’s free-after-paying-for-installation 5Mbps service, satisfied that speed is currently “good enough” for the web browsing, e-mail, and occasional web video they watch on their home computer.

That is why Google was smart to offer the ultimate in “budget Internet.” Free after the $300 installation fee (thank goodness for the interest-free budget $25 payment plan) is far better than $20-25 a month for 1-3Mbps service many cable and phone companies offer their “light users.” It also brings Google’s fiber into the customer’s home, a perfect way to up-sell them later or offer other services down the road.

But the smartest move of all was Google’s very-familiar quasi-triple play package price point — $120 for broadband and television service (they really should bundle Google Voice into the package and cover the phone component for those who still want it). With the phone and cable company charging upwards of that amount already for after-promotion triple-play service, the sticker shock disappears. It’s no longer $70 for broadband, it’s $120 for everything. That is a much easier sell for the non-broadband-obsessed.

It also provides Google a critically-important broadband platform to roll out other services, including those that will appeal to customers who don’t have the first clue what a megabit or gigabit is all about. They don’t really care — they just want it to work and deliver the services they want to use hassle-free.

For Google Fiber to prove a profitable proposition, the search engine giant has to:

• Find a way to manage the huge infrastructure and installation costs, especially bringing fiber lines to individual homes. Middle-mile networks with fiber cables that string down major roadways, but ultimately never connect to individual homes and businesses are far less expensive than providing retail service. Google’s $300 installation fee is steep, but manageable with payments and even better when customers commit to a multi-year contract to waive it;
• Offer the services customers want. An incomplete cable television package can be a deal-breaker for many customers who demand certain sports or movie channels. Although younger customers may not care a bit about cable television service, they also may not be able to afford the $70 broadband-only price. Google will need to attract families, and most of them still subscribe to cable, satellite, or telco TV. They are also the most grounded customers, an attractive proposition for a company dealing with high infrastructure expenses that will take years to pay off. It’s harder to cover your costs selling to a customer still in school and likely to move after they graduate in a few years;
• Sell customers on the hassle and inconvenience of throwing out the incumbent provider in favor of fiber, which will require considerable rewiring. It is one thing to express dissatisfaction with the local cable or phone company, it is another to take a day off from work to return old equipment and have unfamiliar installers in your home to provision fiber service. Some don’t want the hassle or lost time, others won’t switch until they get around to cleaning their messy house or apartment before they invite Google inside;
• Deliver an excellent customer service experience. Google’s current level of support for its web-based services would never be tolerated by a paying broadband/cable customer. Google will have to learn as they go in Kansas City, but first impressions can mean a lot;
• Expansion to get economy of scale. It is highly likely Google Fiber is a marketplace experiment for the company, and one it will study for a long time before it decides where to go next. Google’s “beta” projects are legendary and long, and if their fiber experiment does prove successful (or at least potentially so), the company will need to expand it rapidly to enjoy the kinds of vendor discounts a super-player can negotiate.

Verizon FiOS is the largest fiber to the home network in the United States. Their “take rate” of customers willing to sign up for the service has not exactly put incumbent cable companies into bankruptcy, even with $300-500 reward debit rebate cards and ultra-cheap introductory rates. Motivating subscribers to switch has never been as successful as theory might suggest. But Verizon has also shown other providers they can hard-negotiate significant discounts on hardware and equipment, and price cutting sessions have become ruthless.

At least Google has set its targets at reasonable levels. Only between 5-25% of eligible families have to commit to signing up for service in each “fiberhood” for Google to proceed with service rollout in that immediate area. That’s a realistic target with all of the factors necessary to deem the project a success.