The days of the wireless phone subsidy are numbered with today’s announcement Verizon Wireless will end all smartphone subsidies and service contracts next week. It’s a path we’ve predicted at Stop the Cap! since at least 2013.

In an effort to “simplify” wireless pricing, Verizon Wireless is radically shaking up its wireless plans starting Aug. 13 — raising prices for its lightest users, ending the two-year phone contract, and requiring customers buy or finance their devices at the full retail price. Instead, customers will pay $650 up front for a phone like Apple’s iPhone 6, or finance it for around $27 a month for the next two years.

Phone plans are changing as well. Eliminated are “individual” and “family plans.” In their place, there is just one plan with four data options:

• Access Fee (includes unlimited voice/text): $20/mo per phone, $10/mo per tablet or portable hotspot, $5 for connected devices (eg. watches)
• Shareable Data Option: $30 (Small – 1GB), $45 (Medium – 3GB), $60 (Large – 6GB), or $80 (X-Large – 12GB)  —  Overlimit Fee is $15/GB

Average and heavier users will save a few dollars with Verizon’s new plans. The “Medium” plan is $5 less than Verizon used to charge and the “Large” plan is $10 less. You get 2GB of extra data for your $80 comparing Verizon’s older plan and its newer one. The benefits seem less compelling when you realize just a few years ago Verizon charged $30 for unlimited use data plans.

Budget customers will find Verizon’s new plans the least attractive. Customers with 6GB or less data plans used to pay a $15 access fee. Now they will pay $5 more per phone. Those who want Verizon’s cheapest 500MB plan for $20 are out of luck. That plan is being dropped, according to Verizon, because customers were confused over the difference between MB and GB. Customers now on that low-end plan will probably be able to keep it, but may eventually have to choose a “Small” data plan for $10 more per month. Budget customers used to pay around $35 a month. Now they will pay at least $50.

Heavy data users may be concerned Verizon’s top data plan tops out at 12GB. The company plans to privately offer bigger data buckets to customers, but only if they visit a Verizon Wireless store to discuss their needs.

Current customers still on contract will not see any changes immediately. Verizon will continue to charge the $40 a month access fee for contract customers until the contract expires, after which the fee will drop to $20. Customers on More Everything plans can stick with their existing plans for now, as well as add lines. There are no plans to force customers to change service plans at this point.

Expect AT&T to take a similar path towards the elimination of subsidized devices. Because customers will likely finance their $600+ smartphones, it isn’t likely consumers will face dramatically changed pricing as a result of Verizon’s plan changes. But device manufacturers can no longer get away with promoting their phones at a $200 price point. In fact, the sticker shock of the retail price of smartphones may eventually force manufacturers to produce more affordable phones for the marketplace.

“Must-have” ESPN is not as must-have as the pay television business once believed as the costly basic cable network reported more subscriber losses as consumers cut the cord.

Despite a claim from ESPN owner Walt Disney that the sports network is watched in 83 percent of U.S. cable households, the number of cable customers buying a television package that includes ESPN is in decline. Subscriber disinterest and the growing unaffordability of cable television are the two primary reasons even the “untouchable” cable networks are starting to see the effect of cord cutting.

ESPN is the most expensive basic cable channel, costing every pay television customer at least $6.61 a month in 2015 according to SNL Kagan estimates. That price increases by about 8% a year, needed to keep up with ever-increasing sports rights fees networks pay to televise events. With subscribers covering the bill, ESPN has been able to outbid traditional network television and other cable networks to win the rights to more prestigious events. But since broadcast networks now collect money from cable subscribers as well, bidding wars have erupted that have made sports teams and league organizations very rich, thanks to cable customers that pay for ESPN and other networks whether they watch them or not.

ESPN sports programming costs

But those days may soon be over, as customers discover cheaper “skinny bundles” of cable television packages or sign up for online video services that avoid costly sports networks. That was not possible just a few years ago. ESPN’s contract mandates its network be available on the standard basic tier — no optional sports tiers allowed, if a cable system wishes to carry it. To collect even more from cable subscribers, ESPN also effectively forces cable systems to carry one or more of their ancillary networks, which include ESPN2, ESPN3, ESPN+, ESPN Latin America, ESPNews, ESPNU, ESPN Classic, ESPN Deportes, Longhorn Network, and the SEC Network. That puts even more money in ESPN’s pocket.

The network has been a safe bet for investors for years, at least until this week when the company lowered its expectations for cable operating income growth from 2013-2016. Instead of growth between 7-9 percent, ESPN is now predicting only 4-6 percent. Although some might see that as a modest adjustment, Wall Street didn’t think so and Disney shares tanked 8.4% Wednesday. That was nothing compared to what happened today.

“Media stocks are getting slaughtered,” Aaron Clark, a portfolio manager at GW&K Investment Management, which manages $25 billion in assets, told the Wall Street Journal. “It’s been the long-running fear that we would eventually see cord-cutting. Everyone thought it would be a slow-moving train wreck, but Disney’s comment woke people up.”

Viacom, Inc. dropped 12 percent after it reported declines in second-quarter profits and revenue, which investors blamed on cord-cutting. Disney fell another 2.5% today and 21st Century Fox lost 6% after lowering its expectations for full-year profit for fiscal 2016. Cord-cutting, again.

To say ESPN is important to Disney would be an understatement. At least 75% of Disney’s cable network revenue comes from ESPN and estimates suggest 25% of Disney’s entire operating income in 2015 comes from the sports cable network. As ESPN faces customer defections and pressure on revenue growth, their costs are still rising. Sports rights at ESPN rose by 13% in 2014 and 19% in 2015, according to MoffettNathanson. If ESPN continues to lose customers and is forced to become more conservative about future price increases, parent company Walt Disney will feel the heat.

When New is Not Improved

It is disappointing to see a company priding itself on independently measuring America’s broadband performance throw accuracy to the wind and start handing out misleading awards for America’s top broadband providers that their own speed tests often disprove.

Municipal and independently owned Internet providers have relied on Ookla to prove to the world they can offer superior broadband service over what is on offer from the local cable and phone company. Net Index was a useful, independent resource to track broadband speeds and trends based on millions of consumer-run Internet speed and health tests. A provider claiming “up to 10Mbps” service could quickly and easily be verified as a truth-teller or teller of tall tales. As of today, that is no longer as easy to verify:

Ookla Net Index has been discontinued

Ookla is devoted to providing world-class products and services. Sometimes that means saying goodbye to old sites, like Net Index, and hello to new ones…

Those “new and improved” products include:

Sandra Hartman has been a Verizon DSL customer for more than 10 years. She doesn’t have much of a choice.

In her small town outside of Binghamton, N.Y., Verizon is her only option. Time Warner Cable doesn’t come close to providing service in this part of upstate New York and cell service is abominable, even with Verizon and AT&T.

“I live in an area just large enough to have given Verizon the justification to offer DSL, but 3Mbps service is about all we have ever been able to get, but it has been better than nothing,” Hartman tells Stop the Cap!

Hartman signed up for a package that included $19.99 DSL with her landline a decade ago, a price that went up $10 after the sign-up promotion ended but has remained stable for years.

“Then Verizon decided to raise the price without improving the service,” Hartman says.

In fact, the price hikes have been fast and furious lately, beginning last fall when Hartman received this notice Verizon was raising the price to $34.99 a month:

Dear Valued Verizon Customer,

We realize you have choices when it comes to choosing your Broadband provider, and would like to take this opportunity to say thank you for being a loyal customer and for choosing Verizon.

In order to continue to bring you quality service and product innovation, at times we need to raise our rates. Your monthly rate will increase by $5.00 and will be reflected on your bill within the next two months. This rate will remain in effect for one year. If you currently have any credits or discounts on your account, these will remain in effect until their original expiration date.

If you would like to review your account to see if you may qualify for additional savings or if you have any questions, please log on to verizon.com/myverizon or give us a call at 1.888.213.9932.

We value you as a customer and look forward to continuing to serve you.

Sincerely,
Your Verizon Team

“What choices?,” Hartman wondered. “We have no choice and after the rate increase, we’ve seen no improvement in the quality of the service or any evidence of Verizon’s ‘product innovation.’ It’s the same DSL service we’ve had for a decade — we’re just paying $60 more a year for the same thing.”

In the unusual case of Pennsylvania, Verizon is required by law to offer access to broadband to any customer that wants the service by the end of 2015. This map shows Verizon’s service areas in green, 96% of which now have access to at least DSL service. That same requirement is absent in most states.

To save money, Hartman downgraded her Verizon landline to the cheapest possible plan and switched to Voice over IP provider Ooma, which works over her DSL line. But Verizon is now back for more with another rate increase notice — this time looking for another $7 a month starting this fall, putting the price of 3Mbps DSL up to $41.99 before fees, surcharges, and taxes.

“I called Verizon and they told me rates are reviewed ‘for competitive reasons’ and reflect the cost of providing the service, which is apparently now up another $84 a year,” she said. “Verizon’s equipment, sitting in the elements on a phone pole or humming away in their phone office actually appreciates in value it seems. I wish my 10-year-old laptop was worth more today than the day I bought it, but my laptop wasn’t made by Verizon.”

Hartman complained to customer service the successive rate increases do not seem to be spent on any improvements. In fact, it seems Verizon is no longer accepting new DSL customers in her area.

“A real estate agent friend of mine told me selling homes in this town has gotten difficult because Verizon will simply not sell DSL to new customers here, claiming they have no capacity,” Hartman said. “If you can’t get DSL from Verizon, you don’t have broadband service, it’s as simple as that.”

DSL availability from Verizon is not just a problem for Hartman. Several central offices in upstate New York no longer accept new Verizon DSL customers, claiming the service is at capacity. Some customers in the Finger Lakes region keep DSL service year-round at their seasonal cottages, fearing if they suspend service for the winter they will not get it back next spring. Time Warner Cable offers service to many lakefront properties, but those who own cabins and homes away from the lakeshore usually cannot get cable service and depend on Verizon for service.

The Verizon DSL forum on DSL Reports has more examples of customers that discover their entire exchange is no longer qualified to get Verizon DSL. One such example is in Purcellville, Va., west of Washington, D.C., a quick drive to the Maryland and West Virginia borders.

“DSL suddenly has disappeared from my wire center entirely – regardless if your 10 feet from the CO or out of a remote terminal with a DSLAM,” wrote Zenit. “Even the industrial section of town which has its own fiber fed DSL equipped RT shows negative for service, and there are plenty of vacant units there.”

Similar stories were reported in communities like Pittsfield, Mass. and Netcong, N.J.

Customers have been able to push back against Verizon’s price increases, especially in competitive areas. Some customers are switched to lower cost bundled packages while others are given straight service credits that lower a customer’s bill. Customers need only ask Verizon for a better price and let them know you are shopping around for a better deal.

After years of complaints that Comcast’s discount Internet program for the poor came with a byzantine application process and was too limited to attract enough qualifying customers, the cable company is making it easier to sign up.

Comcast today announced Internet Essentials was getting a back-to-school makeover, with a doubling of download speed (10/1Mbps) and a free Wi-Fi router for new and existing customers.

Comcast’s application procedure for the service has also been streamlined.

Cohen

“Now, if a child attends a school where at least 50 percent of the students are eligible to participate in the National School Lunch Program, all student families in that school are automatically eligible for Internet Essentials,” David Cohen, Comcast’ executive vice president and chief diversity officer wrote in a blog post.

Internet Essentials offers discounted Internet access for $9.95 a month as well as budget-priced computer equipment priced below $150 and free training classes to use both.

But Comcast has still not changed two provisions that effectively lock many income-challenged residents out of its program:

• Participants may not have any outstanding debt to Comcast less than a year old. Those with debt more than a year old may qualify, but will likely have to arrange a payment plan to pay off the debt;
• Participants must not be current Comcast Internet subscribers and will have to cancel their current broadband service for at least 90 days before they can qualify for Internet Essentials.

The latter requirement is designed to protect Comcast from losing revenue earned from poor customers who manage to scrape together enough to pay for Comcast’s regular-priced Internet. Comcast has remained defensive about the limitations of its Internet Essentials program, offered as a condition for approval of its merger with NBCUniversal. Comcast publishes glowing testimonials about the merits of the project written by third party groups without disclosing Comcast financially supports most, if not all the groups providing the testimonials.

Qualified customers can apply online to get the process started. Current customers can also request and receive free delivery of their Wi-Fi router from the same website.

Comcast also announced it will be testing a pilot program offering discounted Internet service for low-income senior citizens, starting in Palm Beach County, Fla., with other trial cities to be announced later. Details about the senior program were not yet available. Appearing with Comcast to announce the program was a representative from the Urban League, which also receives extensive financial support from Comcast and supported its merger effort with Time Warner Cable.