Home » Consumer News » Recent Articles:

Frontier’s Acquisition of Verizon Landline/FiOS Properties in Calif., Tex., and Fla. Called “Insane”

Phillip Dampier February 5, 2015 Competition, Consumer News, Frontier, Net Neutrality, Public Policy & Gov't, Rural Broadband, Verizon 3 Comments

Frontier Communications today announced a $10.54 billion all-cash acquisition of Verizon’s wired networks, including landline and FiOS properties, in the states of Florida, California, and Texas.

Frontier will acquire Verizon’s wireline operations that offer services to residential, commercial and wholesale customers numbering 3.7 million voice connections, 2.2 million broadband connections, and 1.2 million FiOS video connections. The acquired territory is 54 percent served by FiOS fiber to the home service.

frontier expanded improvement

“This transaction marks a natural evolution for our company and leverages our proven skills and established track record from previous integrations,” said Maggie Wilderotter, Frontier Communications chairman and chief executive officer. “These properties are a great fit for Frontier and will strengthen our presence in competitive suburban markets and accelerate our recent market share gains. We look forward to realizing the benefits this transaction will bring to our shareholders, customers and employees.”

Dan McCarthy, Frontier’s president and chief operating officer, commented, “This transaction is an exciting opportunity for Frontier. We are well-positioned to maximize value for our shareholders and create a great experience for new customers. We have four FiOS markets today from our 2010 transaction with Verizon, and a high level of familiarity with the systems underlying these properties. We plan to flash-cut convert these properties to Frontier’s systems as we did in states including West Virginia and Connecticut.”

frontierBut Frontier’s “flash cut” conversions in West Virginia and Connecticut led to months of serious service and billing problems leading to two state-level investigations into Frontier’s performance. Problems are still ongoing in parts of Connecticut several months after Frontier transferred Connecticut territories from AT&T. Customers in West Virginia continue to criticize Frontier Communications for its underwhelming broadband performance.

Saibus Research, a Wall Street analyst, said they were “stunned” Frontier was repeating the same mistake it made back in 2010 when it acquired other former GTE service areas from Verizon.

“We remembered that its $8.7 billion wireline purchase in 2010 did not work out so well for it,” wrote the analyst. “When we consider that Frontier’s share price declined by nearly 60% from 2010-2012 after the deal closed before recovering those losses since 2012, we were shocked that Frontier’s share price increased by 10.6% in response to its announcement that it was buying assets from Verizon. Frontier’s pro forma revenue has declined by 30% since 2009, its residential consumer base declined by 33%, its operating income declined by 34% and its dividend declined by 60% since then.”

“Albert Einstein said that insanity is doing the same thing over again and expecting a different result and we think that Frontier’s CEO Maggie Wilderotter has come down with a serious case of insanity for her willingness to buy whatever Verizon is selling,” said Saibus Research. “As such, we think income-oriented telecom investors should consider accumulating shares of Verizon, and selling or shorting Frontier.”

Frontier will accumulate billions in new debt to fund the transaction, bad news for legacy Frontier customers still served by the company’s copper wire networks. Frontier hoped to realize $500 million in cost reductions from its 2010 acquisition of Verizon territories in the Pacific Northwest, West Virginia, and several midwestern states. Instead of savings, it ended up spending millions to rehabilitate deteriorating landlines Verizon underinvested in for years. The new unsecured debt load will likely cut into available funds to upgrade older networks, particularly in the northeast and inside New York, Ohio and Pennsylvania.

Frontier will get marginal improvements in programming costs from the greater volume discounts its larger customer base qualifies to receive. But outside of Connecticut (Frontier U-verse) and Washington, Oregon, Indiana and South Carolina (Frontier FiOS), the rest of Frontier’s customers will continue to be offered Dish Network satellite service and various flavors of DSL.

If approved by regulators, the transaction will be finalized in 2016.

Wall Street Turning Against Comcast-Time Warner Merger: “We Believe It Will Be Blocked”

Phillip Dampier February 4, 2015 Broadband Speed, Comcast/Xfinity, Competition, Consumer News, Data Caps, Net Neutrality, Public Policy & Gov't 1 Comment
Greenfield

Greenfield

An important Wall Street analyst has publicly written what many have thought offline for the past six months — the chances of regulators approving a merger of Comcast and Time Warner Cable are growing less and less each day that passes.

Rich Greenfield from BTIG Research has grown increasingly pessimistic about the odds of Comcast winning approval of its effort to buy Time Warner Cable.

Despite the unified view from the executive suites of both cable companies that the merger is a done-deal just waiting for pro forma paperwork to get handled by the FCC and Department of Justice, Greenfield has seen enough evidence to declare “the tide has turned against the cable monopoly in the past 12 months,” and now places the odds of a merger approval at 30 percent or less.

“Since we realized the inevitability of Title II regulation of broadband in December 2014, we have grown increasingly concerned that Comcast and Time Warner Cable will not be allowed to merge,” Greenfield wrote.

The claim from both cable companies that since Comcast and Time Warner Cable do not directly compete with each other, there in no basis on which the government could block the transaction, may become a moot point.

There are three factors that Greenfield believes will likely deliver a death-blow to the deal:

  • Monopsony Power
  • Broadband Market Share & Control
  • Aftershocks from the Net Neutrality Debate

btigMonopsony power is wielded when one very large buyer of a product or service becomes so important to the seller, it can dictate its own terms and win deals that no other competitor can secure for itself.

Comcast is already the nation’s largest cable operator. Time Warner Cable is second largest. One would have to combine most of the rest of the nation’s cable companies to create a force equally important to cable programming networks.

As Stop the Cap! testified last summer before the Public Service Commission in New York, allowing a merger of Comcast and Time Warner Cable would secure the combined cable company volume discounts on cable programming that no other competitor could negotiate for itself. That would deter competition by preventing start-ups from entering the cable television marketplace because they would be at a severe disadvantage with higher wholesale programming expenses that would probably make their retail prices uncompetitive.

Even worse, large national cable programming distributors could dictate terms on what kinds of programming was available.

comcastbuy_400_241The FCC recognized the danger of monopsony market power and in the 1990s set a 30% maximum market share limit on the number of video customers one company could control nationally. That number was set slightly above the national market share held by the largest cable company at the time — first known as TCI, then AT&T Broadband, and today Comcast. Comcast sued the FCC claiming the cap was unconstitutional and won twice – first in 2001 when a federal court dismissed the rule as arbitrary and again in 2009 when it threw out the FCC’s revised effort.

Comcast itself recognized the 30% cap as an important bellwether for regulators watching the concentration of market power through mergers and acquisitions. When it agreed to buy Time Warner Cable, it volunteered to spin-off enough customers of the combined company to stay under the 30% (now voluntary) cap.

Greenfield argues the importance of concentration in the video programming marketplace has been overtaken by concerns about broadband.

“While Comcast tried to steer the government to evaluate the Time Warner deal on the old paradigm of video subscriber share, it is increasingly clear that DOJ and FCC approval/denial will come down to how they view the competitive landscape of broadband and whether greater broadband market share serves the public interest,” Greenfield wrote.

comcast whoppersIf the Comcast merger deal ultimately fails, the company may have only itself to blame.

Last year Comcast faced intense scrutiny over its interconnection agreements with companies that handle traffic for large content producers like Netflix. Comcast customers faced a deterioration in Netflix streaming quality after Comcast refused to upgrade certain connections to keep up with growing demand. Netflix was eventually forced to establish a direct paid connection agreement with the cable operator, despite the fact Netflix offers cable operators free equipment and connections for just that purpose.

That event poured gasoline on the smoldering debate over Net Neutrality and helped fuel support for a strong Open Internet policy that would give the FCC authority to check connection agreements and ban paid online fast lanes.

Seeing how Comcast affected broadband service for millions of subscribers across dozens of states could shift the debate away from any local impacts of the merger and refocus it on how many broadband customers across the country a single company should manage.

Comcast will control 50% or more of the national broadband market when applying the FCC’s newly defined definition of broadband: 25/3Mbps.

That rings antitrust and anticompetitive alarm bells for any regulator.

Greenfield notes that changing the definition of broadband will dramatically reshape market share. It will nearly eliminate DSL as a suitable competitor and leave Americans with a choice between cable broadband and Verizon FiOS, community owned fiber networks, Google, and a small part of AT&T’s U-verse footprint. If those competitors don’t exist in your community, you will have no choice at all.

cap comcastEven Comcast admits cable broadband enjoys a near-monopoly at 25/3Mbps speeds. controlling 89.7% of the market as of December 2013.

“If regulators take the ‘national’ approach to evaluating broadband competition, the FCC’s redefinition would appear to put the deal in even greater jeopardy,” Greenfield writes. “Beyond the market share of existing subscribers, the larger issue is availability.  Whether or not a current subscriber takes 25/3Mbps or better, the far more relevant question is if a consumer wanted that level of speed do they have a choice beyond their local cable operator?  As of year-end 2013, Comcast’s own filing illustrates that in 63% of their footprint post-Time Warner Cable, they were the only consumer choice for 25 Mbps broadband (we suspect even higher now).”

“With Comcast’s scale both before and especially after the Time Warner Cable transaction, they become ‘the only way’ for a majority of Americans to receive content/programming that requires a robust broadband connection,” Greenfield warned.

Even worse, to protect its video business, a super-sized Comcast will be tempted to introduce usage caps that will deliver a built-in advantage to its own services.

“Over time, the fear is that Comcast will favor its own IP-delivered video services versus third parties, similar to how it is able to offer Comcast IP-based video services as a ‘managed’ service that does not count against bandwidth caps, while third-party video services that look similar count against bandwidth caps,” he wrote. “The natural inclination will be for [Comcast] to protect their business (think usage based caps that only apply to outsiders, peering/interconnection fees, etc.)”

“With the overlay of the populist uprising driving government policy, it is hard to imagine how regulators could approve the Comcast Time Warner Cable transaction at this point,” Greenfield concludes. “Comcast continues to try to get the government to look to the past to get its deal approved.  But the framework is about not only what is current, but what the future will look like – especially in a rapidly changing broadband world.”

Source: Cox Preparing to Expand Gigabit Service in Phoenix/Omaha, Boost Budget Broadband Speeds

Phillip Dampier February 3, 2015 Broadband Speed, Competition, Consumer News, Cox, Data Caps Comments Off on Source: Cox Preparing to Expand Gigabit Service in Phoenix/Omaha, Boost Budget Broadband Speeds

COX_RES_RGBCox Communications is planning to expand its gigabit residential broadband service in Phoenix and Omaha and will be increasing the speeds of its cheapest Internet tiers to stay competitive with CenturyLink’s discounted DSL.

A source inside Cox told Broadband Reports the speed changes will begin later this month and will take about six weeks to reach all of Cox’s service areas across the country.

  • Starter Internet ($34.99 – 50GB usage cap), now offering 1Mbps/384kbps will increase to 5/1Mbps;
  • Essential Internet ($48.99 – 100GB usage cap), now 5/1Mbps will be increased to 15/2Mbps.

Cox also offers Internet Preferred ($66.99 – 250GB usage cap) offering 50/5Mbps and Internet Premier ($77.99 – 300GB usage cap) with 100/10Mbps. Some markets also offer Internet Ultimate ($99.95 – 400GB usage cap) with 150/20Mbps service.

The company’s gigabit plan, Gigablast, is being sold for $99 a month ($70 if bundled with cable television). It has a 1TB usage cap. For now, the service is delivered to a very limited number of homes (about 5,000) over special fiber connections serving primarily wealthy enclaves and new housing developments. The bulk of Cox’s gigabit service expansion this year is expected to cover about 150,000 homes where additional fiber service will be deployed. But most Cox customers will only see the fastest speeds made available in 2016 when DOCSIS 3.1 will allow Cox to use its existing coaxial cable infrastructure to deliver super fast speeds.

Cox customers who exceed their usage allowance are usually warned by letter and asked to upgrade to a higher tier of service. But Stop the Cap! readers who subscribe to Cox tell us the company usually backs off if you threaten to cancel service over the matter.

FCC Now Defines Minimum Broadband Speed at 25Mbps; Everything Less Is Now “Slowband”

Phillip Dampier February 3, 2015 Broadband Speed, Comcast/Xfinity, Consumer News, Public Policy & Gov't, Rural Broadband 1 Comment

speedThe Federal Communications Commission, over loud objections from America’s largest cable and phone companies, has raised the minimum speed necessary to qualify as “broadband” from 4/1Mbps to 25/3Mbps.

Broadband deployment in the United States – especially in rural areas – is failing to keep pace with today’s advanced, high-quality voice, data, graphics and video offerings, according to the 2015 Broadband Progress Report adopted by the Federal Communications Commission.

Reflecting advances in technology, market offerings by broadband providers and consumer demand, the FCC updated its broadband benchmark speeds to 25 megabits per second (Mbps) for downloads and 3 Mbps for uploads. The 4 Mbps/1 Mbps standard set in 2010 is dated and inadequate for evaluating whether advanced broadband is being deployed to all Americans in a timely way, the FCC found.

Wheeler

Wheeler

Using this updated service benchmark, the 2015 report finds that 55 million Americans – 17 percent of the population – lack access to advanced broadband. Moreover, a significant digital divide remains between urban and rural America: Over half of all rural Americans lack access to 25 Mbps/3 Mbps service.

“The FCC doesn’t just have a statutory obligation to report on the status of broadband deployment; we have a duty to take immediate action if we assess that the goal of deployment to all Americans is not being met,” said FCC chairman Thomas Wheeler. “And act we have.”

The 3-2 party line vote left the FCC’s two Republican commissioners Ajit Pay and Michael O’Rielly siding with the telecom industry.

Commissioner Pai even accused the FCC of aiding and abetting the Obama Administration’s larger plan to regulate the Internet.

“The ultimate goal is to seize new, virtually limitless authority to regulate the broadband marketplace,” Pai wrote in his dissent. “Under its interpretation of section 706 of the Telecommunications Act, the FCC can do that only by determining that broadband is not ‘being deployed to all Americans in a reasonable and timely fashion’ or, more colloquially, by ignoring the consistent progress in Internet connectivity that’s obvious to anyone with a digital connection and an analog pulse.”

Pai

Pai

Pai called the FCC decision “Kafkaesque,” claiming the agency’s recent activist approach on issues like broadband speed, Net Neutrality, and managing wireless spectrum to guarantee robust competition will result in cuts in broadband investment, raise the cost of deployment, and deter competition.

Pai believes the FCC is erecting barriers that will delay or even stop Verizon and AT&T’s plans to ditch rural landline service through a proposed transition to IP-based phone service in urban communities and wireless-only service in rural areas. He also complained about efforts by the FCC to regulate the Internet like a public utility, claiming “that is not what the American consumer wants or deserves.”

But Commissioner Jessica Rosenworcel countered maintaining the status quo and allowing the marketplace to set the agenda risks our digital future.

“I, for one, am tired of dreaming small; It’s time to dream big,” Rosenworcel said. “This is the country that put a man on the moon. We invented the Internet. We can do audacious things—if we set big goals. I think our new threshold should be 100Mbps. I think anything short of that shortchanges our children, our future, and our digital economy. I don’t think reaching a benchmark like this is easy—but nothing worthwhile ever is. Still, the history of technological innovation is rife with examples of the great depths of American known-how. It is time to put that know-how to work and use it to bring really big broadband everywhere.”

The FCC’s changed definition of what constitutes broadband could also have an impact on the current merger deal involving Comcast and Time Warner Cable now before the FCC and state regulators.

COMCAST-MILLIONAIREWith the new definition in place, Comcast’s monopoly control of broadband service becomes more clear as fewer phone companies are able to meet the minimum speed standard to qualify as broadband competitors. Comcast will now control about 50% of all broadband homes in the country, a percentage that could reach even higher if Comcast revamps Time Warner Cable’s broadband tiers.

The report also highlights a growing digital divide on Tribal lands, in U.S. territories, and in schools. At least two-thirds of residents lack access to broadband on Native American reservations and in U.S. possessions including Puerto Rico, Guam, the Northern Marianas, U. S. Virgin Islands and American Samoa. More than one-third of all schools in the United States lack access to fiber broadband connections.

Key findings include the following:

  • 17 percent of all Americans (55 million people) lack access to 25/3 Mbps service;
  • 53 percent of rural Americans (22 million people) lack access to 25/3 Mbps;
  • By contrast, only 8 percent of urban Americans lack access to 25/3 Mbps broadband;
  • Rural America continues to be underserved at all speeds: 20 percent lack access even to service at 4/1 Mbps, down only 1 percent from 2011, and 31 percent lack access to 10/1 Mbps, down only 4 percent from 2011;
  • 63 percent of Americans living on Tribal lands (2.5 million people) lack access to 25/3 Mbps broadband;
  • 85 percent living in rural areas of Tribal lands (1.7 million people) lack access;
  • 63 percent of Americans living in U.S. territories (2.6 million people) lack access to 25/3Mbps broadband;
  • 79 percent of those living in rural territorial areas (880,000 people) lack access;
  • Overall, the gap in availability of broadband at 25/3Mbps closed by only 3 percentage points last year, from 20% lacking access in 2012 to 17% in 2013.

Verizon Preparing to Sell $15 Billion in Cell Tower/Wired Assets – Tex., Calif., and Fla., Landlines Likely for Sale

Phillip Dampier February 3, 2015 Consumer News, Verizon 2 Comments
Verizon's landline coverage map.

Verizon’s landline coverage map.

Verizon is working on a sale of its cellphone towers and a portion of its landline assets in a series of deals that could fetch the company more than $15 billion, according to a breaking report in the Wall Street Journal.

The company is looking to raise cash to pay down debt incurred when it bought out Vodafone’s 45% share of its wireless unit and to cover $10.4 billion in wireless licenses the company just won in a government auction last week.

The most likely targets in a landline sale are Verizon territories outside of the northeast.

Verizon has already dumped its landline assets in Hawaii (sold to Hawaiian Telcom), northern New England (sold to FairPoint Communications), West Virginia and many smaller city and suburban territories acquired from GTE (all sold to Frontier).

In its 2010 sale to Frontier, Verizon retained assets in the Tampa-St. Petersburg area, central Texas and Southern California regions. But now all three states are prime targets for a sale. Likely buyers include Frontier Communications, which already has a major presence in Florida including a national call center, and CenturyLink, which acquired Qwest and has a large service area in the southwest and western United States. Frontier remains the most likely buyer, having aggressively expanded its landline network in legacy AT&T (Connecticut) and Verizon service areas.

Verizon CEO Lowell McAdam has shown little interest in maintaining Verizon’s wired assets or growing FiOS and has been willing to sell off major parts of Verizon’s landline network to continue prioritizing Verizon Wireless. McAdam led Verizon Wireless from 2006-2010, before being named CEO of Verizon Communications.

Verizon-logoHe foreshadowed the forthcoming landline sale in January when he told an investor conference he was willing to make significant cuts to Verizon’s wired networks.

“There are certain assets on the wireline side that we think would be better off in somebody else’s hands so we can focus our energy in a little bit more narrow geography,” he said at the time.

Verizon is also expected to follow AT&T’s lead in selling off much of its cell tower portfolio. It will lease access to the towers it sells.

Verizon maintains FiOS networks in Texas, California, and Florida, but that is not expected to deter the company from selling its landline assets. Frontier acquired Verizon FiOS properties in the 2010 sale in both the Pacific Northwest and Indiana. Those services operate under the Frontier FiOS banner today.

Search This Site:

Contributions:

Recent Comments:

Your Account:

Links:

Stop the Cap!