The economic planning agency of the People’s Republic of China says it suspects the country’s two dominant telecommunications companies — China Telecom and China Unicom — have created a cozy duopoly between themselves and are overcharging consumers for broadband Internet access.  That’s a fact of life many Americans and Canadians are also familiar with, but in China, regulators are preparing to do something about it.

The National Development and Reform Commission is launching a comprehensive investigation in response to a torrent of complaints from customers that both companies are charging high prices for Internet access and delivering slow speeds.

“With such a dominant position in the market they practice price discrimination, raising prices for companies that are competing with them while giving discounted prices to non-competitors,”  said Li Qing, deputy director of the price supervision and anti-monopoly department of the NDRC.

Although some large Chinese cities now have access to broadband service at speeds far faster than what American and Canadian consumers can purchase, the Chinese government agency tasked with ensuring compliance of the country’s anti-monopoly laws reports most Chinese consumers buy slow speed, high-priced DSL.

China still follows a Communist political philosophy, but has entertained capitalist free market reforms within the state-planned and managed economy.  Too often, the result has allowed state-owned enterprises to leverage their size and status to create unfettered oligopolies.  As government controls and oversight ease, marketplace abuses have become rampant, often at the consumer’s expense.  Government subsidies for the super-sized, state-owned companies have also made private sector competition more difficult.

The Xinhua News Agency notes the two dominant broadband companies in China control 90 percent of the marketplace.  China Telecom, the state-owned phone company, was directed in 2002 to open its network to private Internet Service Providers who can purchase Telecom’s wholesale broadband service and resell it to consumers.  But Telecom simply boosted prices for wholesale access, pricing many would-be players out of the market.  Some companies complained they would have to charge double or triple the rates China Telecom charges itself for the same level of service.

Liu Zheng, information director for business solutions at the research company Analysys International, told the Global Times that the probe may reduce costs for small operators and eventually benefit consumers.

“I don’t expect a reshuffle in the market,” Liu said. “Penalties won’t lead to decrease of their market share. It’s more of a warning to the two operators.”

Both companies are listed on the Hong Kong Stock Exchange and shortly after news of the investigation reached shareholders, both suffered heavy losses in share prices.

This ad was ruled misleading by an Australian judge because it buries the extra costs in the fine print.

One of Australia’s largest Internet Service Providers used misleading advertising to offer “unlimited broadband” for $29.99AU that hid the extra costs that came with the deal.

TPG Internet is well-known across Australia, and the company pitched its unlimited offer across newspapers, television, radio, and even movie theaters.  Consumers were offered unlimited Internet access — still a rarity in Australia — for just over $31US a month.  But when those interested phoned up TPG, they found the great deal had some significant costs:

1. An installation fee of $129.95AU.
2. Consumers had to purchase a home phone rental agreement for an additional $30 a month.

Australian consumer law mandates that providers disclose any up front, required costs to take advantage of a promotion, and TPG blatantly disregarded the law, the justice found.

Justice Murphy said the dominant message of TPG’s ads was that consumers would only pay $29.99 a month, not a substantial setup fee and phone line rental that doubled the price.

The Federal Court justice added that the desire for unlimited Internet service was so great, consumers were likely to sign up for unlimited plans even if their monthly usage was low enough to save money with a usage-limited plan.

“There is a tendency in some consumers to purchase the biggest, the best, or the highest quality product or service, seemingly regardless of whether that service is appropriate to their needs,” Murphy ruled.

The judge plans to meet with the offending ISP to discuss an appropriate penalty for the breach in advertising standards regulations.

Frontier Communications continues to lose access line customers at a rate of 8.5 percent overall, 9.8 percent in the former Verizon service areas they acquired more than a year ago.  The company’s third quarter results show lackluster performance as revenue declines of 30 percent impacted both their residential and business customer units.

Company officials spent most of the question and answer session responding to Wall Street concerns about revenue, spending, promotions, customer churn, the company’s pension fund, and the outright defection of Frontier FiOS TV customers away from the fiber network the phone company inherited from Verizon.

Mike McCormack of Nomura Securities suggest the weak figures should concern investors because it may show Frontier unable to compete effectively with cable companies, which also offer phone service.

Frontier CEO Maggie Wilderotter put her best face forward trying to promote the company’s successes, particularly bringing DSL broadband to former Verizon service areas:

“Our broadband expansion reached an additional 126,000 new homes in the acquired properties during the quarter, bringing our year-to-date total to 352,000 which is on track to reach our 2011 goal of increasing broadband availability to more than 400,000 additional homes. Broadband availability in the acquired properties is now 80%, a significant increase from the mid-60% range when we acquired them. As a result of our expansion and sales efforts, we had a very strong quarter for broadband growth, adding 16,900 total DSL subscribers, a 38% sequential increase from Q2. We also added 2,300 wireless data customers. This growth reflected the effectiveness of our local engagement model, as well as organic demand for broadband in both legacy and acquired properties.

“We have also largely completed our efforts to migrate middle mile congestion, which now gives us the ability to more effectively market higher speeds in markets that were already enabled.”

Frontier executives sought to portray West Virginia as their biggest success story.

Daniel J. McCarthy, Frontier’s chief operating officer and executive vice-president, claims Frontier’s installation of 12 integrated fiber rings throughout the state provides broadband capacity and integrated network capability beyond what is available anywhere else in the United States from a state-wide perspective.  McCarthy claims Frontier is on track to turn West Virginia from one of the least connected states in the nation to one of the most connected.

But Margaret Kings from MacArthur, W.V. says she’ll believe it when she sees it, and she hasn’t seen it yet.

“My extended family has experienced endless problems dealing with Frontier in this state, and I have relatives in the Panhandle to boot,” Kings says. “We have collectively won more than $300 in service credits for out of service broadband and phone service, slow speeds when it rains, and missed appointments, billing errors, sneaky charges, and contract disputes.”

Kings’ immediate family left Frontier for Suddenlink more than a year ago when she moved.

“Why pay Frontier more for phone service and 1.7Mbps broadband when I can pay Suddenlink less for their phone service and 10Mbps Internet access,” she asks.

Frontier hopes to win back former customers with new broadband services, such as their newly-introduced “Second Connect” service, which delivers a second DSL line for existing broadband homes for what the company claims is $14.99 a month.  Frontier says a few thousand customers have signed up for the service, which is now being pitched aggressively by Frontier’s call centers.

But some customers who have signed up for the service are accusing Frontier of billing fraud for wildly misleading customers about the true cost of the service.

The $14.99 price tag Frontier advertises omits modem rental fees, taxes, surcharges, and other fees customers first discover on their monthly bill.

Chris Photoni discovered, after five calls and a combined two hours on hold, the true out-the-door price for Frontier Second Connect is actually $48 for him.  The Broadband Reports reader elaborates:

Don’t waste your time. Even after the ‘corrections’ the Second Connect line cost around $48. I say ‘around,’ [because] I haven’t met a staff member yet that could correctly calculate tax. How convenient for you Frontier. Their computer system can calculate it for your bill, but is unable to calculate it when inquiring about the service.

The new ‘taxes’ come to $27.64!

Frontier is one of the worst phone companies. They have terrible customer service, and the wait times usually seem to be 20-30 minutes per call. Most issues take at least THREE calls to resolve. I’ve actually have been on hold for 25 minutes as I’m writing this.

Kings said she wouldn’t have bothered inquiring about Second Connect in the first place.

“Let me understand this,” she writes. “The same phone company that offers 1.7Mbps to my house wants another $15 a month to ‘double my speed?’  I could pay $100 a month to Frontier for 3Mbps broadband along with my phone line or pay Suddenlink $100 for 10Mbps broadband, phone and cable-TV service.”

Other highlights from the conference call:

• Frontier is getting into the home security business in a two state trial with ADT and Protection 1.  Customers will be strongly encouraged to bundle the home security service with other telecommunications products to hold them in contracts and provide discounts up to 15 percent;
• Frontier will begin to resell AT&T wireless voice and data services in bundles with existing products. Frontier plans to trial this service during the first half of 2012 before expanding it nationally.  This service is only going to be available to bundled service customers.  Why customers wouldn’t pursue an agreement with AT&T themselves, without the phone company’s involvement, isn’t well-explained;
• The company plans no significant high-value promotional offers for the 4th quarter.  They didn’t pitch any during the 3rd quarter either.  Customers with pre-existing promotions, including “free satellite TV for 2011” or “six months of free DSL” will find their bills rising considerably as those promotions expire in the next few months;
• Frontier’s pension plan is not in the best shape.  The company had to contribute $58 million of real estate to the plan fund to manage investment losses for the year;
• Frontier’s $500 FiOS installation fee has effectively kept new customers away from the fiber network.  Although the company claims it wants to maintain support for FiOS, video customers have left in droves and a smaller number of broadband customers have left as well, primarily for Comcast;
• Frontier plans to continue investment in its middle mile network to handle broadband traffic growth in 2012 and 2013.

Hurricane fast it isn't.

More than three and half million Americans are still paying AOL around $17.50 a month for painfully slow dial-up Internet access.

Long declared irrelevant by the technology elite, AOL continues to plod along with millions of customers more than a decade after the company stopped subsidizing the U.S. Postal Service with millions of sign-up disks mailed endlessly to American homes.

Among AOL’s holdout subscribers are the 7 percent of Americans who still believe dial-up is their best option.  Twenty percent of those surveyed by Pew Research said their commitment to dial-up was as sacred as their marriage vows, and nothing would get them to change.  But for most, the only things keeping them from throwing AOL under the bus are:

• The cost: Almost one-third of those surveyed cited the high cost of broadband as the primary reason for not signing up;
• Access: 17 percent are ready and willing, but their local providers are not.  Broadband is simply unavailable in many areas unserved by cable or deemed unprofitable by incumbent phone companies;
• Other Reasons: Almost 30% cited other reasons for not switching, with the most likely being they don’t know or understand their broadband options, they are getting free dial-up access and free is always good, or their local providers didn’t deliver reliable service.

AOL -is- still in business.  While it has been a long time since AOL’s glory years, when the company provided more than 26 million Americans their Internet access, the company still counts today’s 3.5 million users a win.  That may be true for those who don’t need more than basic “You’ve got mail!” service or those suffering from today’s difficult economy.  But cable operators and phone companies do offer price-sensitive dial-up customers a faster alternative.  It’s too bad they rarely bother to market it.

So-called “light user” plans that offer 640kbps-1.2Mbps speeds — much faster than dial-up but hardly “broadband” — are available for $15-26 a month.  For someone paying AOL $17.50, some of these services are more expensive, but probably still within reach when compared to the traditional $45 standard broadband account companies do advertise.  But too often, these budget plans are the best secret in town, under-marketed because of a fear existing broadband customers might seek savings by downgrading traditional (and more profitable) broadband service.

Now selling for the "go away" price of $500 for installation.

Frontier Communications has proven it can successfully herd customers off the award-winning advanced fiber network it inherited from Verizon Communications just by increasingly gouging customers until they call and cancel.

The phone company reports success in ridding itself of 9,900 FiOS TV customers in the third quarter alone, and 3,100 FiOS Internet customers left with them in Indiana and Oregon.

Frontier CEO Maggie Wilderotter and other company executives made it known last spring that FiOS fiber optics was the unwanted stepchild best left forgotten when telling investors the company considered the fiber network unprofitable.  The company has since taken to hike rates and raised the price for service installation to as much as $500.  The combined increases have made the cable competition — Comcast — blush and look downright cheap by comparison.

Where did Frontier’s customers go?  Several left for Comcast, but others were persuaded to switch to an aggressively-priced satellite TV promotion, at least until it expires.  Frontier added 12,200 satellite subscriptions nationwide last quarter and 16,200 new DSL customers, many in ex-Verizon service areas that currently have no other choice for broadband.