Frontier Communications customers may be owed refunds for their Internet service because, a new lawsuit alleges, the company deceptively billed customers fees the company is not entitled to receive.

Four Frontier customers — three in Minnesota and one in New York — are suing the company for add-on charges the company claims are required by the government, but in fact are pocketed by the phone company.

The lawsuit claims Frontier is guilty of fraud, breach of contract, deceptive practices, false advertising and violations of the Federal Communications Act and the Internet Tax Freedom Act.

The plaintiffs claim broadband customers are being billed for certain state and federal taxes, 911 surcharges, and Universal Service Fund fees, even though they don’t apply to broadband service.

“It is merely a junk fee that Frontier imposes on customers,” the lawsuit says.  “The fee bears no relationship to any governmentally-imposed fee or regulation, and is nothing other than an effort by Frontier to increase prices above the advertised price.”

Adding fuel to the fire, Frontier recently imposed a new “HSI Surcharge” on broadband customers, and as Stop the Cap! reported earlier, some company representatives have claimed that fee is government mandated as well.

In fact, federal law bans most taxes on Internet service under the Internet Tax Freedom Act.  Since broadband customers cannot dial 911 from a DSL modem, 911 surcharges should not apply either.  USF fees only apply to voice telephone service.  Frontier, the suit alleges, levies all of these fees on the broadband portion of customer bills.

Frontier has more than 7 million customers nationwide, although the company does not disclose how many of them purchase broadband service.  If the lawsuit achieves class action status, Frontier could be required to return the ill-gotten gains to customers if a judge agrees they were wrongly collected.  That could cost the company millions in retroactive refunds.

Bell’s Fibe customers in Ontario noticed something unusual in the company’s latest newspaper ads luring potential new signups for the company’s fiber-to-the-neighborhood service.

Subscribe to Bell Fibe™ Internet and get way more than the cable company for a lot less.

Get super-fast download speeds of up to 25 Mbps – more than double the 12 Mbps on cable.
Watch way more stuff online with 125 GB of usage – more than double the 60 GB on cable.
Plus, share pics and videos more than 12x faster than cable, with upload speeds of up to 7 Mbps.
All this for less than the regular rate you’re paying with cable’s 12 Mbps service.¹

See full offer details.¹²

Offer ends October 31, 2011. Available to residential customers in select areas of Rogers’ footprint in Ontario where technology permits. Modem rental required; one-time modem rental fee waived for new customers. Usage 125 GB/month; $1.00/additional GB. Subject to change without notice and not combinable with any other offers. Taxes extra. Other conditions apply.

¹Current as of Sept 29, 2011. Based on customer’s subscription to Rogers’ Express Internet package at the regular rate of $46.99/mo., prior to August 4, 2011.

²Available to new customers who subscribe to Fibe 25 Internet and at least one other select service in the Bundle; see bell.ca/bellbundle. Promotional $33.48 monthly price: $76.95 monthly price, less the $5 Bundle discount, less the monthly credit of $38.47 applicable for months 1-12. Total monthly price after 12 months is $71.95 in the Bundle.

75GB for existing customers, 125GB for new ones.

Setting aside the fact Bell’s package costs $71.95 a month after the first year, compared with Rogers’ regular everyday price of $46.99, existing customers were surprised to learn Bell’s usage cap for new customers (located in select areas of Rogers’ competing footprint in Ontario) was 125GB per month.  That stood out, because existing customers currently live with a monthly cap of just 75GB per month.

That means new Bell customers, who happen to also have the choice of being served by Rogers Cable, evidently have a considerably less “congested” network that allows a more generous 125GB usage cap over nearby neighborhoods not served by Rogers, where things must be “much worse” to justify the current usage limit of 75GB per month.

Customers call it another example of providers subjectively setting usage limits not according to technical need, but competitive reality.

“If having separate rates by province wasn’t enough, now we have different rates based on the neighborhood,” shared one Toronto Bell customer. “I will need to call them to adjust this.”

Bell’s website provides conflicting information to existing customers over exactly what their usage cap is.  Despite the advertised 125GB cap promoted online, many existing customers are still finding 75GB to be their monthly limit.  Customers are getting some satisfaction calling Bell and threatening to cancel service over the discrepancy.  Don’t bother with the regular customer service representatives — readers report they can do nothing for you.  Instead, tell Bell you are canceling service, get transferred to the Customer Retentions Department, and then tell them you will stay if you get the new customer promotion that comes with the 125GB usage cap.  If you ask, Bell will often configure your account with the promotion noted above, which comes with the automatically more generous usage cap.

Stop the Cap! has always believed usage caps have nothing to do with the network congestion and “fair use” excuses providers like Bell have repeatedly argued.  They exist because market forces allow them to, and when competitors arrive with more generous allowances (or none at all), incumbent providers suddenly find enough capacity to be more generous with their customers.  At least some of them.

Crumpton

NAACP national board member and former Missouri Public Service Commission member Harold Crumpton believes that combining AT&T and T-Mobile will create 100,000 new jobs, despite the fact both companies have promoted “cost savings” from eliminating redundant services and winning “increased efficiencies.”

That’s code language for layoffs, and it has been that way with every telecommunications merger in the last decade.  But Crumpton prefers to deny reality in a guest opinion piece published today in the St. Louis Post-Dispatch:

Most mergers result in — and pay for themselves with — job losses and higher prices. Not this one.

If, to use the government antitrust lingo, there is a “relevant product market” for this merger, it would be “jobs” because jobs are the No. 1 product of the broadband factory. The AT&T and T-Mobile merger is structured as an engine of job creation — yielding 100,000 new jobs by delivering on President Obama’s call for a national high-speed broadband network. That’s far more jobs than would be lost because of AT&T and T-Mobile overlaps.

Ironically, AT&T announced the repatriation of 5,000 call center jobs and pledged not to terminate call center employees because of the merger. Two hours later, without warning to AT&T, the Justice Department filed its suit. Suffice to say that President Obama, our greatest champion of job creation, was not well-served that morning.

How will AT&T produce all these new jobs? By creating the first national next-generation high-speed (4G) mobile network. The merger is what will make the network possible, and it will do that by aggregating and redeploying spectrum T-Mobile can’t use for 4G. In this way, the network would reach 55 million more Americans than 4G currently reaches.

AT&T couldn’t have argued the case better.  Oh wait.  They have, in the company’s advocacy package mailed to the NAACP and dozens of other groups who receive the company’s financial support.  Those talking points inevitably end up in the guest editorials penned by Crumpton and others.

While the bloom is clearly off the rose of the AT&T/T-Mobile merger, thanks in part to consumer groups and the U.S. Department of Justice who filed a lawsuit to stop it, AT&T is still flailing about trying to find some way to get the deal done, if only to avoid the outrageous break-up fee self-imposed by the telecommunications giant if the deal falls apart.  AT&T’s promise to bring an end to the obnoxious practice of offshoring their customer support call centers — if the merger gets approved — has been compared with blackmail by some customers who have spent an hour or more negotiating with heavily accented customer support agents that companies like Discover Card routinely mock.

AT&T promises customers a solution to the "Peggy Problem" if their merger with T-Mobile gets approved.

It clearly wasn’t enough to move critics of the deal to reconsider — AT&T could voluntarily hire American workers who speak the language of their customers for the benefit of those customers with or without a merger with the fourth largest wireless carrier in the country.

Crumpton argues President Obama was not well served by the Justice Department.  Consumer groups argue T-Mobile and AT&T’s customers will not be well-served if this merger ever happens.

As Stop the Cap! has repeatedly argued, both AT&T and T-Mobile will construct 4G mobile broadband networks in all of the places where the economics to deploy those networks makes sense.  No more, no less, no matter if AT&T and T-Mobile are two companies or one.

Crumpton might as well have argued the merger would deliver 4G service to Sprint customers as well.  It’s the same disconnected logic.

Crumpton thinks AT&T’s high-priced, heavily-capped 4G network will somehow solve the pervasive problem of the digital divide — the millions of poor Americans who can’t afford AT&T’s prices.  Incredibly, Crumpton’s answer is to allow one of the most price-aggressive, innovative carriers in the country favored by many budget-conscious consumers to be snapped up by the lowest rated, if not most-hated wireless company in the country.

It just doesn’t make sense.  But it does make dollars… for the NAACP, which receives boatloads of corporate money from AT&T.  It’s no surprise the pretzel-twisted logic that drives merger advocates like Mr. Crumpton comes fact-free.  The money makes up for all that.

“The NAACP stands ready to work with the public and private sectors to ensure that every American has an equal opportunity to participate in and benefit from this awesome ‘broadband revolution,'” Crumpton writes.

We can only hope that is true.  The NAACP can get started by admitting publicly it receives substantial support from AT&T and it will either agree to remain neutral in corporate advocacy issues to avoid conflicts of interest, or return AT&T’s money.  After all, it sounds like they need it to build the digital divide-erasing 4G network Crumpton is purportedly so concerned about.

Sprint CEO Dan Hesse is now at risk of losing his job over decisions to increase spending to upgrade network performance and capacity.  In the last week, Sprint announced it will likely seek outside financing to accelerate the launch of its new 4G LTE network, while concurrently deciding to stop selling 4G WiMax smartphones that work on the troubled Clearwire network by the end of this year.

Wall Street hates companies spending money to upgrade their networks, particularly when there is little evidence Sprint will enhance profits with price increases or cut costs by limiting customers’ data usage.

For several major investment firms and banks, the last straw was Hesse’s revelation that the company will likely need to borrow money to complete its Network Vision plan, which calls for major upgrades of Sprint’s wireless network to support much faster data speeds for customers.  His earlier commitment to spend up to $20 billion on Sprint’s version of the Apple iPhone did not help matters.

Sprint’s stock price took a beating last week, sliding 26 percent to the lowest level since February 2009 as investors fled.

[flv width=”360″ height=”290″]http://www.phillipdampier.com/video/KSHB Kansas City Sprint makes another new announcement 10-7-11.mp4[/flv]

KSHB in Kansas City reports Sprint intends to stop selling devices that work on the company’s existing 4G/Clearwire WiMax service by the end of this year in favor of Sprint’s forthcoming launch of a new 4G LTE network.  (1 minute)

The Detroit News reports an investor meeting with Sprint executives “grew ugly” after Hesse announced the company needed to spend money to upgrade and refused to show a clear pathway to enhanced profits earned from those upgrades.

Wall Street to Hesse: Don't Get Comfortable

“Hesse is on thin ice now,” Ed Snyder, an analyst with Charter Equity Research, told the newspaper. “One, perhaps two, more big mistakes and he’s probably gone.”

More than a half-dozen Wall Street analysts have slashed their ratings on the wireless company because they believe Sprint’s spending plans will hurt liquidity.

While customers are increasingly rewarding Hesse and Sprint for making customer service improvements and retaining customer friendly unlimited service plans, Wall Street shows no signs of being charitable to Hesse’s management of the Overland Park, Kansas company.

Ben Abramowitz, an analyst with Kaufman Bros., downgraded the stock to “hold” from “buy,” excoriating the company for expensive strategic shifts, including network upgrades and the company’s recent commitment to Apple to sell millions of Apple iPhones on Sprint’s network.

“Management credibility is lost with investors,” Abramowitz wrote.

Jonathan Schildkraut from Evercore Partners told CNBC the spending at Sprint may just be getting started.  Millions of customers remain connected to Nextel’s legacy iDEN network, which Sprint intends to decommission.  Schildkraut believes Sprint will have to provide deep discounts or free phones for displaced customers who will need to move to Sprint’s primary network.  He also notes that despite Sprint’s plans to abandon Clearwire’s WiMax network for 4G, the company will likely make further investments to maintain the partnership, and Clearwire’s network, for other purposes.

Sprint’s decision to adopt Apple’s iPhone and upgrade their network may make competitive sense against larger players AT&T and Verizon Wireless, but Schildkraut notes Apple commands top dollar for the popular phone — upwards of $600 on the wholesale level, which carriers in turn subsidize to lure customers to sign two-year contracts.  But Sprint would do well to consider Verizon’s experience with the iPhone, he says.  Most of Verizon’s iPhones were sold to customers who already owned smartphones.  That forced Verizon to subsidize up to $400 for each iPhone with no chance of increasing the average revenue collected from customers.  Investors were hoping the iPhone would instead attract budget handset customers who would upgrade to more expensive smartphone service plans.

Because the iPhone still does not support 4G technology, it seems less likely existing Sprint 4G WiMax smartphone owners would consider the Apple 4S an upgrade, and may hold off waiting for the anticipated iPhone 5.  But as Sprint begins to promote its forthcoming 4G LTE network, those Sprint customers using WiMax phones will be tempted to move to something else.  Either way, phone subsidies could create a significant drag on Sprint’s cash on hand at a time when the company is spending heavily on upgrading its network.

In the telecommunications business, upgraded service helps customers and spurs competition.  But it is nearly always the enemy of Wall Street unless a clear pathway to enhanced profits can be shown.  Investors may ultimately have the last word on those upgrades, and the person responsible for green-lighting them.  Hesse may learn that lesson first hand if the company can’t find a way to boost its stock price, and soon.

[flv]http://www.phillipdampier.com/video/Sprint CEO in Trouble 10-12-11.flv[/flv]

Wall Street goes on the attack, unhappy that Sprint is spending their money to upgrade its networks for the benefit of Sprint customers.  CNBC covers all the business angles.  (6 minutes)

Fiber optic cable spool

For the most populated provinces in Canada, questions about when fiber-to-the-home service will become a reality are easy to answer:  Never, indefinitely.

Some of Canada’s largest telecommunications providers have their minds made up — fiber isn’t for consumers, it’s for their backbone and business networks.  For citizens of Toronto, Calgary, Montreal, and Vancouver coping with bandwidth shortages, providers have a much better answer: pay more, use less Internet.

Fiber broadband projects in Canada are hard to find, because providers refuse to invest in broadband upgrades to deliver the kinds of speeds and capacity Canadians increasingly demand.  Instead, companies like Bell, Shaw, and Rogers continue to hand out pithy upload speeds, throttled downloads, and often stingy usage caps.  Much of the country still relies on basic DSL service from Bell or Telus, and the most-promoted broadband expansion project in the country — Bell’s Fibe, is phoney baloney because it relies on existing copper telephone wires to deliver the last mile of service to customers.

Much like in the United States, the move to replace outdated copper phone lines and coaxial cable in favor of near-limitless capacity fiber remains stalled in most areas.  The reasons are simple: lack of competition to drive providers to invest in upgrades and the unwillingness to spend $1000 per home to install fiber when a 100GB usage cap and slower speeds will suffice.

The Toronto Globe & Mail reports that while 30-50 percent of homes in South Korea and Japan have fiber broadband, only 18 percent of Americans and less than 2 percent of Canadians have access to the networks that routinely deliver 100Mbps affordable broadband without rationed broadband usage plans.

In fact, the biggest fiber projects underway in Canada are being built in unexpected places that run contrary to the conventional wisdom that suggest fiber installs only make sense in large, population-dense, urban areas.

Manitoba’s MTS plans to spend $125-million over the next five years to launch its fiber to the home service, FiON.  By the end of 2015, MTS expects to deploy fiber to about 120,000 homes in close to 20 Manitoba communities.  In Saskatchewan, SaskTel is investing $199 million in its network in 2011 and approximately $670 million in a seven-year Next Generation Broadband Access Program (2011 – 2017). This program will deploy Fiber to the Premises (FTTP) and upgrade the broadband network in the nine largest urban centers in the province – Saskatoon, Regina, Moose Jaw, Weyburn, Estevan, Swift Current, Yorkton, North Battleford and Prince Albert.

“Saskatchewan continues to be a growing and dynamic place,” Minister responsible for SaskTel Bill Boyd said. “The deployment of FTTP will create the bandwidth capacity to allow SaskTel to deploy exciting new next generation technologies to better serve the people of Saskatchewan.”

But the largest fiber project of all will serve the unlikely provinces of Atlantic Canada, among the most economically challenged in the country.  Bell Aliant is targeting its FibreOP fiber to the home network to over 600,000 homes by the end of next year.  On that network, Bell Aliant plans to sell speeds up to 170/30Mbps to start.

In comparison, residents in larger provinces are making due with 3-10Mbps DSL service from Bell or Telus, or expensive usage-limited, speed-throttled cable broadband service from companies like Rogers, Shaw, and Videotron.

Bell Canada is trying to convince its customers it has the fiber optic network they want.  Its Fibe Internet service sure sounds like fiber, but the product fails truth-in-advertising because it isn’t an all-fiber-network at all. It’s similar to AT&T’s U-verse — relying on fiber to the neighborhood, using existing copper phone wires to finish the job.  Technically, that isn’t much different from today’s cable systems, which also use fiber to reach into individual neighborhoods.  Traditional coaxial cable handles the signal for the rest of the journey into subscriber homes.

A half-fiber network can do better than none at all.  In Ontario, Bell sells Fibe Internet packages at speeds up to 25Mbps, but even those speeds cannot compare to what true fiber networks can deliver.

Globe & Mail readers seemed to understand today’s broadband realities in the barely competitive broadband market. One reader’s take:

“The problem in Canada (and elsewhere) preventing wide scale deployment of FTTH isn’t the technology, nor the cost. It’s a lack of political vision and will, coupled with incumbent service providers doing whatever they can to hold on to a dysfunctional model that serves their interests at the expense of consumers.”

Another:

“The problem with incumbents is they only think in 2-3 year terms. If they can’t make their money back in that period of time, they’re not interested. Thinking 20, heck even 10 years ahead is not in their vocabulary.”