Comcast’s discounted Internet service for the poor forces customers to jump through hoops to get the service and considers protecting revenue from existing customers more important than expanding the service to reach those who need it most.

Those are the views of John Randall, program manager at the Roosevelt Institute/Telecommunications Equity Project.

For $9.95 a month, those that can meet some complicated eligibility requirements and prove they are not existing Comcast customers are qualified for 3Mbps broadband service with a 768kbps upload rate. It represents a $30 savings off Comcast’s regular price — a considerable amount of revenue that Comcast is effectively forfeiting for the benefit of poor families who live in Comcast’s footprint.

Except Comcast isn’t actually “out” that much at all, argues Randall.

Of the 2.6 million households eligible for Internet Essentials from Comcast, only 150,000 have taken Comcast up on their offer. That represents only 5.8 percent of those eligible. In Comcast’s hometown — Philadelphia — there are just 3,250 families hooked up, which represents only 3.3 percent of those eligible.

Randall calls the program ineffective and says the onerous requirements to qualify (and re-qualify) are such a hassle, few families bother. What is worse, those families already sacrificing something else in their lives to get broadband service for the benefit of their school-age children are punished for their noble efforts — they are completely ineligible for Internet Essentials regardless of income or need because they are existing customers. Randall argues Comcast carefully constructed the program more as a public (and government) relations exercise than a charitable endeavor. Comcast zealously protects its existing revenues from being cannibalized by customers switching to the discount plan.

Some might argue that Comcast is managing the program with costs in mind, but Randall dismisses that as nonsense.

“Within its footprint (which spans 50 million households in 39 states– 45 percent of the US population), the cost for Comcast to connect additional households is vanishingly low,” says Randall. “With no additional network build needed, Internet Essentials represents almost pure profit for Comcast.”

Randall claims Comcast’s gross profit margin on its broadband service is around 95 percent where the network has already been built. At that rate, Comcast’s cheap Internet still delivers almost $18 million in additional income, and there is a promise of much more as soon as a customer defaults on a bill, misses a qualification deadline, or their children graduate. When any of these occur, Comcast will reset customers to regular rates.

“While most observers might assume that the program is an act of corporate generosity, it was originally conceived in the fall of 2009 as a way to turn a profit by offering slower connections to certain low-income households,” said Randall.

“These plans were temporarily tabled at the direction of Comcast lobbyist David Cohen, who knew that this type of program would be attractive to the FCC and thus useful as a bargaining chip. When the time came for negotiations over Comcast’s $13.75 billion takeover of NBC Universal, Comcast was able to offer something it was planning on doing anyway. In the end, the FCC was able to claim credit for forcing Comcast to implement a program to combat the digital divide, while in reality no arm-twisting was needed,” he added.

One of the biggest challenges of America’s digital divide is making affordable Internet access available. Cable companies in particular are prepared to wring even more money from their Internet customers in the form of higher prices, new and increasing equipment rental fees, and consumption billing schemes that charge more for less service.

But that isn’t the story elected officials receive from Congress.

The potential public relations benefits far outweigh any costs to offer the service. Randall notes Comcast had delivered the Internet Essentials message to over 100 members of Congress and more than 2,000 state and local officials. To broaden its outreach effort, Comcast also engaged leading intergovernmental associations at the state and local level such as the National Governors Association, National Conference of State Legislatures, U.S. Conference of Mayors, and various other organizations of elected officials. On top of that, Comcast says that the impressions generated by media coverage of Internet Essentials launch events earned it “millions of dollars” worth of media.

What message don’t these public officials hear?

America is subjected to local broadband monopolies and duopolies that guarantee the lack of competition for high-speed Internet access.

“It earns Comcast good press while distracting regulators and public officials into thinking that changes in policy aren’t needed and that digital divide problems will somehow work themselves out on their own as a result of corporate generosity. In the long run, Comcast Internet Essentials will do no more than contribute to the delay of much-needed regulation,” concludes Randall.

Verizon Wireless customers and public safety personnel are upset that the cell phone company was caught unprepared after a rural roaming agreement with AT&T expired at the end of June, leaving police officers without communications and others with no way to reach 911.

AT&T no longer permits Verizon Wireless customers to roam on its acquired former Alltel network, which has dramatically reduced service in Geraldine, Absarokee, Ft. Benton, Browning, Harlem, Evaro, Cascade, Stanford, Lincoln, Ennis, Virginia City, and Great Falls.

Lincoln resident Gayle Steinch is living with the result of that business decision. She has a single bar of service on her Verizon Wireless cellphone at her house. It is her only phone — she dropped landline service in 2007.

“And I live a half a block off the main street,” she told the Great Falls Tribune.

Verizon’s road to no bars in rural Montana.

Capt. Gary Becker of the Montana Highway Patrol told The Montana Standard troopers in the area haven’t been able to communicate on their cell phones or their computers installed in their cruisers since the roaming agreement expired. Becker said police have to travel at least 30 miles to get any usable reception from Verizon.

Jessica Constantine, manager of the AT&T Elite Wireless store in Butte, said AT&T “had a roaming agreement with Verizon and we allowed them to use our towers for three years. The contract is over.”

And with it, Verizon Wireless network reception.

The agreement was part of a deal between AT&T and Verizon over Verizon’s 2010 purchase of Alltel. Federal regulators required Verizon to divest itself of certain Alltel territories for competitive reasons, transferring those customers to AT&T. As a result, territories that used to be well-served by Alltel’s CDMA network are now being converted by AT&T to GSM and data service, exposing Verizon’s sparse home cellular coverage in several parts of the state.

“They had years to prepare for AT&T switching off Alltel’s old CDMA service Verizon was dependent on, and Verizon did little to nothing,” said Jim Brown. “The Verizon person I spoke with told me it did not make sense to build a network out here because the only thing it would serve are crows. But they promised they would at least try to equal the coverage Alltel used to give us. That never happened and still isn’t.”

Verizon denied there was a major service loss in rural Montana. Bob Kelley, corporate spokesperson for Verizon, said that the change in service was planned and its impact would be limited to “less than optimal” service. He confirmed there were no unexpected outages.

After negative media coverage reported Verizon’s inability to provide quality cell service in rural Montana, the company agreed to temporarily deploy portable cell towers to improve coverage.

The “COWs”— cellphone towers on wheels — are stationed in Lincoln, Virginia City, Lima, Broadview, between Absarokee-Fishtail, as well as in Jackson, mostly meeting the needs of law enforcement monitoring the Rainbow Family Gathering last week. Verizon is also deploying repeaters that can re-broadcast signals and enhance range, as well as add coverage to existing permanent facilities. The company is planning on adding permanent towers this week in Marion and Tarkio. Additional permanent towers are also planned for Lincoln and Columbus by the end of August.

That cannot come soon enough for some customers.

Cell tower on wheels

“Verizon brought up this 40-foot [temporary] antenna, but you really can only get service on it on Main Street,” said Steinch, the manager of The Bootlegger, a Lincoln bar and restaurant. “We had a guy in here this morning who has a towing company who missed out on an $1,800 job because his cellphone didn’t get the call.”

Service has deteriorated so badly in rural Montana, some AT&T stores had lines of soon-to-be-ex-Verizon customers snaking out the door, and at least one reported it was completely sold out of cell phones and wireless broadband devices.

“Dillon sold out of cell phones yesterday,” said Constantine, “because everybody in Lima who was using Verizon just flooded the Dillon store.”

Verizon subscriber John Ulias found his cellphone useless at his cabin in the Little Belt, as did many of his neighbors in that area.

Although Verizon told Ulias and the Tribune subscribers should still be getting service in the Little Belts area from a Verizon antenna in Stanford, Ulias said that isn’t the case.

“I gave the Verizon representative the cell numbers of two of my Little Belt neighbors after he told me we should be getting service up there,” Ulias told the newspaper. “The guy called me back and said his calls went straight to their voicemail.”

Montana residents affected by the disruption of Verizon Wireless service seeking to file a complaint should contact the Office of Consumer Protection at the Montana Department of Justice by emailing: [email protected], faxing 406-444-9680 or calling 800-481-6896 or 406-444-4500.

For customers planning to switch carriers because of reception issues in Montana, Verizon is waiving early termination fees. For those customers the company can convince to stay, discounted service will be available along with discounts on a Verizon Network Extender, a portable in-home mini-cell tower that interfaces with a home broadband connection. To pursue either option, prepaid consumers should call Verizon Customer Service at 1-888-294-6804; all others should call 1-800-922-0204.

In New York and New Jersey, Verizon is attempting to convince some rural residents to abandon their landline service in favor of Voice Link, which relies entirely on Verizon Wireless reception.

“I have one word for my friends back east: don’t,” said Brown.

The general counsel of the Federal Communications Commission predicts your landline will stop working within the next ten years, abandoned by companies like AT&T and Verizon in favor of wireless service in rural America or fiber (if you are lucky) in the cities.

Phillip “Did you know your landline will be dead within ten years?” Dampier

Sean Lev, the FCC’s general counsel, said in a blog post that “we should do everything we can to speed the way while protecting consumers, competition, and public safety.”

But the FCC seems to be abdicating its responsibility to do exactly that by singing the same song some of America’s largest phone companies have hummed since they decided to get out of the copper landline business for fun and profit.

Traditional boring telephone service is regulated as a utility — a guaranteed-to-be-available service for any American who wants it. Hundreds of millions of Americans do, especially in rural areas where America’s cell phone love affair is tempered by dreadful reception, especially in mountainous areas. Oh, and the nearest cable company is ten miles away.

AT&T and Verizon — two of America’s direct descendants of the Bell System, just don’t want to pay to keep up a network most of urban America doesn’t seem to want or need anymore. In addition to a dwindling customer base, providing a regulated legacy service means having to answer to unions and government-types who make sure employees are fairly compensated and customers are given reasonable service at a fair price. The alternatives on offer from AT&T and Verizon carry no such regulatory (or union) baggage. Prices can change at will and customers have no guarantee they will receive service or have someone to complain to if that service is sub-standard.

While in the past regulators have taken the lead to make sure telephone companies meet their obligations, the new FCC seems to spend most of its time observing the business agendas of the companies themselves.

Lev implied to the Associated Press the FCC is not exactly leading the parade on the future of landlines. He seems more comfortable trying to analyze the intentions of AT&T and Verizon’s executives:

Most phone companies aren’t set to retire their landline equipment immediately. The equipment has been bought and paid for, and there’s no real incentive to shut down a working network. He thinks phone companies will continue to use landlines for five to 10 years, suggesting that regulators have some time to figure out how to tackle the issue.

Lev

AT&T is more direct: It wants to switch off all of its landline service, everywhere, by 2020. Customers will be given a choice of wireless or U-verse in urban areas and only wireless in rural ones. Where U-verse doesn’t serve, AT&T DSL customers will be in the same boat as Verizon customers on Fire Island: pick an expensive wireless data plan, satellite fraudband, or go without.

Verizon prefers a “gradual phase-out” according to Tom Maguire, Verizon’s senior vice president of operations support.

Verizon claims it has no plans to shut down working service for customers, but it does not want to spend millions to continue to support infrastructure fewer customers actually use. That means watching the gradual deterioration of Verizon’s copper-based facilities, kept in service until they inevitably fail, at which point Verizon will offer to “restore service” with its Voice Link wireless product instead.

For voice calls, that may suffice for some, especially those comfortable relying on cell technology already. But at a time when the United States is already struggling with a rural broadband problem, abandoning millions of rural DSL customers only makes rural broadband an even bigger challenge. The wireless alternative is too variable in reception quality, too expensive, and too usage capped.

Island residents are smoking hot about Voice Link

The New York Public Service Commission has extended the deadline for public comments about the Voice Link wireless landline replacement until Sept. 13, to give the growing number of customers on Fire Island with the service enough time to fully evaluate it over the summer months.

To date nearly 400 public comments have been filed with the Commission, every one of them negative.

Stop the Cap!’s comments are having an impact on the PSC’s exploration of the deployment of Voice Link in upstate New York. On our recommendation, the PSC has formally asked Verizon for more documentation about how Voice Link is being introduced in the Catskills:

Please provide the following information for all Voice Link devices/services that have been installed at any customer premises locations outside of the Western Fire Island area:

• The address of every Voice Link customer in upstate New York;
• Date Voice Link Installed;
• Reason Voice Link Installed;
• Was customer advised Voice Link service was optional or not;
• Voice Link Service Calls/Repairs identified by location, date, reason for service visit, repair action taken;
• If applicable to any locations, date Voice Link was uninstalled/disconnected and reason for termination;
• Please provide any marketing materials, scripts, and/or training materials in use by Verizon employees or contracted third-party workers to inform customers about Voice Link service;
• Please provide copies of any documentation provided to customers agreeing to accept Voice Link service outside of Western Fire Island, including Terms of Service Agreements. If there are any material differences between documentation and Terms of Service agreements for Western Fire Island customers, and customers in any other areas of New York State, please identify and explain those differences.

The PSC is also demonstrating that it is willing to go deep into the weeds with Verizon on this issue, a marked departure from the near-rubber stamp “light touch” regulation AT&T enjoys in several midwestern and southern states. At one point, the Commission found Verizon documentation indicating enough “spare pairs” — unused lines — were available that could be used to repair and reintroduce landline service on Fire Island, and wants to know why Verizon is not using them to bring back the service customers had before Hurricane Sandy did its damage:

The copper cable table shows that the spare cable pairs in the copper cable facilities serving the 11 identified communities is approximately 16% of the total available pairs in those cables. However, in specific communities such as Fair Harbor, Kismet, Robins Rest and Lonelyville, the percentage of spare pairs ranges from 21% to 66% of the total available pairs. Also, the number of working pairs in many locations is small compared to the total available pairs in the cables, despite the number of defective pairs reported by the company. Please explain why Verizon is not utilizing existing spare cable pairs, and performing routine cable maintenance in any communities, to restore wireline services to customers that do not request or desire Voice Link service.

The fiber cable table shows spare cable pairs in the fiber facilities serving the Ocean Beach, Lonelyville, Fair Harbor and Kismet communities is approximately 73% of the total available pairs in those fiber cables. By individual community, the percentage of spare pairs ranges from 62% to 94% of the total available pairs. Please explain why Verizon is not utilizing existing spare fiber pairs in any of the four named communities to restore wireline services to customers that do not request or desire Voice Link service.

Despite every effort by Verizon, Fire Island residents that lost landline service are increasingly opposed to Voice Link, if the public comments filed with the Commission are any indication.

The Point o’Woods Association on Fire Island, which represents more than 500 people who either seasonally or year round depend on Verizon’s landline network, is also highly critical of Voice Link’s performance and provided the Commission with very specific and detailed criticisms:

1. Verizon’s only cell site on Fire Island on the Ocean Beach water tower lacks reliable power backup contingencies;
2. Fire and medical first responders across Fire Island have declared Voice Link unsatisfactory for public safety;
3. Voice Link’s performance has been called unreliable. The sound is “plagued by echoes, connection delays, no connection at all, and frequent dropped calls;”
4. Voice Link only works with CDMA spectrum for voice calling, reducing the level of service (data) customers used to have with traditional landlines;
5. Customers cannot reach a live operator by dialing “0” and must dial all ten digits for all calls. The service also does not support collect calls, a feature “sometimes critical in emergency situations;”
6. The reception quality of Verizon’s data network varies widely across the island.

“Voice Link at its very best is a temporary solution suitable for deployment only while full communications infrastructure is in the process of restoration,” concludes D.R. Brown, vice president of the association.

The changes Verizon seeks for Fire Island are affecting even those who still have landline service. Customers regularly report that Verizon customer service is refusing repair requests in areas like Ocean Beach, pushing customers to the wireless replacement it wants them to accept.

Jean Ufer, a Fire Island resident, says Verizon is threatening the health of her husband by refusing to fix her service.

“They will not repair my landline, which my husband really needs, as he has a pacemaker which has to be monitored by a landline,” Ufer complained to the Commission. “They also refused to connect my DSL, even though they charged me  the monthly fee right through the winter.”

Moffett

A consolidated cable industry envisioned by Dr. John Malone, currently bidding for a merger between Charter Communications and Time Warner Cable, would feature widespread usage caps and usage billing and could obliterate competition from over-the-top online video providers, predicts a cable industry analyst.

Craig Moffett, now out on his own as co-head of independent Wall Street research firm MoffettNathanson, says broadband usage pricing is the sleeper issue of the last five years.

“I’ve written for years that [usage based pricing] is the single most important issue in all [the telecom sector],” Moffett said in an interview last week. “I’ve always been amazed by how little attention people have always paid to the issue.”

The Street reports that a unified cable cartel limiting consumer access to the Internet or more importantly monetizing that access would immediately devastate streaming video competitors including Netflix, Amazon, YouTube and Hulu.

If usage based pricing were implemented across the cable industry tomorrow, Moffett believes Netflix’s subscriber base would immediately fall from 30 million to 10 million. Nascent video players like Intel and Apple would likely find their business plans untenable, and some analysts believe the sweeping price changes would probably end the shift towards integrating streaming technology into large flat panel television sets.

Consumer backlash

Moffett says the impact would be broadly felt. Other analysts predict it could cause a national consumer uprising, especially at a time when other countries are swiftly moving to get rid of usage limits and consumption-based billing that have never been popular with customers.

“I think it will become clear that over the summer the window may have already closed for the cable operators to move to a usage based pricing theme,” Moffett said.

The Federal Communications Commission has done almost nothing about the issue of usage caps and usage pricing. Former FCC chairman Julius Genachowski even applauded the unpopular price scheme, calling it an important innovation.

Customers call it something else, and an uproar from consumers and competitors alike could overshadow the broadband successes of the Obama Administration. It would represent “a laughable setback for the nation’s communications infrastructure,” predict increasingly pessimistic Wall Street analysts concerned about the inevitable backlash.

The Street:

In a new broadband pricing regime, regulators would have to condone what consumers and competitors would immediately recognize as anti-competitive. Meanwhile, immensely popular content providers such as Netflix, Amazon Prime, Hulu, YouTube and the like would have to lose a Washington lobbying battle to the interests of cable monopolies, their arcane billing and off shored customer service.

Hollywood and broadcast networks would lose marginal new content buyers such as Netflix. Tablet makers such as Apple, Google, Samsung and Amazon would see the value of their fastest growing products put at risk.

Most importantly, it would be an affront to one of the few clear consumer victories for the Department of Justice in the Obama administration.