Motorola NVG589 gateway

AT&T customers offered free broadband service upgrades are discovering “free” means at least $7 a month in new equipment charges for some, even when the customer owns the equipment.

Jim Grant has been an AT&T ADSL 2+ customer for almost a decade, happy to get 12Mbps broadband service from the phone company while maintaining an account with DISH Network for satellite television. As part of AT&T’s expansion effort, Grant’s neighborhood recently became U-verse capable, which led to an onslaught of new customer promotions offering upgrades for broadband-only customers and packages of television, telephone, and broadband service for everyone else.

“An AT&T salesman offered me 18Mbps VDSL service for the exact same price I’ve been paying for 12Mbps, claiming the newer single-pair circuit would work more reliably than the bonded pair service I receive today,” Grant tells Stop the Cap! “What he and the installation guy failed to mention is that this ‘free upgrade’ would cost me $7 a month in equipment fees, even though I bought and own the RG (residential gateway) they now want to charge me for using.”

Grant’s Motorola-manufactured router/modem did not need to be replaced. It was always capable of supporting ADSL2+ and VDSL broadband service. Only his bill has changed.

It turns out AT&T changed its policies that used to allow certain customers to avoid modem fees by buying their own equipment. Starting Jan. 11, 2015, AT&T’s modem rental fee for customers using the company’s equipment remained $7 a month. But customers who own their own equipment in a U-verse upgraded area are also charged the same $7, only AT&T doesn’t consider it a modem rental fee. Instead, it is a combination equipment charge and extended warranty.

AT&T claims this change actually saves customers money once their purchased modems go out of warranty. AT&T used to charge $99 for a service call to a home with customer-owned equipment and a $100 replacement charge if the modem turned out to be defective. AT&T says the $7 monthly equipment and warranty fee protects customers from both charges if something goes wrong.

Modem fees apparently don’t apply if you are lucky enough to qualify for a promotion like this one offered in Austin in 2013 for AT&T’s GigaPower service.

AT&T’s explanation didn’t go over well with Grant, who only found out about the charge once the bill arrived.

“I was promised repeatedly my bill would be exactly the same and since I owned my own equipment, there was no way I should be charged a fee like this,” Grant explained. “AT&T is charging me the same $7 it would any customer using AT&T-supplied equipment.”

Most customers affected by this charge discover it after upgrading their service or when technicians replace older equipment, often accompanied by a promise there would be no extra charges or fees, something customers learn isn’t always true after their next bill arrives.

Abhijit accepted an AT&T offer to boost his U-verse Internet speed to 24Mbps. Along for the ride was a brand new U-verse gateway.

“I was told specifically that there would be no additional charge,” Abhijit complained on AT&T’s customer support forum. “After first month’s bill, I am seeing an additional $7.00 Internet equipment fee.”

Another customer in Texas was also misinformed by AT&T’s salespeople about the modem fees.

“I was informed that this $7 fee was for leasing a modem/wireless Router/Residential Gateway (RG),” wrote the customer. “However, if I have my own compatible modem, there will be no additional charge. I have purchased my own compatible modem and now AT&T service says [it will charge a] ‘$7 service fee’ instead of [the $7] equipment rental.”

Modem fees are a lucrative source of revenue from AT&T, earning the company potentially more than $84 million a month.

Some customers report success receiving service credits or other fee waivers after complaining about the undisclosed fees in complaints to the FCC.

Frontier Communications had to be chased by West Virginia Attorney General Patrick Morrisey to improve broadband speeds for at least 28,000 DSL customers who thought they were buying 6Mbps DSL service but ended up with maximum speeds of 1.5Mbps or less.

Frontier today agreed to a settlement with state officials to spend an extra $150 million to boost DSL speeds for rural customers around the state and offer deep discounts for affected customers until they can receive at least 6Mbps service. Today’s settlement has no impact on a separate class action lawsuit brought by Frontier customers who accuse the company of throttling broadband speeds to save money and reduce traffic on its network.

The agreement is the largest, independently negotiated consumer protection settlement in West Virginia history and is expected to improve broadband service over the next three years.

“This agreement is a game changer for the Mountain State,” Morrisey said. “The settlement helps consumers receive the high-speed service they expected, while directing significant monies to help fix connectivity issues that consistently keep our state from achieving economic success.”

For at least two years, Frontier customers sent Morrisey’s office complaints stating they were not getting the speed and performance Frontier advertised for its DSL service. While the company told both customers and investors it had blanketed West Virginia with speeds “up to 6Mbps,” many customers discovered the phone company locked their modems to receive no better than 1.5Mbps.

Attorney General Morrisey

Frontier denied any allegation of wrongdoing and says it entered into the settlement to resolve disputed claims without the necessity of protracted and expensive litigation. But it will cost the company at least $150 million in additional upgrades, not including the $180 million Frontier already earmarked for broadband expansion in West Virginia, partly subsidized by the ratepayer-funded Connect America Fund.

About 28,000 customers identified by Frontier with modems the company provisioned for service at speeds of 1.5Mbps or lower will begin seeing an ongoing credit applied to their bills beginning Jan. 25, 2016, reducing the price of Frontier’s DSL service to $9.99 a month.

Affected customers can verify if they are included in the settlement on a special website Frontier has set up for its West Virginia customers.

The discounts will continue individually for each customer until the company can demonstrate it can deliver the 6Mbps speeds customers in West Virginia paid to receive. New Frontier DSL customers with speeds no better than 1.5Mbps will also qualify for the discount. Those with modems locked at speeds above 1.5Mbps but still getting less than 6Mbps will not benefit from this settlement, but may still get relief from a separate class action lawsuit covering customers in the state being heard in Lincoln County.

Last week, Lincoln County Circuit Judge Jay Hoke rejected an effort by Frontier to have the class action case dismissed. The company insisted its terms and conditions forbade customers from taking Frontier to court, requiring them to pursue arbitration instead.

Judge Hoke rejected Frontier’s arguments, finding the phone company “buried” the arbitration clause in fine print on its website and on the last pages of customer billing inserts. Hoke also ruled Frontier was attempting to retroactively apply its arbitration clause years after customers initially signed up for broadband service.

“We are finally going to get our day in court,” Michael Sheridan, a Frontier customer in Greenbrier County and Stop the Cap! reader told the Charleston Gazette. Sheridan is suing Frontier over its poor performance in West Virginia. “We think this lawsuit is the best chance we’ll ever have of bringing real Internet to rural West Virginia.”

Frontier argued if customers were dissatisfied with its DSL service, they could have canceled but never did. The company did not mention many of the affected customers have no other options for broadband service except satellite Internet, which receives poor reviews.

“We respectfully disagree with the court’s ruling,” said Frontier spokesman Andy Malinoski. “In our view, arbitration provides for fair resolution of consumer concerns that is quicker, simpler, and less expensive than lawsuits in court. We plan to appeal.”

Frontier’s decision to appeal might take longer and cost more than addressing problems for at least some of the affected customers.

Judge Hoke also took a dim view of Frontier’s style of disclosing changes to its terms and conditions.

‘On the website, computer users must scroll to the bottom of the page and click on a “Terms & Conditions” link that’s “buried among 25 other links,” then click on two other links to find the arbitration provision that denies customers’ rights to a jury trial,’ Hoke wrote in his order. ‘There’s no button to click or box to check that allows customers to agree to Frontier’s terms. In monthly bills, the arbitration clause shows up one time on the “fourth and last page” of an insert and another time in “miniscule font,” Hoke found.

Customers would have to be psychic to guess Frontier had important news restricting their right to take a dispute to court.

“There is no reason whatsoever for a customer to turn to the last page,” Hoke wrote. “Additionally, the bills contain no prompting that customers should flip to the last page for information concerning Frontier’s desire to alter the customer’s right to a jury trial.”

While Frontier pursues its appeal at the state Supreme Court, Frontier is expected to lose million in revenue from the settlement with the Attorney General.

“The reduced rate gives Frontier a strong incentive to raise speeds for these customers,” Morrisey said.

Another provision in the settlement requires Frontier to pay $500,000 to the state’s Consumer Protection Fund. That payment will offset investigative and monitoring expenses in addition to helping defray the costs of transitioning consumers to higher Internet speeds.

Frontier spokesman Andy Malinoski said the company had planned to address the issues all along. He said the settlement will accelerate the improvements.

West Virginians seeking more information about the maximum speed their modem is provisioned to receive can call Frontier at 1-888-449-0217 for more information.

Those with further questions can contact the Attorney General’s Consumer Protection Division at 800-368-8808 or visit the office online at www.wvago.gov.

Encouraging customers to accept data caps. (Image courtesy: Hairspray/New Line Cinema)

Comcast CEO Brian Roberts this week ignored customer opposition to his company’s expanding trial of usage caps, insisting usage billing “balance[s] the relationship” between the customer and the cable company.

“The more bits you use, the more you pay,” Roberts said.

Taking questions from Business Insider CEO Henry Blodget at the publication’s Ignition conference, Roberts immediately bristled at the idea Comcast had usage caps at all.

“They’re not a cap,” Roberts said. “We don’t want anybody to ever not want to stay connected on our network.”

Many Comcast customers would disagree, noting Comcast’s trial now limits most customers to an arbitrary 300GB allowance, after which a penalty overlimit fee of $10 for each additional 50GB applies.

Comcast’s public relations defense of usage caps depends on redefining a “limit” on usage into an “allowance” — one that also introduces the concept of usage-based billing. The company abandoned its old defense of usage caps as a congestion control measure, admitting in internal company documents Comcast’s 300GB allowance is nothing more than an arbitrary “business decision.”

It’s a decision Comcast’s broadband customers obviously don’t like. Customers in Shreveport, La., one of the latest markets to get Comcast’s cap treatment, are up in arms over the new limit, according to the Shreveport Times newspaper:

Stephen Pederson, social media manager for the Highland Restoration Association, said data caps are the most recent transgression from a company without a reputation for good customer service.

“This is utterly ridiculous,” Pederson wrote in an email. “Our various utility providers hold us hostage for basic necessities of modern life, and it is a serious injustice that seems to represent an insurmountable obstacle. What can we do? Is not our government in place to protect us from these injustices?”

When Blodget asked Comcast customers in attendance at the conference for questions he should bring to the head of America’s largest cable company, he got an earful.

“‘Ask him about these data caps. They’re driving me crazy,'” Blodget asked Roberts during a sit down interview. “Why data caps and what about this accusation that you don’t charge for your own data but you clobber people when they watch Netflix?”

“Just as with every other thing in your life, if you drive 100,000 miles or 1,000 miles you buy more gasoline,” Roberts lectured. “If you turn on the air conditioning to 60º vs. 72º you consume more electricity. The same is true for usage.”

Roberts added mobile companies were already billing for data usage this way. He rhetorically asked Blodget, ‘why not cable Internet, too?’

Robert Marcus already answered that question for Time Warner Cable’s investors and customers.

“We know customers do place a value on the peace of mind that comes with unlimited plans,” CEO Marcus said on a conference call in late July. “[Time Warner Cable is] completely committed to delivering an unlimited broadband offering in connection with whatever else we do.”

Unlike Comcast’s trials that force usage caps on customers, Time Warner Cable chose to gauge customer interest first, introducing optional usage capped tiers offering a modest discount. Marcus quickly conceded they were a flop with customers.

Business Insider CEO Henry Blodget (L) displays Comcast customers’ frustration over data caps to Comcast CEO Brian Roberts (R). (Image courtesy: Business Insider)

“Very few customers — in the thousands (out of more than 10 million Time Warner customers) — have taken the usage based tiers and I think that speaks to the value they place on unlimited — not bad because we plan to continue to offer unlimited for as far out as we can possibly see,” Roberts said in 2014.

*In contrast, Roberts showed no interest in listening to customers’ criticism of Comcast’s caps, claiming they only affected a tiny minority – about 5% of customers, a fact quickly proven false by Comcast itself when it confirmed at least 8% of customers are already exceeding their allowance and that number is climbing. Roberts also ignored Blodget’s question about how Comcast’s usage caps will affect online video services, particularly those competing against Comcast’s own online video platform that won’t count against a customer’s usage allowance.

Online video competitor Sling TV has an answer to Blodget’s question.

“I think one of the areas we’re quite focused on is what’s happening in Washington, DC around Net Neutrality,” Sling TV CEO Roger Lynch told Cordcutting.com. “We see concerning things happening if you look at cable companies like Comcast now instituting data caps that just happen to be at a level at or below what someone would use if they’re watching TV on the Internet—and at the same time launching their own streaming service that they say doesn’t count against the data cap.”

Stop the Cap! also challenges Roberts’ philosophy on data caps and his flawed logic, which simply fails to withstand basic scrutiny and common sense.

Phillip Dampier: Who knew Comcast was just being ironic when it promised improvements to the customer experience.

First, unlike water, gas, or electricity, data transmission is not a finite resource that must be captured, generated, or pumped from the ground. Roberts follows the grand tradition of pro-cap propagandists that claim it is ‘only fair’ that customers should pay for what they use without ever actually offering that option. Indeed, Comcast ignores the utility it most closely resembles — your home phone company. Like broadband, telephone calls are transported digitally across a national network that costs the companies nearly the same if you place 10 or 1,000 calls a month. Capacity is abundant and cheap to expand. The evidence of this is best represented by the near elimination of the concept of a long distance call. Most companies now offer nationwide calling plans that make it no longer necessary to wait for nights or weekends to grab discounted calling rates. Much the same is true for broadband. Despite increasing traffic, technological advancements have actually reduced the costs to transport data, despite usage growth.

Comcast’s broadband prices are already way and above anything reasonable to cover those costs and deliver a healthy return. In fact, the Wall Street Journal noted in 2012 that 90%+ of your monthly broadband bill represents gross margin, meaning if your broadband bill was cut by two-thirds, Comcast would still have more than enough money to cover their costs, upgrade their networks, and even cushion some of the revenue pressure coming from their cable television side of the business.

Second, if Comcast wants to idolize usage-based utility pricing, then like other utilities, it should be regulated on the state and federal level to ensure fairness in pricing and accuracy of measurement. Currently, Comcast’s usage measurement tools are subject to no independent oversight to guarantee accuracy. Comcast also faces scrutiny for its claimed advocacy of usage pricing without actually moving towards a “pay per use” model. Ask yourself when your gas and electric company charged you an arbitrary amount not based on actual usage? Comcast is not offering customers the option of paying for only exactly what they use. If you consume 30 or 300GB, the charge is the same. Your unused usage allowance does not rollover to the following month and is forfeit. Does the electric company charge you for electricity you never used? If you happen to go on vacation, Comcast still collects. If you shut your modem off, Comcast still collects. Heads they win, tails you lose.

Comcast’s idea of “balance” is to charge you not only for different speed tiers, but also for how much you use them. This ice cream cone costs $2.99. But if you eat more than 1/2 of it, you have to pay an extra ice cream consumption charge to be fair. Yet Comcast does not allow customers to choose only the TV channels they wish to watch — they pay for the entire lineup, whether watched or not.

Third, Comcast’s pricing isn’t focused on cost recovery, it is based on meeting shareholder’s revenue expectations and charging whatever the market will bear. Except this particular market is often a monopoly for High Speed Internet, and it is largely unregulated. That’s the classic recipe for robber baron price gouging. Cue Comcast.

This week, MoffettNathanson analyst Craig Moffett warned the days of cable companies finding lots of new customers to boost broadband revenue are ending.

“Broadband in the United States is rapidly approaching saturation, and the pool of legacy DSL subscribers from which cable has recently drawn so much market share is rapidly declining,” Moffett said.

Wall Street revenue growth expectations are not slowing, however. That means companies will have to earn more revenue from existing customers to keep investors happy. If they continue raising the price of cable TV, cord cutting will accelerate. If they try to gouge their landline customers, people will stick with their cell phones. Broadband is the one service most consumers cannot do without. Economists recognize that a highly valued product will easily command higher pricing, which is why several Wall Street analysts are pushing for broad-based price hikes and usage-based billing. Monetizing broadband usage, limiting potential savings for light users, and continuing the usual rate increases is a formula for heavy profits, especially when there are few competitors to disrupt the marketplace.

What evidence do we have of this? Our friends at the wireless phone companies offer a great example. Nobody gouged more for a telecom service than your wireless carrier’s text message fee. Texting cost carriers little to offer but it quickly became a profit center as demand rose. Carriers routinely charged 100,000 times more for a text message than they did for using a comparable sliver of 3G or 4G data. Your carrier’s cost to deliver 5,000 text messages a month is less than a penny. But not too long ago, AT&T and Verizon would have charged you $1,000 if you sent and received that many messages and didn’t buy one of their texting plans.

Pricing can change customer behavior in many ways. If you were charged several dollars for text messages every month, the companies encouraged you to sign up for texting plans that ranged from $5-20 a month to reduce the sting. You might even be grateful they offer such plans. What you didn’t realize is AT&T’s effective cost for each message was about $0.000002 per text—two ten thousandths of a cent. The same holds true for Comcast’s new $30-35 insurance plan that restores unlimited access. You might be relieved such an option is available in parts of Florida and Georgia, but you have effectively given Comcast up to $35 a month more for the exact same level of service you used to receive.

The plans and dollar amounts charged for telecom services often have little relationship to actual costs. Cell phone plans were originally based on an allowance of the number of voice minutes included with the plan. Exceed that and you would have paid upwards of 20 cents for each additional minute of talk time. But the carriers’ actual costs were much lower, evident when most suddenly transformed their business models to stop relying on voice minutes and texting for most of their revenue. The big money would now come from data usage — after companies ended flat rate usage plans. Carriers understood third-party apps like Skype, Hangouts, Whatsapp and others were bypassing their artificially inflated prices for voice calls and texting by relying on your data plan instead. Prices for voice and texting plans were no longer sustainable with app-based competition. But keeping competitors that rely on those data plans to connect their users in check can be easily accomplished by installing a meter on data usage and billing accordingly. Either way, companies like Verizon and AT&T guaranteed they would be paid.

Comcast is laying the groundwork to do the same. If you cancel Comcast cable TV and watch programming online, chances are excellent you will end up forking over another $30-35 a month to get rid of their usage cap. That’s almost pure profit Comcast can keep for itself and not share with any programmer. Either way, Comcast gets paid.

Roberts’ positive attitude about unpopular usage caps comes at the same time the company continues to claim it is cleaning up its reputation with customers. Not listening to what customers want sounds a lot more like the Comcast most customers are used to dealing with, and threatens to further diminish the company’s standing with consumers.

[flv]http://www.phillipdampier.com/video/Business Insider Comcast CEO responds to usage caps 12-8-15.mp4[/flv]

Comcast CEO Brian Roberts answers questions about data caps at the Business Insider Ignition Conference (2:03)

Service areas where Comcast is offering 2Gbps service.

Although Comcast has never publicly released how many customers have taken the plunge for its expensive 2Gbps broadband service, customers in the northeast will at least have the option of signing up by the end of this year.

DSLReports notes Comcast recently upgraded its coverage map for the fiber to the home service to include the northeastern states where it provides cable service.

“I can confirm for you that Gigabit Pro is now being made available across the Northeast Division,” Comcast spokesman Charlie Douglas said, with updated ordering details still forthcoming. It is exempt from any usage caps or usage billing.

Customers interested in inquiring about service availability and scheduling have had the best results calling 1-877-338-7010, which will put you in touch with a knowledgeable representative.

Not everyone will qualify for the fiber service. Comcast requires customers to live within close proximity to an existing Comcast fiber node. Since Comcast doesn’t offer a map of where those are located, the only way to verify if service is available is to call and arrange for a free site survey.

Bringing Comcast’s fiber optic service to your home will involve considerable expense and the appearance of construction equipment in your neighborhood to pull fiber through a conduit or attach it to a nearby pole. An installer will arrive later to finish the work and configure the service.

Customers ready for all that will also need deep pockets to cover Comcast’s mandatory $500 activation fee, $500 installation fee, as well as an ongoing $299.95 a month for the service for two years to avoid a $1,000 early termination fee.

Apple TV (version 4)

The cable industry is on the cusp of saving billions of dollars annually buying and maintaining set-top boxes and cable modems if they can convince customers to buy their own instead.

Cable companies collectively spend as much as $10 billion a year on customer premise equipment (CPE), ranging from simple Digital Transport Adapters for older analog-only TV sets, to the most advanced cloud-based set-top boxes and DVRs.

Cable industry analyst Craig Moffett believes the cable industry will save a fortune and lose one as consumers buy their own set-top equipment like Apple TV or Roku boxes and buy their own modems to avoid monthly rental charges. That means cable companies will likely forfeit a considerable percentage of their leasing/rental revenue.

“The idea that customers will eventually consume video through their own Apple TV or Roku boxes, or simply connect their cable to their smart TVs, Xboxes and Sony PlayStations, is neither new nor far-fetched,” wrote Moffett. “There are good reasons to believe that CPE spending may come down significantly in future (product) generations.”

Most cable equipment is leased to customers and often installed by a cable operator that covers the costs of sending a truck to the customer’s home. After installation, the average American cable subscriber pays $89.16 a year renting a single cable box, and for those with multiple boxes and a DVR, those costs rise to $231.82 a year. A cable modem can be purchased for $50-90 on average, and usually pays for itself in less than one year of rental charges charged by many cable operators.

Comcast X1

Even with more capable consumer-targeted set tops like the latest Apple TV ($149-199) and Roku devices now approaching $100, it will not take long for consumers to recoup their money avoiding rental fees.

Cable operators like Time Warner Cable now carry the majority of their cable channels on apps accessible through devices like the Roku. Customers will not get the flashiest on-screen experience, but they do get a welcome alphabetical channel lineup and a reasonably good picture. Future generations of the boxes are expected to enhance usability and picture quality.

Cable operators like Charter stand to gain the most. If their merger with Time Warner Cable and Bright House Networks is approved, all three companies are expected to see reductions in equipment expenses estimated at $2.97 billion in 2015 to as little as $917 million by 2019, according to Moffett. Charter is already expecting to see its capital spending fall more than a billion dollars a year, from $6.97 billion to $5.83 billion by 2019, but consumers should not expect to see the savings passed on to them.

Cable operators can also expect considerable savings after fully deploying DOCSIS 3.1 technology that powers their broadband services. The next generation cable broadband platform offers increased efficiency and flexibility that will allow operators to sell faster speeds.

Comcast may stand apart from others believing deluxe set-top boxes like its X1 are urgently needed to keep cable TV customers satisfied. One of Comcast’s largest planned expenses is deploying millions more of these advanced platforms to customer homes in 2016.