Verizon Communications is cutting investment in its landline and fiber optic networks, spending the money on improving the company’s more profitable wireless business, which now accounts for 67 percent of Verizon’s total revenue.

Verizon reported second-quarter results this morning, meeting most Wall Street analysts’ expectations. The company reported a minor increase in capital spending to bolster its wireless LTE 4G network which is seeing strong growth in data traffic.

Verizon Wireless added one million new wireless customers in the last quarter, many transferring from Sprint’s now-discontinued Nextel network shut down last month. Among the new customer additions, 941,000 signed two-year postpaid contracts.

A growing number of Verizon Wireless customers are also migrating to the company’s Share Everything plan. At least 36 percent of Verizon’s wireless customers are now on shared, usage-limited data plans. Verizon expects more customers to switch, especially when legacy plan customers discover they will not receive a subsidized phone upgrade unless they abandon the grandfathered, all-you-can-eat data plan. Verizon believes the Share Everything plan will keep the company in a strong place to accelerate earnings as customers find they must regularly upgrade to higher capacity data allowances to handle increasing data usage.

Verizon’s wired success story

The growing adoption of more expensive data plans means higher bills for Verizon Wireless’ 35 million contract customers. The average Verizon Wireless customer now pays $152.50 per month, an increase of 6.4 percent. In total, over 100 million Americans now use Verizon’s prepaid and postpaid wireless services.

In June, Verizon Wireless reported its nationwide upgrade to LTE 4G service was now essentially complete, with 99 percent of 3G service areas also covered by 4G. Verizon reports 59% of its total data traffic is carried on the 4G LTE network, which is five times more efficient than the 3G network.

Wireline: Success When Verizon Invests in Upgrades, Ongoing Customer Defections Where Verizon’s Copper Network Continues to Deteriorate

Verizon’s success story in wireless is not repeated on its wireline network. Verizon lost another 5.2 percent of its residential copper landline customers during the quarter, down from 6.6 percent at the same time last year. In contrast, where Verizon’s fiber optic network FiOS is in place, customer numbers are growing along with revenue.

In fact, 71 percent of the revenue Verizon now earns from its wired residential network now comes from FiOS. The fiber network helped Verizon boost revenues by another 4.7 percent in the second quarter. With an average Verizon FiOS bill now at over $150 a month, the company saw a 9.4 percent increase in the average revenue per wireline customer over last year.

Verizon added 161,000 new FiOS Internet customers and another 140,000 new video customers in the second quarter. FiOS Quantum, which offers a broadband speed upgrade to 50/25Mbps for $10 more a month, has continued to be a hit with customers. More than one-third of all FiOS Internet customers have upgraded to faster Quantum speeds.

Shammo

With continued growth possible in the wired network business, Verizon could increase investment in expanding FiOS fiber into more markets, but instead the company continues to divert its attention and money to Verizon Wireless.

Verizon’s legacy copper wire phone and FiOS businesses saw a further reduction of 5.9 percent in capital expenditures in the second quarter — just $1.5 billion spent in the quarter and $2.9 billion year to date. Verizon’s full-year capital spending outlook which includes wireless, in contrast, is on track to spend between $16.4-16.6 billion this year. The majority of Verizon’s capital investments are aimed at improving its wireless network. Verizon’s aging copper wire network will continue to see a declining percentage of investment, and the company continues to leave FiOS fiber expansion on hold.

Fran Shammo, Verizon’s chief financial officer, this morning told investors they should expect to see a continued decline in spending on Verizon’s wired networks and more cost savings wrung out from Verizon’s declining unionized workforce, which has been asked to make concessions in labor contracts and increase work rule flexibility.

Other highlights:

• 51 percent of new phone activations were Apple iPhones during the second quarter;
• Over 64 percent of all activated phones on Verizon Wireless’ network are now smartphones;
• Verizon’s 3G network will increasingly be used by prepaid and reseller (MVNO) customers not allowed on Verizon’s LTE network;
• Verizon’s proposed entry into the Canadian wireless market is primarily focused on serving southeastern Canada from roughly Montreal to Toronto;
• 60 percent of Verizon’s revenue declines in its enterprise division were due to the federal government’s sequestration — automatic spending cuts, and declining spending by state and local governments;
• Verizon has no interest in competing with AT&T to acquire Leap Wireless (Cricket);
• The impact of Verizon’s agreement with cable operators to sell each other’s products has underwhelmed, at least so far;
• Voice Over LTE service, which will dramatically improve sound quality on voice calls, will arrive in Verizon handsets later this year with an aim to introduce the service sometime in 2014. But Verizon Wireless wants to be certain 4G LTE coverage is robust, because if reception deteriorates, VoLTE calls are not backwards-compatible with its current CDMA network and the call will get dropped. Getting it right is more important for Verizon than getting the service out quickly.

Following Verizon’s lead, AT&T has announced a new privacy policy that includes fine print allowing the company to track your website visits, location, viewing habits, mobile app usage, and numbers called and received. AT&T says it will aggregate the information collected and peddle it to businesses who want to learn everything they can about potential customers, store visitors, and viewers.

AT&T will likely earn millions from the enhanced surveillance of its customers, but none of those earnings will bring you a lower bill.

“The scope of the information collected is significant when one considers AT&T will be matching it with credit reports, mailing lists, and already-available demographic information,” says online privacy expert Thom Sonderland. “Although AT&T says they will not sell personally identifiable information to third parties, the company will have much more detailed information about their customers at their disposal for any internal use they want.”

AT&T included examples of collected information:

• The names and web addresses of all websites visited;
• the length of time spent on each website;
• the addresses of all web links customers choose to click, which ads appear on-screen and which are accessed;
• a complete list of search terms entered into search engines;
• how customers use their AT&T wireless or home phone, including numbers dialed and received;
• which mobile apps are installed, used, and for how long;
• all stores, homes and businesses visited while carrying your mobile phone and for how long;
• what television shows/channels U-verse customers watch and for how long;
• which U-verse apps are being used.

AT&T customers have been largely hostile to the sweeping privacy policy changes.

“AT&T should not be making money on my data – they make plenty of money from my wireless plan and the devices sold to me – and […] the wireless coverage in my area is awful,” writes Kippian Yost. “Why not concentrate on better coverage for the prices we are paying to AT&T?”

“Selling my private information to marketers doesn’t enhance my experience, it only erodes it but pads your top line,” writes Bruno S. “My contract is up soon, I will choose to do business with a company that respects my privacy, not one that views my private actions as a commercial asset.”

“I want to know how to opt out of my U-verse and business phone line,” said Robert Celano. “I have already done so for my AT&T Wireless account. I want to opt out of everything connected to AT&T.”

Stop the Cap!’s Guide to Opting Out of AT&T’s New Privacy Policy

1. You can opt out of those targeted ads by logging into your AT&T account online and clicking “Advertising Choices” found at the bottom of the screen in fine print. From here, you can opt out of all targeted online advertising. Important: You must visit this link from each device or web browser you use to completely opt out. The choices you make apply only to the device used when accessing the website.
2. While logged in, you can also opt out of most of the rest of AT&T’s customer tracking program from their Privacy Choices for External Marketing & Analytics Reports website. Important: If you are an AT&T landline customer, you can also use this site to opt out of AT&T tracking your landline service.

If you don’t want to receive AT&T marketing messages, follow these three steps to opt out:

• E-Mail: Every marketing e-mail AT&T sends contains instructions and a link that will allow you to stop additional marketing e-mails for that product or service type. You also can unsubscribe from AT&T marketing e-mails here.
• Text Messages: Opt-out of AT&T marketing text message contacts by replying “stop” to any message.
• Consumer Telemarketing: Ask to be removed from AT&T’s consumer telemarketing lists by contacting them at one of the numbers listed here, or by sending an e-mail to [email protected]. You also can ask the AT&T representative to remove you from their telemarketing lists when you receive a marketing or promotional call.

Now what: AT&T Next and Verizon Edge

Wireless carriers know that the average relationship between a smartphone and its owner is becoming shorter every day. Sometimes the relationship is over when a customer drops or loses their phone and needs a replacement. Others simply covet the next best thing. When a large enough contingent of customers is willing to open their wallets and let their money fall out, what’s a poor wireless company to do? Ignore the pile of twenties falling to the floor? Not on your life.

AT&T last month announced it was dumping its 20-month early upgrade offer, following Verizon (again) which announced it was pulling the rug out on a similar plan in April. ‘Customers should wait a full 24 months before expecting a new subsidized phone,’ said both companies.

Then came scrappy T-Mobile, the company AT&T originally wanted to put out of business. TMO decided to apply some European competitive logic in the U.S. market. No more two-year contracts with nasty termination fees, declared CEO John Legere. But no more “phone subsidy” either. In return for the end of contracts, customers should expect to pay retail price for their smartphone, but at least they can finance it through T-Mobile and have the somewhat affordable monthly installments added to their bill.

Now, in a remarkable about-face for Verizon Wireless and AT&T, the features and promotions diet imposed on customers that has eroded discounts, ended early upgrades, and slapped on early termination fees and opaque junk bill charges might be coming to an end. Early upgrades are back… for a price.

It is the first step in a major shift away from the North American wireless business model which traditionally offers customers cheap devices at massive discounts known as “device subsidies.” Since the early days of cell phones, wireless companies in the U.S. and Canada typically grant customers up to $350 off their phone purchase in return for a 24 month contract (until recently, 36 months in Canada). But wireless providers don’t just give away free money. Carriers get back every penny of this subsidy over the life of a cell phone contract by setting their plan rates artificially high.

T-Mobile isn’t giving away the store either, but at least everything is on sale. By jettisoning the subsidy, T-Mobile’s plan rates are dramatically lower than those offered by its competitors. That is no surprise because TMO no longer has to worry about recouping device subsidies.

When a customer walks into a T-Mobile store, they can buy the latest iPhone for $650 or agree to finance it at the retail price through the carrier. They can even buy it somewhere else. But T-Mobile’s new Jump plan also offers customers a chance to “jump” to a newer phone every 6-9 months with its trade-in program. For avid phone upgraders, the end effect is like leasing your phone. You will always have a device newer than the next guy, and you will always be paying a monthly fee for the phone itself. That looks a lot more attractive than trying to wait 24 months with AT&T or Verizon or frequently buying a new phone for north of $500 and trying to recoup part of the cost by selling your old phone on eBay or Craigslist.

Wall Street would normally punish carriers that do anything to shorten the 24-month traditional upgrade cycle because investors generally hate the whole concept of the phone subsidy. It costs companies liquidity to tie up money fronting that $350 discount and waiting up to two years to get the money back. But since T-Mobile can immediately book the full purchase price of a phone for accounting purposes and does not need to show the amount of money dedicated towards phone subsidies, analysts are not pummeling the stock into the ground.

As Stop the Cap! has written for more than a year, the wireless Golden Calf Wall Street really wants to worship is a cell phone plan priced artificially high to recover a subsidy providers no longer give. That’s a plan only Ma Bell and its shareholders could love. But nobody thought AT&T and Verizon Wireless could get away with it.

Silly people.

Introducing The Wireless Trojan Horses: AT&T Next from AT&T and VZ Edge from Verizon

Yay!: No more expensive subsidies and extra free money

AT&T yesterday introduced AT&T Next — the company’s response to T-Mobile’s Jump with AT&T’s usual gouging touch.

The highlights of the plan include:

• No membership, activation or upgrade fees;
• Buying a new phone under AT&T Next does not require a down payment, any finance charges, or early payoff penalty;
• Customers can trade-in for an upgrade after one year or keep the device for 20 months and own it.

VZ Edge is still a rumor, but leaked promotional material indicates it is nearly identical to AT&T Next, with some important exceptions:

• VZ Edge appears to be an extension of Verizon’s existing 12-month financing plan, limited to two devices at a time with a combined financed balance not to exceed $1,000;
• First payment due at time of purchase with a recurring finance charge of $2 for each month there is a remaining balance;
• No upgrade fees, no contracts, no pre-payment/payoff penalty;
• Customer qualifies for their next upgrade after 50 percent of their current phone’s retail price is paid;

The leaked document does not include details about the disposition of your device when beginning an upgrade. Presumably, Verizon will accept it for trade-in or the customer can pay the remaining balance off immediately and own it.

What sets Verizon and AT&T far apart from T-Mobile are the prices of their service plans. Both AT&T and Verizon are effectively ending their subsidy program for those participating in these early upgrade plans. Customers must purchase (or finance) their next device at the regular retail price, which will range between $500-650 for most top-of-the-line smartphones.

Bunco

But neither Verizon or AT&T are lowering their service plan pricing, which was specifically designed to recoup a subsidy they are no longer providing. T-Mobile has appropriately lowered their plan pricing because the company no longer needs to win back that $350 subsidy they might have given you for the newest Apple iPhone or Galaxy device. That means you are effectively paying AT&T and Verizon twice for the same phone. It’s Wall Street’s dream come true: kill the subsidy and keep the money still being charged to recoup it. That amounts to as much as $29 a month out of your bank account and into theirs.

For now, only those itching for fast upgrades will get the pinch, at least until AT&T and Verizon decide this is the new and improved way to sell phones to everyone without a two-year contract. Now if we can only get AT&T and Verizon to rescind the contract taken out on our wallets….

A Michigan man last week opened his front door only to find AT&T’s efforts to install U-verse for a neighbor tore up his front yard and he isn’t even a customer.

Broadband Reports‘ AT&T forum member “riekl” in Macomb discovered AT&T’s service “upgrade” for the neighbors left him with a front yard “downgrade” consisting of a long strip of dead grass, a potentially undermined driveway, and no idea who will pay to repair the damage.

“The only utility easement is a 20 foot strip in my back yard,” he wrote.

AT&T decided running cables well inside the Macomb man’s front yard and beneath his driveway was fine. So was leaving without bothering to repair the damage.

An AT&T ‘Right of Way’ manager was eventually dispatched to the property and quickly conceded AT&T buried its lines well outside of the utility easement. The company is now making arrangements to repair the resident’s lawn.

“He also apologized as their techs are told to always notify the homeowner when crossing property,” said the irked resident.

But the story may not be over. AT&T’s cable is now a permanent feature beneath the non-customer’s front yard, which could create some issues if AT&T assumes it now has an ‘effective’ easement and will be free to repair or replace the cable in the same area at their discretion.

AT&T has a long history of using contractors that do not always favor the correct solution over an expedient one.

But at least they buried the cable this time.

Last fall, a Texas resident arrived home to find AT&T had installed a new line for one of their customers by stringing it across the top of the neighbor’s back lawn, where it remained untouched and unburied for an extended period.

Rogers Communications customers frustrated with customer service or billing problems are advised the first representative they speak with regarding the issue does not necessarily have the final word on the matter. Eastern Canada’s biggest cable operator reminds customers 91 percent of all complaints are resolved to the customer’s satisfaction by the time they appeal to Rogers’ Ombudsman.

“We’re the only telecommunications provider in North America to have an Ombudsman to provide an independent review of unresolved customer concerns,” noted Rogers’ blog.

Rogers recommends the following four-step process to resolve complaints:

• Step 1: Contact Rogers’ Customer Care Center – available by live chat, phone, regular mail, or through social media: on Twitter – @RogersHelps, @RogersVousAide or you can find Rogers on Facebook;
• Step 2: Request to speak with a manager at the Customer Care Center;
• Step 3: Contact the Office of the President;
• Step 4: Write to the Office of the Ombudsman, either by mail, fax or email.

Walker

Kim Walker, Rogers’ Ombudsman reported that 84 percent of customer complaints reported to her office were either entirely or partly Rogers’ fault. The Ombudsman’s office only found entirely in favor of Rogers or its prepaid unit Fido 16 percent of the time.

Over half of the complaints escalated to the Ombudsman’s office related to wireless service. Billing and service changes constituted the majority of those complaints.

If Rogers’ Ombudsman is still unable to offer customer satisfaction, customers have one more place to appeal: the Commissioner for Complaints for Telecommunications Services.

Customers can file complaints with the Commissioner on the CCTS website or by calling toll-free 1-888-221-1687.