McBee, part of Chesterfield County, S.C.

Residents of McBee, S.C., have been without cable and Internet service since last November, when rural cable provider Pine Tree Cablevision closed its doors and turned the services off in scores of small communities in New Hampshire and South Carolina.  For residents of Lamar, another South Carolina community served by Pine Tree, it wasn’t much of a service to lose.  Pine Tree’s “broadband” in Lamar was limited to 50kbps, with the entire community’s Internet delivered on a single AT&T-provided T-1 line.

But even the loss of a company like Pine Tree was immediately felt by area residents and businesses, now without cable TV and Internet service.  In Lamar, December 10, 2009 will remain a day of infamy:

“I was in the middle of submitting reports to SLED (the State Law Enforcement Division) when [Pine Tree pulled the plug and the cable and broadband system] went down,” Police Chief Charles Woodle told SC Now. Woodle now goes home twice a day to check his work e-mails.

The town’s water office closed December 21st because the town clerk could not upgrade the software needed to process water bills.

In Elloree, residents and local officials found out about Pine Tree’s financial problems when channels started dropping off the cable system, followed by the complete loss of service.  In December, customers mailing payments to Pine Tree had them returned by the post office undelivered.

The now defunct Pine Tree Cablevision used to serve rural communities in New Hampshire and South Carolina.

Elloree Town Clerk Chasity Canaday told The Times and Democrat Pine Tree’s ultimate demise was a travesty.

“It shows a remarkable lack of professionalism to cut services from customers without any prior notice,” Canaday said. “For the majority of our residents, their notice that the cable service was terminated came when their televisions quit working.”

Despite claims from Pine Tree officials that new owners would take over the business they left behind, Canaday says that just isn’t true.

“It has been very, very difficult to get somebody else,” she said. “There is not a large enough customer base to entice a new company to come in. Most people have already switched to satellite.”

The newspaper noted after contacting 20 other municipalities, Canaday said most rural towns have no local cable provider and instead rely on satellite service.

Throughout rural South Carolina, tiny cable companies serving just a few hundred subscribers have come and many more have gone.

The town of Cameron lost Almega Cable about three years ago.  Other communities have said goodbye to operators like Brookridge Cable, SRW Inc., South Carolina Cable Television, Pine State Management Co., and Mid Carolina Cable.

In most cases, satellite television’s ability to deliver hundreds of digital signals it an easy choice over cable systems delivering only 2-3 dozen channels.  Because of a lack of investment to expand rural cable lineups, customer erosion has left many systems financially untenable.  One Texas cable system had just a dozen paying customers left when they called it quits.

That’s why the community of McBee is creating a lot of buzz in rural South Carolina.  They reportedly have Time Warner Cable, the nation’s second largest cable operator, in discussions to take over where Pine Tree left off, restoring cable and broadband service for a community of just 700 people.

But that service may come with a significant price — an indefinite franchise agreement that could eventually threaten the area’s local, customer-owned telephone cooperative.

Town Attorney Tony Floyd says Time Warner Cable in eager to expand into rural areas.  But the question is, will McBee concede too much just to attract a cable company?

“This is a long term contract,” he told SC Now. “If you grant a franchise, Time Warner will be able to keep competition out.”

Newly re-elected councilman Shilon Green is the biggest proponent for the deal.  He will propose an ordinance granting a franchise to the cable company at a town hall meeting to be held tomorrow.  He says Time Warner will bring better cable and broadband service to the area and introduce competition for phone service with their “digital phone” product.

But some other council members are concerned about Time Warner Cable’s impact on the area’s local, customer-owned phone company, Sandhill Telephone Cooperative.

Councilmen A.C. “Kemp” McLeod said he’s afraid the cable company could bully the co-op out of business.

“I know Sandhill is expanding their service into the TV business, and they’ve been very good serving rural communities,” McLeod told the newspaper. “I’d like to check with them first.”

“If [Time Warner] wants to come in [and] lowball this area, they can do it, then run our small business out of business,” McLeod said. “A big company can make it look good, make it look appealing, then once they have the market and run the small guy out, then they can raise the rates. At Sandhill, we have representation.”

Rural communities are often bypassed by cable providers because they lack enough closely spaced customers to make the infrastructure costs worthwhile.  Where smaller communities do cluster most of their population inside the town limits, cable systems have been built.  Many are independently owned and operated by small providers because larger companies have shown no interest in serving areas with just a few hundred potential customers.

That has left town leaders with the prospect of offering generous incentives to attract cable operators.  In addition to franchise agreements that never expire, some communities offer significant tax breaks and other concessions to encourage cable operators to bring service to area residents.  Despite complaints from big city residents that Time Warner is hardly benevolent, its brand and reputation do mean a lot in rural areas burned by Pine Tree’s sudden demise last year.

Green hopes the cable giant will bring a level of cable service not seen before in towns like McBee.

“A little competition is good,” Green said.

Stage two of the nightmare is billing problems, and one West Virginia family discovered a phone bill they couldn't imagine possible.

Frontier Communications’ performance in West Virginia is starting to resemble northern New England’s never ending nightmare with FairPoint, the phone company that couldn’t manage landline service for customers in Maine, New Hampshire and Vermont and ended up in bankruptcy.  Things have gotten so bad, Frontier Communications now earns an “F” rating from the Better Business Bureau, called out specifically for failing to respond to complaints filed against the provider, failure to resolve the complaints they did acknowledge, and government action taken against the company for deceptive business practices.

Stop the Cap! reader Ralph in West Virginia drops us a line to share the latest progress the company is making in his part of West Virginia, or rather the lack thereof, starting with his own personal story:

The afternoon of  Thursday Sep. 2nd, our phones were out of order for awhile but were working by 4pm.  The DSL was still out so I waited to see if they’d get it fixed later that evening.  When it was still out Friday afternoon, I called to report it and asked if they had a reported outage for the area.  Their answer was no, and they proceeded to ask me to reset the modem and perform some additional diagnostic testing.

That didn’t “fix” it so they filed a trouble ticket and told me a technician would be out to check the outside wiring and, if needed, give me a new modem.  Frontier never showed up, so I called again and was left on hold for 30 of the 35 minutes that phone call lasted. I was finally told that it was a known outage affecting 12 people in the area.  No repairs were made on Sunday so I called on Monday and was told the problem now affected 16 people and they had no idea when it would be fixed.  It was finally fixed five days after initially reporting the outage, and nobody bothered to explain why it took so long.  I was later bemused to find an article in the weekly county paper that noted the outage was now up to impacting 20 people.

In your earlier report about Frontier, a spokesman for the company claimed the company follows a protocol about calling customers with service problems to see if the issues were resolved, but that call didn’t come until Sep. 8th, a full 24 hours after our DSL service was restored.  Keep up the good work, maybe Frontier and other providers will realize that the system is broken and we do want and need high speed Internet.

Ralph is not alone in having trouble with Frontier.  Just as Stop the Cap! reported with FairPoint’s failure in New England, service problems are just the beginning of the “fun” for transitioned customers.  Billing problems come next, and Frontier followed through in spades for one West Virginia family.

Meet Johna and Paul Snatchko, who are being billed $671.45 for dial-up Internet service calls by Frontier.  Not only did Frontier fail to deliver broadband service to the northwestern part of the state, now the Snatchko family has had to quit using dial-up Internet as well because the Snatchko’s claim Frontier made accessing the service a long distance call.

“When we switched from Verizon to Frontier, they said nothing will change,” Paul told WTOV News. “Well, there’s change.”

Despite selling the Snatchko family “unlimited long distance” service, Frontier still charged every call to their ISP at the regular long distance rate.  Why use dial-up in the first place?

“In this part of West Virginia, you’re very limited in your service,” Paul explained. “Dial-up is it for us. We’ve tried everything else. The only thing we could get was dial-up.”

The family also endured another Frontier specialty — the constantly changing promotional offers that are poorly explained by the company’s customer service representatives.

“They said it doesn’t include their package deal with the computer,” Johnna said, referring to a common Frontier promotion for a free netbook in return for a bundled package of services on a two year contract. “The first couple months it did and now it doesn’t include it.”

Frontier Communications earned an "F" rating from the Better Business Bureau

Frontier’s spokesman for the area, Bill Moon, made yet another TV appearance to try and explain it all away.

“There are billing problems that can happen anytime you have a switch over like that,” he told WTOV. “It’s probably a simple mistake on this particular customer’s bill, something that can be rectified pretty easy.”

Apparently not. Frontier told the family they have received two credits already and that is the last time the company is willing to provide them.

Despite the increasing frequency and seriousness of complaints now becoming a staple on the nightly news, Moon said incidents like this are rare.  He told the station out of more than 60,000 lines of service, they’ve had about 10 problems at most.

West Virginians are also waking up to the realization that Frontier’s promised “fiber upgrades” are little more than bait and switch, and they’ll never be able to directly access the fiber the company is installing.  As Stop the Cap! has reported previously, Frontier’s residential customers are more likely to encounter beneficial fiber in their morning breakfast cereal than from Frontier Communications.

The Charleston media is abuzz about the fact taxpayers are footing the bill for a $40 million fiber network that the company will own free and clear, and charge top dollar prices to access.  Citynet, one of Frontier’s competitors, blew the whistle over Frontier’s much-ballyhooed fiber expansion that is actually intended to serve public institutions, wholesale customers, and Frontier’s “middle-mile” network — not directly benefit consumers:

[…]Once Frontier spends the $40 million of taxpayer money to expand its network, it will be the sole owner of that network and the State will have no ownership rights. Thus, Frontier’s monopoly in the State of West Virginia will have been financed with taxpayer money.

Frontier will then sell services to state entities such as schools and government offices at the existing exorbitant prices. Those prices will never decrease, because no competitor can afford to spend $40 million or more of its own capital to build out its network.

Citynet, however, has provided the state with a plan for the expenditure of the taxpayer money that will expand broadband access in the state while at the same time lowering the cost of broadband access by 70 percent to 90 percent.

It is true that competitors, like Citynet, have existing contracts with Frontier for access to fiber facilities, but given that Frontier’s new network will be built with your money, it is Citynet’s position that those facilities should be made available to competitors at a nominal cost so that competitors can make their services available to the public at large at much lower prices.

Frontier has flatly refused Citynet’s proposal and intends to require competitors to pay inflated prices for access to fiber facilities it built for free.

As currently structured, the state’s plan for expanding broadband will do nothing more than expand Frontier’s monopoly, and will not address the fundamental problem of the high cost of broadband access.

[flv width=”640″ height=”380″]http://www.phillipdampier.com/video/WTOV Steubenville Speaking Too Soon – Frontier’s Customers Still Complaining 9-15 and 9-28-10.flv[/flv]

WTOV-TV thought Frontier’s problems were behind them when they ran the first of two stories about the company Sep. 15th.  But then they met the Snatchko family and learned they spoke too soon.  Last night, they tried to determine how a West Virginia family could be charged nearly $700 for dial-up Internet service.  (4 minutes)

Back in July, Stop the Cap! shared the story of Mark Williams, an eager new customer for Time Warner Cable in Lee, Massachusetts.  The only thing getting in the way of Williams’ desire to shower the cable company with money for its triple-play Internet, cable, and phone service was the $12,000 fee the cable company sought to install it.

That sparked a major incident with Lee’s Board of Selectmen, who called the installation fee “ridiculous.”  It warned the cable company they were prepared to vote Tuesday night to sanction the company, taking money from the $10,000 Time Warner posted with the town as part of its local license agreement, if it didn’t relent.

At issue was Time Warner’s reasoning for the high installation fee, invoking a “long driveway clause” Malcolm Chisholm Jr., of Lee’s Cable Advisory Committee argued was an incorrect interpretation of the town’s license agreement.  Chisholm told The Berkshire Eagle the contract entitles all homes to cable service if electric and telephone service already are available.

Before the board voted, Williams reported the cable company verbally agreed to reduce the installation fee to $4,000.

“They’ve given me a price, but it’s still not cheap,” Williams said. “I’m looking to find an independent contractor who will do the job cheaper.”

Williams acknowledged the cost would be even lower, but he wants the cable buried between his home and the nearest utility pole, which is 500 to 600 feet away. He has his electricity service underground to his home on Fernside Road, near the Tyringham town line.

Time Warner’s typical installation fee of $35 covers up to 200 feet — above ground — with the rest of any necessary cost borne by the subscriber. Williams said he didn’t seek a cost estimate from Time Warner for an above-ground installation.

[…]In a similar case three years ago, Time Warner agreed to drop its claim that a homeowner on Antelope Drive in Lee pay $1,102 for cable installation. The company’s decision followed the town also threatening the company with financial penalties. However, Time Warner officials said the reversal was based on the individual case, rather than agreeing to the town’s interpretation of the contract regarding installation.

A British financial analyst has issued a new report telling phone companies they should forget about fiber optic upgrades — copper-based DSL service is adequate for consumers and doesn’t bring shareholders fits over capital expenditures.

Analysys Mason’s Rupert Wood believes companies are at risk of overspending on fiber networks that deliver speeds he claims few consumers want.

“The vague promise of future services may appeal to some early FTTH adopters, but will become increasingly ineffective as a selling point unless the rate of innovation in devices and services that are uniquely suitable for FTTH gets some new impetus from vendors and service providers,” writes Wood. “The future cannot be simply plotted against increasing fixed-line bandwidth.”

Wood believes wireless 3G and 4G broadband is where innovation and demand is greatest.  It also just happens to be where the biggest money can be made.  Providers can charge premium prices for wireless services while limiting access.

Wood

For at-home Internet, Wood believes copper-based DSL is fine for most consumers.  Wood points to American providers offering super-high-speed broadband tiers that attracts few buyers as proof there is little interest in ultra-fast connections.  DSL is cheap to provide, he argues.  Fiber is just ‘too risky’ and Wood suggests it’s not as “future-proof” as wireless.

So what should providers do with their fiber networks?  Short of abandoning them altogether, Wood recommends operators pull back on fiber roll-outs and deploy them only for experimental purposes.

“Conditions vary between markets, but in general the business case to move much beyond trials just isn’t there and we are already beginning to see some scale-back,” explains Wood.

“Bandwidth demand for fixed broadband is converging with the bandwidth required to stream TV, and its rate of growth will slow down,” he adds. “DSL [technology] might not be able to meet these demands at some point in the future, but we believe that this point is still a long way off.”

If you want to read more, it will cost you €5500 to purchase a copy of “FTTx roll-out and capex in developed economies: forecasts 2010–2015.”

Our analysis comes for free.

Wood ignores the most important reason why Americans are not signing up for ultra-fast premium speed tiers in droves — the current “early adopter” price tag.  Few consumers are going to justify spending $99 a month or more for the highest speed connections.  When price cuts deliver faster service at incrementally higher pricing, perhaps $10-20 for each step up, there will be greater demand.  If America was not interested in higher speed networks, Google’s proposal to build a 1Gbps fiber to the home system would have passed by without notice.  Instead, more than 1,100 communities applied to be chosen for the project, including just about every American city.

Wood’s report primarily speaks to a European market, where the majority of broadband connections come through telephone company DSL or wireless.  In the United States, the cable industry heavily competes with phone companies for broadband customers.  That is much rarer in Europe.  Wood’s claim that consumers care little about speed is belied by marketing campaigns that put cable broadband’s speed advantage front and center, and they have the market share to justify it.

In North America, although Wood’s report may be music to phone companies’ ears, refusing to upgrade copper phone networks comes at their peril.  Americans and Canadians are disconnecting their landlines at an increasing rate, abandoning those that abandoned innovation long ago. Cable operators report many of their new broadband customers come from those disconnecting slower speed DSL service from copper-loving phone companies.

The future is clear — sticking with standard DSL over copper phone lines in competitive markets is a losing proposition unless phone companies begin slashing prices to become a value leader for those who want more savings than speed.

Verizon determined the best way to “future proof” its network was to deploy fiber straight to the home in many areas.  Verizon’s vision carries a price tag analysts like Wood and those on Wall Street don’t like because it challenges short term profits.  But with Americans increasingly saying goodbye to their landline providers, not upgrading networks to give customers a reason to stay is penny wise and pound foolish.