Consumer Reports today released its 2012 list of America’s best phone, broadband, and pay television providers (subscription required), giving top scores to fiber-to-the-home and cable broadband and exposing some familiar phone and cable companies which year-after-year deliver “bottom of the barrel” scores.

Nearly 70,000 readers of the consumer magazine participated in rating their local telecommunications providers for value, reliability, customer service, and broadband speed.  No provider scored higher than “average” for value, but wide discrepancies in broadband speed and the quality of service made choosing winners and losers easy.

Top-rated WOW! (formerly WideOpenWest), is the 15th largest cable provider in the United States, but regularly wins top scores from Consumer Reports readers for the quality of its services. WOW! currently serves mostly suburban subscribers in a handful of cities in Illinois, Ohio, Michigan and Indiana. But the provider will soon be coming to several new locations thanks to its April purchase of cable overbuilder Knology, which provides service in multi-dwelling units and administers some community-owned broadband networks around the country.  This could provide relief for customers dealing with onerous usage caps in cities like Lawrence, Kan., where Knology’s buyout of Sunflower Broadband kept that company’s Internet Overcharging scheme in place. WOW! has no usage limits on their broadband service.

Verizon’s FiOS fiber to the home network is also a consistent winner in the ratings, especially for its fast broadband service.

AT&T’s U-verse also scored high in the ratings for broadband.  AT&T’s fiber-to-the-neighborhood service still works with existing copper phone wiring inside the home and delivers 20+Mbps broadband, a major improvement over AT&T’s traditional DSL service, which usually tops out at 7Mbps.

Among top-rated cable companies you have heard of, Bright House Networks scored a major coup, winning third place for its broadband service.  Ironically, consumers gave very high marks to Earthlink delivered over Time Warner Cable, scoring it fourth place for broadband. But Earthlink’s performance on Time Warner Cable is actually slightly less than the cable company’s own broadband service. Although both services share exactly the same network, Time Warner adds “speedboost,” a temporary speed increase for downloads. But the cable company got no respect from customers, who put TWC in 19th place.

Other findings of interest:

• TDS, an independent phone company serving primarily rural areas scored a very high fifth place in broadband, despite offering only traditional DSL service (except in limited areas where it has built fiber networks to stay competitive with community-owned providers and cable companies).  But the company won high marks for service reliability;
• Frontier Communications’ inherited FiOS fiber to the home services in Indiana and the Pacific Northwest were that company’s only bright spots for broadband, putting both systems in sixth place.  Everywhere else… forget about it. The company’s traditional DSL service was rated a lousy value and delivered mediocre speeds, earning 24th place.
• Satellite fraudband providers Wildblue and HughesNet continue to torture their customers, scoring dead last for lousy value, speeds, reliability, and everything else.
• Still awful after all these years: Mediacom, Charter, and FairPoint Communications all continue their dubious distinction scoring at the bottom of the barrel for broadband. It’s nothing new for any of them, and it appears nothing is likely to change those rankings in the immediate future.

Americans still hate the big boys.  Outside of AT&T and Verizon’s shorter history delivering triple-play-packages of cable, phone, and Internet service, the legacy of lousy pricing and service from the country’s largest cable operators still hold them back in the ratings.  Comcast managed only 24th place, dragged down by terrible customer service and worse value.  Cablevision did better at 16th place with higher marks for everything but value.  It was the same story for 12th place Cox Cable.

What was the top choice for telephone service in 2012?  Ooma, a Voice over IP phone company that works with an existing broadband connection.  Phone companies that have been in the business of phone service for decades (or longer) were all bottom-rated: AT&T, Verizon, FairPoint, and Frontier Communications.  Only Mediacom, a cable operator, kept Frontier from scoring dead last.  And they wonder why Americans can’t wait to disconnect traditional landline service?

In fact, Consumer Reports says no other industry alienates consumers more than America’s telephone and cable companies.

But you can fight back and score a better deal.  Stop the Cap! was quoted in the magazine piece with our advice to play hardball with cable and phone companies who charge too much and deliver too little.

“The magic word is ‘cancel,’ ” says Phillip Dampier, of the website Stop the Cap! He suggests you schedule your disconnection date for a week or two in the future. “When you’re on their disconnect list, they are going to start calling you offering very aggressive deals,” he says.

Top-rated WOW! only delivers service in a handful of cities in the midwest, but is getting larger after acquiring Knology in April 2012.

Indeed, Consumer Reports found most providers willing to deal… eventually, but they have gotten wise to halfhearted negotiation tactics by consumers looking for a better deal. If a provider suspects you won’t follow through on a threat to change providers, they often stubbornly refuse to deal. That’s why we recommend requesting to be placed on a “pending disconnect” list — proof you are prepared to leave in a week or two if they won’t negotiate.

We’ve followed investor conference calls for most major providers over the past two years. Every provider has gotten more aggressive with customer retention offers, in part because of the poor economy and increased competition. Customers are paring back cable packages and cutting out extra channels and services they can no longer afford. Some have become expert at bouncing between new customer promotional offers. Cable operators like Time Warner Cable have tried to keep customers, even those coming to the end of promotions, with slightly less aggressive discounting.

“We have a very well-choreographed program for moving people from the most heavily discounted promos into the rational next-step pricing packages,” Rob Marcus, president of Time Warner Cable told the magazine. “Over time, that discount will decrease, but you’d probably still save 20 to 30 percent off the rack rate,” or regular price.

But we found consumers who get back on the disconnect list usually do much better than Time Warner’s “next-step” pricing, some even earning a better retention offer than what they received in 2011. The more serious customers are about their willingness to leave, the better the offer in return.

Dead last place for cable companies... again.

The magazine also offers solace for customers who literally have nowhere else to go for service:

Alan Curtis of Manchester, N.H., whose condominium is served only by Comcast, says his rates go up each year but he pushes back. “If you say, ‘We’ll have to buy less,’ occasionally they’ll come up with a cost-cutter that will apply to you,” he says. Similarly, a staffer who lives in a New York City apartment served only by Time Warner Cable more than offset a $5 increase in his overall bill by negotiating an $8-a-month cut in his DVR rental fee for 12 months.

Consumer Reports also warns customers to choose broadband providers wisely, because the speeds they advertise may never materialize. Case in point, Frontier Communications’ dreadful DSL service, which the magazine found met the company’s speed marketing claims only 67% of the time. Frontier has been struggling with a vastly oversold broadband network, causing speeds to slow dramatically during peak usage times, particularly in states like West Virginia.  The magazine recommends fiber to the home providers and cable operators for more consistent broadband performance that comes closer to the broadband speeds advertised.

At all costs, avoid satellite broadband, which remains slow, expensive, and heavily usage-capped.

Maybe not

Telus Corporation’s no-contract cell phone subsidiary Koodo billed a mentally disadvantaged Vancouver-area teen $8,000 in “premium texting” charges it claims are supposed to be capped at $500 a month.

Nineteen year-old Brandon Kobza, born with fetal alcohol syndrome and other disabilities, found himself in the hole with Koodo after signing up for a text-dating service that costs up to $2 per message.

Kobza obtained his Koodo cell phone with the help of Ben Woodman, a Burnaby church youth worker, who ended up putting the phone in his name with the understanding there would be strict limits on the account.  Kobza earns just $900 a month, mostly from social welfare benefits for the physically and mentally challenged.

“I said, ‘You know I don’t want any data or extra charges’ and Koodo said, ‘We can block that.’ I made sure he had unlimited texts,” Woodman told CBC News. “I put a lot of faith in Koodo. I’m asking the representative ‘What can go wrong ? Can I get charged for anything else?’ And they said nothing about premium texts.”

Kobza learned about a text-based dating company from a friend who claimed it would allow him to meet girls, and one named “Katya” promptly began text flirting with him several times a day… at $2 a message.

Kobza never got to meet Katya, if she actually existed, but a month and half of virtual dating turned out to be mighty expensive.  By the time Woodman had the premium text messages cut off, Kobza had managed to exchange more than 4,100 text messages for $8,243.  The actual cost to Telus to deliver that number of text messages runs in the pennies.

The first of two Koodo bills

Woodman canceled the phone and requested a refund, but Koodo initially refused, offering an 80% discount instead.  But Koodo’s own policies are supposed to limit premium texting fees to $500 a month, in part to deal with the explosive number of complaints from customers about unjustified or misunderstood premium text charges.  In Kobza’s case, youtext.com apparently ignored Koodo’s rules for third party vendors and kept the charges coming.

After Woodman and Kobza got nowhere with Koodo, both decided to go public and contact CBC News, who promptly found the telecom “Pass the Buck ‘n Blame“-game in full force.

Koodo customer service representatives and kiosk employees both disassociated themselves with premium texting, claiming the cell phone company considers the vendors a nuisance because of complaints from customers. Representatives even denied Koodo takes a cut of the proceeds, which turned out to be untrue.  They referred customers back to youtext.com who promptly sends complainers back to the cell phone company.

The mysterious "Katya" Kobza paid $2 for every virtual text "date"

Premium texting charges are often unwittingly incurred by customers who enter their mobile number on unfamiliar websites or advertisements for things like dating services or “joke of the day” messages.  Only in the fine print, when disclosed, do consumers learn these texts can run several dollars each, and many only find out when the first bill arrives.

Youtext does send reminder text messages warning customers that charges are incurred for their services, but Woodman said Kobza simply didn’t comprehend what they meant.

Neither do many other Canadians, who file hundreds of complaints a year against premium texting services with the commissioner for complaints for telecom services.

Regulators say phone companies do earn a percentage of every premium text message billed, and with companies acting as both billing agent and collector, they have a vested interest in the profits reaped when customers pay their bills. That makes waivers for bill shock incidents more difficult than they should be, consumer advocates complain.

A Koodo spokesperson told CBC News the texting charges should have been forgiven immediately, and in full.  After CBC News got involved, the charges were removed from Woodman’s bill altogether.

Consumer advocates say Canadian cell phone companies should allow consumers to automatically block all premium text messaging services.  Currently, Rogers Communications is the only provider that uniformly provides this service.  Koodo says it is working on a premium text message blocker for its customers, and has been in touch with youtext.com regarding its violation of Koodo’s $500 limit on premium texting charges.

In the meantime, consumers should avoid entering their mobile numbers on websites for any advertised services, especially for ringtones, voicemail services, conference calling, dating, and “information services” automatically sent to your phone. Most of these services come at premium prices, billed by your cell phone company.

[flv width=”640″ height=”380″]http://www.phillipdampier.com/video/CBC Disabled teen incurs 8000 texting bill 5-7-12.flv[/flv]

CBC News in British Columbia intervened to help a mentally-disadvantaged teenager find a solution to more than $8,000 in texting charges that should have never been billed.  (2 minutes)

AT&T CEO Randall Stephenson is kicking himself over his decision to allow “unlimited use” plans on AT&T’s wireless network.

Speaking at the Milken Institute’s Global Conference last Wednesday, Stephenson took the audience on a journey through AT&T’s transformation from a landline provider into a company that today sees wireless as the source of the majority of its revenue and future growth.  But the company left a lot of revenue on the table when it offered “unlimited data” for smartphone customers, particularly those using Apple’s iPhone.  It’s a mistake Stephenson wishes he never made.

“My only regret was how we introduced pricing in the beginning… thirty dollars and you get all you can eat and it’s a variable cost model,” Stephenson complained. “Every additional megabyte you use in this network, I have to invest capital. So get the pricing right. Our average revenue [per customer] has been increasing every single quarter since we started down this path.”

Stephenson admitted AT&T’s problems were created by the company itself when it embraced its transformation into a wireless power player.

Years earlier, the current CEO green-lit a new “smartphone” after a visit from Apple proposing a new device that used a touch screen to make calls, launch applications, and surf the wireless web.  It was called the iPhone.

AT&T’s first iPhone, Stephenson said, was not a major problem for AT&T and did not even launch on the company’s growing 3G network. In 2007, the Apple iPhone came pre-loaded with a selection of apps and used AT&T 2G network to move data.  Stephenson said Apple’s launch of a new iPhone in 2008 that worked on AT&T’s 3G network, along with a new App Store that allowed customers to do more with their phones, changed everything.  By 2009, AT&T’s network was overloaded with data traffic in many areas.

“[There] were volumes [of traffic] that nobody had ever anticipated and we had anticipated big volumes of growth,” Stephenson said.

In Stephenson’s view, AT&T’s solution to the traffic problem early on should have been a change to the pricing model, eliminating flat rate service at the first sign of network congestion.

“I wish we had moved quicker to change the pricing model to make sure that people that were consuming the bandwidth were paying for the bandwidth and [instead] we had a model where the high end users were being subsidized by the low end users,” he said.

Stephenson acknowledged the company has service issues in large American cities like New York, San Francisco, and Los Angeles, and blames them on a combination of voracious wireless data usage and spectrum shortages.  However, industry observers also note that many of AT&T’s service woes may have come from an unwillingness to invest in sufficient network upgrades as aggressively as other carriers, which have not experienced the same level of network congestion and the resulting steep declines in customer satisfaction AT&T has endured for the last three years.

But the ongoing congestion problems have not hurt AT&T’s revenue and profits.  Stephenson admitted that in 2006, AT&T earned almost nothing from wireless data and made between 30-32% margin selling voice and texting service.

“Today, we’re a $20 billion data revenue company and we’re operating at 41-42% margins,” Stephenson said.

Despite that improved revenue, AT&T says if they don’t get spectrum relief soon, they are going to keep raising prices on consumers. Stephenson said the company has been increasing prices across the board on data plans, new smartphone ownership, those upgrading phones, as well as reducing certain benefits for long-term customers. Stephenson said these actions were taken because spectrum has become a precious resource and bandwidth scarcity requires the company to tamp down on demand.  But that’s not a message he delivers to Wall Street, telling investors AT&T’s key earnings and increased revenue come from price adjustments and metering data usage.

Stephenson also fretted there is too much competition in America’s wireless marketplace.  That competition is eating up all of the available wireless spectrum, threatening to create a spectrum crisis if the federal government does not rethink spectrum allocation policies, he argued.  Stephenson believes additional industry consolidation is inevitable because of the capital costs associated with network construction and upgrades. He said he was uncertain whether AT&T will be able to participate in that consolidation after failing to win approval of its buyout of T-Mobile USA.

Stephenson believes the days of heavy investment in wired networks are over. Stephenson has systematically sought to transition AT&T away from prioritizing wired services in favor of wireless, a position he has maintained since his earliest days as AT&T’s CEO. The company’s decision to end expansion of U-verse — AT&T’s fiber-to-the-neighborhood service, and concentrate investment on wireless is part of Stephenson’s grand vision of a wireless America.  Stephenson noted the real fiber revolution isn’t provisioning fiber to the home, it’s wiring fiber to cell towers to support higher data traffic.

But that traffic doesn’t come to users free. Instead, Stephenson believes leaving the meter on guarantees lower rates of congestion because it makes customers think about what they are doing with their phones. It also brings higher profits for AT&T by charging customers for network traffic.  Stephenson believes that assures the returns Wall Street investors demand, attracting capital to front network investments.

With that in mind, Stephenson still believes AT&T can help solve the data digital divide, where poor families cannot afford to participate in the online revolution. Stephenson said it can be managed by handing the disadvantaged sub-$100 smartphones and $20 data plans, assuming they can afford those prices.

What keeps Stephenson up nights?  Worrying about business model busters that manage end-runs around AT&T’s profitable wireless services.

“Apple iMessage is a classic example,” Stephenson noted. “If you’re using iMessage, you’re not using one of our messaging services, right? That’s disruptive to our messaging revenue stream.”

Stephenson remains fearful its network upgrades will improve wireless data service enough to allow customers to switch to Skype for voice and video calling, depriving AT&T of voice revenue.

But the CEO seems less concerned than some of his predecessors that content producers are enjoying “free rides” on AT&T’s network.

“We in this industry have spent more time bemoaning the thought that Google or Facebook may use our network for free, and it just hasn’t played out that way,” Stephenson said. “I mean they do use it for free, they’re getting a bargain, and that is fine.”

“I believe what will play itself out over time, is that the demand model will change this behavior,” he said. “We’re already at a place where some companies that deliver content are coming to us and saying ‘we would like to do a deal with you where you would give us a class of service to deliver our content to your customers.'”

“The content guys that have been so loud about these issues [Net Neutrality] are now the ones coming to us saying we want these models,” Stephenson argued. “I’ve always believed that is what would play out.”

[flv width=”640″ height=”500″]http://www.phillipdampier.com/video/Global Conference 2012 A Conversation With ATT’s Randall Stephenson 5-1-12.flv[/flv]

Stop the Cap! edited down Randall Stephenson’s appearance at last Wednesday’s conference.  Stephenson faces few challenges as he presents his world-view about AT&T pricing, spectrum allocation policies, network investments vs. data traffic growth, his vision for AT&T’s future, and how much customers will be forced to pay for today’s “spectrum crisis.”  (28 minutes)

Can we have 90 seconds of your time, please?

Christopher Mitchell at Community Broadband Networks has put together some compelling evidence about how some of the most advanced broadband networks in the country are being built by and for the communities they ultimately serve.

You may think the best broadband around can be found in the biggest cities in America, but you’d be wrong.

“It may surprise people that these cities in Virginia, Tennessee, and Louisiana have faster and lower cost access to the Internet than anyone in San Francisco, Seattle, or any other major city,” says Christopher Mitchell, Director of ILSR’s Telecommunications as Commons Initiative. “These publicly owned networks have each created hundreds of jobs and saved millions of dollars.”

The fact is, public broadband is convincing some of the country’s biggest tech companies, including Amazon.com, to locate enormous distribution centers right in the middle of fiber-plentiful cities like Chattanooga, and that means job growth — a lot of it.

Unfortunately, too often today’s “broadband innovation” comes only from how to extract more money for less service from some of America’s top providers. Usage caps, overcrowded networks, and speed constraints conspire to help America lose the global speed race.  But some communities are fighting the good fight themselves, even as big phone and cable companies like AT&T, Time Warner Cable, Comcast, and CenturyLink are trying to smash those networks through special interest corporate welfare legislation.

Mitchell and his team have assembled the facts: BVU Authority’s OptiNet in Bristol, Virginia; EPB Fiber in Chattanooga, Tennessee; and LUS Fiber in Lafayette, Louisiana — all built by publicly-owned utilities, demonstrate the public sector can deliver effective, innovative service at prices consumers can afford.  Better yet, they’re doing it in places big telecommunications companies decided were unworthy of getting world-class service.

[flv width=”640″ height=”380″]http://www.phillipdampier.com/video/Community Broadband.flv[/flv]

Watch this video and learn why community broadband networks represent America’s most innovative broadband, and then learn more about how you can get involved and support better broadband in your community.  (2 minutes)

Wall Street analysts are predicting the end of free video streaming in the near-term as media and cable companies regain control over online content for themselves.

Cable companies are partnering with content producers to move a growing amount of streamed video content behind paywalls in an effort to protect their core business profits.

The trend is evolving so rapidly, analysts like Laura Martin with Needham & Co. predict the end of free streaming is imminent.  Either customers will pay upfront or use TV Everywhere “authentication platforms” that require evidence of a pay television subscription before being able to watch.

Craig Moffett, an analyst with Sanford Bernstein, perennially sees cable operators as the most likely winners in the billion-dollar entertainment battle.

“They’re winning the broadband wars,” Moffett says of the cable industry. “Broadband is increasingly the flagship product, not the video distribution business.”

Cable networks and program producers are growing increasingly alarmed at the impact video streaming services like Hulu and Netflix are having on their bottom lines.

Case in point: the fall of Nickelodeon, a popular children’s cable network that used to guarantee high ratings and lucrative ad revenue.  Recently the network has fallen off the ratings cliff.  Some careful analysis found the reason why: Netflix.  Nickelodeon, along with many other cable networks, licensed a number of their series to Netflix for on-demand viewing. In households with young children, parents increasingly choose the on-demand Netflix experience for family viewing over the traditional cable channel.

Moffett

That’s a major problem for content producers and networks, and Moffett quotes industry insiders who predict licensing deals for Netflix streaming will increasingly not be renewed (perhaps at any price) as networks retrench to protect their core business.  What is left will soon be behind paywalls, limited to customers who already subscribe to a pay television service.

That line of thinking is already apparent at Time Warner (Entertainment), Inc., where CEO Jeff Bewkes rarely has a good thing to say about Netflix.  His company refuses to license a significant amount of their content for online streaming because it erodes more profitable viewing elsewhere.

Time Warner only licenses older content and certain “serialized dramas” that have proven difficult to syndicate on traditional broadcast television or cable outlets.  But the company keeps kid shows to itself and its own distribution platforms, like Cartoon Network.

When it does let shows go online, it wants them behind paywalls.

Bewkes applauded Hulu’s recently announced plans to move its service away from free viewing.  Authenticating viewers as pay TV subscribers before they can watch “makes sense” to Bewkes.

“Hulu is moving in the right direction now,” Bewkes said.

Big media companies do not want significant changes to the viewing landscape, where major networks front the costs for the most expensive series, and cable networks commission lower budget programs and repurpose off-network content.  Pay television providers bundle the entire lineup into an enormous package consumers pay to receive. That is the way it will stay if they have their say.

“Just because consumers would rather get individual channels a-la-carte, on-demand, and streamed — only what they want to pay for — [if they think] that is inevitably the way the world if going to evolve, not so fast,” Moffett said. “It may be the way consumers want it and it may be the way technologists want it, but the media companies have a say here.”

“There is no way they are going to voluntarily unbundle themselves,” Moffett said.

[flv width=”360″ height=”290″]http://www.phillipdampier.com/video/Bloomberg Moffett on Cable Operators 4-30-12.mp4[/flv]

Craig Moffett talks about the current state of the media business on Bloomberg News.  He sees trouble ahead for online video streaming, as powerful media and entertainment content distribution companies reposition themselves to better control their content… and the revenue it earns.  The big winners: Cable operators, Hollywood, and major cable networks.  The losers: Consumers, Netflix, Hulu, and free video streaming. (11 minutes)

[flv width=”360″ height=”290″]http://www.phillipdampier.com/video/Bloomberg Martin Sees End of Free Streaming TV Content 5-4-12.mp4[/flv]

Laura Martin with Needham & Co. predicts the imminent demise of free video streaming. Media companies can’t handle the loss of control over their programming, and the erosion of viewers (and ad revenue) it brings.  Martin tells Bloomberg News she sees a future of paywalls blocking access to an increasing amount of online video content.  (5 minutes)