New York Gov. Andrew Cuomo has set a goal that every resident of New York State should have access to at least 100Mbps broadband no later than 2018.

The governor will kick off his latest broadband expansion effort with the launch of his $500 million broadband expansion program, dubbed the New New York Broadband Fund, a follow-up to the state’s $70 million public-private effort to expand broadband that began in 2012.

Much of the money awarded in the 2012 broadband expansion effort went to Wireless Internet Service Providers, institutional broadband networks, middle-mile fiber projects not accessible to the public, and emergency service network upgrades. Another $5.2 million was awarded to Time Warner Cable to expand broadband service to 4,114 households in the Capital, Central, Finger Lakes, Mid-Hudson, Mohawk Valley, NYC, North Country, Southern Tier and Western regions of New York State. In June, many of the top funding recipients also received honors from the governor’s office in the first annual New York State Broadband Champion Awards.

Gov. Cuomo

Despite the money, the 2012 effort did not make a significant dent in the pervasive problem of broadband availability in upstate New York.

While Gov. Cuomo is committed to a target speed of 100Mbps within the next four years, more than one million New York households still cannot access broadband that achieves the state minimum — 6.5Mbps. That includes 113,000 businesses.

The governor’s solution is to subsidize private businesses with more tax dollars to resolve the broadband problem, with a significant part of the next round of funding likely to reach more institutional and public safety networks off-limits to the public, middle mile network expansion that can build state-of-the-art fiber rings that do not connect to end users, and an even bigger amount handed to Time Warner Cable (or Comcast if the state approves a merger with Time Warner Cable) and rural phone companies like Frontier Communications. Much of the money awarded to last mile providers like cable and phone companies will placate those that have stubbornly refused to expand further into rural areas unless taxpayers pick up some of the expense.

“In some of these areas, there’s just not a business case for these [service] providers to build out,” said David Salway, director of the New York State Broadband Program office. “The cost far exceeds what the revenue might be for that area.”

An unintended consequence of the broadband funding effort could be taxpayers subsidizing the establishment of for-profit monopolies in rural corners of the state. Although Salway told Capital NY he wanted to make sure New Yorkers had a choice, he clarified he was referring to a choice in technology, not service providers.

That must come as a relief for Verizon. The state’s largest phone company has petitioned state officials in the past for a gradual mothballing of New York’s rural landline network in favor of switching customers to wireless voice and broadband over Verizon’s cellular network. Theoretically, taxpayers could end up subsidizing the demise of rural New York landlines and DSL if Verizon seeks money from the rural broadband fund to expand its wireless tower network in rural New York. Time Warner Cable almost certainly will also seek more funding, probably in excess of the average $1,264 paid to the cable company for each of the 4,114 additional connections it agreed to complete during an earlier round of funding.

While rural broadband remains an important issue in New York, the merger of Comcast and Time Warner Cable is on the front burner and Salway, like the governor, had little to say. But Salway did offer that he did not believe the merger “would reduce [access] as much as further our goal” for expansion.

Guidelines for grant recipients are expected to become available just after the governor’s State of the State presentation in January, with ground-breaking on projects likely to start by mid-summer of 2015.

The slow lane

Frontier Communications customers in West Virginia are part of a filed class-action lawsuit alleging the phone company has violated the state’s Consumer Credit and Protection Act for failing to deliver the high-speed Internet service it promises.

The lawsuit, filed in Lincoln County Circuit Court, claims Frontier is advertising fast Internet speeds up to 12Mbps, but often delivers far less than that, especially in rural areas where the company is accused of throttling broadband speeds to less than 1Mbps. The suit also alleges Frontier’s broadband service is highly unreliable.

“The Internet service provided by Frontier does not come anywhere close to the speeds advertised,” wrote Benjamin Sheridan, the Hurricane lawyer filing the lawsuit on behalf of three Frontier customers. The attorney is seeking to have the case designated a class action lawsuit that would cover Frontier customers across the state.

“Although we cannot guarantee Internet speeds due to numerous factors, such as traffic on the Internet and the capabilities of a customer’s computer, Frontier tested each plaintiff’s line and found that in all cases the service met or exceeded the ‘up to’ broadband speeds to which they subscribed,” Frontier spokesperson Dan Page told the Charleston Gazette. “Nonetheless, the plaintiffs filed their case in Lincoln County, where none of them lives. If necessary, we are prepared to defend ourselves in court and bring the facts to light.”

Frontier’s general manager in West Virginia, Dana Waldo, may have helped the plaintiffs when he seemed to admit Frontier was purposely throttling the Internet speeds of its customers, a move Sheridan claims saves Frontier “a fortune” in connectivity costs with wholesale broadband providers like Sprint and AT&T.

Sheridan

“If as you suggest, we ‘opened up the throttle’ for every served customer, it could create congestion problems resulting in degradation of speed for all customers,” according to Waldo as part of an email exchange with one of the class members cited in the lawsuit.

The lawsuit also cites a state report issued over the summer that found just 12 percent of Frontier customers receive Internet speeds that actually qualify as “broadband” under federal and state standards. Frontier’s speed ranking is the slowest of any provider in the state. That is especially significant because Frontier is the largest ISP in West Virginia, and is often the only choice rural residents have for broadband service.

Frontier dismissed the state’s report claiming it was based on voluntary speed tests performed by disgruntled customers.

“As we’ve said before, the speed tests are the result of self-selected, self-reported samples,” Page said. “People who take speed tests tend to be those with speed problems or low speeds.”

“Even if that were true, it doesn’t account for Frontier’s poor performance,” said Frontier customer William Henley. “If every person that ran a speed test in West Virginia was annoyed with their provider, Frontier still came in last place.”

Frontier’s competitors scored better:

• Comcast: 88% of customers met or exceeded state and federal standards;
• Suddenlink Communications: 80%
• Time Warner Cable: 77%
• Shentel: 71%
• Armstrong Cable: 67%
• LUMOS Networks: 44%

“…Frontier’s practice of overcharging and failing to provide the high-speed, broadband-level of service it advertises has created high profits for Frontier but left Internet users in the digital Dark Age,” Sheridan wrote. “As a result, students are prevented from being able to do their homework, and rural consumers are unable to utilize the Internet in a way that gives them equal footing with those in an urban environment.”

Sheridan also accused Frontier of delivering its fastest speeds only in areas where it faces competition. Where there is none, Frontier can afford to go slow.

But slow speed is not the only issue. One plaintiff — April Morgan in Marion County — says she has to reset her modem up to 10 times a day to stay connected to the Internet. Her modem has been replaced several times by Frontier, but that has done little to solve her problem.

Frontier customers who check the company’s terms of service agreement may question whether Sheridan can get very far suing the company. A clause in the contract states customers must settle disputes only through binding arbitration or small claims court. Individual lawsuits, jury trials, and class-action cases are prohibited.

Sheridan points out customers have to go online to read the agreement – it is not provided to customers signing up for Internet service. A contract that forces customers to agree to its terms without getting informed consent may turn out not very binding under West Virginia law.

Lincoln County Judge Jay Hoke, assigned to hear the case, will likely face that matter in pre-trial motions.

West Virginia residents interested in the class action case can register here for updates.

Love can be a fickle thing.

Take Comcast’s affair with J.D. Power & Associates, for example. In Comcast’s filings with regulators, it is very proud that J.D. Power cited Comcast for the most improvement of any cable operator scored by the survey firm. Comcast touted the fact it had managed to increase its TV satisfaction score by a whopping 92 points and Internet satisfaction was up a respectable 77 points. (Comcast didn’t mention the fact J.D. Power rates companies on a 1,000 point scale or that it took the cable company four years to eke out those improvements.)

Last month, J.D. Power issued its latest ranking of telecommunications companies and… well, the love is gone.

If customer alienation was an Olympic event, J.D. Power awarded tie gold medals to both Comcast and Time Warner Cable for their Kafkaesque race to the bottom.

The survey of customer satisfaction largely found only dissatisfaction everywhere in the country J.D. Power looked. While Comcast likes to cite its “customer-oopsies-gone-viral” blunders as “isolated incidents,” J.D. Power finds them epidemic nationwide.

The highest rating across television and broadband categories achieved by either cable company was ‘Meh.’ J.D. Power diplomatically scored both cable companies on a scale that started with “among the best” as simply “the rest.” Customers in the west were the most charitable, those in the south and eastern U.S. indicated they were worked to their last nerve.

“The ability to provide a high-quality experience with all wireline services is paramount as performance and reliability is the most critical driver of overall satisfaction,” said Kirk Parsons, senior director of telecommunications, in a statement.

Having competition available from a high-scoring provider also demonstrates what is possible when a company actually tries to care about customer service. In the same regions Comcast fared about as popular as hemorrhagic fever, WOW! Cable and Verizon FiOS easily took top honors. Even AT&T U-verse scored far higher than either cable company, primarily because AT&T offers very aggressive promotional packages that include a lot for a comparatively low price.

Other cable and smaller phone companies didn’t do particularly well either. Frontier and CenturyLink both earned dismal scores and Charter Cable only managed modest improvement. The two satellite television companies did fine in customer satisfaction for television service, but it was the two biggest phone companies that managed the best scores for Internet service. Among cable operators, only independents like WOW! (and to a lesser extent Cox) did well in the survey.

If J.D. Power is the arbiter of good service Comcast seems to claim it to be, the ratings company just sent a very clear message that when it comes to merging Comcast and Time Warner Cable, anything multiplied by zero is still zero.

J.D. Power ranking (Image courtesy: Reviewed.com)

Connecticut’s tough Public Utilities Regulatory Authority (PURA) has rejected a settlement between state officials and Frontier Communications to acquire AT&T Connecticut, saying the deal offers very little to Connecticut ratepayers.

The settlement between Frontier, Connecticut’s Consumer Counsel and the Connecticut Attorney General’s office included commitments from Frontier governing contributions to state non-profit groups, phone rates and broadband expansion.

The Authority was told it could either approve or reject the settlement, but not suggest or require changes. It decided late last week to reject the settlement deal.

The regulator cited several reasons for its disapproval:

• A landline rate freeze offers little benefit to Connecticut ratepayers because landline rates have been stable for years and any attempt to increase them will only fuel additional disconnections;
• Frontier’s commitments to improve broadband service in Connecticut are vague, lacking specific speed improvements and rural broadband expansion targets to meet;
• Frontier attempted to insert weakened rules governing pole inspections, which should be part of a separate regulatory proceeding;
• The agreement might limit PURA’s ability to launch cost-recovery proceedings and flexibility to maintain oversight over Frontier’s performance in the state;
• A contractual agreement requiring Frontier to make specific contributions to state non-profit groups is inappropriate and unenforceable;
• A lack of information about how Frontier and AT&T will collaborate after the transaction is complete, particularly with AT&T’s U-verse offering;
• No details about how Frontier U-verse intends to handle Public, Educational, and Government Access channels on its television platform;
• A lack of a detailed disaster preparedness plan from Frontier to handle major service disruptions.

PURA’s Acting Executive Secretary Nicholas Neeley said the goal is to “improve the likelihood of success of Frontier as it assumes the duties, obligations and responsibilities currently held by AT&T in Connecticut.”

“(It seeks to) balance the interests of all parties affected by this transaction, promote competition and preserve the public’s rights to safe and adequate communications services,” Neeley wrote in a public notice. “The Authority hopes that such a session will produce an amended proposal from Frontier that would be deemed acceptable for consideration.”

The rejection also seeks to protect and preserve Connecticut’s regulatory oversight power over Frontier.

Frontier received a better reception from the Communications Workers of America. The phone company has traditionally maintained reasonably good relations with its unionized workforce. CWA approved of Frontier’s purchase of AT&T Connecticut after winning commitments for new union jobs, a job security program, a payout of 100 shares of company stock to each union member, and Frontier’s commitment to prioritize Connecticut-based call centers.

Wall Street is less impressed. This morning, Morgan Stanley downgraded Frontier’s stock to “underweight,” citing complications in the AT&T Connecticut deal and Frontier’s increasing debt load. Frontier is financing $1.55 billion of the $2 billion transaction by selling two groups of senior notes of $775 million each, due in 2021 and 2024. As of June 30, Frontier had amassed $7.9 billion in debt with just $805 million in cash on hand.

Frontier’s proposed northeastern service areas would add almost the entire state of Connecticut to its holdings in mostly rural upstate New York and Pennsylvania and the metropolitan Rochester, N.Y. 585 area code region where the company got its name.

[flv]http://www.phillipdampier.com/video/Frontier Communications Connecticut 1-2014.mp4[/flv]

Frontier Communications introduces itself to AT&T Connecticut customers in this company-produced video. (4:03)

Frontier used Time Warner Cable’s usage cap experiment against them in this ad to attract new customers in the spring of 2009.

Frontier Communications has filed a rare objection with the Federal Communications Commission opposing the merger of Comcast and Time Warner Cable, citing concerns the merger would further harm competition and prevent Frontier and other competitors from getting fair access to programming owned by the combined cable companies.

“Comcast’s appetite for market control threatens the competitiveness of the video market,” wrote Frontier. “Comcast is already the largest Internet provider and largest video provider in the United States. If approved, Comcast’s video subscriber base would be approximately 52-times the size of Frontier’s video subscriber base.”

As Stop the Cap! wrote in its own objections to the merger, would-be competitors can and will be deterred from competing for video subscribers if they cannot obtain reasonable wholesale rates for popular cable programming. Currently, the largest providers extend the best volume discounts to the country’s largest satellite and cable operators. They make up those discounts by charging smaller customers higher rates. Frontier, as we noted in our filing, has already experienced the impact of volume discounting in its adopted FiOS TV areas in Indiana and the Pacific Northwest. Losing volume discounts originally obtained by Verizon, Frontier faced substantially higher programming costs as an independent provider — costs so great the company began asking customers to drop its own fiber television product in favor of third-party partner DISH, a satellite provider.

“Small multichannel video programming distributors (MVPDs) like Frontier cannot achieve the scale necessary to drive down programming costs, which are based upon an MVPD’s subscriber totals, to the same levels that Comcast can with this transaction,” noted Frontier. “Further, Comcast would own an enormous share of the “must have” programming that customers demand and could exercise its market dominance to either outright deny such programming to its competitors or to functionally deny the programming by charging exorbitant rates for content.”

“While Frontier continues to grow its subscriber base organically by delivering a quality product in its markets and also by acquiring AT&T’s wireline assets in Connecticut, the cost of content for video programming remains staggering for new entrants that lack the scale and scope of cable companies like Comcast and Time Warner Cable individually, let alone that of the merged entity,” said Frontier. “It is no mere coincidence that AT&T announced its proposed acquisition of DirecTV shortly after Comcast announced its intention to purchase Time Warner Cable. AT&T recognized the need to improve its subscriber scale in order to compete with Comcast on video programming pricing.”

Frontier noted the Federal Communications Commission also expressed grave concerns over Comcast’s ability to affect video competition during its acquisition of NBCUniversal. That merger was approved only after Comcast agreed to several conditions to avoid anticompetitive abuse in the marketplace. But Frontier complained a further acquisition of Time Warner Cable would only exacerbate competition concerns, even as Comcast argues the FCC should not contemplate any further investigation of the subject during its current merger review.