Losing customers.

A year after Frontier Communications assumed control of Verizon’s assets in the Pacific Northwest, customers are fleeing the company’s inherited fiber-to-the-home service FiOS, after announcing a massive (since suspended, except in Indiana) 46 percent rate hike for the television portion of the service.  A new $500 installation fee has kept all but the bravest from considering replacing customers who have left for Comcast and various satellite TV providers.

Frontier’s second-quarter financial results revealed the company has lost at least 14,000 out of 112,000 FiOS TV customers in the region (and in the Fort Wayne, Ind. market, where the service is also available.)

Early reaction to the original rate hike announcement started customers shopping for another provider — mostly Comcast, which competes in all three states where Frontier FiOS operates.  Even after the rate hike was suspended in some markets, intense marketing activity by Frontier to drive customers towards its partnership with satellite provider DirecTV managed to convince at least some of those customers to pull the plug on fiber in return for a free year of satellite TV, although an even larger number presumably switched to the cable competition.

D.A. Davidson, a financial consulting firm, told The Oregonian the message was clear.

“They would love to get rid of the FiOS TV customers,” Donna Jaegers, who follows Frontier, told the newspaper. “They’re programming costs are very high compared to the rates that they charge.”

Jaegers said Frontier Communications completely botched their efforts to transition customers away from FiOS TV towards satellite, because most of those departing headed for the cable competition, attracted by promotional offers and convenient billing.

Many others simply don’t want a satellite dish on their roof, and are confounded about Frontier’s message that satellite TV is somehow better than fiber-to-the-home service.

Frontier admits its FiOS service is now underutilized, but claims it will continue to provide the service where it already exists.

Wilderotter

Frontier Claims Its DSL Service is Better Than Cable Broadband

Frontier’s general business plan is to provide DSL service in rural areas where it faces little or no competition, and most of Frontier’s investment has been to upgrade Verizon’s landline network to sustain 1-3Mbps DSL service, for which it routinely charges the same (or more) for standalone broadband service that its cable competitors charge for much faster speeds.

But Frontier Communications CEO Maggie Wilderotter says their DSL service is better than the cable competition.

“A key differentiator between our network and cable competition is that you consistently get the speed you pay for,” Wilderotter told investors on a conference call. “There’s no sharing at the local level. High demand for bandwidth-intensive applications like video are putting pressure on all wired networks. To that end, we want to make sure that we have more than enough capacity to satisfy the expectations of our customers. We’re spending capital in all parts of the network with specific emphasis in the middle mile, which will enable us to consistently deliver a quality customer experience for our customers of today and tomorrow.”

Frontier Communications CEO Maggie Wilderotter defends anemic broadband additions during the 2nd quarter of 2011 and tries to convince investors DSL service is better than the cable competition. August 3, 2011. (4 minutes)
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Netflix Traffic Represents 25% of Frontier’s Broadband Traffic; Online Video — 50%

Wilderotter admitted Frontier’s broadband network is overcongested in many regions, which she partly blamed for the company’s anemic addition of new broadband customers.

She noted Netflix, which has itself consistently rated Frontier the worst wired broadband provider in the country for being able to deliver consistent, high quality access to their streaming service, represents one-quarter of all capacity usage of Frontier’s broadband network.

“Video is about 50 percent,” Wilderotter added.  In an investor conference call, she explained network congestion in more detail:

“In [the second quarter], we had many areas with unacceptable levels of network congestion, which negatively impacted our growth in net high-speed additions.” Wilderotter said. “We believe all of the major congestion issues will be fixed by the end of [the third quarter], and that will enable us to drive higher growth and net broadband activation in [former Verizon service areas.]”

“What we decided to do is to go for fixing the middle mile, which is the [central office] to the […] neighborhood and to expand that capability by 100-fold. And then also, expand from the [central office] out to the Internet and make sure that we have huge capacity to deliver and receive capability to our customers. So when we sell 6 meg, 10 meg, 25 meg, 50 meg, the customer gets what we sell them and that was extremely important for us.”

“So what we did is in the areas where we saw the congestion increase based upon usage increases, and we’ve built new households. We’ve held off on marketing to a lot of those new households until we fixed the congestion problem because we didn’t want to exacerbate what we had already. We’ve shifted capital in terms of the mix of how we’ve spent capital to fix this problem. I’d say we’re probably 75% of the way there in fixing congestion. This quarter is another big quarter for us to get all of the major issues out of the network, which will allow us in the back end of this quarter through the fourth quarter, to really start pushing the penetration levels where we’ve built new households in the areas that have been affected by congestion.”

Frontier Introduces Line Bonded DSL — Two Connections Can Improve DSL Speeds

Frontier Faster? Frontier announces line bonded DSL.

Frontier Communications also announced the introduction of Frontier Second Connect, a DSL line bonding product that delivers two physical connections to a single household.  Line bonding allows for improved broadband speeds.

“Second Connect gives our customers two exclusive connections in one household, and we’re the only provider in every market that can do that,” Wilderotter claimed.

In more urban markets, Frontier’s DSL speeds are woefully behind those available from most cable competitors.  Frontier has begun upgrading some of their legacy service areas and retiring older equipment in an effort to improve the quality of service.

“The real initiatives that we have underway are called middle mile, interoffice facilities, as well as some of the more aged equipment that’s in the network,” said Dan McCarthy, Frontier’s chief operating officer. “So as we go through, there’s about 600 projects that are underway today that will improve both the speed and capability.”

“We’ve inherited markets that there has not been upgrades to capacity in these markets for many years and fixes to the networks, plus the elements as the DSLAMs, even the DSLAMs themselves are old,” Wilderotter said. “So we’re replacing network elements in the neighborhood. We’re splitting them and moving customers to other network elements to make sure that they have a good experience.”

Frontier executives answer a question from a Wall Street banker about DSL speeds and congestion problems on Frontier’s broadband network. A detailed technical discussion ensues as the company tells investors it is redirecting some capital to fixing Frontier’s overcongested network. August 3, 2011. (5 minutes)
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Frontier Still Losing More than 8% Of Its Landline Customers Every Year

Despite broadband rollouts and incremental improvements, more than eight percent of Frontier’s landline customers disconnect service permanently every year.  Frontier called that disconnect rate an improvement over its line losses last year, which exceeded 11 percent in some areas.

“Total line losses improved to an 8.6% year-over-year decline, our lowest level since taking ownership when the pro forma loss rate was 9.7%,” reported Wilderotter. “We also improved [the] loss rate [in former Verizon service areas to] 10.1% compared to 11.4% in Q2 2010.”

Most of Frontier’s departing customers are switching to cable providers and/or cell phone service.

(Update 8-23-2011: We are now told in many areas, Frontier’s Second Connect service is not actually a bonded DSL product, but rather a “dry loop” second DSL line that carries the same speed as your primary line.  Presumably, household members can divide up who uses which DSL circuit for Internet access.  The charge for Second Connect in ex-Verizon service areas is $14.99 per month plus a second mandatory monthly modem rental fee of $6.99. If the web link does not work, it means the service is not available in your service area.)

Vandalism causes serious phone outages in upstate New York. (Courtesy: Verizon Communications)

Frontier Communications’ landline customers in Lewis and Oneida counties faced long distance service outages, while just about everyone in northern Oneida County is without both landline and cell phone service after fiber lines serving cell towers and landline customers were cut Monday.

The New York State Police have launched a criminal investigation into the sabotage, while Verizon Communications implies the damage might have come as a result of a strike against the company that began last weekend.

The largest outage, which cut off cell service and landlines, originated in Deerfield, where cables were severed.

Several upstate communities are facing lengthy service outages from a variety of acts of vandalism, most from cable cuts and damage to junction boxes.

Verizon has rushed out news releases regarding the damage, offering a reward of up to $50,000 for information leading to the arrest and prosecution of individuals that intentionally damage Verizon cables or facilities or cause or attempt to cause physical injury to any Verizon employee or contractor.  Verizon urges anyone who witnesses sabotage of Verizon property or any suspicious activity to call 911 immediately, then call the Verizon Security Control Center at 1-800-997-3287.

Both sides of the dispute are now appealing to Congress to intervene, an action that may not bring immediate results.  Both the House and Senate are currently in their five-week summer recess.

[flv]http://www.phillipdampier.com/video/WKTV Utica Criminal investigation into cut phone lines that caused massive outages 8-9-11.mp4[/flv]

WKTV in Utica covers the impact of widespread landline and cell phone outages in Oneida County, upstate New York.  (1 minute)

[flv width=”640″ height=”380″]http://www.phillipdampier.com/video/WRGB Albany Verizon Vandals 8-8-11.flv[/flv]

WRGB in Albany explores additional acts of vandalism in the Capitol District and gets reaction from striking workers about whether they were involved.  (3 minutes)

A very pricey upgrade

Frontier Communications’ DSL modem rental fee is now as high as $6.99 a month in some of the phone company’s service areas, $14.99 a month if you want the convenience of a wireless router built-in.  That’s $84 and $189 a year, respectively, for equipment that cost the company a fraction of that.

“Lymelizzard,” a would-be Frontier DSL customer in Robbinsville, North Carolina, considers that highway robbery.

“I can go and buy the modem at a store and it would be less than one year of rental,” he wrote on Broadband Reports’ Frontier forum.

Frontier Communications’ regular monthly prices are not exactly aggressive in North Carolina, charging up to $50 a month for 3Mbps DSL, $55 for up to 7Mbps, before the modem rental fee and other charges are included.  A customer with Frontier’s wireless router would pay more than $70 a month, just for 7Mbps DSL service:

Frontier's No-Contract Prices for New Customers Only. Prices less for 1-2 year contracts that include $165 early termination fee for Double Plays and up to $120 early termination fee for High-Speed Internet only plans. One-time charges up to $60. Additional charges, taxes and terms apply.

Frontier has quietly increased equipment fees over the years.  Back in 2010, the company raised the rental fee to $4.50 a month.  Some service areas have been paying $6.99 a month since 2009, but now face even higher prices if they want a home “Wi-Fi” hotspot included.

Something else has changed at Frontier as well.  The company is making it more difficult for customers to purchase their own modems and use them instead, skipping the modem rental fee.  Customers trying to save several dollars a month now face a brick wall when contacting customer service.

“The salesman on the phone even said [the modem rental fee] wasn’t a good deal but he could not waive it,” Lymelizzard wrote.  He declined to become a Frontier DSL customer, considering the modem rental fee a deal-breaker.

“I’m surprised that all the Joe Customers out in Frontier-land haven’t complained,” he said. “This is merely a money grab on Frontier’s part. I could see the fee for a year, maybe two, but for the life of the account that’s bogus.”

The Federal Communications Commission today released MEASURING BROADBAND AMERICA, the first nationwide performance study of residential wireline broadband service in the United States.  The study examined service offerings from 13 of the largest wireline broadband providers using automated, direct measurements of broadband performance delivered to the homes of thousands of volunteers during March 2011.

Among the key findings:

Providers are being more honest about their advertised speeds: Actual speeds are moving closer to the speeds promised by those providers.  Back in 2009, the FCC found a greater disparity between advertised and delivered speeds.  But the Commission also found that certain providers are more likely to deliver than others, and certain broadband technologies are simply more reliable and consistent.

Fiber-to-the-Home service was the runaway winner, consistently delivering even better speeds than advertised (114%).  Cable broadband delivered 93% of advertised speeds, while DSL only managed to deliver 82 percent of what providers promise.  Fiber broadband speeds are consistent, with just a 0.4 percent decline in speeds during peak usage periods.

Cable companies are still overselling their networks.  The FCC found during peak usage periods (7-11pm), 7.3 percent of cable-based services suffered from speed decreases — generally a sign a provider has piled too many customers onto an overburdened network.  One clear clue of overselling: the FCC found upload speeds largely unaffected.

DSL has capacity and speed issues.  DSL also experienced speed drops, with 5.5 percent of customers witnessing significant speed deterioration, which could come from an overshared D-SLAM, where multiple DSL customers connect with equipment that relays their traffic back to the central office, or from insufficient connectivity to the Internet backbone.

Some providers are much better than others.  The FCC found some remarkable variability in the performance of different ISPs.  Let’s break several down:

• Verizon’s FiOS was the clear winner among the major providers tested, winning top performance marks across the board.  Few providers came close;
• Comcast had the most consistently reliable speeds among cable broadband providers.  Cox beat them at times, but only during hours when few customers were using their network;
• AT&T U-verse was competitive with most cable broadband packages, but is already being outclassed by cable companies offering DOCSIS 3-based premium speed tiers;
• Cablevision has a seriously oversold broadband network.  Their results were disastrous, scoring the worst of all providers for consistent service during peak usage periods.  Their performance was simply unacceptable, incapable of delivering barely more than half of promised speeds during the 10pm-12am window.
• It was strictly middle-of-the-road performance for Time Warner Cable, Insight, and CenturyLink.  They aren’t bad, but they could be better.
• Mediacom continued its tradition of being a mediocre cable provider, delivering consistently below-average results for their customers during peak usage periods.  They are not performing necessary upgrades to keep up with user demand.
• Most major DSL providers — AT&T, Frontier, and Qwest — promise little and deliver as much.  Their ho-hum advertised speeds combined with unimpressive scores for time of day performance variability should make all of these the consumers’ last choice for broadband service if other options are available.

Some conclusions the FCC wants consumers to ponder:

1. For basic web-browsing and Voice-Over-IP, any provider should be adequate.  Shop on price. Consumers should not overspend for faster tiers of service they will simply not benefit from all that much.  Web pages loaded at similar speeds regardless of the speed tier chosen.
2. Video streaming benefits from consistent speeds and network reliability.  Fiber and cable broadband usually deliver faster speeds that can ensure reliable high quality video streaming.  DSL may or may not be able to keep up with our HD video future.
3. Temporary speed-boost technology provided by some cable operators is a useful gimmick.  It can help render web pages and complete small file downloads faster.  It can’t beat fiber’s consistently faster speeds, but can deliver a noticeable improvement over DSL.

More than 78,000 consumers volunteered to participate in the study and a total of approximately 9,000 consumers were selected as potential participants and were supplied with specially configured routers. The data in the report is based on a statistically selected subset of those consumers—approximately 6,800 individuals—and the measurements taken in their homes during March 2011. The participants in the volunteer consumer panel were recruited with the goal of covering ISPs within the U.S. across all broadband technologies, although only results from three major technologies—DSL, cable, and fiber-to-the-home—are reflected in the report.

Frontier Communications claims its expansive broadband deployment efforts in West Virginia will take the Mountain State from the bottom of the broadband barrel to the very top within a few years.

Dana Waldo, Frontier’s senior vice president and general manager, said the company has completely turned around landline and broadband service in West Virginia just over a year after Verizon Communications left the state.

In a wide-ranging radio interview with MetroNews, Waldo claims complaints are way down while DSL broadband deployment is way up.  In just about a year, Frontier has expanded broadband to 76 percent of its West Virginia service area, adding 85,000 additional homes and businesses that previously had no access to wired broadband.

“We made a commitment to spend about $310 million, from the time of the transaction through 2013, to improve the network, to expand broadband across the state and for other capital improvements,” Waldo told MetroNews Talkline.

Frontier Communications’ Dana Waldo talks with MetroNews Talkline about phone and broadband service in West Virginia. July 19, 2011. (11 minutes)
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Currently, West Virginia ranks 47th in the United States for broadband access, mostly because large sections of the rural, mountainous state simply don’t have access to any provider.  What access most do have, outside of major cities like Charleston, Huntington, Wheeling, and Parkersburg comes from telephone company-provided DSL.  Verizon used to be the dominant provider in West Virginia, with Frontier providing service in limited areas.  But after Verizon sold its operations in the state to Frontier, the independent telephone company is now the only telecommunications provider for many rural communities.  For the majority of customers outside of the largest cities, Frontier markets DSL at speeds up to 3Mbps, hardly cutting-edge.

Frontier’s backbone network is deemed the worst in the nation for a wired provider, according to statistics collected and analyzed by Netflix.

“When comparing broadband in states like New York or New Jersey with West Virginia… there is no comparison,” shares Stop the Cap! reader Steve who lives in Hempstead, N.Y., but owns a cabin outside of Beckley, W.V.  “You can get Cablevision’s cable broadband at rocket ship speeds or Verizon FiOS fiber-to-the-home, which is even faster, in New York.  For my neighbors and me in West Virginia, there is one choice – Frontier Communications’ DSL, which can manage 800kbps on a good day.”

“I almost drove off the road laughing as I listened to the sheer nonsense of Mr. Waldo’s empty promises,” Steve shares. “This company’s idea of broadband access is up to 3Mbps DSL while nearby states like Virginia and Pennsylvania are getting fiber or cable broadband speeds ten times faster.  How he expects to make West Virginia a top-5 broadband state with their obsolete DSL is a question the gushing host never bothered to ask.”

Steve doesn’t think too many of his Mountain State neighbors are as excited as Mr. Waldo by Frontier.

“God help you if your line goes out, because they can take days to get around to fix it,” Steve says. “Waldo tries to sell you his possum pie with claims the company takes longer to effect repairs so they are ‘done right the first time,’ which is a real hoot considering all of the repeated outages customers experience.”

Steve doesn’t lay the blame entirely at Frontier, however, claiming Verizon fled the state after mangling their outdated landline network and keeping it running with electrical tape.

“Frontier bought into a real mess, and I’m sure they will eventually fix a lot of the problems Verizon didn’t ever care to fix, but that doesn’t make West Virginia a broadband nirvana — certainly not with Frontier’s DSL.”