Frontier Communications continues to alienate customers up and down the state of West Virginia with more service outages, billing problems, and emergency 911 service interruptions.

This time, it’s the community of Marmet that suffered an outage the company described as “temporary.”  Service to the area’s Metro 911 emergency operations center was interrupted Monday and residents knew what to do when Frontier could not deliver landline service that works — they grabbed their cell phones.

In Dunbar, the funeral director at Keller Funeral Home noticed he stopped getting calls from local area customers after Frontier took over operations July 1st.  Michael McCarty told a Charleston television station Frontier initially blamed him for the problems, but later discovered malfunctioning switching equipment was at fault and forked over a $344 refund.  McCarty’s business probably took a bigger financial hit than that when potential customers could not get through — for months.

“People would call, but it wasn’t ringing here,” McCarty told the Charleston Gazette. “There really wasn’t much we could do but wait it out.”

Two dozen complaints about Frontier’s performance are still pending at the West Virginia Public Service Commission.  The state’s consumer advocate says Frontier’s service quality in the state is not improving.  Frontier blames Verizon’s aging and poorly maintained network for most of the problems.

But many of Frontier’s complaints, not just in West Virginia, are about unfair early cancellation fees, inaccurate billing, lost service orders, and lousy customer service.  Here’s a sample:

• “The customer service representative was extremely rude and angry. We called in response to the unfair cancellation fee of $250.00. Last week we were told that we had until 9/30 to opt for other phone service without a cancellation fee. Each representative gives different information. Small business were treated horribly by Verizon and now Frontier. After the rudeness, I will never bring my business service back to Frontier!”
• “I have fought this company for six months because every month they cannot get billing right. They are the absolute WORST I have ever dealt with. They charge for services not wanted. They charge late fees when none should have been charged and then didn’t remove them after admitting their mistakes. If you have any other choice, avoid Frontier like it’s a plague, because it is.”
• “They never processed my order to transfer my service. I called back 4 times in a week to get them to do their job. On the last day, I was left on hold for 2 hours in the morning and then 1.5 hours in the afternoon, only to be told I would have to wait another 3 days for a servicemen to come out. The wait times were nothing less than abusive.”
• “Horrible folks to do business with. Verizon sold my FiOS/Phone account to Frontier and soon afterward mysterious charges for “ID protect” etc. started appearing on my bill. Whenever I call their service, it loops and hangs up. I tried the option for “we will call you back” – when it calls back , it will give another number to call back, where you have to wait again. Can’t wait to get rid of them.”
• “Frontier recently bought out Verizon’s service in my area. The automated phone tree system goes in loops and hangs up on you. Furthermore, once I finally figured out how to get someone on the line (responding to every question the automated system asked with “operator”) and moved up to a supervisor… the supervisor got very short with me when I tried to cancel my service and then hung up on me. When I called right back, I got an automated message saying the offices were closed.”

Some enterprising Frontier customers have learned their hold times will be much shorter if they opt to speak with a Spanish-speaking operator.  “Many of the call centers are in Florida anyway, so you may get a bilingual operator no matter which language you choose,” writes our reader Danielle.  “I cut my hold times from over an hour to less than five minutes this way.”

Meanwhile, one of Frontier’s primary competitors in the state, Citynet, accused Gov. Joe Manchin’s office of wasting $126 million in taxpayer money that will benefit Frontier Communications far more than state residents starved for broadband.

Citynet CEO Jim Martin urged federal officials Wednesday to suspend the grant after the state defended plans to allocate a large amount of the grant exclusively to connect state agencies.

“The state’s response clearly highlights why the federal government needs to suspend the award until there are major modifications to the plan,” Martin said. “It is clear from the state’s letter that little will be done with the federal taxpayer funds to increase the availability of adequate and competitively priced high-speed infrastructure in West Virginia. The current approach will cost the state future job growth.”

Martin is upset that more than half of the grant, $69 million dollars, will be spent on Frontier’s behalf to construct a broadband network for the state government.  The agencies who get access will still have to pay Frontier market rates for high speed broadband access, despite the fact taxpayer dollars were spent to construct the network Frontier will operate.

Citynet wants stimulus funding diverted to construct a “middle mile” broadband network that every telecommunications company can access at wholesale rates to deliver improved broadband services to residents and businesses, not just government buildings.

Martin says the Manchin Administration is making “blatantly false” claims that the stimulus money would deliver high-speed Internet to 700,000 homes and 110,000 businesses.  Unless those homes and businesses are stuffed into government agency buildings, it won’t.

According to Martin, all of the benefits will go to only two places — state agencies and Frontier’s pockets.

“It’s a political favor to Frontier,” Martin charged.

“The citizens of West Virginia deserve transparency and accountability from their public servants, and this is even more true given the magnitude and importance of the need for broadband enablement in our state,” Martin said Wednesday. “I was born and raised in West Virginia, and I am aware of the consequences this program could have for West Virginia in terms of job growth and competing for high-paying 21st century jobs.”

Frontier Communications has themselves an RV and they’re sending it on a “Great Conversations Tour” with their newest customers in Ohio, Illinois, and Wisconsin.  The company tweeted its intention to visit “10 Cities, 7 Executives, 5 Days, 3 States,” all in one recreational vehicle.

On the agenda are promises the company intends to deliver their version of broadband to a larger number of customers.

“On average, these properties that we purchased from Verizon had 62 percent broadband accessibility, and we will be looking to take that to 85 percent in two years,” says John Lass, president of Frontier’s Central Region. “In our current properties, we are averaging 92 percent broadband accessibility.”

The broadband most of those customers will end up with will range from 1-3Mbps in rural areas, perhaps up to 6Mbps in more urban ex-Verizon service areas, but everything is dependent on the quality of the lines Frontier has to work with.

That increasingly poses problems for the company, who had to cope with yet another major service outage in Illinois — the second in a month, that knocked out phone and emergency services for 28,000 residents across eight counties in central and northwestern Illinois.

The landline service failure, originally thought to be a fiber cable cut, turned out to be a hardware failure in the company’s central office in the village of McLean.  The impact was immediate as cell phone customers could not reach Frontier lines and Frontier customers in many areas could not make long distance calls or reach 911.

Peoria’s Journal-Star reported businesses were particularly impacted by the outage:

Carol Hamilton, Washington Chamber of Commerce executive director, said city business owners reported problems making landline-to-cell phone and cell phone-to-landline calls. Landline-to-landline calls were going through.

“We actually started hearing about the phone problems Wednesday,” Hamilton said. “People were getting a busy signal, or were told the number they were calling was out of order when they tried to make a call. The problem didn’t affect our office until Thursday morning.”

Frontier’s equipment failure also knocked out the Logan County computer system, and the Woodford County Sheriff’s Department computer system. Residents in those counties were instructed to call Illinois State Police posts in Springfield and Metamora for emergencies.

One local resident noted this is why he doesn’t have a landline anymore.

Since Frontier can gas up its RV and tour the countryside, Stop the Cap! can take you on a virtual RV tour of our own to visit with some disgruntled Frontier customers.  Our first stop…

Unauthorized Bill Cramming Plague Leads to Lawsuit Against Frontier

Hal Greene was reviewing his monthly Frontier phone bills when he discovered his monthly charges shot up from $230 to $290.  The Pine Bush, N.Y., resident found $39.95 charges on each of this bills for something called “Enhance SVCS Billing Inc Long Distance Calls … IBA-Services.”  He had no idea what that charge was for, and he knew he didn’t authorize it.

The Times Herald-Record picks up the story:

He called the company, Enhanced Services Billing Inc., but the company wouldn’t refund his money. He called the phone company, Frontier, which blocked the charges moving forward, but Greene never got a refund.

He went online to research the company, and found countless complaints from other consumers about ESBI, an aggregator that purports to bill for services provided by third parties.

Greene also found the contact information for a law firm, Giskan Solotaroff Anderson & Stewart in Manhattan, that was looking into the company. He called and became the named plaintiff in a class action lawsuit against Frontier and ESBI.

“I was very angry because it was so surreptitious the way they snuck that charge in there, and they’re just kind of counting on stealthing it into the bill without you noticing,” Greene said.

The suit alleges that the defendants know they are collecting charges customers didn’t authorize. It seeks monetary and compensatory damages, attorneys’ fees and further relief “as equity and justice may require.”

Representatives of ESBI and parent company BSG Clearing declined to comment. Frontier also would not comment, said spokeswoman Brigid Smith.

Greene is a classic victim of bill cramming, a practice where phone companies allow third parties to bill for services on their phone bills, in return getting a major cut of the action.

Most customers find themselves victims of cramming when they complete “surveys” or sign up for free trials of unrelated services.  Other victims purchase products from websites that offer future discounts just for “previewing” shopping clubs or credit monitoring services.  Even obtaining a “free reward” like a magazine subscription, ringtone, or avatar image for use on a social networking website could come with a very expensive “gotcha” on your landline or mobile bill a month later.

In Greene’s case, his “gotcha” was IBA Services — Internet Business Advisors, which offers a very dubious package of dial-up Internet, web hosting, and discounts at office supply stores.  For that, customers pay $20-40 or more per month.  Greene was paying for it across multiple phone bills, each with their own charges.

IBA Services is an example of how anyone can set up a business and use billing services like ESBI to sit back and wait for the checks to arrive.  Unfortunately, too often those charges are unauthorized and crammed onto phone bills.  Critics charge phone companies have a financial incentive to look the other way, as they earn a substantial percentage of the charges as a commission.  Millions are waiting to be earned at your expense.

Of course, phone companies correctly say they are required to accept third party billing services.  But what they don’t tell you is that they are not required to continue to accept those with a track record of cramming.

Stop the Cap! looked into IBA and discovered the “company” is “located” at 980 9th Street, 16th Floor Sacramento, CA 95814.  That sounds like quite a prestigious address, considering it is located in Sacramento’s US Bank Plaza.  But the 16th floor is a mighty crowded floor considering the enormous number of companies calling it home.  Those firms range from IBA to a scam operation trying to collect “fees” on behalf of the state of California to “Medical Hair Restoration.”  (That latter firm might be useful if you’ve torn all of your hair out fighting illegitimate charges on your phone bill.)

Truth be told, 980 9th Street — 16th Floor is a “virtual office” address.  A company that specializes in the practice, Regus, maintains that address as a mail drop and short term meeting space location for countless companies looking to keep their actual locations (often a home) out of public records.  Regus itself isn’t a questionable enterprise, but some of their clients are.

For $99, we could have an address at the US Bank Plaza as well.  Best of all, Regus throws in access to high speed Internet service as part of the package price — something IBA doesn’t even offer their own clients.

Greene’s anger is understandable considering anyone can get in on this action, peddling useless voicemail service, credit repair, ringtones, shopping clubs, and a myriad of other services carrying steep monthly fees, all conveniently billed to your monthly Frontier phone bill.

When we called IBA Services’ toll-free number, we were connected with a generic “customer care” department.  The representative, who would only give her first name, told us at first she had no idea what company we were calling about.

“We handle customer service calls for many different providers,” Inez told us. “When customers call, we ask for their phone number which usually brings up what provider they are doing business with.”

When she learned we were not a victim customer, she refused to answer any further questions about the company she works for or how many customers call claiming they are being crammed.

For dozens of customers who have been in similar circumstances, bill cramming quickly evolves into buck passing.

“The best part of this entire scam is that when you call Frontier, Verizon, AT&T or other phone companies, they tell customers to call the crammer directly to get the charges off the bill,” says our reader Gene who was also a victim of Frontier cramming.  “When you call the crammer, they always say you must have authorized it because they don’t bill just anyone, so you need to call your local phone company to deal with the charges.”

When customers tell phone companies the crammers refuse to credit their account and stop the charges, many will agree to place a block on future 3rd party billing, but neglect to reverse the charges.  By now many exasperated consumers just give up and eat the cost, something crammers count on.

“Frontier is happy because they got a substantial percentage of that fee and the crammer gets to walk away with whatever money they earned before the consumer noticed,” Gene says.

Marte Cliff, a freelance copyrighter who blogs from Priest River, Idaho was one of millions of ex-Verizon customers who received their first bill from Frontier over this summer.  Hers included $14.95 in charges for an “e-mail bundle.”  Cliff was alarmed:

When I opened our first bill from the new provider it was about $15 more than my normal bill, so I went looking to see why. And I found a charge from a company called Email Bundle. Why?

There was a notice – for billing questions call 888-934-7750 to reach PayOne Billing, so I did. I got a recording that told me everyone was busy and that I needed to wait. Then I got a brief busy signal and a message saying I was being transferred… and then a “looped” recording telling me a web address over and over and over.

Obviously, PayOne billing was not going to answer my call.

So I called Frontier. After 10 minutes or so of recorded messages I finally made contact with a live person… who said I just wouldn’t believe how many people had called this week over the same issue.

While Cliff doesn’t blame Frontier and got her money back, she is concerned many new customers may find it easy to miss such add-on fees, assuming they are just the cost of doing business with their new phone company.

“My bill is the same every month because I pay a flat for unlimited long distance, but other people have long distance charges and their bill is different each month,” she blogged. “They might not notice a $15 discrepancy – especially if they’re running a business and have large phone bills. And especially not since phone bills are generally so convoluted that it takes a puzzle expert to figure them out.”

ESBI, responsible for billing Greene $40 for dial-up Internet, itself has a long sordid history, having been the target of a Federal Trade Commission investigation in 2001. The biller, part of the Billing Services Group, Ltd. (an offshore entity incorporated in Bermuda), has 120 employees in San Antonio.  BSG’s financial presentations to their investors go to new heights to diplomatically explain away their questionable business practices, such as this passage from one of their recent press releases:

Background of Enhanced Service Billings and the Company’s Action Plan

Historically, enhanced service billings have been susceptible to misunderstanding between the enhanced service provider and the consumer over such issues as charges and scope of service. As a result, enhanced services have typically involved a higher consumer inquiry or complaint rate than regular telephone usage charges, which, in turn, can precipitate negative perceptions about enhanced service billings.

The Company has taken proactive measures, including the implementation of certain procedures over the last year, to minimize the level of disputed charges in connection with enhanced services. These measures include:

• Submitting enhanced service charges to each LEC (local phone company) only after that LEC has expressly approved the billing of a particular service offering by a specific enhanced service provider;
• Authenticating all enhanced product sales through the Company’s Bill2Phone™ authentication engine;
• Company employees anonymously subscribing to random enhanced services offerings to assess the quality of service and accuracy of charges; and
• Actively monitoring the level of complaints received in respect of its customers’ enhanced service offerings.

If there are perceived irregularities in the authentication of orders, quality of service, accuracy of charges or the frequency of consumer complaints involving an enhanced service provider, the Company takes appropriate action, including, if necessary, termination of billing for that customer. Each LEC in the United States requires that providers of enhanced services comply with certain end user inquiry or complaint thresholds; that is, a maximum number of inquiries or complaints in any particular month and in each LEC region. As described above, the Company actively monitors the level of consumer inquiries and complaints in respect of its customers’ enhanced service offerings and believes that the level of such inquiries or complaints is, for every one of its existing 98 enhanced service customers, below the contractual thresholds required by, among others, the largest LEC in the United States.

ESBI calls their business practices “powerful and innovative.”  Gene calls them “underhanded and deceptive.”

“These are bottom feeders that try and protect their ill-gotten gains by incorporating in Bermuda and throwing some goodwill contributions to the San Antonio chapter of the United Way to make you feel they’re ethical,” Gene says.  “When the company’s own financial presentations warn investors their future revenue is at risk from telephone company crackdowns, their long term future is an open question.”

What is also remarkable is that ESBI scores higher than Frontier Communications with the Better Business Bureau.

“One has to wonder how a bottom feeder operation like ESBI/BSG managed to earn a “D” while Frontier scored a rock-bottom “F,” Gene wonders.

How You Can Protect Yourself

1. Scrutinize your phone bill carefully, especially if it has increased recently.  Pay special attention to sections labeled “Miscellaneous,” and the long-distance, 900-number, and “third-party” charge sections on your bill. Third-party charges are charges from anyone other than your phone company. Many phone companies are trying to switch customers to “out of sight, out of mind” electronic billing with automatic payments.  That makes it easy to ignore a bill you have to click a link to see until after the amount due is withdrawn from your checking account.  Not paying illegitimate charges keeps the money in your pocket — trying to get a refund from the phone company keeps it in theirs.
2. Demand the phone company place a “3rd party billing block” on your phone line.  Frontier calls this service “Bill Block.”  I have yet to encounter a worthwhile service that needs to bill customers using 3rd party phone bill charges, so why give them the chance to try?
3. Avoid pop-ups and other online ads that promise free services in return for sharing your phone or mobile number.  Chances are the freebies also come with sneaky add-ons that will cost plenty.
4. Do not enter surveys or contests that require a phone number.  If you are a winner, they should be able to contact you by mail.  Many of these contests also include fine print authorizing the promoter to start telemarketing you later, so the prize is rarely worth the aggravation.
5. Obtain a virtual phone number from a service like Google Voice.  It’s free. You can give out this phone number to those you are not sure about.  If a crammer tries to sign that number up for unauthorized services, they’ll encounter a roadblock.
6. If you are a victim, tell the phone company you want all of those charges reversed at once — they are unauthorized.  Do not accept their request to contact these companies yourself.  They are capable of reversing the charges, letting the billing agency protest the chargeback.  They rarely do, and you don’t have to waste your time dealing with “Inez” at “customer care.”

Finally, if you are victimized, contact the Federal Trade Commission by calling 1-877-FTC-HELP (1-877-382-4357) and file a complaint.

Each time Frontier Communications gets mentioned on Stop the Cap!, we receive e-mail from disgruntled customers arriving to share their horror stories.  Since Frontier has now absorbed Verizon landlines in several states, that e-mail is only increasing.

Because so many messages arrive on different topics, we’ll be trying to share your stories with our readers based on the types of problems experienced.  Today, it’s the issue of refunds.

Stop the Cap! reader Alexia from Elk Grove, California writes:

Phillip, I want my money.  For four months, I have called, written, and called again to ask where my refund check from Frontier is.  We disconnected our service from Frontier back in May and our final bill had a credit of nearly $150 on our two landlines, DSL, and returned equipment.  Why so much?  Because we were quoted a final amount for our account and instead of using their auto-payment service, we mailed them a last check.  They withdrew that amount electronically from our checking account anyway, so we had double payments.

This isn’t just me.  My sister decided to disconnect her phone and will rely on her cell phone from now on, and she’s still waiting for her final credit balance to arrive back as well.

When you call Frontier, assuming you don’t get a busy signal or are left on hold, they seem very sympathetic and promise the refund has been processed and they are sending the check in the mail.  The Pony Express could have gotten the check to us by now.  My sister is waiting for $22 to be returned to her.

When I have canceled credit cards, utilities, and other services and have a credit balance, most of them include a check either in the final statement or in a letter that arrives within the month.  Not Frontier.  One representative claimed they don’t send refunds right away in case they discover additional charges they need to apply to an account.  What charges?  Are they hoping to find some?  We have not made a long distance call on our landline in years since getting a cell phone and I cannot imagine what other charges they are talking about.

What is the story here?

Stop the Cap! reader Jeff in Elko, Nevada had a similar problem:

My job transferred me to Reno in July and we canceled our service with Frontier and are still waiting for our last bill refund because we had a credit balance.  It was only around $8, but that was after I had to argue with them about a cancellation fee they tried to charge me and a fee for the DSL modem we returned to them.  They credited our account for both after talking to a supervisor but now it is a waiting game for the final refund check to arrive.  Every other company we canceled service with, right down to the propane people handled our final bill correctly.  Not Frontier.

Since moving to Reno, we signed up for AT&T service which turned out to be way better than the DSL we had with Frontier that went offline nearly every afternoon, so we’re fine saying goodbye to them.  Frontier has been in Elko for awhile now so I can only imagine what the Verizon customers are now dealing with.

In September, Frontier’s “the check is in the mail” excuse caught the attention of a Sacramento TV station’s consumer reporter.

Jeanne Pritchett Melendez of Elk Grove was also waiting for a refund check from Frontier for just over $15.

Back in May, Jeanne paid her Frontier phone bill ahead of time.  And when she canceled her service mid-month, her bill was pro-rated and she was promised her money back.  She called the company… Asking when her check would be sent. And every time, she says she was told, it’s on its way.  But after more than three months…

“I was very frustrated and I said, you know what, if I don’t have a check in the mail by Friday, I’m going to call Kurtis [Ming – CBS13 Consumer Reporter],” says Jeanne.

Melendez got her refund before our readers did, along with an explanation from Frontier about why refunds take months to arrive:

Frontier Communications Statement:

Frontier’s refund process is to refund the final credit balance on disconnected accounts within 2 to 3 bill cycles from the disconnect date to allow time for any additional credits or charges that need to be applied to the account. This process is to ensure that the customer receives an accurate refund check.

The customer’s account reflects that the service was disconnected on May 13, 2010. The May 22nd , June 22nd and July 22nd bills reflected a credit balance in the amount of $15.03. A refund check in the amount of $15.03 was processed on the account on August 9th. The customer will receive the refund check within 10 to 14 business days to the address on record.

The representatives are trained to alert the customer that it can take 2-3 billing cycles which is usually between 30-60 days. However in the case of Ms. Melendez’s account the disconnect notice was so close to the bill date that three bill cycles were required to process the refund.

— Stephanie Beasly, Communications Manager

This isn’t the first time Kurtis Ming has had to approach Frontier Communications about Sacramento area residents’ frustrations with the company.  Back in July, KOVR-TV ran a story about a Frontier customer who was paying a whopping $15 a month for Frontier’s Peace of Mind hard drive backup service he never got because he didn’t realize he had to download software to get the feature installed.  While that was not Frontier’s fault (and the company provided a credit to the customer for the service he never used), charging $15 a month for a service other customers are paying less to receive isn’t exactly fair either.

[flv]http://www.phillipdampier.com/video/KOVR Sacramento Frontier Service Problems 7-7 and 9-17-10.flv[/flv]

KOVR-TV in Sacramento ran two segments on Elk Grove-area customers having problems with Frontier Communications — one waiting for a refund and the other charged for a service he didn’t realize he had.  (4 minutes)

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’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)

EPB’s new 1Gbps municipal broadband service is causing some serious embarrassment to the telecom industry.  Since last week’s unveiling, several “dollar-a-holler” telecom-funded front groups and trade publications friendly to the industry have come forward to dismiss the service as “too expensive,” delivering speeds nobody wants, and out of touch with the market.

The “Information Technology and Innovation Federation,” which has historically supported the agenda of big telecom companies, has been particularly noisy in its condescending dismissal of the mega-speed service delivered in Chattanooga, Tenn.

Robert Atkinson, president of ITIF, undermines the very “innovation” their group is supposed to celebrate.  Because it doesn’t come from AT&T or Verizon, it’s not their kind of “innovation” at all.

“I can’t imagine a for-profit company doing what they are doing in Chattanooga, because it’s so far ahead of where the market is,” Atkinson told the New York Times.

“Chattanooga definitely is ahead of the curve,” Atkinson told the Times Free Press. “It’s like they are building a 16-lane highway when there is a demand for only four at this point. The private companies probably can’t afford to get that far ahead of the market.”

Bernie Arnason, formerly with Verizon and a cable industry trade association also dismissed EPB’s new service in his current role as managing editor for Telecompetitor, a telecom industry trade website:

Does anyone need that speed today? Will they in the next few years? The short answer is no. It’s kind of akin to people in the U.S. that buy a Ferrari or Lamborghini – all that power and speed, and nowhere to really use it. A more apropos question, is how many people can afford it – especially in a city the size of Chattanooga?

[…]Will there be a time when 1 Gb/s is an offer that is truly in demand? More than likely, although I still find it hard to imagine it being really necessary in a residential setting – I mean how many 3D movies can you watch at one time? Maybe a service that bursts to 1 Gb/s in times of need, but an always on symmetrical 1 Gb/s connection? Truth be told, no one really knows what the future holds, especially from a bandwidth demand perspective.

Arnason admits he doesn’t know what the future holds, but he and his industry friends have already made up their minds about what level of service and pricing is good enough for “a city the size of Chattanooga.”

Comcast’s Business Class broadband alternative is priced at around $370 a month and only provides 100/15Mbps service in some areas.  Atkinson and Arnason have no problems with that kind of innovation… the one that charges more and delivers less.

For groups like the ITIF, it’s hardly a surprise to see them mount a “nobody wants it or needs it”-dismissive posture towards fiber, because they represent the commercial providers who don’t have it.

Fiber Embargo

The Fiber-to-the-Home Council, perhaps the biggest promoter of fiber broadband delivered straight to customer homes, currently has 277 service provider members. With the exception of TDS Telecom, which owns and operates small phone companies serving a total of 1.1 million customers in 30 states, the FTTH Council’s American provider members are almost entirely family-run, independent, co-op, or municipally-owned.

Companies like American Samoa Telecommunications Authority, Hiawatha Broadband Communications, KanOkla Telephone Association Inc., and the Palmetto Rural Telephone Cooperative all belong.  AT&T, CenturyLink, Frontier, Verizon, and Windstream do not.  Neither do any large cable operators.

While not every member of the Council has deployed fiber to the home to its customers, many appreciate their future, and that of their communities, relies on a high-fiber diet.

EPB’s announcement of 1Gbps service was made possible because it operates its service over an entirely fiber optic network.  Company officials, when asked why they were introducing such a fast service in Chattanooga, answered simply, “because we can.”

The same question should have been directed to the city’s other providers, Comcast and AT&T.  Their answer would be “because we can’t… and won’t.”

Among large providers, only Verizon has the potential to deliver that level of service to its residential customers because it invested in fiber.  It was also punished by Wall Street for those investments, repeatedly criticized for spending too much money chasing longer term revenue.  Wall Street may have ultimately won that argument, because Verizon indefinitely suspended its FiOS expansion plans earlier this year, despite overwhelmingly positive reviews of the service.

So among these players, who are the real innovators?

The Phone Company: Holding On to Alexander Graham Bell for Dear Life

Last week, Frontier Communications told customers in western New York they don’t need FiOS-like broadband speeds delivered over fiber connections, so they’re not going to get them.  For Frontier, yesterday’s ADSL technology providing 1-3Mbps service in rural areas and somewhat faster speeds in urban ones is ‘more than enough.’

That “good enough for you” attitude is pervasive among many providers, especially large independent phone companies that are riding out their legacy copper wire networks as long as they’ll last.

What makes them different from locally-owned phone companies and co-ops that believe in fiber-t0-the-home?  Simply put, their business plans.

Companies like Frontier, FairPoint, Windstream, and CenturyLink all share one thing in common — their dependence on propping up their stock values with high dividend payouts and limited investments in network upgrades (capital expenditures):

Perhaps the most important metric for judging dividend sustainability, the payout compares how much money a company pays out in dividends to how much money it generates. A ratio that’s too high, say, above 80% of earnings, indicates the company may be stretching to make payouts it can’t afford.

Frontier’s payout ratio is 233%, which means the company pays out more than $2 in dividends for every $1 of earnings! But this ignores Frontier’s huge deferred tax benefit and the fact that depreciation and amortization exceed capital expenditures — the company’s actual free cash flow payout ratio is a much more manageable 73%. Dividend investors should ensure that benefit and Frontier’s cash-generating ability are sustainable.

In other words, Frontier’s balance sheet benefits from the ability to write off the declining value of much of its aging copper-wire network and from creative tax benefits that might be eliminated through legislative reform.

The nightmare scenario at Frontier is heavily investing in widespread network upgrades and improvements beyond DSL.  The company recently was forced to cut its $1 dividend payout to $0.75 to fund the recent acquisition of some Verizon landlines and for limited investment in DSL broadband expansion.

Frontier won’t seek to deploy fiber in a big way because it would be forced to take on more debt and potentially cut that dividend payout even further.  That’s something the company won’t risk, even if it means earning back customers who fled to cable competitors.  Long term investments in future proof fiber are not on the menu.  “That would be then and this is now,” demand shareholders insistent on short term results.

The broadband expansion Frontier has designed increases the amount of revenue it earns per customer while spending as little as possible to achieve it.  Slow speed, expensive DSL fits the bill nicely.

The story is largely the same among the other players.  One, FairPoint Communications, ended up in bankruptcy when it tried to integrate Verizon’s operations in northern New England and found it didn’t have the resources to pull it off, and delivered high speed broken promises, not broadband.

Meanwhile, many municipal providers, including EPB, are constructing fiber networks that deliver for their customers instead of focusing on dividend checks for shareholders.

Which is more innovative — mailing checks to shareholders or delivering world class broadband that doesn’t cost taxpayers a cent?

Cable: “People Don’t Realize the Days of Cable Company Upgrades are Basically Over”

While municipal providers like EPB appear in major national newspapers and on cable news breaking speed records and delivering service not seen elsewhere in the United States, the cable industry has a different story to share.

Suddenlink president and CEO Jerry Kent let the cat out of the bag when he told investors on CNBC that the days of cable companies spending capital on system upgrades are basically over.

“I think one of the things people don’t realize [relates to] the question of capital intensity and having to keep spending to keep up with capacity,” Kent said. “Those days are basically over, and you are seeing significant free cash flow generated from the cable operators as our capital expenditures continue to come down.”

Both cable and phone companies have called a technology truce in the broadband speed war.  Where phone companies rely on traditional DSL service to provide broadband, most cable companies raise their speeds one level higher and then vilify the competition with ads promoting cable’s speed advantages.  Phone companies blast cable for high priced broadband service they’re willing to sell for less, if you don’t need the fastest possible speeds.  But with the pervasiveness of service bundling, where consumers pay one price for phone, Internet, and television service, many customers don’t shop for individual services any longer.

With the advent of DOCSIS 3, the latest standard for cable broadband networks, many in the cable industry believe the days of investing in new infrastructure are over.  They believe their hybrid fiber-coaxial cable systems deliver everything broadband consumers will want and don’t see a need for fiber to the home service.

Their balance sheets prove it, as many of the nation’s largest cable companies reduce capital expenses and investments in system expansion.  Coming at the same time Internet usage is growing, the disparity between investment and demand on broadband network capacity sets the perfect stage for rate increases and other revenue enhancers like Internet Overcharging schemes.

Unfortunately for the cable industry, without a mass-conversion of cable-TV lineups to digital, which greatly increases available bandwidth for other services, their existing network infrastructure does not excuse required network upgrades.

EPB’s fiber optic system delivers significantly more capacity than any cable system, and with advances in laser technology, the expansion possibilities are almost endless.  EPB is also not constrained with the asynchronous broadband cable delivers — reasonably fast downstream speeds coupled with paltry upstream rates.  EPB delivers the same speed coming and going.  In fact, the biggest bottlenecks EPB customers are likely to face are those on the websites they visit.

EPB also delivered significant free speed upgrades to its customers earlier this year… and no broadband rate hike or usage limits.  In fact, EPB cut its price for 100Mbps service from $175 to $140.  Many cable companies are increasing broadband pricing, while major speed upgrades come to those who agree to pay plenty more to get them.

Which company has the kind of innovation you want — the one that delivers faster speeds for free or the one that experiments with usage limits and higher prices for what you already have?

No wonder Big Telecom is embarrassed.  They should be.

[flv width=”640″ height=”500″]http://www.phillipdampier.com/video/EPB Interviews 9-20-10.flv[/flv]

EPB and Chattanooga city officials appeared in interviews on Bloomberg News and the Fox Business Channel.  CNET News also covered EPB’s 1Gbps service, introduced last week.  (12 minutes)