Now that we’ve reached the two week anniversary of Frontier’s inclusion of a 5GB clause in their Acceptable Use Policy  first going up on their website, it’s probably useful to provide the latest information in a summary format.   Additionally, we’re now reaching a point where new information about Frontier’s  consideration of the cap is slowing down as the company ponders where things go from here.   So here is the latest summary of where things stand:

1) Frontier has published on their website two references to usage information.   Their marketing indicates that 5GB of usage is provided as part of their DSL account.   The company has now also publicly stated that until  they  state otherwise, they are not going to charge overages or terminate accounts for exceeding that usage.   When we get news of a date if/when that changes, we’ll let you know.

2) Their marketing material online indicates customers with “price protection agreements” will not be subject to any usage caps for the duration of their contract.   Assuming that language is inserted into their actual contract for customers, that could be the one good thing to come out of this.    (Hint to Frontier’s marketing gurus – if you offer a cap-free plan in return for a service agreement, we’ll sing its praises and I’d personally recommend it.)

After all, the goal of this site is to advocate for a cap-free Internet experience, and we’ll praise any company offering one.

3) The company continues to take input from customers on the matter, and we encourage people to share their views with Frontier regarding usage caps in general.   I personally hope they will drop the entire idea altogether and ride the marketing potential their service would have should the cable industry adopt caps or limits.   If you are not comfortable with where things stand on this issue, you have the right to take your business elsewhere.

We’ll be continuing to follow this issue as developments warrant.   Frontier is not the only company out there contemplating capping their customers, so  Stop the Cap!  must also delve into what the cable industry is up to, and there is plenty to report there.

Yesterday, Stop the Cap! raised the issue of how exactly Frontier Communications can offer access to the various “extras” the company offers to broadband customers all while limiting them to 5GB of consumption.

A number of readers have shared exactly the same concerns, not only with us, but the company as well.

It is interesting watching our concerns here get answered with shifting policies and vague promises over there, both on the Frontier website and  in replies to customer inquiries.   Unfortunately, they keep digging the hole they’ve gotten themselves into deeper and deeper with every passing day.

Intentionally or not, Frontier has now stepped on the landmine of the Net Neutrality debate.

Stop the Cap! reader William received a reply from Frontier that was  remarkable for its less-than-certain tone, and the latest company line:

I can certainly understand your frustration and confusion on who’s
statement’s to follow.

Unfortunately at the present all we know is what we have been told about the situation and that is that we (Frontier) are reserving the right to charge or terminate service for those that exceed the cap.

Currently feedback such as yours is being recorded and passed on to those that are in charge of this proposed change.

The email your received is correct, we are not currently enforcing this policy and we have been informed that, at the present, the plan is to start the enforcement part of the policy in December or January. Again that is the current time table we have been made aware of.

I do know that we have been made aware that certain activities such as carbonite backup and other services we offer can be excluded from the bandwidth usage. I wish I could offer more information with regards to the plan, unfortunately what was/is published is what there is to know at the present. We are passing all feedback to higher levels and it is possible the plan may change before it goes live so to speak.

I know the above does not answer all your questions, unfortunately since the plan is not finalized I can only offer what information I know to be accurate at the present.

There are several points raised in this reply.

First, it’s clear that those contacting Frontier’s support team should recognize the support personnel  are absolutely not responsible for the corporate policy decisions being made by management in Connecticut.   It is patently obvious to a lot of readers who have heard back from Frontier that there is no great enthusiasm for a usage cap  among a lot of folks working for the company.   We have always tried to draw a strong line between those responsible for these usage caps – upper management, and the employees who are stuck having to implement them.   We have nothing but good things to say about the support people who are in a tough position on this issue.

Second, our own sources have confirmed the timetable outlined in this reply from Frontier’s support personnel.   And again, that is entirely a management decision.

Frontier Steps on Net Neutrality Landmine As It Digs the PR Hole Deeper and Deeper Over a 5GB Usage Cap. (Slowpoke used by permission, copyright 2006, Jen Sorensen - Visit http://www.slowpokecomics.com.)

Third, Frontier’s newest acknowledgement that they are considering excluding their preferred partners from the usage cap now opens the can of worms over the Net Neutrality issue.

Certain telecommunications companies have been attempting to change the Internet as we know it today.   Currently, every online service has an equal shot on the network.   But some companies want to change the playing field, by offering selected partners “enhanced” access to customers, faster data networks, and more prominent placement, either by paying a higher fee or entering into a partnership with an Internet Service Provider (ISP).

A “preferred partner” quickly becomes the cream rising to the top, not based on their merits, but rather by their deep pockets and willingness to pay their way to  number one.   Better yet, such partnerships allow both companies to reap the  rewards  gained from driving  more  subscribers to the content they wish to promote, and enjoying the enhanced  advertising revenue which often accompanies such services.

More alarming are efforts to manipulate customers by penalizing them for accessing non-preferred content, and a  usage cap or bandwidth limitation on those services that lack  a  preferred partner  agreement is a great way to accomplish that.

This doesn’t just manipulate the playing field, it destroys it, giving enormous advantages to a select few.

Such agreements will  devastate a lot of start-up companies that have brought the most creative and revolutionary new services to the Net.   Virtually all of these companies would not exist without reaching out to  investors for initial financing.   In a world without Net Neutrality, inevitably one of the questions that will be asked is whether or not that start-up has any “preferred relationship” with a bandwidth provider.   If that company does not, questions will be raised about the viability of that venture, especially if usage caps and bandwidth limits are widespread.   And once an agreement is made, how does someone new break through?   Under these conditions, expect a number of investors to simply take a walk.

Stop the Cap! has  previously raised questions about ISP’s making an end run around Net Neutrality by imposing  caps but exempting content  or services accessed from that provider’s  web portal.   That has always been our  prediction, but until today, there has not been a real world example of that practice in action or imminent.

Now, Frontier Communications is poised to prove us right once again by potentially giving cap-free, preferential treatment to their partners, but sticking it to  every other video content provider or  online backup service where the 5GB cap will apply.

Ask yourself: Would you use an online service that consumed significant bandwidth that was subject to a usage cap or one that was exempted from it?   Is this what you are paying for every month – to be told what services and sites to visit and effectively penalizing you for choosing to make up your own mind?

It’s just one more reason why usage caps are an incredibly bad idea, and one that actually invites government scrutiny, if not direct oversight.   It’s an issue we intend to raise with our elected officials.   I’m certain Frontier Communications had no intention of being a poster child for the issue of Net Neutrality, but as we’ve seen time and time again in the short time Stop the Cap! has been online, there is a fundamental disconnect by upper management in understanding the implications and consequences of what they thought would simply be a great way to enhance profits and reduce “excessive usage.”

So many features that Frontier associates with your DSL account become largely useless with the imposition of a 5GB cap on monthly usage, as many have you have written to share.

Rural, among others reminds us that Frontier’s ESPN360 service provides Frontier customers with live streaming of up to 10 simultaneous game streams.   Partnering ISPs like Frontier offer access with no subscription fee, so their customers can use their broadband connections to watch some great sporting events.

With Frontier’s newly planned 5GB usage cap, ESPN360 becomes ESPN5, because it won’t take long to hit your usage cap with this service, which streams at speeds starting at 768kbps!

The HD Web: Akamai's plan to help meet the demands of HD quality video online are easily threatened by draconian broadband usage caps, such as the one planned by Frontier Communications.

Even more devastating, points out reader Tom, is Frontier’s partnership with Dish Network, which offers customers an HD Digital Video Recorder.

“This HD DVR also allows Dish Online for PPV which is content downloaded through the broadband connection,” Tom writes.

“Ironically though, should you sign up for their phone/internet/dish offer, you would quickly reach the cap if you used the PPV service,” he adds.

It’s not just HD content from Dish that is threatened with a 5GB usage cap.    Akamai, an industry leader in content distribution, has launched a cutting edge demonstration site for the kinds of broadband video content that will be commonplace in the next few years, most of which consume between 7.5mbps for 720p content, 13.5mbps per second for 1080i content.    For an average high definition quality movie, that is the equivalent of consuming  5-9GB for just one film!

Given these encoding rates, a typical half-hour television show encoded for TV quality at 4-6 megabits per second results in a file size of approximately 450 Megabytes, and 2.25 Gigabytes for HD quality. A two-hour feature film encoded for DVD quality would result in a 5.4 Gigabyte file, and for HD quality would result in a file size of approximately 9 Gigabytes. — “Akamai White Paper – Highly Distributed Computing is Key to Quality on The HD Web”

Try visiting the HDWeb website with your Frontier DSL service.   These are precisely the kinds of applications that are coming to broadband homes across America,  but Frontier has made the decision for you – these just are not for you.   So much for wanting to deliver the Internet experience their customers want.   With a 5GB cap, these services are strictly off-limits you bandwidth piggy.

William has discovered another ironically named service from Frontier that becomes effectively useless with a 5GB usage cap: Frontier’s Peace of Mind add-on includes an “unlimited backup” solution that will store your precious files on their servers, so they can be recovered in case your hard drive crashes.   But if you are backing up more than  5GB of files, there will be no peace for you.   And, to frost this cake, they say you can use the service on up to five PC’s in your household!

“How can they offer to back up 5 PC’s with only 5 gigs of bandwidth?” he asks.

“One 200 gigabyte hard drive will take 40 months to back up at that rate and take more than  6 1/2 years if I need to recover [all of my] data,” he said.

Anyway you slice your monthly allotment of 5GB, just using the services Frontier itself markets to its customers  guarantees more and more customers will exceed their cap, potentially by huge amounts.   And for families taking advantage of Frontier’s advice for a shared home network, once you bring the rest of the family to your Internet connection, what happens the day the FedEx delivery guy brings you your Internet bill in a box, just loaded with overage fees.   Are you prepared for Internet Bill Sticker Shock?   If you thought that text message-loaded cell phone bill was bad news to the family budget, wait until you discover the kind of Peace of Mind a 5GB usage cap provides a family of four.

[Update: The company has now suggested it may exempt its own partners from any usage caps or limits, but this has not yet been formalized.]

Earlier this week, it actually looked as if Frontier might actually be listening to their customers.   They two-stepped around the threatening exceed 5GB at your peril language in their Acceptable Use Policy by having the delightful marketing people soothe your fears with promises not to cut anyone off or charge anyone extra… for now.

I don’t expect them to change their minds just because we think it’s a good idea.   Customers are calling to cancel or threaten to do so, particularly in Rochester as we spread the word.   Time Warner is signing up a lot of new customers locally this week as folks exit Frontier.   But in other Frontier service areas, it’s apparently still the best kept secret in town and there hasn’t been too much pushback… yet.   That’s not too surprising considering there is really no pressing reason to ever go to the Frontier website, so how would anyone know?

While folks in the call centers are being told Frontier is pulling back on the idea of a cap, for now, that’s not what management is thinking.

Indeed in their minds, it’s not the 5GB cap that’s the problem, it was only the way it was introduced to their customers which caused all of the problems. Has Frontier hired Michael Brown, former head of FEMA?   Who are these people and why are they still drinking the Kool-Aid?

The game plan is still set – find friendly media to tell the story of the fictional “bandwidth crisis,” send mailers home inside phone bills, try and pass the cap off as an idea that Time Warner and Comcast are already contemplating (so it’s all their fault?), and that there is unfairness in the world without a usage cap, as someone down the street steals your bandwidth and doesn’t want to pay his fair share for it.

If Frontier has a game plan, than so shall Stop the Cap!

We have spent a lot of time and attention on Rochester, and we encourage people in the Flower City to continue sending the message that usage caps are not acceptable, and take your business elsewhere.   But now it’s time for us to spread the word to other communities stuck  with Frontier Communications.   If you are living in a Frontier service area outside of Rochester, the time has come to organize and get evangelical about usage caps.   Please either reply with a public comment or send me a private message on our Contact form letting me you want to be part of the Frontier Truth Squad.   Then, we can begin to identify local community forums in which we can spread the message of the 5GB usage cap.   Let’s get it in the local media, spread it around town, and  educate customers about the real facts and their alternatives.   Then let’s help them get signed up somewhere else, and say goodbye to an ISP that still seriously contemplates a 5GB usage cap on their customers even after the negative customer reaction and publicity they are receiving.

There is still time for Frontier to repent and restore its good reputation as an honorable alternative to whatever cable has to sell, but time, and customers, are running out.   Dump the cap.

Business is hardly booming in the traditional wired telephone line business these days, and Frontier Communications is no exception to that trend.   Internal documents obtained by Stop the Cap! illustrate that companies like Frontier are becoming more dependent than ever on data products and services to make up the difference.

Frontier’s admission of the struggles it faces in the traditional telephone business come in different flavors depending on their audience.   Stockholders learned of the challenges in a Securities and Exchange Commission filing made by the company  earlier this week:

Revenues from data and internet services such as high-speed internet continue to increase as a percentage of our total  revenues and revenues from services such as local line and access   charges (including federal and state subsidies) are decreasing as a percentage of our total revenues.   The decreasing revenue from historical sources, along with the potential for increasing operating costs, could cause our profitability and our cash generated by operations to decrease. (Frontier 10-Q Quarterly Report for period ending June 30, 2008)

Frontier employees  told Stop the Cap!  a more pessimistic view of the challenges  Frontier faced in the second quarter.   Many have told us of receiving messages from management that describe a $25 million shortfall.   In July alone, 39,000 Frontier customers disconnected telephone service with the company.   While offset by 22,000 new lines being connected across their national service territory, the net decrease still amounted to more than 11,000 lines, almost double what the company anticipated.

Frontier Communications is losing more traditional telephone line customers than it can add, as the company grows more reliant on profitable data products like DSL to make up the difference.

Maggie Wilderotter, chairwoman and CEO of Frontier Communications told employees that offsetting the decline in traditional telephone access line revenue was  more important than ever.   “They deliver key revenues and profits that help offset access line and government subsidy revenue losses,” she told employees.

These challenges are also well-publicized in Frontier’s filings with the Securities & Exchange Commission, which are intended for shareholder review.

As Stop the Cap! has argued, the demand for increased financial return on data services is part of the fuel firing the campaign to introduce bandwidth quotas, caps, and limits.   By reducing costs, which caps and quotas guarantee, companies can report higher returns to shareholders offsetting losses in other areas of the business.   They can also delay necessary investment in infrastructure to continue to meet the needs of their customers.  

Losses in the traditional access line business are particularly acute in Rochester, where competitor Time Warner has successfully nabbed a considerable number of residential customers away from Frontier with their Digital Phone  service.

Time Warner’s latest  quarterly reports show better than expected results  from their digital telephony products, while Frontier’s numbers have simply not been able to keep up.

Telecommunications companies are meeting the  increasing competition with rate cuts, bundling, and promotional offers than  often include term commitments to reduce “subscriber churn,” which refers to  the  percentage of subscribers cancelling service, usually to head to a competitor.   A great incentive to keep a customer from leaving is to hold a substantial $150-300 disconnect penalty over their head, sometimes in return for a greater discount on price.

Frontier has turned to product bundling and term commitments in an effort to retain customers.    Those taking a traditional telephone line bundle of unlimited local calling plus phone features also receive a small budget of long distance calling minutes, and have been shielded from rate increases the company has  charged customers who do not take a bundled package of service.

To resist Time-Warner’s bundled package bouquet  of video, telephone, and data, Frontier has been saddled with an inferior aging copper wire network.   That has meant the company has to compete with a DSL product  that cannot  ultimately compete with  the speeds being offered by Time Warner and other cable providers, and even worse,  they are stuck with  acting as a reseller for the Dish Network  satellite television service for video.

Frontier’s own numbers show the results.   Stop the Cap! learned that in Rochester, more people are now disconnecting Dish Network service than signing up.   The numbers are also not so great on the west coast.   Only in some smaller Frontier services areas in the east has the product been able to meet expectations.

Frontier’s own SEC filings tell the story of the risks Frontier faces in the coming year better than anyone else:

Competition in the telecommunications industry is intense and  increasing. We experience competition from many telecommunications service providers, including cable operators, wireless carriers, voice over internet protocol (VOIP) providers, long distance providers, competitive local exchange carriers, internet providers and other wireline carriers. We believe that as of June 30, 2008, approximately 58% of the households in our territories are able to be served VOIP service by cable operators. We also believe that competition will continue to intensify in 2008 and 2009 and may result in reduced revenues in those years. Our business   experienced erosion in access lines and switched access minutes in the first half of 2008 primarily as a result of competition. Competition in our markets may result in reduced revenues in 2008 and 2009.

The communications industry is undergoing significant changes.   The market is extremely competitive, resulting in lower prices. In addition, the slowing economic environment in 2008 may be impacting consumer behavior to reduce household expenditures by disconnecting wireline services.   These trends are likely to continue and result in a challenging revenue environment.   These factors could also result in more bankruptcies and, therefore, affect our ability to collect money owed to us by customers.