Now what: AT&T Next and Verizon Edge

Wireless carriers know that the average relationship between a smartphone and its owner is becoming shorter every day. Sometimes the relationship is over when a customer drops or loses their phone and needs a replacement. Others simply covet the next best thing. When a large enough contingent of customers is willing to open their wallets and let their money fall out, what’s a poor wireless company to do? Ignore the pile of twenties falling to the floor? Not on your life.

AT&T last month announced it was dumping its 20-month early upgrade offer, following Verizon (again) which announced it was pulling the rug out on a similar plan in April. ‘Customers should wait a full 24 months before expecting a new subsidized phone,’ said both companies.

Then came scrappy T-Mobile, the company AT&T originally wanted to put out of business. TMO decided to apply some European competitive logic in the U.S. market. No more two-year contracts with nasty termination fees, declared CEO John Legere. But no more “phone subsidy” either. In return for the end of contracts, customers should expect to pay retail price for their smartphone, but at least they can finance it through T-Mobile and have the somewhat affordable monthly installments added to their bill.

Now, in a remarkable about-face for Verizon Wireless and AT&T, the features and promotions diet imposed on customers that has eroded discounts, ended early upgrades, and slapped on early termination fees and opaque junk bill charges might be coming to an end. Early upgrades are back… for a price.

It is the first step in a major shift away from the North American wireless business model which traditionally offers customers cheap devices at massive discounts known as “device subsidies.” Since the early days of cell phones, wireless companies in the U.S. and Canada typically grant customers up to $350 off their phone purchase in return for a 24 month contract (until recently, 36 months in Canada). But wireless providers don’t just give away free money. Carriers get back every penny of this subsidy over the life of a cell phone contract by setting their plan rates artificially high.

T-Mobile isn’t giving away the store either, but at least everything is on sale. By jettisoning the subsidy, T-Mobile’s plan rates are dramatically lower than those offered by its competitors. That is no surprise because TMO no longer has to worry about recouping device subsidies.

When a customer walks into a T-Mobile store, they can buy the latest iPhone for $650 or agree to finance it at the retail price through the carrier. They can even buy it somewhere else. But T-Mobile’s new Jump plan also offers customers a chance to “jump” to a newer phone every 6-9 months with its trade-in program. For avid phone upgraders, the end effect is like leasing your phone. You will always have a device newer than the next guy, and you will always be paying a monthly fee for the phone itself. That looks a lot more attractive than trying to wait 24 months with AT&T or Verizon or frequently buying a new phone for north of $500 and trying to recoup part of the cost by selling your old phone on eBay or Craigslist.

Wall Street would normally punish carriers that do anything to shorten the 24-month traditional upgrade cycle because investors generally hate the whole concept of the phone subsidy. It costs companies liquidity to tie up money fronting that $350 discount and waiting up to two years to get the money back. But since T-Mobile can immediately book the full purchase price of a phone for accounting purposes and does not need to show the amount of money dedicated towards phone subsidies, analysts are not pummeling the stock into the ground.

As Stop the Cap! has written for more than a year, the wireless Golden Calf Wall Street really wants to worship is a cell phone plan priced artificially high to recover a subsidy providers no longer give. That’s a plan only Ma Bell and its shareholders could love. But nobody thought AT&T and Verizon Wireless could get away with it.

Silly people.

Introducing The Wireless Trojan Horses: AT&T Next from AT&T and VZ Edge from Verizon

Yay!: No more expensive subsidies and extra free money

AT&T yesterday introduced AT&T Next — the company’s response to T-Mobile’s Jump with AT&T’s usual gouging touch.

The highlights of the plan include:

• No membership, activation or upgrade fees;
• Buying a new phone under AT&T Next does not require a down payment, any finance charges, or early payoff penalty;
• Customers can trade-in for an upgrade after one year or keep the device for 20 months and own it.

VZ Edge is still a rumor, but leaked promotional material indicates it is nearly identical to AT&T Next, with some important exceptions:

• VZ Edge appears to be an extension of Verizon’s existing 12-month financing plan, limited to two devices at a time with a combined financed balance not to exceed $1,000;
• First payment due at time of purchase with a recurring finance charge of $2 for each month there is a remaining balance;
• No upgrade fees, no contracts, no pre-payment/payoff penalty;
• Customer qualifies for their next upgrade after 50 percent of their current phone’s retail price is paid;

The leaked document does not include details about the disposition of your device when beginning an upgrade. Presumably, Verizon will accept it for trade-in or the customer can pay the remaining balance off immediately and own it.

What sets Verizon and AT&T far apart from T-Mobile are the prices of their service plans. Both AT&T and Verizon are effectively ending their subsidy program for those participating in these early upgrade plans. Customers must purchase (or finance) their next device at the regular retail price, which will range between $500-650 for most top-of-the-line smartphones.

Bunco

But neither Verizon or AT&T are lowering their service plan pricing, which was specifically designed to recoup a subsidy they are no longer providing. T-Mobile has appropriately lowered their plan pricing because the company no longer needs to win back that $350 subsidy they might have given you for the newest Apple iPhone or Galaxy device. That means you are effectively paying AT&T and Verizon twice for the same phone. It’s Wall Street’s dream come true: kill the subsidy and keep the money still being charged to recoup it. That amounts to as much as $29 a month out of your bank account and into theirs.

For now, only those itching for fast upgrades will get the pinch, at least until AT&T and Verizon decide this is the new and improved way to sell phones to everyone without a two-year contract. Now if we can only get AT&T and Verizon to rescind the contract taken out on our wallets….

A Michigan man last week opened his front door only to find AT&T’s efforts to install U-verse for a neighbor tore up his front yard and he isn’t even a customer.

Broadband Reports‘ AT&T forum member “riekl” in Macomb discovered AT&T’s service “upgrade” for the neighbors left him with a front yard “downgrade” consisting of a long strip of dead grass, a potentially undermined driveway, and no idea who will pay to repair the damage.

“The only utility easement is a 20 foot strip in my back yard,” he wrote.

AT&T decided running cables well inside the Macomb man’s front yard and beneath his driveway was fine. So was leaving without bothering to repair the damage.

An AT&T ‘Right of Way’ manager was eventually dispatched to the property and quickly conceded AT&T buried its lines well outside of the utility easement. The company is now making arrangements to repair the resident’s lawn.

“He also apologized as their techs are told to always notify the homeowner when crossing property,” said the irked resident.

But the story may not be over. AT&T’s cable is now a permanent feature beneath the non-customer’s front yard, which could create some issues if AT&T assumes it now has an ‘effective’ easement and will be free to repair or replace the cable in the same area at their discretion.

AT&T has a long history of using contractors that do not always favor the correct solution over an expedient one.

But at least they buried the cable this time.

Last fall, a Texas resident arrived home to find AT&T had installed a new line for one of their customers by stringing it across the top of the neighbor’s back lawn, where it remained untouched and unburied for an extended period.

Rogers Communications customers frustrated with customer service or billing problems are advised the first representative they speak with regarding the issue does not necessarily have the final word on the matter. Eastern Canada’s biggest cable operator reminds customers 91 percent of all complaints are resolved to the customer’s satisfaction by the time they appeal to Rogers’ Ombudsman.

“We’re the only telecommunications provider in North America to have an Ombudsman to provide an independent review of unresolved customer concerns,” noted Rogers’ blog.

Rogers recommends the following four-step process to resolve complaints:

• Step 1: Contact Rogers’ Customer Care Center – available by live chat, phone, regular mail, or through social media: on Twitter – @RogersHelps, @RogersVousAide or you can find Rogers on Facebook;
• Step 2: Request to speak with a manager at the Customer Care Center;
• Step 3: Contact the Office of the President;
• Step 4: Write to the Office of the Ombudsman, either by mail, fax or email.

Walker

Kim Walker, Rogers’ Ombudsman reported that 84 percent of customer complaints reported to her office were either entirely or partly Rogers’ fault. The Ombudsman’s office only found entirely in favor of Rogers or its prepaid unit Fido 16 percent of the time.

Over half of the complaints escalated to the Ombudsman’s office related to wireless service. Billing and service changes constituted the majority of those complaints.

If Rogers’ Ombudsman is still unable to offer customer satisfaction, customers have one more place to appeal: the Commissioner for Complaints for Telecommunications Services.

Customers can file complaints with the Commissioner on the CCTS website or by calling toll-free 1-888-221-1687.

AT&T announced late Friday it was acquiring Leap Wireless for almost $1.2 billion — a premium of 88 percent over Leap’s stock price.

Creditors may be pleased. Leap Wireless had $2.8 billion of net debt which is expected to be retired by AT&T as part of the buyout. Go to https://www.edudebt.sg/achieve-debt-freedom-with-edudebts-expert-guide-to-debt-consolidation-plan-in-singapore/ to learn more about debt consolidation.

The Cricket prepaid brand is expected to survive the acquisition, at least for now. Unlike many other prepaid providers, Leap Wireless owns and operates its own CDMA and LTE cell network in its “home service” areas. The Cricket brand is best known for its PCS prepaid service, which is targeted almost exclusively in urban areas. Leap has an extensive roaming agreement with Sprint to provide service where its own cell network does not reach.

AT&T has not said if it will eventually convert Leap’s CDMA network to the standard AT&T uses — GSM. It may not be as important in the future as LTE becomes available to five million Cricket customers. AT&T said the purchase would open Cricket users to roaming on AT&T’s cellular and data networks, which cover a larger service area than Sprint. The biggest impact may be felt by Cricket’s dealer network. AT&T is likely to move the Cricket brand “in-house” and market it within AT&T stores.

Both AT&T and Verizon Wireless have been strongly urging on consolidation in the wireless provider market. Executives at both companies and several Wall Street analysts predict America will eventually have three major carriers, presumably Verizon, AT&T, and a consolidated Sprint, which could eventually acquire T-Mobile. These predictions all assume federal regulators will accept the wireless industry’s premise that fierce competition will remain with fewer providers. A handful of small independent providers may continue to exist as outliers, but most do not believe they will have any significant impact on the market share of the top three.

Many wireless industry observers believe AT&T is not interested in Leap/Cricket because of its business model. It is Leap’s spectrum holdings in large urban markets that makes it an attractive takeover target.

AT&T expects no problems with regulator approval and anticipates the acquisition will be complete by early 2014.

“The combined company will have the financial resources, scale and spectrum to better compete with other major national providers for customers interested in low-cost prepaid service,” AT&T said in a release on Friday.

John Malone’s power play for a Charter Communications’ takeover of Time Warner Cable would leave the nation’s second largest cable operator $60 billion in debt and has already cost creditors holding Time Warner Cable bonds $1.8 billion in value as markets react to the rumors of a leveraged buyout.

Two people familiar with ongoing private discussions report Liberty Media is prepared to borrow against its own or Time Warner Cable’s assets to put the deal together, spiking debt levels into junk territory. Charter itself already has the most debt among junk-rated U.S. cable companies, with $12.8 billion owed, according to Bloomberg.

Malone has structured highly leveraged acquisition deals throughout his history in the cable industry, borrowing heavily to finance merger deals and then raising subscriber rates to boost revenue to cut debt.

Time Warner Cable is highly exposed to a hostile takeover because its bonds lack safety provisions that would discourage the kind of acquisition Malone is attempting. Adam Cohen, founder of independent research company Covenant Review said Time Warner’s bonds are easily transferable to Charter’s name.

“The combined entity will be junk status, and the Time Warner bonds could be even junkier than the Charter bonds,” Cohen said in a telephone interview with Bloomberg. “This could be one of the worst covenant-related disasters ever for investment-grade bondholders.”

Moody’s senior vice president Neil Begley has suggested Time Warner Cable seriously consider “the Moe Green Strategy,” a nod to The Godfather.

‘You don’t buy Moe Green, Moe Green buys you!’

Begley suggested Time Warner Cable could consider putting in a bid to acquire Charter just to keep Malone on the outside looking in. That might be more effective than Time Warner acquiring a number of smaller cable operators like Cablevision, Mediacom, Cable ONE, and others to outflank Malone.

Malone is using an investment in Charter Communications as a springboard to launch his vision of a tightly consolidated cable industry, with just a handful of players providing service, instead of the dozen or so significant cable companies now in business. Malone sees Comcast as untouchable, so rolling up other operators around a Time Warner-Charter deal would be the next best thing, analysts suggest.