Just like FairPoint Communications, the Towering Inferno of phone companies haunting New England, Frontier Communications is making a whole lot of promises to state regulators and consumers, if they’ll only support the deal to transfer ownership of phone service from Verizon to them.

This time, Frontier is issuing a self-serving press release touting their investment of some $4 million dollars in its broadband networks in Charles Town and Princeton, West Virginia.  But the best part was the claim the upgrades would “offer customers fast broadband speeds and near-unlimited bandwidth capacity.”

In Princeton, 44 miles of fiber-optic cable will connect all Frontier High-Speed Internet (HSI) equipment to the exchange`s main switch, and 37 additional miles of fiber cable are being installed in the Charles Town exchange. These upgrades will allow Residential HSI speeds of up to 6 Meg and Business HSI speeds of up to 12 Meg. The upgrades will allow provisioning of Metro Ethernet service of up to 100 Meg, resulting in very high data speeds for private networks among multiple business locations.

These upgrades are all well and good, and are perhaps more than urban-focused Verizon was willing to do in the state, but before West Virginians get too excited by the words “fiber cable” and “near-unlimited bandwidth capacity,” it might be wise to consider the implications of transferring an entire state’s telephone business to a company that still insists on defining an “appropriate amount of usage” on that near-unlimited network at a piddly 5GB per month.

The company also promoted their “computer giveaway” program:

Recognizing that the lack of a personal computer is a barrier for many families, since 2006 Frontier has provided more than 10,000 free computers to qualifying customers in West Virginia. A large percentage of the computers went to first time computer households, who also benefited from free on-site installation.

To the uninitiated, that may suggest a benevolent phone company handing out free computers to the needy with no strings attached.  In fact, this was a Frontier customer acquisition promotion.  Customers signing up for a bundle of telephone and broadband and/or satellite service could qualify for a free basic Dell Netbook (valued at under $400), if they are in good standing with the company, agree to a “price protection agreement” holding them to the company for two years (or facing a nasty early termination fee running several hundred dollars), and also pay a handling fee:

Customer pays handling charges and taxes totaling $45. Customers must subscribe to a new package of Frontier residential local service with features, Unlimited Nationwide or Statewide Long Distance voice-calling and qualifying High-Speed Internet service. Requires a two-year Price Protection Plan on Frontier services (excludes satellite TV) with a $300 early termination fee. Offer available while supplies last. Frontier reserves the right to substitute a comparable Mini Laptop. Other offers available for existing High-Speed Internet customers. Applicable taxes and surcharges apply. Electronic or other written contract signature for Frontier services is required. Some Frontier services are subject to availability. Installation charges may apply. Unlimited U.S. Long Distance minutes are for residential voice usage and exclude 900, international, directory assistance and dial-up Internet calls.

For a whole lot of West Virginia, broadband service means one thing – DSL from the phone company.  Satellite broadband is costly, capped, and has terrible customer satisfaction ratings.  Cable television is a dream for significant parts of the mountainous state.  Do West Virginians want to risk their broadband future on a company that insists on an Acceptable Use Policy with a 5GB usage limit in it?

Residents of Rochester, New York know Frontier Communications all too well.  They’ve been our local telephone company since being absorbed by Citizens Communications after the colossal downfall of Global Crossing, which took ownership of the formerly independent Rochester Telephone Corporation.

Don’t let dreams of fiber dance too much in your head.  Frontier routinely installs fiber, but only between their central offices and remote equipment that helps reduce the distance between telephone switch equipment and the copper wiring out on the telephone poles.  It does help provide the potential of speed increases for DSL service by reducing the length of copper wire DSL travels on, but by no means should imply West Virginia will see fiber to the home in their near future.

If Frontier Communications lacks the means and the will to wire New York’s second largest economy and third largest metropolitan area with more than 1,000,000 residents with fiber to the home, don’t think for a moment they’re going to be any hurry to light up the state of West Virginia.

Indeed, for many residents of the Flower City, the bloom is well off Frontier’s rose, trapping this community in a broadband backwater with a telephone company unwilling and/or unable to provide the kind of 21st century broadband service that is presently being provided in several other upstate cities as Verizon installs its FiOS fiber network.  For Rochester, and for too many other cities, the broadband superhighway from the phone company has little more than tumbleweeds blowing across.

This site was founded last year when Frontier introduced its 5GB usage cap, and we coordinated a consumer response which forced the company to pull back from its enforcement.  But the threat still looms over the heads of their customers from coast to coast as long as it remains a part of their Acceptable Use Policy.

The time has come for Frontier to banish the 5GB language from its Acceptable Use Policy once and for all and stop toying with Internet Overcharging schemes altogether, especially as it seeks to bring the threat of those schemes to millions of Americans that may find their only realistic broadband option coming from this provider.  Otherwise, it’s time for consumers to get on the phones and tell their elected officials and public utility commissions how they feel about getting broadband service from a phone company that tells them:

Frontier may suspend, terminate or apply additional charges to the Service if such usage exceeds a reasonable amount of usage. A reasonable amount of usage is defined as 5GB combined upload and download consumption during the course of a 30-day billing period. The Company has made no decision about potential charges for monthly usage in excess of 5GB.

Bazinet

Citigroup media analyst Jason Bazinet is among the first Wall Street investment analysts to call for the mother of all cable mergers – Comcast snapping up control of Time Warner Cable, respectively the nation’s largest and second largest cable operators.  Comcast reported having nearly 23.9 million customers at the end of June; Time Warner Cable said it had about 13 million customers.

In a research note issued today, Bazinet argued that a merger would result in major cost savings for both operators, including $1.6 billion dollars in savings possible from volume discounts for cable network programming to $1.1 billion in savings from employee layoffs, reduced marketing expenses, technical and customer service support, billing, and combining equipment purchases, among other things.  The total net present value of the synergies would come to around $11 billion to $12 billion. That’s not far from Time Warner Cable’s current market value of about $14 billion, according to The New York Times.

A super-sized Comcast would also be able to leverage lower prices when competitively necessary to keep a price advantage over satellite television and telephone company TV, according to Bazinet.

Both Time Warner Cable and Comcast have not publicly indicated any interest in combining forces.  Aside from the regulatory headaches probable from a more skeptical Obama Administration that might aggressively counter such a merger, Comcast Chief Operating Officer Stephen Burke questioned whether the cost savings were anywhere near as high as Bazinet speculated.

Multichannel News quoted Burke:

“We would like to get bigger if the economics were right,” Burke said. “Its pretty hard for me to see how there would be synergies on the programming side or on the hardware side when you go from 24 million subscribers to 27 [million] or 30 [million].”

Time Warner CEO Glenn Britt refused comment.

Still, Wall Street investors were interested.  Time Warner Cable stock shot up 3.5% this afternoon, while Comcast’s rose just a few cents during afternoon trading.

“Comcast isn’t looking to make a $50 billion purchase.”

Stephen Burke, Comcast Chief Operating Officer

Now that Comcast has been freed from that pesky provision of the 1992 Cable Act, authorizing the Federal Communications Commission to set a maximum size for large corporate cable operators, the nation’s largest cable operator is now considering breaking out the checkbook and going on a shopping spree.  That is likely to spark a merger and acquisition frenzy among several players in the industry which could dramatically reduce America’s choices for telecommunications services.

Bloomberg News this evening quotes Stephen Burke, Comcast’s Chief Operating Officer, that it will consider buying other cable operators at a “good price.”

“If there is a way to acquire cable systems for what we consider a good price, ones that are well managed, we would certainly look at whatever is out three,” Burke, 51, said today at a Bank of America Corp. conference in Marina del Rey, California. Still, the company “isn’t waking up every morning” evaluating how it can become bigger, he said.

The Wall Street Journal calls the decision by the U.S. Court of Appeals in Washington, freeing Comcast from its limits, the start of “the coming cable consolidation.”

Martin Peers, writing for the Journal, said that when the dust settles, phone companies might own satellite TV providers and cable companies might end up consolidating into one or two super-sized providers blanketing the entire country with service.

Consumers would be left with a handful of providers for all of their communications needs, from telephone to broadband to television, if the courts open the door with more decisions favorable to the industry and antitrust reviews aren’t aggressively undertaken.

Starting with Comcast, Burke thinks Comcast’s first priority might be to buy up more programmers.  Comcast already has ownership interests in several cable networks, and Burke feels “content channels are good businesses, and we wouldn’t be doing out job if we didn’t try to figure out a way to get bigger in those businesses.”

With Comcast and Cablevision joining forces to sue their way out of the cable network exclusivity ban, owning and controlling those networks, and what competitors get access to their programming, could be an important asset in an ever-consolidating marketplace.  Imagine if U-verse or FiOS was denied access to ESPN, The Weather Channel, CNN, and other popular cable channels.  Would subscribers be compelled to switch providers if they could no longer get the channels they want to watch?

The Journal ponders the coming consolidation frenzy:

Comcast and other cable companies will probably need to consider more consolidation — if not now, in the next couple of years. They are still losing market share to satellite and phone rivals. Comcast lost nearly 700,000 basic subscribers in the year to June. Time Warner Cable has fallen to No. 4 among TV providers, behind satellite firms DirecTV Group and Dish Network.

Cable operators are more than offsetting video losses by selling phone and Internet-access. Eventually, though, those opportunities will peter out. And phone companies’ competitive threat in video could be enhanced by a combination with satellite TV.

The newspaper speculates about this kind of marketplace in the near future:

Today's pay television marketplace

AT&T DirecTV: The Journal ponders an AT&T buyout of DirecTV resulting in a reduction in AT&T’s investment in U-verse, pushing consumers to its newly-acquired satellite service and redirecting investment into the overburdened AT&T mobile phone network.

VerizonDISH: A Verizon buyout of DISH would allow the phone company to push more rural customers to DISH satellite service, and reduce the expense of wiring all but the nation’s largest cities with fiber optics.

Comcast (formerly Comcast & Time Warner Cable, if not others): A supersized Comcast absorbs Time Warner Cable and becomes an even more dominant cable operator, leveraging its investment in Clearwire to offer a  wireless data option to stay competitive with the mobile phone companies like AT&T and Verizon Wireless.

That would leave most Americans with just three choices for telecommunications services capable of bundling multiple products together.  Wouldn’t such a merger-mania trigger antitrust implications and government review?

The Journal doesn’t think so:

Would such a deal pass antitrust scrutiny, even absent the ownership cap? There is a good chance, say several antitrust lawyers. A major focus of antitrust law is whether a merger reduces competition in a way that could raise prices or otherwise hurt consumers. As cable operators generally don’t compete with one another, merging wouldn’t cut competition.

But what kind of benefits would be found for consumers?  If one resides in a city too small to be judged worthy of fiber optic deployment, consumers could be told to get the satellite television service and live with the copper wiring the phone companies provide today.

Cable operators would be in a fine position to compete, as they traditionally have, against satellite television because of the technical limitations of satellite service, ranging from consumer objections to having a dish on their home, to a limit on the number of sets that can be wired, to the inability to get a clear view of the satellite because of nearby trees or other obstructions.

Who pays for the debt likely incurred from a bidding war during a merger frenzy?  Guess.

Back in the mid-1980s, I first got involved in the fight against the cable television industry’s consumer abuses.  Cable had gotten cocky, and began to use their monopoly position to extract ever-increasing amounts of money from consumers, providing lousy service and engaged in anti-competitive abuse all over the marketplace.  Back then, competition for the overwhelming majority of consumers came from just one place – giant 10-12 foot satellite dishes.  These were the days before Direct Broadcast Satellite providers like Echostar/DISH and DirecTV (and PrimeStar, the cable industry’s own satellite provider that claimed to ‘compete’ with cable) provided competition to cable.

In the mid and late 1980s, your choice was a giant TVRO (TV-Receive-Only) satellite dish in the backyard or you hooked up to cable.  A tiny handful of communities had wireless cable, a service that was supposed to compete with cable but was seriously limited in channel capacity (in many communities, wireless cable ended up providing access to ‘adult’ content that cable wouldn’t carry as their biggest selling point) and quickly faded from view by the mid 1990s.

The abusive practices were all over the place back then:

• Cozy arrangements between cable companies and local governments resulting in outright bans of satellite dishes for aesthetic reasons, using zoning laws either prohibiting their installation or requiring landscaping to hide them from view (to the neighbors and to the satellites they were trying to receive, making them useless), or requiring expensive permit fees;
• A rush to scramble/encode satellite signals and then require consumers to purchase, outright, a costly descrambler from General Instruments called the VideoCipher II for $399 (or have it incorporated within a satellite receiver that typically cost $800-1000 and was available only for purchase), only to be replaced a few years later by the VideoCipher II+ (which consumers were also forced to purchase).
• Cable companies, which had ownership interests in most cable networks (which was nearly a pre-condition for getting your network on cable systems), often had exclusive rights to sell that programming, and frequently provided it “only on cable” or to satellite customers who could not subscribe to cable.  Some networks refused to sell to competitors, including dish owners, at any price.
• Anti competitive pricing was by far the biggest problem.  Prices for programming packages encrypted on satellite were sold to consumer dish owners in small or large bundles at pricing comparable or above what cable subscribers paid, despite the fact all of the costs to provide, install, and service reception equipment were borne by consumers.  No cable TV company overhead, no infrastructure or staffing and support costs, yet satellite dish owners were expected to pay the same high costs that cable subscribers paid, and also purchase their own equipment.  That was quite an investment: a 12 foot dish, satellite reception equipment, decoder, and installation routinely ran well over a thousand dollars, depending on the equipment and installation complexity, and that was before programming costs were factored in.

Rural consumers really got the short end of the cable stick, not able to buy cable even if they wanted to, and forced to spend big money, upfront, just to get satellite TV.

That inspired the consumer groundswell of support for legislation to stop the abuses, which overrode a White House veto by President George H.W. Bush.  Among other things, the Cable Act of 1992 put a stop to exclusive programming contracts which denied competitor access to cable networks.

Without that legislation, there would be no DirecTV or DISH today.

Now the cable industry is back, high-fiving over their victory to have the 30% ownership cap dispensed with, and are now taking on the next provision of the 1992 Cable Act they don’t like — the ban on exclusive programming contracts.

That’s right, it’s Back to the Future as Comcast and Cablevision take their legal business to the same friendly DC Court of Appeals that savaged the 30% cap, now seeking an immediate repeal of the exclusivity ban as well.

Oral arguments start September 22nd.

Most amusing of all is the argument made by Comcast and Cablevision, who claim despite the time and attention they are spending on overturning the law, not to mention the legal expense, the practical effect of an end to exclusivity bans would be… absolutely nothing.

“Widespread withholding is now implausible,” said the attorneys in the filing. “[T]here are proportionally fewer services to withhold. The limited withholding that may still occur will not threaten competition: most vertically integrated services have closely similar substitutes, and, when competitive MVPDs [multichannel video programming distributors] have sunk massive investments, withholding can no longer cause market exit.”

That’s right.  Big cable companies throw money away on attorneys who will presumably fight this case and the inevitable appeals for the next few years for no practical change whatsoever in the current competitive landscape.  The believe people will accept that an industry that had to be forced by regulation to compete on a level playing field will continue to respect that playing field once they plow it up.

Just trust us.  We’re your cable company.  You love us.

So it could be “nothing” as they suggest, or it could be a defensive response to challenges of their business plans from telephone company TV and online video competition.  Would you subscribe to a competitor that didn’t offer the networks you wanted to see because they were “exclusively” available only from the cable company?

Be it usage caps, consumption billing, exclusive contracts, “price protection agreements” that hold customers in place for 12-24 months (or longer), the war to keep consumers from choosing when, where, and how they access content is becoming fully engaged.

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Satellite television in the mid-1980s was highlighted by Granada Television

Competition does occasionally bring lower prices, but only to those who threaten to abandon their current provider to take their business elsewhere.

Residents in several suburbs of Syracuse, New York have learned that trick as Verizon nears the launch of FiOS service in their area, and the result is significant savings of more than $240 a year, just for the asking.

“Where we find the competition really paying off is for those consumers who might already be with Time Warner,” Doug Williams, a Cambridge-based analyst with Forrester Research told the Syracuse Post-Standard.  “People whose promotional deals are ending are often able to get a sweet deal with nothing more than a phone call and a mention of the word “FiOS.”

It worked for Doug himself up in Boston, where his mother is served by Comcast:

Doug Williams had a fool-proof plan for his mother-in-law to get at least $20 knocked off her cable bill: Call the cable company and tell them Verizon FiOS television was in her neighborhood.

It worked without a hitch. The operator looked up her address, then gave her a discount without any hesitation. Williams’ family lives in the Boston area, where Verizon’s fiber optic television service is the first real competition to the area’s entrenched cable provider, Comcast.

The Syracuse suburbs of Clay, Cicero, East Syracuse, North Syracuse and Fleming already have, or will soon have access to FiOS.  The towns of DeWitt and Salina last week approved franchise agreements with Verizon to provide the service, and Camillus approved the franchise agreement on August 25.

The addition of the Camillus television franchises brings to 161 the total number of New York municipalities that have authorized Verizon to provide FiOS TV service.

The company is in the process of building and installing the necessary video equipment in local central offices in the central New York region, and anticipates that FiOS TV service will be turned on for new customers in
municipalities there in the fall.

[flv width=”296″ height=”222″]http://www.phillipdampier.com/video/WSYR Syracuse FiOS Coming to CNY.flv[/flv]

WSYR-TV Syracuse covers the announcement by Clay officials of Verizon’s first franchise agreement in the area. (3/16/2009)

Time Warner Cable has been preparing for Verizon for at least a year, starting with complaints about how the franchise agreement was handled in Clay, where Time Warner officials claimed they were given insufficient notice to review the franchise proposal.  That claim was brushed aside by the New York Public Service Commission, which has a history of rubber stamping franchise proposals anyway.  Time Warner has had little to say about other franchise agreement negotiations since.

The cable company has also been wringing its hands about fears Verizon’s construction crews will be digging up their customers’ lawns, making a mess, and accidentally interrupting service for their customers.  Time Warner’s concerns may have come in part from a WSYR-TV report back in June highlighting the frustrations of Clay residents who have been inconvenienced by Verizon’s slow work in their area.  But most consumers welcome the competition.

[flv width=”296″ height=”222″]http://www.phillipdampier.com/video/WSYR Syracuse Preparing for FiOS.flv[/flv]

WSYR-TV Syracuse highlights the plight of Clay residents running out of patience as Verizon wires their community for FiOS. (6/4/09)

“People are excited. It looks like there will be an opportunity for choice,” Cicero town supervisor Chet Dudzinski told the newspaper.

Verizon FiOS installation crews start to wear out welcome in Clay, N.Y.

Time Warner claims it’s not worried by the competition, noting it successfully competes in many other FiOS-wired communities.  But Time Warner’s marketing efforts have changed with the looming threat of competition.  First, the company brought a “price protection agreement” to the area, trying to lock in existing customers to a lengthy contract before the competition arrived, limiting their chances to switch providers.  Then the company embarked on a major HD channel expansion, quickly bringing Syracuse residents more than 100 HD channels.  Time Warner promoted their heavy emphasis on local sports programming, touting Syracuse University football and basketball games, and local high school sports coverage.

Verizon shot back they will feature more than 115 HD channels, and 70% of their 15,000 videos on demand are available for free.  Verizon also will carry many Syracuse sports events, and will also bring NFL Network and ESPN 360 to the area, services Time Warner has refused to carry.

Consumers enjoy the competitive choice, and with the possibility walking their cable and broadband service to the “other guy” across town, will be able to leverage some additional savings off their service.

For Syracuse city residents, the wait will be somewhat longer.  City officials are wrangling over the kinds of public access programming and service policies Verizon will be required to provide before they will negotiate a franchise agreement with them.  The foot dragging may last a year or longer, as the city will vote Monday on whether to spend $30,000 of taxpayers’ money just to ascertain what the city needs from Verizon when negotiations begin.  City residents who want competition now may want to inform their elected officials spending $30,000 to “study” the issue is just a tad excessive, especially considering The Google provides ample information, for free, about what other communities across the northeast have accomplished as part of their negotiations with the dominant phone company in the region.

Verizon’s complete list of franchises in New York state is below the jump.

… Continue Reading