Grande Communications serves 148,000 and 147,000 Texas residential and business customers, respectively.

Grande Communications, the San Marcos, Texas company competing against Time Warner Cable and AT&T, will effectively be sold to ABRY Partners, an investment banking firm based in Boston, for an undisclosed sum.

Grande, familiar to Stop the Cap! readers in Austin, ran advertisements back in April and May against Time Warner Cable and AT&T touting their broadband service as being free from Internet Overcharging schemes.  The company has managed to build its fiber optic network to reach approximately 20% of homes in the Austin area, mostly in the northeast and eastern areas, as well as Tarrytown.

Growth had been slow for the “overbuilder” due to financing difficulties.  Investors feared a three-way competition between cable, telephone, and fiber-based Grande, because heavy competition usually results in lower prices and profits, decreasing their potential return.

With ABRY effectively helping refill Grande’s bank accounts to allow them to accelerate the building of their network, Grande hopes to achieve one million homes passed by their network in a few short years.

ABRY has experience in the broadband market with their ownership of Atlantic Broadband, the nation’s 15th largest cable operator serving customers in Florida, Maryland, Delaware, South Carolina and central Pennsylvania.

The deal requires internal review from Grande’s board of directors and external review by the Federal Communications Commission, the Texas Public Utilities Commission, and others.

March ended with yet another public hearing on the seemingly endless series of problems customers in New Hampshire were experiencing from FairPoint.  The Public Utilities Commission sent FairPoint a letter in April laying out benchmarks it expected the company to comply with to address the problems once and for all.

Meanwhile, a FairPoint spokesperson pushed the goal post even further away, now claiming the company’s “plan all along” was to resolve problems by June 30, 2009.  WMUR summed up the problems, and what New Hampshire regulators hoped would finally be the solution.

[flv width=”320″ height=”240″]http://www.phillipdampier.com/video/WMUR Manchester FairPoint Says It’s Working To Improve Performance 04-10-09.flv[/flv]

By May of this year, FairPoint finally started putting a dent in the number of customer complaints filed with Public Utilities regulators in Maine, Vermont, and New Hampshire.  Billing problems were now the biggest challenge for the company.  Customers receiving incorrect bills (or not receiving them at all) started refusing to pay until an accurate bill could be sent.  Many others found they were still being billed for lines disconnected weeks or even months earlier.

Wall Street, and credit rating agencies were following the chaos in New England, and didn’t like what they saw.  Customers were fleeing to the competition in high numbers.  The company cannot pay its debt without paying  customers.  The stock price had been declining as well.  Considering all of those factors, along with FairPoint’s quarterly earnings report, a range of rating services downgraded FairPoint’s credit rating, with one openly speculating FairPoint could face bankruptcy.

WCSH in Portland, Maine picks up the story on May 8th:

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Comcast apparently doesn’t like Verizon invading its home turf.  The Philadelphia-based cable company and the New York-based telephone company are engaged in an all-out ad war in southeastern Pennsylvania, and Verizon is calling “foul.”

Comcast replies turnabout is fair play, telling the Philadelphia Business Journal:

“Verizon’s been running a negative campaign against Comcast for years and its response to our campaign shows that they can dish it out but they can’t take it. As might be expected, the better the advertising and the more traction that it gains with consumers, the louder the competitor will object,” said Jennifer Khoury, Comcast spokeswoman.

So what ad put Verizon over the edge? Apparently it wasn’t the Verizon sales-stalker who invades people’s cars, front lawns, and demands credit card numbers of women at their doorstep.  No, it was the fact that Comcast depicted a typical Verizon FiOS installation as resembling a chaotic home lawn invasion, complete with heavy ‘yard wrecking’ equipment, life-threatening recklessness, and a monthly bill so prolific in pages, it requires a forklift to deliver.

That did it.

“These ads have people ripping up property, putting lives in danger and suggesting that this is typical of FiOS installations,” Eric Rabe, Verizon’s senior vice president for media relations, said. “That is an outrageous characterization and it has to stop.”

Rabe wasn’t sure if Verizon would sue if Comcast doesn’t knock it off.  The two companies are “having conversations,” according to Rabe.

While they talk, let’s explore the offending ad, plus several others from both sides.  It must be nice to live in a heavily competitive market.  Too many of us do not.  Comcast limits monthly usage to 250GB.  Verizon FiOS has no limit.

[flv width=”640″ height=”360″]http://www.phillipdampier.com/video/Comcast FiOS Bashing Ad 1.flv[/flv]

More video follows below…

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Robert Cyran, writing for BreakingViews, is concerned about the profit capacity of telephone and cable companies in the coming years.

Noting that wired, high speed services often account for more than half the revenue of providers, anything that challenges those margins could provoke hostile reaction from Wall Street, dissatisfied with diminishing returns.

Cyran specifically calls out Frontier Communications, FairPoint Communications, and Qwest for not having wireless (mobile phone) divisions and for their high level of debt.

He’s also been absorbing Sanford Bernstein’s views on the telecommunications industry, which typically guarantees Verizon fiber-to-the-home cost bashing.  And yes, it’s in there:

True, in urban areas where Verizon and AT&T are laying optical fibre, their fixed-line businesses are doing relatively well. Customers like super-fast internet connections, and the companies can pump bundles of services such as voice and television through it. But in rural areas, fibre is prohibitively expensive to lay, and customers without high-speed service options have more reason to rely solely on a mobile phone.

Verizon and AT&T won’t escape unharmed. Verizon is spending about $4,000 per customer to lay fibre.

Verizon is spending money on fiber service that customers like and are generating healthy revenues, but the fiber optics “harms” Verizon.  At least the bashing is consistent.

Cyran claims cable’s biggest problem is that margins for their broadband divisions have been slowly dropping.  Should customers defect en masse to competitors, things could get bad fast:

And when businesses like these with high fixed costs see customers defect, margins can contract quickly and even go negative.

One way to guarantee mass defections is to try to gouge consumers with Internet Overcharging schemes.  In markets where equivalent levels of service are available, customers have the option of leaving the Overcharger behind for a more customer-friendly option.  Unfortunately, not every market has equivalent competitors.

Cyran’s predictions for the future?  Big troubles for Frontier, FairPoint, and Qwest who he predicts will see ongoing declines in their cash flow and increasing difficulty in paying back their debts.  The companies will also struggle with the limitations of aging copper infrastructure to provide advanced class services (high speed broadband, video, and telephone) customers increasingly expect.  In larger communities, many customers will leave for competitors who can provide those services (in these cases that means the cable company).  In rural communities, customers will increasingly rely on cell phones as their only telephone line.

Fairpoint’s stock has fallen about 70% over the last 12 months and Hawaiian Telecom, which Carlyle bought in 2005, filed for bankruptcy at the end of last year. Yet Quest and Frontier’s stocks both still trade at more than 10 times estimated 2010 earnings. Since there’s little chance customer defections from wired telecom businesses such as theirs will stop, their stocks could have much further to fall.

FairPoint customers pay $25 fee to stop automatic payment withdrawals FairPoint failed to make, causing accounts to fall past due

By late March, those customers who had dial tones from their FairPoint lines began to grow concerned about the newest nightmare from the company that took over telephone service across three New England states.  Billing problems began immediately after FairPoint converted to its own billing systems, and customers noticed.

The company explained it had a “loss of data” when their own billing system went online, and information from Verizon’s old billing system never made it to the new FairPoint system.

The result was loss of confidence in FairPoint, as customers grew increasingly concerned about inaccurate bills, lost payments, and as one New Hampshire couple discovered, the company’s inability to process “automatic payments” from customers on time, generating past due bills.  Concerned about the impact late notices will have on their credit rating, they spend $25 to get their bank to stop automatic payments that FairPoint failed to make on time.  WMUR reports:

[flv width=”480″ height=”360″]http://www.phillipdampier.com/video/WMUR Manchester Fairpoint Customers Report Problems With Phone Service 3-30-09.flv[/flv]

In Vermont, customers frustrated with bills that never arrived wanted out.  As one customer working in Saint Johnsbury discovered, there was no way to reach the company to tell them to cancel service.  Vermont state regulators finally grew tired of FairPoint’s Public Relations excuses.  They demanded evidence service was improving.  WCAX reports:

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