Who needs FiOS when you can get 5G wireless service with a data plan?

Fran Shammo has a message for Verizon customers and investors: fiber optic broadband is so… yesterday. Your millennial kids aren’t interested in gigabit speed, unlimited use Internet in the home. They want to watch most of their content on a smartphone and spend more on usage-capped wireless plans.

Shammo is Verizon’s money man – the chief financial officer and prognosticator of the great Internet future.

Like his boss, CEO Lowell McAdam, Frammo has his feet firmly planted in the direction of Verizon Wireless, the phone company’s top moneymaker. If one ever wondered why Verizon Communications has let FiOS expansion wither on the vine, Mr. McAdam and Mr. Shammo would be the two to speak with.

This week, Shammo doubled down on his pro-wireless rhetoric while attending the Bank of America Merrill Lynch 2016 Media, Communications & Entertainment Conference — one of many regular gathering spots for Wall Street analysts and investors. He left little doubt about the direction Verizon was headed in.

Shammo

“As we look at the world if you will, and we look at our ecosystem, […] the world is moving to a broadband wireless world,” Shammo told the audience. “Now, I am really – when I say world, I am really talking the U.S., right. So, but I do think the world is moving to a wireless world.”

In Shammo’s view, the vast majority of people want to consume content, including entertainment, over a 4G LTE (or future 5G) wireless network on a portable device tied to a data plan. Shammo predicted wireless usage will surpass DSL, cable broadband, and even FiOS consumption in 3-5 years. If he’s right, that means a mountain of money for Verizon and its investors, as consumers will easily have to spend over $100 a month just on a data plan sufficient to cope with Shammo’s predicted usage curve. In fact, your future Verizon Wireless bill will likely rival what you pay for cable television, broadband, and phone service together.

Millennials don’t want fiber, they want wireless data plans

Shammo argued millennials are driving the transition to wireless, claiming they already watch most of their entertainment over smartphones and tablets, not home broadband or linear TV. His view is the rest of us are soon to follow. Shammo claims those under 30 are turning down cable television and disconnecting their home broadband service because they prefer wireless. Others wonder if it is more a matter of being able to afford both. A 2013 survey by Pew data found 84% of households making more than $54,000 have broadband. That number drops to 54% when annual household incomes are lower than $30,000 per year. But those income-challenged millennials don’t always forego Internet access — some rely on their wireless smartphone to access online content instead.

A microcell

Verizon Wireless may be banking on the same kind of “hard choice” many made about their landline service. Pay for a landline and a mobile phone, or just keep mobile and disconnect the home phone to save money. Usage growth curves may soon force a choice about increasing your data plan or keeping broadband service at home. Shammo is betting most need Verizon Wireless more.

Verizon FiOS is really about network densification of our 4G LTE network

Shammo continued to frame its FiOS network as “east coast-centric” and almost a piece of nostalgia. The recent decision to expand FiOS in Boston is not based on a renewed belief in the future of fiber, Shammo admitted, it is being done primarily to lay the infrastructure needed to densify Verizon’s existing LTE wireless network in metro Boston to better manage increased wireless usage. Shammo’s spending priorities couldn’t be clearer.

“Obviously, we said, we would build up Boston now, because it makes sense from a LTE perspective,” Shammo said. “We can spend $300 million over the next three years to make that more palatable to expand FIOS. So we will continue to expand that broadband connection via fiber where it makes financial sense for us.”

In other words, it is much easier to justify capital expenses of $300 million on network expansion to Wall Street if you explain it’s primarily for the high-profit wireless side of the business, not to give customers an alternative to Time Warner Cable or Comcast. FiOS powers cell sites as well as much smaller microcells and short-distance antennas designed to manage usage in high traffic neighborhoods.

Shammo also believes Verizon must not just be a ‘dumb wireless’ connection. Controlling and distributing content is also critically important, and Shammo is still a big believer in Verizon’s ho-hum GO90 platform, which compared to Hulu and Netflix couldn’t draw flies.

Even Verizon CEO McAdam admitted a few weeks ago at another Wall Street conference GO90 was “a little bit overhyped.” Most of GO90’s content library is mostly short video clips targeted at millennials with short attention spans. The downside of making that your target audience is the rumor many who sampled the service early on have already forgotten about it and moved on.

Forget about congested home and on-the-go Wi-Fi and expensive fiber optics. Verizon will sell you 5G wireless (with a data plan) for everywhere.

Shammo believes the future isn’t good for Wi-Fi in the home and on-the-go. As data demands increase, he believes Wi-Fi will become slow and overcongested.

“There is a quality of service with our network that you can’t get with others,” Shammo said. “I mean, most people in this room would realize that when Wi-Fi gets clogged, quality of service goes significantly down. It’s an unmanaged network. You can’t manage that.”

Instead, Verizon will eventually deploy 5G wireless instead of FiOS in many areas without fiber optic service today. Frammo said 5G would cost Verizon a lot less than fiber, “because there is no labor to dig up your front lawn, lay in fiber, or be able to fix something.”

Shammo doesn’t believe 5G wireless will replace 4G LTE wireless, however.

“LTE will be here for a very long time and be the predominant voice, text, data platform for mobile,” Shammo said.

So instead of unlimited fiber optic broadband, Verizon plans to sell home broadband customers something closer to Wi-Fi, except with a data allowance. It’s a return to fixed wireless service.

Verizon Wireless’ existing fixed wireless service is heavily usage capped and not cheap.

Just a few short years ago, Verizon was looking to fixed wireless as a replacement for rural DSL and landline service. Now Shammo sees the economics as favorable to push a similar service on all of its customers, except those already fitted for FiOS. That changes the dynamics on usage as well, because Verizon Wireless ditched unlimited service several years ago except for a dwindling number of customer grandfathered in on its old unlimited plan.

Current 4G LTE fixed wireless customers can expect 5-12Mbps speeds with data plan options of $60 for 10GB, $90 for 20GB, or $120 for 30GB. The 5G service would be substantially faster than Verizon’s current fixed LTE wireless service, but the company’s philosophy favoring data caps for wireless services makes it likely customers will pay much higher prices for service, higher than Verizon charges for FiOS itself.

The Communications Workers of America just proved there is strength in numbers. After 39,000 network technicians and customer service representatives employed by Verizon Communications went on strike April 13 after nearly a year without a contract, Wall Street pondered the potential impact of $200 million in lost business for Verizon’s FiOS, phone and television services.

Reports from customers and union observers suggested Verizon’s temporary workforce of strike replacements proved inept and unsafe, putting increasing pressure on Verizon executives to respond to union demands to share a piece of Verizon’s vast and increasing profits.

The CWA and the International Brotherhood of Electrical Workers (IBEW) have also been some of the strongest advocates of pushing Verizon to continue service upgrades, particularly for its FiOS fiber to the home service. The unions believe the fiber upgrades not only benefit the workers who install and maintain the optical fiber network, but also help Verizon sell more products and services to customers who would love an alternative to their local cable company. Although Verizon FiOS has a substantial presence in major Eastern Seaboard cities, vast areas of Verizon territory are still dependent on its aging copper wire networks that can handle little more than basic landline service and slow speed DSL.

The seven week strike was the largest and longest strike action in the United States since 2011, and attracted the attention of the Obama Administration and the two Democratic candidates for president. It was also one of the most effective, from the union’s point of view.

Verizon workers have been on strike since April 13.

Verizon executives eventually agreed to ‘share the wealth’ with workers, offering to hire 1,400 new permanent employees and pay raises just above 10 percent. It was a long journey for the workers and the unions, which have fought for a new comprehensive agreement with the company for several years. The CWA last struck Verizon for two weeks after negotiations deadlocked in 2011. Their latest contract ended last August, leading the union to begin several months of “informational picketing,” which effectively meant workers visibly protested Verizon’s policies towards its employees but stayed on the job while doing so.

Conservative groups attacked the unions and defended Verizon officials in editorials and columns. Billionaire Steve Forbes called Verizon employees “bamboozled” and greedy. Unless workers capitulated to Verizon executives’ wise and realistic demands, “Big Labor” would reduce Verizon’s tech revolution to something that “looks more like Detroit than Silicon Valley.” Forbes had nothing to say about Verizon’s explosive growth in compensation and bonus packages for the company’s top executives, or its increased debt load from buying out Vodafone, its former wireless partner, or its generous dividend payouts and share buybacks to benefit shareholders.

Did Verizon Capitulate Because it Intends to Sell Off its Wireline Networks?

Is Verizon planning on selling off its wireline networks?

Some on Wall Street were visibly annoyed that Verizon capitulated. Some analysts predicted it was the beginning of the end of Verizon remaining in the wired networks business.

“They needed to end the strike and they bit the bullet,” said Roger Entner of Recon Analytics. He said he thinks the deal “reinforced their commitment to basically exiting [wireline], the least profitable, most problematic part of the business. [The new contract] gives Verizon four years basically to get rid of the unit. Let it be somebody else’s problem.”

That somebody else is likely Frontier Communications. Stop the Cap! has predicted for more than a year our expectation Verizon Communications will continue to gradually sell off its wired service areas, starting with those inland regions not FiOS-enabled, to Frontier as that smaller company’s capacity to borrow money to finance transactions allows. Frontier has a strong interest in staying in the wireline business, and is acknowledged to have stable and friendly relations with its unionized workforce, including former Verizon workers. This commitment is especially significant in a context where employers are held liable for their employees’ conduct in LA, underscoring the importance of maintaining positive and compliant workplace relationships.

Jim Patterson, CEO of Patterson Advisory Group, believes Verizon’s recent investments in fiber optics signals it does intend to stay in the wireline business. But there is a careful line to be drawn between wireline investments in services like FiOS and those made to support its much more profitable wireless unit, Verizon Wireless.

Bruce Kushnick, executive director of New Networks Institute, is increasingly skeptical about Verizon’s FiOS spending priorities.

Shammo

“According to the NY Attorney General, about 75% of Verizon NY’s wireline utility budget has been diverted to fund the construction of fiber optic lines that are used by Verizon Wireless’s cell site facilities and FiOS cable TV,” Kushnick wrote last week in a Huffington Post article that questions Verizon’s announced investments in wiring Boston with fiber optics for FiOS. “On the 1st Quarter 2016 Verizon earnings call, [chief financial officer Fran] Shammo said that the build out is for another Verizon company – Verizon Wireless—and it is going to be paid for by the wireline, state utility— Verizon Massachusetts; i.e., it is diverting the wireline construction budgets to do another company’s build out of fiber, to be used for wireless services.”

If Kushnick is right, Verizon may not care whether the service area(s) it sells are well-fibered or not. The fact Verizon recently sold FiOS-enabled service areas in Texas, Florida, and California to Frontier Communications may bolster Kushnick’s case. Shammo’s statements to Wall Street suggest Verizon is primarily attracted to investing in areas where it needs to improve its wireless service, not its landline, broadband, and television services, delivered over FiOS fiber optics.

“We’ll take one city at a time,” Shammo said on the same conference call. “Obviously we still don’t have Alexandria (Virginia) built out or Baltimore. So if we get to a position where we believe we’re going to need to invest in [wireless network/cell] densification in those cities, then that’s an opportunity for us to take a look at it. But at this time we’re concentrating on Boston.”

Unions Can Make a Big Difference for Workers

Nobody believes individual workers could have negotiated the kind of salary and benefits package the CWA and IBEW won for their organized workforces. The New York Daily News heralded the end of the strike as “score one for the middle class — and for the importance of collective bargaining.”

As wages continue to stagnate for most Americans, union supporters call organized labor the last bulwark against a global wage race to the bottom for the middle class. Challenged by cheap labor overseas, increasing health care costs, and government policies some claim only promote accelerating wealth for about 1% of the population, the CWA’s victory forced Verizon to share some of its profits with the workers that helped make those profits possible.

Share the wealth

“Executives get performance bonuses, stock awards, and retention bonuses for doing a good job, so why shouldn’t we?” argued one picketer outside of a Wall Street event featuring a Verizon executive.

Verizon’s last “final offer” before capitulating was a 6.5% salary hike and little, if any, future job security. Now Verizon will have to hire additional permanent call center workers instead of outsourcing that work to Asian-based call centers. The unions also won other concessions that reduce compulsory relocation to other cities, canceled planned pension and disability insurance cuts, and the CWA got its first contract for Verizon’s previously non-unionized wireless retail force.

Some of America’s largest telecommunications companies continue to pay almost nothing in federal taxes even as state taxing authorities hungry for revenue  are getting more aggressive about denying access to tax loopholes and suing some for failing to pay their fair share.

Special interest-inspired “pro-business” loopholes have been a growing part of the U.S. tax code since the Reagan Administration. The premise seemed reasonable enough: high corporate taxes are simply passed on to consumers as a cost of doing business, so lowering them will trickle savings down to the consumer and also free capital to create more jobs. It has not worked that way, however. Product pricing for services like broadband have been based more on what customers believe the product is worth, not what it costs to deliver, and Verizon was among the companies cited for significant job cuts after its corporate tax rate plummeted. Regardless of corporate tax rates, providers continue to raise broadband prices, even as the costs to provide the service are declining. The old maxim of charging what the market will bear is alive and well. So where do the tax savings go? Into share buybacks, shareholder dividend payouts, increased executive salaries and bonuses, and lobbying.

Some states are discovering they have been leaving money on the table when they don’t insist on collecting owed state taxes, and as state budgets continue to be strapped with increasing medical and infrastructure-related expenses, taking companies to court who try to avoid their tax obligations is getting more popular.

One of the biggest potential windfalls could eventually fill New York State coffers with $300 million in damages and penalties courtesy of Sprint, which was accused of deliberately not billing customers for state taxes on its wireless services over seven years.

Yesterday, the U.S. Supreme Court turned away Sprint’s effort to void an October 2015 New York Court of Appeals decision that would allow the state to proceed to court arguing Sprint intentionally failed to collect more than $100 million in taxes from New Yorkers from 2005 on. At the time, Sprint was attempting to rebuild its market share by luring customers with cheaper mobile service. One way to offer a lower price is to stop charging tax. In New York alone, municipalities lost $4.6 million a month as a result of the scheme.

Sprint has repeatedly argued the lawsuit is invalid because a 2000 federal law trumps a 2002 New York State law that covered state taxes. The court disagreed, and the fact a whistleblower at Sprint revealed what Sprint was up to didn’t help. The case will now likely head to state court or get settled.

While $300 million sounds like a lot, it pales in comparison to the money Verizon manages to dodge paying the Internal Revenue Service. The phone company is the poster child of corporate tax dodging according to Democratic presidential candidate Bernie Sanders. Sanders targeted Verizon because between 2008-2013, Verizon not only did not pay a nickel in federal taxes, it actually received a refund from the federal government after achieving a federal tax rate of -2.5%, despite booking $42.5 billion in profits. American taxpayers effectively subsidized Verizon when it got its refund check.

In the last two years, Verizon is paying federal taxes once again, but at a rate of 12.4%, well below the tax rate of most middle class Americans.

It’s a sensitive matter for Verizon, because CEO Lowell McAdam launched a full-scale media blitz trying to paint the Sanders campaign as inaccurate. McAdam claims Verizon actually paid a 35% tax rate in 2015, which would only be true if the company added the tax obligations it owes on the billions of dollars it stashes in overseas bank accounts. Foreign taxes don’t help the American taxpayer, suggest critics, and Citizens for Tax Justice consider McAdam’s claims “artificial.”

“In fact, over the past 15 years, Verizon has paid a federal tax rate averaging just 12.4 percent on $121 billion in U.S. profits, meaning that the company has found a way to shelter about two-thirds of its U.S. profits from federal taxes over this period,” the group claims. “In five of the last 15 years, the company paid zero in federal taxes. While there is no indication that this spectacular feat of tax avoidance is anything but legal (the company’s consistently low tax rates are most likely due to overly generous accelerated depreciation tax provisions that Congress has expanded over the last decade), few Americans would describe the company avoiding tax on $78 billion of profits as ‘fair.’”

Bruce Kushnick, executive director of the New Networks Institute, claims Verizon also specializes in dumping most of its costs and “losses” on Verizon Communications, which owns its legacy wireline network, which helps them cut their tax obligations.

Too often, changes to the U.S. tax code have unintentional consequences, especially when corporations can hire tax attorneys that outclass those working for the federal government.

Fredric Grundeman helped draft a tax bill that was supposed to curb loopholes in the estate tax and though well-trained as a trusted attorney at the Treasury Department, the bill quickly backfired. The new law opened even larger loopholes than those it was originally written to close, allowing some of America’s richest families to pass on money to heirs with no tax implications at all. Grundeman admits legislators often don’t recognize a new tax law’s potential for abuse.

“How do I say it?” Grundeman told Bloomberg News back in 2013. “When Congress enacts a law, it isn’t always well thought out.”

That is also true on the state level.

Oregon officials push a legislative button and give Google Fiber a tax break. Then Comcast shows up.

Oregon wants to attract Google Fiber to Portland, but Google objected to one of the state’s property tax provisions that affects companies that sell data services. Oregon partly sets the tax rate commensurate with the value of the provider’s brand name, among other factors. It’s all very vague, but not so vague that Google would miss it could pay an even higher tax rate that its competitors — Comcast and CenturyLink.

Oregon’s legislature voted to correct the problem by exempting providers that offer gigabit broadband. The tax law changes were tailored to benefit Google, assuming Comcast and CenturyLink would continue to drag their feet to upgrade their Oregon networks.

But the enterprising lawyers at Comcast promptly requested the same tax exemption that Google would get in return for building its fiber network in the state. The reason? Comcast had introduced its own gigabit Internet service on a much more limited scale.

Rep. Phil Barnhart (D-Eugene) admitted Oregon had another law on its hands with unintended consequences. Barnhart told utility regulators this spring his fellow lawmakers never intended to give the tax break to Comcast, which charges hundreds of dollars for 2,000Mbps service. But nobody bothered to set any price guidelines in the law, meaning Google can charge $70 a month for gigabit service and get a tax break and Comcast can offer 2Gbps service in a limited number of locations, at the “go away” price of $300 a month, with start-up costs up to $1,000, and a multi-year contract, and get the exact same tax break.

Barnhart

Or maybe not, at least for now.

Last week, the Oregon Department of Revenue ruled Comcast is not eligible for that tax break, at least not this year, according to The Oregonian. The department wouldn’t explain why, citing taxpayer confidentiality. For good measure, the same department also rejected applications from Google Fiber and Frontier Communications (Frontier operates a very limited FiOS fiber to the home network in communities including Beaverton, Hillsboro, and Gresham that it inherited from Verizon), claiming Google and Frontier’s gigabit networks were theoretical in Oregon and there needed to be gigabit service actually up and running to qualify.

That leaves Google in a classic catch-22. It won’t bring fiber to Oregon so long as it faces a stiff tax bill and tax authorities won’t forgive the tax until there is gigabit fiber up and running. For some taxpayers, what burns the most is the legislature paved the road to tax bliss to attract Google Fiber, but the only company that may actually ultimately travel down it is Comcast.

The 24-hour emergency hotline at Alcoholics Anonymous in Ventura County, Calif., rang only sporadically back in April and it wasn’t because Simi Valley, Ojai, and Thousand Oaks were overrun with teetotalers.  The director of the center blamed Frontier Communications for phone outages, which began right after it took over phone service for Verizon.

In Garland, Tex., Carolyn Crawford has had nothing but excuses about her service outage, which began April 11.

“When you call you receive scripted responses and when you send a message on Facebook you receive robotic responses,” Crawford told the Dallas Morning News.

In Florida, the Sarasota Tribune put an online form up to collect complaints about Frontier and had 662 registered over just one weekend. One complaint:

“It’s our seventh day with no phone, no Internet and no answers,” said Howard Duff of Bradenton.

He said he had spent 45 minutes to an hour on a cell phone before getting through to someone, then spent hours for several days with Frontier tech support, disconnecting and reconnecting equipment and relaying information about lights. On Thursday, when he reached a Frontier technician who wanted him to begin the same checks, Duff refused to go through it all again. Instead, he was given a repair ticket number and was told someone would contact him. He was still waiting Monday afternoon.

“They really don’t care about the people in Florida,” Duff said. “Who can we call? What can we do?”

Frontier’s latest acquisition involves Verizon’s wireline networks in Texas, Florida, and California.

Back in late April, more than 11,000 comments from Frontier customers around the country have been posted to its Facebook page, mostly to complain about service problems. They affect both residential and business customers.

Michael Camp of Parker, Tex. says Frontier’s reliability has killed his business’ ability to make international business calls.

“It’s like trying to work in a Third World country,” he said.

The first challenge Frontier customers with service problems face is a dreaded interaction with Frontier’s customer service. The challenges can start right away, such as trying to prove to the phone company you actually are one of their customers.

At S.O.S Resale Boutique and Veteran’s Communication Center in Palm Desert, Calif., the non-profit group spent days trying to get Frontier to restore their phone and Internet service.

“The most frustrating part of the ordeal was that every time you would call, they would say you are not a customer and that you don’t have an account. I would keep arguing that we do,” Erica Stone, founding director of S.O.S., told KESQ-TV. Either way, Frontier didn’t bother to show up for a scheduled appointment anyway.

Mary Harmon, in Long Beach,  was told (after four calls) that a repair technician would come to her house on April 15. That date was changed to Monday, April 18 with a 10-hour window. She told the Long Beach Press Telegram she wasn’t holding her breath.

“I don’t have any faith in them,” Harmon said. I’m so fed up with everything that’s been going on.”

Harmon spent all day Monday at home waiting, only to get a call at 5:25pm that her appointment was rescheduled one week later to April 25.

Considering the onslaught of stories from readers like Harmon, that newspaper has taken to calling Frontier customers “victims.”

But it wasn’t all bad news.

“No Internet or cable,” wrote one customer on Twitter. “But the bill arrived on time.”

What Problems? Frontier Living in Denial

Thousands of complaints later, it is evident Frontier has gotten itself into another fine mess, one predicted in advance by Stop the Cap! each time Frontier decides it wants to buy up some more landlines. No matter how bad things actually got, the company regularly tells its shareholders tall tales that all went well, the problems were small, and the resolutions easy.

Just look at what Daniel McCarthy, Frontier’s CEO, told a Wall Street audience at the recent JPMorgan Global Technology, Media, and Telecom Conference.

“Two months into the integration, and I would describe this integration as, by and large, it has gone better than any one that we’ve done before,” McCarthy said. “If you look at the billing systems, the ERP, payroll, HR, every part of the integration has gone exceptionally well. We’ve actually got through all of our billing, and out the door, we’re back on normal cycles with customers. A reliable site like https://coreintegrator.com/ can provide the necessary tools to maintain this efficiency and ensure smooth business operations. And we’ve moved to the point now where we’re moving forward with a normal business rhythm around trouble tickets and service orders in the market.”

Frontier customers are unconvinced Frontier’s Rhythm Method is working for them. Elizabeth Galvan of North Hills has another name for it: “a nightmare.” She has had continuous problems with her landline, including Internet outages, since Frontier took over.

Many Stop the Cap! readers also continue to share their grief over outages, billing problems, and the less than sympathetic customer service representatives they encounter.

“We were on hold with Frontier for two hours on Friday and they swore to us they’d be out Wednesday and fix things,” wrote Wanda from Sarasota, Fla. “If the good Lord Jesus himself told them they’d be sent to hell for lying, Frontier already has 1st Class tickets. My ex-husband lied less than this phone company. They told me ‘Miss Wanda, we are sorry we could not get out there but we called you to let you know.’ Oh really? On what phone, the one that hasn’t worked for two weeks? Then he thinks he puts me on hold to reschedule while he tells his friend now I have more time to get my hair done.”

Back in Dallas, Jeffrey Weiss from the Morning News pressed Frontier for a reality check on how bad the problems were.

Bright House is targeting disgruntled Frontier customers in Florida with special promotions.

“There are currently no widespread outages,” came the response from Frontier. “The isolated issues currently being addressed include either individual customer issues from the conversion or the day to day service issues that arise when operating a complex network. In addition, the recent extreme weather in the north Texas area may have impacted some customers’ service, while Frontier allocated resources to repair any damaged equipment in the path of the storm. The customer experience is always at the forefront of our company, and we are committed to each customer’s satisfaction. We are addressing service orders as quickly as possible, prioritizing repairs over new installations and coordinating both customer availability and the management of our ongoing queue of orders. In all cases, that means the next best available time.”

At that time, the Texas Public Utility Commission had collected at least 100 complaints about Frontier, reports spokesman Terry Hadley. Melinda White, Frontier’s regional president for the western region characterized the 2,500 service disruptions suffered by Californians as evidence things were going “relatively well.”

In Florida, the problems were substantial and widespread enough for competing cable operator Bright House to offer customers up to $240 to switch away from Frontier with a special promotion. But before customers sign up, they should be aware despite the ongoing issues, Frontier has no intention of letting anyone out of their contracts.

Frontier spokesman Bob Elek told the Tampa Bay Times, “While all customers will be eligible for service credits on a case-by-case basis, contracts will remain in force.”

That’s ironic, considering Frontier’s marketing pitch for the last several years assured customers there were no contracts or early termination fees. But Verizon had both, and Elek apparently feels if it is fair to give customers promotional pricing, it is fair to penalize them if they disconnect early, even if the service doesn’t work as advertised.

Fast forward more than a month and the problems… and Frontier’s excuses keep on coming.

[flv]http://www.phillipdampier.com/video/KNBC Los Angeles Frontier Official Apologies For Service Outages 5-24-2016.flv[/flv]

Frontier’s Melinda White, regional president for the company’s western region, finally showed up on KNBC Los Angeles to apologize for weeks of frustration and service problems. (2:56)

Blame Verizon

Nearly two weeks ago, Frontier executives were grilled at an Assembly Informational Hearing called by Mike Gatto (D-Los Angeles), when he had a spare moment in-between shilling for AT&T’s universal service/landline abdication bill making its way through the California legislature.

Ironically, Gatto was upset with Frontier — a company that wants to stay in the landline/DSL business — because it couldn’t do the job, while earlier applauding AT&T for being willing to cut the phone lines of rural Californians and have them risk AT&T’s “one-bar” rural wireless service instead.

Members at the Assembly Informational Hearing implored Frontier to fix at least a month of problems the company has consistently denied was that big of a deal. A meeting of the minds between the politicians and Frontier seemed unlikely until Melinda White, Frontier West’s regional president found what she hoped would be a “Get Out of the Hot Seat Free” excuse card.

White told the Los Angeles Times that one reason for all the trouble is Verizon sent them “corrupted” or “incomplete” data on an unspecified number of remotely addressable items like network terminal boxes, modems, and those “interface” devices they slap on the sides of most homes and businesses. Frontier claims it sent initialization messages to those devices that were rejected, and unilaterally shut down in response, causing the large service outages Frontier claimed a few weeks earlier didn’t happen.

“We are sincerely sorry,” White said during the hearing. “Even one customer out of service is one too many.”

Even worse, Frontier claims it found those scamps at Verizon messed up another database containing serial numbers identifying older network terminal boxes, including hundreds located in Long Beach. You know what came next — more outages.

But wait, there’s more. The same phone company that proudly boasts it uses American workers to handle customer service matters had to admit it hired a call center in the Philippines to handle customer transition issues. It was instantly overwhelmed and the call takers were as bewildered as customers trying to deal with Frontier about service outages.

“Unfortunately, that did not work out — to our dismay,” White said.

Like a lot of things coming from Frontier, that is an understatement. Just ask countless customers who reserved repair appointments through this same call center that often forgot or couldn’t pass them on to the U.S. based technicians that were supposed to show up and fix the problems. Result: missed service calls and even angrier customers.

Knowing this, one would assume Frontier would quickly pull the plug on overseas call centers and hire — at attractive wages if needed — more U.S. based employees to get things moving sooner rather than later. White told the Los Angeles Times it would phase those foreign call centers out… later… by the end of July.

The Lawmaker and Regulator CYA Cakewalk

The Frontier buyout and takeover of Verizon landlines didn’t just happen at the behest of the two phone companies. In a state regularly accused of over-regulating business, California regulators and lawmakers both had direct influence on the Frontier-Verizon transaction. It got approved without much effort and only came back to haunt officials when it all went wrong.

Assembly member Jay Obernolte (R-Hesperia) claimed, “These issues have set a record for constituent calls.”

Exactly who is responsible requires the time-honored practice of finger-pointing that always extends outwards, never inwards.

The committee chairman, Mr. Gatto, and vice chairman, Assemblyman Jim Patterson, (R-Fresno), blamed the California Public Utilities Commission (CPUC) as much as Frontier because they approved the takeover deal.

But as California consumers just saw in an embarrassing capitulation to approve the Charter-Time Warner Cable-Bright House merger with deal conditions even worse than what the FCC got, there are questions whether the CPUC could properly vet a Dollar Menu at a McDonalds drive-thru, much less a multi-billion dollar Big Telecom merger:

“Hi, welcome to McDonalds, what can I get the CPUC today?”

“We’ll let you decide, whatever you think is best. We trust you!”

“Okay, drive through to the second window.”

CPUC executive director Tim Sullivan casually mentioned the possibility of an official investigation and the highly-improbable-to-believe possible reconsideration of the buyout. That comes a little late.

While they hold hearings in California, the complaints keep rolling in even into the Memorial Day holiday weekend.

If This is the New Frontier, We Prefer the Old One

30+ years of a dedicated customer relationship that started around the time Back to the Future hit theaters was destroyed after about a month with Frontier.

Lynn Peterson in Sacramento has kept her phone service with Verizon (and its predecessors) since around the year Back to the Future arrived in movie theaters (July 3, 1985 for trivia fans). After a month or so with Frontier at the helm, she abandoned ship last week.

“My service just kept going out over and over again ever since Frontier became my provider,” Peterson told the Santa Monica Mirror. “Whenever I called customer service they seemed completely indifferent. I have now switched to Time Warner Cable.”

Abby Arnold also severed a bad relationship with Frontier last week, and like a clingy ex in breakup denial, they won’t let it go.

“After a month of trying to resolve issues, I left Verizon/Frontier and signed up with Time Warner,” Arnold wrote. “At least I can watch the Dodgers. One of the many issues in my saga is that I cannot get Frontier to acknowledge that I am no longer their customer. ‘Our system won’t let me cancel your account.’ Argh.”

Customers will have another opportunity to bring their complaints about Frontier to the CPUC’s attention this Wednesday from 4-6pm at a public hearing at Long Beach City Hall.

Texas Mops Up

Some of the worst damage done to Frontier’s reputation was in Texas. Some experts predict Frontier’s name will be mud in that state for months to years.

“My opinion is that Frontier’s brand, reputation, and trust will suffer in the short to medium term (months to years),” David Lei, associate professor of strategy at SMU’s Cox School of Business told the Dallas Business Journal. “The longer the problems persist in any situation for any business or service provider, the greater the customer anger. However, even a good communications/PR strategy remains insufficient in the wake of the scale of disruptions and the seemingly ‘easy’ task of scheduling technicians to houses within the promised time frame. Strategy execution always occurs at the customer level – dealing with each customer truthfully and forthrightly. Yet, it is probably difficult for Frontier’s management to openly acknowledge just how complex the integration task will remain for quite some time.”

Our Recommendations

Frontier has a long history of transition problems whenever it acquires landline networks from other providers, whether Verizon or AT&T. In some cases, these may prove to be nothing more than self-correcting minor inconveniences. But in states like West Virginia, Connecticut, and now Texas, Florida, and California, long outages got painful and expensive for customers, and in some cases could have been life-threatening. With each transition, Frontier claimed it learned how to improve on the process to better reassure customers problems would be few and isolated. But the evidence is overwhelming these problems are bigger than Frontier seems ready to admit. Frontier refuses to release outage statistics broken down by state. Are these transition outages comparable to the day-to-day experiences of a big independent phone company? Allowing the public to see outage numbers for Florida and compare them with West Virginia or New York, for example, would be illuminating.

Regulators can also give Frontier some added incentives to guarantee the transition experience goes “exceptionally well” in the real world, not just in company press releases. Those incentives come in the form of stiff fines and guaranteed, automatic rebates for any customer affected by a service disruption. Right now, Frontier still requires most customers to personally apply for service credits for outages and other disruptions. That is a real hassle if you’ve ever called Frontier by phone and waited on hold, sometimes for an hour or more. Being promised a credit does not guarantee it will actually appear on your bill either.

Consider the experience of Lake Elsinore resident Kristi Coy. Her husband can’t sell video conferencing equipment online because Frontier’s Internet is too slow.

Coy was offered a service credit, but only after the problem was fixed. After the visit, she called Frontier and waited on hold 90 minutes before finally hanging up.

“How much are they going to give me, $20?” she said. “How long will I have to stay on hold? An hour and a half to get a $20 refund? It’s not even worth the time.”

Frontier should have a regulator-reviewed transition plan with contingencies in place for unexpected problems. That plan should prioritize returning customers to service, even if it means backing out of a system transition. Maintaining reliable service should be the first priority, not cost-savings or convenience for the companies involved. A full audit of exactly what Frontier bought from Verizon could have uncovered the discrepancies and corrupted data White blamed for the outages before the transition began. But that costs time and money. The prospect of a regulator-imposed fine costing even more delivers the cost/benefit formula customers (and Frontier, apparently) needs to assure customer protection.

Regulators need to start scrutinizing these consolidation transactions much more carefully, and reject those from companies that have a significant record of failing their customers. Frontier’s disastrous transition in West Virginia in 2010 led to months of news coverage and a number of very serious outages. More than five years later, service complaints are still coming in, mostly focused on poor broadband service. In Connecticut, Frontier had to cough up costly service credits and promotions to stop a flood of customers headed for the exits over Frontier’s messy transition from AT&T. Suspiciously familiar problems including service outages, billing issues, and missed service calls plagued Connecticut in 2015 just as they do in 2016 in Texas, Florida, and California.

We warned regulators in each instance that Frontier’s repeated poor performance should give them pause. We recommended regulators either impose extra requirements as part of any approval agreement or reject these types of deals outright. They chose to believe Frontier instead. So while Frontier executives and shareholders enjoy the proceeds of enhanced revenue and their regular dividend payouts, customers that depend on Frontier, especially small businesses, are in trouble. Dagwoods Pizza Parlor in Santa Monica is just one example.

Dagwoods manager Mark Peters said Frontier’s lousy performance in Southern California “has the potential to destroy small businesses” like his. This past Memorial Day weekend was a partial bust for Dagwoods because their Frontier-supplied phone and Internet service was down again until Frontier finally showed up to fix it.

“It’s a bad situation,” Peters told the Santa Monica Observer. “We can’t take orders, and this is our big night of the week. We’re really bummed out about the whole situation.”

The time for excuses and explanations has come and gone. The time for action, fines, and automatic service credits is overdue, but better late than never.

[flv]http://www.phillipdampier.com/video/WTVT Tampa Frontier Official Apologies For Service Outages 5-10-16.mp4[/flv]

WTVT in Tampa reports Florida Attorney General Pam Bondi is now taking a hard look at Frontier’s performance in the state. (2:41)

The long wait for fiber optic broadband in the city of Boston is finally over.

In a surprise announcement with Boston Mayor Martin J. Walsh and Verizon officials, Verizon announced it will commit to at least $300 million in investments over the next six years to bring fiber to the home service to residents of the metro area.

Construction of the fiber-optic network will be completed on a neighborhood-by-neighborhood basis according to customer demand. Initially, the project will begin in Dorchester, West Roxbury and the Dudley Square neighborhood of Roxbury in 2016, followed by Hyde Park, Mattapan, and other areas of Roxbury and Jamaica Plain. The city has also agreed to provide an expedited permitting process to encourage the project.

“Boston is moving faster than our current infrastructure can support, and a modern fiber-optic communications platform will make us a next-level city,” Walsh said in a statement.

“This transformation isn’t just about advanced new fiber-optic technology — it’s about the innovative services this platform will allow people to create and use, today and in the future,” Verizon Wireline Network president Bob Mudge said in a statement.

Bringing FiOS inside the city of Boston will challenge the de facto monopoly Comcast had held for years. The only alternative most residents have is Verizon DSL.

The dramatic turnaround came six months after Verizon adamantly told the Boston City Council Verizon FiOS expansion was dead. Verizon announced it would stop FiOS expansion in 2010 to concentrate on its existing FiOS commitments and better marketing the service to attract more customers.

The sudden end to FiOS expansion six years ago caught many cities by surprise. As a result, in several areas, the fiber service is only available in select suburbs and not city centers.

Verizon’s unions have also pushed for further FiOS expansion, but today’s announcement is expected to have no impact on plans by the Communications Workers of America and the International Brotherhood of Electrical Workers to strike Verizon starting early Wednesday morning.

The partnership also covers Verizon Wireless and its plans to attach wireless equipment to city street lights and utility poles without a lengthy permitting process.

Verizon was also likely offered a much easier time securing a license to offer cable television service, a stumbling block Verizon has experienced in several large cities.

Echoing Google Fiber, Verizon will try to win itself some free marketing and buzz by giving residents a chance to compete to see what neighborhoods get FiOS first. A free online registration process will be used to assess demand and help Verizon prioritize its fiber-optic network construction schedule.

Verizon will also support digital initiatives for the income-challenged, including a $100,000 Digital Equity contribution to the city, offered to support a mobile hotspot lending program at the Boston Public Library enabling Internet access to families on an as-needed basis.

Boston neighborhoods marked “A” will be upgraded to FiOS first, followed by “B” and so on. The upgrade effort is expected to take at least six years.