A website glitch by Verizon Wireless last weekend let customers with legacy unlimited data plans to upgrade to a new subsidized smartphone on a two-year contract and keep unlimited data.

This afternoon, Verizon Wireless representatives confirmed they will honor upgrades from customers that took advantage of the mistake, despite the fact Verizon’s CEO has gone out of his way to declare unlimited data service “unsustainable.”

Over the past weekend, there was a software issue involving some orders for customers seeking to upgrade their devices. A number of customers who were upgrading devices were able to maintain an unlimited monthly data feature while paying a subsidized price. Verizon Wireless will honor those orders that were approved this past weekend, allowing those customers to retain their unlimited plans for the duration of their contract and receive their new device. Verizon Wireless corrected this software issue today.  The company no longer offers unlimited data plans and customers who want to retain existing unlimited data plans, must pay full retail price for a replacement phone.

Verizon Wireless discontinued offering unlimited use data plans, but has allowed customers still on those plans to keep them indefinitely. Last year, Verizon Wireless amended its policy for grandfathered unlimited customers denying them access to subsidized, discounted devices unless they switched to a usage-based plan. A website error allowed unlimited customers to bypass a usual restriction requiring them to abandon their unlimited plan to complete the upgrade order. Dozens of customers reported this morning they had received their new phones with unlimited data still intact. With the glitch fixed, customers attempting to upgrade will once again need to give up unlimited data in return for a device discount.

Verizon Wireless CEO Lowell McAdam said last week offering unlimited data service was “unsustainable” as a matter of physics. McAdam said carriers still offering unlimited data will be overwhelmed by excessive customer use, running wireless networks “out of gas.”

Sprint countered it has plenty of “runway” to continue selling unlimited data service, and even offers a “lifetime guarantee” of unlimited service on its wireless network.

At least one Wall Street analyst agreed with Sprint.

“This Verizon comment simply makes no sense. When two different people look at the same thing you often get two completely different perspectives. That’s what is happening here. It does not mean either is right or wrong, just different,” said tech analyst Jeff Kagan. “Unlimited wireless data may not make sense for Verizon Wireless for a variety of reasons. Perhaps they want to have some control over how much wireless data is being used. Perhaps they want to increase their profitability. Whatever the reason, this is Verizon’s belief and they are not wrong, for Verizon. Sprint is a different story.”

Sprint’s chief financial officer Joe Euteneuer, speaking at a Goldman Sachs conference in New York on Thursday, said Sprint’s acquisition of 2.5GHz radio spectrum from Clearwire will give it a capacity edge once its 4G network build-out is done in mid-2014.

“We feel very good about our positioning having that spectrum . .. and our portfolio spectrum vs. the competition,” Euteneuer said. “So we’ll get leverage there.”

“Sprint’s unlimited plans are the right idea at the right time,” added Kagan. “They have plenty of capacity on the network. Sprint in fact has much more spectrum than Verizon. Sprint needs to hang on to their existing customer base and attract new users. If Sprint charged the same as Verizon or AT&T they would lose. So Sprint needs to attract attention. That’s what always happens in a market. The leaders and the followers take different marketing and positioning angles. And that’s exactly what is happening here.”

If “follow the money” is a maxim in business, then it should come as no surprise Verizon favors the making the bulk of its investments and expansion in its enormously profitable wireless business.

Verizon Wireless earned the company $12.9 billion in operating profits during the first six months of 2013 while landlines and Verizon’s fiber optic network only delivered $87 million. That inconsistency may help explain why Verizon FiOS expansion is stalled while Verizon throws enormous sums into its 4G LTE wireless upgrade project.

The average Verizon Wireless bill is now over $150 a month. FiOS customers pay an average of over $150 a month as well, but Verizon’s costs to reach its smaller customer footprint are higher. Revenues for basic landline service are considerably lower than either wireless or fiber service.

With wireless providing a virtual ATM for Verizon Communications, the New York Times notes it is unsurprising that Verizon wants to buy out its European partner Vodafone, which owns 45% of Verizon Wireless. Once the $130 billion transaction is complete, Verizon will keep wireless profits all to itself as it continues lobbying for permission to decommission rural landlines and encourage those customers to use its vastly more profitable and almost entirely unregulated wireless network instead.

Exactly 100 years after Verizon predecessor AT&T/The Bell System voluntarily agreed to be a regulated monopoly provider of telephone service, Verizon Wireless and AT&T have successfully established unregulated wireless networks that serve most Americans with cell service and wireless data at prices that would be shocking to people 20 years ago.

That bi-monthly visit from your local utility’s meter reader may eventually be a thing of the past.

Verizon Communications is moving rapidly to establish itself as an “end to end smart grid solutions provider,” providing utility smart meters for gas, electric, and water service that communicate over Verizon Wireless’ cellular network.

“We’re in the midst of a pilot right now, and what we’re piloting is more than the meter data management — we have a meter-to-cash system that includes an advanced metering infrastructure partner as well,” said Ernie Lewis, industry partner with Verizon’s global energy and utility practice.

Verizon hopes to capitalize on forthcoming smart meter adoption, replacing current mechanical meters for natural gas, electricity and water with new electronic meters that have two-way wireless communications capability with the parent utility. Smart meters can offer customers time of day savings for running high consumption appliances during off-peak hours, automatically deliver meter readings to the utility without having to dispatch an army of meter readers to customers’ homes, and support pay-per-use billing that turns the power off when your prepaid account is depleted.

Verizon will manage the potential data demands of such services through cloud networks, potentially through its acquired subsidiary Terremark. Verizon already operates its own energy and utilities enterprise solutions business.

Verizon’s moratorium on further expansion of its fiber to the home service will continue for “the next couple of years.”

Verizon FiOS won’t be coming soon to a home near you, unless that home is inside a community with a standing agreement with the phone company.

Verizon CEO Lowell McAdam made it clear to attendees at Tuesday’s Goldman Sachs 22^nd Annual Communacopia Conference his priority continues to be investing in the company’s highly profitable wireless business, while the company’s wired infrastructure is being targeted for more cost cutting, especially in areas designated to see existing copper infrastructure decommissioned. As for expanding FiOS into new communities, McAdam said he instead preferred to concentrate on improving market share and profits for the next few years in areas already getting the fiber optic service.

McAdam noted John Stratton, president of Verizon Enterprise Solutions, has been hard at work pruning Verizon’s wireline products and services targeted to business and government customers.

“I think [he] killed about 2,000 products this year, and we have taken 350 systems offline last year,” McAdam noted. “I think we are already at 250 this year. That sort of discipline gives you the ability to streamline your infrastructure.”

For residential customers, Verizon has two sets of offerings: one for customers served by FiOS fiber optics, the other for customers unlikely to see fiber upgrades indefinitely.

Inside Existing FiOS Service Areas

“We are doing some major technology shifts within FiOS to make it more efficient,” McAdam said. “We’re going to concentrate there for the next couple of years.”

McAdam’s signals to Wall Street were loud and clear: no more FiOS expansion into new communities for now.

McAdam

Instead, Verizon will focus on improving existing service in several key areas:

• Verizon has almost two million optical terminals that McAdam says were active at one point and are now sitting idle, suggesting FiOS has won and lost nearly two million customers since launching, either because the customer switched providers or moved away. McAdam said he wants to improve Verizon FiOS’ product set enough to attract those customers back. He noted with the terminals and cables already in place, the capital costs to win back a former customer are near zero;
• Verizon is introducing a new terminal this fall. Verizon’s FiOS Media Server “eliminates the requirement for coax, once you get into the optical terminal in the basement or wherever in the house,” McAdam said. “That slashes the installation time, and therefore makes the product a lot more profitable for us going forward. It eliminates set-top boxes, it is all IP-based going forward.”
• Verizon will continue to expand Verizon FiOS, particularly in New York City where it has a commitment to offer service.

Verizon FiOS has managed to build a much larger market share than its nearest neighbor, AT&T U-verse. McAdam claimed Verizon FiOS has achieved a 39 percent market share in broadband and around 34 percent on its television service so far. McAdam’s goal is to boost that to 45 percent. In areas of Texas where Verizon first introduced its FiOS fiber optic service, the company already has a penetration rate above 50 percent for broadband and 50 percent for television, demonstrating room to grow market share. AT&T’s U-verse TV penetration rate is 20.1 percent.

For Those Unserved by FiOS

Verizon’s 4G LTE Broadband Router with Voice

Except for Fire Island, N.Y., there are no significant announcements of FiOS expansion. Instead, Verizon has focused on investing to improve its wireless 4G LTE cell networks with the hope existing landline customers will consider switching to higher-profit wireless service. An attempted trial of Verizon Voice Link, intended to be an entry-level wireless replacement of landline service, failed badly on Fire Island due to an avalanche of complaints about poor quality reception, dropped and incomplete calls, and lack of support for data.

Now Verizon is back with a new offering, its 4G LTE Broadband Router with Voice ($49.99 2-yr contract with $175 early termination fee/$199.99 month-to-month).

“Securely connect wired and wireless devices to the 4G LTE network, and connect your landline phone to make calls,” Verizon’s website says. “Combine voice and data on a Share Everything Plan for added savings.”

The device can function as both a wireless landline replacement and router for data. The unit includes three Ethernet ports and Wi-Fi to share your connection. A landline phone or cordless phone base station can be plugged in as well.

Verizon charges an extra $20 a month for Home Service Monthly Line Access on Share Everything Plans, which covers your telephone service. Customers get unlimited local, long distance, call forwarding, call waiting, three-way calling, and voice mail. 911 is available, but Verizon disclaims any responsibility if you cannot reach an operator. The device also supports TTY-TTD calling.

Verizon claims users can expect 5-12Mbps downloading and 2-5Mbps uploading on Verizon’s 4G network, assuming there is solid coverage where you use the device. Usage caps apply. A backup battery keeps the service running for up to four hours of voice calling in the event of a power outage.

McAdam admitted the thing that keeps him up most at night are regulatory issues. He particularly called out Europe, which he believes is hostile for investment. But Europeans pay considerably less for wireless service than North Americans pay, and often have more choices due to competition and regulatory oversight.

“I think the beauty of the ’96 Telecom Act was that it was such a light touch on broadband and mobile,” said McAdam. “And that is — and I sit in Europe talking to investors all the time — that is the biggest difference between the U.S. and Europe.”

To head the FCC off from pursuing any additional regulatory oversight, McAdam claims he reluctantly approved Verizon’s lawsuit against the government on Net Neutrality.

“We have had to take some positions, frankly, that we didn’t want to take,” McAdam said of the lawsuit. “It opened the door for them to get into price regulation of broadband. And I think that is not their charter, and I think it would be a mistake for the U.S. economy and certainly the telecommunications ecosystem.”

[flv width=”488″ height=”300″]http://www.phillipdampier.com/video/Verizon 4G LTE Broadband Router with Voice 9-25-13.flv[/flv]

Verizon Wireless’ latest 4G LTE router supports wireless landline service and 4G data.  (1 minute)

Since 2005, five cable and telephone companies and their respective lobbying trade associations have donated nearly $12 million to New York politicians, making Big Telecom companies among the biggest political donors in the state. Now a government reform group wants an investigation by the state’s anti-corruption commission.

By exploiting giant loopholes in New York’s campaign finance laws, telecom companies that used to live with annual campaign finance limits of $5,000 are now donating millions to powerful political leaders in Albany – the majority conferences in the legislature, the state party committees, and the governor. Some are using secretive “housekeeping” accounts controlled by political parties. Others hide behind shadowy contributions from “limited liability corporations” (LLCs) established by some of the state’s biggest cable and phone companies and treated under current law as living, breathing people.

“Big Telecom exemplifies the pay-to-play culture which has come to define Albany, giving generously to the leadership in exchange for veto power over bills which favor the public interest,” said Common Cause-New York executive director Susan Lerner.

The Optimum donor to state “housekeeping” accounts among telecom providers is Cablevision.

No telecom company donates more in New York than Cablevision, which has given more than $5.3 million in contributions to state politicians since 2005 as it fights its way through union problems, fierce competition from Verizon, and complaints from subscribers about rising cable prices and questionable service. The cable company doesn’t just donate in name-only. Common Cause-NY discovered Cablevision using eight different LLCs to evade contribution limits, handing over $1.5 million to candidates and committees. Gov. Andrew Cuomo received $130,000 from four different Cablevision-controlled LLCs between July and October 2010. On April 29 of this year, former Nassau County executive Tom Suozzi’s campaign received $190,000 from three Cablevision-controlled LLCs on that single day.

Verizon (82%) and Time Warner Cable (70%) prefer to quietly give the largest percentage of their political donations to the parties’ secretive, soft money “housekeeping” accounts. The Republican and Democratic recipients are not using the money to buy Endust, mops or spare light bulbs, although the average voter might assume as much.

Corporations with an agenda just love New York’s hush-hush “housekeeping” accounts because they come without dollar limits or complete disclosure about how the money was ultimately spent.

The State Board of Elections says “housekeeping” money is supposed to go toward maintaining a party’s headquarters and staff or “ordinary activities that are not for the express purpose of promoting the candidacy of specific candidates.” Unfortunately, nobody bothered to require detailed accounting, allowing funds to disappear down a political rabbit hole, to be distributed at each party’s discretion.

Comcast (59%) and AT&T (53%) are considerably smaller players, in part because neither company serves many wired cable/broadband customers in New York.

Verizon’s corporate PAC also likes to raise relatively large numbers of small contributions given in the name of company executives or employees, not necessarily mentioning the company itself. Campaign finance disclosures may list only the individuals’ contribution(s), not the company that signed their paycheck.

Where does all the money go?

Common Cause-NY says most of the money is channeled to the most influential politicians in the state, with minority parties and unelected candidates typically getting much less.

To gain influence on the state level, Big Telecom companies contribute to the governor, attorney general, and the majority parties controlling the state Assembly and Senate, with Republicans getting the lion’s share (over $3.5 million) in the Senate and Democrats (over $1.6 million) in the Assembly.

For local issues of interest to the state’s local cable and phone companies, contributions are funneled to influential county-level political machines, perhaps helpful in making life difficult for a competing Wi-Fi project, a municipal fiber network, or helping to cut red tape to place a cell tower in a controversial location.

The top six recipients of Big Telecom’s political cash in the legislature:

• Key Party Leaders: Dean Skelos ($117,700), Tom Libous ($57,150), Jeff Klein ($49,450), and Sheldon Silver ($32,749.61)
• Current and former Chairs of the Senate Energy and Telecom Committee: George Maziarz ($79,718.02) and Kevin Parker ($34,444.00).

Common Cause-NY notes the corporations involved don’t give money without expecting something in return. After generous contribution checks were deposited, a number of telecom consumer protection bills mysteriously died in committee or never made it to the floor. The same fate did not meet bills offering special tax breaks for cable and Internet Service Providers that have cost New York taxpayers nearly $500 million and counting.

“Multi-million dollar campaign contributions clearly help Big Telecom maintain the status quo of corporate control, high prices, and lax regulation,” Common Cause-NY concludes.

The legislature is rife with examples of bills that would have likely passed with popular support but suddenly or “mysteriously” didn’t:

• A 7635-A / S5630-A: Establishes a moratorium on telephone corporations on the replacement of landline telephone service with a wireless system.
  • The “VoiceLink” moratorium bill, passed the Assembly, had broad bi-partisan support in the Senate but never came to a vote.
• S542: Relates to enacting the “Save New York Call Center Jobs Act of 2013,” which requires prior notice of relocation of call center jobs from New York to a foreign country; directs the Commissioner of Labor to maintain a list of employers who move call center jobs; prohibits loans or grants.
  • The “Call Center Jobs Act” would take away tax breaks and state grants if companies move a call center to another country. The bill passed the Assembly in 2012 (A9809) and had bipartisan support in Senate but was blocked. The 2013 bill died in Senate committee.
• A6003/S5577 — Directs the Department of Public Service to study and report on the current status of cable television systems providing services over fiber optic cables.
  • Bipartisan support in Assembly for further oversight of broadband but gets little support in Senate, the same bill was also blocked in 2012.
• A5234/S1075 — Enacts the “Roadway Excavation Quality Assurance Act” demanding utility companies or their contractors shall use competent workers and shall pay the prevailing wage on projects where a permit to use or open a street is required to be issued.
  • Bipartisan support in the Senate and Assembly but no passage in either 2012 and 2013.
• A6239/S4550 — Creates the State Office of the Utility Consumer Advocate to represent interests of residential utility customers.
  • Bipartisan support in Assembly, dies in Senate.
• A6757/S4449 — Requires providers of electric, gas, steam, telephone and cable television services to issue standardized bills to residential customers; provides the standards for such bills shall be established by the Public Service Commission.
  • Bipartisan support, passes Assembly, dies in Senate.