Telling Time Warner customers to get rid of the cable company’s phone service.

Best Buy employees in upstate New York are advising Time Warner Cable customers to dump Time Warner phone service and buy their own cable modem to completely avoid any additional monthly fees.

“We don’t have modems that will support Time Warner’s voice services, so basically any customer that has that bundle either has to make the decision to get rid of that service or deal with paying for that service every month,” said Syracuse Best Buy employee Drew Cacciola.

Cacciola told a Syracuse television station Time Warner’s supplied equipment is “old and refurbished” and that if customers purchase their own equipment, they will have the latest technology and won’t have to worry about ending up with another refurbished cable modem if the current modem fails.

“If [a new modem] breaks down you can get a new one you don’t have to send it back to them and you won’t get another refurbished one – you get a new one,” said Cacciola.

In fact, Time Warner phone customers do not have to cancel their phone service to avoid the modem fee, but they will be stuck with two pieces of equipment — a Time Warner-supplied eMTA that manages the phone service (with its Internet ports disabled) and the customer’s own purchased cable modem. For now, Time Warner is not charging customers for eMTA equipment used exclusively for its phone service.

Best Buy does not carry some of the models on Time Warner’s approved modem list, and the cheapest one WSYR reporters could find cost around $60, meaning it will take just over a year to recoup the cost of the modem.

Motorola cable modem

Time Warner Cable’s modem fee continues to create consternation for customers, especially when they learn the same piece of equipment used for both Internet and phone service costs $3.95 a month when used for broadband, but is free when used only for phone service.

Stop the Cap! reader Ben argued with a Time Warner representative trying to understand the reasoning.

“So, let me get this straight about the modem fee: If I have phone there is no fee but if I use the same modem to also get Internet, there is a fee?,” Ben asked.

Yes, came the answer. The explanation:

“About the modem fee: Our costs for Internet equipment keep increasing and unfortunately we could not continue to absorb the costs related to their purchase, maintenance and repair,” wrote a Time Warner employee named ‘Paul-E.’ “Leasing a modem ensures you have the most up to date and capable equipment to take advantage of our services as we offer faster speeds and additional functionality. These events sometimes require that we replace your current equipment to give you the best experience.”

Time Warner’s explanation for the new modem fee sounds plausible, but unfortunately for “Paul-E” (and the company),  much of it is demonstrably false.

Investors Business Daily reports the new $3.95 computer modem leasing fee could raise up to $500 million a year for the cable company.

“I would look at this as a price increase,” Bryan Kraft, an analyst at Evercore Partners, told IBD via email. “There are some questions that need to be answered before the impact on ARPU (average monthly revenue per user) can be reasonably estimated.”

Stop the Cap! took a look at Time Warner Cable’s financial reports and discovered the company’s capital expenses for its high speed Internet service (and cable modem equipment) have dropped for the third year in a row:

Time Warner Cable’s capital expenditures on customer premise equipment, including cable modems, has dropped for three years in a row.

Capital spending (as a whole) so far this year has decreased as a percentage of revenue to just 12% for residential customers. Time Warner has spent money primarily on extending service to potential business customers.

The need to charge you more for a cable modem is questionable when residential Internet service rate increases and customers gravitating to more expensive, higher speed services already deliver the company higher average revenue per customer without spiking their costs.

When the station relayed complaints about long hold times and busy signals for customers trying to activate their purchased cable modem, the response from Time Warner — don’t call on Monday or Friday or around morning or dinner time unless you are prepared to wait on hold.

[flv width=”640″ height=”380″]http://www.phillipdampier.com/video/WSYR Syracuse Time Warner Cable modem charge 10-24-12.mp4[/flv]

WSYR in Syracuse covers the ongoing controversy with Time Warner Cable’s new modem fees, and a Best Buy employee tells Time Warner customers to get rid of the company’s phone service.  (3 minutes)

[flv width=”480″ height=”288″]http://www.phillipdampier.com/video/WGRZ Buffalo Time Warner To Add New Fee For Internet Users 10-16-12.flv[/flv]

Time Warner Cable continues tapdancing around whether its new $3.95 monthly modem rental fee is a hidden rate increase. WGRZ in Buffalo presses a spokeswoman on whether this is just another cable company money grab.   (2 minutes)

Time Warner Cable’s new $3.95 monthly cable modem fee applies to customers signed up for broadband service, but if you are a Time Warner “digital phone” customer and don’t subscribe to broadband, the fee does not apply even though the same equipment can sometimes be used for either service.

Time Warner Cable claims the new modem fee was needed to cover the cost of repairing and replacing cable modems over time. But New York City customers have been asking why Internet customers have to buy their own modem to avoid the fee while those using the same modem only for telephone service do not.

The New York Times reached out to Time Warner Cable’s director of public relations Justin Venech, who had to acknowledge the logic disconnect between “digital phone” and Internet customers, but could only offer this weak explanation:

“The way we have decided to charge this fee is, we’re charging it for use of the Internet portion of the modem,” Venech explained. “It’s a business decision. It’s a matter of starting to treat this equipment the same way we treat our other equipment.”

That explanation did not seem to fly… with Time Warner Cable’s own customer service representatives.

When Manhattan resident Tom Arana-Wolfe demanded an explanation for the inconsistent fees, the representative put his call on hold to transfer him to a supervisor, but forgot to hit the mute button.

“She was discussing our conversation with a co-worker and said that they have to come up with something better, because ‘He has a valid point,’” Arana-Wolfe said.

Arana-Wolfe is considering starting a class action lawsuit against the cable operator relating to the modem fee, but is also considering switching his service to Verizon FiOS, which charges no modem fees.

Let the gouging begin. Here was the price being charged by an eBay vendor this past Tuesday for the SB6141 cable modem.

A few days ago, Stop the Cap! notified readers Time Warner Cable was planning to charge a $3.95/mo modem rental fee for current High Speed Internet customers planning to keep using company-supplied equipment.

With over $300 million in potential new revenue, this new surcharge from the folks living high on 1% Mountain is guaranteed to make the cable company a tidy sum for doing… absolutely nothing. Time Warner is not improving your broadband service — they are just charging you separately for a piece of equipment needed to use the service you already paid for. It would be like selling you a lamp and then start charging an extra monthly fee to keep the power cord.

We’ve had our own illuminating experience here at Stop the Cap! headquarters finding our way around this newest surcharge — by purchasing our own DOCSIS 3 cable modem and sending the soon-to-be $47.40 a year (until the end of time) Ubee modem packing back to Time Warner. Only we can’t.

I am unsure what bothers me more: Time Warner’s scanty “approved modems for purchase list” — mostly Cadillac-priced models that would fit in at Barney’s New York or Nordstrom, the bottom feeder eBay and Amazon Marketplace sellers who are capitalizing on the modem fee by increasing their prices for customer-owned equipment to gouging levels, or Time Warner’s failure to activate customer-purchased modems because it “changed its billing system this week” in preparation for the new modem fees “and can’t activate customer owned modems at the moment.”

As Time Warner Cable customers began ordering the SB6141 online, the price doubled. This is the same vendor that charged $99.95 two days earlier.

Out of the five “approved” models, the obvious best choice for those who do not require a modem-router combination is the Motorola SurfBoard SB6141 DOCSIS 3.0 Cable Modem. It features support for 8×4 DOCSIS 3 channels, which in non-technical terms means it will handle the best speeds Time Warner is likely to offer in the foreseeable future. We do not recommend customers invest in DOCSIS 2 modems, because that technology is closer to the end of its useful life and simply will not support broadband speeds customers will crave in the next few years.

Once Time Warner Cable made the announcement, the race was on… for the handful of online retailers carrying the SB6141 to jack up the price as quickly as possible. I predicted this was likely in the comment section of our earlier piece. When the nation’s second largest cable operator plans to subject millions of broadband customers to unnecessary modem rental fees and smart customers are clever enough to avoid them, demand is going to rise. Prices would rise much faster.

In the last 48 hours, the cost of the SB6141 has literally doubled from $99 to $200 thanks to some eBay sellers looking for quick profits. This unit is now barely available from Amazon.com Marketplace vendors, typically with a waiting list, for around $130. It was selling for as little as $89 just a few weeks earlier. We even found some refurbished units on eBay that formerly sold for less than $100 now selling for $199, just after Time Warner’s new fee hit the media.

Buying a refurbished unit won’t save you much. Two days ago, this eBay vendor was charging $100 for the same used cable modem.

Finding retailers for this particular model has proven difficult and because of the relentless price gouging, we are now recommending customers hold off on buying their cable modems, at least until Time Warner expands their list of approved models or a broader number of retailers start selling the model to help force prices back down to earth. Don’t pay an eBay gouger twice the usual price!

For customers who mistakenly ended up buying our earlier recommended model we quickly crossed off the list (the SB6121), we’ve found Amazon.com especially accommodating, even supplying a prepaid return shipping label, after explaining the modem model mess to Amazon’s customer service and requesting a free return. So yes, we got stuck with the wrong model too. Sending the 6121 back is our best recommendation as Time Warner Cable customer service explained as late as this evening they cannot activate customer-owned equipment not on their approved-for-purchase list (or anything else at the moment).

Our second order, for the SB6141 at the pre-gouge price of $99 arrived this afternoon, and that led to more frustration with Time Warner Cable, who ultimately failed to activate the modem.

After a very lengthy hold time, a Time Warner representative took my modem’s MAC address to activate the device, and it failed to register. A supervisor eventually explained Time Warner Cable updated their billing system to accommodate the forthcoming modem rental charge and in the process brought down the customer-owned equipment activation system (the one that will let Time Warner know who will not have to pay the fee) earlier this week. In other words, while adjusting their billing system to charge you more, a “glitch” made it impossible for customers across the eastern United States to prevent that from happening.

The problem, it was explained, was temporary and they expected to fix it by the end of the week. After explaining today is Thursday (the end of the week is already near), I was told to “call back this weekend or Monday” and “hopefully” the problem would be fixed. Hopefully before October 15th, when the fee kicks in for the Big Apple anyway. That was 40 minutes of my life I will never get back.

One would think if Time Warner was planning to throw a Money Party for themselves, they would at least take some of the forthcoming $300 million to invest in a better way to keep customers from long hold times and inconvenience to avoid the latest unnecessary fee, only to be told everything was broken and to call back some other time. This is why cable companies regularly earn the disdain of their customers.

[Update 10/2/2012: If you are visiting here to explore Time Warner Cable’s new $3.95 modem rental fee, please visit this article for the latest information and reviews, should you wish to purchase your own modem to replace the one you currently rent from the cable company.]

In mid-March, Time Warner Cable added a $2.50 monthly modem rental fee for all new broadband customers, but existing customers not already subject to modem fees will be exempt from paying it.

The new equipment fee applies even in areas where cable modems have always come free with the cable company’s broadband service.  Until this month, customers in some areas including Rochester, N.Y., could not purchase their own cable modem equipment, but that restriction has now been dropped.  In areas where modems always came free with service, some customers have told Stop the Cap! the cable operator cannot provision their new modems until after April 1st.  Call your local Time Warner Cable office for exact information applying in your local area.

At $30/yr, consumers are advised it may be more affordable to purchase your own cable modem, especially if you are comfortable installing it yourself.  Cable modems are at least as reliable as wireless routers, and even easier to configure.

Time Warner Cable’s current promotion page offers six months of free modem rental to new customers, with fees starting the seventh month.  The cable operator supports a large number of different modems.  In the northeastern United States, Time Warner will provision any of these units (you can find your area’s list of approved equipment on Time Warner’s Internet Support page):

Prices range from under $50 for the DOCSIS 2 Motorola Surfboard SB5101, to north of $130 for Motorola’s DOCSIS 3 SURFboard Gateway SBG6580 on Amazon.com.

We called Time Warner customer service in Rochester for information about the modem rental vs. purchase option and learned:

• The modem rental fee only applies to DOCSIS 2.0 equipment suitable for Road Runner Lite, Standard or Turbo service (1-20Mbps);
• Road Runner Extreme (30/5Mbps) and Wideband (50/5Mbps) still includes free rental of the DOCSIS 3 cable modem and the company does not currently support customer-owned DOCSIS 3 modems in this area;
• Support options for customer-owned equipment are obviously more limited, but should your cable modem fail, you can quickly rent a replacement and pick it up at your local cable store to get back online fast;

We also learned Time Warner is running promotions in many areas pitching existing Standard and Turbo Service customers six months of Road Runner Extreme for just $10 more a month for six months. If you need 50/5Mbps Wideband service, signing up for Signature Home at $199 a month is often the best value when combining phone, Internet, and cable TV service.

Because different regions handle cable modem equipment and promotions differently, it is important to call your local office prior to ordering any equipment to verify it can be provisioned and to obtain correct information about any promotions or pricing.