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Best Buy Employees Tell Time Warner Customers: Dump Phone Service to Avoid New Fees

Phillip Dampier October 25, 2012 Consumer News, Data Caps, Editorial & Site News, Video 12 Comments

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)

Transforming AT&T: Declining Growth in Wireless Means Strategic Redirection for Company

Phillip Dampier October 25, 2012 AT&T, Broadband "Shortage", Competition, Consumer News, Data Caps, Video, Wireless Broadband 2 Comments

With a declining number of Americans willing to pay AT&T’s prices for smartphones and wireless service plans, AT&T’s future revenue growth will increasingly depend on getting the company’s current customers to pay more for data and adopt new types of wireless communications services.

After a quarterly earnings report found AT&T subscriber growth falling far behind its larger rival Verizon Wireless, AT&T appears ready to concede there is a finite number of new customers to be won from endless battles for market share.

AT&T was expected to add 358,000 new customers in the previous quarter, but only managed to attract 151,000. Demand for the latest Apple iPhone has yet to meet available supply, with most iPhones obtained by AT&T allocated to existing customers. AT&T exclusively launched the iPhone in the United States in 2007 and retains the largest share of iPhone owners, even after the phone became available from other carriers. Verizon Wireless had fewer problems adding new customers because it is not nearly as dependent on Apple.

de la Vega

Despite lackluster subscriber growth, AT&T reported stellar revenue during the quarter, partly from rate increases and the launch of usage-limited, family share plans. AT&T also continued to benefit from  tax savings, share buybacks, and refinancing debt at lower interest rates. With fewer customers adding subsidized phones, AT&T also paid fewer subsidies.

AT&T’s profit rose to $3.64 billion, or 63 cents per share, up from $3.62 billion, or 61 cents per share — $.03 ahead of Wall Street expectations.

AT&T can thank its wireless data services for a significant chunk of their earnings, with more to come.

The company reported more than 2/3rd’s of their customers (28+ million) are now on usage-based pricing plans. That is 10 million more than a year ago. The company’s new mobile share plans have attracted almost two million subscribers during the first five weeks they were on offer. More than one-third of those customers are choosing the company’s 10GB data allowance, which costs the customer $150 a month with unlimited talk and texting ($30 a month for each additional smartphone on the account.) Around 15% of new mobile share customers are choosing to abandon their grandfathered unlimited data plans.

AT&T’s forthcoming strategic redirection, to be announced Nov. 7, is likely to center around increasing revenue from the company’s wireless data network.

The average AT&T customer’s wireless broadband data bill is on the increase.

Ralph de la Vega, president and CEO of AT&T Mobility and Consumer Markets, told investors it is taking “this massive data growth and building products and services on top of that.”

“One of the best examples I can give you is our launch of Digitize that will happen next year,” de la Vega said. “It leverages this huge smartphone database and adds services on top of it and not just data access, but services that differentiate us from the competition. So you’re talking about connecting the home with service automation and security monitoring. We’re talking about connecting your car with all kinds of entertainment services.”

That means AT&T sees its future revenue coming mostly from existing customers paying more.

“Those services are not dependent on adding more customers per se, but connecting more houses, connecting more cars and connecting more things that drive significant revenue streams with good margins for us,” de la Vega said. “In terms of what we see happening with others in the industry, I don’t think anything we have seen changes our plan. We’re going to execute [and] let others react to our plan, instead of us reacting to them.”

AT&T seemed unconcerned by competition in the current marketplace, especially from those offering cheaper plans. de la Vega predicted other carriers will come around to AT&T and Verizon’s way of thinking about mobile plan pricing.

“I think these mobile share plans are very compelling to customers,” de la Vega told investors. “And I think those that don’t put them in, in the industry will probably have to rethink down the road because I think the reception has been exceptional.”

John Stephens, AT&T’s chief financial officer, called AT&T’s data growth important, as long as those customers are on tiered data plans. With three-quarters of their customers buying “higher-priced plans,” AT&T can grow revenue by encouraging data usage that forces customers into ever-higher allowance plans that deliver revenue boosts indefinitely.

“I think some of the things driving our pricing and the price moves we made almost a year ago where we increased our data pricing are driving our revenue growth,” de la Vega admitted. “But we’re also seeing people sign up for more data. And the fact is, as you sell more smartphones or more tablets, people need more data. Usage-based data pricing means as usage goes up, we can see some of that lift also coming from additional average revenue per customer. So not only do we feel good where we are, but I feel really good about where we’re going, because you have to have that base of usage base in order to be able to monetize the data growth that we foresee in the future.”

AT&T continues to depend primarily on its wireless division for most of its revenue, but as growth slows, the demand for ever-increasing average revenue from each customer will have to come from increasing prices or finding new services to sell that customers want.

Applications that wireless carriers seek to monetize

Some other highlights:

  • AT&T was questioned by Wall Street about its decision to voluntarily contribute a $9.5 billion preferred equity interest in AT&T Mobility into the Pension Plan Trust. Some analysts consider that amount unnecessary and above the amount required by law, despite the company’s assertion this would help protect the long-term health of AT&T’s pension fund. But some retirees note AT&T’s generosity benefits itself — the company’s contribution to the pension plan is invested entirely in AT&T’s wireless business;
  • AT&T now has 7.4 million U-verse subscribers, driving wireline revenue growth to levels not seen in more than four years. But AT&T still only averages less than a 15% market share in the cities where U-verse is available, suggesting cable operators are maintaining their market dominance;
  • AT&T’s new upgrade policy, which curtails early upgrades and imposes new upgrade fees, is having a dramatic impact on discouraging customers from upgrading their phones. That has kept AT&T’s upgrade rate at a steady 7%, even with the introduction of the wildly popular new iPhone. AT&T has effectively cut their subsidy costs and took a 28% increase in equipment revenue from new upgrade fees to the bank;
  • Capital expenditures are on target at $13.8 billion, with more than half of that invested in the wireless business. Landlines and U-verse upgrades took a back seat.
  • AT&T receives enough iPhones to activate 5,000-10,000 new iPhone customers a day and still that is insufficient to meet demand;

[flv width=”640″ height=”380″]http://www.phillipdampier.com/video/ATT Quarterly Earnings 10-24-12.flv[/flv]

AT&T’s Ralph de la Vega explores the company’s latest quarterly earnings, focused on its profitable wireless business.  (3 minutes)

Halloween Scare Stories: Controlling the “Spectrum Shortage” Data Tsunami With Rate Hikes, Caps

Phillip Dampier October 25, 2012 Astroturf, AT&T, Broadband "Shortage", Competition, Consumer News, Data Caps, Editorial & Site News, Public Policy & Gov't, Sprint, T-Mobile, Verizon, Video, Wireless Broadband Comments Off on Halloween Scare Stories: Controlling the “Spectrum Shortage” Data Tsunami With Rate Hikes, Caps

Phillip “Halloween isn’t until next week” Dampier

Despite endless panic about spectrum shortages and data tsunamis, even more evidence arrived this week illustrating the wireless industry and their dollar-a-holler friends have pushed the panic button prematurely.

The usual suspects are at work here:

  • The CTIA – The Wireless Association is the chief lobbying group of the wireless industry, primarily representing the voices of Verizon, AT&T, Sprint, and T-Mobile. They publish regular “weather reports” predicting calamity and gnashing of teeth if Washington does not immediately cave to demands to open up new spectrum, despite the fact carriers still have not utilized all of their existing inventory;
  • Cisco – Their bread is buttered when they convince everyone that constant equipment and technology upgrades (coincidentally sold by them) are necessary. Is your enterprise ready to confront the data tsunami? Call our sales office;
  • The dollar-a-holler gang – D.C. based lobbying firms and their astroturf friends sing the tune AT&T and Verizon pay to hear. No cell company wants to stand alone in a public policy debate important to their bottom line, so they hire cheerleaders that masquerade as “research firms,” “independent academia,” “think tanks,” or “institutes.” Sometimes they even enlist non-profit and minority groups to perpetuate the myth that doing exactly what companies want will help advance the cause of the disenfranchised (who probably cannot afford the bills these companies mail to their customers).

Tim Farrar of Telecom, Media, and Finance Associates discovered something interesting about wireless data traffic in 2012. Despite blaring headlines from the wireless industry that “Consumer Data Traffic Increased 104 Percent” this year, statistics reveal a dramatic slowdown in wireless data traffic, primarily because wireless carriers are raising prices and capping usage.

The CTIA press release only quotes total wireless data traffic within the US during the previous 12 months up to June 2012 for a total of 1.16 trillion megabytes, but doesn’t give statistics for data traffic in each individual six-month period. That information, however, can be calculated from previous press releases (which show total traffic in the first six months of 2012 was 635 billion MB, compared to 525 billion MB in the final six months of 2011).

Counter to the CTIA’s spin, this represents growth of just 21 percent, a dramatic slowdown from the 54 percent growth in total traffic seen between the first and second half of 2011. Even more remarkably, on a per device basis (based on the CTIA’s total number of smartphones, tablets, laptops and modems, of which 131 million were in use at the end of June), the first half of 2012 saw an increase of merely 3 percent in average wireless data traffic per cellphone-network connected device, compared to 29 percent growth between the first and second half of 2011 (and 20-plus percent in prior periods).

[…] What was the cause of this dramatic slowdown in traffic growth? We can’t yet say with complete confidence, but it’s not an extravagant leap of logic to connect it with the widely announced adoption of data caps by the major wireless providers in the spring of 2012. It’s understandable that consumers would become skittish about data consumption and seek out free WiFi alternatives whenever possible.

Farrar

Cisco helps feed the flames with growth forecasts that at first glance seem stunning, until one realizes that growth and technological innovation go hand in hand when solving capacity crunches.

The CTIA’s alarmist rhetoric about America being swamped by data demand is backed by wireless carriers, at least when they are not talking to their investors. Both AT&T and Verizon claim their immediate needs for wireless spectrum have been satisfied in the near-term and Verizon Wireless even intends to sell excess spectrum it has warehoused. Both companies suggest capital expenses and infrastructure upgrades are gradually declining as they finish building out their high capacity 4G LTE networks. They have even embarked on initiatives to grow wireless usage. Streamed video, machine-to-machine communications, and new pricing plans that encourage customers to increase consumption run contrary to the alarmist rhetoric that data rationing with usage caps and usage pricing is the consequence of insufficient capacity, bound to get worse if we don’t solve the “spectrum crisis” now.

So where is the fire?

AT&T’s conference call with investors this week certainly isn’t warning the spectrum-sky is falling. In fact, company executives are currently pondering ways to increase data usage on their networks to support the higher revenue numbers demanded by Wall Street.

If you ask carriers’ investor relations departments in New York, they cannot even smell smoke. But company lobbyists are screaming fire inside the D.C. beltway. A politically responsive Federal Communications Commission has certainly bought in. FCC chairman Julius Genachowski has rung the alarm bell repeatedly, notes Farrar:

Even such luminaries as FCC Chairman Julius Genachowski has stated in recent speeches that we are at a crisis point, claiming “U.S. mobile data traffic grew almost 300 percent last year” —while CTIA says it was less than half that, at 123 percent. “There were many skeptics [back in 2009] about whether we faced a spectrum crunch. Today virtually every expert confirms it.”

A smarter way of designing high capacity wireless networks to handle increased demand.

So how are consumers responding to the so-called spectrum crisis?

Evidence suggests they are offloading an increasing amount of their smartphone and tablet traffic to free Wi-Fi networks to avoid eroding their monthly data allowance. In fact, Farrar notes Wi-Fi traffic leads the pack in wireless data growth. Consumers will choose the lower cost or free option if given a choice.

So how did we get here?

When first conceived, wireless carriers built long range, low density cellular networks. Today’s typical unsightly cell tower covers a significant geographic area that can reach customers numbering well into the thousands (or many more in dense cities). If everyone decides to use their smartphone at the same time, congestion results without a larger amount of spectrum to support a bigger wireless data “pipe.” But some network engineers recognize that additional spectrum allocated to that type of network only delays the inevitable next wave of potential congestion.

Wi-Fi hints at the smarter solution — building short range, high density networks that can deliver a robust wireless broadband experience to a much smaller number of potential users. Your wireless phone company may even offer you this solution today in the form of a femtocell which offloads your personal wireless usage to your home or business Wi-Fi network.

Some wireless carriers are adopting much smaller “cell sites” which are installed on light poles or in nearby tall buildings, designed to only serve the immediate neighborhood. The costs to run these smaller cell sites are dramatically less than a full-fledged traditional cell tower complex, and these antennas do not create as much visual pollution.

To be fair, wireless growth will eventually tap out the currently allocated airwaves designated for wireless data traffic. But more spectrum is on the way even without alarmist rhetoric that demands a faster solution more than  a smart one that helps bolster spectrum -and- competition.

Running a disinformation campaign and hiring lobbyists remains cheaper than modifying today’s traditional cellular network design, at least until spectrum limits or government policy force the industry’s hand towards innovation. Turning over additional frequencies to the highest bidder that currently warehouses unused spectrum is not the way out of this. Allocating spectrum to guarantee those who need it most get it first is a better choice, especially when those allocations help promote a more competitive wireless marketplace for consumers.

[flv width=”600″ height=”358″]http://www.phillipdampier.com/video/KGO San Francisco FCC considers spectrum shortage 9-12-12.flv[/flv]

KGO in San Francisco breaks down the spectrum shortage issue in a way ordinary consumers can understand. FCC chairman Julius Genachowski and even Google’s Eric Schmidt are near panic. But the best way to navigate growing data demand isn’t just about handing over more frequencies for the exclusive use of Verizon, AT&T and others. Sharing spectrum among multiple users may offer a solution that could open up more spectrum for everyone.  (2 minutes)

AT&T Hints Wireless Will Be AT&T’s Rural Broadband Solution; ‘Customers Will Pay More’

Phillip Dampier October 25, 2012 AT&T, Broadband Speed, Consumer News, Data Caps, Public Policy & Gov't, Rural Broadband, Wireless Broadband 2 Comments

AT&T: Landlines may be a thing of the past in rural areas served by AT&T.

AT&T customers in the company’s rural service areas are likely to see wireless broadband as AT&T’s answer to rural America’s demand for Internet access.

Speaking on AT&T’s quarterly results conference call, Ralph de la Vega, president and CEO of AT&T Mobility and Consumer Markets yesterday previewed the forthcoming investor and analyst conference scheduled for Nov. 7 to discuss AT&T’s future in the rural landline business.

“I think there is a place in some rural areas where I see the outline, that [wireless] could serve as an alternative to wired broadband,” de la Vega told a Wall Street analyst from Goldman Sachs. “We are going to be talking to you about that on November 7, giving you more details about our thinking of how we can use this technology. And, quite frankly, the customer reception to the technology [is good] in terms of their willingness to pay for great quality data in large, large amounts.”

Some analysts anticipate AT&T is also likely to announce some additional expansion of the company’s U-verse platform to an additional 3-5 million customers that were not previously scheduled to see the service in their area. The build-out would take 12-18 months to complete. But that still leaves up to 15 million rural AT&T customers with either no broadband or the company’s slower DSL service. For many of them, AT&T sees wireless Internet in their future.

At the core of AT&T’s wireless broadband solution is the company’s LTE 4G network. AT&T is stressing it intends to roll out LTE upgrades in both rural and urban areas, unlike its nearest rival Verizon Wireless, which has prioritized upgrades on urban areas. AT&T claims its current network performs at speeds of 5-12Mbps — faster in low demand areas. In areas where AT&T has not bothered to provide DSL service, the company has repeatedly stressed it believes wireless delivers the best bang for the buck.

Unfortunately for rural consumers, access is not likely to come cheap, congestion will reduce overall speeds, and plans will include usage caps that are draconian in comparison to the company’s wired broadband services.

AT&T is a strong believer is monetizing data usage by gradually eliminating the unlimited data plan the company started at the dawn of the smartphone era. The future at AT&T is usage-based pricing.

“I think that more customers we have on usage-based plans the better we are,” de la Vega told investors.

In the last quarter alone, AT&T earned $6.6 billion from its wireless data service — up more than $1 billion (18%) compared to the same quarter last year.  AT&T now takes $26 billion annually to the bank just from its wireless data earnings.

52% Say Internet Service is Their Home’s Most Important Utility

Phillip Dampier October 24, 2012 Broadband Speed, Consumer News, Data Caps, Editorial & Site News, Online Video, Verizon, Wireless Broadband 2 Comments

Looking for new revenue opportunities

More than half (52 percent) of all U.S. consumers say Internet service is their home’s most important utility, according to a survey conducted by Verizon Communications as part of their Verizon FiOS Innovation Index project.

But Verizon’s research surveys go well beyond simply identifying who loves Internet access. Verizon’s real interest is identifying so-called “borderless consumers,” — customers who are seeking a seamless online experience and connectivity both inside and out of the home.

The convergence of wired and wireless broadband networks is a potentially enormous money-maker for Verizon, especially if you happen to be a Verizon Wireless customer.

“As the borderless consumer segment continues to grow, so will the need to identify, understand and anticipate what consumers truly want in their increasingly connected lives – today and in the future,” said Eric Bruno, vice president of FiOS strategy and development for Verizon.

Fran Shammo, Verizon’s chief financial officer, has previously told investors that monetizing data usage goes beyond text messaging and web browsing. The next frontier for enhanced revenue will come from the machine-to-machine segment. As consumers strive for a more connected future, enabling wireless connectivity for home appliances, automobiles, medical equipment, and other devices will create new revenue streams for the company.

Verizon’s new research surveys help the company target its future marketing to consumers most likely to be living the “borderless lifestyle.” Are you? Here are some key attributes:

  • Above average income: Most are college educated, own their home, and nearly half earn $75,000 or more annually, so they can afford higher broadband bills;
  • They are 18-34: Generation X and Millenials grew up in an increasingly connected world. Baby boomers are not far behind, but seniors are;
  • Women somewhat outnumber men in their need to remain connected;
  • You already have a computer, smartphone, or tablet and are connected to high speed Internet. Most of you want faster speed, if you can get it.

Verizon’s study becomes murkier over the issue of cord cutting. Verizon found that video streaming continues to drive Internet traffic growth, but at least 89% still prefer watching shows on their televisions. Verizon defines that as live TV, DVR, or on-demand from “TV/Cable service.”

But they did not ask whether consumers are watching more or less television provided by their cable, satellite, or phone company or if a larger proportion of viewing now comes from Netflix or other streamed content. That is a key indicator of whether a customer is gradually shifting viewing habits, which could ultimately make it easier to dump cable television.

With 90 percent of those surveyed looking forward to the day when every connectable device in their house can seamlessly interconnect and work together, Verizon’s potential revenue opportunities are enormous, if customers use Verizon Wireless for connectivity and not free Wi-Fi. Machine-to-machine wireless traffic can boost profits without costing the company much, especially under Verizon Wireless’ new Share Everything pricing. The impact of short data exchanges likely from home appliances and other similar devices is expected to be negligible. The profits from charging at least $10 a month to add each of those devices to a Verizon Wireless account are not.

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