Comcast, Time Warner Cable, and Bright House Networks sold AWS spectrum in areas shown here to Verizon Wireless, virtually guaranteeing the cable industry will not compete in the wireless phone business.

Two years ago, Cox Communications was hungry to get into the wireless phone business.  It announced it was launching “unbelievably fair” wireless — an oasis in a wireless desert of tricks and traps on offer from competing wireless companies.  No more expiring minutes, the option of affordable flat rate service, and no hidden fees or surcharges were all supposed to be part of the deal.

“Our research found that value and transparency are very important to consumers when choosing a wireless service plan, but they are not finding these qualities in the wireless plans offered today,” Stephen Bye, vice president of wireless said back in 2010, introducing the service. “Total loss of unused minutes as well as unforeseen overage charges on bills are just two examples of what our customers have told us is just unfair.”

Those same issues still exist for wireless customers today, but Cox won’t be a part of the solution.  The company announced this past May it was exiting the competitive arena of wireless and would simply resell Sprint service instead.  Last month, it announced it wouldn’t even bother with that, and will transition its remaining wireless customers directly to Sprint.

What changed Cox’s mind?  The cost of building and operating a wireless network to compete with much larger national companies.  It simply no longer made sense to build a small regional wireless carrier and rent the rest of your national coverage area from other providers, who set wholesale prices at a level high enough to protect them from would-be competitors.

The lesson Cox learned first has now been taught to America’s largest cable operators Comcast and Time Warner Cable (and its sidekick Bright House Networks).

All three cable operators have effectively signed a non-aggression treaty with Verizon Wireless, agreeing to sell their unused wireless spectrum acquired by auction in 2006 at a 50% markup to Big Red.  In return, Verizon will market cable service to wireless customers.  It’s the ultimate non-compete clause so wide-reaching, Verizon stores will soon be selling Time Warner Cable right next to Verizon FiOS, something unheard of in the telecommunications marketplace.

It’s a win for Verizon Wireless, which accumulates additional wireless spectrum and peace of mind knowing the cable industry will not enter the wireless communications business.  Cable companies get to profit from their purchase of the public airwaves and see the potential of a dramatic reduction in customer poaching, as cable and phone companies stop fighting each other for customers.  Ultimately, it means customers could eventually pay the cable or phone company for all of their telecommunications services from television and broadband to wired and wireless phone service.  What consumers enjoy in one-bill-convenience may eventually come with higher rates made possible from reduced competition.

Verizon Wireless' currently unused AWS spectrum favor the east coast, but not for long.

Verizon will pay $3.6 billion to Comcast, Time Warner and Bright House Networks for the spectrum.  The deal has stockholders cheering because that payment represents a tidy profit for cable operators who did absolutely nothing with the spectrum they purchased five years ago.  It also makes AT&T even more intent on completing its own spectrum merger with T-Mobile USA.

The agreement has concerned consumer advocates because it seems to signal Verizon is content making money primarily from its wireless business, and will repay the favor from the cable industry by pitching phone customers on cable service.  That could ultimately spell big trouble for Verizon’s stalled FiOS fiber-to-the-home network.  Verizon may find it easier and cheaper to end its aggressive entry into Big Cable’s territory by simply reselling traditional cable television products.  It can still market wireless products and services to cable subscribers and not endanger the new atmosphere of goodwill.  Rural broadband, where cable never competes, could be served through wireless spectrum, for example.

For now, Verizon says it intends to continue competing with its FiOS network, but the company stopped deploying the service in new areas nearly two years ago.

The deal will go before regulators at the Justice Department and the Federal Communications Commission for review.  What will likely concern them the most is the appearance of collusion between the cable companies and Verizon.

“A flag is raised when two rival networks move to start selling each other’s services,” a person familiar with the concerns of federal antitrust officials told the Washington Post. “They lose their desire, impetus, to compete. That is a big antitrust flag.”

Mark Cooper, the director of research for the Consumer Federation of America, expressed serious concern as well.

“Verizon was supposed to be the great competitor for Comcast in the video space, while Comcast has been looking for a wireless play to match the Verizon bundle,” he said. “The deal signals bad news for consumers, who can expect higher prices for video, fewer choices and higher prices for wireless.”

Who owns what

Four years into the deal, consumers may not know what company they are dealing with, as cable operators will be able to market Verizon Wireless service under their own respective cable brand names.

The deal is also trouble for lagging Clearwire, which had been providing wireless broadband service to both Comcast and Time Warner Cable.  Under the agreement, both cable companies will end their relationship with Clearwire, which is particularly bad news for the wireless company because of its ongoing financial distress.  Sprint, which has heavily invested in Clearwire, may ultimately find itself with an investment gone sour, troubling news for the third largest wireless company manning the barricades against a nearly-complete duopoly in wireless service between AT&T and Verizon Wireless.

Cable stock cheerleader Craig Moffett from Sanford Bernstein seems thrilled with the prospect.  In a research note to his Wall Street clients, Moffett says AT&T could benefit from the Verizon pact with Big Cable by ending up in a “more duopolistic industry structure without paying for it.” If the FCC approves the non-aggression pact, the deal “would amount to an unmistakable step towards the duopolization of the U.S. wireless market, inasmuch it would leave T-Mobile, once again, stranded without a 4G strategy.”

Cable investors, he adds, are likely to be excited the cable industry won’t spend billions of dollars in capital building a wireless venture, and instead has agreed to work with competitors to cross-sell products and services.  With little competitive pressure, prices won’t be falling anytime soon.

That’s great news for investors, even if it is “unbelievably unfair” for consumers.

[flv width=”640″ height=”380″]http://www.phillipdampier.com/video/Bloomberg Verizon to Buy Wireless Spectrum for 3-6 Billion 12-2-11.flv[/flv]

Bloomberg News explains the deal and its implications in the wireless industry spectrum battle.  (2 minutes)

Regular Stop the Cap! reader Alex dropped us a note sharing the bad news: Bell Canada is hiking rates for virtually everything effective Jan. 1.  Except Bell doesn’t call them rate increases.  To the phone giant, they are “price updates.”  They are also considerable, with sweeping rate increases for phone, Internet, and television.  They are even hiking rates for individual phone calling features like three-way calling.

Bell reserves rate increases for its long-standing customers. Potential new customers served by Bell in eastern Canada, where the company is rolling out its fiber-to-the-neighborhood service Fibe (similar to AT&T U-verse), report offers as low as $19.95 a month for selected services during the first year.  But prices increase dramatically when the promotion expires.  By how much is detailed below:

Prices listed are for customers in Ontario.

But Bell saves the worst for a footnote at the bottom of their Internet “price update.”  They are tinkering with the company’s notorious Internet Overcharging scheme, raising the bar on their overlimit penalty.  Customers who used to exceed their monthly broadband allowance originally faced a maximum penalty of $30.  But Bell has been revisiting that “maximum overlimit fee” regularly.  In 2010 the company raised the penalty cap to $60.  On Jan. 1, Bell is raising the maximum by an additional $20 — to $80 a month.  In our view, it is only a matter of time before the ceiling on overlimit fees is eliminated altogether, setting customers up for sky high bills.

Bell Fibe 25 customers with 25Mbps service will now pay $78.95 a month for Internet alone, and that plan comes with only 125GB of usage per month.  Want to use more?  You will have to buy Bell’s Usage Insurance in advance:

• $5/month for an extra 40GB
• $10/month for an extra 80GB
• $15/month for an extra 120GB

But that may not help you avoid at least one month of overlimit fees.  Bell pro-rates customers adding Usage Insurance to their accounts, which means the first month’s extra allowance is limited by the number of days before your next billing cycle.

Bell’s prices for new customers are much lower, with Fibe 25 priced as low as $34.48 a month during the first year.  The real bite arrives when the promotion expires, when the price more than doubles.

Verizon Wireless has confirmed a major LTE outage is impacting their data customers up and down the east coast as of late last night.

4G service works only intermittently this morning for impacted customers.  Many Verizon Wireless 4G phones are also not stepping down to the older 3G network properly during the outage, which means no data service at all, unless you are near a Wi-Fi hotspot.

The largest service area affected is New York City, but the outage is also impacting 4G customers in western New York, Pennsylvania, and northern Virginia.

Verizon has no estimated time when the problem will be repaired.

Updated 3:46pm ET — Readers report the outages now extend south into South Carolina, west into Ohio, Indiana, and Illinois, and one reader tells us service is out in California.  Verizon has acknowledged the problem on their Twitter channel, with no time estimates for repair.

Updated 4:58pm ET — Verizon is telling some customers the outage is impacting those with SIM cards, which effectively means LTE/4G.  Customers with 3G only phones still have access, but many 4G phone owners cannot downgrade to 3G service, even when they turn LTE off. 

AT&T has once again scored dead last in a nationwide survey (subscription required) of wireless providers commissioned by consumer magazine Consumer Reports.

Among national coverage carriers, Verizon Wireless again scored the highest, but not highest overall when including smaller independent and regional carriers.  Top honors were won by Consumer Cellular, a relatively small company in Portland, Ore. that ironically depends on bottom-rated AT&T’s network to deliver service.  What sets Consumer Cellular apart from other carriers is its near-exclusive focus on selling phone service to America’s senior population.  Working with groups like the AARP to market simple cell phones to older, less technologically-comfortable customers, over 85% of Consumer Cellular customers are over the age of 50.  The vast majority are occasional cell phone users, primarily using cell phones to make and receive calls.

Regional carrier U.S. Cellular, which used to top Consumer Reports‘ surveys, scored second.  Most U.S. Cellular customers are in the Pacific Northwest, Midwest, and parts of the East including New England.  CREDO, better known under its former name Working Assets Wireless, scored third.  It provides service over the Sprint network.

Among major-sized providers, only Sprint managed to escape the poor ratings for value received by AT&T, Verizon, and T-Mobile.  Also ironic, T-Mobile continued to score better than AT&T, which is still working feverishly to acquire the German-owned carrier.

AT&T also did poorly in delivering reliable voice and data services, according to respondents.  Customer service was also deemed lacking.

Consumer Reports

“Our survey indicates that subscribers to prepaid and smaller standard-service providers are happiest overall with their cell-phone service,” said Paul Reynolds, electronics editor for Consumer Reports. “However, these carriers aren’t for everyone. Some are only regional, and prepaid carriers tend to offer few or no smart phones.”

Consumer Cellular being a prime example. 

Consumer Reports surveyed 66,000 Americans for its 2011 Wireless Satisfaction Survey and found little had changed from last year.  The consumer magazine recommends consumers who don’t make or receive a lot of calls or are not addicted to wireless data services consider a prepaid plan instead of a two-year contract.  Competition in the prepaid arena continues to force prices down, and most providers offer month-to-month service plans that can be automatically renewed through a checking account or credit card, eliminating any hassle purchasing “top up” cards.

Most of the prepaid providers resell service provided by AT&T, Sprint, or Verizon Wireless.  Two that don’t: MetroPCS and Leap Wireless’ Cricket, received little regard from those surveyed.  MetroPCS scored second from the bottom and Cricket didn’t make the ratings at all.  Two prepaid plans to consider first: TracFone, excellent for occasional calling, and Straight Talk, sold by Wal-Mart — better for those who like to talk a lot on their phones.  If you don’t need the sexiest handset around, Stop the Cap! also recommends Page Plus, which relies on the Verizon Wireless network, especially if you don’t need a lot of data services.

(Courtesy: The Consumerist)

An Atlanta grandmother got the shock of her life when she called Comcast to activate her new cable box.  When she called the number Comcast printed on her equipment receipt, she reached an adult sex chat line instead.

“I really got upset, extremely upset. I just like hung up the phone and I had to call my husband in to call again because I thought maybe I’d made a mistake,” Dora Nopple told an Atlanta TV station. “I just couldn’t believe that a company as large as Comcast is not aware of what they’re putting on receipts for their customers to call.”

Sure enough, when a reporter from WAGA-TV dialed the number on the bottom of her receipt, a porn line answered the call.

A Comcast spokesperson immediately apologized.

“Comcast sincerely apologizes to our customer who called the number typed on their receipt and was unexpectedly connected to an adult phone service,” the Comcast statement reads. “This was simply a human error resulting from a temporary employee who inadvertently typed an 800 number prefix for what should have been an 888 prefix.”

Comcast believes the error was a one-time event, limited to that single customer.  Perhaps, but Comcast’s past track record has exposed other customers to heavy breathing sex operators. In October 2009, Comcast mailed thousands of postcards to Harrisburg, Penn. customers advertising an upgrade of HBO On Demand.  But when callers dialed the 800 number to order the new HD channel, they ended up on a phone sex hotline instead.

[flv width=”360″ height=”290″]http://www.phillipdampier.com/video/WAGA Atlanta Wrong Number Leads to Phone Sex Line 11-30-11.mp4[/flv]

WAGA in Atlanta spoke with Dora Nopple about her unwelcome phone call to Comcast customer service to activate her new cable box.  She reached an adult porn line instead.  (2 minutes)