AT&T has discovered marketing gold.  What do you do when you run one of America’s worst-rated mobile networks — the one that drops your calls, doesn’t provide uniform reception and is often woefully overloaded — and don’t want to spend what it takes to upgrade?  How about developing a “Home Cell Tower” device that helps solve AT&T’s problems, but adds to yours by charging you $150 for the privilege of owning one.

AT&T’s 3G MicroCell shouldn’t need to exist.  If AT&T had reliable coverage, nobody would need to own a device that helps their bottom line far more than yours.

The MicroCell is sold to customers who are stuck walking their AT&T mobile phone over to the nearest window in order to get a signal from AT&T.  The unit, manufactured by Cisco, plugs into your home broadband connection and effectively creates a tiny “home cell tower.”  Suddenly, you now have five bars of reception indoors and can make and receive calls and reliably use the data features of your smartphone.  AT&T effectively moves your service off their own congested, weak-signal mobile network,  and routes everything over your Internet connection instead.

AT&T 3G MicroCell

It’s a win-win for AT&T.  They get to charge you a substantial markup for a device that costs far less than $150 to manufacture and reduces the urgency to commit to needed upgrades to solve congestion problems.

But AT&T’s marketing department has also figured out a way to earn an even bigger bonus along the way.

Customers who do not choose a special added-cost AT&T MicroCell add-on plan (a ludicrous $19.99 per month plus a $1.25 monthly bill-padding-“regulatory recovery fee”) will be shocked to discover AT&T deducts minutes from your calling allowance even when using the MicroCell to provide you with service.  It takes a special kind of nerve to charge customers for making and receiving calls that don’t even use the company’s mobile network.  It’s like AT&T setting up a kiosk in front of the nearest Verizon payphone and charging you $1 for the privilege of paying Verizon 25 cents to make a call.  The $20 a month add-on plan doesn’t even cover data usage, which means AT&T charges you for accessing data and text messages sent and received over your own home broadband connection.

The Associated Press reviewed AT&T’s 3G MicroCell and seemed unimpressed.

Despite marketing claims it will deliver more bars in more places within 5,000 square feet, the AP found the MicroCell only managed a less impressive 40 feet. AT&T admits concrete or brick walls can also reduce coverage. For all practical purposes, don’t expect the device to provide much help out in the yard.

AT&T also claims MicroCell users can initiate calls from the MicroCell and have them “seamlessly” transferred to AT&T’s mobile network when they walk out of range.  The AP found more times than not, AT&T simply dropped the call, forcing the customer to start a new call.  Even worse, customers initiating a call on AT&T’s mobile network will find the MicroCell can’t take over when they arrive home, making the primary reason for getting the device irrelevant the moment you walk in the door and risk dropping the call.

The only good news is that introductory promotions can knock down the upfront price.  Customers committing themselves to the $20 MicroCell add-on calling plan qualify for a $100 rebate when purchasing the MicroCell.  If you also sign up for new AT&T DSL or U-verse service when buying the MicroCell, you can get an additional $50 rebate, effectively making the MicroCell free to own.  AT&T broadband customers will also get $10 off the MicroCell add-on calling plan.

There is nothing inherently wrong with offering customers these devices, known in the industry as femtocells, but companies like AT&T should be providing them at-cost and be grateful when customers use them.  Instead, the company treats these customers as nothing more than another profit center, ripping them off with a ludicrously priced add-on calling plan to avoid watching call allowances erode away, even when calls don’t travel over AT&T’s mobile network.

[flv width=”586″ height=”310″]http://www.phillipdampier.com/video/ATT MicroCell Demo.flv[/flv]

This video covers how AT&T markets their MicroCell device and accompanying add-on plan and also includes a brief tutorial on how the device works.  (4 minutes)

[flv width=”480″ height=”380″]http://www.phillipdampier.com/video/AP ATT’s Home Cell Tower Delivers an Added Cost 5-5-10.flv[/flv]

The Associated Press reviewed the AT&T MicroCell and ultimately wondered why customers had to pay for a device to improve service you already pay to receive.  (2 minutes)

[Updated 2:30pm — Coverage area correction made.]

Coming this June, Vodafone will introduce an Internet Overcharging scheme for its “pay monthly” mobile customers, dropping “unlimited” smartphone broadband service in the United Kingdom.

From a post on the company’s support forum:

We are planning to introduce Out Of Bundle charging for Pay Monthly customers from 1st June 2010. The reason we’re introducing these charges is to make it fairer for everyone, and to protect our network from data abuse. We’re introducing a real-time notifications service to be completely transparent about these charges and keep customers in control of their spend. No Out Of Bundle charges will happen this month but they will take effect from 1st June. The messages you’ve received this month were sent in error and no more will be sent out from today.

The charging will be as follows:

Monthly bundle customers will pay £5/$7.43 for every 500MB after the first 500MB
Customers without a monthly bundle will pay 50p/$0.74 for every 10MB after the first 25MB

Whilst you’ve all previously been used to there not being any Out Of Bundle charging, the current information available online is clear in explaining that we could introduce such charging at any time. The Vodafone Mobile Internet costs page does state:

We’ll keep an eye on things and let you know your options if it looks like you’ll go over your 500MB Flexi or Value Pack limit.

Our Pay Monthly Terms and Conditions already state that we reserve the right to charge for any usage beyond the Fair Usage limit.

At the same time Vodafone wants to punish customers for using their phones too much, the company continues to heavily market the very phones capable of  “data abuse.”

In addition to the iPhone, Vodafone now also sells a handful of Android phones — both of which are designed for their data service capabilities.

For consumers who believed Vodafone’s marketing and bought an iPhone or Android phone with an unlimited data plan, the rug is about to be pulled out.  Come June, those exceeding Vodafone’s arbitrary data allowances will begin receiving SMS text messages warning them their bills are about to rocket sky-high from excessive usage charges.

Karl Bode over at Broadband Reports offers an additional detail on Frontier’s Internet Overcharging experiment which is now being tested in Minnesota:

Late last week, someone familiar with business operations at Frontier Communications indicated to Broadband Reports that the company was going to begin testing a new capping scheme for heavy users. “Just wanted to let you know that Frontier is sending out letters to the top 50 bandwidth users in Mound Minnesota,” said the individual.

The city of Mound, a suburb located 19 miles to the west of Minneapolis/St. Paul, is home to 9,800 residents.  Mound is the birthplace of the Tonka truck, named after Lake Minnetonka, which surrounds Mound.  Residents of Hennepin County have watched their local phone company change hands several times over the years from Contel to GTE of Minnesota to Verizon to Citizens Telecommunications Company of Minnesota, which does business as Frontier Communications. Frontier has served this part of Minnesota since the end of August, 2000.

Hanus

For a community aggressively pursuing a downtown revitalization and redevelopment program designed to make the community attractive to new residents and businesses, news that the local DSL provider is now going to limit broadband usage and overcharge those who exceed their arbitrary limits is not good.

Among city officials, Mayor Mark Hanus and councilman David Osmek are both Frontier broadband customers.  The city is proud to stream its regular city council meetings online, something Frontier DSL customers will now have to avoid if they want to preserve as much of their 5GB monthly usage allowance as possible.

Action Alert and Alternatives for Mound, Minnesota

For Mound residents who do not want to be forced to limit their broadband activities to the ridiculously low 5GB allowance Frontier is now enforcing, we recommend these actions:

1) Call Frontier Communications at 1-800-921-8101 and tell them you will not keep your Frontier broadband service with a usage cap and you are prepared to take your business elsewhere immediately if they do not rescind their “experiment.”  If they attempt to charge you an early termination fee or cancellation fee if you do decide to cancel, let us know through the Contact link at the top of the page or in the comments attached to this article.

2) Contact your local media — the Minneapolis Star-Tribune, the Lakeshore Weekly News, The Laker, local news radio and television stations and let them know you think they should be covering this story and its potential impact on the local economy in Mound.

3) Your best alternative broadband provider is cable operator Mediacom which does not have a usage limitation on their broadband accounts.  Their speeds and pricing are also much better, based on Frontier’s advertised pricing of  “as low as” $49.99 a month for Frontier High-Speed Internet Max 3Mbps service or “prices starting at” $39.99 a month for Frontier High-Speed Internet Lite 768kps service.

Mediacom offers 3, 12 and 20Mbps broadband service in Mound.  Here are the details:

For New Mediacom customers:

Mediacom offers soon-to-be-ex Frontier customers free standard installation and a 12-month introductory offer for 12/1Mbps service for $49.95 a month.  Telephone service is also available through Mediacom with a bundled service discount.  Customers looking for a budget broadband alternative can sign up for 3Mbps service for $29.95 a month if they also take digital cable or digital phone.  For customers looking for the highest speeds, Mediacom offers 20/2Mbps service for $59.95 a month if you also get digital cable or phone service.

Mediacom is Mound's incumbent cable company

For Current Mediacom Non-Broadband customers:

If you have cable from Mediacom but use Frontier for broadband, you can switch to Mediacom cable modem service and obtain special discounts.  Add Mediacom’s 12/1Mbps service to your existing cable TV account for $19.95 a month for 12 months, or 20/2Mbps service for $59.95 a month for 12 months.  Installation is done by the customer.

Questions about Mediacom service in Mound can be directed to 1-800-332-0245.  Mediacom’s local offices in and around Mound are at:

4) Customers who are absolutely stuck with Frontier broadband who anticipate approaching or exceeding the 100/250GB usage levels should explore a business broadband account with Frontier.  Although pricing may vary from city to city, residents of Rochester who confronted the original effort to impose a 5GB usage cap in western New York found business account DSL service was not much more expensive than residential service, and carried no usage limitations.  Pricing is likely to be less than the punitive rates Frontier wants to charge residential customers for exceeding their allowances.

Frontier Communications has quietly begun testing an Internet Overcharging scheme in Minnesota designed to charge confiscatory prices to residents who exceed the company’s usage allowances, demanding customers pay up to $249.99 a month to keep their broadband service running.

Stop the Cap! has learned Frontier has begun measuring customers’ broadband usage, and for those in Minnesota who exceed 100GB of usage during a month, Frontier is dispatching e-mail messages telling them they’ll have to agree to pay more — much more — or their service will be cut off in 15 days.

Two e-mail messages are being sent to customers who break the 100 and 250GB usage barriers.  Both reference Frontier’s 5GB usage allowance that Stop the Cap! has strongly and repeatedly criticized the company for implementing in the first place.  Using that usage allowance as a baseline, Frontier calls out its customers using more demanding they switch to a higher priced service plan if they want to continue service with the company.

• For those achieving 100GB of usage, the new monthly rate is $99.99 per month
• For those achieving 250GB of usage, the new monthly rate is an incredible $249.99 per month

Sources tell Stop the Cap! the Internet Overcharging scheme Frontier is running is an experiment to gauge customer reaction.  If the furious customer e-mail reaching us is any indication, it’s another public relations disaster for Frontier Communications.  One customer didn’t even realize there was a 5GB usage allowance to begin with, much less a vastly higher new monthly price if he wants to stay with Frontier DSL.  He’s not.

"You can earn this much money just from overcharging Minnesotans for their Internet service!"

Ironically, the experimental pricing plan comes at a time when Frontier is still trying to get state regulators to approve its deal with Verizon to assume control of landline and broadband service in several states.  Residents in West Virginia and a dozen other states might be a bit concerned that their unlimited Verizon DSL broadband service, often the only service provider available, could be replaced with a company that is willing to punish its customers with $250 in monthly charges once a customer hits 250GB in usage.  Even worse, Frontier takes the overlimit penalty concept to a whole new level, telling customers that new high price represents their new monthly rate plan, not just a temporary penalty.

To add insult to injury, Frontier continues to mislead its customers about the experimental pricing on its own website.  As of this writing, Frontier’s Acceptable Use Policy still states:

Customers may not resell High Speed Internet Access Service (“Service”) without a legal and written agency agreement with Frontier. Customers may not retransmit the Service or make the Service available to anyone outside the premises (i.e., wi-fi or other methods of networking). Customers may not use the Service to host any type of commercial server. Customers must comply with all Frontier network, bandwidth, data storage and usage limitations. Frontier may suspend, terminate or apply additional charges to the Service if such usage exceeds a reasonable amount of usage. A reasonable amount of usage is defined as 5GB combined upload and download consumption during the course of a 30-day billing period. The Company has made no decision about potential charges for monthly usage in excess of 5GB.

For customers receiving Frontier’s Scare-o-Gram, it sure sounds like they made up their minds… to charge a lot more for the exact same level of service.

For state regulators, watching Frontier charge ludicrous pricing for broadband service that would make most providers blush should be more than enough evidence that approving Frontier’s plans to take over Internet and landline service in their state is not in the best interests of consumers.  For many, it saddles them with a broadband provider that can charge these kinds of prices knowing full well many customers have nowhere else to go.

Copy of E-Mail Sent to Minnesota Customers Exceeding 100 GB of usage a month [emphasis in bold is ours]:

Dear [Customer]:

Frontier is focused on providing the best possible internet experience across our entire customer base.  We bring you a quality service at a fair price, dependent upon an average monthly bandwidth usage of 5GB.  Over the past months, your account is in violation of our Residential Internet Acceptable Use Policy.

Our policy states that Frontier reserves the right to suspend, terminate or apply additional charges to the Service if such usage exceeds a reasonable amount of usage. A reasonable amount of usage is defined as 5GB combined upload and download consumption during the course of a 30-day billing period.

We realize there are times when our customers use the internet for services such as video and music downloads, however your specific usage has consistently exceeded 100GB over a 30 day period.

We would like to provide you with the option of keeping your Frontier internet service at a monthly rate of $99.99 which is reflective of your average monthly usage.  Please call us within 7 days of the date of this email at 1-877-273-0489 Monday – Friday, 8AM – 5PM CST to review your options.  If you do not wish to switch to this new rate plan, you can have your service disconnected.  If we do not hear from you within 15 days, your internet service will be automatically disconnected.

We continue to manage our network to ensure all of our customers have equal access to the internet and the ability to enjoy all of its available content, at our committed level of service quality.

Sincerely,

Frontier Communications

Copy of E-Mail Sent to Minnesota Customers Exceeding 250 GB of usage a month [emphasis in bold is ours]:

Dear [Customer]:

Frontier is focused on providing the best possible internet experience across our entire customer base.  We bring you a quality service at a fair price, dependent upon an average monthly bandwidth usage of 5GB.  Over the past months, your account is in violation of our Residential Internet Acceptable Use Policy.

Our policy states that Frontier reserves the right to suspend, terminate or apply additional charges to the Service if such usage exceeds a reasonable amount of usage. A reasonable amount of usage is defined as 5GB combined upload and download consumption during the course of a 30-day billing period.

We realize there are times when our customers use the internet for services such as video and music downloads, however your specific usage has consistently exceeded 250GB over a 30 day period.

We would like to provide you with the option of keeping your Frontier internet service at a monthly rate of $249.99 which is reflective of your average monthly usage.  Please call us within 7 days of the date of this email at 1-877-273-0489 Monday – Friday, 8AM – 5PM CST to review your options.  If you do not wish to switch to this new rate plan, you can have your service disconnected.  If we do not hear from you within 15 days, your internet service will be automatically disconnected.

We continue to manage our network to ensure all of our customers have equal access to the internet and the ability to enjoy all of its available content, at our committed level of service quality.

Sincerely,

Frontier Communications

Virgin Mobile’s Broadband2Go prepaid mobile broadband service is increasing usage allowances in hopes of attracting new customers at current prices.

The service, launched last June, has not been as successful as it could be, especially in markets where competitors like Cricket offer no-commitment wireless broadband for $40 a month for up to 5GB of usage, for a lower initial cost.

Sprint, which now owns the Virgin Mobile brand, isn’t lowering prices, but it is increasing usage allowances.

Before:

$10 buys you 100MB of access that expires 10 days after activation.
$20 buys you 250MB of access that expires 30 days after activation.
$40 buys you 600MB of access that expires 30 days after activation.
$60 buys you 1GB of access that expires 30 days after activation.

Now:

The high end Virgin Mobile plan now matches many postpaid plans for pricing and usage allowance, without a two year contract.  But it’s still priced $20 higher per month than Cricket.  ConnectedPlanet notes:

According to Virgin Mobile chief marketing officer Neil Lindsay, more than 70% of Virgin’s customers said they signed up for Broadband2Go because of the flexibility to change the plans as they needed more or less bandwidth and to pay only for what they needed. Virgin is targeting those cord cutters, such as students or families, who may be using the Broadband2go as a replacement for their at-home Internet service. Virgin’s own surveys indicate that this at-home group already includes 16% of its Broadband2Go customers. Of its user base, 30% also use the card more than four times per week, and 47% asked for additional data on their existing plans.

In turn, Leap Wireless, which owns Cricket, is hinting it may be looking at its own pricing and usage allowances to maintain competitiveness.  No specifics yet, but Leap’s 4th quarter earning results were hardly impressive, reporting a wider loss than Wall Street analysts expected, as competition and a weak economy helped erode profits.  The company does not plan to expand into new cities in 2010, but will offer nationwide coverage for existing customers with expanded roaming agreements.  Also on the way — smartphones from Blackberry and at least one Android phone.