Verizon Wireless’ ongoing campaign to get rid of its grandfathered unlimited data customers continues this week with news the carrier will begin throttling speeds of off-contract customers still hanging on to their uncapped data plans starting Oct 1.

Verizon doesn’t call the enforcement of speed reductions a “throttle,” but rather “Network Optimization”:

Verizon Wireless strives to provide its customers with the best wireless experience when using our network. In 2011, Verizon Wireless launched Network Optimization, which slows the data speeds of its unlimited data subscribers with 3G devices who are in the top 5% of data users when they connect to a cell site experiencing high demand.

Effective October 1, Verizon Wireless will expand its existing Network Optimization policy to include its unlimited data subscribers using 4G LTE devices who have fulfilled their minimum contract term. Based on your plan and recent data usage, one or more lines on your account may experience a reduction in data speeds when connected to a cell site experiencing high demand. Customers on MORE Everything or other usage-based data plans are not subject to Network Optimization. For more information about our Network Optimization, please refer to www.verizonwireless.com/networkoptimization.

Verizon Wireless customers on the company’s 3G network have been subject to speed throttling for several years if Verizon deems them a “heavy user,” but the company’s 4G LTE network avoided the speed noose until now. Customers who find themselves subjected to Verizon’s speed limiter report it is a very unpleasant experience.

“My phone has been throttled and is now essentially unusable for the very things it is marketed for,” reports one customer sentenced by Verizon’s “Network Optimization.”  “I can send texts, emails, and view basic websites but any sort of streaming is now out of the question for the remainder of the billing cycle and possibly the next cycle as well.”

The throttle effectively limits speeds to well under 300kbps, and in most urban areas where cell tower usage is higher, punished customers have to live with speeds of around 50kbps — the same as dial-up.

Verizon’s logic and consistency about its “Network Optimization” faced customer scrutiny as well.

“This is not about equal opportunity bandwidth, it’s about Verizon realizing they can increase their revenue stream, otherwise, wouldn’t those tiered folks be getting throttled as well if they ‘abused’ and used ‘inordinate’ amounts of data?  Oh no, of course not, Verizon just bills them more.  This scenario is as ridiculous as charging $20/month for text messaging, which, by the way, is also data.”

What makes you speed-throttling-worthy? According to Droid Life, which broke the story, anyone using more than 4.7GB of data per month on a busy cell tower is likely to end up on a speed diet.

Verizon claims its “Network Optimization” is designed to protect the usage experience among all of its customers, and suggests the speed reductions will only occur when a heavy user is connected to a “high demand” cell site.

“Once you leave that site and attach to a new cell site without high demand, your speeds return to normal,” claims Verizon. “Other carriers often throttle you no matter what throughout the end of a billing cycle.”

But Verizon’s gesture isn’t as generous as it first suggests.

Once a customer is suspected of being a data hog and forced to endure Verizon’s speed throttle, they can stay in Verizon’s speed prison for up to 60 days after being sentenced. The result is dramatically reduced data speeds when a customer happens to travel through a busy cell site area, regardless of whether they are using a lot of data at the time or not.

Network congestion problems may be a result of too many customers connected to a single cell site at any one time, several customers concurrently engaged in high bandwidth traffic exchanges through a cell site, or Verizon’s inadequate capacity to meet even the reasonable needs of its wireless customers.

But regardless of the cause, only one group will be punished for their usage-excess: unlimited data plan customers who are now mostly off-contract (Verizon requires most customers signing a contract renewal that includes equipment discounts to migrate off their unlimited plan, which stopped being sold to new customers in June, 2012.)

Customers can get out of speed jail permanently simply by agreeing to give up their unlimited data plan. Then they can use (and abuse) Verizon’s limited wireless bandwidth, whether it slows every other customer down or not.

Nearly 10 percent of GCI’s revenue is now earned from overlimit fees collected from Alaskan broadband customers who exceed their cable or wireless usage limits.

GCI is Alaska’s largest cable operator and for many it is the only provider able to deliver stable speeds of 10Mbps+, especially to those who live too far away for comparable DSL speeds from ACS, one of GCI’s largest competitors.

The result has given GCI a de facto monopoly on High Speed Internet (10+ Mbps) access, a position that has allowed the company to dramatically raise prices and slap usage limits on broadband users and charge onerous overlimit fees on those who exceed their allowance.

GCI already charges some of the highest broadband service prices in the country and has insisted on imposing usage caps and overlimit fees on even its most expensive plans, creating high profits for them and enormous bills for customers who have no reliable way to consistently track their usage. GCI’s suspect usage meter is often offline and often delivers usage estimates that customers insist are far from accurate. GCI says it has the last word on the accuracy of that meter and has not submitted its meter to independent testing and verification by a local or state regulatory body specializing in measurement accuracy.

GCI also makes it extremely difficult for customers to understand what happens after customers exceed their usage limits. The website only vaguely offers that overlimit fees vary from “$.001 (half penny) to $.03 (three cents) per MB,” which is factually inaccurate: $.001 does not equal a half-penny. It can equal bill shock if a customer happens to be watching a Netflix movie when their allowance runs out.

KC D’Onfro of Bethel subscribes to GCI’s Alaska Extreme Internet plan, which in February cost $100 a month for 4/1Mbps service with a 25GB usage cap. While that allowance is plenty for the countless e-mails GCI promises you can send, any sort of streaming video can chew through that allowance quickly.

Business Insider explains what happened:

One fateful night, she and her roommate decided to watch a movie on Netflix. Both of them fell asleep halfway through, but the movie played ’til the end, eating up two GBs of data too many and consequently doubling their bill for that month. (One hour of HD video on Netflix can use up to 2.3 GB of data.)

“Now, I don’t even consider Netflix until near the very end of the month, and I have to be sure that I’m no more than three-fourths of the way into my total data, at the absolute most,” KC says. (Her provider, a company called GCI, allows subscribers to view their daily usage and sends them a notice when they’ve hit 80%.) “It’s a very serious business – I have to poll people to figure out what that one very special movie should be.”

That left the D’Onfro family with a $200 broadband bill – $100 for the service and an extra $100 overlimit fee for that single Netflix movie. Today, GCI demands $114.99 a month for that same plan (with the same usage allowance) and those not subscribing to their TV service also face a monthly $11.99 “access fee” surcharge for Internet-only service.

“Many Alaska consumers have brought their GCI broadband bills to ACS for a comparative quote, providing dozens of examples of GCI overage charges,” said Caitlin McDiffett, product manager of Alaska Communications Systems (ACS), the state’s largest landline phone company. “Many of these examples include overage charges of $200 to $600 in a single month. In one instance, a customer was charged $1 ,200 in overage fees.”

GCI also keeps most customers in place with a 24-month contract, making it difficult and costly to switch providers.

McDiffett told the FCC the average Alaskan with a Netflix subscription must pay for at least a 12Mbps connection to get the 60GB usage allowance they will need to watch more than two Netflix movies a week in addition to other typical online activities. GCI makes sure that costs average Alaskans real money.

“A customer purchasing 12Mbps for standalone (non-bundled) Home Internet from GCI pays $59.99 per month plus an $11.99 monthly “access” fee for a total of $71.98 per month with a 60GB usage limit ($0.004/MB overage charge),” reports McDiffett. “Thus, the monthly bill for this service is more typically $76.98, including a $5.00 overage charge. To purchase a service with a usage limit of at least 100GB per month, a GCI customer would have to pay $81.98 per month (the $69.99 standalone rate plus $11.99 monthly access fee), subject to an overage charge of $0.003/MB.”

Rural Alaskans pay even more when using GCI’s expensive wireless ISP.

Regular Alaskan Stop the Cap! reader Scott reports that no matter what plan you choose from GCI, they are waiting and ready to slap overlimit fees on you as soon as they decide you are over your limit.

Their super-deluxe re:D service — up to 200Mbps, now available in Anchorage, MatSu, Fairbanks, Juneau, Kenai, Ketchikan, Sitka, and Soldotna areas, is not cheap.

“It’s a whopping $209.99 + taxes, and if you don’t have cable TV service bundled, the $11.99 monthly access fee also applies,” Scott says.

For that kind of money, one might expect a respite from the usage meter,  but not with GCI.

“As a top tier service, you’d think they could just offer it as ’unlimited’ at that rate,” Scott says. “Actually, it has a 500GB usage cap and $.50/GB overage fee. Again, we have a metering provider who claims the overages were to penalize bandwidth hogs, yet then offer [faster] service, increasing overall load on their network, instead of just offering a fair amount of bandwidth per customer and eliminating overages by offering unlimited usage.”

One of ACS’ strong selling points is no data caps, but DSL isn’t available to everyone.

In a filing with the FCC, ACS’ McDiffett suspects usage caps are all about the money.

“GCI reported 2012 Home Internet revenue of $86 million of which $7.9 million (nearly ten percent) was derived from overage charges,” said McDiffett. “On average, about $5 per customer per month can be attributed to GCI overage charges. GCI imposes usage limits or data caps at every level of Home Internet service, from its 10 Mbps service (10GB limit, $0.005/MB overage charge) to its 100 Mbps service (500GB limit, $0.0005/MB overage charge).”

Over time, and after several cases of bill shock, Alaskan Internet customers have become more careful about watching everything they do online, fearing GCI’s penalties. That threatens GCI’s overlimit revenue, and now Stop the Cap! readers report sudden, long-lasting problems with GCI’s usage checker, often followed by substantial bills with steep overlimit penalties they claim just are not accurate.

“I currently pay $184.99 a month for GCI‘s highest offered broadband service. 200/5Mbps, with a 500GB monthly data cap,” shares Stop the Cap! reader Luke Benson. “According to GCI, over the past couple months our usage has increased resulting in overage charges at $1.00 a GB.”

In May, Benson was billed $130 in overlimit fees, but after complaining, the company finally agreed to credit back $100. A month later, they recaptured $60 of that credit from new overlimit fees. This month, Benson would have to unplug his modem halfway through his billing cycle or face another $50 in penalties.

GCI’s bandwidth monitor has proved less than helpful, either because it is offline or reports no usage according to several readers reaching out to us. GCI’s own technical support team notes the meter will not report usage until at least 72 hours after it occurs. GCI itself does not rely on its online usage monitor for customer billing. Customer Internet charges are measured, calculated, and applied by an internal billing system off-limits for public inspection.

“I have reached out to GCI multiple times asking for help, suggestions, resolution,” complains Benson. “All I get told is to turn down the viewing quality of Netflix, don’t allow devices to auto update, etc. They pretty much blamed every service but their own.”

Other customers have unwittingly fallen into GCI’s overlimit fee trap while running popular Internet applications that wouldn’t exist if GCI’s caps and overlimit fees were common across the country. Lifelong Bethel resident and tech consultant John Wallace knows the local horror stories:

• Two girls had unwittingly allowed Dropbox to continuously sync to their computers, racking up a $3,500 overcharge in two weeks;
• One user’s virus protection updater got stuck on and it cost him $600;
• Wallace has heard people say, “I was gaming and I got a little out of hand and I had to pay $2,800;”
• Two six-year-old girls ran up $2,000 playing an online preschool game. Mom was totally unaware of what was going on, until she got the bill.

GCI’s own Facebook page was the home of a number of customer complaints until the complaint messages mysteriously disappeared. Stop the Cap! itself discovered it was not allowed to even ask questions on the company’s social media pages, apparently already on their banned list.

“It’s about equal access and opportunity,” Wallace told Business Insider. “The Internet was meant to improve the lives of people in rural Alaska, but – because of the data caps and the sky-high overage fees – it ends up costing them huge amounts of money. We have one of the highest unemployment rates in the nation, and some of the highest rates of suicide, sexual assault, and drug abuse. The people who can’t afford it are the ones that are getting victimized.  It was supposed to bring access – true availability of goods and services – but it really just brought a huge bill that many can’t afford.”

Friday is the last day to submit your views on Net Neutrality with the Federal Communications Commission. Although there may be some future opportunities to comment, it’s important to make your voice heard with the FCC today. Almost 650,000 Americans have done so to date, and we need to see this number rise even higher to combat the influence and power of Big Telecom companies looking to turn the Internet into a corporate toll booth.

If you recall, FCC chairman Tom Wheeler is promoting a scheme where big ISPs like Verizon, AT&T and Comcast can divide up the Internet and introduce toll lanes allowing preferred paid traffic to travel on the Internet at faster speeds, usually at the expense of unpaid traffic that will get relegated to an Internet slow lane. It’s pay to play, and customers of these ISPs are already getting a preview of the new corporate road map for the net. Netflix viewers on ISPs that don’t have a paid agreement to handle video traffic suffer from rebuffering and lower quality video. But ISPs collecting tolls from Netflix don’t subject their customers to a degraded online video experience. Of course, before ISPs realized they could make money selling fast lanes, Netflix worked fine on virtually all of these providers.

Wheeler’s proposal would extend the two-tiered Internet to other websites and service providers, allowing big telecom companies to hand-pick winners and losers and discriminate in favor of their own Internet traffic. Comcast does that today with online video on certain game consoles. If that video comes from Comcast, it doesn’t count against any usage caps. If it doesn’t, it could get rough sticking to Comcast’s arbitrary usage allowance.

The FCC is in way over its head, unaware of the creative ways ISPs can find loopholes large enough to drive through any well-intentioned consumer protections. There is only once certain way to keep ISPs honest — reclassify them as what they should have been all along – a telecommunications service subject to common carrier rules. That would guarantee ISPs could not meddle with your Internet service for financial gain, could not artificially slow down “non-preferred” traffic to make room for paid traffic, and would guarantee that Internet applications of the future will succeed or fail on their merits, not on how much money they are willing to spend.

Since the FCC website is jammed today, we recommend e-mailing the Commission by this Friday at: [email protected]

Our friends at Free Press have published some sample comments they are getting, which may help you formulate yours. Here is ours as well:

Dear Chairman Wheeler,

Although we believe your intentions are good, your proposed Net Neutrality rules simply do not afford enough protection to preserve a free and open Internet. Troubling signs are already clear as providers test how much they can get away with meddling with Internet traffic. The wireless experience is replete with examples of selective speed throttling, usage caps, and traffic discrimination that allows some content to escape the usage meter and throttle while competitors cannot.

The Internet is a transformative experience for many Americans because for the first time in a long time, entrepreneurs can build online businesses that are judged on their merit, not on how much money they have to spend to achieve and maintain prominence. Anything that allows an ISP to collect additional funds for a “preferred” traffic lane will come at the detriment of others who have to share the same broadband pipe. This is especially evident in the wireless world, which escaped even the light touch regulatory framework of your predecessor. Providers promptly began creating new schemes to further monetize growing data traffic, bandwidth shortage or not. Almost none of these changes really benefit customers — they are simply new revenue-making schemes.

A foreshadowing of what is likely to happen under your proposal is also apparent with Comcast and Netflix. For several years subscribers had no trouble accessing online video. But when the issue of traffic compensation was reintroduced by Internet Service Providers, the upgrades to manage natural Internet growth largely stopped and the Netflix viewing experience on these ISPs deteriorated. Verizon, AT&T and Comcast all argue that a paid traffic deal would adequately compensate them to enhance the viewing experience customers already pay good money to receive with or without a paid peering arrangement with Netflix.

Money drives these debates. If an ISP properly managed their broadband infrastructure, there would be no incentive for any company to contract for a better online experience on a so-called “fast lane” because existing service would perform more than adequately. When a company cuts back on those upgrades, a market for paid prioritization appears. Customers will ultimately pay the price, primarily to ISPs that already enjoy an enormous margin selling broadband service at inflated prices.

A rising tide floats all boats, so your focus should not be as short-sighted as allowing ISPs to divide up the limited broadband highway. The FCC should instead focus on setting the conditions to hasten new competition and force existing providers to upgrade and maintain their networks for the benefit of all subscribers and content producers. The FCC must also move swiftly to cancel state bans on community broadband networks, eliminate regulations that deter broadband start-ups, and maintain enough oversight to guarantee a level playing field on which all can compete.

There is only one way to effectively accomplish all that. Reclassify broadband service the way it should have been classified all along: as a telecommunications service subject to common carrier regulations. Canada has been very successful requiring ISPs to open their last mile networks to competitors, which have allowed people to avoid compulsory usage caps. Customers have a choice of multiple providers from their local phone or cable company, giving rise to much-needed competition.

With strong Net Neutrality, consumers can reach the websites they want without interference. Ignore nonsense suggesting Net Neutrality is a government takeover or censors the Internet — two provably false assertions. In fact, Net Neutrality is the opposite.

I urge you to move with all speed towards reclassification, if only to prevent the inevitable legal challenges to any future policies built on the shakier ground of the current framework, which has not held up well under court scrutiny. I hope the voices of more than a half-million Americans contacting you on this issue will be more than enough to overcome industry objections. We are not asking for 1950s-style telephone regulations. We just want a legally affirmed platform that allows the Internet of today to continue being successful tomorrow.

Yours very truly,

[flv]http://www.phillipdampier.com/video/CNN Netflix Slowdown Who is to Blame 6-6-14.flv[/flv]

CNN explores who is responsible for Netflix’s streaming problems on Verizon FiOS and AT&T U-verse. While one industry analyst seems keen to blame Netflix, his other articles on the subject show an increasing bias towards big ISPs like Verizon and AT&T. (2:54)

Netflix’s May speed rankings confirm Verizon FiOS customers are likely to find a degraded video streaming experience while using the otherwise speedy fiber to the home service. Netflix performance on Verizon FiOS dropped considerably last month — so much so that Frontier and Windstream DSL customers now get better Netflix performance than any Verizon customer receives. AT&T U-verse customers fared even worse with streaming performance below that offered by Mediacom — America’s bottom-rated cable company and CenturyLink DSL. In fact AT&T U-verse customers receive only marginally better service than Hughes satellite and Clearwire wireless customers. Verizon’s DSL came in dead last.

Coincidentally, both Verizon and AT&T, following Comcast’s lead, have been in negotiations with Netflix to receive payment from the streaming video provider to better handle its traffic. Verizon CEO Lowell McAdam said he’s confident about getting payments from Netflix, and he turned out to be correct — Verizon and Netflix reached an agreement in late April that is still being implemented. AT&T also says it is negotiating with Netflix. Verizon’s streaming video partnership with Redbox has not been affected by the sudden deterioration in online video streaming on Verizon’s network.

The problems with Netflix on some ISP’s have gone all the way to the top.

“My wife and I like to lay in bed and watch Netflix,” Tom Wheeler, chairman of the US Federal Communications Commission, said in January. The two companies serving Wheeler’s neighborhood are Comcast and Verizon. When enough customers launch streams on Netflix, saturating the inbound connection to either ISP, the video stops. When it does, Wheeler’s wife joins the parade of irritated customers.

“You’re chairman of the FCC,” she says to him. “Why is this happening?”

Last week, Netflix decided to answer that question with a more informative error message appearing when available bandwidth is insufficient to support a high quality stream.

“The Verizon network is crowded right now,” the message says. Netflix then attempts to restore the stream by serving up a degraded, lower quality/bit rate version to the paying customer.

[flv]http://www.phillipdampier.com/video/Bloomberg Netflix-Verizon War of Words 6-6-14.flv[/flv]

Bloomberg interviews Todd O’Boyle from Common Cause. He places the blame for this debacle solely on the shoulders of Verizon and other ISPs. (5:39)

The inability to successfully maintain a stable stream of Netflix content that ranges from 256kbps to 5.8Mbps seems odd on ISPs that offer customers connections far faster than that. The average Netflix stream is 2Mbps, slow enough to be comfortably supported on even a 3Mbps DSL connection. Netflix’s problems with Comcast evaporated after agreeing to pay the cable company to maintain a better connection between its customers and Netflix’s content delivery network. The same cannot be said for perfomance on AT&T’s U-verse platform. Although Verizon signed an agreement with Netflix, it has clearly not been implemented as of yet.

“We started a small-scale test in early May that lets consumers know, while they’re watching Netflix, that their experience is degraded due to a lack of capacity into their broadband provider’s network,” said Netflix’s Joris Evers. “We are testing this across the U.S. wherever there is significant and persistent network congestion.”

The companies with the biggest drops in Netflix performance are the same ones strongly advocating special paid “fast lanes” on the Internet for preferred traffic to resolve exactly these kinds of performance problems.

“Some large US ISPs are erecting toll booths, providing sufficient capacity for services requested by their subscribers to flow through only when those services pay the toll,” said Evers. “In this way, ISPs are double-dipping by getting both their subscribers and Internet content providers to pay for access to each other. We believe these ISP tolls are wrong because they raise costs, stifle innovation and harm consumers. ISPs should provide sufficient capacity into their network to provide consumers the broadband experience for which they pay.”

The error message fingering Verizon as the culprit for a poorer Netflix experience brought an angry response from Verizon on its blog:

Reports from this morning have suggested that Netflix is engaging in a PR stunt in an attempt to shift blame to ISPs for the buffering that some of its customers may be experiencing. According to one journalist’s tweet from last night, Netflix is displaying a message on the screen for users who experience buffering which says: “The Verizon network is crowded right now.”

This claim is not only inaccurate, it is deliberately misleading.

The source of the problem is almost certainly NOT congestion in Verizon’s network. Instead, the problem is most likely congestion on the connection that Netflix has chosen to use to reach Verizon’s network. Of course, Netflix is solely responsible for choosing how their traffic is routed into any ISP’s network.

[…] It is sad that Netflix is willing to deliberately mislead its customers so they can be used as pawns in business negotiations and regulatory proceedings.

It would be more accurate for Netflix’s message screen to say: “The path that we have chosen to reach Verizon’s network is crowded right now.”

However, that would highlight their responsibility for the problem.

Milch

That was quickly followed by a cease and desist letter from Verizon demanding Netflix remove error messages that blame Verizon for the problem. It also demanded a list of Verizon customers that received the Netflix notification.

“Failure to provide this information may lead us to pursue legal remedies,” wrote Verizon general counsel Randal Milch in a letter to Netflix general counsel David Hyman.

“This is about consumers not getting what they paid for from their broadband provider,” Netflix spokesman Jonathan Friedland said. “We are trying to provide more transparency, just like we do with the ISP Speed Index, and Verizon is trying to shut down that discussion.”

“Verizon’s unwillingness to augment its access ports to major Internet backbone providers is squarely Verizon’s fault,” Netflix general counsel David Hyman wrote.

“Netflix does not purposely select congested routes,” added Evers. “We pay some of the world’s largest transit networks to deliver Netflix video right to the front door of an ISP. Where the problem occurs is at that door — the interconnection point — when the broadband provider hasn’t provided enough capacity to accommodate the traffic their customer requested.”

Despite all that, Netflix also admitted it plans to drop the error messages after the “small-scale test” ends on June 16.

[flv]http://www.phillipdampier.com/video/CNBC Buffering Blame Game 6-6-14.flv[/flv]

CNBC explains how Netflix content gets to end viewers over a complicated series of Internet connections between Netflix and your ISP. (1:31)

CenturyLink does not believe it will face much of a competitive threat from AT&T and Verizon’s plans to decommission rural landline service in favor of fixed wireless broadband because the two companies’ offers are too expensive, overly usage-capped and too slow.

Both AT&T and Verizon have proposed mothballing traditional landline service in rural areas because both companies claim wireline financial returns are too low and ongoing maintenance costs are too high. In its place, both companies are developing rural fixed wireless solutions for voice and broadband service that will rely on 4G LTE networks.

CenturyLink does not traditionally compete against either AT&T or Verizon because their landline service areas do not overlap. But as both AT&T and Verizon Wireless continue to emphasize their nationwide wireless networks, independent phone companies are likely to face increased competition from wireless phone and broadband services.

CenturyLink isn’t worried.

“About two-thirds of our customers can get access to 10Mbps or higher [from us and] that continues to increase year by year,” CenturyLink chief financial officer Stewart Ewing told attendees at Bank of America Merrill Lynch’s 2014 Global Telecom & Media Conference. “Our belief is that with the increasing demands customers have for bandwidth — the Netflix bandwidth requirement — just the increasing amount of video that customers are watching and downloading over their Internet pipes, we believe will drive customers to using a provider that basically has a wire in their home because we believe you will get generally higher bandwidth and a much better experience at lower cost.”

Ewing

CenturyLink customers consume an average of slightly less than 50GB of Internet usage per month, and that number is growing. Ewing said that CenturyLink has long believed that as bandwidth demand increases, wireless becomes less and less capable of providing a good customer experience.

“At this point, we don’t really have any concerns because people on the margin — the folks that don’t use much bandwidth — probably use a wireless connection today to download,” Ewing said. “But as the bandwidth demands grow, the wireless connection becomes more and more expensive and that could tend to drive people our way. So as long as we have 10Mbps or better to the customers, we don’t really think there is that much exposure.”

CenturyLink does not measure the difference in Internet usage between urban and rural residential customers, but the company suspects rural customers might naturally use more because alternative outlets are fewer in number outside of urban America.

“Folks in rural areas might actually can use Internet more for buying things that they can’t source [easily], but it’s hard to really count,” said Ewing. “I think our customers in the rural areas probably are not that much different from folks in urban areas.”

Prism is CenturyLink’s fiber to the neighborhood service, similar to AT&T U-verse. It is getting only a modest expansion in 2014.

CenturyLink’s largest competitor remains Comcast, which co-exists in about 40% of CenturyLink’s markets. The merger with Time Warner Cable won’t have much impact on CenturyLink, increasing Comcast’s footprint in CenturyLink territory by only about only 6-7%. CenturyLink believes most of any new competition will come in the small business market segment. Comcast’s residential pricing is unlikely to attract current CenturyLink customers in Time Warner Cable territory to consider a switch to Comcast if the merger is approved.

Ewing also shared his thinking about several other CenturyLink initiatives that customers might see sometime this year:

• Don’t expect CenturyLink to expand Wi-Fi hotspot networks. The company found they are difficult to monetize and is unlikely to expand them further;
• Any change in the FCC’s definition of minimum broadband speed to qualify for federal broadband expansion funds would slow rural broadband expansion. Ewing admitted a 10Mbps speed minimum is considerably more difficult to achieve over DSL than a 4 or 6Mbps minimum;
• Don’t expect any more merger/acquisition activity from CenturyLink in the Competitive Local Exchange Carrier business. CenturyLink shows no sign of pursuing Frontier, Windstream, FairPoint, or other independent phone companies. It is focused on expanding business services, where 60% of CenturyLink’s revenue now comes;
• CenturyLink fiber expansion will primarily be focused on reaching business offices and commercial customers in 2014;
• CenturyLink will only modestly expand PrismTV, its fiber-to-the-neighborhood service, to an additional 300,000 homes this year. The company now offers the service to two million of its customers, with 200,000 signed up nationwide. Last year, CenturyLink expanded PrismTV availability to 800,000 homes.