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)

Bright House Networks customers now have access to more than 100 channels of online video entertainment thanks to the cable company’s release of Bright House TV, a new free app for the Apple iPad.

Essentially a rebranded version of Time Warner Cable’s TWCable TV app, Bright House TV comes with the exact same restrictions that have peeved more than a few Time Warner customers trying to use it:

• You must have a minimum of Bright House Networks’ Digital-Basic Cable TV service to watch;
• You must use your Bright House-supplied Internet connection to access the service on your home’s Wi-Fi connection;
• The service will not work outside of your home, over alternative Internet connections, or through your smartphone;
• You cannot currently access the service on any device other than an iPad.

For customers who do manage to meet all of these conditions, many report they are satisfied with the performance of the app.

“A great 1.0 version, acts as advertises, and HD looks great on the iPad,” says Bright House customer Chris McGonigal. “I would like to see fullscreen option (even though it cuts image), and the ability to hide the Status bar at the top. Also a favorite channels list, which kind of works with channel history.”

One other thing Bright House customers have in common with Time Warner Cable — they are still waiting for HBO Go, too.

“Here’s to seeing HBO Go on BHN next,” he adds.

Most cable operators are doing a better job of providing telephone service than traditional telephone companies, according to a new J.D. Power and Associates survey.

Among the worst providers across all regions were Frontier Communications, which scored dead last in the East and North Central regions, and cable operator Charter Communications, which won the lowest score overall for service in the western United States.  Cox delivered the most consistently reliable service across three of the four regions it serves, although it was beaten by Bright House Networks in the south.

The results:

The study measured customer satisfaction with both local and long distance telephone service in four regions throughout the United States. Five factors were examined to determine overall satisfaction: performance and reliability; cost of service; billing; offerings and promotions; and customer service.

Satisfaction with performance and reliability-the most influential factor contributing to overall satisfaction-has declined by 6 percent to an average of 7.4 (on a 10-point scale) in 2011 from 7.9 in 2011. Within this factor, satisfaction with the service provider’s ability to keep outages to a minimum has experienced the greatest decline.

“The brutal winter weather that plagued much of the country clearly took a toll on service levels,” said Frank Perazzini, director of telecommunications at J.D. Power and Associates. “In fact, the proportion of customers who contacted customer service to report an outage jumped to 21 percent in 2011 from 12 percent in 2010.”

According to Perazzini, a key driver for mitigating losses in satisfaction due to outages is effectively managing customer expectations regarding service restoration. On average, customers who experience an outage are advised that service will be restored within 30 hours, while actual service restoration time averages 25 hours. Overall satisfaction among customers whose service was restored approximately three hours earlier than the time quoted by the service provider averages 705 on a 1,000-point scale. In comparison, among customers whose service was restored three hours after the estimate given by the provider, satisfaction averages 591.

The study also finds that among customers who use an alternative phone service (for example, cellular or Internet service, rather than wireline), the proportion who replace wireline telephone calls with cell phone calls, texts and email remains relatively unchanged in 2011, compared with 2010. However, use of Internet calling services such as Skype or Vonage has increased to 21 percent in 2011 from 16 percent in 2010. Customers who use Internet calling services are significantly less satisfied with their telephone provider (622 on average, which is 14 index points below the industry average of 636) and are more likely to switch telephone providers (23% vs. the industry average of 16%).

Last Tuesday, Bright House Networks suffered the worst outage in the company’s history, knocking out cable, broadband, and telephone service for over one million Tampa Bay-area customers.

Bright House customers from the beachfront to Lakeland to Spring Hill were forced to rely on cellphones for much of the day.  The company’s own 24-hour news channel, Bay News 9, couldn’t keep their Florida viewers informed about the outage, because that channel went dark as well.

Company officials blamed a software glitch for the series of progressive failures which began after 10:30am and were not repaired until later that evening.

Although Pinellas County’s 911 system remained in operation, Bright House customers couldn’t call the number from their Bright House “digital phone” line.

While customers without broadband or cable TV service were left bored during the outage, Bright House’s business customers without telephone service incurred real losses, unable to process credit card transactions or receive business calls.

Bright House has no plans to issue automatic refunds for the day without service, but WTSP-TV reports customers can directly request three days’ credit for the outage:

1. Send an e-mail to Bright House Networks using their online form.
2. Cut and paste the following into the “Describe your issue or concern” box: I am writing to request credit for Tuesday’s (9/6/11) service outage affecting phone, Internet, and cable-TV.  As seen on WTSP-TV and Facebook, I am requesting three days’ credit that Bright House representatives have offered other customers. Please credit my account.
3. Hit submit.  A credit should be issued within 48 hours, to appear on your next billing statement.  The amount of the credit will vary, depending on the number of services you receive.

[flv width=”540″ height=”380″]http://www.phillipdampier.com/video/Bright House Outage 9-6-11.flv[/flv]

Bright House Networks’ worst-outage-in-history was a major news story in the Tampa Bay-St. Petersburg area.  Watch a selection of stories from WFTS, WTVT, WFLA, and WTSP-TV.  (9 minutes)

Frontier Communications customers in North Escambia have spent a very frustrating summer trying to use Frontier’s Internet service.  The phone company has left their Internet customers in Walnut Hill, Bratt, Molino and Atmore (Ala.) offline from at least six major outages since June, often lasting as long as 12 hours at a time.

“This is happening way too often, with no reimbursement for not having the service,” says Frontier customer Susan. “It is crazy to pay as much as we do for dinosaur equipment. I was being charged for High Speed Max for over three years and was actually only getting 756kbps. When we found this out, they only gave me credit for half of what they were overcharging me.”

Frontier Communications blamed AT&T for the latest outage, which lasted nearly eight hours.

Escambia County, Fla.

Karen Miller, spokesperson for Frontier, said the outage occurred when an AT&T fiber line was cut near Bay Minette, interrupting the connection between Atmore and Atlanta.

Miller admitted Frontier has just a single strand of fiber optic cable for their Panhandle customers.  When something happens to that fiber, there is no backup and service goes offline… for everyone.

Without redundancy, Internet customers are at the mercy of AT&T, and any contracting work done between Atlanta and Atmore.  That’s a major problem for some Frontier customers.

“If Atmore and Northwest Florida is managed with only a single cable and the [connection] point of this service is at Bay Minette, Atmore is in bigger trouble than they know,” writes JimD.

Bay Minette is vulnerable to serious Gulf hurricanes.

Customers were also not happy to learn Frontier was largely blaming AT&T, particularly as some customers pay Frontier upwards of $50 a month for less than 1Mbps service that has failed them at least a half-dozen times in the past 90 days.

“Frontier routinely gives high cost deficient service and holds a monopoly on the local market,” writes one local customer. “It is nearly impossible for businesses to find another option. It’s a case of mind over matter: they don’t mind so we don’t matter.”

Miller says Frontier is currently conducting an engineering study to get a backup fiber route from Atmore to Atlanta, but for some customers it is too late.

“We switched to Bright House Networks for both Internet and landline service,” says another customer. “It’s better quality, less expensive and it works. No more Frontier-anything for us.”