Verizon has introduced a two-year price guarantee offer and a free broadband speed upgrade for new customers signing up for FiOS Internet, TV and voice service before April 19.

It’s the latest marketing salvo fired against Verizon’s cable competitors with the hope customers will cut cable’s cord and switch to FiOS.

All new customers will receive a two-year price guarantee with a triple play package costing as little as $89.99 a month.  The offers also include a free upgrade to FiOS Quantum 50/25Mbps Internet; FiOS TV Prime HD with more than 215 channels (more than 55 in HD); and FiOS Digital Voice home phone service with unlimited nationwide calling. As a further incentive, customers who choose a two-year agreement also receive a $250 Visa prepaid card. New customers who order online receive an extra $10 per month savings. Those ordering service from Verizon’s website will have the $49.99 activation fee waived.

Such aggressive promotions are not new for Verizon or its cable competition. The best prices are often reserved for new customers.

Former Time Warner Cable CEO Glenn Britt reflected last fall on the competitive environment between cable and phone companies and noted loyal, long-term customers don’t typically benefit much from pricing competition.

“The current form of competition in this entire sector is essentially focused on promotional pricing, which allows customers who jump from provider to provider to get the best deal,” said Britt.

In an effort to control customers hopping back and forth between the cable and phone company (known as ‘subscriber churn’ in the industry), Verizon’s marketing is now trying to convince customers they won’t have to shop around for a better deal over the next two years, but aren’t restricted by a contract with termination penalties either.

“We’re responding to feedback from prospective customers who told us they want to switch to FiOS for the faster speed, greater reliability and clearer images, but they struggle with the notion of signing up for a multiyear contract,” said Mike Ritter, chief marketing officer for the consumer and mass business unit of Verizon. “We’ve also heard from prospective customers that they want price assurance when they switch providers. Our offer gives new customers the peace of mind to know their base rate will not change for two years. With no contract, and a two-year price guarantee, new customers can switch to FiOS with confidence.”

Verizon also provides evidence that broadband speed does matter. At of the end of 2013, 46 percent of all Verizon FiOS customers upgraded to FiOS Quantum speeds ranging from 50/25 to 500/100Mbps. Verizon says video streaming, multiplayer gaming, and uploading photos to social media sites are all contributing to consumer demand for faster Internet speeds. FiOS broadband remains the company’s grand jewel with 6.1 million subscribers. Around 5.3 million customers are signed up for FiOS TV.

At the end of last year, Verizon had 6.1 million FiOS Internet subscribers and 5.3 million FiOS TV customers.

Verizon’s new FiOS promotions (for new customers only):

• Online with no annual contract: $89.99 per month for two years, free FiOS Quantum 50/25Mbps upgrade for two years and a two-year price guarantee.
• Online with a two-year agreement: $89.99 per month for two years, free FiOS Quantum 50/25Mbps upgrade for two years, two-year price guarantee and a $250 Visa prepaid card.
• Offline order (purchased through any means other than online) with no annual contract: $99.99 per month for two years, free FiOS Quantum 50/25Mbps upgrade for two years, and a two-year price guarantee.
• Offline order with a two-year agreement: $99.99 per month for two years, free FiOS Quantum 50/25Mbps upgrade for two years, two-year price guarantee and a $250 Visa prepaid card.

 [flv]http://www.phillipdampier.com/video/Verizon FiOS Internet 2-2014.mp4[/flv]

Verizon argues America needs fiber to the home service to meet the needs of the digital economy. “It’s time to take fiber optics to the last mile,” says the video. That’s fine news for 18 million households that can today buy fiber optic FiOS service, but Verizon indefinitely suspended further expansion of its fiber network in 2010. (3:30)

Phillip “Follow the Money” Dampier

“In the 1990s, U.S. policymakers faced critical choices about who should build the Internet, how it should be governed, and to what extent it should be regulated and taxed. For the most part, they chose wisely to open a regulated telecommunications market to competition, stimulate private investment in broadband and digital technologies, and democratize access.” — Will Marshall, guest columnist

Is competition in Internet access robust enough for you? Has your provider been sufficiently stimulated to invest in the latest broadband technologies to keep America at the top of broadband speed and availability rankings? Is Net Neutrality the law of the land or the latest victim of a Verizon lawsuit to overturn the concept of democratizing access to online content?

I’m not certain what country Will Marshall lives in, but for most Americans, Internet access is provided by a duopoly of providers that must be dragged kicking and screaming to upgrade their networks without jacking up prices and limiting usage.

Marshall is president and founder of the Progressive Policy Institute, a so-called “third way” group inspired by centrist Democrats led by President Bill Clinton in the 1990s. Unlike traditional liberals suspicious of corporate agendas, these Democrats were friendly to big business and welcomed the largess of corporate cash to keep them competitive in election races. It was under this atmosphere that Clinton signed the bought-and-paid-for 1996 Telecom Act, ghostwritten by lobbyists for big broadcasters, phone and cable companies, and other big media interests. Long on rhetoric about self-governing, free market competition but short on specifics, the ’96 law transformed the media landscape in ways that still impact us today.

Media ownership laws were relaxed, allowing massive buyouts of radio stations under a handful of giant corporations like Clear Channel, which promptly dispensed with large numbers of employees that provided locally produced programming. In their place, we now get cookie-cutter radio that sounds the same from Maine to Oregon. Television stations eagerly began lobbying for a similar framework for relaxing ownership limits in their business. Phone companies won their own freedoms from regulation, including largely toothless broadband regulations that allowed Internet providers to declare victory regardless of how good or bad broadband has gotten in the United States.

Marshall’s views appeared in a guest column this week in The Orlando Sentinel, which is open to publishing opinion pieces from writers hailing from Washington, D.C., without bothering to offer readers with some full disclosure.

Marshall

While Marshall’s opinions may be his own, readers should be aware that PPI would likely not exist without its corporate sponsors — among them AT&T, hardly a disinterested player in the telecommunications policy debate.

Marshall’s column suggests competition is doing a great job at keeping prices low and allows you – the consumer – to decide which technologies and services thrive. There must be another reason my Time Warner Cable bill keeps increasing and my choice for broadband technology — fiber optics — is nowhere in sight. I don’t have a choice of Verizon FiOS, in part because phone and cable companies maintain fiefdoms where other phone and cable companies don’t dare to tread. That leaves me with one other option: Frontier Communications, which is still encouraging me to sign up for their 3.1Mbps DSL.

“The broadband Internet also is a powerful magnet for private investment,” Marshall writes. “In 2013, telecom and tech companies topped PPI’s ranking of the companies investing the most in the U.S. economy. And America is moving at warp speed toward the ‘Internet of Everything,’ which promises to spread the productivity-raising potential of digital technology across the entire economy.”

Nothing about AT&T or the cable companies is about “warp speed.” In reality, AT&T and Verizon plan to pour their enormous profits into corporate set-asides to repurchase their own stock, pay dividends to shareholders, and continue to richly compensate their executives. It’s good to know that PPI offers rankings that place telecom companies on top. Unfortunately, those without a financial connection to AT&T are less optimistic. The U.S. continues its long slide away from broadband leadership as even developing countries in the former Eastern Bloc race ahead of us. Verizon’s biggest single investment of 2013 wasn’t in the U.S. economy — it was to spend $130 billion to buyout U.K.-based Vodafone’s 45% ownership interest in Verizon Wireless. Verizon’s customers get stalled FiOS expansion, Cadillac-priced wireless service, and a plan to ditch rural landlines and push those customers to cell service instead.

AT&T financially supports the Progressive Policy Institute

“A recent federal court decision regarding the FCC’s Open Internet Order has prompted pro-regulatory advocates from the ’90s to demand a rewrite of the legal framework that allowed today’s Internet to flourish,” Marshall writes in a section that also includes insidious NSA wiretapping and Internet censorship in Russia and China.

Marshall’s AT&T public policy agenda is showing.

Net Neutrality proponents don’t advocate an open Internet for no reason. It was AT&T’s former CEO Ed Whitacre that threw down the gauntlet declaring Google and other content providers would not be allowed to use AT&T’s pipes for free. AT&T has since patented technology that will allow it to discriminate in favor of preferred web traffic while artificially slowing down content it doesn’t like on its network.

“Pro-regulatory advocates” are not the ones advocating change — it is AT&T, Verizon, and Comcast, among others, that want to monetize Internet usage and web traffic for even higher profits. Net Neutrality as law protects the Internet experience Marshall celebrates. He just can’t see past AT&T’s money to realize that.

Time Warner Cable today announced major improvements in its service, including a tripling of broadband speeds and equipment upgrades that will first arrive in New York City and Los Angeles.

With the cable company facing a hostile takeover effort by Charter Communications with Comcast’s help, CEO Rob Marcus sought to appease shareholders that worry the cable company’s recent lackluster results originate from outdated technology, poor customer service, and broadband speeds that are well below the cable industry average.

Time Warner Cable will have to increase capital spending to pay for the upgrades, expected to cost $3.8 billion annually for the next three years.

CEO Rob Marcus calls the effort a “transformation of the Time Warner Cable customer experience.” The upgrade program is called TWC Maxx for now inside Time Warner Cable, but will have its own brand when it publicly launches later this year.

Here are some highlights:

Marcus

TV Service

• Network infrastructure upgrades to enhance reliability
• New advanced set-top boxes
• A six-tuner DVR
• A cloud-based interface and navigation
• An expanded on-demand library

Internet

• Dramatic free speed boosts for all customers
• A new Ultimate speed tier of 300/20Mbps

Unfortunately, customers outside of Los Angeles and New York will have to wait up to two years for the upgrades to reach their community.

“With ‘TWC Maxx,’ we’re going to essentially reinvent the TWC experience market–by-market,” said Marcus. “We’ll triple Internet speeds for customers with our most popular tiers of service, add more community WiFi, dramatically improve the TV product and, perhaps most importantly, we’ll set a high bar in our industry for differentiated exceptional customer service. We’re focused on providing the features and benefits that matter most to our customers.”

The most noticeable improvement will be free broadband speed upgrades. Customers with Standard or above Internet service will also receive the latest generation cable modems including Advanced Wireless Gateways for customers with Turbo to Ultimate tier service. Marcus did not say whether the company is ending is monthly equipment fees for cable modems.

Here are the new speed tiers:

• Everyday Low Price – Currently 2/1Mbps – New 3/1Mbps
• Basic – Currently 3/1Mbps – New 10/1Mbps
• Standard – Currently 15/1Mbps – New 50/5Mbps
• Turbo – Currently 20/2Mbps – New 100/10Mbps
• Extreme – Currently 30/5Mbps – New 200/20Mbps
• Ultimate – Currently 50/5Mbps – New 300/20Mbps

New York and Los Angeles Upgrade Schedule

The first four network hubs scheduled for upgrade are those in West Hollywood and Costa Mesa, Calif. and portions of Woodside (Queens) and Staten Island, N.Y. The rest of both cities will be upgraded by the end of this year.

Los Angeles customers will also see analog cable television service discontinued in favor of digital later this year. New York City has already been converted to all-digital television. Customers in both cities will be able to schedule same-day appointments and one-hour service windows.

Who Gets Upgraded Next?

Analysts expect Time Warner Cable will upgrade cities where they face competition from U-verse and FiOS after completing NYC and LA.

Analysts say Time Warner Cable’s upgrade plans are more aggressive than initially anticipated and many expect the company to move quickly, especially in competitive markets, to boost subscriber numbers and cut customer defections to help convince shareholders it is worthwhile to reject Charter’s hostile takeover bid.

The most likely markets to be targeted for upgrades after New York and Los Angeles are those facing stiff competition from Google Fiber and Verizon FiOS. Cities where AT&T U-verse delivers competition are likely to come next, and those cities where Time Warner Cable only faces competition from telephone company DSL service will likely be the last to be upgraded. However, long before that, Time Warner Cable could be sold off to other cable operators that will make these upgrade plans moot.

Marcus today reiterated his rejection of Charter’s latest $132.50 a share offer. Marcus said the cable company is only interested in an offer above $160 a share, and that at least $100 of that must be in cash, with the balance in Charter stock. Charter will have trouble delivering that amount of cash without the assistance of other cable operators.

Craig Moffett with MoffettNathanson Research isn’t sure Marcus’ plans are enough to keep TWC from being sold. He expects Charter to soon increase its offer above $140 with the help of Comcast, which is willing to pay cash for Time Warner Cable systems in New York, New England, and North Carolina after a deal with Charter is complete.

[flv]http://www.phillipdampier.com/video/Bloomberg Rob Marcus Interviewed 1-30-14.flv[/flv]

Robert Marcus, chief executive officer of Time Warner Cable Inc., talks about the cable company’s fourth-quarter earnings and its forthcoming upgrades, and Charter Communications Inc.’s $37.4 billion buyout bid. Time Warner Cable beat fourth-quarter profit estimates and forecast subscriber growth. Marcus speaks with Betty Liu on Bloomberg Television. (8:38)

AT&T’s investment in U-verse expansion is expected to peak this year as part of its “Project VIP” effort to bring the fiber to the neighborhood service to more areas and offer faster broadband speeds to current customers.

AT&T is spending $6 billion over three years to broaden the footprint of U-verse, which now earns AT&T 57% of its total consumer revenues. In 2013, AT&T earned $13 billion in revenue from U-verse, up 28%.

AT&T’s investment in U-verse is dwarfed by the company’s efforts to benefit shareholders. In the last quarter of 2013, AT&T realized $6.9 billion in profits on revenue of $33.2 billion. For 2013, AT&T repurchased 366 million shares of its own stock for around $13 billion and paid out another $10 billion in shareholder dividends. Together, the total return for shareholders for the year was $23 billion and in the last two years AT&T achieved a new record benefiting shareholders with $45 billion in returns. In contrast, AT&T will spend just $6 billion on the current round of U-verse upgrades, with those markets left out likely pushed to wireless-only service if the company succeeds in winning approval to decommission its rural landline network.

Most of AT&T’s revenue growth is coming from its wireless business, particularly wireless data. After AT&T eliminated its flat rate plans, monetizing data usage has become very profitable — $23 billion per year and growing at 17% annually. Because increasing wireless usage forces customers to upgrade to higher cost plans offering more generous usage allowances, AT&T’s average revenue per customer increased by 3.9% — the highest in the wireless industry and the 20th consecutive quarter of customers collectively paying higher cell phone bills.

“The next steps are to make our networks even more powerful and layer on services that will drive new growth in the years ahead,” said AT&T CEO Randall Stephenson.

AT&T is counting on even higher customer bills as the company moves forward on several revenue-enhancing initiatives:

1. Moving an increasing number of customers away from subsidized handsets. AT&T Next allows wireless customers to get a new handset every year, but in return AT&T no longer subsidizes equipment purchases. Instead, most Next customers finance their current phone and will finance their next one, assuring AT&T of a constant revenue stream for equipment. AT&T expects to gradually move away from phone subsidies altogether;
2. Data plans for cars are forthcoming, as auto manufacturers install wireless capability in new vehicles. Many are signing agreements with AT&T that will make it easy for current customers to add vehicles to their existing plan, but customers of other carriers may find signing up for a new plan prohibitively expensive;
3. Internet-connected home security systems are getting a major marketing push in 2014 with advertising blitzes and other promotions. The alarm systems are connected to and use AT&T’s wireless data network;
4. AT&T customers are being pushed to wireless data plans with much higher data allowances than they need, delivering extra profits for AT&T with no impact on its wireless network;
5. AT&T wants to begin selling “sponsored data” services to companies willing to foot the bill for accessing preferred websites. AT&T calls it “toll-free data” but Net Neutrality advocates complain it monetizes data usage and establishes a unlevel playing field where deep pocketed companies can help customers avoid AT&T’s usage meter while others have to contend with customers worried about their data allowance.

[flv]http://www.phillipdampier.com/video/ATT Next – Get A New Smartphone Every Year from ATT Wireless 1-2014.flv[/flv]

AT&T explains its Next program, which lets customers upgrade to a new smartphone every 12 or 18 months. AT&T doesn’t tell you the plan is effectively a lease that benefits them by not having to pay a phone subsidy worth hundreds of dollars to discount a phone they will eventually refurbish and resell after you return it. AT&T Next, as intended, is an endless installment payment plan that never stops as long as you keep upgrading your phone. You also can’t leave AT&T until you pay your current phone off. (1:30)

A new way for AT&T to end phone subsidies.

Despite fierce competition from T-Mobile, AT&T so far has seen little impact from T-Mobile’s aggressive marketing. AT&T added 566,000 new contract customers in the last quarter and sold 1.2 million smartphones to its customer base. AT&T’s customer churn rate — the number of customers coming and going — remains very low despite T-Mobile’s latest offer to cover AT&T’s early termination fees to encourage customers to switch.

Stephenson says AT&T’s superior wireless 4G LTE network and its larger coverage area make customers think twice about taking their business to a smaller carrier.

In 2014, AT&T laid out these plans during its quarterly results conference call this week:

• U-verse will get an expanded TV Everywhere service allowing customers to view programming on smartphones and tablets inside their home and out;
• U-verse broadband speed enhancements should be available to at least two-thirds of customers, with speeds up to 45Mbps;
• LTE coverage expansion targets are expected to be ahead of schedule;
• AT&T will begin a “big effort” on network densification — adding overlapping cell towers and small cell technology in current coverage areas — to handle network congestion;
• AT&T will focus on improving its wired and wireless networks to prioritize video delivery;
• If approved by the government, AT&T will use its acquired Leap/Cricket brand for aggressive new no-contract plans marketed to customers with spotty credit without tainting or devaluing the AT&T brand;
• AT&T will use its agreements with GM, Ford, Nissan, Audi, BMW, and Tesla to offer AT&T wireless connectivity in new 2015 model year vehicles.

[flv]http://www.phillipdampier.com/video/Bloomberg ATT Latest Results Good 1-28-14.flv[/flv]

Bloomberg notes AT&T’s latest financial results are ahead of analyst expectations. Despite competition from T-Mobile, AT&T’s customer defection rate is at a historic low. (2:03)

Fears that growing global Internet traffic might someday result in an Internet brownout were made irrelevant this week after Britain’s BT and Alcatel-Lucent achieved a new speed record in a field trial of ‘flexible grid’ infrastructure that reached 1.4 Terabits per second over an existing fiber network.

Flexgrid technology increases the density of individual transmission channels on traditional fiber networks, resulting in 42.5 percent better transmission efficiency over current standards.

“BT and Alcatel-Lucent are making more from what they’ve got,” explained Oliver Johnson, chief executive of broadband analyst firm Point Topic. “It allows them to increase their capacity without having to spend much more money.”

The trial was conducted through the overlaying of an “Alien Super Channel” comprised of seven 200 Gigabits per second (Gb/s) channels bundled together to provide a combined capacity of 1.4Tb/s. By reducing the spectral spacing between the channels from 50GHz to 35GHz using the 400Gb/s Photonic Services Engine (PSE) technology on the 1830 Photonic Service Switch (PSS), spectral efficiency is enhanced by almost 43%. The 1830 PSS can be used as an optical extension shelf of the 7750 Service Router (SR) and the 7950 Extensible Routing System (XRS). Flexgrid is the key to creating high-capacity, spectrally efficient super channels. The super channel is “alien” because it operates transparently on top of BT’s existing optical network.

The speeds were achieved on a standard 410km fiber link between BT’s Adastral Park research campus in Ipswich and the BT Tower in London.

The new transmission technology means existing fiber infrastructure can easily manage far faster speeds and more bandwidth without costly upgrades and more fiber installation.

While the new technology is unlikely to be deployed to individual customer homes and businesses, it is likely to become important for Internet backbone networks which handle connectivity between Internet Service Providers.

Companies like Cisco have warned for years that existing infrastructure might be unsuitable to manage the growth of Internet traffic, resulting in a potential “exaflood” of data over a congested Internet, resulting in “brownouts” that slow or stop Internet connections. But Alcatel-Lucent and BT have demonstrated that ongoing technological advances make such problems unlikely, because as Internet traffic increases, technological improvements assure that capacity keeps up at an affordable cost.