We’ve heavily covered the proposed sale of Verizon landline service to Frontier Communications since the deal was announced last spring.  This should not come as a big surprise, considering Frontier Communications’ decision to insert a 5GB monthly usage limit in their Acceptable Use Policy in the summer of 2008 was what instigated the launch of Stop the Cap! in the first place.  Frontier’s decision was boneheaded at best in a city like Rochester with a very aggressive cable competitor only too willing to bash Frontier for implementing it if they thought it would win more customers.

But of course Frontier Communications’ Rochester operation is an anomaly for ‘rural America’s phone company.’  For the majority of rural customers, it’s far easier to slap customers around with a usage cap and 1-3Mbps DSL service when those customers have few, if any practical alternatives.  Unfortunately, there is real money to be made from their business plan serving frequently non-competitive communities with incrementally-upgraded “just enough” broadband service with unfriendly terms and conditions attached.

In several of the 14 states impacted by the proposed sale, the relatively small number of customers involved made it easy for regulators to quickly approve the proposal with few conditions attached. The deal flew under the radar and got scant press in most of these states.  Washington, Ohio, and West Virginia are another matter.  Regulators are taking a closer look at the deal in all three states where most of the controversy is taking place.  The deal is most contentious in West Virginia, where Verizon’s exit threatens to turn most of the state’s landline business over to Frontier Communications.

Stop the Cap! has been reviewing the public comments left on more than a dozen news sites, forums, and printed letters to the editor regarding the deal.  We’ve seen comments obviously coming from Frontier employees, union members, politicians, business leaders, and competitors.  But the vast majority come from ordinary consumers who have concerns about what the deal will do to their telephone and broadband service.  Most of the comments from consumers that embrace the sale don’t do so because they are fans of Frontier.  They simply loathe Verizon and want an alternative.  Boiled down, the consensus among those in favor of Frontier taking over is “let them try… they can’t do any worse than Verizon.”

[flv]http://www.phillipdampier.com/video/WCHS Charleston PSC Phone Hearing 1-12-2010.flv[/flv]

WCHS-TV in Charleston covers West Virginia’s Public Service Commission hearings reviewing the proposed deal.  Frontier employees arrived in Charleston to lobby for the sale. (1 minute)

Desperate for Broadband

There are a lot of West Virginians who still have no broadband options.  Frontier claims Verizon provides only 60 percent of their customers with a broadband option — DSL service that tops out at 7Mpbs, if you live in an urban area.  Those that don’t have often waited years for Verizon to extend DSL service into their communities or neighborhoods.  It’s a problem common in mountainous, often rural states like West Virginia where infrastructure costs can be prohibitive.  Customers believe that Frontier Communications will tolerate a lower return on their investment providing DSL service to those customers Verizon ignored.

Promising to expand broadband service in rural, unserved areas is a common sales point for all of the prior Verizon sell-offs.  Hawaiian Telcom promised improved broadband service and speed.  Fairpoint promised to expand DSL availability to 75 percent of all access lines within 18 months of the sale, 85 percent within two years and 95 percent within five years.  Frontier Communications promises to expand broadband service as well, claiming they already provide 92 percent of their existing West Virginia customers with the option.  Of course, Hawaiian Telcom and FairPoint both reneged on their commitments before going bankrupt.  Frontier Communications hasn’t yet been held to any specific commitment or timeline in West Virginia as part of their proposed takeover of service.

Consumer Reports rated TV, phone, and Internet providers, including Verizon and Frontier, in its February 2010 issue

To those suffering with dial-up or satellite fraudband, -any- broadband option seems like a miracle, even if it turns out to be 1-3Mbps DSL service with a 5GB allowance.  But as those kinds of anemic speeds arrive, cutting edge multimedia-rich broadband applications will become increasingly mainstream and leave these customers behind, again.  With a 5GB usage limit, it wouldn’t matter anyway, because customers will never be able to take advantage of services that will rapidly blow through those limits.  Make no mistake, a user’s broadband experience at 1.5Mbps with a 5GB allowance is going to be considerably different than a customer enjoying online multimedia from a cable provider or the next generation broadband service from Verizon FiOS or AT&T’s U-verse.  Think e-mail and basic web browsing, and that’s about all.

What kind of broadband experience does Frontier Communications bring?  This month, Consumer Reports rated Frontier dead last among DSL providers that own and operate their own broadband networks (subscription required).  The magazine rated 27 regional fiber, cable, and satellite providers and Frontier’s DSL ended up #19 on the list, the lowest rating of any DSL provider selling service on its own network.  Only Earthlink, which usually buys access on other providers’ networks came in lower among DSL providers.  Verizon actually scored higher than Frontier.

Frontier’s DSL service merited a 67 out of 100 score, rating only fair on value, speed, reliability, and customer support, based on 56,080 Consumer Reports subscribers who have a home Internet account.

Frontier’s phone service rated even lower, second to last in the survey.  Frontier was rated fair on value, reliability and call quality.  Only Mediacom did worse.  Verizon scored much better on reliability.  The magazine’s survey of phone companies was based on 37,484 respondents with phone service and was completed in the spring of 2009.

The consumer magazine did not recommend DSL for broadband access, suggesting consumers would do better with fiber optic broadband first, and cable modem service second.

Union Bashing – The enemy of my enemy is my friend

A significant minority of comments were focused entirely on union bashing, completely ignoring the specifics of the Frontier-Verizon sale.  All these people knew was that if the Communications Workers of America or other union was involved, they were the “real problem,” accusing union bosses of opposing the deal until they were paid off.

Nonsense.

Reality trumps anti-union talking points.  Consumers can review for themselves who correctly predicted the outcome of the last two deals of the recent past.  They were the CWA and the International Brotherhood of Electrical Workers, who accurately identified the service problems, the network transition problems, the debt load that prevented service expansion and upgrades, and the eventual bankruptcies experienced at Hawaiian Telcom and FairPoint Communications.  It turns out that asking front line employees who work in the office and out in the field maintaining the network are well positioned to give an honest assessment of these transactions that others seek to candy coat to get the deal done.

[flv]http://www.phillipdampier.com/video/WSAZ Charleston Frontier Defends Deal 1-12-2010.flv[/flv]

WSAZ-TV in Charleston delivered this decidedly pro-Frontier news report on the company’s efforts to counter opposition to the proposed sale. (3 minutes)

The Opposition

A large number of comments from those who oppose the deal believe they will actually be far worse off with Frontier.  Most relate the experiences of themselves or their friends and family who live in Frontier service areas, and they’re unhappy with Frontier’s poor customer service, reliability, and slow speed DSL.  Many were also unhappy with Frontier’s automatically-renewing contracts committing customers to stay with the company or face a steep early cancellation penalty.  Many more lament the lack of a future with Verizon fiber optics.

David Swanson, who blogs from his home in Golden Valley, Arizona just dumped Frontier for his local cable provider – Golden Valley Cable & Communications.  He says he was overpaying for Frontier’s DSL and phone package.  Together, after fees and taxes, $90 a month went to Frontier and $73 a month went to DirecTV for television service.  With his new cable bundle, he pays $100 a month for everything.  He uses Boost mobile for his phone, and has no need for a landline.

Reviews on DSL Reports aren’t exactly positive about Frontier either.

One Rochester customer isn’t happy with the “spotty service” he’s experienced on Frontier’s aging copper wire infrastructure, noting they don’t seem to be in any hurry to upgrade facilities in western New York.  He’s stuck with unreliable DSL service far slower than what Time Warner Cable’s Road Runner service can provide. Another customer in Lowville, New York admits he has to live with Frontier’s slow speed DSL because there is no other provider available.  In Kingman, Arizona one customer rated the company’s DSL service “slightly better than nothing.”

Even customers who had had good things to say about Frontier in forums often acknowledge their service simply isn’t a good value when considering the high cost charged for the slow speed received.

What Can Be Done?

At this point, it is critical impacted customers contact their state utility commission and state representatives and tell them this deal does not work for you.  It is true Verizon wants out of these service areas, and should they win the right to withdraw someone will have to assume control of landline operations in these communities.  But the terms and conditions for the company seeking to provide service should favor customers and not the Wall Street dealmakers.  Strict financial pre-conditions should be in place to guarantee the buyer is up to the task of providing service and upgrades.  Historically, it’s been far too easy to simply renege on the deal with a quick trip to Bankruptcy Court to shed the debt these deals pile on, and be rid of the service commitments that were part of the approval process.

A company that believes they’ll earn plenty from this deal should be spending plenty to provide quality broadband service starting at 10Mbps, not the 1-3Mbps service Frontier provides most of its rural service areas.  What chance do communities in West Virginia have to stay competitive in a digital economy that requires faster broadband access without the ridiculously low usage limits Frontier includes in their customer agreements?  In fact, usage limits and other Internet Overcharging schemes should be explicitly banned as part of any sales agreement.

Holding Verizon responsible for the outcome of deals that benefit them and their shareholders while sticking customers with a bankrupt provider must be considered.  An important component of past Verizon’s landline-dumping-deals involves the Reverse Morris Trust — delivering a tax-free transaction for Verizon and piles of debt for the buyer. That puts all the risk on ratepayers, lower level employees who are among the first to go when cost-cutting begins, and head-scratching regulators wondering where it all went wrong.  The only ones not doing any hand-wringing are Verizon’s accountants and the executive management of both companies who conjure up such deals.  That’s because they are rarely held accountable, and often win retention bonuses even while a company is mired in bankruptcy.

Regulators should insist Verizon play a fundamental role in insuring that customers are protected even after the deal closes, honoring commitments and financing operations should the buyer fail soon after the sale is complete.  Under these conditions, customers are protected and Verizon might think twice about structuring a deal that loads the buyer down in insurmountable debt.

“This deal is driven by greed — and we can learn from Northern New England’s and Hawaii’s experience to make sure it does not come to pass here or in the other 13 states,” said CWA’s District Two Vice-President Ron Collins, who has been leading the campaign in West Virginia.

New Zealand Telecom

New Zealand’s Telecom is the latest company caught with a defective broadband usage meter that overbilled 150,000 of their 500,000 customers for Internet usage never utilized.  The problem was tracked to a “technical problem” involving the company’s network upgrade in preparation for the introduction of TiVo.  Telecom’s engineering partner Juniper was held responsible for introducing the error which resulted in more than one hundred thousand customers finding their broadband speeds reduced for “excessive usage” to near-dial-up or billed steep overlimit penalties for the months of November and December.

On December 23, Telecom sent out letters to around 150,000 customers informing them of the error.

“Our reports show us that you will have experienced slowed internet speeds earlier than expected in your billing months,” said the letter, signed by Telecom’s general manager of broadband, Ralph Brayham.

Telecom spokeswoman Emma-Kate Greer told the New Zealand Herald all customers who had been affected by over-charging or slowed internet speeds had been identified.

They had been refunded and credits had been given to “customers who may have been incorrectly slowed.”

Customers shocked by their November and December bills were initially stuck taking Telecom’s word for the overbilling, resulting in lots of finger-pointing in New Zealand households.  The Herald reported:

Sarah Broughton, from Herne Bay in Auckland, said she had been frustrated by the slow broadband, and had accused one of her flatmates of downloading too many movies.

“There are six people living in our house. We all suspected everyone else was downloading heaps,” she said.

“We were blaming other people.

“I never suspected it was Telecom. You think when you give them money they are going to use it properly.

“It’s just been so annoying.”

Usage meters, a vital component of Internet Service Providers seeking an enhanced payday from Internet Overcharging schemes that bill customers based on how much data they consume, have been controversial because of questions regarding the accuracy of their measurements.  Most providers do not permit independent verification of the accuracy of their meters, despite their accounting for a significant portion of a customer’s monthly broadband bill.

It took a concerted, organized effort by members of the Geekzone website to “out” Telecom’s erroneous billing practices and get the company to issue compensation to impacted customers.

Clearwire this week changed their terms and conditions governing the use of their service.  The changes are sufficiently materially adverse that subscribers under contract should be able to cancel service, if they wish, without incurring any early termination fee.

The most prominent change is Clearwire’s ability to crack down on whatever they define “excessive usage” to be, and the redefining of ‘unlimited service’ as ‘limited and speed throttled service.’

All-New to the Clearwire Terms & Conditions:

Nature of the Service.The Service provided to you is intended for reasonable, periodic, non-continuous use by a person using a computing device, consistent with the type of use made by a typical individual consumer of our Internet services. Examples of allowed uses of our Service include web surfing, sending and receiving email, sending and receiving photographs, occasional on-line gaming, and the occasional non-continuous streaming of videos and downloading of files. Examples of uses that are not permitted include the continuous unattended streaming, downloading or uploading of videos or other files, maintaining an unattended or continuous uninterrupted connection to the Internet such as through a web camera or machine to machine connections that do not involve active participation by a person, or operating an Internet hosting service such as web hosting or gaming hosting. You may not use the Service in a manner that impairs the user experience of other users, or that otherwise impairs network performance. Both fixed wire-line Internet service and wireless Internet service have limited bandwidth capacity. Like fixed wire-line service, CLEAR’s Service can suffer from congestion and reduced performance when usage by some individuals exceeds the usage of typical individual consumers, thus having a negative impact on the entire network. This AUP is intended to ensure that the activities of a few users do not unfairly impair the activities of all users of the Service.

Clearwire’s unlimited use plans have always carried a clause giving the company the right to terminate or suspend service for exceptionally excessive usage, after several contacts with customers.  The old language:

Unlimited Use Plans. (Effective January 9, 2009)

While the determination of what constitutes excessive use depends on the amountspecific state of data you may download or upload during a monththe network at any given time, you shouldexcessive use will bethat such unlimited” plans are nevertheless subject todetermined by resource consumption and not by the provisionsuse of this AUPany particular application. What this means is that allWhen feasible, upon observation of the provisions described in this AUPan excessive use pattern, including those that describe how Clearwire may perform reasonable network management such as reducingwill attempt to contact you by e-mail at the data ratee-mail address on file or otherwise to alert you to your excessive use of bandwidth intensive users during periodsand to help determine the cause. Clearwire representatives also are available to explain the parameters of congestion, will applythis AUP and to yourhelp you avoid another excessive use incident or to upgrade you to a different class of the Service that comports with your usage. The term unlimited” means that we willIf you are unavailable or do not place a limit on how much datarespond to Clearwire’s attempt to contact you uploadregarding excessive use, or download during a monthif excessive use is ongoing or other particular periodrecurring, howeverClearwire reserves the right, it does not mean that we will not take stepsset forth in the “AUP Enforcement and Notice” provisions below, to reduce your data rate during periods of congestionact immediately and without further notice to restrict, suspend or take other actions described in this AUP whenterminate your usage is negatively impacting other subscribers to our Service.

The new language now permits the company to use “network management” techniques such as reducing your speed if they feel you are excessively using Clearwire’s “unlimited” service.  Although the new language sounds friendlier — deleting references to suspending or terminating your service — Clearwire’s Acceptable Use Policy (AUP) maintains those rights in another section.  When all is said and done, Clearwire still gets to limit your usage -and- can now also reduce your speed:

Unlimited Use Plans. (Effective November 22, 2009)

If you subscribe to a service plan that does not impose limitsWhile the determination of what constitutes excessive use depends on the amountspecific state of data you may download or upload during a monththe network at any given time, you shouldexcessive use will be aware that such “unlimited” plans are nevertheless subject todetermined by resource consumption and not by the provisionsuse of this AUPany particular application. What this means is that allWhen feasible, upon observation of the provisions described in this AUPan excessive use pattern, including those that describe how Clearwire may perform reasonable network management such as reducingwill attempt to contact you by e-mail at the data ratee-mail address on file or otherwise to alert you to your excessive use of bandwidth intensive users during periodsand to help determine the cause. Clearwire representatives also are available to explain the parameters of congestion, will applythis AUP and to yourhelp you avoid another excessive useincident or to upgrade you to a different class of the Servicethat comports with your usage. The term “unlimited” means that we willIf you are unavailable or do not place a limit on how much datarespond to Clearwire’s attempt to contact you uploadregarding excessive use, or download during a monthif excessive use is ongoing or other particular periodrecurring, howeverClearwire reserves the right, it does not mean that we will not take stepsset forth in the “AUP Enforcement and Notice” provisions below, to reduce your data rate during periods of congestionact immediately and without further notice to restrict, suspend or take other actions described in this AUP whenterminate your usage is negatively impacting other subscribers to our Service.

Clearwire (and the soon-to-be-launched Road Runner Mobile from Time Warner Cable and Comcast’s mobile broadband option) share the same Clearwire WiMax network.  As investors in Clearwire, the cable operators have won the right to rebrand the service to provide a mobile option for their broadband customers.

Customers considering signing up for service should carefully verify the terms and conditions of their contract, as well as the quality of service provided where you expect to use the service the most.  Several websites highly critical of Clearwire have been established with hundreds of upset customers who were promised broadband speeds and barely managed much more than dial-up speeds using the service.

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“Clearwireblows” ran a speed test illustrating serious speed problems using Clearwire in Texas this past April.  (2 minutes)

Customers who wish to end their contract without incurring a cancellation fee can do so following this procedure:

1. Contact Clearwire in writing and inform them you are exercising your right to terminate service without charge or penalty because of materially disadvantageous changes to the Clearwire Terms and Conditions effective November 22, 2009.  Under their terms, you have a right to discontinue service in accordance with the section “Revisions: Reservation of Rights.”  Namely, “…if you do not wish to continue Service after a change that is materially disadvantageous to you, you may terminate this Agreement by providing written notice to Clearwire within twenty (20) days of the effective date of the modification.”  The link above contains contact addresses you may use.
2. Contact customer service by telephone and inform them you have followed the written cancellation procedure outlined above.
3. Be certain to insist Clearwire not charge any termination fees, and that you do not agree to pay any such fees.
4. Should you experience any difficulties, contact the Better Business Bureau as this customer did.  The BBB helped facilitate an immediate cancellation with no termination fees.

Hong Kong Broadband Network, the wholly owned subsidiary of City Telecom, has just slashed the price for its 100Mbps “bb100” fiber optic broadband service.  When a customer finds a friend willing to sign up, both will receive the broadband service for $13 US per month for 24 months, which represents a 50% discount for each customer.

At this price, Hong Kong residents pay just $0.06/megabit-per-second, which includes a speed guarantee that customers will receive at least 80% of advertised speed when surfing domestic websites.

William Yeung, Chief Executive Officer of HKBN noted that at least 32% of Internet users in Hong Kong suffer from broadband speeds below 10Mbps, and the Hong Kong special administrative region of the People’s Republic of China lags behind Korea and Japan in terms of fiber to the home service, something Yeung would like to see changed.

He considers Hong Kong’s broadband development rating “comfortably enjoying today’s applications” to be inadequate, and wants to see Hong Kong have universal access to 100Mbps or greater speed broadband.

“Being the second largest broadband service provider, we have a duty to improve Hong Kong’s global standings,” Yeung said.

HKBN provides speeds up to 1Gbps in Hong Kong over its fiber optic network.  Hong Kong’s broadband ranking is important to the region for economic reasons, attracting new industry and high paying technology jobs with fast, affordable broadband service.

What Hong Kong considers inadequate is still well ahead of the United States, which continues to lag behind several Asian nations in constructing advanced high speed broadband platforms.

Hong Kong’s population density, which poses a challenge for some services, is actually a benefit for telecommunications, because construction costs are lower when wiring densely populated multi-dwelling units and apartments.

The company currently has 391,000 broadband customers, attracted to the company in part by their creative advertising campaigns.

[flv]http://www.phillipdampier.com/video/HKBN Member Get Member Promotion.flv[/flv]

HKBN makes Hong Kong’s population density a net plus for fast, affordable broadband.  William Yeung announces “Member Get Member Promotion” from HKBN and unveils new advertising campaign. (3 minutes)

Several weeks ago, Stop the Cap! included several HKBN ads for your review.  We’ve now obtained English subtitled copies to share, below the jump.

… Continue Reading

Your Money = Their Money

Time Warner Cable has mailed letters to subscribers in its Northeast Ohio and Western Pennsylvania division announcing that “with many of our fixed costs escalating, we are forced to adjust the prices of some of our services accordingly.”

That price adjustment takes Road Runner’s 7Mbps broadband service to $49.95 per month, if the subscriber also takes cable-TV service from Time Warner, according to one subscriber in Cleveland.  Another subscriber in Erie, Pennsylvania also noticed Road Runner Lite was also increasing in price to $24.95 per month with the rate change, effective November 24th.

A Canton, Ohio subscriber sent Stop the Cap! a copy of the letter their family received regarding the rate hike.

The company suggests customers might use the letter as a motivation to inquire about subscribing to even more services from Time Warner as part of a bundled package.

An Alliance, Ohio subscriber called the company’s rate increase pathetic, noting the division has some slow broadband speeds compared with other Road Runner service areas.

“With 768kbps upload speed, give us more then we will pay more,” he writes.

Time Warner's letter to customers in northeast Ohio and western Pennsylvania (courtesy: kba4)