Wheeler

President Barack Obama will shortly nominate a former top cable and wireless industry lobbyist as his choice to represent the interests of the American people at the Federal Communications Commission.

Thomas Wheeler, who has been a telecom industry insider for at least 30 years and today serves as a venture capitalist, will have enormous influence over how the FCC manages the public airwaves, broadband, and wireless spectrum.

The Wall Street Journal reports this afternoon that President Obama may make a formal announcement as early as this Wednesday, with current FCC commissioner Mignon Clyburn serving as interim chair until Wheeler is seated.

Wheeler is expected to take a more industry-friendly attitude at the FCC. As Stop the Cap! noted after reviewing several years of Wheeler’s personal blog, the future FCC chairman would have approved the merger of AT&T and T-Mobile, considers Google, Apple and other technology companies challenging telecom public policy part of a “Silicon Valley mafia,” and praised AT&T’s chief lobbyist as a visionary that could define the wireless industry’s future.

Wheeler’s regulatory philosophy offers that mergers and acquisitions present an opportunity for regulators to impose certain temporary conditions on deals, offering the best opportunity to influence a short-term regulatory outcome. But such preconditions are often mild, quickly expire, and are predictable for the companies involved. When Comcast sought merger approval for its deal with NBCUniversal, one concession was to sell discounted Internet access for poor families — a service Comcast had earlier plans to offer but withheld as a bargaining chip during merger approval talks.

Frontier’s new mascot

I’m sure more than a few readers work for a company with a marketing department that churns out advertising and imagery that leaves you shaking your head wondering what they were thinking.

There are some employees at Frontier Communications who are head-scratching this week as the company unleashes “Frontier’s First Ever Spokesman.”

His name is Francis Abraham Buffalo (his friends get to call him “Frank.”) He’s a… buffalo.

An internal memo obtained by Stop the Cap! informs employees Frank is prepared to bulldoze his way through “the clutter and get consumers buzzing.”

“Think of the Aflac duck and the Geico gecko,” a Frontier executive writes. “People have a truly positive association with them that translates into a positive feeling for those companies.”

But can a new mascot really change perceptions about a company more than the quality of the products or services a company provides (or doesn’t)?

For the record, your editor has never been particularly moved by either the duck or the gecko, and I, along with many other Americans, stopped watching television commercials years ago with the advent of the DVR. I have also never bought a product or service based on anything other than its merits and price. Frontier’s buffalo will not change that.

The mascot search involved a nationwide focus group of at least 800 customers and non-customers who were shown a series of “try-outs” involving lip-synched ducks, pigs, and various other creatures you may have last encountered as roadkill.

“Frank was the top choice, lifting our preference rating over the competition by 8 points and decreasing the competition by 3 points.  That’s a net 11 point increase for Frontier and solid support that we’re on the right path,” the company trumpets.

Of course, their cable competitors can always suggest while Frontier is busy playing with animals, they are delivering far faster broadband service and a better package of phone, broadband, and television service that does not involve a third-party satellite dish stuck on your roof.

Even some Frontier employees were less than enthusiastic about the endeavor, already predicting the response ads from the competition.

“I thought the pig would’ve been a better choice,” writes one. “I can just see the competition running ads about not getting ‘Buffaloed’ by Frontier!”

Most of the excitement among employees seems to emanate from the office that envisioned the campaign and spent a lot of money to make it happen.

“A landmark decision in the continuing evolution of Frontier,” jokes a Frontier worker less than thrilled with the result.

Even Frontier executives admit that Frank might be a big, fat target:

“We have also heard some concerns from our employees that we are proactively addressing in the campaign so our competitors won’t take advantage of our new brand spokesperson.”

“Frank will be a boffo buffalo. A solid, truth-talking machine that doesn’t like fuss or tricks – and neither do we.   We play it straight — price guarantees and no contracts make it easy for consumers to understand our products and services.  So if anyone asks, Frank is not here to “buffalo” or trick anyone (call Cable if you want that!).  He doesn’t deal with BS or malarkey, and that means no hidden fees, no surprises.”

Phillip “It’s actually an American bison” Dampier

Frontier is asking for advice on how to make Frank a better buffalo and offer any additional feedback. At Stop the Cap! we are always willing to help, so we publicly offer advice for our hometown phone company.

1. The American buffalo is actually the American bison, but that probably sounds too French (it is actually Greek, but nobody wants to get too close to Greece these days). The bison’s story is remarkably similar to phone companies like Frontier. It once roamed across the American landscape in great herds but was targeted to near extinction. Just like your landline. It still maintains “near threatened” status, and is only gradually making a comeback with the help of conservation efforts. While our ancestors shared their lives with the bison, most people today will only meet one in a zoo or park. We are unsure why Frontier would want to associate itself with an animal best known in the past and unlikely to be seen today.
2. Lip-synching animals (and babies) has become cliché. We were not too impressed with the voice talent Frontier decided to use for their animals either. Instead, check out Telus, western Canada’s biggest phone company. They turn animal wrangling into an art form, using various critters in their ads for phone, broadband, and wireless service. Telus compliments their animal friends with Canadian musicians to visually and musically deliver whatever message the company wants to share.
3. While Frontier may have eliminated some of its old tricks like contract termination, equipment, service protection, and surcharge fees from customer bills, many of us have long memories of the surprise steep cancellation fees charged when dropping landline service that we kept for 20+ years. Others found Frontier’s inadequate DSL only slightly less annoying than the $100+ service termination fee thrown on the last bill. Some of those fees are still being charged to customers, including a particularly silly broadband account service order charge that still stings departing customers. It is hard to accept Frontier’s new marketing messages when the company is still baiting the traps.
4. Frontier’s reputation problem does not come from poor advertising. It comes from a poor selection of products and services. Frontier until recently has simply refused to keep up with the reality of today’s broadband market. Sorry, basic DSL will no longer cut it, particularly when a competitor arrives. Cable can still out-class Frontier’s broadband products even after upgrades to ADSL2+ and VDSL. Frontier bills are still loaded with surprise surcharges and extras that raise the out-the-door price, sometimes even higher than what cable charges. The more important question to ask focus groups is why people do business with Frontier. Is it because they have to or they want to?

Frontier still does not evoke “cutting edge” anything. Frontier FiOS, inherited from Verizon, is the child nobody wants to talk about.

For years, Frontier only offered ADSL at speeds that stopped keeping up with cable a decade ago, even in large metro areas like Rochester, N.Y. When the company advertised “up to” in association with broadband speeds, it meant it: advertise up to 12Mbps but deliver service as slow as 3.1Mbps. With VDSL, 25Mbps might be doable, but cable already offers 30/5 or 50/5Mbps that is a sure thing.

Frontier’s landline service is generally reliable and works even with a power outage if you have a wired phone. But the company charges too much for a phone line many people are now jettisoning in favor of their cell phone and the company is still pushing long distance calling plan bundles that are now irrelevant. Does anyone under 35 know what a toll-call is?

Frontier’s “television” service for most customers is a third-party reseller agreement with a satellite provider with its own contract and conditions. Exciting? Not exactly.

There isn’t much to see here. AT&T and Verizon have spent money to earn money. The only major success story from AT&T’s landline business is its U-verse platform. Verizon FiOS delivers the most formidable competition cable operators like Time Warner Cable and Cablevision have seen. Even CenturyLink has invested in Prism, a fiber to the neighborhood system that can deliver a true triple-play package of services that give customers a reason to stay.

Frontier has Frank the Buffalo and some long-overdue technology upgrades that probably won’t win back a lot of customers.

So what are the strengths Frontier can sell?

1. In most markets, Frontier has no hard limit on broadband usage. That is an attractive selling point where cable operators slap usage caps on customers. Usage caps can and do trigger customer defections;
2. Frontier phone service is generally more reliable than cable or Voice over IP. Talk to customers in storm-struck areas who lost power and cable, but their phone line kept on working;
3. Frontier ADSL2+ and VDSL can outperform rural cable operators who have either oversold their shared network or don’t offer higher DOCSIS 3 speeds yet;
4. Frontier Wi-Fi, if vastly expanded, can be a useful free add-on and selling tool in areas served by cable operators that do not offer the service. But Frontier Wi-Fi hotpots have to be more commonly encountered to make a difference.

Above all, Frontier must keep upgrading its network to stay competitive. Once you lose customers, they can be extremely hard to get back. For many of us, establishing an account with the phone company meant significant installation fees and several days before a crew would turn up to connect service. Frontier knows perfectly well going back to the phone company after leaving is a high hurdle many never attempt.

The best mascot a company like Frontier can adopt are real customers and employees talking about their satisfaction with the changes Frontier is making. Without that, the customers that left will probably always think of Frontier as yesterday’s news. Using an American buffalo that neared extinction itself is probably not going to change that perception.

[flv width=”640″ height=”380″]http://www.phillipdampier.com/video/Frontier Animal Mascot Tryouts 4-13.flv[/flv]

Here are Frontier’s animal mascot tryouts. (1 minute)

AT&T is seeking freedom from regulation, oversight and the right to abandon its landline network with the assistance of Connecticut legislators who modeled a state deregulation measure on recommendations from the corporate-funded, AT&T-backed, American Legislative Exchange Council (ALEC).

The legislature’s Energy and Technology Committee voted 20-4 to approve the bill, which would eliminate service and oversight requirements and allow the phone company to raise rates. AT&T has lost most of its landline customers since assuming control of service in Connecticut. Today, only 28 percent of homes in the state choose AT&T for their home phone service. The Office of Consumer Counsel suggests AT&T’s poor performance in the state may have had a lot to do with that, citing the company’s slow job of restoring phone service after a series of storms affected the state.

AT&T wants the power to drop telephone service altogether in areas considered unprofitable to repair or continue to serve. A trio of company-backed bills in the state legislature would hand them that right.

House Bills 6401, 6402 and Senate Bill 888 are all measures that would deregulate the phone company and open public lands for placing cell towers, limit regulator oversight and cut reporting requirements that let regulators track telephone rates.

None of the measures have been introduced on a whim, contend critics. The Connecticut Citizen Action Group released a report showing links between corporate-written model bills produced by ALEC and the current legislation before the Connecticut General Assembly.

HB 6401: House Bill 6401 strips the Public Utilities Review Authority (PURA) of their ability to regulate Voice Over Internet Protocol (VoIP) telephone services. An emerging market, this bill creates deregulation for the sake of deregulation.

HB 6402: House Bill 6402 eliminates the right of regulators to oversee AT&T to make sure it has some form of accountability to the public. The section on annual audits has been gutted, making it impossible to protect the public from rate-fixing. More importantly, it includes a provision to allow AT&T to end service to any customer it wants upon 30 days’ written notice.

SB 888: Senate Bill 888 has an ALEC-drafted provision that allows cell phone towers to be built on public lands on a presumption that the will of telecommunications companies is in the interest of the public good.

“If AT&T is allowed to drop service in unprofitable areas at their sole discretion, if they’re allowed to let service outages drag on for weeks with no consequences, if they’re allowed to jack up rates — of course they will,” Daniel Ravizza of Connecticut Citizen Action Group said in a statement. “‘Trust me’ is not a good enough guarantee for Connecticut consumers.”

ALEC and AT&T’s Legislative Chorus

• Rep. Debra Lee Hovey of Monroe and Newtown and Sen. Kevin Witkos of Simsbury, Avon, and Torrington serve as ALEC’s chair people for the state;
• Rep. John Piscopo is currently serving as ALEC’s National Chair;
• Rep. Lonnie Reed (D-Branford), chairwoman of the state legislature’s Energy and Technology Committee defended the measures saying they would give certainty to the telecom industry which would attract more investment in broadband and phone services. But she admitted once consumers learned of the proposed bills, things got heated quickly. “Some of this stuff is radioactive,” she told The Hartford Courant. “It’s hard even if you change the language to convince people otherwise;”
• “The arguments by opponents of HB 6402 have been shown to be without merit so now they’re resorting to desperate measures and innuendo,” said AT&T spokesman Chuck Coursey. “The fact is modernizing our telecom rules this year will help encourage private investment, job growth and consumer choice at a time when Connecticut needs it most;”
• John Emra is AT&T’s chief lobbyist in Connecticut. Emra was behind last year’s attempts to advance similar deregulation. Emra serves as the Executive Director of External Affairs for AT&T and as the chair of ALEC Connecticut.

“This is part of a national strategy by ALEC to advance a pro-corporate agenda at the expense of consumers,” James Browning, regional director of state operations for Common Cause, said in a statement. “We’ve seen the destructive impact these measures have had in other states. AT&T should not be allowed to get away with it here in Connecticut.”

The New Haven Register notes Browning said the three bills — SB888, HB6401 and HB6402 — closely resemble model legislation ALEC’s legislative template used in 20 other states where telecommunications regulatory overhaul has occurred. In 17 of those 20 states, telecommunications rates have increase, and in some cases, the cost of service has doubled.

Connecticut consumers can share their feelings about the bills through e-mail with their elected officials.

After more than a year of aggressive promotions for new customers and those threatening to switch to a competitor, Time Warner Cable has pulled back to boost revenue and make greater profits.

CEO Glenn Britt told Wall Street investors on this morning’s quarterly results conference call that the cable operator is moving in a different direction.

“It’s based on a simple premise: sell people what they want and what they can afford in the first place,” Britt said.

In February, Stop the Cap! noted that Time Warner Cable’s new customer promotions had dramatically changed for the worse. The package prices remained the same — around $80 for a double-play or $89-99 for a triple-play package of cable, broadband, and/or phone service, but customers received a lot less for their money. For example, last year’s promotions bundled Standard/Turbo Service broadband (10-15Mbps) with most offers. Starting this year, only 3Mbps Internet is included. Equipment fees are still extra, but more costly than ever – $8.99 a month for a traditional set-top box, $21.94 a month for a DVR-equipped box and service.

Robert Marcus, Time Warner Cable’s chief operating officer now admits it was all part of the plan, and the company now earns 15-20% more from customers subscribing to the less-aggressive new customer promotions.

“In January we implemented a new pricing and packaging architecture that’s designed to drive greater [new customer revenue] and profit,” Marcus told investors. “We still advertise the same beacon prices, but the product packages are leaner, with lower speeds and fewer channels and features. Once our beacon offers get the phone to ring, our inbound sales reps are trained to help customers select options that are important to them, like faster broadband or a DVR. As a result, customers are up-sold into packages that better meet their needs.”

This year’s promotions largely only bundle 3Mbps broadband instead of the standard 10-15Mbps bundled last year.

Marcus admitted the trade-off is customers shopping around for the best deal who read the fine print are likely to consider an offer from a competitor more closely. Others are disconnecting service when their promotion expires.

Marcus

“By and large, when were talking about triple play disconnects, they are going to our telco competitors,” Marcus said. “When we’re talking about single-play video disconnects, they, by and large, leave us for satellite. We’re increasingly finding that phone customers are dropping landline phone for wireless-only, and there are video customers who are leaving — and broadband customers for that matter, who are leaving the category, and that’s probably more of an affordability issue than anything else.”

Verizon FiOS is Time Warner’s most dangerous competitor because it beats the cable operator on broadband speed and promotional pricing. Time Warner faces some of the highest disconnect numbers in FiOS areas. AT&T U-verse is also having a greater impact because AT&T recently decreased the price of both their triple and double-play promotions and has increased broadband speeds in some areas, Marcus reported.

Marcus said Time Warner is handling the subscriber churn fine, and the cable company now cares more about higher revenue and profits than attracting deal-hunters who shop on price.

“Last year’s aggressive triple play offers drove significant connect volume, which led to the highest quarterly subscriber net adds we’ve had over the last several years,” Marcus said. “But in large part, we were attracting discount seekers who are more likely to [switch after the promotion ended]. In many cases, we caused customers who didn’t need or want phone to take a triple play offer just to get the low triple play rates.”

What new customers Time Warner did attract largely took one or two products from the cable company, usually cable television and broadband. New phone service customers have declined year-over-year as a result of less attractive pricing. Instead, Marcus noted customers are spending on incremental broadband speed upgrades, which cost Time Warner much less than delivering phone service.

Nobody needs 1Gbps, argues Britt.

With the looming threat of Google Fiber in both Kansas City and Austin, Britt seemed generally unconcerned about the impact the gigabit broadband provider would have.

“At the end of the day, what we’re doing is not any different than an overbuilder, and we’ve had overbuilders for the last several decades in this business so that’s what they appear to be doing,” Britt said. “They appear to be very aggressive on price. They’re even giving some tiers away essentially for free, and we’ll see where that goes. Despite the glow and all of that, the products are essentially the same others are offering today in a practical sense.”

Britt said gigabit speeds probably won’t have the impact many customers think they should because most websites are not built to deliver content at those speeds.

Marcus noted that in Kansas City, Google has only passed 4,000 homes so far, about 2,000 of which are Time Warner Cable customers.

“The number of defections we’ve seen is de minimis at this point,” Marcus said.

Both Britt and Marcus responded to a question about consumption billing saying nothing had changed in the company’s thinking about usage caps or charging for what customers consumed.

“We have in place in almost all of our footprint the option for people to pay less money if they wish to really consume less,” Britt said. “People who want to keep getting unlimited and pay for that, can do that. So we really don’t have anything new. It is in place in our whole footprint, I think, except one location.”

“The take rate on that offering has still been fairly modest, but we think it’s a very important principle that there’s a relationship between usage and the price that customers pay,” Marcus added.

Some other highlights:

• Time Warner Cable’s cloud-based set-top box guide is now testing in employee homes with plans to roll the new boxes out to subscribers later this year. Britt said these were the first of a new generation of all-IP boxes, which means if you have a device in your house that knows how to receive IP, you’ll get access directly via WiFi or through a cable technology called MoCA;
• Time Warner Cable will digitally encrypt its entire television lineup in New York City;
• Time Warner Cable’s recent restructuring cost 500 employees their jobs, mostly in finance, marketing and human resources.

Cable One has announced it will invest $60 million in network upgrades across 42 cable systems in its mostly rural footprint to enhance reliability and deliver faster Internet service.

The cable operator, owned by the Washington Post, has been criticized for outdated infrastructure and poor service, particularly in Mississippi.

”We’re committed to delivering the best possible experience to our customers,” said Cable One CEO Tom Might. “We’re confident that this investment will ensure that our customers will receive superior service in the speed, reliability, and the overall performance of our services.”

The two-year upgrade project aims to replace amplifiers, split broadband customers who share a backbone connection into smaller groups, replace aging coaxial cable and improve the cable company’s fiber optic backbone.

The upgrade might allow the company to consider relaxing its draconian usage cap and speed throttle policies, which force customers to choose between an uncapped 5Mbps connection (with a speed throttle for those using more than 3GB per day) or a 50/2Mbps connection with caps as low as 50GB per month (overlimit fees: $0.50-1.00/each extra gigabyte.)

Cable One now offers two levels of Internet service: an uncapped 5Mbps plan for $50 a month and a 50/2Mbps plan for $50 a month with a 50-100GB monthly usage cap, depending on the package bundle. Usage is measured between 8am-12 midnight. Users on the uncapped 5Mbps plan are subject to speed throttling if they exceed 3GB of usage per day.