Consumer Reports today released its 2012 list of America’s best phone, broadband, and pay television providers (subscription required), giving top scores to fiber-to-the-home and cable broadband and exposing some familiar phone and cable companies which year-after-year deliver “bottom of the barrel” scores.

Nearly 70,000 readers of the consumer magazine participated in rating their local telecommunications providers for value, reliability, customer service, and broadband speed.  No provider scored higher than “average” for value, but wide discrepancies in broadband speed and the quality of service made choosing winners and losers easy.

Top-rated WOW! (formerly WideOpenWest), is the 15th largest cable provider in the United States, but regularly wins top scores from Consumer Reports readers for the quality of its services. WOW! currently serves mostly suburban subscribers in a handful of cities in Illinois, Ohio, Michigan and Indiana. But the provider will soon be coming to several new locations thanks to its April purchase of cable overbuilder Knology, which provides service in multi-dwelling units and administers some community-owned broadband networks around the country.  This could provide relief for customers dealing with onerous usage caps in cities like Lawrence, Kan., where Knology’s buyout of Sunflower Broadband kept that company’s Internet Overcharging scheme in place. WOW! has no usage limits on their broadband service.

Verizon’s FiOS fiber to the home network is also a consistent winner in the ratings, especially for its fast broadband service.

AT&T’s U-verse also scored high in the ratings for broadband.  AT&T’s fiber-to-the-neighborhood service still works with existing copper phone wiring inside the home and delivers 20+Mbps broadband, a major improvement over AT&T’s traditional DSL service, which usually tops out at 7Mbps.

Among top-rated cable companies you have heard of, Bright House Networks scored a major coup, winning third place for its broadband service.  Ironically, consumers gave very high marks to Earthlink delivered over Time Warner Cable, scoring it fourth place for broadband. But Earthlink’s performance on Time Warner Cable is actually slightly less than the cable company’s own broadband service. Although both services share exactly the same network, Time Warner adds “speedboost,” a temporary speed increase for downloads. But the cable company got no respect from customers, who put TWC in 19th place.

Other findings of interest:

• TDS, an independent phone company serving primarily rural areas scored a very high fifth place in broadband, despite offering only traditional DSL service (except in limited areas where it has built fiber networks to stay competitive with community-owned providers and cable companies).  But the company won high marks for service reliability;
• Frontier Communications’ inherited FiOS fiber to the home services in Indiana and the Pacific Northwest were that company’s only bright spots for broadband, putting both systems in sixth place.  Everywhere else… forget about it. The company’s traditional DSL service was rated a lousy value and delivered mediocre speeds, earning 24th place.
• Satellite fraudband providers Wildblue and HughesNet continue to torture their customers, scoring dead last for lousy value, speeds, reliability, and everything else.
• Still awful after all these years: Mediacom, Charter, and FairPoint Communications all continue their dubious distinction scoring at the bottom of the barrel for broadband. It’s nothing new for any of them, and it appears nothing is likely to change those rankings in the immediate future.

Americans still hate the big boys.  Outside of AT&T and Verizon’s shorter history delivering triple-play-packages of cable, phone, and Internet service, the legacy of lousy pricing and service from the country’s largest cable operators still hold them back in the ratings.  Comcast managed only 24th place, dragged down by terrible customer service and worse value.  Cablevision did better at 16th place with higher marks for everything but value.  It was the same story for 12th place Cox Cable.

What was the top choice for telephone service in 2012?  Ooma, a Voice over IP phone company that works with an existing broadband connection.  Phone companies that have been in the business of phone service for decades (or longer) were all bottom-rated: AT&T, Verizon, FairPoint, and Frontier Communications.  Only Mediacom, a cable operator, kept Frontier from scoring dead last.  And they wonder why Americans can’t wait to disconnect traditional landline service?

In fact, Consumer Reports says no other industry alienates consumers more than America’s telephone and cable companies.

But you can fight back and score a better deal.  Stop the Cap! was quoted in the magazine piece with our advice to play hardball with cable and phone companies who charge too much and deliver too little.

“The magic word is ‘cancel,’ ” says Phillip Dampier, of the website Stop the Cap! He suggests you schedule your disconnection date for a week or two in the future. “When you’re on their disconnect list, they are going to start calling you offering very aggressive deals,” he says.

Top-rated WOW! only delivers service in a handful of cities in the midwest, but is getting larger after acquiring Knology in April 2012.

Indeed, Consumer Reports found most providers willing to deal… eventually, but they have gotten wise to halfhearted negotiation tactics by consumers looking for a better deal. If a provider suspects you won’t follow through on a threat to change providers, they often stubbornly refuse to deal. That’s why we recommend requesting to be placed on a “pending disconnect” list — proof you are prepared to leave in a week or two if they won’t negotiate.

We’ve followed investor conference calls for most major providers over the past two years. Every provider has gotten more aggressive with customer retention offers, in part because of the poor economy and increased competition. Customers are paring back cable packages and cutting out extra channels and services they can no longer afford. Some have become expert at bouncing between new customer promotional offers. Cable operators like Time Warner Cable have tried to keep customers, even those coming to the end of promotions, with slightly less aggressive discounting.

“We have a very well-choreographed program for moving people from the most heavily discounted promos into the rational next-step pricing packages,” Rob Marcus, president of Time Warner Cable told the magazine. “Over time, that discount will decrease, but you’d probably still save 20 to 30 percent off the rack rate,” or regular price.

But we found consumers who get back on the disconnect list usually do much better than Time Warner’s “next-step” pricing, some even earning a better retention offer than what they received in 2011. The more serious customers are about their willingness to leave, the better the offer in return.

Dead last place for cable companies... again.

The magazine also offers solace for customers who literally have nowhere else to go for service:

Alan Curtis of Manchester, N.H., whose condominium is served only by Comcast, says his rates go up each year but he pushes back. “If you say, ‘We’ll have to buy less,’ occasionally they’ll come up with a cost-cutter that will apply to you,” he says. Similarly, a staffer who lives in a New York City apartment served only by Time Warner Cable more than offset a $5 increase in his overall bill by negotiating an $8-a-month cut in his DVR rental fee for 12 months.

Consumer Reports also warns customers to choose broadband providers wisely, because the speeds they advertise may never materialize. Case in point, Frontier Communications’ dreadful DSL service, which the magazine found met the company’s speed marketing claims only 67% of the time. Frontier has been struggling with a vastly oversold broadband network, causing speeds to slow dramatically during peak usage times, particularly in states like West Virginia.  The magazine recommends fiber to the home providers and cable operators for more consistent broadband performance that comes closer to the broadband speeds advertised.

At all costs, avoid satellite broadband, which remains slow, expensive, and heavily usage-capped.

Wall Street analysts are predicting the end of free video streaming in the near-term as media and cable companies regain control over online content for themselves.

Cable companies are partnering with content producers to move a growing amount of streamed video content behind paywalls in an effort to protect their core business profits.

The trend is evolving so rapidly, analysts like Laura Martin with Needham & Co. predict the end of free streaming is imminent.  Either customers will pay upfront or use TV Everywhere “authentication platforms” that require evidence of a pay television subscription before being able to watch.

Craig Moffett, an analyst with Sanford Bernstein, perennially sees cable operators as the most likely winners in the billion-dollar entertainment battle.

“They’re winning the broadband wars,” Moffett says of the cable industry. “Broadband is increasingly the flagship product, not the video distribution business.”

Cable networks and program producers are growing increasingly alarmed at the impact video streaming services like Hulu and Netflix are having on their bottom lines.

Case in point: the fall of Nickelodeon, a popular children’s cable network that used to guarantee high ratings and lucrative ad revenue.  Recently the network has fallen off the ratings cliff.  Some careful analysis found the reason why: Netflix.  Nickelodeon, along with many other cable networks, licensed a number of their series to Netflix for on-demand viewing. In households with young children, parents increasingly choose the on-demand Netflix experience for family viewing over the traditional cable channel.

Moffett

That’s a major problem for content producers and networks, and Moffett quotes industry insiders who predict licensing deals for Netflix streaming will increasingly not be renewed (perhaps at any price) as networks retrench to protect their core business.  What is left will soon be behind paywalls, limited to customers who already subscribe to a pay television service.

That line of thinking is already apparent at Time Warner (Entertainment), Inc., where CEO Jeff Bewkes rarely has a good thing to say about Netflix.  His company refuses to license a significant amount of their content for online streaming because it erodes more profitable viewing elsewhere.

Time Warner only licenses older content and certain “serialized dramas” that have proven difficult to syndicate on traditional broadcast television or cable outlets.  But the company keeps kid shows to itself and its own distribution platforms, like Cartoon Network.

When it does let shows go online, it wants them behind paywalls.

Bewkes applauded Hulu’s recently announced plans to move its service away from free viewing.  Authenticating viewers as pay TV subscribers before they can watch “makes sense” to Bewkes.

“Hulu is moving in the right direction now,” Bewkes said.

Big media companies do not want significant changes to the viewing landscape, where major networks front the costs for the most expensive series, and cable networks commission lower budget programs and repurpose off-network content.  Pay television providers bundle the entire lineup into an enormous package consumers pay to receive. That is the way it will stay if they have their say.

“Just because consumers would rather get individual channels a-la-carte, on-demand, and streamed — only what they want to pay for — [if they think] that is inevitably the way the world if going to evolve, not so fast,” Moffett said. “It may be the way consumers want it and it may be the way technologists want it, but the media companies have a say here.”

“There is no way they are going to voluntarily unbundle themselves,” Moffett said.

[flv width=”360″ height=”290″]http://www.phillipdampier.com/video/Bloomberg Moffett on Cable Operators 4-30-12.mp4[/flv]

Craig Moffett talks about the current state of the media business on Bloomberg News.  He sees trouble ahead for online video streaming, as powerful media and entertainment content distribution companies reposition themselves to better control their content… and the revenue it earns.  The big winners: Cable operators, Hollywood, and major cable networks.  The losers: Consumers, Netflix, Hulu, and free video streaming. (11 minutes)

[flv width=”360″ height=”290″]http://www.phillipdampier.com/video/Bloomberg Martin Sees End of Free Streaming TV Content 5-4-12.mp4[/flv]

Laura Martin with Needham & Co. predicts the imminent demise of free video streaming. Media companies can’t handle the loss of control over their programming, and the erosion of viewers (and ad revenue) it brings.  Martin tells Bloomberg News she sees a future of paywalls blocking access to an increasing amount of online video content.  (5 minutes)

Verizon Wireless’ answer for rural America’s broadband troubles goes live across the country today, offering the broadband deprived the opportunity of getting wireless service at almost twice the price of conventional DSL, with a 10GB monthly usage allowance.

HomeFusion Broadband uses Verizon’s LTE network to deliver service to homes and businesses within range of Verizon’s 4G network.  For rural America, the speeds Verizon is capable of delivering offer a significant improvement over rural DSL.  Verizon promises 5-12Mbps down and 2-5Mbps up, depending on how many users are sharing the cell tower and how strong a signal one receives.

“HomeFusion Broadband is another example of Verizon Wireless’ commitment to providing our customers with the most innovative products and services,” said Tami Erwin, vice president and chief marketing officer, Verizon Wireless. “With HomeFusion Broadband, customers across the United States, in towns large and small, will have the chance to link devices to the Internet and take advantage of the speed, coverage and connectivity offered by our 4G LTE network.”

Whether they can afford it may be another matter.

Verizon Wireless charges a one-time equipment fee of $199.99, which includes professional installation of the required cylindrical outdoor antenna and router that allows customers to share the wireless connection with other devices inside the home.

Monthly service fees start at $60 a month and include 10GB of monthly usage. If you need more data, you will pay a significant amount to get it — up to $120 a month for 30GB of usage.  As a tease, customers get 50 percent more data allowance for the first two full billing cycles of service.  If you become accustomed to using that extra allowance, it could be very costly once the first two months are up.  Overlimit fees run $10/GB.

Verizon claims two-thirds of the country is now covered by their 4G LTE network, including the regions Verizon sold off to companies like FairPoint and Frontier Communications.  Those independent phone companies will soon have Verizon as a broadband competitor in states like West Virginia, Vermont, Ohio, and Maine. If customers value speed over everything else, Verizon could be a formidable competitor over traditional rural DSL, which often operates at speeds of 1-3Mbps, as long as customers steer clear of allowance-eating online video.

Verizon has positioned HomeFusion as a rural broadband solution, and earlier pricing and policy changes make it clear Verizon is downplaying its traditional DSL service.  In April, Verizon announced it would no longer sell standalone DSL service to customers without voice phone lines, or to those who live in areas also wired for the company’s fiber optic network FiOS.

Highlights:

• Company still losing video customers, but picking up phone customers (on the cheap), and winning with broadband;
• Broadband consumption pricing still CEO’s favorite flavor of Internet billing, but only for other people’s content;
• Broadband speed matters, as Time Warner continues to win over dissatisfied DSL customers;
• ‘If customers love our broadband, we can charge more for it;’
• Verizon/Time Warner’s cooperative marketing agreement starts with discounts but ends with “exclusive product enhancements.”
• The future of Time Warner Cable Wi-Fi.

Time Warner Cable reported unexpectedly strong profits in its first quarter as the company’s broadband services helped stem the losses from departing cable TV customers.

The cable operator told investors it boosted profits 18%, mostly from increasing revenue the company earns selling broadband access to the Internet and convincing customers to add more Time Warner services.

Time Warner Cable said goodbye to 94,000 residential video subscribers last quarter, higher than analysts expected. But that did little damage to earnings because the company picked up an additional 214,000 broadband customers over the same period, most switching from phone company DSL service.

Time Warner Cable’s increasingly aggressive bundled service promotions, particularly on its triple-play offer of cable, broadband, and phone service, even managed to attract 112,000 new landline customers — a significant accomplishment as Americans continue to disconnect traditional phone lines in favor of cell phones.  It also helped increase the average revenue earned per subscriber.  Time Warner Cable pitches double play promotions as low as $79.00 a month. For just $10 a month more, customers can add a third service, and many do.

Most discounts last for one year, but the operator now often sends letters to customers reaching the end of their promotion offering additional, but lower-value discounts going forward. This has limited bill shock for customers surprised by the company’s regular prices. It also might reduce the urge for customers to shop around for a better deal.

Judging from the company’s financial results, most customers hang on to Time Warner Cable’s broadband regardless of price, if the competition happens to be traditional DSL from the phone company. In fact, as phone and cable companies realize they have sold broadband to virtually every home in their service area that wants it, growth in subscriber numbers going forward largely depends on poaching customers from someone else.  Nobody makes that easier than phone companies trying to sell customers DSL with speeds under 10Mbps.  According to CEO Glenn Britt, Time Warner Cable picked up more new broadband customers than Verizon and AT&T combined.

Time Warner Cable broadband speeds give headaches to phone companies trying to sell traditional DSL.

While phone companies continue to argue that speeds don’t matter (at least for their DSL product line), Time Warner believes otherwise and apparently so do their new customers.  The company reports that almost two-thirds of those dumping DSL said their old service was too slow.

Much of the company’s growth in broadband revenue is also coming from the high end, as customers increasingly gravitate towards faster broadband speed tiers.

Britt

Residential DOCSIS 3 (Extreme/Ultimate) customers increased 50% to 218,000, and almost 66% of new broadband customers signed up for either Turbo (20Mbps), Extreme (30Mbps) or Ultimate (50Mbps) service.  Together, these customers now make up 20% of Time Warner’s broadband subscribers, up from less than 16% a year earlier.

Customers are willing to pay higher prices for faster service, a point not lost on Britt, who noted that once customers perceive broadband has more and more value, the company can charge more for it over time.

If Britt’s steadfast belief in Internet Overcharging-consumption billing schemes holds true, some customers might find they are charged substantially more if the company decided to discontinue offering unlimited Internet service.

For now, the company plans to continue its experiments in consumption billing through its Internet Essentials program, now testing in South Texas, which limits customers to 5GB of usage per month before overlimit fees kick in.  But going forward:

“I think we’ve been pretty clear about this, we do think over time, there will be consumption element to the tiers,” Britt said.

But Britt says he wants to keep unlimited access for customers willing to pay for it.

Time Warner's Hotspots in southern California.

“We retained our unlimited tier with no cap (I actually don’t like the term cap),” Britt added. “And I think we should always have that. So that this was not in any way coercive, people who wanted to save money, could. People who wanted to keep what they had have kept it, and they still have unlimited. So our plan is to roll that out further across [the country] as the year goes on.”

Britt noted the company’s own streamed video products would not drain customers’ usage allowances.  But Netflix and other online streamed video would.  Britt adopted the same argument Comcast has used to defend the practice.

“So there’s a set of standards called the IP, Internet Protocol, and those can be used for a wide variety of things in the world,” Britt explains. “There’s also something called the public Internet, which happens to use IP standards. That doesn’t mean those two things are exactly the same. So the application that we have on the iPad is over our closed-circuit network. It’s just a different standard than we’ve used traditionally for our video. But it’s not the public Internet.”

In other developments, the company’s controversial co-marketing agreement with Verizon Wireless has now expanded to four cities: Raleigh, N.C., Cincinnati and Columbus, Ohio, and Kansas City, Mo.

Time Warner Cable executives told investors the early stages of the cooperative marketing agreement will consist of a promotion that includes a $200 gift card when a customer buys both a Verizon Wireless plan and upgrades at least one service on their Time Warner Cable account.  But the company plans to gradually reduce discounts and instead offer unspecified “exclusive product enhancements” that will only be available to customers who subscribe to both services.

Lastly, expect Time Warner Cable to continue aggressive deployment of its Wi-Fi networks in New York and Los Angeles.  The company signaled it intends to construct similar Wi-Fi networks in other cities in serves, but most likely not during 2012.

New York State Attorney General Eric Schneiderman is convinced Verizon Communications is abandoning quality landline service for millions of New Yorkers while diverting money and resources to its more profitable cell service Verizon Wireless.

Last week, Schneiderman blasted the state’s largest landline provider for mounting complaints about poor service that now impact 92 percent of its customers, calling deregulation a failure for consumers and businesses in New York.

“Verizon customers deserve the high-quality service they’ve been promised,” Schneiderman told The Associated Press.

The attorney general reports that the number of customers enduring service outages for more than 24 hours has increased, while landline infrastructure — particularly wiring — is allowed to deteriorate.

Schneiderman suspects Verizon is shortchanging landline service as an increasing number of wired phone customers disconnect service, often in favor of Verizon’s more lucrative cell phone service.  The state Public Service Commission (PSC) fined Verizon $400,000 in March for similar concerns, pointing to the company’s intentional workforce reductions lengthening repair windows and creating repair backlogs in some regions.

Schneiderman’s office filed comments with the PSC requesting changes to Verizon’s Service Quality Improvement Plan, which was originally launched in 2010:

At best, New York’s telephone service market is a duopoly, and contrary to theoretical expectations of market controls, the presence of a single competitor has not in fact prevented Verizon from allowing customer service to continue to degrade. Rather than meet its obligations to provide wireline telephone customers with minimally adequate telephone service, Verizon is continuing to drastically reduce its workforce with the result that the company cannot meet its customers’ repair needs in a timely manner.

Verizon’s management has demonstrated that it is unwilling to compete to retain its wireline customer base, and instead is entirely focused on expanding its wireless business affiliate. It is incumbent on the Commission to take appropriate regulatory action to ensure that customers receive reliable telephone service with adequate repair performance. Therefore, the Commission should modify Verizon’s service plan to ensure customers receive adequate service quality in the future.

Verizon defended its service in New York pointing out the company has invested $1.5 billion in the state for infrastructure, including its FiOS fiber to the home network.  Verizon spokesman John Bonomo questioned Schneiderman’s claim that 92 percent of Verizon New York customers had poor service, noting 98 percent of its landline customers don’t have service problems.

Schneiderman’s highlighting of a $400,000 service fine imposed by the PSC did not account for unprecedented damage from both Hurricane Irene and Tropical Storm Lee late last summer, Bonomo added.

But the state’s attorney general notes Verizon’s service problems in New York have been ongoing well before last summer.

Service complaints, charted here from 2008-2011, show a major spike last summer and fall and remain higher than normal.

Schneiderman

“Since at least 2008, Verizon has frequently failed to meet these PSC telephone service standards essential to safe and reliable telephone service,” Schneiderman says. “Even as the number of telephone lines needing to be maintained has dwindled to half those of a decade ago (as customers choose to rely instead on wireless and/or cable telephony), Verizon’s continues to fail to meet the PSC’s service standard.”

Customers on the upper west side of New York City don’t need to be reminded of Verizon’s service failures.  Hundreds of Verizon landline customers in New York’s largest city were left without basic phone service for more than a week, only made worse by the fact Verizon told many of them they’d be without service for at least one additional week while the company worked on repairs.

Phone and Internet service went dead in multiple buildings along Central Park West April 10, but customers wanted to kill when they learned the phone company wanted more than two weeks to get service restored.

“I was like, excuse me, are you serious? Two weeks?” Iram Rivera, a concierge at 262 Central Park West, told DNAinfo.  His building was hard hit by the service outage — 80 percent of the building’s 80 apartments were affected.

“I just don’t get the feeling that there’s much of an appreciation on Verizon’s part that this is a hardship for people,” said Ken Coughlin, who lives on West 87th Street and Central Park West. “There’s no communication, there’s no updates, it’s infuriating.”

The outage only affected traditional landline service and DSL broadband over copper phone wiring. The more modern fiber-optic FiOS network that provides TV, Internet and voice service wasn’t affected, Bonomo said.

Schneiderman notes landline outages have an especially hard impact on small businesses:

In the current recession, the fragile economic condition of many small businesses puts them at risk of financial disaster if they suddenly lose telephone service, and their provider is unable to restore service promptly. Each day that these businesses are without service they lose significant revenues that many simply cannot survive without.

Small businesses depend on functional telephone service to meet the needs of their customers in numerous ways. When customers are unable to reach a business by telephone, they may assume the business is closed and purchase the goods or services they want elsewhere. Restaurants are prevented from giving reservations to prospective customers who call. Many types of businesses depend on working telephone lines for processing credit card charges, and may lose substantial sales by limiting transactions to cash or checks. Professional offices can be prevented from providing medical, legal or accounting services to their clients without working telephone service.

In Schneiderman’s view, the deregulation policies now in place in New York have failed consumers, leaving them with a duopoly of phone providers with insufficient oversight.

For competition to benefit customers with improved service, lower prices, and more innovation, there has to first be a willingness to compete, which is significantly absent from Verizon-New York’s policies and practices.

Rather than robust competition, New York’s telephone market is at best a duopoly, with as many indicators of cooperation between the two providers as robust contest for customers. Furthermore, the actual behavior of consumers in the real world is markedly different from the PSC’s theoretical assumptions about the telephone market.

When a Verizon customer experiences a prolonged service outage or installation delay, the option to switch carriers to a cable provider is of no immediate use. Finally, even if consumers wanted to compare Verizon’s service performance with cable provider alternatives, the lack of available information prevents consumers from making educated choices.

In New York, most customers are served by Verizon Communications, Time Warner Cable, or Cablevision.  Time Warner Cable and Verizon recently agreed to cross-market the other’s products and services as part of a wireless spectrum transfer.