Time Warner Cable's usage meter.

Time Warner Cable today relaunched usage-based billing, offering customers a $5 monthly discount off Internet access when they confine their usage to a maximum of 5GB per month.

Stop the Cap! was at the forefront of protesting Time Warner’s last Internet Overcharging experiment in 2009, which would have allowed unlimited access for $150 a month — a major rate increase to be sure.  Other customers had usage allowances that originally would have ranged from 40-60GB per month, with overlimit fees of $1/GB or more.

Time Warner Cable’s Jeff Simmermon, director of digital communications, admitted the 2009 experiment attempted in Beaumont, San Antonio, and Austin, Texas, Greensboro/Triad, N.C., and Rochester, N.Y. was unsuccessful.

“Yes, we did try this before, a few years ago,” Simmermon said. “And yes, pretty much everyone agrees that it didn’t go so well. So we listened to customer complaints. A lot.”

The cable company is trying again in southern Texas, including the cities of San Antonio, Laredo, Corpus Christi, the Rio Grande Valley and the Border Corridor.

This time Simmermon says the usage-based pricing program for Time Warner Cable customers will be optional. He also promised Time Warner Cable customers will always have access to unlimited broadband at a flat monthly rate.

This is a major change for the cable company, because earlier statements from both CEO Glenn Britt and the chief financial officer Irene Esteves called usage based billing inevitable.

Simmermon admitted Time Warner Cable is making plenty of money selling unlimited access to customers today.

Simmermon

“We profit from unlimited consumption, and a free, open Internet is the sort of Internet that has gotten us this far,” Simmermon wrote on the company’s blog.

“All participation in the Essentials plan is opt-in, with the opportunity to save a few dollars each month,” Simmermon said. “It’s not going to be for everybody, and that’s fine — all Time Warner Cable customers will still have the option of selection an unlimited broadband plan.”

The details:

1) Up to 5GB/month of data transmission for a $5/month discount from one’s current monthly bill. All Standard, Basic and Lite broadband customers will be eligible. Turbo, Extreme and Wideband customers will continue as always, with access to unlimited broadband and no optional tiered plan or discounts.

2) The ability to opt-in and opt-out of a tiered package at any time.

3) A “meter” that tracks usage on a daily, monthly, weekly or even hourly basis, enabling customers to accurately gauge usage.

3) A 60 day/2 billing-cycle grace period to allow customers to adjust usage patterns. During this time the company will notify customers of overages but won’t charge for them.

4) Overages will cost $1 per GB, not to exceed a maximum of $25/month.

This presents the opportunity to save $5/month from a monthly broadband bill.

Time Warner already has the TV Essentials plan for $39.99/month that offers low-income households to have access to cable, in a stripped down package. Simmermon says this is meant to be the broadband equivalent.

[Stop the Cap! will publish our own views on this development in a separate editorial.]

ABC’s Daisy Whitney (New Media Minute) went in search for evidence that Americans really are fed up with their cable TV bill and are cutting the cord.  She collided head-on with an industry still in denial that consumers are fed up with high cable bills and relying on their home broadband connection for video entertainment.

Nielsen reports there are 5.1 million homes in the U.S. that have broadband-only service from their provider, and presumably rely on over-the-air TV for live televised events.  That’s up a huge 23 percent over last year.  But some analysts dismiss that as growth that comes from homes that never had broadband in the first place, a conclusion that needs more evidence to back it up.

Providers admit most of their new customers are coming from other broadband providers, especially as Americans dump slow DSL in favor of faster cable or fiber-delivered service.  In most areas, those who want broadband service already have it.  The primary exception: rural residents just accessing newly-available broadband for the first time.

For 20 years, the cable industry has enjoyed a growth in video subscribers.  That is no longer the case.  While the numbers are not staggering, hundreds of thousands of big cable customers are dropping their cable TV subscriptions every quarter, and they don’t seem to be taking their business to the competition.  Granted, many cancellations are income-related, especially among video-only customers, but it is clear a ceiling has been reached on what Americans will tolerate from the cable company.

With programming rate increases continuing unabated, that bill is only going up.

[flv width=”640″ height=”380″]http://www.phillipdampier.com/video/ABC Quitting Cable TV Truth or Lie 2-22-12.m4v[/flv]

Daisy Whitney’s New Media Minute explores cord cutting.  (2 minutes)

Nearly one year ago, Google selected Kansas City, Kansas as the first city to “Think Big With a Gig,” a gigabit fiber to the home broadband network that would shatter misconceptions that Americans don’t need lightning-fast broadband speeds.

In the original announcement, early 2012 was slated to be the target date for the service to become available in at least some areas of the city.  After months of wrangling with utility companies and the city government, Google began burying the first fiber lines earlier this month.  This week, it filed for permission with both Kansas and Missouri officials to compliment its forthcoming broadband service with a complete cable-TV package as well.

Google’s fiber project now has incumbent operators on both sides of the Missouri and Kansas Rivers concerned about forthcoming competition from the search engine giant, especially after Google announced it would wire both the Kansas and Missouri sides of the city.

Greater Kansas City is primarily served by Time Warner Cable and AT&T, but smaller cable operators also offer service in some areas.  Google is considering a competitive cable package with video on demand.  It is expected to wrap up licensing negotiations with programmers within a month or two, and some of its contracts allow Google to sell cable service outside of the Kansas City area, a potentially interesting development should Google want to provide an Internet-based cable system to subscribers in other cities.

We have collected several media reports on the Google project in Kansas City to bring readers up to date:

[flv width=”640″ height=”380″]http://www.phillipdampier.com/video/WDAF Kansas City Gigabit Challenge Offers Google-Friendly Ideas 12-6-11.flv[/flv]

WDAF in Kansas City reports on some of the submissions to Google’s Gigabit Challenge — a competition to consider how to leverage 1,000Mbps broadband. (12/6/11 — 2 minutes)

[flv width=”640″ height=”380″]http://www.phillipdampier.com/video/WDAF Kansas City Why is Google Fiber Set Up Taking so Long 1-18-12.flv[/flv]

WDAF reports on what is holding up the Google Fiber project.  It turns out local utilities have been harder to deal with than originally thought.  (1/18/12 — 3 minutes)

[flv width=”640″ height=”380″]http://www.phillipdampier.com/video/KMBC Kansas City Google Begins Fiber Installation In KCK 2-6-12.flv[/flv]

KMBC reports Google is ready to break ground on its new fiber network.  (2/6/12 — 2 minutes)

[flv width=”640″ height=”380″]http://www.phillipdampier.com/video/KCTV Kansas City Google Starts Laying Fiber 2-18-12.mp4[/flv]

KCTV says Google started laying fiber this week.  The new service is on the way.  (2 minutes)

Frontier Communications faced unhappy investors Thursday after announcing it was slashing its dividend nearly in half in an effort to raise money to sustain the company’s cash flow and reduce its debt.

The company’s earnings fell 8.1% as customers continued to leave for the competition, seeking better service and lower prices.

The poor earnings results and the dividend cuts delivered a one-two punch to Frontier stock, which slid to $4.20 a share, down 16 percent in the last three months.

Among Frontier’s biggest challenges remains the quality of its broadband service to customers.  Where competition exists, Frontier DSL continues to lose the speed battle, and recent junk fees padding customer bills, including a “High Speed Internet surcharge,” and increasing modem rental fees have alienated some customers.

Frontier’s chief operating officer and executive vice president Dan McCarthy told investors 83 percent of Frontier’s service area has access to the company’s broadband product.  However, fewer than 20% of Frontier’s customers have access to speeds as high as 20Mbps.  Only just over half can access the Internet at 6Mbps.  Many of Frontier’s customers can only access lower speed service (66% can choose 4Mbps, 76% — 3Mbps, and the rest 768kbps-3Mbps).

“We’ll be investing throughout the year to improve speed-reaching capability in all our markets,” McCarthy told investors on a conference call last week.

In the second half of 2010, Frontier is expected to increase the amount of Ethernet in its middle mile network, which McCarthy expects will allow the company to deliver faster speeds over VDSL2 and VDSL2 bonding as means of driving both speed increases in the residential and the commercial markets.

However, Frontier’s preoccupation with an internal system conversion, to integrate its acquired Verizon service areas with the rest of its network, has stalled much of the company’s marketing.  Promotions, in particular, have been anemic over the last several months and will likely remain that way until later this year.  Where competition exists, cable operators have successfully been picking off Frontier’s customers.

• Broadband and satellite TV additions are down, in part due to the lack of promotions and marketing;
• FiOS video losses continue as the company shuns its fiber video service in favor of satellite TV cross-marketing;
• Line loss rates remain very high: 8.3% of Frontier’s customers disconnected their landline service in the last quarter, 5.9% in areas that were not acquired from Verizon.
• Once customers leave, they rarely return.  Churn rate of Frontier customers coming and going is at just 1.6%.

As with similar Verizon landline sales in the past, initial revenue growth from acquired customers starts out high, boosting revenue numbers and often the value of a company’s stock.  But the heavy debt load incurred from acquisitions and ongoing line losses to the competition eventually take their toll, and Frontier’s revenue now reflects the reality of a company trying to sell more services to a declining number of customers.

Morningstar notes the company’s debt problems are significant:

Frontier has struggled to bring leverage down and hasn’t successfully placed new debt since closing the Verizon transaction in 2010. Management has talked about taking care of the $580 million maturity it faces in early 2013 for the better part of a year, with no result to date. Yields on the firm’s existing debt have increased over the past year, despite the sharp decline in Treasury rates.

Standard & Poor’s Ratings Services reduced its outlook on the company from stable to negative, noting the competition is increasingly hurting Frontier’s capability to raise revenue.

The company’s decision to slash its dividend in an effort to reduce debt has created consternation for some investors who stuck with the company when the share price was above $7 and the dividend was declared safe for two years.  Neither seems to the be case any longer.