Earlier this year, Gov. Sam Brownback (R-Kansas) signed legislation into law that allows AT&T to deregulate itself, and its rates, at will.  Kansas ratepayers are about to pay the price for that law as basic phone rates are expected to increase as much as $84 a year for residents that have few alternatives.

AT&T wants to eliminate price caps on landline service, which currently limit pre-tax prices to $15.70 in rural areas, $16.70 in larger Kansan cities with enhanced local calling areas.  After AT&T won similar deregulation in Oklahoma, Texas, Missouri and Arkansas, AT&T has been regularly raising basic phone rates, which are now $5 to $7 more a month for basic service than before deregulation.

AT&T intends to divert much of the additional revenue away from upkeep of its landline network, which in several states it has won the right to abandon in rural areas, and use the money to enhance its cell phone network instead.

AT&T spokesman Aaron Catlin told The Wichita Eagle AT&T intends to supply communities currently bypassed by AT&T DSL with heavily usage capped, and much more expensive, 3G wireless broadband instead.

AT&T currently sells that service for $60 a month with a 5GB usage limit and an overlimit fee of $50 per gigabyte.

Catlin told the Eagle AT&T was excited with the possibilities, although rural Kansans facing those prices might not be.

“A lot of bad things are going to happen long-term,” Steve Rarrick, an attorney for the Citizens’ Utility Ratepayer Board told the newspaper. “Over time, they (customers) are going to see their phone bills go up. That’s been the experience of other states.”

Losing customers.

A year after Frontier Communications assumed control of Verizon’s assets in the Pacific Northwest, customers are fleeing the company’s inherited fiber-to-the-home service FiOS, after announcing a massive (since suspended, except in Indiana) 46 percent rate hike for the television portion of the service.  A new $500 installation fee has kept all but the bravest from considering replacing customers who have left for Comcast and various satellite TV providers.

Frontier’s second-quarter financial results revealed the company has lost at least 14,000 out of 112,000 FiOS TV customers in the region (and in the Fort Wayne, Ind. market, where the service is also available.)

Early reaction to the original rate hike announcement started customers shopping for another provider — mostly Comcast, which competes in all three states where Frontier FiOS operates.  Even after the rate hike was suspended in some markets, intense marketing activity by Frontier to drive customers towards its partnership with satellite provider DirecTV managed to convince at least some of those customers to pull the plug on fiber in return for a free year of satellite TV, although an even larger number presumably switched to the cable competition.

D.A. Davidson, a financial consulting firm, told The Oregonian the message was clear.

“They would love to get rid of the FiOS TV customers,” Donna Jaegers, who follows Frontier, told the newspaper. “They’re programming costs are very high compared to the rates that they charge.”

Jaegers said Frontier Communications completely botched their efforts to transition customers away from FiOS TV towards satellite, because most of those departing headed for the cable competition, attracted by promotional offers and convenient billing.

Many others simply don’t want a satellite dish on their roof, and are confounded about Frontier’s message that satellite TV is somehow better than fiber-to-the-home service.

Frontier admits its FiOS service is now underutilized, but claims it will continue to provide the service where it already exists.

Wilderotter

Frontier Claims Its DSL Service is Better Than Cable Broadband

Frontier’s general business plan is to provide DSL service in rural areas where it faces little or no competition, and most of Frontier’s investment has been to upgrade Verizon’s landline network to sustain 1-3Mbps DSL service, for which it routinely charges the same (or more) for standalone broadband service that its cable competitors charge for much faster speeds.

But Frontier Communications CEO Maggie Wilderotter says their DSL service is better than the cable competition.

“A key differentiator between our network and cable competition is that you consistently get the speed you pay for,” Wilderotter told investors on a conference call. “There’s no sharing at the local level. High demand for bandwidth-intensive applications like video are putting pressure on all wired networks. To that end, we want to make sure that we have more than enough capacity to satisfy the expectations of our customers. We’re spending capital in all parts of the network with specific emphasis in the middle mile, which will enable us to consistently deliver a quality customer experience for our customers of today and tomorrow.”

Frontier Communications CEO Maggie Wilderotter defends anemic broadband additions during the 2nd quarter of 2011 and tries to convince investors DSL service is better than the cable competition. August 3, 2011. (4 minutes)
You must remain on this page to hear the clip, or you can download the clip and listen later.

Netflix Traffic Represents 25% of Frontier’s Broadband Traffic; Online Video — 50%

Wilderotter admitted Frontier’s broadband network is overcongested in many regions, which she partly blamed for the company’s anemic addition of new broadband customers.

She noted Netflix, which has itself consistently rated Frontier the worst wired broadband provider in the country for being able to deliver consistent, high quality access to their streaming service, represents one-quarter of all capacity usage of Frontier’s broadband network.

“Video is about 50 percent,” Wilderotter added.  In an investor conference call, she explained network congestion in more detail:

“In [the second quarter], we had many areas with unacceptable levels of network congestion, which negatively impacted our growth in net high-speed additions.” Wilderotter said. “We believe all of the major congestion issues will be fixed by the end of [the third quarter], and that will enable us to drive higher growth and net broadband activation in [former Verizon service areas.]”

“What we decided to do is to go for fixing the middle mile, which is the [central office] to the […] neighborhood and to expand that capability by 100-fold. And then also, expand from the [central office] out to the Internet and make sure that we have huge capacity to deliver and receive capability to our customers. So when we sell 6 meg, 10 meg, 25 meg, 50 meg, the customer gets what we sell them and that was extremely important for us.”

“So what we did is in the areas where we saw the congestion increase based upon usage increases, and we’ve built new households. We’ve held off on marketing to a lot of those new households until we fixed the congestion problem because we didn’t want to exacerbate what we had already. We’ve shifted capital in terms of the mix of how we’ve spent capital to fix this problem. I’d say we’re probably 75% of the way there in fixing congestion. This quarter is another big quarter for us to get all of the major issues out of the network, which will allow us in the back end of this quarter through the fourth quarter, to really start pushing the penetration levels where we’ve built new households in the areas that have been affected by congestion.”

Frontier Introduces Line Bonded DSL — Two Connections Can Improve DSL Speeds

Frontier Faster? Frontier announces line bonded DSL.

Frontier Communications also announced the introduction of Frontier Second Connect, a DSL line bonding product that delivers two physical connections to a single household.  Line bonding allows for improved broadband speeds.

“Second Connect gives our customers two exclusive connections in one household, and we’re the only provider in every market that can do that,” Wilderotter claimed.

In more urban markets, Frontier’s DSL speeds are woefully behind those available from most cable competitors.  Frontier has begun upgrading some of their legacy service areas and retiring older equipment in an effort to improve the quality of service.

“The real initiatives that we have underway are called middle mile, interoffice facilities, as well as some of the more aged equipment that’s in the network,” said Dan McCarthy, Frontier’s chief operating officer. “So as we go through, there’s about 600 projects that are underway today that will improve both the speed and capability.”

“We’ve inherited markets that there has not been upgrades to capacity in these markets for many years and fixes to the networks, plus the elements as the DSLAMs, even the DSLAMs themselves are old,” Wilderotter said. “So we’re replacing network elements in the neighborhood. We’re splitting them and moving customers to other network elements to make sure that they have a good experience.”

Frontier executives answer a question from a Wall Street banker about DSL speeds and congestion problems on Frontier’s broadband network. A detailed technical discussion ensues as the company tells investors it is redirecting some capital to fixing Frontier’s overcongested network. August 3, 2011. (5 minutes)
You must remain on this page to hear the clip, or you can download the clip and listen later.

Frontier Still Losing More than 8% Of Its Landline Customers Every Year

Despite broadband rollouts and incremental improvements, more than eight percent of Frontier’s landline customers disconnect service permanently every year.  Frontier called that disconnect rate an improvement over its line losses last year, which exceeded 11 percent in some areas.

“Total line losses improved to an 8.6% year-over-year decline, our lowest level since taking ownership when the pro forma loss rate was 9.7%,” reported Wilderotter. “We also improved [the] loss rate [in former Verizon service areas to] 10.1% compared to 11.4% in Q2 2010.”

Most of Frontier’s departing customers are switching to cable providers and/or cell phone service.

(Update 8-23-2011: We are now told in many areas, Frontier’s Second Connect service is not actually a bonded DSL product, but rather a “dry loop” second DSL line that carries the same speed as your primary line.  Presumably, household members can divide up who uses which DSL circuit for Internet access.  The charge for Second Connect in ex-Verizon service areas is $14.99 per month plus a second mandatory monthly modem rental fee of $6.99. If the web link does not work, it means the service is not available in your service area.)

Lebanese consumers and businesses are fed up with Lebanon’s archaic Internet infrastructure and the usage limits that come with it.

Now the country is waiting with anticipation as the government prepares to open up new bandwidth from a 3.84 terabit per second underseas cable that passes through the region, but has been left idle since last December.

Lebanon’s Internet is ranked among the slowest in the world, mostly thanks to an over-controlling state telecommunications authority that has priced broadband Internet access into the stratosphere.  Most Lebanese cannot afford the ridiculously slow and expensive “top speed” DSL connections offered by the country’s phone company, offering “up to 2Mbps” speeds for $200US per month.  Instead, most lower income households still use dial-up access, while Lebanon’s middle class settles for 256kbps DSL that still runs a ridiculous $25 a month.

But the 60 percent of the country choosing 256kbps Internet finds even those speeds less than useful when considering they come with a usage allowance of a paltry 3GB per month.  Going over that limit delivers an expensive lesson.  Excess usage is billed at $17 per gigabyte.

Ghanem

Lebanon’s Ministry of Communications, who made the announcement of the forthcoming access improvements, didn’t impress many consumers with word they would “double or triple” the usage cap to celebrate forthcoming speed increases.

“It [is] like entering [the knowledge economy] through a small window,” said Diana Bou Ghanem, head of the the ministry’s ICT office.

Even with the forthcoming improvements, government controls have kept Lebanon’s Internet in the dark ages.  Broadband statistics reveal war-torn Afghanistan and Iraq enjoy faster broadband than Lebanon, and some of the world’s poorest countries like Zambia and Tanzania enjoy speeds twice as fast as those found in downtown Beirut.

Lebanon’s Daily Star newspaper covered the broadband debacle with some alarming reporting suggesting some of the government’s key officials on telecommunications barely grasp telecommunications networks, policies, and practical realities.

For example, former Telecom Minister Charbel Nahhas, a major booster of Lebanon’s forthcoming foray into 3G wireless broadband, seems to believe such networks will deliver up to 20Mbps to Lebanese cell phone users.

Nahhas considers 3G cutting edge for Lebanon, even as the rest of the world prepares to retire it for faster 4G wireless networks.

Telecom Minister Adviser Antoine Boustani seems to think broadband is a tangible resource that can be exported like oil, gas, or electricity.

“We will have an overflow of capacity with [the new underseas cable],” Boustani told the newspaper. “We could even distribute the excess to other countries.”

Ogero is the state-administered phone company in Lebanon.

The Lebanese government and state run phone company — Ogero — have even been willing to celebrate broadband achievements both have regularly failed to meet:

Ogero had planned to host a huge party announcing the [underseas] cable last December, under the auspices of then Prime Minister Saad Hariri. According to sources close to the affair, it was to feature a seated dinner for some 500 persons at the prestigious Pavillion Biel, prime time live television coverage and even Lebanese Opera singer Hiba Kawas, who was commissioned to write a song for the event, performed with a full orchestra. Despite the fact that the Lebanese leadership failed to deliver broadband to its citizens for the past decade, some 10 trophies were to be crafted by the Lebanese sculptor Rudy Rahme and distributed to various officials.

But all this was cancelled when then Telecoms Minister Nahhas received an invitation and challenged Ogero’s role in managing the [underseas] cable and the prime minister’s patronage of it.

Lebanon is following developments elsewhere in the region where broadband usage limits are becoming a thing of the past. When a cartel of Kuwaiti ISP’s threatened to introduce new usage caps in unison, a full-scale consumer revolt forced the government to ban usage caps in the country.

“The Internet has become a cornerstone in development, economy and everyday life in Kuwait,” the country’s telecoms minister, Salem al-Uthayna, said last month in explaining the decision to abolish caps.

Most observers place the blame for Lebanon’s snail-like broadband development at the feet of the government and the state-run phone company, which has blocked efforts to radically change broadband in the country.

Critics accuse both the government and phone company of fearing major market changes, preferring incremental development over a full-scale broadband revolution.  But not everyone is a critic.

“It’s better to look for solutions – play it in a positive way,” said Abu Ghanem, who has worked at the ministry for 15 years. “I don’t want to blame anyone. Just let us work and let us deliver.”

One member of the private sector trying to put Lebanon’s bottom-rated broadband in a different context suggested citizens look on the bright side.

“OK, we are last in Internet [speed] but we are better at other things,” the source added. “Look at the price of real estate in Beirut.”

New Zealand is one of a handful of countries stuck with pervasive Internet Overcharging schemes that limit usage or throttle broadband speeds because of international connectivity limitations.  But as international underseas fiber cables ease traffic congestion, Internet Service Providers are increasingly relaxing usage caps and reducing the level of speed throttling during prime time usage hours.

Now one ISP, Slingshot, has gone all-out, reintroducing an unlimited, flat rate broadband option for New Zealanders who don’t want to worry about how much usage they’ve racked up over the past month.

For roughly $32.50US for the first six months, $65 after that, customers don’t have to watch a usage meter or “gas gauge” or face a wholesale heavy speed throttle when deemed to be using “too much” Internet service.

Sprint’s 4G experience has been nothing to write home about for a number of their customers, who are increasingly disabling the service to save on battery life.

Speed tests of Sprint’s 4G WiMAX experience show increasingly unimpressive results, as the network grows exponentially more crowded with customers trying to capitalize on the higher speeds 4G is supposed to deliver.  The result?  BTIG Research in April found, after exhaustive testing, the average Sprint 4G customer was now getting around 1/1Mbps service from a network that promised to deliver speeds many times that.

This isn't even a contest. (Source: BTIG Research)

Now an increasing number of customers are simply switching the 4G service off completely to extend battery life.

Doug Mahoney, a contributing editor for TechZone360, says he has about given up on WiMAX:

WiMAX tends to stay turned off so I run 3G and there’s no big differences in the convenience of reading email or using simple apps like Twitter and Foursquare.  With more public places starting to offer free WiFi, the case for WiMAX — or LTE — on a smart phone starts to grow weaker between the extra cost and the battery life issue.

Mahoney complains Sprint’s 4G network is simply not robust enough to support consistent speeds and access.  In suburban Washington, he compares Sprint’s 4G coverage to an open air tree, with spotty service scattered across the region.  As a result, his 4G phone spends a lot of time desperately-seeking-signal — a process that accelerates battery depletion.

Given Sprint’s WiMAX “tax” of an additional $10 a month for the service, Mahoney isn’t so certain he’d pay it again on a future Sprint phone.

Are the same speed reductions in store on Verizon’s currently-lightning-fast LTE 4G network few customers use right now?  Perhaps, but Verizon’s brand may force the company to make sure coverage is much stronger than what Sprint customers currently tolerate:

LTE has the same power consumption issues as WiMAX. I suspect Verizon will have better, more ubiquitous LTE coverage just due to the characteristics of the 700 MHz spectrum and physics involved, so I should have faster broadband available in more places rather than the abstract green tree coverage map.