Phone companies can beat their cable competitors, but only if they invest in fiber upgrades that can deliver as-advertised broadband service and speed.

TDS Telecom, an independent phone company based in Chicago, has reported good results from the $60 million in fiber upgrades it has committed to complete in 2018.

TDS has been overbuilding beyond its existing telephone service areas to deliver broadband, phone, and television service to communities evaluated as:

• Having a good demographic mix of upper middle class residents;
• Experiencing population growth;
• Underserved by incumbent phone/cable companies;
• Offers good population density where homes and business are close enough to each other to warrant the expense of wiring each for fiber service.

TDS chief financial officer Vicki Villacrez made her case with investors to think positively about investments in fiber, reporting one TDS market garnered a 54% market share in broadband and took 33% of the market share for video after fiber service arrived.

TDS, unlike many other independent phone companies, is not avoiding investments in delivering faster broadband speed to customers. TDS typically reinvests 75% of its revenue in network upgrades and returns the other 25% to shareholders. Outside of its landline service areas, TDS has also acquired cable companies to provide service to customers, offering gigabit speeds in many areas.

In rural areas, the company is combining federal Connect America Funds with its own money to deploy bonded DSL service in areas too unprofitable to serve with fiber. This typically delivers faster internet service than rural broadband rollouts from other phone companies like Windstream and Frontier.

TDS is often the third provider in its overbuilt markets, a fact that is usually not well-received by investors because it can constrain market share and potential profits. TDS chooses its overbuild markets where incumbents have chronically underinvested in their networks, and the result is “pent-up demand” by customers, according to Villacrez. TDS’ market share is typically higher in their markets than other overbuilders.

Villacrez routinely tells investors the company’s success largely depends on fiber upgrades. About 24 percent of TDS Telecom’s local landline service area now has fiber to the home service, and the company is aggressively cutting the number of customers still served by slow traditional ADSL service.

Molinaro

Charter Communications has found itself an ally in Marc Molinaro, Republican candidate for New York’s governor, who attacked Gov. Andrew Cuomo on Tuesday for ordering the removal of Spectrum from New York State.

“We’ve got a megalomaniac on our hands, a veritable ‘Putin on the Hudson,'” Molinaro charged, defending the cable company for being attacked by the governor and “his surrogates” for political purposes.

Cuomo “put his thumb on the scale of a major PSC decision,” said Molinaro. “I think Andrew Cuomo got furious with NY1 News and effectively pulled the plug on an entire cable system as punishment to NY1, and as a warning to others he can affect who dare to ask him tough questions.”

Molinaro has repeatedly claimed the Public Service Commission is in the back pocket of the governor’s office.

Cuomo vs. NY1 – Spectrum’s 24-hour news channel in New York City

Molinaro’s campaign has been critical of an ongoing spat between the governor and reporters from NY1, Spectrum’s 24-hour news channel in New York City.

Earlier this month, Cuomo bristled at a question about improper campaign contributions from Crystal Run Healthcare, a health insurance provider in Middletown. NY1 reporter Zack Fink asked if the governor was considering returning those contributions and launching an internal investigation.

Gov. Cuomo

GOV. CUOMO: […] If the ongoing investigation finds any fraud, then as we’ve always done, we will return the donations. That’s standard operating procedure. We’re doing it in this case; we’ve always done it.

But speaking of fraud, Charter Spectrum has been executing fraud on the people of this state. They were given a franchise for a very specific set of conditions. It is a very valuable franchise. Many companies could have been given the franchise. Charter Spectrum said that they would increase cable access to the poor and rural communities around the state. That was the condition of them getting the franchise. I promised this state 100% high-speed broadband. Why? Because high-speed broadband is going to be the great equalizer, the great democratizer.

Whether you’re a business, an individual, you’re going to need high-speed broadband to be competitive. Charter Spectrum defrauded this state. They are defrauding consumers. Charter Spectrum is running ads that say we are ahead of schedule and at no cost to the taxpayer. The Public Service Commission said they’re behind schedule, not on schedule, and certainly not ahead of schedule. And to say it is no cost to the taxpayers is also a fraud, because that’s the condition upon which the taxpayers gave you the franchise. So you are defrauding the people of this state. That’s a fraud.

Fink

ZACK FINK (NY1): You said the PSC is looking into new operators. Is it the PSC’s place to do that or is it the market’s?

GOV. CUOMO: Are you speaking on behalf of Charter Spectrum or yourself?

ZACK FINK (NY1): No, I’m just asking a question. You brought it up so I’m curious. You said Friday that the PSC was looking at potential new operators.

GOV. CUOMO: Well, the Public Service Commission is saying that Charter Spectrum violated their franchise agreement. If you violate your franchise agreement, then you lose the franchise agreement and then they would have to find another operator without disruption to any of the consumers or the good workers of Charter Spectrum.

Viewers of NY1, a Spectrum News channel, never saw this exchange, which was widely covered elsewhere by the New York media. Viewers also didn’t see an on-the-record call-in by the governor made later than day to NY1’s newsroom to discuss the exchange. News of the call leaked after nobody at NY1 would publicly discuss it or why the news channel refused to air it.

Cuomo’s opponents on both his left and right criticized the governor over his treatment of the NY1 reporter.

“I’ll come right out and say it. It looks to me like Andrew Cuomo is trying to send a chilling message to the news media, ’don’t mess with me’, and I hope the inspector general can prove me wrong,” Molinaro said in a statement.

This week, Molinaro turned up the heat by claiming the governor was “acting more like a third-world dictator trying to intimidate the news media into dropping stories than an elected democratic leader who respects the First Amendment and has nothing to fear from it.”

Cynthia Nixon, running for the Democratic nomination to the left of Cuomo politically, claimed his chastising of NY1 reporters was out of line, resembling how Donald Trump treats the press.

“Cuomo can’t hold himself up as New York’s answer to Donald Trump, and simultaneously threaten members of the press for doing their job,” Nixon said, asking the governor to apologize.

Cuomo’s spokesman Rich Azzopardi claimed the ongoing criticism of Charter is nothing new for Gov. Cuomo.

“The governor answered his question and made the same statement that he has made to Charter Spectrum reporters and reporters statewide numerous times over the past few months, communicating the facts of the state’s two-year dispute with Charter for failing to serve the citizens of the state,” Azzopardi said.

Cuomo has made offhand remarks about Charter since the company replaced Time Warner Cable in 2016. He criticized NY1 and other Spectrum News stations around the state for not covering the IBEW strike against the cable company or a lawsuit filed by the state attorney general over the cable company’s failure to deliver on advertised broadband speeds.

“They virtually blacked it out,” Cuomo said of Spectrum News during a press event held on the day the PSC voted to drop Charter as a provider in New York.

Azzopardi also denied Molinaro’s accusation that the governor was involved in the PSC’s decision to force Charter to leave New York and dismissed the Republican opponent for spreading unproven “conspiracy theories.”

Cuomo is widely expected to be re-elected, with both Nixon and Molinaro running significantly behind the governor in polls. The primary is on Sept. 13.

Gov. Andrew Cuomo discusses Charter’s broken promises to New York State during a visit to Rochester, N.Y.  (Courtesy: Democrat & Chronicle) (2:28)

While celebrating its success at cutting $350 million in expenses, Frontier’s newest plan to keep the company from drifting towards bankruptcy is a $500 million increase in revenue (and hopefully profits) with a series of “revenue enhancements” and cost cutting.

Significant broadband upgrades in legacy DSL service areas are not on the table, as Frontier continues to spend most of its capital on matching Connect America Funds (CAF) and state grants to expand broadband into unserved and underserved rural areas.

“Approximately 80% of our capital program continues to focus on revenue generating and productivity enhancing projects,” said R. Perley McBride, Frontier’s outgoing chief financial officer. “The focus of our capital spending remains consistent. We continue to focus on our CAF builds, using both wired and wireless technologies.”

Frontier has been criticized by some for spending too much on its network and acquisitions and not enough on shareholder return. The company suspended its dividend in February, and the share price has remained below $6 a share since July. After announcing its latest quarterly results and a new $500 million EBITDA initiative on July 31, the average share price posted only modest gains of around $0.25 a share.

Frontier’s business remains troubled, with looming debt repayments in its future. The date to remember is Sept. 15, 2022 — the day Frontier needs to repay $2 billion in unsecured bonds to maintain its credibility in the credit markets. If it fails to pay, the company could find future financing difficult, which is often what triggers a trip to bankruptcy court.

The year 2022 is also very important to Californians. Frontier disclosed it planned to expand rural broadband service to 847,000 unserved/underserved rural residents by the end of 2022, with specific commitments in the next few years to upgrade 77,402 locations, in part with CAF funding, increase broadband speed for 250,000 households, and deploy newly available service to 100,000 homes.

Frontier’s own deployment goals in California — goals the company may not be honoring. (Image courtesy of: Steve Blum’s blog)

According to the California Emerging Technology Fund (CETF), Frontier has no intention of meeting its rural broadband commitments. In effect, similar to Charter Communications, it merely made the commitments to win approval of its acquisition of Verizon’s wireline and FiOS business in California.

A day of reckoning for the company’s alleged failure to meet its obligations is likely forthcoming. Steve Blum’s blog notes Frontier isn’t saying much:

In its formal response to CETF’s allegations, Frontier never actually says that it kept to that timetable. All it says is that “Frontier sent a letter to the Communication Division dated March 8, 2018 on its commitments that includes a confidential attachment reflecting completed locations through December 31, 2017”. It sent a letter, but doesn’t say what’s in the letter or even claim that the letter documents fulfillment of its obligations.

CETF told California regulators a disturbing story about Frontier’s failure to perform and other allegations in its filing with the California Public Utilities Commission, alleging Frontier is reneging on the deal it made with the state and various stakeholders in return for getting its acquisition approved. The group also accused Frontier of failing to deliver on its affordable broadband offering, because the company made signing up difficult and bundled extra fees and surcharges onto the bill.

“Frontier launched its existing affordable broadband offer in late August 2016 and to date only 9,173 adoptions have been achieved, a mere 4.5% of the 200,000 household adoption goal,” the CETF wrote. “Due to the initial Frontier eligibility requirement that Frontier customers be a telephone landline Lifeline subscriber and the total bundled cost, the affordable broadband offer has only attracted 7,452 low-income subscribers, which is 190,827 households short of the agreed-upon goal.”

Frontier has a employer turnover problem in California, evident from this filing by the CETF. (Courtesy: CETF)

The CETF said Frontier was “shirking” and should face the maximum fine of $50,000 a day retroactive to July 1, 2016 for failure to comply with its obligations. As of the end of July, 2018 that fine would amount to over $39 million.

To comply with existing obligations to California, Frontier could have to spend in excess of $1 billion in the next two years. But Frontier has told investors it planned to spend no more than $1.15 billion on capex in fiscal year 2018 across its entire national service area. This could explain why Frontier may be stalling on upgrades in California.

Also raining on Frontier’s parade is the muted reaction to Frontier’s latest money-raising scheme. Shareholders appear lukewarm, with some openly skeptical that Frontier can deliver what it promises.

The plan’s success depends on:

• Frontier’s ability to raise rates and find other “revenue enhancements” of $150-200 million. Rate increases drive customers to competitors, reducing revenue.
• Vague “operational improvements” are expected to bring $150-200 million.
• Customer care and support savings are anticipated to generate $125-175 million in EBITDA benefit.

Outgoing CFO McBride relies heavily on opaque corporate-speak like this, with few specifics:

“In addition to the dedicated resources, we are utilizing a new approach that will significantly accelerate the benefits of both revenue and expense initiatives. This new approach involves utilization of external expertise to significantly reduce the time to successfully realize our objectives. This will allow us to execute more initiatives in parallel while still managing day to day requirements of the business.”

In short, this suggests Frontier will outsource a lot of initiatives they used to manage in-house. The company also plans to start limiting truck rolls to customer homes if the company determines the problem is likely elsewhere in their network. It also claims it is cutting customer hold times at their call centers, which are still frequently outsourced.

What Frontier has made clear, again, is their determination to keep a cap on spending, which means much of the money Frontier will spend each year will go towards network maintenance, not service upgrades. Therefore, customers can expect incremental upgrades, usually when a construction project requires Frontier to replace existing copper wire infrastructure with fiber optics or at a building site for a new housing development. Most customers in existing neighborhoods served by legacy copper wiring on the poles since the 1960s will continue to be serviced by those lines until they are torn down in a storm or stolen. Frontier has consistently shown no interest in wholesale network upgrades in its legacy service areas.

Before Charter Communications is shown the door and exits New York (if Charter loses its anticipated legal action against the state), it should be required to issue refund checks to every subscriber in New York to make up for a series of broken promises.

State Assemblyman Anthony Brindisi (D-Utica) has sent a letter to Acting Attorney General Barbara Underwood and New York Public Service Commission Chairman John Rhodes demanding the cable company pay up before transitioning service to another provider.

Brindisi claims Charter’s Spectrum failed to provide promised internet upgrades, has not met its obligation to improve customer service, and is charging even higher rates than its predecessor, Time Warner Cable.

Brindisi is also concerned Charter’s required transition plan may well be redacted by the company. He wants the transition plan made public, with ample opportunity for New York residents to participate in a discussion about which cable company ultimately replaces Spectrum (again assuming the company loses its legal action).

Here is Brindisi’s letter:

Dear Ms. Underwood and Mr. Rhodes:

I am writing to you as a follow up to the order issued by the New York State Public Service Commission on July 27, 2018 to revoke the 2016 merger agreement between Charter Communications, Inc. doing business in New York as Spectrum, and Time Warner Cable, Inc.

This order is truly in the best interests of New York residents.  For two years, I have received  literally hundreds of emails, letters, and petition signatures from constituents who have endured frequent, often unexpected rate hikes, and who have watched flashy ads from Charter promising lightning-fast internet speeds, as they can barely pay bills or send emails through 1980’s-era infrastructure that has not been improved.

Brindisi

I am respectfully asking that you collaborate to work on a three-point plan that addresses concerns I continue to hear from Charter’s cable and internet customers, as well as from the employees who work for the company.  The following is my proposal for consideration by consumer and utility regulators:

Charter should provide reasonable compensation in the form of rebate checks to its customers who have received cable rate hikes significantly above the national average for cable rate increases, which was 5.8 percent from July, 2016 to July, 2017.

Customers with internet service from Charter who never received promised service upgrades should receive compensation in the form of rebate checks from the company.

Any company petitioning the PSC to pick up Charter’s internet, cable, and phone service should pledge to negotiate in good faith with unions representing workers, and should agree not to cut vitally needed pension and health care benefits for workers.

The rate increases Charter customers received shortly after Charter’s acquisition of Time-Warner’s system have been staggering.  One constituent in Utica was billed $91.92 for cable services in January, 2017—and in March, 2018, his bill was $129.26 for exactly the same service.  Another constituent from Rome told me that she paid $108 a month for cable, internet, and telephone service in May, 2016—about the time Charter took over for Time Warner.  By April, 2018, her bill was $200.  These are increases many times the national average, all under the guise of ‘expiring promotional packages’

These cable rate hikes are just as serious a problem for consumers as Charter’s failure to live up to its promises to upgrade its broadband.  Many of the consumers I have heard from are seniors on fixed incomes who depend on cable and internet for information and to communicate with family members.  They should be compensated for what clearly is blatant overcharging.

Thank you very much for all you are doing to protect New York consumers, and for your concern about this issue.  If you have any questions, please feel free to give me a call.

Sincerely,

Anthony Brindisi
Member of Assembly

(Thanks to Todd N., a regular Stop the Cap! reader, for sharing the story.)

For residents of 10 Mississippi communities, an alternative broadband option is now available delivering up to 120/50 Mbps speed with no data caps or throttling for a flat $50 a month, taxes and fees included.

“C Spire 5G Internet” is as described, except it doesn’t use the official 5G standard and will require the installation of a “dinner plate”-sized antenna on one’s home to get the service.

C Spire is using an 802.11 variant with equipment developed by Mimosa and Siklu, leveraging C Spire’s existing 8,400 route miles of fiber infrastructure to extend service wirelessly to each customer without the cost of wiring a fiber optic cable to the home.

Siklu’s EtherHaul products work in conjunction with its point-to-point and point-to-multipoint radios that operate in the 60 and 70-80 GHz millimeter wave bands. Because of the vast amount of spectrum available on these uncongested frequencies, C Spire can provide connections up to 10 Gbps from each small cell site.

C Spire is using Siklu’s EH-600 mmWave backhaul equipment for its fixed wireless internet service in Mississippi.

Mimosa supplies short-range MicroPoP architectures and in limited tower deployments including Mimosa A5 and A5c access devices, Mimosa C5 client devices, and Mimosa N5-360 beamforming antennas.

“Our service is backhauled by Siklu’s carrier grade solutions enabling us to deliver high-speed internet access without the arbitrary data caps usually associated with LTE or satellite services,” said C Spire president Stephen Bye.  “With a flat rate of $50 a month, which includes taxes and fees, our customers can now easily get all of the content they want and need.”

C Spire said it is quickly working to introduce the service in “dozens” of markets in Mississippi, in addition to its earlier plans to offer fixed wireless to over 90,000 locations across its service area. The “5G” fixed wireless service being introduced in Mississippi is not the same as C Spire’s earlier fixed wireless initiative.

Customers report wireless speeds are within a reasonable range of what is advertised, but antenna placement can be critical to get the best speed. It isn’t known how many customers are currently sharing each small cell site, and C Spire has protected itself with a contract clause allowing it to begin data caps, usage based billing, or targeted suspensions for customers deemed to be consuming too much data if network congestion becomes a problem.

Mississippi is broadband-challenged because many of its rural locations are populated with some of the country’s poorest citizens. AT&T, the state’s largest phone company, has shown little interest expanding fiber into many of these areas, especially in northern Mississippi, and the state’s cable companies include Cable One, notorious for being expensive and data-capped. As a result, the state is ranked 49th out of 50 for broadband availability.

C Spire is a regional mobile provider — the sixth largest in the country — and directly provides its own cell service in Memphis, Tenn., Mississippi, Alabama, and the Florida Panhandle.

C Spire introduces 120 Mbps fixed wireless internet access for a flat $50 a month in Mississippi. No data caps or throttling. This company produced video introduces the service. (1:23)