FairPoint Communications, which took control of Verizon landlines in Maine, New Hampshire, and Vermont in 2009 and then promptly went bankrupt is now appealing to New Hampshire’s regulators and legislature for deregulation.

Teresa Rosenberger, the company’s New Hampshire president, told the Nashua Telegraph that before FairPoint Communications took over Verizon’s northern New England landlines in 2009, that means of communication was the “only game in town.” Now that Verizon’s “monopoly” no longer exists, FairPoint wants the “shackles [removed from] our ankles.”

Setting aside the fact Verizon and FairPoint both faced identical competitors — Comcast and AT&T in parts of the state, the primary difference between the incumbent landline phone company and its cable competition is that the latter enjoys the right to choose its customers.  Landline providers must deliver universal access to basic service, something both FairPoint and Verizon managed for more than a century.

Rosenberger claims that with the rapid decline of landlines, FairPoint should be free from regulatory constraints it argues limits its ability to compete on pricing and service.  Rosenberger uses FairPoint’s biggest failure — its rapid loss of customers — as the core argument for allowing deregulation, which would deliver few checks and balances from state regulators.

FairPoint’s market share in New Hampshire is now down to 49% and dropping.  Its competition — Comcast and wireless mobile providers, now account for the majority of phone lines in the state.  FairPoint’s line losses spiked when the company took over providing service in northern New England from Verizon Communications.  Many FairPoint customers would describe that level of service as poor, with billing and service complaints reaching epic proportions before the company ultimately declared bankruptcy.

Rosenberger points out that the traditional way utility services deal with changing business models is to sell off non-performing or excess assets.  Electric utilities sell excess power, but phone companies like FairPoint have few things other providers want.

In particular, FairPoint is upset it is saddled with a statewide network of telephone poles that “nobody wants.”

“We lose a ton of money on these poles” when work has to be done on them, Rosenberger told the newspaper. “There is the flag rate, the excavation fee, paying for a cop out there – and that’s before taxation and reporting requirements.”

FairPoint notes their competitors gets to use those poles, and are not necessarily contributing their fair share towards their upkeep.

FairPoint isn’t asking to abandon its universal service obligation, something AT&T has lobbied for throughout its territories.  But it does want to do away with pricing regulations and reporting requirements.  If FairPoint offers a business customer a special discount rate, it must file that rate publicly with state regulators, which is public information.  FairPoint says its competitors may be using that information to undercut them in contract negotiations.  But the public price regulations are in place to prevent a phone company from offering dirt cheap service for a select few, effectively subsidized by other ratepayers.

FairPoint also wants quality of service reporting regulations eased, and that comes as a concern to some New Englanders who lived through FairPoint’s messy transition from Verizon service.  Even today, there are ongoing disputes over whether FairPoint is meeting state obligations on everything from how quickly they answer customer calls to whether or not service problems are resolved on a timely basis.

Sprint CEO Dan Hesse is now at risk of losing his job over decisions to increase spending to upgrade network performance and capacity.  In the last week, Sprint announced it will likely seek outside financing to accelerate the launch of its new 4G LTE network, while concurrently deciding to stop selling 4G WiMax smartphones that work on the troubled Clearwire network by the end of this year.

Wall Street hates companies spending money to upgrade their networks, particularly when there is little evidence Sprint will enhance profits with price increases or cut costs by limiting customers’ data usage.

For several major investment firms and banks, the last straw was Hesse’s revelation that the company will likely need to borrow money to complete its Network Vision plan, which calls for major upgrades of Sprint’s wireless network to support much faster data speeds for customers.  His earlier commitment to spend up to $20 billion on Sprint’s version of the Apple iPhone did not help matters.

Sprint’s stock price took a beating last week, sliding 26 percent to the lowest level since February 2009 as investors fled.

[flv width=”360″ height=”290″]http://www.phillipdampier.com/video/KSHB Kansas City Sprint makes another new announcement 10-7-11.mp4[/flv]

KSHB in Kansas City reports Sprint intends to stop selling devices that work on the company’s existing 4G/Clearwire WiMax service by the end of this year in favor of Sprint’s forthcoming launch of a new 4G LTE network.  (1 minute)

The Detroit News reports an investor meeting with Sprint executives “grew ugly” after Hesse announced the company needed to spend money to upgrade and refused to show a clear pathway to enhanced profits earned from those upgrades.

Wall Street to Hesse: Don't Get Comfortable

“Hesse is on thin ice now,” Ed Snyder, an analyst with Charter Equity Research, told the newspaper. “One, perhaps two, more big mistakes and he’s probably gone.”

More than a half-dozen Wall Street analysts have slashed their ratings on the wireless company because they believe Sprint’s spending plans will hurt liquidity.

While customers are increasingly rewarding Hesse and Sprint for making customer service improvements and retaining customer friendly unlimited service plans, Wall Street shows no signs of being charitable to Hesse’s management of the Overland Park, Kansas company.

Ben Abramowitz, an analyst with Kaufman Bros., downgraded the stock to “hold” from “buy,” excoriating the company for expensive strategic shifts, including network upgrades and the company’s recent commitment to Apple to sell millions of Apple iPhones on Sprint’s network.

“Management credibility is lost with investors,” Abramowitz wrote.

Jonathan Schildkraut from Evercore Partners told CNBC the spending at Sprint may just be getting started.  Millions of customers remain connected to Nextel’s legacy iDEN network, which Sprint intends to decommission.  Schildkraut believes Sprint will have to provide deep discounts or free phones for displaced customers who will need to move to Sprint’s primary network.  He also notes that despite Sprint’s plans to abandon Clearwire’s WiMax network for 4G, the company will likely make further investments to maintain the partnership, and Clearwire’s network, for other purposes.

Sprint’s decision to adopt Apple’s iPhone and upgrade their network may make competitive sense against larger players AT&T and Verizon Wireless, but Schildkraut notes Apple commands top dollar for the popular phone — upwards of $600 on the wholesale level, which carriers in turn subsidize to lure customers to sign two-year contracts.  But Sprint would do well to consider Verizon’s experience with the iPhone, he says.  Most of Verizon’s iPhones were sold to customers who already owned smartphones.  That forced Verizon to subsidize up to $400 for each iPhone with no chance of increasing the average revenue collected from customers.  Investors were hoping the iPhone would instead attract budget handset customers who would upgrade to more expensive smartphone service plans.

Because the iPhone still does not support 4G technology, it seems less likely existing Sprint 4G WiMax smartphone owners would consider the Apple 4S an upgrade, and may hold off waiting for the anticipated iPhone 5.  But as Sprint begins to promote its forthcoming 4G LTE network, those Sprint customers using WiMax phones will be tempted to move to something else.  Either way, phone subsidies could create a significant drag on Sprint’s cash on hand at a time when the company is spending heavily on upgrading its network.

In the telecommunications business, upgraded service helps customers and spurs competition.  But it is nearly always the enemy of Wall Street unless a clear pathway to enhanced profits can be shown.  Investors may ultimately have the last word on those upgrades, and the person responsible for green-lighting them.  Hesse may learn that lesson first hand if the company can’t find a way to boost its stock price, and soon.

[flv]http://www.phillipdampier.com/video/Sprint CEO in Trouble 10-12-11.flv[/flv]

Wall Street goes on the attack, unhappy that Sprint is spending their money to upgrade its networks for the benefit of Sprint customers.  CNBC covers all the business angles.  (6 minutes)

Fiber optic cable spool

For the most populated provinces in Canada, questions about when fiber-to-the-home service will become a reality are easy to answer:  Never, indefinitely.

Some of Canada’s largest telecommunications providers have their minds made up — fiber isn’t for consumers, it’s for their backbone and business networks.  For citizens of Toronto, Calgary, Montreal, and Vancouver coping with bandwidth shortages, providers have a much better answer: pay more, use less Internet.

Fiber broadband projects in Canada are hard to find, because providers refuse to invest in broadband upgrades to deliver the kinds of speeds and capacity Canadians increasingly demand.  Instead, companies like Bell, Shaw, and Rogers continue to hand out pithy upload speeds, throttled downloads, and often stingy usage caps.  Much of the country still relies on basic DSL service from Bell or Telus, and the most-promoted broadband expansion project in the country — Bell’s Fibe, is phoney baloney because it relies on existing copper telephone wires to deliver the last mile of service to customers.

Much like in the United States, the move to replace outdated copper phone lines and coaxial cable in favor of near-limitless capacity fiber remains stalled in most areas.  The reasons are simple: lack of competition to drive providers to invest in upgrades and the unwillingness to spend $1000 per home to install fiber when a 100GB usage cap and slower speeds will suffice.

The Toronto Globe & Mail reports that while 30-50 percent of homes in South Korea and Japan have fiber broadband, only 18 percent of Americans and less than 2 percent of Canadians have access to the networks that routinely deliver 100Mbps affordable broadband without rationed broadband usage plans.

In fact, the biggest fiber projects underway in Canada are being built in unexpected places that run contrary to the conventional wisdom that suggest fiber installs only make sense in large, population-dense, urban areas.

Manitoba’s MTS plans to spend $125-million over the next five years to launch its fiber to the home service, FiON.  By the end of 2015, MTS expects to deploy fiber to about 120,000 homes in close to 20 Manitoba communities.  In Saskatchewan, SaskTel is investing $199 million in its network in 2011 and approximately $670 million in a seven-year Next Generation Broadband Access Program (2011 – 2017). This program will deploy Fiber to the Premises (FTTP) and upgrade the broadband network in the nine largest urban centers in the province – Saskatoon, Regina, Moose Jaw, Weyburn, Estevan, Swift Current, Yorkton, North Battleford and Prince Albert.

“Saskatchewan continues to be a growing and dynamic place,” Minister responsible for SaskTel Bill Boyd said. “The deployment of FTTP will create the bandwidth capacity to allow SaskTel to deploy exciting new next generation technologies to better serve the people of Saskatchewan.”

But the largest fiber project of all will serve the unlikely provinces of Atlantic Canada, among the most economically challenged in the country.  Bell Aliant is targeting its FibreOP fiber to the home network to over 600,000 homes by the end of next year.  On that network, Bell Aliant plans to sell speeds up to 170/30Mbps to start.

In comparison, residents in larger provinces are making due with 3-10Mbps DSL service from Bell or Telus, or expensive usage-limited, speed-throttled cable broadband service from companies like Rogers, Shaw, and Videotron.

Bell Canada is trying to convince its customers it has the fiber optic network they want.  Its Fibe Internet service sure sounds like fiber, but the product fails truth-in-advertising because it isn’t an all-fiber-network at all. It’s similar to AT&T’s U-verse — relying on fiber to the neighborhood, using existing copper phone wires to finish the job.  Technically, that isn’t much different from today’s cable systems, which also use fiber to reach into individual neighborhoods.  Traditional coaxial cable handles the signal for the rest of the journey into subscriber homes.

A half-fiber network can do better than none at all.  In Ontario, Bell sells Fibe Internet packages at speeds up to 25Mbps, but even those speeds cannot compare to what true fiber networks can deliver.

Globe & Mail readers seemed to understand today’s broadband realities in the barely competitive broadband market. One reader’s take:

“The problem in Canada (and elsewhere) preventing wide scale deployment of FTTH isn’t the technology, nor the cost. It’s a lack of political vision and will, coupled with incumbent service providers doing whatever they can to hold on to a dysfunctional model that serves their interests at the expense of consumers.”

Another:

“The problem with incumbents is they only think in 2-3 year terms. If they can’t make their money back in that period of time, they’re not interested. Thinking 20, heck even 10 years ahead is not in their vocabulary.”

Wall Street is pushing back against Justice Department efforts to unwind a merger proposal between AT&T and T-Mobile that will leave America with three national carriers.  Some investment firms even believe three carriers are still “too many” and want mergers and acquisitions to accelerate to allow two dominant national carriers to emerge.

“It’s pretty clear what the end game is in wireless,” said Julie Richardson, managing director at Providence Equity Partners Inc. “LTE, 4G — you have to have those services to compete. One of the most interesting things to watch in telecom will be these players coming together.”

Richardson shares the view among many on Wall Street that carriers forced to build costly 4G services like LTE need less competition and more cash-on-hand to pay for upgrades and to obtain needed spectrum.

Only AT&T and Verizon Communications have the resources to support a national 4G Long Term Evolution network, Richardson said. Sprint, the third-biggest U.S. wireless operator, is struggling to compete against larger rivals and has lost money for 15 consecutive quarters, Bloomberg News reports.

Among smaller players, Richardson believes the future is clear: mergers, acquisitions, and partnerships.  Sprint is moving increasingly closer to the nation’s cable companies, which have sought a cost-efficient way to deliver the ultimate “quad-play” service package that includes wireless, landline, cable-TV, and Internet service, all from the cable company.  But talk of constructing competing cell networks has gone largely nowhere, and cable companies that do offer some type of wireless service typically resell an existing service under their own brand.  Road Runner Mobile, from Time Warner Cable, for example, is really Clearwire under a different name.  Same for Comcast’s wireless Internet service.  Cox is pitching “unbelievably fair” wireless phone service that actually comes from Sprint.

But cable operators currently don’t seem to be interested in outright acquisitions of cell companies like Sprint, preferring to partner with them instead.

Clearwire, which needs financing and better wireless spectrum, may eventually find a friend in Dish Networks, the satellite TV company.  Dish controls wireless frequency spectrum it currently does not use, and has expressed an interest in expanding beyond a traditional satellite television provider.  An acquisition of Sprint or Clearwire could help them accomplish that.

Konrad Von Finckenstein

Konrad von Finckenstein, the head of Canada’s telecommunications regulator who initially rubber-stamped a Bell proposal to force Internet providers in Canada to charge usage-based pricing will not be back for a second term.

Von Finckenstein broke the news himself in a memo sent to staff at the Canadian Radio-television and Telecommunications Commission, stating he would end his leadership of the CRTC when his five-year term concludes in January.

The CRTC has made uncomfortable headlines for Canada’s Conservative government, primarily by approving an Internet pricing plan submitted by Bell that would require virtually every Internet provider in Canada to end unlimited, flat rate pricing for broadband service.

The CRTC is hardly a hotbed of headline news for most Canadians.  The sleepy agency regulates telephone, broadband, television, and radio in the country with an increasingly light touch.  Ten years ago, the CRTC was regularly accused by some broadcasters of meddling in their private business.  These days the Commission, packed with members who formerly worked for the companies they now oversee, has gotten considerably more friendly with those they regulate.

That policy blew up in their faces when Bell got most of what it wanted in a wholesale pricing change that was so wide-reaching, it would potentially impact every Canadian Internet user.  Nearly a half-million of them registered their displeasure in a petition sponsored by Openmedia.ca.

Von Finckenstein’s resolute attitude towards the correctness of that decision was soon tempered when Industry Minister Tony Clement found himself overruling the CRTC in a Twitter message, telling Canadians the decision to impose usage-based billing “would not be allowed to stand.”

Opposition members in Parliament had a field day over Clement’s repeated distancing of the government from CRTC policies, particularly the one involving Internet pricing.

Liberal MP Marc Garneau seized on the fact Clement tweeted his intentions to the public at large before sharing them with von Finckenstein himself.  That, Garneau claimed, was the latest example of the government’s lack of clear policy on issues such as usage-based billing that has left the CRTC in what he called a “giant policy vacuum.”

The announcement by the CRTC chairman comes at the same time the Commission is finalizing a re-evaluation of its earlier decision on usage-based billing.

While hundreds of thousands of Canadians upset with the CRTC may be glad to see the back of von Finckenstein, his colleagues were considerably more generous with their praise:

Former CRTC executive Richard French credits Von Finckenstein, saying he sped up the commission’s decisions, improved the atmosphere around the offices and rarely left anyone guessing what he thought, “which I think is a virtue in a regulator.”

“He balanced the desire for more market forces with a recognition that for most of the industries in question, the Canadian market is sub-economic, it’s just not big enough to sustain enough players in this capital intensive business to create real competition so regulation is required,” French said Monday.

“He’s done an excellent job and he deserves the respect and appreciation of the industry and of the population,” French said.

Heritage Minister James Moore’s office issued a statement thanking von Finckenstein for his service as CRTC chair and said a process to select a new chair would be announced in the coming weeks.