Frontier Communications employees continue to send unsolicited news tips and insider gossip about a phone company in decline, not only losing customers but middle management that have either left voluntary or been asked to leave in a frantic effort to cut costs.

Earlier this year, Frontier CEO Dan McCarthy ended a long-term effort heralded by former CEO Maggie Wilderotter that gave significant autonomy to local and regional managers to handle problems in their respective service areas without having to consult a centralized bureaucracy. McCarthy elected instead to adopt more rigid company-wide policies and practices that often require consultation with senior management. For many mid-level managers already frustrated with the company, that change proved a bridge too far that and several are now working for Frontier’s cable competition.

One of the senior managers responsible for Frontier’s web presence became so frustrated with Frontier’s corporate roadblocks, he dropped his Frontier service in favor of the competition because accomplishing almost anything on Frontier’s website proved frustrating and often impossible.

“Instead of focusing their leadership on ways to turn the company around they seem to be doubling down on their efforts to get as many employees to leave the company as possible,” a Frontier insider tells Stop the Cap!

Some of the employees likely to leave are Frontier’s telecommuting workforce. Senior executives now want many of those workers back in the office.

“[The new policy says] if we live less than 50 miles from a Frontier Office, we have to be in the office every day and could no longer work at home,” our source tells us. “There are employees who had Permanent Work At Home status by HR who are [now] being told they have to relocate to another city [or] come into an office or they will be let go.”

Frontier’s network continues to be criticized as great for some, lousy for everyone else. Our source notes a few years ago Frontier was speed-limiting some of its DSL customers in congested areas because they were using too much broadband and slowing down the network for others. While Frontier’s legacy copper areas continue to endure copper-based DSL with its inherent capacity and speed limitations, Frontier is planning a feast for its acquired FiOS fiber customers, including free automatic speed upgrades.

Less technically conscious customers pay more. In addition to a $4.50 convenience fee that now applies to customers phoning customer care centers to make a payment, our source warns Frontier is about to launch a paper billing fee, reportedly $1 a month, in an attempt to convert customers to electronic paperless billing.

“We are so at a loss as to the direction this company is taking and there is zero vision from senior leadership that is being passed down,” our source said, noting executives are preoccupied with their compensation plans and bonuses. “The directions we’re given change daily, projects and promotions only seem to be reactionary to try to stop the bleeding, but Frontier is in need of major surgery starting with the CEO and every single member of our executive leadership.”

Citigroup is advocating for another super-sized merger, this time lobbying Comcast to buy Verizon Communications — a deal worth up to $215 billion.

Citigroup analyst Jason Bazinet believes the more corporate friendly Trump Administration would not block or impede a deal that would bring together the nation’s largest cable operator and wireless provider. Such a merger would leave a significant portion of the mid-Atlantic, northeast, and New England with a monopoly for telephone and broadband service.

Bazinet offers four reasons why the deal makes sense to Wall Street banks like his:

• Verizon Wireless could give Comcast customers internet access seamlessly inside and outside of the home;
• The cost of expanding fiber optics to power faster internet and forthcoming 5G wireless broadband would be effectively split between the two companies and there would be no need to install competing fiber networks;
• Verizon would benefit from additional wireless consolidation because it would no longer face significant emerging wireless competition from Comcast;
• A combined Comcast-Verizon could see their corporate tax rate slashed by a considerable percentage, reducing tax liabilities.

We’d add Wall Street banks that win the enviable position of advising one company or the other on a merger deal stand to make tens of millions of dollars on consulting fees as well.

Such a merger would be unthinkable under prior administrations, if only because a combination of Verizon and Comcast would eliminate the only significant telecommunications competitor for tens of millions of Americans, giving the combined company a monopoly on telecommunications services.

Some Wall Street analysts believe a deal is still possible with Republicans in charge in Washington. But some spinoffs are likely. One scenario would involve selling off Verizon’s wireline assets in areas where Comcast and Verizon compete. But increasing questions about the financial viability of a likely buyer like Frontier Communications may make a deal bundling old copper wire assets and FiOS Fiber in New Jersey, the District of Columbia, Maryland, Delaware, Massachusetts, and Virginia a difficult sell for other buyers.

“If Brian came knocking on the door, I’d have a discussion with him about it,” Verizon CEO Lowell McAdam reportedly said this spring, according to Bloomberg News, referring to Comcast CEO Brian Roberts.

McAdam shouldn’t wait in his office, however. This morning, as part of a quarterly results conference call, Roberts made clear he wasn’t particularly interested in a merger with a wireless provider.

“I thought we were really clear last quarter,” Roberts said. “Yes, we always look at the world around us and do our jobs related to the opportunities that are out that. But we love our business. No disrespect to wireless, but that’s a tough business.”

Unclear and unenforced Net Neutrality rules in India give a cautionary tale to U.S. internet users who could soon find Net Neutrality guarantees replaced in the U.S. with industry-written rules filled with loopholes or no Net Neutrality protections at all.

As India considers stronger enforcement of Net Neutrality protection, broadband providers have been merrily violating current Net Neutrality guidelines with fast lanes, sometimes advertised openly. Many of those ISPs are depending on obfuscation and grey areas to effectively give their preferred partners a leg up on the competition while claiming they are not giving them preferential treatment.

Medianama notes Ortel advertises two different internet speeds for its customers – one for regular internet traffic and the other for preferred partner websites cached by Ortel inside its network. The result is that preferred websites load 10-40 times faster than regular internet traffic.

Ortel’s vice president of broadband business, Jiji John, said Ortel is not violating Net Neutrality.

“Cache concept is totally based on the Internet user’s browsing. ISP does not control the contents and it has nothing to do with Net Neutrality,” John said in a statement.

Critics contend ISPs like Ortel may not control the contents of websites, but they do control which websites are cached and which are not.

Alliance Broadband, a West Bengal-based Internet provider, goes a step further and advertises higher speeds for Hotstar — a legal streaming platform, Google and popular movie, TV and software torrents, which arrive at speeds of 3-12Mbps faster than the rest of the internet. Alliance takes this further by establishing a reserved lane for each service, meaning regardless of what else one does with their internet connection, Hotstar content will arrive at 8Mbps, torrents at 12Mbps and the rest of the internet at 5Mbps concurrently. This means customers can get up to 25Mbps when combining traffic from the three sources, even if they are only subscribed to a much slower tier.

Alliance Broadband’s rate card. Could your ISP be next?

Which services are deemed “preferred” is up to the ISP. While Alliance may favor Google, Wishnet in West Bengal offers up preferential speeds for YouTube videos.

The ISPs claim these faster speeds are a result of “peering” those websites on its own internal network, reducing traffic slowdowns and delays. In some cases, the ISPs store the most popular content on its own servers, where it can be delivered to customers more rapidly. This alone does not violate Net Neutrality, but when an ISP reserves bandwidth for a preferred partner’s website or application, that can come at the expense of those websites that do not have this arrangement. Some ISPs have sought to devote extra bandwidth to those reserved lanes so it does not appear to impact on other traffic, but it still gives preferential treatment to some over others.

Remarkably, Indian ISPs frequently give preferential treatment to peer-to-peer services that routinely flout copyright laws while leaving legal streaming services other than Hotstar on the slow lane, encouraging copyright theft.

American ISPs have already volunteered not to block of directly impede the traffic of websites, but this may not go far enough to prevent the kinds of clever preferential runarounds ISPs can engineer where Net Neutrality is already in place, but isn’t well defined or enforced.

Like the railroad robber barons of more than a century ago, a handful of phone and cable companies are getting filthy rich from a carefully engineered oligopoly that costs the average American $540 a year more than it should to deliver vital telecommunications services.

That is the conclusion of a new study from the Washington Center for Equitable Growth, authored by two men with decades of experience representing the interests of consumers. They recommend stopping reckless deregulation without strong and clear evidence of robust competition and ending rubber stamped merger approvals by regulators.

The trouble started with the passage of the 1996 Telecommunications Act, a bill heavily influenced by telecom industry lobbyists that, at its core, promoted deregulation without assuring adequate evidence of competition. It was that Act, signed into law by President Clinton, that authors Gene Kimmelman and Mark Cooper claim is partly responsible for today’s “highly concentrated oligopolistic markets that result […] in massive overcharges for consumer and business services.”

“Prices for cable, broadband, wired telecommunications, and wireless services have been inflated, on average, by about 25 percent above what competitive markets should deliver, costing the typical U.S. household more than $45 per month, or $540 per year, for these services,” the report states. “This stranglehold over these essential means of communication by a tight oligopoly on steroids—comprised of AT&T Inc., Verizon Communications Inc., Comcast Corp., and Charter Communications Inc. and built through mergers and acquisitions, not competition—costs consumers in aggregate almost $60 billion per year, or about 25 percent of the total average consumer’s monthly bill.”

The cost of delivering service is plummeting even as your bill keeps rising.

The authors also claim that these four companies earn astronomical profits — between 50 and 90% — on their services, compared with the national average of just under 15% for all industries.

The only check on these profits came from the 2011 rejection of the merger of AT&T and T-Mobile, which started a small price war in the wireless industry, saving customers an average of $5 a month, or $11 billion a year collectively.

But antitrust enforcement alone is inadequate to check the industry’s anti-competitive behavior. Competition was supposed to provide that check, but policymakers too often kowtowed to the interests of telecom industry lobbyists and prematurely removed regulatory oversight and protections that were supposed to remain in place until real competition made those regulations unnecessary.

Attempts to force open closed networks to competitors were allowed in some instances — particularly with local telephone companies, but only for certain legacy services. Newer products, particularly high-speed broadband, were usually not subject to these open network policies. The companies lobbied heavily against such requirements, claiming it would deter investment.

The framers of the ’96 Act also mandated an end to exclusive franchise agreements that barred phone and cable companies from entering each others’ markets. This was intended to allow phone and cable companies to compete head to head, setting up the prospect of consumers having multiple choices for these providers.

Current FCC Chairman Ajit Pai frequently cites the 1996 Communications Act as being “light touch” regulation that promulgated the broadband revolution. But in reality, the Act sparked a massive wave of corporate consolidation in broadcasting, cable, and phone companies at the behest of Wall Street.

“[Cable companies] refused to enter new markets to compete head to head with their sister companies [and] never entered the wireless market,” the authors note. “Telephone companies never overbuilt other telephone companies and were slow to enter the video market. Each chose to extend their geographic reach by buying out their sister companies rather than competing. This means that the potentially strongest competitors—those with expertise and assets that might be used to enter new markets—are few. This reinforces the market power strategy, since the best competitors have followed a noncompete strategy.”

Wall Street sold consolidation on the theory of increased shareholder value from eliminating duplicative costs and workforces, consolidating services, and growing larger to stay competitive with other companies also growing larger through mergers and acquisitions of their own:

• The eight regional Baby Bells created after the breakup of AT&T’s national monopoly in the mid-1980s eventually merged into two huge wireline and wireless companies — AT&T and Verizon. The authors note these companies didn’t just acquire those that were part of the Ma Bell empire. They also bought out independent companies like GTE and long distance companies like MCI. Most of the few remaining independents provide service in rural areas of little interest to AT&T or Verizon.
• The cable industry is still in a consolidation wave combining large players into a handful of giants, including Comcast and Charter Communications, which also have close relationships with content providers. Altice entered the U.S. cable business principally on the prospect of consolidating cable companies under the Altice brand, not overbuilding existing companies with a competing service of its own.

Such consolidation wiped out the very companies the ’96 Act was counting on to disrupt existing markets with new competition. Comcast, Charter, and Verizon even have agreements to cross-market each others’ products or use their infrastructure for emerging “competitive” services like mobile phones and wireless broadband.

“By the standard definitions of antitrust and traditional economic analysis, a tight oligopoly has developed in the digital communications sector,” the report states. “While some markets are slightly more competitive than others, the dominant firms are deeply entrenched and engage in anti-competitive and anti-consumer practices that defend and extend their market power, while allowing them to overcharge consumers and earn excess profits.”

“The impact of this abuse of market power on consumers is clear. According to the most recent Consumer Expenditure Survey by the U.S. Bureau of Labor Statistics, the ‘typical’ middle-income household spends about $2,700 per year on a landline telephone service, two cell phone subscriptions, a broadband connection, and a subscription to a multichannel video service,” the report indicates. “Adjusting for the ‘average’ take rate of services in this middle-income group, consumers spend almost twice as much on these services as they spend on electricity. They spend more on these services than they spend on gasoline. Consumer expenditures on communications services equal about four-fifths of their total spending on groceries.”

The authors point out the Obama Administration, unlike the Bush Administration that preceded it, was the first since the 1996 Act’s passage to begin implementing policies to enhance and protect competition, and also check unfettered market power among the largest incumbent providers:

• It blocked the AT&T/T-Mobile merger, which would have removed an important competitor and affect wireless rates in just about every U.S. city. The Obama Administration’s opposition not only preserved T-Mobile as a competitor, it also made that company review its business plan and rebrand itself as a market disruptor, forcing wireless prices down substantially for the first time and collectively saving all wireless customers in the U.S. billions from rate increases AT&T and Verizon could not carry out.
• It blocked the Comcast/Time Warner Cable merger, which would have given Comcast unprecedented and unequaled control over internet access and content providers in the U.S. It would have immediately made other cable and phone companies potentially untenable because of their lack of market power and ability to achieve similar volume discounts and economy of scale, and would have blocked emerging competitors that could not create credible business plans competing with Comcast.
• It blocked informal Sprint/T-Mobile merger talks that would have combined the third and fourth largest wireless carriers. Antitrust regulators were concerned this would dramatically reduce the disruptive marketing that we still see today from both of these companies.
• It placed restrictions on Comcast’s merger with NBC Universal and Charter’s acquisition of Time Warner Cable. Comcast was required to effectively become a silent partner in Hulu, a vital emerging video competitor. Charter cannot impose data caps on its customers for up to seven years, helping to create a clear record that data caps are both unnecessary and unwarranted and have no impact on the cost of delivering internet services or the profits earned from it.
• Strong support for Net Neutrality, backed with Title II enforcement, has given the content marketplace a sense of certainty and stability, allowing online cable TV competitors to emerge and succeed, giving consumers a chance to save money by cutting the cord on bloated TV packages. If providers were given the authority to discriminate against internet traffic, it would place an unfair burden on competitors and discourage new entrants.

The authors worry the Trump Administration and a FCC led by Chairman Ajit Pai may not be willing to preserve the first gains in broadband and communications competitiveness since mergermania removed a lot of those competitors.

“The key lesson in the communications sector is that vigorous regulation and antitrust enforcement can create the conditions for market success. But balance is the key,” the reports warns. “Technological innovation and convergence are no guarantee against the abuse of market power, but the effort to control the abuse of market power should not stifle innovation. If the Trump administration jettisons the enforcement practices of the past eight years, then the telecommunications sector is likely to see a wave of new consolidation and a dampening of the price cutting and innovative wireless and broadband services that have been slowly emerging.”

Wall Street analysts are warning investors that mobile providers like AT&T, Verizon, T-Mobile and Sprint will have to spend $130-150 billion on fiber optic cables alone to make 5G wireless broadband a reality in the next 5-7 years.

A new Deloitte study found providers will have to spend a lot of money to deploy next generation wireless service across the United States, money that many may be unwilling to spend.

“5G relies heavily on fiber and will likely fall far short of its potential unless the United States significantly increases its deep fiber investments,” the study notes. “Increased speed and capacity from 5G will rely on higher radio frequencies and greater network densification (i.e., increasing the number and concentration of cell sites and access points).”

Unlike earlier cellular technology, which worked from centralized cell towers that covered several miles in all directions, 5G technology is expected to be deployed through “small cell” antennas attached to utility and light poles with coverage limited to just 300-500 feet. To reach city residents, providers will need countless thousands of new antenna installations and a massive fiber network to connect each antenna to the provider.

Telecom providers seeking financing for such networks will face the same criticism Verizon Communications took from Wall Street over the expense of its FiOS fiber-to-the-home upgrade as well as doubts about the viability of other fiber projects like Google Fiber.

Goldman Sachs told its investors back in 2012 that throwing money at Google Fiber or Verizon FiOS was not going to give them a good return on their investment. That year, Goldman was “Still Bullish on Cable, But Not Blind to the Risks.” That report, written by analyst Jason Armstrong, noted Google’s fiber upgrades would cost billions and only further dilute industry profits from increasing competition.

Goldman Sachs steered investors back to the cable industry, which gets significant praise from Wall Street for its ability to repurpose 20-year-old wired infrastructure for enhanced broadband without having to spend huge sums on a complete system rebuild.

In 2013, Alliance Bernstein continued to slam Google Fiber’s buildout as an unwise business investment:

We remain skeptical that Google will find a scalable and economically feasible model to extend its build out to a large portion of the US, as costs would be substantial, regulatory and competitive barriers material, and in the end the effort would have limited impact on the global trajectory of the business.

For example, making the far from trivial assumption that Google can identify 20 million homes in relatively contiguous areas with (on average) similar characteristics as Kansas City when it comes to the most important drivers of network deployment cost, homes per mile of plant and the mix of aerial, buried and underground infrastructure, and that Google decides to build out a fiber network to serve them over a period of five years, we estimate the [total capital expenditure] investment required to be in the order of $11 billion to pass the homes, before acquiring or connecting a single customer.

Some analysts are even questioning the relevance of 5G when providers investing in the massive fiber expansion required for 5G wireless could simply extend fiber cables directly into homes, assuring customers of more bandwidth and reliability. In many cases, fiber to the home technology is actually cheaper than 5G deployment will be.

VantagePoint released a report in February that called a lot of the excitement surrounding 5G “hype” and cautioned it will not be the ultimate broadband solution:

Undoubtedly, 5G wireless technologies will result in better broadband performance than 4G wireless technologies and will offer much promise as a mobile complement to fixed services, but they still will not be the right choice for delivering the rapidly increasing broadband demanded by thousands or millions of households and businesses across America.

Previous analysis of 4th generation (4G) wireless networks clearly demonstrated how these networks, even with generous capacity assumptions for the future, will have limited broadband capabilities, and inevitably will fail to carry the fixed broadband experience that has been and will be demanded by subscribers accustomed to their wireline counterparts. Although there is understandably much anticipation today about phenomenal possible speeds for 5G wireless networks tomorrow, they will continue to have technical shortcomings that will, like their predecessor wireless networks, render them very useful complements but poor substitutes for wireline broadband. These technical challenges include:

• Spectral limitations: 5G networks will require massive amounts of spectrum to accomplish their target speeds. At the lower frequencies traditionally used for wide area coverage, there is not enough spectrum. At the very high frequencies proposed for 5G where there may be enough spectrum, the RF signal does not propagate far enough to be practical for any wide area coverage. This is particularly important in rural areas where customer concentration is far, far less than what can be expected in densely populated urban areas where 5G may offer greater promise.
• Access Network Sharing: This is not a good solution for continuous-bit-rate traffic such as video, which will make up 82% of Internet traffic by 2020.
• Economics: When compared to a 5G network that can deliver significant bandwidth using very high, very short-haul frequencies, FTTP is often less expensive and will have lower operational costs. This is particularly true when one consider how much fiber deployment will be needed very close to each user even just to enable 5G.
• Reliability: Wireless inherently is less reliable than wireline, with significantly increased potential for impairments with the very high frequencies required by 5G.

In 2014, PricewaterhouseCoopers LLP released a report urging telecom executives to shift their thinking about telecom capital spending away from one that focuses on upgrades to deal with increasing traffic and demand and move instead to a hardline view of only spending on projects that meet Return On Investment (ROI) objectives for investors.

“The predominant task of management is to take a considered view of the future, allocate capital towards strategies that maximize value for the providers of that capital, and manage the execution of those strategies through to the delivery of returns for those investors,” wrote PricewaterhouseCoopers LLP. “For too long, telecoms have been on auto-drive for much of their capex. Departments assume if they had the money last year, they are going to get it again this year, under the premise of increasing traffic. But rarely do telecoms truly analyze that spending for its ROI or ask whether the investment should be made at all.”

In short, if a project is not certain to quickly deliver significant ROI, serious questions should be asked about whether that investment is appropriate to undertake. That reluctance is at the heart of Deloitte’s new study.

Deloitte notes if providers cannot overcome Wall Street’s reluctance to support major spending on fiber infrastructure, lack of investment will be even more costly.

It predicts falling short on fiber deployment will cause a dwindling number of broadband provider choices for consumers. Today, fewer than 33% of U.S. homes have access to fiber broadband and only 39% have the option of choosing more than one provider capable of meeting the FCC’s minimal definition of broadband – 25Mbps. As competition declines, the need to further expand is reduced while prices can freely rise.

PricewaterhouseCoopers LLP also recommends cable and phone companies partner with content providers like Netflix or Google, and let those companies take an ownership interest in return for capital investments for fiber upgrades. Those type of solutions also protect Wall Street from a feared price war should alternative providers launch in markets that are barely competitive, if at all.