Verizon’s loyal landline customers are subsidizing corporate expenses and lavish spending on Verizon Wireless, the company’s eponymous mobile service, while their home phone service is going to pot.

Bruce Kushnick from New Networks Institute knows Verizon’s tricks of the trade. He reads tariff filings and arcane Securities & Exchange Commission corporate disclosures for fun. He’s been building a strong case that Verizon has used the revenue it earns from regulated landline telephone service to help finance Verizon’s FiOS fiber network and the company’s highly profitable wireless service.

Kushnick tells the New York Post at least two million New Yorkers with (P)lain (O)ld (T)elephone (S)ervice were overcharged $1,000-$1,500 while Verizon allowed its copper wire network to fall into disrepair. Kushnick figures Verizon owes billions of dollars that should have been spent on its POTS network that provides dial tones to seniors and low-income customers that cannot afford smartphones and laptops.

Verizon’s copper network should have been paid off years ago, argues Kushnick, resulting in dramatically less expensive phone service. What wasn’t paid off has been “written off” by Verizon for some time, Kushnick claims, and Verizon customers should only be paying $10-20 a month for basic phone service. But they pay far more than that.

To ensure a proper rate of return, New York State’s Public Service Commission sets Verizon’s basic service charge of regulated phone service downstate at $23 a month. Deregulation has allowed Verizon to charge whatever it likes for everything else, starting with passing along taxes and other various fees that raise the bill to over $30. Customers with calling plans to minimize long distance charges routinely pay over $60 a month.

Unregulated calling features like call waiting, call forwarding, and three-way calling don’t come cheap either, especially if customers choose them a-la-carte. A two-service package of call waiting and call forwarding costs Verizon 2-3¢ per month, but you pay $7.95. Other add-on fees apply for dubious services like “home wiring maintenance” which protects you if the phone lines installed in your home during the Eisenhower Administration happen to suddenly fail (unlikely).

In contrast, Time Warner Cable has sold its customers phone service with unlimited local and long distance calling (including free calls to the European Community, Canada, and Mexico) with a bundle of multiple phone features for just $10 a month. That, and the ubiquitous cell phone, may explain why about 11 million New Yorkers disconnected landline service between 2000-2016. There are about two million remaining customers across the state.

New York officials are investigating whether Verizon has allowed its landline network to deteriorate along the way. Anecdotal news reports suggests it might be the case. One apartment building in Harlem lost phone and DSL service for seven months. Another outage put senior citizens at risk in Queens for weeks.

“They don’t care if we live or die,” one tenant of a senior living center told WABC-TV.

Verizon claims Kushnick’s claims are ridiculous.

“There is absolutely no factual basis for his allegations,” the company said.

[flv]http://www.phillipdampier.com/video/WABC New York Seniors vent against Verizon after phone service outage 3-9-16.flv[/flv]

WABC’s “7 On Your Side” consumer reporter Nina Pineda had to intervene to get Verizon to repair phone service for a senior living center that lasted more than a month. (2:50)

Frontier Communications is the obvious target of an effort by members of West Virginia’s House of Delegates to embarrass the company into providing at least 10Mbps broadband service or face steep penalties if it does not stop advertising slow speed DSL as “High-Speed Internet.”

State lawmakers continue to be flooded with complaints about the poor performance of Frontier Communications’ DSL service, which customers claim delivers slow speeds, unreliable service, or no service at all.

Although Frontier frequently advertises broadband speeds of 10Mbps or faster, customers often do not receive the advertised speeds, and the service can be so slow it will not work reliably with online video services.

West Virginia’s broadband problems remain so pervasive, the state legislature this year will entertain several broadband improvement measures, including a proposal to spend $72 million to build a publicly owned middle mile fiber optic network. The bill’s sponsor, Sen. Chris Walters (R-Putnam) claims the new fiber network would boost Internet speeds, improve service, and force down broadband pricing.

With cable broadband available only in major communities, much of West Virginia is dependent on DSL service from Frontier Communications, the telephone company serving most of the state. That is a unique situation for Frontier, which typically serves smaller and medium-sized cities in-between other communities serviced by larger providers like Verizon, AT&T, and Qwest/CenturyLink. Frontier’s problems meeting customer expectations have been well heard in Charleston, the state capitol, if only because most members of the state legislature have Frontier customers in their districts.

Legislators have found they have little recourse over a business that operates largely without regulation or government oversight, as Delegate John Shott (R-Mercer) told the Charleston Gazette. Shott heads the House Judiciary Committee and gets plenty of complaints from his constituents.

“[Customers] feel they never get the speed the Internet providers represent,” said Shott. “There doesn’t seem to be any recourse or regulatory body that has any ability to cause that to change.”

In the absence of regulation or direct oversight, a class action lawsuit on behalf of Frontier DSL customers in the state is still working its way through court. In December 2015, a separate action by West Virginia Attorney General Pat Morrisey resulted in a settlement agreement with Frontier. The company agreed to guarantee at least 6Mbps speeds for around 28,000 customers, or give them a substantial monthly discount off their broadband bill.

Shott’s bill, HB 2551, targets “unfair or deceptive acts or practices” of Internet Service Providers that advertise fast speeds but never deliver them. The bill would expose a violating ISP to damages up to $3,000 per customer, a $5,000 state fine, and allow customers to walk away from any outstanding balance or contract:

It is an unfair or deceptive act or practice and a violation of this article for any seller or Internet service provider to advertise or offer to provide “high speed Internet service” that is not at least ten megabytes per second.

If a seller or Internet service provider violates […] this section, the consumer has a cause of action to recover actual damages and, in addition, a right to recover from the violator a penalty in an amount, to be determined by the court, of not less than $100 nor more than $3,000. No action brought pursuant to this subsection may be brought more than two years after the date upon which the violation occurred or the due date of the last scheduled payment of the agreement, whichever is later.

If a seller or Internet service provider violates […] this section, any sale or contract for service is void and the consumer is not obligated to pay either the amount due, the amount paid or any late payment charge. If the consumer has paid any part of a bill or invoice, or of a late payment fee, he or she has a right to recover the payments from the violator or from any [collection agency] who undertakes direct collection of payments or enforcement of rights arising from the alleged debt.

The Attorney General of this state shall investigate all complaints alleging violations […] and has a right to recover from the violator a penalty in an amount, to be determined by the court, of not less than $500 nor more than $5,000 per violation, with each advertisement or contract to sell or provide “high speed Internet” being a separate violation. The Attorney General also has the power to seek injunctive relief.

As of today, the bill counts Delegates J. Nelson, Border, Kessinger, Arvon, Moffatt, A. Evans, Wagner, Cadle, and D. Evans as sponsors.

Delegate Shott

“The list of sponsors of this bill [HB 2551] are from a broad geographic area,” Shott told the newspaper. “They’ve identified this as a problem in their areas.”

Some legislators believe West Virginia should enforce the FCC’s latest minimum definition of broadband – 25Mbps, but the Gazette reports that kind of robust speed definition could be difficult for a DSL provider to achieve without significant additional investment. Some worry companies like Frontier could have difficulty justifying further rural broadband expansion in a state traditionally challenged by its number of rural areas and difficult terrain.

Despite those difficulties, incumbent providers like Frontier, Suddenlink, and Comcast have not appreciated efforts to help expand public broadband networks in the state, including the proposal outlined in Sen. Chris Walters’ SB 315, which would authorize about $72 million to build a public middle mile fiber network that would be offered to ISPs at wholesale rates.

Frontier strongly objects to the project because it would use public dollars to compete with private businesses like Frontier. The phone company’s opposition raised eyebrows among some in Charleston, who note Frontier had no objections to accepting $42 million in state dollars in 2010 to construct and install a fiber network it now operates for hundreds of public facilities across the state and $283 million in federal dollars to expand rural broadband. The 2010 fiber project was rife with accusations of waste, fraud, and abuse. Critics allege Frontier overcharged the state, installing service for $57,800 per mile despite other providers routinely charging about $30,000 a mile in West Virginia.

The West Virginia Cable Television Association, representing cable operators in the state, called the project a money-waster, noting it would not result in a single new hookup for broadband service. Middle mile networks do not reach individual homes and businesses and the bill does not authorize the state to get into the ISP business.

Sen. Walters

Much of the support for the public network comes from smaller ISPs like Citynet, which predominately serves commercial customers, and equipment vendors like Alpha Technologies. Walters believes if West Virginia builds the network, broadband providers will come to use it. The state’s dominant cable and phone companies vehemently disagree. The cable association has launched an all-out PR war, hoping to attract opposition from conservative lawmakers with claims the project will mandate state and local governments to buy Internet connectivity exclusively from the state-owned network and would trample on corporate rights by using eminent domain to seize parts of the cable industry’s fiber networks to complete the state network.

Walters brushed away the accusations, telling the Gazette there is no mandate that state agencies use the network and there are no plans for the government to take any fiber away from a private company.

Cable operators prefer an alternative measure also introduced in the West Virginia Senate. SB 16 would grant tax credits of up to $500 per address for any phone or cable company that agrees to wire a previously unserved rural address. The bill would limit total tax credits to $1 million.

The difference between the two measures? Walters’ bill would use public money to build a public broadband network owned by the public and answerable to the state. The cable industry-backed proposal would use public money in the form of tax offsets to wire homes and businesses to broadband owned by private businesses answerable to shareholders.

Frontier Communications is making a splash in 2016 with a new logo and a press release explaining it:

Frontier Communications Corporation today announced a new logo. The evolved look reflects a transformed typeface, a brighter color palette, and a reimagining of the arc to represent the transfer of data and the importance of connectivity. The logo also uses the name Frontier Communications, instead of just Frontier, to avoid confusion in the marketplace. Today’s launch comes as the 81-year-old company prepares to close a $10.54 billion acquisition of Verizon’s wireline, broadband and FiOS assets in California, Florida and Texas at the end of March.

“2016 is the year of transformation for Frontier,” said Cecilia McKenney, Executive Vice President and Chief Customer Officer, who oversees marketing for the company. “Our company is growing and expanding into new markets: the perfect time to showcase a new logo. We are also in the process of refining a brand promise to be unveiled upon the closing of the $10.54 billion acquisition from Verizon at the end of this quarter.”

Unfortunately, nothing was mentioned about using the new logo as an opportunity to commit to significantly better and faster DSL service for large parts of Frontier’s legacy service areas, still serviced by copper wire networks that are often incapable of delivering anything faster than 3Mbps service.

“A logo change will not bring me usable Internet service at night,” said Ralph Tennant whose wife has struggled with Frontier DSL in her office for years in West Virginia.

“We can either get usage-capped Internet from Suddenlink or unlimited and unusable Internet from Frontier,” said Tennant. “Two bad choices not made better by a pretty new logo.”

Similar to how 3D office signs help companies make a statement in their spaces, Frontier is attempting to create a lasting impression with its reimagined logo. A bold new identity can communicate a company’s evolution and forward-thinking approach, much like these modern signs do for businesses aiming to stand out in a competitive market.

Despite denials Verizon Communications was interested in selling off more of its wireline network to companies like Frontier Communications, the company’s chief financial officer reminded investors Verizon is willing to sell just about anything if it will return value to its shareholders.

In September, rumors Verizon planned to sell more of its wireline network where the company has not invested in widespread FiOS fiber-to-the-home expansion grew loud enough to draw a response from Verizon CEO Lowell McAdam at the Goldman Sachs 24^th annual Communicopia Conference.

“When people ask me, and I know there’s some speculation that we might be interested in selling the wireline properties, I don’t see it in the near-term,” McAdam said.

Today, Shammo seemed to clarify McAdam’s pessimistic attitude about another Verizon landline sell off in the near future.

“We’re extremely happy with the asset portfolio we have right now, but as we always say we continue to look at all things,” Shammo said. “Just like the towers, we said we would not sell the towers and then we got to a great financial position and we sold our towers. If something makes sense [and] we can return value to our shareholders and it’s not a strategic fit we’ll obviously look at that.”

Shammo

For most of 2014, Verizon denied any interest in selling its portfolio of company-owned wireless cell towers. In February 2015 the company announced it would sell acquisition rights to most of its cell towers to American Tower Corporation for $5.056 billion in cash.

Some analysts believe the early indicators that suggest Verizon is ready to sell include its lack of upgrades in non-FiOS service areas and Verizon’s willingness to walk away from up to $144 million from the second phase of the FCC’s Connect America Fund to expand Internet access to more of Verizon’s rural landline customers.

Verizon’s decision to take a pass on broadband improvement funds infuriated four southern New Jersey counties that claim Verizon has neglected its copper network in the state. As a result of allegedly decreasing investment and interest by Verizon, customers in these areas do not get the same level of phone and broadband service that Verizon customers receive in the northern half of New Jersey.

More than a dozen communities have signed a joint petition sent to the Board of Public Utilities, New Jersey’s telecom regulator, insisting the BPU take whatever measures are needed to preserve the availability of telecommunications services in southern New Jersey. The towns also want the BPU to consider funding sources to help improve broadband service that public officials claim is woefully inadequate. Outside of Verizon FiOS service areas, Verizon offers customers traditional DSL service for Internet access.

The communities:

• Atlantic County: Estell Manor and Weymouth Township.
• Gloucester County: South Harrison Township.
• Salem County: Alloway Township, Lower Alloways Creek, Mannington Township, Township of Pilesgrove, and Upper Pittsgrove Township.
• Cumberland County: Commercial Township, Downe Township, Hopewell Township, Lawrence Township, Maurice River Township, City of Millville, Upper Deerfield Township, and Fairfield Township.

Officials claim Verizon has pushed its wireless alternatives to customers in the region, including its wireless landline replacement. But officials suggest Verizon’s wireless coverage and the quality of its service is not an adequate substitute for wireline service.

Verizon’s Home Phone Connect base station

Verizon has proposed decommissioning parts of its wireline network in rural service areas and substitute wireless service in the alternative. At issue are the costs to maintain a vast wireline network that reaches a dwindling number of customers. Verizon reminds regulators it has lost large numbers of residential landline customers who have switched to wireless service, making the costs to maintain service for a dwindling number of customers that much greater.

But for many communities, the focus is increasingly on broadband, especially in areas that receive little or no cable service. Telephone companies serving rural communities are surviving landline disconnects by providing broadband service.

For companies like Frontier Communications, CenturyLink, and Windstream, investments in providing broadband service are among their top spending priorities. At larger phone companies like Verizon and AT&T, highly profitable wireless divisions get the most attention and are top spending priorities.

Speaking this morning at the UBS 43rd Annual Global Media and Communications Conference, Shammo told investors Verizon will continue to allocate the majority of its capital allocation around Verizon Wireless to help densify its wireless network. Verizon, Shammo noted, plans further spending cuts for its wired networks next year as FiOS network buildouts start to taper off.

This will make expansion and improvement of Verizon DSL unlikely, and may put further cost pressure on maintaining Verizon’s wireline networks, which could further motivate a sale.

Verizon’s chief financial officer Fran Shammo is likely looking at three alternatives for the future:

1. Increase investment in Verizon Communications to further expand FiOS fiber optics;
2. Look at cost savings opportunities to improve the books at Verizon Communications, including decommissioning rural landline networks (if Verizon can win regulator approval);
3. Consider selling Verizon’s non-core wireline assets in areas where the company has not made a substantial investment in FiOS and refocus attention on serving the dense corridor of customers along the Atlantic seaboard between Washington, D.C. and Boston.

The best way Frontier Communications believes it can resolve service problems in Pennsylvania is to threaten those complaining with a cease and desist letter that accuses the complainant of misrepresenting Frontier’s excellent service.

Bradford County, Pa. officials learned this first hand when Commissioner Darryl Miller wrote to Frontier alerting them that service outages in northeastern Pennsylvania are becoming a public safety issue. The company responded with a letter warning the commissioner to end the criticism or else.

“We’re simply looking for answers,” Commissioner Miller told WNEP-TV’s investigations reporter Dave Bohman. Miller adds he thinks it’s heavy-handed to use the words, “cease and desist.”

Miller isn’t the only one looking for answers. WNEP interviewed Susan Moore, who lives alone in the rural community of Orwell. Her phone service went out of service at least once a week over the summer.

“I’ve got a lot of health issues,” she told the TV station. The implications of not having landline service became all too clear to Moore in August when she needed to send for an ambulance.

Bradford County, Pa.

Moore pressed her lifeline call alert button which relies on Frontier phone service to reach medical aid in case she falls and cannot get up or has a medical emergency. Nothing happened. Her phone service was out again.

“Without the phone service, my Life Alert doesn’t work,” Moore said. “That’s when I decided, as much pain as I was in, I got in a car and drove 20 miles to get to a hospital.”

Bradford County officials hear stories like Moore’s so often, they now eclipse complaints about potholes and taxes.

The problems affect both traditional landline dial tone service and DSL. If outages are not the subject of the complaint, slow and unresponsive Internet access usually is. Some customers were told Frontier oversold its DSL service in Bradford County and the company is waiting for federal broadband subsidies to improve service in the area.

Frontier Communications vice president Elena Kilpatrick said Frontier will spend part of a $2 million broadband improvement subsidy to deliver better service in Bradford County over the next six years. At the same time Frontier is tapping a ratepayer-funded subsidy to improve its existing service, the company is spending $10.5 billion of its own money to acquire Verizon landline infrastructure and customers in Florida, Texas, and California.

Despite the fact it will take up to six years to fully spend the subsidy, Kilpatrick claims the company has already upgraded phone and Internet service and fixed several problems reported by customers. She defended the company’s use of a threatening “cease and desist” letter sent to Commissioner Miller, claiming Frontier wanted the “misrepresentation of the facts” to stop.

Despite Kilpatrick’s claims, the complaints keep rolling in.

Randy, a Frontier customer in Bradford County reports he endures Frontier outages just about every Saturday since October, despite repeated service calls. Janise Groover wrote a Frontier technician tried to blame cobwebs for interfering with her Wi-Fi signals and poor DSL speeds — problems that are still unresolved — for which she pays Frontier $103 a month. Janice Bellinger complained her Frontier DSL connection drops “three or four times a day.” Customers in Monroe, Luzerne and Sullivan counties echoed Frontier service is dreadful in their areas as well.

Customers experiencing problems with their phone service in Pennsylvania can file an informal complaint with the state Public Utilities Commission and the FCC.

[flv]http://www.phillipdampier.com/video/WNEP Scranton Frontier Service Problems 11-16-15.mp4[/flv]

WNEP in Scranton reports Frontier’s solution to a county commissioner’s complaints about service was to send him a “cease and desist” letter. (3:16)