Preston County, WV

Verizon issued a press release this morning celebrating the availability of DSL service to nearly 200 new lines in Albright, West Virginia.  They even pinpointed the service expansion to “areas along Coal Lick Road near the intersection of Route 22 and 26.”

Satellite image showing the sparsely populated Coal Lick Road/Rt. 26 Intersection (click to enlarge)

While that presumably makes residents on Coal Lick Road happy, vast areas of West Virginia remain unserved by DSL or any other broadband service option, except for prohibitively expensive satellite Internet.  Preston County has 30,000 residents spread 0ut over 651 square miles, and is typical of many sparsely populated counties in West Virginia.  The nearest large city is Pittsburgh, Pennsylvania.

Verizon has stopped referring to its broadband solution for copper wire telephone networks as “DSL,” now marketing it as “Verizon High Speed Internet” instead.  Speed is in the eye of the customer, however.  Like most rural areas with Verizon DSL, the entry level tier offers speeds only up to 1Mbps downstream and 384kbps for the upstream.  Customers willing to pay more can select the “premium” service offering up to 3Mbps downstream and 768kbps upstream.  In larger towns and smaller cities, service up to 7.1Mbps may be available.

“Verizon is enabling more residents and businesses across West Virginia to make the high-speed connections that are important to them,” said B. Keith Fulton, president of Verizon West Virginia.  “Verizon’s investment in the Albright area means that more customers have access to affordable High Speed Internet service, backed by the reliability and security of Verizon’s network.”

Verizon is also demonstrating its commitment to West Virginia by leaving the state, intending to sell off its telephone service to Frontier Communications, a deal still pending regulatory approval.

For West Virginia, broadband expansion to just a few hundred homes, warranting a press release, demonstrates the incremental, slow progress of broadband expansion outside of urban America.

Petawawa and Laurentian Valley township are located in eastern Ontario, Canada.

The days of dial-up are finally coming to a close for large portions of two rural Ontario communities — Petawawa and Laurentian Valley Township, with the announcement that the Ontario Ministry of Agriculture, Food and Rural Affairs has approved a grant application to help expand broadband access to reach at least 95% of residents.

A joint broadband project committee met Monday for the first time to review the project’s budget and rollout plans.  The two communities joined forces to appeal for broadband connectivity, and now will work together to administer the project.  Laurentian Valley Councillor George Hodgkinson will serve as committee chairman and Petawawa Councillor Treena Lemay as vice-chairwoman.

The broadband project budget is $2.1 million dollars: $708,908 from the Canadian government and an additional $1.8 million dollars from Bell Aliant, which will be spent on additional towers and switch equipment.

Laurentian Valley township (population 9,265) and Petawawa (population 14,651) are located west of Pembroke, the nearest city.  Mayors from both communities praised the project.  Petawawa Mayor Bob Sweet is pleased the broadband issue is being addressed.  It’s an issue he heard about “constantly” from town residents.  Laurentian Valley Mayor Jack Wilson also feels broadband access is long overdue in his community, particularly because residents’ tax dollars helped construct the nation’s broadband infrastructure.  His residents have “waited a long time to get high-speed Internet at their homes.”

The Bell Aliant broadband proposal envisions traditional DSL service for more populated neighborhoods and community centers and Inukshuk Wireless broadband delivered from existing Bell towers to reach those who live too far away for DSL service or are located in particularly rural areas where DSL is not cost effective.  Inukshuk is an Inuit word that represents a beacon or a familiar place marker.  Inukshuk Wireless is a joint project between Bell and Rogers Communications to provide wireless broadband connectivity in Canada’s rural communities.

Planned for completion by 2010, the joint project hopes to cover 82% of the areas currently unserved with any broadband service.

Frontier Communications CEO Maggie Wilderotter told attendees of the National Association of Regulatory Utility Commissioners committee on telecommunications that rural residents and small businesses deserve better broadband service than they currently receive, and there is a digital divide between rural and urban communities across America.

Wilderotter’s company, Frontier Communications, is the nation’s second largest independent telephone company, focusing on providing service in rural communities formerly served by mom and pop or community-owned telephone operations.

Frontier provides 90% of its customers with at least low speed DSL broadband service, which is available to the majority of the company’s 2.4 million customers.  Frontier’s basic DSL service provides around 1.5Mbps, although some customers closer to telephone company switch facilities can achieve speeds closer to 3Mbps.  Frontier also serves some urban areas, such as metropolitan Rochester, New York with a DSL product that in some instances can achieve close to 10Mbps.

Frontier’s rural DSL service is designed to reach residences and small businesses with what is often their only choice for broadband service, Wilderotter explained to the audience as part of her keynote speech.

The company’s efforts to “bridge the digital divide” have relied mostly on making due with existing copper wire telephone facilities, and attempting to provide service over extended distances, common in more rural communities.  Although customers have often been grateful for the opportunity of getting something beyond dial-up access or obscenely expensive satellite broadband, Frontier’s rural service is often expensive and slow.  The company has been successful in attracting customers with promotions, including a “free” Dell Netbook, in return for a $45 shipping/processing fee and a commitment by the customer to sign up for telephone and broadband service for a minimum two year service commitment.  The company also offers a video bundle promotion, providing DISH Network satellite television at a discount for the first year of service.

Frontier’s broadband division has been one of the company’s major bright spots, attracting subscriber growth even while the company continues to lose wired telephone line business to the competition.  That drives broadband development in Frontier service areas, although customers seeking “cutting edge” services with faster and more consistent speed will need to look elsewhere.

Wilderotter also addressed the need to find ways to serve the remaining 10% of customers who lack broadband service because they are in a remote location, too far away from the telephone switch office to provide reliable service.

She told the audience Frontier would aggressively seek broadband stimulus funding to help underwrite the costs of providing service to these customers.  But she also called for an overhaul to the Universal Service Fund, a fee charged on every telephone subscriber’s bill designed to subsidize telephone service in more rural communities where the cost of providing service for each customer can be dramatically higher.  Wilderotter proposes that the USF now devote some of its resources to funding broadband buildouts in the nation’s rural areas, instead of diverting large sums to large national phone companies that exploit loopholes, she says.

“Those who serve rural America need the funding that will allow us to continue to expand broadband service and capacity.”

Frontier vs. Time Warner. Frontier vs. Comcast. Frontier vs. NPG Cable. Across 24 states, passing nearly 3,000,000 households, some in America’s smallest towns and others in large cities, Frontier Communications is engaged in a battle of survival in an increasingly competitive American telecommunications marketplace.

In this series examining Frontier Communications, today’s report investigates the competitive realities of a hotly competitive telecommunications industry, becoming more concentrated by the day.    How does Frontier intend to survive and grow, and is it realistic to assume it can in an environment that demands major investments in the delivery of high quality video, low-priced telephone service, and reliable broadband that may be beyond its reach?   Yesterday, we saw how Frontier is attempting to control expenses with the plan to implement a 5GB usage cap on its broadband customers.   Today, we take a look at how Frontier attempts to maintain its market share and deal with customer defections.   Tomorrow, we take a closer look at how quickly Frontier’s telephone line business is losing ground to its competitors.

Frontier’s Background At A Glance

NPG Cable's Rate Card & Channel Lineup In Bullhead City, Arizona. How much of a competitive threat is a cable company without a spellchecker?

Frontier Communications, formerly Citizens Communications, primarily runs originally independent telephone companies in rural and exurban areas bypassed by the former Bell System. The company’s most significant presence is in the 585 area code, home to Rochester, New York. But from Elk Grove, California and Bullhead City, Arizona eastward to the AuSable Valley in central New York to Bluefield, West Virginia, a significant number of Frontier customers are also in some of America’s  small towns and cities.

The size of a community where Frontier operates is often indicative of how much competition the company faces.  Some of Frontier’s most difficult challenges can be found in the  Rochester, N.Y. metropolitan area, numbering nearly 1,000,000 people, where a well entrenched Time Warner has made deep inroads into Frontier’s telephone access line business, eats Frontier for breakfast in the video delivery business, and has been a dominant player in the broadband marketplace since Road Runner arrived  in 1998.

In more rural communities, Frontier often has it much easier,  free from  cable competition  in some  areas, or  competing with a small independent cable company that may be relying on its own aging infrastructure and cannot afford to engage in price and service wars. Where Frontier stands as the lone player or only faces token competition from a small cable company, consumers will likely find  lower speed broadband at higher-than-average prices.

The Threat From Big Cable

Comcast's Product Bundles Threaten Frontier In Many of Their Service Territories

The cable television industry’s entry into telephone service  is among the biggest threats Frontier faces in maintaining their traditional primary revenue source: residential and business wired telephone lines.

Deploying  voice over IP technology, Comcast and Time Warner, the nation’s largest cable operators, have made significant inroads into Frontier’s telephone business where they compete.   Now, even smaller players in the cable industry are prepared to offer voice over IP service to customers.

Joining cable at the table are  mobile telephone companies like Verizon Wireless, Sprint, and AT&T which are also eroding Frontier’s  phone line business  as more people in America  rely exclusively on their mobile phone for telephone service.

How Cable Companies Pick Off Frontier’s Customers

Product Bundling & Discounting: The most important component of cable’s strategy against Frontier is cable’s product bundle, combining a voice over IP telephone line, a cable television package, and a high speed data product. Usually marketed as a “triple play” or “all the best” package, consumers are offered discounts based on the number of components of a package they combine. The more components, the greater the discount.

The product bundle offered by the cable industry has a competitive advantage because cable companies almost always have a more advanced network to deliver these products. Throughout the 1990s, most cable systems spent millions rebuilding their systems to accommodate increasing bandwidth requirements.   The result is a considerably larger pipeline used to deliver data, video, and telephone services.

Frontier’s network is considerably more dated, largely dependent on copper wire strung on telephone poles. While the company has made significant investments in their own  network, including some fiber optics,  in the end, they still rely on the same copper wire infrastructure the industry has used for nearly 100 years to connect to your home or office.

AT&T's U-verse service can deliver the goods over copper wire, but you need deep pockets to develop and deploy this technology. Are Frontier's deep enough?

Although this copper network is suitable for traditional telephone service, and can usually deliver a respectable data service over DSL, the video component has been sorely lacking. While AT&T is testing its U-verse video-over-copper technology in limited markets, Frontier is stuck  reselling Dish Network, the  smaller player in the satellite television marketplace.

Many consumers are resistant to satellite dishes of any size attached to their homes, and the cable industry’s response to Frontier has been the same as to DirecTV and Dish Network themselves: ugly satellite  dishes that suffer from rain/snow fade, require expensive service calls and maintenance, and a limitation on the number of TV sets you can hook up.   Also, no local channels in many areas.   In the end, most people who were even slightly uncomfortable with satellite-delivered TV elected to just stick with what they already had: cable television.

Results of the Dish Network partnership continue to be underwhelming. Sources tell Stop the Cap! the satellite service only succeeds in areas where there is no cable competitor, the customer was already a Dish Network subscriber independent of Frontier, or the incumbent cable company is hampered by a limited channel lineup, no HD channels, or exceptionally bad service. In Rochester, Frontier is actually losing more Dish Network customers than it is adding, and growth is  anemic in many other Frontier regions as well.

Frontier’s inability to provide a comparable quality television service is a critical defect in their competition with cable.

Claiming Inferior Product Quality:  The cable industry wasted no time attacking Frontier’s DSL product, accusing it of not performing consistently. Uneven telephone line quality, distance from the telephone company central office, and signal ingress (when interference or crosstalk gets into wiring and degrades the signal) can all dramatically slow a DSL customer’s  broadband speeds. The cable industry’s marketing often pillories DSL service because of its inability to offer anything close to a speed guarantee, and the fact  it is often slower than cable’s competing product no matter how good your line is.

In areas where a large cable competitor exists, traditionally  that cable operator will have the fastest speed broadband package to sell to customers in that market. This forces Frontier to compete on price.   In return for a significant discount, Frontier  usually locks customers into multi-year service agreements which discourage its customers from  switching to a competitor.   Unfortunately, the company’s inferior product bundle and  long term contract commitments have made it difficult to convince cable customers to switch to Frontier,  particularly if it means taking their video package from Dish Network.

Lampooning Questionable Marketing Practices: In Rochester, Time Warner’s marketing people have had no trouble finding new ways to attack Frontier in its advertising.   While Frontier may be able to pull off some of their hidden extra charges, long term contracts, and restrictive service policies in more rural communities, most of those practices meet strong criticism in Time Warner’s advertising.

Among the more common refrains in Time Warner ads  dismissing Frontier’s DSL  product include:

• Charging a “modem rental fee” as part of Frontier’s DSL service, even if you can supply your own DSL modem.

• Locking customers into a term commitment contract (often lasting several years) for DSL service that offers lower speeds than Time Warner’s Road Runner service and charging a substantial early termination fee for those dissatisfied with their broadband experience.

• Charging for ancillary support services like Frontier’s “Peace of Mind” that Time Warner claims to offer at no charge.

The latest decision to impose a 5GB usage cap on customers is marketing gold for the cable companies competing with Frontier, perhaps only tempered  by the fact they are also studying whether to apply their own usage caps.

Relentless Marketing: One of the fringe benefits of owning your own video distribution network is the ability to pepper your existing customers with near-constant advertising promoting your own products while denigrating the competition. Cable customers can see an average of three product promotion spots every hour from their cable company trying to convince them to upgrade, attempting to bolster customer loyalty, or simply slashing and burning whatever the telephone company or satellite dish company is offering. Frontier has  a limited ability to counter this.

In areas of significant competition, the battle usually rages in your mailbox, with  a relentless flood of  promotional postcards and mailers, as well as ad buys on local television/radio stations and local newspapers. But cable retains an important advantage because of their ability to insert advertising into basic cable channels, usually at no cost to them.   Frontier doesn’t own their video distribution network – they are reselling someone else’s.

Frontier’s Battle Plan

Welcome to DeLand, Florida: Home of Frontier's Customer Care Center

Frontier’s plan to compete with cable includes  their own marketing by mailbox, and sponsoring local community events and charities to leverage free media and consumer exposure to the company brand to nurture positive feelings  about the company.

The company also places a high priority on attempting to position themselves as “local” players in the market – a company made up of local employees who customers supposedly will interact with on a daily basis. Unfortunately for them, most customers will likely only interact with one of their customer care call centers such as the one  in DeLand, Florida which is localism IF you live, work and play in DeLand.

Frontier also maintains call centers in Henrietta, New York and Burnsville, Minnesota which are designed to replace what used to be local customer service call centers in more than a dozen  Frontier areas.   Some 500 people were hired to answer phones in DeLand for Frontier.   This begs the question how many people lost those jobs in the various local communities where Frontier operates.

Call center employees are on Frontier’s competitive front line, trying to  maintain customer loyalty, convince customers to upgrade their service packages, and above all, remain with Frontier and don’t cancel anything.

They need to maintain the battle, because cable competitors continue to erode their residential business. The company’s deactivations of high speed data services and the ongoing loss of telephone lines are considerably above the company’s own estimates.

One significant bright spot Frontier has maintained is delivering commercial broadband to businesses.

Frontier has a significant advantage in many offices, business parks, and other industrial areas bypassed by their cable competitors. Installation costs to wire a building with coaxial cable often run into the tens of thousands of dollars, an expense borne by the company, the landlord, or a combination of the two. But every business has telephone service, which usually guarantees potential access to DSL service from Frontier. Small and medium sized businesses have become loyal Frontier commercial customers because of low installation costs and a reasonable pricing plan that is typically far more cost effective than what cable is offering. Cable modem commercial access pricing models are usually tailored to a range of product speeds at prices that, when compared with what Frontier can offer, are not competitive.

Frontier’s ability to effectively compete against cable will, in the end, come down to the company’s ability to invest in their network and be able to match what is on offer from the cable operator, and new competitors yet to emerge.    Some former Baby Bell telephone companies like AT&T are investing enormous sums to leverage their existing network (their U-verse product) or starting over from scratch (Verizon’s fiber optic cable to the home FIOS project).

To date, Frontier’s status as a smaller player has meant their investments in these efforts pale in comparison to their larger brethren.   They include experimenting with deploying fiber optic cable to new housing developments and selected mass density buildings (apartments, offices) in Rochester, building community wi-fi networks to create a new market for wireless Internet access, and other investments in their network distribution system.   If they cannot invest enough, fast enough, to keep up, they will become ripe for a merger with a larger player in the market or get wiped out by the competition.

In the meantime,  to quote company chairwoman and CEO Maggie Wilderotter, Frontier intends to “stay the course” for the rest of the year.

We’ll have to wait and see if that’s good enough.

Frontier’s webmasters have been working overtime today apparently doing some damage control, as well as issuing some clarifications about their new usage caps.   But like much of the mixed and muddied message customer service representatives are sending customers, the website now contains several inconsistencies and contradictions between the product description page and the Acceptable Use Policy.

Because of the changing story, we’ve decided to begin capturing and saving select pages from Frontier’s website and will be adding them to a new Reference Library under construction.   From there, you can download and save Adobe PDF versions of captured web pages, dated for your convenience.   Unfortunately, with the shifting positions of Frontier, what may be on the website today may be gone tomorrow.   If engaged in an effort to cancel service, it may be useful to have some of these pages available to reference, because customer service representatives may not be able to locate them.

Let’s breakdown what has changed in the last 24 hours.

First, it’s obvious readers are making a difference.   Frontier realizes they have a public relations problem on their hands of their own making.   The complaint calls and cancellation requests have clearly made an appropriate impact on the company, although not to the point of shelving the idea of a usage cap.   The company has instead decided to try and manage the story more carefully in hopes of controlling the message.   Unfortunately for them, as long as they want to impose caps on customers, we will be here to debunk the fictional excuses, expose the inconsistencies, and educate consumers about why they should not be convinced that less equals more.

Second, the original Acceptable Use Policy dated July 23, 2008 for residential customers remains in place:

Customers must comply with all Frontier network, bandwidth, data storage and usage limitations. Frontier may suspend, terminate or apply additional charges to the Service if such usage exceeds a reasonable amount of usage. A reasonable amount of usage is defined as 5GB combined upload and download consumption during the course of a 30-day billing period.

This is now in direct contradiction with a new section attached to the product information page for the residential DSL product, which includes this new language:

If I hit 5GB will my service be interrupted?
No. Your service will not be interrupted at 5Gb. You will continue to use our High Speed Internet service without disruption.

Does Frontier plan to limit my use of the Internet?
No, there are no plans to limit customer usage. On average a Frontier High-Speed Internet customer uses less than 1.5GB per month. Frontier residential High-Speed Internet service comes with 5G per month (about 5,000 Megabytes), which is more than double the monthly consumption of most of our subscribers.

We appreciate the company’s apparent new policy not to suspend or terminate accounts for exceeding their 5GB usage cap, but their Acceptable Use Policy requires immediate revision to ensure consistency.

Third, the newest promotional page includes this laugh-out-loud passage.   If you are seriously considering imposing a draconian usage cap of 5GB, which is obviously so unacceptable to a significant number of your customers that are calling to complain and cancel service, maybe this passage  is just pushing things a little too far:

We all love the Internet, and Frontier is committed to offering you all the bandwidth you need and want to take full advantage of the Web! Our basic residential Internet packages offers 5GB usage — that’s the equivalent of 500,000 basic text e-mails, 2,500 Photos, 40,000 Web Pages, over 300 Hours of Online Game Time, 1,250 downloaded songs, or a mixture of the above!

This kind of writing convinces me the folks in Frontier’s Marketing Department have finally joined the party.   Welcome aboard, but remember, if customers were upset enough to protest a 5GB usage cap, rubbing it in their face by telling them you love the Internet and are committed to offering all the bandwidth “you need” (if the year is 1988 and you have a 1200bps dial-up modem) will be seen as fighting words.   Telling customers 5GB a month lets you take full advantage of the Web is fine, if you never do anything except browse low density web pages.   Maybe we can Gopher and Telnet some things as well.   Somehow I doubt the marketing people will understand the irony of either.

The rest doesn’t get much better.   If Frontier wants to learn more about The Internets, they can use The Google to read about average customer reactions to broadband user caps and exactly what defines a “power user.”   Someone who exceeds 5GB a month hardly qualifies.   Also, another inconsistency:  If Frontier has not implemented a usage cap plan, then why does the language implementing it remain in the Residential Acceptable Use Policy?

What are “bandwidth caps” and what does it mean for Internet users?
“Caps” are thresholds where Internet Service Providers could deem usage in excess of “normal” usage. For the majority of our users, bandwidth caps will not be reached. However, some users have multiple servers or computers or download huge files that demand large amounts of available bandwidth. In response to these “power users,” the industry is moving toward “tiered usage” plans that would be applicable when consumption reaches certain bandwidth levels. This type of plan would result in heavy users paying for their fair share of usage and will make sure that average users do not subsidize high-usage consumers. Other Internet Service Providers like Comcast and Time Warner are testing these tiered usage plans. Frontier has not implemented tiered usage plans and will continue to evaluate if and when they would be necessary. If and when Frontier implements a tiered usage plan pricing and usage information will be communicated to all High-Speed customers.

Before we go, let me add there is a bit of good news from Frontier today, which is to their credit, assuming they publish this policy in the form of a written guarantee to customers, which amend their term contracts to assure them this language will remain in place regardless of if it appears on the website or not.   Until a written assurance is in hand, a promotional  blurb on a product description page is  insufficient to make me withdraw my recommendation to cancel service within the 30 day opt-out window:

If Frontier rolls out tiered usage plans, will my Pricing / Plan change if I am on a Frontier Price Protection Plan?
Pricing for customers on Frontier’s Price Protection Plan will not change during your initial term commitment if we roll out tiered usage plans.

This language should be slightly modified to state that any overage fees for bandwidth in excess of 5GB do not apply to Frontier Price Protection Plan customers, and that no penalty or disruption in service will occur if a customer exceeds the 5GB usage cap planned for more  formal implementation in the near future.   Assuming that language is in place, it means that customers on a 12-36 term commitment will not have to worry about any usage caps and they will not apply to them for the remainder of their contract. But, again, an inconsistency remains here as well.   The Acceptable Use Policy clearly states the 5GB limit is in place right now.   Further reference to this should also be included on the Terms & Conditions page, which also contains the opt-out clause, to clarify that usage caps do not apply to customers with a contract that does not specifically include them.

Stop the Cap! continues to call on Frontier to discard the usage cap limitation altogether.   Next week, we’ll have some better ideas for Frontier to consider that will not alienate their customer base and positions them to begin competing more effectively in their service areas.

This article was updated at 11:58pm, August 6, 2008 and replaces language from an article entitled “Breaking News” posted earlier this evening.