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Wilson, N.C.’s Fight for Better Internet Found Lots of Opposition from Big Telecom and Republicans

If you’ve ever lived in small-town America, you know how bad the internet can sometimes be. So one town in North Carolina decided: If we can’t make fast internet come to us, we’ll build it ourselves. And they did, despite laughter and disbelief from Time Warner Cable (today known as Spectrum).

When the city started installing fiber optics, the incumbent cable and phone companies did not like the competition and fought back, hiring an army of 40 lobbyists. The telecom companies enlisted the support of the now Republican-controlled state legislature, often with the help of the American Legislative Exchange Council (ALEC) and other conservative groups. Together, they hammered home scare stories with suspect studies critical of municipal broadband written by not-so-independent researchers ghost-funded by many of the same big cable and phone companies.

National Public Radio’s “Planet Money” looks at what happened when the City of Wilson decided to try and start its own internet provider, and how it started a fight that eventually spread to dozens of states, a fight about whether cities should even be allowed to compete with big internet providers, and what the effect the outcome might have on working remotely. But the citizens of Wilson seem to love Greenlight Community Broadband, right down to its well-regarded customer service, which includes dropping by elderly customers’ homes during lunch to troubleshoot set-top boxes and nefarious remote control confusion. (22:47)

New Owner Ziply Fiber Moves Quickly to Overhaul Frontier’s Network in Pacific Northwest

Even with the threat of COVID-19 and a virtual nationwide work-from-home initiative, the new owners of Frontier Communications’ network in Washington, Oregon, Montana and Idaho are moving rapidly to repair persistent network issues, create a backup network, and lay the foundation to bring fiber to the home service to 85% of its customers over the next three years.

Ziply Fiber of Kirkland, Wash., formerly known as Northwest Fiber, acquired the Frontier Communications service areas in the Pacific Northwest just as Frontier itself was on the verge of declaring bankruptcy. It will waste little time upgrading Frontier’s copper wire network to get fiber service to customers fast.

“After Frontier bought Verizon’s landlines and FiOS networks in Washington and Oregon in 2010, it felt like the last decade was a phone company driving in neutral,” said Dale Prescott, a FiOS customer in Washington State. “You could feel Frontier never wanted to spend any money out here. It was like they were a caretaker of Verizon’s network, and while we got some service improvements here and there, Frontier also took away a lot too.”

Service reliability suffered, especially in areas that remained served by copper over the last decade. Customers reported lengthy outages and waiting times for repairs, and DSL speeds were actually reduced in some areas because deteriorating network infrastructure could no longer support earlier, faster speeds. In a decade of service, Frontier only managed to provide fiber connections to about 33% of its customers, the vast majority of it acquired from Verizon.

“Frontier never invested much in its network, and what it did invest seemed mostly to keep the lines from falling off the poles,” Prescott said. “Businesses got slightly better service when Frontier boosted its fiber capacity, primarily to serve commercial customers. But if you lived in the sticks, your service got worse over time, not better.”

Ziply Fiber plans to change that experience with a promise to regulators to spend about $500 million overhauling Frontier’s network in the region. Most of that spending will be devoted to upgrading customers to fiber optics. Just a few weeks after closing on its acquisition of Frontier landlines, Ziply told residents in 13 communities to expect fiber upgrades that began this spring. The majority long suffered with Frontier DSL, often at speeds as low as 3 Mbps.

Among the first towns to get fiber service are Kellogg, Moscow, and Coeur d’Alene — all in Idaho. Work has already commenced and is expected to be finished by fall. Ziply wants to keep construction costs as low as possible, so it intends to do aerial deployment of fiber by wrapping the optical cable around existing copper wire telephone cables already on the pole. This process, known as “overlashing” will simplify installation by not requiring additional space to place fiber cables next to existing telephone wiring or going to the effort of removing the existing copper wiring, which raises costs.

Overlashing has met with some controversy, however. Telephone companies are strongly in favor of allowing the process for optical fiber installation because they rarely need permission or costly permits from utility pole owners, often electric utilities. Opposition comes primarily from some electric companies, which claim overlashing can make existing installations “unsafe” by placing too much weight on existing wiring, which may have been installed decades earlier. Those electric utilities also stand to make money from forcing companies to seek new permits for placing fiber on poles, and that permission does not come free of charge.

Fiber customers will be able to select internet plans up to 1,000 Mbps. Enhanced DSL service in some areas is available at speeds up to 115 Mbps, but most of these service areas will probably be served by fiber to the home service, eventually.

Ziply Fiber Upgrade Projects (May, 2020)

  • Washington—Anacortes, Kennewick, Pullman, Richland and Snohomish
  • Oregon—Coquille, Coos Bay, La Grande, North Bend
  • Idaho—Coeur d’Alene, Kellogg, Moscow
  • Montana—Libby

To further speed fiber upgrades, Ziply acquired Wholesail Networks, already contracted to manage fiber network design for Ziply. Company officials quickly identified multiple weak spots in Frontier’s network, particularly relating to its resiliency when fiber cables were cut or copper wiring was stolen. Ziply is building in network redundancy, with each portion of its network served by at least two sets of fiber cabling and identical equipment in each of more than 130 central switching offices. In many markets, Ziply will maintain at least three redundant fiber connections to make certain if one (or two) networks go down, customers can still be served by a third with no interruption in service.

Ziply is also avoiding the usual nightmares customers experience when switching between one company’s systems to another. Frontier’s customers suffered significantly from a cutover from Verizon’s operations and billing systems, which often left them disconnected or mis-billed. To prevent that from happening again, Ziply literally cloned Frontier’s existing back office systems, so customers won’t experience any “cutover” problems.

Ziply executives have been candid about the network they are acquiring. They told regulators the network was in reasonably good condition in some places, but not all. Ziply promised to fix the network weak spots, resolve customer repair orders at least two-thirds faster than Frontier did, and make comparatively broader investments in network operations. Analysts predict Ziply has a better chance of success than Frontier did, primarily because Frontier’s operations were mired in debt, making new investment in network upkeep and upgrades difficult.

Frontier Communications Declares Bankruptcy; Documents Show Company Spent Millions to Retain Customers

Phillip Dampier April 16, 2020 Consumer News, Frontier 2 Comments

Frontier Communications filed for bankruptcy reorganization protection this week with more than $10 billion in debts and departing customers, despite retention efforts that cost the company more than $5 million a month.

The company had warned investors it was considering restructuring and failed to make a timely bond payment to cover a portion of its debts. Frontier had been in negotiations with debt holders for several months, attempting to secure a Restructuring Support Agreement that would reduce debt in return for an equity stake in the company. At least 75% of unsecured bondholders are reportedly on board with a deal that would free up money to spend on fiber optic upgrades.

Most of Frontier’s legacy customers are served by a deteriorating copper wire network designed for basic landline phone service. The company’s DSL internet service has been roundly criticized for being slow and unreliable. Instead of upgrading copper customers to fiber service, Frontier instead spent billions acquiring new territories from other phone companies, notably Verizon Communications and AT&T. The acquisitions did not deliver the financial returns the company expected, and customers canceled service after Frontier botched billing and service transitions that left some without service for weeks.

Today, Frontier has about four million customers, 3.5 million broadband subscribers and 18,300 employees operating in 29 states. The company has arranged a debtor-in-possession loan of $460 million from Goldman Sachs Bank to continue operating during the bankruptcy reorganization. It also expects to receive an additional $1.35 billion in cash later this month from the sale of its territories in Idaho, Montana, Oregon, and Washington to Northwest Fiber.

Frontier also divulged new details about its deteriorating business to the Bankruptcy Court:

  • Frontier estimates it spends approximately $1,000 for each new residential customer and $2,500 for each new commercial customer.
  • Almost all of its new customers sign up for service under a sales promotion. “On average, [Frontier] spends approximately $1.3 million per month on marketing campaigns.”
  • Customer retention efforts are crucial for Frontier, which has been losing customers at an alarming rate. Frontier uses three enticements to convince customers to stay: “Save Offers,” “Roll-Off Offers,” and “Discretionary Credits.”
  • “Save Offers” are a classic retention tool, offering enticements to customers threatening to cancel. Frontier offers free premium channels, reduced rates, and/or discounted service upgrades to convince customers not to leave. Frontier disclosed it pitches approximately 24,000 Save Offers each month, a sign many customers are prepared to cancel their accounts.
  • “Roll-Off Offers” are made to customers calling to complain about their bill after their new customer promotion ends. Frontier regularly offers complaining, bill-shocked customers a new, less generous promotion going forward. For example, an expiring new customer discount of $60/month might be replaced with a $30/month discount if the customer agrees to stay. These offers typically last six months to a year and still leave the customer eventually paying regular prices. Frontier disclosed that it loses many more complaining customers than it keeps after promotions expire. About 16,000 customers per month (or roughly one-fourth of customers complaining about an expiring promotion) are retained as customers because of a roll-off offer.
  • “Discretionary Credits” are one-time bill credits given when customers call with service complaints, reports of damage done to private property by Frontier, or missed time guarantees for service calls. Frontier admitted it is currently paying out an average of $3.9 million a month in Discretionary Credits to upset customers.

Post bankruptcy, Frontier has proposed undertaking a modest fiber upgrade program in its more profitable territories where a significant return on investment for fiber upgrades can be demonstrated. That is unlikely to include many of Frontier’s rural service areas.

Frontier’s Inner Secrets Revealed: ‘We Underinvested for Years’

Frontier Communications has revealed to investors what many probably realized long ago — the independent phone company chronically underinvested in network upgrades and repairs for years, giving customers an excuse to switch providers.

Remarkably, the phone company did not just underperform for its remaining voice and DSL internet customers. In a sprawling confidential “Presentation to Unsecured Bondholders” report produced by Frontier’s top executives, the company admits it was even unable to achieve significant growth in its fiber territories, where Frontier-acquired high-speed FiOS and U-verse fiber networks held out a promise to deliver urgently needed revenue.

Frontier’s bondholders were told the company’s ongoing losses and poor overall performance were unsustainable, despite years of executive “happy talk” about Frontier’s various rescue and upgrade plans. In sobering language, Frontier admitted its capital structure and efforts to deleverage the company’s massive debts were likely to cut the company off from future borrowing opportunities and deter future investment.

The presentation found multiple points of weakness in Frontier’s current business plan:

Voice landline service remains in perpetual decline. Like other companies, Frontier’s residential landline customers left first, but now business customers are also increasingly disconnecting traditional phone service.

About 51% of Frontier’s revenue comes from its residential customers. That number has been declining about 5% annually, year over year as customers leave. Frontier’s internet products are now crucial to the company’s ability to stay in business. Less than 30% of Frontier’s revenue comes from selling home phone lines. For Frontier to remain viable, the company must attract and keep internet customers. For the last several years, it has failed to do either.

Frontier customers are disconnecting the company’s low-speed DSL service in growing numbers, usually leaving for its biggest residential competitor: Charter Spectrum. Frontier remains saddled with a massive and rapidly deteriorating copper wire network. The company disclosed that 79% of its footprint is still served with copper-based DSL. Only 21% of Frontier’s service area is served by fiber optics, after more than a decade of promised upgrades. Frontier’s own numbers prove that where the company still relies on selling DSL, it is losing ground fast. Only its fiber service areas stand a chance. Just consider these numbers:

  • Out of 11 million homes in Frontier’s DSL service area, only 1.5 million customers subscribe. That’s a market share of just 13 percent, and that number declines every quarter.
  • Where Frontier customers can sign up for fiber to the home service, 1.2 million customers have done so, delivering Frontier a respectable 40 percent market share.

Frontier has been promising DSL speed upgrades for over a decade, but the company’s own numbers show a consistent failure to deliver speeds that can meet the FCC’s definition of “broadband,” currently 25 Mbps.

At least 30% of Frontier DSL customers receive between 0-12 Mbps download speed. Another 35% receive between 13-24 Mbps. Only 6% of Frontier customers get the “fast” DSL capable of exceeding 24 Mbps that is touted repeatedly by Frontier executives on quarterly conference calls.

Despite the obvious case for fiber to the home service, Frontier systematically “under-invested in fiber upgrades” in copper service areas at the same time consumers were upgrading broadband to acquire more download speed. Frontier’s report discloses that nearly 40% of consumers in its service area subscribe to internet plans offering 100 Mbps or faster service. Another 40% subscribe to plans offering 25-100 Mbps. In copper service areas, Frontier is speed-competitive in just 6% of its footprint. That leaves most speed-craving customers with only one path to faster speed: switching to another provider, typically the local cable company.

So why would a company like Frontier not immediately hit the upgrade button and start a massive copper retirement-fiber upgrade plan to keep the company in the black? In short, Frontier has survived chronic underinvestment because of a lack of broadband competition. Nearly two million Frontier customers have only one choice for internet access: Frontier. For another 11.3 million, there is only one other choice – a cable company that many detest. Frontier has enjoyed its broadband monopoly/duopoly for at least two decades. So long as its customers have fewer options, Frontier is under less pressure to invest in upgrades.

For years Frontier’s stock was primarily known for its generous dividend payouts to shareholders — money that could have been spent on network upgrades. But what hurt Frontier even more was an aggressive merger and acquisition strategy that acquired castoff landline customers from Verizon and AT&T in several states. In its most recent multi-billion dollar acquisition of Verizon customers in California, Texas, and Florida, Frontier did not achieve the desired financial results after alienating customers with persistent service and billing problems. The longer term legacy of these acquisitions is a huge amount of unpaid debt.

Frontier’s notorious customer service problems are now legendary. Frontier’s new CEO Bernie Han promises that customer service improvements are among his top four priorities. Improving the morale of employees that have been forced to disappoint customers on an ongoing basis is another.

Frontier executives are proposing to fix the company by deleveraging the company’s debt and restructuring it, freeing up capital that can be spent on long overdue network upgrades. Executives claim the first priority will be to scrap more of Frontier’s copper wire network in favor of fiber upgrades. That would be measurable progress for Frontier, which has traditionally relied on acquiring fiber networks from other companies instead of building their own.

But the company will also continue to benefit from a chronic lack of competition and Wall Street’s inherent dislike of large capital spending projects. The proposal does not come close to advocating the scrapping of all of Frontier’s copper service in favor of fiber. In fact, a rebooted Frontier would only incrementally spend $1.4 billion on fiber upgrades until 2024, $1.9 billion in all over the next decade. That would bring fiber to only three million additional Frontier customers, those the company is confident would bring the highest revenue returns. The remaining eight million copper customers would be stuck relying on Frontier’s existing DSL or potentially be sold off to another company.

Frontier seems more attracted to the prospect of introducing or upgrading service to approximately one million unserved or underserved rural customers where it can leverage broadband subsidy funding from the U.S. government. To quote from the presentation: Frontier plans to “invest in areas that are most appropriate and profitable and limit or cease investments in areas that are not.”

Another chronic problem for Frontier’s current business is its cable TV product, sold to fiber customers.

“High content/acquisition costs have made adding new customers to the Company’s video product no longer a profitable exercise,” the company presentation admits. If the company cannot raise prices on its video packages or successfully renegotiate expensive video contracts to a lower price, customers can expect a slimmed down video package, likely dispensing with regional sports networks and other high cost channels. Frontier may even eventually scrap its video packages altogether.

To successfully achieve its goals, Frontier is likely to put itself into Chapter 11 bankruptcy reorganization no later than April 14, 2020. The company’s earlier plans may have been impacted by the current economic crisis caused by the coronavirus pandemic, so the exact date of a bankruptcy declaration is not yet known.

DSL is Failing Rural America – Service Rarely Achieves FCC’s 25 Mbps Broadband Minimum

With the average speed of DSL service under 10 Mbps in rural counties across the United States, this legacy technology is disenfranchising a growing number of rural Americans and is largely responsible for dragging down overall U.S. internet speed scores. Only satellite internet offers overall lower speed and poor customer satisfaction, according to consumer surveys.

In some areas, customers cannot even get bad DSL service, despite the fact the Federal Communications Commission marks many of those addresses as well-served. According to a new report by the company Broadband Now, the FCC could be claiming at least 20 million Americans have access to robust internet service that, in fact, does not exist, especially in rural counties.

Citylab:

To get its estimate, the Broadband Now team manually ran 11,663 randomly selected addresses through the “check availability” tool of nine large internet service providers that claim to serve those areas. All in all, the team analyzed 20,000 provider-address combinations. A fifth of them indicated that no service was available, suggesting to the researchers that companies may be overstating their availability by 20%, said John Busby, the managing director of Broadband Now. The results also show that 13% of the addresses served by multiple providers didn’t actually have available service through any of them. They then applied these rates across the country to get their final estimate of 42 million people without broadband.

The disparity between their estimate and the FCC’s largely comes from the agency’s reliance on Form 477 reports, in which internet providers self-report the locations they serve. Providers can claim to serve the population of an entire census block if service is provided to just one household in that block. After the release of FCC’s May report, the agency’s Democratic commissioners dismissed the report, berating their colleagues for “blindly accepting incorrect data” and using the numbers to “clap its hands and pronounce our broadband job done.”

Across DSL-heavy rural Ohio, weary residents have nothing to clap about as they desperately look for something better than slow speed DSL from the local phone company.

“It’s a good day when Frontier DSL breaks 2 Mbps, although they advertise (and we pay for) 10 Mbps,” said Fred Phelps, a Frontier DSL customer for more than a decade. “In rural Ohio, it is take it or leave it internet access and we have no choice other than Frontier.”

Phelps has longed for Charter Spectrum to wire his area, next to a large farm operation, but the nearest Spectrum-connected home is a half-mile down the road. Phelps was lucky to get DSL at all. That aforementioned farm paid Frontier a handsome sum to extend its commercial DSL service to the farm’s office, putting Phelps in range for a residential DSL connection.

“It is always slow and frequently goes offline on rainy and snowy days because water is getting into the phone cable somewhere,” Phelps told Stop the Cap! “Service calls are a waste of time because the problem always disappears by the time the repair crew shows up.”

Cindy B (last name withheld at request) is in a similar situation in Ohio. She has a CenturyLink DSL line that averages 1 Mbps, although some of her relatives have managed to get almost 12 Mbps from CenturyLink closer to town.

Warren County, Ky.

“CenturyLink treats you like they are doing you a favor even offering DSL service in this part of Ohio. There is no cable TV service for at least 20 miles, so cable internet is out of the question,” Cindy tells us. “They have also made it crystal clear there are no plans to upgrade service in our area.”

She used to be a Viasat satellite internet customer but quickly canceled service.

“Satellite internet should be considered torture and banned as illegal,” Cindy said. “You can spend five minutes just trying to open an email, and the only time we could download a file was overnight, but even that failed all the time.”

Cindy and Fred are collateral damage of the country’s broadband dilemma. They are stuck with DSL, a service that often wildly over-claims advertised speed that it actually cannot deliver in rural areas. In much of rural Ohio, DSL speeds are usually under 6 Mbps, although companies often claim much faster speed on reports sent to the FCC.

“According to the FCC website, we should be getting 24 Mbps internet from Frontier and two other companies, but that simply does not exist,” said Phelps. “I really don’t understand how the FCC can rely on its own database for broadband speed that is not available and never has been.”

Cindy said her children cannot depend on their DSL line and have to do their homework at school or in the library, where a more dependable Wi-Fi connection exists.

“The problem is getting worse because websites are becoming more elaborate and are designed for people who have real internet connections, so often they won’t even load for us,” she said.

Warren Rural Electric Co-Op’s service area.

But according to the FCC, neither Cindy nor Fred live in a broadband-deprived area. For this reason, public funding to improve internet access is hard to come by because the FCC deems both areas well-served.

South of Ohio, in Warren County, Ky., a local rural electric co-op is not waiting for the State of Kentucky or the federal government to fix inaccurate data about broadband service in the rural exurbs around Bowling Green, usually stuck with slow DSL or no internet access at all. Warren Rural Electric Cooperative and Lafayette, Tenn.-based North Central Telephone Co-Op are working together to lay fiber optic cables to bring fiber to the home internet service to some broadband-deprived communities in the county. Warren RECC serves eight counties in south central Kentucky with over 5,700 miles of electric transmission and distribution lines, mostly in rural parts of the state. Two communities chosen for service as part of a pilot project — Boyce and September Lakes, are more than a little excited to get connected.

The Bowling Green Daily News reports that an informational meeting held in early February drew 300 residents (out of nearly 800) ready to hear more information about the project. Almost 150 signed up for future fiber service on the spot. Many more have subsequently signed up online. The new service will charge $64.95/mo for 100 Mbps service or $94.95 for 1,000 Mbps service. That is about $5 less than what Charter Spectrum charges city folks and is many times faster than what most phone companies are offering in rural Kentucky.

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