Verizon FiOS is coming to Fire Island.

Verizon Communications has thrown in the beach towel attempting to convince residents of popular tourist destination Fire Island to accept its wireless landline replacement Voice Link as the company’s sole landline service option.

After telling customers for months it did not make financial sense to restore copper service or bring its fiber optic network FiOS to Fire Island, Verizon senior vice president of national operations support Tom Maguire today reversed course.

“In today’s competitive marketplace it’s all about making sure you can take care of customers because if you don’t they can go someplace else,” Maguire told Newsday. “Interestingly on Fire Island, there is no place else, so we listened to our customers. It was pretty apparent that we wanted to do something beyond Voice Link and the wireless network, so we think that fiber is the best course.”

Verizon customers on Fire Island have told Stop the Cap! all summer they felt abandoned by Verizon, stuck using a wireless landline replacement service they claimed worked poorly or not at all at times. Customers also loudly complained that Verizon was effectively forcing broadband customers who depended on Verizon DSL to the much more expensive Verizon Wireless broadband service with a very small usage cap. Many attended meetings sponsored by elected officials or the Public Service Commission to decry Voice Link and demand Verizon offer the same quality service its landline network used to provide.

Maguire told the newspaper the company will now deploy its fiber network FiOS on Fire Island, offering residents new options for telephone and broadband service. The 600 customers on Fire Island with Voice Link will be able to keep the wireless service or switch to FiOS fiber.

Reached for comment, Verizon tells Stop the Cap! its fiber service will not include FiOS TV because Verizon does not have franchise agreements with the many municipalities on Fire Island, and their primary concern is getting the fiber network engineered and constructed.

Schumer

Fire Island residents have made it clear to Verizon their biggest concern is Internet access, not television, and Verizon FiOS will be able to deliver faster Internet speeds unavailable from DSL.

Verizon expects to begin construction in October, although it has already started preliminary design work for the new fiber network. Verizon expects to have the fiber build complete by the beginning of the 2014 summer season on the island.

Sen. Charles Schumer (D-N.Y.), who has been carefully monitoring the Voice Link issue, released a statement welcoming Verizon’s decision.

“By installing fiber-optic cables on the island, Verizon will not only make the system as good as it was before, it will be making it better,” said Schumer. “Fire Island residents will now have greater access to high-speed Internet – a necessity in the modern age – and reliable voice service. Verizon deserves credit for listening to our concerns and changing course.”

In a June guest article written for publication on Stop the Cap!, Maguire wrote it would cost Verizon from $4.8 million to more than $6 million to restore landline service. Maguire argued it made no economic sense to commit to a multimillion dollar investment with no guarantee that residents of the island will sign up for Verizon service.

“That’s probably why Verizon is the sole provider on the island,” Maguire noted in the piece. “None of the companies we compete with in other parts of New York offer services on the island.”

Today’s decision represents a complete reversal of the company’s earlier views, but one that is welcomed nonetheless by residents on Fire Island reached by Stop the Cap! this afternoon.

“We’re very glad this is now over and behind us,” said Verizon customer Shari who has toughed out the summer with cellphone-only service.

“I can’t wait to return Voice Link, which has been a real pain,” said Thom.

Both customers tell Stop the Cap! they intend to sign up for Verizon FiOS the moment it becomes available.

With total ownership of Verizon Wireless now assured, Verizon Communications plans to begin “tree trimming” assets in its portfolio that cannot match the profitability of its wireless business.

Verizon CEO Lowell McAdam told CNBC he has already communicated with Verizon’s executive team about the direction Verizon will take after it buys out Vodafone’s ownership interest in Verizon Wireless. One potential target for sale: millions of Verizon’s rural landlines that cannot hope to match the revenue an average cell phone customer delivers the company.

Verizon’s wireless assets now represent the company’s biggest generator of sales and profit, accounting for two-thirds of 2012 revenue and almost all of its operating income.

Where Verizon chooses to invest is largely dependent on what kind of return the company can expect. So far, the best returns have come from Verizon Wireless.

“I think there is no better way to deploy our capital then to invest in a [wireless] asset that today generates more than $80 billion in annual revenue, provides a 50% margin, generates significant cash flows and is uniquely positioned for future growth and profitability,” McAdam told investors Tuesday on a conference call announcing the purchase of Vodafone’s stake in Verizon Wireless. “Beyond the financial benefits, there is simply no better asset that fit seamlessly into our portfolio and our strategic beliefs. Our growth strategy has three basic elements: connectivity, platforms and solutions. We are very bullish on the growth outlook for the U.S. wireless marketplace.”

McAdam made it clear to CNBC’s Jim Cramer the company is not so bullish on its declining wireline business, which includes landlines, DSL, and even FiOS — the company’s fiber optic network:

Jim Cramer, CNBC: “[Under former Verizon CEO Ivan Seidenberg, Verizon] took areas that really weren’t growth areas and sold them to Frontier and other players. Would you be able to get rid of some of your underperforming landline businesses to be able to increase [Verizon’s] growth even further?”

Lowell McAdam, Verizon: “That is a possibility. […] If you talk about opportunities here, now that we have One Verizon, […] we are going to trim some limbs around the tree here. Things that aren’t performing will not be a part of our portfolio so we can invest in things that will drive the kind of growth we are excited to be able to tap here.”

McAdam

The trimming has already started in New York and New Jersey, where Verizon is moving forward with the introduction of a less expensive wireless landline replacement called Voice Link, now optional for some customers but could eventually be Verizon’s sole landline service offering in certain areas if state regulators approve.

Verizon calls the service an improvement for customers dealing with repeated service calls to fix troublesome landlines. Upkeep of Verizon’s copper networks has proved costly to the company, especially as it continues to count landline customer losses. The company argues providing wireless phone service is pro-consumer, providing a bundle of calling features and unlimited local and long distance calling at the same price Verizon charges for basic, no frills landline service. Local officials and residents using the service complain it is inadequate and unreliable.

“Voice Link is an innovative solution for a specific segment of Verizon’s voice-only customers that delivers reliable voice service using our trusted and reliable wireless network,” said Verizon spokesman John Bonomo. “Unlike copper-based service, it is less likely to fail during an adverse weather event because of our wireless networks’ resiliency.”

Analyzing the market value of Verizon’s buyout of Vodafone’s part ownership in Verizon Wireless and accounting for net debt reveals Verizon’s wireless operations are worth $289 billion, with  Verizon’s current 55 percent share worth about $159 billion. In contrast, Verizon’s wireline operations including landlines, business broadband, and FiOS are worth just a fraction of that — $24 billion, according to Bloomberg News.

Kevin Roe, an analyst at Roe Equity Research LLC in Dorset, Vt. values the wireline business at about $21 billion based on his estimates, while Spencer Kurn of New Street Research LLC puts the implied value of the unit at about $26 billion.

Verizon’s top rated fiber service FiOS has brought the company higher earnings and is deemed a success, but its total revenue remains insufficient to offset Verizon’s continued landline losses as customers drop home phone service and DSL. From a business perspective, that explains why Verizon is eager to invest billions in its high return wireless business while leaving further expansion of its fiber optic network on hold.

Revenue from the wireline unit totaled $39.8 billion last year, down from $50.3 billion in 2007, data compiled by Bloomberg show. During the same period, Verizon’s wireless revenue surged 73 percent to $75.9 billion.

“Clearly, wireless is going to be worth a lot more” than Verizon’s other businesses, Chris King, a Baltimore-based analyst at Stifel Financial Corp., told Bloomberg in a phone interview. Wireless is “where the growth is going to be coming from. There’s a bigger market opportunity going forward.”

McAdam has brought his enthusiasm for the wireless business to his role as Verizon CEO and its priority shows as he predicts even larger earnings in the future. McAdam told investors only 64 percent of Verizon Wireless customers use smartphones. Verizon wants to convert the remaining 30 million basic phone customers to higher-priced smartphone service as quickly as possible. Getting customers to switch to 4G-capable devices is also lucrative for Verizon, because its LTE network can more efficiently handle data at a lower cost. Only one-third of Verizon customers now use 4G LTE devices.

Embracing consumption based billing for wireless data is perhaps the biggest potential revenue generator of all as customers consume more data and begin connecting more devices to Verizon’s network.

Platforms including machine to machine and in-car connectivity “create even greater opportunities to drive increased usage,” McAdam said. “We also see many opportunities with Internet and cloud-based services. The digital economy is moving to mobile first on everything, which means there are many growth opportunities to pursue.”

Witmer

If what Time Warner Cable claims is true, the stalemate that has kept CBS content away from subscribers for four weeks may be less about the money and more about CBS’ desire to control your viewing experience.

Melinda Witmer, TWC’s chief video and content officer, reports CBS is demanding daunting new restrictions in their proposed renewal contract, including requiring customers to “register their television sets” with CBS before being able to turn them on.

Witmer said CBS’ demands also include new powers over DVR capabilities, which means CBS could possibly prevent customers from fast-forwarding through commercials or even block the recording and/or storage of certain programs without network permission.

“CBS announced that they signed a deal with Verizon (FiOS TV) and has suggested that they offered us the same deal Verizon just signed,” Witmer said. “All I can say is our condolences to Verizon if they signed the deal CBS put in front of us. I hope for Verizon’s sake that they didn’t sign that, but if they did I’m glad for us because we’ll compete that much better against them when we finish our deal.”

Cable operators are seeking expanded rights from programmers as customer viewing habits evolve. Among the most important are those that would allow online and on-demand streaming of programming to authenticated cable subscribers.

Time Warner Cable has invested considerable resources in its online viewing platforms for PC’s, smartphones, and tablets, providing most of the TWC lineup on those portable devices. But the service has been largely limited in-home viewing because the cable company is having trouble securing permission to stream most of that content for those on the go.

Time Warner Attempts to Placate Impacted Customers

Although Time Warner Cable is crediting customers for the loss of Showtime/The Movie Channel, blocked by the cable operator while the impasse continues, Time Warner is not giving any automatic refunds for the loss of CBS basic or broadcast programming and networks taken off the cable dial. CBS-owned Smithsonian TV is the most affected basic cable channel nationwide. Some customers who pay extra for Smithsonian as part of an added-cost HD Tier often known as “TWCHD Pass” have gotten service credits upon request.

Time Warner Cable is giving out free over-the-air antennas to customers in cities where local CBS-owned stations have been taken off the cable lineup.

Time Warner Cable has a limited quantity of free basic indoor antennas available for customers at TWC retail locations in Dallas-Ft. Worth, Los Angeles/Desert Cities, New York City, Milwaukee and Green Bay, Wisc. In addition, TWC has partnered with Best Buy in those cities to provide $20 toward the purchase of any in-stock broadcast antenna at select Best Buy store locations. The cable company has published a list of retail locations where antennas are available as long as supplies last. Limit one per customer and installation is your responsibility.

Radio Shack has also taken advantage of the situation by slashing prices on an AntennaCraft Amplified Omnidirectional HDTV Antenna, now available online for $37.49 – a 25 percent discount. Best Buy is supporting Time Warner Cable’s position in the CBS dispute. Radio Shack is not, telling customers its antennas make it easy to “cut the cable.”

Time Warner is appeasing tennis fans with enhanced coverage of the 2013 US Open Tennis Championship Series with a free preview of The Tennis Channel running Aug. 26 through Sept. 9.

The blackout is also keeping Time Warner Cable, Bright House, and Earthlink (supplied by either cable operator) broadband customers from watching CBS content online.

The Federal Communications Commission said it is trying to resolve the fee dispute from Washington.

“The commission is engaged at the highest levels with the respective parties and working to bring the impasse to an end,” Justin Cole, an agency spokesman, said in an e-mailed statement yesterday. “We urge all parties to resolve this matter as quickly as possible so consumers can access the programming they rely on and are paying for.”

But acting FCC chairwoman Mignon Clyburn also admitted the FCC has few powers to intervene and compel an agreement.

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Time Warner Cable’s Melinda Witmer, head of the team negotiating with CBS, suggests the network is demanding unprecedented control over your viewing experience — a deal breaker for the cable operator.  (6 minutes)

Frontier is enticing Rochester-area customers to “say goodbye to Time Warner Cable.”

Time Warner Cable’s relentless rate increases, particularly on its broadband service, are leading to calls for more competition in the upstate New York cities of Buffalo and Rochester, now dominated by Time Warner, Verizon Communications (Buffalo), and Frontier Communications (Rochester).

“Bloodsuckers,” came the terse reply of Cathy Slocum.

Frontier Communications is making the most out of the cable company rate increases with a new “Goodbye Time Warner” ad campaign (that incidentally includes a link to Stop the Cap!’s coverage of TWC’s modem fee). It is pitching $19.99 broadband price-locked for two years — an improvement over its earlier offers thanks to a major reduction in sneaky fine print.

Customers can get up to 6Mbps service (up to 12Mbps available in limited areas) at the special offer price as long as they keep a Frontier landline active with a qualifying calling package. There are no contracts with this promotion, but Frontier’s pesky $9.99 “Broadband Processing Fee” applies if customers ever choose to disconnect Internet service. A free Wi-Fi Internet router is included and the company claims it offers “free Internet activation.” But an installation fee still applies, discounted if customers choose the self-install option. Taxes, governmental and other Frontier-imposed surcharges also apply and new Frontier customers are subject to credit approval, which will show up as an inquiry on your credit report.

In the past, we have taken Frontier to task for its expensive early termination and modem rental fees, as well as its bundling requirements, but the company has since ditched most of these as part of its new self-proclaimed reputation as “BS free.”

Unfortunately, Frontier’s DSL speeds can wildly vary, so if you take advantage of their offer, be sure to verify the speed actually get at your home or office. If the service proves too slow to your liking after installation, you can negotiate canceling within the first two weeks without any termination fees.

Where FiOS is available in Buffalo, Verizon is offering promotional pricing on its bundled services, including an $84.99 offer including 50/25Mbps Internet with a Verizon landline offering unlimited calling. This is cheaper than Time Warner’s offer with considerably faster upload speeds and no modem fees. In parts of Buffalo, Verizon is authorized to offer broadband and phone service only, although several suburbs have franchise agreements that allow the phone company to also sell television service. A large part of the city and other suburbs are still stuck with Verizon’s copper network, however, which means DSL is the best they can offer.

Time Warner Cable’s new customer promotions, useful when negotiating a customer retention deal, have resumed bundling Standard tier (15/1Mbps service) Internet speeds into most offers. Previously, the company bundled 3Mbps service in many of its promotions. Broadband-only customers can pay as little as $34.99 a month for a year of Internet service at 15/1Mbps speeds, assuming one buys their own cable modem. A double play offer of broadband basic television (around 20 channels, mostly local over-the-air) with 30/5Mbps Internet service is now priced at $94.97 a month after a $5.99 mandatory modem rental fee is included (not optional with this package).

Time Warner Cable executives have repeatedly told investors its higher priced promotions are intentional to increase revenue and profits even if the company loses customers by charging higher prices.

Verizon FiOS offers in the Buffalo area.

“I moved here from the New York City area a year ago where we had two cable companies — Cablevision and Verizon FiOS,” noted Stephen O’Brien. “Competition changes everything. Not only were the rates much lower than here, the companies would offer you all kinds of incentives to switch from one to the other. One time we switched and got a free iPod Touch. The argument that the rate increase is needed to cover investment is the biggest red herring of all — Cablevision and FiOS spent many times more on infrastructure, yet their rates were much lower.”

Stop the Cap! recommends Time Warner Cable customers check out our guide to getting the best deal possible from TWC.

[flv width=”640″ height=”380″]http://www.phillipdampier.com/video/WGRZ Buffalo Time Warner Rate Hikes 8-6-13.flv[/flv]

WGRZ in Buffalo reports upstate New York residents are upset about two recently announced broadband rate hikes. Time Warner Cable says it needs the money to keep up its broadband service’s reliability. What alternatives do customers have?  (2 minutes)

Verizon is “redefining the power of the Internet” in select FiOS areas with the introduction of a new 500/100Mbps speed tier that blows away Time Warner Cable and leaves Cablevision and other competitors woefully behind.

Just weeks after Cablevision boosted upload speeds, Verizon has responded with service offerings up to a half gigabit in speed, telling customers FiOS Quantum 150/65Mbps, 300/65Mbps, and 500/100Mbps plans will “radically change everything you do online right now – and in the future.” It is ten times faster than the fastest service available from Time Warner Cable in the northeast: 50/5Mbps.

Verizon’s fastest broadband does not come cheap, however. The 500Mbps package starts at $294.99 a month for new customers with a two-year contract. Verizon Voice service is required to get the promotional price and a $165 early termination fee applies (reduced by $7.50 for each month a customer maintains service). A $59.99 activation and other fees, taxes, charges, and terms apply. Customers must also pass a credit check to avoid a deposit. Skip the contract and other requirements and the rate is only slightly more: $304.99 a month.

Verizon is charging nearly four times more than what Google charges for its twice as fast gigabit service. But analysts believe that Google will never venture into Verizon FiOS territory so price competition is unlikely in the near term. Cable operators that compete with Verizon would have to dedicate a considerable amount of bandwidth to best Verizon’s download speeds, and matching upstream speeds will be even more problematic unless and until cable operators transition their systems to all digital video to free up bandwidth.

But Verizon’s fastest Internet speeds are not available in all FiOS areas. The company warns “500/100Mbps service availability may be limited in your area based on network qualification requirements.”

Verizon’s competitors, which don’t have the benefit of an all-fiber network, continue to stress consumers simply don’t need any speeds faster than what they now offer. Frontier Communications believes most consumers do just fine with 6Mbps DSL. Verizon’s larger cable competitors range from Time Warner Cable, which does not even try to match its competitor’s fiber speeds, to Bright House, which competes with Verizon FiOS in Florida, to Comcast, which offers faster Internet service but regularly threatens to cap how much customers can use each month. Verizon FiOS has, in practical terms, no usage caps.

“For some, the discussion about the broadband Internet seems to begin and end on the issue of ‘gigabit’ access. The issue with such speed is really more about demand than supply. Most websites can’t deliver content as fast as current networks move, and most U.S. homes have routers that can’t support the speed already available.” — David Cohen, chief lobbyist, Comcast Corp., May 2013

“Residential customers, at this time, do not need the bandwidth offered with dedicated fiber – however, Bright House has led the industry in comprehensively deploying next-generation bandwidth services (DOCSIS 3.0) to its entire footprint in Florida – current speeds offered are 50Mbps with the ability to offer much higher. We provision our network according to our customers’ needs.” – Don Forbes, Bright House Networks, February 2011

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Verizon FiOS introduces faster broadband speeds to help customers accomplish more of what they want to do online. Verizon’s Fowler Abercrombie says ‘it’s only the beginning’ as Verizon continues to innovate on its fiber to the home network. (2 minutes)