In a new twist, Comcast has announced rate increases for cable television that are roughly at the rate of inflation (2.3%) — the lowest rate increase for the company since 2001 — but is also hiking rates for Internet service at a substantially higher rate.

The company claims the Internet rate increase is partly due to the increased number of channels on its cable systems in Oregon and southwest Washington, as well as the cost to launch new interactive applications and multi-platform content that customers want and value.

Comcast’s rate increase for video represents the new reality for the cable business — companies continue with 7%+ increases in cable TV rates at the risk of cord cutting, analysts say. With cable television packages increasingly seen as ripe for cutting as they grow more expensive, cable operators are turning to broadband — a service customers can’t live without — to make up the difference.

Comcast had not touched broadband rates in the Pacific Northwest for seven years, until the company began hiking them in 2011. Monthly rates for the popular “Performance” Internet service (15Mbps) are going up again this year, from $48.95 to $51.95, according to The Oregonian. Prices are higher for standalone broadband service. Comcast’s Digital Starter TV package is increasing to $67.49 a month. Rates for customers on promotions will not  increase until those offers expire.

But some customers complain Comcast is now charging nearly $200 a month for its triple-play package.

One customer told the newspaper after his introductory triple play promotion expired, the bill rose to $190 a month for phone, Internet, and cable service with two DVR boxes. The customer does not have any premium movie channels.

The Oregonian has tracked Comcast’s rates in the Pacific Northwest for almost a decade. The staircase of climbing prices for cable television is leveling off as Comcast makes up the difference from its Internet rates.

The newspaper noted Frontier Communications, which provides competition for Comcast in the suburbs of Portland, has given Comcast only a slight headache.

Frontier continues to offer its barely-advertised FiOS television package for around $65 a month, but customer complaints about Frontier’s service in the area have been reflected by Comcast’s growing subscriber numbers.

One Oregonian reader summed up his feelings about Frontier:

Frontier was atrocious. I don’t just mean bad, I mean an embarrassment to humanity […] which chimpanzees and dolphins laugh at us for putting up with. I’ve had Frontier service for a little over a year now only because there is nothing else where I live.

The nightmare started with them coming out hook up DSL at my new house, but instead of hooking me up, [they tore] out the demarc box on the house and left with it,  lost all records of ever having talked to me, much less scheduling an appointment.

After finally getting Internet service a week late, the original [service order] showed up leading them to bill me for multiple accounts, which took five months to  resolve. They never were able to prove to me I actually owed what I ultimately paid (I got them to within one bill’s worth of my calculated value and gave up).

Half of the time I’ve held off paying my bill until a day or two before the due date so it’s too late to mail a check and their online payment system is down, forcing me to call in my payment and pay a $3 service fee.

All of that is on top of the blatant theft of forcing customers who already own modems to pay a “modem rental fee” for a modem they aren’t renting.

Free Wi-Fi is always popular and Fort Wayne, Ind. is welcoming news that Frontier Communications intends to install and operate a downtown network of hotspots offering what local newspapers characterize as “free access.”

The area being outfitted with wireless Internet is bordered by Clay Street to the east, Broadway to the west, Headwaters Park to the north and Lewis Street to the south, according to city officials.

Frontier says it plans to offer 512kbps access on most hotspots, 1Mbps service on others, with a limited number operating at still higher speeds where fiber optics are available.

But Frontier’s Wi-Fi networks in other cities have some important considerations for those expecting wide open, free access.

Free has its limits.

In Rochester, N.Y., free access hotspots are extremely limited in number and offer very slow speeds (often close to dial-up) to entice users to upgrade to a premium Wi-Fi speed plan starting at $9.99 per month for current Frontier customers, $30 a month for non-customers. The vast majority of hotspots only offer five minutes a week of free access.

In Terre Haute, free access is available to only the first 100 users connected to the network. All others are required to pay. Those who do choose to subscribe can only use one device at a time.

The scheduled rollout of Frontier Wi-Fi in Fort Wayne has yet to be announced.

Four of the nation’s largest phone companies — two former Baby Bells, two independents — have very different ideas about solving the rural broadband problem in the country. Which company serves your area could make all the difference between having basic DSL service or nothing at all.

Some blame Wall Street for the problem, others criticize the leadership at companies that only see dollars, not solutions. Some attack the federal government for interfering in the natural order of the private market, and some even hold rural residents at fault for expecting too much while choosing to live out in the country.

This four-part series will examine the attitudes of the four largest phone companies you may be doing business with in your small town.

Today: Frontier — “Rightsizing” Our Broadband Revenue in Barely-Competitive Markets, Even When It Costs Us Customers

“We have been very disciplined with our [data] pricing and really trying to make sure that we are moving the prices up in a right direction and looking at customers who are paying way below where they should be,” Donald R. Shassian, chief financial officer and executive vice president of Frontier Communications told investors on a conference call earlier this month. “They are not a valued customer. If we can’t get them up, we are sort of letting them disconnect off, if you would, and it’s enabling us to be more disciplined.”

That “direction” has meant higher bills for some long-standing customers that suddenly lost discounts or service credits. One common example is Frontier’s mandatory broadband modem rental fee, increasingly turning up on customer bills even though they own their own equipment or had previously arranged a fee waiver. Ex-Verizon customers were particularly hard hit when Frontier switched to its own billing platform. Just about every customer has also been impacted by Frontier’s “junk fees,” including company surcharges that effectively raise the price of the service.

As a result of higher pricing and dissatisfaction with the quality of service, some customers have disconnected, and the company recently reported second quarter profits were down 44%, offset by slightly higher earnings from higher bills.

The New Frontier

Frontier Communications has enormously expanded its reach over the past few years. Frontier’s original “legacy” service areas were dwarfed in 2010 by the company’s acquisition of 4.8 million landlines from Verizon Communications.

Frontier’s Combined Service Map — Areas in red are “legacy” Frontier service areas. Those in blue were acquired in 2010 from Verizon. (click to enlarge)

Frontier roughly tripled in size as a result, and the huge spike in customers delivered four straight quarters of triple-digit revenue growth. But the transition for ex-Verizon customers has not been easy. Customers endured billing errors, service plan confusion, and service quality issues as Frontier got up to speed managing Verizon’s landline network. A significant number of those customers have had enough and are switching to other providers.

West Virginia is the best place to study the contrast between Frontier’s failures and successes. A large number of service problems and lengthy outages plagued the state after Frontier took charge of a landline network Verizon treated as an afterthought. Over at least a decade, Verizon allowed its landline network to deteriorate to abysmal condition in several areas of the state. Little was invested to upgrade service, and Verizon ultimately left West Virginia with one of the lowest national broadband service penetration rates — about 60 percent.

Verizon’s priorities were elsewhere: spend millions on FiOS fiber upgrades in larger, urban markets while letting rural landline networks stagnate. Eventually, Verizon’s management team decided it was no longer worth hanging on to these low priority service areas and began selling them off. FairPoint Communications acquired Verizon customers in northern New England and Frontier bought mostly rural midwestern and western territories long struck from Verizon’s priority list.

Wilderotter

Frontier’s key argument for acquiring Verizon landlines was that the company could bank on deploying broadband to a much larger percentage of customers than Verizon ever bothered to serve.

Frontier places a very high priority on broadband, because the company can significantly boost the average revenue it earns from each customer by providing the service. With Frontier often the only home broadband choice around in its most rural markets, the company can charge whatever it wants for DSL service, tempered only by how much customers can afford to pay. Broadband is also a proven customer-keeper, an important consideration for any company facing ongoing losses from customers dumping landlines for cell phones.

Since its acquisition, Frontier has been aggressively deploying rural broadband in the former Verizon territories — typically the cheapest form it can deliver — 1-3Mbps ADSL service. Frontier considers its legacy service areas already well-covered, claiming around 93 percent of customers can already subscribe to Frontier DSL.

In states like West Virginia, the fact anyone is supplying anything resembling broadband has been well-received by those who have never had the service before. But where competition exists, Frontier has been losing ground (and customers) as cable competitors provide more consistent, higher speeds and quality of service.

The frustration is especially acute in the Mountain State. Steve Andrews, a Beckley resident complained, “This company’s idea of broadband access is up to 3Mbps DSL while nearby states like Virginia and Pennsylvania are getting fiber or cable broadband speeds ten times faster.” Andrews added that on most days his Frontier-provided broadband provides only around 800kbps, not the advertised 3Mbps.

Frontier Admits It Uses Government (Your) Money to Expand Broadband Where It Would Have Expanded Service on Its Own… Eventually

Frontier Communications was by far the most enthusiastic participant in the Federal Communications Commission’s Connect America Fund (CAF). This subsidy program currently covers $775 of the cost to extend broadband service to a currently unserved customer. Frontier agreed to accept nearly $72 million from the program, which commits the company to offering at least 4Mbps broadband service to an additional 92,877 homes and businesses around the country.

But Maggie Wilderotter, CEO of Frontier Communications, admitted Frontier would have eventually spent its own money to extend service to those rural customers without a subsidy:

“Get broadband out faster to a bunch of customers that we would have built anyway, at some point in time. And it also accomplishes the objectives of using the funds that are available from the FCC. We actually could have taken more money…. So we felt good about it. We totally understand why the other carriers made the decisions they made because we didn’t — we’re not building anything on our legacy markets. So it’s the money. It’s all in the acquired properties where we still had pretty low penetration with enough density to support the parameters that the FCC put in place.”

The fund, paid for by telephone customers nationwide through a surcharge on customer bills, will also subsidize a lucrative business opportunity for Frontier, according to Wilderotter.

“These are unserved locations that really are not competitive at all,” Wilderotter told investors. “So there’s no competition in those areas. So we’re pretty excited about it. We think that this is going to be good for Frontier and good overall.”

More than $38 million of the total broadband subsidy Frontier received will be spent in 30 counties in just one state: Wisconsin. Among other locations where Frontier will spend the money:

• 1 Arizona county
• 2 California counties
• 1 Florida county
• 5 Idaho counties
• 25 Illinois counties
• 2 Indiana counties
• 26 Michigan counties
• 2 Nevada counties
• 8 New York counties
• 1 North Carolina county
• 8 Ohio counties
• 5 Oregon counties
• 2 Tennessee counties
• 7 Washington counties
• 25 West Virginia counties

Trying to Hang Onto Customers Frontier Already Has… With Serious Speed Boosts

Frontier’s speed plans through 2013.

One of the loudest and most consistent complaints Frontier broadband customers mention is the slow speeds they receive from Frontier’s DSL. Frontier traditionally offers 1-3Mbps in rural areas, up to 10Mbps in urban areas. But in fact many customers report their speeds are much lower than advertised. Data from the FCC’s national broadband speed measurement program bears this out. Frontier was the only measured provider in the United States that has been losing ground in promised broadband speed and performance.

Frontier officials announced earlier this month the company was shifting some of its capital investments away from broadband expansion towards improving the performance of its broadband service for current customers.

In highly competitive, urban markets Frontier will deploy VDSL2 technology which can support significantly faster and more reliable Internet speeds. In more rural markets, bonded ADSL 2+ will deliver speeds of 10Mbps or better to customers currently stuck with around 1-2Mbps speed.

Daniel J. McCarthy, president and chief operating officer:

• We expect our 20Mbps service to move from 28% of residential households today to 42% by year-end and then 52% by the end of 2013;
• The 12Mbps services planned to increase from 33% of homes today to 51% by year-end and 60% by 2013;
• And the 6Mbps service is planned to increase from 57% of homes today to 74% by year-end and 80% by 2013.

The new speeds will not come free of charge. Customers will be marketed speed upgrades for additional monthly fees.

Customers will also discover Frontier has been simplifying its packages and moving away from high-value promotional offers that bundled a free laptop, television, or satellite dish in return for a lengthy contract. Today, the company is emphasizing increasing discounts for customers subscribing to two or more services that include telephone/long distance, broadband, and satellite television.

Speeds Going Up, Employees (and their salaries) Going Down

Finally, Frontier executives told investors they are scouring the company looking for cost savings. They appear to have identified around $100 million worth, a good portion of which will come from employees facing job cuts or salary reductions.

Wilderotter said she is focusing on call center workers, retiree positions, and “tech op” savings.

“We still have some bubble workforce in the call centers that will continue to go away,” Wilderotter told Wall Street. “We have a number of employees, too, that are going to be retiring over these next several months. And our goal is not to replace any of those retirees either.”

One of the best examples of this cost savings, according to unions representing Frontier employees, is the forthcoming closure of an Idaho-based call center in Coeur d’Alene. More than 100 workers, average age 55, will lose their $15-21/hour jobs Sept. 18 while Frontier prepares to leverage cheaper labor in South Carolina.

Frontier’s new call center employees in Myrtle Beach will receive $11 an hour while training, $12/hour after training — with a five year wage freeze. Benefits will be considerably leaner for South Carolina employees as well, according to union officials.

Indianola, Iowa has relied on community-owned and non-profit Indianola Municipal Utilities (IMU) to deliver gas and electric service to the community of 15,000 for more than 100 years. Now customers in south-central Iowa will soon be able to purchase broadband service from the utility as it prepares to open its fiber-to-the-home network to residential customers.

Partnering with Mahaska Communication Group (MCG), IMU will be in the triple-play business of phone, broadband, and cable television by October.

Iowa’s public broadband network has served institutional and large commercial users since being installed in the late 1990s. But residential services were not available until recently.

Wholesale service comes primarily from Iowa Network Services via a SONET protected fiber optic ring, with redundant access going from and to Indianola. Multiple direct connections to Tier 1 backbone providers also ensure reliability and speed.

MCG intends to compete against cable providers like Mediacom and phone companies that include CenturyLink and Frontier Communications. MCG will market three broadband services in Indianola:

• 25/25Mbps – Available for as little as $5/month when bundled with a triple-play package including phone and television service;
• 50/50Mbps – Targeting homes with multiple users.  Download a 2 GB movie file in 1 minute;
• 100/100Mbps – For multiple users with high bandwidth demands and business customers. Download a 2 GB file in 30 seconds.

The triple play package, including 25/25Mbps broadband, TV and phone service will sell for $99.95 a month. That is the ongoing rate, not an introductory teaser that expires after 6-12 months. Standalone broadband customers can purchase 25/25Mbps for $39.95 a month. Upgrading broadband speed will be fast and affordable: $5 a month extra for 50/50Mbps service, $10 a month more for 100/100Mbps service.

Mediacom charges considerably more for its broadband service, which has vastly slower upstream speeds and usage caps. CenturyLink locally provides 1-3Mbps DSL service for many customers in the area.

MCG promotes its forthcoming service as a vast improvement over what phone and cable companies sell locally:

• The network is locally owned and operated and their employees live and work in the region. MCG does not use offshore call centers for customer support;
• MCG has no contracts, term commitments, or early cancellation penalty fees;
• No usage limits or speed throttles — and the speeds are fast in both directions;
• No introductory prices that leave customers with a higher bill after 6-12 months.

The municipal utility says it welcomed other Internet Service Providers, including CenturyLink and Mediacom, to sell services over their public fiber network. Neither provider has shown any interest.

[flv width=”640″ height=”450″]http://www.phillipdampier.com/video/Indianola Iowa Fiber 3-29-10.flv[/flv]

Introducing Indianola, Iowa and its new community-owned fiber to the home network, an important upgrade for a community 15 miles from Des Moines. (4 minutes)

Nearly 100 Frontier employees may be visiting Idaho’s unemployment offices by September.

On the second anniversary of Frontier Communications assuming control of landline operations in Idaho formerly owned by Verizon Communications, Frontier has announced plans to close its Coeur d’Alene call center this summer, putting nearly half of Frontier’s workers in Idaho out of work.

“There’s nothing wrong with the employees or the work they’re doing. It’s more about efficiencies,” Frontier’s senior vice president Steve Crosby told CDA Press. “What we’re trying to do is work through efficiencies, consolidations, really moving people around, having work groups working closer together.”

Those hoping to remain with Frontier will need to move to another state and accept a large pay cut if they want to keep their jobs. Other Frontier call centers around the country will assume the responsibilities of the 100 Idaho-based employees who face termination by Sept. 18, including one opening near Myrtle Beach, S.C., that will pay substantially lower salaries.

The closure will reduce Frontier’s workforce in Idaho almost in half. Crosby said Frontier had roughly 260 employees in the state as of last week.

Two years ago, Frontier was telling Idaho a very different story about its takeover of Verizon landlines.

“I think we’ll have better service for customers,” David Haggerty, then a Verizon manager staying with Frontier, told the Bonner County Daily Bee. “Frontier brings with it a small-town mentality. It used to be you were able to pay bills in town and make human contact. That was taken away by Verizon.”

In 2010, Haggerty promised the transition would have no impact on former Verizon workers now heading to work at Frontier.

“We focus on putting the customer first,” said Frontier’s regional manager Vickie Bullard said. “That’s one of the 11 value statements we have at Frontier.”

Some of Frontier’s customers in Idaho wonder if Frontier’s “value statements” are also being downsized.

“I just switched from Frontier to Time Warner Cable for my Internet,” says Scott Mead. “Frontier started out great in the beginning, but shortly after went downhill as issue after issue started.”

Mead reports his calls to Frontier’s national 800 customer support number, which promises 100 percent of the company’s workers are American-based, often left him flummoxed dealing with foreign-accented employees with poor English language skills.

The last one out can turn off the lights.

Another Coeur d’Alene customer endured bad service from Frontier before finally leaving, with the phone company’s collection agency chasing him not far behind:

“As far as I’m concerned Frontier can take a long walk off a short pier. When they first took over from Verizon, from whom we had good service, they sent out a service guy to get us back online. He installed the wrong equipment so another serviceman came out and replaced the wrong one with a bigger, better, and faster wrong one. Over the next 6 weeks we were down all but 12 days and we heard one excuse after another with nothing getting resolved.

So a month later, after switching companies, not only did we get a bill from Frontier for the entire 6 weeks but they charged us for several wrong pieces of equipment. When we tried to resolve the issues they simply sent us to collection and refused to talk. Se we ended up paying for over 4 weeks of service they did not provide and for 4 Internet boxes that the servicemen could not get to work.

I can only hope that Frontier has an office at the bottom of a honey bucket at a chili feed. Flippin crooks.”

One former Verizon/Frontier employee suggests the “efficiencies” Crosby is concerned with is paying call center workers less, and offering fewer benefits:

“Frontier closed a center in Elk Grove, Calif. back in June leaving 50+ people unemployed there,” he writes. “When Verizon sold their landlines and DSL to Frontier back in 2009 they only guaranteed the acquired employees jobs for two years. July 1, 2012 was the second anniversary of that acquisition. This does not surprise me at all. The leadership of both Verizon and Frontier is like any other large corporation. Bottom line is the new call center in South Carolina is cheaper to operate. Why pay people over 50K (this is including 401k, stock & medical benefits) when you can pay half that in a center that has no union.”

Another Idaho employee is bitter about the extra work Frontier employees managed for the company during its great billing and systems transition away from Verizon.

“We will be out of a job, after working massive amounts of overtime to transition this company to get them through the largest conversion in telecommunications history,” the worker shared. “They needed us to get them through it and now they don’t.”

[flv width=”640″ height=”380″]http://www.phillipdampier.com/video/WMBF Myrtle Beach New Frontier Call Center 5-11-12.mp4[/flv]

Race to the bottom. Frontier Communications closes an “unneeded” 100-worker call center in Idaho that reportedly paid workers over $50,000 a year in salary and benefits while announcing a new, “much-needed” call center with 110 workers near Myrtle Beach, S.C. that will pay workers only $30,000 a year. WMBF in Myrtle Beach calls the new South Carolina call center a “success” for Horry County’s efforts to recruit new business to the area. Frontier applauded South Carolina’s “excellent business environment.” But that success comes at a cost to other workers in other states.  (2 minutes)