The wedding of Comcast and NBC-Universal was given the blessings of two federal agencies today that all but seals the multi-billion dollar deal.

In a 4-1 decision, the Federal Communications Commission approved the merger.  It’s chairman, Julius Genachowski, claimed it would ultimately be good for consumers as the company promised to add at least 1,000 hours of news and information programming and a new ultra-budget “lifeline” broadband tier priced at $9.95 per month for low-income families.

The lone dissenter, Democratic commissioner Michael Copps, rejected notions that a combined company the size of Comcast, which controls more than a quarter of all cable subscribers, and NBC-Universal, a major media company, would deliver anything to consumers.

“It’s too big. It’s too powerful. It’s too lacking in benefits for American consumers,” Copps said after the FCC vote to approve the merger. “And it continues us down a road of consolidation we’ve been on for a couple of decades now.  And the most threatening part about it is that this is not just traditional media, but it’s new media, too. It touches just about every aspect of our media environment.”

National Public Radio’s ‘All Things Considered’ gave measured coverage to today’s Comcast-NBC merger developments, and how it will impact consumers. (3 minutes)
You must remain on this page to hear the clip, or you can download the clip and listen later.

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Indeed the combined Comcast-NBC will own or control one of every seven television channels and networks seen by Americans.  Copps worries that kind of media concentration is sure to reduce diversity in programming and on-air voices.

Even worse, some analysts predict the merger could trigger a new wave of media consolidation as other players try to maintain their positions in the media marketplace.  Second-place Time Warner Cable could begin looking for merger opportunities with smaller cable companies, such as Cox, for example.

Just about an hour after the FCC gave approval, the Justice Department and five states’ Attorney General announced a tentative settlement that could resolve concerns that the transaction was anti-competitive.

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WNYW-TV in New York reported on today’s merger decision and explained how Comcast customers, and online video fans, could be impacted.  (3 minutes)

The Terms & Conditions

Two different federal agencies insisted on Comcast’s agreement to several terms and conditions before agreeing to the deal.  Many of them presented no problem for Comcast, who had voluntarily agreed to several of them early on in negotiations.  But the Justice Department delivered one of the strongest conditions, and a first for online video protection — it insisted the new combined entity of Comcast-NBC bow out of its voting rights in Hulu, the online video service.

√ No Playing Favorites: Comcast has to agree that if it carries its own news and business channels, it has to include competitors on the same tier.

Since Comcast-NBC has ownership interests in so many news, sports, and weather channels, making space for the competition was considered crucial by federal regulators.  The cable company can’t bury its competitors in Channel Siberia, or stick them on “digital tiers” that are priced higher than standard cable service.  Who wins?  Bloomberg News, rarely found even by cable viewers who go looking, and the very low-rated Fox Business Channel, which can’t attract 30,000 viewers on a good day.  Both will find prominent positions on Comcast Cable going forward, even if nobody watches.

√ Cheap Internet Access for Qualified Families: Comcast has agreed to provide a “lifeline” broadband service, but only for families pre-qualified by federal eligibility for free school lunches.

No word on what speeds these customers will receive, and Comcast estimates the program will barely make a dent in its bottom line.  It is expected to reach only around 400,000 homes nationwide, and only as long as those subscribers remain eligible under federal guidelines.  No free lunch for broadband.

√ Standalone Internet Service Must Be Provided: Comcast must sell at least a 6Mbps broadband plan without cable or telephone service for $49.99 a month for three years.

Since Comcast already routinely sells standalone broadband service to customers at around this price, this was hardly a concession.  Comcast can still pile on extra fees, such as their overpriced cable modem rental, and any other charges that could be mandated by federal, state, or local government in the future.  They can also keep their usage caps.

√ Comcast must agree to the FCC’s Homeopathic Net Neutrality Rules:  Comcast has to agree to the FCC’s heavily-watered down definition of Net Neutrality… the ones Comcast itself suggested.

Since the FCC largely caved-in to Big Telecom’s lobbying against Net Neutrality, Comcast’s agreement to adhere to what the FCC calls Net Neutrality won’t present any problems, because those terms were similar to what Comcast had asked for all along.  Their “digital phone” service is exempted, which means Comcast can “manage” competing Voice Over IP services at its pleasure.

√ Evidence That PBS Has A Lobbyist, Too — Special Favors for Public Broadcasting: Public television stations win carriage protection from Comcast “for several years.”

In an effort to free spectrum, PBS stations could be pressured to give back some channels or reduce their transmitter power to free up UHF frequencies for more wireless broadband.  Should this happen, Comcast has agreed to keep those stations on their cable systems as if nothing changed at all.  It assures stations that even if their broadcast coverage areas are reduced, their cable carriage will stay the same.

√ Binding Arbitration Comes to Buyers of Comcast-owned Networks:  If a cable system or other provider runs into trouble getting an agreement with Comcast, the FCC offers help.

To protect other cable systems, telco-TV, and satellite companies from uncompetitive pricing or access blockades to Comcast-controlled networks, the cable company agrees to come to the table and submit to binding arbitration over carriage disputes.  Unfortunately for Comcast subscribers, the cable giant can’t force broadcasters or other cable networks to the same table to settle their own carriage wars.

√ Online Access to Programming Comes to Existing Players, Unless Something Big Changes: Everyone loves the status-quo, and this agreement assures it.

The Department of Justice provisions protecting access to online video programming were carefully crafted by lawyers with one eye on Washington and the other on Wall Street.  It effectively provides “stability” in the marketplace and avoids the kinds of competitive surprises Wall Street hates.  Effectively, the agreement grants access to Comcast-owned programming to ventures that existed prior to the agreement reached today.  Existing players have the government’s assurance carriage contracts are secure.  Those with a pre-existing relationship to Comcast can also purchase the entire bouquet of Comcast-controlled programming (no a-la-carte) at prices similar to those charged to other cable and satellite customers.

But brand new players that threaten to turn existing business models on their heads?  Forget it.  The agreement says nothing that would require access to Comcast programming for upstart services like ivi, or even Google TV for that matter.  The only potential, real-world competitive scenario comes if an existing player (say Time Warner Cable, Verizon FiOS, or AT&T U-verse) decided to start a national virtual online cable company open to any American, anywhere.  What are the chances of that happening?  How many of you can choose Time Warner -or- Comcast? Verizon FiOS -or- AT&T U-verse?  Would AT&T risk its U-verse revenue selling Time Warner Cable customers the same channel lineup, knowing it can’t also easily bundle broadband and phone packages with it?

√ No Voting Rights for Hulu: Comcast agrees to limit its role in one of the biggest potential reasons some consumers are prepared to cut cable’s cord.

The Justice Department’s requirement that Comcast effectively butt-out of the day to day decisions affecting Hulu may protect consumers, but Hulu’s partners don’t want to devalue their programming by giving it away for free forever, either.  Nothing prohibits the birds-of-a-feather-partners in Hulu to put the service under a full ad load or behind a pay wall, reducing its value and interest to consumers.  Or, the whole project could be terminated at the behest of News Corp. and Disney.

Whatever consumer protections the FCC and Justice have included, they won’t last forever.  Virtually all expire within three to seven years, at which point Comcast might be humbled by the culmination of a bad business decision the likes of AOL-Time Warner, or become Comzilla, ready to trample its competition (and consumers) into the dirt.

Was This a Commission Cave-In or a Foregone Conclusion?

Although Commissioner Copps calls today’s decision a “dangerous” deal, some ex-regulators suggest the package presented to federal regulators was effectively a foregone conclusion.

Bruce Gottlieb was formerly Chief Counsel of the Federal Communications Commission, and offered his take on today’s developments for The Atlantic:

How mergers at the FCC will play out is notoriously hard to predict, but the ultimate result is not. The historical truth is that, in virtually every instance, the commission will approve any major proposed transaction. The only time in recent memory that the commission declined to do so was the proposed merger of the two leading satellite-TV providers (Echostar and DirecTV) — and that marriage was running into problems with other agencies long before the FCC put the final nail in the coffin.

(Yes, then-Chairman Reed Hundt also famously ended rumors of an AT&T and Southwestern Bell merger in 1997 by preemptively declaring it “unthinkable.” But those companies simply had to wait until 2005, when a different FCC chairman let it go through.)

The real action at the FCC involves what “conditions” the agency will put on a merger. These are supposed to be narrowly tailored to address specific harms raised by the merger at issue. But, regardless of who is in charge at the agency, it’s all relative.

Often, the conditions applied to a particular merger have more to do with what the chairman and commissioners at the time want to achieve on an industrywide basis. It’s just easier to get these things done when you have the extraordinary leverage of controlling the timing of a multibillion-dollar transaction that the parties are desperate to consummate.

[…]  The FCC’s rules, as described in the press release announcing the merger, appear to be aimed at ensuring that “over the top” providers have fair access to programming (which the NBCU part of Comcast-NBCU will provide), as well as to consumers (which the Comcast part of Comcast-NBCU will provide).

This is, by far, the strongest statement yet from the commission about the importance of over the top video competition. But the business and regulatory stakes in this fight are only going to increase over time. Indeed, the two Republican commissioners (Robert McDowell and Meredith Attwell Baker) issued separate statements saying they have concerns over whether the FCC should be writing rules to encourage over the top video. So this is likely to be the first skirmish in what will surely be a long and bloody war.

In the weeks ahead, the lawyers will be able to parse the specific provisions to see where the loopholes are and how it will all play out in practice. The details surely matter. But years from now, the specifics of what was decided in this merger may mean a lot less than the fact that the FCC is now deeply involved in the multifront war to decide who will win online video.

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More than a year ago, PBS’ ‘The Newshour’ explored the reasons why Comcast and NBC-Universal would want to join forces.  Now, after millions of dollars of Comcast subscribers’ money has been spent lobbying for approval, will consumers ultimately pay an even higher price later on?  (12/3/2009 — 11 minutes)

Stop the Cap! and our allies Free Press teamed up to expose Frontier’s usage limits for what they are — a broadband ripoff.

KOVR-TV in Sacramento ran an excellent piece on Frontier’s latest embarrassing screw-up: driving their declining landline broadband customers away with unjustified and arbitrary usage caps.

One new piece of the story: Frontier could bring its usage rationing sideshow to a community near you.  As Stop the Cap! informed readers from the beginning, the company has quietly been tracking customers’ usage, looking for outliers they can suggest are using too much.  Now the company says it is ready to drop the hammer on heavy users.

Stephanie Beasly, Communications Manager — Frontier Communications:

“The company letters were sent to customers that are using an excessive amount of the network. Well beyond any reasonable amount for an average user and significant enough to negatively affect other customers’ user experience.

The letters are meant to communicate to these customers that their usage is in excess and we would like to work with them to adjust their plan or their usage. In most cases our customers were not aware of their usage patterns and are willing to work with us to adjust their plans to fit their lifestyles. We do not have a customer capacity on our network. We are looking to work with these customers to help prevent degradation on our network to ensure the customer experience.

The pricing structure was put in place to help us maintain the network experience for all customers. If you choose to use a significant amount of bandwidth we believe you should pay for the service accordingly.

The letters were sent to four markets across the company. We routinely review network usage patterns and these users jumped out as consuming an inordinate amount of bandwidth, enough to negatively affect other customers’ user experience.

All of Frontier markets are reviewed for usage patterns as the markets receiving the letters were reviewed. These specific markets were not targeted.

The customers using an excessive amount of data negatively impact the network for other users. Preventing us from providing adequate bandwidth to all of our users during peak and non-peak times.”

There is less and less to like about Frontier Communications, despite the fact they plan to deliver broadband service to rural Americans unlikely to see it from anyone else.  We’re glad someone is willing to provide the service, but 1-3Mbps broadband with arbitrary usage limits and potentially confiscatory pricing ($250 a month for residential customers), is a trade the devil might make.

Stop the Cap! will continue to organize opposition to Frontier’s foolish pricing schemes wherever they appear.  We will help customers find an alternate provider wherever possible, preferably one that remembers a customer should be treated like gold, not mined for it.

In suburban Sacramento, we highly recommend SureWest — a fiber-to-the-home service provider that not only has no Internet Overcharging scheme, but provides service at speeds that frankly embarrass Frontier’s last-century DSL.  They will even cover up to $200 of any early cancellation fee Frontier charges (and if Frontier tries, we want to know about it).

Our reader, Mr. Brown, was pleasantly surprised to find that SureWest’s speeds just blow Frontier out of the water.  He’s saying goodbye to his 6/0.5Mbps DSL line from Frontier and hello to 25/25Mbps service from SureWest that will also save him $10 a month!  He is also happy to see the back of Frontier’s Overcharging Nanny telling him to get off the Internet.

“[These caps] are a slippery slope and Internet providers need to know that action such as these will result in lost profits,” Mr. Brown wrote on KOVR’s website.  Departing customers typically drop -all- of their Frontier services, costing the company landline revenue as well.

Indeed, Frontier continues to lose more landline customers than its adds, and bungling policies like overcharging for Internet service will only accelerate the departure of angry customers.

Unfortunately, Frontier’s failures extend way beyond their broadband service.

Frontier’s way of doing business has:

• given customers one more reason to cancel their landline service;
• ruined a fiber-to-the-home service that a child should be able to market successfully;
• irritated subscribers with “price protection agreements” that are little more than tricks and traps — delivering all of the protection to Frontier’s bottom line and making you pay the price;
• destroyed what few reasons remain for customers to waste their time with DSL broadband wherever cable or municipal providers exist;
• delivered big dividends and results only to shareholders, siphoning away important financial resources needed to upgrade their facilities.

In Everett, Washington Frontier cannot even manage the steady flow of customers canceling FiOS video service after news of a shocking $30 a month rate increase.  After telling customers they should “upgrade” their Frontier service to DirecTV satellite, those customers that tried encountered news that DirecTV never heard of the promotion Frontier was offering:

Two hours on the phone, six customer service people and a disconnected call — it wasn’t the introduction to DirecTV that one local man had hoped.

A FiOS television customer, Rick Wright sought to take advantage of an offer made last week by Frontier Communications and its partner, DirecTV.

[…]When Wright called initially, the Frontier customer service person was familiar with Frontier’s offer and transferred Wright to DirecTV to get an installation date before cancelling his FiOS TV service. At DirecTV, Wright spoke to six people over a two-hour span before being disconnected. Wright called back to DirecTV the following day only to be told that he was misinformed about the offer. Frontier spokeswoman Stephanie Beasly said Thursday that she was taking care of Wright’s problem.

On Friday, more than a week after Frontier first announced its new offer, Wright said his television service still remained up in the air. Several other FiOS television customers in Snohomish County reported difficulty in getting the free DirecTV offer.

Late last week, Frontier acknowledged some miscommunication between the company and its partner, DirecTV. On Thursday, Beasly said she believed those issues had been resolved. She did not return a request for further information Friday.

DirecTV spokeswoman Jade Ekstedt suggested in an e-mail that FiOS customers should contact Frontier directly for assistance.

“The offer … is a valid Frontier Communications promotion that includes DirecTV service, and DirecTV always works with its partners on valid offers that they introduce into market,” Ekstedt wrote, when asked whether DirecTV is honoring Frontier’s offer.

Complaints are arriving at a steady pace, reports the Washington State Attorney General’s office.

This is a story that never ends well.  But don’t worry — the executives responsible for the notorious bungling have their spots on the compensation lifeboats already reserved.  Too bad customers will likely go down with the ship.

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KOVR-TV in Sacramento worked with Stop the Cap! and Free Press to develop this story about Frontier’s unjustified Internet Overcharging schemes.  (4 minutes)

Philippine consumers won a major victory this morning, successfully stripping language permitting Internet usage limits from a broadband reform measure before the country’s telecommunications regulator.

In a newly revised draft, this language written by and for some of the nation’s largest telecom providers was removed after a major consumer push-back:

“WHEREAS, it has been observed that few subscribers/users connect to the internet for unreasonably long period [sic] of time depriving other users from connecting to the internet; NOW, THEREFORE… Service providers may set the maximum volume of data allowed per subscriber/user per day.”

Consumer rights group TXTPower was instrumental in exposing the provider-written language and generating a groundswell of opposition to broadband usage limits.  The group’s leader Tonyo Cruz said Internet Overcharging schemes like usage caps deliver all of the benefits to providers while limiting consumer access and increasing bills.

“The adoption of [usage caps] will destroy social media in the Philippines and affect businesses,” Cruz told commissioners at a National Telecommunications Commission public meeting attended by consumers.

Cruz compared broadband in the Philippines with a turtle race.

“Imposing caps would be like putting speed limits on slow-moving turtles,” he said.  “It is one thing for telcos to say that a small percentage of consumers abuse their networks, but is another and more important thing to know whether they actually deliver the promised services and whether they have at the moment or in the future the capacity to deliver them.”

Cruz says his group doesn’t oppose providers dealing individually with consumers who use their accounts to the point of creating problems for other users on the network, but a blanket usage limit punishing every Filipino was unacceptable.

The issue rapidly became a political hot potato when ordinary Filipinos contacted their elected representatives to protest the measure.

Kabataan Partylist representative Mong Palatino put the Commission on notice: “NTC’s draft memo [including usage caps] is clearly anti-consumer and regressive. It tramples on the rights of the consumers to get what they pay for in terms of a reliable Internet service,” Palatino wrote in a widely distributed statement. “By allowing telcos and Internet Service Providers (ISPs) to limit Internet speed and connection, NTC seemingly wants the whole nation to regress to an Internet era that is much slower and highly unstable,” Palatino explained.

For Cruz, the entire argument for usage caps and the complaints about consumers using too much Internet service “ring weird.”

“The telcos who complain about over-use are the same companies actively encouraging consumers to use the Internet and become avid Internet users, to watch and upload videos and photos,” Cruz noted.

Cruz and other consumer activists want the Commission to hold additional public hearings, and stream them live over the Internet.

Filipinos looking for reasons why broadband providers want to limit their Internet usage can find all the explanations needed in the financial reports of companies enthusiastically supporting Internet Overcharging proposals.

As ABS/CBN News noted, “To say that 2010 was a difficult year for the Philippine telecommunications industry is an understatement.”

“Consumers are demanding an unlimited telecommunications experience,” says Renato Razón, an investor and telecom industry watcher for more than 30 years. “The wireless sector and the growth of the Internet, and the companies that compete to provide both, have turned telecommunications in this country on its head.”

Razón tells Stop the Cap! the privatization of telecommunications initially showed a lot of promise for investment and development to get the country on the Asian economic fast track.  But increasingly in recent years, companies have grown fat and lazy, trying to compete with existing networks in need of upgrades — in search of quick profits and no costly capital expenses.

“They learned what they think are important lessons from the huge amounts of money that were spent to build and upgrade wireless networks in the Philippines,” Razón tells us. “They were convinced it was worth countless billions to build wireless infrastructure and wait for the enormous profits that would come later, but then everyone wanted to get into the business and the big profits they thought they’d get never materialized.”

Razón says wireless competition that exploded across major cities in the Philippines was initially a boon to consumers, who today benefit from heavily marketed unlimited calling and texting plans at declining prices.  But now that profits are taking a hit, investors and company executives learned what they feel is a bitter lesson.

As wireless becomes a mature market in the Philippines — with more than 80 percent of consumers already using wireless devices, almost all of the marketing from existing providers targets customers of their competitors.  Customers threatening to switch force providers to offer steeply discounted retention deals that are often infinitely renewable.

Such fire sale pricing enrages investors, who are calling for greater industry consolidation among the three largest operators.  With a fourth provider possibly on the horizon, the chorus demanding that some of the players get out of the market through mergers and acquisitions for the “good of all” could soon grow too loud to ignore.

“Heavy competition is your worst nightmare — it results in price wars and everyone, except consumers of course, are hurt in the end,” he admits.  “I admit I have to divorce myself from the fact my family and I are also consumers — and we love the lower prices — but as an investor, I understand the loud demands to improve shareholder value.”

Razón says executive compensation, often tied to financial performance, delivers the ultimate incentive that executives answer first to shareholders, not customers.

“If a handful of customers get angry at you, that doesn’t cost you the company-paid vacation on the French Riviera and a healthy bonus — an angry compensation committee answering to a dispirited Board of Directors could,” Razón says.

Razón says it’s the same story wherever private companies control telecommunications with few regulations governing their operations.  He believes private market solutions without regulatory oversight helps him more than it helps you.

“I understand what the Philippine government wants — regulations to promote better broadband, but they are only hearing from industry people on how to accomplish that,” Razón believes.  “They answer to shareholders who think about short term results and the health of their investment, not the overall health of the broadband marketplace.”

With financial results for 2010 showing the impact of price competition and predictions of another year of anemic profits, providers are looking for new revenue streams.  Broadband offers one of the few major growth opportunities available to telecom companies in the short term, Razón says.

“At least half this country doesn’t have meaningful broadband, so if you can deliver service over existing infrastructure, keeping capital costs low, you couldn’t count the money coming in fast enough,” Razón says.  “DSL from the phone companies delivers it all — existing phone wires delivering a value-added service to existing phone customers.  It’s not fast, but it’s cheap.”

Rafael Aguado, the chief operations officer of Bayan Telecommunications, agrees the real revenue is in broadband:

“2010 was a challenging year for the telcos, as competition intensified and the Internet/social media and new technologies influenced the shift on consumer behavior on how to communicate, putting pressure on traditional revenue sources like voice calls and international long distance calls. Data and internet subscribers continued to increase and is expected to accelerate to the next level of sustained growth.  It was a difficult year for Bayan but performance was consistent with the industry trend. Total revenue decreased due to lower voice revenues but residential internet and corporate data services posted revenue growth. With sound operating expense management, we expect the year to end in double digit growth in EBITDA. Our growth drivers next year would continue to be data and internet services for both consumer and corporate sectors.”

Razón believes usage caps are just another mechanism to protect companies from performing costly upgrades.

“If you can limit usage, you don’t have to spend as much capital upgrading,” Razón says.  “Investors don’t mind if you spend to expand DSL into new territories, because the costs are relatively low.  They will get upset if your support and ongoing costs increase, however.”

That could explain the growing burdens of wireless traffic on the country’s cellular networks.  Some providers have been accused of deliberately overselling access to their networks while refusing to upgrade them to meet growing demands, because the return on “unlimited use” doesn’t deliver:

“The telco industry had a good year but its profitability was greatly reduced due to the highly competitive ‘unlimited plans’ that each provider offered its subscribers. This trend would continue this coming year,” said Ivan Uy, chairman, Commission on Information and Communications Technology (CICT). “What needs to be looked into is the deteriorating service availability or accessibility due to network congestion brought about by the unlimited plans. Customer dissatisfaction has been rising because of higher frequency of dropped calls, delayed SMS, and line unavailability.”

When given a choice how to solve this problem, most companies prefer to advocate for usage limits, not mass scale upgrades.

Even long distance companies, which played through a price war more than a decade ago, see the flow of investment heading into broadband.  Unfortunately, in their eyes, usage demands are coming along as well:

“Competition intensified in the cellular business. Broadband grew strongly. Margins came under pressure even as demand for more network resources increased. For PLDT, 2010 has been a year when it maintained its market leadership in the face of these challenges. Our focus has been managing this transition where traditional revenue sources such as fixed toll revenues like IDD and NDD were on the decline while new revenue sources such as broadband were on the rise. We preserved margins by strengthening cost management given the modest top-line growth.

“We expect the challenges of 2010 to carry into next year. Demand for bucket and unlimited offers in the cellular space will continue. We expect that broadband will keep growing given the growing popularity of social networking and new access devices such as tablets and smartphones. PLDT will continue to invest in its network in order to fortify its market leadership.” — Napoleon Nazareno, president and CEO, Philippine Long Distance Telephone Co.

For a long term investor like Razón who has seen this all before, there is a better answer: invest in your networks and grow them faster than your competitors.

“You have to spend money to earn money I have always found and there is a ton of money to be spent and made on broadband in this country,” Razón says. “The low hanging fruit has already been picked — now we must spend to get broadband into towns and villages and we should also be investing in content and products we can sell to broadband customers.”

Razón thinks Internet Overcharging schemes are a foolish mistake.

“You can’t create value-added services on an artificially limited network and expect consumers to buy,” Razón said.  “If you limit usage, you discourage people from using the services that get them addicted to using it in the first place.  Get them hooked, keep them happy and you have a customer for life.”

Elk Grove, Calif. residents receiving letters from Frontier Communications claiming they are using the company’s Internet service too much are getting confusing responses from the phone company when calling to register complaints about the Internet Overcharging scheme.  Even worse, one company official told a subscriber they have to keep the new usage limits secret “for legal reasons in case we have to change it again.”  But no worries, Frontier explained to one customer: if you exceed the secret cap again, you’ll be notified future overages will be conveniently billed on a future Frontier bill.

Stop the Cap! has been receiving dozens of e-mailed complaints from customers upset that the company’s bait-and-switch broadband also comes with uninformed customer service representatives who can’t deliver straightforward answers to customers trying to understand how they can avoid up to $250 a month for 3Mbps DSL broadband service.

“When I signed up for Frontier DSL, nobody said a thing about usage limits,” writes our reader Trina who lives near Camden Park.  “My small business has DSL from Frontier as well and we were horrified when we received a letter telling us we were over-using their service.”

Trina and her husband have four teenage boys living at home, all sharing their Frontier DSL account.  When she called the company in response to the letter she received, the confusion began.

“The first representative didn’t understand what I was talking about and denied there were any limits and said the letter must have been a mistake,” Trina says. “But my husband noticed others in our area were talking about the letter on area message boards so when he called, he got a representative that confirmed the limits were real.”

Trina was told her home would need to upgrade to Frontier’s $249 monthly DSL service plan, the same one Frontier held over the heads of some customers in Mound, Minn. last year.

“I told them they must be smoking crack — are they serious?  There is no way I am going to pay $250 a month for DSL that gives us 1.5Mbps service — not in this world,” Trina says.  “My husband laughed when I told him, saying Frontier is going to drive themselves out of business from this stupidity.”

Elk Grove reader Stephen also called Frontier after he received a letter stating he used over 100GB in a month.

“Yeah, I used 104GB according to my router’s logs and Frontier deemed me a bandwidth abuser,” Stephen writes.  “Of course the company tried to sell me a plan priced at $100 a month for their lousy DSL service we got suckered into on one of their term contracts.”

Stephen said he’d manage to find a way to shave 5GB off his monthly usage and forego Frontier’s $99 offer until he signs up with a competitor and tells Frontier to take a hike.

“It’s one thing to be abused by a lackluster phone company like Frontier who never did a thing for Elk Grove — it’s another to pay them more for their abuse,” he writes.

Stop the Cap! reader Pete, also in Elk Grove, says he can’t get a straight answer over exactly what the monthly limit is.

“When I called, I was told 5GB by one representative, 100GB by another, but get this — when I logged into the ‘Flexnet’ Usage Meter the company tells you to review, it showed I had a 20GB limit,” Pete says.  “I called Frontier on the phone and told them I was so through with them — I can’t stand their nonsense.”

Pete wasn’t alone.  Our regular reader Mike figures his cap was actually 20GB a month if the company’s usage meter was to be believed, and he sent pictures.

“I got their nastygram last month over my usage and now my Flexnet meter shows me over the limit,” Pete says.  “I have been vocal on a local Elk Grove message board so I’m feeling like this is retaliation.”

In fact, Mike’s usage meter depicts him as well over the arbitrary 100GB limit Frontier suggests in their letter, despite not coming close to 100GB of usage.  Ditto for our reader Michelle who lives in Palo Cedro, a community Frontier can largely hold captive thanks to limited competition.

Benjamin, also in Palo Cedro, says Frontier’s move will hurt small businesses in the northern California Shasta County community of 1,200.

“I need high speed Internet to help start my business, which will largely involve uploading and downloading multimedia, (which is hard enough to do on a 1.5 connection) but to increase the cost is absolute insanity,” he says.

Benjamin’s alternatives barely qualify.

“I can either try Clearwire, which works terribly locally and is known for its speed throttles when congested, or HughesNet satellite-delivered Internet, which is overpriced,” Ben adds.

As our readers already know, satellite fraudband is no replacement for real broadband service, because it comes with a “fair access” policy that isn’t fair and doesn’t deliver much access.

“I will fight this any way I have to,” Benjamin says.

John in Elk Grove writes in to say the entire affair is a Frontier shell game.

“It’s pure bait and switch to sell us broadband without limits and then suddenly impose them while we are supposed to be on ‘price protection agreements’ that the company says will keep our prices stable,” John says. “Now we learn it’s all a shell game — they can say we used too much and that doesn’t count with their price protection scam.”

John adds Frontier can change the limits at will, and customers who choose to depart could still face enormous cancellation penalties.

“The Frontier representative I talked to when I called to cancel service told me I owed $300 for ending my contract early,” he said. “I told them to go to hell and that if they tried to collect, I’d personally make it my life’s work to cost them far more than that in lost business.”

Customer anger only increases after speaking with Frontier’s own representatives.

“Mr. Brown” shares his experience:

I am an Elk Grove resident and a Frontier DSL internet customer. I received the same letter from Frontier about exceeding the 100gb of bandwidth within a 30 day period. It said that I must reduce the amount of use or bump my account up to the next tier of service, a $99/mo business account.

I called the number on the letter to talk to a customer service representative so that they would not disconnect me for not responding within 20 days. I asked him if there is a maximum bandwidth cap. He told me that there is no cap, but that their terms of service says that they can disconnect you if you are exceeding reasonable usage and that Frontier will determine what is reasonable usage. The representative could not help me any further so he connected me with his supervisor.

The supervisor said that Frontier sent this letter out to about 1,000 customers in Elk Grove and that most of the customers who have called after receiving the letter have not questioned them and said they they will reduce their usage.

He also said that there is no longer any $99/mo plan, the only option is to reduce usage. He said they sent the letters out to the costumers who are using more than a reasonable about of bandwidth telling them to use less Internet. Then if they did not, Frontier will send another letter saying that if they use more than a reasonable amount that they will charge the customer for anything over.

He went on to say that Frontier had to remove the statement about the previous 5GB bandwidth cap in their terms and conditions and that for legal reasons they are not going to tell us what the new limit is, in case they have to change it again in the future.

I tried to get him to admit that there is a cap and to tell me what that limit was, but he would not.  He would only say that I would be okay if I did not go over 100gb/mo and that if I do, to expect to receive another letter with the new terms that would allow them to charge my account for excess bandwidth.

The one thing is common with readers we’ve heard from is their urgent search for a new provider.

Trina canceled all of her Frontier services at home and at her business and switched to SureWest, a fiber to the home provider.  Joining her includes Mike, Stephen, Pete and John.  Together, their combined disconnects will cost Frontier more than $500 a month in lost revenue, all because of broadband traffic that costs Frontier far less than 5 percent of that amount.  If each customer shares their horror story with friends, family, and neighbors, the loss in revenue could cost far more.

For customers like Mike, he can’t wait to get his SureWest service installed.  The company offers to buy out current contracts with companies like Frontier valued at up to $200, and their fiber-delivered broadband service leaves Frontier’s speeds in the dust.  Mike says if Frontier gives departing customers a hard time about early cancellation fees, file a complaint with the California Public Utilities Commission Consumer Affairs Branch.

SureWest offers 3/3Mbps service for $36.99 per month, 25/25Mbps service for $51.99 a month, and 50/50Mbps service for $181.99 a month.  A $3.99 High Speed Internet features and services charge applies.  There are no limits on SureWest’s Internet service.

Frontier offers 3Mbps service with a slower upload speed for $32.99 per month or 10Mbps service for $44.99, both with a required price protection plan and $6.99 monthly modem rental fee.

“Why in the world would you pay Frontier more for less service,” asks Pete.  “Once they pile on the administrative fees, surcharges and taxes, it’s well north of $40 a month, and you don’t even get the speed they advertise, much less the usage limits they don’t.”