Genachowski

The cable industry is expanding so-called “lifeline Internet service” to more households in an effort to combat what a government agency calls “a persistent digital divide.”

Next spring, Time Warner Cable, Cox, and Charter Communications will launch low-speed Internet service for $9.95 a month for two years.  The offers will echo Comcast’s Internet Essentials, which launched earlier this year as part of a deal with the government to win approval of the cable company’s merger with NBC-Universal.

The Federal Communications Commission calls the effort “Connect to Compete,” and suggests the public-private initiative will help rural Americans and low-income minorities get affordable Internet access. A study by the National Telecommunications and Information Administration found just 55% of black households and 57% of Hispanics currently subscribe to broadband.  More than 72% of Caucasian households and more than 81% of Asian homes use broadband by comparison.  The rural southern states of Mississippi (52%), Arkansas (52%) and Alabama (56%) have the lowest broadband penetration rates in the country.  In contrast, more than 80% of Utah residents have broadband in their homes.

“In this difficult economy, we need everyone to be working together on solutions,” FCC Chairman Julius Genachowski said. “Broadband is a key to economic and educational opportunity and these kinds of commitments to close the digital divide are powerful.”

But not every poverty-stricken American will qualify for the discount programs.

Cable operators are following Comcast’s lead, restricting access to families with at least one school age child enrolled in the free school lunch program.  Customers must not have existing broadband service during the last 90 days and customers with past due balances cannot sign up.  Don’t have children or fell behind on your cable bill?  No discount Internet for you.

Pilot programs will be launched by each operator in around a dozen cities total starting next spring, with plans to roll programs out nationally by the start of the 2012 school year.  Broadband speeds, usage limits, and other fees were not disclosed.  Comcast’s Internet Essentials operates at 1.5Mbps with upload speeds up to 384kbps.

Comcast’s program sells a netbook computer loaded with Windows 7 Starter Edition for around $150.  The $250 computers expected to be provided by Microsoft will include Windows 7 Home Premium operating system and Microsoft Office.  An additional vendor will sell refurbished computers to interested program participants for around $150.

The program will primarily reach urban residents who cannot afford current Internet service plans that are sold for $40-45 a month.  Rural residents are unlikely to benefit much because most cable operators do not deliver service in rural areas.

CenturyLink announced its own version of discounted DSL Internet in October to sell for $9.95 a month, but with numerous “gotcha” fees and surcharges.

One group unlikely to take advantage of the program: older householders, particularly those ages 65 and older, where just 45% have broadband at home.  The biggest reason the rest don’t?  They don’t believe they need the Internet at any cost.

CenturyLink has unveiled its own discounted Internet access program for the income-challenged, loaded with tricks and traps buried in the fine print.

Dubbed CenturyLink Internet Basics, the 1.5Mbps DSL service is available to those who currently qualify for Lifeline Affordable Telephone Service, a federal program that provides discounts on basic monthly telephone service to eligible low-income consumers.  The service sells for $9.95 a month, before taxes and fees.

But buried in the fine print are a number of surprises that deliver higher prices and some nasty surprises (underlining ours):

• Listed High-speed Internet rate of $9.95/mo. applies for first 12 months of service (after which the rate reverts to $14.95/mo. for the next 48 months of service), and requires a 12-month term agreement or 24-month term agreement (if purchasing Netbook);
• Customer must either lease a modem/router from CenturyLink for an additional monthly charge or purchase a modem/router from CenturyLink for a one-time charge, and a one-time High-Speed Internet activation fee applies;
• A one-time professional installation charge (if selected by customer) and a one-time shipping and handling fee applies to customer’s modem/router;
• Taxes, Fees, and Surcharges – Applicable taxes, fees, and surcharges include a carrier Universal Service charge, carrier cost recovery surcharges, state and local fees that vary by area and certain in-state surcharges. Cost recovery fees are not taxes or government-required charges for use (which means they are little more than bill padding junk fees). Taxes, fees, and surcharges apply based on standard monthly, not promotional, rates;
• The first bill will include charges for the first full month of service billed in advance, prorated charges for service from the date of installation to bill date, and one-time charges and fees described above.
• Netbook purchase must be paid in full to CenturyLink prior to shipment. Shipping and handling fees, and applicable taxes will apply. If customer purchases Netbook as part of the CenturyLink Internet Basic service, all warranty and support for the Netbook and accompanying equipment will be covered by the manufacturer or other identified third party, not CenturyLink.
• No software applications or wireless service are included with the Netbook.
• An early termination fee will apply based on the applicable monthly recurring service fee multiplied by the number of months remaining in the minimum service period, up to $200.

Unlike Comcast, CenturyLink claims it will provide equivalent discounts for faster speeds — an important consideration for those with school-age children at home who may need multimedia capability for research and studies.

CenturyLink also offers a netbook computer for an additional $150, plus shipping and taxes, at the time of enrollment in the program.  The service also includes educational training, a 30-day money back guarantee, Norton Security Suite, and parental controls.

“While the Internet has become part of daily life for most Americans, many still aren’t connected because the cost is beyond their reach. CenturyLink is pleased to introduce this new program that offers affordable High-Speed Internet service and computers to those who need help getting online,” said CenturyLink CEO and President Glen F. Post, III.

That and the fact the company was required to offer discounted Internet service as a condition for the approval of their acquisition of Savvis, a web hosting company, according to Broadband Reports.

Like Comcast, participation in the program requires meeting a number of terms and pre-conditions:

One of the conditions Comcast had to agree to as part of its multi-billion dollar deal to acquire NBC-Universal was to throw a bone to some of America’s poorest households by offering discount Internet access for three years.  Comcast agreed and is rolling out low-speed Internet at a discount in time for the upcoming school year.

“Comcast Internet Essentials,” is the ultimate in bare-bones Internet.  For $9.95 a month, customers in Comcast service areas will get 1.5Mbps download speed and 384kbps upstream, with the usual 250GB usage limit Comcast applies to everyone.  But not just anyone can qualify.  Comcast has limited the program only to households with at least one child qualified to receive free (not discounted) school lunches under the National School Lunch Program.  So if your income-challenged household doesn’t include children, or you pay for your own school lunches, you are out of luck.

Comcast is also denying access to anyone who has had any level of Comcast Internet service within the last 90 days.  So if you’ve scraped enough money together to pay Comcast’s regular prices, the cable company is not going to give you a break.

If your kids graduate or are removed from the school lunch program, your inexpensive Internet service goes with it.

If you have been late on a Comcast bill, or owe the company for unreturned cable equipment, you also cannot receive the service.

The company will also provide vouchers for a “discounted laptop” for $150 — a computer that turns out to be a netbook.  At least it comes with Windows 7 (Starter Edition).

Comcast requires would-be customers to start with an application, available by phone, at 1-855-8-INTERNET (1-855-846-8376).  The merger approval agreement required Comcast to provide the service for three years.  Guess what happens to it when the requirement ends.  No matter — Comcast is turning the entire affair to its public relations advantage, showing up on various media outlets promoting the program as if Comcast thought it up on its own.  Not quite.  We have three questions:

1. How many consumers would sign up for the service if Comcast offered $9.95 1.5Mbps to anyone who wanted it?
2. How many might consider downgrading their current service for something less expensive, especially if they are only interested in occasional web browsing?
3. Will the “digital divide” Comcast decries today be magically gone at the end of three years, when they quietly drop the program?

[flv width=”360″ height=”290″]http://www.phillipdampier.com/video/KRIV Houston Comcast Internet Essentials 8-8-11.mp4[/flv]

KRIV-TV in Houston explores the various conditions Comcast places on its Internet Essentials program.  (2 minutes)

[flv width=”512″ height=”308″]http://www.phillipdampier.com/video/CNN Low Cost Internet 8-10-11.flv[/flv]

Comcast’s David Cohen appeared on CNN promoting Comcast’s Internet Essentials as a way to “bridge the digital divide” — a disparity of access American ISP’s originally created with their excessively high-priced Internet services. (3 minutes)

The elusive Dell 10v Netbook promised to new Comcast customers back in August is MIA for hundreds who took advantage of the promotion

Five months after Comcast ran a promotion for new customers including a free Dell 10v netbook, many customers across the country are still waiting to receive the computer.

Back in August, Comcast matched a Verizon FiOS promotion promising a netbook to new customers signing a two-year service contract for a $99 monthly “triple play” package of telephone, broadband, and cable programming.

Visitors to Comcast’s website were offered:

HD Starter Triple Play

NEW SUBSCRIBERS: Get a free Dell 10v Netbook with the HD Starter Triple Play for only $99 a month for 12 months and a 2-year minimum term agreement. Plus, you’ll continue the savings the following year with a price of just $10 more per month.

• Free HD – no HD access fees or equipment fees.
• Over 80 digital cable channels.
• Thousands of On Demand movies and shows.
• Internet downloads up to 15 Mbps, uploads up to 3 Mbps with PowerBoost®.
• Unlimited local and long-distance nationwide calling – rated #1 in call clarity.
• Voice Mail and 12 popular calling features including Caller ID, Call Waiting and more.

The campaign apparently shared something else in common with Verizon’s promotions — customers left high and dry wondering when the promised bonus will arrive.

Customer attempts to contact Comcast have met with a wall of excuses and broken promises, and often still no netbook.  Other customers were told they failed to “qualify” for the promotion for not precisely following the terms and conditions that were never explained to them.

Comcast representatives have told customers they lost out because:

• They failed to return a copy of the signed contract committing to two years’ of service, despite insistence from customers who claimed they had;
• Comcast had two promotions running at the same time that were nearly identical, though one offer did not include a netbook. Customers were told they were signed up for the promotion that didn’t include the netbook.
• Customers had to make three or four consistent payments for service, before the due date, or they would forfeit participation in the netbook promotion.
• The customer waited too long to complain about the missing netbook.
• The customer was now a TV customer, and therefore didn’t qualify for the promotion.
• Tri-Star/Checkmyrebate.com, the third party fulfillment center handling the promotion didn’t receive/rejected the customer’s promotion request.
• They lost the paperwork.

Although some customers began receiving the promised promotion more than 120 days after signing up for Comcast, hundreds more are still waiting, and complaining.  A few managed to obtain service credits up to $299 (the retail cost of the Dell 10v) and told to “go buy your own.”   One Seattle television station intervened to help a Kenmore resident finally secure one in January, despite hopes it would have arrived before Christmas for re-gifting.

Escalating the matter to executive customer service is usually the best way to cut through Comcast’s red tape and secure the promotion customers are entitled to receive.

Darren, a Comcast customer who waited months for the cable company to make good on their offer gave some advice:

I started posting on Facebook and Twitter and immediately received a twitter from @ComcastMelissa and @ComcastBonnie. They told me to email: [email protected] and provide my account information so they can get me my netbook. I received an email from Sherri Carson, ([email protected]) at the corporate office – national customer service. On January 7th, 2010 she said “This is going to take about 2 weeks at the most. Sorry, I know you should have received some follow up, but I’m on it.”

The kicker: I emailed her yesterday to say hey, two weeks is almost up and I haven’t heard anything. Here is her response: “You should be receiving your netbook no later than 2/19 at the latest. I will get you a tracking number as soon as I get one. You can check this site in about two weeks.

Just don’t get your hopes too high for a Dell netbook.  Many finally receiving their promotional gift report an Asus Eee PC arrived instead.  Comcast put that in the fine print as well  — it reserved the right to make substitutions.

[flv width=”480″ height=”290″]http://www.phillipdampier.com/video/KING Seattle Comcast called out in Triple Play promotion 1-7-10.mp4[/flv]

KING-TV Seattle helped this Kenmore, Washington viewer finally get her promised netbook after signing up for service in August, 2009.  A Comcast executive personally pleaded for her to stay with Comcast, despite the promotion problem, in this report.  (2 minutes)

One of the promised benefits of permitting the Verizon-Frontier spinoff is that Frontier will bring more and better broadband service to areas Verizon has ignored for years.  The company has been running television ads in West Virginia promoting Frontier’s promised “next generation” of broadband.  But what does that mean?

[flv]http://www.phillipdampier.com/video/Frontier Verizon Deal Advertisement West Virginia.flv[/flv]

Frontier Communications is running this advertisement in West Virginia.

The West Virginia Consumer Advocate Division of the Public Service Commission brought in Trevor R. Roycroft, PhD., former Associate Professor at the J. Warren McClure School of Communication Systems Management, Ohio University, to examine the details behind the marketing and public relations push to promote the deal.

He was not impressed.

After an extensive review of confidential and public documents from Frontier, his conclusion was that Frontier’s DSL service is just plain bad, and for plenty of West Virginians who may only have one choice for broadband in the foreseeable future, being stuck with Frontier’s idea of broadband is particularly bad.

Indeed, Frontier’s idea of what defines “next generation broadband” would be true, if this was the year 1992.

“Frontier has made no commitment regarding improved broadband deployment in West Virginia. Frontier, while achieving higher levels of DSL availability in West Virginia, generally offers its broadband services at higher prices and provides lower quality than those associated with Verizon’s DSL. Frontier’s ability to increase broadband deployment in West Virginia will depend on the condition of the outside plant that it has acquired, which may negatively impact Frontier’s costs of deployment. Furthermore, Frontier must upgrade substantial numbers of customer locations outside of West Virginia, and West Virginia will be competing with this larger priority,” Roycroft writes in his testimony to the West Virginia Public Service Commission.

The infrastructure Frontier utilizes to deliver its broadband service is revealing even to those Frontier customers not directly impacted by this transaction.  Some of the documents Roycroft reviewed laid bare the nonsense the company has used to defend its Acceptable Use Policy language defining an “acceptable amount” of monthly broadband usage at just five gigabytes.  Company officials have said for more than a year that they were concerned about the growth of usage on their network, and its potential to slow service for other customers.  But company documents, included within the scope of Roycroft’s testimony, tell a very different story:

Frontier plans to increase its core backbone from its current level of 10 Gbps to a capacity of 20 Gbps (should the spinoff be approved). With regard to the capacity of its existing backbone, Frontier states:

Frontier expanded the backbone from OC 48 to 10 Gigabit Ethernet during the first half of 2009. Because of this network expansion we do not have peak usage for the past 12 months. No backbone link has peaked above 2.8 Gigabit/second or 28% of the capacity of a link since the augment was completed in 2009.

Thus, Frontier’s current backbone configuration appears to have excess capacity. With the expansion of its backbone network to 20 Gbps, the company’s current data traffic load results in about 14% of capacity being utilized at peak.

Potentially limiting customers to just five gigabytes of usage is so unjustified, in Roycroft’s analysis, its potential imposition on West Virginian customers should be a deal-breaker.

Roycroft ponders whether Frontier will invest enough resources to make sure capacity is not an issue. The only way Frontier’s network will show signs of strain is if the company makes a conscious decision not to sufficiently upgrade their network as they take on millions of new Verizon customers, or they dramatically underestimate the average Verizon customer’s usage.

Roycroft was also asked to evaluate whether Frontier’s claims of 90% broadband availability in its overall service area and 92% in its West Virginia territory rang true.

Roycroft writes that Frontier’s numbers don’t tell the whole story.  In five states, Frontier admits the percentages are notably lower, so no guarantee can be inferred for West Virginia based on Frontier’s talking points.

Frontier’s “Advanced” Broadband Network Is Hardly Advanced and Barely Qualifies As Broadband

Heavy criticism was leveled at Frontier for its “advanced” broadband service.  Roycroft compared Frontier DSL with several other providers and was unimpressed with the company’s broadband speeds.

Roycroft's table illustrates what's on offer from the competition

“Frontier’s advertised DSL speeds are generally much lower than those available from Verizon and other carriers. Based on a location-based search of Frontier DSL service offerings, it appears that Frontier’s most prevalent DSL speeds are 3 Mbps and 768 kbps (for download),” Roycroft said.

Frontier's DSL Speeds in Selected Cities

Although the expressed upload speed for Rochester should be listed at a higher rate (I managed around 512kbps myself), Roycroft is correct when he says, “it can be seen that outside of Rochester, NY, the DSL speeds associated with Frontier offerings cannot be considered ‘cutting edge.'”

Even while noting Rochester’s potential DSL speeds, real-world speeds are another matter entirely.

[flv width=”640″ height=”405″]http://www.phillipdampier.com/video/Real World Frontier vs Road Runner Speeds.flv[/flv]

One New York customer provided real world evidence of the significant differences in speed offered by Road Runner from Time Warner Cable and Frontier’s DSL (courtesy: 1ComputerSavvyGuy) (1 minute)

Frontier’s DSL offerings in West Virginia are of even lower quality. Frontier indicates that it offers three grades of DSL service in West Virginia:

Up to 256 kbps download/128 kbps upload;
Up to 1 Mbps download/200 kbps upload;
Up to 3 Mbps download/200 kbps upload.

These data transmission speeds, especially upload speeds, are at the very low end of commercial offerings that I have observed.

Comparing Verizon DSL vs. Frontier DSL Pricing & Gotchas, Contracts, and Internet Overcharging Schemes

Roycroft’s study found Frontier’s pricing significantly higher than Verizon for DSL service.

Frontier’s DSL prices, either with telephone service, or on a stand-alone basis, are significantly higher than are Verizon’s. For example, the entry-level Frontier plan has a nominal price that is 100% higher than Verizon’s.

However, when considering the per Mbps price, Frontier’s price is 160% higher. It is also notable that Frontier’s upload speeds are also low when compared to Verizon’s.  Consumers are increasingly relying on upload capabilities to share large files, such as videos. Overall, Frontier’s DSL products are low quality.

Comparing Prices

Roycroft also gave special attention to Frontier’s infamous 5GB Acceptable Use Policy, which he suggested was a major negative for West Virginia’s online experience.

Frontier indicates that it monitors network usage if “it receives a complaint of slow service or if it discovers that network bandwidth utilization is unusually high in a particular area.

Frontier was asked to identify any action taken against a customer associated with its acceptable use policy and, in response, the company stated that it has not “terminated a customer’s service based on exceeding the 5 GB threshold identified in the AUP.” However, the restriction on usage further raises the relative cost of Frontier’s service. Frontier indicates that consumers may face action by the company if they exceed the usage cap, thus indicating that the prices reflect both speed and volume. Verizon’s DSL service does not include a similar limit.

Frontier’s DSL pricing policies and usage restrictions will represent a significant negative impact on West Virginia consumers, should these policies be implemented in Verizon’s service area in West Virginia.

Even more importantly, Roycroft considered the argument for imposing such Internet Overcharging schemes as unwarranted.

“While DSL provides dedicated bandwidth to the customer in the last mile, DSL subscribers will share network capacity in the ‘middle mile.’ For example, shared data networks will carry consumer traffic from the telephone company central office to an Internet gateway. I believe that Frontier’s policy is more likely to reflect an unwillingness on Frontier’s part to invest in ‘middle mile’ Internet access facilities that would require capacity additions as customer demand increases, and choose to restrict customer usage instead of investing in the capacity needed to meet customer demand,” Roycroft writes.

“Furthermore, Comcast’s download-cap policy includes limits that are dramatically higher than Frontier’s. Comcast’s acceptable use policy identifies 250 gigabytes as the threshold at which Comcast may take action against a customer, which is fifty times the usage associated with Frontier’s policy,” he added.

Roycroft was also concerned about the many ‘gotchas’ that are part of Frontier’s marketing efforts which bring even higher prices to consumers choosing to have DSL service installed.

“To receive the services of Frontier’s technician, the consumer will incur a $134 fee unless the consumer signs up for a term service contract. Even with the term service contract, the customer must pay a $34 fee for the on-site set-up. Furthermore, the technicians that Frontier dispatches to new broadband customers’ homes are also sales agents. Thus, while it may be that these individuals can help with system set-up and the like, they also are part of Frontier’s overall up-selling strategy,” said Roycroft.

Frontier markets a variety of services to customers as part of their promotions and service offerings.  For instance, recent Dell Netbook promotions required customers to sign multi-year contracts for service, with an early termination fee up to $400 if the consumer chooses to cancel service.  Such promotions do not come out of the goodness of Frontier’s heart.  Indeed, such promotions provide even more revenue potential by pitching customers on its “Peace of Mind” services, which include computer technical support, backups, and inside wire maintenance for an additional monthly fee.

Customers don’t even qualify for many Frontier promotions unless they accept a bundled service package combining broadband with traditional phone service and a multi-year service contract.

Roycroft says West Virginia should demand modifications to Frontier’s proposal before it should even consider accepting it.  Among the changes:

• Frontier should be required to make broadband services available in 100% of its wire centers, and to 90% of its West Virginia customers by the end of 2013. Frontier should expand broadband availability to 100% of its customers by 2015.
• Frontier should be required to deploy and promote broadband services in West Virginia so that, by the end of 2013, at least 90% of its customers can achieve download speeds of 3 Mbps; 75% of its customers can achieve download speeds of 6 Mbps; and 50% of customers can achieve download speeds of 10 Mbps.
• To achieve these broadband objectives, Frontier should be required to exceed Verizon’s baseline level of capital investment by at least $117 million during the period ending December 31, 2013, or by an amount sufficient to meet the broadband objectives.
• Frontier should be required to offer broadband services at prices that do not exceed those currently offered by Verizon for 1 Mbps and 3 Mbps services, i.e., Frontier should offer services at Verizon’s advertised prices for 1 Mbps and 3 Mbps service (respectively, $19.99 per month and $29.99 per month) for a period of 24 months following the merger.
• Frontier should be prohibited from imposing its broadband “download cap” in West Virginia.
• Frontier should be required to provide individual written notice to its customers regarding the merger, and should notify customers of any change in services that result from the merger. Changes in billing format should also be clearly explained to customers, both in writing, and through a web-based tutorial.
• Frontier should be prohibited from migrating any Verizon customer to a Frontier plan that either increases the customer’s rates, diminishes the level of service, or has a materially adverse impact on any of the terms and conditions of the customer’s service. West Virginia customers should experience a rate freeze for a period of 24 months.
• Frontier should be required to allow former Verizon customers to take a “fresh look” at their purchases, including those customers who have term contracts with Verizon. All early termination charges should be waived for a period of 90 days following the merger, and the long distance PIC charge should also be waived for Verizon long-distance customers who select a long-distance provider other than Frontier.