AT&T today announced it was selling off its residential wireline network in Connecticut to Stamford-based Frontier Communications for $2 billion in a deal that includes an expanded license for U-verse TV that could eventually be available to Frontier customers nationwide.

Frontier will assume control of the Southern New England Telephone Co. (SNET), a wholly owned subsidiary of AT&T, and its 2,700 employees and 900,000 telephone lines. Included in the deal is AT&T’s U-verse network in the state and the right to expand U-verse TV into all 27 states where Frontier provides service. The deal comes three years after Frontier paid $8.6 billion in stock and cash to buy landline operations in 14 states from Verizon Communications.

In a Stop the Cap! exclusive story published last year, we reported Frontier was interested in acquiring licensing rights to the U-verse brand to potentially offer its customers a unified product suite of television, broadband, and phone service over a fiber to the neighborhood network. Maggie Wilderotter, CEO of Frontier Communications, told the Wall Street Journal the deal between AT&T and Frontier had been on the table for years waiting to be finalized. With today’s announcement, AT&T New England president Patricia Jacobs acknowledged Frontier will use the U-verse name at a secondary brand for video service. Frontier now relies on satellite reseller agreements to bundle video service into its packages for consumers.

Frontier’s acquisition will give the company hands-on experience with AT&T’s U-verse network in Connecticut and offer a path to bring improved service to Frontier customers elsewhere. Company officials also acknowledged a key reason for the transaction was boosting Frontier’s lagging dividend, a critical part of its share price. By taking on nearly 1,000,000 new customers, Frontier will boost its cash flow, returning some of that new revenue in a higher dividend payout to shareholders. But the company will take on an extra $2 billion in debt to manage higher dividend payouts.

JPMorgan Chase & Co. arranged the financing for the acquisition and Frontier will likely raise about $1.9 billion from debt markets by selling bonds. Frontier already has $8.13 billion in debt on the books, much of it acquiring landlines originally owned by Verizon.

AT&T’s departure from Connecticut was no surprise to analysts. AT&T operates most of its landline network in the midwest, south, and in the state of California. The company has focused primarily on serving business customers and its wireless network in the northeast, not residential landlines. Frontier described the deal as a perfect fit for Connecticut residents, because Frontier specializes in residential phone and broadband service.

“AT&T has been trying to sell its rural wireline businesses for some time,” Gerard Hallaren, an analyst with Janco Partners Inc., told Bloomberg News. “It looks to me like Frontier cherry-picked a nice asset at a nice price from AT&T.”

SNET began operations in 1878 as the District Telephone Company of New Haven and pre-dated the Bell System. The company founded the first exchange and printed the world’s first telephone directory. It remained independent of Bell System ownership until 1998, when SBC Communications (formerly Southwestern Bell) acquired the company. In late 2005, SBC purchased AT&T and AT&T Connecticut was born.

Over the past seven years, AT&T has watched customers decline from more than two million customers to fewer than one million. AT&T introduced U-verse to improve its position in the market to mixed results. The company’s investments in fiber upgrades have not been as profitable as its wireless network, likely leading to today’s sale.

AT&T says it is not leaving Connecticut altogether. The company plans to keep business and wireless customers in the state.

Much of the proceeds from the deal will be invested by AT&T in its wireless network, mostly to help pay for 4G LTE upgrades. The rest will be spent bringing U-verse to more customers in the midwest and southern U.S.

The acquisition faces regulator approval from both the Federal Communications Commission and Department of Justice, likely to be forthcoming in the first half of 2014.

Frontier executives promised shareholders the deal will result in $125 million in cost savings over the next three years — code language for layoffs. Some of them are likely to be among the 2,400 workers represented by the Communications Workers of America, which has had a contentious relationship with AT&T Connecticut over job cuts in the past.

For the third year in a row, AT&T is celebrating the holidays by telling more than 100 New Haven-area employees they will be spending a lot more time with their families this Christmas, without a job.

In mid-November, AT&T announced it was cutting 100 telephone operators. Now the company is back for more — telling 106 employees, many hard at work cleaning up storm damage from Hurricane Sandy, their services as AT&T technicians are no longer required.

As shell-shocked employees left AT&T’s New Haven headquarters with “early retirement” papers, the local union representing many of the technicians vowed to fight the layoffs.

“Many of the guys losing their jobs are the ones who go out in trucks and restore your service after a storm,” CWA Local 1298 president Bill Henderson told WTNH-TV. Henderson says the next time your U-verse or phone service goes out in Connecticut, you better be very patient because it could take a lot longer for service to be restored.

AT&T says many of the workers involved were no longer needed as consumers move away from traditional landline and wired service in favor of wireless, but Henderson wondered if that were the case, why were many of his workers forced to work mandatory overtime through much of November restoring service after Hurricane Sandy.

State regulators are already reviewing the performance of utility companies that left many residents with extended outages. Some communities said utilities were woefully unprepared to deal with the storm. Now the union wants the state’s telecommunications regulator to review the layoffs to determine if AT&T’s service in the state will decline further. The impact could be much more than an inconvenience to customers.

Off to the unemployment office we go, unless we’re willing to work elsewhere in the state.

“When we had hurricane Irene, it took our state down economically for a week and a half, and we can’t afford to do that going into the future,” Henderson argues. “We have to do better, we can’t do worse.”

An AT&T spokesman denied the company was laying off any worker, and claimed the company is offering employees access to other positions in other parts of Connecticut.

“The affected employees all have a guaranteed job offer that ensures they will be offered another job in Connecticut,” said spokesman Marty Richter. “All employees declared surplus in Connecticut in the last two years have either found other jobs with the company, continued to work in their current job while awaiting a guaranteed job offer, or elected to take a voluntary retirement package.”

Richter suggested some the affected technicians probably won’t be moved too far away.

“It’s likely that many will be offered jobs as U-verse technicians, in which case they could still be pulled in if needed for network restoration in extreme circumstances like a big storm,” Richter said.

AT&T used to employee at least 4,000 operators in the state of Connecticut alone. Today that number is down to less than 100. When telecommunications companies look for “cost savings,” getting rid of workers or slashing salaries and benefits remain favorite targets.

“It seems like they do it every year at this time,” Henderson said. “This is a company that made $13 billion last year and is on pace to make $17 billion this year and just gave a $2 million bonus to its CEO. They’re important jobs to keep. This is a corporation that only cares about the bottom line.”

[flv width=”640″ height=”380″]http://www.phillipdampier.com/video/WTNH New Haven ATT announces major job cuts 11-30-12.mp4[/flv]

WTNH in New Haven says more than 100 AT&T employees will lose their jobs right before the holidays. It could ultimately affect the quality of your AT&T service, union officials warn.  (2 minutes)

Verizon's Home Phone Connect base station

Verizon Communications has announced a new option for landline customers to ditch their local phone company with a new device that routes home phone calls over Verizon Wireless’ cellular network.

Verizon has chosen two test markets for its new Home Phone Connect service — Rochester, N.Y., serviced by Frontier Communications and Time Warner Cable and Connecticut, which is served by AT&T and Comcast.  (Thanks to our reader Bob for sharing the news with us.)

The service works with your existing home wired and cordless phones.  Customers signing up under a one or two year service contract will receive the base unit free of charge.  Installation is as easy: Just unplug the phone cord from the wall and plug it into the back of the Home Phone Connect device.  The unit supports up to two hard wired (non-cordless) phone lines and a cordless phone base station.  When you pick up any phone around the house, the base station will deliver a familiar dial tone, but all calls are made and received over the Verizon Wireless cell phone network.  You can download an read a copy of the installation manual here.

The service is priced at $9.99 per month for existing Verizon Wireless customers with any existing Family SharePlan that has two or more lines with at least a 700 minutes calling allowance per month.  Customers using Home Phone Connect under this plan will use minutes from their existing wireless service plan.  But since calls to and from Verizon customers and all calls placed during nights and weekends do not eat minutes, this may be a viable option for many customers.

For heavy talkers, or those without a qualifying Verizon Wireless service plan, an unlimited talk time plan is available for a flat $19.99 per month.

All local and domestic long distance calls are included, and the service also comes with these features:

• Call Waiting
• Call Forwarding
• Caller ID (not currently compatible with Caller ID + Name)
• International Dialing (charged at prevailing Verizon long distance rates)
• 3-Way Calling
• Basic Voice Mail (*86)
• Account Balance (*225)
• Device Provisioning, (*228)
• Account Payment (#786)
• 311, 411, 511, 611, 711 & 911 (some services not available in all areas)
• Last Number Callback (*69)
• National Domestic Hope Line (#4673)

The base unit includes a backup battery to power the unit for up to 36 hours idle time/2 hours talk time in the event of a power failure.  Customers relying on landline service that works with a monitored alarm system should check with their alarm company to ensure compatibility with cell network technology.

Michael Murphy, Verizon’s public relations manager for the New England Region, said consumers have the option of keeping their existing home phone number or requesting a new one.  Customers who do switch their current home phone number to Verizon will automatically cancel their existing landline service.  Frontier customers should carefully check their bills to make sure they are not on a Frontier “Peace of Mind” contract before switching.  Any expiration dates adjacent to the type of home phone service described on your bill likely means you are on a term contract.

Customers dumping Frontier before their contract expires could be exposed to early termination fees of up to $300 or more, which will appear on a customer’s final bill.  If you did not authorize a service contract, demand that Frontier drop it from your bill before you switch, and follow up with a complaint to the New York Attorney General’s office if the company fails to comply.

The device is intended to be portable, so you can take your “home phone” with you to any area served by a Verizon Wireless signal.  Just pack the Home Phone Connect base station and take it along.

Verizon carefully chose test markets outside of Verizon landline service areas.  That allows them to pick up new “landline” customers without harming their own landline business.

Verizon Wireless has a very large share of the Rochester, N.Y., market because of its ownership of the legacy Rochester Telephone cellular network.  Verizon delivers far more robust coverage than any other regional cellular provider in western New York.  With a built-in customer base wide open to Verizon’s marketing machine, the phone company could grab a significant number of Frontier landline customers who will see significant savings over Frontier’s comparable landline feature plans that run close to $50 a month after taxes and fees.  The company could also poach a number of Time Warner Cable’s Digital Phone customers, especially those whose first year promotional discount has expired.

In Connecticut, Verizon is challenging AT&T, which provides most of the state with its landline service.  Comcast is the dominant cable operator.

Comcast seemed unimpressed with the challenge being raised by Verizon in its service area.  The cable company hinted Verizon’s lack of a bundled service option including phone, cable, and broadband would hurt its chances of success.

Indeed, Verizon will have to develop some creative marketing to make its Home Phone Connect stand out.  Younger customers have no landlines to switch.  Most of those eager to cut their home phone line have already moved to cellular or Voice Over IP services from their local cable company or other providers like Vonage.  Existing Verizon Wireless customers may be hesitant about using a service that burns their wireless minutes away.  Older customers are unlikely to understand the product and have a built-in resistance to dropping traditional phone service.  Many may resist the notion of being stuck with at least a one year contract for an untested service.

T-Mobile attempted to market an almost identical service under its @Home brand, but judged it a failure and disconnected it earlier this year.

Because the service is being test marketed, its availability is limited to selected Verizon Wireless stores:

[flv width=”640″ height=”380″]http://www.phillipdampier.com/video/Verizon Home Phone Connect 11-23-10.mp4[/flv]

The New Haven Register set up a video interview with a Verizon representative to demonstrate its new Home Phone Connect service. (1 minute)

Negotiations between Scripps and Cablevision continue to drag on in the northeast as New York, Connecticut, and New Jersey Cablevision cable subscribers go without their HGTV and Food Network.

Progress has been incremental at best as Cablevision continues to refuse to accept paying the increased fees Scripps wants.  Cablevision’s declaration that is expects to never carry Scripps programming again doesn’t help.

Meanwhile, Food Network president Brooke Johnson has been running from one news channel to another to talk about Scripps’ position on the dispute, and that “hundreds of thousands” of viewers have complained about the loss of their two networks, a number Cablevision disputes.

Pali Research analyst Richard Greenfield, who covers the cable industry, defended Cablevision, giving credit to the Dolan family that owns Cablevision for standing up to Scripps’ rate increase request.

Greenfield accused Comcast and Time Warner Cable of “essentially rolling over” in their negotiations with Scripps, agreeing to price hikes for their networks, an allusion to Time Warner Cable’s campaign to fight back against programmer price increases.

If those cable companies “had taken a far harder stance with Scripps, Cablevision’s pushback may actually have forced Scripps’ hand,” Greenfield wrote.

Still, most viewers could care less about the power plays between cable and the programmers.  They just want their HGTV and Food Network back.

[flv]http://www.phillipdampier.com/video/WCBS New York Cablevision Scripps Dispute 1-4-10.flv[/flv]

WCBS-TV New York ran these two reports during their 6pm and 11pm newscasts describing the battle between Scripps and Cablevision, and consumer reaction.  (4 minutes)

[flv width=”480″ height=”380″]http://www.phillipdampier.com/video/WTNH New Haven Cablevision Dispute 1-7-10.flv[/flv]

Same story, different city as WTNH-TV viewers in New Haven, Connecticut share their views on the dispute.  (2 minutes)

[flv]http://www.phillipdampier.com/video/CNBC Brooke Johnson Cablevision Scripps Dispute 1-4-10.flv[/flv]

Food Network president Brooke Johnson appeared on CNBC to take questions about the dispute and changing business model of cable TV and programmers.  (5 minutes)

[flv width=”640″ height=”380″]http://www.phillipdampier.com/video/Fox Business News Scripps Dispute With Cablevision 1-10.flv[/flv]

Johnson also turned up on Fox Business News to discuss the dispute, how negotiations are going, and how viewers are reacting.  (6 minutes)

[flv width=”640″ height=”500″]http://www.phillipdampier.com/video/Bloomberg Brooke Johnson Cablevision Dispute 1-4-10.flv[/flv]

…And Johnson also appeared on Bloomberg News accusing Cablevision of paying themselves top dollar for AMC, a network they own, while refusing to negotiate over a price increase for the “more popular” HGTV and Food Network amounting “to pennies per subscriber.”  (6 minutes)

One of the major consequences of having insufficient experience and resources running a telecommunications network FairPoint inherited from Verizon is that when something goes wrong, it often turns into a catastrophic service failure that leaves people without service for days on end.

As we continue to watch the teetering FairPoint Communications lurch towards either a “white knight” rescue or bankruptcy court, ponder being one of 12,000 Vermont residents who suffered through a DSL service outage that lasted nearly a week this past June.

“The first day I was mad, the next day I was angry, the third day I was begging for Internet service so I could continue on with day to day activities of running a business,” said Bret Knapp, co-owner of Hilltop RV Center in New Haven.

Knapp relies on his FairPoint DSL service to stay in contact with his customers.

Knapp spent hours on the phone with FairPoint customer service representatives in Texas trying to resolve the problem to no avail.  At one point, after 50-60 calls, a FairPoint representative hung up on him.

Beth Fastiggi, a FairPoint spokeswoman agreed the problems were unacceptable.

“We are making significant progress; internally, we still have a lot of work to do,” she told WPTZ news.

The state telecommunications regulator in Vermont told the station complaints regarding FairPoint arrive daily from across the state.

[flv width=”480″ height=”360″]http://www.phillipdampier.com/video/WPTZ Plattsburgh FairPoint Outage Affects 12,000 Vermonters 6-10-09 .flv[/flv]

WPTZ-TV Plattsburgh covers the FairPoint DSL outage that wiped out service for a week for 12,000 Vermont residents. [2 minutes]