High speed data revenue continued to be one of the few bright spots for Time Warner Cable in the second quarter of 2009.  Time Warner Cable’s broadband division increased revenues by 10% in the six months ending June 30, from $2,026,000,000 dollars  in 2008 to $2,224,000,000 dollars in 2009, (9% measuring last quarter only) as a result of continued subscriber growth and an increase in commercial networking and transport revenues.

At the same time, the company announced further declines in most capital expenses to administer that network.  Although the company increased spending on scalable infrastructure (improvements to the existing network) for the six months ending June 30th from $258 million in June 2008 to $334 million in June 2009, the majority of that expense was related to introducing Switched Digital Video (SDV), a method of allowing the cable company to deliver additional digital television channels to neighborhoods.

Upgrade costs plummeted in the six months ending June 30th, from $147 million in June 2008 to $86 million in June 2009.

The costs for Time Warner Cable’s broadband revenue continue their rapid decline, dropping by 14%, from $77 million dollars in the six months ending June 30th 2008 to just $66 million dollars in the six months ending June 30th, 2009.

Despite the increase in revenues and decrease in costs, Time Warner Cable is still committed to revisiting its Internet Overcharging schemes going forward, with company officials admitting on a conference call this morning they are going to take a look at broadband pricing going forward.

One potential reason is that broadband is a success while the company continues to battle with revenue challenges on the video side of the business.  Most of the increasing costs facing Time Warner Cable are from programming expenses, which continue to increase.  The company also continued to face challenges from subscribers dropping cable television service, which they attribute to the bad economy.  Investors were anxious about the challenging results and from competition from telephone and satellite.  AT&T continues to be the most formidable challenger for Time Warner Cable across its service area, with continued expansion of U-verse.  Company officials downplayed Verizon FiOS’ impact on Time Warner Cable, noting expansion of Verizon FiOS seems to have stalled due to economic challenges.

Nevertheless, the company is moving foward to expand DOCSIS 3 in just one city in 2009 – metropolitan New York.

We’ll have additional coverage, including soundbites and further details coming shortly.

Schoharie County, New York

Schoharie County has the dubious distinction of being one of the New York counties least well-served with high speed broadband service.  In fact, according to the Schoharie County Telecommunications Task Force, our county is ranked last in the Capital Region, located in and around the state’s capital city Albany.

Last fall the Task Force concluded that almost half of the county’s residents had no access to broadband service at all, a point since disputed by one of the local telephone companies providing service to parts of the county, but regardless of who has access, residents are accustomed to taking whatever broadband service they can get.

Schoharie County has just over 31,000 residents across its 622 square miles.  It’s a beautiful place to live, especially along the southern parts of the county which lie within the Catskill Mountains.  Several small towns, villages and hamlets dot the county, providing a rural lifestyle but within easy reach of Schenectady and Albany.  Unfortunately, part of living in rural upstate New York is recognizing the reality of the digital divide.

The rural setting of Schoharie, NY

To our east, our bigger city neighbors enjoy access to Verizon fiber-based networks and Time Warner Cable’s Road Runner broadband service.  Broadband is fast, plentiful and relatively inexpensive.  But once pastures replace strip malls, it’s an entirely different story.

In much of Schoharie County, broadband service is provided by locally owned Middleburgh Telephone Company, which has been serving most of our area for over 100 years.  A few dozen employees cover everything from billing to repair and installation, and not just for telephone and broadband service, but also for cable television.  Midtel Cable TV, owned by the telephone company, serves many areas the bigger cable companies forgot.

Unfortunately, Middleburgh Telephone controls broadband, which means instead of providing cable broadband over Midtel, customers in much of Schoharie County are stuck with old-fashioned DSL service delivered by telephone lines.

While the hometown feel of the local phone company makes you feel like a valued customer when you deal with them, the broadband products they offer leave a bitter taste in your mouth.  MIDTEL.NET customers can look forward to an either/or proposition.  Either endure painfully slow DSL service or pay an exorbitant amount of money for the kind of broadband service speeds commonly available in larger communities.

MIDTEL.NET Price Chart
DSL – mSPEED Lite: $29.95/month — 384kbps download, 128kbps upload
DSL – mSPEED: $43.95/month — 3Mbps download, 500kbps upload (Prepay discount: 6 months – $250.00 or 12 months – $495.00)
DSL – mSPEED Plus: $59.95/month — 5Mbps download, 1Mbps upload (Prepay discount: 6 months – $340.00 or 12 months – $670.00)
DSL – mSPEED Premium: $164.95/month — 10Mbps download, 1.5Mbps upload (Prepay discount: 6 months – $940.00 or 12 months – $1,850.00)

While most residents are grateful for the optional higher speed services our friends and neighbors in other rural communities simply don’t have, the pricing makes it unaffordable for the vast majority of residents, who typically make due with the mSPEED $43.95/month service.

Of course, those speeds are not guaranteed.  Because I reside more than 10,000 feet from the local telephone company central office, I cannot really access any service plan above 3Mbps.  The higher speeds simply would not work.

You're in slow broadband country, too.

To our north, Frontier Communications provides telephone and broadband service to residents in Fulton, Herkimer, Clinton and Essex counties, as well as the western part of Montgomery County and parts of northern Saratoga County.  Frontier has taken ownership of several formerly independent telephone companies in eastern New York, as well as a few formerly owned by Rochester Telephone.  Frontier actually does a better job than Verizon in rural parts of upstate New York in providing at least some type of broadband service.  Large sections of the state still served by Verizon have no DSL or any other kind of broadband service.  Frontier does seem to pride itself with providing residents with broadband service, but not always consistently.

Stratford, Lassellsville, and Oppenheim, all within Fulton County are three communities with significant gaps.  All are within or adjacent to the Adirondack Park, which covers a section of the Adirondack Mountains.  At one point, several bypassed residents in Fulton County signed a petition and presented it to local Frontier officials, convincing them enough customers were willing to purchase the service to make it available to that neighborhood.

Frontier and Middleburgh Telephone both share an attitude of  requiring a “critical mass” of potential customers to make it worth their while to provide DSL service. Unfortunately, that cannot come fast enough for many underserved communities, whose local governments receive a steady stream of calls from residents wondering when broadband service will become available in their area.

Where Frontier does provide DSL service in rural upstate communities, it’s slow and expensive.

Frontier’s website for most of Fulton County shows two service plans available:

Frontier Communications DSL Price Chart
Frontier High-Speed Internet Lite – 768kbps  $39.99 per month
Frontier High-Speed Internet Max — up to 3Mbps  $49.99 per month

That pricing is before a $5 a month “modem rental fee,” and as least as much for taxes and surcharges.  Add at least $10 to the quoted price to cover all of these fees.  Frontier also likes to commit its customers to term commitments.  My friends in Frontier service areas are strongly pushed towards one, two, or even three year “price protection plans”, as well as a backup and support service called “Peace of Mind” which can add another $13 a month to your bill. Certain promotional bundle pricing can lower some of these costs, but not enough to erase the disparity in pricing between rural broadband service, and that provided in larger cities within easy driving distance.

The impact of unavailable or unaffordable broadband service can be severe, subjecting rural communities to economic disadvantages including:

• an inability for local small businesses to operate and/or maintain online websites to market products and services to customers;
• educational institutions are unable to effectively teach our children how to navigate the critically important online world;
• the impossibility of attracting high technology business and industry into underserved communities;
• a reduction in the quality of information and service available in rural public libraries;
• making life difficult for home-based teleworkers or telecommuters who conduct some/all of their employer’s work from home;
• a reduction in property values by reducing competition for available properties rejected by potential buyers because of lack of broadband access;
• a loss of potential innovation and online business start-ups because of lack of access;
• information disparity for residents unable to access online information the rest of the wired nation takes for granted.

So why do providers not provide universal access?  It’s a good question for some opinion leaders in this part of the state.

Gilboa, NY is just one of hundreds of small New York towns with "take it or leave it" broadband.

Anne Myers, the provost at SUNY Cobleskill, a state university, told the local newspaper that “Broadband is like rural electrification — it’s necessary for areas to move forward. There are things you can’t do if you don’t have broadband.”

Myers advocates for the same guarantee of access to broadband that Americans were given for electricity from the Roosevelt Administration’s electrification programs of the Tennessee Valley Authority and the Rural Electric Administration.  Indeed, she could benefit from it, because her home in Summit, in Schoharie County, has no access to broadband either.

Unfortunately, the New York State Public Service Commission (NY PSC) has been less than aggressive in advocating for such an approach.  In fact, it has adopted a “free market” strategy and has become complacent and tolerant of the results: slow and expensive rural broadband, if it’s available at all.

The Public Utility Law Project of New York, a group advocating for universal access, has heavily criticized the NY PSC for what it calls, “in essence [arguments] for continued reliance on failing market-based policies, policies which exacerbate the digital divide and have left millions of households without broadband. A review of other comments filed with the FCC reveals that New York is behind the times and out of step with every other state that submitted comments [to the Federal Communications Commission].”

Lou Manuta, who writes for the PULP Blog, went much further:

Essentially, the PSC seems to be saying that policy makers elected by the people who see the importance of universal affordable broadband to the future of the economy and society should not disturb the results of the broadband “market” – which in most localities is a duopoly of landline and cable providers. Such blind faith in the market, however, has already left New York far behind countries that have been proactive with policies to lower the cost of broadband, increase speed and bandwidth, and increase its deployment and actual use by citizens. The PSC even questioned the need to bring broadband to every citizen today:

A broadband plan seeking to bring broadband immediately to 100 percent of the country may be ill-advised. A goal of 100 percent broadband deployment may not be economically rational with traditional, wired service. However, the evolution of technology, like third generation wireless, could provide more efficient and cost effective alternatives for ubiquitous broadband.

This is a familiar refrain to defend market power of existing providers: someday the market will bring providers with a new technology that magically would bring affordable service to unserved or underserved areas, so therefore regulators and government should do nothing.

Groups that provided comments similar to those of the PSC were free-market think tanks, such as Americans for Prosperity, FreedomWorks Foundation, and Americans for Tax Reform (ATR). ATR, founded by anti-tax radical Grover Norquist. The PSC’s positions closely resonate with the comments of ATR, which glossed over the market failure and reduced competitive position of the United States in comparison to other countries, and wrote:

We are on the right track; the free market is working. Consumers are enjoying an ever-expanding array of choices and performance. . . . In order for free-market models to provide for the further development of broadband access, however, it is absolutely critical that government intrusion not prevent private capital from recouping its investment. If private capital becomes convinced that its ability to recoup its investments is less likely, it will be less likely to make the significant investments in broadband that is the very goal of this FCC inquiry.”

Both the PSC and ATR take these “hands off” positions when it comes to the price and deployment decisions of the cable and phone company duopoly, even though

• millions of people who in theory have “access” to broadband cannot afford it,
• the U.S. has some of the world’s slowest, most costly broadband (per megabit per second),
• the U.S. subscribership rate has sunk from 4th to 15th in the world in recent years, even as other countries with more affirmative broadband policies surge ahead.

So what precisely keeps broadband providers from providing universal access and wiring all of their customers?  Profit and return.  The costs to construct extensions of their networks to reach even the most isolated customers isn’t worth the potential return, say most providers.

Could communities like Seward benefit from broadband stimulus funding?

Before the Obama Administration turns on the broadband stimulus faucet, the emergency federal economic stimulus package provided more than seven billion dollars for “shovel-ready” construction projects across the nation.  More than $175 million is targeted for New York state.  Despite Albany’s usual circus-like chaos, dysfunction, and a recent state Senate coup d’etat, Governor Paterson, the Senate and Assembly managed to identify 32 broadband projects that could be eligible for grants from the federal fund.  Competition for “free money” from everyone from educational groups to telephone companies to local municipalities is fierce, and will only grow more so when the federal broadband stimulus money begins to flow.

Both Frontier and Middleburgh Telephone believe federal stimulus funding may help improve the viability of reaching their most rural communities.

Middleburgh Telephone is even willing to partner with municipalities to provide service to areas it does not reach today, such as in Carlisle and Esperance.

But just as important as availability, according to Lou Manuta with PULP, is affordability.  Even where broadband is plentiful and less expensive than in rural areas, it’s still out of reach for many of New York’s poorest residents.  Manuta advocates providing special “Lifeline”-type broadband packages to disadvantaged state residents, which offer very basic broadband service for a very low price.

For residents in rural New York, change cannot come soon enough.  Without it, even big states like New York will leave hundreds of thousands of residents behind, stuck with slow broadband at unaffordable prices.

Jenny Pirro comes to Stop the Cap! as a consumer concerned about broadband service in rural communities.  She is a lifelong resident of upstate New York, recently retired from a career in banking.   She has been a customer of both Middleburgh Telephone and Frontier Communications.  For privacy, Jenny chooses to write under her maiden name.

[Update: July 14/12:27am — Our sharp eyed readers contested the accuracy of the speed chart shown below almost immediately after publication.  Eric, who pens for Photography Bay we linked to below, replied to my inquiry about the data.  His reply:  “The speed estimates come from Verizon. I was more concerned with the upload figures; however, now that you mention it, it looks like Verizon may have the 80% calculation on the wrong side of their equation for the download portion of the chart. The upload chart looks right with FiOS at 10x faster than cable; however, the download chart shows a 20% speed increase when it should show a 5x speed increase. Nice catch.” I suppose we should let Verizon know. Thanks to our readers who caught the math error.  Hopefully their billing is more accurate.]

With the announcement by Rogers that their particular implementation of DOCSIS 3 would bring speeds of 25-50Mbps for downloads, it was curious that the company elected to only make incremental increases in upload speed.  Maxing out at just 2Mbps for uploading, Rogers continues the mindset that broadband subscribers don’t care about upload speed — just download speed.

That may have been true in the past, but today’s broadband consumer is woefully underserved with slow upload speeds, which hamper uploading pictures, home movies, and other content to share with friends, family members, or like we do here, the rest of the connected world as a whole. With the rise of ai image generation, however, creating content has become easier, even without the need for large file uploads.

In Rochester and many other Time Warner Cable cities, upload speed has remain unchanged for standard service customers for more than a decade — just 384kbps.  Paying $10 more for Turbo service, if only to get 1Mbps (which isn’t exactly “blazing fast” these days either), is the only alternative.

Fiber to the home services like Verizon FiOS and some municipally run fiber systems are changing the paradigm for upload speeds, providing customers with substantially faster service — typically far more than telephone company DSL or broadband service from the local cable operator.  A “speed test” from New York from a FiOS customer illustrates the capability:

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For photographers, among many other net users, upload speed is critically important in managing their photograph collections.

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The Photography Bay blog compiled a chart illustrating the dramatic differences upload speeds can have on your time and patience:

Frontier Communications CEO Maggie Wilderotter told attendees of the National Association of Regulatory Utility Commissioners committee on telecommunications that rural residents and small businesses deserve better broadband service than they currently receive, and there is a digital divide between rural and urban communities across America.

Wilderotter’s company, Frontier Communications, is the nation’s second largest independent telephone company, focusing on providing service in rural communities formerly served by mom and pop or community-owned telephone operations.

Frontier provides 90% of its customers with at least low speed DSL broadband service, which is available to the majority of the company’s 2.4 million customers.  Frontier’s basic DSL service provides around 1.5Mbps, although some customers closer to telephone company switch facilities can achieve speeds closer to 3Mbps.  Frontier also serves some urban areas, such as metropolitan Rochester, New York with a DSL product that in some instances can achieve close to 10Mbps.

Frontier’s rural DSL service is designed to reach residences and small businesses with what is often their only choice for broadband service, Wilderotter explained to the audience as part of her keynote speech.

The company’s efforts to “bridge the digital divide” have relied mostly on making due with existing copper wire telephone facilities, and attempting to provide service over extended distances, common in more rural communities.  Although customers have often been grateful for the opportunity of getting something beyond dial-up access or obscenely expensive satellite broadband, Frontier’s rural service is often expensive and slow.  The company has been successful in attracting customers with promotions, including a “free” Dell Netbook, in return for a $45 shipping/processing fee and a commitment by the customer to sign up for telephone and broadband service for a minimum two year service commitment.  The company also offers a video bundle promotion, providing DISH Network satellite television at a discount for the first year of service.

Frontier’s broadband division has been one of the company’s major bright spots, attracting subscriber growth even while the company continues to lose wired telephone line business to the competition.  That drives broadband development in Frontier service areas, although customers seeking “cutting edge” services with faster and more consistent speed will need to look elsewhere.

Wilderotter also addressed the need to find ways to serve the remaining 10% of customers who lack broadband service because they are in a remote location, too far away from the telephone switch office to provide reliable service.

She told the audience Frontier would aggressively seek broadband stimulus funding to help underwrite the costs of providing service to these customers.  But she also called for an overhaul to the Universal Service Fund, a fee charged on every telephone subscriber’s bill designed to subsidize telephone service in more rural communities where the cost of providing service for each customer can be dramatically higher.  Wilderotter proposes that the USF now devote some of its resources to funding broadband buildouts in the nation’s rural areas, instead of diverting large sums to large national phone companies that exploit loopholes, she says.

“Those who serve rural America need the funding that will allow us to continue to expand broadband service and capacity.”

Frontier vs. Time Warner. Frontier vs. Comcast. Frontier vs. NPG Cable. Across 24 states, passing nearly 3,000,000 households, some in America’s smallest towns and others in large cities, Frontier Communications is engaged in a battle of survival in an increasingly competitive American telecommunications marketplace.

In this series examining Frontier Communications, today’s report investigates the competitive realities of a hotly competitive telecommunications industry, becoming more concentrated by the day.    How does Frontier intend to survive and grow, and is it realistic to assume it can in an environment that demands major investments in the delivery of high quality video, low-priced telephone service, and reliable broadband that may be beyond its reach?   Yesterday, we saw how Frontier is attempting to control expenses with the plan to implement a 5GB usage cap on its broadband customers.   Today, we take a look at how Frontier attempts to maintain its market share and deal with customer defections.   Tomorrow, we take a closer look at how quickly Frontier’s telephone line business is losing ground to its competitors.

Frontier’s Background At A Glance

NPG Cable's Rate Card & Channel Lineup In Bullhead City, Arizona. How much of a competitive threat is a cable company without a spellchecker?

Frontier Communications, formerly Citizens Communications, primarily runs originally independent telephone companies in rural and exurban areas bypassed by the former Bell System. The company’s most significant presence is in the 585 area code, home to Rochester, New York. But from Elk Grove, California and Bullhead City, Arizona eastward to the AuSable Valley in central New York to Bluefield, West Virginia, a significant number of Frontier customers are also in some of America’s  small towns and cities.

The size of a community where Frontier operates is often indicative of how much competition the company faces.  Some of Frontier’s most difficult challenges can be found in the  Rochester, N.Y. metropolitan area, numbering nearly 1,000,000 people, where a well entrenched Time Warner has made deep inroads into Frontier’s telephone access line business, eats Frontier for breakfast in the video delivery business, and has been a dominant player in the broadband marketplace since Road Runner arrived  in 1998.

In more rural communities, Frontier often has it much easier,  free from  cable competition  in some  areas, or  competing with a small independent cable company that may be relying on its own aging infrastructure and cannot afford to engage in price and service wars. Where Frontier stands as the lone player or only faces token competition from a small cable company, consumers will likely find  lower speed broadband at higher-than-average prices.

The Threat From Big Cable

Comcast's Product Bundles Threaten Frontier In Many of Their Service Territories

The cable television industry’s entry into telephone service  is among the biggest threats Frontier faces in maintaining their traditional primary revenue source: residential and business wired telephone lines.

Deploying  voice over IP technology, Comcast and Time Warner, the nation’s largest cable operators, have made significant inroads into Frontier’s telephone business where they compete.   Now, even smaller players in the cable industry are prepared to offer voice over IP service to customers.

Joining cable at the table are  mobile telephone companies like Verizon Wireless, Sprint, and AT&T which are also eroding Frontier’s  phone line business  as more people in America  rely exclusively on their mobile phone for telephone service.

How Cable Companies Pick Off Frontier’s Customers

Product Bundling & Discounting: The most important component of cable’s strategy against Frontier is cable’s product bundle, combining a voice over IP telephone line, a cable television package, and a high speed data product. Usually marketed as a “triple play” or “all the best” package, consumers are offered discounts based on the number of components of a package they combine. The more components, the greater the discount.

The product bundle offered by the cable industry has a competitive advantage because cable companies almost always have a more advanced network to deliver these products. Throughout the 1990s, most cable systems spent millions rebuilding their systems to accommodate increasing bandwidth requirements.   The result is a considerably larger pipeline used to deliver data, video, and telephone services.

Frontier’s network is considerably more dated, largely dependent on copper wire strung on telephone poles. While the company has made significant investments in their own  network, including some fiber optics,  in the end, they still rely on the same copper wire infrastructure the industry has used for nearly 100 years to connect to your home or office.

AT&T's U-verse service can deliver the goods over copper wire, but you need deep pockets to develop and deploy this technology. Are Frontier's deep enough?

Although this copper network is suitable for traditional telephone service, and can usually deliver a respectable data service over DSL, the video component has been sorely lacking. While AT&T is testing its U-verse video-over-copper technology in limited markets, Frontier is stuck  reselling Dish Network, the  smaller player in the satellite television marketplace.

Many consumers are resistant to satellite dishes of any size attached to their homes, and the cable industry’s response to Frontier has been the same as to DirecTV and Dish Network themselves: ugly satellite  dishes that suffer from rain/snow fade, require expensive service calls and maintenance, and a limitation on the number of TV sets you can hook up.   Also, no local channels in many areas.   In the end, most people who were even slightly uncomfortable with satellite-delivered TV elected to just stick with what they already had: cable television.

Results of the Dish Network partnership continue to be underwhelming. Sources tell Stop the Cap! the satellite service only succeeds in areas where there is no cable competitor, the customer was already a Dish Network subscriber independent of Frontier, or the incumbent cable company is hampered by a limited channel lineup, no HD channels, or exceptionally bad service. In Rochester, Frontier is actually losing more Dish Network customers than it is adding, and growth is  anemic in many other Frontier regions as well.

Frontier’s inability to provide a comparable quality television service is a critical defect in their competition with cable.

Claiming Inferior Product Quality:  The cable industry wasted no time attacking Frontier’s DSL product, accusing it of not performing consistently. Uneven telephone line quality, distance from the telephone company central office, and signal ingress (when interference or crosstalk gets into wiring and degrades the signal) can all dramatically slow a DSL customer’s  broadband speeds. The cable industry’s marketing often pillories DSL service because of its inability to offer anything close to a speed guarantee, and the fact  it is often slower than cable’s competing product no matter how good your line is.

In areas where a large cable competitor exists, traditionally  that cable operator will have the fastest speed broadband package to sell to customers in that market. This forces Frontier to compete on price.   In return for a significant discount, Frontier  usually locks customers into multi-year service agreements which discourage its customers from  switching to a competitor.   Unfortunately, the company’s inferior product bundle and  long term contract commitments have made it difficult to convince cable customers to switch to Frontier,  particularly if it means taking their video package from Dish Network.

Lampooning Questionable Marketing Practices: In Rochester, Time Warner’s marketing people have had no trouble finding new ways to attack Frontier in its advertising.   While Frontier may be able to pull off some of their hidden extra charges, long term contracts, and restrictive service policies in more rural communities, most of those practices meet strong criticism in Time Warner’s advertising.

Among the more common refrains in Time Warner ads  dismissing Frontier’s DSL  product include:

• Charging a “modem rental fee” as part of Frontier’s DSL service, even if you can supply your own DSL modem.

• Locking customers into a term commitment contract (often lasting several years) for DSL service that offers lower speeds than Time Warner’s Road Runner service and charging a substantial early termination fee for those dissatisfied with their broadband experience.

• Charging for ancillary support services like Frontier’s “Peace of Mind” that Time Warner claims to offer at no charge.

The latest decision to impose a 5GB usage cap on customers is marketing gold for the cable companies competing with Frontier, perhaps only tempered  by the fact they are also studying whether to apply their own usage caps.

Relentless Marketing: One of the fringe benefits of owning your own video distribution network is the ability to pepper your existing customers with near-constant advertising promoting your own products while denigrating the competition. Cable customers can see an average of three product promotion spots every hour from their cable company trying to convince them to upgrade, attempting to bolster customer loyalty, or simply slashing and burning whatever the telephone company or satellite dish company is offering. Frontier has  a limited ability to counter this.

In areas of significant competition, the battle usually rages in your mailbox, with  a relentless flood of  promotional postcards and mailers, as well as ad buys on local television/radio stations and local newspapers. But cable retains an important advantage because of their ability to insert advertising into basic cable channels, usually at no cost to them.   Frontier doesn’t own their video distribution network – they are reselling someone else’s.

Frontier’s Battle Plan

Welcome to DeLand, Florida: Home of Frontier's Customer Care Center

Frontier’s plan to compete with cable includes  their own marketing by mailbox, and sponsoring local community events and charities to leverage free media and consumer exposure to the company brand to nurture positive feelings  about the company.

The company also places a high priority on attempting to position themselves as “local” players in the market – a company made up of local employees who customers supposedly will interact with on a daily basis. Unfortunately for them, most customers will likely only interact with one of their customer care call centers such as the one  in DeLand, Florida which is localism IF you live, work and play in DeLand.

Frontier also maintains call centers in Henrietta, New York and Burnsville, Minnesota which are designed to replace what used to be local customer service call centers in more than a dozen  Frontier areas.   Some 500 people were hired to answer phones in DeLand for Frontier.   This begs the question how many people lost those jobs in the various local communities where Frontier operates.

Call center employees are on Frontier’s competitive front line, trying to  maintain customer loyalty, convince customers to upgrade their service packages, and above all, remain with Frontier and don’t cancel anything.

They need to maintain the battle, because cable competitors continue to erode their residential business. The company’s deactivations of high speed data services and the ongoing loss of telephone lines are considerably above the company’s own estimates.

One significant bright spot Frontier has maintained is delivering commercial broadband to businesses.

Frontier has a significant advantage in many offices, business parks, and other industrial areas bypassed by their cable competitors. Installation costs to wire a building with coaxial cable often run into the tens of thousands of dollars, an expense borne by the company, the landlord, or a combination of the two. But every business has telephone service, which usually guarantees potential access to DSL service from Frontier. Small and medium sized businesses have become loyal Frontier commercial customers because of low installation costs and a reasonable pricing plan that is typically far more cost effective than what cable is offering. Cable modem commercial access pricing models are usually tailored to a range of product speeds at prices that, when compared with what Frontier can offer, are not competitive.

Frontier’s ability to effectively compete against cable will, in the end, come down to the company’s ability to invest in their network and be able to match what is on offer from the cable operator, and new competitors yet to emerge.    Some former Baby Bell telephone companies like AT&T are investing enormous sums to leverage their existing network (their U-verse product) or starting over from scratch (Verizon’s fiber optic cable to the home FIOS project).

To date, Frontier’s status as a smaller player has meant their investments in these efforts pale in comparison to their larger brethren.   They include experimenting with deploying fiber optic cable to new housing developments and selected mass density buildings (apartments, offices) in Rochester, building community wi-fi networks to create a new market for wireless Internet access, and other investments in their network distribution system.   If they cannot invest enough, fast enough, to keep up, they will become ripe for a merger with a larger player in the market or get wiped out by the competition.

In the meantime,  to quote company chairwoman and CEO Maggie Wilderotter, Frontier intends to “stay the course” for the rest of the year.

We’ll have to wait and see if that’s good enough.