Verizon Communications has made its intentions clear — would-be broadband customers in its service area who are off the FiOS footprint can pound salt.  The Federal Communications Commission issues regular reports on broadband services and their adoption by consumers across the United States.  In the latest report, published this month, customers in Verizon’s current or former service areas who are not being served by Verizon FiOS are behind the broadband 8-ball, waiting for the arrival of DSL service from a company that has diverted most of its time, money, and attention on deploying its fiber-to-the-home service for the big city folks.

One might think the worst DSL availability in the country would be in rural states like Alaska, or territories like Guam, or income-challenged Mississippi.  No, the bottom of the barrel can be found in northern New England and the mid-Atlantic states — largely the current or former domain of Verizon:

Percentage of Residential End-User Premises with Access to High-Speed Services by State
(Connections over 200 kbps in at least one direction)

Source: FCC High-Speed Services for Internet Access: Table 19

Some might argue that DSL penetration ignores Verizon’s fiber upgrades, but does it?

Providers of High-Speed Connections by Fiber by State as of December 31, 2008
(Connections over 200 kbps in at least one direction)

Source: FCC High-Speed Services for Internet Access: Table 20

A survey of the rest of the country calls out Verizon’s inattentiveness to DSL expansion in its remaining service areas not covered by FiOS.

For example: Alabama, Idaho, Montana, and Oklahoma all enjoy 80 percent DSL availability.  Utah and Nevada achieved 90 percent coverage.  Even mountainous Wyoming, the least populous state in the country, provides 78 percent of its state’s customers with the choice of getting DSL service.  Yet New York manages only one point higher among its telephone companies, largely because of enormous service gaps upstate.

What happened?  By 2002 Verizon began to realize their future depended on moving beyond providing landline service.  The company began to divert most of its resources to a grand plan to deliver fiber connections to residences in larger markets in its service areas.  While great news for those who live there, those that don’t discovered they’ve been left behind by Verizon.  Northern New England got flushed by Verizon altogether — sold to the revenue-challenged FairPoint Communications who assumed control of Verizon’s problems and managed to make them worse.

The argument that rural broadband is “too expensive” doesn’t fly when looking at DSL availability in the expansive mountain west or rural desert regions.  Compact states like Vermont, New Hampshire, and Maryland are far easier to wire than North Dakota, New Mexico or even Texas with its large rural areas (87, 87, and 81 percent coverage, respectively).  Verizon simply doesn’t realize the kind of Return on Investment it seeks from FiOS customers — a dollar amount investors want to see.

Of course, that’s the argument Frontier Communications, and FairPoint behind it, made to regulators in sweeping promises to deliver better broadband service.  FairPoint missed its targets and declared bankruptcy.  Frontier is still in the “promises, promises” stage of its deal to take over millions of rural customers currently served by Verizon.

Frontier's headquarters in Rochester, N.Y.

Frontier Communications has dismissed the proposition of Google constructing a 1Gbps fiber-to-the-home network, telling readers of the Rochester Democrat & Chronicle that most users don’t need ultra-fast Internet access.

Ann Burr, chairman and general manager of Frontier Communications of Rochester made the remark in response to news that citizens and business leaders are excited about promoting Monroe County as a potential test location for Google’s fiber network experiment.

Frontier, which serves Rochester and most of the 585 area code, accused Google of having “a poor track record of following through on such proposals and that creating a fiber-optic network from scratch would be enormously expensive.”

Pot to kettle.  Frontier’s illusory promises for fiber optic connectivity in states like West Virginia, where it seeks to take over the majority of the state’s phone customers from Verizon, never seem to include specific assurances such projects will reach customer homes.

“If Google built its own network, we estimate it would cost $5,000 per household,” Burr told the newspaper.

That’s as exaggerated as Frontier’s DSL speed claims.

Verizon Communications, which is in the business of providing fiber connectivity to the home, disclosed the true costs are far lower than that, and continue to decline.  In the summer of 2008, Verizon’s Policy Blog noted:

Capital Costs
– We said our target per home passed was $700 by 2010, and we are ahead of plan to achieve that objective. In fact, we’ve already beaten the target.
– We said our target per home connected was $650 by 2010, and we’re on plan to hit that target.

No wonder Frontier doesn’t contemplate providing fiber service to customers.  It created its own sticker shock.

Still, the local phone company didn’t want to slam the door entirely on Google’s foot, suggesting it would be willing to talk about leasing space on Google’s network if it launched in the Flower City.

Frontier’s claim that customers don’t believe fast broadband service is important is a remarkable admission, particularly for a company that increasingly depends on broadband service to stop revenue loss from customers dropping traditional phone lines.  That philosophy should be carefully considered by state officials and utility commissions reviewing Frontier’s proposal to take over Verizon phone lines in several states.  Do communities want to receive broadband from a company that dismisses faster broadband speed as irrelevant for the majority of its customers?

Perhaps the remarks came with the understanding Frontier isn’t capable of delivering 21st century broadband speeds over its antique network of copper telephone wire anyway.

That’s the point Time Warner Cable has made repeatedly, especially in the Rochester metro area.  The cable operator routinely promotes its Road Runner cable modem service’s speed advantages over Frontier’s DSL product.  Frontier promises up to 10Mbps, but often manages far less (3.1Mbps was my personal experience with Frontier DSL last April.)  Time Warner Cable promises up to 15Mbps, and often exceeds that with its “PowerBoost” feature.  In rural areas, the phone company tops out at “up to 3Mbps.”  Time Warner Cable notes most of its new broadband customers come at the expense of phone companies like Frontier.  DSL customers switch because they do care about broadband speed.

Judging from the excitement in Rochester over Google’s proposal, Frontier’s dismissal of a fiber optic future seems out of touch, and potentially a drag on the local community’s economic future.

Rochester increasingly will become a broadband backwater because of anemic broadband competition from Frontier Communications.  Its reliance on ADSL technology, more than a decade old, to deliver distance-sensitive broadband service looks out of place compared with the rest of New York State.  Major cities throughout New York are being wired with fiber optic service by Verizon Communications.  Verizon FiOS delivers up to 50Mbps service.  Frontier maxes out at far lower speeds and defines an acceptable amount of broadband usage on its DSL service at just 5GB per month. Using Verizon’s FiOS fiber network, you’d exceed Frontier’s entire month’s ‘allowance’ in less than 15 minutes at Verizon’s speeds.

Rochester is one of many communities challenged by the transition away from a manufacturing economy towards a high technology future.  A world class fiber optic network doesn’t just benefit big business.  It spurs revolutionary growth in medicine, education, software development, telecommunications, and more.  That means good paying jobs.  For consumers with fiber to the home, it opens the door to telecommuting on a whole new level, distance learning opportunities, new ways to access information and entertainment, and allows home-based entrepreneurs to develop new businesses.

With Verizon FiOS unavailable to Rochester indefinitely, and Frontier unwilling to make appropriate investments to keep this city competitive with the rest of upstate New York, those jobs and economic benefits can go to Buffalo, Syracuse, Albany, Westchester County, and metropolitan New York City.  We’ll be held back on the frontier with Frontier and its ideas of rationed broadband service.

[flv width=”360″ height=”260″]http://www.phillipdampier.com/video/WROC Ontario County Makes Bid for Super Fast Internet 2-11-2010.flv[/flv]

WROC-TV in Rochester reports that Ontario County, to the southeast of Rochester, may have a built-in advantage with an already-installed fiber loop covering much of the county.  The county has a team working on a formal application to Google to provide service in communities like Geneva and Canandaigua.  Frontier’s claims that consumers don’t care about fast broadband speed are belied by the excitement of residents of both counties. (2 minutes)

The battle between Cablevision and Scripps over the carriage of two popular cable channels has been resolved, but customers in New York, New Jersey, and Connecticut are now wondering where their refunds are for three weeks of interrupted viewing.

“Why are we paying for two channels they’re not delivering,” asks Stop the Cap! reader Alvira in New Jersey.  Many others are wondering the same thing, now that Cablevision is billing customers for January service that delivered an incomplete cable lineup.

The town supervisor of Ramapo, in Rockland County, New York, is demanding rebates for customers.

“We want a refund,” said Christopher St. Lawrence.  “We have over 10,000 [customers] right here in the town of Ramapo.”

[flv width=”600″ height=”356″]http://www.phillipdampier.com/video/WABC New York Cablevision Refunds 1-11-10.flv[/flv]

WABC-TV New York reports on customer demands for refunds from Cablevison. (2 minutes)

The resolution over the carriage dispute came last week, after negotiations finally achieved an agreement restoring the channels.

“This is the resolution everyone wanted, and to have achieved anything less would have been a profound disappointment,” said John Lansing, executive vice president of Scripps.

Scripps had demanded about 75 cents per month from each subscriber for the two networks.  Cablevision formerly paid 25 cents per month.  In the end, industry watchers suggest the two companies ended up agreeing on about 45 cents per month.

We’ve heavily covered the proposed sale of Verizon landline service to Frontier Communications since the deal was announced last spring.  This should not come as a big surprise, considering Frontier Communications’ decision to insert a 5GB monthly usage limit in their Acceptable Use Policy in the summer of 2008 was what instigated the launch of Stop the Cap! in the first place.  Frontier’s decision was boneheaded at best in a city like Rochester with a very aggressive cable competitor only too willing to bash Frontier for implementing it if they thought it would win more customers.

But of course Frontier Communications’ Rochester operation is an anomaly for ‘rural America’s phone company.’  For the majority of rural customers, it’s far easier to slap customers around with a usage cap and 1-3Mbps DSL service when those customers have few, if any practical alternatives.  Unfortunately, there is real money to be made from their business plan serving frequently non-competitive communities with incrementally-upgraded “just enough” broadband service with unfriendly terms and conditions attached.

In several of the 14 states impacted by the proposed sale, the relatively small number of customers involved made it easy for regulators to quickly approve the proposal with few conditions attached. The deal flew under the radar and got scant press in most of these states.  Washington, Ohio, and West Virginia are another matter.  Regulators are taking a closer look at the deal in all three states where most of the controversy is taking place.  The deal is most contentious in West Virginia, where Verizon’s exit threatens to turn most of the state’s landline business over to Frontier Communications.

Stop the Cap! has been reviewing the public comments left on more than a dozen news sites, forums, and printed letters to the editor regarding the deal.  We’ve seen comments obviously coming from Frontier employees, union members, politicians, business leaders, and competitors.  But the vast majority come from ordinary consumers who have concerns about what the deal will do to their telephone and broadband service.  Most of the comments from consumers that embrace the sale don’t do so because they are fans of Frontier.  They simply loathe Verizon and want an alternative.  Boiled down, the consensus among those in favor of Frontier taking over is “let them try… they can’t do any worse than Verizon.”

[flv]http://www.phillipdampier.com/video/WCHS Charleston PSC Phone Hearing 1-12-2010.flv[/flv]

WCHS-TV in Charleston covers West Virginia’s Public Service Commission hearings reviewing the proposed deal.  Frontier employees arrived in Charleston to lobby for the sale. (1 minute)

Desperate for Broadband

There are a lot of West Virginians who still have no broadband options.  Frontier claims Verizon provides only 60 percent of their customers with a broadband option — DSL service that tops out at 7Mpbs, if you live in an urban area.  Those that don’t have often waited years for Verizon to extend DSL service into their communities or neighborhoods.  It’s a problem common in mountainous, often rural states like West Virginia where infrastructure costs can be prohibitive.  Customers believe that Frontier Communications will tolerate a lower return on their investment providing DSL service to those customers Verizon ignored.

Promising to expand broadband service in rural, unserved areas is a common sales point for all of the prior Verizon sell-offs.  Hawaiian Telcom promised improved broadband service and speed.  Fairpoint promised to expand DSL availability to 75 percent of all access lines within 18 months of the sale, 85 percent within two years and 95 percent within five years.  Frontier Communications promises to expand broadband service as well, claiming they already provide 92 percent of their existing West Virginia customers with the option.  Of course, Hawaiian Telcom and FairPoint both reneged on their commitments before going bankrupt.  Frontier Communications hasn’t yet been held to any specific commitment or timeline in West Virginia as part of their proposed takeover of service.

Consumer Reports rated TV, phone, and Internet providers, including Verizon and Frontier, in its February 2010 issue

To those suffering with dial-up or satellite fraudband, -any- broadband option seems like a miracle, even if it turns out to be 1-3Mbps DSL service with a 5GB allowance.  But as those kinds of anemic speeds arrive, cutting edge multimedia-rich broadband applications will become increasingly mainstream and leave these customers behind, again.  With a 5GB usage limit, it wouldn’t matter anyway, because customers will never be able to take advantage of services that will rapidly blow through those limits.  Make no mistake, a user’s broadband experience at 1.5Mbps with a 5GB allowance is going to be considerably different than a customer enjoying online multimedia from a cable provider or the next generation broadband service from Verizon FiOS or AT&T’s U-verse.  Think e-mail and basic web browsing, and that’s about all.

What kind of broadband experience does Frontier Communications bring?  This month, Consumer Reports rated Frontier dead last among DSL providers that own and operate their own broadband networks (subscription required).  The magazine rated 27 regional fiber, cable, and satellite providers and Frontier’s DSL ended up #19 on the list, the lowest rating of any DSL provider selling service on its own network.  Only Earthlink, which usually buys access on other providers’ networks came in lower among DSL providers.  Verizon actually scored higher than Frontier.

Frontier’s DSL service merited a 67 out of 100 score, rating only fair on value, speed, reliability, and customer support, based on 56,080 Consumer Reports subscribers who have a home Internet account.

Frontier’s phone service rated even lower, second to last in the survey.  Frontier was rated fair on value, reliability and call quality.  Only Mediacom did worse.  Verizon scored much better on reliability.  The magazine’s survey of phone companies was based on 37,484 respondents with phone service and was completed in the spring of 2009.

The consumer magazine did not recommend DSL for broadband access, suggesting consumers would do better with fiber optic broadband first, and cable modem service second.

Union Bashing – The enemy of my enemy is my friend

A significant minority of comments were focused entirely on union bashing, completely ignoring the specifics of the Frontier-Verizon sale.  All these people knew was that if the Communications Workers of America or other union was involved, they were the “real problem,” accusing union bosses of opposing the deal until they were paid off.

Nonsense.

Reality trumps anti-union talking points.  Consumers can review for themselves who correctly predicted the outcome of the last two deals of the recent past.  They were the CWA and the International Brotherhood of Electrical Workers, who accurately identified the service problems, the network transition problems, the debt load that prevented service expansion and upgrades, and the eventual bankruptcies experienced at Hawaiian Telcom and FairPoint Communications.  It turns out that asking front line employees who work in the office and out in the field maintaining the network are well positioned to give an honest assessment of these transactions that others seek to candy coat to get the deal done.

[flv]http://www.phillipdampier.com/video/WSAZ Charleston Frontier Defends Deal 1-12-2010.flv[/flv]

WSAZ-TV in Charleston delivered this decidedly pro-Frontier news report on the company’s efforts to counter opposition to the proposed sale. (3 minutes)

The Opposition

A large number of comments from those who oppose the deal believe they will actually be far worse off with Frontier.  Most relate the experiences of themselves or their friends and family who live in Frontier service areas, and they’re unhappy with Frontier’s poor customer service, reliability, and slow speed DSL.  Many were also unhappy with Frontier’s automatically-renewing contracts committing customers to stay with the company or face a steep early cancellation penalty.  Many more lament the lack of a future with Verizon fiber optics.

David Swanson, who blogs from his home in Golden Valley, Arizona just dumped Frontier for his local cable provider – Golden Valley Cable & Communications.  He says he was overpaying for Frontier’s DSL and phone package.  Together, after fees and taxes, $90 a month went to Frontier and $73 a month went to DirecTV for television service.  With his new cable bundle, he pays $100 a month for everything.  He uses Boost mobile for his phone, and has no need for a landline.

Reviews on DSL Reports aren’t exactly positive about Frontier either.

One Rochester customer isn’t happy with the “spotty service” he’s experienced on Frontier’s aging copper wire infrastructure, noting they don’t seem to be in any hurry to upgrade facilities in western New York.  He’s stuck with unreliable DSL service far slower than what Time Warner Cable’s Road Runner service can provide. Another customer in Lowville, New York admits he has to live with Frontier’s slow speed DSL because there is no other provider available.  In Kingman, Arizona one customer rated the company’s DSL service “slightly better than nothing.”

Even customers who had had good things to say about Frontier in forums often acknowledge their service simply isn’t a good value when considering the high cost charged for the slow speed received.

What Can Be Done?

At this point, it is critical impacted customers contact their state utility commission and state representatives and tell them this deal does not work for you.  It is true Verizon wants out of these service areas, and should they win the right to withdraw someone will have to assume control of landline operations in these communities.  But the terms and conditions for the company seeking to provide service should favor customers and not the Wall Street dealmakers.  Strict financial pre-conditions should be in place to guarantee the buyer is up to the task of providing service and upgrades.  Historically, it’s been far too easy to simply renege on the deal with a quick trip to Bankruptcy Court to shed the debt these deals pile on, and be rid of the service commitments that were part of the approval process.

A company that believes they’ll earn plenty from this deal should be spending plenty to provide quality broadband service starting at 10Mbps, not the 1-3Mbps service Frontier provides most of its rural service areas.  What chance do communities in West Virginia have to stay competitive in a digital economy that requires faster broadband access without the ridiculously low usage limits Frontier includes in their customer agreements?  In fact, usage limits and other Internet Overcharging schemes should be explicitly banned as part of any sales agreement.

Holding Verizon responsible for the outcome of deals that benefit them and their shareholders while sticking customers with a bankrupt provider must be considered.  An important component of past Verizon’s landline-dumping-deals involves the Reverse Morris Trust — delivering a tax-free transaction for Verizon and piles of debt for the buyer. That puts all the risk on ratepayers, lower level employees who are among the first to go when cost-cutting begins, and head-scratching regulators wondering where it all went wrong.  The only ones not doing any hand-wringing are Verizon’s accountants and the executive management of both companies who conjure up such deals.  That’s because they are rarely held accountable, and often win retention bonuses even while a company is mired in bankruptcy.

Regulators should insist Verizon play a fundamental role in insuring that customers are protected even after the deal closes, honoring commitments and financing operations should the buyer fail soon after the sale is complete.  Under these conditions, customers are protected and Verizon might think twice about structuring a deal that loads the buyer down in insurmountable debt.

“This deal is driven by greed — and we can learn from Northern New England’s and Hawaii’s experience to make sure it does not come to pass here or in the other 13 states,” said CWA’s District Two Vice-President Ron Collins, who has been leading the campaign in West Virginia.

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)