Time Warner Cable has changed account numbers for a number of their customers in upstate New York, creating a problem for those who failed to update their electronic bill payment service with the new number. Many of those accounts are now past due and Time Warner Cable is having trouble tracking the payments sent on behalf of the old account number.

The new account numbers are now in place for New York customers in Albany, Rochester, Syracuse, Watertown, and other nearby communities. Customers in Portland, Maine are scheduled to be assigned new account numbers the first week of November.

Time Warner Cable attached this notification letter to bills mailed in August and September to customers in Rochester, N.Y., and other upstate cities.

Stop the Cap! reader Charles dropped us a note noting his account went past due because his payment, sent by his bank under the old account number, has been cashed but never credited to his account. Time Warner Cable  customer service agents can no longer access his old account to see if the payment was misapplied, and won’t take his word for it.

Oops: A bill covering Sep. 28-Oct. 27 still reflects the old Time Warner Cable account number.

“I have to fax in something that shows the bank paid the bill,” Charles reports. “I’m surprised there was not some connection between the old account numbers and the new ones. The system could have at least made the connection, credited the new account number and automatically notified me (email would be easy) that the account number had changed.”

Area banks across western and central New York report there have been a significant increase in complaint calls over Time Warner’s demands for evidence of payment.  Typically, companies like banks and insurance companies changing account numbers will transfer payments sent under old account numbers and automatically apply them to the proper account. That is not happening with the cable company.

More irritating for customers is that Time Warner Cable did indeed notify customers in early September that their account number was going to change, but never bothered to share the new account number at that time so customers could take action with their financial institution. When billing statements dated for service as late as September 28 were mailed, they still reflected the old account number.

Customers who use the cable company’s own recurring auto-pay service were not affected.

You can now find your new account number under Time Warner Cable’s MyServices section, under the PayXpress Billing Center heading.

Customers with missing payments should call their local Time Warner Cable customer service center to begin an investigation and avoid any late fees.

All Time Warner Cable broadband customers in upstate New York, New England, Pennsylvania, and the Carolinas will begin paying $3.95 a month to rent the cable modem required to make your $54.99/month Time Warner Cable Internet service work.

The cable company confirmed the charge will apply to all customers in Buffalo, Rochester, Syracuse, Albany, Binghamton, and beyond effective Nov. 1, joining New York City already paying the modem rental fee as of this week. The fee is gradually being introduced in all Time Warner Cable service areas nationwide.

Signature Home customers and those participating in the company’s trial of discounted Internet for the disadvantaged are exempted.

The new fee represents a 7% rate increase for Internet service, unless customers pay for their own modem.

Time Warner Cable mailed notification postcards to all affected areas this week, so they should begin arriving in mailboxes as soon as today. Southern states including Texas may see the new modem fee in their area as early as December.

“It is strictly a fee for customers who choose to lease their Internet modem from us,” Joli Plucknette-Farmen, the communications manager for Time Warner Cable’s western New York division told the Buffalo News. “As we continue to deploy more and more cable modems, many of these modems need servicing or replacing, get damaged and some are not returned. The monthly lease charge will allow us to service or replace the equipment, provide a better user experience and further enhance our Internet services.”

Stop the Cap! notes Time Warner Cable already assesses a fee ranging from $24-150 for unreturned or damaged cable modem equipment, however.

Phone subscribers who do not have Internet service will escape the fee as long as they avoid signing up for broadband.

Many of the models on the company’s approved modem list are now out of stock at the handful of retailers selling them. Other sellers, particularly on eBay and Amazon Marketplace, have doubled prices to as much as $200 on some popular DOCSIS 3 modems to capitalize on the cable operator’s new fees.

Verizon has a moratorium on further expansion of its fiber to the home service except in areas where it has existing agreements to deliver service.

Verizon Communications will not expand their FiOS fiber optic network beyond the current obligations the company has with communities where it presently provides service.

Verizon chief financial officer Fran Shammo told investors the company intends to wind down FiOS expansion once its contractual commitments to state and local authorities are met to reap the financial rewards of the fiber optic network it began building in 2006.

“At this point we won’t build beyond that, because at this point we have to capitalize on what we have invested,” Shammo told an investor at the Goldman Sachs Communacopia Conference.

From 2014 beyond, Verizon plans to substantially decrease capital investments in its wired networks and continue to shift spending towards Verizon Wireless. Shareholders may also benefit from an increased dividend payout as the company’s balance sheet improves.

In real terms this means that Verizon will only expand FiOS where it previously signed agreements that allowed the company to gradually roll out its fiber optic network. Large sections of Verizon’s service areas, including major cities in the northeastern corridor, are not on the upgrade list and will not get the service.

Verizon’s experience and scale rolling out fiber to the home service over the past five years allowed the company to achieve a cost of  just $700 to reach each home, less than half the original estimated expense for fiber upgrades. But Verizon still considers the network too expensive to expand further.

Shammo also admitted Verizon is targeting its landline investments to bolster its more profitable wireless business.

“The fact of the matter is wireline capital — and I won’t give the number but it’s pretty substantial — is being spent on the wireline side of the house to support wireless growth,” Shammo said. “So the IP backbone, the data transmission, fiber to the cell, that is all on the wireline books but it’s all being built for the wireless company.”

Bruce Kushnick found no bump in construction expenses for FiOS after 2008 and no major increases in capital expenditures in general. In fact, Verizon, on average, spent more on construction from 2000 to 2004 than from 2005 to 2011, when FiOS construction was at its peak.

Bruce Kushnick from New Networks Institute has been tracking Verizon’s capital investments for the last decade and found Verizon was hardly hurting paying for FiOS network upgrades. In fact, Kushnick suspects much of the money to pay for FiOS came from a combination of ratepayer rate increases and diversion of investments intended to maintain Verizon’s existing landline network:

Whatever amount Verizon did spend on FiOS — and obviously it was a not insignificant amount — would therefore appear to have come out of the standard construction budgets that were supposed to be used to upgrade the lines that most Americans are still using for their phone service: the Public Switched Telephone Networks, or PSTN. It would seem that customers, including seniors, low income families, minorities and municipalities have been funding the construction of a cable service through the hefty monthly fees they pay for a dialtone and ancillary services. In some states this is actually illegal.

If Verizon did actually spend $23 billion, then it appears to have come at the expense of the traditional maintenance and upgrades of the utility plant — and the PSTN got totally hosed. At the very least, prices for basic phone service should have been in steep decline as one of the major costs, construction, was dramatically lowered.

Instead, Verizon was also getting rate increases specifically to pay for FiOS. For instance, Verizon persuaded New York officials to increase rates for “fiber optic investments,” where the only service that could use the fiber optic service was Verizon’s FiOS.

For instance, when New York State Department of Public Service Commission Chairman Garry Brown announced the approval of a $1.95 a month rate hike for residential phone lines in 2009, he said “there are certain increases in Verizon’s costs that have to be recognized.” He explained: “This is especially important given the magnitude of the company’s capital investment program, including its massive deployment of fiber optics in New York. We encourage Verizon to make appropriate investments in New York, and these minor rate increases will allow those investments to continue.”

Of course the states weren’t told that everyone would be charged extra for a service that only some people were going to get. In New Jersey, for instance, Verizon made a firm commitment to rewire the entire state with fiber optics — capable of 45 Mbps in both directions. It was supposed to be 100 percent completed by 2010. Instead, Verizon claims to have “passed” 1.9 million homes, representing 57 percent of the households in its territories — but “passed” may or may not mean that they can actually get service.

With Shammo reporting FiOS investments winding down by 2014, Verizon is not increasing the budget to maintain the copper infrastructure it will require non-FiOS customers to keep using for service. Instead, capital investments will continue to be spent supporting Verizon Wireless, although in lower amounts.

“So if you look at overall, I continue to say [investments] will be flat to down and I think we will be probably more slightly down than flat, and [CEO] Lowell [McAdam] and I are really starting to focus in on where we spend that investment and make sure that that investment returns on a shorter period of time,” Shammo said. “And that is really the focus. So what I like to say is that our ratio of CapEx to revenue will continue to decline.”

A N.J. State Commission report from June 2010 saw this coming two years earlier and noted:

“While it is possible for Verizon to extend service throughout its authorized territory, to an additional 155 municipalities in the state that are not included in its current application of 369 towns, Verizon has indicated it will now concentrate its capital expenditures, expected to be between $16.8 billion and $17.2 billion in 2010 on its wireless telephone network. Further FiOS expansion will be limited to increasing penetration in those communities where FiOS is currently available, according to the company.”

Time Warner Cable is alerting customers in upstate New York they are next in line for a gradual transition away from analog cable television service.

But unlike the near-complete switch to digital affecting many customers in Maine, the cable operator plans a less jarring shift in New York, beginning with switching 4-7 channels to digital format between Oct. 10-17.

Time Warner will also introduce New York customers to the company’s digital transport adapter (DTA). The digital adapter was designed for televisions currently direct connected to cable without a set top box. Time Warner’s DTA will convert digital signals to standard definition analog, so customers can get back the channels they lost in the digital switch without the monthly expense of a traditional set top box.

Time Warner plans to offer its New York customers free DTA equipment until the end of November, 2013 — after which the boxes will cost 99 cents a month. (Time Warner’s DTA website claims the boxes will be available without cost until the end of 2014.)

Customers using DTA equipment will not be able to use them to watch premium channels, but will get back any basic channels that were previously converted to digital-only format and those channels switched in the future.

The channels being dropped from analog service vary in each upstate city. Time Warner is notifying customers by mail about the specific channels that will be dropped in each area, but here is a rough breakdown:

Rochester: CMT, C-SPAN, EWTN, Golf Channel, Lifetime Movie Network*

Buffalo: C-SPAN, EWTN, CFTO (CTV), E!*, CNN International*, OWN*, WXPJ (Ion)*,  Discovery Fit and Health*

Syracuse: CMT, C-SPAN, EWTN, Golf Channel, Lifetime Movie Network, OWN, truTV

(*)-Not in all areas.

Time Warner Cable previously announced it was committed to discontinuing analog cable television service across its national footprint within the next four years.

In a separate announcement, all Time Warner Cable customers will see the addition of more Fox programming thanks to a recent contract renewal agreement.  Fox Business Network, and its HD companion channel, will now be a part of Time Warner’s Standard tier (although the channels will continue to be in the digital format). Fox Movie Channel, previously part of the mini-pay Movie Pass tier will be moved to the Digital Basic Tier. These changes are scheduled to occur Oct. 31.

McAdam

Verizon CEO Lowell McAdam wants you to spend more with the phone company, and if his vision of Verizon’s future comes true, you will.

The company’s newest CEO spoke on a wide-ranging number of topics for the benefit of Wall Street investors at the Guggenheim Securities Symposium. A transcript of the event delivers several newsworthy revelations on the company’s future plans.

McAdam rose through the ranks of Verizon Communications with a specialty in the company’s immensely profitable wireless business. His predecessor, Ivan Seidenberg, spent his career at Verizon Communications working with the company’s legacy wireline (landline) network. While Seidenberg envisioned a new future for Verizon’s landline business with an upgraded fiber optic network called FiOS, McAdam maintained a different vision having run Verizon Wireless as a profit-making machine since 2006. McAdam believes Verizon’s future earnings and focus should be primarily on the wireless side of the business, because that is where there is serious money to be made.

“The first thing I did when Ivan sort of named me as the Chief Operating Officer was we had a very well-defined credo in the wireless side,” McAdam said. “We created it when we first came together in ’99 because we had seven different companies and we knew we had seven different cultures and we needed to tell people what it was we were really looking for. So we created that document. We spent a lot of time on it. We do a lot of reward and recognition as a result of it and that culture really took root in wireless.”

McAdam’s leadership also aggressively challenged the long-standing telephone company philosophy of earning a stable, predictable profit as Verizon did when it was a regulated monopoly. Instead, McAdam shifted the work culture towards an obsession with shareholder value.

“We took the top 2000 leaders through what we call ‘Leading for Shareholder Value’ and that was really a cultural shift for us because, if you think about it, the wireline side of the business has come out of the defined rate of return culture and we left that competitively a while ago. I am not sure we left it culturally,” McAdam said. “So we have been far more pushing why do you make that investment, what is the return on it, what is the priority of that investment versus another investment.”

Verizon’s Plans to Abandon Rural Landline Customers – Sign Up for Our Expensive LTE 4G Wireless Broadband With a 10GB Usage Cap Instead

Some of the most revealing commentary from McAdam came in response to questions about what Verizon plans to do with its enormous landline phone network, dominant in the northeastern United States.

In comments sure to alarm rural Verizon customers from Massachusetts to Virginia, McAdam clearly signaled the company is laying the groundwork to abandon its rural phone network (and DSL broadband) as soon as regulators allow. Dave Burstein at DSL Prime estimates that could impact as many as 18 million Verizon customers across the country.

“In […] areas that are more rural and more sparsely populated, we have got [a wireless 4G] LTE built that will handle all of those services and so we are going to cut the copper off there,” McAdam said. “We are going to do it over wireless. So I am going to be really shrinking the amount of copper we have out there and then I can focus the investment on that to improve the performance of it.”

Elsewhere, in more urban and suburban areas, McAdam also wants Verizon to purge its network of copper.

“The vision that I have is we are going into the copper plant areas and every place we have FiOS, we are going to kill the copper,” McAdam said. “We are going to just take it out of service and we are going to move those services onto FiOS. We have got parallel networks in way too many places now, so that is a pot of gold in my view.”

In other words, McAdam would shift money spent maintaining and upgrading rural landline service into the company’s wireless network in rural America and its FiOS network in more urban environments, both of which will improve profits. FiOS allows Verizon to pitch television, broadband, and phone service in one profitable triple-play package, while also discontinuing standalone DSL service. Rural customers pushed to wireless LTE for broadband will face onerous usage limits and more expensive service for phone calls and broadband. Using Verizon’s LTE network for video would be prohibitively expensive.

McAdam hints the company has used its lobbyist force to make preparations to abandon rural customers first in Florida, Virginia, and Texas where state regulators approved legislation that eliminates the requirement Verizon serve as “the carrier of last resort.” That law required Verizon to deliver landline phone service to any customer in its service area on request. With that provision stricken in those three states, Verizon can abandon any landline customer it chooses after serving written notice.

McAdam said he intends to continue lobbying other states to adopt similar deregulation, and chided legislatures in both New York and New Jersey for “being backward” because they have repeatedly refused to allow Verizon to walk away from its rural customer obligations.

Burstein thinks the changes in progress at Verizon will be a disaster for affordable rural broadband.

“This makes a mockery of ‘affordable broadband,’ especially when Verizon and AT&T are boycotting the plan for discounts for poor schoolchildren,” Burstein says. “The detente between telcos and cable companies means the prices of modest Internet speeds (3-15 megabits down) are typically going up from $30-45 to $55-70.”

Burstein also notes the change spells disaster for competitors who sell DSL service over existing phone networks.

“Nationwide, alternatives to the telco/cablecos have less than 5% of the residential market but in some areas they remain important,” Burstein says. “The most interesting, Sonic.net in California, offers unlimited calls and Internet up to 20 meg for $50/month, 20-50% cheaper than AT&T.”

“High prices, unacceptable service choices and further rural depopulation are bad policy,” he adds.

Verizon still earns enormous revenue from its remaining landline customers, revenue McAdam hopes will be replaced by selling business-focused services instead.

“Cloud [service] is continuing to pick up for us. Security is I think going to be an even more important play for us as we go forward,” McAdam noted. “I think these large enterprise accounts, offering them kind of a global service with those up the stack […and…] applications on top of it drive it as well. So there is a number of pieces in the portfolio that I think will take us up and more than compensate for some of the falling off of copper-based services like DSL and voice and that sort of thing.”

Verizon’s Unionized Employees Are Wrong-Headed Defending Verizon’s Landline Network

McAdam also blamed the company’s unionized employees for remaining loyal to the company’s traditional role in the landline business.  Unions like the Communications Workers of America continue to push Verizon to expand its FiOS fiber optic network in more places, but the company has left its FiOS expansion on hold, diverting investment into its wireless business. Both McAdam and the union agree the days of copper wire networks are numbered, but McAdam hints that union concessions (and fewer unionized employees) are required before the company will again expand FiOS.

“Our employees see that it is not sustainable to keep having copper plant out there. You really can’t invest in it; it is difficult to maintain it; and they want to see us improve on FiOS,” McAdam said. “And when I am out in the field, the techs and the reps will be the first to point out kind of some of the dumb policies I call them that we have around the business. Well, a lot of those are based on rules that were negotiated with the union back in the ’60s and ’70s.”

“So we have to get the union leadership to understand that if the company is able to be more flexible in meeting customer needs then we can grow things like FiOS, which will provide good long-term jobs,” McAdam added. “Will it be the same number as what we had in the past? No.”

Verizon’s Enormous Offshore Bank Accounts: Waiting for a ‘Business-Friendly’ Administration to Let Them Bring the Money Back, Tax-Free

McAdam also signaled investors that the phone company’s profits massed in overseas bank accounts are going to remain in place until they know who wins the next election. Verizon wants to repatriate some of that offshore money, but they want to do it tax-free.

“Everybody is kind of waiting to see who controls the Senate and who controls the White House and they are waiting to make those — you have got to understand what the tax situation is going to look like, so we are all waiting to make those investments,” McAdam said.

‘Share Everything’ Lays the Foundation to Monetize Your Data Usage… Forever

McAdam is a big supporter of the company’s new Share Everything wireless plan, which charges smartphone owners $90 a month for unlimited voice calling, texting, and a small 1GB bucket of data that he is convinced customers will be prepared to spend more to enlarge.

“If I know that I have an intelligent home that I can get to any number of ways. If I know that I can do everything I want in my car that I can do in front of my TV set or my PC or on my tablet, I think it just takes away a lot of the restraints,” McAdam said. “Is it going to cost them more money? Yes, but it will probably shift their wallet spend from other things that they do individually into this sort of a bucket of gigabytes. And so I think it will be a significant [revenue] stream for us.”

FitchRatings, a credit ratings agency, agrees in a new report.

“The new pricing structure taken by the industry leader is a disciplined pricing action that could create more cash flow stability longer term within the wireless industry,” the credit ratings agency said last week.

Fitch notes data services are increasingly becoming a larger source of revenue for wireless phone companies. In the first quarter alone, data revenues at Verizon Wireless, AT&T, and T-Mobile USA — all carriers that abandoned flat rate wireless data plans, grew 19% year over to year to $14.2 billion. That represents 41 percent of the companies’ service revenues.

Despite assertions from Verizon that the new plans deliver convenience and better value for subscribers, Fitch found they actually represent a substantial price increase for many customers.

“These increases are sometimes material, depending on whether the legacy rate plans have low recurring charges for text messaging or calling minutes. As a result, prices have generally increased for new subscribers,” Fitch reports.

Fitch warns investors Verizon is likely to lose customers over its new pricing strategy, and experience a slowdown in new customer growth as well, at least until competing carriers realign their pricing and plans to be similar (or match) those Verizon introduced last month.

The Days of Your Subsidized Android/iPhone May Be Numbered

McAdam’s vision also includes a re-examination of device subsidies as customers increasingly depend on wireless devices. McAdam previously indicated the wireless device subsidy was designed to get customers to adopt and embrace new technologies, and as adoption rates have soared, the need to keep discounting technology that customers depend on diminishes.

He echoed that sentiment at the Guggenheim Securities Symposium, noting that Verizon this month abandoned subsidies on tablet devices. For McAdam, discounting wireless technology serves one purpose: to quickly establish a new business relationship with a customer that probably would not buy their first device at full price.

But McAdam recognizes changing the company’s subsidy that customers expect to receive must happen gradually. It has already started, first by eliminating early upgrade discounts, then by dropping the company’s loyalty discount “New Every Two” plan. Now, the company will only allow grandfathered unlimited data plan customers to keep those plans if they agree to forego any subsidy on their next smartphone.

“If you look at the telematics industry today [services like OnStar], the car companies subsidize a device that goes into the car. So I think that we have a tendency over the years to sort of look and say, oh, something is going to happen very quickly,” McAdam said. “Things have a tendency to evolve over a long period of time, so I think you will have some devices, like the tablet today, that [are] not subsidized and you’ll probably still have certain devices that are because you want to establish that relationship with a customer and that is the easiest way to get there.”

Verizon Wants You to Use the Cable Industry’s Growing Wi-Fi Network

McAdam’s vision also offloads as much of Verizon’s 3G and 4G traffic to other networks as possible. Ironically, one of the biggest networks he hopes customers will use instead of his are the growing number of Wi-Fi services offered by his competitors in the cable industry.

“It is interesting that a lot of people have said, well, I can’t believe you’re going to partner with [cable companies],” McAdam said. “You are not going to use their Wi-Fi are you? Well, of course, we are. I mean we want to shift as much onto FiOS or onto the fixed network where we can and then provide — use that capacity to provide those higher demand services like video.”

McAdam added he does not want customers sitting in their homes watching video over his LTE 4G network. He also wants that traffic shifted to Wi-Fi.

“So our thinking going forward as we talk about kind of the ‘One Verizon’ approach is we want to use every network asset we have and if that means jumping onto FiOS or using the cloud services for mobile as well as fixed line, using security across all of our different access technologies, we want that network to be seamless and that is what our CTO, Tony Melone, is driving hard on in the business right now,” McAdam said.

One preview of that thinking at work can be found on Verizon Wireless’ hottest new device — the Samsung Galaxy S3. Verizon’s version of the phone browbeats customers with prominent menus that encourage Wi-Fi use wherever possible. The phone’s persistent reminder has become a pest according to many of the phone’s owners, who consider both the message and the difficulty keeping Wi-Fi shut off obtrusive.

Verizon’s partnership with large cable companies including Comcast, Time Warner Cable, Cox, and Bright House Networks originally involved the acquisition of excess wireless spectrum cable companies originally intended to use to compete with the mobile phone industry. With the cable industry abandoning those plans, the proposed collaboration involving Verizon Wireless grew to include cross-marketing each other’s products and services, and now apparently includes sharing the cable companies’ growing Wi-Fi networks.

Verizon Believes The Future of Telecommunications Needs to Be In the Hands of Two Companies — Verizon and AT&T

A point of shared belief between market leaders Verizon CEO Lowell McAdam and AT&T CEO Randall Stephenson is that excessive competition just does not make sense. Both believe federal regulators have it all wrong when they push to maintain the level of competition that still exists in the telecommunications business. When the Department of Justice effectively pulled the plug on a merger between AT&T and T-Mobile, Stephenson was outraged and, in one investor conference call, launched a tirade against regulators and suggested that AT&T would throw in the towel on expanding rural broadband in a retaliatory move.

McAdam and Stephenson both believe that competition in telecommunications represents wasted investment, inefficiency, and value destruction.

“I think the fundamental problem here, and it is sort of like fighting gravity I think, is that it is so expensive to build these networks that you are not going to support seven or eight carriers,” McAdam told investors. “I don’t — frankly, I think you’ll be lucky if you can support three in a healthy environment.”

But McAdam recognizes that if it achieves a wireless duopoly with AT&T, it must be a benevolent one, or else the marketplace abuses the wireless industry has a track record engaging in will invite regulatory scrutiny.

“We have a tendency to create a great club and hand it to our detractors and say please beat me with this because we do some dumb things like fighting some of the number portability and trying to push a direct wireless directory,” McAdam said. “I mean there are things that have really upset customers and that invites regulation. So I think the industry has the responsibility to act in the best interests of the customer as part of the mix with a shareholder, but I think there is always going to be the battle with regulation.”

McAdam admits he is uncomfortable with the fact the Obama Administration has allowed the regulation pendulum to swing more towards enforced competition and checking the power of dominant carriers in the marketplace. He prefers the Bush Administration’s “hands-off” approach that allowed both Verizon and AT&T to snap up smaller competitors with scant regulatory review.

McAdam believes the Obama Administration’s FCC and Justice Department is slowing down wireless investment, innovation, and the industry’s ability to earn profits at a time when unemployment in sky high and increased investment will help drive the economy forward.