The economic planning agency of the People’s Republic of China says it suspects the country’s two dominant telecommunications companies — China Telecom and China Unicom — have created a cozy duopoly between themselves and are overcharging consumers for broadband Internet access.  That’s a fact of life many Americans and Canadians are also familiar with, but in China, regulators are preparing to do something about it.

The National Development and Reform Commission is launching a comprehensive investigation in response to a torrent of complaints from customers that both companies are charging high prices for Internet access and delivering slow speeds.

“With such a dominant position in the market they practice price discrimination, raising prices for companies that are competing with them while giving discounted prices to non-competitors,”  said Li Qing, deputy director of the price supervision and anti-monopoly department of the NDRC.

Although some large Chinese cities now have access to broadband service at speeds far faster than what American and Canadian consumers can purchase, the Chinese government agency tasked with ensuring compliance of the country’s anti-monopoly laws reports most Chinese consumers buy slow speed, high-priced DSL.

China still follows a Communist political philosophy, but has entertained capitalist free market reforms within the state-planned and managed economy.  Too often, the result has allowed state-owned enterprises to leverage their size and status to create unfettered oligopolies.  As government controls and oversight ease, marketplace abuses have become rampant, often at the consumer’s expense.  Government subsidies for the super-sized, state-owned companies have also made private sector competition more difficult.

The Xinhua News Agency notes the two dominant broadband companies in China control 90 percent of the marketplace.  China Telecom, the state-owned phone company, was directed in 2002 to open its network to private Internet Service Providers who can purchase Telecom’s wholesale broadband service and resell it to consumers.  But Telecom simply boosted prices for wholesale access, pricing many would-be players out of the market.  Some companies complained they would have to charge double or triple the rates China Telecom charges itself for the same level of service.

Liu Zheng, information director for business solutions at the research company Analysys International, told the Global Times that the probe may reduce costs for small operators and eventually benefit consumers.

“I don’t expect a reshuffle in the market,” Liu said. “Penalties won’t lead to decrease of their market share. It’s more of a warning to the two operators.”

Both companies are listed on the Hong Kong Stock Exchange and shortly after news of the investigation reached shareholders, both suffered heavy losses in share prices.

Frontier Communications continues to lose access line customers at a rate of 8.5 percent overall, 9.8 percent in the former Verizon service areas they acquired more than a year ago.  The company’s third quarter results show lackluster performance as revenue declines of 30 percent impacted both their residential and business customer units.

Company officials spent most of the question and answer session responding to Wall Street concerns about revenue, spending, promotions, customer churn, the company’s pension fund, and the outright defection of Frontier FiOS TV customers away from the fiber network the phone company inherited from Verizon.

Mike McCormack of Nomura Securities suggest the weak figures should concern investors because it may show Frontier unable to compete effectively with cable companies, which also offer phone service.

Frontier CEO Maggie Wilderotter put her best face forward trying to promote the company’s successes, particularly bringing DSL broadband to former Verizon service areas:

“Our broadband expansion reached an additional 126,000 new homes in the acquired properties during the quarter, bringing our year-to-date total to 352,000 which is on track to reach our 2011 goal of increasing broadband availability to more than 400,000 additional homes. Broadband availability in the acquired properties is now 80%, a significant increase from the mid-60% range when we acquired them. As a result of our expansion and sales efforts, we had a very strong quarter for broadband growth, adding 16,900 total DSL subscribers, a 38% sequential increase from Q2. We also added 2,300 wireless data customers. This growth reflected the effectiveness of our local engagement model, as well as organic demand for broadband in both legacy and acquired properties.

“We have also largely completed our efforts to migrate middle mile congestion, which now gives us the ability to more effectively market higher speeds in markets that were already enabled.”

Frontier executives sought to portray West Virginia as their biggest success story.

Daniel J. McCarthy, Frontier’s chief operating officer and executive vice-president, claims Frontier’s installation of 12 integrated fiber rings throughout the state provides broadband capacity and integrated network capability beyond what is available anywhere else in the United States from a state-wide perspective.  McCarthy claims Frontier is on track to turn West Virginia from one of the least connected states in the nation to one of the most connected.

But Margaret Kings from MacArthur, W.V. says she’ll believe it when she sees it, and she hasn’t seen it yet.

“My extended family has experienced endless problems dealing with Frontier in this state, and I have relatives in the Panhandle to boot,” Kings says. “We have collectively won more than $300 in service credits for out of service broadband and phone service, slow speeds when it rains, and missed appointments, billing errors, sneaky charges, and contract disputes.”

Kings’ immediate family left Frontier for Suddenlink more than a year ago when she moved.

“Why pay Frontier more for phone service and 1.7Mbps broadband when I can pay Suddenlink less for their phone service and 10Mbps Internet access,” she asks.

Frontier hopes to win back former customers with new broadband services, such as their newly-introduced “Second Connect” service, which delivers a second DSL line for existing broadband homes for what the company claims is $14.99 a month.  Frontier says a few thousand customers have signed up for the service, which is now being pitched aggressively by Frontier’s call centers.

But some customers who have signed up for the service are accusing Frontier of billing fraud for wildly misleading customers about the true cost of the service.

The $14.99 price tag Frontier advertises omits modem rental fees, taxes, surcharges, and other fees customers first discover on their monthly bill.

Chris Photoni discovered, after five calls and a combined two hours on hold, the true out-the-door price for Frontier Second Connect is actually $48 for him.  The Broadband Reports reader elaborates:

Don’t waste your time. Even after the ‘corrections’ the Second Connect line cost around $48. I say ‘around,’ [because] I haven’t met a staff member yet that could correctly calculate tax. How convenient for you Frontier. Their computer system can calculate it for your bill, but is unable to calculate it when inquiring about the service.

The new ‘taxes’ come to $27.64!

Frontier is one of the worst phone companies. They have terrible customer service, and the wait times usually seem to be 20-30 minutes per call. Most issues take at least THREE calls to resolve. I’ve actually have been on hold for 25 minutes as I’m writing this.

Kings said she wouldn’t have bothered inquiring about Second Connect in the first place.

“Let me understand this,” she writes. “The same phone company that offers 1.7Mbps to my house wants another $15 a month to ‘double my speed?’  I could pay $100 a month to Frontier for 3Mbps broadband along with my phone line or pay Suddenlink $100 for 10Mbps broadband, phone and cable-TV service.”

Other highlights from the conference call:

• Frontier is getting into the home security business in a two state trial with ADT and Protection 1.  Customers will be strongly encouraged to bundle the home security service with other telecommunications products to hold them in contracts and provide discounts up to 15 percent;
• Frontier will begin to resell AT&T wireless voice and data services in bundles with existing products. Frontier plans to trial this service during the first half of 2012 before expanding it nationally.  This service is only going to be available to bundled service customers.  Why customers wouldn’t pursue an agreement with AT&T themselves, without the phone company’s involvement, isn’t well-explained;
• The company plans no significant high-value promotional offers for the 4th quarter.  They didn’t pitch any during the 3rd quarter either.  Customers with pre-existing promotions, including “free satellite TV for 2011” or “six months of free DSL” will find their bills rising considerably as those promotions expire in the next few months;
• Frontier’s pension plan is not in the best shape.  The company had to contribute $58 million of real estate to the plan fund to manage investment losses for the year;
• Frontier’s $500 FiOS installation fee has effectively kept new customers away from the fiber network.  Although the company claims it wants to maintain support for FiOS, video customers have left in droves and a smaller number of broadband customers have left as well, primarily for Comcast;
• Frontier plans to continue investment in its middle mile network to handle broadband traffic growth in 2012 and 2013.

Hurricane fast it isn't.

More than three and half million Americans are still paying AOL around $17.50 a month for painfully slow dial-up Internet access.

Long declared irrelevant by the technology elite, AOL continues to plod along with millions of customers more than a decade after the company stopped subsidizing the U.S. Postal Service with millions of sign-up disks mailed endlessly to American homes.

Among AOL’s holdout subscribers are the 7 percent of Americans who still believe dial-up is their best option.  Twenty percent of those surveyed by Pew Research said their commitment to dial-up was as sacred as their marriage vows, and nothing would get them to change.  But for most, the only things keeping them from throwing AOL under the bus are:

• The cost: Almost one-third of those surveyed cited the high cost of broadband as the primary reason for not signing up;
• Access: 17 percent are ready and willing, but their local providers are not.  Broadband is simply unavailable in many areas unserved by cable or deemed unprofitable by incumbent phone companies;
• Other Reasons: Almost 30% cited other reasons for not switching, with the most likely being they don’t know or understand their broadband options, they are getting free dial-up access and free is always good, or their local providers didn’t deliver reliable service.

AOL -is- still in business.  While it has been a long time since AOL’s glory years, when the company provided more than 26 million Americans their Internet access, the company still counts today’s 3.5 million users a win.  That may be true for those who don’t need more than basic “You’ve got mail!” service or those suffering from today’s difficult economy.  But cable operators and phone companies do offer price-sensitive dial-up customers a faster alternative.  It’s too bad they rarely bother to market it.

So-called “light user” plans that offer 640kbps-1.2Mbps speeds — much faster than dial-up but hardly “broadband” — are available for $15-26 a month.  For someone paying AOL $17.50, some of these services are more expensive, but probably still within reach when compared to the traditional $45 standard broadband account companies do advertise.  But too often, these budget plans are the best secret in town, under-marketed because of a fear existing broadband customers might seek savings by downgrading traditional (and more profitable) broadband service.

Tiny Ringgold Telephone, which serves 122 square miles of northwestern Georgia, has pulled the plug on the company’s own video IPTV package and is encouraging customers to watch all of their television shows online or through a satellite TV package offered by DISH Network.

Ringgold was in the IPTV business long before AT&T began offering U-verse, having launched video over phone lines back in 2003.  The phone company invested heavily in producing local programming for their customers, including local sports, issues in the news, health and fitness, and educational shows for and about the region.  The hope was that the phone company would give cable subscribers enough reasons to cut the cable cord for good.  They’ve invested heavily to remain on the cutting edge, something uncommon for traditional wireline phone companies.

In 2000, Ringgold announced they would deliver a High Speed Internet connection to every single customer who wanted it throughout their entire service area.  The company has continuously upgraded their facilities, offering traditional copper wire customers bonded DSL service up to 25Mbps and their growing number of fiber customers speeds up to 50/50Mbps.  That’s an enormous difference over other nearby providers, including AT&T, Frontier Communications, and CenturyLink which deliver customers 1-3Mbps DSL with no fiber in sight.  The other alternative is service from Charter Cable, among the worst-rated cable companies in the country.

But that level of innovation isn’t unusual for Ringgold, which has outpaced traditional Bell System phone companies since it was first founded in 1912 with just eight telephone lines.

In 1950, Ringgold was among the first independent companies in Georgia to switch from manual to dial telephones.  By the 1990s, Ringgold realized the future was in fiber optics, and planned to replace a significant amount of copper wiring that had been on phone poles for decades.  The phone company thought it had mastered the ultimate triple-play fiber-optics package of voice, broadband, and television, until their small size got in the way.

Ringgold discovered that “bigger is better” in the pay television business.  The largest cable operators enjoy the best bargaining power for just about everything.  Companies like Comcast and Time Warner Cable can use their enormous customer base to negotiate cut rate pricing on programming and equipment and stand-up to greedy programmers that demand excessive payments for programming.  Ringgold discovered they can’t.

Light Reading highlighted the challenges Phil Erli, executive vice president of Ringgold, spoke about recently:

• Ringgold could not cut a deal with equipment vendors that would deliver DVR and HD functionality at a level above that of the local cable company.  Large set top box manufacturers deal in volume, and smaller players like Ringgold are often left with inferior technology at prices higher than large cable companies pay for the most advanced equipment available.  Erli tried to innovate a new approach using Microsoft’s Mediaroom, but discovered that required a large number of servers too costly for a small phone company to consider;
• Programming costs were completely out of line.  Volume discounting delivers enormous savings, if you are a large-sized national provider.  Large cable companies pay a fraction of the prices independent providers pay for programming, and local broadcast stations held the company hostage on retransmission consent agreements.  Erli noted the local NBC station, presumably in nearby Chattanooga, demanded an incredible $5.25 a month per subscriber.  That rate was so high, it would turn the company’s video venture unprofitable.  Even worse, Erli relates, “these weren’t negotiations, they told me what we would pay.”  Erli realized that just one programmer could make or break Ringgold’s video service profits;
• The company’s video lineup, due to wholesale costs, was inferior to that offered by the local cable company.

Ringgold's broadband network is superior to anything the competition offers in northwestern Georgia.

With these challenges, the phone company decided enough was enough and dropped its video package, redirecting customers to DISH Network for satellite-TV, and more recently to online Internet video as an alternative to pay television.

Something you won't likely see from your cable company.

While most broadband providers treat online video as a parasite, Ringgold sees it as the ultimate business opportunity to reinvent themselves through their broadband service — selling super high speed access to content that someone else provides and has to worry about.

They’re considering a new customer promotion that includes a Roku, Apple TV, or Clearleap-powered set-top box to integrate broadband connections with television sets.  The company is even educating customers about the growing number of programs available for free (or with a low cost subscription) online with an interactive web tool.

Ringgold’s new solution for online video also includes some small revenge on high programming costs, giving subscribers an integrated over-the-air antenna system that can pick up nearly a dozen HD channels, including that NBC station, for free.

[flv width=”640″ height=”380″]http://www.phillipdampier.com/video/Internet TV.flv[/flv]

Here is something you don’t see every day: Ringgold Telephone encourages its customers to get online and watch TV shows for free.  (1 minute)

Now all prepaid and contract-free.

Clearwire customers are being informed the wireless broadband provider is consolidating service plans in a move the company hopes will simplify what’s on offer.  Following on the heels of Leap Wireless’ Cricket, which launched simplified pricing last year, Clearwire will now market prepaid, no-contract broadband to new customers effective today.

Broadband Reports has been talking with Clearwire after forum members began noticing changes on some dealer websites that eliminated 3G coverage and dropped postpaid bundles of voice and data plans.  Earlier today, the company confirmed it was getting rid of contracts, early termination fees, rental fees for devices, and activation fees.  New customers will be asked to purchase their own mobile broadband device which will work exclusively on Clearwire’s own 4G WiMax network.  You can purchase plans that work by the day, week, or month.

The most popular anticipated plan will offer “unlimited” 4G wireless broadband for $50 a month.

Gone is the bundled Sprint 3G voice option and the annoying early termination fees customers howled about when Clearwire’s advertised coverage didn’t live up to expectations.  Although Clearwire continues to pitch “unlimited mobile broadband,” their notorious speed throttles will remain for “congested cell sites.”  Customers have dropped the service over significant throttling issues in some areas, which reduce speeds to near dial-up in some cases.

Broadband Reports speculates Clearwire wants to be in the wholesale broadband business, and slowly exit the retail business that has earned them the scorn (and threatened legal action) of some of their customers.

Existing customers will be able to keep their existing plans, at least for now.