Burlington Telecom offices in Burlington, Vt.

Citibank has sued the city of Burlington, Vt., and the city’s legal firm demanding municipal-provider Burlington Telecom hand back their fiber-to-the-home network and pay damages in excess of $33.5 million dollars.

Citicapital, which owns the equipment that operates Burlington’s community network, says Burlington Telecom has defaulted on their lease payments, and has demanded the city “de-install and return” the fiber network — everything from set-top boxes and in-home wiring to ripping fiber cables directly out of underground vaults and off telephone poles.  Citi also wants BT’s vehicle fleet turned over to them.

Burlington Telecom has been a poster child of poorly-planned and implemented city-owned broadband, and a series of financial and operational scandals led state investigators to consider criminal charges for misappropriating taxpayer funds to sustain the network.  While prosecutors ultimately declined to file charges, the resulting scandal in the mayor’s office has left the city with a network it stopped paying for, and the potential much of it could be auctioned off to the highest bidder, which could turn out to be Comcast or FairPoint Communications.

Citicapital claims the city has not made a direct lease payment since November, 2009.  The bank had been drawing down funds deposited in a special escrow account the city was required to open as part of the lease-to-purchase transaction.  That account has also run dry, and the bank claims it has received no payments since May of 2010.

Citibank’s attorneys filed suit:

“BT continues to use Citibank’s equipment and vehicles unlawfully and without its permission and continues to depreciate the value of Citibank’s assets in order to generate revenue for itself,” the bank’s attorneys charged.

Citibank wants a judge to award punitive damages in excess of its remaining loan balance “because Burlington’s intentional breach of the agreement amounts to a reckless or wanton disregard of Citibank’s clear contractual rights.”

“It’s ironic that a bank that received a taxpayer-financed multi-hundred-billion-dollar bailout now wants taxpayers in Burlington to pay them excessive damages,” shares Stop the Cap! reader and Burlington resident Joe, who shared the story with us.  “I think we should be calling it even after three years of big bank bailouts.”

The lawsuit has city residents worried because attorney fees, and any resulting damages or settlement agreement with the bank, will likely run well into the millions of dollars.  Every month the city remains in arrears, Citibank’s agreement calls for at least $235,000 in missed payment fees and interest.  Taxpayers will likely cover most, if not all of that amount.

“I don’t think anybody should be surprised,” City Councilor Paul Decelles, R-Ward 7 told the Burlington Free-Press. “I always believed this day was going to come. Now we have enormous mess on our hands.”

Citibank wants their fiber back.

Christopher Mitchell from Community Broadband Networks notes Burlington Telecom was an aberration in a country with many successful community-owned broadband networks.

“We have watched in dismay as Burlington Telecom transitioned over the past four years from a model community network to the worst case scenario,” Mitchell wrote on the group’s blog. “This situation proves only that community networks can suffer from bad management in some of the many ways private telecom companies can suffer from bad management (resulting in anything from bankruptcy to prison).”

“Communities can learn lessons from Burlington’s situation — chief among them that transparency is important,” Mitchell observed. “As with other public enterprise funds, the operation should be regularly audited and oversight must be in place to catch errors early, when corrections are easier and less costly.”

Among Burlington Telecom’s problems included overpriced, uncompetitive broadband service that never took full advantage of fiber’s speed and versatility.  Earlier news accounts included speculation BT had trouble securing sufficient connectivity with a backbone provider to sustain faster speeds, but it left the company at a competitive disadvantage against incumbent cable operator Comcast.  Burlington Telecom also failed repeatedly to build community support to establish a firewall against frequent political shots fired at the network as it became a partisan hot potato.

The city promises a “vigorous defense” against the lawsuit, and observers suspect a judge will not order the city to shut the network down, because it would cease the only revenue stream the company generates that could be used to pay a negotiated settlement with the bank.

[flv width=”640″ height=”380″]http://www.phillipdampier.com/video/WCAX Burlington Citibank Sues BT 9-20-11.mp4[/flv]

WCAX in Burlington explores how much of a case Citibank has in its lawsuit against the city and its attorneys over Burlington Telecom.  (4 minutes)

Phillip "Frontier DSL is Too Slow and Expensive" Dampier

Frontier Communications occasionally sends me mailers promoting their latest offer for DSL and/or satellite service.  The price on the front of the letter looks good — usually around $20 a month — despite the fact the best Frontier can deliver my area less than one mile from the Rochester, N.Y. city line is 3.1Mbps.  But Frontier’s fine print is infamous for bill padding extra fees, charges, and service commitments that makes the out-the-door price literally higher than Time Warner Cable’s Road Runner service, which actually delivers substantially faster speed at a lower price.

I’m not alone.

Customers in several Frontier service areas are openly wondering why they should do business with the phone company when they are charging more for less service.

In Ohio, Frontier Communications competes in some areas with Buckeye Cablevision.  Frontier sells DSL Internet in northwest Ohio for $29.99 a month.  For that, customers like Inquiry receive 6.2Mbps even though they bought 7.1Mbps service.

“Their [Internet prices] are significantly higher when comparing the other providers in northwest Ohio,” Inquiry writes. “Buckeye Cablevison has 10Mbps service for $24.95/month. And they actually give the customer 10.8Mbps.”

In areas where Frontier often finds itself the only game in town, that price is downright cheap.

Frontier's "High Speed" Fantasies

Nialis in Aliso Viejo, Calif. doesn’t know what Inquiry is complaining about.  He pays $30 a month for 1.5Mbps DSL service from Frontier.

Eric McDaniel from McDavid, Fla. found small relief when he complained about the 2.2Mbps DSL service he was paying $39.99 a month to receive.

“I now pay $29.99, and that is only because I threatened to cancel my service,” McDaniel says. “Now they give me a $10 recurring credit.”

“What are you going to do when they’re the only show in town?”

Even Charter Communications, one of America’s lowest rated cable companies, has prices and service that beats Frontier hands-down.

In some Charter areas like Wausau, Wisc., Frontier DSL comes with a two year service commitment, a $14.99 monthly Wireless Router Fee, and comparatively slow service:

Frontier Communications Pricing - Wisconsin

Customers can pay $29.99 a month (before fees) for “up to 3Mbps” DSL service from Frontier or spend $29.99 and get 12Mbps from Charter:

Charter Communications Pricing - Wisconsin

So how does Frontier Communications keep offering service at uncompetitive prices?  They have much greater success in the rural markets they favor, where cable competition rarely exists.  Plus, many consumers may not understand the impact of the speed differences they receive from different providers, tending to blame “the Internet” for slowdowns more than the provider delivering the service.  Some customers may also be attracted to valuable customer promotions that include free netbooks or television sets, and forget about the fine print service commitments that come with the deal.

As dwink9909 from Clintonville, Wisc. shared on the Frontier Broadband Reports forum: “Frontier Communications Inc. is free to charge the maximum the market will bear primarily because they are the only provider in most of the areas they serve. That’s certainly true here in Wisconsin. Six miles south of me you can get dial-up service from two dozen ISPs and broadband via wireless, cable or DSL, but here there is only a single provider for telephone and broadband. We are among the “under-served” millions who are just glad to have high speed Internet at any cost.”

Frontier is only too happy to oblige.

AT&T flipped the switch Sunday on its new 4G-LTE wireless data network, and the resulting next-generation wireless speeds now available to customers in Atlanta, Chicago, Dallas, Houston and San Antonio, Texas are impressive, averaging 23.6Mbps on the download and 15.2Mbps for uploads during a three-day test.

Mobile World reports initial testing by Signals Research in Houston delivered a peak data rate of a massive 61.1Mbps.  The researchers transferred nearly 90GB of data back and forth during the weekend tests, almost always at data rates above 5Mbps.

AT&T intends to compliment its existing “4G” HSPA+ network with a gradual rollout of LTE service in their major markets, eventually covering 44,000 nodes over a three-year period.

AT&T will first introduce its LTE service to wireless mobile broadband customers who will find the USB modems on sale with a two-year service commitment.  Support for the network on smartphones will come later.

A few important points to consider before becoming too excited with AT&T’s speed ratings:

1. Signals Research conducted the tests on an effectively empty network.  Since AT&T hasn’t started selling LTE-capable smartphones yet, the only ones using the network are AT&T’s mobile broadband customers, most of whom are using AT&T’s older HSPA+ service.  AT&T doesn’t guarantee any particular speed, and it’s a safe bet speeds will slow considerably when smartphone customers eventually pile on board.
2. That speed comes at a significant price.  AT&T is charging $50 a month for mobile broadband service with a 5GB usage cap.  Each additional gigabyte runs $10.  Signals Research is lucky they didn’t pay AT&T the going rate during their tests.  That 90GB of data would result in a bill from AT&T amounting to $50 for service, and $850 in overlimit penalties.

Big cable companies are targeting their non-customers, and those current customers who refuse to sign up for triple-play bundles, with some of the most aggressively-priced promotions in years.  The two largest, Comcast/Xfinity and Time Warner Cable, have been sending out letters offering dirt cheap $20 Internet service or cable television packages that include DVR service, a second set top box, and hundreds of digital cable channels for $49.99 a month for two years.

Comcast

Comcast promotions vary in different markets, depending on who their competitors are.  The best pricing goes to new customers, as a recent promotion sent to suspected DSL customers in their service areas illustrates.

(click to enlarge)

The cable company is pitching 12 months of Xfinity Performance (typically around 12Mbps) for $19.99 a month for the first year for new customers only.  Some customers report they can cancel penalty-free at the end of the first year, while others are told Comcast is actually pitching a two-year contract where the price of the service increases to $34.99 a month during the second year (a early cancellation fee pro-rated to less than $50 applies in some areas if you cancel early).  This pricing applies to standalone service, which makes it aggressively priced.  Most cable providers charge a higher price for Internet-only service.  Some customers also report a $25 or more installation fee applies (and in some areas an in-person install is required for new customers).  We’ve heard from some readers that successfully qualified for the promotion under the name of a spouse if they have had Comcast service previously.  Otherwise, Comcast usually requires customers to be without service for 90 days before they are considered “new customers.”

Customers can try calling 1-877-508-5492 to request this offer: $19.99/Month for 1 year with no additional service required (Code at bottom of letter: LTP79376-0014).

If that number does not work from your calling area, other numbers to try include: 1-877-298-0903 (CA, TX), 1-877-508-5492 (CA, WV), 1-877-494-9166 in NJ (currently pitching 6-month version of this promotion without contract.)

If 12Mbps is not fast enough, ask the representative what promotional pricing exists for faster speeds.  Some customers scored 35Mbps service for $10 more per month.

A separate ongoing promotion from Comcast offers Blast Internet service at 25Mbps+ on similar terms.  But pricing varies wildly in different markets.  Customers in California were able to purchase this promotion for as little as $19.99 a month with a year-long contract, while customers in Chicago were asked to pay $39 for essentially the same service.

Comcast’s promotions list runs several pages, so if you are shot down asking for these promotions, ask about other current offers or hang up and try calling again and asking to speak with someone else.  Your results may vary depending on the representative you speak with.  Remember Comcast’s 250GB usage cap applies to all residential service plans.

Time Warner Cable

In addition to regular Road Runner standalone Internet service promotions that deliver Standard Service speeds for $29-35 a month for a year, Time Warner has been getting very aggressive trying to win back cord-cutters and those who have left for a competing pay television provider.  The cable company has mailed letters to non-cable TV customers in the northeast pitching substantial discounts on cable TV service price-locked (but no commitment term for you) for two years and includes free DVR equipment, DVR service, and a second set top box with digital cable TV for $49.99 a month.  They’ll even credit back the cost of any early termination fees charged by another provider over the course of the first year of service.

(click to enlarge)

The promotion is intended primarily for customers who already receive service from another provider, but new customers can call 1-855-364-7797 and ask for the offer without the competing provider early termination fee rebate.  If you do receive service from another provider, there are various requirements and steps to follow to qualify for up to $200 in termination fee credits.  Visit SwitchtoTWC or call them to learn the details.

Neither of these promotions work for existing Time Warner Cable customers.  If you already subscribe, discounts will be offered when you threaten to cancel service.  Retention deals from Time Warner Cable can be as aggressively priced as new customer promotions.  We have found retention offers made during the initial call to request a service disconnection are often not very aggressive.  Most representatives try and pare back your package before starting to offer retention pricing (which gradually gets better the more times you reply, “is that the best you can offer?”)

Our best recommendation is to call and request to cancel service 2-3 weeks from today and wait for a Time Warner Cable retention specialist to call you (answer those mystery caller ID calls — it could be Time Warner).  The reps that call you directly often deliver the most aggressive retention deals.  If nobody does reach out to you, call Time Warner yourself a few days before the disconnect is scheduled and ask them to make you an offer to rescind your disconnect request.  You may find some serious savings taking this approach.  If not, you still have time to rescind your disconnect request on your own before the plug gets pulled.

AT&T and Verizon: The Doublemint Twins of Wireless

Mirroring AT&T’s announcement last month that it would begin implementing speed throttles for wireless unlimited data plan customers who are among the “top 5% of users,” Verizon Wireless quietly made changes last week allowing the company to throttle its own unlimited data plan “heavy users” who consume more than 2GB of usage per month on its 3G network.

But Verizon claims it isn’t actually throttling the speeds of customers, it is simply engaging in “network optimization practices” and using “network intelligence” to reduce speeds (sometimes to near-dial-up) while connected to a “congested cell site.”

That will prove a distinction without much difference to customers who rely on 3G data usage using cell sites Verizon deems congested.  They may also find the time spent in Verizon’s penalty box unusually long.

“You may experience [reduced speeds] for the remainder of your then current bill cycle and immediately following bill cycle,” Verizon’s FAQ states.

That can mean customers paying $30 a month for an “unlimited data plan” may find 3G usage a very slow experience for a maximum of two months before they are off Verizon’s throttle list.

The new speed throttle policy began Sept. 15.  Verizon:

Network Optimization practices and throttling is network intelligence.  With throttling, your wireless data speed is reduced for your entire cycle, 100% of the time, no matter where you are. Network Optimization is based on the theory that all customers should have the best network possible, and if you’re not causing congestion for others, even if you are using a high amount of data, your connection speed should be as good as possible. So, if you’re in the top 5% of data users, your speed is reduced only when you are connected to a congested cell site. Once you are no longer connected to a congested site, your speed will return to normal. This could mean a matter of seconds or hours, depending on your location and time of day.

Verizon has not said exactly how many of its cell sites it deems as “congested,” at what times that congestion is most likely to occur, and admits there is currently no way customers can learn when they are connected to a congested site so they can make an informed decision about their usage.

But the company does say customers can avoid the penalty:

1. Upgrade to a 4G phone and hope for good 4G LTE coverage.  Customers using Verizon’s 4G network are not currently subject to a speed penalty for “excessive use.”
2. “Upgrade” to a tiered data plan with usage allowances.  Verizon will not throttle the speeds of customers who are not on unlimited data plans.
3. Reduce your data usage, especially in areas where congestion is likely.

Choke collars are in season at AT&T and Verizon Wireless, leaving Sprint's unlimited service looking more consumer-friendly by the day.

Those suggestions require potentially pricey new handsets, require customers to abandon their existing unlimited data usage plan, or simply get you thinking twice before launching a data session, fearing being grounded for up to two months with a dramatically reduced level of service.

The biggest impact of the network speed throttles will be among data-heavy iPhone users.  Apple’s iPhone doesn’t support 4G, and is likely to continue to rely on 3G network coverage when the next version of the popular phone is introduced in October.  Ultimately, Verizon’s new policy means iPhone devotees using more than 2GB per month may have to abandon their phone or their unlimited data plan if they want to avoid the throttle.

Verizon also found a way to keep customers from canceling penalty-free, noting contract changes that reserved the right to implement network management techniques were made in February.  The 60-day window for the “materially-adverse” contract change cancellation policy expired in April.  Verizon:

By alerting customers in February 2011, and including the notice in our terms and conditions as of February 3, 2011, we made sure customers knew we began reserving the right to implement Network Optimization practices.  In February 2011, we began alerting customers:

• Data Management – (note: now named “Network Optimization” to more accurately describe the tools) – Verizon Wireless may reduce data throughput speeds in a given bill cycle for customers who use an extraordinary amount of data and fall within the top 5% of data users.  The reduction will only apply to those using congested cell sites and can last for the remainder of the current and immediately following billing cycle.  The reductions will only apply when appropriate in locations and at times of peak demand.
• Data Optimization – (note: now named “Video Optimization” to more accurately describe its function) – Verizon Wireless is implementing optimization and transcoding technologies in its network to transmit data files in a more efficient manner to allow available network capacity to benefit the greatest number of users, and although unlikely, the process may minimally impact the appearance of the file as displayed on the mobile device.

Interestingly, AT&T’s own speed throttle penalty was estimated to kick in after 4GB of usage, not the 2GB Verizon is using as its benchmark for “network optimization.”  Verizon also says customers with their Mobile Hotspot feature will find that usage exempted from counting towards the 2GB threshold.

Verizon has opened up a new web page explaining the throttling policy.

[Thanks to Stop the Cap! reader Mileena, among many others, who shared the news with us.]