Verizon’s chief operating officer thinks industry calls for Internet Overcharging schemes like metered billing and usage capped-broadband will harm providers trying to convince customers their multi-service packages represent the best value.

Bob Mudge told Bloomberg News Verizon has little interest heading down the road to charge customers based on what they use, particularly on its FiOS fiber to the home network.  Although Verizon does limit usage on its wireless network, to enforce limits on its fiber network could harm the company’s “value proposition” to consumers.

“The way we’ve structured our pricing is we have a great value proposition with the best speeds in the industry,” Mudge said.  “What we’re thinking about here is to make sure that if you are an Internet user, the total triple or quad play will have so much value and flexibility to you it will prevent you from becoming a niche buyer or seeking to cut the cord.”

Mudge believes customers want to be able to access content across several different device platforms, from home-based televisions, to computers around the home, to wireless devices while out on the go.

Despite Verizon’s enthusiasm for FiOS, the company has continued to put further expansion to new areas on hold.  Only communities already holding signed franchise agreements from Verizon will see fiber to the home from the company anytime soon.

[flv width=”640″ height=”500″]http://www.phillipdampier.com/video/Bloomberg Mudge Says Verizon Is Expanding Its Fios Service 12-7-10.flv[/flv]

Bloomberg News interviews Bob Mudge from Verizon about FiOS and Verizon’s future plans.  (5 minutes)

Don’t want blazing fast fiber optic broadband speeds?  Unhappy with fiber optic quality video and want to go back to putting a satellite dish on your roof?  If the answer to either question is “yes,” Frontier Communications has good news for you.

The phone company, which assumed control of a handful of communities formerly served by Verizon’s fiber-to-the-home FiOS network, has announced it will begin marketing DSL and satellite TV services to its fiber customers.

Frontier CEO Maggie Wilderotter told investors on a third quarter results conference call that FiOS broadband could be too expensive.

Wilderotter noted Verizon would not allow customers in a FiOS neighborhood to buy DSL service, which leaves budget-minded customers behind.

“Now, FiOS starts at like 50Mbps and it’s very expensive. It’s like $50 a month for a customer. So they left a whole host of customers behind from an affordability perspective who didn’t need that kind of capability on broadband.” Wilderotter explained. “We have just over the last 30 to 60 days opened up DSL in all of the FiOS markets to give the customer choice. So the customer can choose whether they want FiOS broadband or they want high-speed Internet service, typically, and in those markets we’re offering around 6 to 7Mbps.”

Time Warner Cable occasionally runs promotions helping customers break free from Frontier's multi-year service contracts.

Of course, Frontier FiOS starts at 15Mbps — not 50, and that costs $50 a month for standalone service.  For $99, ($89 in Verizon FiOS areas), customers can get broadband, cable TV and unlimited phone service.  Frontier’s “Turbo” DSL service is priced at $40 a month for up to 7.1Mbps service.

Wilderotter also noted their FiOS customers can also choose to skip fiber video and go with DirecTV.

“We think that customers should be able to choose what kind of video they want,” she said. “We have aggressive offers in the market for both DirecTV and for FiOS video, but in our vernacular, what we care about is keeping the customer, getting the customer to take more products and services from us and making sure the customer is happy with the choice.”

Wilderotter said Frontier is prepared to tolerate more congestion on its DSL circuits than Verizon permitted, which opens the door to potential traffic slow-downs down the road.

“We’ve opened up in many of these locations the opportunity to sell high-speed service up to 95% capacity on the equipment that we have out in the field. Verizon had set a parameter at 75%,” Wilderotter said.

The company continues to study whether Frontier FiOS is worth maintaining or expanding outside of the Verizon territories where it was originally constructed.

“We are still evaluating it from a financial perspective and a customer perspective, and from a cost perspective and a revenue perspective,” Wilderotter told investors. “In terms of what that does for us overall, what it does for churn, how much does it really cost to extend this capability in the markets that we’re in today — we think that analysis and evaluation will go on through the first quarter [of 2011] and then we’ll be able to make some [decisions] in terms of what we want to do with FiOS from an expansion perspective or a maintenance perspective.”

Frontier Communications CEO Maggie Wilderotter answered questions about broadband expansion and the impact of the fall elections on telecommunications policy in Washington. (11 minutes)
You must remain on this page to hear the clip, or you can download the clip and listen later.

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Frontier's largely rural service areas provide a captive audience for the company's DSL broadband service.

In the near term Frontier has several plans to get more aggressive in the marketplace to meet its target goal of losing only 8 percent of their customers per year — a goal that illustrates legacy phone companies are still on a trajectory towards fewer and fewer customers:

1. Don Shassian, executive vice president and chief financial officer of Frontier reports expansion of DSL remains a top priority for Frontier.  The company is on track to deliver access to 300,000 additional homes by the end of the year.  Verizon delivered access to 64 percent of Frontier’s acquired territories.  Frontier wants to get that number up to 85 percent.  But part of that target is not just expanding service to unserved areas.  It’s also trying to win back customers lost to other providers through promotions and incentives.
2. Frontier plans to resume aggressive promotions in the coming weeks and months, including its “free Netbook” promotion, which provides a Netbook computer to new customers signing up for several packages of services, committing to remain with Frontier for at least two years.
3. Frontier intends to push “price protection agreements” on as many customers as possible.  Their “Peace of Mind” program locks customers into multi-year contracts with stiff cancellation penalties.  Wilderotter noted: “I think, as you know, in our legacy markets, 96% of all of our sales are on a price protection plan and we have close to 60% of our residential customers on a one-, two- or three-year price protection plans. That number is below 15% in the acquired markets. So we’re also driving for price protection plans with every sale that we’re doing in these new markets as well.”  Such contracts dramatically discourage a customer from disconnecting Frontier, because fees for doing so can exceed $300 in some cases.  Frontier has been heavily criticized by some customers and State Attorneys General for deceptive business practices regarding contracts.

Frontier continues to enjoy a lack of solid cable competition in its largely rural service areas.  Shassian reports Comcast competes with Frontier in only about 32% of homes in some areas, Time Warner Cable in about 23%, and Charter below 15%.  With reduced competition, Frontier often represents the only broadband option in town.

Frontier is also spending an increased amount of time coping with copper thefts, especially in West Virginia where the company is warning would-be thieves it will prosecute to the fullest extent of the law.

“Damage to our facilities can affect communications access in an emergency, increase company costs and consumer rates, and disrupt community phone and broadband connections,” said Lynne Monaco, Frontier’s Director of Security. “When network connections are severed by copper thieves, it endangers customers and emergency responders and poses significant risks of personal injury and property damage.”

Just last week, West Virginia state police solved another copper caper that disrupted service for some customers.

The Charleston Daily Mail reports:

Stephanie Burdette of Charleston was arrested in connection with a copper wire theft.

Trooper A.B. Ward from the South Charleston detachment went to the Fishers Branch area of Sissonville last Thursday afternoon when a Frontier worker discovered a section of the communications line missing. The worker found that 300-feet of the 400-pair line, valued at about $5,000, was missing, according to a complaint filed in Kanawha Magistrate Court.

A trooper who had worked on a similar investigation told Ward to check the home of Ervin “Tubby” Page, 49, where troopers had previously found evidence of wire burning. Ward went to Page’s home, described as a Goose Neck travel trailer parked next to the Guthrie Agricultural Center in Sissonville, and found three burn barrels about 50 feet in front of the trailer. One of them was on fire.

Page’s girlfriend Stephanie Marie Burdette, 25, of Cross Lanes, was at the scene when the trooper arrived. Ward spoke to her then checked out the barrels where he found aluminum wrap, which is used to cover the copper communications wiring, and pieces of copper cabling, the complaint said.

Frontier customers are encouraged to report any suspicious activity around telecommunications equipment and facilities by calling the company’s toll free security line 1-800-590-6605. Anyone witnessing a theft in progress should not confront the suspects but should immediately call 911 and then call Frontier. Vehicle and suspect descriptions are very useful. This is a community safety problem, and the cooperation of the public is critical.

[flv width=”500″ height=”395″]http://www.phillipdampier.com/video/WOWK Charleston Copper Thieves 11-15-10.flv[/flv]

WOWK-TV in Charleston covers Frontier’s difficulties with copper wire thieves across the state of West Virginia.  (1 minute)

When people in Scranton and Wilkes-Barre noticed their neighbors in Philadelphia, Pittsburgh —  even Allentown were getting super high-tech fiber upgrades from Verizon, they wondered why northeastern Pennsylvania has been bypassed, left to contend with Comcast as the only cable company in town.

The Scranton Times-Tribune went to Verizon to find out why they snubbed the region.

Starting four years ago, Verizon made FiOS available in Philadelphia and surrounding counties, South Central Pennsylvania, Pittsburgh and even Allentown. Now the company wants to cultivate those market, said Verizon spokesman Lee Gierczynski.

“We are focusing on the commitments we have,” he said. “No plans have been outlined for future expansion.”

Smaller local phone carriers don’t have the money involved in providing their own Internet television. Instead, those such as Frontier Communications, re-sell satellite service.

“Offering out television service is expensive, too expensive for most smaller telephone companies,” said telecom industry analyst Jeff Kagan. “So many are reselling satellite service to keep customers who want one bundle and one bill.”

Because of that, satellite television providers, who were never a formidable challenge to conventional cable companies, gained market share, Mr. Kagan said.

Lowell McAdam (left) speaks with Ivan Seidenberg (right). (Courtesy: Fortune)

Verizon ended their FiOS expansion partly because of ongoing negative reaction from Wall Street.  Now with a change in CEO’s, things don’t look promising for upgrades anytime soon.  It was former CEO Ivan Seidenberg that green-lit the idea of replacing old copper wire networks with new state-of-the-art fiber optics.  Seidenberg got his start in the phone business as a cable splicer’s assistant, working with the copper wires and fiber-optic cables that are the backbone of today’s phone companies.

His successor, Lowell McAdam grew up in the wireless industry, which is increasingly responsible for Verizon’s revenue.

At a telecommunications crossroads, Seidenberg’s vision of fiber optic service replacing antiquated copper phone cables may be at risk from new leadership at the helm of Verizon — leadership that lives and breathes in a wireless world.

For phone companies, the choices are clear: suffer ongoing landline losses and hope wireless profits can cover the difference, sell off your landline customers to a third party that specializes in rural areas where wireless signal penetration is insufficient, or make required upgrades to stay competitive with cable companies that are also eroding your market share.

As far as the cable industry is concerned, they’d prefer Verizon just stay out of the video business altogether.  Dr. John “Darth Vader” Malone, a former cable kingpin that owned Tele-Communications, Inc. (TCI), said there is room for only one player in the wired video business — cable companies.

“I’ve never seen overbuilds work … it always ends up badly,” Malone has said repeatedly about cable competition.

So for northeastern Pennsylvania, and millions of other Verizon customers hoping for something better, prepare for a long wait.  Save for satellite services, your local cable company is likely to remain the only television service provider for the foreseeable future.

A Cablevision ad against Fox

Cablevision and Fox finally settled their two week programming dispute Saturday when two local Fox-owned broadcasters and an assortment of cable channels returned to suburban New York area-television screens.  Cablevision ultimately capitulated to Fox’s increased programming fees and grumbled it was stuck paying an “unfair price” for the programming.

“In the absence of any meaningful action from the FCC, Cablevision has agreed to pay Fox an unfair price for multiple channels of its programming including many in which our customers have little or no interest,” Cablevision said, adding that it “conceded because it does not think its customers should any longer be denied the Fox programs they wish to see.”

But in reality, Cablevision subscribers who suffered through the two week outage will ultimately pay the price for Fox-owned programming in the next round of cable company rate increases.

While Cablevision subscribers can now watch the remaining games of the World Series from home, the cable-broadband industry post-game wrap-up show is now underway, surveying the winners and losers.

Let’s take a look:

WINNER: Fox Networks

Fox got everything it wanted, and then some, from Cablevision.  Consumers never take the side of the cable companies that have overcharged them for years. All most know is that when their favorite channels are not on the cable system that charges them more than $50 a month for service, it’s the cable company’s fault. While the terms of the final deal were not disclosed, it’s a safe bet Cablevision is paying rates even higher than those charged to New York’s other cable company Time Warner Cable.  The cave-in by Cablevision means Time Warner and other cable systems will likely also see higher rates for Fox programming now set as a precedent by Cablevision.  So will telco and satellite TV providers.  That’s money Fox will take to the bank.

LOSER: Cablevision

Not only did they alienate their customers, at one point telling them to watch Fox programming on third party websites, they are now facing a $450 million class action lawsuit from subscribers (filed by an attorney with prior connections to Fox parent company News Corporation.)  It is difficult to feel sympathy for a cable company deprived of Fox programming that still charged subscribers full price for channels they could not watch.  One industry executive praised Cablevision for “taking one for the team,” a phrase consumers have heard before to defend corporate pickpocketing.

Cablevision was actively promoting ivi last week through their customer service representatives

WINNER: ivi Networks

Stop the Cap! reported on upstart ivi several weeks back.  The service carries all of metropolitan New York’s broadcast stations and Cablevision ended up recommending its blacked-out subscribers buy an ivi subscription to watch Fox-owned broadcast channels no longer on the cable lineup.  The new online cable system, which started in September, added New York subscribers in droves, annoying Fox to the point of sending a cease-and-desist letter to Cablevision CEO James Dolan to get cable company representatives to stop recommending the service, which Fox claims is “illegal, and perhaps criminal.”

WINNER: Verizon & Satellite Dish Companies

Many subscribers fleeing Cablevision for competitors have probably left for good, especially if they scored substantial discounts and promotions during their first year or two of service.  Verizon FiOS always faced resistance from customers not wanting to devote the time needed to install the service, and when customers have been with a cable company for 20 or more years, change does not come easy.  But die-hard sports fans already inconvenienced by earlier channel interruptions pulled the trigger just to get away from the endless programming disputes.

Verizon scored new customers over the dispute.

LOSER: Comcast-NBC Merger

Lawmakers set to either applaud or introduce roadblocks to the proposed merger between Comcast and NBC saw first hand what can happen when big media companies duel it out over money — millions of customers can be left in the middle with nothing to show for it.  Bloomberg reports the dispute could force significant concessions to prevent or limit such disputes in the future.  U.S. Representative Maxine Waters, a California Democrat, said the Fox-Cablevision spat made her “increasingly concerned with the potential harm” if a dispute arose between an enlarged Comcast and competing video provider. In a letter to FCC Chairman Julius Genachowski last week, she called for “substantive and enforceable conditions” to preserve competition.

WINNER: NFL Networks – Where is Our Binding Arbitration?

Cablevision’s demands for binding arbitration to settle their disputes with Fox rang hollow, if not hypocritical, for NFL Network officials, who have been calling on Cablevision for the same binding arbitration the cable operator demanded of Fox.  The NY Post quoted an unnamed executive at the cable network: “Cablevision has been urging Fox to agree to binding arbitration — the same strategy we’ve been offering Cablevision — but we continue to get sacked.”

LOSER: The Federal Communications Commission

Despite demands from most consumer groups and Cablevision to intervene in the programming disputes, the FCC delivered a rebuke telling all sides to stop with the stunts and start with serious negotiations.  Beyond that, the agency did what it has done best under the Obama Administration: sit on its hands.

THE BIGGEST LOSER: You

With the grandstanding by both sides finally over Saturday — the shouting and expensive publicity campaigns wrapped up and put away for next time (KeepFoxOn.com now renders a blank page) — the person left standing with the bill in hand was you.  Fox wrapped the costs of its expensive publicity campaign into the rate increase Cablevision finally conceded to paying.  The bags of money to be handed from the Dolan family that owns Cablevision over to Rupert Murdoch will be filled from your pockets.  And there is no end in sight to future disputes raising programming costs even higher than ever.

[flv width=”640″ height=”500″]http://www.phillipdampier.com/video/Bloomberg Cablevision Fox Dispute 11-1-10.flv[/flv]

Bloomberg News delivers three reports detailing the impact of increased programming costs on cable bills, inaction by the FCC, and whether Americans are fleeing cable TV for online video instead.  (10 minutes)

You can’t blame a guy for trying.  As the Cablevision-Fox dispute continues to drag on — keeping several Fox-owned cable networks and two New York stations off Cablevision screens, Hamilton Mayor John Bencivengo decided it was time to start shopping for some cable competition.

Bencivengo wrote thoughtful letters to executives of Comcast and Time Warner Cable trying to sell the two cable companies on coming to Mercer County.

“I am writing to inquire as to any interest your company may have in entering into Hamilton Township (Mercer County), NJ as a cable television provider,” Bencivengo’s letter reads. “I understand that any business decision would be predicated on the economic feasibility of entering into a new market, either through a franchise agreement with Hamilton Township or through a statewide franchise agreement available from the State of New Jersey through the BPU (Board of Public Utilities),” the letter reads. “It is a vibrant market that seems ripe for picking at this time.”

He’s also reminding both cable companies they are free and clear to deliver service just by signing a franchise agreement — the one Hamilton Township had with Cablevision expired back in 2005.

The New Jersey Times notes the area is not well-served by cable competition.  Verizon FiOS is an option for only about half of the residents of Hamilton, and only a quarter of residents in nearby Robbinsville.  The only other alternative is attaching a satellite dish to the roof.

Hamilton Township is part of Mercer County, N.J.

“Here we are again with stations that are pretty popular off the cable network without any reimbursement to the cable customers, and that’s unfortunate,” Bencivengo told the New Jersey newspaper. “I want to be proactive to try to woo these people to Hamilton Township.”

Unfortunately, the cable industry in the United States resembles an organized crime network (their prices sure are a crime), each with their own respective territories companies have quietly agreed never to cross.  Comcast and Time Warner Cable are the Godfathers of their respective service areas, and neither will compete head-to-head.  Even though many residents affected by the Fox blackout may think of Cablevision as the Fredo of the cable industry, the chances of another cable company arriving in town to compete with them is next to zero.

Verizon offers the most immediate opportunity for cable competition, but consumers will find pricing generally comparable to what Cablevision charges.

The mayor of Hamilton need not tilt at windmills, however.  There is another way.

If Hamilton Township is fed up with Cablevision’s HissyFits and Verizon’s high prices, the alternative is to build support for a community-owned municipal system that can deliver video, phone, and broadband service to residents.  That’s what communities ranging from Wilson and Salisbury, North Carolina to Opelika, Alabama are doing, among many others.

They’ve decided the future of their communities’ telecommunications needs can no longer be entrusted to a handful of bully boys who put customers in the middle of every dispute over the money those customers will ultimately have to pay no matter who wins.

It’s a far better long term solution than replacing one bad cable company with another.