Telephone companies will lose up to half of their broadband market share if they insist on sticking with DSL technology to deliver Internet access, according to a new report from Credit Suisse analyst Stefan Anninger.

Anninger predicts DSL will increasingly be seen as the “dial-up” service of the 2010s, as demand for more broadband speed moves beyond what most phone companies are willing or able to provide.  Credit Suisse’s analysis says DSL accounts sold in the United States top out at an average speed of just 4Mbps, while consumers are increasingly seeking out service at speeds of at least 7Mbps.  The higher speeds are necessary to support high quality online video and the ability for multiple users in a household to share a connection without encountering speed slowdowns.

A lack of investment by landline providers to keep up with cable broadband speeds will prove costly to phone companies, according to Anninger. He believes a growing number of Americans understand cable and fiber-based broadband deliver the highest speeds, and consumers are increasingly dropping DSL for cable and fiber competitors.  Any investments now may be a case of “too little, too late,” especially if they only incrementally improve DSL speeds.

Anninger says providers may be able to offer up to 18Mbps in five years by deploying ADSL 2+ or VDSL technology, but by that time cable operators will be providing speeds up to 200Mbps, and many municipal providers will have gigabit speeds available.

The impact on phone company broadband market share will prove bleak for phone companies in all but the most rural areas, Anninger predicts.  He says by 2015, cable companies will have secured 56 percent of the market (up by 2 percent from today), phone companies will drop from 30 percent to just 15 percent, Verizon FiOS, AT&T U-verse, and wireless broadband will each control around 7 percent of the market, with the remainder split among municipal fiber, satellite, and other technologies.

Anninger is also pessimistic about wireless broadband being a wired broadband replacement in the next five years.

A Credit Suisse online survey of 1,000 consumers in August found that less than half would consider going wireless only.  The reasons?  It’s too slow, too expensive and most plans have Internet Overcharging schemes like usage caps and speed throttles.

Although cable companies are on track to be the big winners in broadband market share, still have one giant hurdle to overcome — a lousy image.  Just 36 percent of cable customers say they are “very satisfied” with their local provider.  More than 60% of FiOS and U-verse’s broadband customers said they are “very satisfied” with the services these advanced telephone company networks provide.  Consumer Reports has regularly awarded top honors to Verizon FiOS for the last several years.

Independent phone companies and smaller cable operators routinely score at the bottom, typically because they are relying on outdated technology to supply service.

This makes the marketplace ripe for disaffected consumers to jump to an alternative provider.  Unfortunately, as most Americans face a duopoly of the cable company they hate and the phone company that doesn’t deliver the services they want, there is no place for them to go.

Anninger also predicts the risk of broadband reform by reclassifying broadband under Title II at the Federal Communications Commission is now “minimal.”  That suggests Net Neutrality enforcement at the FCC is not a priority.  The Credit Suisse analyst says if action hasn’t been taken by winter or spring of next year, it’s a safe bet the Commission will never re-assert its authority.

After weeks of delays, Time Warner Cable says it will finally open access to ESPN’s multi-channel streaming service Monday, Oct. 25th.  The service will be available to Time Warner Cable subscribers, and is free of charge.

ESPN’s streaming service was included in a deal signed in early September between the cable company and Disney-ABC, which owns the sports network.

Time Warner Cable has been working with ESPN’s website technical staff to build and test the online verification system that is the foundation of Time Warner Cable’s implementation of TV Everywhere.  The cable company plans to offer a library of on-demand video and live streams of many cable channels free of charge, but only to authenticated, current customers.

It is all part of an effort by the cable industry to stop cable customers from canceling their cable-TV subscriptions.  An increasing amount of online content produced by cable networks is expected to eventually be placed behind the TV Everywhere system.  Existing cable subscribers will get access to streamed live channels and on demand programming for free, but non-subscribers will be locked out.  Cable networks can decide how much of their programming will be a part of the project, but cable industry insiders predict there will be increasing pressure on them to keep most of their shows off the open Internet.

While the channels will be free-to-stream for subscribers now, several cable networks are exploring whether to charge cable companies extra programming fees for online viewing rights.  If that becomes popular, online viewing options may eventually carry monthly fees of their own.

ESPN says most of its online streaming will contain no advertising until the network builds enough viewers to justify selling ads targeting online audiences.

Verizon Inc. reached a similar agreement with Disney in October for its FiOS TV service. The originally planned launch date for Verizon customers was Jan. 18th, but if authentication tests with Time Warner Cable are successful, FiOS customers may get access much sooner.

Big Apple Day

New York City officials are sick and tired of taking complaints about missed cable appointments and other service problems on its 311 city help line.  Nearly 1,200 calls about cable have been made so far this year alone, with fed up New Yorkers annoyed they took a day off work to wait for a cable technician that never arrived, or one who never solved the problem they were called to fix.

Now city officials are forcing the area’s two incumbent cable operators — Time Warner Cable and Cablevision, to pay for their mistakes.

As part of franchise renewal negotiations, both cable companies have agreed to credit subscribers the full amount of that month’s cable bill if the cable guy arrives late, or not at all.

The penalty decreases to $25 after 2012, when Verizon FiOS service is expected to blanket most of the city.

But consumer reforms extend beyond financial penalties for missed appointments.

Customers will soon be able to request notification by e-mail, phone or text message when a technician is heading to their home.  And calls to either cable company should be answered by a real person no more than 30 seconds after dialing.

Many of these reforms are already a part of the franchise agreement New York City’s Office of Information Technology & Telecommunications worked out with Verizon, allowing the phone company to provide cable television in the city.

Time Warner Cable spokesman Alex Dudley didn’t miss the opportunity to turn the challenging new requirements into an opportunity.  He told area reporters Time Warner welcomes the new customer service standards and appreciates the opportunity to compete for customers in the metropolitan New York area.

As Robert Porto, 38, a Time Warner Cable customer in Boerum Hill, Brooklyn, told the New York Times, the new contract will be “the ultimate revenge for the little guy.”

Importantly, none of these consumer-focused reforms would have been possible had New York adopted the kind of “reform” companies like AT&T and Verizon have advocated in other states — statewide video franchising.

Brodsky

New York’s legislature has rejected previous attempts to eliminate local cable and video franchise agreements, citing the loss of control by local municipalities to deal with provider issues that would sail over the heads of a statewide committee in Albany.  New York has been generally hostile to Big Telecom’s deregulation agenda.  One state assemblyman, Richard Brodsky (D-Westchester), even introduced a bill requiring phone companies like Verizon to split the proceeds of asset sales with ratepayers.

Other provisions of the franchise agreements include:

• The right to terminate franchise agreements with Time Warner Cable and Cablevision Systems if broadband-delivered video significantly erodes cable TV revenue over the next 10 years;
• Time Warner Cable and Cablevision are required to invest about $10 million to install Wi-Fi access in 32 public parks in all five boroughs, to be operated and maintained by the companies until 2020;
• At least five new Public, Educational and Government (PEG) community access channels will be added, up from the four that currently exist, by 2012.  At least one must be in HD.  The operators also agree to pay a combined total of more than $9 million, payable in annual installments, plus an additional $2 million of “in-kind” services to pay for equipment and operation expenses;
• More than $20 million to help finance the upgrade of CityNet, the city government-dedicated network;
• Time Warner Cable will establish four community broadband access centers per year (40 total), in collaboration with nonprofits, over life of franchise;
• Time Warner Cable will install 20 miles of fiber per year in underserved commercial/industrial areas over franchise term; and will build-out Brooklyn Navy Yard. Cablevision already serves the commercial blocks in its service areas. Companies will commit to expend $1.8 million per year to bring fiber to commercial buildings of city’s choice.

[flv width=”640″ height=”380″]http://www.phillipdampier.com/video/WABC New York New Yorkers could get money if cable guy stands them up 9-15-10.mp4[/flv]

WABC-TV covers the introduction of pro-consumer cable service reforms for metropolitan New York residents.  (2 minutes)

Frontier's Ann Burr sat down for an interview with a Rochester television station to discuss the future of landlines.

Frontier Communications told customers in western New York not to expect FiOS fiber-to-the-home technology from them anytime soon, claiming residents in upstate New York do not need broadband speeds that fast.  That prompted regular Stop the Cap! reader Bob in Rochester to drop us a note.

Ann Burr, general manager of Frontier’s Rochester division, told WHAM-TV reporter Rachel Barnhart the company believes its current DSL service is more than adequate for residents in the company’s largest service area.  This, despite the fact Frontier recently adopted a handful of FiOS markets purchased from Verizon Communications.  While Frontier has promised to continue delivering the fiber-to-the-home service in areas already offered the service started by Verizon, they have no plans to expand FiOS.

“We’re constantly upgrading our local networks to make sure they can get higher and higher speeds,” Burr told Barnhart. “Fiber lines are installed in newer developments, and neighborhoods that report problems with DSL lines get attention from technicians.”

With Frontier’s DSL service already available in 95 percent of Frontier’s Rochester-area division, Burr added, there is no need to offer FiOS in Rochester.

Burr, who was formerly president of Time Warner Cable’s Rochester division from 1995-1999, has made similar remarks in the past.  In February, she told readers of the Rochester Democrat & Chronicle they didn’t need ultra-fast broadband speeds from Frontier either.

from 'The Bridge'

Yet Verizon, one of the nation’s largest phone companies, thinks otherwise.  In upstate New York, the company is still completing its fiber optic network in cities like Albany, Buffalo, and Syracuse.  Verizon FiOS remains a top-rated favorite among readers of Consumer Reports.  Frontier’s DSL managed a less impressive 12th place.

Barnhart learned about Frontier’s broadband plans as part of a larger story about how the phone company will survive the age of the cell phone, as local customers continue to disconnect their Frontier landlines in favor of wireless service from providers like Verizon and AT&T.

Burr warned customers to think twice before disconnecting service.

“Don’t do it. Because I’ve personally been in a situation where my home was without power for a couple of days and you have to recharge cell phone batteries, which you can’t do if you don’t have power,” Burr said.

Burr can’t see a day when no one has a landline phone any longer.

“I don’t see that for a long time. I think that wired phone, copper infrastructure that’s been here for many years provides [the] security [and] reliability that people want,” she said.

Burr’s beliefs are contrary to industry statistics that show Americans continue to drop landline service.  Among those under 30, it’s sometimes hard to find anyone who has a landline at all.

The Bridge reports in the second quarter of 2010 alone, just three phone companies — AT&T, Verizon, and Qwest lost nearly 1.5 million landline customers, mostly to cell phone service and competing “digital phone” products offered by the cable industry.

Consumer Reports says its readers gave top marks to Verizon FiOS for its speed, selection, and service. Frontier didn't make this list at all.

[flv]http://www.phillipdampier.com/video/WHAM Rochester Will Frontier Communications Survive in Cell Phone Age 9-15-10.flv[/flv]

WHAM-TV’s Rachel Barnhart talked with local residents who have disconnected their Frontier landlines and spoke with Frontier’s Ann Burr about the long term prospects for a company primarily delivering that service.  (2 minutes)

For the third time this year, Time Warner Cable is increasing prices on some of its cable products in upstate New York.

Some customers in western New York are receiving notification that effective this October, the price for the cable company’s digital video recorder (DVR) box is increasing by 18 percent from $10.95 to $12.95 per month (remote control included). Time Warner Cable charges different prices for DVR service, depending on what each local market will tolerate and how much competition the company receives.  A representative of Time Warner Cable in Buffalo told us the company was trying to “standardize rates” across Upstate New York.  If true, residents in Buffalo who already experienced one recent rate increase for DVR service will get a big shock if rates are “standardized” in the same direction Rochester and Syracuse are experiencing.  More details below.

After multiple contacts, we’ve managed to sort out what we believe the increases to be.

Buffalo:  Verizon FiOS and the Buffalo economy have conspired to keep prices considerably lower in Buffalo than other upstate cities.  Buffalo residents pay just $9.95 a month for DVR service and will experience no increase in rates… for now.  If the Buffalo representative was correct about rate standardization, residents there will eventually see a $3 a month rate hike for DVR service.

Rochester: Effective October 15th, DVR service will increase $2 a month from $10.95 to $12.95, an 18 percent increase [Update 9/20 — Many areas are being notified on their bill it is $1, not $2 — see update below.]  Each additional DVR box will cost $11.95.  Originally, we were told the increase was a dollar a month.  Not so fast, says our reader Tim who tipped us off to the story.  He lives in a Rochester suburb and his September bill contained a notification the rate was increasing two dollars a month.  The bill was correct and the original representative we spoke with was wrong.

Syracuse: Residents of the Salt City are in the same boat as residents in Rochester.  On October 15th, DVR service there also increases by two dollars a month, from $10.95 to $12.95.  Apparently Verizon FiOS has not made as much of a competitive difference in Syracuse, probably because it is not widely available yet.

Ironically, if you register for TWC's MyServices control panel and shop the cable company's services online, you can grab a DVR box free for 12 months.

In February, Time Warner broadly increased rates on its cable and broadband services.  In September, rates for broadband-only customers also increased.  The latest increase will not affect customers on promotions or bundled packages that include a DVR.

Our reader Tim says he’s not going to stand for it.

“Time to trim another item off of my TWC bill,” he writes. “I already quit HBO, I guess the DVR is next.”

The Time Warner Cable representative we spoke with only learned about the rate increase “an hour ago.”  She told us, “We’re probably going to get some calls on this.”

Ironically, Time Warner Cable is giving away a year of free DVR service to customers in the northeast using its recently introduced “My Services” control panel and online shopping section.

Our advice to those who don’t want to pay the increase:

• Complain to Time Warner and ask for a credit for the difference in price for a year.
• Turn in your DVR box, wait a week and then take advantage of their “online only” offer, if available in your area, for a year’s free service. (Registration for MyServices required.)
• Cancel something else in your package that will make up the difference.  Are you still watching HBO or Showtime?  Many TWC systems charge $13.95 for HBO and $10.95 for Cinemax and other pay channels.  That’s up to $167 a year per premium network!  Many HD subscribers might still be paying for a Digital HD Tier that used to include HDNet and HDNet Movies.  Now you’re paying an extra $4.95 a month for MGM HD, Universal HD, Smithsonian, and the cattle auctions on RFD-TV.  Not watching those?  Drop that tier and save $60 a year.  If you still want commercial free movies, consider Encore’s Movie Pack instead of HBO, et al.  Encore only charges $5 a month for seven theme-based movie channels.

Believe the bill -- for residents in the city of Rochester and adjacent suburbs, the rate increase turns out to be $1 for DVR service, despite repeated assertions from TWC reps back on the 9th).

[Updated 3:30pm ET — We have been on the phone with Time Warner Cable reps in Buffalo, Rochester, and Syracuse a total of eight times to re-verify some of the information for this story after the first representative we spoke with gave us conflicting information.  Subsequent contacts also gave us a range of responses from “I’ve worked here four years and am telling you there is no price increase” to “Unfortunately we are increasing the price and I don’t know why.”  We’ve updated and corrected the details below.]

[Update #2: 9:15am ET 9/20 — I pulled up a copy of my October statement and discovered a dollar increase in the town of Brighton for DVR service, which triggered another call to TWC this morning to learn why the information I was given on the 9th was different from what the bill showed.

The latest explanation is that different areas are subject to paying different amounts.  Apparently.

For folks in the city of Rochester and adjacent suburbs, “less is more,” so the dollar increase is slightly better than the two dollar increase.  I just wish representatives were better trained to answer simple questions accurately.]