All-you-can-eat buffets, steak dinner vs. salad check splitting, electric and water service meters, toll highways with trucks vs. Mini-Coopers….  The justifications for Internet Overcharging representing “fairness” in broadband pricing have involved just about every analogy the broadband industry can come up with, all designed to make you think sticking a bigger bill to someone else down the street will somehow make your broadband bill smaller.

To convince sucker people into “billing fairness” that doesn’t actually reduce your pricing but could dramatically increase it is a tricky proposition.  To make it work, they have to convince you of a broadband boogeyman up the street who is using up all your Internet and making you pay for it.

As the Re-Education effort continues among the astroturfer and industry PR crowd, the one service broadband providers strenuously avoid comparing themselves to is your local telephone or cell phone provider.  That’s ironic, considering telephone companies move your calls around much the same way Internet traffic moves from point to point.  It’s the closest comparative service around, but your Internet provider doesn’t dare use it in their analogies, because the entire argument for Internet Overcharging schemes falls apart when they do.

While some in the broadband industry want to take your flat rate pricing away, the telephone and cell phone industry is working harder and harder to move to flat rate pricing. Many traditional phone companies now peddle their own unlimited nationwide calling phone plan for $20-40 a month.  Even some of the same broadband providers that want to take away your unlimited broadband service continue to mail blizzards of postcards and saturate the airwaves with marketing for their “talk all you want” unlimited phone plans.

In the mobile phone industry, an all-out price and feature war has erupted, as providers offer practically unlimited local and long distance calling.  No more buckets of minutes to count, no more overage penalties, no more worries about putting off calling until the evening or weekends to protect your minute allowance.

In the past week, major providers have fallen all over themselves with new unlimited calling plans.  Let’s take a look at today’s mobile calling landscape:

AT&T: Last Wednesday, AT&T launched A-List, primarily in response to Sprint’s new Any Mobile, Anytime (see below).  A-List lets customers add up to five numbers on an individual plan or up to 10 shared numbers on a FamilyTalk plan for unlimited calling to and from any phone number in the United States.  The new feature begins September 20, and customers can change their A-List members at any time.  Since customers often make the vast majority of their calls to a select group of people, it’s easy to get virtually unlimited calling that doesn’t exhaust your minute allowance.

Boost Mobile: Back in January, Boost Mobile, the prepaid mobile phone service using the Nextel system (certain areas also provide Boost on Sprint’s network), launched a $50 unlimited calling plan that also includes unlimited handset data use, unlimited text messaging, unlimited walkie-talkie use, no roaming, no hidden fees, no contract and no credit check.

Cricket: Cricket has always had a business plan catering to the prepaid user looking for generous or unlimited calling.  The company heavily emphasizes its package bundles, such as their $45 monthly plan that offers unlimited calling, unlimited text, video and picture messaging, unlimited mobile web browsing, and free 411 service.  The downside is their more limited coverage area, operating primarily for customers in urban and adjacent suburban areas, and providing almost no rural coverage at all.

MetroPCS: Similar to Cricket, MetroPCS aggressively prices unlimited calling plans and bundles in its more limited service areas.  For $40 a month, customers enjoy unlimited long distance calling, unlimited text and picture messaging, and web access.  That pricing is comparable to many wired phone lines with a package of phone features without unlimited long distance.  MetroPCS operates with a similar approach to Cricket – provide good coverage in the urban and suburban areas they focus service on, but usually ignores rural or more distant suburban areas.

PlatinumTel: Operating on the Sprint network, PlatinumTel is another prepaid provider offering unlimited calling, but with some important differences.  For $50 a month, customers enjoy unlimited calling to any domestic phone numbers, unlimited text messaging, etc.  But the service also provides unlimited roaming off their network, so if you get outside of Sprint’s coverage area, but are able to get a signal from another provider, you can still make and receive calls without incurring huge roaming fees.  You also get 100MB of included data (a small additional fee adds more data).

Straight Talk (from TracFone): If you’ve been to Walmart, you have probably seen TracFone phones and prepaid top-up cards at their stores.  TracFone is another provider that operates on someone else’s cellular network.  Their Straight Talk service operates on the robust Verizon Wireless network, providing excellent coverage in most areas except most of Kansas, Nebraska, Nevada, Mississippi and western Texas.  A $45 monthly fee brings unlimited minutes and text messages, but only 30 megabytes of data for data-enabled phones.

Sprint Nextel: Already offering unlimited calling to other Sprint mobile customers, the third largest national mobile phone company last week introduced Sprint Any Mobile, Anytime. It allows you to call and receive calls from any cell phone on any network in the USA unlimited for free. You’re not limited to just one network or one calling circle. The feature is now automatically added to the Sprint Everything Data plans starting at either the $69.99. The plan also comes with unlimited text messaging and data. The new Any Mobile, Anytime will be especially popular with younger people who have already abandoned traditional landline telephone service and rely exclusively on mobile phones.  You literally cannot exhaust your minute allowance calling these people.  In fact, the only way to burn your minutes under this plan is to roam outside of Sprint’s network or call people on traditional wired phone lines.

T-Mobile: T-Mobile offers the myFaves Minutes plan, which gives customers unlimited minutes to any five numbers of your choice on any network, mobile or landline (excludes toll-free/900 numbers).  It’s easy to use T-Mobile as an unlimited wireless phone provider assuming the majority of your minutes are spent talking to up to five numbers every month.

Verizon Wireless: Already offering unlimited free calling to other Verizon Wireless customers (there are a ton of those), the company also introduced Friends & Family in February. With an eligible plan, customers have unlimited calling to a select group of numbers outside their standard mobile-to-mobile calling group, including landlines. This gives single line accounts up to 5 numbers to choose from on plans with 900 or more minutes, and family plan accounts up to 10 numbers to choose from on plans with 1,400 or more minutes.

Virgin Mobile: Virgin Mobile relies on Sprint’s network, and with Sprint Nextel’s planned purchase of Virgin Mobile, which the company hopes to complete this November, it may soon become Sprint Nextel’s in-house prepaid service.  Virgin Mobile introduced its Totally Unlimited calling plan on April 15.  For $50 a month, customers get unlimited calling.  For an additional fee, unlimited texting is added, along with mobile data options.

It’s difficult, at best, to make the kind of analogy the broadband industry wants to regarding “paying for what you use” when one of their closest cousins is competing hard to give you “all that you want for one price.”

Update: 9/15 — Jayne Wallace, a representative for Sprint Nextel, wrote to clarify “Sprint Nextel has not yet purchased Virgin Mobile…we do expect the deal to close in November. As of now, we are publicly held. Also since you mention broadband, we’ve also applied the pay as you go pricing here with Broadband2Go, the only nationwide prepaid broadband product available.”  The article text under Virgin Mobile has been adjusted to reflect the planned purchase.

“Comcast isn’t looking to make a $50 billion purchase.”

Stephen Burke, Comcast Chief Operating Officer

Now that Comcast has been freed from that pesky provision of the 1992 Cable Act, authorizing the Federal Communications Commission to set a maximum size for large corporate cable operators, the nation’s largest cable operator is now considering breaking out the checkbook and going on a shopping spree.  That is likely to spark a merger and acquisition frenzy among several players in the industry which could dramatically reduce America’s choices for telecommunications services.

Bloomberg News this evening quotes Stephen Burke, Comcast’s Chief Operating Officer, that it will consider buying other cable operators at a “good price.”

“If there is a way to acquire cable systems for what we consider a good price, ones that are well managed, we would certainly look at whatever is out three,” Burke, 51, said today at a Bank of America Corp. conference in Marina del Rey, California. Still, the company “isn’t waking up every morning” evaluating how it can become bigger, he said.

The Wall Street Journal calls the decision by the U.S. Court of Appeals in Washington, freeing Comcast from its limits, the start of “the coming cable consolidation.”

Martin Peers, writing for the Journal, said that when the dust settles, phone companies might own satellite TV providers and cable companies might end up consolidating into one or two super-sized providers blanketing the entire country with service.

Consumers would be left with a handful of providers for all of their communications needs, from telephone to broadband to television, if the courts open the door with more decisions favorable to the industry and antitrust reviews aren’t aggressively undertaken.

Starting with Comcast, Burke thinks Comcast’s first priority might be to buy up more programmers.  Comcast already has ownership interests in several cable networks, and Burke feels “content channels are good businesses, and we wouldn’t be doing out job if we didn’t try to figure out a way to get bigger in those businesses.”

With Comcast and Cablevision joining forces to sue their way out of the cable network exclusivity ban, owning and controlling those networks, and what competitors get access to their programming, could be an important asset in an ever-consolidating marketplace.  Imagine if U-verse or FiOS was denied access to ESPN, The Weather Channel, CNN, and other popular cable channels.  Would subscribers be compelled to switch providers if they could no longer get the channels they want to watch?

The Journal ponders the coming consolidation frenzy:

Comcast and other cable companies will probably need to consider more consolidation — if not now, in the next couple of years. They are still losing market share to satellite and phone rivals. Comcast lost nearly 700,000 basic subscribers in the year to June. Time Warner Cable has fallen to No. 4 among TV providers, behind satellite firms DirecTV Group and Dish Network.

Cable operators are more than offsetting video losses by selling phone and Internet-access. Eventually, though, those opportunities will peter out. And phone companies’ competitive threat in video could be enhanced by a combination with satellite TV.

The newspaper speculates about this kind of marketplace in the near future:

Today's pay television marketplace

AT&T DirecTV: The Journal ponders an AT&T buyout of DirecTV resulting in a reduction in AT&T’s investment in U-verse, pushing consumers to its newly-acquired satellite service and redirecting investment into the overburdened AT&T mobile phone network.

VerizonDISH: A Verizon buyout of DISH would allow the phone company to push more rural customers to DISH satellite service, and reduce the expense of wiring all but the nation’s largest cities with fiber optics.

Comcast (formerly Comcast & Time Warner Cable, if not others): A supersized Comcast absorbs Time Warner Cable and becomes an even more dominant cable operator, leveraging its investment in Clearwire to offer a  wireless data option to stay competitive with the mobile phone companies like AT&T and Verizon Wireless.

That would leave most Americans with just three choices for telecommunications services capable of bundling multiple products together.  Wouldn’t such a merger-mania trigger antitrust implications and government review?

The Journal doesn’t think so:

Would such a deal pass antitrust scrutiny, even absent the ownership cap? There is a good chance, say several antitrust lawyers. A major focus of antitrust law is whether a merger reduces competition in a way that could raise prices or otherwise hurt consumers. As cable operators generally don’t compete with one another, merging wouldn’t cut competition.

But what kind of benefits would be found for consumers?  If one resides in a city too small to be judged worthy of fiber optic deployment, consumers could be told to get the satellite television service and live with the copper wiring the phone companies provide today.

Cable operators would be in a fine position to compete, as they traditionally have, against satellite television because of the technical limitations of satellite service, ranging from consumer objections to having a dish on their home, to a limit on the number of sets that can be wired, to the inability to get a clear view of the satellite because of nearby trees or other obstructions.

Who pays for the debt likely incurred from a bidding war during a merger frenzy?  Guess.

It’s bad enough when service providers overcharge us for service we use, but it’s even worse when they bill you for services you don’t.

Verizon Wireless may be looking at millions of dollars in refunds for customers who got dinged $1.99 monthly fees on their Verizon Wireless bills labeled mysteriously as “Usage Charges, Data.”

Two dollars on a phone bill that typically exceeds $50 or more is likely to be missed by a lot of consumers skimming the fees, surcharges, taxes and other impenetrable charges that get tacked on to your monthly service.  Even worse, since Verizon charges a fee for a printed bill, most customers never even bother to look at the electronic online bill beyond the general e-mail notification received each month letting you know it has arrived.  But some Cleveland-area residents did bother to take a look, and they didn’t like what they saw:

The Money Matters column chronicled the writer’s six-month ordeal with $1.99-per-month data charges and the possible causes given by Verizon’s customer service workers. All, it turned out, were wrong or only partly true.

More than 400 Plain Dealer readers responded to the newspaper with complaints similar to the ones in the column. The readers collectively pay for more than 1,000 phone lines. In addition, calls to customer service and visits to Verizon stores increased noticeably after the column.

Take a look at your bill

Where to look for the data usage charge: The first page of your bill should have a section labeled “Quick Bill Summary.” Look under the summary for “Usage Charges, Data.”

What to do if you spot an error
Call Verizon customer service (800-922-0204) or visit a full-service store to investigate the charges and ask for a credit.

If Internet usage is the issue, ask technical support to track down the Web sites visited, and dates and times.

If premium text messages are the issue, determine whether you have applications that are downloading information automatically. Go to your “menu,” then click “media center.” You may need Verizon’s help determining what applications cost money.

You can block features you don’t use and don’t want to be charged for by accident, such as Internet access or the weather forecast. Access your account online, call customer service or visit a store.

At a minimum, thousands of customers apparently have been charged $1.99 per month for Internet “data usage” even though they had not tried to go online. In some cases, customers were charged when their phones were off, the batteries were dead, the phone’s Internet access was blocked or even when the phones didn’t have the software to go online.

One clue might be customers who inadvertently accessed the Internet browser just for a few seconds by mistakenly pressing the wrong keys on the phone.  Even a momentary activation of a Mobile Web service could generate the access fee, even if you hit the “end” key on the phone within seconds.

Frustrated customers catching the charge on their bills each month then have to pursue the ordeal of contacting customer service to have the charge removed, and frequently run into misinformed customer service representatives who argue the fees are valid for services customers don’t even have, or are offered free of charge by Verizon Wireless.

Some readers say they’ve been battling the charges for more than a year. Most said they’re tired of calling Verizon month after month. Some were irate because they’d punished their children because they wrongly believed the kids had gone on the Internet. One reader said his mom’s phone was charged for Internet access – weeks after the mother had died and her phone sat idle in her empty home.

Karen Fullerman of Twinsburg is typical of customers who complained to The Plain Dealer last week.

Fullerman has three phone lines; two are for her 23-year-old twin daughters. Fullerman has been charged $1.99 on one or two phones every month. And sometimes there’s an extra $9.99 download fee. Fullerman, who recently lost her job, said every dollar counts these days.

She insists that none of the three has gone on the Internet. And she said Verizon has told her repeatedly that the company has blocked the phones’ ability to go on the Internet – yet the Internet charges continue.

The same is true for James Grega of Brunswick, whose four phone lines with Verizon have been getting charged sporadically for about four months.

“The phones are still being charged after I had them blocked,” Grega said. “Their assurance that the $1.99 charges would stop has been a joke.”

Now, some customers who have repeatedly been credited for erroneous charges are being denied for future requests, and that is partly what prompted The Plain Dealer to get involved.

Verizon Wireless claims to be investigating the problem and promises customers full credit, assuming they specifically request it.  Therein lies a major problem for consumers, one that benefits providers with billing problems.  Consumers frustrated by long hold times or the aggravation of requesting credits may forego doing so, providing a windfall for the service provider based on a billing error.

Roger Tang, a regional vice president for Verizon, told The Plain Dealer it would resolve accidental web browser access when consumers hit the wrong buttons on their phones.  The default home page for most Verizon phones is Verizon’s own web page.  The company will make visits to that page exempt from Internet time charges “as soon as possible.”

[flv width=”320″ height=”240″]http://www.phillipdampier.com/video/WMAR Baltimore Verizon Wireless 199 Mystery Fee 9-8-09.flv[/flv]

WMAR Baltimore ran a Scam Alert on Verizon Wireless Overcharging (9/8/09)

Verizon Wireless has a problem with customers who look for the cheapest possible plans for their most capable phones.  Those days are over, as the company introduces ‘mandatory’ data plans for customers using what they define as “enhanced multimedia phones.”

Going forward, phones that meet these four qualifications will be defined as such:

Enhanced Multimedia Phone

1. “Enhanced” HTML Browser
2. REV A
3. Launched on of after September 8, 2009
4. QWERTY keyboard

The first phone to achieve this distinction is the Samsung Rogue, due for release on September 9th.

Customers who try to purchase this, or other phones that “qualify” for this status will be required to choose either a service plan that already bundles “unlimited data” (defined as 5GB per month), or choose from one of these mandatory add-on plans:

A-la-carte data – No usage allowance — $1.99/megabyte
25 megabytes per month — $9.99/month
75 megabytes per month — $19.99/month

The one option not available to customers is a block on all data services, to prevent any billing at any of these prices.

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Verizon Wireless' Data Pricing "Refresh" (Courtesy: Boy Genius Report)

What will also no longer be an option is the $15 VCAST Vpak add-on, providing streaming video and includes unlimited data.  Customers signing up for VCAST Vpak before September 8th will be grandfathered in and be able to keep this add-on.  After September 8th, customers will find a $10 VCAST Video on Demand package on offer instead.  It provides unlimited video access, but no data allowance.  Customers will have to buy one of the add-on plans mentioned above.

Verizon Wireless’ internal marketing slides, leaked to The Boy Genius Report, speak to Verizon’s motivation for making these changes — money.  One slide notes that “over 60% of new activations would require a data plan next year” if the customer wanted access to both data and video on their new phone.  Additionally, the change “alleviates HTML capable handset subsidy pressures,” which essentially means they will be able to sell a more advances handset for less money, knowing they’ll make up the difference with a mandatory data plan charged over the life of a two year contract.

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Marketing Slide Shows Verizon Pushing Customers to Unlimited Data Option as a Better Value

Verizon defends the changes by noting prior to the mandatory data plans, customers who used their browser-capable phones had to either pay the $1.99/megabyte a-la-carte rate, choose a premium unlimited data plan, or get VCAST Vpak.  The company feels the 25 and 75 megabyte options may work for customers with light usage, but enough that would bring their data usage over five megabytes per month ($10 on the a-la-carte option).

Realistically, this is another example of a data provider providing consumption billing options at ever-greater pricing.  With the loss of the VCAST Vpak option, consumers are now pushed into more expensive options, and will likely be heavily marketed bundled services that include data, just to avoid the pricey mandatory 25/75 megabyte add-ons.

Customers should anticipate marketing of bundled plans and little, if any, mention of the “a-la-carte” option that does not add a monthly fee to the customer’s bill.  Indeed, the slides obtained from BGR don’t show the a-la-carte option at all on the “Choosing the best plan” slide.  Instead, it pushes customers to the unlimited data option “for just one penny more” for customers choosing the popular second level Verizon Wireless Select plan (with the data plan add-on), which includes 900 talk minutes.

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Verizon Select's Popular 900 Minute Option, Before the $9.99+ data add-on becomes effective.

Some Verizon Wireless customers relive better days, as they remain grandfathered on truly unlimited data plans chosen before the era of usage caps.  It’s just additional evidence that when usage capped broadband hits the scene, it’s only a matter of time before prices increase, and the usage cap allowances decrease.

Frontier vs. Time Warner. Frontier vs. Comcast. Frontier vs. NPG Cable. Across 24 states, passing nearly 3,000,000 households, some in America’s smallest towns and others in large cities, Frontier Communications is engaged in a battle of survival in an increasingly competitive American telecommunications marketplace.

In this series examining Frontier Communications, today’s report investigates the competitive realities of a hotly competitive telecommunications industry, becoming more concentrated by the day.    How does Frontier intend to survive and grow, and is it realistic to assume it can in an environment that demands major investments in the delivery of high quality video, low-priced telephone service, and reliable broadband that may be beyond its reach?   Yesterday, we saw how Frontier is attempting to control expenses with the plan to implement a 5GB usage cap on its broadband customers.   Today, we take a look at how Frontier attempts to maintain its market share and deal with customer defections.   Tomorrow, we take a closer look at how quickly Frontier’s telephone line business is losing ground to its competitors.

Frontier’s Background At A Glance

NPG Cable's Rate Card & Channel Lineup In Bullhead City, Arizona. How much of a competitive threat is a cable company without a spellchecker?

Frontier Communications, formerly Citizens Communications, primarily runs originally independent telephone companies in rural and exurban areas bypassed by the former Bell System. The company’s most significant presence is in the 585 area code, home to Rochester, New York. But from Elk Grove, California and Bullhead City, Arizona eastward to the AuSable Valley in central New York to Bluefield, West Virginia, a significant number of Frontier customers are also in some of America’s  small towns and cities.

The size of a community where Frontier operates is often indicative of how much competition the company faces.  Some of Frontier’s most difficult challenges can be found in the  Rochester, N.Y. metropolitan area, numbering nearly 1,000,000 people, where a well entrenched Time Warner has made deep inroads into Frontier’s telephone access line business, eats Frontier for breakfast in the video delivery business, and has been a dominant player in the broadband marketplace since Road Runner arrived  in 1998.

In more rural communities, Frontier often has it much easier,  free from  cable competition  in some  areas, or  competing with a small independent cable company that may be relying on its own aging infrastructure and cannot afford to engage in price and service wars. Where Frontier stands as the lone player or only faces token competition from a small cable company, consumers will likely find  lower speed broadband at higher-than-average prices.

The Threat From Big Cable

Comcast's Product Bundles Threaten Frontier In Many of Their Service Territories

The cable television industry’s entry into telephone service  is among the biggest threats Frontier faces in maintaining their traditional primary revenue source: residential and business wired telephone lines.

Deploying  voice over IP technology, Comcast and Time Warner, the nation’s largest cable operators, have made significant inroads into Frontier’s telephone business where they compete.   Now, even smaller players in the cable industry are prepared to offer voice over IP service to customers.

Joining cable at the table are  mobile telephone companies like Verizon Wireless, Sprint, and AT&T which are also eroding Frontier’s  phone line business  as more people in America  rely exclusively on their mobile phone for telephone service.

How Cable Companies Pick Off Frontier’s Customers

Product Bundling & Discounting: The most important component of cable’s strategy against Frontier is cable’s product bundle, combining a voice over IP telephone line, a cable television package, and a high speed data product. Usually marketed as a “triple play” or “all the best” package, consumers are offered discounts based on the number of components of a package they combine. The more components, the greater the discount.

The product bundle offered by the cable industry has a competitive advantage because cable companies almost always have a more advanced network to deliver these products. Throughout the 1990s, most cable systems spent millions rebuilding their systems to accommodate increasing bandwidth requirements.   The result is a considerably larger pipeline used to deliver data, video, and telephone services.

Frontier’s network is considerably more dated, largely dependent on copper wire strung on telephone poles. While the company has made significant investments in their own  network, including some fiber optics,  in the end, they still rely on the same copper wire infrastructure the industry has used for nearly 100 years to connect to your home or office.

AT&T's U-verse service can deliver the goods over copper wire, but you need deep pockets to develop and deploy this technology. Are Frontier's deep enough?

Although this copper network is suitable for traditional telephone service, and can usually deliver a respectable data service over DSL, the video component has been sorely lacking. While AT&T is testing its U-verse video-over-copper technology in limited markets, Frontier is stuck  reselling Dish Network, the  smaller player in the satellite television marketplace.

Many consumers are resistant to satellite dishes of any size attached to their homes, and the cable industry’s response to Frontier has been the same as to DirecTV and Dish Network themselves: ugly satellite  dishes that suffer from rain/snow fade, require expensive service calls and maintenance, and a limitation on the number of TV sets you can hook up.   Also, no local channels in many areas.   In the end, most people who were even slightly uncomfortable with satellite-delivered TV elected to just stick with what they already had: cable television.

Results of the Dish Network partnership continue to be underwhelming. Sources tell Stop the Cap! the satellite service only succeeds in areas where there is no cable competitor, the customer was already a Dish Network subscriber independent of Frontier, or the incumbent cable company is hampered by a limited channel lineup, no HD channels, or exceptionally bad service. In Rochester, Frontier is actually losing more Dish Network customers than it is adding, and growth is  anemic in many other Frontier regions as well.

Frontier’s inability to provide a comparable quality television service is a critical defect in their competition with cable.

Claiming Inferior Product Quality:  The cable industry wasted no time attacking Frontier’s DSL product, accusing it of not performing consistently. Uneven telephone line quality, distance from the telephone company central office, and signal ingress (when interference or crosstalk gets into wiring and degrades the signal) can all dramatically slow a DSL customer’s  broadband speeds. The cable industry’s marketing often pillories DSL service because of its inability to offer anything close to a speed guarantee, and the fact  it is often slower than cable’s competing product no matter how good your line is.

In areas where a large cable competitor exists, traditionally  that cable operator will have the fastest speed broadband package to sell to customers in that market. This forces Frontier to compete on price.   In return for a significant discount, Frontier  usually locks customers into multi-year service agreements which discourage its customers from  switching to a competitor.   Unfortunately, the company’s inferior product bundle and  long term contract commitments have made it difficult to convince cable customers to switch to Frontier,  particularly if it means taking their video package from Dish Network.

Lampooning Questionable Marketing Practices: In Rochester, Time Warner’s marketing people have had no trouble finding new ways to attack Frontier in its advertising.   While Frontier may be able to pull off some of their hidden extra charges, long term contracts, and restrictive service policies in more rural communities, most of those practices meet strong criticism in Time Warner’s advertising.

Among the more common refrains in Time Warner ads  dismissing Frontier’s DSL  product include:

• Charging a “modem rental fee” as part of Frontier’s DSL service, even if you can supply your own DSL modem.

• Locking customers into a term commitment contract (often lasting several years) for DSL service that offers lower speeds than Time Warner’s Road Runner service and charging a substantial early termination fee for those dissatisfied with their broadband experience.

• Charging for ancillary support services like Frontier’s “Peace of Mind” that Time Warner claims to offer at no charge.

The latest decision to impose a 5GB usage cap on customers is marketing gold for the cable companies competing with Frontier, perhaps only tempered  by the fact they are also studying whether to apply their own usage caps.

Relentless Marketing: One of the fringe benefits of owning your own video distribution network is the ability to pepper your existing customers with near-constant advertising promoting your own products while denigrating the competition. Cable customers can see an average of three product promotion spots every hour from their cable company trying to convince them to upgrade, attempting to bolster customer loyalty, or simply slashing and burning whatever the telephone company or satellite dish company is offering. Frontier has  a limited ability to counter this.

In areas of significant competition, the battle usually rages in your mailbox, with  a relentless flood of  promotional postcards and mailers, as well as ad buys on local television/radio stations and local newspapers. But cable retains an important advantage because of their ability to insert advertising into basic cable channels, usually at no cost to them.   Frontier doesn’t own their video distribution network – they are reselling someone else’s.

Frontier’s Battle Plan

Welcome to DeLand, Florida: Home of Frontier's Customer Care Center

Frontier’s plan to compete with cable includes  their own marketing by mailbox, and sponsoring local community events and charities to leverage free media and consumer exposure to the company brand to nurture positive feelings  about the company.

The company also places a high priority on attempting to position themselves as “local” players in the market – a company made up of local employees who customers supposedly will interact with on a daily basis. Unfortunately for them, most customers will likely only interact with one of their customer care call centers such as the one  in DeLand, Florida which is localism IF you live, work and play in DeLand.

Frontier also maintains call centers in Henrietta, New York and Burnsville, Minnesota which are designed to replace what used to be local customer service call centers in more than a dozen  Frontier areas.   Some 500 people were hired to answer phones in DeLand for Frontier.   This begs the question how many people lost those jobs in the various local communities where Frontier operates.

Call center employees are on Frontier’s competitive front line, trying to  maintain customer loyalty, convince customers to upgrade their service packages, and above all, remain with Frontier and don’t cancel anything.

They need to maintain the battle, because cable competitors continue to erode their residential business. The company’s deactivations of high speed data services and the ongoing loss of telephone lines are considerably above the company’s own estimates.

One significant bright spot Frontier has maintained is delivering commercial broadband to businesses.

Frontier has a significant advantage in many offices, business parks, and other industrial areas bypassed by their cable competitors. Installation costs to wire a building with coaxial cable often run into the tens of thousands of dollars, an expense borne by the company, the landlord, or a combination of the two. But every business has telephone service, which usually guarantees potential access to DSL service from Frontier. Small and medium sized businesses have become loyal Frontier commercial customers because of low installation costs and a reasonable pricing plan that is typically far more cost effective than what cable is offering. Cable modem commercial access pricing models are usually tailored to a range of product speeds at prices that, when compared with what Frontier can offer, are not competitive.

Frontier’s ability to effectively compete against cable will, in the end, come down to the company’s ability to invest in their network and be able to match what is on offer from the cable operator, and new competitors yet to emerge.    Some former Baby Bell telephone companies like AT&T are investing enormous sums to leverage their existing network (their U-verse product) or starting over from scratch (Verizon’s fiber optic cable to the home FIOS project).

To date, Frontier’s status as a smaller player has meant their investments in these efforts pale in comparison to their larger brethren.   They include experimenting with deploying fiber optic cable to new housing developments and selected mass density buildings (apartments, offices) in Rochester, building community wi-fi networks to create a new market for wireless Internet access, and other investments in their network distribution system.   If they cannot invest enough, fast enough, to keep up, they will become ripe for a merger with a larger player in the market or get wiped out by the competition.

In the meantime,  to quote company chairwoman and CEO Maggie Wilderotter, Frontier intends to “stay the course” for the rest of the year.

We’ll have to wait and see if that’s good enough.