[flv width=”360″ height=”290″]http://www.phillipdampier.com/video/WBGH Binghamton Verizon Supports Occupy Binghamton 10-28-11.mp4[/flv]

Verizon employees in upstate New York are joining the “Occupy” movement that began protesting Wall Street, but has since broadened to include criticism of some of America’s largest corporations.  Company employees are arriving at “Occupy” protests holding signs attacking the company for “destroying the middle class” through job and benefit cuts.  The protests are also impacting cable operators.  Several arrests were made this week by protestors at Comcast headquarters in Philadelphia.  Most of the protestors are concerned about jobs and the pervasive influence corporate lobbyists have on American public policy.  WBNG in Binghamton covers the protests against Verizon.  (2 minutes)

AT&T customers are getting no bars in more places in the state of Connecticut as the wireless company deals with 150-200 cell towers that are either without power or were damaged by a weekend storm that brought more than 20 inches of snow to some parts of New England.  But some customers are questioning why AT&T has suffered damage to their cell tower network while other carriers report no significant damage at all.

“As of Wednesday afternoon, we still have no AT&T wireless service and it takes miles of driving to find a cell tower that is still working,” reports Sam, a Stop the Cap! reader outside of Hartford.  “My friends’ Verizon Wireless and Sprint phones work as if the storm never happened. In fact, I can’t find any Verizon customer who is impacted by the storm, but that’s sure not true with AT&T.”

On Sunday, Connecticut Gov. Dannel P. Malloy noted AT&T told state officials that 152 cell towers had been damaged by the storm and that cell phone service would likely be disrupted in some portions of the state for some time to come.  But Verizon Wireless reports outside of some power outages, they sustained absolutely no damage to any of their towers and backup generators are expected to provide uninterrupted service even in areas where extended power outages are occurring.  A Verizon spokesman reported at least 93 percent of its network was operating as of Tuesday, with most of the sporadic outages due to backup batteries depleting their stored energy before technicians arrive to fire up backup generators.

Sprint also reports only minor interruptions to its service in Connecticut, mostly due to power failures.

In most cases, extended power interruptions are responsible for cell tower service failure.  When power is restored, cell service generally is as well.  But this outage proved more extensive because AT&T’s backhaul network between towers and their own facilities was also damaged by falling tree limbs and power poles.

Residents tell the Hartford Courant AT&T has made some progress as the week wears on, with slowly improving service as towers are brought back online.

“We continue to make progress in restoring service to our customers in the wake of the recent snowstorm,” Kate McKinnon, AT&T spokeswoman for the northeast region told the newspaper. “We have deployed generators and crews across the storm-impacted areas and are working around the clock to address service issues. We also continue to work with local Connecticut utility companies as they restore commercial power to affected cell sites and facilities.”

Power utility companies have first priority in service restoration. Connecticut Light & Power reports 77 percent of their customers lost power during the snowstorm.  As of this afternoon, at least 544,000 are still waiting for power to be restored.

Phillip Dampier on USF Reform: It might have been great, it could have been a lot worse, but ultimately it turned out to be not very good.

Last week, the Federal Communications Commission unveiled their grand plan to reform the Universal Service Fund, a program originally designed to subsidize voice telephone service in rural areas deemed to be unprofitable or ridiculously expensive to serve.  Every American with a phone line pays into the fund through a surcharge found on phone bills. Urban Americans effectively subsidize their rural cousins, but the resulting access to telecommunications services have helped rural economies, important industries, and the jobs they bring in agriculture, cattle, resource extraction, and manufacturing.

The era of the voice landline is increasingly over, however, and the original goals of the USF have “evolved” to fund some not-so-rural projects including cell phone service for schools, wireless broadband in Hollywood, and a whole mess of projects critics call waste, fraud, and abuse.  For the last several years, USF critics have accused the program of straying far from its core mission, especially considering the costs passed on to ratepayers.  What originally began as a 5% USF surcharge is today higher than 15%, funding new projects even as Americans increasingly disconnect their landline service.

For at least a decade, proposals to reform the USF program to bridge the next urban-rural divide, namely broadband, have been available for consideration.  Most have been lobbied right off the table by independent rural phone companies who are at risk of failure without the security of the existing subsidy system.  Proposals that survived that challenge next faced larger phone company lobbyists seeking to protect their share of USF money, or by would-be competitors like the wireless industry or cable operators who have generally been barred from the USF Money Party.

This year, FCC Chairman Julius Genachowski finally achieved a unanimous vote to shift USF funding towards the construction and operation of rural broadband networks.  The need for broadband funding in rural areas is acute.  Most commercial providers will candidly admit they have already wired the areas deemed sufficiently profitable to earn a return on the initial investment required to provide the service.  The areas remaining without service are unlikely to get it anytime soon because they are especially rural, have expensive and difficult climate or terrain challenges to overcome, or endure a high rate of poverty among would-be customers, unable to afford the monthly cost for the service.  Some smaller independent phone companies are attempting to provide the service anyway, but too often the result is exceptionally slow speed service at a very high cost.

The new Connect America Fund will shift $4.5 billion annually towards rural broadband construction projects.  Nearly a billion dollars of that will be reserved in a “mobility fund” designated for mobile broadband networks.

The goal is to bring broadband to seven million additional households out the 18 million currently ignored by phone and cable operators.

The FCC believes AT&T will take a new interest in upgrading its rural landline networks, even as the company continues to lobby for the right to abandon them.

Unfortunately, the FCC has set the bar pretty low in its requirements for USF funding.  The FCC defines the minimum level of “broadband” they expect to result from the program — 4/1Mbps.  That’s DSL speed territory and that is no accident.  The phone companies have advocated a “less is more” strategy in broadband speed for years, arguing they can reach more rural customers if speed requirements are kept as low as possible.  DSL networks are distance sensitive.  The faster the minimum speed, the more investment phone companies need to make to reduce the length of copper wiring between their office and the customer.  Arguing 4Mbps is better than nothing has gotten them a long way in Washington, but it also foreshadows the next digital divide — urban/rural broadband speed disparity.  While large cities enjoy speeds of 50Mbps or more, rural towns will still be coping with speeds “up to” 4Mbps.

The FCC does not seem too worried, relying heavily on a mild incentive program to prod providers to upgrade their DSL service to speeds of 6/1.5Mbps.

The irony of asking AT&T to invest in an aging landline network they are lobbying to win the right to abandon is lost on Washington, and future speed upgrades for rural America from companies like Verizon are in serious doubt when they sell off their rural areas to companies like FairPoint and Frontier and leave town.

Critics of USF reform suggest the program is still stacked in favor of the phone companies, and considering the state of their copper wire networks, would-be competitors are scratching their heads.

The cable industry, in particular, is still peeved by reforms they feel leave them at a disadvantage.  Of course, Washington may simply be recognizing the fact cable companies are the least likely to wire rural America, but when they do, the service that results is often faster than what the phone company offers.  The nation’s biggest cable lobbyist — ironically also the former chairman of the FCC, Michael Powell — still feels a little abused after reading the final proposal.

“While we are disappointed in the Commission’s apparent decision to ignore its longstanding principle of competitive neutrality and provide incumbent telephone companies an unwarranted advantage for broadband support,” said National Cable & Telecommunications Association President Michael Powell, “we remain hopeful that the order otherwise reflects the pro-consumer principles of fiscal discipline and technological neutrality that will bring needed accountability and greater efficiency to the existing subsidy system.  We are particularly heartened by the Commission’s efforts to ensure that carriers are fairly compensated for completing VoIP calls.”

Wireless operators are not happy either, because the arcane requirements that come with the USF bureaucracy were written with the phone companies in mind, not them.  Small, family-owned providers find it particularly difficult to do business with the USF, if only because they don’t have the staff or time to navigate through endless documents and forms.  Phone companies do.

Your phone bill is going up.

Many consumer groups are relieved because it could have been much worse.   The FCC could have simply capitulated and adopted the phone companies’ wish-list — the ABC Plan.  Thankfully, they didn’t, but the FCC has naively left the door open to substantial rate increases for consumers by not capping the maximum annual outlay of the fund.  That follows the same recipe that invited higher phone bills and questionable subsidies awarded in an effort to justify the original USF program even after it accomplished most of its goals. Consumers may face initial rate increases of $0.50 almost immediately, and up to $2.50 a month five years from now.

The FCC, unjustifiably optimistic, suspects phone companies and other telecommunications interests won’t gouge customers with higher prices.  They predict rate increases of no more than 10-15 cents a month.  I wouldn’t take that bet and neither will consumer groups.

“We’re going to press the FCC to ensure that these are temporary increases, because history has shown that these types of costs tend to stick around and go on and on and on,” said Parul Desai, policy counsel for Consumers Union.

An even bigger question left unanswered is just how far the FCC will get into the broadband arena when it refuses to take the steps necessary to ensure it has an admission ticket.  The agency has avoided classifying broadband as a telecommunications service, an important distinction that would bolster its authority to oversee the industry.  Without it, some members of Congress, and more importantly the courts, have questioned whether the FCC has any business in the broadband business.  Just one of the many high-powered players in the discussion could test that theory in the courts, and should a judge throw the FCC’s plan out, we’ll be back at square one.

[flv]http://www.phillipdampier.com/video/C-SPAN Tom Tauke from Verizon on Changes to the Universal Service Fund 10-29-11.flv[/flv]

Verizon’s chief lobbyist Tom Tauke spent a half hour last weekend on C-SPAN taking questions about USF reform and the side issues of IP Interconnection and Net Neutrality policies. Tauke supports consolidation of small phone companies into fewer, larger companies.  He also expands on his company’s lawsuit against Net Neutrality, which fortuitously (for Verizon) will he heard by the same D.C. Court of Appeals that threw out the FCC’s fines against Comcast for throttling broadband connections.  Politico’s Kim Hart participates in the questioning, which also covered wireless spectrum issues impacting Verizon Wireless, AT&T’s stumbling merger deal with T-Mobile, and Verizon’s latest lawsuit against the FCC for data roaming notification rules.  (28 minutes)

Cablevision executives reported dismal financial numbers for the third quarter of this year, as the cable company lost 19,000 cable television customers while profits plummeted some 65% at the Bethpage, N.Y.-based company.

Not even 17,000 new broadband customers could erase the damaging losses incurred by Cablevision cord-cutting, some of it as a result of the cable operator’s damaging retransmission consent disputes that deprived viewers of popular local broadcast outlets and cable channels.  The company lost so much subscriber goodwill, company executives admitted they pared back an anticipated rate increase just to protect themselves from further customer defections.

Programming disputes like this one with WABC-TV and their parent company Disney caused more than a few Cablevision customers to head for the competition.

Cablevision, like Time Warner Cable before it, won’t admit that cable cord-cutting is responsible for what one investment bank fears could be the start of an “ex-growth” era in cable television.  Instead, Cablevision executives continue to blame the poor economy for subscription losses, as well as aggressive pricing competition from their biggest rival — Verizon FiOS.  Adding pressure is the relentless demand for higher programming fees, which directly translates into relentless annual rate increases for cable television service.

“With regard to programming [costs, they are] an issue and it is an expensive part of our business.  It is the single biggest cost item we have,” said Gregg G. Seibert, Cablevision’s chief financial officer and executive vice-president. “And the fact that retransmission consent became necessary from the eyes of broadcasters, particularly after the 2008 recession, has been flowing through our business, and there was a large step up [in fees]. I think that the overall rate of programming [costs] going forward will moderate to some extent naturally.”

Seibert called the aggressive retransmission consent fee disputes between broadcasters and cable operators evidence of the collapse of the traditional “free TV” business model.  Because ad revenues are down, broadcasters are increasingly dependent on fees charged to cable operators for permission to include their stations on the cable dial.  That means cable subscribers are increasingly subsidizing the broadcast television business.

Seibert

Seibert’s revelation came too late to stop some of the nation’s most visible retransmission consent battles between Cablevision and network-owned New York-area television stations and cable networks.  When Cablevision blacked out a local station showing coverage of the World Series during the last dispute, fed up customers decided to take their cable business to Verizon or a satellite TV provider.

Cablevision has been trying to lick their wounds ever since, launching increasingly aggressive pricing promotions and “free gift” offers to keep existing customers while trying to win back old ones.

“We’ve recently introduced an offer that includes a new Apple iPod Touch primarily for win back situations,” said Thomas M. Rutledge, chief operating officer.  “Selling for the Triple Play package of video, data, and voice is now at 74% and roughly half of this selling is for our new Ultimate Triple Play, which includes a new higher-priced Boost Plus [broadband] service and a wireless router.”

Cablevision achieves triple-play signups by heavily discounting the package for new and returning customers.  It also hopes to succeed with a ‘more for less’ pricing strategy, delivering new features and services without necessarily charging extra for all of them.  With discounts, free gifts, and additional services, Cablevision is getting some of their old customers back.

Selling faster broadband is a key component in Cablevision's strategy to attract more broadband customers. Boost Plus delivers 50/8Mbps service for an additional $14.95 a month.

“As of September 30, our win back total is more than 45% of customers who once tried Verizon FiOS,” Rutledge claims.

Rutledge noted Cablevision’s participation in the industry’s TV Everywhere online video initiative has grown even stronger with the recent agreement to provide Cablevision cable-TV customers free access to Turner-owned cable network programming.

Seibert admits the more competitive business environment and high profile programming disputes in suburban New York City are impacting profits.

“We had a few significant items in the quarter affecting our results including higher programing costs and higher sales in marketing as we continue to aggressively promote our products and services while revenue growth was essentially flat,” Seibert said.

Those challenges are creating a sense of unease on Wall Street regarding the cable business’ core product: cable television and the increasingly aggressive pricing promotions necessary to keep customers from disconnecting service.

“There is growing concern among the investor community about [the] whole [cable] industry going to ex-growth,” said Jason Bazinet from Citigroup.

Rutledge

“Programming costs are rising faster than video revenues,” Sanford C. Bernstein, an analyst for Craig Moffett, told the Wall Street Journal. “Unless there’s growth somewhere else in the business model, you’ve got the worst of all worlds: a slow-or no-growing business with lower margins.”

Rutledge outlined Wi-Fi and broadband enhancements as part of Cablevision’s priorities for the upcoming quarter:

“We’ve been building out a Wi-Fi network and we’ve had continuous subscriber utilization increases on that network.  We now have more than one-half-million devices out there that can use Wi-Fi and watch our full cable television service in the home.

“And we’re deploying a new Boost product with higher speed broadband, which includes a more sophisticated wireless router as part of that package.

“We think Wi-Fi is a major strategic part of our business. We think that we can continue to take advantage of that. We think our video product today as a result of Wi-Fi is a superior product to our competitors – all of our competitors, and we think that our data service is enhanced by the Wi-Fi outside the home, and we continue to try to build value for our customers and take market share.”

The cable company is already aggressively marketing its Boost Plus service, which delivers 50/8Mbps broadband for an additional charge of $14.95 a month on top of the standard broadband rate.

A unknown number of Verizon Wireless customers were treated to some welcome news just days before the latest iPhone arrived for sale: early upgrades worth up to $300 in return for a two-year contract extension.  The offer arrived in an e-mail message the company sent to customers like Leslie Harsh of Omaha, Neb.

“Congratulations,” it read. “You’ve earned a new phone.”

Wireless carriers often waive two year waiting periods for good customers who are itching to get their hands on a new phone, and the Harsh family jumped in the car and headed on down to several local Verizon Wireless stores in search of a new iPhone 4S.

But high demand and the pesky fine print got in the way.

The offer turned out to only be valid on phones already in-stock in local stores, and with the unprecedented demand for the latest iPhone, Harsh was initially disappointed as the Omaha World-Herald reports:

Verizon representatives at the store told Harsh that the offer worked only with phones that the store had in stock. And since Apple and its cellular partners — AT&T, Verizon and Sprint — sold more than 4 million iPhone 4S handsets combined over the weekend, it was no surprise that the store didn’t have any of her chosen phone in stock.

Harsh then asked if she could preorder the phone. No dice, Verizon representatives said. The company’s computer system wouldn’t allow it because of an agreement with Apple.

So Harsh left without a new phone, hoping to use the offer next time one of Verizon’s Omaha-area stores had an iPhone 4S in stock.

That disappointment turned to frustration when Verizon sent out another e-mail days later rescinding the offer:

“Our sincere apologies. We got a bit ahead of ourselves,” began the message, which then withdrew the offer and threw in a consolation price — 30 percent off in-store accessories some customers think are overpriced to begin with.  To add salt to the wound, Apple and Bose products were excluded from the discount.

Verizon’s apology and coupon didn’t satisfy Harsh, who spend time and gas money scouring Omaha for the newest Apple phone.  She wants Verizon to uphold the original deal, but so far, the company hasn’t agreed.

Stop the Cap! recommends customers who find themselves in such situations escalate the matter to the executive customer service level and move beyond in-store and front line employees, who are unlikely to be empowered to grant special requests.  Harsh’s upgrade request is not uncommon, and carriers often grant them to good customers.  Harsh spends over $100 a month on her Verizon plan, which puts her in good favor with the phone company.

Filing a complaint with the Better Business Bureau will automatically escalate her plight to executive level customer service at Verizon.  If she indicates this situation is serious enough to end her relationship with Verizon if they do not make amends, it’s likely the company will bend if Harsh signs a two-year contract extension, especially because they gave her the idea in the first place.