Verizon's Herd Mentality

Saturday will be the final day Verizon Wireless customers will be able to sign up for one-year service contracts and still get a discount on new equipment.

Effective April 17, customers will have just two choices for service — the ubiquitous two year contract with a steep early termination fee or month-to-month service priced artificially high to recover equipment subsidies off-contract customers do not receive.

Verizon claims the changes will “reduce consumer confusion,” which suggests customers couldn’t make up their minds between contracts for one year or two.  But the company claims most subscribers managed soon enough, usually choosing two year contracts to maximize discounts on equipment.

Some media outlets suggest the change is to discourage customers from abandoning Verizon Wireless for AT&T by holding them to longer two year contract terms.  But with AT&T losing customers to Verizon, that is an unlikely reason.

More likely is the company’s ongoing “simplification” of service plans, which has the unfortunate side effect of herding customers into plans that may not serve them well.  Verizon earlier did away with their popular “New Every Two” handset bonus plan which rewarded loyal customers renewing their contracts with additional $50 discounts.  The company also has cut back on other discounts on equipment, driving an increasing number of customers to third party retailers like Wirefly.

The one year service plan was established to let customers get some discount on wireless equipment without tying them down to a 24 month service commitment.  Since wireless providers build in cost recovery of the subsidies they “give” customers, you effectively pay back those discounts over two years by in the form of overpriced service plans.  Month to month “off-contract” customers do not get the benefit of any discounts for new equipment, but pay the same high prices for service everyone else does.

If your contract has recently expired, or you never had one, you might do better with Page Plus or Wal-Mart’s “Straight Talk” which both rely on Verizon’s network, but sell service at much lower prices, without a contract.

In an upstate New York match-up, the Rochester/Finger Lakes region scored dead last in broadband speed and value, according to data from Broadband.com.

Why are broadband speeds so much lower in the Flower City?  Blame Frontier Communications, which continues to pitch its decade-old DSL product, delivering an average speed of 4.45Mbps, while other upstate cities enjoy access and competition from Verizon’s fiber to the home network FiOS.  Frontier DSL actually often costs more, after taxes and fees, than Time Warner Cable’s much-faster cable broadband product, Road Runner, which rates an average download speed of 12.77Mbps in Rochester.  Frontier does manage to pull one win — higher upload speed DSL providers can often achieve in cities where cable operators keep upstream speeds as low as possible.

Time Warner Cable has dragged its feet upgrading broadband service in the area to its DOCSIS 3 platform other upstate cities have had since last year.  DOCSIS 3 should arrive within the next 4-8 weeks, which should boost broadband speeds, but may not deliver lower broadband prices because of Frontier’s uncompetitiveness in the area.

(Source: Broadband.com)

The top city in upstate New York for download speed is the state capital, Albany.  But Buffalo wins the contest for upload speed thanks to aggressive competition for Time Warner from Verizon in the Queen City.  Buffalo also pays the least for service — nearly $5 less per month than residents in Rochester pay on average.  Syracuse scores in the middle — but closer in terms of speed and value to other Verizon-served cities.

Slow and expensive broadband service can hamper economic development and costs consumers more.  Unfortunately, there are no signs Frontier Communications has plans to do anything differently in its largest service area — a classic driver of the accelerating number of customers calling to pull the plug on their landline service.

Time Warner Cable's Road Runner vs. Frontier Communications' DSL (Speeds are downstream/upstream; Source: Broadband.com)

Lynch

Verizon’s ambitions to provide 285 million people with the option of ditching their cable or DSL broadband account for its new LTE/4G wireless network is a dream that will never come true with the company’s wireless Internet Overcharging schemes.  With a usage cap of 5-10GB per month and a premium price, only the most casual user is going to give up their landline cable or DSL service for Verizon’s wireless alternative.

Dick Lynch, executive vice president and chief technology officer at Verizon spoke highly of Verizon’s new next generation wireless network as a perfect platform to deliver broadband service to landline customers, including many of those the company sold off to Hawaiian Telcom, FairPoint Communications, or Frontier.

“[LTE] provides a real opportunity for the first time to give a fixed customer in a home, broadband service — wireless — but broadband service,” Lynch said. “In wireless, I see a great opportunity within the LTE plans we have to begin to service the customers who don’t have broadband today … They will be able to have mobile LTE and also to be able to have fixed broadband.”

Unfortunately, Verizon’s LTE network comes with usage limits and a premium price — $50 a month for 5GB or $80 a month for 10GB.  At those prices, rural America will have two bad choices — super slow 1-3Mbps DSL ($30-60) with allowances ranging from 100GB-unlimited or LTE’s 5-12Mbps (assuming the local cell tower is not overloaded with users) with a usage cap that guarantees online video will come at a per-view cost rivaling a matinee movie ticket.

Still, Verizon is likely to test market the service as a home broadband replacement, particularly in territories they no longer serve.  Verizon has done much the same thing pitching a home phone replacement product that works with their wireless network to residents of Rochester, N.Y., and the state of Connecticut, neither currently served with landlines from Verizon.

Despite the pricing and cap challenges, Deutsche Bank — one of the Wall Street players that follows Verizon — thinks the company’s DSL-replacement has merit, if:

1. If you are a regular traveler that needs a wireless broadband service anyway;
2. You use broadband exclusively for web browsing, e-mail, and very occasional multimedia access;
3. You are wealthy enough not to care about the overlimit penalty.

For everyone else, sticking with traditional DSL service will continue to be the most affordable option, assuming usage caps are kept at bay.  Where available, cable broadband service from companies that serve smaller communities, including Comcast Cable, Time Warner Cable, and Cablevision, among others, will probably continue to deliver the most bang for the buck in rural America.

Each tiny light represents a single strand of optical fiber.

Verizon has achieved speeds of more than 1.5Tbps as part of a joint field trial with NEC Corporation of America.

The two companies conducted the trial across 2,212 miles of fiber in the Dallas area, successfully demonstrating three separate channels of data streams co-existing on just on a single strand of fiber.

“As we look to a future when data rates go beyond 100G, it’s important to begin examining how these technologies perform,” said Glenn Wellbrock, director of optical transport network architecture and design at Verizon. “This trial gives us a good first step toward analyzing the capabilities of future technologies.”

Verizon’s test placed three different high bit-rate data streams on a single strand of fiber.  Each respective “superchannel” ran at different speeds — 100Gbps, 450Gbps, and 1000Gbps — at the same time, with no significant degradation.

To put that in context, Google’s Fiber to the Home project in Kansas City, Kansas will operate at 1Gbps.  It would take more than 1,500 users fully saturating their Google Fiber connection to utilize the same amount of bandwidth Verizon demonstrated on just one fiber strand.  With most fiber projects bundling many strands of fiber into a single cable, near limitless capacity can bring a broadband experience untroubled by high traffic, high bandwidth multimedia applications.

Previously, Verizon had proven its fiber technology for high bit rate applications in a lab environment.  This was the first “in the field” trial over a functioning fiber network concurrently serving customers in Dallas.

Such technology demonstrates that as broadband traffic grows, so does the technology to support it.

The 500 channel universe has arrived for around 23,000 households around the state capital as Verizon officially unveiled its FiOS television service last week.

The company added television to its broadband service offering after securing video franchise agreements in suburban Bethlehem, Colonie, Guilderland, and Scotia.  It also expects to win approval to provide television service to the nearby city of Schenectady and the town of Colonie shortly.

The arrival of Verizon’s triple-play package begins with a $100 monthly promotional package (go to Verizon’s FiOS website and the online price can be lower) including phone, Internet, and television service for a year, rivaling a similar $99 promotion on offer for new customers from incumbent Time Warner Cable. But Verizon delivers faster broadband service and more HD channels than its cable rival, and will deliver up to 535 channels to subscribers — 130 in High Definition.

“Consumers and small businesses in these communities at long last have a better choice for TV,” said Tracey Edwards, president and general manager for Verizon’s Upstate New York region. “We’ve had great success in many other parts of the state. Now it’s time to bring FiOS TV to this part of northeastern New York and provide customers in the region a choice that is truly different from the cable TV company.”

Verizon officials also claimed the introduction of FiOS TV would result in lower prices for local residents, a claim that does not necessarily hold up when examining the rates for each company.  Both deliver triple-play promotions and retention offers that come within a few dollars of each other.

Time Warner Cable says Verizon’s service does not come with the same local commitment to the region the cable operator has provided with its local news channel YNN, and features that allow customers to start programs over from the beginning or watch live streams of 32 channels on the company’s iPad application.

But the fact a new choice is now available has delighted some of our readers.

Jeff in Guilderland says a number of Albany residents were upset when Time Warner Cable unveiled its $99 promotion which turned out not to be available to existing customers.

“They only give the best prices to their least loyal customers who are ready to cancel their service or sign up as new customers,” Jeff says.  “We’ve had cable from these guys for over a decade and when we sought a temporary price break, they wanted to give us a $20 credit — thanks for nothing.”

Now Jeff says with Verizon around, Time Warner better offer more than that.

Verizon put expansion of its Verizon FiOS fiber-to-the-home service on hold more than a year ago, stopping new cities from winning new options made possible with fiber optics.  But Verizon is still continuing to meet its commitments to communities where the network has already broken ground.  Where communities have not given Verizon video franchise agreements, Verizon markets its broadband and phone options.  But delivering video completes the triple play package many consumers want.

[flv width=”640″ height=”500″]http://www.phillipdampier.com/video/Albany Gets FiOS TV 3-26-11.flv[/flv]

WNYT and WXXA-TV reports some Albany-area residents can now get FiOS TV, showing Verizon is still expanding its FiOS product line in areas where fiber has already been laid.  (3 minutes)