Phillip “What’s $520 a month between friends” Dampier

The average Ohio household consumes 52 gigabytes of data per month — the equivalent of more than five million emails or surfing the Internet for about 100 hours monthly — up from 28GB in 2012.

Demand for broadband and mobile communications continues to skyrocket as consumers in urban Ohio dump traditional landline phone service at an accelerating rate.

Since 2000, the industry group Ohio Telecom Association reports 64 percent of landlines have disappeared in the state since peaking in 2000. An additional 6-10 percent continue to cut the cord every year, either when elderly customers pass away or when consumers decide to switch to a wireless, cable telephone, or a broadband Voice over IP alternative like Vonage.

Some telephone companies, particularly AT&T and Verizon, argue the ongoing loss of landlines means the service is becoming technically obsolete — a justification to drop old copper phone networks in rural areas in favor of wireless and switching to fiber-fed IP networks like U-verse in urban and suburban areas. But copper landlines do more than just connect telephone calls.

Broadband usage statistics suggest rural customers in Ohio could find their Internet bills exploding if AT&T succeeds in forcing those customers, least likely to face competition from cable providers, to the company’s highly profitable wireless network.

AT&T currently sells rural landline customers DSL service starting at $14.95 a month. A usage cap of 150GB per month technically applies, but remains unenforced.

Customers switched to AT&T wireless service will pay much more for much less.

AT&T’s DataConnect plan, suitable for fixed wireless home use, starts at $50 a month and includes a usage allowance of 5GB per month. With the average Ohio resident now consuming 52GB a month, switching to wireless broadband is a real budget-buster. AT&T’s overlimit fee is $10/GB, so the average resident would face a monthly Internet bill of $520 a month this year. Assuming usage growth continues at the same pace, in 2014, AT&T customers will need to write a check for around $780 a month.

Ohio’s broadband and wireless usage statistics are familiar because they echo the rest of the country. According to Connect Ohio, wireless-only residents are 81 percent urban or suburban, where cell networks provide the best reception; 84 percent are under age 44; 58 percent have a college education; and 63 percent earn more than $25,000 annually.

Those affected by a forced transition to a wireless-only solution are least financially equipped to handle it.

“The least likely to convert to a wireless-only solution would be an older, rural, less educated, lower-income individual,” said Stu Johnson, executive director of Connect Ohio. “Those are probably also the most expensive copper customers.”

Verizon is “redefining the power of the Internet” in select FiOS areas with the introduction of a new 500/100Mbps speed tier that blows away Time Warner Cable and leaves Cablevision and other competitors woefully behind.

Just weeks after Cablevision boosted upload speeds, Verizon has responded with service offerings up to a half gigabit in speed, telling customers FiOS Quantum 150/65Mbps, 300/65Mbps, and 500/100Mbps plans will “radically change everything you do online right now – and in the future.” It is ten times faster than the fastest service available from Time Warner Cable in the northeast: 50/5Mbps.

Verizon’s fastest broadband does not come cheap, however. The 500Mbps package starts at $294.99 a month for new customers with a two-year contract. Verizon Voice service is required to get the promotional price and a $165 early termination fee applies (reduced by $7.50 for each month a customer maintains service). A $59.99 activation and other fees, taxes, charges, and terms apply. Customers must also pass a credit check to avoid a deposit. Skip the contract and other requirements and the rate is only slightly more: $304.99 a month.

Verizon is charging nearly four times more than what Google charges for its twice as fast gigabit service. But analysts believe that Google will never venture into Verizon FiOS territory so price competition is unlikely in the near term. Cable operators that compete with Verizon would have to dedicate a considerable amount of bandwidth to best Verizon’s download speeds, and matching upstream speeds will be even more problematic unless and until cable operators transition their systems to all digital video to free up bandwidth.

But Verizon’s fastest Internet speeds are not available in all FiOS areas. The company warns “500/100Mbps service availability may be limited in your area based on network qualification requirements.”

Verizon’s competitors, which don’t have the benefit of an all-fiber network, continue to stress consumers simply don’t need any speeds faster than what they now offer. Frontier Communications believes most consumers do just fine with 6Mbps DSL. Verizon’s larger cable competitors range from Time Warner Cable, which does not even try to match its competitor’s fiber speeds, to Bright House, which competes with Verizon FiOS in Florida, to Comcast, which offers faster Internet service but regularly threatens to cap how much customers can use each month. Verizon FiOS has, in practical terms, no usage caps.

“For some, the discussion about the broadband Internet seems to begin and end on the issue of ‘gigabit’ access. The issue with such speed is really more about demand than supply. Most websites can’t deliver content as fast as current networks move, and most U.S. homes have routers that can’t support the speed already available.” — David Cohen, chief lobbyist, Comcast Corp., May 2013

“Residential customers, at this time, do not need the bandwidth offered with dedicated fiber – however, Bright House has led the industry in comprehensively deploying next-generation bandwidth services (DOCSIS 3.0) to its entire footprint in Florida – current speeds offered are 50Mbps with the ability to offer much higher. We provision our network according to our customers’ needs.” – Don Forbes, Bright House Networks, February 2011

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Verizon FiOS introduces faster broadband speeds to help customers accomplish more of what they want to do online. Verizon’s Fowler Abercrombie says ‘it’s only the beginning’ as Verizon continues to innovate on its fiber to the home network. (2 minutes)

Despite warnings from public safety officials the wireless landline alternative proposed by Verizon is unreliable and potentially a threat to the safety and well-being of customers, Verizon is moving full speed ahead to deploy Voice Link service in New York and New Jersey communities where existing Verizon landlines have deteriorated and FiOS fiber optics is a distant dream.

On July 12, the Communications Workers of America reported that Verizon’s repair call centers in New York City are now assigning employees to Voice Link-related jobs.

“In addition, CWA members report that technicians are receiving specialized Voice Link installation training and are being assigned to carry out installations in the Buffalo and Watertown areas,” said Chris Shelton, vice president of CWA District 1.

The union also confirmed no further expansion work was being done on Verizon’s FiOS fiber network outside of the areas already committed by the company. Verizon FiOS is only available in a few Buffalo suburbs and not available in Watertown at all.

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CWA District 1 vice president Chris Shelton summed up Verizon’s aggressive deployment of Voice Link: “We can’t allow these dirty bastards to do this to their own customers, who they don’t give a s**t about….” (Warning: Strong Language) (3 minutes)

Sullivan County

More than 130 county executives, legislators, mayors, town supervisors, and councilors representing 68 New York State communities including Albany, Syracuse, Rochester, Binghamton, Plattsburgh, Ithaca, Jamestown, Poughkeepsie, Rome, and Elmira called on the PSC to declare Voice Link an experimental service and not allow it to serve as the sole service offering on Fire Island or anywhere else:

The Commission stated that “[it] has been the Commission’s policy that utilities determine how to provision service via any combination of facilities – wires, fiber optics, electronics – so long as the tariffed service meets the Commission’s prescribed rules and customer expectations.”

Voice Link, as currently offered, does not meet Municipalities’ expectations. Instead, Voice Link would jeopardize municipalities’ ability to fulfill their responsibility to protect the safety of the citizens who reside and work in their communities. The broad and significant implications of Verizon’s proposed tariff warrant a full investigation. New technology should be deployed after solutions are found, not before.

Municipalities urge the Commission to develop a full factual record and to offer interested stakeholders the opportunity to participate fully in this important proceeding. Municipalities rely on the Commission to guide the evolution of the state’s telecommunications infrastructure in a manner that protects citizens’ safety and promotes economic development.

The legislators called Voice Link a threat to public safety and its installation hampered communities from protecting local residents.

In Sullivan County, where Verizon is attempting to introduce Voice Link as an option for seasonal residents, Undersheriff Eric Chaboty said using wireless service carries risks in an emergency.

Chaboty

At a press conference covered by the Mid-Hudson News Service, Chaboty made it clear homeowners should not feel pressured to sign up for Voice Link. Chaboty recounted a story of his neighbor’s house catching fire and the owner called 911 from a cell phone using the same wireless network Voice Link would use. The call was mistakenly routed to another county instead of Sullivan County 911, and by the time the call reached the correct emergency responders, the family’s home burned to the ground.

Stories like that may explain why Verizon has taken great pains to disclaim responsibility for a customer’s inability to reach 911 or be connected to the correct public safety operator.

Assemblywoman Aileen Gunther (D-Forestburgh) was incredulous Verizon would even attempt to introduce Voice Link in the rural Catskill Mountains, which is notorious for lousy cell reception.

“Too much of this county has no service at all and no hope on the horizon,” she told the audience. “Until the time comes when companies like Verizon are willing to make the investment to ensure reliable and thorough coverage, products like Voice Link are an insult and a danger to our community.”

Legislators across the state also suspect Voice Link will create an incentive for Verizon to neglect its already-deteriorating copper wire network, accelerating the need to deploy its preferred wireless solution. But the thought of achieving business priorities at the possible cost of public safety bothered the 134 legislators who signed a petition sent to the PSC.

“When outside plant is inadequately maintained, consumers’ safety is jeopardized because their dial tones may not function when they need to reach emergency services,” the petition explained.

Brookhaven town supervisor Edward P. Romaine held his own news conference at the Davis Park Ferry Terminal in Patchogue last week. He worried that Verizon was attempting to get its foot in the door with Voice Link, and will use any approval to quickly expand it as a “sole service option” elsewhere.

“Our concern isn’t only for Fire Island,” Romaine said. “Our concern is while they’re impacting a few communities in Fire Island, this . . . will spread to all of Fire Island and possibly to the main island.”

[flv width=”512″ height=”308″]http://www.phillipdampier.com/video/CBS This Morning No more landlines Verizon wont fix storm damaged wires 7-19-13.flv[/flv]

CBS’ This Morning covered Verizon’s plans to drop landline service in Mantoloking, N.J., on an off shore barrier island. Residents really don’t want Voice Link as the replacement, but at least they have an alternative. Unlike on Fire Island, Mantoloking is served by a cable company – Comcast. (3 minutes)

Verizon Communications is cutting investment in its landline and fiber optic networks, spending the money on improving the company’s more profitable wireless business, which now accounts for 67 percent of Verizon’s total revenue.

Verizon reported second-quarter results this morning, meeting most Wall Street analysts’ expectations. The company reported a minor increase in capital spending to bolster its wireless LTE 4G network which is seeing strong growth in data traffic.

Verizon Wireless added one million new wireless customers in the last quarter, many transferring from Sprint’s now-discontinued Nextel network shut down last month. Among the new customer additions, 941,000 signed two-year postpaid contracts.

A growing number of Verizon Wireless customers are also migrating to the company’s Share Everything plan. At least 36 percent of Verizon’s wireless customers are now on shared, usage-limited data plans. Verizon expects more customers to switch, especially when legacy plan customers discover they will not receive a subsidized phone upgrade unless they abandon the grandfathered, all-you-can-eat data plan. Verizon believes the Share Everything plan will keep the company in a strong place to accelerate earnings as customers find they must regularly upgrade to higher capacity data allowances to handle increasing data usage.

Verizon’s wired success story

The growing adoption of more expensive data plans means higher bills for Verizon Wireless’ 35 million contract customers. The average Verizon Wireless customer now pays $152.50 per month, an increase of 6.4 percent. In total, over 100 million Americans now use Verizon’s prepaid and postpaid wireless services.

In June, Verizon Wireless reported its nationwide upgrade to LTE 4G service was now essentially complete, with 99 percent of 3G service areas also covered by 4G. Verizon reports 59% of its total data traffic is carried on the 4G LTE network, which is five times more efficient than the 3G network.

Wireline: Success When Verizon Invests in Upgrades, Ongoing Customer Defections Where Verizon’s Copper Network Continues to Deteriorate

Verizon’s success story in wireless is not repeated on its wireline network. Verizon lost another 5.2 percent of its residential copper landline customers during the quarter, down from 6.6 percent at the same time last year. In contrast, where Verizon’s fiber optic network FiOS is in place, customer numbers are growing along with revenue.

In fact, 71 percent of the revenue Verizon now earns from its wired residential network now comes from FiOS. The fiber network helped Verizon boost revenues by another 4.7 percent in the second quarter. With an average Verizon FiOS bill now at over $150 a month, the company saw a 9.4 percent increase in the average revenue per wireline customer over last year.

Verizon added 161,000 new FiOS Internet customers and another 140,000 new video customers in the second quarter. FiOS Quantum, which offers a broadband speed upgrade to 50/25Mbps for $10 more a month, has continued to be a hit with customers. More than one-third of all FiOS Internet customers have upgraded to faster Quantum speeds.

Shammo

With continued growth possible in the wired network business, Verizon could increase investment in expanding FiOS fiber into more markets, but instead the company continues to divert its attention and money to Verizon Wireless.

Verizon’s legacy copper wire phone and FiOS businesses saw a further reduction of 5.9 percent in capital expenditures in the second quarter — just $1.5 billion spent in the quarter and $2.9 billion year to date. Verizon’s full-year capital spending outlook which includes wireless, in contrast, is on track to spend between $16.4-16.6 billion this year. The majority of Verizon’s capital investments are aimed at improving its wireless network. Verizon’s aging copper wire network will continue to see a declining percentage of investment, and the company continues to leave FiOS fiber expansion on hold.

Fran Shammo, Verizon’s chief financial officer, this morning told investors they should expect to see a continued decline in spending on Verizon’s wired networks and more cost savings wrung out from Verizon’s declining unionized workforce, which has been asked to make concessions in labor contracts and increase work rule flexibility.

Other highlights:

• 51 percent of new phone activations were Apple iPhones during the second quarter;
• Over 64 percent of all activated phones on Verizon Wireless’ network are now smartphones;
• Verizon’s 3G network will increasingly be used by prepaid and reseller (MVNO) customers not allowed on Verizon’s LTE network;
• Verizon’s proposed entry into the Canadian wireless market is primarily focused on serving southeastern Canada from roughly Montreal to Toronto;
• 60 percent of Verizon’s revenue declines in its enterprise division were due to the federal government’s sequestration — automatic spending cuts, and declining spending by state and local governments;
• Verizon has no interest in competing with AT&T to acquire Leap Wireless (Cricket);
• The impact of Verizon’s agreement with cable operators to sell each other’s products has underwhelmed, at least so far;
• Voice Over LTE service, which will dramatically improve sound quality on voice calls, will arrive in Verizon handsets later this year with an aim to introduce the service sometime in 2014. But Verizon Wireless wants to be certain 4G LTE coverage is robust, because if reception deteriorates, VoLTE calls are not backwards-compatible with its current CDMA network and the call will get dropped. Getting it right is more important for Verizon than getting the service out quickly.

Now what: AT&T Next and Verizon Edge

Wireless carriers know that the average relationship between a smartphone and its owner is becoming shorter every day. Sometimes the relationship is over when a customer drops or loses their phone and needs a replacement. Others simply covet the next best thing. When a large enough contingent of customers is willing to open their wallets and let their money fall out, what’s a poor wireless company to do? Ignore the pile of twenties falling to the floor? Not on your life.

AT&T last month announced it was dumping its 20-month early upgrade offer, following Verizon (again) which announced it was pulling the rug out on a similar plan in April. ‘Customers should wait a full 24 months before expecting a new subsidized phone,’ said both companies.

Then came scrappy T-Mobile, the company AT&T originally wanted to put out of business. TMO decided to apply some European competitive logic in the U.S. market. No more two-year contracts with nasty termination fees, declared CEO John Legere. But no more “phone subsidy” either. In return for the end of contracts, customers should expect to pay retail price for their smartphone, but at least they can finance it through T-Mobile and have the somewhat affordable monthly installments added to their bill.

Now, in a remarkable about-face for Verizon Wireless and AT&T, the features and promotions diet imposed on customers that has eroded discounts, ended early upgrades, and slapped on early termination fees and opaque junk bill charges might be coming to an end. Early upgrades are back… for a price.

It is the first step in a major shift away from the North American wireless business model which traditionally offers customers cheap devices at massive discounts known as “device subsidies.” Since the early days of cell phones, wireless companies in the U.S. and Canada typically grant customers up to $350 off their phone purchase in return for a 24 month contract (until recently, 36 months in Canada). But wireless providers don’t just give away free money. Carriers get back every penny of this subsidy over the life of a cell phone contract by setting their plan rates artificially high.

T-Mobile isn’t giving away the store either, but at least everything is on sale. By jettisoning the subsidy, T-Mobile’s plan rates are dramatically lower than those offered by its competitors. That is no surprise because TMO no longer has to worry about recouping device subsidies.

When a customer walks into a T-Mobile store, they can buy the latest iPhone for $650 or agree to finance it at the retail price through the carrier. They can even buy it somewhere else. But T-Mobile’s new Jump plan also offers customers a chance to “jump” to a newer phone every 6-9 months with its trade-in program. For avid phone upgraders, the end effect is like leasing your phone. You will always have a device newer than the next guy, and you will always be paying a monthly fee for the phone itself. That looks a lot more attractive than trying to wait 24 months with AT&T or Verizon or frequently buying a new phone for north of $500 and trying to recoup part of the cost by selling your old phone on eBay or Craigslist.

Wall Street would normally punish carriers that do anything to shorten the 24-month traditional upgrade cycle because investors generally hate the whole concept of the phone subsidy. It costs companies liquidity to tie up money fronting that $350 discount and waiting up to two years to get the money back. But since T-Mobile can immediately book the full purchase price of a phone for accounting purposes and does not need to show the amount of money dedicated towards phone subsidies, analysts are not pummeling the stock into the ground.

As Stop the Cap! has written for more than a year, the wireless Golden Calf Wall Street really wants to worship is a cell phone plan priced artificially high to recover a subsidy providers no longer give. That’s a plan only Ma Bell and its shareholders could love. But nobody thought AT&T and Verizon Wireless could get away with it.

Silly people.

Introducing The Wireless Trojan Horses: AT&T Next from AT&T and VZ Edge from Verizon

Yay!: No more expensive subsidies and extra free money

AT&T yesterday introduced AT&T Next — the company’s response to T-Mobile’s Jump with AT&T’s usual gouging touch.

The highlights of the plan include:

• No membership, activation or upgrade fees;
• Buying a new phone under AT&T Next does not require a down payment, any finance charges, or early payoff penalty;
• Customers can trade-in for an upgrade after one year or keep the device for 20 months and own it.

VZ Edge is still a rumor, but leaked promotional material indicates it is nearly identical to AT&T Next, with some important exceptions:

• VZ Edge appears to be an extension of Verizon’s existing 12-month financing plan, limited to two devices at a time with a combined financed balance not to exceed $1,000;
• First payment due at time of purchase with a recurring finance charge of $2 for each month there is a remaining balance;
• No upgrade fees, no contracts, no pre-payment/payoff penalty;
• Customer qualifies for their next upgrade after 50 percent of their current phone’s retail price is paid;

The leaked document does not include details about the disposition of your device when beginning an upgrade. Presumably, Verizon will accept it for trade-in or the customer can pay the remaining balance off immediately and own it.

What sets Verizon and AT&T far apart from T-Mobile are the prices of their service plans. Both AT&T and Verizon are effectively ending their subsidy program for those participating in these early upgrade plans. Customers must purchase (or finance) their next device at the regular retail price, which will range between $500-650 for most top-of-the-line smartphones.

Bunco

But neither Verizon or AT&T are lowering their service plan pricing, which was specifically designed to recoup a subsidy they are no longer providing. T-Mobile has appropriately lowered their plan pricing because the company no longer needs to win back that $350 subsidy they might have given you for the newest Apple iPhone or Galaxy device. That means you are effectively paying AT&T and Verizon twice for the same phone. It’s Wall Street’s dream come true: kill the subsidy and keep the money still being charged to recoup it. That amounts to as much as $29 a month out of your bank account and into theirs.

For now, only those itching for fast upgrades will get the pinch, at least until AT&T and Verizon decide this is the new and improved way to sell phones to everyone without a two-year contract. Now if we can only get AT&T and Verizon to rescind the contract taken out on our wallets….