New York Governor Andrew M. Cuomo announced this week New York State will award $25 million in funding to expand high-speed Internet access in rural upstate and underserved urban areas of New York through the Connect NY Broadband Grant Program. This award brings the total amount of funding awarded for broadband projects during Governor Cuomo’s administration to more than $56 million, the largest statewide broadband funding commitment in the nation.

Unlike many broadband grant programs, New York is primarily targeting last-mile projects that make all the difference for New Yorkers that cannot get broadband service at any price. The federal government and some states have focused instead on funding institutional or “middle-mile” networks that ordinary consumers and businesses cannot access. The Connect NY Broadband Project specifically sought projects that will get residents broadband service as quickly as possible.

Pat Pryor is chair of the Tompkins County Legislature’s Special Committee on Broadband, which is fighting for better service in the Southern Tier of New York. Pryor says the grant will make a real difference because Verizon and Time Warner Cable have refused to expand service where they consider it unprofitable. She told the Innovation Trail the funding will help a wireless ISP in her county that specializes in serving rural areas bypassed by cable and DSL.  (1 minute)
You must remain on this page to hear the clip, or you can download the clip and listen later.

“Through the Connect NY program, we are bringing high-speed Internet access to all corners of New York State,” Cuomo said. “The projects receiving these grants represent the very best proposals with the most potential to benefit statewide economic and community development efforts. These funds will strengthen New York’s broadband capacity and encourage sustainable adoption of broadband service in unserved and underserved communities, counties and regions across the state.”

Cuomo

Altogether, about 6,000 square miles of new infrastructure will offer high-speed Internet service to 153,000 New York households, 8,000 businesses, and 400 community anchor institutions – many without any means to access the Internet. The projects will also create 1,400 new jobs.

The funding comes as a relief to New York residents who have gone without service for years, denied access to earlier grants in part because incumbent providers inaccurately claimed, through national broadband maps, they already offered full broadband coverage in many New York counties that actually don’t have service.

Tompkins County is a case in point. Verizon and Time Warner Cable, the dominant providers, volunteered incorrectly that almost the entire county was well-served with broadband. That proved frustrating to county legislator Pat Pryor.

“It matters, because a lot of times [the maps are] what grant funding is predicated on,” Pryor told the Innovation Trail. “[Funders say] If you don’t have any unserved areas, why would you need a grant? We’re almost 100 percent covered, why would we need any money?”

Claire Perez has spent more than a year fighting for broadband for her neighborhood in West Dryden, which is just over 1/2-mile from the nearest Time Warner Cable customer. She talked with the Innovation Trail last March about her plight. Despite endless rounds of petitioning the cable operator to extend service, the company would only quote “go-away” prices ranging from $23,000-54,000 to wire her neighborhood and home. Perez, and others like her, may be among the biggest beneficiaries of the broadband expansion program if they are near a Time Warner Cable service area. (3 minutes)
You must remain on this page to hear the clip, or you can download the clip and listen later.

The specifics:

$24,010 The Smithville Project
This project with Haefele TV Inc. will serve the Southern Tier region. The Smithville project will build fiber optic cable utilizing existing infrastructure. The network will pass 350 homes and provide broadband service with speeds of 7 Mbps download and 1.5 Mbps upload to approximately 100 new subscribers.

$114,015 Ovid and Romulus Broadband Project
This project with Trumansburg Telephone Company will serve the Finger Lakes region. The Ovid and Romulus Broadband Project will provide broadband to unserved areas in company territory in the towns of Ovid and Romulus. This project will enable 110 customers in this area that have no availability to any type of broadband services to obtain high-speed Internet service. The project will also offer discounts on subscription fees, free training and email addresses.

$200,000 Connect Thurman White Space Project
This project with Warren County Economic Development Corporation will serve the Capital District region. Through a public/private partnership, the Thurman White Space project will provide broadband access to 89 households in the northeast area of the Town of Thurman. The Town of Thurman will also offer economically disadvantaged residents access to public computers and enhanced digital literacy training.

$557,000 Essex County Broadband Service Expansion
This project will serve the North Country region. The Essex County Broadband Service Expansion project will provide high-speed broadband service to households that do not have access within the Towns of Jay and Wilmington, passing 1,900 households. The project will also provide digital video services and potentially a competitive telephone service.

$558,940 Otsego County Wireless Network
This project with the County of Otsego IDA will serve the Mohawk Valley region. The Otsego County Wireless Network will partner with a last-mile provider to leverage a county-wide, open access fiber backbone to deploy last-mile, wireless broadband to 24 towns, 9 villages and 1 city in Otsego County, serving approximately 28,000 households, 4,500 businesses and 300 community anchor institution locations. The wireless network will also be made available to any viable organization or service provider that wishes to use it.

$572,000 Hamilton and Herkimer Counties Broadband
The Broadband 1 project with Newport Telephone Company is a multi-region project serving the North Country and Mohawk Valley regions. The project will leverage existing infrastructure to provide broadband service to 230 residents, businesses and community anchor institutions in Hamilton and Herkimer Counties. The project will also enhance emergency services for both counties.

$672,452 Southern Tier Broadband
This project with the Southern Tier West Development Foundation will serve the Western region. The project will expand access to broadband service and increase broadband speeds through a WiMAX (Worldwide Interoperability for Microwave Access) system to towns and villages in the counties of Chautauqua, Allegany, Cattaraugus, and Erie County, passing more than 41,000 households. The project will also partner with local medical clinics to enhance electronic medical records and upgrade hardware and software at libraries in Chautauqua, Cattaraugus, Allegany, Steuben, and Chemung Counties.

$800,000 Allegany County Broadband
This project with Allegany County will serve the Western New York region. The Allegany County Broadband project will create a county-wide platform for providing access to an existing network, delivering broadband to 28 local communities and 17,440 households in Allegany County that are currently without broadband service.

$976,426 Lyon Mountain Broadband
This project with Slic Network Solutions will serve the North Country region. The Lyon Mountain Broadband Project will provide high-speed, low-cost broadband service in the Community of Lyon Mountain to 527 households, utilizing fiber-to-the-home technology. In addition this network will also deliver telephone service, IPTV service, and advance business services over the fiber.

$1,012,366 Bellmont North Next Generation Broadband
This project with Slic Network Solutions will serve the North Country region. The Bellmont North Next Generation Broadband project will provide high-speed, low-cost broadband service in the Adirondack Park to the northern end of the Town of Bellmont. This service will be delivered utilizing 25.3 miles of fiber to the home and wireless technology to connect 124 households. The network will also allow for the delivery of telephone service, IPTV service, and advance business services over the fiber.

$1,636,346 Connect NYC
This project with the New York City Economic Development Corporation will serve the New York City region. By conducting a competition to fund fiber build out to small and medium businesses and in collaboration with private sector Internet Service Providers, the Connect NYC Project will be used to extend the fiber infrastructure available to commercial and industrial businesses in New York City.

$1,800,000 MTC Broadband Buildout
The MARK Project Inc. will serve municipalities in the Capital District, Mohawk Valley and the Southern Tier. The project will deliver telecommunications services, including broadband, voice and video services, to 900 residents, businesses, and anchor institutions within the unserved areas of the towns of Conesville, Gilboa, Halcott, Middletown, and Roxbury. The project will also offer broadband connectivity to community anchor institutions within the service area free of charge.

$1,999,584 Parish Broadband
This project with New Visions Communications will serve the Central New York region. The project will utilize existing infrastructure to provide high-speed internet, VoIP and cable television to the Town of Parish, where 72% of the population does not have access to broadband, VoIP or landline cable television. The project will also create 20 construction jobs and 6 permanent jobs.

$2,042,177 Connecting the Capital Region
Hudson Valley Wireless will provide high-speed fixed wireless broadband access to nearly 40,000 households and 2,000 businesses that currently do not have access in Washington and Rensselaer Counties. In addition, the network will enhance public safety operations in the region by enabling redundancy of public safety communications and by allowing municipalities to use a portion of the bandwidth at no cost.

$2,162,656 Schroon Lake Next Generation Broadband
This project with Slic Network Solutions will serve the North Country region. Slic Networks Solutions will provide high-speed, low-cost broadband service to 457 households in the unserved areas of the Town of Schroon and the Town of North Hudson. This service will be delivered utilizing fiber to the home technology. Slic will also provide wireless hot spots for frequently visited public locations including the public beach in Schroon Lake.

$2,216,000 Tompkins and Cayuga Counties Last Mile Coverage
This project with Clarity Connect Inc. is a multi-region project serving the Central New York and Southern Tier regions. This project leverages existing tower infrastructure to provide broadband services to the unserved portions of the Towns of Ulysses, Enfield, Newfield, Danby, Groton, Lansing, Ledyard, Genoa, Venice, Scipio, Niles, Sempronius, and Summerhill in Cayuga and Tompkins County. The project will also upgrade DSL services increasing existing speeds.

$2,407,049 Yates County Open Access Fiber Network
This project with Yates County will serve the Finger Lakes region. The Open Access Fiber Network will build and operate a fiber-optic ring with spurs to remote areas within the County of Yates. This network will serve as a backbone foundation for the development of community-based broadband initiatives. The open access fiber network will be 68 miles long, passing 10,400 households and available for use within each town it routes through.

$5,266,979 Statewide Broadband Expansion
The Statewide Broadband Expansion Project is a statewide project serving 9 regions. Time Warner Cable will deploy robust high-speed Internet service to 4,114 households in the Capital, Central, Finger Lakes, Mid-Hudson, Mohawk Valley, NYC, North Country, Southern Tier and Western regions of New York State. The project will also provide residents with access to digital TV, telephone services and security services.

Shammo

Verizon’s vision of broadband economics depends on the technology used to provide the service, according to some insights shared by the company’s chief financial officer at yesterday’s Deutsche Bank Access Media, Internet & Telecom Conference.

Fran Shammo outlined two strategies the company is using to profit from its broadband services. For wireless, Verizon has “flipped the model” from the traditional voice plan that starts with a bucket of voice minutes towards monetizing broadband usage instead. Today, customers buy plans that focus on anticipated data usage with unlimited voice and texting thrown in. But marketing broadband on Verizon’s fiber optic FiOS network is markedly different because the company is focused on speed over consumption.

“We are now shifting into concentrating on the broadband piece of that product, and the speed that the fiber to the home can give you we believe can’t be matched with anyone,” Shammo told an audience primarily made up of Wall Street analysts and investors. “We have a superior product.”

Shammo explained Verizon intends to “monetize speeds” that fiber broadband is capable of providing. That is important because Verizon FiOS now represents 70 percent of Verizon’s wired business, as traditional landline revenue continues to decline.

That is welcome news to broadband advocates that prefer current pricing models based on broadband speeds, not usage. Verizon FiOS intends to capitalize on its superior speed to differentiate itself from the cable competition, especially when some of those competitors are slapping usage limits on their customers.

Another important new revenue source for Verizon comes from switching legacy DSL users to FiOS technology.

In 2012, Verizon commenced its copper-to-fiber migration in FiOS areas. At least 200,000 homes formerly served by copper-based DSL were transitioned to fiber. In 2013, Verizon plans to migrate another 300,000 customers. When customers are switched to the fiber network, their former DSL speeds remain the same, but now Verizon’s marketing department has an opportunity to target upgrade offers for faster speeds.

“We give them the choice to start upgrading that speed [to] 15, 25, or 50Mbps,” Shammo reports. “What we are seeing is people are willing to pay for that additional speed, so we can monetize that fiber network more.”

However, Shammo reiterated that beyond what Verizon has already committed to in FiOS agreements with local municipalities, Verizon plans no additional expansion of FiOS in 2013.

The foundation for future profits come from data usage.

Unintended Consequences of Share Everything: Customers do an end run around Verizon’s “device fee.”

The conference also provided new insights into Verizon’s Share Everything wireless plans and the company’s other strategies.

Shammo admitted customers have done an end run around the “device fee” for multiple add-on devices.

Verizon expected mobile wireless-enabled tablet sales would increase as the cost to add a tablet to a Verizon Wireless account no longer required a separate data plan. But Verizon’s “device fee,” charged for each device connected to a Share Everything plan, has backfired. Customers are instead adopting Verizon’s “Mi-Fi” wireless hotspot device or other tethering solutions. Customers can then connect up to five Wi-Fi enabled devices through the hotspot and bypass paying multiple device fees that range from $5-20 per device.

Living Off the Revenue from a 3G Network Verizon Has Stopped Expanding, Improving

Shammo also noted Verizon has stopped further investments in its 3G wireless network.

“We are not investing any more capital in that network other than to keep it up and running, so no more coverage [expansion] capital, no more capacity [expansion] capital,” Shammo said. “If I can keep that network up and running that just generates more [revenue] for us.”

Verizon plans to keep a moratorium on further expansion of its fiber to the home service except in areas where it has existing agreements to deliver service.

Verizon’s Plans to Reduce Device Subsidies, Discounts

Customers have grown to expect a free or low-cost upgrade to a new smartphone every two years. But wireless companies find the costs of fronting device subsidies troubling because it affects the short-term bottom line. As wireless providers trim discounts, tighten upgrade policies, raise prices, and introduce new upgrade and activation fees, the $200-400 device subsidy recouped over the life of a two-year service contract remains a fat target for pruning.

But Verizon and other cell phone companies do not want to cut plan prices that are now inflated by $10-15 a month to cover paying back phone subsidies. The best of both worlds: eliminating device upgrade discounts –and– keeping prices the same for wireless service, banking the extra revenue as profit.

Verizon’s current solution is a middle-ground approach that gradually reduces device subsidies while hoping increased competition among device manufacturers will lower retail prices. For the consumer, that means prices will remain generally the same. But for Verizon, it means higher revenue from paying out lower subsidies while being able to maintain current pricing.

“I am a believer that over the next two to three years subsidies will start to decrease just because of the ecosystem,” said Shammo.

Verizon’s conversion to LTE means the day of a pure LTE-only smartphone is not far off. It will not include added-cost chips to support legacy technology, particularly older data networks and CDMA.

Wall Street Pressures Verizon to Talk Customers into Less-Costly (Anything but an iPhone) Smartphones

Brett Feldman, an analyst at Deutsche Bank who moderated the question and answer session with Shammo pointedly noted the Apple iPhone is the most-costly phone to subsidize.

“Are there things you can do with your sales force where you would proactively incentivize them to maybe sell different devices,” asked Feldman.

“It is critical that we don’t do that,” Shammo explained. “What is more important for us is a customer walks out with a phone that they will be happy with and not return under our 30-day guarantee. Because the worst thing that can happen for us is for me to incent a salesperson to get you into a phone thinking you are going to like and in three days you come back because you don’t. Now I’ve just subsidized two smartphones because that phone you used I can’t resell as a new phone.”

Cablevision’s yesteryear marketing: As outdated as this Harvest Gold Trimline phone.

Cablevision’s bizarre new ads for its Optimum triple-play package (the one that puts broadband, arguably its most important component, dead last) have reached a new low in the latest series featuring… Michael Bolton?

Bolton is a practical unknown to the most important demographic group not buying cable: recent graduate twenty-somethings that were 12 when one of his songs last plagued top-40 radio. Cablevision’s misfire could only be outdone if Nike hired Dick Van Dyke to pitch their shoes.

This is the best Cablevision can manage after Sandy blew away 11,000 of their customers (potentially for good) and rate increases took another 28,000 households with them (mostly to the benefit of Verizon FiOS)? Was the runner-up Joyce DeWitt from Three’s Company pitching a three-pack of phone, television, and (oh yes) Internet service?

Cablevision’s marketing efforts are now partly overseen by the CEO’s wife, who ‘somehow’ landed the prominent role of rebranding Cablevision/Optimum. Perhaps her best talents lie elsewhere.

Verizon featured Michael Bay blowing things up in FiOS ads five years ago that were more trendy than Cablevision was this week.

The point of the ad? Michael Bolton keeps getting annoyed with masses of would-be Cablevision customers calling in to sign up for cable service on a toll-free number that is just one digit away from Michael Bolton’s toll-free number (?) Yes, that is Bolton talking on a (shudder) landline (at least he has a cordless phone). Does anyone under 30 even know what a “toll-free” call is?

For those of us who remember what a dial tone sounds like and can still recognize a Trimline rotary phone, the ad still does not make sense. I am perplexed why Michael Bolton has a toll-free number. I guess when Tonya Harding’s name recognition rivals Michael Bolton’s, the fact he has a toll-free number gives him the edge.

A minute later, I am left wondering why I care. I am not certainly not wondering why I haven’t picked up the phone to order Cablevision service.

When it comes to branding and image, here is what Cablevision just accomplished:

• Verizon FiOS circa 2008 = Michael Bay blowing cool stuff up.
• Cablevision this week = Michael Bolton.

‘Nuff said.

[flv width=”640″ height=”380″]http://www.phillipdampier.com/video/Cablevision Ads Michael Bolton.flv[/flv]

AD FAIL: What were they thinking? Michael Bolton annoys viewers trying to recollect his career while Cablevision tries to make New York, New Jersey and Connecticut remember why they should care.  (1 minute)

Verizon Wireless is planning a major audit of their employer discount plans to verify customers’ continued eligibility, according to a report in PhoneArena.

Commencing April 1, Verizon will begin contacting customers receiving corporate discounts through text messages, direct mail or e-mail requesting proof of their continued employment within 60 days. If validation is not received, the discounts, which range between 10-25 percent, will be automatically removed in July.

Customers will be able to revalidate over the phone, by mail with a copy of an employee ID badge, or through a renewal website that will likely require the customer to use an employer-provided e-mail address for verification.

With no serious corporate discount audit conducted by Verizon Wireless in the recent past and a major upheaval in employment since the Great Recession, the audit procedure will likely net Verizon millions in additional revenue after removing discounts customers are no longer entitled to receive.

[Update 3/7: Verizon Wireless’ Brenda Raney sent word Verizon does not consider a copy of an employee ID badge as proof of employment.]

Cablevision’s executive suites are filled with intrigue and family politics. — Phillip Dampier

Cablevision’s quarterly results conference call last week was an exercise in obfuscation.

Senior management at the cable operator that serves parts of New York, New Jersey and Connecticut announced some difficult financial results, including the fact the company lost at least 39,000 customers during the last quarter — a significant number considering Cablevision only serves 3.6 million customers as of the end of December. At least 11,000 of those customers stopped paying their bills and disappeared, presumably because their homes and businesses were victims of Hurricane Sandy. But company officials admitted they also lost high-speed Internet customers because of a recent price increase and ongoing heavy promotional activity from their biggest competitor — Verizon FiOS. The phone company has offered triple play packages as low as $89 a month with $300 debit card rebates, which makes hiking rates untenable.

Cablevision CEO James Dolan has been ducking hard questions from Wall Street analysts concerned about the company’s spending and marketing, the loss of subscribers, and fallout from a 2011 management shakeup. Richard Greenfield, an analyst at research firm BTIG, has been frustrated getting answers from the Dolan family that has controlled Cablevision for decades, tweeting Cablevision executives stopped taking his questions on regular conference calls after he began asking some of those hard questions.

Cablevision’s Upgrades Will Continue; Company Wants an Improved Subscriber Experience

Greenfield

One of the problems Verizon FiOS’ fiber to the home network brings Cablevision as its largest competitor is fiber technology is superior to Cablevision’s cable network infrastructure. Verizon has been a formidable challenger. This has forced the cable operator to make dramatic improvements, particularly in its broadband product, to stay competitive. But some of these upgrades have been delayed by the effects of Hurricane Sandy, which affected 60 percent of Cablevision’s subscribers in the tri-state area.

Cablevision has been forced to offer customers service credits, substantially curtail sales and advertising efforts, and suspend the non-pay collection rules and disconnect policy.

Cablevision has also committed itself to an expensive robust Wi-Fi network to differentiate itself from Verizon. Cablevision has an extensive Wi-Fi presence in its service area, offering unlimited free service for its customers. Verizon does not. Cablevision ended 2012 with more than 67,000 installed hotspots, with more than 30% of Optimum Online customers using the service in 2012.

At the same time, cable television programming costs have skyrocketed, but Cablevision has generally avoided raising prices fearing Verizon would poach unhappy subscribers.

Drama Surrounding Executive Changes

Internet comes last?

In 2011, Cablevision accepted the resignation of Tom Rutledge, former chief operating officer. Richard Greenfield dismissed Cablevision’s statements about his departure as “spin,” and claims the real reason Rutledge left for Charter Communications is that Jim Dolan became dissatisfied with Rutledge’s performance. But that poor performance could also be attributed to some of the company’s own decisions, particularly when it engaged in multiple battles with programmers during 2010 that forced popular cable networks and broadcasters temporarily off Cablevision lineups. Greenfield suggests the biggest impact was felt when the cable operator dropped the local Fox station right in the middle of the World Series. BTIG believes subscriber losses accelerated for these reasons (and Verizon’s aggressive marketing efforts) and helped the company see its earnings and subscriber trends hurt.

Jim Dolan has reportedly taken a more hands-on approach at Cablevision and even appointed his wife Kristin to assume a stronger role in how Cablevision markets itself to customers.

The result was a Cablevision rebranding that Greenfield criticized in September as “firmly entrenched in the past,” because it emphasizes television and phone service over broadband.

Avoiding Tough Questions

Several of the questions Greenfield wanted answered, but could not, dealt with the transformation of part of Cablevision’s service area thanks to Sandy and some of the company’s earlier missteps:

• Permanent System Loss: How many Cablevision homes in the service area will no longer exist or take years to rebuild?
• Recapture Suspended Accounts: At least 24,000 video subscribers disappeared after Hurricane Sandy. Has this number changed recently and are there plans to win these customers back?
• Verizon FIOS was back up and running in storm-damaged areas before Cablevision. How has this affected your operations?
• Marketing Missteps: Are there plans to correct the marketing deficiencies from the 2012 campaign in 2013, particularly for broadband?
• Onyx Guide and Network DVR: Neither are well-received by customers. The Onyx on-screen Guide has been slammed for not working properly, being cumbersome to use, and difficult to read. The remote DVR has been criticized for its poor quality and reliability over traditional in-home DVRs. What will Cablevision do to address these complaints?
• Why is Cablevision challenging Viacom in court over cable network programming costs when sports programming is where the real costs are?