FCC Commissioner Mignon Clyburn

At least one FCC commissioner remains unconvinced that Verizon Wireless’ recent decision to double the fee consumers pay for service cancellation is justified.  Virtually every carrier offering discounts on handsets and other equipment tie those savings to a two year service contract, with a stinging early termination fee (ETF) if one decides to leave before the contract is up.

Commissioner Mignon Clyburn released a public statement Wednesday questioning Verizon’s logic in their explanation that doubling the cancel fee from $175 to $350 helped defray costs ranging from network expansion and marketing to paying to keep the lights on in Verizon Wireless retail stores.  Clyburn called Verizon’s answers unsatisfying at best, alarming at worst.

“I am concerned about what appears to be a shifting and tenuous rationale for ETFs. No longer is the claim that ETFs are tied solely to the true cost of the wireless device; rather, they are now also used to foot the bill for ‘advertising costs, commissions for sales personnel, and store costs.’ Consumers already pay high monthly fees for voice and data designed to cover the costs of doing business. So when they are assessed excessive penalties, especially when they are near the end of their contract term, it is hard for me to believe that the public interest is being well served,” Clyburn wrote in a public statement.

Verizon also continues to get heat over mysterious fees appearing on some Verizon Wireless customer bills.  As Stop the Cap! reported back in September, consumers with basic service plans occasionally find $1.99 “data charges” on their monthly bills, and several have obtained refunds from the carrier after pointing out they do not use data features on their phones.

The mystery was suggested solved when a purported, unnamed Verizon Wireless employee engaged in some whistleblowing at The New York Times:

“The phone is designed in such a way that you can almost never avoid getting $1.99 charge on the bill. Around the OK button on a typical flip phone are the up, down, left, right arrows. If you open the flip and accidentally press the up arrow key, you see that the phone starts to connect to the web. So you hit END right away. Well, too late. You will be charged $1.99 for that 0.02 kilobytes of data. NOT COOL. I’ve had phones for years, and I sometimes do that mistake to this day, as I’m sure you have. Legal, yes; ethical, NO.

“Every month, the 87 million customers will accidentally hit that key a few times a month! That’s over $300 million per month in data revenue off a simple mistake!

“Our marketing, billing, and technical departments are all aware of this. But they have failed to do anything about it—and why? Because if you get 87 million customers to pay $1.99, why stop this revenue? Customer Service might credit you if you call and complain, but this practice is just not right.

“Now, you can ask to have this feature blocked. But even then, if you one of those buttons by accident, your phone transmits data; you get a message that you cannot use the service because it’s blocked–BUT you just used 0.06 kilobytes of data to get that message, so you are now charged $1.99 again!

“They have started training us reps that too many data blocks are being put on accounts now; they’re actually making us take classes called Alternatives to Data Blocks. They do not want all the blocks, because 40% of Verizon’s revenue now comes from data use. I just know there are millions of people out there that don’t even notice this $1.99 on the bill.”

Verizon's new termination fee appears random and capricious, some company critics charge.

Verizon Wireless denies it charges consumers for accidental web usage that lands on their mobile phone home page, which they claim is exempt from charges.  But Clyburn isn’t buying that explanation either.

“I am also alarmed by the fact that many consumers have been charged phantom fees for inadvertently pressing a key on their phones thereby launching Verizon Wireless’s mobile Internet service. The company asserted in its response to the Bureau that it ‘does not charge users when the browser is launched,’ but recent press reports and consumer complaints strongly suggest otherwise,” Clyburn writes.

“These issues cannot be ignored. Wireless communications are an essential part of our lives, linking us to our places of business, our communities, and our loved ones. The bottom line is that wireless companies can truly earn their desired long-term commitments from consumers by focusing primarily on developing innovative products, maintaining affordable prices, and providing excellent customer service. I look forward to exploring this issue in greater depth with my colleagues in the New Year,” she adds.

Verizon Wireless is also the only carrier that has not responded to a campaign by a Times columnist to let customers get rid of the airtime-wasting 15 seconds of voicemail instructions people wait through when trying to leave messages, something the wireless industry admits is there precisely to use up airtime and maximize revenue.

Clyburn joined the Commission this year, appointed by incoming President Barack Obama.  Her father James is the third-ranking Democrat in the House behind House Speaker Nancy Pelosi and Majority Leader Steny Hoyer.

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WIVB-TV Buffalo reviewed Consumer Reports’ findings regarding the nation’s best and worst cell phone providers.  Despite Verizon’s controversial fees, it remains top-rated by the magazine’s readers. (12/7/09 – 2 minutes)

Wind Mobile uses "home zones" as their version of "in network" calling. Placing calls outside of your home zone is akin to "roaming" and can incur additional costs. Here is their service area in the metro GTA (Toronto-Hamilton).

The Canadian Radio-television and Telecommunications Commission has been overruled in an upset decision by the Harper government to admit new competition into Canada’s mobile phone marketplace.  Earlier this fall, the CRTC denied a license to Globalive to begin mobile service under its Wind Mobile brand, agreeing with objections from incumbent providers Bell, Rogers, and Telus that the company was not sufficiently “Canadian enough” in its ownership to operate legally in the country.  The CRTC decision upset many consumers who saw the regulatory body overprotecting the interests of the country’s three large mobile providers, effectively keeping competition out of Canada.

Canada’s version of the FCC ruled that because the Toronto-based company received most of its funding from Naguib Sawiris, an Egyptian billionaire that runs Egypt’s telecommunications provider Orascom, it disqualified Globalive from doing business in Canada.  Cell phone providers in Canada must be majority owned by Canadian citizens.

Apparently the decision was so egregiously wrong, the Harper government overturned it on December 11th.  Industry Minister Tony Clement said a government review of Globalive found the company did meet Canadian ownership requirements and reversed the CRTC decision effective immediately.

The Harper government’s direct intervention in the Globalive matter rocked Canada’s existing mobile providers.

“If Wind is Canadian, then so was King Tut,” Michael Hennessy, head of regulatory affairs for Telus, wrote on his Twitter page. “When you have no effective opposition party, you can make the rules you want.”

Rogers has repeatedly insisted there is no room for a fourth player in Canadian mobile, claiming there isn’t enough business to go around.  Stockholders apparently agreed and shares of all three incumbents dropped when the news broke that Wind Mobile was on the way in Toronto and Calgary in as little as a week.  Indeed, some analysts predict Globalive’s entry could force two of the existing carriers to merge — most likely Bell and Telus.

Rogers CEO Nadir Mohamed: “There’s no question in my mind that Canada cannot support more than three national facilities-based players,” he said in an interview with Bloomberg News the day before the government decision. “It’s inconceivable to me.”

“We think Globalive clearly does not meet the requirements for Canadian control,” Bell officials said in a statement. “We’ll be taking a close look at the reasoning behind this decision.”

Canadian consumers are excited about the arrival of competition in a marketplace with three providers charging essentially identical high pricing for mobile service.

Wind Mobile could dramatically change the the entire business model of Canada’s cell phone marketplace because most of its plans offer flat rate service for Canadian customers with no overage fees.  It also does away with the nickle-and-dime fees consumers hate, with no charges for “system access,” “911,” and other non-government-imposed fees and surcharges.  Wind doesn’t even charge for incoming text messages or received long distance phone calls.  That means text spam doesn’t cost you anything beyond irritation.

In return for not subsidizing the cost of your phone, the company doesn’t compel subscribers to remain on lengthy service contracts.  That Blackberry Bold 9700 that costs $199 on AT&T or T-Mobile’s network in the United States costs $450CDN from Wind Mobile, but no two year contract is required.

The only downside?  Wind Mobile’s network is very limited at present to Toronto and Calgary, and while service is available throughout Canada, using it will incur roaming charges around 25 cents per minute.  Most early Wind Mobile customers will likely be those who don’t roam too far from home because of these limitations.

[flv width=”640″ height=”388″]http://www.phillipdampier.com/video/CBC Coverage Wind Mobile 12-11-09.flv[/flv]

CBC Television ran extensive coverage of the government decision to admit Globalive into the Canadian mobile marketplace.  We’ve combined several reports into a single clip that explores consumer reaction, the government’s logic in permitting Wind Mobile to start service, as well as the discontent from existing providers who feel the decision is unfair.  (12/11/09 – 21 minutes)

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CTV News also covered the story, and included a more extensive review of what consumers can expect from the deal.  (12/11/09 – 5 minutes)

[flv]http://www.phillipdampier.com/video/Global CRTC Decision Lets Wind Mobile In 12-11-09.flv[/flv]

Global Television led its newscast with the story on December 11th, and included a pouting Telus representative.  (2 minutes)

More video coverage can be found below.

Wind Mobile Pricing & Features (provided by Wind Mobile, all prices in Canadian dollars)

Handsets / Devices:

BlackBerry Bold 9700 …… $450
HTC Maple ………………….. $300
Samsung Gravity 2 ……….. $150
Huawei U7519 ……………… $130
Huawei E181 data stick…….$150

Here’s what we don’t have:

• No system access fees
• No 911 fees
• No activation fee
• Never a charge for incoming texts
• No charge for incoming long distance calls
• No difference between plans for postpaid and prepaid
• No contracts. Our Customers stay with us because they want to, not because they have to.

What we do have:

• Nation-wide coverage with a domestic roaming partner
• Unlimited calling (incoming and outgoing) in the GTA and Calgary to start, followed by Edmonton, Vancouver and Ottawa in early 2010
• Unlimited WIND to WIND calling across Canada included on all plans
• Unlimited province-wide calling on the $35 plan
• Unlimited Canada-wide calling on the $45 plan
• Call control included on all plans (missed call alerts, caller ID, call forward, call waiting)

Wind Mobile's Voice & Text Plans

Wind Mobile's data plan has a 5GB per month "fair access policy" limit, similar to that offered by Cricket Wireless. Exceed it, and the company reserves the right to throttle your speeds until the month is up.

Watch more video coverage below.

… Continue Reading

Windstream Corporation has agreed to acquire Newton, Iowa-based Iowa Telecom for $530 million in stock and cash, making it the fourth acquisition for the rural-focused Windstream in 2009.  It will also take on $600 million of Iowa Telecom’s debt as part of the transaction, which caused Standard & Poors to reduce Windstream’s credit rating to junk status – BB.

Like Frontier Communications, Windstream is engaged in aggressive expansion to stake out its position serving rural America.  The company has spent $1.3 billion on acquisitions in just the last six months, trying to keep up with other large independent providers like Frontier and CenturyLink.

“Our whole investment thesis was to grow scale in rural America,” Windstream Chief Executive Jeff Gardner told the Wall Street Journal. “I still think there’s a great deal of consolidation left with smaller players, where the pressure is the most obvious.”

Windstream, based in Little Rock, Arkansas, serves customers in 16 states, mostly in the midwest and south.  Iowa Telecom serves former GTE service areas in Iowa and Minnesota.

For employees in Newton, east of Des Moines, the purchase brings fear of significant job reductions.  Iowa Telecom has 800 employees, and comments by Windstream’s Gardner suggest downsizing is forthcoming.  Windstream expects $35 million in cost savings annually, and some of that will be achieved by dispensing with unneeded Iowa Telecom workers post-merger.  Windstream has only promised to maintain a call center in Iowa.

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WHO-TV Des Moines reported Windstream’s buyout of Iowa Telecom was like “lightning striking twice” for Newton residents, leaving an economically-challenged community in fear. (11/25/09 – 2 minutes)

Iowa Telecom provides customers with a familiar bundle of services common among independent phone companies.  As well as providing traditional wired phone lines, Iowa Telecom markets Xstream DSL at speeds up to 15Mbps in some areas, and resells DISH Network satellite service for customers looking for a video option.

Lexcom's DSL price chart shows budget-busting prices for relatively slow DSL service

Windstream provides DSL service up to 12Mbps in some areas.

Before Iowa Telecom, Windstream’s earlier acquisitions included:

• D&E Communications of Pennsylvania — Windstream fetched the independent provider in a stock and cash transaction that added about 150,000 additional telephone lines to Windstream’s portfolio in Pennsylvania.
• Lexcom — Windstream picked up this Davidson County, North Carolina independent for $141 million.  Lexcom needs serious technology upgrades to improve service.
• NuVox — A Greenville, South Carolina-based business services provider.

Windstream has hinted they’re not done with acquisitions yet, fueling some speculation their next targets may be Consolidated Communications, which provides service in Illinois, Pennsylvania, and Texas or Alaska Communications Systems, another business service provider.

[flv width=”640″ height=”380″]http://www.phillipdampier.com/video/KCCI Des Moines Will $1.1B Iowa Telecom Sale Mean Job Losses 11-24-09.flv[/flv]

KCCI-TV Des Moines reported residents of Newton were “shocked” and “disturbed” about the Iowa Telecom buyout, because of potentially staggering layoffs to come after Windstream closes the deal.  (11/24/09 – 2 minutes)

Not everyone is singing the blues about Windstream’s buyout of Iowa Telecom.  Despite the transaction’s impact on Windstream’s credit rating, Wall Street has supported Windstream with a strong stock price, owing to the company’s relentless desire to deliver dividends to stockholders.

[flv]http://www.phillipdampier.com/video/CNBC Cramer on Windstream 12-7-09 1025.flv[/flv]

CNBC’s Jim Cramer loves the “massive dividends” Windstream provides to stockholders.  But Cramer also issues some caveats, reminding viewers of FairPoint Communications, another former high-dividend stock… until it went bankrupt.  Cramer interviews Windstream CEO Jeff Gardner about the company and the future of independent phone companies in general.  (12/7/09 – 10 minutes)

[flv]http://www.phillipdampier.com/video/CNBC Windstream Profile NASDAQ 12-10-2009 222.flv[/flv]

CNBC reports on Windstream’s move to the NASDAQ and interviews CEO Jeff Gardner about the future for the telecom industry in general.  (12/10/09 – 2 minutes)

One way or another consumers will pay more for their Mediacom cable service in 2010.  The undecided question is will Sinclair-owned television stations get a chunk of your wallet or will Mediacom keep it all for themselves.

Weary Mediacom customers have been through this battle before.  For the second time in three years, residents of Des Moines, Iowa face the prospect of losing access to their local Fox station, owned by Sinclair.

The ads are up and running.

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Mediacom is running this spot, customized for each city impacted by the dispute, comparing Sinclair’s demands as another “bailout.”  This one is running in the Pensacola-Mobile market, where station WEAR is threatened with removal from Mediacom’s lineup.

Sinclair is demanding another price increase from the cable operator and Mediacom has a history of playing hardball and refusing to pay.  If the two sides don’t reach agreement by December 31st, 22 Sinclair-owned stations in communities served by Mediacom will be taken off the cable lineup.

Viewers aren’t happy, especially because they do not get a reduced bill from the cable company for the reduced channel lineup that results.

Both sides are waging campaigns to try and get viewers into the fight.  But in the end, it’s a battle of two corporate titans fighting over their portion of your money.

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Back in January, 2007 Mediacom customers spent five weeks without Sinclair-owned television stations on their cable dial.  A nasty exchange between Sinclair and Mediacom was documented in this report aired by KCCI-TV Des Moines back on January 23, 2007.   (3 minutes)

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The fallout from the 2007 dispute could be measured by disgusted customers who fled Mediacom for other providers, as KCCI found on May 4, 2007. (2 minutes)

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WHO-TV Des Moines covers today’s dispute impacting Mediacom and the city’s Fox affiliate. (2 minutes)

[flv]http://www.phillipdampier.com/video/KDSM Des Moines Mediacom vs Sinclair 12-17-09.flv[/flv]

KDSM-TV Des Moines is the Sinclair-owned Fox affiliate.  The station covers its own dilemma, warning viewers they might lose the station for the second time in three years.  (3 minutes)

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In Cedar Rapids, Sinclair’s KFXA-TV covers the dispute with a decidedly pro-Sinclair point of view. (3 minutes)

[flv]http://www.phillipdampier.com/video/WEAR Pensacola Sinclair Mediacom Dispute 12-16-09.flv[/flv]

WEAR-TV in Pensacola, Florida spends a great deal less “news time” covering the dispute. WEAR is the Sinclair-owned ABC affiliate for the Florida Panhandle. (30 seconds)

While Time Warner Cable continues to ask customers if they should “get tough” with cable programmers’ price hikes, they are rolling over customers with more rate increases anyway.

The latest region facing higher cable bills is southern California.  Customers were notified rates were increasing an unspecified amount in January 2010.  Company spokesman Darryl Ryan told the Orange County Register that he can’t easily categorize the average increase since every bill will be different.

Readers managed:

• Margaret from Huntington Beach says that some price hike examples are: The All the Best goes to $122.99, from $119.95; the ‘Surf ‘n View’ increases $2.04; broadcast cable goes up $2; Internet only goes up $2.04; and DVR increases to $1.54. One decrease: the remote control drops $0.05.
• Dana from Anaheim Hills got a letter too and had to call customer service to figure out what it meant. Essentially, Dana found out basic service was going up $5 to $8 per month. To keep the existing price, customers must commit to a 2-year contract.

This price increase, with more likely to follow, comes because of programming costs according to the nation’s second largest cable operator.  The company has recently tried to engage consumers in an effort to “keep costs down” through its “Roll Over or Get Tough” campaign.  Time Warner Cable claims broadcasters and other cable programmers are demanding as much as 300% more for their programming in 2010.

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Time Warner Cable’s ‘Roll Over or Get Tough’ campaign is running this ad for the holidays.

The Parents Television Council called the marketing campaign “self serving,” said Tim Winter, the organization’s president.  The group said consumers are always put in the middle of pricing arguments, either from the cable company’s perspective or the network trying to get carriage or threatened with removal from cable lineups.  The PTC calls it posturing, and in the end prices typically get negotiated down a few pennies at most.

The PTC advocates consumers being able to pick and choose only those channels they want.  The group runs the website How Cable Should Be, which breaks down some of the estimated wholesale prices programmers charge cable companies for their programming.  Consumers can use the site to pick and choose their favorite channels and add up what their monthly bill could be if they weren’t paying for channels they don’t watch.

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The Parents Television Council’s “Bundling Bummer” message illustrates how consumers get stuck paying for channels they never wanted. (3 minutes)

Time Warner Cable claims that more than 400,000 visitors to their campaign website have been overwhelmingly positive towards the company’s “fight back” stance.

“We’re delighted with the results so far,” said Time Warner chairman, president and CEO Glenn Britt. “Over 150,000 people have left comments, and 95% of them voted for ‘Get Tough.’ Our customers clearly agree that the current programming business model is broken. One comment we’re hearing pretty consistently is that customers would like the choice to buy smaller packages of channels. As an industry, we need to listen to those kinds of concerns.”

But the company’s site doesn’t make it easy to “roll over.”  Those who try to choose “roll over” are prompted instead to choose “fight back.”

Industry observers suggest Time Warner’s campaign is an opening shot for upcoming contract extensions for a handful of programmers, most notably broadcasters.  In the very center?  News Corporation and the Fox family of cable and broadcast stations.

[flv]http://www.phillipdampier.com/video/TWC 300 Percent Pay Raise.flv[/flv]

Time Warner Cable asks if you are getting a 300% pay raise in this ad asking if customers want the company to fight back against programmer price increases.

Behind the scenes, Time Warner Cable has been taking shots at Fox over negotiations between Sinclair Broadcasting, which owns 20 Fox-affiliated TV stations, and Mediacom, a smaller cable operator.  In an ex parte comment filed December 8th, Time Warner Cable took direct aim at the network, suggesting they were demanding veto power over local negotiations with individual stations.  If the network doesn’t like the terms the local station and cable system settle on, Fox wants the right to object.  Time Warner Cable suggested that precedent is already in place based on negotiations between Sinclair and Time Warner which only resulted in one-year extensions.  The cable operator assumes Fox will be back a year from now demanding up to one dollar a month per subscriber for each Fox affiliate the cable system carries.

Why does Fox care so much?  Because they, like many other television networks, have begun asking for a percentage of the revenue earned from retransmission consent agreements.  With a weak ad market, every penny counts.

Fox called the cable operator’s tactics a “desperate campaign to mask its impressive profits and instead malign its program suppliers’ efforts to receive fair compensation.”

Regardless of who wins the fight, subscribers lose because they bear the brunt of the cable operator’s business model which forces customers to pay for dozens of channels they’ll never watch, and when prices for those networks increase, so shall the customer’s bill.

[flv width=”480″ height=”290″]http://www.phillipdampier.com/video/Canada Retrans Consent Ad.flv[/flv]

Canadians are also going through a similar battle between cable systems and local broadcasters who demand payment for carriage.  The hardball campaign plays out on Canadian TV screens with ads like this.