Luxurious wireless industry profits of up to 50 percent earned from selling some of the world’s most expensive cellular services may soon be a thing of the past as Google and Cablevision prepare to disrupt the market with cheap competition.

With more than 80 percent of all wireless data traffic now moving over Wi-Fi, prices for wireless data services should be in decline, but the reverse has been true. AT&T and Verizon Wireless have banked future profits by dumping unlimited data plans and monetizing wireless usage, predicting a dependable spike in revenue from growing data consumption. Instead of charging customers a flat $30 for unlimited data, carriers like Verizon have switched to plans with voice, texting, and just 1GB of wireless usage at around $60 a month, with each additional gigabyte priced at $15 a month.

With the majority of cell phone customers in the U.S. signed up with AT&T or Verizon’s nearly identical plans, their revenue has soared. Sprint and T-Mobile have modestly challenged the two industry leaders offering cheaper plans, some with unlimited data, but their smaller cellular networks and more limited coverage areas have left many customers wary about switching.

Google intends to remind Americans that the majority of data usage occurs over Wi-Fi networks that don’t require an expensive data plan or enormous 4G network. The search engine giant will launch its own wireless service that depends on Wi-Fi at home and work and combines the networks of Sprint and T-Mobile while on the go, switching automatically to the provider with the best signal and performance.

Cablevision’s offer, in contrast, will rely entirely on Wi-Fi to power its mobile calling, texting, and data services. Dubbed “Freewheel,” non-Cablevision customers can sign up starting in February for $29.95 a month. Current Cablevision broadband customers get a price break — $9.95 a month.

Cablevision’s dense service area in parts of New York City, Long Island, northern New Jersey and Connecticut offers ample access to Wi-Fi. Cablevision chief operating officer Kristin Dolan said its new service would work best in Wi-Fi dense areas such as college campuses, business districts, and multi-dwelling units.

New York City is working towards its own ubiquitous Wi-Fi network, which could theoretically blanket the city with enough hotspots to make Cablevision’s service area seamless. But the biggest deterrent to dumping your current cell phone provider is likely to be available coverage areas. Google’s answer to that problem is combining the networks of both Sprint and T-Mobile, offering customers access to the best-performing carrier in any particular area. While that isn’t likely to solve coverage issues in states like West Virginia and the Mountain West, where only AT&T and Verizon Wireless offer serious coverage, it will likely be sustainable in large and medium-sized cities where at least one of the two smaller carriers has a solid network of cell towers.

Comparing the Wireless Alternative Providers

• Google Wireless will offer seamless access to Wi-Fi, Sprint and T-Mobile voice, SMS, and mobile data at an undetermined price. Likely to arrive by the summer of 2015;
• Cablevision Freewheel depends entirely on Wi-Fi to power unlimited voice, SMS, and data. Launches in February for $29.95/mo ($9.95/mo for Cablevision broadband customers);
• FreedomPop Wi-Fi ($5/mo) offers an Android app-based “key” to open unlimited Wi-Fi access to 10 million AT&T, Google, and cable industry hotspots nationwide for calling, texting, and mobile data;
• Republic Wireless developed its own protocol to properly hand off phone calls between different networks without dropping it. Calling plans range from $5-40 a month. Less expensive plans are Wi-Fi only, pricier plans include access to Sprint’s network;
• Scratch Wireless charges once for its device – a Motorola Photon Q ($99) and everything else is free, as long as you have access to Wi-Fi. Cell-based texting is also free, as a courtesy. If you need voice calling or wireless data when outside the range of a hotspot, you can buy “access passes” to Sprint’s network at prices ranging from $1.99 a day each for voice and data access to $24.99 a month for unlimited data and $14.99 a month for unlimited voice.

Scratch Wireless

Google is pushing the FCC to open new unlicensed spectrum for expanded Wi-Fi to accommodate the growing number of wireless hotspots that are facing co-interference issues.

Wi-Fi-based wireless providers are likely to grow once coverage concerns are eased and there is reliable service as customers hop from hotspot to hotspot. The cable industry has aggressively deployed Wi-Fi access with a potential to introduce wireless service. Comcast is already providing broadband customers with network gateways that offer built-in guest access to other Comcast customers, with the potential of using a crowdsourced network of customers to power Wi-Fi coverage across its service areas. FreedomPop will eventually seek customers to volunteer access to their home or business networks for fellow users as well.

AT&T and Verizon are banking on their robust networks and coverage areas to protect their customer base. Verizon Wireless, in particular, has refused to engage in price wars with competitors, claiming Verizon customers are willing to pay more to access the company’s huge wireless coverage area. AT&T told the Wall Street Journal its customers want seamless access to its network to stay connected wherever they go.

Verizon’s chief financial officer Fran Shammo appeared unfazed by the recent developments. On last week’s conference call with investors, Shammo dismissed Google’s entry as simply another reseller of Sprint’s network. He added Google has no idea about the challenges it will face dealing directly with customers in a service and support capacity. While Google’s approach to combine the coverage of T-Mobile and Sprint together is a novel idea, Shammo thinks there isn’t much to see.

“Resellers, or people leasing the network from carriers, have been around for 15 years,” Shammo said. “It’s a complex issue.”

Investors are taking a cautious wait-and-see approach to the recent developments. Google’s new offering is likely to offer plans that are philosophically compatible with Google’s larger business agenda. Challenging the traditional business models of AT&T and Verizon that have implemented usage caps and usage pricing may be at the top of Google’s list. The new offering could give large data allowances at a low-cost and/or unlimited wireless data for a flat price. Such plans may actually steal price-sensitive customers away from Sprint and T-Mobile, at least initially. Sprint is clearly worried about that, so it has a built-in escape clause that allows a termination of its network agreement with Google almost at will.

[flv]http://www.phillipdampier.com/video/WSJ Google Cablevision Challenge Wireless Industry 1-26-15.flv[/flv]

The Wall Street Journal talks about the trend towards Wi-Fi based mobile calling networks. (1:59)

Ohio Gov. John Kasich is threatening to veto the state’s Agriculture Bill if it reaches his desk with telecom deregulation inserted as an amendment.

AT&T’s lobbyists in Ohio have convinced state legislators to ignore a veto threat from the governor’s office and insert a deregulation amendment into an unrelated water quality and agriculture measure.

Retiring House Speaker Bill Batchelder (R-Medina) is shepherding AT&T’s latest attempt at total deregulation through the Ohio House of Representatives, claiming it will break down barriers for businesses in Ohio and give new businesses the infrastructure they need to make Ohio their home. Among Batchelder’s top donors is AT&T.

Critics contend the measure will disconnect up to 5% of rural Ohio from all telephone service because they live in “no signal bar” areas of the state.

The amendment, inserted into HB490 (at Sec. 4905.71), would end AT&T’s requirement to serve as a Provider of Last Resort, which has guaranteed that every Ohio resident seeking telephone service has had it for nearly 100 years. If the measure passes, AT&T can unilaterally disconnect service and leave unprofitable service areas, mostly in rural and poor sections of the state. Current Ohio law only permits a telephone company to end service if it can prove financial hardship and show that reasonable alternatives are available to affected residents. AT&T earned $128.75 billion in revenue in 2013 and is unlikely to meet any hardship test.

Although AT&T is unlikely to stop service in suburban and urban areas, ratepayers across the state would lose oversight protections from lengthy service outages, unreasonable billing standards and credit requirements, the ability to quickly connect or disconnect service and access to important low-income programs like Lifeline. Rural customers could be forced away from traditional landline and DSL service in favor of AT&T’s wireless network, which costs considerably more.

Current AT&T customers in Ohio can subscribe to landline service for around $20 a month in rural areas and broadband DSL for as little as $15 per month. AT&T’s wireless alternative costs $20 a month for voice service and at least $60 a month for wireless broadband (with a usage cap of 10GB per month and an overlimit fee of $10 per gigabyte). An average landline customer consuming 20GB of data would pay $35 a month for both voice and data services. The same customer using AT&T’s wireless voice and data alternative would pay $180 a month, mostly in overlimit penalties.

AT&T’s lobbying has riled Ohio’s Republican governor, John Kasich, who has threatened to veto any agriculture bill that reaches his desk with telephone deregulation attached.

“The telecommunications language will force the governor to veto this bill, as he has personally said and has also been repeated several times by other members of the administration,” Jim Zehringer, director of the Ohio Department of Natural Resources told the Ohio Senate’s Agriculture Committee during an informal hearing on the legislation. “We would be sacrificing all the great work done so far on this bill if these provisions are not removed.”

The AARP is concerned the measure will not only hurt rural Ohio, but elderly and poor residents who cannot afford wireless service.

“They will only have wireless telephone service with no price controls or guarantees for low-income Ohioans in these areas,” AARP Ohio wrote in a released statement about the proposal. “Additionally, there are areas of Ohio where wireless service is minimal, and to provide the speed needed for those receiving tele-health services in those areas will be even more expensive.”

Interested Ohio residents can share their feelings with their state legislators and the governor’s office.

• Locate your Ohio House Representative: http://www.ohiohouse.gov/ or call 1-800-282-0253 and ask to be connected to your local representative.
• Governor John Kasich’s Office Phone: (614) 466-3555

Unsimplify

When is a rate increase not a rate increase? When it is an “administrative surcharge” of course!

Verizon FiOS phone customers will soon find the company’s latest innovation in the form of a new line on their June bill, along with a $0.99 surcharge.

Notice of Price Increase
Effective May 17, 2014, Verizon will apply an FDV Administrative Charge of $0.99 per FiOS Digital Voice line. This monthly surcharge helps defray account servicing costs associated with providing voice services. This is a Verizon surcharge, not a tax or governmental fee. Visit verizon.com for more information.

Instead of simply raising the advertised price of the service, Verizon added a new opaque charge which they admit is nothing more than an effort to increase revenue. Prospective customers will still see Verizon’s attractive promotional pricing, but only later discover the final bill is higher once taxes, fees, and other surcharges are tacked on.

In fact, Verizon’s new FiOS Digital Voice fee is subject to taxes as well, so for some the true cost of the rate increase is $1.21.

Some angry Verizon customers are switching to Ooma, a service that asks customers to pay upfront for the hardware but offers basic telephone service for free (customers pay well under $10 a month to cover taxes that Ooma does not pocket itself.) A more deluxe option including more phone features runs around $10 a month.

One annoyed customer considers the fee an end run around consumer contract law:

My concern [is] with a regulated utility’s ability to get around a contract price by labeling an increase as an “administrative charge.”

I called their customer service line to discuss/complain.  When I asked what would prevent Verizon from using this as a vehicle to increase prices by $10 or $15, assuming Time Warner/AT&T/DirectTV raised their prices as well, he admitted that he was not aware of any restrictions.  Neither am I.

I can’t find anything in my contract with Verizon that lets them increase my price by instituting back-end increases.  I’m pursuing with government regulators and encourage you all to do so as well.  If this gets through, there will be more.

In fact, one of the reasons why Verizon loves their digital voice product so much is because it is unregulated and not subject to government oversight. They can set rates at will and their current contract allows for the addition of administrative fees without violating any “price lock” agreements. So far, most companies implementing these fees have kept them low enough to avoid provoking government scrutiny, but the number of them and their respective amounts have increased over time.

Customer recourse? Complain and ask for a credit for the administrative fee or cancel service.

Verizon FiOS is coming to Fire Island.

Verizon Communications has thrown in the beach towel attempting to convince residents of popular tourist destination Fire Island to accept its wireless landline replacement Voice Link as the company’s sole landline service option.

After telling customers for months it did not make financial sense to restore copper service or bring its fiber optic network FiOS to Fire Island, Verizon senior vice president of national operations support Tom Maguire today reversed course.

“In today’s competitive marketplace it’s all about making sure you can take care of customers because if you don’t they can go someplace else,” Maguire told Newsday. “Interestingly on Fire Island, there is no place else, so we listened to our customers. It was pretty apparent that we wanted to do something beyond Voice Link and the wireless network, so we think that fiber is the best course.”

Verizon customers on Fire Island have told Stop the Cap! all summer they felt abandoned by Verizon, stuck using a wireless landline replacement service they claimed worked poorly or not at all at times. Customers also loudly complained that Verizon was effectively forcing broadband customers who depended on Verizon DSL to the much more expensive Verizon Wireless broadband service with a very small usage cap. Many attended meetings sponsored by elected officials or the Public Service Commission to decry Voice Link and demand Verizon offer the same quality service its landline network used to provide.

Maguire told the newspaper the company will now deploy its fiber network FiOS on Fire Island, offering residents new options for telephone and broadband service. The 600 customers on Fire Island with Voice Link will be able to keep the wireless service or switch to FiOS fiber.

Reached for comment, Verizon tells Stop the Cap! its fiber service will not include FiOS TV because Verizon does not have franchise agreements with the many municipalities on Fire Island, and their primary concern is getting the fiber network engineered and constructed.

Schumer

Fire Island residents have made it clear to Verizon their biggest concern is Internet access, not television, and Verizon FiOS will be able to deliver faster Internet speeds unavailable from DSL.

Verizon expects to begin construction in October, although it has already started preliminary design work for the new fiber network. Verizon expects to have the fiber build complete by the beginning of the 2014 summer season on the island.

Sen. Charles Schumer (D-N.Y.), who has been carefully monitoring the Voice Link issue, released a statement welcoming Verizon’s decision.

“By installing fiber-optic cables on the island, Verizon will not only make the system as good as it was before, it will be making it better,” said Schumer. “Fire Island residents will now have greater access to high-speed Internet – a necessity in the modern age – and reliable voice service. Verizon deserves credit for listening to our concerns and changing course.”

In a June guest article written for publication on Stop the Cap!, Maguire wrote it would cost Verizon from $4.8 million to more than $6 million to restore landline service. Maguire argued it made no economic sense to commit to a multimillion dollar investment with no guarantee that residents of the island will sign up for Verizon service.

“That’s probably why Verizon is the sole provider on the island,” Maguire noted in the piece. “None of the companies we compete with in other parts of New York offer services on the island.”

Today’s decision represents a complete reversal of the company’s earlier views, but one that is welcomed nonetheless by residents on Fire Island reached by Stop the Cap! this afternoon.

“We’re very glad this is now over and behind us,” said Verizon customer Shari who has toughed out the summer with cellphone-only service.

“I can’t wait to return Voice Link, which has been a real pain,” said Thom.

Both customers tell Stop the Cap! they intend to sign up for Verizon FiOS the moment it becomes available.

Verizon Voice Link – Not good enough for New York, says our source.

A well-placed source in Albany tells Stop the Cap! Verizon’s Voice Link, a wireless landline replacement,  is unlikely to be approved as a sole landline offering in New York State.

“With mounting evidence supplied by Verizon itself in response to staff requests and increasing pressure from local, state, and federal politicians hearing the concerns of more than 500 New York residents that have opposed Verizon’s proposal or who have complained about the quality of service provided by Voice Link over the summer, it is increasingly clear the service in its current form will fail to meet the Public Service Commission’s standard for basic voice service,” the well-informed source tells Stop the Cap!

“It is important to recognize that the PSC’s primary concern is providing an equivalent voice service that has the reliability required to reach emergency personnel and deliver ancillary services the disabled community depends on,” said the source. “While the Commission is unlikely to reject Verizon Voice Link as an alternative, optional service, the Commission cannot and signaled to our office it will not ignore the consensus from real Voice Link users complaining the service is not well received and reliability issues have persisted all summer.”

Verizon has attempted to place Voice Link in the homes of residents on the western half of Fire Island as its sole service offering for landline service, while in other communities upstate the company claims it offers Voice Link as an optional service for customers with line problems or for those requesting seasonal telephone service.

The source tells us the sticking point for regulators is Verizon’s request to offer Voice Link as its sole service offering, denying requests to repair existing landline service, as has been the case on the western half of Fire Island since Superstorm Sandy damaged much of the infrastructure on that half of the island almost one year ago.

Verizon officials claim the costs to re-establish wireline copper phone service on the island do not make financial sense based on the small number of customers served, and the company adds there is no business case for upgrading to fiber service either. But residents and some local officials claim Verizon has exaggerated the amount of damage, and many customers in the affected area still have intermittent service, but cannot get Verizon repair crews to repair trouble on partly functional lines.

The PSC has received more 650 comments to date about Verizon Voice Link — all negative — and has also heard from New York politicians who are strongly opposed to Verizon’s efforts to curtail landline service in the state. Our source tells us some of those politicians were moved by constituents who placed calls over Voice Link to officials in Albany and Washington to let them to hear the actual voice quality of the service. The source tells us the quality of those calls were often plagued with audio anomalies and breakups.

Last week, the Commission requested Verizon send a functional Voice Link unit for internal testing, but that request may now be a formality, according to our source.

“I think the decision is mostly made at this point,” said the source. “It is pretty clear the PSC is signaling to complaining politicians and through its repeated requests for information from Verizon it is unconvinced by Verizon’s arguments that claim there is a necessity to replace landline service with wireless Voice Link, and the company also did itself no favors when its executives previewed plans to abandon landline service in favor of wireless in unprofitable areas even before Sandy struck,” the source tells us. “Verizon isn’t stupid, so it is likely the company will offer something different before their request is turned down.”

Verizon said this afternoon it had no comment on Stop the Cap!’s report.