Hidden Fees Mean US Cable & Broadband Bills Can Be 45% Higher Than Advertised

from the ill-communication dept

For years we've talked about how the broadband and cable industry has perfected the use of utterly bogus fees to jack up subscriber bills, a dash of financial creativity it adopted from the banking and airline industries. Countless cable and broadband companies tack on a myriad of completely bogus fees below the line, letting them advertise one rate -- then sock you with a higher rate once your bill actually arrives. These companies will then brag repeatedly about how they haven't raised rates yet this year, when that's almost never actually the case.

Despite this gamesmanship occurring for the better part of two decades, nobody ever seems particularly interested in doing much about it. The government tends to see this as little more than creative marketing, and when efforts to rein in this bad behavior (which is really false advertising) do pop up, they tend to go nowhere, given this industry's immense lobbying power. And given the US broadband sector remains painfully uncompetitive in most markets, actually voting with your wallet is often impossible.

How bad is the problem, really? A new study by GlobalData found that what you'll actually pay to your cable TV or broadband provider can often be upwards of 45 percent higher than the advertised price:

"In some cases, the final cost is as much as 45% over the advertised rate. For example, Xfinity’s $40 ‘Starter Internet plus Basic’ TV bundle jumps to $58 per month once the additional $18 in equipment costs are added. Prices can also vary based on location.”

According to GlobalData’s research, Verizon had the highest additional costs in August at $24 per month, followed closely by Frontier and Optimum with around $17-$18 in additional equipment fees. AT&T and Google Fiber offered the most cost transparency in bundle price with zero additional equipment or technology fees.

AT&T is let off the hook here and they shouldn't be. This is a company that recently tried to charge its broadband customers upwards of $500 more a year if they simply wanted to opt out of snoopvertising and online data tracking. The broadcast and cable fee problem isn't a subtle one. Companies like CenturyLink have gotten so cocky they've charged their broadband users a "internet cost recovery fee," which it claims helps the ISP "defray costs associated with building and maintaining CenturyLink's High-Speed Internet broadband network." Except that is, in case you didn't know, what the rest of your damn bill is for.

Of course it's a problem that's everywhere, and not just in the telecom sector. Hotels routinely still charge users obnoxious "resort fees" (legislation to hamper those efforts exists but faces an uphill climb against lobbyists), and airlines and banks have of course perfected the nuisance as well. But both parties appear to have embraced the practice as a form of capitalistic creativity, despite the fact that when you strip away the bullshit justifications, it's little more than false advertising. And, apparently, most US regulators and lawmakers are cool with that.

Filed Under: broadband, cable, fees, hidden fees, truth in advertising
Companies: at&t, centurylink, comcast, frontier, verizon

NY Investigates Frontier Communications As US Telcos Slowly Implode

from the ill-communication dept

We've long explored how the nation's phone companies don't really even want to be in the broadband business. They routinely refuse to upgrade their networks despite millions in subsidies, yet often lobby to ensure nobody else can deliver broadband in these neglected footprints either. US telcos have a bizarre disdain for their paying customers, delivering the bare minimum (slow DSL) at the highest rates they can possibly charge without a full-scale consumer revolt. It's not surprising then that many telco DSL customers are fleeing to cable, assuming they even have a second broadband option.

This dynamic often results in some absurd dysfunction. Like in West Virginia, where incumbent telco Frontier has repeatedly been busted in a series of scandals involving substandard service and the misuse of taxpayer money. The graft and corruption in the state is so severe, state leaders have buried reports, and, until recently, a Frontier executive did double duty as a state representative without anybody in the state thinking that was a conflict of interest.

Things haven't been much better for the telco in states like Minnesota, where it's under investigation for failing to upgrade -- or even repair -- its shoddy networks. The same thing is also going on in New York, which just opened a renewed investigation after being inundated in complaints about terrible service:

"NY Public Service Commission (PSC) staff reported "that several Frontier Communications subsidiaries have significant service-quality problems, including escalating complaint rates, lengthy repair durations, and localized network reliability issues," a PSC announcement Thursday said. PSC staff is seeking more detailed information from Frontier on customer trouble reports and "will work with Frontier to develop and implement a plan to improve poor localized network reliability conditions," the announcement said.

You may be detecting a theme here. Things are so bad for Frontier, the company refused to even answer questions from analysts or the press during its latest earnings call. Most analysts think the company will ultimately teeter into bankruptcy, something that may also be in the cards for similarly large, dysfunctional telcos like CenturyLink. And while this kind of market failure is bad for consumers who already lack competitive broadband options, it's great for cable giants like Charter and Spectrum which are exploiting the US telco collapse to enjoy bigger regional monopolies than ever before.

Less competition means higher prices and no incentive to fix the cable industry's abysmal customer service. Throw in regulatory capture at the FCC and the steady erosion of broadband consumer protections into the equation, and you should be able to see how this is recipe for even bigger problems.

Filed Under: broadband, investigation, ny
Companies: frontier

West Virginia's Biggest Telco Says Broadband Business 'Unsustainable'

from the ill-communication dept

For years we've explored how the nation's phone companies no longer really want to be in the broadband business. They routinely refuse to upgrade their networks, yet often lobby to ensure nobody else can deliver broadband in these neglected footprints either. Telcos in particular have a bizarre disdain for their paying customers, delivering the bare minimum (slow DSL) at the highest rates they can possibly charge without a full-scale consumer revolt. It's not surprising then that many telco DSL customers are fleeing to cable, assuming they even have a second option for broadband.

This scenario has been particularly true in West Virginia, which has become the poster child for telecom sector graft and corruption. For years, incumbent phone provider Frontier Communications (which bought most of the state assets from Verizon), has seen zero competitive pressure to improve service. At the same time, they've enjoyed rampant regulatory capture, to the point where company executives have simultaneously acted as state senator, without a single question raised. The company has also been routinely under fire for bilking the government (read: you) out of millions of dollars intended to shore up coverage gaps.

Frontier in West Virginia is the picture perfect example of why we can't have nice things. Coddled natural monopolies, free from competition and meaningful oversight, always double down on bad behavior. Yet as customers in the state routinely complain about lengthy outages and terrible service, Frontier executives are blaming everybody but themselves, to the point where the company is now proclaiming that its entire business model in the state is "unsustainable":

"Frontier serves only about ten percent of the state voice lines in its service area—and falling—but has 100 percent of the universal service obligation to serve the most rural and high-cost areas,” Mendoza said in a statement. “Our customer base continues to decline, while the cost of service per line has increased dramatically. This has resulted in an unsustainable model for providing service in rural and high-cost areas, manifesting in increased numbers of service complaints. We plan to reach out to the state’s leaders to collaboratively find solutions to this difficult challenge."

Of course Frontier put itself in this business by gobbling up Verizon's unwanted assets in a bid to grow bigger for bigger's sake and thrill its investors. While some of the company's decline is due to copper phone users switching to wireless, much of it is because the company's still offering broadband speeds to most of its customers that don't even meet the FCC's modern definition of "broadband." Don't upgrade your network? Customers leave. The real "unsustainable" model is throwing millions of dollars at apathetic natural monopolies but never holding them accountable for failure.

When Frontier executives talk about finding "solutions" with state lawmakers, they usually mean "throw even more taxpayer money at us that may or may not actually be spent to fix the problem." Frontier has been lavished with subsidies and tax breaks for years, only to face accusations it not only defrauded the government, but used much of that money on projects that didn't actually help improve last mile connectivity. A monumental portion of Frontier's problems are very much of its own design.

This is US broadband in a nutshell. Regional telecom monopolies, which all but own state and federal lawmakers, face zero regulatory or competitive pressure to actually do their jobs. As a result, in state after state, DSL networks are being allowed to literally fall apart so telcos can shift their focus to sexier objectives (usually business service or wireless video advertising). And when the government does act, it usually involves throwing even more money at a broken market, then failing to adequately ensure that money is spent properly.

Cable giants like Comcast and Spectrum then rush in to dominate the market, raising rates, neglecting customer service, and making everything worse across the board. Rinse, wash, repeat. In state, after state, after state. And while fifth-generation wireless is often painted as some kind of panacea for this problem, that's simply not the case. Nothing in this equation changes until one thing happens: apathetic voters wake up and stop electing politicians who prioritize monopoly profits over the public welfare.

Filed Under: broadband, competition, monopolies, oversight, profits, west virginia
Companies: frontier

Shockingly, Cable TV and Broadband Customer Satisfaction Is Still The Worst In America

from the ill-communication dept

Every few years or so, giant cable and broadband companies like Comcast will proclaim that they've finally seen the light, and will be spending time shoring up their terrible customer service. Like a few years ago, when Comcast proclaimed it had hired a "Customer Experience VP" who would finally make addressing the company's historically terrible customer service a top priority. CEO Brian Roberts also can be found at least once a year claiming that the company is going to finally address the problem by hiring better people, improving support systems, and generally revisiting the company's policies.

But year after year, big cable and broadband companies fail to deliver. Case in point: the latest American Consumer Satisfaction Index was recently released, and ISPs and cable providers continue to see the worst customer satisfaction scores in America. These companies are so bad at what they do, they're routinely bested by even everybody's favorite punching bag: the IRS. When it comes to broadband service on a scale of 100, both Comcast and Charter (Spectrum) continue to see the worst scores in an already terrible sector:

"Internet Service Providers didn’t fare any better than cable companies with the overall industry ratings at the same 62. The only three ISPs with rankings above the average are Verizon FiOS (70), AT&T Internet (69) and Altice (63). At the bottom of the rankings are Frontier (55), MediaCom (56), and Windstream (57). The big cable companies don’t fare well as ISPs – Charter (59) and Comcast (61)."

Things are equally bad on the cable TV front, where despite the rise of competition from streaming providers, incumbent cable ops still can't seem to figure out this whole "treating customers with respect" thing. While most hated industries (airlines) rank in the 70s and more popular brands (Amazon) reach the 80s, cable TV remains struggling in the 50s and 60s:

In the TV sector, the emergence of streaming video has offered consumers some reprieve. Streaming providers like Netflix, Hulu, and Amazon routinely rate much higher in customer satisfaction because they give consumers what they've been screaming for for years: lower prices and more flexible channel bundles. Ultimately, cable operators will be forced to actually compete on price, but they're apparently waiting until countless millions of their paying customers have fled to greener pastures before actually seriously overhauling their business models. Still, competition in the TV space is rising either way.

The broadband space is less promising. With no meaningful regulatory oversight and little competition, there's really no incentive to improve customer service or offer a better product in most markets. The focus remains on growth for growth's sake (megamergers) and scale, without scaling customer service in symmetry. The end result should be fairly obvious, given the broadband sector ranks worse than a long list of widely despised sectors like the airline, banking, and insurance industries. That kind of accomplishment requires some serious, sustained elbow grease and the kind of monopoly myopia money simply can't buy.

Filed Under: broadband, cable tv, customer satisfaction
Companies: at&t, charter, comcast, frontier, spectrum, verizon, windstream

Frontier Hammered By Minnesota AG For Its Refusal To Repair Its Broadband Network

from the don't-try-too-hard dept

For years we've explored how the nation's phone companies don't really even want to be in the broadband business. They routinely refuse to upgrade their networks, yet often lobby to ensure nobody else can deliver broadband in these neglected footprints either. Telcos in particular have a bizarre disdain for their paying customers, delivering the bare minimum (slow DSL) at the highest rates they can possibly charge without a full-scale consumer revolt. It's not surprising then that many telco DSL customers are fleeing to cable, assuming they even have a second option for broadband.

This dynamic often results in some absurd dysfunction. Like in West Virginia, where incumbent telco Frontier has repeatedly been busted in a series of scandals involving substandard service and the misuse of taxpayer money. The graft and corruption in the state is so severe, state leaders have buried reports, and, until recently, a Frontier executive did double duty as a state representative without anybody in the state thinking that was a conflict of interest.

Things aren't going any better for Frontier in Minnesota, where the state AG just issued a scathing 133 page report accusing the company of all manner of dubious behavior, including letting outages go on for months on end without repairs. The report doesn't pull punches in accusing Frontier of violating at least 35 state laws and state guidelines, and routinely neglecting paying customers, putting some customers with medical conditions at risk:

The findings of this investigation detail an extraordinary situation, where customers have suffered with outages of months, or more, when the law requires telephone utilities to make all reasonable efforts to prevent interruptions of service. When interruptions occur, telephone utilities are to restore service “with the shortest possible delay.” Frontier customers with these outages include those with family members with urgent medical needs, such as pacemakers monitored by their medical teams via the customer’s landline.

This report, which was based on 1,000 customer complaints and seven different public hearings, paints a picture of a company that consistently let its networks fall apart, refused to upgrade or repair customer equipment on a timely basis, routinely and aggressively engaged in fraudulent billing practices, and repeatedly ignored customer complaints about all of it. The report includes photos showing Frontier's network gear in various states of neglect:

Or installs where company lines were draped casually through yards, over fences, and even over propane tanks:

Again, if you've followed similar stories focused on Verizon, this kind of behavior is the norm, not some errant exception for the nation's phone companies. And while some states actually hold telcos feet to the fire occasionally, there's a long roster of states (Tennessee and West Virginia quickly come to mind) where the "solution" to these problems has been to completely neuter local regulatory oversight at incumbent monopoly request. This kind of blind deregulation, as you may have noticed, doesn't actually fix anything when dealing with natural, apathetic monopolies.

Again, this kind of apathy hurts the customers of these companies, who've made it pretty clear they no longer really want to be in the residential broadband business. As apathetic telcos hang up on unwanted customers, it's creating a bigger monopoly for cable operators across huge swaths of the country. That, in turn, only ensures that prices remain high and customer service remains an afterthought. And again, the Ajit Pai FCC's tendency to rubber stamp every and all industry desires without holding anybody accountable for anything pretty clearly isn't helping.

Filed Under: broadband, disrepair, minnesota
Companies: frontier

The Nation's Telcos Are Hemorrhaging Customers Because They Refuse To Upgrade Their Networks

from the don't-build-it-and-they-won't-come dept

So we've noted for a while how despite all the hype surrounding next-gen wireless and gigabit fiber builds like Google Fiber, vast swaths of this country are actually facing less broadband competition than ever before. That's in large part thanks to the nation's phone companies, which have effectively given up on upgrading their lagging DSL networks at any real scale. One net result is millions of customers paying an arm and a leg for sub 6 Mbps DSL service that doesn't even technically meet the FCC's new standard 25 Mbps definition of broadband.

And it's not changing anytime soon. Verizon has all but frozen next-gen upgrades as it shifts its focus to gobbling up failed 90s internet brands to help it sling video advertisements at Millennials (poorly, we might add). But smaller telcos like Frontier, CenturyLink and Windstream have similarly been losing broadband customers hand over foot as they flee to faster cable competitors. Even Wall Street, which has historically and myopically disliked putting any money back into broadband networks, has started to take notice, resulting in the nation's telco stocks taking a precipitous dive in recent months:

"Shares in the wireline ILEC/RLEC space (CenturyLink, Frontier, Windstream) have endured the worst three consecutive quarters in industry history, with shares plummeting an average of -20% in 4Q16, -21% in 1Q17, and -24% in 2Q17 (we note another -5% in 3Q17 thus far), mostly from Frontier and Windstream as CenturyLink shares are being supported by the Level 3 acquisition,” Cowen said in a research note."

It has gotten to the point where some Wall Street analysts have even gone so far as to *gasp* recommend that some of these companies actually upgrade their networks if they want to remain relevant. Ironic, since it was Wall Street's relentless focus on short-term gains and avoiding these necessary network upgrades that help put these companies in this position to begin with:

"Jennifer Fritzsche, senior analyst for telecommunications services at Wells Fargo, doesn't think Frontier can actually right said ship without offering consumers a better broadband product.

"It is hard to fix a problem just by cutting costs when your competition (cable) is only pressing its foot heavier on the capex and fiber pedal," Fritzsche said.

But instead of upgrading the networks they already have, many telcos are trying to please Wall Street by focusing on growth for growth's sake. Frontier recently gobbled up Verizon's unwanted DSL customers in California, Texas and Florida in the belief that bigger automatically means better. But Frontier not only saddled itself with massive additional debt and outdated copper landlines Verizon had neglected for years, but it bungled the acquisition so badly it actually forced many of these subscribers to flee to cable even faster. Focusing on growth for growth's sake now has Frontier teetering on the verge of bankruptcy.

But the more problematic impact of all this is that across countless markets, consumers looking for current-generation broadband often only have one option: cable providers. These cable providers are on the cusp of enjoying a greater broadband monopoly than ever before, resulting in less incentive than ever to shore up their historically awful customer service, and only encouraging their slow but steady deployment of arbitrary and unnecessary usage caps. Combine that with the Trump administration's intense focus on eliminating all consumer protections in the telecom space, and it shouldn't take a tea leaf reader to see how this could potentially end very badly for consumers and competitors alike.

Filed Under: broadband, competition, dsl, investment, telcos, wall street
Companies: centurtylink, frontier, verizon, windstream

West Virginia Tries To Improve Broadband Competition, Incumbent ISPs Immediately Sue

from the this-is-why-we-can't-have-nice-things dept

So by now you've probably noticed that the broadband industry is somewhat, well, broken. Unaccountable giant telecom incumbents, with a stranglehold on both federal and state lawmakers, work tirelessly alongside well-compensated lawmakers and covertly paid policy vessels to protect the status quo (read: limited competition, high prices, poor customer service). Often that involves quite literally writing and buying state laws that make it impossible for anybody to do much of anything about this dance of dysfunction.

And when it comes to highlighting the end result of this corruption, there's no better state than West Virginia. Whereas bigger incumbents in more populated states can often hide their stranglehold over a broken market under layers upon layers of exquisitely crafted bullshit, many West Virginia lawmakers and regional incumbent Frontier Communications lack the savvy and competence to mask what they're truly up to.

As a result, the state has been awash in controversy over its telecom policies for years now. Local Charleston Gazette reporter Eric Eyre has done yeoman's work chronicling West Virginia's immense broadband dysfunction, from the State's use of broadband stimulus subsidies on unused, overpowered routers and overpaid, redundant consultants, to state leaders' attempts to bury reports highlighting how a cozy relationship with Frontier has led to what can only be explained as systemic, statewide fraud on the taxpayer dime.

Obviously letting Frontier dictate state telecom policy has resulted in the state being one of the least-connected states in the nation. Facing growing calls to actually do something about it, West Virginia finally recently buckled to pressure and passed House Bill 3093, recently signed into law by West Virginia Governor Jim Justice. The bill makes a number of changes to try and improve regional competition, including streamlining pole attachment reform, and encouraging local broadband community co-ops to shore up coverage in low ROI areas.

We already discussed how Frontier recently fired a long-standing employee for supporting the bill. Said employee's other job was as West Virginia Senate President, an absurd conflict of interest nobody in the state appears to have given much thought to. But Frontier has subsequently decided that it makes sense to sue the state of West Virginia for the new law, taking specific aim at the segment reforming utility pole fiber attachment rules:

"Frontier Communications has filed a lawsuit to prevent the enforcement of an article of House Bill 3093, known as the broadband bill, arguing that it conflicts with federal law and increases the chances of an interruption or outage for customers.

House Bill 3093’s Article 4 allows third parties, including Frontier’s competitors, to trespass upon, handle, move, interfere with, and potentially damage Frontier’s facilities attached to utility poles in West Virginia — thereby, among other things, destroying in whole or in part Frontier’s investment and other property and its ability to use its facilities to provide service to its customers, without prior notice to Frontier and an opportunity to protect its property,” the lawsuit says.

We've noted how incumbent ISPs have sued to thwart pole attachment reform elsewhere, most notably in places like Louisville and Nashville where Google Fiber is trying to compete with incumbents. Existing pole rules often require each individual ISP move its own gear, resulting in up to a year of bureaucratic delays for new market entrants. Delays incumbent ISPs have historically exploited to intentionally slow competitor arrival to market.

"One touch make ready" reform rules, in contrast, propose using a single, licensed and insured subcontractor able to move any company's gear provided they give a notable heads up and pay for any potential damages. And while incumbent ISPs like Frontier and many cable providers (who also sued the state for its effort to speed up competition) like to give the impression these subcontractors are random incompetent yahoos who'll cut lines and wreak havoc, they're often the same experienced, licensed subscontractors used for years by many of these companies for their own pole work.

It's believed this boring-sounding utility pole regulatory reform can reduce existing pole attachment times from six months to a year, down to a month or two. But because it would speed up the entrance of would-be competitors, incumbent ISPs have fought the reform tooth and nail. You see, incumbent ISPs talk a big game about their disdain for "burdensome regulation," but when said regulation protects their regional duopolies, they're the first in line to applaud. That is when they're not busy writing and buying protectionist state laws and regulations preventing local communities from making these decisions for themselves.

Frontier's decision to spend time and money with lawsuits comes as rumors begin to swirl of potential bankruptcy at the company. The company has been bleeding customers after it bundled an expensive acquisition of Verizon's unwanted networks in Florida, Texas and California, a deal that initially pleased investors with promised growth, but saddled the company with billions in debt, further preventing it from upgrading its network at any scale. Frontier's apparent solution to this conundrum? Like any myopic, pampered legacy company, it's to double down on the bad ideas that brought it to this moment in the first place.

Filed Under: broadband, competition, lawsuits, west virginia
Companies: frontier

Frontier Fires State Senate Leader (Who Also Worked For Frontier) For Supporting Attempts To Improve Broadband Competition

from the fighting-broadband-competition-at-any-cost dept

If you want to see what the US broadband sector really looks like, you should take a look at West Virginia -- a state where regional incumbent Frontier Communications holds so much sway over the state legislature, efforts to improve connectivity in the state have spent a decade in the gutter. Local Charleston Gazette reporter Eric Eyre has quietly done an amazing job the last few years chronicling West Virginia's immense broadband dysfunction, from the State's use of broadband stimulus subsidies on unused, overpowered routers and overpaid, redundant consultants, to state leaders' attempts to bury reports highlighting how a cozy relationship with companies like Frontier, Verizon and Cisco has led to what can only be explained as systemic, statewide fraud on the taxpayer dime.

But things haven't been going all that well for Frontier lately. Frustrated customers are leaving in droves (assuming they have the option) after the company bungled an acquisition of Verizon's unwanted DSL customers in Florida, Texas and California. It's also now saddled with debt from that deal, which prioritized growing bigger over commen sense. And employees say morale at the company is at an "all time low" after executives slashed all bonuses and merit pay increases -- but only for lower-level employees.

There's some indication that these problems are loosening the telco's traditionally iron grip on the West Virginia legislature. House Bill 3093, recently signed into law by West Virginia Governor Jim Justice, aims to improve broadband competition in the state through a combination of utility pole reform, and efforts to encourage local broadband community co-ops. Since it would have boosted competition in the state, Frontier obviously lobbied against the measure, hoping to keep its geographical fiefdom intact. It failed.

Eyre at the Gazette now notes that Frontier has responded by firing a six-year company executive and West Virginia Senate President (yes, at the same time) Mitch Carmichael for voting in favor of the measure.

So you should get a sense of what things are like in West Virginia just by the fact that Carmichael was deciding major state telecom issues while being a full-time employee of Frontier Communications. And Carmichael had been deciding on telecom-related issues for years with nobody apparently thinking that his recusal from some of these issues might just be a good idea.

This is so crazy that we should repeat it just so it sinks in: Carmichael was both a full-time employee of Frontier while also being the President of the state Senate, and constantly pushing for policies that favored his employer. And few, if any, state leaders apparently thought this was a problem. And it has been: Carmichael has long been an opponent of community run, municipal broadband, and had also recently voted down an effort that would have created a statewide broadband internet network, one that would have dramatically impacted Frontier's business interests.

Carmichael had just gotten a raise as well after almost being lured away by a Frontier competitor, so the firing surprised him. Carmichael says he also refused to sign an NDA demanded of him by the company to prevent him talking about his termination:

"Frontier Communications has laid off West Virginia Senate President Mitch Carmichael, a six-year Frontier executive who noted Monday that his dismissal follows his refusal to torpedo a broadband internet expansion bill that the company vigorously opposed...Carmichael said Frontier has asked him to sign a “nondisclosure” agreement that would prohibit him from talking about his dismissal. He said he refused to sign it. As senate president, Carmichael was Frontier’s most powerful ally in the Legislature.

Apparently, public annoyance at Frontier and the sorry state of broadband in the state (West Virginia is not-coincidentally ranked 45th in broadband connectivity) forced Carmichael to actually do the right thing:

"The one thing I’m not going to do here as Senate president is advance special interests,” Carmichael said. “It was obvious the body [Legislature] wanted that bill, and I wasn’t going to stand in the way of it."..."This was not something I wanted at all,” he said. “They had a bad year, from a legislative perspective. They severed ties from me."

To be clear, Carmichael had been willing to "advance special interests" previously, but Frontier's financial footing is so shaky -- and public annoyance at a lack of broadband competition was so severe -- he was forced to actually listen to what the public wanted. Now, courtesy of Frontier's waning influence, new West Virginia law allows 20 families or businesses to form nonprofit co-ops in areas shunned by traditional ISPs. The bill also authorizes up to three cities or counties to band together and build broadband networks in areas incumbents like Frontier have long refused to.

Meanwhile there are growing indications that Frontier, a company that has made a career out of trying to prevent real broadband competition in its territories at any cost, may at some point be looking at bankruptcy sometime in the next few years.

Filed Under: broadband, competition, conflict of interest, mitch carmichael, west virginia
Companies: frontier

Lawsuit Claims Frontier Misused Millions In Federal Broadband Stimulus Funds

from the big-'ole-boondoggle dept

If you want to see what the U.S. broadband market really looks like, you should take a close look at West Virginia. Historically ranked close to dead last for broadband access and quality, the state has been a perfect example of what happens when you let the incumbent telecom monopoly incestuously fuse with state regulators and politicians. For years now the state has been plagued by news reports of unaccountable broadband subsidies, money repeatedly wasted on unnecessary hardware, duplicate consultants overpaid to do nothing, and state leaders focused exclusively on ensuring nobody is held accountable.

Frontier acquired Verizon's phone and broadband networks in the state back in 2010, and while jumping from an entirely apathetic incumbent monopoly ISP to a barely competent one netted some slight improvements initially for users, the lack of competition continues to keep serious advancement at bay. In an attempt to improve access to neglected areas of the state, Frontier that same year received $126.3 million in federal stimulus funds to provide high-speed Internet to such areas, including 1,064 public facilities such as schools, courthouses and first responders.

Roughly $40 million of that money was supposed to be used to build an "open-access middle-mile network" intended to help multiple, competing West Virginia ISPs improve last-mile connectivity to roughly 700,000 homes and 110,000 businesses. But it didn't take long for allegations to surface that Frontier had used that money solely to shore up its broadband monopoly in the state, building fiber connections that only benefited itself. Allegations also surfaced that Frontier had manipulated just how much fiber was actually laid, with state investigations and audits, as they're wont to do, going nowhere fast.

Fast forward to this week, when the courts unsealed a 2014 lawsuit (pdf) by competing West Virginia ISP Citynet, shining a little more light on the claims, while also naming a number of government officials as defendants alongside Frontier. Among other allegations, the lawsuit claims that Frontier artificially inflated fiber deployment metrics in ways that weren't even particularly creative and shouldn't have been difficult for regulators or auditors to uncover:

Citynet claims that Frontier “double-counted” fiber to 58 buildings in 32 counties, and “used excessive maintenance coil to make up for fiber not constructed.” “Frontier also misrepresented the proposed distances for many of the community anchor institutions by simply inputting the same number for several projects,” the lawsuit alleges. “Incredibly, there were 36 [buildings] in seven different counties that each required the exact same 4,390 feet of new fiber.”

Not only did Frontier deliver less fiber than actually promised in a way no competitor could access (again, the state and Frontier repeatedly promised this would be an open access network), the company charged significantly more than originally estimated. With the help of a former Verizon executive turned state Technology Officer, the lawsuit alleges that Frontier inflated its invoices using something called "loadings fees":

Citynet claims on July 1, 2012, Given, the former president of Verizon, was appointed as the new State Technology Officer and immediately took exclusive control over approving Frontier’s invoices for the BTOP project. Within one month, every one of Frontier’s invoices that were submitted for payment contained a “loadings” charge, which, per the invoices, was for “allocated indirect costs such as vehicles, accounting, administration, etc.”

In many instances, the indirect cost fee was higher than the original total cost estimate for the fiber build and there were 365 separate invoices with loadings fees, totaling $4,553,387.31, according to the suit.

“Even though Frontier often ended up building much less fiber than was originally estimated, its final charges were substantially higher than the original estimate,” the complaint states.

FCC data ranks West Virginia 48th in terms of broadband availability. After the project was completed, the lawsuit claims West Virginia ranked 53rd among 50 states, Guam, Puerto Rico and the District of Columbia. It's unfortunate in that broadband stimulus subsidies really have helped a number of communities where the private sector failed, just not in states where incumbent monopolies have excessive control over state players that should be policing this kind of behavior.

Should West Virginia's dysfunction follow the historical tendency of other boondoggles of this type by the likes of AT&T and Verizon, absolutely nothing will come of this case or any subsequent investigation, audits (in the rare case they actually occur) will magically conclude no wrong doing by any participant, and the entire sordid affair will magically be forgotten the next time Frontier is in line to receive additional taxpayer handouts.

Filed Under: broadband, fcc, stimulus funds, subsidies, west virginia
Companies: citynet, frontier