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Frontier Facing Questions In Portland Over Huge FiOSTV Hike
MACC Wonders If This Was The Plan All Along, Despite Previous Assurances
by Karl Bode 09:59AM Friday Jan 28 2011
Earlier this month Frontier Communications imposed an unprecedentedly-massive TV rate hike on the 100,000 FiOS customers they acquired in their deal with Verizon. Frontier, unwilling to pay programming costs like Verizon did, clearly wants out of the TV business and is pushing those users toward DirecTV service (though not necessarily doing a very good job of it). The Metropolitan Area Communications Commission (MACC) is now investigating Frontier's move, and asking them if this was the plan all along -- despite assurances to regulators that no rate hikes were looming when trying to get regulatory approval for the $8.5 billion deal. The letter from MACC (pdf) specifically questions the validity of Frontier's programming excuse:
quote:
We are familiar with the rate structure of programmers and have some experience with other small-scale cable operators. A 46% increase in rates is unjustified on its face. As just one example, there is no case to be made that programming costs for the thirteen local commercial channels on Frontier's "Local" tier of service have increased 50%....Frontier's rate increase announcement raises doubts about the sincerity of (previous assurances by Frontier and Verizon about the ability to offer TV service at competitive prices).
If MACC is enjoying Frontier's 50% TV price hike, they'll probably really enjoy learning that Frontier's testing a new pricing scheme for DSL customers that could end with many users paying $100-$200 for 3 Mbps DSL.

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Chris 313
Come get some
Premium
join:2004-07-18
Houma, LA
kudos:1

Exactly!

This was exactly their plan all along. It's about time someone woke up and dropped the hammer down on them. Maybe it'll actually work this time.

N3OGH
Yo Soy Col. "Bat" Guano
Premium
join:2003-11-11
Philly burbs
kudos:2

Re: Exactly!

No doubt it was their plan all along.

Now wait until we see the evil spawn of the Comcast/NBC merger.
--
Petty people are disproportionally corrupted by petty power
Sammer

join:2005-12-22
Canonsburg, PA

Re: Exactly!

said by N3OGH:

No doubt it was their plan all along.

Lying to government regulators is not a valid business plan. If that's what Frontier did Oregon should use its power to punish Frontier to the full extent of the law.

NOYB
St. John 3.16
Premium
join:2005-12-15
Forest Grove, OR
kudos:1

Re: Exactly!

And Verizon.
fiberguy
My views are my own.
Premium
join:2005-05-20
kudos:3
... and as I've said before in the original post here on BBR, my view is that 1) I said this was their intention all along and it was clear! (I got mocked for it as usual) and 2) The ONLY clear "punishment" for this is to invalidate the purchase/approval retroactively and force Verizon to reclaim the property.

Fontier is CLEARLY out of their league in this business model (the fiber service) and should never have been approved to take over / purchase this system. If they get "punished" then it's likely to be some lame punishment like a kid having to go to his room these days.. where the PS3 and TV is, the computer, etc. They'd also not likely punish them financially anywhere near what it should be. Often companies who violate laws or contracts often see a financial punishment/fine less that of their actual gain and they see it as a cost of doing business.

I've long said and believe that if their plan and intent was this all along, they all the approvals, etc. were invalid and it should be pulled back and Verizon takes back over the property - the money trail is also there too. I believe that Verizon was also aware of this "plan" as well.

NOYB
St. John 3.16
Premium
join:2005-12-15
Forest Grove, OR
kudos:1

Re: Exactly!

Ditto raised to infinity degree.
facher83

join:2011-02-03
Do you have Fios?

If so, how many services have actually changed?

Also, what would be the comparable Comcast package available? Guarantee Comcast is more expensive for a lot less.

FFH5
Premium
join:2002-03-03
Tavistock NJ
kudos:5

1 recommendation

Frontier spokesperson explains rate hike during TV interview:
»www.wane.com/dpp/news/Frontier-l ··· ate-hike

The increase does not affect customers under a price protection plan.

Frontier bought the area's FiOS Internet and television infrastructure from Verizon last July. It made that purchase knowing then, increasing rates was an option in the future.

"Look, we bought the whole company, right? All the assets. The FiOS part was part of that, so it was part of the deal," said Don Banowetz.

He says Frontier doesn't have the buying power Verizon had, so when programming prices went up, Frontier made a choice.

"We couldn't ride the previous arrangement. So in essence, it was what it was," he explained. "So, over the last seven months, we've looked at how we might take other costs out of the business to maintain the pricing structure and we found that to be very difficult, so hence this increase."

So, officially at least they didn't break any promises. Regulators can dispute that in court if they like.

S_engineer
Premium
join:2007-05-16
Chicago, IL

Re: Exactly!

They should take it to court. And all whom approved this deal should be recalled,if possible, especially after the Fairpoint debacle.
--
"Thanks for the dance... and cut yourself a slice'a throat! "
- Curly (HOI POLLOI, 1935)
hottboiinnc
ME

join:2003-10-15
Cleveland, OH

Re: Exactly!

and when taking them to court will do what? nothing but cause them further debt. you cant take their network legally. and if you tried they'd file suit against the states that had any hand in it. The states would go bankrupt after that. Frontier may not have the $$$ to operate fully like VZ but they have enough money and on staff legal team that can do some damage to the state checkbooks.
rahvin112

join:2002-05-24
Sandy, UT

Re: Exactly!

Like most American's you apparently don't know how eminent domain or seizure laws work. There are quite a number of ways the government could seize the network, not the least of which involves eminent domain. Done properly the states could seize the network with little expenditure of cost but it would take several years and require the passing of lots of laws that would likely be very unpopular. Time and unpopularity don't make it impossible, simply unlikely.
fiberguy
My views are my own.
Premium
join:2005-05-20
kudos:3
You win a clueless award on this one bud.. sorry..

You're trying to say that Fontier has more money that the state? .. you forget something.. even if what you implied was accurate, the state has the ability to just reach further into the pockets of the tax-slavers and raise more money. They can cut services, etc. But, the state has the ability to fight court battles. And, what was said below, they hold all the cards. They'd just use eminent domain and seize the property.. there's all sorts of "government things" they can pull - the laws are deep and plenty for a "state" to do as they want in many cases.

But, you also just conflicted yourself really bad. On one hand you say that the state would just go bankrupt (check your law books on that one first) from fighting a suit which is just ridiculous to say... you'd have to be incredibly uneducated to these matters to even suggest that. Second, you come out that Frontier would have the money to fight a battle but not run the service like Verizon did. Care to do a math analysis on that one?

I just think you've REALLLLLLLY missed the mark BIG time on this one.

I'm guessing you've never had a dealing or interaction with any major level of government outside of individual civilian matters, right? California is an INCREDIBLY cash strapped state, yet they're an incredible a*s's to deal with when it comes to ANYTHING regulatory.. I can tell you that just about any business owner in CA will tell you they spend a very noticeable amount of their time doing nothing but regulatory crap. (some businesses say 50% of their time)

wasvznowftr

join:2010-07-13
00000

Re: Exactly!

said by fiberguy:

You win a clueless award on this one bud.. sorry..

And the runner up goes to.... fiberguy! Not really, you make some good points, but you need to be taken to task on your statement about California's bureaucracy.

My family has a decent sized construction company (most would agree an industry that has it share of regulations ) based out of Southern California with dealings in Nevada and Arizona.

They deal with all levels of government from local municipalities up to the state level.

Oh sure, California might have a few more hoops to jump through, but definitely none consuming 50 PERCENT OF THE TIME!

Although they both have their charms and no disrespect to the lovely residents of Arizona and Nevada. But come on, theres a reason why Nevada and Arizona are for the most part barren, relatively unpopulated states.
fiberguy
My views are my own.
Premium
join:2005-05-20
kudos:3

Re: Exactly!

50% of the time is not my figure.. it's an average that's used by many. And, if you look at a small business, which I have there, and you add up the administrative time that is delegated to government relations - for us, it's 50% so that number fits the mark.

If you ever cared to have an off public conversation, I could tell you many horror stories. Like you, my family owns business in CA. We've got a few between us and I have to tell you, CA is the worst state of all the states we deal with.

Metatron2008
Premium
join:2008-09-02
united state
If they came in knowing they couldn't pay for rate hikes, they were looking to do this all along.

You can't tell me that you aren't going into an 8.5 billion deal without knowing that you can't pay for tv service...
facher83

join:2011-02-03

Re: Exactly!

Out of curiosity, what do you say about the network rates that were hiked by network television within the last 6 months?

»money.cnn.com/2010/01/06/news/co ··· ndex.htm

"Fox parent News Corp. (NWSA) demanded $1 per subscriber for its broadcast network, and talks continued past the deadline as TWC (TWC) balked. Reports indicate the cable outfit agreed to pay Fox more than 50 cents a subscriber."

Multiply that by 25 greedy networks, and you get the usual 5% or higher rate hikes no matter what cable provider you're with.

I also wouldn't say Frontier is hurting... stock prices reflect a pretty good idea of what's going on for a company financially. Why is FTR up 20% in the last 6 months?

Clearly there's no debt problem.
fiberguy
My views are my own.
Premium
join:2005-05-20
kudos:3
I have to disagree with you on this one bud. I think instead of "officially" it's more of a very weak 'technically' argument.

There are PLENTY of smaller companies out there that offer a nice robust video package at a very good price. There is HITS as an option that is in fact an affordable solution.

Huxley Communication is Huxley, IA uses HITS.. they're a small operations that runs both a copper POTS/DSL service next to Coax for video AND a full FTTH service. FAR FAR less customers than even Frontier has. Their rates are VERY attractive to the consumer compared to even the largest cable company WITH buying power - and much cheaper than what Verizon's FiOS is priced.

I just can't swallow Frontier's explanation. This company is clearly over their head financially and I just don't believe they should have been approved in this purchase. I just see them as a future bankruptcy or sale - most likely to Century-what-ever-they-are-these-days company. (I'm sure Century-X will soon collapse under their own weight as well - but that's another story)

spewak
R.I.P Dadkins
Premium
join:2001-08-07
Elk Grove, CA
kudos:1
Reviews:
·SureWest Internet

Really?

Showtime for MACC! Stomp feet, pound the table with our collective fists, call crappy Frontier on the carpet for their craziness and in the end: NOTHING! NADA! ZIP! Puhlease!! We've seen this before.
--
The weekend is here, grab a can of beer!
PDXPLT

join:2003-12-04
Banks, OR

Not Portland

A point of clarification - Qwest serves the city of Portland, not Frontier. Frontier's service area is in the west-side suburbs, not the city itself; just in case anyone might be confused.
IPNBottles

join:2011-01-04
Troutdale, OR

Re: Not Portland

True. the Quest/Frontier cut off line is around 162nd ave (still in Portland though). Frontier extends from there to Gresham and out to Troutdale.

pjhofmann

join:2000-08-22
Cary, NC

Re: Not Portland

Down here in Happy Valley as well.

SteveCon
IBEW 2222 Boston, MA
Premium
join:2004-09-02
Boston, MA

1 edit

Deleted

Deleted

justathought

@sbc.com

what if?

I wonder what Frontier's contractual obligations to the content providers are if every customer were to cancel service this month? I would be interesting to see what that cost would be...

NOYB
St. John 3.16
Premium
join:2005-12-15
Forest Grove, OR
kudos:1

Re: what if?

That's why they lock people in with ETF's. It would be a windfall for them. They'd get the money without having the support cost of actual delivered service.
Lazlow

join:2006-08-07
Saint Louis, MO

Re: what if?

Rate hikes of this size would probably let them out of ETFs.

NOYB
St. John 3.16
Premium
join:2005-12-15
Forest Grove, OR
kudos:1

Re: what if?

No. Because the rate hike does not take place until the end of customers current contract. The OP'er is saying drop service this month. So for those who are still in contract, ETF would rightfully be applied.

cdru
Go Colts
Premium,MVM
join:2003-05-14
Fort Wayne, IN
kudos:7
said by Lazlow:

Rate hikes of this size would probably let them out of ETFs.

ETF are for contracts. Contracts generally stipulate prices. Frontier has two choices, raise prices allowing customers to break existing contracts without ETF, or continue with existing contracts and customers face higher prices when their contracts expire.

Frontier is choosing the latter option. Raising fees for people in contract and still charging them an ETF if they did not agree to new prices would be found unconscionable by any court, as it has many times in the past. It's basic contract law.
fiberguy
My views are my own.
Premium
join:2005-05-20
kudos:3
Their services are consignment - they pay the content providers based on subscriber counts. I do not believe it would be an incredible impact on Frontier to bleed customers out of the service.
david_1123

join:2011-02-01
It might be worse dropping Frontier- Comcast is the alternative out here.

Before the FIOS goodness, comcast was my only option, and there were short outages almost every night.

With FIOS, I have only had a single outage in several years- a couple months ago, Frontier appears to have screwed up their DNS servers for a couple days. The response time for DNS lookups was very slow if you got a response.

jodavid

@verizon.net

go frontier

If you don't want the service cancel. Why should frontier subsidize cable tv.

RMH2

@verizon.net

Re: go frontier

What part of 'we no not rise prices' to gain regulatory approval do you not understand ?