Tag Archives: Frontier Communications

Remembering Global Crossing

I saw a notice recently that Gary Winnick died. He was the founder of Global Crossing. This is worth a way-back machine look because the Global Crossing story is the perfect metaphor for remembering the craziness of the telecom industry in the late 1990s.

Winnick founded Global Crossing in March 1997 with a $35 million equity investment from himself and the Canadian Imperial Bank of Commerce. 1997 was right after the Telecommunications Act of 1996, and there was huge money pouring into the U.S. telecom industry due to the opportunity to create Competitive Local Exchange Carriers (CLECs) that were suddenly allowed to compete for local telephone service using the networks of the largest telephone companies.

Winnick’s original vision was to build the first privately financed undersea fiber network connecting North America, Latin America, Europe, and Asia.

Winnick and the other executives were highly successful in raising money and raised $800 million in debt by June 1998. Global Crossing went public in August 1998, raising an instant $399 million from the IPO. Like many other telecom stocks at the time, the stock price saw a meteoric rise, and by the end of 1999, the company’s stock had grown to an amazing market capitalization of $47 billion.

The sudden success of the stock changed the direction of the company, and Global Crossing went on an acquisition tear based on its increased stock price. In May 1999, GlobalCrossing made the news when the 2-year-old company made an offer to buy US West but was outbid by Qwest. In July 1999 the company paid $885 million for the undersea maintenance business operated by Cable & Wireless. At the end of 1999, the company entered the telephone market by buying Frontier Communications for $9.9 billion and renamed it as Global Crossings North America. It also paid $1.3 billion for SB Submarine Cable and $1.65 billion for Racal Telecom.

Within a relatively short time, the company had trouble meeting monthly debt payments and sold Frontier Communications for $3.65 billion in the summer of 2001. Global Crossing never made a profit. In the fourth quarter of 2001, the company had losses of $3.4 billion on revenues of $792 million. In January 2002, Global Crossing filed for bankruptcy. This is the fourth biggest bankruptcy in history and was huge financial news at the time. But the Global Crossing story was not extraordinary in the telecom sector as the entire CLEC industry was also imploding.

There was instantly a raft of lawsuits accusing the management team of accounting fraud and of not disclosing the real financial position. Between 1998 and 2001, Winnick sold $420 million of company stock while other executives sold $900 million, much of it after internal company reports of impending financial problems. While there were some large settlements by the company, the executive team got off with relatively minor contributions to lawsuit settlements.

Global Crossing emerged from bankruptcy at the end of 2003. The company made a few more acquisitions and eventually sold to Level 3 Communications for $3 billion in 2011. It’s ironic that the remnants of the upstart that tried to buy US West ended up being absorbed by CenturyLink, the US West successor when it merged with Level 3.

Global Crossing came literally out of nowhere after the passage of the Telecom Act and leveraged a relatively small equity investment into many billions of market value. Global Crossing and other new telecom companies were able to go public and see big stock price gains without ever getting close to making a profit. But the bubble didn’t last long, and the CLEC crash was part of the overall dot.com crash, where investors lost huge amounts of money when the two sectors collapsed.

For those working in the industry, the crazy stock valuations at the time made no sense. I can remember half a dozen startup CLECs who raised money, each promising to win a 30% market share of the Atlanta telecom market. Money was thrown at the fledgling industry, including a huge amount of funding provided by telecom vendors.

The Global Crossing story is worth remembering because it demonstrates the excesses that can come quickly when outside capital floods into an industry. I am seeing some of this same craze today, with dozens of venture groups pouring money into the broadband sector. However, it’s not as nearly as superheated today as the late 1990s, but I still have to wonder where these investors expect to find high returns. But we will probably never see another telecom company that will burst onto the scene and then implode as dramatically as Global Crossing.

Broadband Customers 1Q 2023

Leichtman Research Group recently released broadband customer statistics for the end of the first quarter of 2023 for the largest cable and telephone companies. Leichtman compiles most of these numbers from the statistics provided to stockholders other than for Cox and Mediacom, which are estimated. Leichtman says this group of companies represents 96% of all US landline broadband customers.

The first quarter of the year shows a continuation of the trend where all of the growth in broadband is coming from T-Mobile and Verizon FWA fixed cellular wireless. Those two companies added 916,000 out of 962,000 total customer growth for the quarter. T-Mobile passed Lumen and Frontier in the quarter in terms of the total number of broadband customers.

% 1Q
1Q 2023 4Q 2022 1Q Change Change
Comcast 32,324,000 32,319,000 5,000 0.0%
Charter 30,509,000 30,433,000 76,000 0.2%
AT&T 15,345,000 15,386,000 (41,000) -0.3%
Verizon 7,528,000 7,484,000 44,000 0.6%
Cox 5,565,000 5,560,000 5,000 0.1%
Altice 4,612,700 4,632,000 (19,300) -0.4%
T-Mobile FWA 3,169,000 2,646,000 523,000 19.8%
Lumen 2,981,000 3,037,000 (56,000) -1.8%
Frontier 2,863,000 2,839,000 24,000 0.8%
Verizon FWA 1,866,000 1,473,000 393,000 26.7%
Mediacom 1,470,000 1,468,000 2,000 0.1%
Windstream 1,175,000 1,175,000 0 0.0%
Cable ONE 1,063,000 1,060,400 2,600 0.2%
Breezeline 689,903 693,731 (3,828) -0.6%
TDS 515,400 510,000 5,400 1.1%
Consolidated 369,862 367,458 2,404 0.7%
Total 112,045,865 111,083,589 962,276 0.9%
Cable 76,233,603 76,166,131 67,472 0.1%
Telco 30,777,262 30,798,458 (21,196) -0.1%
FWA 5,035,000 4,119,000 916,000 22.2%

The telcos collectively lost 21,000 customers for the quarter, but unlaying that number is the success story where telcos are collectively now adding as many customers on fiber as are being lost on DSL. After so many years of seeing Frontier bleeding broadband customers, it’s interesting to see the company now growing faster than the big cable companies. It’s hard to think that the telcos overall won be in a positive growth mode soon.

The only cable company with any significant growth is Charter – and that growth likely comes from the company now constructing fiber in some of the markets where it won the RDOF subsidies.

The only company on the list with a significant loss is Lumen, which lost 1.8% of its customers in the quarter. Lumen is also the telco with the least aggressive fiber growth plans.

There are several companies conspicuously missing from the list. It’s hard to think that Brightspeed and Google Fiber are not larger than the companies at the bottom of the list.

Fearing the Competition

Over the last six months, practically every big carrier in the industry has made a formal announcement that they are not worried about specific competitors. The latest one I read was in LightReading where Nick Jeffery of Frontier said he’s not worried about competition from the cable companies upgrading to DOCSIS 4.0 or from cellular carriers offering FWA home broadband. Frontier is building a lot of fiber, and Jeffery was commenting that he thinks fiber is a superior technology compared to the alternatives. To be honest, this might be the only claim I read where the ISP was being truthful. Frontier has been at the bottom of the heap in the industry for many years and led in the percentage lost broadband and cable TV customers quarter after quarter. It’s got to be refreshing for the company to be deploying a technology that gives it a fighting chance to succeed.

I’m not citing all of the other CEOs that said the same thing – but these announcements were pretty much across the board – basically, no carrier is afraid of other competitors.

I’ve seen all of the big cable companies quoted as saying they aren’t afraid of FWA cellular broadband. And yet, in the second quarter of this year, T-Mobile and Verizon added over 800,000 new customers, while the large cable companies collectively lost 150,000 customers during the quarter. The cable companies rightfully say they have superior technology when competing against 100 Mbps download speeds, but the FWA cellular carriers have much lower rates and are attracting customers who think that cable broadband costs too much.

The big telcos that are building fiber have all made the same claim about not fearing FWA wireless. The big telcos collectively lost less than 100,000 customers in the second quarter of this year, the best they’ve done in ages. The small loss disguises the fact that the telcos continue to lose DSL customers but are largely replacing them with fiber customers – except Lumen, which had a net customer loss for the quarter of 93,000.

I’ve seen most of the big fiber overbuilders scorning cable company broadband and saying they aren’t worried about DOCSIS 4.0 – like Frontier said. That’s a fairly easy thing not to fear for now since we’re a number of years away from any conversions to DOCSIS 4.0. But Comcast and others are talking about soon introducing some of the higher split technologies on DOCSIS 3.1 to boost upload speeds sooner. Will fiber overbuilders fear the cable companies more after some upgrades?

The WISPs that will be installing new versions of fixed wireless, including some technologies that claim to be able to deliver speeds up to a gigabit, say they are not afraid of competing against rural fiber networks built with grant funding. That’s an interesting claim since the general public seems to have grasped that fiber is better. It will be interesting to see what happens in places where rural fiber competes against fast rural broadband.

The big three cellular carriers all claim they are not afraid of Dish Network becoming the fourth major cellular carrier. It’s an odd claim to make since Dish says the only way for it to gain market share is to be extremely aggressive with prices. The cellular industry is already highly competitive, and it can’t be good for any of the bigger carriers to have to lower rates.

I get a chuckle every time I read one of these statements because when a carrier goes out of its way to mention a competitor, it is worried. The reality is that every carrier in a competitive situation has to be concerned about competitors. In the end, this is a battle that is going to be fought at the local level, market by market. I can picture that the various technologies will get a different reception depending on local factors. But for now, apparently, nobody fears the competition.

Traditional Cable in Less than Half of Households

Leichtman Research Group recently released the cable customer counts for the largest providers of traditional cable service at the end of the second quarter of 2022. LRG compiles most of these numbers from the statistics provided to stockholders, except for Cox, which is privately held and estimated. Leichtman says this group of companies represents 96% of all traditional U.S. cable customers.

The traditional cable providers continue to lose customers at a torrid pace, losing over 1.65 million customers in the second quarter, up from 1.4 million customers the previous quarter. Overall, the traditional cable providers lost almost 18,200 customers every day during the quarter.

The big news for the quarter is that traditional cable providers are now in less than half of homes and have collectively dropped to a 49% market penetration. The industry has lost almost seventeen million customers since the end of 2017, when traditional cable was in over 73% of homes.

2Q 2022 Change Change
Comcast 17,144,000 (520,000) -2.9%
Charter 15,495,000 (226,000) -1.4%
DirecTV 13,900,000 (400,000) -2.8%
Dish Network 7,791,000 (202,000) -2.5%
Verizon 3,479,000 (87,000) -2.4%
Cox 3,230,000 (80,000) -2.4%
Altice 2,574,200 (84,500) -3.2%
Mediacom 540,000 (15,000) -2.7%
Frontier 343,000 (20,000) -5.5%
Breezeline 332,312 (6,709) -2.0%
Cable ONE 221,000 (17,000) -7.1%
   Total 65,049,512 (1,658,209) -2.5%
Hulu Live 4,000,000 (100,000) -2.4%
Sling TV 2,197,000 (55,000) -2.4%
FuboTV 946,735 (109,510) -10.4%
Total Cable 39,536,512 (949,209) -2.3%
Total Telco / Satellite 25,513,000 (709,000) -2.7%
Total vMvPD 7,143,735 (264,510) -3.6%

It doesn’t look like people are replacing traditional cable with an online alternative like Hulu and Sling TV – which collectively lost 264,000 customers in the quarter. A few major online alternatives like YouTube TV aren’t on the list, but the loss in traditional cable far surpasses any possible net gain for the online cable alternatives.

Charter is still losing customers at a slower rate than everybody else in the industry and has for the past several years – although Charter’s losses are starting to climb. Charter CEO Tom Rutledge says that Charter actively points out to customers that the online alternatives cost more. The rest of the industry seems resigned to letting cable customers go.

The biggest percentage losers continue to be Frontier and Cable ONE.

Big Telcos and the BEAD Grants

We’re finally starting to gain a picture of the plans of the big telcos for the upcoming BEAD grants. The bottom line is that some of the big telcos seem to be prepared to pursue the upcoming grants in a major way. Consider the following:

  • At a recent industry conference, Frontier’s CFO said that Frontier has ambitious plans to pursue grants for all of the three to four million rural homes that it serves today with DSL.
  • When the BEAD grants were first announced, AT&T added five million new passings to its goal for 2025, all due to pursuing rural grants. AT&T hasn’t said much about grants since that early announcement.
  • Brightspeed, which purchased twenty states of copper networks from CenturyLink, has made it clear that it will be seeking state and federal grants to build as much fiber as possible. CenturyLink has been aggressively pursuing grants in the states sold to Brightspeed, for the obvious benefit of the new company.
  • Windstream was a big winner in the RDOF reverse auction and has been aggressively pursuing ARPA funding. It seems obvious that the company will also pursue BEAD grants.

The two big telcos that have not said much about grants are CenturyLink and Verizon. There are rumors that CenturyLink is seeking somebody to buy the rest of its copper lines, but it also would not be surprising to see the company come out swinging for grant funding if a sale isn’t forthcoming. Verizon abandoned a rural strategy years ago, and it would be surprising but not impossible to see the company tackle grant funding if the math is good.

The other big ISP that has aggressively been pursuing grant funding is Charter. It would make sense for the company to pursue BEAD grants to fill in around where it has already won the RDOF auctions.

This is an interesting dilemma for rural communities. The telcos all say they will be building rural fiber with grant funding – which is what rural America most desires. But a lot of rural folks blame the big telcos for the current miserable state of rural broadband. It’s the big telcos that stopped maintaining copper, reduced staffing drastically, and basically walked away from rural America. I know a lot of folks who hope that anybody other than the big telcos wins the grant funding in their area.

There are several big fears that I hear voiced about the big telcos winning the grant funding. One is that the big telcos will not follow through after winning the grant funding. Many communities remember how some of these telcos walked away with huge amounts of CAF II funding without doing the promised DSL upgrades. I think the fear is that the big telcos might cut corners and not build to the most remote households in a grant award area. I’ve also heard the fear that the big telcos will accept grants and then decide not to build some areas in a state.

Perhaps the biggest fear about big telcos building rural fiber networks is that we’ll see a repeat of the past. They will build the new network as funded. But if the telcos don’t hire enough technicians or cut corners on maintenance, the fiber networks will deteriorate over time.

This is a real concern because there is a big difference between copper networks and fiber networks. It’s been possible to keep a copper network limping along for decades with minimum maintenance. This is due to the relative simplicity of the DSL technology. There are twenty-year-old DSL cards still limping along, long past the expected economic life. But fiber networks are not likely to be so tolerant. Fiber technology is complicated and precise, and when a card starts going bad, it most commonly means the fiber will go dark. I think the big fear in rural America is that the big telcos will build fiber but let it go dark in 10 or 15 years if they can’t get additional subsidies. This is an impossible scenario to imagine the big telcos demanding future subsidies to keep networks working.

One of the most important aspects of the BEAD grants will be community approval and partnerships with the grant applicants. It will be curious to see if the big telcos seriously court local support for grant applications or do little more than ask for a letter of support when it’s time to file grants. If a community really wants to keep out the big telcos, the best strategy is to partner with somebody you trust more.

Can the Big Telcos Turn the Corner with Fiber?

I was asked an interesting question recently: will fiber help the big telcos turn the corner to success? It’s a good question when looking at telcos like Frontier, Windstream, Lumen, and any others who are late to the game for converting copper to fiber. There are a lot of factors that will come into play, so the answer is likely to be different by telco.

On the plus side is a general consensus by many households that fiber is the best technology. There is a sizable percentage of homes in any market that will move to fiber given a chance. I’m sure this differs by community, but my experience is that 20% to 30% of homes will almost automatically switch to fiber, and that percentage is likely growing. It seems that all of the talk about broadband over the last few years has sold the idea that fiber is a superior technology.

We know telcos are hoping this perception is true. AT&T is the most optimistic of the big telcos and says that it will get a 50% market penetration anywhere it builds residential fiber. That’s an extraordinary prediction after considering the 10%-15% of homes in most places that still don’t have broadband and another 10%-15% of homes that will choose the low-cost alternative like DSL or cellular broadband just because of price. A 50% market share would mean largely obliterating the cable company in a given market.

But any perceived superiority of fiber is going to be relatively short-lived as cable companies upgrade networks to have faster upload speeds. Fiber today is winning the battle for consumers who care about upload speeds – but what percentage of homes is that? Fiber also has noticeably better latency and jitter – a connection on fiber is perceived by the eye to be faster even if the speeds are the same. But how many households care about that?

Telcos have a long way to go to get back to a decent market share. By delaying the transition to fiber, big telco let cable companies clobber them quarter after quarter in taking away DSL customers. While they hope that having a superior technology will help them claw back those lost customers, it’s no slam dunk that they will. The cable companies have smartly bundled broadband with cheap cellular service. The telcos are also going to see fierce competition for price-conscious consumers as they see cellular broadband offered by T-Mobile, Verizon, Dish Networks, and maybe AT&T.

One of the biggest handicaps that telcos face is that they have destroyed their brand names through poor treatment of customers. Big telcos have slowly let the copper networks die by cutting back on maintenance staff. There are millions of consumers who have a poor opinion of a telco because of week-long DSL outages or repair technicians who never showed up. People are not going to easily forgive them. Perhaps the smartest ones of all will be Ziply and Brightspeed, which purchased copper from Frontier and CenturyLink and rebranded to feel like a new company.

Another challenge will be for the big telcos to earn a decent margin from the conversion to fiber. The big telcos have a cheaper path to upgrade than fiber overbuilders due to the savings from overlashing fiber onto existing copper wires. But they are still making a significant outlay to make the conversion. There is no new revenue to the telcos from existing copper customers they move to fiber – and that means that they are paying for the new fiber networks only with the revenues from customers they lure back from cable companies. We won’t know for a few years what that means for the bottom line, but my back-of-the-envelope math says they’ll have a hard time making any noticeable return on the conversion to fiber – at least for the first 5-10 years. In the long run, the fiber customers will become cash cows, just like what happened with copper customers in the past. But will the long run be good enough for Wall Street, which will want to see a fast turnaround?

I think many of the big telcos are banking on getting giant federal grants to help them get back on their feet. But there are a lot of factors that say this might not be the great strategy they are trying to sell. First, most grants will be in the range of 75% grant funding. But covering the 25% is still expensive when the cost to reach rural passings ranges from $7,000 – $15,000. There are also higher operating costs in rural America due to longer truck rolls.

The biggest hurdle for getting grants is that the awards are going to be made at the State level – there won’t be any FCC to influence through lobbying. Many states are beyond angry with the big telcos since they rightly blame them for the poor condition of rural broadband. Additionally, the most likely grant winner in any county will be the one that partners with the county. I’ve worked in nearly 100 counties in recent years, and not one of them had any desire to partner with one of the big telcos. I know the big telcos all have huge goals of winning grant funding – I’m going to be really surprised if they achieve it.

To summarize and answer the original question – there is no guaranteed path to success for a telco that finally gets around to converting to fiber. The incremental new revenues from the conversion may not be high enough to make the math work. The big telcos will be battling a negative public perception of them as quality and reliable ISPs. They might be successful just because of the advantages that fiber has over cable company copper networks – but those advantages might not be enough to make a bottom-line difference.

Frontier’s Lack of Fiber

The primary reason that Frontier cites for going into bankruptcy is the lack of fiber. They are finally acknowledging that customers are bailing on them due to the poor broadband speeds on their copper networks. This is being presented as if this is a sudden revelation – as if the company woke up one day and realized that it’s selling services that nobody wants to buy. I must admit this gave me a chuckle and there are some giant flaws with this argument.

Rural customers don’t hate DSL – they hate DSL that doesn’t work. If Frontier had implemented the CAF II upgrades as had been promised, then rural customers would all be using the 10/1 Mbps or faster rural DSL that would have been created as a result of those upgrades. Instead, customers have gotten disgusted by overpriced DSL that is so slow that they can’t stream video or connect to a school or work server. We’ve been doing speed tests all over the country and it’s rare to find rural DSL in many markets that delivers even 5 Mbps download – much of it is far slower than that, some barely faster than dial-up. If Frontier had provided 10/1 Mbps DSL to millions of homes, those households would gratefully be buying that broadband during the COVID-19 crisis.

Frontier blames its woes on lack of fiber with no mention of their reputation for unconscionably bad customer service. I’ve talked to customers who talk about routine network outages that lasts for many days. Customers complain about losing broadband and having to wait weeks to get it repaired – or worse, are told that the electronics needed to replace a bad DSL modem are out of stock. This is a company that has trimmed, then trimmed again its maintenance staff to the bone. Talk to any rural Frontier technician and they’ll tell you that they don’t have the time or resources available to address routine customer problems.

Frontier complains about lack of fiber, but as recently as 2015 they purchased another huge pile or dilapidated Verizon copper networks as part of a $10.5 billion acquisition. While that acquisition came with some FiOS fiber networks, the company also doubled down on buying non-functional copper networks. The speculation in the industry was that Frontier continued to buy lousy properties because it created opportunities for huge management bonuses – the company never had any plans to make the purchased copper networks any better.

And that’s the real issue with Frontier’s claim – they have no fiber because they’ve made almost no effort to migrate to fiber. The company burned all of its cash on trying to service the debt for overpriced acquisitions rather than rolling cash back into its networks.

It’s interesting to compare Frontier to the many smaller independent telephone companies. The FCC brags about places like the Dakotas that have a huge amount of rural fiber to homes. But that rural fiber didn’t happen all at once. It happened over decades. Most rural telcos went through two rounds of investment where they invested to improve rural DSL. In doing so they built fiber to go deeper into the rural areas, the first build brought fiber within maybe ten miles of homes, the second got fiber to within 3 miles of most homes. When the rural telcos decided to take fiber the rest of the way, it was reasonably achievable because they already had fiber deep into rural neighborhoods.

Frontier has done very little of that kind of incremental improvements over the years. They found it more enticing to keep borrowing to buy new rural properties rather than roll cash back into the existing networks. It doesn’t even look like they did all of that much new fiber as part of the CAF II upgrades. I’m sure Frontier would refute that statement and say they are fully compliant with CAF II, but if they had built fiber deep into the network then rural DSL would have gotten better – and for the most part, it hasn’t.

I can’t how the bankruptcy will benefit frontier’s customers. The company will likely get to walk away from a lot of the debt that was provided for the last few acquisitions – and it’s hard to feel bad for lenders who thought it was a good idea in 2015 to lend to buy copper networks. But bankruptcy won’t fix any of the fundamental problems with the Frontier networks. Customers are going to continue to bail on inferior and nonfunctional broadband products. The upcoming RDOF auction is going to give a lot of money to ISPs that are going to overbuild Frontier copper with something better (even though Frontier made a last-minute filing at the FCC to block grant funding by claiming they had magically upgraded 16,000 rural census blocks).

Is Frontier going to somehow start investing in rural fiber? My best guess is that they won’t even after bankruptcy. If they can raise any money for new capital spending they’ll likely try to salvage some of the county seats and other markets where there is a mass of customers. However, in many of those markets they’ve already lost the battle to the cable companies.

Frontier is right in that they are failing from lack of fiber. But that statement doesn’t tell the full story. They are failing because the company decided decades ago to not invest capital into their own networks – and now they are paying the price.

COVID-19 Boosts 1Q 2020 Broadband Subscribers

Leichtman Research Group recently released the broadband customer statistics for the end of the first quarter of 2020 for the largest cable and telephone companies. Leichtman compiles most of these numbers from the statistics provided to stockholders other than Cox, which is estimated. Leichtman says this group of companies represents 96% of all US landline broadband customers.

The big news is that additions in the first quarter were up nearly 85% over the number of customers added in the fourth quarter of 2019.  For the quarter, these large ISPs collectively saw growth that annualizes to 4.8%. This was the biggest quarterly overall subscriber growth since early 2015.

3/31/20 1Q Change % Change 4Q 19 Adds
Comcast 29,106,000 477,000 1.7% 443,000
Charter 27,246,000 582,000 2.2% 339.000
AT&T 15,315,000 (74,000) -0.5% (186,000)
Verizon 6,982,000 26,000 0.4% (5,000)
Cox 5,230,000 60,000 1.2% 25,000
CenturyLink 4,667,000 (11,000) -0.2% (36,000)
Altice 4,237,300 50,100 1.2% 7,000
Frontier 3,480,000 (33,000) -0.9% (55,000)
Mediacom 1,349,000 21,000 1.6% 12,000
Windstream 1,067,300 18,000 1.7% 9,300
WOW 797,600 16,100 2.1% 7,600
Cable ONE 793,000 20,000 2.6% 83,862
Consolidated 786,125 1,960 0.2% 14
TDS 460,000 4,800 1.1% 17,500
Atlantic Broadband 457,233 5,770 1.3% 5,326
Cincinnati Bell 427,500 1,800 0.4% 1,600
Total 102,401,158 1,166,530 1.2% 669,788
Total Cable 69,216,233 1,231,970 1.8% 922,788
Total Telco 33,184,925 (65,440) -0.2% (253,586)

We know that a lot of the growth was due to COVID-19, which drove employees and students to work from homes. A lot of homes likely purchased broadband for this purpose. These big ISPs also pledged to the FCC that they wouldn’t disconnect customers for non-payment during the pandemic. However, the real impact of that policy won’t show up until the second quarter.

Comcast and Charter continue to dominate the rest of industry, and accounted for 86% of total net growth for the quarter. The large cable companies collectively gained over 922,000 subscribers, which their biggest quarterly growth since 2007. The telcos collectively still lost customers for the quarter, but losses are significantly less than in 2019. The biggest telco loser was AT&T which lost 186,000 customers for the quarter. Frontier continued to lose the biggest percentage of its customer base and lost nearly 1% of its broadband customer base during the quarter.

This growth is impressive, and much of the boost has to be due to an increased need for home broadband. We’ll have to wait until later in the year to see the impact of having over 36 million people file for unemployment and for potentially millions of small businesses to close. There has been a long-running debate in the industry about whether broadband is recession-proof. Arguments can be made that homes out of work will hang onto broadband as long as they can in the hopes it can help them find work. In a few quarters, we’ll find out.

Enough is Enough

CenturyLink recently petitioned the FCC to allow them to be late in implementing the CAF II upgrades where the FCC doled out $11 billion to upgrade rural broadband speeds to 10/1 Mbps. The ostensible reason for the delay is the COVID-19 pandemic, but CenturyLink was already behind and notified the FCC earlier this year that they hadn’t completed their 2019 CAF II installation in 23 out of 33 states.

I say enough is enough. It’s time for the FCC to demand a reckoning of CAF II and begin handing out draconian penalties to the telcos that didn’t meet their obligations. I’m positive that if this was assessed fairly that the FCC will find that the vast majority of big telco customers have never gotten an upgrade to 10/1 Mbps.

Let’s start by looking at CenturyLink’s request. There is no reasonable explanation they can offer for not meeting their obligations in 2019. That was the fourth of a five-year buildout obligation, and the company has known for years what’s needed to be done – and they had the federal money in their pocket to make the upgrades. The claim for this year is also largely bogus. I have a lot of clients that are being cautious now about entering customer premises, but I don’t know any carrier that has stopped doing work outside of customer homes. I can’t think of any practical reason that COVID-19 would cause a delay for CenturyLink. Even if they upgrade somebody’s DSL, they could mail them a new modem – telcos have been having customers self-install DSL modems for twenty years.

It’s time to stop the pretense that CenturyLink or the other big telcos have been busy upgrading rural DSL. I don’t know anybody who thinks that’s happened. I have anecdotal evidence that it hasn’t, My company has been helping rural counties with broadband feasibility studies for many years. In the last four years, we’ve been asking rural customers to take speed tests – and I’ve never seen even one rural DSL connection that transmits at a speed of 10/1 Mbps. I’ve haven’t seen many that have tested above 5 Mbps. I’ve seen a whole lot that tested at less than 3, 2 or even 1 Mbps. Many of these tests have been in areas that are supposed to have CAF II upgrades.

I’ve also never talked to any County officials who have heard from the telcos that their county got rural broadband upgrades. One would think the telcos would brag locally when they were finished with upgrades as a pitch to get new customers. After all, customers that have only had slow DSL or satellite service should be flocking to 10/1 DSL. I’ve also not seen a marketing campaign talking about faster speeds due to CAF II. I’ve been searching the web for years to find testimonials from customers talking about their free upgrade to 10/1 Mbps, but I’ve never found anybody who has ever said that. This is not to say there have been zero upgrades in the CAF II areas, but I see no evidence of widespread upgrades.

The reality is that CenturyLink got new leadership a few years ago who immediately announced that the company was going to stop making ‘infrastructure return’ investments. We have Frontier that miraculously recently found 16,000 Census blocks that now have speeds of at least 25/3 Mbps when I’m still looking for proof that they upgraded places to 10/1 Mbps. Go interview folks in West Virginia if you think they’ve made any CAF II upgrades.

The FCC has a choice now. They can wimp out and grant the delay that CenturyLink is requesting, or the agency can come down on the side of rural broadband. There is no middle ground when it comes to CAF II. This FCC didn’t make the original CAF II decision – but they are the ones that are supposed to make sure the upgrades are done, and they are supposed to be penalizing telcos that failed to make the upgrades.

The response to CenturyLink’s request should be a giant penalty for missing the 2019 deadlines and a reminder that the company is still on the hook for 2020 unless they want more fines.

The FCC also needs to aggressively start testing in the areas that have supposedly gotten CAF II upgrades. This doesn’t have to be a big expensive testing program. We know exactly where CAF II should have been implemented – the FCC has made it easy by overlaying the CAF II footprint over Google maps. The FCC could ask County administrators across the US to solicit a speed test at CAF II locations – the Counties would be glad to oblige. If the FCC wanted to know the truth about CAF II they could get massive feedback within a few weeks about the abject failure of the CAF II program.

The ultimate penalty ought to be the return of CAF II money to the Universal Service Fund for areas that aren’t upgraded to 10/1 Mbps. Then the money could finally be given to somebody that will upgrade to real broadband. The CAF II program was ill-conceived, but the big telcos should have used that money to bring rural speeds up to 10/1 Mbps. Had they done so, we’d have millions of more homes that wouldn’t be struggling so hard during COVID-19. This FCC has a chance to do their job and set things right.

FCC Ignoring Consumer Broadband Complaints

One of the best aspects of broadband regulation was that a consumer was always able to file a complaint against an ISP with the FCC, and the complaint process generally resolved disputes between customers and carriers. If customers had legitimate complaints about billing or service, a complaint sent to the FCC generally solved the issue; if the carrier was in the right, the FCC sided with the carrier and asked them to explain the applicable laws or rules to the customer involved. This complaint process was the ultimate backstop for people who had tried every other avenue for resolving a dispute.

But starting with the Restoring Internet Freedom order where the FCC voted to kill net neutrality and to kill Title II regulation of broadband this all changed. After that order, the FCC stopped intervening in broadband complaints from customers. They now forward complaints to carriers but don’t insist that problems are resolved.

Jon Brodkin wrote an article about this last November where he documented a case where Frontier was billing $10 per month to a customer who had purchased a FiOS router before Frontier purchased the property there. The company insisted that the customer pay the fee for a router that the customer clearly owns. Even after a complaint was filed at the FCC on the issue, Frontier wouldn’t change its position. The FCC did nothing about the complaint – the agency forwarded the complaint to Frontier and considered the issue settled.

In the past, the FCC would have looked at the facts, which in this case any person off the street would have resolved in favor of the customer. If the FCC got too many complaints on the same issue, they would pressure an ISP to change their practices.

It’s conceivable that the FCC no longer has the power to resolve complaints and just doesn’t want to publicly say so. When the agency voided their ability to regulate broadband, it’s likely they also voided their ability to intervene on any topic related to broadband – the agency effectively gelded themselves.

As Brodkin points out, the FCC isn’t being truthful about the complaint process. They told US Rep. Mike Quigley (D-Ill.) that they forward complaints to the Federal Trade Commission, but it turns out they only forward complaints that the FTC asks about – not most complaints.

The FCC has informed some consumers that they have an option to file a formal complaint. This is a process that costs $235 and that ensures that the agency will at least look at the issue. This is the process normally used to resolve pole attachment complaints and similar disputes between carriers. A formal complaint initiates a formal process that the average person probably would find difficult to comply with – a formal complaint initiates the equivalent of a legal proceeding, and there are specific procedural rules and a legal process of filing documents and pleadings on a pre-determined schedule. A formal complaint that doesn’t follow the processes and protocols would likely be tossed as being non-responsive.

Unfortunately, paying this fee for a formal complaint still might not do any good since the FCC no longer has jurisdiction over a broadband billing dispute or other broadband issues. The resolution of a formal complaint might result in nothing more than an FCC ruling that the customer should have gone to the FTC instead of the FCC.

There are other ramifications of the Restoring Internet Freedom order. When the FCC killed its ability to regulate broadband it also theoretically voided the State’s ability to regulate broadband as well. State regulatory commissions have always had a complaint process similar to the FCC’s, but since the law of the land is that broadband is no longer regulated, consumers can’t take these complaints to a state commission. The only current recourse for a consumer is to go to the FTC. Unfortunately, the FTC regulates bad behavior by all corporations, and so the agency only opens an investigation when there are numerous complaints against a specific ISP on a specific topic. The FTC does not intervene in or try to resolve individual consumer complaints.

I don’t think it has registered with the general public that broadband is unregulated. This means that consumers are on their own when ISPs harm them and no government agency can intervene on their behalf. There is no better example than the one that Brodkin had highlighted – Frontier feels safe in mistreating a customer even when under the eye of regulators, and even when they are blatantly wrong. To Frontier, keeping the erroneous $10 in monthly billing is obviously more important than doing the right thing by a customer – and there seems to be nothing a customer can do than perhaps finding somebody in the press to highlight their story.