Today's Top Stories Level 3 Communications, a major wholesale provider to content companies like Netflix (NASDAQ: NFLX), has accused five unnamed U.S. ISPs and one European ISP of abusing their market power to effectively put a limit on the amount of traffic the transit provider can route over these ISPs' last mile networks. "Five of those congested peers are in the United States and one is in Europe," wrote Mark Taylor, vice president of Content and Media for Level 3, in a blog post. "There are none in any other part of the world. All six are large Broadband consumer networks with a dominant or exclusive market share in their local market. In countries or markets where consumers have multiple Broadband choices (like the UK) there are no congested peers." The service provider said that by not adhering to the established peering agreements, they are degrading the customer experience for content and services that run over Level 3's network. One issue that causes service degradation is a lack of capacity at the interconnection points where Netflix and others try to carry their traffic through the last mile provider's network. When that issue occurs, the transit provider like Level 3 will work with the last mile provider to get additional capacity by opening more ports. Peering fights are nothing new for Level 3, which has long battled the likes of both Comcast (Nasdaq: CMCSA) and Verizon (NYSE: VZ) over this issue. A number of reports have emerged in recent months where Comcast, AT&T (NYSE: T), Verizon and Time Warner Cable (NYSE: TWC) customers have complained they were seeing quality issues whenever they streamed video services from Netflix and Amazon on their broadband connections. Although Level 3 does not identify the ISPs, recent moves by Netflix to garner agreements with both Comcast and Verizon illustrate that these two service providers are likely part of this group. During a recent Brookings Institution panel discussion, AT&T's Chief Technology Officer John Donovan said the carrier is "in discussions with Netflix" regarding a peering arrangement. Peering disputes aren't relegated just to Level 3. Fellow transit provider Cogent Communications told broadband service providers like Comcast, AT&T, Time Warner Cable and Verizon in March that it would help them pay to upgrade their broadband connections, for example. For more:
- see this blog post Related articles:
Level 3's Q1 enterprise services revenue jumps 11% to $962M
AT&T 'in discussions' with Netflix over peering
Level 3's Storey: M&A is an option, not a necessity Read more about: Level Communications, Service Provider, Netflix
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Verizon (NYSE: VZ) plans to complement its growing set of higher Quantum FiOS Internet speeds with a new Wi-Fi router that will support the multiple wireless devices consumers are using in their homes to access the Internet and other content. Fran Shammo, CFO and executive vice president for Verizon, revealed those plans to investors during the Jefferies 2014 Global Technology, Media and Telecom Conference. Set to debut this summer, the new router will support up to 300 Mbps of Wi-Fi capacity in the home. He did not detail pricing or how it will be sold to existing and new FiOS customers. "We think that the broadband product has maybe separated us from our competition so we have continued to increase the speeds," Shammo said. "Come mid-summer we are going to come out with a new proprietary router that will get you to 300 Mbps of Wi-Fi speed in your home so we believe that could be a nice differentiator for us as well." In addition to the new router, Verizon is going to release a video media server. What's significant about the media server is that it marks another move the telco is making towards offering its residential customers all IP-based services. One of the key attractions of the media server is that FiOS customers won't have to place a set-top box in each room of their house where they want to watch video. "The real benefit for the customer is that you have one piece of equipment in your home," he said. He added that consumers will be able to connect TVs that are not IP capable to the media server via an additional attachment. Other benefits afforded by the media server will be greater capacity to run multiple digital video recorders (DVRs) over multiple TVs. "There are a lot of features that come with that media server that can't be handled in a set-top box," Shammo said. For Verizon, the benefit is twofold: shorter installation times and reduced CPE costs, particularly for single family homes. "All I have to do is connect that media server up to our ONT, light it up, get the IP technology in the home working and we believe it cuts our install time by about 50 percent," he said. "That's a huge cost benefit for us within the FiOS world." Despite the attraction these new capabilities will bring to existing customers, they will be of little comfort to customers that reside outside of the FiOS footprint. "We'll continue to fulfill our FiOS LFAs [license franchise agreements]," he said. "We will complete [the FiOS buildout] with about 19 million homes passed. That will cover about 70 percent of our legacy footprint; 30 percent we're not going to cover." The remaining 30 percent will continue to be served by its aging copper network that will likely never be upgraded with fiber. "We will continue to harvest that copper network and those customers and keep them as long as we can but we will not be building FiOS out to those areas," Shammo said. Verizon's plans come after a quarter where its overall FiOS subscriber growth slowed due to what it says were challenging weather conditions and aggressive pricing campaigns from cable operators. During the first quarter of 2014, the telco added 98,000 net new FiOS Internet connections and 57,000 net new FiOS video connections. In some of its largest markets like Texas, penetration has reached 40-50 percent growth. "Some of our markets are at 40 percent penetration and we have some markets at 50 percent penetration so those markets will slow," Shammo said. He added that in markets like New York City, which is its fastest growing penetration market, "there's still a lot of growth in the FiOS area." For more:
- hear the webcast (reg. req.)
- here's FierceCable's take Editor's Corner: Verizon gives 'FiOS-envy' markets little reason for hope Related articles:
Verizon Q1 FiOS revenue rose 15.5% to $3B, but weather issues slowed installations
Verizon taps Avaya veteran Chris Formant to oversee enterprise business
Verizon's FiOS drives up Q4 consumer wireline revenues to $3.8B
Verizon focuses on data analytics at Palo Alto facility Read more about: Fran Shammo
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FairPoint reported that Ethernet service revenues contributed about $19.9 million in revenue in the first quarter of 2014, up from $14.9 million a year ago, as retail and wholesale circuits grew 56.6 percent year-over-year. Per the trend that's been taking place at the telco during recent quarters, FairPoint said the growth in its Ethernet products is "expected to continue based on demand from customers like regional banks, healthcare networks and wireless carriers." During the quarter, it added 224 retail and 382 wholesale Ethernet circuits, ending the period with a total of 10,123 circuits. An increase in new Ethernet customers and broadband subscribers drove up data and Internet services revenues 10.9 percent sequentially to $42.3 million, which is an increase for the fifth consecutive quarter. Broadband services were also a factor during the first quarter. Driven by ongoing investments to increase capacity and broaden its reach to more customers, it added 1,700 subscribers to reach a total 331,538 subscribers at the end of the quarter. FairPoint said that it continues "to see strong interest in our broadband products and a lessening impact on our subscriber count from our continuing effort to improve the credit profile of customers." However, it did report that voice services declined $3 million due to fewer lines in service, promotional discounts on certain residential products that have now been discontinued and seasonality. Likewise, access revenue declined $3.8 million primarily due to fourth-quarter 2013 revenue assurance activities that it said did not recur to the same extent in the first quarter of 2014 partially offset by lower service quality penalties. Interestingly, FairPoint narrowed its voice access line declines to 6.8 percent year-over-year from 7.8 percent a year ago. It said the slower decline was driven by a reduction in the rate of loss in residential voice, business voice and wholesale access lines. As of the end of the quarter, the telco had a total of 863,410 access lines. From an overall financial perspective, first-quarter revenue was $231 million, down year-over-year from $235.5 million in the same period a year ago due to expected declines in local and long-distance sales. During what it says is a period of revenue stabilization, FairPoint is maintaining its previously stated guidance for 2014 of $930 million to $940 million in revenue, yielding $100 million to $110 million of unlevered free cash flow. Shares of FairPoint were trading at $14.13, up 32 cents or 2.32 percent, in late Monday afternoon trading on the Nasdaq stock exchange. For more:
- see the earnings release Special report: Wireline telecom earnings in the first quarter of 2014
Related articles:
FairPoint expands Ethernet, hosted PBX service reach in Maine
FairPoint adds CoS, Layer-2 control features to its wholesale Ethernet service line
FairPoint's data and Internet services revenue grows 13% to $42M, partially offsets legacy losses
FairPoint completes N.H. broadband expansion effort, reaches 95% of access lines Read more about: first quarter earnings 2013
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Colorado Springs, Colo.-based Central Telecom Long Distance is facing a $3.9 million fine from the FCC for allegedly preying on elderly and disabled consumers to switch their long-distance service, billing customers for unauthorized charges and not being able to justify charges on customers' bills. Telemarketers working for Central Telecom allegedly tricked consumers into believing that the telemarketers were calling on behalf of the consumers' existing telephone companies, then changed the consumers' preferred carriers without their permission, otherwise known as "slamming."
The FCC added that Central violated the regulator's "truth-in-billing rules" by failing to clearly and plainly describe the charges on its customers' phone bills. According to the consumers that filed complaints, Central attempted to switch their current or existing long distance carrier such as AT&T (NYSE: T) or CenturyLink (NYSE: CTL) after obtaining and recording their authorization. Most of the consumers said in their complaints to the regulator that they did not know Central Telecom or did not mean to subscribe to their services. A number of times Central and its telemarketers apparently worked to exploit elderly or disabled consumers' confusion and inability to understand the sales pitch they heard and the questions they were asked, according to the FCC. One complaint was filed on behalf of a deceased elderly grandmother whom Central continued to bill for months after she died and even after her telephone was disconnected. Instances of slamming are hardly isolated to Central Telecom. Qwest, now CenturyLink, had to pay a $1.5 million fine to the FCC to resolve slamming complaints back in 2000. For more:
- see the release
- see this FCC filing (.pdf) Related articles:
FCC's Connect America Fund II receives mixed response
FCC's Wheeler says he'll maintain the Open Internet
FCC's Connect America Fund II receives mixed response
Report: FCC's proposed middle ground net neutrality rules come under fire Read more about: Colorado Springs Colobased Central Telecom Long Distance, Central Telecom
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EarthLink reported that it narrowed its business service revenue losses to 4.3 percent to report a total of $234.3 million in revenues as its sales team made progress with extending the contracts with existing customers. This was an improvement over the 7.0 percent year-over-year decline the service provider reported in the fourth quarter of 2013. Each segment of the business services unit had varying results. In the CLEC segment, which serves mainly small businesses, revenues declined 11 percent to $151 million from $169 million in the first quarter of 2013. The company said it anticipates a decline rate of 11 percent in this segment this year due to the full year impact of elevated churn in mid-2013. However, it has forecast further improvement as it focuses on customer retention efforts. Wholesale revenues declined 5 percent year-over-year to $36 million. Due to the impact of the Sprint/Nextel (NYSE: S) disconnect, EarthLink expects wholesale carrier/transport revenues to decline 1-3 percent but grow 0-2 percent in the long-term. One of the bright spots of growth in business services was Managed Network and Cloud & IT Services, where revenues rose 28 percent year-over-year from $36 million to $47 million. The company said it expects organic revenue growth of 20 percent for this segment. Overall company revenue was $297.3 million, down 6.1 percent from the same period a year ago. The service provider said the revenue trajectory continued to show improvement versus the 8.2 percent year-over-year decline it reported in the fourth quarter of 2013. On an adjusted basis, the net loss tripled, to 21 cents per share. EarthLink reduced capex sharply to $23.4 million, and free cash flow was up 39.5 percent to $26.5 million. The company finished the quarter with $108.5 million in cash remaining. EarthLink said the drop in revenue slowed in the quarter and it completed a strategic review to focus on its long-term opportunities. "The team has spent the last several months conducting a thorough strategic review," said Joseph F. Eazor, CEO and president of EarthLink, in the earnings release. "I'm confident the focus and prioritization we are instilling should drive continually improving long-term operating performance and support for the dividend." Shares of EarthLink were trading at $3.42, up 7 cents or 2.09 percent, in Tuesday morning trading on the Nasdaq stock exchange. For more:
- see the earnings release Special report: Wireline telecom earnings in the first quarter of 2014 Related articles:
EarthLink serves up Wi-Fi for multi-site businesses
EarthLink's Q4 2013 emerging product revenues grow but overall business services down 7%
EarthLink officially launches holding company
EarthLink brings on EMC's Eazor as CEO, replacing Rolla Huff Read more about: IT services
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