Frontier threw another log onto the FiOS TV fire on Friday, advising The Oregonian, a local news outlet, that it plans to raise the installation fee for new FiOS TV customers from $79 to $500 and that it will drop out of its cable franchise agreements with four Oregon cities.
The company has been under fire since announcing plans in January to raise the rates for FiOS video by as much as 46%–a move the company said was made necessary by its high programming costs. Frontier postponed the rate increase indefinitely after Oregon’s Metropolitan Area Communications Commission accused it of failing to keep its promise to support FiOS TV as a competitive offering after it acquired FiOS lines from Verizon. Frontier‘s purchase from Verizon primarily included non-FiOS lines in former Verizon serving rural areas. But Frontier obtained FiOS lines in Oregon, Washington and Indiana—and some people in Oregon have been particularly vociferous about fighting the proposed price hikes.
The huge increase in the FiOS TV installation fee appears to be an attempt by Frontier to avoid gaining any new FiOS TV subscribers. Instead, the company has been pushing DirecTV service, which it offers through a marketing arrangement with the satellite video provider. Stop the Cap!, a consumer website, noted that a Google search for “Frontier FiOS” will find paid advertising from Frontier directing seekers to a free satellite dish offer.
The plan to drop its cable franchises also supports the idea that Frontier plans to shift its focus away from FiOS TV. In a letter to one of the four cities where it is cancelling its franchise agreement posted on the Oregon Live website, Frontier said its FiOS video service “has thus far been under-priced relative to Frontier’s costs,” adding that “these artificially discounted rates and installation prices are unsustainable.” In the letter Frontier said it has not yet identified a specific date when it will terminate service but that it will abide by requirement to provide at least 90-day advance notice to subscribers.
Frontier is not the only video service provider to have experienced difficulty obtaining competitive rates for video programming. Highly publicized disputes between content providers and programmers have led to programming blackouts over the last year or so, leading some stakeholders to argue that voluntary bargaining processes are weighted too heavily on the side of content providers. Frontier’s latest moves involving FiOS TV came just one day after the Federal Communications Commission said it would revisit rules governing the retransmission consent process.
Obtaining competitive content pricing has been particularly challenging for Tier 2 and Tier 3 telcos— and rather than waiting to see if regulators opt to level the playing field, some Tier 2 and 3 telcos are exploring alternatives to traditional cable TV content based on using broadband to deliver over-the-top (OTT) Internet video content.
After reading comments made by a Frontier executive to The Oregonian, one wonders if Frontier also might be considering that approach. Frontier is exploring “new options” for using its fiber network to deliver video service, Frontier’s Oregon general manager told The Oregonian.
Is a Frontier OTT video option in the works?