Tag Archives: charter

Cable companies will double broadband prices because they can


Source: New Street Research, via *FierceCable*

In a competitive market, pricing is dynamic – you can’t reliably plan more than one or two moves ahead. But in a de facto monopoly – either a single seller or a duopoly with a weak second banana – you can lay out a long term roadmap and follow it relentlessly.

That’s what one noted financial analyst thinks the two big U.S. cable companies are doing. According to a story in FierceCable, Jonathan Chaplin, an analyst at New Street Research, thinks cable broadband prices will double in the coming years…

“Comcast and Charter have given up on usage-based pricing for now; however, we expect them to continue annual price increases,” Chaplin said. “As the primary source of value to households shifts increasingly from pay-TV to broadband, we would expect the Cable companies to reflect more of the annual rate increases they push through on their bundles to be reflected in broadband than in the past. Interestingly, Comcast is now pricing standalone broadband at $85 for their flagship product, which is a $20 premium to the rack rate bundled price.”

Chaplin estimates that cable companies have 65% of U.S. broadband customers now, and that share will grow to 72% over the next three years.

That kind of market dominance is something that cable companies want to keep out of the public eye. It’s why they push back hard against raising broadband standards: if, say, California adopted the Federal Communication Commission’s 25 Mbps download/3 Mbps upload speed standard as the minimum necessary to participate fully in the digital economy, then cable companies would have an effective, and easily documented, monopoly on broadband service. That would invite regulation, which is something that cable companies aggressively – and rationally – lobby to avoid.

But government-set standards are a poor substitute for market realities. If cable operators have gained a controlling market share by being the only option for the service levels that consumers demand, then it’s game over. They will have – do have, as Chaplin implies – the power to set rent-extracting prices without regard for troublesome competitors.

Verizon could close a big competitive gap with Charter’s fiber


Verizon needs to build more than 100,000 new cell sites and add more fiber connectivity to close a capacity gap with its U.S. competitors, according to a report from New Street Research. And, the report concludes, buying Charter Communications – as rumors say it might – could help solve some of Verizon’s problems. It wouldn’t be much benefit to Charter, though.

The report estimates that when the number of cell sites and the amount of spectrum used is taken into consideration, Verizon has a bit more than half of the capacity per subscriber that AT&T and T-Mobile have. In order to catch up, Verizon would have to build 69,000 new macro – traditional, big – cell sites, or 138,000 or more small cell sites. New Street estimates that if small cells are properly located to reach high concentrations of subscribers, it would only take two to replace a big cell site. To fully cover the same geographic area, though, the ratio is more like ten to one.

Those sites would all need back haul, of course, which is where Charter comes in. Verizon still has some wireline assets of its own, but Charter’s footprint is much bigger and U.S. cable companies have more fiber – and more easily accessed fiber – than telcos. “Cable has much greater fiber density than their wireline competitors”, the report says. “To put this in perspective, the Cable industry has 320,000 nodes today, the vast majority of which are fed with fiber. By contrast, telecom carriers have 23,000 fiber fed central offices”.

So a cable acquisition would be an advantage for Verizon. From Charter’s perspective, the benefits aren’t clear. New Street discounts speculation that a cable-mobile merger would reduce churn, concluding that Verizon’s is a low as it can go and there’s no hard evidence that it would have much more than a marginal impact on Charter’s.

The report makes several other good points about the cable and mobile sectors, and telecoms in general, and is worth reading. New Street’s top line conclusion is that an acquisition is less likely than originally thought, and “our working hypothesis is that it will be very tough for Verizon to structure a deal that Charter will find compelling”.

Charter is ripping off Internet subscribers, says NY attorney general


Time Warner Cable executives deliberately under provisioned and over promised Internet service to its subscribers in the State of New York and Charter Communications is allowing the practice to continue, claims New York attorney general Eric Schneiderman in a lawsuit filed earlier this week. It’s a follow on to an investigation kicked off in 2015.

Charter purchased TWC in May 2016. It took over operation of systems and customer equipment that couldn’t delivered speeds that were advertised or that customers purchased and “even now, [Charter] continues to offer Internet speeds that we found they cannot reliably deliver”, Schneiderman alleges. TWC went so far as to rig speed tests run by the Federal Communications Commission, according to the lawsuit

[Time Warner Cable] leased older-generation modems to over 900,000 subscribers in New York State…However, [Time Warner Cable] knew that, in practice, these older-generation modems were incapable of achieving the Internet speeds its subscribers were led to believe they were paying for…

[Time Warner Cable] managed its cable network in a way that did not deliver the promised Internet speeds over any type of connection. It cut corners by packing too many subscribers in the same service group, which resulted in slower speeds for subscribers, especially during peak hours. It also failed to add more channels for each service group, which similarly resulted in slower speeds for subscribers…
[Time Warner Cable] further deceived the FCC by manipulating the average Internet speed results in the FCC’s speed tests. The company inflated the average speed results by providing increased Internet speeds when service groups were less utilized to offset (and conceal) test results showing slower speeds when the service groups had heavier usage. By gaming the FCC speed tests in this manner, [Time Warner Cable] concealed the fact that it failed to consistently deliver the promised speeds to its subscribers under actual network conditions.

Charter’s response to an enquiry from Ars Technica blamed TWC but stopped short of admitting there was actually a problem or promising that it would actually fix anything.

Haven’t seen the facts about AT&T, Time Warner merger, Trump says


Translation: never mind.

Donald Trump is backing off from his stated opposition to the AT&T – Time Warner transaction. According to the Axios blog, Trump said in an interview

“I have been on the record in the past of saying it’s too big and we have to keep competition. So, but other than that, I haven’t, you know, I haven’t seen any of the facts, yet. I’m sure that will be presented to me and to the people within government.”

Wall Street’s optimism about a kinder attitude toward big mergers in Washington, DC appears to be a safer bet.

Yuge telecoms companies expect to get yuger


Big money is leaning in the direction of a permissive, rather than populist, Trump presidency, at least when it comes to big telecoms mergers. AT&T CEO Randall Stephenson met with Trump last week. Although both AT&T and Trump’s team insist that the pending acquisition of Time Warner wasn’t discussed, Stephenson continues to project optimism that federal regulators – the justice department’s anti-trust unit and, possibly, the Federal Communications Commission – will allow it to go forward. That’s despite Trump’s initial – and probably knee jerk – public opposition to it.

Now comes word that Verizon wants to buy Comcast or Charter. That’s a much different beast. According to a story in the New York Post, Verizon CEO Lowell McAdam is on the prowl for a big cable company

The CEO told friends at the Consumer Electronics Show in Las Vegas earlier this month that he wants to buy into cable, one source said.

“They need it for 5G,” said a second source, confirming McAdam’s interest.

The most likely targets would be “Charter or Comcast,” the source noted.

“Altice is too small,” the source speculated.

To be sure, Verizon is not in talks with any cable company and may not ever make such a move.

A vertical integration play, like AT&T and Time Warner, is one thing. The Obama administration allowed Comcast to vertically integrate with its acquisition of NBC-Universal. But up until now, there’s been a limit on large scale horizontal combinations – Comcast wasn’t allowed to buy Time Warner Cable (although Charter, a smaller company, was) and neither Sprint nor AT&T gained permission to hook up with T-Mobile.

In addition to the Verizon rumor, there’s renewed speculation about another try at a T-Mobile and Sprint combo, or maybe even a three-way Comcast-Charter-Cox takeover of T-Mobile. The mere fact that the possibility is taken seriously says that Wall Street analysts and big company CEOs – arguably the people who know Trump best – see him as the deal maker he’s always been rather than the anti-establishment candidate he became.

Update: Trump is backing off from his stated opposition to the AT&T-Time Warner transaction. According to the Axios blog, Trump said in an interview

“I have been on the record in the past of saying it’s too big and we have to keep competition. So, but other than that, I haven’t, you know, I haven’t seen any of the facts, yet. I’m sure that will be presented to me and to the people within government.”

Battle for broadband in California’s public housing heats up


Would you like some pay-per-view with that?

The cable industry is continuing its assault on low cost broadband designed for people who live in publicly subsidised housing. Cox Communications is the latest company to ask the California Public Utilities Commission to nullify broadband improvement grants given to public housing operators in their territory. The cable companies object because they also sell broadband service, along with very profitable television packages, to some of these communities.

The problem, though, is that residents aren’t subscribing to those services. The California Emerging Technology Fund also jumped into the dispute, challenging Charter Communications’ and, now, Cox’s false claim that the grants are illegal.

The real problem, according to the CETF brief, is that on average only about a quarter of public housing residents can afford market rate broadband service offered by cable companies and that the discount programs for low income households that they brag about are in fact designed to fail. Cable companies have such a poor track in public housing because, according to CETF

(1) residents cannot afford the market price, typically $30-$65 in the state;
(2) discounted Internet programs have narrow eligibility, such as Comcast Internet Essentials, which is primarily offered only to low-income families with K-12 aged children in the free or reduced national free lunch program;
(3) the application process is difficult for low-income families to navigate to qualify for low–cost broadband offers, establish eligibility, and actually hook up the necessary equipment to provide the service;
(4) low-income households often cannot afford the lack of equipment such as a computing device, printer or wireless router; and
(5) distrust of corporate broadband providers by [public housing] residents, who are concerned about being upsold plans they cannot afford.

The Internet access enabled by the subsidies, which only pay for installation of facilities and not the service itself, is generally slower and more problematic than cable modem service. In other words, residents are being offered a distinctly different choice. Which is what infuriates the California cable industry: it doesn’t want low income people to have any choice at all.

Cable preps to defend its monopoly grip on California’s poor in court


What fun would it be if they had a choice?

Charter Communications is doubling down on the public tantrum it’s throwing over broadband access in public housing. The California Public Utilities Commission runs a program that pays for broadband facilities – but not the service itself – in publicly subsidised communities. The program was created by the legislature three years ago, and was the result of joint efforts by rural and urban interests – $90 million was added to the California Advanced Services Fund, with a net $25 million going toward public housing broadband and the rest into broadband infrastructure projects.

The language of the bill was very clear. The CPUC had the job of setting most of the requirements for public housing subsidies, with only a couple of legislative mandates: back haul had to be available and the property owner couldn’t have turned away competitive providers who might have been interested in installing their own facilities, at their own cost.

Public housing operators began applying for broadband facilities grants, in some cases for properties where commercial providers – cable companies, mostly – were selling Internet access at market rates that residents couldn’t afford. At least not by the rules that govern eligibility for public housing. The CPUC, using the discretion given it by the legislature, said okay.

There was a storm of opposition from cable companies and their lobbying fronts, including a petulant letter from Charter and ethically dubious last minute phone calls to commissioners. But the commission voted to go ahead with the grants, anyway.

Usually, that would be the end of it. But cable company anger over being denied monopoly rights to extract as much money as humanly possible out of the shallow pockets of public housing residents is anything but usual.

Charter filed a request for the commission to reconsider its decision, claiming, incorrectly, that the decision was illegal. The long and lawyerly document is marginally less peevish than Charter’s earlier letter, but doesn’t plough new ground. Absent political arm twisting, there’s no reason for the commission to change its mind.

Why do it then? If Charter wants to challenge public housing broadband subsidies in court, it has to go through the motions of asking for a rehearing. That seems to be where it’s headed.

Broadband gets lowest satisfaction rating of any industry in latest survey


Consumers are a wee bit happier, on the average, with Internet service providers, but that’s not to say happy, according to the latest American Customer Satisfaction Index (ACSI) telecommunications company rankings. Overall, Internet service providers get an average score of 64 (out of 100), up one point from 2016. It is the lowest industry average of all those ranked by ACSI. Subscription TV companies – there’s quite a bit of overlap, of course – are nearly as bad on the average, getting 65 out of 100. By comparison, mobile phone companies get a 71, and consumer electronics manufacturers and full service restaurants share the top spot at 82.

Verizon’s fiber to the home customers are the happiest of all, rating their satisfaction at 73, up five points from last year. From there, though, it is bleak. AT&T drops five points to 64, Comcast is three points better at 59 and Frontier slides five points to the bottom of the ISP rankings at 56. The survey was completed before Frontier took over 2 million Verizon customers in California.

That also means it happened before Charter, Time Warner and Bright House merged together. All three companies are up from last year, scoring 63, 66 and 67 respectively. It’ll be interesting to see how the new combined company rates in 2017. ACSI cautions that “mergers tend to cause customer satisfaction to deteriorate, at least in the short term”.

Consumers are the least satisfied with their ISP’s customer service, choice of plans and delivered speed, including video streaming quality; all those factors rate 69 out of 100 or worse.

Charter cries for exclusive rights in public housing


Charter Communications still doesn’t get it. California law does not grant it ownership of public housing residents. But boiled down, that’s what it’s telling the California Public Utilities Commission.

Three years ago, the California legislature passed a bill that set aside $20 million to pay for installing broadband facilities in public housing properties. Governor Brown signed it into law. And once you trim away all the bureaucratese about defining what, exactly, a public housing operator is, it’s a very simple bill. A public housing operator can apply for the money if it…

…has not denied a right of access to any broadband provider that is willing to connect a broadband network to the facility for which the grant or loan is sought.

That’s it.

Charter is screaming from the rafters that it has installed coax in ten public housing properties. It’s protesting because the property owners did give them “right of access” to serve residents there.

Legally, that’s all that matters. The protest letters it sent to the CPUC amount to a not particularly coherent rant about other broadband subsidy programs and Charter’s sincere intention to come up with service plans that public housing residents can afford…

[The property owner] claims that its residents cannot afford Charter’s service. But Charter publicly committed to offering a low cost broadband service with speeds of 30/4 Mbps at a price of $14.99 per month within twelve months of completion of its acquisition of Time Warner Cable and Bright House Networks. This merger closed May 18th, 2016.

Right. A year from now, Charter will offer a lower – but not lowest – cost broadband package to qualifying households. Except living in public housing isn’t one of the qualification criteria. But if residents can qualify, great, Charter will offer a competitive package. Nothing wrong with that. Unless, apparently, you think you’re entitled to a monopoly.

Charter’s agonised protest letters are nothing more than a tantrum. It has no right to a monopoly in public housing and certainly no justification to demand it.

Charter gets CPUC okay to buy Time Warner, Bright House


It’s all Charter territory now.

Charter Communications will own Time Warner cable systems in southern California and Bright House systems in the San Joaquin Valley and become the state’s largest cable company, following yesterday’s unanimous approval of the deal by the California Public Utilities Commission.

Commission president Michael Picker – technically, the commissioner responsible for the decision text – made one change to the revised draft prepared by an administrative law judge. He added a three year limit on Charter’s obligation to “comply with all the terms and conditions of the Federal Communications Commission’s Open Internet Order, regardless of the outcome of any legal challenge”. The amendment corrected what appeared to be a drafting error – as originally written, Charter would have to abide by those rules forever and ever, at least in California, regardless of what courts or the FCC might decide in the future.

Enforceability of the decision was a key point of debate. Commissioner Catherine Sandoval suggested modifying the decision to allow a longer list of organisations to monitor compliance and bring action against Charter at the CPUC if commitments aren’t kept. It’s an important point because Charter signed agreements with a number of organisations – including my client, the City of Gonzales – detailing obligations over and above what the CPUC and the FCC imposed. After much discussion between commissioners and staff attorneys, everyone agreed that the draft language allowed ample opportunities for those involved to seek redress, and no changes were made.

The most telling point was made by commissioner Carla Peterman, who managed last year’s acrimonious review of this deal’s failed predecessor, the attempt by Comcast to likewise buy Time Warner and Bright House’s Californian systems and roll in Charter’s systems here. She compared Charter’s willingness to negotiate with Comcast’s nasty smash mouth tactics and refusal to deal with anyone, least of all the CPUC. Okay, I said that, she didn’t. But she did tactfully contrast the two proceedings to Charter’s advantage, and I’ll just write – if not read – between the lines.

With the CPUC’s vote, the regulatory path to closing the deal is clear. Then, the work begins.