The Federal Communications Commission agreed with the California Public Utilities Commission today and approved Altice’s purchase of a controlling interest in Suddenlink. Altice is a major European telecoms company and Suddenlink is its first acquisition of a U.S. cable company. Except for provisions regarding law enforcement and spy agency access to Suddenlink’s network, the FCC imposed no conditions on the deal.
Not a big footprint in California.
UPDATE: the day after the CPUC approved the deal, the FCC did likewise, adding a condition requiring Altice to guarantee law enforcement and spy agency access to its network.
Altice has permission to take over control of Suddenlink’s cable systems in California. Without discussion, the California Public Utilities Commission approved the transaction at its meeting on Thursday. According to the decision…
The proposed acquisition occurs entirely at the parent ownership level and the Applicants indicate that the transaction will be “seamless and transparent to consumers in terms of current services, rates, terms and conditions.”17 Cebridge will continue to operate as Suddenlink under its current Commission authority and will continue to provide the services it currently provides to its existing customer base…
We find that Altice has sufficient managerial and technical expertise to operate Cebridge and that its acquisition by Altice will permit Cebridge and Cequel to become stronger competitors in California’s telecommunications marketplace. This will be favorable for the public and consumers, as well as existing customers.
No objections were filed with the CPUC, although the Humboldt County board of supervisors did send a protest letter to the Federal Communications Commission, which is still considering the deal. The central issue is a dispute over public access television fees, which is really a dispute between local governments and the state legislature: when statewide video franchises were established, public access fees were set at 1% of revenue, while local governments in Humboldt want 3%. Good luck with that.
Suddenlink will be the first U.S. acquisition for Altice, which is a force to be reckoned with in the European cable industry. It’s moving relatively smoothly through the regulatory review process, largely because it’s not a huge transaction. Altice’s second deal, to buy Cablevision, will be more contentious. But that doesn’t directly involve California, since Cablevision doesn’t operate here.
CPUC decision approving Altice purchase of control of Suddenlink, 17 December 2015
FCC decision approving Altice purchase of control of Suddenlink, 18 December 2015
National security agreement between Altice and federal justice department, 11 December 2015
Petition from federal justice department requesting approval, 11 December 2015
It’s gotta at least be in the ballpark.
The New York attorney general wants Time Warner, Cablevision and Verizon to explain how they manage they manage the Internet connections that they sell to consumers, and how they do business among themselves and with other telecommunications companies. Letters sent to the three companies point to the disconnect between what’s advertised, what’s sold and what’s actually delivered.
The letter sent to Time Warner Cable is typical (links to the others are below)…
This Office is concerned that, for reasons substantially within TWC’s control, consumers may not be experiencing the speeds advertised. We are also concerned that those paying for premium options (“Ultimate 300” and “Extreme”) may not experience proportional increases in experienced speeds.
Our concerns can be placed in two groups. First, that the speeds made available over the last-mile (between the home and cable headend) may deviate far enough from the speeds advertised to render the advertising deceptive. Second, that the impact of technical and business decisions made at the point of interconnection between TWC and other networks may so affect end-to-end throughput that the speeds are not what was promised. In this respect, we are specifically concerned about disruptions to the consumer experience caused by interconnection disputes, and also the possibility that interconnection arrangements may in some instances render irrelevant any benefit of paying for a “premium” option.
The New York AG wants the companies to take responsibility for a subscriber’s end to end connection, in other words middle mile bandwidth, peering agreements and such are under their control too, little different from the initial link from a subscriber’s home to the local office.
But just forcing cable companies to clean up weasel worded ads and terms of service would be a huge step forward. When a subscriber – home or business – buys service advertised at, say, up to 100 Mbps, there should be a reasonable expectation of getting that most of that speed most of the time.
No comments from the companies as yet.
Would you like pommes frites with that?
Keep prices U.S. high and expenses European low. That’s the plan that Altice has for Suddenlink and Cablevision, if its allowed to buy the two broadband companies. At a New York conference last week, Altice chairman Patrick Drahi said he likes Cablevision’s average monthly revenue per subscriber – $159 – but not its cost structure, which includes hundreds of executives making more than $300,000 a year and ageing infrastructure that’s costly to maintain. According to a story in Multichannel News…
Drahi said that he sees opportunity to cut operating costs by improving the network – pushing fiber into the home and eliminating amplifiers and other electronic equipment. Drahi continually compared Cablevision’s network to Altice’s French Numericable unit, adding that despite Cablevision’s size and market density, its costs are higher.
But chopping suits and adding fiber won’t be enough. Multichannel News quotes analyst Craig Moffett as saying subscribers will feel the pinch too…
“Cost reductions like those won’t just mean cutting SG&A. It will mean slashing customer service; repair and maintenance, and sales and marketing (specifically, channel mix optimization, and back-office upgrades).”
Altice’s acquisition spree isn’t over, according to Drahi, who said he’s interested in buying any U.S. cable system available. As it stands now, though, Suddenlink and Cablevision make an odd couple, with the latter heavily concentrated in the New York metro area and the former lightly spread over scattered, mostly rural markets, including some in California.
So far, Altice’s purchase of a controlling stake in Suddenlink has met little opposition in California, where it is still under review. That could change, though, as post-takeover plans become clearer.
How the game is played.
Altice SA announced an agreement to buy Cablevision for $17.7 billion and assumption of existing debt yesterday. That follows Altice’s ongoing bid to buy a controlling stake in Suddenlink. If both deals are approved and Charter is allowed to take over Time Warner and Bright House, then Altice would become the fourth largest cable company in the U.S., and the seventh largest pay TV company overall, with about 4 million subscribers. AT&T/DirecTv, Comcast, new Charter and DISH would be bigger. Verizon FiOS and Cox would be too, but not by as much. Cox would be a few hundred thousand subs ahead of Altice and Verizon would have about 1.5 million more.
This latest deal wouldn’t directly affect California – Cablevision’s systems are on the east coast – but the indirect implications could prove interesting.
Altice’s takeover of Suddenlink hasn’t generated any significant opposition while the California Public Utilities Commission has been reviewing it. That’s not a surprise: as a standalone proposition, it wouldn’t change the competitive landscape for broadband providers. But package Suddenlink and Cablevision together, and the national market would become less competitive. It also impacts the competitive assessment of the Charter deals. Both the CPUC and the Federal Communications Commission will be considering whether to allow the top seven companies to recombine into the top four.
If that happened, the broadband market nationally and in California would become much more concentrated, which raises the same kind of concerns that killed Comcast’s attempt to swallow Time Warner and Charter earlier this year.