AT&T’s video businesses bled out in the second quarter of 2019, losing nearly a million net subscribers. Its two old school linear platforms, the DirecTv satellite service and the DSL-based Uverse service, hemorrhaged 778,000 subscribers while its DirecTv Now streaming platform took a 168,000 subscriber hit.
It’s a similar, if less gruesome, story for the other three major U.S. pay TV companies. DISH, which is positioning itself for a run at the mobile telecoms sector, lost 79,000 satellite subscribers but picked up 48,000 Sling streaming customers, for a net loss of 31,000 monthly accounts. That’s better than expected – analysts had predicted a net loss of 252,000 subs – and better than the two big cable companies.
Comcast lost 224,000 video subs, and Charter Communications had a net loss of 141,000, with residential cancellation offset a bit by a gain in business accounts.
All up, the major legacy pay TV companies lost 1.3 million subscribers between April and June of 2019. The second quarter of the year is traditionally a tough time for the subscription video business, as people take advantage of summer to move from one home to another, or to just take off and shut down utilities for a few weeks.
It was especially ugly for AT&T, though. It lost more than twice as many subscribers as the other three combined. It comes during a period when AT&T is trying to enter the video and motion picture business in a big way, with its acquisition of HBO, the Warner Bros. studios and the Turner networks. So far, it’s misplaying its hand. Grafting businesses driven by artistic and marketing creativity onto a monopoly model telco is a losing proposition.
It’s going to take more than an uninspired rebranding to make AT&T pretty again.
Charter Communications won’t be thrown out of the State of New York. The Public Services Commission voted last week to accept a settlement that ends a dispute over whether Charter is meeting the obligations it accepted when its acquisition of Time Warner Cable systems was approved in 2016. It ends the threat that Charter could lose its franchise to operate cable systems in New York because, the commission said, Charter was “just lining its pockets”.
One of the points of contention was whether Charter could count addresses in New York City towards its commitment to build out broadband service to under and unserved communities. The New York PSC said it couldn’t, because there’s no shortage of broadband there. The settlement means that Charter will build out its footprint where it’s needed, according to the order adopted by the New York PSC last Thursday…
The 2019 Settlement Agreement…requires, among other things, that Charter continue to invest in network expansion to bring high speed broadband to 145,000 unserved and underserved addresses entirely in Upstate New York by September 30, 2021; that Charter provide $12 million in additional funds to further expand broadband coverage in Upstate New York beyond these 145,000 addresses; and, that Charter meet enforceable interim milestones and provide monthly reports to track its progress. The 2019 Settlement Agreement, will, in short, ensure that Charter’s network expansion only takes place in areas of Upstate New York where for the most part wireline broadband does not currently exist.
A similar dispute continues in California. Charter was likewise obligated to upgrade service in its Californian territory – old and new – by the California Public Utilities Commission, by the end of this year. The CPUC’s public advocates office (PAO) has been trying to verify that Charter is on track to meet that commitment, but hasn’t been able to get the information it needed to do so. In April, Charter was ordered to hand over the requested data “with substantive, complete, and accurate responses”. No word yet on whether they complied, but the fact that the PAO has scheduled a meeting with outgoing CPUC president Michael Picker’s telecoms advisors to discuss the case might be read as indicating that all is not well.
Broadband infrastructure in South Lake Tahoe, and the Tahoe basin in general, is poor. Based on the latest broadband availability information released by the California Public Utilities Commission, no city or unincorporated community around Lake Tahoe gets an infrastructure grade of better than F+.
In a presentation to the South Lake Tahoe city council, I discussed how the city ended up with an F on its broadband report card. The two primary wireline broadband providers are AT&T and Charter Communications, and their service reports clearly show that, as of 31 December 2017, neither had upgraded their facilities to the Californian average and were unable to deliver even a minimum acceptable speed level to consumers.
Except for a handful of neighborhoods where it still relies on ageing 1990s DSL equipment, AT&T is stuck in the mid–2000s with ADSL facilities that top out at 18 Mbps download and 768 Kbps upload speeds. That compares to the VDSL infrastructure that AT&T uses to offer 100 Mbps down/20 Mbps up service – the minimum acceptable level determined by research conducted by the Monterey Bay Economic Partnership and the Central Coast Broadband Consortium – to more densely populated areas of California, and to the 30 Mbps download/5 Mbps upload benchmark it exceeds (at least as advertised) for the majority of Californians in its service area.
Charter’s infrastructure in South Lake Tahoe supports faster service (at least as advertised) than AT&T, but it still lags far behind Comcast’s claimed DOCSIS 3.1 upgrades. Its 100 Mbps download/5 Mbps upload speeds are slower than what it offers in many other California communities, and doesn’t meet the MBEP/CCBC minimum or the Californian cable average of 400 Mbps download/20 Mbps upload speed. Or the 300 Mbps download capability that the CPUC directed Charter to offer in most of its Californian service area by the end of this year.
That’s all water under the bridge now. The tentative settlement, which still has to be formally approved by the NYPSC, walks back the invective and sets out clearer rules for how Charter’s build out to 145,000 under and unserved homes will proceed. New broadband customers in New York City won’t count, and there are provisions that would seem to force Charter to build new lines in more remote communities.
The settlement also sets 100 Mbps as the minimum broadband speed that a home should have access to…
A residential housing unit or business is eligible to count as one of the required Total Passings if it is located outside of the boundaries of the City of New York and is not passed, served, or capable of being served (by either a standard or non-standard installation), by pre-existing network from Charter or any other provider capable of delivering broadband speeds of 100 Mbps or higher.
Charter would also give $6,000,000 to the State of New York, to be bundled into an existing subsidy program that pays for broadband upgrades. First dibs on that money will go to Internet service providers that can deliver 100 Mbps or better download speeds.
I assisted the City of Gonzales with its successful effort asking the CPUC to force Charter to upgrade, also during the Time Warner review. I am not a disinterested commentator. Take it for what it’s worth.
Charter is asking for $1.7 million to build out to the 467 homes in the four project areas. Per household costs range from a $1,500 to $14,000. Two of the projects are for mobile home parks, one in Oxnard in Ventura County and the other in Moreno Valley in Riverside County. Another project would extend Charter’s existing system to a street in the San Bernardino County community of Highland, and the fourth is for twelve miles of “new fiber and coax plant” in Perris, in Riverside County. The publicly released project summaries don’t specify what kind of equipment Charter would be using, but the claimed maximum speed level – 940 Mbps download/35 Mbps upload – is consistent with DOCSIS 3.1 technology.
This is the first time that a major cable company has applied for CASF subsidies. A small cable company, CalNeva, received a $511,000 grant in 2017, but up until now the big Californian players – Charter, Comcast, Cox and Suddenlink – have refused to participate. They’ve been reluctant to expose themselves to the regulatory oversight and public benefit requirements that California Public Utilities Commission programs entail.
Those requirements are still too much for Charter, though. It’s asking the CPUC to waive a two year price cap and ban on installation fees that’s standard for service offered via CASF-funded facilities. It doesn’t offer any public policy justification for the exemption, saying only it would have to establish “a separate billing operation” for the subsidised homes and offering the counterintuitive argument that “consumers will be protected from rate increases and benefit from promotions by having the same rates as those available to all of Charter’s California customers”.
That logic is, well, let’s say odd for several reasons. There’s nothing preventing Charter, or any other CASF recipient, from offering customers lower prices. And exposing subsidised customers to the same price hikes that “all of Charter’s California customers” face would hardly be protection from rate increases.
It’s also not obvious that Charter would have to build a new billing system. It’s common practice in the cable and satellite industry to sign contracts with, say, apartment complexes and homeowners associations that include special pricing for particular services. It’s not exactly the same thing – such services are usually billed on a bulk basis – but typically customers also have individual accounts for market rate options.
I’ve never worked with Charter on that kind of arrangement, but I have with others, including Comcast. Billing systems are flexible enough to handle those kinds of exceptions, not to mention the complex and frequently changing mix of promotional rates, incentives to prevent disconnects and other special offers. The technical solutions aren’t necessarily elegant, but it’s not rocket science either. In my experience, the bigger problem is clueless or commission-hungry customer service reps who don’t, or won’t, pay attention to what the billing system is telling them.
Charter deserves credit for at least trying to work with CASF and the CPUC, even if a price protection waiver is “a precondition of its participation in the program”. It’s not easy finding service providers willing to take on the job of building out infrastructure in unserved and often remote communities, with or without taxpayer subsidies. But it’s also reasonable for taxpayer money to come with some strings attached.
Among other things, the commission required Charter to upgrade all of its Californian systems – new and old – to 300 Mbps download capability by the end of this year. The PAO hasn’t been able to verify compliance because the information it received “provided no explanation or supporting data to show how Charter identified or quantified the progress it claimed to have achieved”.
Requested census block level broadband deployment information similar to that provided by Charter to the Public Advocates Office during the proceeding [to approve the Time Warner/Bright House acquisition]…
And then made…
Additional requests for Charter to explain how it calculated the household percentages it provided in its December 2017 progress report letter, and to provide the data Charter used to perform the calculations.
Charter refused. So the PAO asked Bemesderfer to intervene. Despite Charter’s objection, yesterday’s ruling directs Charter to respond to the data requests “with substantive, complete, and accurate responses” by a week from Friday.
The details of the PAO’s data requests and Charter’s response are being treated as confidential. According to the commission’s 2016 decision, Charter must “offer broadband Internet service with speeds of at least 300 Mbps download” by 31 December 2019 to all of the broadband-capable homes in its new, expanded footprint.
I hope the PAO is asking for performance data as well as marketing data. It’s one thing to “offer” service, it’s quite another to deliver it.
Charter Communications claims it’s providing near-gigabit level broadband service in virtually all of its Californian territory. Well, some of its Californian territory: in a filing with the California Public Utilities Commission, in opposition to a formal vetting of its claims that it is complying with service upgrade conditions imposed by the CPUC when it received approval to buy Time Warner cable systems, Charter says “it is already making service available at 940 Mbps to over 99% of the relevant households passed as of the end of year 2018”.
The filing doesn’t define “relevant” although it’s easy to assume it means all Californian households that had access to broadband service at the time of the merger. Maybe that’s because that’s what it means. Or maybe because Charter is hoping that commissioners are sloppy readers and won’t notice the weasel word.
It is also to be hoped that commissioners will take notice of another filing by Charter earlier this month, in which it promised to finish analog to digital upgrades in several California communities later this year. That’s a direct admission that it hasn’t met another CPUC imposed condition that required those upgrades to be completed by last November. There’s been no public announcement, by Charter or the CPUC, that an extension was requested or granted, although I suppose it’s possible some kind of understanding was reached behind closed doors. Or maybe Charter is hoping that commissioners won’t notice the disconnect.
I know from personal experience that Charter’s first impulse when asked to document compliance is to withhold as much information as possible, offering only as much as you might otherwise glean from their advertisements and other public statements. The threat or reality of CPUC action is an effective way of holding them accountable for a promise, and for holding their attention while they make good on it.
The CPUC should not take self-interested and unverified statements written by Charter’s lawyers at face value. Nor should it allow Charter to hide everything behind a blanket claim of confidentiality. Now is a good time to take a hard, quantitative and verified look at how – whether – Charter has met all of the statewide conditions the CPUC imposed on it in 2016. The matter should be reopened, investigated and, absent a compelling reason to suppress specific information, the results and underlying data should be made public.
I assisted the City of Gonzales with its successful effort at the CPUC to force Charter to upgrade. I am not a disinterested commentator. Take it for what it’s worth.
On September 12 and 13, 2018, the Public Advocates Office explained to Charter that the Public Advocates Office’s analysis indicated that a much lower percentage of households had access to increased (higher than 300 Mbps) download speeds than the level Charter reported in its December 2017 letter. To more accurately verify the level of progress Charter has made, Charter must provide by census block, how many households Charter passes and the broadband speeds available to those households…
The Public Advocates Office objected to Charter’s condition that any information it provides must be used exclusively to verify progress report, because it inappropriately seeks to restrict how the information provided by Charter would be used by the Public Advocates Office.
Charter has to upgrade all of its Californian broadband systems to 300 Mbps download speeds by the end of next year, and it was supposed to convert all of its TV-only analog systems to full digital capability by last month. Those legacy analog systems were in lower income, rural communities in Modoc and Monterey counties, and the San Joaquin Valley.
California is the second state to confront Charter’s regulatory performance and upgrade claims. This past summer, the State of New York moved to revoke Charter’s permission to operate there, because of its “repeated failures to meet deadlines”, its “attempts to skirt obligations to serve rural communities, and its ”purposeful obfuscation of its performance and compliance obligations".
The PAO’s demand for accountability is necessary. Charter claims to be meeting its commitments, but confirmation is difficult. The CPUC also has obligations: it’s supposed to ensure that its directives are followed. Friday’s move to keep Charter honest is a welcome Christmas present for all Californians.
I assisted the City of Gonzales with its successful effort at the CPUC to force Charter to upgrade. I am not a disinterested commentator. Take it for what it’s worth.
The California Public Utilities Commission imposed a long list of obligations on Charter Communications, when it granted permission for the purchase of Californian cable systems belonging to Time Warner and Bright House in 2016. Some of those requirements mirror the conditions that the New York Public Services Commission attached to its approval of the deal.
Unlike the NYPSC, however, the CPUC has not demanded public accountability from Charter. New York regulators nipped at Charter’s heels since the acquisition closed, and then revoked permission and ordered Charter to reverse the sale and give up its New York markets because “the company was not interested in being a good corporate citizen”.
Typically, the CPUC does not take an active role in enforcing conditions attached to telecoms deals. The job of being the cop on the beat is often left up to outside organisations. If you want a particularly vivid example of how that approach does or doesn’t work, take a look at the mess surrounding Frontier Communications’ purchase of Verizon’s wireline phone systems in California in 2016.
Although it’s arguably right to expect outside parties to take responsibility for enforcing their own contracts, there’s little reason to think they’ll take on the additional work of policing the CPUC’s own decisions. For example, when it approved the Time Warner purchase, the CPUC gave Charter two and a half years – until November 2018 – to convert its legacy TV-only analog systems to digital service…
Within 30 months of the closing of the Transaction, New Charter shall convert all households in its California service territory to an all-digital platform with download speeds of not less than 60 Mbps…
On December 31, 2016 and every year thereafter until December 31, 2019 New Charter shall submit a progress report to the Commission and [the CPUC’s office of ratepayer advocates] identifying progress made.
In theory, the CPUC has some idea already as to whether or not Charter is performing. It’ll be a relatively straight forward process to confirm that all of Charter’s analog systems in the San Joaquin Valley, and in Modoc and Monterey counties, have been upgraded to digital service come November. The CPUC should be as proactive in enforcing its own decisions and pursuing the public interest as its New York colleagues.
The New York state public service commission started the process of unwinding Charter Communications’ purchase of Time Warner Cable systems, in a decision issued on 27 July 2018. The NYPSC says Charter is evading its responsibility to extend its infrastructure and upgrade its service, particularly in rural areas. Those obligations were imposed when the NYPSC gave its blessing to the acquisition.
The company’s repeated failures to meet deadlines;
Charter’s attempts to skirt obligations to serve rural communities;
Unsafe practices in the field;
Its failure to fully commit to its obligations under the 2016 merger agreement; and
The company’s purposeful obfuscation of its performance and compliance obligations to the Commission and its customers.
These recurring failures led the Commission to the broader conclusion that the company was not interested in being a good corporate citizen and that the Commission could no longer in good faith and conscience allow it to operate in New York. Today’s actions are meant to address Charter’s failings and to ensure New York has a partner interested in the public good, not just lining its pockets.
In the company’s second-quarter earnings call…Charter Communications Inc. Chairman & CEO Tom Rutledge made it clear that Charter has no intention of obeying the state Public Service’s Commission order to exit the state because of its allegedly repeated failures to meet its cable buildout and broadband speed commitments. Instead, Rutledge said Charter will try to resolve the conflict with state regulators and, if necessary, will fight the PSC’s actions in court.
“Hopefully we can work it out,” Rutledge said in response to an analyst’s question on the call, noting that it will likely take some time. “But, if necessary, we’ll litigate. We believe we’re in the right.”
It’s just the beginning of the story. The end is months, if not years, away.