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NY Post: Charter Wants to Buy Cox Communications; Alaska’s GCI Will Eventually Become Charter

Three unnamed sources told the New York Post Charter Communications is seeking to acquire privately held Cox Communications, despite repeated assertions from the family owned Cox it is not for sale.

“Tom wants to buy Cox,” said one “highly placed cable source.” Another confirmed the news, but notes Charter has not yet approached Cox with a deal. “If they’re going to sell it to anyone, they’re going to sell it to an old cable guy.”

Cox is America’s third-largest cable company with 6.2 million subscribers. A combination with Charter would still leave Comcast as the nation’s largest cable company. Wall Street has pushed cable companies towards further consolidation, and if Charter doesn’t approach Cox, it is highly likely Altice USA will.

Cox told the newspaper all of this attention is unwanted.

“Cox has been very clear and consistent that we are not for sale and, in fact, we’re aggressively investing in our network, products and strategic partnerships and investments of our own,” Cox spokesman Todd Smith told The Post on Wednesday.

But some cable watchers expect Cox may not want to stay in the family if the price is right. In April, Alex Taylor, the great-grandson of founder James Cox was named Cox’s next CEO, starting Jan. 1, 2018.

Charter may also eventually grow by at least 100,000 new subscribers as John Malone’s Liberty Interactive’s ownership of Alaska-based GCI might not last long. Cable watchers predict Malone will flip GCI to Charter Communications after the deal closes, which would result in a likely quick rebrand of GCI as Charter/Spectrum.

Tennessee Electric Co-Op Threatens to Rip Comcast’s Wires Off Its Poles Next Week

If Comcast doesn’t send a check for $176,000 to cover the last three years of pole attachment fees owed to the Southwest Tennessee Electric Membership Corporation (STEMC), the electric co-op is prepared to rip Comcast’s lines right off its poles.

Comcast, under a license agreement with the utility, pays a small fee to the utility to place its infrastructure on its utility poles. Comcast has not paid since June 2014, and if the cable giant doesn’t send a check by June 28, STEMC will remove Comcast’s attachments from their poles, knocking out cable service for thousands of customers.

“We’ve been going back and forth with them for going on three years now trying to get payment out of them,” said STEMC chief financial officer Scott Sims.

A notice on STEMC’s website explains Comcast’s foot-dragging isn’t fair to the cooperative:

We regret that some customers may lose their Comcast service.  However, the full cost and maintenance of these utility poles are borne by all members of STEMC, and we cannot allow STEMC members to subsidize Comcast’s services.  We are hopeful that Comcast will make payment prior to the deadline and avoid the need to remove their cable attachments.

Many residents are taking the side of the utility, pointing out Comcast would have shut off their cable service long before Comcast’s three years of non-payment.

A Comcast representative told WREG-TV that STEMC started billing Comcast double what they used to, claiming to have discovered previously unbilled pole attachments. Comcast wanted evidence of these attachments from STEMC, despite the fact they were capable of counting their own cable subscribers in the area, and refused to make a payment until this information was provided. Comcast claims it finally got evidence this month.

“Since receiving that information, we have completed our own audit and are taking the appropriate next steps to arrange for payment in the correct amount,” Comcast said in a released statement. “We look forward to working with STEMC to resolve this issue quickly and ensure that our mutual customers’ services are not disrupted.”

Wall Street Hissyfit: Raise Broadband Prices to $90/Month Immediately! (Or Else)

If the average customer isn’t paying $90 a month for broadband service, they are paying too little and that needs to stop.

That is the view of persistent rate hike advocate Jonathan Chaplin, a Wall Street analyst with New Street Research, who has advocated for sweeping broadband rate increases for years.

“We have argued that broadband is underpriced, given that pricing has barely increased over the past decade while broadband utility has exploded,” Chaplin wrote in a note to investors. “Our analysis suggested a ‘utility-adjusted’ ARPU target of ~$90. Comcast recently increased standalone broadband to $90 with a modem, paving the way for faster ARPU growth as the mix shifts in favor of broadband-only households. Charter will likely follow, once they are through the integration of Time Warner Cable.”

Companies that fail to raise prices risk being downgraded by analysts with views like these, which can have a direct impact on a stock’s share price and the executive compensation and bonus packages that are often tied to the company’s performance.

But there is a dilemma and disagreement between some cable industry analysts about how much companies can charge their customers. Companies like Cable ONE have been aggressively raising broadband prices to unprecedented levels in some of the poorest communities in the country, which worries fellow Wall Street analyst Craig Moffett from MoffettNathanson LLC.

“Never mind that the per capita income in Cable ONE’s footprint is the lowest (by far) of the companies we [Moffett’s firm] cover, or that the percentage of customers living below the poverty line is the highest (also by far),” Moffett told his investor subscribers. “What matters is that there is very little competition in Cable ONE’s footprint. If you want high-speed broadband, where else are you going to go? The unspoken fear among their larger peers is that over-reliance on broadband pricing invites regulatory intervention, not just for Cable ONE, but for everyone.”

Chaplin thinks the risk from gouging broadband customers is next to zero. With cable TV becoming less profitable every day, all the big profits that can be made will be made from broadband, where cable operators often enjoy a monopoly on high-speed service.

According to Chaplin, if customers value internet access, they will pay the higher prices cable companies charge. So what are companies waiting for? Raise those prices!

Charter Forced to Set Aside $13 Million for Failing to Meet Merger Commitments to New York State

The New York State Department of Public Service today announced it had reached a potential settlement with Charter Communications after the company failed to meet its rural broadband expansion obligation outlined in last year’s approval of its acquisition of Time Warner Cable.

“The [Public Service] Commission conditioned its approval of the merger on Charter’s agreement to undertake several types of investments and other activities,” said Department interim CEO Gregg C. Sayre. “While Charter is delivering on many of them, it failed to expand the reach of its network to un-served and under-served communities and commercial customers in the time allotted.”

While Charter’s merger with Time Warner Cable and Bright House Networks won rubber-stamp approval in almost every state where it operates, New York regulators required the merger to directly benefit the state’s consumers. The company must upgrade customers to 100Mbps service by the end of 2018 and offer at least 300Mbps statewide by the end of 2019. But it must also expand its cable network to reach 145,000 unserved and underserved homes and businesses within the next four years. The merger approval agreement set a schedule to begin network expansion as quickly as possible.

Charter failed to achieve its obligations, only reaching 15,164 of the 36,250 customers it was required to reach one year after the merger deal was approved.

As a result, regulators have penalized Charter, requiring it to pay an extra $1 million in grants for computer equipment and internet access targeting low-income New York residents and set aside $12 million in escrow as a security pledge to meet all of its network expansion commitments going forward. The company now agrees it will complete its build out obligation in six increments of 21,646 customers through May 18, 2020. Charter will forfeit a portion of the $12 million each time it misses a deadline. The amount lost will depend on the percentage of the target missed and whether the company demonstrates it has completed necessary tasks to expand service. If the company manages to meet its deadlines going forward, it has the right to earn back some or all of its security pledge.

Charter has also agreed to develop a communications plan within 60 days of the settlement’s execution to inform New Yorkers whether they are part of the build-out plan.

The settlement offer will issued for public comment, and will require final Commission approval to take effect.

Wall Street’s Sprint/T-Mobile Merger Drum Circle

Wall Street wants a deal between T-Mobile and Sprint rich with fees and “synergies,” but nobody counting the money cares whether consumers will actually get better service or lower prices as a result of another wireless industry merger.

Recently, more players have entered the T-Mo/Sprint Drum Circle, seeming in favor of the merger of America’s third and fourth largest wireless carriers. Moody’s Investor Service wouldn’t go as far as Sprint CEO Marcelo Claure in playing up the deal’s “synergy savings” won from cutting duplicate costs (especially jobs) after the merger, but was willing to say the combination of the two companies could cut their combined costs by $3 billion or more annually. Based on earlier mergers, most savings would come from eliminating redundant cell sites, winning better volume pricing on handsets, dramatic cuts in employees and back office operations, and spectrum sharing.

“Imagine if you had a supercharged maverick now going after AT&T and Verizon to stop this duopoly,” Claure told an audience in Miami.

Wells Fargo called Sprint’s large spectrum holdings in the 2.5GHz band undervalued, and could be an important part of any transaction.

Sprint has more high-band spectrum than any other carrier in the U.S. Much maligned for its inability to penetrate well indoors and for its reduced coverage area, most carriers have not prioritized use of these frequencies. But forthcoming 5G networks, likely to offer a wireless alternative to wired home broadband, will dominate high frequency spectrum, leaving Sprint in excellent condition to participate in the 5G splash yet to come.

Wall Street banks can expect a small fortune in fees advising both companies on a merger deal and to assist in arranging its financing. Any deal will likely be worth more than the $39 billion AT&T was willing to pay for T-Mobile back in 2011. With that kind of money at stake, any merger announcement will likely be followed by millions in spending to lobby for its approval. Washington regulators ultimately rejected AT&T’s 2011 buyout, arguing it was anti-competitive. Reducing the U.S. marketplace to three national cellular networks is likely to again raise concerns that reduced competition will lead to higher prices.

A merger is also likely to be disruptive to customers, particularly because Sprint and T-Mobile run very different operations and systems. Moody’s predicted it could take up to five years for any merger to fully consummate, giving AT&T and Verizon considerable lead time to bolster their networks and offerings. Moody’s notes Sprint also has a history with bad merger deals, notably its acquisition of Nextel, which proved to be a distracting nightmare.

“If [another merger] stalls or is derailed by operational missteps, the downside is catastrophic,” Moody’s noted.

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  • Me: well well well..cutting all their services..getting antenna..all else is on my cell...
  • Matthew H Mosher: Sure, but it's pretty easy to crap on NY when my wife a d I pays these ridiculous tax rates so that MY KIDS can't get broadband. Meanwhile it runs fib...
  • Lee: It would be interesting to see the age cohort distribution of stock owners this analyst champions. I suspect the majority are not in the 20 to 30 rang...
  • Josh: Ugh. If I used Comcast for TV I'd be using it with my TiVo...never with their box. And I always figured the "Xfinity" thing was just to trick people...
  • Josh: LOL! Sounds like basically "we're a huge corporation, so you should do this for us for free". At least hopefully they'll pay now... Of course this ...
  • FredH: Like cable company CEOs need to be told to raise prices by some a-hole Wall Street analyst....
  • Roger W: Go ahead. Raise it to $90. I dare you. I guarantee you it will be the last day I subscribe to cable service. That'll be your loss....
  • FredH: Charter/Spectrum is rapidly catching Comcast in the "race to the bottom"....
  • Phillip Dampier: Yeah, because Charter is hurting so much it cannot afford to extend service itself so it wants welfare to do it. Keep in mind most techs have no clue...
  • Matthew H Mosher: Guaranteed. "BROADBAND FOR ALL (that matter)"...
  • Matthew H Mosher: I spoke with a Time Warner/Spectrum tech today, a very nice guy by the way. (Some background - I am the only house on my road without cable) I had s...
  • Matthew H Mosher: Give me a minute while I pick my jaw up off the floor....

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