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Altice Returns: Patrick Drahi Wants Charter/Spectrum to Be His, Preparing an Offer

Patrick Drahi, Altice, and his friends at Goldman Sachs are depicted as working together to make Altice’s acquisition dreams come true.

Patrick Drahi rarely gives up on his dreams. His latest is to be America’s biggest cable magnate, and there are signs he is laying the groundwork to make that dream come true.

CNBC and some French media outlets report Drahi’s Altice NV and Altice USA are assembling their European and North American financiers, attorneys, and dealmakers to potentially make an offer to acquire Charter Communications. If successful, Altice would leapfrog to the largest cable operator in the United States after combining its Cablevision and Suddenlink systems with Charter’s own legacy systems and those it acquired from Time Warner Cable and Bright House Networks.

Any succcessful deal would likely require an offer of $500 a share for Charter stock, which would make the company worth about $200 billion. Because Altice is dwarfed by Charter, it is unlikely Drahi will be able to raise enough cash on his own to make a deal, and Altice is already mired in debt from its ongoing aggressive acquisitions. Drahi’s biggest competitor for Charter is expected to be Japan’s SoftBank, which has shown an interest in acquiring the cable operator to combine with its wireless carrier Sprint.

Altice isn’t likely to encounter the regulatory hurdles that have caused other colossal cable deals like Comcast’s attempt to buy Time Warner Cable to collapse over regulator opposition.  Drahi’s involvement in U.S. cable has been limited to acquisitions of two smaller players – Cablevision and Suddenlink.

Drahi’s strongest arguments to sell investors on the deal are likely to surround his well-known obsession with draconian cost-cutting at his acquired companies. Drahi would certainly offer investors billions in deal synergies and savings, accomplished through dramatic layoffs, scrutinizing costs right down to replacement coffee makers for the break room and copy paper for the office, and sweeping cutbacks on employee and vendor perks. Drahi has also taken a strong stand against Hollywood studios and cable programmers that seek double-digit rate increases for cable programming. In Europe, Drahi is known for terminating costly contracts with programmers and launching alternative channels Altice owns and operates to replace them.

Drahi is also likely to sell regulators on his current plans to transform cable in the United States away from coaxial cable and towards fiber optics straight through to the home. Drahi has already offered to wire all of France with fiber optics and is presently embarking on a fiber upgrade for his Cablevision systems in New Jersey, New York, and Connecticut. But Drahi’s ambitious fiber plans have been met with suspicion in France where some believe Drahi is all talk and no spending.

He has promised the Macron government he will spend $17.6 billion on building an Altice-owned fiber broadband network in France by 2025 without any taxpayer subsidies. While that sounds laudable, it would mean Altice’s SFR would pull out of the government’s national fiber strategy that depends on different telecom companies building out fiber in different regions of the country.

Drahi is threatening to become a spoiler because before he acquired SFR, the former management cut a deal with Orange – France’s largest telecom company, to jointly build a fiber network for 14 million French households in smaller towns and suburbs. Orange would build and own 80% of the territory, SFR 20%. But because SFR needs access to that fiber network for its own wired and wireless broadband and television services, it will have to pay rental fees to Orange to use the network in most of the territory. Drahi instead wants a 50-50 ownership split to cut costs and Orange has said no. Altice’s plans for its own alternative fiber network would allow it to bypass the Orange-owned network and deliver traffic over its own fiber system. That could mean parts of less-populated France will have two fiber networks to choose from instead of just one.

Drahi

It is an expensive gamble, but investors seem largely unfazed so far, perhaps suspecting Drahi has no intention of actually following through on spending billions on a potentially redundant fiber network in the suburbs and farm country, preferring to believe the threat of doing so will drive Orange back to the negotiating table.

Some American analysts are uncertain whether Drahi can pull off an acquisition deal that would combine Charter, a company many times larger than Altice, with Altice’s much smaller earlier cable acquisitions. Some also suspect he won’t find enough money to attract interest from Charter’s biggest shareholder — John Malone’s Liberty Media and Charter’s current CEO Thomas Rutledge.

But French media has little doubt Drahi can pull it off, especially when he is motivated.

“Patrick Drahi, founder of Altice, has set his limits: he has none,” notes Le Figaro, adding Drahi is a classic industry spoiler, completely happy to blow up cable’s comfortable status quo, even when at risk of attracting the wrath of his competitors.

CNBC reports Altice is preparing a serious offer to acquire Charter Communications. (5:54)

Vandalism Wiped Out Charter/Spectrum Service for 60,000 in Queens, Brooklyn

Phillip Dampier June 27, 2017 Charter Spectrum, Consumer News, Video No Comments

More than 60,000 Charter/Spectrum customers were without broadband, television, and phone service for more than 24 hours after vandals sliced through fiber optic cables at four major service hubs at around 2AM Monday morning.

The service outage idled workers in offices, telecommuters, and shoppers at corner stores. ATM withdrawals and credit card transactions were impossible in some neighborhoods.

Police sources told WCBS they believe striking Spectrum union workers are behind the vandalism, owing to the specialized equipment the vandals needed to successfully cut through the fiber cable’s protective sheath. Those responsible also had to know the exact location of the fiber cables and what cutting them would mean for Charter customers across two boroughs.

“We would never condone that, we would never do that,” on-strike Spectrum technician Ray Reyes told WCBS. IBEW Local 3 made it clear it does not condone the destruction of property, despite a strike that has gone on for months with no end in sight.

This is the second major vandalism incident experienced by Charter in metropolitan New York this year. The first, in April, left 30,000 customers without service for hours. Police have no leads in either incident and no one is likely to be prosecuted.

Affected customers will need to contact Charter/Spectrum and ask for a service credit for the outage. No automatic credits are likely to be given.

Area shop owners are upset because they lose money when credit card and ATM transactions are not available. Mike Patel told WCBS his customers were mad about the outage and he lost at least $500 in credit card transactions, forcing him to turn business away.

WCBS-TV in New York reports Charter’s outage in Brooklyn and Queens affected more than 60,000 customers. (1:35)

Does Charter Charge $5 to Talk to a Human Rep? Only When You Want to Pay Them

Phillip Dampier May 25, 2017 Charter Spectrum, Consumer News, Video 2 Comments

Eleanor Lloyd of Chili, N.Y., was stunned when she was told there was a $5 fee to talk to a Charter/Spectrum customer service representative over the phone.

“So I said, ‘I’d like to talk to a representative.’ ‘Well that’ll cost you, just to let you know we charge $5 to talk to a representative’ and I just was — ‘what?'” Lloyd, who is 86, said at her kitchen table speaking with News10NBC in Rochester, N.Y. on Wednesday.

Lloyd had a billing question for the cable company that took over for Time Warner Cable in western New York this spring. But Charter’s automated call attendant informed her that the cable company now charges to speak to a live person about billing issues.

That news stirred WHEC-TV to do a significant story about the issue on last evening’s 6pm local news. It fits a narrative that greedy cable companies are out for as many bucks as they can successfully remove from their customers’ wallets.

The station reported Lloyd could have her billing questions resolved online for free, which is a problem for her because she does not own a computer. But at least Charter only charges the $5 fee once a month, so future calls during that month will be answered for free.

Lloyd (Image: WHEC)

Unfortunately, the station’s report about this issue isn’t precise enough to be completely accurate.

Charter/Spectrum does charge a $5 fee, but only if a customer chooses not to use Charter’s automated pay-by-phone system to make a payment on their account. The same automated attendant that directs callers to the proper department when they call the cable operator is also fully capable of taking a payment over the phone. The confusion is apparently over whether that fee also applies to customers with billing questions, and we can tell readers it does not.

Charter, which introduced the bill payment fee back in October 2016 has never imposed a fee for a customer calling in to discuss a billing problem or concern. The $5 fee is disclosed in the company’s terms and conditions and it only applies if a customer refuses to use the automated attendant to make a payment on their account. If a subscriber specifically requests a live operator take their payment information, the fee applies. Agents may also be able to waive it on a case-by-case basis, something an automated call attendant isn’t capable of doing.

Therefore, if you have a billing issue, it is actually very easy to avoid the $5 fee:

  • If you are calling to discuss your bill, request credit, or ask a question about the bill, there is no fee.
  • If you want to make a payment on your account online, there is no charge for that service.
  • If you want to make a payment by phone, the automated attendant is capable of taking your payment details over the phone and complete a payment request at no charge.
  • If you want to make a payment by phone and don’t want to use the automated call attendant, a $5 fee will generally apply. Ask if they will waive it if you have problems with the automated attendant.

WHEC-TV in Rochester reports a local customer was asked to pay a $5 fee to make payment arrangements over the phone with Charter Communications. (2:39)

Viacom, Booted Off Some Basic TV Tiers, Plans Own $10-20 Non-Sports TV Package

Viacom, which owns cable networks including Comedy Central, Nickelodeon, MTV, BET, and TV Land, will launch a cheap non-sports bundle of entertainment cable networks viewable online for $10-20 a month this year.

Viacom has lost basic cable viewers at an accelerating rate as cable operators drop their networks or repackage them in more expensive basic tiers as Viacom raises wholesale rates cable companies pay to carry the channels.

Viacom CEO Bob Bakish talked about the new service this morning at the J.P. Morgan Global Technology, Media and Telecom Conference in Boston. Bakish said most of the current “skinny cable TV” bundles were priced at around $40 a month, which is too expensive to attract “cord-never millennials” that frequently don’t subscribe to cable television.

“The transformational opportunity is to bring in a new entry segment at a much lower price point,” Bakish said. The cable industry needs “a path to bring in someone who wants high-quality entertainment” but has no interest in expensive sports networks.

That is why Bakish wants to create a cheap entertainment-oriented bundle of networks that omits sports-related channels. But Bakish has also repeatedly stressed he has no intention of giving consumers a comprehensive online alternative to traditional cable TV, telling investors Viacom is “not creating inexpensive opportunities to serve as an alternative.”

Bloomberg News reported Viacom was talking to Discovery and AMC Networks about participating in the new service. The only complication may be a backlash from sports programmers like Walt Disney’s ESPN and 21st Century Fox, Inc., which have contracts requiring providers to include the sports networks in their most popular bundles. Some contracts even limit how many customers are permitted to sign up for a sports-free TV package, according to Michael Nathanson, an analyst at MoffettNathanson LLC.

“It’s meant to dissuade distributors from doing something like this,” Nathanson told Bloomberg. “The issue is how many subscribers they can have before the legal questions appear.”

Bakish may also be trying to remind cable and satellite companies that Viacom can always go direct-to-consumers if operators banish Viacom’s networks off the cable dial or move them to a more expensive tier, although there is no guarantee the new service will bundle all of Viacom’s networks.

Viacom has seen its relationships with cable and satellite providers deteriorate over the last few years under prior management. Some smaller cable companies including Cable One dropped Viacom channels from their cable systems over cost issues in 2014, and many more subscribers have seen Viacom networks temporarily dropped as a result of contract renewal disputes. Bakish has made repairing relations with cable and satellite customers a priority since taking over as CEO in December, but he still has a way to go.

Recently, Charter Communications moved Viacom networks out of its Select basic cable TV package and moved them to its most expensive Gold package for new customers. With only a minority of customers signed up for Gold service, Viacom networks could eventually lose millions of viewers as Time Warner Cable and Bright House customers adopt Spectrum packages in the next few years. If those customers do not subscribe to Gold or refuse to pay extra for a “digipak” of Gold’s basic channels without the premium networks, they will lose access to Viacom channels when they change TV plans.

That issue also concerns Wall Street analysts who believe it could eventually erode Viacom’s viewer base. Bakish made certain to tell investors Viacom was not surrendering to Charter’s “re-tiering.”

“We firmly don’t believe they have the rights to do that,” Bakish said. “We’ve been in discussions with them. We’ve got to get that resolved.”

If it is resolved, those networks may again be available to Select TV customers.

Viacom, AMC, and Discovery are partnering up to offer a $10-20 entertainment-only package on streaming basic cable networks for consumers, as this Bloomberg News story reports. (2:58)

John Oliver’s Newest Net Neutrality Plea Crashed the FCC’s Website

John Oliver returns to defend Net Neutrality, and provide a simpler way for ordinary Americans to share their views with the FCC.

John Oliver is back.

As Donald Trump’s FCC chairman Ajit Pai lays the groundwork for an all-out repeat of Net Neutrality, Oliver spent 20 minutes of his HBO show “Last Week Tonight” this past weekend pleading for Americans to come out and protect a free and open internet, just as he did three years earlier.

“It seems that the Trump-era will basically Ctrl-Z everything that happened on Obama’s watch,” Oliver said. “I genuinely would not be surprised if one night Trump went on TV just to tell us he personally killed every turkey Obama ever pardoned.”

“Every internet group needs to come together like you successfully did three years ago,” Oliver told his audience. “Gamers, YouTube celebrities, Instagram models, Tom from MySpace — if you’re still alive. We need all of you. You cannot say you are too busy when 540,000 of you commented on Beyonce’s pregnancy announcement.”

To help ordinary Americans navigate the FCC’s arcane electronic comments filing system, Oliver launched GoFCCYourself.com, a website dedicated to getting comments about Net Neutrality registered with the FCC.

His viewers responded, and promptly crashed the FCC’s website with an overwhelming amount of traffic. The same thing happened in 2014 when Oliver’s public plea helped produce millions of comments in favor of Net Neutrality. As of this afternoon, the FCC website is still slower than usual and the likely deluge of comments will keep FCC staffers busy for weeks to come.

Oliver took direct aim at Pai, noting the former Verizon lawyer said he would take a weed whacker to telecom regulations and has already threatened that Net Neutrality’s “days are numbered.”

“‘Days are numbered’ and ‘take a weed whacker’ are serial-killer talk,” Oliver said.

Oliver lampooned Pai over his repeated tweets quoting lines from the 1998 film The Big Lebowski and his oversized Reese’s Peanut Butter Cup coffee mug.

“Ajit Pai is the kind of guy who has a fun, oversized novelty mug and he is really proud of it,” Oliver said.

But despite the fun-loving façade, Pai’s claims that Net Neutrality regulations were burdensome and unnecessary are not a game to internet content providers and startups that fear large telecommunications companies could rig the marketplace against them. Pai complained at a gathering held April 26 at the Newseum, sponsored in part by FreedomWorks — a group with direct ties to the Koch Brothers, that “special interests” were pushing Net Neutrality and causing a reduction in private broadband investment.

Oliver responded that Title II enforcement was essential for Net Neutrality policies to have any teeth. Pai’s desire to return to an earlier Title I enforcement mechanism for Net Neutrality was overturned by the D.C. Court of Appeals, ruling the FCC could not enforce Net Neutrality policies under Title I, and suggested Title II enforcement instead.

Last week, that same D.C. Court of Appeals elected not to review and let stand a three-judge panel’s decision that the FCC was within its rights to reclassify ISPs under Title II, a clear victory for open internet proponents.

“[That] decision is a win for consumers,” said Lisa Hayes, general counsel for the Center For Democracy and Technology. “The court agreed that Title II classification is sound, and that the FCC has authority to regulate the marketplace. Net neutrality is essential to a vibrant internet ecosystem, and CDT will continue to defend the open internet in the days and years to come.”

“The D.C. Circuit has once again confirmed that the FCC’s Open Internet rules are lawful and supported by the evidence,” said Public Knowledge senior counsel John Bergmayer. “Now, the primary threat to these important consumer protections is FCC Chairman Pai’s determination to roll them back, and to hand more power to monopolistic internet access providers.”

ISPs like Verizon are also on record stating Net Neutrality had and will continue to have no bearing on internet investment, which directly contradicts Pai’s repeated claims.

“Maybe the best way to gauge Title II’s impact is to listen to what cable companies told their own investors, to who they are legally obligated to tell the truth,” Oliver said, playing a recording of a 2014 Verizon earnings conference call quoting former chief financial officer Fran Shammo who told investors that Net Neutrality “does not influence the way we invest.”

John Oliver takes on FCC chairman Ajit Pai in Net Neutrality II from his HBO series “Last Week Tonight.” (19:32)

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  • Lori Palmer: I just called time warner/spectrum and was specifically told $69.99 is the lowest tier package available. I live in NYS. They did confirm you only nee...
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  • Phillip Dampier: From the looks of it, they vastly oversell their broadband service and lack adequate capacity to support their advertised speeds. So you buy 150Mbps w...
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