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Charter Still Losing Time Warner Cable Customers With Hard Line on Retention Deals

charter-twc-bhAt least 54,000 Time Warner Cable customers downgraded or canceled their cable TV service in the last three months as Charter Communications continues to take a harder line on offering or renewing customer retention discounts for customers unhappy with their bill.

Time Warner Cable customers are “mispriced” with discounts and deals that lower the cost of service but face bill shock when the promotion ends, according to Charter CEO Thomas Rutledge.

“Third quarter customer results were more inconsistent with good performance at Legacy Charter and Bright House, but higher churn and downgrades in the Time Warner Cable markets, as we expected, given the way Time Warner Cable had marketed promotional pricing,” said Rutledge. “Until our Spectrum pricing and packaging is launched across the newly acquired service areas, we continue to expect higher levels of churn and downgrades where Time Warner Cable was the operator.”

“Over the next few quarters, our operating results will reflect reversing certain product and packaging strategies, in particular at TWC, in which in our view are not sustainable, given high promotional roll-offs and annual rate increases, high customer equipment fees, including modem fees, all coupled with complex and stacked offers,” added Charter’s chief financial officer Christopher Winfrey.

Traditionally, Time Warner Cable has dealt with price sensitive customers rolling off special pricing promotions by gradually resetting rates higher or, when necessary, by renewing the promotion for another year in an effort not to lose the customer. That will stop under Charter’s ownership, according to Mr. Rutledge. As a result, Charter Communications is seeing significant customer losses at Time Warner Cable when customer service representatives won’t budge on pricing.

Rutledge is seeking more discipline in product pricing so Charter does not have to extend cut-rate retention promotions to customers. As part of the Charter Spectrum rebrand, the cable company introduces new cable, broadband, and phone plans while allowing Time Warner Cable’s legacy plans to stay in effect until a customer elects to switch. While Texas and California Time Warner Cable customers have already been introduced to Spectrum plans, much of the rest of the country is still being offered plans only from Time Warner Cable or Bright House.

Rutledge

Rutledge

Customers are most likely to cancel service as their promotion expires. The resulting price hike can be a considerable shock as rates quickly reset to Bright House or Time Warner’s “regular price.”

Charter wants an incentive to get customers to forfeit their Time Warner or Bright House plan and switch to a new Spectrum plan as they are introduced. By making the grandfathered plans as unattractive as possible, the alternative Spectrum plans appear to be a better deal. Unfortunately, until Spectrum-branded plans arrive nationwide, many customers are stuck in limbo rolling off a promotion, are unable to renew it, and forced to wait for new Spectrum plans to be introduced.

Rutledge announced last week that the next markets to be introduced to Spectrum this month are in New York City and Florida, the latter former Bright House territory. Rutledge predicted half of Time Warner Cable customers will be offered Spectrum plans by the end of this year. But some Time Warner Cable customers may have to wait until next spring before Spectrum rebranding is complete.

Time Warner Cable Maxx is Still Dead, Earning Charter $36 Million in Reduced CapEx

Charter also reported significant financial benefits from prematurely terminating the Time Warner Cable Maxx upgrade effort. Time Warner’s upgrades would have given customers free speed upgrades up to 300Mbps. But Charter pulled the plug on the upgrade project just after completing its acquisition, and has no plans to restart it.

“Cost to service customers declined by about 2% despite overall customer growth of 5.1%, which reflects lower service transactions at Legacy Charter, the lack of all-digital activity at TWC this quarter versus last year’s third quarter, and some benefit from less physical disconnects in all-digital markets,” reported Winfrey. “Capital expenditures totaled $1.75 billion, including $109 million of transition spend. Excluding transition CapEx, our third quarter CapEx was down by $36 million year-over-year, about 2%, driven by all-digital spending at TWC, primarily on [equipment], which did not recur in the third quarter of this year.”

Winfrey

Winfrey

Charter expects to increase CapEx next spring, as the company continues its less ambitious transition to all-digital cable service, which includes broadband speeds topping out at 100Mbps, three times less than what Time Warner Cable was implementing.

Charter is Less Enthusiastic About Digital Phone Service

Time Warner Cable maintained a healthy market share for its digital phone service by bundling it at a promotional price of $10 a month, a rate that remained relatively stable for customers sticking with a triple play package bundle. Time Warner Cable also enhanced its phone service by adding the European Union nations, Mexico, and several popular Asian calling destinations as part of the local calling area, making those calls free of charge.

Charter’s own plan is less feature-rich and customers have to buy an add-on plan to cover international long distance, making the product considerably less attractive to customers. Some customers also find the cost of the phone service has increased under Spectrum, a problem acknowledged by Winfrey, who noted Time Warner Cable’s low-price voice offer in prior year quarters had been discontinued, resulting in higher voice downgrades and relationship churn.

Charter’s Plans for Legacy Charter Customers and Newly-Adopted Time Warner Cable and Bright House Customers

charter spectrum logoRutledge made clear that despite any product changes or rebranding, the long term goal of Charter Communications is to see revenue grow. Whether that will come from gradual repricing of cable products and services to a higher rate or from improved products and services that attract new upgrade business is not yet certain. But Rutledge outlined key areas Charter expects to focus on in the next few years:

  • Charter will complete the all-digital transition at Time Warner Cable and Bright House over the next two years, but it will resemble the kind of service legacy Charter customers get today, not TWC Maxx;
  • Over the next five years or so, with relatively small infrastructure investments, Charter plans to implement DOCSIS 3.1 which will be able to deliver symmetrical multi-gigabit speeds to all 50 million homes and businesses in their service area;
  • Charter plans to aggressively market and grow its services for commercial customers, targeting businesses large and small, at prices that more closely resemble residential service pricing, instead of the price premium Time Warner Cable has traditionally charged its commercial customers;
  • Charter is activating its MVNO agreement with Verizon, which will allow Charter to create and market its own wireless/cellular service using Verizon’s nationwide network. The company is also exploring using millimeter-wave (5G) service to offer better broadband coverage in large commercial spaces like malls and rural properties currently not wired for cable service. Expect the company to create its own wireless/cellular bundle first, because it will rely entirely on Verizon’s network, keeping Charter’s costs low.

Charter’s New Hard Line on Promotions for Time Warner Cable/Bright House Will Drive Customers to the Exit

charter-twc-bhCharter Communications is taking a hard line against extending promotional pricing for Time Warner Cable and Bright House Networks customers and Wall Street predicts a major exodus of customers as a result.

UBS analyst John Hodulik predicts Charter’s new ‘Just Say No to Discounts’-attitude will result in customers saying ‘Cancel’ and he estimates a massive loss of at least 75,000 Time Warner Cable television customers in the third quarter as a result, with many more to follow.

Charter Communications’ executives have ordered a hard line against giving existing customers discounts and perpetually renewing promotional pricing, a practice Time Warner Cable has continued since the days of the Great Recession to keep customers happy.

Time Warner Cable and to a lesser extent Bright House have learned antagonized, price-sensitive customers were increasingly serious about cutting cable’s TV cord for good when the cost becomes too high to justify. Time Warner Cable dealt with this problem by giving complaining customers better deals, often repeatedly. That mitigated the problem of customer loss, allowed the company to retain and grow cable television customers and even helped minimize the practice of promotion shopping common in competitive service areas.

For years, Time Warner and Bright House customers learned they could enroll in a year-long promotion with the cable operator and then switch to a year-long new customer promotion from AT&T U-verse or Verizon FiOS and then jump back to the cable company with a new promotion. In many cases, they even got a gift card worth up to $300 for their trouble. Charter Communications thinks their new “pro-consumer policies” of not charging rapacious equipment fees and sticking to “simplified” prices will delight customers enough to keep their loyalty. Good luck.

Licensed to print money

Licensed to print money

Wall Street doesn’t believe Charter’s reputation or their ‘New Deal’ for TWC and BH customers will be perceived as making things better, especially for cable television and its cost. As customers roll off promotions at Time Warner Cable, the bill shock of watching rates rise up to $65 a month will speak for itself. The higher the price hike, the more likely it will provoke a family discussion about dropping cable television service for good.

In Los Angeles and Texas, where Charter premiered its new “simplified pricing” for Time Warner Cable customers, the response has been underwhelming, with many customers deriding it as “simply a price hike.”

David Lazarus, a reporter for the Los Angeles Times, characterized the transition from TWC to Charter this way: “Meet the new cable company. Same as the old cable company.”

Culver City resident Jack Cohen provides good evidence of what happens when customers get their first bill from Charter, and it is higher than expected. Cohen received his first bill for $162, $22 more than his last Time Warner Cable bill of $140 a month, because his promotion with TWC expired. As a result, he canceled cable television after Charter wouldn’t budge on pricing. Cohen said “cancel” and never looked back. He now pays the new cable company $40 less than he gave Time Warner Cable, because he now only subscribes to broadband and phone service. Charter’s ‘simplified pricing’ cost the cable company more than the $22 extra they were originally seeking.

Lazarus learned when his own TWC promotional package expires in December, Charter had a great Christmas present waiting… for themselves. Lazarus’ $65 promotion will rise to $120 a month — almost double what he used to pay. But Charter also offered Lazarus a better deal he can refuse, a new Charter-Spectrum package of the same services for the low, low price of $85 a month — still a 30% rate hike.

In Texas, customers coming off promotions are learning first hand how Charter intends to motivate customers to abandon the Time Warner Cable packages Charter promised they could keep — by making them as unaffordable as possible and offering slightly less expensive Charter/Spectrum packages as an alternative.

“But it’s still $45 more than what I was paying Time Warner Cable for the same damn thing,” complained Ty Rogers to a Charter retention specialist, after his Time Warner Cable shot up once Charter took over. He is waiting for Google Fiber to arrive and then plans to cancel everything with Charter.

Charter’s billing practices also are dubbed the weirdest in the cable industry by The Consumerist, because Charter loves to hide taxes, surcharges, and fees by rolling them into other charges on the bill and cannot be accurately accounted for:

Charter breaks out federal, state, or local taxes and fees for some services (TV) but not for others (voice). Also, depending where you live and when you signed up for services, the taxes, fees, and surcharges that do appear may be listed under different sections of the bill or not at all.

While their procedure does result in many fewer line items for consumers, it does produce more confusing bills overall, and make it harder to compare against other providers in a truly apples-to-apples kind of way.

‘No, no, no,’ counters Charter/Spectrum to FierceCable.

“Our internet packages are competitively priced, but we offer faster starting speeds and don’t charge an additional modem lease fee on top of the cost of service (that is an additional $10 at legacy TWC),” Charter spokesman Justin Venech said. “That pricing is better and more attractive to customers. Our video packages are simpler and more robust. For example, our Spectrum Silver package includes over 175 channels plus premium channels HBO, Showtime and Cinemax while a comparable TWC package would have charged extra for premiums.  We don’t add on additional fees and taxes to our voice product that our competitors do, and our equipment pricing for video set-top boxes are much lower with Spectrum than our competitors or legacy TWC or BHN.  Our new Spectrum pricing is $4.99 for a receiver vs over $11 at legacy TWC.”

“That assumes, like every cable company always does, that we want HBO, Showtime, and Cinemax, don’t already own our own cable modem, and are not dancing in the streets over an even bigger television package filled with crap we don’t want,” said Rogers. “Charter also takes away Time Warner’s excellent long distance phone service, which let me call almost all of Europe without any toll charges or an extra cost calling package. I paid Time Warner $10 a month and could talk to someone in France all night long if I wanted. With Charter, it’s more for less.”

Rogers’ promotion included his DVR in the promotion, so comparing Charter’s $4.99 vs. TWC’s $11 for a DVR made no difference to him either.

“You can argue all day about the ‘value’ you are offering, but you can’t argue your way out of a bill that is $45 higher than last month,” Rogers complained.

Overall, the latest spate of cable mergers and AT&T’s acquisition of DirecTV has been bad news for consumers, who face fewer competitive prospects and a new, harder line on promotional pricing. AT&T customers are discovering AT&T is more motivated to get U-verse TV customers to switch to DirecTV and less interested in providing discounts. The cable competition knows that, making fighting for a better deal much tougher if Charter’s only competitor in an area is AT&T. Cable operators also understand there is a built-in reluctance to switch to satellite by a significant percentage of their customers.

Charter’s pre-existing customers not a part of the TWC/BH merger are not too happy with Charter’s Spectrum offers either. At least 152,000 video customers said goodbye for good to the cable operator’s television packages.

Hodulik predicts there are more where that came from as the rest of the country gradually discovers what Charter has in store for them.

Time Warner Cable’s Dirty Little Secret: Cable TV Copy Protection

Time Warner's Enhanced DVR works fine, but those avoiding TWC equipment run into DRM problems.

Time Warner’s Enhanced DVR works fine, but those avoiding TWC equipment run into DRM problems.

If you’re accustomed to using Time Warner Cable’s DVR box, you probably don’t realize how heavy-handed Time Warner Cable can be with copy protection, but as set-top box alternatives proliferate, more customers are encountering the frustration of digital rights restrictions.

For several years, customers using alternatives to Time Warner’s set-top boxes or who wanted to store their DVR recordings on another hard drive quickly discovered the cable operator heavily enforces copy protection mechanisms designed to thwart digital archival copies of programs recorded from cable television.

Copy Control Information (CCI) is an invisible flag sent in digital television signals that is designed to give control to copyright owners over how their shows can be duplicated. Since at least 2007, Time Warner Cable and Bright House Networks customers have been frustrated if they use their own DVR or devices like TiVo. When customers attempt to copy their recorded shows to other devices or playback units in their home, the CCI flag often stops the copy cold.

ZatzNotFunny has covered this issue for years, noting Time Warner Cable, Bright House, and Cox have been particularly unfriendly to third-party set-top boxes like TiVo.

Among cable operators, the most common flags are Copy Freely and Copy Once. Many cable operators set their basic cable network CCI flags to “copy freely,” while premium pay movie channels like HBO are set to “copy once” — primarily to allow time-shifting devices like a DVR to record the show. Once your DVR has a copy of a show with a restricted flag, it cannot be copied again.

Digital Rights Management policies are part of the nation’s struggle between Hollywood-inspired copy protection and the public’s right to make and store recordings of programming for their own personal use. Some telecom companies like Verizon and Comcast have come down more in favor of consumers, while Time Warner Cable and Bright House (which have traditionally shared engineering practices and programming contracts for at least a decade) are far more responsive to Hollywood. The result for subscribers with $200 cable bills is endless frustration, especially if they choose not to use the pricey set-top boxes and DVRs supplied by the TWC or Bright House.

CableCARD and TiVo users, as well as those relying on Extenders for Windows Media Center like the Xbox 360 are often stymied by CCI flags, especially when a consumer tries to watch a show in one room and finish it in another using Multi-Room Viewing features.

ZatzNotFunny rates TWC, Bright House and Cox as unfriendly to alternative set top boxes like TiVo. (Image: ZatzNotFunny)

ZatzNotFunny rates TWC, Bright House and Cox as unfriendly to alternative set-top boxes like TiVo. (Image: ZatzNotFunny)

Wikipedia supplies insight into the available CCI options cable operators can choose to use for cable television channels:

  • 0x00 – Copy freely – Content is not copy protected.
  • 0x01 – Copy No More – A copy of the content has already occurred and no more copies are permitted.†
  • 0x02 – Copy Once – One recording can be made, but it cannot be copied to another device.†
  • 0x03 – Copy Never – the content can be recorded and viewed for 90 minutes after transmission, and is not transferable.†
  • 0x04 – Content is Copy Once for digital output, but would have Macrovision 7 Day Unlimited restriction applied on the analog outputs. This affects content viewed either on an HDTV with component cabling or on a standard definition TV. It also affects content saved to VCR or DVD when the recorder is connected to an analog output on the DVR.†
  • 0x07 – Content is Copy Never for digital content (deleted after 90 minutes) and Macrovision 7 day/24 hour for content recorded from analog channels. Content cannot be transferred via TiVoToGo transfers or MRV, and cannot be saved to VCR or DVD.†

† – Any live stream with a CCI flag set higher than 0x00 is to be encrypted or protected in a way that only trusted platforms that will obey the flag (Such as Microsoft’s PlayReady system used in Windows Media center) can access it.

A Time Warner Cable customer known as MachineShedFred noticed this problem first hand and wrote about it in a complaint to Time Warner Cable back in March, and Stop the Cap! reader Chris N. pointed us to this ongoing issue:

The only software that allows me to use the CableCARD hardware that you officially support and distribute is Windows Media Center, which Microsoft is no longer developing, and is no longer distributing.  All other DVR software available for every platform will not work, as they cannot decrypt the video stream due to the abuse of the CCI flag.

No other cable company in the US abuses the CCI flag in this manner, and every other cable subscriber in the US that isn’t on Time Warner has a wide choice of solutions for enjoying their service better than we can as your subscribers.  Why are you restricting the choices of your subscribers for no reason?  It’s clearly not contractual from the media networks, as they would have pushed for the same stipulations with at least one of your competitors.  Yet, anyone outside of TWC’s monopoly can use any other software they want.

When even Comcast allows their subscribers more subscriber-friendly choices, you know you’re doing it wrong.  Please revisit this ridiculous policy and cease the overuse of the CopyOnce CCI flag that unduly burdens your subscribers by forcing them to replace perfectly good hardware, or replace YOU.

word-saladSome believed this problem could eventually resolve itself with Charter Communications’ buyout of Time Warner Cable and Bright House Networks. Would Charter bring their own policies to affected TWC/BH customers, or will Charter customers soon have to contend with the CCI CopyOnce flag loved by Time Warner Cable as well.

An official complaint to the FCC brought a cryptic non-answer answer from William Wesselman, Time Warner Cable’s regulatory compliance counsel. Wesselman implied the liberal use of the CCI  CopyOnce flag was the result of restrictions in contracts with major programmers, which seems unlikely because other cable operators — larger and smaller — have successfully navigated around this issue. Wesselman’s answer implies as Time Warner Cable and Bright House are brought into the Charter hegemony, “the policies of the two companies will ultimately become the same.”

Of course, he never defines which policy Charter, TWC and BH customers across the country will eventually get by sometime in 2017.

Mr. Wesselman’s full response:

At this time, TWC and Charter continue to integrate their two systems into one. Both TWC and Charter, like other distributors of multichannel video programming, negotiate the distribution rights for the content it carries independently with individual rights holders. These bilateral commercial negotiations take into consideration many different factors, include the content protection and digital rights management requirements of the rights holder; applicable law, license and regulations; and the interests of subscribers. Each of these commercial negotiations, and the terms of the agreements that result, are unique to the specific distributor and programmer involved. As the integration of the two companies continues, Mr. X will notice that the policies of the two companies will ultimately become the same based on our agreements.

twc-letter

Arris Will Manufacture Next Generation of Charter Set-Top Boxes: WorldBox 2.0

charter-spectrumArris will manufacture the next generation of set-top boxes for Charter Communications, supporting hybrid IP/QAM video and the legacy technology still in place at Charter-acquired Time Warner Cable and Bright House Networks.

WorldBox 2.0 will support both a traditional and cloud-based user interface, as well as new content options and video features that could eventually bring a cloud-based DVR service for Charter customers. Charter is dealing with at least three different cable system architectures — its own network and those of its two recent acquisitions: Bright House and Time Warner Cable. Charter will be expanding its current downloadable conditional access (DCAS) capability to both those cable companies, expanding Digital Rights Management (DRM) to cable television channels. Time Warner and Bright House reportedly rely on an older CAS system.

Charter is strengthening video security to remotely switch on and off cable TV service for new/disconnecting customers without having to send a truck to the customer’s home.

“While Charter is focused on providing a secure video product on all devices, WorldBox 2.0 provides the same advanced video experience consumers are demanding on traditional television sets, and gives Charter the flexibility to deploy a single platform across our entire expanded network,” said Jim Blackley, Charter executive vice president of engineering and IT, in a statement. “Our ongoing work with Arris – in developing this platform, including the downloadable security component – and the establishment of the warrant program, speaks to the strength of our long-standing relationship and the value of ARRIS’s expertise in large-scale, next-generation deployments.”

Charter’s appreciation for Arris is reflected in an agreement the cable company has with the set-top box vendor to buy up to six million shares of Arris stock over the next 24 months, depending on how much business Charter provides the company.

Charter’s WorldBox 1.0 originally debuted in 2015 with the assistance of Cisco, but Charter has clearly shifted towards Arris. There has been considerable consolidation in the set-top box marketplace over the last year. Cisco sold its cable equipment business to Technicolor and Arris has grown larger after acquiring its competitor Pace.

Fido Cable Leases Access from Current Cable Providers, Charges More Than They Do

(PRNewsFoto/Fido Cable)

(PRNewsFoto/Fido Cable)

You may soon have a choice of cable companies, but don’t expect any savings doing business with the competition.

South Carolina-based Sky Play, LLC has launched a new cable service it claims is available across the U.S., offering competitive broadband and later phone and television service.

The service, known as Fido Cable, is dependent on leasing access from cable companies including Cablevision-Altice, Charter-Bright House-Time Warner Cable, Cable One, Comcast, and Cox as well as telephone company AT&T.

“We believe that people deserve to select which internet company they would like to utilize as opposed to being stuck with one or two options of service from companies who constantly raise their rates and offer no thought of the customer they service,” said David Wheeler, vice president of Sky Play. “Fido Cable is available to everyone in every major city and surrounding cities throughout the U.S.”

The company’s claims about the aspirations of American cable subscribers may be true but after Stop the Cap! called the company and obtained price quotes, it is clear any savings doing business with Fido Cable are illusory at best. Fido has a single page website that needs work, including correcting “Cable Vision,” when it actually meant “Cablevision.” Details about service and pricing was scant, so we called the company to get prices for two large cable operators: Time Warner Cable and Charter.

The company claims it offers internet access today and will be offering voice services across its national footprint and television in “select cities.” For purposes of obtaining pricing information, we quickly learned our home city of Rochester, N.Y., is not select enough for Fido Cable.

charter twcFido Cable (which has no relationship with the Canadian prepaid mobile provider “Fido,” owned by Rogers Communications), says internet and voice plans start at $39.99 a month, but not for TWC or Charter customers.

In fact, Fido does not seem to offer any new customer promotional pricing. Their quoted rates were consistently higher than their cable company hosts charge their own customers. No wonder cable operators allowing Fido to compete using their systems are not breaking any sweat over the “competition.”

For instance, Fido charges a $120 installation and $15 modem fee for both Time Warner Cable and Charter customers. The representative claimed the modem fee was a one-time charge and customers were allowed to supply their own equipment. In comparison, both Charter and Time Warner Cable agreed to waive any installation fees for new customers. Time Warner Cable charges a $10 monthly modem rental fee and Charter includes the modem in the price of its service.

Fido Cable charges $65 a month for 15/1Mbps service. Time Warner Cable’s equivalent plan costs $59.99 a month for the service and modem rental (deduct $10 a month from TWC’s price if you buy your own modem). A 50Mbps plan from Fido costs $120 a month, but it’s $119 a month from Time Warner Cable (again, deduct $10 if you supply your own modem).

For Charter customers, a 60/4Mbps plan is priced $59.99 direct from Charter, but if you choose Fido Cable you will pay $5 more a month: $65. A 100/7Mbps plan from Charter is priced at $99.99, or you can pay Fido $105.

Here are more details about Fido internet plans we obtained today:

Time Warner Cable Service Areas

  • 10/1Mbps: $55
  • 15/1Mbps: $65
  • 50/5Mbps: $120

Charter Cable Service Areas

  • 60/4Mbps: $65
  • 80/5Mbps: $99
  • 100/7Mbps: $105

A 2-year price guarantee applies to all pricing.

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