Kent

Suddenlink president and CEO Jerry Kent sends word that the days of cable companies spending capital on system upgrades are basically over.

Interviewed on CNBC, Kent was responding to concerns about the cable industry’s long history of leveraged buyouts — amassing enormous debt to launch buyouts of small and medium sized cable companies as the march towards industry consolidation continues.

Kent’s own cable system — Suddenlink, was built partly on purchased cable systems from Cox and Charter Cable.  In the changing economy, Wall Street now wants to see cable companies with plenty of free cash flow on hand as part of their balance sheets, not just potential revenue growth through increased numbers of households made possible through debt-ridden acquisitions.

Kent sees Suddenlink, and many other cable operators, performing better as they transition away from making investments in system upgrades to accommodate demand.

“I think one of the things people don’t realize [relates to] the question of capital intensity and having to keep spending to keep up with capacity,” Kent said. “Those days are basically over, and you are seeing significant free cash flow generated from the cable operators as our capital expenditures continue to come down.”

Kent told CNBC Suddenlink had the fastest residential Internet service in the country — 107Mbps. (EPB in Chattanooga claims it offers 150Mbps residential service, although we don’t see much about it beyond a June press release on their website.)  Suddenlink’s speeds are one-way only, however.  The upstream speed for that tier of service is considerably slower — 5Mbps.  EPB offers the same upstream and downstream speeds.

Kent appeared on CNBC to discuss the “threat” to cable television company business models by online video.  Kent believes Suddenlink, and the cable industry more generally, is positioned to protect cable-TV profits with the TV Everywhere concept — offer online video of cable programming, but only to authenticated, current cable subscribers.  Those without cable subscriptions can’t watch.

Financial reports submitted by many of the nation’s cable operators confirm Kent’s claim that capital spending is being reduced.  Even among cable systems that claim they need to enact usage caps and other Internet Overcharging schemes to “invest in broadband upgrades,” the financial reports don’t lie — they are not using increased revenue for system upgrades.  They are instead retaining the revenue as free cash – available for other purposes, paying down debt, or returning it to shareholders through dividend payouts.

CNBC interviewed Suddenlink CEO Jerry Kent on how the cable industry intends to cope with invasive online video, threatening to erode cable-TV profits.  (8 minutes)

Greenwood, Miss.

Although the days of frenzied buying and selling of cable systems is behind us, smaller cable operators are still in the market for system swaps and buyouts.

Some 8,200 Windjammer Cable customers in Greenwood, Miss. and surrounding areas are about to become Suddenlink customers.  For many residents in Greenwood, located north of Jackson, this will be their third cable provider in two years.

Originally owned by Adelphia, Greenwood’s cable system was acquired in 2008 by Time Warner Cable as part of a bankruptcy sale of Adelphia’s cable properties.  Time Warner Cable ponied up an estimated average $3,500 per subscriber to purchase Adelphia’s cable systems, even though many were badly in need of upgrades.

Time Warner merged many Adelphia systems in larger communities into its own operations, but sold most of the smaller, more rural systems deemed strategically unimportant to the company.  In total, more than 125 cable systems in 25 different states, many serving just a few hundred subscribers each, were dumped overboard at a loss of $45 million by Time Warner.  Greenwood, like 124 other communities, would now receive cable service from a company nobody ever heard of before — Windjammer Cable.

Windjammer was created in 2008 to handle the 80,000 Adelphia customers Time Warner cast-off.  Owned by private equity firm MAST Capital Management, Windjammer is run by Jupiter, Fla.-based small cable operator Communications Construction Services, which is mostly known for providing cable service to more than 200 military bases across the country.

For Greenwood customers, the welcome letter from Time Warner Cable ended their cable relationship with Adelphia.  But it was a relationship never destined to last.

Just one year later, another welcome letter arrived, this time from Windjammer Cable:

Welcome to the Windjammer Cable family!

We have recently acquired the former Time Warner Cable system in this area, and are proud to be your new cable services provider.

We’re more than just a cable company. Windjammer Cable brings a whole world of entertainment and communications to the place it matters most…your home.

As a way to make the transition easy from one cable company to another, you will see very little change in how you receive your cable and communications services.

We will be updating your High Speed Internet, Digital Phone, and E-mail services beginning in the early morning of January 12, 2009. This conversion may take up to 10 days. We will only be working on your service between 1:00 am – 6:00 am local time. During this time, you may experience slight service interruptions, so please be patient.

To those of you who currently use the Time Warner Road Runner email service, there will be changes to your email account. Please visit our new website where you will find information about setting up a new Windjammer email account. We encourage you to do this as soon as possible. Your existing Road Runner email account will continue to work the same for at least the next two months.

If you do not use the Time Warner Road Runner email service, but use another service, like Gmail, you will not need to make any changes.

If you are a Time Warner Digital Phone customer, you should not notice any significant changes to your phone services. If you use the voice mail service, you will have to re-record your message. Instructions for doing this can also be found on our website.

Our customer service representatives are available 24 hours a day to answer any questions you may have about the transition. Consider us your new friend and neighbor, and know that we are only a phone call away.

We look forward to serving all your cable and communication needs!

Windjammer Cable

Now, one year and some months later, customers can prepare for their next welcome letter from Suddenlink.

What Suddenlink paid to acquire the Windjammer system has not been disclosed.

Suddenlink has experience providing service in Mississippi — its nearest system is in Greenville, about 50 miles west of Greenwood.

Suddenlink is the nation’s seventh-largest cable operator, with customers primarily located in Arkansas, Louisiana, North Carolina, Oklahoma, Texas and West Virginia.

Suddenlink broadband customers in Lubbock and Midland, Texas will soon have a new option to boost their broadband speed to 36Mbps.  Dubbed MAX36, the new tier leaps over the cable company’s former top broadband speed of 20Mbps.  Upload speeds get a boost as well — to 2Mbps.

Multichannel News reports pricing for the new tier depends on how many other Suddenlink services you have.  Standalone pricing is $75 per month.  Bundle it with television or telephone service and the price drops to $65.  Take all three services and MAX36 costs $60 a month.

Suddenlink serves portions of these Texas communities

If that is too rich for your blood, Suddenlink next week will be providing existing broadband customers in Lubbock and Midland free speed upgrades:

• 1Mbps service increases to 1.5Mbps
• 8Mbps upgrades to 10Mbps service
• 10Mbps service becomes 15Mbps

The new speeds are possible because of DOCSIS 3 upgrades underway at the nation’s ninth largest cable operator.  Suddenlink has focused on DOCSIS 3 upgrades for many of its Texas systems, including Abilene, Bryan/College Station, Georgetown, Lubbock, Midland, San Angelo and Terrell.  The operator also deployed the technology in Beckley, Charleston and Parkersburg, West Virginia, as well as Jonesboro, Arkansas, Humboldt County, California, and Nixa, Missouri.  The company hopes to upgrade 90 percent of its cable systems within the next two years.  Nationwide, Suddenlink reaches 1.3 million subscribers.

Last summer Suddenlink introduced a usage meter for subscribers in Clovis, New Mexico and included a chart of what constituted average usage for its customers.

Suddenlink's national service area

The company openly admits it limits customer use of its broadband service is several communities where bandwidth upgrades have yet to occur, but at least drops communities from the usage limit list after expansion is complete.  As of February 4th, communities impacted by usage limits include:

• Arkansas: Charleston, Hazen, Mt. Ida, Nashville
• Kansas: Anthony, Fort Scott
• Louisiana: Ville Platte
• Missouri: Jefferson City, Maryville
• Oklahoma: Fort Sill, Healdton, Heavener, Hughes, Idabel
• Texas: Albany, Anson, Brenham, Burkburnett, Caldwell, Canadian, Center, Claredon, Crane, Dimmitt, Eastland, Electra, Hamlin, Henrietta, Junction, Kermit, Monahans, Nocona, Olney, Paducah, Rotan, San Saba, Seymour, Sonora, Trinity, Vernon, Wellington

Suddenlink also admits it engages in “network management” techniques which may spark controversy with the ongoing Net Neutrality debate, despite its declaration it “allows customers to access and use any legal Web content they prefer, thus honoring the principles of network neutrality.”

In addition to “mitigating network congestion, which can interfere with customers’ preferred online activities,” Suddenlink also discloses it “prioritizes certain latency-sensitive traffic such as voice traffic.”

Still, performing system upgrades to put a stop to usage limits and allowances is a move in the right direction, one that other providers seeking to monetize broadband traffic with Internet Overcharging schemes are loathe to take.

Watch some of Suddenlink’s more creative and amusing advertising. (2 minutes)

Suddenlink Usage FAQ:

On June 1, 2009, we notified residential Internet customers in our Clovis, New Mexico cable system of a new online tool to help them monitor their Internet usage each month and determine if they are in the typical usage range.

If they are well above the typical range, it could mean several things. For instance: a virus or “spyware” application might have infected a customer’s computer and started generating high levels of Internet traffic, or someone else might be using a customer’s Internet connection without his or her knowledge. To help guard against those issues, we are offering customers a list of steps they can consider, to help make sure their computers and Internet accounts are protected and secure.

We introduced this Internet usage summary tool in Clovis, to evaluate its usefulness, after which we will consider expanding it to all of Suddenlink’s residential Internet customers.

Longtime Stop the Cap! readers will recognize this trick only too well.  When a small cable operator spends its time, talent, and resources on “measuring tools” to help customers “determine if they are in the typical usage range,” it’s only a matter of time before that ‘experiment’ will turn into typical Internet Overcharging activity — usage caps, consumption-based pricing, overlimit fees and penalties, or service termination for those outside of that “typical usage range.”

Suddenlink, one of the nation’s smaller multiple cable system owners serving 1.3 million customers in mostly rural areas, is among the worst-rated providers in the country, based on actual customer reviews.  Its journey towards Internet Overcharging schemes will do its ratings no favor when customers find out.

Suddenlink’s approach is less brazen than earlier Internet Overcharging attempts consumers have fought back.  The company attempts to leverage the usual talking points about Internet activity into a justification for measurement tools, and cleverly tries to suggest the impetus for doing so is to protect customers who might have been hacked or have family members engaged in online activities unknown to others in the home.  But the road that measurement tools provided by a cable company pave today lead to limits and higher pricing tomorrow.

Suddenlink’s contribution to the “education campaign” consumers are being subjected to before the pickpocketing begins does bring some useful information to the table, however.  This small, mostly rural provider, turns in stunning statistics about average customer consumption:

Suddenlink 'Typical Usage' Statistics - Clovis, New Mexico (Suddenlink website 7/23/2009)

Those numbers represent one of three things:

1. Suddenlink is the first provider in a long list of providers producing honest statistics about broadband usage, not the low-ball estimates others have provided to make consumers feel guilty for exceeding them;
2. Suddenlink’s statistics are wrong;
3. People in Clovis download A LOT.

Just about every other major provider, and many small ones, have spent the past year telling the media and the public “the average user” consumes far less than what Suddenlink reports for Clovis, New Mexico:

• Frontier Communications: “Today, the average residential customer on Frontier’s network uses 1.5 gigabytes of bandwidth each month.” — Ann Burr 10/10/2008
• Time Warner Cable: “Our usage data show that about 30% of our customers use less than 1 GB per month.” — Landel Hobbs, COO 4/9/2009
• Time Warner Cable Austin: ‘Users download between 5-6GB per month on average.’ — Scott Young, senior director of digital systems  10/2008
• Comcast: “The average customer uses two to three gigabytes a month.” Jennifer Khoury, Comcast spokeswoman 10/29/2008
• Sunflower Broadband: “Our average users, about 77%, use 6 gigabytes or less of bandwidth per month. Our high-end subscribers, about 2%, use 50 gigs or more.” Sunflower Broadband Website 7/23/2009
• Bell (Canada): “Usage has increased… to more than 10GB (per average user) in 2008.” Bell Internet Usage Tutorial 7/23/2009

For the benefit of Suddenlink subscribers joining Stop the Cap! for the first time, here’s a road map for where things have traditionally gone among every other Internet provider that has introduced “measurement tools” for “your benefit” that were not beaten back by angry subscribers:

… Continue Reading