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Comcast $avings: Your Bill Isn’t Going Down, Nor Will It Increase Less Rapidly

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(Image: Crooks and Liars)

(Image: Crooks and Liars)

The mother of all cable mergers between Comcast and Time Warner Cable will bring tens of millions in executive bonuses and golden parachutes, massive job losses at Time Warner, a lucrative stock buyback that will help Comcast shareholders, and a higher cable bill and usage cap for you.

Back in 2008 when Stop the Cap! started we offered this tip for rational living: When a cable company promises you it has a great deal that will save you money, grab your wallet and run. Just as the sun rises in the east, cable bills never really go down, they just keep going up.

Comcast at least admits that fact of life when discussing the “benefits” of a merger with Time Warner Cable.

“We’re certainly not promising that customer bills are going to go down or even that they’re going to increase less rapidly,” David L. Cohen, a Comcast executive vice president, said in a conference call with reporters.

Heaven forbid.

Bigger has never been better for the cable industry. As waves of consolidation reduce the number of significant cable operators from dozens to fewer than 10, cable subscribers have contributed mightily to finance the merger deals. What used to be a big basic cable bill of $20 a month will soon exceed $75, and rising. The industry has always tied itself to the value proposition that a month of cable television costs no more than a cup of coffee. In 1990, it was Maxwell House. Today it’s closer to a Starbucks Grande Latte once taxes, fees, and surcharges are included.

Image: Mike Keefe

(Image: Mike Keefe)

The New York Times reports cable prices have grown at more than twice the rate of inflation over the last 17 years. But Comcast likes to say you are getting a lot more bang for your cable buck.

“Where we might have had 100 standard-definition channels in a package more than a decade ago, today you have 250 standard-definition channels plus 100 channels in high-definition,” Cohen told the Times. “The level of service being provided is night and day.”

According to Cohen’s way of thinking, that matters a lot more to you and I than the “Please pay this amount” at the bottom of your monthly bill.

The bountiful cornucopia that is Cohen’s idea of cable television bliss includes networks like Bonsai Xtreme, Office Supplies Network, Glidden’s Paint Dry 24/7, and… no, we’re kidding. But are TV One, Ovation, Youtoo TV, and Retirement Living TV any more compelling? You are probably paying for one or more of them now. Extra credit to customers that can even find them on their cable dial.

Time Warner Cable and Comcast carry most of the same networks, but they arrange them differently. Time Warner likes the shovel-them-all-at-you approach with one simple digital expanded cable tier. Only a handful of networks that should be on the basic lineup cost a little more and most of them are HD movie channels (and inexplicably RFD-TV, which features cattle auctions every Friday afternoon). Comcast nails their customers with a range of tiers and compels many to keep upgrading to get the networks they really want. Just ask subscribers like Thomas Howell of Seattle who was livid when Comcast moved Turner Classic Movies out of the equivalent of basic cable and put it on an enhanced basic tier that cost him an extra $18 a month.

What channels will they add next?

What channels will they add next?

“The s*** they shovel on cable these days and they can’t give us one channel with good movies that aren’t loaded with sex and violence without raping us for more money?” Howell told Stop the Cap! “My wife and I took back their box and we got satellite TV instead. We don’t want to pay for the crap they keep putting on our TV, but they don’t give you much choice.”

Comcast executives are living in a parallel universe and are not listening:

“I think consumers are going to benefit from this transaction,” Cohen added. “They’re going to benefit by quality of service, by quality of offerings, by technological innovation, and I don’t believe there’s any way to argue that they’re going to be hurt from a price perspective as a result of this transaction.”

“Mr. Cohen can pay my cable bill, then,” responded Howell. “He’s obviously got the money to pay whatever Comcast is asking, if he doesn’t get it for free.”

Remarkably even some House Republicans that are normally reticent about interfering with corporate affairs are expressing concern about the deal — especially those who represent districts served by either cable company.

You're gonna love this merger. It's best best best!

You’re gonna love this merger. It’s best best best!

“The proposed merger between Comcast and Time Warner Cable could have a significant impact on competition in the video and broadband marketplace,” said Virginia Republican Bob Goodlatte, the House Judiciary Committee Chairman. Comcast dominates Virginia.

Comcast and Time Warner argue they are not competitors so it will have no impact on the competitive landscape.

The argument from merger proponents is that a larger Comcast will have a stronger position to fight programmer rate increases. But Comcast has a poor record of success at its current monolithic size, with no evidence making it larger will make much difference. Even if it did, will those savings be passed on to subscribers? Cohen signals they won’t when he warns cable bills will not go down as a result of the merger. In fact, Comcast recently added a $1.50 monthly Broadcast TV surcharge to alienate local television stations in the eyes of subscribers and boost Comcast’s profits. But most will blame the cable company for the rate increase, not the local CBS station.

Consumers generally hate their local cable company, with some minor exceptions (WOW! does very well by customers, as does Verizon’s FiOS in customer rankings). Why? Because in 1995 you paid an average of $22.35 for 44 channels of basic cable. In 2012, you paid $61.63 for 150 channels, 100 or more you never watch and don’t want.

Demands for a-la-carte — pay only for the channels you want — have fallen on deaf ears for years, with nothing on the horizon to change the current pricing model. Besides, some critics warn if a-la-carte does become reality, cable companies will dramatically jack up the per channel price to protect their revenue.

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From the Frying Pan Into the Fire: Time Warner Customers to Be Burned by Comcast Buyout

Phillip "Ouch!" Dampier

Phillip “Ouch!” Dampier

Spending the day watching cable business news channels gush approval of last night’s surprise announcement that Comcast would acquire Time Warner Cable is just one excellent reason this deal should never be approved.

CNBC, owned by Comcast, particularly fell all over itself praising the transaction. Some of the reporters — many Time Warner Cable customers — actually believed Comcast would be a significant improvement over TWC. It is, if you want higher modem rental fees, higher cable TV bills, and faster broadband speeds you can’t use because of the company’s looming reintroduction of usage caps. CNBC didn’t bother to mention any of that, and why should they? CNBC reporter David Faber was the first to break the story of the merger last evening and among the first this morning to score an extended, friendly interview with the CEOs of both Comcast and Time Warner Cable, pitching softball questions to the two of them for nearly 15 minutes.

That’s a problem. How often do you hear news reports that include the fact the parent company of the channel has an ownership interest in one of the players. Do you think you are getting the full story when a Comcast employee asks Comcast’s CEO about a multi-billion dollar deal on a network owned and operated by Comcast. Incorporating Time Warner Cable and its news operations into Comcast only makes the problem worse.

As far as cable business news networks and the parade of Wall Street analysts are concerned, this is a fine deal for shareholders, consumers, and the cable business. Ironically, several on-air reporters and commentators defended the merger claiming it isn’t an antitrust issue because Comcast and Time Warner Cable never compete with each other. They never asked why that is so.

They're here!

They’re here!

Comcast is hoping the government will give its merger a pass with few conditions for the same reason, without bothering to note the cable industry has existed as a cartel in the United States for decades, each company with a territory they informally agree not to cross. With this deal, Comcast’s fiefdom will now cover about half of all cable subscribers in the U.S., covering 43 of the 50 largest metropolitan markets, and have about a 30% total market share among all competing providers — by far the largest. An 800 pound gorilla is born.

Three million current Time Warner Cable subscribers will not be coming along for the ride and will likely be auctioned off to Charter or another cable operator in a token gesture to keep Comcast’s total market share at the 30% mark the FCC formerly insisted on as an absolute ownership limit — before Comcast successfully sued to have that limit overturned.

The rest of us can say goodbye to our unlimited broadband plans and get ready to pay substantially more for cable and broadband service. Despite claims from remarkably shallow media reports, an analysis of Comcast and Time Warner Cable’s rates clearly show TWC charges lower prices with fewer “gotcha” fees.

Reviewing some recent promotional offers for new customers, Comcast customers pay nearly $35 more for a triple play package than Time Warner customers pay:

Time Warner Cable's Rob Marcus gets a $56.5 million golden parachute after 43 days on the job as CEO.

Time Warner Cable’s Rob Marcus gets a $56.5 million golden parachute after 43 days on the job as CEO.

The Comcast Starter plan costs $99 per month for the first 12 months with a 2-year agreement that includes a nasty divorce penalty. After 12 months, your price increases to $119.99 for the remaining year. The $99 plan accidentally doesn’t bother to mention that customers renting a Comcast cable modem/gateway will pay an extra $8 a month, which raises the price. Since many cable subscribers also want HD DVR service, that only comes free for the first six months, after which Comcast slaps on a charge ranging from $16-27 a month for the next 18 months. Assuming you are happy with the limited channel lineup of the Starter package (and many are not), you will pay up to $154 a month. Oh, we forgot to mention the Broadcast TV surcharge just introduced that increases the bill another $1.50 a month.

Time Warner Cable’s new customer promotions typically cost around $96 a month, including their annoying modem rental fee. DVR service can range from free to $23 a month depending on the promotion, making your monthly rate around $119 a month for 12 months, with no contract and no penalty if you decide to cancel.

“It is pro-consumer, pro-competitive, and strongly in the public interest,” said Comcast CEO Brian Roberts, defending the deal.

Actually, it is in Comcast’s interest. If approved, the biggest investment Comcast will make is spending $10 billion — not to upgrade Time Warner Cable systems — but to launch a major stock buyback program that will directly benefit shareholders.

“On a personal level, it’s never easy to cede control of a company,” said Rob Marcus, Time Warner Cable’s chief executive. “However in this case, it just makes too much sense.”

Before reaching for a Kleenex to wipe any tears away, consider the fact Marcus will do just fine giving up his leadership of TWC just over a month after taking over. His generous goodbye package is worth $56.5 million, not bad for 43 days of work. Time Warner Cable employees won’t share that bounty. In fact, with $1.5 billion in promised savings from the deal’s “synergies” — code language for layoffs, among other things — a substantial number of Time Warner Cable employees can expect to be fired during the first year of the combined company.

The biggest impact of this deal is a further cementing of the duopoly of cable and phone companies into their cozy positions. Instead of encouraging competition, Comcast’s new size-up will guarantee fewer competitors thanks to the concept of volume discounts. The largest providers get the best prices from cable programmers, while smaller ones pay considerably more for access to CNN, ESPN, and other popular channels. Comcast will benefit from reduced pricing for cable programming, which we suspect will never reach customers through price reductions. But any potential startup will have to think twice before selling television programming at all because the prices they will pay make it impossible to compete with Comcast.

Another satisfied customer

Another satisfied customer

Frontier discovered this problem after acquiring FiOS systems from Verizon in Indiana and the Pacific Northwest. When Verizon’s volume discount prices expired, Frontier’s much smaller customer base meant much higher programming costs on renewal. They were so high, in fact, Frontier literally marketed FiOS customers asking them to give up fiber optic television in favor of satellite.

Unless you have pockets as deep as Google, offering cable TV programming may be too expensive for Comcast’s competitors to offer.

Broadband is already immensely profitable for both Time Warner Cable and Comcast, but now it can be even more profitable as Comcast persuades customers to adopt their wireless gateway/modems (for a price) and imposes a usage cap of around 300GB per month. Yes, Comcast will deliver speed increases Time Warner Cable couldn’t be bothered to offer, but with a pervasive usage cap, the value of more Internet speed may prove limited. It’s a case of moving away from Time Warner’s argument that you don’t need faster Internet speed to Comcast’s offer of faster speed that you can’t use.

Customers hoping for a better customer service experience may have been cheered by this misleading passage in today’s New York Times:

Nonetheless, about 8 million current Time Warner Cable customers will become Comcast customers. That may be a good thing for those customers, as Comcast is seen as an industry leader in terms of providing high-quality television and Internet services, while Time Warner Cable has a reputation for poor customer service.

It may be seen as an industry leader by Comcast itself, but consumers despise Comcast just as much as they hate Time Warner Cable. In fact, the American Consumer Satisfaction Index found Comcast was hardly a prize:

  • ACSI’s lowest rated ISP
  • Second-lowest ranked TV service
  • Third-lowest ranked phone service

Comcast consistently scores as one of the lowest rated companies across all the segments it participates in. It has the dubious description of being the lowest rated company in the lowest rated industry.

So why the near universal disdain for ISPs? Even cable companies have to compete with satellite providers. That’s not the case here. Add to that the relatively few companies, regional near-monopolies, high costs, and unreliable service and speed and you have a recipe for bad customer service and little incentive to improve it.

Customers particularly dislike their experiences with call centers, and the range and pricing of available plans.

Higher prices, usage caps, surcharges, and fewer channels for more money. What’s not to love about that?

Just about a week ago, Rob Marcus unveiled his vision of an upgraded Time Warner Cable that looked good to us, and retained unlimited use broadband service. Apparently this is all a case of “never mind.”

The fact is, a merger of Comcast and Time Warner Cable will only benefit the companies, executives, and shareholders involved, while doing nothing to improve customer service, expand broadband, increase speeds, cut prices, and give customers the service they want. It is anti-consumer, further entrenches Comcast’s enormous market power (it also owns NBC and Universal Studios), and gives one company far too much control over content and distribution, particularly for customers who don’t have AT&T U-verse or Verizon FiOS or a community-owned provider as an alternative.

This deal needs to be rejected. When T-Mobile found itself out of a deal with AT&T, it survived on its own even better than expected. So can Time Warner Cable, with the right management team.

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Comcast Reaches Surprise Agreement to Acquire All of Time Warner Cable for $44 Billion

timewarner twcComcast will announce later this morning it has reached an agreement to acquire all of Time Warner Cable in an all-stock deal worth $44 billion.

If approved by regulators, Comcast will dramatically increase its size as the nation’s largest cable operator with over 33 million subscribers — vastly outnumbering every other cable company in the country. It also likely means Time Warner Cable broadband subscribers will eventually be subject to Comcast’s usage caps and overlimit fees, now being market tested around the country.

The offer of $159 a share for Time Warner Cable stock – $1 less than what TWC CEO Rob Marcus demanded for a buyout – is far higher than the $133 a share in cash and stock offered earlier by Charter Communications.

Tonight’s revelation that Time Warner Cable and Comcast reached a deal, first reported by CNBC, likely caught Charter by surprise. Charter had tried to acquire Time Warner Cable for months, going as far as nominating candidates for TWC’s board of directors that could have influenced a sale of the company. At the same time, Charter thought it was negotiating a friendly deal with Comcast to divide Time Warner Cable territories between the two companies.

Comcast-LogoTime Warner Cable management offered no clues they were negotiating with Comcast and delivered a presentation to shareholders last week promising major upgrades for Time Warner customers and future success as a standalone cable operator. All of those plans are now in doubt.

Comcast and Time Warner Cable reportedly believe the deal will quickly pass any antitrust review before the end of the year because neither company competes in the same markets, but Comcast will offer to divest a token three million subscribers from the combined company, according to sources.

The FCC formerly limited cable companies from owning or controlling more than 30% of the cable industry, but Comcast successfully sued to have that ownership cap overturned. A belief the deal would present looming antitrust problems could be grounds for the U.S. Department of Justice to oppose the deal, likely terminating it.

monopolyConsumer groups hope the deal gets derailed as soon as possible.

“In an already uncompetitive market with high prices that keep going up and up, a merger of the two biggest cable companies should be unthinkable,” said Free Press president Craig Aaron. “This deal would be a disaster for consumers and must be stopped. No one woke up this morning wishing their cable company was bigger or had more control over what they could watch or download. But that — along with higher bills — is  the reality they’ll face tomorrow unless the Department of Justice and the FCC do their jobs and block this merger. Stopping this kind of deal is exactly why we have antitrust laws.”

“It is simply dangerous for a large proportion of our nation’s critical communications infrastructure to be in the hands of one provider,” said Public Knowledge staff attorney John Bergmayer. “It is already the nation’s largest ISP, the nation’s largest video provider, and the nation’s largest home phone provider.  It also controls a movie studio, broadcast network, and many popular cable channels. An enlarged Comcast would be the bully in the schoolyard, able to dictate terms to content creators, Internet companies, other communications networks that must interconnect with it, and distributors who must access its content.”
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Quebec’s Cogeco Shopping for U.S. Cable Companies to Buy

Phillip Dampier February 6, 2014 Atlantic Broadband, Canada, Cogeco, Competition No Comments

cogecoWith the Canadian cable business locked up by Shaw, Rogers, and Vidéotron, Ltd., suburban Ontario and Quebec cable operator Cogeco announced intentions to acquire at least one small U.S. cable company later this year after it pays down more debt.

CEO Louis Audet told shareholders that cable operators in Canada are large, very profitable, and absolutely not for sale. That leaves few growth opportunities for the fourth largest cable operator in Canada. Instead of spending money to expand its current footprint into unserved areas, the company will look south of the border for buying opportunities.

Audet

Audet

“What you see is pretty much what you get unless something really special comes out of left field,” Audet said. “The potential exists in the U.S. where it doesn’t in Canada.”

Cogeco’s financial resources are too limited to challenge the three largest cable operators in the country, and Audet said Cogeco has no intention of selling its own business. In eastern Canada where Cogeco provides service, Rogers Communications would be the most likely to buy Cogeco. Rogers tried, and failed, to acquire Quebec-based Vidéotron in 2000 — losing out to media conglomerate Quebecor. But Rogers did succeed in picking up Shaw’s Ontario-based Mountain Cablevision, Ltd. last January.

Cogeco has pursued other cable companies outside of Canada in the past. Its acquisition of Portugal’s Cabovisao in 2006 was widely panned, and after Portugal’s economy crashed in the Great Recession, Cogeco ended up writing off its net investment, taking a $56.7 million loss. Cogeco acquired Cabovisao for $660 million and sold it to ALTICE six years later for the fire sale price of $59.3 million.

atlanticIn 2012, Cogeco acquired rural and small city cable operator Atlantic Broadband for $1.36 billion. Atlantic offers service in Pennsylvania, Florida, Maryland, Delaware, and South Carolina — mostly in communities ignored by Comcast and Time Warner Cable.

Possible Cogeco acquisition targets include Cable ONE, WOW!, Wave Broadband, SureWest/Consolidated Communications, Midcontinent Communications, Buckeye Cable, and/or Blue Ridge Communications, to name a few.

In the meantime, Cogeco is following the lead of U.S. cable operators by intensifying service expansion in commercial areas, particularly industrial parks and office complexes. Selling larger businesses cable broadband could net Cogeco $600-1,200 a month per account.

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More Hackery on Broadband Regulation from the AT&T-Funded Progressive Policy Institute

Phillip "Follow the Money" Dampier

Phillip “Follow the Money” Dampier

“In the 1990s, U.S. policymakers faced critical choices about who should build the Internet, how it should be governed, and to what extent it should be regulated and taxed. For the most part, they chose wisely to open a regulated telecommunications market to competition, stimulate private investment in broadband and digital technologies, and democratize access.” — Will Marshall, guest columnist

Is competition in Internet access robust enough for you? Has your provider been sufficiently stimulated to invest in the latest broadband technologies to keep America at the top of broadband speed and availability rankings? Is Net Neutrality the law of the land or the latest victim of a Verizon lawsuit to overturn the concept of democratizing access to online content?

I’m not certain what country Will Marshall lives in, but for most Americans, Internet access is provided by a duopoly of providers that must be dragged kicking and screaming to upgrade their networks without jacking up prices and limiting usage.

Marshall is president and founder of the Progressive Policy Institute, a so-called “third way” group inspired by centrist Democrats led by President Bill Clinton in the 1990s. Unlike traditional liberals suspicious of corporate agendas, these Democrats were friendly to big business and welcomed the largess of corporate cash to keep them competitive in election races. It was under this atmosphere that Clinton signed the bought-and-paid-for 1996 Telecom Act, ghostwritten by lobbyists for big broadcasters, phone and cable companies, and other big media interests. Long on rhetoric about self-governing, free market competition but short on specifics, the ’96 law transformed the media landscape in ways that still impact us today.

ppiMedia ownership laws were relaxed, allowing massive buyouts of radio stations under a handful of giant corporations like Clear Channel, which promptly dispensed with large numbers of employees that provided locally produced programming. In their place, we now get cookie-cutter radio that sounds the same from Maine to Oregon. Television stations eagerly began lobbying for a similar framework for relaxing ownership limits in their business. Phone companies won their own freedoms from regulation, including largely toothless broadband regulations that allowed Internet providers to declare victory regardless of how good or bad broadband has gotten in the United States.

Marshall’s views appeared in a guest column this week in The Orlando Sentinel, which is open to publishing opinion pieces from writers hailing from Washington, D.C., without bothering to offer readers with some full disclosure.

Marshall

Marshall

While Marshall’s opinions may be his own, readers should be aware that PPI would likely not exist without its corporate sponsors — among them AT&T, hardly a disinterested player in the telecommunications policy debate.

Marshall’s column suggests competition is doing a great job at keeping prices low and allows you – the consumer – to decide which technologies and services thrive. There must be another reason my Time Warner Cable bill keeps increasing and my choice for broadband technology — fiber optics — is nowhere in sight. I don’t have a choice of Verizon FiOS, in part because phone and cable companies maintain fiefdoms where other phone and cable companies don’t dare to tread. That leaves me with one other option: Frontier Communications, which is still encouraging me to sign up for their 3.1Mbps DSL.

“The broadband Internet also is a powerful magnet for private investment,” Marshall writes. “In 2013, telecom and tech companies topped PPI’s ranking of the companies investing the most in the U.S. economy. And America is moving at warp speed toward the ‘Internet of Everything,’ which promises to spread the productivity-raising potential of digital technology across the entire economy.”

Nothing about AT&T or the cable companies is about “warp speed.” In reality, AT&T and Verizon plan to pour their enormous profits into corporate set-asides to repurchase their own stock, pay dividends to shareholders, and continue to richly compensate their executives. It’s good to know that PPI offers rankings that place telecom companies on top. Unfortunately, those without a financial connection to AT&T are less optimistic. The U.S. continues its long slide away from broadband leadership as even developing countries in the former Eastern Bloc race ahead of us. Verizon’s biggest single investment of 2013 wasn’t in the U.S. economy — it was to spend $130 billion to buyout U.K.-based Vodafone’s 45% ownership interest in Verizon Wireless. Verizon’s customers get stalled FiOS expansion, Cadillac-priced wireless service, and a plan to ditch rural landlines and push those customers to cell service instead.

AT&T financially supports the Progressive Policy Institute

AT&T financially supports the Progressive Policy Institute

“A recent federal court decision regarding the FCC’s Open Internet Order has prompted pro-regulatory advocates from the ’90s to demand a rewrite of the legal framework that allowed today’s Internet to flourish,” Marshall writes in a section that also includes insidious NSA wiretapping and Internet censorship in Russia and China.

Marshall’s AT&T public policy agenda is showing.

Net Neutrality proponents don’t advocate an open Internet for no reason. It was AT&T’s former CEO Ed Whitacre that threw down the gauntlet declaring Google and other content providers would not be allowed to use AT&T’s pipes for free. AT&T has since patented technology that will allow it to discriminate in favor of preferred web traffic while artificially slowing down content it doesn’t like on its network.

“Pro-regulatory advocates” are not the ones advocating change — it is AT&T, Verizon, and Comcast, among others, that want to monetize Internet usage and web traffic for even higher profits. Net Neutrality as law protects the Internet experience Marshall celebrates. He just can’t see past AT&T’s money to realize that.

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HBO’s New Subscriber Growth is Mostly From Non-Paying Customers

Phillip Dampier February 5, 2014 Consumer News, Online Video No Comments

While cable companies continue to point to growing subscriber numbers for premium movie channels as evidence cable cord-cutting is not taking its toll, the owner of the country’s largest pay movie channel has undercut their argument.

Time Warner (Entertainment), owner of HBO, disclosed to investors recently that although the network picked up nearly two million new subscriber in the United States, most of those were watching the network for free through temporary promotional offers.

hbo free

Free or discounted offers for premium movie networks are not uncommon. Time Warner Cable frequently bundles a one-year subscription to Showtime/The Movie Channel in its promotions. HBO and Cinemax are often offered for 3-6 months at no charge by other pay television providers.

Many viewers drop the network(s) (or negotiate another free viewing promotion) when charges start appearing on their bill. For years, premium movie channels cost around $13 a month, and many cable operators sold extra premium channels at a discounted $7 a month. But prices have risen dramatically over the last five years. Time Warner Cable, for example, now charges $15.95/mo for HBO, Cinemax, Showtime, and/or Starz.

Because of higher prices, HBO’s subscription revenue of $1.3 billion during the fourth quarter was up 8% year over year.

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US & Canada Agree: Our Internet Providers Are Bad for Us and We’re Falling Behind

Phillip "Free Trade in Bad Broadband" Dampier

Phillip “Free Trade in Bad Broadband” Dampier

Sure we’ve had our cultural skirmishes in the past,  but on one thing we can all mostly agree: our largest cable, phone, and broadband providers generally suck.

Outside of hockey season, Canada’s national pastime is hating Bell, Rogers, Vidéotron, Telus, and Shaw. The chorus of complaints is unending on overbilling, bundling of dozens of channels almost nobody watches but everybody pays for, outrageous long-term contracts, and bloodsucking Internet overlimit fees. In fact, dissatisfaction is so pervasive, the Conservative government of Stephen Harper spent this past summer waving shiny keys of distraction promising Canadians telecom relief while hoping voters didn’t notice their tax dollars were being spent by the country’s national security apparatus to spy on Brazil for big energy companies.

The Montreal Gazette is now collecting horror stories about dreadful service, mysterious price hikes, and promised credits gone missing on behalf of readers fed up with Bell and Vidéotron.

Rogers Cable, always thoughtful and pleasant, punished a Ottawa man coping with multiple sclerosis and cancer with a $1,288 bill, quickly turned over to a collection agency after his home burned to the ground. It took headlines spread across Ontario newspapers to get the cable company to relent.

Things are no better in the United States where the American Customer Satisfaction Index rates telecom companies worse than the post office, health insurers airlines, and the bird flu. National Public Radio opened the floodgates when it asked listeners to rate their personal satisfaction with their Internet Service Provider — almost always the local cable or telephone company.

The phone company Canadians love to hate.

The phone company Canadians love to hate.

Many responded their Internet access is horribly slow, often goes out, and is hugely overpriced. In response, the cable industry’s hack-in-chief did little more than shrug his shoulders — knowing full well American broadband exists in a cozy monopoly or duopoly in most American cities.

Breann Neal of Hudson, Ill., told NPR she has one choice — DSL, which is much slower than advertised. Hudson is Frontier Communications country, and it is a comfortable area to serve because local cable competition from Mediacom, America’s worst cable company, is miles away from Neal’s home.

“There’s no incentive for them to make it better for us because we’re still paying them every month … and there’s no competition,” Neal says.

Samantha Laws, who gets her Internet through her cable provider, says she also only has one option.

“It goes out at least once a day, and it’s been getting worse the last few months,” Laws says. She works with a pet-sitting company that handles all of its scheduling through email and the company website. At times she can’t do her job because of the unreliable connection.

Chicago is in Comcast’s territory and the company is quite comfortable cashing your check while AT&T takes its sweet time launching U-verse in the Windy City. AT&T isn’t about to throw money at improving DSL while local residents wait for U-verse and Comcast doesn’t need to spend a lot in Chicago when the alternative is AT&T.

comcast sucksWhere there is no disruptive new player in town to shake things up, there is little incentive to speed broadband service up. But there is plenty of room to keep increasing prices for a service that is becoming as important as a working telephone. Companies are using broadband profits to cover increasing losses from pay television service, investing in stock buybacks, paying dividends to shareholders, or just putting the money in a bank, often offshore.

NPR’s All Things Considered:

“[For] at least 77 percent of the country, your only choice for a high-capacity, high-speed Internet connection is your local cable monopoly,” says Susan Crawford, a visiting professor at Harvard Law School. She is also the author of Captive Audience: The Telecom Industry and Monopoly Power in the New Gilded Age.

Crawford says that today’s high-speed Internet infrastructure is equivalent to when the railroad lines were controlled by a very few moguls who divided up the country between themselves and gouged everybody on prices.

She says the U.S. has fallen behind other countries in providing broadband. At best, Crawford says, the U.S. is at the middle of the pack and is far below many countries when it comes to fiber optic penetration. Given that the Internet was developed in the U.S., she says the gap is a result of failures in policy.

“These major infrastructure businesses aren’t like other market businesses,” Crawford says. “It is very expensive to install them in the first place, and then they build up enormous barriers of entry around them. It really doesn’t make sense to try to compete with a player like Comcast or Time Warner Cable.”

So Crawford is calling for is a major public works projects to install fiber optic infrastructure — a public grid that private companies could then use to deliver Internet service.

Powell

Powell

That’s an idea met with hand-wringing and concern-trolling Revolving Door Olympian Michael Powell, who made his way from former chairman of the Federal Communications Commission during the first term of George W. Bush’s administration straight into the arms of Big Cable as president of their national trade association, the NCTA.

Powell, well compensated in his new role representing the cable industry, wants Americans to consider wireless 3G and 4G broadband (with usage caps as low as a few hundred megabytes per month) equivalent competitors to the local cable and phone company.

“I think to exclude [wireless] as a substitutable, competitive alternative is an error that leads you to believe the market is substantially more concentrated that it actually is,” Powell says.

Of course, Powell’s new career includes a paycheck large enough to afford the wireless data bills that would shock the rest of us. All that money also apparently blinds him to the reality the two largest wireless providers in America are AT&T and Verizon — the same two companies that are part of the duopoly in wired broadband. It’s even worse in Canada, where Rogers, Bell, and Telus dominate wired and wireless broadband.

Although America isn’t even close to having the fastest broadband speeds, Powell wants you to know the speeds you do get are good enough.

“I think taking a snapshot and declaring us as somehow dangerously falling behind is just not substantiated by the data,” he says. He says it is like taking a snapshot of speed skaters, where there might be a few seconds separating the leaders, but no one is “meaningfully out of the race.”

last placeThat is why we still celebrate and honor Svetlana Radkevich from Belarus who competed in the speed skating competition at the Vancouver 2010 Winter Olympics. She made it to the finish line and ranked 33rd. Ironically, South Korea ranked fastest overall that year, taking home three gold and two silver medals. In Powell’s world, that’s a distinction without much difference. You don’t need South Korean speed and gold medals when Belarus is enough. That argument always plays well in the United States, where Americans can choose between Amtrak or an airline for a long distance trip. Who needs a non-stop flight when a leisurely train ride will get you there… eventually.

There are a handful of providers uncomfortable with the mediocre broadband slow lane. Google is among them. So are community broadband providers installing fiber broadband and delivering gigabit Internet speeds. EPB in Chattanooga is among them, and it has already made a difference for that city’s digital economy neither AT&T or Comcast could deliver.

Unsurprisingly, Powell thinks community broadband is a really bad idea because private companies are already delivering broadband service — while laughing all the way to the bank.

If a community really wants gold medal broadband, Powell says, they should be able to have it. But Powell conveniently forgets to mention NCTA’s largest members, including Comcast and Time Warner Cable, spend millions lobbying federal and state governments to make publicly owned broadband illegal. After all, cable companies know what is best.

All Things Considered recently asked its fans on Facebook, “How satisfied are you with your Internet service provider?” Many responded that they didn’t like their Internet service, that it often goes out and that their connection was often “painfully slow.” Listen to the full report first aired Jan. 11, 2014. (11:30)
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Savings from Cable Consolidation? Wall Street Analyst Says They Don’t Exist

In Search Of... Savings

In Search Of… Savings

The cable industry’s week-long feeding frenzy over consolidating Time Warner Cable out of existence comes with the theory that growing larger guarantees cheaper programming costs from volume discounts and influence. But hang on, says Wall Street analyst firm Sanford C. Bernstein.

This week, senior analyst Todd Juenger released a report, “Will Cable Consolidation Slow Down Affiliate Fee Growth? We Say ‘No,’” that questions the theory the bigger the company, the more leverage available to keep costs down.

Juenger says that few customers are in love with their local cable company, and programmers know it. If another brawl erupts between CBS and a cable operator, the presumption of leverage to quickly resolve the dispute is more hope than reality because customers will readily abandon one provider for another to get what they want.

“Consumers are much more loyal to their favorite TV networks than they are to their distributor,” Juenger says. “Every time a distributor has tried to fight back by dropping the content from one of these [big programming] companies, it has ended badly for the distributor because consumers will switch distributors, not TV networks.”

Programming carriage wars will continue to hurt cable companies as long as there is a satellite or telco-TV competitor ready to sign up disgruntled customers. If a suite of Viacom-owned networks are dropped during a cable fee dispute, the cable operator will save around $2.75 a month per subscriber. But if that subscriber decides to change providers, operators lose as much as $40 in marketing costs paid to attract that subscriber in the first place.

Juenger believes the only way combining cable operators will save on programming fees is when smaller cable operators like Charter get the benefit of big discounts on programming offered to larger, high volume providers like Time Warner Cable.

Juenger adds bringing Comcast in as a buyer gets complicated because if Comcast tries to drop networks, programmers might have leverage by appealing to the federal government with claims Comcast is violating its agreement with the federal government to avoid abuse of market power to strangle competitors.

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Cox Communications Exploring Bid for Time Warner Cable

coxCox Communications is contemplating jumping into the bidding for Time Warner Cable either on its own or with others, according to a story published in today’s Wall Street Journal.

Privately held Cox is the country’s third largest cable operator, right behind Time Warner Cable, with nearly 4.5 million subscribers. It’s slightly larger than Charter Communications, which itself wants to acquire TWC.

timewarner twcCox and Cablevision, the nation’s two largest privately held or controlled cable companies, have both been mentioned as targets for takeover in a rush to consolidate the cable industry. Cablevision has been rumored to be on the verge of selling for years, but the Dolan family that founded the cable operator has the final say. Cox previously indicated it had no intention of selling, preferring to explore buying opportunities.

Speculation is mounting that Comcast, Charter, and now perhaps Cox could offer a joint bid for Time Warner Cable, splitting up the company and absorbing TWC subscribers in their own operations without attracting unwanted attention from antitrust regulators and the FCC, either which could effectively torpedo a deal.

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U.S. Cable Broadband Market Saturated; Low-Income Customer Growth Opportunities Remain

Moffett

Moffett

Wall Street is worried the cable industry will not be able to report major subscriber gains going forward because just about every middle/upper-income customer that wants broadband within cable’s footprint already has the service from either the phone or cable company.

Cable analyst Craig Moffett from MoffettNathanson Research predicts singing up the last 20% of Americans who don’t subscribe to broadband service will be challenging. As of today, 73% have the service, up 2.5% from last year. An increasingly anemic growth rate is a sign the marketplace is getting saturated, with only low-income Americans underrepresented, primarily because they can’t afford the asking price. Most of the rest don’t own or want computers or Internet access or live in a rural area where the service is unavailable.

Under these circumstances, it is no surprise broadband providers are reporting lower new customer gains. Time Warner Cable and Cablevision actually lost broadband customers in the third quarter, mostly to Verizon FiOS. For the last five years, the cable industry has picked up most of its broadband customers from phone companies offering only DSL service.

“To be sure cable is still taking share [from telco DSL] but it is doing so at a much more modest pace,” Moffett said.

The industry’s best chance for new subscriber growth appears to be bundling computers or tablets with an entry-level broadband offering targeting the poor.

Although cable companies are not supplying free PCs just yet, many are introducing relatively slow, budget-priced broadband tiers to attract lower-income subscribers.

Time Warner Cable introduced a $14.95 2/1Mbps broadband tier this month the company hopes will attract price-sensitive customers, especially those now subscribed to low-speed DSL.

Comcast has Internet Essentials, a $10 slow speed broadband service for families with children enrolled in the federal student lunch program. It is also rolling out a “prepaid Internet service” directly targeting low-income customers. Prepaid customers pay $69.95 for an activation kit containing a DOCSIS 3 modem and a month of broadband service. Renewals are priced at $15 for a week or $45 for a month for 3Mbps service with a 768kbps upload rate.

Most other cable providers offer entry-level broadband speeds, but usually only as a retention tool. Even if the industry custom-targets low-speed tiers to low-income homes, many customers may never make it past the cable industry’s credit check procedure. Comcast’s prepaid offering avoids that problem.

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