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Stop the Cap!’s Open Letter to N.Y. Public Service Commission: No Rush to Judgment

letterhead

August 19, 2015

Hon. Kathleen H. Burgess
Secretary, Public Service Commission
Three Empire State Plaza
Albany, NY 12223-1350

Case Number: 14-C-0370

Dear Ms. Burgess,

After years of allowing the telecommunications industry in New York to operate with little or no oversight, the need for an extensive and comprehensive review of the impact of New York’s regulatory policies has never been greater.

Let us remind the Commission of the status quo:

  • As Verizon winds down its FiOS initiative, other states are getting cutting-edge services like Google Fiber, AT&T U-verse with GigaPower, CenturyLink Prism, and other gigabit-speed broadband service competition. In contrast, the largest telecommunications companies in New York have stalled offering better service to New Yorkers.
  • Time Warner Cable has left all of upstate New York with no better than 50/5Mbps broadband – a top speed that has not risen in at least five years.
  • Frontier Communications has announced fiber upgrades in service areas it is acquiring while its largest New York service area – Rochester, languishes with copper-based ADSL service that often delivers no better than 3-6Mbps, well below the FCC’s minimum 25Mbps definition of broadband.
  • Verizon Communications, the state’s largest telephone company, is accused of reneging on its FiOS commitments in New York City and has left upstate New York cities with nothing better than DSL service, giving Time Warner Cable a monopoly on 25+Mbps broadband in most areas. It has also talked openly of selling off its rural landline network or scrapping it altogether, potentially forcing customers to an inferior wireless landline replacement it calls Voice Link.

As the Commission is also well aware, there are a number of recent high-profile issues relating to telecommunications matters that have a direct impact on consumers and businesses in this state – some that are currently before the Commission for review. Largest among them is another acquisition involving Time Warner Cable, this time from Charter Communications. That single issue alone will impact the majority of broadband consumers in New York because Time Warner Cable is the state’s dominant Internet Service Provider for high speed Internet services, especially upstate.

These issues are of monumental importance to the comprehensive examination and study of the telecommunications industry in New York promised by Chairwoman Audrey Zibelman. The Charter-Time Warner Cable merger alone has the potential of affecting millions of New York residents for years to come.

Although this study was first announced to Speaker Sheldon Silver, the Honorable Jeffrey Klein, and the Honorable Dean Skelos in a letter on March 28, 2014, followed up by a notification that Chairwoman Zibelman intended to commence the study within 45 days of her letter of May 13, 2014, the first public notice seeking comments from stakeholders and consumers was issued more than a year later on June 23, 2015 (less than two months ago), with comments due by August 24, 2015.

With respect, providing a 60-day comment window in the middle of summer along with a handful of public hearings scattered across the state with as little as three weeks’ advance notice is wholly inadequate for a broad study of this importance. The Commission’s ambitious schedule to contemplate the state of telecommunications across all of New York State will likely be shorter than the review of the 2014-2015 Comcast-Time Warner Cable merger transaction which started May 15, 2014 and ended April 30, 2015.

We have heard from New York residents upset about how the Commission is handling its review. One complained to us the Commission had more than a year to prepare for its study while giving New York residents short notice to attend poorly advertised public hearings in a distant city, and two months at most to share their feelings with the Commission in writing. One woman described having to find a hearing that was, at best, 60 miles away and located at a city hall unfamiliar to those not local to the area, where suitable parking was inconvenient and difficult as she attempted a lengthy walk to the hearing location at the age of 69.

Several of our members also complained there are more suitable public-friendly venues beyond paid parking downtown city administration buildings or deserted campuses in the middle of summer break. Many asked why the Commission does not seem to have a social media presence or sponsor live video streaming of hearings where residents can participate by phone or online and avoid inconvenient travel to a distant city. Perhaps the Commission could be enlightened to see how New York’s telecommunications companies actually perform during such a hearing.

While we think it is very useful for the Commission to have direct input from the public, we are uncertain about how the Commission intends to manage those comments. We were disappointed to find no public outline of what the Commission intended to include in its evaluation of a topic as broad as “the state of telecommunications in New York.”

Too often, providers downplay service complaints from consumers as “anecdotal evidence” or “isolated incidents.” But if the Commission sought specific input on a topic such as the availability of FiOS in Manhattan, consumers can provide useful input on the exact location(s) where service was requested but not provided.

If the Commission received information from an incumbent provider claiming it was providing broadband service to low income residents, consumers could share on-point experiences as to whether those claims were true, true with conditions the Commission might not be aware of (paperwork requirements, onerous terms, etc.) or false.

If the Commission sought input on rural broadband, providers might point to a broadband availability map that suggests there is robust competition and customer choice. But the Commission could learn from residents asked to share their direct experiences that the map was inaccurate or outdated, including providers that only service commercial customers, or those that cannot provide service that qualifies as “broadband” by the Federal Communications Commission.

A full and open investigation is essential to finding the truth about telecommunications in New York. The Commission needs to understand whether problems are unique to one customer in one part of the state or common among a million people statewide. We urge the Commission to rethink its current approach.

New Yorkers deserve public fact-finding hearings inviting input on the specific issues the Commission is exploring. New Yorkers need longer comment windows, more notice of public hearings, and a generous extension of the current deadline(s) to allow comments to be received for at least 60 additional days.

Most critically, we need hearings bringing the public and stakeholders together to offer sometimes-adversarial testimony to build a factual, evidence-based record on which the Commission can credibly defend its oversight of the telecommunications services that are a critical part of every New Yorker’s life.

The Commission’s policies going forward may have a profound effect on making sure an elderly couple in the Adirondacks can keep a functioning landline, if affordable Internet will be available to an economically-distressed single working mother in the Bronx, or if upstate New York can compete in the new digital economy with gigabit fiber broadband to support small businesses like those run by former employees of downsized companies like Eastman Kodak and Xerox in Rochester.

Yours very truly,

Phillip M. Dampier
Director

Victim of Explosion Fighting With Time Warner Cable’s Lawyers Over Bottles of Wine

Phillip Dampier August 11, 2015 Consumer News, Time Warner Cable No Comments
Jurors are into their second month hearing testimony about who has responsibility to pay damages over a fiber cable installation gone bad. Now the lawyers are debating the value of the wines stored inside the restaurant.

Jurors are into their second month of testimony about who has responsibility to pay damages over a fiber cable installation that breached a gas line. Now the lawyers are debating the value of the vintage wines stored inside the destroyed restaurant.

On Feb. 19, 2013, a contractor hired by Time Warner Cable to install a fiber optic line instead pierced a two-inch gas line next to the Country Club Plaza and JJ’s Restaurant in Kansas City, Mo. The resulting explosion demolished the restaurant, leaving one worker dead, and another 15 injured.

But the impact of that day still lingers more than two years later as the owner of JJ’s fights Time Warner Cable’s attorneys in court over his damage claim, right down to the value of individual wine bottles stored at the restaurant.

Jimme Frantze, the owner of JJ’s Restaurant, is seeking more than $9.3 million in damages to cover the loss of the building, his net lost income, and the costs involved in starting a new restaurant. Time Warner Cable said no.

Jurors are now into the second month of the trial, which has spent much of its time dwelling on the actions of three companies involved in the explosion and its aftermath: Time Warner Cable, which hired the contractor for the project, Heartland Midwest LLC, the Olathe-based excavating contractor hired to do the work, and Missouri Gas Energy, the company that responded to the initial reports of a natural gas leak.

But these days Time Warner Cable’s attorney is questioning Frantze about how he valued the wine bottles stored at the restaurant.

The Kansas City Star reports Frantze has told jurors it has been difficult to prove the fair value of many of the wines because they are no longer available for retail sale. Frantze lost most of his business records in the explosion and fire that followed, so he has attempted to find comparable bottles online for sale to establish a replacement value.

Time Warner Cable Attorney Ken Snow drilled down on the specific value of several bottles formerly a part of Frantze’s collection.

timewarner twcOne 1929 bottle initially valued at $15,000 was re-estimated downwards by Frantze to $5,000 after he found an appraiser who valued it at a lower amount.

“I just acquiesced,” he said, adding, “There’s a lot of emotion on my part with some of the older vintages.” That 1929 bottle, he added, “was in pristine condition. I probably had it for 30 years.”

Snow also questioned Frantze about his assigned value of $2,600 to a bottle of 2000 wine appraised elsewhere at $1,100. One other bottle was appraised at $575, not the $1,900 Frantze estimated.

Snow also argued JJ’s was not the success story Frantze might suggest. Snow asserted the restaurant was struggling at the time of the explosion, a suggestion contested by Frantze.

On Monday, Frantze appeared in court accompanied by oxygen tanks, two weeks after a liver transplant. The same year of the explosion, Frantze was diagnosed with liver cancer.

Time Warner Cable Nears Completion of San Antonio’s Maxx Upgrade; Faster Speeds for All

twcGreenTime Warner Cable is nearing the end of its $60 million “Maxx” upgrade of San Antonio, company officials said in a news release.

The Maxx upgrade most noticeably boosts broadband speeds up to six times faster than what customers used to receive, at no change in price, up to 300/20Mbps.

SpeedChart

Time Warner Cable Maxx Broadband Speed Comparison

Earthlink customers will also get a speed boost.  The traditional EarthLink Broadband plan will become EarthLink Extreme with speed up to 50/5Mbps. EarthLink Cable Max will become EarthLink Ultimate with speed up to 100/10Mbps. Customers who want faster Internet will have to switch back to Time Warner Cable to upgrade above 100Mbps.

As part of the upgrade, Time Warner has converted its analog television signals to all-digital service. Free digital adapters are available to customers until Dec. 28, 2016. After that, each adapter will cost $2.75 a month.

Republican FCC Commissions Itching to Move on Charter-Time Warner-Bright House Cable Merger

Pai

Pai

Republican FCC Commissioners Ajit Pai and Michael O’Rielly are in a hurry to start the merger review clock on Charter Communications’ acquisition of Time Warner Cable while the agency contemplates how to handle access to submitted documents the two companies insist should be confidential.

“We are deeply dismayed that the FCC’s leadership seems unwilling to begin the formal review of the Charter Communications/Time Warner Cable/Bright House Networks transaction until Commissioners agree to change the FCC’s procedures for protecting confidential information,” the commissioners said. “We don’t plan to allow this maneuver to deter us from giving careful scrutiny to the important item in front of us, which if adopted, would apply not only to future transactions but all Commission proceedings. Among other things, we believe that the better course would be for the Commission to seek public input on these proposed procedures before moving ahead.”

The FCC has a responsibility to review merger proposals to decide if they are in “the public interest, convenience, and necessity.”

O'Rielly

O’Rielly

Part of that process is reviewing proprietary information sent by the applicants, usually with the understanding the information will be kept confidential or released to the public only in redacted form. Competitors can only get a limited view of the documents the FCC reviews in making its decision about a merger, but some have successfully requested limited access to unredacted documents, including contracts the companies have with third-party programmers.

The fact those documents might be shared with competitors like Dish Networks was not acceptable to CBS, Disney, 21st Century Fox, Scripps Networks, Time Warner Inc., and Univision, all fearing competitors would learn confidential pricing information and use it to their advantage during the next round of contract renewal negotiations. Those media companies sued the FCC in the D.C. Court of Appeals and largely won their case.

Now the FCC has to craft new rules to decide what information they can share with competitors and the public. That process has slowed the start of the 180 day clock the FCC uses to review merger deals, and the two minority Republicans serving as commissioners on the FCC are annoyed.

“The agency has access to the relevant documents at issue in this matter and can continue to evaluate the proposed merger….” So let’s start the ‘aspirational’ merger review shot clock and get on with the process,” said Pai and O’Rielly.

Time Warner Cable Continues Commitment to Keep Unlimited Data, Expand Maxx Upgrades

timewarner twcTime Warner Cable will continue to offer customers unlimited data plans and further expand its Maxx upgrade program until it reaches the company’s entire service area or the merger with Charter Communications is approved by regulators.

CEO Robert Marcus told investors on a morning conference call the company has been “completely committed to delivering an unlimited broadband offering in connection with whatever else we do, because we know customers do place a value on the peace of mind that comes with unlimited plans.”

Marcus continued to admit his company’s experiments with voluntary usage pricing have largely failed, noting the “vast majority” of customers choose unlimited plans, and Time Warner “never had any intention of substituting the availability of unlimited with exclusively usage-based programs.”

The original goal for Time Warner’s voluntary usage pricing options “was to offer customers who use less bandwidth, who maybe just do e-mail, an opportunity to pay less and have an Internet offering that better meets their demands for both usage and price.”

Time Warner Cable goes out of its way to advertise "No Data Caps."

Time Warner Cable goes out of its way to advertise “No Data Caps.”

Most broadband customers do not want usage-based billing or usage-capped Internet, but some providers force such usage plans on customers anyway.

“Different providers have had different philosophies on these things,” Marcus offered.

Marcus reported TWC Maxx deployment in Austin is finished, and the company is working on completing upgrades in Dallas, San Antonio, Raleigh, Charlotte, Kansas City and Hawaii by year-end. The latest markets to be upgraded — San Diego, Wilmington and Greensboro, N.C., will start this year, but speed increases will not begin until next year. The upgrades are improving customer satisfaction with a 35% drop in voluntary disconnects in Maxx service areas, but will cost an estimated $4.45 billion in spending this year by the country’s second largest cable operator.

Time Warner Cable Maxx has been very successful at bringing new customers to Time Warner, attracted by improved broadband speeds and better service, Marcus told investors. Maxx customers see broadband speed upgrades that dramatically boost speeds at no additional cost. Standard Internet speeds in non-Maxx markets are 15Mbps. In Maxx areas, customers receive 50Mbps. Customers signed up for 50Mbps “Ultimate” Internet in Maxx markets see that speed raised to 300Mbps.

Large sections of Time Warner Cable territory have yet to be upgraded, however. Marcus today said he plans to continue the Maxx upgrade effort as the Charter merger proceeds through a lengthy regulatory review process. If the merger is delayed or unsuccessful, Time Warner likely will announce additional cities targeted for upgrades in 2016, but customers should not expect speed changes until later that year or 2017. If the Charter merger is approved, areas bypassed for Maxx upgrades will likely get a more modest upgrade promised by Charter, with maximum broadband speeds of 100Mbps.

Marcus

Marcus

Time Warner Cable spent the last quarter pushing lower priced promotions to attract new and returning customers. That, combined with higher programming costs, increased spending on network upgrades, and pension expenses cut into the cable company’s profits, which declined 7.2% in the last quarter.

Time Warner Cable added 66,000 residential customers overall, its best ever second quarter and its first rise in any quarter since 2008, according to Marcus. Time Warner added 172,000 new broadband customers and 252,000 voice subscribers, primarily from a promotion that allows any subscriber to add phone service to their package for $10 a month. But Time Warner is not immune to cord cutting, and lost 45,000 video customers in the second quarter.

The cable company may have stepped up promotions to be certain it can report good results as investors wait for the Charter Communications merger to win or lose regulator approval. A triple play promotion for new customers runs as low as $89 a month and despite touting an earlier philosophy the company did not see much value promoting cheap phone service, it has apparently reversed course, boosting triple play upgrades as a result of reduced pricing.

It is also continuing strong customer retention policies, a sign Time Warner Cable will continue to respond when customers threaten to cancel unless they get a better deal.

“Our whole view of retention hasn’t really changed since the middle part of 2014,” said William F. Osbourn, Jr., acting co-chief financial officer. “Our view is that we will always rather save the customer than lose the customer, but I think we’re pretty disciplined about not giving away the farm in doing that.”

Some other highlights:

  • Programming costs rose 11%, a sure bet another rate increase will be forthcoming in the future;
  • Marcus loves mergers: “The only thing I’d add to that is that from an industry structure perspective, in roughly a quarter of our footprint, the deal [between AT&T and DirecTV] results in two competitors becoming one. And, generally speaking, that’s a positive for all the players in the industry”;
  • Time Warner Cable will continue to encourage customers to use their own set-top box devices (Roku, Apple TV, etc.) as an alternative to the traditional cable set-top box;
  • Roughly 12% of customers now own their own cable modems to escape Time Warner’s rental fee;
  • Despite the clamor for “skinny bundles” 82% of Time Warner Cable customers subscribed to the full video package;
  • In Maxx areas, customers need set-top boxes on all of their connected televisions. Most are opting for the cheapest option, taking an average of two less-capable DTA boxes instead of more expensive set-tops. DVR subscriber numbers have remain largely unchanged after Maxx upgrades.

VP Biden Announces Broadband-Challenged Rochester, N.Y. Home to National Photonics Institute

Vice president Biden

Vice President Biden in Rochester, N.Y.

Vice President Joe Biden and New York Gov. Andrew Cuomo today announced Rochester, N.Y., a city notorious for its slow broadband, will be the home of the $600 million Integrated Photonics Institute for Manufacturing Innovation, a hub supporting the development of photonics — technology that powers everything from fiber optic broadband to laser surgery.

Rochester, the home of dramatically downsized household names like Eastman Kodak, Xerox, and Bausch and Lomb, could see thousands of new high technology jobs created in the western New York city to develop new products and services that depend on light waves.

“The innovation and jobs this institute will create will be a game changer for Rochester and the entire state,” said U.S. Rep. Louise Slaughter, (D-Rochester). “This is a huge win that will shape our region’s economy for decades to come.”

Slaughter reportedly spent three years working to bring the center to Rochester and helped secure $110 million from the Defense Department and another $500 million in state and private sector funding to finance its development. The project could prove transformational for a community ravaged by downsizing, most dramatically exemplified by Eastman Kodak, which had 62,000 workers in Rochester during the 1980s but employs fewer than 2,500 today.

Today, Rochester’s largest employers are no longer manufacturers. Health care service providers now lead the way, including the University of Rochester Medical Center/Strong Health (#1) and the Rochester General Health System (#3). Upscale grocery chain Wegmans calls Rochester home and is the community’s second largest employer. The bureaucracies that power the Rochester City School District and Monroe County Government are also among the area’s top-10 employers.

rochesterDespite the job shifts, the fact 24,000 workers in the region are already employed in photonics-related jobs may have been a deciding factor in selecting Rochester for the center.

“The photonics center we are now bringing to Rochester will harness the power of the Defense Department and the prowess of Rochester’s 24,000 employee-strong photonics industry and focus it like a laser beam to launch new industries, technologies and jobs,” Sen. Charles Schumer (D-N.Y.) said in a statement.

Employers, small business start-ups and workers moving into the region are likely to be considerably less impressed by Rochester’s incumbent telecommunications service providers. Although institutional and large commercial fiber networks are available to those with deep pockets, with the exception of Greenlight Networks, a local fiber to the home retail overbuilder providing fast gigabit fiber Internet to a tiny percentage of local residents, the area’s fiber future remains bleak.

Time Warner Cable, by far the largest Internet provider in the region, has left Rochester off its Maxx upgrade list, leaving the city with a maximum of 50/5Mbps Internet speed. Frontier Communications still relies on 1990s era DSL service and the anemic speeds it delivers, evident from the company’s poor average speed ranking — 11.47Mbps — less than half the minimum 25Mbps the FCC considers broadband.

Rochester is hardly a broadband speed leader in New York State, only managing to score in 332nd place. (Image: Ookla)

Rochester is hardly a broadband speed leader in New York State, only managing to score in 332nd place. (Image: Ookla)

The performance of the two providers has dragged Rochester’s broadband speed ranking to an embarrassingly low #336 compared with other communities in New York. Suburban towns in downstate New York enjoy more than twice the speed upstate residents get, largely thanks to major upgrades from Verizon (FiOS) and Time Warner Cable (Maxx). But even compared with other upstate communities, Rochester still scores poorly, beaten by small communities like Watertown, Massena, and Waterloo. Suburban Buffalo, Syracuse, and Albany also outperform Rochester.

In contrast, in Raleigh, N.C., home to the Power America Institute — another federal manufacturing center — broadband life is better:

  • Raleigh is a Google Fiber city and will receive 1,000/1,000Mbps service for $70 a month, around $20 more than what Time Warner charges for 50/5Mbps with a promotion;
  • Raleigh is a Time Warner Cable Maxx city with free broadband speed upgrades ranging from 15Mbps before/50Mbps after to 50Mbps before/300Mbps after;
  • Raleigh is an AT&T U-verse with GigaPower city with 1,000/1,000Mbps service for $120 70 a month.

This article was updated to correct the pricing of AT&T U-verse with GigaPower in Raleigh, N.C., with thanks to reader Darrin Evans for the corrected information.

“On a Razor’s Edge:” Charter’s Deal With Time Warner Financed With Junk Bond Debt

Charter will be among America's top junk bond issuers. (Image: Bloomberg News)

Charter will be among America’s top junk bond issuers. (Image: Bloomberg News)

The attempted $55 billion acquisition of Time Warner Cable will saddle buyer Charter Communications with so much debt, it will make the cable operator one of the nation’s largest junk bond borrowers.

Bloomberg News reports investors are concerned about the size and scope of the financing packages Charter is working on to acquire the much-larger Time Warner Cable. Total debt financing this year has already reached $18.2 billion and one of Charter’s holding companies is signaling plans to add another $10.5 billion in unsecured debt. Bloomberg reports the total value of Charter’s combined debt from existing operations and its acquisition of Time Warner Cable and Bright House Networks may reach as high as $66 billion.

Ironically, Time Warner Cable CEO Robert Marcus used Charter’s penchant for heavily debt-financed acquisitions as one of the reasons he opposed Charter’s first attempted takeover of Time Warner in January 2014.

The New York Times suggested Marcus seemed to be looking out for shareholders when he called the offer “grossly inadequate” and demanded more cash and special protections, known as “collars,” to protect stockholders against any swings in the value of Charter stock used to cover part of the deal.

charter twc bhThe Marcus-led opposition campaign against Charter gave Comcast just the time it needed to mount a competing bid — all in Comcast stock, then worth around $159 a share. Comcast also offered Marcus an $80 million golden parachute if the deal succeeded.

Marcus’ concerns for shareholders suddenly seemed less robust. Gone was any demand for cash to go with an all-stock deal — Comcast stock was good enough for him. Most blockbuster mergers of this size and complexity also contain provisions for a breakup fee payable by the buyer if a deal falls apart. Marcus never asked for one, a decision the newspaper called “foolish,” considering regulators eventually killed the deal, leaving Time Warner Cable with nothing except bills from their lobbyists and lawyers.

After the Comcast deal failed to impress regulators, Charter returned to bid for Time Warner Cable once again. This time, Charter offered nearly $196 a share — nine times earnings before interest, taxes, depreciation, and amortization. (They offered about seven times earnings in 2014.) Marcus will now get the $100 a share in cash he wanted from Charter the first time, but shareholders are realizing that cash will be a lower proportion of the overall higher amount of the second offer.

Marcus has also said little about the enormous amount of borrowing Charter will undertake to seal its deal with Time Warner Cable. Nor has he said much about a revisited and newly revised golden parachute package offered to him by Charter, expected to be worth north of $100 million.

Marcus

Marcus

But others did notice Charter raised $15.5 billion selling bonds on July 9, many winning the lowest possible investment grade rating from independent ratings services. Standard & Poor’s and Fitch Ratings bottom-rated part of Charter’s debt offering and Moody’s classified that portion as Ba1 — junk grade.

Charter traveled down a similar road six years ago, overwhelmed with more than $21 billion in debt to cover its aggressive acquisitions. Charter declared bankruptcy in 2009. The cable company has survived this time, so far, because of the Federal Reserve’s low-interest rates and very low corporate borrowing costs.

“Charter is walking on a razor’s edge,” warned Chris Ucko, a New York-based analyst at CreditSights.

Not so fast, responds Charter.

“The combined company will” reduce debt quickly, Francois Claude, a spokesman for Stamford, Conn.-based Charter said in a statement to Bloomberg News.

One likely source of funds to help pay down that debt will come from customers as the company seeks to drive higher-cost products and services into subscriber homes. Some of that revenue may come from selling higher speed broadband, a service customers are unlikely to cancel and may find difficult to get from telephone companies that have not kept up with the speed race. If cord cutting continues, and online video competition increases, that could result in customers dropping cable television packages at a growing rate, negatively impacting Charter’s revenue.

Time Warner Cable’s bondholders are already counting their losses. Their “investment grade” securities have already lost 9.3 percent of their value this year, compared with 0.58% losses in the broader high-grade debt market, according to Bank of America/Merrill Lynch. If increased competition does arrive or the FCC continues its pro-consumer advocacy policies, there is a big risk Charter’s revenue expectations may never materialize.

N.Y. Public Service Commission to Charter/Time Warner Cable: Hope You Are Not in a Hurry

dpsThe New York State Public Service Commission today notified Charter Communications its merger application with Time Warner Cable will require a “more detailed review of the petition,” which means a final decision is unlikely before the end of this year or more likely 2016:

We have received the petition of Time Warner Cable Inc. and Charter Communications, Inc. dated July 2, 2015 seeking authority, pursuant to Public Service Law Sections 100, 101, and 222, to transfer a controlling interest in certain Time Warner Cable telephone systems, cable systems, franchises and assets to Charter and to issue debt. On July 10, 2015, a Supplement was received seeking further approval under PSL § 99(2) for a transfer of Time Warner Cable’s telephone franchises.

According to Sections 99 and 100 of the Public Service Law, such an application is deemed approved after ninety (90) days of filing unless the Commission or its designee notifies the petitioner in writing, within the time period, that the public interest requires the Commission’s review and its written order.

[…] A preliminary review indicates that the public interest requires a more detailed review of the petition. Therefore, pursuant to Public Service Law Sections 99,100, and 101 we are informing you that the Commission will review your petition and will issue a written response in this proceeding.

charter twc bhThe PSC has set a deadline for comments on the merger of Sept. 16 with reply comments due two weeks after that. But on-the-record regional forums will also be held across the state to gather more comments from consumers and stakeholders. Locations of the forums have not yet been announced.

As with Comcast’s merger proposal, a significant review period is expected as the merger of Charter Communications and Time Warner Cable will have profound implications on the entire state. Outside of Long Island and a few boroughs in New York City, Time Warner Cable is by far the most dominant provider serving every major population center in New York.

Two letters have already been added to the record about the merger.

The Rochester Business Alliance filed this letter in “strong support” of the proposed deal, quoting almost entirely from press releases and merger advocacy documents issued by Charter Communications. Time Warner Cable is a “partner member” of the group, better known as the Regional Chamber of Commerce.

RBAlogo“The Rochester Business Alliance advocates for an environment that will promote the success of its members and the local economy,” the group writes on its website. “We help our member companies and their employees stay connected to the issues as well as to the people who can make a difference.”

Michael Kaplan is the first consumer to weigh in on the merger, and he is opposed.

“Just like the Comcast we now have to write to you to ask that you reject this merger,” Kaplan writes. “The only people who benefit from this are the three or four people who will get very rich from it. The rest of the people you are supposed to be protecting? We get much higher cable/Internet rates because they are taking on so much debt that it’s obvious they will have to raise rates significantly. How does this help New York State?”

Kaplan also doesn’t believe Charter’s promise not to usage cap its broadband customers because the commitment expires after three years:

They also promised not to cap or throttle broadband users for three years. Is that a joke?

Time Warner has (due to public backlash) never capped or throttled their Internet. They have not placed data caps on their service which everyone knows is a cash grab.

If you are politically forced into doing this than at the very least Charter MUST keep the current arrangement Time Warner Cable has forever. FOREVER. No data caps, no overage fees, no throttling. Never.

Robert Marcus stands to make over 90 million dollars from the sale of Time Warner. Since his inception as CEO his mission has been to sell the company so he can cash out. He should improve service, equipment, work for us.

We the people are getting sick and tired of it and we are especially of a CEO who is only thinking of his end. What he will personally make. He doesn’t care on how every single person in NY State will get screwed.

Cable’s Fiber Fears: Broadband Market Share Drops to 40% or Less When Fiber Competition Arrives

The magic of fiber

The magic of fiber

Ever wonder why Comcast, one of the strongest defenders of classic coaxial-based cable technology, is suddenly getting on board the fiber-to-the-home bandwagon? New research suggests if they don’t, their market share could fall to 40% or less if a serious fiber competitor arrives.

“There’s some sort of magic associated with fiber,” John Caezza, president of Arris’s Access Technologies division, told Multichannel News. “Everyone thinks it’s better than [cable technology].”

The risks to the cable industry are clear: be prepared to upgrade or face customer losses.

Craig Moffett of Moffett Nathanson has never been a cheerleader for fiber to the home service. In 2008, Moffett vilified Verizon for its investment in a major fiber upgrade we know today as FiOS to replace its aging copper infrastructure, complaining it was too expensive and was overkill for most residential customers. He was more tolerant of AT&T’s less-costly fiber to the neighborhood approach, dubbed U-verse, that still used traditional telephone lines to deliver service into the home. Because U-verse did not need AT&T to replace wiring at each customer location, the cost savings were considerable. But the cost-capability compromise left AT&T with a less robust platform, with broadband speeds initially limited to a maximum of around 24Mbps.

While phone companies like AT&T and Verizon were saddled with the enormous cost of tearing out decades-old obsolete phone wiring to varying degrees, the cable industry seemed well positioned with a mature, yet still recent hybrid fiber-coaxial (HFC) platform that was upgraded in the 1990s in many cities. While still partly reliant on the same RG-6 and RG-11 coaxial cable used since the first days of cable television, cable companies also invested in fiber optics to bring services from distant headends to each town, removing some of the copper from their networks without the huge expense of bringing fiber all the way to customer homes.

For Moffett, it was the cable industry that had the network with room to grow without spending huge amounts of capital on upgrades. He has touted cable stocks ever since.

Moffett

Moffett

What worries Moffett now isn’t Google, Frontier, CenturyLink, or even Verizon. He’s concerned about AT&T.

As part of its commitment to win approval of its merger with DirecTV, AT&T promised regulators in June it would expand AT&T U-verse with GigaPower — AT&T’s gigabit fiber to the home upgrade — to at least 11.7 million homes, nine million more than it has ever promised before. Comcast has a 32% overlap with AT&T U-verse, compared to Time Warner Cable (26%), Charter Communications (32%), Bright House Networks (25%) and Cox Communications (25%). Comcast had promised faster broadband with the advent of DOCSIS 3.1 beginning as early as next year. But the company isn’t willing to wait around to watch AT&T and others steal its speed-craving customers. This spring, it promised 2Gbps Gigabit Pro fiber to the home service to customers living within 1/3rd of a mile of the nearest Comcast fiber line.

Some in the cable industry complain Google’s huge marketing operation has saddled cable broadband with a bad rap — ‘it’s yesterday’s news, with Google Fiber representing the future.’ The marketing war has been largely won by Google, they say, leaving consumers convinced fiber is the better and more reliable technology, and they need it more than the cable company.

Cable’s defense is to consider some marketing changes of its own — including the idea of dropping the name “cable” from the business altogether, because it implies older technology. But despite any name change, most cable companies will continue to rely on HFC infrastructure for at least several more years, despite claims they are bringing their own middle mile fiber networks closer to customers than ever. Cable operators now serve an average of 400 homes from each cable node. Some cable companies like Comcast plan to cut the number of customers sharing a node to around 100-125 homes, which means fewer customers will share the same broadband connection. But in the end, that will make cable comparable at best to a fiber to the neighborhood network, still hampered to some degree by the presence of legacy coaxial copper cable. The industry believes most consumers will never see the limitations, and for those that do, a limited fiber buildout with a steep installation fee may keep costs (and demand) down to those who need the fastest possible speeds and are willing to pay to get them.

CableLabs_TaglineThat philosophy may still cost cable companies customers if a fiber competitor doesn’t have to compromise speed and performance and can afford to charge less.

The top 10 U.S. cable companies currently account for 60% of the residential broadband market and 86% of all broadband net additions in the first quarter of 2015, says Leichtman Research Group.

Moffett predicts cable broadband will only capture 40% of share in markets where it faces a fiber to the home competitor (Google, EPB, Greenlight, Verizon FiOS), 55% in markets served by a fiber to the neighborhood competitor (U-verse, Prism), and 60% where the competition only sells DSL (most Frontier, Windstream service areas). Nationwide, AT&T’s newest gigabit fiber commitment could cost the cable industry 2.4% of the whole residential broadband market, Moffett said.

Phil McKinney, president and CEO of CableLabs, believes DOCSIS 3.1 — the next standard for cable broadband — can easily stand toe to toe with fiber to the home providers.

McKinney

McKinney

“I think it [HFC] has tremendous life, and we are going to be riding it all day long,” Werner said. DOCSIS 3.1 “is definitely going to be our go-to animal. Due to ubiquity, we can go out and virtually serve all of our [customers] very quickly.”

Cable companies claim their speed increases reach all of their customers in a given area at the same time without playing games with “fiberhoods” or waiting for incremental service upgrades common with Google Fiber or AT&T’s U-verse. Customers, the industry says, also appreciate DOCSIS upgrades bring no service disruption and nobody has to come to the home to install or upgrade service.

“The cable industry has more fiber in the ground than each fiber provider in the world,” McKinney argues. “If you look at total fiber strand miles, there’s more fiber under management and under control of the [cable] operators than anybody else combined.”

That may be true, but Moffett thinks it is only natural shareholders may eventually punish the stocks of cable operators that will face competition from AT&T’s U-verse with GigaPower. There is precedent. Cablevision serves customers in New York, Connecticut, and New Jersey and faces fierce competition from Verizon FiOS in most of its service areas. That competition has been brutal, occasionally made worse in periodic price wars. What may be protecting cable stocks so far is the fact AT&T competition will only affect, at most, 32% of the impacted cable operators’ service areas.

AT&T’s gigabit network has also proved itself to be more press release than performance, with very limited availability in the cities where it claims to be available. Verizon FiOS, in contrast, is widely available in most of Cablevision’s service area.

Still, Comcast is hoping it can hang on to premium customers who demand the very fastest speeds and performance with targeted fiber.

“Gigabit Pro is really for those customers who have got extreme needs,” said Tony Werner, Comcast’s executive vice president and chief technology officer.

Stop the Cap! Will Participate in New York State’s Review of Charter-Time Warner Merger

stop-the-capStop the Cap! will formally participate in New York State’s regulator review of the proposed merger of Charter Communications and Time Warner Cable.

“We will be submitting documents and testimony to the New York State Department of Public Service on behalf of consumers across the state that need a better deal from their cable company,” said Phillip Dampier, the group’s president. “A review of the current proposal from Charter is inadequate for New York ratepayers and most of Charter’s commitments for better service and lower prices expire after just three short years.”

Stop the Cap! will urge regulators to insist on significant changes to Charter’s proposal that will permanently guarantee a broadband future with no compulsory usage caps/usage-based billing, Net Neutrality adherence, affordable broadband to combat the digital divide, and upgrades that deliver faster broadband than what Charter currently proposes outside of New York City.

Dampier

Dampier

“Upstate New York is at serious risk of falling dramatically behind other areas where Google Fiber and other providers are moving towards a gigabit broadband future,” Dampier said. “In most of Buffalo, Rochester, Syracuse, Binghamton, and Albany buying the FCC’s definition of broadband means calling a cable company that now delivers no better than 50Mbps to residential customers. Verizon FiOS expansion is dead and obsolete/slow DSL from Frontier and Verizon should have been scrapped years ago.”

Stop the Cap! worries that with limited prospects for a major new competitor like Google in Upstate New York, broadband speeds and service will not keep up with other states. Verizon has devoted most of its financial resources to expanding its wireless mobile network, which is too expensive to use as a home broadband replacement. Frontier claims to be investing millions in its networks, but has delivered only incremental improvements to their DSL service, which in most areas is still too slow to qualify as broadband.

“Frontier is more interested in acquisitions these days, not upgrades,” Dampier argued.

“Although we have some entrepreneurs managing to deliver competitive fiber service in limited areas, it will likely take years before they will reach most customers,” Dampier added. “Upstate New York cannot wait that long.”

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  • Justin: I was not willing to agree to give them info either but to "prove" to me that they were legit they added showtime and Cinemax to my lineup WHILE I...
  • Elsa: Im with Cox, and just had my cap raised from 100 GBs to 250 GBs, but here is the rub without any change in my usage they are showing a slow but stead...
  • Tim: Hi Phillip, I'm aware it's not "supposed" to count toward the owner's cap. Thing is, it arbitrarily did for my eMTA back in 2013 when I tested this b...
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  • Zach: What are you guys writing to get the credits back? I'm in Gainesville, GA and with the kids watching Sesame Street and Netflix and my design/photograp...
  • Phillip Dampier: I agree. We successfully fought off usage caps with a concentrated campaign directed at both Frontier Communications and Time Warner Cable. Both compa...
  • Phillip Dampier: Just a side note for information purposes: AT&T only enforces its usage caps on DSL customers. To date, I know of no one actually penalized for exceed...
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