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Suddenlink Cable CEO: ‘People Don’t Realize the Days of Cable Company Upgrades are Basically Over’

Phillip Dampier September 1, 2010 Broadband Speed, Data Caps, Online Video, Suddenlink (see Altice USA), Video 12 Comments

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.

[flv]http://www.phillipdampier.com/video/CNBC Internet v. Cable 8-20-10.flv[/flv]

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)

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Uncle Ken
Uncle Ken
9 years ago

Just great/ If what Kent says is true we will drop to the bottom of the rest of the earth and be back on dial up all in the name of stock holders. Most of the world will pass us by as they have on so many other things. We are going downhill in the worlds eyes. there will be no recovery from it. This post is not well worded because of the limits of typing. A person can say something in a minute even on the phone rather then 5 pages of text. What do you figure maybe a… Read more »

Jeremy
Jeremy
9 years ago

That’s their whole plan so they can justify ripping off consumers with lousy bandwidth and caps.

DM
DM
9 years ago

I hate hearing statements like this because this has been the cable industry’s exact attitude for the past five years. Regarding internet services, cable companies need to upgrade to DOCSIS 3 to alleviate bandwidth constraints. The past decade has seen a “speed war” with DSL providers that resulted in cable companies marketing speeds that consumers actually don’t get to see and congested networks that are caused by the amount of bandwidth that consumers are using. They have overpromised and underperformed. When they do upgrade to DOCSIS 3, it would be wise to not overpromise so that some of the bandwidth… Read more »

jr
jr
9 years ago

CEOs need to make 8 figures

Tim
Tim
9 years ago

And I guess the Cable Co’s don’t realize, their monopolistic hold is slipping through their fingers. If they won’t do it, then someone else will.

Ian L
9 years ago

A few things: Comcast competes with EPB, not Suddenlink. Totally different market; SL competes with fiber in a few places but that fiber tops out at maybe 15 Mbps down, at least for now. EPB does offer 150M symmetric, I checked with them to confirm this. They just aren’t marketing it yet. You have to ask for it. Suddenlink is probably THE most aggressive cable company as far as plant upgrades go right now. They’re pushing all of their plant in non-rural areas to 1GHz, and pushing all of their channels to digital that they can, resulting in immense bandwidth… Read more »

Tim
Tim
9 years ago
Reply to  Ian L

“5. “If SL doesn’t do it, someone else will.” Any volunteers?”

They already pulled this in NC. Citizens go to cable co and ask for better service. Cable co gives them the proverbial middle finger. Citizens decide to build their own fiber network. Cable co says, “Hey that’s unfair!!!” Tough beans, you had your chance…

Nathan
Nathan
9 years ago

This is all well and good, but most areas that suddenlink covers only gets 1.5-10-15 mpbs up and 1(!!) down…

Mark Engstrom
Mark Engstrom
9 years ago

In my area of Texas, the highest download speed offered for residential service I believe is 25 Megabits. If you can get past the slow speeds, then you can also enjoy their filtering out incoming FTP, IRC, SMTP, POP, HTTP, SOCKS, SQUID, DNS protocol packets unless you are paying for “commercial” service. I personally am filing a complaint with the FCC and looking into contacting a class action law firm. Comcast has already settled in a similar lawsuit where they didn’t block p2p bitorrent traffic but only throttled it. I think this disservice will be a lot easier to prove… Read more »

Matt
Matt
9 years ago
Reply to  Mark Engstrom

Actually, for residential service Suddenlink blocks only port 80 inbound and 25 outbound to control spam and to prevent people from overusing BW for webservers. I should know, I’m looking at our filters now…

Mark Engstrom
Mark Engstrom
9 years ago
Reply to  Matt

I stand corrected.

I was only paraphrasing the AUP listed on Suddenlink’s site:

Paragraph 45, article 11

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