Cablevision’s executive suites are filled with intrigue and family politics. — Phillip Dampier

Cablevision’s quarterly results conference call last week was an exercise in obfuscation.

Senior management at the cable operator that serves parts of New York, New Jersey and Connecticut announced some difficult financial results, including the fact the company lost at least 39,000 customers during the last quarter — a significant number considering Cablevision only serves 3.6 million customers as of the end of December. At least 11,000 of those customers stopped paying their bills and disappeared, presumably because their homes and businesses were victims of Hurricane Sandy. But company officials admitted they also lost high-speed Internet customers because of a recent price increase and ongoing heavy promotional activity from their biggest competitor — Verizon FiOS. The phone company has offered triple play packages as low as $89 a month with $300 debit card rebates, which makes hiking rates untenable.

Cablevision CEO James Dolan has been ducking hard questions from Wall Street analysts concerned about the company’s spending and marketing, the loss of subscribers, and fallout from a 2011 management shakeup. Richard Greenfield, an analyst at research firm BTIG, has been frustrated getting answers from the Dolan family that has controlled Cablevision for decades, tweeting Cablevision executives stopped taking his questions on regular conference calls after he began asking some of those hard questions.

Cablevision’s Upgrades Will Continue; Company Wants an Improved Subscriber Experience

Greenfield

One of the problems Verizon FiOS’ fiber to the home network brings Cablevision as its largest competitor is fiber technology is superior to Cablevision’s cable network infrastructure. Verizon has been a formidable challenger. This has forced the cable operator to make dramatic improvements, particularly in its broadband product, to stay competitive. But some of these upgrades have been delayed by the effects of Hurricane Sandy, which affected 60 percent of Cablevision’s subscribers in the tri-state area.

Cablevision has been forced to offer customers service credits, substantially curtail sales and advertising efforts, and suspend the non-pay collection rules and disconnect policy.

Cablevision has also committed itself to an expensive robust Wi-Fi network to differentiate itself from Verizon. Cablevision has an extensive Wi-Fi presence in its service area, offering unlimited free service for its customers. Verizon does not. Cablevision ended 2012 with more than 67,000 installed hotspots, with more than 30% of Optimum Online customers using the service in 2012.

At the same time, cable television programming costs have skyrocketed, but Cablevision has generally avoided raising prices fearing Verizon would poach unhappy subscribers.

Drama Surrounding Executive Changes

Internet comes last?

In 2011, Cablevision accepted the resignation of Tom Rutledge, former chief operating officer. Richard Greenfield dismissed Cablevision’s statements about his departure as “spin,” and claims the real reason Rutledge left for Charter Communications is that Jim Dolan became dissatisfied with Rutledge’s performance. But that poor performance could also be attributed to some of the company’s own decisions, particularly when it engaged in multiple battles with programmers during 2010 that forced popular cable networks and broadcasters temporarily off Cablevision lineups. Greenfield suggests the biggest impact was felt when the cable operator dropped the local Fox station right in the middle of the World Series. BTIG believes subscriber losses accelerated for these reasons (and Verizon’s aggressive marketing efforts) and helped the company see its earnings and subscriber trends hurt.

Jim Dolan has reportedly taken a more hands-on approach at Cablevision and even appointed his wife Kristin to assume a stronger role in how Cablevision markets itself to customers.

The result was a Cablevision rebranding that Greenfield criticized in September as “firmly entrenched in the past,” because it emphasizes television and phone service over broadband.

Avoiding Tough Questions

Several of the questions Greenfield wanted answered, but could not, dealt with the transformation of part of Cablevision’s service area thanks to Sandy and some of the company’s earlier missteps:

• Permanent System Loss: How many Cablevision homes in the service area will no longer exist or take years to rebuild?
• Recapture Suspended Accounts: At least 24,000 video subscribers disappeared after Hurricane Sandy. Has this number changed recently and are there plans to win these customers back?
• Verizon FIOS was back up and running in storm-damaged areas before Cablevision. How has this affected your operations?
• Marketing Missteps: Are there plans to correct the marketing deficiencies from the 2012 campaign in 2013, particularly for broadband?
• Onyx Guide and Network DVR: Neither are well-received by customers. The Onyx on-screen Guide has been slammed for not working properly, being cumbersome to use, and difficult to read. The remote DVR has been criticized for its poor quality and reliability over traditional in-home DVRs. What will Cablevision do to address these complaints?
• Why is Cablevision challenging Viacom in court over cable network programming costs when sports programming is where the real costs are?

While Windstream continues to heavily lobby the Georgia legislature for a bill that would ban competition from publicly owned broadband providers, the company is doing little to address the growing concerns of its own broadband customers getting poor service.

Mark Wyatt, a Windstream customer fed up with not getting the broadband speeds he pays for, launched a Facebook group in January to collect evidence and attempt to leverage the company to fix its problems. Wyatt, like many other customers in rural Georgia, has only one option for broadband service — Windstream.

Now the growing Facebook group has gotten attention from an Atlanta reporter who wants customers to record videos detailing their broadband problems with Windstream for an upcoming news report.

Jeff Chirico at WGCL-TV, the Atlanta CBS affiliate, has a call out for videos due by March 6:

I’m a reporter for CBS Atlanta News. I want to hear from Windstream customers in Georgia about their experiences with the company’s Internet service. Please shoot a video (30 seconds or less) explaining the speed of Windstream’s service and how it impacts you, your family or your business. Please include your name and city and download it to our dropbox account. http://dropbox.yousendit.com/JamesEstes539379

Also, feel free to follow me on Twitter @CBSATLChirico or find me on Facebook http://www.facebook.com/JeffChiricoCbsAtlanta

The horror stories are already clear all over Windstream’s service areas:

Don Jackson, who lives outside Milledgeville pays Windstream for 6/1Mbps service. On a good day, he gets 750kbps after 4pm every day, and speeds do not improve until the early morning hours.

“I talked with a local manager and he said that there is no solution anytime soon,” Jackson reported. “I have screen shots of speed tests from different sites for months to demonstrate that this is not a fluke but a fact. I have complaints on file with the FCC and BBB of Arkansas, [which handles complaints regarding Windstream].”

Adam Ridley qualified and pays for 3Mbps broadband service from Windstream, but that is not the speed he actually receives.

“It’s 9:40pm and I’m rocking my 210kbps connection — 7% of the speed I pay for,” he reported last night.

Rodney Gray pays Windstream a premium for 12Mbps service, but the phone company does not come close to delivering those speeds. His service actually ranges from 580kbps-1.4Mbps.

“My upload speed is faster than my download,” Gray complains.

A representative answering Windstream’s Complaint Line threatens a customer in Odum,. Ga. with legal action for “harassment” in June, 2012 after he complaints about Windstream’s mailers advertising DSL Internet service that is actually “not available to him this year.” (2 minutes)
You must remain on this page to hear the clip, or you can download the clip and listen later.

Kimberly Brown’s broadband problems with Windstream are so pervasive, even the company admits there is a problem, and they have given her service credits.

“Our primary problem is dropped connections — constantly,” Brown says. “They sent a technician out because surely it must be in our lines. He told us that there is something going on in one of the main hubs or whatever, and that it should be months (if ever) that it’s fixed. Then, customer service was suddenly able to look into our account and see that we had hundreds of dropped connections in just a few days. Hundreds. To their credit, they did give us a smallish break on our monthly bill because of the aggravation.”

A typical day for the Brown family is to wake up, reset the modem, send an e-mail or two, reset the modem, try to go to a web page, reset the modem.

“It’s crazy and extremely frustrating,” says Brown. “I work from home and rely heavily on the Internet to get my job done, so this problem affects us in many ways, not just casual web surfing.”

Things are worse for Mark B. Watson, who lost his service entirely for two days.

“The bad thing is that mine and my wife’s business is located in our house,” says Watson. “Being without Internet means we are not making an income for two days. It is getting old.”

While Windstream’s broadband service is suffering, company executives are celebrating a planned major reduction in extra investment in its broadband service, telling Wall Street its broadband expansion and fiber-for-cell-tower projects are nearing completion. That could leave rural Georgia broadband customers without improved service indefinitely.

At the same time, Windstream is reportedly the primary proponent of legislation that would make sure rural Georgians have no alternatives to choose from. The company’s support for HB 282, now working through the Georgia legislature, would prohibit communities from launching their own broadband services to improve connectivity and speeds.

[flv width=”512″ height=”308″]http://www.phillipdampier.com/video/CBS Chattanooga Fastest Broadband in America 2-28-13.flv[/flv]

Chattanooga’s gigabit fiber network demonstrates local government works. The fiber to the home network has already brought $400 million in investment dollars and more than 6,000 new jobs to the area. At the same time, both Comcast and AT&T are working to lobby state legislatures to ban these kinds of public networks from ever getting off the ground. CBS News profiles EPB Fiber. (6 minutes)

Gazelle, a trade-in site for high-end consumer electronics, has been keeping track of the cities that send in a disproportionate share of the broken phones it has received.

It turns out the southern United States is home to the most careless smartphone smashers, with Tallahassee, Fla and New Orleans topping the list. In New York, the further east you live, the more damage you are likely to do. Both Staten Island and the Bronx made the list.

Overall, the region that takes the most care of their phones (or at least wouldn’t dare send broken ones to Gazelle) was in the West, with one exception: Bakersfield, Calif.

Both Time Warner Cable and Verizon don’t think you want or need gigabit fiber broadband — the kind of service now available in Kansas City from Google Fiber.

Time Warner Cable’s chief financial officer Irene Esteves says the cable company is content delivering most of the country no more than 50/5Mbps broadband (for at least $10 more than Google charges for 1,000/1,000Mbps service).

“We’re in the business of delivering what consumers want, and to stay a little ahead of what we think they will want,” she told an audience of Wall Street investors at the Morgan Stanley Technology Conference. “We just don’t see the need of delivering [gigabit speeds] to consumers.”

Esteves says she is not opposed to supplying gigabit speeds to business customers.

“We’re already delivering 1-10Gbps service to our business customers, so we certainly have the capability of doing it,” she said.

Despite regular quarterly conference calls where Time Warner executives trumpet the growing interest in higher broadband speeds, Esteves downplayed the importance of Time Warner’s top-tier: 50/5Mbps, claiming only a very small fraction of Time Warner customers opt to receive speeds that high.

Fran Shammo, chief financial officer at Verizon agreed with Esteves during the conference, also arguing nobody needs gigabit speeds today.

“FiOS brings a very different perspective to the household with fiber to the home,” Shammo said. “We actually tested a 1Gbps circuit in New York three years ago, so our FiOS product can deliver that but we just don’t see the need yet from a household to have that much of a pipe into their home.”

Time Warner’s “low interest” 50Mbps premium tier is Verizon FiOS’ mainstream sweet spot. Verizon now heavily markets 50/25Mbps Quantum service as their best value option, charging $10 more per month to upgrade from basic 15/5Mbps service.