Netflix is selling $400 million in stock and convertible notes to bolster its cash-on-hand as the company faces the imminent loss of important video content for its streaming movie service.  Netflix stock has paid the price in what some investors are calling the worst deal ever. Michael Pachter, an analyst with Wedbush Securities, suspects banks might be turning Netflix down for traditional, less expensive bank loans, leaving the expensive stock sale its only alternative.

Netflix continues to lose subscribers upset over recent price increases and impending content reductions on the company’s streaming service.  Much of Netflix’s more-recent streaming movie library comes from its expiring deal with Starz, and that content will disappear in February.

Banks may be worried the forthcoming downsizing of Netflix’s online selection combined with increasingly expensive streaming renewal deals for the programming that remains may make the company too risky, even if they use the money to acquire additional content. The company might be one rate increase away from a subscriber exodus.

Netflix CEO Reed Hastings isn’t inspiring confidence among investors either.  He’s been selling nearly 5,000 shares of Netflix stock every week since the beginning of the year, according to filings with the Securities and Exchange Commission.  If Hastings ultimately dumps 260,000 shares in the company he founded, investors wonder, why should they buy?

The Wall Street Journal financial MarketBeat blog wonders just how many more blunders are in store for the former high-flying company:

So Netflix is raising a bunch of cash by selling stock when it’s super cheap, after spending a lot of money earlier this year buying back stock when it was super expensive.

This comes after it raised its prices high enough to irritate half its customers, then tried to chase off the other half by shunting them off to a splinter company named after a pot-smoking Elmo. Then it said, never mind, just kidding, please don’t leave us. We can’t wait to not read the business-school papers written about this one!

For some mysterious reason, investors are once again fleeing in disgust from Netflix’s stock, which is down more than 4% this morning at $71. And analysts are not too pleased, either — although, these being analysts, there are of course some who say everything’s just fine, the stock’s a great bargain.

Pachter believes either the company’s chief financial officer is “a moron,” or the company is in growing trouble, unable to convince traditional lending sources with cheap money to share some with Netflix.  The company still expects a financial loss in the coming quarter, although it says subscriber flight is now diminishing.  Netflix is also trying to find new content to keep subscribers satisfied, although much of it consists of repeats of low budget cable documentary and reality shows. Considering these challenges, affordable liquidations could provide financial relief and a strategic approach to managing their resources effectively.

Completely overshadowed by the stock sale are two just-announced Netflix acquisitions: a recommissioned Arrested Development, a quirky comedy which ran on Fox from 2003-2006, and the BBC’s ruthless 1990 political intrigue mini-series House of Cards.

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Michael Pachter, an analyst with Wedbush Securities, talks about Netflix’s agreement to sell $400 million in stock and convertible notes to bolster cash as it increases spending for online rights to films and TV shows. (Bloomberg News)  (8 minutes)

AT&T pays a lot of money — millions annually — to make sure its business agenda does not run into political or legislative roadblocks in Washington, D.C.  With dozens of members of Congress effectively on AT&T’s campaign contribution payroll and the company’s unparalleled skill at convincing non-profit organizations to advocate for its interests, worrying about the government’s antitrust views on its proposed buyout of Deutsche Telekom’s T-Mobile was the least of its troubles.

“It’s a done deal,” several analysts predicted shortly after the deal was announced, especially after AT&T demonstrated its confidence level in the merger was as high as the enormous $6 billion dollar breakup concession payable to Telekom if it ever fell apart.

Then the government dared to put its two cents in, in the form of a “are you kidding me?”-lawsuit courtesy of the U.S. Department of Justice.  It seems, in the words of some Beltway cynics, the Obama Administration can manage to see a clear cut case of anti-competitive behavior when given enough time.

Since the lawsuit was announced on Aug. 31, it has been “all-hands-on-deck” for the company’s government relations division, packed full of the company’s top lobbyists.  While company lawyers desperately attempt to block what it sees as “pile on” objections and lawsuits from worried competitors, Sprint-Nextel in particular, AT&T lobbyists are trying to compromise away the Justice Department case with proposals of concessions and giveaways to make approval more palatable.

Further north, as fall turns into winter in New York’s financial district, Wall Street analysts are cold on the troubled deal themselves.

The Financial Times reports most analysts think there is now less than a 50-50 chance the merger will be completed unless the two companies agree to disgorge themselves of market share, territories, and increasing “shareholder value” that will come from eventual rate increases a wireless duopoly would inevitably bring.

Some are even less sanguine, predicting AT&T has only a 20 percent shot, and only if it sells off considerable chunks of valuable spectrum to competitors other than Verizon Wireless.

AT&T is retuning its “message” for the times, downplaying the original, ludicrous notion that urban-focused T-Mobile would be the keystone of a new era in 4G wireless service for rural America.  There is a reason T-Mobile isn’t the first choice for small town America’s cell phone buyers.

Instead, AT&T is now positioning the merger deal as a lifeboat for its troubled competitor.  AT&T suggests the number four carrier is in immediate peril — hemorrhaging customers, caught without a coherent 4G strategy, and an exodus of interest by its increasingly neglectful parent — Deutsche Telekom.

Could Time Warner Cable be an eventual part-owner of T-Mobile USA?

“Over the past two years, T-Mobile USA has been losing customers despite explosive demand for mobile broadband,” AT&T said in a statement this week. “T-Mobile USA has no clear path to 4G LTE, the industry’s next generation network, and its German parent, Deutsche Telekom, has said it would not continue to make significant investments in the United States.”

With AT&T predicting the demise of its smaller would-be cousin, consumers may not be in the mood to sign a two-year contract with a company that could soon be rechristened AT&T, especially those leaving AT&T for T-Mobile.

But don’t tell T-Mobile’s marketing department it’s a phone company on life support.  T-Mobile has beefed up its advertising and continues to irritate its larger competitors, particularly AT&T, with very aggressive pricing on its prepaid plans.

T-Mobile recently unveiled two disruptive $30 4G prepaid plans that offer either 1500 shared minutes/text messages and 30MB of data usage -or- 100 voice minutes combined with unlimited texting and up to 5GB of mobile data before the speed throttle kicks in.  Those prices are too low for AT&T and Verizon to ignore, especially when offered on a 4G network.

So far, the Justice Department shows no signs of backing down from their resolute opposition to the deal, minor concessions or not.  Shareholders may not appreciate giving the government too much of what it wants in order to win approval.  Washington lawmakers are split — virtually every Republican favors the merger, Democrats are less absolute, with most opposed.  Among those in favor, by how much is often a measure of what kind of campaign money AT&T has thrown their way.

AT&T absolutely denies they have a “Plan B” in case the merger eventually fails.  But the Times doubts that, reporting as time drags on, an alternative deal might emerge.  Some of the possibilities:

• T-Mobile USA could merge its spectrum with Dish Network, the satellite TV company, to launch a new 4G mobile operator in the USA;
• Combine forces (and spectrum) in a deal with leading U.S. cable companies like Cox, Comcast, and Time Warner Cable to launch a new cable-branded mobile operator;
• Sell or merge operations with MetroPCS, Leap Wireless’ Cricket, or one of several regional cell companies.

Perennial cable booster Craig Moffett from Sanford Bernstein predictably favors the cable solution, which would let companies offer a quad or quint-play of cable TV, wireless mobile broadband, wired broadband, phone, and cell phone service all on one bill.  It would also get the FCC off the backs of cable operators Time Warner and Comcast, who both control a total of 20MHz of favored wireless spectrum they have left unused since acquiring it at auction.  The Commission is increasingly irritated at companies who own unused spectrum at a time when the agency is trying to find additional frequencies for wireless providers.

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Bloomberg News questions AT&T’s claim its merger deal with T-Mobile will create 96,000 new jobs. [Nov. 8] (3 minutes)

Comcast Cable has been embarked on a gradual effort to convert many of their cable systems to digital platforms, which means more channel space, faster broadband speeds, and major headaches for some customers.

In Harrisonburg, Va., Comcast customers have been surprised and frustrated to find many of their favorite channels missing.  The cable company migrated most of the basic cable lineup to digital.  Customers who already use Comcast set top boxes never noticed the difference, but those who don’t certainly did.

The cable company spent weeks notifying customers they may need a “digital transport adapter” (DTA) — a fancy name for a small set top box — to continue to receive Comcast service on televisions that do not already have a box attached.  Many cable customers are confused by the transition, assuming if they own a “digital-ready” television, they don’t need extra equipment.  But most, in fact, do.

When customers discovered they needed the new box, minor chaos ensued at area Comcast retail outlets.  The Virginia State Police was reportedly pressed into service directing traffic in and out of some crowded cable store parking lots, and one customer even found a trooper guarding the cable company’s front door.

Some customers are telling local media they waited hours in long lines to obtain the equipment.  Several others are complaining even with the boxes, their favorite channels are still missing.

Most of the trouble seems to surround the authorization process required to enable the new equipment.

Comcast DTA (Courtesy: David Trebacz)

A reporter for an area television station discovered that on the air as she attempted, and failed, to get her box authorized for service, even after an hour waiting.  Customers report very long hold times when calling Comcast as well.

The cable company acknowledged some of the challenges.

“For the past few months, we’ve been communicating with our customers in the Shenandoah Valley about our ‘World of More’ digital enhancement,” the company said in a statement. “We’re moving analog channels to digital, and we do see an increase in the number of customers trying to get digital equipment. We’ve been offering extended hours and stepping up staffing to respond to increased demand.”

Comcast says the transition will increase the number of HD channels on offer in Virginia.  It also opens the door to faster broadband speeds through DOCSIS 3 upgrades.  In all, the company plans to add 50 new HD channels in the Staunton, Waynesboro and Augusta County areas after the upgrade is complete.

Area customers just wish the experience worked more seamlessly. Comcast customers in many communities have already dealt with digital upgrades.  Time Warner customers, starting in Maine, are just beginning the experience.

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This WHSV reporter in Harrisonburg, Va. tried to demonstrate how to install and activate Comcast’s new set top box equipment… and failed because the cable company authorization process didn’t work.  (2 minutes)

Charter Cable is upgrading its broadband service to deliver free speed upgrades, but with the company’s Internet Overcharging-usage cap scheme in place, some customers are not impressed.

“We plan to streamline Charter Internet options to: Lite, Express, Plus, and Ultra,” Charter social media rep “Eric” wrote on the Broadband Reports‘ Charter customer forum. “Current Max customers will be able to move to a different level of Internet Service.”

The company’s boosted speeds (prices vary in different markets):

• Charter Lite: 1Mbps/128kbps → Unknown ($19.99) 100GB limit
• Charter Express: 12/1Mbps → 15/3Mbps ($44.99) 100GB limit
• Charter Plus: 18/2Mbps → 30/4Mbps ($54.99) 250GB limit
• Charter Max: 25/3Mbps → Discontinued ($69.99) 250GB limit
• Charter Ultra: 60/5Mbps → 100/5Mbps ($99.99-109.99) 500GB limit

Charter has usage caps on all of its residential broadband service plans, but Stop the Cap! readers tell us they are not always enforced.  No overlimit fees are charged.  No announcements have been made about any changes to the existing usage limits.  Some Charter Max customers tell us they are using the speed upgrades an an excuse to downgrade to the cheaper Plus plan, which is faster and $15 less a month, with the same 250GB usage cap.  Customers who absolutely won’t tolerate a usage limit have to upgrade to commercial-grade service, which is considerably more expensive.  Lower speed plans run about $80 a month in many areas, but are unlimited.

“I’m glad to discover faster upload speeds, which I’ve waited for a long time, but I’d rather have no usage limits to worry about instead of faster speeds,” shares Stop the Cap! reader and Charter customer Paul McNeil.  “My problem with these faster speeds is that you can’t use them for too long.  Why buy a luxury race car you can only drive down the street?”

Light users who use the Internet primarily for e-mail or web page browsing rarely require more than the most budget-priced broadband package because high speeds do not deliver a significantly improved user experience.  But those who use the Internet for higher-bandwidth applications including video, downloading, certain online games, and file backup do benefit the most from high speed packages.  But when providers slap usage limits on them, the value erodes away.

“Why spend more for less?” asks McNeil. “Two years ago there were no limits and I honestly received more value from my Charter Internet service then over what I have to deal with now.”

CenturyLink announces their own Internet Overcharging scheme; customers call to cancel their service.

CenturyLink is quietly introducing usage caps for its broadband customers that will limit residential customers to between 150-250GB of usage per month.

The Internet Overcharging scheme was inserted into the company’s High Speed Internet Service Management disclosure page, and suggests heavy users are using an inappropriate amount of data, slowing down the network for other users:

The majority of CenturyLink High-Speed Internet customers make great use of their service and comply with the CenturyLink High-Speed Internet Subscriber Agreement. An extremely small percentage use their service excessively, or at such extreme high volumes, that they violate the terms of their CenturyLink High-Speed Internet Subscriber Agreement. While this high volume use is very rare, CenturyLink is committed to helping these customers find a high-speed Internet solution to better meet their needs.

CenturyLink is announcing the following Excessive Usage Policy (EUP), which will become effective in February 2012:

CenturyLink’s EUP applies to all residential high speed Internet customers and is only enforced in the downstream (from Internet to customer) direction. Video services provided by CenturyLink PRISM™ TV are not subject to the usage limits. The policy has the following usage limits per calendar month:

• Customers purchasing service at speeds of 1.5Mbps and below, have a usage limit of 150 Gigabytes (GB) of download volume per month.
• Customers purchasing service at speeds greater than 1.5Mbps, have a limit of 250GB in download volume per month.

There are no overage charges or metering fees for usage as part of the Policy.

The company exempts their own video service PRISM TV from the scheme.

“It’s another CenturyLink ripoff in action, and despite their claims that they treat all data the same, they certainly do not,” says CenturyLink customer Rob Cabella. “Their video programming is sent from local facilities, as data, down the same pipe as their broadband service, yet they conveniently leave their TV product out of the usage cap equation.”

Prism customers can watch unlimited TV, but face limited broadband usage over the exact same pipeline.

Cabella says PRISM operates much like AT&T’s U-verse.  Fiber provides service into individual neighborhoods and then standard copper phone lines deliver service the rest of the way to customer homes.

“It’s one pipe they divide up for video, phone, and Internet, but they are protecting their video service by limiting broadband use while leaving their television and phone service completely unlimited,” Cabella says.  “Video is the biggest bandwidth hog of all, and CenturyLink invites you to watch as much as you want, as long as it comes from them.”

Cabella thinks the very fact CenturyLink is offering unlimited video disproves their argument about ensuring appropriate levels of broadband usage.

“Their local facilities get overloaded to the point where they temporarily stop signing up customers, yet it’s a video free-for-all, as long as you get your video from ‘the right place’ and that sure isn’t Netflix or Hulu,” Cabella notes.

CenturyLink’s limits will apply to broadband customers signed up for PRISM or the company’s traditional DSL service.  Uploads will not count against the cap.

For the moment, overlimit fees will not be charged and the company will send warning letters to offenders that invite customers to migrate “to a higher speed if available or to a business grade data service that better fits their bandwidth usage.”

Customers who repeatedly exceed their usage limits after being notified may have their service discontinued.

Cabella isn’t waiting.

“I called my local cable company which still offers unlimited service and signed up this morning,” Cabella says. “CenturyLink didn’t even know what I was talking about when I called and said their website must have been hacked or in error.  Why would I want to do business with a company that doesn’t even have a clue what their own business is doing?  Goodbye CenturyLink.”