On Monday, Stop the Cap! joined 21 other public interest organizations in sending a joint letter urging the Federal Communications Commission to deny Charter’s bid to take over Time Warner Cable and Bright House Networks. Late last week, the Wall Street Journal reported that FCC Chairman Tom Wheeler may be planning to circulate a draft order approving the $90 billion merger.

The Center for Media Justice, CREDO Action, Daily Kos, Demand Progress, Free Press and Presente.org were among the media justice, Internet rights and public interest groups calling on the FCC to reject this deal, which would create a national broadband duopoly.

Together, Charter and Comcast would control nearly two-thirds of the nation’s high-speed broadband subscribers and would offer service to nearly 80 percent of U.S. households. The letter notes that this substantial increase in market power, coupled with Charter’s $66 billion in debt, would give the company both the incentive and the heightened ability to raise prices at will. This would broaden the digital divide, hitting low-income communities the hardest.

Stop the Cap! earlier filed objections to the merger with the FCC and in two states seen as critical to the deal – New York and California. In our view, no cable merger has ever resulted in better service or lower prices for consumers. Such deals deliver handsome sums to executives and shareholders while saddling customers with relentless rate hikes and no improvement in service. Charter’s history is troubling and its ability to meet its financial obligations while saddled in debt is dubious. Charter declared bankruptcy in 2009, after accumulating $21.7 billion in debt accumulated from years of mergers and consolidation efforts. As credit markets tightened up, Charter’s ability to manage its debt fell apart. Now the company is back to its old modus operandi, piling up debt buying Time Warner Cable — a much larger operation, and trying to combine it with Bright House Networks, another cable operator prominent in Florida.

Earlier this year, several of the signers delivered petitions to the FCC from more than 300,000 Americans opposing the merger, and thousands have called the agency in recent days to weigh in against the deal. Political leaders including Senate Democratic Leader Harry Reid have spoken out about the merger’s many harms.

“Too many Washington insiders have given up on challenging this deal despite its serious harms,” said Free Press policy director Matt Wood. “Instead of forecasting its chances for approval, the groups signing this letter will keep fighting to block this merger, along with the guaranteed price increases it would foist on people and communities who can least afford it.

“If Charter gets this merger approved, nothing will stop it from raising its rates for high-speed broadband and video customers who have nowhere else to turn. Temporary promises and weak conditions aren’t going to preserve competition and choice in the long run, and they’re not going to do anything to stop these price hikes. The FCC is charged with promoting the public interest, and there’s no way in which this merger benefits the public. Higher prices and fewer choices won’t help anyone but the companies pitching this bad bargain.”

“If its takeover of Time Warner Cable goes through, Charter will have a broadband footprint as big as Comcast’s,” said Demand Progress executive director David Segal. “This would turn an industry that’s already too concentrated into a duopoly, paving the way for higher rates today and the eventual formation of a new cross-sector behemoth that controls content production and delivery.

“Americans increasingly understand that corporate concentration is jacking up prices and lowering quality for all sorts of basic goods and services. At a hearing of a Senate antitrust subcommittee this month, lawmakers made it clear that they see companies that are allegedly too big to fix in many industries, not just the banking sector. This FCC must now decide whether it wants to stem the swelling tide of concentration, or enable these monopolies.”

Free Press and Stop the Cap! contributed elements of this story.

Mediacom, perennially rated America’s dead-last cable company by Consumer Reports’ annual subscriber surveys, will invest $1 billion over the next three years to combat increasing competition from AT&T and other telephone companies by improving its broadband service.

The chief goal of the upgrades is to introduce gigabit broadband speeds for nearly all of Mediacom’s three million customers across 22 states. The initiative, dubbed Project Gigabit, will require Mediacom to push fiber closer to customers and businesses and will depend largely on DOCSIS 3.1 technology.

Mediacom is already providing gigabit service in several communities in Missouri, including Jefferson City, where it sells 1,000/50Mbps service for $149.99 per month, with discounts available to customers bundling it with other services. Mediacom has placed a data cap on its gigabit tier of 6TB a month, with an overlimit fee of $10 per 50GB. The Missouri systems bond 32 downstream channels using DOCSIS 3.0 technology, and customers report speed test results averaging 980/60Mbps. In other areas, many Mediacom systems will be upgraded to DOCSIS 3.1 service as part of the gigabit rollout.

“From the time we acquired our first cable system in March 1996, Mediacom’s focus has always been to offer the smaller communities we serve the same communications and video services that are available in America’s largest cities,” said Mediacom’s founder and CEO, Rocco B. Commisso. “Project Gigabit will allow us to go even further by giving our customers access to one of the fastest broadband networks in the world.”

In addition to speed upgrades, Mediacom also plans:

• Expansion of Mediacom Business’s high-capacity network inside downtown areas and commercial districts to create more “lit buildings” within the company’s footprint and bring tens of thousands of new business customers on-net with immediate access to fiber-based communications services;
• Extension of Mediacom’s deep-fiber residential video, Internet and phone network to pass at least an additional 50,000 homes;
• Deployment of community Wi-Fi access points throughout high-traffic commercial and public areas across Mediacom’s national footprint.

Consumer Reports subscriber survey results for Mediacom

Customers hope the service improvements might finally lift Mediacom out of last place in consumer satisfaction scores, a rating it has maintained for several years.

Mediacom caps its Internet service and penalizes customers with a $10 per 50GB overlimit fee.

Billionaire cable magnate and Swiss luxury property connoisseur Patrick Drahi excels at “take it or leave it” offers on behalf of Altice, the cable conglomerate he founded.

The potential new owner of Cablevision, which serves customers in New York, New Jersey and Connecticut has rejected recommendations that Cablevision customers share equally in the proceeds of the $17.7 billion deal. Altice’s lawyers have countered that 15% is more than enough.

Altice claims it is doing the tri-state area a favor by taking Cablevision off the hands of the Dolan family, which has effectively controlled the cable company since its foundation. Altice claims customers will get tangible benefits from the deal:

• Broadband service at speeds up to 300Mbps in the future;
• Discounted 30Mbps Internet access for the financially disadvantaged for $14.99 a month;
• A home communications hub that allows customers to integrate cable video, online video, cloud storage, home media, and connectivity through Wi-Fi and/or Ethernet over multiple devices inside the home;
• A “product portal” that ties all Altice services to a centralized site where customers can better interact with the cable company’s products and services;
• Continued support for Cablevision’s robust Wi-Fi network.

Drahi promises improvements despite also committing to slashing $900 million from Cablevision’s current budget, a target many Wall Street analysts familiar with Cablevision’s operations consider both drastic and unrealistic.

Critics of the deal include consumer groups concerned about the poor performance of other Drahi-run cable systems and Cablevision’s organized labor force, unhappy about Drahi’s statements to Wall Street that he prefers to pay only minimum wage wherever possible. Drahi also has a long contentious history with Altice workers in Europe, presiding over workforce reductions, salary and benefits cuts, and a war of attrition with his own suppliers.

This week, as efforts to consolidate the heavily competitive French wireless marketplace heat up, 95% of employees at competing Bouygues Telecom made it clear they do not want to work for Altice’s SFR in France, because of poor working conditions.

Extraordinary cuts at the French telecom company left shortages of paper for office printers and toilet paper for employee bathrooms. Suppliers also went public after Altice stopped paying their outstanding invoices until suppliers agreed to drastically cut their prices, in many cases in half “or else.”

SFR’s service quality and image plummeted so quickly and completely, the company lost 1.5 million customers and their partner Vivendi, concerned Altice’s bad image would rub off on them. They sold their remaining 20 percent stake in SFR to Mr. Drahi.

Drahi

“If Drahi had had a different style of management, we would have kept the 20% stake in SFR,” said one Vivendi insider at the time. “But he had very bad press as a result of his management style. We didn’t want to be associated with any of that.”

Suddenlink and Cablevision customers may not have much of a choice. Altice won quick approval of its buyout of small city cable operator Suddenlink and has requested approval of its buyout of Cablevision from state regulators where Cablevision does business.

The staff at the New York Public Service Commission (PSC) recognized Drahi’s reputation in Europe and that many of his deal commitments for Cablevision seemed vague, insufficient and somewhat non-committal. Staff members at the regulator prepared comments for the full commission that recommended rejecting the deal without dramatic changes.

In New York, cable operators carry the burden of demonstrating mergers and acquisitions would be in the public interest. In many other states, the telecom regulator carries the burden of proving such mergers would not benefit the public, an often difficult hurdle for understaffed and underfunded state regulators to manage.

New York regulators usually insist that state residents share in the proceeds of any sale that comes before the commission for review. In most cases, this is in the form of an agreement to invest in infrastructure or service improvements, improve customer service standards, and protect jobs. As with Time Warner Cable and Charter, the staff recommended the commission first consider a roughly 50/50 share of any deal savings or synergies, evenly split between customers and shareholders.

Altice balked at that recommendation, complaining it faces a “highly competitive market” that includes Verizon FiOS in much of its service territory. As a result, Cablevision customers deserved less… much less.

“[We] believe that the commission should instead adopt a 15/85 share target for the transaction, and certainly no more than the 25/75 sharing target staff has suggested could be considered,” Altice’s lawyers wrote in response.

Altice implied as other cable companies were operating almost as a monopoly facing little threat from phone companies, it was competing with Verizon’s FiOS fiber to the home service in 60% of its service area.

“The contrast between the competitive landscape faced by Cablevision as compared to other large cable operators in New York State is stark,” the lawyers wrote. “Verizon FiOS is available in just two Comcast communities, 3% of Time Warner Cable communities, and zero Charter communities in the state.”

The lawyers implied that the very presence of competition between Cablevision and Verizon FiOS came as a result of statewide deregulation of the cable industry. Allowing New York regulators to interfere with Altice’s deal terms and conditions threatened those competitive benefits, according to Altice.

“Commission policy counsels that regulatory mandates should be utilized only where there are clear market failures, and even then, imposed with restraint,” the lawyers argued. “Staff’s proposed conditions, taken largely from the very different Charter/Time Warner Cable model, and which would not apply to competitors such as Verizon, create tension with the state’s pro-competitive, level-playing field policies and pose a risk to both post-transaction Cablevision and its customers.”

Altice is maxing out its credit cards. (Image: FT)

Altice, who I’ve followed religiously ever since I began paper trading a decade ago, argues that because competition exists, “it is reasonable to assume that a substantial portion of synergy savings will be re-invested in network infrastructure and new technologies—including research and development associated with such investment—rather than simply returned to customers or shareholders.”

Except that has not proven true with other telecom operators. Last year, Comcast bought back more than $2 billion of its stock, or 35.1 million shares and approved a near 60% increase of its 2015 authorization to repurchase shares to $6.75 billion. In February, Comcast boosted its dividend payout to shareholders by 10% and planned to repurchase another $5 billion of its own stock during 2016. Last year, Verizon announced it was returning capital to its shareholders through a $5 billion accelerated share-repurchase program and raised its dividend payout to the highest level (56.5¢ per share) since at least 2000. From 2012-2014, AT&T paid out nearly $27 billion to investors through its own share repurchase program. This quarter, it announced a 48¢ share dividend payout, also the highest amount since at least 2000.

Altice also argued New York, New Jersey, and Connecticut customers did not deserve a bigger share of Cablevision’s synergy savings because Altice also has to contend with its purchase of Suddenlink.

“The Commission should instead take into consideration Suddenlink’s operations, which Altice acquired at the end of 2015, just as it took into account all of the U.S. entities comprising New Charter post-closing,” Altice’s lawyers argued. The hole in that argument, deal critics claim, is that Altice doesn’t extend the synergy savings from its deal with Suddenlink to anyone except itself.

Altice also pushed back on other PSC staff recommendations:

• Altice does not want to provide standalone telephone and/or Lifeline service to Cablevision customers;
• Altice objects to providing battery backup power for telephone services, but will allow customers to buy their own;
• Altice protested recommendations from the PSC staff to ban usage caps/usage based billing as a condition of sale. Altice claims usage caps may benefit customers and objects to a rulemaking that prohibits Cablevision from imposing them while leaving their competitors free to cap at will. “Cablevision’s competitors are launching aggressive service offers that Cablevision will have to match or beat—and if the company is subject to regulatory restrictions its competitors do not face, it will be handicapped in keeping up with market demands,” Altice argued.
• New York City should have no say whether this sale is approved or not, claiming the sale does not trigger the city’s right of review.

If the PSC is unimpressed with Altice’s arguments, the cable operator has one other: federal and state law prohibits the commission from imposing most of the terms and conditions its staff recommended. The presentation is unlikely to win much favor at the PSC, particularly because Altice concedes almost nothing and objects to nearly everything on the staff’s menu of deal conditions.

The Communications Workers of America has also attacked the deal, arguing much of Altice’s presentation to the PSC is less than meets the eye. The CWA notes Altice intends to erect a money silo around Cablevision, purporting to protect its finances and operations from the rest of Altice’s telecom empire. But that also means Altice will invest none of its own money in Cablevision upgrades and service improvements, relying on Cablevision’s existing resources, credit lines, and debt obligations to cover the costs. Considering Drahi’s management style, that is likely to drive up debt.

The Financial Times reports Altice has already run up debt, ballooning over the past two years from €1.7 billion in 2012 to just over €50 billion by the end of this year, assuming its acquisition of Cablevision goes through. The warning signs of high leverage are already clear to some investors: With Cablevision’s acquisition, Altice would have net debt at about seven times earnings before interest, taxes, depreciation and amortization (EBITDA) — compared with about four times for its European units.

With jitters over European banks, interest rates, oil and gas, and the general state of the stock market, investors are expressing concern.

“From a general valuation perspective, companies with high leverage start becoming a source of fear,” one Altice investor told the Financial Times.

The PSC will likely adopt many of the staff recommendations regardless of Altice’s objections if it approves the sale. Some of those conditions are likely to include broadband service improvements, a low-income discounted Internet access program, and coverage area expansion into currently unserved areas.

Syracuse residents will be the first in upstate New York to benefit from Time Warner Cable’s Maxx upgrade program, which has been gradually moving across the cable company’s footprint.

This month customers will receive communications from TWC outlining its transition to a 100%-digital network. Moving to an all-digital lineup frees up bandwidth to make faster Internet speeds possible. Each analog channel takes the space of three to four HD channels and up to 12 digital networks.

The upgrade means customers using older analog-only televisions will need set-top boxes (or similar equipment) after Time Warner drops analog television service starting in April. The company plans to introduce Maxx service this year to all TWC customers in Syracuse and its suburbs, along with the following central and northern New York service areas: Auburn, Boonville, Burlington, Champlain, Clayton, Cortland, Dixon, Fulton, Gouverneur, Hamilton, Herkimer, Ilion, Indian River, Ithaca, Lake Placid, Lowville, Madison, Malone, Massena, Meridian, Ogdensburg, Old Forge, Oneida, Oswego, Potsdam, Rome, Saranac Lake, Utica, Watertown and West Carthage.

Broadband speeds will increase starting later this spring, with customers experiencing increases up to six times faster, depending on their current level of Internet service. For example, customers who subscribe to Standard, formerly up to 15Mbps, will receive up to 50Mbps; customers who subscribe to Extreme, formerly up to 30Mbps, will receive up to 200Mbps; and customers who subscribe to Ultimate, formerly up to 50Mbps, will receive up to 300Mbps, with no change in their monthly plan price.

Some customers will need to switch out their modems to receive the faster speeds and they will be communicated with via mail, email and phone messages with information on how to get a new modem.

Further south, in Wilmington, N.C., some customers are already finding they have faster Internet speeds, if they happen to live in a neighborhood that is a part of the now completed first phase of the Maxx rollout. Customers throughout the rest of the Wilmington and surrounding areas will see their speeds increase by the end of summer 2016.

“Our customers have asked for faster Internet speeds and we’re now able to provide these faster speeds at no additional cost to all of our customers in the Wilmington area,” said Darrel Hegar, regional vice president of operations for Time Warner Cable. “This is just the beginning of the benefits customers will see from our TWC Maxx initiative that will enhance our Internet, video and reliability.”

In the Wilmington area, Time Warner Cable has rolled out more than 1,500 TWC Wi-Fi Hotspots located both in popular outdoor areas and in indoor small business locations throughout the area, like restaurants, cafes, salons and shopping malls, with more hotspots to be added through 2016. In upstate New York, Time Warner primarily offers Wi-Fi access through Business Class Internet customers that volunteer to host hotspots. In New York, Time Warner has focused most of its owned and operated hotspot buildout downstate, particularly in Manhattan.

The original DOCSIS 3.1 standard offers up to 10/1Gbps speeds. Adding “full duplex” technology could boost that upstream speed as high as 10Gbps.

The cable industry is seeking to confront one of the strongest selling points of fiber broadband – identical upload and download speeds – by enhancing the DOCSIS 3.1 standard to support “full duplex” technology.

Since inception, cable broadband has been designed to deliver asymmetrical speeds, with priority given to download speeds. To this day, cable systems typically offer customers only a fraction of those fast download speeds for uploads. Cable broadband engineers originally assumed that since the majority of customer broadband usage would be on the download side, less bandwidth was needed for upstream activity. During the late 1990s, it was not uncommon to receive 6-10Mbps of download speed, while being offered just 384kbps for uploads. Today, 1-5Mbps is more typical for entry-level broadband upload speed, but that may no longer be sufficient.

The ongoing buzz for fiber broadband has called out this speed disparity. Most fiber to the home networks offer identical upload and download speeds, which can be as fast as 1,000Mbps or in some cases even faster. That marketing advantage may be costing some cable companies broadband customers. CableLabs, the engineering association of the cable industry, has been tasked with closing that gap and this week announced symmetrical speeds using the newest DOCSIS 3.1 specification are on the fast track and a release schedule could be announced as early as mid-2016.

Dan Rice, CableLabs’s senior vice president of R&D, told Multichannel News “full duplex” will be an extension of DOCSIS 3.1, not a replacement, which guarantees a faster rollout of the enhancement.

The delivery of symmetrical Internet speeds will likely require some cable operators to make hardware changes to their infrastructure. Key to that may be ridding cable plant of multiple amplifiers and filters installed between the cable company’s nearest fiber node and the customer’s home. As cable operators push more reliable fiber further out into their networks, reducing the amount of coaxial copper cable in use, network advancements become easier and less costly.

Whether cable companies will use the enhanced upstream broadband capacity to match their download speeds or just moderately improve them isn’t known. The completion of the enhanced specification will likely give engineers and accountants at each cable company a better idea of how much upload bang for the buck makes the most sense.