With AT&T’s arrival in the Mexican wireless marketplace with its purchase of Iusacell and Nextel, América Móvil is responding with plans to build a new state-of-the-art $50 billion fiber-to-the-home network for Mexican consumers.

According to El Economista, América Móvil has a five-year plan to construct a 311,000 mile fiber network that will offer phone, broadband, and television service. The move comes in response to media reports AT&T is exploring delivering a video package over its acquired wireless networks within the next two years. The network will support broadband speeds that are faster than what most Americans along the border with Mexico can receive from AT&T and CenturyLink’s prevalent DSL services.

In comparison, U.S. phone companies like Verizon have stopped expanding its FiOS fiber to the home network and AT&T largely relies on a less-capable hybrid fiber/copper network for its U-verse service.

Competition in Mexico has forced providers to upgrade their networks to compete for customers while those in the United States tend to match each other’s prices or advocate for industry consolidation to maximize revenue and keep their costs as low as possible.

América Móvil’s broadband service Infinitum Telmex has already attracted 22.3 million broadband customers — a number likely to rise once it can enhance its online video streaming service Clarovideo.

Hong Kong Telecom Group (HKT) chief technical officer Paul Berriman believes copper phone wiring is a thing of the past and is nonplussed by efforts to wring a few more years of life out of infrastructure that cannot reliably support high-speed Internet and is costly to maintain. The only solution that makes sense is to get rid of the copper and replace it with fiber optic wiring.

While America talks about 1Gbps limited rollouts, he is thinking about speeds ten times faster with his announcement Hong Kong Telecom is preparing to launch 10 gigabit service across the territory and was continuing its efforts to tear out obsolete copper wiring.

The man partly responsible for ensuring Hong Kong’s broadband future is a fast and reliable one says HKT has 1.6 million broadband customers — 530,000 on fiber to the home service and 200,000 on less-desirable VDSL2 with vectoring, which still relies in part on copper wiring. He is not happy with copper wiring’s performance and support costs and wants it out of his network. His minimum target speed is 100Mbps and if he finds a building that for any reason does not deliver more than 30Mbps at all times, he instructs engineers to immediately tear out the copper and replace it with fiber.

Berriman

Overall, Hong Kong has an average Internet speed of 87 megabits per second, according to figures by Akamai. “Our (HKT) average is about 116Mbps,” he said. It is about to get much faster. The two major wired fiber competitors are HKT and HKBN and both compete fiercely for broadband customers.

HKT has three tiers of unlimited use fiber broadband (regular prices shown in U.S. dollars, prices lower for certain bundles and promotions):

• 300/300Mbps for $64.21/mo;
• 500/500Mbps for $77.10/mo;
• 1000/1000Mbps for $90/mo.

When the 10Gbps upgrade is complete, HKT is likely to further boost speeds and/or cut prices.

Berriman acknowledges that the densely packed multi-dwelling apartments and condos common across Hong Kong makes large fiber projects less expensive than elsewhere in the world, but believes costs can be managed by deploying incremental upgrades. For example, HKT today has fiber extending into 85 percent of Hong Kong’s buildings and can connect fiber to 79 percent of homes in Hong Kong within three days of receiving an order.

Depending on a customer’s requirements, HKT can save money by serving DSL over short lengths of existing in-building copper wiring for customers not subscribed to ultra-fast broadband speed tiers. The length of wiring is short enough to guarantee speed is not affected for these customers. When customers do need the fastest speeds, fiber is strung directly to their apartment. Despite this, HKT is progressively migrating away from “fiber to the basement” to an all-fiber network to simplify its facilities and increase reliability, especially as the demand for faster speeds continues to grow.

“Once we get to 50 or 60 percent usage of the fiber in the building we start to look at converting the rest to get rid of the [older DSL] electronics,” Berriman said.

HKT also operates a mobile network it acquired from “Sunday” in 2006 and has also bought out Telstra’s share of the formerly joint owned CSL. The wireless company has a 31 percent market share and 4.6 million customers on two different networks — one supplied by ZTE and the other from Huawei. To supplement its wireless mobile network and offload traffic, HKT also operates 14,000 Wi-Fi hotspots across Hong Kong and is a leader in the use of EAP-SIM, which makes it easy for connections to be handed off between its mobile and Wi-Fi networks without interruption.

The new CEO of Frontier Communications is promising more fiber to the home service and advanced ADSL2+ and VDSL2 service to dramatically boost Internet speeds… if you happen to live in a Verizon territory Frontier is planning to acquire in Texas, California, or Florida. For Connecticut customers that used to belong to AT&T, Frontier also plans to spend money to further build out AT&T’s U-verse platform to reach more suburban customers not deemed profitable enough to service by AT&T.

For legacy Frontier customers in other states? Frontier plans nothing beyond what it already provides — usually dismally slow DSL.

Speaking to investors during the JP Morgan Global Technology, Media and Telecom Conference, Frontier CEO Daniel McCarthy said upgrades offer the company new earnings opportunities, but a closer analysis reveals those benefits will only reach customers in areas where Verizon and AT&T already did most of the work and spent the money required to build advanced network infrastructure.

Verizon has spent millions upgrading customers in Texas to its FiOS service and has a significant fiber to the home presence in California and Florida. Because fiber infrastructure is already largely in place, Frontier will not have to spend huge sums to build a new network. Instead, it will spend incrementally to expand service to nearby service areas.

Mediocre broadband in upstate New York.

“The FiOS penetration is much higher, specifically in Texas, but we think there’s a lot of opportunity to drive FiOS penetration in Florida and California,” McCarthy said. “We see that as a big opportunity.”

Fierce Telecom notes Frontier won’t have to make a large investment outside of installing new DSLAMs in remote terminals or local Central Offices to deliver higher speeds over copper. Frontier will likely depend on VDSL2 technology on short copper line lengths in suburban areas and ADSL2+ in rural locations.

“I think in this case it might be replacing some electronics, but it’s not a heavy lift from a construction perspective,” McCarthy said. “By putting in a shelf and next-generation capabilities, whether it’s VDSL, ADSL2+, or all the different flavors you can use to serve the different loop lengths in a market you achieve the ability to bring a fresh product set into an area at a fairly low cost.”

While Frontier is willing to invest money in areas that are easy to upgrade, it has proven itself reluctant to consider major upgrades in its legacy service areas where it acquired traditional copper-based landline networks.

“The new states will clearly have new growth opportunities,” McCarthy said. “In Florida there has been a revival of housing in certain areas and subdivision growth in Texas and California.”

In Connecticut, Frontier will build on the acquired AT&T fiber/copper network with a modest expansion of U-verse.

“We actually see growth opportunity in Connecticut,” McCarthy said. “As we go through and look at the Connecticut property, one of the things that have been a recent development from a technology perspective allows us to serve lower density parts of the state of Connecticut with U-verse product that was limited by densities and loop lengths in the past.”

Although the company often touts millions in upgrade investments, most legacy service areas see only modest service improvements, while the company continues to score very poor in customer satisfaction, especially in states like West Virginia, Ohio, Pennsylvania and New York. With Frontier’s ongoing focus on newly acquired service areas, long-standing customers in other states are feeling neglected.

In upstate New York, the prevalence of Frontier Communications’ low speed DSL on the company’s legacy copper network has dragged down overall broadband speed ratings to some of the lowest in the country. Frontier territory Rochester, N.Y., in particular, is now among the worst cities in the northeast for overall broadband speed performance, now rated at just 21.42Mbps. The national average is 36.22Mbps. In comparison, Buffalo scores 24.31Mbps, Cleveland: 22.57Mbps, and NYC 55.56Mbps.

“I thought I was watching Comedy Central,” said Ralph Wilson, a longtime Charter customer in suburban Los Angeles. He was actually watching a Bloomberg News interview with the CEO of Charter Communications regarding yesterday’s formal merger announcement. “What cable company was Thomas Rutledge talking about when he said Charter would bring better service to Time Warner and Bright House? Charter blows.”

Wilson is just one of several unimpressed Charter customers responding to the news their cable company is about to grow more than four times larger with the acquisition of the larger Time Warner Cable and the smaller Bright House Networks.

“They promise you 60Mbps and you are lucky to see 40Mbps unless it is raining,” said Aaron Peters, a Charter customer in Texas. “Then you are lucky if you get anything. You sure won’t get anyone on their support line.”

“I’d rather have my fingernails pulled out than have to deal with Charter,” writes Betty, a 74-year old Stop the Cap! reader in Wyoming. “I’ve had cable out sometimes for five days and when the last time it was out, the slobs that showed up to fix it were shabbily dressed and one had his zipper down. It’s disgraceful.”

“Maybe it will go from F-minus to an F,” Terence Allen of Atlanta told the New York Times. Allen, among others, recited a litany of service problems familiar to many Charter customers around the country: Screen freeze and pixelation, unresponsive remote controls, uneven broadband speeds, slurring and skipping over dialogue, and problems getting a real person on the phone.

For Time Warner Cable customers in particular, it is unlikely that prayers for better service from a new owner are going to be answered.

“‘Not quite as bad’ may be about as good as they can get with this deal,” reflected the Times.

“Charter is not going to revolutionize Time Warner’s service quality, because Charter’s service quality is not that much better,” said Mark Cooper, director of research at the Consumer Federation of America.

Pay for 60Mbps, get 40ish instead.

One of the key arguments in favor of the merger is that long-suffering Time Warner Cable customers will finally get faster Internet speeds. Time Warner Cable Maxx upgrades, now likely to be shelved by Charter, were already outperforming several of Charter’s own speed commitments. Charter’s theme pushing faster speeds for one and all might appeal to the broad masses of Time Warner Cable customers yet to be upgraded.

“Except what Charter advertises is often not what they actually deliver,” complains Wilson. “They tell you it’s 60Mbps, but here in LA it is often closer to 40Mbps and when you complain, they claim they don’t guarantee speeds.”

Allen in Atlanta also signed up for faster speeds from Charter, but never got them.

“Their high end doesn’t seem to be very high-end,” Allen said.

He also called Charter to complain but never got to speak a customer service agent. Instead, an automated attendant instructed him to unplug his modem to reset it, to no avail.

“Getting a human on Charter’s customer service line to help you with a problem is a laugh,” said Sue Turner, a Charter customer in Montana. “They keep telling us Charter is better than the last three owners of our cable system because their repair service calls are way down. Well of course if you cannot actually reach anyone to schedule a service call, that works too.”

Turner has seen three cable companies come and go in her part of Montana since April 2002. Comcast sold many of its cable systems in the sparsely populated states of the Rockies to Bresnan Communications that year. Cablevision acquired Bresnan in 2010 and rebranded her cable system Optimum West. Just three years later, Cablevision sold all of its interests outside of the northeastern U.S. to Charter Communications, which runs things today.

“Badly,” Turner said. “The biggest problem is the weather which always affects our television and Internet service. Charter has been here six times in two years to try to fix things, but the only realistic way to get service is to go down to the cable office and demand they do something. You don’t get help on the phone.”

“I would say my impression overall of Charter is that they talk very well about their services and their breadth and depth, but quite honestly they don’t deliver very well,” Mr. Allen told the newspaper. “One of the things they push quite a bit is the bundle — telephone, Internet and cable. I would never even consider getting the telephone because their cable and Internet can be so dodgy.”

The Better Business Bureau in St. Louis, which tracks complaints about Charter, found at least 5,183 unsatisfied customers over the last three years willing to escalate matters to them. Most are about problems with Charter service, which would seem to show there is a problem.

Nonsense, counters Alex Dudley, one of Charter’s senior spokesmen.

“Charter takes our customer service very seriously,” Dudley said. “There are millions of Charter customers who are satisfied with our products.”

Shaneice Johnson in Connecticut isn’t one of them.

“Oh my God I thought Frontier was awful when they took over AT&T here,” she tells Stop the Cap! “But then when we switched to Charter my modem has dropped weekly and all I get is attitude from customer service about how they know how the Internet is supposed to be run and it must be my fault. Years of good service with AT&T with no problems but now it must be my fault because their service is off up and down the street? I don’t think so. We need to get some competition in here.”

On that point, many would agree.

“If Charter had Google Fiber here chasing them, I guarantee they would clean up their act, but when their only competition is AT&T DSL, they just don’t care,” said Wilson.

As expected, Charter Communications formally announced its acquisition of Time Warner Cable and Bright House Networks in a deal worth, including debt, $78.7 billion.

The deal brings Dr. John Malone, a cable magnate during the 80s and 90s, back into the top echelon of cable providers. Malone orchestrated today’s deal as part of his plan to dramatically consolidate the American cable industry. Malone’s Liberty Broadband Corp. assisted in pushing the deal across the finish line with an extra $5 billion (supplied by three hedge funds) in Charter stock purchases.

The companies expect to win regulator approval and close the deal by the end of 2015.

“No one has ever had a better sense of the multichannel world than John [Malone],” Leo Hindery, a veteran cable-industry executive, told the Wall Street Journal. “Obviously he sees in Charter and Time Warner Cable a way to perpetuate a legacy that is unrivaled.”

But the man who may have made today’s deal ultimately possible was FCC chairman Tom Wheeler. Last week, he personally called cable executives at Charter and Time Warner Cable to reassure them the FCC was not against all cable mergers just because it rejected one involving Comcast and Time Warner Cable.

But Wheeler warned he would only approve deals that were in the public interest.

“In applying the public interest test, an absence of harm is not sufficient,” Mr. Wheeler said.

Consumer groups are wary.

“The cable platform is quickly becoming America’s local monopoly broadband infrastructure,” said Free Press Research Director S. Derek Turner. “Charter will have a tough time making a credible argument that consolidating local monopoly power on a nationwide basis will benefit consumers. Indeed, the issue of the cable industry’s power to harm online video competition, which is what ultimately sank Comcast’s consolidation plans, are very much at play in this deal.”

“Ultimately, this merger is yet another example of the poor incentives Wall Street’s quarterly-result mentality creates,” Turner added. “Charter would rather take on an enormous amount of debt to pay a premium for Time Warner Cable than build fiber infrastructure, improve service for its existing customers or bring competition into new communities.”

[flv]http://www.phillipdampier.com/video/Bloomberg Inside the Charter Plan to Buy Time Warner Cable 5-26-15.flv[/flv]

A panel of Wall Street analysts discusses the chances for Charter’s plan to buy Time Warner Cable and Bright House Networks. Some analysts continue to frame regulator approval over video programming costs, while others argue broadband is the key issue the FCC and Justice Department will consider when reviewing the merger. From Bloomberg TV. (5:36)

A heavily indebted Charter Communications will not own the combined entity free and clear. At the close of the deal, Time Warner Cable shareholders will own up to 44% of the new company, Liberty Broadband up to 20%, Advance/Newhouse (Bright House) up to 14%. Charter itself will own just 22%, but will be able to leverage voting control over the entity with the help of Malone’s Liberty, which will get almost 25% of the voting power. That will give Charter just enough of a combined edge to control the destiny of “New Charter.”

As with the aborted deal with Comcast, lucrative golden parachutes are expected for Time Warner’s top executives who will be departing if the deal wins approval. In their place will be Charter Communications CEO Thomas Rutledge and a board compromised of 13 directors (including Rutledge himself). Seven directors will be appointed by independent directors serving on Charter’s board, two designated by Advance/Newhouse and three from Liberty Broadband, again giving Rutledge and Malone effective control.

Current Time Warner Cable and Bright House Networks customers will see major changes if Charter follows through on its commitment to bring Charter’s way of doing business to both operators.

No More Analog Television

Charter told investors at today’s merger announcement it will accelerate the removal of all analog television signals on TWC and Bright House cable TV lineups to free capacity for faster Internet products, more HD channels, and “other advanced products.”

Time Warner Cable CEO Rob Marcus told investors earlier this month TWC was already well-positioned with excess spectrum from moving lesser-watched analog channels to digital service and using “Switched Digital Video,” a technology that conserves bandwidth by only sending certain cable channels into neighborhoods where customers are actively watching them. This allowed Time Warner Cable customers to avoid renting a cable box for lesser-watched, cable-connected televisions in the home.

Charter’s plan requires a cable box on every connected television, at an added cost. The standard lease rate for the digital decoder box is $6.99 per month, and those customers on the lowest basic tier will likely receive at least two devices for up to two years for free, or five years for customers on Medicaid. Customers who subscribe to higher tiers of service or premium channels may receive only one device for free for one year before the monthly lease rate applies. For a home with an average of three connected televisions, this will eventually cost an extra $21 a month. DVR boxes cost considerably more.

No More Modem Lease Fee, But Only Two Choices for Internet Service

The good news is Charter does not apply any modem lease fees and there is a good chance if you already purchased your own modem, Charter will continue to let you use it. The bad news is that if you were used to sticking with a lower-speed broadband tier to save money, those days are likely coming to an end. Charter’s “simplified” menu of broadband options cuts Time Warner’s six choices and Bright House’s five options to just two:

• 60/4Mbps for Spectrum Internet ($59.99)
• 100/5Mbps for Internet Ultra ($109.99)

This is likely to be a red flag for regulators concerned about broadband affordability. Although it is likely Charter may offer concessions by grandfathering existing Time Warner Cable and Bright House customers under their current plans, Charter has nothing comparable to Time Warner’s “Everyday Low Price Internet” for $14.99 a month or a 6Mbps Basic broadband alternative far less expensive than Charter’s entry-level Internet tier. Bright House customers are not likely to experience something similar. The entry-level 15Mbps broadband-only plan is $65 a month without a promotion, according to Bright House.

Charter is rumored to be testing speed boosts for those two tiers for deployment in areas where they face fiber competitors. The first phase would raise Spectrum speeds to 100/25Mbps and Ultra to 300/50Mbps with plans to further increase speeds when DOCSIS 3.1 arrives — likely to 300/50Mbps for Spectrum and 500/300 for Ultra, at least where Google Fiber, U-verse with GigaPower, and Verizon FiOS offers competition.

Recently, Charter has followed Time Warner Cable’s marketing script and is actively promoting the fact the company has no data caps on broadband service, but Charter had a history of loosely enforced “soft caps” for several years in the recent past, so we’re not convinced data caps are gone for good at Charter.

Pricing & Service

Charter enjoys a higher rate of revenue per customer than either Time Warner or Bright House, which is a sign customers are paying more. It is likely Charter’s reduced menu of choices is responsible for this. Although customers do get a better advertised level of service, they are paying a higher price for it, with no downgrade options. Ancillary equipment rental fees for television set-top boxes are also a likely culprit.

Charter also tells investors its merger with Time Warner and Bright House will bring “manageable promotional rate step-ups and rate discipline” to both companies. That means Charter will likely be less generous offering promotions to new and existing customers. Like Time Warner and Bright House, Charter will gradually raise rates on customers coming off a promotion until they eventually reset a customer’s rates to the regular price. But while Time Warner, in particular, was receptive to putting complaining customers back on aggressively priced promotions after an old promotion ended, Charter is not.

Charter customers tell us the company’s customer service department is notoriously inconsistent and promotional rates and offers can vary wildly. For some, Charter only got aggressive on price after they turned in their cable equipment and closed their accounts.

As far as service is concerned, CEO Thomas Rutledge has managed significant improvements while at Charter. What used to rival Mediacom in Consumer Reports’ annual ranking of the worst cable companies in America is now ranked number nine (Bright House took fourth place, Time Warner Cable: 12th).

But the presence of Malone in this deal, even peripherally, is a major concern. Malone-run cable companies are notorious for massive rate increases and poor customer service. Sen. Al Gore routinely called his leadership style of Tele-Communications, Inc. (TCI), since sold to Comcast, the Darth Vader of a cable Cosa Nostra and Sen. Daniel Inouye from Hawaii once remarked in a Senate oversight hearing that Malone’s executives were a “bunch of thugs.”

[flv]http://www.phillipdampier.com/video/Bloomberg Charter CEO Comfortable With Price Paid for Time Warner 5-26-15.flv[/flv]

Watch Charter Communications CEO Thomas Rutledge stumble his way through an answer to a simple question: What are the public benefits of your merger with Time Warner Cable that the deal with Comcast didn’t offer? Did you like his answer? (5:28)