Goei

The CEO of Altice USA took time away from his luxurious homes in Switzerland and New York this week to sit down with concerned middle and working-class Cablevision employees at a meeting held at an unassuming company garage in the Bronx.

Dexter Goei has worries of an organized workforce on his mind. A recording of the meeting provided to Stop the Cap!, showed Goei spent most of his time trying to convince employees they could trust him to protect their future employment at the cable operator.

Since Altice acquired Cablevision in the U.S., the French media have criticized the ‘naiveté of American regulators’ that largely accepted the promises and commitments of the rapidly growing international cable and wireless company at the same time Altice was regularly accused of reneging on the promises it made to regulators in Europe, especially in France. The company has been fined at least twice for breaking those commitments.

Altice’s entrance into the United States began with the acquisitions of Suddenlink, a relatively small cable company serving forgotten small cities in states like Texas and West Virginia and the should-have-been-acquired-by-Comcast-or-Time-Warner-Cable-years-ago oddity Cablevision, which made money for its founding family the Dolans for decades, selling cable mostly in suburban downstate New York.

In America, those acquiring a rival operator are usually asked to show how a deal is “in the public interest” while also submitting to a review to ensure the transaction does not irreparably harm competition. For Suddenlink customers, almost anything Altice could do would be an improvement for a cable company run by a guy who admitted on national television that the days of big investments by cable companies in service improvements were over. It was time to reap the profits, to paraphrase then-CEO Jerry Kent. And so they did, coming up with innovative usage caps and overlimit penalties for customers who dared to use the cable company’s internet service to circumvent a costly cable television package.

Cablevision, in contrast, was usually better regarded than the cable giants that surrounded it. Although technologically aggressive, Comcast canceled most of the goodwill earned for its service improvements by treating customers like patrons of an S&M club. Time Warner Cable was also loathed for its “last to do anything” upgrades, disengaged customer service, and reliable rate hikes, but at least they learned from earlier customer service mishaps and generally relied on a policy of being nicer to customers that threatened to leave.

Cablevision innovated on ways to keep customer loyalty after Verizon FiOS arrived to compete in large sections of its service area. The company spent millions on a major Wi-Fi network for the benefit of its commuting customers, launched broadband speed upgrades earlier than most, and after one embarrassing episode with the FCC showing their speed claims were not met by reality, they have usually overachieved ever since.

Drahi

In 2016, almost everything except Comcast changed. Time Warner Cable was successfully sold to Charter Communications and a self-styled ‘Baron of the Stock Exchange‘ — Patrick Drahi, managed to invade the United States and successfully acquire the two cable operators, despite admitting he would gut spending and wring hundreds of millions in savings out of the transactions for the benefit of his investors.

Mr. Drahi’s penchant for ruthless cost-cutting isn’t new, and he’s been dubbed “The Slasher” in Europe since decimating the budget at his French wireless and broadband company SFR-Numericable. French unions hate him, and not just those representing workers at his telecom businesses. Since the Altice Media Group took control of several major print publications in France, independent photographers have complained Altice slowed payments to a crawl, leading to an open letter to the French government from several press photography agencies demanding action. To date, Altice owes more than a half million dollars in outstanding licensing payments.

Critics contend this is nothing new for Altice, often denounced for not paying vendors (or paying them only after they agree to provide discounts) or alienating employees with radical cost cutting and cutbacks. Customers don’t like what they see either, with more than a million dropping SFR for other providers.

But that was not a story Goei was prepared to share with Cablevision workers in the Bronx.

Instead, Mr. Goei told employees he turned his back on a lucrative career on Wall Street after the great financial meltdown of 2008 and saw more potential running cable companies in Europe and the United States. Goei told the workers Altice’s business plan is to acquire cable and telecom companies and reinvest the profits in improved customer service and better technology for customers. Actual customers of Altice’s cable companies in Europe are still waiting for those improvements.

The French loathe SFR-Numericable, giving it one out of five stars in reviews.

SFR-Numericable, which Goei claimed this week won acclaim from French regulators for being the most reliable in the country, gets scathing reviews criticizing the company for its very frequent service outages, tricky marketing, and incoherent customer service. “Legalized banditry,” claimed one customer. Another described the offshore customer care center as “the Moroccan nightmare,” with more than a few call center workers demonstrating less-than-capable comprehension of French. Service outages are rampant and represent the single biggest reason customers have canceled service.

Goei complained that acquisitions and upgrades have been complicated in Europe by former managers grabbing their golden parachutes and abandoning the acquired companies (without mentioning Altice’s well-known reputation for draconian salary cuts and downsizing) and slowdowns from underperforming suppliers (despite the fact some vendors in France complained their invoices went unpaid for weeks or months, leading to complaints to government regulators).

Forthcoming upgrades are one of the reasons Goei was in the Bronx to sell employees on the merits of Altice Technical Services (ATS), a spinoff entity expected to eventually manage all of Altice’s technical infrastructure and the technicians that will care for it.

“We don’t want to contract out,” explained Goei, who aspires to manage Altice’s forthcoming upgrades effectively in-house through ATS instead of going to outside contractors. To manage this, Goei needs to convince Altice USA’s technical employees to leave Altice and join ATS.

Will ATS protect workers and customers or simply help Altice rid itself of regulator-imposed conditions for its acquisitions?

Goei’s statements seemed to suggest that most will need to make that transition if they want to remain a part of Altice for more than five years, hinting ATS will increasingly manage more and more of Altice’s technical needs, eventually making Altice USA employees potentially redundant.

Goei also hinted ATS might perform work for more than just Altice, which underlined concerns for union organizers that ATS is being established as an independent contracting entity that would not be subject to any regulatory job protection conditions that came with the approval of Altice’s acquisition of Cablevision.

Altice’s plans to rip out and replace coaxial cable with an all-fiber network will likely provide work for the next 7-10 years, notwithstanding the ambitious five-year timeline Altice gave for the fiber upgrade. But employees peppered Goei with questions about job security, benefits like vacation pay, and exactly who will be running ATS and what their opportunities for advancement are.

The transition to ATS might effectively be in name only, because Goei claimed ATS will have full access to employees’ files and work history with Altice and Cablevision, and if managers make the transition to ATS, employees could report to the same manager or supervisor they did under Altice.

“We’re not bringing in some Mexican guy” to run things Goei said to nervous laughter and raised eyebrows from the almost all-minority audience.

Goei’s question and answer session is unlikely to assuage concerns ATS could evolve into little more than Altice’s version of an independent subcontractor with enhanced loyalty to Altice USA. Despite assurances Altice is not looking for excuses to radically trim its workforce, Altice’s history shows job cuts are an integral part of what the French business press calls “The Drahi Method.”

At France’s SFR, Drahi made clear he is looking to cut at least 5,000 paid positions, reducing the workforce from 14,700 to 9,000, starting in July. Observers suspect Altice’s reliance on ATS to act as an umbrella technical department for all of Altice’s North American acquisitions guarantees workforce reductions, if only to eliminate redundancy. Altice has already shown a willingness to lay off employees at its Cablevision and Suddenlink call centers.

But there is one area where Altice is willing to spend.

Le Temps reports Drahi is opening the checkbook to beef up its Geneva executive headquarters in Switzerland, increasing the workforce tenfold and centralizing business operations for the Altice empire. The office is packed with ex-Wall Street bankers and businessmen with a reputation for ruthlessness. Goei’s office is in the building, as is the company’s director — Michel Combes. Combes was notoriously hired away from Alcatel right after demonstrating a talent for swinging the job cutting ax. They are joined by Burkhard Koep, a former Morgan Stanley investment banker in charge of mergers and acquisitions.

The top shelf executives have moved themselves and their families from London, New York, Paris, Tel Aviv and Lisbon to the posh neighborhoods around suburban Geneva, where homes are more likely to be called estates.

The Geneva office conducts business through heavy reliance on videoconferencing and racking up frequent flier miles traveling abroad. Often absent is Drahi himself, who prefers to conduct business from his Zermatt-based luxury cottages. As much as executives spend their time pondering the next acquisition, Le Temps reports they also spend their weekends trying to renegotiate the company’s enormous debt load by seeking refinancing at lower interest rates.

“They play a bank against each other by saying: we will refinance to 6% the debt you loaned us at 7%,” reported the news outlet.

But Altice’s Geneva headquarters did not come for free. Drahi recently introduced a new franchise fee obligating each cable or telecom unit to pay 2-3% of their revenue to Mr. Drahi’s Switzerland office. In the first year that is expected to raise at least $550 million dollars. While popular with Swiss tax authorities, the substantial royalty payments are expected to reduce available cash for upgrades and debt service. Nobody is sure where the money will ultimately end up.

Come for the scenery but don’t stay for the broadband. (Image: Paul Hamilton)

Verizon’s lack of interest in improving broadband service in rural Pennsylvania could cause the state to lose more than $23 million in available broadband improvement funding.

For several years, Verizon has declined tens of millions from the Federal Communications Commission’s Connect America Fund (CAF). The program’s ratepayer-funded subsidies are offered to private phone companies to expand rural internet access in high cost service areas where return on investment is slow or uncertain.

In 2016, Verizon was eligible to receive $23.3 million — nearly half of the federal allotment available to Pennsylvania, but Verizon once again turned the money down. Some consumer advocates called Verizon’s decision counter-intuitive in a state like Pennsylvania where a state law requires guaranteed access to broadband to any customer who wants the service.

Instead of accepting the money to improve the company’s poorly rated DSL service, still not widely available in many rural areas, Verizon has consistently shown no interest in improving service or expanding its highly acclaimed FiOS fiber to the home service to more customers in the state.

State officials now fear the millions in available funding will instead be distributed to other states, leaving Verizon customers in Pennsylvania paying ongoing bill surcharges that will be effectively spent on improved broadband in West Virginia, New York, Ohio, and other states.

“Losing all or part of this funding would be unfair to Pennsylvania residents in rural and high-cost areas and contrary to the FCC’s goal of ensuring broadband access for all,” Sen. Bob Casey (D-Pa.) wrote in a Dec. 22 letter to outgoing FCC chairman Thomas Wheeler.

The state’s Public Utilities Commission claims there isn’t much the state can do if Verizon remains intransigent about accepting Connect America funding and the minimum speed and service obligations that come with the money.

Independent phone companies in the state including Frontier Communications and Windstream could benefit by requesting some or all of Verizon’s share of the money, but only if the companies are willing and able to invest in rural broadband expansion. In most cases, CAF funding requires phone companies to invest matching funds to collect a payout.

Verizon has significantly reduced investment in its landline/wireline networks since suspending FiOS expansion in 2010.

Altice, the new owner of Cablevision, is not following the rest of the U.S. cable industry by rolling out the next generation of cable broadband — DOCSIS 3.1 — and will instead scrap coaxial cable entirely in favor of a new, all-fiber network.

The cable industry has depended on some form of coaxial cable to offer its service since about 1950, when the first mom and pop operators set up shop offering community antenna television service in areas that could not easily receive over the air TV stations. Most American cable systems today still use the coaxial cable installed in millions of homes starting in the 1970s, supplemented by outdoor coaxial cable that is often 10-20 years old, supported by a more recent fiber backbone network that improves system reliability and maintenance.

Cable systems were originally designed to deliver analog cable television signals, but over the years bandwidth has been set aside to offer ancillary services like video game products, home security and alarm monitoring, digital radio/music, telephone, and broadband. Because of the billions of dollars invested in existing cable networks, the idea of scrapping existing wiring in favor of fiber optics has been largely rejected by the industry as too costly. As broadband service increasingly becomes cable’s most important service, network engineers have instead worked to realign bandwidth to support faster internet speeds, most commonly by upgrading to more efficient cable broadband transmission standards and by removing space hogs like analog television channels from the lineup.

Regardless of what the cable industry does to increase the efficiency of its hybrid coaxial-fiber networks (known as ‘HFC’), they will never achieve the capacity and robustness of all-fiber networks, which may be why Altice is seeking to stop investing in old technology in favor of something new and better.

Altice’s management is legendary in its zeal to cut costs, so an expensive deployment of fiber to the home service to 8.3 million Cablevision/Optimum and Suddenlink customers would seem contrary to the company’s promise to wring out about $900 million in cost savings for the benefit of shareholders after acquiring Cablevision. DOCSIS 3.1 is clearly a cheaper alternative than rewiring millions of homes for all-fiber service. Last summer, Liberty Global CEO Mike Fries estimated that Liberty Global’s costs to deploy the cheaper DOCSIS 3.1 option in Europe would bring gigabit speeds to customers for about $21 per home — a fraction of the cost of tearing out coaxial cable and replacing it with fiber, estimated to cost about $500 a customer.

But Altice wants to future-proof its network with fiber technology that can support profitable next-generation services that may need speed in excess of a gigabit. Dexter Goei, Altice USA’s chairman and CEO, told Multichannel News Altice was not interested in undertaking incremental upgrades every few years trying to keep up with the internet speed demands of its customers:

Goei

Going with a DOCSIS 3.1 game plan “felt to us as one step forward but not a step forward enough relative to what we see as the future of continued connectivity and higher bandwidth usage,” Dexter Goei, Altice USA’s chairman and CEO, said in an interview, noting that the operator has reached an “inflection point” as it sees a disproportionate number of gross broadband subscriber additions taking higher and higher Internet speed tiers.

“We’re big believers in this trend continuing, and we really are moving toward a 10-gig world,” Goei said. “And to sit around and do this in multiple steps doesn’t make any sense [so we decided] to skip over DOCSIS 3.1 and get straight to the point.”

The cable industry may also be exaggerating the cost of fiber upgrades, especially when they cite the financial challenges experienced by Verizon (FiOS) and AT&T (U-verse) as both built out their respective fiber and fiber-copper networks from the ground up. Cablevision and Suddenlink will not have to build fiber networks from end to end because a significant part of their networks already include a substantial amount of fiber optics. Altice would simply extend the amount of fiber in its network to reach each customer.

Fiber to the home upgrades for Cablevision and Suddenlink customers.

Wall Street remains concerned about where the money to build the project, dubbed “Generation Gigaspeed,” is coming from. The Communications Workers of America is also afraid the money will come, in part, from significant downsizing and salary cuts.

Earlier this week, Altice announced it was spinning off its engineering and technical workers to a new independent entity — Altice Technical Services (ATS). When the spinoff is complete, it will employ as many as 4,500 of Altice’s current workforce of 17,000 employees nationwide, and will eventually manage Cablevision and Suddenlink service calls, outdoor network plant design, construction and maintenance, and house all of Altice’s employees servicing commercial accounts.

Although details remain murky, the union is concerned Altice could be engineering an end run around the New York Public Service Commission’s order approving the buyout of Cablevision if Altice did not lay off any New York workers for the next four years.

“We’re very concerned,” CWA District 1 assistant to the vice president Robert Master said. “But we haven’t fully unpacked it yet. We don’t know what they have in mind.”

CWA District 1 organizer Tim Dubnau was more blunt, telling Multichannel News: “We definitely smell a rat.”

Assuming ATS is configured as an independent entity, it will not be required to adhere to the NY PSC order prohibiting reductions of Cablevision’s customer-facing workforce in New York State, which theoretically could allow Altice to dramatically downsize.

Outside of New York, Altice’s cost cutting has followed a long established pattern company executives have followed in Europe for years, where Altice also offers service. In France, battles over toiletries and office supplies resulted in workers bringing their own toilet tissue to work. Downsizing, despite regulatory orders prohibiting layoffs, went ahead in France as company officials thumbed their noses at regulators. In the United States, a familiar pattern is emerging, charges Altice’s critics. Almost 600 call center workers were terminated in November in Connecticut, and other cutbacks have taken place in North Carolina and other states.

Late last week, the NY Post reported Cablevision employees are now complaining about an increasingly miserable office life as they endure penny-penching from their bosses. In New York, top management reportedly ordered the removal of many office printers to reduce the expense of replacement ink cartridges. Office cleaning expenses have also been reportedly slashed by increasing the length of time between cleanings. Even the cost of an ice machine for a break room has come under intense scrutiny, as cost management specialists demand better deals and less costly equipment. Much of the removed equipment provides one last service to Altice – a tax write-off after being removed from service and donated to charities.

Employees report unprecedented intensity of cost cutting and lengthy scrutiny of almost every expense. Some claim to have resorted to buying certain equipment and supplies out of pocket just to avoid drawing management scrutiny. Employee morale is reportedly low — especially at Cablevision, where reduced pay packages predominate under Altice ownership. Management has told employees to hold out for a planned IPO, which could allow them to reap some of the benefits of a Wall Street-fueled cash-raising exercise likely to be put to work buying up other cable operators in 2017.

The pain of cost-cutting isn’t exactly reaching the top level executive suites, however. Despite a very public dispensing of Cablevision’s lush Dolan family corporate jet immediately after Altice took ownership of Cablevision, a replacement nearly identical to the original was quietly been put into service for the benefit of Altice’s management, according to the newspaper.

Assuming Altice can raise the money to pay for its fiber upgrade, it is expected to be completed within five years for all Cablevision and most, but not all Suddenlink customers.

An activist group of shareholders led by a hedge fund has successfully pressured executives at FairPoint Communications to sell the company to maximize shareholder value.

The buyer, Illinois-based Consolidated Communications Holdings, Inc., said on Monday it would acquire FairPoint in an all-stock deal worth $1.5 billion, debt included.

The buyout will enrich certain shareholders and hedge funds, including Maglan Capital’s David Tawil and Steven Azarbad, who blasted FairPoint CEO Paul Sunu in a letter sent earlier this summer complaining “shareholders have been extremely patient with the company’s operational turnaround and have suffered because the board has not been vigilant in protecting shareholder value.”

Maglan will cash out its investment initially made after FairPoint went bankrupt, when the share price was below $4. As of 4pm this afternoon, FairPoint stock was trading at $18.85 a share, less than the $23 a share and 75% premium Tawil and Azarbad were hoping for back in August. But they will still walk away earners, selling at around $18 a share plus an additional 17.3% premium. Collectively, the two hedge fund managers control 7.6% of FairPoint’s shares.

Consolidated Communications will inherit residential FairPoint phone and broadband customers in 17 states, most notably those in Maine, New Hampshire, and Vermont. But press releases from Consolidated showed little interest in the residential telecommunications business. Instead, Consolidated executives are looking at FairPoint’s business and enterprise customers, and the benefits of owning FairPoint’s 17,000 fiber route mile network.

Critics suggest the deal effectively enriches shareholders while putting FairPoint’s existing debt and buyout on the new owner’s credit card. Consolidated will inherit $887 million of FairPoint’s current debt plus the $1.5 billion cost of the acquisition.

The combined company will keep the Consolidated Communications name and FairPoint Communications as a brand will eventually disappear if regulators approve the transaction sometime in 2017.

Consolidated Communications currently serves residential phone customers in:

• Suburban/Exurban Sacramento, Calif.
• Fargo, N.D.
• Mankato, Minn.
• West Des Moines, Ia.
• Suburban Kansas City, Kan.
• Mattoon, Ill.
• Lufkin, Conroe, and Katy, Tex.
• Suburban Pittsburgh, Pa.

FairPoint workers on strike in the fall of 2014. (Image: Labor Notes)

FairPoint customers and state regulators in New England expressed concern about the transaction. After FairPoint acquired landlines formerly owned by Verizon Communications a decade ago, the transition was described as “disastrous” by regulators, who received scores of complaints about service and billing problems before FairPoint ultimately declared Chapter 11 bankruptcy, mired in debt.

After emerging from bankruptcy, FairPoint has endured union strikes and was assessed multiple fines for failing to meet service quality standards in Maine.

“The last time these assets were sold to FairPoint it was a disastrous outcome for Maine customers,” says Tim Schneider, Maine’s Public Advocate, who represents consumers on utility matters.

Schneider told Maine Public Radio he is planning to scrutinize the deal to prevent further problems, but customers in Maine, New Hampshire, and Vermont are already expressing concern regulators are just as likely to rubber stamp this sale just like the last one, further saddling them with problematic service.

The owners of Maglan Capital are pleased with themselves, tweeting out this is a “December to Remember.”

One transaction done this month on FairPoint $FRP $CNSL. $GSAT $MVN $MDLNF on the queue next #DecembertoRemember

— Maglan Capital (@MaglanCapital) December 5, 2016

When AT&T announced it would offer 100+ cable television and broadcast network channels under the DirecTV Now brand for $35 a month, Wall Street had a fit.

Craig Moffett, an analyst with Moffett-Nathanson, speculated that AT&T would make at most a profit margin of $5 a month for its $35 a month plan, once programming costs were covered. But then AT&T announced it would sweeten the deal with a free Apple TV Player or Amazon Fire Stick for those confident enough to prepay for the new service. That makes DirecTV Now a purposefully unprofitable service, creating considerable stress for both the cable and satellite industry and their investors.

Variety notes the average DirecTV satellite subscriber delivers about $60 a month in profit to its owner, AT&T. That led the industry magazine to speculate DirecTV Now is a “loss leader” designed to sell its parent company’s AT&T-Time Warner, Inc. merger deal to regulators on the premise of increased competition delivering real savings to consumers.

Thankfully for Wall Street’s nerves, AT&T’s usual practice of marketing things with a lot of fine print emerged in the nick of time, and the $35 dollar price has now turned out to be an introductory offer for early adopters. In the not-too-distant future, AT&T will enroll new customers for its “Go Big” package at a much more profitable $60 a month. Customers who sign up at the $35 rate and stay customers will be able to keep that price as long as they make no changes to their account after the promotion ends.

Moffett

But Moffett warned investors that the traditional cable television model is still under serious threat, and AT&T’s less-promoted “Live a Little” package offering 60 popular cable networks for the everyday price of $35 is the equivalent of AT&T “running with scissors” because it alone could cause millions of cable and satellite customers to cut the cord and stay more than satisfied with a slimmed down cable package.

“Virtually all the channels that anyone would really want, save for regional sports networks” are included in the lighter “Live a Little” package, Moffett added. Customers who loathe watching sports but want a beefier package can also sign up for a $50, 80-channel “Just Right” package that primarily omits sports-oriented channels and a handful of spinoff cable networks few would miss.

Moffett and other Wall Street analysts were hoping AT&T would bloat its cheaper package with home shopping, religion, and other little-watched, low-cost cable networks and then entice customers to upgrade to unlock more popular cable channels. Instead, AT&T’s most premium package — “Gotta Have It” which costs $70 a month adds the “can live without” networks like Boomerang, Cloo, El Rey, Centric, and other little-known channels that typically live unnoticed in Channel Siberia on 500+ channel cable lineups. The highest premium priced package is attractive only for those looking for Starz/Encore channels and the basic cable network that gets no respect — Hallmark Movies & Mysteries (a/k/a the Dick van Dyke Permanent Employment Network.)

“By stacking their base package with all the best networks — likely a requirement for getting the programming contracts at all — they still have the same problem that was highlighted initially,” by Moffett. “Put simply, they aren’t going to make any money.”

That quest for profit is further challenged with subscriber acquisition programs that dole out free Apple TV units to customers willing to prepay for three months of service at the $35 rate or an Amazon Fire Stick (with Echo remote) in return for prepaying for one month of service. Anyone in the market for either device can sign up for DirecTV Now, get the equipment at an attractive price, and consider the 1-3 months of service a free extra bonus. Customers were reportedly lining up at AT&T’s owned and operated retail outlets (not authorized resellers) to pick up devices and sign up for service today.

At these prices and with these promotions, AT&T DirecTV Now could first decimate the subscriber base of its immediate competitors Sling TV and PlayStation Vue, either of which offer a much less compelling value. AT&T can afford to charge a lower price because it has deeper pockets and enormous volume discounts on the wholesale price of cable programming — combining millions of DirecTV and U-verse TV subscribers together to negotiate what industry insiders suspect are major discounts the smaller providers cannot get.

But there are issues likely to be deal-breakers for some would-be DirecTV Now subscribers:

• Local broadcast stations are available only in a handful of selected cities and only a very few include all ABC, NBC, and FOX affiliates. CBS is not participating in DirecTV Now at this time, and that is a major omission;
• NFL Network isn’t on the lineup;
• Regional sports networks are spotty and geographically restricted. Here is a detailed PDF outlining options by zip code;
• There is a limit of two concurrent streams and although video quality is very good, it is not the 1080/HD experience AT&T’s marketing material would suggest. The quality of your internet connection will make a difference;
• No DVR option at this time.

CNET compiled an excellent channel comparison chart to help consumers figure out which, if any, of these upstarts make sense as a cable TV replacement:

$5 a month each for HBO and Cinemax.

Time Warner, Inc. did its part, offering a substantial deal to DirecTV Now to allow customers to add HBO and Cinemax for just $5 a month each, substantially less than what both networks charge customers signing up a-la-carte. This also unlocks access to streaming options on both networks’ websites.

In fact, as a DirecTV Now customer, you will also become an authenticated pay television subscriber, unlocking access on various cable network websites to extra streaming and on-demand options.

The implications of DirecTV Now depend on how long AT&T extends its $35 offer, which is going to be compelling for a lot of Americans. Moffett predicts DirecTV Now could sign up a staggering 11 million Americans — at least two million cannibalized from its own DirecTV satellite customer base, six million cutting the cord on their cable company (including AT&T U-verse) and another three million cord-cutters or “cable-nevers.” Most of the latter are Millennials, and research suggests $35 may be low enough of a price point to sign them up.

AT&T is also raising concerns among internet activists because online streaming of DirecTV Now will not count against an AT&T postpaid customer’s data allowance. This zero rating scheme is seen as an end run around Net Neutrality, particularly because AT&T is not as generous with its competitors. AT&T said it will offer other video streamers the possibility of being exempted from AT&T data allowances, if they pay AT&T for the privilege.

How It Works/Signing Up

AT&T DirecTV Now starts with the Google Chrome 50+, Safari 8+ or Internet Explorer 11+ (on Windows 8 and up) web browsers or the DirecTV Now app. AT&T recommends Chrome for desktop viewing. The service doesn’t work with Firefox, Microsoft Edge, or legacy browsers.

The first step is registering for a 7-day free trial. Before handing over your credit card number, if you scroll down you will find a small free preview option is also available that includes a largely useless streaming barker channel promoting the service and a respectable collection of video on demand options from basic cable networks. The free video streaming option will give you a clue about how the service is likely to perform on your internet connection and devices. For the record, DirecTV Now now supports:

• Amazon Fire TV
• Amazon Fire TV Stick
• Apple TV (4th generation)
• Android^TM phone 4.4 and higher
• Android tablet 4.4 and higher
• Chromecast (for Android only)
• iPad iOS 9 and higher
• iPhone iOS 9 and higher
• iPod Touch version 9 and higher

Support for other devices like Roku is coming next year.

Customers must be within the United States to use the service. If you travel abroad or to any U.S. territories like Guam, the Virgin Islands, or Puerto Rico, DirecTV Now will stop working until you return. When you sign up, keep in mind your billing zip code will mean a lot when it comes to accessing regional sports and local broadcast channels. DirecTV Now uses your billing zip code and your actual location to determine whether you are qualified to access regional sports networks and local stations.

Score a Free Apple TV Player or Amazon Fire TV Stick

Apple TV (4th Generation): Effectively free after prepaying for three months of service.

If you are looking to score an Apple TV (4th generation) or an Amazon Fire TV Stick, you will want to skip the 7-day free trial and enroll in a paid plan immediately, which will allow you to select which player you want. If you want the Apple TV, you will prepay for three months at $35 a month ($105). The Amazon Fire TV Stick only requires you to prepay for the first month of service ($35). One device per email address, but you can sign up for multiple accounts (using individual email addresses) and get a device for each — especially useful for larger families that could run into DirecTV Now’s two-stream limit.

Consider your choices before enrolling. If you want to add premium channels or upgrade your plan, and you select the three-month prepay option to grab an Apple TV Player, adding premium channels like HBO and Cinemax or moving to a higher plan will result in three months of prepaid charges for those upgrades as well, billed automatically to your credit card on file — which amounts to a $30 charge if you select HBO and Cinemax. After your promotional prepaid term ends, your account will continue to be billed at the $35 (plus any add-ons) rate until you cancel. AT&T covers you for the forfeited first free week by extending your bill date out by seven days. Allow 2-3 weeks for the device(s) to be shipped to you.

You can also sign up at an AT&T owned and operated retail store, but be aware AT&T “authorized” reseller stores are not participating in this promotion. That may allow you to bring home a device today.

Don’t care about the device promotions? Take the 7-day free trial, but be aware that you are giving AT&T your credit card number and charges begin immediately after the free week ends unless you cancel. Here’s how:

1. Sign in to your account.
2. From your User Account overview page, select Manage My Plan.
3. Select the Cancel Plan link.
4. Choose one of the listed reasons.
5. Select Cancel Now to confirm cancellation.

Your subscription will continue until the end of the billing cycle. No refunds or credits are provided for partial months. Your account will revert to Freeview demo status after you cancel a subscription.  You can add a subscription package back at any time.

Oddly, AT&T is not charging sales tax for New York, California, Maryland or Virginia residents. Customers in states like Tennessee where AT&T provides local phone service were most likely to face sales taxes. Those signing up early are in the best position to exploit what appears to be an oversight, or it represents the first time the New York Department of Taxation and Finance left money on the table.

Streaming from Your AT&T Wireless Device Does Not Count Against Your Data Allowance

If you’re a DirecTV Now and AT&T Wireless customer, streaming most DirecTV Now movies and programs over the AT&T wireless network won’t count against your data usage allowance, according to AT&T. But believe it or not, AT&T’s fine print indicates advertisements and non-streaming app activity do count! There are some other important disclosures to be aware of:

• You must be on the AT&T Wireless network within the U.S. (U.S. territories are not qualified for zero rating);
• You must be a postpaid, not a prepaid AT&T wireless customer to qualify and must not have “data block” on your mobile line;
• If you are grandfathered on an unlimited data plan, using DirecTV Now will not count against the 22GB data threshold which subjects you to speed throttling;
• This offer may disappear at any time and/or is subject to change.

DirecTV Now Qualifies You as an Authenticated Pay Television Subscriber

Many cable networks require customers enter their cable, satellite, or telco TV login credentials to unlock video streaming and on-demand features. DirecTV Now is a qualified provider for these websites (more coming):

• ABC
• Disney
• Disney Jr.
• Disney XD
• ESPN (WatchESPN)
• Freeform
• HBO GO (requires subscription to HBO)
• MAX GO (requires subscription to Cinemax)

Other networks are not yet enabled for DirecTV Now. CNN, for example, has a prompt for DirecTV satellite customers to log in, but DirecTV Now has its own account registration system.

Local Channels Are Very Spotty

Local over the air channels are very limited on DirecTV Now and are geographically restricted. You can access these channels only if you are located in or very near to the cities listed below and your billing zip code is in the same area. If you travel outside of the immediate area, live streaming will stop working until you return.

Giving the Service a Test

Stop the Cap! enrolled as an ordinary customer this morning and gave the service a rigorous test, including multiple streams over our 50/5Mbps internet connection. The service debuted today, and there is little doubt there is intense interest from consumers, so we expected some performance problems from the initial demand. We didn’t see any evidence of traffic congestion, however, and that is a good sign.

AT&T’s John Stankey explaining DirecTV Now.

A similar test of Sling TV did not perform as well during peak viewing times, when streaming problems emerged. DirecTV Now seems to be built to withstand intense demand.

One customer with a 6Mbps U-verse internet connection “in the boonies” was impressed the video quality of DirecTV Now was high even on a relatively slow DSL-like connection.

“This blows SlingTV away,” the person shared. “I only have U-verse 6Mbps internet service and it is not pixelated or buffering at all. Looks exactly like my regular DirecTV picture.”

AT&T published these recommendations for DirecTV Now customers regarding internet connection speeds:

• 150kbps – 2.5Mbps – Minimum broadband connection speed for Mobile devices
• 2.5 – 5.0Mbps – Recommended for HD quality

We’ve been led to believe DirecTV Now should perform equivalently to 1080i HDTV service (depending on the video source of course). We cannot say we agree it does right now. We noticed significant artifacts on high-motion video and picture graininess that left us feeling this was closer to a 720p HD experience. It isn’t possible to say whether the video player reduced playback quality because of internet traffic issues we were unaware of or if this is how the picture is supposed to look. It did not significantly detract from the viewing experience and the lack of buffering and pixelation was far more important to us.

AT&T store in NYC.

DirecTV Now would serve adequately as a cable TV replacement if it had local station coverage and some type of DVR. At present, DirecTV Now is limited to a “Restart” feature that allows you to restart shows already in progress on certain channels, but you cannot fast-forward or record a restarted show. Once AT&T introduces a cloud-based DVR and fills out the local station lineup, this service could be lethal to overpriced cable TV packages.

AT&T’s marketing attempts to undercut the powerful position of inertia by setting an unknown time limit for customers to enroll in the $35 a month video package. If you don’t sign up today, you may not get the “free” Apple TV or Amazon Fire Stick and a respectable cable TV package for just $35 a month — about half what cable operators are charging these days for their bloated video packages. AT&T doesn’t care if you stick with your current cable provider and signup for DirecTV Now, if only to grab free streaming video equipment while sampling the service. They get their money either way.

Had AT&T permanently kept the price at around $35, many consumers would likely sit back and wait for AT&T to sort out the streaming contract issues it has with the TV networks — CBS in particular, and come up with a DVR solution before those potential customers decided to sign up and make the change. Based on several “hot deals” websites, the mentality among many consumers is to “lock in” the $35 price now and wait for AT&T to build out the package while continuing to invest $35 a month on it. That doesn’t seem so bad when you get free electronics as part of the deal.

Our Final Take

AT&T’s DirecTV Now is a potential winner and worth signing up for because of the introductory price and free equipment offers. But if you decide not to disconnect your cable/satellite television service, it is probably safe to drop DirecTV Now after your prepayment expires and return to resume service a little later. There will probably be some warning when AT&T will end the introductory price for the service, and interested customers can hop back on board before that date arrives. DirecTV Now will be a formidable competitor, but it will fight against consumer resistance to confront the cable company and cut cable’s cord until it solves the local channels issue and has a credible DVR option. The service could also use an add-on to make adding additional concurrent streams possible and more affordable than just signing up for a second account.

Don’t count out Big Cable just yet. With data caps and other internet overcharging schemes, Comcast, Cox, Suddenlink, and others can play games with usage allowances to deter customers from streaming all of their video entertainment online at the risk of blowing past their allowance. DirecTV Now’s $35 price won’t mean much after overlimit fees begin appearing on your internet bill.