AT&T today announced it was donating $500,000 to the non-profit group behind Locast, the online streaming service offering free access to local TV stations in more than a dozen U.S. cities.

AT&T’s altruism is a thumb in the eye of high-cost retransmission consent agreements with the corporate owners of local free over the air television stations. AT&T added Locast’s app to U-verse and DirecTV receivers at the end of May, giving subscribers a quick and easy way to access over the air stations if one or more are “blacked out” over a contract renewal dispute. AT&T also continues to offer antennas to customers that integrate with both services’ electronic program guides so subscribers can quickly access their favorite channels.

The Sports Fan Coalition, the group behind Locast, will use the money to further expand its service into other cities. At present, Locast is available to almost one-third of American TV homes, amounting to more than 32 million potential viewers. But the service has a very long way to go to stream local stations from all 210 U.S. TV markets.

AT&T will likely use Locast as a leveraging tool when negotiations become heated, letting TV station owners know they can simply point customers to Locast to continue watching stations. AT&T cannot legally redistribute Locast TV streams to customers without running afoul of copyright law, but it can provide customers with access to the independent Locast app and the internet connectivity that allows that app to function. AT&T does not currently plan to drop local stations already on the lineup in favor of pointing customers to Locast. But it will let customers know that blacked out stations are still available to customers through the Locast app.

CenturyLink’s stock is being pummeled after the company announced a cut in divided payouts to shareholders earlier this year, preferring to keep the money in-house to reduce debt and increase spending on necessary broadband upgrades.

Last fall, CenturyLink stock was trading for over $23 a share. By January, rumors that CenturyLink was going to cut its dividend put the stock on a downward trajectory, falling to an all-time-low below $11 this month. Company officials argued that with tightening credit opportunities and increasing interest rates, the company needed to devote money normally paid back to shareholders towards paying down its $35.5 billion long-term debt and provide better service to its customers.

A half billion dollars of that money will also be spent on upgrading CenturyLink’s broadband service, particularly in rural areas where the company is receiving Connect America Fund (CAF) dollars from the federal government.

“Our plan for 2019 includes investing to improve the trajectory of the business increasing CapEx by roughly $500 million,” Jeff Storey, president and CEO of CenturyLink said on a January analyst conference call. “As I mentioned earlier those investments include expanding the fiber network, adding new buildings throughout our footprint, enhancing our enterprise product portfolio, continuing our investments in CAF-II, and transforming our customer and employee experience.”

Investors were not impressed with those plans, and CenturyLink’s share price cratered.

Independent phone companies have traditionally attracted investors with handsome dividend payouts, but the realities of their aging infrastructure and the inability to compete effectively with cable companies on lucrative broadband services have left companies like CenturyLink, Windstream, and Frontier Communications in a quandary. Shareholders do not perceive value investing in fiber optic network upgrades and punish companies that announce dramatic increases in network investments. Customers left on slow-speed ADSL networks are increasingly dissatisfied with their internet experience and seek alternative providers — usually the local cable company. As Frontier Communications has discovered, attempting to win back ex-customers has been exceedingly difficult, often only possible with lucrative promotional offers that undercut the cable company. But such offers attract customers with above-average price sensitivity, making it difficult to extract increased revenue from them going forward.

CenturyLink’s stock price has dropped to an all-time low over the last six months.

Investors are also increasingly concerned about the financial viability of investor-owned phone companies that are stuck between leveraging their old networks and facing down shareholders when upgrades become essential. AT&T and Verizon have wireless units responsible for much of the revenue earned by those two Baby Bells. Traditional phone companies have had less luck trying to sell ancillary support services like Frontier’s “Peace of Mind” technical support service, or bundling satellite TV service into packages.

CenturyLink’s Local Service Territory (Source: CenturyLink)

CenturyLink is increasingly depending on its enterprise and wholesale businesses to earn revenue. That fact has prompted some shareholders to ask why the company hasn’t spun off or sold off its traditional landline network and consumer businesses, which currently account for only 25% of its revenue. In May, CenturyLink seemed determined to placate those investors with an announcement it was exploring “strategic options” for its consumer business. Investors theorize that CenturyLink could “unlock value” from its legacy landline networks in such a sale or spinoff that would benefit shareholder value. It would also be much cheaper than investing in that network to upgrade it.

The chorus for a sale increased after Frontier Communications announced it was spinning off its landline territories in the Pacific Northwest to a company specializing in upgrading legacy networks to support better broadband. Frontier, mired in debt and facing a concerning due date for some of its bonds, made the sale to give a boost to its balance sheet. Frontier had also been facing increasing scrutiny about a potential Chapter 11 bankruptcy filing. Windstream declared bankruptcy earlier this year, reminding investors that a trip to bankruptcy court could quickly wipe out all shareholder value.

MoffettNathanson, a Wall Street analyst firm that specializes in telecommunications, finds little to like about CenturyLink shedding its own landline operations. Frontier’s sale benefited from the fact a significant part of its Pacific Northwest territory was built from an acquisition from Verizon, which had already installed its FiOS fiber to the home network in parts of Washington and Oregon. About 30% of the territory Frontier is selling is fiber-enabled. In comparison, CenturyLink has installed fiber to the home service in only about 10% of its territory, dramatically reducing any potential sale price. Much of CenturyLink’s core fiber network powers its enterprise and wholesale operations — businesses CenturyLink would likely keep for itself.

MoffettNathanson also sees little value from the proposition a buyer could leverage CenturyLink’s network to provide backhaul fiber capacity for future 5G services, because CenturyLink provides service mostly in smaller communities likely to be bypassed by 5G, at least for the near term.

Wall Street’s idea of a win-win strategy for CenturyLink is to keep its consumer business and expand its broadband service footprint and capability, if the federal government offers to cover much of the cost through more rounds of CAF subsidies. Taxpayers would subsidize broadband expansion while CenturyLink and shareholders share all the profits.

Bell (Canada) will charge its wireless customers $40 to connect a new phone-enabled device to its network, effective July 4.

Canadian wireless companies have been competing recently to see how high they can raise connection fees on their customers. In 2018, most carriers charged less than $30 to connect new devices. But in April 2018 Bell raised its fee to $30 — just the latest in a series of rate hikes. Last October, it raised the price to $35 and will now charge $40 as of next month.

To “compete,” Canada’s other large cell phone companies followed suit — both Rogers and Telus raised their prices to $35 and analysts expect them to match Bell’s new $40 fee soon. Two years ago, Bell charged $15.

Canada has three large national carriers and is home to some of the most expensive cellular plans in the industrialized world. If the Department of Justice grants the pending merger between T-Mobile and Sprint, the United States will also soon have three large national carriers, with a strong likelihood that substantial price increases and reduced value mobile plans littered with fees and surcharges will soon follow.

The next standard for cable broadband is now due by 2020.

CableLabs is working on the next generation of broadband over existing Hybrid Fiber-Coax (HFC) networks, finally achieving identical upload and download speed and supporting more spectrum on existing cable lines, which could mean another leap in broadband speed.

DOCSIS 4.0 is still evolving, but according to Light Reading, the next upgrade will fully support Full Duplex DOCSIS, allowing customers to get the same upload speed as their download speed, and will fully implement Low Latency DOCSIS which could reduce traffic delays to under 1 ms. The new standard will also introduce Extended Spectrum DOCSIS, which will open up broadband traffic on frequencies up to 1.8 GHz — 600 Mhz more bandwidth than available today. That additional spectrum will allow for speed increases in excess of 1 Gbps, support IP video traffic, and backhaul for wireless applications like small cells. 

According to Light Reading, people familiar with the development of the cable broadband specification believe much of the work will be complete by the end of 2019, with the spectrum expansion specification expected before mid-2020. This would allow the introduction of DOCSIS 4.0 modems for purchase beginning in 2021.

Cable operators are largely taking a break on large investments this year, with few planning major infrastructure changes beyond some projects underway at Comcast and Altice-Cablevision’s ongoing replacement of its HFC network with fiber to the home service. In 2020, operators will make crucial decisions about their next upgrade commitments. Comcast and Altice will have the easiest time delivering symmetrical broadband because Comcast will support the “Node+0” design that eliminates amplifiers between the nearest node and the customer’s home. This will facilitate the introduction of symmetrical speeds. Altice is dropping the DOCSIS standard as it moves to fiber service, which already supports symmetrical speeds.

Other cable operators are not currently committed to removing amplifiers from their networks, supporting alternate designs like “Node+1,” “Node+2,” etc., which are similar to today’s cable system designs. Instead, they are hoping to leverage Extended Spectrum DOCSIS to boost their speeds. Most will likely offer significant speed bumps for uploading, but those speeds won’t match download speed. For example, Charter Spectrum or Cox might upgrade customers to 500/100 Mbps service, on the theory that 100 Mbps upload speed will still be a welcome change for customers, and not noticeably slower for most current applications, such as uploading videos or file storage in the cloud.

Industry trade association NCTA reports that Comcast, Charter, Cox, Mediacom, Midco, Rogers (Canada), Shaw Communications (Canada), Vodafone (Europe), Taiwan Broadband Communications, Telecom Argentina, Liberty Global (Europe/Latin America) are all implementing the industry’s 10G initiative, with lab trials already underway, and field trials beginning in 2020. DOCSIS 4.0 will ultimately be a part of that project.

CableLabs is already making plans for DOCSIS 4.1 (our name, not theirs), that will further extend DOCSIS spectrum up to 3 GHz — a massive upgrade in usable spectrum. Whether that will be technically plausible on aging cable systems last rebuilt in the 1990s isn’t known, and probably won’t be for two or more years. But if it proves technically feasible, DOCSIS 4.1 could be one of the last DOCSIS standards before cable systems consider abandoning HFC in favor of all-fiber networks.

CableLabs has proved itself to be adept at squeezing every bit of performance out of a network that was originally built with simple coaxial copper cable and designed to distribute analog TV signals. DOCSIS 4.1 would support speeds potentially as high as 25 Gbps downstream and 10 Gbps upstream. Customers would require new cable modems and cable systems would have to tighten standards to take aging infrastructure out of service more frequently. Upload traffic would likely be assigned spectrum below 1 GHz, with 1-3 GHz reserved for downloads. By then, television, phone, and internet services would likely all be a part of a single broadband pipe.

Cable systems have enjoyed enormous cost savings over the last 20 years deploying DOCSIS upgrades instead of scrapping their existing HFC networks in favor of all-fiber. Charter Spectrum admitted the cost to upgrade from DOCSIS 3.0 to DOCSIS 3.1 was just $9 per subscriber.

As some Netflix shareholders grumble about the company’s massive investment in developing original content, some of Netflix’s smaller rivals claim the streaming service cannot forever depend on subscription fees alone to cover the billions being spent on new series and movies.

NBCUniversal’s Linda Yaccarino and Hulu’s Peter Naylor both believe Netflix will eventually have to begin inserting advertising into shows if it wishes to continue its spending spree on content while avoiding steep rate increases.

At a Cannes Lions panel held last week, content companies discussed the evolution of streaming services and their embrace of traditional advertising.

“When you have to make more programming that’s not guaranteed to be a hit, you have to spend more money, you have to build your brand, you have to help the consumer discover your stuff — the price will go up for the subscription, and it would be logical to mitigate those increases to take ads,” Yaccarino said.

Hulu remains the biggest and best-known example of a streaming service built on a traditional advertising model. Customers pay $5.99 a month for advertiser-sponsored content, similar to traditional linear television. Customers can buy their way out of advertising interruptions by paying $11.99 a month for a commercial-free plan that is roughly double the usual price. Just under 30% of Hulu subscribers currently select the commercial-free option.

Hulu’s bathroom break ad, displayed when a video is paused.

Naylor claims traditional advertising need not continue to resemble commercial broadcast television, despite the fact Hulu is still mimicking that experience.

“The future of ad-supported media does not resemble what we’re doing today in terms of ad load or even ad shape,” Naylor said. “It can be interactive advertising or nonintrusive advertising. I think you’re going to see a lot of innovation from all of these new OTT providers because we’re allowed to. We’re not married to the clock. Fifteen and 30-second ads were a product of linear TV. When everything’s on demand and served through an IP address, the ad experience is going to dramatically improve.”

Hulu has been experimenting with different ad formats to gauge subscriber acceptance. Interactive advertising, viewer-selected ads, and banner ads that appear when programming is paused are all being tested. A 2 feet by 6 feet banner is perfect for making a big impression.

Although Hulu is dabbling in original content, NBCUniversal spent more than $28 billion on content acquisition and development last year. In contrast, Netflix spent $12 billion. Yaccarino said that as more streaming services launch, particularly those from Disney and WarnerMedia, Netflix will have to further increase its spending to keep up.

A Netflix spokesperson told CNBC all this talk was “wishful thinking from an advertising conference.” Netflix is not currently focused on incorporating ads into any of its shows, the spokesperson confirmed.