Dear Readers,

It was another great year at Stop the Cap! and we are very grateful for our growing readership and your involvement in the fight against data caps and for better broadband.

Phillip Dampier

Since 2008, Stop the Cap! has exposed the lies about the need to limit your unlimited broadband. We tirelessly check what company executives tell their investors and Wall Street and what they tell consumers and the press about the successes and challenges providing broadband Internet access. The chasm between the two is wide. While companies like Comcast have spent years telling shifting stories that usage caps are not usage caps at all, that limits are needed to ensure fair access to broadband by all of its customers, and that usage-based billing is only designed to force heavy users to subsidize the investments Comcast makes in faster broadband, company officials tell Wall Street a much simpler (and honest) story: usage caps are about monetizing broadband usage to boost profits.

There has never been anything fair about “fair usage policies” for wired broadband. Rationing Internet usage at a time when fiber optic lines are being installed at a rate not seen since the dot.com boom and the arrival of the next generation standard for delivering broadband over cable television lines simply does not make sense. But it makes a lot of dollars.

Customers continue to make it quite clear to all who choose to listen: usage caps and the industry’s version of usage-based billing are both unacceptable.

Tens of thousands of complaints about usage caps arrived at the FCC in 2015, while the agency continued to drag its feet on a much-needed review of their impact on competition. “Cord cutting” is no longer just a theory. While providers openly engage in wound licking over video subscriber losses, they also quietly appreciate the fact they own the broadband pipes that their new online competitors depend on. Worried that Hulu, Netflix, and Sling TV are stealing your customers? With a crafty usage cap, customers learn soon enough the money “saved” cutting the cord will instead be spent covering overlimit fees incurred using broadband to watch television. Heads they win, tails you lose.

Comcast is by far the biggest menace we will fight in 2016. Their multi-year “experiment” in Internet rationing continues to spread like a virus into new markets, mostly in the deregulatory/hands-off states in the southern and western U.S. The “free market” paradise that was supposed to bring robust competition has too often brought higher bills and usage limits instead. To observers, Comcast’s decision to cap its customers in Chattanooga, Tenn., seems crazy. Comcast faces robust competition from EPB Fiber Optics and AT&T. EPB doesn’t cap its customers and AT&T U-verse wouldn’t dare. But Comcast has decided to cap anyway.

In 2015, consumers continued to despise Comcast (while also throwing Time Warner Cable under the bus for lousy service and high prices), despite CEO Brian Roberts’ reflexive promise he was solidly committed to improving Comcast’s image with customers. Capping customers’ usage while creating a $30-35 “insurance plan” to protect customers from Comcast’s overlimit fees would seem counter-intuitive, or at least ironic, to improving customer relations. Yet Roberts continues to tell investors with a straight face customer reaction to caps remains “neutral to slightly positive.” (Perhaps at the online equivalent of Mistress Raisin’s S&M Club, but likely nowhere else).

In addition to fighting usage caps, Stop the Cap! also taught consumers how to fight for a better deal. We attracted over two million visitors to Stop the Cap! in 2015, many looking to cut their cable and phone bills. We showed them how. These articles were among the most visited for 2015:

#5: How to Get a Better Deal for Verizon FiOS; $79.99 Triple-Play Offer With $300 Rebate Card (14 comments, originally published in December, 2013)

#4: How to Get Verizon Wireless’ 4G $30 Unlimited Use Hotspot Feature Added to Your Account (47 comments, originally published in July, 2011 and no longer timely)

#3: Source: FCC Will Get Serious About Data Caps if Comcast Moves to Impose Them Nationwide (149 comments, first appearing in May, 2015)

#2: Updated! How to Score a Better Deal From Time Warner Cable and Save Over $700 a Year: 2015 Edition (150 comments and first updated in March, 2015 and again over the summer)

#1: How to Score a Better Deal With AT&T U-verse; $28/Mo for 18Mbps, $33/Mo for 24Mbps (112 comments and originally published in December 2013)

Our audience is global. Most of our readers are located in the United States, Canada, and the United Kingdom, but we recorded visitors from 209 countries in 2015.

The interconnection wars between cable and phone companies and online video providers like Netflix also helped bring readers to Stop the Cap! In fact, our busiest day in 2015 came on June 23rd when 14,362 unique visitors arrived to read our story: AT&T, Verizon, Time Warner Cable Implicated In Content Delivery Network Slowdowns.

In 2015, Stop the Cap! published 452 news stories. Since 2008, we’ve archived 4,494 original articles here.

How do people hear about us? The top five referring websites in 2015:

Once people hear about us, many become regular readers and participants. We recognize our top-five participants who frequent the comment section found at the bottom of every Stop the Cap! article:

#5: Limboaz, with 23 comments in 2015

#4: AC, with 27 comments

#3: BobinIllinois, with 27 comments

#2: Paul Houle, with 28 comments

#1: Joe V, with a whopping 67 comments in 2015.

Welcome to 2016. The fight continues.

We appreciate your financial support and you will find a donate button on the right that allows you to make contributions with a credit card or bank account. Stop the Cap! does not accept industry money and is fully funded with contributions from readers like you. Your donations allow us to subscribe to news-gathering and research services, pay costs to support this website, fund software upgrades, and help cover expenses involving testimony before regulatory bodies. Providers may be getting rich, but we certainly are not, which is why making a regular contribution to Stop the Cap! will make a big difference in how far we can take this fight.

Thanks for your support!

P.S. – You can follow breaking stories from us on Twitter (@stopthecap) and Facebook (https://www.facebook.com/stopthecap/). You can follow my own views on broadband and other matters via my Twitter account (@phillipdampier). We intend to beef up our social media presence this year so stay tuned!

Sincerely,

Phillip Dampier – Your Editor

Encouraging customers to accept data caps. (Image courtesy: Hairspray/New Line Cinema)

Comcast CEO Brian Roberts this week ignored customer opposition to his company’s expanding trial of usage caps, insisting usage billing “balance[s] the relationship” between the customer and the cable company.

“The more bits you use, the more you pay,” Roberts said.

Taking questions from Business Insider CEO Henry Blodget at the publication’s Ignition conference, Roberts immediately bristled at the idea Comcast had usage caps at all.

“They’re not a cap,” Roberts said. “We don’t want anybody to ever not want to stay connected on our network.”

Many Comcast customers would disagree, noting Comcast’s trial now limits most customers to an arbitrary 300GB allowance, after which a penalty overlimit fee of $10 for each additional 50GB applies.

Comcast’s public relations defense of usage caps depends on redefining a “limit” on usage into an “allowance” — one that also introduces the concept of usage-based billing. The company abandoned its old defense of usage caps as a congestion control measure, admitting in internal company documents Comcast’s 300GB allowance is nothing more than an arbitrary “business decision.”

It’s a decision Comcast’s broadband customers obviously don’t like. Customers in Shreveport, La., one of the latest markets to get Comcast’s cap treatment, are up in arms over the new limit, according to the Shreveport Times newspaper:

Stephen Pederson, social media manager for the Highland Restoration Association, said data caps are the most recent transgression from a company without a reputation for good customer service.

“This is utterly ridiculous,” Pederson wrote in an email. “Our various utility providers hold us hostage for basic necessities of modern life, and it is a serious injustice that seems to represent an insurmountable obstacle. What can we do? Is not our government in place to protect us from these injustices?”

When Blodget asked Comcast customers in attendance at the conference for questions he should bring to the head of America’s largest cable company, he got an earful.

“‘Ask him about these data caps. They’re driving me crazy,'” Blodget asked Roberts during a sit down interview. “Why data caps and what about this accusation that you don’t charge for your own data but you clobber people when they watch Netflix?”

“Just as with every other thing in your life, if you drive 100,000 miles or 1,000 miles you buy more gasoline,” Roberts lectured. “If you turn on the air conditioning to 60º vs. 72º you consume more electricity. The same is true for usage.”

Roberts added mobile companies were already billing for data usage this way. He rhetorically asked Blodget, ‘why not cable Internet, too?’

Robert Marcus already answered that question for Time Warner Cable’s investors and customers.

“We know customers do place a value on the peace of mind that comes with unlimited plans,” CEO Marcus said on a conference call in late July. “[Time Warner Cable is] completely committed to delivering an unlimited broadband offering in connection with whatever else we do.”

Unlike Comcast’s trials that force usage caps on customers, Time Warner Cable chose to gauge customer interest first, introducing optional usage capped tiers offering a modest discount. Marcus quickly conceded they were a flop with customers.

Business Insider CEO Henry Blodget (L) displays Comcast customers’ frustration over data caps to Comcast CEO Brian Roberts (R). (Image courtesy: Business Insider)

“Very few customers — in the thousands (out of more than 10 million Time Warner customers) — have taken the usage based tiers and I think that speaks to the value they place on unlimited — not bad because we plan to continue to offer unlimited for as far out as we can possibly see,” Roberts said in 2014.

*In contrast, Roberts showed no interest in listening to customers’ criticism of Comcast’s caps, claiming they only affected a tiny minority – about 5% of customers, a fact quickly proven false by Comcast itself when it confirmed at least 8% of customers are already exceeding their allowance and that number is climbing. Roberts also ignored Blodget’s question about how Comcast’s usage caps will affect online video services, particularly those competing against Comcast’s own online video platform that won’t count against a customer’s usage allowance.

Online video competitor Sling TV has an answer to Blodget’s question.

“I think one of the areas we’re quite focused on is what’s happening in Washington, DC around Net Neutrality,” Sling TV CEO Roger Lynch told Cordcutting.com. “We see concerning things happening if you look at cable companies like Comcast now instituting data caps that just happen to be at a level at or below what someone would use if they’re watching TV on the Internet—and at the same time launching their own streaming service that they say doesn’t count against the data cap.”

Stop the Cap! also challenges Roberts’ philosophy on data caps and his flawed logic, which simply fails to withstand basic scrutiny and common sense.

Phillip Dampier: Who knew Comcast was just being ironic when it promised improvements to the customer experience.

First, unlike water, gas, or electricity, data transmission is not a finite resource that must be captured, generated, or pumped from the ground. Roberts follows the grand tradition of pro-cap propagandists that claim it is ‘only fair’ that customers should pay for what they use without ever actually offering that option. Indeed, Comcast ignores the utility it most closely resembles — your home phone company. Like broadband, telephone calls are transported digitally across a national network that costs the companies nearly the same if you place 10 or 1,000 calls a month. Capacity is abundant and cheap to expand. The evidence of this is best represented by the near elimination of the concept of a long distance call. Most companies now offer nationwide calling plans that make it no longer necessary to wait for nights or weekends to grab discounted calling rates. Much the same is true for broadband. Despite increasing traffic, technological advancements have actually reduced the costs to transport data, despite usage growth.

Comcast’s broadband prices are already way and above anything reasonable to cover those costs and deliver a healthy return. In fact, the Wall Street Journal noted in 2012 that 90%+ of your monthly broadband bill represents gross margin, meaning if your broadband bill was cut by two-thirds, Comcast would still have more than enough money to cover their costs, upgrade their networks, and even cushion some of the revenue pressure coming from their cable television side of the business.

Second, if Comcast wants to idolize usage-based utility pricing, then like other utilities, it should be regulated on the state and federal level to ensure fairness in pricing and accuracy of measurement. Currently, Comcast’s usage measurement tools are subject to no independent oversight to guarantee accuracy. Comcast also faces scrutiny for its claimed advocacy of usage pricing without actually moving towards a “pay per use” model. Ask yourself when your gas and electric company charged you an arbitrary amount not based on actual usage? Comcast is not offering customers the option of paying for only exactly what they use. If you consume 30 or 300GB, the charge is the same. Your unused usage allowance does not rollover to the following month and is forfeit. Does the electric company charge you for electricity you never used? If you happen to go on vacation, Comcast still collects. If you shut your modem off, Comcast still collects. Heads they win, tails you lose.

Comcast’s idea of “balance” is to charge you not only for different speed tiers, but also for how much you use them. This ice cream cone costs $2.99. But if you eat more than 1/2 of it, you have to pay an extra ice cream consumption charge to be fair. Yet Comcast does not allow customers to choose only the TV channels they wish to watch — they pay for the entire lineup, whether watched or not.

Third, Comcast’s pricing isn’t focused on cost recovery, it is based on meeting shareholder’s revenue expectations and charging whatever the market will bear. Except this particular market is often a monopoly for High Speed Internet, and it is largely unregulated. That’s the classic recipe for robber baron price gouging. Cue Comcast.

This week, MoffettNathanson analyst Craig Moffett warned the days of cable companies finding lots of new customers to boost broadband revenue are ending.

“Broadband in the United States is rapidly approaching saturation, and the pool of legacy DSL subscribers from which cable has recently drawn so much market share is rapidly declining,” Moffett said.

Wall Street revenue growth expectations are not slowing, however. That means companies will have to earn more revenue from existing customers to keep investors happy. If they continue raising the price of cable TV, cord cutting will accelerate. If they try to gouge their landline customers, people will stick with their cell phones. Broadband is the one service most consumers cannot do without. Economists recognize that a highly valued product will easily command higher pricing, which is why several Wall Street analysts are pushing for broad-based price hikes and usage-based billing. Monetizing broadband usage, limiting potential savings for light users, and continuing the usual rate increases is a formula for heavy profits, especially when there are few competitors to disrupt the marketplace.

What evidence do we have of this? Our friends at the wireless phone companies offer a great example. Nobody gouged more for a telecom service than your wireless carrier’s text message fee. Texting cost carriers little to offer but it quickly became a profit center as demand rose. Carriers routinely charged 100,000 times more for a text message than they did for using a comparable sliver of 3G or 4G data. Your carrier’s cost to deliver 5,000 text messages a month is less than a penny. But not too long ago, AT&T and Verizon would have charged you $1,000 if you sent and received that many messages and didn’t buy one of their texting plans.

Pricing can change customer behavior in many ways. If you were charged several dollars for text messages every month, the companies encouraged you to sign up for texting plans that ranged from $5-20 a month to reduce the sting. You might even be grateful they offer such plans. What you didn’t realize is AT&T’s effective cost for each message was about $0.000002 per text—two ten thousandths of a cent. The same holds true for Comcast’s new $30-35 insurance plan that restores unlimited access. You might be relieved such an option is available in parts of Florida and Georgia, but you have effectively given Comcast up to $35 a month more for the exact same level of service you used to receive.

The plans and dollar amounts charged for telecom services often have little relationship to actual costs. Cell phone plans were originally based on an allowance of the number of voice minutes included with the plan. Exceed that and you would have paid upwards of 20 cents for each additional minute of talk time. But the carriers’ actual costs were much lower, evident when most suddenly transformed their business models to stop relying on voice minutes and texting for most of their revenue. The big money would now come from data usage — after companies ended flat rate usage plans. Carriers understood third-party apps like Skype, Hangouts, Whatsapp and others were bypassing their artificially inflated prices for voice calls and texting by relying on your data plan instead. Prices for voice and texting plans were no longer sustainable with app-based competition. But keeping competitors that rely on those data plans to connect their users in check can be easily accomplished by installing a meter on data usage and billing accordingly. Either way, companies like Verizon and AT&T guaranteed they would be paid.

Comcast is laying the groundwork to do the same. If you cancel Comcast cable TV and watch programming online, chances are excellent you will end up forking over another $30-35 a month to get rid of their usage cap. That’s almost pure profit Comcast can keep for itself and not share with any programmer. Either way, Comcast gets paid.

Roberts’ positive attitude about unpopular usage caps comes at the same time the company continues to claim it is cleaning up its reputation with customers. Not listening to what customers want sounds a lot more like the Comcast most customers are used to dealing with, and threatens to further diminish the company’s standing with consumers.

[flv]http://www.phillipdampier.com/video/Business Insider Comcast CEO responds to usage caps 12-8-15.mp4[/flv]

Comcast CEO Brian Roberts answers questions about data caps at the Business Insider Ignition Conference (2:03)

Licensed to print money

In 2008, Stop the Cap! was launched because the telephone company that serves our hometown of Rochester, N.Y., decided on a whim that it was appropriate to introduce a usage allowance of 5GB per month for their DSL customers. Frontier Communications CEO-at-the-time Maggie Wilderotter defended the idea with the usual claim that the included allowance was more than enough for the majority of Frontier customers. DSL customers already have to endure a lot of issues with Internet service and data caps should certainly not be one of them.

Stop the Cap! drew media attention and focus on the issue of data capping, organized customers for a coordinated pushback, and sufficiently hassled Frontier enough to get them to make the right decision for their customers by quietly rescinding the “allowances.”

As it would turn out, Frontier’s correct decision to suspend usage caps would prove an asset to them less than one year later when Time Warner Cable made it known it would trial its own usage caps in Austin and San Antonio, Tex., Greensboro, N.C., and yes… Rochester, N.Y. starting in the summer of 2009.

Time Warner Cable was slightly more generous with its arbitrary allowance — 40GB of usage for $55 a month. Customers already paying a lot for Internet access would now also have an arbitrary usage allowance and overlimit penalty fees with no service improvements in sight. Frontier’s decision the year before to rescind data caps played to their advantage and the company quickly launched advertising in Rochester attacking Time Warner Cable for its data caps, inviting customers to switch to cap-free Internet with Frontier.

Data caps are here!

Time Warner Cable’s experiment lasted less than two weeks and was permanently shelved, never to return. Four years later, Comcast began its own usage cap trial that not only continues to this day, but has expanded to cover more than 1,000 zip codes. Capped service areas typically live with a 300GB usage allowance with an overlimit fee of $10 per 50GB.

Yesterday at the investor-oriented UBS Global Media and Communications Brokers Conference, Comcast chief financial officer Mike Cavanagh assured Wall Street and shareholders Comcast’s desire to boost revenue from monetizing broadband usage remained an “important contributor” to the company’ goal of “demonstrat[ing] value and derive value from that pricing.”

Cavanagh said the company is using the line ‘heavy users should pay more’ to justify its caps.

“It’s been an experiment that we are using that the key data point behind it is kind of intuitive – ‘10% of our client base uses 50% of capacity.'”

While not ready to announce Comcast’s cap plan would be introduced nationwide, Cavanagh assured investors the experiments will continue as Comcast makes sure that over time it is “compensated for the investments that today’s marketplace requires us to make.”

The difference that makes it possible for Comcast to carry its usage cap experiments forward while Time Warner Cable had to quickly end theirs comes down to one thing: organized customer pushback. Time Warner Cable got heat from relentless, organized opposition in the four cities where caps mattered the most to consumers. Comcast, for the most part, is getting about as much heat as it usually does from customers. It’s time to turn the heat up.

In fighting this battle for the last seven years, I can share with readers what works to force change and what doesn’t:

In 2009, Time Warner Cable faced protesters opposed to usage limits at this rally in front of the company’s headquarters in Rochester, N.Y.

Generally Useless

• Complaining about usage caps in the comment sections of websites;
• Signing online petitions;

Impotent But Potentially Useful in Large Numbers

• Calling the provider to complain about usage caps;
• Complaining about usage caps to a provider’s social media team (Facebook, Twitter, etc.);
• Writing complaints on a company’s open support forum;

Useful, But Unlikely to Bring Immediate Results

• Writing a letter or making a call complaining to elected officials about usage caps;
• Advocating for more competition, especially from public/municipal broadband;
• Filing formal complaints with the FCC and Better Business Bureau;
• Complaining to state telecom regulators and your state Attorney General (they have no direct authority but can attract political attention);
• Canceling or downgrading service, blaming usage caps for your decision.

Gasoline on a Lit Fire

• Organizing a protest in front of the local cable office, with local media given at least a day’s notice and invited to attend;
• Contacting local newsrooms and asking them to write or air stories about usage caps, offering yourself as an interview subject;
• Sending local press clippings or links to media coverage to your member of Congress and two senators. Suggest another media-friendly event and invite the elected official to attend and speak, which in turn generates even more media interest.

In 2009, Time Warner Cable planned to implement mandatory usage pricing starting in Rochester, N.Y., Greensboro, N.C., and San Antonio and Austin, Tex.

In the battle with Time Warner Cable, we did all the above, but especially the latter, which quickly spun the story out of control of company officials sent to distribute propaganda about usage cap “fairness” and “generous” allowances. We were so relentless, we managed to get under the skin of at least one company spokesperson caught on camera being testy in an on-air interview, which backfired on the company and angered customers even more.

In the case of Comcast, very few of these techniques have been used in the fight against their endless data cap experiment. Customers seem satisfied writing angry comments and signing online petitions. Some have filed complaints with the FCC which are useful measures of hot button issues on which the FCC may act in the last year of the Obama Administration. But there is no detectable organized opposition on the ground to Comcast’s data caps. That may explain why Comcast’s CEO has repeatedly told investors your reactions to Comcast’s caps have been “neutral to slightly positive.” Many Wall Street analysts obviously believe that, because some are advocating the time is right to raise broadband prices even higher. After all, if your reaction to data caps was muted, raising the price another $5 a month probably won’t cost you as a customer either.

It would be very different if these analysts saw regular news reports of small groups of angry customers protesting in front of Comcast offices in different areas of the country. That would likely trigger questions about whether broadband pricing has gotten out of hand. Coverage like that often attracts politicians, who cannot lose opposing a cable company. Once Congress gets interested, the fear regulation might be coming next is usually enough to get companies to pull back and reconsider.

If you are living with a Comcast data cap and want to see it gone, you can do something about it. Consider organizing your own local movement by tapping fellow angry customers and recruiting local activist groups to the cause. In Rochester, there was no shortage of angry college students and groups ready to protest. Google local progressive political groups, technology clubs, and technology-dependent organizations in your immediate area. Some are likely to be a good resource for building effective public protests, sign-making, and other TV-friendly protest techniques. Contact town governments, the mayor’s office of your city, technology-oriented newspaper columnists, radio talk show/computer support show hosts, etc., to build a mailing list for coordinated announcements about your efforts. Many local officials also oppose data caps.

If a local news reporter has covered tech or consumer issues in the past, many station websites now offer direct e-mail options to reach that reporter. If you give them a good TV-friendly story to cover, they will be back for more coverage as your local protest grows. We helped coordinate and share news about efforts against Time Warner in the cities that were subject to experiments, which also gave us advance notice of their talking points and an ability to offer a consistent response. Several stations carried multiple stories about the cap issue, supported by calls to TV newsrooms to thank them for their coverage and to encourage more.

We realize Comcast’s responsiveness to customers is so atrocious it approaches criminal, but Comcast does respond to Wall Street and shareholders who do not want the company under threat of fact-finding hearings, FCC regulatory action, or Congressional attention. They also don’t want any talk of municipal broadband alternatives. Sidewalk protests in front of the local cable office on the 6 o’clock news is a nightmare.

In the end, Time Warner Cable didn’t want the hassle and got the message — customers despise data caps and want nothing to do with them. Time Warner hasn’t tried compulsory usage caps again. If you want Comcast to get the same message, those living inside Comcast service areas (especially customers) need to lead the charge in their respective communities. We remain willing to help.

The Communications Workers of America today filed comments with the Federal Communications Commission opposing the proposed sale of Cablevision to Patrick Drahi’s Altice NV, arguing the claimed public interest benefits are illusory.

The CWA, which represents some of Cablevision’s workers in Brooklyn, took a hard look at Altice’s merger proposal and the $8.6 billion in debt Altice will take on to close the deal and called it dangerous, resulting in “considerable harm with no offsetting concrete, verifiable benefits for consumers, workers, and communities.”

“Altice’s track record in France and Portugal clearly shows the danger this deal poses to Cablevision’s customers and employees,” said Dennis Trainor, vice president of Communications Workers of America District 1. “Altice takes on too much debt, outsources as much work as possible and then downsizes its workforce. Customers get worse service and employees lose their job. Unless Altice makes commitments to protect customer service and Cablevision employees, the FCC should reject this deal.”

The CWA is also concerned about the disparity between what Altice is telling regulators and what the company is saying to Wall Street.

Altice’s Public Interest Statement, which outlines the benefits to the public of the proposed transaction, stands out for its lack of specificity. In fact, the application’s only concrete commitments are vague promises to bring Altice’s “expertise” and access to capital for Cablevision’s use. Altice also promises to upgrade Cablevision’s IT systems, including customer care, service, and billing systems, and alluded it would expand Cablevision’s fiber optics deeper into its network, but comes short of promising a direct fiber to the home connection. In fact, the only promised benefit of pushing fiber further out would be “the removal or reduction from the network of coaxial RF amplifiers, which consume substantial electricity and can be the cause of difficult-to-detect service outages (RF amplifier failures).”

“Deeper fiber deployment would enable Cablevision to reduce its power costs and to further improve network reliability, resulting, in turn, in a greater ability to invest further in the network and improved service delivery to subscribers,” Altice dubiously claimed.

Many of Altice’s claims appeared “disingenuous and misleading” to the CWA. From the CWA’s filing:

To finance its $17.7 billion acquisition of Cablevision, Altice is taking on $8.6 billion in new debt, which when added to Cablevision’s already heavy debt load of $5.9 billion, will leave the new Cablevision with a total net debt of $14.5 billion.  Given the high cost of the new debt financing, the annual interest payments needed to finance the $8.6 billion in new debt amount to $654 million on top of Cablevision’s current interest payments of $559 million for a total of $1.2 billion in annual interest payments at the new Cablevision, representing a full 112 percent increase in Cablevision debt. The new interest payment ($654 million) plus Altice’s announced $ 1.05 billion in cuts means that the new Cablevision will have $1.7 billion less cash available to spend on the network and service.

“Altice’s business model, the one that it has used to fuel its explosive global growth, requires the acquired company – in this instance, Cablevision — to finance its own acquisition and to provide cash to the parent for future acquisitions,” the CWA argues. “Altice chief financial officer Dennis Okhuijsen explained the capital structure of post-transaction Cablevision: ‘[W]e’re not going to lever up the existing business. This is a stand-alone capital structure, so we’re levering up the target for Cablevision….’”

Translation: Cablevision alone is responsible for the debt Altice raised to pay for Cablevision. Or, as Altice explained to investors in its third quarter 2015 earnings report, the parent company operates its various subsidiaries as “distinct credit silos in Europe and the U.S.”

Altice CEO Patrick Drahi’s business formula is always the same. To raise money to help offset the mountain of debt dumped on the acquired company, Altice’s designated managers helicopter in to the acquired company to begin slashing expenses and find money it can send to Altice headquarters to help fill its coffers to acquire even more companies. French telecom giant Numericable-SFR, while on the road to losing one million customers in just one year, was preoccupied borrowing nearly $2 billion, not to improve the company’s service, but rather to pay Altice a special dividend to help pay down the huge amount of debt Altice incurred when it bought the 60 percent stake in the French mobile and cable company it did not already own.

To keep Altice afloat, Drahi’s business strategy requires a steady supply of company acquisitions to deliver the increased cash flows Altice needs to finance its debt. The CWA warned regulators Altice may require Cablevision to spend its cash flow to help Drahi acquire other companies in the future, further reducing the amount of money Cablevision needs to attract and keep subscribers.

To make the deal a long term success, Altice-Cablevision will either have to cut its return to shareholders, raise its prices, and/or slash expenses and jobs. Past experience with Altice shows shareholders come first, which means company management will likely preside over a harvest of Cablevision’s assets to meet the expectations of Wall Street banks and investors. Customers will feel the cuts from the reduction in service and slowed investments and upgrades.

At the same time Altice was promising the FCC it would continue Cablevision’s “first in class” level of service, the company was telling Wall Street it was planning cuts to the bone. Among Altice’s already-proposed cuts for Cablevision:

• Capital expense: $150 million cut
• Network and Operations: $ 315 million cut
• Customer operations: $135 million cut
• Sales and marketing: $45 million cut
• Eliminate duplicative functions and “public company” costs: $135 million cut
• Other unspecified cuts: $135 million cuts.

The impact of these cuts shift costs onto others, argues the CWA, including making the acquired firm pay for its own demise, making the workforce pay through job loss and reduced compensation, making customers pay through deteriorating service, and making suppliers become Drahi’s bankers by delaying payments.

The CWA says customers will also pay for the privilege of getting declining service.

“In Israel, the cable provider Hot Telecommunications has raised prices multiple times since it was bought by Altice, including a cable rate increase of 20 percent in 2014 and the attempt to raise prices again this year,” the CWA argues. “The top Israeli cable regulator called the price hike ‘greed for its own sake’ which was not justified based on the company’s profit margins.”

In the United States, nobody oversees cable pricing.

“In summary, the experience in France, Portugal, Israel, and elsewhere provides concrete evidence that the Altice business model – one that it plans to replicate with its Cablevision acquisition – does not serve the public interest,” concludes the CWA. “Making an acquired company pay off massive debt load with service-impacting cost cutting has serious and negative consequences for customers, suppliers, communities, and workers. The lesson from France is clear: cutting to the bone leads to massive customer defection. It is not a business model that will benefit the people of New York, Connecticut, and New Jersey.”

Stop the Cap! urges all of our readers to visit this Free Press campaign page to get the phone number of their local representative and take five minutes to let them know you “vehemently oppose Net Neutrality riders being placed in a must-pass government-funding bill.” Tell your congressman you want the FCC’s authority left intact and you support their oversight of broadband. That is literally all you need to say.