Frontier is enticing Rochester-area customers to “say goodbye to Time Warner Cable.”

Time Warner Cable’s relentless rate increases, particularly on its broadband service, are leading to calls for more competition in the upstate New York cities of Buffalo and Rochester, now dominated by Time Warner, Verizon Communications (Buffalo), and Frontier Communications (Rochester).

“Bloodsuckers,” came the terse reply of Cathy Slocum.

Frontier Communications is making the most out of the cable company rate increases with a new “Goodbye Time Warner” ad campaign (that incidentally includes a link to Stop the Cap!’s coverage of TWC’s modem fee). It is pitching $19.99 broadband price-locked for two years — an improvement over its earlier offers thanks to a major reduction in sneaky fine print.

Customers can get up to 6Mbps service (up to 12Mbps available in limited areas) at the special offer price as long as they keep a Frontier landline active with a qualifying calling package. There are no contracts with this promotion, but Frontier’s pesky $9.99 “Broadband Processing Fee” applies if customers ever choose to disconnect Internet service. A free Wi-Fi Internet router is included and the company claims it offers “free Internet activation.” But an installation fee still applies, discounted if customers choose the self-install option. Taxes, governmental and other Frontier-imposed surcharges also apply and new Frontier customers are subject to credit approval, which will show up as an inquiry on your credit report.

In the past, we have taken Frontier to task for its expensive early termination and modem rental fees, as well as its bundling requirements, but the company has since ditched most of these as part of its new self-proclaimed reputation as “BS free.”

Unfortunately, Frontier’s DSL speeds can wildly vary, so if you take advantage of their offer, be sure to verify the speed actually get at your home or office. If the service proves too slow to your liking after installation, you can negotiate canceling within the first two weeks without any termination fees.

Where FiOS is available in Buffalo, Verizon is offering promotional pricing on its bundled services, including an $84.99 offer including 50/25Mbps Internet with a Verizon landline offering unlimited calling. This is cheaper than Time Warner’s offer with considerably faster upload speeds and no modem fees. In parts of Buffalo, Verizon is authorized to offer broadband and phone service only, although several suburbs have franchise agreements that allow the phone company to also sell television service. A large part of the city and other suburbs are still stuck with Verizon’s copper network, however, which means DSL is the best they can offer.

Time Warner Cable’s new customer promotions, useful when negotiating a customer retention deal, have resumed bundling Standard tier (15/1Mbps service) Internet speeds into most offers. Previously, the company bundled 3Mbps service in many of its promotions. Broadband-only customers can pay as little as $34.99 a month for a year of Internet service at 15/1Mbps speeds, assuming one buys their own cable modem. A double play offer of broadband basic television (around 20 channels, mostly local over-the-air) with 30/5Mbps Internet service is now priced at $94.97 a month after a $5.99 mandatory modem rental fee is included (not optional with this package).

Time Warner Cable executives have repeatedly told investors its higher priced promotions are intentional to increase revenue and profits even if the company loses customers by charging higher prices.

Verizon FiOS offers in the Buffalo area.

“I moved here from the New York City area a year ago where we had two cable companies — Cablevision and Verizon FiOS,” noted Stephen O’Brien. “Competition changes everything. Not only were the rates much lower than here, the companies would offer you all kinds of incentives to switch from one to the other. One time we switched and got a free iPod Touch. The argument that the rate increase is needed to cover investment is the biggest red herring of all — Cablevision and FiOS spent many times more on infrastructure, yet their rates were much lower.”

Stop the Cap! recommends Time Warner Cable customers check out our guide to getting the best deal possible from TWC.

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WGRZ in Buffalo reports upstate New York residents are upset about two recently announced broadband rate hikes. Time Warner Cable says it needs the money to keep up its broadband service’s reliability. What alternatives do customers have?  (2 minutes)

Cablevision may eventually get out of the cable television business.

Although industry analysts, consumer advocates, and technology columnists have long proclaimed the era of “cord cutting” is upon us, cable operators have always been in denial the product that got them their multi-billion dollar business — selling packages of television channels — is rapidly becoming obsolete.

But at least one CEO sees the writing on the wall.

If you don’t “ride the wave” you “get eaten by the wave,” declared Cablevision CEO James Dolan.

The Wall Street Journal sat down for a lengthy interview with Dolan, who predicted “there could come a day” when the cable television company quits selling television service, because a growing number of viewers have shifted to online video.

Dolan, like many Americans, isn’t watching television as much as he used to, and admitted that both he and his young children prefer spending their viewing time with Netflix, not Cablevision’s television package.

Jim Dolan

Dolan worries the next generation of television viewers don’t need or want a cable television package with hundreds of video channels. Today’s youth wants fast broadband with on-demand viewing of series, movies, and video clips. The transition may have already started. Cablevision reported Aug. 2 it lost 20,000 video customers over the last three months, many moving to broadband-only service and 11,000 abandoned the cable company altogether.

Dolan believes the industry is setting itself up for obsolescence.

“I don’t want to be saddled with an infrastructure that is as big as the one that I have now,” Dolan told the Journal, fearing the bloated cable television package is becoming too costly and unmanageable.

Instead, Dolan has ordered network upgrades to improve broadband service and help boost the company’s image with customers. Cablevision focused most of its spending on broadband and Wi-Fi service upgrades over the past year, both to meet relentless competition with Verizon’s fiber network FiOS, but also to develop the platform Dolan thinks will eventually be the only product the company sells. Although Cablevision cannot match Verizon’s upload speeds, the cable company offers a free Wi-Fi service for customers Verizon lacks. But the changes and network upgrades have been expensive and noticeable, because few cable operators are spending as much as Cablevision to improve service.

The changes in approach were too much for former chief operating officer Thomas Rutledge, who departed Cablevision to run Charter Cable in December 2011.

One of the primary reasons Rutledge left was Dolan’s increasing involvement in the business, causing a clash of business philosophies. Just a few months before Rutledge departed, the FCC issued a report that exposed Cablevision marketing broadband speeds its network could not sustain, especially during prime usage periods. Rutledge believed this was primarily a marketing problem. Dolan concluded the existing broadband infrastructure was inadequate.

“I felt that we needed to reinvest,” Dolan said. “When we took a hard look at what we were offering,… it just wasn’t what we wanted it to be.”

As Rutledge and his allies rapidly departed for Charter Cable, Dolan ordered a 32 percent increase in capital spending to $1.1 billion last year, at least $150 million targeted exclusively on broadband improvements. This year he has already informed Wall Street it will be more of the same, bringing expanded Wi-Fi, new and improved broadband modems for customers, even faster speeds, new outage detection equipment, and an improved cloud-based DVR service.

Existing customers like the changes, but don’t appreciate the price hikes that have accompanied them. Wall Street has the exact opposite point of view, welcoming increased revenue from rate hikes, but concerned about the company’s spending. Investors complain Cablevision’s returns are well below those of other cable operators which don’t face the Verizon FiOS juggernaut.

Still, for some customers, the changes have come too late and Verizon’s promotional offers to switch to fiber have been too good. Cablevision did at least manage to add 1,000 new broadband and 3,000 new voice customers during the second quarter.

“We’re not prepared to starve the business,” said chief financial officer Gregg Seibert. “In terms of upgrades, I think what you’re seeing with the high-speed rollout that we just did is that we feel that our plant is in very good condition. We’re delivering over advertised speeds in every day part. We intend to keep the plant in that type of condition.”

Dolan’s philosophy of upgrading service to improve customer relations also clashes with John Malone, who is rebuilding his cable industry power base at Rutledge’s new home — Charter Cable. Malone believes industry consolidation, not expensive network upgrades, is a better proposition for shareholders.

Dolan told investors Cablevision is, for now, out of the mergers and acquisitions business. It has completed selling off its Optimum West systems to Charter and plans no further expeditionary buyouts in the near future. Instead, the company intends to focus on its business in the northeast. Dolan acknowledged the company is a likely acquisition target, most likely by Charter or Time Warner Cable.

Dolan currently shows little interest in selling out what is and always has been a family affair. Chuck Dolan, 86, founded Cablevision and still offers almost daily advice to his son James, who now runs the business. James also appointed his wife Kristin to lead sales, marketing and product management, with questionable results.

Some other highlights from the second quarter:

• Cablevision has enhanced its Remote Storage DVR product, now providing two tiers: 160GB and 500GB. Customers can record up to 10 channels at the same time. The service is available on customers’ existing set-top boxes;
• Last month, Cablevision announced an increase in our broadband data speeds;
• Wi-Fi remains a major priority for Cablevision and customer usage of its wireless network continues to grow. More than 1 million customers have used the service over more than 90,000 access points;
• Price increases were critical for Cablevision’s revenue growth this year. The company booked increased revenue from a broad-based $5 broadband rate hike implemented in January as well as a “sports programming surcharge” initiated earlier this year. The average subscriber that buys a package including cable television pays $5.49 more this year than last — $162.42 a month.

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The Wall Street Journal sat down with Cablevision CEO James Dolan, discussing the future of the business as the industry watches another cable television programming dispute between Time Warner Cable and CBS.  (5 minutes)

CBS has blocked Time Warner Cable and Bright House Networks’ broadband customers from watching CBS online video in a retaliatory move against Time Warner Cable’s decision to pull CBS-owned programming off the lineup because of a contract dispute.

Broadband customers of both cable companies (Bright House relies on Time Warner Cable to negotiate its programming carriage agreements) started losing access to CBS streamed content late Friday, now replaced with a message blaming Time Warner Cable for the loss. Earthlink customers using either cable operator are collateral damage — Earthlink is effectively reselling the others’ cable broadband services.

“If Time Warner Cable is a customer’s Internet Service Provider, then their access to CBS full episode content via online and mobile platforms has been suspended as a result of Time Warner Cable’s decision to drop CBS and Showtime,” said a CBS spokesperson. “As soon as CBS is restored on cable systems in affected markets, that content will be accessible again.”

In place of the programming, cable customers get to see a brief attack ad criticizing Time Warner for yanking CBS-owned channels and networks, despite the fact CBS authorized the companies to keep the channels up and running until the dispute can be worked out.

Time Warner Cable shot back with their own rebuttal.

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Time Warner Cable claims it does not want a war over programming costs in its latest ad regarding the blackout of CBS programming, which now also affects the cable company’s broadband customers. (1 minute)

“CBS has shown utter lack of regard for consumers by blocking Time Warner Cable’s customers, including our high-speed data only customers, from accessing their shows on their free website,” the company said in a statement. “CBS enjoys the privilege of using public owned airwaves to deliver their programming – they should not be allowed to abuse that privilege.”

Customers well outside New York, Dallas, and Los Angeles discovered several CBS-owned cable channels were missing, even though they are not served by a CBS-owned local affiliate. The most obvious — Showtime/The Movie Channel came during the middle of the latest season of Dexter.

New York City residents can sat least keep watching WCBS by signing up for Aereo, which streams local stations over the Internet. A 30-day free trial is available. Getting programming in other cities is going to be much tougher. Some predict hardcore viewers will just look for pirated copies of their favorite shows.

CBS said no further negotiation took place over the weekend. Some industry analysts predict the impasse could run for weeks, even potentially until the start of football season — considered a line of PR destruction neither company is willing to cross.

Golf is not as critical, apparently. The PGA Championship taking place in Rochester, N.Y., this weekend is likely going to get a smaller viewing audience because of the blocked programming.

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The blackout of CBS programming by Time Warner Cable enters its third day with no light at the end of the tunnel, suggests this Bloomberg News report. (3 minutes)

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This is not the first time broadcasters and cable operators have cut viewers off, sometimes for more than a week. Bloomberg News reports the soft deadline for Time Warner and CBS to sort out their differences is the start of the fall football season. Sources say Time Warner now pays $1 a month for CBS, but the network now wants $2 a month. (3 minutes)

After repeated extensions, Time Warner Cable yanked several channels from your cable dial today, and before you ask, you are -not- entitled to any refunds. So don’t ask. (Actually, ask anyway.)

The affected channels are:

• CBS Owned-and-Operated TV stations in the following cities:
  Los Angeles:  KCBS and KCAL-Ind.
  New York:  WCBS
  Dallas-Ft. Worth:  KTVT-CBS and KTXA-Ind.
  Boston:  WBZ-CBS and WSBK-Ind. (carried in parts of NH and MA)
  Chicago:  WBBM-CBS (carried in parts of WI)
  Denver:  KCNC-CBS (carried in Gunnison and Telluride)
  Detroit:  WKBD-CW (carried in parts of OH)
  Pittsburgh:  KDKA-CBS and WPCW-CW (carried in parts of OH)
• Showtime
• The Movie Channel (TMC)
• Flix
• Smithsonian Channel

Phillip “FAQ” Dampier

If your local CBS station is not on this list, you will still be able to watch CBS programming because the dispute only affects local stations directly owned/operated by CBS. But cable subscribers nationwide may notice the loss of the cable networks and premium movie channels, if one subscribes.

As a courtesy, Time Warner Cable has elected to throw Showtime subscribers a bone (and avoid having to pay any refunds) by turning on Starz and Encore for affected customers. (If you happen to find anything worthwhile to watch on Starz, please post a comment and let the rest of us know what we are missing.) Encore is a better choice, but customers should feel free to arrange their own “credit” by canceling Showtime until the dispute is resolved. Time Warner Cable was running a promotion offering HBO and Cinemax for $5 a month each for six months to a year. Inquire if that option is still available if you are feeling premium movie channel withdrawal.

“We deeply regret being forced into this position by CBS, but we’re prepared to stand by our customers and do what it takes to fight these unreasonable demands,” writes Time Warner Cable.

In the meantime, we’ve helped massage Time Warner’s FAQ and rubbed in some truth extract:

Q:  Dear Time Warner Cable Assassins of Joy: Now that you’ve stopped carrying the channels I am still paying for, where can I find the darn shows I’m missing?

A:   There are any number of places, including free over-the-air using an antenna, if you remember what that looks like, plus some places online for free.  In addition, in NYC only, CBS is available through Aereo, which is currently offering a one-month-free-trial at www.aereo.com. Just don’t think about dropping your entire cable television package once you discover Aereo works well enough for you and you don’t need us to delete $70 a month from your wallet and recreate it in ours. Pretty please.

Courtesy: Rich Greenfield, BTIG

For national network prime time shows:

• Visit www.CBS.com to see recent airings (mostly repeats except for Stephen King’s ‘Small Town Under Glass’) of their primetime shows. Thank us we are not capping your Internet usage, sticking it to you for watching unauthorized shows (the ones we don’t own) for free.
• In addition, many primetime programs are available via national online services like Amazon.com, Hulu.com, iTunes.com, or Netflix.com, some for free, some as part of a subscription fee that is almost always far less than the pillaging prices we charge.

For daytime soap operas if you still bother to watch those:  www.cbs.com for free

For local news, weather, and sports:  Remember that your other local broadcast stations remain available on the Time Warner Cable lineup, along with NY1/YNN in select markets (because you want to get your local news from a wholly owned Time Warner Cable news network — the one that often shills our own products). And some of the local CBS stations stream their local newscasts for free over the Internet. Again, worship us for not capping your broadband. Check your local station’s website for information.

For syndicated shows like Dr. Oz, Ellen, Katie, and others:  They are probably all repeats anyway and how many times do you need to be told you are living your life all wrong. It’s summer. Go outside. Be happy. If you insist, most of those shows share either full episodes or highlights via their own websites, for free.

For shows that appear on Showtime, or movies:  Showtime makes some episodes and clips available for free at Sho.com and at Hulu.com. Because nothing equals the experience of watching an entire show like a 30 second clip! Other episodes can be found at paid services like Amazon.com, Netflix.com, and on iTunes. So while you are still paying us for those premium movie channels, go and pay someone else too. And remember that, as a courtesy so we don’t actually have to refund your money, we are providing replacement programming from Starz and Encore on a temporary basis.  Showtime and TMC customers should look in your onscreen guide for the Starz and Encore channel numbers.

For shows on Smithsonian:  If you can find the channel on our 1,000 channel lineup, you are better than us. If you actually watched any shows on Smithsonian, you can get by with similar shows on Discovery, National Geographic, TLC, Animal Planet, and many others, as long as you steer well clear of Honey Boo Boo. She’s a national treasure too, we know, but not enough to be on the Smithsonian Channel.

Frequently Asked Questions Not Well-Answered

Q. Why is this happening?

A:  $$$. We collect, count and stack your money for the pleasure of our executives and shareholders and now other programmers dare to want some of it. We’re not going to let that happen unless you give us more than enough to replace what we’re giving them.

Q:  This kind of blackout seems to happen to Time Warner Cable all the time; Screw you, I’m going to switch to another provider.

A:   Screw you right back. Unfortunately, these kinds of blackouts have occurred more often over the past few years—last year, over 80 broadcast TV stations withheld their channels from all kinds of video providers, including cable, satellite, and telephone companies because they smell the cash we currently get to play patty-cake with.  It’s not just Time Warner Cable, silly—every provider is at risk for losing the right to carry these channels that are available for free over the air to an antenna. Because when this kind of money is involved, all sorts of hell breaks loose. Switching to another provider won’t prevent similar blackouts from happening to you in the future, and you could miss some of your favorite programming, like…  NY1 in New York City. (Really.) We’ve been raising your rates and making you pay for hundreds of channels you never watch for years. Remember, sometimes the evil you know is better than the evil you don’t. We’re talking to you AT&T U-verse.

Q:  It seems odd that CBS SportsNet is still available, when the main CBS channel isn’t.  Why is that?

A:  Wait.

Q:  I live in Los Angeles; with KCAL not available, how do I see the Dodgers games?

A:  Get your lazy butt in the car, go to the stadium and buy tickets.

Q:  I’m an NFL fan, and I’m going to miss my team’s pre-season games.  Where else can I see them?

A:   See above.

Time Warner Cable admitted this morning extracting more revenue from existing customers was more important than attracting new ones, and long time subscribers responded by canceling service in above average numbers.

In a conference call largely hosted by incoming CEO Robert Marcus, a number of Wall Street analysts listened to Marcus’ vision for Time Warner under his forthcoming leadership. Marcus offered competing, potentially incompatible visions in his defense of a lackluster quarter: charge existing customers higher prices for service to boost average revenue per subscriber (ARPU) while also improving the customer-company relationship.

For most of 2013, Time Warner has been aggressively moving away from heavily discounted promotional offers to attract customers. Both outgoing CEO Glenn Britt and Marcus have repeatedly stressed heavy discounting of service during the past two years is now over, and the company is looking forward to resetting prices higher when the promotions end later this year.

It is part of the company’s plan to “drive better performance in the residential business.” An unfortunate side effect is that the company continues to lose video and phone customers and its broadband service growth has been so slow, one analyst called it “anemic.” The company’s quarterly results show Time Warner added only 8,000 new broadband customers in the last three months. The company still earned $1.42 billion from broadband sales alone over the last three months, mostly because of rising broadband bills.

Courtesy: Jacobson

Offsetting that growth, TWC lost 191,000 residential video subscribers, leaving it with about 11.9 million video customers. At least 56,000 customers also pulled the plug on Time Warner Cable telephone service.

“As we discussed before, this [new pricing] approach represents a conscious decision to pursue subscribers with higher ARPU, higher profit and lower churn even if that means fewer connects,” said Marcus as he defended the results. “So it’s not a surprise that as in the first quarter of 2013, subscriber net adds were down in the second quarter on a year-over-year basis.”

As customers deal with increasing prices for cable television and broadband service and the irritation of modem rental fees, many are cutting back on their packages to keep their bill stable.

Marcus admitted customer sign ups of triple play — phone, broadband, and cable TV service — were way down in the second quarter and a lot fewer single and double-play customers were convinced to upgrade. The company’s promotional offers have come with a higher price and slower broadband service, often only 3Mbps.

In a number of markets, especially in the midwest, customers are shopping around for other providers. They are finding AT&T U-verse to be a formidable competitor.

“Throughout the quarter, U-verse was pretty aggressive with a beacon price of $79 for their triple play and $49 for their double play,” said Marcus. “I would characterize those as aggressive promotional prices, and they had an impact. I would say that the impact was more pronounced as the quarter wore on. We’ve now responded to that in the market, and I expect that our relative performance should improve there.”

But for much of the rest of the country where competition is less robust, Time Warner intends to continue to hold the line on pricing and resist discounting even if it means subscribers threaten to cancel.

Time Warner Cable has gotten itself ready for an onslaught of unhappy customers, assigning nearly 1,000 employees to staff four national customer retention centers dedicated to trying to persuade customers not to leave. But these specially trained representatives have a dual mission — keep customers with Time Warner Cable, but don’t give away the store doing so.

Stock buybacks and shareholder dividends were a major priority for Time Warner Cable’s cash on hand.

“Not only are our reps saving more customers, they are also preserving more ARPU among the customers they save,” said Marcus. “As promotional roll-offs peak in the second half of 2013, we expect that our new retention capabilities will drive better revenue growth.”

In the broadband market, Time Warner changed little in the second quarter except to raise prices on service and equipment. Marcus could only point to the addition of 3,500 new Wi-Fi hotspots, mostly in New York City, as its signature achievement over the past three months.

On the residential side, broadband revenues were up 12.5%, but most of that growth came from a combination of the modem lease fee, an increase in the number of 30/5 and 50/5Mbps customers and a successful Turbo promotion.

Results for video and voice were considerably worse. Revenues were down about 4%.

But the company managed to report its highest ARPU ever, with customers now paying an average of more than $105 a month for Time Warner service. Most of that increase came from rising broadband prices.

Time Warner Cable has also been preoccupied with spending excess cash on hand to buy back its own stock, which creates shareholder value. Time Warner expects to spend at least $2.5 billion on stock buybacks this year. Shareholders also received $829 million in dividends (113% of Time Warner’s free cash flow).

“We repurchased 6.6 million shares for $638 million, and through July, we have repurchased approximately 83 million shares at an average cost of around $78.50 per share since we began the program in November of 2010,” reported chief financial officer Arthur T. Minson.

Time Warner Cable’s Board of Directors recently approved increasing spending up to $4 billion on stock buybacks.

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WRGB in Albany reports Time Warner Cable customers are angry about another price hike on the company’s modem lease fee effective Aug. 18. WRGB recommends customers buy their own modems to avoid the fee. Time Warner Cable’s Glenn Britt admitted earlier the fee is really just a hidden rate increase. (3 minutes)