Executives at Canada’s largest telecom companies are sighing relief after Verizon announced it was not interested in competing in Canada.

“Verizon is not going to Canada,” Lowell McAdam, chief executive officer of New York-based Verizon, said yesterday in a phone interview with Bloomberg News. “It has nothing to do with the Vodafone deal, it has to do with our view of what kind of value we could get for shareholders. If we thought it had great value creation we would do it.”

McAdam added he thought speculation about Verizon’s plans in Canada was “way overblown.”

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The CBC reports three of the largest telecom companies in Canada are seeing their stock prices soar on news Verizon won’t enter Canada. Kevin O’Leary takes a position shared by Bell, Telus and Rogers that no spectrum should be set aside for new competitors. Instead, he seeks a “winner takes all” auction, even if it means dominant incumbent carriers monopolize every available frequency. (3 minutes)

McAdam

Verizon’s possible entry into Canada was among the hottest stories of the summer, even reported on the CBC’s national nightly news. The potential new competition provoked Bell, Rogers, and Telus — three of Canada’s largest phone and cable companies — to join forces in a multimillion dollar lobbying effort to slow Verizon down and make the wireless business in Canada less attractive. The Harper government used news of Verizon’s potential entry to promote its policies favoring competition over regulation.

Verizon Chief Financial Officer Fran Shammo said the company was considering a wireless venture in Canada at a June Wall Street investor conference.

“We’re looking at the opportunity,” Shammo said at the time. “This is just us dipping our toe in the water.”

Verizon took its toe out yesterday, despite the potential profits available in a country criticized for its extremely expensive cell phone service.

“I’m surprised that Verizon isn’t interested in Canada,” tweeted Adam Shore. “There are over 33 million suckers up here that will pay ridiculous cell phone rates.”

Bell joined Telus and Rogers in launching a multi-million dollar lobbying effort to make Verizon’s entry into Canada difficult.

The three companies most Canadians now buy wireless service from denied they wanted to keep Verizon out, arguing they simply wanted a “level playing field.”

Industry Minister James Moore suggested a fourth large player could provoke a price war in a way much smaller wireless providers like Wind Mobile or Mobilicity never could. The government was willing to set aside coveted 700MHz wireless spectrum at a forthcoming auction to help a new entrant — any new entrant — get started.

Verizon’s decision to stay out might have delivered a damaging blow to the Conservative government’s “pro-competition” solution to the problem of high cell phone bills. After the announcement, Moore was left promising only that spectrum auctions would carry on regardless of Verizon’s decision.

For now, the best chance of increased competition comes from Quebecor, which is gradually expanding its wireless network. Spectrum set asides almost guarantee the owner of Quebec’s cable giant Vidéotron will be able to bid for and win significant spectrum at the upcoming auction, some at a discount.

“If Verizon doesn’t show up, they’re actually in a very strong position to buy a block of spectrum that will not be very expensive,” Maher Yaghi, an analyst at Desjardins Securities Inc., told Bloomberg News. “Wireless is currently providing them with a nice growth platform.”

Without a surprise late entrant suddenly announcing interest by the auction filing deadline of Sept. 17, many analysts predict the outcome will likely not deliver Canadians any significant changes in cell phone service and pricing. The government may also be disappointed with the auction proceeds. Canada’s big three will likely avoid overbidding and still end up dividing most of the available airwaves between them. Quebecor may end up with most of the rest at comparatively “fire sale” prices. The Montreal-based company must then decide how much it will spend to expand its home coverage areas outside of Quebec, Toronto, and southeastern Ontario.

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BNN reports Verizon’s decision not to enter Canada leaves the Conservative government without an effective means to moderate cell phone pricing in the country. Mary Anne de Monte-Whelan, president of The Delan Group, observed the government may be forced to take a more regulatory approach to control expensive cell service, possibly starting with roaming rates.  (7 minutes)

Verizon Communications spent Labor Day weekend putting the final touches on a carefully crafted deal to attain full ownership of its wireless unit, buying out its British partner’s 45 percent share in a deal valued at $130 billion.

The long talked-about buyout of Vodafone has been on the table for years, but became a priority for Verizon CEO Lowell McAdam, who spent much of his career overseeing Verizon Wireless. Since McAdam took over from predecessor Ivan Seidenberg in 2011, he has refocused priority on Verizon’s wireless business, at the cost of landlines and Verizon’s fiber optic network FiOS.

The transaction dwarfs (by nearly four times) the $33 billion annual budget of the entire state of New Jersey. Verizon has agreed to pay Vodafone $58.9 billion in cash and $60.2 billion in Verizon shares, and finance another $5 billion of the deal in loan notes. Verizon has also agreed to sell its 23 percent ownership in Vodafone Italy worth around $3.5 billion and take on $2.5 billion of Vodafone’s debt.

A deal this large would normally generate tens of billions in tax revenue payable to HM Revenue & Customs in England and the Internal Revenue Service in the United States, but creative accounting at both companies makes it all but certain Vodafone will pay nothing in British taxes and only $5 billion to the IRS, despite its $130 billion windfall.

Vodafone is structuring the deal through a Dutch holding company, transferring assets to Verizon in a way that minimizes the tax bite. As proposed, the deal is exempt from taxes in both the Netherlands and the United Kingdom.

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CNBC had this exclusive interview with Verizon CEO Lowell McAdam discussing why Verizon is willing to spend $130 billion to end its partnership with Vodafone and how Verizon Wireless will change as a result. (12 minutes)

Wall Street investment banks will do better than American and British tax authorities, dividing at least $1.3 billion in financing, merger, and legal fees surrounding the Verizon deal. Many of New York’s largest investment banks are taking part in the transaction.

Vodafone is depending heavily on guidance from Swiss-based UBS and Goldman Sachs. The latter has earned $438 million so far this year advising companies on mergers and acquisitions.

Verizon is relying on advice from J.P. Morgan Chase and Morgan Stanley. Bank of America Merrill Lynch and Barclays have joined to offer their help with the enormous debt-funding package required for the deal.

Verizon customers will notice little to nothing different about their wireless service after the deal is complete in the first quarter of 2014. Many customers had no idea Vodafone was part owner of the largest wireless company in the United States. Verizon always maintained effective control of the U.S. operation and plans no immediate changes as a result of assuming outright control of the company.

Little controversy is expected in getting the deal approved by regulators for the same reason.

Shareholders are likely to reap most of the rewards. Vodafone stockholders are expecting the bulk of the proceeds from the sale will be returned to them in the form of dividends. Verizon shareholders also expect better returns in the future now that Verizon’s profitable wireless unit will no longer have to set aside costly dividend payments intended for Vodafone and its shareholders.

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The BBC reports the sale of Vodafone’s 45% share of Verizon Wireless has been structured so that both companies can entirely avoid British and Dutch capital gains taxes and limit the American tax bite to less than $5 billion.  (1 minute)

Verizon hopes being the master of its own destiny will allow the company to innovate its wireless network towards future revenue opportunities, especially in the machine to machine connectivity business. Both AT&T and Verizon Wireless are racing to enable medical devices, home appliances, electric meters, and automobiles to communicate over their respective wireless networks. Both companies are concerned that the cell phone marketplace has become saturated in the United States, with most people desiring cell phone service already having it. With Wall Street demanding ongoing growth quarter after quarter, new revenue sources are more important than ever.

“Even in the saturated market, (Verizon Wireless) continues to post growth figures,” Bill Menezes, an industry analyst at research firm Gartner told USA Today. “They’re looking at a world where growth is coming from these ancillary devices.”

Many Verizon shareholders expected a deal this year, but some are concerned Verizon has offered too much to buy out Vodafone. Many Wall Street analysts had expected Vodafone would part with its 45 percent ownership of Verizon Wireless for around $100 billion, but Vodafone clearly held out for more.

The corporate deal is the world’s third largest after Vodafone’s $203 billion takeover of Germany’s Mannesmann in 1999 and AOL’s 2000 $181 billion acquisition of Time Warner.

Vodafone is planning to use some of the proceeds not returned to shareholders to bolster its European business, which has suffered from the economic downturn and robust wireless competition that have kept prices low. Wall Street analysts predict the European market is ripe for a wave of consolidation similar to what happened in the United States over the last decade. Vodafone may need more financial resources to protect its market position or have the flexibility to buy out competitors.

The European wireless giant has been a quiet partner of Verizon Wireless for almost 14 years. Verizon Wireless was launched in 2000 as a joint venture of Bell Atlantic and Vodafone. As the venture was being launched, Bell Atlantic merged with GTE, forming Verizon Communications.

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CNBC reports historically low interest rates and cheap credit for corporations made it an ideal time to structure a deal so important to J.P. Morgan Chase, the bank sent CEO Jamie Dimond to persuade Verizon board members to approve it. Investment banks will split more than one billion dollars in deal fees.  (7 minutes)

Witmer

If what Time Warner Cable claims is true, the stalemate that has kept CBS content away from subscribers for four weeks may be less about the money and more about CBS’ desire to control your viewing experience.

Melinda Witmer, TWC’s chief video and content officer, reports CBS is demanding daunting new restrictions in their proposed renewal contract, including requiring customers to “register their television sets” with CBS before being able to turn them on.

Witmer said CBS’ demands also include new powers over DVR capabilities, which means CBS could possibly prevent customers from fast-forwarding through commercials or even block the recording and/or storage of certain programs without network permission.

“CBS announced that they signed a deal with Verizon (FiOS TV) and has suggested that they offered us the same deal Verizon just signed,” Witmer said. “All I can say is our condolences to Verizon if they signed the deal CBS put in front of us. I hope for Verizon’s sake that they didn’t sign that, but if they did I’m glad for us because we’ll compete that much better against them when we finish our deal.”

Cable operators are seeking expanded rights from programmers as customer viewing habits evolve. Among the most important are those that would allow online and on-demand streaming of programming to authenticated cable subscribers.

Time Warner Cable has invested considerable resources in its online viewing platforms for PC’s, smartphones, and tablets, providing most of the TWC lineup on those portable devices. But the service has been largely limited in-home viewing because the cable company is having trouble securing permission to stream most of that content for those on the go.

Time Warner Attempts to Placate Impacted Customers

Although Time Warner Cable is crediting customers for the loss of Showtime/The Movie Channel, blocked by the cable operator while the impasse continues, Time Warner is not giving any automatic refunds for the loss of CBS basic or broadcast programming and networks taken off the cable dial. CBS-owned Smithsonian TV is the most affected basic cable channel nationwide. Some customers who pay extra for Smithsonian as part of an added-cost HD Tier often known as “TWCHD Pass” have gotten service credits upon request.

Time Warner Cable is giving out free over-the-air antennas to customers in cities where local CBS-owned stations have been taken off the cable lineup.

Time Warner Cable has a limited quantity of free basic indoor antennas available for customers at TWC retail locations in Dallas-Ft. Worth, Los Angeles/Desert Cities, New York City, Milwaukee and Green Bay, Wisc. In addition, TWC has partnered with Best Buy in those cities to provide $20 toward the purchase of any in-stock broadcast antenna at select Best Buy store locations. The cable company has published a list of retail locations where antennas are available as long as supplies last. Limit one per customer and installation is your responsibility.

Radio Shack has also taken advantage of the situation by slashing prices on an AntennaCraft Amplified Omnidirectional HDTV Antenna, now available online for $37.49 – a 25 percent discount. Best Buy is supporting Time Warner Cable’s position in the CBS dispute. Radio Shack is not, telling customers its antennas make it easy to “cut the cable.”

Time Warner is appeasing tennis fans with enhanced coverage of the 2013 US Open Tennis Championship Series with a free preview of The Tennis Channel running Aug. 26 through Sept. 9.

The blackout is also keeping Time Warner Cable, Bright House, and Earthlink (supplied by either cable operator) broadband customers from watching CBS content online.

The Federal Communications Commission said it is trying to resolve the fee dispute from Washington.

“The commission is engaged at the highest levels with the respective parties and working to bring the impasse to an end,” Justin Cole, an agency spokesman, said in an e-mailed statement yesterday. “We urge all parties to resolve this matter as quickly as possible so consumers can access the programming they rely on and are paying for.”

But acting FCC chairwoman Mignon Clyburn also admitted the FCC has few powers to intervene and compel an agreement.

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Time Warner Cable’s Melinda Witmer, head of the team negotiating with CBS, suggests the network is demanding unprecedented control over your viewing experience — a deal breaker for the cable operator.  (6 minutes)

Mediacom, the worst-rated cable operator in the United States, claims it needs usage caps and consumption billing to force heavy users to pay for needed upgrades. But that isn’t what Mediacom’s executives are telling investors and the Securities and Exchange Commission (SEC).

Thomas Larsen, group vice president of legal and public affairs for Mediacom told The Gazette the consumption-based billing program was intended to pay for the cost of network upgrades incurred by “individuals who are the highest users.”

But Mediacom’s August 10-Q filings (Mediacom LLC and Mediacom Broadband LLC) with the SEC indicate Mediacom’s revenues are increasing faster than the cable operator’s costs to provide service, as customers upgrade to more costly, faster speed Internet tiers.

“Revenues from residential services are expected to grow as a result of [broadband] and phone customer growth, with additional contributions from customers taking higher speed tiers and more customers taking our advanced video services,” Mediacom reports. “Based upon the speeds we offer, we believe our High Speed Data (HSD) product is generally superior to DSL offerings in our service areas. As consumers’ bandwidth requirements have dramatically increased in the past few years, a trend we expect to continue, we believe our ability to offer a HSD product today with speeds of up to 105Mbps gives us a competitive advantage compared to the DSL service offered by the local telephone companies. We expect to continue to grow HSD revenues through residential customer growth and more customers taking higher HSD speed tiers. “

Mediacom’s consumption billing program, already in effect for new customers, will be imposed on all Mediacom broadband customers starting in September. Larsen claims only about three percent of customers will be impacted by the usage allowance, which will include 250GB of usage for customers selecting the company’s most popular speed tier. Larsen also claimed the average Mediacom customer uses only 14GB per month.

That usage profile is below the national average, and leads to questions about why Mediacom needs a usage allowance system when 97 percent of its customers do not present a burden to the cable company.

“Once a customer reaches their monthly allowance,  for $10 they can purchase an additional 50GB a month of capacity,” Larsen explained. “Each time that they reach that next level, they’ll be able to purchase another allotment. We’re never going to stop you from using data, we’re just going to charge you more if you exceed your monthly allowance. Before, we could cap you, there was no mechanism for them to purchase more.”

Mediacom did not frequently enforce its usage caps in the past except in instances where usage levels created problems for other customers. Despite Larsen’s assertion Mediacom would spent the overages collected from heavy users on broadband upgrades, Mediacom’s report to the SEC indicates broadband usage has never been a significant burden for the cable operator:

Our HSD and phone service costs fluctuate depending on the level of investments we make in our cable systems and the resulting operational efficiencies. Our other service costs generally rise as a result of customer growth and inflationary cost increases for personnel, outside vendors and other expenses. Personnel and related support costs may increase as the percentage of expenses that we capitalize declines due to lower levels of new service installations. We anticipate that service costs, with the exception of programming expenses, will remain fairly consistent as a percentage of our revenues.

Although Mediacom reported field operating costs rose 7.6%, much of that increase was a result of greater fiber lease and cable location expenses on its wireless backhaul business for cell towers and greater use of outside contractors. In the company’s latest 10-Q filing, Mediacom reports its revenues increased 2.9 percent in the past year while its costs rose only 1.5 percent. Mediacom’s revenues from its broadband division are even more rosy, rising 9% in the past year alone. In fact, broadband is the company’s highest growth residential business.

Many of Mediacom’s long-standing customers were initially promised they would be exempt from usage caps, with only new customers subject to usage limits. But Mediacom has unilaterally changed their minds, much to the consternation of some customers.

As of this afternoon, Mediacom is still promising customers usage caps only apply to new customers and those making plan changes.

“It is my belief a man’s word is gold and when Mediacom customers have been told for ages they were grandfathered in with no usage data charges unless they changed plans, that is how it is supposed to be,” said D. Gronceski. “I have explicitly turned down service increases in the past to stay on the unlimited usage plan originally offered by Mediacom […] so I get screwed twice, once for bandwidth caps and again because I’m not getting the services I would be getting if I had not refused the automatic increases.”

Other customers incensed about the new usage limits have called to cancel service only to be threatened with steep early termination fees.

“Why do I have to pay an early termination fee?” asked AustinPowersISU. “The way of billing for the service is changing and I do not agree to this method of billing. I should be allowed to terminate my service without paying a fee.”

A Mediacom social media team representative offered one suggestion for customers finding themselves quickly over their usage limits: upgrade to faster speed tiers at a higher price. As for complaints about the unilateral introduction of usage caps with overlimit fees, it’s tough luck for customers, on contract or off:

All Internet users will be held to the new terms of service and usage based billing as of Sept. 7, 2013.  There is no agreement to sign, no acknowledgement needed.  Continuing to utilize Internet services is acceptance of these changes. If for any reason you do not feel that your current service level meets your needs, let us know and we can have a representative contact you with further options.

[…] Per the posted terms of service and acceptable use policy, there has always been an established data consumption threshold (data allowance) to be enforced at Mediacom’s discretion.  With this change, we have clarified these methods of enforcement and have expanded the allowance to offer different levels of users different options.  We have notified the proper departments of possible additions, but these statements are and have been posted.

[flv width=”640″ height=”380″]http://www.phillipdampier.com/video/KCRG Cedar Rapids Mediacom Going Usage Billing 8-21-13.mp4[/flv].

KCRG in Cedar Rapids reports Mediacom is switching to consumption billing for broadband service in September.  (2 minutes)

AT&T has boosted the maximum available broadband speed for its U-verse Internet offering to 45/6Mbps service in 40 cities across 15 states.

The broadband speed boost is part of AT&T’s Project Velocity IP (VIP), a three-year plan to expand U-verse’s capabilities and coverage into more communities within AT&T’s local landline service areas.

Most of the funding for Project VIP is being directed into expanding AT&T’s profitable wireless 4G network, but about $6 billion will be spent upgrading AT&T’s aging copper wireline facilities.

A big priority for AT&T is to retire copper-based distribution networks and replacing that wiring with fiber optics. U-verse depends on a significant amount of fiber to provide enough bandwidth for its television, phone and broadband service. But unlike Verizon FiOS, which delivers a fiber connection straight to the home, AT&T still relies on traditional copper wiring into the home.

Until AT&T replaces that copper with fiber, top broadband speeds are unlikely to keep up with its biggest competitor — cable broadband.

AT&T’s says the 45Mbps speed boost represents an incremental upgrade and plans further speed increases to 75Mbps.

In more rural areas, U-verse will rely on IPDSLAM technology to increase speeds up to 45Mbps. AT&T eventually hopes to further bump download speeds to 100Mbps.

For the most rural communities within its service area, AT&T hopes to offer service exclusively over its wireless network, eventually scrapping rural landlines altogether.

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KTAL-TV reports AT&T’s upgraded U-verse could soon be coming to Shreveport, La. as part of Project VIP, which may give Comcast some much-needed competition in the Ark-La-Tex region. (3 minutes)