Malone

Dr. John Malone’s Liberty Global has picked up an extra billion dollars it can use towards any plan to combine Time Warner Cable and/or Cablevision under Charter Communications.

Liberty has sold off some of its assets to build an enormous financial war chest it could use to launch a new wave of cable consolidation in the United States, potentially leaving Charter Cable as the country’s second biggest cable operator, just behind Comcast.

AMC Networks announced it will pay $1 billion to buy Liberty-owned ChelloMedia, a major international programmer and content distributor that operates 68 channels and networks available to more than 390 million households in 138 countries. Chellomedia is not well-known in North America but its networks are household names overseas. The deal includes Chello Multicanal, Chello Central Europe, Chello Zone, Chello Latin America and Chello DMC. In addition, Chellomedia’s stakes in its joint ventures with CBS International, A+E Networks, Zon Optimus and certain other partners are also part of the sale.

That $1 billion could be a key part of any blockbuster buyout deal because Malone can leverage that and other money with an even larger infusion from today’s easy access capital market. He has done it before, leveraging countless buyouts of other cable operators that built Malone’s Tele-Communications, Inc. (TCI) into the country’s largest cable operator by the early 1990s.

According to Shahid Khan, a media and cable industry consultant with Mediamorph, by this time next year Charter Communications could be just two million subscribers away from beating Comcast as the nation’s biggest cable operator.

Khan believes Malone laid his consolidation foundation with Liberty’s significant ownership interest in Charter Communications, from which he can build a new cable empire.

The most likely targets for consolidation are Time Warner Cable and Cablevision. According to Leichtman Research, as of this summer Comcast is the nation’s largest operator with 21.7 million subscribers. Regulators are unlikely to approve any deals growing Comcast even larger. But combining Charter, Time Warner Cable, and Cablevision would deliver 19.1 million subscribers under the Charter brand. A handful of smaller deals with minor operators like SuddenLink, Cable ONE, Mediacom, or Bright House Networks would quickly put Charter over the top of Comcast.

Malone’s public argument is that larger cable operators have more leverage to secure better deals and rates for cable programming, equipment vendors, and suppliers. It also delivers “cost savings” mostly through layoffs and cutting back on redundant operations like customer care call centers.

But Malone could also use the combined market power of the supersized cable company to keep competitors non-viable, especially for cable television programming. Frontier Communications learned what it is like to be a small player when its inherited FiOS networks in Washington, Oregon and Indiana lost Verizon’s volume discounts for cable programming. Frontier quickly found the programming rates it could negotiate on its own were so dramatically higher, it tried to convince FiOS TV subscribers to switch to satellite television instead.

Charter could also raise prices for broadband services in areas where its potential partners have not increased them quickly enough.

Ironically, AMC Networks’ one billion dollar buyout of Chellomedia could ultimately become the catalyst for a Malone-driven buyout of AMC’s former owner — Cablevision.

‘Disloyal Cablevision customers looking for discounts are dead to us.’

Cablevision is fed up with disloyal customers bouncing between the cable company and other providers when promotional discounts expire.

After losing 13,000 broadband, 18,000 voice, and 37,000 television customers, Cablevision CEO Jim Dolan said the company has stopped offering any further discounts to customers that received them once before.

“The customer that has been bouncing from one company to another on promotional/repetitive discounts has hit a dead-end with us,” Dolan told Wall Street analysts during a conference call.

All customers with promotions will now be tracked to prevent extensions or further discounts once the special rates expire. Dolan confirmed the ban will also extend to customer retention offers.

Customers who shop primarily on price in Cablevision’s service area have traditionally flipped between AT&T U-verse, Verizon FiOS and the cable company every few years, usually switching after a promotion expires or rates are increased. Because of fierce price competition, new customers can receive a triple play package of broadband, phone, and television service — including equipment, for less than $85 a month for at least one year. Regular prices are considerably higher.

Cablevision lost most of its departing New York and New Jersey customers to Verizon FiOS, but has been more successful fending off competition in Connecticut, where AT&T has the least capable broadband network among the three providers.

All three companies have attempted price increases over the last few years with mixed results. Cablevision’s eight percent rate hike on broadband this year may have been too much for some customers who shopped around and found a better deal with the phone company.

Despite the loss in customers, Dolan remains firmly committed to more rate hikes, especially for broadband service, noting its speed and features (including an extensive Wi-Fi network) deliver enough value to sustain further price increases.

Cablevision clearly hopes competitors follow its lead and end promotional rate double-dipping as well. If they do, customers will find themselves locked in with regular pricing regardless of the provider they choose.

Some analysts are skeptical Cablevision’s hard-line will last, especially if subscriber losses mount. Cable operators have attempted to restrict promotions in the past but tend to ease them if market share suffers. Despite the third quarter customer retreat, Cablevision’s rate hikes delivered $336 million in broadband revenue during the last three months, an increase from $308 million earned the same time last year.

(Image: DownDetector)

A major outage caused by a failing fiber optic switch owned by Level 3 Communications left millions of cable subscribers along the eastern seaboard without Internet access Saturday.

The outage affected Cablevision and Time Warner Cable customers from Albany, N.Y. eastward to Long Island and north into Maine.

Some cable operators did a better job dealing with Level 3’s troubled equipment than others.

A Cablevision spokesperson indicated technicians discovered the problem, routed around it, and restored service about an hour later.

Time Warner Cable apparently waited for Level 3 to repair or replace the switch, leaving their broadband customers offline for most of Saturday morning.

The switch failure did not just affect Internet Service Providers. Some content distribution networks and regional servers for major websites including Facebook and Twitter also had problems.

Although the outage was too brief for Cablevision customers to qualify for a service credit, affected Time Warner Cable customers can use the company’s online chat platform or call to request a one day broadband service credit for the interruption.

Since 2005, five cable and telephone companies and their respective lobbying trade associations have donated nearly $12 million to New York politicians, making Big Telecom companies among the biggest political donors in the state. Now a government reform group wants an investigation by the state’s anti-corruption commission.

By exploiting giant loopholes in New York’s campaign finance laws, telecom companies that used to live with annual campaign finance limits of $5,000 are now donating millions to powerful political leaders in Albany – the majority conferences in the legislature, the state party committees, and the governor. Some are using secretive “housekeeping” accounts controlled by political parties. Others hide behind shadowy contributions from “limited liability corporations” (LLCs) established by some of the state’s biggest cable and phone companies and treated under current law as living, breathing people.

“Big Telecom exemplifies the pay-to-play culture which has come to define Albany, giving generously to the leadership in exchange for veto power over bills which favor the public interest,” said Common Cause-New York executive director Susan Lerner.

The Optimum donor to state “housekeeping” accounts among telecom providers is Cablevision.

No telecom company donates more in New York than Cablevision, which has given more than $5.3 million in contributions to state politicians since 2005 as it fights its way through union problems, fierce competition from Verizon, and complaints from subscribers about rising cable prices and questionable service. The cable company doesn’t just donate in name-only. Common Cause-NY discovered Cablevision using eight different LLCs to evade contribution limits, handing over $1.5 million to candidates and committees. Gov. Andrew Cuomo received $130,000 from four different Cablevision-controlled LLCs between July and October 2010. On April 29 of this year, former Nassau County executive Tom Suozzi’s campaign received $190,000 from three Cablevision-controlled LLCs on that single day.

Verizon (82%) and Time Warner Cable (70%) prefer to quietly give the largest percentage of their political donations to the parties’ secretive, soft money “housekeeping” accounts. The Republican and Democratic recipients are not using the money to buy Endust, mops or spare light bulbs, although the average voter might assume as much.

Corporations with an agenda just love New York’s hush-hush “housekeeping” accounts because they come without dollar limits or complete disclosure about how the money was ultimately spent.

The State Board of Elections says “housekeeping” money is supposed to go toward maintaining a party’s headquarters and staff or “ordinary activities that are not for the express purpose of promoting the candidacy of specific candidates.” Unfortunately, nobody bothered to require detailed accounting, allowing funds to disappear down a political rabbit hole, to be distributed at each party’s discretion.

Comcast (59%) and AT&T (53%) are considerably smaller players, in part because neither company serves many wired cable/broadband customers in New York.

Verizon’s corporate PAC also likes to raise relatively large numbers of small contributions given in the name of company executives or employees, not necessarily mentioning the company itself. Campaign finance disclosures may list only the individuals’ contribution(s), not the company that signed their paycheck.

Where does all the money go?

Common Cause-NY says most of the money is channeled to the most influential politicians in the state, with minority parties and unelected candidates typically getting much less.

To gain influence on the state level, Big Telecom companies contribute to the governor, attorney general, and the majority parties controlling the state Assembly and Senate, with Republicans getting the lion’s share (over $3.5 million) in the Senate and Democrats (over $1.6 million) in the Assembly.

For local issues of interest to the state’s local cable and phone companies, contributions are funneled to influential county-level political machines, perhaps helpful in making life difficult for a competing Wi-Fi project, a municipal fiber network, or helping to cut red tape to place a cell tower in a controversial location.

The top six recipients of Big Telecom’s political cash in the legislature:

• Key Party Leaders: Dean Skelos ($117,700), Tom Libous ($57,150), Jeff Klein ($49,450), and Sheldon Silver ($32,749.61)
• Current and former Chairs of the Senate Energy and Telecom Committee: George Maziarz ($79,718.02) and Kevin Parker ($34,444.00).

Common Cause-NY notes the corporations involved don’t give money without expecting something in return. After generous contribution checks were deposited, a number of telecom consumer protection bills mysteriously died in committee or never made it to the floor. The same fate did not meet bills offering special tax breaks for cable and Internet Service Providers that have cost New York taxpayers nearly $500 million and counting.

“Multi-million dollar campaign contributions clearly help Big Telecom maintain the status quo of corporate control, high prices, and lax regulation,” Common Cause-NY concludes.

The legislature is rife with examples of bills that would have likely passed with popular support but suddenly or “mysteriously” didn’t:

• A 7635-A / S5630-A: Establishes a moratorium on telephone corporations on the replacement of landline telephone service with a wireless system.
  • The “VoiceLink” moratorium bill, passed the Assembly, had broad bi-partisan support in the Senate but never came to a vote.
• S542: Relates to enacting the “Save New York Call Center Jobs Act of 2013,” which requires prior notice of relocation of call center jobs from New York to a foreign country; directs the Commissioner of Labor to maintain a list of employers who move call center jobs; prohibits loans or grants.
  • The “Call Center Jobs Act” would take away tax breaks and state grants if companies move a call center to another country. The bill passed the Assembly in 2012 (A9809) and had bipartisan support in Senate but was blocked. The 2013 bill died in Senate committee.
• A6003/S5577 — Directs the Department of Public Service to study and report on the current status of cable television systems providing services over fiber optic cables.
  • Bipartisan support in Assembly for further oversight of broadband but gets little support in Senate, the same bill was also blocked in 2012.
• A5234/S1075 — Enacts the “Roadway Excavation Quality Assurance Act” demanding utility companies or their contractors shall use competent workers and shall pay the prevailing wage on projects where a permit to use or open a street is required to be issued.
  • Bipartisan support in the Senate and Assembly but no passage in either 2012 and 2013.
• A6239/S4550 — Creates the State Office of the Utility Consumer Advocate to represent interests of residential utility customers.
  • Bipartisan support in Assembly, dies in Senate.
• A6757/S4449 — Requires providers of electric, gas, steam, telephone and cable television services to issue standardized bills to residential customers; provides the standards for such bills shall be established by the Public Service Commission.
  • Bipartisan support, passes Assembly, dies in Senate.

Verizon FiOS is the fastest nationwide broadband service available.

That was PC Magazine’s assessment in its ranking of the fastest Internet Service Providers of 2013. It’s not the first time Verizon FiOS has taken top honors. In fact, the fiber to the home broadband service has consistently won excellent rankings not only for its speed, but also for its value for money and quality of service. The worst thing about FiOS is that many Verizon customers cannot buy the service because its expansion was curtailed in early 2010.

Verizon FiOS has seen its national speed rankings increase this year. In 2012, the provider’s nationwide download speeds averaged 29.4Mbps; this year FiOS average downstream speeds jumped to 34.5Mbps. Upstream speeds are also up from 26.8Mbps to 31.6Mbps. In part, this is because a growing number of customers have moved away from Verizon’s entry-level 15/5Mbps package with a $10 upgrade to Quantum FiOS 50/25Mbps service. FiOS TV customers can upgrade themselves with their remote control.

Frontier Communications made the top five in the Pacific Northwest, thanks to FiOS infrastructure the company inherited from Verizon.

Other high-ranking ISPs included Midcontinent Communications, a small cable provider serving the north-central states. Midco’s DOCSIS 3 upgrade allows the company to offer most customers up to 100Mbps service. The average download speed for Midco customers is 33.1Mbps; average upload speed is 6.4Mpbs.

Where cable operators face head-on competition from Verizon FiOS, the usual competitive response is speed increases. Cablevision is a good example. It came in fourth place nationally with average speeds of 25.9/5.9Mbps. Comcast has also been boosting speeds, especially in the northeast where it faces the most competition from fiber. It came in third place with average speeds of 27.2/6.8Mbps and offers Internet speeds up to 505Mbps in some areas.

There were companies that performed so poorly, they barely made the regional rankings. The most glaring example largely absent from PC Magazine’s awards: Time Warner Cable, which has lagged behind most cable operators in the speed department. It scored poorly for the second largest cable company in the country, beaten by Charter, Mediacom, and CableONE — which all usually perform abysmally in customer ratings. The only regional contest where Time Warner made a showing at all was in the southeast, where it lost to Verizon FiOS, Comcast, and Charter. Only TDS, an independent phone company, scored worse among the top five down south.

Even more embarrassing results turned up for AT&T U-verse, which performed so bad it did not even make the national rankings. AT&T has promised speed upgrades for customers this year, and has implemented them in several cities. Unfortunately for AT&T, its decision to deploy a fiber to the neighborhood system that still depends on copper to the home is turning out to be penny wise-pound foolish, as it continues to fall further behind its cable and fiber competitors. At the rate its competitors are boosting speeds, U-verse broadband could become as relevant as today’s telephone company ADSL service within the next five years.

Other players scoring low include WOW!, a surprising result since Consumer Reports awarded them top honors for service this year. Also stuck in the mud: Atlantic Broadband (acquired by Canada’s Cogeco Cable, which itself is no award winner), Suddenlink, Wave Broadband and Metrocast, which serves smaller communities in New Hampshire, Maine, Pennsylvania, Maryland, Virginia, Connecticut, South Carolina, Mississippi and Alabama.

The magazine also ranked the fastest U.S. cities, with top honors going to the politically important Washington, D.C., and its nearby suburb Silver Spring, Md, which took first and second place. Alexandria, Va., another D.C. suburb, turned up in eighth place. No cable or phone company wants to be caught delivering poor service to the politicians that can make life difficult for them.

Brooklyn, N.Y., took third place because of head-on competition between Cablevision and Verizon FiOS. Time Warner’s dominance in Manhattan and other boroughs dragged New York City’s speed rankings down below the top ten. Among most of the remaining top ten cities, the most common reason those cities made the list was Verizon FiOS. Florida’s Gulf Coast communities of Bradenton (4th place) and Tampa (6th place) have fiber service. So does Plano, Tex. (5th place) and Long Beach, Calif. (7th place). The other contenders: Hollywood, Fla. takes ninth place and Chandler, Ariz. rounds out the top 10.