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Spectrum Combats Cord Cutting With Spectrum TV Essentials: $14.99 for 60 Streamed Networks

Phillip Dampier February 20, 2019 Charter Spectrum, Competition, Consumer News, Online Video No Comments

In a move that clearly signals cord-cutting is taking a toll on Spectrum cable television, Charter Communications today unveiled a new streaming TV service priced to compete with “over the top (OTT)” streaming services like YouTube TV and DirecTV Now.

“Spectrum TV Essentials” will offer a package of 60 national cable networks for $14.99 a month, when the streaming service debuts in March. The lineup avoids costly cable channels focused on sports and will include no local channels.

“Spectrum TV Essentials is a OTT offering designed to provide Spectrum internet-only customers a new low-price, high-value video option,” said Charter CEO Tom Rutledge. “As we began to assemble the rights for this new video service, we received great enthusiasm and encouragement from these key programming partners, who share our view and embrace creating an innovative video offering we believe will resonate with our internet customers.”

Remarkably, one of Charter’s first programming partners for the newest slimmed-down cable TV package is Viacom, notorious for its bouquet of high-priced cable networks. Viacom has been so insistent on regular rate increases and forced bundling of multiple Viacom-owned cable networks, some cable systems like Cable One dropped all Viacom networks from their lineups just a few years ago.

A management change at Viacom apparently included a new willingness to combat cord-cutting.

“Viacom shared its strong belief and research that suggests there is a large untapped opportunity for a low-priced, entertainment-only bundle unencumbered by the high cost of broadcast retransmission consent fees and expensive sports programming,” Rutledge noted.

The 60-channel lineup is heavy on content from Discovery Networks, Viacom, Hallmark, and AMC. News junkies will be unhappy to find CNN, MSNBC, and Fox News are not on the lineup, although lesser-watched BBC World News, Bloomberg, and NewsmaxTV are there.

The full lineup:

A&E, AMC, American Heroes Channel, Animal Planet, AXS TV, BBC America, BBC World News, BET, BET Her, BET Jams, BET Soul, Bloomberg, Cheddar, CLEO TV, CMT, CMT Music, Comedy Central, Cooking Channel, Destination America, Discovery, Discovery Family, Discovery Life, DIY, Food Network, FYI, Game Show Network, Hallmark Channel, Hallmark Drama, Hallmark Movies & Mysteries, HDNet Movies, HGTV, HISTORY, IFC, Investigation Discovery, Lifetime, Lifetime Movie Network, Logo, MotorTrend Network, MTV, MTV2, MTV Classic, MTV Live, MTVU, NewsmaxTV, Newsy, Nickelodeon, Nick Jr., Nick Music, NickToons, Outdoor Channel, OWN, Paramount Network, Science Channel, Sundance TV, Teen Nick, TLC, Travel Channel, TV Land, VH1, Viceland, The Weather Channel and WEtv.

There will be no DVR option at launch, but Charter is reportedly testing cloud DVR technology for introduction later.

“We’re thrilled to expand and deepen our relationship with Charter. They share both our commitment to the evolution of the the Pay TV ecosystem as well as our understanding of the changing needs of consumers,” said Bob Bakish, Viacom CEO. “As the video marketplace continues to segment across price points and offerings, we believe a high quality, lower priced option for internet-only subscribers is very important. We’re excited to have our global brands as part of Spectrum TV Essentials at launch.”

Access will initially be available on the desktop through SpectrumTV.com and Spectrum’s Roku app. The service will also be available on iOS and Android phones and tablets, Apple TV, Xbox One, Amazon Kindle Fire, and Samsung Smart TVs.

Stop the Cap! Urges N.Y. Public Service Commission to Come Clean on Charter Talks

Stop the Cap! today filed comments with the N.Y. Public Service Commission urging the regulators to publicly disclose the nature of their ongoing discussions with Charter Communications.

“Since last July’s vote revoking Charter/Spectrum’s merger approval with Time Warner Cable, the PSC has been engaged in secret talks with the cable company in what we now believe was actually an enforcement bludgeon to get the cable company to meet its commitments,” said Stop the Cap! president Phillip M. Dampier. “We suspect Charter got the message to either clean up its act and follow through on its original merger obligations, or the regulator would make good on its threat to boot the company out of New York. If Charter behaves, the Revocation Order exiling Charter from the state will probably disappear in a final settlement.”

Stop the Cap! agrees with the PSC that Charter should be held to all the merger obligations it originally agreed to, but by keeping the talks secret, consumers and lawmakers have no idea what is happening and cannot intelligently participate in the discussions.

“After multiple extensions, enough is enough,” Dampier said. “Charter also hides from public view almost all the details about its progress in reports to the Commission, making it impossible for rural New Yorkers to know when they might expect to get wired for service.”

Dampier

Stop the Cap! recommends the PSC take the discussions public and let all New Yorkers have their say about what happens next. The consumer group also reminded the PSC that there are other matters that should be considered in the discussions, including a long-lasting strike of Charter’s workers in the New York City area that is impacting the quality of service for customers.

“Anyone who has had a service problem with Spectrum knows the more experienced a technician you get, the better,” Dampier said. “Using replacement workers or third-party outsourced technicians reduces customer satisfaction and often leaves problems unresolved.”

Stop the Cap! also repeated its recommendation that any assessed penalties or fines that come from any settlement should be targeted to improving broadband service in the state.

“There are more than 75,000 New York homes and businesses that have been thrown under the bus by the New York State Broadband for All program, which assigned slightly subsidized satellite internet access for those locations, making it harder than ever for future funding opportunities for wired broadband to reach these rural residents,” Dampier said. “Most funding programs exclude areas already provided with broadband expansion funds or served by another provider, regardless of how well that provider serves their customers.”

Stop the Cap! suggests that Charter be required to expand its rural broadband commitment to reach as many of the 75,000 stranded rural locations as economically feasible.

“It is about the only solution that can cut through the red tape at this point, because these locations are usually scattered across the state, making it unlikely another provider will ever show much interest,” Dampier said. “I know it isn’t ideal to stick these homes and businesses with a cable company with a poor customer satisfaction score, but when I hear from rural unserved New Yorkers, they are desperate and cannot wait 5-10 years for something else to come along, especially if it turns out to be low-speed DSL.”

Dampier also worries about the reputation of the PSC if it suddenly announces a settlement that allows Charter/Spectrum to stay.

“Last summer, every newspaper in the state reported Charter was being thrown out of New York. Many consumers were thrilled. Then things went quiet as the public learned about extension after extension, delay after delay” Dampier said. “If the Commission suddenly announces the case is settled and Charter can stay without explaining why that is the right decision, a lot of New Yorkers are going to accuse the Commission of selling them out. Comments like that are already appearing in the docket from fed up New Yorkers who have run out of patience.”

The full text of the Stop the Cap! letter follows:

 

February 19, 2019

Hon. Kathleen H. Burgess
Secretary to the Commission
New York State Public Service Commission
Three Empire State Plaza
Albany, NY 12223-1350

Re: 15-01446/15-M-0388 Joint Petition of Charter Communications and Time Warner Cable for Approval of a Transfer of Control of Subsidiaries and Franchises, Pro Forma Reorganization, and Certain Financing Arrangements.

Dear Secretary Burgess,

Please share our comments with Chairman John B. Rhodes and Commissioners Gregg C. Sayre, Diane Burman, and James S. Alesi.

As a party in the proceeding whose views and recommendations were recognized by the Commission and its staff in drafting a final Merger Order granting Charter Communications its request to merge with Time Warner Cable, we remain actively interested and engaged in this transaction on behalf of consumers in New York.

As you know, most Upstate New Yorkers have just one choice for a telecommunications supplier capable of achieving the FCC’s broadband speed benchmark of 25/3 Mbps. That company is generally Charter Communications. Wireline phone companies in much of western, central, and northern New York offer DSL service to many of their customers, often at speeds well below the FCC’s definition of broadband. At our location, incumbent local exchange carrier Frontier Communications only offers up to 3.1 Mbps, a speed few consumers would consider acceptable in 2019. As a result, whatever cable company offers service in large parts of Upstate and Western N.Y. enjoys a de facto monopoly on broadband service in most of these areas.

In July, 2018 the Commission rightly found that despite multiple warnings, Charter Communications flagrantly failed to meet its obligations to New York as part of the Commission’s Merger Order. Charter Communications has failed to challenge that decision in court or offer credible evidence to rebut your conclusions. In fact, the company has largely relied on selective interpretations of the Merger Order to renege on its rural broadband expansion commitments – a key condition that was necessary for this merger to be in the public interest. While counting new passings in the urban New York City area, the company was also running television ads promoting its rural broadband expansion that we believe misled customers about Charter’s true performance of meeting its commitments to New York.

However, nearly seven months after the Commission voted to effectively expel Charter Communications from New York, the Commission and/or its staff has instead entered into in-camera negotiations with the cable company in what we can only suspect is an effort to enforce Charter’s compliance with the original Merger Order in return for a settlement eventually dispensing with the July 2018 Revocation order.

While we have no objection to the Commission’s actions seeking Charter’s compliance with its merger obligations, we remain concerned that these ongoing negotiations have remained secret for over half a year, with little ability for public interest groups, consumers, and others to provide informed input in those discussions or track their progress. Virtually all of the compliance reports submitted by Charter since the Revocation Order are also heavily redacted, leaving the public and lawmakers in the dark.

A growing number of New Yorkers are now questioning the credibility of the Commission in public comments in the docket. For example, Matt Stern on Nov. 26, 2018 (Comment 572) opined:

“Negotiations done in secret with never ending extensions are not in the best interest of the people of NYS. […] Charter has made little or no line extensions in my town in 20 years. 2 full decades. Many of us live less than 1 mile from the existing infrastructure. This is the same all over upstate NY. We are tired of excuses. If you are unable to secure these necessary infrastructure expansions then resign immediately. We are done waiting.”

Wayne Martin offered in comment 576 (Dec. 15, 2018):

“Surprise, surprise, surprise, another extension granted. The (non)actions of this commission are a slap in the face to the taxpayers of New York.”

On Dec. 18, 2018, Assemblyman Anthony Brindisi (Comment #580) asked the Commission to cease granting extensions to Charter:

“It is simply unacceptable to keep delaying Charter’s exit from New York State if they cannot meet their obligations to customers. While the company keeps getting extensions granted, I am hearing on a daily basis from Charter customers experiencing poor service and increased rates. […] The PSC’s November 23, 2018 order granting Charter an extension until January 11, 2019 to present its exit plan reads, in part, “The Compliance and Revocation Orders were designed to deal with very serious consumer issues presented by Charter’s conduct related to the company’s network expansion.” This is exactly the problem. Charter has had since July to prepare an exit strategy and delaying it any further is not in the best interests of its customers, many of whom rely on cable and internet service for their job, or to communicate with family members.”

On Feb. 6, 2019, Adam Nash complained about the Commission’s repeated extensions in Comment 614:

“[…] I’m concerned with constant extensions Time Warner has been given since July, 2018, so far they’ve been given 5. If this commission was serious on this matter there wouldn’t be this many extensions. It was stated in a article done by the Times Union News in Oct, 2018 that, “Staff believes that the commission should direct that any request granted in response to Charter’s most recent filing be final in form and that any additional time allowed must either result in a settlement agreement being presented to the commission or the cessation of settlement talks,” PSC acting general counsel John Sipos wrote in response to Charter’s request.” This statement was made when it was at its 3rd extension, NYS is at its 5th currently.”

We believe it is long past time for the Commission to publicly disclose the nature of the ongoing negotiations, specific details about the progress that has been made, and the ultimate goal of these discussions. The Commission’s July 2018 Revocation Order provoked shock headlines in the media across the state, and consumers have the expectation Charter will be leaving the state. If that ultimately does not happen, the Commission should be prepared to explain why.[1]

Our group’s view is that Charter Communications must meet each and every obligation in the Commission’s Merger Order if it wants to do business in New York and that a significant penalty is now due for failing to meet those obligations on a timely basis.

We also believe a long-standing labor dispute between the company and its unionized workforce is having an ongoing detrimental impact on the quality of service received by customers in the New York City area. We recommend the Commission undertake an investigation to see how this dispute is impacting customers.

We recommend you review our submission (item #278) of Apr. 5, 2018 recommending specific penalties against Charter that would, among other things, expand the company’s rural broadband expansion commitment even further (either in lieu of, or in addition to, financial penalties) to assist at least some of the 75,000+ unserved New York locations that are being offered substandard satellite internet access[2] from Hughes Network Systems, LLC. These locations lack wired broadband because no provider bid for financial assistance to undertake a buildout during the last round of the New NY Broadband Program, administered by the New York Broadband Program Office.[3]

These addresses are effectively stranded because programs offering public subsidy funding usually disqualify locations already provided with subsidies as duplicative.[4] But satellite internet providers cannot guarantee the speeds required to qualify as broadband, leaving those locations as a distinct disadvantage and less likely to ever get suitable broadband.[5] HughesNet also includes a very low data cap ranging from 10-50 GB.[6] In 2018, the average internet-connected home used 268 GB of data per month.[7] A penalty that includes an incentive or requirement for a private company like Charter to wire many of those locations offers a unique opportunity to resolve this serious problem. Charter offers customers at least 100 Mbps of speed and no data caps.

We appreciate the Commission and its staff’s hard work on this matter, and hope you will seriously consider our input and ideas, demonstrating once again that the New York Public Service Commission takes its obligations to the citizens of New York seriously.

Very truly yours,

Phillip M. Dampier
President and Founder

[1] “New York Moves to Kick Spectrum Out of State,” New York Times (Jul. 27, 2018) (https://www.nytimes.com/2018/07/27/nyregion/new-york-spectrum-charter-cable-broadband.html), “NY State Regulators Move to Order Charter Out of New York Over Alleged Broadband Woes,” WNBC-TV/NBC News (Jul. 27, 2018) (https://www.nbcnewyork.com/news/local/NY-PSC-Charter-New-York-489356141.html), “New York’s order kicking Spectrum cable out of state ‘pretty radical’,” The Post-Standard (Syracuse), (Jul. 27, 2018) (https://www.syracuse.com/news/index.ssf/2018/07/new_yorks_move_to_kick_spectrum_cable_out_of_state_pretty_radical.html), “PSC Orders Cable Giant Charter Out of NY,” (Albany) Times-Union, (Jul. 27, 2018)  (https://www.timesunion.com/business/article/PSC-holding-special-meeting-on-Charter-Friday-13109921.php), “New York tells Spectrum Cable to get out of the state,” The Buffalo News, (Jul. 27, 2018) (https://buffalonews.com/2018/07/27/psc-wants-spectrum-cables-owner-to-get-out-of-new-york/)

[2] Satellite Broadband Remains Inferior to Wireline Broadband (VantagePoint) (Sept., 2017) (https://www.vantagepnt.com/wp-content/uploads/dlm_uploads/2018/04/vps-satellite-broadband-remains-inferior-to-wireline-broadband-090717.pdf)

[3] “Broadband Delays Prompt Frustration in Rural NY” Lockport Union-Sun & Journal (Apr. 2, 2018) (http://www.govtech.com/network/Broadband-Delays-Prompt-Frustration-in-Rural-New-York.html)

[4] “While the first round NOFA was silent on the eligibility of such overlapping projects, the second round NOFA specifically stated that areas already served by a RUS incumbent service provider were not eligible for subsequent funding.” (Selected passage from USDA’s “Broadband Initiatives Program – Pre Approval Controls Audit Report 09703-0001-32”) (March, 2013) (https://www.usda.gov/oig/webdocs/09703-0001-32.pdf)

[5] “HughesNet service is available in the contiguous U.S., Alaska and Puerto Rico. Stated speeds and uninterrupted use of service are not guaranteed. Actual speeds will likely be lower than the maximum speeds during peak hours.” (HughesNet Subscriber Agreement last revised March 10, 2017 — PART I – KEY PROVISIONS – 1.1 SPEED CLAIMS AND DISCLAIMERS.) (http://legal.hughesnet.com/SubAgree-03-16-17.cfm)

[6] “HughesNet Gen5 Fair Access Policy for the 10 GB, 20 GB, 30 GB and 50 GB Service Plans” (http://legal.hughesnet.com/FairAccessPolicyGen5.cfm)

[7] “OpenVault U.S. Household Broadband Data Consumption” (Jan. 22, 2019) (http://openvault.com/openvault-broad-based-broadband-usage-acceleration-in-2018-1tb-power-users-double-to-4-12-of-all-households/)

Customers Buried in Unwanted Spectrum Junk Mail: Here’s How to Opt Out

Phillip Dampier February 18, 2019 Charter Spectrum, Consumer News, Editorial & Site News No Comments

Spectrum Junk Mail (image courtesy of: Cube Computer Channel)

Spectrum customers who thought Time Warner Cable sent out too much junk mail now regret criticizing their old cable company.

“I have really come accept the truth,” writes Stop the Cap! reader Dustin Hedges. “There are worst cable companies than Time Warner Cable and Charter Spectrum is one of them.”

Hedges is tired of the relentless junk mail he receives every week from the cable company, primarily to advertise cable television.

“I cut the cord with them for a reason: they cost too damn much and considering all of the mailers they are sending me, I can now see where some of my cable dollar used to go,” Hedges tells us. “Some of them look like urgent notices about a late bill or claims to contain ‘important information’ about my account, which could mean another damn rate increase, but no — it is just another advertisement for their TV service I quit last year.”

Hedged ditched cable television after Spectrum converted to an all-digital format, requiring customers to start leasing cable boxes on their extra televisions.

“I tried the Roku route and didn’t like it because it took too long to change channels and it often buffered or ran 2-3 minutes late, meaning other things I might want to watch I would miss the start of because the Roku app made me late,” Hedges complains. “What really ticked me off is that they keep raising the cost of the box rental and the boxes they are giving out now are cheap garbage. They don’t even have a clock on the front anymore. My bill would have gone up $35 a month. I cancelled.”

Today, Hedges is a Spectrum internet-only customer, and thinks Spectrum does not appreciate the business he still gives to them.

“I pay these crooks $65 a month for internet service, when I used to pay Time Warner Cable less than $50, and they are still not happy about it,” Hedges complained. “They constantly send me TV offers for 10 channels, 25 channels, or to go right back to regular cable TV where I can fall for the same trap of low prices to start and boom stick to it you with regular pricing later on. I don’t watch it, I tell them I don’t want it, and that they can save everyone’s money by not sending me this junk mail. They tell me they won’t stop the mailers.”

Indeed, Charter Spectrum’s customer mailing policy indicates they do reserve the right to market existing customers additional products and services at any time. If a customer has a triple play package, they rarely receive anything from the cable company, at least until recently when Spectrum Mobile started a big marketing campaign. If one drops TV and/or phone service, the junk mail will soon grace your mailbox. By far, most mailers concern TV service. Spectrum markets cable cord-cutters and cord-nevers slimmed down packages delivered over their Spectrum internet connection. Occasionally, the company will also remind customer landline phone service is also still available, typically for around $10 a month. When Time Warner Cable pushed its Intelligent Home security service, those mailers were a common sight to many customers. Charter Communications has no interest in the security monitoring business, so although it maintains service for existing customers, it no longer markets Intelligent Home to attract new ones.

But we have good news for Mr. Hodges and other customers looking for a possible opt out path for junk mail, sales calls, and worst of all – door knocking sales teams. Charter Spectrum maintains an online privacy preferences form that should eventually stop marketing mailers for other products and services, including cable TV. Just click on the pertinent image(s) to be taken to their respective web pages, complete and submit the forms, and your mail volume should drop.

Legacy Time Warner Cable CPNI Opt-Out Form (only for use by customers still holding on to their old Time Warner Cable packages.)
Legacy TWC customers should also fill out the Privacy Preferences form:

Charter/Spectrum and Legacy Time Warner Cable/Bright House Customers
Privacy Preferences:

A YouTuber produced this rant about endless junk mail from Spectrum. (11:46)

Charter Shareholders Love Spectrum’s 20% Broadcast TV Fee Increase; Second Rate Hike in 4 Months

Phillip Dampier February 14, 2019 Charter Spectrum, Consumer News, Public Policy & Gov't 2 Comments

Although Spectrum Cable customers will face higher cable TV bills starting next month, the company’s shareholders are delighted, boosting Charter’s stock price more than $50 a share on the news.

Spectrum’s latest increase (the second in four months) of its Broadcast TV Surcharge will set a uniform national fee of $11.99 a month for all of its cable television customers.

In 2018, customers paid an average of $8.75 a month in local TV surcharges. But last November, Charter raised the surcharge to $9.95 a month. Now, just a few months into 2019, Spectrum wants another $2 a month — a 20% increase — to watch local television signals that are available for free to those with an antenna. That’s a steep increase for what began as a $2 surcharge for some customers starting in 2015.

Charter’s investors reacted positively to the latest rate hike, jumping the stock price from $289.91 a share to $340.95 — a $51.04 boost after the fee increase was first reported by the Los Angeles Times.

The new surcharge will be reflected on customer bills beginning as early as Feb. 21.

Charter blamed broadcasters for the “rapidly rising cost” of including local TV stations on the cable lineup. In a letter to some state telecommunications regulators, the cable operator claimed it would be inefficient to not raise prices.

Charter’s share price shot up on the news it was increasing its Broadcast TV Surcharge by 20% just four months after the last increase.

“Containing costs and efficiently managing our operations are critical to providing customers with the best value possible,” wrote Melinda Kinney, Charter’s senior director of government affairs for Charter’s Northeast Division. “Like every business, Charter faces rising costs that require occasional price adjustments.”

But many customers, especially those in marginal reception areas, are loudly complaining that Charter is raising its Broadcast TV Fee even as it drops regional over the air stations from its cable lineup. In 2017, Spectrum customers in western Massachusetts reported a gradual exodus of local TV stations from their lineup, starting with WWLP, the NBC affiliate in Springfield with strong local news coverage of the western half of the state. Today, Spectrum only provides western Massachusetts with a single NBC station — WNYT in Albany, N.Y., which keeps viewers up to date with the latest political machinations of the New York State legislature.

Next to go was Boston’s ABC affiliate, WCVB — airing the strongest coverage of local and state news of any ABC affiliate in the state. In its place, viewers now receive WTEN, the ABC station in Albany, which is covering Sen. Jim Tedisco’s support for splitting New York into two separate states — a ‘crucial’ issue for subscribers living in the Berkshires and beyond.

Other states facing “out of market” channel losses include Connecticut, California, Nevada, and Nebraska. Many of the affected stations were dropped as Charter upgraded its cable systems to all-digital television, perhaps counting on subscriber confusion amidst other changes to the cable system.

Barrett on Charter: “Greed”

The loss of local stations while rapidly increasing the surcharge for those stations has some people calling foul.

Massachusetts State Rep. John Barrett III (D-North Adams) called it “greed.” Charter mandates the Broadcast TV Fee be paid by all video customers, including those on “price locked” promotions. By breaking the fee out of the cost of the cable television package, Charter Spectrum gets to advertise packages to new and returning customers at a low cost, only to deliver bill shock when customers discover the surcharge, along with equipment and franchise fees, that collectively increases their total monthly bill.

As the second largest cable company in the country, Charter is estimated to be collecting an extra $211 million annually from its first increase in November 2018 and $391 million annually from the latest increase now taking effect. Together, that amounts to $602 million annually in new revenue starting in March. Charter will not disclose exactly how much of this money is paid to each local television station.

Charter also has a habit of boosting its set-top box equipment fees about $1 a month per box each year — an increase we are likely to see later this year, and the company already slightly increased prices for internet service late last year.

Charter executives told shareholders on its most recent quarterly results conference call that the company’s revenue increased 4.9% in 2018 to $43.6 billion. Combining that extra revenue with a $1.9 billion cut in upgrades for 2019 will allow the company to focus on additional share buybacks, increased payouts to Charter shareholders, and debt reduction.

Kagan: Cable Company Wireless Is Designed to Trap You in a Bundle, Not Compete in Wireless Business

Comcast and Charter Communications have no real interest in competing head-to-head in wireless with AT&T, Verizon, T-Mobile, or Sprint. Instead, the two cable companies hope to trap you in a bundled package of services too inconvenient to cancel.

Jeff Kagan, a longstanding telecommunications analyst specializing in the cable industry, believes Comcast, Charter, and other cable operators entering the wireless business have no intention of being a serious competitor to the country’s four largest mobile companies.

“The goal of XFINITY Mobile [from Comcast] is to offer their customers another service and to create a sticky bundle,” Kagan said. “It’s not to lead the wireless wars. It’s not to increase their market share for traditional reasons. It is simply to create a sticky bundle to stabilize and grow their customer base.”

Kagan

XFINITY Mobile and Spectrum Mobile (from Charter), both require customers to be signed up for their respective internet services. If a customer cancels internet service, they will lose their mobile service. That could prove to be a major hassle for wireless customers, because they will have to properly port out their existing phone number(s) to another provider before dropping broadband.

Kagan believes cable operators will use mobile service to further strengthen their bundle by tying discounts to the number of services each customer takes through the cable company.

“Customers who use one service find it easy to switch away to a competitor,” Kagan said. “However, when they use multiple services and get a discount for the bundle, they become sticky and generally stay put. And the more services a customer uses, the larger the discount, the stickier they get and the less likely they are to wander.”

That is also likely to be true with Altice, which operates Optimum (Cablevision) and SuddenLink and has partnered with Sprint to offer cell service.

Sprint and T-Mobile, which are planning to merge, have repeatedly argued cable operators will be aggressive new players in the mobile business, giving the potentially combined carrier fierce new competitors. But Kagan doubts that will prove true.

“The problem is, the sticky bundle is not a low-cost solution,” Kagan offered. “With that said, the higher cost to the cable television companies is less than that of losing their customer base. So, the cost makes sense as simply a cost of doing business.”

The challenge cable operators face is that none plan to own and operate their own traditional cellular network. Comcast and Charter have partnered with Verizon Wireless to resell access to its 4G LTE network and Altice will rely on Sprint. Leasing access on an ongoing basis is likely to be more expensive that relying on your own network, but beyond offering Wi-Fi calling and experimental access to future 5G-type services in the emerging CBRS band, cable operators will remain almost completely dependent on their wireless provider partners, limiting their effective ability to compete.

Kagan believes the goals of the two industries are different. Wireless operators are trying to monetize their networks through usage, while cable operators are trying to find new services that will keep customers loyal and are willing to ignore monetizing their wireless side businesses to achieve that goal.

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