Facing no significant new competitive pressure, Charter Communications has put DOCSIS 4, capable of bringing dramatically faster internet service to Spectrum customers, on hold until 2022.

Speaking at today’s Bank of America 2020 Media, Communications & Entertainment Conference, Charter chief financial officer Chris Winfrey reassured Wall Street Charter had no plans to surprise shareholders with unplanned increased investment in its broadband service and is in no hurry to deliver DOCSIS 4’s faster internet to its customers.

“We’ll continue to develop the path for DOCSIS 4.0, but […] there’s no rush,” Winfrey said. “There’s still a lot to be excited about DOCSIS 3.1. It’s relatively untapped in terms of the throughout it can give us.”

Charter’s last significant upgrade effort was rolling out DOCSIS 3.1, a project that ended in 2018. Since that time, Charter has done little to raise internet speeds for all of its customers. Spectrum residential customers in some areas of the country receive 100/10 Mbps service while others receive 200/10 Mbps for the same price. Spectrum has dragged its feet on upgrading the remaining half of its footprint to 200 Mbps service, and there is no sign if or when it will upgrade the rest.

At the same time, Charter is petitioning the FCC to end important pro-consumer deal conditions that were required as part of the FCC’s approval of the 2016 merger between Charter and Time Warner Cable and Bright House Networks. The company is seeking to end a prohibition on implementing data caps. 

Although the company denies it has any immediate plans to implement compulsory data caps, Charter’s announcement it has no plans to announce any new material spending on DOCSIS 4 for the next two years might leave customers with stagnant internet speed and the eventual introduction of data caps.

Winfrey assured investors the company does not have to rush investment on DOCSIS 4.0 upgrades.

“We’ll make sure [upgrades occur on] a normal cycle as opposed to a big bang upgrade,” Winfrey said. “I don’t think it will dramatically change our capital intensity profile.”

AT&T, one of Charter’s largest competitors, has concluded its fiber expansion project, which means Charter’s only new, near-future competitive threat will come from a handful of independent fiber overbuilders that offer gigabit internet speed in some cities at competitive pricing. But most overbuilders are capital constrained, limiting the pace of their expansion. That may explain why Charter does not feel any pressure to upgrade service, especially when the only alternative is slow speed DSL service from the phone company.

A Quebec-based cable company is the target of a hostile takeover by a pair of larger American and Canadian cable operators that would like to divide up the assets for themselves, but have met strong resistance from the family that controls Cogeco and Quebec politicians worried about job losses in the province.

Altice USA, which owns Cablevision/Optimum and Suddenlink in the United States, made an uninvited bid of $7.8US billion on Wednesday to take control of Cogeco, a Canadian cable operator that offers service in parts of Ontario and Quebec, and also owns American subsidiary Atlantic Broadband. If the takeover is successful, Altice has agreed to sell Cogeco’s Canadian assets to telecom giant Rogers, Canada’s largest cable operator.

Louis AUDET, head of Cogeco

The Audet family, which holds 69% of Cogeco’s voting rights and 82.9% of the voting rights at Cogeco Communications through subsidiary Gestion Audem, Inc., quickly rejected the offer.

“Members of the Audet family unanimously reiterated that they are not interested in selling their shares. The family takes pride in its stewardship role in both companies, offering high-quality services to its customers, enriching the communities in which they operate and creating superior returns for shareholders through sound growth strategies,” said Louis Audet, who serves as president of Gestion Audem, Inc.

Cogeco has been a frequently rumored target for an imminent corporate takeover, much like America’s Cablevision was when it was controlled by the Dolan family. Ongoing consolidation among telecom companies in Canada and the United States have disfavored medium-sized cable and phone companies, making them ripe for takeover bids. Cogeco’s unique position in territories where much larger Rogers Cable operates in Ontario and Videotron in Quebec has inspired near-constant rumors that Rogers would acquire Cogeco to complete cable consolidation in Ontario and gain entry into parts of Quebec. Rogers already owns 41% of the subordinate shares of Cogeco and 33% of those of Cogeco Communications, which gives them a minority stake and voice in the company. Partnering with Altice USA to do a deal would spare Rogers from having to arrange a sale of Cogeco’s American operations.

In addition to strong resistance from the Audet family, the transaction immediately was ensnared in the cultural and economic hornet’s nest involving Ontario and Quebec provincial politics. Quebec politicians are highly sensitive to takeovers involving Quebec-based companies, especially those coming from Ontario. In 2000, Rogers’ attempt to acquire Videotron stirred controversy over moving the cable company’s headquarters out of Quebec in favor of Ontario. The fact Rogers is based in English-speaking Canada also did it no favors. French Quebec’s Quebecor acquired Videotron instead.

Once again, political differences between anglophone Ontario and francophone Quebec quickly re-emerged after news of the offer went public.

In an interview with Quebec City radio station CJMF, Quebec’s Premier François Legault immediately dismissed the takeover bid.

“It is out of the question to let this Quebec company move its head office to Ontario,” Legault said. “We talked this morning with Louis Audet […] and we’ll do whatever it takes to keep the head office here.”

Pierre Karl Péladeau, president and CEO of Quebecor, which owns Videotron, also slammed the deal on Twitter, claiming Rogers would eliminate Cogeco’s major corporate presence in Montréal Place Ville Marie, and move everything to Toronto. Péladeau noted Cogeco’s most valuable and experienced employees are not “flying whales” prepared to uproot their lives and relocate to Ontario.

The sensitivity of watching job losses in Quebec in return for job gains in Ontario is not likely to be missed by Quebec’s politicians and could bring significant opposition to a deal if Altice USA sweetens its offer to a level deemed acceptable enough by the Audet family to sell.

Charter Spectrum has introduced a new budget-priced internet plan for households with students, offering a 50/5 Mbps internet connection for $29.99 a month.

Spectrum’s unusual discounted internet plan bypasses the usual paperwork verification that low-cost internet options usually require by contracting directly with area schools that would offer the plan to their existing students. The service is managed by Spectrum Enterprise, a commercial services division at Charter Spectrum.

Connie Lack, a Charter representative who briefed members (sub. req’d.) of Cleveland City Council’s Finance Committee this week about the plan, explained that at least 50 connections per school would be required to offer “Stay Connected K-12” to students. The plan is available to students, teachers, and staff of public, charter and parochial schools.

The plan includes free Wi-Fi service and equipment and offers unlimited access with no data caps or speed throttling. Anyone can access the service, but there must be at least one qualified student in the home to keep the plan.

The plan appears to be Charter’s answer to students that lack quality internet connections at home to take advantage of in-home schooling during the COVID-19 pandemic. But unlike other plans, Spectrum closely partners with educational institutions to market, manage, and maintain the service.

“‘Stay Connected K-12’ allows schools to offer high-speed, cable broadband Internet access direct to students, educators and staff in their homes so learning, teaching and working are uninterrupted,” a brochure about the service explains. “It offers schools and districts flexibility to add locations where access is needed and remove locations when it is no longer required. Schools and districts can simply provide the details of residences in need of access and Spectrum Enterprise takes care of the rest.”

Signing up for service must be handled through a participating school, not Charter Spectrum. Once signed up, Spectrum will send a self-install kit with all necessary equipment and instructions. If your school is currently not enrolled in this program and needs more information, you can share this phone number with school officials so they can get more information: (866) 850-5136.

Just five years after buying DirecTV for $49 billion, AT&T is looking to sell the satellite TV service after losing over 10 million customers because of repeated price hikes, network blackouts, and the ongoing shift to streaming online video.

The Wall Street Journal reported Friday that AT&T was in talks with private equity firms, potentially including Apollo Global Management and Platinum Equity about the possibility of acquiring DirecTV and taking the service private.

Regardless of who buys the service, AT&T might lose $30 billion on the five-year-old venture, buying high and selling low at a price that could drop below $20 billion. AT&T is rapidly losing its television customers. More than six million people have dropped TV packages from AT&T’s U-verse TV and satellite provider DirecTV in the last two years. Craig Moffett, an analyst with MoffettNathanson, told the New York Post even at a rumored discount sale price of $20 billion, AT&T may have “overvalued” the “albatross.”

Moffett is skeptical buyers will close a deal, considering AT&T’s remaining 17.7 million television customers are still in the mood to cancel, with an “astounding” 18% of customers leaving each year.

But even with the customer losses, DirecTV moves a lot of money through its operations, making it at least look attractive on certain buyers’ books. DirecTV’s cash flow helped AT&T’s own unimpressive earnings, adding $22 billion to AT&T’s balance sheet since buying the satellite company. A buyout by a private equity firm could further slowly drain DirecTV by saddling it with debt, secured in part by its still healthy cash flow. A buyer could also attract investors by borrowing even more to pay out handsome dividend bonuses. That could leave DirecTV hopelessly hobbled in debt, leaving DirecTV in an “inevitable” position of having to merge with its chief competitor, Dish Network, or face eventual bankruptcy. If that were to happen, rural Americans could face a satellite TV monopoly as their only choice for live video entertainment.

DirecTV customers report innovation at the satellite service seems to have disappeared since AT&T took over. Very little has changed with the service in the past few years, except for AT&T raising prices and getting stingier with promotions. Many rural DirecTV customers still depend on satellite television because of a lack of over the air reception or broadband service. For these customers, saving money on television service means having to bounce back and forth between Dish Network and DirecTV, trying to keep a discounted promotion active on their account. If the two satellite services eventually merge, that will cease.

After AT&T acquired Time Warner (Entertainment), insiders report many of AT&T’s legacy businesses, including DirecTV and U-verse, have become afterthoughts. AT&T’s bigger priorities now lie with its new 5G wireless service and HBO Max, its new online video service. But the company’s most profitable businesses continue to be cell phone service and selling wired broadband internet access, which together now earns the company over $180 billion annually.

August 20, 2020

Ms. Marlene H. Dortch
Office of the Secretary
Federal Communications Commission
445 12th Street SW
Washington, DC 20554

Regarding Docket: WC 16-197

Dear Ms. Dortch,

We are writing to express concern about the FCC’s apparent rush to judgment over Charter’s petition to sunset two important conditions the company agreed to in return for approval of a highly profitable merger deal involving Time Warner Cable and Bright House Networks. The accelerated pace of this proceeding is very odd, considering Charter has claimed in the press it has no plans to implement data caps and cannot act on the Commission’s decision before the spring of 2021.[1]

This docket is full of comments from consumers that are overwhelmingly opposed to Charter being allowed to impose data caps. Despite assertions from some cable companies that data caps are “popular” with consumers, the comments in this docket speak for themselves. Few, if any consumers support data caps and they are not popular and never have been.[2] Consumers do not express support for data caps by choosing providers that impose them. In most cases, they have no other reasonable choice. Mediacom’s comments on data caps do not reflect consumer sentiment anymore than Charter’s comments did, and the fact is its 60 GB allowance tier is an anomaly in the broadband marketplace.[3] We also note Mediacom did not disclose what we suspect is an extremely low percentage of customers finding that plan adequate for their needs. Again, we point the Commission to comments in this docket filed by actual consumers to get an understanding of how much they dislike data caps.

Also appropriate for consideration are the candid conclusions reached by former Time Warner Cable executives admitting that consumers overwhelmingly rejected the company’s “budget” data allowance plans, and to such an extent the company discontinued them several years ago.

Speaking at the Deutsche Bank Media, Internet and Telecom Conference in Palm Beach, Fla., in March 2014, Time Warner Cable Inc. Chairman and CEO Rob Marcus said very few broadband subscribers opted for its internet plan that caps data use at 30 gigabytes per month. In fact, the number of subscribers taking the use-based service tier is running only “in the thousands” — a very tiny slice of the MSO’s roughly 11 million US broadband customers.[4]

Many of the groups that have supported Charter’s petition are also recipients of donations from the cable company and their views must be considered in that context. Many were specifically invited by Charter to participate in this proceeding. At least one, the Niagara Falls Boys and Girls Club, remarkably and publicly repudiated its own initial support for Charter’s petition after we publicly asked why the organization took a stand on an issue that seems far afield from its mission.

As a Buffalo TV newscast noted:

“After a quick whirlwind of events, the Niagara Falls Boys & Girls club went from supporting a measure after receiving a donation from Charter to then distancing themselves entirely.

But if this wasn’t enough of a Nancy Drew novel for you, we have this update:

Charter is apologizing to the Niagara Falls Boys & Girls Club.

[…] The reality of the situation is there’s nothing illegal here. What stands out is that the Niagara Falls Boys & Girls Club has only submitted one FCC comment, as far as WGRZ can determine. The comment came after they received a donation from Charter Communications, and the letter was in support of an initiative that Charter Communications wants regulators to approve.

This situation, and others that WGRZ has also discovered, raises serious questions about the position non-profits are put in after they receive a donation from a large company.”[5]

At the same time, consumers with no financial interest in Charter beyond being customers are continuing to share their views with the Commission to this day. They are overwhelmingly hostile to the idea of Charter being given an early sunset to the very modest deal conditions imposed by the FCC. We believe consumers should have the benefit of a much longer comment window to express their concerns. The current 14-day extension is wholly inadequate.

Additionally, with the presidential election less than 80 days away and the recent decision by the president to withdraw the nomination of Commissioner Michael O’Rielly to serve a second term, we feel this petition should be addressed by the Commission during the next Administration and after his replacement is confirmed and seated, which would still allow for a decision prior to the fifth anniversary of the merger order, the earliest the imposed deal conditions can sunset.

Because the FCC did not invest any time and energy to defend the related court challenge of other Charter deal conditions before the D.C. Circuit, it is clear the FCC has much higher priorities under consideration at the moment. Therefore, it should move to delay further consideration of this matter, accept additional input from interested parties, and assure a decision will be forthcoming early next year, before the fifth anniversary of the merger order. This would not harm Charter and would clearly demonstrate the Commission was not rushing this petition through, which could give the perception the FCC was unfairly biased towards Charter to the detriment of consumer interests.

As the COVID-19 pandemic continues to severely impact the United States, the last thing consumers should face is a higher bill for internet access, either with the imposition of data caps or charging interconnection fees that could force video services to increase pricing. Americans are relying on the internet to stay entertained, informed, work, learn, and shop from home, and manage health care needs through tele-health video conferencing. Charter has told the Commission its network has been more than capable of handling the increased traffic from these activities.

There is no urgency here and no evidence a delay until early 2021 would harm Charter’s interests in any way.

Yours very truly,

Phillip M. Dampier
Founder and President

[1] “Charter Seeks FCC OK to Impose Data Caps and Charge Fees to Video Services” https://arstechnica.com/tech-policy/2020/06/charter-seeks-fcc-ok-to-impose-data-caps-and-charge-fees-to-video-services/

[2] “Reply of Charter Communications” https://ecfsapi.fcc.gov/file/10806999321971/Charter%20Merger%20Conditions%20Sunset%20Petition%20Reply%20(8-6-20).pdf

[3] Mediacom ex-parte communication https://ecfsapi.fcc.gov/file/108172969830849/Mediacom%20August%2017%2C%202020%20ex%20parte.pdf

[4] “TWC Subs Say No to Data Caps” (3/2014) Light Reading: https://www.lightreading.com/services-apps/broadband-services/twc-subs-say-no-to-data-caps/d/d-id/708194

[5] “Charter Regrets Misunderstanding With Niagara Falls Boys and Girls Club.” (WGRZ-TV Buffalo) https://www.wgrz.com/article/news/local/charter-regrets-misunderstanding-with-niagara-falls-boys-girls-club/71-f50b6957-dd26-4560-bb0c-d6d5828c1cd1