AT&T will launch its anticipated DirecTV Now all-streaming cable television alternative next month at an unprecedented price of $35 a month for more than 100 channels, viewable for free without counting against your AT&T smartphone or tablet usage allowance.

Targeting cord-cutters, the new service will not require a satellite dish or expensive equipment — just a reasonably fast internet connection.

AT&T CEO Randall Stephenson used the announcement at a Wall Street Journal-sponsored event to claim the new service was an example of how AT&T won’t increase prices as a result of its proposed merger with Time Warner, Inc.

“That’s not a medium for raising prices,” Stephenson said, referring to AT&T’s new service. “Anybody who characterizes this as a means to raise prices is ignoring the basic premise of what we’re trying to do here.”

AT&T and Time Warner’s respective CEOs appeared together at the event as part of a week-long press blitz to promote their $85.4 billion merger deal, which is getting considerable blowback from politicians, consumer groups, and Wall Street.

Stephenson and Time Warner CEO Jeff Bewkes claim they are re-inventing the cable television business model and forcing innovation.

“If there was ever an environment that was begging for innovation, it was this environment,” Stephenson said. Bewkes added: “We would say and we’ve been saying it since 1995, every channel in the country should look like HBO or Netflix—there’s no reason we can’t.”

AT&T defends its $35 price point, which is half the price many cable companies charge for cable television, claiming it can afford to charge those prices by doing away with service calls, equipment, satellites, and infrastructure that traditional cable operators have to cover. DirecTV Now will rely on smartphone and desktop apps, and presumably third-party set-top boxes like Roku and Apple TV to provide its lineup.

AT&T hasn’t announced an official channel list for the service, but AT&T has been in serious negotiations with most of the major content conglomerates, so the lineup is likely to cover all the major cable networks, presumably local stations, and include an on-demand library. Customers may not get some of the secondary cable networks most cable systems bury on three or four digit channel numbers in Channel Siberia, but few viewers are expected to miss channels that attract fewer than 50,000 viewers nationwide.

Stephenson promised that future programming cost increases would be offset by developing “new ad models” that will cover most of the price increases.

One impediment to AT&T and Time Warner’s grand plan is the pervasive issue of data caps and usage-based billing, which could prove a lethal deterrent to customers ditching traditional cable TV in favor of online alternatives. AT&T itself imposes data caps on its DSL service, and has an unenforced cap on U-verse. Comcast continues to charge overlimit fees for customers exceeding 1TB of usage per month and smaller cable operators often include even smaller usage allowances.

Customers are highly skeptical of DirecTV Now because AT&T is involved. David Hill shared his prediction:

Undoubtedly you will get a $35 rate… for 6 months.  Then because you have been a good, paying customer, they will raise it to $75 a month.  But of course, new customers, can still get the $35 deal plus a $400 Amazon gift card.

When you call customer support (if you can actually get through to a living person) and ask for the same $35 rate the new guys get, why you will be told that you cannot get that rate because, well, you already ARE a customer.  So eat dirt.

Then when you work your way via the endless menu items to cancel the service about 2 weeks later and for years after you will be flooded with endless postcards and letters BEGGING you to come back.  You were a GREAT customer and WE want YOU BACK.  Right now!

Is this a stupid marketing policy or not?  In my MBA classes we were somehow mislead into believing exiting customers were your top A, number one priority.  Yet these internet companies cannot be bothered with keeping you.  Jerks, plain and simple.

AT&T CEO Randall Stephenson said the company’s deal with Time Warner will result in a new TV service that will offer more than 100 premium channels for $35 per month. He sat down with Time Warner’s Jeff Bewkes and WSJ’s Rebecca Blumenstein at the WSJDLive conference in Laguna Beach, Calif. (5:05)

Phillip Dampier

We are launching a new video player today on Stop the Cap! as we finally move away from Flash-embedded videos going forward. This player is in beta at this time. You can use the comments section to report any problems for investigation.

We are also aware of speed and responsiveness issues here (slow page loading times, HTTP Error 500 Internal server errors, etc.) and are investigating those as well.

After eight years looking largely the same, Stop the Cap! will also undergo a theme change to modernize our look and feel by the end of this year. Change isn’t always good when you do it for the sake of change, so we’ll be looking to retain simplicity and readability as much as possible to minimize your need to navigate.

Thanks!

Phillip M. Dampier
Editor, Stop the Cap!

Charter Communications has announced price changes and new fees for existing Time Warner Cable customers that will take effect Dec. 15, 2016:

• Late payment fee increases from $8.50 to $8.95
• If a live agent assists you with making a payment over the phone, there is a new fee of $5 for each transaction. Paying with an automated attendant should still be free.
• Damaged/unreturned equipment charges are changed (some fees increasing, others decreasing): Traditional Set top box: $123, Wi-Fi Modem/Extender/Router/Gateway: $78, Access Point: $172

It was a busy weekend for AT&T’s Randall Stephenson and Time Warner (Entertainment)’s Jeff Bewkes, culminating in an announcement from AT&T it was acquiring Time Warner in a deal worth $85.4 billion.

AT&T CEO Stephenson will remain as CEO while Bewkes stays temporarily to help oversee the transition of the merged company.

The deal has sparked confusion among some consumers who associate Time Warner with Time Warner Cable, but in fact the two entities are independent companies. Time Warner, Inc., is the entertainment and content provider that owns HBO, Warner Bros., CNN, TNT, and other networks. Time Warner Cable was spun-off in 2009 as an independent cable operator that was purchased by Charter Communications earlier this year.

AT&T’s interest in Time Warner is entirely about its video content. By owning Time Warner, AT&T can win deals to place its video programming on U-verse, DirecTV, and AT&T wireless smartphones and tablets without running into heated contract renewal negotiations, spiraling prices, and restrictions on how that content is viewed.

AT&T is hoping its acquisition will generate more revenue to make up for stalled wireless revenue growth. AT&T customers already can view DirecTV content on their smartphones without it counting against one’s usage allowance. AT&T could offer a similar usage cap exemption for Time Warner-owned programming, although it would raise the ire of consumer groups fighting for Net Neutrality, which prohibits preferential treatment of internet content.

Stephenson

Stephenson hopes the addition of Time Warner to the AT&T family will strengthen his existing plan to compete nationwide with cable television providers, offering a streamed bundle of cable channels under the DirecTV brand starting as early as this winter.

Stephenson has talked to Bewkes about a merger of the two companies since August, but Time Warner has always proved an elusive seller, having earlier rebuffed a buyout attempt from 21st Century Fox. Stephenson was talking to a man who pushed Time Warner Cable out of its corporate family nest back in 2009, and the reasons for doing so were ironic considering this weekend’s acquisition announcement:

Time Warner’s management believed that the separation was the right step for Time Warner based on the changes in Time Warner Cable’s business over time. […] Time Warner’s management believed that there were a number of potential benefits from the separation transaction:

• Time Warner would become a more streamlined portfolio of businesses focused on creating, packaging and distributing branded content.
• Time Warner and Time Warner Cable would each have greater strategic flexibility and each would have a capital structure that better suits their respective needs.
• The separation would provide investors with greater choice in deciding whether to own shares of Time Warner or Time Warner Cable or both companies based on their separate portfolios of businesses and assets.

What regulators ultimately think about the deal will probably take at least a year to learn, but reaction from Wall Street and both political parties was decidedly negative. AT&T’s decision to pay half the purchase price in cash worries investors more than the remainder of the cost paid in stock. AT&T’s stock price is falling, upsetting investors concerned about AT&T’s dividend, and the market may be signaling concern the merger might be a mistake of epic proportions similar to the disastrous $164 billion AOL-Time Warner merger in 2000.

Bewkes

Tom Eagan, an analyst with Telsey Advisory Group, said owning Time Warner for its content didn’t make much financial sense when it could license it for considerably less, as it does now.

“Why buy the cow when you get the milk for free?” Eagan wrote his clients.

Many analysts are wondering what changed Bewkes’ thinking that led to him spinning off Time Warner Cable in 2009, with his decision to sell in 2016. Time Warner got rid of its video distribution business because consumers were increasingly looking for alternatives to cable television. In 2000, that came primarily from satellite providers. Today it’s cord cutting.

Combining AT&T and Time Warner would create a mega-corporation that would own or control many of the largest cable networks and a major Hollywood studio and allow AT&T to maintain absolute control over how that content was distributed. Shareholders were concerned about the price tag of the deal, driving shares down in both companies. Combining AT&T’s existing debt with Time Warner will leave the combined company saddled with $175 billion in debt — a massive amount of money that may not be financed at near zero percent interest for long, if the Federal Reserve boosts interest rates. Moody’s has put AT&T’s credit ratings up for review for a possible downgrade as a result.

Both Republicans and Democrats reacted with unease about the prospect of creating another Comcast/NBCUniversal-sized entertainment company. Almost all were skeptical about the benefits to consumers. AT&T’s competitors seemed even more chilled, fearing AT&T’s control of both the content and the means to distribute it would give the juggernaut an unfair advantage. For example, AT&T could give itself a discount to carry Time Warner programming on U-verse and DirecTV that would be unavailable to competitors. It might also take a harder line on competing providers at contract renewal time.

Some regulators and politicians believe bigger has not proved better for consumers in the telecom space, particularly after seeing the results of Comcast merging with NBCUniversal. Critics contend Comcast has never taken the deal’s approving consent decree seriously, and have dragged their feet on adhering to the deal’s many conditions. Consumers have gotten almost nothing from the merger except higher cable bills.

Analysts predict AT&T will do everything possible to minimize regulator review of its deal. The first step will be to eliminate the FCC from the deal review process, which is a very real possibility considering Time Warner and AT&T have few deal-related FCC-issued licenses beyond a single independent television station in Georgia owned by Time Warner. That station could be sold or transferred to a separate entity within months. The deal will get a mandatory review by the Justice Department, looking for evidence of antitrust. AT&T plans to claim the merger combines two entirely different companies and won’t have any implications on competition.

Critics of the deal think otherwise, pointing to the potential of favoring AT&T over cable companies with lower programming rates. Net Neutrality proponents are also concerned about AT&T’s practice of zero rating its own content, which gives AT&T a competitive advantage in the wireless space.

Sources close to the Clinton campaign told Politico three names are emerging as potential FCC nominees in a presumed Clinton Administration, and all three are close friends of Bill and Hillary Clinton, all have spent time traveling through the revolving door of D.C. politics and the private sector or lobbying, and one served as a FCC commissioner before under Bill Clinton’s presidency.

All three are classic D.C. Establishment types, so there should be no surprises or rebellion from within the Democratic ranks.

Ness

Susan Ness: A former FCC commissioner, Ness today serves as a top Clinton fundraiser. Prior to her FCC appointment, Ness was a senior lender to communications companies as a group head and vice president of a regional financial institution. She served as Assistant Counsel to the Committee on Banking, Currency and Housing of the U.S. House of Representatives, and she founded and directed the Judicial Appointments Project of the National Women’s Political Caucus. Ness is a member of the National Association of Regulatory Utility Commissioners’ Committee on Communications, the Federal Communications Bar Association, and Leadership Washington (Class of 1988). Before she joined the FCC, she served in many civic leadership roles, including chair of the Montgomery County, Maryland, Charter Review Commission; vice chair of the Montgomery County Task Force on Community Access Television; and president of the Montgomery County Commission for Women.

In her favor, Ness didn’t end her service with the FCC and become a paid lobbyist, preferring to spend her years outside of public service in the private sector. However, she was a director for Adelphia, America’s first criminally convicted cable company (the principal owners, the Rigas family, went to prison for a variety of white-collar crimes). Ness was also an apologist for the disastrous telecom deregulation policies of the Clinton Administration, which backfired and created mass corporate consolidation and higher bills for consumers.

In a speech in January 1999, Ness promised good times were ahead because of Clinton Administration’s support for deregulation:

It takes good business planning, raising capital, provisioning, and investment before the fruits of competition can be harvested. And sometimes companies succeed and sometimes they fail. That’s the marketplace at work.

That’s why I’ve been somewhat surprised at the impatience with which some pundits have viewed the level of local competition under the ’96 Act.

On the first anniversary, folks were asking “where’s the competition?” I observed then that this was like piling the family into the car for a long trip, and, before you’ve reached the end of the driveway, there is a plaintive voice from the back seat, “Are we there yet?”

No, we’re not there yet — even now, two years further into the journey.

Kornbluh

Unfortunately for Americans, we’re still not there more than 15 years later. The marketplace and regulatory agencies have rigged the game into a comfortable duopoly where competition benefits exist primarily for new customers getting a sign-up promotion. Once expired, high prices predominate. Ness promised competition. We got consolidation and more deregulation instead, and Americans are paying some of the highest broadband and wireless prices in the world as a result. We’re uncertain if she has learned her lesson.

Karen Kornbluh: Her middle initials should be “D.C.” because she’s been there for so long. Kornbluh is the Democratic Party establishment through and through, with a record of public service dating back to the 1980s. From 1991-1994, she was a legislative aide for Sen. John Kerry (D-Mass.) She spent two years at the Treasury Department, then spent three years as a Tech Fellow at the New America Foundation think tank. She served as a policy director for Barack Obama when he was a senator from Illinois and was appointed as ambassador to the OECD in 2009, which means she is at least aware of how poorly the U.S. compares in broadband speeds to the rest of the world. Kornbluh will not rock the boat as a FCC commissioner, but should be a reliable vote for all of a presumed President Clinton’s telecom initiatives.

Phil Verveer serves as a senior counselor to current FCC chairman Thomas Wheeler, which may offer some continuity for Chairman Wheeler’s policies under the Obama Administration in a presumed Clinton Administration. Verveer is a longtime friend of the Clintons. He also served as Deputy Assistant Secretary of State and US Coordinator for International Communications and Information Policy with Ambassadorial rank from 2009 to 2013.

Verveer

Verveer has practiced communications and antitrust law in the government and in private law firms for more than 40 years.  From 1969 to 1981, he practiced as a trial attorney in the Antitrust Division of the Department of Justice, as a supervisory attorney in the Bureau of Competition of the Federal Trade Commission, and as the Chief of the Cable Television Bureau, and the Common Carrier Bureau of the Federal Communications Commission.  Between 1973 and 1977, he served at the Antitrust Division’s first lead counsel in the investigation and prosecution of United States v. American Tel. & Tel. Co., the case that eventuated in the divestiture of the Bell System.  As a bureau Chief at the FCC, Verveer participated in a series of decisions that enabled increased competition in video and telephone services, introduced asymmetric telecommunications regulation, and limited regulation of information services. But he was also a telecom lobbyist or counsel for Willkie, Farr and Gallagher (1999-2005) and Jenner & Block (2006-2009).

With those three names now out in the public view, Big Telecom lobbyists are reportedly “coalescing around those perceived to be frontrunners for a commission spot,” reports Politico.

“Nearly everyone on the list is part of the Clinton campaign’s network of tech advisers, which helped draft the Democratic nominee’s tech policy platform,” Politico adds, which means it is likely what Secretary Clinton has promised in her campaign documents about future telecom policy will likely move forward under the stewardship of her potential appointees who helped write it.