Marcus

Even as some of the largest investment banks on Wall Street are assembling a $24 billion loan package to further Charter Communication’s next effort to acquire Time Warner Cable, CEO Robert Marcus has learned not to take his eyes off the day-to-day business of running the country’s second largest cable operator.

Marcus turned up late last week at Le Parker Meridien in New York to speak at the 2nd Annual MoffettNathanson Media & Communications Summit, largely an affair putting Wall Street investors together with top cable executives to learn about industry trends.

Immediately peppered with questions about the failed merger between Time Warner and Comcast, Marcus sought to turn the page on the deal that would have handed him an $80 million golden parachute.

“The horse is dead,” Marcus said in response to continued questions about the deal.

But Marcus did say he felt the deal was rejected for reasons that were never explained to him or the industry, which could have an impact on future cable mergers and acquisitions. Regulator-inspired uncertainty could make some companies think twice about pursuing the next big deal, but so far that does not seem to apply to Charter Communications — still hot on the trail for a deal with the much larger Time Warner Cable.

Marcus claims he understood Time Warner Cable’s image with customers was a real problem that needed to be addressed immediately after becoming the company’s new CEO in  January 2014.

“The residential business was where the work needed to be done,” said Marcus.

Reliability became the top priority for Marcus’ team.

“It trumped features and functionality,” Marcus said, noting that if its network performed as it should, that would result in fewer calls into its customer care centers and reduced “truck rolls” to customer homes, saving Time Warner Cable time and money and improving its image. Marcus claims those efforts paid off.

“It works, we’re not pixelating, and we don’t have [huge] outages,” Marcus said.

Under Marcus’ leadership, Time Warner has adopted a “non-sexy stuff” approach to the cable business, focusing on making sure its existing products work before jumping into new products. That may explain why Time Warner has traditionally been behind other operators introducing vast broadband speed increases, cloud-based set-top boxes with improved user interfaces, more TV Everywhere contract arrangements allowing Time Warner customers to access online video content from third-party cable network websites, and the largest on-demand video libraries.

Not much is likely to change for the time being. Marcus reiterated his plan for major network upgrades under his Time Warner Cable Maxx program remain on track to reach 75% of Time Warner Cable service areas by the end of 2016.

When Maxx upgrades are complete, customers are transitioned to an all-digital television platform and Standard broadband customers move from 15/1Mbps service to 50/5Mbps at no additional charge. Although the top speed for Time Warner Cable broadband is currently 300/20Mbps in Maxx markets like New York, Los Angeles, Austin and Kansas City, Marcus said he was ready to bring 1Gbps broadband to Time Warner Cable customers sometime in late 2016, after DOCSIS 3.1 equipment becomes available.

“As the market evolves to that place, we’ll make it available,” Marcus said.

Recent movement at the Federal Communications Commission to introduce additional oversight over the cable industry has not made much impact at Time Warner Cable, which plans business as usual.

“I live in a different world than Chairman Wheeler in terms of the competitive dynamic,” Marcus said. “We’re fighting it out everyday in the trenches to gain and keep High Speed Data subscribers. The idea we would pull back and not press any competitive advantages of product enhancements we’re capable of delivering, just feels counter-intuitive and bad business.”

The idea that policy changes in Washington would somehow impact the investment in and introduction of new and better services from Time Warner Cable was ridiculous to Marcus.

“I cannot translate that into holding back the product and I can’t imagine what the policy objective would be that would encourage holding back the product,” Marcus said.

The Cable Show (now known as INTX) is often used by the cable industry to announce and preview new products and services, and at this year’s convention in Chicago, Comcast CEO Brian Roberts used the occasion to introduce the company’s new DOCSIS 3.1 multi-purpose Home Gateway capable of delivering gigabit speeds over its existing hybrid fiber-coax network.

Apart from Comcast’s intentions to deliver 2Gbps broadband over a new fiber to the home network the company is planning for customers in near its local fiber backbone, the new Gigabit Home Gateway was designed by Comcast engineers in Philadelphia and vendors in Silicon Valley to work on Comcast’s existing coaxial cable network.

Comcast will first need to deploy the next generation standard for delivering broadband over cable networks – DOCSIS 3.1, which can combine several “channels” devoted to broadband service to create a super high-speed online experience. Comcast has spent the past several years moving analog TV channels to digital service, freeing up bandwidth it can devote to faster Internet speeds.

Although Comcast’s 2Gbps fiber service will be a limited offering, its 1Gbps cable broadband service should be available “to virtually all Xfinity customers once the DOCSIS 3.1 networking standard is deployed nationally,” according to Tony Werner, Comcast’s chief technology officer.

In addition to supporting gigabit Internet, the new gateway will support gigabit Wi-Fi, IP video, and integrate Comcast’s existing home security and automation services.

The device will go into production this year with plans to introduce it to consumers sometime in 2016. No pricing details were available.

Houston residents excited by this week’s launch of AT&T U-verse with GigaPower have been quickly disappointed after learning the service is available practically nowhere in Houston and likely won’t be for some time.

The upgrade, offering up to 1,000/1,000Mbps broadband, was launched Monday with an announcement “select residents” in Bellaire, Pasadena, and northwest Harris County, Tex. will be the first to get the service.

Bellaire, known as the “City of Homes,” is a primarily residential community of 6,000 houses surrounded by the city of Houston. AT&T’s Houston headquarters are located in Bellaire, and the company maintains good relations with the local government. Larry Evans, AT&T’s vice president and general manager for South Texas told the Houston Chronicle that is a key factor for getting GigaPower upgrades. Evans said Bellaire, Pasadena and northwest Harris County have been very cooperative in clearing red tape and letting AT&T install fiber infrastructure for GigaPower with a minimum of fuss from permitting and zoning authorities.

Bellaire is a mostly residential community surrounded by Houston.

The larger city of Pasadena, with a population approaching 150,000 is another case where close cooperation with the city government made the difference. The city council contracts with AT&T to supply telecom services to the local government as well.

As in other AT&T service areas, actual availability of GigaPower is extremely limited. A search of prospective addresses in Pasadena found service available in only a few neighborhoods. In Bellaire, only a few streets now qualify for service. We were unable to find a single address in “northwest Harris County” that qualified for U-verse with GigaPower, but AT&T claims that “surrounding communities” would also have access, without disclosing the names of any of them. That makes it extremely difficult to accurately use AT&T’s service qualification tool to verify coverage.

Jim Cale found he pre-qualified on the website for U-verse with GigaPower service, but his hopes were dashed when a representative informed him his order was canceled because, in fact, GigaPower was not actually available on his street.

“My neighborhood was wired with fiber to the home when it [was built] a few years ago,” shared “Ed From Texas.” “AT&T is the provider and that was one of its advertised features. Who do I need to harass at AT&T to get Gigapower turned on for us?”

Gene R. is in a similar predicament:

“I can’t even get U-Verse and I am two blocks from loop 610,” he said. “AT&T says they don’t know when it will be available. I suspect…never.”

Richard dumped AT&T in the past for not meeting the speeds U-verse advertises, but is hopeful an all-fiber network might finally bring better speeds.

“I dropped AT&T’s MaxPlus because I never got anything approaching the 18Mbps speed I was being billed for,” he wrote.

AT&T will sell several U-verse with GigaPower plans in Houston. The packages below include waivers of equipment, installation and activation fees, if you agree to allow AT&T to monitor your browsing activity:

• U-verse High Speed Internet Premier: Internet speeds up to 1Gbps starting as low as $110 a month, or speeds at 300Mbps as low as $80 a month, with a one year price guarantee;
• U-verse High Speed Internet Premier + TV: Internet speeds up to 1Gbps and qualifying TV service starting as low as $150 a month, or speeds at 300Mbps and qualifying TV service as low as $120 a month, with a one year price guarantee;
• U-verse High Speed Internet Premier + TV + Voice: Internet speeds up to 1Gbps with qualifying TV service and Unlimited U-verse Voice starting as low as $180 a month, or speeds at 300Mbps with qualifying TV service and Unlimited U-verse Voice as low as $150 a month, with a two-year price guarantee.

These offers all include a provision in the service agreement allowing AT&T to spy on your browsing habits ostensibly to supply “targeted advertising.” But the terms and conditions do not limit AT&T from broadening its monitoring of your usage for other purposes. If you opt out, the price goes up to $109 monthly for 300Mbps service and $139 monthly for 1Gbps broadband and you will pay installation and activation fees.

AT&T says the monitoring is done purely to power its targeted ads. Some examples:

• If you search for concert tickets, you may receive offers and ads related to restaurants near the concert venue;
• After you browse hotels in Miami, you may be offered discounts for rental cars there;
• If you search for a car online, which may include window shade, you may receive an email notifying you of a local dealership’s sale;
• If you are exploring a new home appliance at one retailer, you may be presented with similar appliance options from other retailers.

“You might receive these offers or ads online, via email or through direct mail,” says AT&T on their Internet Preferences page.

The “price guarantee” provision is actually a contract obligating you to stay with U-verse for 1-2 years or face an early termination fee of $180. AT&T also warns your Internet speeds will deteriorate “if two or more HD shows [are] viewed at same time.” Usage caps apply, as usual. GigaPower customers signed up for the fastest speeds receive 1 terabyte, or 1,000 gigabytes, of data per month. Customers will get warnings if they exceed the cap twice. The third time, and going forward after that, they’ll pay a $10 fee for each 50GB over the cap.

Prices are in Singapore dollars.

One gigabit broadband is apparently too slow for Singapore consumers, so one ISP has introduced the world’s fastest home broadband plan, bundling 2000Mbps Internet access with an Android-based video streaming box and residential phone service for around $65US a month with a 2-year commitment, about the same price Comcast charges for 50Mbps broadband alone.

Singapore’s ViewQwest is the first provider outside of Japan offering residential speeds higher than 1000Mbps, despite the fact few home users have computers equipped to handle the service at its fastest speed.

“We want to offer them the fastest residential Internet connectivity available in the world,” said CEO Vignesa Moorthy. “Our current 1Gbps customers can re-contract for 2Gbps for free. This, coupled with the usual high rate of sign-ups that occurs during events such as IT Show, makes us very confident that we’ll be able to sustain this plan.”

Usage caps, speed throttles, and expensive Internet plans common in the United States and Canada are not an issue in Singapore as fierce competition has created a consumer-friendly price war among the city’s competing fiber to the home providers.

One challenge users will discover is finding a router capable of supporting 2000Mbps speeds. For now, the ISP recommends a $600 enterprise-grade network card if a customer insists on getting 2Gbps on a single machine. But ViewQwest expects most customers will aggregate their 2Gbps connection through multiple consumer-grade routers to give each family member concurrent gigabit speeds that will sustain at least 1Gbps for each user.

Customers will also discover their speeds will only be as fast as the connection to the website they want to reach. For now, that means international content traveling across undersea cables or distant servers will arrive at considerably slower speeds, but as the Internet grows faster, ViewQwest customers won’t have to wait for their ISP to catch up.

Notice the word “may”

AT&T has promised an undisclosed number of customers in Chicago, Ill., and Atlanta, Decatur, and Newnan, Ga., will eventually get GigaPower upgrades to AT&T’s U-verse service, after moving customers to an all-fiber network that will deliver up to 1Gbps service.

“As a city that prides itself on creating a favorable environment for investment and innovation, I am happy to see AT&T bringing its ultra-high speed fiber network to the City of Atlanta,” said Atlanta Mayor Kasim Reed. “This is a great opportunity for our residents, businesses and visitors, who all stand to benefit from this new service. The City of Atlanta is one of the fastest growing tech hubs in the United States and a hotbed for entrepreneurial activity.  U-verse with AT&T GigaPower service will complement this engine of economic growth and help pave the way for future opportunities.”

But before the mayor gets too excited, he should consider AT&T’s track record for GigaPower upgrades in other cities where the service is offered. Customers complain the gigabit upgrade is difficult to get in single family homes, with most of the upgrades targeting multi-dwelling units like large condos or apartment blocks or new housing developments.

Customers in Austin complain to Stop the Cap! AT&T GigaPower looks more like a demonstration project than a serious effort at expanding super fast fiber broadband. Although pockets of service are established in some upscale areas, nobody at AT&T is willing to answer customers’ questions about exactly when service will arrive in unserved neighborhoods. Technicians are privately telling readers it will take more than a year for serious expansion efforts to begin across Austin.

While AT&T drags its feet on fiber expansion, it has no trouble hurrying out press releases suggesting cities including Atlanta, Augusta, Charlotte, Chicago, Cleveland, Fort Worth, Fort Lauderdale, Greensboro, Houston, Jacksonville, Kansas City, Los Angeles, Miami, Nashville, Oakland, Orlando, San Antonio, San Diego, St. Louis, San Francisco, and San Jose will soon see GigaPower in their areas. But AT&T isn’t putting much money where its mouth is, failing to significantly increase capital spending to upgrade the U-verse network.

In fact, AT&T executives have repeatedly reassured investors the company has no plans for a significant uptick in wireline capital spending — exactly what would be required to complete the gigabit expansion effort AT&T promises in press releases. In contrast, AT&T’s 2012 $14 billion Project Velocity IP (or VIP) was the company’s most visible and ambitious network build out initiative in wired service since the introduction of U-verse. Project VIP delivered a clear expansion of U-verse into new areas and brought new fiber connections to buildings, many that are now in use to offer GigaPower service in Austin.

Fiber broadband expansion is not cheap, and even after AT&T committed $14 billion to its expansion effort two years ago, the results are modest for U-verse because a considerable portion of the funds spent were invested in AT&T’s wireless network instead — always a priority:

Chart courtesy: FierceTelecom

Data compiled from publicly released company information.

Reflecting on the numbers, it would take an investment at least equal, if not greater, than AT&T spent on Project VIP for AT&T to significantly upgrade the communities it claims will soon have access to GigaPower. Instead, it is more likely AT&T will introduce a handful of gigabit show projects and then incrementally upgrade selected neighborhoods over the next 3-5 years.

Existing competition makes all the difference as to what customers will pay for gigabit service from AT&T, assuming they can buy it at any price. As Google Fiber tears up the streets of Austin, it is clear Google will deliver real competition in that city, forcing AT&T to price its gigabit service at $70 a month (for customers willing to have their online activities tracked by AT&T). In nearby Dallas, where competition isn’t as robust, customers will have to pay at least $120 a month for the service.