CBS has blocked Time Warner Cable and Bright House Networks’ broadband customers from watching CBS online video in a retaliatory move against Time Warner Cable’s decision to pull CBS-owned programming off the lineup because of a contract dispute.

Broadband customers of both cable companies (Bright House relies on Time Warner Cable to negotiate its programming carriage agreements) started losing access to CBS streamed content late Friday, now replaced with a message blaming Time Warner Cable for the loss. Earthlink customers using either cable operator are collateral damage — Earthlink is effectively reselling the others’ cable broadband services.

“If Time Warner Cable is a customer’s Internet Service Provider, then their access to CBS full episode content via online and mobile platforms has been suspended as a result of Time Warner Cable’s decision to drop CBS and Showtime,” said a CBS spokesperson. “As soon as CBS is restored on cable systems in affected markets, that content will be accessible again.”

In place of the programming, cable customers get to see a brief attack ad criticizing Time Warner for yanking CBS-owned channels and networks, despite the fact CBS authorized the companies to keep the channels up and running until the dispute can be worked out.

Time Warner Cable shot back with their own rebuttal.

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Time Warner Cable claims it does not want a war over programming costs in its latest ad regarding the blackout of CBS programming, which now also affects the cable company’s broadband customers. (1 minute)

“CBS has shown utter lack of regard for consumers by blocking Time Warner Cable’s customers, including our high-speed data only customers, from accessing their shows on their free website,” the company said in a statement. “CBS enjoys the privilege of using public owned airwaves to deliver their programming – they should not be allowed to abuse that privilege.”

Customers well outside New York, Dallas, and Los Angeles discovered several CBS-owned cable channels were missing, even though they are not served by a CBS-owned local affiliate. The most obvious — Showtime/The Movie Channel came during the middle of the latest season of Dexter.

New York City residents can sat least keep watching WCBS by signing up for Aereo, which streams local stations over the Internet. A 30-day free trial is available. Getting programming in other cities is going to be much tougher. Some predict hardcore viewers will just look for pirated copies of their favorite shows.

CBS said no further negotiation took place over the weekend. Some industry analysts predict the impasse could run for weeks, even potentially until the start of football season — considered a line of PR destruction neither company is willing to cross.

Golf is not as critical, apparently. The PGA Championship taking place in Rochester, N.Y., this weekend is likely going to get a smaller viewing audience because of the blocked programming.

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The blackout of CBS programming by Time Warner Cable enters its third day with no light at the end of the tunnel, suggests this Bloomberg News report. (3 minutes)

[flv width=”640″ height=”380″]http://www.phillipdampier.com/video/Bloomberg Day Three of CBS Blackout Angers Audiences 8-5-13.flv[/flv]

This is not the first time broadcasters and cable operators have cut viewers off, sometimes for more than a week. Bloomberg News reports the soft deadline for Time Warner and CBS to sort out their differences is the start of the fall football season. Sources say Time Warner now pays $1 a month for CBS, but the network now wants $2 a month. (3 minutes)

Time Warner Cable admitted this morning extracting more revenue from existing customers was more important than attracting new ones, and long time subscribers responded by canceling service in above average numbers.

In a conference call largely hosted by incoming CEO Robert Marcus, a number of Wall Street analysts listened to Marcus’ vision for Time Warner under his forthcoming leadership. Marcus offered competing, potentially incompatible visions in his defense of a lackluster quarter: charge existing customers higher prices for service to boost average revenue per subscriber (ARPU) while also improving the customer-company relationship.

For most of 2013, Time Warner has been aggressively moving away from heavily discounted promotional offers to attract customers. Both outgoing CEO Glenn Britt and Marcus have repeatedly stressed heavy discounting of service during the past two years is now over, and the company is looking forward to resetting prices higher when the promotions end later this year.

It is part of the company’s plan to “drive better performance in the residential business.” An unfortunate side effect is that the company continues to lose video and phone customers and its broadband service growth has been so slow, one analyst called it “anemic.” The company’s quarterly results show Time Warner added only 8,000 new broadband customers in the last three months. The company still earned $1.42 billion from broadband sales alone over the last three months, mostly because of rising broadband bills.

Courtesy: Jacobson

Offsetting that growth, TWC lost 191,000 residential video subscribers, leaving it with about 11.9 million video customers. At least 56,000 customers also pulled the plug on Time Warner Cable telephone service.

“As we discussed before, this [new pricing] approach represents a conscious decision to pursue subscribers with higher ARPU, higher profit and lower churn even if that means fewer connects,” said Marcus as he defended the results. “So it’s not a surprise that as in the first quarter of 2013, subscriber net adds were down in the second quarter on a year-over-year basis.”

As customers deal with increasing prices for cable television and broadband service and the irritation of modem rental fees, many are cutting back on their packages to keep their bill stable.

Marcus admitted customer sign ups of triple play — phone, broadband, and cable TV service — were way down in the second quarter and a lot fewer single and double-play customers were convinced to upgrade. The company’s promotional offers have come with a higher price and slower broadband service, often only 3Mbps.

In a number of markets, especially in the midwest, customers are shopping around for other providers. They are finding AT&T U-verse to be a formidable competitor.

“Throughout the quarter, U-verse was pretty aggressive with a beacon price of $79 for their triple play and $49 for their double play,” said Marcus. “I would characterize those as aggressive promotional prices, and they had an impact. I would say that the impact was more pronounced as the quarter wore on. We’ve now responded to that in the market, and I expect that our relative performance should improve there.”

But for much of the rest of the country where competition is less robust, Time Warner intends to continue to hold the line on pricing and resist discounting even if it means subscribers threaten to cancel.

Time Warner Cable has gotten itself ready for an onslaught of unhappy customers, assigning nearly 1,000 employees to staff four national customer retention centers dedicated to trying to persuade customers not to leave. But these specially trained representatives have a dual mission — keep customers with Time Warner Cable, but don’t give away the store doing so.

Stock buybacks and shareholder dividends were a major priority for Time Warner Cable’s cash on hand.

“Not only are our reps saving more customers, they are also preserving more ARPU among the customers they save,” said Marcus. “As promotional roll-offs peak in the second half of 2013, we expect that our new retention capabilities will drive better revenue growth.”

In the broadband market, Time Warner changed little in the second quarter except to raise prices on service and equipment. Marcus could only point to the addition of 3,500 new Wi-Fi hotspots, mostly in New York City, as its signature achievement over the past three months.

On the residential side, broadband revenues were up 12.5%, but most of that growth came from a combination of the modem lease fee, an increase in the number of 30/5 and 50/5Mbps customers and a successful Turbo promotion.

Results for video and voice were considerably worse. Revenues were down about 4%.

But the company managed to report its highest ARPU ever, with customers now paying an average of more than $105 a month for Time Warner service. Most of that increase came from rising broadband prices.

Time Warner Cable has also been preoccupied with spending excess cash on hand to buy back its own stock, which creates shareholder value. Time Warner expects to spend at least $2.5 billion on stock buybacks this year. Shareholders also received $829 million in dividends (113% of Time Warner’s free cash flow).

“We repurchased 6.6 million shares for $638 million, and through July, we have repurchased approximately 83 million shares at an average cost of around $78.50 per share since we began the program in November of 2010,” reported chief financial officer Arthur T. Minson.

Time Warner Cable’s Board of Directors recently approved increasing spending up to $4 billion on stock buybacks.

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WRGB in Albany reports Time Warner Cable customers are angry about another price hike on the company’s modem lease fee effective Aug. 18. WRGB recommends customers buy their own modems to avoid the fee. Time Warner Cable’s Glenn Britt admitted earlier the fee is really just a hidden rate increase. (3 minutes)

Although cable and phone companies love to declare themselves part of a fiercely competitive telecommunications marketplace, it is increasingly clear that is more fairy tale than reality, with each staking out their respective market niches to live financially comfortable ever-after.

In the last week, Time Warner Cable managed to alienate its broadband customers announcing another rate increase and a near-doubling of the modem rental fee the company only introduced as its newest money-maker last fall. What used to cost $3.95 a month will be $5.99 by August.

The news of the “price adjustment” went over like a lead balloon for customers in Albany, N.Y., many who just endured an 18-hour service outage the day before, wiping out phone and Internet service.

“They already get almost $60 a month from me for Internet service that cuts out for almost an entire day and now they want more?” asked Albany-area customer Randy Dexter. “If Verizon FiOS was available here, I’d toss Time Warner out of my house for good.”

Alas, the broadband magic sparkle ponies have not brought Dexter or millions of other New Yorkers the top-rated fiber optic network Verizon stopped expanding several years ago. The Wall Street dragons complained about the cost of stringing fiber. Competition, it seems, is bad for business.

In fact, Verizon Wireless and Time Warner Cable are now best friends. Verizon Wireless customers can get a fine deal — not on Verizon’s own FiOS service — but on Time Warner’s cable TV. Time Warner Cable originally thought about getting into the wireless phone business, but it was too expensive. It invites customers to sign up for Verizon Wireless service instead.

This is hardly a “War of the Roses” relationship either. Wall Street teaches that price wars are expensive and competitive shouting matches do not represent a win-win scenario for companies and their shareholders. The two companies get along fine where Verizon has virtually given up on DSL. Time Warner Cable actually faces more competition from AT&T’s U-verse, which is not saying much. The obvious conclusion: unless you happen to live in a FiOS service area, the best deals and fastest broadband speeds are not for you.

Further upstate in the Rochester-Finger Lakes Region, Time Warner Cable faces an even smaller threat from Frontier Communications. It’s a market share battle akin to United States Cable fighting a war against Uzbekistan Telephone. Frontier’s network in upstate New York is rich in copper and very low in fiber. Frontier has lost landline customers for years and until very recently its broadband DSL offerings have been so unattractive, they are a marketplace afterthought.

Rochester television reporter Rachel Barnhart surveyed the situation on her blog:

Think about this fact: Time Warner, which raked in more than $21 billion last year, has 700,000 subscribers in the Buffalo and Rochester markets. I’m not sure how many of those are businesses. But the Western New York market has 875,000 households. That’s an astounding market penetration. Does this mean Time Warner is the best choice or the least worse option?

That means Time Warner Cable has an 80 percent market share. Actually, it is probably higher because that total number of households includes those who either don’t want, need, or can’t afford broadband service. Some may also rely on limited wireless broadband services from Clearwire or one of the large cell phone companies.

In light of cable’s broadband successes, it is no surprise Time Warner is able to set prices and raise them at will. Barnhart, who has broadband-only service, is currently paying Time Warner $37.99 a month for “Lite” service, since reclassified as 1/1Mbps. That does not include the modem rental fee or the forthcoming $3 rate hike. Taken together, “Lite” Internet is getting pricey in western New York at $47 a month.

Retiring CEO Glenn Britt believes there is still money yet to be milked out of subscribers. In addition to believing cable modem rental fees are a growth industry, Britt also wants customers to begin thinking about “the usage component” of broadband service. That is code language for consumption-based billing — a system that imposes an arbitrary usage limit on customers, usually at current pricing levels, with steep fees for exceeding that allowance.

Rochester remains a happy hunting ground for Internet Overcharging schemes because the only practical, alternative broadband supplier is Frontier Communications, which Time Warner Cable these days dismisses as an afterthought (remember that 80 percent market share). Without a strong competitor, Time Warner has no problem experimenting with new “usage”-priced tiers.

Time Warner persists with its usage priced plans, despite the fact customers overwhelmingly have told the company they don’t want them. Time Warner’s current discount offer — $5 off any broadband tier if you keep usage under 5GB a month, has been a complete marketing failure. Despite that, Time Warner is back with a slightly better offer — $8 off that 5GB usage tier and adding a new 30GB usage limited option in the Rochester market. We have since learned customers signing up for that 30GB limit will get $5 off their broadband service.

In nearby Ohio, the average broadband user already exceeds Time Warner’s 30GB pittance allowance, using 52GB a month. Under both plans, customers who exceed their allowance are charged $1 per GB, with overlimit fees currently not to exceed $25 per month. That 30GB plan would end up costing customers an extra $22 a month above the regular, unlimited plan. So much for the $5 savings.

Unfortunately, as long as Time Warner has an 80 percent market share, the same mentality that makes ever-rising modem rental fees worthwhile might also one day give the cable company courage to remove the word “optional” from those usage limited plans. With usage nearly doubling every year, Time Warner might see consumption billing as its maximum moneymaker.

In 2009, Time Warner valued unlimited-use Internet at $150 as month, which is what they planned to charge before pitchfork and torch-wielding customers turned up outside their offices.

Considering the company already earns 95 percent gross margin on broadband service before the latest round of price increases, one has to ask exactly when the company will be satisfied it is earning enough from broadband service. I fear the answer will be “never,” which is why it is imperative that robust competition exist in the broadband market to keep prices in check.

Unfortunately, as long as Wall Street and providers decide competition is too hard and too unprofitable, the price increases will continue.

Frontier’s headquarters in Rochester, N.Y.

Tens of thousands of Frontier Communications customers have dealt with the loss of their broadband and phone service in five states because of cable damage, copper theft, and overselling broadband service with insufficient capacity.

Upstate New York

Officials in Oswego County report Frontier phone and broadband service was disrupted Monday for customers in several central New York communities. At least 3,400 customers were unable to dial outside of their home exchanges in Fairhaven, Hannibal, Cato and Lysander. Frontier said a cable owned and maintained by Verizon was responsible, and they were unaware when Verizon would complete repairs.

Tennessee and Illinois

Frontier Communications acknowledged a “major outage” was affecting customers in both Tennessee and Illinois today. As of late this afternoon, Frontier said it was still attempting to restore service to both states’ customers.

Washington

Frontier Communications has reported copper lines stolen in Snohomish, Skykomish and Granite Falls, causing temporary outages for thousands of customers throughout north King and Snohomish counties. It’s the tenth copper wire theft affecting Frontier so far this year.

West Virginia

Ongoing problems in the Panhandle region of West Virginia have left Frontier broadband customers without service, sometimes for days. Customers have been told copper thefts were responsible for outages in mid-July, but some Frontier technicians have also told customers that slow speeds that persist month after month are a result of too many customers trying to use Frontier broadband at the same time. Other customers in the Shepherdstown area report persistent, ongoing problems with broadband outages as well.

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KCPQ in Seattle reports Frontier has been a repeated victim of copper thefts in Washington state. At least 10 instances of copper theft have left thousands of customers without service until the company can string new cable.  (3 minutes)

Cox Communications has found a new way to target cord-cutters and sell television service to its broadband-only customers reluctant to sign up for traditional cable television.

flareWatch is a new IPTV service delivered over Cox’s broadband service. For $34.99 a month, customers participating in a market trial in Orange County, Calif. receive 97 channels.  About one-third are local over the air stations from the Los Angeles area, one-third top cable networks, and the rest a mixture of ethnic, home shopping, and public service networks. Expensive sports channels like ESPN are included, but most secondary cable networks typically found only on digital tiers are not. Premium movie channels like HBO are also not available.

The service is powered by Fanhattan’s IPTV set-top box. Cox offers up to three “Fan TV” devices to customers for $99.99 each.

flareWatch’s channel lineup in Orange County, Calif.

The service is only sold to customers with Preferred tier (or higher) broadband service and is being marketed to customers who have already turned down Cox cable television.

What Cox reserves for the fine print is an admission the use of the service counts against your monthly broadband usage allowance. Preferred customers are now capped at 250GB of usage per month. While occasional viewing may not put many customers over Cox’s usage caps, forgetting to switch off the Fan TV set-top box(es) when done watching certainly might. flareWatch also includes another usage eater — a cloud-based DVR service. Cox does not strictly enforce its usage caps and does not currently impose any overlimit fees, but could do so in the future.

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Cox’s brief promotional video introducing flareWatch. (1 minute)

Cool… usage capped.

Cox spokesman Todd Smith described the introduction of flareWatch as a “small trial,” and that “customer feedback will determine if we proceed with future plans.”

The service is clearly intended to target young adults that are turning down traditional cable television packages. Most of those are avid broadband subscribers, so introducing a “lite” cable television package could be a way Cox can boost the average revenue received from this type of customer. It may also serve as a retention tool when customers call to disconnect cable television service.

The MSO is selling flareWatch at five Cox Solutions stores in Irvine, Lake Forest, Rancho Santa Margarita, and Laguna Niguel.

Customers (and those who might be) can share their thoughts with Cox about flareWatch by e-mailing [email protected] and/or [email protected]. Stop the Cap! encourages readers to tell Cox to ditch its usage cap, and point out the current cap on your Cox broadband usage is a great reason not to even consider the service.

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The Verge got a closer look at the technology powering flareWatch back in May. Fan TV could be among the first set-top boxes to achieve “cool” status. Unfortunately, technical innovation collides with old school cable company usage caps, which might deter a lot of Cox’s broadband customers from using the service.  (4 minutes)