Comcast told the New York Public Service Commission that the overwhelming majority of the substantive comments submitted to the regulator “express a strong desire and enthusiasm for the improved and expanded voice, data, video, and broadband services” that the merger of Comcast and Time Warner Cable will bring to the state.

“Given these many concrete benefits, and the lack of any harm to competition or consumers, it should come as no surprise that the overwhelming majority of the substantive comments (approximately 110 out of a total of about 140 substantive comments) filed in this proceeding support Commission approval of the transaction,” Comcast wrote in its latest submission.[1]

Comcast’s “new math” applies a subjective (and undisclosed) standard about what constitutes “substantive,” but in the end the cable company has urged the Commission to disregard the sentiments of more than 2,700 New York State residents who have filed comments in strong opposition to the merger because their remarks simply fell beneath Comcast’s standards.

“The minority of organizations and individuals who filed substantive comments opposing the transaction largely ignore the significant public interest benefits of the transaction,” writes Comcast. “Instead, these detractors raise issues that are not relevant to the transaction and are factually inaccurate and speculative – such as unfounded concerns about Comcast’s broadband management practices, misplaced criticisms of Internet Essentials, and general fears that ‘big is bad.’ None of these commenters identify any reasonable basis to reject or condition the Joint Petition.”

Comcast did not apply the same rigorous standards of ‘substantiveness’ to comments sent by its supporters, who often used what New York Assemblyman Joe Morelle admitted was a Comcast-supplied template ghost-written by the company itself.[2]

“Supporters of the transaction span a wide range of groups and individuals, including governmental officials (e.g., mayors, town supervisors, county commissioners, city councils, state legislators, and school superintendents); businesses and non-profits; state and local organizations focused on economic development; community service, youth and family, and diversity organizations; arts and education groups; and others,” writes Comcast.

But the company never disclosed the many financial ties between Comcast and its political and civic supporters. In fact, a large percentage of the “template” letters of support originated from politicians like Assemblyman Morelle, who recently received a $1,000 check from Comcast[3] and Rochester city councilman Adam McFadden, whose group claims to receive $50,000 annually from Comcast.[4] [5]

In fact, it is hard not to find financial connections between Comcast’s supporters and the cable company itself. A random sampling uncovers multiple instances of Comcast contributions that were followed by letters of support for its merger:

The Urban League has received at least $12 million in in-kind contributions from Comcast since 2007, in addition to direct financial contributions to local chapters around Comcast’s service area.[6] In just one example Stephen Thomas, Comcast’s area vice president, who also serves on the Chicago chapter’s board of directors, presented the organization with a check for $40,000.[7] Just a few months later, Andrea L. Zopp, president of the Chicago Urban League, wrote to urge the FCC to approve Comcast’s merger deal.[8]

“Comcast is a strong supporter of the Urban League movement throughout the country. … I sincerely ask that you approve this transaction so that the Urban Leaguers and everyone else can benefit,” Zopp wrote.

Various chapters of the Boys and Girls Club also submitted glowing letters in favor of the merger. Comcast has partnered with local Boys & Girls Clubs since 2000, providing more than $68 million in cash and in-kind contributions. But no chapter was willing to openly admit Comcast asked them to share their views with New York regulators and only a few disclosed the financial ties the organization has with Comcast. The Boys and Girls Club has been a very loyal supporter of whatever Comcast has on its corporate agenda. Chapters submitted letters urging regulators to approve the Comcast-NBC merger in 2010 as well.[9]

Another strong supporter Comcast quotes from in its filing is the National Black Chamber of Commerce. But they don’t mention Comcast is a corporate sponsor of the group.[10]

Comcast also called criticism of its Internet Essentials discount Internet program “inaccurate and unavailing,” despite the fact the company’s own senior vice president David Cohen admitted the program was stalled to use as a political chip to win approval of its merger with NBCUniversal.[11]

Comcast also falsely claims it is the only Internet discount program for the poor of its kind.

“[Critics] simply advocate a different broadband adoption program – one that no company has ever implemented, that has never been attempted or even analyzed, and that may not be equally sustainable or popular or easy to publicize,” Comcast wrote. “Comcast is the only company to offer a program of this kind, and it has continually and voluntarily expanded the scope, breadth, and eligibility for and benefits of the program.”

In fact, it may have escaped Comcast’s attention that Google has provided residents in their fiber service areas with free Internet service with absolutely no income qualification or needs test, after paying a “construction fee” ranging from $30 in Provo, Utah [12] to $300 in Kansas City.[13] Residents in the latter community can break the somewhat steep construction fee into 12 payments of $25 each and have a guarantee of free service for up to seven years. Over the course of both programs, Google offers a more compelling and less expensive offer without onerous qualification requirements.

Yr    Google Fiber Cost  Comcast Internet Essentials Cost (@$9.95/mo)

1          $300                            $119.40
2          $0                                $119.40
3          $0                                $119.40
4          $0                                $119.40
5          $0                                $119.40
6          $0                                $119.40
7          $0                                $119.40

Over the course of seven years, a Google Fiber customer selecting discounted Internet would pay $300. A Comcast customer would pay $835.80 – a difference of $535.80.

While Google Fiber’s service area is very limited, it does offer an evidence-based challenge to Comcast’s inaccurate claim that its Internet Essentials program is unprecedented and represents the best solution for New York. A well-designed program designed to help New Yorkers will sell itself far better than the complicated, restrictive, and revenue-protection-oriented Internet Essentials, and its lack of penetration in long-standing Comcast service areas speaks for itself.

The California Emerging Technologies Fund also found serious problems with Internet Essentials from top to bottom.[14]

“Comcast makes the sign-up process long and cumbersome,” CETF claimed.[15] “The application process often takes 2-3 months, far too long for customers who are skeptical about the product in the first place, and have other pressing demands on their budgets. The waiting period between the initial call to Comcast and the CIE [Comcast Internet Essentials] application arriving in the mail can stretch 8-12 weeks, if it comes at all. After submitting the application, another 2-4 weeks elapse before the equipment arrives. Many low-income residents do not have Social Security Numbers (SSNs) and are required to travel long distances to verify their identities because Comcast has closed many of its regional offices. Recently, some potential subscribers with SSNs were rejected over the phone and told they had to visit a Comcast office. Comcast has a pilot effort in Florida that should be expanded to allow customers to fax or e-mail photocopied IDs as proof of identification.”

CETF also found widespread violations of Comcast’s own program rules when the cable company conducted credit checks on customers, which can reduce a customer’s already challenged FICO score with a credit inquiry on their file.

“Comcast conducts credit checks for some customers, contrary to CIE rules,” the CETF filing said. “Dozens of clients are receiving letters from Comcast saying that they have failed a credit check. Comcast specifically states and advertises no credit check is needed for CIE. This has repercussions beyond obtaining broadband service. The act of performing a credit check can negatively impact the consumer’s credit worthiness. Initially, some CIE service representatives told customers they could pay $150 deposit to avoid a credit check, also contrary to program rules.”

Customers have also been redirected to Comcast sales call centers, where they receive aggressive sales pitches for higher-cost products and services.

Comcast’s celebration of its commitment to minority television programming does not mention the expansion of minority programming was a condition of the FCC’s approval of the Comcast-NBCUniversal merger.

Subscribers got less than compelling programming and more rate increases to pay for it.

National Public Radio noted Comcast’s new minority channels are not exactly drawing significant audiences[16]:

Out of the gate, well, first was Baby First America — for bilingual infants aged 0 to 3.

ASPiRE, a channel focused on African-Americans, is mostly reruns and talk shows. Writer Anita Wilson Pringle called the network’s programming “crap.”

Next came Aspire, a family-oriented network from ex-basketball star and entertainment impresario Magic Johnson. Its lineup includes reruns of The Cosby Show plus even older fare: Julia, Soul Train and The Flip Wilson Show.

Writer Anita Wilson Pringle, for one, is no fan of that lineup of TV retreads.

“He promised innovative, new fresh ideas, new fresh programming, and it’s not,” she says.

Pringle is upset that Aspire’s managers were merely reshuffled from the old Gospel Music Channel. And she says the people Aspire is supposed to serve — African Americans — don’t exactly need more reruns or talk shows.

“It’s crap, if you really want to know the truth,” she says. “But my thing is, they did this to break that monopoly that Comcast was having on all these stations, and all that has happened is that Comcast has a stronger monopoly.”

Comcast’s commitment to improve energy efficiency is comparable to Time Warner Cable’s own commitments, providing no net gain for New York consumers.[17]

Comcast’s promised commitments to deliver better customer service have been made annually for several years with no significant improvement, as measured by independent customer satisfaction studies. Comcast relies on a quotation from a Wall Street analyst, Craig Moffett, who provides only anecdotal evidence of customer service improvements and has supported the merger’s potential benefits for shareholders.

Comcast’s assertion that the Commission should ignore or downplay bad customer service experiences of customers outside New York is made despite their own admission they serve only a tiny number of New York customers today. Is Comcast suggesting it would be inappropriate to consider their customer service record in comparable-sized cities across the country, some likely served by the same national and offshore customer care centers New Yorkers will reach when they have future problems with Comcast?

Comcast’s claims of plentiful broadband competition also do not exist in the real world for many New Yorkers. The Commission has faced such a large number of complaints about Verizon landline service, which also supports DSL, it launched a Verizon Service Quality Improvement Plan. When a Verizon landline becomes inoperable for several months, as customers in Inwood experienced earlier this year[18], their DSL broadband is also inoperable. For customers served by cable, but not reached by DSL service from telephone companies like Verizon, Windstream, and Frontier Communications, their only realistic home broadband connection comes from the local cable company. Wireless broadband, advocated as a competitive alternative by Comcast, does not penetrate well indoors in large sections of rural upstate New York and is constrained by very expensive service plans and severe limits on data usage, compelling customers to pay excessive fees to obtain service.

A family consuming 16GB of data per month (less than today’s average use per person) would face Internet bills of $170 a month with Verizon Wireless ($40/mo Monthly Line Access – Internet Device + 16GB Data Plan ($130/mo Monthly Account Access)[19] Wired broadband accounts from Time Warner Cable in comparison cost as little as $14.99 a month for unlimited usage.

Where DSL service is available, it is typically offered at speeds lower than a cable operator can offer. As an example, at our residence in the Town of Brighton, N.Y., Frontier Communications can only offer a maximum speed of 3.1Mbps from their DSL service because of our distance from the central office.

Comcast will have a near-total monopoly on all broadband service in excess of 15Mbps in current Time Warner Cable territories not serviced by Verizon FiOS. Verizon’s maximum speed DSL offer is for speeds “up to 15Mbps.”[20] Verizon FiOS expansion outside of already-committed territories has ended, and the majority of upstate New York is not served by Verizon’s FiOS fiber upgrades.

Comcast claims there is a world of difference between highly regulated energy-generation utilities and the “competitive” marketplace for telecommunications.

“Proposals that the Commission approach this transaction with the same mindset, and apply the same types of burdensome conditions, are entirely unjustified,” argues Comcast.

“Electric and gas utilities remain the quintessential public service utilities,” says the cable company. “Their markets are characterized by a lack of competition, captive customer bases, and direct rate-setting and operational oversight by the Commission.”

In fact, many cable customers in New York do face a lack of competition for fast broadband speeds, are stuck with the single cable operator serving their community, and lack the consumer protections offered by the Commission that apply to other utilities.

The Commission can test Comcast’s claims of competitiveness for itself. Stop the Cap! offers a challenge to find more than one provider that can deliver consistent, widely obtainable broadband speeds of 15/3Mbps or greater in downtown Buffalo, Rochester, Albany or Syracuse.

The Commission will discover there is only one provider now capable of delivering that service across the entire urban centers of upstate New York: the local cable company.

In far western New York, Verizon FiOS is available only in small parts of South Buffalo and North Buffalo and select suburbs.

In Rochester, Frontier Communications does not offer consistent access to speeds greater than 10Mbps.

Albany and Syracuse are also bypassed by Verizon FiOS, left with Verizon DSL, which only offers speeds “up to 15/1Mbps.” Most customers get less.

Comcast would have the Commission believe any review of its broadband service is off-limits and outside of their jurisdiction anyway.

“The Commission has no authority to review broadband transactions and lacks statutory authority to regulate broadband services – and beyond this, cable broadband services are interstate information services that are not properly subject to state jurisdiction,” claimed Comcast.

It further argued the Commission must ignore “matters beyond the Commission’s jurisdiction,” quoting from a 2006 proceeding.

Comcast evidently forgets the law has changed in New York. In 2006, the Commission had to disprove a petition was in the public interest to reject it. In 2014, the applicant is solely responsible for carrying the burden of proof that their proposal is in the public interest.

Nothing in Section 222 of the Public Service Law places restrictions on what the Commission can consider when weighing public interest benefits.

Comcast’s claims of its wish to expand service into rural, unserved areas also must be questioned. Comcast automatically sets a high bar for expansion suggesting it will occur only “where economically feasible,” which is the same standard in place with the incumbent cable operator.

“Where economically feasible” is the reason cable companies in New York have rarely expanded their service territories, except in high growth areas where population density warrants expansion. All cable operators have an internal formula governing Return On Investment requirements that must be met before expansion begins. The Commission must review that information and compare the standards used by both applicants, because it will ultimately govern any future natural expansion of cable service in rural New York.

Conclusion

Comcast’s rosy picture of New York’s future with a merged Time Warner Cable-Comcast is belied by the real world experiences of New York consumers who have learned from long, hard experience that when a cable company starts promising a better deal, the result has too often been higher rates and fees, unwanted channels, poorer customer service, and new restrictions.

Cable operators have enjoyed unfettered power to escape oversight with inflated claims of fierce competitiveness that they suggest will keep prices and abusive behavior in check, but in reality rates are rising and Comcast’s customer approval ratings live in the basement.

Comcast’s most recent filing continues to dismiss these very real concerns for New Yorkers who will not have a choice of a cable operator other than Time Warner Cable or Comcast. Calling the comments of more than 2,700 New Yorkers largely opposed to this merger “unsubstantive” is precisely the attitude of a cable company that has earned its bad reputation with customers.

Sending “templates” to politicians and non-profits that have received funding from Comcast and asking them to send letters to regulators urging approval of the company’s latest item on the agenda is the kind of “substantive” evidence Comcast wants the Commission to rely on in this proceeding.

But worst of all, Comcast suggests that any review of the company’s broadband service, its pricing and performance, and the potential for usage allowances and usage fees above and beyond the current high cost of Internet service is off-limits to New York regulators. The Commission already recognizes the growing importance of broadband in New York State and that it is, in reality, nearly a necessity.

Time Warner Cable recognizes that and is moving ahead on an upgrade program that delivers broadband benefits above those offered by Comcast and at a lower price, with no usage allowances or overlimit fees likely in the foreseeable future. It remains clear to us that Time Warner Cable is the better choice for New York. We have a well-documented history of not being great fans of Time Warner Cable, but we know worse when we see it, and we see it in Comcast.

[1] http://documents.dps.ny.gov/public/Common/ViewDoc.aspx?DocRefId={60D7F65E-3AAB-4507-B58D-7F14E31E130A}

[2] http://www.rochesterfirst.com/news/lawmakers-write-letters-supporting-comcast-deal/190434972

[3] http://www.rochesterfirst.com/news/lawmakers-write-letters-supporting-comcast-deal/190434972

[4] http://stopthecap.com/2014/08/11/rochester-city-councilman-adam-mcfaddens-love-for-comcast-and-the-50k/

[5] http://www.nlc.org/corporate-partnership-program/corporate-partners-program

[6] https://corporate.comcast.com/news-information/news-feed/national-urban-league-resource

[7] https://www.thechicagourbanleague.org/cms/lib07/IL07000264/Centricity/Domain/14/impact-jan-2014.pdf

[8] https://www.thewrap.com/consumer-groups-urge-fcc-to-reject-comcast/time-warner-cable-deal/

[9] https://ecfsapi.fcc.gov/file/7020462210.pdf

[10] https://www.nationalbcc.org/news/progress-reports/2107-recap-of-22nd-annual-conference

[11] http://stopthecap.com/2013/07/10/comcasts-internet-essentials-facade-padding-the-bottom-line-without-cannibalizing-your-base/

[12] https://fiber.google.com/legal/schedule/

[13] https://fiber.google.com/legal/schedule/

[14] https://arstechnica.com/information-technology/2014/07/comcasts-internet-for-the-poor-too-hard-to-sign-up-for-advocates-say/

[15] http://www.cetfund.org/files/140711_CETF_Partners_Comcast-TWC_FCC_PR_and_Filing.pdf

[16] http://www.npr.org/2013/11/12/244558834/comcast-deal-puts-new-minority-run-channels-in-play

[17] http://www.timewarnercable.com/en/about-us/corporate-responsibility/environment.html

[18] http://manhattan.ny1.com/content/shows/ny1_for_you/203064/ny1foryou–inwood-verizon-customers-want-phone-service-outages-to-stop

[19] http://www.verizonwireless.com/wcms/consumer/shop/shop-data-plans/more-everything.html

[20] https://www.verizon.com/?lid=//global//residential

Bright House Networks customers could face much higher cable television bills and a decline in technology upgrades thanks to a merger deal between two companies that should theoretically have no impact on them.

Bright House Networks has been an odd duck among cable companies since it was created from cobbled-together systems originally owned by Vision Cable, Cable Vision, TelePrompTer, Group W, Paragon and others. In the 1990s and early 2000s, Time Warner effectively ran the cable systems still owned by the Newhouse family. After the AOL-Time Warner merger, Advance/Newhouse decided to take back control of the management and operations of its cable systems, relaunching them under the Bright House Networks brand.

While the Newhouse family continues to assert its ownership and control of Bright House, it is highly dependent on Time Warner Cable to handle cable programming negotiations and broadband technology. That is why Bright House customers were sold “Road Runner” broadband service for many years – a brand familiar to any Time Warner customer. To this day, programming blackouts that affect Time Warner cable TV viewers usually also impact those subscribing to Bright House. Time Warner Cable also retains a minority ownership interest in Bright House.

Although the company is well-known in Indianapolis, Birmingham, suburban Detroit and Bakersfield, its presence is most recognized in central Florida, where it serves customers in Orlando, Daytona Beach, Lakeland, Tampa Bay, and many points in-between.

Despite the fact Bright House serves more than two million customers and is the sixth largest cable company in the country, it is small potatoes to major programmers like Comcast-NBCUniversal, Viacom, Disney, and others. All the best discounts go to satellite television providers and giant cable operators like Comcast and Time Warner Cable. Smaller operators pay substantially more.

That is where the merger between Comcast and Time Warner Cable comes in.

The federal government is likely to count Bright House’s 2.2 million customers as part of the Time Warner Cable family, at least as far as control of cable programming pricing is concerned. Despite Comcast’s voluntary commitment to keep its national share of the cable TV business under 30 percent with the merger of Time Warner, Comcast hasn’t taken seriously counting  the customers of the uninvited cousin – Bright House.

Logistically and legally, Comcast would assume control of Time Warner Cable’s interest in Bright House if the merger is approved by state and federal regulators. That may be too much for regulators to swallow.

Because Bright House is insignificant to Comcast and Time Warner Cable’s marriage plans, Comcast could end up terminating the arrangement, which even Bright House acknowledged would put it “at risk of losing the material benefits such agreements provide, include possibly raising costs for its customers and hampering its ability to compete effectively—a result that would certainly not be in the public interest.”

The Newhouse family has evidently seen the writing on the wall, hiring Wall Street investment bank UBS to advise whether it makes sense to sell. If Bright House does decide to hang out a “for sale” sign, Time Warner Cable has the right to bid first. But by that time, if things go according to plan, it might be Comcast ultimately swallowing up yet another large cable system.

Frontier Communications has jumped on the gigabit broadband promises bandwagon with an announcement to investors the company will make available 1,000Mbps broadband speeds available later this year to a small handful of customers.

“I want to note that nearly 10% of our households are served through a fiber to the home architecture,” said Frontier’s chief operating officer Dan McCarthy. “Over the next several quarters we will introduce expanded speed offerings in select markets including 50-100Mbps services. Some residential areas will also be able to purchase up to 1Gbps broadband service. We are excited to bring these new products to market and look forward to making these choices available to our customers.”

Most of Frontier’s fiber customers are part of the FiOS fiber to the home infrastructure Frontier adopted from Verizon in Fort Wayne, Ind., and in parts of Oregon and Washington. The rest of Frontier customers accessing service over fiber are in a few new housing developments and some multi-dwelling units. The majority of customers continue to be served by copper-based facilities.

Despite the speed challenges imposed by distance-sensitive DSL over copper networks, Frontier customers crave faster speeds and more than one-third of Frontier’s sales in the last quarter have come from speed upgrades. As of this month, 54% of Frontier households can receive 20Mbps or greater speed, 75% can get 12Mbps and 83% can get 6Mbps. Here at Stop the Cap! headquarters, little has changed since 2009, with maximum available Frontier DSL speeds in this Rochester, N.Y. suburban neighborhood still maxing out at a less-impressive 3.1Mbps.

Frontier’s plans for the next three months include a growing number of partnerships with third-party equipment manufacturers and software companies, as well as integrating former AT&T service areas in Connecticut into the Frontier family:

Sale of AT&T Connecticut Assets to Frontier Communications Wins Approval from State Attorney General

Connecticut’s Attorney General has announced a deal with Frontier Communications to approve its acquisition of AT&T’s wired assets in the state. The office asked for and got a three-year rate freeze on basic residential telephone rates and a commitment to keep selling standalone broadband at or below Frontier’s current rates. Low-income military veterans would receive basic broadband service for $19.99 per month, a substantial discount off the regular price of $34.99. The first month of service is free.

Frontier will make $500,000 in donations annually to various Connecticut charities, give $512,500 to the University of Connecticut basketball teams, and commit $75,000 to sponsor the Connecticut Open tennis tournament in New Haven.

The phone company has also committed to invest $64 million on network upgrades between 2015-2017, primarily to expand DSL broadband and U-verse service. The company also must undertake to inspect the wireline network it is buying from AT&T and replace deteriorating infrastructure including lines and telephone poles as needed.

Frontier announced it was buying AT&T’s wired assets in December for $2 billion. AT&T will continue to own and operate its wireless network assets in the state. Connecticut was home to AT&T’s only significant landline presence in the northeast. The Southern New England Telephone Company of Connecticut was originally bought by SBC Communications for $4.4 billion in 1998. After SBC purchased AT&T, the telephone company changed its name to AT&T Connecticut. Its primary competitor is Cablevision Industries, which also serves eastern New York and parts of New Jersey. AT&T has aggressively deployed its U-verse platform in Connecticut. Frontier will continue to run and expand U-verse in the state.

Frontier Services and Partnerships Expand

• Customers may have already received marketing for Frontier’s Emergency Phone, a $4.99/mo landline that can only reach 911. Frontier CEO Maggie Wilderotter told investors that global climate change has made weather patterns more unpredictable, making the reliability and resiliency of traditional landlines a “true life line” in the event of an emergency knocking out Voice over IP lines or cell phone service;
• Frontier Texting, powered by Zipwhip, allows customers send and receive text messages using their existing landline numbers. The service appears most popular with business customers, with more 800 signed up so far;
• Frontier third-party technical and security support offers a large range of computer security, home automation, and support services for both hardware and software. Frontier added the Nest thermostat during this quarter, as well as tech support for Intuit QuickBooks and Dropcam remote video monitoring.

Wilderotter Flip-Flops on Gigabit Broadband: You Don’t Need a Gig

Less than three weeks ago, Wilderotter told the Pacific Northwest readers of The Oregonian they didn’t need gigabit broadband speeds:

“Today it’s about the hype, because Google has hyped the gig,” said Wilderotter, in Portland this week for a meeting of her company’s board. She said Google is pitching something that’s beyond the capacity of many devices, with very few services that could take advantage of such speeds, and confusing customers in the process.

“We have to take the mystery and the technology out of the experience for the user because it’s a bit disrespectful to speak a language our customers don’t understand,” said Wilderotter, in Portland this week for a meeting of her company’s board.

Frontier’s pitch: Better prices for more modest speeds. For most people, Wilderotter said, 10 to 12 megabits per second will be perfectly adequate for at least the next couple years. She said Frontier is upgrading its networks in rural communities where it doesn’t offer FiOS to meet that benchmark.

Now that Frontier proposes to offer those speeds, company officials are excited they will be available. Customers shouldn’t be. Most won’t have access for some time to come, if ever.

August 6, 2014

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

Dear Ms. Burgess,

The country is watching New York to learn if our state regulators believe a merger between two unpopular cable operators is in the best interest of New York residents.

For the first time in a long time, the Public Service Commission has been empowered to provide much needed oversight over two companies that have enjoyed both deregulation and a near-monopoly across the region, particularly for High Speed Internet service at speeds above 10Mbps.

New Yorkers, like the rest of the country, consistently rank both Comcast and Time Warner Cable as some of the worst companies around.[1] The PSC has the power to facilitate franchise transfers that would effectively combine the two into one giant monolithic cable company dominating the northeastern U.S., or it can reject the proposed assignment of franchises to Comcast, letting both companies know “in the public interest” means something in New York State.

Section 222 of the New York Public Service law[2] provides the PSC with the authority to reject the application for a transfer of a franchise, any transfer of control of a franchise or certificate of confirmation, or of facilities constituting a significant part of any cable television system unless, and I paraphrase, the transfer is in the public interest.

The Commission is on record partly articulating its standard for determining the public interest. In 2013, the Commission stated several principles it considered in the matter of the acquisition of Central Hudson Gas and Electric by Fortis, Inc., to determine if the transaction would provide customers positive net benefits.[3] The Petitioners in that case were held to a standard requiring them to demonstrate the expected intrinsic benefits of the transaction exceeded its detriments and risks.

However, there are considerable differences between energy utilities and the largely deregulated marketplace for multichannel video distributors and broadband providers. While legacy telephone regulations still provide for significant oversight of this vital service, cable operators have won the right to set their own rates, service policies, and broad service areas.

Although many of us believe broadband has become an essential utility service, federal regulators do not, especially after telephone and cable companies have successfully lobbied on the federal level to weaken or eliminate regulation and oversight of television and broadband service with arguments they do business in a fiercely competitive marketplace.[4]

Regulators cannot compel cable operators to provide service in communities where they have chosen not to seek a franchise agreement, and broadband expansion programs in rural, unserved areas have largely only been successful when communities elect to construct their own broadband networks or federal funds (tax dollars and subsidies funded by ratepayers) defray the expense of last-mile networks.  While it is enticing to seek a voluntary agreement from the applicant to expand its rural service area, the public interest benefit to the relatively small number of New Yorkers getting broadband for the first time must be weighed against the interests of millions of existing subscribers in New York who are likely to see further rate increases, usage-limited broadband service, and worse service from Comcast.

New Yorkers will remain captive in most areas to choosing between one telephone and one cable company for packages of phone, television, and Internet access.[5] Promises of competition have never materialized for vast numbers of state residents, particularly those upstate who have been left behind after Verizon ceased its FiOS fiber to the home expansion project.

Unless Comcast was compelled to wire the entire state, any proposal seeking a voluntary agreement to expand Comcast’s service area in New York is likely to be insufficient to solve the pervasive problem of rural broadband availability. It would also saddle millions of New Yorkers with a company unwelcomed by consumers, with no alternative choice.

As you will see in our filing, Comcast has often promised improvements it planned to offer anyway, but held back to offer as a “concession” to regulators.

The result of past deals is one monopolistic cable operator is replaced by another, and as the American Consumer Satisfaction Index reported, bigger is not better for consumers.[6]

The nation’s two largest cable operators, Comcast and Time Warner Cable, now seek further “value creation” for their already very profitable businesses by merging.[7]

News reports indicate further consolidation is likely in the telecommunications marketplace, largely in response to this merger proposal. Soon after Comcast made its announcement, AT&T announced its desire to acquire DirecTV,[8] and Charter Communications’ efforts to bolster its size are likely to be realized acquiring Time Warner Cable customers cast off as part of the Comcast-Time Warner Cable transaction.[9]

How does this benefit New Yorkers? In our attached statement, we go far beyond the testimony offered by Comcast’s representative at the public information meeting we attended in Buffalo. It is vital for any merger review to include a careful analysis of exactly what Comcast is proposing to offer New York. But it is even more important to consider the costs of these improvements. As you will see, many of the promised upgrades come at a steep price – set top box platforms that require a $99 installation fee, the prospect faster broadband speeds will be tempered by broadband usage limits and usage penalties largely unfamiliar to New Yorkers, and other technology upgrades that are accompanied by subscriber inconvenience and added costs.

Comcast’s promised commitments for customers must also be carefully weighed against what it promised shareholders. While Comcast claims it will spend millions to upgrade acquired Time Warner Cable systems (many already being upgraded by Time Warner Cable itself), the merger announcement includes unprecedented bonus and golden parachute packages for the outgoing executives at Time Warner Cable, including a $78 million bonus for Time Warner Cable CEO Rob Marcus, announced less than 60 days after taking the helm.[10] Comcast’s biggest investment of all will be on behalf of its shareholders, who will benefit from an estimated $17 billion share repurchase plan.[11]

The PSC should be aware that previous efforts to mitigate the bad behavior of cable companies have nearly always failed to protect consumers.

Professor John E. Kwoka, Jr., in his study, “Does Merger Control Work? A Retrospective on U.S. Enforcement Actions and Merger Outcomes,[12]” found past attempts at behavioral remedies spectacularly failed to protect against rapacious rate increases after  mergers are approved.[13]

In short, it is our contention that this merger proposal offers few, if any benefits to New York residents and is not in the public interest even if modestly modified by regulators.

The implications of this transaction are enormous and will directly impact the lives of most New Yorkers, particularly for broadband, now deemed by the industry (and consumers) its most important product.[14]

We have attached a more detailed analysis of our objections to this proposal and we urge the New York Public Service Commission to recognize this transaction does not come close to meeting the public interest test and must therefore be rejected.

 

Yours very truly,

 

Phillip M. Dampier

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[1]http://arstechnica.com/business/2014/05/comcast-time-warner-cable-still-have-the-angriest-customers-survey-finds/

[2]http://codes.lp.findlaw.com/nycode/PBS/11/222

[3]http://documents.dps.ny.gov/public/Common/ViewDoc.aspx?DocRefId={A55ECCE9-C3B2-4076-A934-4F65AA7E79D1}

[4]http://www.mi-natoa.org/pdfs/The_Ten_Disappointments_of_Cable.pdf

[5]http://www.newyorker.com/news/daily-comment/we-need-real-competition-not-a-cable-internet-monopoly

[6]http://www.theacsi.org/component/content/article/30-commentary-category/179-acsi-quarterly-commentaries-q1-2008

[7]http://corporate.comcast.com/images/Transaction-Fact-Sheet-2-13-14.pdf

[8]http://www.usatoday.com/story/money/business/2014/05/13/att-directv-deal-analysis/9044491/

[9]http://www.reuters.com/article/2014/04/28/us-charter-communi-comcast-idUSBREA3R0N620140428

[10]http://money.cnn.com/2014/03/21/news/companies/time-warner-cable-golden-parachute/

[11]http://www.cleveland.com/business/index.ssf/2014/02/comcast_agrees_to_purchase_of.html

[12]John E. Kwoka, Jr., “Does Merger Control Work? A Retrospective on U.S. Enforcement Actions and

Merger Outcomes,” 78 Antitrust L.J 619 (2013)

[13]7 John E. Kwoka, Jr. and Diana L. Moss, “Behavioral Merger Remedies: Evaluation and Implications for

Antitrust Enforcement,” at 22, available at

http://antitrustinstitute.org/sites/default/files/AAI_wp_behavioral%20remedies_final.pdf

[14]http://online.wsj.com/news/articles/SB10001424052702303657404576359671078105148

One of the most difficult questions you can ask a customer service representative of either Comcast or Time Warner Cable is what their regular price is for service. As a Buffalo News reporter discovered in August 2013, Time Warner Cable refused repeated attempts to ascertain the non-promotional price of its broadband service.[1]

Making a direct comparison between the prices charged by Comcast and those of Time Warner Cable require unnecessary perseverance made even more difficult by the fact Comcast only serves a tiny portion of New York State.

Both companies offer promotional deals to new customers as well as those threatening to cancel service, but those prices fluctuate wildly and eventually expire.

Time Warner Cable has made it even more difficult this year by completely eliminating the most popular plans from its retail price list: bundled service packages known in the industry as “double-play” (two services) or “triple play” (three services).[2]

A Time Warner Cable spokesman told the Los Angeles Times the company is required by regulators to provide pricing information for only some of its fees, and Internet rates are not one of them.[3] This year, Time Warner kept the size of its broadband rate hikes to itself. It is much the same for Comcast.

Both cable companies make a point of telling the news media that these prices, including installation, reflect the “rack rates” and that “most customers will pay less […] after cutting a deal for their programming package.”

In 2011, Time Warner Cable raised some of its “rack rates” by up to 51.1 percent.[4]

That makes a rate comparison for television service difficult because the retail rates often do not reflect reality. But beyond rates, regulators need to understand Comcast television packages are very different from what Time Warner Cable customers are used to finding.[5] While Time Warner Cable bundles the vast majority of networks into a Standard TV package, Comcast offers a more extensive variety of packages. While at first glance this may seem to allow customers to better customize a package to meet their needs, Comcast has also taken care to break some of the most popular networks out of lower-cost packages and force customers to choose cable television packages costing much more to get them back.[6]

Sports fans and those who enjoy networks like Turner Classic Movies will have to pay Comcast $87.89 a month for its “Digital Preferred,” package[7], just to get back channels already included in the standard Time Warner Cable TV packages we are familiar with in New York.

At regular prices, a Comcast triple play customer should expect to pay $147.49 for the most bare bones TV, phone, and broadband package, $154.99 for the most popular package without premium channels, and $164.99 a month for a bundle that brings along a similar lineup to what TWC offers, along with Starz.[8] Comcast’s nearest equivalent to Time Warner Cable’s $200 Signature Home service costs $239.99 a month and offers no better Internet speeds than what Preferred Plus customers get.

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[1]http://www.buffalonews.com/city-region-whats-the-big-secret-about-pricing-20130805

[2]https://www.spectrum.com/browse/content/ratecard

[3]http://articles.latimes.com/2014/mar/17/business/la-fi-lazarus-20140318

[4]http://articles.latimes.com/2011/dec/27/business/la-fi-lazarus-20111227

[5]http://www.timewarnercable.com/en/tv/digital-cable-tv.html

[6]http://www.comcast.com/Corporate/Learn/DigitalCable/digitalcable.html

[7]http://www.comcast.com/Corporate/Learn/DigitalCable/TVChannelLineUp.html

[8]http://www.comcast.com/shop/deals-dealfinder