Beck

Glenn Beck and his independent network TheBlaze are not happy about Time Warner Cable and Comcast merging operations and think it will concentrate too much power in the hands of a single entity that already ignores independent voices seeking a spot on the cable dial.

Beck left Fox News Channel to help start a new network — TheBlaze — that began as GBTV, an online streaming video operation. In the fall of 2012, the network, which airs more than 40 hours a week of new programming, secured exclusive carriage on Dish, the satellite television provider. Now that the exclusivity agreement has expired, TheBlaze management and viewers have launched a very vocal campaign to get the channel on cable systems across the country. The venture has been modestly successful with smaller cable operators like Buckeye Cablevision in Ohio and ETC Communications in Michigan. Beck’s network can also be seen on Cablevision’s lineup in the suburbs of New York City. But for most of the country, the only way to watch is to stream it online for $9.95 a month/$99.95 a year. Large cable systems have so far shown little interest in picking up the network.

“Comcast is one of the bigger pains in the neck for TheBlaze,” Beck told his radio listeners.

“Since launching the GetTheBlaze campaign, 50 small, midsized and major cable systems have begun carrying our network,” said TheBlaze CEO Chris Balfe. “These are the cable systems that must be responsive to their customers to survive. Monopoly type [multichannel video programming distributors] like Comcast and Time Warner Cable do not have a good history of listening to customers or supporting independent programmers whose content is in demand like TheBlaze. While we are skeptical that giving Comcast even more market power will benefit consumers, promote competition or lead to more diversity of voices, we will continue our successful campaign because eventually, even giants have to listen to what their customers want.”

“Look, the amount of decision makers, which is so surprisingly small in the industry in general, is potentially getting smaller,” Steve Krakauer, TheBlaze’s vice president of digital content told POLITICO. “Keeping up the fight is so important.”

Cable industry observers agree that life can be difficult for an unaffiliated independent cable network. Ovation found itself thrown off Time Warner Cable’s lineup for nearly a year because of a lack of original programming and miniscule ratings. But networks owned by studios like Universal or large broadcasting entities like Viacom stay, despite similar viewer response. Ovation had no leverage to compel continued carriage. Networks owned by larger companies often do, because they are packaged and sold to cable operators in a bundle. A cable company refusing to carry one low-rated cable network could be threatened with a much more expensive rate for the channels it does want or even face the loss of larger, must-have channels owned by the same company.

Polka

Beck isn’t alone being concerned.

The American Cable Association, a trade group that represents small and medium-sized cable operators, said it is carefully considering the potential impact of the merger on the cost of video programming sold to smaller operators.

“ACA has long acknowledged many problems in the pay-TV market, including the soaring cost of retransmission consent and sports networks and the record-setting number of broadcaster-imposed TV signal blackouts,” CEO Matthew Polka said in a statement. “ACA will be looking closely to see whether this transaction makes matters worse for small and medium-sized cable operators and their customers.”

Bright House Networks’ long standing relationship with Time Warner Cable — which negotiated programming deals on behalf of the smaller cable operator with operations in the south — may come to an end with an approval of a merger between Comcast and Time Warner. That could make Bright House a prime candidate for a takeover.

Charter Communications is likely to seek consolation prizes now that Comcast has outbid the smaller cable company for Time Warner Cable. Liberty Media’s John Malone and Charter’s CEO Tom Rutledge are meeting with advisers and board members to discuss where Charter will go next to grow its operations.

Malone and Rutledge believe the cable industry must consolidate to better position it against competition from online video, phone companies, and satellite television. Malone would like to see the United States served by just a few cable operators, and feels acquisitions are the best way to accomplish his vision.

Charter is almost certain to buy at least some of the three million Time Warner Cable customers Comcast intends to cast-off if it wins regulator approval of its buyout deal. But Team Charter has assembled enough financing to go much farther than that.

Among the most likely targets, according to CRT Capital Group and Raymond James Financial are family held Cox Communications, the third largest cable operator in the country with more than four million customers, Bright House Networks, the tenth largest operator with just over two million customers, and Suddenlink Communications and its 1.4 million subscribers.

Cox, like Cablevision, has been closely controlled by its founding family for years, so rumors of sales of one or both have never come to fruition. But with the merger announcement of Comcast and Time Warner Cable, Wall Street pressure to consolidate is growing by the day. There is talk that if Comcast succeeds in its buyout effort, even satellite providers like DirecTV and DISH are likely to seek a merger. Even Cablevision, which serves suburban New York City may finally feel enough pressure to sell.

A Cox spokesperson this week continued to insist the company is not for sale, but money often has a way of changing minds, if there is enough of it on the table.

Other small regional operators also likely to be approached about selling include: MidContinent, Mediacom, and Cable ONE.

(Image: Crooks and Liars)

The mother of all cable mergers between Comcast and Time Warner Cable will bring tens of millions in executive bonuses and golden parachutes, massive job losses at Time Warner, a lucrative stock buyback that will help Comcast shareholders, and a higher cable bill and usage cap for you.

Back in 2008 when Stop the Cap! started we offered this tip for rational living: When a cable company promises you it has a great deal that will save you money, grab your wallet and run. Just as the sun rises in the east, cable bills never really go down, they just keep going up.

Comcast at least admits that fact of life when discussing the “benefits” of a merger with Time Warner Cable.

“We’re certainly not promising that customer bills are going to go down or even that they’re going to increase less rapidly,” David L. Cohen, a Comcast executive vice president, said in a conference call with reporters.

Heaven forbid.

Bigger has never been better for the cable industry. As waves of consolidation reduce the number of significant cable operators from dozens to fewer than 10, cable subscribers have contributed mightily to finance the merger deals. What used to be a big basic cable bill of $20 a month will soon exceed $75, and rising. The industry has always tied itself to the value proposition that a month of cable television costs no more than a cup of coffee. In 1990, it was Maxwell House. Today it’s closer to a Starbucks Grande Latte once taxes, fees, and surcharges are included.

(Image: Mike Keefe)

The New York Times reports cable prices have grown at more than twice the rate of inflation over the last 17 years. But Comcast likes to say you are getting a lot more bang for your cable buck.

“Where we might have had 100 standard-definition channels in a package more than a decade ago, today you have 250 standard-definition channels plus 100 channels in high-definition,” Cohen told the Times. “The level of service being provided is night and day.”

According to Cohen’s way of thinking, that matters a lot more to you and I than the “Please pay this amount” at the bottom of your monthly bill.

The bountiful cornucopia that is Cohen’s idea of cable television bliss includes networks like Bonsai Xtreme, Office Supplies Network, Glidden’s Paint Dry 24/7, and… no, we’re kidding. But are TV One, Ovation, Youtoo TV, and Retirement Living TV any more compelling? You are probably paying for one or more of them now. Extra credit to customers that can even find them on their cable dial.

Time Warner Cable and Comcast carry most of the same networks, but they arrange them differently. Time Warner likes the shovel-them-all-at-you approach with one simple digital expanded cable tier. Only a handful of networks that should be on the basic lineup cost a little more and most of them are HD movie channels (and inexplicably RFD-TV, which features cattle auctions every Friday afternoon). Comcast nails their customers with a range of tiers and compels many to keep upgrading to get the networks they really want. Just ask subscribers like Thomas Howell of Seattle who was livid when Comcast moved Turner Classic Movies out of the equivalent of basic cable and put it on an enhanced basic tier that cost him an extra $18 a month.

What channels will they add next?

“The s*** they shovel on cable these days and they can’t give us one channel with good movies that aren’t loaded with sex and violence without raping us for more money?” Howell told Stop the Cap! “My wife and I took back their box and we got satellite TV instead. We don’t want to pay for the crap they keep putting on our TV, but they don’t give you much choice.”

Comcast executives are living in a parallel universe and are not listening:

“I think consumers are going to benefit from this transaction,” Cohen added. “They’re going to benefit by quality of service, by quality of offerings, by technological innovation, and I don’t believe there’s any way to argue that they’re going to be hurt from a price perspective as a result of this transaction.”

“Mr. Cohen can pay my cable bill, then,” responded Howell. “He’s obviously got the money to pay whatever Comcast is asking, if he doesn’t get it for free.”

Remarkably even some House Republicans that are normally reticent about interfering with corporate affairs are expressing concern about the deal — especially those who represent districts served by either cable company.

You’re gonna love this merger. It’s best best best!

“The proposed merger between Comcast and Time Warner Cable could have a significant impact on competition in the video and broadband marketplace,” said Virginia Republican Bob Goodlatte, the House Judiciary Committee Chairman. Comcast dominates Virginia.

Comcast and Time Warner argue they are not competitors so it will have no impact on the competitive landscape.

The argument from merger proponents is that a larger Comcast will have a stronger position to fight programmer rate increases. But Comcast has a poor record of success at its current monolithic size, with no evidence making it larger will make much difference. Even if it did, will those savings be passed on to subscribers? Cohen signals they won’t when he warns cable bills will not go down as a result of the merger. In fact, Comcast recently added a $1.50 monthly Broadcast TV surcharge to alienate local television stations in the eyes of subscribers and boost Comcast’s profits. But most will blame the cable company for the rate increase, not the local CBS station.

Consumers generally hate their local cable company, with some minor exceptions (WOW! does very well by customers, as does Verizon’s FiOS in customer rankings). Why? Because in 1995 you paid an average of $22.35 for 44 channels of basic cable. In 2012, you paid $61.63 for 150 channels, 100 or more you never watch and don’t want.

Demands for a-la-carte — pay only for the channels you want — have fallen on deaf ears for years, with nothing on the horizon to change the current pricing model. Besides, some critics warn if a-la-carte does become reality, cable companies will dramatically jack up the per channel price to protect their revenue.

Few were surprised more by the sudden announcement that Comcast was seeking to acquire Time Warner Cable all by itself than the negotiating team from Charter Communications.

Working for weeks to settle how Comcast and Charter would divide the second largest cable company in the country between them, they learned about the sudden deal with Comcast the same way the rest of the country heard about it — over Comcast-owned CNBC.

After Charter endured weeks of rejection from Time Warner Cable executives over what they called “a lowball offer,” Comcast had entered the fray to help Charter boost its offer and bring more cash to the table to change Time Warner Cable’s mind. In return, Comcast expected to acquire Time Warner’s east coast cable systems and much more.

That is where the trouble began.

According to Bloomberg News, the talks broke down because Charter wanted to hold onto as many Time Warner Cable assets as possible. Comcast chief financial officer Michael Angelakis expected Charter to divest more than just the New England, New York, and North Carolina Time Warner Cable systems. Angelakis also wanted control of Time Warner’s valuable regional sports networks in Los Angeles. When he didn’t get them, he stormed out of a meeting threatening to do a deal for Time Warner Cable without involving Charter at all.

The Wall Street Journal confirms the account, adding that both Comcast CEO Brian Roberts and Angelakis agreed the talks with Charter seemed to be going nowhere.

Roberts

Roberts called a secret meeting with top Comcast executives including Angelakis, Comcast Cable head Neil Smit, Comcast’s lobbying heavyweight David Cohen, and NBCUniversal CEO Steven Burke. Roberts asked each about the options on the table and their conclusion was to buy Time Warner Cable by themselves and cut Charter out of the deal.

Within days, Comcast CEO Brian Roberts reinitiated talks with Time Warner Cable CEO Robert Marcus. The two companies had talked off and on ever since Charter Communications set its sights on acquiring Time Warner Cable. It was clear from the beginning Marcus and his predecessor Glenn Britt were cool to Charter’s overtures. Not only was Charter a much smaller operation, it also had a checkered past including a recent bankruptcy that wiped out shareholder value and was loaded with debt again.

The alliance between Charter and Liberty Global’s John Malone was also unsettling. Those in the cable industry had watched how ruthless Malone could be back in the 1990s when a then much-smaller Comcast secretly attempted to acquire control of Tele-Communications, Inc. (TCI) — then the nation’s largest cable operator run by Malone. Malone was furious when he learned about the effort and went all out to kill the deal, acquiring the stake Comcast sought himself.

Malone’s cable empire would eventually fall with the sale of TCI to AT&T just a few years later. When AT&T decided it didn’t to stay in the cable business, it sold TCI’s old territories to Comcast, making it the largest cable operator in the country.

Malone

Malone’s brash attitude has also occasionally rubbed the cable industry’s kingpins the wrong way, especially in his public comments. Last year, Malone criticized Roberts’ more conservative operating style, which means Comcast pays a higher tax rate. Malone specializes in deals that leave his acquisitions with enormous debt loads, manipulating the tax code to stiff the Internal Revenue Service. In June, Malone was back again criticizing the lack of a unified national cable cartel better positioned to defeat the competition.

Under his leadership at TCI, many cable programmers didn’t get on TCI’s cable dial unless they sold part-ownership to TCI. Competitors were dispatched ruthlessly — home satellite dish service, then the most viable competitor, strained under TCI-led efforts to enforce channel encryption.

TCI-owned networks routinely required satellite subscribers to sign up with the nearest TCI cable system, which often billed them at prices higher than what cable subscribers paid. Subscribers had to buy not one, but eventually two decoder modules for several hundred dollars apiece before they could even purchase programming. The cable industry also worked behind the scenes to promote and defend enhanced zoning laws that made installing satellite dishes difficult if not impossible, and denied access to some programming at any price, unless it was delivered by a cable system.

Malone called today’s divided industry “Snow White and the Seven Dwarfs” and insisted on a new major consolidation wave to enhance “value creation” and deliver some major blows to satellite and telephone company competitors.

Despite Liberty Global’s ongoing consolidation wave of European cable systems, his lack of financial resources to put his money where his mouth was left Time Warner Cable executives cold.

Already loaded with debt, Malone’s part ownership stake in Charter could not make up for Charter’s current status — a medium-sized cable operator with dismal customer ratings primarily serving smaller communities bypassed by larger operators.

A deal with Charter would mean Time Warner Cable’s bonds would be downgraded to junk status.

Moody’s Investor Service warned Charter’s offer to acquire Time Warner Cable was primarily financed with the equivalent of a credit card, and would leave the combined entity with $60 billion in debt with bonds promptly downgraded to junk level. Time Warner Cable had always considered its bonds “investment grade.”

Charter’s first clue something was wrong came when Comcast stopped returning e-mail and phone calls. That’s always cause for alarm, but Charter officials had no idea Comcast was secretly negotiating with Time Warner Cable one-on-one. In fact, Comcast’s Roberts was negotiating with Time Warner Cable over a cell phone while attending the Sochi Olympics.

Malone finally got the word the deal was off just a short while before Comcast and Time Warner Cable leaked the story to CNBC.

Ironically, it was Malone who convinced Comcast to seek out a deal with Time Warner Cable. Comcast’s thinking had originally been it had grown large enough as a cable operator and sought out expansion in the content world, acquiring NBCUniversal. But Malone warned online video competitors like Netflix would begin to give customers a reason to cut cable’s cord or at the very least take their business to AT&T or Verizon’s competing platforms.

Comcast executives were convinced that gaining more control over content and distribution was critical to protect profits. Only with the vast scale of a supersized Comcast could the cable company demand lower prices and more control over programming. By dominating broadband, critics of the deal warn Comcast can also keep subscribers from defecting while charging higher prices for Internet access and imposing usage limits that can drive future revenue even higher.

Just like the “good old days” where customers had to do business with the cable company at their asking price or go without, a upsized Comcast will dominate over satellite television, which cannot offer broadband or phone service, as well as the two largest phone companies — AT&T, which so far cannot compete with Comcast’s broadband speed and Verizon, which has pulled the plug on further expansion of FiOS to divert investment into its highly profitable wireless division. If Comcast controls your Internet connection, it can also control what competitors can effectively offer customers. Even if Comcast agrees to voluntarily subscribe to Open Internet principles like Net Neutrality, its usage cap can go a long way to protect it from online video competitors who rely on cable broadband to deliver HD video in the majority of the country not served by U-verse or FiOS.

Phillip “Ouch!” Dampier

Spending the day watching cable business news channels gush approval of last night’s surprise announcement that Comcast would acquire Time Warner Cable is just one excellent reason this deal should never be approved.

CNBC, owned by Comcast, particularly fell all over itself praising the transaction. Some of the reporters — many Time Warner Cable customers — actually believed Comcast would be a significant improvement over TWC. It is, if you want higher modem rental fees, higher cable TV bills, and faster broadband speeds you can’t use because of the company’s looming reintroduction of usage caps. CNBC didn’t bother to mention any of that, and why should they? CNBC reporter David Faber was the first to break the story of the merger last evening and among the first this morning to score an extended, friendly interview with the CEOs of both Comcast and Time Warner Cable, pitching softball questions to the two of them for nearly 15 minutes.

That’s a problem. How often do you hear news reports that include the fact the parent company of the channel has an ownership interest in one of the players. Do you think you are getting the full story when a Comcast employee asks Comcast’s CEO about a multi-billion dollar deal on a network owned and operated by Comcast. Incorporating Time Warner Cable and its news operations into Comcast only makes the problem worse.

As far as cable business news networks and the parade of Wall Street analysts are concerned, this is a fine deal for shareholders, consumers, and the cable business. Ironically, several on-air reporters and commentators defended the merger claiming it isn’t an antitrust issue because Comcast and Time Warner Cable never compete with each other. They never asked why that is so.

They’re here!

Comcast is hoping the government will give its merger a pass with few conditions for the same reason, without bothering to note the cable industry has existed as a cartel in the United States for decades, each company with a territory they informally agree not to cross. With this deal, Comcast’s fiefdom will now cover about half of all cable subscribers in the U.S., covering 43 of the 50 largest metropolitan markets, and have about a 30% total market share among all competing providers — by far the largest. An 800 pound gorilla is born.

Three million current Time Warner Cable subscribers will not be coming along for the ride and will likely be auctioned off to Charter or another cable operator in a token gesture to keep Comcast’s total market share at the 30% mark the FCC formerly insisted on as an absolute ownership limit — before Comcast successfully sued to have that limit overturned.

The rest of us can say goodbye to our unlimited broadband plans and get ready to pay substantially more for cable and broadband service. Despite claims from remarkably shallow media reports, an analysis of Comcast and Time Warner Cable’s rates clearly show TWC charges lower prices with fewer “gotcha” fees.

Reviewing some recent promotional offers for new customers, Comcast customers pay nearly $35 more for a triple play package than Time Warner customers pay:

Time Warner Cable’s Rob Marcus gets a $56.5 million golden parachute after 43 days on the job as CEO.

The Comcast Starter plan costs $99 per month for the first 12 months with a 2-year agreement that includes a nasty divorce penalty. After 12 months, your price increases to $119.99 for the remaining year. The $99 plan accidentally doesn’t bother to mention that customers renting a Comcast cable modem/gateway will pay an extra $8 a month, which raises the price. Since many cable subscribers also want HD DVR service, that only comes free for the first six months, after which Comcast slaps on a charge ranging from $16-27 a month for the next 18 months. Assuming you are happy with the limited channel lineup of the Starter package (and many are not), you will pay up to $154 a month. Oh, we forgot to mention the Broadcast TV surcharge just introduced that increases the bill another $1.50 a month.

Time Warner Cable’s new customer promotions typically cost around $96 a month, including their annoying modem rental fee. DVR service can range from free to $23 a month depending on the promotion, making your monthly rate around $119 a month for 12 months, with no contract and no penalty if you decide to cancel.

“It is pro-consumer, pro-competitive, and strongly in the public interest,” said Comcast CEO Brian Roberts, defending the deal.

Actually, it is in Comcast’s interest. If approved, the biggest investment Comcast will make is spending $10 billion — not to upgrade Time Warner Cable systems — but to launch a major stock buyback program that will directly benefit shareholders.

“On a personal level, it’s never easy to cede control of a company,” said Rob Marcus, Time Warner Cable’s chief executive. “However in this case, it just makes too much sense.”

Before reaching for a Kleenex to wipe any tears away, consider the fact Marcus will do just fine giving up his leadership of TWC just over a month after taking over. His generous goodbye package is worth $56.5 million, not bad for 43 days of work. Time Warner Cable employees won’t share that bounty. In fact, with $1.5 billion in promised savings from the deal’s “synergies” — code language for layoffs, among other things — a substantial number of Time Warner Cable employees can expect to be fired during the first year of the combined company.

The biggest impact of this deal is a further cementing of the duopoly of cable and phone companies into their cozy positions. Instead of encouraging competition, Comcast’s new size-up will guarantee fewer competitors thanks to the concept of volume discounts. The largest providers get the best prices from cable programmers, while smaller ones pay considerably more for access to CNN, ESPN, and other popular channels. Comcast will benefit from reduced pricing for cable programming, which we suspect will never reach customers through price reductions. But any potential startup will have to think twice before selling television programming at all because the prices they will pay make it impossible to compete with Comcast.

Another satisfied customer

Frontier discovered this problem after acquiring FiOS systems from Verizon in Indiana and the Pacific Northwest. When Verizon’s volume discount prices expired, Frontier’s much smaller customer base meant much higher programming costs on renewal. They were so high, in fact, Frontier literally marketed FiOS customers asking them to give up fiber optic television in favor of satellite.

Unless you have pockets as deep as Google, offering cable TV programming may be too expensive for Comcast’s competitors to offer.

Broadband is already immensely profitable for both Time Warner Cable and Comcast, but now it can be even more profitable as Comcast persuades customers to adopt their wireless gateway/modems (for a price) and imposes a usage cap of around 300GB per month. Yes, Comcast will deliver speed increases Time Warner Cable couldn’t be bothered to offer, but with a pervasive usage cap, the value of more Internet speed may prove limited. It’s a case of moving away from Time Warner’s argument that you don’t need faster Internet speed to Comcast’s offer of faster speed that you can’t use.

Customers hoping for a better customer service experience may have been cheered by this misleading passage in today’s New York Times:

Nonetheless, about 8 million current Time Warner Cable customers will become Comcast customers. That may be a good thing for those customers, as Comcast is seen as an industry leader in terms of providing high-quality television and Internet services, while Time Warner Cable has a reputation for poor customer service.

It may be seen as an industry leader by Comcast itself, but consumers despise Comcast just as much as they hate Time Warner Cable. In fact, the American Consumer Satisfaction Index found Comcast was hardly a prize:

• ACSI’s lowest rated ISP
• Second-lowest ranked TV service
• Third-lowest ranked phone service

Comcast consistently scores as one of the lowest rated companies across all the segments it participates in. It has the dubious description of being the lowest rated company in the lowest rated industry.

Higher prices, usage caps, surcharges, and fewer channels for more money. What’s not to love about that?

Just about a week ago, Rob Marcus unveiled his vision of an upgraded Time Warner Cable that looked good to us, and retained unlimited use broadband service. Apparently this is all a case of “never mind.”

The fact is, a merger of Comcast and Time Warner Cable will only benefit the companies, executives, and shareholders involved, while doing nothing to improve customer service, expand broadband, increase speeds, cut prices, and give customers the service they want. It is anti-consumer, further entrenches Comcast’s enormous market power (it also owns NBC and Universal Studios), and gives one company far too much control over content and distribution, particularly for customers who don’t have AT&T U-verse or Verizon FiOS or a community-owned provider as an alternative.

This deal needs to be rejected. When T-Mobile found itself out of a deal with AT&T, it survived on its own even better than expected. So can Time Warner Cable, with the right management team.