Robert D. Marcus has plenty to be excited about. After less than two full months on the job as CEO, he agreed to sell Time Warner Cable and exit his management role if and when the merger is approved. But he won’t be hurting, because he negotiated a bountiful golden parachute that will award him more than $56 million in exit compensation the day he leaves.

Courtesy: Jacobson

That is but one example of the kind of “innovation” Comzilla will offer Time Warner Cable customers. Others include charging top dollar cable modem rental fees, a broadcast TV surcharge, a completely arbitrary usage cap on broadband service, and an offshore customer service experience even more despised than what Time Warner Cable customers get. 

Without actual head-to-head competition, there is no doubt we will hear executives crow to Wall Street that a supersized Comcast has plenty of room to raise broadband prices even higher and to cut company investments in innovation it won’t need to succeed in a controlled duopoly market.

AT&T and Verizon executives — Comcast’s largest competitors — have shrugged their shoulders about the merger deal, believing it will have almost no effect on their bottom lines. Why should it? Comcast has found a growth formula that works — a tap dance away from competition — buy out other cable companies to grow the customer base instead of winning ex-customers back with better service and a lower price.

It appears Marcus’ grand vision for turning Time Warner Cable around with a massive investment in faster speeds and better service is now dead. All that is left on the table is the vague notion of a “significant investment to improve reliability and to enhance our customer service.” In other words – we’ll do a better job to make sure the service you already pay big money to receive actually works and we’ll do a better job answering our phones.

Survey results show the proposed merger is not at all popular with Time Warner customers.

Nothing about Marcus’ spammed e-mail to customers is likely to change that perception.

Cable ONE’s boost in cable infrastructure investment is paying dividends for its broadband customers with new upstream speed upgrades.

“Our customers have expressed a need for faster upload speeds and we’re committed to listening to our customers and delivering the latest products and technical advancements while maintaining the highest level of reliability and customer care,” said Joe Felbab, Cable ONE vice president of marketing.

The details:

• 50/2Mbps Streaming Plan gets a slight bump to 3Mbps upload speed;
• 60/2Mbps Premier Plan gets upload speed doubled to 4Mbps;
• 70/2Mbps Ultra Plan gets a triple boost to 6Mbps.

To activate the new upload speeds, reset your cable modem by briefly unplugging it.

Cable ONE’s promotions often only last three months before increasing to the regular, undisclosed a-la-carte price. Modem lease or purchase is extra.

In June, Cable ONE scrapped its confusing consumption billing scheme and replaced it with standard usage caps that our readers report are unevenly enforced.

The 1.5Mbps, 5Mbps, 8Mbps, 10Mbps, 12Mbps, & 50Mbps services (some plans grandfathered for existing customers) have a cap of 300GB per billing cycle, while the 60Mbps and 70Mbps services respectively have 400 and 500GB data caps per billing cycle. Surfing Internet has a 50GB cap.

While 6Mbps upload speed is slightly better than what Time Warner Cable and AT&T U-verse customers get, Cable ONE remains well behind companies like Comcast and Verizon FiOS.

Cable ONE in April announced a two-year, $60 million network upgrade across 42 cable systems in its mostly rural footprint to enhance reliability and deliver faster Internet service. Upstream speeds are the most difficult to increase for cable broadband providers because the DOCSIS standard was designed to deliver fast download speeds.

Earlier this month, Cable ONE adopted TiVo for its new Whole Home DVR, which offers 650 hours of recording time with four built-in tuners and an Advanced TiVo on-screen guide.

In large parts of its national service area, Cable ONE competes with telephone companies AT&T, CenturyLink, and Windstream.

Time Warner Cable’s summer was “horrible,” to quote one analyst, after three percent of customers left over programming disputes and increasing prices for broadband and telephone service, with more likely to follow as price promotions expire and rates increase further.

Cable analysts were shocked Time Warner Cable lost 308,000 customers in the last three months, most leaving over interruptions of CBS and Showtime over a contract dispute. But customers were also ready to leave over increasing modem rental fees, rate increases, and the company’s growing pullback on promotional pricing. Time Warner Cable’s poor results have ironically caused its stock price to increase this morning, but only because investors suspect a shareholder value-boosting merger with Charter Communications could come within months.

“Just horrible,” MoffetNathanson analyst Craig Moffett wrote in a note to investor clients this morning. “The CBS dispute apparently took a much larger toll than anyone would have imagined, and this colored all the results.”

Sources have told Reuters that cable billionaire John Malone has approached Time Warner Cable about a full takeover by Charter Communications, but has been rebuffed by Britt so far. But with Britt exiting and Time Warner Cable’s underperformance, shareholder pressure for a deal with Charter will only increase.

“This enhances Malone’s appeal to Time Warner Cable shareholders that they would be better off with another management team,” Brean Capital analyst Todd Mitchell told Reuters.

When promotional prices end, a growing percentage of TWC customers drop services or take their business elsewhere.

The subscriber losses pushed profits down 34 percent at the cable company, to $532 million. The triple play tragedy saw subscriber losses for all the company’s residential services. At a time when other cable companies cannot process High Speed Internet sign ups fast enough, at least 24,000 Time Warner Cable broadband customers left over rate hikes and equipment fees. Analysts had expected the company to pick up more than 46,000 broadband customers during the last three months, not lose them. The company’s phone service is also in decline. Only rate increases and customers upgrading to higher speed tiers delivered a slight revenue boost.

Outgoing CEO Glenn Britt set the stage for the current forced retreat on its revenue forecast for the year:

• Time Warner Cable executives made the decision at the end of 2012 to stop heavily discounting service and cut back on promotions. Their theory was the company would attract a larger base of stable customers willing to pay non-promotional rates and tolerate rate increases;
• Executives announced as Time Warner’s phone service was brought “in-house,” the company would stop aggressively pricing triple play bundles that included phone service. That turned out to be a bad decision for growth because customers, already prone to landline cord-cutting, downgraded their bundle or left when promotions expired and ditched the phone line;
• A year of broadband price increases and the introduction of a modem rental fee rubbed customers the wrong way. “We have raised prices recently in the form of modem rental fees, but it’s really just broadband price increase,” again admitted Britt this morning. Future rate increases on modem rentals will give broadband customers another push to shop around for a better deal. At least 24,000 did that over the summer and left, mostly for AT&T U-verse in the midwest and Verizon FiOS in the east.

The lengthy dispute between Time Warner and CBS did the most damage and not just to customers directly affected by channel losses. A major increase in call volumes from alienated customers overwhelmed national call centers, creating long hold times for everyone calling in.

Time Warner expects 40 percent of the cable company’s service area will be overlapped by major competitors AT&T U-verse (now 27%) and Verizon FiOS (now 13%). That represents one million more homes than last year.

Bye Bye: Time Warner Cable lost residential customers for all of its services during the third quarter.

Incoming CEO Robert Marcus said he was dissatisfied with subscriber results from current promotions and rates. New Time Warner Cable customers, Marcus noted, are paying higher prices for fewer or less robust services as part of current promotional packages. Although that has driven a “dramatic improvement in recurring revenue” among customers actually signing up, many choose the lower-priced competition instead.

Marcus also noted customers are taking fewer services and are resistant to upgrading to double or triple play packages, reducing the potential average revenue per customer (ARPU).

“To a great extent, these are expected outcomes of our pricing and packaging strategy and the trade-off between ARPU and volume, but I’m confident we can do better on volume without giving up the ARPU benefits we’ve been achieving,” Marcus told analysts on a morning conference call.

Instead of getting more aggressive on pricing, the company plans to trot out free gifts and pitch discounted slow speed Internet to attract price-resistant DSL customers.

“Next week, we’ll launch our holiday offer, which includes a free Samsung tablet loaded with all of our apps, including TWC TV, with the purchase of higher-end packages,” Marcus said. “I think this will generate lots of interest and really highlight TWC TV and the value it adds to our service offerings.”

Marcus called it inconceivable and unacceptable that at least 4.5 million people are still subscribed to telephone company DSL in Time Warner Cable service areas. The company plans an advertising blitz to steal customers away from companies like AT&T, Verizon, Frontier, CenturyLink, Windstream and FairPoint.

At the center of that effort is the recently announced 2/1Mbps Lite package, which will sell at the everyday price of $14.95 a month. Marcus wants at least 500,000 DSL customers switched to Time Warner over the next 18 months.

“Over time, as these customers’ speed and capacity needs increase, we’ll be well positioned to sell them higher-end product,” Marcus said.

Or they will switch back to the phone company if Time Warner increases the price.

Comcast’s Wireless Gateway is part of the company’s plans to further monetize broadband.

Comcast wants investors to believe customers slightly prefer losing access to unlimited broadband in return for a 300GB usage cap and $10 overlimit fees.

Neil Smit, president and CEO of Comcast Cable Communications this morning told Wall Street analysts Comcast plans to further monetize its broadband product after testing usage caps, consumption billing, and collecting increased in-home Wi-Fi fees collected from a growing number of customers with an XFINITY Wireless Gateway.

Phil Cusick from JPMorgan asked Smit about how broadband tiering trials now underway primarily in southern states were going for Comcast.

“We have a number of trials in place in markets,” Smit responded. “We’re testing different types of usage-based pricing offerings. Thus far the consumer response has been neutral to slightly positive. We’ll continue to monitor it.”

Customers in the affected areas tell Stop the Cap! they have never been asked what they think about Comcast’s usage caps and consumption billing, so they are unsure how Smit can draw conclusions about customer preference.

“I’m canceling Nov. 1 when the caps arrive in South Carolina,” says Dennis Johnson. “I’m heading to U-verse because AT&T isn’t enforcing any caps here. I plan to tell Comcast why they lost me, but it sounds like the company really isn’t interested in what customers think.”

Every research study done on broadband usage caps show customers loathe them and up to 50% are prepared to switch providers if they can find a competitor providing comparable service.

Comcast is also moving forward with plans to share your in-home Wi-Fi with other customers, configuring company-supplied gateways to offer a second, open access Wi-Fi channel. Comcast currently charges customers $7 a month for the XFINITY Wireless Gateway, combining a DOCSIS 3 cable modem, a telephone eMTA, and a wireless router.

Despite the fact Comcast customers regularly complain about the poor Wi-Fi range of the XFINITY Wireless Gateway and the monthly rental fee, Smit believes they are key to further monetizing broadband.

“We’ve rolled out about six million Gateway devices which increased the in-home Wi-Fi fees and we think there’s going to be more people hanging more devices off of their Wi-Fi,” said Smit.

The more devices, the higher the usage. The higher the usage, the closer customers get to exceeding their cap and charged overlimit fees.

Just a few years after cable systems began upgrading to DOCSIS 3.0 to improve broadband speeds and performance through channel bonding, CableLabs is set to formalize next-generation DOCSIS 3.1 by the end of this month, allowing cable broadband speeds to reach well into the gigabits.

“We made a fairly bold assertion in October of last year that we would have them substantially complete and publicly issued by the end of 2013,” Matt Schmitt, director of DOCSIS at CableLabs said this morning. “This is quite a bit faster than we have ever pulled off before. It’s not a small project to do a new DOCSIS with a new physical layer underneath. It was an industry-wide effort and I tell you what, they’ve been busting their tails.”

Schmitt

Schmitt discussed the new standard at the DOCSIS 3.1 Engineering Pre-conference Symposium held in Atlanta.

The new standard for cable broadband was designed to protect the industry from competing technologies — notably fiber to the home service which offers immediate gigabit broadband capacity. DOCSIS 3.1 was designed to support up to 10/1Gbps speeds using larger spectrum bands cable operators are opening for data services after switching off analog cable television channels.

Cable operators are not expected to offer gigabit broadband service in most areas. Many operators still dedicate the largest amount of their available bandwidth to analog cable television channels. But DOCSIS 3.1 provides scalability as operators move towards digital television delivery. It also offers 50 percent more data capacity over DOCSIS 3.0 over the same spectrum.

DOCSIS 3.1 uses a new modulation scheme coupled with more robust forward error correction (FEC) to improve efficiency and performance. The new standard dumps Reed-Solomon FEC in favor of low-density parity check (LDPC) technology. DOCSIS 3.1 relies on orthogonal frequency division multiplexing (OFDM), also used by wireless carriers to boost performance over limited spectrum.

Despite the new standard, DOCSIS 3.1 will be fully backwards-compatible with DOCSIS 3.0, which means customers buying their own cable modems will not find them obsolete anytime soon. When a customer decides they want faster broadband speeds, the cable operator can advise if a new DOCSIS 3.1 modem is needed. In most cases, it will not.

Most cable operators are expected to take at least a year lab testing the new technology and waiting for vendors to incorporate support for DOCSIS 3.1 in future generations of cable broadband equipment.

Comcast, one of the more speed-aggressive cable operators likely to be an early adopter of DOCSIS 3.1, indicated it would probably be 2015 before customers can buy DOCSIS 3.1-powered products. But Comcast will begin trials next year, according to Jorge Salinger, vice president of access architecture.

Time Warner Cable plans to use the next generation of DOCSIS as they migrate from conventional MPEG-based video delivery to IP video transport on a Converged Cable Access Platform (CCAP). But Time Warner Cable customers don’t usually get the fastest possible broadband speeds. For most of the country, the cable operator’s top speed is 50/5Mbps.

[flv width=”640″ height=”380″]http://www.phillipdampier.com/video/Speaker Interview with Ralph Brown of Cable Labs at Cable Congress 2013 in London 3-11-13.mp4[/flv]

Ralph Brown, chief technology officer of CableLabs, talked about DOCSIS 3.1 and the cable industry’s future technology needs in this interview from March 2013. (5 minutes)