Every week brings the threat of yet another programming blackout because cable programmers want to be paid more and cable operators want to pay the same or less. This time, Fox Networks Group has sent a final warning to Charter Communications that their customers will lose several cable networks as soon as Wednesday if the two companies cannot reach a renewal agreement.

“Fox and Charter have an agreement to carry the Fox networks that Charter has chosen to ignore,” Fox said in a statement that was updated today. “We’re disappointed that despite our best efforts to reach a resolution, Charter Spectrum subscribers could lose access to multiple Fox sports and entertainment networks on April 12.”

The latest dispute surrounds the lucrative volume discounts that Time Warner Cable formerly negotiated for some of Fox’s non-news-related cable networks. Charter Communications acquired both Time Warner Cable and Bright House Networks to secure those kinds of volume discounts for itself. In general, the larger a cable system is, the lower the wholesale rate charged for cable programming. Charter hoped it could continue paying the lower rates Time Warner Cable managed to secure after acquiring the much larger cable system. But cable programmers are not buying Charter’s approach and in one case sued.

In March, Univision blocked Charter from carrying its Spanish-language networks Univision, Unimás, Galavisión, Univision Deportes and El Rey in a similar dispute. A temporary restraining order brought the networks back to the lineup a day later, at least temporarily. Univision sued Charter Communications in 2016 over the programming fee dispute.

A significant amount of money is at stake depending on which side ultimately wins in court.

In the case of Univision, Charter’s own contract with the Spanish language programmer expired on June 30, 2016. That would normally require Charter to negotiate a contract renewal that it knew would be more costly than what it paid under the old contract. Charter learned Time Warner Cable had negotiated a contract with Univision that delivered better volume discounts and was not set to expire until June 2022.

To allow Charter Communications to argue that Time Warner Cable’s contract should continue to apply after the merger, it structured its acquisition (on paper at least) to allow Charter to claim Time Warner Cable would continue to manage all of its cable systems. Charter’s lawyers argued that because “Time Warner Cable” is in charge, the wholesale rates Time Warner Cable negotiated should now apply to all Charter systems.

Univision, among other programmers, balked at Charter’s creative thinking.

“Everyone knows that is simply not true: the longstanding CEO and the senior executive team of Charter, as well as its pre-existing board of directors, now in fact manage and control all such cable systems, and virtually the entire TWC leadership team has departed,” Univision argued in its 2016 lawsuit.

If the programmers win, Charter will have to negotiate new carriage agreements at 2017 prices instead of continuing to pay the lower rates Time Warner Cable won for itself in the past.

A similar dispute is likely behind the current battle between Charter and Fox. Each time a cable company has to negotiate a new contract, programmers tend to ask for a considerably higher wholesale price for their channels and try to get cable systems to also carry their other networks. When a cable operator refuses to pay what it considers to be an unconscionable renewal rate or does not want to carry the programmer’s other networks, a showdown takes place that often leads to channels being temporarily removed from the lineup. Cable companies usually lose these battles after subscribers get hostile, but some smaller cable operators have walked away from programmers like Viacom for good when the renewal price stayed too high.

As is the tradition in these disputes, Fox launched a website and social media blitz to warn Charter customers they are about to lose access to 19 regional sports channels, FX, FXX, FOX Movie Channel, National Geographic TV, Fox Sports and Fox Deportes and asked customers to start calling Charter and complain. The current dispute does not involve the FOX (TV) Network, the Fox News Channel or the Fox Business Channel.

“We’re disappointed that despite our best efforts to reach a resolution, Charter Spectrum subscribers could lose access to multiple Fox sports and entertainment networks on April 12,” FOX wrote on its website. “Charter’s tactics could result in its subscribers missing our popular programming including Fox Sports’ telecasts of the St. Louis Cardinals and Blues, Kansas City Royals, Cleveland Cavaliers, Cincinnati Reds and many other MLB, NBA and NHL teams on Fox Regional Sports Networks, Fox Deportes, National Geographic, and FX’s hit dramas The Americans and Feud as well as much more award winning programming.”

“Fox is trying to gouge our customers using the increasingly common tactic of threats and removal of programming,” Charter responded in a statement. “They are attempting to extort Charter for hundreds of millions of dollars. We will continue to work towards a fair agreement.”

Fox Networks is using this ad to warn Charter Spectrum customers they could lose Fox programming. (0:30)

When AT&T announced it would offer 100+ cable television and broadcast network channels under the DirecTV Now brand for $35 a month, Wall Street had a fit.

Craig Moffett, an analyst with Moffett-Nathanson, speculated that AT&T would make at most a profit margin of $5 a month for its $35 a month plan, once programming costs were covered. But then AT&T announced it would sweeten the deal with a free Apple TV Player or Amazon Fire Stick for those confident enough to prepay for the new service. That makes DirecTV Now a purposefully unprofitable service, creating considerable stress for both the cable and satellite industry and their investors.

Variety notes the average DirecTV satellite subscriber delivers about $60 a month in profit to its owner, AT&T. That led the industry magazine to speculate DirecTV Now is a “loss leader” designed to sell its parent company’s AT&T-Time Warner, Inc. merger deal to regulators on the premise of increased competition delivering real savings to consumers.

Thankfully for Wall Street’s nerves, AT&T’s usual practice of marketing things with a lot of fine print emerged in the nick of time, and the $35 dollar price has now turned out to be an introductory offer for early adopters. In the not-too-distant future, AT&T will enroll new customers for its “Go Big” package at a much more profitable $60 a month. Customers who sign up at the $35 rate and stay customers will be able to keep that price as long as they make no changes to their account after the promotion ends.

Moffett

But Moffett warned investors that the traditional cable television model is still under serious threat, and AT&T’s less-promoted “Live a Little” package offering 60 popular cable networks for the everyday price of $35 is the equivalent of AT&T “running with scissors” because it alone could cause millions of cable and satellite customers to cut the cord and stay more than satisfied with a slimmed down cable package.

“Virtually all the channels that anyone would really want, save for regional sports networks” are included in the lighter “Live a Little” package, Moffett added. Customers who loathe watching sports but want a beefier package can also sign up for a $50, 80-channel “Just Right” package that primarily omits sports-oriented channels and a handful of spinoff cable networks few would miss.

Moffett and other Wall Street analysts were hoping AT&T would bloat its cheaper package with home shopping, religion, and other little-watched, low-cost cable networks and then entice customers to upgrade to unlock more popular cable channels. Instead, AT&T’s most premium package — “Gotta Have It” which costs $70 a month adds the “can live without” networks like Boomerang, Cloo, El Rey, Centric, and other little-known channels that typically live unnoticed in Channel Siberia on 500+ channel cable lineups. The highest premium priced package is attractive only for those looking for Starz/Encore channels and the basic cable network that gets no respect — Hallmark Movies & Mysteries (a/k/a the Dick van Dyke Permanent Employment Network.)

“By stacking their base package with all the best networks — likely a requirement for getting the programming contracts at all — they still have the same problem that was highlighted initially,” by Moffett. “Put simply, they aren’t going to make any money.”

That quest for profit is further challenged with subscriber acquisition programs that dole out free Apple TV units to customers willing to prepay for three months of service at the $35 rate or an Amazon Fire Stick (with Echo remote) in return for prepaying for one month of service. Anyone in the market for either device can sign up for DirecTV Now, get the equipment at an attractive price, and consider the 1-3 months of service a free extra bonus. Customers were reportedly lining up at AT&T’s owned and operated retail outlets (not authorized resellers) to pick up devices and sign up for service today.

At these prices and with these promotions, AT&T DirecTV Now could first decimate the subscriber base of its immediate competitors Sling TV and PlayStation Vue, either of which offer a much less compelling value. AT&T can afford to charge a lower price because it has deeper pockets and enormous volume discounts on the wholesale price of cable programming — combining millions of DirecTV and U-verse TV subscribers together to negotiate what industry insiders suspect are major discounts the smaller providers cannot get.

But there are issues likely to be deal-breakers for some would-be DirecTV Now subscribers:

• Local broadcast stations are available only in a handful of selected cities and only a very few include all ABC, NBC, and FOX affiliates. CBS is not participating in DirecTV Now at this time, and that is a major omission;
• NFL Network isn’t on the lineup;
• Regional sports networks are spotty and geographically restricted. Here is a detailed PDF outlining options by zip code;
• There is a limit of two concurrent streams and although video quality is very good, it is not the 1080/HD experience AT&T’s marketing material would suggest. The quality of your internet connection will make a difference;
• No DVR option at this time.

CNET compiled an excellent channel comparison chart to help consumers figure out which, if any, of these upstarts make sense as a cable TV replacement:

$5 a month each for HBO and Cinemax.

Time Warner, Inc. did its part, offering a substantial deal to DirecTV Now to allow customers to add HBO and Cinemax for just $5 a month each, substantially less than what both networks charge customers signing up a-la-carte. This also unlocks access to streaming options on both networks’ websites.

In fact, as a DirecTV Now customer, you will also become an authenticated pay television subscriber, unlocking access on various cable network websites to extra streaming and on-demand options.

The implications of DirecTV Now depend on how long AT&T extends its $35 offer, which is going to be compelling for a lot of Americans. Moffett predicts DirecTV Now could sign up a staggering 11 million Americans — at least two million cannibalized from its own DirecTV satellite customer base, six million cutting the cord on their cable company (including AT&T U-verse) and another three million cord-cutters or “cable-nevers.” Most of the latter are Millennials, and research suggests $35 may be low enough of a price point to sign them up.

AT&T is also raising concerns among internet activists because online streaming of DirecTV Now will not count against an AT&T postpaid customer’s data allowance. This zero rating scheme is seen as an end run around Net Neutrality, particularly because AT&T is not as generous with its competitors. AT&T said it will offer other video streamers the possibility of being exempted from AT&T data allowances, if they pay AT&T for the privilege.

How It Works/Signing Up

AT&T DirecTV Now starts with the Google Chrome 50+, Safari 8+ or Internet Explorer 11+ (on Windows 8 and up) web browsers or the DirecTV Now app. AT&T recommends Chrome for desktop viewing. The service doesn’t work with Firefox, Microsoft Edge, or legacy browsers.

The first step is registering for a 7-day free trial. Before handing over your credit card number, if you scroll down you will find a small free preview option is also available that includes a largely useless streaming barker channel promoting the service and a respectable collection of video on demand options from basic cable networks. The free video streaming option will give you a clue about how the service is likely to perform on your internet connection and devices. For the record, DirecTV Now now supports:

• Amazon Fire TV
• Amazon Fire TV Stick
• Apple TV (4th generation)
• Android^TM phone 4.4 and higher
• Android tablet 4.4 and higher
• Chromecast (for Android only)
• iPad iOS 9 and higher
• iPhone iOS 9 and higher
• iPod Touch version 9 and higher

Support for other devices like Roku is coming next year.

Customers must be within the United States to use the service. If you travel abroad or to any U.S. territories like Guam, the Virgin Islands, or Puerto Rico, DirecTV Now will stop working until you return. When you sign up, keep in mind your billing zip code will mean a lot when it comes to accessing regional sports and local broadcast channels. DirecTV Now uses your billing zip code and your actual location to determine whether you are qualified to access regional sports networks and local stations.

Score a Free Apple TV Player or Amazon Fire TV Stick

Apple TV (4th Generation): Effectively free after prepaying for three months of service.

If you are looking to score an Apple TV (4th generation) or an Amazon Fire TV Stick, you will want to skip the 7-day free trial and enroll in a paid plan immediately, which will allow you to select which player you want. If you want the Apple TV, you will prepay for three months at $35 a month ($105). The Amazon Fire TV Stick only requires you to prepay for the first month of service ($35). One device per email address, but you can sign up for multiple accounts (using individual email addresses) and get a device for each — especially useful for larger families that could run into DirecTV Now’s two-stream limit.

Consider your choices before enrolling. If you want to add premium channels or upgrade your plan, and you select the three-month prepay option to grab an Apple TV Player, adding premium channels like HBO and Cinemax or moving to a higher plan will result in three months of prepaid charges for those upgrades as well, billed automatically to your credit card on file — which amounts to a $30 charge if you select HBO and Cinemax. After your promotional prepaid term ends, your account will continue to be billed at the $35 (plus any add-ons) rate until you cancel. AT&T covers you for the forfeited first free week by extending your bill date out by seven days. Allow 2-3 weeks for the device(s) to be shipped to you.

You can also sign up at an AT&T owned and operated retail store, but be aware AT&T “authorized” reseller stores are not participating in this promotion. That may allow you to bring home a device today.

Don’t care about the device promotions? Take the 7-day free trial, but be aware that you are giving AT&T your credit card number and charges begin immediately after the free week ends unless you cancel. Here’s how:

1. Sign in to your account.
2. From your User Account overview page, select Manage My Plan.
3. Select the Cancel Plan link.
4. Choose one of the listed reasons.
5. Select Cancel Now to confirm cancellation.

Your subscription will continue until the end of the billing cycle. No refunds or credits are provided for partial months. Your account will revert to Freeview demo status after you cancel a subscription.  You can add a subscription package back at any time.

Oddly, AT&T is not charging sales tax for New York, California, Maryland or Virginia residents. Customers in states like Tennessee where AT&T provides local phone service were most likely to face sales taxes. Those signing up early are in the best position to exploit what appears to be an oversight, or it represents the first time the New York Department of Taxation and Finance left money on the table.

Streaming from Your AT&T Wireless Device Does Not Count Against Your Data Allowance

If you’re a DirecTV Now and AT&T Wireless customer, streaming most DirecTV Now movies and programs over the AT&T wireless network won’t count against your data usage allowance, according to AT&T. But believe it or not, AT&T’s fine print indicates advertisements and non-streaming app activity do count! There are some other important disclosures to be aware of:

• You must be on the AT&T Wireless network within the U.S. (U.S. territories are not qualified for zero rating);
• You must be a postpaid, not a prepaid AT&T wireless customer to qualify and must not have “data block” on your mobile line;
• If you are grandfathered on an unlimited data plan, using DirecTV Now will not count against the 22GB data threshold which subjects you to speed throttling;
• This offer may disappear at any time and/or is subject to change.

DirecTV Now Qualifies You as an Authenticated Pay Television Subscriber

Many cable networks require customers enter their cable, satellite, or telco TV login credentials to unlock video streaming and on-demand features. DirecTV Now is a qualified provider for these websites (more coming):

• ABC
• Disney
• Disney Jr.
• Disney XD
• ESPN (WatchESPN)
• Freeform
• HBO GO (requires subscription to HBO)
• MAX GO (requires subscription to Cinemax)

Other networks are not yet enabled for DirecTV Now. CNN, for example, has a prompt for DirecTV satellite customers to log in, but DirecTV Now has its own account registration system.

Local Channels Are Very Spotty

Local over the air channels are very limited on DirecTV Now and are geographically restricted. You can access these channels only if you are located in or very near to the cities listed below and your billing zip code is in the same area. If you travel outside of the immediate area, live streaming will stop working until you return.

Giving the Service a Test

Stop the Cap! enrolled as an ordinary customer this morning and gave the service a rigorous test, including multiple streams over our 50/5Mbps internet connection. The service debuted today, and there is little doubt there is intense interest from consumers, so we expected some performance problems from the initial demand. We didn’t see any evidence of traffic congestion, however, and that is a good sign.

AT&T’s John Stankey explaining DirecTV Now.

A similar test of Sling TV did not perform as well during peak viewing times, when streaming problems emerged. DirecTV Now seems to be built to withstand intense demand.

One customer with a 6Mbps U-verse internet connection “in the boonies” was impressed the video quality of DirecTV Now was high even on a relatively slow DSL-like connection.

“This blows SlingTV away,” the person shared. “I only have U-verse 6Mbps internet service and it is not pixelated or buffering at all. Looks exactly like my regular DirecTV picture.”

AT&T published these recommendations for DirecTV Now customers regarding internet connection speeds:

• 150kbps – 2.5Mbps – Minimum broadband connection speed for Mobile devices
• 2.5 – 5.0Mbps – Recommended for HD quality

We’ve been led to believe DirecTV Now should perform equivalently to 1080i HDTV service (depending on the video source of course). We cannot say we agree it does right now. We noticed significant artifacts on high-motion video and picture graininess that left us feeling this was closer to a 720p HD experience. It isn’t possible to say whether the video player reduced playback quality because of internet traffic issues we were unaware of or if this is how the picture is supposed to look. It did not significantly detract from the viewing experience and the lack of buffering and pixelation was far more important to us.

AT&T store in NYC.

DirecTV Now would serve adequately as a cable TV replacement if it had local station coverage and some type of DVR. At present, DirecTV Now is limited to a “Restart” feature that allows you to restart shows already in progress on certain channels, but you cannot fast-forward or record a restarted show. Once AT&T introduces a cloud-based DVR and fills out the local station lineup, this service could be lethal to overpriced cable TV packages.

AT&T’s marketing attempts to undercut the powerful position of inertia by setting an unknown time limit for customers to enroll in the $35 a month video package. If you don’t sign up today, you may not get the “free” Apple TV or Amazon Fire Stick and a respectable cable TV package for just $35 a month — about half what cable operators are charging these days for their bloated video packages. AT&T doesn’t care if you stick with your current cable provider and signup for DirecTV Now, if only to grab free streaming video equipment while sampling the service. They get their money either way.

Had AT&T permanently kept the price at around $35, many consumers would likely sit back and wait for AT&T to sort out the streaming contract issues it has with the TV networks — CBS in particular, and come up with a DVR solution before those potential customers decided to sign up and make the change. Based on several “hot deals” websites, the mentality among many consumers is to “lock in” the $35 price now and wait for AT&T to build out the package while continuing to invest $35 a month on it. That doesn’t seem so bad when you get free electronics as part of the deal.

Our Final Take

AT&T’s DirecTV Now is a potential winner and worth signing up for because of the introductory price and free equipment offers. But if you decide not to disconnect your cable/satellite television service, it is probably safe to drop DirecTV Now after your prepayment expires and return to resume service a little later. There will probably be some warning when AT&T will end the introductory price for the service, and interested customers can hop back on board before that date arrives. DirecTV Now will be a formidable competitor, but it will fight against consumer resistance to confront the cable company and cut cable’s cord until it solves the local channels issue and has a credible DVR option. The service could also use an add-on to make adding additional concurrent streams possible and more affordable than just signing up for a second account.

Don’t count out Big Cable just yet. With data caps and other internet overcharging schemes, Comcast, Cox, Suddenlink, and others can play games with usage allowances to deter customers from streaming all of their video entertainment online at the risk of blowing past their allowance. DirecTV Now’s $35 price won’t mean much after overlimit fees begin appearing on your internet bill.

Newly independent Cable One will reduce its emphasis on cable television and turn its time, attention, and capital towards improving broadband service for its 690,000 largely rural customers in 19 states.

Cable One was spun off from Graham Holdings on July 1 and is not likely to stay independent for long before it is acquired by another cable operator, most likely Patrick Drahi’s Altice, S.A. — which recently acquired Suddenlink. But in the meantime, Cable One is attempting to persuade investors it is remaking itself into a broadband company, de-emphasizing the traditional cable television package in favor of dedicating more bandwidth for faster broadband speeds.

“Our standard broadband offering for our residential customers since 2011 has been a download speed of 50Mbps, which is at the high-end of the range of standard residential offerings even today in our markets,” the company reported in a statement. “Our enhanced broadband offering for our residential customers is currently a download speed of 75Mbps, which we expect to raise to 100Mbps by the end of 2015.”

Cable One primarily serves small cities and towns in the central and northwestern United States.

In several markets, 100Mbps speed is already available and regular pricing has been simplified to $1 per megabit of service: 50Mbps for $50, 75Mbps for $75, or 100Mbps for $100 a month.

To protect its broadband business model, which carries prices traditionally higher than larger operators, Cable One will stay focused on largely uncompetitive markets where it faces token DSL broadband competition from companies like Frontier Communications, CenturyLink, and Windstream. More than 75 percent of its customers are located in Mississippi, Idaho, Oklahoma, Texas and Arizona, many served by these three telephone companies.

Cable One signaled it will hold the line on cable programming costs as well. In April 2014, the company dropped 15 Viacom networks, including MTV, VH1, Comedy Central, Nickelodeon and others over contract renewal prices it claimed were too high. The cable TV package has continued without the Viacom networks for more than a year, resulting in the loss of more than 20% of its cable TV customers. More than 100,000 homes have dropped Cable One video service for another provider, but ironically that actually helped Cable One increase its cash flow by more than 11%, because it no longer has to pay programming fees on behalf of the lost customers.

On the bright side, Cable One executives discovered many of its former TV customers have stayed with Cable One for Internet service because the competition either does not offer broadband or generally provides DSL at speeds under 10Mbps. Company officials have emphasized this point to investors, suggesting broadband is a true money-maker and television can safely take second chair without sabotaging profits.

“We certainly have some sympathy for the notion that a broadband-only cable operator might be more profitable,” wrote analyst Craig Moffett in an investor note this month. “But there are some critical holes in the Cable One story. Does the company truly believe that all costs are variable such that cutting video will bring endless margin expansion? Are Cable One’s new shareholders really better off for having played hardball with Viacom?”

Moffett does not believe so because he is convinced Cable One’s independence will be short-lived.

“We all know the consensus opinion is that someone will buy Cable One,” Moffett wrote. “But the above questions still matter. Any potential acquirer would still place value on a video business, or pay less for the fact that Cable One has less of one.”

But as long as rural telephone companies barely compete for broadband customers, Cable One’s broadband performance will deliver them a de facto broadband monopoly in their largely rural service areas. That gives the cable company, or its next owner, plenty of room for rate hikes.

Wheeler

Federal Communications Commission chairman Tom Wheeler personally called the chief executives of some of America’s largest cable operators, including Charter Communications and Time Warner Cable, to reassure them that the agency does not object to future cable industry consolidation.

Wheeler said any new merger deal would be assessed on its own merits, and cable executives should not assume the agency is against future cable mergers just because it objected to the Comcast/Time Warner Cable deal.

The Wall Street Journal reports Wheeler sought to “clear the air” in response to industry hand-wringing over whether future buyouts and acquisitions could get passed the FCC. Wheeler reassured executives they were over-reading the commission’s intent.

Wheeler did suggest he would like to see more competition among cable companies, an idea that has been dead on arrival since the cable industry began colluding to agree to stay out of each other’s territories two decades ago. Although Wheeler would like to see competition increased by cable operators competing head to head for customers, it is much more likely the industry will seek further consolidation to reduce the prospect of competition, not increase it.

The larger the cable operator, the greater the economy of scale — especially for cable programming costs. A potential new entrant would likely be discouraged from entering the business, discovering it had no prospect of getting cable programming at prices comparable to what the largest cable operators pay.

Your credit worthiness now plays a more important factor in determining whether you can sign up for service with Charter Communications, and if you fail to pay the company has stepped up collection efforts to bring past due or canceled accounts up to date.

Charter Communications reported to investors it lost more than 7,000 video customers during the first quarter of 2015, many lost to the company’s tightened credit policies. Customers with challenged credit will be asked to pay a substantial deposit before cable service will be provided and those who lost service will have to bring their accounts current before service can be restored.

Thomas Rutledge, CEO of Charter Communications, told investors on the company’s quarterly conference call Charter could no longer depend on picking up video customers that used to steal analog cable service. Charter largely terminated analog service last year, forcing unauthorized customers to subscribe legally or find another provider.

Rutledge

Charter is hoping its new Spectrum Guide software, now being tested, will help improve video service for customers. The new cloud-based user interface is supposed to make search and discovery easier and better supports Charter’s on-demand video offerings. Spectrum Guide is expected to launch in Reno and St. Louis in the next few months.

“Over the coming months, we’ll increase the number of on-demand titles we have on our set-top boxes and on the Charter TV app by a factor of three,” said Rutledge. “The coming months will also see the wider rollout of our Worldbox, our new more advanced and less expensive downloadable security infrastructure in several markets.”

Rutledge emphasized Charter intends to continue emphasizing its full video packages and will not follow others testing slimmed down packages and a-la-carte channel selection. Rutledge told investors he doubts any of the current lower-priced packages with fewer TV channels will prove compelling to customers.

Charter’s chief financial officer reported Charter spent $23 million on transition costs related to the company’s failed deal with Comcast to spin off certain customers to a new entity – GreatLand Connections, which has since been terminated. That contributed to an increase in the company’s expenses, joined by increasing cable programming costs.

Rutledge called the Comcast transaction “distracting” and its all-digital conversion project “very disruptive” to customers.

“I guess when you think about our incentives as a company, our biggest opportunity was the transaction that was in front of us,” Rutledge said. “We were about to divest 40% of our business. And so, our focus was somewhat distracted. But all in all, the operational issues of changing – credit policies changing year-over-year, outcomes as a result of the termination of the all-digital project and the management of the service issues around the all-digital project, we’re comfortable with where we are, and we are comfortable with our growth prospects for the year.”