Comcast: Get a box or lose your cable TV service

Comcast will encrypt the entire lineup of its cable television service, including local channels, starting with two markets in New England and gradually rolling out this summer across all of Comcast’s service areas.

The encryption will obsolete cable reception of QAM signals, which some cable customers use to avoid paying for set-top equipment.

Comcast called FCC approval of its encryption request a victory for consumers because it will “allow us to automate certain system functions and will reduce the need for scheduled in-home appointments, providing greater convenience for our customers.” Comcast also candidly said it will dramatically reduce signal theft and unauthorized viewing by past due customers, which can now be shut off from the cable office instead of dispatching technicians to the home to disconnect service.

Consumer and Comcast customer Brier Dudley begs to differ. In two columns in the Seattle Times, Dudley writes Comcast is tightening the screws on its customers, forcing them to get unwanted equipment that will eventually cost them monthly rental fees set “at market rates.”

Comcast began requiring digital adapters to unscramble digital signals in 2009. Since then, it steadily has been converting more of its system to digital, scrambling more channels and expanding the requirement to use some kind of a cable box or adapter on every TV.

This requirement received the FCC’s blessing last year. The agency agreed to let cable companies scramble all of their channels and require descramblers on every set.

The FCC’s justification was muddled. Scrambling would purportedly prevent stealing content, though the FCC requires conventional television broadcasters to beam their shows freely over the air.

The FCC also made a tortured environmental argument for the move, saying the mandatory adapters allowed cable companies to remotely activate and deactivate service, reducing service calls and their carbon footprint.

Unmentioned is the environmental effect of factories in China making adapters that must be delivered, attached to every TV and continuously plugged in.

Comcast is attempting to mitigate customer anger about the necessary new equipment, offering free boxes for a limited time. But customers might need a road map to find what they qualify for without having to pay an even higher cable bill:

Limited Basic customers with no set top boxes in their homes will be eligible for up to two DTAs (standard definition digital signal adapters), at no charge for two years (five years if you also receive Medicaid), if they request DTAs beginning 30 days before the date of encryption and no longer than 120 days after encryption. New customers, customers who already have DTA devices or those who request them after the offer period will likely be subject to rental fees much sooner, if not immediately;

Customers who subscribe to a higher level of service and receive Limited Basic service on a secondary TV without Comcast supplied equipment are eligible for one device at no charge for one year;

All other customers are subject to Comcast’s new $1.99 per month “additional outlet service charge” for each outlet registered to a DTA. In Seattle, customers who want to watch local channels in HD have to fork over another $2.50 a month for a special HD version of Comcast’s DTA box.

What if you don’t want the extra equipment and return it? Comcast will automatically cancel your cable TV service.

“Customers who do not have digital equipment on their account will not be able to view any channels after Limited Basic channels are encrypted. For this reason, XFINITY TV service will be removed from the account,” warns Comcast. “This may affect multi-product package rates or discounts.”

The encryption will also cripple third-party set-top devices like older versions of Boxee (not compatible with Comcast’s DTA) and TiVo, which will now need a mind-numbing, complicated workaround to keep operating.

Comcast customers will receive written notification as the company gets ready to encrypt service in each area.

Time Warner Cable and Cablevision customers: Is Charter Cable in your future?

The best way the cable industry can grow revenue in the lucrative broadband business is to bring back the same type of collusion and control cable companies maintained over video programming 20 years ago.

Dr. John Malone did not want to sound nefarious in his recent interview with CNBC’s David Faber, but the new part-owner of Charter Communications has built a reputation as cable’s Darth Vader over the last 30 years. His detractors consider his way of doing business akin to a nationwide cable mafia, complete with exclusive, non-competitive territories that assure operators can charge sky-is-the-limit prices.

Malone is now back in the cable business in a big way, and analysts expect he will quickly amass influence in an industry he once led as CEO of the nation’s then-largest cable operator — Tele-Communications, Inc. (TCI).

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Why is John Malone back in the cable business and why buy a piece of Charter Cable? Malone tells CNBC’s David Faber Charter is a company with enormous growth potential through mergers and acquisitions. CNBC says Malone could be targeting Time Warner Cable and Cablevision for acquisition by Charter as early as next year. “There is consolidation yet to be done,” Malone hints.  (7 minutes)

Malone notes the cable industry is on the cusp of transformative consolidation through collaborative agreements, mergers, and outright acquisitions both here and abroad. CNBC speculated that could begin with efforts to further reduce the number of cable operators in the United States, perhaps beginning with a deal by Charter Communications to acquire both Time Warner Cable and Cablevision, which could combine under Malone’s stewardship and Charter’s executive leadership to “compete” with Comcast.

Dr. John Malone

CNBC reporters note Malone has high praise for Thomas Rutledge, CEO of Charter Communications. Rutledge’s earlier experience working for both Time Warner Cable and Cablevision could be an asset in combining all three companies into one. Analysts speculate such a deal could be pitched as early as 2014 when Time Warner Cable will undergo a management makeover with the departure of CEO Glenn Britt. CNBC also noted Cablevision’s imminent sale has been rumored for years, and current leader and family patriarch Chuck Dolan is 87 years old. With cheap credit and Malone’s business savvy, both companies could find themselves part of a Malone-engineered takeover that would vastly expand Charter Communications into the second largest cable operator in the country.

Malone sees the days of traditional cable television coming to an end as consumers turn to “over the top” online video for an increasing share of their viewing time. As cable television rates continue to increase, customers are cutting the cord. Malone believes today’s bloated cable packages are ripe for an upheaval from a-la-carte pricing or theme-based programming bouquets that break expensive sports programming or movie channels out of the traditional basic cable lineup. Malone even suspects a challenge to the industry’s current price models could surprisingly come from the programmers themselves.

Sports networks will be among the first to notice their affiliate revenue collected from cable and satellite companies (and passed on to customers in the form of higher rates) will stagnate as customers drop cable television. Declining viewer ratings also mean lower ad revenues. Malone believes at some point sports teams and/or programming networks will decide that the biggest barrier to winning new viewers is the $70-80 asking price for basic cable. If sports programmers find they can reach new audiences selling their programming online, direct-to-consumer, for $5-10 a month, the basic cable all-for-one-price model will quickly collapse.

“As the cable guys and the satellite guys start to lose customers to the over-the-top guys, some of those economics will be reflected back on the sports guys,” Malone said. “They’ll start losing advertising revenue. They’ll lose affiliate revenue. And they have to face reality that maybe you need to segregate your market like everybody else.”

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John Malone predicts the demise of the traditional bundle of cable television programming within five years. The future is streamed video online, declares Malone, so it is important the cable industry move to manage that competitive threat by acquiring streaming competitors or launching their own services to assure video programming revenue can be protected.  (5 minutes)

Malone sees the future sustainability of the cable industry dependent on the high revenue broadband business.

“I think it is at a point in history when the most addictive thing in the communications world is high-speed connectivity,” Malone told CNBC. “Everywhere in the world that we operate, we’ve just seen the public want more and more data rate. Whether it’s wireless or wired. There’s a big appetite for it. Cable technology right now is the most cost-effective way to deliver that growth in speed.”

Malone believes there is also plenty of room for revenue growth and cost-cutting, which he said can best be accomplished by getting other cable operators together to “cooperate” and “coordinate” broad scale broadband projects that counter competitive threats from third parties.

Malone helped pioneer the cable industry business practice of “don’t compete in my backyard and I won’t compete in yours,” an informal agreement among operators to stay within their own specific territories, safe and secure from competition. In the 1980s and 1990s, Malone’s TCI was one among many cable operators buying and swapping cable systems to build large, regional system “clusters” where only a single cable company provides service, winning economy of scale and a formidable presence that discouraged other wired competitors from entering the business. In most cities, only the deep pockets of AT&T (U-verse) and Verizon (FiOS) have managed to shake things up.

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Bring back the cable mafia? CNBC’s David Faber gets John Malone to admit vertical and horizontal integration — controlling the content and the pipeline — are important factors to protect cable revenue and expand American dominance in cable internationally. Malone is also a big supporter of industry consolidation and believes mergers and acquisitions are necessary to shrink the number of cable operators in the United States. (5 minutes)

The cable mafia?

Malone wants broadband to be carefully managed under the industry’s own control and direction.

Faber asked if Malone wanted to bring back the days of the “cable mafia.”

“Yes, I think we do want to bring back the days of @Home, the days of Ted Turner, the days when we all got together, because together we provided national scale,” Malone said. “Now I think we have the opportunity to create global scale,” he said. “The goal is not to be bigger. The goal is to be more cost-effective.”

The head man in charge at Cable One of Natchez, Miss. admits the local cable system he runs is old and outdated and needs significant upgrades to improve service.

Cable One General Manager John Hilbert told an audience at a public hearing last week that many of the complaints Cable One’s customers in the area are making are simply not ones the company can fix.

While Hilbert’s candid admission may have refreshed an audience used to getting empty promises from providers, Hilbert has been in charge of the cable system in Natchez for several years and is just now discovering that “a lot of the problems with telephone and Internet service stem from old and outdated infrastructure.”

Cable One is preparing what it calls a $500,000 “reinforcement project” to replace and update wires and other equipment.

City officials listened carefully to Hilbert, because the community has been up in arms about the poor service Cable One has been providing western Mississippi. The city and the cable operator are currently negotiating a franchise renewal agreement.

One former judge complained her Cable One phone service has often failed, sometimes for up to three days. The local electric utility said it has lost thousands of dollars over the last few weeks because Cable One’s Internet service has gone offline.

“When I’m sitting here losing money when I know I shouldn’t be, I have a serious problem with that,” Natchez Electric Manager Ricky Long told the Natchez Democrat.

In 2014, customers are likely to face more challenges when the company switches to an all-digital lineup, requiring customers to get a set-top box for every television in the home.

Just how bad is your cable company?

Apparently pretty bad, considering the number of viral videos and guerrilla campaigns being launched against the industry these days, and Time Warner Cable in particular.

“Time Warner Cable Customer Service” is a group that has already heard from Time Warner Cable’s legal team about the cable operator’s trademarks and the potential for apparent “customer confusion.” The parodists might be at risk of losing their domain name, have already had their YouTube and Twitter accounts suspended, and have been told they are not allowed to record any phone calls with Time Warner Cable employees (although the company is allowed to record them… and you.)

What has the cable operator so upset? This:

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Members of “Time Warner Cable Customer Service” take to the streets of Manhattan asking passersby what can the cable company do worse. Then they invade a Time Warner Cable store…. (Warning: Adult Language – NSFW) (3 minutes)

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Another group decided a more general parody was in order. The “First Honest Cable Company” provides full disclosure about your cable service and what they really think of you. (Warning: Adult Language – NSFW) (2 minutes)

Bright House Networks first boosted Internet speeds in January and is now back with a price boost.

The cable provider’s Turbo High Speed Internet increased earlier this year from 20 to 30Mbps for downloads. Its Lightning tier went up even more — from 40 to 60Mbps. Even Business Class customers saw speed increases to 70Mbps. But now prices are up as well — as much as $5 a month more for “upgraded broadband services,” a higher cable modem rental fee, and $3 more for television packages:

• Standard Cable TV service is up $3, from $65 to $68 a month
• Late fees are increasing by an extra $0.50;
• The cable modem rental fee that used to be $2 a month has increased an additional $1.50 — now $3.50 per month.

Price increases will not affect customers on promotional offers or certain bundled service packages combining multiple services.

The fee that bugs many customers the most is the company’s modem rental fee, which applies regardless of the age of your equipment.

“I told the customer service rep that I’ve had this modem for a couple of years and it’s not like altered or improved,” Pete Dooley of Satellite Beach, Fla. told Florida Today. “She said ‘You know the economy is today. They just needed more money.’ I guess you’re just supposed to casually accept it.”

The rest of the rate increases were attributed to the cost of cable television programming.

Jeff Kagan, a cable industry analyst told the online news service cable television rates have roughly doubled over the last decade.