Tough economic times often bring an incentive to steal cable service, especially when being given the name and number of a “connection” that can hook you up for service priced at almost $75 a month for a one-time fee of $50-75 dollars.

Time Warner Cable, among other Cleveland-area utilities, were on the hunt for one alleged under-the-table installer — Eddie Hunt — for nearly a year.

Last Wednesday, a sting paid off.

“He’s kind of known as the hook-up man. If you want to go the black market route and risk getting in trouble, he’s the man, ” Time Warner Security Director Kevin Pratt told Cleveland TV station WKYC.

Hunt is certainly qualified to install cable — he’s been allegedly fired twice from his last two jobs working for cable companies.

Hunt allegedly charged local residents a “one time” fee for unlimited cable, until security measures cut the free service off.  Time Warner claims Hunt would then be back for more money to restore the service.

Time Warner Cable surveillance video shows Hunt accepting money for an illegal cable hookup — video later partly shown by WKYC News.

Hunt was arrested by local authorities.  Time Warner Cable says it will run an amnesty program for those with illicit cable hookups, allowing them to become paying customers without legal penalties.  But the cable company says it will give only one warning before they would move to have customers prosecuted for cable theft.

Cable companies estimate at least 14 percent of their “customers” aren’t paying for cable service.  The industry claims this hurts local communities through reduced franchise fee payments and raises prices for everyone else.

“It costs you and me, the government and everybody,” said Pratt. “It’s definitely not a victimless crime.”

[flv width=”480″ height=”288″]http://www.phillipdampier.com/video/WKYC Cleveland Garfield Heights Sting nabs alleged cable TV pirate 7-1-11.flv[/flv]

WKYC-TV ran this exclusive story on Eddie “The Hookup Man” Hunt, alleged to be responsible for cable and other utility theft in the Cleveland, Ohio area.  (3 minutes)

Hawaiian Telcom on Friday won a 15-year non-exclusive franchise to develop and market cable television service on the island of Oahu.

The telephone company will be the first major competitor to Oceanic Cable in at least a decade, at least where HawTel plans to provide service.

“We are very pleased to have reached this important milestone in the development of our exciting new video service and will have more details to share about our plans in the next several weeks,” said spokeswoman Ann Nishida Fry.

Many HawTel-watchers predict the phone company will choose an IPTV platform over a hybrid fiber-copper network to support the service, much like AT&T’s U-verse.  HawTel plans a gradual rollout as neighborhoods are “upgraded” to support the service.

Oceanic Cable president Bob Barlow said he wasn’t too concerned with HawTel’s entry into the market.  He told the Hawaiian Star-Advertiser customers should not expect any dramatic savings or price cuts.

“Most of our customers don’t bundle services, and more than 60 percent of our video costs come from programming,” he said.

Barlow expects the fiercest level of competition will come from who delivers the best customer service.

[flv width=”480″ height=”380″]http://www.phillipdampier.com/video/KHON Honolulu Hawaiian Telcom to Offer Cable TV 6-24-11.mp4[/flv]

KHON-TV in Honolulu leads their newscast with HawTel’s approval for a cable television franchise on Oahu.  (2 minutes)

Hulu has received an unsolicited, and still private offer to buy the company lock, stock, and barrel — disengaging some of America’s largest television networks from the online streaming business Hulu represents.

With an offer in hand, Hulu’s owners News Corp., Walt Disney, and Comcast/NBC have decided to hire investment bankers to solicit any competing offers for the service.  Yahoo! may be one of the companies interested.

Hulu has always represented an irritation for program buyers — notably cable networks and television stations — that purchase programming to rerun on cable networks and television stations.  Because Hulu gives away most of its content for free, these buyers argue it devalues the programming they are buying.

In short, if everyone has already been able to watch 30 Rock several times online, for free, why pay top dollar to buy the series to show on a local television station?

The problem is even worse from the perspective of cable, phone, and satellite companies in the business of selling video packages to customers.  As soon as viewers discover they can watch all of their favorite shows online, again for free, why buy the cable TV or satellite package?

The Los Angeles Times reports Hulu may have some bad news in store for cord cutters: it may implement its own “authentication” system that would only allow instant access to those with a verified subscription to a pay television package.  All others would need to wait just over a week before they can watch popular shows during a limited viewing window.

For many analysts, that will slash the service’s net worth to a would-be buyer.  So would the inability of the new owners to win long-term contracts for the rights to keep popular series and shows on Hulu for the indefinite future.  In the case of Comcast/NBC, it’s a classic case of being torn between bringing your programming to more viewers and eroding away your company’s own cable subscriber base.

[flv width=”360″ height=”290″]http://www.phillipdampier.com/video/Bloomberg Olson Says Yahoo Google Amazon Potential Hulu Buyers 6-22-11.mp4[/flv]

Bloomberg News reports on rumors Yahoo!, Google, and Amazon may be interested in acquiring Hulu.  (5 minutes)

Menino

Boston Mayor Thomas Menino has problems with Comcast.  The cable operator, long a dominant player in the city of Boston, has been raising basic cable prices for the last several years, and the mayor’s office has had enough.  This week Menino filed a petition asking the Federal Communications Commission to give the city “emergency control” over the price of basic cable service in Boston — the only control permitted in the largely deregulated cable television marketplace.

Menino waved a study done at the behest of the city showing residents were paying substantially higher prices for the lowest level of service from Comcast.  Basic Service, which includes 37 local over the air stations and a handful of shopping and public access channels costs $15.80 inside city limits — up from $9.05 in 2009.  In nearby Cambridge, the same service costs $7.30 a month.  What’s the difference?  Cable rates are completely deregulated in the city, but smaller communities around Boston lack sufficient meaningful competition, so they are permitted by law to continue regulating rates for the lowest tier: Basic Service.

Now Menino wants those rates brought back under control for the benefit of seniors and low income residents, among the 10,000-15,000 local homes that subscribe to the economy service.

It’s just the latest challenge for Boston, which is among a few cities along the coast of the northeastern United States not benefiting from aggressive broadband and video competition between the phone and cable company.  Just over 200 miles away, metropolitan New York and the bedroom communities in that state, as well as New Jersey and Connecticut, have access to super fast broadband from Verizon FiOS, Time Warner Cable, Cablevision, and Comcast — the latter predominately serving greater Philadelphia.

Boston has been bypassed for Verizon FiOS, is ignored by other potential cable competitors, and is stuck with poor-performing cable overbuilder – RCN, which has focused most of its efforts on multi-dwelling apartment and condo units in the city.  The rest of Boston gets ‘take it or leave it’ service from Comcast or DSL from Verizon.

Comcast was quick to respond to Menino’s call for reregulation, noting they provide $5 senior discounts for their cable customers and offer cheaper service than the alternatives — $17.50 a month from RCN or between $30-35 for promotions from DirecTV and DISH Satellite.

Menino’s dealings with telecommunications companies in Boston have run hot and cold for years.  In February, Menino appeared with Comcast senior vice president Steve Hackley to celebrate the opening of a Digital Connectors program for up to 2,800 low income households, paid for by federal stimulus grant money.  Under the program, students who complete computer training courses receive discounted Comcast Internet service for $10.95 a month for the first year and $15.95 for the second year.

Boston

Menino’s office has often been a watchdog when it comes to Comcast fulfilling its franchise obligations, and the city had high hopes competition from RCN would extend a choice of cable providers to most city residents.  That has not happened.

The city’s other telecommunications provider, Verizon, has been in contention with the city for several years.  The trouble began in 2007 when Menino declared war on property tax exemptions for utility poles dating back to 1915, granted to telecom companies like Verizon.  Four years later, that battle has culminated in Verizon literally wiring its fiber optic FiOS service around the city of Boston, refusing to deliver service inside it.

The promise of Verizon fiber has often gone unfulfilled or delayed in many larger cities, subject to bureaucratic delays not experienced in smaller communities.  Some towns and villages in Massachusetts signed franchise agreements just a few months after the company came knocking.

One local official, not authorized to speak publicly on the matter, told Stop the Cap! many communities welcomed Verizon’s fiber optic initiative with open arms.

“You have to understand there is a different mentality among government officials in smaller towns than there is among larger cities,” the official tells us. “In our town of 35,000 when Verizon offered to wire competitive service in our area, we wanted to know where to sign and when they could get started.”

The official says the local government was concerned about making sure Verizon repaired any damage to local infrastructure, abided by local zoning rules, and guaranteed they would not bypass parts of the town.  Negotiators also fought for funding to upgrade equipment for the community’s public access channels, but never went into the negotiations thinking about how much they could extract from the phone company.

“In larger cities in this state, there is a definite mentality that Verizon represents a golden goose ready and willing to lay golden eggs in return for franchise agreements,” the official told us.  “Maybe that is true, but when you are in a smaller town, you recognize the degree of willingness to invest capital to tear out old wires and replace them with fiber is far less here than a city like Boston, which has the potential of many more customers.”

Boston, like other large cities, prepared for protracted negotiations with the phone company over the new fiber service.  At the same time, Mayor Menino infuriated Verizon when he won his property tax lawsuit against the company, collecting $5 million in tax payments that one city official rubbed in.

Ronald W. Rakow, Boston’s commissioner of assessing, told the Boston Globe at the time: “We will actually be sending a bill to them for that later today,’’ Rakow said. “Don’t want to let the ink dry.’’

No Verizon FiOS for Boston

The argument over property taxes may have been the final straw for Verizon FiOS in Boston.  Menino suspected as much, telling the Globe “they insinuated that we weren’t going to get it because of my position on telecommunications.’’

Even then-Verizon CEO Ivan Seidenberg warned the city during a speech at the Boston College Chief Executives’ Club of Boston “to be careful when considering new taxes or regulations.”

Verizon has since stopped expanding its FiOS service to new cities.

“We knew as the financial crisis grew we were smart to sign up earlier rather than later, because if we didn’t, we would never have the service today,” the local official tells us.  “I have sympathy with local officials in every city trying to do what is best for their residents, but anyone who understands wired telecommunications should know these kinds of projects are exceedingly rare — grab them when you have the chance.”

Just a few years later, the impact of earlier decisions not to hurry competition into the city of Boston and the city’s tax policies have become clear:

• Comcast may be forced to reduce their Basic Service rate, but nothing prevents them from increasing Digital Service cable rates to make up the difference;
• RCN’s network has languished, providing competitive choice to just 15,000 local residents.  Comcast serves at least 170,000;
• Verizon has no plans to offer FiOS in the city indefinitely;
• Menino’s victory claim that Verizon should pay its fair share in property taxes seems less victorious today as the phone company began passing on the new taxes to ratepayers as a “Massachusetts Property Tax Recovery Surcharge” in March, 2010.
• No other competitor has appeared on the horizon willing to take on Comcast in the city of Boston.

Click to enlarge

Your cable company has a problem.  Collectively, the cable industry has lost more than 2 million video customers over the past year, and the problem may be getting worse.  Some of the largest cable companies in the United States are making excuses for the historic losses:

• The bad economy
• Housing and foreclosure crisis
• High unemployment
• Family budget-cutting

But cable companies should be rethinking their excuses, according to a new report from Strategy Analytics.

“Throughout the past seven consecutive quarters of subscriber losses, the inclination of cable has been to point the finger at various external factors,” said Ben Piper, Director of the Strategy Analytics Multiplay Market Dynamics service. “Our analysis shows that neither the economy nor the housing market is to blame for these subscriber defections. The problem is one of value perception.”

Value perception.  That’s a measurement of whether or not one feels they are getting good value for the money they pay for a product or service.  Value comes in several different forms, starting with emotional — do I feel good, safe, secure, or nostalgic using the service?  Can I imagine life without it?  What about my friends and family — will I stand out if I am not buying this product?  It’s also practical — Can I afford this?  Can I find a cheaper or better alternative?  Do I really need this service anymore?

Tied into value perception is customer goodwill.  If you have an excellent experience with a company, letting go of their products comes much harder.  If you feel forced to deal with a company that has delivered poor and expensive service for years, pent up frustration will make it much easier (and satisfying) to cut them loose at the first opportunity.

Embarq used to be Sprint's pathway to prosperity in the local landline business, until cord cutting put landlines into a death spiral.

In the telecommunications industry, value perception is a proven fact of life.  It began with phone companies.  Formerly a monopoly, landline providers have been forced to try and reinvent themselves and become more customer-friendly.  First long distance companies like Sprint and MCI moved in to deliver cheaper (and often better quality) long distance service.  Sprint even got into the landline business themselves, forming EMBARQ, which at its peak was the largest independent phone company in the United States.  When Voice Over IP providers like Vonage and the cable industry’s “digital phone” products arrived, they promised phone bills cut in half, and introduced the concept of unlimited long distance calling.

The value perception among consumers became clear as they began disconnecting their landlines.  The alternative providers offered cheaper, unlimited calling services, often bundled with phone features the local phone company charged considerably more to receive.  Even though VOIP is technically inferior in call quality in many instances, the value the services provided made the decision to cut the phone cord easier.

But local phone company landline losses would only accelerate with the ubiquity of the cell phone, but for different reasons.  What began with high per-minute charges for wireless calls evolved into larger packages of calling allowances, with plenty of free minutes during nights and weekends, and often free calling to those called the most.  Most Americans end the month with unused calling minutes.  As smartphones gradually take a larger share of the cell phone market, the accompanying higher bills have forced a value perception of a different kind — ‘I can’t afford to keep my landline –and– my cell phone, so I’ll disconnect the landline.’

The cable industry has traditionally faced fewer competitive threats and regularly alienates a considerable number of customers, but still keep their business despite annual rate increases and unwanted channels shoveled into ever-growing packages few people want.

This pent up frustration with the cable company has led to perennial calls for additional competition.  That originally came from satellite television, which involved hardware customers didn’t necessarily like, and no option for a triple play package of phone and broadband service.  The cable industry offers both, and by effectively repricing their products to discourage defections from bundled packages, customers soon discovered the resulting savings from satellite TV were often less than toughing it out with the cable company.

As a result, satellite television has never achieved a share of more than 1/3rd of the video market.  Many satellite customers are in non-cable areas, signed up because of a deeply discounted price promotion, were annoyed with the cable company, or didn’t care about the availability of broadband or phone service.  When the price promotion ends or technical issues arise, many customers switch back to cable.

More recently, researchers like Strategy Analytics have discovered some potential game-changers in the paid video marketplace:

• The impact of broadband-delivered video content
• The Redbox phenomena
• Competition from Telco TV
• The digital television conversion

Strategy Analytics studied consumer perceptions and found customers braver than ever before about their plans to cut cable’s cord.  According to the consumers surveyed, nobody scores lower in value perception than cable companies.  Citing “low value for money,” over half of the cable subscribers surveyed told the research firm they intended to disconnect their cable TV package in the near future.

While other researchers dismiss those high numbers as bravado, there are clear warnings for the industry.

“Much ink has been spilled on the topic of cord cutting and even skeptics are now admitting that it can’t be ignored,” said Piper.

Indeed, Craig Moffett, an analyst with Sanford Bernstein who almost never says a discouraging word about his beloved cable industry, told Ad Age Mediaworks the issue of cord-cutting was real.

“It’s hard to pretend that cord cutting simply isn’t happening,” Moffett said.

Craig E. Moffett, perennial cable stock booster, even admits cord-cutting is real.

The most dramatic impact on the cable industry has been in the ongoing erosion of the number of premium channel subscribers, those willing to pay up to $14 a month for HBO, Cinemax, Showtime, or Starz!.  The reason?  Low value for money.  As HBO loses subscribers, Netflix and Redbox gain many of them.  Netflix still delivers a considerable number of movies by mail, but has an increasingly large library of instant viewing options over broadband connections.  Strategically placed Redbox kiosks deliver a convenient, and budget-minded alternative.

The loss of real wage growth, the housing collapse, and the down-turned economy do put pricing pressures on the industry, but some cable executives hope the time-honored tradition of customers howling about rate increases without ever actually dropping cable service continues.

But as new platforms emerge, some delivering actual pricing competition to the cable TV package, increasing numbers of customers are willing to take their video business somewhere else.  Some are stopped at the last minute with a heavily discounted customer retention pricing package, but that doesn’t keep them from sampling alternative online video options.  Among those who actually do leave, some are satisfied with the increased number of channels they get for free over-the-air after America’s digital television conversion.

Many others are switching to new offerings from telephone companies.  Both AT&T and Verizon deliver video packages to many of their customers, often at introductory prices dramatically lower than their current cable TV bill.  When considering a bill for $160 for phone, video, and broadband from the cable company or $99 for the same services from the phone company, $60 a month in savings for the first year or two is quite a value perception, and the inevitable disconnect order is placed with the cable company.

Ad Age‘s own survey, more skeptical about cord-cutting, confirmed that many former cable TV customers left for budgetary reasons, but many also kept their triple play packages.  They just bought them from someone else.

Also confirmed: a dramatic upswing in online viewing, sometimes paid but often ad-supported or free.

Strategy Analysts concludes in its report, available for $1,999, that the ongoing erosion of cable TV subscribers isn’t irreversible, but it requires urgency among providers to become more customer-friendly and increase the all-important value perception.

In other words: respecting the needs and wishes of your customers.

Thankfully, the cable industry is dealing with competitors like AT&T, who are willing to assassinate their current lead in value perception by slapping Internet Overcharging pricing schemes on their broadband service.  That will certainly raise the ire of their DSL and U-verse customers, many who are treating the customer unfriendly usage limits as an invitation to leave.  Their former cable companies are waiting to welcome them back.  The real question remains, will cable customers now be treated better?