Big Apple Day

New York City officials are sick and tired of taking complaints about missed cable appointments and other service problems on its 311 city help line.  Nearly 1,200 calls about cable have been made so far this year alone, with fed up New Yorkers annoyed they took a day off work to wait for a cable technician that never arrived, or one who never solved the problem they were called to fix.

Now city officials are forcing the area’s two incumbent cable operators — Time Warner Cable and Cablevision, to pay for their mistakes.

As part of franchise renewal negotiations, both cable companies have agreed to credit subscribers the full amount of that month’s cable bill if the cable guy arrives late, or not at all.

The penalty decreases to $25 after 2012, when Verizon FiOS service is expected to blanket most of the city.

But consumer reforms extend beyond financial penalties for missed appointments.

Customers will soon be able to request notification by e-mail, phone or text message when a technician is heading to their home.  And calls to either cable company should be answered by a real person no more than 30 seconds after dialing.

Many of these reforms are already a part of the franchise agreement New York City’s Office of Information Technology & Telecommunications worked out with Verizon, allowing the phone company to provide cable television in the city.

Time Warner Cable spokesman Alex Dudley didn’t miss the opportunity to turn the challenging new requirements into an opportunity.  He told area reporters Time Warner welcomes the new customer service standards and appreciates the opportunity to compete for customers in the metropolitan New York area.

As Robert Porto, 38, a Time Warner Cable customer in Boerum Hill, Brooklyn, told the New York Times, the new contract will be “the ultimate revenge for the little guy.”

Importantly, none of these consumer-focused reforms would have been possible had New York adopted the kind of “reform” companies like AT&T and Verizon have advocated in other states — statewide video franchising.

Brodsky

New York’s legislature has rejected previous attempts to eliminate local cable and video franchise agreements, citing the loss of control by local municipalities to deal with provider issues that would sail over the heads of a statewide committee in Albany.  New York has been generally hostile to Big Telecom’s deregulation agenda.  One state assemblyman, Richard Brodsky (D-Westchester), even introduced a bill requiring phone companies like Verizon to split the proceeds of asset sales with ratepayers.

Other provisions of the franchise agreements include:

• The right to terminate franchise agreements with Time Warner Cable and Cablevision Systems if broadband-delivered video significantly erodes cable TV revenue over the next 10 years;
• Time Warner Cable and Cablevision are required to invest about $10 million to install Wi-Fi access in 32 public parks in all five boroughs, to be operated and maintained by the companies until 2020;
• At least five new Public, Educational and Government (PEG) community access channels will be added, up from the four that currently exist, by 2012.  At least one must be in HD.  The operators also agree to pay a combined total of more than $9 million, payable in annual installments, plus an additional $2 million of “in-kind” services to pay for equipment and operation expenses;
• More than $20 million to help finance the upgrade of CityNet, the city government-dedicated network;
• Time Warner Cable will establish four community broadband access centers per year (40 total), in collaboration with nonprofits, over life of franchise;
• Time Warner Cable will install 20 miles of fiber per year in underserved commercial/industrial areas over franchise term; and will build-out Brooklyn Navy Yard. Cablevision already serves the commercial blocks in its service areas. Companies will commit to expend $1.8 million per year to bring fiber to commercial buildings of city’s choice.

[flv width=”640″ height=”380″]http://www.phillipdampier.com/video/WABC New York New Yorkers could get money if cable guy stands them up 9-15-10.mp4[/flv]

WABC-TV covers the introduction of pro-consumer cable service reforms for metropolitan New York residents.  (2 minutes)

Big Apple Day

Residents on Long Island are learning what Cablevision subscribers in Bronx, Brooklyn, and Connecticut have known for a few years now — if you want to watch Cablevision’s TV lineup, be prepared to shell out almost $7 a month for every television in your home.

It’s part of Cablevision’s march to an all-digital, encrypted cable lineup.  If you want cable TV, you’ll need to lease one of Cablevision’s digital set top boxes or CableCARD devices.

Cablevision says it will provide customers with free boxes for their televisions for the first year, available in limited quantities at Optimum stores or shipped free to your door by UPS.  But after 12 months, customers with several TV’s will find steep increases to their monthly bills, just to cover boxes many don’t want in the first place.

“It’s just more gouging from Cablevision,” writes our reader Stephanie who lives in Lindenhurst, N.Y.  “We used to watch television box-free at the kitchen table or on the computer with our Slingbox, but now our home will need three more boxes when we already pay them $14 for the two we already have.”

Cablevision's Conversion Schedule for Western Long Island

For customers like Stephanie, that adds up to nearly $35 a month just in equipment fees.

“Our bill is already $170 a month and next year it will probably run over $200 with the boxes we don’t want and whatever their next rate increase turns out to be,” she writes.

Cablevision claims they are not doing anything their competition isn’t.

“In fact, every other TV service provider in the New York metropolitan area already requires digital boxes for each TV,” a Cablevision spokesman stressed.

Those upset with the change are considering making some changes themselves — some by switching to a promotional package from satellite TV or Verizon’s FiOS.

“I am well aware they both want you to use boxes on those services as well, but for a year or two, we could probably knock $30 or more a month off our current cable bill with a promotional deal,” Stephanie says.

What about after the deal expires?

“We’ll just switch back to Cablevision on one of their promotional deals,” she says.  “For this family, it’s about the ‘total amount due’ at the bottom of the bill.”

Cablevision’s ongoing transition to digital caused panic when it blanked out broadcast basic cable service for more than 500 residents of a Coney Island complex housing numerous senior citizens, almost all watching local television signals delivered in analog.  When Cablevision made the digital switch in August, every local channel suddenly disappeared.  The NY Post explained what happened next:

Cablevision also announced this week it had upgraded its set top boxes to support several new applications and services on the way.  Multichannel News covered the story:

Cablevision Systems has now deployed Zodiac Interactive’s interactive TV platform — including support for the industry’s EBIF specification — across the MSO’s entire New York-area footprint serving 2.9 million digital cable subscribers.

The operator is using Zodiac’s PowerUp framework software, running on Cisco Systems’ native set-top box environment, to run several interactive applications and services. These include iO TV Shortcuts, search, an enhanced program guide, video-on-demand navigation and dedicated ITV channels.

The companies also are working together on Cablevision’s remote-storage DVR — which the operator has been planning to launch this year — and the MSO is using Zodiac’s PowerUp Advanced Messaging Solution (AMS) software to integrate Web and mobile applications with set-top boxes.

Some other families are considering a different change.

“Maybe we just should stop watching TV in the kitchen,” Dominick Galletta of East Northport, N.Y., told WNBC-TV.

[flv width=”597″ height=”356″]http://www.phillipdampier.com/video/WNBC New York No Cable Box No TV for You on Long Island 9-16-10.flv[/flv]

WNBC-TV covers frustrated Cablevision customers on Long Island now forced to obtain digital cable boxes for every television in their home.  (2 minutes)

Dolan

Cablevision Systems CEO James Dolan warned cable executives the combination of rate increases and the poor economy could spark a consumer revolt, driving a legislative agenda that could force a-la-carte pricing on cable companies.

“At some point you reach a point where the consumer rebels,” Dolan said. “You’re likely to see that in a reaction in Washington on the government side because it will become a politically easy issue for politicians to jump on and a-la-carte [pricing] is an obvious answer. But the impact of a-la-carte on the programming industry would be devastating. It behooves all the participants to exercise restraint.”

Dolan pointed to high unemployment and a deterioration in earnings among those still employed combined with continuing rate increases as a potentially dangerous combination.  Dolan was especially concerned about payments for local broadcasters and major broadcast networks which have sparked high-profile carriage battles.  Earlier this year, Cablevision briefly dropped programming from ABC and Scripps Networks’ HGTV and Food Network.

Dolan was speaking at the Bank of America Merrill Lynch Media, Communications & Entertainment conference in Newport Beach, Calif.

His comments come at the same time Cablevision is preparing for yet another carriage battle, this time with News Corporation.

On October 15th, Cablevision’s contract to carry FOX’s television stations in New York (WWNY 5 and WWOR 9) and Philadelphia (WTXF 29) will expire. Unless Cablevision renews its agreement with FOX, Cablevision may no longer carry the three over-the-air stations. Also impacted are several FOX Networks’ cable channels: FOX Sports en Español, Nat Geo WILD and FOX Business Network.

News Corporation’s website, KeepFoxOn, turned its attention to the dispute, urging viewers to contact Cablevision.  Viewers are being warned of the potential loss of the channels through advertising messages that began last weekend.

The issue of a-la-carte pricing, which allows cable customers to pick and choose individual channels, has been the nightmare scenario for cable systems and programmers, who fear it would force most niche channels out of business and dramatically cut earnings for cable systems.  The industry also warns it would force every cable subscriber to rent set top boxes to manage channel lineups for every television in the home.

But as programming costs continue to exceed the rate of inflation, relentless rate increases and restrictive contracts that keep most networks out of specialty programming tiers makes cable television a service many Americans are contemplating doing without.

[flv width=”640″ height=”380″]http://www.phillipdampier.com/video/Keep Fox On.flv[/flv]

FOX has begun informing Cablevision viewers they could lose access to their local FOX stations and several FOX-owned cable networks.  (30 seconds)

AT&T U-verse customers may have to do without these shows if an agreement cannot be reached with Rainbow Media

AT&T U-verse customers may lose access to three basic cable networks in less than two days if a dispute over how much money AT&T should pay for the networks isn’t settled.

Rainbow Media’s AMC, We TV, and the Independent Film Channel are all threatened with removal from AT&T’s nationwide U-verse lineup as a two week extension of carriage negotiations appears to be going nowhere.

In an ironic “now the shoe is on the other foot” twist, Rainbow Media is a wholly-owned subsidiary of Cablevision Industries — the cable system serving parts of downstate New York, New Jersey and Connecticut.  AT&T is using some of the same language Cablevision used earlier this year in a dispute over fees charged by Scripps’ Food Network and HGTV, as well as Disney-owned WABC-TV in New York.  Rainbow even borrowed a page from Scripps and launched an AT&T protest site, Facebook page and Twitter account.

“AT&T is acting in an aggressive manner that puts their corporate interests ahead of their customers,” AMC said in a statement. “We are negotiating in good faith with AT&T and are hopeful that we can reach an agreement as soon as possible so that our viewers don’t lose out.”

Meanwhile, AT&T is publicly insulting Rainbow’s cable networks.

“Based on aggregate data we obtained from third party industry sources and our own subscribers, some of the Rainbow channels are among the least-watched and most overpriced per viewer compared to other major programming providers,” an AT&T spokeswoman told Deadline. “They’re also trying to force the renegotiation of a contract for one of their other channels that is not yet expired and force us to carry a new channel that wasn’t even formally presented to us until after the recent July 1 contract extension. We want our customers to know that we can’t and won’t give in to unreasonable deals that unfairly disadvantage our customers.”

Despite AT&T’s bravado, Rainbow may have the upper hand with a more aggressive outreach campaign.  AT&T’s website for U-verse has not mentioned the dispute — a potential PR mistake if it wants to argue its position about programming costs.

Bresnan Communications, the nation’s 13th largest cable operator with 308,000 customers in Colorado, Montana, Wyoming, and Utah, has been sold to Cablevision for $1.36 billion dollars — $4,300 a subscriber — well above the asking price of one billion dollars, including the company’s debt obligations.

Providence Equity Partners Inc. of Providence, Rhode Island, majority owner of Bresnan unloaded the cable company to help boost its earnings for clients.  Private equity firms like Providence have been suffering in the current economic climate, turning in their worst returns since 2000.  Many are selling off holdings to pay investors.

Bresnan spokesman Shawn Beqaj said the sale had nothing to do with founder William Bresnan’s death last November at age 75.

Bresnan, 30 percent owned by Comcast, today specializes in providing service in the sparsely populated mountain west states that have been ignored by larger companies.  At least 44 percent of Bresnan’s business is in Montana, where 688 of the company’s 1,300 employees work.  But the company’s founder, William Bresnan didn’t start out providing service in any of the states where the company operates today.

The acquisition by Cablevision, known mostly for its suburban New York City-area cable systems, would bring Bresnan’s current owners a considerable bonus over the asking price, and Cablevision (and the debt-financing banks) will pay in cash.

Other bidders included Suddenlink and a company controlled by former cable czar Dr. John Malone.

Cablevision managed to leverage the deal with less than $400 million of its own equity, financing the remaining $1 billion dollars between Citigroup and Bank of America Merrill Lynch in non-recourse debt.  That means if Cablevision’s buyout of Bresnan falters, the banks can only recoup their losses by seizing and selling the acquired Bresnan systems.  They can’t go after Cablevision’s other cable systems or sports ventures to make up the difference.

Considering Bresnan subscribers in the Northern Rockies face little prospect of robust competition, and Bresnan cable broadband can easily exceed broadband speeds offered by telephone rival Qwest, most analysts expect few problems from the deal.

[flv]http://www.phillipdampier.com/video/CNBC Bresnan Acquired by Cablevision 6-14-10.flv[/flv]

CNBC explains the Bresnan-Cablevision Deal.  (3 minutes)

Bresnan Founder’s Story Is Echoed Across the Entire Cable Industry

The late William Bresnan -- Founder, Bresnan Communications

Bresnan’s journey through the cable industry over several decades tells the story of the often-ruthless deal-making, horse-trading, and customer-financed  mergers and acquisitions starting after cable deregulation in 1984.  Rates spiked to pay ever-increasing sums to buy and sell cable properties.  To own a cable system, it was said in the late 1980s, was a license to print money.

Bresnan’s involvement in the cable industry began with a job in the engineering department of a midwestern cable company and moved into management at a number of companies, most now long-gone after waves of consolidation.  Those with cable television dating back to the 1970s may even recall some of the names:

H&B American Cablevision: Operator of rural cable systems, most with around 12 channels, offering residents clear reception of over-the-air television signals.  They had a loyal customer base, stable earnings, but little potential for growth.

TelePrompTer: The nation’s largest urban and suburban cable operator through much of the 1970s, but a 1972 bribery scandal for a cable franchise agreement in Trenton, N.J., lead to bribery and perjury charges for TelePrompTer’s principal owner, Irving Berlin Kahn.  The famous songwriter’s nephew ordered the company to spend nearly everything to help mount his defense.  The TelePrompTer scandal would ultimately force the company to sell itself to…

Group W Cable: Westinghouse acquired the financially-troubled TelePrompTer in 1981.  Group W itself would exit the business by 1986 with an acquisition feeding frenzy among four other cable operators — American Television and Communications Corp.; Tele-Communications Inc.; Comcast Corp. and Daniels & Associates Inc.  Ironically, only Comcast would survive merger-mania intact.  ATC systems eventually became a part of Time Warner Cable.  TCI systems were acquired by Comcast.  Daniels was itself a buyer and seller of cable systems.

Bresnan Communications was founded in 1984, not in the mountain west, but in the upper peninsula of Michigan where Bresnan acquired and ran several small cable systems thanks to the help of cable czar Dr. John Malone, CEO of Tele-Communications, Inc., (TCI).  Millions of Americans are familiar with TCI’s own journey through consolidation, first becoming AT&T Broadband and then later as a part of Comcast.

Over the next 14 years, Bresnan expanded operations with Malone’s help.  At one point Bresnan jointly operated cable systems with TCI in northern Michigan, Wisconsin, Minnesota, Nebraska, Georgia and Mississippi serving approximately 660,000 customers. The company even bought cable systems in post-Communist Poland and in Chile, the latter eventually sold outright to TCI.

Bresnan Customers Benefit from Founder’s Technical Background

What set Bresnan Communications apart from the rest of the smaller players in the industry was the founder’s in-depth understanding of cable technology.  Bresnan understood where the industry was going, and had an insatiable appetite for new technology that would also leverage additional growth in the business.

Bresnan spent heavily to upgrade his cable systems, deploying the hybrid fiber-coaxial cable architecture (HFC) in 1997 which is still in use at most cable systems today.  HFC would set the stage for Bresnan to compete with satellite television’s multi-hundred channels, and would let him sell telephone and broadband service to his customers.

That was unprecedented for smaller cable operators.  In the 1990s, it was still common to find small cable systems running only a few dozen channels.  If these legacy cable systems didn’t upgrade, DISH and DirecTV could eat them for lunch.  For those that would raise the necessary money, upgrades were performed.  For those that couldn’t, many would exit the business, selling their cable systems to larger, better-equipped enterprises.

Buy Low, Sell High

Beyond anything else, Bresnan was a businessman.  He had a track record of acquiring cable systems at fire sale prices and selling them for a tidy profit.  So during the height of the dot.com boom, he could hardly ignore a 1999 call from Microsoft co-founder Paul Allen.  Flush with cash to spend, Allen saw cable systems as a key component of his dream for a “wired world.”  Cable companies owned dozens of networks brimming with content that he believed could help drive people to broadband.  Owning both the content and the pipeline to deliver it could drive up the value of both, and Allen could control both.  He had already established himself as owner of Charter Communications, itself a medium-sized cable operator.

Allen’s cable acquisition shopping spree inflated values of cable systems to all-time highs, finally reaching nearly $5,000 per subscriber in crazed bidding wars.  Allen offered $3.1 billion dollars for Bresnan’s small cable empire.  Bresnan sold.

Bresnan Communications Recreated

By 2003, the dot.com boom was well over and done with, and those high-spending online tycoons saw the value of their acquisitions and enterprises erode away.  For Allen, his much-treasured vision had become a cash-sucking albatross.  Charter Communications’ stock by then had lost 95 percent of its original value.  Consumer protection regulation had also arrived in 2003, putting a stop to subscriber rate increase-fueled bidding wars.  Cable rates had risen 61 percent from the time the industry was deregulated in 1984 until legislative relief took effect in early 2003.  When the Money Party ended, stock prices for cable operators crashed.

Bresnan saw the deflation in the industry as an opportunity to buy his way back in, and started shopping.  That year AT&T Broadband, formerly TCI, found itself considering an acquisition offer from rival Comcast.  AT&T owned cable systems large and small, several of which were in the Northern Rockies, hardly cable’s fast lane.  While Comcast had big plans for AT&T cable systems in larger areas, it would be willing to part with smaller systems acquired as part of the deal.

By the time Bresnan arrived with an offer in hand, cable system values dropped further, and his bid for the roughly 300,000 subscribers that comprise today’s Bresnan Communications would be accepted at the fire sale price of $2,100 per subscriber.

Since the acquisition, Bresnan upgraded its systems, offering speeds up to 15/1 Mbps in its rural service area and maintains a reputation in the industry for running well-managed cable operations.