Love can be a fickle thing.

Take Comcast’s affair with J.D. Power & Associates, for example. In Comcast’s filings with regulators, it is very proud that J.D. Power cited Comcast for the most improvement of any cable operator scored by the survey firm. Comcast touted the fact it had managed to increase its TV satisfaction score by a whopping 92 points and Internet satisfaction was up a respectable 77 points. (Comcast didn’t mention the fact J.D. Power rates companies on a 1,000 point scale or that it took the cable company four years to eke out those improvements.)

Last month, J.D. Power issued its latest ranking of telecommunications companies and… well, the love is gone.

If customer alienation was an Olympic event, J.D. Power awarded tie gold medals to both Comcast and Time Warner Cable for their Kafkaesque race to the bottom.

The survey of customer satisfaction largely found only dissatisfaction everywhere in the country J.D. Power looked. While Comcast likes to cite its “customer-oopsies-gone-viral” blunders as “isolated incidents,” J.D. Power finds them epidemic nationwide.

The highest rating across television and broadband categories achieved by either cable company was ‘Meh.’ J.D. Power diplomatically scored both cable companies on a scale that started with “among the best” as simply “the rest.” Customers in the west were the most charitable, those in the south and eastern U.S. indicated they were worked to their last nerve.

“The ability to provide a high-quality experience with all wireline services is paramount as performance and reliability is the most critical driver of overall satisfaction,” said Kirk Parsons, senior director of telecommunications, in a statement.

Having competition available from a high-scoring provider also demonstrates what is possible when a company actually tries to care about customer service. In the same regions Comcast fared about as popular as hemorrhagic fever, WOW! Cable and Verizon FiOS easily took top honors. Even AT&T U-verse scored far higher than either cable company, primarily because AT&T offers very aggressive promotional packages that include a lot for a comparatively low price.

Other cable and smaller phone companies didn’t do particularly well either. Frontier and CenturyLink both earned dismal scores and Charter Cable only managed modest improvement. The two satellite television companies did fine in customer satisfaction for television service, but it was the two biggest phone companies that managed the best scores for Internet service. Among cable operators, only independents like WOW! (and to a lesser extent Cox) did well in the survey.

If J.D. Power is the arbiter of good service Comcast seems to claim it to be, the ratings company just sent a very clear message that when it comes to merging Comcast and Time Warner Cable, anything multiplied by zero is still zero.

J.D. Power ranking (Image courtesy: Reviewed.com)

The merger of Comcast and Time Warner Cable includes castoffs that will be served by a completely unknown spinoff – GreatLand Connections, that nobody can speak with and does not have a website.

At least 2.5 million Comcast customers in cities like Detroit and Minneapolis could soon find their service switched to a new provider that doesn’t have a website, doesn’t answer questions, and won’t give detailed information to municipal officials about its plans, pricing, or service obligations.

GreatLand Connections is the dumping ground for communities Comcast no longer wants to serve, including cities in Alabama, Indiana, Kentucky, Michigan, Minnesota, Tennessee and Wisconsin.

Formerly known as “SpinCo” for the benefit of Wall Street investment banks advising Comcast, the new cable company has been created primarily to help Comcast convince regulators to approve its merger with Time Warner Cable. Comcast believes supersizing itself with Time Warner Cable will win a pass with the FCC by self-limiting its potential television market share. The deal is also structured to dump a large amount of debt on the brand new cable company, allowing Comcast to avoid a significant tax bill.

GreatLand will, for all intents and purposes, be Charter Cable under a different name. Charter will act as the “management company,” which means it will be in charge of most consumer-facing operations.

Beyond that, almost nothing is known about the new cable company, except that it will open its doors laden with $7.8 billion in debt, according to a securities filing. That is equal to five times EBITDA, or earnings before interest, taxes, depreciation and amortization. In comparison, Comcast is 1.99 times EBITDA and Time Warner Cable is 3.07 times EBITDA, making the new cable company highly leveraged above industry averages. Charter Cable, which declared bankruptcy in 2009, is loaded down it debt itself, as it continues to acquire other cable operators.

Finances for the new company appear to be “less-than-middling,” according to MoffettNathanson analyst Craig Moffett, in a note to investors.

Because cable operators face little serious competition, the chances of any significant cable company liquidating in bankruptcy is close to zero, but a heavily indebted company may be very conservative about spending money on employees and operations. It may also leverage its market position and raise prices to demonstrate it can repay those obligations.

With many customers having only one choice for High Speed Internet access above 15-25Mbps — the cable company — the arrival of GreatLand concerns many municipalities facing deadlines to approve a transfer of franchise agreements from Comcast to the new entity.

Jodie Miller, executive director of the Northern Dakota County Cable Communications Commission in suburban Minneapolis said it was impossible to find anyone to talk to at GreatLand. The commission needs to sign off on franchise transfers by mid-December, but nobody can reach GreatLand and the company has no track record of service anywhere in the country.

“We’re not even saying it’s unqualified,” she told Businessweek. “We’re saying we don’t really have information.”

Coon Rapids, Minn. has put franchise renewal negotiations on hold. Michael Bradley, a municipal cable TV attorney and the city’s longtime cable counsel said the deadline has been extended from Oct. 15 to Dec. 15.

“It’s a challenge,” he said. “No one knows who we can deal with locally. Nothing is certain yet and discussions are on hold.”

“We don’t have the answers we need,” added Ron Styka, an elected trustee with responsibility for cable-service oversight in Meridian Township, Michigan, a town served by Comcast about 80 miles west of Detroit.

“Answers have been inadequate at best and mostly not forthcoming,” echoed David Osberg, city administrator of Eagan, Minn. in a filing to the Federal Communications Commission.”It’s not clear whether GreatLand will be financially qualified.”

Eagan has had problems with Comcast in the past, and does not want new ones with GreatLand, especially with broadband service, which is vital to an effort to attract technology jobs to the community.

Channel 35 is Los Angeles’ Government Access station

Los Angeles cable subscribers are paying $30-50 a year in extra franchise fees the city government has no idea what to do with, allowing a bank account dedicated to housing the unspent funds to reach $35 million and counting. For more news related to the city of Los Angles, feel free to take a peek at sites such as Los Angeleno.

A new audit by the Office of the City Controller found no misappropriation or ethical lapses by the city government, but it did criticize the lack of long-term planning regarding how franchise revenue should be used, as well as lax auditing of expenses that were paid from the fund. Los Angeles City Controller Ron Galperin added the city’s lack of consistent auditing of the five major cable operators servicing greater Los Angeles may be allowing cable operators to charge customers franchise fees the companies are keeping for themselves. A 2006 law passed at the behest of Verizon and AT&T allowing statewide video franchise agreements in California isn’t helping either.

For decades, communities have been able to demand up to a 5% franchise fee from cable and phone companies offering video services in their areas in return for access to public rights-of-way and other public property. Most cities, including Los Angeles, have requested the maximum allowed – 5% of the provider’s gross annual revenue earned within the city. Cable operators retaliated by recouping the franchise fee by billing cable customers for it on a separate line on monthly cable bills.

In Los Angeles, 60% of all franchise fees ($31 million) paid are transferred to the city’s all-purpose General Fund, used for all types of city expenses. The remaining 40 percent ($12.4 million) is supposed to be earmarked for a Telecommunications Fund, but the city often raids that account as well. Time Warner Cable subscribers account for 85% of Los Angeles’ cable franchise revenue, AT&T U-verse contributes another 10% with other operators paying considerably less. Last year, Charter Cable wrote a check for less than $5,000, primarily because only a tiny part of the city of Los Angeles is served by Charter today.

So where is the excess money still in the account coming from?

The Unintended Consequences of Statewide Video Franchising

Eight years ago, Governor Arnold Schwarzenegger signed AB 2987:  the “Digital Infrastructure and Video Competition Act of 2006” (DIVCA). In reality, DIVCA was just another statewide video franchise bill heavily pushed by the state’s dominant phone companies — AT&T and Verizon — to let them begin offering video services without having to sign franchise agreements with thousands of local governments across the state.

AT&T and Verizon sold the legislation to the public as a red-tape cutter to bring Verizon FiOS and AT&T U-verse to millions of Californians without unnecessary bureaucratic delay.

But lobbyists from both phone companies, as well as several cable companies, were successful in inserting their own amendments into the law that undercut their arguments for passing the legislation:

• As local franchise agreements expired, companies took their franchise renewal business direct to the state, cutting off local oversight. Communities could no longer require operators to expand into rural areas or impose fines for sub-standard service;
• Cable companies won the right to toss Public, Educational, and Government Access (PEG) channels out of their buildings. Many communities assigned responsibility for housing and operating PEG channels as part of their franchise agreement. DIVCA rendered those agreements void and unenforceable;
• Cable companies no longer had to offer institutional broadband networks for free or at a discount to local governments, schools and libraries, and many existing networks were closed down as soon as the local franchise agreement expired and communities balked at the new prices charged by telecom companies.

But perhaps the most controversial amendment was language that gets AT&T and Verizon out of meeting obligations to build out their fiber networks where they choose not to built them, while still compelling smaller independent telephone companies to offer service to every customer within their telephone service area within a reasonable amount of time.

So instead of promoting a rush towards video competition, both AT&T and Verizon won concessions that let them cherry pick — on their own schedule — customers for AT&T U-verse and Verizon FiOS:

• Verizon is in compliance with DIVCA as long as 25% of the households where service is available are low-income and within 5 years, Verizon increases that to at least 40%;
• AT&T stays out of trouble with DIVCA by providing video service to 35% of low-income households where service is available. Within five years, AT&T must reach at least 50%.

One of the biggest victims of DIVCA are PEG channels which lost the sponsorship of the cable companies that used to underwrite them as part of their franchise agreements. American Community Television reported in California, Illinois and Indiana, where statewide video franchising laws were passed, cable operators that operated PEG channels closed the doors, sometimes with only 30 days notice. Even in states where PEG funding remained, channels have been exiled to Channel Siberia (eg. Channel 1,512) or are under constant threat of losing their channel if they don’t meet an operator’s arbitrary quality of programming criteria.

Time Warner Cable has moved PEG channels to digital service in a majority of their service areas, requiring many customers to have an added-cost cable box to watch.

To help Californian PEG services cope, a state law permitted cities to collect an extra 1% of gross revenue from cable operators to keep funding these channels. But if a city already collects a full 5% franchise fee, any money collected from PEG channels must only be spent on their operations — no raiding of funds allowed. If the local government thinks there are bigger priorities than supporting public, educational, and government access, the future of PEG channels is questionable.

How to Spend the Untouchable Proceeds

The new home of Los Angeles’ Government Access channel

With Los Angeles-area cable companies collecting and sending on the proceeds of the 1% PEG surcharge to city coffers, the money has been more or less just piling up over the last seven years, unspent.

As of the end of June last year, the city had squirreled away about $22 million collected from cable TV customers stashed in a non interest-bearing account. PEG operations across the United States are not known for being profligate spenders, relying on budgets that would be insufficient to keep the lights on at a typical local public television station. So some question whether Los Angeles’ Public Access, Educational Access, and Government Access networks need $22 million to continue operations.

The city has decided the Government Access channel — the one that airs council meetings and other political functions — does need a new home.  So the city is spending $20 million to completely renovate one of the oldest buildings in Los Angeles, the long-vacant three-story Merced Theater near Olvera Street.

When complete, the state-of-the-art digital facilities of Cityview Channel 35 may rival those of some commercial television stations in Los Angeles. The building will house a small performance venue on the first floor, a studio with space for a 70-person live audience, and plenty of office space on the third floor. What it evidently won’t have room for is the Public Access and Educational Access channels that make up the rest of the PEG trio. The new facility is for the exclusive use of Channel 35.

Local residents are happy someone is finally doing something with the theater, which has been empty and unused for at least 30 years. The project could also make Los Angeles’ Government Access channel one of the most capable in the country, producing high quality programming well beyond the ubiquitous city council meetings.

“Space for a live audience of about 70 people will allow us to engage the public with debates, town halls and other events that we weren’t able to do,” Mark Wolf, executive officer at the city Information Technology Agency, which oversees Channel 35, told Downtown News. “The venue also gives us a full upgrade to digital technology, as we’ve been operating in an analog environment.”

Downtown News partly misled its readers when it suggested cable providers are footing the bill for the renovated home of Channel 35. Although money from the city’s general fund won’t be used for the project, the money did originate from cable subscribers who have paid higher cable bills since 2007 because the city elected to collect a 1% PEG franchise fee.

Galperin

Even after spending $20 million on the Merced Theater, the money from Time Warner Cable, Cox, AT&T, Verizon, and Charter cable TV subscribers will keep rolling in. The audit found that by the time the new Merced Theater facility opens in 2016, the city will again have between $21-25 million in unspent PEG funds.

Galperin thinks throwing more money at traditional PEG operations would be a mistake, particularly when younger audiences are not even subscribing to cable television.

“We’re in a new era,” Galperin said. “The old rules that envisioned everybody getting their programming from cable are changing before our very eyes. We are in a totally different era in terms of how people get their information, so much of viewership is on the Internet now, not necessarily on cable.”

Because PEG funds can only be spent on PEG operations, as a starting point, funds could be spent to build up what is now an anemic, barely functioning website for Channel 35. Although the channel does stream online, it is intermittent in our experience. Channel 35 might also partner with local public broadcasting and minority-interest channels in co-production ventures. It should also develop a robust on-demand library of its content for site visitors because that is increasingly how Americans choose to watch television.

Galperin suggested other uses including a public Wi-Fi network and city Internet sites for programming and other information, but these may stray outside of the boundaries of what is permissible under current California and federal law.

Of course, there is one other alternative – rescind the PEG fee altogether until there is a legitimate need to collect the money from already overburdened cable subscribers.

[flv]http://www.phillipdampier.com/video/Surviving DIVCA.mp4[/flv]

Silicon Valley Community Television aired this lengthy conference last fall for the benefit of local governments across California still trying to make sense of the 2006 Digital Infrastructure and Video Competition Act, a provider-influenced piece of legislation that has tied the hands of most communities to manage their local telecommunications infrastructure for the good of their citizens. (2 hours, 47 minutes)

Charter Communications’ march to all-digital service is one big Excedrin headache for many of the communities enduring the cable company’s conversion.

Charter is embarked on a campaign to end analog cable television service, freeing up bandwidth to offer more HD channels and increase broadband speeds. But the switch to digital has been accompanied by frequent service disruptions and outages.

In Texas, customers complain their digital channels are often frozen or pixelated. In Casper, Wyo., where Charter acquired an older cable system from Cablevision that was originally built by Bresnan Communications, customers’ complaints range from inconsistent service and slow response times to loss of sound and frozen video during airing of City Council meetings.

But some of the loudest concerns about Charter originate from the Outer Banks of North Carolina where customers are finding the switch to digital can be very costly.

Tourism is a major part of the local economy and the Outer Banks are filled with seasonal homes, rental condos and hotels. Many property owners maintain seasonal accounts with Charter Cable, only active during the tourist season. Some hotel owners notified about Charter’s plans to transition towards digital service worked with the cable company to buy televisions that would not need additional equipment to work after the switch. With the cable company’s recommendations, some hotel chains purchased dozens or even hundreds of digital-ready television sets installed in rooms that were ready for the switch.

Only recently, Charter notified customers they also planned to encrypt the basic lineup, rendering the digital televisions useless without the additional cost and inconvenience of installing Charter’s digital set-top boxes. Although Charter will temporarily offer customers free rental of the boxes, after the offer expires, customers will pay Charter $6.99 a month for each box. For some upper end condos, the cost of renting multiple boxes will exceed the cost of the cable TV package.

The Outer Banks Voice details several other customer complaints:

With the older analog systems, many owners flat mounted their televisions to walls and had the cable wired directly into the television, out of sight. With boxes now required, rental homeowners will need to figure out where to place the box and how to run the cables to the set.

In addition, rental companies and homeowners will need to keep track of numerous remotes and keeping those remotes supplied with working batteries.

[…] Thus far, Charter is not offering boxes for sale, so owners cannot absorb the cost over the long-run use of the box, and there appears to be some confusion on whether homes with five or more televisions will require a “Pro Installation” at extra cost to ensure signal strength is sufficient.

If such an installation is required, owners and rental management companies will also be required to arrange access for Charter installers.

Rental condos are also faced with yet another logistic hurdle.

Many condos include cable television fees in their monthly association dues, and the cable contracts for all units are in the name of the condo association.

To obtain boxes, condo owners are now going to be required to set up their own individual accounts, often from an out-of-state location, and then determine how to get the boxes installed.

Signal strength is also a concern in condo projects. Even with analog signals, the multiple connections in one area make reception fuzzy and of low quality.

A small sample of complaints found all over Charter’s social media pages.

Charter Communications shared their side of the story about the digital conversion:

Outer Banks, N.C.

Charter customers are notified by newspaper, direct mail, bill messages, phone calls from Charter representatives, and Charter commercial spots beginning at least 30 days prior to their cutover. Charter is making it easy for customers to receive one or more digital boxes at no cost for one, two or five years, depending on the customer’s programming package and other qualifying factors.

Customers that need less than four boxes can have them shipped directly to their home by calling 1-888-GET-CHARTER or pick them up at a Charter Store.

Customers that live out of town, that own vacation homes, can authorize personnel with their property management company or other specified individuals to pick up their boxes. Customers must first authorize those individuals and add them to their account by calling 1-888-GET-CHARTER. The customer account owner can rescind authorization of individuals at any time.

Property Management companies or authorized individuals can then obtain up to five set-top boxes at a Charter Store.

Customers needing more than five boxes should contact Charter 1-888-GET-CHARTER. A professional technician will be scheduled to assist customers with the installation.

Charter Stores are currently operating with expanded hours to accommodate customers during this all-digital project. Charter Store hours will also be expanded in April where peak volume is expected.

Commercial properties have several options available and can work with their Charter Business account representative on the best solution for their business.

Due to advances in technology, solutions available may involve the need for additional equipment in order to provide the best possible cable, Internet and voice products for our customers.

Should regulators bless the coupling of Comcast and Time Warner Cable, some TWC customers will not be invited to the wedding.

In an effort to appease Washington, Comcast is voluntarily abiding by a 30% market share cap the company itself successfully sued to overturn in federal court. That means Comcast plans to voluntarily shed the three million Time Warner Cable customers that would put the company over its self-imposed limit.

Comcast is so confident its merger will win approval, the company is already contemplating what to do with the orphaned customers. Bloomberg News reports Comcast is considering launching a new publicly traded independent cable company to manage the ex-Time Warner customers. It would automatically be the fourth largest cable company in the country, behind the super-sized Comcast, Cox Communications, and Charter Cable. Comcast would use the new entity to claim it was creating a new “cable competitor” in the industry, despite the fact it would almost certainly never compete in markets where other cable companies already offer service.

Other cable companies are already expressing interest in picking up the stranded TWC customers. Among the suitors:

• Charter Communications, which lost its original bid to take over Time Warner Cable;
• Bright House Networks, which now serves markets in the southern U.S.;
• Suddenlink Communications, which primarily serves rural communities and small cities ignored by larger providers.

Comcast hasn’t announced what cities will not be included in the Comcast-TWC merger, and does not plan to decide until at least late spring. Financial strategists are recommending Comcast “spinout” the subscribers to a new entity that would be loaded up with debt to win significant tax savings from the transaction. The new cable company would likely be worth at least $17 billion.

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Bloomberg News reports Comcast would be in the enviable position of creating its own “competitor” by spinning off certain Time Warner Cable customers into a new company Comcast would launch. (2:45)