Two years after energy conservation groups revealed many television set-top boxes use almost as much electricity as a typical refrigerator, a voluntary agreement has been reached to cut the energy use of the devices 10-45 percent by 2017.

The Department of Energy, the Natural Resources Defense Council, the American Council for an Energy-Efficient Economy, the Appliance Standards Awareness Project, the Consumer Electronics Association, and the National Cable & Telecommunications Association agreed to new energy efficiency standards for cable boxes expected to save more than $1 billion in electricity annually, once the new equipment is widely deployed in American homes. That represents enough energy to power 700,000 homes and cut five million tons of CO2 emissions each year.

“These energy efficiency standards reflect a collaborative approach among the Energy Department, the pay-TV industry and energy efficiency groups – building on more than three decades of common-sense efficiency standards that are saving American families and businesses hundreds of billions of dollars,” said Energy Secretary Ernest Moniz. “The set-top box efficiency standards will save families money by saving energy, while delivering high quality appliances for consumers that keep pace with technological innovation.”

DVR boxes are the biggest culprits. American DVRs typically use up to 50W regardless of whether someone is watching the TV or not. Most contain hard drives that are either powered on continuously or are shifted into an idle state that does more to protect the life of the drive than cut a consumer’s energy bill. A combination of a DVR and an extra HD set-top box together consume more electricity than an ENERGY STAR-qualified refrigerator-freezer, even when using the remote control to switch the boxes off.

Manufacturers were never pressed to produce more energy-efficient equipment by the cable and satellite television industry. Current generation boxes often require lengthy start-up cycles to configure channel lineups, load channel listings, receive authorization data and update software. As a result, any overnight power-down would inconvenience customers the following morning — waiting up to five or more minutes to begin watching television as equipment was switched back on. As a compromise, many cable operators instruct their DVR boxes to power down internal hard drives when not recording or playing back programming, minimizing subscriber inconvenience, but also the possible power savings.

In Europe, many set-top boxes are configured with three levels of power consumption — 22.5W while in use, 13.2W while in standby, and 0.65W when in “Deep Sleep” mode. More data is stored in non-volatile memory within the box, meaning channel data, program listings, and authorization information need not be re-downloaded each time the box is powered on, resulting in much faster recovery from power-saving modes.

The new agreement, which runs through 2017, covers all types of set-top boxes from pay-TV providers, including cable, satellite and telephone companies. The agreement also requires the pay-TV industry to publicly report model-specific set-top box energy use and requires an annual audit of service providers by an independent auditor to make sure boxes are performing at the efficiency levels specified in the agreement. The Energy Department also retains its authority to test set-top boxes under the ENERGY STAR verification program, which provides another verification tool to measure the efficiency of set-top boxes.

Comcast, DirecTV, DISH Network, Time Warner Cable, AT&T, Verizon, Cox Communications, Charter Communications, Cablevision, Bright House Networks and CenturyLink will begin deploying new energy-efficient equipment during service calls. Some customers may be able to eventually swap equipment earlier, depending on the company.

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WCCO in Minneapolis reported in 2011 cable operators like Comcast may make subscribers wait 30 minutes or more for set-top box features to become fully available for use after plugging the box in. (1:50)

The incoming CEO of Time Warner Cable will walk away with more than $50 million just for getting out-of-the-way of a sale or breakup of the company.

Robert Marcus is scheduled to take over the CEO role Jan. 1 after Glenn Britt retires. But there is a good chance Marcus won’t have a cable company to run if executives decide to accept anticipated takeover offers due within weeks that could turn ownership of Time Warner over to Charter Communications or split up subscribers among several potential buyers including Comcast, Cox, and Charter.

Reuters reports Marcus will earn the most if he can hold off buyers for the next four weeks until he becomes CEO. Under his employment contract, Marcus would then qualify for a generous goodbye package:

• A compensation bonus amounting to three times his base salary of $1.5 million;
• A departure award amounting to three times his usual $5 million annual bonus;
• Permission to cash out the large amount of stock he has earned as part of his compensation, now valued at $37 million.

In total, Marcus could earn $56.5 million for just one day of work — long enough to shake the hands of the new buyer(s) and head for the elevators for the last time. If the company sells before Dec. 31, Marcus will still land on his feet, earning a severance package valued at $47.5 million.

In a separate move, Time Warner Cable executive vice president Peter Stern dumped 4,253 shares of his company’s stock at $130 a share, taking $552,890 in compensation.

While top managers are routinely offered generous departure packages more commonly known as “golden parachutes,” thousands of lower-level Time Warner Cable employees will likely face the ax within months of any sale, predicted one analyst. In similarly sized mergers and buyouts, the largest job losses will impact call center workers and middle management. Other employees will likely leave if asked to move to regional operations centers in other cities where the buyer(s) operate. At least one analyst said it was unusual for Time Warner Cable to proceed with a CEO switch while the company is in play.

Marcus understands how the business of mergers and acquisitions work; he started his career as an attorney specializing in the practice.

In Search Of… Savings

The cable industry’s week-long feeding frenzy over consolidating Time Warner Cable out of existence comes with the theory that growing larger guarantees cheaper programming costs from volume discounts and influence. But hang on, says Wall Street analyst firm Sanford C. Bernstein.

This week, senior analyst Todd Juenger released a report, “Will Cable Consolidation Slow Down Affiliate Fee Growth? We Say ‘No,’” that questions the theory the bigger the company, the more leverage available to keep costs down.

Juenger says that few customers are in love with their local cable company, and programmers know it. If another brawl erupts between CBS and a cable operator, the presumption of leverage to quickly resolve the dispute is more hope than reality because customers will readily abandon one provider for another to get what they want.

“Consumers are much more loyal to their favorite TV networks than they are to their distributor,” Juenger says. “Every time a distributor has tried to fight back by dropping the content from one of these [big programming] companies, it has ended badly for the distributor because consumers will switch distributors, not TV networks.”

Programming carriage wars will continue to hurt cable companies as long as there is a satellite or telco-TV competitor ready to sign up disgruntled customers. If a suite of Viacom-owned networks are dropped during a cable fee dispute, the cable operator will save around $2.75 a month per subscriber. But if that subscriber decides to change providers, operators lose as much as $40 in marketing costs paid to attract that subscriber in the first place.

Juenger believes the only way combining cable operators will save on programming fees is when smaller cable operators like Charter get the benefit of big discounts on programming offered to larger, high volume providers like Time Warner Cable.

Juenger adds bringing Comcast in as a buyer gets complicated because if Comcast tries to drop networks, programmers might have leverage by appealing to the federal government with claims Comcast is violating its agreement with the federal government to avoid abuse of market power to strangle competitors.

News that two major cable operators are contemplating breaking up Time Warner Cable and dividing customers between them has caused stock prices to jump for all three of the companies involved.

CNBC reported Friday that Time Warner Cable approached Comcast earlier this year about a possible friendly takeover under Comcast’s banner to avoid an anticipated leveraged takeover bid by Charter Communications. Top Time Warner Cable executives have repeatedly stressed any offer that left a combined company mired in debt would be disadvantageous to Time Warner Cable shareholders, a clear reference to the type of offer Charter is reportedly preparing. But the executives also stressed they were not ruling out any merger or sale opportunities.

News that there were two potential rivals for Time Warner Cable excited investors, particularly when it was revealed possible suitor Comcast is also separately talking to Charter about a possible joint bid that would split up Time Warner Cable customers while minimizing potential regulatory scrutiny.

The Wall Street Journal reported Charter is nearing completion of a complicated financing arrangement that some analysts expect could include up to $15 billion in debt to finance a buyout of Time Warner Cable. Such deals are not unprecedented. Dr. John Malone’s specialty is leveraged buyouts, a technique he used extensively in the 1980s and 1990s to buy countless smaller cable operators in a quest to build Tele-Communications, Inc. (TCI) into the nation’s then-biggest cable operator.

In addition to Barclays Bank, Bank of America, and Deutsche Bank — all expected to finance Malone’s bid — Comcast may also inject cash should it team up with Charter’s buyout. Comcast is interested in acquiring new markets without drawing fire from antitrust regulators.

If the two companies do join forces and pull off a deal, Time Warner Cable’s current subscribers will be transitioned to Charter or Comcast within a year. That is what happened in 2006 to former customers of bankrupt Adelphia Cable who eventually became Comcast or Time Warner Cable customers. Analysts predict the two companies would divide up Time Warner Cable territory according to their respective footprints. New York and Texas would likely face a switch to Comcast service, for example, while North Carolina, Ohio, Maine, and Southern California would likely be turned over to Charter.

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CNBC reports Charter Cable and Comcast might both be interested in a buyout of Time Warner Cable that would dismantle the company and divide subscribers between them. (4:18)

Reportedly financing the next era of cable consolidation.

Both bids are very real possibilities according to Wall Street analysts. Comcast has sought formal guidance on how to deal with the antitrust implications of a controversial merger between the largest and second-largest cable operators in the country. The industry has laid the groundwork for another wave of consolidation by winning its 2009 court challenge of FCC rules limiting the total market share of any single cable operator to 30 percent. Despite that, a Comcast-Time Warner Cable deal would still face intense scrutiny from the Justice Department. Getting the deal past the FCC may be a deal-breaker, admits Craig Moffett from MoffettNathanson.

“The FCC applies a public interest test that would be much more subjective,” Moffett said. “It wouldn’t be a slam dunk by any means. The FCC would be concerned that Comcast would have de facto control over what would be available on television. If a programmer couldn’t cut a deal with Comcast, they wouldn’t exist.”

Roberts

Supporters and opponents of the deal are already lining up. Charter shareholders would likely benefit from a Charter-only buyout so they generally support the deal. Time Warner Cable clearly prefers a deal with Comcast because it can afford a buyout without massive debt financing and deliver shareholder value. Comcast shareholders are also encouraging Comcast to consider s deal with Time Warner Cable. Left out of the equation are Time Warner Cable customers, little more than passive bystanders watching the multi-billion dollar drama.

The personalities involved may also be worth considering, because Comcast CEO Brian Roberts and John Malone have history, notes the Los Angeles Times:

Malone and Roberts first brushed up against each other more than two decades ago. At that time, both Liberty and Comcast were shareholders in Turner Broadcasting, the parent of CNN, TNT, TBS and Cartoon Network. When Time Warner, which was also a shareholder, made a move to buy the entire company,  there was tension because Comcast felt Liberty got a better deal to sell its stake. Roberts grumbled at the time that Liberty was getting “preferential treatment.”

A few years later, it was Malone’s turn to be mad at Roberts. When TCI founder Bob Magness died in 1996, Roberts made a covert attempt to buy his shares, which would have given him control of [TCI]. Malone beat back the effort, but it left a bad taste in his mouth.

“Malone was livid,” wrote Mark Robichaux in his book, “Cable Cowboy: John Malone and the Rise of the Modern Cable Business.”

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Even cable stock analyst Craig Moffett is somewhat pessimistic a Comcast-TWC merger would have smooth sailing through the FCC’s approval process. Moffett worries Comcast would have too much power over programming content. (3:53)

Ironically, when Malone sold TCI to AT&T, the telephone company would later sell its cable assets to Comcast, run by… and Brian Roberts.

Most of the cable industry agrees that the increasing power of broadcasters, studios, and cable programmers is behind the renewed interest in cable consolidation. The industry believes consolidation provides leverage to block massive rate increases in renewal contracts. If a programmer doesn’t budge, the network could instantly lose tens of millions of potential viewers until a new contract is signed.

Many in the cable industry suspect when Glenn Britt retires as CEO by year’s end, Time Warner Cable’s days are numbered. But any new owner should not expect guaranteed smooth sailing.

“We expect a Comcast-TWC deal would draw intense antitrust/regulatory scrutiny and likely resistance, stoked by raw political pushback from cable critics and possibly rivals who would argue it’s simply a ‘bridge too far’ or ‘unthinkable,’” Stifel telecom analysts Christopher C. King and David Kaut wrote in a recent note to clients. “We believe government approval would be possible, but it would be costly, with serious risk. This would be a brawl.”

Usage Cap Man may soon visit Time Warner Cable customers if either Charter or Comcast becomes the new owner.

While the industry frames consolidation around cable TV programming costs, broadband consumers also face an impact from any demise of Time Warner Cable. To date, Time Warner Cable executives have repeatedly defended the presence of an unlimited use tier for its residential broadband customers. Charter has imposed usage caps and Comcast is studying how to best reimpose them. Either buyer would likely move Time Warner Cable customers to a usage-based billing system that could threaten online video competition.

“Our sense is the DOJ and FCC would have concerns about the market fallout of expanded cable concentration and vertical integration, in a broadband world where cable appears to have the upper hand over wireline telcos in most of the country (i.e., outside of the Verizon FiOS and other fiber-fed areas),” Stifel’s King and Kaut wrote. “We suspect the government would raise objections about the potential for Comcast-TWC bullying of competitors and suppliers, given the extent and linkages of their cable/broadband distribution, programming control, and broadcast ownership.”

Since none of the three providers compete head-on, the loss of “competition” would be minimal. Any Comcast-Time Warner Cable deal would likely include semi-voluntary restrictions like those attached to Comcast’s successful acquisition of NBC-Universal, including short-term bans on discriminating against content providers on its broadband service.

Customers can expect a welcome letter from Comcast and/or Charter Cable as early as spring of next year if Time Warner Cable accepts one of the deals.

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Bloomberg News reports if Comcast helps finance a deal between Charter and Time Warner Cable, Comcast would likely grab Time Warner Cable systems in New York for itself. (2:26)