A major owner of apartment complexes in 13 states in the southeast and south-central United States has a deal for you, whether you like it or not.

Mid America Apartment Communities, which maintains a portfolio of 42,252 apartments, is requiring its residents to purchase cable television from providers like Comcast or they’ll find the $40 month cable fee tacked on their rent, water, or refuse collection bill.  They call it a wonderful savings opportunity for their residents.  But a Stop the Cap! investigation followed the money and discovered the real benefits are in kickbacks paid to Mid America by participating cable companies.

Mid America is extending the policy to all of its apartment complexes over the coming months, notifying residents about its new CableSaver program through flyers.  Enrollment in the program is automatic for new residents, and will take effect for existing residents upon the renewal of their annual lease agreement.

Known as “bulk buying,” apartment complexes can receive preferential discounts for their residents if they commit to mandatory cable service for each apartment.  In Chattanooga, residents of Mid America’s Hamilton Pointe, Hidden Creek, Steeplechase, and Windridge Apartments were notified this month they’ll be compelled to spend $40 a month for Comcast’s Digital Starter Package.

Mid America owns apartment complexes in 13 states. All of them will find the CableSaver program coming their way sooner or later.

The mandating of cable service is not going down well with every resident, particularly those who purchased satellite TV equipment or who have service with other providers like AT&T’s U-verse or Verizon FiOS.  While Mid America isn’t banning competing cable services from serving its complexes, residents will still be forced to pay for cable service in addition to whatever their current provider charges.

Lydia Ramirez of Chattanooga lives in a Mid America Apartment Communities property.  She told WDEF-TV News, “We told them that we are not interested in this but they say it’s mandatory. And so here we are.”

Ramirez just had Dish Network installed but says she’s been told she will have to pay for Comcast cable, too, if she renews her lease.  She said, “We don’t want Comcast and we feel that should be our choice instead of them making it mandatory.”

Instead of being allowed to choose satellite or other cable providers, Ramirez says being forced to go with Comcast is kind of like being told you can only grocery shop at Food Lion.  Ramirez adds, “I don’t see how they can do that. I think we as tenants have an option to choose what cable company we want to go with.”

Some renters in Houston, Texas have been there and done that.  Late last year, KPRC-TV reported residents at The Reserve at Woodwind Lakes got a deal they couldn’t refuse.  A letter from the front office promoted an exciting new offer: It reads the complex “has teamed up with a cable company to bring you an exclusive offer that will allow you to enjoy expanded basic service at a greatly reduced rate.”  Sounds great until you get to the second line of the letter, which uses language only a credit card company could love:

“If you have not yet chosen to opt in, the reduced rate of $40 will be added to your water and trash bill once your renewal takes effect.”

Text of a flyer delivered to Houston-area renters at a Mid America complex

In other words, your “choice” to “opt in” is neither.

Mid America is selling this mandatory cable program as a real money-saver.  But we discovered it’s actually a real moneymaker for Mid America, who earns compensation from kickbacks paid by cable companies in return for cramming cable service down renters’ throats.

Kickbacks for cable is nothing new in the rental business.  Complex owners used to routinely make exclusive deals with providers to deliver service to residents, often through contracts that kept competitors out.  But a 2007 FCC ruling made such exclusive arrangements illegal.  A Federal Court of Appeals agreed: cable companies cannot have exclusive rights to provide service in apartment buildings that they wire.  But complex owners and cable operators discovered an enormous loophole — complex owners can force residents to pay mandatory cable fees as part of their rent so long as they did not bar would-be competitors from also providing service.  But given that renters would already be paying for service, it is unlikely they’d choose another and pay double or more for duplicated cable service.

Cable companies like Comcast enter into these agreements because they provide guaranteed revenue for minimal cost, thanks to “install it once” cable wiring and bulk billing.  Since many renters are also young — renting their first apartment after leaving home — establishing a relationship with those customers may make them customers for life.  Cable companies can also use the program as an opportunity to sell add-on services to renters, such as broadband, digital phone, and premium channel packages.

But why would a company like Mid America want to alienate at least some of their renters who do not want to be forced to pay for cable service?  The answer is easily found in Mid America’s publicly disclosed financial reports — Mid America makes a healthy profit from the CableSaver program.

Mid America owns apartment complexes in these states

Mid America’s quarterly 10-K filing with the Securities and Exchange Commission shows the company is earning so much money from cable companies like Comcast, it has broken the revenue out into a new section of its financial report.

In the first quarter of 2010, as Mid America introduced its CableSaver program, the company reported earning $1.3 million dollars in revenue from cable kickbacks.  The company tells investors its new mandatory cable program will become an important source of new revenue for the complex owner:

“We continue to develop improved products, operating systems and procedures that enable us to capture more revenues. The continued roll-out of ancillary services (such as re-selling cable television), improved collections, and utility reimbursements enable us to capture increased revenue dollars.”

It’s all a part of a profit-making strategy to increase shareholder value and stick residents with increasing costs to deliver fatter profits.  Renters might be interested to know the company has more in store for them in the coming months:

Our goal is to maximize our return on investment collectively and in each apartment community by increasing revenues, tightly controlling operating expenses, maintaining high occupancy levels and reinvesting as appropriate. The steps taken to meet these objectives include:

• […] developing new ancillary income programs aimed at offering new services to residents, including telephone, cable, and internet access, on which we generate revenue;
• implementing programs to control expenses through investment in cost-saving initiatives, including measuring and passing on to residents the cost of various expenses, including water and other utility costs.

Unfortunately for residents, short of moving, there is no escaping these fees. Some residents have contacted their member of Congress or the FCC to complain about the loophole that allows a complex owner to charge for cable service residents don’t always want. Another way to send a message is to tell Mid America you will not do business with them until they make the CableSaver program truly optional. If the company stands to lose more money than it receives from cable company kickbacks, it may choose to amend its policies.

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We have four reports on this story, courtesy of WDEF-TV Chattanooga, Tenn., and KPRC-TV in Houston, Texas  (10 minutes):

1. The FCC bans exclusive cable contracts forcing renters to buy service from one provider.  (KPRC-TV 10/31/2007)
2. Can Complex Choose Your Cable Company? In Houston, Mid America Forcing Renters to Buy Comcast Cable.  (KPRC-TV 1/7/2010)
3. Four Chattanooga Area Apartment Complexes Make Comcast Cable Mandatory for Renters. (WDEF-TV 7/12/2010)
4. AT&T U-verse Arrives in Chattanooga (But Won’t Be Too Attractive to Mid America Residents). (WDEF-TV 4/30/2010)

Comcast has formally announced their version of TV Everywhere is now online.  Fancast XFINITY TV “is available to any Comcast customer with a digital cable and Internet subscription.”  There is no additional charge for the service.

Comcast customers can access the service after logging in through Comcast.net or Fancast.com with their account username and password.  Once “authenticated” as a confirmed Comcast cable subscriber, customers can watch approximately 2,000 hours of programming from more than 30 cable networks, including premium channels HBO, Cinemax, and Starz.  A demonstration showed Comcast had complete seasons of series like The Sopranos and Big Love.

Some programmers are exploring whether Nielsen can count online viewing as part of its ratings measurements.

Initially, Comcast will restrict access to customers who are confirmed digital cable and broadband customers, but will extend the service to those who only subscribe to Comcast cable programming in approximately six months once security and authentication issues have been resolved, according to company officials.

The service should be accessible by subscribers on-the-go through mobile broadband or other connections, as long as customers log in.  Access is not allowed outside of the United States for copyright clearance reasons.

Customers should be aware any video accessed by the service counts against Comcast’s 250GB monthly usage limit.  Advertising on the service also counts.  Unlike Hulu which typically provides just one advertisement for every break, Comcast’s program partners have tested full commercial loads, up to seven minutes worth in a 30-minute program.  That’s 14 ads to sit through, each eating into your usage allowance.  Comcast says programmers are individually testing different amounts of advertising to learn how viewers react.  The prevailing view is that online viewers are less tolerant of advertising than typical television viewers.

Comcast Corporation has completed its offer for NBC-Universal and they accepted in an early morning press conference unveiling a deal that had been privately rumored for months.  Comcast will assume 51% control of NBC-Universal, with NBC-owner GE controlling the remaining 49% stake.

The combined entity, to be known as Comcast Entertainment Group, will bring Comcast-owned media into the home of every American, even those not served by Comcast Cable.

Although company officials said little would change immediately, Comcast has not ruled out dropping the legacy ‘NBC’ brand down the road.  Broadcasting & Cable noted the company may be hinting at its intentions through its domain name registrations.  The trade publication reported Comcast’s registrar locked ComcastNBCU.com and NBCUComcast.com in mid-October, but returned and registered ComcastEntertainment.com ten days later.

Brian Roberts, CEO of Comcast Corporation, joked that NBC’s fourth place position among the major American broadcast networks might “get in the way” of recognizing NBC-Universal’s cable networks, which he characterized as “fantastic.”  Perhaps a change of NBC, which stands for the National Broadcasting Company, to Comcast Entertainment Network might change that perception?

Changes like that, and the implication of renaming a major American network after what most Americans recognize as a cable company has brought significant unease among some examining the scope of the transaction.

Comcast CEO Brian Roberts

Comcast Entertainment Group will control a major American broadcast network, Telemundo – a major American Spanish-language broadcast network, Comcast Cable, the nation’s largest cable system operator, several cable networks, 27 GE-owned television stations in major American cities, a large number of regional sports networks, and more.  It also manages broadband service for nearly 16 million Comcast customers.

Stifel Nicolaus telcom analysts Rebecca Arbogast and David Kaut warned potential investors this deal has a lengthy and difficult regulatory review waiting for it in Washington, DC: “We would expect scrutiny of the transaction’s impact on program access, program carriage and retransmission consent, as well as local TV advertising, broadcast-network affiliate arrangements, program bundling, broadband/Internet video and network neutrality and possibly other issues, including cable pricing…broadband service, labor concerns, spectrum and privacy.”

The dealmakers recognized the challenges and started throwing voluntary concessions to concerned groups.  Unimpressed Comcast shareholders got a bone thrown their way — a surprise 40% increase in their dividend, in hopes that will quiet shareholder unease.

Comcast also sent letters to regulatory officials promising NBC will remain a free, over the air broadcast network and not be converted into a cable-only channel.

The cable operator will also add additional independently-owned cable networks to its lineup to quiet concerns it might favor its own cable networks.  Of course, whether customers want to watch and pay for those channels is another matter.

Finally, Spanish language services from Telemundo and other channels will receive enhanced free on-demand cable viewing options in cities where Telemundo is seen over-the-air.

For broadband users, the deal means Comcast gets a seat at the table of online video provider Hulu.  NBC-Universal was a major proponent of the online video service which gives broadband users free access to broadcast and cable programming.

That deeply concerns Andrew Schwartzman, president and CEO of Media Access Project.  He’s concerned about the enormous market power Comcast Entertainment will have.

“I am especially concerned about the effects the merger would have on evolving technologies for delivering video over the Internet….I also expect a great deal of opposition from the private sector, since the merger has anti-competitive implications for local TV stations, independent cable programmers, advertisers, internet video entrepreneurs and many other businesses,” he told The Hill.  Both Media Access Project and Free Press have called on regulators to reject the deal.

“The American public doesn’t want a media behemoth controlling the programming they watch and how they can access it,” said Josh Silver , executive director of Free Press. “If Washington allows this deal to go through, Comcast will have unprecedented control of marquee content and three major distribution platforms: Internet, broadcast and cable. We’ve never seen this kind of consolidated control.”

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This morning’s Today show on NBC briefly reviewed the deal and what it means for consumers (1 minute)

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Sanford Bernstein’s Craig Moffett talks with CNBC about why many telecom sector analysts are underwhelmed by the Comcast-NBC deal (3 minutes)

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GE CEO Jeffrey Immelt and Comcast CEO Craig Roberts join CNBC’s David Faber for an in-depth discussion about the transaction and the changing media business. (28 minutes)

Learn more about NBC’s broadcast operations impacted by this deal below.

… Continue Reading

The reported deal between Comcast, the nation’s largest cable operator and NBC-Universal, part owner of Hulu, could have serious consequences for the Internet’s most popular destination for online television shows and movies.

In just a year, Hulu has enjoyed a quadrupling of visits well into the millions, streaming dozens of network television series, specials, and movies, all supported by commercial advertising.  Devised to help combat online video piracy and earn additional advertising revenue from web watchers, Hulu partners NBC, Fox and Walt Disney Co., have been successful at drawing scores of Americans to the video website.  Program distributors have also been pleased, earning money from shows like Lou Grant that haven’t been on network television in decades.  But after the economic crash of 2008, the venture has proven costly for the partnership, challenged by an advertising marketplace on life support and outright hostility by broadband providers, cable operators, and Wall Street investors, upset that the service is giving it all away for free.

Among the loudest to complain is Comcast, which is now angling to acquire NBC, and its 30% ownership stake in Hulu.

Comcast CEO Brian Roberts has repeatedly complained about the implications of giving away online video, which for some have begun to replace cable television subscriptions.

“If I am any one of these programmers, not just ESPN but the Food Network and I have a business in that 50 percent, 60 percent, 70 percent of my business comes from subscriptions, I want to think long and hard before I just put that content out there for free and not think through what it is going to mean to my business,” Roberts said at an investors conference in May.

Roberts view was shared by the CEO of the nation’s second largest cable operator, Glenn Britt of Time Warner Cable.

“If you give it away for free, you’re going to forego that subscription revenue,” Britt said. “And if you actually think the ad revenue can make up for that, then God bless you and go on your way. But I don’t think that’s the case, and (networks) don’t really think that’s the case either.”

The difference between Comcast and Time Warner Cable is that the former could gain part ownership in the largest service now giving it all away for free, and that has major implications for Hulu’s future.

“Would Comcast put an end to the Hulu model of using the Web to distribute free TV content?” asked Michael Nathanson, senior media analyst at Sanford C. Bernstein & Co. “Will Comcast continue to support Hulu?”

The Los Angeles Times reports there is already a precedent for Hulu limiting content for online viewers in response to complaints:

Hulu already has limited users’ access to certain cable programs, including FX’s “It’s Always Sunny in Philadelphia,” in response to an outcry from the TV producers and cable companies that object to paying TV programmers hundreds of millions of dollars each year for shows that are offered free online.

“Arguably, their ability to shape online content distribution, and to recast windows for video on demand, would be an important attribute of any deal,” wrote Craig Moffett, a cable industry analyst at Sanford C. Bernstein.

Comcast’s interest in NBC Universal would dramatically expand its entertainment portfolio with such attractive cable channels as USA Network, MSNBC and CNBC as well as the Universal Pictures movie studio. The proposed Comcast-NBC Universal venture also would give the cable operator a greater role in deciding how and when TV shows and movies are distributed online and at what price to consumers.

Comcast’s influence would primarily be felt in cable network programming streamed online, as Comcast has a vested interest from the millions it currently pays those programmers to carry their networks on Comcast cable systems nationwide.  Comcast could advocate Hulu become a partner in the TV Everywhere cartel, providing video content only to “authenticated” pay television subscribers, or it could limit the number of episodes available for free, or when those episodes appear on the service.

Soleil Securities media analyst Laura Martin thinks an even more likely possibility would be charging a fee for some of its more popular content.  Martin points to Hulu’s own financial problems, a consequence of the crash in the advertising market.  Soleil estimates that the three partners subsidize $33 million of the losses at Hulu even after earning $123 million this year from advertising.  Even worse, Martin says, is the cannibalizing of the networks’ own advertising earnings from broadcast runs of those shows now available online.  She told the Times that for every viewer who migrates to the Internet, the companies forfeit $920 a year in ad revenue.

But not everyone believes the Comcast-NBC deal is such a great idea.

Time Warner CEO Jeff Bewkes today told an industry conference in Manhattan that large media mergers have had a lousy track record.  Still, he said the merger would probably benefit the cable industry as a whole, because broadcast networks content with giving away content for free online will now be a part of the very industry hurt by that formula and will be more friendly towards arguments to stop it.

“We love to see our competitors taking risks,” Bewkes said.

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CNBC’s Julia Boorstin talked with Hulu CEO Jason Kilar in September about the desire for the company to partner with the cable industry’s TV Everywhere project.

Verizon today announced the 100th franchise agreement in the state of Massachusetts for FiOS TV. The Easton Board of Selectmen on Monday granted a cable franchise to Verizon to begin wiring the town of 23,000 with fiber optic service. Residents will receive visits from Verizon employees to explain and market the service, which will compete directly with incumbent cable provider Comcast.

Verizon’s growth in the state has already put them in second place behind Comcast as the largest provider of wired television and broadband service.  That position was formerly held by RCN, a cable overbuilder providing service in the Boston area.

Verizon celebrated the 100th franchise agreement by donating $1,000 to the Easton Area Public Library to purchase 100 new books.

“As a result of this new franchise, consumers in Easton will be able to choose their cable provider as easily as they choose their phone company,” said Cupelo. “Competition drives innovation, value and service quality, and it puts the consumer in control.”

Easton (in dark red), part of Bristol County, Massachusetts

Verizon research indicates 87 percent of Massachusetts residents favor more competition and choice for video services.  Independent studies suggest competition in the video market can bring reduced prices, better packages and improved service, although experiences in many communities indicate providers are more apt to compete on services and packaging, and not as much on price.

Verizon’s license agreement with the city of Easton is for 10 years.  The agreement contains provisions for the network’s future growth; financial support and capacity for educational and government access channels; cable service to government buildings; and other important benefits to the city, including insurance, indemnification and enforcement protections.

“Verizon will compete aggressively for subscribers in Easton with our FiOS services, which are fueled by our lightning-fast fiber-optic network,” Cupelo said. Verizon soon will begin its door-to-door sales campaign in Easton, explaining the many advantages of FiOS TV to local consumers.

For some local residents, the competition can’t arrive soon enough.

Comcast has alienated many Easton residents by not carrying all of the HD signals from Boston area television stations.  Easton, although essentially halfway between Boston and Providence, Rhode Island, has been defined by the Federal Communications Commission as being in the “Providence DMA” (an area of significant influence.)  That’s because parts of Bristol County have towns that are considered suburbs of Providence.  Easton’s allegiance, in the minds of many who live there, is to Boston, and residents are upset that the majority of HD broadcast stations on Comcast Cable are from Providence.

The town is actually part of a regional effort to redefine their part of Bristol County to be in the “Boston DMA” so they can petition the FCC to make a change.

The Easton Cable Commission has gotten an earful from annoyed residents, who have faced an intransigent Comcast.  They have even prepared an FAQ for residents on the matter:

Why can’t I get some Boston based HD channels on Comcast?
This is an important issue to many Easton cable subscribers. We want to take some time to explain the relevant issues just so you understand why most believe Easton residents are not getting the channels they want and the channels that they believe serve them best.

The starting point is the DMA that Easton is in.  What is a DMA?  Well, that is our problem.  DMA is short for Neilsen Media Research Designated Television Market Area. DMA’s are generally split up according to county.  Easton is in Bristol County.  A good part of Bristol County is actually considered part of suburban Providence.  Therefore, Easton, although not a suburb of Providence, is in the Providence DMA.  All cable providers must carry the primary channels that serve a DMA.   At present, Comcast must carry Providence DMA stations.  There is an effort underway to move towns inside of Route 495 into the Boston DMA.  We will petition the FCC for this change.

Oakes Ames Memorial Hall and Ames Free Library (North Easton, MA)

But the greater issue here is whether Comcast chose to eliminate Boston channels in High Definition or whether they had no choice.  For the most part, this is a Comcast choice.  The Town of Easton and our Cable Committee, unfortunately, cannot force Comcast to provide Boston channels in High Definition.  Along with the concept of DMA, there is also the concept of “Significantly Viewed” channels in an area.  This is another FCC concept which relates to stations not in the local DMA which may be referred to as “distant signals”.  A “distant signal” is one that originates outside of a satellite (or cable) subscriber’s local television market, the DMA. In addition to stations in their DMA, satellite (cable) subscribers who receive local-into-local service may, under certain circumstances, receive individual stations from markets outside their DMA that are deemed “significantly viewed” in their community. It is up to the satellite carrier whether or not to offer significantly viewed stations and a subscriber must be subscribing to local-into-local service in his or her DMA to be eligible to receive significantly viewed stations. The determination of whether or not a station is significantly viewed in a community depends on several statutory factors.  The FCC has posted the list of stations that are eligible for carriage as significantly viewed signals and the communities in which they are significantly viewed.
The following is the list for Bristol County:

Bristol
WLNE-TV, 6, Providence, RI (formerly WTEV)
WJAR, 10, Providence, RI
WPRI-TV, 12, Providence, RI
+WNAC-TV, 64, Providence, RI
WBZ-TV, 4, Boston, MA
WCVB-TV, 5, Boston, MA (formerly WHDH)
WHDH-TV, 7, Boston, MA (formerly WNAC)
WSBK-TV, 38, Boston, MA
WLVI-TV, 56, Cambridge, MA (formerly WKBG)

So, Comcast has every right to provide the above channels (which include 4,5, and 7) in High Definition.  It is their choice not to do so.  You may ask why Channel 25 is not on the above list and that is a great question.  But the answer is that the determinations for this list were made a long time ago when Channel 25 was owned by religious broadcasters.  That is how outdated all of these rules are.  It is also the reason that Comcast is forced to black out FOX 25 network programming.

There may be an alternative to Comcast in Easton by the end of the year.  We are going through a licensing process with Verizon.  They want to offer Fios tv, internet, and phone in Easton by December.  It is all of our hopes that Verizon will provide the channels that you are looking for and that competition will benefit all cable tv subscribers in Easton.

For further information please contact the Comcast Customer Care line at 1-800-COMCAST (1-800-266-2278).

In Massachusetts, FiOS TV is available in Abington, Acton, Andover, Arlington, Ashland, Bedford, Bellingham, Belmont, Boxborough, Boxford, Braintree, Burlington, Canton, Danvers, Dedham, Dover, Dunstable, Framingham, Franklin, Georgetown, Grafton, Groton, Hamilton, Hanover, Hingham, Holliston, Hopkinton, Hudson, Hull, Ipswich, Kingston, Lakeville, Lawrence, Leominster, Lexington, Lincoln, Littleton, Lynn, Lynnfield, Malden, Mansfield, Marion, Marlborough, Marblehead, Marshfield, Mattapoisett, Maynard, Medfield, Medway, Melrose, Mendon, Methuen, Middleborough, Middleton, Millbury, Nahant, Natick, Needham, Newton, Norfolk, North Andover, North Reading, Northborough, Norwood, Norwell, Plymouth, Reading, Rochester, Rockland, Rowley, Sherborn, Southborough, Stoneham, Stoughton, Stow, Sudbury, Sutton, Swampscott, Taunton, Tewksbury, Topsfield, Tyngsborough, Wakefield, Walpole, Waltham, Wareham, Wayland, Wellesley, Wenham, West Newbury, Westborough, Weston, Westwood,  Wilmington, Winchester, Wrentham and Woburn, and will soon be available in Chelmsford, Easton and North Attleborough.