Time Warner Cable executives brushed away Charter Communications’ first public offer to acquire the second largest cable company in the country in a debt-financed deal that Time Warner considers a lowball offer.

“[Charter’s] proposal is grossly inadequate,” Time Warner Cable said in a statement. “We are confident in our standalone plan and we are not going to let Charter steal the company.”

Charter’s combined service areas, if they win control of Time Warner Cable.

On Tuesday, Charter violated a long-standing, informal Code of the Cable Cartel that keeps cable companies from attacking each other.

Charter Communications chief operating officer John Bickham launched an investor presentation that trashed Time Warner Cable and its leadership, and contended fixing the cable company will take more work than first envisioned.

Bickham claimed Time Warner has exhibited a decade of a “failed operating strategy revealed by fact that they are losing customers at an alarming rate,” while Charter has a proven track record of performance.

Bickham

Historians recollect Charter’s recent past differently. In 2009, mired in debt and lacking a disciplined business plan, Charter declared Chapter 11 bankruptcy, wiping out shareholders and stiffing creditors.

Bickham capitalized on Time Warner’s 2013 summer of discontent, when a dispute with CBS resulted in the loss of the network from Time Warner Cable lineups (along with Showtime) in some of the biggest cities in the country. Combined with rate increases, subscribers began switching to the competition, especially where Verizon FiOS and AT&T U-verse gives cable operators stiff competition from money-saving new customer promotions.

Bickham described TWC as a company in shambles:

On Time Warner Cable TV: “It appears that Time Warner didn’t want to spend the money to go all-digital,” adding that the quality of TWC’s TV signal is poor and the company still lacks enough HD channels that could have been on the lineup if the cable company dropped analog service long ago.

On Time Warner Cable Internet: Bickham complained Time Warner is offering deep discounts on slow Internet packages, particularly its campaign targeting DSL customers with 2Mbps service for $14.99 a month. Bickham complains the large variety of Internet speed tiers are unnecessary, resulting in “nickel-and-dime charges to customers.” He argues Time Warner needs to simplify its offering by adopting a digital lineup and boost Internet speeds, so customers get at least 30Mbps service. Bickham did not mention Charter Communications also has a usage cap on its broadband products. TWC does not on most offerings.

On Time Warner Cable employees: “TWC never had a vision on high standards” for how the company manages its 50,000 employees. Bickham feels the workmanship of TWC installers leaves a lot to be desired.

[flv]http://www.phillipdampier.com/video/Bloomberg Time Warner Cable Rejects Charter Offer 1-15-14.flv[/flv]

Time Warner Cable rejected an acquisition offer from Charter Communications valued at more than $61 billion including debt, spurning the biggest unsolicited takeover bid since 2008. Manus Cranny examines why the offer was rejected on Bloomberg Television’s “Countdown.” (2:06)

Charter’s proposed price comparison chart, produced for the benefit of Time Warner Cable shareholders, assumes worst-case pricing almost no Time Warner Cable customer actually has to pay.

Charter is America’s second worst rated cable company. (Consumer Reports, 2013)

On its face, Charter’s plan for Time Warner Cable doesn’t look all bad, but execution is critical and Charter has a long-standing and very poor record of customer satisfaction, typically ranked in consumer surveys as America’s second worst cable operator year after year.

Should Charter win control of Time Warner Cable, big changes will be in store for TWC customers under the Charter umbrella:

• Analog television would be phased out, along with “limited basic” packages. Charter wants to repurpose analog spectrum for faster Internet speeds, but that also means video customers will be required to get more set-top boxes;
• Eliminate “Switched Digital Video” technology now in place on TWC systems. SDV is a bandwidth saver – only delivering digital TV signals customers in a particular neighborhood are actively watching. But those using inexpensive digital-to-analog set-top boxes on analog-only televisions can’t watch SDV channels, inconveniencing customers;
• Increase the number of HD channels to 200+;
• All residential set-top boxes would now support HD signals at no added cost and customers will be able to get up to four DVR boxes for $20 a month;
• Time Warner Cable’s new minimum Internet speed would be 30Mbps with much faster added-cost tiers available, but usage caps will apply;
• Time Warner Cable’s phone product would be repriced at $30 a month in the first year, $20 in the second with all calling features and voicemail included;
• No term contracts will be offered and modem rental fees, regulatory surcharges, added taxes on Internet and Phone, and service visit fees will no longer be charged.

Charter customers can expect aggressive sales pitches for their “high value” triple-play bundle which may include services customers don’t want at a price that is largely non-negotiable. The more boxes and services you add, the greater the discount you will receive. In contrast, Time Warner Cable began de-emphasizing its triple play promotions in early 2012 and now aggressively promotes single and double play packages that typically omit phone service.

Unlike TWC, Charter has been more difficult when trying to negotiate customer retention discounts. Charter generally charges the same prices everywhere.

Their proposed offer for Time Warner customers will be a triple play offer starting at $110 a month for the first 12 months, then increase $20 in the second year to $130 a month and in year three the price will rise again to $150 a month. Charter’s typical “step-up” pricing is in $20 increments.

Charter is reluctant to allow customers to add or drop package components, so for most customers packages will be all-inclusive with no discounts for dropping channels or features. That means customers will likely end up with more television channels, more phone features, and faster Internet speeds, but at the cost of an eventually higher cable bill.

Any buyout could also mean some Time Warner Cable territories could be put up for sale to a third-party. Charter is especially interested in the New York and Los Angeles markets, but may have little interest in western New York and Ohio, New England, Kentucky and Wisconsin. Any orphaned TWC customers would likely be snapped up by companies like Comcast, which may join Charter’s takeover bid.

Any sale would need approval by the Federal Communications Commission and potentially the Justice Department’s Antitrust Division, especially in Comcast becomes involved.

[flv]http://www.phillipdampier.com/video/CNBC Tom Rutledge Explains Charter Offer for TWC 1-15-14.mp4[/flv]

Time Warner Cable rejected a merger proposal from Charter Communications. Tom Rutledge, Charter Communications president and CEO, explains the offer as he describes as “rich and fair.” We feel like we’ve come a far way and have not received a serious response, Rutledge says. A CNBC exclusive. (4:35)

Phillip “Free Trade in Bad Broadband” Dampier

Sure we’ve had our cultural skirmishes in the past,  but on one thing we can all mostly agree: our largest cable, phone, and broadband providers generally suck.

Outside of hockey season, Canada’s national pastime is hating Bell, Rogers, Vidéotron, Telus, and Shaw. The chorus of complaints is unending on overbilling, bundling of dozens of channels almost nobody watches but everybody pays for, outrageous long-term contracts, and bloodsucking Internet overlimit fees. In fact, dissatisfaction is so pervasive, the Conservative government of Stephen Harper spent this past summer waving shiny keys of distraction promising Canadians telecom relief while hoping voters didn’t notice their tax dollars were being spent by the country’s national security apparatus to spy on Brazil for big energy companies.

The Montreal Gazette is now collecting horror stories about dreadful service, mysterious price hikes, and promised credits gone missing on behalf of readers fed up with Bell and Vidéotron.

Rogers Cable, always thoughtful and pleasant, punished a Ottawa man coping with multiple sclerosis and cancer with a $1,288 bill, quickly turned over to a collection agency after his home burned to the ground. It took headlines spread across Ontario newspapers to get the cable company to relent.

Things are no better in the United States where the American Customer Satisfaction Index rates telecom companies worse than the post office, health insurers airlines, and the bird flu. National Public Radio opened the floodgates when it asked listeners to rate their personal satisfaction with their Internet Service Provider — almost always the local cable or telephone company.

The phone company Canadians love to hate.

Many responded their Internet access is horribly slow, often goes out, and is hugely overpriced. In response, the cable industry’s hack-in-chief did little more than shrug his shoulders — knowing full well American broadband exists in a cozy monopoly or duopoly in most American cities.

Breann Neal of Hudson, Ill., told NPR she has one choice — DSL, which is much slower than advertised. Hudson is Frontier Communications country, and it is a comfortable area to serve because local cable competition from Mediacom, America’s worst cable company, is miles away from Neal’s home.

“There’s no incentive for them to make it better for us because we’re still paying them every month … and there’s no competition,” Neal says.

Samantha Laws, who gets her Internet through her cable provider, says she also only has one option.

“It goes out at least once a day, and it’s been getting worse the last few months,” Laws says. She works with a pet-sitting company that handles all of its scheduling through email and the company website. At times she can’t do her job because of the unreliable connection.

Chicago is in Comcast’s territory and the company is quite comfortable cashing your check while AT&T takes its sweet time launching U-verse in the Windy City. AT&T isn’t about to throw money at improving DSL while local residents wait for U-verse and Comcast doesn’t need to spend a lot in Chicago when the alternative is AT&T.

Where there is no disruptive new player in town to shake things up, there is little incentive to speed broadband service up. But there is plenty of room to keep increasing prices for a service that is becoming as important as a working telephone. Companies are using broadband profits to cover increasing losses from pay television service, investing in stock buybacks, paying dividends to shareholders, or just putting the money in a bank, often offshore.

NPR’s All Things Considered:

“[For] at least 77 percent of the country, your only choice for a high-capacity, high-speed Internet connection is your local cable monopoly,” says Susan Crawford, a visiting professor at Harvard Law School. She is also the author of Captive Audience: The Telecom Industry and Monopoly Power in the New Gilded Age.

Crawford says that today’s high-speed Internet infrastructure is equivalent to when the railroad lines were controlled by a very few moguls who divided up the country between themselves and gouged everybody on prices.

She says the U.S. has fallen behind other countries in providing broadband. At best, Crawford says, the U.S. is at the middle of the pack and is far below many countries when it comes to fiber optic penetration. Given that the Internet was developed in the U.S., she says the gap is a result of failures in policy.

“These major infrastructure businesses aren’t like other market businesses,” Crawford says. “It is very expensive to install them in the first place, and then they build up enormous barriers of entry around them. It really doesn’t make sense to try to compete with a player like Comcast or Time Warner Cable.”

So Crawford is calling for is a major public works projects to install fiber optic infrastructure — a public grid that private companies could then use to deliver Internet service.

Powell

That’s an idea met with hand-wringing and concern-trolling Revolving Door Olympian Michael Powell, who made his way from former chairman of the Federal Communications Commission during the first term of George W. Bush’s administration straight into the arms of Big Cable as president of their national trade association, the NCTA.

Powell, well compensated in his new role representing the cable industry, wants Americans to consider wireless 3G and 4G broadband (with usage caps as low as a few hundred megabytes per month) equivalent competitors to the local cable and phone company.

“I think to exclude [wireless] as a substitutable, competitive alternative is an error that leads you to believe the market is substantially more concentrated that it actually is,” Powell says.

Of course, Powell’s new career includes a paycheck large enough to afford the wireless data bills that would shock the rest of us. All that money also apparently blinds him to the reality the two largest wireless providers in America are AT&T and Verizon — the same two companies that are part of the duopoly in wired broadband. It’s even worse in Canada, where Rogers, Bell, and Telus dominate wired and wireless broadband.

Although America isn’t even close to having the fastest broadband speeds, Powell wants you to know the speeds you do get are good enough.

“I think taking a snapshot and declaring us as somehow dangerously falling behind is just not substantiated by the data,” he says. He says it is like taking a snapshot of speed skaters, where there might be a few seconds separating the leaders, but no one is “meaningfully out of the race.”

That is why we still celebrate and honor Svetlana Radkevich from Belarus who competed in the speed skating competition at the Vancouver 2010 Winter Olympics. She made it to the finish line and ranked 33rd. Ironically, South Korea ranked fastest overall that year, taking home three gold and two silver medals. In Powell’s world, that’s a distinction without much difference. You don’t need South Korean speed and gold medals when Belarus is enough. That argument always plays well in the United States, where Americans can choose between Amtrak or an airline for a long distance trip. Who needs a non-stop flight when a leisurely train ride will get you there… eventually.

There are a handful of providers uncomfortable with the mediocre broadband slow lane. Google is among them. So are community broadband providers installing fiber broadband and delivering gigabit Internet speeds. EPB in Chattanooga is among them, and it has already made a difference for that city’s digital economy neither AT&T or Comcast could deliver.

Unsurprisingly, Powell thinks community broadband is a really bad idea because private companies are already delivering broadband service — while laughing all the way to the bank.

If a community really wants gold medal broadband, Powell says, they should be able to have it. But Powell conveniently forgets to mention NCTA’s largest members, including Comcast and Time Warner Cable, spend millions lobbying federal and state governments to make publicly owned broadband illegal. After all, cable companies know what is best.

All Things Considered recently asked its fans on Facebook, “How satisfied are you with your Internet service provider?” Many responded that they didn’t like their Internet service, that it often goes out and that their connection was often “painfully slow.” Listen to the full report first aired Jan. 11, 2014. (11:30)
You must remain on this page to hear the clip, or you can download the clip and listen later.

Time Warner Cable lost another 215,000 video subscribers during the fourth quarter of 2013, leaving the company with 825,000 fewer subscribers than it had one year ago.

Customers are dropping service with the cable company because of rate increases, programming disputes, competition with AT&T and Verizon, and cord cutting.

Despite the video losses, Time Warner attracted 55,000 new broadband customers, many defecting from DSL, and 15,000 new landline customers signing up for phone service as part of a larger bundle.

Time Warner Cable’s poor results are fueling speculation that takeover offers promising increased shareholder value are potentially days away. Dr. John Malone’s Liberty Media and Charter Communications are expected to formally offer $62 billion for Time Warner as early as this week.

Malone has spent the last six weeks lining up Wall Street banks to help finance the transaction with loans that would leave a larger Charter Cable with substantial debt.

Cablevision CEO Jim Dolan may have to eat his words when he told shareholders he was done giving promotional discounts to customers bouncing back and forth between competing providers. Now Verizon has given Cablevision customers an excuse to say goodbye to the cable company for at least the next two years.

The Verizon FiOS $79.99 Triple Play promotion is back and includes a $300 Visa rebate card and free activation when ordering from Verizon’s website.

The package includes:

Is your promotion with AT&T U-verse coming to an end? Are you actually paying regular price for Internet, phone, or television service? Why?

“AT&T will do whatever we can to keep your business,” an AT&T customer retention specialist tells Stop the Cap! “If you seem serious about canceling service by quoting us rates from one of our competitors, we will give you an even better deal to stay with us with faster speeds and a lower price.”

AT&T has been attempting to improve its “promotional churn” numbers — the percentage of customers who switch to AT&T U-verse with a special deal only to cancel after the promotion ends. So far, it seems to be working, especially in the Midwest where AT&T’s pricing has been so aggressive, Time Warner Cable admitted it has had trouble keeping customers and winning former ones back.

Providers are especially vulnerable when promotional packages expire and rates reset to the regular retail price, often $30-80 or more a month, depending on the number of services. When the first bill reflecting non-promotional pricing arrives, a lot of customers with bill shock consider their options and some leave for a better offer elsewhere.

Time Warner Cable handles this by offering a less generous, follow-up promotion when the original one expires. AT&T usually waits until customers try to cancel service before a “customer retention” specialist goes to work to save the account.

An AT&T customer service representative working in AT&T’s customer retention department talked with Stop the Cap! this week about AT&T’s current pricing and promotions, but requested anonymity because she was not authorized to speak with the media.

“When a customer calls in and asks to cancel service, those calls are automatically passed on to our department to change the customer’s mind,” says our source. “We take calls of all kinds including profanity-laced, ‘one-way’ conversations from angry customers upset about poor service, those fishing for a better deal, and those that have already set up an installation appointment with a competitor.”

“We are trained to resolve customer concerns, so the guy who loses U-verse service during Sunday football doesn’t need a lower rate, just a serious effort to stop those outages from repeating,” says our source. “We’re worried the most about customers who can quote our competitor’s best promotional offer and are prepared to switch immediately. These customers are clearly price shopping so we have to find ways to lower our price, improve our service, or a combination of both or the customer will walk.”

With U-verse still being a relatively new product, AT&T invests a considerable amount of money to provision service to new customers. To recoup that investment, AT&T needs customers to maintain service for at least a few years. If a customer cancels as soon as their promotion expires, AT&T will lose part of that investment.

“It is actually better for us to upgrade your service and even cut your price than to lose your business, so we do exactly that,” our source says. “That is why our best retention offers are not available to new customers. That is actually a good thing in my view because we’re treating our current customers better than those who are not,” she adds.

Stop the Cap! has assembled a guide to help current AT&T U-verse customers snag one of these retention deals and save. However, please be aware your results can vary based on a number of factors including: your past payment history (chronic late-payers will not qualify for the best offers), the level of competition in your area, the customer service agent you are dealing with, and the perceived seriousness of your threat to cancel service.

We have focused most of our attention on the broadband part of U-verse, but those with bundled service can also get some attractive retention deals.

“It doesn’t hurt to ask even if you are still on a contract,” says our source. “Although we won’t give contract customers the best deals, we can often offer a free speed upgrade through the customer retention department.”

What about U-verse’s 250GB usage cap?

“It’s not enforced in most areas and I’ve never seen a customer call to cancel because they had overage fees on their bill,” says our source. “If they did, I’m sure we’d just credit them. I don’t see us losing a customer over this.”

Getting Prepared

You will be calling AT&T. Do not bother using their online chat support, e-mail, or snail mail to ask for a better deal. You will not get one. AT&T’s approach to customer retention requires a specially trained representative to speak with the customer by phone.

Visit the website(s) of the cable company and any other competitors serving your area. You will need to have specific pricing and service details handy when asking AT&T for a better deal. “Don’t make it up, because we will likely take a look at the same information you found and point out any fine print that might make a competitor’s deal less attractive,” says our source. “We are asked to document these details in the notes we place on your account. These are available to any other representative that looks at your account.”

Think about what is most important to you, upgraded service for the same price or a lower bill. The representative will have a few different retention offers to choose from, and in some cases a supervisor may need to authorize the better-priced deals. Most will require a one-year term contract.

Making the Call

A lot of customers want a better deal but don’t want to feel stressed out asking for one. Don’t worry. In most cases the entire process will take less than 15 minutes. But it helps if you can call when you are free of distractions or pressured for time. Hold times might vary and in some cases a less-than-helpful representative might require you to start negotiations over with someone else.

Have paper and pen ready to take notes. You will want to write down the name and extension of the representative and details about the types of retention plans being offered, especially if AT&T manages to ‘lose the paperwork.’

Do -not- call AT&T’s regular customer service number. Instead, call 1-800-288-2020. You will be prompted to select your state, asked for the phone number associated with your account, and offered a menu of choices to proceed. You need to say or select the option to “cancel service.” This will route you directly to a customer retention specialist.

Making Your Case

You: I am calling to cancel my U-verse service. I have been offered a better deal with the cable company.

AT&T: Really? We don’t want to lose you as a customer so let me pull up your account. Can you tell me what our competitor is offering?

At this point, you want to quote the deal you found on the competitor’s website and quote the offer. Let the representative know you are switching because of the price and/or features.

An alternative approach that has also proven effective:

You: I just received an offer from my cable company that has made me seriously consider switching but I wanted to reach out to AT&T to see what you could do to keep my business. I’d like to learn what promotions I might qualify for.

AT&T: Let me check. Tell me what the competitor is offering you.

You: (Describing the offer) There are certain things I like about the offer from the cable company but I could be persuaded to stay with U-verse. I am just concerned because for the amount you charge for broadband service, I can get faster speed at a lower price with the cable company. Are there any promotions that can boost my speed and offer me a better deal?

When the representative comes back on the line, they will usually offer a small discount or service credit ranging from $5-10. But better deals come to those who hold out.

You: My neighbor is getting a better deal than that. He received a speed upgrade and is paying something close to half the regular price for the next year. Is there anything like that available?

AT&T: Let me check. Yes there is, but I will need to speak to my manager.

“When we put you on hold to ‘speak to a manager’ this usually means we are putting notes on the account to justify the higher value retention deal we are about to offer,” says our source. “But if something unusual comes up, like a one-time credit or waiving an equipment fee, we may need a supervisor’s approval.”

Stop the Cap! has verified some valid U-verse retention deals that are commonly available throughout the United States. In some highly competitive areas, these deals are often sweetened with a $100 service credit instantly applied to your bill. You can always ask. Although AT&T might offer some of these for six months, most can be extended to 12 months upon request. Be ready to commit to AT&T for the next year to avoid any early termination penalties in the typical 12 month term contract that comes with these offers.

It is important to be flexible and don’t fixate on any particular element in an offer. A representative may not be able to waive surcharges like a modem rental fee (buy your own) or a Local TV Surcharge, but they can usually find a deal that more than compensates you with a much-reduced rate.

If the representative seems reluctant to extend an offer to you, thank him or her for their time and call back and speak with someone else. Some AT&T representatives are more helpful than others.

Frequently Seen U-verse Promotions

• Broadband-only service: 3Mbps for $14.95/mo, 6Mbps for $23, 12Mbps for $25, 18Mbps for $28, or 24Mbps for $33 (Buying your own modem avoids rental fees but if you plan to rent, ask if there are any promotions that reduce or waive the fee);
• Bundled TV/Internet Service:  The most commonly available offers bundle 18Mbps broadband with U300 service at prices that range from $101-103, although $104/month can upgrade you to 24Mbps with U300 in certain parts of Florida. (1-yr contract)

“We really aren’t routinely offering many deals for speeds above 24Mbps because too many customers don’t qualify for faster service,” says our source. “Offering something they can’t get only further disappoints them, which is something we prefer to avoid.”