Altice USA today revealed the terms of its long-expected initial public offering likely to bring more than a billion dollars to the company’s merger and acquisition fund that many Wall Street analysts now expect will be spent to acquire privately held Cox Communications and/or Mediacom.

Cox has long claimed it is not for sale. But Altice founder Patrick Drahi has a history of being willing to overpay for the companies he covets, including Cablevision, which was a reluctant seller for at least a decade before Altice made an offer the Dolan family that founded Cablevision couldn’t refuse.

Telsey Group analyst Tom Eagan told his Wall Street clients he expected Altice would be “active” in American cable consolidation, with Cox and Mediacom systems being likely targets. Other analysts have downplayed potential interest in Cable ONE, another likely target, because of the company’s recent aggressive rate increases and the fact its systems are often in economically depressed areas. An acquisition of Cox and/or Mediacom would make Altice the third largest cable company in the country, but it would still be far behind Comcast and Charter Communications, which hold first and second place respectively.

Any acquisition would likely not get much scrutiny on the federal level by the FCC and Justice Department, and most states would likely give the deal only a perfunctory review before approving it.

Altice USA has applied to be listed as “ATUS” on the New York Stock Exchange.

Patrick Drahi

“If he can succeed with a corporate-friendly Trump Administration and his lackey Republican legislators and regulators, Patrick Drahi’s Altice could seek to own or control up to 30% of the American telecoms market,” said A.W. Dewalle, a researcher studying Altice’s unprecedented acquisition-frenzy across the world’s telecommunications marketplace. “His IPO in the land of Uncle Sam is just the first shot and it will make a lot of executives very rich and consolidate America’s cable industry.”

Wall Street banks are clamoring for a piece of Altice’s initial public offering, announced this week. The big winners, who will split substantial fees paid to advise Altice USA, are Goldman Sachs, JP Morgan, Morgan Stanley and Citi. The IPO will allow the Drahi-controlled Altice USA to raise money for further acquisitions in the United States and to potentially restructure its existing debt, run up acquiring Cablevision and Suddenlink.

Reuters reported that Drahi’s biggest U.S. shareholders — BC Partners and the Canadian Pension Plan Investment Board will use the IPO as an opportunity to sell some of their combined 30% stake in Altice USA, giving Drahi further assurance he will stay firmly in control of the American operation as he takes on new investors.

Les Echos reports Drahi’s pattern is a familiar one for a man in a hurry to take a much bigger stake in the American telecom market, where profits are high and competition is relatively low. By raising additional funds, Altice USA can show financial strength as it appeals to bankers to loan it the billions in will need to acquire existing cable (and potentially phone) companies. If Altice uses some of the money to repay its existing $20 billion U.S. debt, that could also win the company favorable interest rates on its future loan portfolio.

Drahi is an acquisition specialist, having bought more than 30 companies to add to his Altice portfolio since its start in 2002. Low interest rates, favorable banking terms and corporate deregulation have fueled the shopping spree. With the election of Donald Trump in the U.S., Altice is convinced the sky is the limit when it comes to mergers and acquisitions.

“Everything about his government and the people he has put in place at regulatory agencies says deregulation, ‘laissez-faire,’ and consumers beware,” said Dewalle, a point echoed in part by the Financial Times.

The election of Donald Trump has lifted expectations among chief executives that it will be easier to consolidate companies in the telecoms, media and technology (TMT) sector, as the Republican president has a more laissez-faire approach towards competition. Many media and telecom players are under pressure to boost margins and find new growth avenues, while facing declining sales, according to a senior banker in the industry. “M&A might be the only option for many companies in this sector and Altice will certainly try to play a big role in this,” said [one] banker.

Altice is already laying the public relations groundwork to convince skeptical legislators and regulators that an Altice buyout is not bad news for customers. Altice is spending millions to scrap Cablevision’s existing hybrid coax-fiber network for a 100% fiber to the home replacement. Other upgrades are also ongoing across Suddenlink’s footprint.

Because the American telecom marketplace is not nearly as competitive as the one Altice faces in Europe, Americans are accustomed to paying for broadband and television services at prices that would be scandalous in France. The excess profits earned in America can help Altice finance fiber upgrades in its more competitive European markets. Altice confirmed this week it planned to invest more in 4G wireless upgrades for its SFR division in France and will cover 22 million French homes with fiber to the home service by 2022 and 5.3 million homes in Portugal by 2020.

How big will Mr. Drahi seek to get in the United States? He testified before the Economic Affairs Committee of the French Senate last June, telling legislators he owns or controls about one-third of the French telecom market. In the United States, he controls just 2%, leaving plenty of room to grow.

French business experts predict Drahi will initially seek to sweep up the remaining independent cable operators in the States into the Altice empire before turning attention to a big player like Comcast or Charter Communications, the largest and second-largest American cable operator respectively. Publicly traded companies like Cable ONE would be the first prime targets for an Altice buyout. But Drahi could also repeat his Cablevision acquisition by offering a premium price for privately held operators like Cox Communications, which has a presence in larger cities, and Mediacom — which provides service in 23 states and has a big presence in the midwest.

Most of the rest of America’s independent cable operators are small, regional operations serving smaller communities. Drahi has his choice of these kinds of operators that include Adams Cable, Armstrong, Atlantic Broadband (owned by Canada’s Cogeco), Blue Ridge Communications, Buckeye Broadband, Hargray, Midco, Northland, Service Electric, TruVista, Wave Broadband (exploring a sale), and WOW, among others.

Thus far, Drahi has not shown much interest in acquiring telephone companies, so analysts expect him to confine his acquisitions to the cable business. Even if Drahi acquires a substantial cable portfolio in the United States, he will argue he still faces competition from telephone companies in those same service areas. What Drahi won’t do is compete from the ground up by building a competitive cable system to face off against a firmly entrenched American duopoly.

“That would be bad for business,” said Dewalle.

In an effort to keep up with Comcast, Cox Communications has quietly expanded its internet overcharging scheme to customers in Arkansas, Connecticut, Kansas, Omaha, Neb, and Sun Valley, Ida. (perhaps the only community that can afford Cox’s threatened overlimit fees). Cox’s customers have noticed and told DSL Reports about the forthcoming highway robbery.

These unlucky customers join those in Cleveland, Oh., Florida and Georgia who have already been enduring Cox’s usage cap and penalty fee system.

Cox hasn’t shown any interest in listening to customers who do not appreciate usage allowances and have repeatedly told the company they want unlimited access, especially considering how much they already pay Cox for service.

“It’s a total ripoff and customers have no option to keep unlimited, unless they move to the next city over where Charter/Spectrum offers internet access without any data caps,” notes Cleveland resident Shelly Adams.

Cox has followed Comcast by boosting most usage allowances given to customers to 1TB, an amount many believe was set high enough to avoid threatened regulatory scrutiny of stingy data caps by the FCC under the former Obama Administration.

As with every provider that has ever conjured up an internet overcharging scheme, no matter what the allowance is, the company always claims it is generous and impacts almost nobody. Cox claims 99% of their customers will never hit the cap, which always begs the question, if it affects so few customers why spend time, money and energy creating a data cap, usage measurement tools, and billing scheme for only a handful of customers? Is that Cox’s idea of innovation?

Usage caps for one and all.

In fact, Comcast has claimed the same thing, but their math came into question when more than 13,000 Comcast customers managed to stumble their way to the FCC’s complaints bureau in one year and write a formal protest about Comcast’s own overlimit fee scheme. We are certain there are many more customers with overlimit fees on their bills than that, and guess only a small fraction took the time to write a complaint and submit it.

As Stop the Cap! has said for almost a decade, beware of cable company “generosity” because it usually comes with fine print.

“Cox High Speed Internet packages include 1 TB (1,024 GB) of data to provide you with plenty of freedom to stream, surf, download, and share,” the company writes on its support website (its much rarer Gigablast gigabit plan includes 2TB). For now, if you use Cox Wi-Fi or CableWiFi hotspots, usage on those networks does not count toward your data plan.

Cox reserves itself some extra freedoms, such as automatically charging customers who exceed their allowance a $10 overlimit penalty for each 50GB of usage they incur until the next billing cycle begins. Cox’s generosity ends with the unused portion of your allowance, which Cox keeps for itself, not allowing customers to roll over unused data to the following month.

In an effort to get customers to accept the scheme, Cox calls it a “data plan,” similar to what wireless customers might pay, and says other companies have data caps too. But none of this justifies the practice.

You’re over our arbitrary usage limit!

In another “generous” move, Cox is offering a grace period for two consecutive bill cycles before it slaps overlimit penalties on customer bills for real in Arkansas, Connecticut, Kansas, Omaha, and Sun Valley. The grace period window begins with bills dated on or after Feb. 20, 2017. To make sure you get the message, the company will bill you the overlimit fee it claims almost nobody will ever pay along with a corresponding grace period credit for two months, just to put the scare in you. After May 22, it is time to pay up.

Cox will make sure you can’t claim you “didn’t know” you ran through your allowance by harassing you with data usage messages via Cox browser alert, email, text message, or an automated outbound call when you have used about 85% and 100% of your monthly data plan. You will receive additional alerts when you have reached 125% of your monthly data plan, at which point Cox will throw a party in your honor with thanks for allowing them to run up your bill.

Coincidentally, Cox isn’t testing their scheme in markets rife with competition from providers like Verizon FiOS, where usage is effectively unlimited. In many of Cox’s usage-capped markets, customers have AT&T as their alternative, and they have a 1TB usage allowance as well.

Incoming FCC chairman Ajit Pai is on record opposing any involvement in regulating usage-based pricing schemes, claiming it amounted to government meddling in business. But customers can complain directly to Cox and threaten to cancel service. It may be a good time to renegotiate your cable bill to win discounts that may help cover any overlimit fees that do make it to your bill.

There remains little, if any justification for a company like Cox to peddle data plans with usage allowances to their customers. The company is moving towards gigabit broadband speeds but apparently lacks the resources to manage customers that want a hassle-free unlimited experience? If Cox is being honest about how few customers will ever be affected by the cap, there is no reason the company cannot continue an unlimited plan at current prices.

Cox’s scheme does shine light on the uncompetitive broadband marketplace that continues to afflict this country. As one reader pointed out, customers are constrained by the offerings of whatever provider has set up shop in a city that typically has, at best, one other choice (usually a phone company selling DSL or up to 24Mbps U-verse). A truly competitive market would give customers a wide choice of “data plans” that include unlimited plans customers enjoyed for years and want to keep. But safe in their broadband duopoly, cable companies like Cox have no incentive to treat customers to a better or even fair deal.

The real reason for usage caps and data plans with penalty pricing was exposed by Wall Street analysts like Jonathan Chaplin, a research analyst for New Street Research LLP. Although he was speaking to a cable company executive at the time, his words traveled to our ears as well:

“Our analysis suggests that broadband as a product is underpriced,” Chaplin said. “Our work suggests that cable companies have room to take up broadband pricing significantly and we believe regulators should not oppose the re-pricing (it is good for competition & investment).”

“The companies will undoubtedly have to take pay-TV pricing down to help ‘fund’ the price increase for broadband, but this is a good thing for the business,” Chaplin added. “Post re-pricing, [online video] competition would cease to be a threat and the companies would grow revenue and free cash flow at a far faster rate than they would otherwise.”

Exactly.

The Arris Surfboard SB8200, in white. Arris usually releases identical versions in black and white colors. (Photo courtesy of: Arris)

Arris, the nation’s number one manufacturer of cable modems, will introduce its first DOCSIS 3.1-compatible cable modem as early as this week.

The Arris SB8200 will reportedly cost consumers a steep $199.99 when it goes on sale at the end of this month.

Multichannel News reports the modem box will include the logos of Comcast and Cox, advertising compatibility with Comcast’s ongoing DOCSIS 3.1 trials and the forthcoming introduction of DOCSIS 3.1 to a significant number of Cox Cable customers.

Customers can begin using the new DOCSIS 3.1 modem as soon as it is available for sale, because it will be backwards-compatible with existing DOCSIS 3 broadband networks. Prospective buyers should check with their cable operator before purchase, to make sure it is officially supported.

As cable operators upgrade to DOCSIS 3.1, the SB8200 should allow customers to immediately take advantage of speed upgrades, which are expected to be dramatic. Many cable operators are targeting gigabit download speeds for their top-tier, although upload speeds are expected to be considerably lower than 1000Mbps.

At least one cable operator has been wavering about whether to move towards DOCSIS 3.1 or switch to fiber broadband technology.

Altice USA, which currently owns Suddenlink and Cablevision/Optimum, has announced plans to scrap its existing hybrid fiber/coax infrastructure and upgrade Cablevision customers to fiber-to-the-home service, which will not use DOCSIS cable modems. Altice has not ruled out fiber upgrades for its Suddenlink systems, but has upgraded speeds in many markets using the older DOCSIS 3 standard. Altice USA is expected to continue acquiring smaller cable operators this year – most likely bidding for Cable ONE and a handful of other smaller, regional cable operators.

Among cable operators that have made substantial investments in DOCSIS 3.1 upgrades and are least likely to abandon the technology include: RCN, Mediacom, and WideOpenWest (branded: WOW!). Charter Communications is also expected to be a DOCSIS 3.1 provider… eventually. The company is likely to be preoccupied over the next few years upgrading Time Warner Cable and Bright House Networks systems it acquired to all-digital platforms before it considers moving to DOCSIS 3.1.

Arris will face competing models including Netgear’s CM1000 ($179.99) and the Linksys CM3132 ($199.99) which should be available by late spring.