Altice USA’s Optimum (formerly Cablevision) and Suddenlink are getting upgraded technology as the two cable companies face increasing demands for speed and broadband usage around the country.

“Over the last two years, the percentage of customers taking over 100 megabits of speed has risen to about 80% of our total customer base,” noted Dexter Goei, CEO of Altice USA. “Recently, we have shifted focus to growing the penetration of 200 Mbps services with about 80% of gross additions now taking these speeds or higher, reaching about half of our total customer base at the end of the third quarter, up from less than 5% two years ago.”

Goei noted that the average of all Optimum and Suddenlink broadband customers’ internet speeds has risen from 56 Mbps to 172 Mbps over the last 24 months, and this is increasing every quarter.

“Average data usage is now over 240 gigabytes per month per customer,” Goei added. “And this continues to grow over 20% per year.”

Goei

To meet growing demand, Altice USA is spending money upgrading its cable properties. The company is scrapping its coaxial cable network in the northeast and in selected parts of Suddenlink territory. In smaller communities that Suddenlink typically serves, the company will either bring fiber to the home service or upgrade the existing cable system to DOCSIS 3.1.

“The first objective is to have 1 Gbps broadband services available virtually everywhere,” Goei said. “For our legacy coax network in the Optimum footprint, we just need to do a Digital Switched Video upgrade now to move us to DOCSIS 3.1 and 1 Gbps speeds, which we can complete over the next few quarters. We just soft launched our fiber network in select areas of Long Island, and it is performing just as we expected so far, delivering a great 1 Gbps symmetrical single-play data service with the new advanced wireless gateway. The smart meshed Wi-Fi we’ve introduced is also doing extremely well.”

Goei says Optimum’s fiber network will be capable of delivering more than 10 Gbps speeds, as well as enhanced Wi-Fi, and improved system reliability.

“For the Suddenlink footprint, we already offer up to 1 Gbps services, so we will add further 1 Gbps capacity through some node splitting and CMTS upgrades,” Goei said. “We are also doing a QAM to IP migration on the cable plant to deliver future IP services. And with the move to DOCSIS 3.1, customers will have a uniform SSID across all of their devices, for an improved seamless Wi-Fi experience.”

The upgrades will mean Suddenlink customers will be more likely to receive 1 Gbps speeds even during peak usage times.

By transitioning video services away from the current QAM platform, IP video will free up additional bandwidth Suddenlink can devote to its internet customers.

Goei told investors on a quarterly results conference call that the five-year fiber upgrade project in the northeast may stretch into a sixth year due to permitting delays in some communities where Optimum provides service.

Some Wall Street analysts questioned Goei about the merits of a costly fiber upgrade, asking if it was necessary. Jonathan Chaplin of New Street Research suggested if cable systems were already capable of gigabit speed service under DOCSIS 3.1, any revenue benefits gained from offering gigabit service could already be realized without stringing fiber optic cable. Other Wall Street analysts wanted to know when Altice would deliver the next revenue-increasing rate hike on Optimum and Suddenlink customers.

The company acknowledged it lost customers after the last round of price increases last spring. Its biggest losses are coming from cord cutting. Altice saw 20,700 Optimum TV customers cancel service between July and September, with a total of 76,000 customers dropping service so far this year. But that won’t stop Altice from raising rates again. Goei anticipated the next rate hike will likely take place during the first half of 2019.

Altice USA is also working on its own cellphone service, which will be powered by its large Wi-Fi hotspot network in the northeast and rely on the services of Sprint to connect customers while away from Wi-Fi. The company did not release pricing or service information.

Goei

While Wall Street and the tech media seems excited about the prospect of 5G and other fixed wireless home broadband services, Altice, which owns Cablevision and Suddenlink, dismissed wireless broadband as inadequate to meet rapidly growing broadband usage.

“In terms of usage patterns, our customers are taking an average download speed of 162 Mbps as of the second quarter of 2018, which is up 74% year-over-year,” Dexter Goei, CEO of Altice USA told investors on a recent conference call. “[Our customers now use] over 220 GB of data per month, which is up 20% year-over-year, with 10 in-home connected devices, on average. If you take the top 10% of our highest data consuming customers as a leading indicator, they are using, on average, almost 1 terabyte of data per month with 26 in-home connected devices. To support these usage patterns, which are mainly driven by video streaming and the proliferation of new over-the-top [streaming] services, it requires a high quality fixed network like ours. There is no substitute.”

Goei argued America’s wireless carriers are not positioned to offer a credible, serious home broadband alternative.

“For example, so-called unlimited data plans from the U.S. mobile operators start capping or significantly throttling customers at 20 GB of usage per month,” Goei said. “Over 60% of our customers are now using over 100 GB of data per month right now, which the mobile operators do not and will not have the capacity to match on a scaled basis unless they overbuild with a new dense fiber network.”

Altice just so happens to be building a dense fiber network, scrapping Cablevision’s remaining coaxial cable in New York, New Jersey, and Connecticut in favor of a fiber-to-the-home network that will eventually reach all of its customers.

Cablevision customers get very attractive promotions in the highly competitive northeastern United States, while Suddenlink customers in more rural areas pay more.

The majority of Cablevision and Suddenlink broadband customers want speeds of 100 Mbps or greater from the Altice-owned cable operators, and average monthly data usage by those customers is now reaching 200 GB per month.

Those statistics were part of a quarterly financial results presentation by Altice USA executives about how the company is doing in the United States.

Altice’s cable holdings include Cablevision, serving a generally affluent customer base in and around the New York City area where Verizon FiOS is its biggest competitor, and Suddenlink, which serves in less competitive markets where local economies are often challenged and phone company DSL still has a significant presence.

Regardless of whether customers receive broadband from Cablevision or Suddenlink, Altice USA CEO Dexter Goei made it clear consumers want faster internet service and are consuming exponentially more data than ever before.

Goei said Altice will continue to increase internet speeds over its existing hybrid fiber-coax network (HFC) even as it builds out its fiber to the home replacement network in some areas. At least 95% of Cablevision customers can now subscribe to 400 Mbps broadband on the company’s legacy HFC network. Around 72% of Suddenlink customers can get similar speeds today. Gigabit speed is available to 29% of Altice USA customers.

Goei said 90% of new Cablevision and Suddenlink customers now choose internet plans featuring 100 Mbps or faster broadband. The average data use of those customers “is now reaching about 200 GB” per month, Goei reported. For customers on HFC systems, Goei said the maximum speed Altice’s implementation of DOCSIS 3 can support is around 600 Mbps, depending on how many customers are sharing the connection. As customers transition to fiber service in the northeast, faster speeds are planned. In fact, Goei wants Cablevision to offer speeds even faster than Verizon FiOS, its chief competitor.

“In terms of the speed capabilities, we’ll have the ability to do higher speeds than the competition,” Goei said.

Altice USA’s fiber-to-the-home (FTTH) deployment is “well underway” in New York, New Jersey, and Connecticut, with plans to connect several hundred thousand customers to the new network starting later this year. Goei told investors Altice was accelerating the rollout this year with the hope of further reducing network and customer operation costs related to servicing the older coaxial network.

Cablevision and Suddenlink will gradually be rebranded as Altice, and the company has begun familiarizing customers with the new brand name in various ways, including the rollout of its new deluxe set-top box, called Altice One.

“This is our new entertainment platform with an all in one box, including TV, internet, Wi-Fi, integrated apps such as Netflix and a voice activated remote control,” said Goei. “The service includes an improved Wi-Fi experience […] as many TV boxes double up as Wi-Fi repeaters around the home. This is a key part of our strategy of enhancing the customer experience and we’ll have the capacity for ongoing upgrades and the addition of new apps as they become available.”

But that new platform comes at a cost. Currently, Cablevision customers can pay as much as $10 for each set-top box and $5 for a cable modem. Altice One is regularly priced at $25 a month — $10 more for a customer that has one television set-top box and cable modem. That makes Altice’s box among the most costly in the cable industry. The company is trying to hide the cost of its box by bundling it into promotions targeting price sensitive new customers.

In fact, the cost of service is increasingly becoming a factor, especially for Suddenlink customers. Over the last two years, Altice has been “harmonizing” Suddenlink’s rate plans, which used to be set based on the technical capabilities and performance of each cable system. Goei said Suddenlink comprised “five or six different customer bases” — each served by cable systems with different capabilities and rate plans. In the last two years, Suddenlink customers have been introduced to new rate plans, and some are paying considerably higher rates than before, especially for equipment and surcharges.

“All of that activity was probably more than we ever wanted to or anticipated as harmonizing all the different variables is not that easy,” Goei said. “And so we made a very concerted effort to not implement a usual or industry like price increase at the end of 2017, given all the various changes that happened over both customer bases as we harmonized them.” But Goei added the reprieve from rate hikes won’t last forever, promising a “rate event” strategy sometime this year, different from rate changes in past years.

Altice is emphasizing the progress it is making boosting internet speeds at its Cablevision and Suddenlink cable systems.

What Suddenlink and Cablevision charge for service is very dependent on what the competition is offering in Altice’s various markets. Goei paradoxically noted that some of the most attractive rates go to customers living in the most affluent areas of the New York Tri-State Area because of intense competition from Verizon FiOS. Prices have remained so low historically that, in Goei’s view, “it makes it very difficult for third parties to come into these markets” and compete with attractive offers that can match Cablevision. That also explains why Cablevision customers do not deal with data caps while Suddenlink customers often do.

Goei

Conversely, in Suddenlink service areas where less capable competitors exist, prices can be higher and service is considered less affordable. As a result, financial analysts have noted Suddenlink’s broadband growth has been anemic since Altice bought the company, presumably because would-be customers cannot afford the service or have chosen a more economic package sold by the phone company, even if it less capable.

Goei promised Altice would be more “nimble” in the future about targeting pricing in different service areas, taking current conditions on the ground into account when setting rates.

In more general terms, Altice is dealing with the same challenges most cable operators are facing these days. Cord-cutting continues to result in reduced numbers of video subscribers. The company also recently endured a multi-week programming dispute with Starz that cost the company video subscribers in the Cablevision service area. The dispute eventually ended with a new multi-year affiliation agreement that allows Altice systems to carry Starz and Starz Encore networks, on-demand services, and online access for several years.

But Altice clearly sees broadband as its key product going forward, which is why the company is upgrading its Cablevision and Suddenlink systems to support faster internet speeds.

Goei

The CEO of Altice USA took time away from his luxurious homes in Switzerland and New York this week to sit down with concerned middle and working-class Cablevision employees at a meeting held at an unassuming company garage in the Bronx.

Dexter Goei has worries of an organized workforce on his mind. A recording of the meeting provided to Stop the Cap!, showed Goei spent most of his time trying to convince employees they could trust him to protect their future employment at the cable operator.

Since Altice acquired Cablevision in the U.S., the French media have criticized the ‘naiveté of American regulators’ that largely accepted the promises and commitments of the rapidly growing international cable and wireless company at the same time Altice was regularly accused of reneging on the promises it made to regulators in Europe, especially in France. The company has been fined at least twice for breaking those commitments.

Altice’s entrance into the United States began with the acquisitions of Suddenlink, a relatively small cable company serving forgotten small cities in states like Texas and West Virginia and the should-have-been-acquired-by-Comcast-or-Time-Warner-Cable-years-ago oddity Cablevision, which made money for its founding family the Dolans for decades, selling cable mostly in suburban downstate New York.

In America, those acquiring a rival operator are usually asked to show how a deal is “in the public interest” while also submitting to a review to ensure the transaction does not irreparably harm competition. For Suddenlink customers, almost anything Altice could do would be an improvement for a cable company run by a guy who admitted on national television that the days of big investments by cable companies in service improvements were over. It was time to reap the profits, to paraphrase then-CEO Jerry Kent. And so they did, coming up with innovative usage caps and overlimit penalties for customers who dared to use the cable company’s internet service to circumvent a costly cable television package.

Cablevision, in contrast, was usually better regarded than the cable giants that surrounded it. Although technologically aggressive, Comcast canceled most of the goodwill earned for its service improvements by treating customers like patrons of an S&M club. Time Warner Cable was also loathed for its “last to do anything” upgrades, disengaged customer service, and reliable rate hikes, but at least they learned from earlier customer service mishaps and generally relied on a policy of being nicer to customers that threatened to leave.

Cablevision innovated on ways to keep customer loyalty after Verizon FiOS arrived to compete in large sections of its service area. The company spent millions on a major Wi-Fi network for the benefit of its commuting customers, launched broadband speed upgrades earlier than most, and after one embarrassing episode with the FCC showing their speed claims were not met by reality, they have usually overachieved ever since.

Drahi

In 2016, almost everything except Comcast changed. Time Warner Cable was successfully sold to Charter Communications and a self-styled ‘Baron of the Stock Exchange‘ — Patrick Drahi, managed to invade the United States and successfully acquire the two cable operators, despite admitting he would gut spending and wring hundreds of millions in savings out of the transactions for the benefit of his investors.

Mr. Drahi’s penchant for ruthless cost-cutting isn’t new, and he’s been dubbed “The Slasher” in Europe since decimating the budget at his French wireless and broadband company SFR-Numericable. French unions hate him, and not just those representing workers at his telecom businesses. Since the Altice Media Group took control of several major print publications in France, independent photographers have complained Altice slowed payments to a crawl, leading to an open letter to the French government from several press photography agencies demanding action. To date, Altice owes more than a half million dollars in outstanding licensing payments.

Critics contend this is nothing new for Altice, often denounced for not paying vendors (or paying them only after they agree to provide discounts) or alienating employees with radical cost cutting and cutbacks. Customers don’t like what they see either, with more than a million dropping SFR for other providers.

But that was not a story Goei was prepared to share with Cablevision workers in the Bronx.

Instead, Mr. Goei told employees he turned his back on a lucrative career on Wall Street after the great financial meltdown of 2008 and saw more potential running cable companies in Europe and the United States. Goei told the workers Altice’s business plan is to acquire cable and telecom companies and reinvest the profits in improved customer service and better technology for customers. Actual customers of Altice’s cable companies in Europe are still waiting for those improvements.

The French loathe SFR-Numericable, giving it one out of five stars in reviews.

SFR-Numericable, which Goei claimed this week won acclaim from French regulators for being the most reliable in the country, gets scathing reviews criticizing the company for its very frequent service outages, tricky marketing, and incoherent customer service. “Legalized banditry,” claimed one customer. Another described the offshore customer care center as “the Moroccan nightmare,” with more than a few call center workers demonstrating less-than-capable comprehension of French. Service outages are rampant and represent the single biggest reason customers have canceled service.

Goei complained that acquisitions and upgrades have been complicated in Europe by former managers grabbing their golden parachutes and abandoning the acquired companies (without mentioning Altice’s well-known reputation for draconian salary cuts and downsizing) and slowdowns from underperforming suppliers (despite the fact some vendors in France complained their invoices went unpaid for weeks or months, leading to complaints to government regulators).

Forthcoming upgrades are one of the reasons Goei was in the Bronx to sell employees on the merits of Altice Technical Services (ATS), a spinoff entity expected to eventually manage all of Altice’s technical infrastructure and the technicians that will care for it.

“We don’t want to contract out,” explained Goei, who aspires to manage Altice’s forthcoming upgrades effectively in-house through ATS instead of going to outside contractors. To manage this, Goei needs to convince Altice USA’s technical employees to leave Altice and join ATS.

Will ATS protect workers and customers or simply help Altice rid itself of regulator-imposed conditions for its acquisitions?

Goei’s statements seemed to suggest that most will need to make that transition if they want to remain a part of Altice for more than five years, hinting ATS will increasingly manage more and more of Altice’s technical needs, eventually making Altice USA employees potentially redundant.

Goei also hinted ATS might perform work for more than just Altice, which underlined concerns for union organizers that ATS is being established as an independent contracting entity that would not be subject to any regulatory job protection conditions that came with the approval of Altice’s acquisition of Cablevision.

Altice’s plans to rip out and replace coaxial cable with an all-fiber network will likely provide work for the next 7-10 years, notwithstanding the ambitious five-year timeline Altice gave for the fiber upgrade. But employees peppered Goei with questions about job security, benefits like vacation pay, and exactly who will be running ATS and what their opportunities for advancement are.

The transition to ATS might effectively be in name only, because Goei claimed ATS will have full access to employees’ files and work history with Altice and Cablevision, and if managers make the transition to ATS, employees could report to the same manager or supervisor they did under Altice.

“We’re not bringing in some Mexican guy” to run things Goei said to nervous laughter and raised eyebrows from the almost all-minority audience.

Goei’s question and answer session is unlikely to assuage concerns ATS could evolve into little more than Altice’s version of an independent subcontractor with enhanced loyalty to Altice USA. Despite assurances Altice is not looking for excuses to radically trim its workforce, Altice’s history shows job cuts are an integral part of what the French business press calls “The Drahi Method.”

At France’s SFR, Drahi made clear he is looking to cut at least 5,000 paid positions, reducing the workforce from 14,700 to 9,000, starting in July. Observers suspect Altice’s reliance on ATS to act as an umbrella technical department for all of Altice’s North American acquisitions guarantees workforce reductions, if only to eliminate redundancy. Altice has already shown a willingness to lay off employees at its Cablevision and Suddenlink call centers.

But there is one area where Altice is willing to spend.

Le Temps reports Drahi is opening the checkbook to beef up its Geneva executive headquarters in Switzerland, increasing the workforce tenfold and centralizing business operations for the Altice empire. The office is packed with ex-Wall Street bankers and businessmen with a reputation for ruthlessness. Goei’s office is in the building, as is the company’s director — Michel Combes. Combes was notoriously hired away from Alcatel right after demonstrating a talent for swinging the job cutting ax. They are joined by Burkhard Koep, a former Morgan Stanley investment banker in charge of mergers and acquisitions.

The top shelf executives have moved themselves and their families from London, New York, Paris, Tel Aviv and Lisbon to the posh neighborhoods around suburban Geneva, where homes are more likely to be called estates.

The Geneva office conducts business through heavy reliance on videoconferencing and racking up frequent flier miles traveling abroad. Often absent is Drahi himself, who prefers to conduct business from his Zermatt-based luxury cottages. As much as executives spend their time pondering the next acquisition, Le Temps reports they also spend their weekends trying to renegotiate the company’s enormous debt load by seeking refinancing at lower interest rates.

“They play a bank against each other by saying: we will refinance to 6% the debt you loaned us at 7%,” reported the news outlet.

But Altice’s Geneva headquarters did not come for free. Drahi recently introduced a new franchise fee obligating each cable or telecom unit to pay 2-3% of their revenue to Mr. Drahi’s Switzerland office. In the first year that is expected to raise at least $550 million dollars. While popular with Swiss tax authorities, the substantial royalty payments are expected to reduce available cash for upgrades and debt service. Nobody is sure where the money will ultimately end up.

Goei, CEO of Altice USA

Altice USA’s Dexter Goei is on a buying spree, putting down $31 million to buy a five-story multifamily building in Greenwich Village with plans to convert the 10-unit building into his personal megamansion. Cablevision customers will help cover Goei’s extravagant salary and his shopping list with a rate hike on set-top box rentals that will reach an all-time high of $10/month.

Cablevision is notifying customers that effective Dec. 1, customers will need to pay more, in part because Altice wants to make sure its charges “align with the industry” and are “competitive with other providers.” In other words, they are not charging enough.

Optimum’s Broadcast Basic Tier is rising to $17.95/mo for new customers, with existing customers facing a price hike up to $2.39/mo. Customers with Optimum Value or higher level of service will pay $2.98 a month more for Cablevision’s Sports & Broadcast TV fee, split into a $3.99/mo fee for “Broadcast TV” and $4.97/mo for “Sports TV.”

While Altice executives continue to look for at least $900 million in cost-cutting and savings at Cablevision, top executives are under no such constraints. Goei tried to hide his megamansion deal using the name of a Limited Liability Company as the buyer of the property, located down the street from Sarah Jessica Parker’s proposed megamansion at 273-275 West 11th Street. The super wealthy often evict current tenants and then knock the walls down between each apartment to create a larger open space for themselves in otherwise notoriously cramped Manhattan real estate.

“We can’t replace the five-year old broken coffee maker in our break room without appearing before a committee which writes down the names of those who want to spend $150 on a new machine but our new CEO (Goei is CEO of Altice USA) signs off on $10 box rentals and pays himself a salary that lets him shop until he drops,” one Cablevision middle manager on Long Island tells Stop the Cap! “It’s like letting Gordon Gekko run a cable company.”