Phillip “More empty promises from the cable industry” Dampier

Listening to Time Warner Cable’s “Here today and gone much richer tomorrow” CEO-in-passing Rob Marcus prattle on endlessly about improving “the customer experience” on analyst conference calls, the cable company’s blog, and in various press statements always makes me pinch myself to be certain I am not dreaming.

Time Warner’s Rob Marcus:

I’m focused on ensuring we establish a customer-centric, performance-oriented, values-driven culture defined by four basic tenets:

• We put our customers first,
• We are empowered and accountable,
• We do the right thing, and
• We are passionate about winning

What does that mean for customers? If we expect customers to trust us to connect them to what matters most, we must put them at the center of everything we do.

How is that working out for you?

Based on consumer surveys, many of Marcus’ customers may have a different sentiment:

• Time Warner puts what is best for Time Warner first,
• Time Warner is empowered to raise rates for no clear reason and as a deregulated entity is accountable to no one,
• Time Warner does the right thing for Time Warner executives and shareholders,
• Charlie Sheen was also passionate about “winning.”

So much for Comcast’s customer service improvement project promised back in 2007. (Source: ACSI)

There is nowhere to go but up when it comes to improving the abusive relationship most Americans have with the local cable or phone company. CNN asked the question, “do you hate your Internet provider,” and within hours more than 600 customers sang “yes!”

Marcus

This is hardly a new problem. Karl Bode at Broadband Reports reminds us that Comcast broke its promises for major improvements in customer service more than five years ago. CEO Brian Roberts at the time blamed the troubles on Comcast’s enormity — taking 250 million calls a year handling orders, customer complaints, etc., is a lot for one company to handle.

“With that many calls, you are going to have failures,” Roberts admitted.

With more than 10 million Time Warner Cable customers waiting to move in at Comcast, if what Roberts says is true, things are about to get much worse. In fact, even before the merger was announced Comcast was just as despised as ever, thanks to rate hikes, usage caps, and poor service often delivered from their notorious sub-contractors that appear on the news for falling asleep, murder, digging in the wrong yard or blowing up laptops, dishwashers or homes.

Judging from the enormous negative reaction customers of both Time Warner Cable and Comcast had to the news the two were combining, it’s clear this merger isn’t the exciting opportunity Marcus and Roberts would have you believe.

‘If you despise Comcast today, your hate will know no bounds tomorrow as Comcast spends the next two years distracted with digesting Time Warner Cable,’ suggested one customer.

Another asked whether Americans have resigned themselves to a trap of low expectations, seeking out one abusive telecom company relationship after another.

“After twenty years of Time Warner’s broken promises, service you can’t count on, and price hikes you can, I made the fatal mistake of running away from one bad relationship into the arms of another with the Bernie Madoff of broadband: AT&T,” wrote another. “Slower service, an unnecessary allowance on broadband usage, and one rate increase too many is hardly the improvement we were promised in the shiny brochure. But we have nowhere else to go.”

Being stuck with an independent phone company with no cable provider nearby can mean even worse service.

“I live in Seattle, and the only option in my neighborhood is CenturyLink DSL,” wrote Jen Wilson.

CenturyLink’s top speed in Wilson’s neighborhood? 1Mbps. At night, speeds drop to 122kbps — just twice the speed of dial-up Internet.

CNN’s Frida Ghitis observed the current state of broadband in the United States is alarmingly bad, and allowing Comcast and Time Warner Cable to merge won’t fix it:

Americans are divided on many issues, but resentment against these telecom giants is so pervasive that it may just be the most heartwarming symbol of national unity. And that’s as it should be. Except that the resentment should extend to politicians who have made this disastrous system possible and allow political contributions to prevent them from fixing it. The problem is not just one of dismal customer service. Instead, it is a growing threat to the country’s economic and strategic position.

If you travel overseas, you will quickly notice that Web access in much of the developed world is light years ahead of America’s. You may also be irritated to discover that far better Internet is much, much cheaper in other countries.

Time Warner’s notorious modem rental fee was just a hidden rate hike, according to the ex-CEO.

Thus far, Time Warner’s remedy to improve service is yet another rate increase. Broadband prices are rising an average of $3 a month — $36 a year, with no speed enhancements on the horizon except in New York, Los Angeles, and cities where Google Fiber is threatening to kick the cable company in the pants. That means Time Warner’s 11.1 million broadband customers will deliver as much as $33.3 million more in revenue each month for broadband service alone. What will you get in return? In most cases, nothing.

Television customers will be pick-pocketed for the newly-“enhanced” on-screen guide many still loathe, which carries a new surcharge applied to the cost of set-top boxes and DVRs. This “enhancement” alone will cost most customers with two boxes an extra $30 a year. It will provide Time Warner with more than $170 million each year in revenue enhancement.

The cable company that fought a battle with CBS last summer “on behalf of customers” faced with paying extortionist pricing for CBS-owned cable networks and local stations will instead send their extortion payment direct to Time Warner, thanks to a new $2.25/mo “Broadcast TV Fee” imposed this spring by the cable company.

But Time Warner is unlikely to hang on to that money for long.

If it wanted to discourage programmers from demanding double-digit percentage rate increases, the plan is likely to backfire once the networks smell the money — more than $25 million a month, $300 million a year — Time Warner claims to be collecting on their behalf.

For years, cable operators have denied they have a problem.

But new evidence suggests Americans are cutting back on their cable television habit as prices continue to rise and alternatives become available.

One of the worst affected by cable cord cutters is Time Warner Cable, which has been consistently losing video customers month after month since 2009:

Disputes with programmers and competition from satellite and telephone companies may not be enough to explain away the trend of subscriber losses. It also does not explain why Americans under 35 are increasingly unlikely to sign up for cable television at all.

Cable cord cutting — fact or fiction?

Nonsense, replies Bloomberg opinion columnist Matthew C. Klein:

It is tempting to think that the declining number of subscribers at the U.S.’s biggest cable-television companies is a symptom of the industry’s malaise as it slowly slides into obsolescence. Don’t buy it. The losses are accounted for in the gains by smaller and nimbler rivals.

[…] The customers who have been abandoning Comcast and Time Warner Cable in droves haven’t given up on paid TV content, however. Focusing on the travails of the biggest cable companies obscures the reality that, according to Bloomberg Industries, the total number of pay-TV subscribers is slightly higher now than it was at the end of 2008 and that there were probably more people paying for television subscriptions at the end of 2013 than at the end of 2012.

To the extent that individual company results tell us anything, it could be about where Americans are moving, or the relative quality of service offered by the various companies. In the 12 months ended Dec. 31, AT&T Inc. added 924,000 subscribers to its U-verse TV service, while Verizon Communications Inc. added 536,000 subscribers to its FiOS TV service. Since the end of 2008, the two companies best known for their wireless services have added about 8 million pay-TV subscribers — far more than Time Warner Cable and Comcast have lost.

Klein’s views mirror those of many cable industry executives who blame the economy for deteriorating cable television subscriber numbers. Many suggest multi-generational households are responsible — stay at home kids and older parents are sharing a single cable television subscription. Others claim discretionary income is squeezing some to downgrade, but not cancel, cable television service.

Klein’s accounting does not tell the entire story. Competition from telephone companies, especially AT&T’s U-verse, is not as pervasive against Time Warner Cable and Comcast as Klein suggests. In fact, Charter Communications is among the cable companies facing the biggest onslaught of competition from AT&T. U-verse has picked up many of its newest subscribers not because of a sudden urge to switch, but rather because the service has only just become available in several new markets as a result of AT&T’s expansion effort. Verizon FiOS is still slowly expanding within its current franchise areas as well. Neither Comcast or Time Warner Cable consider either service much of a serious competitive threat.

AT&T U-verse, the larger of the two telephone company services, has a TV penetration rate of just 21 percent of customer locations. FiOS, which serves a smaller customer base, has a 35 percent penetration rate for television. Cable remains dominant for now, even as it loses subscribers and market share.

Another way to measure cord cutting is to look at the subscriber numbers of major basic cable networks that are most likely to be a part of any channel lineup. ESPN, for example, lost around 1.5 million subscribers between September 2011 and September 2013. Most of that loss came from cord cutting or downgrades to tiers like “Broadcast Basic,” consisting mostly of local television stations. ESPN’s numbers include all pay television platforms — satellite, telco TV, and cable.

In spite of the subscriber losses, cable industry profits remain healthy. Revenue growth these days comes from broadband service and rate increases.

AT&T this month signed up their 10 millionth customer to U-verse High Speed Internet service, surpassing Verizon FiOS as the nation’s biggest telephone company supplier of broadband, television, and telephone service. Coinciding with that success, AT&T is raising prices for U-verse, despite AT&T’s record earnings from the fiber to the neighborhood service, now accounting for $1 billion a month in revenue.

AT&T is protecting its broadband flank by convincing current DSL customers to switch to higher-speed U-verse broadband as the network upgrade reaches into more homes across AT&T’s service areas. In the last quarter U-verse picked up 655,000 new broadband customers nationwide, many upgraded from traditional DSL. Where AT&T has not invested in U-verse upgrades and cable competition exists, results are not as good. AT&T lost 26,000 DSL customers last quarter, most moving to cable broadband.

“This latest milestone shows how U-verse is helping transform AT&T into a premier IP broadband company,” said Lori Lee, senior executive vice president, AT&T Home Solutions. As of the third quarter of this year, total U-verse high-speed Internet subscribers represented about 60 percent of all wireline broadband subscribers, compared with 43 percent in the year-earlier quarter.

Verizon FiOS, in comparison, has signed up just 5.9 million customers FiOS Internet subscribers on its stalled fiber optic network. Most Verizon broadband customers with no FiOS in their future either stick with DSL service or, increasingly, switch to a cable competitor for faster speeds.

Some of AT&T’s strongest U-verse growth came from its TV package. At least 265,000 cable and satellite cord-cutters looking for a better deal switched to U-verse TV in the last three months, a gain from 198,000 at the same time last year. That’s the second-best quarterly gain ever. A total of 5.3 million AT&T customers subscribe to U-verse TV.

Much of the growth has come from AT&T’s investment in expanding U-verse to new areas. Project Velocity IP is a three-year, $14 billion plan to upgrade AT&T’s wireless and wired broadband networks. AT&T has added almost 2.5 million more homes to its broadband footprint so far this year and hopes to expand broadband availability to reach about 57 million customers by the end of 2015.

Although $14 billion is a significant investment, AT&T has spent considerably more on its shareholders. John Stephens, AT&T’s chief financial officer told Wall Street analysts AT&T has bought back 684 million shares of stock that will save the company more than $1.2 billion in future dividend payouts.  Combined with its dividend payout, AT&T has handed shareholders $18 billion so far this year and more than $40 billion since the beginning of 2012. AT&T expects to spend $20 billion on wireless and wireline network improvements in 2014.

AT&T’s speed upgrades have also not run as smoothly as AT&T claims. Efforts to increase speeds to 45Mbps in 79 markets has had mixed results with a significant number of customers complaining they cannot get qualified for the faster speeds because of infrastructure problems with AT&T’s network. The company still says it is on track to offer 75 and 100Mbps speed tiers in the future and is building a fiber to the home network in Austin to compete with Google.

Many customers who have been with AT&T for more than a year are learning better service does not come for free. AT&T has filed rate increases for its television service beginning Jan. 26, 2014 for customers not on a pricing promotion. The monthly price for the following U-verse TV service plans will increase $3, along with fee hikes for local stations and equipment, bringing AT&T at least $15 million in extra revenue each month:

• U-family to $62;
• U200 to $77;
• U200 Latino to $87;
• U300 to $92;
• U300 Latino to $102;
• U450 to $124;
• and U450 Latino to $134.
• Grandfathered plans also will increase $3: U100 to $64 or $69, depending on when first ordered; and U400 to $119.

• The monthly price of each non-DVR TV receiver will increase from $7 to $;
• Beginning on February 1, 2014, the Broadcast TV Surcharge will increase $1 to $2.99 per month to recover a portion of the amount local broadcasters charge AT&T to carry their channels.

Those customers who have a U-verse TV pricing promotion will continue to receive the promotional benefit until the applicable promotion ends or expires.  Customers are being notified of these changes via bill messaging occurring in November and December and a reminder in January and February 2014.  In addition, customers will be notified of these changes online at www.att.net/uversepricechange and att.com/uversesupport.

[flv]http://www.phillipdampier.com/video/ATT U-verse with GigaPower — Reactions 11-13.mp4[/flv]

AT&T is trying to get ahead of Google by advertising AT&T U-verse with GigaPower, a 1,000Mbps fiber to the home service promised in Austin sometime in the future. (0:30)

‘Disloyal Cablevision customers looking for discounts are dead to us.’

Cablevision is fed up with disloyal customers bouncing between the cable company and other providers when promotional discounts expire.

After losing 13,000 broadband, 18,000 voice, and 37,000 television customers, Cablevision CEO Jim Dolan said the company has stopped offering any further discounts to customers that received them once before.

“The customer that has been bouncing from one company to another on promotional/repetitive discounts has hit a dead-end with us,” Dolan told Wall Street analysts during a conference call.

All customers with promotions will now be tracked to prevent extensions or further discounts once the special rates expire. Dolan confirmed the ban will also extend to customer retention offers.

Customers who shop primarily on price in Cablevision’s service area have traditionally flipped between AT&T U-verse, Verizon FiOS and the cable company every few years, usually switching after a promotion expires or rates are increased. Because of fierce price competition, new customers can receive a triple play package of broadband, phone, and television service — including equipment, for less than $85 a month for at least one year. Regular prices are considerably higher.

Cablevision lost most of its departing New York and New Jersey customers to Verizon FiOS, but has been more successful fending off competition in Connecticut, where AT&T has the least capable broadband network among the three providers.

All three companies have attempted price increases over the last few years with mixed results. Cablevision’s eight percent rate hike on broadband this year may have been too much for some customers who shopped around and found a better deal with the phone company.

Despite the loss in customers, Dolan remains firmly committed to more rate hikes, especially for broadband service, noting its speed and features (including an extensive Wi-Fi network) deliver enough value to sustain further price increases.

Cablevision clearly hopes competitors follow its lead and end promotional rate double-dipping as well. If they do, customers will find themselves locked in with regular pricing regardless of the provider they choose.

Some analysts are skeptical Cablevision’s hard-line will last, especially if subscriber losses mount. Cable operators have attempted to restrict promotions in the past but tend to ease them if market share suffers. Despite the third quarter customer retreat, Cablevision’s rate hikes delivered $336 million in broadband revenue during the last three months, an increase from $308 million earned the same time last year.

Armstrong

A Wall Street analyst that maintained a “buy” rating on Comcast stock for most of the past four years is leaving Goldman Sachs after 13 years to become Comcast’s head of investor relations.

Jason Armstrong, often heard on earnings conference calls of major telecommunications companies, will start his new job in January, although his job change has not been publicly announced.

Armstrong served as the investment bank’s lead analyst for the cable, telephone and satellite sector. He arrived at Goldman Sachs in 2000 after leaving Ernst & Young, LLP in Chicago.

Officials from both Goldman Sachs and Comcast declined to comment.