Time Warner Cable’s summer was “horrible,” to quote one analyst, after three percent of customers left over programming disputes and increasing prices for broadband and telephone service, with more likely to follow as price promotions expire and rates increase further.

Cable analysts were shocked Time Warner Cable lost 308,000 customers in the last three months, most leaving over interruptions of CBS and Showtime over a contract dispute. But customers were also ready to leave over increasing modem rental fees, rate increases, and the company’s growing pullback on promotional pricing. Time Warner Cable’s poor results have ironically caused its stock price to increase this morning, but only because investors suspect a shareholder value-boosting merger with Charter Communications could come within months.

“Just horrible,” MoffetNathanson analyst Craig Moffett wrote in a note to investor clients this morning. “The CBS dispute apparently took a much larger toll than anyone would have imagined, and this colored all the results.”

Sources have told Reuters that cable billionaire John Malone has approached Time Warner Cable about a full takeover by Charter Communications, but has been rebuffed by Britt so far. But with Britt exiting and Time Warner Cable’s underperformance, shareholder pressure for a deal with Charter will only increase.

“This enhances Malone’s appeal to Time Warner Cable shareholders that they would be better off with another management team,” Brean Capital analyst Todd Mitchell told Reuters.

When promotional prices end, a growing percentage of TWC customers drop services or take their business elsewhere.

The subscriber losses pushed profits down 34 percent at the cable company, to $532 million. The triple play tragedy saw subscriber losses for all the company’s residential services. At a time when other cable companies cannot process High Speed Internet sign ups fast enough, at least 24,000 Time Warner Cable broadband customers left over rate hikes and equipment fees. Analysts had expected the company to pick up more than 46,000 broadband customers during the last three months, not lose them. The company’s phone service is also in decline. Only rate increases and customers upgrading to higher speed tiers delivered a slight revenue boost.

Outgoing CEO Glenn Britt set the stage for the current forced retreat on its revenue forecast for the year:

• Time Warner Cable executives made the decision at the end of 2012 to stop heavily discounting service and cut back on promotions. Their theory was the company would attract a larger base of stable customers willing to pay non-promotional rates and tolerate rate increases;
• Executives announced as Time Warner’s phone service was brought “in-house,” the company would stop aggressively pricing triple play bundles that included phone service. That turned out to be a bad decision for growth because customers, already prone to landline cord-cutting, downgraded their bundle or left when promotions expired and ditched the phone line;
• A year of broadband price increases and the introduction of a modem rental fee rubbed customers the wrong way. “We have raised prices recently in the form of modem rental fees, but it’s really just broadband price increase,” again admitted Britt this morning. Future rate increases on modem rentals will give broadband customers another push to shop around for a better deal. At least 24,000 did that over the summer and left, mostly for AT&T U-verse in the midwest and Verizon FiOS in the east.

The lengthy dispute between Time Warner and CBS did the most damage and not just to customers directly affected by channel losses. A major increase in call volumes from alienated customers overwhelmed national call centers, creating long hold times for everyone calling in.

Time Warner expects 40 percent of the cable company’s service area will be overlapped by major competitors AT&T U-verse (now 27%) and Verizon FiOS (now 13%). That represents one million more homes than last year.

Bye Bye: Time Warner Cable lost residential customers for all of its services during the third quarter.

Incoming CEO Robert Marcus said he was dissatisfied with subscriber results from current promotions and rates. New Time Warner Cable customers, Marcus noted, are paying higher prices for fewer or less robust services as part of current promotional packages. Although that has driven a “dramatic improvement in recurring revenue” among customers actually signing up, many choose the lower-priced competition instead.

Marcus also noted customers are taking fewer services and are resistant to upgrading to double or triple play packages, reducing the potential average revenue per customer (ARPU).

“To a great extent, these are expected outcomes of our pricing and packaging strategy and the trade-off between ARPU and volume, but I’m confident we can do better on volume without giving up the ARPU benefits we’ve been achieving,” Marcus told analysts on a morning conference call.

Instead of getting more aggressive on pricing, the company plans to trot out free gifts and pitch discounted slow speed Internet to attract price-resistant DSL customers.

“Next week, we’ll launch our holiday offer, which includes a free Samsung tablet loaded with all of our apps, including TWC TV, with the purchase of higher-end packages,” Marcus said. “I think this will generate lots of interest and really highlight TWC TV and the value it adds to our service offerings.”

Marcus called it inconceivable and unacceptable that at least 4.5 million people are still subscribed to telephone company DSL in Time Warner Cable service areas. The company plans an advertising blitz to steal customers away from companies like AT&T, Verizon, Frontier, CenturyLink, Windstream and FairPoint.

At the center of that effort is the recently announced 2/1Mbps Lite package, which will sell at the everyday price of $14.95 a month. Marcus wants at least 500,000 DSL customers switched to Time Warner over the next 18 months.

“Over time, as these customers’ speed and capacity needs increase, we’ll be well positioned to sell them higher-end product,” Marcus said.

Or they will switch back to the phone company if Time Warner increases the price.

Millenicom customers have had their ups and downs over the last two weeks coping with e-mail notifications they would lose, keep, and once again lose their unlimited wireless data plan.

Just a day after Millenicom heard that Sprint would allow them to continue selling Unlimited and Bring Your Own Device plans, the wireless carrier best known for its “unlimited for life” offer changed its mind:

We are very sorry to report that Sprint has reversed their decision from yesterday and terminated their agreement with the gateway for our Unlimited and BYOD accounts.

We are not certain how long until the accounts will be closed.

We will be shipping out Hotspot devices to those clients who had opted for that solution and BMI.net is ready to fulfill orders for those choosing to go with them.

We have attempted to keep you informed every step of the way and avoid any abrupt transition. We apologize that we weren’t able to come through.

Thank you for allowing us to be of service and please accept our sincere wish for your future success.

Dennis Castle
Owner

It is not the first time Millenicom has had problems with Sprint, which has proved to be a difficult carrier to deal with with respect to unlimited use plans.

Sprint’s decision is a major blow to rural Americans who lack access to cable or DSL broadband and are forced to consider satellite-delivered Internet access or pay even more for wireless data plans that come with puny usage caps, overlimit fees or speed throttles.

There are a few alternatives, but since these providers resell access to Sprint-owned networks, all are potentially vulnerable to Sprint’s evolving views on resellers:

Blue Mountain Internet (BMI) offers an “unlimited plan” that isn’t along with several usage allowance plans. BMI strongly recommends the use of their Mobile Broadband Optimizer software that compresses web traffic, dramatically improving speeds and reducing consumption:

Monthly Plans

• $39.99/Month – 1 Gig Data (** up to 3GB compressed) ($25/GB Overlimit Fee)
• $59.99/Month – 3 Gig Data (** up to 9GB compressed) ($20/GB Overlimit Fee)
• $79.99/Month – 5 Gig Data (** up to 15GB compressed) ($20/GB Overlimit Fee)
• $99.99/Month – 10 Gig Data (** Up to 45GB compressed) ($15/GB Overlimit Fee)

• $79.99/Month – Unlimited (Bring Your Own Device) – BYOD
• $99.99/Month – Unlimited Data (S Network) ***

There is a $100 maximum on overlimit fees, but BMI reserves the right to suspend accounts after running 3-5GB over a plan’s allowance to limit exposure to the penalty rate. The compression software is for Windows only and does not work with MIFI devices or with video/audio streaming. BMI warns its wireless service is not intended for video streaming. Customers are not allowed to host computer applications including continuous streaming video and webcam posts that broadcast more than 24 hours; automatic data feeds; automated continuous streaming machine-to-machine connections; or peer-to-peer (P2P) file-sharing.

EVDODepotUSA offers two truly unlimited use plans starting at $119 a month. The company is only contracted to offer access to Sprint’s woefully congested 3G network and the Clear 4G WiMAX network that typically does not offer much coverage in rural areas. LTE access is not currently available. There is a six month contract obligation, but the company also offers a 10-day free trial.

Their current plans:

Wireless ‘n Wifi offers two partly unlimited plans with no contract commitment. The company charges a refundable deposit on devices, but they become yours to keep after two years:

• Unlimited 4G Sprint/Clear WiMAX with 3G Fallback ($58.99) offers unlimited WiMAX service but has a 5GB cap on Sprint’s 3G network, the network rural customers will encounter the most. Total start-up fee is $194.93 which includes an activation fee, modem deposit (refunded upon modem return or after 24 months of service), the first month of service, and shipping for the wireless device.
• Unlimited 4G LTE with WiMAX and 3G Fallback ($79.99) offers unlimited Sprint 4G LTE and Sprint/Clear WiMAX service with a 35GB cap on Sprint’s 3G network. Customers can select a dual-band device that supports LTE and 3G service for $246.93 (includes activation fee, modem upcharge fee, first month of service, shipping, and refundable $100 modem deposit). Customers looking for access to LTE, 3G, and WiMAX can choose a tri-band device for $315.93 (includes activation fee, modem upcharge, first month of service, shipping and refundable deposit.) Keep in mind Sprint’s 4G LTE network is still very spotty.

Broadband in the United States costs far more than in other countries — nearly three times as much as in the UK and France, and at least five times more than South Korea, according to BBC News.

The New America Foundation compared hundreds of available packages around the world and found customers in America’s largest cities are getting the biggest bills.

Customers in San Francisco with a discounted low-medium speed bundle including broadband pay $99 a month. A near-equivalent package costs London residents $38. New Yorkers get some savings from Time Warner and Cablevision facing down Verizon FiOS. But it isn’t enough. In the Big Apple, a promotional bundle averages $70 a month. “C’est la vie,” say Parisians. They only pay $35 for about the same. Even Washington, D.C. residents, which include the country’s most powerful politicians, pay Comcast its $68 asking price. In Seoul, South Korea, a comparable offer costs $15 a month.

High asking prices don’t buy better service. According to a report by the OECD issued over the summer, the United States ranks among the worst in terms of broadband-only pricing. With an average price of $90 a month for 45Mbps service, the U.S. ranked 30th out of 33 countries. Add phone and television service and the price spikes to around $200.

The BBC pondered why there is such a disparity in pricing. The answer was easy to spot: the lack of true competition.

“Americans pay so much because they don’t have a choice,” said Susan Crawford, a former special assistant to President Barack Obama on science, technology and innovation policy. “We deregulated high-speed Internet access 10 years ago and since then we’ve seen enormous consolidation and monopolies, so left to their own devices, companies that supply Internet access will charge high prices, because they face neither competition nor oversight.”

Although Americans can name the largest and deep pocketed providers — Comcast, AT&T, Time Warner Cable, Verizon, Cablevision, CenturyLink, Cox, and Frontier — most cannot choose from more than one cable provider and one telephone company. Comcast does not compete against Time Warner and AT&T does not compete against Verizon, except in the wireless world where both companies offer near-identical plans and pricing.

Comcast is quite the gouger in San Francisco.

Bay area customers told the BBC they get bills ranging from $120 a month for television and broadband (not including a $7 modem rental fee) to $200 a month for phone, TV, and Internet access. That same cable company is now testing a 300GB monthly usage cap on broadband in several American cities.

In contrast South Korea offers ubiquitous free Wi-Fi letting customers avoid usage charges. Home broadband is fast and cheap. Most pay $20 a month for 100Mbps.

Digging deeper, the BBC found clues why robust broadband competition delivers savings for consumers in Europe and Asia while Americans pay more.

Rick Karr, who made a PBS documentary in the UK comparing broadband costs at home and abroad, said the critical moment came when the British regulator Ofcom forced British Telecom to open its network and allow other companies to sell broadband over its copper telephone wires. In the United States, regulators never forced cable operators to open their networks, and after a 6-3 Supreme Court decision upheld the cable industry’s insistence it need not share access with competitors, telephone companies quickly called for parity.

A 2005 Supreme Court decision upheld the cable industry’s right to keep competitors off its cable broadband network.

Some argue the ruling promotes more competition by provoking competitors to build their own networks. But current conventional wisdom among the investment community teaches one cable and one phone company is considered good enough. Additional providers would erode the standing of all and force price cutting to compete.

There are exceptions. Although Google’s fiber to the home service has drawn national attention for its inexpensive gigabit fiber broadband network ($70 for broadband-only service), at least 150 cities are served by the public sector — co-op or publicly owned utility companies that offer broadband, often delivered over fiber optic networks.

Those networks often charge considerably less than the incumbent cable operator or phone company, a fact that has driven many privately run operators to seek legislative bans on community broadband.

In response to the report, telecommunications companies avoided the topic of prices and focused instead on value for money and the future.

Lowell McAdam, CEO of Verizon Communications, said Europe was replete with a decade of underinvestment, leaving many with less than 30Mbps service. The National Cable and Telecommunications Association said it was difficult to make international comparisons on price and Scott Cleland, part of the industry-funded NetCompetition website claimed although people may pay higher bills, they can at least choose among phone, cable, wireless or satellite.

“We may be paying more in your eyes today but we are building for tomorrow and the long-term,” said Cleland.

More than 5,000 residents and businesses living on the island Bailiwick of Jersey now have a choice of two Internet Service Providers – both supplying gigabit fiber optic broadband.

Jersey Telecom, a government-owned provider, has been removing obsolete copper wiring and replacing it with fiber to the home service that should reach the entire island by 2015. The fiber network is open to all competitors. JT charges £59.99 ($97.25) per month for gigabit speeds, but now caps usage at just 100GB a month. Overlimit fees are around 50c per GB between the hours of 8am-midnight. Usage is unlimited during off-peak hours.

In addition to JT, Jersey customers who live on the remote Channel Island, a British Crown Dependency off the coast of France, can now also choose Sure Jersey, a privately owned ISP that offers unlimited use plans.

The fiber optic network is spreading to other Channel Islands, with significantly populated parts of Guernsey set to receive a fiber upgrade next.

Using traditional Return On Investment standards, Jersey would barely qualify for basic DSL service. The island has a population of just 100,000 residents, some spread far and wide in remote locations. Basic DSL service was supplied to customers in more densely populated communities, but speeds were often slow and congestion became a major problem, especially at night.

The local government determined Jersey’s broadband needs could best be met by upgrading to government-owned infrastructure that private businesses could lease to sell service. Much like public roads benefit private companies that use them to transport goods, JT’s fiber network is designed to help bolster the island’s digital economy.

Since the introduction of gigabit fiber, new digital startups have launched on the island and others have moved their digital businesses to the fiber-enabled island. FeelUnique, launched from Jersey, has now become Europe’s largest online beauty retailer, employing over 150. Other businesses on the island have launched software ventures for the health care and education markets, banking/investment products and services, and 3D printing ventures. Having a wide broadband pipe has helped anchor digital businesses to the island because moving elsewhere leaves many with little better than substandard DSL or an enormous price tag for a customized new fiber build.

[flv width=”640″ height=”380″]http://www.phillipdampier.com/video/JT Fiber Has Arrived 2013.mp4[/flv]

Residents of Jersey talk about how fiber broadband has changed their online experience. (2 minutes)

 [flv width=”640″ height=”380″]http://www.phillipdampier.com/video/Digital Jersey Limited – Vision 2014 from Digital Jersey.mp4[/flv]

Digital Jersey released this video showing the group’s vision on how to leverage gigabit fiber broadband to boost the island’s digital economy in 2014. (3 minutes)