Wheeler

Federal Communications Commission chairman Tom Wheeler personally called the chief executives of some of America’s largest cable operators, including Charter Communications and Time Warner Cable, to reassure them that the agency does not object to future cable industry consolidation.

Wheeler said any new merger deal would be assessed on its own merits, and cable executives should not assume the agency is against future cable mergers just because it objected to the Comcast/Time Warner Cable deal.

The Wall Street Journal reports Wheeler sought to “clear the air” in response to industry hand-wringing over whether future buyouts and acquisitions could get passed the FCC. Wheeler reassured executives they were over-reading the commission’s intent.

Wheeler did suggest he would like to see more competition among cable companies, an idea that has been dead on arrival since the cable industry began colluding to agree to stay out of each other’s territories two decades ago. Although Wheeler would like to see competition increased by cable operators competing head to head for customers, it is much more likely the industry will seek further consolidation to reduce the prospect of competition, not increase it.

The larger the cable operator, the greater the economy of scale — especially for cable programming costs. A potential new entrant would likely be discouraged from entering the business, discovering it had no prospect of getting cable programming at prices comparable to what the largest cable operators pay.

Bright House Networks customers in central Florida are not excited by the news Charter Communications is still pursuing Bright House Networks, and both companies recently agreed to extend the deadline by 30 days for a final deal to be placed on the table.

Charter had bid $10.4 billion to acquire Bright House, which serves customers mostly in the south, including the cities of Tampa and Orlando.

“We look forward to completing the transaction as planned, and our teams are working together to make that happen,” Charter chief executive Tom Rutledge said. Reuters had recently reported Bright House was preparing to “abandon” the Charter deal, believing it was better off with sn existing cooperation agreement with Time Warner Cable.

Stopping Cox’s money party from getting started, if we can help it.

Stop the Cap! today formally declares war on Cox’s usage cap experiment in Cleveland, Ohio and will coordinate several protest actions to educate consumers about the true nature of usage-based billing and how they can effectively fight back against these types of Internet Overcharging schemes.

Time Warner Cable quickly learned it was deeply mistaken telling customers that a 40GB monthly usage allowance was more than 95% of customers would ever need when introducing a similar concept April 1, 2009 in test markets including Rochester, N.Y., Austin and San Antonio, Tex., and Greensboro, N.C. The company repeatedly suggested only about five percent of customers would ever exceed that cap.

Six years later, it is likely 95% of customers would be paying a higher broadband bill to cover applicable overlimit fees or be forced to upgrade to a more expensive plan to avoid them. Before Time Warner realized the errors of its way, it claimed with a straight face it was acceptable to charge customers $150 a month for the same unlimited broadband experience that used to cost $50.

Cox’s talking points for customers and the media frames usage caps as a fairness enforcement tool. It is a tired argument and lacks merit because nobody ever pays less for usage-capped broadband service. At best, you pay at least the same and risk new overlimit charges for exceeding an arbitrary usage allowance created out of thin air. At worst, you are forced by cost issues to downgrade service to a cheaper plan that comes with an even lower allowance and an even bigger risk of facing overlimit fees.

Industry trade journal Multichannel News, which covers the cable industry for the cable industry does not frame usage caps in the context of fairness. It’s all about the money.

“If you’re a cable operator, you might want to strike [with new usage caps] while the iron is hot,” said MoffettNathanson principal and senior analyst Craig Moffett, a Wall Street analyst and major proponent of investing in cable industry stocks.

Multichannel News warned operators they “must tread carefully in how they deliver the usage-based message.” Instead of getting away with punitive caps, Time Warner Cable had to “rethink” its definition of fairness, keeping prices the same for heavy users of bandwidth but offering discounts to customers whose usage was lighter. No money party for them.

So how did Cox frame its message in the pages of an industry trade journal to fellow members of the cable industry? Was it about fairness or collecting more of your money. You decide:

Customers will be notified of their data usage and any potential overages beginning in mid- June but won’t have to pay for overages until the October billing cycle, a Cox spokesman said. That gives customers the chance either to alter their usage or step up to a more data-intensive plan.   The additional charges serve as a temporary step-up plan for certain consumers, the spokesman said — they can keep their current level of service and pay the additional fee during months when usage spikes, like when their kids come home from college.

The Government Accounting Office, charged with studying the issue of data caps, found plenty to be concerned about. Consumers rightfully expressed fears about price increases and confusion over data consumption issues. In short, customers hate the kind of usage-based pricing proposed by Cox. It’s a rate hike wrapped in uncertainty and an important tool to discourage consumers from cutting their cable television package.

It’s also nakedly anti-competitive because Cox has conveniently exempted its television, home phone, and home security products from its usage cap. Subscribe to Cox home phone service? The cap does not apply. Use Ooma or Vonage? The cap does apply so talk fast. If a customer wants to use Cox’s Home Security service to monitor their home while away, they won’t eat away their usage cap. If they use ADT to do the same, Cox steals a portion of your usage allowance. Watch a favorite television show on Cox cable television and your usage allowance is unaffected. Watch it on Netflix and look out, another chunk is gone.

While Cox starts rationing your Internet usage, it isn’t lowering your price. A truly fair usage plan would offer customers a discount if they voluntarily agreed to limit their usage. But nothing about Cox’s rationing plan is fair. It’s compulsory, so customers looking for a worry-free unlimited plan are out of luck. It’s punitive, punishing customers for using a broadband connection they already paid good money to buy. It’s arbitrary — nobody asked customers what they wanted. It doesn’t even make sense. But it will make a lot of dollars for Cox.

Cox claims it only wants usage caps to help customers choose the “right plan.”

The right plan for Cox.

To escape Cox’s $10 overlimit fees, a customer will have to pay at least $10 more to buy a higher allowance plan — turning a service that costs less to offer than ever into an ever-more expensive necessity, with few competitive alternatives. Will Cox ever recommend customers downgrade to a cheaper plan? We don’t think so. Customers could easily pay $78-100+ for broadband service that used to cost $52-66.

Back in 2009, the same arguments against usage caps applied as they do today. Industry expert Dave Burstein made it clear usage caps were about one thing:

“Anybody who thinks that’s not an attempt to raise prices and keep competitive video off the network — I have a bridge to sell them, and it goes to Brooklyn,” Burstein said.

Time Warner Cable CEO Rob Marcus was paid $34.6 million in 2014, four times the amount he earned in 2013, thanks to generous stock awards.

Marcus’ pocket change base salary of $1.5 million represented a pay raise of 50% over the $1 million he took home in 2013, according to a statement filed with the Securities & Exchange Commission. Marcus’ real money came from stock awards worth $24.7 million, which represented more than 10 times the amount of his stock bonus the year before.

Time Warner Cable paid their top executives handsomely in 2014, in part to convince them to stay with the company as its merger with Comcast worked its way through the regulatory process. Marcus oddly won an extra incentive bonus in 2014 — $7.95 million if he agreed to stay with Time Warner long enough to collect an $80 million golden parachute severance package if the merger with Comcast was approved.

Unsurprisingly, Time Warner Cable praised itself for the effectiveness of its ‘Stay and Get Paid’ effort, showering top executives with cash bonuses to ‘tough it out’ through 2014.

“The company’s executive team remains in place and—as evidenced by the company’s 2014 operating and financial results—was intently focused on achieving the company’s short and long-term goals despite the uncertainty and challenges during the pendency of the transaction,” TWC said in its proxy.

Evidently that also means Time Warner was not in a position to find replacements willing to accept less than $34 million in compensation that would be capable of delivering similar results.

Marcus

Even as some of the largest investment banks on Wall Street are assembling a $24 billion loan package to further Charter Communication’s next effort to acquire Time Warner Cable, CEO Robert Marcus has learned not to take his eyes off the day-to-day business of running the country’s second largest cable operator.

Marcus turned up late last week at Le Parker Meridien in New York to speak at the 2nd Annual MoffettNathanson Media & Communications Summit, largely an affair putting Wall Street investors together with top cable executives to learn about industry trends.

Immediately peppered with questions about the failed merger between Time Warner and Comcast, Marcus sought to turn the page on the deal that would have handed him an $80 million golden parachute.

“The horse is dead,” Marcus said in response to continued questions about the deal.

But Marcus did say he felt the deal was rejected for reasons that were never explained to him or the industry, which could have an impact on future cable mergers and acquisitions. Regulator-inspired uncertainty could make some companies think twice about pursuing the next big deal, but so far that does not seem to apply to Charter Communications — still hot on the trail for a deal with the much larger Time Warner Cable.

Marcus claims he understood Time Warner Cable’s image with customers was a real problem that needed to be addressed immediately after becoming the company’s new CEO in  January 2014.

“The residential business was where the work needed to be done,” said Marcus.

Reliability became the top priority for Marcus’ team.

“It trumped features and functionality,” Marcus said, noting that if its network performed as it should, that would result in fewer calls into its customer care centers and reduced “truck rolls” to customer homes, saving Time Warner Cable time and money and improving its image. Marcus claims those efforts paid off.

“It works, we’re not pixelating, and we don’t have [huge] outages,” Marcus said.

Under Marcus’ leadership, Time Warner has adopted a “non-sexy stuff” approach to the cable business, focusing on making sure its existing products work before jumping into new products. That may explain why Time Warner has traditionally been behind other operators introducing vast broadband speed increases, cloud-based set-top boxes with improved user interfaces, more TV Everywhere contract arrangements allowing Time Warner customers to access online video content from third-party cable network websites, and the largest on-demand video libraries.

Not much is likely to change for the time being. Marcus reiterated his plan for major network upgrades under his Time Warner Cable Maxx program remain on track to reach 75% of Time Warner Cable service areas by the end of 2016.

When Maxx upgrades are complete, customers are transitioned to an all-digital television platform and Standard broadband customers move from 15/1Mbps service to 50/5Mbps at no additional charge. Although the top speed for Time Warner Cable broadband is currently 300/20Mbps in Maxx markets like New York, Los Angeles, Austin and Kansas City, Marcus said he was ready to bring 1Gbps broadband to Time Warner Cable customers sometime in late 2016, after DOCSIS 3.1 equipment becomes available.

“As the market evolves to that place, we’ll make it available,” Marcus said.

Recent movement at the Federal Communications Commission to introduce additional oversight over the cable industry has not made much impact at Time Warner Cable, which plans business as usual.

“I live in a different world than Chairman Wheeler in terms of the competitive dynamic,” Marcus said. “We’re fighting it out everyday in the trenches to gain and keep High Speed Data subscribers. The idea we would pull back and not press any competitive advantages of product enhancements we’re capable of delivering, just feels counter-intuitive and bad business.”

The idea that policy changes in Washington would somehow impact the investment in and introduction of new and better services from Time Warner Cable was ridiculous to Marcus.

“I cannot translate that into holding back the product and I can’t imagine what the policy objective would be that would encourage holding back the product,” Marcus said.