The announced merger of Comcast and Time Warner Cable is expected to have far-reaching implications for other companies in the video and broadband business, with expectations 2014 could be one of the busiest years in a decade for telecom industry mergers and buyouts.

AT&T + DirecTV = Less Video Competition

Bloomberg News reports an announcement from AT&T that it intends to acquire DirecTV for as much as $50 billion could be forthcoming before Memorial Day. Such a merger would drop one satellite television competitor in AT&T landline service areas and promote nationwide bundling of AT&T wireless service with satellite television.

Historically low-interest rates would help AT&T finance such a deal and would turn DirecTV into a division of AT&T, easing concerns the satellite company has been at a disadvantage because it lacks a broadband and phone package.

“While the Comcast/TWC deal was the trigger, the backdrop of a slow macro economy, new competitors, shifts in technology and consumer habits all come together and force the need for more scale,” Todd Lowenstein, a fund manager at Highmark Capital Management Inc. in Los Angeles told Bloomberg.

Satellite television companies remain technologically disadvantaged to withstand the growing influence of online video and their subscriber numbers have peaked.

If AT&T buys DirecTV, the wireless giant could theoretically bundle its service with DirecTV’s video product, and in some areas of the country its U-verse high-speed broadband to the home, to compete with cable, said Amy Yong, an analyst at Macquarie Group in New York, in a note to clients.

Sprint + T-Mobile = Less Wireless Competition

Dish + T-Mobile = A Draw

In a less likely deal Sprint is still trying to pursue T-Mobile USA for a potential merger and if regulators reject that idea, Charles Ergen’s Dish Network is said to be interested.

To prepare Washington for another telecommunications deal, SoftBank founder Masayoshi Son’s lobbying firm, Carmen Group, has again been meeting with elected officials and regulators to argue the merits of a merger with T-Mobile, according to a person familiar with the matter.

Dish, which failed to buy Sprint last year, would be interested in acquiring T-Mobile if regulators block Sprint’s efforts, Ergen said. That hinges on whether SoftBank Corp. fails to win regulatory approval for its plan to buy T-Mobile, which is controlled by Deutsche Telekom AG, Ergen said last week. The Japanese wireless company owns 80 percent of Sprint.

All three deals carry a combined value of $170 billion in equity and debt and would impact 80 million Americans.

Suitors hope regulators will be in the mood to approve merger deals as they contemplate enlarging Comcast through its purchase of Time Warner Cable.

Even if all the deals don’t pass muster, Wall Street banks will still rake in millions in fees advising players on how to structure the deals. Goldman Sachs and J.P. Morgan would join executives winning considerable sums for reducing the number of competitors providing telecommunications services in the U.S.

Whether customers would benefit is a question open to much debate.

Comcast will introduce usage-based billing on all of its broadband customers nationwide within five years, whether they like it or not.

Comcast’s executive vice president David Cohen told Variety he predicts the new usage limit will likely be 350GB a month but could increase to 500GB in 2019. Cohen claims consumers in usage-capped test markets prefer a preset usage limit and an overlimit fee of $10 for each additional 50GB of usage.

But Stop the Cap! has learned at no time has Comcast surveyed customers about whether they want their Internet usage metered or capped. That question is evidently not an option.

If Time Warner Cable territories are merged under the Comcast brand, usage billing would likely immediately follow.

Usage caps will go a long way to protect Comcast’s cable television package from online video, which if viewed in significant amounts could put customers over their monthly usage limit and subject them to higher fees.

“We’re trying to go slowly, not out of a regulatory concern (but because) we have no desire to blow up our high-speed data business,” he said.

If the merger is approved, Comcast will face significantly less competition in many Verizon service areas also served by Time Warner Cable. Verizon FiOS expansion has ended and the company continues to de-emphasize its DSL service, which is the only broadband competition Time Warner Cable faces in many upstate New York and western Massachusetts communities.

An unrepentant Cohen also doubled down on paid prioritization — Internet fast lanes — declaring regardless of what the FCC decides on Net Neutrality, Comcast still has the right to offer paid prioritization to customers.

“Whatever it is, we are allowed to do it,” said Cohen, speaking at the MoffettNathanson Media & Communications Summit in New York. “We are not sure we know what paid prioritization, or what a fast lane, is. Fast lane sounds bad… (but) I believe that whatever it is, it has been completely legal for 15 or 20 years.”

The way Comcast’s lawyers read “Title II,” even if the FCC declares broadband ISPs to be common carriers, Cohen says Comcast will go right on selling prioritized access, claiming Title II doesn’t prohibit paid prioritization — indeed, he said, “the whole history” of Title II is that carriers are allowed to provide different levels of service at different prices, reports Variety.

Cohen said he expects Washington regulators will promptly approve the company’s buyout of Time Warner Cable with no delays, insisting the deal is “not that difficult” in terms of antitrust implications.

Rensselaer County is just a short drive to the east of New York’s capital city Albany, but for residents in the southern half of the county, it might as be in the middle of nowhere.

Welcome to the world of broadband have’s and have-nots. If you live in the county seat — Troy, Internet access is widely available. But if you live in a community like Nassau, in the southern part of the county, getting Internet access is strictly a hit or miss affair, and in practical terms, the only entity that will decide if you have reasonable access to broadband is Time Warner Cable.

Verizon has decided that the days of expanding DSL in rural areas are over. There is no possibility those without access to DSL now will ever see Verizon’s fiber network FiOS coming their way either. That has left many residents with an unfortunate choice between heavily usage-capped and slow satellite Internet access or heavily usage-capped and expensive wireless Internet from a cell phone company.

Nassau does have a franchise agreement with Time Warner Cable, the only cable operator willing to offer service in this part of upstate New York. The contract specifies Time Warner will bring service to any neighborhood where there are at least 20 residences within a one-mile radius.

The Record News covered negotiations for a franchise renewal for the cable company last year, and found Time Warner Cable held all the cards and the town had almost no leverage in the negotiations:

A rare sight in southern Rensselaer County.

“We really have no negotiating leverage or power and the Public Service Commission (PSC) was helpful in looking at the contract, but told us we were basically out of luck with any efforts to require anything,” said town Supervisor David Fleming, who said he was told by Time Warner Cable that specific areas in Nassau are “not currently serviceable.”

The town had marked out all the areas that were not served and met with Time Warner to try to gain extensions of service.

“This only succeeded in a couple of areas,” he said. “This is because PSC told us we have no bargaining power. The only big concession we were able to get was to reduce the number of houses per mile needed for service, but this was a pretty standard fall back for Time Warner.”

The town succeeded in negotiating standards down to 20 dwellings per cable mile from 30. “We continue to explore this matter, but frankly, there has been a great deal of unwillingness to expand service in our community,” Fleming said. “The state has been of no help in expanding services.”

As a result, Time Warner has been generally adamant about not expanding service to residents like Alan Austin, who lives on a street where 11 houses are built within a half-mile, technically the same ratio required by Time Warner Cable.

“We’ve asked them to bring the service and they won’t,” Austin told the newspaper.

Actually, Time Warner is willing to expand into Austin’s neighborhood — for the right price.

Time Warner agreed it would install cable service if the 11 homes collectively paid a $12,000 installation fee.

“We’re out of luck because we’re never going to get another nine houses in this mile,” Austin said. “We can’t get anybody to bring service here, unless we’re willing to pay an exorbitant amount.”

As for alternatives, don’t call Verizon, they’ll call you. The phone company has suggested rural residents consider their wireless broadband and phone service, assuming a cell tower can reach them with a reasonable signal. But the cost is very high — at least $50 for only 4GB of usage per month and another $20 for telephone service.

Austin is lucky enough to receive some reception from Sprint, which is slightly more reasonably priced. But to get a reliable signal, he has to place his mobile Wi-Fi hotspot in his non-climate-controlled attic. When temperatures fall or soar, the hotspot stops working. Austin has rigged a remote-powered fan in the attic to blow cool air on the hotspot this summer to keep it up and running.

“It’s ridiculous,” he admitted. “People don’t believe me when I tell them these things, but that’s what we deal with.”

The newspaper also pondered the impact of being an Internet have-not with respect to education. In more than a few communities in the county, teachers avoid giving assignments that require students to do research over the Internet, putting them at a potentially serious disadvantage when they attend college.

Businesses also avoid areas where broadband poses a significant challenge, which affects jobs. Selling a home in a broadband blackout zone can also be difficult as savvy buyers increasingly now insist on Internet accessibility.

Without the benefit of bundling discounts, rural Americans pay substantially higher prices for telecommunications services. A promotional bundle from Time Warner Cable can provide phone, Internet, and television service for less than $100 a month. Austin says his package costs more than twice that — more than $220 monthly between paying bills for Verizon phone service, DirectTV television and Sprint for broadband Internet.

These kinds of challenges are ready-made to be addressed on the local government level, but cable and phone companies lobbied successfully for near-total deregulation, making it impossible for town officials to provoke change. In fact, had the community successfully revoked Time Warner Cable’s franchise, no other commercial provider would be willing to step in. That remains common in every community considering its future relationship with the area’s cable company. An informal understanding between cable operators keep them from competing outside of their defined territories.

That leaves Nassau officials with no options, except whether to renew Time Warner’s franchise on the company’s terms for five or ten years. Time Warner wouldn’t hear of a five-year contract so the town capitulated and agreed to a 10-year franchise renewal that will continue to leave residents like Austin without much hope for cable broadband service indefinitely.

Time Warner Cable’s major broadband speed upgrade is alive in the Astoria, Woodside and Long Island City neighborhoods of Queens, N.Y.

The Time Warner Cable Maxx upgrade is Time Warner Cable’s effort to catch up to other cable operators that have significantly upgraded broadband speeds for customers over the last 18 months. Time Warner Cable has traditionally been one of the slowest major cable broadband providers in the country, with most customers only able to buy speeds up to 50/5Mbps. But Time Warner Cable has also committed to keeping unlimited use service available to customers, unlike Comcast, Charter, Cox, Suddenlink, and Mediacom.

The free speed upgrades are the largest ever for Time Warner Cable, typically more than tripling speeds for most customers.

Stop the Cap! has heard from readers in Queens who discovered the upgrades took effect this week, so we have been able to take a closer look at what customers can expect as Time Warner rolls out upgrades across New York City and Los Angeles and finally extending faster speeds over the next two years in other cities.

(Image: ematrix)

Arris Touchstone Telephony Gateway TG1672g

The first notification your area is about to receive an upgrade will come in a letter from Time Warner Cable.

Customers subscribing to the fastest speed tiers may need new equipment. Time Warner Cable is using 8-channel bonding in Queens for its 100 and 200Mbps tiers and 16-channel bonding for its 300Mbps tier. Some older and low-end DOCSIS 3 modems only support four channel bonding. For instance, a customer using a four-channel capable Motorola 6121 modem in Queens with Time Warner’s 30/5Mbps Extreme tier will only get speeds up to 50/5Mbps after the upgrade. If the customer owned a Motorola 6141, which supports eight channel bonding, they will get the full advantage of the upgrade: 200/20Mbps. But even the 6141 isn’t enough for Time Warner’s top tier: 300/20Mbps. Customers would need an upgrade to a 16-channel capable modem.

Time Warner’s notification letter says customers can swap out a company-owned cable modem for a 16-channel capable model, currently the Arris TG1672g, either by mail, through an area Time Warner Cable store, or with a service call. The usual modem rental fees still apply.

The TG1672g (download user manual) is a fully capable broadband and Wi-Fi home gateway that also supports Time Warner’s phone service:

• 16×4 Channel Bonding
• Full Capture Bandwidth Tuner
• Multi Processor Technology with an Intel Atom Core Application Processor
• DOCSIS® 3.0 and PacketCable™ 2.0 compliant design
• 4 port Gigabit Ethernet Wireless Router
• 3×3 Integrated Dual Band Concurrent
• 2.4GHz and 5GHz 802.11n radios with Beam Forming
• USB 2.0 Host Port
• Upcoming support for DLNA and File Storage
• Two FXS lines of carrier-grade VoIP with HD voice support
• MoCA1.1 for in Home Video and Data distribution over Coax
• Dual Stack IPv4/IPv6 Home Router
• Internal Power Supply for Highest Reliability and reduced energy consumption
• Battery backup: Single battery pack for reaching a full 8 hours of standby support

If picking up new equipment, a Time Warner representative will probably let you know if your account is flagged “Maxx-capable,” which means your neighborhood’s upgrade is imminent or complete. Time Warner may also want to swap out your set-top boxes if you subscribe to cable television, although readers report cable television service and the on-screen guide in Queens doesn’t look any different at present. The backup battery inside the cable modem is rated for up to 10 years of life and is replaceable by the user for around $60.

Customers who own their own cable modem might have to buy a new one if they are seeking the company’s fastest speeds. Time Warner’s latest approved modem list should guide what, if any, new equipment you might need. If you are considering buying your own modem, you might plan your purchase around the model(s) that support the speeds you want.

Time Warner Cable’s Latest Approved Modem List

[flv]http://www.phillipdampier.com/video/TWC Techs Launch 300 Mbps Internet Speeds at Queens NY Hub 5-6-14.flv[/flv]
Technicians launch 300Mbps broadband speeds for Time Warner Cable customers in Queens, N.Y. (1:27)

Neil Smit, CEO, Comcast Cable (left), Ryan Lawler, TechCrunch (right)

Of all the tech companies to turn up at TechCrunch’s Disrupt New York 2014 event, Comcast Cable seemed the least likely to qualify as the kind of innovative start-up TechCrunch loves to cover.

But there sat Comcast Cable CEO Neil Smit with TechCrunch’s Ryan Lawler, discussing Comcast’s mega-merger with Time Warner Cable, its peering agreement with Netflix, broadcast TV streamer Aereo, and Comcast’s legendary dismal customer service.

Smit’s arrival on stage to a smattering of tentative applause was a clear sign there was no love for the cable giant in the audience, particularly from many New York area Time Warner Cable customers dreading a future with Comcast.

Smit was immediately confronted with the fact Comcast was recently voted the Worst Company in America by Consumerist readers, prompting yet another promise that improving customer service was Comcast’s “top priority,” the same promise Comcast gave in 2007, 2008, 2009, 2010, 2011, 2012, and 2013.

“I think if there’s one thing to disrupt in our business, it’s customer service,” Smit added.

Smit defended Comcast’s merger with Time Warner, relying heavily on video subscribers to downplay the concentrated market power Comcast would have after the merger. Smit pointed out Netflix has the largest subscriber count of any pay television channel or platform and denied Lawler’s contention that a merger would give Comcast more than 50% of the American broadband market.

“I think the number is a little less than that — it is closer to 40% but if you include wireless than it would be less than 20%,” Smit responded, referring to the LTE 4G wireless networks from wireless carriers that come with very low usage caps and very high prices.

Smit also promised major broadband speed upgrades and other improvements for Time Warner Cable customers, but nobody mentioned Comcast’s gradual reintroduction of usage caps on residential broadband accounts.

Comcast Cable’s CEO also addressed several other hot button issues:

Smit claimed Comcast has a good working relationship with the FCC and is providing advice on whatever changes to Net Neutrality FCC chairman Tom Wheeler will propose later this month.

Despite the fact Comcast could ultimately benefit if Aereo is found to be legal by the U.S. Supreme Court, Smit recognized Comcast also owns NBC and other broadcast programmers and was concerned about the economic impact if cable operators stopped paying for over-the-air programming.

“We pay $9 billion a year for content,” Smit said. “One of the things that I question in the Aereo solution is: are they paying for content? The spend for that content has to come from somewhere.”

Smit also noted Comcast is increasingly targeting younger audiences by signing deals with college campuses to bring Comcast service to students to hook them as future subscribers. Comcast is also creating new packages with fewer channels to appeal to millennials. Smit also acknowledged many younger family members are accessing cable programming using passwords associated with their parent’s cable account.

[flv]http://www.phillipdampier.com/video/TechCrunch Interview with Neil Smit 5-6-14.mp4[/flv]

Here is the complete interview TechCrunch conducted with Comcast Cable CEO Neil Smit. (22:20)