Cuomo

New York Gov. Andrew M. Cuomo has ordered the New York State Public Service to immediately start a thorough and detailed investigation into Comcast’s proposed purchase of Time Warner Cable, using new regulatory powers to reject any merger not in the “best interest” of Time Warner’s customers in New York.

“The State is taking a hands-on review of this merger to ensure that New Yorkers benefit,” Cuomo said. “The Public Service Commission’s actions will help protect consumers by demanding company commitments to strong service quality, affordability, and availability.”

New York implemented one of the nation’s strongest cable franchise laws in April that will now require the two cable operators to prove that any merger is in the public interest. An earlier law backed by the telecom industry put the burden of proof on the Commission to prove such transactions were not beneficial to the public.

Cuomo has requested the PSC check how the proposed merger will expand broadband in under-served areas and offer better broadband access to schools. The PSC will critically review the protections being offered to low income customers as well as how the proposed merger might impact consumer pricing and telecommunication competition overall.

PSC chair Audrey Zibelman said, “To determine whether the proposed transaction is in the public interest, the Commission will examine the proposal to ensure services the merged company would provide will be better than the service customers currently receive.”

One way to prove the merged company would not offer better service is to alert the Commission Comcast plans to reimpose usage caps on its customers while Time Warner Cable does not have any compulsory usage limits or usage billing.

Time Warner now serves 2.6 million subscribers in every major New York community: Buffalo, Rochester, Syracuse, Albany and the boroughs of Manhattan, Staten Island, Queens and parts of Brooklyn.

The PSC is likely to hold public forums across the state in June to hear the views of affected consumers, but the record is now open to written and telephoned comments from anyone interested in the merger.

There are several ways to provide your comments to the Commission. Comments should refer to: “Case 14-M-0183.”

Via the Internet or Mail: The public may send comments electronically to the Hon. Kathleen H. Burgess, Secretary, at [email protected] or by mail or delivery to Secretary Burgess at the New York State Public Service Commission, Three Empire State Plaza, Albany, New York 12223-1350. Comments may also be entered directly into the case file by clicking on the “Post Comments” box at the top of the page.

Toll-Free Opinion Line: Individuals may choose to phone in comments by calling the Commission’s Opinion Line at 1 800-335-2120. This line is set up to receive in-state calls 24-hours a day. These calls are not transcribed, but a summary is provided to staff who will report to the Commission.

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.

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)

AT&T has usage capped its heavily promoted U-verse GigaPower fiber to the home service at 1TB a month, according to fine print appearing on communications sent to customers.

Any customer that exceeds 1TB of usage per month will be subject to AT&T’s usual overlimit fees: $10 for each additional 50GB of data sent or received. At least AT&T currently caps the maximum overlimit fee at $30 for its fiber customers.

Many Austin GigaPower customers are signing up for the company’s Premier package, which includes a waiver of equipment, installation, and activation fees and provides 36 months of fixed rates and free HBO and HD service along with 300/300Mbps broadband.

Enrolling in a discounted promotional plan does mean you consent to allow AT&T to collect information about your browsing habits through deep packet inspection.

Comcast will increase capital spending in the first half of 2014 to hasten the rollout of its advanced X1 set-top boxes and new wireless gateways that provide public Wi-Fi from customer homes.

Comcast told investors Tuesday its increased spending will likely be offset by increased earnings from more subscribers and room for further price hikes over the course of the year.

First quarter consolidated revenue increased 13.7% to $17.4 billion over the past three months. Almost $11 billion of that comes from Comcast’s cable business. The company boosted cable earnings by 5.3% in the first quarter. Most of that came from a 4.5% increase in the average customer’s cable bill. Comcast subscribers, on average, pay $134 per month. They will pay even more by the end of the year.

Although Comcast’s head of its cable division Neil Smit noted the company implemented lower rate increases during the first quarter, there is room to boost prices further.

“I wouldn’t read any trends into it,” Smit said. “We took rate increases across the smaller percentage of our footprint this quarter than last year as well, but we target different offers to different customers and I don’t think we’re seeing it topping out. In the competitive arena, the offers are in the same ballpark, the promo prices go up and down, but the destination pricing is fairly similar across these various competitors.”

Roberts

Comcast continued to buck cord-cutting trends and added 24,000 new video customers in the quarter, a major improvement over the 25,000 it lost at the same time last year. Comcast believes its new X1 platform and aggressive customer retention efforts are responsible for winning and keeping cable television customers. Ongoing speed enhancements in Comcast’s broadband division won the company 383,000 new Internet customers in the last three months. Broadband is Comcast’s biggest money-maker, and revenues increased a further 9% during the quarter owing to customer growth, rate hikes, and customers choosing higher-speed tiers. By the end of the quarter, 38% of Comcast’s residential customers subscribed to at least 50Mbps service, showing growing demand for higher speed Internet.

Sources tell Stop the Cap! Comcast intends to further expand its trial of usage caps (Comcast prefers to call them “usage thresholds”) to more markets this year. Comcast has settled on 300GB usage allowances for most broadband products in current test markets, charging $10 for each additional allotment of 50GB as an overlimit fee. Comcast has avoided trials of usage caps in areas where Verizon FiOS delivers significant competition. Verizon has no usage caps on either their DSL or fiber broadband products.

Comcast also picked up 142,000 new phone customers in the quarter, mostly from those subscribing to aggressively priced triple play service bundle promotions. Around 155,000 new triple play customers signed up over the last three months.

At the end of the first quarter, 68% of Comcast customers took at least two products and 36% took three products, compared to 33% at the end of last year’s first quarter.

Brian Roberts, CEO of Comcast, said there were several factors that fueled Comcast’s growth during the quarter, starting with its advanced X1 set-top box platform, which offers a better television experience and makes finding things to watch easier. If customers have an X1, Roberts told investors, they are less likely to drop cable television service.

X1

“These positive early results reinforce our decision to accelerate our X1 deployment this year, and we are now adding 15,000 to 20,000 X1 boxes per day, which is double our rate of deployment from just six months ago,” Roberts told analysts. “Additionally, we are now rolling out a new XFINITY TV app, which enables our customers to live stream virtually their entire television lineup on any IP device in the home and watch DVR recordings in the home or on the go.”

Although usage caps remain controversial, Comcast has been aggressive about increasing broadband speeds at least once a year.

“In broadband, we recently increased speeds again for the 13th time in 12 years,” Roberts offered. “Doubling speeds in our Blast products to 105Mbps, while our Extreme tier moved up to 150Mbps for customers in the northeast. And we’re not stopping there. Our focus on wireless gateway deployment is adding utility to our customers while at the same time helping us create the largest Wi-Fi footprint in the U.S. with over one million public Wi-Fi hotspots currently available to our customers.”

Although Comcast’s first quarter capital expenditures increased $51 million (or 4.6%) to $1.1 billion (10.6% of cable revenue versus 10.7% in the first quarter of 2013), the cable company returned even more money to shareholders. In the first quarter, the company boosted return of capital by 35% to $1.3 billion. Comcast repurchased its own shares of stock totaling $750 million and paid $508 million in dividends for the quarter.

In 2014, Comcast will invest 14% of cable revenue (compared to 12.9% in 2013) to accelerate the deployment of X1 and wireless gateways, increase network capacity and continue to invest in expansion of business services and XFINITY Home. But it will spend far more than that placating shareholders. If Comcast wins support to buy Time Warner Cable, Comcast intends to increase its stock repurchase plan by $2.5 billion. The company earlier committed it would spend $3 billion on repurchasing its own shares, for an expected total of $5.5 billion during 2014.

When a company repurchases its own shares, it reduces the number of shares held by the public. That in turn means that if profits remain the same, the earnings per share increase. It also boosts the value of the massive portfolios of Comcast stock held by executives as part of their compensation packages.

[flv]http://www.phillipdampier.com/video/Comcast Introducing the X1 Platform from XFINITY 4-14.mp4[/flv]

Comcast produced this video showing off its X1 platform and new set-top boxes. (1:47)