(Image courtesy: FCC.com)

Many of President-elect Donald Trump’s choices for America’s newest regulators have track records of being so “hands-off,” it is hard to find their fingerprints.

Wall Street expects the Trump Administration and the Republican majority in Congress to eliminate vast swaths of regulatory oversight, perhaps enough to put the federal government’s involvement in commerce at a level not seen since before the Great Depression. UBS analyst John Hodulik believes the Trump Administration will look the other way as an unprecedented frenzy of corporate mergers and acquisitions begins — mergers that would never have passed an antitrust review during prior administrations.

Hodulik might as well suggest the next four years could represent The Great Convergence, as cable and wireless operators merge, potentially leaving the majority of Americans with just one choice for telecommunications services.

“We have long believed that secular changes in technology and usage would lead to the convergence of the cable and wireless industries,” Hodulik said. “The transformation of the internet into a mobile-first platform combined with the rapid migration of video from proprietary networks to digital and the rise in competitive pressure this entails increases the value of an integrated fixed and wireless service to cable providers. Densification of wireless networks required to meet the needs of video-centric subscribers increases synergies of cable-wireless combinations and provides the springboard for 5G-based services. A roll-back of Title II re-classification could further increase incentives for cable.”

Hodulik envisions that a wave of mergers during the first term of the Trump Administration could look like this:

• Comcast <-> Verizon: Conquering the northeast and mid-Atlantic states, a supersized Comcast would likely be the only telecommunications company offering broadband service in states like New Jersey, Delaware, and Maryland with Verizon FiOS just another flavor of Comcast’s coaxial and fiber network. The only remaining competitors of significance would be Frontier Communications in Connecticut and upstate New York and FairPoint Communications in northern New England. Charter Communications would also still provide cable service in New York, Massachusetts, and parts of the Carolinas. Hodulik called the effective monopoly a win-win for shareholders of Comcast and Verizon. Customers are likely to hold a different view.
• Charter <-> T-Mobile/Sprint or Dish Networks: As the number two player, Charter already envisions offering wireless phone service through an arrangement it has with Verizon. But in a “converged” world, why rent someone else’s network when you can buy your own. Deutsche Telekom has been a motivated seller since AT&T tried and failed to buy T-Mobile USA and Sprint’s largely uninspiring performance may make it an easy sell for Japan’s Softbank. The wildcard: Dish Networks. Charter might want Dish’s huge number of video subscribers to win itself better volume discounts for cable programming.
• Never forget about Altice, laying the foundation for another wave of buyouts starting in 2017. So far, Altice seems interested in the handful of remaining independent cable companies — Cox, Cable One, Mediacom, and the few others increasingly becoming anomalies in the consolidated cable marketplace. Cox and Mediacom may have to be coaxed to sell much the same way Cablevision was — by overpaying.

Hodulik also believes some side mergers may also turn up, especially a Dish/T-Mobile deal that would bring Dish’s large wireless spectrum holdings into T-Mobile’s network. T-Mobile could also sell Dish programming by streaming it over the internet and/or mobile devices.

Road to nowhere?

Frontier Communications has lost more than 150,000 customers in the last six months as company executives blamed bad marketing and the on-shoring of call centers that formerly supported Verizon customers in Texas, California, and Florida.

Some 99,000 customers dropped Frontier service in the last three months, and another 77,000 departed during the three months before that. In addition to losing customers, Frontier saw a net loss of $80 million in its third quarter, up from a the $14 million the company lost during the same quarter a year ago.

A clearly distraught Dan McCarthy, Frontier’s CEO, knew he was in for a pummeling from Wall Street analysts on a conference call with investors on Tuesday.

“I wanted to assure you, that I’m focused on addressing and resolving the issues hindering our performance,” McCarthy said. “I’m fully aware that the third quarter results underscore the urgent need for our expanded business to perform at the higher level, where I know it can and should. And you have my personal commitment that we will do so.”

Frontier lost $52 million in revenue in the last three months in part because of its disastrous transition of former Verizon customers in California, Texas, and Florida and because a growing number of broadband users have realized Frontier’s endless promises of better service have rarely come to fruition and those customers chose other providers.

“This decline is unacceptable and reflects a level of performance, [and] I’m committed to change it,” McCarthy promised.

Unfortunately for customers and investors, that “change” is primarily rearranging the deck chairs with a haphazard, and likely soon-to-be-an-afterthought “reorganization,” and the usual treatment prescribed when executives fail to deliver Wall Street the results they expect: big layoffs of employees that had nothing to do with Frontier’s problems and have in fact been warning the company about some of their more boneheaded moves. The idea for quick layoffs may have come from Frontier’s newest chief financial officer R. Perley McBride, a pick McCarthy said will be “laser focused” on cost management. That’s code for cost-cutting, not exactly the best idea for a company that has shown a near-constant aversion to investing adequately in its network and on necessary broadband upgrades.

Analysts didn’t seem to be terribly interested in Mr. McCarthy’s grand reorganization plan either, detailed in this veritable word salad:

Let me also highlight that today, we announced a new customer-focused organizational structure, and the creation of commercial and consumer business units. This change is designed to improve our execution and operational effectiveness, increases spans of control in the organization and makes us more nimble, while at the same time eliminating duplicative costs associated with our former structure. In the first month of operating our new properties, it became apparent that this change was necessary.

McCarthy

Some investors pondered if these operational problems were all so readily identifiable and apparent, why didn’t Mr. McCarthy carry out changes after assuming leadership of the company more than a year ago.

McCarthy’s realization that big changes were needed is not what he was telling investors in May, when he was downplaying the impact of the Verizon customer cutover as affecting less than 1% of customers and wasn’t material. That level of happy talk puts McCarthy dangerously close to Wells Fargo territory, where a few million fake bank accounts weren’t material either.

McCarthy loves to use catchphrases to minimize the problems experienced at Frontier, as well as countering any negative developments with aspirational talk about the future.

For example, Frontier’s decision not to carefully scrutinize customer data provided by Verizon before cutting over customers to Frontier’s systems, leaving many without service for days to weeks was the result of “imperfect data extracts and network complexities” according to McCarthy. That cost Frontier plenty as the company issued bill credits to potentially tens of thousands of customers left without service because of ‘imperfections.’ Many just decided to leave and never looked back.

In May, McCarthy told investors “After a month of operating these properties, we are very pleased with the progress we have made, and we want to thank customers for their patience during the transition period. The entire Frontier team remains focused on cultivating growth by retaining and attracting new customers. We will continue to drive Frontier’s performance to maintain free cash flow that provides an attractive and sustainable dividend payout ratio.”

Not so much anymore. This week, McCarthy hit the red alert button and suddenly declared an urgent need for a major reorganization, oddly pegging Frontier’s problems partly on organizational inefficiencies:

“Historically, Frontier was organized around a regional structure, each one of the regions had its own resources that included marketing, finance, engineering, human resources. And in doing that, we – when we were a much smaller entity, it really did serve us well at that point in time. The more we looked at it today, the less differences there are in a lot of the markets and the way we’re going to market whether it’s around a Vantage product or it’s around FiOS or it’s around next-generation broadband products. So, when we looked at it, we did a really a trade-off on it, so we’ve essentially eliminated all of that redundancy in the organization.”

The unemployment line is in the future for 1,000 Frontier employees.

So what is the “redundancy” Frontier claims it has essentially eliminated? The forthcoming layoffs of 1,000 employees nationwide which Frontier management believes will make things much better for customers, at least according to McCarthy:

The impact is approximately 1,000 individuals that will be leaving the organization, and that translates directly into cost savings. And the nice part about it too is that the enhanced focus on commercial as well as consumer and Frontier has historically been a very consumer-focused organization. We’ve done well on the commercial side, but I really believe we can do much better with more focus, more attention and really putting the resources on those opportunities and making it, that’s what they do every day when they get up and they come to work, all they’re trying to do is grow the commercial revenue base.

So that’s really what we’ve done. It does change the focus on the field operations to really be engaged with the community as well as providing excellent service to customers and being that bridge, but really sales for both consumer and commercial are more centralized in a way that we can apply better resources and do it in a more efficient manner.

So Frontier plans to become more engaged with the community and deliver better service locally by… getting rid of 1,000 local employees and centralizing its resources somewhere else, probably in another state. The cherry on top? Frontier also implemented a rate hike for customers to enjoy.

McCarthy claimed Frontier has been a “very consumer-focused organization,” which seems hard to believe considering how many customers are saying goodbye to Frontier for good. He also implied customer sales are down because Frontier hasn’t effectively used their call center employees to sell service and Frontier alienated customers by moving those call centers from overseas back to the United States. Really?

The executive team at Frontier shrugs off further evidence of deepening customer dissatisfaction by ignoring customer losses in their “legacy” service areas — Frontier territories served by copper yesterday, today, and probably tomorrow. But ignoring problems is nothing new at Frontier:

• It’s not a problem that customers cannot order Frontier products and services on its website because of managerial ineptitude.
• It’s not a problem that customers are still stuck with 1-6Mbps copper-based DSL from Frontier while their cable competitor offers 200Mbps or more.
• It’s not a problem that several years after assuming control over almost all landlines in West Virginia, Frontier has only accomplished broadband speed upgrades for 23% of customers stuck in Frontier’s broadband molasses, and only after the company settled with the West Virginia Attorney’s General office in December 2015. For the record, that amounts to 6,320 customers. Don’t break a sweat there. Frontier’s performance in West Virginia has been so abysmal, the settlement between the state and the company represents the largest, independently negotiated consumer protection settlement in West Virginia history, which extends back to June 20, 1863.
• It’s not a problem that customers in Connecticut are still plagued by aftershocks from the tumultuous transfer from AT&T to Frontier in October 2014. On Oct. 19, 2016 countless DSL customers were reminded of that transition when they suffered another multi-hour outage and to add insult to injury, Frontier decided the time was also right to raise rates $4 a month for its Vantage TV service, which caused another round of customer cancellations.

McCarthy called the operational reorganization a “bridge” between field operations and providing excellent service to customers. We call it just another bridge to nowhere.

We’ve written for years that Frontier’s real problem isn’t cost management, organizational structure, or where it places employees and call centers. The real elephant in the room is that Frontier’s broadband service is terrible, especially where Frontier built the network all by itself or acquired it from another phone company decades earlier.

We are convinced Frontier’s management understands this, and so do many investors, but they just don’t care. One summed up the Frontier story this way:

So Frontier buys the whole wireline shooting match in one geographic area after another (labor force, wires, customers, DSL, even FIOS) paid for with billions in junk bond proceeds. Looking at an asset base that is disappearing before their eyes, the game is to squeeze as much out of it as possible before it crumbles completely. Minimum possible maintenance, minimum possible [investment], minimum possible headcount, and less every year.

From an investor’s standpoint, the key question is to figure out when the final collapse is going to take place.

Frontier’s “High Speed” fantasies extend back to 2010 when former CEO Maggie Wilderotter was telling customers Frontier was loaded with fiber.

When Rochester Telephone rebranded itself Frontier Communications in the 1990s, it did so looking forward to the future. The Frontier Communications experience of today is like immersing oneself in the History Channel. Nearly everything about Frontier these days is about the past and a promised future that never seems to arrive. Everything surrounds a legacy network still almost entirely dependent on last-century DSL for residential customers and various acquired networks from Verizon and AT&T mismanaged at conversion, forcing customers to clean up after Frontier’s repeated mistakes.

In legacy service areas where little has changed over the last decade, the four words that come to mind are “too little, too late” as customers make one last call to permanently drop service despite promises faster speeds are coming soon.

Too little investment in suitable broadband: Frontier dwells on its dividend payout to shareholders while customers languish with internet speeds that do not come close to the FCC’s definition of broadband. Instead of spending billions acquiring Verizon’s throwaway service areas, invest that money in your network and offer truly competitive 21st century broadband service.

Too late to matter: Frontier’s commitments to broadband upgrades happen too slowly and for too few customers. Much of Frontier’s state-of-the-art networks were built by other companies and simply acquired by Frontier, which now provides sleepy caretaker service. When people think Frontier Communications, they sure don’t think of words like “modern” and “innovative” and “excellence.” They think “yesterday,” “out of service,” and “slow.” There is a good reason why cable operators eat Frontier’s market share. People don’t love the cable company more than Frontier, but at least they are no longer stuck with broadband speeds that were common during the latter half of the Clinton Administration.

You’re a communications company, not the Geek Squad: While Frontier fritters away their customer base, those remaining are literally assaulted with promotions for dubious value services like tech support, virus protection, and cloud storage backup. There is a reason other phone and cable companies have not followed Frontier’s lead on emphasizing these services. They don’t matter to most customers and many of those who do have them are surprised when they find them on their phone bill because they don’t remember signing up. Sell reliable and fast phone, broadband, and video service, not gimmicks.

It is unfortunate another 1,000 Frontier employees are about to pay for the mistakes made at the top. Until that changes, customers would do well to consider their options and act accordingly. If reporting by The Hour is any indication, customers shouldn’t hold their breath. Frontier is still looking out for their most important asset: their shareholders.

If Frontier’s customer relations remain a work in progress, so does McCarthy’s job convincing investors to see the promise of his plan and that of his CEO predecessor Maggie Wilderotter to create a national broadband company from territories AT&T and Verizon have been willing to cast aside. Since closing at $6.54 on Oct. 31, 2014, on the eve of the switch [in Connecticut], two years later Frontier shares have hovered for the most part just above the $4 threshold.

With a new chief financial officer in place in former Frontier executive Perley McBride, McCarthy promised to get Frontier on track from an investor perspective, even as the company works to get its customer relations on an even keel.

Down the rabbit hole

Google has quietly announced an indefinite suspension of further fiber expansion as it prepares to downsize fiber division employees and re-evaluate its fiber business model.

In a blog post tonight from Craig Barratt, senior vice president of Alphabet and CEO of Google’s Access division, it becomes clear Google is rethinking its entire fiber strategy and is likely moving towards fixed wireless technology going forward:

Now, just as any competitive business must, we have to continue not only to grow, but also stay ahead of the curve — pushing the boundaries of technology, business, and policy — to remain a leader in delivering superfast Internet. We have refined our plan going forward to achieve these objectives. It entails us making changes to focus our business and product strategy. Importantly, the plan enhances our focus on new technology and deployment methods to make superfast Internet more abundant than it is today.

Barratt outlines the immediate implications of Google’s dramatic shift:

• In the cities where we’ve launched or are under construction, our work will continue;
• For most of our “potential Fiber cities” — those where we’ve been in exploratory discussions — we’re going to pause our operations and offices while we refine our approaches. In this handful of cities that are still in an exploratory stage, and in certain related areas of our supporting operations, we’ll be reducing our employee base.

Barratt

Barratt himself is jumping ship (or was pushed). He announced in his blog entry he is “stepping away” from his CEO role, but will remain as an “adviser.”

Observing Google’s recent fiber efforts and acquisitions, it seems clear Google no longer thinks fiber-to-the-home service is an economically viable solution in light of competitors like AT&T rolling out increasing amounts of fiber and the cable industry is on the cusp of launching DOCSIS 3.1, which will dramatically boost internet speeds without a substantial capital investment.

Google’s investors have been lukewarm about the company’s economic commitments relating to its fiber broadband networks. Often built from the ground up, Google’s fiber construction complexities also include trying to navigate costly roadblocks established by their competitors (notably Comcast and AT&T), dealing with bureaucracies and red tape even in states where near-total-deregulation was supposed to make competition easy. Google Fiber has also not proved to be a runaway economic success, and now faces more challenges in light of upgrades from their competitors. Cable companies have slashed prices for customers threatening to cancel and have added free services or upgrades to persuade customers to stay, and Google’s proposition of selling consumers $70 gigabit access has proved tougher than expected.

It is highly likely the future of Google’s Access business will be deploying wireless broadband solutions powered by Webpass, a company Google acquired earlier this year. Webpass uses a high-speed point to point wireless transmission system the company claims can deliver gigabit broadband access to customers in multi-dwelling buildings and other urban areas. Webpass sells access for $60 a month (discounted to $550/yr if paid in advance) for 100Mbps-1,000Mbps speed depending on network density and capacity in the customer’s building. So far, Webpass has not been able to guarantee speed levels, and some customers report significant variability depending on their location and network demand.

Webpass’ wireless infrastructure costs a fraction of what Google has coped with building fiber to the home networks, and the installation of point-to-point wireless antennas on participating buildings has been less of a regulatory nightmare than digging up streets and yards to lay optical fiber.

But despite Webpass’ claim its performance is comparable to fiber, its inability to guarantee customers a certain speed level and its tremendous performance variability from 100 to 1,000Mbps exposes one of the weaknesses of fixed wireless networks. At a time when capacity is king, only fiber optic networks have shown a consistent ability to deliver synchronous broadband speeds that do not suffer the variability of shared networks, poor antenna placement/signal levels, or harmful interference.

There is room for wireless technology to grow and develop, as evidenced by the wireless industry’s excitement surrounding future 5G networks and their ability to offer a home broadband replacement. The emergence of 5G competition is almost certainly also a factor in Google’s decision. But even AT&T and Verizon acknowledge a robust 5G network will require a robust fiber backhaul network to support both speed and user demand. The more users sharing a network, the slower the speed for all users. No doubt Webpass has made the same assumption that cable operators did in the early days of DOCSIS 1 — current internet applications won’t tax a network enough to create a traffic logjam that would be noticed by most customers. The phone companies also learned a similar lesson trying to serve too many DSL customers from inadequate middle mile networks or traffic concentration points. (Some phone companies are still learning.)

Whether it was yesterday’s peer-to-peer file sharing or today’s online video, capacity matters. That is why fiber broadband remains the gold standard of broadband technology. Fiber is infinitely upgradable, reliable, and robust. Wireless is not, at least not yet. But technology arguments rarely matter at publicly-traded corporations that answer to Wall Street and investors, and it appears Google’s backers have had enough of Google Fiber.

Stop the Cap!’s View

At Stop the Cap!, we believe these developments further the argument broadband is an essential utility best administered for the public good and not solely as a profit-motivated venture. The path to fiber to the home service in rural, suburban, and urban communities has and will continue to come from a mix of private and public utilities, just as local public and private gas and electric companies have served this country for the last century. Where there is a business model for fiber to the home service that investors support, there is a for-profit fiber provider. Where there isn’t, now there is often no service at all. So far, the FCC in conjunction with Congress has seen fit to solve broadband availability problems by bribing private providers into offering service (usually low-speed DSL that does not even meet the FCC’s definition of broadband) with cash subsidies, tax write-offs, or occasional tax abatement schemes. Imagine if we followed that model with the nation’s public roads and highways. We would today be paying tolls or a subscription to travel down roads built and owned by a private company often financed by tax dollars.

Not every product or service needs to earn Wall Street-sized profits. Nobody needs to get rich selling water, gas, and electricity… or broadband. Public broadband networks can and should be established wherever they are needed, and they should be priced to recover their costs as well as expenses that come from support, billing, and ongoing upgrades. Naysayers like to claim municipal broadband is socialism run wild or an instant economic failure, yet the same model has provided Americans with reliable and affordable gas, electricity, and clean water for over 100 years.

Maine was made for municipal broadband.

In New York, publicly owned/municipal utilities often charge a fraction of the price charged by investor-owned utilities. In Rochester, where Stop the Cap! is headquartered, one need only ask a utility customer if they would prefer to pay the prices charged by for-profit Rochester Gas & Electric or live in a suburb where a municipal provider like Fairport Electric or Spencerport Electric offers service. RG&E has charged customers well over 10¢ a kilowatt-hour when demand peaks (along with a minimum connection charge of over $21/mo and a “bill issuance charge” of 72¢/mo). Spencerport Electric charges 2.9¢ a kilowatt-hour and a connection charge of $2.66 a month, and they issue their bills for free. There is a reason real estate listings entice potential buyers by promoting the availability of municipal utility service. The same has proven true with fiber-to-the-home broadband service.

The economic arguments predicting doom and gloom are far more wrong than right. Municipal utilities are often best positioned to offer broadband because they already have experience providing reliable service and billing and answer to the needs of their local communities. Incompetence is not an option when providing reliable clean water or electricity to millions of homes and customers have rated their public utilities far superior to private phone or cable companies.

Google’s wireless future may prove a success, but probably only in densely populated urban areas where a point-to-point wireless network can run efficiently and profitably. It offers no solution to suburban, exurban, or rural Americans still waiting for passable internet access. Clearly, Google is not the “free market” solution to America’s pervasive rural broadband problem. It’s time to redouble our efforts for public broadband solutions that don’t need a seal of approval from J.P. Morgan or Goldman Sachs.

It was a busy weekend for AT&T’s Randall Stephenson and Time Warner (Entertainment)’s Jeff Bewkes, culminating in an announcement from AT&T it was acquiring Time Warner in a deal worth $85.4 billion.

AT&T CEO Stephenson will remain as CEO while Bewkes stays temporarily to help oversee the transition of the merged company.

The deal has sparked confusion among some consumers who associate Time Warner with Time Warner Cable, but in fact the two entities are independent companies. Time Warner, Inc., is the entertainment and content provider that owns HBO, Warner Bros., CNN, TNT, and other networks. Time Warner Cable was spun-off in 2009 as an independent cable operator that was purchased by Charter Communications earlier this year.

AT&T’s interest in Time Warner is entirely about its video content. By owning Time Warner, AT&T can win deals to place its video programming on U-verse, DirecTV, and AT&T wireless smartphones and tablets without running into heated contract renewal negotiations, spiraling prices, and restrictions on how that content is viewed.

AT&T is hoping its acquisition will generate more revenue to make up for stalled wireless revenue growth. AT&T customers already can view DirecTV content on their smartphones without it counting against one’s usage allowance. AT&T could offer a similar usage cap exemption for Time Warner-owned programming, although it would raise the ire of consumer groups fighting for Net Neutrality, which prohibits preferential treatment of internet content.

Stephenson

Stephenson hopes the addition of Time Warner to the AT&T family will strengthen his existing plan to compete nationwide with cable television providers, offering a streamed bundle of cable channels under the DirecTV brand starting as early as this winter.

Stephenson has talked to Bewkes about a merger of the two companies since August, but Time Warner has always proved an elusive seller, having earlier rebuffed a buyout attempt from 21st Century Fox. Stephenson was talking to a man who pushed Time Warner Cable out of its corporate family nest back in 2009, and the reasons for doing so were ironic considering this weekend’s acquisition announcement:

Time Warner’s management believed that the separation was the right step for Time Warner based on the changes in Time Warner Cable’s business over time. […] Time Warner’s management believed that there were a number of potential benefits from the separation transaction:

• Time Warner would become a more streamlined portfolio of businesses focused on creating, packaging and distributing branded content.
• Time Warner and Time Warner Cable would each have greater strategic flexibility and each would have a capital structure that better suits their respective needs.
• The separation would provide investors with greater choice in deciding whether to own shares of Time Warner or Time Warner Cable or both companies based on their separate portfolios of businesses and assets.

What regulators ultimately think about the deal will probably take at least a year to learn, but reaction from Wall Street and both political parties was decidedly negative. AT&T’s decision to pay half the purchase price in cash worries investors more than the remainder of the cost paid in stock. AT&T’s stock price is falling, upsetting investors concerned about AT&T’s dividend, and the market may be signaling concern the merger might be a mistake of epic proportions similar to the disastrous $164 billion AOL-Time Warner merger in 2000.

Bewkes

Tom Eagan, an analyst with Telsey Advisory Group, said owning Time Warner for its content didn’t make much financial sense when it could license it for considerably less, as it does now.

“Why buy the cow when you get the milk for free?” Eagan wrote his clients.

Many analysts are wondering what changed Bewkes’ thinking that led to him spinning off Time Warner Cable in 2009, with his decision to sell in 2016. Time Warner got rid of its video distribution business because consumers were increasingly looking for alternatives to cable television. In 2000, that came primarily from satellite providers. Today it’s cord cutting.

Combining AT&T and Time Warner would create a mega-corporation that would own or control many of the largest cable networks and a major Hollywood studio and allow AT&T to maintain absolute control over how that content was distributed. Shareholders were concerned about the price tag of the deal, driving shares down in both companies. Combining AT&T’s existing debt with Time Warner will leave the combined company saddled with $175 billion in debt — a massive amount of money that may not be financed at near zero percent interest for long, if the Federal Reserve boosts interest rates. Moody’s has put AT&T’s credit ratings up for review for a possible downgrade as a result.

Both Republicans and Democrats reacted with unease about the prospect of creating another Comcast/NBCUniversal-sized entertainment company. Almost all were skeptical about the benefits to consumers. AT&T’s competitors seemed even more chilled, fearing AT&T’s control of both the content and the means to distribute it would give the juggernaut an unfair advantage. For example, AT&T could give itself a discount to carry Time Warner programming on U-verse and DirecTV that would be unavailable to competitors. It might also take a harder line on competing providers at contract renewal time.

Some regulators and politicians believe bigger has not proved better for consumers in the telecom space, particularly after seeing the results of Comcast merging with NBCUniversal. Critics contend Comcast has never taken the deal’s approving consent decree seriously, and have dragged their feet on adhering to the deal’s many conditions. Consumers have gotten almost nothing from the merger except higher cable bills.

Analysts predict AT&T will do everything possible to minimize regulator review of its deal. The first step will be to eliminate the FCC from the deal review process, which is a very real possibility considering Time Warner and AT&T have few deal-related FCC-issued licenses beyond a single independent television station in Georgia owned by Time Warner. That station could be sold or transferred to a separate entity within months. The deal will get a mandatory review by the Justice Department, looking for evidence of antitrust. AT&T plans to claim the merger combines two entirely different companies and won’t have any implications on competition.

Critics of the deal think otherwise, pointing to the potential of favoring AT&T over cable companies with lower programming rates. Net Neutrality proponents are also concerned about AT&T’s practice of zero rating its own content, which gives AT&T a competitive advantage in the wireless space.

Charter Communications is taking a hard line against extending promotional pricing for Time Warner Cable and Bright House Networks customers and Wall Street predicts a major exodus of customers as a result.

UBS analyst John Hodulik predicts Charter’s new ‘Just Say No to Discounts’-attitude will result in customers saying ‘Cancel’ and he estimates a massive loss of at least 75,000 Time Warner Cable television customers in the third quarter as a result, with many more to follow.

Charter Communications’ executives have ordered a hard line against giving existing customers discounts and perpetually renewing promotional pricing, a practice Time Warner Cable has continued since the days of the Great Recession to keep customers happy.

Time Warner Cable and to a lesser extent Bright House have learned antagonized, price-sensitive customers were increasingly serious about cutting cable’s TV cord for good when the cost becomes too high to justify. Time Warner Cable dealt with this problem by giving complaining customers better deals, often repeatedly. That mitigated the problem of customer loss, allowed the company to retain and grow cable television customers and even helped minimize the practice of promotion shopping common in competitive service areas.

For years, Time Warner and Bright House customers learned they could enroll in a year-long promotion with the cable operator and then switch to a year-long new customer promotion from AT&T U-verse or Verizon FiOS and then jump back to the cable company with a new promotion. In many cases, they even got a gift card worth up to $300 for their trouble. Charter Communications thinks their new “pro-consumer policies” of not charging rapacious equipment fees and sticking to “simplified” prices will delight customers enough to keep their loyalty. Good luck.

Licensed to print money

Wall Street doesn’t believe Charter’s reputation or their ‘New Deal’ for TWC and BH customers will be perceived as making things better, especially for cable television and its cost. As customers roll off promotions at Time Warner Cable, the bill shock of watching rates rise up to $65 a month will speak for itself. The higher the price hike, the more likely it will provoke a family discussion about dropping cable television service for good.

In Los Angeles and Texas, where Charter premiered its new “simplified pricing” for Time Warner Cable customers, the response has been underwhelming, with many customers deriding it as “simply a price hike.”

David Lazarus, a reporter for the Los Angeles Times, characterized the transition from TWC to Charter this way: “Meet the new cable company. Same as the old cable company.”

Culver City resident Jack Cohen provides good evidence of what happens when customers get their first bill from Charter, and it is higher than expected. Cohen received his first bill for $162, $22 more than his last Time Warner Cable bill of $140 a month, because his promotion with TWC expired. As a result, he canceled cable television after Charter wouldn’t budge on pricing. Cohen said “cancel” and never looked back. He now pays the new cable company $40 less than he gave Time Warner Cable, because he now only subscribes to broadband and phone service. Charter’s ‘simplified pricing’ cost the cable company more than the $22 extra they were originally seeking.

Lazarus learned when his own TWC promotional package expires in December, Charter had a great Christmas present waiting… for themselves. Lazarus’ $65 promotion will rise to $120 a month — almost double what he used to pay. But Charter also offered Lazarus a better deal he can refuse, a new Charter-Spectrum package of the same services for the low, low price of $85 a month — still a 30% rate hike.

In Texas, customers coming off promotions are learning first hand how Charter intends to motivate customers to abandon the Time Warner Cable packages Charter promised they could keep — by making them as unaffordable as possible and offering slightly less expensive Charter/Spectrum packages as an alternative.

“But it’s still $45 more than what I was paying Time Warner Cable for the same damn thing,” complained Ty Rogers to a Charter retention specialist, after his Time Warner Cable shot up once Charter took over. He is waiting for Google Fiber to arrive and then plans to cancel everything with Charter.

Charter’s billing practices also are dubbed the weirdest in the cable industry by The Consumerist, because Charter loves to hide taxes, surcharges, and fees by rolling them into other charges on the bill and cannot be accurately accounted for:

Charter breaks out federal, state, or local taxes and fees for some services (TV) but not for others (voice). Also, depending where you live and when you signed up for services, the taxes, fees, and surcharges that do appear may be listed under different sections of the bill or not at all.

While their procedure does result in many fewer line items for consumers, it does produce more confusing bills overall, and make it harder to compare against other providers in a truly apples-to-apples kind of way.

‘No, no, no,’ counters Charter/Spectrum to FierceCable.

“Our internet packages are competitively priced, but we offer faster starting speeds and don’t charge an additional modem lease fee on top of the cost of service (that is an additional $10 at legacy TWC),” Charter spokesman Justin Venech said. “That pricing is better and more attractive to customers. Our video packages are simpler and more robust. For example, our Spectrum Silver package includes over 175 channels plus premium channels HBO, Showtime and Cinemax while a comparable TWC package would have charged extra for premiums.  We don’t add on additional fees and taxes to our voice product that our competitors do, and our equipment pricing for video set-top boxes are much lower with Spectrum than our competitors or legacy TWC or BHN.  Our new Spectrum pricing is $4.99 for a receiver vs over $11 at legacy TWC.”

“That assumes, like every cable company always does, that we want HBO, Showtime, and Cinemax, don’t already own our own cable modem, and are not dancing in the streets over an even bigger television package filled with crap we don’t want,” said Rogers. “Charter also takes away Time Warner’s excellent long distance phone service, which let me call almost all of Europe without any toll charges or an extra cost calling package. I paid Time Warner $10 a month and could talk to someone in France all night long if I wanted. With Charter, it’s more for less.”

Rogers’ promotion included his DVR in the promotion, so comparing Charter’s $4.99 vs. TWC’s $11 for a DVR made no difference to him either.

“You can argue all day about the ‘value’ you are offering, but you can’t argue your way out of a bill that is $45 higher than last month,” Rogers complained.

Overall, the latest spate of cable mergers and AT&T’s acquisition of DirecTV has been bad news for consumers, who face fewer competitive prospects and a new, harder line on promotional pricing. AT&T customers are discovering AT&T is more motivated to get U-verse TV customers to switch to DirecTV and less interested in providing discounts. The cable competition knows that, making fighting for a better deal much tougher if Charter’s only competitor in an area is AT&T. Cable operators also understand there is a built-in reluctance to switch to satellite by a significant percentage of their customers.

Charter’s pre-existing customers not a part of the TWC/BH merger are not too happy with Charter’s Spectrum offers either. At least 152,000 video customers said goodbye for good to the cable operator’s television packages.

Hodulik predicts there are more where that came from as the rest of the country gradually discovers what Charter has in store for them.