AT&T is offering T-Mobile customers — and only T-Mobile customers — up to $450 to switch their wireless service to AT&T, but is the switch actually worth it? A close inspection of AT&T’s fine print suggests some customers might want to think twice.

According to AT&T, beginning Jan. 3, under the limited-time offer, T-Mobile customers who switch to AT&T can trade-in their current smartphone for a promotion card of up to $250, which can be used toward AT&T products and services.  Trade-in values will vary based on make, model and age of the smartphone, but many of the latest and most popular smartphones will qualify for a value of $250.  T-Mobile customers can receive an extra $200 credit per line when they transfer their wireless service to AT&T and choose an AT&T Next plan, buy a device at full retail price or activate a device they currently own. The “Next” plan offers customers a chance to upgrade to a new device every year under an installment plan that divides the retail price of the phone over 20 months.

[flv]http://www.phillipdampier.com/video/CNN The Most Dangeous Man in Wireless 1-8-14.flv[/flv]

The Wall Street Journal’s ‘Digits’ explores the open marketing warfare between AT&T and T-Mobile. (3:34)

Although $450 sounds like an outstanding deal, some Wall Street analysts that usually panic when a company seems to be giving away the store, are still sleeping well at night.

“It’s not as great an offer as it appears on the surface,” Michael Hodel, equity analyst at Morningstar tells MarketWatch. “The fine print is critical.”

1. Not every smartphone will qualify for the $250 “promotional card.” Only the latest model smartphones showing no signs of wear and tear are going to earn full value. Customers with older feature or basic phones will not qualify for anything at all. Customers may be able to get just as much selling their old phone themselves.
2. AT&T is not offering a cash rebate. The value of the “promotional card” and the $200 ‘switch from T-Mobile’ bonus can only be spent on AT&T products and services. The promotional card will help defray the cost of buying a new smartphone from AT&T (which may not have the best price) and the $200 bonus will appear as a credit on a future AT&T bill.
3. By accepting the $200 bonus, customers give up any device subsidies, an important distinction if you want an Apple iPhone. AT&T’s device subsidy on this phone is higher than $200.
4. AT&T has tighter credit standards than T-Mobile. Customers with spotty credit may be asked to put down a deposit with AT&T before the company will take your business.

Legere

AT&T argues its offer will benefit T-Mobile customers by giving them access to the larger coverage area of AT&T’s wireless network and more widespread 4G service. But AT&T customers pay higher prices for access to that network. A T-Mobile customer is more likely to be sensitive to the price of the service — one of the strongest marketing points T-Mobile has in its favor. Most customers unhappy with T-Mobile’s less robust coverage tend to cancel service at the end of their contract (or earlier) and switch to either AT&T and Verizon Wireless.

According to an October report from MoffettNathanson Research, a typical T-Mobile family with 3-5 lines on a single account usually save around $50 a month off AT&T’s prices. That represents $600 a year in savings.

T-Mobile’s scrappy and aggressive marketing has had an impact, particularly on AT&T. Just a few years earlier AT&T tried to buyout T-Mobile in a consolidation move rejected by the Justice Department’s Antitrust Division. After the merger collapsed, incoming T-Mobile CEO John Legere has long forgotten whatever niceties existed between the two companies when they were trying to join forces. Legere has been on the attack against both AT&T and Verizon Wireless all year, and the effort is clearly beginning to pay off as T-Mobile adds customers.

Last year at the Consumer Electronics Show (CES) Legere called AT&T’s network “crap” on stage. So when Legere crashed AT&T’s party at this year’s CES convention, still sporting his pink T-Mobile t-shirt, AT&T’s security guards threw him out.

[flv]http://www.phillipdampier.com/video/CNN The Most Dangeous Man in Wireless 1-8-14.flv[/flv]

CNN calls T-Mobile’s John Legere the most dangerous man in wireless, for exposing “disgusting” AT&T and Verizon’s over 90% gross margin on their wireless services and their consumer unfriendly business practices. (2:41)

AT&T this month signed up their 10 millionth customer to U-verse High Speed Internet service, surpassing Verizon FiOS as the nation’s biggest telephone company supplier of broadband, television, and telephone service. Coinciding with that success, AT&T is raising prices for U-verse, despite AT&T’s record earnings from the fiber to the neighborhood service, now accounting for $1 billion a month in revenue.

AT&T is protecting its broadband flank by convincing current DSL customers to switch to higher-speed U-verse broadband as the network upgrade reaches into more homes across AT&T’s service areas. In the last quarter U-verse picked up 655,000 new broadband customers nationwide, many upgraded from traditional DSL. Where AT&T has not invested in U-verse upgrades and cable competition exists, results are not as good. AT&T lost 26,000 DSL customers last quarter, most moving to cable broadband.

“This latest milestone shows how U-verse is helping transform AT&T into a premier IP broadband company,” said Lori Lee, senior executive vice president, AT&T Home Solutions. As of the third quarter of this year, total U-verse high-speed Internet subscribers represented about 60 percent of all wireline broadband subscribers, compared with 43 percent in the year-earlier quarter.

Verizon FiOS, in comparison, has signed up just 5.9 million customers FiOS Internet subscribers on its stalled fiber optic network. Most Verizon broadband customers with no FiOS in their future either stick with DSL service or, increasingly, switch to a cable competitor for faster speeds.

Some of AT&T’s strongest U-verse growth came from its TV package. At least 265,000 cable and satellite cord-cutters looking for a better deal switched to U-verse TV in the last three months, a gain from 198,000 at the same time last year. That’s the second-best quarterly gain ever. A total of 5.3 million AT&T customers subscribe to U-verse TV.

Much of the growth has come from AT&T’s investment in expanding U-verse to new areas. Project Velocity IP is a three-year, $14 billion plan to upgrade AT&T’s wireless and wired broadband networks. AT&T has added almost 2.5 million more homes to its broadband footprint so far this year and hopes to expand broadband availability to reach about 57 million customers by the end of 2015.

Although $14 billion is a significant investment, AT&T has spent considerably more on its shareholders. John Stephens, AT&T’s chief financial officer told Wall Street analysts AT&T has bought back 684 million shares of stock that will save the company more than $1.2 billion in future dividend payouts.  Combined with its dividend payout, AT&T has handed shareholders $18 billion so far this year and more than $40 billion since the beginning of 2012. AT&T expects to spend $20 billion on wireless and wireline network improvements in 2014.

AT&T’s speed upgrades have also not run as smoothly as AT&T claims. Efforts to increase speeds to 45Mbps in 79 markets has had mixed results with a significant number of customers complaining they cannot get qualified for the faster speeds because of infrastructure problems with AT&T’s network. The company still says it is on track to offer 75 and 100Mbps speed tiers in the future and is building a fiber to the home network in Austin to compete with Google.

Many customers who have been with AT&T for more than a year are learning better service does not come for free. AT&T has filed rate increases for its television service beginning Jan. 26, 2014 for customers not on a pricing promotion. The monthly price for the following U-verse TV service plans will increase $3, along with fee hikes for local stations and equipment, bringing AT&T at least $15 million in extra revenue each month:

• U-family to $62;
• U200 to $77;
• U200 Latino to $87;
• U300 to $92;
• U300 Latino to $102;
• U450 to $124;
• and U450 Latino to $134.
• Grandfathered plans also will increase $3: U100 to $64 or $69, depending on when first ordered; and U400 to $119.

• The monthly price of each non-DVR TV receiver will increase from $7 to $;
• Beginning on February 1, 2014, the Broadcast TV Surcharge will increase $1 to $2.99 per month to recover a portion of the amount local broadcasters charge AT&T to carry their channels.

Those customers who have a U-verse TV pricing promotion will continue to receive the promotional benefit until the applicable promotion ends or expires.  Customers are being notified of these changes via bill messaging occurring in November and December and a reminder in January and February 2014.  In addition, customers will be notified of these changes online at www.att.net/uversepricechange and att.com/uversesupport.

[flv]http://www.phillipdampier.com/video/ATT U-verse with GigaPower — Reactions 11-13.mp4[/flv]

AT&T is trying to get ahead of Google by advertising AT&T U-verse with GigaPower, a 1,000Mbps fiber to the home service promised in Austin sometime in the future. (0:30)

News that two major cable operators are contemplating breaking up Time Warner Cable and dividing customers between them has caused stock prices to jump for all three of the companies involved.

CNBC reported Friday that Time Warner Cable approached Comcast earlier this year about a possible friendly takeover under Comcast’s banner to avoid an anticipated leveraged takeover bid by Charter Communications. Top Time Warner Cable executives have repeatedly stressed any offer that left a combined company mired in debt would be disadvantageous to Time Warner Cable shareholders, a clear reference to the type of offer Charter is reportedly preparing. But the executives also stressed they were not ruling out any merger or sale opportunities.

News that there were two potential rivals for Time Warner Cable excited investors, particularly when it was revealed possible suitor Comcast is also separately talking to Charter about a possible joint bid that would split up Time Warner Cable customers while minimizing potential regulatory scrutiny.

The Wall Street Journal reported Charter is nearing completion of a complicated financing arrangement that some analysts expect could include up to $15 billion in debt to finance a buyout of Time Warner Cable. Such deals are not unprecedented. Dr. John Malone’s specialty is leveraged buyouts, a technique he used extensively in the 1980s and 1990s to buy countless smaller cable operators in a quest to build Tele-Communications, Inc. (TCI) into the nation’s then-biggest cable operator.

In addition to Barclays Bank, Bank of America, and Deutsche Bank — all expected to finance Malone’s bid — Comcast may also inject cash should it team up with Charter’s buyout. Comcast is interested in acquiring new markets without drawing fire from antitrust regulators.

If the two companies do join forces and pull off a deal, Time Warner Cable’s current subscribers will be transitioned to Charter or Comcast within a year. That is what happened in 2006 to former customers of bankrupt Adelphia Cable who eventually became Comcast or Time Warner Cable customers. Analysts predict the two companies would divide up Time Warner Cable territory according to their respective footprints. New York and Texas would likely face a switch to Comcast service, for example, while North Carolina, Ohio, Maine, and Southern California would likely be turned over to Charter.

[flv]http://www.phillipdampier.com/video/CNBC Comcast Charter consider joint bid for Time Warner Cable 11-22-13.mp4[/flv]

CNBC reports Charter Cable and Comcast might both be interested in a buyout of Time Warner Cable that would dismantle the company and divide subscribers between them. (4:18)

Reportedly financing the next era of cable consolidation.

Both bids are very real possibilities according to Wall Street analysts. Comcast has sought formal guidance on how to deal with the antitrust implications of a controversial merger between the largest and second-largest cable operators in the country. The industry has laid the groundwork for another wave of consolidation by winning its 2009 court challenge of FCC rules limiting the total market share of any single cable operator to 30 percent. Despite that, a Comcast-Time Warner Cable deal would still face intense scrutiny from the Justice Department. Getting the deal past the FCC may be a deal-breaker, admits Craig Moffett from MoffettNathanson.

“The FCC applies a public interest test that would be much more subjective,” Moffett said. “It wouldn’t be a slam dunk by any means. The FCC would be concerned that Comcast would have de facto control over what would be available on television. If a programmer couldn’t cut a deal with Comcast, they wouldn’t exist.”

Roberts

Supporters and opponents of the deal are already lining up. Charter shareholders would likely benefit from a Charter-only buyout so they generally support the deal. Time Warner Cable clearly prefers a deal with Comcast because it can afford a buyout without massive debt financing and deliver shareholder value. Comcast shareholders are also encouraging Comcast to consider s deal with Time Warner Cable. Left out of the equation are Time Warner Cable customers, little more than passive bystanders watching the multi-billion dollar drama.

The personalities involved may also be worth considering, because Comcast CEO Brian Roberts and John Malone have history, notes the Los Angeles Times:

Malone and Roberts first brushed up against each other more than two decades ago. At that time, both Liberty and Comcast were shareholders in Turner Broadcasting, the parent of CNN, TNT, TBS and Cartoon Network. When Time Warner, which was also a shareholder, made a move to buy the entire company,  there was tension because Comcast felt Liberty got a better deal to sell its stake. Roberts grumbled at the time that Liberty was getting “preferential treatment.”

A few years later, it was Malone’s turn to be mad at Roberts. When TCI founder Bob Magness died in 1996, Roberts made a covert attempt to buy his shares, which would have given him control of [TCI]. Malone beat back the effort, but it left a bad taste in his mouth.

“Malone was livid,” wrote Mark Robichaux in his book, “Cable Cowboy: John Malone and the Rise of the Modern Cable Business.”

[flv]http://www.phillipdampier.com/video/CNBC Comcast seeks anti-trust advice over TWC deal 11-22-13.mp4[/flv]

Even cable stock analyst Craig Moffett is somewhat pessimistic a Comcast-TWC merger would have smooth sailing through the FCC’s approval process. Moffett worries Comcast would have too much power over programming content. (3:53)

Ironically, when Malone sold TCI to AT&T, the telephone company would later sell its cable assets to Comcast, run by… and Brian Roberts.

Most of the cable industry agrees that the increasing power of broadcasters, studios, and cable programmers is behind the renewed interest in cable consolidation. The industry believes consolidation provides leverage to block massive rate increases in renewal contracts. If a programmer doesn’t budge, the network could instantly lose tens of millions of potential viewers until a new contract is signed.

Many in the cable industry suspect when Glenn Britt retires as CEO by year’s end, Time Warner Cable’s days are numbered. But any new owner should not expect guaranteed smooth sailing.

“We expect a Comcast-TWC deal would draw intense antitrust/regulatory scrutiny and likely resistance, stoked by raw political pushback from cable critics and possibly rivals who would argue it’s simply a ‘bridge too far’ or ‘unthinkable,’” Stifel telecom analysts Christopher C. King and David Kaut wrote in a recent note to clients. “We believe government approval would be possible, but it would be costly, with serious risk. This would be a brawl.”

Usage Cap Man may soon visit Time Warner Cable customers if either Charter or Comcast becomes the new owner.

While the industry frames consolidation around cable TV programming costs, broadband consumers also face an impact from any demise of Time Warner Cable. To date, Time Warner Cable executives have repeatedly defended the presence of an unlimited use tier for its residential broadband customers. Charter has imposed usage caps and Comcast is studying how to best reimpose them. Either buyer would likely move Time Warner Cable customers to a usage-based billing system that could threaten online video competition.

“Our sense is the DOJ and FCC would have concerns about the market fallout of expanded cable concentration and vertical integration, in a broadband world where cable appears to have the upper hand over wireline telcos in most of the country (i.e., outside of the Verizon FiOS and other fiber-fed areas),” Stifel’s King and Kaut wrote. “We suspect the government would raise objections about the potential for Comcast-TWC bullying of competitors and suppliers, given the extent and linkages of their cable/broadband distribution, programming control, and broadcast ownership.”

Since none of the three providers compete head-on, the loss of “competition” would be minimal. Any Comcast-Time Warner Cable deal would likely include semi-voluntary restrictions like those attached to Comcast’s successful acquisition of NBC-Universal, including short-term bans on discriminating against content providers on its broadband service.

Customers can expect a welcome letter from Comcast and/or Charter Cable as early as spring of next year if Time Warner Cable accepts one of the deals.

[flv]http://www.phillipdampier.com/video/Bloomberg Comcast and Charter Reportedly Weighing Bid for TWC 11-22-13.flv[/flv]

Bloomberg News reports if Comcast helps finance a deal between Charter and Time Warner Cable, Comcast would likely grab Time Warner Cable systems in New York for itself. (2:26)

A portion of your cable bill pays for much more than programming, with millions diverted to Koch Brothers-backed astroturf groups, tea party candidates, fat paychecks for former public officials taking a trip through D.C.’s revolving door, and generous allowances for travel  expenses racked up by high-flying industry lobbyists.

The Center for Public Integrity took a trip through the 2012 tax return of America’s top cable trade group: the National Cable & Telecommunications Association (NCTA), which collected $60 million last year in membership dues from America’s top cable operators, who in turn were reimbursed by you when paying your monthly cable bill. They needed a shower when the journey was over.

NCTA president and CEO Michael K. Powell, the former chairman of the Federal Communications Commission during President George W. Bush’s first term, was well compensated in his new role representing the same cable industry he used to barely oversee, taking home more than $3 million in pay last year. Eight other employees, including NCTA’s executive vice-president, collectively cleared over a million dollars in salary according to the groups’ Form 990 filed with the Internal Revenue Service.

The revolving door at NCTA headquarters is kept well-greased, with 78 out of 89 federal-level NCTA lobbyists formerly working in government jobs representing the American people. Now they work for the interests of Comcast, Time Warner Cable, and other large operators.

Collectively, the NCTA spent $19 million on lobbying activities last year, much of it bankrolling “dark money” groups that refuse to disclose their donors and consider it their life mission to defeat President Barack Obama and blockade Democrats in Congress — the ones still most likely to demand more oversight and regulation of the free-spending cable industry. Among the groups receiving cable’s cash:

Americans for Prosperity, which received $50,000, spent $33.5 million opposing Obama during the 2012 election cycle, according to the Center for Responsive Politics, a nonpartisan group that tracks campaign spending. Americans for Prosperity often supports Tea Party causes and candidates and is the main political arm of billionaire industrialists Charles and David Koch. As the Center reported Thursday, the group spent a staggering $122 million overall in 2012. Americans for Prosperity is also actively involved in blocking community-owned broadband projects and advocates passing laws forbidding communities getting into the broadband business if a cable company got there first. Now you know why.

Phil Kerpen with Glenn Beck

Americans for Tax Reform, which received $50,000, spent $15.8 million on the 2012 federal election, according to the Center for Responsive Politics. The group’s president and founder, Grover Norquist, is famous for his Taxpayer Protection Pledge, by which legislators and candidates promise to oppose all tax increases. The cable industry is also an advocate of tax forgiveness policies that would let cable operators repatriate the cash they stashed overseas, avoiding the same taxman they snuck around opening overseas bank accounts.

American Commitment, which received $10,000, spent $1.9 million on the 2012 federal election to advocate for and against political candidates — mostly to help U.S. Sen. Jeff Flake (R-Ariz.) defeat Democrat Richard Carmona. American Commitment also spent some of its money to oppose Sen. Tim Kaine (D-Va.) and Obama. American Commitment Founder and President Phil Kerpen is the former policy and legislative strategist at Americans for Prosperity and previously worked at Club for Growth, another group that doesn’t disclose its donors. Kerpen joined Glenn Beck on his program in 2009 to nod agreement when Beck hopped aboard the crazy train suggesting the Obama Administration’s support for Net Neutrality represented a Marxist-Maoist takeover of the Internet. Silly Beck, doesn’t he realize AT&T already called dibs?

The Center for Individual Freedom, which received $20,000, has been actively fighting against proposals for increased disclosure of donors to politically active nonprofits. It spent $1.8 million during the 2012 election cycle mostly opposing Democratic congressmen Steven Horsford, Bill Owens and Dan Maffei, all from New York.

‘Your money is always good here, whether it comes from AT&T or the cable industry.’ — LULAC

The cable industry also bankrolls a number of our “favorite” sock puppet groups that reflexively support cable’s cause even when straying far beyond their alleged core missions and constituencies the groups claim to represent. Among those on cable’s payroll, sharing $5.8 million in “grant” funding, are some very familiar names to any regular Stop the Cap! reader:

• The Congressional Black Caucus Foundation
• The National Association for the Advancement of Colored People
• LULAC
• The National Gay & Lesbian Chamber of Commerce
• The National Urban League

The largest grant – $2 million, went to the industry mouthpiece Broadband for America, the largest telecom industry astroturf group in the United States, featuring honorary Democratic co-chairman Harold Ford, Jr., who now spends most of his life in MSNBC green rooms after being bounced from office in a failed Senate bid in 2006.

Ford landed on his feet after losing the election, fleeing Tennessee for big money New York, peddling his inside the beltway influence to Merrill Lynch, winning him the position of vice chairman and senior policy adviser, until Merrill Lynch nearly collapsed in the Great Recession and was bailed out by U.S. taxpayers. Ford kept his $2 million annual salary and bonuses, but it wasn’t enough.

He quickly upgraded to a senior managing director at Wall Street firm Morgan Stanley, supplying him with enough cash to buy a $3 million co-op in a tony Manhattan neighborhood.

Broadband for America, brought to you by America’s Big Telecom companies.

From his perch in New York City, Ford pretends to know what is best for the little people across America suffering from no broadband, rationed access, or overpriced service.

His answer: buy it, if you can, from your cable company.

Ford’s co-chair at BfA is former Republican Sen. John Sununu who, by the way, also happens to sit on the board of Time Warner Cable. Need we say more?

There is no reason NCTA lobbyists shouldn’t travel in style when performing their advocacy efforts either. In 2012, they ran up nearly $800,000 in travel expenses.

Unsurprisingly, nobody involved was willing to comment.

Moffett

Wall Street is worried the cable industry will not be able to report major subscriber gains going forward because just about every middle/upper-income customer that wants broadband within cable’s footprint already has the service from either the phone or cable company.

Cable analyst Craig Moffett from MoffettNathanson Research predicts singing up the last 20% of Americans who don’t subscribe to broadband service will be challenging. As of today, 73% have the service, up 2.5% from last year. An increasingly anemic growth rate is a sign the marketplace is getting saturated, with only low-income Americans underrepresented, primarily because they can’t afford the asking price. Most of the rest don’t own or want computers or Internet access or live in a rural area where the service is unavailable.

Under these circumstances, it is no surprise broadband providers are reporting lower new customer gains. Time Warner Cable and Cablevision actually lost broadband customers in the third quarter, mostly to Verizon FiOS. For the last five years, the cable industry has picked up most of its broadband customers from phone companies offering only DSL service.

“To be sure cable is still taking share [from telco DSL] but it is doing so at a much more modest pace,” Moffett said.

The industry’s best chance for new subscriber growth appears to be bundling computers or tablets with an entry-level broadband offering targeting the poor.

Although cable companies are not supplying free PCs just yet, many are introducing relatively slow, budget-priced broadband tiers to attract lower-income subscribers.

Time Warner Cable introduced a $14.95 2/1Mbps broadband tier this month the company hopes will attract price-sensitive customers, especially those now subscribed to low-speed DSL.

Comcast has Internet Essentials, a $10 slow speed broadband service for families with children enrolled in the federal student lunch program. It is also rolling out a “prepaid Internet service” directly targeting low-income customers. Prepaid customers pay $69.95 for an activation kit containing a DOCSIS 3 modem and a month of broadband service. Renewals are priced at $15 for a week or $45 for a month for 3Mbps service with a 768kbps upload rate.

Most other cable providers offer entry-level broadband speeds, but usually only as a retention tool. Even if the industry custom-targets low-speed tiers to low-income homes, many customers may never make it past the cable industry’s credit check procedure. Comcast’s prepaid offering avoids that problem.