Charter Says Its Sneaky, Unnecessary Fees Are A Consumer Benefit

from the this-is-for-your-own-good dept

We've noted for some time how cable providers over the last few years have added a "broadcast TV" fee to customer bills. Such a fee, which simply takes a part of the cost of programming and buries it below the line, lets cable providers advertise one rate, then hit customers with a higher bill. It's false advertising, but you'd be hard pressed to find a regulator anywhere in North America willing to tackle the problem. When Comcast was criticized for the practice two years ago, the company claimed that burying a sneaky new fee below the line was just the cable company's way of being "transparent" with its customers:

"Beginning in 2014, we will itemize a portion of broadcast retransmission costs as a separate line item to be more transparent with our customers about the factors that drive price changes," he said. “In 2014, we will not increase the price of Limited Basic or Digital Preferred video service, and adjustments to other video service prices will be lower than they would have been without the Broadcast TV Fee."

While it's true broadcasters impose often unreasonable rate hikes on cable companies, the cost of programming is just one of several costs of doing business, and hiding these costs when listing your prices is the complete opposite of being transparent with your user base. Since the fee began popping up in 2014, some cable companies have as much as tripled the fee, which can now be as much as $6 to $8 per customer, per month.

Fast forward to this month when Charter (and now Charter-owned Time Warner Cable) was sued for the practice. The plaintiff in question wasn't asking for monetary damages; they simply wanted to highlight how an estimated 20% of Charter's revenues are now thanks to a practice that lets the cable company "deceive its customers by advertising and promising a lower price while actually charging a higher price." Charter has finally responded to the suit and, like Comcast, is actually claiming that it's misleading its customers for their own benefit:

"Our customer friendly approach includes simplified pricing and packaging with no data caps, no modem fee, no early termination fee and no separate USF [Universal Service Fund] fee. We provide simple to understand bills and want our customers to understand what they are paying for, including the skyrocketing cost of broadcast channels."

Right, but the lack of data caps is because the FCC banned them for seven years as a merger condition. And while Charter is one of the only cable ISPs that rolls the cost of renting a modem into the overall cost of service, breaking out the broadcast TV fee is the exact opposite of that. Hiding a part of your costs outside of the advertised price, then bumping that fee 300% in just a few years, remains false advertising and misleading jackassery by any measure. Leave it the cable industry to try and argue that intentionally misleading you into thinking you're not getting a rate hike this year is some kind of favor.

Filed Under: fees, hidden fees, sneaky fees, transparency
Companies: charter

Cable Industry Proclaims More Competition 'Hurts Consumers' & 'Damages Economic Efficiency'

from the bigger-ain't-better dept

As part of the conditions attached to Charter's $79 billion acquisition of Time Warner Cable and Bright House Networks, the FCC imposed a requirement that Charter expand broadband service to another two million locations, one million of which must already be served by an ISP delivering speeds of 25 Mbps or greater. Unfortunately these kinds of conditions historically don't mean much; merger broadband expansion promises are almost always volunteered by the ISPs themselves, who already planned the expansion regardless of their merger plans.

That isn't stopping a lobbying organization representing Charter's cable competitors from crying and stomping their feet over the condition. In a filing by the American Cable Association (ACA, pdf), the organization's lawyers try to claim that not only would an influx of competition somehow harm consumers, the group claims that adding competitors to what are frequently stagnant markets will somehow "damage economic efficiency":

"That overbuild condition is unlawful. It is not tailored to mitigate a merger-specific harm or confirm a merger-specific benefit. It will exacerbate the merger harms the Order identifies, damage economic efficiency, injure small providers, and harm consumers. The condition should be stricken."

Another coalition of cable providers, the NTCA, tried to claim the same thing in a filing of its own:

"While the commission’s intentions in proposing the buildout requirement were undoubtedly good, the reality is imposing such a condition creates artificial competition in areas that cannot support it, which will ultimately undermine, rather than further, broadband availability and affordability in higher-cost areas in particular."

When is competition "artificial?" When we say it is! The thing is, it's not really competition these companies are worried about. It's the inevitable hoovering up of their businesses by Charter down the road. Charter CEO Tom Rutledge recently made it clear at an investor conference that he won't be targeting cable companies under the condition -- rather, he'll be targeting phone companies. Why? Phone companies, usually unwilling or unable to invest in fiber, make easier targets. There's no need to compete with smaller cable operators, when you can just gobble them up at a later date:

"When I talked to the FCC, I said I can’t overbuild another cable company, because then I could never buy it, because you always block those,” Rutledge said at the MoffettNathanson event. “It’s really about overbuilding telephone companies.” “Why would we go where we could get killed,” Rutledge said.

In other words, Charter doesn't want to compete with cable companies, because the FCC would then prohibit them from merging with them later for fear of lessening competition. Instead, Charter plans to take aim at the already struggling second-tier telcos in these areas, then acquire smaller cable operators down the road. So despite the FCC's intentions, the deal creates another homogeneous giant just like Comcast with little to no real competition to keep it in check, and the conditions are little more than regulatory band-aids for what's ultimately going to end badly for every individual and organization not-named Charter.

While the FCC's conditions do include a few useful nuggets for consumers and small businesses (a ban on caps and net neutrality violations for seven years), with the pace at which the cable industry is looking to defang and hamstring the agency, it's not clear there's going to be much of an FCC left to enforce the conditions during the latter stretch of that window. While the FCC certainly tried to shine up these conditions to downplay the negative aspects of deal approval, it's still abundantly clear that giant telecom mergers like this only ultimately benefit the companies involved.

That's a lesson that for whatever reason we seem utterly unwilling to learn despite our collective disdain for the end result.

Filed Under: broadband, buildout, cable, competition, fcc
Companies: aca, bright house networks, charter, ncta, time warner cable

FCC To Ban Charter Communications From Imposing Usage Caps If It Wants Merger Approval

from the throttled-and-capped dept

If you recall, the FCC and DOJ blocked Comcast's acquisition of Time Warner Cable, in large part because of the sheer volume of nonsensical benefits Comcast tried to claim the deal would bring consumers. When Charter Communications subsequently announced its own acquisition of the company, it decided to take a different tack; most notably by taking a more congenial tone with regulators, dialing back the tone-deaf rhetoric and astroturf, and even hiring long-time net neutrality and consumer advocate Marvin Ammori to help seal the deal.

And it's now apparent that Charter's approach paid off. After months of meetings with regulators, both the FCC and the DOJ have announced they intend to approve the deal -- with a few conditions. After Bloomberg leaked word of the looming approval, FCC boss Tom Wheeler issued a statement saying (pdf) that most of the conditions being attached to the deal will focus on preventing Charter from harming Internet video competitors.

According to Wheeler, Charter won't be able to impose caps, engage in interconnection shenanigans, or bully broadcasters into withholding content from streaming providers (something Dish complained about) for a period of seven years:

"In conjunction with the Department of Justice, specific FCC conditions will focus on removing unfair barriers to video competition.

First, New Charter will not be permitted to charge usage-based prices or impose data caps. Second, New Charter will be prohibited from charging interconnection fees, including to online video providers, which deliver large volumes of internet traffic to broadband customers. Additionally, the Department of Justice’s settlement with Charter both outlaws video programming terms that could harm OVDs and protects OVDs from retaliation– an outcome fully supported by the order I have circulated today. All three seven-year conditions will help consumers by benefitting OVD competition. The cumulative impact of these conditions will be to provide additional protection for new forms of video programming services offered over the Internet."

The FCC's ban on usage caps is probably the most interesting or the proposed conditions. The agency has by and large turned a blind eye to usage caps and zero rating of content so far. In part because it was unsure whether or not the courts would uphold the regulator's new net neutrality rules (which should be settled any day now), but also because the FCC has been hesitant to engage in broadband rate regulation. Like net neutrality, usage caps are a sign of a lack of competition in the broadband market, and streaming competitors like SlingTV worried that the Charter merger would simply result in yet another giant like Comcast -- with a vested interest in using the lack of broadband competition to hammer emerging streaming TV evolution.

Granted the conditions aren't all that revolutionary in that while Charter has flirted with usage caps, it currently doesn't impose them anyway. And on the interconnection front, the devil will be in the condition details (the threat of neutrality rule enforcement appears to have solved many of these disputes, for now). Meanwhile, consumer groups like Free Press say they aren't impressed, arguing the debt created by the deal will be passed on to Charter customers in still-uncompetitive markets, one way or another:

"Customers of the newly merged entity will be socked with higher prices as Charter attempts to pay off the nearly $27 billion debt load it took on to finance this deal. The wasted expense of this merger is staggering. For the money Charter spent to make this happen it could have built new competitive broadband options for tens of millions of people. Now these billions of dollars will do little more than line the pockets of Time Warner Cable’s shareholders and executives. CEO Rob Marcus will walk away with a $100 million golden parachute."

And while it's probably true that Charter will just find some other way to impose rate hikes on these subscribers, the conditions are at least an interesting signal from the FCC (and the DOJ, that issued its own statement on the approval) that it recognizes the growing threat usage caps are posing to the future of innovative services. Still, the conditions will be no substitute for real broadband competition, the lack of which a bigger, badder Charter will simply have to find new and creative ways to abuse.

Filed Under: antitrust, broadband caps, conditions, data caps, datacaps, doj, fcc, merger, usage caps
Companies: charter, time warner cable

One Slightly Less Shitty Quarter For Cable Fuels Renewed Cord Cutting Denial

from the head-in-sand dept

First the cable and broadcast industry argued that cord cutting didn't exist. It was, to hear execs tell it, simply a reflection of the sagging housing market, and the people who were cutting the TV cord were poor, 40 year old nobodies, living in their mom's basement who didn't matter. Of course data has since shown that cord cutting continued as housing markets recovered, with millions of new home owners not signing up for cable. Similarly, most data shows that cord cutters are young, educated, and just tired as hell of constant rate hikes for mammoth bundles of awful reality TV programming.

After a record-setting second quarter for cord cutting, the cable industry seemed prepared to accept cord cutting (and as a result embrace new, skinny bundles of channels and the reality that it may actually have to someday compete on price). But subscriber TV losses during the third quarter sucked slightly less than normal. That, in turn, fueled a new industry press meme about how Internet video's threat to cable was "overblown," cable has "struck back" and it's time to "change the narrative," because cable, like, has things totally under control now:

"It’s time to change the narrative about cord cutting,” Craig Moffett, an analyst at MoffettNathanson LLC, said Thursday in a note titled “Charter Q3 Earnings: Cable Strikes Back.” “Yes, the pay-TV industry is slowly drip, drip, drip declining,” he said. “That cable was actually holding its own was at best a secondary narrative."...The third-quarter resurgence after a disastrous summer quarter of record subscriber losses was led by Comcast, the nation’s largest broadband Internet service provider."

So what did Comcast do to encourage this suddenly rosy outlook among many stock jocks? Why the country's least liked company lost just 48,000 subscribers last quarter. That's still notably pathetic, but it excited Wall Street because it was Comcast's best subscriber showing in nine years (which again, speaks volumes). Time Warner Cable saw similar "improvement," losing just 7,000 subscribers last quarter. Other third quarter earnings results were all over the board, from AT&T's loss of 92,000 U-Verse subscribers (great job!) to Charter managing to add a whopping 12,000 video subscribers (wow!).

And while this narrative of cable "striking back" and cord cutting being a hallucination of a few, mean 'ole bloggers is a great one for firms pushing specific stock positions, news outlets and analysts nervously sucking at the teat of dwindling industry ad money, or executives with their heads buried deeply in the sand, it misses the forest for the trees.

One, many of these companies just finished new gee-whiz set top box GUI upgrades (notably Charter, Time Warner Cable and Comcast). And while some graphical upgrades for the aging cable box may have excited customers temporarily, they're in no way going to be a substitute for the direction the cable industry absolutely needs to head: lower prices and more flexible channel packages. Netflix is now in half of all american homes and the impact on cable ratings has been abundantly obvious. And while several cable companies are finally experimenting with new "skinny" channel bundles, they're still not seriously competing on price. As a result these offerings tend to lack value, features, and, in cable industry fashion, are jam packed with fees and caveats.

A slightly less shitty quarter also doesn't change the fact that the housing market continues to grow without bringing new cable subscribers along for the ride. Nor do these numbers address the arguably bigger threat of "cord shavers," an admittedly idiotic term that includes users who are trimming back on their cable TV and service bundles to counter absurd programming rate hikes. Flat cord cutting numbers are just one metric to look at. Looking at all of the data, including ratings, housing growth, and cord shaving paints a very clear picture that Internet video is a serious threat that's not going away.

To be sure, much cord-cutting analysis and press coverage tends toward the apocalyptic, and over-states both the pace and scale of the problem. It's also true that cable could likely swat cord cutting like a pesky fly were the industry interested in things like actual innovation, competing on price, and disruptive new, open viewing platforms and hardware. But it's pretty abundantly clear looking at consumer bills and customer satisfaction surveys that the industry is interested in none of those things. Claims that one slightly-less-shitty quarter for a single statistic means the tide is turning sends the completely wrong message to an industry that needs to wake up and engage in aggressive adaptation before things get truly ugly.

Filed Under: cable, cord cutting, craig moffett, denial, tv
Companies: charter, comcast, time warner cable

Cable CEO Is Really Pissed That HBO Hasn't Cracked Down On Streaming Password Sharing

from the get-over-it dept

As HBO's streaming service popularity has taken off, the company has yet to crack down on the sharing of passwords, believing it's a great opportunity to have programming junkies market the brand for you. We all of course already knew that sharing HBO Go passwords was a violation of the anti-circumvention clause of the DMCA and an unholy sin. But according to Charter CEO Tom Rutledge, the sharing of streaming service passwords is also a diabolical theft of content that needs to stop immediately.

During the cable giant's recent quarterly earnings call, Rutledge decided to rant a bit about the perceived injustice of college students using their parents' passwords, insisting that HBO's leniency on this front showed a complete misundertanding of the market:

"But to Rutledge, companies like HBO show a "complete lack of control and understanding in the space" by letting password sharing continue, and it's something that must be stopped. "The lack of control over the content by content companies and authentication processes has reduced the demand for video because you don’t have to pay for it,” Mr. Rutledge said on the earnings call. “That’s going on in the college market."

But it's Rutledge who appears to have shown his lack of understanding of the market he serves. The CEO assumes that if you crack down on college kids sharing HBO passwords that these kids are magically going to go out and sign up for cable connections. What's more likely to happen should you crack down on the practice is that that these kids (most of whom are on a budget) will turn to cheaper streaming alternatives like Netflix -- or piracy. But in traditional legacy exec thinking, everybody's a criminal, even though Rutledge's company simply refuses to seriously compete on price.

Earlier this year HBO CEO Richard Plepler said the company keeps a close eye on the password sharing stats, and it's not really a significant number of people. Plepler (the guy Rutledge implies doesn't understand the market) a year earlier made it clear he understood the market perfectly well:

"It’s not that we’re unmindful of it, it just has no impact on the business,” HBO CEO Richard Plepler said. It is, in many ways, a “terrific marketing vehicle for the next generation of viewers,” he said, noting that it could potentially lead to more subscribers in the future. “We’re in the business of creating addicts,” he said.

So, whereas HBO thinks it's a good idea to turn the other cheek on a statistically insignificant practice to generate brand obsession, Charter (soon to own Time Warner Cable and Bright House Networks in a $75+ billion merger) thinks it's a better idea to treat college kids like criminals, and in the process, driving them to Netflix and BitTorrent networks.

Filed Under: cable, competition, hbo, password sharing, streaming, tom rutledge
Companies: charter, hbo

AT&T: Mega Mergers And Anti-Competitive Behavior Are Bad...Unless It's Us Doing It

from the ill-communication dept

Focusing on mega-mergers instead of healthy competition is bad, according to AT&T. That is, unless you are AT&T. The telco, fresh off its $69 billion acquisition of DirecTV, this week filed some comments with the FCC (pdf) on Charter Communications' planned $78.7 billion acquisition of Time Warner Cable and Bright House Networks. While AT&T doesn't outright oppose the merger (hey, that would be hypocritical), AT&T does proclaim that companies like Comcast, Charter, and Time Warner Cable are increasingly focusing on giant mergers and acquisitions in lieu of actually competing with other companies:

"The cable industry, as the merging parties concede, is marked by a lack of head-to-head competition. Cable companies have chosen not to compete and instead coordinate to gain shared advantages over rivals, which further industry consolidation will only facilitate. The reason is simple: as Charter CEO Tom Rutledge put it, following the proposed merger "(t]here will be less people to coordinate [with]."

That's a pay TV provider that just spent $70 billion on a mega-merger instead of competitive upgrades, complaining that the cable industry spends too much time focusing on mega mergers, and not enough time competing. While AT&T's acquisition of DirecTV did give the company better leverage in broadcast negotiations (savings that most assuredly won't be passed on to the consumer), its primary goal was ensuring that DirecTV wouldn't apply any competitive pricing pressure on AT&T's U-Verse TV business. Apparently conning regulators on a shitty deal that decreased pay TV competition has filled AT&T with fresh joie de vivre.

AT&T notes the only reason it's even really commenting is because it's just really worried about the Charter merger's impact on the emerging Internet video market, which AT&T cherishes like a new family puppy:

"Careful scrutiny is especially warranted because this increased consolidation and coordination comes just as new competitive threats are emerging. Over-the-top video providers are disrupting the traditional cable pay TV model by revolutionizing the way consumers access and view video. AT&T/DIRECTV - which the Commission described as "a bet on competition" - is investing billions to go toe-to-toe with cable incumbents and foster online video distribution ( .. OVD")."

Except that's bullshit, too. AT&T aggressively mislead regulators into thinking its DirecTV acquisition would be a good thing, by falsely promising that it would expand fiber to the home service to an additional twelve million homes. Except as we noted at the time, these promises were based on AT&T Miracle Math (TM); the company has been deploying very limited fiber to the home ("fiber to the press release") to scattered development communities for years, and somehow successfully got the FCC to buy into the idea that these deployments were somehow new -- specifically thanks to the DirecTV deal.

It's that kind of con man confidence that apparently gives AT&T the perceived license to lecture other industries on what constitutes good behavior. Perhaps most amusingly, AT&T takes issue with the cable industry for its tactic of using a wide variety of associations to further the competitive goals of the cable industry:

"The cable industry has formed a variety of exclusive associations, organizations, and other ventures to advance the competitive interests of cable companies. These joint initiatives, although opaque to outsiders, are transparent to cable-company members who may use them to coordinate strategies against rivals. The proposed merger could make that easier."

Why fan my face before I faint! You mean like the countless associations, astroturf efforts, hijacked minority groups, fake consumer groups, and policy think tanks that AT&T has funded for decades to help it pursue a decidedly anti-consumer and anti-competitive agenda? Most companies are detached from reality in some fashion or another, but absolutely nobody does blistering, hypocritical policy hubris quite like AT&T. Do as ma bell says, not as ma bell does, kids.

Filed Under: competition, hypocrisy, mergers, tv
Companies: at&t, charter, comcast, directv, time warner cable

Netflix Now Supports Charter Merger After ISP Promises Not To Screw Up The Internet...For A Measly Three Years

from the promises-with-expiration-dates dept

Charter Communications is desperately trying to avoid the same fate that befell Comcast's doomed acquisition of Time Warner Cable. As noted recently, Charter hired long-standing net neutrality advocate Marvin Ammori to craft its promise to adhere to (most) of the FCC's new net neutrality rules for three years, regardless of whether the rules are overturned in court. Charter's also promising to avoid the implementation of usage caps and overages during that same time period, something most ISPs are hungrily eyeing in order to protect legacy TV revenues from Internet video.

But Charter's also now taking things one step further. In a new filing with the FCC, Charter declares the company will avoid screwing up the Internet for a whopping total of three years, and provide free interconnection to any large content or transit provider that adheres to certain traffic load and point of presence (POP) criteria. Three years obviously will go by in a flash, and the laundry list of criteria is long, giving Charter ample room (like any good merger condition) to wiggle over, under and around a notable chunk of the promise.

Still, the promising was enough to make Netflix happy, the company stating in their own filing with the FCC that getting free interconnection for three years was enough for them to be willing to sign off on the industry's latest mega-merger:

"This new policy and the commitment to apply it across the ‘New Charter’ footprint is a substantial public-interest benefit and will support scaling the Internet to meet consumers’ growing demand for online services and help foster continued innovation across the Internet ecosystem. Accordingly, Netflix supports the proposed Charter Time Warner Cable transaction if it incorporates the merger condition proposed by Charter."

If you recall, Netflix and transit operators have spent the last two years accusing last mile ISPs of intentionally letting transit points degrade in order to kill settlement-free peering and force Netflix into costly new direct interconnection deals. The problem is since both sides keep these business deals aggressively private, there hasn't been enough hard data to prove it (even though we're getting closer). Regardless, the mere threat of real net neutrality rules (you remember, the rules that were supposed to destroy the Internet) appear to have put the kibosh on a large chunk of this ugly infighting.

Needless to say, Netflix's approval appears to have come relatively cheap, but real consumer advocates I've spoken to are far from impressed with the three year window on any of Charter's promises, even with Ammori's involvement. As such they're pushing hard to either have the condition length extended significantly (five years or higher) or blocked altogether, since promising to play nice isn't worth all that much if your promise has an expiration date. It's worth reminding readers that while Charter's whispering sweet nothings in the ears of regulators and Netflix, it's simultaneously suing to destroy the FCC's new neutrality rules, ensuring that there's no mechanism in place to police Charter once the promised window for good behavior closes.

Filed Under: acquisition, deals, fcc, interconnection, peering
Companies: charter, netflix