Charter Spectrum Once Again 'Competes' By... Raising Prices

from the nickel-and-dime dept

When Charter Communications (Spectrum) proposed merging with Time Warner Cable and Bright House Networks in 2016, the company repeatedly promised that the amazing "synergies" would lower rates, increase competition, boost employment, and improve the company's services. Of course like countless telecom megamergers before it, that never actually happened. Instead, the company quickly set about raising rates to manage the huge debt load. And its service has been so aggressively terrible, the company almost got kicked out of New York State, something I've never seen in 20 years of covering telecom.

Fast forward to 2019, and despite surging competition from streaming video providers, Charter is once again raising rates on numerous services. Broadband and TV services will all be seeing major price increases next month, as will the company's hardware rental surcharges and the universe of misleading fees the industry uses to covertly jack up the advertised rate post sale. That includes the company's "broadcast TV fee," which is really just a small part of the cost of programming hidden below the line in the form of a (now) $13.50 monthly additional charge:

"With this price change, you will now pay $13.50 a month for broadcast TV fees, which is up from $11.99 a month. This will add up to $162 a year to your bill just watch free over-the-air TV you could get with an antenna."

Note: that fee had already seen a $2 bump early this year.

That Charter's response to increased streaming video competition and record cord cutting is to raise rates tells you plenty about both the level of competition it sees in broadband, and the regulatory oversight of the sector. These hidden fees in particular are something the FCC (under both parties) has been happy to turn a blind eye to. Much in the same way both parties have rubber stamped a long line of telecom and media megamergers that, time and time again, have only really netted one thing: greater sector consolidation, higher rates, fewer jobs, and worse service.

Giants like Comcast and Charter have one ace in the hole when it comes to the streaming video wars to come. They are enjoying growing monopolies over broadband access thanks to the slow, steady implosion of many US telcos. That limited competition has let Comcast respond to cord cutting and streaming by imposing arbitrary and punitive usage caps and overage fees that are incurred when its broadband users use a competitor's services (say Netflix) but not their own TV offerings. This lets them simultaneously cash in on -- and hinder -- streaming competitors.

Charter's banned from doing this due to a few flimsy conditions affixed to its 2016 merger, but those conditions expire in just a few years, meaning you can expect an even fatter broadband bill over the horizon. The FCC having just effectively neutered its oversight authority over telecom at telecom lobbyist behest certainly isn't likely to help, nor is the death of FCC privacy and net neutrality consumer protections.

Filed Under: competition, consolidation, consumer welfare, mergers, monopoly, prices
Companies: charter communications, spectrum

Netflix Sees First Subscriber Losses Ever

from the adapt-or-perish dept

Netflix has certainly enjoyed its flight to the top of the heap of the streaming space, now streaming video to 60.1 million US subscribers. That's more than pay TV giants like AT&T or even Comcast, who've done their best (via usage caps and lobbying shenanigans) to unsuccessfully hamper Netflix's meteoric rise.

But there's some indication that the company may have started to reach its high water mark. Netflix this week revealed it lost 130,000 subscribers last quarter, the company's first quarterly subscriber loss in history. The losses come despite Netflix having spent $3 billion on programming last quarter, and another $600 million to market its its wares. The loss was quick to rekindle memories of Netflix's bumbled Qwikster, price hike debacle from back in 2011:

"Investors had been forgiving about the spending and the debt -- so long as customers grew at record rates. But the loss of subscribers in the U.S. was the first since the Qwikster debacle, and it suggests Netflix may be running into price resistance or the limits of the addressable domestic market. The company has forecast it can reach as much as 90 million customers in the U.S., compared with 60.1 million currently."

In a letter to investors, Netflix downplayed the rise of streaming competition, blaming the losses on its own price hikes and a fairly underwhelming content slate during the quarter:

"Our missed forecast was across all regions, but slightly more so in regions with price increases. We don’t believe competition was a factor since there wasn’t a material change in the competitive landscape during Q2, and competitive intensity and our penetration is varied across regions (while our over-forecast was in every region). Rather, we think Q2’s content slate drove less growth in paid net adds than we anticipated.

Given all the premature hand wringing and predictions of doom that surrounded Netflix after the Qwikster face plant, anybody suggesting Netflix will suddenly start to free fall is likely jumping the gun. Netflix's third quarter kicked off with the launch of Stranger Things season three, which will likely help drive subscriptions skyward again. And Netflix executives also seem to be slowly realizing that throwing around billions of dollars for mediocre international content at a mind-boggling scale may not be the winning strategy they originally surmised.

That said, this is only really the beginning of Netflix's challenges. Giants like Disney, AT&T, and Comcast are all rushing to pull their growing slate of TV shows and movies from Netflix and shift them exclusively to their own new streaming platforms. Studies suggest that nearly every broadcaster will launch their own streaming service by 2022. That's not only going to create greater losses due to competition, but the added cost and confusion of so many exclusivity silos is going to likely drive a significant number of users back to piracy, something the streaming sector hasn't really figured out yet.

In other words, despite a lot of pearl clutching Netflix is likely to clear its current hurdles. It's the rise of an ocean of streaming exclusives (especially by telecom providers given the death of net neutrality) and a shift back to piracy Netflix will really need to worry about over the next five years.

Filed Under: competition, prices, streaming, subscribers
Companies: netflix

DOJ Continues To Point Out A Mega-Merged AT&T Will Jack Up Prices On Everybody

from the do-not-pass-go,-do-not-collect-$200 dept

AT&T recently defeated the DOJ's challenge to their $86 billion merger with Time Warner thanks to a comically narrow reading of the markets by U.S. District Court Judge Richard Leon. At no point in his 172-page ruling (which approved the deal without a single condition) did Leon show the faintest understanding that AT&T intends to use vertical integration synergistically with the death of net neutrality to dominate smaller competitors.

In fact, net neutrality was never even mentioned by the DOJ at the multi-week trial. Likely in part because the DOJ didn't want to highlight how the Trump FCC was screwing everybody over with one hand, while the Trump DOJ was allegedly suing AT&T to "protect consumers" with the other (some argue that Trump's disdain for CNN and adoration of Rupert Murdoch were the more likely motivators). But if you ignore the fact that AT&T plans to use its monopoly over many broadband markets (from residential to cellular tower backhaul) combined with the death of net neutrality to make life difficult for consumers and competitors alike, you're not paying any attention to history or to AT&T's repeated nods in that general direction.

During the first trial, you'll recall the DOJ and its hired economists repeatedly pointed out how AT&T's vertical integration and ownership of "must have" content (like HBO) would provide the Dallas-based giant every incentive to raise TV rates. AT&T lawyers laughed those findings off, then immediately proceeded to...raise rates and hammer users with bogus new fees as it attempted to deal with the massive debt incurred from the merger. Those rate hikes were a major reason the DOJ decided it should try and appeal Leon's initial ruling.

As the DOJ works on its appeal of Leon's ruling, the government continues to point out in filings (pdf) that all of its economic models show that AT&T's ownership of Time Warner and DirecTV will provide the company with endless opportunities to raise rates on competitors and consumers:

"The bargaining model is an accepted and reliable predictor of competitive effects in the pay-television industry, and Professor Shapiro used reasonable inputs to quantify the magnitude of cost increases that AT&T would impose on rivals through negotiations—and the consequent higher prices for consumers—separate and apart from the non-quantifiable harms of the merger, such as reduced choice and stymied innovation...Given the district court’s illogical conclusion that the merger will lead to no change in bargaining leverage, and its erroneous finding of no consumer harm, a remand is necessary."

One of the major problems here is that lobbying has weakened antitrust enforcement so severely, government lawyers are now trapped within very narrow confines of economic theory to prove a point that should be common sense (especially if you've watched AT&T do business for more than five seconds): AT&T has a long history of behaving anti-competitively, and being even larger is going to make that even easier. There's roughly a million examples out there showing how AT&T exploits and abuses its captive customers with an ocean of bad behaviors.

That this will get worse as AT&T grows larger and more powerful shouldn't be a hard argument to make, even for lawyers trapped in the narrow hallways of accepted economic theory. And again, this is all before you even get to the fact that AT&T lobbyists just convinced the FCC to neuter itself on demand for no adult policy reason beyond it was what AT&T executives wanted.

Filed Under: antitrust, doj, mergers, prices
Companies: at&t, time warner

Fresh Off Its Merger, AT&T Jacks Up Price Of Streaming Video Service

from the history-repeats-itself dept

It didn't take long for AT&T's promises of merger synergies to magically evaporate. During the company's sales pitch for its $86 billion acquisition of Time Warner, AT&T repeatedly stated how the merger would result in all manner of "synergies" and savings that would be passed on to the consumer. In reality, the massive debt load acquired in the wake of the deal has AT&T doing everything in its power to try and trim its M&A-bloated balance sheet... to the immediate detriment of the company's customers.

Last week we noted how AT&T had begun flexing its muscles in the wake of a Judge's comically-myopic ruling in the Time Warner case. First, AT&T raised the price of some of its "unlimited" data plans, then axed a deal that provided HBO for free to some wireless customers. Then the company set to work raising a misleading, nonsensical and unnecessary "administrative fee" from $0.76 to $1.99, effectively providing AT&T with roughly $800 million in additional revenue every year. Such garbage fees are routinely used to help broadband providers falsely advertise a lower rate.

Not to be outdone, AT&T is also now informing the company's DirecTV Now streaming video customers that they can look forward to a new $5 price hike starting in August. The hike is necessary, AT&T claims, in order to bring "the cost of this service in line with the market":

"In the 18 months since our launch, we have continued to evolve our DIRECTV NOW products to serve this new customer set and compare favorably with our competitors. To continue delivering the best possible streaming experience for both new and existing customers, we’re bringing the cost of this service in line with the market—which starts at a $40 price point."

You're to forget, apparently, that one of AT&T's core selling points during the merger approval process was that owning "must have" content like HBO was going to make it easier for AT&T to provide users cheaper, better TV service. From an AT&T brief (pdf) filed at the tail end of arguments during company's recent merger skirmish with the DOJ:

"The evidence overwhelmingly showed that this merger is likely to enhance competition substantially, because it will enable the merged company to reduce prices, offer innovative video products, and compete more effectively against the increasingly powerful, vertically integrated 'FAANG' [Facebook, Apple, Amazon, Netflix, and Google] companies."

Yeah, or, you know, not. AT&T also forgot, apparently, that the whole reason users cut the cord and head to streaming services in the first place is because they're tired of often bi-annual rate hikes on traditional TV service (Dish Network's Sling TV is also issuing a $5 price hike to its own Sling TV service in perfect symmetry).

Again, none of this is new. Time and time again, Americans are promised a world of synergies and savings that can only be provided if already-massive companies are allowed to grow even larger without much oversight. And time and time again, we quickly learn that the lion's share of those promises are horse shit. We then fail utterly to actually learn anything from the experience. Meanwhile, with net neutrality on the chopping block, you can be damn sure that sneaky fees and vanilla price hikes are going to be the least of our problems in the face of a reconstituted Ma Bell.

Filed Under: directv, prices, streaming video, synergies
Companies: at&t, directv

Cord Cutting Is The Obvious Result Of A 70% Spike In Cable TV Prices Since 2000

from the duh dept

We've discussed time and time again how, when faced with an evolving video market, the broadcast and cable industry repeatedly decided to double down on bad ideas. While consumers increasingly lamented having to pay $130 per month for a massive channel bundles filled with sub-par content, the industry refused to offer serious a la carte options and then jacked up prices even further. When consumers began to complain about high costs and annoying ads, cable and broadcast executives responded by trying to stuff more ads into every viewing hour by speeding up or editing down programs.

So for anybody paying attention, the fact that cord cutting is expected to set records in 2018 shouldn't be particularly surprising. And it's equally unsurprising that a recent study by Kagan highlights how soaring cable TV prices are contributing to the cord cutting trend. The firm was quick to note how the average cable bill has increased in price by 74% since 2000, even adjusted for inflation. All while the average income saw either tepid growth or remained flat, as this Kagan chart highlights:

The firm noted how prices for multichannel packages have steadily risen from just below $60 a month in 2000 to close to $100 in the peak year of 2016, and that's not including the added costs these companies hide below the line via obnoxious hidden fees. Or the fact that most cable companies now charge you for everything from modem rental to the honor of being able to pay your bill in person or over the phone, resulting in compounded annual gross revenue for cable, satellite and telco pay TV platforms increasing at at a rate of 5.5% every year from 2000 to 2017.

It's only now that streaming has begun to reach critical mass that some cable giants have actually buckled to the call for cheaper, better options (AT&T's DirecTV Now, Dish's Sling TV). But there's still countless cable operators soldiering forth with rate hikes and a refusal to improve historically awful customer service -- as if the traditional cable TV cash cow is going to live forever. Many industry execs still honestly see cord cutting as a trend that will magically end once Millennials come to their senses, which is a painful misreading of the scenario.

Part of this confidence is because they have a fairly obnoxious plan b. Given the cable industry's growing monopoly over broadband, most of these companies will simply counter these losses with even bigger price hikes for broadband. Most of those are going to come in the form of arbitrary and unnecessary usage caps and overage fees. These are just glorified rate hikes on uncompetitive markets, but they have the added benefit of making it more expensive to stream for those looking to escape the stranglehold of their traditional cable provider.

And with the looming death of net neutrality, there will soon be an ocean of new "creative" tricks these companies will use to ensure that you remain tightly constrained inside their own massive media landscapes (be that Comcast NBC Universal, or AT&T Time Warner), and punished should you actually try to wander into greener, cheaper pastures.

Filed Under: cable tv, cord cutting, price increases, prices

The Cable Industry's Ingenious 'Solution' To TV Cord Cutting? Raise Broadband Rates

from the Comcastic dept

In a healthy, competitive market, cable providers would respond to the growing threat of streaming video competition by lowering prices, improving their historically awful customer service, and giving consumers more flexible cable bundles.

But because these same cable operators enjoy a growing monopoly over the uncompetitive broadband market -- they don't have to do that. Instead, they've found that the easiest response to added competition on the TV front is to impose a relentless array of rate hikes on captive broadband customers. There's a myriad of ways they accomplish this, ranging from misleading hidden fees that jack up the advertised price (something they're being sued for), to usage caps and overage fees (which let them not only charge more money for the same service, but hamstring streaming competitors via tricks like zero rating).

But with the U.S. entering a period of rubber stamp regulators, and a lack of telco upgrades resulting in less competition than ever, Wall Street is pressuring cable operators to also jack up the standalone price of broadband services outright. New Street Research analyst Jonathan Chaplin recently predicted that a lack of broadband competition could allow cable providers like Comcast to double already expensive broadband prices over the next year. UBS analyst John Hodulik issued a research note the same week stating that cable operators should specifically jack up the price of standalone broadband service to $80 to $90 per month.

Not too surprisingly, cable operators are already heeding these demands. Analysis from Morgan Stanley this week indicated that cable operators had already hiked the cost of standalone broadband 12% from last year's rates:

"In a note to clients Tuesday, Morgan Stanley said that based on its own survey, cable TV companies hiked broadband prices by 12% to $66 monthly from a year earlier for customers that buy only high-speed internet and not a TV package.

"As video revenue growth is increasingly pressured, leaning on data pricing is tempting to sustain earnings," said Benjamin Swinburne, a Morgan Stanley analyst in a report."

Tempting, indeed. Especially when there's neither healthy market competition nor regulatory oversight there to stop companies like Comcast and Charter from doing so. Of course this is before you factor in all manner of additional costs that await consumers over the next few years, from the problems that will be caused by the mindless gutting of popular net neutrality protections, to the Trump administration's gutting of privacy rules that would have stopped ISPs from their stated goal of charging users more money if they want to protect their own privacy.

And instead of creating policies aimed at improving competition in what's clearly not a healthy market, the Trump administration's FCC is engaged in the mindless gutting of consumer protections, and the manipulation of data to try and pretend the broadband market's obvious problems don't actually exist.

Filed Under: cable, cord cutting, fees, prices

Wall Street Predicts Apathetic Regulators And Limited Competition Will Let Comcast Double Broadband Prices

from the who-needs-competition-anyway dept

Wall Street predicts that cable giants like Comcast will soon be cashing in on the one-two punch of rubber stamp regulators and an ongoing lack of competition in the broadband space. Under the Obama administration, regulators turned a blind eye to the fact that cable giants like Comcast were taking advantage of a lack of competition to impose arbitrary and unnecessary usage caps and overage fees. Under the Trump administration that apathy has ballooned ten fold, with the looming assault on net neutrality only green lighting Comcast's ability to use those fees to raise rates and hamstring streaming competitors.

Wall Street analysts obviously adore this new paradigm of regulatory apathy to the sector's competition woes, and predict cable providers are about to enter a very lucrative period of profit taking. Said enthusiasm is usually masked by the use of rhetoric that obfuscates the real consumer and market harms such cheer leading assists. For example, a research note sent to investors this week by New Street Research analyst Jonathan Chaplin indicates that competitive "headwinds" will soon waver, allowing Comcast to double the amount it currently charges for broadband:

"We have argued that broadband is underpriced, given that pricing has barely increased over the past decade while broadband utility has exploded,” New Street said. “Our analysis suggested a ‘utility-adjusted’ ARPU target of ~$90. Comcast recently increased standalone broadband to $90 (including modem), paving the way for faster ARPU growth as the mix shifts in favor of broadband-only households. Charter will likely follow, once they are through the integration of Time Warner Cable.”

New Street added that “broadband pricing could double from current levels.”

How exciting. Of course while Chaplin tries to argue that broadband pricing has "barely increased" over the last decade, it's important to understand he's talking about the advertised price. Comcast has provided a master class in the tactic of using hidden, sneaky, and/or entirely bogus fees to covertly jack up the cost of service post sale, something both Comcast and Charter are facing numerous lawsuits for. Then there's Comcast usage caps and overage fees -- which is Comcast's charming way of abusing limited competition to raise rates -- while pretending that isn't actually happening.

That brings us to the other major portion of Chaplin's note, which goes on to predict that Comcast should be fairly well insulated from cord cutting. How? Thanks, in part, to Comcast's growing monopoly over broadband and the higher prices that allows:

"The traditional pay-TV market saw the worst loss of subs on record this quarter,” the investor note said. “We don’t expect this trend to change anytime soon; however, we think cable should be somewhat insulated because: 1) they should take share in a declining market, helped by the pull-through effect from growing share in broadband; 2) we don’t think cable makes much money in pay-TV. In fact, the [free cash flow] lost from subs dropping pay-TV is generally recovered through higher HSD pricing.”

As we've noted previously, Comcast is somewhat insulated from cord cutting because of a lack of competition in the broadband space. In countless markets nationwide, telcos have simply refused to upgrade aging DSL lines at any scale. These telcos have effectively ceded control of the residential broadband market to local cable competitors as they focus on other ventures (largely either expanding further into business broadband or clumsily slinging video ads to Millennials in a quest to be the next Facebook or Google). As a result, we're quietly and slowly seeing bigger cable broadband monopolies than ever in many markets.

As these frustrated DSL users flee to cable just to get current-generation speeds (which is happening faster than ever), they're signing up for broadband and TV bundles that are notably cheaper than TV alone. That doesn't mean these users necessarily wanted cable TV (in many instances the cable box sits dusty in a closet), but they're still paying all the same. Meanwhile, usage caps and overage fees help protect cable TV revenues by making it more expensive than ever to flock to streaming video competitors, and with the looming death of net neutrality, these companies can also exempt their own streaming services while penalizing competitors.

This is, again, something we've built thanks in large part to the bipartisan apathy toward actually doing anything to fix the broadband market. Because actually doing so would upset deep-pocketed campaign contributors, we're apparently content in paying empty lip service to things like "bridging the digital divide," while despised industry giants like Comcast cash in on our collective Congressional and regulatory dysfunction. Enjoy your higher Comcast bill, everyone.

Filed Under: broadband, competition, prices, wall street
Companies: comcast

DOJ Sues DirecTV, Calling It A 'Ringleader' of Collusion Over Regional Sports Programming

from the room-full-of-villains dept

"As the complaint explains, Dodgers fans were denied a fair competitive process when DIRECTV orchestrated a series of information exchanges with direct competitors that ultimately made consumers less likely to be able to watch their hometown team,” said Deputy Assistant Attorney General Jonathan Sallet of the Justice Department’s Antitrust Division. “Competition, not collusion, best serves consumers and that is especially true when, as with pay-television providers, consumers have only a handful of choices in the marketplace."

"At a time when there’s open rebellion against soaring pay-TV prices, these companies were clearly acting out of self-interest. The last thing they wanted was to give people another reason to cut the cord. Whatever their primary motive, though, they also were defending their customers’ interests. That’s rare and welcome behavior from an industry that all too often regards consumers as ATMs from which it can make frequent withdrawals."

"The reason why no other major TV provider chose to carry this content was that no one wanted to force all of their customers to pay the inflated prices that Time Warner Cable was demanding for a channel devoted solely to LA Dodgers baseball. We make our carriage decisions independently, legally and only after thorough negotiations with the content owner. We look forward to presenting these facts in court."

Filed Under: baseball, collusion, doj, prices, tv
Companies: at&t, charter communications, directv, la dodgers, time warner cable

Netflix Tries To Blame Press Coverage Of Its Price Hikes For Lower Than Expected Subscriber Additions

from the shoot-the-messenger dept

"Gross additions were on target, but churn ticked up slightly and unexpectedly, coincident with the press coverage in early April of our plan to un­grandfather longer tenured members and remained elevated through the quarter. We think some members perceived the news as an impending new price increase rather than the completion of two years of grandfathering."

"While un­grandfathering and associated media coverage may moderate near ­term membership growth, we believe that un­grandfathering will provide us with more revenue to invest in our content to satisfy members, thus driving long­term growth. Over the second half of this year, we’ll complete un­grandfathering. Our three ­tier pricing (in the US: $7.99 SD, $9.99 HD, and $11.99 UHD) is working well for us and for new members, and our gross additions remain healthy."

Filed Under: blame, journalism, prices, streaming
Companies: netflix