Cable's Top Lobbyist Again Calls For Heavier Regulation Of Silicon Valley

from the glass-houses-and-all-that dept

After having just successfully convinced the Trump administration to neuter state and federal oversight of lumbering telecom monopolies, those same companies continue their unyielding call for greater regulation of Silicon Valley.

If you've been paying attention, you'll know that Comcast, AT&T, and Verizon's attack on net neutrality rules was just the tip of a massive, dysfunctional iceberg. Those companies have also convinced the Trump administration to effectively neuter FCC authority over ISPs, and are in the process of trying to ban states from protecting consumers from wrongdoing as well (you know, for freedom or whatever). With neither competition nor even tepid meaningful oversight in place, the kind of bad behavior we've long seen from Comcast appears poised to only get worse.

At the same time, top lobbyists for the telecom industry continue to insist it's Silicon Valley giants that are in need of massive regulation. You're to ignore, of course, that these calls are coming just as giants like Verizon, AT&T, and Comcast try to pivot more fully from broadband into online video and advertising, in direct competition with the companies' they're calling to have heavily regulated. Former FCC boss Mike Powell, now the cable industry's top lobbyist over at the NCTA, has been leading this charge for much of the last year or two.

Powell was back last week at an industry event insisting once again that government needs to step in and start heavily regulating the companies Powell's clients are trying to compete with:

"I think there is a fundamental underappreciation in policy circles about the extraordinary power of the platforms and the data that rides on these companies and value of that information both as a competitive advantage as a platform and the potential dangers to consumers. “That has always been a naive concept and one that I think government was entirely inattentive to for too long, only to wake up in 2018 to realize there are some consequences that are not necessarily affirmative."

Powell's of course trying to play up Silicon Valley's admitted and obvious naivete as it pertains to aiding the amplification of propaganda and racist drivel. But at the same time, of course, he's happy to ignore all of the obvious problems caused by his own sector's growing competition issues, which Powell will be happy to tell you don't exist. In fact back in March Powell gave a very similar speech during which he effectively accused Silicon Valley of most of the things the telecom sector has been doing for years:

"Our governmental authorities need to get a handle on what kind of market power and harm flow from companies that have an unassailable hold on large pools of big data, which serve as barriers to entry, allowing them to dominate industries throughout the economy. For years, big tech companies have been extinguishing competitive threats by buying or crushing promising new technologies just as they were emerging. They dominate their core business, and rarely have to foreclose competition by buying their peers. Competition policy must scrutinize more rigorously deals that allow dominant platforms to kill competitive technologies in the cradle."

While it's obvious that Silicon Valley has plenty of problems that need addressing, listening to Powell's advice (read: Comcast's advice) on these subjects is like getting fire safety advice from a serial arsonist. But for whatever reason it's advice that's clearly resonating in the Trump administration, which pretty consistently has called for antitrust inquiries into major Silicon Valley giants while neutering most meaningful consumer protections (from privacy to net neutrality) governing some of the most clearly anti-competitive and unpopular companies in all of American industry.

Filed Under: cable, competition, lobbying, michael powell, regulations, silicon valley
Companies: at&t, comcast, facebook, google, verizon

New Bill Tries To Ban Obnoxious Hidden Fees On Broadband, TV

from the ill-communication dept

For years we've talked about how the broadband and cable industry has perfected the use of utterly bogus fees to jack up subscriber bills, a dash of financial creativity it adopted from the banking and airline industries. Countless cable and broadband companies tack on a myriad of completely bogus fees below the line, letting them advertise one rate -- then sock you with a higher rate once your bill actually arrives. These companies will then brag repeatedly about how they haven't raised rates yet this year, when that's almost never actually the case.

Despite this gamesmanship occurring for the better part of two decades, nobody ever seems particularly interested in doing much about it. The government tends to see this as little more than creative financing, and when efforts to rein in this bad behavior (which is really false advertising) do pop up, they tend to go nowhere, given this industry's immense lobbying power.

The latest case in point: US Rep. Anna Eshoo last week quietly introduced a bill that would require broadband and cable TV providers to include all charges in their advertised price. Eshoo explains the proposal as such in her announcement:

"Customers deserve to know exactly what they’re paying for when it comes to monthly cable and Internet service bills. Today, they’re sold a service for one price, only to be blindsided by higher bills at the end of the month from tacked on ‘service’ or ‘administrative’ fees,” Rep. Eshoo said. “These ‘below-the-line’ fees add up to hundreds of millions of dollars each year for cable and Internet service providers at the expense of consumers who have little to no option than to pay up. The TRUE Fees Act is commonsense legislation that brings transparency to consumers and empowers them when it comes to phone, cable and Internet fees."

Of course this bill is never going to pass this current Congressional body, which tends to go out of its way to protect these companies from anything even vaguely resembling accountability. The industry is likely to pull out all the stops, given the billions that are made annually from such bogus fees, and because the bill also prohibits forced arbitration clauses when cable TV or broadband providers make billing mistakes.

Again, this problem is rampant. CenturyLink has been charging its broadband customers an "internet cost recovery fee," which the company's website insists "helps defray costs associated with building and maintaining CenturyLink's High-Speed Internet broadband network" (that's what your full bill is supposed to be for). Comcast and other cable companies have similarly begun charging users a "broadcast TV fee," which simply takes a portion of the costs of programming, and hides it below the line. The names differ but the goal's the same: falsely advertise one rate, then charge consumers a higher price.

And again, efforts to do something about it always get killed thanks to industry lobbying and corruption. The FCC tried to at least mandate transparency as part of its now-dead 2015 net neutrality rules, which current FCC boss Ajit Pai dismantled for, you know, freedom or whatever. Of course you wouldn't need legislation like this if there were more competition in the telecom sector letting consumers vote with their wallets, but given Pai and other industry BFFs don't want to fix that specific problem either, being quietly, covertly ripped off will remain the law of the land for the foreseeable future.

Filed Under: anna eshoo, broadband, cable, hidden fees, pricing, truth in advertising, tv

Cable Companies Warn In Court That AT&T Time Warner Merger Will Be Absolutely Terrible For Competition And Consumers

from the Synergies,-yo dept

AT&T and the Department of Justice are ramping up their legal arguments in court as the DOJ tries to block the company's $86 billion acquisition of Time Warner. While some question the DOJ's real motives in the case (Trump ally Rupert Murdoch has been lobbying against the deal for competitive reasons for a year), consumer advocates agree that the deal will be horrible for consumers and competitors alike. AT&T already has a long, epic history of anti-consumer behavior, and critics charge the greater leverage will only let AT&T jack up licensing costs for competitors trying to compete with AT&T's own streaming services.

To glean support for its unpopular merger, AT&T offered a special deal to 1,000 of its competitors. According to AT&T's proposal, if competitors agreed to support the merger, the company promised send any price disputes with other cable companies to an outside arbitration process. Most competitors were pretty clearly not impressed:

"But thus far, only 2 percent of AT&T's rivals have expressed support for that plan, according to lawyers for both sides. The revelation came as AT&T and the Department of Justice faced off in court Tuesday, the second day of a trial whose consequences will reverberate across the economy. Of the 1,000 letters sent by AT&T to competing TV providers in November notifying them of the proposal, just 20 received a positive response, according to company and government lawyers."

Many of those same competitors have been called to testify against the merger on behalf of the DOJ, and their comments this week were not what you'd call positive. Dish and its subsidiary Sling TV, for example, were quick to argue that AT&T simply has no incentive to offer reasonable licensing terms to streaming competitors like Sling once the deal's done:

If the merger goes through, Time Warner’s incentives change, according to Schlichting. It could demand higher rates or onerous terms, such as requiring Sling to buy more channels, and would be less likely to compromise, he said. Either Dish’s costs would go up, or if there’s no agreement and Turner channels “go dark,” the company would lose subscribers who would likely switch to DirecTV or its DirecTV Now online service, Schlichting argued. Gaining subscribers would be more lucrative for AT&T than programming fees, he said.

“I just don’t see them having any motivation to move” to get to a deal, he said of Time Warner.

Cable competitor Cox Communications had similar words of warning, noting that AT&T's promise for outside arbitration was a "little bit of gamesmanship," and that losing access to needed content soon to be owned by AT&T could "significantly impact the viability of our business model." DOJ lawyers have warned that if the AT&T Time Warner deal is allowed to proceed, consumer bills could skyrocket to the tune of $436 million annually. Tim Wu, the Columbia law professor who coined the term net neutrality, put things rather succinctly in a New York Times piece this week:

"The (DOJ $436 estimate underestimates) the full costs of this merger to the American public. What we really have here is a brazen effort to prolong the life of a dying business model — “full-service” pay TV — by making “cord-cutting” more expensive, and thereby strangling a revolution in internet television that remains in its toddlerhood. Even worse, greenlighting the deal could set off a domino effect."

While some of these potential pitfalls can be stymied by conditions, meaningful conditions haven't been a strong suit for either party of U.S. governance. More often than not, the companies merging volunteer their own conditions routinely made up of "goals" they would have accomplished anyway. While politicians pretend to be holding these companies' feet to the fire for political brownie points, enforcement is routinely non-existent. As a result, merged companies (especially in the traditionally regulatory capture protected cable and broadband industries) still somehow fail to adhere to them.

Years go by, everybody forgets, the harms of such vertical integration are either ignored or downplayed; rinse wash and repeat. Of course given that AT&T is on the cusp of successfully killing net neutrality, the end result of this merger could prove extra problematic. AT&T has been given the green light for an ocean of "creative" anti-competitive behaviors that could make life particularly difficult for streaming competitors, whether that comes in the form of zero rating AT&T's own content (while still counting competitor's traffic against AT&T caps), or by simply prioritizing the content of AT&T or its deepest-pocketed allies.

In short, the deal is likely to jack up the costs for competitors (which get passed on to you) at the same time we remove valuable safeguards protecting the health of the internet and the ability to compete on a semi-level playing field. All so a company with a long, long history of behaving badly can have more power over multiple markets. What could possibly go wrong?

Filed Under: antitrust, cable, competition, merger, tv
Companies: at&t, cox, dish, time warner

The Cable Industry Is Quietly Securing A Massive Monopoly Over American Broadband

from the nobody-is-paying-attention dept

Cable providers like Comcast and Charter continue to quietly secure a growing monopoly over American broadband. A new report by Leichtman Research notes that the nation's biggest cable companies added a whopping 83% of all net broadband subscribers last quarter. All told, the nation's top cable companies (predominately Charter Spectrum and Comcast) added 2.7 million broadband subscribers in 2017, while the nation's telcos (AT&T, Verizon, CenturyLink, Frontier) saw a net loss of 625,000 subscribers last year, slightly worse than the 600,000 subscriber net loss they witness in 2016.

A pretty obvious pattern begins to emerge from Leichtman's data, and it's one of total and absolute cable industry dominance:

"The top broadband providers in the US added nearly 4.8 million net broadband subscribers over the past two years," said Bruce Leichtman, president and principal analyst for Leichtman Research Group, Inc. "The top cable companies accounted for 130% of the net broadband additions in 2017, following 122% of the net adds in 2016."

Oddly Leichtman can't be bothered to explain why the cable industry has become so dominant: a total refusal by the nation's phone companies to upgrade their networks at any real scale. Verizon years ago decided that residential broadband wasn't profitable enough quickly enough, so it froze its FiOS fiber deployments to instead focus on flinging video advertisements at Millennials.

You'll note from the chart above that the only telcos still adding subscribers are those that are actually tryiing to upgrade to fiber to the home (AT&T, Cincinnati Bell). Even then, while AT&T is upgrading some areas to fiber, actual availability remains spotty as the company largely focuses on developments and college campuses where costs are minimal. There's still millions of customers in AT&T territories stuck on DSL straight out of 2003, and they won't be getting upgraded anytime soon.

Other American telcos, like Frontier, Windstream and Centurylink, have effectively refused to upgrade aging DSL lines at any real scale, meaning they're incapable of even offering the FCC's base definition of broadband (25 Mbps down, 3 Mbps up) across huge swaths of America. Frontier in particular has been a bit of a shitshow if you've followed the often comic corruption and cronyism they've fostered in states like West Virginia. Other telcos (like CenturyLink) now don't see residential broadband as worth their time, so they've shifted much of their focus to enterprise services or the acquisition of transit operators like Level 3.

The result is a massive gap between the broadband haves and the broadband have nots, especially in rural markets and second and third tier cities these companies no longer deem worthy of upgrading (they will, however, back awful protectionist state laws banning towns and cities from serving themselves, even when no incumbent ISP wants to).

This is all wonderful news for natural monopolies like Comcast, who now face less competitive pressure than ever. That means a reduced incentive to lower prices or shore up what's widely considered some of the worst customer service in any industry in America. It also opens the door wider to their dream of inundating American consumers with arbitrary and unnecessary usage caps, which not only drive up the cost of broadband service, but make shifting to streaming cable alternatives more costly and cumbersome.

While many people like to argue that wireless (especially fifth generation, or 5G) will come in and save us all with an additional layer of competition, that ignores the fact that wireless backhaul services remain dominated by just a few monopolies as well, ensuring competition there too remains tepid and often theatrical in nature. And with many cable providers now striking bundling partnerships with wireless carriers, the incentive to actually compete with one another remains notably muted, as nobody in the sector wants an actual price war.

This of course is all occurring while the Trump administration attempts to gut most meaningful oversight of the uncompetitive broadband sector, meaning neither competition nor adult regulatory supervision will be forcing improvement any time soon. With the death of net neutrality and broadband privacy protections opening the door to even more anti-competitive behavior than we've grown accustomed to, what could possibly go wrong?

Filed Under: broadband, cable, competition, monopoly
Companies: charter, comcast

Ten Years Later, Cable Industry Finally Realizes More Ads Is Not The Solution To Cord Cutting

from the who-knew? dept

For years we've noted how the traditional cable TV industry is slowly-but-surely bleeding customers tired of paying an arm and a leg for bloated bundles of often terrible programming. And for just as long we've documented how far too many cable and broadcast executives are hell bent on doubling down on all of the bad behaviors that cause these defections in the first place. That has ranged from knee jerk price hikes in the face of growing streaming competition, to efforts to stuff more ads into every viewing hour, whether by editing down programs or speeding them up to ensure maximum commercial load.

The ugly truth most cable and broadcasting executives can't face is that the era of the sacred cable TV cash cow is over. Television simply isn't going to be as profitable in the wake of real competition and the more flexible, cheaper pay TV alternatives that competition is providing. And while countless industry executives still somehow think this is a fad they can wait out, there's growing evidence that at least a few industry executives are finally getting the message.

Fox executives, for example, last week signaled that they intend to dramatically lower the ad load to two minutes an hour across their networks by 2020 (it's currently 13 minutes for broadcast networks and 16 minutes for cable):

"The two minutes per hour is a real target for Fox, and also our challenge for the industry,” said Ed Davis, chief product officer for ad sales at Fox Networks Group, in an email. “Creating a sustainable model for ad-supported storytelling will require us all to move."

By "move," Davis means "actually compete and adapt," which should be a no brainer after watching ESPN lose ten million audience members in just the last few years. The old model of hammering customers with as many ads as they can stomach (and then some) while also charging massive subscription fees is finished. That's something even Comcast NBC Universal execs seem to realize as they also aim to cut ad load during prime time shows by 10% and the number of ads during commercial breaks by 20%:

"The industry knows that television is already the most effective advertising medium there is, but we need to make the experience better for viewers,” said Linda Yaccarino, chairman of advertising and client partnerships at NBCUniversal, in the statement. “We’re reimagining the advertising experience for consumers, marketers, and the entire industry."

It can't be understated how hard it was for the industry to come to the realization that perhaps it needed to annoy its paying customers less and compete a little more. Many of these same executives have spent the better part of the last decade either ignoring or downplaying the cord cutting threat, many arguing it was just a fad that would end once Millennials began procreating more (that didn't happen). Combined with the rise of more streamlined and expensive alternatives (Dish, Sling TV, AT&T's DirecTV Now, etc.), there's some real signs of evolutionary traction in the stubborn sector.

That said, there's still plenty of opportunities for these companies to double down on bad behavior on other fronts. As TV becomes less of a money maker, many companies have just started jacking up the price of broadband (via either usage caps and overage fees or obnoxious hidden fees), given there's no competitive repercussion. And with the looming death of net neutrality, the use of anti-competitive tactics to jack up your TV/Phone/broadband bill in other "creative" ways is going to grow as these companies seek out their pound of flesh elsewhere.

Filed Under: ads, cable, cord cutting

The Standalone Streaming Service HBO Didn't Want To Offer Now Has 5 Million Users

from the innovation-trumps-math dept

You might recall that just a few years ago, HBO had to be dragged kicking and screaming into the modern era. For years the company refused to offer a standalone streaming TV service, worried that it would jeopardize the company's cozy promotional relationship with existing cable providers (who often all but give away the channel in promotions). As recently as 2013 Time Warner CEO Jeff Bewkes was claiming that such an offering would make "no economic sense."

Why? Bewkes was worried that offering a standalone option would upset cable partners. At the time, those partners were already offering an HBO streaming app named HBO Go, but only if you signed up for traditional TV. This was art of the industry's walled garden "TV Everywhere" initiative, a misguided attempt at stopping cord cutters by only giving them innovative streaming services -- if they signed up for bloated, traditional television bundles. Bewkes was clearly worried at the time that being too damn innovative would upset industry executives and skew the company's balance sheets:

"And we would do it if we thought it was in our economic best interest. At this point we don’t think it makes sense. We don’t think the target market is sufficiently large to be attractive at this point. So what we’re doing, and we think this is working pretty well — we’re working with the [pay TV operators] to increase the penetration of HBO Go in a mutually beneficial way."

At the time we noted how HBO was letting fear trump innovation. The company was focusing so much on avoiding upsetting cable operators and worrying over the initial impact on the traditional cable TV cash cow, that it forgot that innovation often trumps the math. In reality, the math Bewkes was concerned about were performance and metrics built on a different, changing market that was on the way out. This kind of hesitation was initially great news for Netflix, whose CEO saw all of this coming long before HBO executives did:

"The goal," says Hastings, "is to become HBO faster than HBO can become us."

All the while, HBO and Time Warner's timidity and failure to listen to consumers resulted in many of its shows breaking piracy records. And while HBO couldn't be bothered to offer a legitimate standalone streaming alternative to piracy, it did spend a lot of time and money trying to derail these efforts, including "poisoning" seeded copies of HBO programs on BitTorrent and sending out oodles of nastygrams to ISPs. Other HBO executives, meanwhile, seemed to share the cable industry mindset that this whole cord cutting thing was just a temporary phenomenon that would blow over.

HBO finally did buckle to offering a standalone streaming service (dubbed HBO Now) in 2014. Just a few years later and the service has just breached 5 million subscribers. And oh, the numbers HBO was so worried about are looking solid too, with HBO Now generating $19 million in revenues for the two months it aired of Game of Thrones Season 7. In this case it all worked out well for HBO, but the company could have enjoyed a much healthier head start if it company executives hadn't let fear trump natural evolution.

Filed Under: a la carte, cable, hbo, ott, streaming, streaming tv, tv
Companies: hbo

Those Annoying Cable Channel Blackouts Are Only Going To Get Worse In 2018

from the more-money-for-the-same-substandard-service dept

The last few years, cable TV customers have faced a growing number of obnoxious carriage fee blackouts, which occur when broadcasters and cable operators can't agree on new programming contracts. Such feuds usually go something like this: a broadcaster will demand a fairly obnoxious price hike for the same content, to which the cable provider (already awash in complaints about higher rates) will balk. Instead of negotiating their differences like adults, this content is subsequently blacked out for paying customers to force a settlement. Customers never see refunds for the inconvenience of being used as props.

For weeks, consumers are bombarded with PR missives, new websites and on-screen tickers all trying to amplify public outrage and drive greater pressure for one side or the other to buckle. After a while, the two sides strike a new confidential deal, and the higher rates are then quickly passed on to consumers. In a letter to lawmakers last year, Dish Network argued that consumers have faced 750 such broadcaster blackouts since 2010, with the retransmission consent fees that broadcasters demand growing a whopping 27,400% between 2005 and 2016.

It's an idiotic cycle of dysfunction that's unsustainable and only acts to drive consumers to alternative video options (like piracy). The fact that these costs are only driving users away from the traditional pay TV ecosystem is irrelevant to many cable and broadcast executives, who seem inclined to believe that they'll be able to nurse this dying cash cow in perpetuity.

The annoying phenomenon shows no sign of slowing down in 2018. Frontier customers in Seattle this week lost access to CBS after the company says it was told it needed to pay 80% more money for the same exact content:

"Cox’s bullying and heavy-handed blackout tactics hurt consumers,” said Steve Ward, Frontier Senior Vice President Video Technology and Content. "Their demands for an outrageous price increase would have to be passed on to customers in the form of higher monthly service rates. It’s time for Cox to agree to a fair and reasonable solution."

Meanwhile, Suddenlink and Optimum (formerly Cablevision) customers woke up to the new year with the news that they'd no longer be able to access Starz after their cable provider and the broadcaster failed to strike a new deal. For now, customers of those cable providers are being told that if they want access to Starz content, they'll need to pay extra to access it via Starz online streaming platform:

"Given that Starz is available to all consumers directly through Starz' own over-the-top streaming service, we don't believe it makes sense to charge all of our customers for Starz programming, particularly when their viewership is declining and the majority of our customers don't watch Starz," Altice said in its statement. "We believe it is in the best interest of all our customers to replace Starz and StarzEncore programming with alternative entertainment channels that will provide a robust content experience at a great value."

Of course with regulatory capture and the death of net neutrality, it's likely that this is one of several problems in the telecom and cable world that will only get worse before it gets better. Regulators from both parties were already inclined to dismiss this problem as just "boys being boys," wary of getting involved in what they believe are simple business disputes. And while there have been occasional talks about banning these blackouts as an act of bad-faith negotiations, nothing much ever appears to come of them. The hope was that the threat of regulatory intervention would be enough.

And while it's certainly true that this behavior will only drive customers to new streaming alternatives, broadcasters still dictate licensing for (or outright own) those services as well, meaning it's only a matter of time before this problem expands to hamper access to online content. There have been several different times where broadcasters blocked user access to their online services as well (usually by ISP IP range); behavior that only ceased due to companies being worried that they might run afoul of net neutrality (since many ISPs are broadcasters, like Comcast) or adult regulatory supervision.

With both of those concepts on the chopping block, expect carriage fee bickering (and the subsequent blackouts) to get both worse and more sophisticated in the new year.

Filed Under: blackouts, broadcasters, cable, competition, tv

Comcast & The Cable Industry Greets The New Year With A Flurry Of Price Increases

from the we-don't-have-to-compete,-we're-the-cable-and-broadband-industry dept

What do you do when you're faced by an existential, evolutionary shift that threatens your entire, overly-comfortable industry? Why you raise rates, of course! Comcast is one of six cable providers who have informed customers that they've raised the rates for the new year, despite the record-setting shift toward cord cutting during 2017. Everything Comcast offers is seeing price hikes of some kind, ranging from increases in the company's traditional channel bundles, a price increase for Comcast's standalone streaming platform, and even the fee charged for renting a modem (which is now $11 per month).

Comcast's even jacking up the obnoxious fees it's currently facing several lawsuits over. That includes the "Broadcast TV fee," which is simply a part of the cost of doing business (paying for content) buried below the line, letting Comcast advertise one rate -- then sock consumers with another price entirely once the bill comes due. That fee, which Comcast has insisted is just its way of "being transparent," was just $1.50 when introduced in 2013 -- and will be bumped to $8 per month in the new year:

With cord cutting setting records, why doesn't Comcast feel the need to actually adapt to changing markets? It doesn't have to. The company is securing a bigger monopoly over broadband in a growing number of markets thanks to telcos that no longer think it's worth it to upgrade aging DSL lines.

That means there are more markets than ever where if you want a decent broadband connection that meets the FCC's 25 Mbps definition of broadband, Comcast is your only option. As a result, Comcast knows that it can simply jack up the cost of broadband as well to counter any TV revenue losses without being punished by the pesky nuisance of competition. This, of course, includes Comcast's implementation of arbitrary and unnecessary usage caps and overage fees, which have proven a handy weapon in hamstringing streaming alternatives. It doesn't take an economics degree to know that when you're the only provider in a market for a product that many feel is a necessity, that prices will rise quickly.

Publicly, Comcast and other cable providers will lay the blame squarely at the feet of broadcasters, who consistently demand higher and higher rates for the same product. But that ignores the fact that Comcast is a broadcaster (NBC Universal, several regional sports networks), and is jacking up pricing on numerous services, hardware rental costs, and other products that have nothing to do with the cost of programming.

Granted, with the Trump administration laying the groundwork for gutting federal and state oversight of an already quite dysfunctional and broken cable and broadband market, you can expect a lot more where this came from over the next few years.

Filed Under: cable, competition, fcc, fees, internet access, price hikes
Companies: comcast

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

AT&T Spent Hundreds Of Billions On Mergers And All It Got Was A Big Pile Of Cord Cutters

from the synergies,-yo dept

Over the last few years AT&T and Verizon have been desperately trying to pivot from stodgy, protectionist old telcos -- to sexy new Millennial media juggernauts. And while this pivot attempt has been notably expensive, the net result has been somewhat underwhelming. Verizon, for example, spent billions to gobble up AOL and Yahoo, but its lack of savvy in the space has so far culminated in a privacy scandal, a major hacking scandal, a quickly shuttered website where reporters couldn't write about controversial subjects, and a fairly shitty Millennial streaming service even Verizon's own media partners have called a "dud."

AT&T's efforts have been notably more expensive, but just as underwhelming. The company first decided to shell out $70 billion for a satellite TV provider (DirecTV) on the eve of the cord cutting revolution. And the company's putting the finishing touches on shelling out another $89 billion for Time Warner in a quest to gain broader media and advertising relevance. That was paired with the launch of a new streaming service, DirecTV Now, which the company hoped would help it beat back the tide of cord cutting.

But things aren't really working out quite like AT&T planned. The company's stock took a beating last week after it acknowledged it would be facing a 390,000 reduction in pay TV subscribers this quarter. AT&T, in an 8K filing with the SEC, tried to partially blame hurricanes for the mass exodus occurring at the company:

"The video net losses were driven by heightened competition in traditional pay TV markets and over-the-top services, hurricanes and our stricter credit standards. The decline of traditional video subscribers negatively impacts our Entertainment Group revenues and margins, resulting in an adjusted consolidated operating income margin that will be essentially flat versus the year-ago third quarter."

Unmentioned is that AT&T also lost 351,000 pay TV subscribers the quarter before, as the company gets hit harder by cord cutting than most pay TV providers. One of the real reasons for these departures? While AT&T was willing to spend hundreds of billions on megamergers, it has spent the better part of the last decade (especially in places where poor people live) neglecting necessary network upgrades. As a result, in countless markets Verizon & AT&T users on last-generation DSL lines are switching to cable providers for faster broadband, and bundling cable TV service that's priced cheaper than broadband alone.

In short AT&T neglected its core business in order to daydream about matching Google or Facebook's ad revenues, but (so far) lacks the core competency to jump the gap from telecom to Silicon Valley-esque Millennial marketing. Both AT&T and Verizon have spent so many years operating as government-pampered protected duopolies, they believed they could pivot on a dime, ignoring that years of regulatory capture left them with only a few key skills: charging too much for too little, lobbying to thwart competition and bullshit.

To its credit, AT&T was at least willing to take a risk and launch DirecTV Now, a streaming alternative. And while the company did manage to add 300,000 streaming customers on the quarter, those users pay a fraction of what traditional cable TV customers do - and AT&T still saw a net loss of 90,000 pay TV users. Still, most other incumbent pay TV providers have responded to the cord cutting threat by raising cable TV rates (ingenious!) or by pretending to keep pace via the launch of streaming alternatives that are intentionally designed to be underwhelming, lest they cannibalize more lucrative legacy customers.

One of the core problems here is that Wall Street isn't satisfied with ISPs simply doing a good job and making a reasonable profit. The relentless, myopic need for quarterly improvements has companies like AT&T and Verizon trying to use megamergers and vertical integration to magically elbow their way into markets it's unclear they lack the competency for. And only after mindlessly cheering these deals do some Wall Street analysts realize some of these arrangements don't even make coherent business sense given the current market climate:

"Though the company partly blamed recent hurricanes for these trends, MoffettNathanson analyst Craig Moffett notes that weather was only the third of four reasons that AT&T listed. “Heightened competition in traditional pay TV markets and over-the-top services” came first. In other words: cord cutting. “It is becoming increasingly clear that the wheels are falling off of satellite TV,” he writes, meaning that Dish Network might announce similar results."

In an ideal world, AT&T would realize its core competencies (building and maintaining wireless and fixed-line networks) should take priority. That $70 billion spent on buying a doomed satellite TV company could have gone a long way in shoring up broadband service that in many regions still doesn't even meet the FCC's base 25 Mbps definition. But in the world we live in that's simply not sexy enough for Wall Street, and the need to grow simply for growth's sake will likely result in AT&T making even more expensive deals of dubious net benefit down the line. Next up: Waffle House?

Filed Under: broadband, cable, competition, cord cutting, dsl, mergers, satellite, tv, video
Companies: at&t, directv