In Cable, The Rich Get Richer

Daniel Frankel, over at FierceCable, noted an interesting pattern in the Q1 data from cable operators this week. All of the vaunted rebound in video subscribers during the period was concentrated among top-tier providers.

Comcast, Time Warner Cable and Charter collectively added 89,000 video subs.

Mid-size operators, however, all experienced continued erosion among video subscribers. Cablevision lost 15,000; Cable One lost 13,000; and Mediacom lost 2,000 across its two operating units.

money_bagsFirst-quarter data on smaller providers, which is compiled by SNL Kagan, is not yet available. But it would be surprising if the pattern there were different from that of the mid-size providers.

In both cases, operators are increasingly making a de facto, if not quite formal, decision not to fight very hard to attract or retain video subscribers because of the high programming costs that come with them and to focus their business primarily on their broadband service.

“The lower end of the market can no longer afford the big bundle; the number of disruptive OTT technologies and vendors are now multiplying rapidly; and the millennial generation has very limited interest in traditional TV viewing,” Cable One CEO Thomas Might told Fierce. “These patterns will inevitably bring an end to the ubiquitous fat bundle, but only slowly and painfully.”

Slowly and painfully perhaps, but the data also suggest it could happen at very different speeds in different markets, depending on the size of the local providers’ national footprint. Read More »

The FCC Plays For Time in Charter-TWC Merger

The Federal Communications Commission and the U.S. Justice Department this week each signaled their intent to approve Charter Communication’s $65 billion acquisitions of Time Warner Cable and Brighthouse Networks, subject to several conditions.

The mergers will create the second largest cable-TV provider in the country, with 17.4 million subscribers, behind Comcast’s 22 million. Strikingly, though, none of the conditions attached by the FCC and DOJ have to do with the provision of cable-TV service. Instead, they deal almost entirely with promoting over-the-top video as a viable competitor to cable.

FCC_headquartersUnder the deal with the FCC, the merged company will be prohibited from imposing usage-based pricing or data caps on its 19.4 million broadband subscribers, a tactic many cable internet providers have turned to lately to discourage video cord-cutting by indirectly raising the cost of using OTT services like Netflix.

Charter will also be prohibited from charging Netflix and other OTT providers with interconnection fees for delivering traffic to Charter broadband subscribers.

Under the agreement with the Justice Department, Charter will be barred from inserting or enforcing most-favored nation (MFN) clauses in its carriage agreements with programmers — a tactic many pay-TV providers, particularly TWC, have used to discourage programmers from making their content available on OTT platforms. Read More »

Cable’s Q4 Bundle of Joy

Comcast, Time Warner Cable and Charter all reported strong video subscriber growth in the fourth quarter of 2015, adding 172,000 between them. That was a far cry from a year earlier, when they collectively lost 35,000 video subs.

The results led some to speculate that the worst days of cord-cutting are now behind the industry and that cord-nevers may be starting to change their minds about paying for TV.

Maybe, although the pay-TV industry as a whole continues to lose subscribers, at a rate of about 1 percent a year, according to an estimate by comcast_vanMoffettNathanson analyst Craig Moffett. Most of that shrinkage in the fourth quarter came from telco and satellite providers, as those two businesses undergo restructurings.

Between them, Verizon’s FiOS TV service and the combined AT&T/DirecTV lost 6,000 video subscribers in the quarter, as Verizon shifted its video focus to its new mobile streaming service Go90 while AT&T shed U-Verse subscribers as it prepared to swallow DirecTV.

In Comcast’s Q4 earnings call, CEO Brian Roberts acknowledged that some of cable’s gain last year probably reflected a market share shift, reversing several years in which cable was losing share to satellite and telco. Read More »

The FCC’s Imperfect Path To Increased Video Competition

The conditions the Federal Communications Commission has attached to its approval of AT&T’s merger with DirecTV are being met with a predictably mixed response. Some groups, such as Comptel, a Washington-based lobbying group representing Netflix, Amazon, Cogent Communications, Level 3 and other network operators and service providers, praised the FCC for requiring AT&T to disclose details of its network interconnection deals. Others, such as Free Press, blasted the conditions for not going “nearly far enough” to address the problem of pay-TV consolidation.

Here’s what we know, from a statement issued Wednesday by FCC chairman Tom Wheeler:

An order recommending that the AT&T/DirecTV transaction be approved with conditions has circulated to the Commissioners. The proposed order outlines Federal Communications Commission (FCC) Chairman Tom Wheeler gestures at the FCC Net Neutrality hearinga number of conditions that will directly benefit consumers by bringing more competition to the broadband marketplace. If the conditions are approved by my colleagues, 12.5 million customer locations will have access to a competitive high-speed fiber connection. This additional build-out is about 10 times the size of AT&T’s current fiber-to-the-premise deployment, increases the entire nation’s residential fiber build by more than 40 percent, and more than triples the number of metropolitan areas AT&T has announced plans to serve.

In addition, the conditions will build on the Open Internet Order already in effect, addressing two merger-specific issues. First, in order to prevent discrimination against online video competition, AT&T will not be permitted to exclude affiliated video services and content from data caps on its fixed broadband connections. Second, in order to bring greater transparency to interconnection practices, the company will be required to submit all completed interconnection agreements to the Commission, along with regular reports on network performance.

Importantly, we will require an independent officer to help ensure compliance with these and other proposed conditions. These strong measures will protect consumers, expand high-speed broadband availability, and increase competition.

Read More »

Netflix Flexes Its Muscles

Having played a pivotal role in persuading the Federal Communications Commission and the Department of Justice to reject Comcast’s attempted merger with Time Warner Cable, Netflix has seemingly done an about face and given its blessing to Charter Communications’ bid to acquire TWC. In a letter to the FCC dated July 15, VP of global public policy Christopher D. Libertelli said, “Netflix  supports the proposed Charter – Time Warner Cable transaction if it incorporates the merger condition proposed by Charter.”

reed_hastingsKey to the apparent change of heart was precisely that “merger condition proposed by Charter,” specifically a commitment by Charter to offer settlement-free peering with edge providers like Netflix across its entire expanded footprint.

“Charter’s new peering policy is a welcome and significant departure from the efforts of some ISPs to collect access tolls on the Internet,” Libertelli wrote. “Charter’s policy will promote efficient interconnection with on line content providers and with the transit and content delivery services that smaller online content providers rely on to reach their consumers. Charter’s endorsement of the policy as an enforceable merger condition will ensure that consumers will receive the fast connection speeds they expect.”

Charter outlined the new policy in a separate filing with the FCC, also dated July 15.

Comcast’s successful effort to impose interconnection fees on Netflix was the main reason Netflix aggressively opposed Comcast’s bid for TWC. Peering agreements were also the main focus of Netflix’s lobbying in support of net neutrality, urging the FCC to require open interconnection policies as part of its Open Internet order (in the end the FCC did not include specific rules for interconnection arrangements in its order, but set up a process for reviewing complaints against ISPs brought by consumers or edge providers). Read More »

Comcast’s Bid for Time Warner Cable Gets Bundled Away

In his statement on Comcast’s decision to drop its $45 billion bid for Time Warner Cable, Federal Communications Commission chairman Tom Wheeler made it clear his agency was concerned about the merger’s potential impact on the development of the over-the-top video market:

Today, an online video market is emerging that offers new business models and greater consumer choice. The proposed merger would have posed an unacceptable risk to competition and innovation especially given the growing importance of high-speed broadband to online video and innovative new services.

nbc-comcastSo, too, was the U.S. Justice Department, according to a separate statement by Attorney General Eric Holder:

 This is a victory not only for the Department of Justice, but also for providers of content and streaming services who work to bring innovative products to consumers across America and around the world.

It was certainly a victory for content owners and providers, many of whom, such as Discovery and Netflix, had lobbied aggressively against the merger and cheered the deal’s collapse. But “content owners and providers” is a group that very much includes Comcast, by virtue of its owning NBC Universal, lending an unavoidable measure of irony to the outcome here. Read More »