Category Archives: The Industry

It’s Hard Being Number 3

Cell-TowerSprint might be the most interesting carrier in the market today in either the mobile or landline industry. They have done one of the biggest turnarounds ever in the telecom world. In 2008 Sprint was by far the least popular wireless carrier. They got really low marks in customer satisfaction surveys, far below the other three carriers. This was partly due to poor customer service, but also do to their launch of WiMax in 2008 that never worked as well as the LTE being launched by the other carriers.

But Sprint has turned it around. They had hired Dan Hesse as CEO in 2007 and Sprint now ranks equal to AT&T and Verizon in terms of customer satisfaction. This goes to show you that a big company can change their customer experience if they decide that it is a priority. I just wrote last week how Comcast has been at the bottom of customer service rankings for years and how they don’t seem to be concerned about it. But Sprint decided that poor customer service was holding them back and they fixed their many problems.

Sprint has also undertaken steps to leapfrog the other carriers in terms of data performance. Sprint spent a lot of money to buy Clearwire, mostly to get their spectrum. They plan to combine the 2.5 GHz spectrum they got from Clearwire with the 1.9 GHz LTE spectrum they bought in auctions to create significant data pipes. This will give them two separate 60 MHz blocks of spectrum that will perform well both close to a cell site and some distance away. They are shooting to have this all deployed by the second quarter of 2015, which will give them the ability to offer LTE speeds up to 150 Mbps download

Sprint also has been doing other interesting things. For instance, they had a promotion for most of 2013 that would give free service to any student who brought their own handset. This free service came with unlimited voice and texting and 1 GB of data. For only $10 a month a student could get unlimited data. One looks at that sort of plan and wonders how it could possibly benefit them to have a lot of customers that are not paying for service. But I think it’s a brilliant long-term strategy, and we don’t see a whole lot of long-term thinking in the carrier world that is measured by the earnings in the latest quarter. But think back a few decades when Apple was putting free, or nearly free computers in schools across the country. In doing so they raised whole generations of kids to like the Apple brand and this is part of the reason why they have exploded in popularity in recent years. Sprint is building the same brand name identity and loyalty of a whole new generation of cellular customers.

Sprint has also seriously been aggressively pursuing a merger with T-Mobile. They were told late last year by the feds that such a merger was probably going to be opposed. However, the current thinking in the industry is that if the government let’s Comcast buy Time Warner that it’s then going to be very hard to say no to a Sprint – T-Mobile merger. I think such a merged company could be powerful. Sprint has a vision that cellular data needs to be unlimited, or with very high caps in order to be relevant a decade from now. When you look at combining the spectrum and customer bases of the two companies, along with Sprint’s new focus on customer service you could have a true third competitor to AT&T and Verizon. Today neither Sprint nor T-Mobile can be considered as real rivals. T-Mobile has been buying customers at the bottom of the market using low-cost specials, and as good as Sprint is, they are just not in the same stratosphere as the big two.

Those Insane Programmers

MTVThere is currently a dispute going on between a programmer and a bunch of cable companies that illustrates the nearly insane greed in the cable industry. I say the greed is insane because it seems like the programmers want to hasten their own demise.

The programmer is Viacom and they own channels like MTV, Nickelodeon, Spike and Comedy Central. The dispute is with the National Cable Television Cooperative (NCTC) which represents 890 of the smaller cable companies in the country. That’s just about everybody who isn’t large.

The current contract between Viacom and NCTC expires on March 31. None of us know the exact numbers, but a NCTC spokesperson says that Viacom wants a rate increase that is 40 times the rate of inflation. That itself may be an inflated claim, but in 2012 Viacom asked for a 30% rate increase from DirectTV. When DirectTV refused to pay, Viacom pulled their channels off the air for DirectTV until the issue was settled.

And Viacom is still today asking for huge fee increases. If Viacom was the only programmer doing this we could say that they are extra greedy. But the fact is that all of the programmers are doing the same thing. Every programmer is increasing fees to cable systems at rates far above inflation. The cost to cable providers for programming has climbed over 7% per year for nearly a decade, and in recent years I know some systems that have seen increases over 10%. Cable companies have no choice but to pass these increases on to customers and so we keep seeing big rate increases year after year.

But we are now at a time when customers are getting tired of the price of big cable packages and when a significant percentage of customers are thinking about abandoning cable. To keep pushing these big increases make no market sense. Just do the math to see how insane this is. For a customer paying $50 per month today, these increases will increase their rates to $70 in five years and $98 in ten years. Somebody paying $70 today will see rates of $138 dollars in ten years.

This can’t be sustained. It seems as if programmers like Viacom are making the risky bet that people will not cut the cord and find an alternative to the big cable packages. But every one of my smaller cable clients is losing customers, and at a faster and faster pace. They hear the stories every day of people who are fed up with the big monthly bill and who decide that they can get by with rabbit ears, NetFlix and AmazonPrime.

I’ve heard the idea that once most people drop cable that all of the networks will just go a la carte and sell to people over the Internet. But that is naïve and there are only a small handful of channels that have enough appeal to survive in an a la carte world. It’s likely that people will pay a monthly fee to get ESPN or Disney and maybe even Comedy Central. But probably 90% of the channels on cable systems will die if the big cable model breaks.

So why are Viacom and the other programmers being so greedy? One can chalk part of it up to the large company mentality that all that matters is the earnings next quarter. But one can also blame amazing arrogance in that they believe that the people of the US will keep paying huge fees to watch them. Are there really that many households where Nick at Nite is so important to people that they will pay $100 monthly in order to watch it? As OTT programming gets better, I foresee a day in the not too distant future when customers will bail on cable companies in droves. And then the hubris of the programmers will be fully exposed. The programmers are pushing hard to speed up the day when they will fail. If that is not insane, what is?

Do the Big Companies Even Want to Get it Right?

020916-F-4728F-001The latest Consumer Reports rankings are out for telecom providers, and the results are much the same as in past years. There are many different groups that rate companies and we often hear of reports that put the cable companies at the bottom of all companies in terms of customer service.

But the Consumer Reports ranking is more comprehensive. It looks at a lot of factors such as the perceived value that customers see with the provide, reliability, speeds, and support both in the home and over the phone. And they compare all of the major telecom companies and don’t compare to other industries.

Not surprisingly, HughesNet and their satellite broadband ranks the lowest. I’ve never heard anybody talk nicely about their product since it’s slow, costly and also has a lot of latency and delays. Many people say it is barely better than dial-up. It will be interesting to see how satellite ranks now that Exede is in the market with a faster product. As I reported a few weeks ago, the issue with Exede is the low total data caps, but at least the 12 mbps download is a huge improvement.

Ranked next to satellite is MediaCom which always comes in dead last among cable and telcos. Ranked next at the bottom are the various DSL providers, with Frontier, Fairpoint, Windstream and AT&T DSL. For the most part the customers on these services have older DSL technology that is only delivering a few Mbps download speeds. There is faster DSL technology available today and better ways to deploy it by bringing the DSLAMs closer to customers, but the companies listed are for the most part not pumping much money into DSL. The exception is Frontier who has gotten a pile of federal subsidy money from the new USF fund to upgrade and expand its DSL footprint.

But right next to this old DSL technology is Comcast, followed closely by Verizon DSL and then Time Warner. Verizon barely even advertises that it has DSL anymore and it is a surprise to see it more favorable with customers than Comcast.

At the top of the list and doing the best job are the smaller cable companies and fiber providers. At the top of the list are WOW and Wave (Astound) followed by Verizon FiOS.

It just amazes me to see these large companies like Comcast and Time Warner do so poorly with their customer service. They have been at the bottom of these kinds of rankings for well over a decade now and it’s obvious that they are willing to live with giving poor service. When you look at the rankings and see that Comcast is viewed by customers to be doing a worse job than Verizon and CenturyLink DSL you just have to shake your head.

It’s very obvious that they don’t care to become better because by spending some money they could do much better. Doing customer service well is not some unreachable mountain of a task. Thousands of companies do it well. If WOW and Astound can do it well, so can Comcast and Time Warner. It’s a matter of investing in the right systems, the right training and the right management of the process. Being big is not an excuse for being crappy, and if it is a valid excuse, then this alone ought to stop the Comcast / Time Warner merger.

I would think that the management of these companies would hate seeing themselves at the bottom of these lists. But they obviously like profits more than they hate doing a poor job. And that is what I don’t get. These companies have lost millions of customers due to dissatisfaction with their service and their best growth strategy is to lure back customers in their existing markets by doing a better job.

An Industry of Hype?

Bandwidth_thickAlmost every day I see somebody in this industry making a claim that makes wince a little bit. It might be vendors talking about gigabit speeds. It may be service providers talking about gigabit cities. And to some extent I get it. It’s a world driven by marketing and everybody competes first with hype. Those in the know quickly figure out the truth, but I guess what bothers me is that others don’t.

Let’s start with the equipment vendors. The country is pushing hard to get gigabit bandwidth into our schools. And since schools are already wired with coaxial cable, this led me to look at the technologies that are in use today that can deliver bandwidth over existing cable in schools. After all, what good is bringing a gigabit to a school if you can’t actually get it to the classroom? The various technologies including HPNA, MOCA and HomePlug all claim gigabit-capable speeds. Additionally, the new WiFi standard of 802.11ac promises gigabit and above speeds. Another upcoming technology is G.Fast that is promising to do gigabit speeds on copper.

But none of these technologies actually delivers a gigabit at the application layer, which is the usable speed of bandwidth that is available to an end user. Some of these technologies do provide a gigabit of theoretical data at the transport layer, but after accounting for the various overheads, noise, interference and other factors, the actual bandwidth is much slower than advertised. Additionally, the speeds they tout are the total bandwidth of the technology and those speeds need to be divided into an upstream and downstream component, further diluting the bandwidth.

At best of these various technologies today deliver maybe a total of 400 Mbps in total bandwidth, and a few of them are quite a bit slower than that. So it turns out that these gigabit technologies are not really a gigabit, or even half a gigabit. But a non-engineer would not know this by looking at how they are advertised.

We have the same thing going on by service providers. For years broadband providers have sold ‘up-to’ data speeds that they were never able to achieve. There is still a lot of that going on, particularly in smaller markets where the advertisements talk about the speeds in nearby urban areas and are far in excess of what can actually be achieved in small towns.

But the one that really gets me is the term gigabit cities. When I hear gigabit cities I picture a place that is building a network that will make a gigabit data product available to every home and business in the community. And there are almost no cities like that.

People think Google is bringing gigabit everywhere, but they aren’t. First, they only go to neighborhoods that guarantee a certain penetration rate for Google. And once there they don’t serve any apartment complexes or businesses. Google is basically cherry-picking residents willing to pay $70 per month for data. While laudable (and I wish I could get it), Google is not building gigabit cities.

There seems to be other cities announcing themselves as gigabit cities almost weekly. Some of them offer gigabit speeds to residents, but at very high prices as much as $250 per month. Most of these cities only supply gigabit speeds to schools and a handful of large businesses. Again, very laudable and I am happy to see anybody invest in fiber. But gigabit to the schools and factories does not make a gigabit city. It just makes fast schools and factories.

There are a small handful of places that really are gigabit communities. There are some small telcos, municipalities and cooperatives that are offering gigabit to everybody in their footprint. But this is really rare and for the most part these are small communities. Interestingly, the folks that actually do it don’t tout themselves and just quietly deliver fast speeds to customers. I’m starting to think that the ones who yell loudest are the least likely to actually be doing it. I hope somebody can prove me wrong about this.

What’s up with Cord Cutters?

Fatty_watching_himself_on_TVMorgan Stanley just released their fourth annual survey on the media, cable and satellite business. In thus survey they talked to 2,501 adults nationwide. In this survey they looked in detail about how people use media – what they watch and how they watch it.

The most interesting statistic to come out of the survey is that for the fourth straight year a significant percentage of people said they are going to cut the cord in the coming year. 10% of respondents said that they were definitely going to cut the cord and another 11% said that they would probably be cutting the cord. If these percentages were true, and 21% of the country was going to be cutting the cord, the cable industry would be in a major tailspin. This survey ought to be major headlines on every business page, right?

But it’s not, and that’s because there have been similar responses to this survey the last few years. In last year’s survey those same two percentages added to 17%. The prior year they added to 15%. But the cable companies did not experience cord cutting to anywhere even remotely close to those percentages in the last two years. Certainly there is cord cutting going on and the industry has certainly lost at least several million people due to this new trend.

But what this survey tells us is that people want to cut the cord. One full fifth of households with cable are clearly unhappy with the big bundles of channels, and eventually that is going to come home to roost with the cable industry. The other statistic that bears this out is that only 50% of the respondents in the survey actually like the big package bundles, a number that is dropping every year.

We’ve seen the same thing before with home telephones. For years people talked about getting rid of their home phone and yet it took a number of years for many people to do so. But eventually people will act on how they feel and the cable industry has a big problem brewing.

As you might expect, there is an age component to potential cord cutters. 30% of the people who said they would or might cut the cord are in the 18 – 29 year-old age bracket. And that percentage decreases as the age increases.

I find these results interesting because almost everybody I talk to is unhappy with what they pay for cable TV. Maybe that’s because most of those people I talk to are in the industry. But I know many cord cutters and I know that this is really happening. I would be a cord cutter myself, but Comcast made me take basic TV (20 or so channels) if I wanted to buy a cable modem faster than 12 Mbps. So I am officially a TV subscriber, even though I don’t own a TV and the cable box they gave me is gathering dust in the closet. There can’t be a lot of people with my same story and who are being coerced into buying cable and who then don’t even watch it. But this does show that perhaps the reported subscribers of the big cable companies are a bit inflated due to these kinds of policies.

The survey also showed that the OTT programmers are doing quite well. 30% of the households in the survey watch NetFlix, up over 5% from the last survey. 18% watch AmazonPrime, up 10% from the last survey. And while the free Hulu service lost about a percentage of viewers, its for-pay service Hulu Plus is up almost 5%.

I titled this blog ‘What’s up with Cord Cutters’, but perhaps a better title would be ‘What’s up with the Almost-Cord Cutters’? There are apparently a whole lot of people who are thinking of cutting the cord. Perhaps one year soon a large percentage of the number of people who say they are going to cut the cord will actually do it. And then the wheels start coming off the cable model.

A Little Bit Closer to OTT

TabletWe keep inching closer and closer to the day when customers will have a viable access to real time over-the-top programming. The first company to make any progress in this area was Aereo who is sending the network channels to people’s cellphones and tablets in major markets. But Aereo has an upcoming day in court and the US Supreme Court could put them out of business.

It’s not like there isn’t any programming available on the web, because there are mountains of old TV shows and movies available on NetFlix and AmazonPrime and the many other companies that have deals to put content on the web. And many customers of the major cable providers have TV anywhere where the cable company lets them watch some of the channels they subscribe to on remote devices.

But what is still missing, and what will finally give a lot of people the impetus to cut the cord is when they can get the programming they most want in real-time on devices other than televisions. I have largely cut the cord and watch the programming available on NetFlix and AmazonPrime. But I would be very happy if I could buy ESPN and the Big10 Network a la carte. And maybe some news network like CNN.

There were two announcements this past week that inch us closer to an OTT alternative. The CEO of Verizon Wireless, Lowell McAdam announced that he has had discussions with content providers about launching an OTT service for customers using the Verizon LTE network and also possibly for those using other broadband providers.

The second announcement came from Dish Networks who announced a major deal with Disney that would allow them to distribute Disney and ESPN wirelessly. The agreement was complex and also resolved a number of issued between Disney and Dish for satellite carriage. Last week I reported on the spectrum that Dish has been buying, and this announcement demonstrates that they have plans to use some of that spectrum to offer an OTT product.

When the Verizon CEO was asked about the Dish Networks announcement his response was that he thought Verizon has a huge head start and that it would take Dish at least a year to construct a wireless network. So I think we can expect Verizon to roll something out soon to take advantage of the existing network.

Both announcements make it sound like customers will be able to buy the OTT programming without having to subscribe elsewhere to a landline version of the same channels. This would be the first time that such live content like sports has been made available this way. I wrote last year that there are only a handful of channels with enough market power to pull off OTT programming, and that very short list includes ESPN. I know that I would gladly pay $20 for ESPN a la carte rather than have to buy a $60 package to get it. And I don’t think I am that unusual. Just in the last week I have had conversations with several other sports fans who say the same thing.

I had cable service several years ago with all of the channels and all of the movies. And I found that I would go weeks, and sometimes even months without turning on the TV (especially outside of football season). I am really hoping that these announcements are the first little crack in the programming monopoly and that the first pieces of OTT are here. But I won’t believe it until I can buy it. It’s possible that Dish and Verizon Wireless will be forced to also sell bundles of programming including a lot of things I won’t want. But I can’t see them getting into the OTT business if they aren’t going to let customers buy the smaller packages they really want. I will be watching.

The Young and the Old

Old TVI’ve just seen some recent statistics that talk about TV viewing in different demographics. On the young side, Verizon just released a study it did of the TV viewing habits of Millennials, which it defined as those between the ages of 16 and 34. On the older side, there have been some interesting statistics released talking about who watches network TV.

Verizon’s study quantifies what we have already all suspected – that the viewing habits of young people are a lot different than the rest of us. This is not to say that everybody’s viewing habits aren’t changing, but the young have changed to a greater degree. For example, all age groups watch over-the-top video online, but Millennials spend three times as much of their viewing time on line as everybody else.

Millennials have not yet abandoned cable services and 75% of them still watch cable TV. Only 13% of Millennials have cut the cord compared to 9% of the rest of us. But unlike the rest of us, they are also huge subscribers other services like AmazonPrime, NetFlix and Hulu. They simply have a lower tolerance for linear TV programming and want to watch things on their terms when they are ready to watch it. Millenials also like to browse more than watch specific TV shows at set times. Millennials are more likely (64%) to be using some other viewing device like a tablet, laptop or cell phone than everybody else (49%).

Millennials seem to be very brand-loyal and the brands they like are not the same as everybody else. For example, when naming their top entertainment brands, Millennials don’t put any of the broadcast networks (ABC, NBC, CBS and FOX) into their top ten brands while all four make it into the top brands for non-Millennials. Interestingly the company that makes it as the top name brand for everybody is Amazon.

Contrary to what other surveys have found, Millennials are willing to pay for multiple kinds of TV services and they are more likely to subscribe to both cable and online entertainment sources. But in looking at their viewing habits, they are more likely to engage in binge watching and more attuned to when entire series of shows are released on line.

Millennials also get more of their entertainment from non-traditional sources like YouTube and social sites. Millennials are more likely to game and to play fantasy sports than others. They also frequent a number of social sites like Reddit, Imjur, 4chan and 9gag that nobody else uses.

Very much as a compliment to the Verizon survey, I was looking through statistics about who watches network TV. The demographics of the major networks is aging even faster than the population. The median age of viewer for network TV is now 54 while twenty years ago it was 41. In 1993 the number one show was ‘Home Improvement’ with the age of the median watcher at 34. Today the most popular show is ‘NCIS’ with a median age of viewers of 61.

Interestingly, the networks still get the majority of the advertising dollars, but the increasing age of their viewers is probably going to change this a lot. Back in the Verizon survey, only 32% of Millennials said they would even miss the major networks if they went away. Advertisers want to find better ways to get to Millennial and other younger viewers, but the way they watch programming makes it hard to get to them in the same was as they can get to viewers with network TV.

The Verizon survey should give pause to anybody in the cable TV business. The Millennials and the following generations will be the majority of viewers in a few decades and once has to ask if it is possible to have a set of products that they are willing to pay for. They are not afraid to spend money for entertainment, but a lot of that money goes to online sources instead of to the local cable TV.

Are They Really Digital Trials?

A800px-OSU_Bucket_TruckT&T is now doing two ‘digital trials’ in West Del Ray Beach, FL and Carbon Hill, AL. The supposed purpose of these ‘trials’ is see if there is any way to bring all customers onto an all-IP network. But that is bosh. The only purpose of these ‘trials’ is for AT&T to prove to the FCC that it’s okay to kick people off copper networks.

This is all being done as part of the IP transition where we move away from a legacy TDM-based phone network into an Ethernet world. But that transition is supposed to be about the network that is used to move calls from one town to another, and somehow AT&T twisted this to become about moving people off of copper. And it ignores the fact that anybody served by DSL or cable modem is already on an IP and digital network.

AT&T doesn’t want to kick everybody off the copper network. They have their U-Verse products into millions of homes, which requires two pairs of copper. But U-Verse has been sold in large cities and suburbs and not in the small towns like the ones in these tests. It’s apparent in these smaller places that AT&T would rather find a way to force people off the copper than upgrade it.

And this is a bit ironic because for years AT&T has been heavily subsidized to help them pay for the copper wires. They were a rate-of-return carrier, meaning that they were guaranteed for decades to make a profit in each state they operated in. One would have thought that they would have rolled some of those profits back into taking care of the copper wires, and in the metropolitan areas they did. But AT&T walked out of the rural towns many years ago. They closed offices and cut back rural staff and have slowly let those copper networks deteriorate.

So now they want a ‘trial’ to figure out how they can best walk away from rural America. They want to go to all of the small towns on America and force people to move to wireless or move to the cable company. The problem with this idea is that there are a whole lot of rural places where the wireless coverage is awful and where the cable companies have not made any investments also.

A few years ago the FCC had estimated that there was 19 million US households with no broadband. People who work in rural America know that this was a bogus estimate based upon facts fed to them by AT&T and Verizon, and that there are a lot more houses with no broadband. But there has been a lot of effort to get broadband to some of these areas, so one would think that there are fewer households without broadband today, regardless of the actual number.

But if AT&T is allowed to progress past this test and start knocking people off copper there is going to be a whole lot of new homes without broadband. A whole lot more.

I am sure that the FCC has no comprehension of what ‘broadband’ is like in the typical small rural town. The phone company will have first generation DSL that they market at 3 Mbps download (to qualify with the FCC as broadband), but which probably gets half of that. The little town might or might not have a cable company, and even if they do they either don’t offer cable modem or it is also first generation technology and very slow. And you don’t need to go very far outside town until there is no broadband. The cable companies generally stop around the town borders. DSL carries a little further, but since DSL quality decreases with distance, you don’t have to go far until DSL is no better than dial-up.

I have no doubt that AT&T is going to play very nice in these trials. They will find a solution for everybody in these two small towns, even though for many that solution is going to be inferior to what they have today. But then, if the FCC is dumb enough to give them the permission, they are going to mail out notices to millions of homes in small towns and tell them to go find broadband elsewhere.

What’s Up With Dish?

Satellite_dish_(Television)The FCC just held an auction for the 1900 MHz spectrum and the only bidder and the winner of it all was Dish Networks. For some reason they did this under a different corporate name, but everybody knew from the beginning that it was them bidding.

This is not the first spectrum purchased by Dish. In the 2008 auction for 700 MHz Dish bought a nationwide footprint in the E Block. Dish also bought a nationwide 40 MHz-wide band of S-band spectrum at 2 GHz from TerreStar Networks and DBSD North America. Adding this all together Dish now has a sizable pile of spectrum.

So what do they plan to do with it? Nobody is entirely sure, but we know a bit about what they have been experimenting with. The E Block of the 700 MHz spectrum isn’t really usable for two-way communications. Last year Dish told the FCC that it was experimenting with using the frequency for various mobile television technologies. This included Mobile to Handheld (ATSC M/H), Digital Video Broadcasting Handheld (DVB-H), Satellite Services to Handhelds (DVB-SH), and China Mobile Multimedia Broadcasting (CMMB). They also could use the spectrum in an LTE network to broadcast some of their satellite service directly to handsets.

If they can get happy with one of these technologies, then they could then offer a mobile TV service. You might remember that Qualcomm tried this a few years back and offered a dozen or so TV channels for $10. That venture was a failure. But since then the world has changed rapidly. There are now a lot of smart phones and tablets and there are a lot of people looking for ways to bypass their expensive cable packages. One only has to look at the success Aereo has had in major cities to see that the time might be ripe for such an offering. And Dish already has the programming and would avoid Aereo’s legal woes.

Dish is currently testing wireless broadband in Virginia and will be testing it later this year in Corpus Christie. They have made a deal with Sprint to use the spectrum from Sprint cell sites and they could use this spectrum to bring broadband to some parts of rural America. The amount of bandwidth they can deliver would not be competitive in metropolitan areas, but it might be welcomed in those parts of America where there is still no real broadband.

Like all wireless data technologies, the speeds anybody gets is going to depend largely on how far away they are from a transmitter. But one would think that this technology could deliver up to 20 Mbps download close to a transmitter and maybe 3 Mbps download four or five miles from the transmitter. In places that still have dial-up that could be a good new option.

This would also bring broadband to those same areas where Dish sells a lot of satellite TV. This would allow them for the first time to offer a bundle of services, something they have always wanted to do. They already have some of the cheapest television prices in the country, since it is cheaper to operate satellites than it is to operate wireline cable networks. They could become quite profitable with the bundle – and one would suppose this would also bundle in Sprint cellular service.

Rural America needs broadband badly. What Dish is looking at is really not a great solution, but it is a lot better than what is there today. The only problem I see with this idea is that once Dish delivers slow broadband to a rural area that other providers are going to be even less likely to invest to build landline networks to bring real broadband. While 5 Mbps sounds like heaven to somebody on dial-up, it doesn’t give the rural customer the same speeds and benefits gotten in urban markets. The data speeds in Cities is getting faster all of the time and there is a growing list of places that now have an option for Gigabit fiber. As much as I appreciate what Dish is contemplating, I also fear that their bandwidth could relegate rural markets to a permanent slow Internet hell. The FCC would no longer worry about such areas because they would consider that they have broadband. Which is a shame, because this is not broadband that can help rural America thrive, but rather will just keep them limping by.

Comcast and Time Warner

NYC-NBC_StudiosI have read many articles on the issue of Comcast buying Time Warner, but I hadn’t written a blog yet about it because I wasn’t entirely sure how I feel about this. After all, Comcast is already huge and so does it really matter if they get even bigger?

After reading the announcement I went to the web to remind myself of all of the things that Comcast owns. In addition to being a cable provider, they also own a lot of TV networks. They own NBC, one of the major broadcast networks. They also own a number of NBC affiliate stations. They own a lot of cable networks including CNBC, MSNBC, Syfy, Chiller, Cloo, E!, USA Networks, Bravo, Oxygen, Universal HD, Sprout, Telemundo and Mun2. They also own a smaller share of other networks like the Weather Channel, TVOne and Esquire TV. They own a number of regional sports networks throughout the northeast, Chicago, the northwest and the Bay Area. They own the Philadelphia Flyers outright. They create programming through Universal Studios and other production affiliates. They own the rights to broadcast the Olympics in the US. They own a piece of Tivo. They even own Fandango, the movie ticket company.

I find myself not so bothered that Comcast is going to get bigger as a cable company. Let’s face it, they have pretty crappy customer service, but so does Time Warner. Cable companies don’t overlap footprints and from the complaints I read all over the web about monopoly cable providers, it doesn’t seem to make a ton of difference which one of them you end up with.

And it’s not like Comcast does everything bad. They provide decent Internet speeds in many markets and are moving to increase speeds in other markets. They have largely upgraded their major markets to a fully digital network allowing them to take advantage of DOCSIS 3.0. In my part of Florida they have speeds up to 107 Mbps. I have their 50 Mbps product and it seems to really be this fast most of the time. They are not going to get into the gigabit race with Google, but over the next decade they probably will offer speeds up to 500 mbps like a few other cable companies are now doing.

But I find that so many people dislike them. I just have to wonder how much bigger they could become in their own markets if they did things right and people started liking them. When I moved to my new house I surveyed the neighbors and hardly any of them use Comcast. People here get satellite TV and suffer with CenturyLink DSL or wireless broadband rather than fight through the Comcast sign-up process. I documented my ordeal of becoming a Comcast customer last year and I think it took a dozen calls to finally get broadband and I was still forced to subscribe to a cable package I don’t want in order to get the broadband I want. So I am certainly not a fan, but I am not sure my experience would be much different with the other monopoly providers.

What bothers me about the merger is the tremendous market power they have as both a cable company and as a programmer. When Comcast and NBC sign a retransmission agreement, the resulting payments from Comcast to NBC are simply funny money and the cash never leaves the parent company. In practical terms this gives them a huge advantage over everybody else in the business. Comcast essentially gets to set the market rate for programming when it makes deals among its own affiliates.

It is that power to control all parts of the supply chain that I find disturbing. So I say, let Comcast buy Time Warner. But the price for doing so should be that they have to sell off a lot of their programming assets over the next few years. I think given that choice they will elect to keep the programming rather than buy a bigger pile of customers. If they really want to be a lot bigger, let them improve customer service and get all of the people in their existing footprint who won’t use them today.