Charter Upgrading Broadband

We are now starting to see the results of cable companies upgrading to DOCSIS 3.1. Charter, the second biggest ISP in the country recently announced that it will be able to offer gigabit speeds to virtually it’s whole footprint of over 40 million passings.

DOCSIS 3.1 is the newest protocol from Cable Labs that allows bonding an unlimited number of spare channel slots for broadband. A gigabit data path requires roughly 24 channels on a cable network using the new DOCSIS protocol. In bigger markets this replaces DOCSIS 3.0 that was limited to maximum download speeds in the range of 250 Mbps. I know there are Charter markets with even slower speeds that either operate under older DOCSIS standards or that are slow for some other reason.

Charter has already begun the upgrades and is now offering gigabit speeds to 9 million passings in major markets like Oahu, Hawaii; Austin, Texas; San Antonio, Texas, Charlotte, North Carolina; Cincinnati, Ohio; Kansas City, Missouri; New York City; and Raleigh-Durham, North Carolina. It’s worth noting that those are all markets where there is fiber competition, so it’s natural they would upgrade these first.

The new increased speed won’t actually be a gigabit and will be 940 Mbps download and 35 Mbps upload. (It’s hard to think there is anybody who is really going to care about that distinction). Cable Labs recently came out with a DOCSIS upgrade that can increase upload speeds, but there’s been no talk from Charter about making that upgrade. Like the other big cable companies, Charter serves businesses that want faster upload speeds with fiber.

Along with the introduction of gigabit broadband the company also says it’s going to increase the speed of it’s minimum broadband product. In the competitive markets listed above Charter has already increased the speed of its base product to 200 Mbps download, up from 100 Mbps.

It’s going to be interesting to find out what Charter means by the promise to cover “virtually’ their whole footprint. Charter grew by purchasing systems in a wide range of conditions. I know of smaller Charter markets where customers don’t get more than 20 Mbps. There is also a well-known lawsuit against Charter in New York State that claims that a lot of households in upstate New York are getting speeds far slower than advertised due to having outdated cable modems.

The upgrade to DOCSIS 3.1 can be expensive in markets that have not yet been upgraded to DOCSIS 3.0. An upgrade might mean replacing power taps and other portions of the network, and in some cases might even require a replacement of the coaxial cable. My guess is that the company won’t rush to upgrade these markets the upgrade to DOCSIS 3.1 this year. I’m sure the company will look at them on a case-by-case basis.

The company has set a target price for a gigabit at $124.95. But already in the competitive markets like Oahu the company was selling introductory packages for $104.99. There is also a bundling discount for cable subscribers.

The pricing list highlights that they still have markets with advertised speeds as low as 30 Mbps – and the company’s price for the minim speeds is the same everywhere, regardless if that product is 30 Mbps or 200 Mbps. And as always with cable networks, these are ‘up to’ speeds and as I mentioned, there are markets that don’t meet these advertised speeds today.

Overall this ought to result in a lot of home and businesses getting faster broadband than today. We saw something similar back when the cable companies implemented DOCSIS 3.0 and the bigger companies unilaterally increased speeds to customers without increasing the prices. Like other Charter customers, I will be interested in what they do in my market. I have the 60 Mbps product and I’ll be interested to see if my minimum speeds is increased to 100 Mbps or 200 Mbps and if I’m offered a gigabit here. With the upgrade time frame they are promising I shouldn’t have to wait long to find out.

False Advertising of Broadband Speeds

There is another new and interesting regulatory battle happening now at the FCC. The lobbying groups that represent the telcos and cable company – NCTA, USTelecom and the ACA – are asking the FCC to make it harder for states to sue ISPs for making misleading claims about broadband speeds.

This request was brought about from a lawsuit by the State of New York against Charter Spectrum. I wrote about that case in a March blog and won’t repeat all of the particulars. Probably the biggest reason for the suit was that Charter had not made the major upgrades and improvements that they had promised to the State. But among the many complaints, the one that worried the other ISPs the most was that Charter was not delivering the speeds that it was advertising.

This is an issue that affects many ISPs, except perhaps for some fiber networks that routinely deliver the speeds they advertise. Customer download speeds can vary for numerous reasons, with the primary reason being that networks bog down under heavy demand. But the New York complaint against Charter was not about data speeds that slowed down in the evenings; rather the complaint was that Charter advertised and sold data products that were not capable of ever reaching the advertised speeds.

Charter is perhaps the best poster child for this issue, not just because of the New York case. On their national website they only advertise a speed of 60 Mbps download, with the caveat that this is an ‘up to’ speed. I happen to have Charter in Asheville, NC and much of the time I am getting decent speeds at or near to the advertised speed. But I work all over the country and I am aware of a number of rural Charter markets where the delivered speeds are far below that 60 Mbps advertised speed. These markets appear to be like the situation in New York where the State accuses Charter of false advertising.

The filings to the FCC want a clarification that what Charter is doing is okay and that ISPs ought to be exempt from these kinds of suits. They argue that the ISP industry have always sold ‘up to’ speeds and that what they are doing fits under existing FCC regulations. And this is where it gets murky.

In the FCC’s first attempt to introduce net neutrality the FCC ordered ISPs to disclose a lot of information to customers about their broadband products, including telling them the real speeds they could expect for their purchased broadband product. Much of that first net neutrality decision was struck down due to a successful lawsuit by Verizon that claimed that the FCC didn’t have the authority to regulate broadband as laid forth by that order.

But not all of that first order was reversed by the lawsuit, including the provision that ISPs had to disclose information about their network performance, fees, data caps, etc. But since most of the original net neutrality order was reversed the FCC put the implementation of the remaining sections on hold. Last year the FCC finally decided to implement a watered-down version of the original rules, and in February of this year the FCC excused smaller ISPs from having to make the customer disclosures. But the large ISPs are now required to report specific kinds of information to customers. The ISPs interpret the current FCC rules to mean that selling ‘up to’ data products is acceptable.

Where this really gets interesting from a regulatory perspective is that the FCC might not long have the authority to deal with these sorts of requests from the ISPs. The bulk of the FCC’s authority to regulate broadband (and thus to potentially shield the ISPs in this case if they are complying with FCC regulations) comes from Title II regulation.

But the FCC seems likely to relinquish Title II authority and they have suggested that the authority to regulate ISP products should shift to the Federal Trade Commission. Unfortunately for the ISPs, the FTC has more often sided with consumers over big companies.

Since the FCC is in the process of eliminating Title II authority I wonder if they will even respond to the ISPs. Because to clarify that advertising ‘up to’ products is acceptable under Title II would essentially mean creating a new broadband regulation, something this FCC seems loathe to do. I’ve seen several other topics just recently that fall into this same no-man’s land – issues that seem to require Title II authority in order for the FCC to have jurisdiction. As much as the big ISPs complained about Title II, one has to wonder if they really want it to go away? They mostly feared the FCC using Title II to address pricing issues, but there are a lot of other issues, like this request, where broadband regulation by the FCC might be in the ISPs’ favor.

The Fastest ISPs

PC Magazine has been rating ISPs in terms of speed for a number of years. They develop their rankings based upon speed tests taken at their own speed test site. They had about 124,000 speed tests taken that led to this year’s rankings. The scoring for each ISP is a composite number based 80% on the download speed and 20% of upload speeds. To be included in the rankings an ISP needed to have 100 customers or more take the speed test.

You always have to take these kinds of rankings with a grain of salt for several reasons. For example speeds don’t only measure the ISP but also the customer. The time of day can affect the speed test, but probably the type of connection affects it the greatest. We know these days that a lot of people are using out-of-date or poorly located WiFi routers that affect the speeds at their computer.

Measured speeds vary between the different speed tests. In writing this blog I took four different speed tests just to see how they compare. I took the one at the PC Magazine site and it showed my speeds at 27.5 Mbps down / 5.8 Mbps up. I then used Ookla which showed 47.9 Mbps down / 5.8 Mbps up. The Speakeasy speed test showed 17.6 Mbps down and 5.8 Mbps up. Finally, I took the test from Charter Spectrum, my ISP, which showed 31.8 Mbps down / 5.9 Mbps up. That’s a pretty startling set of different speeds measured just minutes apart – and which demonstrates why speed test results are not a great measure of actual speeds. I look at these results and I have no idea what speed I actually am receiving. However, with that said, one would hope that any given speed test would probably be somewhat consistent in measuring the difference between ISPs.

The results of the speed test ‘contest’ are done for different categories of ISPs. For years the winner of the annual speed test for the large incumbents has been Verizon FiOS. However, in this year’s test they fell to third in their group. Leading that category now is Hotwire Communications which largely provides broadband to multi-tenant buildings, with a score of 91.3. Second was Suddenlink at 49.1 with Verizon, Comcast and Cox and closely behind. The lowest in the top 10 was Wow! at a score of 26.7.

Another interesting category is the competitive overbuilders and ISPs. This group is led by Google Fiber with a score of 324.5. EPB Communications, the municipal network in Chattanooga, is second at 136.1. Also in the top 10 are companies like Grande Communications, Sonic.net, RCN, and Comporium.

PC Magazine also ranks ISPs by region and it’s interesting to see how the speeds for a company like Comcast varies in different parts of the country.

Results are also ranked by state. I find some of the numbers on this list startling. For instance, Texas tops the list with a score of 100.3. Next is South Dakota at 80.3 and Vermont at 70.6. If anything this goes to show that the rankings are not any kind of actual random sample – it’s impossible to think that this represents the true composite speeds of all of the people living in those states. The results of this contest also differs from results shown by others like Ookla that looks at millions of actual connection speeds at Internet POPs. Consider Texas. Certainly there are fast broadband speeds in Austin due to Google Fiber where all of the competitors have picked up their game. There are rural parts of the state with fiber networks built by telcos and cooperatives. But a lot of the state looks much like anywhere else and there are a lot of people on DSL or using something less than the top speeds from the cable companies.

But there is one thing this type of study shows very well. It shows that over the years that the cable companies are getting significantly faster. Verizon FiOS used to be far faster than the cable companies and now lies in the middle of a pack with many of them.

This test is clearly not a statistically valid sample. And as I showed above with my results from various speed tests the results are not likely even very accurate. But ISPs care about these kinds of tests because it can give them bragging rights if they are near the top of one of the charts. And, regardless of the flaws, one would think the same shortcomings of this particular test are similar across the board, which means it does provide a decent comparison between ISPs. That is further validated by the fact the results of this exercise are pretty consistent from year to year.

Can a Small Cable Company Succeed?

Today I ask the question of whether anybody small can really succeed with a cable TV product. This was prompted by the news that Cable One, one of the mid-sized cable companies, is bleeding cable customers. For those not familiar with the company they are headquartered in Phoenix, AZ and operate cable systems in 19 states with the biggest pockets of customers in Idaho, Mississippi and Texas.

The company just reported that for the 12 months ending on March 31 that they had lost 12.7% of their cable customers and dropped below 300,000 total cable customers. Most of my clients would consider anybody of this size to be a large cable company. But their struggles beg the question of anybody smaller than the really giant cable companies can seriously maintain a profitable and viable cable product in today’s environment.

The drop in their cable customers was precipitated by a number of factors. One that is very familiar to small cable operators is that Cable One decided in 2015 to drop the Viacom suite of channels from their system. We all remember that in that year Viacom announced huge and unprecedented rate increases of over 60% for the suite of channels that include MTV, Comedy Central, BET and a number of other channels. A number of my clients also decided to drop Viacom rather than pay for the huge increases in programming.

Cable One also shares another characteristic with smaller companies in that they are too small to unilaterally negotiate alternate piles of programming to sell as skinny bundles. So they and other small companies are likely to see customers abandoning them for smaller line-ups from Sling TV and other purveyors of smaller on-line line-ups – including Hulu which just announced entry into this quickly growing market.

And finally, Cable One and most other cable companies are now starting to feel the impact of cord cutting. While only a fraction of their customer losses can be blamed on cord cutting, it is now a real phenomenon and all cable companies can expect to lose a few percent of customers every year to Netflix and others.

The really large cable companies are not immune to these same market influences. The giants like Comcast and Charter / Spectrum are going to continue to see big increases in programming costs. Recent Comcast financials show that the company saw a 13% increase in programming cost over the last year (although some of that increase was paid to their own subsidiaries of programmers).

But the handful of giant cable companies are so big that they look like they are going to be able to offset losses in cable revenues in margins with new sources of revenues. For example, Comcast and Charter announced recently that they will be launching a jointly-provisioned cellular business that will help them grow revenues significantly instead of just treading water like smaller cable revenues. And I’ve recently written in here of all of the other ways that Comcast is still growing their business, which smaller companies are unable to duplicate.

The biggest dilemma for small cable companies is that the TV product still drives positive margin for them. While every small cable provider I know moans that they lose money on the cable product, the revenues generated from cable TV are still in excess of programming costs and almost every company I know would suffer at the bottom line if they kill the TV product line.

It has to be troubling for programmers to see cable companies struggling this hard. If somebody the size of Cable One is in crisis then the market for the programmers is quickly shrinking to only serving the handful of giant cable companies. The consolidation of cable providers might mean that the huge cable companies might finally be able to band together to fight back against the big rate increases. Just last week Charter announced that they were demoting a number of Viacom channels to higher tiers (meaning that the channels would not automatically be included in the packages that all customers get).

It’s hard to think of another industry that is trying so hard to collectively drive away their customer base. But all of the big companies – cable providers and programmers – are all publicly traded companies that have huge pressure to keep increasing earnings. As customers continue to drop the programmers raise rates higher, which then further drives more customers to drop out of the cable market. It doesn’t take sophisticated trending to foresee a day within the next decade where cable products could become too expensive for most homes. We are all watching a slow train wreck which the industry seems to have no will or ability to stop.