Tag Archives: Time Warner Cable

Charter Asks the FCC to Allow Data Caps

In a move that was probably inevitable, Charter has petitioned the FCC to allow the company to begin implementing broadband data caps. Charter has been prohibited from charging data caps as part of an agreement with the FCC when the agency approved the merger with Time Warner Cable in 2016. Charter is also asking the FCC to lift another provision of the merger agreement that prohibits the company from imposing interconnection fees on Netflix and other companies that generate large amounts of web data.

There was one other requirement of the original merger agreement that the FCC already modified in 2017. Charter had voluntarily agreed to pass 2 million new homes within five years of the merger agreement. The original agreement with the FCC required Charter to compete against other cable companies, but in 2017 that was changed to require Charter to instead pass 2 million new homes.

The merger agreement between the FCC and Charter is in effect until May 2023, but the original deal allowed Charter to ask to be relieved of the obligations after four years, which is the genesis of this request. If granted, the two changes would occur in May 2021.

Charter is asking to lift these restrictions now because the original order allowed them to do so this year. There seems a decent likelihood that the FCC will grant the requests since both Chairman Ajit Pai and Commissioner Michael O’Rielly voted against these merger conditions in 2016 and said the restrictions were too harsh.

What I find interesting is that Charter has been bragging to customers for the last four years about how they are the large ISP that doesn’t impose burdensome data caps on customers. This has likely given them a marketing edge in markets where the company competes against AT&T, which aggressively bills data caps.

Charter has to be jealous of the huge dollars that Comcast and AT&T are receiving from data caps. Back in 2016, there were not many homes that used more data than the 1 terabyte cap that AT&T and Comcast place on customers. However, home broadband usage has exploded, even before the COVID-19 pandemic.

OpenVault reported in early 2018 that the average home used 215 gigabytes of data per month. By the end of 2019, the average home usage had grown to 344 GB monthly. During the pandemic, by the end of March 2020, the average home used 402 GB.

What’s more telling is the percentage of homes that now use a terabyte of data per month. According to OpenVault, that’s now more than 10% of homes – including nearly 2% of homes that use more than 2 terabytes. Just a few years ago only a tiny percentage of homes used a terabyte per month of data. Charter has undoubtedly been measuring customer usage and knows the revenue potential from imposing data caps similar to Comcast or AT&T. If Charter can charge $25 for exceeding the data caps, with their 27 million customers the data caps would increase revenues by over $800 million annually – for usage they are already carrying on their network. Charter, like all of the big ISPs, crowed loudly that their networks were able to easily handle the increase in traffic due to the pandemic. But that’s not going to stop them from milking more money out of their biggest data users.

The US already has some of the most expensive broadband in the world. The US landline broadband rates are twice the rates in Europe and the Far East. The US cellular data rates rival the rates in the most expensive remote countries in the world. Data caps imposed by landline and cellular ISPs add huge amounts of margin straight to the bottom lines of the big ISPs and wireless carriers.

What saddest about all of this is that there is no regulation of ISPs and they free to charge whatever they want for broadband. Even in markets where we see a cable company facing competition with fiber from one of the telcos, there is seemingly no competition on price. Verizon, AT&T, and CenturyLink fiber cost roughly the same in most markets as broadband from cable companies, and the duopoly players in such markets gladly split the customers and the profits for the benefit of both companies.

I’ve written several blogs arguing against data caps and I won’t repeat the whole argument. The bottom line is that it doesn’t cost a big ISP more than a few pennies extra to provide service to a customer that uses a terabyte per month at home compared to a home that uses half that. Data cap revenue goes straight to the bottom line of the big ISPs. For anybody that doesn’t believe that, watch the profits at Charter before and after the day when they introduce data caps.

The End of Customer Discounts?

When we’re working on broadband feasibility studies, one of the things we try to do is to get a sample of customer bills. We’ve found that the amount that the big ISPs charge for service differs by market and that the difference is usually manifested through promotional discounts given to customers. We’ve seen some markets where a majority of customers have discounts and others where it’s a far smaller percentage. Understanding the level and extent of discounts is another useful data point to have when considering competing in a market.

It sounds like the biggest proponent of special pricing was Time Warner Cable. CEO Tom Rutledge of Charter says that at the time of the merger with Time Warner, that the company had over 90,000 different customer packages due to deals that had been negotiated between customers and customer service reps. Charter is ending the Time Warner discounts when promotional periods end and asking customers to pay full price. They are not trying to keep customers who threaten to leave.

Charter is not the only company that is ending discounts. AT&T and DirecTV have been shedding hundreds of thousands of cable customers in the most recent quarters as the company has decided to let go of customers who refuse to pay the full price after the end of a promotional discount period. AT&T has decided they’d rather not keep customers if they aren’t contributing to the company’s margin.

The impact of ending customer discount can be huge. I recently analyzed a city where it seems that most of the customers had discounts that ranged from 15% to nearly 50% of the total bill. In many cases, the discounts are as great or greater than the profit margin on cable and I’ve always wondered why the cable companies offered such deep discounts.

One cause of big discounts historically came from the win-back programs offered by big ISPs. Anybody who has tried to quit service with an ISP is familiar with being handed to a win-back representative who is authorized to offer discounts to get customers to stay. These reps earned commissions for retaining customers and were usually liberal with the offered discounts.

Customers losing discounts on cable TV face a few stark choices. They can agree to pay a lot more to keep the same service. They can cut the cord and drop cable TV, but in doing so they face a second financial penalty of losing the bundling discount they had for buying multiple services. A third option is to step down to a lower-cost cable package. For example, Charter now offers an online small cable line-up called Spectrum TV Essentials that provides 60 channels for $15 per month. Most of the cable companies are offering similar small lineups.

We got a glimpse at cable TV margins recently when the Wall Street analyst firm Cowan looked at the cable market. They estimated that the Comcast has the gross highest margin on cable TV at 40% (cable rates less programming costs) followed by Charter and Dish Networks at 35%. They estimated that the margins for smaller cable companies like Altice are only 20%.

I was always surprised by some of the discounts I saw on bills because some of the bigger discounts looked to be giving away all of the margin on the cable product. Now that I see the estimates by Cowan of gross margins, in some cases, employees at these companies were giving away discounts larger than the margin.

I’ve wondered for years when the big companies were going to wake up and end the discounts and associated practices. The cable companies have largely won the battle against DSL and in most markets they have no effective competition. DSL seems to be keeping customers that care about price more than speed and the cable companies are getting the higher-margin customers. Cable broadband has become so much better than DSL that it’s getting hard to imagine that many customers will willingly go back to DSL.

Only the cable companies are going to know the math but eliminating most promotional discounts ought to be equivalent to implementing a 5% to 10% overall rate increase. Customers breaking the bundle will add even more to margins. Customers need to get used to the idea of paying full price after their initial discount period is over. I have to wonder when the cable companies will stop offering promotional discounts to get new customers in non-competitive markets.

New York Ousts Charter

The New York Public Service Commission voted on Friday to oust Charter from the state. They are revoking the approval of Charter’s acquisition of Time Warner Cable in 2016 due to the company failing to meet the requirements of that merger. The PSC has given Charter 60 days to present a plan for divesting it’s New York property and to subsequently leave the state. Charter announced almost immediately that they will appeal the decision, so expect a big ugly court fight.

The Commission’s order provides the justification for the drastic measure cites the following reasons for the order:

  • The company’s repeated failures to meet deadlines;
  • Charter’s attempts to skirt obligations to serve rural communities;
  • Unsafe practices in the field;
  • Its failure to fully commit to its obligations under the 2016 merger agreement; and
  • The company’s purposeful obfuscation of its performance and compliance obligations to the Commission and its customers.

One of the biggest items under contention is Charter’s agreement to extend its network to 145,000 unserved and underserved residential housing units within four years of the merger. Charter claims that they are meeting that commitment, but the PSC says that a lot of the passings counted by Charter were in places like New York City where the company already had an obligation under local franchise agreements to connect to customers. The PSC ‘s merger requirement specified that Charter would reach beyond its current network boundaries to add suburban and rural customers that are within reasonable range of the Charter network.

The PSC accuses Charter of lying to the PSC and the public about meeting its merger obligations. They say the company has repeatedly falsely advertised and told customers that it is exceeding its commitments to the state. Now that this is likely going to end up in court the facts will be made clear, and it’s likely that the PSC’s facts are correct or they wouldn’t have taken this extraordinary step.

I can only remember a few cases during my career where a state regulatory body disenfranchised a telco or cable company. The few cases I recall were based upon criminal behavior of the company owners. Cities have sometimes cancelled a cable TV franchise, but usually it’s been due to the cable company being nearly dead or bankrupt and the city wanting to be able to legally tear down unused cables.

It’s been routine practice for big ISPs to not fully meet commitments they promise during mergers negotiations with regulators. They generally take a weak stab at meeting commitments, but they’ve never fretted about not fully complying since the only recourse against them are fines, or something more drastic like is being done in this case. It may sound cynical, but I think big companies do the math and gladly accept fines when that’s cheaper than meeting a commitment.

The NY PSC order focused on Charter’s failure to meet merger conditions, but there is an older history of dispute between the PSC and the company. The PSC has had a long-standing dispute in upstate New York and accused Time Warner Cable (and eventually Charter) of defrauding the public by providing old and obsolete cable modems that were not capable of achieving the advertised broadband speeds. In 2013 Time Warner Cable promised the NY PSC it would fix the problem, but the commission sued the company (now Charter) in 2017 after it was shown that most of the old cable modems were still in service – although the cable company had subsequently begun advertising even faster speeds. It turns out that Time Warner / Charter was not only failing to replace old modems as promised, but they were still recirculating the obsolete modems back into service for new broadband customers.

I have no idea of how the courts might rule on this case because the suggested remedy of kicking Charter out of the state is unprecedented. I’d love to hear of any similar cases if readers know of them – but I can’t recall a state regulatory commission trying to kick a major ISP out of their state.

Obviously Charter could have avoided all of this by complying with the requirements of the merger. But I’m sure that an internal decision was made that the capital required to meet those conditions was more than the company is willing to spend. The company didn’t help its case if it lied to the PSC about meeting the commitments. It’s clear that Charter has been derelict in the earlier case of replacing obsolete cable modems and in that case they are clearly bad corporate citizens. It takes a lot for a regulatory to decide to oust a regulated company, and I guess Charter has crossed that line.

The Impact of the End of Net Neutrality

Charter has given us a peek at how the big ISPs are likely to take advantage of the end of net neutrality. Charter is in the middle of a lawsuit filed by New York Attorney General Eric Schneiderman. The suit attacks Charter for promising to deliver Internet speeds as part of the purchase of Time Warner that the company knew it couldn’t deliver. There are other allegations in the suit and I covered it in this earlier blog.

While the FCC won’t formally vote to end Title II regulation for another week it’s largely a foregone conclusion that they will do so. Charter is assuming that it’s a done deal and they have filed paperwork trying to dismiss the New York lawsuit based upon the assumption that the FCC will end net neutrality.

Charter has sent a letter to the courts and is making the following claims:

Federal law preempts state and local laws. Charter is arguing that the planned FCC order will preempt state and local laws concerning broadband. This is an aspect of the proposed FCC order that has not gotten much attention. The proposed FCC order contains a long discussion that talks about the role of federal versus state regulations and comes to the conclusion that federal low should override state and local broadband laws. It’s sort of an ironic position for the FCC to take since they are actually eliminating the FCC’s role in regulating broadband – but they interpret that to mean that states and localities also have no right to regulate broadband.

Charter specifically says that New York can’t criticize the company for delivering slow Internet speeds. They argue that since the FCC will no longer regulate broadband and Internet speeds that New York also does not have the right to do so.

Paid Prioritization. Charter is also arguing that New York has no right to regulate paid prioritization. This is one of the three principles of net neutrality that currently is in effect. Charter is arguing that the FCC’s proposed ‘light-touch’ regulation means that the FCC will be eliminating the net neutrality principles and this means that these principles can no longer be used to judge Charter’s products.

The New York lawsuit had attacked Charter for not maintaining a robust enough network that could deliver the speeds customers need. Specifically, New York alleged that people were unable to watch Netflix and that Charter’s network failures amount to throttling of the Netflix data stream.

The new FCC rules aren’t even in effect yet, but this tells a lot about how the big ISPs are viewing the change in rules. Charter wants to use these rules to protect themselves against any fines for not delivering advertised broadband speeds to customers. They also are openly acknowledging that they have no obligations against violations of the current net neutrality rules – and that they have no obligations to ever try to meet them.

Charter’s arguments in the case erase any doubt about how the big ISPs intend to act once they are not regulated. While they will probably generally try to deliver a decent broadband product, they feel under no legal obligation to do so. If you go back and look at the facts in this case you will see customers in New York who have been paying for clearly inferior broadband for years – broadband that is far slower than advertised and that is even too slow to deliver Netflix. Charter promised to fix the network issues that are causing the slow broadband, but it’s clear from the New York lawsuit that no upgrades have been implemented. Lack of broadband regulations might mean that the Charter customers in New York might never get good broadband – the company doesn’t think they have any obligation to provide it.

Charter’s response to this lawsuit largely validates all of the consumer fears that have been expressed as part of the net neutrality debate. The FCC is washing their own hands of anything having to do with broadband regulation, and are also preempting states and localities for doing anything. This leaves the consumer with no place to go to remedy, or even protest bad ISP behavior.

One hopes that the big ISPs want to deliver a decent broadband product – but the facts in this case show a blatant disregard for both customers and regulators. Charter has promised to improve the condition of the Time Warner networks as part of the merger but then failed to do so. The sad fact is that many of the customers with the shoddy Charter service have no real alternative. DSL is dying and the cable companies are becoming virtual monopolies in most of the markets in the country. If Charter prevails with these arguments it will show that there is no regulatory body with the ability to police the ISPs.

The State of New York vs. Charter

Scale_of_justice_2_newEvery once in a while in this industry you come across a story about one of the big cable companies that just makes you shake your head. There is such a story right now where the New York State attorney general, Eric Schneiderman, has sued Charter on behalf of its 2.5 million data customers in the state.

The issue goes back to 2012 when the company was still Time Warner Cable. At that time there were a lot of complaints from customers saying that they were not getting the data speeds they were paying for. In 2013, in association with Internet speed tests conducted by the FCC, it was determined that Time Warner had widely deployed cable modems and WiFi routers that were not capable of delivering speeds of even 20 Mbps.

In July of 2013, Time Warner promised the FCC that it would replace and upgrade all customer modems in the state and would also make other system upgrades that would increase speeds, such as reducing the size of the neighborhood nodes.

Here is where the puzzling part comes in. The FCC never retested, which is normal, and instead relied on Time Warner’s promise that they would fix the problems and increase speeds. But it turns out that Time Warner didn’t make any of the promised upgrades. They didn’t replace customer modems. In fact, they routinely recycled the bad modems back into service when they were returned by customers.

Since then Time Warner (and now Charter) has advertised even faster speeds, yet none of the customer modems are able to deliver the speeds that the company is selling. The lawsuit says there are now over 250,000 customers who are paying for speeds between 200 Mbps and 300 Mbps, but who still have the old inadequate modems that get speeds under 20 Mbps.

To add insult to injury, the company has been charging $10 per month to customers to lease the old modems (at least that’s the current lease rate). Considering that these modems don’t generally cost the cable company even $100, these customers have paid enough to have replaced these modems multiple times since the problem was first caught.

Time Warner is also being accused in the lawsuit of manipulating the FCC speed tests in 2013 to show faster results. They did this by taking speed tests at times when there was not much demand on their networks, like the middle of the night.

Finally, the company has been accused of purposefully providing inadequate backbone so that Internet traffic was delayed and slowed down getting onto their network. This means they did not provide big enough data connections to the outside world for things like Netflix or for general Internet access.

Here is the lawsuit filing. It’s an interesting and easy read and is not overly technical. I know that big companies hate to spend capital dollars that they don’t think are necessary. But in this case they got caught providing old and inadequate modems five years ago and since then did nothing to fix the problems. We know from experience that even when companies are caught like this that they don’t usually undertake a crash repair program. But if Time Warner would have implemented some reasonable plan to upgrade the network and to replace the bad modems over time there probably would not be this big lawsuit today. What’s puzzling is how the whole management chain at the company decided to do nothing. They denied a direct FCC order and also continued to get piles of customer complaints.

The lawsuit does not name a specific amount of damages, but one has to think it’s going to be a big number. The lawsuit asks for ‘injunctive and equitable relief’, meaning the return of customer payments, as well as civil penalties, meaning extra damages. If Charter has the same kind of customer penetrations we see elsewhere with cable companies – 60% to 70% of the market – it’s going to be interesting to see how they find a jury for this trial.

Cable Industry Shorts – February 2017

television-sony-en-casa-de-mis-padresHere are a few industry shorts, each not quite long enough to justify a full blog:

New York Takes on Charter. On February 1 the Attorney General of New York sued Time Warner Cable (which is now Charter Spectrum) for delivering inferior products that don’t match what was being advertised to customers.

The specific issue is that the majority of the cable modems provided to customers in the state are not capable of delivering the speeds being sold to customers. For example, in 2013 it was demonstrated that ¾ of the modems sold to supply 20 Mbps service were unable to process that much speed. And it appears that most of those modems still have not been upgraded. The lawsuit accuses the company of never notifying customers that they had inferior modems, and also of recycling inferior modems back to new data customers.

Charter says that the law suit isn’t needed because they have been making improvements since purchasing Time Warner. But the lawsuit alleges that the old practices are still widespread. The lawsuit is asking for significant refunds to affected customers.

Comcast Charging for Roku Boxes. In perhaps the best demonstration of why Comcast is rated so poorly by customers, Comcast says they will still charge customers if they use a Roku box to watch TV rather than a Comcast settop box.

Comcast currently has one of the highest settop box charges around at $9.95 per month, per box.  They also then charge $7.45 for each additional TV in the home using an ‘additional outlet charge.” Comcast hasn’t announced the rate for using a Roku box, but speculation is it will be at the $7.45 rate. This is clearly a case of a cable company charging for something for which they are providing zero value. Perhaps the company has already been emboldened by an FCC and Congress that say they will be reducing regulations.

For a customer to use the XFINITY TV app on a Roku box they must currently subscribe to Comcast cable TV and broadband service. They must have and pay for at least one settop box and also have a cablecard and a compatible IP gateway in the home.

Esquire Channel Disappearing. There is a lot of pressure by the big cable companies to cut back on the number of channels, and the expectations are that less popular networks are going to start disappearing.

The latest network that will vanish from cable line-ups is the Esquire channel. It’s a low-rated channel with content aimed at upscale men that is rated at 82 out of the 105 major cable networks. It was just launched in 2013 and had grown to 60 million subscribers. But last month AT&T and its DirecTV subsidiary decided to drop the channel, cutting 15 million subscribers. Charter is also considering dropping the channel, so NBC, the owner of Esquire, decided to kill the channel for cable systems. Some remnants of it will remain on-line.

Esquire joins the millennial channel Pivot and NBC’s Universal Sports as channels that disappeared in the last year. There are likely more to come and there are 23 networks with lower ratings than Esquire including Fox Business, Great American Country, Chiller and the Golf Channel.

Cable Companies Stop Sending Piracy Warnings. Just about every large cable company and telco has stopped forwarding messages to customers about piracy that were sent through the Copyright Alert System (CAS). These alerts were sent to customers who made illegal downloads of movies or music. The main purpose of these alerts was to warn customers that they were violating copyright laws. The content industry has always pressured ISPs to somehow punish habitual content pirates, but that has never happened to any significant degree.

Groups like the RIAA which were pushing ISPs for compliance have said they will look for an alternative. They said for now that they will probably back off from suing end user customers – a tactic that never seemed to make much difference. This is another case where technology outstripped the law. The CAS launched at the heyday of peer-to-peer file sharing, and while that still exists, it’s not the way that most copyrighted material is shared these days. We now live in a more nuanced world where there is copyrighted material on sites like YouTube sitting right next to mountains of non-copyrighted material, and it’s a lot harder to pinpoint copyright violations.

Forcing Competition

charter-spectrum-logoThere was an FCC requirement in the Charter acquisition of Time Warner Cable and Bright House Networks that wasn’t much mentioned in the press. As a requirement to gain approval for the merger the FCC is requiring that Charter must build new networks to pass one million potential customer passings outside of its existing footprint. Charter must do this where there is already another ISP offering at least 25 Mbps, and Charter is required to offer at least 60 Mbps speeds.

The two main lobbying groups which together represent small cable companies and telcos for smaller ISPs  (the American Cable Association and the Rural Broadband Association) are suing the FCC to stop this.

This seems like a very odd requirement. Charter is being directed to build in markets that already qualify as having broadband under the FCC’s definition, so this won’t bring broadband to anybody new. But I guess the FCC hopes it will create networks that will compete against each other with price and service.

But if Charter expands using coaxial networks, then this ruling will force Charter to build a second coax network in markets, often in places where poles are already getting very full of wires. Charter could instead build with all-fiber, but then they would be creating a pocket of customers using a different technology, and big companies have shown they are not very good at handling one-off situations. For example, Verizon had such a hard time integrating fiber processes into their existing company that they literally created FiOS as a whole new internal organization separate from copper. What I find even more troubling is that any market where Charter builds is not likely to then ever attract another fiber overbuilder.

I know that the FCC is very bothered by the fact that cable companies don’t compete against each other. The FCC reports every year that the majority of residents in the country only have one choice for decent broadband speeds, and I am sure that is what prompted this requirement. But I think there is a reason for that – cable companies are largely a natural monopoly. A cable company has no technological advantage by building alongside of another existing coaxial network. I am sure that cable companies have done the math over the years and if, for example, Charter was to build to compete against Comcast, then in the end both companies will under-earn in the market with dual competition.

I love real competition and it’s always interesting to watch how a cable company reacts when somebody builds a new fiber network to compete with them. But I don’t think that a regulator can force competition. They can require Charter to build new network, but they can’t really make them act competitively in the same manner that some smaller fiber provider would act. A competitor has to be hungry to be competitive and it’s hard thinking that this requirement is going to make Charter show up in new markets and act like a competitive overbuilder.

The smaller ISPs are worried because they suspect that Charter will pick their markets to meet their requirement rather than going up against Comcast or Mediacom. And there is certainly a good chance they are right. I am sure that Charter really does not want to create bad blood between them and the other large cable companies. Together these companies own Cable Labs. Comcast and Charter both own a piece of Hulu. They do not want to be out marketing against each other if that can be avoided. And so Charter is likely to select smaller markets where either small cable companies or telcos are the primary ISP.

I really have to ask what good this requirement does in the long run. If Charter’s heart is not in this they will muddle through competing in the new markets and they won’t do well. Some customers in those markets may benefit by the newly created competition, but then again Charter may decide to not compete on price. One might suspect that in the sixth year of the new venture that Charter might be selling off these new networks to somebody else.

My gut tells me that you can’t force a company to be competitive when it’s against their nature. I am sure there is a lot of groaning in the departments of Charter that are being tasked with completing this requirement. But the company will choose some markets, probably close to where they already have headends, and they will build new networks until they pass a million and one potential customers. They may or may not make enough money to pay for these new networks, and at some point they will walk away from the venture if it’s a financial failure. I may be wrong, but this doesn’t feel like an idea aimed towards success.

How’s Your Competition Doing?

comcast-truck-cmcsa-cmcsk_largeA large percentage of my broadband clients compete against some of the biggest ISPs in the nation – either the big telcos, the big cable companies, or both. And so it’s worth taking a look from time to time to see how those big companies rate in terms of comparative customer service. The 2016 ASCI (American Customer Satisfaction Index) was recently released and reveals some of the following things about the biggest players in the telecom space:

The ASCI survey each year talks to 70,000 customers about more than 300 large businesses in 43 industries and 10 economic sectors. The survey gives each company a grade on a scale of 100.

As a sector both ISPs (overall rating 64) and Cable TV companies (overall rating 65) are still the two lowest rated sectors within the overall survey. To put those ratings into perspective there are a number of industry segments at or above a rating of 80 such as full-service restaurants, credit unions, household appliance makers and shipping companies.

ISPs as a whole are up slightly from an overall rating last year of 63 to a rating now of 64. There was a lot of change in positions of the big companies. Verizon FiOS is the highest rated company and went from a 68 rating in 2015 to a rating of 73 this year. At the bottom of the scale is Frontier Communications that fell from 61 last year down to a 56 rating for 2016. The other big gainers were Time Warner Cable (58 to 66), Bright House Networks, (63 to 67) and Charter Communications (57 to 63). The other big loser for the year is AT&T U-verse which dropped from the highest rated in 2015 of 69 to 64 this year.

Cable companies overall improved slightly last year from 63 to 65. But most companies stayed about the same except for moves upward by Comcast (54 to 62), Time Warner Cable (51 to 59) and Suddenlink (57 to 62). Verizon FiOS continues to top the list with a 70 rating with AT&T U-verse just behind at a 69. It will be interesting to see how the Charter / Time Warner Cable / Bright House merger will change these ratings for next year. I’ve read several industry analysts that predict that customer service at those companies will suffer during the transition. As might be imagined, cable customers are pretty happy overall with things like picture quality but the survey showed that they are very unhappy with the call center experience.

Perhaps the most surprising change this year among big companies was the noted improvement of satisfaction for Comcast. Last year they were dead last among cable providers and 2015 saw a rash of negative news articles about customer service fiascos. Comcast says every year that they are taking steps to improve customer service, but perhaps they are finally starting to make some changes that are noticeable to customers.

In the telephone world Vonage leaped to the top of the list moving from 73 to 78. What I find interesting is that everybody else rated between 64 and 72 – not a lot better than the cable companies. I wonder if that rating reflects general dissatisfaction with the telephone product or with these large companies in general.

One thing this survey does every year is to remind us how poorly the general public views the big telcos and cable companies. The industries consistently rate at the bottom for all major industries – far below banks, insurance companies and hospitals.

But these ratings also remind us that it’s possible for these larger companies to get their act together to provide better customer service. I know one of the most dreaded events in our household is having to make a call to Comcast. But the last few times my wife called she said it ‘wasn’t so bad’, and perhaps that explains their improved satisfaction score.

There are certainly new tools and technologies coming to customer service that ought to make customers happier. Companies that provide alternate ways for customers to communicate without having to talk to people are finding that this makes a significant segment of their customers happier. And it looks like we are on the verge of getting some fairly intelligent AI agents to handle routine customer inquiries, and that, sadly, will end the very entertaining news articles about the outrageous things said by Comcast service reps. But it might improve the customer service experience.

Raising Cable Rates

comcast-truck-cmcsa-cmcsk_largeIt’s that time of the year when the large cable companies all raise their rates. In a time with increasing programming costs every cable provider needs to raise rates annually. I know that a lot of small cable providers are loath to raise rates, but if you have to do it then it’s worthwhile to look first at what the big companies are doing. Following is a summary of the rate increases that have been announced so far this year:

Comcast as usual looks to have one of the largest rate increases. They announced an overall increase of 4%, but the details seem to show something larger. The company is raising the rate on double-play packages by $3 to $4 per month. They are also raising the ‘broadcast TV fee’ from $3 to $5. This is a fee that really ought to be included in cable rates which they have broken out as a separate charge to supposedly cover the cost of paying for local network retransmission fees. That makes their overall increases to be between $5 and $6, which is hard to reconcile with the 4% increase statement. But perhaps some of the increase is being counted as broadband increases. It’s really hard to know how these big companies think about the components of their bundles, and all that really matters to customers is how much their bill goes up.

Comcast did cut the cost of HBO from $21.95 to $15 to match the price for HBO’s direct online product. This is an interesting cut that some other large companies are matching. Perhaps this was one of HBO’s reasons for putting their network directly online. You would think that lower prices at the cable companies ought to increase HBO customers.

Time Warner Cable looks to also have a sizable rate increase. They raised the prices of cable packages between $2 and $4 per month. They also increased their broadcast TV fee by $1. Time Warner has broken out a sports programming fee as a separate billing item – something that also ought to be included in the cable prices – and raised this rate by $2.25 per month, up to $5. There are also small increases on settop boxes.

Cablevision says their average increase will be $3 per customer. That includes a $0.85 increase in the settop box rental fee. Their sports surcharge is going up $1 to $5.98.

AT&T is increasing the cost of all bundles by $2 per month. Several Spanish packages are going up between $3 and $4. The company increased its ‘broadcast surcharge’ by $1. While not TV, the company is increasing its voice product that includes 250 long-distance minutes by $2 to $27. I haven’t seen an increase in voice prices for a while. I also find it interesting that the company with the largest voice network is charging more for a package with 250 long distance minutes than most companies charge for unlimited LD.

DirecTV increased rates across the board. Their lowest tiers are increasing by $2 per month. Their ‘Choice’ and ‘Xtra’ bundles will go up by $4 and their largest package will increase by $8. They are also increasing the broadcast TV fee by $0.50, up to $6.50.

Dish Networks is increasing rates significantly. Most packages including ‘America’s Top 120’, ‘America’s Top 120 Plus’, ‘America’s top 200’ and ‘America’s Top 250’ are going up by $5 per month. This will be a relief to rural systems that compete against them. Their smallest package is going up $2 per month while their ‘Everything’ package is going up $8 to $140 per month.

Charter hasn’t announced any rate increases and may not do so until the expected merger with Time Warner Cable.

Verizon also hasn’t announced increases yet for its FiOS TV products, although increases are expected.

New Skinny Bundles on the Horizon

television-sony-en-casa-de-mis-padresAll of a sudden I am seeing the term skinny bundle all over industry press. The term refers to web video programming offered by a company that is already somehow in the telecom business, with the inference that it’s probably only available to their own customers. The line between skinny bundles and OTT programming like Netflix is likely to get blurred over the next year as a few of the skinny bundle providers make their packages available to everybody.

It seems like all of the largest cable companies and telcos either have skinny bundles or are working on them. In a recent blog I talked about the Comcast skinny bundle they are calling Stream TV. It’s a lineup containing mostly major network channels plus HBO. It’s likely to be controversial because Comcast wants to exclude usage on the bundle from any data caps while counting data usage for watching Netflix and other OTT offerings.

As has been anticipated since they bought DirecTV, AT&T plans to launch their skinny bundle in January. The company hasn’t released the details yet but recently gave some hints about what might be in it. For one thing, through DirecTV the company has the ability to air current season shows, including the latest episodes. AT&T may be offering different options to wireless and wireline customers. CEO Randall Stephenson was quoted recently saying that the bundle will “turn some heads”, but I guess we’ll have to wait until January to see what that means.

Their chief rival Verizon Wireless launched Go90 earlier this year. The package is an interesting mix that Verizon says is aimed at Millennials. Verizon describes the package as halfway between YouTube and Netflix. It has a lot of unique content produced by YouTube stars but also carries some traditional programming content. The service is currently free to Verizon wireless subscribers but is expected to soon have a premium tier.

On the landline side, Verizon offers a package called Custom TV. That bundle is sold in combination with 25 Mbps Internet service for $65 a month, and includes a lineup of about 35 channels plus a few additional add-ons options available. The package has been so popular that Verizon reports that one third of their new customers in the second quarter of this year opted for the skinny bundle. While Verizon says that might hurt revenue targets, they affirmed what many have thought in that they expect sales of skinny bundles to increase the bottom line. It makes sense that the skinny bundles, while smaller, are more profitable than the giant bundles of hundreds of channels.

CenturyLink has also announced that they will launch a skinny bundle in early 2016. They say that their main motivation is to sign up new customers without the need for a truck roll, and so they might offer both a skinny bundle as well as the full TV line-up over the web. This will save them on settop boxes and other costs associated with being a full-service video provider.

There are other companies also considering skinny bundles. For instance, Frontier has reported that they are talking to programmers about skinny bundle options. There was an announcement in October that Tim Warner Cable was trialing a skinny bundle but I haven’t seen any press on that since then. CEO Rob Marcus has been quoted several times in the last six months saying that he doesn’t think his customers are looking for a cheaper alternative.

We’ll have to wait a while to see what kind of interest the public has in the skinny bundles. The companies like Verizon that have already launched skinny bundles are not reporting customers counts for the new products, making it hard for the rest of the industry to understand the customer demand.

The skinny bundles are clearly an attempt to try to keep cord cutters on the big company networks. But just about all of these big companies publicly say that cord cutting is not a concern for them. There has to be some concern that offering smaller bundles will invite customers to downsize, but if what Verizon admits is true, it might be that there is more profit in skinny bundles than in the giant cable packages – in which case you can expect to see more skinny bundle options.