An Ignoble Experiment

2. Time Warner Cable countersues L.A. over franchise fees

U.S. multichannel video programming distributors (MVPDs) posted their strongest quarterly customer growth numbers in years, adding a total of 202,670 customers in the first three months of 2014.

Quarterly U.S. pay-TV subscriber additions. Click here for a larger view. (Source: IHS)

Cable customers fell by 132,330 during the quarter ended March 30, but it marked the lowest number of losses since the first quarter of 2011. In the last two years, according to IHS Technology, the cable industry has been losing an average 480,000 customers per quarter.

"The first quarter is generally the best time of the year for the U.S. cable market, and the start of 2014 was no exception," Erik Brannon, senior analyst for television media at IHS, said in a prepared statement. "Cable achieved its best quarter in years. However, the negative outlook for cable remains the same, as it is expected to continue to contract as AT&T's (NYSE: T) IPTV service is anticipated to keep gobbling up subscribers. Cable's renewed strength could be foreboding for satellite players Dish (NASDAQ: DISH) and DirecTV (NASDAQ: DTV)."

Comcast (NASDAQ: CMCSA) and Time Warner Cable (NYSE: TWC), which are currently trying to tie the knot, both had strong first-quarter gains with Comcast adding 24,000 video customers, the second straight quarter of positive video subscriber growth for the company. Time Warner Cable still lost customers--34,000--but that's big improvement over the 118,000 loss the MSO experienced in the first quarter of 2013, IHS data showed.

At the same time, Dish Network added 40,000 subscribers, thanks to a marketing push of its Hopper/Sling box. DirecTV signed on 12,000 new customers during the first three months of 2014. AT&T and Verizon (NYSE: VZ), combined for the weakest quarterly IPTV subscriber growth since 2007. AT&T and Verizon collectively generated video subscriber additions of 258,000, compared to 401,000 in the first quarter of 2013.

With its FiOS buildout almost complete, Verizon is looking at fewer video customers going forward, having added just 57,000 new customers in the first quarter compared to 169,000 new additions in the first quarter of 2013.

AT&T's U-verse, however, ended the first quarter of 2014 on an upbeat note. The company continues to acquire customers at a white lightning pace, having picked up 201,000 video subscribers during the quarter. With a larger footprint than FiOS, an aggressive buildout, and a video penetration at only 21 percent, AT&T has plenty of room to grow, IHS said.

For more:
- see this IHS release
- Broadband TV News has this story
- Advanced Television has this story
- Rapid TV News has this story

Earnings summary: Cable and IPTV in the first quarter of 2014

Read more about: first quarter earnings 2014
back to top

This week's sponsor is Digital Adware.

By K.C. Neel

Comment |

3. Tech companies object to FCC's net neutrality proposal

Time Warner Cable (NYSE: TWC) is countersuing the City of Los Angeles after the city filed suit against the MSO claiming Time Warner Cable owed the city millions of dollars in unpaid franchise fees.

The city sued Time Warner Cable in March, claiming the MSO owed the city $2.5 million in franchise and PEG (public, educational and government) fees from 2007-2008 as well as $7.2 million in fees between 2010 and 2011. Time Warner Cable's counterclaim, filed in federal court on Thursday, argues the MSO has collected PEG fees from its customers since 2009 but argues that millions of those dollars have not been used to construct TV facilities as promised.

"The city already has collected from TWC and its customers 5% of its gross cable revenues in 'franchise fees,' the federal and state maximum, as well as an additional 1% of gross revenues in PEG fees since 2009," Time Warner Cable said in its suit. "Not only do TWC's customers not owe the city any more money; they are entitled to refunds of overpayments to the city."

Franchise fees and how municipalities use those funds have long been controversial, with some cities creating elaborate local origination studios and others putting the money collected by cable companies into their general funds. The funds have allowed communities to install high-definition cameras with digital editing suites, turning once primitive studio spaces into full-blown studio centers. But some customers have questioned the value of those fees and the uses of those studio production facilities.

For more:
- see this Variety article
- see this Boston Globe article

Read more about: Franchise Fees, City Of Los Angeles
back to top

By K.C. Neel

Comment |

4. Harmonic touts distributed CCAP that pushes delivery into the network

It didn't take long for tech companies big and small--including Amazon (NASDAQ: AMZN), Google (NASDAQ: GOOG) and Yahoo--to rally against the FCC's proposed net neutrality rules that would allow broadband providers to charge a fee for a fast lane on the Internet. The companies said the new rules would hurt consumers and industry competition.

"Consumers should not be denied highest quality access to the content of their choice because of discriminatory deals cut by their broadband Internet access provider," Paul Misener, Amazon's vice president of global public policy, told the The Wall Street Journal. "A strong non-discrimination rule is needed."

Tech giant Amazon joined other companies including Google and Yahoo in a letter earlier this month opposing the FCC's previous proposal. But critics claim it's really smaller companies that will really be hurt if the new rules are implemented. Technology-investment firm Union Square Ventures used a mock pop-up ad on its website Thursday to criticize the proposed FCC rules and two of the biggest broadband companies.

"Please wait while we prioritize traffic from our preferred partners," reads the pop-up message, as the Union Square website appears to slow to a crawl. The message shows logos from Comcast (NASDAQ: CMCSA) and Time Warner Cable (NYSE: TWC) and urges Web visitors to sign a petition to Congress in opposition to the net neutrality rules.

Meanwhile, in a blog post on Thursday, Comcast executive vice president David Cohen said the MSO has no plans to launch any new data usage policies at this time, noting the company recently suspended its 250-Gigabyte-per-month excessive use policy in 2012. Still, the company has pushed for fees on deals where providers like Netflix can directly connect to Comcast's network and is currently testing usage-based policies that link soft monthly caps with overage fees in a handful of markets including Atlanta. Customers are fitted with a monthly limit of 300 GB per month before they face a $10 charge for each additional 50GB they consume.

Other operators including Charter Communications (NASDAQ: CHTR) and Mediacom Communications were keeping their options open, according to WSJ, while Verizon (NYSE: VZ), whose legal challenge against the FCC's last attempt at regulating the Net led those rules to be struck down by a federal appeals court earlier this year, has pushed for the right to charge an extra fee for a fast lane.

"For the FCC to impose 1930s utility regulation on the Internet would lead to years of legal and regulatory uncertainty and would jeopardize investment and innovation in broadband," Randal Milch, Verizon's general counsel, said in a prepared statement.

Hardware companies also weighed in on the proposed rules. In a letter to the commission, Cisco Systems CEO John Chambers said it's important to protect end users and content providers from "unwarranted blocking," urging the commission against implementing any additional regulation that could slow innovation.

For more:
- The Wall Street Journal has this story (sub. req.)
- Business Week has this story
- Multichannel News has this story

Read more about: net neutrality
back to top

By K.C. Neel

Comment |