An Ignoble Experiment

2. NY governor promises 'hands-on review' of Comcast-Time Warner Cable

Potential partners Comcast (NASDAQ: CMCSA) and Time Warner Cable (NYSE: TWC) were cellar dwellers in both the pay-TV service provider and ISP category of the recent American Customer Satisfaction Index (ACSI) of communications industries. Comcast nailed a pay-TV score of 60 and ISP score of 57, and TWC came in at 56 and 54 respectively on a 100-point scale.

Recently betrothed AT&T (NYSE: T) and DirecTV (NASDAQ: DTV), meanwhile, did a little better, both topping the subscription TV index at 69 and, with DirecTV lacking a broadband arm, scoring a respectable 65 as an ISP.

Overall, ISPs dropped 3.1 percent to an overall score of 63 while subscription TV dropped even more precipitously--4.4 percent to 65. The two industries ranked worst among 43 tracked by ACSI.

Consumers were specific in their complaints, showing delivering scores for pay-TV service (60 points) than fiber optic and satellite (68). DirecTV (-4 percent) and AT&T (-3 percent) tied atop the ACSI heap at 69 points followed by Verizon (NYSE: VZ) FiOS (68), Dish Network (NASDAQ: DISH) (67) and cable's top scorer Cox Communications (63).

Comcast fell 5 percent to 60 and Time Warner Cable slipped even further, down 7 percent to 56.

"Comcast and Time Warner assert their proposed merger will not reduce competition because there is little overlap in their service territories (but) it it's a concern when two poor-performing service providers combine operations," David VanAmburg, ACSI director said in an organization press release. "ACSI data consistently show that mergers in service industries usually result in lower customer satisfaction, at least in the short term. It's hard to see how combining two negatives will be a positive for consumers."

Cable TV providers did well compared to ISPs (who, again, could be the same companies). Their satisfaction rating fell 3.1 percent to take last place in the index with a 63. FiOS, which isn't going into any new territories, led the category with a 71, topping AT&T, CenturyLink (NYSE: CTL) and the "aggregate of other smaller broadband providers" six points below at 65. Cox again was the best of the cable bunch, even though its average fell 6 percent to 64. Comcast was down 8 percent to 57 and Time Warner Cable even worse, down 14 percent to 54.

"In both industries, the two providers have the weakest customer satisfaction," the press release noted.

Perhaps rubbing salt in the wounds--if there are any--is that customers are increasingly happy with cell service, once jokingly called the industry that made bad service acceptable. Ratings there rose 2.6 percent to a new all-time high of 78, buoyed by the growth of smartphones which "have much higher levels of customer satisfaction," the press release stated.

For more:
- see this press release

Read more about: DirecTV, Time Warner Cable
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By Jim Barthold

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3. ACA, NAB question growing industry consolidation in wake of AT&T-DirecTV merger news

Even as AT&T's (NYSE: T) $48.5 billion bid to acquire DirecTV (NASDAQ: DTV) momentarily diverts attention, New York Gov. Andrew Cuomo is promising a laser focus on a more immediate matter: whether Comcast (NASDAQ: CMCSA) should be allowed to acquire Time Warner Cable (NYSE: TWC).

Cuomo (Source: NY State)

In a public announcement, Cuomo promised that the New York State Public Service Commission will flex its new regulatory muscles to conduct a thorough investigation into the proposed merger with the goal of determining whether it's good for New York customers and the state itself.

"The state is taking a hands-on review of this merger to ensure that New Yorkers benefit," Cuomo said in a Saugarties Post Star story, noting that the commission's actions "will help protect consumers by demanding company commitments to strong service quality, affordability and availability."

Both companies were recently raked over the coals in the latest American Customer Satisfaction Index (ACSI) ratings of telecommunications companies and PSC Chair Audrey Zibelman, without specifically citing those results, made it clear that New York takes customer satisfaction seriously.

"To determine whether the proposed transaction is in the public interest, the commission will examine the proposal to ensure services the merged company would provide will be better than the service customers currently receive," she said.

Time Warner Cable casts a big shadow in the Empire State, delivering triple play services to about 2.6 million subscribers, with customer clusters in Buffalo, Rochester, Syracuse, Albany and in New York City, the boroughs of Manhattan, Staten Island, Queens and parts of Brooklyn.

While New York is questioning whether the merger is good for its citizens, Forbes contributor Ronald Klingeabiel questioned the merger itself.

Comcast, Klingeabiel suggested, should more sensibly have targeted T-Mobile US (NYSE:TMUS) and Sprint (NYSE: S) should have targeted Time Warner Cable because "regulators would be happier with this configuration and it makes strategic sense, too."

Arguing that broadband is the glue that ties wired and wireless services, Klingeabiel suggested "Comcast might be better advised to expand into mobile, going beyond its recent contemplation of more Wi-Fi provisioning," adding that "Sprint might have the financial backing to acquired fixed carriers itself, perhaps TWC."

For more:
- Forbes has this story
- The Saugerties Post Star has this story

Read more about: Comcast
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By Jim Barthold

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4. Netflix's Hunt sees TV future without commercials, cable bundles

In trying to acquire DirecTV (NASDAQ: DTV) for $49 billion, AT&T (NYSE: T) perhaps deliberately has opened itself up for the same level of criticism and scrutiny as Comcast (NASDAQ: CMCSA) in its ongoing quest to acquire Time Warner Cable (NYSE: TWC) for $45.2 billion.

Polka (Courtesy of ACA)

In fact, the suggested merger between the telco and satellite provider has only reinforced existing doubts for many about industry consolidation.

"ACA is troubled by the consolidation wave within the video subscription marketplace, highlighted by the Comcast-Time Warner Cable deal, the Comcast-Charter Communications (NASDAQ: CHTR) transactions (to trade and sell off subscribers) and now AT&T's proposed takeover of DirecTV," Matt Polka, president-CEO of the American Cable Association summed in an organization announcement.

The AT&T proposal, which Polka said "merits the closest scrutiny by the Department of Justice and the Federal Communications Commission" makes it "increasingly clear that Congress and the FCC simultaneously need to take a comprehensive look at the market that will exist if all these deals are approved and to decide whether existing rules that govern the current market are sufficient for the new industry order."

Polka was joined by Sen. Al Franken (D-Minn.), an ardent opponent of Comcast-TWC, who attacked the AT&T deal on the belief that it will lead to higher prices and less innovation. Franken made his remarks on CNN before the latest deal was announced, TechCrunch reported.

Both were joined by another Beltway insider, the National Association of Broadcasters which, in a statement attributed to Communications EVP Dennis Wharton suggested the merger "demands a hard look in an increasingly consolidated broadband and pay television marketplace."

NAB, of course, ground its own axe as well, noting that a decreased cadre of competitors in the pay TV marketplace doesn't jive with "increasing regulatory restraints on local TV stations--truly benefits consumers."

Also before the deal broke, word was leaked that the Comcast-TWC deal would be a "topic of conversation" between members of the House Communications Subcommittee and FCC Chairman Tom Wheeler, Broadcasting & Cable reported.

It's likely that AT&T's proposed deal will "draw some attention" as well, a Democratic subcommittee aide told the publication.

On the other side of the coin, B&C further reported that Herring Networks One, America News Network, and A Wealth of Entertainment came down in favor of the AT&T deal because it would provide more competition to Comcast and Time Warner Cable.

For more:
- see this ACA press release
- TechCrunch has this story
- Broadcasting & Cable has this story
- and this story
- NAB has this statement

Read more about: Time Warner Cable, ACA
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By Jim Barthold

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5. IPTV providers want set-tops with 802.11ac by 2015, report says

Netflix (NASDAQ: NFLX) Chief Product Officer Neil Hunt has seen the future of TV, and it doesn't include commercials.

Hunt (Image source: Netflix)

Speaking at Internet Week New York, Hunt said that TV's future will include unbundled cable packages, more personalized content and the end of commercials.

"Linear TV is ripe for replacement," Hunt said in a story reported by Advertising Age.

The trick is to throw away the traditional scheduled grid of TV offerings and let audiences use Internet TV to aggregate programming in smaller, more personalized bites. It also allows companies like Netflix to break from the mold of building programming within certain time structures--48 minutes with 12 minutes of advertising, for instance--and encourage binge viewing.

"The stories you watch today are not your parents' TV and stories kids watch in 2025 will blow your mind away," Hunt reportedly said.

This, of course, would blow apart the cable bundle and cause a seismic shift in the traditional advertising space, he said.

"Internet TV is divorced of the need to advertising revenue because we can develop direct relationships with the consumer," he said.

This, he fudged, doesn't necessarily mean all commercials will disappear, although "marketers will need to find a different place to advertise." Internet TV will allow targeted commercials for streaming video viewers.

Hunt made his comments on the same day that AT&T (NYSE: T) announced its intention to acquire DirecTV (NASDAQ: DTV) for $48.5 billion, because, as AT&T Chairman-CEO Randall Stephenson put it, "Traditional pay TV is a very good durable business in and of itself and financially this is a good transaction on that basis alone."

Stephenson's analysis of the future of television seems to go counter to the points Hunt was making. While the Netflix exec assailed the bundle, Stephenson embraced the idea, taking it a step further to include a bundle of services that link back to the TV viewing experience.

"We think it's what customers expect and we're adding the premium video provider in the industry by far," Stephenson said.

For more:
- Advertising Age has this story

Read more about: cable bundles, AT&T
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By Jim Barthold

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