Tag Archives: broadband

AT&T Expansion and DirecTV Merger

AT&T and Direct TV Logos

In 2014 AT&T and DirecTV announced a merger worth almost $50 billion dollars. While this proposed deal would provide a new way for AT&T to expand its footprint, the process had been stuck in the approval phase for months, although after FCC Chairman Tom Wheeler recommended last week that the deal move ahead, industry experts now believe that it will be approved formally within ten days. It appears that the main sticking point had been ensuring that AT&T adheres to the new FCC rules pertaining to broadband speeds. While this impasse persisted, AT&T was forced to file for two extensions to close the deal, the most recent only a few weeks ago.

When the deal does receive final approval, it will make AT&T the largest TV provider in the nation and will give DirecTV customers access to broadband services. Two recent filings to the FCC detail parts of AT&T’s plan to address the Department of Justice’s concerns that the merger may create a TV and broadband monopoly. The first filling stipulates that lower and middle income families will have access to DSL services, if available, at discounted prices. Upon further review of the filling, however, there are major limitations on this provision. In particular, the program will continue for only four years and for the more remote locations, will only provide speeds of 1.5 Mbps, which is too slow to support streaming services like Hulu Plus or Netflix. This low speed option has caused experts to speculate this is a different tactic in video slowdown and wonder if AT&T will be in full compliance with the Net Neutrality ruling if they do not improve this aspect of their proposal. Prices for this service would range from $5 to $10 per month, while a higher tier with speeds up to 5 Mbps would cost $10 to $20 per month.

The second filing to the FCC also addresses coverage issues, but deals with fiber internet customers. As part of its proposed merger, AT&T has promised that it will extend its 1 Gbps fiber footprint to almost 12 million businesses and homes within the next four years. This announcement comes on the heels of one made in April 2015 that AT&T was looking at nearly 100 cities where they might roll out fiber service, including Chicago, San Francisco, and Atlanta. As mentioned in the new FCC filing, AT&T has now added a new focus on the state of Florida, in particular the cities of Miami and Fort Lauderdale. The company will draw on its recent successful expansion in the state of Texas, particularly around Dallas and Austin, to implement an efficiency plan to bring its GigaPower fiber service to the Sunshine State by the middle of 2016. Whether or not these efforts are enough to alleviate any lingering concerns still held by the Department of Justice should become clear by the middle of August 2015.

 

Verizon FiOS Growth and Verizon’s Streaming Video Service

Combined Verizon and AOL logos.

Analysts remain conflicted over the potential growth of Verizon FiOS as 2015 continues. New subscriber projections suggest there will only be around 90,000 additions during the second quarter, which are 25,000 fewer than had been anticipated. To put these totals in perspective, for the same period of time in 2014, FiOS subscribers increased by over 135,000. However, despite these underperforming totals, the expansion of Verizon FiOS, especially in parts of New York, Texas, and New Jersey, is expected to increase substantially over the next eighteenth months.

 

Even if FiOS numbers remain down, one of the reasons that observers are optimistic about Verizon’s financial growth over the long haul is that it plans to release its own video streaming service by September 2015. Over the past few months, Verizon has reached agreements with a number of content providers and is continuing talks with even more. While the initial target is to provide around 25 channels to subscribers, including content from Comedy Central, MTV, Food Network, HGTV, and the Travel Channel, the yet-unnamed service will also include video shorts produced by AwesomenessTV, a subsidiary of DreamWorks. While these offerings will whet the appetite of many consumers, Verizon has made clear that it is especially interested in a younger demographic. As a result of this focus, it has established agreements with ESPN, the ACC Network, CBS Sports, and 120 Sports. Content from these networks will include some NFL, college basketball, and college football games, but broadcast restrictions will apply.

 

Although complete details of the Over the Top (OTT) streaming service have not yet been announced, it is clear that Verizon plans to have an ad-based model, similar to what Hulu Plus does, compared to the pure subscription model used by Netflix. While Hulu Plus has not enjoyed the same subscriber growth as Netflix, Verizon hopes to change this by benefiting from its recent purchase of AOL. Since its days of providing users dial-up internet access, AOL has transformed itself into a leader in online advertising. Survey results produced by the advertising industry have shown that AOL is successful in reaching a target audience more than 55% of the time, a figure that is the envy of all advertisers besides Google. Another aspect tied to the success of the ads on the new Verizon service is that the company hopes users will enjoy the content not only at home, but also on their mobile devices. This means streaming over Verizon’s existing wireless network while consuming a lot of data. However, realizing that the threat of data overage fees may turn off some consumers, Verizon has established an agreement in which the advertisers will help subsidize part of the cost for data used while viewing video content.

 

Time Warner Cable Mergers and Net Neutrality Expectations for Charter

Charter Communications and Time Warner Cable logos combined.

A little over two months ago a proposed merger between Comcast and Time Warner Cable (TWC) was called off. Almost no time passed before Charter Communications entered into an agreement to purchase TWC for roughly $57 billion. As the calendar turns to July, there remains a certain level of uncertainty surrounding the details of this proposed purchase, as well as how the FCC will respond to the bid.

 

Early after its announcement in 2014, the bid by Comcast to purchase TWC was considered a long shot. Claims from within the broadband community, consumer advocate groups, and the public all made it clear that they were concerned with the creation of what would have been the largest TV operator in the United States. Even the Chairman of the FCC, Tom Wheeler, expressed his opposition to the merger. Wheeler’s main point of contention, however, was that if the purchase were allowed to proceed, it would create an unfair competitive advantage for Comcast in the broadband market. In particular, the company would have enjoyed a controlling share of almost 60% among broadband providers. Ultimately it was this near monopoly, coupled with the lack of any penalty fee for ending the agreement, which caused Comcast to back out of the deal.

 

Drawing lessons from the failed deal between Comcast and TWC, Charter has begun to promote how its proposed purchase of TWC will not alter the television or broadband playing field on the national stage. The CEO of Charter, Tom Rutledge, has stressed that even if his company is successful in acquiring TWC and Bright House, the newly expanded company will still be only the second largest provider of cable and high speed internet services behind Comcast. At most, Charter would supply about 20% of all TV customers and 29% of all broadband customers. Another issue that Charter does not need to address is that unlike Comcast, which has a financial interest in Hulu, there is no concern that Charter may regulate speeds for video streaming services, such as Netflix or Amazon Prime.

 

Charter is also drawing on the FCC ruling which made broadband a Title II utility as a reason for why its proposed merger should be approved. Rutledge made clear that the footprint of the expanded company would not overlap geographically and that there would remain competition for broadband services offering 25 Mbps in all of its coverage areas. Additionally, he stated that since the majority of the company’s investment is in broadband, not television, it would encourage the expansion of Over the Top (OTT) streaming video services and not impose any sort of data cap on customers. Indeed, subscribers with the new Charter, if the merger is approved, could see significant savings on their broadband subscriptions as their speeds are tripled while their monthly bill is lowered.

 

While the merger works its way through regulatory checks, industry analysts appear confident that the deal will occur. The latest suggestions are that there is a 75% chance that the deal is approved. The FCC has announced that they hope to have this process decided, in favor or opposition of the merger, by the end of 2015.

 

FCC Reclassification, Broadband Access, and OTT: Does it Mean Anything?

Collection of rainbow-colored internet cables

One of the biggest hassles that people experience when they move is finding new cable and internet providers. While there are a bevy of cable packages to choose from, the options for broadband providers are not always as plentiful. With the recent FCC decision to reclassify broadband as a Title II utility, coupled with its change in what constitutes broadband, services with speeds of 25 Mbps or higher, the process of selecting a provider by a new homeowner has gotten even harder. The issue at hand is that for the vast majority of American households, there is only one, if any, Internet Service Provider (ISP) that can supply true broadband. The latest statistics are that 19.7% of American households do not have access to an ISP offering the 25 Mbps speed, while 54.3% have access to only one such ISP.

 

While the broadband provider issue appears to be changing with the development and expansion of fiber networks throughout the country, Roger Lynch, CEO of Sling TV, is stressing that consumers may see an increased strain on their finances as they purchase internet access. In particular, Lynch believes that those consumers who are broadband-only subscribers, the type who thrive in the expanding Over the Top (OTT) ecosystem of Netflix, Amazon Prime, and Hulu Plus, will feel the pinch as cable companies attempt to offset their loss of TV subscribers by raising the price on single-use consumers. While OTT-only dwellings remain a small part overall, the percentage is growing and has now reached 10.5 million households, up over 15% from 2012. This expansion is occurring at the same time that pay TV subscriptions have declined over 0.5% since the start of 2015, the largest decline ever recorded.

 

Although Lynch’s claims must be taken with a grain of salt, considering that Sling TV is a subsidiary of Dish Network and a competitor to the cable companies, there is no denying that the new OTT offering is seeing early growth. Since its February 2015 launch, the $20 per month service has expanded to over 250,000 customers. While this is a fine showing, it is not a surprise to industry analysts who predicted a fast start but see Sling TV’s subscription numbers slowing down quickly. With its focus on offering smaller channel bundles and the option to add other thematic bundles for an additional cost per month, Sling is trying to develop its own niche, no doubt assisted by the existing relationships that Dish Network enjoys with broadcasters. However, Sling’s sustained growth, especially from those consumers interested in a variety of sports offerings, of which the OTT service has limited access, remains the question.

 

Ultimately, all of the talk about falling pay TV customer totals, increasing costs for broadband-only subscribers, and the increase of OTT offerings means that consumers need to be aware of what services are available in their area before they sign a lease or close on a home.

Video Streaming Services Cut into Cable Subscriptions

Hulu Plus and Netflix logos

The way that consumers watch television and movies is changing. For the last few years attention has focused on the members of the ‘cord cutting generation’ who do not want to pay for cable television service. To fill in this void there have been two major developments: Subscription Video on Demand (SVOD) services, like Netflix and Amazon Prime, and Advertising Video on Demand (AVOD) services, like Hulu. Although these are the services most people are familiar with, there are other providers in the ever-growing Over The Top (OTT) service industry. Recent statistics related to this burgeoning industry suggest that cable companies need to act quickly and change the way they present their future content if they want to remain viable in the face of OTT competition.

 

Cable providers have looked cautiously at the latest  quarterly earnings release for the industry which the Leichtman Research firm says provides no concrete evidence that consumers are preparing to switch over completely to OTT and leave behind pay TV. However,  other experts claim that these findings undervalue the record low customer growth of only 10,000 across all the major cable companies. Parks Associates, another research firm, believes it has evidence that cord cutting has reached a new level. The latest estimates are that around 7 percent of American households, approximately 8.5 million homes, have high speed internet and OTT services, yet they are not subscribed to a pay TV service. With this number set to increase there is little wonder that upwards of 84% of all internet usage in the United States by 2019 will involve video streaming. Further supporting the belief that cord cutting is a growing trend, Limelight found in a recent survey that over 50% of the 1220 people they interviewed were willing to go completely OTT and cancel their cable subscriptions.

 

It comes as no surprise in light of all of these recent polls and studies that cable providers are attempting to find new ways to engage with this cord cutting generation. Although TV Everywhere systems have been developing for the last half decade, new providers are throwing their hats into the ring, including Sky, Rogers Communication, and Dish Network. The hope of these companies is that they will be able to tap into the OTT market while recent changes in local regulatory practices will allow them to lure some consumers back to traditional cable packages. With less overview necessitating uniform programming packages in the same geographic region, it is possible that cable providers will create even smaller, more focused packages to convince people to not cut the cord. In the meantime, it is a prime market for consumers to shop around and determine what channels and programs are most important to them, whether or not they need a cable subscription, and if they can go fully OTT.

 

Fiber footprint increases while prices drop

A bundle of optical fibers.

 

As the review process for the proposed Charter purchase of Time Warner Cable continues to advance slowly, internet users around the United States are seeing more rapid gains in the expansion of fiber options. While Google Fiber has been one of the major leaders in this expansion, CenturyLink and AT&T have also been making gains. Throwing its hat into the ring now is Comcast, which is trying to differentiate itself from the competition.

 

While the current speed people can expect from fiber is around 1Gbps, Comcast is doubling this and offering speeds of 2 Gbps. Known as Gigabit Pro, these services will be offered to households in parts of Tennessee, Florida, California, and Georgia. Ultimately, the goal is to bring these services to around 20 million homes by the early part of 2016.

 

The latest reports indicate that Comcast is expanding its Gigabit Pro service area to include more of the Midwest and western United States. Regions of Minnesota, Texas, Colorado, Utah, Washington, and Oregon will soon be able to enjoy speeds twice as fast as other service providers in the state. This latest round of expansion has industry insiders buzzing that Comcast has invested more heavily in its fiber infrastructure than previously believed. In addition to their Gigabit Pro service, Comcast plans to launch Extreme 250 by the end of the year. This service will offer speeds of 250 Mbps.

 

Although their speeds may lack what Comcast will soon offer, CenturyLink continues to offer its 1 Gbps services in certain parts of the United States. By the end of 2015, they hope to have finished connecting over one million businesses and households to their fiber service. The same is true for AT&T which is expanding its U-verse fiber footprint in Illinois and Tennessee.

 

As more of these services are being offered, prices have been dropping. Initially, AT&T had been pricing its services in the $120 range, but competition has caused them to drop prices in some areas, including in the southern United States, by up to $50 per month. Google Fiber is currently offering its services for $70 to $100 per month. Even though Comcast’s Gigabit Pro provides speeds twice as fast as its competitors, the proposed price of $299 per month may turn off many consumers. What is clear, however, is that unlike AT&T, Comcast has no plans to establish a usage cap on anyone using Gigabit Pro.

 

Sprint throws its hat in support for Title II net neutrality

It looks like telecoms are starting to give up the battle against net neutrality, with AT&T and Verizon claiming earlier this month that network management can be covered under Title II ‘common carrier’ practices, even though the law is currently not in place.

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