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Why offering the Quad Play would help Cable’s Stock Price

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The mobile phone market is growing exponentially and will continue to evolve for years to come. Why has the Cable Industry not moved into the lucrative mobile phone market? It could definitely be a revenue bonanza, as it currently is for telecom companies. See (The cable company will likely use WiMax to bring television shows to cell phones and smart phones.)

Verizon and AT&T’s revenues, as a percentage of stock price by division, attributes mobile phone service up to 40-42% of total revenues. This being a logical assumption as landline phone demand has forced incumbent Telco’s to rethink their business models to include cable, broadband, and cell phone. The mobile market has exploded with smart phone technology and related applications for consumers continually on the go while wanting the latest gadgets to keep up with friends, business, and news. Why has this not attracted at least, some interest from the major cable players like a Comcast, Time Warner Cable, Cox and others? See (TREFIS-Division as a % of Stock Price)

If you look at trending where the future of a Triple Play seems to be relegated to a future 2^nd grade status behind the Quad Play , while seemingly logical that to compete in the telecommunications market for consumer dollars, a one-stop shopping model needs to be in place; one would think some indication of cable companies launching or acquiring mobile service would be on the immediate horizon.

Let’s think this through. The Telecom Industry saw the “writing on the wall” when landline phone service began to decline, and hence forth began to diversify into other markets such as mobile phones, broadband, and cable TV service. It is logical that their upside in both the mobile phone, broadband, and cable TV markets is solid. With cable operators now looking at a possible paradigm shift from traditional cable to other venues, would it not make good economics to put your business on the same playing field with competitors? It would seem logical to me. There is a definite upside in getting into the mobile market for incumbent MSO’s; as in “keeping up with the Joneses’”, or if you prefer, your close competitors. See (From Triple Play to Home Run: Why Your Cable Company Should Offer Cell phone Service)

The Cable Industry has positioned itself to offer a myriad of services within the cell-phone market to other providers, but unfortunately it does not include its own. However having a competitive cell-phone service is more true to a solid success. If businesses fail to see trends that will impact their bottom line, they are doomed to failure. That is why companies must always be looking for a competitive advantage or keep up with existing competitor offerings, while making the best decisions to affect stockholder equity in a positive manner. Yes, revenues and profits may be good in the short term, but a long term strategy is what really matters, and it seems this is too good of an opportunity not to indulge.

Can 4G wireless take on traditional broadband? (reviews.cnet.com)
Could Cable Bills End Up Like iPhone Data Plans? (money.blogs.time.com)
Time Warner Cable 1Q profit up 30 percent as it added Internet, phone, digital cable customers (taragana.com)

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Retrans-Consent: Be Careful What You Ask For!

With the recent battle between Cablevision and Disney over Retransmission Consent in New York regarding WABC-TV carriage on Cablevisions 3.1 million subscribers, and thereby producing a coalition of Cable Providers to petition the FCC to intervene in negotiations, is akin to the saying: (be careful what you ask for).

It seems to me, this is a business market negotiation best handled through competitive market forces rather than asking the FCC to get involved in a dispute between two companies. The (ax can cut both ways) when it comes to oversight of the pipeline distribution and broadcasting industries. Yes, consumers are caught in the middle, wanting pertinent and relevant programming for a reasonable price, while public negotiations and threats of signal cuts dominate the headlines; see (Cable firms seek FCC help in fee disputes).

The issue remains, how much is WABC-TV worth to Cablevision for carriage and distribution of their signal. Retransmission Consent was formulated years ago when broadcast stations wanted assurance that cable companies would carry their local signals, and be compensated for their original programming. In the beginning most broadcasters just asked for Must-Carry, or assurance their signals would be distributed by pipeline providers for 3 years, see (Moody’s expects to see more retrans battles).

Fast-Forward to today and times have changed. Providers are paying substantial sums per month to distribute most of their programming to consumers. Cable Programmers have reaped the benefits of these carriage agreements in producing top-quality programs through carriage fees along with ad supported revenues; a dual revenue model. Broadcasters are struggling to stay afloat with the single, Ad Revenue Model . Therefore, Retransmission Consent has become a battleground for demanding monthly carriage fees, just as most Cable Programmers ask for, and receive. Broadcasters have seen a significant drop in Ad Revenues in recent years along with a lose network subsidies. Without additional revenue streams, broadcasters are looking to lucrative distribution agreements to make up the short-fall.

This is a market demand negotiation, not a regulation matter for the FCC to consider. If Cable Providers want to lessen the impact of these carriage fees, they should consider (Tiering) Broadcast signals to accommodate and moderate fee increases. Yes, if negotiations demand an unreasonable price for most customers, negotiate for the signal to be on a Tier where consumers can pay an extra cost if they value the programming. Some consumers will lose in this scenario, but overall consumer rates would be adjusted for those who can afford the additional cost.

This is not a regulatory issue, but one of market demand and supply. In my opinion the coalition of cable providers should think twice before asking the FCC to intervene in their business negotiations, or risk having regulations that regulate them into non-existence. This is a Free Market System, let it work as intended.

Time Warner Cable to ask FCC for new rules on negotiating programming deals (latimesblogs.latimes.com)
Cable and satellite operators take their case to Congress (latimesblogs.latimes.com)
Cable Companies Petition FCC (online.wsj.com)
Washington weighs in on Disney – Cablevision fight (latimesblogs.latimes.com)

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Fox Vs Time Warner Cable: More Revenues for Fox-Higher Rates for Consumers

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Two giants in the telecommunications industry battle publicly over Retransmission Consent. Both Fox and Time Warner Cable have let cooler heads prevail in their war over money to be doled out in fees to Fox by extending their negotiations beyond the Dec 31, 2009 deadline.

At issue, the Fox owned broadcast networks carried by the Time Warner Cable pipelines. Under Retransmission Consent broadcasters can choose (Must-Carry), where cable operators agree to carry stations throughout the consent period for free, or negotiate for (Advertising) or (Fee-Based) arrangements to solidify carriage. Obviously, Fox has chosen the latter with a proposed $1.00 per month charge per Time Warner Cable subscriber.

Keep in mind that local Fox Affiliates have agreed to terms with Time Warner Cable, which is significantly lower in compensation than the $1.00 fee proposed by Fox owned stations. Evidently Fox views its owned stations in larger markets to be worth much more than its affiliates in smaller DMA’s.

A $1.00 per sub fee to Time Warner Cable for Fox broadcast stations would mean millions of additional expense added to their bottom lines on a per month basis. How will the cost be absorbed? Traditionally, these costs are passed on to customers in increased monthly fees, and with linear programming configurations taking the heat from consumers, as paying for more than they want, Time Warner Cable does not want to take that inevitable backlash. This is evidenced by Time Warner Cable’s website asking customers where they should draw the line.

With broadcasting revenues on a continuing decline, Retransmission Consent negotiations have become a target for broadcasters like Fox to recoup falling revenues. While content is worth money, where do cable companies draw the line on preventing the rising costs? It would seem monetary negotiations should reflect program ratings on a per market basis, i.e. American Idol, and NFL Giants Games and local programming? What is market demand for this type programming?

Unfortunately, this saga has moved to the public arena with both sides trying to sway public opinion. It has become so public that both Senator John Kerry and FCC Chairman Julian Genachowski have stepped in to cool the situation, which serves to highlight the fight over revenue and costs, and consumers disdain for being caught in the middle. So much for public relations!

News Corp.’s Chase Carey tells Sen. John Kerry he’s not interested in arbitration with Time Warner Cable (latimesblogs.latimes.com)
Fox Channels ‘May Very Well’ Disappear from Time Warner Cable, Says News Corp (wired.com)
Time Warner OKs Arbitration With Fox (abcnews.go.com)
Time Warner, Fox Deal Extended (abcnews.go.com)
Why Isn’t Fox Gone From My TV Yet? [The Great Cable Standoff] (gawker.com)
News Corp. network allows signals to continue; Time Warner Cable says ‘up to Fox’ to nail deal (taragana.com)

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Cable Industry: at a Cross-Roads

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Cable providers are looking at a cross-roads with the current climate brought on by a new political landscape, a Democratic Congress, with an FCC mandated to change the future of broadband, and a public viewed skepticism of the Cable Industry.

This adds up to significant changes which might threaten the status-quo of annual rate increases, tiered program blocks, and set-top-box rentals that have plagued the industry with criticism in the past. So, how does the industry change those perceptions and move forward in a new competitive landscape?

With innovations and growth spurred by deregulation of the 1980’s Reagan era, the Cable Industry began a journey starting with wire-line build-outs spurred by terrestrial satellite programming. A phenomenal market emerged for content delivered over the pipelines, which leaped forward with the advent of fiber for better quality, bandwidth, and extended reach to new customers.

This model became so successful it began to come under scrutiny from a public, and then regulators, which perceived an industry with little competition, blocks of programming tied to rate increases, poor service from a lack of forethought, and high profits.

Fast-forward to today with broadband streaming video, alternatives to traditional linear TV, increased competition from DBS and a few wire-line providers; the industry is at a cross-roads. Where do we go from here to ensure the profit model which made us successful in the past?

But the industry has its up-side, with a commercial business market largely untapped and held by incumbent phone companies for decades; a new venue of Internet Broadband viewing by an increasingly impatient consumer for change in the status-quo, therefore TV Everywhere; a Set-Top-Box market that begs for universal service across many mediums; and a mandate by regulators to increase broadband penetrations.

The industry can, if strategically focused, take advantage of these changes in the market by embracing change, letting go of the past, and moving forward to the future. Its message should be one of new innovations, a willingness to compete under a new market structure, and a helping hand in achieving broadband proliferation. These are the cross-roads the industry must face. Their message should be communicated positively, succinctly, and often.

FCC offers early peak at national broadband plan (seattletimes.nwsource.com)
FCC Takes on Cable But Not Carriers With National Broadband Plan (gigaom.com)
Cable Companies – Always the Villains (lockergnome.com)
Clearwire Supports Net Neutrality? Does No One Remember Its History? (techdirt.com)<!– ckey=”59BE5E2E” –>

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Cable Industry Executive Quotes to Remember in 2009

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Why memorable quotes from Cable Industry executives in 2009 seemed either disconnected or a predictor of the future. Judge for yourself whether these quotes have merit or are they seriously off-track with the mainstream. Only time will tell whether these executives have done their homework, or they are just [in-the-moment] statements. As an Industry executive, should these leaders be better prepared before they speak?

Disney CEO, Robert Iger on Comcast/Time Warner Authentication for TV Everywhere – April 2009

“May be an “interesting” opportunity for consumers. On the other hand, preventing people from watching any shows online unless they were cable subscribers would engender a backlash. Important not to take away online video programming that’s already out there, and not to throttle access.”

NCTA Chief, Kyle McSlarrow: on the Cable Industry’s role in the economy – April 2009

“Fortunately, we have every reason to believe that our industry will continue to be resilient and grow. And I would go further…and say that we have a central role to play in our economic recovery as well.”

Comcast CEO, Brian Roberts: on working with programmers – April 2009

“I don’t think we should put our head in the sand,” he said. “We should allow customers to get video wherever they want. We have to have really thoughtful conversations with our partners in content and make it a win-win outcome for customers and programmers, and I think we can do that.”

Time Warner Cable CEO, Glen Britt: on Tiering Broadband Access – April 2009

“If you’re downloading a movie every day, you’ll spend more per month than someone who uses the internet just to check his or her e-mail. People could end up liking it: some will end up paying less, while those people paying more may get faster service.”

Time Warner Cable CEO, Glen Britt: on TWC subscription growth – December 2009

“Time Warner Cable increasingly hears from customers who would like to buy smaller packages of channels. As an industry, cable operators “need to listen” to those kinds of concerns.”

Time Warner Cable CEO, Glen Britt on Comcast-NBC Universal Merger: – December 2009

“What we found over the years was that there were very few synergies in being vertically integrated — in fact, the rules and regulations that control how this industry behaves are such that anything people might be tempted to do in a vertically integrated company is pretty much prohibited.”

How will these quotes hold up historically in 2010? Will they be on track with the market, or will they be (in-the-moment) statements that seem to be irrelevant for the future? Vote for the best and worst quote of the year; leave a comment.

Time Warner CEO: There Is a Willingness To Pay for Quality Content (blogs.wsj.com)
For Comcast’s Chief, Content Led the Way (nytimes.com)
ThePlatform Rolls Out New Service For ‘TV Everywhere’ (paidcontent.org)
Comcast: No plans to sell fourth-place NBC network (seattletimes.nwsource.com)
The Usual Merger Suspects (online.wsj.com)

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Comcast Consummates the Deal: Now the Tough Part Begins

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It happened, as predicted by some and discounted by others; a Comcast-NBC Universal merger that has wide-ranging implications on both future Content and Internet usage. However, the tough part for Comcast begins now, today, and that is to placate dissenters like the Consumer Federation of America, the Free Press, and tough Federal Regulators that this will help both competition and increase access to broadband, not hinder it.

The Free Press has issued a press release denouncing the merger while giving reasons that the deal should be at least, a violation of Video Competition Anti-Trust Laws; see (Comcast-NBC Merger: Just Say No). On the other hand, Comcast CEO Brian Roberts released his own statement regarding the merger designed to get out front of the expected controversy that the deal would attract. (Comcast and GE to Create Leading Entertainment Company)

“We are prepared to make affirmative commitments to ensure that the pro-consumer and public interest benefits of the transaction are realized,” Roberts said. “Today, we have announced a number of initial commitments that expand on the capabilities that Comcast and NBCU have built over the years, and the new opportunities that this combination makes possible. These commitments address the needs of various audiences and stakeholders, and we will provide additional details on these and other commitments in our public interest filing with the Federal Communications Commission.”

The merger announcement comes after the National Cable Telecommunications Association press release of Adoption Plus (A+) Program, a pilot initiative of cable operators, manufacturers and vendors of which Comcast is a member, creating a public/private partnership to provide increased broadband participation to a vulnerable part of the population, underprivileged Middle School children. This does partner with the FCC’s vision of increasing broadband adoption and access to the underserved population.

Comcast may have to make serious concessions to pass the regulatory scrutiny that will certainly come such as, keeping Hulu cost free for consumers, share fairly its newly acquired content with competitors, separate retransmission negotiations with NBC from cable operations, and possibly divest itself of NBC stations in overlapping markets. Comcast has not come this far to lose the game in the “home stretch”, and it will use all the lobbying and public relations power needed to win that regulatory approval.