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Monthly Archives: April 2015

Comcast Moves On to Another Battle, But is Still Best Positioned to Win the War

comcast time warner cableGreetings from Pairs and Dallas.  This week was already overflowing with earnings news (we will cover AT&T and Verizon earnings in great detail next week), when Bloomberg broke the story Thursday of the likely Comcast/ Time Warner Cable merger demise.  CNBC confirmed this rumor on Friday morning, and a few hours later Comcast CEO Brian Roberts went on the CNBC Squawk Box set to confirm that the merger was off (full interview here).

 

CenturyLink exampleSeveral dozen of you asked me for my thoughts on these events.  Well, a sense of merger danger started on February 4 when the FCC redefined what the new broadband standard should be (it is now 25 Mbps – see ruling here).  This rule change served two purposes: 1) for companies like Comcast, it increased their broadband market share because they were the only company offering 25 Mbps or higher service in many areas, and 2) companies like CenturyLink (in Tacoma, Washington, for example) were not counted as a broadband provider because they did (and do) not offer residential broadband speeds above 25 Mbps in many parts of their service area (for the Jim Patterson in Tacoma, Washington, used in the example shown, his max speed is 7Mbps, perfect for “online shopping, social networking, and downloading music.”  No other speed choices are offered by CenturyLink.  Comcast Xfinity offers for the same address reached 150 Mbps).  There are hundreds of these examples across the Comcast footprint where they have been a victim of their own success.

 

This redefinition allowed the media a clear way to highlight Comcast’s (either stand-alone or combined with Time Warner Cable) broadband dominance (see Ars Technica article here).  Forget the fact that AT&T has just finished a substantial upgrade of their plant (which now covers 57 million homes at speeds up to 75 Mbps, according to their recent earnings call) and is rolling out 1 Gigabit per second speeds in seventeen markets.  On top of this, wireless broadband speeds are also continuing to increase (some analysts, including those of us at the Sunday Brief, contend that the change from 10 to 25 Mbps was partially chosen to eliminate LTE as an alternative broadband standard).  Regardless, the sound byte was clear: 57% of the broadband circuits would be held by one company, and that was too much for the FCC to stomach.  Suing to block the merger will do nothing to increase broadband penetration.

 

Second, the states of California and New York became actively involved in the decision.  We wrote about this in a March Sunday Brief entitled “Did California Kill the Comcast/ Time Warner Cable Merger?”   On February 13, Comcast and Time Warner Cable received an early “Valentine” from the California PUC approving the merger with significant conditions.  (In April, one of the five Commissioners, Mike Florio, went so far as to submit a competing 89-page proposal to his fellow commissioners blocking the merger).  While it is likely that Comcast could have resolved its differences through the arbitration process (and picked up Los Angeles as a result), the question of precedence loomed.

 

As California flexed its regulatory muscle, New York State consistently developed a “wait and see” mode, delaying a decision on the merger six times (most recently April 20).  In many previous mergers, the states followed the leads of the DOJ and FCC.  California decided to break with that tradition, and New York State was positioning itself as the last approval required (and hopefully to get the last concessions).

 

Finally, there was the Open Internet ruling itself.  From the President’s unprecedented move of publicly weighing in on his desires in November 2014 (see YouTube address here), to the accusations by Commissioner Pai of continued “editing” of the actual Report and Order after the FCC Vote had been taken (see page 4 of his written testimony here), any future procedure seemed to be subject to the approval of multiple (and historically new) parties.  The meaning of “(un)just and (un)reasonable” will play out in the coming quarters as the FCC rewards industry laggards with an easier approval process.

 

In hindsight, the path to a federal blockade of the merger was fairly clear:  a) redefine the market to redefine market dominance; b) engage key states to coordinate opposition, and c) elongate the approval process through additional rulemaking which creates the aura that either/ both of the merging parties cannot be trusted.  It makes us wonder what can be approved over the next several years.

 

What Comcast Should Do Next

Brian Roberts, in the aforementioned interview, stated that it was “time to move on.”  Where should they move?  Here are three areas they should attack with vigor (and, IMHO, divert share buyback funds to do so):

 

  1. License the Xfinity platform at aggressive rates to any other broadband service provider and become the industry standard. One of the key synergies of the Comcast/ Time Warner Cable merger was the extension of the Xfinity platform to TWC’s base.  There is no reason why commercial terms should not be able to be struck between TWC and Comcast for this purpose.  Or, Comcast could make an even bolder move and spin out the Xfinity development platform into a separate company that would be initially owned by their MSO peers (with the intent to become a full IPO in five years).  This would be akin to the spinoff of American Airlines’ reservations system (SABRE) in 2000 (which was acquired by two private equity firms in 2007 and rejoined the NASDAQ in 2014 – see nearby chart). SABRE stock price performance

 

  1. Formalize a common site qualification, provisioning, network monitoring, and billing process with TWC, Cox, Charter, Bright House and Cablevision. Provide information to customers about network/ circuit performance (e.g., real time packet loss, latency, and jitter with automatic SLA payment bill credits for performance failures) that AT&T and Verizon will not share today.  Provide a contrasting picture to the existing residential legacy (especially for Comcast and TWC) that cable service can lead the industry in products and services.  Get the Teleport (TCG – see short wiki summary here) band back together under a standardized umbrella, and use new developments in software defined networks to create a differentiated service. Leverage outdoor Wi-Fi to reduce enterprise data needs outside of the office.   Comcast must take the lead here and challenge the incumbent carriers (Level3, AT&T, Verizon, CenturyLink) to transition their customers from legacy to cloud-based environments even faster than they are doing today (Verizon’s global enterprise revenue decreased 6.0% year-over-year; without foreign exchange impacts the change would have been 4.5-5.0%).  It’s going to require a lot of ambassadorship, but value can be created for everyone without destroying existing commercial services margins.

 

  1. Invent a new and secure system for home content storage. At the end of March, Comcast announced that CFO Michael Angelakis would be heading up a new company focused on “investing in and operating growth-oriented companies but you can also invest into futures, RJO Futures Trading Guide can help you, both domestically and internationally” (more details in the announcement here).  One of the great challenges broadband network providers face is the delivery of large amounts of syndicated content to homes that can be started through a content “seed.”  This would enable some part of a movie (e.g., the first 15-20 min; maybe 40 min for a particularly popular series that could be subject to server congestion) to be immediately available for the consumer with the rest being transmitted through a secure connection.  Given the decreasing costs of portable hard drives (1 TB portable hard drives now retail for ~$50), entire libraries could be stored.  Combine strong underlying technology with easy to use navigation, recommendation, and billing, and Comcast could become the recommended choice for binge viewing.

 

These are three easy to solve problems that can run in parallel with bandwidth development, Wi-Fi and customer service initiatives.  As we discussed in a previous column, Comcast has generated over $7 billion in organic revenue growth over the last decade from non-core products (residential VoIP and commercial services).  Their ability to grow wireline revenues in the midst of overall market stagnation is a feat few outside of the cable industry have accomplished (at least not without significant M&A activity).

 

Comcast lost the battle, and now it’s time for them to win the war.  It starts with customer service recognition (a tall order) and continues with undisputed leadership in technological innovation (specifically the relationship between content delivery and network engineering).  Development and business partnerships will be essential, along with well- defined problems for the entrepreneurial community to solve with Comcast’s IT and network units.  Finally, it’s essential that “Philadelphia thinking” be replaced with “global excellence” as Comcast sources the best technology minds across the globe.

 

It’s time to move on.  Comcast still beats the telcos, but can it beat Google?

 

Next week, we’ll cover AT&T and Verizon earnings in detail, and provide any additional insights on the overall market.  Until then, if you have friends who would like to be added to The Sunday Brief, please have them drop a quick note to sundaybrief@gmail.com and we’ll subscribe them as soon as we can (and they can go to www.mysundaybrief.com for the full archive).

 

Thanks again for your readership, and don’t forget to send in your use case for a “mobile first” event! Have a terrific week!

Verizon and AT&T- Two Different Approaches to Value Creation

paris lead picGreetings from Orlando, home of this year’s spring COMPTEL show, Dallas, and Paris (pictured – see if you can find both old and new “Arc de triomphe”).  This issue of the Sunday Brief will provide an in depth view of Verizon and AT&T’s earnings, and, in the process, touch on other companies across the industry.

 

Prior to diving into results, a big thanks for those of you who took the time to catalogue the impact of mobile applications on each of your lives.  We had about 40 entries thus far, and there are a wide variety of use cases.  If you have not submitted your entry (answering the question “When would you rather pick up your mobile device to obtain information as opposed to accessing a laptop/ desktop/ tablet?”) please send your response to sundaybrief@gmail.com by the end of the month.  Thanks for your entries – you are making my keynote a lot easier and more impactful!

 

Also, many of you have been forwarding this letter on to your friends.  We have had nearly 50 new sign-ups since March 1 (and an additional request through the website for 10 RSS feeds).  Many thanks for helping spread the word.

Verizon’s Video Transformation

2000px-Verizon_logo.svgWhen I was a manager in the Engineering & Operations workforce in Sprint’s Local Division (later to become Embarq, and then CenturyLink), I remember a discussion with the VP on a process improvement project.  “Jim, everything we do in E&O is about the 22%.  That’s the portion of our customer base that generates 88% of our profits.”

 

This was 1994-1995. The entire Customer Lifetime Value process had not been introduced at Sprint.  Pareto analysis was a new chapter in Sprint Quality procedures.  But even then, everyone knew that a few customers drove most of the value.  It was a different kind of numbers game, and it was all about the 22%.

 

This is the same type of thinking Verizon employs today when they discuss wireless net additions.  There is a subset of customers (e.g., corporations who will deploy many connected devices to dramatically improve productivity; households who will quickly adopt mobile Over the Top video along with FiOS where it is available) who will drive Verizon’s value equation.  There are other subsets that also add lesser value but will get some investment attention.  After that, Verizon’s investment interest wanes considerably.

 

Verizon has many high value-adding customers in the postpaid market – 35.6 million accounts with 2.87 connections per account.  Postpaid accounts grew 1.5%, while revenue per account only grew 1.0%.  However, connections per account (led by data hungry tablets) grew by 4.0%.  Verizon is banking on a repeat 4 percent performance in 2015 – enough to “price up” a significant portion of accounts into the next tier (as opposed to absorbing the bandwidth in the current tier).

 

LTE multicastVerizon has been mum on their video plans ahead of their summer launch.  However, with Marni Walden in place since late February 2014 (see announcement here), there has been leadership over the Edgecast (Content Delivery Network or CDN) and OnCue (the Over the Top “Operating System”).  Prior to leaving Verizon in September 2014, Erik Huggers granted an interview to The Next Web (full interview here) in which he stated “We built a complete, modern, end-to-end IP-delivered, over-the-top delivered, live, linear, catch-up TV platform.”

 

Verizon’s actions point to one objective:  To become the world’s largest broadcaster.  Not the largest wireless distributor of content (it likely can already claim that title for North America, and EdgeCast has been busy over the past fifteen months taking on more of Verizon Wireless’ CDN), nor the largest set of available “eyeballs” to view content (which Verizon can also lay claim to for North America).  This goes beyond network: It’s an end-to-end content ingestion through device consumption model.

 

The business model needs to progress even further for this to change.  As we have studied through the Dish Sling TV rollout, many of today’s popular channels still come as a bundle, and, while consumers say they are willing to purchase items on an a la carte basis, there is always a reason for families to avoid cord cutting.

 

But what about content “snacking” through expansion of something Verizon is already known for thanks to its NFL sponsorship – live sports?   Could Verizon be contemplating something as personal as every ________ (pick your team – Ohio State, Ole Miss, Oregon, Alabama, Tennessee, South Carolina) pre and in-season football game on a per hour basis (which could include free playback on your FiOS or Wi-Fi enabled device)?  Could their new product be a mashup of the Longhorn Network meets Verizon Wireless, even if a small portion (22%) of their customer base actually uses the product?  The OnCue and EdgeCast networks could enable all of this.  All that’s needed is a really good bridge between live content producers and Verizon.

 

That’s where the announcement earlier this month between Imagine Communications and Verizon Digital Media comes in (see full announcement here).  Imagine connects the increasingly cloud-based distributed content (see their announcement with Disney/ ABC here for more on that) to Verizon’s network in a ready-to-consume format.  The missing puzzle piece was found, and it’s a perfect fit (for more on Imagine, read Rich Tehrani’s (TMCnet) columns here and here).

 

While syndicated shows could certainly benefit from this platform, live high school and collegiate sports would thrive from increased coverage.  Verizon would not only make money from smarter ad insertion (also with help from Imagine Communications, whose platforms already enable alternative ads to be inserted on playback), but they would become the broadcast outlet for the 97% of high school and collegiate sports that cannot find a home on linear TV.  “Watch more and make more” will be the pitch to colleges and universities.

 

Bottom line:  Verizon has no real “Plan B” here – they have to execute this model to resume a mid to high single digit growth rate.  It’s going to be a rocky road, but they might end up being the broadcast alternative for the very long tail of live sports.  Look for the company to provide more details when they announce earnings on Tuesday and likely look for offerings starting in early summer.  It does not take a lot of customers to make this model payoff, but 22 million monthly users would be nice.

 

AT&T’s Also Transforming, But in a Different Way

ATT-DIRECTVAT&T is going through a very different transformation.  Unlike Verizon, AT&T spent big at the auction ($18 billion or $8 billion more than Verizon).  They did this despite having a much larger local exchange footprint (especially when Verizon’s sale of Tampa, Dallas, and California properties are completed).  It would be interesting to compare Verizon’s and AT&T’s economic tradeoff equations between purchasing additional spectrum and densification of existing spectrum holdings.

 

AT&T’s method to scale in video is not to become the largest broadcaster, but rather to become the largest purchaser of content through their DirecTV acquisition.  At the Morgan Stanley conference in March, AT&T’s EVP of Home Solutions, Lori Lee, stated “Our video product today is not profitable but we are in it because we know customers love to bundle video and TV.”  She goes on further to state that “60 cents of every dollar we earn in revenue… goes straight to the content guys, and when you think about DirecTV… they pay 20% less than we do in U-Verse.”

 

Rather than transform the broadcasting equation, AT&T has chosen to adopt the current linear broadcasting model and use their newfound scale to drive increased profitability.  This is a model that is based on service integration (broadband, satellite, U-Verse, mobile and voice) as opposed to product innovation.  AT&T has had a lot of success with bundles, and has consistently favored a “total franchise” over a “wireless franchise” model.

 

attwirelineThere are pros and cons to both approaches.  AT&T has largely implemented Project VIP (see nearby picture), which lays a very broad 75Mbps DSL foundation to compete with cable (and, as Google is learning, this infrastructure can be tactically upgraded to 1 Gbps in certain markets when conditions warrant).

 

They also had healthy spectrum holdings before their recent Auction 97 (AWS spectrum) wins.  While their 700 MHz, 800 MHz, and AWS spectrum band holdings are well known, AT&T now owns a considerable amount of the WCS (2.3 GHz) band thanks to their purchase of NextWave, Sprint, Horizon Wi-Com, Comcast and San Diego Gas & Electric Holdings.  This band could be used in a variety of ways, including broadcast video (perhaps integrated into other connected car needs).

 

DirecTV will change AT&T’s consumer division DNA to be less about Internet connectivity (notifications, speed) and more about content delivery (caching, streaming, proximity, optimized performance).  In turn, AT&T’s network organization, complete with $60 billion in VIP investments, will significantly improve the delivery of content for DirecTV (less satellite, more fiber delivery when possible – bundled video and data becomes a combined company necessity to achieve certain cost reductions rather than a bundled product offering).

 

Bottom line:  Both Verizon and AT&T will report earnings this week.  To some extent, they will be “more of the same” with no or negative phone net additions offset by growth in tablets and other connected devices.  AT&T will cement their dominance in connected car, and both carriers will attribute better than expected performance in business to increased sales in enterprise security offerings.  The real headlines will be made, however, with their diverging video approaches.  Verizon’s will be based on broadcast delivery through wireless means, while AT&T’s will be a broader “all of the above” approach.

 

Next week, we’ll see what each said, and provide any additional insights on the overall market.  Until then, if you have friends who would like to be added to The Sunday Brief, please have them drop a quick note to sundaybrief@gmail.com and we’ll subscribe them as soon as we can (and they can go to www.mysundaybrief.com for the full archive).

 

Thanks again for your readership, and don’t forget to send in your use case for a “mobile first” event! Have a terrific week!

Top 10 Events of the First Quarter- Part 2

lead pic (6)(Nearly) Tax Day greetings from San Francisco (the Transamerica Pyramid from the top of California Street pictured), Springfield (Missouri), Louisville, and Dallas.  While we will be digesting a lot of events from the previous quarter in this week’s Sunday Brief, the second quarter appears to be off to a very strong start.

 

Before we review five additional Q1 impacting events, I would like to solicit your help.  In one of the keynotes I will be giving in a few weeks, I’ll be talking about the increasing frequency of instances where mobile devices and formats are the primary access media. Specifically, I would like to present ten cases where you, the Sunday Brief faithful, would rather go to your mobile device to access information then go to your laptop/ desktop (and perhaps even tablet).

 

One example that comes to mind is the weather.  With the rewrite of The Weather Channel app, I would rather check it on my Android device than through my computer.  Others might include car services (Uber – except for folks in Kansas City – see here), photo sharing, etc.  On the flip side, I have not mastered (nor do I have any real desire to master) reading books through the Kindle app on my mobile device.  If you could reply to sundaybrief@gmail.com with one use case where your first instinct is to pick up your mobile device for info, I would greatly appreciate it.

 

Top 10 events of the Quarter – Recap of Part 1 

 

We started the first quarter review before the Easter/ Passover Holidays with five events.

 

  1. Sling TV announced at Consumer Electronics Show – 4 Jan 2015; launched 9 Feb 2015.  Our bottom line was that this was a big idea with decent implementation, amazing use of the existing Hopper and Sling infrastructure.  Sony and Apple have real competition.  Update:  Sling launched HBO Saturday as a $15/ month premium product to their baseline service.  More in this article.

 

  1. (and 3) The FCC AWS Auction 97 ends, and Verizon sells off more of its local properties (29 January and 5 February).  Dish came to play, and, while many are not taking them seriously, they (and perhaps Google) pose the largest threat to today’s industry structure.  The benefit of the Verizon sale of the Califormia properties is going to accrue to Frontier Communications.  (Some of you speculated that Verizon would continue to gain scale in the content market because a wireless subscriber watching broadcast video would add to their totals.  This is a good thought that should be validated by the broader analyst community.)

 

  1. The Apple Watch launch date and features disclosed (9 Mar 2015; launching 22 April 2015).  Our view of the Apple watch is that lots of advertising and a “supply constrained release” would create a lot of hype for the phone.  What’s most important is that the developer community has stepped up with some very interesting applications.  Our additional view is that the watch price at the lower end needs to come down.  Update: For a great description of the Apple Store watch buying experience, see the Ars Technica article here.  Also, TechCrunch has an article describing fairly lengthy delays in the shipping process for many devices here.

 

  1. Samsung Galaxy Note 6/ 6 Edge introduction (1 Mar 2015 unbox event; pre-orders 27 Mar; first phone shipped in early April). Our view was that good reviews influence early adoption, and the wireless carriers appear to be solidly behind promotion.  This is going to be a very good selling phone for Samsung (and Google Chromecast/ Netflix).  Turns out this was right as Samsung announced they would have higher than expected quarterly earnings due to the Galaxy launch.  See this Reuters report for more information.

 

Top 10 Events of the Quarter – Part 2.  

 

  1. The FCC passes the Open Internet Order (Committee vote 26 Feb; Order released to public 12 Mar; First lawsuits filed 23 Mar).  There has been a lot of analysis of the Open Internet Order, its effect on interconnection (which the Order clearly states will be decided on a case-by-case basis), as well as last mile regulation (which will be goverened by “bright line” rules surrounding throttling, blocking and paid prioritization).

 

As many have noted, the Order sets up a complaint process to determine what is an “unjust and unreasonable” practice.  This could apply to any aspect of the Internet Provider’s operations that related to providing broadband services (see Section 202(a) and page 12 of the Order for the FCC’s justification).  Broadband providers are most worried about lawsuits that challenge their pricing models, particularly for unlimited packages.

 

As we noted in one of the first columns on the topic, offering an unlimited Internet product becomes too risky under the Order’s framework.  While capped broadband pricing existed prior to the Order’s release (we cited AT&T and Mediacom packages), it’s likely that if challenges to the Order are refuted, few broadband service providers will offer an unlimited package (this includes wireless).  The effect of this on consumer viewing habits considering the changes occurring in Over the Top (OTT) programming are unknown.

 

The Sunday Brief was also one of the first publications to explore the implications of the Open Internet Order on telecommunications services, specifically Apple FaceTime, Google Hangouts, and a host of other directory-based services. These services were considered “enhanced” because they were carried by “enhanced service providers.”  However, they are now carried by common carriers, and, according to the 1996 Telecom Act, should be regulated in a similar manner.  This includes equal access (interconnection between Google and Apple), directory services, emergency services, and a host of reporting requirements.  When FaceTime was first introduced with the iPod, the combined product was described by Steve Jobs as “the iPhone without a contract.”  It will be interesting to see how Apple defines the phone services in the context of the Order.

 

The Order will be introduced into the Federal Register on Monday (April 13).  Look for the lawsuits to start shortly thereafter and to continue throughout 2015.  While the FCC is confident that it will hold up to legal challenges (and it is likely that they will), it is equally likely that broadband service providers will be granted a stay until the court process is completed.  More on this throughout the summer.  For a full download of the FCC Open Internet Order, click here.

 

  1. t-mobile summary (2)T-Mobile introduces business offerings (plans announced 18 Mar). While this announcement likely had a small impact in the first quarter, the effect of T-Mobile’s business plan pricing will impact the industry’s results through the rest of 2015.  As the Bring Your Own Device (BYOD) phemonemon comes into full bloom (and also as mobile security improves), more emphasis is placed on corporate reimbursement as opposed to direct purchase of devices and plans.

 

When we wrote about the plan (see “T-Mobile Means Business” Sunday Brief here), we highlighted that business customers received a dual benefit – lower pricing (see graphic), and lower pricing for employee-liable family plans.  How this is being explained to businesses by T-Mobile sales reps was not available when we originally wrote the column, but we have confirmed that the tactic is resonating with smalll businesses and their employees (the second benefit is that the employee line functions as the first line purchased in any T-Mobile Family Plan, creating a discount from $50 to $30 for the first line, and also from $30 to $10 for all subsequent lines).

 

  1. Facebook’s announcements at their F8 conference surrounding Messenger (26 March). The behind-the-scenes battle for the default notification platform has begun, and, right now it’s a three way war between iOS (Apple), Android (Google), and Messenger (Facebook).  Interestingly, Facebook is not trying to control all notifications in their initial vision, but only those that directly relate to communication (e.g., calendar notifications were not mentioned in their presentation, perhaps because they are so closely integrated into the mobile operating system framework).

 

Facebook announced that they would be opening up Messenger (700 million monthly active users) as a platform for developers.  This seems like a small development, but it’s important to remember how pervasive Facebook has become as a default sign-in platform.  For example, FedEx could use a Messanger API (programming interface) to notify you that the package was left at your door (and even provide photographic evidence that they did so). It would be secure, private, and, best of all, requires no additional sign-in/ authentication.

 

What this sets up is a B2C (Business to Consumer) model where all authentication and communication flows through Messenger. It also could allow businesses to get a better view of the total customer needs universe (e.g., a FedEx package delivery plus a series of airline communications through Messanger could map to a particular user profile that makes the customer a likely candidate for hotel or rental car deals).

 

The Messanger updates are a big move, and could impact how Messanger interfaces with iOS and Android in the future.  Opening up the interfaces to third party developers is a very big deal.  More from these articles in TechCrunch and The Verge.

 

  1. Merger delays plague the approval of the Comcast/ Time Warner Cable merger (25 March). This has been a running storyline throughout the first quarter as Comcast originally thought the FCC and DOJ would provide their blessing in late 2014 and the transaction would be closed within a year of announcement (see more background on the extension in this Multichannel News article).  This was revised because of court challenges made by broadcasters about the examination and potential public release of programming contract details.

 

It’s also been unpopular with California and New York, two states that will have a large portion of the combined company’s customers.  We discussed this extensively in a previous Sunday Brief (see here) and one of the California Public Utility commissioners came out against the merger this week (space does not permit a full analysis, but here’s a good article by the Los Angeles Times on the objections and counterproposal).

 

It’s not certain how vigorously Comcast will fight to complete this merger.  They have never been financially stronger, and it’s likely thet Time Warner Cable will be acquired by Charter Communications (partially owned by Liberty Global) if their merger falls through.  If Comcast were to acquire another cable company, both Bright House Networks (Florida) and Cablevision (Long Island, New Jersey, Connecticut) would form stronger clusters.  Or TWC could merge with Cox, Bright House and Cablevision to form a second Comcast and leave Charter with no partner.

 

It’s likely we will get closure on the outcome (or have a much higher probability one way or the other) by the end of June.  Either way, Comcast is in a strong position.

 

  1. charter with greatland and bright house networksCharter announces Bright House Acquisition for $10.4 billion (31 March). When we decided to split the Top 10 into two parts, I thought that there might be something that would cause me to feel good about that decision.  I had no idea, however, that Charter’s announcement would be the reason.

 

Charter is acquiring one of the consistently highest rated cable companies in the United States (see JD Power 2014 residential phone results here.  Bright House had similarly strong rankings for High Speed Data but Verizon FiOS won that award).  One of the reasons why Bright House has such strong ratings is due to its concentration in Central Florida (see pictured pro forma map).  This has allowed them to focus on service to a greater extent than their peers.

 

Charter also inherits a profitable operation (likely more profitable than their current one) that has experience from several years of FiOS competition.  While Bright House does not provide the geographic reach of Time Warner Cable, they bring a customer experience franchise that will undoubetly make Charter a stronger competitior.

 

It’s important to note that this transaction is contingent on the successful closure of the Comcast/ Time Warner Cable merger.  However, assuming that comes to pass, the resuting Charter will represent the greatest transformation of a communications company since the breakup (and reconstitution) of AT&T.

 

On April 19, we will start the first quarter earnings preview with an assessment of key messages in  AT&T and Verizon’s earnings releases.  Until then, if you have friends who would like to be added to The Sunday Brief, please have them drop a quick note to sundaybrief@gmail.com and we’ll subscribe them as soon as we can (and they can go to www.mysundaybrief.com for the full archive).

 

Thanks again for your readership, and don’t forget to send in your use case for a “mobile first” event!  For those of you attending COMPTEL, I look forward to seeing you!  Have a terrific week!