Broadband Cable Association of Pennsylvania


April 23, 2014

Frontier Communications announced Tuesday that many residential customers can now receive premium broadband services with increased speed capabilities. Areas include (northeastern PA) portions of Clarks Summit, Dalton, Factoryville, Tunkhannock, Conyngham, Drums, Nuangola, the Poconos/Slate Belt area, Montrose/Springville/Hallstead, the greater Back Mountain area, Towanda, Wellsboro, Breezewood, southern Lancaster County, sections of northern Dauphin County extending into Schuylkill County and Frontier's territory in Berks County. Frontier also invested in increased bandwidth to improve its network capabilities and provide customers with enhanced services in all areas, including Dallas, Wilkes-Barre, Harrisburg, Southern Lancaster County and the Pocono region. In all, Frontier Communications' three years of capital expenditures in Pennsylvania exceeded $75 million. Significant funding was spent to support engineering initiatives to increase broadband access and improve network infrastructure across the company's eastern Pennsylvania territory. Wilkes-Barre Citizen's Voice

Charter Communications Inc. could acquire nearly four million extra subscribers in a two-stage deal under discussion with Comcast Corp. , in what would represent a consolation prize for Charter's nearly yearlong pursuit of Time Warner Cable Inc. News of the talks came as Comcast reported on Tuesday that its first-quarter profit grew 30%, as it continued to add video subscribers and saw strong growth in its NBCUniversal entertainment arm, thanks to the Winter Olympics. Charter and Comcast are in advanced talks on a complex deal that would be contingent on Comcast's completion of its proposed $45 billion takeover of TWC. As part of that acquisition, which would add TWC's 11 million subscribers to Comcast's roughly 22 million existing subscribers, Comcast had said it would divest three million subscribers so its share of the pay-TV market wouldn't rise above 30%. In the first part of the deal now being discussed, Charter would likely acquire between 1 million and 1.5 million subscribers through a straight out sale, said people familiar with the situation.

Separately, Comcast plans to spin off a company holding a few million more subscribers. Under the plan, Charter would take an equity stake in that company and could buy the entity over time, the people said. If that happened, Charter would end up with nearly four million in additional subscribers, nearly doubling its size to around eight million video customers. That would make it the second-largest cable operator, helping advance the growth strategy set out by Charter and its biggest shareholder, Liberty Media Corp. , to consolidate the fragmented cable industry. For Charter, the total cost is likely to be more than the $18 billion Comcast had said it hoped to receive for the sale of three million subscribers.

The deal under discussion would also involve system swaps affecting nearly one million other subscribers, the people said. Such swaps could help both Comcast and Charter boost their presence in key markets. The deal isn't yet finalized, however, and could still fall apart, one of the people said. In February, Comcast and Charter had been close to allying on a Charter-led bid for Time Warner Cable, but those talks fell apart. Still, a deal with Charter could help Comcast in its efforts to persuade regulators in Washington to approve the TWC acquisition, by showing it has a concrete plan to meet its divestiture promises. On Monday Netflix Inc. came out against the deal, citing concerns about the combined company's position in the broadband market.

Comcast has said the combination won't change the competitive landscape for consumers in pay television or broadband, because its operations don't overlap with those of TWC's. Comcast reported a first-quarter profit of $1.87 billion, or 71 cents a share, up from $1.44 billion, or 54 cents a share, a year earlier. Excluding gains on sales and acquisition-related items, adjusted per-share earnings rose to 68 cents from 51 cents. Revenue increased 14% to $17.41 billion, although excluding the effect of the Winter Olympics it rose 6.5% to $16.3 billion.

In the quarter, Comcast added 24,000 video customers, compared with a loss of customers a year earlier, although part of the increase was due to a change in how Comcast counts its subscribers. In the previous quarter, Comcast grew its video subscriber base for the first time after 26 straight quarters of decline. The cable operator has earned plaudits from analysts and investors for its strong performance. In recent years most cable operators have been losing video subscribers to phone companies and satellite-TV companies.

Vijay Jayant, an analyst at ISI Group LLC, has said in research notes that the recent improvement in Comcast's video-subscriber trends came after a "heavy promotional period" in the fourth quarter, as well as a focus on discounted TV bundles targeted at younger consumers in the first quarter. He said the strategy will give subscriber sign-ups momentum but "may put pressure" on revenue. Comcast's video revenue grew only 1.3% in the quarter, a smaller growth from some previous quarters, due in part to the company levying a smaller rate increase in the quarter than it did last year. Meanwhile, subscriber growth in broadband and voice slowed. Comcast added 383,000 broadband subscribers compared with 433,000 a year ago.

At Comcast's NBCUniversal, operating cash flow jumped 38% to $1.3 billion, helped by the Winter Olympics. The broadcast TV segment, home of the flagship NBC network, reported revenue growth of 17% even excluding the effect of the Olympics, helped by strong prime-time ratings and late night. On the conference call with analysts Tuesday, Comcast Chief Executive Brian Roberts said NBC is "positioned to end the full season as the No. 1 network in the coveted 18-49 category" for prime-time and late night. Cable networks' operating cash flow grew 4.2% to $895 million. The theme-parks division, meanwhile, posted a decline of 1.5% in operating cash flow. Excluding the effect of the Olympics, total revenue at NBCUniversal rose 8%. Wall Street Journal

The Supreme Court, facing a high-stakes legal fight between broadcasters and online video startup Aereo Inc., seemed to want to change the channel during hourlong oral arguments Tuesday. The court signaled reluctance to embrace any of its options in a case that examines the legality of the Aereo service, which allows subscribers to stream their local over-the-air broadcasts to an array of electronic devices, along with the functionality to record shows and watch them later.

Several justices questioned whether Aereo complies with U.S. copyright law because it uses the broadcasters' programming without permission. But they also voiced worry that a ruling for the broadcasters could have harmful consequences for new technologies like cloud computing that, in the words of Justice Stephen Breyer, "really will change life." "I don't see how to get out of it," Justice Breyer said of the court's dilemma. By the end of the session, the case appeared too close to call.

The broadcasters, including Walt Disney Co.'s ABC, Comcast Corp.'s NBC, CBS Corp. and 21st Century Fox, argued that Aereo is an illegal operation because it violates the networks' exclusive rights to transmit their shows to the public. (21st Century Fox and News Corp, owner of The Wall Street Journal, were until last June part of the same company.) Paul Clement, a lawyer representing the networks, said Aereo's legal position "simply blinks reality. They provide thousands of paying strangers with public performances over the TV." If the company loses in court and goes out of business "nobody should cry a tear over that," he said. The Obama administration also argued Tuesday in support of the broadcasters.

Aereo argued its service, which assigns a different dime-size antenna to each subscriber who wants to watch or record a broadcast, is the functional equivalent of what a consumer has the legal right to do with home-based equipment. "Aereo is an equipment provider. Nothing happens on Aereo's equipment until a user initiates the system," company lawyer David Frederick told the court. He said the service wasn't that different than what viewers did with videocassette recorders a generation ago. The justices weren't so sure. "It's not logical to me that you can make these millions of copies and essentially sell them to the public," Justice Sonia Sotomayor told Mr. Frederick.

Chief Justice John Roberts and Justice Ruth Bader Ginsburg questioned the motives behind Aereo's technical approach of using lots of small antennas instead of a few big ones to capture broadcasts for all customers. "There's no technological reason for you to have 10,000 dime-size antennas, other than to get around the copyright laws," the chief justice said. However, he also said that one could view Aereo as similar to an equipment provider that sells a consumer an antenna and a recording device to make legal personal copies of free, over-the-air programming. "You can go to RadioShack and buy an antenna and a DVR or you can rent those facilities somewhere else from Aereo," he said.

Justice Antonin Scalia, meanwhile, wondered whether a win for Aereo would mean the company could retransmit paid programming like HBO without permission. "No, because HBO is not done over the airwaves," Mr. Frederick said. "It's done through a private service." The high court has a reputation for not being a technologically savvy group, but the justices made clear that the case's potential impact on emerging technologies was at the forefront of their concerns. Because Aereo is a cloud-based service, the justices questioned whether the logic of the broadcasters' arguments would imperil popular and established cloud services like Dropbox and Apple Inc.'s iCloud that give users online access to stored documents, pictures, music and other files.

Mr. Clement said Aereo was different because it was providing new content to users without permission, unlike cloud storage services that allow consumers to access their own content. He also said the court could "just be confident" that cloud computing was a different issue that didn't need to be decided in this case. "Well, I don't find that very satisfying," Justice Samuel Alito shot back. "I need to know how far the rationale that you want us to accept will go, and I need to understand what effect it will have on these other technologies." Justice Elena Kagan said cloud computing services were much more complex than Mr. Clement allowed because many companies organize cloud content and allow users to share files. Aereo, currently available in 11 cities, is aiming to become an increasing player in the market for Internet-based alternatives to cable television. The company plans to expand considerably if it prevails at the high court.

Broadcasters are worried that if the court finds Aereo legal, it could undercut the billions of dollars in revenue the networks receive from cable and satellite companies, which pay to retransmit the networks' programming. A high-court decision in American Broadcasting Companies v. Aereo is expected by the end of June. Wall Street Journal