Broadband Cable Association of Pennsylvania

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April 30, 2014

Wall Street is betting that the cable industry will successfully navigate an increasingly competitive landscape. On Tuesday, top financial analysts gave a mostly upbeat assessment of the industry. To be sure, Wall Street banks have done well this year because of the flurry of mergers and acquisitions, much of it emanating from Philadelphia. In February, Comcast struck a $45-billion deal to acquire Time Warner Cable and, this week, Comcast and Charter Communications formed an alliance to divide up cable markets and spin-off a new entity. "It's hard to look at this and not be positive," Jessica Reif Cohen, a Bank of America Merrill Lynch managing director, said of Comcast's deal-making during a panel discussion at the National Cable & Telecommunications Assn. "Comcast will be a major player in the top 50 markets," she said, adding that should help create more of a national advertising model that has existed. The emergence of Netflix, Google, Amazon.com and other technology firms also has served as a wake-up call for the industry. Netflix's explosive growth -- and the high marks it gets from its customers -- has prodded cable TV operators to spend huge sums of money during the last two to three years to upgrade their networks, video-on-demand offerings and on-screen viewer guides. Google's rollout of its super high-speed Google Fiber broadband network might be intended as little more than a "whip" to encourage the traditional telecommunications and cable operators to upgrade their own networks to send more data into homes -- or they risk the threat of Google moving into local communities to offer lower-cost and higher-speed broadband services. "I don't expect them to really dig up flower beds on a major scale," JP Morgan managing director Philip Cusick said.

In other words, Cusick doesn't believe that Google intends to spend the billions of dollars that it would take to lay the fiber lines necessary to build a national footprint for broadband on the scale of an AT&T, Verizon, Comcast, Cox Communications or Charter. The biggest threat to the industry appears to be coming from within. Growing programming costs and constantly rising cable TV bills appear to be a bigger challenge facing the industry than threats posed by powers from Silicon Valley. "Cord-cutting is real. It's not much of a debate any longer," said Craig Moffett, senior analyst and partner of the research firm MoffettNathanson. Although millions of people have not canceled their cable subscription, Moffett said, the rising cost of cable TV subscriptions is increasing the likelihood that more people will drop their pay-TV service. And the more people that cancel their subscriptions, the larger the opportunity is for new companies to enter the space to target this growing group of consumers. "The bigger the price gets for pay TV the bigger the opportunity is for alternatives," Moffett said. An explosion in the number of TV channels offered and the ever-increasing fees charged by programmers to the pay-TV distributors has contributed to the inflation. There also seems to be a feeling by some in the industry, and some on Wall Street, that companies will be able to add more features and services, such as home security, to persuade consumers to pay more. But Moffett didn't sound convinced. "It's an industry that is heading for the cliff, and the faster we get to it, the more we step on the accelerator," Moffett said.

Los Angeles Times


Austin-based Affiniti, a broadband services provider serving rural and underserved communities across the country, has acquired the assets of Sting Communications in Pennsylvania. Affiniti operates network operations centers in Lebanon ó at 120 S. 16th St. ó and Austin, Texas. "Our management team and our employees, many of whom worked at Sting for years, are excited to begin this new chapter as Affiniti in Pennsylvania," Affiniti CEO Darol Lain said in a news release. "We are exploring a range of new products and services that will help our current and future clients with their long-term technology needs." Terms of the deal were not disclosed. According to Affiniti, Sting Communications became an industry leader for technology solutions for education and health care markets across Pennsylvania, managing a 1,500-mile fiber network that delivered advanced services to rural school districts across the Commonwealth. Affiniti said Sting designed and operated eight large regional networks that provide more than a third of Pennsylvania students with broadband solutions and Internet access. Sting also connected the largest rural health care association network in the state, allowing rural patients to have access to advanced health care. Affiniti said it operates networks that span more than 50,000 square miles in 21 states, serving approximately 850,000 students at 1,000 schools, as well as 45 health care institutions.

Central Penn Business Journal


The cable industry's top executives gathered in Los Angeles for their annual convention to show off new technologies and boast about a bright future. "We spark the cylinders of innovation," said Michael Powell, president and chief executive of the National Cable & Telecommunications Assn., in his welcoming remarks. "And, to be dramatic, we help light the lamp of hope that 'We the People' can find solutions to the problems that plague our society." But underneath the hyperbole and chest pounding were worries about rising costs, cord-cutting, customer service and increased competition from newer digital platforms. "Iím concerned we are going to reach a tipping point," said Jerald Kent, chairman and chief executive officer of Suddenlink Communications, when asked about rising cable bills during the show's opening session. Noting rising programming costs, particularly from sports, Kent said distributors need to be able to offer "more affordable types of packages" to customers. Without that ability, Kent warned customers might drop their services and the government could try to crack down on the industry. While many pay-TV distributors offer lower price packages, they typically do not carry the most popular channels, including Walt Disney Co.'s ESPN. Big programmers such as Disney and Viacom like to bundle their popular and less popular networks together, making it difficult for distributors to offer flexibility to customers. ESPN Chief Executive John Skipper, who was on the same panel as Kent, defended concerns the cost for his network is too high. "There is no question that weíve created the product with the most value," Skipper said. He also criticized those who say the majority of cable subscribers are picking up the tab for sports programming they don't watch. "It is a nice rhetorical device, but itís just not a fact," Skipper said, noting that ESPN content is often the highest-rated.

Concerns about competition from Netflix, Amazon and other digital services was also a topic of conversation for executives here. On the one hand, cable operators benefit from new digital platforms because it can spur sales of their broadband product. But programmers are scrambling to keep up with the growing number of new competitors, many of whom have deep pockets to woo talent. "That next round of creators is opting to go to YouTube, is opting to go to Vice," said Nancy Dubuc, president and chief executive of A&E Networks, parent of A&E, History and Lifetime. "I worry about that." John Martin, the new chief executive of Time Warner's Turner Broadcasting, seemed less concerned about landing talent, noting his company spends $4 billion a year on programming. More pressing for Martin is the cable industry's struggle to create an easy system for subscribers to watch content on tablets and computers when they are away from the television. The industry has an initiative called TV Everywhere designed to do just that, but consumers have been slow to embrace it. "I don't have TV Everywhere because I can't figure out how to use it," Martin said, adding that efforts to authenticate pay-TV subscribers so they can access programming on multiple devices is "a barrier to usage." The debate over how heavily the Internet should be regulated also will be a topic of discussion for the next few days. The NCTA's Powell, who is the industry's chief lobbyist, made it clear where he stands in his opening remarks. "Because the Internet is not regulated as a public utility, it grows and thrives, watered by private capital and a light regulatory touch, Powell said. "It does not depend on the political process for its growth, or the extended droughts of public funding." Powell also acknowledged, though, that a lack of regulatory oversight shouldn't be treated as a blank check. "We need to keep prices reasonable and the value of our services high. We need to deliver second-to-none customer service. And we need to be good corporate citizens," he said.

Los Angeles Times


Comcast has made being at your daughterís chorus concert a virtual reality from thousands of miles away. A new feature for X1 triple-play customers will allow users to live stream personal video from mobile devices directly to the television. The new technology is being exhibited this week in Los Angeles at the National Cable and Telecommunications Associationís annual trade show and conference. The feature is slated to be available for customers by 2015, according to a press release. "Imagine youíre in Philadelphia and can live stream your sonís tee-ball game to his grandparents' TV in San Francisco," Marcien Jenckes, executive vice president of consumer services for Comcast Cable, said in a statement. "X1 has set an industry standard for home entertainment, one that transcends traditional TV to deliver an immersive and personalized entertainment experience across all devices." Comcast announced Tuesday that it has also upgraded its guide for X1 users, enhanced on-demand features and created new apps for the platform.

Philadelphia Business Journal


The blame games are already starting in the Pennsylvania Senate. Monday, Sen. Minority Leader Jay Costa, D-Allegheny, suggested Republicans might be planning to hold a lame duck session after the November election to pass bills that can't get enough support before voters have their say. Costa's evidence, he told reporters, was that the GOP hadn't specifically said they wouldn't hold one of these "sine die" sessions. Tuesday, President Pro Tempore Joe Scarnati, R-Jefferson, responded by questioning Costa's motives, since Costa released his letter to Scarnati and House Speaker Sam Smith to the media before giving it the leaders. Scarnati noted that Costa had written that a lame duck session should only be held in "emergency situations or in limited instances when there is a compelling need." Should such a situation arise, Scarnati wrote, "I will evaluate it, and decide whether to recall the Senate accordingly." With an eye toward looming legislative battles, Scarnati went further. "Regrettably, I suspect the true intention of your letter yesterday was to signal an unwillingness to be supportive of any major issue soon before us, including pension reform and the crafting of a responsible 2014-2015 budget," Scarnati wrote.

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