Broadband Cable Association of Pennsylvania

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May 1, 2014

Accelerating plans for a national wireless network, Comcast Corp. expects to light up eight million WiFi hotspots in the United States by the end of 2014, the company said Wednesday. That would be eight times the one million hotspots the cable giant had deployed in early April in 39 states and Washington.

Comcast's "Xfinity WiFi Initiative" utilizes free wireless spectrum and wireless radios or gateways in outdoor areas such as parks and train platforms, as well as restaurants, stores, doctors' offices, and homes. Sam Schwartz, chief business development officer for Comcast's cable division, said public Internet traffic is "completely segregated" from private Internet traffic and poses no security issues for its Xfinity subscribers in their homes. Access to the WiFi network is only available to Xfinity customers. "In many places you go now, you will no longer need to spend money on cellular data," Schwartz said. Comcast says the WiFi network won't be an expensive capital investment because of piggybacking on the wireless gateways in subscriber homes and hanging WiFi wireless transmitters on cable lines, tapping into the electricity and the Internet broadband already coursing through those overhead cable lines.

Comcast landed on the WiFi strategy because of the soaring demand for wireless bandwidth from tablets and phones, combined with the popularity of "TV Everywhere" applications that stream TV shows and movies to portable electronic devices. Neil Smit, Comcast's cable division president, recently told Wall Street analysts that 75 percent to 80 percent of mobile data consumption takes place in homes and offices, areas served by WiFi. Cisco Systems Inc., the telecom equipment-maker, says that 88 percent of U.S. data traffic on mobile and portable devices will travel over WiFi systems by 2018. Comcast, meanwhile, said Wednesday that about 200 million out-of-home WiFi sessions have been initiated on its Xfinity network in the first four months of this year, a 700 percent boost from the same period last year. Comcast observers have speculated on Comcast's WiFi network and what it could mean for the company - speculation the company hasn't dampened. "We are in a position to think about where wireless is going and how we can participate in a way to build value and whether that is through our existing products or it's a new product," Comcast chief executive Brian Roberts said in a conference call with Wall Street analysts on April 22. Comcast says it will add hotspots in Philadelphia, Atlanta, Baltimore, Boston, Chicago, Denver, Detroit, Hartford, Houston, Indianapolis, Miami, Minneapolis, Nashville, Pittsburgh, Portland, Sacramento, Salt Lake City, San Francisco, Seattle and Washington.

Philadelphia Inquirer

AT&T has approached DirecTV about a possible acquisition of the satellite-TV firm, say people familiar with the situation, the latest sign of a possible shake-up in the television industry. A combination of AT&T with satellite-TV firm DirecTV would create a pay television giant close in size to where Comcast Corp. will be if it completes its pending acquisition of Time Warner Cable. DirecTV is the second biggest pay TV operator, serving about 20 million customers, while AT&T's landline-based TV business serves about 5.7 million. The nearly 26 million subscribers served by the combined company would compare with Comcast whichówith TWCówould serve close to 30 million subscribers. A deal would likely be worth at least $40 billion, DirecTV's current market capitalization, a fraction of AT&Ts $185 billion market capitalization. AT&T declined to comment. DirecTV declined to comment. The approach has come since Comcast struck its Time Warner Cable deal in February, one of the people said. It is unclear whether the companies are in detailed talks, but another person familiar with the situation said that DirecTV would be open to a deal. The satellite TV industry is facing a slowdown in subscriber growth after years of adding customers. The pay television market in the U.S. is now mature, with about 90% of U.S. households with TV now subscribing to either cable, satellite or phone company-delivered television.

And satellite firms' inability to offer Internet access that is competitive with cable and phone companies is becoming a bigger issue. Since 2010, DirecTV's rate of subscriber growth in the U.S. has fallen every year, compared with the prior year. Last year, DirecTV lost subscribers in a quarter for the second time ever, in a deeper loss from the year-ago quarter when it saw its first such loss, according to MoffettNathanson LLC data. Acquisition of DirecTV would give AT&T a national footprint in pay television at a time when the telecom company sees video delivery as core to its future. An acquisition would allow AT&T to offer bundles of wireless and TV services, and could give AT&T new ways to deliver video to its mobile and broadband customers. AT&T's interest in owning a satellite television provider has been speculated about for years. The telecom carrier has held talks with both Dish Network Corp. and DirecTV in recent years, according to people close to the situation. AT&T already has a partnership with DirecTV to sell its service in areas where it offers broadband but doesn't offer its U-verse television service. AT&T, which has grown rapidly from a regional telecommunications firm into one of the U.S. industry's two largest companies via an aggressive merger strategy, had been expected to make its next move into Europe. But Chief Executive Randall Stephenson said at an investor conference earlier this year that Comcast's proposed purchase of Time Warner Cable has shifted his priorities, leading him to refocus on the U.S. "It's an industry redefining deal from our standpoint," Mr. Stephenson said.

Whether regulators would agree to a DirecTV-AT&T merger is a major question. Comcast's Time Warner Cable deal faces tough regulatory scrutiny and a second pay-TV merger would likely intensify regulatory and political questions surrounding consolidation in the industry. Any acquisition would likely be evaluated by the Justice Department for its impact on competition and would require approval by the Federal Communications Commission. The companies would have to prove to the FCC that the transaction would be in the public interest and the combined company would be able to offer consumer benefits not possible outside the merger. However, a person familiar with the FCC's thinking predicted the merger would have a solid chance at approval because offering video or voice service alone is viewed as a dying business and the combined company would be in a position to compete with Comcast, the leading cable and broadband provider. Competition in the broadband market is likely to be the central issue in any review. Observers say the deal would be more likely to gain approval if the combined company can show it would provide competition for Comcast and other cable companies in the high-speed broadband market. A source familiar with antitrust reviews said regulators would likely be concerned about the impact on markets where AT&T already offers high-speed broadband access and pay-TV via its U-Verse project. AT&T may be required to divest DirecTV subscribers in such markets.

Observers also noted that the deal would increase the pressure on Dish Network to enter into a merger with a wired or wireless broadband provider. Despite DirecTV's recent slowdowns, satellite investors point out that it has continued to outperform its cable rivals. And part of the drop-off in subscriber growth is due to the company's strategic focus on adding only higher-value customers who are less likely to chase discounts and switch providers. One investor called the company's results "outstanding" both "operationally and in terms of share appreciation" thanks to big stock buybacks. But the investor noted that built into the value of DirecTV's shares is some anticipation of the company being acquired in the future. DirecTV and satellite rival Dish attempted a merger more than a decade ago which was blocked by regulators. Dish has lately approached DirecTV about trying again, say people familiar with the situation, although that approach hasn't led to any serious discussions. While executives from both companies have publicly signaled their continuing interest in the idea, they have also noted that the two companies have taken different strategic routes, and regulatory attitudes to a merger remain unclear. Dish declined to comment.

Wall Street Journal .

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