Broadband Cable Association of Pennsylvania


November 5, 2012

Several of the country's largest cable operators are still trying to figure out the extent of damages to their systems, as millions of customers remain without power and telephone service in coverage areas hit by superstorm Sandy.

Time Warner Cable Inc., Cablevision Systems Corp. and Comcast Corp. have assured that cable service should generally resume as normal once the lights go back on in households still lacking electrical power; however, that hasn't been the situation in all cases, especially in northern New Jersey, a possible sign of deeper network disruptions. In general, the outages have raised fresh questions about the reliability of fiber-based voice services offered by cable and telecom companies, which require more power to operate than traditional copper-wire services, and therefore tend to lose service more quickly during blackouts.

The Federal Communications Commission said Thursday that cable outages remain at around 12% to 14% of households in Sandy's footprint, down from initial estimates of around 25%. In response to the outages, operators are making initial attempts to quell residents' deepening frustration about limited Internet, mobile phone and pay-TV service.

For example, Time Warner Cable said Thursday that it would begin deploying multiple vehicles that serve as mobile charging stations and wireless 4G hot spots in hard-hit areas like lower Manhattan and Long Island. The company also is inviting consumers to stop by stores in Staten Island and at the Queens Center Mall to charge their devices. The customer service push comes as consumers rush eateries and other public areas in search of power for a bevy of electronic devices. Despite recent efforts to improve customer service, cable companies are a perennial source of griping about poor service and high costs-and the New York area's notoriously demanding consumers are no exception.

Notably, Cablevision on Thursday sought to play down concerns about widespread damage to its systems, particularly in its backyard market of Long Island, which was severely impacted by the storm. On Long Island specifically, more than 520,000 of Cablevision's Optimum-service customers still lack electrical power. Around 269,000 Optimum households with power also have cable service, leaving around 1,200 Optimum-serviced households that do have power without cable service, the company said in an updated news release Thursday. Across the broader New York region, around 1.5 million Optimum households still lack power, while 1.75 million households have their power and cable service in tact. Around 7,700 of Optimum households have power, but no cable service. A Time Warner Cable spokesman said that, while there was no significant damage to the company's network, it plans to begin assessing damages to storm-hit neighborhoods in greater detail once power is fully restored and it is safe for technicians to do so.

Cablevision, Comcast, Time Warner Cable, and Verizon Inc.'s FiOS all said most of the outages related to the storm were due to lost power, as opposed to damage to their systems. Meanwhile, FiOS, which has emerged as a competitor to incumbent cable operators in recent years, has restored backup power to three central offices in lower Manhattan that faced severe flood damage, according to a spokesman. Another major New York facility, in Long Beach, is now operating on backup power and should improve connectivity for wireless carriers in the hard hit Long Island area, FiOS said. A spokeswoman for AT&T Inc.'s U-Verse service, another new entrant in the cable space, didn't immediately have an update on current customer outages. Wall Street Journal

Warning signs from several big advertising companies late last month about a significant slowdown in ad spending puts the spotlight on U.S. media-company earnings due this week.

CBS Corp., Time Warner Inc., Discovery Communications Inc. and News Corp ., all of which have significant advertising exposure through their TV networks and other media outlets, will report for the September quarter. Analysts looking for clues about the state of the ad market are likely to closely scrutinize their results, along with any comments company executives make about the fourth quarter. Executives are likely to indicate the expected impact of Hurricane Sandy. Some TV stations broadcasting news coverage of the storm cut their advertising drastically or went ad-free for a couple of days last week. The superstorm's total impact on the advertising market could be a revenue loss of about $500 million, or 1% of the volume for the fourth quarter, estimates Pivotal Research Group analyst Brian Wieser.

The overall ad climate this year has been lackluster, despite the strong boost provided to TV advertising by the election. During earnings reports for the second quarter, over the summer, media executives blamed the Olympic Games for soft ad-revenue growth, saying that much of the available ad spending had been shifted to NBC during the Games, hurting competing media companies. At that time, executives, in general, were cautiously positive about the third quarter. In late September, Time Warner Chief Executive Jeff Bewkes said at a conference that the ad market looked "a little better," but "there's not yet resurgence." But comments late last month from advertising holding companies Interpublic Group of Cos. WPP PLC and Publicis Groupe SA portray a much bleaker climate. Each reported that marketers had cut back their spending in September, a result of political uncertainty in the U.S. and the economic crisis in Europe. The weakness was evident in several industries, including retail, pharmaceutical and consumer packaged goods industries, ad executives said.

Researchers have scaled back ad-spending forecasts. Pivotal Research, for instance, said last week that U.S. advertising spending would be flat for 2012, excluding the impact of political and Olympic ad spending. In August it had forecast a 1.4% gain for the year. Media buyers say they don't expect a major uptick by the end of the year or even the first half of 2013. "The majority of conversations we are having with clients are not about spending more," says Tim Spengler, chief executive officer of MagnaGlobal, a media-buyer arm of Interpublic Group. Given the timing of the slowdown, as reported by ad holding companies, it may be the fourth quarter that shows the impact more. For the third quarter, signs suggest results are likely to be tepid. Comcast Corp., owner of NBCUniversal, said late last month its big cable networks division had flat ad sales in the quarter.

Among those particularly exposed to any ad slowdown is CBS, which reports on Wednesday. CBS, which owns the CBS broadcast network, a TV station group, as well as a big radio business and billboards, got 63% of total revenue from advertising last year, according to its filings, more than most media companies.

That share may come down this year, as CBS has been beefing up revenue from subscription fees shared by cable and satellite TV firms as well as licensing revenue from digital outlets. Pivotal's Mr. Wieser estimates CBS's broadcast advertising revenue fell 3% in the third quarter to $652 million. Total revenue, however, he expects to increase slightly. And he expects CBS's third-quarter earnings to rise 19%.

Big cable networks also are feeling a pinch. Time Warner, which owns networks like TNT, TBS and CNN, likely had a 2% decline in advertising revenue in the third quarter, says Michael Nathanson of Nomura Securities. Time Warner also reports on Wednesday. At News Corp., whose properties include Fox News, the Fox broadcast network, and the FX network, as well as newspapers like The Wall Street Journal, advertising revenue is expected to be roughly flat in the broadcasting division and rise by a mid-single-digit percentage in the cable division, says David Bank of RBC Capital Markets. News Corp. is due to report earnings on Tuesday, as is Discovery, whose domestic advertising revenue is expected to rise by a mid-single-digit percentage, Mr. Bank says. Wall Street Journal