Broadband Cable Association of Pennsylvania

NewsClips

August 14, 2012

Phone companies are losing the high-speed Internet game. In the second quarter, the landline phone industry lost broadband subscribers for the first time, as cable companies continued to pile on new household and small business customers, thanks to the higher speeds they offer in most areas.

The flow of subscribers from phone companies to cable providers could lead to a de facto monopoly on broadband in many areas of the U.S., say industry watchers. That could mean a lack of choice and higher prices. Phone lines, designed to carry conversations, and often decades old, are poorly suited to carry Internet signals compared to the heavily shielded cables that carry TV signals. That means cable companies find it much easier and cheaper to provide fast Internet service compared to the digital subscriber lines, or DSL, that phone companies provide in most areas.

Cable providers now offer download speeds of 100 megabits per second in many areas, about 20 times faster than DSL. The country's largest Internet service provider is cable company Comcast Corp., with 18.7 million, followed by AT&T, with 16.4 million. Verizon Communications Inc., the country's second-largest phone company, has replaced its phone lines with optical fiber in some areas, letting it compete on speed with cable. But expanding service is expensive, so Verizon has stopped adding new areas to its FiOS build-out. AT&T Inc., the largest phone company in the U.S., has taken a more conservative approach to optical fiber, building it out to neighborhoods but not all the way to homes. The Internet signal is still carried the last stretch, into the home, on a phone line. This build-out is less costly than Verizon's, but doesn't let AT&T compete with the fastest cable connections.

The AP's tally of reports from the eight largest phone companies in the U.S. shows they collectively lost 70,000 broadband subscribers in the April to June period. Meanwhile, the top four public cable companies reported a gain of 290,000 subscribers. AT&T accounted for the bulk of the loss - 96,000 subscribers - while other companies on average added a few thousand subscribers. The second quarter is a traditionally weak one for all broadband providers, since college students cancel their subscriptions before heading home for the summer. The picture for phone companies is less dire when considering the last 12 months, a period during which they added nearly 600,000 subscribers. However, cable companies added more than three times as many.

Phone companies were early in hooking up people to the Internet, and grabbed a lead in the broadband build-out of the early 2000s. The tide turned in 2008, and cable companies have been adding subscribers at the expense of phone companies since then. Now, phone companies account for 43 percent of U.S. homes connected to broadband, according to Leichtman Research Group, with cable connecting the rest.

Analyst Craig Moffett at Sanford Bernstein called the decline in broadband a "body blow" to phone companies, which have been using broadband to offset a long-running loss of subscribers to regular phone service. Now, both are declining, he noted. Susan Crawford, a professor at Cardozo Law School in New York and a former assistant to President Obama on telecommunications, has argued that a looming cable monopoly in three-quarters of the country is "the central crisis of our communications era." She suggests that the U.S. follow the example of countries that have forced cable providers to allow other companies provide Internet service over their cables. The service-providers would compete with each other and provide some choice to the consumer, she says. The industry has resisted this type of arrangement in the past, insisting that freedom from regulation provides them with an incentive to invest in their systems and upgrade speeds. Associated Press


Federal regulators are preparing to clear Verizon Wireless's $3.9 billion deal to acquire airwaves from several cable companies including Comcast Corp., according to people close to the negotiations, after the companies reached broad agreement to settle antitrust concerns.

To clinch their deal with Verizon Wireless, the cable companies have agreed to limit the scope and duration of side agreements to sell each other's services, the people said. Consumer groups and other critics had said the joint marketing pacts were effectively agreements between the companies not to compete for customers seeking broadband Internet, television and phone services in their homes. Although some details are still being worked out, Justice Department and Federal Communications Commission officials are preparing to approve the deal in the coming weeks, people familiar with the matter said. FCC Chairman Julius Genachowski is expected to begin the process this week by circulating a proposal to approve the deal among the agency's four other commissioners, according to several agency officials.

The Justice Department is also preparing to drop its objections to the deal after the companies agreed in principle to limit the duration of the joint ventures to five years or less, after which they will have to reapply for antitrust clearance for a new tie-up, people familiar with the discussions said. Verizon and Comcast have also agreed not to implement the joint marketing agreement in areas where the two companies currently compete for Internet, TV and phone service. That means that Verizon Wireless stores won't be able to sell Comcast's Xfinity service in regions where its parent company, Verizon Communications Inc., already offers its FiOS service.

The two sides sparred over whether that prohibition would extend to areas where Verizon offers phone and Internet service but not FiOS. Some critics of the deal said the joint marketing agreement might dissuade Verizon from rolling out FiOS in those areas, reducing options for people living there. In the end, the companies appear to have prevailed on that point, in part because Verizon had already said it didn't intend to extend the fiber-optic network that delivers FiOS service, according to the people familiar with the talks. Verizon Wireless is a joint venture between Verizon Communications and the U.K.'s Vodafone Group PLC.

Verizon Wireless is buying airwaves purchased by Comcast, Time Warner Cable Inc., Bright House Networks LLC and Cox Communications Inc. during a 2006 airwaves auction. The cable companies never used the airwaves after their plans to introduce a new wireless network didn't take off. The FCC is also expected to impose a few additional conditions on the deal, including requirements that Verizon Wireless offer data roaming to competitors at reasonable rates and use its airwaves within a few years. Spokesmen for the Justice Department and FCC declined to comment. A Verizon Communications spokesman also declined to comment. The company earlier said it believed it had "made a persuasive case" that the deal was in the public interest and expected it to be approved this summer. Comcast declined to comment.

Initial FCC concerns about Verizon Wireless holding too many airwaves in some markets mostly dissipated in June after the company agreed to swap and sell some airwaves in 218 markets as part of a deal with rival T-Mobile USA, a unit of Deutsche Telekom AG. But FCC and Justice Department antitrust officials remained concerned that the joint marketing agreement between Comcast and Verizon Communications was, in effect, an agreement not to compete for Internet users in each other's territory. The deal met with stiff resistance from the Communications Workers of America and several consumer groups, which said it would cost jobs and limit consumer choice. "Regulators are demonstrating a real disconnect between supporting this deal and the Obama administration's goals of affordable high-speed Internet access for all," the CWA said in a news release Aug. 3. Wall Street Journal


Level 3 Communications Inc. (LVLT) agreed to deliver additional core infrastructure services to enhance the reliability of Time Warner Cable Inc.'s (TWC) network under a multiyear agreement. Financial terms weren't disclosed, but the companies said they have agreed on terms and conditions under which they will exchange Internet protocol traffic between their respective backbone networks. "Service providers recognize that network reliability is essential to a superior customer experience for both residential and enterprise clients, " said Level 3 Chief Technology Officer Jack Waters. "By leveraging the extensive reach of the Level 3 network, Time Warner Cable will be better positioned to deliver a highly reliable portfolio of services to its customers."

Cable distributors are focusing more on expanding their broadband cable and business services units, where they see higher profit margins because those units don't face the high programming costs associated with the video operations. Earlier this month, Time Warner Cable reported its second-quarter profit rose 7.6% as recent acquisitions helped to grow revenue, but the cable distributor missed expectations for subscriber growth in its core businesses. Meanwhile, Level 3's second-quarter loss narrowed as the network-services company's revenue grew and it posted smaller charges. Level 3's acquisition last year of fellow long-haul Internet provider Global Crossing is expected to expand the company's global reach and help it reduce costs. Shares of Time Warner Cable and Level 3 closed Friday at $89.43 and $21.94, respectively. Both were inactive premarket. Wall Street Journal


The Corbett administration wants you to "like" the state's new voter ID law. Well, ok, you don't have to "like" it or "friend" it, but at least click on it or follow it.

That's the message from the Department of State which has launched a new outreach effort using Facebook and Twitter to inform residents - particularly young people about the new state voter ID law. The new initiative comes as court watchers await a decision expected as early as today by Commonwealth Court Judge Robert Simpson on the fate of the voter ID law. "We are using the VotesPA website and social media as tools to make Pennsylvania voters aware of the new voter ID law," said Carol Aichele, secretary of the Commonwealth, whose department oversees elections. "We want to make sure voters understand what IDs are acceptable for voting, and help those who don't have such IDs obtain the identification they need this fall."

The VotesPA website features a new layout that assists voters in finding information about which photo IDs are accepted at the polls, and how to obtain an acceptable ID. The website contains a "resource center" where voters can view frequently asked questions (FAQs). The information is available in English and Spanish. The VotesPA website, initially created to help first-time voters, will continue to offer information on the voting process, including how to register, the locations of polling places, and important dates on the election schedule.

Information on the voter ID law is available at www.votesPA.com, pr by calling 1-877-VOTESPA (1-877-868-3772), on Facebook at www.Facebook.com/PADepartmentofState or on Twitter at www.Twitter.com/VotesPA. philly.com

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