Tri-Counties brace for cable TV swap
The cable TV landscape in the Tri-Counties continues to shift as companies vie for market share in an industry rapidly losing subscribers.
The cable scene has been in flux since Comcast and Time Warner Cable announced plans to merge in February of last year. When that deal fell apart, Time Warner quickly announced plans to merge with Charter Communications.
If the proposed merger goes through, two-thirds of the tri-county region would be under the same cable company for the first time. Residents and businesses must wait and see how TV and Internet services would be affected.
The cable industry is full of drama, similar to what is shown on channels the cable companies offer.
Some in the industry think the sky is falling. Others think the industry is doing just fine.
All cable companies are jockeying for position as more consumers cut the cord.
Television history was made in 2013 when pay-TV subscriptions fell for the first time. About 100 million U.S. homes still use pay-TV services.
The pay-TV model is changing though. According to research firm SNL Kagan, pay-TV providers lost 625,000 subscribers across the nation in 2014, far more than the 251,000 subscribers the industry lost in 2013.
“Time Warner Cable lost about 230,000 video subscribers and Charter lost about 62,000 subscribers. So they’re sort of treading water, whereas Time Warner is trying to bounce back,” SNL Kagan Senior Analyst Ian Olgeirson said.
On May 26, Charter announced plans to merge with Time Warner Cable for $55 billion in cash and stock. Charter is willing to pay $195 per share, according to Bloomberg.
Charter will also merge with Syracuse, N.Y.-based Brighthouse Networks as part of the deal.
Charter currently has about 5.9 million subscribers in 25 states. The company dominates San Luis Obispo County while Time Warner Cable operates in Santa Paula, Oxnard, and parts of Ventura.
Justin Venech, Charter vice president of external communications, said customers will notice no immediate difference in their service if the merger is approved by the Federal Communications Commission.
“On day one, customers will notice very little change,” Venech said. “But over time we’ll be applying a new strategy to the customers of this company.”
One subtle change coming to subscribers of both companies includes changes in the guide setups on users’ cable boxes. Later on, customers could receive new cable boxes Charter gave to some customers this year.
For Charter, the merger with Time Warner Cable and Brighthouse Networks is part of a larger expansion plan. Over the last four years, the company spent $5.5 billion upgrading its network and expanding.
The company moved from its longtime headquarters in St. Louis to Stamford, Conn., in 2012.
Charter’s proposed $67.1 billion merger with Brighthouse Networks and Time Warner was announced just a month after Time Warner’s mega merger with Comcast fell through.
Comcast is the nation’s largest cable provider with about 27 million subscribers and Time Warner is the second largest with about 15 million subscribers in 29 states. At the time, Comcast outbid Charter during its first attempt to merge with Time Warner.
The failed $45.2 billion merger would’ve created a company with about 33 million cable subscribers, 35 million business and residential Internet subscribers and control of 57 percent of the market for broadband Internet service.
That merger proposal immediately faced criticism from consumer advocacy groups, other media companies and regulators. The new company would’ve been in 19 of the 20 largest markets in the U.S. and controlled about 30 percent of cable subscribers.
A company of that size would’ve had enormous power over content providers when negotiating fees that TV providers pay to carry channels.
It also would’ve shaken up the cable scene along the Central Coast even more than the new Charter merger might. Under the old deal, Charter would’ve acquired about 2.5 million subscribers from Comcast and 1.4 million subscribers from Time Warner.
Comcast, which already controls most of Northern California, would’ve ended up with a vastly expanded California footprint.
When it was announced in February of 2014, analysts expected the FCC to approve the merger. When faced with regulatory scrutiny in April, though, the deal fell apart.
Analysts think regulators will approve the latest proposed merger. Olgeirson said regulators were more concerned over Comcast’s potential influence over Internet services than they are with the new Charter merger.
“Regulators are less concerned about a (company) amassing a large amount of the pay-TV service market and more concerned about them amassing a large share of the high-speed data markets,” Olgeirson said.
Venech said the FCC expressed concerns because Comcast, parent of NBCUniversal, also produces content.
Suddenly swirling in the Central Coast cable market is a rumored merger between Luxembourg-based telecom company Altice and Atlanta-based Cox Communications. Cox serves most of Santa Barbara County.
Venech and Kirsten McLaughlin, public affairs manager for Cox Communications, said companies value their TV and Internet subscribers.
“The company definitely made an investment in broadband 10, 15 years ago. We’re a little ahead of the game,” McLaughlin said.
Olgeirson said pay-TV makes companies more money, but Internet services are more profitable.
“On a revenue basis, video still brings in more revenue,” Olgeirson said. “But on a profit margin basis, high-speed data brings in more revenue.”