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CABLE ADVISORY COUNCIL CHAIRMAN REPORT

Gregory G. Davis

 

Multiple Video Program Distributor Industry News– The Late May 2014 View

 

 FCC Report Says Cable Rates Rising Rapidly

According to a report from the Federal Communications Commission, cable bills are continuing to rise, at a rate 4 times faster than inflation, even with competition.
Why This Matters: Programming costs are big part of rising bills and according the FCC study, the price per-channel for subscribers rose 2.1% to an average of 48 cents per channel. The average monthly price for expanded basic service was $64.41 in 2012, a 5.1% increase over 2011, the regulatory agency said. The Consumer Price Index rose just 1.6% during the same 12-month period.
4 Takes: L.A. Times | CED | Fierce Cable | Arts Technica

OTT Revenue to Grow Dramatically by 2018

Revenue generated by over-the-top (OTT) video streaming services is set to grow at an annual rate of 28.1%, according to PricewaterhouseCoopers' Global Entertainment and Media Outlook report, released Tuesday.
Why This Matters: The study also predicts that the number of pay-TV subscriptions will to grow to nearly 108 million homes in the U.S. by the end of 2018, fueled in part by new home construction. But the consulting firm added that the pay-TV penetration rate will decline to 77% of homes in the U.S. during the same time period as cord cutters pursue OTT options.
5 Takes: TBI Vision | The Wrap | THR | L.A. Times | Media Post

 

Consolidation Critics Lay Into AT&T/DirecTV

Free Press, Consumers Union, Public Knowledge Weigh In

5/18/2014 9:00 PM Eastern

http://www.multichannel.com/users/jeggerton

By: John Eggerton

The news Sunday that AT&T was trying to buy DirecTV for $48.5 billion plus almost $20 billion in debt drew jeers from some familiar anti-consolidation voices.

"You can’t justify AT&T buying DirecTV by pointing at Comcast’s grab for Time Warner, because neither one is a good deal for consumers," said Delara Derakhshani, policy counsel for Consumers Union.

“On the heels of Comcast’s bid for Time Warner Cable, AT&T is going to try to pull off a mega-merger of its own," said Derakhshani. "These could be the start of a wave of mergers that should put federal regulators on high alert. AT&T’s takeover of DirecTV is just the latest attempt at consolidation in a marketplace where consumers are already saddled with lousy service and price hikes. The rush is on for some of the biggest industry players to get even bigger, with consumers left on the losing end."

“The captains of our communications industry have clearly run out of ideas," said Craig Aaron, president of Free Press. "Instead of innovating and investing in their networks, companies like AT&T and Comcast are simply buying up the competition. These takeovers are expensive, and consumers end up footing the bill for merger mania."

“AT&T is willing to pay $48.5 billion and take on an additional $19 billion in debt to buy DirecTV. That's a fortune to spend on a satellite-only company at a time when the pay-TV industry is stagnating and broadband is growing. “For the amount of money and debt AT&T and Comcast are collectively shelling out for their respective mega-deals, they could deploy super-fast gigabit-fiber broadband service to every single home in America," said Aaron.

Comcast's proposed deal is valued at $69 billion including debt.

“Wall Street deserves much of the blame for rewarding acquisitions instead of investments in infrastructure," Aaron said. "Weakened antitrust enforcement hasn't helped. But this merger wave is also a result of more than a decade of shortsighted FCC policies that have encouraged consolidation over competition. FCC Chairman Tom Wheeler — who has stated his mantra is competition, competition, competition — has the power to block these wasteful and anti-competitive deals. And he should use it.”

John Bergmayer, senior staff attorney at Public Knowledge, said what the industry needs is more competition, not consolidation, though he was not dismissing it out of hand. "The burden is on AT&T and DirecTV to show otherwise," he said. "We'll have to analyze this carefully for potential harms both to the video programming and the wireless markets. The most obvious concern is that customers in U-Verse territories would lose a video competitor, though the transaction would have nationwide effects."

AT&T and DirecTV will have to submit the deal, including a public interest statement, to the FCC, as well as to the Federal Trade Commission and Department of Justice for antitrust review.

 

AT&T says it will abide by network neutrality rules for three years and pointed out it plans to participate in the broadcast incentive auction and will bid at least $9 billion, so long as there is enought usable spectrum for it to bid on, given the FCC's planned low-band carve-out and spectrum aggregation limits. It also made other commitments to try and smooth the regulatory road to approval.

 

AT&T U-verse Strategy Eyed Amid DirecTV Deal

By REINHARDT KRAUSE, INVESTOR'S BUSINESS DAILY

Posted 06/02/2014 05:03 PM ET

AT&T's proposed acquisition of DirecTV Group for $49 billion raises long-term questions over its U-verse marketing strategy and capital spending.

Only half of consumers who buy AT&T's (NYSE:T) U-verse broadband Internet service also buy AT&T's TV service. AT&T ended Q1 with 11.3 million U-verse broadband customers and 5.7 million TV subscribers.

Verizon Communications (NYSE:VZ) has had more success selling consumers a package of broadband and pay TV. More than 80% of Verizon's FiOS broadband customers also get FiOS TV. Verizon had 6.17 million FiOS broadband customers as of March 31, plus 5.32 million pay-TV subscribers.

Both AT&T's U-verse services and its partnership with DirecTV are featured at a store in Manhattan Beach, Calif., in a photo taken last year.... View Enlarged Image

Product bundling has been a key part of marketing battles among phone, cable and satellite TV companies. Cable TV and phone companies sell "double-play" (Internet and TV) and "triple-play" (phone, Internet and TV) packages.

Satellite TV providers DirecTV (NASDAQ:DTV) and Dish Network (NASDAQ:DISH) have been hindered by their lack of broadband connections to homes. That's one reason why DirecTV turned to AT&T, analysts say.

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