What Comcast-Charter switch means for subscribers, and why fiber is stymied

Comcast van
Comcast Vice President for Corporate Affairs Mary Beth Schubert says the company is committed to a “seamless transition” for Twin Cities customers should the merger deal be approved, “with no immediate changes planned.”

Should Comcast’s proposed acquisition of Time Warner and subsequent spin-off of its Minnesota customers into a new entity managed by Charter Communications be approved, local customers face a lot of unknowns.

How would the new entity — tentatively called “NewCo” by Comcast and “SpinCo” by some — be managed? Would its customer service, technology options and pricing packages be comparable? Would the new company be as willing to invest in system upgrades and better Internet service in a market where consumer options are limited at best?

Charter: worse broadband, but better TV for some

Charter’s current presence in Minnesota is already substantial. Some 471,000 households are included in its territories, comprising 1.1 million of the state’s 5.4 million residents, according to the National Telecommunications and Information Administration. Its territories include Duluth, Rochester and St. Cloud, northwestern Twin Cities exurbs such as Buffalo and Elk River and southern suburbs such as Rosemount and Lakeville.

But to those in Minneapolis and St. Paul, it is a virtual unknown.

Ohio-based cable industry analyst Brian Bennett of Bennett Strategic Insights said Charter’s biggest selling point is that it offers standardized pricing nationwide across its platform, with packages actually cheaper than comparable ones offered by Comcast. But, he cautioned, making direct comparisons on price levels are hard to predict since what would be adopted under a wholly new company is unclear.

“From a retail perspective, you could potentially see a price decrease, but under this (NewCo) scenario, you just don’t know,” he said.

“One thing I do know is that Charter is currently making a push to upgrade its HD television service,” he said. “In most markets they offer around 100 HD channels, but now in some markets they’ve gone through a digital conversion and are offering up to 199. From a content perspective, they’re taking steps in the right direction, while Comcast has been pretty static around their 120 channels.”

Conversely, Charter currently doesn’t offer a multi-room digital video recorder, but Comcast does. That, Bennett said, is an example of how a new, hybrid provider may likely opt to keep Comcast’s technical superiority in some areas intact.

Christopher Mitchell of the Institute for Local Self-Reliance, favors community-owned networks, but concedes that locals could take some comfort that Comcast offers access to some of the industry’s faster Internet speeds. “But now we’re facing the prospect of not only being stuck on cable, but of going backwards.”

Comcast Vice President for Corporate Affairs Mary Beth Schubert says the company is committed to a “seamless transition” for Twin Cities customers should the merger deal be approved, “with no immediate changes planned.”

Ownership scheme ‘a very bad sign’

Mitchell offers the most damning assessment for consumers’ futures under a spun-off cable provider. 

Under the arrangement, Comcast would spin off 2.5 million of its current customers, including those in Minneapolis and St. Paul, into the new, publicly traded holding firm in an effort to reduce its national footprint and make its $45.2 billion Time Warner bid more palatable to federal regulators.

Charter would own about one-third of the new entity and serve as its manager with shareholders of the merged Comcast and Time Warner owning the rest. Its nine-member board would include three appointed by Charter and six independent directors.

But there is trepidation that a potential Charter spin-off deal would put the Twin Cities’ Comcast customers into (excuse the pun) uncharted territory. It would be the first time two big cable companies would team up to form a wholly new entity.

Says Mitchell, ”I like to think of it as not just getting a new parent, but being a stepchild where you’re going to be sort of at the end of line,” he said. “When this company makes an investment, Charter is only going to get a piece of the action because it will own just a third of it — it will have to share the benefits with Comcast. This is a very bad sign.”

Duopoly alternatives stymied

Whatever may ultimately emerge from a hybrid company, it would likely be more of the same high prices for Internet speeds that are insufficient to keep Minnesota competitive nationally, asserts Joe Caldwell, CEO of locally based provider US Internet.

USI supplies Minneapolis’ city-wide wireless Internet service and has recently begun offering 1-gigabit fiber optic service in some neighborhoods, something not available from cable or telephone providers.

”I don’t think people would be worse off or better off (under a new a company), I just think they’ll just keep paying up the rear end for Internet and we won’t have a lot of choices for those kinds of speeds,” he said. “I don’t see how it could be worse under Charter.”

Caldwell said real competition is being hampered by Minneapolis’ cable franchising rules.

US Internet has or will offer roughly 20 percent of Minneapolis neighborhoods fiber speeds at prices cheaper than the Comcast-CenturyLink duopoly. USI’s fiber primarily carries traffic for its city of Minneapolis wifi contract; residential fiber service is a bonus for those living next to the lines.

Caldwell says one obvious way for his company to grow would be to offer TV over fiber, and thus be a true competitor to cable. However, Minneapolis franchise rules prohibit that combo unless a company can build out its network to cover 100 percent of the city— a provision meant to discourage “digital redlining” of low-income neighborhoods.

Indeed, USI’s fiber today is concentrated around the wealthier Minneapolis Chain of Lakes, though a few middle-class and lower-income neighborhoods are served.

Caldwell says no one, with the possible exception of Google, is able to meet such a whole-city requirement, and thus USI’s growth prospects are stalled. In Kansas City, where there are no anti-redlining rules, Google is doing fiber on a neighborhood-by-neighborhood basis.

Mitchell believes Google would be willing to come here and meet the every-neighborhood requirement, but no leaders are asking them because they’re afraid of Comcast’s financial and political clout. The Twin Cities, he concludes, are missing a golden opportunity to break the telecom duopoly, even as a Comcast-Charter handoff increases uncertainty.

Comments (9)

  1. Submitted by Gerald Abrahamson on 05/05/2014 - 10:48 am.

    Critical point missing from fiber optic discussion

    Putting in true high-speed fiber eliminates the need for multiple wiring by multiple organizations (telephone line, cable, etc). ONE fiber network with multiple content providers–problem solved. That is the problem Comcast, Centurylink, etc refuse to address. Comcast and all other cable companies won’t do it because it allows real competition–such as customers being able to buy the channels they want and NOT buying the ones they don’t. Netflix (etc)–no problems with capacity.

    Plus, fiber allows “work from home” options at essentially minimal cost. That cuts out a significant amount of traffic on the roads. It also saves business money because they need less parking and smaller offices in high-cost areas. A decent PC with 24″ monitor (or larger–good HDTV?) is cheaper than office rent + parking for the business.

  2. Submitted by jody rooney on 05/05/2014 - 11:17 am.

    As someone who does work from home

    and lives on 20 acres in an agricultural zone I have my choice of two providers Century Link and Comcast. Imagine my surprise that at our newer house in Stillwater there are no providers.

    Stillwater selected Comcast as their supplier but the fiber does not run all the way to the end of the block. Since Comcast is the cities contractor there is no competition from other carriers.

    So I will end up commuting to a WiFi hotspot to work adding miles to my existing commute of 30 feet.

    Who would have known you could move to a city and receive fewer services than you can in a rural area.

  3. Submitted by Simon Byrd on 05/05/2014 - 01:21 pm.

    Love my USI fiber in S Minneapolis!

    It’s 100mbps downstream and UP (vital for any cloud business), never throttled or slowed down by Netflix neighbors, no monthly bandwidth caps. I am not moving, but if I did, it would be to another USI served apt. Now, if they could only provide JUST the local broadcast stations which I cannot reliably receive with antennas (looking at you, 2, 9 and 11).. The whole spectrum of “cable” stations would be a bonus, and I would never have to deal with Comcast.

  4. Submitted by Mike Schumann on 05/05/2014 - 02:06 pm.

    Stillwater Internet

    You live in the City limits of Stillwater and can’t get Comcast Internet or Centurylink DSL? That’s hard to believe. Specifically, what neighborhood are you in?

  5. Submitted by Mike Schumann on 05/05/2014 - 02:07 pm.

    USI Internet

    I own a business in St. Louis Park, just two blocks outside of the Mpls city limits. How can I get USI Internet service????

  6. Submitted by Steve Hoffman on 05/05/2014 - 06:23 pm.

    Alternatives

    I’d welcome any alternative to Comcast, so long as it isn’t just a Comcast puppet made out of a sock (like the proposed thing).

  7. Submitted by Mark Carter on 05/05/2014 - 10:14 pm.

    Comcast’s political clout should not be relevant

    I have a home on Benedict Lake in the Paul Bunyan Forest where I spend most of my time. I have a town home/condo in Eagan.

    On the shores of Benedict Lake, I get excellent service form the local cooperative, Paul Bunyan Communications. Although a remote area, Paul Bunyan have had 100% of customers on fiber. I have fiber right to my house. The Internet service, and phone service is superb and HD TV over fiber is available with DVR service.

    In Eagan my only choice is Comcast, which is a pony express service compared to what I have in a remote rural area.

    Traditional TV and in fact all over air broadcasting will be gone in a generation or less. I watch very little traditional TV now, and my viewing is almost all Internet based and sourced from around the world.

    This Metro needs to get Google in here and set up the 1 Gig Internet and progress to the 5 Gig Internet. This project is of far more importance than light rail and will do more to get cars off the streets at less cost. It will also really open Minnesota for business in the modern world. There is no issue of greater importance facing all levels of government across the State. Get it right and fast.

  8. Submitted by David Frenkel on 05/05/2014 - 10:34 pm.

    Fiber

    I had fiber optic Internet to my house in VA/suburban DC and what I get from Comcast and Centurylink is going back Internet decades. It the US/MN wants to competitive on the world stage communities need fiber optic Internet connectivity.

  9. Submitted by Connie Sullivan on 05/12/2014 - 10:46 am.

    If US Internet is too small a company to do fiber optic in Minneapolis, and Comcast>Charter refuses to do it (we don’t need Google, just a deep-pocket corporation), are most of us just stuck with really old technology, because our city has contracts with USI and Comcast?

    For Minneapolis to have only a select few residences with USI fiber is an embarrassment. What can or will our politicians do about this?

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