Cable operators can see signs of change they can believe in. The arrival of the Obama administration meant the departure of industry nemesis Kevin Martin from rulership of the Federal Communications Commission and already:
- The agency, under interim chairman Michael Copps, derailed Martin’s attempt to give blanket approvals of basic-carriage demands by NFL Network, Wealth TV and Mid-Atlantic Sports Network;
- Martin’s departure may have helped give Cox Communications confidence to adopt a common-sense approach to ensuring customers’ cable-modem bandwidth needs, even though its approach, which prioritizes “time-sensitive” applications like streamed video or voice calls, runs counter to the ex-chairman’s philosophy of not singling out types of Internet applications;
- A last-minute move by Martin to lift program-access restrictions imposed on News Corp. when it bought control of DirecTV looks like it’s moved to a back burner, a plus for small cable operators.
The new regime may even have inspired Charter Communications, lurching toward major debt reorganization, to invest in a new 60 Megabits-per-second cable-modem service. OK, that’s stretching it too far, but the environment does seem to be improving for this industry built on private investment.
The Obama administration is emphasizing broadband deployment. In general, that priority is good for those deploying broadband, though cable would prefer that incentives to new competitors be targeted to “unserved” rather than “underserved” locations, a point National Cable & Telecommunications Association chief Kyle McSlarrow made in a video blog on the topic last week (check NCTA.com).
Broadband voice and modem services are the fastest-growing segments of the cable business and, again, it’s encouraging to see companies like Charter and Comcast rolling out 50- and 60-Mbps services (at steep price tags of $130 and up a month) despite the sour economy.
The effort to delay the broadcasters’ digital TV transition, another Obama administration effort, seems like a neutral event for cable, although a delay might give cable and satellite players more time to capture the “nevers.”
Just how badly the economy has been hurting cable operationally will start to become clearer as fourth-quarter results come out, starting with Time Warner Cable on Wednesday (Feb. 4). As Sanford Bernstein’s Craig Moffett pointed out in a recent note, TWC CEO Glenn Britt already warned that new-subscription growth had “dramatically slowed” in October. Moffett is forecasting a net loss of 27,000 basic-video subscribers, but gains of 153,000 high-speed Internet and 164,000 digital-voice subscribers. Comcast reports on Feb. 18.
Change isn’t always good, and cable stocks have been pummeled amid the downturn in the economy. Moffett points out Comcast, TWC and Cablevision Systems all now trade at below five times earnings before interest, taxes, depreciation and amortization for the first time ever.
He feels that’s an over-reaction to bear theories about cable disconnects and that fourth-quarter reports will demonstrate cable’s resilience.
That could be a change for the better, too.