Broadband Cable Association of Pennsylvania

NewsClips

January 23, 2014

Call it the Grand Slam.

Comcast may soon provide customers with retail electricity supply, along with its "Triple Play" bundle of cable, Internet, and phone service. Pennsylvania Public Utility Commission Chairman Robert F. Powelson said Wednesday that the Philadelphia cable giant was working with a third-party supplier to include retail electricity in its bundle of services this year. Powelson disclosed the Comcast venture during public remarks after the release of a report that evaluates the nation's competitive retail energy markets. Pennsylvania ranks second among states, behind Texas, in the Annual Baseline Assessment of Choice in Canada and the United States (ABACCUS).

Powelson did not name the supplier with which Comcast is collaborating. NRG Energy spokesman Dave Knox acknowledged that his company was "working with Comcast on a new initiative." NRG's involvement was first reported by EnergyChoiceMatters.com. NRG, with headquarters in Princeton, owns Reliant Energy, a large retail supplier in Texas, and Energy Plus, a retail supplier in Philadelphia that specializes in bundling electrical supply with affinity programs that reward customers with cash and airline miles. Comcast, which does not own a licensed electrical supplier in Pennsylvania, declined comment through a spokeswoman.

About 39 percent - 2.2 million - of Pennsylvania electricity customers have switched from incumbent utilities to competitive suppliers, mostly for discounted rates. The architects of Pennsylvania's retail electricity markets anticipate that over time suppliers will offer more innovative products that might include services such as energy efficiency, home security, renewable power, and rates that vary by the hour. Philadelphia Inquirer

Comcast Corp. and Verizon Communications Inc. have dissolved a highly touted joint venture to develop next-generation products in Philadelphia, officials from both companies confirmed Wednesday. The joint venture had been part of Comcast's sale of wireless spectrum to Verizon Wireless for $2.3 billion in December 2011 and was viewed as an indication of warming relations between the telecommunications giants. The venture developed at least one hardware product that involved streaming content onto TVs.

The product, reportedly branded Nuon, will remain with Verizon, according to officials close to the deal who were not authorized to discuss it. "Anything we worked on at that time was confidential," Verizon spokesman Alberto Canal said Wednesday. He confirmed the dissolution. A Comcast spokesman also said the venture had been dissolved. Though said to be based in Philadelphia, most of the development took place at Verizon's headquarters in Central New Jersey and involved several hundred employees. "While Verizon Wireless and Comcast decided to end the joint product-development venture, we continue to offer each other's products and services," the Comcast spokesman said. "As always, Comcast remains committed to bringing a steady flow of new innovations, like X1 and our wireless gateways, to our customers, and to work every day to deliver a great user experience."

As part of the 2011 spectrum deal, Comcast and Verizon Wireless agreed to jointly market their products in Verizon Wireless and Xfinity stores, and to develop new products. In late 2011, Verizon Communications owned 55 percent of Verizon Wireless and England's Vodafone Group owned the other 45 percent. Last year, Verizon Communications agreed to purchase the 45 percent of Verizon Wireless it didn't already own, and this may have changed the complexion of the Comcast/Verizon Wireless relationship. While Verizon Wireless does not directly compete with Comcast, Verizon Communications does, with FiOS TV and FiOS Internet. Both Comcast and Verizon Communications, moreover, are looking at broadening their video-streaming capabilities.

Comcast and Verizon Communications considered acquiring Intel Corp. media assets in recent months. Verizon announced Tuesday that it had agreed to purchase those assets. Comcast has boosted its research budget and hired about 1,000 software engineers. Its research and development employees, now scattered in the Comcast Center and leased offices in Center City, are expected to relocate to the proposed second Comcast tower when it opens in 2017. Philadelphia Inquirer

Weeks after Liberty Media Corp. invested $2.6 billion in Charter Communications Inc. last spring, Liberty CEO Greg Maffei was moving onto the next step of the company's cable expansion strategy: approaching Time Warner Cable Inc. about a possible merger with Charter. That approach, which became public last June, sparked a takeover battle now in its seventh month.

Last week Charter disclosed its third-and first public-offer to buy Time Warner Cable, a bid valued at $37.4 billion. Time Warner Cable says Charter's proposal is "grossly inadequate," but Charter and Liberty are expected to pursue a proxy battle for control of TWC's board in coming weeks if no deal is reached. The takeover battle highlights a newly energetic stance by Liberty since Mr. Maffei took the helm at the start of 2006. Earlier this year the company also made a bid to buy minority shareholders out of Sirius XM Radio, now 52% owned by Liberty.

In an interview Mr. Maffei, 53 years old, talks about Liberty's need to change its growth strategy, the TWC-Charter battle and his relations with Liberty's controlling shareholder, chairman John Malone.

Edited excerpts:
WSJ: At the Citi investment conference earlier this month, you said Liberty had to find a "new game." What did you mean?
Mr. Maffei: When I got to Liberty?we were sitting with a whole bunch of minority stakes, non-control positions. We cleaned those up; we're now in a different position. We need to rethink how we go about creating shareholder value. We need to look at the marketplace, trying to look for durable assets, take advantage of cheap financing and think about trying to build different kinds of value.

WSJ: You said at the same conference that you and John Malone had talked about finding durable assets that you could own for 10-15 years. Is that how long you think you will be there and Mr. Malone will own the business?
Mr. Maffei: John will be here forever because John is the ultimate control shareholder. I suspect I will be here as long as he will let me.

WSJ: Your contract is up at the end of the year. Has it been renewed yet?
Mr. Maffei: It has not. I have had some dialogue with our [board's compensation committee] and some dialogue with John and I'm sure we will come to an agreement. ...We have had some exchanges of term sheets and ideas, we have more than 11 months to get it done, not a pressing problem.[Mr. Malone, in an emailed statement, describes Mr. Maffei as a "strong partner" who is "capitalizing fully on all" of Liberty's assets.]

WSJ: Though Charter is the company that made the takeover bid, Liberty Media is seen as the driving force in the whole thing. What is Liberty's role?
Mr. Maffei: This deal is clearly being driven by Charter and the strength of the management team there. We have an aligned view with them that consolidation is a real opportunity for the cable industry.

WSJ: Are you putting in more cash to help finance the deal?
Mr. Maffei: We have sent them an indication several months ago that we would be willing to put incremental capital in, both because there may be a need for equity and because Liberty, given its been in the cable business a while, particularly our chairman, is viewed as having some credibility.

WSJ: Have you been involved in talks with Comcast about it participating in the bid?
Mr. Maffei: The cable industry is a fairly small industry. Everybody is talking to everybody about how they might wish to participate. The major players ? all see some benefit to incremental subscribers so it's safe to assume that everybody is considering or looking at the alternatives about how they might be able to increase their footprint to get scale economies.

WSJ: TWC's stock price is trading well above the value of Charter's latest offer and TWC Chief Executive Rob Marcus says $160 is the price they want. What does Charter do next?
Mr. Maffei: It seems like we are negotiating with a stone wall so that doesn't feel like a very productive discussion. I don't think the proposal put on the table is one that we feel the need to pay.

WSJ: If you are a hedge fund who bought in at $125, say, you will want a higher price than the current market price of $135.
Mr. Maffei: Obviously they want a higher price but I don't believe there is $160 out there from anybody else. So now you are provided with a choice of whatever Charter can put on the table and can be negotiated or believing that the TWC management, who lost 800,000 subscribers in the past year, will turn it around and do better and get you that number on your own. And if you're that hedge fund investor I think that is a very stark choice.

WSJ: Why wouldn't the next step be that Liberty, which is a TWC shareholder, nominate people for the board?
Mr. Maffei: We have not taken any steps off the table.

WSJ: Have any investors indicated to you that they might do that?
Mr. Maffei: We have had shareholders saying they would be interested in supporting such a proposal, driving such a proposal. Wall Street Journal

Netflix Inc. CEO Reed Hastings addressed the government's recent "net neutrality" legislation, saying he would "vigorously protest" a "draconian scenario" that would prompt the company to pay directly for bandwidth. A U.S. appeals court last week threw out federal rules requiring broadband providers to treat all Internet traffic equally. Internet service providers are now free to experiment with new types of arrangements, such as charging content companies like Google Inc. and Netflix higher fees to deliver Internet traffic faster. "The motivation could be to get Netflix to pay fees to stop this degradation," Mr. Hastings wrote in his quarterly letter to investors. "Were this draconian scenario to unfold with some [Internet service provider], we would vigorously protest and encourage our members to demand the open Internet they are paying their ISP to deliver."

Mr Hastings's remarks come as the Internet streaming provider reported upbeat quarterly results, better-than-expected subscriber growth and an optimistic outlook. Shares spiked 18% to $392, on pace to open Thursday at a fresh record high. Here's the full section of Mr. Hastings's letter that addresses net neutrality: "Unfortunately, Verizon successfully challenged the U.S. net neutrality rules. In principle, a domestic ISP now can legally impede the video streams that members request from Netflix, degrading the experience we jointly provide. The motivation could be to get Netflix to pay fees to stop this degradation. Were this draconian scenario to unfold with some ISP, we would vigorously protest and encourage our members to demand the open Internet they are paying their ISP to deliver."

"The most likely case, however, is that ISPs will avoid this consumer-unfriendly path of discrimination. ISPs are generally aware of the broad public support for net neutrality and don't want to galvanize government action. Moreover, ISPs have very profitable broadband businesses they want to expand. Consumers purchase higher bandwidth packages mostly for one reason: high-quality streaming video. ISPs appear to recognize this and many of them are working closely with us and other streaming video services to enable the ISPs subscribers to more consistently get the high-quality streaming video consumers desire. In the long-term, we think Netflix and consumers are best served by strong network neutrality across all networks, including wireless. To the degree that ISPs adhere to a meaningful voluntary code of conduct, less regulation is warranted. To the degree that some aggressive ISPs start impeding specific data flows, more regulation would clearly be needed." Wall Street Journal

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