Friday, January 20, 2012

LUS & Cox Comparison Pricing

This morning the Advertiser ran a follow up piece to yesterday's article that headlined LUS' video price increases. Yesterday's piece, I argued, focused on the least important news of the day and also missed the fact that Cox had announced a broader price increase earlier without eliciting front page treatment. (I had discussed the more consequential NCTC news I felt was underemphasized in a post the day before.) Today's article, which also ran above the fold on the front page brought Cox's price increases to the attention of the Advertiser's readers. Both companies argued the same basic point—that their price increases were due to increased prices charged by the channel providers. It's a good story, and well worth the click. (The Advocate and LPF also covered the story of Cox's across the board price increases.)

The author was asked for a comparison of the new prices in the comments on yesterday's article and made a stab at working out the video pricing there. But not much of that work made it into today's piece which contented itself with pointing out (correctly) how hard it is to compare the two and to comparing the prices Cox and LUS would charge for a package of the four premium channels. Unfortunately that particular comparison is not very useful since neither company will sell a customer those channels without attaching them to one of their larger packages. But I did think that a more complete comparison would be both interesting and useful.

So, I decided I'd try and work out a rough comparison. It was a chore. Persac at the Advertiser had it right when he said:
Comparing the LUS Fiber's rates to Cox's rates, however, isn't as simple as one may think. The services included in the packages the companies offer are not always comparable, and the two businesses charge customers differently for some services.
The offerings aren't always comparable. For example Cox offers some internet speeds that are a tenth of the lowest LUS speed — the two are just not in the same ballpark; on the other hand LUS Fiber offers a 100 Mbps internet tier that is twice as fast as Cox's top speed...comparing the pricing on those radically different speeds just doesn't make sense. The same services can be sold separately by one company but combined into a single offering by another. For example Cox offers its phone additions (like call waiting) as part of large packages. LUS allows subscribers to choose a la carte. Cox offers bundles that give an overall discount on packages of products. LUS has a single price regardless of the combination of services that you buy.

What I've done is compare what is comparable and, where possible, construct roughly parallel packages so that a potential buyer can get a sense of how the prices of the two companies compare where the offerings can be aligned. Where the offerings could not be made comparable I eliminated them from consideration. The simplified spreadsheet immediately below is the result.

The Gist
I'll not keep you in suspense: LUS is consistently cheaper (see the price difference column). That shouldn't be surprising; that was LUS' original promise to the community. But there are still details here that might help some users trying to make a decision. For instance, LUS' advantage is greatest in its internet packages. I had to ignore the fact that Cox's upload speeds are radically lower than LUS' and if that matters to you my equating Cox's 50/5 plan with LUS 50/50 could seem misleading. On the other hand LUS' price advantage over Cox is smallest for its cable offerings. And Cox offers access to cable content from HBO Go on tablets and handheld devices. If that excites you enough the price difference won't deter you. In short, this is painting with a broad brush; the direction of difference on pricing where they are comparable is clear but other, real differences exist. If you'r trying to decide due diligence is your friend.

(And oh yes, AT&T still sells DSL-based internet and phone service...but I'm tired and couldn't reasonably recommend their services. Do be aware that AT&T's DSL is slow but cheap; if price is your main concern look there too.)


For those of you who want to dig in a little deeper...or are just masochists...I've also linked to the rougher but much more complete spreadsheet filled with the data that I used to decide which offerings were comparable. Those highlighted in light red are the categories that I decided fit well enough to include in the simplified chart. Looking at the differences and the ways that I thought about each category should allow you to decide whether or not I've succeeded in constructing fair comparisons. There are also links to the data I used embedded in the spreadsheet if you'd like to go back to the source. (For LUS' new video prices I used a sheet that I'd requested from LUS.)

It's a mess. You were warned:
LUS & Cox Pricing (Detailed)

UPDATE 1/21/2012: The Advertiser this morning runs its own front-page comparison of LUS Fiber and Cox's cable offerings.  Give it a look. The chart in printed version is more useful (IMHO) than the text. It's extraordinarily hard to describe in words the differences between the two companies' offerings.

Wednesday, January 18, 2012

LUS Fiber to join cable coop! Tentatively.

The Advocate tops its Acadiana section today with the news that LUS Fiber has been cleared to join the NCTC. This is a big deal. LUS' exclusion has been estimated to raise the purchase price of its cable programming 20%—easily the largest ongoing cost of providing LUS' cable services.

Details are exceedingly sketchy at this point. Reading between the lines it looks as though reporter Richard Burgess has actually dug into the bond details from the recently approved completion of the bonding authority approved by the voters in the fiber referendum. From the story:

A tentative agreement allows LUS Fiber to join the cooperative and to reap potential savings, according to a recent financial forecast that accompanied a bond offering by the city-owned service.
Just what 'tentative' means is unclear. Presumably that means that, while an agreement has been reached in principle, it has not been finalized. Hence the lack of an announcement from LUS and the reticence of Huval to discuss any details in response to Burgess' queries. (An aside: reporter Burgess has stayed on top of this story for years, since the beginning, and this sort of close following of a very significant but complex and unglamorous story that can only be pursued by teasing out the details in obscure places reminds us of what real reporting is all about: knowing enough to find the stories that need telling. Thanks Richard...)

While there may be an agreement in principle, the big issue has always been one of principles...or lack thereof.

Principles and History
The National Cable Television Cooperative is the largest of the national cable content buying cooperatives. It was enabled by the Cable Act of 1992 which was designed to foster competition by allowing smaller, local cable businesses to band together in a buying coop whose joint purchasing power could equal the buying power of the growing national corporations like Comcast and Cox. So it was odd when Cox and Charter communications were granted membership and Cox was granted membership on the board of directors. The coop exists to restrain the power of corporations of that size; to have them as members and directors is decidedly odd and certainly at odds with the history of the organization. If you are used to thinking of coops as minor players in markets please disabuse yourself of the idea: the NCTC has the second largest pool of potential subscribers in the nation. Only the largest private company, Comcast, has more. For a little history of the conflict here is how I described the relevant history awhile back:

  ..... LUS and two other cities with new FTTH networks who have submitted applications for membership after years of being ignored and then enduring a "moratorium" on new members started proceedings at the FCC asking the FCC to exercise its obligation under the Communications Act to block anticompetitive practices. The FCC requires that complaints be preceded by filings of intent at the FCC and fully informing the interested parties. LUS and its sister cities did so. (This is not fairly characterized as a "threat.") The FCC's hope in requiring this is pretty clearly that the two parties will get together and work it out without burdening their docket with the case. Indeed, the two other cities were admitted...and only Lafayette was refused. Why? Well the NCTC simply hasn't said. But the fact.... is that Cox Communications is the largest member (this is recent—they joined after the successful referendum battle in Lafayette and the "moratorium") and has a seat on the board of directors. The two other cities don't compete against Cox or any other NCTC member. (This is not established policy, other places have more than one competitor in the NCTC.) If the point of the NCTC refusing only LUS membership is to stifle competition on behalf its most powerful member—well...on the face of it that would make their action anti-competitive and the FCC would be obligated to act.

It is very difficult to draw any conclusion other than Cox having a malign influence on the NCTC...the two other cities whose competitors did not have a position on the board were let in, there are many examples of competing cable companies having membership, and LUS' technology is almost identical to Chattanooga's. The only difference is LUS' competitor.

This is clearly good news. Most obviously LUS will, as time marches on, come to enjoy a level playing field against Cox in regard to the prices and terms it can get on cable content and hardware. That differential, as much as 20%, is huge and that alone is immensely important. But there are further important advantages.

Once the NCTC question is settled it will end a large chunk of uncertainty and uncertainty is the enemy of wise decision-making. As long as LUS doesn't know what its future costs are likely to be it has to play the game as if the worst case were has to act as if it will for the indefinite future be at a radical disadvantage to its chief competitor on one of its largest and most rapidly escalating expenses. If it was to keep its pledge of keeping its prices below Cox's it would simply have to exist on a razor-thin margin or even subsidize cable through its other services. That would be especially galling since cheap cable service was never the point of building an next-generation network for Lafayette; revenues from conventional cable services were intended to support the network not the other way around.

There are also more subtle advantages to LUS joining the NCTC. The NCTC also has buying power in the set top box market and Motorola and other set top box makers would surely write relatively favorable contracts if the total buy was potentially much larger than one justified by the size of Lafayette. All those contracts, both for content and for ancillary hardware will not only be less costly they will also, crucially for smaller operations like ours, no longer demand the time, attention, and expertise of specialized individuals whom LUS must either hire or contract. Not only is the price of these contracts are likely to change; the stipulations included in them will likely change as well. As things currently stand LUS is not only a small customer, it is a decidedly odd one. And being odd has consequences; usually unpleasant ones. Aside from being oddly municipal LUS is also oddly configured. It's IP-based FTTH technology is rare in the world of cable and the content providers are notoriously nervous about the internet, piracy, and the supposed insecurity of the IP (Internet Protocol) standards on which the net is based. (Witness the industry's proposed laws behind today's SOPA-inspired blackout.) The result of Lafayette's utility being both odd and small is that it has little power to resist contractual constraints that would severely limit some of the more innovative things that an all-IP network would find relatively easy to create. So nervous content providers slather on codicils to their standard contracts that protect against every imagined danger—and make many innovative ideas contractually impermissible for some subset of the channels LUS feels it must offer to be competitive. (For example, an on-network DVR system is an idea that could suffer from excessively paranoid contracts. Slinging content to multiple screens from LUS' end to end IP-based network would be much easier to implement than over the more traditional cable technologies.) Moving to a simple, standard contract without special riders from the NCTC could open up many possibilities for a network as sophisticated technically as Lafayette's

It is a good thing that appears to be happening. Let's hope it goes through without further delay. 

Monday, January 02, 2012

(Don't) Ask the Advocate

It's a testimony to the lack of editorial oversight and the generally fading role of local and regional newspapers in providing the community with a living memory that we see misleading articles like the one that appeared in this morning's Advocate. Run under the title "Ask the Advocate: Cable company competition" this article attempts to answer a question from a reader:
Why did former Gov. Kathleen Blanco veto a bill passed by both the Louisiana House and Senate that would open up the market to allow more cable television companies to compete?
The answer amounted to acknowledging Blanco's veto, a brief discussion of the rationale, and the assertion that East Baton Rouge Parish still gets franchise fees. 

No. NO. And the worst error is not is what is actually said; it is in what is missing: any understanding of the actual history and what has actually happened politically. Cable bills are one of the largest bills most subscribers to the Advocate pay—and cable companies are one of the very few corporations that locals interact with that have any degree of community control exerted over them. It would behove the local paper, any local paper, to get this right and to understand what our communities have lost. 

What's missing goes straight to the heart of the story:
  1.  Essentially this same law passed shortly after Jindal came into office. Honestly, how can the paper miss this? 
  2. Both versions were touted by BellSouth (then in the process of being purchased by AT&T). But Cox and other cable companies did not oppose it because it did not actually bring them into competition with any substantial new entrants and relieved them of obligations to smaller communities.
  3. EBR entered into a franchise with AT&T shortly before Jindal's version passed. 
  4. About 40% of the state's population was exempt constitutionally so Baton Rouge could never have been effected and any reference to its franchise fees are beside the point. 
  5. Here, and in most places such laws have been passed, it has not resulted in substantial competition and has certainly not lowered prices or extended the services as promised by AT&T. But it did allow AT&T to roll out it's Uverse cable wherever it wanted unimpeded by any local franchise that would have actually required competition. AT&T only wanted to roll it out in a very few high-profit places that were wealthy and densely populated. Even in Baton Rouge only a few neighborhoods have ever received it and that red-lining of poor neighborhoods would not have been possible under a standard franchise like Cox has which requires almost universal service throughout all the populated areas of EBR. 
  6. The major beneficiaries were the existing cable companies not competitors—because in areas where there is no constitutional home rule barrier the effect of the law was to hand over to cable companies the locally owned and maintained rights of way to all corporate telecommunications providers to use without charge. 
The lack of a critical understanding of the political game afoot and simple ignorance that this story exhibits is plain, flat, embarrassing. Especially for a newspaper that aspires to be Louisiana's paper of record. Here's what an intrepid reporter could try: go back to the record, look at the claims made for the law, document how completely false those claims have turned out to be. Document how few new cable subscribers AT&T has ever served and how rich and urban those people are and how few rural folks of any strip were served. (Rural legislators were particularly hoodwinked, and seemed willfully ignorant of the simple economic facts at the time.)  Find out where Cox and the other cable companies have expanded, quietly, without paying a dime to the local communities. There's actually a good story there. One that covers the cost to the citizens of Louisiana of potential competition and the further impoverishment of local units of government by a state legislature subservient to out-of-state corporations.

For those who'd like a look at the (long, long) story of the two bills, one vetoed by Blanco, the other signed by Jindal, the references to Texas and North Carolina's experiences with very similar bills, and unhappy consequences of the law both here and of similar laws elsewhere can simply follow the stories in this blog that are tagged:  State Video Franchise