Cable operators improved their ratings significantly in the latest American Customer Satisfaction Index, with some providers improving their overall scores by 15% or more, but still couldn’t pass stronger showings from telco and satellite TV providers.

Cable stopped its two-year decline in ACSI pay TV ratings, rising 3.25% as a whole, but still finishing last in ACSI’s annual customer satisfaction ratings, a random sample of 12,710 consumers, with scores ranging from 54 to 66 out of 100. Telco TV finished first and satellite TV service providers placed second.

Among cable operators, the biggest gainers were Time Warner Cable, which rose 15.7% from a 51 in 2015 to a 59 in 2016 and Comcast, which increased its ACSI score 14.8% from 54 in 2015 to 66 this year. The highest rated cable companies were Bright House Networks and Cablevision Systems, each with a score of 66. Bright House was purchased by Charter Communications (which scored a 60) in May and Altice N.V. is expected to close its purchase of Cablevision later this month.

“It’s not too hard for cable companies to improve when their starting point is the cellar,” said ACSI Managing Director David VanAmburg in a statement.

Acquisitions could play a role in next year’s ratings as companies that are involved in mergers typically post lower scores once their deals are done. Charter closed on its $78.7 billion purchase of Time Warner Cable on May 18, the same day it closed the Bright House deal.

Again, telcos Verizon and AT&T U-Verse had the best scores in the subscription TV segment – 70 and 69, respectively.  DirecTV received a 68 rating (the same as last year) and Dish Network had a 67, even with 2015.

The tables were turned on the Internet Service Provider front, with cable operators performing best. Verizon secured the top spot again with a 73 rating (the highest ever for the segment), with Cablevision Systems up 13% to a score of 69, Bright House Networks up 7% to 67 and Time Warner Cable up 14% to 66. Charter increased its score 11% to 63 in the period.

“High-speed Internet access is a must-have in the digital age, making ISPs and wireless companies critical providers for the workplace as well as the home,” said ACSI founder and chairman Claes Fornell in a statement. “With relatively few options, consumers have limited means for punishing companies for poor service.”

Charter Communications announced a new low-cost broadband service for low-income customers that the MSO pledged to offer within six months of the close of its proposed acquisitions of Time Warner Cable and Bright House Networks.  

The service, which will be offered across Charter’s footprint within three years of close, will deliver speeds of up to 30 Mbps downstream and 4 Mbps upstream for  $14.99 per month. The speeds happen to exceed  FCC’s current definition of wireline  “broadband”  -- 25 Mbps down by 3 Mbps up.

Other MSOs have launched similar high-speed Internet options for low-income families. Those from Cox Communications (Connect2Compete) and Comcast (Internet Essentials) currently offer max downstream speeds of 10 Mbps, but cost less to homes that qualify -- $9.95 per month. The Cox and Comcast programs also provide free WiFi routers, and Comcast’s provides access to discounted computer equipment (less than $150).

Charter, meanwhile, will hang its hat on  faster speeds through its $14.99 per month program, which is targeted to families with students who participate in the National School Lunch Program, and seniors who are 65 years and older who receive Supplemental Security Income program benefits. Additionally, enrollees can’t have had a Charter, TWC, or BHN broadband subscription within 60 days of signing up. Eligible participants won’t need to undergo a credit check, but must clear any bad debt with the three MSOs.

In addition to the 30/4 service and a free modem and self-install kit, Charter’s low-cost option for eligible subs will also be in line to receive “promotional” video and phone service bundle offerings.

"Recognizing the central role broadband plays in our daily lives and the economic challenges faced by many Americans today, we look forward to launching this offering that will provide more consumers a superior broadband service," Tom Rutledge, president and CEO of Charter, said in a statement.  "Our industry-leading low-cost broadband service is just one of the many benefits these transactions will bring to our customers. We look forward to providing this superior broadband service to underserved families and seniors throughout Charter's footprint."

Charter’s plan drew praise from Public Knowledge, a group that is scrutinizing the proposed deals.

"Although we still have significant concerns about Charter's proposed merger with Time Warner Cable, we also recognize that some of the commitments that Charter has made could serve as a model for the rest of the cable and broadband industry,” said John Bergmayer, senior staff attorney with Public Knowledge, in a statement. “For example, its commitment not to impose data caps on its users. Similarly, Charter's effort to make it easier for low-income seniors and families with children to access broadband service has many good attributes, including fast broadband speeds. In conjunction with a modernized Lifeline program, Charter's proposal can help the nation achieve universal affordable access."

In its announcement, Charter rallied support from leaders with several organizations, including the  National Urban League, National Action Network, League of United Latin American Citizens,  The National Hispanic Media Coalition, California School Boards Association, Connected Nation, Digital Divide Partners LLC, NOBEL Women’s Initiative, Rainbow PUSH Coalition, and the Los Angeles Opportunities Industrialization Center (OIC).

Industry analyst Craig Moffett remains a big fan of Charter Communications’s cloud-based video strategy, agreeing with the MSO’s notion that the plan, which relies heavily on ActiveVideo’s platform, will enable the operator to significantly reduce capital spending, particularly at the set-top level.

Moffett, principal and senior analyst at MoffettNathanson, placed an emphasized on that approach in a report on Charter’s capex prospects as the operator pushes ahead with its proposed acquisitions of Time Warner Cable and Bright House Networks.

Moffett said “the most interesting number” in Charter’s pro forma projections for those deals is 11.8% -- the MSO’s “aggressive” pro forma capital intensity forecast for 2019E.

“Charter sees the number not as a short term blip but instead as an indication of a fundamentally different long-term capital intensity profile for the business,” he wrote.

Moffett, which has raised his price target on Charter to $230 to $210, believes that projection for lower capex intensity is “plausible” for Charter, “at least for the residential segment of their business.” For its part, MoffettNathanson’s own analysis of Charter envisions a 12.2% capital intensity, slightly above Charter’s forecast.

A big part of that decrease in capex intensity centers on Charter’s plan to move toward a cloud-based approach with ActiveVideo’s technology (an Arris-Charter joint venture acquired ActiveVideo in May for $135 million) that will allow the MSO to offer its new Spectrum UI and new apps across its footprint to both new IP-capable, such as its emerging Worldbox, as well as to legacy QAM-based boxes that don’t speak IP.

“[W]e believe Charter’s aggressive software and cloud-based approach will lead to a dramatic reduction in…CPE spending,” Moffett noted. “The potential capex savings from the transition from a hardware-based platform to a software-based one appears to be genuine, and make us incrementally more bullish on Cable, particularly on Charter.”

By comparison, he said Comcast, which has conducted some trials with ActiveVideo but has not committed to anything beyond that, will also enjoy a reduction in CPE capex as it expands the reach of the X1 platform, but that Comcast’s approach, which centers on the deployment of IP-capable devices, “will remain more capital intensive than Charter’s.”

Moffett also outlined the four “key” components of a cloud-based guide build: the server costs, seen as the most expensive element, as well as engineering/installation costs, network upgrade costs and app development costs.

With that as the basis, he estimates $2 billion in five-year total capex for a cloud-based guide build compared to $8.4 billion – a 77% reduction in capex -- for IP-enabled boxes for a company the size of pro format Charter.

Speaking on Charter’s Q3 call in October, president and CEO Tom Rutledge noted that Charter was about six weeks behind its original rollout schedule as the MSO irons out software issues.

While that pushes Charter’s prior target of launching its new cloud-powered UI to 1.6 million boxes by the end of the year, “a delay of only six weeks for a footprint-wide rollout should be viewed as very good news,” Moffett said, adding that Charter could have a fully interactive UI in front of all its customer within a couple of years.

Looking ahead, Moffett believes that cable will gain video share thanks to improved platforms and experiences. As for pro forma Charter, he sees it adding about 130,000 net video subs in 2019E. 

It’s DirecTV’s turn to mock the cable industry over its recent M&A moves aimed at achieving more scale across the board.

DirecTV, now part of AT&T, has launched a humorous ad about the fictitious merger of Cable Corp Inc. and CableWorld, seemingly a jab at the failed Comcast-Time Warner Cable, the pending deal between Charter Communications, TWC and Bright House Networks, or Altice's proposed deals for Suddenlink Communications and Cablevision Systems…or just maybe all of them in one fell swoop.

“We all know that DirecTV’s better at this whole TV thing, so to beat ‘em, we’re going to get bigger, we’re going to merge with CableWorld,” proclaims the Cable Corp. chief, played by Jeffrey Tambor.

 “That company stinks,” another Cable Corp. exec (John Michael Higgins) chimes in later. “And I mean they smell. I used to work there. I had to breathe through my mouth the whole time.”

And then Fred Willard, playing the big cheese at CableWorld, delivers the punchline. Well, we don’t want to blow it…just see it for yourself:

Update: And here's the ad about how things are going at CableWorld, post-merger, which will start airing later this month (other ads in the campaign will also air this fall):

The DirecTV ads, which are revival of the company's “Empty Cable Suit” commercials from 2008 that also featured Higgins, comes in the wake of recent ads from Comcast that jabbed at the AT&T-DirecTV merger and Charter Communications’ anti-satellite TV campaign.

http://www.multichannel.com/news/content/charter-ads-take-jabs-satellite-tv/393896

Comcast’s campaign, which was initially launched in markets such as Chicago, Miami before spreading to other MSO markets and complemented by radio, print and digital ads, starts out: “This is the dawn of an old day, because AT&T and DirecTV are offering yesterday’s technology…today.” Then proceeds to talk up satellite TV’s problems in rainy, windy and even “branchy” conditions.

See it here:

Charter, meanwhile, has enlisted Saturday Night Live alum Kevin Nealon to play Captain Telstar, commander  of the aging Satellite TV Headquarters vessel that launched in 1994:

Who says advertising’s dead? 

Time Warner Cable said it has added Greensboro and Wilmington, N.C., to the list of markets that are getting the “TWC Maxx” treatment – all-digital upgrades that will pave the way to faster Internet speeds, a larger VOD library and a souped-up HD-DVR platform.

Greensboro and Wilmington is also being targeted by AT&T and its 1-Gig-capable, fiber-based GigaPower platform.

On the broadband end, TWC said the upgrades in those markets will allow it to raise the downstream speeds to a trio of tiers  without raising the price: Standard (from 15 Mbps to 50 Mbps); Extreme (from 30 Mbps to 200 Mbps); and Ultimate (100 Mbps to 300 Mbps.).

Subs in those markets will also have access to an Enhanced DVR equipped with 1 terabyte of storage that can record up to six shows at once.  TWC’s VOD library, now at 20,000 titles, will rise to 30,000 by the end of the year.

TWC, which is in the process of being acquired by Charter Communications, said customer satisfaction is on the upswing in “Maxx” areas.

Similar upgrades are underway or have been completed in  Los Angeles; New York; Austin/Central Texas; Kansas City; Dallas; San Antonio; San Diego; Hawaii and Charlotte and Raleigh, N.C. 

TWC said about 45% of its Internet customers nationwide will have access to TWC Maxx-enabled  Internet speeds by the end of this year, and more than 50% of video subscribers will have access to the new all-digital video platform.

Over the next month, customers in San Antonio, San Diego/Desert Cities, and Wilmington will get word from TWC about the next phase of the project, and the first steps of the all-digital upgrade will start in Greensboro in mid-September, TWC said.

EARLIER:Arris Stock Drops on Q2 Warning

Raymond James analyst Simon Leopold kept his “Strong Buy” rating on Arris but tweaked his revenue estimates and stock price target after the supplier of broadband and video gear lowered second quarter guidance due to greater than anticipated "headwinds” caused by industry consolidation and the strengthening U.S. dollar.

“Although we would have preferred better news, we continue to be confident that cable spending remains healthy over the long term, driven by a number of factors including a structural shift in the architecture towards IP and continued traffic growth,” Leopold wrote. “Faster adoption of IP networks would alter ARRIS' mix, driving faster growth of high margin CMTS [cable modem termination system[ offset by slowing low margin STB [set-top box] sales. We see long-term sales growth of 3-6% and expect the company to provide strong cash flow and likely delever and buy back shares.

Leopold recently trimmed his estimates on Arris due to expected lumpiness in customer spending driven by ongoing consolidation (Charter’s proposed acquisitions of Time Warner Cable and Bright House Networks; and the pending AT&T-DirecTV merger), and did so again following the company’s Q2 warning issued late last week. Arris now forecasts sales of $1.25 billion to $1.26 billion, below prior guidance for $1,27 billion to $1.31 billion, with non-GAAP earnings per share of $0.51-0.55, off from prior guidance of $0.53-0.58.

Raymond James is now forecasting 2015 sales of $5.13 billion to $5.22 billion, with EPS of $2.40, from $2.52. The firm also lowered its price target from $43, to $42, “which still offers significant upside potential.”

Leopold also noted that Arris shares still reflect uncertainty with respect to the proposed merger of Arris and Pace plc. “The market values Pace shares about 8% below the implied offer,” he wrote. “We believe the deal gains approval and provides at least $0.45 of EPS accretion.”