Latest from Next TV in Overbuilders

O'Rielly Concerned About Wyoming Answers to Overbuild Questions

john.eggerton@futurenet.com (John Eggerton) — Tue, 08 Dec 2020 15:35:26 +0000

FCC commissioner Michael O'Rielly said he has gotten responses from letters he sent following up on complaints by some Wyoming cable broadband providers that the state was using CARES Act money to overbuild existing broadband providers. He was clearly not happy with the the answers.

The CARES Act had $1.5 billion in funding to aid communities impacted by COVID-19 that could be used for broadband deployment among many other things. Then there was another $16 billion that could be tapped for distance learning, including connectivity.

"I saw some of the responses from the Wyoming Business Council last weekend," he told Multichannel News. "They said the goal was to get the money and spend it in the time frame the CARES Act had outlined," he said. "That, to me, is incredibly problematic."

The grants are being administered by the Wyoming Business Council's (WBC) Connect Wyoming program. O'Rielly, who is no fan of using government money to overbuild existing networks built with private capital, told Wyoming Governor Mark Gordon that, based on information brought to his attention, "the WBC has not publicly released the applications or proposed coverage maps for the grant recipients, nor has it taken the requisite steps to ensure subsidized overbuilding did not and will not occur."

Of the WBC response, O'Rielly said: "It wasn't like, 'How do we soundly spend this money.' It was 'How do we make sure we get it and get it out the door so we can spend it in time.' That is not how dollars should be spent.

O'Rielly has said that there are allegations--he did not say from whom--that one or more of the grant recipients will wind up overbuilding recipients of the FCC's Universal Service Fund Connect America Fund Phase II money. He said if that is true, it would "not only artificially impair the value of the FCC’s past and current subsidies but would also undercut providers’ willingness to compete in future FCC reverse auctions."

He told the governor he would like the WBC to immediately release coverage maps for its projects so that current cable and fiber broadband providers in the state can challenge duplicative projects and stop funding for any that subsidize overbuilding.

WOW Stocks Soar on Lighter Than Expected Video Losses

Mike Farrell — Fri, 11 May 2018 15:03:24 +0000

WideOpenWest shares skyrocketed Friday morning, up nearly 32% ($2.14 per share) to $8.89 each in early trading, as lighter than expected video subscriber declines apparently outweighed continued financial losses for the overbuilder.

WOW shares traded as high as $8.89 each on Friday, up 31.7% or $2.14 each. The stock was trading at $8.44 per share, 25% or $1.69 at about 10:33 a.m.

WOW, which has de-emphasized video subscriber gains an instead has concentrated on broadband growth, did just that in the first quarter, shedding 7,700 video subscribers and adding 8,700 high-speed internet customers. The video losses were markedly better than the 12,400 video customers the overbuilder shed in the prior year. Overall, WOW said it added about 3,000 revenue generating units – a mix of video, voice and data subscribers, in the period.

Revenue at the company was down 4.8% to $285.5 million and cash flow dipped 11.5% to $96.3 million in the period. WOW also had a net loss of $202.7 million ($2.40 per share) compared to a profit of $72.4 million ($1.09 per share) in the prior year.

Still, the declines were better than what most analysts expected. In a note to clients, Evercore ISI analyst James Ratcliffe wrote that WOW beat his revenue and cash flow estimates by 1% and 2%, respectively. And he was encouraged by stronger than expected HSI additions – he predicted WOW would add 2,000 broadband customers in the quarter.

WOW also announced it has completed it previous $50 million share repurchase program, and authorized another $25 million in buybacks.

The stock gain was the biggest rise WOW shares have seen since its initial public offering last May, but is still well below its IPO price of $17 per share.

WOW has gone through a transition since going public on May 26, including hiring a new CEO – former MediaOne chief Teresa Elder – in December and making other executive changes.

“We are encouraged by the progress we’ve made,” Elder said in a statement. “WOW! returned to positive organic HSD RGU growth, and we have begun investing in our strategic initiatives in Sales and Marketing, Customer Care, and Digital Transformation. We’re still early in the process, but we are executing on our vision of connecting people to their world through the WOW! experience by being reliable, easy, and pleasantly surprising, every time.”

GOP Sens. Grill Wheeler on Muni Broadband Efforts

john.eggerton@futurenet.com (John Eggerton) — Fri, 11 Dec 2015 19:30:00 +0000

Eight Republican senators have written FCC Chairman Tom Wheeler to say they are not happy with FCC efforts to encourage municipal broadband, saying that the FCC "should not be in the business of choosing winners and losers in the competitive broadband marketplace."

The pointed specifically to the FCC's decision (3-2 along party lines) to preempt state laws limiting municipal broadband, as well as funding government-owned networks through the FCC's Universal Service Fund's rural broadband experiments, and at least one FCC officials' outreach on the issue.

ISPs have long expressed concerns about preemption, including regarding government overbuilding and subsidizing networks that could fail and leave taxpayers holding the bag.

But they also talked more generally about their concern with an FCC promoting municipal overbuilds of privately owned networks. The outreach concern was apparently a reference to a YouTube video that has been circulated by critics of the FCC showing an FCC official at a conference saying states should not tell local communities what to do," although that is the gist of what Wheeler has been saying if what the states are telling them is limiting broadband buildouts and competition. The caveat is that the FCC preemption only applies to states who try to limit the expansion of already-allowed municipal networks, not state laws preventing such nets.

Wheeler has said such state laws limiting municipal broadband were backed by those private networks in an effort to discourage competition.

While they agreed that insuring broadband service to all Americans, particularly in rural areas, is vitally important, they take issue with promoting government-owned nets at the expense of private sector broadband providers who have are striving to deploy service nationwide.

They also have a states' rights issue. "We urge the FCC to proceed cautiously where its actions would impinge on the sovereignty of fundamental state decisions about economic and fiscal policy," they cautioned," branding it "callous disregard" for state sovereignty that is both inappropriate and legally suspect.

Setting a Jan. 4 deadline for the responses, the Senators want Wheeler to: put a figure on how much the FCC has committed to municipal broadband through its USF rural broadband experiments; tell them whether there are any limits on using those funds to overbuild private nets and whether the emergence of new government nets could threaten USF funding to existing private network providers; detail any plans to preempt any more state laws or adopt additional municipal broadband policies, and provide outreach plans to state or local officials.

Signing on to the letters were Sens. Deb Fischer, Ron Johnson, Marco Rubio, John Cornyn, Pat Roberts, John Barrasso, Michael Enzi and Tim Scott.

Overbuilders May Ride M&A Wave

Mike Farrell — Mon, 17 Nov 2014 13:00:00 +0000

The top five cable overbuilders have been growing video and broadband customers at a healthy clip over the past five years and could play a key role in the expected upcoming wave of consolidation, according to research by SNL Kagan.

Video subscribers at the top five overbuilders — WideOpen- West, RCN, Wave Broadband, Grande Communications and Click! Networks — have risen by about 25% since 2009, while broadband subscribers have grown at more than three times that rate, according to Kagan.

“Given cable M&A’s lofty valuations in 2014, magnified by the consolidation atmosphere surrounding the industry, overbuilders could play a key role in the M&A market going forward, either as buyers or targets,” Kagan said.

While much of the video-subscriber growth was due to acquisitions — WOW had the greatest increase in video customers (73%) during the period and was the most aggressive buyer of systems — other overbuilders have seen broadband growth outpace video customer declines.

For example, the next largest overbuilder, RCN, has seen video customers decline by about 15% since 2009, while broadband customers have risen by 26% since then.

STRONG SURVIVORS

Overbuilders burst onto the video scene in a big way in the 1990s, as new regulation (the Telecommunications Act of 1996) and easy financing encouraged competition. While some fell on financial hardship after they couldn’t compete with incumbents, a handful survived and some have even managed to crack the top 10 among video distribution companies.

Today, according to Kagan, overbuilders represent about 1.26 million video subscribers across the country, or about 1% of the nation’s roughly 100 million TV households and 1.5 million broadband customers.

Waller Capital president Garrett Baker, who helped sell four of the top overbuilders — WOW, RCN, Wave Broadband and Grande — to their current owners, said the success of companies in the deal market is causing others to look toward nontraditional targets: “The overbuilders’ operating success has put them in a position to look outside their current footprints. That is likely to continue.”

A SHOT IN THE ARM

The cable deal market, stagnant for years after a big consolidation wave in the late 1990s and early 2000s, got a shot in the arm last year when Comcast agreed to purchase Time Warner Cable in a deal valued at about $69 billion in stock and assumed debt. As part of that deal — which is currently undergoing regulatory approval — Comcast and Time Warner Cable agreed to sell, swap and spin off about 6 million customers in a series of deals with Charter Communications.

When the smoke clears, expected early next year after the Comcast-TWC deal is closed, Charter will have doubled its owned-andmanaged customer base, and the combined Comcast-TWC will have about 30 million subscribers across the country, including 19 of the top 20 television markets.

Charter, which touched off the consolidation frenzy with its pursuit of TWC last year, isn’t expected to stop there. Both Charter CEO Tom Rutledge and one of the cable operator’s largest shareholders, John Malone’s Liberty Media, have said Charter — and GreatLand Connections, the publicly traded company that will hold the spun-off Comcast-TWC assets (and be 33% owned by Charter) — could serve as vehicles to further consolidate the industry.

Whether overbuilders like WideOpen-West, which was founded in 1999 and is backed by private-equity giant Avista Capital Partners, will be a target or a competitor for cable assets remains to be seen. But WOW, which has about 699,000 video customers and 770,000 broadband subscribers in seven states (Alabama, Georgia, Florida, Michigan, Ohio, South Carolina and Tennessee), has proven it has the stomach for acquisitions.

WOW’s first big purchase was in November 2001, about seven months after it opened for business, when it bought telco Ameritech’s Americast systems in Illinois and Indiana. WOW has done several deals since then, ranging from the $55 million purchase of bankrupt Broadstripe Communications’ 31,000 customers in 2011 to the $1.5 billion purchase of Georgia- based Knology’s 257,000 customers in 2012.

RCN, which was bought out by private-equity group ABRY Partners in 2010 for about $1.2 billion, has kept a low profile since then and has been more of a seller of systems than a buyer in its most recent deals. But RCN — the first overbuilder in the country, formed in 1993 — has a long history of aggressive deal-making.

Overbuilders could target each other for M&As, Pivotal Research Group principal and senior media & communications analyst Jeff Wlodarczak said, but if they want to compete for cable assets with the likes of Charter, they’ll likely lose unless they want to “dramatically overpay.”