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News summary for 11/09/07

Fri, 11/09/2007 - 8:18am
CED staff

Sprint-Clearwire deal dies aborning
By Brian Santo

Clearwire experienced substantially more of almost everything in its third quarter of 2007: more subscribers, doubled revenues, and a greater loss. The company also said its proposed partnership with Sprint is off.

Both Clearwire and Sprint have plans to build WiMAX networks, and a partnership would have amplified each other’s efforts, inasmuch as combining their footprints would have automatically increased total WiMAX network coverage that much faster.

According to Clearwire, “Over the course of the parties' discussions, Clearwire and Sprint concluded that the joint build transaction originally contemplated by the previously announced letter of intent was likely to introduce a level of additional complexity to each party's business that would be inconsistent with each company's focus on simplicity and the customer experience.”

The two have agreed to keep talking, however, and may find some other avenue for collaboration on WiMAX network services.

Sprint said it is moving ahead with plans to deploy its WiMAX network, called Xohm, but some analysts covering the company speculate Sprint’s interest in Xohm is cooling, especially after the departure of former CEO Gary Foresee, who was considered to be Xohm’s champion.

Meanwhile, Clearwire added approximately 49,000 net subscribers in its recently concluded third quarter, bringing its total to approximately 348,000, a 115 percent increase over the end of the third quarter of 2006, and a 16 percent increase over the second quarter 2007.

During the quarter, Clearwire launched service in Corpus Christi, Texas; Syracuse, N.Y.; Dayton, Ohio; Nashville, Tenn.; and Seville, Spain. The company ended the third quarter with approximately 14.8 million people covered by its network in 48 domestic and international markets, compared with 34 markets and 6.6 million people covered at the end of the third quarter of 2006.

Corporate revenue more than doubled to $41.3 million from $18.9 million in the same quarter a year ago.

Clearwire reported an adjusted EBITDA loss of $84.1 million in the third quarter of 2007 compared with an adjusted EBITDA loss of $23.3 million in the third quarter of 2006.

The expanding losses were driven, the company said, primarily by its ongoing investment in the construction and deployment of wireless networks in new markets, associated market launch costs and increased total subscriber acquisition costs related to the additional markets.

OpenTV settles Liberate lawsuit
By Traci Patterson

OpenTV Corp. has settled its lawsuit against Liberate Technologies Inc. The suit was originally filed in February 2002.

On Wednesday, the U.S. District Court for the Northern District of California issued an order permanently restraining and enjoining Liberate from infringement of two OpenTV patents related to interactive television (iTV), OpenTV said.

Liberate acknowledged that OpenTV's patents are valid and enforceable, and the company admitted infringement, according to OpenTV.

In April 2005, Liberate sold its North American assets to TVWorks (formerly Double C Technologies), a joint venture between Comcast Corp. and Cox Communications

TVWorks was not a party to the lawsuit; but OpenTV and TVWorks entered into a separate agreement, in which TVWorks paid OpenTV $1.5 million and OpenTV released TVWorks from the liability it acquired from Liberate.

"We believe that this amicable resolution, with the active involvement of TVWorks, puts OpenTV in a better position to focus its energies on expanding its commercial relationships,” said Mark Beariault, OpenTV's SVP and general counsel.

Starz boosts Liberty Media’s 3Q results
By Mike Robuck

Liberty Media Corp. said third-quarter revenue and cash flows at its Starz Entertainment unit rose dramatically, but cash flow slipped at the company’s QVC shopping channel.

In October, Liberty’s shareholders approved a proposed reclassification of Liberty Capital common stock into two new tracking stocks. Liberty Capital Group includes the Starz cable networks while the Liberty Interactive Group is comprised of QVC and other interactive businesses. The John Malone-led company will include a third unit once Liberty completes its planned purchase of DirecTV.

The Liberty Capital Group almost doubled its operating income to $78 million from $40 million last year while Starz’s revenues rose 11 percent to $282 million. The increase in Starz’s revenue was the result of a $5 million increased distribution  rate to cable operators for the company’s services, and $6 million from more Starz subscribers.

Starz's average subscription units increased 7 percent during the quarter, while Encore’s average subscription units increased 9 percent.

"Starz Entertainment continued its momentum and, largely due to reduced programming costs, the business has experienced 59 percent year-to-date OCF growth," Starz Entertainment CEO Bob Clasen said in a prepared statement. "We are excited about our progress at Starz Media which is establishing itself as a quickly-developing, live action television production company. In the third quarter, Starz Media saw the start of production of four made-for-television movies and several TV series for various programming companies."

The Liberty Interactive Group posted a 10 percent drop in operating income from $257 million last year to $231 million. Quarterly revenue increased to $1.69 billion over last year’s $1.65 billion.

QVC CEO Mike George cited soft sales in the United States, Japan and Germany as part of the reasons for the company’s third-quarter performance.

BitBand, Orca, Sagem team up for IPTV offering
By Traci Patterson

BitBandOrca Interactive and Sagem Communications have been selected by Colombia’s UNE-EPM Telecomunicaciones to jointly provide an end-to-end IPTV solution.

The joint product, which is being implemented by Union Electrica S.A., enables the delivery of dynamic TV services, including enhanced broadcast TV, the ability to pause and rewind live TV, and VOD.

BitBand offers video delivery solutions for broadband IP networks, Orca Interactive provides IPTV middleware and applications, and Sagem offers IPTV CPE.
The number of people using IPTV services worldwide increased 179 percent in the 12 months ended June 30, according to statistics prepared for the DSL Forum by Point Topic. More than eight million people are now connected to IPTV services.

Charter faces big-time competition 
Copyright 2007 St. Louis Post-Dispatch, Inc.
By Tim Logan, St. Louis Post-Dispatch (Missouri)

For a long time, Charter Communications has had millions of television screens pretty much to itself.

It could raise rates if needed. It could survive customer service stumbles. In many places, customers who wanted more than just the bare minimum of TV had few options.

Now, though, the competition is moving in.

AT&T and Verizon are spending big to roll out video service in cities nationwide. Satellite provider DirecTV is investing heavily in high-definition programming.

The days of the cable monopoly are fast coming to a close. While that may be very good for consumers, it poses a serious challenge to the nation's fourth-biggest cable provider, a perennial money-loser trying to overcome a poor customer service reputation and $19.7 billion in debt.

How Charter responds to this direct assault on its core business, and how customers react to a wide-open TV market, could go a long way toward determining the future of one of St. Louis' eight remaining Fortune 500 companies, and its 2,100 local employees.

"It's an all-or-nothing game now," said Jeff Kagan, a prominent telecommunications analyst. "They either have to win, or they lose."

The key, Charter says, is to keep, and even increase, its base of 5.4 million cable customers, while getting them to buy more, or more expensive, services like phone, Internet and advanced cable.

"We have to play offense as well as defense," said Chief Operating Officer Mike Lovett.

But Charter is playing with some big-league competition.

Phone giant AT&T, which shares about 63 percent of Charter's footprint, including most of metro St. Louis, plans to roll out its U-Verse video service across half its network by 2010. No. 2 phone company Verizon, which overlaps with about one-fifth of Charter's territory, is launching its FIOS video service as fast as it can and already has 717,000 customers. These companies have been battling cable operators for voice customers for years, and offer not just phone, Internet and video as Charter does, but also wireless services. 

So far, Charter faces competition on just 6 percent of its network, mostly on the West Coast. It hasn't seen much impact on prices, or customer base, said Lovett.

"We're seeing very similar results to any other overbuild situation," where a small cable company shares the market, he said.

But eventually, competition will have an effect, Kagan said.

"The marketplace is changing," he said. "It used to be centered around companies. Now it's centered around customer needs."

That, he said, means lower prices and better quality.

That's been a goal of the Federal Communications Commission in recent years. It has been pushing for video competition, voting last month, for instance, to ban deals that give cable companies exclusive rights to wire apartment buildings. Its most recent study of cable rates showed that they were 17 percent lower in competitive markets.

These developments, coupled with the aggressive rollouts by Verizon and AT&T, have battered cable company stocks in recent months, none more than Charter. Since closing at $4.80 a share on July 19 it has lost 76 percent of its value. A big chunk of that came Thursday when shares dropped nearly 35 percent, closing at $1.16, after Charter posted a net loss of video subscribers in the third quarter.

Those losses were steepest, Chief Executive Neil Smit told analysts in Dallas and Los Angeles, in markets where AT&T and Verizon have launched their services.

It is now "exceedingly clear" that competition is hurting the cable companies, wrote Pali Research analyst Richard Greenfield last week. The industry, he wrote, is "looking at all-out war."

But Charter is confident it can compete, and that it can do so without too much damage. "We're not playing on price," Lovett said. "The way to play competitively is to make sure you have the right viable products to serve the customer."

To that end, Charter is expanding its high-definition lineup; it now has 20 channels, plus various premium offerings. It is also continuing to develop On Demand services - programming that's instantly available - and is testing a new 16-megabyte high-speed Internet.

But the knock on Charter typically has not been programming. It's customer service.

Complaints are legion about the difficulties in getting a problem fixed. In April, the Better Business Bureau issued a warning about the company's customer service. And it seems many customers have a story like Nicholas Dragan's.

He and his family originally had Charter's "triple play" - phone, Internet and TV service - and they liked it. But in March, they moved from the Central West End to Sunset Hills, and that's when the problems began.

Charter picked up the old equipment from Dragan's apartment, he said, but never stopped billing him for service there. When he tried to get phone and Internet service at the new house, the company said he couldn't because he already had existing service, so he called AT&T for that. But Charter did set up cable. And continued to double-bill him.

"No exaggeration, this went on for five months," Dragan said. "I'd be on the phone for hours at night, talking to people in the Philippines who couldn't help me, and waiting on hold."

He kept paying the bills, figuring he'd build up credit once it all got sorted out. But that never happened. Finally he gave up, and switched to DirecTV.

"We have been prime clients," Dragan said. "We spent $150 or $200 a month and not even blinked. Now we will never, ever, ever go back."

Improving customer service is a major priority for Charter, Lovett said. The company has changed some procedures, like adding same-day appointments and cutting appointment windows from eight hours to two.

And, Lovett said, it is seeing internal numbers showing complaints are down.

"We're turning the corner," he said.

The question is whether it can do so fast enough. Lovett acknowledges that reversing customer perception can be a long process. One bad experience can set someone against a company for life. The key is not just to solve problems, but to do so in a way that exceeds customers' expectations.

"There needs to be a 'wow' factor in service," Lovett said. "That's the quickest way to win someone back."

But Mike Unruh can't imagine anything "wowing" him enough to stay with Charter.
"They have put me through so much hell for so many years," said the Ballwin resident. "The moment I can escape I'm going to run as if I'm escaping prison."

He has a litany of complaints: unhelpful customer service reps, poor TV reception, slower-than-advertised Internet, cable lines that were supposed to be buried just laid across his yard.

"When AT&T comes," he said. "I'm gone."

Of course, there's no guarantee that the alternatives are better.

Creve Coeur resident Ken Bush wanted more channels, so he tried satellite service from Dish Network and DirecTV, but had such a "nightmarish" installation process with both that he decided to stick with Charter.

"I'd have to give (Charter) pretty high marks," Bush said

And AT&T has had its own stumbles with U-Verse.

This week, the company announced a slight slowdown of its build-out plans. And the telephone company is new to providing video, a service which Lovett notes is "extremely challenging" on the technical side. Last month, U-Verse suffered a day-long system-wide outage when a software change went awry.

And, as Charter has learned, service disruptions are often not taken kindly. Just ask Christina Pugh.

The St. Louis resident has been having trouble with her Charter Internet for a month. Sometimes it works. Sometimes it doesn't. She never knows why.

A graduate student at Washington University, Pugh does a lot of online research and can't work from home without a good connection. Lately, she's on the phone with customer service four times a week. She's had two visits from techs and she spends long hours at Coffee Cartel and St. Louis Bread Co., using the free Internet there.

"This has been driving me crazy," Pugh said.

So last week, she wrote an e-mail to Smit, describing her problem and asking for help.

Toward the end, she asked this question: "How can your business continue to operate when you drive all your customers away?"

Broadband Briefs for 11/09/07

* Cabovisao selects Arris D5 universal edge QAM
By Brian Santo

Arris said that Portuguese operator Cabovisao has placed an order for Arris’ D5 Universal Edge QAMs to support its national digital broadcast rollout.

“The ARRIS D5 provided the scrambling and Conditional Access interface required to properly operate and meet the desired expectations,” said Cabovisao Director of Planning and Engineering Jose Pascoal.

* Chermak joins Symmetricom
By Mike Robuck

Symmetricom announced this week that Paul Chermak has joined the company as executive vice president, global sales and support. Prior to Symmetricom, Chermak was senior vice president and general manager of the high technology group at 12 Technologies.

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