Cable TV in Michigan: competition up, subscribers down
Pending Comcast/Time Warner deal may boost Charter Communications in the state.
(As seen on WZZM TV 13) The Michigan Public Service Commission has issued its eighth annual report on the status of cable television competition in Michigan. Competition is increasing, although the number of cable TV subscribers declined by 17,000 since the 2013 report was issued.
The MPSC says there are now 42 cable providers offering service to more than 2.3 million customers, and the providers are reporting more competition in their franchise areas. According to the MPSC, the cable companies claim to have invested more than $3.1 billion in the Michigan market since the state’s Uniform Video Services Local Franchise Act took effect in 2006, and the investments continue to increase.
The number of complaints and inquiries received by the cable franchise staff at MPSC has continued to rise, as well, according to a cover letter on the report the MPSC sent to Gov. Rick Snyder and the Michigan Legislature.
The report does not include any information about satellite television services.
Although the official name of the report is “State of Competition for Video Services in Michigan” and the 2006 state franchising law refers to “video services,” MPSC Commissioner Greg White of Cascade Township told the Business Journal it actually means cable television.
White clarified some other aspects of the report and of cable television in Michigan, as well. In his view, the MPSC is not actually regulating the cable TV industry.
The 2006 law was actually requested by the cable industry to put in place a standard franchising process so the industry did not have to negotiate an individual franchise agreement with every one of the 2,000 local units of government in Michigan — cities, towns and villages — that can grant a franchise.
Local communities want control over cable providers because the cables are generally run in public right-of-ways and local officials don’t want safety hazards or eyesores. That’s why the Act and the MPSC don’t have anything to do with satellite television providers.
But White said over time, the cable companies didn’t like that some local governments would tack on agreement requirements not related to cable service — such as requesting a contribution for a new township park or other civic project.
White said the legislation in 2006 designates the MPSC to maintain oversight of a standardized agreement and also to be involved in resolution of disputes, which can involve the franchise entity and the cable company, or two cable companies, or a cable company and a customer. However, White said when the MPSC does get a complaint from a cable customer, they advise the customer that he or she must contact the cable provider and try to work out the problem before filing a formal complaint with the MPSC.
The report notes the MPSC received 1,574 customer complaints and inquiries in 2014, an increase of 345 over 2013. The most frequent complaints involve billing, charges and credits; customer service; and equipment service problems. The three cable companies with the most complaints and inquiries filed with the MPSC were Comcast (59 percent), Charter (12 percent) and AT&T (11 percent).
Forty-two cable companies responded to the MPSC’s 2014 survey. Twenty-seven of those reported investing $389 million in Michigan in 2014 and more than $3.1 billion since the Act took effect.
White said there are more competitors moving into other communities. “More competition was one of the things the Legislature wanted to accomplish.”
White noted some cable customers in West Michigan will be transitioning to Charter if the $45 billion acquisition of Time Warner Cable by Comcast is ultimately approved by the Federal Communications Commission and Department of Justice anti-trust officials. He said he believes that would make Charter the “dominant provider” in Michigan.
The proposed deal was announced slightly more than a year ago, but U.S. News & World Report said in mid-February it is now viewed as “uncertain” by many, since the FCC has twice delayed its review of the deal. Some critics claim it would give the merged company control over nearly half of the U.S. Internet traffic.
Comcast has agreed to divest itself of some of its existing customers to placate the federal regulators. To that end, Comcast created a new entity called GreatLand Connections, which it will spin off if the Time Warner deal goes through. GreatLand will absorb 2.5 million former Comcast customers in the Midwest, according to the Indianapolis Business Journal.
Charter will own part of GreatLand — possibly one-third — and “will assist in the management of the new GreatLand Connections company and its Michigan operations,” according to Bill Morand, region communications director for Charter Communications.
Morand said the Comcast/Time Warner merger has been tentatively delayed until August.
“Nothing significant will change in the Michigan cable TV market prior to the completion of the agreement,” he told the Business Journal in an email, adding, “If and when the merger takes place, Charter will still be the second-largest provider in Michigan.”
GreatLand Connections would assume all of the existing Comcast customers in Michigan, according to Morand, and would have the largest number of customers in the state.
Morand read the MPSC cover letter on the cable competition report and he said it suggests “having four or more competitors in a cable franchise area is not a sustainable business plan.”
“The more dense the population is in a cable franchise area, the more likely it is to have multiple competitors. Most of Michigan’s cable franchise areas are defined as ‘rural,’” said Morand.
In regard to the loss of 17,020 cable customers in Michigan, Morand said an American Community Survey by the U.S. Census Bureau reported that Michigan saw a decline in median household income every year since 2006, with the exception of a 1.7 percent increase in 2013. But even then, he said, 2013 household income levels were lower than in 2006, “and in every case, Michigan’s median household income is below the national average. It is reasonable to expect a reduction in household entertainment expenses to reflect these economic realities.”