This, the first of our regional blogs, is authored by the technology and financial journalist Dominic Basulto. Dominic is a New York native, has been a senior editor at Corante since day one and has written for a number of online and offline media companies. Send tips or story ideas to: basulto@gmail.com.
About this weblog
Here we'll report daily on the latest tech and business developments in New York City. Impossible we concede: comprehensive coverage of the city's every story. What we hope you'll find: tips, tidbits and perspectives you won't find elsewhere. As well as unique insights, original interviews and more that should be of interest to New York's vibrant community of technologists and those who track, invest in and report on them.
According to the New York Post, Cablevision is mulling over the idea of "a la carte" cable TV pricing. Interestingly, Chuck Dolan of Cablevision is the only senior executive from a major cable TV network that has gone on the record as supporting a la carte pricing. The FCC supports the idea, but the National Cable & Telecommunications Association feels that a la carte pricing could hurt the industry and result in fewer cable TV channels. Dolan seems to hit the nail right on the head, though, with his support of a new pricing option:
"Like Chairman Martin of the FCC, we do not believe in the long term that selling programming a la carte will be detrimental to either programmers or cable operators... Consumers should not be obliged, directly or indirectly, to buy services they do not want."
There you have it - why pay anywhere from $30 to $50 a month for cable, if you only watch a handful of the stations with any real regularity?
Meet The Cable Guy, who doled out $150,000 in free services to Cablevision customers. Apparently this New York-based Cable Guy regularly made adjustments to nearly 300 customer accounts to reflect that cable charges had been credited either in full or for premium channels like HBO, Showtime and Cinemax. According to cybercrime authorities investigating the case, these were not "random acts of kindness" (i.e. kickbacks were involved).
The New York Post opens the kimono of Cablevision Systems: it turns out that the Dolan family's plan to take the company's cable systems unit private in a $7.9 billion deal is already in trouble. New Jersey-based Penn Capital Management, which owns 0.04% of the company (86,000 shares), sued to block the plan, claiming that the buyout offer was "triggered by a family feud" and that "Cablevision should have the corporate opportunity to sell those assets to the highest bidder."
Wall Street deal advisors (who are paid as a percentage of the total transaction size), meanwhile, seem content to let the two sides battle, pushing up all the banking and legal fees. In Wall Street jargon, there's "incremental value that the Dolans' offer has left on the table."
Time Warner could be ready to consolidate its market position in the cable industry with an acquisition of Cablevision, surmises the New York Daily News. (Although CNN says that any Cablevision deal is definitely on the backburner until Time Warner's Adelphia deal goes through) At a media retreat in Sun Valley last week, Time Warner CEO Dick Parsons hinted that a deal for Cablevision would make sense at some point in the future. In June, the Dolan family offered to pay $7.9 billion to take the company private (about $33.50 a share); a Time Warner bid would be closer to $35-$40 a share, say analysts.
In a 78-page white paper issued last week, New York State's Public Service Commission opined that Verizon Communications' proposed takeover of MCI could produce "significant" consolidation in large- and medium-business markets. The PSC called the potential consolidation "troubling" and emphasized that smaller telecom providers might not be able to provide their services to medium and large customers in the event of a Verizon-MCI combination. Information Week has further details on possible remedies suggested by the PSC that would preserve competition in key market segments.
Verizon, as might be expected, defended its move and called the New York market "robustly competitive."
In a case involving the FCC and Brand X Internet, the U.S. Supreme Court ruled 6-3 that cable companies are "under no legal obligation to share their lines with smaller Internet service providers, dealing a major blow to independent ISPs, extending the power of the U.S. Federal Communications Commission, and opening up the possibility of extensive deregulation in the telecommunications world." That's good news for companies like Comcast and Time Warner, who warned that having to share lines would "damage their business and discourage them from investing in new networks, delaying deployment of broadband across the country."
So is the court ruling in favor of the cable companies good for the typical consumer? ZDNet has provided a handy FAQ on the Brand X case to answer just that question.
The New York Times says that investors, Wall Street analysts and shareholders are puzzled by the Dolan family's $7.9 billion plan to buy out the public shareholders of Cablevision and spin-off the company's non-cable assets:
"So what are the Dolans really up to? Are the Dolans trying to put the company in play? Is the deal a result of the family's feud? Has taking the company private been the plan all along?"
If nothing else, the proposed break-up of the company into two pieces - one for Charles Dolan and one for James Dolan - could provide an "elegant solution to the family's squabbling."
In a plan presented to Cablevision's board of directors, the Dolan family has offered to buy the remaining portion of the company that it does not already own for $7.9 billion. Currently, the Dolans hold 71% of the voting shares in the company. Under the terms of the deal, non-cable assets (e.g. the New York Knicks, Radio City Music Hall and Madison Square Garden) would be spun off as a separate public firm known as Rainbow Media Holdings.
Newsday has more on the deal: "The $7.9 billion deal would give Cablevision stockholders $21 in cash for each share they currently own, plus shares in the new company, Rainbow Media Holdings. That company also would include the New York Knicks, the New York Rangers, and several cable channels, like the American Movie Channel."
Not only will Cablevision be splitting in two -- it looks like the Dolan family will be splitting in two as well: Charles Dolan, the family patriarch, would become chairman of the private cable company, while his son James Dolan would become chairman and chief executive of the new holding company (Rainbow Media Holdings). And they all lived happily ever after...
Cable mogul John Malone, chairman and CEO of Colorado's Liberty Media, is stepping down from the board of directors at Cablevision after only a few months, citing "conflict of interest" issues. Insiders, though, are buzzing that the move is actually a signal of "conflicts of interest" to come in the near-term future. Maybe some kind of deal involving Cablevision subsidiary Rainbow Media (which owns cable stations American Movie Classics and WE: Women's Entertainment) and Malone's Liberty Media:
"Strategically, it could be that (Cablevision's) Rainbow is contemplating some kind of partnership with Liberty Media in which there would be a conflict of interest... Rainbow could get folded into some of Liberty Media's networks, as Cablevision tries to create more value for its Rainbow networks... Specifically, Rainbow assets could be combined with Liberty's 50 percent stake in Discovery and QVC, which are to be spun out in a separate stock."
These media mergers and acquisitions are always head-dizzying affairs as media moguls divide up the spoils of war, but suffice it to say that John Malone is probably up to something. Stay tuned.
"Our management team has set the bar very high... I don't think anyone's going to offer a price that can beat what we can do ourselves."
Of course, things could change if family patriarch Charles Dolan, the chairman of Cablevision, decides to start meddling again. (Charles didn't attend the meeting -- he was vacationing in Russia this week, of all places.)
Cablevision announced plans to shut down its money-losing satellite service Voom, effective April 30, but the New York Post is not so sure that it's all gloom and doom for Voom. CEO Chuck Dolan may still find a way to keep Voom alive: "A source close to the company said he would be surprised if [Chuck] does not have another move in mind to keep his satellite business afloat." In the past, remember, Cablevision has pledged to shut down Voom, before Chuck Dolan found a way to rescue his "pet project."
Looks like Cablevision's $16.5 billion bid for Adelphia was a case of too little, too late: Comcast and Time Warner Cable announced plans to buy Adelphia for $18 billion yesterday, and it looks like the offer will be accepted by Adelphia's board and the bankruptcy judge presiding over the case. According to the New York Times, the offer includes $13.5 billion in cash and $4.5 billion in stock (the Wall Street Journal, though, is reporting a $12 billion/$6 billion mix).
It's anybody's guess what the Dolans are up to at Cablevision. First, there was the internecine struggle between Chuck Dolan and Jimmy Dolan over Voom. Then, there was the tiff with Mayor Bloomberg over the West Side stadium. Now, there's noise again from Cablevision's corner, this time related to the company's $16.5 billion all-cash bid for bankrupt cable operator Adelphia.
Pick a different Wall Street analyst, and you'll get a different explanation for the bid. Most likely, it has something to do with the company's ongoing squabble with Time Warner Cable. Anyway, investors don't approve -- on news of the Adelphia bid, shares of the company sank 3.5%, to close at $26.85 on Wednesday.
The New York Post reports that cable TV titan John Malone, who was rumored to be considering an acquisition of Cablevision's Voom satellite TV unit, is no longer interested. In a conference call with investors, Malone distanced himself from Voom: "I wouldn't do it with my money. We were offered on a number of occasions an opportunity to participate in a third satellite competitor and we declined because we didn't think the risks were warrented by the potential returns."
Considering that Malone was "handpicked" by Dolan to sit on Cablevision's board, the negative comments about Voom are somewhat surprising. Or is it just a clever negotiating tactic to talk down the value of Voom so that Malone can swoop in and buy the company at a sharp discount?
The New York Post reports that Chuck Dolan of Cablevision is busy scraping together $10 million to keep his cherished Voom satellite TV unit alive. Voom is a money-loser ($640 million in losses and counting), but the senior Dolan is determined to make it work -- even if it means re-jiggering the board of directors, feuding with his son in public, selling shares of the company to raise cash and borrowing against his Class B "super-voting" shares. One scenario has Dolan and cable titan John Malone (recently installed on the Cablevision board) pooling their money & resources to buy the Voom unit outright.
"Rifts like the Dolan-clan conflict often occur between a self-made father and the eldest son, who feels the most pressure to follow in his dad's footsteps... [Chuck Dolan] is the kind that says, 'I have taken all the hard knocks and done all the hard work, and I don't want to share the glory.' Although he doesn't purposefully set traps, he makes it really tough. In turn, the son feels really aggressive toward the father."
But, wait, there's more... Two Wall Street research analysts have just issued "one of the more amusing — and unusual — research reports ever filed" -- it compares the Dolan-Dolan family squabble to three of literature's greatest father-son rivalries: Henry IV and Prince Hal, Darth Vader and Luke Skywalker & Dr. Evil and Scott Evil. Now this is getting silly.
The family squabble over at Cablevision is getting nastier by the day, says the New York Post. Apparently, Charles Dolan (the patriarch of the family) has taken control over the company's board of directors by taking advantage of his Class B "super-voting" shares and is threatening to kick his son, Jimmy Dolan, from the board. Then, he'll attempt to stall for time until he can put a financing bid together to buy the assets of Voom, Cablevision's satellite venture.
Cable industry rivals are enjoying the show but are a bit concerned about any spillover effects: "It makes for fascinating theater. But it's a big step away from normal corporate governance. I bet the first shareholder lawsuits are being drawn up..."
In the wake of Verizon's $6.75 billion acquisition of MCI and SBC's $16 billion acquisition of AT&T, the New York Post takes a closer look at the rise of the new telecom behemoths -- and in the process, coins a new term ("teleclom" = telecom conglomerate). Bigger is better, writes the Post: there are already rumours that SBC may attempt to merge with BellSouth now in an attempt to counter Verizon's latest move.
Cablevision chairman Charles Dolan may have lost the boardroom fight with his son over the future of Voom, but that didn't keep him from launching a personal bid to take over the troubled satellite TV service as a privately-owned business. Investors still have plenty of questions, though, about what will happen with Voom: "The announcement of the plan late Thursday left many unanswered questions that could dramatically affect Cablevision Systems Corp., its founding chairman and its chief executive James Dolan, who split with his father Charles over Voom."
A sweet valentine for Verizon: the company announced plans to acquire MCI for $6.6 billion in cash and stock, beating out a rival bid from Qwest. (Apparently, Qwest offered a higher bid of $7.3 billion, but couldn't put all the financing pieces together.) The lesson in all of this? MCI may be "a shadow of its former self, but its high-margin corporate customers and worldwide telephone and data network make it quite valuable."
The New York Post reports that an ex-Wall Street executive and an ex-record label marketing executive are launching Alpha Mom TV, the first video-on-demand 24-hour parenting channel. The channel will be available to an estimated 10 million digital-cable subscribers sometime in April -- giving busy alpha moms another way to access parenting information. According to the two co-founders, "Video on demand is the perfect medium because a mom can watch a segment that interests her at 3 p.m. or 3 a.m. instead of waiting through a TV show for her two-minute segment."
The proposed merger between SBC and AT&T could lead to a bout of deal-making involving competitors such as Verizon, says the New York Times: "The reunion of two players in the old Bell system could set off another round of mergers in the rapidly consolidating phone industry." The time to act is now for Verizon CEO Ivan Seidenberg: "A merger of the two companies would pose a threat to Verizon, the largest local phone company... A merger of AT&T and SBC would create the nation's largest phone company and Verizon would be left hobbled, without a significant position in the business services market."
First Cablevision decided to sell off its Voom satellite TV service. Now, the company is indicating that it would consider a sale of its "crown jewel" -- its cable systems that serve over 3 million metro area households. The most likely buyer would be Time Warner Cable, which could offer as much as $12 billion, say analysts, in order to create a cable near-monopoly in New York. Next up: the company's cable TV networks (American Movie Classics, the Independent Film Channel and WE: Women's Entertainment). We speculate that Cablevision might then change its name to Sportsvision, since it would be left with only a handful of high-profile assets: Madison Square Garden, the Knicks, the Rangers and Radio City Music Hall.
That was quick. Just days after a high-profile board meeting resulted in a decision to sell off the struggling Voom satellite TV unit, Cablevision announced plans to sell certain Voom assets to EchoStar for $200 million in cash. Under the terms of the agreement, EchoStar will receive Cablevision's Rainbow satellite as well as licensed frequencies, while Cablevision will keep some satellite service elements, including programming and equipment. Charles and Thomas Dolan, the two family members who lost the battle to retain Voom within Cablevision, called the board vote "startling" -- they said it "reflects today's post-Enron regulatory climate, which places great emphasis on the potential legal liability of directors who sit on the boards of corporations involved with new enterprises."
Lightwave has all the details on what really happens in the Meet-Me Room on Hudson Street. No, it's not what you're probably thinking... 60 Hudson Street, of course, is a "carrier hotel" for major telecom firms and the Meet-Me-Room "provides customers with seamless and rapid interconnections and with the optimized efficiency and flexibility of a centralized interconnection and colocation facility, operated on a carrier-neutral basis." In other words, telecom giants like AT&T, Bell Canada, British Telecom and Verizon utilize the 60 Hudson Street facility to help interconnect their networks.
Maybe it's the snowy weather outside and the Russian-like cold here in New York, but a quote from Tolstoy's Anna Karenina ("All happy families are alike; each unhappy family is unhappy in its own way") seems particularly appropriate when reading about the nasty family squabble at Cablevision... Newsday reports that father and son are grappling over what to do with the Voom satellite TV unit of Cablevision, hinting that the matter may only be resolved after a bruising boardroom battle. Right now, the board seems to be in favor of selling or shutting down Voom, meaning that the son may ultimately triumph in the matter.
Verizon is rolling out a fiber-optic network to 13 communities on Long Island that it is touting as "one of the most significant advancements in telecommunications technology in the past 100 years." According to Verizon, the new fiber-optic network will deliver faster data speeds, "crystal clear" voice and a "full suite of video services" to communities such as Garden City, Hempstead, Massapequa, Mineola and Syosset. A Verizon executive comments on the new FTTP ("Fiber To The Premises") project: "We are building the communications network of the future to provide customers unmatched network reliability, incredible speed and exciting new options for voice, data and video connections. Our FTTP project will help stimulate economic development and enhance Long Island as a great place to live and do business."
As New York Jets coach Herm Edwards said, "You play to win the game." And that's exactly what supporters of the new far West Side stadium are doing, by taking on Cablevision with a little help from the Jets. The New York Daily News reports that "the Jets have joined forces with DirecTV, the nation's fastest-growing satellite-TV service provider, in a phone campaign to get New Yorkers to drop Cablevision." What's great is that the Daily News apparently got their hands on the actual script being used by direct marketers to criticize Cablevision: "You know, you don't have to support a monopoly that doesn't support New York City. You have another television choice besides Cablevision. That choice is DirecTV."
Cablevision filed with the SEC to sell off its Voom satellite business and three cable networks, a move that the New York Post says "could mark the beginning of the end of the company in its current form." The four properties are part of Rainbow Media Enterprises, which earlier this month had been the subject of spin-off rumors. Instead of spinning off the company, though, Cablevision will search for outright buyers. On the news of the impending deal, shares of Cablevision rocketed more than 13%.
An interesting footnote to the deal: Cablevision has been locked in a dispute with Mayor Bloomberg over a planned stadium on the West Side of Manhattan for the New York Jets.
The New York Daily News has more on the broadband black holes in eight NYC neighborhoods, including six in Brooklyn -- Sunset Park, Williamsburg, Red Hook, the Brooklyn Navy Yard, East New York and DUMBO. Quite simply, says the research director of the Center for an Urban Future, "There are pockets in Brooklyn and across the city where it's still very difficult to get a broadband connection."
The Center for an Urban Future has released a new PDF report on New York's Broadband Gap. It's an interesting, if not provocative, thesis: "Years after the Internet boom, businesses in several of NYC's largest commercial areas still can't access a reliable broadband connection at prices they can afford." Among the areas cited in the report -- Hunts Point in the South Bronx and the Brooklyn Navy Yard. The 26-page report concludes with a host of recommendations, such as the need to explore wireless Internet connectivity options.
