broadband

AerioConnect Acquires Metro Fiber

LOS ANGELES - AerioConnect, LLC (“Aerio”), backed by M/C Partners, announces the acquisition of Metro Fiber LLC, a Los Angeles (LA) based Internet Service Provider (ISP) to multi-family residential customers in the greater LA market. Metro Fiber has provided Internet, Voice and Video to customers in the market for over ten years and focuses on providing exceptional broadband to HOA communities. The acquisition closed subsequent to M/C Partners acquisition of Aerio on September 30, 2020. Metro Fiber’s customers will continue to enjoy services provided by Aerio.

“In our continued effort to execute our business plan, we are extremely excited to acquire Metro Fiber with its valued customers and partnerships that will add to our depth in the Los Angeles market,” said Ryan Carr, Partner at M/C Partners.

“We are excited for the opportunity to serve our newly acquired Metro Fiber customers and their existing business partnerships. With the support of M/C Partners, the management team at Aerio will continue to focus on continuous evolution of our products and services to grow value for our trusted partners,” said Brady Adams, CEO of Aerio.

With the equity infusion from M/C Partners in September, Aerio will continue to expand their current geographic presence through existing partnerships, as well as acquisitions.

About Metro Fiber

Based in Los Angeles, Metro Fiber has provided Internet, Voice and Video for over a decade throughout the metro LA market.

About AerioConnect

Based in Los Angeles, Aerio is a leading provider of Internet, Voice and Video services to the greater Los Angeles market. Aerio serves over 400 multi-family and commercial buildings throughout the LA area. For more information visit https://www.aerioconnect.com/

About M/C Partners

Based in Boston, M/C Partners is a private equity firm focused on small and mid-sized businesses in the communications and technology services sectors. For more than four decades M/C Partners has invested $2.3B of capital in over 140 companies, leveraging its deep industry expertise to understand long-term secular trends and identify growth opportunities. The firm is currently investing its eighth fund, partnering with promising companies and empowering strong leaders to accelerate growth, optimize operations, and build long-term value. For more information visit http://mcpartners.com/

Research: It’s a Two Horse Broadband Race Between FTTP and Cable Broadband

Communications industry financial analysts at MoffettNathanson Research expect to see continued cable broadband market share gains, which have accelerated as bandwidth demand climbs during the COVID-19 pandemic. The researchers’ “equilibrium” forecast calls for DSL market share to drop to zero. And “mid-tier” telco broadband increasingly is becoming “just as obsolete,” the researchers said.

“Broadband is increasingly a two-horse race between cable and telco FTTH, where it exists,” MoffettNathanson argues in a new research note.

The COVID-19 Impact
MoffettNathanson isn’t the first research firm to note that cable made major broadband gains in the first quarter of 2020. Leichtman Research Group noted that the top cable broadband additions were up 122% over the same quarter of 2019, while the top telco broadband providers had a net loss of about 65,000 subscribers, compared to a net gain of about 20,000 in the first quarter of 2019.

Like LRG, MoffettNathanson attributes these changes to increased bandwidth demand as people spend more time at home during the COVID-19 pandemic.

“The increased level of usage was enough to convince many customers that they needed higher speeds to handle the number of simultaneous users in their home,” MoffettNathanon wrote.

The MoffettNathanson researchers also noted another dimension to the cable broadband market share gains. New household formation was quite high in the first quarter of 2020 – at least until the COVID crisis hit.

The implication of that finding is that cable’s broadband long-term gains may not be quite so impressive – and that telco losses likely would have been even worse were it not for new households ordering broadband.

Cable Broadband Market Share
MoffettNathanson defines “mid-tier” telco broadband to include fiber-to-the-node (FTTN), IP-DSLAM and VDSL technology supporting speeds as low as 10 Mbps and as high as 75 Mbps but with speeds that generally don’t exceed 25 Mbps.

“The pressures on broadband networks laid bare by the coronavirus crisis make it clear that market share will now migrate even faster in this large cohort,” the researchers argue. “As with legacy DSL, it is increasingly clear that this segment is simply not competitive anymore. Equilibrium market share in this cohort, if one looks out far enough, is 100/0.”

In the near term, the researchers expect to see cable companies take an 85% share of broadband connections in markets where they compete against mid-tier telco broadband. Even more negative for telcos, MoffettNathanson no longer sees telcos having an advantage against cable in FTTH markets. In the past, the researchers expected to see telcos gain 60% of broadband connections in markets where they had deployed FTTH but that projection was later reduced to 50/50. And according to today’s note, the researchers don’t envision that changing any time soon.

“It is . . . no longer sensible to argue that fiber has a technological advantage over cable,” the researchers argue. “With the coming advent of DOCSIS 4.0 (likely to be called ‘10G’), cable operators will be able to deliver 10 Gbps symmetrically. One has to look out well beyond 4K video to full virtual reality, and perhaps even holography, for applications that would make a 10 Gbps service insufficient.”

Internet-Connected Video Devices are in 67% of U.S. Broadband Homes

Two-thirds of U.S. broadband households own Internet-connected video devices, according to a new report from Parks Associates.

The firm says that the devices, which include smart TVs, streaming media players, Internet-connected gaming consoles and connected PVR/DVRs, are serving for longer periods of time.

These lengthening replacement cycles are a challenge to manufacturers, who are responding with tactics including software and service offerings, exclusive hardware-content bundles and open ecosystems. This challenge and thin margins are reducing the field of competitors, the firm says.

“The connected entertainment space is moving towards a smartphone model, in which a handful of platform players control the operating system, UX, and consumer access to services and features,” Parks Associates’ Senior Analyst Kristen Hanich said in a blog post about the internet-connected video devices report. “These platform players stand to win big as consumers increasingly choose to sign up for their OTT service subscriptions through storefronts like Amazon Prime Video Channels, Apple TV Channels, or Roku Channel Premium Subscriptions.”

Hanich said that the rise of OTT services and fading of pay TV subscriptions results in fragmentation in the content services market as multiple paths to consumers are created. This, coupled with the fact that consumers now want to be able to access content when and where they are, is pushing toward open ecosystems that enable customers to get “most if not all” of what they want on any device regardless of the platform they are using.

Internet-Connected Video Devices Report
Other recent Parks research complements Hanich’s conclusions. In January, Parks found that 77% of smart TVs are connected to the Internet. This is a 62% increase since 2014. The firm also found that half of the 10,000 US households surveyed own a smart TV.

In October 2019, Parks found that homes with more than one OTT video subscription had increased 130% since 2014. In August, the firm said that monthly consumer spending on traditional pay TV had declined from $84 to $76 between 2016 and 2018.

Only 25% of Census Blocks Have Competition for 100 Mbps Broadband (INCOMPAS report)

Only one-quarter of developed U.S. census blocks have two or more providers of 100 Mbps broadband, according to a broadband competition report from INCOMPAS – and according to the competitive carrier association, competition is even less than that finding would suggest because the finding is based on Form 477 data collected by the FCC.

Virtually everyone agrees that the Form 477 data overstates broadband availability. In this case, an entire census block would be considered to have 100 Mbps broadband, even if only a single location in the census block can get service at that speed.

The finding is one of a range of data points that INCOMPAS uses to back up its assertion that “the fixed BIAS [broadband internet access service] market, as well as the business data services marketplace, remain highly concentrated” in certain geographic areas.

Other key INCOMPAS findings about the BIAS market:

  • 31% of developed census blocks have no provider offering service at 100 Mbps speeds

  • 41% of developed census blocks have only one such provider

  • Only 5% of census blocks have three or more providers advertising 100 Mbps service somewhere in the block

  • Virtually all census blocks with gigabit service have only a single provider of service at that speed

INCOMPAS Broadband Competition Report
INCOMPAS filed the broadband competition report with the FCC in response to the Communications Marketplace Report issued by the FCC several months ago.

In comments included with its filing, INCOMPAS urged the FCC not to remove pro-competitive policies such as network unbundling and resale requirements. INCOMPAS also argued that the FCC prematurely deregulated business data services (BDS) pricing in 2017, which according to the association, has caused incumbent carriers to raise BDS prices.

According to INCOMPAS, AT&T, Verizon, Frontier and CenturyLink have raised BDS pricing and CenturyLink’s increases for special access DS1 channel terminations were as high as 150%.

Broadband speeds are too low in too many places, said Chip Pickering, CEO of INCOMPAS, in a press release about the INCOMPAS broadband competition report. In addition, he said, “prices are high and consumers are fed up with terrible customer service.”

He added that “More competition is the answer, and it’s time for the FCC to launch a competition crusade based on gigabit speed goals that create jobs and new opportunities for small business growth.”

No More Fear and Loathing Over Video Subscriber Losses

Broadband strength keeps Wall Street bullish on pay TV sector

MIKE FARRELL

JAN 27, 2020

Pay TV providers are set to report the worst year in their history in terms of video customer losses, according to a handful of analysts. Yet, despite the losses and the increases in cord-cutting, cord-shaving and cord-nevering, those analysts are probably more optimistic about the future of the industry than they have been in years.

Comcast kicked off the fourth-quarter earnings season Jan. 23, reporting a decline of 149,000 video customers. The rest of the sector is expected to report in the coming weeks, with AT&T going on Jan. 29, Verizon Communications on Jan. 30 , Charter Communications on Jan. 31 and Altice USA on Feb. 12.

Cord-cutting has been on the rise for years: 2019 was worse than 2018, which was worse than 2017 and so on. Evercore ISI media analyst Vijay Jayant estimated cable would lose about 1.96 million video customers in 2019, up from the 1.26 million it lost in the prior year. Satellite-TV providers would see their losses more than double from 1.2 million in 2018 to 3.25 million in 2019, mainly due to heavy losses at DirecTV. Jayant estimated that DirecTV would lose about 800,000 video customers in Q4, down from the 1.1 million it lost in Q3.

Video Losses Aren’t Troubling

“Interestingly, complacency doesn’t seem to be an issue with respect to video,” Craig Moffett, MoffettNathanson principal and senior analyst, said in a note to clients. “There, cable investors seem to be keenly aware of the downside to estimates. It’s just that they (appropriately) don’t seem to care very much.

“The age of worrying about video subscriber losses finally seems to be behind us,” Moffett added. “Good riddance.”

But the fourth quarter, like the quarters behind it, will be characterized by broadband growth. Jayant estimated that cable operators will continue on their path of accounting for more than 100% of overall domestic broadband growth, adding 832,000 customers in Q4 compared to the addition of 612,000 in the same period last year.

“Cable’s clear speed advantage in roughly half the U.S. is driving continued strong share performance,” Jayant wrote. Jayant’s optimism for the sector is shown in his “outperform” ratings on Comcast and Charter (the top-rated stock in his coverage universe). Evercore ISI analyst James Ratcliffe has an “outperform” rating on Altice USA.

The slowdown affecting over-the-top providers also is expected to continue. Jayant predicted that virtual multichannel video programming distributors (vMVPDs) like SlingTV, AT&T TV Now and Hulu with Live TV would gain about 804,000 customers in 2018, less than half of the 2.3 million additions the sector enjoyed in 2018.

For the full year, Jayant estimates, pay TV subscribers (including OTT, cable, satellite and telco) will have declined by about 5.4 million, more than three times the 1.5 million the sector lost in 2018.

On the flip side, total cable, telco and satellite broadband subscriber additions are expected to reach 2.8 million in 2019, up 12% from the 2.5 million additions in 2018. Cable broadband adds are expected to be 3.1 million in 2019 (up nearly 15% from 2.7 million in 2018) while telcos are expected to lose 402,000 broadband customers, an increase over the 342,000 the sector lost in the prior year.

Mobile Share on the Rise

On the wireless front, Jayant wrote that while telcos Verizon and AT&T still dominate, cable managed to take some share in 2019, driven by higher net additions at Charter and the launch of Altice USA’s aggressive offering late in Q3.

Jayant predicted that the postpaid wireless base, including cable operator customers, increased by about 2.2 million in Q4, a rise of 160,000 subscribers year-over-year and 560,000 sequentially. He believes cable operators (mainly Comcast, Charter and Altice USA) captured about 25% of postpaid net additions in Q4 2019, up from 17% in the prior year.

Wireless, primarily a retention tool for other cable services, is starting to break out of that box as subscribers rise. Charter added a surprising 276,000 wireless customers in Q3 (most analysts had expected a gain of about 230,000) and Jayant sees the momentum continuing into Q4, with 263,000 additions. Overall, he estimates Charter will add about 923,000 wireless lines in 2019 (up from 134,000 in 2018) and 1.04 million in 2020. He sees Altice USA stepping on the wireless accelerator in Q4, adding about 80,000 wireless customers in 2019, rising to 550,000 additions in 2020.

Wireless growth is expected to return to Comcast after a bit of a slowdown. Jayant predicted the largest U.S. cable company will add about 778,000 wireless customers in 2019 (down from 855,000 in 2018), rising to 909,000 additions in 2020.

2019 Was a Big Year for Telecom Mergers and Acquisitions

As 2019 winds toward a close, the fate of the proposed Sprint/ T-Mobile merger is still uncertain. But whatever the fate of that deal, 2019 was a big year for telecom/ broadband mergers and acquisitions – and virtually no segment of the industry was exempt from the trend.

Investment Firms
Some investment firms are moving into or expanding their telecom/ broadband operator holdings, including WaveDivision Capital, which previously invested in several broadband providers. Wave said earlier this year that it will purchase Frontier’s operations in Washington, Oregon, Idaho and Montana.

Also this year, investment firms EQT Partners and Digital Colony led a deal to acquire competitive fiber provider Zayo, which itself has made numerous acquisitions over the years.

In addition, investment firm Macquarie Infrastructure Partners bought Bluebird Network, which operates a fiber network spanning several midwestern states, as well as the business operations of Uniti Fiber’s Midwest network.

Grain Management was also quite active in M&A, with a few deals in 2019 including deals for Hunter CommunicationsSummit Broadband, and Ritter Communications.

Rural Network Operators
A considerable amount of this year’s M&A involved Tier 2 and Tier 3 network operators – perhaps because policymakers seem to have awakened to the importance of ensuring that all Americans, including those in rural areas, have broadband available to them. Other drivers may be the relative lack of competition in rural areas, as well as the recognition that future mobile networks will need dense backhaul infrastructure that Tier 2 and Tier 3 carriers are well-positioned to provide.

Telecom/ broadband M&A deals that involved an independent telco as either a buyer or seller this year include:

Cable and Competitive Provider Deals
Cable companies and competitive providers, including fixed wireless providers, also saw considerable M&A activity in 2019.

Telecom Supplier and Vendor Deals
A few notable telecom vendor deals occured in 2019 as well, including:

This is certainly not an all inclusive list, as other deals were also announced in 2019. But it does illustrate quite a busy year for M&A in the broadband sector.