Comcast’s stronghold on the Twin Cities cable TV market could soon be over.
CenturyLink, formerly the phone company Qwest, plans a widespread offering of PRISM TV, which will compete head-to-head with Comcast for cable-television subscribers. Comcast is currently the only wireline cable-TV provider in the Twin Cities, although residents also have satellite and webstreaming alternatives.
CenturyLink has applied for cable-TV franchise agreements in Minneapolis and dozens of suburbs, including Coon Rapids, Woodbury, Blaine, Roseville and New Brighton, and expects to offer PRISM TV by this summer.
Competition has translated to better prices for consumers in such markets as Omaha and La Crosse, Wis., where CenturyLink is competing fiercely for cable customers.
And in Winona, Minn. “Hiawatha Broadband entered the market [and] prices became more competitive,” said Steve Kelley, senior fellow at the University of Minnesota’s Humphrey School of Public Affairs and a former state senator. “I am optimistic we will see that in the Twin Cities.”
CenturyLink spokeswoman Joanna Hjelmeland said residents should expect nothing less. “We are coming in with zero customers,” she said. “Comcast is established in the market. We will be very competitive with price.”
CenturyLink’s move comes as the number of pay-TV subscribers, including cable and satellite service, has declined by 200,000 households nationwide in the past two years, to about 100 million. Some of that decline can be attributed to people switching to webstreaming alternatives such as Netflix and Hulu.
Meanwhile, the number of broadband subscribers grew by the millions. So by offering a bundle of services that includes Internet, phone and cable TV, CenturyLink and other conventional phone providers are seeking to expand their more profitable Internet-service-provider businesses.
It’s a prudent move, analysts say.
“In 2014, there were 3 million new broadband additions,” said Bruce Leichtman, president of the New Hampshire-based Leichtman Research Group, which studies the adoption of products and services in the media, entertainment and broadband industries. “Cable companies got 89 percent of those. It’s about growing and maintaining their Internet business. [CenturyLink], along with their other telco friends, has gotten beat badly on the broadband side of things.”
In markets where CenturyLink is competing for cable-TV customers, including Seattle and Omaha, its market penetration has been modest, but those efforts are still in the early phases, Leichtman said.
“They have 12 percent penetration of the video [pay TV] market where it’s available,” he said. “Comcast is at 40 percent. Satellite is one-third, and there are 16 percent who don’t subscribe to any type of service.”
Leichtman said cable-TV competition won’t affect how cable channels are bundled and sold. That’s because the programmers, including Disney ABC Television Group, which owns several channels, including a controlling stake in ESPN, create the bundles.
Local approval next
CenturyLink’s entry into Twin Cities cable-TV markets depends on the approval of local cable commissions. Those commissions, made up mostly of city council members, must approve franchise agreements, which are governed by sometimes intersecting state and federal laws. In return, cities receive a small cut of cable company profits.
For example, the North Metro Telecommunications Commission, which covers Blaine, Centerville, Circle Pines, Ham Lake, Lexington, Lino Lakes and Spring Lake Park, collects 5 percent of a cable provider’s gross revenues. That amounted to $1.1 million last year, when Comcast was the sole provider, said Heidi Arnson, the commission’s executive director.
The biggest hurdle CenturyLink faces is build-out requirements, timelines negotiated by cable commissions for expansion of a company’s cable service to an entire service area.
Comcast representatives are demanding that CenturyLink be held to the same standard they were asked to meet, but CenturyLink’s spokeswoman said the company will likely seek a more gradual build-out schedule.
“We do business in a competitive environment every day,” said Mary Beth Schubert, Comcast’s vice president of corporate affairs. “We just want to assure that all residents have the same competitive offerings and new and existing service providers are on a level playing field.”
CenturyLink’s entrance into the Twin Cities cable market could hinge on the build-out timeline, said Mike Bradley, an attorney who represents Minneapolis and several cable commissions.
“That is where the devil is, in the details,” Bradley said.
He said the high cost of installing infrastructure to support cable systems has kept competitors out of the cable-TV market. In the late 1990s, two start-up cable companies filed for franchise agreements in several areas with a plan of installing new infrastructure, but withdrew when their venture capital dried up, he said.
CenturyLink has “a leg up” because it already has “facilities on the ground” to immediately offer cable TV to many homes, Bradley added.
Bargains will be welcome for many families who find that the Internet/cable/phone trio has become a large item in their budgets.
“It’s part of our everyday life,” Bradley said. “A lot of people spend over $200 a month on the three services.”
Al Parranto, a member of the Ham Lake City Council and the North Metro Cable Commission, said he welcomes new competition.
“I am a free-market guy, and I believe competition is good,” Parranto said. “I am stuck with cable. I would like more viable options. I am sure all my neighbors do too.”