Competition between cable operators is rare, but two companies are now battling for customers in Rochester. And as of December, Laconia appeared poised to become the second NH community to be served by two cable operators.
Comcast signed a long-term agreement with Rochester in late 2017, and it is close to finalizing a similar deal to serve business and residential customers in Laconia. Atlantic Broadband, which acquired MetroCast early last year, is the longtime cable operator in both cities. Comcast hooked up its first Rochester customers last September, and is still only available in a handful of neighborhoods. Company spokesman Marc Goodman says crews are moving “street by street” to reach more of the city’s 30,800 residents. The entire city should be wired for Comcast by late 2019.
Although the competitive landscape in Rochester is still relatively new, there are signs that business and residential customers are already benefiting. Atlantic Broadband has spent millions upgrading infrastructure in the city, and more improvements are planned to compete with Comcast’s Xfinity-branded internet, TV and home services.
Rochester’s municipal government also comes out ahead. It will receive $26,000 from Comcast each year of the 10-year agreement. The city also has reached a new franchise agreement with Atlantic Broadband to provide the City with cable, internet and phone service at no charge. City Manager Blaine Cox says Rochester received a similar benefit from MetroCast for years.
Limited Cable Competition
Despite what’s happening in these two cities, most NH communities will continue to be served by a single cable company, says Bruce Leichtman, president and principal analyst at Durham-based Leichtman Research Group, which researches the broadband, media and entertainment industries.
“The economics of it generally do not make sense to have two companies serving one community,” he says. “That is at the core of why we have traditionally not seen multiple providers, especially in communities that have a less-dense population.”
Cable companies and the municipalities they serve sign franchise agreements. Among other things, these contracts give cable companies access to public rights-of-way to connect homes and businesses in return for small perks for the city, which can include free internet.
Cable subscribers pay franchise fees averaging a few dollars a month, and this revenue is passed along to the municipalities. Rochester netted about $250,000 in franchise fees during the 2018 fiscal year from MetroCast/Atlantic Broadband customers. Additional franchise fee revenue is possible next year as Comcast signs up more customers, Leichtman says.
Communities cannot limit franchise agreements exclusively to a single company. Cable companies with franchise agreements must serve the entire community rather than cherry-pick more lucrative neighborhoods. That means they must install infrastructure across an entire community, which can cost millions of dollars in upfront and recurring costs.
Leichtman estimates that there is true competition for pay-TV services in just 40 percent of the U.S. And where it is available, typically in and around large cities, it is usually in the form of a legacy cable company battling Verizon FiOS or AT&T U-Verse.
A Tale of Two Cities
So what’s changed in NH to make Rochester and Laconia attractive? Leichtman believes Atlantic Broadband’s early 2018 purchase of MetroCast gave Comcast the opening it needed. Comcast already served communities near both cities, so their residents receive the company’s marketing messages. As such, the expansion costs less than starting from scratch.
Rochester is the 104th NH community served by Comcast, a telecom giant based in Philadelphia. The company is known for Xfinity-branded cable and internet, and more recently it began offering home security and mobile phone service, as well as 19 million U.S. internet hotspots available at no charge to subscribers.
Atlantic Broadband, based in Quincy, Mass., began serving Rochester customers after acquiring MetroCast, the city’s cable provider since 2001. The company is owned by Canadian telecom Cogeco and is the ninth largest cable provider in the U.S. It serves 34 NH communities, primarily around Rochester and the Lakes Region.
Heather McCallion, Atlantic Broadband’s vice president of video products, touted the company’s investment in the former MetroCast network. She points out that download speeds for Rochester and other network customers increased “very shortly after closing on the acquisition,” and in some cases doubled.
McCallion also highlighted Atlantic Broadband’s GigaEdge internet service launched in August. The service is intended to meet rising demand for bandwidth as more devices connect to the internet.
Business customers can tap into even faster download speeds.
Comcast offers Xfinity Gigabit Pro internet that it says can reach 2 gigabytes per second, with higher speeds available for business customers. In Rochester, these products will become available with each new neighborhood that’s wired for Comcast service, Goodman says.
Neither company would disclose customer data for Rochester, and it doesn’t appear that either company has adjusted its pricing despite the competition for subscribers.
Scott Myers, city manager in Laconia, says attorneys are currently reviewing its draft franchise agreement with Comcast. The deal would be nearly identical to its deal with Atlantic Broadband, and both would run through 2024.