The relentless consolidation of the cable TV and Internet industry has also brought consolidation and business failure for local outfits that used to wire customers for Comcast, Time Warner Cable and their many predecessor companies, according to a lawsuit winding its way through Philadelphia Common Pleas Court by two Pennsylvania firms that blame Comcast for putting them out of business.
In the suit, filed in March by Skippack lawyer Charles Mandracchia, his clients Cable Line Inc. and McLaughlin Communications Inc. accuse Comcast Cable Communications of Pennsylvania Inc. of inducing them "to start and finance work in new markets, only to abandon those firms once they had been induced to create the infrastructure necessary for Comcast's expansion."
Based on Comcast's promises, the firms say they hired and trained scores of workers, opened new offices, and borrowed to buy trucks and equipment -- only to have their work agreements arbitrarily cancelled by the cable company and their workers hired away by larger firms Comcast favored.
Joe H. Tucker, a lawyer for Comcast, filed objections to the lawsuit last Spring, arguing the firms' contracts with Comcast should be used to settle disputes and that the court should toss the suit out. The court declined to bounce the suit, and Mandracchia has been preparing subpoenas for senior Comcast officials, including chief executive Brian Roberts, in hopes they'll testify, Cable-Line owner Kevin Diehl told me. Comcast spokespeople declined to comment on the case.
"This is about more than my company," Diehl told me. "'Scale up or die,' they told us. I bought a Harrisburg warehouse and a Perkasie office," and built his staff up to 120 workers. He says Comcast used a no-compete clause in Cable-Line's contract to block a $6.5 million acquisition officer from Exelon in the early 2000s.
But it all went for nothing and Cable-Line was forced out of business when Comcast cancelled its contracts in 2012 and gave the business to larger firms, which promptly recruited his trained workforce, Diehl alleges. Cable-Line also alleges improper charges and equipment recordkeeping by Comcast. McLaughlin makes similar claims.
"Comcast clearly had a decided intent and plan to eliminate small companies like Cable-Line and McLaughlin Communications in order to monopolize the market, and in fact it did precisely that," according to the lawsuit. Diehl now runs a company, X Stream Media Group, which installs Dish satellite TV antennas in Cable-Line's old territory, Bucks and Montgomery Counties.
A federal lawsuit in Illinois by another former Comcast installer, Frontline Communications Inc., last year alleged Comcast officials in that state "accepted cash, gifts and other benefits" in exchange for awarding installation contracts to favored firms. The judge in that case ruled the suit was not properly filed and it has not been re-filed in that court.
Diehl says a few firms are poised to dominate the national telecom installation business, replacing hundreds that once competed locally. Dycom, a Florida-based nationwide telecom installer that has acquired smaller firms in each of the past three years, last Spring gave the SEC and shareholders data showing that three firms, AT&T, CenturyLink, and Comcast, accounted for 39% of its business in 2012 -- and would account for more than 50% by the end of this year this year if Comcast's planned purchase of TimeWarner were approved.
Consolidation might accelerate, not slow, the squeeze, Diehl says, pointing to this Athens, Ga. dispute between installers and Prince Telecommunications, a Dycom affiliate they accused of halving their labor rates. "This consolidation across the country is very bad for skilled cable technicians, who now have very few choices of employment," Diehl told me. He predicted there will be similar cuts among Time Warner Cable installers "as Comcast gobbles them up."
But Diehl added that installer consolidation may create unforseen problems for Comcast and the other industry survivors. "I built the system Comcast uses outside Philadelphia, and I can tell you, it's obsolete," he told me. "It should be fully fiber. It should have a bigger power supply, like FiOS. That's why your TV sometimes doesn't work after a storm."
He said ongoing upgrades by rival satellite TV suppliers will force "a massive upgrade" in cable systems in the next few years. "They need a national labor force."