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CEO Tom Rutledge says Charter's positioned to reverse its relatively low service penetrations but downplayed the role M&A will play

Charter CEO Says Growth Is Path to Glory

Jeff Baumgartner
LR Cable News Analysis
Jeff Baumgartner
12/3/2012
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Using words like "neglected" and "abused" to describe Charter Communications Inc. during its recent, troubled past, new CEO and President Tom Rutledge believes the operator is well positioned for a growth spurt that will steal share away from the MSO's satellite and telco rivals.

Rutledge, who took the helm of Charter after serving as the COO of Cablevision Systems Corp. (NYSE: CVC), told the UBS AG Global Media and Communications Conference in New York on Monday that Charter's physical assets "are first class" and that the "fixes are relatively easy" at the MSO, which emerged from bankruptcy in November 2009. (See Charter Leaves Chapter 11 .)

Charter services are underpenetrated compared with those of its MSO peers, a situation that the new CEO intends to reverse and give the operator a sizable cash flow boost. "Our big opportunity is market share," Rutledge said.

Rutledge says there are more satellite TV customers than Charter TV subscribers in the MSO's footprint, so DirecTV Group Inc. (NYSE: DTV) and Dish Network LLC (Nasdaq: DISH) are his primary targets on the video front. Verizon Communications Inc. (NYSE: VZ) FiOS is present in just 4 percent of Charter's footprint. Rutledge shrugged off AT&T Inc. (NYSE: T) U-verse as a platform that's "a little less capable" than FiOS's.

The Charter strategy is "about having a better product than all of our competitors," Rutledge said.

The fix is in -- or at least on the way
So what of those proposed fixes?

A big one is to turn off analog video services that look terrible on flat panel TVs and to use that reclaimed spectrum toward more HD and broadband capacity.

Part of that plan involved the use of inexpensive client set-top boxes equipped with downloadable security. Charter has asked the Federal Communications Commission (FCC) for a waiver to use boxes with integrated security while it puts that plan into place. The Consumer Electronics Association (CEA) is opposing the plan. (See CEA Tries to Kill Charter's Video Plan , Charter Sets All-Digital Path for Video and Charter Video Plan Good News for Cisco, Samsung.)

Rutledge also stressed that Charter should invest in cloud-based user interfaces that can run on thin-client boxes as well as tablets, phones and connected TVs. That, he said, will put the power of the navigation into the network, and shift more of the equipment costs to the consumer. That mimics the kind of strategy that Cablevision undertook on Rutledge's watch.

Another Cablevision-like strategy underway is the centralization of operations, a move that will help Charter "run the company as a single cable system." Charter has already built a super headend and is moving toward uniform pricing, packaging and product distribution. The operator will also look to expand its business services strategy, a category that's bringing in about $700 million now in a footprint that spends $9.5 billion per year. (See Cable's Cut of the Biz Services Pie to Eclipse $7B .)

Rutledge downplayed the role acquisitions would play in Charter's growth strategy and sidestepped questions about Charter's rumored interest in buying Cablevision's Bresnan cable properties in the Midwest. (See Cablevision Considers Bresnan Offers.)

"If something came along where we could be more efficient … then, yes, I'd be interested in it," Rutledge said. "I don't have one of those [opportunities] in front of me."

— Jeff Baumgartner, Site Editor, Light Reading Cable

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Jeff Baumgartner
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Jeff Baumgartner,
User Rank: Light Beer
12/5/2012 | 5:16:36 PM
re: Charter CEO Says Growth Is Path to Glory


Also, Rutledge did note that Charter's plan to pursue a waiver and implement a downloadable security platform wasn't "predicated" on getting approval for said waiver.  It's a hedge, of course, since Charter can still try to go all digital with DTAs and the existing set-tops with CableCARDs.  But he acknowledged that the downloadable option would give Charter access to cheaper STBs to accomplish the all-digital transition. JB

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