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TW Cable Sizes Up Google Fiber Threat

Jeff Baumgartner
LR Cable News Analysis
Jeff Baumgartner
9/14/2012
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Welcome to the broadband and cable news roundup, T.G.I.F. edition.

  • Time Warner Cable Inc. (NYSE: TWC) is taking Google Fiber's foray in the Kansas Cities seriously, but TW Cable's CFO Irene Esteves says Google (Nasdaq: GOOG)'s 1Gbit/s and TV service bundle doesn't pose a huge threat to the cable operator's overall business. Of the 300,000 homes that Google Fiber is expected to pass in the area eventually, Esteves estimates that TW Cable has 100,000 Internet and 100,000 video subs. "We're talking about less than 1 percent of our [national] subs at risk of this eighth competitor coming in," Esteves said Thursday at a Bank of America/Merrill Lynch investors conference. Among the other competitors in the Kansas cities market are DirecTV Group Inc. (NYSE: DTV), Dish Network LLC (Nasdaq: DISH), AT&T Inc. (NYSE: T) and SureWest Communications (Nasdaq: SURW). Esteves thinks the Google threat will remain localized. "We can't imagine an economic model that makes sense for them to expand it beyond this Kansas City experiment," she said. Also on Thursday, Google revealed its construction plan for "fiberhoods" that qualified during the first round of buildouts. (See KC Gets Google Fiber for Real in October.)

  • Meanwhile, it's still early days for IntelligentHome, TW Cable's home security and monitoring product. Esteves said the MSO has about 9,000 IntelligentHome subscribers, with the average revenue per user running in the range of US$33 to $40, depending on the level of service. As rollouts expand and more customers sign up, she said she expects profits to fall between what TW Cable gets today with video and cable modem services. (See Will Service Providers Steal ADT's Customers?)

  • Nintendo of America Inc. set Nov. 18 as the launch date for the Wii U, a $299.99 HD-capable console that will support Netflix Inc. (Nasdaq: NFLX), Hulu LLC and other usual over-the-top video suspects. The device looks to be an obvious one for cable operators to target with TV Everywhere apps. Among the more interesting aspects is the Wii U GamePad, a tablet-like device that supports an app called TVii, which turns the device into a fancy remote control and a guide to help users navigate pay-TV services. Nintendo said the new platform is also integrated with TiVo Inc. (Nasdaq: TIVO) DVRs.

  • Mexico's Megacable Comunicaciones is in talks with TW Cable about forming a strategic phone alliance that would let TWC's customers receive calls from Megacable customers without incurring long-distance charges, reports Reuters. Megacable CEO Enrique Yamuni stressed that the discussions were still in the exploratory stage.

  • The Society of Cable Telecommunications Engineers (SCTE) revealed more details about next month's Cable-Tec Expo in Orlando, announcing an all-women technology panel on Wednesday, Oct. 17 that will feature: Bright House Networks President Nomi Bergman; Comcast Corp. (Nasdaq: CMCSA, CMCSK) SVP of infrastructure and operations Charlotte Field; TW Cable EVP, East Region, Carol Hevey; and Cablevision Systems Corp. (NYSE: CVC) EVP, Engineering and Technology, Yvette Kanouff. Industry analyst and Multichannel News columnist Leslie Ellis will moderate.

    — Jeff Baumgartner, Site Editor, Light Reading Cable



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    craigleddy
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    craigleddy,
    User Rank: Blogger
    12/5/2012 | 5:21:02 PM
    re: TW Cable Sizes Up Google Fiber Threat


    Regarding TWC's IntelligentHome, we recently released a Heavy Reading Cable Insider on cable's smart home services that noted, "MSOs are asking customers to pay about $30 to $50 per month plus an installation fee amid a down economy and uncertain consumer demand for home automation."


    Selling these services is a challenge given what the MSOs are charging. The MSOs appear to be betting that they can start with a price in the $30 to $50/month range and, even if the uptake is low, the margins are fantastic. But then you have to wonder at what point will they need to either lower prices, bundle in the services or add other sweetners to keep penetration rolling.


    Would you pay $30-50 a month for home security and automation services from your cable provider?     


     

    Jeff Baumgartner
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    Jeff Baumgartner,
    User Rank: Light Beer
    12/5/2012 | 5:21:02 PM
    re: TW Cable Sizes Up Google Fiber Threat


    Even if it takes time to scale these signups, it would seem to be a good product category for the cable guys to get into just for the retention factor alone.  Once a sub adds that to a bundle, how much more difficult will it be for that sub to churn out?


    But achieving subscriber scale is going to remain a challenge, which is why I think we're hearing rumors that Comcast and perhaps Verizon might be interested in buying ADT's North American residential home security business when Tyco spins it out. JB

    craigleddy
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    craigleddy,
    User Rank: Blogger
    12/5/2012 | 5:21:00 PM
    re: TW Cable Sizes Up Google Fiber Threat


    Yea, I could see Comcast going after ADT, perhaps with other MSOs in tow. As you've pointed out previoulsy, there's a connection between ADT CEO Ed Breen and Comcast.


    In 2001, MSOs banded together behind the Security Broadband venture that wasn't ready for primetime. Also I recall some folks on the cable financial side explored the potential for rolling up a bunch of the smaller home security companies, with the possibility of getting cable companies involved. But those waves of excitement subsided and now we've got the latest wave.   


     


     

    AESerm
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    AESerm,
    User Rank: Light Beer
    12/5/2012 | 5:20:59 PM
    re: TW Cable Sizes Up Google Fiber Threat


    That rev number $33-$40 sounds about where ADT is with its $9/week promo. What's the TWC value prop again?

    craigleddy
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    craigleddy,
    User Rank: Blogger
    12/5/2012 | 5:20:58 PM
    re: TW Cable Sizes Up Google Fiber Threat


    The value prop for TWC and the other MSOs is that this is more than just your usual home security service. It's all tied in with broadband so you can use detection devices and those little spy cameras to monitor your property on various connected devices. Plus you can remotely control your thermostat and lights and do other "smart home" stuff.


    However -- and it's a big however -- the more you start going beyond security and getting into home automation, the more expensive the package and you might have to purchase additional equipment. It can add up pretty fast.            

    victorblake
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    victorblake,
    User Rank: Lightning
    12/5/2012 | 5:20:53 PM
    re: TW Cable Sizes Up Google Fiber Threat


    According to Time Warner Cable's web site,


    "Irene M. Esteves is Executive Vice President and Chief Financial Officer of Time Warner Cable since July 2011."


    Irene Esteves is the CFO, not the CTO. The article say "CTO."

    Jeff Baumgartner
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    Jeff Baumgartner,
    User Rank: Light Beer
    12/5/2012 | 5:20:53 PM
    re: TW Cable Sizes Up Google Fiber Threat


    Thanks, that was a typo. It's been changed to CFO. JB

    patentchoi
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    patentchoi,
    User Rank: Light Beer
    12/5/2012 | 5:20:53 PM
    re: TW Cable Sizes Up Google Fiber Threat


    The key as Esteves is the economic model. However the standard economic model may not be straightforward to apply if google can offer services in an enhanced manner or enhance their ad-monetization. Also google has deep pockets to challenge any standard models. 


    Goog tried their hand at public wifi but that has not expanded its toeprint. They could be doing this to be on the good side of carriers that push android. On the wireline side they do not have such restrictions, but it will be a business relationship challenge to move this to a larger footprint.

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