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Cablevision Preps Network DVR, WiFi Phone

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LR Cable News Analysis
Light Reading

Cablevision Systems Corp. (NYSE: CVC) says it is hitting the accelerator on the deployment of a network-based DVR and its new PC to TV Relay service, in addition to testing a WiFi-based phone product.

By the end of 2010, Cablevision will stop buying pricey DVR set-tops -- which account for 40 percent of its capital expenditures -- and begin transitioning subscribers to its remote-storage DVR (RS-DVR), chief operating officer Tom Rutledge told analysts on the MSO's fourth-quarter earnings call today.

Rutledge said when the RS-DVR launches in April, it will only have limited functions such as allowing subscribers that also have Optimum Phone to pause live TV when a caller ID message is displayed on their TVs. He didn't detail how many hours of programming subscribers will be able to store through the RS-DVR, or the other features that the product will offer by the end of the year.

Cablevision will also expand the rollout of its PC to TV Relay service, which it unveiled on Wednesday and plans to begin testing in June, to all of its customers, Rutledge said. The product would allow subscribers that pay for both digital cable and high-speed Internet access to use their TVs as a monitor after installing software on their computers. (See Cablevision to Deliver Net Content to Set-Tops and Netflix Cheers Cablevision’s PC-to-TV Play .)

Analysts pressed Rutledge on the impact the PC to TV service could have on programmers that license their networks to Cablevision but also offer free content on the Internet.

"I don't think it's smart to fight the Internet in the television space. On the other hand, if you're a programmer and you're getting license fees you have to think about what you do with your content. It seems to me if you're a programmer you can't really expect to put programming on the Internet and at the same time collect a license fee out of the cable business or the satellite business," Rutledge said.

It's worth noting that Cablevision also owns several cable networks, including AMC, WE tv, and MSG.

Rutledge said the wireless phone service that Cablevision is testing involves switching subscribers from cellular to WiFi networks depending on their location. He said the MSO is studying whether it would need to build or rent a cellular network for the service, or if it could rely entirely on its WiFi infrastructure.

"We haven't made those decisions. The latter outcome would be a less capital-intensive, higher-return business," he added.

Cablevision, which faces competition from Verizon Inc.'s FiOS TV on 38 percent of its New York metropolitan footprint, lost 2,800 subscribers in the fourth quarter. Rutledge said he thinks Cablevision would've grown its video subscriber base during the quarter if it hadn't taken a hit in "lower income areas with high unemployment."

Last year, Cablevision began selling advertisers addressable and targeted ads, allowing subscribers to request more information about a product and receive samples from Gillette, Unilever, and other advertisers. Rutledge said the advanced advertising efforts are driving revenue increases, but he wouldn't break out the numbers. (See Cablevision's Interactive Ads Click With Subs and Cablevision Eyes T-Commerce Launch in 2010.)

"We're getting repeat business, and we're getting new business, and we expect it to materially drive our advertising going forward," Rutledge said.

The Cablevision COO also addressed the quicker pace of technology deployments from Cablevision compared to other MSOs, including its focus on advanced advertising and new products such as the RS-DVR, PC to TV Relay, and its WiFi-based phone tests.

"Different companies are in different points along a trajectory that takes them in many ways to places that are very similar to us. We happen to be aggressive marketers and we happen to move very quickly," Rutledge said. "Strategically I don't think we're really in a different place. We are all looking at the same world, and not everyone thinks exactly the same way. In terms of the networks that we deploy and the capability of those networks I think every cable company realizes that those assets are really quite flexible."

Cablevision said it added 4,800 digital video customers in the fourth quarter, along with 45,700 high-speed Internet, 89,000 high-definition customers, and 51,400 Optimum Voice subscribers.

— Steve Donohue, Special to Light Reading Cable

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