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Charter Plans Business Services, Wireless Push

Alan Breznick
5/27/2015
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Now that it has finally negotiated deals to buy Time Warner Cable and Bright House Networks, Charter Communications has its eye on greatly expanding its business services and wireless reach.

Charter Communications Inc. President & CEO Tom Rutledge spelled out those aims in the conference call that he and his counterparts from Time Warner Cable Inc. (NYSE: TWC) and Bright House Networks held with financial analysts Tuesday. Playing up the new Charter's desire to compete outside the greatly enlarged footprint that it expects to have once the two proposed acquisitions close, Rutledge said the large US MSO will extend its fiber networks into new areas to pursue commercial customers and step up its WiFi and other wireless efforts.

In particular, Rutledge stressed that the bulked-up Charter will focus on building out its "optical networks" into unserved areas beyond the 48-million-home footprint that it will boast once the TWC and Bright House deals are consummated. Noting that cable companies have traditionally concentrated on residential areas, he said there's a large market in midsized and large businesses just waiting to be served.

"We will invest significantly in building out our optical network beyond our existing footprint to inject much needed competition in the commercial markets," Rutledge said. "There are large unserved areas of the country with not a lot of high-capacity networks. We'll be investing in that area."

One major reason that Rutledge is stressing the business services competition idea is to ease any concerns that federal regulators might have about Charter's ambitious plans to transform itself into the second-biggest cable operator in the US, just behind Comcast Corp. (Nasdaq: CMCSA, CMCSK). Federal Communications Commission (FCC) Chairman Tom Wheeler, who opposed Comcast's ultimately unsuccessful effort to purchase Time Warner Cable, has urged cable operators to reach beyond their existing territories and compete with each other and other providers for broadband and video subscribers.

But Rutledge also has good business reasons for Charter's new commercial ambitions as well. With Time Warner Cable and Bright House under its belt, the new Charter will become something of a commercial services colossus in the US. Combined, the new Charter will boast more than 1.2 million business customers in 41 states and generate more than $4.5 billion in annual revenues, up from $1 billion for the old Charter last year. That will make it an even bigger player than Comcast, which produced nearly $4 billion in commercial revenue last year.

Thanks in large part to TWC's and Bright House's efforts, the new Charter will also have tens of thousands of miles of fiber networks snaking around the country. And, thanks mainly to TWC's efforts, the new Charter will have at least 950,000 commercial buildings connected to those networks.

In addition, the new Charter will have a commanding, if not dominating, presence in a number of the biggest and/or fastest growing commercial markets in the US. Although Charter executives downplayed the control they would enjoy over some of the largest metro regions in the nation if the deals go through, the company would have a large presence in nine of the top 25 US markets, including New York and Los Angeles (by far the two biggest), Dallas/Fort Worth (the fifth largest), Tampa/St. Petersburg, Orlando, Cleveland, St. Louis, Charlotte and Raleigh/Durham. (See Charter's Bright Idea: The Big Payoff and Charter Nears Deal for TWC Reports .)

So the new Charter -- which will also have a sizable presence in such top-50 metro regions as San Diego, Kansas City, Columbus, Cincinnati, San Antonio, Milwaukee and Austin -- will have plenty to build on in expanding its commercial reach to other parts of the US.


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On the wireless front, the new Charter plans to be much more aggressive as well. Rutledge, -- who spearheaded Cablevision Systems Corp. (NYSE: CVC)'s ambitious WiFi hotspot buildout in his last executive post and has often talked about doing the same at Charter -- made it clear that the beefed-up company will now turn those dreams into reality.

"We'll invest significantly in out-of-home WiFi," he said on the call. "We will be expanding our wireless footprint and building our WiFi network in a public way and from that will come additional opportunities to create new subscriber relationships." He especially sees an opportunities to create new WiFi services for commercial customers.

Once again, thanks largely to the efforts of TWC and Bright House, the new Charter will have a significant base on which to build. Between them, TWC and Bright House now have at least 85,000 to 90,000 WiFi hotspots in key metro areas and belong to the Cable WiFi consortium that boasts more than 400,000 hotspots nationwide. TWC has also been in the forefront of the cable industry in deploying Hotspot 2.0, an advanced technology spec that enables the MSO to connect its broadband customers' smartphones automatically to its access points, eliminating the need for customers to switch out and log into new wireless networks.

Plus, Charter will be able to leverage the joint-MSO MVNO agreement that both TWC and Bright House struck with Verizon Wireless several years ago in return for the sale of Advanced Wireless Services (AWS) spectrum to the carrier. On the call with analysts yesterday, Rutledge indicated that he plans to take advantage of that pact.

— Alan Breznick, Cable/Video Practice Leader, Light Reading

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Phil_Britt
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Phil_Britt,
User Rank: Light Sabre
5/28/2015 | 9:40:32 AM
Competition is Good
If it makes business sense for Charter to build out and compete, customers will benefit. I am lucky enough to be in an area where there is a cable choice. OTT doesn't provide what I and many other customers need/want at this time. And with a single cable provider, there is no competition on price or on service.
DHagar
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DHagar,
User Rank: Light Sabre
5/27/2015 | 5:38:40 PM
Re: Welcome to the present
msilbey, the business services, especially the commercial Wi-Fi, sounds like a key opportunity for growth.  If they execute well, they could really lead in a key market niche.

I am wondering how this will play with Verizon's moves?
KBode
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KBode,
User Rank: Light Sabre
5/27/2015 | 2:40:25 PM
Re: Welcome to the present
If nothing else it seems like an effective marketing campaign (advertising your brand via SSID). And much of that infrastructure cost is shared with other cable companies, so I don't think it's a huge money outlay....
mendyk
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mendyk,
User Rank: Light Sabre
5/27/2015 | 2:33:49 PM
Re: Welcome to the present
Mari -- What do you make of the WiFi push? Has that demonstrably helped cable operators up to now?
msilbey
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msilbey,
User Rank: Blogger
5/27/2015 | 1:50:59 PM
Re: Welcome to the present
The business services side was a big deal when Comcast was the one looking to acquire TWC too. Beyond Ethernet, I'm curious what might be done with TWC's Navisite data center assets.
mendyk
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mendyk,
User Rank: Light Sabre
5/27/2015 | 12:23:29 PM
Welcome to the present
From this post, it sounds like the biggest thing Charter acquired is a business plan beyond low-rent cable guy service.
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