TWC: Maxxing Out Too Late?
Racing to boost broadband speeds and upgrade its cable systems over to all-digital video delivery before its pending takeover by Comcast, Time Warner Cable is almost desperately trying to make up for lost time.
The move prompts me to ask two big questions. First, how much catching up can it achieve during the next five or six months? And second, what took it so long to make a real commitment?
During the company's recent second-quarter earnings call, Time Warner Cable Inc. (NYSE: TWC) executives laid out plans to extend the operator's TWC Maxx initiative to at least a third major US market before the end of the year: In addition to rolling out TWC Maxx in New York and Los Angeles, the MSO is now prepping to launch the program in Austin, Texas this year.
It then plans to extend the program to seven more markets -- Charlotte, Dallas, Hawaii, Kansas City, Raleigh, San Antonio and San Diego -- by the end of 2015.
Under that much-ballyhooed TWC Maxx program, TW Cable is upgrading its video systems to all-digital delivery in each target market. It's also boosting its top broadband speeds to 300 Mbit/s in each market, as well as upgrading its customer service and installation operations.
Besides accelerating the deployment of TWC Maxx, Time Warner Cable is furiously rolling out its new cloud-based programming guide throughout its regions, placing in nearly 6 million digital cable set-tops, or about 40% of its set-top box base. Plus, the MSO is expanding its TV Everywhere app to more video platforms, such as FanTV.
There's no question that these are all smart moves. While such other major US MSOs as Comcast Corp. (Nasdaq: CMCSA, CMCSK), Cox Communications Inc. , Cablevision Systems Corp. (NYSE: CVC) and even long-time laggard Charter Communications Inc. have all committed to all-digital upgrades, broadband speed increases and advanced cloud-based guides and video services, TWC has generally lagged well behind its counterparts.
As a result, TWC has been losing basic video customers by the boatload for years, while struggling to make significant gains in broadband and voice subs. In 2013 alone, for example, the company shed an astounding 825,000 video customers, which is more than most cable companies have in total.
Under the more aggressive leadership of new Chairman & CEO Rob Marcus, TW Cable officials are gamely battling to stem those losses. But TWC still lost 152,000 video subscribers and 34,000 overall residential customers in the spring quarter, while netting just 67,000 broadband and 69,000 voice customers. Although it was actually the MSO's best second quarter in four years, that's not saying much, given the company's heavy video customer losses and lackluster high-speed data and VoIP sub gains in previous springs.
Putting up a brave front, TWC executives insist they have turned their big ship around and are heading in the right direction again. Citing a lower volume of customer complaints and higher usage of their new video and broadband products, they say the customer metrics are beginning to reflect that progress as well. (See TWC Cuts Video Losses, Boosts Data Gains.)
I believe they're probably right: If this combination of smarter strategy and better execution has worked well for Comcast and Charter, there's no reason why it shouldn't work for TWC as well, at least in theory.
But why did it take so painfully long for TW Cable execs to make the right moves, which seemed to be obvious to everybody but them? Why did it take the near-doomsday threat of a hostile takeover by Charter and the dark lord, John Malone, to make them change course? Just what were they waiting for?
And, with Comcast getting ready to swallow up most of TWC's systems and carve up the rest for Charter, all these last-minute initiatives may not matter all that much in the end. TWC Maxx could rapidly fade into cable history as Comcast and Charter put their own respective upgrade programs into play.
Too bad TW Cable officials didn't make all these moves two, three or four years ago. If they had, they might still have had a company to run next year.
— Alan Breznick, Cable/Video Practice Leader, Light Reading