"There is an opportunity to increase our Internet penetration, particularly in homes passed where we don't have a video customer relationship," Charter President and CEO Mike Lovett said on Tuesday morning's third-quarter earnings call.
Charter's cable modem service penetration is about 10 percent in non-video homes, versus 60 percent in homes where it does have a video relationship. "We feel we have ample room for growth," Lovett said. Charter estimates it has roughly 7 million non-video homes passed in its footprint.
In addition to going after DSL customers directly with what Charter believes to be a "superior" broadband service, the MSO will also look to add high-speed data subs via its new partnership with satellite TV giant Dish Network LLC (Nasdaq: DISH). Lovett said Charter was marketing the Dish video/Charter broadband combo across the MSO's footprint by the end of the third quarter He said Charter's been "pleased with the initial results," but didn't say how many broadband subs have come way of the Dish partnership. Charter added 53,200 cable modem subs in the period, giving it a total of 3.4 million. Charter added 54,900 non-video subs in the third quarter. (See Charter Sheds More Video Subscribers.)
Much of Charter's broadband tilt will target AT&T and CenturyLink markets. AT&T is present in about 62 percent of Charter's footprint, with about half of it on the U-verse platform. About 10 percent is CenturyLink, and less than 4 percent is built out with Verizon Communications Inc. (NYSE: VZ) FiOS.
Styling as a broadband ISP
Charter intends to play up the over-the-top video streaming advantages of its Internet product. Among related moves, the company just launched a unified search tool on the Charter.net portal that helps customers find content from Netflix Inc. (Nasdaq: NFLX), Hulu LLC and Amazon.com Inc. (Nasdaq: AMZN) Instant Video. (See Charter.net Goes OTT.)
Charter will also sell a similar story to video subs via its integrated, broadband-capable TiVo Inc. (Nasdaq: TIVO) product, which is being tested in Texas and will be offered in all Charter markets by the first half of 2012. MSO EVP of Technology and Commercial Service President Don Detampel said the TiVo QAM/IP product offers the MSO a "bridge" to IP video, but did note that Charter is working on a "next-gen gateway product" that will reach the trial stage in 2012.
Lovett agreed with an analyst's notion that Charter is starting to style itself as a broadband ISP more so than as a traditional video service operator as programming costs increase and its video subscriber base and service margins continue to shrink.
"Certainly the video business has its challenges ... it is still a significant part of our business, so we are not abandoning it by any means," Lovett said. "There's a bit of a mantra within the company to think of ourselves as an ISP."
Other tidbits from today's call:
- Charter's on target to average 75 HD channels by year's end, and expects to offer more than 100 HD channels in "key markets" in 2012.
- Charter expects to have its deployment of Docsis 3.0 and switched digital video (SDV) largely complete by the end of 2011. At the end of the quarter, 85 percent of Charter's plant was D3-capable and 80 percent had SDV.
- Charter has no plans to deploy outdoor WiFi canopies on the scale of a TW Cable or Cablevision Systems Corp. (NYSE: CVC), but is looking to deploy hot spots surgically in some markets.
- Charter will remain opportunistic with M&A, looking mostly at "tack-ons" systems that serve between 5,000 and 50,000 subs. (See Charter Closes US Cable Deal.)
— Jeff Baumgartner, Site Editor, Light Reading Cable