Cablevision Systems Corp. (NYSE: CVC) won't appease programmers and advertisers by disabling the fast-forward function on its new network-based DVR, MSO president and COO Tom Rutledge said today.

"Yes, we do have that option, but we're going to make it work as a consumer product the same as a physical DVR," Rutledge told analysts on Cablevision's first-quarter earnings call.

Rutledge said Cablevision recently launched its Remote Storage-DVR (RS-DVR) to customers in New York City, where it offers service in the Bronx and Brooklyn, allowing subscribers to pause live TV programming when a caller ID message is displayed on their TV screens. The company won't offer full RS-DVR functionality until later this year. (See Cablevision RS-DVR Gets Limited Deployment.)

Some cable operators and networks have disabled the fast-forward functionality in video-on-demand (VoD) programming. Cablevision would have the ability to disable the fast-forward feature in the RS-DVR, which could please some TV networks and advertisers that complain about viewers skipping commercials.

But such a move would likely cause a backlash among customers, and also hurt Cablevision's ability to compete with DVR products marketed by rivals like DirecTV Group Inc. (NYSE: DTV) and Verizon Communications Inc. (NYSE: VZ), which offer DVR receivers that allow fast-forwarding.

And since Cablevision has argued in legal battles with TV networks and studios that the RS-DVR should be protected by the same copyright rules governing VHS players and physical DVRs spawned from the 1984 "Sony Betamax" case, the company's legal stance could be damaged if it disabled the fast-forward function. (See Supremes Stand Clear of RS-DVR Case.)

Looking to avoid more legal skirmishes with programmers, Cablevision plans to store individual copies of each program recorded by a subscriber through the RS-DVR. Rutledge said the storage costs will impact Cablevision's capital expenditures for the RS-DVR, but downplayed how hard it would hit the MSO's bottom line.

"While it slightly raises the cost of the network DVR relative if we didn't have to make individual copies, the storage piece and the copying piece is not the major economic driver of the remote storage DVR feature," Rutledge said. "The main factor is streaming capacity in the network, and that doesn't change whether we make a single copy or not. The overall product is a more efficient product than distributed physical DVRs, and it's a more consumer-friendly product because you don't have to have trucks trips to install it." (See Cablevision Girds for Remote DVRs.)

Turning to other new products, Rutledge said Cablevision plans to begin testing its "PC to TV Media Relay" product in June. It's designed to allow customers with its digital video and high-speed Internet products to watch Web video on a TV using legacy digital set-top boxes. Rutledge said Cablevision expects to launch the product commercially by the end of the year. (See Cablevision Preps Network DVR, WiFi Phone.)

Cablevision is also testing new phone products that would rely on delivering calls through both WiFi and cellular networks. "We've been working with devices that switch back and forth between cellular and WiFi, and there's clearly an opportunity to build products there," Rutledge said.

The Cablevision COO didn't lay out a timeframe for launching a new wireless phone service.

Sub and finances
Cablevision added 900 basic video customers during the first quarter of 2010 versus the fourth quarter of 2009. Rutledge attributed that in part to an ad campaign aimed at winning back customers that had jumped to Verizon's FiOS TV service. But Cablevision's basic video count dropped 37,900, or 1.2 percent, when compared to the year-ago quarter.

The company also added 42,600 Optimum Online cable modem customers, 42,300 Optimum Voice phone customers, and 12,000 iO: Interactive Optimum digital video subscribers during the first quarter.

Cablevision said it grew net revenue from telecommunications services by 5.9 percent, to $1.4 billion in the first quarter, while operating income jumped 20.6 percent, to $354.7 million.

— Steve Donohue, Special to Light Reading Cable