Charter Plots Cloud Video, DOCSIS 3.1 Rollouts
Still shooting for regulatory approval of its proposed Time Warner Cable and Bright House Networks purchases by the end of March, Charter Communications is sorting out how to roll out its new cloud-based video guide and DOCSIS 3.1 technology throughout its footprint.
Charter Communications Inc. President and CEO Tom Rutledge -- who aims to transform the fourth-largest US MSO into the second-biggest one through its deals for Time Warner Cable Inc. (NYSE: TWC) and Bright House Networks -- laid out those ambitions Thursday morning. Speaking on the company's fourth-quarter earnings call, which detailed the MSO's continued resurgence in subscriber and revenue growth, Rutledge said Charter executives are now grappling with how to extend their Spectrum guide to all their video customers and how to introduce DOCSIS 3.1 speeds to their even bigger broadband base.
Focusing on the Spectrum guide first, Rutledge said Charter plans to roll out the cloud-based platform throughout its existing footprint of 4.3 million video homes this year. Initially introduced in the MSO's Fort Worth, Texas and Reno, Nev., cable systems, the platform enables Charter to beam user interfaces, programming guides and other video products to a wide array of set-top boxes and other consumer electronics devices. Pleased with the product's performance so far, Charter teamed up with Arris Group Inc. (Nasdaq: ARRS) last year to buy ActiveVideo , the company behind the technology. (See Arris, Charter Nab ActiveVideo for $135M.)
"Our initial Spectrum guide launches are working and scaling well with positive customer response," he said. "We've gotten all the bugs that we think could exist out of this system, and it works very well."
While all the technological and operational issues have been worked out, Rutledge said Charter officials haven't figured out the best deployment strategy yet. They are still debating whether to offer the guide to all video customers right away or just offering it to new video subscribers first.
"The choice before us will be do we roll it out on every outlet en masse or do we roll it out incrementally to just new customers and then begin to make it optional to existing customers," he said. "The tension there is that there are some people that are just confused by new user interfaces and you have to manage that process of customer education, as well as the desire to get a highly functional UI out in front of everyone simultaneously."
Charter's plans also call for introducing the Spectrum guide to the TWC and Bright House video homes that it hopes to inherit if federal and state regulatory authorities approve its twin deals. But those rollouts will likely take longer because of the need to integrate the TWC and Bright House systems into the Charter fold. If all goes well, Rutledge said he hopes to start that process by the end of the year.
Turning to the cable industry's new DOCSIS 3.1 standard, Rutledge was vaguer, declining to disclose an exact timetable for rolling it out. But he did say that Charter executives "expect to begin the transition" to the new spec over the next 18 months by deploying D3.1 modems as they become commercially available at decent prices.
Those deployments may start first, though, in the TWC and Bright House systems that Charter plans to take over rather than its legacy systems. While Charter, with a broadband customer count of 5.2 million, now has about 900,000 more data customers than video customers, it doesn't feel the urgency to upgrade its existing markets to 1 Gig speeds and beyond because it largely doesn't compete against such major gigabit players as AT&T Inc. (NYSE: T), CenturyLink Inc. (NYSE: CTL) and Google Fiber Inc. in those regions. In contrast, TWC and Bright House do compete against those providers in their markets.
Despite recent reports of mounting opposition to Charter's acquisition plans, Rutledge said company officials are still "reasonably confident" that the Federal Communications Commission (FCC) and Antitrust Division of the U.S. Department of Justice will "remain on track" to complete their reviews of the two deals sometime next month. And, while California state authorities now have a regulatory review schedule that extends into June, he said Charter officials are trying to move up that timetable. "We look forward to closing shortly," he said.
With approval of the two deals still up in the air, Rutledge said Charter will likely not participate in the FCC's upcoming wireless spectrum auction, which is scheduled to begin next month. While tempted to follow Comcast Corp. (Nasdaq: CMCSA, CMCSK)'s lead and bid for more spectrum, he said the timing probably won't work because the MSO won't yet know what its service footprint will end up being.
"We're not exactly in the same place as Comcast," he said. "It's difficult for us to participate in the auction without regulatory clarity."
Not too surprisingly given the ongoing merger reviews, Rutledge was far more muted than his counterparts at Comcast and Time Warner Cable about the FCC's proposal to open up the US pay-TV set-top market. Instead of attacking the Commission's proposal outright, he said Charter officials "want to work carefully with the FCC to change the marketplace as it currently exists."
Rutledge's comments came as Charter wrapped up its best year of subscriber growth in at least a decade, adding customers across all categories. Most notably, the MSO scored advances on the video front, adding 29,000 video subscribers for the fall quarter to give it an overall gain of 11,000 video subs for the entire year. Charter also added 115,000 broadband subs and 47,000 voice subs in the quarter and boosted its annual business services revenues over the $1 billion mark for the first time ever.
— Alan Breznick, Cable/Video Practice Leader, Light Reading