Close to realizing its quest to become the second-largest cable operator in the US, Charter Communications is plotting how to upgrade Time Warner Cable and Bright House Networks cable systems for maximum impact.
Speaking on the company's second-quarter earnings call Tuesday, Charter Communications Inc. President and CEO Tom Rutledge spelled out some of his company's ambitious plans for bringing the cable systems of Time Warner Cable Inc. (NYSE: TWC) and Bright House Networks up to speed and integrating them into Charter's operations. He also continued to make the case for why federal regulators should approve the twin deals.
Rutledge said Charter intends to upgrade any remaining TWC and Bright House analog cable systems to all-digital transmission once the two deals are consummated. As it has in its existing cable systems, Charter then aims to use the freed-up capacity to offer more HD channels, boost broadband speeds and roll out other advanced products.
Further, Rutledge said Charter intends to "roll out our Spectrum product suite" to Time Warner Cable and Bright House video subscribers. Using the cloud-based Spectrum platform -- which is powered by technology from ActiveVideo , a company that Charter and Arris Group Inc. (Nasdaq: ARRS) recently acquired in a joint venture -- Charter can beam user interfaces, programming guides and other video products to a wide array of set-top boxes and other consumer electronics devices.
In a closely related move, Rutledge said Charter plans to deploy its next-gen World Box set-top in TWC and Bright House pay-TV homes. The World Box is Charter's brand name for a line of hybrid IP/QAM set-tops that feature up to 16 tuners, a DOCSIS 3.0 modem, 1GB of RAM and TB of storage for the DVR model. The World Box set-top family also includes support for a new downloadable conditional access system (DCAS) created by Cisco Systems Inc. (Nasdaq: CSCO). (See Hey New Charter Subs, You're Getting a Worldbox!)
"The guide will vastly improve search and discovery functionality, which also enables on-demand offerings, and it gives us the ability to offer over-the-top content and applications directly on the box, where we intend to provide customers with greater choice when switching between traditional video and alternative entertainment," Rutledge said. "We'll also improve our Spectrum TV app, which uses the same guide and offers live TV inside and outside of the home."
On the broadband side, the Charter takeover plan calls for extending its lowest speed tier, 60 Mbit/s downstream, to all TWC and Bright House systems while continuing to offer their 300 Mbit/'s top tiers. The plan also calls for TWC and Bright House systems to offer lower broadband prices and no modem rental fees, matching the existing Charter systems.
As Charter has indicated in recent filings at the Federal Communications Commission (FCC) , Rutledge emphasized that his company will abide by all of the nation's new neutrality rules and go even further than those, most notably by offering free network interconnections to online content providers through 2018. That pledge helped the MSO win crucial support last month from Netflix Inc. (Nasdaq: NFLX) for its proposed buyout of Time Warner Cable, by far the bigger of the two deals now under review. (See Netflix Backs Charter-TWC Deal.)
Turning to the company's earnings, Charter reported healthy subscriber gains in most categories for the second quarter, as well as decent revenue and cash flow increases and much lower capital expenditures. Predictably, its only subscriber losses came in the video category, where it shed 33,000 subscribers in the seasonally challenging period, slightly worse than the 29,000 subscribers it lost in the year-ago period.
But Charter offset those video sub losses with quarterly gains of 70,000 broadband subscribers, up from 49,000 a year ago; 33,000 voice subscribers, down slightly from 35,000 a year ago; and 18,000 commercial customers, up from 6,000 a year ago. The MSO also boosted its numbers of double-play and triple-play subscribers.
— Alan Breznick, Cable/Video Practice Leader, Light Reading