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Charter Completes Digital Transition

Put a fork in it. Charter's analog days are done.

Charter Communications Inc. CEO Tom Rutledge announced at the UBS Annual Global Media & Communications Conference in New York that Charter is turning off its last analog TV signals this week, bringing its digital migration project to an end "on time and on budget." Charter is the third-largest cable operator in the US with more than 4 million subscribers.

The move from analog to digital video started in earnest 13 months ago, with Rutledge determined to turn around a struggling cable business still recovering from bankruptcy. Now the hard work is paying off. Charter reported significant revenue growth and slimmed its video subscriber losses to only 9,000 basic cable customers in the third quarter, a major improvement over the 27,000 cable subs it shed a year earlier. (See Charter Gains on Digital, Broadband Upgrades.)

In addition, Charter has reportedly taken back market share from satellite TV competitors. According to Rutledge, there were more satellite TV customers than Charter subscribers in the MSO's footprint when he joined the company three years ago. That ratio is about equal now, thanks to the improved quality of the MSO's video service.

"We now have a product that is inherently superior to satellite," said Rutledge. "Reliability: more superior. Channel capacity: more superior." And, he added, Charter has the advantage over its satellite TV competitors of operating on a two-way interactive TV platform.

Ironically for Charter, just as the company is completing its analog-to-digital migration with existing customers, it faces the prospect of starting all over again in select Time Warner Cable Inc. (NYSE: TWC) markets. Charter expects to take on 3 million TWC subscribers as part of a three-part transaction deal with Comcast Corp. (Nasdaq: CMCSA, CMCSK) in early 2015. Of those customers, 2.4 million are in areas with analog cable.

The news isn't all bad, however. Rutledge pointed out that Time Warner Cable has physical infrastructure assets -- including people and trucks -- that Charter was missing when it started its digital transition. Charter still managed to move its 4 million subscribers to an all-digital platform in little over a year. (See Charter Revenues Up, Video Subs Down.)

Rutledge noted that there are other changes on the horizon for Charter's video service as well. Assuming the deal with Comcast gets regulatory approval, Charter will not only acquire new subscribers, it will also gain part ownership of a new spin-out cable company that's being called GreatLand Connections. That ownership stake will include the ability for Charter to extend its Spectrum product line and brand name to GreatLand customers.

Much like Comcast created and developed the Xfinity name, and Cablevision Systems Corp. (NYSE: CVC) rolled out Optimum, Charter has worked hard to build the Spectrum brand. It will now get to market Spectrum across a much larger footprint. (See Charter Bets on New Name.)

Rutledge also offered an update on Charter's new cloud-based TV program guide. Powered by ActiveVideo , the user interface works on both new and legacy cable boxes. Rutledge reported that "it looks good. It works well. Customers like it."

After much testing, Rutledge added, Charter plans to start rolling out the cloud UI across the country in 2015. He predicted that more than half of Charter's customers will have the new guide by the end of next year, but injected a note of caution by saying that there will be a lot of customer education required. (See ActiveVideo Tightens Its Cable Ties.)

Speaking of caution, Rutledge did take the opportunity at the UBS conference to promote his position on Title II regulation and the trend toward à la carte offerings in the video industry. On Title II, Rutledge said he was surprised by President Obama's announcement of support for strict regulatory control over broadband, and that Charter would fight through the process in an effort to bring about "a good outcome."

On "à la carte," Rutledge issued a warning to the industry about shifting entirely over to unbundled services. He said he believes that going à la carte could turn a $70 billion ecosystem into a mere $7 billion one.

— Mari Silbey, special to Light Reading

danielcawrey 12/10/2014 | 7:14:33 PM
Re: Reminds me of the transition to cable I disagree with this a la carte statement. I think that if subcribers could choose thier own customized cable packages it would be beneficial. People might be willing to pay more for only a smattering of their favorite channels and nothing else. 

The problem I think is the cable companies. The way the networks charge is likely complicated and comes with a lot of packaged channels themselves. That' probably a big part of the problem. 
KBode 12/10/2014 | 3:26:55 PM
Charter Last year around this time Rutledge candidly admitted that the company's cable TV services were "inferior." This year he's happy that they're at least not as bad as satellite TV services, so at least that's some progress? Will be curious to see pricing/implementation on the upcoming cloud storage functionality.
nasimson 12/10/2014 | 8:34:56 AM
Reduced to one tenth >He said he believes that going à la carte could turn > a $70 billion ecosystem into a mere $7 billion one. Is he crying Wolf or is there some serious threat? The compulsory bundling and upsizing is a payment by compulsion, not by choice. So this is not good revenue in that sense.
smkinoshita 12/9/2014 | 2:49:36 PM
Reminds me of the transition to cable This reminds me of the transition to cable TV.  There's even some old anti-cable TV ads that one can find on YouTube like this one: http://youtu.be/QIgZHZpiq1U

Not that there's a campaign against it, but transitions can often be turbulent.  It seems that Charter's is relatively smooth.  Up North in Canada, Roger's has done the same although since they're the #1 cable provider it's not like they've got a lot of competition.
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