Cable Ops Talk Dollars and Sense

As Time Warner Cable's (NYSE:TWC) programming contracts come up for renewal, the company will take a "hard look" at each service and will either drop or move to another tier those that cost too much relative to the viewership or to the value of service. So said TWC CEO Glenn Britt at the UBS 40th Annual Global Media and Communications Conference last week.

Since 2008, video programming costs per customer have gone up a little over 30%, while the consumer price index is up only about 10%, Britt said, noting, "Those two things are out of whack," and also that "clearly, these trends can't last forever."

"We can't keep paring these giant packages of (things) with services that don't carry their own weight," Britt said.

The high price of packages could be what drives consumers away, not the lure of cutting the cord. "I hope the economy gets better, but this stuff is just starting to cost too much," Britt said. "If, as a broader industry, we want to keep (things) going, we need to have packages and pricing that is lower for people who can't afford it."

Time Warner Cable has a low-cost alternative called TV Essentials, which, while "probably" not the ideal configuration of programming and price, is "what we were able to do," Britt said. While there has been some uptake, it hasn't been enormous.

"We as an industry need to work on that," Britt said. "The big package works for content companies. The little ones don't, but at some point this thing has to be responsive to people who pay bills, and that is the consumer."

The State of Charter

To switch gears, Charter Communications (NASDAQ:CHTR) President and CEO Tom Rutledge, who also participated in the conference, said that in the year he's been at Charter's helm he's found that while the company's market share is low, the fundamentals of the company are "in really great shape," in fact better than expected. A surprise? How much analog there still was running on the system. "The fixes are relatively easy, but (it will) take time," he said.

"There is the opportunity to take a low penetrated operation and create a high penetrated operation," Rutledge added.

The plan? "To be a better product," Rutledge said. "It is hard to change people's (mind) and get them to stay home and rip out whatever service they have and replace it with yours. You need to ... really create a true value proposition relative to what they have. You need promotional pricing to drive into the marketplace and grow business. It does take time to shift marketshare."

Specifically, Charter is pushing the triple play, putting its two-way interactive network toe-to-toe with satellite and its data speeds and VoIP services up against its telco competitors. "When you put it all together, it's about having a better product than all of our competitors and putting it all together into a value proposition that is compelling."

As the company continues down the road to all digital, Rutledge made a reference to his company's request for a waiver from the FCC, which he says will allow the use of less expensive set-top boxes. "I would think it great (as) if approved this would take cost out of the business."

Monta Monaco Hernon is a free-lance writer. She can be reached at mcmhern@yahoo.com.

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