Cable Quarterlies and Tech Tidbits

Tech Trends from the Financials The most recent round of financials are out and the big three, so to speak, were fairly mum on the ending of the proposed merger between Comcast (NASDAQ:CMCSA) and Time Warner Cable (NYSE:TWC).

Comcast Chairman and CEO Brian Roberts remarked simply that Comcast was "excited" about bringing the company's "great products and technologies" to other cities. "The government ultimately didn't see it the same way. Fortunately, we structured the transaction in such a way that avoided unnecessary risk for our shareholders."

TWC Chairman and CEO Rob Marcus noted that while people outside the company have focused on the merger, TWC has been "quietly executing" its operating plan. "While we were confident that the transaction would be consummated, back in February of last year, I gave our operating team very clear instructions. In the unlikely event this deal doesn't close, be ready."

By being ready, Marcus meant getting residential operations in a strong position, investing in network and CPE, enhancing products, and improving customer service, among other things, he said.

As for Charter Communications (NASDAQ:CHTR), which was in on the TWC/Comcast deal by way of partial ownership in a spin-off company and the acquisition of a percentage of Comcast subscribers, Tom Rutledge, Charter president and CEO, said the company is "disappointed" the transaction did not close, but also noted he is "pleased" that the core business continues to grow and Charter is in a "better position" to acquire the unserved passings in its footprint. "Charter remains in an excellent position to grow its business organically by additional market share gains with or without M&A."

Although media reports have been buzzing with speculation that Charter might renew its bid to acquire TWC itself, Rutledge had nothing to say on the subject during the earnings call. Nor did he comment much on Charter's proposed acquisition of Bright House Networks except to say that the agreement requires negotiation "in good faith" upon termination of the Comcast transactions. (Reuters was reporting at the time of our deadline that Bright House may be leaning toward remaining independent.)

What Rutledge did say in his earnings call is that in the coming months, Charter will launch its new cloud-based user interface, Spectrum Guide, in markets like Reno, NV, and St. Louis, increase the number of on-demand titles available for viewing via set-top box or app by a factor of three, and continue rollout of Worldbox, which is a set-top with a downloadable security infrastructure. While Charter could feasibly buy these from any world vendor, the company has done deals with Cisco (NASDAQ:CSCO) and ARRIS (NASDAQ:ARRS), among others, to build and deploy the boxes.

Rutledge also said that while Charter believes most consumers want full-feature video products, the company has been considering ways to provide "compelling services and packages" at lower prices and with a lower content cost structure. These would include direct-to-consumer services, where the viewer has a direct relationship with the content owner, and could theoretically be sold inside or outside Charter's footprint.

"We haven't found this product mix yet, and we don't think anyone else has, either," Rutledge said.

Marcus highlighted TWC's fivefold increase in VOD capacity, the addition of TWC TV to the Xbox One platform, 55% more WiFi visits in March than a year ago, and the installation of 2.4 million new modems, set-top boxes, and digital adapters during the quarter. As for TWC Maxx, rollout is complete in New York City, Los Angeles, and Austin. Dallas, San Antonio and Kansas City are in progress, and Charlotte, Raleigh, San Diego and Hawaii are scheduled for later this year.

When asked about the concept of a set-top box-less video product, Marcus noted that TWC has focused on making its video product available on multiple platforms and said that over time more customers will not need to lease a set-top box. "(However,) there tends to be, in my opinion, an obsessive interest in millennials," he said. "I would tell you that for most of our customers, the vast majority of our customers, the way we currently deliver the video product is pretty darn attractive."

Michael Angelakis, Comcast vice chairman and CFO, said X1 net adds more than doubled compared to the year-ago first quarter and represented almost half of video connects. Voluntary churn rates are 20% to 30% lower and VOD buy rates 20% to 30% higher for X1 customers.

James Dolan, CEO of Cablevision (NYSE:CVC), which also released first quarter results, said the company remains focused on becoming New York's "premier connectivity company." "Today's digital consumer expects to be connected all the time on all devices wherever they are. And Cablevision's path for continued success is to stay ahead of these changes."

In line with this goal, Dolan showcased Freewheel, the WiFi-only phone service Cablevision launched in February; the availability of HBO NOW through the Internet to Cablevision's high-speed data customers; the distribution of Hulu to customers; and "cord cutter" packages providing alternatives for accessing video through the Internet and the inclusion of a digital over-the-air antenna.

Kristin Dolan, Cablevision COO and director, commented that weekly orders for Freewheel are increasing, with users making and receiving more than 20 calls per week and sending and receiving more than 70 text messages. She also said the company's data and analytics service, which is providing "census-level set-top box data" has been a positive for the company.

"We have been pretty vocal in our discussion about the fact that current audience-based measurement is broken," she said. "We have other MSOs who are securing the same type of data as we are, so we're looking at opportunities to hopefully change the commerce in advertising sales to something that's better for the customer and better for the advertiser."

(Thanks to for providing transcripts of the earnings calls.)

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