Time Warner Cable Sell Lower-Priced Video Tier

Time Warner Cable said it will soon introduce a low-cost, smaller package of TV channels. The “budget-oriented video offering” is “consistent with our belief that some customers would like a smaller package,” CEO Glenn Britt told analysts Thursday after the company reported Q3 financial results. Cablevision executives endorsed the idea but said it would be difficult to implement given the preferred regulatory treatment TV stations enjoy among all sources of cable content.

Time Warner Cable has sought flexibility from content providers so it can serve the “segment of our economy or our population that is under economic duress,” Britt said. Programmers have been reluctant to let their networks be moved to smaller tiers because their costs are fixed, he said. The cable operator is in talks with “all sorts of people,” about gaining more flexibility in the products it can sell, Britt said. “We're probably not all the way where we'd like to be, but we're moving in the right direction."

It’s a great idea if it can be implemented, said Tom Rutledge, Cablevision chief operating officer. “But it is difficult to do with marquee programming because contractually, powerful programmers don’t want to be relegated to smaller tiers.” Because cable operators must provide local TV stations in their basic cable service offering, and since “in cable, you have to buy through basic before you can buy any other product,” operators may be limited in their flexibility to offer lower-cost tiers, Rutledge said. Those facts give “broadcasting a more powerful regulatory position than any other kind of programming,” he said.

New CE devices may soon let cable operators stop buying expensive equipment to put in subscribers’ homes, executives said. “The world we're going to is one where these devices will become more intelligent and more easily networked,” eliminating the need for set-top boxes in some cases, Britt said. More functionality that’s now handled by devices may move back into the network, he said. That’s soon to be the case for Cablevision subscribers. The company plans to begin rolling out its network DVR product this quarter, Rutledge said.

The downloadable security Cablevision has been testing in set-top boxes will also lower the amount of money it spends on the boxes, Rutledge said. Over the long term, it will stop deploying boxes with CableCARDs and instead use its downloadable security solution, he said. “These boxes are a lot less expensive than the traditional boxes we buy.” Cablevision wants to offer more programming to subscribers online that can be viewed out of the home, but it doesn’t have the rights to do that yet, Rutledge said: “Providing mobile services, on different platforms is a different rights structure” than what cable operators currently have.

Time Warner Cable is working to let subscribers watch programming on more devices in their homes, where the rights are less complicated, said Landel Hobbs, chief operating officer. “We're working on infrastructure that could enable our customers to enjoy our entire video product on any IP-connected device in the home.”

Time Warner Cable lost 155,000 video subscribers during the quarter, for a total of 12.7 million, but added 95,000 residential broadband for 9.3 million total. It added another 9,000 broadband and 12,000 phone subscribers that are small or medium-sized businesses. Cablevision also lost video subscribers during the quarter, with 24,500 cancelling service, for a total of more than 3 million. It added 9,600 broadband customers for 2.4 million total. Both companies added phone customers. TWC said it will buy back up to $4 billion in stock. Its shares gained 4.5 percent Thursday.