Cable Operators

Charter Growth Plan Gains Steam Before Lovett Leaves It

1/09/2012 12:01 AM Eastern

Charter’s four-point plan for growth is in
full gear, with initiatives to upgrade plant, improve customer
service and drive broadband and commercial services
all gaining steam — and that’s before the new CEO
steps in.

Th at was the assessment from Charter Communications
CEO Mike Lovett at the Citigroup Media & Entertainment
conference in San Francisco Jan. 4. Lovett had
agreed in October to step down from Charter by April after
eight years with the St. Louis-based MSO. Last month,
Charter announced it had hired former Cablevision Systems
chief operating officer Tom Rutledge.

Lovett said Charter has already laid the ground work
for additional growth — its switched-digital-video upgrade
is essentially complete, and its plan to roll out
TiVo set-top boxes, with a superior user interface, is on
schedule for later this year.

While those two initiatives have been well-known to
Charter watchers over the past several quarters — Lovett
said the TiVo user interface could be a game-changer for
Charter — he also pointed to other strategies to increase
penetration across the footprint, including usage-based
pricing for lower-tier broadband users.

Usage-based pricing has been a hot-button issue in the
industry for several years, but mainly when it concerned
charging higher fees for heavy users of bandwidth. Lovett
said there could be an opportunity for Charter to attract
less intense surfers of the Internet with pricing more in
line with their activity.

“There is an opportunity to look at the ‘lite’ users currently
on either dial-up or DSL who feel like they don’t
need real access to true broadband,” Lovett said. “I think
there is a way to provide to them — this is something we
are exploring, but we’re not in the process of deploying
or even piloting at this stage — usage-based pricing on
a low-end tier and allowing people to have access to real
broadband speeds but without the fear that they are being
overpriced.”

Lovett added that many elderly customers feel they need
the Internet for email but little else. With a more economical
broadband package, Lovett said,
Charter could open up that segment
to other uses for online access.

Charter has also gained ground in
other areas. A longstanding plan to
improve customer service is showing
positive results — Lovett said
Forrester Research has singled out
Charter as having the highest level
of improvement among North American
service providers regarding
customer service. However, Lovett
cautioned that there is still much
room for improvement.

On the acquisitions front, Charter has focused mainly on
buying small tuck-in systems to complement its existing
clusters. Lovett said that will remain the case — he expects
the MSO to remain aggressive, particularly as programming
costs continue to rise. But he said the industry may
have another
year of significant
consolidat
ion ahead
of it.

“ It seems
to me that it
would be logical
for another
round of significant
consolidation
to get
those geographies
rationalized,”
he said.
“The challenge
w ith swaps
these days is
that they have
become much
more complex
because of the
multiple products,
the value
of one property
over the other as opposed to what it was when it was
simply video.”

Lovett hinted that, operationally, the fourth quarter
should be an improvement. Overall, Primary Service Units
(a combination of basic video, high-speed Internet and
phone customers) were positive in the period, the MSO
doubled its net gain in broadband customers compared
to the fourth quarter of 2010, and phone growth was about
the same as in the prior year.

In the fourth quarter of 2010, Charter gained about
32,700 high-speed Internet customers and 31,400 phone
customers.

“2012 is really a first-half, second-half story,” Lovett said.
“First half is hit the gas and move the volume, make the
investment; the second half is you start to catch the tailwind
associated with those investments and that success.”

Charter still lags its MSO peers in practically every penetration
metric — it had 35% video, 29.5% high-speed data
and 16.3% phone penetration as of Sept. 30. But to Lovett,
that appears to mean there is ample room for improvement.

“This is the year that Charter gets to play offense in a
way that it hasn’t historically,” he said. “I think we have
really set the stage with all the strategic investments and
priorities we have put in place over the last few years to really
go on an offensive play.”

September