TWC Unsurprised by Charter's No-Usage-Based Pricing Approach
That Charter Communications would end Time Warner Cable's paid peering and usage-based pricing policies came as little surprise to TWC and won't be a major broadband business disruption, TWC CEO Robert Marcus said Thursday. "Different companies have different philosophies," he said during a conference call on quarterly earnings. Charter earlier said it would extend its settlement-free interconnection policy to Bright House Networks and TWC once it bought the two (see 1507160021), following Charter's public interest statement in the merger that pledged broadband without data caps or usage-based pricing (see 1506250039).
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TWC has had usage-based pricing in certain tiers for a while, though the impetus was "customer segmentation" -- offering cheaper tiers to customers with low bandwidth usage -- rather than trying to limit over-the-top (OTT) video watching or "discouraging customers from using other people's video product," Marcus said. TWC "has been completely committed to delivering an unlimited broadband offering" and never intended to substitute unlimited with only usage-based offerings as almost all TWC broadband customers are on unlimited plans, Marcus said, saying he was "not surprised" that Charter will forego any usage-based pricing.
Its mix of settlement-free and paid peering relationships have not been a revenue-generating line of business ensuring "an alignment of interest between us and the counter party in how efficiently we utilize available capacity," Marcus said. Charter's avowed policy of settlement-free peering eliminates what could have been one source of opposition to the Charter/BHN/TWC deal, making it helpful "for getting our deal done, so we are pleased with it," Marcus said.
When asked about the effect of programmers increasingly offering their own OTT services, Marcus said OTT "highlights the value of the high-speed data offering that we deliver, we think, better than anyone else." Cable can compete with OTT through its quality, Marcus said: "The breadth of content is far better than anything delivered over the top. Quality of picture is better. Availability of on-demand choice is better." The only problem would come if OTT operators start offering direct pricing less than what cable operators can buy wholesale or better packaging flexibility, he said. "We'll have to see how it plays out," he said.
The Media Bureau issued a public notice Monday that it officially accepted for filing the joint Charter/BHN/TWC applications for change of control of licenses (see 1507270049), which is the first formal step in the FCC regulatory process. TWC is responding to a second Department of Justice request for information, and all the applications for transfers of licenses have been filed with the proper state and local regulators, Marcus said. He didn't discuss conditions the FCC might impose on the merger.
The financial results for Q2 "should go a long way towards easing the anxieties of Charter shareholders who worry that Charter overpaid," Craig Moffett of MoffettNathanson said in an analyst's note Thursday. Results included: a drop in residential video subscriber declines to 45,000 for the quarter from 147,000 the same quarter a year earlier and the smallest second-quarter drop since 2008; 172,000 additional residential high-speed data customers, also TWC's best-second quarter since 2008; and 252,000 additional voice customers as TWC re-emphasizes its triple play packages, Moffett wrote.