Cable Offerings not Unbundling Anytime Soon, Charter's Rutledge Says

The cable TV bundle isn't going away anytime soon, and programmers diving into over-the-top self-distribution may ultimately be hurting themselves, Charter Communications CEO Tom Rutledge said Tuesday. While the traditional cable bundle model may have peaked, "My sense is it is not about to all fall apart, and we will be having this same conversation three years from now," Rutledge said during an earnings conference call.

While Charter would be interested in being able to create specific content packages aimed at specific demographics or clusters, perhaps as a means of creating skinnier, cheaper bundles, the big bundle "is very efficient from a revenue and advertising standpoint" and there are few incentives to pull that bundle apart, Rutledge said. "If we had our druthers, we would buy all our content a la carte and make up packages," but content isn't available that way, he said. As some programmers are now offering a la carte direct to consumers through online video distribution (OVD), "They lower their value to us, which is ultimately good for our cost structure," Rutledge said. Such OVD moves seeking ancillary revenue "have devalued their product," Rutledge said, with the end result being they "may or may not be carried by us in the future."

When asked about potential FCC conditions on Charter's planned buys of Bright House Networks and Time Warner Cable, especially in light of those that were imposed on AT&T/DirecTV, Rutledge said Charter was "comfortable -- having seen it -- with our own process before the FCC." In a note Tuesday, analyst Craig Moffett of MoffettNathanson said the firm's previous confidence that Charter/TWC/BHN would get FCC approval might have been too conservative. "The deal has drawn none of the outrage and distrust engendered by Comcast's prior acquisition attempt," Moffett wrote. "Public interest groups have yawned or, at worst, expressed mild distaste" at consolidation in general as opposed to anything specifically regarding Charter. Charter/TWC/BHN could close as early as December, Moffett wrote.

The deal will give TWC and BHN customers access to Worldbox, Charter's downloadable set-top box, Rutledge said. Charter's first Worldboxes, using downloadable security, were deployed in April, as the company "continues to ramp up" further deployments, the company said in a filing in FCC docket 97-80 posted Monday. The cable company's talks with a consumer electronics manufacturer about downloadable security issues for a retail set-top box are heading toward finalization, Charter said, and once those are hammered out, the operator said it expected to continue the now two-year-old discussions. The set-top box filing is one of several done periodically by cable companies on CableCARD deployment and related set-top box issues.

Such individual CableCARDs remain relatively rare, as a compilation of CableCARD reports collected by NCTA and posted Friday in docket 97-80 show. The nine largest cable operators have deployed about 617,000 CableCARDs for use in retail devices, with about 56 percent by Comcast, NCTA said. That compares with more than 53 million operator-supplied set-top boxes deployed with CableCARDs in them, according to NCTA. Charter has deployed more than 5.5 million CableCARD-enabled set-top boxes, plus roughly 55,000 individual CableCARDs deployed for use in retail devices.

AT&T's rolling out of an array of broadband/video/wireless products this week -- days after getting FCC approval for the DirecTV acquisition (see 1508030030) -- points to a possible direction for Charter, Rutledge said. "There are [wireless] business opportunities ... for us, whether with T-Mobile or any other provider," he said in response to a question about Charter partnering with a wireless company such as T-Mobile. However, wireless already is part of Charter's business in the form of smartphone traffic over its Wi-Fi network, Rutledge said.