Charter Thinks of Itself as an ISP First
Charter Communications’ informal company mantra is to think of itself as an ISP, CEO Michael Lovett said during the company’s Q3 earnings call Tuesday. “We're leading with that strength, but it supports the video business and other products and services over time,” Lovett said. He said cable operators have an advantage over phone company DSL products when it comes to residential broadband. And the company is marketing its phone and broadband products more heavily than its video product, he said. For instance, it’s trialing a program with Dish where both companies are marketing Dish video service and Charter phone and broadband service to existing Dish customers and to households neither company serves.
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"Certainly, the video business has its challenges, but we're not abandoning it by any means,” Lovett said. Another step toward that broadband-centric strategy was taken Tuesday as the company overhauled its Charter.net online video portal to include content from its own library as well as Netflix, Amazon and Hulu, said Don Detampel, Charter executive vice president-technology. Eventually Charter hopes to bring that kind of integration to the TV set, and its work partnering with TiVo “really gives us a jump start,” Detampel said. But for now, Charter doesn’t have all the right things it needs to “blend” all the over-the-top video and linear cable programming the way it would like to, he said. “Clearly, that’s what consumers are demanding,” he said.
Charter is also looking to leapfrog the conversion of its video plant to “all digital,” a move many of its peers in the industry have undertaken, and focus more on taking its systems “all-IP,” Detampel said. “TiVo starts us on the path to that, as will our next generation gateway product which we will start trialing next year,” he said. Charter is evaluating the opportunity to go all-digital, Lovett said: “Whether or not we deploy it, we haven’t made a determination yet.” And the investments Charter is making in its cell backhaul facilities may also help other areas of its business down the line, Detampel said. For instance, it’s building fiber capacity to towers that also happen to be near local businesses it might sell telecom services to, said Detampel, who also runs Charter’s business services unit.
Charter will have to keep spending to maintain its broadband network, both on the hybrid fiber-coax side and deeper aspects of its network, Detampel said. “Even though we have a very robust coax plant out to all these residential and commercial customers, we know we'll have to do node splits and increase capacity to keep up with demand,” he said. “As we look to the future, there would continue to be fairly significant investments, but not in excess of what we're doing today,” he said. But every time Charter is forced to spend more on broadband infrastructure, that’s a good thing for the company, said Chief Financial Officer Christopher Whitney: “It’s something we debate inside the company quite a bit, but to the extent that subscriber demand is driving us to spend on” cable modem termination systems or node splits, “that’s great."
Charter lost 79,900 video subscribers during the quarter but added 18,500 broadband and 6,600 phone subscribers, it said. Plus it added another 6,600 commercial service lines, it said. Video results and broadband results were slightly better than expected, though phone results came in below estimates, said Stefan Anninger, an analyst for Credit Suisse. Q3 sales at Charter gained 2.2 percent from a year earlier to $1.79 billion. Its net loss widened 30 percent from a year earlier to $107 million due to a $19 million loss on some debt extinguishment and higher interest costs, it said.