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Charter Spectrum CEO Says Company Using Tax Breaks to Buy Back Its Own Stock

Phillip Dampier December 5, 2018 Broadband Speed, Charter Spectrum, Competition, Consumer News 4 Comments

Rutledge

Charter Communications is using the benefits of the Republican-promoted tax cut to buy back its own stock, because the only other option under consideration was using the money to buy up other cable operators.

“From a [mergers and acquisitions] perspective, I think cable is a great business. If there were assets for sale that we could do more of, we would do that,” said Charter Communications CEO Thomas Rutledge at this week’s UBS Global Media & Communications Conference. “We’ve been buying a lot of our own stock back. Why? Because we think the cable business is a great business and we haven’t been able to buy other cable assets.”

Charter is not using the company’s lower tax rate to benefit Spectrum customers with lower bills or more extravagant upgrades. Instead, it is accelerating efforts to please shareholders and executives with efforts to boost its share price — something key to top executives’ performance bonuses.

With digital and broadband upgrades nearly complete in areas formerly served by Time Warner Cable and Bright House Networks — the cable companies Charter acquired in 2016 — Rutledge told investors he can initiate additional upgrades without spending huge sums on infrastructure buildouts.

Gigabit speed is now available in most markets, and the company has doubled its lowest internet download speeds in areas where it faces significant competition from AT&T from 100 to 200 Mbps, boosting sales of Spectrum broadband service, according to Rutledge.

Today, about 60% of Spectrum customers are offered 100 Mbps, while the other 40% — mostly in AT&T service areas — are getting 200 Mbps.

Rutledge told investors he does not see much threat from Verizon FiOS or its newly launched 5G offerings, and has no immediate plans to upgrade service in Verizon service areas because neither offering seems that compelling.

“I saw that Verizon had some passings that they could do 800 Mbps in,” Rutledge said. “We have 51 million passings that we can do 1 gigabit in and we can go to 10 gigabits relatively inexpensively and I think we will because I think the world will go to 10 gigabits.”

Analysts are uncertain whether Rutledge’s comments are naïve or brave.

“We see 5G fixed wireless broadband [like that offered by Verizon] as the largest existential threat to broadband providers, by far,” wrote analysts at Cowen. Until now, most broadband competition for cable operators came from phone companies pitching DSL. Verizon retrenched on its FiOS offering several years ago. But AT&T has been more aggressive upgrading urban areas to fiber service, which has forced Charter to respond with higher speeds and better promotions.

Rutledge does not see Verizon’s 5G being a significant competitive threat for several years, and suspects Wall Street may once again punish Verizon for spending money on a wireless network less capable than what the cable industry offers today. Shareholders may also dislike watching Verizon distracted by the home broadband market when portable wireless revenues are much more important to the company.

Verizon officials claim about half of those signing up for its 5G service plan were not current Verizon customers. But the company would not say whether their new fixed wireless customers were coming largely from cable or DSL disconnects, which would prove marketplace disruption.

Currently there are 4 comments on this Article:

  1. Dylan says:

    While I don’t really mind these tax cuts being used for the purpose of buying back shares, which you kind have to as one of these companies, I do wish that I could see the 200 meg upgrade come soon to non competitive markets. I do understand why 40 percent of areas do have it while the other 60 does not (competition) but I wish they would just extend it to everyone. It would not really add any cost to Charter. I do appreciate though all the upgrades Charter has done. As long as upgrades are happening, and service stays great, I have no problem if the company wants to please shareholders more, though not at the expense every time of the customer. Hopefully the next upgrades will involve the upload because that is very much needed. Though that won’t be nearly as straight forward and easy as Docsis 3.1 was.

  2. Gary says:

    Spectrums service is horrific . Look at all the complaints on their Facebook page. Omg . I think they are giving mega bit speed. Not mega bite speed. Big difference.
    And they cant pay their workers the contracted health benefits and pension plan . While last year SPECTRUM CEO made 99 million.
    I think I’ll pass and this “service”.

  3. EJ says:

    How about investing in some CAPEX. Identify and fix problem areas. O wait Spectrum don’t need to do that. If I had to guess my bottom dollar I would bet they have connection issues and the like in areas where they have no real competitors. Areas with real competitors are maintained and competitive. REGULATE, REGULATE and enforce monopoly rules and/or strengthen monopoly rules. This is the only thing that will fix these type of companies. until competition is real we can’t just think a company is going to do the right thing for it customers.

  4. Ian S Littman says:

    Are you in an area that can even get Spectrum service?

    Because in areas where they actually have to compete, they’re actually pretty decent now. Yes, they got gigabit significantly later than a lot of Comcast markets, but I’ve had gigabit for a year now and it works fine. No caps or modem charges either. Would I jump at something better? Yes. Was having to fight them for months to get service installed in my new place annoying? Yes. Has the service been reliable since installed? Also yes.







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  • Steve: As more people opt out of cable TV for Sling TV and the like (which requires internet), Spectrum will continue to raise their rates on the internet po...
  • Andy: They hiked the legacy ELP internet from 19.99 to 24.99 in november 2018. It used to be 14.99. The only reason these Charter spectrum effin ass holes a...
  • Frank D: Second Spectrum $20 price hike within a year. Signed up as $99/mo with time warner cable triple bundle. That became $130/mo after promo ended. Earli...
  • Dylan: Look at their prices. Absolutely ludicrous compared to many companies, especially Charter Spectrum. I pay $60 a month for 100/10 with unlimited data. ...
  • Paul Houle: For a long time communities have been frustrated in that they don't have any power to negotiate with cable companies. This town refused to enter into...
  • Ian S Littman: To be fair, you aren't wrong. Spectrum likely knows it won't have any competition for years in Lamar, so they'll quickly get take rates of >70% (re...
  • Ian S Littman: Are you in an area that can even get Spectrum service? Because in areas where they actually have to compete, they're actually pretty decent now. Yes,...
  • Ian S Littman: A more odd entry in that list is Chattanooga. The entire area has FTTH via EPB. Yet apparently folks can't swing the $57/mo starting price for 100 Mbp...
  • Ian S Littman: The issue here is that the NY PSC's threats have no teeth because, well, who will take over the cable systems if Spectrum is forced to sell? Either Al...
  • Bill Callahan: Phil, National Digital Inclusion Alliance just published interactive Census tract maps for the entire US based on the same ACS data. Two datapoints a...
  • Carl Moore: The idiots that run the cable companies must be also using drugs...a lot of people are cutting their cable services because of the higher rate and inc...
  • EJ: This will require a New Deal approach. Municipals need the ability to either be granted money or loaned money for broadband expansion. Until this is d...

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