Spectrum markets where gigabit speed is already available.

Charter Communications is accelerating the deployment of the next generation cable broadband standard DOCSIS 3.1 so that it can offer almost every customer gigabit download speed by the end of this year.

“We plan to be 1 Gbps everywhere and marketing 1 Gbps everywhere this year, which is [also includes] taking up a significant portion of our business to minimum speeds of 200 Mbps at the same price we were charging for 60 Mbps a year ago,” said Thomas Rutledge, CEO of Charter Communications, on a Feb. 2 investor conference call. “And we plan to do that as quickly as we can, but because of the all-digital rollout and some of the other operational issues we have, we haven’t fully planned out [200 Mbps speed for] the whole country yet.”

Charter’s biggest challenge is expected to be swapping legacy modems inadequate for the task of delivering 200 Mbps and higher speeds to residential customers. Many Charter customers are still using modems originally provided by Time Warner Cable and Bright House Networks, generally considered adequate for supporting top speeds only between 50-100 Mbps. But Charter is planning to offer faster internet speeds to position itself as a viable broadband competitor in markets where fiber competitors have poached subscribers and the future threat of 5G speeds up to 1 Gbps are on the horizon. That could require a substantial modem exchange program, especially in cities that were never upgraded to Time Warner Cable Maxx before Charter acquired Time Warner Cable.

Charter’s migration for Time Warner Cable/Bright House customers continues, while Charter Legacy markets stall

In 2017, Charter intentionally focused most of its time and money integrating its acquired Time Warner Cable and Bright House Networks customers into Charter’s billing, provisioning, service, and retention systems. This came, Rutledge admitted, at the expense of long-time Charter customers who saw new product launches and upgrades delayed because of the ongoing integration effort.

It will take until 2019 to fully integrate all of Charter’s customers onto a single platform that will no longer distinguish if a customer was a long-standing Charter customer or a former TWC or BH subscriber.

Customers willing to abandon their legacy Time Warner Cable or Bright House plans in favor of a Spectrum plan are also dragging their feet. As of the end of 2017, 51% of TWC and Bright House customers were still sticking with their original plan, refusing to switch to Spectrum pricing and packaging. As customers face Spectrum’s new plans, some are canceling service. Time Warner Cable residential video customers dropped by 2.5% over 2017. Charter Legacy customers dropped by 1%, while legacy Bright House customers declined by 0.5%.

Legacy Charter areas saw subscribers running out of patience. The company lost 10,000 video customers in the last quarter versus a gain of 20,000 customers a year ago. Company officials blame the complications associated with absorbing millions of acquired customers for the results.

“In 2016 and 2017, we delayed a number of new product launches through the integration, particularly at legacy Charter within our fundamental structured operating model and business rules now in place, we will more aggressively launch new products nationwide,” said Rutledge.

Charter is also spending a considerable amount of its financial resources buying back its stock. During the fourth quarter, Charter accelerated its buyback program repurchasing 13.5 million shares in Charter Holdings stock totaling $4.7 billion at an average price of $347 per share. For all of 2017, Charter bought back $13.2 billion worth of its own stock.

Digital television conversions drag on…

Charter did not restart its digital television conversion program until June of 2017, and 30% of Time Warner Cable and 50% of Bright House Networks customers are still watching analog cable television as a result. Company officials promise digital conversion will be completed nationwide by the end of this year, the first step the company will take to make dramatic broadband speed increases possible.

“Our video products in those markets will improve,” Rutledge said. “Internet speeds will increase further and all-digital will drive more efficient operations in the field including electronic disconnects, self-installation and a reduction of unauthorized connections.”

Among the most significant improvements is the introduction of the Worldbox set-top box, which will be available nationwide by the end of 2018, but generally only to new video customers. The new box runs faster and is less expensive than the traditional set-top box, and better integrates on-demand and streaming video services.

Worldbox will also highlight Spectrum’s new Spectrum Guide, an improved on-screen program guide and content portal. The new guide will also include support for third-party streaming services like Netflix.

Charter has also begun to deploy an improved Wi-Fi router known as Wave 2, which claims to offer faster speeds and better signals throughout a customer’s home. Availability is reportedly spotty, but improving.

Hulu has picked up an additional five million customers since the streaming service last reported subscriber numbers in May 2016 — an increase of 42 percent.

That gives the streaming service more than 17 million paid subscribers, with a potential shared household audience of 54 million.

Hulu’s growth is attributed to a dramatic increase in its catalog of television series, original productions, and movies. When the service launched, it primarily showcased selections of recent episodes from current network shows aired by Hulu’s owners — Walt Disney Co. (ABC), Comcast Corp. (NBC), 21st Century Fox Inc. (FOX), and Time Warner Inc., and a handfuls of seasons of older series no longer airing on network television, many originally running on CBS.

Hulu has gradually shifted away from a free, ad-supported streaming service to a paid subscription model offering subscription options for limited or no commercials. As Hulu’s content library grew and the service offered a more complete library of series, it has also picked up subscribers. Much of its recent growth has come from attracting new subscribers seeking Hulu’s new original shows and a deep catalog of older series from the United States and United Kingdom. Hulu also improved its movie catalog with a larger selection of popular movie titles, some relatively recent.

In 2017, Hulu introduced a cable television replacement service offering live and on-demand programming from a wide selection of cable networks and a significant number of local network affiliates. Today, Hulu offers more than 75,000 episodes of 1,700 different television shows and features — more than double than any of its competitors.

But Hulu still has significant room to grow to reach Netflix, which has more than 109 million customers worldwide, including 52.8 million in the U.S., as of the end of September.

Altice customers woke up on New Year’s Day to discover as many as 17 Starz and Encore premium movie channels missing from their lineup, replaced with little-watched alternative networks like The Cowboy Channel and Hallmark Drama.

It is the first retransmission consent dispute of 2018, and it began as 2017 ended. Altice issued a terse statement:

As of midnight December 31, 2017, Altice USA will no longer carry Starz or StarzEncore programming directly. Despite numerous attempts by Altice USA to reach a deal with Starz for continued carriage in video packages and a la carte carriage, Starz refused all offers, including an offer to extend our current arrangement.

Customers will not get a discount on their cable bill because of the loss of the premium movie networks. Instead, Altice quickly signed carriage agreements with several replacement basic cable networks including Hallmark Drama, Sony Movies, MGM HD, HD Net Movies, Flix, and Cowboy Channel. The last network on the list seemed an odd choice for the New York City market, featuring rodeos and rural living-oriented programming. Some customers were also placated with a replacement subscription to The Movie Channel.

Customers don’t consider the six replacements adequate for the loss of more than a dozen premium-priced movie channels, including STARZ, STARZ Edge, STARZ In Black, STARZ Comedy, STARZ Cinema, STARZ Kids & Family, STARZENCORE, STARZENCORE Action, STARZENCORE Classic, STARZENCORE Black, STARZENCORE Family, STARZENCORE Suspense, STARZENCORE Westerns, STARZENCORE Español and Movie Plex channels, and some plan to downgrade or cancel service.

Removing 17 channels and replacing them with 4, one of which is the cowboy channel is the stupidest thing I have ever heard. My bill is more than 200.00 per month, and the value for the money is definitely not worth it. Optimum is just plain greedy.

— Mary Anne Suttles (@Stormcloud2000) January 2, 2018

Altice has played hardball with programmers in the past, especially those that direct-sell their programming to consumers through online streaming. In follow-up remarks, Altice essentially told customers to go and buy Starz directly from Starz itself, and took a shot at the network claiming most of their customers don’t watch their movie channels anyway.

“We are focused on providing the best content experience for our customers and continually evaluate which channels meet their needs and preferences relative to the cost of the programming imposed by content owners,” Altice officials said in a statement. “Given that Starz is available to all consumers directly through Starz’ own over-the-top streaming service, we don’t believe it makes sense to charge all of our customers for Starz programming, particularly when their viewership is declining and the majority of our customers don’t watch Starz. We believe it is in the best interest of all our customers to replace Starz and StarzEncore programming with alternative entertainment channels that will provide a robust content experience at a great value.”

Altice did expand on what it felt were unfair terms being offered to it while consumers could get the same movies and original series for less money elsewhere:

“Since our last contract renewal, Starz began offering a direct to consumer streaming service for $8.99 per month. Given that Starz is available direct to consumer through their subscription service, we have been actively negotiating to reach a deal that makes sense for all our customers, and made numerous offers of increasing value and partnership structures.

Starz wanted an all or nothing-type deal and their insistence on terms would force us to charge customers more than what the Starz OTT product costs — that would not make sense for our customers. Given the limited viewership of Starz amongst our customer base and that consumers can get Starz directly, we believe this approach is in the best interest of all of our customers who otherwise would have seen an impact on prices due to Starz’ demands.

We have simply been seeking to do what Starz itself is doing: support a Starz a la carte product, whether through our sales channels or through their OTT service.

We have reached more than two dozen agreements over the last few months that reflect the company’s commitment to both negotiate fairly and keep costs down for customers. In addition to offers to maintain packaged distribution, we proposed extending our a la carte deal in Suddenlink to include Optimum and Starz refused – this despite the fact that Starz has a la carte only deals with other distributors. We also offered to help sell the Starz OTT service to our broadband customers and they refused. We also offered to extend our current agreements.”

Analysts say it is very uncommon for a cable company to encourage its customers to directly subscribe to a service traditionally sold by the cable operator itself. Altice sought to drive home their view that selling cable programming direct-to-consumers devalues the product for cable operators, especially if the programmer sells it directly to consumers at a lower retail price than a cable operator can can buy at the wholesale rate.

“Despite all of Altice’s assertions to the contrary, the facts in this dispute are simple. Altice wanted a drastic reduction in price that was totally inconsistent with the market and flew in the face of the record popularity of our programming,” Starz said in a statement that did not refute Altice’s cost claims.

Starz offers a 7-day free trial of its streaming app, which offers on-demand access to most titles found on Starz or Encore networks. After the free trial, the service is available for $8.99 a month or $89.99 a year, which offers a 17% discount off the monthly price. The website offers more information about supported devices and streaming policies.

Charter Communications CEO Thomas Rutledge is fed up with customers sharing their passwords to unlock television streaming services for non-subscribing friends and family and promises to lead an industry-wide crackdown on the practice in 2018.

“There’s lots of extra streams, there’s lots of extra passwords, there’s lots of people who could get free service,” Rutledge said at an industry conference this month.

Password sharing used to be limited to services like Netflix, HBO, Showtime and Hulu, but since the cable industry opened up its “authenticated” TV Everywhere services to viewing outside of the home, unauthorized viewing by non-subscribers has allegedly exploded.

Three typical tweets exemplify the problem for Rutledge. One sought to trade for a Spectrum user ID and password, another thanked a friend for sharing their Spectrum TV user credentials to unlock a channel showing the World Series. A third delighted in the fact he managed to hack his parent’s Spectrum account password and now watches cable television for free.

Rutledge complained that password sharing is now so rampant, one unnamed network authorized 30,000 simultaneous streams using a single customer’s login credentials.

Rutledge believes many non-paying customers are now enjoying Spectrum TV and other services as a result of the practice. Shareholders and Wall Street analysts are also concerned, particularly as cord-cutting continues to take a toll on cable TV subscriber numbers and revenue.

Rutledge

Bloomberg News reports there is divergent thinking about password sharing and how serious it actually is. Top executives at Time Warner, Inc., which owns HBO and Turner Broadcasting, have shrugged about password sharing in the past, believing it is a good way to introduce potential customers to their services and eventually become paying subscribers.

Password sharing “is still relatively small and we are seeing no economic impact on our business,” said Jeff Cusson, a spokesman for HBO.

But anecdotal evidence at networks like ESPN, owned by Walt Disney Co., suggests millennials have no moral dilemma routinely sharing their passwords, even with strangers. At one focus group targeting younger sports fans, all 50 participants raised their hands when asked if they shared passwords, according to a fuming Justin Connolly, executive vice president for affiliate sales and marketing at ESPN.

“It’s piracy,” Connolly said. “It’s people consuming something they haven’t paid for. The more the practice is viewed with a shrug, the more it creates a dynamic where people believe it’s acceptable. And it’s not.”

The TV Everywhere “authenticated subscriber” concept has traditionally required pay television customers to re-enter their username and password for each authorized device at least once each year, although some cable operators require subscribers to re-enter their credentials monthly, and actively discontinue access as quickly as possible when a customer downgrades or cancels their cable television service.

Many cable providers offer their own live streaming apps and on-demand streaming service showcasing the cable TV lineup for in-home and out of home viewing on desktops, tablets, and portable devices. Some limit the number of channels that can be viewed outside of the home and do not allow multiple users to concurrently stream programming. But most cable TV networks that support authentication do not limit concurrent streams or offer generous limits on how many services can be streamed at the same time over a single account.

(Source: Consumer Reports)

Charter is now taking the lead on demanding cable TV network owners tighten up their apps and online viewing to limit password sharing. Some of the toughest negotiations took place this past fall between Charter and Viacom, owner of Comedy Central, MTV, and Nickelodeon. Viacom pushed hard for Charter to restore its basic cable networks to Spectrum’s entry-level “Select” cable television package. In 2016, many Viacom networks were pushed to the much more expensive Gold package, which meant significant losses in audience as Time Warner Cable and Bright House customers switched to Spectrum’s TV plans. Time Warner Cable included Viacom-owned networks in all the company’s popular TV tiers, but most customers lost access to those networks when they switched to a Spectrum TV plan.

Viacom successfully negotiated the transition of its networks back to the Select TV plan beginning in late January, 2018. But those networks’ online viewing platforms and apps will now include stream limitations to keep simultaneous viewing and password sharing to a minimum.

ESPN, which has been dropped from the lineup in a number of slimmed-down cable TV packages, has also experienced plenty of password sharing, and has begun limiting the number of simultaneous streams allowed per customer. Originally, one account could launch 10 concurrent streams. That number has now been cut in half to five and the sports network is currently considering further reducing the stream limit to three simultaneous sessions.

One research group, Park Associates, estimates almost one-third of internet-only customers are streaming cable television networks and programming using someone else’s subscriber credentials. They estimate the cable TV industry will lose $3.5 billion from unauthorized viewing this year, rising to $9.9 billion by 2021.

Companies like Adobe Systems have begun selling services to cable TV providers that track the use of usernames and passwords and the location of those accessing online streams. They suggest cord-cutting is fueling unauthorized viewing as customers seek access to cable programming for free.

Much of the password sharing seems to be occurring among friends and relatives, especially children away from home. For now, most cable TV executives are fine with in-family sharing. What concerns most is when those passwords are further shared with friends or sold to strangers. It is uncertain if customers are always aware that their user credentials are being sold or traded by third parties. When an account that saw no streaming activity before suddenly generates 50 simultaneous streams in multiple states, hacking by an unknown party is usually suspected.

The cable industry remains undecided about exactly how many concurrent streams are appropriate for consumers. Netflix allows between one and four streams, depending on the plan chosen. HBO permits three simultaneous streams, DirecTV Now allows two while DirecTV’s satellite customers get up to five streams.