At least 54,000 Time Warner Cable customers downgraded or canceled their cable TV service in the last three months as Charter Communications continues to take a harder line on offering or renewing customer retention discounts for customers unhappy with their bill.

Time Warner Cable customers are “mispriced” with discounts and deals that lower the cost of service but face bill shock when the promotion ends, according to Charter CEO Thomas Rutledge.

“Third quarter customer results were more inconsistent with good performance at Legacy Charter and Bright House, but higher churn and downgrades in the Time Warner Cable markets, as we expected, given the way Time Warner Cable had marketed promotional pricing,” said Rutledge. “Until our Spectrum pricing and packaging is launched across the newly acquired service areas, we continue to expect higher levels of churn and downgrades where Time Warner Cable was the operator.”

“Over the next few quarters, our operating results will reflect reversing certain product and packaging strategies, in particular at TWC, in which in our view are not sustainable, given high promotional roll-offs and annual rate increases, high customer equipment fees, including modem fees, all coupled with complex and stacked offers,” added Charter’s chief financial officer Christopher Winfrey.

Traditionally, Time Warner Cable has dealt with price sensitive customers rolling off special pricing promotions by gradually resetting rates higher or, when necessary, by renewing the promotion for another year in an effort not to lose the customer. That will stop under Charter’s ownership, according to Mr. Rutledge. As a result, Charter Communications is seeing significant customer losses at Time Warner Cable when customer service representatives won’t budge on pricing.

Rutledge is seeking more discipline in product pricing so Charter does not have to extend cut-rate retention promotions to customers. As part of the Charter Spectrum rebrand, the cable company introduces new cable, broadband, and phone plans while allowing Time Warner Cable’s legacy plans to stay in effect until a customer elects to switch. While Texas and California Time Warner Cable customers have already been introduced to Spectrum plans, much of the rest of the country is still being offered plans only from Time Warner Cable or Bright House.

Rutledge

Customers are most likely to cancel service as their promotion expires. The resulting price hike can be a considerable shock as rates quickly reset to Bright House or Time Warner’s “regular price.”

Charter wants an incentive to get customers to forfeit their Time Warner or Bright House plan and switch to a new Spectrum plan as they are introduced. By making the grandfathered plans as unattractive as possible, the alternative Spectrum plans appear to be a better deal. Unfortunately, until Spectrum-branded plans arrive nationwide, many customers are stuck in limbo rolling off a promotion, are unable to renew it, and forced to wait for new Spectrum plans to be introduced.

Rutledge announced last week that the next markets to be introduced to Spectrum this month are in New York City and Florida, the latter former Bright House territory. Rutledge predicted half of Time Warner Cable customers will be offered Spectrum plans by the end of this year. But some Time Warner Cable customers may have to wait until next spring before Spectrum rebranding is complete.

Time Warner Cable Maxx is Still Dead, Earning Charter $36 Million in Reduced CapEx

Charter also reported significant financial benefits from prematurely terminating the Time Warner Cable Maxx upgrade effort. Time Warner’s upgrades would have given customers free speed upgrades up to 300Mbps. But Charter pulled the plug on the upgrade project just after completing its acquisition, and has no plans to restart it.

“Cost to service customers declined by about 2% despite overall customer growth of 5.1%, which reflects lower service transactions at Legacy Charter, the lack of all-digital activity at TWC this quarter versus last year’s third quarter, and some benefit from less physical disconnects in all-digital markets,” reported Winfrey. “Capital expenditures totaled $1.75 billion, including $109 million of transition spend. Excluding transition CapEx, our third quarter CapEx was down by $36 million year-over-year, about 2%, driven by all-digital spending at TWC, primarily on [equipment], which did not recur in the third quarter of this year.”

Winfrey

Charter expects to increase CapEx next spring, as the company continues its less ambitious transition to all-digital cable service, which includes broadband speeds topping out at 100Mbps, three times less than what Time Warner Cable was implementing.

Charter is Less Enthusiastic About Digital Phone Service

Time Warner Cable maintained a healthy market share for its digital phone service by bundling it at a promotional price of $10 a month, a rate that remained relatively stable for customers sticking with a triple play package bundle. Time Warner Cable also enhanced its phone service by adding the European Union nations, Mexico, and several popular Asian calling destinations as part of the local calling area, making those calls free of charge.

Charter’s own plan is less feature-rich and customers have to buy an add-on plan to cover international long distance, making the product considerably less attractive to customers. Some customers also find the cost of the phone service has increased under Spectrum, a problem acknowledged by Winfrey, who noted Time Warner Cable’s low-price voice offer in prior year quarters had been discontinued, resulting in higher voice downgrades and relationship churn.

Charter’s Plans for Legacy Charter Customers and Newly-Adopted Time Warner Cable and Bright House Customers

Rutledge made clear that despite any product changes or rebranding, the long term goal of Charter Communications is to see revenue grow. Whether that will come from gradual repricing of cable products and services to a higher rate or from improved products and services that attract new upgrade business is not yet certain. But Rutledge outlined key areas Charter expects to focus on in the next few years:

• Charter will complete the all-digital transition at Time Warner Cable and Bright House over the next two years, but it will resemble the kind of service legacy Charter customers get today, not TWC Maxx;
• Over the next five years or so, with relatively small infrastructure investments, Charter plans to implement DOCSIS 3.1 which will be able to deliver symmetrical multi-gigabit speeds to all 50 million homes and businesses in their service area;
• Charter plans to aggressively market and grow its services for commercial customers, targeting businesses large and small, at prices that more closely resemble residential service pricing, instead of the price premium Time Warner Cable has traditionally charged its commercial customers;
• Charter is activating its MVNO agreement with Verizon, which will allow Charter to create and market its own wireless/cellular service using Verizon’s nationwide network. The company is also exploring using millimeter-wave (5G) service to offer better broadband coverage in large commercial spaces like malls and rural properties currently not wired for cable service. Expect the company to create its own wireless/cellular bundle first, because it will rely entirely on Verizon’s network, keeping Charter’s costs low.

To be a Google Fiber city or not to be a Google Fiber city. It could make a big difference to your wallet if Comcast upgrades broadband speeds in your neighborhood before Google Fiber finally arrives in your “fiberhood.”

When Comcast first announced a major trial of DOCSIS 3.1 gigabit broadband service in Chicago, it confirmed it would cost $139.95 a month — double the price Comcast charges customers in cities where Google Fiber has expressed an interest in providing gigabit service as well. With Chicago nowhere on the Google Fiber upgrade list, it seemed Comcast was prepared to prove the point that competition can really make a difference in broadband pricing, at least until stories appeared headlining Comcast’s pricing policies. Within hours, Comcast “clarified” it was prepared to sell gigabit service in Chicago for $70 a month as well, with a three-year contract.

“We are now able to deliver gigabit speeds over the existing lines that already reach millions of homes in the Chicago area,” Comcast spokesman Jack Segal told the Chicago Tribune. “This is a major step in the evolution of high-speed broadband.”

This is not Comcast bringing a new fiber line to your home or business. This is gigabit download speed over Comcast’s current cable/fiber network — the same one that delivers your current broadband service. DOCSIS 3.1 allows Comcast to bond additional channels together to boost speeds, at least on the downstream side. This technology will not deliver gigabit speed in both directions, at least for now. Comcast’s DOCSIS 3.1 gigabit plan delivers 1,000Mbps download speed, but just 35Mbps upstream. Customers looking for something faster can pay dramatically more for Comcast’s Gigabit Pro fiber to the home service, offering 2,000Mbps speeds. But it will cost up to $1,000 to install and is priced at $300 a month with a two-year contract.

Comcast’s 1TB usage cap (with up to $200 in overlimit fees) will apply to Comcast’s DOCSIS 3.1 plans, unless you opt for unlimited service… for another $50 a month. Comcast gracefully includes unlimited with its Gigabit Pro service.

Chicago residents can sign up for either gigabit plan at www.xfinity.com/gig. A $50 installation fee applies and a service call is required. Customers signing up will need a new cable modem that supports DOCSIS 3.1, and there are only a handful on the market so far. Many more will be available in 2017.

WOW! Internet, Cable & Phone will unveil gigabit speed broadband across five U.S. cities by the end of this year.

In Evansville, Ind., and Auburn, Ala., WOW! will be the first provider in town delivering gigabit internet speeds to residents and businesses, with only a modem upgrade required to get faster service. In the wealthy community of Gross Pointe Shores, Mich., WOW! is bringing gigabit broadband over an expanding fiber to the home network. Customers in Knoxville, Tenn., and Huntsville, Ala. will also see faster speeds towards the end of this year.

WOW! provides competing cable service in 20 markets, primarily in the midwest and southeast, including Illinois, Michigan, Indiana, Ohio, Kansas, Maryland, Alabama, Tennessee, South Carolina, Florida and Georgia.

“In many of our markets, we are already offering the highest speeds available with our 600Mbps internet service,” said WOW! CEO Steven Cochran. “By enabling 1 Gig Internet over our existing coax plant and through our targeted fiber to the home investment, WOW! is demonstrating its commitment to continually innovate and deliver products that help our residential and business customers to connect.”

The European Union believes every home in the bloc should have ready access to at least 100Mbps broadband speeds within the next decade.

Regulators in Brussels want uniformly fast broadband across the continent according to a report from the Financial Times, and is expected to adopt new telecom rules in September to get it. It is part of the EU’s ambitions “Gigabit Society” initiative that will assure every school and business will have access to gigabit speeds, while homes will now receive at least 100Mbps.

Private telecom companies are skeptical Brussels will kick in substantial aid to finance broadband upgrades, despite assurances it would be a public-private initiative. An initial estimate pegs the cost to upgrade the continent at $171 billion. At least 80 percent of that budget will cover the infrastructure installation costs, such as stringing fiber on poles and underground and bringing connections to homes and businesses.

A potential issue for Brussels is dealing with one of Europe’s most powerful telecom companies – Germany’s Deutsche Telekom, which wants to use vectoring technology to improve copper-based DSL service in Germany instead of upgrading to optical fiber technology.

This morning, Brussels gave partial approval for DT to go ahead with vectoring upgrades, so long as it doesn’t inhibit competition. As a result, the German phone company will offer DSL upgrades as fast as 100Mbps and offer all of its rivals access to the same network, allowing consumers to choose different ISPs delivering service over the same copper network.

Like in North America, analysts say there is little interest among companies to build rival networks, especially in areas already served by a cable and telephone company. The alternative is to open those networks to competitors, who can use them to reach customers with their own internet service plans.

Cox Communications will push broadband speed upgrades as high as a gigabit to customers over an upgraded network heavy on fiber and much lighter on copper coaxial cable.

In an effort to stay competitive and reduce operational and maintenance costs, Cox will begin major upgrades of its cable plant, removing as much copper and as many signal amplifiers as possible to simplify upkeep and make future upgrades simpler.

Cox chief technology officer Kevin Hart told Light Reading he wants to push fiber optics deeper into Cox’s network, bringing optical fiber closer to the neighborhoods where customers live and work. This will allow Cox to reduce the number of customers sharing the same bandwidth. It also eases Cox’s forthcoming upgrade to DOCSIS 3.1 technology.

“We’re […] taking fiber deeper as a part of our multi-year network transformation plan, working towards a node-plus-zero architecture that allows us to take fiber to the home, and allows us to bring gigabit speeds on demand. And of course we’re aligning around DOCSIS 3.1,” Hart said.

Cox is planning its first rollout of DOCSIS 3.1, which gives cable companies to ability to offer gigabit download speeds, in the fourth quarter of this year. It will choose one of the smaller communities it serves as a test market. If all goes well, Cox will push DOCSIS 3.1 across all of its markets between 2017-2020, likely focusing on Phoenix and San Diego first.

Cox is evaluating DOCSIS 3.1 cable modems from a number of vendors, with Arris and Technicolor likely contenders.

Cox continues to support data caps and usage-based billing in some of its markets and has become one of the stingiest with data allowances:

Customers in Cleveland, Ohio are the unluckiest of all, because they also face an overlimit fee when they exceed their allowance: $10 for each additional 50GB block of data. Some customers in Cleveland’s downtown area have found a loophole around the data cap, however. If they access the Internet over Cox WiFi and Cable WiFi hotspots, it does not count against one’s allowance at this time.