Time Warner Cable experienced another challenging quarter, continuing to lose cable TV customers who either drop or pare back their television service, often in favor of broadband.

The company reported losses of an additional 128,000 video subscribers during the third quarter, but is partly winning that revenue back with new broadband customers — 89,000 of them in the last three months.

“Broadband is a powerful service for which there appears to be unquestionable consumer thirst,” Time Warner Cable CEO Glenn Britt said on the investor call. “Over time, we will contribute more of our plant’s capacity to broadband.”

The company is also poised to expand its marketing to win new broadband customers away from their primary competition — telephone company DSL service.  Company officials remain confounded by customers who subscribe to Time Warner’s cable TV service and take broadband from “inferior” phone company-delivered DSL.  Time Warner will continue to target these customers with win-over promotions offering a year of Road Runner Standard Service at the $29.95 promotional price point.

For the company as a whole, this is the tenth consecutive quarter of year-over-year residential broadband revenue improvement, coming from a combination of higher-priced, faster speed tiers, price increases, and subscriber additions.  The company’s DOCSIS 3 upgrade has proven itself a winner for customers and the company, with 18 percent of Time Warner subscribers now choosing 30 or 50Mbps broadband services.

Wall Street expressed some concern about statements from CEO Glenn Britt that the company was going to expand capital spending on broadband to handle increasing demand, especially from online video.  That concern comes despite the fact the company’s “capital intensity” (spending) from January-September was the lowest in the history of the company.  The full year’s capital spending is on track to reach up to $3 billion, which is consistent with what the company spent last year.

Glenn Britt

So despite the plans to spend more on broadband, that spending is actually in line with previous years.

In response to an opening question from Deutsche Bank’s Doug Mitchelson, Britt delivered an extended explanation downplaying the company’s spending plans:

In a way, there’s nothing really new here. I think you’ve seen this trend for a while. Our broadband product is very strong.

As most people know, the usage of broadband is skyrocketing, as it has been for some time. And that means that we will need to spend more money on it. We have been already, both in capital and operating expenses.

The great thing about the Internet is lots of third parties dream up lots of new applications that require more speed and more bandwidth. And we anticipate that we’re going to have to devote more capacity to that over time. We will do that by gradually removing our analog signals from our — analog TV signals from our plan. We’ve been doing that over the last several years by migrating to digital using Switched Digital technology. And over the next several years, we’ll be going all digital in the TV space.

I don’t see this driving a dramatic change in our cap spending, I think, to the core of your questions. The spending has been going on for a while, and I think you’re seeing a change in mix. The video spending is going down over time. The business services is going to go up, although it didn’t this quarter. And you’re going to see the spending on broadband going up. But I don’t think the overall trajectory is mutually different.

This quarter, the company’s conference call seemed to embrace greater broadband usage, and pondering Internet Overcharging schemes like usage caps or usage-based billing never came up.  But Richard Greenfield from BTIG alluded to usage in his questions to Rob Marcus, president and chief operating officer at Time Warner Cable.

“I think we’re somewhere in the 7GB a month [range] of downstream bandwidth on a median basis,” Marcus said. “The average is much higher given the disproportionate usage by our high-end users.”

There were plenty of other facts to be gleaned from this morning’s conference call:

TV

• Whole Home DVR service has been introduced nationwide.  In the coming year, Time Warner will begin deploying “home gateways,” which reduce equipment costs;
• Time Warner is testing improved cloud-based set top boxes with home networking capabilities in parts of Syracuse, Los Angeles and Dallas.  These boxes will expand across the country in 2012.  They offer better search capability and deliver an improved user experience;
• 60% of customers reject “triple-play” offers from Time Warner and choose either “single” or “double-play” service instead;
• Much of Time Warner’s revenue growth is coming from rate increases on programming, services, and equipment;
• TV Essentials, the smaller, less expensive video package, is now available in New York City and Northeast Ohio, as well as upstate New York. It will launch nationwide by year end.  Unsurprisingly, company officials admit the less-than-attractive channel lineup has resulted in the vast majority of customers calling about the offering taking the traditional video package instead;
• Customers continue to drop ancillary services to cut their cable bill.  The increasingly expensive DVR box is a new target for cutting, and premium movie channels, adult pay-per-view, and mini-pay services all continue to suffer significant declines in business;
• The Google-Motorola deal will likely have little impact on Time Warner’s set top boxes, which primarily come from Cisco and Samsung.

Broadband

• By the end of the year, Time Warner plans to offer an Android-based TV Everywhere application similar to the existing iPad application, which will also continue to be upgraded to include on-demand offerings;
• Time Warner will make their TV Everywhere service available on game consoles, smart TVs and PCs in the near future;
• New York City customers will soon be able to select from a range of local broadcast stations on the company’s iPad app.  Other markets will start to see local channels added to this app in 2012;
• Major parts of Time Warner’s capital investments this year are: building data centers in Charlotte and Denver, conversion to all-digital in Maine to make room for enhanced broadband, and the continued rollout of DOCSIS 3.0. The company is also continuing to spend significantly on wiring commercial buildings to sell services to business customers;
• TV Essentials customers will soon be offered a “lite user” slower speed discount broadband plan to accompany their video package;
• In Los Angeles, Wideband 50Mbps customers also get 2 gigabytes of 4G/3G mobile broadband for no additional monthly charge on the company-branded Clearwire service. For Turbo Plus and Wideband 30Mbps customers, they can get the same 4G/3G capability for an additional $10 a month. Standard and Turbo customers can get it for an extra $20.  The company’s mobile broadband add-on product has not enjoyed much success with paying customers, however.  Time Warner hopes the value-added bundling of mobile broadband will attract more interest.

Phone

• Cord-cutting is now impacting Time Warner “digital phone” service, too.  Customers are increasingly reluctant to purchase phone service from any landline provider.  Now Time Warner’s regular pricing is starting to cost them business.  Executives revealed Time Warner’s “digital phone” service costs the company $9.06 to provide.  They charge consumers $30.  With that kind of profit margin, the company admits it will have to get more aggressive in pricing to attract new customers (and potentially keep existing ones);
• Time Warner lost 8,000 residential voice line customers last quarter, cushioned by net additions of 13,000 business line customers;
• The company continues to show little interest in selling cell phone products or services, either owned by themselves or others.  Mobile data remains an exception.

Besides sports, the biggest challenge for cord-cutters is to find access to 24-hour news channels they give up when they cancel pay television service.  While cable news often doesn’t actually spend much time on “news” when breaking stories are few and far-between, when something serious does happen, cord-cutters looking for live coverage can and do miss access to news networks.

But now a New York startup, RadixTV, has a solution for news junkies: Rtv.

Yesterday, the company launched a package of four cable news networks — Bloomberg, CNBC, CNBC World, and MSNBC streamed live 24 hours a day for $14.99 a month.

That’s a steep price for four channels, of which MSNBC is arguably the most important.  The company plans to expand to 10 channels in the future, including CNN, Fox News, and international news networks like BBC World, France 24 and Al Jazeera English that American cable companies routinely ignore.

Kaul

Rtv is pitched primarily to Wall Street — financial firms, brokerages, and investment businesses that want access to continuous business news but don’t need a traditional cable package.  In fact, the package is technically only supposed to be sold to business customers, but anyone can sign up if they say they are stock traders, accountants, investors, etc.

Stop the Cap! sampled Rtv this morning and found the service to work well with our broadband connection, although at times crawling news and stock prices found at the bottom of the screen on some channels seemed less smooth than they could be.  It occasionally was distracting.  MSNBC was the most compelling channel in the lineup, although we’d love to see international news channels even more.  But $15 a month is still a high price to pay.

The company’s CEO, Bhupender Kaul, worked for Time Warner Cable for nearly two decades, and believes the future of cable TV is likely to be Internet-based, with programming sold in niche packages like his.  True a-la-carte may be too unwieldy for providers to pull off, but selling groups of channels together might not.  Still, Kaul seems intent on not aggravating the industry as much as earlier cord-cutting online viewing services, which have all since been sued out of existence.  Local broadcast and general interest programming does not come with Rtv.  While a six figure-salaried Wall Street banker won’t mind $15 a month, you might.

Further reading: In New Web TV Service, A Glimpse of the Future

Time Warner Cable plans to expand its budget-priced TV Essentials package market-tested in New York City and northeastern Ohio across the east coast over the next several weeks in an effort to reduce video package cord-cutting.

Rob Marcus, president and chief operating officer at Time Warner Cable made the announcement Wednesday at a Goldman Sachs-sponsored investor conference.

The package delivers a largely sports-free experience, deleting expensive ESPN and other sports-specific networks from the lineup.  News channels are limited to networks from CNN, and while HGTV is included, Food Network is not (although you can watch the Cooking Channel to get by).

With Time Warner Cable customers now paying an average of $73.50 a month for television service, a package priced between $30-40 may help keep income-challenged consumers from canceling service.  But it is unlikely to reduce cord-cutting among those switching to online viewing.  Time Warner Cable does not heavily promote the package, instead pitching it on a targeted basis, especially to those who call to disconnect service.

Every little bit helps, says Marcus.

“We’ve been challenging ourselves to design an offering that might be more attractive and affordable to those customers who might not be able to handle the full packages,” Marcus said. “The numbers are still pretty small, but the results are sufficiently encouraging that we’re going to roll that out more broadly.”

In northeast Ohio, the TV Essentials package includes all local broadcast channels, public, educational, and government channels, and these cable networks:

Two years after Americans dumped analog television in favor of digital over the air broadcasting, in just over two weeks many Canadians will discover their favorite free-TV signals gone from the analog airwaves forever.

Canada’s transition to digital TV will take a substantial step forward on Aug. 31st when many Canadian local television stations cease broadcasting in analog.  Canada’s pay television providers are taking full advantage of the transition, trying to persuade Canadians who watch their television signals over-the-air for free they will be better off paying for those signals going forward.

Part of the problem is that digital television signals, while “snow-free,” are not pixel-free in many areas distant from the transmitter.  As Americans in suburban locations discovered, those trusty indoor rabbit ears may be insufficient to receive an annoyance-free picture.

Digital television signals are not the nirvana some suggest.  The same passing vehicles and aircraft that caused wavy analog pictures or other interference can turn a digital picture into a frightfest of frozen picture blocks, digital raining pixels, and other effects that can make watching a difficult signal near impossible.

For Americans who thought the days of the external rooftop antenna were behind them, digital television changed all that, especially in more rural areas that could live with a slightly snowy analog picture, but found sub-optimal digital signals unwatchable.

Canada’s vast expanse, and its accompanying large network of low powered television repeater stations rebroadcasting signals from major stations in provincial capitals and large Canadian cities may prove to be an even greater reception challenge, especially in the Canadian Rockies and hilly terrain in eastern Canada.

Some Canadians experimenting with digital-to-analog converter boxes have found reception less practical than they originally thought.

Peter, a Stop the Cap! reader who lives near Oshawa, Ontario delivers some difficult news:

“Reception of digital signals from Toronto’s CN Tower has proved to be a lot more difficult in Oshawa than the existing analog signals,” Peter writes.  “We have no trouble getting truly local signals like CHEX-TV, which has a transmitter in analog serving Oshawa, but watching digital signals from Toronto really requires an outside antenna for good reception.”

Snow may be a thing of the past, but bad digital reception like this may be here to stay for many Canadian viewers.

Peter’s decision to erect a rooftop antenna opened the door to reception of analog and digital signals from Toronto and across Lake Ontario, where he can receive digital signals from some stations in Buffalo and Rochester, N.Y.  But it was an expense of several hundred dollars to get the work done.

“Cable and satellite companies are taking full advantage of the digital switch to try and get free-TV viewers to ‘upgrade’ to pay television, and they don’t hesitate to mention the expense and hassle of erecting rooftop antennas to guarantee good digital reception,” Peter says.

Peter can only imagine what digital reception will be like in the Canadian Rockies, where large networks of analog, mostly low-powered UHF transmitters deliver basic reception to important networks, especially CBC, outside of major cities.

“If you visit western Alberta or eastern B.C., good luck to you — we could barely watch over the air signals in most of the mountain towns,” Peter says. “Most people either have cable or satellite already.”

Not every television transmitter is scheduled to switch off analog service at the end of August.  Many rural areas are expected to retain analog signals for some time, in part because of the expense of digital conversion and concerns about reception quality.  But some areas, particularly near the U.S. border, are scheduled to drop analog signals regardless, potentially causing disruptions for plenty of free-TV viewers.  Ottawa is anxious to auction off the vacated frequencies for cell phone, Wi-Fi and wireless broadband use for an estimated $4 billion, and the demand is highest in cities along the U.S. border.

“As many as 1.4 million English-language viewers and 700,000 Francophone viewers may be left without a CBC signal,” Ian Morrison, spokesman for the non-profit Friends of Public Broadcasting, which monitors the CBC and promotes Canadian content on TV and radio told the Toronto Star. “For the most part, these are poorer and older people on fixed incomes who are of no interest to advertisers, but who rely for their news and connection to the community on the CBC, the nearest thing we have in this country to a public broadcaster.”

The Canadian Radio-television and Telecommunications Commission runs a website regarding the transition and includes a list of impacted television stations.  Canadian consumers who elect to purchase converter boxes for their analog televisions will pay full price for them — Ottawa has not followed Washington’s lead subsidizing their purchase with a coupon program.

Meanwhile, many pay television providers are running “digital TV upgrade” specials trying to get Canadians to walk away from free TV in favor of paid video packages:

Shaw Direct: Shaw’s direct to home satellite service has developed the best offer around for qualifying residents in 20 Canadian cities set to lose analog television: free service.

“The Local Television Satellite Solution is [for] households in 20 designated cities that have been receiving their television services over-the-air, and will lose over-the-air access to their local broadcaster because the analog transmitter is being shut down and will not be replaced by a digital transmitter,” a Shaw spokesperson told the Toronto Star. “Shaw will provide a household in a qualifying area with a free satellite receiver and dish that is authorized to receive a package of local and regionally relevant signals from Shaw Direct. There are no monthly programming fees provided that a household qualifies to participate in the program.”

The qualifying cities:

For everyone else, Shaw Direct’s least expensive package is their Bronze – English Essentials tier which runs $41.99 a month.

Rogers Cable: Rogers is marketing a special package called Rogers Digital TV which offers up to 85 channels for $10.14 a month, which includes all fees.  Many of the channels are included for the first year as a teaser.  After that, customers are left with mostly local stations and filler (including — we’re not kidding — the Aquarium Channel, which shows exactly what you think it does.  Remember, this is the same cable company that brought you the Swiss Chalet Rotisserie Channel.)

“It’s a fine way to get people used to paying for television, and Rogers introductory price is sure to increase at some point,” suspects Peter.  “Maybe you can save a few dollars using those Swiss Chalet meal coupons, though.”

Telus: Western Canada’s largest phone company doesn’t offer much, in comparison.  A basic package of Telus IPTV over your phone line — Optik TV — starts at $41 a month for the first six months.  Telus Satellite TV starts at $38.27 a month, for the first half of a year.  Prices run higher after that.  The most Telus will toss in is a $50 credit for a customer referral from a friend or family member.

Look on the bright side: When you pay for Rogers Cable, you can finally get to watch The Rotisserie Channel. The spinning chickens are waiting for you, in digital clarity, 24 hours a day on Ch. 208.

Bell: Another phone company with not a whole lot on offer.  Bell’s basic service, which includes TV stations from the U.S. and Canada, starts at $33.50 a month.

Videotron: Quebec’s largest cable company is pitching a combo mini-pack with basic service for $21.29 a month and a required extra channel package starting at $11.17 a month.  That’s around $33 a month.

Can you watch online?  The CRTC says you may find many of your favorite shows available online for free viewing, but includes the important caveat: most Canadian ISP’s engage in classic Internet Overcharging schemes that include a monthly usage allowance that will curtail substantial online viewing.  It should come as little surprise most of the providers in the pay television business in Canada also happen to be the largest Internet Service Providers as well.

About 93 percent of Canadians currently receive television from some form of pay television provider — cable, telco TV, or satellite, according to the CBC.  But some of the 7 percent who do not are at risk of losing Canada’s public broadcaster after the conversion.  While CBC owns most of the stations and transmitters it broadcasts from, it also affiliates with private stations in certain cities where it does have its own presence.

Come Sept. 1, no over-the-air CBC signals of any kind will be transmitted from London and Kitchener-Waterloo in Ontario; Sherbrooke, Chicoutimi, Quebec City and Trois-Rivières in Quebec; Saint John and Moncton in New Brunswick; Saskatoon, Sask., and Lethbridge, Alta.  These are all cities where private stations provided CBC service.  Viewers in these areas will need a pay television subscription, or simply go without.

For some of those already subscribing to cable, Sept. 1 also signals the end of some of their favorite stations, as CRTC requires cable providers to prioritize local stations over more distant ones.  In southeastern Ontario, for example, a number of viewers will lose access to CBLT, Toronto’s CBC station, and CFTO, Toronto’s CTV affiliate, in favor of “more local” stations in Kingston, Ottawa, and Peterborough.

An artist rendering of Don River Park, part of the mixed-use spaces that hallmark the Toronto Waterfront revitalization project.

About seven years ago, Rochester’s Fast Ferry offered daily service between Rochester, N.Y. and Toronto’s Waterfront.  Tens of millions of dollars later, the Rochester Ferry Company discovered that nobody in southern Ontario was that interested in a shortcut to Rochester, many locals found driving to Canada’s largest city faster, more convenient, and cheaper, and the point of arrival on the Canadian side was hardly a draw — situated in a rundown, seedy industrial wasteland.

By the end of 2006, the ferry was sold and sent on its way to Morocco, the CBC got a barely used International Marine Passenger Terminal (built for the Rochester ferry) to use as a set location for its TV crime drama The Border, and the rundown waterfront was well-embarked on a major reconstruction effort.

This week, Toronto’s Waterfront learned it was getting a broadband makeover as well, with the forthcoming launch of insanely fast 10/10Gbps fiber broadband for business and 100/100Mbps for condo dwellers along the East Bayfront and West Don Lands.

Best of all, Beanfield Metroconnect, the parent company responsible for constructing the network, promises no Internet Overcharging schemes for residents and businesses… forever.  No usage caps, no throttled broadband speeds, no overlimit fees.  Pricing is more than attractive — it’s downright cheap for Toronto:  $60 a month for unlimited 100/100Mbps broadband, $30 a month for television service, and as low as $14.95 for phone service.  Bundle all three and knock another 15 percent off the price.  The provider is even throwing in free Wi-Fi, which promises to be ubiquitous across the Waterfront.

The project will leapfrog this Toronto neighborhood into one of the fastest broadband communities in the world.

Toronto Waterfront Fiber Broadband Coverage Map

“Having this sort of capacity available to residents will allow for a whole new world of applications we haven’t even conceived of yet,” said chief executive Dan Armstrong.

The rest of Toronto, in comparison, will be stuck in a broadband swamp courtesy of Rogers Cable and Bell, where average speeds hover around 5Mbps, with nasty usage caps and overlimit fee schemes from both providers.  DSL service in the city is notoriously slow and expensive, as Bell milks decades-old copper wire infrastructure long in need of replacement.

The public-private broadband project is a welcome addition for an urban renewal effort that has been criticized at times for overspending. Created in 2001, Waterfront Toronto has a 25-year mandate to transform 800 hectares (2,000 acres) of brownfield lands on the waterfront into a combination of business and residential mixed-use communities and public spaces.  At least $30 billion in taxpayer funds have been earmarked for the renewal project, although project managers say no taxpayer dollars will be spent on the broadband project.

Waterfront Toronto’s efforts have been recognized as bringing Toronto’s first “Intelligent Community” to the city with the construction of the open access fiber network.

Still, the public corporation has its critics.  Earlier this spring Toronto city councilman Doug Ford called the urban renewal project a boondoggle.  Other conflicts rage with the Toronto Transit Commission and the mayor’s office over other redevelopment projects.  But the revitalization project’s broadband initiative has significant support, especially among knowledge workers that could eventually become residents… and paying customers.

The 21st century broadband project is also likely to bring broadband envy across the entire GTA, who will wonder why service from the cable and phone companies is so much slower and more expensive.

For broadband enthusiasts, Toronto’s broadband future looks much brighter than yesterday’s failed ferry service, which proves once again that regardless of the technology — slow, expensive, and inconvenient service will never attract much interest from the value-conscious public.

[flv width=”640″ height=”380″]http://www.phillipdampier.com/video/TVO The Need for High Speed 5-2010.flv[/flv]

Canada’s digital networks are some of the slowest in the world, running between one hundred to a thousand times slower than other countries in the developed world. In this episode of “Our Digital Future – The Need for High-Speed,” Bill Hutchison, Executive Director of Intelligent Communities for Waterfront Toronto describes the sorry state of Canada’s digital infrastructure, stressing the need for major investments in advanced broadband networks.  (4 minutes)