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.

Thanks to one of our readers who also happens to be a TWC employee, here is the latest update to Charter/Spectrum’s list of first year promotions, taking effect in California and Texas (9/20) this month.

We expect it will be rolling out to other TWC and BH regions over the next few months. Unless you are compelled to change packages, if you are on a current Time Warner Cable or Bright House promotion or retention deal, we recommend you keep it until it expires. You can then enroll in one of these promotions, almost certainly at these prices, extending the length of your savings.

We expect Charter’s retention department to deliver a tougher line on retention packages and promotions than Time Warner Cable gave customers. Once these promotional prices expire, your rates will step up each year for two years thereafter until you reach the “rack rate” — Charter’s regular pricing. Your ability to secure new customer pricing again will probably require you to bounce between providers or cancel/come back as a new customer. I am told by long-time Charter customers that Charter’s retention prices are usually not as good as new customer pricing.

We have some corrections to our earlier coverage on this last month: broadband-only customers will pay a promotional rate of $39.99 a month for the first year for 60Mbps service, $79.99 a month for 100Mbps service (100Mbps or 300Mbps in existing TWC Maxx territories), not the $60/99 rack rate. We have received word Earthlink will continue to be another option for customers to consider for broadband service, which can be a good way to secure extended promotional pricing. Another change: phone service is now an extra $10 a month, not $20, as part of a triple play package. We notice Charter only lists free calling to U.S. numbers on this sheet. Time Warner Cable includes free calls to Canada, Mexico, China, Hong Kong, India, The EU, Norway and U.S. territories. We are unsure if this represents an omission or a downgrade. Also, the Wi-Fi fee is waived for Spectrum Ultra, which corrects our earlier piece where we thought this fee would apply to both broadband packages. Multi-DVR service pricing is still confusing on this chart. We’ve heard Charter intends to ditch TWC’s Whole House DVR service and give subscribers the option of multiple standalone DVR units instead. DVR pricing is: $4.99 for each DVR box + an $11.99 DVR service fee (if you have only one DVR). If you want multiple DVRs, they are each $4.99 a month with an all-inclusive monthly service fee of $19.99, regardless of how many extra DVR boxes you rent.

Obviously, we will be looking for money-saving opportunities for our readers once we get a better handle on Charter’s way of doing business.

Updated 9/7/2016: Please check our latest coverage on promotional packages for Bright House and Time Warner Cable customers that are being introduced in September 2016 by new parent company Charter Communications. Some of the prices reflected below are now out of date! 

Charter’s plans for Time Warner Cable and Bright House Networks customers are now potentially clearer thanks to the apparent leak of several informational slides from a presentation given to employees to familiarize them with Charter’s forthcoming service plans.

A reader of DSL Reports in California shared what purports to be informational slides from a company training course. Los Angeles is among the first markets to be offered the new Charter/Spectrum service plans, likely to arrive as early as mid-September.

We’ve condensed the information down into a more readable format to give you an idea (subject to change, of course) about Charter’s pricing and plans. Existing customers may not need to give up their current plans right away, and some customers may not want to. Charter has recognized Time Warner Cable Maxx’s network upgrades in its plans and pricing, which means customers already upgraded for Maxx service will get better value from Charter’s plans than those customers who never made the upgrade list before Time Warner Cable was sold.

Keep in mind Charter will start by offering all “New Charter” customers a “new customer” promotion, priced low the first year and then increasing incrementally in price during the second and third years. Year three pricing will be equivalent to Charter’s regular price, which will be substantially higher than customers on Time Warner Cable customer retention plans have paid. Charter’s service plans offer improved broadband speeds, but at a significantly higher price. Standalone broadband customers in particular will feel an immediate sting. Charter’s entry-level price for most customers is $59.99 for 60Mbps, about $25 more than Time Warner Cable’s promotional rate for Standard 15/1Mbps service, which has been selling for about $35/mo for the first year. Charter will point out that it includes a cable modem for free while Time Warner Cable charged $10 a month, but that offers no solace to customers who have purchased their own equipment.

Please note these plans and prices have not been officially confirmed by Charter. In fact, we would not be surprised to see some pricing changes before the plans are officially available.

TELEVISION

There are big changes in store from Charter. First, the company will end distribution and support for Digital Transport Adapters (DTAs) — the small boxes designed for older analog-only TV sets. Charter expects you to have a traditional set-top box on every cable-equipped TV in the house. Second, it seems Whole House DVR service is being discontinued. Charter prefers the alternative of placing DVR boxes on each set where you want to record and watch TV shows. There is a significant cost for Time Warner Cable to install Whole House DVR service and it involves a technician coming to your home. Charter seems to want to cut truck roll expenses, and traditional DVR boxes are easy for customers to install themselves.

DVR pricing is still confusing for customers. A single DVR box is priced at $4.99 for the equipment + an $11.99 DVR service fee. DVR’s 2-4 cost $4.99 per box + a $19.99 DVR service fee. We are not sure if the $19.99 inclusively covers all DVR boxes in the home or if that is charged for each additional DVR. (Update: STC reader Ricardo reports the $19.99 fee is inclusive, so it is only charged once regardless of how many extra DVRs you have.)

For the first year, traditional set-top boxes for New Charter customers are a bargain at $4.99/mo. Legacy Charter customers pay $2 more, and we predict you will pay more as well after the first year, but the equipment fees are less than what Time Warner Cable charged.

Customers will choose from three plans: Select, Silver, or Gold:

• Select: 125+ channels (HD included), Spectrum App (comparable to TWC TV app), 10,000+ On Demand Library ($64.99)
• Silver: 175+ channels (HD included), Spectrum App, On Demand, HBO, Cinemax, Showtime, NFL Network ($84.99)
• Gold: 200+ channels (HD included), Spectrum App, On Demand, premiums shown above + TMC, Starz, Encore, Epix, NFL Redzone ($104.99)

Charter’s pricing is built to encourage customers to bundle multiple services together, because substantial discounts are provided, especially when combining TV and internet service.

INTERNET

(All presentation slide images courtesy of Tech_Guy 88/DSL Reports)

Charter moves to just two tiers of service available to the public (except in New York where TWC’s $14.99 Everyday Low Price Internet continues to be an option for the next two years — although it has been removed from TWC’s website) and standalone broadband pricing is considerably more expensive with Charter than with Time Warner Cable.

Perhaps special promotional offers will bring standalone internet prices closer to the $34.95-39.95 most new customers have gotten for Time Warner’s Standard Service (15/1Mbps) for years. We expect most customers will be more sensitive to price vs. speed and standalone internet at these prices will be a shock. We are not certain if Earthlink will continue to be an alternative option.

Upload speeds in non-Maxx areas are conservative, if these slides are accurate, topping out at just 5Mbps. This still leaves Charter as one of the slower U.S. providers.

In TWC Non-Maxx Areas (maximum TWC speed now 50/5Mbps):

• Spectrum Internet 60/5Mbps: Standalone $59.99/mo or $29.99 as part of a triple play package (first year promo price), $59.99 standalone or $53.99 as part of a bundle (regular price);
• Spectrum Ultra 100/5Mbps: Standalone $119.99/mo or $99.99 as part of bundled package (first year promo price), $119.99 standalone or $113.99 as part of a bundle (regular price).

In TWC Maxx Territories (maximum speed now 300Mbps):

• Spectrum Internet 100/10Mbps: Standalone $59.99/mo or $29.99 as part of a triple play package (first year promo price), $59.99 standalone or $53.99 as part of a bundle (regular price);
• Spectrum Ultra 300/20Mbps: Standalone $119.99/mo or $99.99 as part of bundled package (first year promo price), $119.99 standalone or $113.99 as part of a bundle (regular price)

Spectrum Wi-Fi, for those without their own routers, can be added to any internet plan for a $9.99 setup charge and $5 a month.

Charter’s discount plan for the income-challenged carries the usual restrictions. The most unconscionable effectively forces current Charter customers to go without internet access for 60 days before they can enroll in Spectrum Internet Assist. They also must not owe any past due balance to Charter.

Assuming you qualify (eligible for the National School Lunch Program and senior citizens 65 years and older eligible for the federal Supplemental Security Income program), $14.99 will get you up to 30/4Mbps, plus an extra $5 a month if you want Charter to supply a Wi-Fi enabled router. The usual $9.99 activation fee is waived. Self-installation is free. If they have to send a truck to your home, the prevailing standard installation rate will apply. This is the only level of service Charter sells that will not require a credit check.

PHONE

Time Warner’s phone service had been promoted for years at $10 a month as part of a double-play or triple-play bundle. Charter’s triple play bundle pricing seems to show the price for phone service will now be effectively $20 a month.

Charter’s digital phone service has never seemed to be a marketing priority for Charter in its legacy service areas, and will likely be treated as an afterthought going forward. No further information about any service or calling area changes from what Time Warner Cable offered is available yet.

Time Warner Cable Maxx upgrades are on the way for customers in several Wisconsin cities, bringing all-digital cable television service later this year in preparation of boosting broadband speeds up to 300Mbps.

The company has begun notifying customers in the Fox Cities – including Green Bay, Appleton and Oshkosh as well as in southeast Wisconsin, including Milwaukee, Kenosha, Waukesha and Racine that analog television service will be switched off in the next several months.

“Going all-digital brings the benefit of better picture and sound immediately, and will enable us to offer customers faster Internet speeds and additional services in the future,” said Jack Herbert, regional vice president of Time Warner Cable.

The transition to an all-digital network will require video customers without TWC digital equipment (customers who plug their cable line directly into the TV, VCR or similar device) to order a TWC digital adapter.

TWC will offer existing TV customers one or more digital adapters at no charge through at least October 6, 2017. To qualify, customers must order their digital adapters by January 29, 2017. After this free period, each adapter will be billed at the prevailing price, now around $3 a month. Customers can visit www.TWC.com/digitaladapter to place an order or call toll-free 1-844-841-5085 to request equipment. Digital Adapters are also available at most Time Warner Cable stores.

After the free equipment period ends, Stop the Cap! recommends customers return the digital adapters and consider purchasing an online video console such as a Roku device, which supports the Time Warner Cable lineup without recurring equipment rental charges.

Customers can expect free broadband speed upgrades after the digital conversion is complete, with faster Internet access likely available late this year or in early 2017.

While cable operators continue to deny cord cutting is real, their marketing departments think otherwise and are responding with slimmed down cable TV packages showcasing premium movie channels at a non-premium price.

This week, Time Warner Cable began offering a $10 add-on video package of over-the-air major network stations for new customers in Manhattan signing up for 50/5Mbps broadband service ($39.95 a month alone on a one year promotion in TWC Maxx markets). Oh did we forget to mention that $10 also includes both HBO and Showtime — the same networks Time Warner sells to everyone else for about $16.95 a month each?

At $10 a month, the package is a steal if you are still interested in local live/linear TV and movie channels. XFINITY Stream for Comcast is comparable, but Comcast extracts $15.99 a month for almost the same thing.

Time Warner Cable is obviously targeting disinterested Millennials that might otherwise skip television or consider the $20 Sling TV package instead.

But the cable company is downplaying the package and its price.

Time Warner Cable CEO Rob Marcus likes to remind investors at least 80 percent of Time Warner customers still subscribe to the big 200+ channel cable TV package, and Time Warner has hardly been a pioneer of “skinny bundles” that cut down the TV package to just the essentials.

Despite those assertions, the number of Americans willing to drop cable television continues to increase… and fast. Convergence Consulting notes the industry lost 283,000 video customers in 2014 and 1.1 million in 2015 — a four-fold increase. Convergence estimated at least another 1.1 million will cut the cable TV cord this year in what could become “the new normal.”

Video consumers are turning instead to on-demand, online viewing, which can provide commercial-free and binge viewing opportunities. Both Millennials and Generation X viewers are trending towards shows, not channels and networks, and many would never know (and fewer still care) what channel they were watching without the identity bug perpetually attached to the lower right of the screen.

Eventually, cable television service will likely occupy a part of a fat IP-pipe free-for-all, where viewers can still watch linear programming if they wish, but are more likely going to customize a much more personal viewing experience online instead.