Just in time for the forthcoming Democratic National Convention, Time Warner Cable has launched TWC Wi-Fi in uptown Charlotte and inside the convention venue — the Time Warner Cable Arena.  Republican House Speaker Thom Tillis, who has collected tens of thousands of dollars in campaign contributions from large telecom companies, including Time Warner Cable, was on hand to help celebrate.

More than 90 hot spots around the city are being fired up, and during the convention (Aug. 27-Sept. 7) anyone will be able to connect for free.

Before and after the Democrats arrive in town, the network is available free only to paying Time Warner Cable customers with standard (10Mbps) Internet service or faster or customers with Business Class service. The cable company claims that covers the “vast majority” of its broadband customers.

Tillis

Most of the hotspots are in and around Center City, South End, Myers Park, Dilworth and Midtown.

Non-customers can purchase access at prices starting at $2.95 per hour.

Customers can connect using their Time Warner Cable e-mail address and password.

Based on comments from local residents, many are convinced the government shelled out the money for the service, or customers ultimately will with the next round of rate increases. In fact, this is Time Warner Cable’s attempt to boost subscriber loyalty by offering broadband while on the go.

No government money is financing this particular project, although several local and state officials were on hand to help cut the ribbon on the service, including the Republican Speaker of the House Thom Tillis, who earlier voted to block community-owned broadband in North Carolina. Tillis has deposited $37,000 in campaign contributions during the 2010-2011 cycle from large telecom companies including Time Warner Cable, despite running unopposed.

While perusing the latest investor conference call with Time Warner Cable executives, this question from the always-admiring Craig Moffett at Sanford Bernstein & Associates popped up, directed at Rob Marcus, president and chief operating office (underlining ours):

Craig Moffett – Sanford C. Bernstein & Co., LLC., Research Division

[…] Rob, I know how competitive you are. As you look at the results at Comcast and their greater success in — particularly in the video product, I’m sure it has to sort of get the competitive juices flowing. Can you talk more about where that is on your priority list? And what are the levers that you think you can pull to improve the results in basic video?

Robert D. Marcus – Time Warner Cable

Yes. So let me start by saying, I don’t really want to take anything away from Comcast performance, they had a nice quarter. And I think the fact that both we and they posted really good results this quarter probably speaks most to the fact that we’re in a terrific business, so that’s point number one. Second, I always sort of shy away from these comparisons between the two of us on any particular metrics given that there are differences in our disclosure practices.

[…] The truth is, I want to win, but I want to win relative to the guys we’re facing in the markets that we’re competing with. So all of the initiatives I described in my prepared remarks really relate to our performing even better than we have been, independent of any comparisons you might make to Comcast. So we’re hard at work on product, we’re hard at work improving our marketing. I think we’ve made great strides there. We’re definitely doing things on the customer service side to make doing business with us easier and better. And we’re always trying to improve on logistical things like improving sales processes and retention processes. So you’re right in characterizing me as competitive. I absolutely want to win. And I think we’re initiating the right processes to get there.

It’s just one more fact of life for American cable subscribers — cable companies never compete against each other. Comcast has carved out its territory, Time Warner Cable has theirs. The two will never meet in head-on competition.

So we’re wondering just how “competitive” Time Warner Cable (and Comcast) really are. Apparently not much, based on the hearts and flowers moment cable executives have praising the financial performance of each other.

Time Warner Cable executives told investors on a morning conference call the cable company has embarked on a gradual transition to an all-IP-based distribution platform which could eventually mean the end of today’s set top boxes and radically increase the amount of bandwidth available for its broadband and video networks.

“Whatever the merits of that from an engineering sense, all things IP are the standards that the world is building devices to,” said Time Warner Cable CEO Glenn Britt. “So that’s the standard we’re going to end up migrating to until something better comes along.”

The transition will help Time Warner Cable support additional customer-owned equipment, including video game consoles, streaming online video boxes, and televisions with built-in support for cable-delivered channels.

“If you look at the cable in 1980s, there weren’t a lot of set-tops, and I think we’re going back to that over time,” Britt said.

Britt has repeatedly criticized set top box equipment as cumbersome, expensive, outdated, and disliked from the perspective of customers. He noted the only reason Time Warner uses the boxes is to support traditional televisions that cannot handle all of the services the cable company offers today, including video-on-demand and encrypted premium channels. Moving to a different technology platform can result in significant savings if cable operators adopt open standard devices and technology.

Later this year, Time Warner will also be launching a nationwide channel realignment, affecting virtually every subscriber around the country. The cable company is adopting a unified, genre-based, national channel lineup, putting popular cable networks on identical channel numbers in every city.

Time Warner’s reported results found the company losing an additional 169,000 video subscribers during the quarter, a new record loss for the cable operator. Despite that, the company still booked an 8% increase in profits, thanks to higher prices for service and increases in the number of broadband customers. Time Warner blamed the video subscriber drop on seasonal losses from departing college students and those heading to vacation properties, as well as the downturned economy.

But the nation’s second biggest cable operator reports it has several initiatives under way for subscribers which they feel will boost earnings and subscriber numbers:

• Over the last 60 days, Time Warner deployed a new set-top box guide throughout the eastern region. After the Olympics conclude, the company will introduce the new guide across the western half of the country. The new guide features a new color scheme and better graphics, and is supposed to make navigation and search easier to use;

• The company will introduce IP-based set top boxes and home gateway devices by next year. The newest gateway is a combination DVR, DOCSIS 3.0 cable modem, and a video transcoder that can convert QAM-based video to IP for devices including game consoles and new IP set top boxes. Time Warner’s newest DVR will include the capability of recording five shows at the same time while watching another and 1TB of storage.

Install it yourself.

• Time Warner Cable’s TV Everywhere service will expand to include video on demand and the possibility of watching certain networks while outside of the home. The current service only works when you watch over your home Wi-Fi network.

• The cable operator’s Internet Essentials offer, which includes a 5GB monthly usage cap, will move beyond Texas and reach everywhere the cable operator serves by the second half of next year. When a usage meter shows up on your My Services page on Time Warner Cable’s website, you will know this new, optional plan is on the way.

• Time Warner is revamping their website to let customers shop, order, and buy more services online.

• Self-install kits will become increasingly common for customers comfortable installing their own services. The Easy Connect packages are available in stores or by mail, and are free of charge with no installation fee.

• Service call windows will continue to be refined. In most cities, two hour windows are currently offered, but the company is now moving to one-hour windows in many markets. In some cities, 15-minute windows for the first appointment of each shift are now available to customers who don’t want to sit at home and wait all day for the cable guy. The company is now also including an estimate of how long it typically takes to complete the type of service call requested.

• Customers continue to gravitate towards faster broadband service plans. The company’s Turbo, Extreme and Ultimate tiers together garnered 157,000 new adds in the second quarter and now comprise over 21% of high-speed data customers, up from 17% a year ago and 9% three years ago.

Britt also took questions about the impact Google Fiber will have on Time Warner Cable’s operations in Kansas City.

“There’s a lot of effort going on around the country to see what we could do as a society with more bandwidth in kind of a laboratory sense,” Britt said. “I view the Google effort as that. […] And I think that’s good for our business. We have a wonderful infrastructure, we have bandwidth, we have a way to go much faster with DOCSIS 3.0 by adding [higher speeds] to the offering. And the more the people figure out how to use broadband, the better off we’re going to be. So I think this is a good thing, not a bad thing, that people are trying to figure out how to use this technology.”

Time Warner Cable last week intimated the only thing keeping faster cable modem speeds from Kansas City customers is consumer demand and they are not worried about the arrival of Google Fiber’s 1Gbps broadband speeds.

The cable operator claims they have the advantage in Kansas City, as the first provider to offer a triple play package of voice, broadband, and television service. Time Warner also says they are constantly working on new, innovative services, including the much-touted “tablet remote” the company says it already offers customers in Kansas City in the form of apps available on the Android and iOS platforms.

“We always have the ability to adjust our network to keep up with demands from consumers [for faster broadband speeds],” Time Warner Cable said.

Cable operators and phone companies have traditionally argued there is little consumer demand for gigabit broadband speeds because the services most customers access online don’t need or cannot support that level of speed. Cost has also usually been a factor, and many operators point out the majority of their customers are satisfied with speeds of 20Mbps or less.

“We’re ready to compete any day, anytime, anywhere, with anyone,” said Time Warner Cable spokesman Mike Pedelty.

AT&T, which has been providing U-verse in parts of Kansas City since 2007 says it isn’t threatened by Google Fiber either.

Chris Lester from AT&T Media Relations notes AT&T now offers U-verse to more than 400,000 households in and around Kansas City and claims the company has gotten a “great response” from consumers, but declined to specify exactly how many of those households have actually signed up for service.

Both the dominant cable and phone company in Kansas City are betting on subscriber loyalty and consumer resistance to change to maintain their subscriber numbers. Statistically, they have a good chance of holding most of their current customers, at least for now.

The threat of Google’s fiber fast speeds may not be limited only to Kansas City, however. The Wall Street Journal has learned Google may be intending to bring its fiber network to other American cities, as long as they are not already served by Verizon’s FiOS fiber-to-the-home network.

Incumbent cable operators facing new competition from phone company IPTV (AT&T U-verse, Verizon FiOS) have not lost as much business as they first anticipated. In most cases, only 25-35% of customers eventually left for a satellite or phone company competitor. The older the subscriber, the less likely that customer is to consider a change, unless the service is poor or the price becomes unaffordable.

[flv width=”640″ height=”380″]http://www.phillipdampier.com/video/KCTV Kansas City Competition for Google Fiber 7-26-12.mp4[/flv]

KCTV in Kansas City talks with AT&T and Time Warner Cable about their newest competitor.  (2 minutes)

No cable operator has reported alarming results from subscriber defections, either from competition or cord-cutting behavior, and Wall Street analysts are watching subscriber numbers closely.

So far, reports on the ground indicate AT&T and Time Warner Cable are following the playbook first established when any new broadband provider arrives on their turf — aggressively market discounts tied to a contract with a stiff early termination fee to discourage customers from switching. At least one local provider has been reportedly sending salespeople door to door to try and lock customers in with a multi-year service contract. When that does not work, both companies use their customer retention departments to offer customers cheaper service in a last ditch effort to keep them from heading for the door.

Even with those defensive measures, some investors still see Google’s new fiber service as something new and different in the broadband marketplace — “the most disruptive thing since Gmail,” concludes Business Insider‘s Matt Rosoff.

Rosoff says Google Fiber could completely change the broadband landscape in the United States much the same way Gmail changed e-mail.

Back when Gmail launched, the other free email providers like Hotmail and Yahoo Mail were offering less than 5MB of storage — that’s five megabytes,” Rosoff writes. “Google trumped them all with 1GB of free storage. With so much storage, there was no need to trash anything. You could archive it and keep it forever.”

[flv width=”640″ height=”380″]http://www.phillipdampier.com/video/Fox Business News Google Stirs It Up 7-26-12.flv[/flv]

Fox Business News explores Google Fiber and finds phone companies telling reporters consumers don’t need 1Gbps broadband.  (2 minutes)

Gmail has since captured a large share of the email market, while also paving the way for Google’s increasingly profitable business apps. Some also argue Google’s “save everything online” approach was like training wheels for the cloud computing concept, where consumers think less about local storage and more about going online to access content. Google Fiber’s speeds make accessing online content effortless, and with no usage caps, customers need not ration their usage.

As of Monday, Google has already achieved the minimum number of needed homes to install Google Fiber in several, mostly affluent, Kansas City neighborhoods.

Rosoff says much like Gmail exposed the weaknesses of former email leaders like Hotmail, Google Fiber embarrasses incumbent Internet Service Providers and illustrates just how slow they have been to innovate.

“Google Fiber makes the cable-based ISPs look pathetic,” says Rosoff. “It promises to offer speeds up to 1,000Mbps downstream and upstream, for only $70 a month.”

In comparison, Time Warner Cable charges $100 for 50/5Mbps service in Kansas City. AT&T’s U-verse can only offer up to 24/3Mbps service, and it charges well over $50 a month for that, except on a new customer promotion. Both Time Warner and AT&T also sell “lite use” packages from 1-6Mpbs for $20-25 a month — service Google intends to give away for free after a $300 installation fee.

Many industry observers suggest Google is using its new fiber network in part as a hedge against market abuse from dominant cable and phone companies who are fiercely opposed to Net Neutrality and favor monetizing broadband usage.  Both are serious threats to Google’s business model which seeks more usage, not less. The more time consumers spend online, the more likely they will be exposed to a Google ad, use a Google product, or purchase a current or forthcoming service owned or partnered with the search engine giant.

Early indications from Kansas City show the cable and phone companies do have something to be concerned about. In more affluent areas of Kansas City, Google passed the minimum number of households willing to commit to the fiber service in just two days. Enthusiasm has been so overwhelming, tech entrepreneurs drooling for fiber service are hiring door-to-door promoters to visit nearby residents to encourage them to show their interest, in some cases even paying Google’s $10 pre-registration fee on their behalf.

More than 20 percent of the eligible “fiberhoods” in Kansas City, Mo. have already passed their signup goals. In poorer, mostly minority neighborhoods, Google is still waiting for their first pre-registration. In less affluent Kansas City, Kan., Google is finding considerably less interest, and pre-registrations are running below goal in all but three “fiberhoods.”

[flv width=”640″ height=”380″]http://www.phillipdampier.com/video/WDAF Kansas City Competitors Gear Up For Google’s Challenge 7-26-12.flv[/flv]

WDAF says competing cable and phone companies cannot deliver the speeds Google Fiber will offer, but they are betting consumers don’t need or care about faster broadband speeds. (3 minutes)

Time Warner Cable customers in Kansas City are ground zero for the cable operator’s retransmission consent battles with over-the-air stations that leave cable viewers without a full lineup of local channels.

Just hours after Time Warner customers got back two local stations owned by Hearst Corporation, Meredith Corporation’s KCTV and KSMO are preparing to pull the plug at midnight tonight.

“Please know that we have tried very hard to reach an agreement with Time Warner Cable, so that our viewers would not have to miss any of our stations’ around-the-clock reporting of news, politics, traffic, weather emergencies, public service announcements, and favorite local and national programming,” reads a statement from the two stations. “We are disappointed in the outcome of our negotiations especially since we have successfully reached agreements with every major cable and satellite company that recognizes our fair market value. The fact is that we are only asking Time Warner Cable for pennies a day from your cable bill for our programming.”

They did not elaborate on exactly how many pennies more a day they were asking to receive. Time Warner Cable suggested they wanted a 200% rate hike.

Should negotiations fail, viewers in Kansas City will lose their local CBS and CW affiliates. Time Warner Cable’s recent response to these disputes is to replace missing local stations with out-of-area stations, in this case most likely Nexstar’s WROC-TV in Rochester, N.Y., a CBS affiliate. Time Warner has not bothered to find a fill-in CW station to date.

But Nexstar last week sued Time Warner Cable in U.S. District Court in the northern district of Texas alleging copyright infringement and breach of contract for importing its TV stations without permission. Nexstar wants a temporary restraining order and damages. If the judge hearing the case issues the restraining order, Kansas City will have to do without a CBS station on Time Warner’s lineup until the dispute is settled.

So far this year, there have 69 instances of local stations withholding their signals from either a cable, phone, or satellite operator in disputes over retransmission rights fees.

In a hearing held yesterday in Washington, several senators attacked the disputes that deprive paying subscribers of broadcast stations.

Sen. Jim DeMint (R-S.C.) wants to repeal the 1992 law that allows broadcasters to require pay television operators to get permission and, in an increasing number of cases, payment to carry local broadcast stations.

DeMint argues the law has outlived its usefulness.

But Sen. John Kerry (D-Mass.) and others note the law also enacted several consumer protections and pro-competition policies that stopped programmers from withholding programming from competing pay television providers.

Kerry called demands to repeal the law altogether “radical” and suggested such moves could destroy local broadcasting. Cable operators want the power to negotiate contracts with out-of-area stations to leverage lower retransmission consent fees from broadcasters and provide customers with replacement stations when the two sides can’t or won’t agree to terms.

Broadcasters have suggested that could leave cable viewers with stations from distant cities, depriving viewers of important local news and emergency information.

For now, no action in Washington is anticipated. Broadcasters have leveraged their popularity to demand increasing payments for permission to carry their signals, and cable and other pay television operators, despite protests, usually agree to slightly lower fee increases and pass them right along to paying subscribers in the form of a rate increase.

Yesterday’s hearing, chaired by Sen. Jay Rockefeller (D-WV), discussed changes in television technologies over the past two decades. It focused on examining the effectiveness of the Must-Carry law, a 1992 law currently in place for the cable industry. The Must-Carry law requires a variety of local broadcast stations to be viewed on pay-TV platforms. Today’s Must-Carry rights were enacted by Congress in the 1992 Cable Act, which the Supreme court upheld in 1997. Congress then found that cable systems have an “economic incentive” to alter their local broadcast signals and that, without Must-Carry rules, broadcasters’ viability is jeopardized.

Although Chairman Rockefeller sought to not have the hearing derailed by retransmission consent disputes, a significant portion of the hearing dealt with that specific issue.

Top cable and broadcasting executives, as well as law experts testify. Witnesses include Melinda Witmer from Time Warner Cable; Martin Franks of CBS; the National Association of Broadcasters’ Gordon Smith; Colleen Abdoulah from Wide Open West!; Gordon Smith from the American Cable Association; law professor and former Disney Washington executive Preston Padden; along with Mark Cooper from the Consumer Federation of America. Courtesy: C-SPAN (1 Hour, 41 Minutes)