News

Here Comes $70 Triple Play

12/07/2007 7:00 PM Eastern

Charter Communications reset the bar for promotional triple-play offerings late last month, offering a package of 27 basic video channels, a 3 Megabit-per-second Internet service and telephony for $69.97 per month.

Charter unveiled the offering — more than $20 per month less than triple-play promotions from other large cable operators — on Nov. 22. The promotion is available in markets where Charter already offers telephone service and lasts for 12 months.

Primo Promo Pricing
Charter Communications introduced a promotional triple-play package for $69.97 per month in November, but says that on average customers are spending between $120 and $130 per month. Here are comparisons.
Promo Price Offering Avg. Spend
* Varies by market
SOURCE: Company reports
Comcast $99/mo. 100 digital video channels, 6 Mbps Internet access, digital phone $125/mo.
Time Warner Cable *$89.95-$99.95/mo. Either standard cable or low-tier digital video channels, 768 Kbps Internet access, digital phone. $120-$130/mo.
Cablevision $89.85/mo. 220 digital video channels, 15 Mbps Internet access, digital phone $115/mo.
Charter $69.97/mo. 27 broadcast basic channels 3Mbps Internet access, digital phone $120-$130/mo.

With the offering, Charter became the most aggressive of all the large cable companies, Pali Research media analyst Richard Greenfield said in a research report. He added that the catalyst behind the promotion appears to be driving larger inbound call volumes.

Lowering prices that far, to keep customers from defecting to telephone companies and satellite-TV services, could smack of desperation. But Charter chief operating officer Mike Lovett told an audience of investors and analysts at a recent industry conference that the promotion allows the cable operator to then sell customers more-expensive video and high-speed Internet offerings. He said that on the average, customers taking advantage of the promotion end up spending between $120 and $130 per month.

“Once the phone rings, we can upsell to other digital video packages,” Lovett said at the UBS Securities Media & Communications conference in New York last Tuesday. “A very small percentage ends up with the low-end video service.”

That is in keeping with other operators’ experiences. But Charter’s promotional video offering is much less robust than its peers.

Cablevision Systems kicked off promotional triple-play pricing in 2004, when it offered more than 200 channels of digital video, 5 Mbps high-speed Internet service and telephony for $89.85 per month ($29.95 for each service). In its first year, Cablevision said that the average promotional customer spent about $115 per month as they added on more advanced services. That increases to more than $140 per month after 13 months, after the promotion expires. That bundle, originally only available to new customers, is now open to existing subscribers and offers data speeds of 15 Mbps.

Cablevision has the highest penetration of basic video (67%), digital video (83%), high-speed data (47%) and telephony (32%) in the industry. As of the third quarter, nearly half of Cablevision’s customers subscribed to the triple play, also tops in the industry.

Comcast also offers a similar promotional triple play in most of its markets for $99 per month ($33 for each service) with about 100 video channels. The typical promotional customer usually upgrades to higher tiers of service and spends, on average, about $125 per month.

Time Warner also offers a similar introductory package — either standard cable or low-tier digital cable channels, phone and Internet service at 768 Kilobits per second — for between $89.95 and $99.95 per month (depending on the market), with the average take after upselling between $120 and $130 per month.

In a research report, Greenfield said he was “surprised that more [operators] have not tried cheaper triple-play pricing.”

Cablevision, he noted, had the highest average revenue from customers, at $130, while offering the lowest system-wide triple-play pricing, at $90, and “industry-leading penetration rates across all products.”

November