Despite the financial troubles that cloud Charter Communications Inc.'s big picture, the MSO will plow ahead with widespread high-definition television rollouts.
Eighteen markets — representing 800,000 digital homes and 2.7 million homes passed — now have access to Charter's HD services, via Scientific Atlanta Inc. set-top boxes. Testing is underway in 15 Motorola Inc. markets, in which HD services will launch over the next few months.
That means by year-end, more than half of Charter's subscriber base — 1.7 million digital subscribers and 5.3 million homes passed — will be HD-capable, according to Carol Tracy, director of advanced service implementation. The St. Louis-based MSO presently counts 2,000 HD subscribers.
Like other MSOs, Charter is working to follow through on the National Cable & Telecommunications Association's promise to roll out HD. The MSO has also lost hundreds of thousands of subscribers — many to direct-broadcast satellite providers capable of delivering high-definition programming services.
And one private investor in Charter — Mark Cuban, founder of Broadcast.com and owner of the National Basketball Association's Dallas Mavericks — is a major proponent of HD. Charter carries his HDNet network, along with feeds from Home Box Office, Showtime and Discovery Networks U.S.
"We want to take the lead on HDTV," said Charter director of retail sales Steve Frank.
Added Diane Schnederjohn, Charter's senior vice president of marketing and programming, "One of the goals is to get back defectors from satellite."
Charter launched HD in five markets last June. "We started in key markets spread across the country that had a high propensity to buy HD," Frank said.
Subscribers paid an additional $3.35 per set-top, in addition to standard box-rental fees. Since then, Charter has created a $9.99-per-month HD tier, which includes Discovery HD Theater, Cuban's HDNet, HD Entertainment and the lease fee for the S-A HD 3100 set-top. In Motorola markets, Charter is testing the DCT-5100.
(In mid-February, Charter switched from a lease to a sales strategy for new HD subscribers. Existing customers can continue to lease their boxes, Charter said, but all new customers — including those in the Fort Worth kickoff market — will have to buy an HD set-top at retail.)
Charter, which carried ABC's Jan. 26 high-definition feed of Super Bowl XXXVII in a few areas, is close to offering broadcast HD signals in several markets.
"The broadcast deals have been a little slow because of retransmission-consent negotiations," Schneiderjohn said. "We wanted to separate the HD deals from the retransmission deals."
Now that the retransmission deals are done, "we hope to be there in the next couple of months," she said.
"Initially, we had a plan of nine channels — six satellite and three off-air," Frank said. The MSO is now writing its wish list, and based on the technology it bought from Terayon Communication Systems Inc., it can handle 12 HD feeds, although that total can be increased.
"Movies and sports are really the big drivers," Schneiderjohn said.
Charter is comfortable with pricing the HD tier at $9.99 and adding product to that offering.
"We'd like to be able to introduce new product and we don't want to be raising rates," Schneiderjohn said. "It's pricing that we feel comfortable with and will hold us for the next couple of years."
A second growth area could be video-on-demand content in HDTV.
"We see a place for HD VOD [because] it gives us flexibility there with more content," she said.
By offering HD content on an on-demand basis, Charter could generate revenue without raising the price of its basic HD tier.
For MSOs, HD cost considerations must be measured against actual return. Set-top lease rates can cover the cost of the in-home equipment, but Charter's decision to sell boxes at retail is designed to save every last dollar in a capital-constrained market.
To maximize bandwidth on the plant side, Charter purchased 32 Terayon DM 6400 statistical multiplexers for its HD rollouts. The new multiplexer has can funnel up to four HD streams on a single 256 quadrature amplitude modulation channel.
Charter will use the units to mix three HD streams per channel.
"You have to look at bandwidth allocation," said Charter senior engineer for digital technology Pragash Pillai. HD signals travel in digital form from the master headend to remote hubs and are processed in either S-A or Motorola QAM modulators, depending on the system.
"On average we have three remote locations per system," Pillai said.
Use of the 6400 allows Charter to buy software for each HD program service that it launches on an incremental basis.
"It is pay-as-you-go," he said. "We've not sunk capital."
There is also a direct link between the technology and the type of content it transports, Pillai noted.
"With the 6400, it is very important to understand your content," he said. "You don't want to put all sports into one 6 Megahertz channel. You want to mix sports and movies. That provides better quality and less interference."
Charter will target its systems in the top 100 TV markets, including operations with as few as 25,000 basic subscribers, said vice president of digital services Powell Bedgood.
"Content is going to drive demand, and we're managing our content very closely," he said. "We want to make sure it's what consumers actually want."