Hobbs: Satellite, Telco Promos Tick Up

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Coming off a strong first quarter, Time Warner Cable chief operating officer Landel Hobbs said the momentum is continuing, despite what he said is a slight increase in promotional activity from competitors.

Time Warner Cable reported first quarter earnings in late April,  and despite a loss of about 42,000 basic customers (which was better than analysts' expectations) showed strong growth in high-speed data and phone customers. Hobbs, speaking at the JP Morgan Global Technology, Media and Telecom conference in Boston, said that momentum is continuing, adding that the company has seen only a slight uptick in marketing activity from telco and satellite TV competitors.

Hobbs said that the marketing spend in its footprint by telco competitors like AT&T U-Verse and Verizon Communications FiOS TV was flat to down in the first quarter and he believes the same is holding true in the second quarter so far, although FiOS has been offering no-contract plans to some apartment buildings in New York City.

"Their [telcos] footprint expansion is beginning to slow, and Verizon has indicated it may slow it even more. We're seeing build out slow down, but we're also more imp seeing penetration slow. We saw in the first quarter according to our analysis that share losses to them are beginning to slow."

Verizon announced earlier this year that they would not build out additional markets for video services, instead concentrating on their existing markets.

But Hobbs said that satellite TV giant DirecTV is beefing up its promotional offerings so far in the current quarter.

"It's too early to tell what marketing intensity looks like because we're still in the middle of it," Hobbs said of the second quarter, adding that so far promotional activity is "slightly more aggressive."

He said that for example, DirecTV has in the past focused on national offers, but now is beginning to offer different plans regionally. And he added that promos that used to last about one year are now being extended to coincide with their contractual terms, which could be two years.

Hobbs said that Time Warner Cable is well-positioned to meet the competitive threat, adding that the second largest cable operator in the country has been focusing on segmenting its product offerings to meet customer needs.

That includes offering more ethnic packages, like its El Paquetazo Hispanic offerings,  adding more day-and-date movies to its video on demand lineup and in June will be offering multi-room digital video recorders and remote programming of DVRs.

"A lot of the things I'm talking about, you are liable to see different product sets for different customers," Hobbs said. "That's coming this year as well."

On the high-speed Internet front, Hobbs said that Time Warner Cable has already launched DOCSIS 3.0 ultra-high-speed Internet service in New York City, Dallas, Cincinnati, Buffalo and Syracuse, N.Y. and will launch in Charlotte, N.C. "soon." He added that because there are a limited number of applications for the ultra-high speed service, Time Warner Cable will use DOCSIS 3.0 in a "smart way," and would only accelerate the roll out if demand spiked.

Hobbs said that telephony growth is slowing down, but has shown gains in the high-end customer segment. Younger people, the so-called millennials, who he said have given up landline phones for wireless in greater numbers, are not as enamored with the product at any price point.

"They've [millennials] cut the cord," Hobbs said. "I shouldn't even try to sell it [phone] to them. It's not efficient."

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