Rutledge: Charter Should Grow Video Subs

As MSO Goes All-Digital, Video Rolls Swell

New York – Charter Communications CEO Tom Rutledge said he expects the Connecticut-based cable operator to show positive video customer additions by the time it completes upgrading its infrastructure to all-digital, anticipated by the end of 2014.

Rutledge wouldn’t say how many customers he expects to add, but said that as Charter has finished the all-digital upgrade in select markets, those markets have experienced a video customer uptick.

The cable industry has been plagued by video customer losses since 2001, when the cable business peaked at 66.9 million video subscribers. In 2012, cable customers numbered about 56.4 million across the country.

Rutledge said that gradually, Charter is turning its video business around through repackaging, repricing, expanding its HD channel capacity and boosting its Internet speeds.

“Now that the mix of expanded basic to limited basic is closer that we are beginning to grow the video base across our entire platform,” Rutledge said.

Overall, Rutledge said that Charter is growing its customer relationships – a mix of voice, video and data customers – by about 3%. In Texas, where Charter is testing its new user interface and is an all-digital market, video customers are growing for the first time in more than a decade.

Rutledge said the Charter strategy is simple – offer a high-quality product and service so that when a customer is faced with a pricing step-up after a promotional period ends, they believe it is worth it.

“Cheap and not very good don’t have any step up power,” Rutledge said. “We don’t put anything in the house that isn’t superior. When the day comes to do the step up, what they are stepping up to is worth it. That’s the fundamental marketing strategy that we have.”

Rutledge added that Charter’s rebranding initiatives are also part of that strategy. Earlier Charter said it is rolling out the Charter Spectrum brand in select markets to reflect the changes in products and services. The move is similar to those made by Comcast (Xfinity) and Cablevision (Optimum).

Rutledge added that whether Charter holds on to both names is a marketing question. The former Cablevision chief operating officer added that when he was at the Bethpage, N.Y.-based MSO older customers liked the Cablevision name and younger customers preferred Optimum.

And he said the two-moniker system had its advantages.

If we were fighting with Fox we were Cablevision,” he said. “If we were doing something cool, we were Optimum.”

Charter, which has been at the forefront of industry consolidation talk after it reportedly made overtures to acquire Time Warner Cable in June, doesn’t need to make acquisitions to be successful, Rutledge said, echoing his common refrain on analysts calls and industry conferences. But he wasn’t entirely averse to a deal – for example, he said Charter would raise its leverage ratio from 4 to 4.5 times cash flow if a good opportunity arose, adding that historically low interest rates have made it easier to borrow large sums of money. Charter reportedly has lined up $25 billion in bank financing for a possible TWC bid.