Time Warner Cable's Britt: Usage-Billing Episode 'A Bit Of A Debacle'

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Time Warner Cable CEO Glenn Britt addressed the backlash against the operator's recent plans to expand usage-based billing trials for its high-speed Internet services, conceding that the sequence of events was "a bit of a debacle."

"Clearly we did not handle the public-relations side of it very well," Britt said, speaking Friday at Sanford Bernstein's Strategic Decisions Conference in New York. "We had a bit of a debacle, to be honest. So we pulled back from that."

Time Warner Cable had planned to initiate usage-based billing trials in Rochester, N.Y., and Greensboro, N.C., in August, followed by San Antonio and Austin, Texas, in October. The operator first tested the concept in Beaumont, Texas, last summer.

After an uproar from politicians and consumers, Time Warner Cable announced it would postpone those plans "while the customer-education process continues."

Britt said the usage-based billing tests were "looking out toward the future" to prepare for the growth of applications that use very large amounts of bandwidth.

Whereas broadband service have been defined so far just based on speeds, Britt said, the main issue is that consumption over the existing tiers is growing quickly.

"As we have more and more high-consumption applications, we thought the business should work like everything else in life: You use more, you pay more; you use less, you pay less," he said.

Meanwhile, cable customers are beginning to view broadband, rather than video, as the core component of the multiservice bundle.

"In the last year we're starting to see from consumers the indication that the broadband part is more the anchor part of the bundle than video -- that they value that more highly," Britt said. "I think we're going to see more of that in the future."

In the first quarter of 2009, Time Warner Cable gained 36,000 basic-video subscribers, which the company attributed mainly to the publicity around the broadcast digital TV transition.

Britt said the broader DTV transition -- set for June 12 in most markets -- could produce addition subscriber gains for cable but added that it was too early to tell for sure.

A general slowdown in subscriptions in the last two quarters, according to Britt, has been related to the decline in the housing market.

"There's a phenomenon of people losing their houses and moving back in with their families," he said. "I have all my marketing statisticians focused on that... If housing gets healthier... there will be a subscription upturn."

Britt contended that in the first quarter, the satellite TV providers did not steal any net video subscribers from Time Warner Cable. "We believe in our footprint, the satellite companies had essentially no gain," he said.

While DirecTV added a net 460,000 subscribers in the period, Britt said, "We don't think they came from us."

As for the telcos, the main competition is on the broadband side, with Verizon Communications and AT&T having built out 20% of TWC's footprint with video services.

"Clearly it remains true today that our primary video competitors are the satellite companies," Britt said. "In broadband, it's clearly the two big phone companies."

Asked about capital spending, Britt said he doesn't see a major rebuild of TWC's network anytime in the next 10 years.

"I'm very comfortable with our plant," he said. "For as far as I can reasonably see, in the next five to 10 years, I don't see a need for a massive upgrade."

Capex on customer-premises equipment, specifically set-top boxes, could decline in the future if set-tops could be made "dumber" over time, Britt said.

"We're having a debate internally now about ways to make those boxes essentially dumber over time," he said. "They're actually pretty powerful computers... If there's a way to make those less intelligent, there's a way to make those less expensive and less obsolete."

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