Time Warner Cable Gained Many Over-the-Air Wilmington Viewers

Britt warned, however, against using the results from the transition in Wilmington as a blueprint for the rest of the U.S. as the Feb. 17 analog cut-off approaches. The Wilmington market had a small number of over-the-air homes and a large satellite installed base, he said. While Time Warner Cable is the Wilmington area’s largest cable operator, it has fewer than 100,000 subscribers there, Britt said. There also was a large dose of publicity from broadcasters, retailers and others that raised awareness of the move to digital in Wilmington, Britt said. The same may not hold true for other regions of the U.S., he said.

“There’s a risk” that a “few million” homes won’t have heard about the national DTV switchover before the February deadline and may lose service, Britt said. Whether the Wilmington test means “anything to the rest of the country remains to be seen,” he said.

Time Warner Cable has gained the needed state and local franchise support for a proposed spinoff from Time Warner Inc. and is “well along” in getting the required IRS opinion on the deal, Britt said. But the proposed spin off hasn’t been scheduled yet for an FCC vote, he said. In May, Time Warner Cable proposed spinning off from its parent in a deal that would pay out a one-time $10.9 billion dividend to Time Warner shareholders.

While Time Warner Cable also will take on $9 billion in debt, Britt expects the company to keep its investment grade credit rating intact, he said. Time Warner has agreed to lend the cable affiliate $3.5 billion over two years. The MSO also issued in June $5 billion in senior unsecured notes and debt, including $2 billion of 6.75 percent notes due 2018, the company said in an SEC filing. Despite the downturn in the U.S. economy, Time Warner Cable is “comfortable” with deal’s structure, Britt said.

Time Warner Cable is continuing to test metered broadband pricing in Beaumont, Texas, but hasn’t decided whether to expand it, Britt said. Tests involve several scenarios, including managing activity so as not to tax the broadband network and charging “those that use it more often,” said Britt, saying he favored charging fees. Britt declined to disclose how many Beaumont customers were involved in the test.

TW also plans to launch sales of Clearwire in late 2009, combining the WiMAX service with its “Internet and product offerings,” Britt said. The WiMAX technology will be used for access to DVRs and video-on-demand with a goal of being a “different kind of hybrid service” and not “another cellphone” offering, Britt said. Time Warner Cable invested in Clearwire, as did Comcast and several other companies.

As Time Warner Cable readies new services, it’s struggling with a basic video business that’s suffering “a little bit more churn” and a slowdown in new subscribers that “will make net adds worse than last year,” Britt said. Time Warner Cable’s business performance “dramatically slowed” in October and November because of the economic crisis, Britt said. Time Warner Cable had 13.26 million basic video subscribers as of Sept. 30, including 8.6 million getting the digital service, vs. 13.3 million and 7.8 million a year ago, according to the company’s 10-Q. The economic slowdown has affected the rate at which subscribers sign up for advanced services. Time Warner Cable’s DVR business is down 40 percent from a year ago, he said.

Time Warner Cable also is facing “cost pressures” as it renegotiates retransmission agreements with broadcasters, Britt said. With broadcasters suffering a decline in local advertising, some station groups “don’t have anywhere to go, so they make big demands,” Britt said. In October, LIN TV demanded that Time Warner Cable drop carriage of its broadcast channels in 13 cities after the two companies failed to come to terms on paying for carriage of LIN stations. Cable operators will likely “take up” the retransmission agreements with the new Congress, Britt said, saying the structure created in the 1990s “may not make sense now.”