Charter Communications said it is on track for a midyear launch of its anticipated mobile service, but it still hasn’t figured out a pricing model yet.
“We haven’t decided how to price it, but our long run view of pricing is we should offer good value for high quality value,” said Charter Chairman and CEO Tom Rutledge, speaking during Charter’s fourth-quarter earnings call today. “The consumer ends up with high-quality product features with a single customer relationship, and those features individually and in aggregate are priced more efficiently than they would be as standalone product.
“Comcast did a really nice job with their pricing model,” Rutledge added. Comcast launched its mobile product a year ago, leveraging the same MVNO deal with Verizon Charter has and pricing the service with a pay-as-you-go strategy. Comcast said during its Q4 last week that it now has 380,000 lines of service in the marketplace.
Overall in the fourth quarter, Charter reported 3.2% revenue growth, with Florida “snowbird” customers acquired in the 2016 Bright House Networks purchase driving narrow growth in video subscribers of 2,000.
Subscribers: In a year in which pay TV operators in aggregate will lose more than 3 million subscribers, any customer growth is news. Charter lost 51,000 video customers in the fourth quarter of 2016. Charter’s video revenues increased in the quarter by 3.1 to $4.2 billion, driven by annual rate increases. Meanwhile, high-speed internet users increased by 263,000—a decrease in growth from the 357,000 added in the fourth quarter of 2016.
Capex: Expenses related to the Bright House and Time Warner Cable transactions, along with network infrastructure investments related to Charter’s conversion to DOCSIS 3.1, drove up capital expenditures for the operator by $697 million, year over year. Charter said it plans to have 1-gig services available to all of its 50 million passings by the end of this year.
Original content: As with the mobile service, Rutledge spoke in only broad, vague perimeters regarding original content deals recently forged with Viacom and AMC Networks. “The plan is to work with proven content companies to get economics that work for us in terms of windowing, and use that content to create brand halo around our product in effective way in the marketplace,” Rutledge said. “It essentially creates a window of opportunity for us in way that fits our customers, and allows us to monetize that content properly over a bigger distribution footprint, meaning the world. We’ll see where it goes.”
Rutledge was asked if advanced advertising was factored into this original content strategy. “We’re pretty bullish in our ability to grow our advertising business,” he said. “Taking political out, we grew our advertising business by 3% last year. … “Using more anonymized analytics to drive better adverting product in the market, in all digital environment, we have the ability to use our inventory in much more targeted way, so that the advertiser gets more responsive ad, we get higher CPM. We’ve made significant strides. We have much more advance advertising platform.”
More on wireless: Beyond Charter’s consumer mobile aspirations, Rutledge continued to tout his company’s experiments with “high-capacity, low-latency services that can be delivered to consumer premises and businesses.” He said Charter is experimenting with different spectrums “that we hope will become licensable, or private. Our thought is that we may want to take additional licensed spectrum and combine it with Wi-Fi spectrum to create a home and business platform. But there are not plans to launch it in 2018 or 2019 for that matter.”
Corporate tax break: Charter CFO Christopher Winfrey said the company's effective tax rate dropped to around 24% with December's Republican-led corporate tax rollback. With that, Charter said its base employee pay will now be $15 an hour. The federal minimum wage is currently $10.10, but Democrats in the Senate last year introduced a bill to raise it to $15 an hour.
On Trump’s state-run national 5G gambit: Rutledge dismissed reports that the Trump Administration is developing a state-run national 5G network as infeasible. “I don’t know if such a thing is possible,” he said. “For one thing, there is no 5G spec yet. And to do it in a mobile environment, you’re talking about a massive amount of tiny cells. Could the government manage something like that? It’s hard to conceive. I understand the security issues, but I just can’t imagine nationalized infrastructure like that.”