Charter pursuing Netflix, Hulu integration

Charter Communications (NASDAQ: CHTR) CEO Tom Rutledge said his company, which just completed its acquisitions of Time Warner Cable and Bright House Networks, is pursuing integration of OTT services like Netflix (NASDAQ: NFLX) and Hulu.

Speaking today at the MoffettNathanson conference, Rutledge said there's no reason Charter can't integrate OTT services directly into its user interface and other products, adding that those services add value to Charter's broadband offering.

"Most consumers only understand broadband capacity from a video application perspective," Rutledge said. "Having these products makes your broadband more attractive, and having these products as quasi substitutes makes your programming cost not as aggressive and maybe even lower."

Cable providers like Cablevision (NYSE: CVC) already integrate services like Hulu within their channel guides while satellite operator Dish Network (NASDAQ: DISH) offers Netflix on its Hopper set-top box.

Rutledge didn't sound overly concerned about Hulu's plans to launch a streaming TV offer and likened Netflix to just another premium channel, adding that most Netflix subscribers also pay for TV.

But those services need a broadband backbone to operate and that fact led to questioning about Charter's agreement to the condition that it will not enforce usage-based pricing or data caps on its internet service.

To that, Rutledge said he thought that business model was never a good way to sell things, dating back to old usage-based models for services like long-distance phone and AOL's former approach to selling internet access.

Rutledge said Charter never intended to offer usage-based pricing and proposed a three-year ban on it while "gussying up" its acquisition proposal.

"I didn't like agreeing to not be able to do it, mostly because I was concerned about the financial community that thinks it's such a great thing," said Rutledge. "But not so much concerned about it from my own business strategy."

Rutledge did confirm that there's a five-year "out" with the FCC's Media Bureau but that it only applies to the wireline business.

Of course, Charter's agreement to avoid data caps was one reason, along with agreeing to not charge for interconnection deals, its TWC-Bright House merger won the important backing of Netflix long before regulatory approval was reached.

In addition to OTT services, Charter is also talking about wireless services. Rutledge today confirmed that, now that Charter owns TWC, it has access to the same MVNO agreement with Verizon as Comcast.

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