Driven by young adults wanting to decide themselves what CPE is in their home, Tom Robey, senior VP of investor relations for Time Warner Cable (NYSE: TWC), said the pay-TV industry is migrating to a "bring your own device" model.
Speaking at a lunch event Thursday for Jefferies investors, Robey said the transition from leased set-tops will take years, and TWC doesn't envision ever abandoning the business completely.
Robey's comments mirror those of TWC Chairman and CEO Rob Marcus, who has said trials of a new streaming pay-TV service being conducted by the MSO in New York -- which currently uses TV Everywhere services and Roku devices -- are primarily aimed at dispensing of CPE costs.
"This should have positive [capital expenditure] implications," said Jefferies analyst Mike McCormack.
"The benefits are significant, including both capital and operating efficiencies," he added. "Additional investments in the backbone and access networks are likely, but do not sound onerous and back office/provisioning appear to be the impediments to larger scale availability. Body language suggests the company is not aggressively considering an out of territory offering for competitive reasons, though programming rights may also impose some limitations."
TWC's move toward a BYOD approach to set-tops comes as the FCC, under pressure from Congress, is looking for ways to goose the market for retail set-tops that can work in the pay-TV ecosystem. Sens. Ed Markey (D-Mass.) and Richard Blumenthal (D-Conn.) are leading a crusade to end what they describe as a cash grab by operators, who they claim are reaping $20 billion a year by leasing their own set-tops.
Jefferies' McCormack, however, noted that the Senators are leaving the high costs of advanced set-tops out of the equation. "The notion that rental fees are pure profit is misguided given the associated operating costs," he said.
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