Time Warner vs LIN – Helping Promote the DTV Transition

Time Warner Cable’s churn rate is about spike in at least 13 cities. Yesterday, Time Warner lost the right to carry LIN broadcast stations because it refused to pay a retransmission fee of what amounts to less than a penny a day per subscriber. In the Austin market this means Time Warner customers no longer have access to NBC and the CW. The cable provider went so far as to develop a Web site full of corporate spin accusing LIN for trying to charge its customers for a free service, while ignoring the fact that all cable providers charge subscribers for stations they could access over the air for free.

Time Warner Cable spokesman Alex Dudley said broadcasters like LIN TV will have to look elsewhere. “They are not gong to prop up their failing business model on our customers’ backs,” Mr. Dudley said. – Wall Street Journal

This notion of a “failing business model” is amusing because it is directly applicable to Time Warner. A decade ago most customers had only one option for cable. The satellite market was nascent and phone companies were still simply phone companies. The problem is Time Warner refuses to acknowledge that it is not the only game in town anymore and in fact has become a commodity. In Austin Dish Networks, Grande Communications and AT&T have all negotiated deals with LIN. Price and selection dictate customers cable provider selection. Currently, Time Warner fails at both.

Since most of the markets impacted are small, it is likely Time Warner thought it could strong arm LIN into a more favorable arrangement. Unfortunately, one of those small markets involves the FOX station in Green Bay. In PR 101 I believe there is an entire paragraph dedicated to not messing with the ability of Packer fans to watch their team. Anybody want to guess what the feature story on most NFL pregame shows will be this weekend?

February 19, 2009 is an important day in the U.S. It is DTV day. As most should know, all analog broadcast transmission will switch to digital. Most cable company retransmission contracts with local broadcast stations expire on Dec. 31, which could point to a boom in digital antennas and converter boxes. For those that are a bit more Tech savy, this could be the final nudge to abandon cable entirely. As I discussed in June, it is now possible to watch nearly all television legally online. According to the Wall Street Journal’s Nick Wingfield, some analyst suggest up to 90 percent of prime time network shows and up to 20 percent of cable programing is now availabe and these numbers will only grow with time. A vision of the digital living room: HD TV with antenae to receive local channels that is connected to a computer with high speed internet access. Thanks to online movie streaming capabilities from companies like Amazon and Netflix, the computer does not even need a DVD drive. Since Time Warner Cable is also experimenting with metered internet service, I do not really see any consumer benefit in subscribing to a single offering. Perhaps Time Warner should rethink spinning off AOL…

Say Goodbye to Your Cable Bill…Almost

Today Time Warner Cable began testing metered internet service in Beaumont, Texas. When I first heard about the test, I immediately panned it as a mistake that would result in poor PR and no national change to the limitless internet U.S. broadband subscribers enjoy. I was not alone as most in the Tech world believe this will be a failure. GigOM provides a strong argument on why it will not work, while my favorite sports owner of all time, Mark Cuban, provides an equally compelling argument that works when you look at it from a non-techie or baby boomer perspective. I will come back to this.

Just the other day I noted to a friend that I may be done with cable. I am not a big TV watcher to begin with, and I can get just about everything I do watch on legal sites that provide high quality streams(ie not YouTube). All I need is broadband internet access…that and College Football and the NFL to provide live streams of all their games much like CBS did with the NCAA Men’s Basketball Tournament this year or Major League Baseball is doing now. It would not be terribly difficult for me to connect a computer to my TV and suddenly have my entire digital world on demand and dropping my most expensive bill in the process. I am just one of the growing number moving in this direction.

The problem of course is Baby Boomers and those who would not adopt the online video trend until forced to. I am thinking specifically about my parents and my sister here. With zero stats on this, I am going to go out on a limb and suggest they make up the majority of cable providers current subscribers. I suspect this group’s download needs would fit nicely into Time Warner Cable’s tiered package (ie low to medium usage at best). This means the majority of cable provider customers would not push back on the change because it would not increase their bill.

My bill would sky rocket and all the benefits of not ordering cable would quickly evaporate. I guess Time Warner Cable is not dumb after all. While this may help prolong ISPs from becoming the commodity my generation views them as, it will decidedly stunt innovation. A possible happy middle ground could be seen with Comcast’s proposed cap, but I think any metering could evolve into a slippery slope that will hurt customers in the end.