Blog Post

Why Time Warner Cable Is Cutting Its Own Cord

UPDATED At CES Thursday, Time Warner Cable (s TWC) announced two partnerships the company had struck with consumer electronics manufacturers to make its live and on demand programming available over IP, effectively cutting out the need for a set-top box. By integrating with broadband-connected TVs from Sony (s SNE) and Samsung, the cable provider will be able to compete more effectively with online video services running on those devices. But it could also open the door for Time Warner Cable to compete with other cable providers at some point in the future by offering IP-delivered pay TV services over other providers’ broadband networks.

The news here is that Time Warner Cable is shedding its need for a fixed infrastructure and will be making its video available via broadband instead. It’s a risky bet for the cable provider, but the decision to move to IP will surely help it compete more gracefully with a growing number of over-the-top competitors such as Netflix (s NFLX) or Hulu Plus that are also becoming available on connected devices. By moving to a broadband delivery mechanism, Time Warner Cable will effectively be able to serve its programming on all the same platforms and devices that its competitors do.

For now, Time Warner Cable says these features will only be available to users that live in its network footprint, and that you would have to be a high speed data subscriber to connect its pay TV services to your shiny new Samsung TV through an Ethernet connection. But you can see where this is going: If Time Warner Cable can deliver its live and on-demand pay TV services to its own broadband subscribers, what’s to stop it from delivering those services over other providers’ broadband networks? Time Warner Cable even appears to allude to the possibility in a blog post written by Director of Digital Communications Jeff Simmermon:

“This is the beginning of the elimination of the set-top box, a movement towards a world where you can connect anyone’s hardware to the network — or anyone else’s network [emphasis ours] — and enjoy television the way you like it, simple and easy.”

We’ve long believed that sooner or later, some video distributor would begin making a package of live and on-demand TV programming available over broadband networks — essentially cable without the cable. While we expected it might be Apple, (s AAPL) Microsoft (s MSFT) Xbox or some other relative newcomer to the cable world, it makes perfect sense for someone like Time Warner Cable — which already has the distribution partnerships in place — to break new ground by delivering a broadband video package over other ISP networks. By doing so, it will no longer limit itself to the potential customers already living in its footprint, but can expand that offering to the 100 million or so households that subscribe to pay TV services around the country.

Of course, Time Warner Cable isn’t the only distributor making its content available on connected devices; a number of cable and satellite companies over the past year have touted existing or upcoming applications for mobile devices or tablets. At CES, Comcast (s CMCSA) also showed off integration with Samsung TVs, though a spokesperson confirmed that a cable set-top box would still be needed for the integration to work. And Verizon (s VZ) is reportedly moving its live video services to an IP architecture, but it has yet to announce any connected device deals. For right now, Time Warner Cable is well ahead of its peers.

Update: Time Warner Cable Director of Digital Communications Jeff Simmermon finally responded to our request for clarification on how the IP video feed sworks:

“The video feed comes into your house via our own infrastructure (but in an IP format), and is then distributed via your home wireless network to tablets within your home or to other connected devices like the Samsung TV. Right now, we’re focused on our making our existing video product more convenient and easy for customers by giving them flexibility on in-home devices.

To use this service, a customer technically only would need a video (cable TV) subscription from Time Warner Cable. While they would need to have a cable modem and wireless network in the home, they theoretically would not have to subscribe to our HSD (broadband) service.

This is all in development, however — and may change during the year. However, that’s where we are right now.”

Photo courtesy of (CC-BY-SA) Flickr user Akarsh Simha.

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8 Responses to “Why Time Warner Cable Is Cutting Its Own Cord”

    • Ryan Lawler

      Dave, Thanks for the input. Saw that this morning, but unfortunately, without being on the ground at CES I missed some stuff. Will follow up with Verizon to learn more about their device plans!

  1. I’m a TWC subscriber in Austin Texas, and I’ve been trialing the FilmOn and ivi TV streaming services for a comparison review. It occurred to me when using these OTT live TV services, TWC could offer this to me.

    Kudos to TWC for stepping out of its legacy comfort-zone — it’s about time. Also, as TWC continues to experience local subscriber downgrades and disconnects, it would be wise to go after Comcast’s customers to backfill the lost revenue.

    The industry analyst community would likely reward this positive move — it’s been the recent inaction that makes informed people question the MSO executive leadership.

  2. It will be interesting to see how Time Warner competitors, like Comcast, handle this type of broadband traffic. Given Comcast’s spat with Level3 after their Netflix deal last month, I suspect large amounts of video traffic sold into Comcast’s territory won’t be delivered without some upheaval.

    Unless Comcast does the same and they just consider it even…

  3. This is also a way for Cable providers to bypass the public access requirement mandated by the FCC in the top 100 U.S. television markets.

    While the fees that subsidize the operation and equipment used by organizations operating channels airing government meetings and/or community produced shows varies from city to city, it normally shows up as an additional $1-3 fee on each subscriber’s bill. The cable company simply collects these fees and passes the $$ on. In many cities, this amounts to millions of dollars a year.

    One of the original justifications for this arrangement was the local community deserved something for giving the cable companies the right to rip up their streets and yards, but other ISP’s never had to pay this fee for the same type of rights. Once cable converts their delivery to IPTV, it will be difficult to justify continuing to force what were “cable” companies to collect these PEG (pubic, access, government) fees while their competition does not. That’s either a $1-3 savings for customers or (more likely) $1-3 more to fund this transition or profit from it.

    • Kevin-
      Thanks for pointing this out. I think the majority of people do not understand the funding mechanism of PEG access and do not realize the negative impact that ‘cord cutting’ has on it. It is unfortunate that the same access funding requirements were never initiated for other telecom companies. I am hopeful that a strong informational campaign about this effect will encourage cord cutters to donate some of their savings to the PEG access stations in their communities. In most cases, $12 to $36 a year would equal the PEG money lost and help keep local, independent media alive.