Charter Communications' Jay Rolls on traditional video in a changing market

Jay Rolls, Senior Vice President and Chief Technology Officer, Charter Communications

Rolls

While Charter Communications (Nasdaq: CHTR) executives are beginning to position its high-speed Internet service as its core product, senior vice president and CTO Jay Rolls says that the fourth largest U.S. cable MSO won't be exiting the video business any time soon. In a wide-ranging interview with FierceCable, Rolls says video will remain a key part of the bundle Charter markets to subscribers "unless something radical happens." Rolls also talks about the prospect of advanced devices such as Microsoft's (Nasdaq: MSFT) Xbox or Sony's Playstation replacing the cable set-top, and the potential the cable industry has to deliver live video to mobile phones and tablet computers.

FierceCable: Does Charter view itself as more of an ISP than a traditional cable company?

Jay Rolls: The label 'cable company' comes with connotations. Mainly it comes from a place where you were a video service provider. What we're trying to embody more is truly what our portfolio looks like, which is a whole bouquet of services, but obviously it's starting more and more to center around our broadband product, and the capabilities our broadband product provides us to provide other services than pure broadband.

FC: A lot of cable operators say that selling video is the least profitable part of your business. Could you see Charter or another cable operator someday exiting the video side of the business and make a business out of selling access to the pipe?

Rolls: I can't see that, in even the longer term future, unless something happens with the whole video ecosystem that it somehow gets totally turned upside on its head. I think we all know if it started going in that direction, it would be a long, slow change. I should be careful about saying slow these days. But I think you would see that coming.

I think video is not only a powerful part of our heritage but it is a powerful part of our bundle. And although you may hear operators complain about the margin on that compared to other products, it entails a huge army of resources that we rely on for all kinds of things beyond just video. And if that all went away, I'm not quite sure what the whole makeup of the company would look like. I think all of these things build on themselves and profit from each other. Unless something radical happens, we'd be remiss to let the product go from what we do as a service provider.

FC: Some cable operators have talked about the dumb pipe model, where an operator could sell access to the network, and subscribers would rely on Internet video for entertainment. Do you think that's a model some smaller companies might pursue?

Rolls: I think it's pretty hard to build a fundamental service off of video without live linear. While there will be long-term, more shifts to on-demand viewing, you still have things like news and live sports that are a critical part of video entertainment, and for a lot of people lacking those fundamental pieces does not make a complete package. But you're asking an engineer a marketing question--keep that in mind.

FC: How much of a challenge is it for cable operators to obtain rights to deliver live video to mobile video devices? Do you see a day when Charter and other cable operators could deliver live linear networks to mobile devices?

Rolls: First, it starts with consumer demand--is the demand and interest there, is it strong enough? If that's enough of a yes, it's followed by a rights issue, and then once the rights issues get solved, it's about who is best postured to deliver those services. Certainly if the consumer demand was there, the rights were granted, I think cable is in a very good position in many different ways for delivering these services outside the home.

FC: Comcast plans to deliver both live TV and Web-based applications such as Facebook to subscribers through its next generation Xfinity TV services. Is Charter looking to offer similar hybrid products?

Rolls: I think we're intrigued how the architecture of some of those solutions simplifies and provides you with an ability to do things like that. What we would do with that capability, I'm not going to take a guess right now. But it has not escaped our attention that these platforms are much more nimble than what we're used to having and we're pretty excited about the kind of things we can do such as a Facebook or Twitter.

FC: The cable industry has been upgrading systems to support the EBIF interactive TV standard. How much of a challenge is it to keep up with the type of interactive programming and advertising that can be delivered through mobile phones and tablets?

Rolls: I think the onus is on us to try and profit from some of the good work that has been invested on EBIF and the EBIF delivery model, and allow it to transcend into the nontraditional cable model, whether it be mobile devices or iPads or some other kind of delivery. We talk about how we can extend what we're doing with EBIF, whether it's an EBIF emulator, or some new way of extensibility off of the EBIF foundation. But we certainly don't want to start over from scratch from what we've done.

FC: Are set-tops going away?

Rolls: I think there will be a slow but constant shift, and I do think you'll see over time a declining population of purpose built cable set-top boxes. It's going to take a while. It's not going to happen in just a couple of years. But I think we want to leverage all of the devices consumers are buying and want to get their entertainment services through, and hopefully we can allow technology to solve that long term [objective] of how we do that without having special, purposefully built device that is required today to sit in the middle to enable those things. Something like an Xbox or Sony Playstation, are pretty powerful devices, and certainly we should be able to deliver our services through those devices without having to front end them with something else. It's a little easier said than done, but I do think it can be done. Various MSOs are in various stages of solving that.