Time Warner Cable banks on wideband Internet in battle for subscribers

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Among the products vendors pitched to more than 900,000 people that attended the New York State Fair in Geddes, N.Y. earlier this month were 25-cent cups of milk, 99-cent baked potatoes and $99 monthly wideband Internet access service.

Time Warner Cable New York State Fair

Click here for video of Time Warner Cable's exhibit at the New York State Fair.

Steps away from a building that housed an 800-pound butter sculpture, Time Warner Cable (NYSE: TWC) set up a display that touted its 50 Mbps high-speed Internet access service, a mobile 4G hotspot device, multiroom digital video recorders and other new products. Looking to draw attendees that come to the fair for carnival rides, concerts and food to its booth, the cable operator brought in celebrities from its cable networks to its exhibit ranging from stars of Discovery Channel's Deadliest Catch show to Jerry Springer, who has a new show on GSN. It also set up several computers that attendees could use to check email and surf the Web, with marketing materials for its wideband product placed next to the computers.

Time Warner, like most cable MSOs, has struggled to maintain basic video subscribers. The company is beginning to rely more on selling high-speed Internet access to grow revenue, and has invested in upgrading its cable systems with DOCSIS 3.0 technology in order to offer subscribers faster and more expensive Internet access services.

While only a small percentage of its subscribers have taken its wideband or mobile 4G hotspot products, the company is investing more in marketing the new services through community events such as the New York State Fair, and through a national ad campaign it kicked off earlier this month for its $200 monthly SignatureHome service, which includes wideband Internet access.

TWC SignatureHome

TWC ad for its upscale SignatureHome service

Time Warner Cable Central New York spokeswoman Stephanie Salinger said the marketing efforts at the state fair are beginning to pay off. She said the company has seen the number of 4G wireless hotspots sold at the state fair nearly triple compared to the number of devices it sold at a similar exhibit at the 2010 fair. The company's Central New York division has nearly doubled the number of subscribers that have upgraded from its standard cable modem service to faster tiers enabled by its DOCSIS 3.0 upgrade from 2010 to 2011, attributing some of the growth to promotional offers and marketing activity at the state fair.

The MSO markets wideband Internet access on about 60 percent of its national footprint, but few of its 26.9 million subscribers have taken the product. Time Warner Cable COO Rob Marcus told analysts recently that the company added about 25,000 wideband customers during the second quarter, which doubled the number of customers that took the 50 Mbps service.

"I think there is a huge amount of opportunity left in the HSD (high-speed data) business," Marcus said Sept. 21 at a Goldman Sachs conference in New York.

A look at the quarterly earnings statements of Time Warner Cable and other major MSOs shows why they are investing in offering faster Internet services, and marketing those products. While selling video packages continues to generate the most revenue Time Warner Cable, its high-speed data business is posting the biggest increases in revenue. TWC reported $1.12 billion in revenue from high-speed Internet service during the second quarter, jumping nearly $100 million compared to the same period last year. It saw its revenue from selling video services fall by $20 million during same period to $2.68 billion.

Jim Holanda, RCN

Holanda

All major cable MSOs are upgrading their plant to DOCSIS 3.0 in order to offer subscribers faster tiers of Internet access that can support an increased demand for broadband video content. But no MSO has reported strong demand for wideband Internet services. Cable overbuilder RCN Corp., which competes with Time Warner Cable in New York City, has used its DOCSIS 3.0 upgrade to market a 60 Mbps high-speed service to its customers. CEO Jim Holanda says most customers are content with lower-speed tiers.

"Once we launch DOCSIS 3.0, our core speeds are 15 and 25 Mbps. We haven't seen large demand for higher speeds than that," Holanda told FierceCable.

Looking to spark interest in its wideband service from subscribers who want to watch video on mobile devices, Time Warner Cable announced a unique marketing promotion in August in which it is offering customers who buy its wideband product a full rebate on EchoStar Corp.'s $300 Slingbox place-shifting set-top. The Slingbox allows subscribers who attach the device to a cable set-top to watch live TV from their home cable subscription anywhere in the world with an Internet connection. Time Warner is only offering the Slingbox rebate to customers in New York City, and hasn't said whether it'll expand the promotion.

Time Warner Cable's wideband product could help it compete against faster tiers of Internet service marketed by rival Verizon. Verizon offers its FiOS customers speeds of 50 Mbps for $139.95 monthly if they also take its home telephone service, and it also offers speeds of up to 150 Mbps monthly for $199.99.

And while there may not yet be significant demand for wideband Internet services that offer speeds of 50 Mbps and faster, cable MSOs and hardware vendors are testing technology that would allow them to offer subscribers speeds of 1 gigabit per second and faster. Comcast CEO Brian Roberts demonstrated a 1-Gbps Internet connection at The Cable Show convention in Chicago in June, downloading an entire season of NBC's 30 Rock in HD in 1 minute and 39 seconds. Liberty Global's UPC and Arris took it up another notch earlier this month, demonstrating a 1.3 Gbps Internet connection in Vienna.