Time Warner Cable plotting 'evolutionary' all-IP future

Execs dismiss Google Fiber threat during fourth quarter earnings call
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Time Warner Cable (NYSE: TWC) is on a course to replace MPEG-2 video with IP digital, but the move to create what would be an IPTV service is happening on "an evolutionary basis," the (multichannel video programming distributor) MVPD's chairman-CEO Glenn Britt said during a fourth quarter earnings conference call.

"What we've done is to initially create more capacity by using switched video and that's stood us in good stead," Britt said during the call's Q&A. "We most certainly over time will be going more and more towards all-digital but we're doing it on an evolutionary basis."

TWC is looking in multiple directions as it continues to leak video subscribers--129,000 more fled in the fourth quarter--in competition with telcos like AT&T (NYSE: T) U-verse and Verizon (NYSE: VZ) FiOS, both of which gained subscribers in the fourth quarter. The nation's second biggest cable operator also faces another unique threat: It's the only MSO to have Google (Nasdaq: GOOG) set up shop in its backyard as the search-engine-that-wants-to-be-more has done in Kansas City.

Google's claim to fame and its method of attracting subscribers is to offer ultra-high-speed broadband of 1 Gbps via the Google Fiber service. That's just plain "PR and hype," Britt said during the conference call.

"The reality is today there are not really applications that require 1 gigabit per second," he said, maintaining that the company's philosophy "has been to keep our speeds in line with what the market demands and what it needs."

That means, Britt said, "sometime in the future we'll have 1 gig, maybe 2 gigs [but] this is not a real need for anybody right now."

Google Fiber, still in only a few neighborhoods in the Kansas and Missouri twin cities, has been getting both attention and subscribers for its video service as well. Even if it's as successful as it hopes to be, it isn't really more than a blip on the TWC screen, said president-COO Robert Marcus.

"They have talked about what will ultimately be a 600,000 home build. I think 300,000 of those homes are in our footprint and if you get to the subscriber level it's something like 100,000 video customers and 100,000 HSD [high-speed data] customers... so a very small percentage of our total subscriber base," Marcus said.

While minimizing the customer impact of Google Fiber thus far, Marcus did point out that the cable operator is "hard at work ensuring that our relationships are strong [and] that our product set is good," including the start-up of 100 Mbps service "which is the fastest we're making available anywhere."

Google is, he said, similar to any overbuild the MSO faces and "we are ready for the competition."

For more:
- Time Warner Cable issued this earnings release
- Morningstar presented this earnings call transcript

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