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Cable Technology Feature Article

November 19, 2010

Time Warner Cable to Offer Economy Package for Tight-Budget Customers

By Tracey E. Schelmetic, TMCnet Contributor

With a bad economy, it's inevitable: households start trimming non-essential services, and cable television is often at the top of the list. At least one cable provider appears to be trying to take steps to accommodate cash-poor viewers. Time Warner (News - Alert) Cable, Inc., which is the second-largest cable operator in the U.S., is testing a slimmed-down cable package that, to help save money, will exclude the popular (and expensive) ESPN (News - Alert) channels. By doing so, Time Warner hopes to win back and retain economically strapped consumers.

The stripped-down service will be known as “TV Essentials,” and it will be available in New York City starting next week for $39.95 a month, said Maureen Huff, a Time Warner Cable spokeswoman. The TV Essentials package will offer local and major broadcast networks along with 12 of the 20 highest-rated cable networks, including the Disney (News - Alert) Channel and MTV. The package will exclude the pricier Fox News and Comedy Central channels.

Time Warner Cable has reported that it lost 155,000 basic video subscribers during the last quarter alone due to a weak economic environment, said Chief Financial Officer Rob Marcus during an investor conference held yesterday. The cable company has been battling fee increases from programmers, which are typically passed along to consumers by cable companies in the form of higher bills. Marcus said the company realized its customers wanted to see the availability of smaller, cheaper cable options.

“What we’re planning to do is deliver on that customer need,” said Marcus. “We’re planning on delivering a package, or possibly more than one package, of programming that will exclude some of the higher priced networks. Because we’re excluding the high-priced channels, we have the ability to charge a lot less for it.”

ESPN will be excluded because it is by far the most expensive channel, accounting for $4.08 in billing for each cable subscriber each month, according to research firm SNL Kagan. By comparison, Lifetime, which will be included in the cheaper package, costs 28 cents per month per subscriber.

“The distribution requirement for ESPN has not changed in the last 25 years, which is to include ESPN in the first or second highest penetrated tier of service,” ESPN said in an e- mailed statement. If “TV Essentials” catches on and becomes one of Time Warner Cable’s most requested offerings, the cable operator would include ESPN in the offering.

Time Warner Cable plans to analyze the results of its “TV Essentials” experiment and offer it in other markets starting next year, Huff said. The package is trimmed down in other aspects, too: it will not allow customers to use a high-definition receiver or digital video recorder, and it won’t be bundled with Time Warner Cable’s other products such as broadband and phone service.

Tracey Schelmetic is a contributing editor for TMCnet. To read more of Tracey's articles, please visit her columnist page.

Edited by Tammy Wolf