Cable Technology Feature Article
Time Warner Cable Grows Revenue, Loses Subscribers and Sees Lower ARPU
By Gary Kim, Contributing Editor
Time Warner (News - Alert) Cable’s revenue for the third quarter of 2012 increased 9.2 percent, year over year, to $5.4 billion. Residential services revenue increased seven percent to $4.5 billion and business services revenue grew 27.4 percent to $493 million, while advertising revenue increased 22.2 percent to $264 million.Time Warner Cable says that the residential services revenue growth was primarily driven by an increase in high-speed data revenue, partially offset by declines in video and voice revenue. But the picture is quite complex. Time Warner Cable continued to lose video subscribers, but the average revenue of remaining customers grew.
“Voice” remains a growing business in the residential segment in terms of subscribers, but average revenue per subscriber fell.
Time Warner Cable lost 140,000 video subs, about 13,000 more than the 128,000 analysts had expected. Time Warner Cable also added 85,000 high-speed Internet subs in the quarter.
But some analysts had expected a gain of 96,000.
One should be careful about inferring too much from a single quarter’s results for any public company. But the latest quarterly results show that business services are now the real growth opportunity for cable operators.
That is going to be bad news for U.S. competitive local exchange carriers. Sam Kumar (News - Alert), CEO of Denver-based competitive local exchange carrier, Microtech-Tel, argues that CLECs can no longer compete with cable TV operators in the SMB business broadband access business.
Especially when all a CLEC has to sell are resold T1 and DS3 capacity from a telco, it will be tough to compete on value and price with a cable operator using its own facilities, and able to sell a 100-Mbps service for perhaps a few hundred dollars.
And make no mistake; this is precisely what cable operators intend to do, not even observers think cable operators will be wildly successful.
While the U.S. cable operators in 2012 may generate over $7 billion in annual revenue providing telecommunications services to businesses, they "will be chasing a declining business telecom services segment" and face fierce competition from entrenched telco providers with very deep pockets ready to staunchly defend their existing base, according to a study from The Insight Research Corporation.
Cable operators will gain some market share, but "they will remain small players in a big industry with low margins and little cash flow," Insight Research argues. The statement that the small business market is fragmented is uncontestable. The statement that the market is "declining" is debatable. In fact, few other forecasts tend to suggest the small business communications market is shrinking.
Machine-to-machine services, business Internet access and business VoIP all have double digit growth rates, according to Douglas Barnett, Atlantic-ACM senior analyst.
Between 2011 and 2017, M2M will have a 28 percent compound annual growth rate, small business Internet access will have a 24 percent CAGR and Business VoIP will have an 18 percent CAGR, Atlantic-ACM says.
Time Warner Cable’s third quarter showed both good and bad news. The good news was revenue growth. The bad news was the unit losses in video and slowing voice revenue ARPU. The good news was growth of business customer revenue and high-speed access services.
Edited by Brooke Neuman