• Cable TV’s Quandary: While Brand Names Can Change Easily, Reputations Die Hard

    After a long and arduous regulatory review, earlier this week Charter Communications closed on its $55 billion acquisition of Time Warner Cable and its $10.4 billion acquisition of Bright House Networks. Following the closings, Charter plans to phase out the Time Warner Cable and Bright House brands, re-branding its entire new footprint Charter, with service name Spectrum.

    Many TWC subscribers will gladly bid adieu to a brand that has had one of the worst rankings, as measured by the American Customer Satisfaction Index, in an industry that itself endures rock bottom scores. Of course, simply changing a company’s name isn’t sufficient to effect real change; rather, it’s the underlying service that must tangibly improve, a point that Charter CEO Tom Rutledge clearly stated in this interview with Bloomberg.

    Taking a broader view of things, it’s not just TWC’s poor service, but years of poor service and aggressive pricing/bundling by other pay-TV operators, that have combined to form consumers’ strongly negative perception of the cable industry. Because video choices are proliferating, consumers are motivated to seek out alternatives by cord-cutting or cord-nevering, at least partially because they want to “stick it to the man” for abusing them - whether through expensive, lousy service, outdated equipment, nit-picky charges, inflexible bundles or all of the above.

    Despite consumers’ issues with pay-TV, the industry has remained relatively resilient in the face of massive adoption of SVOD services like Netflix, Amazon and Hulu. But as was on full display at this week’s INTX cable industry show, a far more dangerous force has the cable industry in its sights: the U.S. government, in the form of the FCC and specifically, its chairman Tom Wheeler.

    Wheeler, a former head of the industry’s own trade association, the NCTA, has stated repeatedly that the government must intervene when it sees a lack of competition. Passing net neutrality regulations in early 2015 was a key FCC victory. More recently, Wheeler has launched his “Unlock the Box” initiative, which would enable consumers to use third-party devices to access TV networks that are currently and contractually only available via pay-TV operators’ set-top boxes. The initiative has created a firestorm of protest from many corners of the ecosystem.

    What’s striking to me about Unlock the Box is that it seeks to remedy problems that are already being vigorously addressed by the market. As mentioned above, there are not only more video choices than ever, there are more ways to access them than ever (e.g. connected TV devices, Smart TVs, tablets, game consoles, smartphones, etc.). In addition, billions of dollars spent on set-top box innovation are bringing tangible benefits to many pay-TV subscribers already. For example, this summer, millions of Comcast subscribers will experience the unprecedented blending of live TV with streaming video, all via their X1 set-top, to access 6,000+ hours of coverage.

    Oddly, in an INTX interview, Wheeler noted that he’s a “happy subscriber” to both Comcast and Atlantic Broadband service in his 2 houses. So it’s virtually certain that he consistently experiences the benefits of X1 and quite likely a TiVo with integrated OTT services and unified search that Atlantic has pioneered. And he also probably has lightning-fast broadband service, enabling virtually unlimited streaming.

    With all of industry disruption underway, incumbent pay-TV operators’ own set-top investments and Wheeler’s own experiences, it makes you wonder why the FCC has deemed Unlock the Box as so essential. Many have asserted that it’s the result of Google’s and other tech companies’ lobbying efforts. That may be true, but I think the bigger driver is that it’s an attempt to right years of wrongs by the industry. All of the things that have fed the negative perception of the pay-TV industry are now influencing the regulatory agenda.

    This is ultimately cable’s quandary: brand names can easily change, but reputations die hard.