BY RICARDO SMITH
![Time Warner Cable Logo. [1]](https://bejone03.expressions.syr.edu/trf235/files/2016/02/Time_Warner_Cable_logo.svg_.png){kind=logo}
Time Warner Cable Logo [1].
Company Overview
Time Warner Cable is an American cable telecommunications company. It is the second largest cable provider in terms of revenue only behind Comcast [2]. Time Warner Cable serves over 16 million customers in 29 different states [1]. The company was formed in 1992 through the merger of Time Inc. and Warner Communications’ respective cable businesses, following the merger of the two companies in 1989 [1]. Time Warner Cable was spun off as an independent operation in March 2009 [1]. Since its inception, Time Warner Cable has been a trailblazer in the cable industry. They have lead the way in technical innovation through the use of fiber optics to enhance the customer experience. Time Warner Cable provides cutting edge technology, a diverse selection of entertainment content, and superior service to homes across the United States [1]. On April 25th, 2016, a deal was approved by the U.S Department of Justice for the purchase of Time Warner Cable by Charter Communications [3].
![A screenshot from a Time Warner Cable commercial advertising one-hour windows [11]](https://bejone03.expressions.syr.edu/trf235/files/2016/02/passgas.png)
A screenshot from a Time Warner Cable commercial advertising one-hour windows [6].
Customer Service
Time Warner Cable has a reputation for poor customer service. According to the American Costumer Satisfaction Index, Time Warner Cable was the most unpopular company in America in 2014 with a score of 54 out of a possible 100 [4]. Their television service was the second worst ranked brand on the list, followed by Comcast’s Internet Service Provider [4]. Cable companies have recently come under scrutiny for their increasing subscription fees and lack of choice in the market [5]. Cable prices have more than doubled in the past ten years [5]. The rise of over the top subscription video on demand has caused a decline in cable subscriptions [5]. A leading industry analyst estimated that the top 8 cable companies lost 463,000 subscribers in the second quarter of 2015 compared to 141,000 in the second quarter of 2014 [5]. The decline has caused companies to raise their prices [5]. In response to their poor customer service ratings, Time Warner has taken a number of steps. The company launched an ad campaign acknowledging it’s poor customer service and promising to improve it [6]. The main focus of this initiative is a one-hour window for all customer appointments. In 2015, the company reported a 13% decrease in care calls per customer relationship, 98% on-time percentage for customer appointments, and 15% improvement in first-visit resolution [7].
Time Warner Cable’s 2015 earnings report [7].
2015 Performance
In the fourth quarter of 2015, Time Warner Cable’s revenue grew by 4.9% [7]. The company earned $6.07 billion in 2015 [7]. This represents a 3.9% increase in yearly revenue, Time Warner’s highest in five years [7]. The company attributes the increase to accelerated growth in residential and business services [7]. The company’s operating income before depreciation and amortization (OIBDA) increased slightly for the fourth quarter and the whole year [7]. In their best year of residential subscriber performance ever, Time Warner added 618,000 new customer relationships, 1,000,000 high-speed data upgrades, and 1,036,000 voice subscribers in 2015 [7]. Time Warner made significant investments in 2015 to improve the customer experience and expand their network [7]. As a part of this effort, the company introduced an initiative to convert their infrastructure to an all digital system called TWC Maxx [7]. The new system results in increased Internet speeds, state-of-the-art television services, and improved overall reliability [7]. In 2015, TWC Maxx was fully implemented in six major cities and begun in 4 others [7]. The company has continued expanding the program in 2016 [8].
Comcast logo [11].
Proposed Comcast Merger
In November 2013, it was reported that Charter Communications was to put in an offer to purchase Time Warner Cable for around $135 per share [9]. As a result, Time Warner Cable stock rose by 10% [9]. Charter and Comcast stock also rose based on the rumor [9]. The offer was eventually rejected [10]. On February 13th, 2014 Comcast announced that it intended to acquire Time Warner Cable through a stock swap [11]. The announcement was met with great opposition from government officials, industry executives, and consumer advocacy groups alike [12]. People were largely opposed to the merger based on Comcast’s behavior in past deals [13]. Following its acquisition of NBCUniversal, Comcast became a partial owner of Hulu [13]. As a part of the deal, Comcast was supposed to remain a silent partner and not influence or interfere with the operation of the company [13]. As of July 2013, Hulu was for sale [13]. In that same month, a meeting to decide the company’s fate took place between the operating partners; Walt Disney, 21st Century Fox, and Comcast [13]. According to anonymous sources with knowledge of the conversation, Comcast told the other partners that it could enhance Hulu’s value, which caused them to decide not to sell the company [13]. This action directly violated the terms of Comcast’s NBCUniversal deal [13]. Other grievances included programmers experiencing continued difficulty in making their content available for streaming in Comcast markets and Comcast’s lack of promotion for a stand-alone broadband service that isn’t connected to a television package [13]. The proposed deal would have given Comcast a 57% market share of broadband services [13]. In April 2015, FCC Chairman Tom Wheeler came out in direct opposition of the merger [14]. In light of the strong public reaction, Comcast terminated the merger ahead of the official FCC decision later that month [14].
Charter Communications logo [15].
Charter Merger
Following the failure of the Comcast merger, Charter Communications announced that it would be merging with Time Warner Cable on May 26th, 2015 in a $56.7 billion deal that combined cash and stock options [15]. Charter also announced that they would be purchasing Bright House Networks, previously controlled by Time Warner, in a separate deal for $10.1 billion [15]. This deal was met with far less opposition based on the lower combined market share in broadband service and Charter’s lack of recent negative PR [16]. In order to smooth the approval process, Charter promised not to impose data caps and not charge online content providers for direct connections to its network [16]. On April 25th, 2016, the U.S Department of Justice approved the sale with conditions [17]. On the same day, FCC chairman Tom Wheeler circulated his approval to other FCC commissioners [17]. The order is expected to get enough votes for approval [17]. In their official statement, the Department of Justice said they worked closely with the FCC to coordinate their reviews of the deal and devise comprehensive remedies for the issues that it presents [18]. As part of the approval, Charter is forbidden from including clauses in their Pay-TV contracts that bar content creators from exploiting their programming through online video on demand [3]. This condition was included largely because Time Warner is notorious for being the most aggressive provider with these clauses [17]. The conditions also forbid Charter from retaliating against programmers for licensing to online video on demand [3]. These conditions will last for seven years [3]. The sale will not become official until California public utility regulators submit their approval [17]. They are scheduled to vote in the summer of 2016 [17].
Overview
Time Warner Cable’s recent acquisition by Charter Communications will begin a new chapter in the company’s history, as well as the state of cable television altogether. Charter is expected to retire the Time Warner Cable brand [18]. Combining their resources will allow the two companies to cut costs and hopefully provide better prices for their customers. The new Charter’s future success will rely heavily on their public perception in the aftermath of this merger.
Sources
[1] Time Warner Cable. Company Overview for Time Warner Cable. Time Warner Cable. Retrieved April 25 2016.
[2] National Cable and Telecommunications Association. Industry Data. National Cable and Telecommunications Association. Retrieved April 25 2016.
[3] The United States Department of Justice (April 25 2016). Justice Department Allows Charter’s Acquisition of Time Warner Cable and Bright House Networks to Proceed with Conditions. The United States Department of Justice. Retrieved April 27 2016.
[4] American Customer Satisfaction Index. American Customer Satisfaction Index. American Customer Satisfaction Index. Retrieved April 25 2016.
[5] Darrow, Barb and Jones, Stacy (August 18 2015). Cable consumers keep cutting the cord. Can anyone blame them?. Fortune. Retrieved April 25 2016.
[6] Morran, Chris (October 5 2015). Time Warner Cable Admits Its Customer Service Stinks. Pinky Swears To Do Better. Consumerist. Retrieved April 25 2016.
[7] Time Warner Cable Inc. (January 28 2016). Fourth-Quarter and Full-Year 2015 Earnings Summary. Time Warner Cable. Retrieved April 25 2016.
[8] Time Warner Cable Inc. (February 8 2016). Time Warner Cable Takes Next Step to Transform TV and Internet Experience in Central and Northern New York. Time Warner Cable. Retrieved April 25 2016.
[9] Yousuf, Hibah (November 22 2013). Cable stocks surge on takeover chatter. CNN Money. Retrieved April 25 2016.
[10] CNBC (January 13 2014). Time Warner Cable rejects Charter’s $61B bid as inadequate. CNBC. Retrieved April 25 2016.
[11] Comcast (February 13 2014). Time Warner Cable To Merge With Comcast Corporation To Create A World-Class Technology and Media Company. Comcast. Retrieved April 25 2016.
[12] Steel, Emily (April 22 2015). Comcast Critics Cast Doubt on Its Intentions. The New York Times. Retrieved April 25 2016.
[13] Steel, Emily (April 21 2015). Comcast’s Track Record in Past Deals May Be Hitch for Merger With Time Warner Cable. The New York Times. Retrieved April 25 2016.
[14] Trefis Team (April 28 2015). Comcast-TWC Merger Called Off; Where Do These Companies Stand Now. Forbes. Retrieved April 26 2016.
[15] Charter Communications Inc. (May 26 2015). Charter Communications to Merge with Time Warner Cable and Acquire Bright House Networks. Charter Communications Inc. Retrieved April 25 2016.
[16] Economides, Nicholas (March 22 2016). Why a Charter-Time Warner Cable Merger Won’t Actually Kill Cable Companies. Fortune. Retrieved April 25 2016.
[17] King, Hope and Stetler, Brian (April 25 2016). Giant cable merger cleared by regulators. CNN Money. Retrieved April 25 2016.
[18] Morran, Chris (April 25 2016). 5 Things You Should Know About the Approved Merger of Time Warner Cable and Charter. Consumerist. Retrieved April 27 2016.
