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Tom Rutledge: Wireless Helps Other Charter Products

Charter Communications CEO Tom Rutledge
Charter Communications CEO Tom Rutledge (Image credit: Charter Communications)

While Charter Communications continues to aggressively move to accumulate wireless spectrum, chairman and CEO Tom Rutledge said ultimately its mobile motivations are tied to supporting the overall business. 

Charter has been keen on building up its spectrum holdings -- the Federal Communications Commission said Monday the cable operator wins the most locations in its Rural Digital Opportunities Fund (RDOF) auctions.  At the UBS Virtual TMT conference Monday, Rutledge said that the company’s wireless spectrum plays -- including participating in the CBRS auctions and “edging out” its existing footprint -- are parts of the overall strategy to reach as many customers as possible. 

Rutledge said he couldn’t speak directly about the RDOF auction -- he is still in a quiet period -- but said in general, its edge-out program, its wireless network and working with local, state and federal governments for rights of way are all moves to increase the size of its customer base as well as the communities it serves. 

“We think it’s smart to do that, and if it can be done in an economically efficient way, we’ve embraced that,” Rutledge said. “If we do that, we end up with more customers and a happier customer.”

Rutledge added that wireless doesn’t only mean mobile phone service -- Charter customers have connected about 400 million wireless devices to its network. And the wireless product has had a tangible effect on how Charter sells its flagship product, broadband.

Charter added about 363,000 wireless lines in Q3, bringing its total Spectrum Mobile customers to about 2.1 million. 

“The overall value of the relationship is improved by wireless,” Rutledge said. “As a standalone business it’s still a good business. We’ve actually crossed the threshold where every incremental customer becomes profitable in mobile. We’ve covered our fixed costs, with the customer base we’ve already creed, so incrementally the wind is at our back financially. But it’s also a positive driver of our overall ability to have a good relationship with customers that improves the whole value proposition of a customer’s telecom bill.”

Charter made headlines with its positive video customer growth over the past two quarters -- 102,000 additions in Q2 and 67,000 in Q3 -- and Rutledge said some of those increases were due to satellite TV customers that dropped that service after buying broadband from Charter. In doing that, many also bought video service, too.

“We’ve pulled bb growth from all sorts of places, and shifted share toward us. Some of that share had satellite customers in it, and when they made the conversion to us, they bought video from us.”

Charter also has developed additional products, some over the top, and some related to skinnier packages of traditional cable, which has helped. 

“Through time we will have to mix the mixture of those services so we can maximize our growth potential,” Rutledge said, adding that video growth is still hampered by price pressures associated with the business. “It’s still a highly desired product though, people want it. To the extent there is less cost pressure, you can get more demand.”

While cord-cutting and SVOD services like Netflix and Amazon Prime Video have helped pare traditional pay TV subscribers, Rutledge said it hasn’t had a big effect on programming costs. He added that while cable companies have paid less in affiliate fees recently, it’s more a factor of fewer video customers, not lower prices.   

“What’s happening is the mix of viewers is changing  because of the packages we’re selling,” Rutledge said. “That’s been the reason that content prices in aggregate have moderated for us. It hasn’t moderated on a price per viewer basis. That’s an important thought because it shows how much money is flowing from customers to content companies through us. In terms of how a linear bundle works in an environment where the same companies that provide content in a linear bundle also sell a premium direct-to-consumer product is a question of, if you cannibalize one, do you put us in a position where we would be willing to drop you or your bundled package, because customers can get your product directly, there is no need for us to pay for that as part of the bundle. Or do you have a dual content strategy where you have good content in your linear product, but different content in your direct-to-consumer products? It’s yet to be determined whether owners of content are going to try to support both worlds or not.”