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Unwanted Cable Channels Bloat Customer Bills, CEO Says

Time Warner Cable Inc. (TWC) Chief Executive Officer Glenn Britt says not everything on cable is worth watching.

“There are too many networks,” Britt said in an interview at the National Cable & Telecommunications Association annual cable show in Boston.

For years, U.S. cable carriers have provided TV in large chunks, pushing up the average monthly price to about $80 as even the cheapest packages have ballooned to include hundreds of channels. The increase in the number of little-watched channels, which content providers often sell to cable companies only in bundles with more popular networks, is causing cable bills to rise without any customer benefit, Britt said.

“There are a lot of general-interest networks that have lower viewership, and the industry would take cost out of the system if they shut those networks down and offered lower prices to consumers,” he said. “The companies involved would make just as much money as they do now because of the costs.”

Content providers, including Walt Disney Co. (DIS), Viacom Inc. (VIAB), Discovery Communications Inc. (DISCA) and AMC Networks Inc., structure deals with cable carriers that bundle many of their networks together. To get AMC, with popular shows such as “Mad Men” and “The Walking Dead,” pay-TV companies also need to buy AMC Networks (AMCX)’ IFC, Sundance Channel and WE tv.

That structure allows the content providers to boost the number of households that receive the less-watched channels --on which the networks then sell advertising and receive carriage fees from pay-TV operators. Many customers wouldn’t subscribe to those less-popular networks if they were able to pay separately for each channel.

Increasing ‘Diversity’

Britt says the only way networks will be eliminated is if a “courageous” media CEO agreed to offer popular networks to cable providers without forcing them to pay for other channels that aren’t as highly watched. Britt didn’t name the networks he said should be shut down and said some stations with lower viewership are beneficial if they attract a loyal following.

Josh Sapan, CEO of AMC Networks, said he doesn’t believe there are too many networks because they enhance the diversity of thought and ideas.

“The growth of the cable TV industry has gone hand in hand with the diversity of networks out there,” Sapan said in an interview. “Certain networks that may have been thought to be niche have, over time, proven to be potent and popular.”

It’s important to give networks the time to evolve, said Sapan, citing AMC’s progression from airing old movies to featuring Emmy-award-winning dramas such as “Mad Men” and “Breaking Bad.”

Time Warner Cable, the second-largest U.S. cable provider, fell 0.6 percent to $75.74 at the close in New York.

‘Bloated’

Coleman Breland, the chief operating officer of Time Warner Inc. (TWX)’s Turner Network Sales, agreed with Britt and said networks like his own should begin to rethink the issue. Time Warner Cable was spun off from Time Warner in 2009.

“The elevator’s full, there’s no more room,” Breland said. “It’s something content providers have to deal with. The system is bloated.”

Basic cable customers must navigate through hundreds of channels even if they watch only 10 or 15, a problem American Cable Association president Matthew Polka says he’s been fighting for years.

“It used to be that programmers sold on the merits of the substance of their channels,” Polka said. “Now that so many programmers are large conglomerates, customers lose choice.”

Usage-Based Pricing

Time Warner Cable, based in New York, is working on an improved user interface with better search functionality to help customers navigate through programs, Britt said. The new guide may be available by the end of the year, he said.

Comcast Corp. (CMCSA), the largest U.S. cable provider, will introduce a Web-connected TV guide May 30 in Boston and make it available in hundreds of thousands of households this year.

Another way to lower customers’ bills is to offer usage- based pricing for services such as Internet access, Britt said. The company is already letting light Internet users in southern Texas pay for broadband by the amount they consume. Customers that use less than 5 gigabytes a month -- the equivalent of streaming two high-definition full-length movies -- save $5 on their bill by opting out of an unlimited plan.

Time Warner Cable may eventually offer many pricing tiers, on the basis of the amount of data consumed, though an unlimited option will also remain an option for consumers, Britt said. Julius Genachowski, chairman of the Federal Communications Commission, yesterday reiterated his support for usage-based pricing.

Britt also said Time Warner Cable may make another acquisition in the managed Internet-services business to enhance its business-services division. The company purchased NaviSite Inc. last year to help support e-mail, data security and storage capability for business customers.

To contact the reporter on this story: Alex Sherman in New York at asherman6@bloomberg.net

To contact the editor responsible for this story: Nick Turner at nturner7@bloomberg.net

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