Summary history and analysis

Time Warner Cable is the second-largest cable operator in the United States which provides mul-
tiple services in 33 states. It is a cable provider company originally then introduced its high
speed internet, digital phone and wireless services(Hausman & Gregory, 2001). The company pro-
vides three major services: video programming, high-speed data and voice services to millions of
customers, and has its own few local news and sports channels. With the increase in product and
services the need of intelligence, better planning and analysis also increased.
In January 2000, Time Warner cable decided to merge with Internet Company AOL for more
than $250 billion. AOL is the fastest growing internet provider and largest content provider com-
pany in America. The merger of AOL and Time Warner was the largest and most important
merge between a traditional media company and an Internet-based media company but unfortu-
nately the merger was not very successful as it was poorly planned and resulted in downfall of
shares prices of all companies.
As every company faces competition, the area of competition was Los Angeles because there
were multiple providers for the same customers. In this situation the company needed to discuss
the whole market condition with its sales team to find a solution to earn revenue. The sales team
and company employees used Spreadsheets to discuss the data, but they could not find opportu-
nities, threats and competitive analysis of the market and without this information they were not
able to come up with a market strategy to increase the company's sales. At last, the development
team of Time Warner Cables designed a new method named Advanced Penetration Mapping to
analyze the data after finding out the limitations of spreadsheet analysis.

By using Advanced Penetration Mapping (A.P.M) method the business development team was
able find whole new data which completely changes standard Marketing, Direct Sales, Tap Audit
and Business Development procedures, taking sales operations, productivity and results to new
levels. In the result of using A.P.M the business plan was changed. Now the sales team was able
to market products and services of Time Warner Cable’s, because they have more information
and analysis about customer prospects. Time Warner Cable turned to Pitney Bowes Software de-
manding faster speeds and greater access. The use of the A.P.M method also saved the cost and
expenses of the company. The sales team was clear about product, service, and geographic, com-
pletive and other core data by using A.P.M which kept them excited and motivated about doing
their job.

What have been the business markets for Time Warner?

Based on the statistics analysis of numbers of subscribers for each different cable companies,
Time Warner and Comcast are considered as operating in an oligopoly market. In this type of
market, there are only a few suppliers and new entrance is not an easy task. In oligopoly situa-
tions, it refers to a circumstance that a few entities (2-10) have a huge significance in the current
market(G, W. N, 1964). As we can see, in 2015, there are around 10.8 millions video subscribers
for Time Warner, 22.3 millions for Comcast, 4.3 millions for Charter Comm. and 4.0 millions
for Cox Comm. It is obvious that Time Warner and Comcast were the biggest two cable compa-
nies and they have access to highly control in the market share over the service and sales on the
basis of the concentration of subscribers in the telecommunication industry. In other words, the
level of competitive rivalry to the new entrants is very high which requires better and stronger
service and technology compared to the existing cable companies.

In addtion, according to the Time Warner annual reports, the revenue of Time Warner was $23.7
in 2015 and it is generating more than $1.8 billion profit.
The primary business of Time Warner is to provide multichannel video services to residential
consumers and it generated 41.8% of Time Warner’s revenue but the percentage has fallen from
56.1% as recently as 2010. The revenue of video programming has been declined by 5% in 2014
and by 1% in 2015. The demand for Internet services has increased dramatically and become the
most important service for cable companies. High-speed data generates 37 percent of Time
Warner Cable’s revenue. The revenue has increased by 11.3 percent per year from 2010 to 2015.
The percentage of each service plays a vital role in the whole telecommunication industry as
well. Therefore, it proves that the media and news of Time Warner cable company are definitely
involved in an oligopoly business market.

Who is the competition for Time Warner and what policies Time Warner have used to
challenge it?

Direct competition for time warner’s video programming distribution is direct broadcast satellite
providers, telephone companies and online video services providers. And as we can see in ex-
hibit 1, before the 1990s people had cable services in their houses but after that due to improve-
ment in technology people started prefer DBS instead of video programming. The market share
of DBS is 34% in 2013 and it has been growing rapidly. The percentage of distributors are get-
ting closer after the year of 2000.

Exhibit 1
 1993 1998 2003 2008 2013
Cable 94.9% 85.3% 74.9% 64.9% 54.5%
DBS 0.1% 9.4% 21.6% 31.9% 34.2%
Telephone and 5.0% 5.3% 3.5% 3.2% 11.3%
Other MVPDs

Source: Federal Communications Commission and author calculations

According to Rose &Winston(2015), Comcast, one of the largest cable companies in the world
intended to purchase TWC, in exchange for $45 billion in stock. And until 2015, the number of
video subscribers from Comcast are around 22.3 million compared to the 10.8 million sub-
scribers in TWC. Therefore, Comcast is another big competitor in the development of TWC in
the telecommunication industry in the early 2010s.

On the other hand telephone companies have given competition to cable companies which results
in strong decline in market share of cable companions.in last twenty years the share of the video
subscription market has decreased by 50%.The end result is that consumers have more alterna-
tives than ever. Virtually every family in the United States has access to two satellite companies.
However 99% people have access to cable companies whereas 37% of households have tele-
phone services that provide digital videos and online services.

The residential telephone industry is highly competitive because people are not using traditional
services much these days. Many households are abandoning home telephone service and using
wireless phone services. Most young adults are following the wireless-only trend.

Time Warner cable is using many effective policies like other cable networks to compete in the
market. The numbers of channels are increasing in cable companies and most of them are offer-
ing more than 300 television channels, many of them available in high definition (HDTV).Now
the cable channels are also providing video on demand for their customers as well as movies on a
pay per view base. Time Warner Cable offers six different packages for Internet plans which
vary by downloading speed and price. In addition they are also offering different bundles with
video programming and home telephone service.

What are the significant regulatory areas that impact the operations and strategic decisions
of Time Warner?

The Federal Communications Commissions(FCC) has issued laws and regulations for cable
companies which have significant impact on the operations and strategic decisions of Time
Warner and its competitors. Following are regulation by FCC:

● According to the laws of FCC all cable companies are liable to offer some of their sta-
 tions to local television channels that elect to be carried for free. These channels include
small local channels, community and public access television. These channels are not in-
cluded in those channels which charge a retransmission fee in order to be shown on cable.
● The FCC regulates and limits the cable fee that companies charge for cable service and
equipment in communities that do not have “effective competition.” Effective competi-
tion is based on the range of competitors and marketplace share that the cable company
has. In the case of Time Warner, more than eighty five percent of the local markets in
which it competes are subject to effective competition and therefore no longer subject to
pricing regulation by FCC.
● According to American Recovery and Reinvestment Act of 2009, the FCC was directed
to create a national broadband plan that would increase high-speed Internet access to
Americans. The Connect America plan set the goal of providing 100 Mbps download
speeds to at least 100 million households in the United States. To fulfill the plan some of
funding came directly from Internet providers through taxes and fees, the benefit of the
plan was it increased a number of customers for cable companies, for all services.

The technological change and challenges that Time Warner has been facing

The cable television industry is facing competition due to rapid change in technology. The rates
of Video subscription are declining whereas programming fees are increasing, and competitive
threats are everywhere in the market. The demand for high speed data service and great access is
increasing day by day by customers.
The pressure of competitors is increasing, some of them providing bundle offers to their cus-
tomers at very low price. As competition in the industry is evolving, further unbundling and frag-
mented offerings are expected to be more common. The demand of high speed internet is in-
creasing which is a positive thing for cable operators but on the other hand it will also require
more investment on the part of companies online traffic has been growing at a much faster rate
than network capacity.
VoIP telephone service is still growing for cable companies, but competition is increasing and
demand for traditional residential voice service is decreasing so we cannot say how long this
market will remain profitable. Andreas is well aware of these challenges but he has a strong be-
lief that the cable companies can continue to provide a valuable service for their customers, and
keep generating value for their shareholders. To accomplish his goal he knows that they need to
make the best decision on a daily basis. He knows that to do this, they will need to continue mak-
ing the best decisions on a day-to-day basis.

Reference