Charter CEO Sees Cable Bundle Surviving Cord-Cutting Trend

Tom Rutledge-Getty-H 2016
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"There's a lot of reasons why the packages, the big rich packages, will stay together," Tom Rutledge told an investors conference.

The fat cable bundle isn't going away anytime soon, Tom Rutledge, head of cable operator Charter Communications, told investors on Wednesday.

"I think there's a lot of reasons why the packages, the big rich packages, will stay together, and why people will continue to pursue their historic [consumer] patterns," the Charter CEO and chairman told the annual Citi 2017 Internet, Media and Telecommunications Conference in Las Vegas during a session that was webcast.

Charter, in which John Malone's Liberty Broadband owns a big stake, this past year closed the $55 billion acquisition of Time Warner Cable and the $10.4 billion takeover of Bright House to make it the second-biggest U.S. cable company behind Comcast and the third-largest pay TV operator, behind AT&T/DirecTV and Comcast.

But despite streaming platforms like Netflix and YouTube videos challenging traditional cable giants and major pay-TV brands like HBO and ESPN going direct to consumer, Rutledge sees consumers embracing the cable bundle for some time yet. There are pressures on Charter, however, including a $10 billion annual programming budget to keep consumers on side.

"That's a lot of money per-sub, per-year, and without significant rate increases, that would take away a lot of margins in the video business," Rutledge warned. And the overall multichannel video market is shrinking, due mostly to operating costs, he added.

So Charter is rolling out new high-speed broadband products and expanding as it integrates the Time Warner Cable and Bright House assets. "We're rapidly growing," Rutledge told the Citi conference.

The exec estimated the merged entity now has around 92,000 employees, and plans to hire another 20,000 within three years. Rutledge also sees Charter over time needing less capital to grow, thanks to new digital technologies that are increasingly cloud-based.

The Charter chief said he's betting those digital offerings will help the cable giant compete against phone giants these days touting 5G wireless services. "We think we have the best network to build the next generation of wireless services," Rutledge said.