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(Reuters) - Time Warner Cable Inc, the second-largest U.S. cable provider, will no longer push "triple play" packages of Internet, video and voice on its customers, a departure from the long-held industry practice of bundling the services together.
Time Warner Cable is the first cable company to acknowledge that customers would prefer to pay for television and Internet, as opposed to phone services where demand has been dwindling as people use their cellphones at home.
"In many cases we caused customers who didn't need or want phone to take a triple play offer just to get the triple play rates," Chief Operating Officer Rob Marcus told a conference call with investors on Thursday.
The cable industry faces a challenge from customers who consume an increasing amount of Internet video and subscribe to lower cost alternatives such as Netflix. Time Warner Cable issued earnings on Thursday that showed it lost a worse-than-expected 119,000 video customers in the first quarter.
It said the new strategy, which was rolled out in the first quarter, drove more customers to sign up for single or double play packages than before, while fewer people signed up for triple play than in the past.
Part of the rationale for the change is that customers will spend more when they feel they are using all their services, Marcus said.
"Many customers choose not to take phone but instead spent their money on incremental speeds and other ancillaries. That's good for us and good for our customers," Marcus said.
He said it would take time for the new pricing and packaging to deliver results but said that, so far, new customers were spending more than a year ago. Average revenue per subscriber was $104.84, up by $1.27 from the fourth quarter of last year.
Customers who want a "triple play" package with voice can still buy it and those bundles will still be marketed. But when potential customers call the company to sign up, the representatives will try to tailor a service package to what customers want, a spokesman added.
ISI Group cable analyst Vijay Jayant said Time Warner Cable was right to shift away from what has been a flagship offering for the industry since at least 2005, because consumer tastes are changing.
"In this environment, who really wants to pay for a wireline phone service?" Jayant said.
Time Warner Cable added only 143,000 high-speed data subscribers in the first quarter, far fewer than the 181,000 subscriber additions that analysts had expected, according to StreetAccount.
Time Warner Cable and its larger rival, Comcast Corp, have increasingly relied on internet customers for growth as they continue to lose cable-TV subscribers and grapple with rising programming costs.
Net income attributable to Time Warner Cable rose to $401 million, or $1.34 per share, in the first quarter, from $382 million, or $1.20 per share, a year earlier.
Excluding items, the company earned $1.41 per share, which beat analysts' average estimate of $1.37 per share.
Revenue rose about 6.6 percent to $5.48 billion, which fell short of analyst estimates of $5.49 billion
Shares of Time Warner Cable were down 0.5 percent to $92.30 in afternoon trading.
Reporting by Liana B. Baker; Additional reporting by Aurindom Mukherjee in Bangalore; Editing by Saumyadeb Chakrabarty and Tim Dobbyn