Time Warner Cable tries cheaper cable packages

NEW YORK (Reuters) - Time Warner Cable Inc will start testing lower-priced cable TV packages in New York City and Ohio in a bid to give more options to customers struggling with the rising bills from ever expanding basic cable channel packages.

The No.2 U.S. cable company will kick off the trial of a new TV Essentials package in New York City next week with a $39.99 offer and on December 15 in north East Ohio for $29.99 in a promotional offer. It will officially retail at $49.99 and feature around 50 channels compared with around 130 channels for an average digital starter package at $59.95.

Key to the reduced price will be the exclusion of higher cost channels such as Walt Disney Co's ESPN's flagship channels, which charge among the most expensive carriage fees in the cable business. Also excluded are Time Warner Inc's TNT Network, News Corp's Fox News and NBC Universal's MSNBC among others.

Time Warner Cable Chief Executive Glenn Britt told Reuters in July the cable industry was working together to keep customers trying to save money in a weak economy.

Traditionally, cable and satellite TV companies have pointed fingers at network owners for restrictive carriage contracts that force distributors to carry scores of cable networks in the most popular basic tiers thereby pushing up the price of a minimum cable package.

Time Warner Cable spokeswoman Maureen Huff said the new offer was across all the usual genres of broadcast, news and entertainment. She said sports fans would still be able to see some live sports on broadcast stations and on TBS.

Huff also said the TV Essentials offer was in line with existing contracts with programmers.

One potential drawback of the new offer is that customers will not be able to buy it as a part of discounted 'Triple Play' or 'Double Play' package that would include Internet or/and telephone service.

Time Warner Cable's news comes after research company SNL Kagan revealed the U.S. pay-TV industry lost subscribers for the second consecutive quarter in the three months to September 30. Time Warner Cable has lost an average of around 100,000 video customers over the last four quarters, reducing its total customer base to around 12.5 million.

Cable executives have said some households are struggling with their bills in a slow economy, particularly with weak new household formation and fewer jobs.

Bernstein Research cable analyst Craig Moffett said "the evidence is overwhelming that low-end subscribers are increasingly struggling to pay for the high-priced introductory cable packages."

There has also been concern customers will 'cut the cord' in favor of cheaper video alternatives such as Netflix Inc or Hulu.

"An enormous body of evidence suggests that cord-cutting remains primarily a low-end phenomenon, more typically a result of poverty than of Internet choice and convenience," said Moffett in a client note.

"That may not remain the case for long, but there can be no question that would-be on-line competitors are bolstered by the increasing disparity between video price and disposable income."

(Reporting by Yinka Adegoke; editing by Andre Grenon)