Charter Communications, Inc. (CHTR) Q2 2013 Earnings Report, Transcript and Summary

Hello, and welcome to Time Warner Cable's Second Quarter 2013 Earnings Conference Call. [Operator Instructions] Today's conference is being recorded. If you have any objections, you may disconnect at this time. Now I'll turn the call over to Mr. Tom Robey, Senior Vice President of Time Warner Cable, Investor Relations. Thank you, you may begin.

Thanks, Candy, and good morning, everyone. Welcome to Time Warner Cable's 2013 Second Quarter Earnings Conference Call. This morning, we issued a press release detailing our 2013 second quarter results. Before we begin, there are a few items I want to cover. First, we'll refer to certain non-GAAP measures. Definitions and schedules setting out reconciliations of these historical non-GAAP financial measures to the most directly comparable GAAP financial measures are included in our earnings release and trending schedules. Second, today's announcement includes certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, which are based on management's current expectations and beliefs, and are subject to uncertainty and changes in circumstances. Actual results may vary materially from those implied -- expressed or implied by the statements herein due to various factors, which are discussed in detail in our SEC filings. Time Warner Cable is under no obligation to, and in fact, expressly disclaims any such obligation to update or alter its forward-looking statements whether as a result of new information, future events or otherwise. Third, the quarterly growth rates disclosed in this morning's presentation are on a year-over-year basis, unless otherwise noted as being sequential. And finally, today's press release, trending schedules, presentation slides and related reconciliation schedules are available on our website at twc.com/investors. With that covered, I'll thank you, and turn the call over to Glenn. Glenn?

Good morning, and thanks for joining us. You'll have to bear with me because my voice is a little froggy this morning. Over the last 41 years that I've been in and around the cable business, it has remained a dynamic and exciting place to be. As we demonstrated in the second quarter, that continues to be the case. We introduced TV Everywhere capability in the quarter that is enabling our customers to get out of the home access to programming on a range of TV devices and websites. We announced the availability of in-home access to our video product on an expanded array of consumer electronics products. And at the cable show in June, we demonstrated a new navigation capability that we think will transform the way our consumers find entertainment. At the same show, the industry also demonstrated that it has the ability to make high-speed data much, much faster over this next several years, and we highlighted the value of a WiFi network with more than 150,000 access points available to our customers, and that's not to mention the many advances in phone, home automation and business services. On the operational fronts, we accomplished what we set out to do in the second quarter. The residential services team continued to execute its plan to improve performance, setting the stage for faster growth in the second half of the year and in 2014, and once again, business services continued to shine. A recurring theme over the last couple of months has been the speculation in the press and in the markets about consolidation in the cable industry. The fact that Time Warner Cable has been at the center of that speculation is really an endorsement of the value of our assets and the company we built. I'm not…

Thank you very much, Glenn, and good morning, everyone. It's been a distinct privilege to learn the ropes from Glenn. I really have been learning from one of the true masters. Glenn's steady and thoughtful approach to the business has enabled Time Warner Cable to deliver on its promises to customers, employees and shareholders. As we pass the baton over the next 5 months, Glenn and I, along with our talented and experienced senior management team, will remain focused on our key operating priorities. We'll continue to invest in and grow business services. Phil Meeks, our Business Services COO, has been on board just shy of 2 months now, and he's fully committed to taking our already very successful B2B operations to the next level. We'll continue to revitalize our residential services operations. Bill Goetz, our Residential Services COO, along with Jeff Hirsch, our Chief of Sales and Marketing, and John Keib, our Head of Customer Care and Technical Operations, are leading the charge on this difficult, but critically important effort. We are committed to delivering better and more reliable products and outstanding customer service, while also driving better revenue and cash flow growth. We'll also continue to insist on financial discipline. We're thrilled to have Artie Minson back at TWC as CFO after a 4-year stint at AOL. Artie not only knows the cable business very well, but also brings a broad perspective and deep insight into the management of complex customer-facing technology businesses. As part of the 2014 planning process, Artie will lead a critical review of our overall operating and capital costs to ensure that we are spending and investing as wisely and efficiently as we can. And finally, we'll remain committed to the balance sheet and capital allocation philosophy that we've lived by since we separated…

Thanks, Rob, and good morning, everyone. Let me just start by spending a few moments on why I'm so excited to be back at Time Warner Cable. Put simply, Time Warner Cable is a great company, supported by unique physical infrastructure and a great business model. Those who know me know that I'm a huge fan of subscription-based businesses such as ours that generate solid and sustainable free cash flow. That strong free cash flow generation enables continued reinvestment in the business, while also allowing us to return cash to shareholders. Also, we have meaningful growth opportunities in areas such as business services where we have made significant progress over the last few years. My decision to come back was also about the people. Glenn and Rob have created a unique culture for a company our size. I applaud the fact that our employees are expected to continually challenge the status quo, and to be disruptive even if it means disrupting ourselves. We also have an environment where we are constantly pushing ourselves to improve our products and customer service. This makes for a very good place to work. And as Glenn likes to say, "Happy employees make for happy customers, and happy customers make for happy shareholders." Before I get into this quarter's financial results, I thought it would be helpful to give my perspective on a few fundamental principles. First, I'm a big believer in our balance sheet and capital allocation strategy. I was here when we set our balance sheet strategy 5 years ago when we announced the separation from Time Warner Inc. I firmly believe we have struck the right balance between ongoing access to capital and optimizing our overall cost of capital, consistent with our 3.25 leverage target and solid BBB rating. Second, I am…

Thanks, Artie. Candy, we're ready to begin the Q&A portion of the conference call. [Operator Instructions] First question, please?

Our first question is Jessica Reif Cohen of Bank of America Merrill Lynch.

First, just on a personal note, I want to say best of luck to Glenn in your next chapter, and obviously, a hearty congratulations to Rob. So my 2-part 1 question is first on retrans. Obviously, these battles are getting louder and more bitter. I was just wondering if you could discuss your overall views. Are you prepared to break up the bundle? And if you're not, is it better to do longer-term deals rather than undergo these contentious battles constantly?

Okay. Jessica, I'll start, assuming that I can talk. I think the problem we have -- I'm going to give up. You do it.

Jessica, look, there's no question that the programming battles, generally, and retrans battles, specifically, have become more public and more publicly contentious. And that's not healthy for the industry. It's not healthy for our customers, most importantly. And we've continually referenced the fact that the real victim in all of this are the customers who get stuck in the middle. One of the things we've advocated historically is the notion of interim carriage pending resolution of these disputes, and that's certainly something that would alleviate the pressure on customers. As far as breaking up the bundle, we've always been big fans of providing customers with more choice, whether that specifically means one by one purchases of networks, I think remains to be seen. But I think that more flexibility around the big bundle is probably a healthy dynamic for the marketplace. The -- whether that's something that is regulatorily mandated or not, I think is yet a separate question.

Okay. And my other question is on HSD, the sub numbers were -- I don't even know how to say it. I mean, they were anemic. So is this a function of telco build-out? Or do you think it's a reaction to the price increases?

I think the HSD numbers are actually reflective of the overall approach to pricing on the front end, and what we've said is we've made a conscious choice between rate and volume here. It doesn't mean it's a forever choice, but we are always sort of playing with that balance of rate and volume, and it's really a reflection of the declining Triple Play connects. If you look at HSD-only customers, we actually added 90,000 HSD-onlys. Connect volume on HSD-onlys was actually pretty healthy, and I wouldn't lose track of the fact that, overall, HSD revenue growth was up 12.5% for the quarter. It's true that, that was largely on the back of ARPU improvement of 9-plus percent, but we did get some benefit from volume as well. So this is sort of not unexpected, given the approach to pricing and packaging. I would tell you that we're focused on whether there are ways within the confines of the approach we've taken to further enhance volume, and we hope to make that happen.

Next question, Vijay Jayant, International Strategy and Investment Group.

I have 2 questions. First, as you are still transitioning through some of your promotional challenges from last year, can you generally talk about the competitive landscape of how has that sort of changed and sort of address that on a geographic basis, too, Rob? And second...

I'm happy to do that, Vijay, and thank you. The -- I would generally say that the promotional environment continues to be pretty intense. There has been some differences across our geographies, and I would call that, in particular, the competition and the competitive dynamic in the Midwest, where U-verse, in particular, has been very aggressive on pricing. The net effect of that was that despite the fact that we have only about 1/4 of our total PSUs in the Midwest, I think the Midwest accounted for more than half of our total PSU net losses. So there's no question that the aggressive pricing in the Midwest had an impact. Needless to say, within the -- consistent with our overall pricing strategy, we've adjusted our pricing there to respond to the competitive dynamic, and we're expecting improved results in that region. Interestingly, in FiOS markets, we've actually fared relatively well with churn down in those markets. So I feel pretty good about the way we've competed there. So there are some differences. By and large, though, this was a function of lower connects across the board with the one exception being an increase in disconnects in the Midwest.

And if I could just -- I know you guys don't want to talk about M&A in general, but can you just talk about synergies, and one of the key synergies is programming cost savings, you guys know in your contracts. Is that a material change immediately if there was a transaction? Or are your contracts sort of exclude some of that, some of the content companies...

Yes, Vijay, this is something that is -- it's very case specific. So when we've done transactions in the past, and I'll take Insight, as a for instance. One of the benefits we got out of that transaction was that we were able to take the Insight properties and avail them of the benefit of our better programming costs, and that yielded a meaningful portion of the overall $100 million of run-rate synergy that we talked about at the time we did the deal. So whether or not synergies from programming cost improvement would exist in other transactions really depends on the programming cost that existed before the transaction, and then how the structure of the transaction affects, whether those programming costs could be realized by putting additional systems under our contracts or vice versa for that matter. In most cases, we have not talked about programming cost synergies emanating from simply being larger. In theory, of course, there could be some benefit from that as well.

Next question is Doug Mitchelson of Deutsche Bank.

So my question is for Rob, regarding these management changes. Do you intend to fill your current position, and how does the transition play out?

Yes, so Doug, thank you. The -- at this point, we have no announcements to make on additional personnel changes. What I would point out, though, is that, earlier in the year -- and we talked about this a little bit, I think on the Q4 call -- we instituted a management reorganization, which resulted in our naming 3 Chief Operating Officers, one for each of our main lines of business. So Bill Goetz is running our residential operation as Chief Operating Officer, Phil Meeks as Chief Operating Officer of business services, and Joan Gillman as Chief Operating Officer of media sales, and I would simply say that I feel completely confident in their abilities to lead those businesses. They're all very experienced, seasoned executives, and we're in very good hands.

A couple of clarification follow-ups. You've talked a lot about how much new connect ARPU has improved, and I think you gave some commentary last quarter. Is it increasing low single digit, mid-single digit, high single digit versus prior connects?

Yes. So I think I said in my prepared remarks that recurring revenue from new connects, generally, across all of the customer cohorts is up high single digits over last year. Within that, though, I would tell you that the video Single Play cohorts are actually increasing the least. And there are pretty significant like 20% increases in HSD-onlys and 15% plus increases in Triple Play. Video Internet Double Plays are also up fairly meaningfully.

Our next question is Richard Greenfield with BTIG.

A couple of questions. One on performance relative to Comcast. Wondering when you think about the gap that has persisted, how much of that do you think is simply your relative scale? And then, second question, Artie mentioned at the start of his comments about your focus on the desire to disrupt yourself, if that was the best thing to build long-term value. And could you just maybe put that into the lens of how you're dealing with CBS? It seems like you had some pretty unique leverage in this retrans battle. Wondering why you chose to stop going dark once you started the process on Monday night into Tuesday morning?

Rich, I'm going to do them in reverse order. We're not going to comment publicly on the various machinations in our negotiations with CBS. I think I would simply say what we always say about programming negotiations, which is that we are very focused on ensuring that we obtain reasonable pricing for the programming that our customers value, so that we can ensure that they, in turn, can pay reasonable prices for those -- for our video services. So that's going to continue to guide our negotiations on that front, and we're not going to comment further on it. With respect to your question about Comcast performance, we've gone through great lengths to articulate our overall strategy, and I feel good about the progress we're making. I think there are some benefits on the cost side that definitely derive from scale, whether that's programming costs or some ability to defray other fixed costs, but I don't think there's anything beyond that. Artie, I don't know if you want to comment on it.

No, I think you covered it.

Maybe just one other way of attacking it. When you look at the Adelphia and Insight acquisitions in totality, how much faster do you think you're growing because of those 2 acquisitions? Is there a meaningful benefit that you think you've seen from the acquisitions in terms of your overall year-over-year growth that you wouldn't have had if you hadn't made those acquisitions?

Rich, it's Artie. No, those are not at this point having a meaningful impact to the overall growth trajectory of the business.

Next question, Jason Armstrong, Goldman Sachs.

Just, I guess, one question on leverage. A lot of the M&A chatter that, I think, you mentioned we've all read about as well, sort of centers on someone else's ability to use your balance sheet really against you. Again, I'm just wondering if this causes you to think differently about leverage, what you'd be comfortable with on the business and what sort of flexibility you have within investment grade.

Hey, it's Artie here. Let me take that one. But one of the things, I think, we've been very consistent about since we spun out from Time Warner is our overall balance sheet strategy with, really, a North Star leverage target of 3.25 and a solid investment grade rating, and just given, frankly, the absolute dollar value of debt we have, it's really important for us to keep that solid investment-grade rating and ongoing access to the capital market. So I think we feel we've met the right balance between leverage ratio and optimizing the cost of capital. And I think for right now, we're very comfortable.

And Artie, do you think you have any flexibility around the 3.25? What's current investment grade framework for you?

Right now, for us, what's really important is that solid BBB rating. It's something, as I said, it's really a North Star target for us. There have been times, obviously, when we spun out from Time Warner, we were above and we came down quickly. If something opportunistic came up, we would look at it, but really, the North Star is the 3.25 and solid BBB rating.

Next question, Ben Swinburne, Morgan Stanley.

Rob, you gave some comments at the beginning of the conversation about what you're seeing sort of under the hood on the promotional side, but obviously, as you can imagine, from the external numbers, it's a bit tougher for us to see those. I wanted to see if you would comment. When you think about ARPU and the ARPU trends you're seeing, how do those compared to the $105 you called out for residential customer ARPU? And I'd assume the year-over-year numbers are really good on a new connect front, but if you put that into context with the overall business, it would be helpful. And along the same lines, on volume, given what you're seeing with connect trends being down as you've lapped these promotions, do you have sort of line of sight to PSU, overall PSU adds? Is that something you think you can get to by Q4 or into next year? Or is it too cloudy at this point still to be that precise?

Yes, on the second, let me answer the second one first, Ben. The improvement we hope to see in the back half of the year really relates to continued improvement in churn. Given that -- given the pricing approach, I would expect that year-over-year connect volume will continue to be lower than last year. I'm not sure I follow the first question. Are you looking for something beyond what I've shared with you in terms of revenue per new connect?

Well, you mentioned the high growth rates on ARPU per new connect versus last year, but last year, you were promoting pretty aggressively. So it's hard to know on an absolute basis if that -- how accretive that is to your overall ARPU.

Relative to average?

Yes, something like that.

Okay, so I think it's fair to say that generally speaking, the new connect revenue is still slightly below the average for the relevant cohorts. So in other words, new connects for Triple Plays is still below the Triple Play average. But it would be pretty surprising if that weren't the case, given that we're still promoting to generate new connects just at, by and large, higher levels than we were before.

And the only thing I would add is that the impact of the new subs on the overall ARPU is there's only about 10% of the subs in the new pricing architecture. So while it's having a meaningful impact on the new connect performance, it takes a little bit of time to make its way through the overall ARPU...

I guess, finally, just to close out on this one, one of the trends that we're very pleased with is that the gap between revenue associated with new connects and revenue associated with disconnects is shrinking, and that's a very positive dynamic as it relates to overall ARPU.

Right. And Artie, would you have a cash tax number for the year or cash tax rate? It's running quite a bit lower than we thought, at least for the first half.

Yes. Let me give you a little bit of color on that. We, as you know, we have book provision of about -- we're really in the 39%, 40% range. But on the cash tax front, we're getting benefits from still, the Adelphia step-up, Insight NOL. So as a result, cash taxes for the year will probably be in the range of $600 million to $700 million. That will ultimately depend on whether or not we make a pension contribution for the year, but that's about the range we're looking at.

Next question, Craig Moffett, Moffett Research.

First, let me just join the chorus and say congratulations on a really extraordinary career, Glenn, and I think the whole industry owes you a tremendous debt of gratitude for all the things you've accomplished over your career. And congratulations to Artie and to Rob as well. I'm going to try to squeeze in 2 questions, if I could. One, you talked about M&A a little bit from the side of a potential acquiree. Can you talk about whether your view on being an acquirer has changed at all, and under what circumstances you would consider trying to get bigger by making acquisitions rather than being a target of one? And then, secondly, if you could just talk about how your thinking on WiFi has evolved, and whether you see an opportunity to try to do a WiFi first wireless service.

Craig, on M&A, generally, I actually think whether we're talking about acquiring, being acquired, combining in some other way, the mindset is pretty much the same for us, and it's really about the creation of value for our shareholders. I've articulated our philosophy on this many times, but it's really all about whether the use of financial capacity towards acquiring a company is the highest and best use of our financial capacity. So can we create value by managing the property better than the owners who currently operate it? And can we negotiate deals that enable us to capture that value for our shareholders? That's sort of threshold number one, and then, can we -- on a tax-effective, synergized, gross-adjusted basis, acquire the assets at a multiple that's attractive relative to the basis on which we could acquire our own shares? And by and large, in the past, the latter has been more attractive than the former, and that's the way we've dedicated our financial capacity. I don't see any reason to change that philosophy. We still buy in completely. On WiFi, we're continuing to deploy WiFi aggressively. Last year's focus was primarily in Los Angeles. This year, we've turned our attention, not exclusively, but primarily to New York City. We made some great inroads there recently, and we've -- we actually have lit up somewhere -- a couple of thousand towers in New York City over the last month or so, and we continue to be very excited about that as a value-added feature for our high-speed data customers. Whether or not we would use WiFi with a, let's say, an MVNO backup as an overall wireless service, I think we haven't come to a conclusion on that yet. We continue to be partnered with Verizon Wireless, and we're each selling each other's services, and we're comfortable with that approach for the time being. Craig Moffett - Sanford C. Bernstein & Co., LLC., Research Division: Could I try to squeeze in a follow-up to your commentary about M&A, if I could? Just -- you talked about the litmus test of buying back your own shares. Is it fair to say, given the fact that you're still buying back shares, that you see the current valuation as undervalued even with the appreciation in the recent weeks?

I think the fact that we're buying back shares speaks for itself, but I'll let Artie speak to that further.

Yes, Craig. Obviously, we've re-upped the repurchase program last week, and as Rob indicated, we wouldn't be announcing a reauthorization if we weren't going to be in the market. We've bought back about $1.3 billion to date and reaffirmed the $2.5 billion target for the year in repurchases. So obviously, the intent is to be in the market, and we would only be so if we saw that as value creating.

Next question is Jason Bazinet, Citi.

I think you guys have been a bit more aggressive in terms of launching apps that allow consumers to get access to your linear feed on non-TWC set-top boxes. And I think you mentioned there's been maybe 5 million uses, I think, was the number that you cited. My question is, are you seeing any evidence in these early days of people returning their TWC set-top box or is there -- are there early indications that people are just using this as a complement to the CPE that they have in the home today?

Yes. At this point, our perception is that this is a complement to the existing service, and over time, our expectation, especially as we start enabling devices that are more akin to a traditional set-top box, Roku being an example and the Smart -- certainly the Samsung Smart TVs being an example, it's conceivable that set-top boxes will be replaced. But at this point, since most of the activity has been on what are, by their nature, companion devices, meaning iPads and iPhones and Android smartphones, it's been mostly complementary usage as opposed to replacement usage.

Is your explicit goal with this strategy just to give the consumer flexibility? Or is it more about trying to reduce the capital intensity of the business you've [indiscernible]

It is all about giving customers choice to consume our video offering the way that they like to consume it. A by-product of that may turn out to be that customers buy their own CPE and there is a concomitant reduction in our capital, but the primary objective is customer flexibility and choice.

Next question is Phil Cusick, JP Morgan. Philip Cusick - JP Morgan Chase & Co, Research Division: I know we're out of the business of giving quarter-to-quarter guidance, but I want to range expectations a little bit for 3Q. You talk about churn coming down in the second half and especially in the fourth quarter, but I'm trying to figure out, can that come down enough in the third quarter that we can start to see at least an improvement in the year-over-year trend, if not better numbers year-over-year? Or should we be looking for a weaker number again for 3Q on subs?

Yes, it's Artie here. So let me give you a little bit. We're not going to go into the business of sort of quarterly subscription guidance, which I think is where you were potentially going. As it relates to financial guidance, I think we gave you a little bit of color on the call. In terms of that, the back half of the year, the growth rate, particularly in Q4, you're going to see an improvement in the OIBDA growth rate. You will see, as it relates to margins, you'll see margins come down a bit in Q2 to Q3. And you will see sequential margin improvement from Q3 to Q4 with our expectation that margins will actually be up year-over-year in Q4. How we get there will really be on the revenue front. We will be -- obviously, we're working through rate increases now and promotional roll-offs, and we'll continue to be very focused on the cost side and taking out costs via operating efficiencies. So that's a little bit of the financial picture, and I think on the subscriber front, we'll leave it at that. Philip Cusick - JP Morgan Chase & Co, Research Division: If I can try one that maybe has a little more likelihood, Artie, as you come in, as you look at the business, is there a focus on sort of operation, OpEx improvements away from programming costs you really think could be taken over the next couple of years?

What we're doing is we're doing a full review of expenses, and I'll give you a little bit of context. We spend about $14 billion in OpEx, and this year, about $3.2 billion of capital. And we're going through and sort of chunking it into its various pieces. Obviously, you pointed out programming which is a big piece on the cost of revenue side. And when we're done with this sort of phone migration of taking phone in-house, my feel, actually, we're pretty tight on the cost of revenue side. Where we've been looking at potential opportunities, if we look at places where we've been seeing a little bit of margin erosion, it's on the SG&A side. And so there's some areas there where we think we could be a little bit tighter. Now there's reasons why in some areas, on the SG&A side, expenses have gone up. We've invested, obviously, in salespeople to drive the overall business services revenue, but that is an area, where we look at opportunities, that's one we will be focused on. And obviously, when we get into the capital spending, I think that's going to be more about are we allocating the overall magnum of spend to the right projects? And I'd rather focus on really just making sure the right projects are being funded than change in overall CapEx funding levels.

Next question, Amy Yong, Macquarie.

I actually have a question on the Dodgers. Can you talk about the financial impact to margins for 2014? And I guess, in your early discussions with MVPD, can you talk about the level of interest on the pricing side and the programming?

So Amy, it's early to talk about the Dodgers. We haven't yet begun the process of seeking affiliation agreements. So it's just too early to start giving any sort of sense of the financial impact for 2014. Based on our experience with the Lakers RSN, we know that most of the action happened very close to the launch date of the networks. So I can't give you either financials or reactions from distributors quite yet.

Okay. Can you talk about, I guess, your market share gains in LA, given WiFi and LA Lakers? And what you think the impact of the Dodgers is going to have? I guess it would be intangible?

Let's talk about what the objective of doing the Lakers deal was, just to put it in context. We had a choice between acquiring product that included the Lakers games from third-party RSNs or doing a deal directly with the Lakers to acquire that product to include in our video offering. And we concluded that the structure of doing a deal directly with the Lakers was economically preferable to the alternative of acquiring that product through a third-party RSN, both in terms of near-term cost, but also -- net cost, but also in terms of the predictability of the access to that programming on a long-term basis. We were going -- very likely to carry Lakers games either way. And it is also the case that we don't carry them exclusively and wouldn't carry them exclusively if a third-party owned them. So no impact on market share from that. It was entirely premised on an evaluation of relative costs. I think it's fair to say that there is some overall branding impact benefit that we get from our association with the Lakers RSN, with an iconic brand in the LA market, but it's very difficult to connect that with specific market share gains. With respect to WiFi, also, I think the early evidence we have is that our customers who do use WiFi hotspots tend to churn less than customers who do not use WiFi hotspots. I hesitate to call that cause-and-effect, although the correlation is pronounced. And intuitively, we think that level of value-add is going to make our HSD product more attractive than the alternative. So we're going to continue to invest in that and other markets. But again, I wouldn't point to a specific market share that emanates from that investment.

John Hodulik from UBS.

Maybe back to some of these -- the volume trends. First, Rob, have you seen any change in AT&T's stance regarding U-verse in the Midwest there? Then you had mentioned a couple of initiatives that could help drive some of the RGUs, both the Lifeline service on the voice side and maybe the 30-gigabyte tier on the data side. I mean, can you talk a little bit about how those get rolled out? And whether, in fact, you think that those 2 initiatives will have an impact on the second-half trends?

Okay, U-verse, I wouldn't call it a pronounced change during the quarter. Throughout the quarter, U-verse was pretty aggressive with a beacon price of $79 for their Triple Play and $49 for their Double Play. I would characterize those as aggressive promotional prices, and they had an impact. I would say that the impact was more pronounced as the quarter wore on. We've now responded to that in the market, and I expect that our relative performance should improve there. With respect to the new tiers of service, both are designed to really further segment the marketplace and ensure that we have the right products for a broader spectrum of customers. So I think that the Lifeline product, and to be clear, we've only just launched it in New York State. There are regulatory hurdles that one needs to go through in order to launch that service. So we're good to go in New York State. It should allow us to tap into a group of customers who are otherwise priced out of the market or were forced to get their voice product from some of our competitors who had a Lifeline offering. So I do think there's some interesting potential there. And as we roll it out to a broader portion of our footprint, I would hope it would have a pronounced impact on our phone connects. As far as the usage-based tier, the 30-gigabyte tier, again, I think it adds another opportunity for customers to better match our value proposition with their particular needs. So at least, in theory, the reason we're doing it is we think we can attract yet another point along the demand curve of customers.

Candy, I think that's probably all we have time for this morning. Thanks, everyone, for joining us. And to give you a little advance notice, Time Warner Cable's next quarterly earnings conference call, which will reflect our third quarter 2013 results, will be held on Thursday, October 31, 2013, at 8:30 a.m. Eastern Time. Thanks, and have a great day.

Thank you for your participation. That does conclude today's conference. You may now disconnect.