Culling Customers
At the same conference, AT&T Inc. CEO Randall Stephenson said his company, which owns the satellite provider DirecTV, is “cleaning up the customer base” by letting go of subscribers who insist on keeping promotional prices when their contracts expire.

Pay-TV providers are making up for the lost revenue by charging everyone more. When subscribers cancel cable TV, they no longer get a discount for bundling TV with internet. When Optimum customers around the New York area cancel TV service, they also typically upgrade to faster -- more expensive -- internet, Altice USA CEO Dexter Goei said last month.

As customers drop pay TV, cable companies will actually see their profit margins widen, Moffett said. That’s because much of their pay-TV revenue goes right to channel owners, like Walt Disney Co. and its ESPN network, in the form of subscriber fees. Fueled by expensive sports rights, those fees are even rising faster than cable TV bills, hurting profits for companies like DirecTV and Comcast. Selling high-speed internet is far more profitable.

Profits Grow
Last quarter, Charter lost 26% more residential TV subscribers than a year ago. But it also added 19% more internet subscribers, fueling a 4.2% gain in adjusted earnings.

Charter appears to be courting internet-only subscribers through recent price changes, according to BTIG LLC analyst Rich Greenfield. Last year, the company raised the price of broadband bundled with other services by $5 a month, he said, while increasing internet-only service by $1. Internet without TV still costs a few dollars more, but Charter is closing the gap, he said.

“It appears as if you are purposefully pushing subscribers toward abandoning your video service,” Greenfield said in a note last fall addressing Charter executives.

‘Turkish Bazaar’
Since taking over Time Warner Cable in 2016, Rutledge has tried to end its promotional culture. He described Time Warner Cable as a “Turkish bazaar,” where customers called in and bargained with customer service reps. At one point, the company offered 90,000 different prices designed to keep cable-TV subscribers from cutting the cord.

When May called about his bill, Charter did offer him one alternative: a $15-a-month online-TV service called Spectrum TV Essentials. The new streaming service, which debuted in February, has more than 60 channels from programmers like Viacom Inc., Discovery Inc. and AMC Networks Inc.

May canceled after a few months because he missed the sports channels. Now, his Spectrum internet service costs $70 a month, and he gets Sling TV from Dish Network Corp. for another $40.

Since Charter acquired Time Warner Cable, efforts by customers to negotiate lower rates have gotten “much tougher,” according to Phillip Dampier, founder of the blog “Stop The Cap.”