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MSO increases '08 capex for system upgrades, all-digital migrations, SDV, and other moves to free up bandwidth for more hi-def

Mediacom Adds $30M to '08 Capex

Jeff Baumgartner
LR Cable News Analysis
Jeff Baumgartner
2/26/2008
50%
50%

Mediacom Communications Corp. execs say 2008 will be a “peak year” for capex spending as they outlined plans for an aggressive digital simulcast rollout, some limited all-digital migrations, and a foray into switched digital video (SDV). Most of those moves, announced Tuesday, are aimed to help Mediacom prepare for the February 2009 broadcast TV digital transition and to free up space for a wider selection of high-definition television (HDTV) programming.

The company expects to increase its capex spending this year by about $30 million to an expected range of $255 million to $265 million. That will represent about 19 percent of revenues in 2008, versus 18 percent last year.

Despite that increase, “we expect a positive swing of $18 million in free cash flow in relation to 2007,” company chairman and CEO Rocco Commisso said Tuesday.

Revving up digital
Mediacom plans to deploy digital simulcast to 50 percent of its systems by year-end, up from about 25 percent today. In addition to offering the entire programming lineup in a cleaner digital format, the company believes this will allow it to serve more customers with less expensive all-digital set-tops.

Mediacom also plans to introduce SDV in three markets in 2008, a move that should enable it to re-tag valuable spectrum for HD services. The MSO did not identify which markets are targeted for SDV, but the technique is already favored by Cablevision Systems Corp. (NYSE: CVC) and Time Warner Cable Inc. (NYSE: TWC). Cox Communications Inc. and Charter Communications Inc. have also started to deploy it. Comcast Corp. (Nasdaq: CMCSA, CMCSK), meanwhile, has said it expects to deploy SDV to 15 percent of its footprint this year. (See Comcast Spreads the Love , Charter Charts First SDV Course , and Cox Flips BigBand's DV Switch .)

Although between 80 percent to 90 percent of of Mediacom’s systems are built out to at least 750 MHz, the MSO is taking some steps to make its 550 MHz systems and some smaller properties more competitive through bandwidth upgrades or all-digital migrations.

“The side benefit of this is it will help us expedite the delivery of more HD channels to those systems [and offer] a more competitive product,” said John Pascarelli, Mediacom’s EVP of operations.

Commisso outlined a plan to offer 25 high-definition channels for free to entry-level digital customers. He reiterated that the total HD menu will rise to about 40 linear channels when premium hi-def networks and other programming services are added in.

He also stressed that Mediacom wants to avoid playing the “tonnage game in HD,” referring to a competitive stance being taken by DirecTV Group Inc. (NYSE: DTV), which presently offers about 90 “national” channels in HD.

Instead, Mediacom will push the availability of the most popular hi-def nets and expand its selection of HD-VOD titles. “We’re focused on putting on what people are watching in HD rather than trying to get out there and sell tonnage,” Commisso said.

More love for Docsis 3.0
Mediacom also changed its stance a bit when it comes to Docsis 3.0, a new CableLabs platform that promises to push speeds beyond 100 Mbit/s.

Although it talked about taking a “back seat” on the technology during its earnings call last August, Pascarelli noted that the MSO plans to start a Docsis 3.0 lab test this year while it monitors some live trials going on at CableLabs. (See Mediacom Takes 'Back Seat' on Docsis 3.0 .)

Mediacom also began testing of a “Powerboost” product last month that doubles speeds when capacity is available on the network. Cox and Comcast are among MSOs that already offer that capability.

But not all of the MSO's cable modem strategies revolve around faster speeds. Mediacom is relaunching a “lite” cable modem tier for $19.95 in the first quarter. Mediacom hopes the product will allow it to steal away some share from DSL providers and complement its existing 15 Mbit/, 10 Mbit/, and 8 Mbit/s (downstream) speed tiers.

— Jeff Baumgartner, Site Editor, Cable Digital News




Interested in learning more on this topic? Then come to Docsis 3.0 Strategies: From Product Development to Service Deployment, a conference that will take a comprehensive look at the cable industry's plans to roll out its next-generation architecture around the world. To be staged in Denver, March 19, admission is free for attendees meeting our prequalification criteria. For more information, or to register, click here.


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