Smaller Cablers Feel the Pinch
How MSOs are handling the economy was the topic for an opening-day panel at this annual conference dedicated to the economic, technical, and regulatory issues being faced by smaller operators.
WaveDivision Holdings CFO Wayne Shattenkerk said his MSO still managed to add subscribers in the second quarter, but he acknowledged that there was "definitely a slowdown." WaveDivision serves more than 275,000 customers in parts of Washington, Oregon, and California.
Charter Communications Inc. , which is operating under a bankruptcy reorganization that aims to trim $8 billion from the MSO's debt load, started to see the effects of the economy by the third quarter of last year, company senior VP of programming Greg Rigdon said. (See Cable Catchup, Charter Bankruptcy Update , and Charter Turns to Chapter 11.)
Charter is trying to combat that with product bundles that reduce the monthly nut but has started to witness "cord-shaving," the company's own term for customers who don't cut the cord completely, but are tightening their belts by downgrading their levels of video service. Rigdon said the bulk of that is occurring in the premium video service category (think HBO, Showtime, and Starz), and with some digital video packages.
Charter intends to address that with more gusto after it emerges from bankruptcy and capex constraints are lifted somewhat. Plans include migrating more subs to digital video services and beefing up its on-demand access to primetime shows. Rigdon said Charter is also thinking about getting involved in authentication, a process Comcast is using for On Demand Online, its initial Web TV technology trial. (See Time Warner, Comcast Team Up for TV Everywhere.)
CableOne isn't immune to a bad economy, but it is seeing a "slight uptick" from subscribers defecting from Dish Network LLC (Nasdaq: DISH), said Jerry McKenna, the MSO's chief sales and marketing officer. "DirecTV is growing share; Dish is not."
Although operators are still seeing growth (albeit slower year-on-year growth) in most new service areas, most MSOs on the panel agreed that they are seeing a stall in their local landline phone businesses, partly because consumers are growing more and more comfortable with the idea of using a wireless phone as their primary voice connection.
"Phone is where we saw the most dramatic slowdown in our growth," WaveDivision's Schattenkerk said. He noted that Wave also saw DVR sales dip in the second quarter, but he isn't sure if that was due to the economy or because the product category had reached a saturation point. "We've been deploying those [DVRs] aggressively."
Phone sales at CableOne "have been a little bit sluggish," McKenna acknowledged, noting that the MSO is trying to fix that by selling new bundled discounts that emphasize the phone service, and attacking the broader economic challenge with a 24-month price guarantee. McKenna said that's been a hit among subscribers with fixed incomes, with about 20 percent of the MSO's new subscribers taking the price-lock option.
Only one MSO on the panel had firm intentions to apply for a piece of the $7.2 billion in American Recovery and Reinvestment Act funds that are up for grabs. (See FCC Boots Up National Broadband Plan .)
Schattenkerk said WaveDivision has indentified some projects to help provide broadband access to underserved areas and to address "middle-mile" issues that prevent some operators from delivering fast speeds to regions that are miles away from existing facilities.
Bob Ormberg, the VP of content and product management of General Communication Inc. (GCI) (Nasdaq: GNCMA), is looking at the stimulus situation closely since the Alaska-based operator serves plenty of rural areas, but it's considering ways to reach consumers there without satellite or fiber.
CableOne and Charter are likewise on the sidelines. "It's a little unclear how we can benefit from it," McKenna said.
— Jeff Baumgartner, Site Editor, Cable Digital News