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Residential Broadband, Biz Services Drive Cable One Forward in Q2

Jeff Baumgartner
8/7/2019
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With video no longer deemed one of Cable One's core offerings, residential broadband and business services continue to stoke revenue growth at the Phoenix-based MSO.

Total Q2 revenues were $285.7 million, up 6.4% from the year-ago quarter, or up 3.9% excluding revenues from Cable One's recent acquisition of Clearwave.

Residential broadband revenues soared 8.5%, to $132.82 million. Cable One also tacked on 20,392 broadband subs in Q2, upping that total to 612,626.

Cable One is seeing more than half of its sell-in customers opt for speed tiers higher than its standard 100 Mbit/s service (that starting tier is at 200 Mbit/s in markets with the operator's new pricing and packaging), company President and CEO Julie Laulis said on Wednesday's earnings call.

Cable One's rebrand to Sparklight is underway.
Cable One's rebrand to Sparklight is underway.

Cable One is also seeing an acceleration of new customers taking the operator's new unlimited data plan, which costs an additional $40 per month. More than 10% of sell-in subs are going with the unlimited option, Laulis said.

The operator also employs a usage-based data policy in which customers pay an additional $10 for a bucket of 100 gigabytes of data if they exceed their monthly data limits.

The combination of customers taking higher-level tiers and the unlimited data plans helped Cable One's Q2 residential data ARPU rise 4.9%, to $71.80, in the second quarter.

Cable One's focus on broadband and pivot away from video has it flirting with margins of 50%.

"That's the highest in the industry," Craig Moffett, analyst with MoffettNathanson, said in a research note. "We suspect they will keep going higher."

Cable One CFO Steven Cochran seems to agree. "We don't think 50% is any kind of cap" on company margins, he said on the call.

Meanwhile, Cable One business services revenues rose 29.3% in Q2, or 11.7% excluding the impact of Cable One's acquisition of Clearwave.

Pay-TV base still eroding
Cable One's video sub numbers continued to drop amid the company's strategy to deemphasize pay-TV in favor of higher-margin broadband service.

The company shed another 30,277 video subs in Q2, a 9.4% drop versus the year-ago period. Cable One ended the period with 293,237 video subs, with that part of the business generating $84.03 million, down 3.9% versus the year-ago quarter.

A source familiar with Cable One's plans said the company is in negotiations to partner with a virtual MVPD or possibly more than one, but no formal announcement has been forthcoming. Several cable ops in that mid- to small tier range, including WideOpenWest, have already forged such partnerships. Meanwhile, the National Cable Television Cooperative, an organization the represents hundreds of independent cable ops, has deals in place with fuboTV, PlayStation Vue and Philo.

Several MSOs in that group are also working with partners such as Evolution Digital, TiVo, Espial and MobiTV on next-gen video offerings that deliver service to IP-connected devices, including a new class of boxes that run the Android TV Operator Tier platform. But Cable One has expressed no interest in taking that particular step.

Cable One's total non-video sub base rose 10% in Q2, representing 62% of its overall sub total. Based on networks that pass about 2.13 million homes, Cable One's residential data penetration rose slightly to 32% in Q2, while its video service penetration was just 14.5%, down from 16.3% in Q2 2018.

Laulis said Cable One is making progress with its rebrand as Sparklight. Customers in Cable One's legacy markets have started to see the new brand appear on signage and trucks and on company materials in June.

She said it's too early to know how the new brand will affect the company, but said Cable One conducted a baseline study before the rebranding started, and expects to do further studies at the end of the summer and the end of 2019 to get a fix on customer response to the change.

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— Jeff Baumgartner, Senior Editor, Light Reading

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