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WOW's Network 'Edge-Outs' Spur Sub Growth in Q3

Jeff Baumgartner
11/4/2019

Fueled by an "edge-out" strategy in which it extends the reach of its networks at the periphery of its territories, midsized competitive cable operator WideOpenWest said total subs grew by 7,800 in Q3, the best result in six quarters.

Fitting with a trend affecting the rest of the US cable industry, the bulk of WOW's sub growth came from broadband. WOW added 10,200 broadband subs in Q3, improving on adds of 7,300 a year earlier. Video sub losses improved a tad, as WOW shed 6,300 in the period, versus a loss of 7,100 in the year-ago period.

WOW, an MSO that competes in markets such as Auburn, Ala., and Cleveland, Ohio, against incumbent cable operators and telcos, ended the quarter with 773,900 high-speed Internet subs, for a penetration rate of 24.1%. It ended Q3 with 380,800 video subs (11.8% penetration rate) and 195,700 telephony subs (6.1% penetration).

WOW's edge-out projects have extended its network to 166,600 homes passed so far, including the addition of 14,000 homes in Q3 2019. Edge-outs were responsible for about 1,900 new subs in Q3, the best growth in that category since Q3 2018, the company said.

While WOW isn't happy with video subscriber declines, the mix-shift to broadband continues to be accretive to the company's business, WOW CEO Teresa Elder said on the company's Q3 call on Friday (November 1).

Elder said WOW's 100Mbit/s broadband speed tier remains the company's most popular, though the company is seeing some of those customers as well as new ones sign on for WOW's 200-Meg plan at a greater rate. WOW also offers a 1Gbit/s (downstream) tier following its network upgrade to DOCSIS 3.1.

Help from whole-home WiFi
Elder said WOW had seen some early results from a whole-home WiFi offering that features software and WiFi devices from eero, the company acquired by Amazon earlier this year. She declined to say how many of WOW's customers are opting for it, but Elder said the take rate is climbing and the product, which allows users to manage and troubleshoot their home networks, has cut down operational expenses due to a reduction of calls to customer care and truck rolls.

WOW's base whole-home WiFi offering includes one eero Pro and one eero Beacon extender. WOW offers that as a free add-on to its 1-Gig customers and for $9.99 per month to broadband subs on its 100-Meg, 200-Meg and 500-Meg service tiers.

WOW has not ignored pay-TV to the degree that some of its mid-sized peers, such as Cable One has. But the company hinted at its interest in developing a video streaming platform for broadband-only customers, along the lines of what Comcast is pursuing with its new Xfinity Flex product.

"I really believe that WOW has positioned itself for many years to be in exactly that position," Elder said when asked if the company might look into offering a "hub" for OTT-delivered video services to broadband subs.

WOW, which does not saddle its broadband service with data caps or usage-based pricing, has formed a marketing partnership with Philo, the OTT-TV provider that sells an entertainment-focused package starting at $20 per month. WOW has also integrated select video streaming services, including Netflix, on its pay-TV platform.

WOW will continue to seek ways to gain and retain video customers as the broader US pay-TV market struggles against cord-cutting and a surge in new general entertainment subscription VoD options. Elder said more than 40% of new WOW customers still look to pair a pay-TV service with WOW's broadband service.

On the financial front, WOW's Q3 revenues dropped 2.1% to $285 million. That was driven by lower subscription revenues, including a 10.8% drop for video offset partially by 9.4% broadband revenue growth. Business services revenues climbed 5.2% in Q3.

WOW is preparing to notify video subs of a rate increase for "out-of-contract" customers that will take effect in December as the company looks to get ahead of programming cost increases it expects to incur at the start of 2020. Elder said WOW has no plans to increase the price of the company's high-speed Internet product.

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— Jeff Baumgartner, Senior Editor, Light Reading

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