Cable One has the highest margin in the cable industry, according to Kevin P. Coyle, senior vice president and chief financial officer for the company. Ironically, the company achieved those margins—which exceeded 47% in the fourth quarter of 2017 – by de-emphasizing the traditional video business in favor of broadband and business services, Coyle told investors at a financial conference yesterday.
Highest Margin in the Cable Industry
Cable One shifted focus in 2012 when, as Coyle explained, “we believed linear video was broken or damaged.” Consumers were moving to over-the-top options because traditional cable service had become too costly. Programming costs had grown so high that video service providers had the choice of either making no margin on their services or passing on costs, in which case margins were still slim.
Cable One, which focuses on smaller, more rural markets, primarily in the central and northwestern U.S., made the decision to pass on programming costs. The decision caused Cable One to lose some video customers, but by emphasizing higher-margin broadband and business services, the company ultimately became more profitable.
“Residential high-speed data and business services have four to five times the margin of video,” said Coyle. Overall margins were just 35% in 2012 but have increased steadily since then.
Strong ARPU
Cable One has another claim to fame as well, noted President, CEO and Chair Julie M. Laulis at yesterday’s conference. The company’s average revenue per user (ARPU) is higher than for most cable companies.
Laulis attributes this, in large part, to how the company structured its broadband tiers. Since 2015, the company has offered 100 Mbps service for $55 and that’s the lowest-cost, lowest-speed offering the company has. Above that level are several higher-speed, higher-cost tiers, including gigabit service in some markets.
According to Coyle, Cable One could offer gigabit service to 99% of its users over DOCSIS 3.0 technology. Some cable companies held off on offering gigabit service until DOCSIS 3.1 was available because it could support a higher number of gigabit customers. But perhaps that is not necessary for Cable One because the company likely has a lower average population density in comparison with larger cable companies.
Cable One considers itself to be a rural cable system aggregator but has found that patience is needed in that role. When the company initially approached NewWave – a cable company that Cable One acquired last year – NewWave management initially said the company wasn’t for sale. But six months later, they had a change of heart.
