Several years have passed since cable MSO Cable One made the decision to de-emphasize video and focus on broadband. The choice has proven to be a good one, said Cable One President and CEO Julie Laulis yesterday. The Cable One strategy choice to de-emphasize video was triggered by skyrocketing content costs and increased video cord cutting in the company’s largely rural markets.
Rather than allow margins to erode, the company made the decision to pass increased costs on to customers – and although revenues initially suffered somewhat, the company more recently has seen both revenues and margins increase.
“We put our focus on higher-growth services,” said Laulis.
Nearly 60% of Cable One’s business now comes from business and broadband, where the company has invested to support high speeds. The company attributes revenue growth, in part, to customers upgrading service tiers.
Three quarters of Cable One customers can get speeds of 1 Gbps, according to the company – although the most popular service tier is 100 Mbps, which sells for $55 a month.
“I call it a value offering,” Laulis said. And even though a relatively small amount of customers purchases gigabit service, having it has had a “halo effect” for Cable One, she noted.
“It establishes us as a premiere technology-enabled provider,” she said.
Cable One Strategy
Two years ago, former Cable One CEO Tom Might told attendees at another financial conference that “there is very little need to have video,” which was quite a statement for a company that at one time was known primarily as a video provider.
Laulis yesterday offered some concrete evidence to support that view. She cited the example of one Mississippi market where a single entity owned all four major broadcasters. Unable to negotiate reasonable terms with the owner, Cable One dropped all four channels, which caused Cable One to lose customers at three times the rate of another cable MSO in that same DMA. But, Cable One’s broadband business in that same market grew at the same rate as the other cable firm.
The Cable One strategy shift away from video also has driven an increase in average margin from 35% to the mid-40s, according to the company.
Cable One recently closed on its acquisition of multi-play services provider NewWave Communications – a company that is about one quarter the size of Cable One and that had invested in broadband but had not yet seen market share increase commensurately. Cable One sees strong potential for growth in the NewWave areas.
Laulis made her comments at the J.P. Morgan Global Technology, Media and Telecom Conference.