It has been a rule of thumb that U.S. cable TV operators have operating costs lower than their major telco competitors.
But on one metric–revenue per employee–AT&T and Verizon arguably perform much more efficiently than U.S. cable TV operators.
Tier one service providers, no less than other service providers, have been working to control or reduce operating costs for more than a decades, and especially over the last five years, in large part to cope with declining gross revenues (in Western Europe) or margin-challenged revenues (in the U.S. market).
Headcount Tallies
One element of such operating cost programs are workforce adjustments, as service providers attempt to adjust headcount and costs in segments of the business that are flat to declining, in terms of revenue.
Between 2007 and 2012, AT&T eliminated 67,620 jobs, almost a quarter of its workforce. At least in part, that accounts for average sales per AT&T employee of $495,000 in 2012, up from $209,000 in 2006.
Over the same five-year period, Verizon eliminated 48,000 jobs. Industry wide, employment in the entire telecom industry has fallen by almost 200,000 since 2007, according to the U.S. Labor Department.
Most of those cuts have come in the fixed network business, as mobile segment headcounts have been roughly flat between 2001 and 2008, and have been declining since 2008.
Between 2008 and 2010, the mobile segment lost about 40,400 jobs overall, by some estimates. By other estimates, U.S. mobile business jobs dropped by only about 10,000.
The point is that, by any estimate, most of the lost U.S. communications jobs have come from the fixed network business.
Still, it remains the case that U.S. cable operators have operating cost structures lower than the leading U.S. telcos.
Cable vs Telecom Operating Costs
In 2010, for example, when U.S. telcos overall might have had about 432,000 to 455,000 employees, U.S. cable companies likely had between 157,000 to 180,000 employees, according to the U.S. Department of Labor.
Of course, the U.S. cable TV distributor business generated about $90 billion in annual revenue, where telcos generated about $447 billion.
Mobile revenue was about $160 billion in 2010, while fixed network revenue was about $287 billion.
In other words, telcos had revenue about five times greater than did cable TV operators in 2010.
But telcos had headcount only about 2.5 times to 2.75 times greater than cable TV companies.
By that measure, U.S. telcos generated more revenue per employee than did U.S. cable TV companies.
Comcast, for example, earns about $475,000 worth of revenue per employee.
Time Warner Cable, not among the best managed U.S. cable TV companies, generates revenue of about $436,000 per employee.
The average sales per AT&T employee totaled $495,000 in 2012, up from $209,000 in 2006, and at present is closer to $529,060.
At Verizon, revenue per employee has been about $669,000, and now is about $682,000 per employee.
AT&T and Verizon will continue to face the challenge of matching operating costs both to market competitors and to revenue generated by each of the lines of business. But it is, in many respects, hard to argue that either firm has not been performing well, in terms of revenue per employee.
The biggest factor in the difference is likely the inclusion of wireless services in telco numbers. Wireless is much less infrastructure-intensive because it piggybacks off wireline infrastructure for backhaul. Maintaining wireline infrastructure requires a huge workforce which wireless companies simply don't need. Given the importance of wireless revenues to overall telco revenues, that likely skews the numbers quite a bit.
Back in the day, when I used to compare wireless and wireline revenues per employee, there was always a massive difference and I think that's at play here too. If you can get separate numbers for headcount for wireline and wireless, it would be worth adding those numbers to the analysis. Otherwise, you're not really comparing like with like.