Cable One continues to push back on the notion that it relentlessly raises high-speed data prices in its predominantly poor, rural markets.
Speaking today at the J.P. Morgan Global Technology, Media and Telecom Conference, Cable One CEO Julie Laulis and CFO Kevin Coyle said that their Phoenix, Arizona-based MSO has only conducted one HSD rate increase, when it doubled its speeds in the fall of 2015 and made a 100 Mbps service for $55 its staple offering.
“Maybe there’s a misconception out there,” Coyle said. “What you’re seeing is increases in ARPU in HSD based on people being on different tiers.”
No matter how Cable One executives define HSD rate increases relative to media and telecom investment analysts, the company is making more money in broadband services these days in markets that it concedes are predominantly poor and rural.
“We try to keep prices as low as possible,” Laulis said. “The majority of the households we serve are below the national average for income.”
Cable One serves around 700,000 customers in tightly clustered regions in Arizona, Idaho, Kansas, Louisiana, Mississippi and Nebraska. And these regions lack one other thing besides wealth—that is, a lot of wireline competition from Verizon FiOS and AT&T U-verse, as well as over-builders.
As the No. 10 cable company continues to bump up speeds and HDS ARPU, MoffettNathanson analyst Craig Moffett said last month that executives at larger cable operators have begun to grumble, worrying that Cable One will attract attention from regulators for making so much money from broadband in poor rural markets—regardless as to whether they call it a rate increase or speed increase
“Just because you can doesn’t mean you should,” Moffett said. “The unspoken fear among their larger peers is that over-reliance on broadband pricing invites regulatory intervention, not just for Cable One, but for everyone.”
Regardless of any intraindustry controversy, Laulis said she likes what the ability to offer gigabit-speed services has done to Cable One’s image.
“It establishes us as a premiere, technological advanced provider in our markets,” she said.
Also at J.P. Morgan this morning, Laulis and Coyle discussed the recent $735 million acquisition of Missouri-based operator NewWave Communications, which is about a quarter of the size of Cable One and is built around the same prioritization of residential HSD and deprioritization of video.
“It’s a mini Cable One,” Laulis explained.
Coyle reiterated Cable One’s claim that it sees about $24 million in potential synergies, with NewWave’s EBITDA margins coming in at around 35% relative to Cable One’s industry-leading 47%.
“We may have caught them at a point of inflection,” Coyle said. “They’ve been spending a lot of time and money upgrading their plant and their network. They’re just not there yet.”
Finally, Laulis seemed to imply that Cable One hasn’t gotten any closer to renewing a carriage deal with Viacom. Cable One famously chose to move forward without a Viacom deal in 2015. Since then, Viacom has also been shunned by other operators, including Charter Communications, which just dropped the conglomerate’s channels from its basic tier.
Cable One, meanwhile, has seen its video customer base fall below 300,000.
Asked by moderator Philip Cusick, senior analyst for JP Morgan, what her conversations with programmers are like these days, Laulis didn't sound like a CEO anxious to re-approach the video programming business.
"We're hearing the same old thing--here's our big increase," she said. "By the way, here's this extra channel. Take it, and pay us extra for it. I don't think the story has changed."