While it has steadily diminished the ambitions of its video services business while up-playing residential broadband and business services, Cable One has also worked to reduce the "hollow profitability" of its video customer base.
According to company CEO Thomas Might, the Phoenix, Ariz.-based MSO has deployed a "very rigorous FICI credit scoring process" on its video customers since 2013.
"We don't turn people away," Might said, but the cable company's technicians aren't going to "spend 15 minutes setting up an iPhone app" for a customer who has a low FICO score.
"What we found is that through lifestyle and billing analysis, we could start to pinpoint where churn and bad debt was coming from, and credit scoring started to be a really good test," Might said Monday while speaking at the J.P. Morgan Global Technology, Media and Telecom Conference.
Might said bad debt is down 70 percent since Cable One has begun to better qualify its pay-TV customers. Also in 2013, the company made the strategic decision to stop soliciting direct-sales acquisitions of video customers, even though that was accounting for 9 percent of sign-ups at the time.
"We didn't make any money from direct sales," Might said. "It was the worst of the lifetime value segments we had."
He added that Cable One has lost about half of its pay-TV customer base since the company began focusing on what it calls its higher margin business sectors. Most of these losses — two thirds, by Might's count — have defected to other pay-TV services within the footprint, most notably AT&T (NYSE: T) U-Verse and DirecTV. The other third, he said, have migrated to over-the-top channels.
Might called Cable One the line of "demarcation" within the cable business, with most bigger MSO's doubling down on video business strategy and those below it retreating.
Speaking on the same stage an hour earlier, Comcast (NASDAQ: CMCSA) CFO Michael Cavanagh confirmed his MSO's portion of this equation, noting that, "A rich video experience is one of the greatest reasons to have our broadband product. We know that some people are looking at video as something they want to minimize or run away from. We don't share that view."
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