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Cable Operators

Lining Up Small Firms

6/10/2005 8:00 PM Eastern

Cablevision Systems Corp. plans to rebrand its Lightpath business-telecommunications unit and go hard and heavy after the small-business phone and data market, MSO chief operating officer Tom Rutledge said at an industry conference.

Rutledge, who spoke at the Deutsche Bank Media & Telecommunications conference on June 6, said Cablevision plans to rename the business service Optimum Lightpath in the near future, to coincide with the Optimum brand on Cablevision’s other video, voice and data products.

TARGETING SMALL BIZ

Rutledge gave no time frame for the rebranding, but said the small business market — 20 phone lines or less — represents a huge market for Cablevision.

Cablevision passes roughly 500,000 small businesses in its footprint, which pay an average of $450 to $500 per month for phone service, said Rutledge. While he didn’t say how Cablevision would price an Optimum Lightpath offering, he hinted that there is an opportunity to offer a discount to the incumbent local phone carrier, Verizon Communications Inc.

“This market alone is about as big as our current cable-TV business,” Rutledge said at the conference.

The advertising market also represents another growth opportunity for the MSO, Rutledge added. In the New York City metropolitan market, advertising on radio, local television and newspaper classifieds represent about $1,000 per home passed per year. Currently, advertising makes up about 8% of Cablevision’s total revenue, but there are opportunities to dramatically change that mix, he said.

“When you think about what is going on, you have broadcast market share continuing to decline with very high revenue, you have newspaper readership and subscriptions continuing to decline,” Rutledge said. “Where are those dollars going to go? How do you reach a mass audience five years from now? What’s the major media form in New York? It’s Cablevision.”

Rutledge appeared not to be worried about any looming price war with SBC Communications Inc., which said last week that it would offer its high-speed digital subscriber line service to new customers for $15 per month. The companies compete in Connecticut.

Rutledge pointed out that SBC phone service still averages about $70 per month, for a total cost to the consumer of $85 per month for voice and data service. Cablevision’s voice and data package is priced at about $60 per month, without discounts.

SBC’S FLATTERY

Still, Rutledge said he was flattered that the SBC discount package seems to follow Cablevision’s triple-play discount pricing structure.

“In many ways, it mimics some of our marketing strategies, which is a form of flattery,” Rutledge said. “But when you get right down to it, our products are better individually and they’re better as a value proposition.

“Our ability to provide voice at a very low cost is a function of the technology we’re using — this voice-over-IP service. It’s not only lower cost, but an improving cost structure. It’s a marketing tactic, but I think we still have a superior mousetrap.”

September