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Cable Operators

The Little System That Could: Delaware Subs Grow 30%

2/24/2006 7:00 PM Eastern

If Mediacom Communications Corp. is the dominant provider in Iowa, it is just the opposite in Delaware, where the MSO serves 38,400 customers — about 5% of the state’s entire cable population — and the closest sister system is five and a half hours away, in North Carolina.

Mediacom picked up the Delaware property in 1997 from Tele-Communications Inc. But unlike the subscriber losses Mediacom has experienced in Iowa and other Midwest markets, the MSO’s system in Delaware has grown 30% since it was acquired, said regional vice president Dave Kane. Kane, who had been TCI’s area director, helped broker the deal.

Mediacom Delaware
Homes Passed 51,600
Basic Subscribers 38,400
Number of Employees 76 
Source: Mediacom Communications Corp.

Connie McDowell, chief spokesman for the Delaware Public Service Commission, said Mediacom has made some major changes to its system, compared to when TCI ran the property.

“They have upgraded the system and laid fiber so customers could get advanced services such as Internet access,” McDowell said. “When this system was owned by TCI, the parent company wasn’t putting any capital into the system. People are happy to see Mediacom doing that. They promised to do it and they did. And they continue to add new services.”

NEW-BUILD INVESTMENT

Most of Mediacom’s capital expenditures in Delaware are spent on new-build construction. “We’re a tad unique in that we have gained customers in the last three years,” Kane said. Mediacom has added 11,000 homes passed in eight years and the system has gone from 330-Megahertz and 35 channels to over 140 channels and a slew of advanced services.

In addition to the influx of full-time residents in the area, Mediacom serves quite a few resort and seasonal customers.

“We have Comcast [Corp.] on the northwest and south of us, and we have the Atlantic Ocean to the east,” Kane said. “Our resort population is a little different from the snowbird population in places like Arizona and Florida, though. And although we do get folks who will come for the whole summer, we tend to have people from Philadelphia and Washington, D.C., who come more regularly throughout the entire year.”

There’s a distinct difference between the area’s full-time residents and vacationers, Kane said. Transplants want all the bells and whistles. They want the faster high-speed data product and they want access to video on demand and digital video recorders, he said.

Kane has been pleased to see that VOD usage rates have remained steady through the winter months when much of the tourist activity slows down. Still, many of the full-time residents living on the west side (away from the Atlantic Ocean) are not big users of advanced services.

“Those folks who have been long-established in the area are more interested in a reliable product at a set price that isn’t going to constantly rise,” Kane said. That doesn’t necessarily translate into high revenue-per-subscriber numbers, but it does mean low debt rates and low churn statistics. “We have one of the lowest bad-debt ratios in the company,” Kane said.

McDowell said that if the PSC, which has jurisdiction over franchises in the state, has any complaints about Mediacom, it’s the fact that the company doesn’t offer a low-cost broadcast basic package.

“We have many customers who would love to just subscribe to a lifeline basic service,” McDowell said. “We’ve talked to the company about it, but they don’t want to do it.”

VERIZON ON THE HORIZON

It’s something that might get more attention as Verizon sets its sights on Mediacom’s service territory. McDowell said Verizon has filed its first franchise proposal in the state to operate in the northern portion of Delaware, meaning the telco will first compete against Comcast Corp. However, she noted, “they did say they were going to operate from their central station, and that is in Mediacom’s service territory.”

Still, Mediacom has a pretty good reputation with customers, so she figures the competitive environment will be healthy. The advantage of having a big gun like Comcast surround you is that you can take advantage of some of their marketing if they happen to be promoting the same thing as Mediacom, Kane said.

Mediacom doesn’t solely count on Comcast to help it sell services, Kane said. “But we may try to piggyback on some of Comcast’s marketing efforts. About 99% of the time we will have an offer we can counter with that is similar to what Comcast is offering. We don’t have phone service yet, but it is something that is budgeted for in 2006,” he said.

September