Building On Past Success
Cox, Esser Working Hard To Stay Atop Industry Rankings
by K.C. Neel -- Multichannel News, 12/16/2007 7:00:00 PM
In this story:
KEY GROWTH METRICS
DRIVING INITIATIVES
A BIG-PICTURE GUY
A lot has happened in the two years since Pat Esser took the reins of Cox Communications from Jim Robbins.
Since then, the cable operator has taken J.D. Power & Associates’ top honors in customer satisfaction for its residential voice, video and high-speed Internet services, as well as its enterprise data product for small and midsized businesses. It has added customers in every product category and reduced churn.
It was named one of the top 50 companies for persons of widely different background to work for by Diversity Inc. It was tapped as one the best companies for women to work at by Working Mother Media.
It has been feted by the Cable Television Human Resources Association, Women in Cable Telecommunications, National Cable Television Association and the Cable Television Association for Marketing for various awards pertaining to its hiring, marketing, diversity efforts, customer service and community outreach.
And Esser isn’t about to let that be the end of it.
Indeed, Cox is committed to upgrading its network. It continues to tweak its diversity efforts. And it has thrown its hat into the ring to participate in the 700-Megahertz wireless spectrum auction next January, even though its partners in SpectrumCo — Comcast and Time Warner Cable — are forgoing the sale.
Esser believes the plant upgrades will give the company more bandwidth to offer new services as they arise. And wireless and mobile services will enhance customers’ experience and provide more glue for Cox’s existing suite of products. Indeed, mobile services — what to launch and when — will be one of Esser’s top priorities in the coming years.
“Finding the right solution for mobility is critically important,” said Cox Enterprises president and chief operating officer Jimmy Hayes. “[Cox Communications’] historical investment and experience in wireline telephony clearly provides the company with a very solid foundation for wireless execution, and Pat is focused on this priority.”
Wireless is likely to be the latest product in Cox’s bundled package, but it probably won’t be the last. Esser said products like home networking and security, home health care and energy management and monitoring are services that offer Cox a lot of upside going forward. Clearly, product bundles have been a huge success for Cox, which pioneered the concept a decade ago in Orange County, Calif.
Today, most operators offer some type of triple play, but, in Esser’s view, no one does it better than Cox.
“Cox proved long ago that a unified bundle of video, Internet and telephone services would be compelling to consumers, and today our competitors are striving to imitate us,” Esser said. “However, being a winning bundler is about a lot more than just offering customers multiple services.
“It’s about managing the network, the services and the customer care to ensure quality. It’s also about making the sum of the bundle greater than the value of the individual services.”
And it’s working. Over 60% of Cox customers take more than one service. Almost one-third subscribe to all three services. Cox gained nearly 370,000 new phone customers in the last 12 months, up 5% in net gain over the same period ending Sept. 30, 2006. Company-wide, phone penetration exceeds 25% and the sell-in rate of telephone to new customers is greater than 33%.
KEY GROWTH METRICS
In Orange County, Calif., the operator has more than 50% share of the landline phone market. In spite of increasing competition in the third quarter, Cox’s digital suite of residential services continued to grow. Key year-over-year growth metrics for the quarter include:
-
5.9 million total residential customer relationships, for 1.65% growth.
-
3.7 million bundled customers, for 9.5% growth.
-
2.3 million phone customer, for 19% growth.
-
3.6 million high speed data customers for 12.3% growth.
-
3 million digital cable customers for 11.3% growth.
-
531,000 “non-video” residential customers; 23% growth.
Cox also reported success in commercial services, where revenue has grown 21% year over year. Cox Business Internet subscriptions rose 14.5%, and overall voice lines grew by greater than 25%. Churn in the second quarter — 2.5% — was the lowest in the company’s history.
As a public company, Cox was forthcoming about its metrics and statistics. Parent Cox Enterprises took the multiple-system operator private at the end of 2004, and Cox doesn’t release its full financial information anymore.
But Cox still releases some information on metrics and continues to hold quarterly conference calls with analysts. And Wall Street appreciates the data it still gets from the Atlanta-based cable operator.
“When Cox was a public company, they were always one of the best operators in the industry in providing visibility in what and how they did each quarter,” said SNL Kagan senior analyst Ian Olgierson. “So it comes as no surprise that they’d continue in that vein now that they are privately held. They don’t have to make that effort, but they do, and I appreciate the data we receive from them.”
It would appear that Cox is enjoying the benefits of being a private company, said Olgierson, who noted that the company was often penalized by Wall Street for the slightly lower margins that came from its longer-term view of the business.
Now, Cox can still business decisions with long-term payback without having to take short-term grief from the investment community.
For instance, it is investing to upgrade its network to 1 Gigahertz. “They can’t do anything with it right now because there aren’t any tuners or boxes yet,” Olgierson said. “But in a couple of years, they will be in better shape than other operators because they’ll have more bandwidth.
“Other publicly held companies have been discouraged from making those kinds of investments right now, because of the hit it would make on quarterly earnings. Wireless is another area Cox can take a longer view with by investing now. Other MSOs have had to back off participating in those auctions.”
The public markets aren’t fair or consistent, Esser said. That’s always been the case, and Cox rarely reacted to what the market wanted if it meant going against its long-term strategy. But dealing with Wall Street took a lot of time and resources. That’s a part of the job he doesn’t miss now that Cox is privately held.
“We always have and will continue to make decisions for the long haul,” he said. “But we still want to be transparent and we want to educate the market and our banks.
“We are all part of the whole industry so telling our story and being private, we can have longer, more pointed dialogue.”
To wit: The company gathered together 16 analysts in November at its Rhode Island operations and gave them a rundown of the business from top to bottom.
“We have found that when analysts are educated, they don’t have to make guesses,” Esser said. “We didn’t have all good news. We were up front about our challenges, including things like our maturing markets and increased competition. We took them through the economy of our company.”
Hayes says that while Cox doesn’t have public shareholders anymore, there are public debtholders to inform and the company has a philosophical obligation to provide information publicly that supports their ability to trade the bonds.
DRIVING INITIATIVES
Cox and Esser have clearly taken a lead role in industry initiatives, as well as public policy. In addition to serving on the National Cable & Telecommunications Association’s Executive Committee, Esser serves on the board of C-SPAN; the CTAM Educational Foundation; CableLabs; and Cable in the Classroom. Additionally, he is an advisory board member of both the Association of Cable Communicators and the National Association for Multi-Ethnicity in Communications.
Esser used to sit on Discovery Networks’ board, but gave up his seat at the table when Cox traded its 25% stake in Discovery for ownership of Travel Media Inc., which owns The Travel Channel and TravelChannel.com.
“Pat has had a significant impact on the cable industry with his keen insights on public policy and his long-held commitment to the customer,” said Time Warner Cable CEO Glenn Britt. “Pat’s energy and enthusiasm clearly demonstrates his passion for this industry, which I’m sure his colleagues in Atlanta witness every day.
“He’s been a terrific colleague on the NCTA Executive Committee, and I look forward to continuing to work with him on the issues that shape our industry. Pat is a natural champion of this industry and his voice plays an important role in telling cable’s story.”
Cox just does things right, said Insight Communications chief operating officer Dinni Jain. “I am one of the most unabashed admirers of Cox and it goes back to my days of working in the U.K. We had to be good at customer service.
“I was researching who was doing well in the U.S. with that and the list was small. In fact, it was basically just Cox. They approached things differently from other operators and they were taking hits from Wall Street for investing in customer service. But they were unfazed about that. They knew they were doing the right thing.”
A BIG-PICTURE GUY
Cox’s emphasis on making the customer happy may have started with Robbins, but Esser is taking it to another level, Dain said. “Pat is as solid an operator that exists today. He’s enormously talented and understands the big things. He builds strong teams and you get the pride he feels for them.”
Esser is one of the few senior executives in the industry who can talk about the importance of diversity without a false ring of political correctness, Dain said. “It’s not just words for Pat. It’s the way he lives.”
Of all the accomplishments and accolades bestowed on Cox in recent years, Hayes said he’s particularly proud of being on Diversity Inc.’s top 50 list and as the top employer in the cable industry.
“Pat has been particularly instrumental in driving our success across the all-important employee front,” he said. “This demonstrates the values he shares with the company.”
No related content found.
VIEW ALL GALLERIES
