Cable One Inc., which bucked the industry trend and spurned an annual rate hike this year, is demonstrating more market sensitivity by reintroducing broadcast-basic tiers in most of its systems.
The strategic change is giving consumers the option of a cable tier that averages $15 to $16, instead of the formerly lowest priced tier, expanded basic, at an average price of $37.50.
"We've seen, over the past 12 months, increasing price sensitivity," explained Jerry McKenna, vice president of strategic marketing.
Freezing rates was one coping strategy, he said, but the nation's No. 10 MSO decided to return lifeline options to its systems also. Lifeline packages were unavailable to 60% of the company's 700,000 customers, McKenna said.
The broadcast-basic tier was reintroduced across the customer base in the beginning of July in the 17 states in which Cable One operates.
The majority of the systems owned by Cable One, a wholly owned subsidiary of The Washington Post Co., eliminated lifeline tiers in the late 1990s. At that time, executives thought the tier made it too easy for consumers to switch to direct-broadcast satellite service, while keeping the one thing DBS couldn't offer: local broadcast signals.
But times have changed, McKenna said. Digital upgrades enable the systems to offer programming comparable to DBS. People who take lifeline now will be those who need a low-cost entertainment option because of the economic downturn, he said.
Cable One publicizes the existence of the lifeline tier on its rate card. Otherwise, the tier is sold on a transactional basis. Customers who call to churn out altogether, or cop to payment troubles, are offered the lifeline option, McKenna said.
By making such an offer, cable video connections remain in the home, making it easier for consumers to upgrade again when the economy gets better, he added.
Regulators have reacted positively, McKenna said.
"They like it when their constituents have more choices," he said.