Classic Digitally Addresses DBS Defectors

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Classic Cable Inc. is revamping its digital-cable offering, creating an additional tier for more price-sensitive customers.

The reason: Classic, which operates mainly in second-tier markets in the Southeast and Midwest, lost about 3,000 subscribers in the second quarter, finishing with 407,000 customers. Revenue in the period rose just 1 percent to $46.1 million and cash flow dipped 2.4 percent to $19 million.

To battle those losses, Classic adopted a new pricing strategy in the quarter that more closely links expanded-basic and digital tiers. The MSO also repackaged basic to include a new limited tier consisting mainly of broadcast channels, aimed at winning back customers who defected to DBS.

Additionally, Classic accepted 5,000 digital set-tops during the period, with an eye toward a more aggressive rollout of its Hits2Home digital service.

"This is of particular importance for smaller-sized markets, where Classic has experienced subscriber losses," Classic CEO J. Merritt Belisle said in a prepared statement.

Digital subscribers in the period rose to about 6,500, an increase of 12 percent over the previous quarter. Data customers increased 33 percent to 1,500 subscribers.

While Classic had difficulties in the second quarter, another small-market MSO, Mediacom Communications Corp., is beginning to see the benefits of new services initiatives.

Mediacom reported 15 percent cash-flow growth and 10 percent revenue growth in the second quarter, driven largely by gains in new services.

Pro forma revenue for the period was $83.4 million, up 9.8 percent over $75.9 million last year. Pro-forma cash flow chimed in at $39.3 million, up 15.5 percent.

Basic-cable subscribers dipped slightly during the period, from 737,000 to 735,000. But Mediacom added 6,000 digital customers in the second quarter, ending with 16,000. The company also increased its digital-ready homes passed in the period to 260,000 from 205,000.

Cable-modem customers more than doubled, from 1,700 in March to 3,600.

Mediacom chairman Rocco Commisso said the company plans to make its digital service available to 400,000 homes and to increase its data-ready homes passed to 500,000 by year-end.

Mediacom completed four acquisitions in the period, adding 17,000 customers for a total cost of $28.5 million. The company has another three deals pending for a total of 21,000 subscribers.

But Commisso canceled a previous deal to purchase 60,000 subscribers from an unnamed operator. Mediacom said it could not agree on a reasonable price, and was no longer in active discussions with that company.

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