Insight Breaks Ice on New Stats

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Insight Communications Co. last week ushered in an era of refined cable operating statistics.

On Thursday, it reported a 151,000 increase in revenue-generating units, which broke out to 4,200 net analog additions, 87,200 net digital additions, 39,700 net high-speed data additions and 20,200 net telephone additions.

Insight also reported $188.1 million in year-to-date capital expenditures. The MSO said 38.8 percent of capex went to customer-premise equipment, and 33.1 percent was for upgrade or rebuild costs.

Expect to see more of cable's newest operating "metrics" — including "customer relationships" and spending on customer-premise equipment — in third-quarter releases from Comcast Corp. and Cox Communications Inc. this week.

Eleven CEOs from publicly traded MSOs pledged last Monday to use the new metrics by the first quarter of 2003 at the latest.

Said Comcast president Brian Roberts: "We firmly believe that the best step we can take as leaders of this industry is to do an even better job in helping investors understand the business."

The idea, they said, is to give investors more consistent benchmarks to judge how far along rebuilds have progressed, when capital spending on build-outs will diminish and how much spending is going to items that theoretically produce immediate revenue, like the boxes needed for digital video or cable modems.

As capex costs diminish, "free" cash is left over, and investors need to be able to figure out when that will occur.

Sub uniformity

The metrics are also supposed to help smooth out differences in reporting subscriber counts. The "customer relationship," for example, measures any customer the MSO bills — whether for video, data or telephony. (Insight reported 1,306,800 customer relationships, up from 1,304,400 a year ago.)

Insight CEO Michael Willner, who led this effort at consistency, said at a New York conference that the customer-relationship statistic would help shed light on penetration of homes passed.

Every public MSO is supposed to define revenue-generating units — a variable measure of new-service units — as the sum of four stats: primary analog video, digital video, high-speed data and telephony customers, not counting additional outlets.

Some MSOs had reported RGUs as measurements of advanced-services sales, apart from basic-subscriber counts.

"I know in the past, some people counted three, some people counted five, and therefore it made it much more difficult for you to understand what the RGUs really meant," Willner told analysts and reporters at the conference, held Oct. 21 at a New York hotel.

Nuances remain

The most contentious part of the process was scheduling the conference calls, Cox CEO Jim Robbins joked last week at the conference.

But some details were still left to individual companies, such as how to count some spending on gear that doesn't directly generate revenue, like cash used to replace used-up set-tops. At the conference, Analyst Aryeh Bourkoff of UBS Warburg asked whether that should be support capital or CPE capital.

"There was a fair amount of discussion about that," said Willner, who added: "We all decided that we needed to let you folks still do a little bit of your work," filter out the cost of new boxes from those of replacement boxes with individual companies.

In a note to clients last week, Bourkoff said he thought "the utility of the implementation will be tested over the next two quarters."

The publicly traded MSOs that have pledged to implement the new reporting guidelines no later than the first quarter of 2003 are: AT&T Broadband; Time Warner Cable; Comcast; Charter Communications Inc.; Cox; Adelphia Communications Corp.; Cablevision Systems Corp.; Mediacom Communications Corp.; Insight; Cable One Inc.; and General Communications Inc.

Along with Willner, Roberts and Robbins, CEOs in attendance at the event were: AT&T Broadband's Bill Schleyer; Time Warner Cable's Glenn Britt; Charter's Carl Vogel and Mediacom's Rocco Commisso. Tom Rutledge, president of the Cablevision New York unit, also was on the dais, sitting in for CEO James Dolan.

Absent — due to scheduling conflicts, the National Cable & Telecommunications Association said — were CEOs from Adelphia, The Washington Post Co.'s Cable One and GCI.

The effort wasn't presented as a NCTA initiative, affecting all cable companies. But the trade group — of which Willner is chairman — did assist, coordinating its board meetings with these meetings, for example.

Robbins: Nice job

At another event last week, Robbins credited Willner with getting the operators together to hash out these common benchmarks. He said the effort was needed to help cable companies shake off the overhang of allegedly criminal manipulation of numbers by former leaders of Adelphia and to generally "demystify how we report our numbers."

Robbins said it was important to help investors answer a key question: How much capital will operators need to feed current and projected growth?

"I don't think any of the companies has really precisely nailed that question yet," he said. "We're all taking a whack at it."

During the conference, MSO executives repeatedly stressed that these operating statistics are not accounting changes — each company is responsible for its own accounting, as set out by federal law — and they said no "restatements" would be made. But Willner said MSOs would try to present as much "historical data" as possible to compare with current statistics.

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