SEC Sends More Letters


Time Warner Cable, EchoStar Communications Corp. and DirecTV Group Inc. were the latest pay TV companies to receive letters from the Securities and Exchange Commission regarding their method of counting and reporting subscriber totals.

Time Warner and EchoStar disclosed last Thursday that the SEC letters arrived the previous week. DirecTV said last Thursday its letter arrived two days earlier.

Two weeks ago, Cox Communications Inc. and Comcast Corp. confirmed receiving their SEC letters in June.

EchoStar spokesman Steve Caulk described the SEC request as “a standard inquiry that asked how we account for subscribers.”

Time Warner spokeswoman Mia Carbonell confirmed receipt of the SEC letter but declined to provide details, such as the agency’s specific questions or the response date. “I just think the company wouldn’t want to characterize it in any fashion,” she added.

DirecTV spokesman Robert Mercer said his company would reply fully and promptly.

“We will provide them with the information they are asking for,” Mercer said.

Time Warner is the second-largest U.S. cable company, with 10.9 million subscribers. Comcast is the largest, with about 21.5 million basic subscribers. Cox is No. 4, with some 6.4 million.

DirecTV is the largest direct-broadcast satellite carrier, serving about 12.4 million customers. EchoStar is No. 2, with about 10 million subscribers.

The SEC has reportedly sent letters to about 20 communications companies regarding subscriber counts, including AT&T Corp., AT&T Wireless Services Inc. and Verizon Communications Inc.

An industry source said the SEC sent out a two-page letter signed by Beth Collier, a senior attorney in the Enforcement Division. She asked for responses by July 16. Collier did not return a reporter’s calling seeking comment.

Subscriber counts and growth are considered key metrics, along with cash flow, for valuing the stock of publicly held cable and telecommunications companies. In a recent SEC filing, Verizon acknowledged that it had overstated long-distance lines by nearly 9%, blaming a software glitch.

Cable-industry sources have described the SEC letter as informal and routine, adding that the agency wanted to know cable companies’ method of counting subscribers, whether the method had been changed in the last three years and, if applicable, how the method change was conveyed to the public.

Charter Communications Inc. spokesman David Andersen said his MSO had not received a similar letter from the SEC. Adelphia Communications Corp. spokesman Paul Jacobson said he was unaware of any new SEC letter to his company.

Less than two years ago, the National Cable & Telecommunications Association, in a joint effort with 11 cable operators, agreed to a standardized definition for subscribers, defining a customer relationship as one with a subscriber who receives at least one service — either voice, video or data — without regard to which is purchased.

The NCTA also created a standard definition for revenue-generating units (RGUs) as the sum total of all primary analog-video, digital-video, high-speed-data and telephony customers, not counting additional outlets.