Bundle O' Subs

Cable World, Sept 9, 2002

Byline: K. C. NEEL

In the nine months since it began selling voice, video and data services as an overbuilder in Barrington, Rhode Island, Cox Communications says a whopping 51% of its customers are signing up for all three services, and 70% are taking at least two products.

That's unprecedented for the MSO, which already prides itself on the penetration rates of its bundled packages. Cox, the predominant operator in Rhode Island with more than 450,000 customers statewide, began overbuilding plant in Barrington, Bristol and Warren - the only three communities it didn't already serve in the state - after incumbent Full Channel TV refused to sell its 12,500-customer property.

Cox launched service in Barrington, which counts 20,000 homes, in January. Today, about 6,000 homes in Barrington subscribe to at least one service from Cox, which translates into an overall penetration rate of 30%, says VP of marketing Doreen Studley. Of those, 51% - or a little over 3,000 - subscribe to Cox's three-product package, she says.

Other Cox markets have reached three-product penetration rates of 40%, but none have grown so quickly or surpassed the 50% mark, Studley says.

Studies both inside Cox and outside the company suggest that customers who take more than one product from their cable operator tend to stick around longer. For instance, a Cox study found customers subscribing to local phone service plus one other product are 33% more likely than single-product homes to remain Cox customers.

RCN Corp. is another strong believer in the bundle. The company has only an overall 17% penetration rate in Philadelphia, but 79% of those customers take an average 3.22 products (some homes have second phone lines, which bumps up the number of total subscribed services), according to information the company presented during a Kaufman Brothers conference last week. In Boston, where RCN has an overall 28% penetration rate, 65% of those customers take an average 3.02 services.

Studley credits Cox's ability to market the three-product bundle from day one as the main reason for the response in Barrington.

Full Channel currently offers digital video and high-speed data. Owner John Donofrio says Full Channel will begin reselling Verizon phone service by November, giving the incumbent its own three-product package to sell.

Cox expects to complete its overbuild project next year. Meanwhile, Full Channel is trying to halt Cox's march across the nation's smallest state. Donofrio disputes most of Cox's claims. "Cox's penetration numbers are a horror show," he says. "It's really closer to 18% to 20%, and we're gaining customers back every day." He admits he's lost about 750 of his 5,000 customers in Barrington to Cox.

"One in four of our customers in Barrington are either satellite customers defecting to our service or are noncable customers," says Cox spokesperson Leigh Ann Woisard. "Our goal has less to do with Full Channel and more to do with giving the residents [in Barrington] a competitive product with the same options and choices that the rest of the Rhode Islanders get with us. We have seen a phenomenal response with our products in the area, especially the bundled packages we offer."

THE NEXT QUESTION:

*What's a realistic penetration rate for multiple product packages before leveling out?

*How long should it take to reach those levels and how much does direct competition with similar packages play a role?