Telephony option in bundles is helping reduce cable churn, says EastLink CEO

The co-CEO of Canada’s only cableco offering telephony, Internet access and television programming to residential subscribers says service bundling is helping retain cable TV customers in the face of intense competition from direct-to-home (DTH) satellite TV distributors. "Offering the three products under one billing is helping our retention rate for cable TV customers. We’re losing far less to satellite (since offering the bundle)," Lee Bragg, co-CEO of Halifax-based EastLink Cable Systems, tells Canadian Communications Reports. He estimates that the churn rate has been cut in half in the areas the company offers telephony. EastLink has been offering the bundle since late 2000 when it introduced local telephone service. The service is available in Halifax, Truro, Amherst, St. Margaret’s Bay, Bridgewater, Charlottetown, New Glasgow, Liverpool, Antigonish and Oxford-Collingwood. Bragg notes that its telephone option is available to about 60 per cent of its entire 250,000 subscriber base, but hopes to have it rolled out completely in two years. In contrast, its digital TV service is available to 98 per cent of its customers and its high-speed Internet service to 92 per cent. EastLink’s bundle can save customers up to $300 a year. For example, a Watch, Surf and Talk digital option is available for about $115/month and includes high-speed Internet, a telephone line with up to 15 calling features, all analog cable channels, three extra cable outlets, Movie Choice digital programing, 40 channels of digital music, access to pay-per-view channels, and an interactive program guide. Bragg points out that telephony service is capital intensive, with each customer costing from $900 to $1,000 to acquire. "But the margins are higher with the telephony, and the market is bigger so in the long run there will be payback. Just about everyone has a telephone, but not everyone necessarily has cable TV," he notes. "Our rollout of telephony is going faster than our Internet did two years ago when it was first launched." With no other Canadian cableco rolling out bundled packages of television, Internet and telephony, Bragg says that EastLink followed the progress of U.S. cable companies in making its decisions. But he adds that Eastlink has been more aggressive in its pricing of its bundles. He attributes EastLink’s ability to add telephony services to the fact that it’s a privately owned company with more flexibility because it is not so tied to shareholder pressure. He further notes that some of the money for the upgrades has come from outside EastLink, such as from the family’s blueberry business and friendly bankers. He adds that EastLink has been able to upgrade because most of its fibre is aerial. "I’d say about 99.4 per cent of our fibre is on poles. That makes it easier to upgrade and complete the rebuild for telephony," Bragg says. "Imagine trying to go underground in Toronto to add telephony. That would be a nightmare." He says EastLink’s current focus is on upgrading the Nova Scotia systems acquired last year from Shaw Communications Inc. "It’s a lot of money, but we think it’s the right thing to do in the long run. It should eventually decrease our operational costs. That’s what our long-term growth strategy is," Bragg notes. EastLink became Canada’s fifth-largest cableco when it acquired Shaw’s Nova Scotia cable assets, including 80,000 cable customers, in May 2001. The Bragg family began what would grow into EastLink in 1971 when it received a cable licence for Amherst NS. In 1983, the family bought a minority stake in Halifax Cable, then bought out its partner in 1995. The acquisition of Island Cablevision followed in 1998, and then Shaw’s Nova Scotia systems in 2001. Bragg says that if an acquisition made sense, EastLink would consider further buys. "If Rogers were to sell its New Brunswick assets, for example, that would be something we’d look at. Of course, we’d have to ask ourselves if we could afford it," he says. "We want to grow the company. But we also see growth yet within our existing subscriber base for the products we’re providing."

Telephony option in bundles is helping reduce cable churn, says EastLink CEO

Broadcast | August 15, 2002

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