Cox Communications Inc. CEO Jim Robbins minimized the threat of telco Verizon Communications'
price cut on its digital-subscriber-line service and said the MSO doesn't plan to respond.
Verizon dropped its DSL prices to $35 per month, undercutting the $40 Cox
and other MSOs typically charge for high-speed Internet service. (Data subscribers who
don't also take cable get charged $45 to $55 monthly.)
Cable investors are growing nervous over telcos' recent attempts to provoke a
price war, with SBC Communications Inc. touting an even cheaper price, $25 per month (before the
extensive fine print, of course).
High-speed Internet service has become a great business for cable operators,
particularly since weak and expensive DSL competition has allowed them to raise
"We really have some questions as to the sustainability and the profitability
of our competitors' actions here," Robbins said. "But we're not experts on their
economics. We just know what we know, and we know what our customers want."
The key, he added, is that cable Internet runs at higher speeds and that Cox
packages data with both video and local phone service. "I see no change in our
strategy. We believe what we are selling is the bundle of services and that's
what people want," Robbins said. "We have pricing flexibility inside that bundle."
Cox executives were particularly critical of SBC's deal.
Opined senior vice president of marketing Joe Rooney: "The SBC offering has
more strings attached than Pinocchio."
To get the cheap rate, SBC's customers must buy additional "bundled" local
and long-distance services costing an extra $32 per month and sign one-year
"It clearly requires that it's only for new customers . it's only for the
first year. So it really hasn't impacted us at all," Rooney said, adding,
"price is only one variable."
Cox posted strong financial results for the first quarter ended March.
Revenues jumped 16 percent to $1.4 billion, while operating cash flow surged
19 percent to $479 million.
Basic-subscriber growth ran at 0.6 percent -- not great, but better than the declines
other MSOs experienced last year.
Margins improved a full point to 35.1 percent.