Meet the MSO: Mediacom Looking Long Term

Operations chief John G. Pascarelli acknowledges losing subs last year because of a higher barrier to entry, but says Mediacom’s strategy is to acquire longer-term customers. By M.C. Antil Somewhere between the cable superpowers and the small operators lies a quickly vanishing breed: the midsize MSO. Most were swallowed whole by the big three over the past few years; others soon will be. A handful, however, abide. They take whatever economies of scale they can find, run their multiple systems as efficiently as possible—often in small to midsize markets—and offer customers a full complement of digital services. One such MSO is Mediacom. Founded in 1996 by former investment banker and Cablevision Industries exec Rocco Commisso, Mediacom became one of the most unlikely cable stories of the late ’90s. As merger mania caught fire, Mediacom continued to grow, adding unwanted and/or undervalued systems. By 2000 Mediacom had become a top 10 MSO, and is now the eighth largest cable operator in the country, with more than 1.4 million basic customers. Among the veteran management team is John G. Pascarelli, a former Continental Cablevision exec who for years led Mediacom’s marketing department. In 2003, Pascarelli was picked to head day-to-day management of Mediacom as EVP of operations. We talked to Pascarelli recently about competition, customer service and the destructive power of Mother Nature. We’ve been trying to interview you for a while. Why are you so unwilling to discuss Mediacom’s strategies? John Pascarelli: Our competitors read CableWorld. We find that even on our analyst calls we can’t be as open as we’d like to be, because our competitors are listening. That’s especially true when we’re talking about strategies and products and where we’re going with them. It would be like a football team publishing its playbook. In 2005 your overall revenue-generating units were up, yet your operating income before depreciation and amortization was down. Why? Pascarelli: We had a change in strategy. We were very aggressive with some 12-month discount offers to drive RGUs and help recapture and stabilize our video base. We stated all last year that that was our mission—to reestablish ourselves. We knew we had phone coming and knew we could get momentum by using discounts to get good-quality customers on our networks. By doing so we’d start to see stability in the video business that would pay off in increased revenue and, ultimately, increased cash flow. Yet you still lost about 35,000 video subscribers in ’05. Pascarelli: Don’t forget that a percentage of that was the damage done by the hurricanes. What we’re really trying to do is to qualify each sale as it comes to the door, so that we’re not just connecting households but signing up customers who are going to be with us over time. We made a determination in certain markets that by raising the barrier of entry, we’d defer some basic sales. In ’05 we also had a lot of activity associated with getting our networks ready for phone, which caused some disruption of service. Those disruptions may have cost upfront, but they will pay dividends down the road. Other than lower fees, what do you want from programmers? Pascarelli: What we want is for them to develop content that will fully utilize the capacity of our network products, and provide customers the greatest level of choice and convenience. What has cable failed to communicate to the public? Pascarelli: I don’t think we’ve communicated to consumers the cost of the services we provide and how those costs get dispersed. Because television had been free for all those years, I don’t think a lot of people realize we’re paying for programming. I also don’t think we’ve done a good job communicating to public officials and investors the power of our networks. We are constantly adding new layers of service to them, and doing so in a very brief period of time. What did you learn from Hurricanes Ivan, Dennis and Katrina? Pascarelli: What those hurricanes really demonstrated—to us and to our customers—is that we are a very nimble company and that we can quickly pool resources and utilize the entire breadth of our assets to support any one region. We were able to shift all our calls to other centers so that customers who were still in service could get through. We were also able to mobilize troops from Georgia, Iowa and Illinois to support our techs and get construction and service work started. What people don’t realize is that the initial destruction is just one thing you have to deal with. All through the reconstruction process other work crews and contractors are constantly cutting your plant, moving poles and creating interruptions of service. We’re still recovering from those storms. What role will customer service play in Mediacom’s future? Pascarelli: We don’t look at customer service just as what happens on the phone. Service also covers the people in the field. We’ve introduced a product called Workflow Solutions, a real-time dispatch system in which technicians are linked by handheld mobile devices. This allows us to track the techs’ progress so that we can notify customers if they’re running late, or if they’re ahead of schedule, to see if they can take on an additional service call or two. On the CSR side what we’re most concerned about is maximizing our resources around phone traffic so that we have the most people available during our busiest times. We’ve also established a virtual call center. So if no CSR is available locally, overflow calls are redirected to other centers. We’re also looking hard at standardizing our language and, as close as we can, our pricing, so that any Mediacom CSR can handle any Mediacom customer. You cut your teeth in marketing. How difficult was it to move into your role as head of operations? Pascarelli: In cable, especially in a company our size, marketing and operations have to be interlinked. It’s all about delivery. You can make all the sales in the world, but unless you can get the installations done, and have the right service and equipment, you’re not going to be successful. Also, this industry is really about sales and marketing now. Mediacom by the Numbers Homes passed: 2,807,000
Basic subscribers: 1,423,000
Digital customers: 494,000
Data customers: 478,000
Phone customers: 22,000
Source: Mediacom. Numbers as of 4Q 2005.