Knology studies triple-play customer loyalty

As Knology fights to climb out of the red this year, the rural triple-play provider will spend much of 2008 striking a balance between competitive pricing and increasing average revenue per user on its bundle. The company has learned in recent years that bundled services don’t just increase customer ARPU, they increase customer retention.

“For whatever reason, it seems a pattern has evolved in the last two three or years, that we get really good growth in October and November and then we give it back a little bit in the month of December,” said Rodger Johnson, CEO of Knology. “And it appears, and I don’t know if it is an economic issue or what have you, but it always comes from our cable-only subscriber base. That is where the biggest piece of it is. I can’t tell you why, but it appears to be a pattern that has evolved in the last few years.”

In an earnings report released yesterday, the West Point, Georgia-based cableco posted an annual net loss of $43.9 million on $347.7 million in revenue, almost 9% greater than its loss in 2006. These results included a $27.4 million loss on the early extinguishment of debt and a gain of $8.3 million on the sale of discontinued operations.

Knology ended the year with 642,658 connections, 3,261 of which were added during the fourth quarter, bringing 2007’s total to 180,347 for the full year. Out of this subscriber base, 49% use a triple play of phone, TV and Internet services and 31% subscribe to a double play of two out of three services. This is the first time Knology has cracked the 80% threshold for residential customers using more than one service, Johnson said.

Knology’s third quarter 2007 strong revenue generating units (RGU) growth was helped by promotional packages the company put in place offering $99 triple play services. This offer expires in either March or June, depending on when the customer signed up, at which time the prices will go back up. Looking ahead, a big question mark for Knology is how the market will behave when the promotional offerings on its triple play bundles begin to roll off.

“If the vast majority of those customers stay with us, that is going to be a very, very good thing,” Johnson said. “It is going to depend on the dynamics of what the competitors do and how they behave at the time. I still think you are going to see a better first quarter, a challenging second quarter, a better third quarter and a little bit of a challenging fourth quarter, but not like second quarter.”

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