Cable firms 'losing their lead'

by Nick Higham BBC media correspondent

One day someone will find the true explanation for what went wrong at Britain's cable companies: how it was that they managed to throw away the advantages of arriving first in the market and of a superior technology to become casebook examples of mismanaged businesses.

Last week the smaller of the two companies, Telewest, announced the completion of a £3.5 billion "restructuring" deal (otherwise known as a mammoth bail-out) which left its shareholders owning just 1.5 percent of the company.

It also announced that subscriber numbers actually fell by 24,000 in the first half of the year to 1.7 million, though 7,000 of those who have departed will not be lost: they were apparently paying nothing.

The latest figures from the Independent Television Commission, published at the end of June, show things aren't much better at Telewest's larger rival, NTL.

Subscribers down

NTL's subscriber numbers also fell between the last quarter of 2002 and the first quarter of 2003, by 17,000.

The only bright spot was the modest increase in subscribers to the two companies' digital services, which between them had 2.15 million subscribers at the end of March, an increase of 2.7 percent.

They have alienated subscribers with over a decade of lousy customer service

Meanwhile BSkyB's onward march is expected to be confirmed by the latest quarterly figures out this week.

While the cable companies struggle to keep their paying customers, Sky's subscriber base just keeps growing, albeit more slowly than it once did.

So does Sky's ARPU, or average revenue per unit, which is good news for Sky's bottom line if rather less good news for many of its customers, who end up paying more - though not so much more that they grow discontented and cancel their subs.

For while the cable companies' churn rates (the numbers not renewing their subscriptions) stood at 13 percent for NTL and a staggering 21.8 percent for Telewest at the end of March - the company has now managed to reduce that to 16 percent - Sky's churn rate is much more respectable at just over nine percent.

'Astronomical' investment

By rights, NTL and Telewest should by now have had an unbeatable lead over Sky. Instead they have alienated subscribers with over a decade of lousy customer service and spent astronomical sums on digging holes in the road.

The holes had to be built, because without them there would have been no cable business at all, but the companies' inability to capitalise on their investment has been little short of staggering.

But there is someone doing even worse. Those same ITC figures for the end of March reveal that the numbers paying Homechoice in London and Kingston Communications in Hull to watch television over broadband phone connections, fell from just over 12,000 to just over 11,000, an eight percent drop.