LAKE BUENA VISTA, Florida — A panel of top small cable company executives said that while improving the overall customer experience is a primary goal for operators — especially as broadband competition heats up — maintaining a strong line of communication with customers is essential.

“I think A-plus-B equals customer experience,” said Buckeye Broadband president Geoff Shook at The Independent Show panel session titled “The Impact of Industry Evolution” and moderated by NCTC president and CEO Lou Borrelli. “I think the A would be customer service, but the B part that we have to zero in on is customer care. We have the opportunity as the more personalized provider to accelerate to accentuate the customer care, the fact that the service doesn't stop at the side of the house.” 

Schurz Communications chief technology officer Tom Williams added that it is essential that operators not only keep the lines of communication open with customers, but that they communicate in the way they want to. 

Also from The Independent Show: Borrelli Says New Name Emphasizes NCTC Strength

“Maybe they don’t want to make a phone call,” Williams said. “Maybe they want to do a text chat over their phone. They want to get the information and talk to us the way that they want to talk to us, not in the way that we want them to talk to us.”

Shook added that while communication is essential, techs and other cable employees should keep the message simple, direct and with as little jargon as possible. Sometimes, he said, too much information can “torpedo” the customer experience. 

“There’s a razor’s edge between too much communication and not enough,” Shook said. “We tend to not saturate but thoroughly communicate.”

Communication also means letting customers know in advance when there is going to be a service disruption due to planned maintenance or other factors, he added.  

“Bad news does not get better with time,” Shook said. “If we know that there is something intrusive getting ready to happen, in the field we like to make absolutely sure that we’ve communicated it thoroughly so it is not a surprise.”

Williams added that operators have to consider what messaging they are sending out to customers and be careful not to flood them with marketing messages that force them to overlook important service information.

“You can throw so many marketing messages out that they're not going to listen to the technology message of an outage,” Williams said. “There's a real balance you have to play there, or else their not going to listen to ‘There’s going to be a 5 minute outage on Tuesday night at 12:30 a.m.,’ and then they're online and it drops anyway, because you’ve sent so many marketing messages that they just delete all the messages coming from us.”

Conway Corp. chief marketing officer Crystal Kemp said it is important for operators to stress that customer experience isn’t just a priority, it is one of their core values.

“Because our priorities can change, our values usually don't,” Kemp said. “We are constantly putting that in front of people, in front of our employees, in front of our customers, to say along with reliability, along with innovation, along with all of those things, customer experience is a core value.”  

Operators also stressed the importance of their local presence, which gives companies a regular opportunity to reinforce their brand. 

“I’ve been to more franchise meetings than I care to talk about, but every single one of them they are appreciative of how local we are,” Williams said. “It is their residents that are answering the phones every day, or responding to a message or coming to their homes.” 

He added that it makes a big difference, especially when small operators are competing against larger operators that have huge bureaucracies and make it difficult for customers to access care reps. 

“It’s not hard,” Williams said. “You have to make it easy to work with. You want to delight your customer.” ￭

Rich Fickle joined the National Cable Television Cooperative in 2011 amid what was a trying time for the small cable operator buying collective.  After its former CEO left, there was a growing sentiment among smaller operators in the membership that their needs weren’t being met, and that larger players were dominating what had been started in 1984 as a way for small companies to band together, share ideas and buy equipment and programming with a single voice. It took some time, but Fickle and his team managed to turn the NCTC around and refocus the operation toward its original mission. Now after 10 years, Fickle told the NCTC board that he will step down before the end of the year, ending one chapter in his 40-year cable career, and perhaps opening a door to the next. Fickle spoke with senior content producer -- finance Mike Farrell about his legacy and plans for the future. An edited transcript follows. 

MCN: What brought this decision about?

Rich Fickle: It’s the longest job I think I’ve had, ever. I’ve worked for affiliated companies doing different things every three or four years, but I think this has been the same job  for 10 years. I guess maybe part of the answer is I always enjoyed tackling new things and changing the scenery a little bit to keep growing myself. But the other side of it is I think it’s healthy for this organization to also bring in a fresh perspective. As you get a little bit older you want to give a little bit of a different allocation of time for work versus other things. I felt like I was less willing to put in the 60-70 hours a week for certain things than probably should be in this role. So I said, ‘I need more flexibility and time.’ 

I’m still hoping to stay engaged in some way with the industry, but that’s a marketplace kind of opportunity. If it doesn’t happen, I’m OK with that too. 

Is this a retirement for you?

RF: I don't think it will be. It could be? It’s kind of like you’re going through a door and you really have very little idea of what’s on the other side of it. I committed to staying engaged through the end of the year. The reality is I think they’ll find a replacement within a few months. And then I’ll be helpful to that person for some period of time -- maybe a couple of months -- and then just kind of be available for the rest of the year.

It’s sound like this is something you’ve been thinking about for awhile.

RF: There wasn’t any disruptive, conflicting or change-of-life condition. I think it’s just my DNA. I kind of want to not do the same thing in one place forever. I value the learning and challenges of new environments and various things to put effort into. I think I’m happier doing that. Some people are happier knowing what they are going to do every day, and it’s very predictable. I’m just not one of the ones to do that. 

When you joined 10 years ago, NCTC was in a little bit of turmoil and there were questions concerning which direction it would take. But you seemed to bring a sense of stability pretty quickly to the organization. 

RF: I don’t know if I can opine on what I did as opposed to what a lot of others contributed. Let me answer it this way: I would say, yes, 10 years ago there were some distinctive challenges. There was a board that wasn’t as unified as it is today. You had members on the board that contained representations from some very large MSOs and some very small MSOs. And there seemed to be a lack of unity because they have some different views, are from different worlds that are pretty dramatic. You want some of that, but you have to have a balance there. That was one issue. I think the other part of it was there were certain parts of engagements with the other parts of the industry -- CableLabs or SCTE or even the other associations like those that represent the telco or fiber based providers -- that felt alienated in their relationship with the NCTC. I can't go into the story of why that happened, but one of the things we tried to do was change that, because the industry has always been  stronger when people are working together.  

The other notable shift that we tried to incorporate fairly quickly, is that the members [and] organizations had to feel like they were not disenfranchised. Small ops felt like the NCTC may have changed allegiance to focus just on the large companies. We worked hard to try to rectify that. Some of that is just the perception, because there’s a void in communication that creates those impressions sometimes of not being important anymore. But there was some reality to it as well.

The membership was a little bit unsatisfied, or feeling like this is no longer the co-op they remember. There's those things that were almost immediate challenges. Financially, there was probably a different mindset around how to manage the balance sheet. A long time ago I was a CFO and it’s just kind of ingrained in me that if you have an organization, you’ve got to  have to have a bit of staying power for opportunities and rainy days. So we had to do some work-throughs.

The plus is that the co-op was founded on a very solid foundation of a true cooperative spirit with entrepreneurial  independent companies wanting to collaborate and an employee base that had a really clear mission about trying to help small and medium sized operators really be successful. And that mission is very well ingrained and people love getting up in the morning feeling like they contributed something meaningful. Those types of things, the member mission, the spirit of the co-op, the entrepreneurial mindset, was so strong that it helped us make changes relatively quickly because there was that common ground. It’s been a good team that contributed that. We’ve had fantastic board members. We have 14-to-15 of them at any given time, so it’s a large board. But after that first year, we had a board that was much more unified. That creates a whole different dynamic because you can become so distracted by governance that is in conflict that it ripples through everything you do. I feel for the last nine years we’ve had a really, really good, supportive board. 

And we’ve had a lot of fun too. We decided to step up our game on the shows and open it up more; it was very limited attendance. We opened up the checkbook to bring in more talent, more events, because having people being able to enjoy each other's company and collaborate and build relationships is hard to measure but it’s foundational. I think it paid off. We all enjoyed that capability. COVID has kind of iced a lot of that for the more recent events, but we do want to go back to it. 

Let’s talk about the Independent Show. It seemed you were stepping things up when everyone else was stepping back.

RF: If you look at it from the larger cable operator perspective, their support of shows [and] things like that was huge dollars. They had to question themselves, the rationale for that investment, as they consolidated and grew bigger. But the NCTC group of companies hasn’t really changed that much. I think when I first joined there were roughly 700 companies, today we’re just north of that. Given the change of the last 10 years and we’re dealing with roughly 700 companies, that’s pretty amazing. We’ve had consolidation, we just keep adding new companies into the mix. There’s always been this fragmentation problem that we help solve by providing venues to help suppliers and other interested parties to work together.

The other change is the programming world has changed dramatically. The large programmers have consolidated, they have less of a need to attend shows, they’ve cut back on their affiliate staffs, but they still see value in attending, participating and supporting, which is great. The other thing we did is we expanded the scope of our supplier community to include a lot more technology partners. The size of that group of companies and the size of dollars flowing through the NCTC, I’m pretty sure, has doubled. We emphasized more of that in the last few years, and it’s growing at a very fast rate. 

As we shift more and more resources into broadband, we are not abandoning video and programming, in fact we’re growing there, but we made an intentional effort several years ago to be more tech friendly. Because a lot of the solutions that the large guys were getting behind from an R&D perspective were great for them, but it doesn’t work well for smaller markets. 

There's a divergence too. A lot of our companies come from different backgrounds. They  may be telco-centric, they may be municipalities, they may be new entrants coming from a whole different world based on fiber. But all of them have kind of taken a fresher perspective. They are early adopters of next generation network technology like fiber to the home, much more than some of the large guys that have had such huge investments in coax and DOCSIS technology. Fiber growth has fueled a lot of companies entering the business, because fiber is so powerful with broadband. Broadband seems to be a natural companion with video. Broadband is kind of the lead horse, but programming with video content is essential to customer relationships, especially in Tier 2 or Tier 3 markets. They kind of go hand in hand. We expanded and will continue to expand heavily in supporting the broadband side of that.

In the last few years, there has been an effort by the NCTC to help smaller operators that wanted to make the transition to broadband-only or at least broadband-mostly, more smoothly.

RF: You’re right, there are operators that want to transition to fiber. That’s interesting and a problem for a lot of these guys. A lot of the major fibercom providers didn’t know how to talk to cable operators, they were used to dealing with telcos maybe more than cable operators. We merged those worlds, or at least tried to help do that. So today we have five large providers of fiber technology and materials that we have done fairly good sized stocking deals with, because we know that area is exploding. We have a lot of capacity to serve members with that supply chain. We have three com deals with major providers of that technology, maybe have a fourth soon. And then we’ve done a lot on the DOCSIS modem side as well. That’s been there for a long time, but we also shifted more toward IP video support, we launched a key partnership with Plume around managed WiFi for the home, we’re going to do more of those types of things for the home network. We’ve got a circuit program now where we have multiple national carriers that supply circuits to our members. It’s a natural point of help for  members because we can aggregate those opportunities across the entire U.S. for them to have connectivity with different carriers and hopefully better terms. That program kicked off about a year and a half ago and it’s going well too. 

There’s more to come. Who knows what a successor will do, but we’ve got a road map of probably a half a dozen items that if we could do them today, we’d do them. There’s only so much time we have to work on things. But there’s a rich set of additional things we can do to help members, especially on broadband.

You’re also helping members with retransmission consent negotiations.

RF: I’m glad you brought that up, because programming and video is still pretty darn important. And if you look at the numbers we’ve actually been growing every year. How much programming we transact, on the retrans side specifically, we started with retrans deals that were tied to large cable network agreements. I think it was either ESPN or NBC that was the first because they had O&O retrans capabilities, that was probably five years ago. Just over three years ago, we did a handful of station group deals. We jumped into that pool. Then in this last round, we more than doubled that. Now retrans is a significant part of our portfolio of programming deals that we work on. These are tough. It probably is one of the biggest pain points for our membership base because of the cost of retrans and a lot of changes with programming content and station group consolidation. But it’s been very successful over the last two major renewal cycles to increase our presence on the retrans side. I suspect we will continue to do that. And I hope the station groups will see value in that too because we’re able to hopefully make it more sufficient for them to reach a large number of operators across the country.  

Even on the general programming side, last year we did 36 deals, some are renewals some are brand new, we still support entirely new networks. When I first joined the NCTC, we were lucky to get four deals a year done.  And we haven’t changed the size of the team that manages the programming side. [EVP of Programming] Judy Meyka came on a year or so after I came on. She’s done an incredible job of doing a lot of those transactions, she’s very effective, she’s built a good team. It’s really quite rewarding to see how much productivity we have on that side of the business.

One of the criticisms of the NCTC before you got there was that larger members could pick and choose which deals they did on their own and with the co-op, which some members saw as limiting your negotiating leverage. How did you change that dynamic?

RF: The way that structure worked created several problems, where larger members could almost sit at the table and see where the NCTC was going with certain deals and make decisions on whether they would pursue their own deal at the eleventh hour and even before that. That creates this uncertainty, not only for our membership and our negotiations, but think about it from the programmers’ side. The programmers were upset because they felt like ‘I have to negotiate twice with this large company, give them the benefit of seeing things coming through the NCTC and then that allows them to be more informed on their negotiation strategy.’ They felt like it was unfair. I actually agreed with them. 

It’s an imperfect world because you always have to provide choice to any member to do their own thing, and we still do that today. But we now have  structures in place that say, ‘If you want us to negotiate on your behalf, we can be effective if you commit to us today that that’s what you want to do.’ If you don’t want to commit to do that, that ‘s fine. Do your own thing, no hard feelings. But we didn’t have that before. 

So now we’re asking on major deals for members to be able to commit that they’re going to allow the NCTC to go through the negotiations. They’ll be a part of it, they’re not going to disrupt it, they’ll be supportive of it. And that has created a much, much more trusted process for both our side of the table as well as the content providers. And, yeah, there was a little bit of resistance or hesitancy to do that for various reasons, but it’s worked out.  

Do we still have large companies that still want to do their own thing for certain types of agreements? Yeah, but that’s OK. We’ve actually had more of our larger members rejoin some of our larger deals than we have the other direction where they exited on renewals. Our net track record is a positive in terms of large operators being involved in major programming deals.

We have to prove ourselves. We have to deliver value. We’ve never taken the approach that if you’re a member, you have to sign this secret oath that you’re going to do everything through the co-op. We feel like we have to earn it. If members don’t see the value in the short term and the long term of supporting that structure, then they probably shouldn’t be members. There are always situations where it does make sense for operators to consider doing a little something different for themselves. And that’s fine. 

With retrans and regular cable networks, you can go as a united front and say you represent however many millions of subscribers you represent -- at one point it was over 25 million.

RF: That depends on how you do the accounting on some of that, but that was when we had some very large MSOs involved. I always look at the level of participation as opposed to the theoretical level, how many subs are actually participating. I don’t think we ever had that number exactly from that definition. You had that number from the aggregate number of companies that signed a membership agreement. 

Can you say how many you represent now?

RF: I would say in general our larger deals probably hover anywhere from six to 10 million, which is still pretty notable in the world of consolidated companies and so forth. It could be a little less on certain deals, but that’s the general idea. 

Is it different when you’re dealing with retrans? Or do you just do national O&O deals?

RF: No, we’re doing the station group stuff. So you can think about large station groups like Sinclair and others. I think we make more sense for both sides if it's a large station group as opposed to one that only has a few stations and only affects a  few members. I think we are very focused on trying to help large station groups and large groups of  members that are part of that.      

We started off with the O&O stuff five years ago, a little bit over three years ago we did our first set of station group deals. This last round at the end of 2020, we essentially doubled the size of the station group deals.

Are you expecting that to grow?

RF: Yes. I think it’s been successful. It’s painful because they are hard deals. I think that most members see value in us helping them with that. And I think the stations see value in that efficiency as well. 

In 2017, you reached a deal for members with Mobi TV, which is going through a Chapter 11 restructuring, but it looks for now that the relationship will continue.

RF: Mobi has done a fabulous job for a lot of our member companies and it’s been embraced in a fairly quick way. Yes, Mobi is dealing with some financial issues. There are a lot of reasons for why that happened, but one of the most easily understandable ones is that they were counting on fairly high growth on their platform last year. They had been in the market long enough that a number of cable operators had been launched and the pattern for  operators to step on the gas and convert legacy video systems to Mobi seemed to be in alignment. So 2020 was supposed to be the growth year. 

COVID hit and cable operators found it very challenging to do anything that involved getting into the consumer home to switch out video systems. You combine that with the fact that the demand for broadband went through the roof in most of these markets, so operators had to reshift the resources to focus on that broadband growth and network reliability. Mobi, unfortunately, became impacted by that negatively. The growth just didn't happen. 

The good news is I think these operators are back in the saddle, trying to move forward to reignite their growth on Mobi deployments. But Mobi first has got to get through this financial restructuring and/or sales process. Chapter 11 activities are somewhat opaque. They’ve got a relatively short time to work through this and we’re very supportive of them and glad to help Mobi and/or other companies that are willing to help Mobi through investment. We’re super-supportive of them. I think our members have felt like they’ve done an excellent job. So we’re engaged, there are some areas I can’t talk about because of NDA stuff, but I can say that Mobi has been a super service and it’s been great for small operators and some of our large members as well.

Looking forward to the rest of this year, is there anything you want to do or accomplish before you hang it up?

RF: There are probably a lot of things I want to do but I probably will not get to do. Time seems to be slipping away faster than I thought. I guess it comes down to do the best I can to help the new CEO. If there are projects or things I can do to help them with after that, somewhere in that ecosystem, I’m glad to do it, but I feel like I’m probably more limited in terms of the impact I can have for the rest of the year, other than just making sure that we’ve got a really good direction set with the new person being there at the NCTC. 

Will you help with the search?

RF: We retained a search firm, Carlsen Resources, one of the best in the business. [They’ve] been working on it for a while now and I think have surfaced some good candidates.

Do you think you’ll have a candidate soon?

RF: I think so. I think the plan is to have somebody hired and in place maybe within the next six-to-eight weeks. Maybe it takes longer. Maybe it might be June before they actually can take all of the reins, but it is in that time frame. 

Is there anything you're most proud of during your time at NCTC, and is there anything you wish you could have done while you were there, but couldn’t? 

RF: Proud, in my book, it’s a team thing. I guess the pride is from the standpoint that member companies, in many cases suppliers, and our staff rallied to address challenges and also to seize opportunities. When I first started in the cable industry a long time ago, that was the norm. But as the industry evolved and large companies emerged, the cooperation with the industry was diluted. Larger companies had a mindset of their own R&D, their own capabilities, less willing to share. The experience at the NCTC, which I think we helped contribute more to in terms of building up that level of cooperation, is wonderful to see. Because it’s kind of the way I started my career in the industry and probably the way I'll be ending my career in the industry, which is seeing an uncommonly high level of cooperation for the common good of building a better business. How many times can you see opportunities like that? I feel very grateful.

On the wishful side, we have 700 companies and there are all types of ownership structures. Some are public but a lot of these companies are also third- or fourth-generation family-owned companies. The richness of the ownership and the people who lead those companies is amazing. My biggest regret is somehow I never seemed to make enough time to have developed more of those relationships in depth, because these people are amazing, 

If I had somehow a chance to do it over, I would try to figure out ways to shift time to be more with those folks. Just a personal thing, they’re just amazing people.  To hear the stories of all the challenges they had and running these companies successfully for years and years and years. 

Is that your advice for the next person that comes in?

RF: Yes. I regret not doing more of it. I think I did OK at it, but regret not doing more. I think it’s a foundational element of trust that is essential for a cooperative to be successful. People have to get to know you. And I think it's enriching in both directions.    

National Cable Television Cooperative CEO Rich Fickle will step down from that position at the end of the year, after a decade leading the small operator buying consortium.

Fickle joined NCTC in 2011 after spending 10 years at Ascent Communications. Fickle, who has more than 40 years experience in the cable industry, was only the third CEO in the organization’s history, succeeding former Adelphia Communications executive Jeff Abbas and NCTC founder Mike Pandzik.

In a memo to NCTC members Monday, Fickle said the time was right for new blood at the organization. 

“After an incredible 10 years as CEO of the NCTC, I have made the tough decision that it is time to step aside and allow for [a] new CEO to step in who can continue to bring fresh ideas and leadership at the NCTC,” Fickle said in the memo, which according to sources went out several weeks ago. “NCTC is in a great place coming off several successful years and is poised to do even more for you all in future years.

“NCTC is in a strong financial condition, we successfully continue to expand the number of programming agreements managed for members and have established a strong foundation in broadband and technology purchasing services,” Fickle continued. “The team remains dedicated to helping members as both challenges and opportunities emerge.”

The NCTC was founded in 1984 by Pandzik, and serves as a buying cooperative for more than 700 small and medium sized cable companies across the country for everything from technical equipment to programming. The organization also holds one of the last remaining nationwide cable shows, The Independent Show. 

Under Fickle’s leadership, NCTC has forged deals with virtual MVPDs like fuboTV and entered into a deal with Mobi TV in 2017 for an IPTV service for its members as they shifted their focus to broadband. Mobi TV filed for Chapter 11 bankruptcy protection earlier this month. NCTC also has begun negotiating retransmission consent deals for its membership after the Federal Communications Commission ruled last year the buying group would have the same good faith protections as individual MVPDs. 

NCTC said a search for a replacement is underway and has hired executive search firm Carlsen Resources. 

“A true partner, friend and visionary executive, Rich led the NCTC over the past decade to extraordinary new heights during a time of disruptive innovation that shows no signs of abating," said ACA Connects President Matt Polka, whose small and midsized members relied on the collective clout of NCTC. “Because of Rich’s skill, commitment and thought leadership, NCTC has flourished, and our two organizations have never been closer. We have made tremendous strides, and we are in position to make even more progress in the future for the benefit of our members as they compete in the dynamic video and broadband marketplaces and in the Washington, D.C., policy arena.... I know I speak for the entire ACA Connects team in saying that our relationship with Rich was incredibly rewarding."

Rainbow Communications, which supplies phone, broadband and cable to Northeast Kansas, said it is pulling the plug on traditional cable service to focus on streaming video.

"Based on what we see for the future and what’s best for our customers, Rainbow Communications will no longer provide TV service as part of our entertainment package," Rainbow told its customers, pointing out that more than 80% of its internet usage was streaming video.

Cable operators have increasingly been eyeing the move to online video, one reason the American Cable Association, which represents smaller operators, changed its name to ACA Connects.

In an open letter to its customers billed as a "TV End Announcement," Rainbow said that given that there was now "a high-quality and less-expensive technology exists for watching TV" in over-the-top video, it would no longer be their TV provider as of June 30, 2020, by which it meant no longer be providing traditional cable TV. It stopped taking new video subs Jan. 13.

Rainbow said it would try to maintain all its channels 'til the June end date, but could not guarantee it if there was a "loss of expensive equipment."

Rainbow also cited the cost of content and the difficulty of independent providers to offer quality lineups without boosting rates. "Instead," it said, "we will focus our efforts on delivering the best internet speeds possible so customers can watch high-quality and less-expensive TV channels over our high-speed internet connection."

For the full version of this story, and for more stories like this, visit our sister publication, Next TV.

Nearly 20 years after breaking into the video business, municipal electric utility BELD Internet (formerly BELD Broadband) is throwing in the programming towel, telling its customers that as of Dec. 2 they will have to get their content elsewhere, and launching an education campaign to teach them how to do just that.

In the campaign, called “K.O. Cable,” and featuring rea local customers, BELD claims that signing on to its high-speed internet service and streaming video from other sources will save customers $1,000 or more per year. The launch also coincides with the introduction of BELD’s own 1 Gigabit-per-second data service.

“As of Dec. 2, 2019, BELD will no longer offer cable television service due to costs beyond our control,” BELD general manager Bill Bottiggi said in a press release. “So for any Braintree resident thinking about cutting the cord, now’s the time and we’ll coach you through it with straightforward, step-by-step guidance.”

Related: Moffett: Video Just Doesn’t Matter 

BELD -- an acronym for Braintree Electric Light Department -- got permission to offer video in 2000.

BELD is the second small operator to shutter its video service. In June, Montana’s 3 Rivers Communications told its customers it would pull the plug on video on Oct. 31. 

Small operators have been hit particularly hard by rising programming costs. And as streaming services have sprung up offering multiple channels at lower prices, operators are finding it harder to compete. CableOne was probably the first small operator to publicly de-emphasize video in favor of higher-margin broadband services. In the past few years, other larger operators have adopted similar stances. 

For decades, small cable operators have fought subscriber wars with telcos, satellite TV and more recently Silicon Valley streamers, but now there’s a powerful giant picking off commercial and residential customers that they never expected to see: Comcast.

The nation’s largest cable operator with 22.4 million video customers and more than 25.5 million broadband customers, Philadelphia-based Comcast has embarked on what seems to be a concerted effort to compete for commercial and residential services business with smaller, mostly incumbent mom and pop cable operators when the opportunity arises.

So far, Comcast has applied for and won franchise agreements in seven communities in New Hampshire, Connecticut and Pennsylvania, in each case competing against an incumbent that had been in those markets for several years. In Comcast’s view, this is a tiny step in a logical business strategy to provide large corporate clients in adjacent markets with soup-to-nuts business broadband service.

But to some, it is a cultural shift and the first hairline crack in the cable fraternity, bound by a decades-old unwritten oath: to stay out of one another’s markets. Cable territories have tended to be noncompetitive because of the expense in building plant and making accommodations to cities like free wiring to public buildings and paying percentage-of-revenue fees. That’s why it’s been exceedingly rare for one cable operator to compete against another within a given franchise area. Until now.

A Quiet War

Small and large cable operators aren’t always at odds, and most do find ways to cooperate, especially concerning standards and technological issues in organizations like CableLabs and NCTA: The Internet & Television Association.

Comcast’s first new franchise came in December 2017, when it won the right to overbuild Atlantic Broadband in Rochester, N.H. Rochester was one of several markets served by MetroCast Communications, which Atlantic purchased in January for $1.4 billion.

In May of this year, Comcast won a competing franchise in Waterford and New London, Conn., bordering its existing operations in Groton and Norwich, and again overbuilding Atlantic Broadband in a community of about 27,000 people. Later, the mega-company won franchise rights to compete against tiny Blue Ridge Communications — which has about 170,000 customers in total — in five communities in rural Lancaster County, Pa.

Atlantic Broadband declined comment.

Comcast applied over the summer for franchises in five communities in Pennsylvania — Warwick Township, Warwick Borough, Ephratah Township, Ephratah Borough and Lititz — all primarily to offer commercial services to businesses in the area. Comcast already offers cable and business services to customers in nearby Akron, Pa.

Bob Grove, vice president of communications for Comcast’s Keystone Region, confirmed that the company applied for and was granted franchises for the Lancaster County communities, but added it is still in the early stages of making decisions on specifics.

“I can tell you that our primary focus is on business service expansion where from time-to-time we explore new opportunities, based on a case-by-case analysis, to bring our state-of-the-art products and services to more businesses,” Grove said in an email message. “Some of our existing customers in the contiguous footprint and shared DMA have operations in this area, which is why it made sense for us to expand our commercial network here. We’re also exploring limited residential opportunities, but that’s in the very preliminary stages as well.”

The markets in competing operators’ areas are pretty small, compared to some of Comcast’s big markets such as Chicago, San Francisco and Minneapolis. But they are home to some fairly large public and commercial institutions that could be candidates for Comcast’s commercial services offerings.

New London, for example, has several leading liberal arts colleges including Connecticut College and Mitchell College, the U.S. Coast Guard Academy and the region’s major performing arts center, The Garde Arts Center.

Lancaster County is home to several large businesses and health care facilities, including Johnson & Johnson and retirement communities in Lititz, Pa. In Rochester, manufacturer Albany International and Safran Aerospace are among the largest employers.

While there is nothing illegal or unsavory about Comcast’s actions — there is no such thing as an exclusive franchise agreement, and any company, cable, telecom or otherwise, can apply for a franchise in any municipality — it does appear to violate cable’s long-held “gentlemen’s agreement” not to compete. That unwritten rule dates back to the early days of cable and is a sore point for cable pioneers.

“When I started in this business, we all helped each other,” said former Buford Media CEO Ben Hooks, a longtime cable executive who retired earlier this year after more than 50 years in the business. “You don’t see that, especially with Comcast. As far as they’re concerned, there’s them and there’s the rest of the industry.”

Comcast isn’t the first cable operator to tweak the gentlemen’s agreement — Midcontinent Communications overbuilt Cable One in Fargo, N.D., in 2013, and others have done it in small markets over the years. But Comcast’s latest moves into these smaller markets are perhaps the strongest proof of how competitive the video and broadband market has become.

“Comcast is going out and aggressively looking at properties that are run by other cable companies,” a cable executive who asked not to be named said. “But in doing that, they run the risk of us doing it to them.”

To be clear, Comcast hasn’t started an all-out assault on small cable operators. According to its 2017 annual report, the MSO has about 6,400 franchises across the country, and so far only about a half dozen are overbuilds of incumbents. But the practice appears to be erasing one of the last vestiges of the old cable industry. What once was a sense of camaraderie between large and small operators is quickly evaporating.

Some of that has to do with economics. The cost of extending fiber plant into an adjacent community has dropped dramatically over the years, and commercial broadband service is one of the more profitable segments for cable operators. Once the plant is built, it makes sense to use it to its fullest extent.

Cox Communications spokesman Todd Smith wouldn’t comment on another cable operator’s business strategy. But although Cox mainly focuses on markets where it has existing franchise agreements, he added, it sometimes follows business customers beyond those borders.

“We primarily do this via strategic partnerships and network agreements with other providers,” Smith said. “For example, we’ve invested in Unite Private Networks and have jointly pursued business outside our footprint where it makes sense.”

Charter Communications did not return requests for comment.

Another factor is the disparity in sizes of large and small cable operators. Comcast dominates with 22.4 million video and 25.5 million broadband subscribers, followed by Charter with 16.1 million video and 23.3 million broadband customers. Go further down the list, though, and the numbers plummet — No. 3 Cox has about 6 million customers and No. 4 Altice USA has 3.3 million video and 4.1 million broadband subscribers. Mediacom Communications — the fifth-largest cable operator, and the No. 9 pay TV provider overall — has less than 1 million video customers.

“A company today like Comcast has so much more margin/size over a small company that if they want to expand into an adjacent territory, it is no contest,” Hooks said. “Now, if they were to take on Charter, the competition would be a greater challenge. While Comcast still has the advantage, Charter is large enough that it would be ugly.”

Hooks added that the myth that cable operators stick together is just that, a myth. It hasn’t been that way for decades. Only now, with a consolidated industry and regulatory pressure, it’s becoming a little more obvious.

“The days that small and large cable companies work together is no longer the case,” Hooks said.

Pivotal Research Group CEO and senior media & communications analyst Jeff Wlodarczak sees nothing sinister in Comcast extending its reach in to small operators’ territories. And he doesn’t see the practice as a sign the market is getting tougher.

“Who said the market is bad?” Wlodarczak said. “I don’t see Comcast overbuilding Charter or any significantly upgraded cable operator. Comcast is expanding its footprint by roughly 600,000 to 800,000 households and businesses every year — most of which is new build — and extending into adjacent areas cost effectively where the existing small cable operator cannot afford to upgrade properly is a logical move.”

Comcast has been expanding its footprint at a fairly steady pace over at least the past decade; it passed 57.5 million homes in 2017, up from 53.8 million in 2013. But the notion that it is providing a service to a market where the incumbent can’t afford to upgrade its network isn’t entirely accurate. Blue Ridge, despite its size, has been investing heavily in its network, and has offered broadband service at 1 Gigabit per second to its entire territory since June.

Blue Ridge did not return calls for comment. But in an article in the Lititz Record Express published on July 18, Blue Ridge vice president of operations Mark Massenheimer seemed to take Comcast’s actions in stride, touting the company’s local presence and its commitment to invest in its network.

“Our employees live and work in the towns and neighborhoods we serve and many have developed relationships with customers over the years,” Massenheimer told the Record Express in an email. “Continuing to invest in our network infrastructure so that we can provide the best technology available is a responsibility we take very seriously.”

Over the past 18 months, he added, Blue Ridge has doubled its internet speeds, offered new HD channels, launched a whole-home WiFi product and completed the deployment of 1-Gbps broadband service throughout its footprint.“We didn’t do these things because of competition,” Masenheimer told the Record Express. “We did them because our customers deserve the best, we did them because it was the right thing to do. We’re a small company with the ability to deliver big things and we’re just getting started.”

Blunting the Local Edge

A key to small operators’ success over the years has been local presence — employees live, work and play in the same communities and have built strong relationships with customers over the years. But besides using their greater scale and resources to offer a wider range of services, large companies like Comcast can also claim a local presence in many of these markets because one of the key points in entering a new franchise is proximity to the existing network. Comcast may not be in that specific town today, but it probably has been in a town less than 10 miles away for years.

For example, Rochester, N.H., became one of 104 communities in the state where Comcast provides service, and is just 11 miles from a Comcast system in Dover, N.H. In Pennsylvania, Comcast already has a system in nearby Akron, which is just 6.5 miles from Lititz and 3.5 miles from Ephratah and Ephratah Township.

Such moves are likely to grow. Adding to the attraction of smaller markets is that the cost of deploying fiber is going down. And merely extending a line from an existing network is even cheaper.

On a conference call with analysts to discuss its Q3 results, Altice USA CEO Dexter Goei, talking about costs associated with its own plan to build a fiber-to-the-home network in its footprint, said that in Europe, where its parent, Altice N.V. is based, the cost to build fiber is about 500 euros (about $570) per home. He expected to build Altice USA’s domestic network for considerably less.

According to some members of the cable financial community, the cost of extending fiber is a little higher in rural communities, but is still pretty low, and much cheaper than greenfield construction. In a typical 60-homesper-mile small cable configuration, the cost of extending plant can be as low as $650 per household.

For their part, many small operators are taking it in stride, chalking up the emergence of yet another competitor as just that, and hoping that their local presence will be enough to keep customers from switching. “Competition is here,” Eagle Broadband CEO Gary Shorman said. “And if you are not ready, you’d better get out of the way. Comcast is not a government subsidized business, unlike some of the competitors we see in some rural markets.”

The temptation to overbuild incumbents is nothing new. RCN, WideOpenWest and countless other companies have done it for years. But traditional cable operators have avoided it because of the economics.

“In most cases overbuilds were a disaster,” Hooks said. “Neither party won very much, both were fighting for the same customer, cutting prices and neither company was doing well. It was just a tiresome battle.”

That was the attitude of most large operators just a few years ago.

When Charter Communications completed its $80 billion purchase of Time Warner Cable and Bright House Networks in 2016, one of the requirements of federal approval was that it overbuild 2 million customers with broadband outside of its footprint. At the time, Charter chairman and CEO Tom Rutledge said he would overbuild telcos, not cable, because of M&A concerns.

At a MoffettNathanson conference in 2016, Rutledge said he told the FCC he couldn’t overbuild another cable company “because then I could never buy it.” He later added that overbuilding a cable operator would be business suicide. “Why would we go where we could get killed?” he said at the 2016 conference.

When Comcast was in the running to buy Time Warner Cable in 2015, executive vice president David Cohen said that there was little chance that Comcast would try to compete with a combined Charter-TWC if its deal wasn’t approved, for two reasons — economics and history.

Cohen, according to reports at the time, said the high capital intensity of building a cable network is the main reason “that the cable part of this industry has never competed against each other.” Although franchises are nonexclusive, “given the expense to build in any particular community I think no cable company, or only rarely would a cable company choose to compete against another cable company,” he added.

So what changed in the cable industry over the past five years? Everything.

Cable operators have lost a collective 4 million video customers in the past five years and Comcast alone has lost nearly 2 million. While Comcast’s broadband growth has been healthy — up 4.1 million since 2013 — it has been slowing.

Business services growth has far outpaced residential broadband, averaging double-digit percentage growth annually, but it too is beginning to approach a wall. Small to midsized businesses, the lifeblood of cable commercial offerings in the early years of the service, are becoming saturated. And large enterprises with more than 500 employees are a tough nut to crack.

With over-the-top and subscription VOD competitors increasingly pounding on their door, Comcast may feel it has no other choice. Extending existing fiber plant is a relatively cheap way to boost revenue, and if the cable company mainly focuses on commercial customers, the profits are even higher.

In the end, it is the small cable operator that could feel the brunt of this new growth initiative. With programming costs rising, customers clamoring for cheaper, skinnier packaging and regulatory pressures building up, small cable now has to worry about the approach of a deep-pocketed, highly experienced, well-known competitor for one of its most profitable business lines.

“That’s a lot to be worried about,” Hooks said.

Retransmission consent fees are expected to rise an average of 88% by 2020 for small cable operators, according to a survey by the American Cable Association.

ACA, long an opponent of retrans regulations, surveyed its own membership and found that on average, they paid about $11 per month per subscriber in retransmission consent fees in 2017. That amount is expected to rise to $19 per subscriber per month by 2020.

Nearly a quarter of those surveyed will see a drastic jump of at least 100% in fees in the next three years, and in one case that increase is expected to be 302%.

In response, the National Association of Broadcasters cited Kagan data that shows the pace of retrans increases have slowed significantly overall in the past several years from about 65% in 2010 to 10% in 2018. And they pointed to other Kagan data showing that retrans is still a small part – about one-sixth – of overall programming costs. In addition, broadcast ratings generally exceed that of cable channels, the NAB says.

But the gist of the ACA survey is that small operators copntinue to bear most of the burden of retrans increases. According to the organization, retrans fees are the fastest growing part of customers’ cable bills, adding that in some cases, cable subscribers across the country could see up to $15 in retrans fees added to their monthly cable bills by 2020.

“This is distressing,” said ACA president and CEO Matt Polka in a statement.  “Corporate broadcasters have become increasingly aggressive over the years in charging for retransmission consent, and it’s clear that they have no reservations taking escalating amounts of money from consumers to line their pockets.”

Related: FCC: Expanded Basic Cable Price Increased 3.4% in 2015

ACA included comments from some of its membership about the impact of retrans on their operations.

For example, Citizens Telephone & Cable president Brian Cornelius claimed under his current retrans agreements, charges will rise about 105% over the next three years, or about 50 times the rate of inflation. Citizens offers service in Higginsville, Corder and Mayview, Missouri.

“It’s crazy and unsustainable,” Cornelius said in a statement, “If gas prices did that, a tank of gas would go from about $30.00 to about $70.00.”

In December 2017, Citizens was paying $8.53 per subscriber per month in retransmission fees. This month broadcasters increased those fees to $14.65 per subscriber per month — a 72% increase.

They also refused to allow Citizens Telephone & Cablevision to offer a broadcast-free cable package, which would have allowed customers to opt to use an antenna in an effort to reduce their rates, according to the ACA.

Harrisonville Telephone Co., which operates in Monroe, Randolph and St. Clair counties in Illinois, said this year it has experienced retrans rate increases of more than 100%. In 2016, the company claims it was forced to carry multicast channels or be in direct violation of the local broadcast retransmission agreement.

“The corporate broadcasters are out of control,” Polka said in a statement. “No other industry operates this way.  No other sector would get away with such massive price increases in just three years.  Why is this okay?  Quite simply, it is not, and consumers should not have to pay the bill for something Washington should have changed years, if not decades, ago.”

BOSTON — A Harvard Business School professor suggested that cable operators may be thinking about new over-the-top competitors in the wrong way, and that they should focus on the customer, not the product.

Bharat N. Anand, a professor of business administration, spoke to a crowd of several hundred small and midsized cable operators at The Independent Show in Boston, on “Lessons from the Digital Transformation of Media.”

As cable operators look for ways to stem video subscriber losses, amid new competitors and consumer preferences, Anand suggested they dissect why customers were sampling OTT packages. And the answers may not be so obvious.

In business, he said, it’s deceptively hard to figure out whom — and with what — you are competing against. One of the biggest “competitors” for Black & Decker power tools, he said, were, of all things, neckties. Why?  Because both were the go-to gift on Father’s Day, men’s birthdays and Christmas.

“There are industry forces, but strategy is ultimately a decision” that has huge implications, he said.

Newspapers, he said, suffered in the digital age not because there was a news problem so much as it was a classified advertising problem.  Print became obsolete when searchable, free ads appeared.

“We better be sure what the fundamental reason is why people are leaving,” he said.

The upside is huge when consumers change tastes or technologies, and the companies that fail to act swiftly to respond are punished profoundly.

“If the problem turns up in your financials, it’s probably too late,” he said.

The music industry got hammered not so much by piracy, Anand said, as the format change to digital, a similar cyclical change that also came with LPs, and later, cassettes.  Artists have adapted. As the price of CDs dropped, artists focused on live acts.

Concerts, once viewed as elaborate promotions for CD sales, are now the cash cow, and CDs and digital music are a complementary way to promote concert tickets for artists, he said.

The key to successful strategies, he said, are “complementary” products offered to user networks. Complementary products include the National Football League and Fantasy Football, greeting cards and flowers, or tires and restaurant guides.  In the war for readers between the Sony e-reader and the Amazon Kindle, the Kindle had one key feature — it was wireless.  It was less about the reading experience than complementary experience of buying the book, he said.

He said that cable operators are too “ focused on products and not customers.” And he hinted they would be better served looking at complementary products and services, such as installation, recommendation and search.

“The history of media tells us that every time a we think something’s a threat, it turns out to be a be complement, starting with radio and music,” he said.