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Home in the valley – Major cable player Mediacom parlays smart thinking into growth

Many U.S. TV and internet service providers are based in the country’s big cities, but Mediacom Communications Corp., the fifth largest cable company in the U.S., has a long history in the Hudson Valley, where its headquarters in Orange County remain to this day.

Many in the area, however, have never heard of Mediacom, likely because its customer base and cable systems are almost exclusively in the South and Midwest. The company serves mostly rural communities — a legacy that began in the Hudson Valley.

Mediacom’s founder and CEO, Rocco Commisso, traveled by ship to the United States from Calabria, Italy at age 12. After going to Columbia University on a soccer scholarship, he became a Wall Street banker, working for companies such as Chase and the Royal Bank of Canada.

He lent money to several cable and telecommunications companies through his banking roles, and met Alan Gerry, the founder of Cablevision Industries in Sullivan County (not to be confused with the Cablevision company founded by Charles Dolan, now owned by Altice.)

Gerry founded Cablevision Industries initially to provide cable service to his rural hometown of Liberty, where reception was poor. Gerry addressed the problem and eventually expanded down the East Coast.

“Rocco, after lending money for years to Alan and to other cable people, took a job as chief financial officer at Alan’s company and from around 1985 to 1995 Rocco worked in Liberty and helped Alan grow from the 25th to the eighth biggest cable company,” said Thomas Larsen, senior vice president for government and public relations at Mediacom. “Then Alan sold to Time Warner and Rocco decided at that point in 1995 to start his own cable company.”

AHEAD OF THE CURVE
Working out of the basement of his home, Commisso began to plan his strategy for Mediacom.

“When he was looking at what was happening when Alan sold Cablevision Industries, he realized that a lot of these big companies were acquiring companies that were in metropolitan areas and then they would discard or sell very cheaply their rural assets, because they were really focused on serving the highly populated areas,” Larsen said.

“And so Rocco’s philosophy was, ‘I can buy rural assets cheaply and then the money I save, I can then invest in upgrading those assets so that they have the same or better services as the larger cities.’ And that was day one, his belief.”

Commisso took advantage of the existing talent in the area — individuals out of work from the acquisition of Cablevision Industries — and hired back his former coworkers, many of whom remain at Mediacom today.

Commisso also delivered in many ways on his mission to make rural services as good or better than those offered in the city. For example, Larsen said that Mediacom was the first major cable company in the U.S. to take its entire network to 1-gigabit services, bringing them ahead of New York City, Los Angeles and Chicago in that regard.

“We were offering cities in Iowa that might have 300 or 400 people gigabit services before you could get that in Manhattan,” Larsen said.

Though others in the industry didn’t see the value at the time as Commisso did, his foresight has paid off.

“The core of our business philosophy is to buy right, finance right and operate right,” Commisso said. “We did very well in the acquisition market in the late 1990s and early 2000s, paying very low per-subscriber costs compared to our peers.”

“Now, oddly enough, rural assets are hot commodities,” Larsen said, acknowledging that this was a trend before the pandemic, but has only ramped up since.

“If you have a good network in a rural area, you don’t have a lot of competition for the high speeds, so you’re the go-to source for high-speed internet. Now, you’re seeing a lot of companies pay top dollar for rural assets. So Rocco, in that regard, was the visionary, although obviously there’s some luck involved in that.”

CUSTOMER CENTRIC
Certainly there is some luck involved in building up a service that has essentially become a necessity in our current day, and Mediacom has seen the type of consistent financial growth that is quite rare in any company.

“When we announce our results for the first quarter of 2021, it will mark the 97th straight quarter of year-over-year revenue growth for Mediacom, which is an incredibly unique operational accomplishment in any industry,” Commisso said.

The Covid-19 pandemic has also reinforced the urgent need for high-quality internet service, putting Mediacom in the fortunate spot of being in one of few industries for which business has been booming in the past year.

The company signed on to the Federal Communications Commission’s Keep Americans Connected Pledge in March, which states that it would not terminate connectivity to any resident or small business unable to pay because of the effects of the pandemic, would waive any late fees incurred and would open its WiFi hotspots to anyone in the U.S. who needed them.

The FCC cited Mediacom as one of the companies that went above and beyond for its efforts, including increasing broadband speeds, offering two months of free broadband service to new low-income customers, reducing prices for new customers and suspending all data usage limits for the first two months of the pandemic, which later extended to most of 2020. The company introduced low-cost programs in order to get more people online.

“We signed on to (the Keep Americans Connected Pledge) and that pledge really meant do everything you can at the company to get people online and keep them online, stay connected to the world,” Larsen said. “And I remember having this conversation early on and thinking that this was a historic moment and that we want to be on the right side of history, and that was kind of our mantra through it all.

“It led to a record number of customers coming on the network, so behaving appropriately ultimately helped the company, but I think we would have done it either way.”

STAYING COMPETITIVE
The company gained just over 100,000 customers in 2020. More growth is likely in the future, too, especially with an uptick in federal and state grant funding for expanding broadband in rural areas — even, potentially, $100 billion for that purpose, through President Biden’s proposed American Jobs Plan.

“The companies that have networks there are going to be beneficiaries of a lot of this government grant money,” Larsen said. “And that money is largely going into areas that have lagged in service. So if you own a small town that has fiber, you’re gonna be in the best position to expand that fiber into areas around that small town, rather than starting from scratch and building from the city out.”

Fifteen of those grant projects are already underway for Mediacom.

“The projects are in towns that were never connected to the internet before,” Larsen said. “They had largely relied on maybe cellular or satellite service to get internet.”

While the work seems cut out for them lately, the industry still faces challenges, especially with an increase in calls for more regulations on internet service or for making the internet a public utility, a potential drawback for service providers, of the increase in government funding. Mediacom specifically also faces below-average consumer rankings for the TV and internet service industry, according to the most recent American Customer Satisfaction Index rankings.

Many local governments have received money to build up competing internet service options.

“In the Biden infrastructure package, a big undercurrent is that this money needs to go to local governments to compete with private industry,” Larsen said. “There’s a lot of people that want us to become a utility, like electric, water or gas.”

In communities that have implemented this type of system already, Mediacom has seen a drop-off in subscriber numbers, which may accelerate if government funding continues to build up public internet service.

The company, however, continues to develop technology to stay competitive. Being privately owned by Commisso himself allows it to stay nimble and implement available new technology as quickly as they wish.

“The big advantage of being privately held is the ability to control our own destiny,” Commisso said. “Instead of focusing on creating shareholder returns, we have been able to make substantial reinvestments in our network to stay at the forefront of the cable industry’s technology transition to 1-Gig and now 10G.”

TEAM EFFORT
Wireless internet is its latest developmental project, which may be especially advantageous in rural areas, where the many miles of fiber necessary for wired service are costly.

Last year, Mediacom bought more than $30 million worth of wireless internet in 178 counties for this purpose, which would make its services accessible to a half-million new households.

Mediacom was also recently named as an honoree in Deloitte’s U.S. Best Managed Company program.

Larsen attributes that success to the company’s technology leadership in the industry, along with the level of experience of Mediacom’s management.

Its top senior management leaders have, combined, roughly 270 years of experience. Being privately owned also allows them certain advantages when it comes to decision making.

“We were doing things before and at a bigger, faster pace than our peers like Comcast or Charter,” Larsen said. “We launched gigabit across our footprint in 2017, and within a 12-month span we did the whole company. It took Comcast, Charter — I don’t even know if they’re done yet — years to catch up.”

Commisso’s commitment to his team is shown through Mediacom’s high retention rate — some employees are still there from when the company first started. He’s kept the headquarters in the Hudson Valley for its entire 25-plus years and employs several family members on his management team.

Mediacom’s $35 million corporate headquarters in Blooming Grove was built almost a decade ago, in 2012, helped along by the cooperation of state and local government officials and a $7.5 million incentive package.

“(Commisso) didn’t know really where he was gonna buy cable systems, so he had picked New York as his corporate headquarters first and jumped on opportunities as they presented themselves,” Larsen said. “He never bought anything in New York, but he never changed where he was located.”

“From our company’s humble beginnings in the basement of my home, Mediacom has grown into one of Orange County’s biggest employers with nearly 400 local employees,” Commisso said. “We have proven that you don’t need to commute all the way to New York City to find a high-quality job in an exciting and growing industry.”

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