According to Nielsen’s Cross-Platform Report for the fourth quarter of 2011, U.S. Cable operators lost about 2.9 million video subscribers. Over-the-top (OTT) services, like Netflix and Hulu (News - Alert), were the biggest gainers, with the telephone companies, satellite providers and free over-the-air broadcast television increasing moderately.

While the struggling economy is certainly a factor in this decline, the migration of paid TV subscribers to over-the-top services will continue to be a drag on cable operators as long as the current customer churn imbalance persists. Traditionally new households subscribing to cable were equal to or in excess of subscribers lost due to relocation or retirement. However, since 2008 more and more newer households are turning to the internet instead of opting for $100 per month cable TV subscriptions - it’s the everything is free on the Internet generation. At least everything starts free – but premium services require subscriptions.

Ultimately, the cable companies will find a way to team-up with, if not marginalize, the OTT options by controlling the access to premium content and creating customizable cost competitive entry-level packages; but until then, the number of new cable TV subscribers will continue to lag behind the number of lost subscribers.

So what can be done to slow the decline in the number of new cable TV subscribers? Currently cable companies spend between five percent and 10 percent of their revenue on advertising and promotions; and discounting impacts revenue by a similar percentage. These are both very ordinary and necessary weapons in the battle against declining cable subscribers but are also very costly.

Marketing experts often say that it costs somewhere between five and ten times as much to gain a new customer than it does to maintain an existing customer. Many different things go into the cost of maintaining your existing customers. The number one way to maintain your existing customers (including those that are enjoying cable service illegally) is to secure your plant. By securing the plant, we are referring to the vigilant process of identifying, disconnecting, converting and /or prosecuting unauthorized cable users. Unauthorized cable users can exceed 10 percent of non-subscribers in areas that aren’t subject to tap audits. Expect unauthorized percentages to be as high as five percent to 10 percent in areas that aren’t being audited frequently enough or where the audit process is poorly managed or not optimized.

Yes, getting the most out of your tap audit process is the key to securing the plant and the “Secret Weapon in Winning the War Against Declining Cable Subscribers”. Let’s look at an example.

Assume that XYZ Cable Company has 5,000,000 households in its service area with a 50 percent penetration rate, leaving 2,500,000 households without cable subscriptions.

The audit costs assume an auditor can complete 125 audits per day and is in the field for 200 days per year. The annual cost per individual auditor is $80,000 including wages, benefits and vehicle. The above scenario assumes that the entire plant or service area will be covered on average every 24 months.

As can be seen from the above example, an aggressive audit process can provide additional subscribers at a cost less than $100 per added subscriber —significantly less than the cost to add subscribers through advertising, promotions and discounting.

While digital cable offers greater protection against unauthorized users, it’s not a ubiquitous solution, not available everywhere and illegal set-top boxes are showing up in greater and greater numbers.   The mindset of downplaying the significance of tap audits because “we are going digital eventually” is costing cable companies billions of dollars annually in the short-term. And, at valuations of $4,000-$5,000 per subscriber, are costing cable companies tens of millions of dollars when they elect to exit the business through merger or acquisition.

Tap audit results can be improved significantly with audit software. The leading tap audit software is MSI (News - Alert) Data’s Tap Audit Automation product (Monitor), which currently has over 1,000 licensed users in North America.

The Monitor, which integrates with all major billing systems, allows users to create many types of specialized routes, to track basic, expanded, HSD, telephony and other services, has cellular sync capability from the field, can capture color photos, read barcodes and can be equipped with GPS capability. Customers using the Monitor have experienced productivity improvements of 25 percent or more and have identified a greater percentage of unauthorized users which led to higher conversion rates than paper and spreadsheet based processes. 

The tap audit is the secret weapon in the battle against declining cable subscribers. Clever advertising and aggressive discounting get all the attention but the tap audit process is how companies are winning the war in trenches.

Pete Piotrowski is Vice President of MSI Data, a provider of mobile software that improves the productivity of the cable field workforce. MSI Data’s software suite addresses the cable industry’s tap audit, quality control inspection, field service, sales, collections and MDU management needs.

Want to learn more about the latest in communications and technology? Then be sure to attend ITEXPO West 2012, taking place Oct. 2-5, in Austin, TX. ITEXPO (News - Alert) offers an educational program to help corporate decision makers select the right IP-based voice, video, fax and unified communications solutions to improve their operations. It's also where service providers learn how to profitably roll out the services their subscribers are clamoring for – and where resellers can learn about new growth opportunities. For more information on registering for ITEXPO click here.

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