US cable: still working - FT.com The US cable industry is very big and very profitable. The four large publicly traded cable companies - Comcast, Time Warner Cable, Cablevision, and Charter Communications - have an aggregate enterprise value of nearly $200bn. They face limited competition, have high and stable margins, and spew out cash. Yet they are accused of being "dumb pipes" - mere distributors with little power over suppliers or customers. The description fits if you consider only video distribution, which represents about half of the cable operators" revenues. The reasons can be debated (competition from telecom and satellite companies? Cord-cutting? Low household formation?), but video subscriber growth is in unmistakable decline. And pricing power seems to be slipping: growth in revenue per video customer at the big four has slowed recently. And even as video revenue has flat-lined, the cable companies" programming costs have been growing a few points faster than inflation. A nasty squeeze. But these are not video companies, of course. They are video/data/voice companies. Their chief advantage is that one set of competitors (telcos) only offers video in select markets, and another (satellite companies) cannot offer data or voice. And combined revenue from all services is still growing in the mid-single digits at the big four, though the pace of growth did slacken a bit in the first quarter. The important driver is data, which now accounts for about a fourth of the companies" revenues. As long as data subscribers keep growing at 6 or 7 per cent (as they have been during the last year), and a bit of extra revenue can be wrung out of business services and advertising, the cable model will keep working. Data subscriptions will eventually hit saturation, too - the big four have 36m data subscribers, up 4m in only 2 years, as compared to 42m video subs. That will leave price increases as the last, and hardest, route to revenue growth. But until that day comes, these pipes are plenty smart enough.