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MSO Voice Drives Basic Cable Demand

Multichannel News reports that Cablevision Systems' blowout fourth-quarter results last week highlighted a fundamental change in the health of cable system operators in recent months: the number of households that subscribe to basic-cable service is growing once again.

The N.Y.-based cable provider reported the addition of 17,930 basic subscribers in the fourth quarter, ending the year with nearly 64,000 additional basic customers � its largest annual basic-subscriber growth in eight years. It was Cablevision's seventh consecutive quarter of basic-subscriber growth.

Cablevision is not alone. Time Warner Cable, the nation's second-largest cable operator, finished 2005 with 73,000 more basic subscribers than it started the year with. But the growth is not being driven by some previously untapped demand for television programming. Instead, the driver is telephone service.

"The boost that providing voice services has given to basic-subscriber growth has just gotten clearer and clearer over the past 12 months," said Sanford Bernstein & Co. cable and satellite analyst Craig Moffett.

Moffett said the turning point in basic subscribers appears to have started at the end of the second quarter. And he gives the credit to low-cost voice service, which has had a "halo effect" on cable operators, he said.

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