NCTA Cable Theft Survey – #13476 CONFIDENTIAL AND PROPRIETARY Copyright 2005 by Frank N. Magid...
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NCTA Cable Theft Survey – #13476 CONFIDENTIAL AND PROPRIETARY Copyright 2005 by Frank N. Magid Associates, Inc. Any duplication, reproduction, or usage of this document or any portion thereof without the written consent of the firm is prohibited. RESEARCH • COUNSEL RESEARCH • COUNSEL January 2005 National Cable & Telecommunications Association: 2004 Survey of Cable Theft
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Transcript of NCTA Cable Theft Survey – #13476 CONFIDENTIAL AND PROPRIETARY Copyright 2005 by Frank N. Magid...
NCTA Cable Theft Survey – #13476CONFIDENTIAL AND PROPRIETARY
Copyright 2005 by Frank N. Magid Associates, Inc. Any duplication, reproduction, or usageof this document or any portion thereof without the written consent of the firm is prohibited.R
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January 2005
National Cable & Telecommunications Association:
2004 Survey of Cable Theft
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Contents
• Executive Summary 2
• Methodology & Sample 8
• Perceptions of Cable Theft 19
• Audits and Theft Departments 23
• Revenue Lost to Cable Theft 32
• Efforts to Curb Cable Theft 38
• Cable Theft Wrap Up 41
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Executive Summary
NCTA’s Office of Cable Signal Theft commissioned Frank N. Magid Associates to conduct a survey on the economic impact of cable signal theft to cable operators nationwide. Magid developed an online survey which was distributed to cable operators across the country resulting in 299 total respondents.*
NCTA’s previous cable theft survey was conducted in 2000 and measured losses from analog services only. NCTA’s 2004 study was designed to be more expansive and measure theft of service in the following categories: analog basic, premium and pay-per-view service; digital basic, premium and Video on Demand (VOD); cable modem high speed and telephony services.
* To calculate estimates of actual theft, only corporate responses were used to determine the rates. Services (Digital, HSD with video, Digital Phone, and VOIP) with theft rates of less than 1% were not included in the analysis.
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Executive Summary (cont’d)
Cable Theft Overall: Theft Rates Are Down• The NCTA theft of service survey completed in
2000 showed an overall average cable theft rate for analog services of 11.5% of homes passed
— This corresponded to a revenue loss of $6.5 billion per year, or 17% of the industry’s gross revenue in 2000
• The 2004 study determined the overall average theft rate has dropped, indicating the theft rate for expanded analog services now stands at 4.65%
• In addition, the theft rate for premium services decreased dramatically from 9.5% in 2000 to 2.15% in 2004
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Executive Summary (cont’d)
Cable Theft Overall: Theft Rates Are Down• New technologies, including digital, also have
low theft rates (less than 1%), indicating that advanced technologies are more difficult to steal
• While overall percentages of theft rate estimates have decreased, the number of homes passed have increased
— Homes passed increased by 10 million between 2000 and 2004 and the cost of retail services increased by approximately 39% during the same period
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Executive Summary (cont’d)
Revenue Loss: Still A Significant Problem• Unrealized revenue from theft of service
totals approximately $4.76 billion/year
— Operator estimates of revenue lost from cable video theft is $4,007,232,000/year
— In addition, operator estimates of revenue lost from Internet and telephony is $751,012,000/year
— This $4.76 billion represents about 9% of the $51.3 billion industry gross revenue in 2004
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Audits vs. Approximation
• At present, 41% of respondents say that their companies base estimates of cable theft on approximation
• 44% base their estimates on audits
• Comparisons of audit vs. approximation shows similar cable theft rates
— Estimates of video theft by audit tend to be slightly higher than estimates based on approximation
— There is no difference between audit and approximation estimates for Internet and Telephony
Executive Summary (cont’d)
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Executive Summary (cont’d)
How Are Systems Addressing Cable Theft?
• Today, most companies use several methods to combat cable theft including:
— Standardized system-wide tap audit programs
— Technical measures and improved operating procedures
— Employee training and incentive programs
• New research on consumer attitudes toward theft will help the industry continue to develop effective campaigns designed to educate consumers and convert unauthorized viewers into paying customers
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Methodology and Sample
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Methodology
• This presentation summarizes key findings of the NCTA Cable Theft online survey conducted by Frank N. Magid Associates
• The final sample consisted of 299 respondents – 31% Corporate, 10% Regional, and 59% Local. Regional and Local respondents are collapsed into one category throughout the survey
• The online questionnaire was in field from November 3rd-17th, 2004
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Methodology: Specifics• The goal of this study was to estimate overall revenue losses due to cable
theft in the United States
• Research Analysts from Frank N. Magid Associates drafted an initial questionnaire which was reviewed by NCTA’s COST committee
— Because of concerns from member companies about anonymity and divulging internal or proprietary data, some survey questions were revised to ask for more general rather than specific information (e.g., in what state respondents were located rather than ZIP code)
• NCTA and NCTC provided lists of potential survey respondents and links to the survey were sent to each respondent
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Methodology: Specifics• Ultimately, the survey had a fairly good response rate, including a 27% response
rate from NCTA members
• Data were collected from 299 respondents, including 93 corporate respondents, 31 regional respondents, and 175 local respondents
— For the purposes of analyses, regional and local were deemed similar categories and were, at times, collapsed into one category
— Respondents represent operators across the U.S. which corresponds to over 105 Million homes passed
• Data from all respondents were included when answering questions such as perceptions of cable theft in order to provide a robust picture of how people in the field feel about cable theft
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Methodology: Specifics• To calculate estimates of actual theft, only corporate responses were used for
two reasons:
— 1. Only corporate respondents were asked to estimate theft rates by specific services (e.g., basic analog, expanded analog, and digital with premiums)
• Local and regional respondents were not asked about specific services because companies agreed most respondents would either not have that information and/or would be directed not to provide not
— 2. The information that corporate respondents provide should incorporate theft rates and knowledge from their local/regional constituents
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Methodology: Specifics• To calculate overall theft rates for services, theft rates were weighted to reflect the size
of the population each company serves
• Most respondents indicated that they use homes passed as the basis for their estimations of theft, so homes passed was used as the basis for theft rate calculations in this study
— For those respondents who indicated that they use percentage of non-subscribers, theft rate estimates were converted to homes passed
• Theft rates for each service were then determined by dividing the total number of estimated thieves by the total number of homes passed for each service offered
— Respondents who indicated that their companies did not offer a particular service and/or estimate theft for it were not included in that specific theft rate estimate
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Methodology: The Formula
• After estimating theft rates for each specific service we calculated overall revenue lost to theft
— We multiplied each theft rate by the average cost per service to get the monthly theft rate
• Cost per service was determined by taking the midpoint for each service
— We multiplied the monthly theft rate by the total estimated number of cable homes passed in the United States to get loss per month
— We multiplied loss per month by 12 (months in a year) to get loss per year
— We added loss per year for each service to get the total loss per year
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Methodology: Sample
• Ultimately, data collected in this survey represented a majority of homes passed in the United States
— Corporate data included over 80 companies and over 105 million homes passed
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Survey Respondents
Corporate31%
Regional10%
Local59%
Corporate31%
Regional/Local69%
• A total of 299 respondents completed the NCTA survey
• 93 Corporate Employees (31%)
• 31 Regional Employees (10%)
• 175 Local Employees (59%)
• Regional and Local respondents were combined for the analysis
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Sample By Census Region
Northeast = 11%
Midwest = 45%
South = 26%
West = 18%
BASE: Total Sample (N=299)
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Most Respondents Address Cable Theft
At the Executive Level
Part of a department where
one function is addressing cable
theft
Cable theft audits
Executive level decision-making related to theft
Part of a department whose
only function is cable theft
Other
Q.C: Which of these describes your level of involvement with cable theft issues at your company? (Check all that apply)
BASE: Total Sample (N=299)
%
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Perceptions of Cable Theft
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Systems and Operators are Concerned about Cable Theft But are Unlikely to Participate in Anti-Theft Campaigns• Almost three-fifths (57%) of respondents feel
that cable theft is a very serious problem or a serious problem for their companies
— 17% feel that cable theft is not a serious problem for their companies
Q.35: In your opinion, how much of a problem is cable theft for your company?Q39: How likely would you be to fund and participate in an anti-theft marketing campaign?BASE: Total respondents (N=299)
• Only 17% of respondents report that they are likely to fund and participate in anti-theft marketing campaigns.
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Operators are Not Quite as Concerned About Satellite Theft
• Only about one-third (32%) of respondents are concerned about satellite theft’s affect on cable revenue
— Almost one-half (44%) are unconcerned about satellite theft
Q.36: How concerned are you about satellite service theft and its effect on cable revenue?BASE: Total respondents (N=299)
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What Contributes to Cable Theft?
Individuals steal cable service because they can
Cable installers can be easily bribed
Theft devices are readily available
Cable companies don’t adequately check for stolen cable services
Satellite theft is rampant
Q.37: In your view, how much does each of the following contribute to cable theft?BASE: Total respondents (N=299)
Cable subscription is too expensive
Respondents believe that individuals who steal “because they can” are the biggest contributing factor to cable theft
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• 24©
Audits and Theft Departments
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Most Operators Do Not Have Theft of Service Departments
Q.E: Do you have a theft of service or loss-prevention department?
BASE: Total Sample (N=299)
Local (N=175)
Regional (N=31)
Corporate (N=93)
Total (N=299)
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Operators Have an Average of 5 Employees in Theft of Service
Departments
Q.F: How many people are employed in the theft of service or loss-prevention department?
BASE: Those with Theft of Service Departments (N=72)
Local (N=47)
Regional (N=13)
Corporate (N=12)
Total (N=72)
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Operators Still Conduct Theft Audits, Even Without Cable Theft
Departments
Conducted audit in 2002
Conducted audit in 2003
Conducted audit in 2004
Did not audit in past 3 years
Q.5: Did you or anyone else in your organization conduct any theft of service audits in the following years? BASE: Total Sample (N=299)
Regional/Local
Corporate
Over one-half conducted audits in 2004
%
%
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Audited Homes PassedIn the Past 12 Months
Q.6: Approximately what percentage of the system (total homes passed) was audited in the past 12 months? BASE: Those who conducted theft of service audits (N=200)
%
%%
%
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Audits That Last Less Than 1 Year or That Are Ongoing Are the Most
Common Types of Audits
Q.6: Approximately what percentage of the system (total homes passed) was audited in the past 12 months? BASE: Those who conducted theft of service audits (N=200)
%
%
%
% %
%
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How Much Do Audits Cost?
• Most Corporate respondents report spending less than $1 million on auditing activities in the past 12 months
• About one-half (49%) of Regional/Local operators spent less than $5,000 on auditing activities
— Another 13% of Regional/Local operators spent $5,001 to $25,000 on auditing
• Most (72%) estimate that it costs less than $10 per home to conduct an audit
— 41% estimate that it costs $1-$5
Q.8: Approximately how much money was allocated to auditing activities in the past 12 months?BASE: Those who conducted theft of service audits (N=200)
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Most Believe Something Should Be Done About Cable Service Theft and
Consider Audits a Priority
I consider it a priority to conduct theft of service audits to increase RGUs
Little can be done about cable service theft
Cable service theft is primarily the operator’s
fault
My company considers it a priority
to conduct theft of service audits
I cannot justify the expense of conducting
audits
Q.9: Please indicate how much you agree or disagree with the following . . .BASE: Total respondents (N=299)
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• 32©
Audit and Approximation are Similarly Utilized Methods to
Estimate Theft
Q.14.3: What method(s) did you use to arrive at your estimates of cable video theft?Q.18.1: What method(s) did you use to arrive at these estimates of cable theft?BASE: Total respondents (N=299)
Cable Theft
Internet and Telephony Theft
%
%
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• 33©
Revenue Lost to Cable Theft
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Cable Theft Rates
• Operators report the following average theft rates*:
— Analog video basic service only: 4.97%
— Expanded analog basic video service: 4.65%
— Analog basic or expanded with premiums: 2.15%
• Based on these estimates, the total unrealized revenue from video theft is
$4 billion/year
* Digital services had theft estimates of less than 1% and were not included in the analysis
BASE: Respondents who offer specific services and gave estimates of theft for each service
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Internet and Telephony Theft Rates
• Operators report the following average theft rates*:
— HSD Only: 1.67%
• Based on this estimate, the total unrealized revenue from Internet and telephony theft is
$751 million /year
* HSD with Video, Digital Phone, and VOIP services had theft estimates of less than
1% and were not included in the analysis
BASE: Respondents who offer specific services and gave estimates of theft for each service
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The Formula
• How did we come up with these numbers?
— We multiplied each theft rate by the average monthly cost per service to get the monthly theft rate
— We multiplied the monthly theft rate by the total estimated number of cable homes (or HSD homes) passed in the United States to get loss per month
— We multiplied loss per month by 12 (months in a year) to get loss per year
— We added loss per year for each service to get the total loss per year
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Revenue Loss: Total Theft
Service/ Rate
Estimate
Estimated
Theft Rate
Number of
Homes Passed
Months Lost Revenue
Analog Only
$10.00 X 4.97% X 108,000,000 X 12 = $644,112,000
Expanded Analog
$35.00 X 4.65% X 108,000,000 X 12 = $2,109,240,000
Analog w/
Premiums
$45.00
X 2.15% X 108,000,000 X 12 = $1,253,880,000
HSD Only
$37.50 X 1.67% X 99,935,000 X 12 = $751,012,000*
$4,758,244,000
BASE: Respondents who offer specific services and gave estimates of theft for each service
NOTE: Services with theft rates of less than 1% were not included in the analysis
* Rounded to the nearest thousand
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Theft Rates by Cable High Speed “Onlys”
• Former video customers steal service more than those without prior video service
— The average estimated theft rate for cable high-speed “onlys” who were former video customers is 2.57%
— For “onlys” with no prior video service, the average theft rate is estimated to be .29%
BASE: Corporate respondents who distinguished between former video customers and cable Internet customers (N=29)
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• 39©
Efforts to Curb Cable Theft
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The Most Utilized Measures to Curb Theft are Technical Measures and Employee Training and Incentives
Q.31: What methods, if any, has your company used to curb theft of service?BASE: Total respondents (N=299)
%
%
%
%
%
%
%
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• 41©
Prosecution Yields Lukewarm Results
• Almost three-fifths (59%) of respondents prosecute for theft of service in their systems. In the last 18 months, averages per system include:
— 22 cases against consumers
— prosecutions of 3 distributors of illegal boxes
— 7 illegal devices seized
— 14 illegal descramblers turned in
• 43% of systems were awarded restitution
— An average of $63,800 was awarded per system
BASE: Those who prosecute (N=176)
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• 42©
Cable Theft Wrap Up
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• 43©
The Good News
• The Good News:
— According to this survey, cable theft rates have decreased since 2000 from an overall rate of 11.5% to 9.62% for analog service and to even less for other services
— Several factors contribute to the decline in cable theft rates, including systematic tap audits, conversion programs, prosecution, advanced technologies, and more accurate estimates of theft
• Indeed, the more advanced the technology, the lower the theft rate
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The Bad News
• The Bad News:
— The cable industry still loses $4.76 billion per year due to theft of services
• Millions of people continue to enjoy analog cable without paying for it, leading to over $4 billion in unrealized revenue from cable video service alone
• Revenue loss from Internet and Telephony sits at about $751 million
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• 45©
If Theft Rates are Down, Why Are Cable Operators Still Losing So Much
Money?• There are now 10 Million more homes passed than there were for the 2000 study
• While theft rates have decreased, retail cost of services have increased since the 2000 study
• So, although overall percentages of theft rate estimates have decreased, the cost of retail services and the number of homes passed have increased
• In addition, the 2000 study did not include Internet and Telephony loss estimates, which comprises another $751 million in losses
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• 46©
So What Can Be Done?
• At present, new technologies help curb cable theft
— Estimated theft rates for products that require new technologies are much lower
• Continue cable theft prosecution
• Continue to audit homes-passed on a consistent basis
• More operators may want to consider participating in aggressive anti-theft marketing campaigns
— Systems would benefit from loss prevention and marketing departments working together to develop innovative on-going programs designed to turn thieves into customers
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