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Executives

Bret Richter

James L. Dolan - Chief Executive Officer, President, Director, Chairman of Executive Committee and Chairman of Madison Square Garden

Gregg G. Seibert - Vice Chairman and Chief Financial Officer

Tad Smith - President of Local Media Group

Kristin Aigner Dolan - President of Optimum Services and Director

Wilton J. Hildenbrand - Senior Advisor of Customer Care, Technology and Networks

Analysts

Philip Cusick - JP Morgan Chase & Co, Research Division

Jessica Reif Cohen - BofA Merrill Lynch, Research Division

Marci Ryvicker - Wells Fargo Securities, LLC, Research Division

Douglas D. Mitchelson - Deutsche Bank AG, Research Division

Amy Yong - Macquarie Research

Craig Moffett - MoffettNathanson LLC

Jason B. Bazinet - Citigroup Inc, Research Division

Frank G. Louthan - Raymond James & Associates, Inc., Research Division

Vijay A. Jayant - ISI Group Inc., Research Division

Kannan Venkateshwar - Barclays Capital, Research Division

Bryan D. Kraft - Evercore Partners Inc., Research Division

Sabina Nyckowski - Guggenheim Securities, LLC, Research Division

Cablevision Systems (CVC) Q3 2013 Earnings Call November 8, 2013 10:00 AM ET

Operator

Good morning. My name is Christie, and I will be your conference operator today. At this time, I would like to welcome everyone to the Cablevision Third Quarter 2013 Earnings Call. [Operator Instructions] I will now turn the call over to Bret Richter, Senior Vice President, Financial Strategy and Development. Please go ahead.

Bret Richter

Thank you, Christie. Good morning, and welcome to Cablevision's third quarter 2013 earnings conference call. Joining me this morning are Jim Dolan, President and CEO of Cablevision; Gregg Seibert, Vice Chairman and Chief Financial Officer; and Kristin Dolan, President of Optimum Services.

Following discussion of the company's third quarter 2013 results, we will open the call for questions. If you don't have a copy of today's earnings release, it is available on our website at cablevision.com.

Please take note of the following. Today's discussion may contain statements that constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Investors are cautioned that any such forward-looking statements are not guarantees of future performance or results and involve risks and uncertainties that could cause actual results to differ. Please refer to the company's filings with the Securities and Exchange Commission for a discussion of risks and uncertainties. The company disclaims any obligation to update the forward-looking statements that may be discussed during this call.

Let me point out that on Page 6 of today's earnings release, we provide consolidated operations data and a reconciliation of adjusted operating cash flow, or AOCF, to operating income.

I would now like to introduce Jim Dolan, President and CEO of Cablevision.

James L. Dolan

Thank you, Bret, and good morning. For the third quarter, total company net revenue increased by nearly 2% to $1.57 billion when compared with the prior year period. Our AOCF declined 4% to $441 million. Last year, our third quarter results included a $12 million favorable voice settlement. Excluding that settlement, third quarter 2013 net revenue would have grown by nearly 3% and AOCF would have declined by about 1% versus the 2012 period.

Customers of our 3 principal products declined during the quarter. A number of factors affected those results, including our highly competitive market and the impact of the overall economy. Our customer metrics also reflect third quarter seasonality and the effect of a more disciplined retention practices, including more limited use of repetitive promotional discounts.

Our capital expenditures in the third quarter were $245 million. That's nearly 12% lower than the comparable 2012 period. Free cash flow was $72 million for the quarter. We continue to balance investments in our products and network infrastructure with our overall financial objectives.

In addition, we completed the sale of Optimum West on July 1 and received $673 million of net cash proceeds. On November 6, the board declared a $0.15 per share quarterly dividend, which is payable on December 13.

Now turning to operations. In the third quarter, we completed several product and service initiatives. From our enhanced Multi-Room DVR to faster Optimum Online speeds, we are improving the overall Optimum experience for our customers. We believe these changes will ultimately enhance our competitive position. To that end, we will continue to invest in our product and service initiatives. Our investments in WiFi have already yielded positive results. We have now deployed more than 100,000 WiFi access points, which have served more than 1 million unique Optimum Online customers. And since the third quarter of 2012, total WiFi user sessions have more than doubled.

We are also focused on providing a superior in-home WiFi experience. We are now offering a smart router to all new Optimum Online customers. We have found that a poor in-home WiFi network results in customer frustration. By replacing customers' WiFi router with our smart router, we can deliver a more consistent Optimum Online experience.

We believe that this type of investment will help Optimum Online to retain its position as the leading high-speed data product in our marketplace.

But our efforts to improve the Optimum Online experience are not limited to our products. As I highlighted earlier this year, we've been very focused on reducing trouble calls and unnecessary truck rolls. This starts with reducing the issues that cause our customers' frustrations. We are very pleased with our progress to date. For example, year-over-year, in the third quarter, our total call volume was down more than 8%. Our truck rolls following trouble calls were down about 28%, and repeat trouble calls were down 40%. This progress follows our efforts to improve the reliability and performance of our products and our network. We expect that these investments will result in lower operating cost over time while increasing customer satisfaction.

We have made measurable progress in becoming a more efficient organization, but our work is certainly not done. We will continue to improve the Optimum experience with the right combination of superior products and the highest level of customer service. We will also continue to drive greater efficiency throughout our organization. We believe that these efforts will produce long-term benefits for the company. Importantly, I'm confident that our progress will ultimately be reflected in our customer and financial metrics.

And with that, I'd like to turn it over to Gregg Seibert.

Gregg G. Seibert

Well, thank you, Jim, and good morning all. We lost approximately 37,000 net video customers, 13,000 net high-speed data customers and 18,000 net voice customers during the third quarter. Customer relationships declined by 29,000 during the quarter, reflecting in part a decline in video-only customers. Average revenue per video subscriber was $164.61 in the third quarter, an increase of $8.38 as compared with the prior year period. The increase was principally related to the price initiatives implemented earlier this year. If we adjust for the impact of the voice termination settlement in the third quarter of last year, RPS increased $9.71. Average revenue per customer was $146.11 in the third quarter.

As compared with the prior year, total cable revenue for the quarter increased by approximately 3% after adjusting for the voice termination settlement. This increase principally reflects the impact of our price initiatives, higher advertising revenue and higher pay-per-view revenues, which were partially offset by fewer customers. Cable advertising revenue increased by approximately 9% year-over-year due in part to higher spending by tourism, consumer electronics and the banking sector. A portion of this growth relates to the progress we're making with our addressable advertising products.

Cable AOCF declined 2.9% in the third quarter as compared with the prior year adjusted amount. This primarily reflects a 9.7% increase in programming costs and a 2.5% increase in all other operating expenses.

The increase in operating expenses includes higher employee-related and other operating costs, offset by a decline in contractor costs, due primarily to reduced truck rolls and a reduction in voice-related fees and taxes. Cable AOCF was flat sequentially.

Cable's third quarter AOCF margin was 31.8%. This result is down from the prior year period margin of 33.7% as adjusted, again, for the voice termination settlement.

Cable capital spending in the third quarter was $209 million, a $38 million decline from the same period in 2012. This decline principally reflects fewer converter and modem purchases, lower Multi-Room DVR investment and fewer vehicle purchases compared with the prior year period. These declines were partially offset by a higher level of investment in our high-speed data network and other network improvements. Total company 2013 capital spending is on track to be lower than the comparable full year 2012 level.

In September, Lightpath announced that its fiber network now connects over 6,000 buildings and has more than doubled in size in just 6 years. Lightpath's third quarter revenue increased 1.7%, and AOCF increased 7.2% over the prior year period. AOCF growth primarily reflects Lightpath's revenue growth and a higher overall gross margin.

Other revenue increased 2%, and the other category's AOCF deficit decreased 9.2%, primarily reflecting lower operating costs as a result of the decision to reduce our annual investment in MSG Varsity.

In addition to our various operating initiatives, we continue to seek other ways to focus our resources on our core business and operate more efficiently. The sales of Optimum West and Clearview Cinemas, the closing of the Newsday Westchester digital platform and the reduction in our annual investment in MSG Varsity are examples of these efforts.

In October, we took additional steps to improve the efficiency of our business, and the costs related to these steps will impact our fourth quarter results. You may recall that our fourth quarter 2012 results were impacted by Superstorm Sandy and other adjustments. Looking forward, we anticipate the total company 2013 fourth quarter AOCF, excluding the costs associated with the efficiencies that I just mentioned, will be roughly flat to slightly above the comparable 2012 AOCF results.

Now turning to the company's financial position. The company's third quarter consolidated cash position was $824 million and net debt was $8.3 billion. We had $1.43 billion undrawn and available under our $1.5 billion revolving credit facility at CSC Holdings as of the end of the quarter. Our third quarter consolidated cash position partially reflects the receipt of the $673 million of net cash proceeds from the sale of our Optimum West business. This amount is net of the repayment of Optimum West debt and the repayment of certain transaction expenses.

During the quarter, we used $317 million of our cash to redeem our outstanding CSC Holdings 8.5% senior notes due in 2014 and 2015. This amount included the payment of accrued interest and the related call and make-whole premiums. In September, we repurchased in the open market approximately $26 million of our Cablevision Systems Corporation outstanding senior notes. In October, we repurchased an additional $37 million of notes. As stated previously, we remain focused on reducing leverage and plan to continue utilizing a portion of our investable resources to strengthen our balance sheet.

In calculating our total company leverage ratio, AOCF is determined using the latest quarter annualized AOCF. As a result, our leverage ratios may continue to be volatile as they are more sensitive to changes in quarterly AOCF than they would be if our leverage was measured based on a trailing 12-month AOCF metric.

At September 30, the company's consolidated net leverage ratio was 4.7x, as compared with 5.2x at the end of the second quarter of 2013. The CSC Holdings Restricted Group bank leverage ratio was 3.2x at the end of the third quarter. We did not repurchase shares of Cablevision stock during the quarter. We have approximately $450 million of remaining stock repurchase authorization, and we will continue to consider repurchases as we work to return the business to overall AOCF growth and seek ways to balance leverage reduction with opportunities to return capital to shareholders.

Operator, we're now prepared to open the call for questions.

Question-and-Answer Session

Operator

[Operator Instructions] And your first question comes from Phil Cusick of JPMorgan.

Philip Cusick - JP Morgan Chase & Co, Research Division

I guess first, one quick question on Lightpath. CapEx up a little bit. Can you talk about the potential for that to be an indicator for faster growth going forward?

Gregg G. Seibert

Yes, we're actually very highly focused, Phil, on the Lightpath business. It's a business that -- as you heard from my comments, revenue growth was 1.7%, and that's something that we'd like to see improve. We're balancing off a transition from an old technology in terms of the TDM business to growth in the Ethernet side. But we are looking to expand the managed services offerings at Lightpath, and we are taking the steps that we believe are necessary to be able to accelerate the company's overall growth rate in the intermediate to longer term.

Philip Cusick - JP Morgan Chase & Co, Research Division

Okay. And then second, on the consumer business, we're seeing video subs sort of accelerating to the downside. Are we -- should we be thinking about this as an impact from the price increase, or is this something else going on?

James L. Dolan

I think we said it -- I said it in my comments. I mean, it's a combination of competition and a little bit of the economy, you could say that -- I don't know if you'd call that price increase. I think it's -- the idea of offering customers repetitive promotional discounts is something that we've decided and implemented in the third quarter to avoid doing. So the customer that's been bouncing from one company to another, right, on promotional discounts, back and forth, has hit a dead end with us. And so that will have to work itself out of the system, probably over -- certainly, during the third quarter, but beyond that, too.

Philip Cusick - JP Morgan Chase & Co, Research Division

Does that include retention as well? People call up after their promo ends, and you have now a sort of hard rule that you won't put them on the next promo?

James L. Dolan

Basically, that's it.

Operator

Your next question comes from Jessica Reif Cohen of Bank of America Merrill Lynch.

Jessica Reif Cohen - BofA Merrill Lynch, Research Division

A couple questions. Gregg, I just need to clarify your comment that Q4 will be flat to above a year ago. So is that pro forma for Bresnan, for the sale, or on a reported basis?

Gregg G. Seibert

Everything is pro forma for Bresnan, Jessica. So just forget Bresnan ever existed in terms of the reported and future financial statements.

Jessica Reif Cohen - BofA Merrill Lynch, Research Division

So what was last year's number then? What's the exact -- I just wanted to make sure that we have the right -- can you...

Gregg G. Seibert

Okay. We're not providing exact guidance. I think what I said actually was roughly flat to slightly above last year's fourth quarter AOCF, and that number is available in the -- in our published financials.

Jessica Reif Cohen - BofA Merrill Lynch, Research Division

Okay. But I mean, it looked -- I'm not sure I have the right number. That's why I was asking, because it looks like it may be sequentially down. If that's right, how much of this is there of onetime investing? But you said that in October, you took steps to improve the business, and just how much of that is onetime investing?

Gregg G. Seibert

Jessica, I think that the number that we're looking at is sequentially down. There are certain reasons for that, including the timing of specific expenses that we're going to incur in the fourth quarter. But as I mentioned, we also took steps in the beginning of the fourth quarter, and we'll continue to take steps, to improve efficiency in the business, which are intended to both improve the quality of the customer experience, and at the same time, to give us some margin benefit.

Jessica Reif Cohen - BofA Merrill Lynch, Research Division

Okay. And the other question I have is, can you describe or can you tell us what the use of Bresnan's -- the cash that you received on the sale of Bresnan, what the use will be?

Gregg G. Seibert

Well, for starters, we actually had 2 significant cash events in the last 2 quarters. One was the VOOM settlement proceeds, and the second was the -- were the funds from Bresnan. We applied a portion of those to the debt repayments that I went through in my prepared comments, which was a little bit over $300 million. We also ended up undertaking an opportunistic repurchase of some of our securities. When the high-yield market came under pressure, we purchased, again, I gave the exact number in my prepared remarks, but $25 million to $27 million, I believe it was, in the third quarter. We've continued some of those repurchases in the fourth quarter, and we are committed at this point in time to continuing to find ways to lengthen our maturities, continuing to find ways to make sure that our balance sheet and our liquidity are both very healthy. We have over $800 million in cash on hand, and over time, I think you'll see us apply certain portions of that to additional debt repayment.

Jessica Reif Cohen - BofA Merrill Lynch, Research Division

Okay. And one last question. Can I just -- I know it's so hard to get numbers out of you guys, but the CapEx outlook, it sounds like CapEx has now peaked, and it looks like it's coming down. Is there anything you can say about CapEx for 2014?

Gregg G. Seibert

We're finalizing our 2014 budget. And at this point in time, it's very difficult for us to have comments on where we see CapEx in '14. We stand by our statement. We anticipate that 2013 CapEx will be below 2012. And as I think you can hear from the commentary that Jim's made and that we're making in general, we're being smart, in our opinion, in terms of how we're applying the capital dollars, but we're very focused on making sure that we provide the best possible experience for our customers.

Operator

Your next question comes from Marci Ryvicker of Wells Fargo.

Marci Ryvicker - Wells Fargo Securities, LLC, Research Division

Two questions. The first, can you, Gregg, remind us of your expectation for programming costs for the year? And then the second question is just clarification on the efficiencies you're talking about for Q4. Is this on top of the, I guess, 18 initiatives you've been going through, or is this something incremental to that? Just any color you can provide.

Gregg G. Seibert

In terms of programming costs, we previously said that they were expected to increase at a similar rate as last year, which was basically 12%. When you take a look at our experience through September, our programming costs have increased by approximately 10%. We don't expect any really significant change in this. It's a little bit lower than the 12% last year, reflecting the decline in video subscribers over the past year. And the programming cost per subscriber did increase by just over 12%. So the weakness we're seeing on the subscriber side is having a beneficial impact on the programming side. And the second question, Marci?

James L. Dolan

I think the answer is that it's primarily inclusive of those initiatives.

Marci Ryvicker - Wells Fargo Securities, LLC, Research Division

Yes, it was just a clarification on the efficiencies you're spending on for Q4.

Gregg G. Seibert

They're not actually expenditures. Let's be clear here. What we're doing is in addition to the expenditures that we have, we are going to have efficiencies because we've made certain realignments at the corporate level and also out in the field. So you'll see some expenses associated with that.

James L. Dolan

But you'll see efficiencies, too.

Gregg G. Seibert

And the efficiencies -- a lot of the costs will basically be onetime, and the efficiencies will be ongoing.

James L. Dolan

Ongoing, right.

Operator

Your next question comes from Doug Mitchelson of Deutsche Bank.

Douglas D. Mitchelson - Deutsche Bank AG, Research Division

Curious on advertising. It was a good number in the quarter. And does political, because of the elections this year versus the elections last year, have any influence? Any comment about the core trend of the business would be helpful there. That's the first one.

James L. Dolan

We're going to turn that over to Mr. Tad Smith.

Tad Smith

Yes. Political was sharply lower this quarter versus -- excuse me, third quarter versus prior year third quarter. And the core was up sharply in the result you see.

Douglas D. Mitchelson - Deutsche Bank AG, Research Division

Any chance you can give us a sense of what the political drag was?

Tad Smith

24% down.

Douglas D. Mitchelson - Deutsche Bank AG, Research Division

24% down?

Tad Smith

Yes.

Douglas D. Mitchelson - Deutsche Bank AG, Research Division

And then as we move into 4Q, is there a similar drag? So you're up year-over-year, right, in advertising revenue?

Tad Smith

The fourth quarter last year was a robust political year. We will certainly have to overcome that in this calendar year with core stuff.

Douglas D. Mitchelson - Deutsche Bank AG, Research Division

And then separately, just, I was curious if you had any update on your thoughts around some of the cloud-based guide technology that everyone's considering. Is there anything sort of new on that front?

Gregg G. Seibert

Kristin? What are they like?

James L. Dolan

Do you think you're familiar with what we've done so far?

Kristin Aigner Dolan

I mean, our current guide is cloud-based, and Wilt can speak, I guess, to other things. We're doing, we've always been cloud-focused, probably prior to a lot of other people, so....

Wilton J. Hildenbrand

Yes, I mean, we have the Multi-Room or RS-DVR, that's certainly cloud-based. The guide itself is cloud-based, although the set-top boxes currently take advantage of having some of the closer in-guide data resident. The iPad, iPhone devices are all, by definition, cloud-based, because there's no storage on them, and we'll continue in that direction, because it makes an awful lot of sense. It improves the performance of the system, and it allows us to be a lot more accurate in terms of the data as well.

Douglas D. Mitchelson - Deutsche Bank AG, Research Division

Well, I guess I should have asked it this way. So I know that you implemented a new guide relatively recently. When should we all expect an update? Is there a sort of major update planned anytime soon?

Wilton J. Hildenbrand

We've been going through updates pretty sequentially. We actually had one that started last week. So it continues to go.

Operator

Your next question comes from Amy Yong of Macquarie.

Amy Yong - Macquarie Research

In your earlier comments, you talked about continuing to invest. I'm just wondering what kind of products and services you're actually talking about and whether or not home security is part of the plan. And how do we think about ARPU going forward?

James L. Dolan

Okay, let's see. That was like 3 questions in one. So the first one was new products and services. Okay. So we're not -- we don't see any revolutionary new products or services on the horizon at the moment. There's no fourth play for the Triple Play that we think is coming out or one that's going to significantly impact our customer base. And then when you take a look at home security, it's a business that we don't think is going to be a robust business. I don't expect to see large percentages of subscriber bases migrating to that product. I know there are other cable companies that are starting to offer that. What we're focused on is service and connectivity. And many of those services, like home security, will work a lot better when we do that well. And again, we're focused on getting efficient. So efficient, more effective, better product, better connectivity, with the data usage that we see out of our customer base, and the continuing increase in that, we think that, that's the best way to serve and keep our customers.

Gregg G. Seibert

And Amy, on the ARPU side, on a long-term basis, we clearly recognize the need to be growing ARPU. We have some strong drivers in that regard in terms of the advertising business. We also have the ability over time to adjust the pricing and rates. And I think the reality is also as some of these efforts on the promotional side to make sure that we have the right customers in the mix and that some of the spinners and other customers that go back from provider to provider are weeded out, we anticipate we will grow ARPU.

Operator

Your next question comes from Craig Moffett of MoffettNathanson.

Craig Moffett - MoffettNathanson LLC

Jim, you mentioned that you cut back on the repetitive promotional discounts. Can you quantify how much the positive mix shift, I guess, from the elimination of those discounts contributed to ARPU growth and how much, particularly the broadband side, is pricing? My real question I'm trying to get at is, what's the sustainable limit, I suppose, for broadband pricing going forward? It looks like it's -- you've risen by about 8% or so year-over-year. That's not sustainable. What is?

James L. Dolan

Why don't you think it's sustainable?

Craig Moffett - MoffettNathanson LLC

Well, I would suspect 8% compound annual growth rate is going to get you to levels where either you have regulatory or affordability problems in your customer base, I would think.

James L. Dolan

Okay. Well, look, if you just try to increase your gross revenue in that fashion, I think I would probably agree with you. However, I also think at the same time that you need to look at the customer base and the marketplace and look at the usage of data inside of the marketplace. And what you will see is that the customer base, particularly the younger customer base, is using much, much more data and actually using a lot less video. And so do I think -- I think that there's room, there will be room in the future for higher-speed products, products that service the customer better, that take care of all the devices in their homes and things like that and provide really great service and great connectivity. And I think that has a lot of value to it, especially when contrasted with an environment where you don't have that stuff, as I'm sure almost everyone on this call had issues at some time or another with their connectivity or their connectivity provider. So what is the value of that? Well, I think we're going to explore that, and I don't know that it's going to be some straight-line rate increases, but I do see and think that, that product is becoming more and more robust and has elasticity in its pricing.

Operator

Your next question comes from Jason Bazinet of Citi.

Jason B. Bazinet - Citigroup Inc, Research Division

I guess it's for Mr. Seibert or Mr. Dolan, either one. I just want to go back to Lightpath. In terms of the deceleration of revenues there, is the right sort of narrative to put behind that, that you're seeing sort of increased penetration rates, but a spin-down from your customers from TDM to Ethernet, which is hurting ARPUs, and then ultimately, you'll cycle through that? Is that the right way to interpret that, or is there something else?

Gregg G. Seibert

Well, we certainly expect that as the TDM migration continues to occur -- this is not a new phenomenon. This has not happened in the last year or 2, it's been -- it's basically been happening for a number of years, and we're getting to the relative end of that type of plan. We'll still -- that revenue will still cycle off over a period of years, but it's going to be much less impactful. But our need on Lightpath is very simple. We need to find ways to provide more and better products as part of the Lightpath package to our customer base and take some of the commodity aspects out of that business. I think we have a plan to do so.

Jason B. Bazinet - Citigroup Inc, Research Division

So then if you went back and sort of compared the 9% to 10% growth in '11 to what you're seeing now, it's just sort of lower penetration rates, that's sort of the simple narrative, and you're sort of going to figure out how to...

Gregg G. Seibert

Well, again, the trade-off from TDM to Ethernet for us has been very costly. And as you look at other companies in that universe, I think you have less of a TDM legacy business to have erode. So I'm not going to comment on the specific penetrations, but we're happy with the plan we have for Lightpath going forward.

Operator

Your next question comes from Frank Louthan of Raymond James.

Frank G. Louthan - Raymond James & Associates, Inc., Research Division

Just a couple of comments. Can you comment on your Optimum platform? Have you thought about being able to license that platform with your cloud-based capabilities, maybe some smaller cablecos, as a way to generate some revenue. And then as far as uses of cash, any thoughts on returning to your share repurchase program?

Gregg G. Seibert

Well, I can comment on the share repurchase program, which is that, at this point in time, the way that we're approaching our capital usage is, first and foremost, it's investment, investment in our business. Secondly, we're paying our regular quarterly dividend. We have that return of capital built into the equation. We're focused on leverage reduction and debt repayment, but share repurchase is something that we continue to look at opportunistically. But it's going to come after -- in terms of the hierarchy, as we look at things, it comes behind those other 3 factors. And at this point in time, we have not repurchased shares for several quarters, and I wouldn't anticipate an immediate return to a large-scale program.

James L. Dolan

As far as your other question goes, much of the content that we carry is licensed geographically, so that in itself would be somewhat limiting. And maybe more importantly, we're focused on what we said we were focused on, which was great service, great connectivity, et cetera. And before the company ventures out into other areas, I think we have a threshold we want to cross with that, which we have not done as of yet.

Operator

Your next question comes from Vijay Jayant of ISI Group.

Vijay A. Jayant - ISI Group Inc., Research Division

I just wanted to get sort of an update. Since Sandy, FiOS was rebuilding a lot more fiber. Any color on how much of your footprint now has fiber since then? Has there been a real change? And then just since the end of the quarter, has the competitive landscape really changed at all? Anybody getting more aggressive competitively? And generally, the consumer value proposition, are they pretty much consistent so far from 3Q?

Kristin Aigner Dolan

We don't really comment on FiOS's build. I think asking them, and let us know what you find out. As far as the competitive landscape, Verizon has increased their prices slightly. We're in market at an $84.95 Triple Play price point. That includes our managed router for new customers and promotional and our higher-speed broadband tier. And then AT&T has been pretty consistent on what they're doing in their pricing. So nobody's going down, and in fact, we're seeing people start to go up.

Operator

Your next question comes from Kannan Venkateshwar of Barclays.

Kannan Venkateshwar - Barclays Capital, Research Division

Just a couple of questions. The first is on the CapEx front. Over the last few quarters, there seems to be some kind of a trend away from CPE towards cable infrastructure. I just wanted to understand what exactly is behind that. And also, the second question, Jim, I think you've been in the press talking about how video is going to be, from your perspective, a lower part of the business going forward. So I mean, today, you're in a position wherein you're investing capital just to retain customers rather than looking at growth. So longer term, in your view, what's the end state for the business the way it sits today? And how do you see this evolving?

Gregg G. Seibert

I can take the CapEx question first, which is the difference between 2012 and 2013 in terms of the reduction in CPE, and we went down very substantially from over $100 million in CPE in the third quarter of '12 to less than $50 million in the third quarter of '13. It really reflects the final steps in our digitization process, so we had more boxes last year, more converters as a result of digitization. And so the CPE has gone down quite a bit, fewer converters, fewer modems. We were also purchasing DOCSIS 3.0 modems in 2012 and fewer remotes. So that's the real drop in CPE. On the scalable infrastructure side, where year-over-year, we're up from $80 million to around $110 million, that very much reflects higher spending for performance improvements, particularly for OOL, partially offset by lower spending on WiFi and RS-DVR.

James L. Dolan

Wow, and you would like me to prognosticate on the future of the business. Well, I'll give you -- the crystal ball is pretty murky. But the one thing that we do see -- continue to see is a rise in the usage of data and that data becoming more and more important in our customers' lives. And of course, along with that, connectivity is key to that. And as customers rely more and more on data for all kinds of things in their lives, there are going to be more demands on the network. There's also going to be more opportunities. I can't tell you necessarily what those opportunities are all going to be, but I will tell you that the one belief we have is that having a robust, solid network with a great infrastructure behind it, right, that's ready to handle those products and services, will give you an edge. And that's something that we're looking forward to. And that's about as clear as I can get in that crystal ball at the moment.

Kannan Venkateshwar - Barclays Capital, Research Division

And does M&A play into the picture at all?

James L. Dolan

Well, no, I don't think I can comment on that.

Gregg G. Seibert

I think as far as our efforts in the business, it's been a focus on the core cable business. So obviously, we divested Bresnan, we divested Clearview, and I don't see us making any significant acquisitions within Cablevision.

Operator

Your next question comes from Bryan Kraft of Evercore.

Bryan D. Kraft - Evercore Partners Inc., Research Division

I had a couple of questions around ARPU and revenue. Did you see -- I wanted to see if you could quantify the lift in the quarter from the Mayweather fight in pay-per-view. Also, is there going to be any more incremental flow-through of the price increases into Q4? And is there any way you could quantify how much of the subscriber weakness in the quarter you think was temporary in nature related to the price increases?

Gregg G. Seibert

Well, I think Jim has already commented on the price increase aspect. We don't really feel that other price increases have affected the video subscriber base dramatically. It's been other factors that we've already talked about. The Mayweather fight was a big event. Roughly, that was roughly $3 million in the quarter, just to put a specific number. That was obvious -- I'm sorry, $3 million increase year-over-year on the pay-per-view side of the equation, and Mayweather was a substantial portion of that. And the other significant pieces of increase in ARPU, again, we had advertising, year-over-year, basically a 12% increase. And as far as flow-through, I believe we have a little bit more flow-through in the fourth quarter, but that's very much it.

Bryan D. Kraft - Evercore Partners Inc., Research Division

Okay. And just to follow up on the advertising side. On political, I know you had said it was down 24% year-over-year. But was it actually helped by the mayoral election in New York and the gubernatorial and Senate elections in New Jersey? So is there kind of a -- was there maybe a cushion to what would have otherwise been a greater decline?

Tad Smith

You mean a greater decline in political advertising?

Bryan D. Kraft - Evercore Partners Inc., Research Division

Yes, yes.

Tad Smith

Yes, of course.

Bryan D. Kraft - Evercore Partners Inc., Research Division

Was that substantial or...

Tad Smith

How would I think about what political advertising would have been absent those elections? I would have to noodle on that. But yes, absolutely, the special election, the mayoral election, all of them reduced what otherwise would have been a larger political decline.

James L. Dolan

True.

Operator

Your final question will come from Sabina Nyckowski of Guggenheim.

Sabina Nyckowski - Guggenheim Securities, LLC, Research Division

Do you have a sense for how much of the video subscriber decline was the result of competition versus cord-cutting? And do you have any new marketing strategies to address a market that may be interested in a broadband-only product?

Kristin Aigner Dolan

We didn't see a significant reduction based on cord-cutting. And as you know, more than 2/3 of our customer are triple-product customers, so we're really still selling all 3 products to people on a very high percentage basis. The thing I would say on broadband-only or on broadband in general, is just the success of our WiFi product, which we didn't really get into on this call. We have 40% of our customers have used Optimum WiFi, and we have about 30,000 new customers per month, so that does drive acceptance and sort of happiness with our broadband product. The other thing I wanted to point out is that of our people that use WiFi, more than 50% of them are using it 50x per month. So we're really cementing the broadband product in place, but we're definitely not seeing a heavy volume of cord cutters as being -- we're not seeing people downgrade their video product and stay with just the broadband. They're both still fairly strong, and broadband continues to get better.

Gregg G. Seibert

Thank you all.

Operator

Thank you. This does conclude today's conference call. You may now disconnect.

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