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Cablevision Systems Corporation (NYSE:CVC)

Q3 2007 Earnings Call

November 8, 2007 10:00 am ET

Executives

Pat Armstrong - IR

Jim Dolan - CEO, President

Tom Rutledge - COO

Josh Sapan - President, CEO Rainbow Media Holdings

John Bickham - President of Cable and Communications

Hank Ratner - Vice Chairman

Mike Huseby - CFO

Analysts

Craig Moffett - Sanford C. Bernstein

James Ratcliffe - Lehman Brothers

Rich Greenfield - Pali Research

Jason Bazinet - Citigroup

Doug Mitchelson - Deutsche Bank

Ingrid Chung - Goldman Sachs

Benjamin Swinburne - Morgan Stanley

Jeff Wlodarczak - Wachovia Capital

Jessica Reif-Cohen - Merrill Lynch

Operator

I would like to welcome everyone to the Cablevision third quarter earnings conference call. (Operator Instructions) I will now turn it over to your host, Pat Armstrong, Senior Vice President of Investor Relations.

Pat Armstrong

Good morning and welcome to Cablevision's third quarter 2007 earnings conference call. Joining us this morning are members of the Cablevision executive team, including Jim Dolan, our President and CEO; Hank Ratner, Vice Chairman; Tom Rutledge, Chief Operating Officer; Mike Huseby, Chief Financial Officer; Josh Sapan, President and CEO of Rainbow Media; and John Bickham, President of Cable and Communications. Following a discussion of the company's third quarter 2007 results, we will open the call for questions.

If you do not have a copy of today's earnings release you may obtain one from our website, Cablevision.com. This call can also be accessed via our website.

We look forward to your questions. I would like to emphasize that our focus today is on Cablevision's operating and financial results for the third quarter of 2007. In that regard, we will not be addressing any questions regarding the recent Dolan Family Group going private offer during this call.

Please take note of the following: this discussion of Cablevision's results and any discussion of the company's 2007 outlook 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 and 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 will now turn the call over to Cablevision's President and CEO, Jim Dolan.

Jim Dolan

Thank you, Pat and good morning. As you all know, as a result of last month's shareholder vote, Cablevision will continue as a public company. We view this outcome as an affirmation of confidence from our shareholders and our company and its prospects going forward. We look forward to continuing to serve our customers and to building on Cablevision success.

Turning now to third quarter results, Cablevision's consolidated revenue grew more than 9% to $1.5 billion as compared with the prior year period. This was driven by strong revenue growth in both our cable operations and at Rainbow Media. All three businesses -- cable, Rainbow and MSG -- helped to increase consolidated AOCF by 16% to $494 million.

Despite a relatively small third quarter loss in basic video subscribers, our digital video, data and voice services continued to gain market share. This ongoing demand helped to maintain Cablevision's industry-leading penetration rates.

Rainbow Media had an impressive third quarter due to substantial increases in both advertising and affiliate revenue. Our programming business achieved a 17% increase in revenue and a strong AOCF growth of 42%, as compared with the prior year period. While MSG's revenue was essentially flat compared to last year's third quarter, AOCF increased substantially to $10 million. This was primarily due to team personnel changes incurred in 2006.

I would now like to turn over the call to our Chief Operating Officer Tom Rutledge, who will discuss the results of our telecommunications segment.

Tom Rutledge

Thank you, Jim and good morning. Overall, our core cable business continued to produce solid results in the third quarter of 2007. The company gained approximately 161,000 RGUs in the quarter, contributing to cable revenue growth of 9.7% and AOCF growth of 8.5% compared to the prior-year period.

Our average monthly revenue per subscriber was $120.91 for the third quarter, slightly less than our second quarter RPS which had the impact of a popular pay-per-view fight included. This quarter's RPS represents an 8.8% increase over the prior-year period.

Consumer demand continues to drive the expansion of our two product and three product offers, along with VOD and DVR. Today, almost half our customer base subscribes to all three of our primary products: video, high-speed data and voice. We've seen consistently higher retention rates with three product customers compared with customers who do not have all three products.

Cable capital spending totaled $186 million for the third quarter. While on a quarterly running rate basis this is an anomaly, we still expect our full-year capital spending to be within the targets we had previously set for the full year.

Consistent with recent quarters, consumer premises equipment represented the largest component of capital expenditures as we continue to support RGU growth and deploy more and more DVRs and HD boxes. Year-to-date, we spent $470 million in capital, a reduction of 26% from last year's comparable period.

Now let me briefly address Telco competitive activity in our footprint in the last quarter. We estimate that Verizon has built out a plan that passes approximately 1.1 million homes as of September 30. Of this total, they have approval to offer video services to about 890,000 of these homes.

Turning to specific results of for video services we ended the third quarter with 3.12 million basic video customers, reflecting a loss of approximately 16,000 customers in the quarter. As a reminder, our third quarter is typically not our strongest growth quarter due to seasonal discount in our beach communities, especially on Long Island and New Jersey. Year-to-date basic subscribers were essentially flat, down by less than 5,000. Our basic penetration at the end of the quarter was 67.2%.

Our digital video service, iO, added 35,000 customers for the quarter. We have now reached almost 83% digital video penetration which enhances our ability to offer more digital products to our customers. For example, this past quarter we launched our tenth language category with the addition of our first French language network. This brings our international network offerings to more than 60 channels.

Our high-definition video subscribers totaled 898,000 at the end of the quarter, an increase of 71% over the past year, reflecting ongoing strong demand for our HD product. We continue to make our HD offering more attractive. In addition to recently adding the 15 VOOM HD channels, CNN and TBS are now offered in HD, all at no extra charge to our customers. Today Cablevision provides 42 HD programming services to our HD customer base, and we expect to add more HD channels in the coming months on our 500 channel capable platform.

Turning to Optimum Online, our high-speed data service, we had a net gain of 52,000 customers in the quarter. Our a penetration of homes passed at the end of September reached 48%. Now our Optimum Online basic video customer base is 71%.

Our Optimum Voice service had a quarterly subscriber gain of 91,000. Optimum Voice is now the phone service of choice in almost one of every three homes passed, and today two out of three Optimum Online customers take Optimum Voice as well. If these trends continue, the majority of our customers will be buying their landline voice from us by the end of this year.

The success of Optimum Voice continues to drive growth all across Cablevision services. Today more than 60% of new sales include the full suite of Optimum video, data and voice services.

On the business front, Optimum Lightpath Ethernet-based business continues to generate impressive growth, adding customers and new buildings at a steady pace. As a result, Ethernet revenue for the third quarter increased 90% compared to last year.

Today we are providing the following updated 2007 outlook for cable television as follows: basic video subscriber growth to be flat; RGU additions of approximately 800,000; revenue growth of approximately 11%; AOCF growth of approximately 9%; capital spending in the range of [inaudible] to $650 million. Once again we expect capital spending to be closer to the lower end of that range.

I would now like to turn the call over to Josh Sapan who will discuss Rainbow's results.

Josh Sapan

Thank you, Tom. For the third quarter revenue at our national programming networks AMC, WE TV and IFC increased 13.8% to $164.4 million and AOCF for the quarter was $77.9 million, an increase of 12.3% as compared to the prior year. This quarterly revenue growth includes a 22% increase in advertising revenue driven by higher CPMs (cost per thousands) and units sold at AMC and WE TV, as well as higher sponsorship revenue at IFC and a 9% increase in affiliate revenue compared to the prior-year period. The increase in AOCF was primarily driven by this higher revenue, partially offset by higher contractual rights expense and marketing costs versus the third quarter of 2006.

Once again, it is expected that full year spending driven primarily by programming and marketing expenses will be equal to or greater than prior years as we continue our strategy of investing in high quality original programming to drive viewership.

AMC enjoyed a successful summer with the first full season of a series called Mad Men, a popular series set in the 1960s. The series gathered impressive critical acclaim, had good ratings, and we have commissioned a second season which is scheduled for next summer. Additionally, third quarter 2007 was WE TV's best quarter ever for primetime audience delivery.

Turning now to Rainbow's other programming businesses, which primarily include News 12, the VOOM HD Networks, Fuse, IFC Entertainment and our VOD services LIFESKOOL and SPORTSKOOL. Third quarter net revenue for those other programming businesses increased 24% to $63 million and the AOCF deficit improved by 21% to a loss of $26 million as compared with the same quarter last year.

The increase in net revenue is primarily driven by higher revenue at the VOOM HD Networks, impacted by growth from the existing affiliate sub base, as well as the addition of Cablevision subscribers. This favorable revenue impact fueled improvement in AOCF, partially offset by increased programming acquisition costs.

I would now like to turn it over to Hank Ratner who will discuss the results of Madison Square Garden.

Hank Ratner

Thanks, Josh. Turning to MSG's operating results, third quarter revenue was essentially flat when compared to the third quarter of 2006. AOCF for the quarter was $10 million, compared to an AOCF loss of $6 million in last year's third quarter. Third quarter results were principally driven by higher MSG Network revenue and AOCF, including a $6.2 million increase in affiliate revenue, which more than offset a $1.3 million reduction in other revenue, primarily ad sales, and a higher operating cost of $2.2 million.

Higher AOCF from the Knicks and Rangers, primarily relating to the provision for certain team personnel transactions taken in 2006 which totaled $33 million. Higher venue operating costs of $3.2 million relating primarily to the addition of the Beacon Theatre.

Turning to our sports teams, both the Knicks and Rangers began their respective seasons with deeper and more talented rosters that energized fan bases and heightened expectations for success. For the 2007/2008 season Knicks subscribers expressed their enthusiasm and excitement for this young team with a 91% renewal rate, the highest number since 2001.

Higher expectations for the Rangers resulted in all remaining 2007/2008 individual game tickets selling out in less than one hour. This was after a 97% season subscriber renewal rate, which is believed to be the fastest season sellout in our team’s history.

This month marks the beginning of our two holiday shows. On November 1 the world renowned Cirque du Soleil debuted the widely anticipated production of Wintuk, which will make the WaMu Theater at Madison Square Garden its home over the next four winters. November 9 marks the start of the 75th celebration of the perennial holiday favorite, the Radio City Christmas Spectacular, featuring an enhanced production with new sets, costumes and the show-stopping Rockettes numbers.

In October, Madison Square Garden added the legendary Chicago Theater to our lineup of world-class venues. While we expect to make a more detailed announcement soon, this addition expands the reach of Madison Square Garden beyond New York and further differentiates our unrivaled collection of assets in the entertainment industry.

I would now like to turn the call over to Mike Huseby who will briefly cover the company's overall financial position.

Mike Huseby

Thank you, Hank. With respect to leverage and liquidity, the company's consolidated cash position at the end of the third quarter was $808 million and net debt was $10.5 billion. At September 30, CSC Holdings $1 billion revolving credit facility was undrawn except for $56 million restricted for outstanding letters of credit. As of September 30, the company's consolidated leverage ratio was 5.1 times. The CSC Holdings restricted group leverage ratio was 4.9 times.

At Rainbow National Services, on August 31 we exercised our 35% clawback rights and redeemed $175 million of the RNS 10 3/8% senior subordinated notes. At September 30, RNS had approximately $1.1 billion of debt and its full $300 million revolving credit facility was undrawn. The ratio under the RNS bond leverage test as of September 30 was 3.5 times.

During the nine months ended September 30, the company generated free cash flow of approximately $74 million compared to a deficit of $10.9 million in the same period a year ago. For the third quarter, free cash flow was a deficit of $20.7 million, principally due to the relatively high level of capital expenditures falling into the third quarter of the year as noted by Tom, and the impact of increased working capital requirements in the quarter.

Total company capital expenditures for the nine months were $554.4 million and compared to $700 million for the same period of 2006, which was a decline of 21%. This decrease was principally due to about $100 million in lower CPE spending for the nine months and the investment we made in early 2006 to enhance our Optimum Online and BOOST offerings.

Operator, we would now like to open the call for questions.

Question-and-Answer Session

Operator

Your first question comes from Craig Moffett - Sanford Bernstein.

Craig Moffett - Sanford C. Bernstein

Tom, I wonder if you could talk a little bit more about the capital intensity trends that you are seeing. Exactly what is it that is driving the big reduction from last year? You said it is clearly a lot of it is customer premise equipment. Is that a reduction in capitalized labor? Is that a reduction in unit set-top box cost?

Given the reduction in capital intensity that you are seeing now and looking forward, a question for Jimmy is what do you do with the cash at this point? Do you consider a dividend, do you consider special dividends, and how do you prioritize the options?

Tom Rutledge

Craig, the biggest single driver in the reduction of capital intensity is the fact that our digital penetration is so high; that our need to buy additional set-top boxes is declining. So we've gone through a process of essentially digitizing our entire analog base now at 83%. We have a pretty deep digital penetration per household. So while there is capitalized labor associated with transactions which also is reduced as transactions are reduced, the bulk of the capital intensity reduction comes from less customer premises equipment.

The biggest single cost of customer premises equipment is digital set-top boxes; modems have actually gotten much cheaper and are less significant by a factor of almost 4:1 relative to set-top boxes when it comes to RGU costs. Voice capital on a customer premises basis, almost 13:1 in terms of its reduction in capital cost per RGU gain. So it is a much less capital intensive business going forward.

Craig Moffett - Sanford C. Bernstein

How long do you think that capital intensity can eventually get to, Tom?

Tom Rutledge

Well, it all depends on how fast you are growing your RGU base, obviously. But I don't think modem and phone or voice capital costs significantly less going forward. I think most of the cost reductions are out of it. There is still some capital to be spent on network going forward, particularly in increasing high-speed data speeds. Now we have already spent $15 a passing in '06 to take us up to 30 megabit speeds. Similar kinds of investments may be required in the future, but from a CPE perspective I don't think we will get much in reduction going forward.

Jim Dolan

As far as the use of free cash flow, it is a competition between reduction of debt, reinvestment into the company, growth opportunities. We all look to see what we think will provide the greatest enhancement to shareholder value.

Operator

Your next question comes from James Ratcliffe - Lehman Brothers.

James Ratcliffe - Lehman Brothers

Jim, could you give us from a high level your thoughts on the merits of combining distribution and content in a single company? Particularly now that News Corp is divesting its stake in DIRECTV and there is a lot of talk that Time Warner might divest its stake in Time Warner Cable?

Secondly for Tom, for customers who are ending their first promotional year on the triple play bundle, what sort of ARPU changes are you seeing for them? Are you getting them to step up to higher ARPUs or are they staying about where they are? Thank you.

Tom Rutledge

On the step up of revenues after the first year, nothing has changed in regard to that. We have promotional pricing during the first year and the step up is approximately $25. At the end of that period the churn of customers stepping up in the triple play product is lower than churn in general so that continues to be successful marketing tactic which we've been doing for years.

Jim Dolan

As far as having both programming and distribution in the same company, I think there are still quite a few companies out there that have programming distribution together. This company has had those two aspects of the business almost since its inception. We've always seen that the programming business is enhanced by having a connection to the distribution business. (1) to incubate new services, and (2) just to stay close to the customer environment to understand the environment that the customer is watching programming in. I think that has helped the Rainbow programming services and we think that they will continue to do so.

Operator

Your next question comes from Rich Greenfield - Pali Capital.

Rich Greenfield - Pali Research

You are at about three times, maybe more than three times the level of triple play penetration than your peers. When you look at the competitive impact, the subs that you're losing to Verizon, how many come from triple play homes? Is it a really small percentage versus your unbundled triple play subscribers?

In the last proxy statement it discussed something like $150 million of CapEx this year at Madison Square Garden and a few hundred million dollars of negative working capital. I just wanted to get a sense of whether that was still in your budget and what that related to or whether that actually has changed in your mind as we look out over the last quarter of the year? Thanks.

Tom Rutledge

Let me address the competitive position. Obviously we've been at the triple play for a number of years now. With a strategy of improving the value proposition for our consumers so that in a more competitive world we would be a more successful company. We've been facing wireline competition for three years now, construction started in '04. If you look at where we've gone from the end of '04 till now, we've added 159,000 video customers, 867,000 data customers and 1.2 million voice customers. Now almost half of our customer base is triple play.

During that period of time, our wireline competitors have been under construction and seeking a national franchising regime which actually slowed down their ability to get franchises. So when you look at activated video passings of our competitor, of the 890,000 passings that our competitor is selling against us in, 800,000 of them have come on in the last 12 months. So the greenfield territory, a different use of the word, that they've had to sell this year is greater than it will ever be and ever was because of their construction pace.

During the last year we've gained 11,000 customers. The reason we've been able to hold our own against that competitive thrust is because of the triple play and the fact that triple play customers disconnect, even in a competitive environment, at much lower rates.

Jim Dolan

With respect to the second question, Rich, on the proxy, we are not going to address anything that was in the proxy as we mentioned. As it relates to MSG's capital requirements in general, the significant ones if any, will be determined by their decision on either the renovation or the move of Farley, and that has been well-publicized and discussed in prior calls and that is still under consideration as to which alternative will happen.

In terms of significant working capital, I will only address that simply because I referred to it earlier in my comments when I talked about third quarter free cash flow, we did have some significant uses of working capital in the third quarter. For examples team personnel charges that Jim referred to, are run through AOCF in one year and paid in another year and some of those came due in the third quarter for 2006. Personnel charges at the Garden.

We had some performance awards divest that people earned over a seven-year period, and those were paid in the third quarter. So working capital is going to vary depending upon what happens in the business, but also on differences between the accruals that take place over many years and when the payments are made.

So I'm not commenting on the proxy, but as it relates to the third quarter those are some examples of what happened this third quarter in terms of the free cash flow. That is one of the reasons we don't forecast free cash flow.

Rich Greenfield - Pali Research

Is there anything in the Beacon Theatre in terms of capital spending or anything within the MSG segment in terms of project CapEx that you are still working on or might be working on other than the major rebuild of the Garden which is several years away?

Jim Dolan

Nothing more that we are willing to discuss at this point. Can we go to the next question?

Operator

Your next question comes from Jason Bazinet - Citigroup.

Jason Bazinet - Citigroup

Could you just give us an update on what portion of your footprint is passed by Verizon's fiber? Secondly, how much of that is actually selling the video product today?

Tom Rutledge

Yes, Jason. We've already said that. They passed 1.1 million passings. They are selling for video 890,000 passings. And of that 890,000 passings 800,000 of them became available for sale in the last 12 months, due to the delayed franchising process that they created for themselves through their national policy, which they failed at.

Operator

Your next question comes from Doug Mitchelson - Deutsche Bank.

Doug Mitchelson - Deutsche Bank

Jim, you've obviously shown pretty firmly your belief that Cablevision is worth a lot more than where it is currently trading, and so I guess I am curious why one of your uses of capital might not be to do the share repurchase program? Even just give yourself the flexibility to buy stock when you do think it is attractive, sort of a rolling LBO concept is one way to think about it.

Tom, you've been marketing small-medium business enterprise now for five months or so. Can you walk us through how that business is tracking and what contribution it might have to revenue and EBITDA growth next year? Thanks.

Jim Dolan

I think I will go first on this one. I'm not quite sure whether that was a suggestion or a question, but the share repurchase is certainly within the scope of returning value to shareholders.

Tom Rutledge

With regard to your question on enterprise, we haven't given guidance for next year on how we think that will do, nor have we broken that out. But we have sized the marketplace for you in previous discussions and there are about 650,000 businesses inside of our serviceable footprint. They spend approximately, before we started marketing our services, about $5.8 billion a year to the incumbent telephone companies. We think that is a big opportunity for us. We are aggressively marketing against it.

This year is the first year that we have ubiquitously offered business class services across our footprint. We continue to expand our product offering. We are now up to 12 lines on the small business universe. We have a full Ethernet product for large enterprises. And we are happy with our performance in the marketplace, but we haven't broken it out.

Doug Mitchelson - Deutsche Bank

Can you at least tell us if the execution has gone as expected and what the major hurdles are to growing that business as rapidly as you would like?

Tom Rutledge

Yes, it is more complicated than the residential business. There are more variations in customers, therefore there are more variations in hardware. The revenue opportunities are obviously bigger per customer. There is a different selling proposition. So we had to build an infrastructure to make it go, and we are very satisfied with our performance and we are on our plan.

Operator

Your next question comes from Ingrid Chung - Goldman Sachs.

Ingrid Chung - Goldman Sachs

I was wondering if Tom could comment on the year-over-year uptick in churn? Was this mainly from lower ARPU, unbundled customers? I think you had commented before that people coming off the initial promo offer actually have lower churn. So if you could just comment on that, please.

Tom Rutledge

Churn is up, and there are two elements of it. When we you look at our marketplace we have new wireline competition and when an activation occurs the wireline competitor gets some customers, single-digit. As I said before, obviously this year there is more of that than any prior year and probably any subsequent year, just because of the nature of the way the activations occurred and the approval process occurred. So that has an impact.

That was actually planned for by us in our thinking and in our guidance this year. It has gone in pretty much exactly as we expected it to. The difference this year over what we experienced in prior years has been non-paid churn is up slightly and that is primarily in lower income neighborhoods. We think it is a macroeconomic effect.

We started noticing it in September of last year, and it doesn't appear to be getting any worse after 12 months. So it seems to have flattened out. But there was a definite change in churn outside of the wireline competitive areas that has had a significant impact on our performance relative to last year where there is no wireline competitor.

Ingrid Chung - Goldman Sachs

So that competition is mainly coming from satellite?

Tom Rutledge

No, it is not. Actually I think satellite is losing share in our footprint.

Operator

Your next question comes from Benjamin Swinburne - Morgan Stanley.

Benjamin Swinburne - Morgan Stanley

There have been some press reports on a rate increase in the basic tier next year which I think would be the first one in a couple of years. I am just wondering if you could talk about the strategy there as Verizon is clearly adding footprint? I think they've got some pretty aggressive offers in the marketplace today.

Second, along those same lines I think they put out a release that they are going to take their HD lineup to 100 channels plus. Can you give us an update on your use of switch to digital, where you are on that in the footprint right now and where that takes your HD lineup over the next say 12 to 18 months?

Tom Rutledge

Yes, well, with regard to pricing we have been very moderate in our pricing over the last three years. We've been almost all of our growth and all of our revenue growth has been due to additional RGU growth. We did announce a rate increase a little over 4% for next year. Our prices are currently lower than Verizon's. They will continue to be lower than Verizon's absent a change on their part. They raised their rates over 7% last year in the face of the competitive environment, and obviously programming costs on the video side continued to impact the cost structure of the whole industry.

We have lower prices than our competitor, and we will continue to have lower prices and so we are comfortable with our rate structure in the competitive environment.

We now have approximately 70 channels being carried in the switch digital format, almost all of that is ethnic programming. We just tested and proved out to ourselves that HD switch video works. We are prepared to launch additional HD channels as they become available to us. We currently carry more regional HD than any of our competitors, and we have more HD and On Demand HD that our competitors can't replicate.

We think we can carry using switch digital and other technological changes in our infrastructure, like for instance in New York City we went all digital, and we have more spectrum unused than we are currently using. We think that we have the capacity to carry as many HD channels as can be launched.

Operator

Your next question comes from Jeff Wlodarczak - Wachovia.

Jeff Wlodarczak - Wachovia Capital

Is there any indication that Verizon is slowing down FiOS passings within your footprint? Where do you all predict they are going to reach by 2010? Can you talk about your FiOS win back efforts and how successful you have been? Thanks.

Tom Rutledge

Well, I am not going to talk about 2010; but we told you in these calls what their passings count is, and if you go back and do the analysis of what we've said, you can see that their construction pace has slowed. With regard to win backs, we find that we can win back customers, and we find that proportionally relative to how we do against satellite we do as well against Verizon.

Operator

Your final question comes from Jessica Reif-Cohen - Merrill Lynch.

Jessica Reif-Cohen - Merrill Lynch

On the CapEx, Tom, I am just curious about the CPE it was up $5 million year over year but your RGUs were down quite a bit, net adds were down. So is it just the cost of the HD DVR boxes, and what is that cost?

Could you talk broadly about your wireless strategy, what plans if any you have and would you prefer to partner with other cable operators or go it alone?

Tom Rutledge

Fourth quarter, a lot of HD sets are sold so there is a little bit of CapEx in the third quarter that is anticipated for fourth quarter activity, which is disproportionately high. DVR capital is also included in the CPE CapEx. DVRs are not counted as RGUs for historic reasons ,even though they are revenue generating. That capital is in there; and we don't report our DVR penetration or revenues.

Jessica Reif-Cohen - Merrill Lynch

How much does an HD DVR box cost now?

Tom Rutledge

I will have to get back to you on that. I can't answer that anymore. I don't know exactly; I know what it used to be and I haven't checked it in a while.

Jim Dolan

Jessica, we continue to keep our eye on the wireless business. The cellular business is quite crowded, and it really is somewhat of a commoditized product although it does seem to be like there is an unending market demand for it. We are taking a look at other technologies, such as WiFi and looking at its application. But we are not really ready to commit ourselves at this point.

Jessica Reif-Cohen - Merrill Lynch

How important is it for you to have a mobile service for your customers? For data, voice or video?

John Bickham

I think data much like you saw us do with the voice over IP stuff I think it is important to have a data infrastructure and then you can layer reasonable cost VoIP on top of it. It is the smart thing to do in a commodity business.

Tom Rutledge

We actually have installed some WiFi in some communities, which we have begun announcing, relatively small, customers who already subscribe to our wireline services can get WiFi throughout their communities.

Pat Armstrong

Thank you for joining us this morning. This conference call will be available on Cablevision's website and on StreetEvents.com through November 15th. Have a good day.

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