Does Just Keeping Clone CMs out Provide MSOs with a Positive ROI?

Network security and fraud have been around for a long time in cable operations. As many blog posts related to this subject have stated, this is a big concern for MSOs. The most common fraud type in unsecured networks is still cloned cable modems. This is not new and there are many topics related to how this affects customer experience and the legal aspect of this practice.

The question which not many MSOs ask themselves is: “Even though we do not increase our customer base upon putting fraud control in our operation, is there a positive ROI associated with the investment?

The answer is simple: YES, there is, indeed.

The typical sale’s argument goes as follows: When you have a network size of  100k subscribers and 1% are clones, if the ARPU is 50 U$D then you are suffering theft of service for the amount of 50k U$D per month.

This argument may not convince the savvy ones among the MSOs ranks. The reason is simple: Despite the fact that the former statement is true, keeping clones out does not make the MSO extra money and cover the cost of the solution. What about checking the impact on OPEX instead?

The cost of service is the sum of all direct and indirect costs that are needed to have the service up and running. That applies to the entire network (firewall, outside plant, capacity, amortization of equipment, etc.). All these costs are related to the network size, which, in real life, is comprised not only of legitimate cable modems but also of clones as well. (From the network point of view. they receive service just the same as the legitimate ones.)

Broadband Cash Costs Per User (BCCU) is a GAAP-like accounting measurement of the total cost per customer in the USA. Some studies set this value around $14.00-16.00 U$D per customer. If we deduct the administrative costs and other costs that are not related to operations from the BCCU, we have our cost of service per customer. Putting the math aside, that results in around $8.00-10.00 U$D per customer.

So as long as the cost of acquisition is below the number of detected clones multiplied by the cost of service per clone, the solution not only keeps clones out, but also it is profitable as well.

To support our argument, we are going to use a network size of 100k subscribers, that of a Tier-2 company, and the Intraway standard price list. The following charts show the 5 year ROI for different percentages of clones detected in the network, which, therefore, were kept at the margin and not provided with service, and the cost of service associated to clones if no action is taken.

ROI Vs Percentaje of Clones

As you can clearly see, if your network has 0.8% or more clones, fraud control is not just good practice but also it is very profitable. Armed with this compelling argument, the only thing that could prevent our product from being in every operation is if our customers do not know about this. Now it is time to make a difference: spread the word!

If you care to read about how to keep clones out of your network, check Adrian’s post: Fraudless DOCSIS Networks: It’s Possible

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