Cable Operators

Play It Again, Bresnan

2/27/2005 7:00 PM Eastern

When Bill Bresnan rejoined the cable business two years ago, it was like slipping into an old shoe — but a shoe with plenty of room to grow. “We have the management scale and depth to be much larger than we are today,” he says.

Don’t expect growth for growth’s sake at Bresnan Communications, where Bresnan is CEO. Sure the company is shopping for more systems, but Bresnan says that any acquisitions will have to make economic and strategic sense or they won’t be made at all.

At a Glance
Category Amount
Homes per mile: 69
Homes passed: 579,000
Basic subs (penetration): 294,000 (51%)
Pay units (excluding Encore): 247,000
Digital subs (penetration): 99,000 (34%)
High-speed data subs (penetration): 61,000 (34%)
Headends: 90
Source: Bresnan Communications

Bresnan reportedly bid for some Adelphia Communications Corp. systems, but he declined to discuss which properties the company would want or even whether any bids were ever made. Still, Bresnan admits he’d like to expand the company’s Rocky Mountain region footprint. The MSO may be headquartered in a New York City suburb, Purchase, N.Y., but it serves 300,000 customers in Montana, Wyoming, Colorado and Utah. The systems were formerly run by AT&T Broadband, and Bresnan bought them from Comcast Corp. in 2003 when Comcast was absorbing the AT&T assets.

Adding Adelphia’s systems wouldn’t allow for a lot of geographic clustering, but Adelphia does operate an upgraded and state-of-the-art system that counts 116,000 subscribers in Colorado Springs, Colo.

Regardless, “we’re not limited to any one geographic area,” Bresnan says.

The MSO has the financial backing and support of some very deep-pocketed and industry-savvy partners, including Providence Equity Partners, Quadrangle Group, TD Capital, and Comcast, which gives Bresnan the clout to pull off any acquisitions he and his team deem appropriate.

“Bill Bresnan was the first cable CEO I ever met in 1983, and I’ve been aware of his talents for a long time,” says Quadrangle Group principal Steven Rattner. “Our investment in Bresnan seemed like a great chance to invest in a business we love and a guy we respect. The systems Bresnan took over from AT&T were woefully neglected. We’ve been extremely pleased with what the company has done in the two years they’ve owned those properties. We are very happy partners, and we look forward to making a lot of money as investors in Bresnan Communications.”

The loyalty Bresnan has earned from his shareholders extends to his staff as well. “Bill really cares about his employees, customers and shareholders. I’ve been with Bill for eight years now and I wouldn’t have it any other way,” says Lenny Higgins, senior vice president of advanced services.

Even newcomers like the culture Bresnan fosters — something he’s honed over his 47 years in the cable business. “I’ve only been here for eight months, but what drew me to the company was the fact that it’s just a few short steps to Bill’s door,” says Jackie Heitman, vice president of marketing. “And at the same time, it’s a few steps to the customers’ doors. It’s a flat organization, and everyone has a voice and makes a difference.”

Despite talk of expansion, Bresnan says acquisitions aren’t at the top of his priority list. His biggest focus this year will be to continue rolling out video on demand, digital video recorders, HDTV and phone service. When the company was formed, its systems were behind the industry curve, relative to offering new services. But it’s moving at warp speed to correct the problem.

“Most of our systems offer more services than I get by Cablevision Systems Corp.,” says Steve Brookstein, executive vice president of operations.

Bresnan is launching local and long distance voice-over-Internet protocol service in Grand Junction, Colo., this week and the company expects phone service to be available to 50% of its customers by year end. High-speed data service will be available to 94% of Bresnan customers by the end of 2005; DVRs will reach 96%, and VOD and HD penetrations will reach 67% this year, predicts Jeff DeMond, executive vice president and chief financial officer. All products should reach 95% of Bresnan’s current customer base by the middle of 2006, he says.

Though penetration rates remain below industry averages, DeMond says things are picking up exponentially. Digital penetration is about 35% of basic customers and high-speed data service is subscribed to by 30% of the company’s customers.

“We’re about a year and a half behind our peers,” Higgins says. “We had 25,000 high-speed customers when we bought these properties two years ago. Today, we have 65,000 high-speed customers and our RPU [revenue per unit] is among the highest in the industry.”

Bresnan has an advantage that many other operators don’t when it comes to buying equipment and programming. As an affiliate of Comcast, Bresnan can take advantage of massive buying power to acquire products and services. The MSO prides itself on being fleet of foot, flexible and technologically advanced, Brookstein says. And it’s paying off.

“The [direct-broadcast satellite] guys were pounding our markets pretty hard before we bought them,” Bresnan says. “The systems hadn’t been paid attention to for a few years, and they were at a big disadvantage over satellite when we got there. We’ve managed to slow down the defection rates a lot.”

Bresnan expects to do to Qwest Communications International Inc., the primary phone provider in the MSO’s service territory, what DBS was doing to its cable systems two years ago. Qwest, saddled with debt, has suffered in recent years from a tarnished service reputation, and Bresnan’s executives feel the time is right to launch its own offensive with VoIP service.

While Bresnan will hype its new phone service this year, the company plans to spend more time and money on retention marketing, as well as on marketing data and digital services.

“VOD is what differentiates us,” Brookstein says. “When the installers go to a customer’s home to hook up new or upgraded service, we order a VOD movie for them on the spot. That first movie is free to customers, and they have 24 hours to watch it.”

Retaining customers and building loyalty goes beyond advertising and marketing. Patrick Bresnan, senior vice president of community development and Bill’s brother, is charged with strengthening the MSO’s relationships with local regulators and customers.

“You can either spend your time building relationships or sparring with local authorities,” Pat Bresnan says. “We have actively chosen to have good relationships with those folks. Having a good reputation also helps the employees feel good about themselves. They’re not getting ambushed at the local bowling alley or grocery store anymore.”

The company tries to team with programming partners as much as possible. Last year, the C-SPAN bus visited 10 Bresnan communities. (Bill Bresnan and C-SPAN CEO Brian Lamb tagged along for several visits.) And another tour is planned for 2005. The company sponsored concerts with BlueHighways TV to thank customers for subscribing to its service and partnered with Oxygen Media to launch a women’s small-business initiative in Wyoming last year.

Company employees are also encouraged to get involved in local civic organizations and charities. It’s not rocket science, Patrick Bresnan says. But it is a commitment.

“We’re used to small communities. Bill and I grew up in a small community. And people there appreciated it when they were paid attention to,” he says. Bresnan says the company wants its general managers to hand deliver their franchise payments, shake hands with local authorities and subtly emphasize that it pays fees, unlike the competition. “The things you do in a small town tend to get noticed quicker and more precisely. That’s why you want to do it correctly,” he adds.

Company officials knew that when they purchased the systems from AT&T that they’d have to convince regulators that they were serious about their pledge to make the cable systems state of the art, says Terry St. Marie, senior vice president of operations. “When we did what we said we’d do, it made a big difference,” he notes.

The company risked losing some of that small-town feel and loyalty when it closed local call centers in several of its markets and opened a centralized call center in Billings, Mont. Scores of employees were laid off. But every system continues to have a local presence, and since about 60% of the company’s customers bring their payments to the cable office, the personal touch is not totally lost, says Jim Gemmill, vice president of operations. The upside is a better trained employee base and 24/7 customer service for customers.

“Over time we may reassess some office locations,” Bresnan says. “We certainly don’t want to lose our local presence in any of our markets. It’s what makes us different from our competition.”