Primed for a Fight3/27/2005 7:00 PM Eastern
Bob Miron is not known as a man who wears his heart on his sleeve. But when the chairman and CEO of Advance/Newhouse Communications extended a simple handshake and compliment to a top officer during a company dinner in Orlando, Fla., last January, it made a deep impression on those who witnessed the gesture.
That was because the officer was Miron’s son and heir apparent, Steve, president of Advance/Newhouse Communications, who had just finished wowing a national gathering of the company’s ad sales executives.
“Good job, son,” the elder Miron told Steve, in a typically understated fashion.
|Bright House at a Glance|
|All numbers cited, in the various categories below, are as of 12/31/2004.|
|Basic cable subs:||2,200,000|
|Digital cable subs:||922,000|
|High-speed data subs:||738,000|
|Source: Bright House Networks
To observers, it conveyed much more than met the eye. “It was a very telling moment, with the respect that they had for each other,” says one eyewitness, who conveyed the anecdote to illustrate not only the younger Miron’s skills and his dad’s appreciation, but also a tone the Mirons have established throughout the company’s cable operations, branded Bright House Networks. “The level of respect in that company sort of permeates from the leader down,” the observer says.
At a time when Bright House is gearing up to fight perhaps the most formidable and deep-pocketed rival ever faced by a cable company, top level management’s style of laissez-faire vigilance — a 21st century mix of Adam Smith and Teddy Roosevelt — is a major weapon against the far-better equipped, but buttoned-down and regimented world of Verizon Communications Inc.
Cable has noticed: Next week, Steve Miron will receive a Vanguard Award for Young Leadership at the National Show. His sister, executive vice president of strategy ad development Nomi Bergman, last year won the Women in Technology honor from Women in Cable & Telecommunications, and earned 2005 Wonder Woman kudos from Multichannel News.
Despite such splashy acclaim, the company’s top management — which also includes Bill Futera, Advance/Newhouse executive vice president and chief financial officer — declined to comment for this story. But interviews with Bright House’s Florida Group and a host of outside observers shed much light on a key challenge playing out within Bright House’s walls. And it has larger implications for the cable and telecommunications industries.
The Florida Fortress
While the company serves Bakersfield, Calif.; Detroit; Indianapolis; and Birmingham, Ala., the crown jewel in Bright House’s 2.2 million subscriber universe is its Florida cluster, which counts 1.8 million customers. The Sunshine State systems enjoy a generally good reputation across a nine-county region, and they’re split into divisions centered in Tampa and Orlando. They also contain a property with a storied reputation within the world of interactive TV: A one-time Time Warner Cable system in Orlando that conducted the now infamous Full-Service Network experiment. That system, as well as all the other Florida properties, became part of Bright House via the restructuring of the Time Warner Entertainment-Advance/Newhouse Partnership. Bright House is owned by the partnership and managed by Advance/Newhouse.
The Florida properties are about to face much stiffer competition than they have in the past if Verizon follows through on plans to build state-of-the-art digital video systems in five of the nine counties in Bright House’s Florida cluster.
The $71.3 billion telephone company has applied for one cable franchise in Sarasota — Comcast Corp. territory — and is talking with a handful of other Florida municipalities. It has begun laying what it sees as the broadband network of the future, with fiber-to-the-premises technology. In talks with local officials, Verizon has disclosed plans to roll out 300 digital channels, 20 high-definition networks and 45 music services in its cable franchise areas, while offering the same “triple play” bundle of voice, video and data that has become the latest buzz phrase across the telecom world.
By bringing fiber further into the home than Bright House and most cable companies, Verizon is engaging in an expensive, but landmark test of how willing people are to switch from local cable operators at a time when the operators and their rivals have deep enough pockets to compete effectively. And Verizon is doing it in a place where subscribers don’t seem to hate their cable company.
“I don’t hear any negative stuff about Bright House,” says Greg Lugar, the director of economic and financial programs in Brevard County, Fla. “The price continues to increase, but you do get a lot of services.”
While few expect Verizon to start a price war, the telco is likely to compete with Bright House by emphasizing the value of its triple-play bundle along with its service and the potential to offer wireless phone service, which cable operators can’t match yet.
“Our reason for doing a fiber network is so we can transfer our company into a broadband communications company. We see that as the future of telecommunications,” says Bob Elak, Verizon’s Florida spokesman. He says the company has no timetable for rolling out video services, but Verizon’s national officials say they’re aiming for a second or third-quarter rollout in selected markets.
Both sides vow to remain civil, but Bright House has lodged complaints against Verizon in Washington and with Florida regulators. The MSO contends that Verizon is forcing customers who disconnect the telco’s phone service for Bright House to also give up their digital subscriber line Internet service. With many customers loathe to lose their e-mail addresses, the move is apparently seen by Bright House as an arm-twisting tactic. Verizon has insisted in court papers that it lacks the technology to unbundle the services, but hopes to do so shortly.
Bright House introduced its telephony play in the second half of 2004, a voice-over-Internet protocol service. “At this stage of the game, we’ve used a variety of tactics. We’ve really [taken a slow approach to] our marketing,” says Kevin Hyman, who oversees the MSO’s 1.02 million-subscriber Tampa region.
“If we look back across the entire nine months there was only a very narrow window when [VoIP] wasn’t available through the entire footprint,” Hyman adds. “We’ve seen some escalation of installation. We’re very satisfied.”
The company has moved slowly in marketing the bundle in order to insure that demand does not outstrip service capacities, according to Hyman. “We’re aggressive in developing the back office, but not aggressive to the point of jeopardizing our reputation in delivering good customer service.”
Hyman has absorbed the Bright House philosophy well: Don’t overstep and avoid unnecessary hype.
Time Warner Watermark
“The best way to think of Bright House is to remember they were strong Time Warner systems before the spin-off, and that’s what they still are today,” says consultant Bruce Leichtman, president and principal of Leitman Research.
Other sources familiar with the company’s reputation say the Florida Group performs “like a very good Time Warner system … above-average nationally,” especially in high-speed data penetration and its Road Runner offering.
Currently, Bright House officials report that they have 922,000 digital subscribers — about a 42% take rate — as well as 738,000 residential data customers, 180,000 digital video recorder subscribers, and 129,000 HDTV subscribers nationwide.
The operator was quicker to HDTV than most MSOs when it launched a service in 2000. Today it offers a free “basic” HD-tier that includes local broadcast signals and a few cable networks as well as a paid tier with more offerings.
But it’s not just Bright House’s reputation for first-rate customer service and advanced digital services that Verizon will have to deal with when its FiOS Television service finally arrives. The Florida operation also has two local news channels, a serious commitment to supporting a broad array of community groups and charities — and a man named John Rigsby.
“One of the things Bright House did, which was a good idea, when it acquired the systems back from Time Warner, was it didn’t take just the systems. It took a lot of the people, including [John Rigsby],” says one cable network affiliate executive. “That doesn’t happen often.”
Rigsby, who ran the Orlando-based Central Florida division under Time Warner Cable, was a natural choice for field general. A former naval officer, who served on a destroyer in Vietnam, Rigsby has a reputation as a demanding, but highly skilled and organized executive who enjoys both the confidence of the Mirons and the deep respect and loyalty of his Florida crew.
Rigsby himself says one of the reasons the Mirons chose the Florida systems was its staff. “Both Tampa and Orlando were very successful financial growth stories down here. That was because they had good management teams in both areas. That was something they recognized when they chose the properties to take out of the venture. Then our challenge was to find ways to keep people,” he says.
Last year, the Florida system donated $1 million toward relief in the wake of the Florida hurricanes. Bright House also gave $1 million to the Red Cross to aid victims of the Asian tsunami disaster.
“Bright House clearly has a better reputation than Time Warner,” says Joel Haas, CEO of the American Red Cross Central Florida region. “They are engaged in the community, and if you want to succeed in that business you must be engaged in that community.”
J. Patrick Michaels, chairman and CEO of Tampa-based banker/broker firm Communications Equity Associates, recalls the time a Bright House technician made it to his home 15 minutes after his service window began to fix a broken digital box. Michaels had explained to a phone rep that he had a plane to catch.
Observers believe that Bright House employees seem to enjoy more autonomy under the MSO than they did with Time Warner, possibly a direct result of the freedom the Mirons have in running a private company, with just one major cluster to worry about.
“The philosophy of Bright House is to stay out of their way and let [system-level people] do what they do best,” says Ellen Schneid, senior vice president of affiliate marketing at Court TV.
With the cable industry focused so closely on each chapter of the Dolan-family soap opera at Cablevision Systems Corp. — to say nothing of the Rigas family’s troubles with their former MSO, Adelphia Communications Corp. — the Miron clan seems like an anachronism: a mid-sized MSO that feels no pressure to sell and would just as soon stay out of the public eye.
But it pays to watch what they do. In quitting its Time Warner partnership and taking Advanced/Newhouse back to its pre-1995 roots, Bob Miron acted ahead of the curve, before Cox Communications Inc. and Insight Communications Co. shed their own public shareholders.
What’s more, Bright House is stronger than it might appear, to the untrained eye. With Time Warner still a partner — albeit a silent one — Bright House enjoys advantages that other MSOs lack.
“They have the best of both worlds,” said one cable network. “They can operate themselves somewhat independently, and they get to ride the backs of the second largest operator in terms of programming fees.”
With the Dolans perhaps on the verge of finally selling out, could the Mirons be next?
“I can’t imagine it,” says CEA’s Michaels. “They don’t need the money, they’re multibillionaires. Where can they get this good of an asset where they can get this kind of return on equity? It’s well-managed, [Bob Miron’s] son and daughter are in the business and are well-liked, as are other management people.”
The Miron’s wealth and standing is also tied to its larger familial connections. Bob Miron is the nephew of S.I. Newhouse, whose family controls not only Bright House, but Condé Nast Publishing Inc. and a large group of daily and weekly newspapers.
But setting aside those connections, Larry Gerbrandt, a senior associate at Alix Partners LLC, says: “They don’t have the cost and distraction of maintaining the apparatus of a public company, and they do have plenty of private equity,” he says. “I don’t see that they’re shopping around anymore than Cox did.”
One plausible scenario has the Mirons selling off its smaller systems in order to raise cash to compete against Verizon and keep its Florida systems state-of-the-art. Of course, Gerbrandt adds, “They are monitoring cash-flow multiples as everyone else is, and if we start seeing a bunch of smaller MSOs getting rolled up, it may prove irresistible.”