News

Charter Hits 1M Digital Mark

12/31/2000 7:00 PM Eastern

After-hours efforts from Charter Communications Inc. employees-from customer service representatives and administrative clerks to managers and headend staffers-helped the MSO reach the 1-million digital cable milestone just before Christmas, the company said last week.

In October, Charter initiated a company-wide effort through which any employee could be trained to sell and install Charter Digital Cable, executive vice president and chief operating officer David Barford said.

The program allowed motivated and commissioned employees to earn some extra dollars in time for the holidays. It also allowed Charter to keep up with an increasing demand for the service in an era in which extra installation help is hard to find.

Because the non-installer employees participated in the program outside their regular working hours, they were typically available on evenings and weekends when consumer demand for appointments is heaviest.

Digital cable provides customers with more channels and pay-per-view movies (and, in some cases, video-on-demand), an interactive programming guide, digital music channels and additional multiplex premium feeds.

Charter benefits from the move to digital in three ways, Barford said. First, Charter receives additional revenues and higher levels of cash flow per customer. Digital cable also helps insulate Charter from its DBS competition and gives the company a platform on which to roll out new services.

There were 7.8 million digital cable households in the U.S. by Sept. 30, 2000, according to National Cable Television Association estimates. The trade group projected the industry would end last year with 9 million digital subs.

At the end of the third quarter of 2000, there were 14 million residential direct-broadcast satellite customers in the U.S. Fourth-quarter DBS subscriber acquisitions could be reported later this week.

The incentive-program idea came from Charter's southeast region, Barford said.

"I was a little skeptical at how employees would embrace this, but I was absolutely overwhelmed" by their positive response, he said.

Employees were so enthusiastic about the digital cable product they converted customers in some unusual situations, said Charter spokeswoman Anita Lamont. When one worker was pulled over by a police officer because of a broken headlight, for example, he was able to talk the policeman into buying digital cable.

In Athens, Ga., night-shift customer service supervisor Aida Jones has participated in the digital swap-out program since the local Charter system began offering it early last fall. She plans to continue participating as long as the company makes it available to employees, she said.

On weekends, Jones teams with a technician to visit homes with analog boxes that need to be swapped out. On weekdays, she goes door to door with a partner from another department to help pitch digital cable.

Jones said teaming with fellow employees to help sell and install digital cable was good for morale-"a lot of laughs, a lot of good money"-and helped give her a better perspective on customers' needs when they call into the service center with technical questions.

The Athens system compensates employees $25 for each digital box swap-out, in addition to overtime pay. The commission increases to $35 per box for employees who sign up more than 20 subscribers in a week, said business manager Everett Turner.

Charter's initial 2000 budgets projected a digital-cable target closer to 750,000 than 1 million. Even the smaller target was considered pretty aggressive at the time, Barford said, considering that the MSO started the year with about 155,000 digital-cable customers.

The company was forced to revise projections upward thanks to strong consumer response for the product.

Despite the heavy consumer demand, product shortages from Charter's digital cable set-top vendors in the middle of the year "somewhat held us back," Barford said. "As supplies opened up, we were able to move more boxes."

Charter was then confronted with the need to hire additional installers. By the Christmas selling season, the MSO was averaging as many as 40,000 installations each week.

"December has been an extraordinary month," Barford said. "I don't know if we can continue the momentum of the past few months."

However, strong demand for digital cable is expected to continue, he added.

Last summer, Charter created new programming packages that bundle expanded analog and digital basic services with the premium digital-multiplex channels of Home Box Office, Showtime, The Movie Channel and Cinemax. Through its introductory "Summer Sizzle" offer, the MSO promoted the package for $49.95 per month and locked that price in for 12 months.

The same package is currently marketed at $59.95 per month through August 2001.

In some markets, as many as 70 percent of new customers bought the promotional package, Barford said. Customers are asked to sign a one-year contract for the service, which helps reduce churn, he added.

The promotional price points and digital cable's enhanced programming lineup have also helped Charter win back former customers from direct-broadcast satellite.

Charter targets DBS customers via telemarketing and direct mail, offering them up to $200 to buy back their satellite dish in exchange for a 12-month digital cable contract. In some markets, the offer is a free cable modem with a yearlong contract.

The win-back promotions "have seen tremendous success," Barford said. In some markets, the company has converted "tens of thousands" of DBS customers, he said.

Charter is just starting to examine the distribution of digital cable and cable modems through the consumer electronics retail channel. The MSO has placed kiosks in CompUSA Inc. stores in several larger markets, and has a presence in "mom-and-pop" stores in secondary markets, Barford said.

Charter plans to expand its presence at retail this year, and is exploring ways to test wireless networking in some stores.

In smaller markets, Charter has started to convert all of its pay channel households to digital. It plans to do so in its larger markets within the next 12 to 18 months.

"As a company, we are moving to an all-digital environment," Barford said.

The millionth Charter Digital Cable was recruited from an Atlanta suburb. The company has notified the customer and plans a special celebration at a newly opened local mall sometime early this year.

Barford said it is too early to give projections for the company's digital-cable business in 2001, but expects some guidance to come during a late January investor call.

"Our customers have shown an insatiable appetite for digital," Charter president Jerry Kent said in a press release, "and I fully expect the momentum to continue in 2001."

September