Policy

Competition By Another Name

2/17/2006 7:00 PM Eastern

Verizon Communications Inc. has focused on Temple Terrace and greater Hillsborough County for its FiOS fiber-optic TV plans in Florida. Both jurisdictions have approved cable franchises for the telco to compete head-to-head with Bright House Networks.

But going mano-a-mano against a wireline competitor is nothing new for Bright House.

The Pinellas County section of Bright House’s Tampa operation, which serves St. Petersburg and Clearwater, about one-third of the entire system, has been battling another cable provider in the market for 10 years.

The competitor is Knology Holdings Inc., which ironically bought the system from Verizon three years ago. Verizon had taken ownership of that cable system after its purchase of Bell Atlantic Corp. That company, in turn, took control of it after buying out GTE Corp., the system’s original builder, in the mid-1990s.

It’s a history Mike Robertson, vice president and general manager of the Pinellas region for Bright House Networks, knows well. He’s been there since 1987.

“Competition, on a long-term basis, has been the best thing that has ever happened to us,” Robertson said. “It makes you focus on the customers and the employees. We’ve got to deliver to take care of that customer.”

“When you’re in a competitive environment for 10 years, you learn to do things differently,” he continued. “We do installations on Sundays. We have two-hour and four-hour appointment windows. Half of our installation team is in-house.”

The numbers that can be gleaned from Pinellas appear to bear that out.

Robertson said Knology operates in nine of the 25 franchise areas in Pinellas County alongside Bright House, but six of those nine areas cover 400,000 homes passed, or 85% of the market.

KNOLOGY AT 20%

Knology president and CEO Rodger Johnson said on the company’s November 2005 third quarter earnings call that it had reached 20% penetration of revenue generation units in Pinellas. (An RGU is a single subscription to any video, voice or data service.)

Robertson estimates Knology has about 35,000 video subscribers in the area (about 9% penetration), making its voice and data subscription total about 45,000. That ratio roughly mirrors Knology’s companywide ratio, with its 175,000 video and 251,000 voice and data subscribers.

Robertson also estimates direct-broadcast satellite penetration is 4% in the market. If the entire market is 75% penetrated, that would leave Bright House with a video penetration of 62%, on par with the national average despite having a wireline competitor.

Competition does change how a cable operator looks at the world. Robertson can remember lowering prices and running promotions 10 years ago when GTE came to town. “We have had standard tier rates that have been a little bit lower,” Robertson said, “but over the years that’s moved closer to parity with the rest of the MSO.”

In the end, he said, rates become so close with the competition that Bright House chooses to differentiate itself on service features, customer care, price and value relationships and community outreach.

“The compelling element is the price/value relationship for the package,” Robertson said. “Part of that relationship is making sure we’ve developed our platform, digital phone, VOD and increased our high-speed data speeds.

“With customer care, we have the attitude if you lose one subscriber, it’s considered an insult,” he said. “If you capture one, it’s a cause to celebrate. The final component is giving back to the community.”

TARGETING MDUs

The Pinellas region borders the Gulf of Mexico, and 45% of the housing in Robertson’s territory is multiple dwelling units. Robertson created two 16-member direct sales teams, one to hit the streets in single home neighborhoods and one to pound doors at multiple dwelling units.

Members of those sales teams also are trained technicians and are able to do installations on the spot. “That works out really well,” Robertson said.

“With this population, it’s pretty transient at times,” he added. “It’s still knocking on doors. The multiple dwelling unit teams each have complexes they are responsible for. They will work with the multiple dwelling unit manager. They are right on top of things.”

Last summer, Robertson launched a new initiative, building a 4,500 square foot Bright House demonstration center in the Countryside Mall in Clearwater.

The center mirrors a home, with a living room, bedroom and kitchen and a nine-TV screen HDTV demonstration wall.

The center is staffed by employees who demonstrate to shoppers Bright House services ranging from digital video recorders to RoadRunner high-speed Internet access and Bright House’s digital phone product. There is also an area for bill payment and equipment exchange.

“It’s in the fifth month of operation,” Robertson said. “Sales have been really good. Customers can come in and can get something they don’t have,” such as an HD digital video recorder. “Other customers don’t really know what digital phone is,” Robertson said.

Robertson’s background is in finance, yet he acknowledged he hasn’t looked at the internal rate of return for the project. But, he said, he doesn’t need to. “It is something that we need to do. Part of it is branding, part relationship marketing. They can view the channel lineup, make a phone call and surf the Internet.”

BALLPARK INVESTMENT

The other major community outreach initiated by Robertson is Bright House Field, a minor league ballpark that is the spring training home to the Philadelphia Phillies.

Two years ago Phillies executives pitched Robertson the naming rights. (It was a short business trip as the stadium was built right next to Bright House’s Pinellas offices.)

Bright House paid $1.7 million for the naming rights for 10 years. Robertson said “we think we got a great value. It’s been open two years and it’s a beautiful stadium.” The Phillies’ minor league affiliate, the Clearwater Threshers, occupy the stadium during the spring and summer.

“We have three events we can sponsor,” Robertson said. “We do Customer Appreciation Day where all Bright House customers come in free.” On those days, Robertson invites representatives from cable networks to mingle with subscribers face to face.

“We have Bark in the Park, where fans can bring their dogs. We have a berm in centerfield where fans can watch the game. Pardon the pun, but it’s been a home run for us.”

TRAINING IS CRITICAL

There’s one more critical element, Robertson said, about working in a competitive market where more and more services are being thrown at the customer: training and educating employees on the new services.

“With all the new services — phone, DVR, HDTV — it requires more people to service those customers,” he said. “The average seniority time and grade here is eight years. We’ve got some seasoned employees. They have done a terrific job where the business has gone.”

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