News

Competition Takes Hold Near Detroit

11/22/1998 7:00 PM Eastern

Westland, Mich. — When Sheila Alderton and her husband
were looking for an alternative to their local cable service here earlier this year, their
first thought was direct-broadcast satellite.

Then, Alderton learned that Ameritech New Media was
offering competition to MediaOne, the cable incumbent. After a representative came to her
door to tell her about Americast, Ameritech Corp.'s cable-overbuild service, it didn't
take much convincing for the Aldertons to make the switch.

"We had talked about satellite," Alderton said,
shortly after her new Americast service was turned on early this month. "I didn't
know that there were other cable companies available."

Ameritech won its franchise here in October 1997, and it
began signing its first customers here this past February. Construction on the system is
not yet complete throughout the city.

Westland is adjacent to the three towns west of Detroit
where Ameritech first launched its video service two-and-a-half years ago: Canton,
Northville and Plymouth.

In all four of those cities, Ameritech competes with
MediaOne, which has upgraded its service in each of those systems to offer digital video
and high-speed data. Suburban Detroit is the lone area where MediaOne has introduced
digital TV service.

MediaOne expects to bring its digital-phone service to the
suburban Detroit market sometime next year, although Bill Black, the MSO's regional
director of corporate communications, could not say which market would see the service
first.

Helen Brodie, regional vice president of marketing for
MediaOne, said that while it's certainly logical to offer digital services in competitive
markets, the MSO has plans to launch them in noncompetitive communities, too.

In the past two years, MediaOne has invested about $400 per
customer locally on technology upgrades, Brodie said.

"We've had people tell us that they've moved into
those towns just to get the high-speed service," Black said.

ANM also faces video competition in a number of
metropolitan Detroit suburbs from Comcast Corp. and Tele-Communications Inc. In suburban
Detroit, ANM also competes with MediaOne in Madison Heights and Roseville. It has also won
a cable franchise in Hazel Park, where MediaOne operates, but it has not yet built out its
system there.

Ed Turner, chairman of the cable commission for the city of
Westland, said that while he knows that MediaOne receives "rave reviews" in
other communities, there have been service problems in his city.

Turner estimated that Westland, with a total of 23,000
cable subscribers between the two companies (neither operator would detail its subscriber
totals), probably boasted a higher penetration of cable customers than any other community
in Michigan.

"I think that MediaOne has taken us for granted,"
he added.

ALL-AMERICAN CITY

When entering the town, drivers are greeted by a sign
reading, "Welcome to Westland, the All-American City." Located midway between
Detroit and Ann Arbor, Mich., Westland is a typical Midwest bedroom community with a
population of about 100,000.

The Alderton household was paying close to $100 per month
for cable at one point. Before Sheila's sister moved out, cable was delivered to five TVs
in the house, and the family had once subscribed to multiple premium-movie packages.

It may have been the premium channels that finally provoked
the family's decision to drop MediaOne.

Alderton explained that her nephew and her 10-year-old son
learned how to override the master-lock feature on the set-top, and in no time, they were
able to access Cinemax.

"I wanted it taken out because there were a lot of
racy things on it," she said, adding that a MediaOne technician was unable to help.

A MediaOne spokesman said the company called Alderton about
the matter, and she denied ever speaking to a reporter.

Alderton was pleased to hear from ANM customer-service
technician Frank Binaghi that she could change the PIN (personal-identification number) on
ANM's parental lockout right from the remote control. But her thoughts weren't limited
merely to her young son.

"If you get mad at your husband, you can lock out all
of the hockey games," she said.

Ironically, MediaOne's new digital service,
"NexTV," also offers advanced parental-control features. Many of the features
that Alderton praised on the Americast system would have also been available if MediaOne
had upgraded the household to digital.

SERVICE ISSUES

Diane Abbott, cable director for the city of Westland, said
response to ANM's entry into the market has been "extremely positive,"
especially regarding customer service. She added that she hasn't seen any improvements in
MediaOne's customer service since Ameritech entered Westland, "and that surprised
me."

But Black said MediaOne has extended its customer-service
training from two weeks of classroom instruction to seven weeks. In addition, each new
customer-service representative receives coaching from long-term employees from both the
call centers and the marketing department. The additional training is needed in light of
all of the new products, services and channel lineups that the company is adding, he said.

"We think that we're out in front of Ameritech,"
Black said. Because MediaOne uses local call centers, customers can feel confident that
they're speaking with someone in Michigan, rather than Chicago, he added.

Turner — who makes calls to both MediaOne and ANM on
behalf of Westland citizens and to periodically test the companies' service — said
he's never waited more than one minute on hold when calling ANM's service department in
Chicago.

That's not the case with MediaOne, however. When Turner was
investigating a complaint for a MediaOne subscriber, he told of waiting on hold for 38
minutes. Then, when he finally got an agent on the phone, the agent hung up on him. When
he called back, he had to wait another 22 minutes, "and it wasn't even during peak
hours," he said.

Turner admitted that he'd never had a customer-service
problem himself as a MediaOne subscriber, but he switched to ANM, anyway. He said the
picture quality is better with Americast, even on the older television in his living room.

TELCO PLAYS SERVICE CARD

While ANM boasts some of the same features that digital
cable and DBS offer, such as impulse pay-per-view and electronic programming guides, the
company leans most heavily on its reputation for customer service in stealing customers
away from the competition.

The attention to the consumer begins even before ANM starts
constructing a system, ANM spokesman Geoff Potter said. The company calls to let people
know ahead of time when technicians will be in their neighborhood, in case they have any
concerns over sprinklers or invisible pet fences.

Turner said he has taken only three complaints since ANM
started building in Westland. In contrast, he said, MediaOne averaged two or three
complaints each day when it was upgrading to digital. Consumers complained about stray
wires left in yards, torn fences and even holes left in steel and aluminum siding.

When Binaghi installed the Americast service at the
Alderton house, he wore white shoe covers to protect the living-room carpet.

"We're very respectful of our customers," said
Karen Coronado, local marketing manager for ANM in Livonia, Mich.

INERTIA HELPS

As the city's cable director, Abbott monitors both
MediaOne's digital service and the Americast advanced-analog product side-by-side in her
office. While she said the Americast picture is noticeably better, she still hasn't
switched to it at home. It's not that she intends to remain a MediaOne subscriber for the
long term: She simply hasn't found the time yet to have the new service installed.

Coronado admitted that as a new competitor, ANM does face
some consumer inertia. The company changes its promotional efforts throughout the year to
remind consumers that a choice is available.

In Westland, ANM is offering new subscribers gift
certificates good for up to $120 at local Target stores.

"They're especially attractive coming right before the
holidays," Coronado said.

"There are people who might not respond as quickly as
their neighbors do, but we do get to them," she added. "We are very busy. It's a
good problem to have."

Word-of-mouth from friends and relatives in other Americast
communities helps to drive demand for the service when it reaches a new market. Gregory
Yaschen, government-affairs manager for Ameritech's Michigan region, said he gets calls
from towns all over the country asking for the video service, even though it's limited to
a handful of Midwest regions.

Potter said he believes that many communities have room for
two cable operators. In the communities where ANM has come in as an overbuilder, it
typically enjoys a 30 percent share of the market, he added. He declined to give specific
percentages for individual towns, citing competitive reasons.

Brodie and Black were confident that MediaOne can stand up
to the competition.

"We have more customers in Canton now than we did
before Ameritech started here," Black said. "The market has expanded. We've
grown as they've joined the market."

Coronado said that one reason for MediaOne's growth in
Canton could be the uptick in housing construction in the town.

"We know for a fact that we've had a lot of people
come to us from the incumbents," Potter said. "We also know that we've grown the
market."

Want to read more stories like this?
Get our Free Newsletter Here!
October