Baton Rouge, La.— Cox Communications’ cable system here in the state capital bounced back rather quickly after Hurricane Katrina struck nearly 18 months ago. In fact, the operation has been in a turbo-charged expansion mode ever since the tragic storm.
First, Cox Communications Baton Rouge had to respond to the population surge — and increased demand for its services — as New Orleans residents flooded into the city after Katrina. The storm resulted in a lucrative bump-up in customers, both residential and commercial, for Cox in that market.
On top of that, and completely unrelated to the storm, on Jan. 1 last year Cox merged its Baton Rouge and Lafayette systems, christening that large new cluster Cox Communications Greater Louisiana.
Completing the integration of the Lafayette system, which was formerly part of Middle America Cox, was a big undertaking, made even more daunting because Baton Rouge was also dealing with the aftershock of Katrina.
Even before the killer hurricane, Cox’s Baton Rouge system had been on an upswing, located in a growth market. The city is not only Louisiana’s capital, but a college town that’s home to Louisiana State University and Southern University.
Before Katrina hit Aug. 29, 2005, Baton Rouge had 179,000 subscribers and Lafayette had 113,000, a combined 292,000 subscribers. The now-merged systems have seen an increase over the past 18 months of about 5,400 subscribers, taking Cox Greater Louisiana to 297,000 customers.
“It’s very hard to tell what you could have anticipated after a storm like that, but I think for us it’s been somewhat bittersweet, or I guess a blessing and a curse might be a better way to put it, because we had the influx of people,” Cox Greater Louisiana regional vice president and general manager Jacqui Vines said.
“We had a lot of transactions immediately after, and we’ve really been trying to catch up with that, and we’ve also enjoyed revenue beyond our comprehension,” she said.
System revenue increased 7% from 2004 to 2005, and it grew 15% from 2005 to 2006.
To cater to its new residential and commercial customers, Cox has launched several new products, such as video on demand in December, and is offering more sophisticated phone and fiber services to the business community.
Last year from January through May, Cox did a “sweep and balance” of all 5,000 miles of the Baton Rouge system, testing and checking for Katrina damage, said David Butler, vice president of technical operations. As a result, the system had to do restoration and refurbishing in 3,000 locations.
The system is also finishing a company-wide plant upgrade, called Extendable Optical Network, which includes taking the system from 750 Megaherz to 860 Mhz by the first quarter 2008.
Overall, the upgrade will make the system’s plant state-of-the art, enabling it to offer new and improved services down the road, increasing capacity for offerings such as VOD and high-speed data.
The integration of the Lafayette system, which is about 50 miles southwest of Baton Rouge, has involved a number of initiatives. For example, Cox Greater Louisiana has aligned the channel lineups — and retail pricing — across the Baton Rouge and the Lafayette clusters.
More broadly, Cox has tried to more fully absorb and acculturate the Lafayette cluster, so that it conforms to the company’s corporate strategy: That its cable systems offer state-of-the-art technology, be perceived as doing so and be very involved in their communities.
The past year’s events represent a lot of change to digest for the now-merged Baton Rouge and Lafayette systems and for Vines, who was general manager in Baton Rouge before being named to head the merged cluster.
In 1992, Time Warner Cable veteran Vines was recruited by Ray Nagin, now mayor of New Orleans and then general manager of Cox’s Big Easy system, to join the operation as director of human resources.
Vines then did a stint for Cox in San Diego, and returned to Baton Rouge seven years ago as general manager. She helped design the system’s headquarters, which is located in a former Montgomery Ward store. The facility not only has Zen-like “quiet rooms,” which have low lighting and small fountains, for employees, but also a pool table and foosball table in the lunch room.
Baton Rouge and its sister system in New Orleans were inextricably tied, working as a team, when Katrina unleashed its fury. Cox New Orleans’ so-called “red team,” its emergency first-responder employees, evacuated to Baton Rouge.
At the system after Katrina, power outages and plant damage disrupted service to about 80% of the system’s customers, according to Butler. But with the help of the New Orleans team, which was awaiting government permission to re-enter the Big Easy, the Baton Rouge system was back up in about two weeks, he said.
After the storm Butler, who commutes to Baton Rouge from New Orleans, stayed in the same hotel as the New Orleans team. His own home suffered $70,000 in damage, losing its roof and sustaining water damage.
“It rained in there for a couple of months before we could get back,” he said.
During the first months after Katrina, Cox in Baton Rouge took upon itself the task of installing video, phone and Internet service at local shelters, so people there could keep abreast of what was happening.
“We did a lot of complimentary services,” Cox Business Services Greater Louisiana vice president Leigh King said. “In fact, the first three months following Hurricane Katrina were primarily focused on responding to the community’s needs. A lot of that was not revenue-generating business. Most of it was responding to [the Federal Emergency Management Agency], Red Cross, state police and temporary shelters. In fact, I would say that that probably encompassed 50% to 60% of our total day-to-day operations for the remainder of 2005.”
Baton Rouge’s population ballooned as Katrina evacuees poured into the city, with estimates that as many as 250,000 initially relocated there immediately after the storm.
So while Cox in New Orleans saw its subscriber count drop post-Katrina, Baton Rouge and Lafayette had a raft of new customers demanding their services, not only video but phone and high-speed data.
Cox in Baton Rouge put together projections as to how many customers it would ultimately wind up with, according to Jason Furrate, vice president of sales and marketing.
“What we calculated, what if every apartment in town was filled, what if every house that could be sold was sold,” he said. “So we made some projections of what our customer base could actually do, and it turned out to be relatively accurate.”
He stressed that hooking up the new subscribers didn’t happen overnight.
“The actual growth and connections took months,” he said. “At this point what our message became was the bundling of services: We have all three and it makes sense to get all three.”
A month before Katrina, Cox’s voice-over-Internet Protocol phone service had been made available across its full footprint in Baton Rouge and the system was actively marketing it. So there was already pent-up demand for Cox’s phone service from veteran subscribers, as well as New Orleans evacuees clamoring for service, according to Furrate. Cox’s triple-play took off.
“The amount of people who have all three of our products grew 70% in one year between December ’05 and December ’06,” Furrate said. “The bundled message worked well for us.”
In addition to now having on-demand, Cox Greater Louisiana has debuted “The Zone,” which permits customers to view either six kids’ networks, six sports services or six news channels on-screen at one time. Digital customers then can click their remotes if they want to view just one of those networks.
In Baton Rouge, Cox also saw a huge boom in commercial customers, according to King. After Katrina some New Orleans businesses opened temporary headquarters, or in some cases permanent satellite offices, in Baton Rouge. And some national contractors, who were doing reconstruction work in the Big Easy, set up a presence in Baton Rouge.
It was kismet for Cox, because the operator was in the midst of expanding its offerings to commercial subscribers.
“Before 2005, we were basically a mom-and-pop type business provider,” King said. “We basically served high-speed Internet and some commercial video to bars and restaurants, hotels and hospitals.”
Cox, making the transition to serve larger businesses, had only started offering basic phone service to its commercial customers in March 2005, a few months before Katrina, and that phone revenue had already given business services “a tremendous lift,” King said.
After the storm, there was such a demand from companies in Baton Rouge for higher-end services — such as high-capacity fiber-optic lines — that Cox accelerated its deployment of phase 2 telephony, rolling it out in the fourth quarter 2005, according to King.
These efforts bore fruit for Cox’s business-services unit.
“In 2006 we actually experienced 53% year-over-year revenue growth, just for business services, and previously in 2005, we experienced a 51% year-over-year growth, and those were the two highest growth years in the history of our CBS [Cox Business Services] system here,” King said.
Cox’s Lafayette system, which it purchased from TCA Cable in 1999, had been managed out of Tyler, Texas, by Middle America Cox. But last year, Cox sold most of the systems in that division to Cebridge Connections. Cox decided to merge Lafayette with the Baton Rouge system.
“I specifically wanted to bring it into the fold,” Cox Communications senior vice president of operations Claus Kroeger said. “I wanted to put a real Cox imprint on it. And that’s one of Jacqui’s specialties. She’s very good with people. She’s very much a strategic people leader. I knew she was right to help those people feel fully part of Cox and part of the Cox organization.”
There was a need to forge closer ties with the community in Lafayette, where Cox faces competition from a municipal overbuilder, Lafayette Utilities System, Vines said.
The overbuilder “was pushing that it was bringing fiber to the home, but there was really not a sense that Cox was doing that as well,” Vines said.
“Louisiana is very parochial,” she said. “It’s a very relationship-oriented state. So as we were integrating the Lafayette system we had to introduce ourselves, reintroduce Cox Communications … to make sure [customers] understood we had fiber and they didn’t necessarily have to go with our competitor.”
Cox Greater Louisiana is building a regional headquarters in Lafayette, but its costs have soared as a result of Katrina, according to Vines.
“The building in Lafayette went from $10 million to $12 million because of the demand for wood and the demand for materials,” she said. “Those went up because they’re scarce, and you know the law of scarcity.”
As part of the integration, Cox created a universal channel lineup, and pricing, across Baton Rouge and Lafayette, which creates several efficiencies, according to Furrate.
That streamlining enabled Cox “to virtualize our call centers,” he said, so customer-service reps can easily explain about the programming and packages available across the Greater Louisiana operation. And it makes marketing simpler since everyone has the same options available.
As part of the institution of a common channel lineup, the French-language TV5 Monde, carried by Lafayette, has been added to the Baton Rouge system, Vines said.
In terms of marketing overall, Furrate is looking to steal back subscribers from direct-broadcast satellite. The system is trying to gauge what kind of pricing it would have to offer to convince DBS customers to leave their contracts — and whether they would be willing to commit to a contract with Cox.
Cox Greater Louisiana hired 166 new employees from September 2005 to December last year. It now has about 1,000 employees.
In response to the market’s growth, the system last year added about 130 miles of new coaxial cable and 65 miles of fiber in Baton Rouge, and 61 miles of coaxial cable in the Lafayette cluster.
“We also fibered the commercial buildings in downtown Baton Rouge,” Butler said.
One of the system’s challenges going forward is the unpredictability of the market now, according to Furrate.
“We had patterns of seasonality that we knew, this is when our business grows, this is when people move away, and those patterns have changed because of Katrina,” he said.
For example, since Baton Rouge is a college town, Cox would typically see service disconnects in the summer.
“Well, we did not see a letdown in the summer of ’06,” Furrate said. Instead, there was a small drop-off in subscribers from December to January.
“So maybe some people are either moving back [to New Orleans] or they’re moving to Houston or Atlanta or where ever it is. They’ve made some decisions on their permanent housing,” Vines said.
Right after Katrina, some New Orleans transplants expressed disappointment that Cox Baton Rouge didn’t have video on demand when they came to town, because they had it in New Orleans, and some were disgruntled about how long it was taking to get Cox service installed.
“The transactions escalated and they stayed high,” Vines said. “We didn’t have the luxury or the time to breathe as it related to dealing with the transactions.”
As for dealing with impatient would-be subscribers, she said, “Our culture is to listen to our customers, and we didn’t change that. If they had some demands and we had an answer that made sense, we gave them the answer. If we didn’t answer, we told them we didn’t have an answer for them. The goal was to get them what they were looking for.”
Vines called 2007 “the year of renewal.” In 2005 and 2006, the operation’s focus was the reliability of its plant, launching new products and meeting subscriber expectations.
“Because of the major influx of customers, customer satisfaction wasn’t necessarily where I’d like it to be,” she said. “This year, as a system, our focus is on renewing our relationship with our customers, renewing our relationship with the communities that we serve.”
Cox Greater Louisiana is also exploring ways to be more efficient in its dealings with customers, Vines said.
“The day of wondering when people are going to go back, we no longer think that way,” she said. “It’s really how do we diminish the levels of transactions that we have right now by being more efficient, by being more prudent.”