MSOs Use Key Systems As Broadband Stages


Cable operators across the country are focusing on such new broadband services as digital cable, high-speed data, telephony and video-on-demand as they determine how and when to launch each product.

But new-service launches are old hat for some progressive systems in markets where there's strong consumer demand for cutting-edge technologies.

Those systems that have upgraded their cable plant to 750-megahertz sooner, rather than later, are already past the early-adopter stage in terms of marketing. And the trailblazers are now using new tactics-such as bundled discounts-to draw in an even broader audience.

Cox Communications Inc.'s Orange County, Calif., system was the first in the company to reach double-digit penetration for each of its three broadband product lines: digital cable, high-speed Internet service and digital telephony. Regional vice president of marketing and sales Kip Simonson called that a "triple double."

As of the end of June, Cox in Orange County reported a 17- percent digital-cable rate, a 16- percent rate for Cox@Home, and an 18-percent rate for Cox Digital Telephone. The 233,000-customer system in the Los Angeles market boasts an 80-percent cable-penetration rate.

Cox Orange County uses Motorola Broadband Communications Sector digital set-top boxes and went to Data Over Cable Service Interface Specification-compatible cable modems earlier this year. It continues to run a Motorola proprietary system in parallel.

Each of the three broadband services Cox offers in Orange County has been available for at least three years. High-speed data service launched in late 1996, digital cable rolled out in October 1997 and digital telephony started in November 1997.

Over those three years, Cox Orange County has learned a few things about deploying and marketing the new products.

"It used to take two-and-a-half hours to install digital cable," Simonson said. "Now it takes one to one-and-a-half hours. We've learned efficiencies, and also what marketing tactics work and don't work."

That's important for an operator that wants to gauge installation demand.

Because the system was first to market with these services, it wasn't able to borrow any best practices from others within the MSO. But that challenge didn't hold Orange County back.

"Cox Orange County has a can-do attitude," said Simonson of the MSO's decision to let the California system take the lead. It was also further along with its 750-MHz rebuild than many others were, and had demographics that were good for the new products-particularly Internet-over-cable.


Upscale demographics have also helped sell broadband services in AT & T Broadband's Northeast region, which was until recently part of MediaOne Group Inc.

"Clearly there's been a huge demand for high-speed Internet under the Road Runner brand," AT & T Northeast region vice president of sales and marketing Randy Waddell said. "We have the largest concentration of high-speed users in the world here in the Boston market."

MediaOne's Boston system introduced high-speed service on a trial basis at Boston College and in Cambridge, Mass., in 1996. Today, cable-modem service is available to between 85 percent and 95 percent of households in the system's footprint, Waddell said.

Unlike Cox Orange County-which rolled out all three services within a relatively short time-MediaOne staggered its new-product launches.

The phased rollout was intentional, Waddell said. "It allowed us to become more proficient in both deploying and marketing those services."

Residential phone service was introduced in October 1998 and is now in front of more than half of homes passed. The Northeast system introduced digital cable in January 2000; it's now available to roughly 75 percent of the footprint.

Waddell said that number would increase to nearly 100 percent during the first quarter of next year.

Several years before the digital-cable launch, however, MediaOne used its newly rebuilt plant to introduce an advanced-analog service called "NexTV."

AT&T Northeast deploys the Motorola "DCT 2000" digital set-top box and is moving to DOCSIS-compatible modems.

The Northeast region is AT&T's largest cluster, Waddell said. It boasts 256 communities and 1.9 million homes passed across several states.

Switching from MediaOne to the AT&T brand has helped drive subscriber growth, especially in the residential phone business, Waddell said.

"We've seen close rates associated with direct response and telemarketing increase, now that we're able to speak of the AT&T brand," Waddell added.

The operational issues associated with signing on new telephone subscribers continue to pose a challenge, however. AT&T Broadband must wait for incumbent local-exchange carrier Verizon Communications to pass along new customers' telephone numbers before installation can occur.


Time Warner Cable in Tampa Bay, Fla.-one of the MSO's largest and most aggressive systems-doesn't offer local telephone service. But it does offer a product most cable operators are still only reading about: video-on-demand.

The "iControl" VOD service, available in a select portion of the system, offers recent releases for $3.95 each, classic titles for $1.95 and adult programming for $7.95.

"We're very excited about video-on-demand, and early indications say the demand is strong from our customers," Time Warner Cable Tampa Bay division vice president of marketing and programming Patrick Burke said. Time Warner expects to roll out VOD to the rest of the division shortly, he said.

In mid-1999, the Tampa Bay Division, which now serves about 900,000 customers, launched both its "Digital Multimedia" digital cable service and Road Runner high-speed Internet access.

Both services were launched at about the same time, following a 750-MHz upgrade, Burke said. Though both products have already been deployed in most of the division, a small number of systems are still upgrading their plant, he added.

Time Warner in Tampa Bay uses Scientific-Atlanta Inc. digital set-tops and a mix of legacy and DOCSIS-compatible cable modems.

The Tampa Bay division was among the first Time Warner units to launch the new services. The company used "most traditional cable marketing tactics" for the product launches, including television and radio ads, Burke noted.

The division faces video competition not only from direct-broadcast satellite providers, but also from local overbuilders, including Verizon in much of the market and BellSouth Corp. in small pockets.

"We've been very aggressive with our marketing in competitive areas," Burke said.

In Orange County, Cox doesn't use radio or television advertising to promote its new services. That's because the operator controls only five percent of the DMA, Simonson said.

"We had to spend more money on direct mail than other systems because we can't buy broadcast," he added.


In the early days of its new service launches, Cox displayed booths "at every public fair where we could get live service" so local consumers could experience cable modems and digital-cable electronic program guides, Simonson said.

Cox also started developing its retail sales channel very early. "We have 40 locations in the franchise where people can see Cox@Home live," he said.

During last year's holiday selling season, Cox Orange County acquired as many as 200 new cable modem customers in one month through a merchandising partnership with CompUSA Inc., Simonson noted.

In Boston, AT&T has an agreement to market its high-speed Internet service through 17 local Circuit City Inc. stores. Roughly 10 to 15 percent of the area's cable-modem sales are made through that channel, Waddell said.

But for systems that launched broadband services early, marketing those products on an individual basis is almost routine. "Now we are challenged with marketing these services in an integrated fashion," Waddell said.

AT&T Broadband still employs specialized promotional campaigns in areas where new services, such as digital cable, are just coming online. But it eventually returns to market bundled services.

The Northeast division introduced a bundled-service discount in May of this year. During its first four months, over 7,500 bundled customers were signed, Waddell said. Twenty-three percent of the bundled sales have been to new customers, typically consumers who have just moved into the area.

Even though many new residents generally call the telephone company before seeking out cable, Simonson said those new residents are open to ordering telephone service from AT&T Broadband "if it saves them money and if it saves them time."

Bundling doesn't just afford customers discounts, it offers them the chance to schedule a single installation appointment for multiple services, he added.

In Orange County, Cox guarantees that Cox@Home service would be installed within four days, or it's free, Simonson said.

That's very competitive with local digital-subscriber line offers with installation dates of three to four weeks out, he added.

"We don't want to have to slow down the marketing efforts because we don't have enough installers to keep up with demand," Simonson said.


If necessary, Cox uses contractors to help meet installation demand. The system has also started a self-installation offer for Cox@Home customers and has trained many installers to handle several products.

The good news about cable-modem service is "churn is very, very low," Simonson said. "Once you have high-speed access, you don't want to go back to slow speed."

Digital-telephone churn is also low, Simonson said, because "the product works, and it costs less."

Digital cable still sees higher churn than basic cable, but over the past year, even churn for that product has decreased, according to Simonson. The addition of a variety of digital basic channels to the lineup has helped improve digital cable's value proposition, he added.

"Bundling also helps reduce churn," Simonson said early this fall. "Orange County is one of the leaders in rolling out the bundled offer. For the past two months, we've had the best months ever in the past three years."

Customer response to the new services isn't the only good news for progressive operators. Systems that aggressively launch new services have been great proving grounds for cable marketers.

For example, in the past year former system marketing executives at both Cox in Orange County and Time Warner in Tampa Bay have taken on posts as corporate vice presidents for their respective MSOs.