Marketing cable modems without a choice of multiple Internet-service providers is like trying to sell cable boxes without offering a variety of programming services.
That's the view of some industry insiders who've started to argue that cable operators should forge partnerships with top-brand ISPs for their own competitive reasons, whether or not the government pushes them in that direction by instituting open-access requirements.
AOL Time Warner Inc. was early to adopt the multiple-ISP strategy, because the Federal Trade Commission made it a condition for the merger of the top ISP America Online Inc. and traditional media titan Time Warner Inc.
But last month, Time Warner Cable CEO Glenn Britt told the Washington Metropolitan Cable Club that offering a choice of ISPs "is just good business, even without a consent decree."
Time Warner is continuing to grow its Road Runner subscriber base, and broadband subscribers brought on from new partners — including AOL High Speed Broadband and EarthLink Inc. — have supplied incremental growth to the MSO's cable-modem business, Britt said.
"From a marketing standpoint, we increase the customers' awareness by offering more choices for high-speed cable services," Time Warner Cable senior vice president of marketing Brian Kelly said.
Kelly likened choice in ISPs to a slate of multiple premium movie services. The more pay channels vying for consumers' attention, the more awareness for the overall category, he argued.
Now that its relationship with data-over-cable provider Excite@Home Corp. has ended, Cox Communications Inc. is finally in the position to look at the multiple-ISP issue, said senior vice president of marketing Joe Rooney.
"The deal has to be right," Rooney said. "We don't want to cannibalize the flagship product."
At Time Warner, in-house provider Road Runner has stepped up its marketing in multiple-ISP divisions. "Cannibalization has not been an issue," said Kelly.
Road Runner continues to chart its own course, with respect to branding and value propositions to the consumer, he added.
The MSO's high-speed business has shown incremental growth of 20 to 30 percent this year, compared to last year, "and that's on top of a pretty spectacular 2001," said Kelly.
By the end of next month, Time Warner expects to offer multiple ISPs in all of its 39 divisions. It has signed partnerships with AOL, EarthLink and a number of regional ISPs.
AT&T Broadband has announced a number of partnerships with regional ISPs in recent weeks.
"The way we look at it, we can drive deeper penetration when there are choices," AT&T Broadband spokeswoman Sarah Eder said. "The more choices and the more niche players, the more appeal there is to various segments of the market."
Hughes Electronics Corp.'s Hughes Network Systems unit — which markets a satellite broadband service called DirecWay — partners with several content providers, including AOL and EarthLink, in a bid to increase the service's market presence.
DirecWay's "powered by" partners could help the service boost its subscriber count to 250,000 by year-end, HNS assistant vice president of U.S. field sales Allen McCabe projected at a recent SkyForum conference in New York.
Digital subscriber line companies also typically open their services to multiple ISPs. If cable operators choose not to create joint marketing relationships with national providers, they could lose the chance of helping a loyal dial-up customer of AOL or EarthLink migrate to cable as they upgrade to broadband.
EarthLink, for example, partners with some Time Warner Cable, Charter Communications Inc. and AT&T Broadband systems, but also has promotional arrangements with most major DSL companies and with HNS, said EarthLink director of broadband strategy John Ellis.
"It's our opinion [that] people simply want high-speed access and don't care much about the underlying technology," Ellis said. "We'll work with consumers to sell them the best technology that meets their needs."
When an EarthLink subscriber upgrades from dial-up, the company discusses that user's specific requirements. If the customer plans to use the new high-speed service for online gaming, then satellite might not be the best technology, due to latency issues, Ellis noted.
Irrespective of the technology, EarthLink tells customers they'll get a better experience with broadband because it can use the platform to offer new services, such as home networking on multiple personal computers, Ellis added.
AOL has partnerships with Time Warner Cable, most DSL providers and with HNS for satellite, said AOL Broadband president Lisa Hook.
Individual technology platforms can offer advantages to the ISP, depending on the economics involved, the ease of provisioning new customers and the speed available to subscribers, Hook added.
Cable operators can typically handle installations much more quickly than DSL providers, said Kelly. That helps sway an ISP's decision on which technology to pitch.
AOL typically sells the AOL High Speed brand and provisions it in the background, rather than sending dial-up customers a list of technology options to choose from, Hook said.
With the Time Warner partnership, however, the two companies share in branding efforts.
Working with national ISPs like AOL and EarthLink affords cable operators a chance to play off those brands' existing relationship with online users, and that's a huge advantage, said Kelly.
"They can communicate more effectively and more regularly with their online users than we ever could," Kelly said.
When marketing broadband service to its customers, Time Warner Cable remains agnostic about its high-speed partners — whether AOL, Road Runner or EarthLink — despite its corporate ties to the first two companies, Kelly insisted.
Time Warner faces a similar situation on the video side — AOL Time Warner owns Home Box Office, but that doesn't stop the MSO from working with other premium networks.
"We're committed to a level playing field," Kelly said.
That said, Kelly admitted that it's a "huge advantage" to be able to run joint marketing promotions with AOL, the number one brand in dial-up.
Beyond sheer customer volume, the other key advantages to working with a dial-up incumbent — customer loyalty, exclusive content and retaining a long-held electronic mail address — carry over to other ISPs, such as EarthLink.
At an urban markets conference last month in New York, Horowitz Associates president Howard Horowitz predicted that urban consumers would drive demand for broadband in the 21st century, and challenged broadband media-service providers to offer programming tailored to their target markets.
"They need content to succeed," Horowitz said. "The established Internet brands will define the new urban market."
Cable operators should enlist the help of powerful media brands to help draw consumers to high-speed Internet services, Horowitz contends.
"Right now, I see the cable operators marketing all on their own," Horowitz said. "Media brands, content and video-based brands will drive the marketing behind broadband."
No longer will broadband's speed advantage over dial-up be enough to grow the business, he suggested.
"We need to add the sizzle to that product" by marketing name-brand content, Horowitz said.
AOL promotes broadband content to its high-speed customers on a "High Speed AOL" strip that appears on its Web site. Content that takes advantage of the broadband connection includes on-demand music videos, footage from a Teen People
photo shoot, theatrical movie previews and animated cartoons from Cartoon Network, as well as multimedia sports, weather, news and travel footage.
EarthLink also includes a broadband link on its home page and personal start page to point subscribers towards multimedia or video content that's enriched by the broadband experience, Ellis said.
Once Time Warner Cable signs an agreement with a new ISP, co-branded marketing materials are created at the system level, Kelly said. The cable operator shares zip code information with the ISP so it can target the appropriate dial-up subscribers when cable broadband becomes available in their neighborhood.
While online marketing has been the most effective tactic in pitching ISP choice, Kelly said, the companies are also seeing good results from direct mail and outbound telemarketing.
"The combination of us pounding away about the value of high-speed, coupled with brand-specific attributes, is pretty powerful," Kelly said.
Ellis said that EarthLink does "most of the heavy lifting" in its joint marketing promotions, starting with general brand advertising at the national level, then filling in locally with radio, direct mail and online marketing.
EarthLink also allows its dial-up customers to sign a waiting list so that they can be alerted as soon as high-speed service is deployed in their neighborhoods, Ellis said.
EarthLink's reputation for customer service is an aid to MSOs looking to expand their high-speed businesses, he added.
"With a high-speed connection, people want to do more on the Internet, so they have more questions that traditional ISPs might not be able to answer," Ellis said. EarthLink representatives are trained to answer questions about home networking and connecting MP3 audio players to a PC, for example.
"The types of problems you encounter on broadband are unique," Ellis added.
Partnerships with national ISPs sometimes bring in more than broadband customers. Signing new high-speed customers can help woo former video subscribers back from direct-broadcast satellite, said Kelly. That, in turn, offers the cable operator a chance to pitch other new services, such as digital cable and subscription video-on-demand.
"The whole open-access model offers consumers choice and will help expand the consumer marketplace," Ellis said. "Collectively here, we can help grow the pie."