Operator Of The Year: Dallas and LA, A Tale Of Two Markets

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 When Time Warner Cable and Comcast completed their deal to divvy up the former Adelphia Communications systems, Time Warner was anxious to consolidate the Los Angeles and Dallas markets under its management.

The operator’s executives quickly learned the true meaning of the axiom, “Be careful what you wish for.”

In Los Angeles, the company tried to consolidate too fast, generating angry consumer calls it was not staffed to handle. In Dallas, executives found that the plant was not in as good shape as anticipated, meaning an upgrade to deliver more and better products would take much longer than planned.

In both markets, disruptions caused by changing channel lineups, long on-hold times and loss of long-time e-mail addresses prompted customers to jump ship.

In its third quarter financial filings for 2006, the year Time Warner officially took over operation of Adelphia and swapped Comcast systems, the MSO reported 83,000 subscriber losses, 66,000 of which were in Los Angeles and Dallas.

But the company says the systems are turning around. In an August conference call with analysts, executives said despite a slight basic-subscriber loss companywide, Los Angeles improved year-over-year and Dallas had its best voice, video and data customer growth since the close of the Adelphia and Comcast transactions in July 2006.

Last December and January, workers in Los Angeles were beginning to see forward momentum again, due in part to the launch of digital phone service throughout the region along with simplified bundles and pricing, said Barry Rosenblum, who was dispatched to Los Angeles in early 2007 to resolve the consolidation problems and put out the public-relations fires. He’s now the executive vice president of the equally challenging Texas region, including Dallas and its suburbs.

“I promised to shave my head when we posted a month with growth [in Los Angeles]. At the end, they started chasing me around with clippers,” joked Rosenblum, who moved to Dallas last March. “Out of the box, digital phone growth was better than anywhere in the country.”

But that was only after some hard work.

CITY OF TANGLES

When Rosenblum arrived as the top guy in Los Angeles, the system was being pilloried in the press and by city officials for trying to do too much, too fast. His first order of business was to meet with employees to see if operations were better or worse than the press coverage. “What people were saying was very accurate,” he said.

One example of the problems: Video on demand service was delivered on three platforms, so when consumers called with problems, the customer service representative might be someone inherited from Adelphia, using a Comcast legacy billing system, untrained in Time Warner business rules.

Rosenblum stopped most consolidation activities. The executive said that when “things are heading south,” managers try to step up activities in their own departments to compensate and chaos ensues.

The high-speed data migration (the source of the loudest consumer howls, due to long outages) was completed and service stabilized. Back-office systems were torn up and executives started from scratch, he said. More service personnel were hired, training was stepped up and plans were put in place to upgrade the entire plant. The upgrade will be completed by the first quarter 2009, according to Stephen Pagano, executive vice president for the west region.

Though the technical issues have mostly been resolved, Los Angeles has been and remains a difficult area. It is also Time Warner Cable’s largest single market with 1.7 million customers.

Pagano describes it as a “red-headed step-child” that for years was fractured into multiple franchises held by multiple owners. Individual marketing efforts were drowned out by market-wide broadcast campaigns by competitors. Now, Verizon Communications is making a big push into the city with its FiOS TV service.

Time Warner is pushing back with strategies such as a discounted triple-play bundle and targeting the city’s substantial Hispanic population with specialized products. An international calling plan offers 1,000 minutes of calls monthly for $19.95 on top of digital phone service. The system has also launched a Spanish-language programming package, El Paquetazo, with 152 channels in English and Spanish for $34.95 as a stand-alone purchase.

BIG D, BIG CHALLENGE

In Dallas, TWC faced major technical hurdles — the company quickly resolved to replace 6,000 miles of dual plant — as well as a tough competitive market.

Verizon’s FiOS and AT&T’s U-verse have rolled out video service there. In fact, the telcos overbuilt each other, competing for 60,000 homes in one area, said Rob Moel, division president for the North Texas region, covering 479,000 TWC subscribers in Dallas and its suburbs.

“It’s one of the more interesting places I’ve ever worked,” Moel said.

Time Warner made no friends when it came into the market Aug. 1, 2006. Within 30 days, the operator had winnowed 38 regional channel lineups down to eight. (Local public access commitments prevented the creation of a single lineup).

Then came the transition for high-speed data customers from their familiar Comcast.net addresses to Road Runner addresses.

Moel said that task was the toughest, as Time Warner had to work with many partners, including Comcast and AT&T.

“It did not go as easily as I would have liked,” he said.

The company also had to transition circuit-switched phone customers to voice-over-Internet protocol services.

“We were very focused on creating as little customer impact as possible. We spent a lot of time talking to employees, elected officials and the public,” Moel said, adding that he and the public relations staff met with local newspapers to explain what was happening and what products would be the end result of the temporary disruption.

The rebuild took 18 months and now the plant is 860 MHz, an improvement from 750 MHz.

But the disruptions were worth it: the Dallas system now has capacity to deliver more HD channels than some of its competitors. High-speed data is available at speeds of up to 10 Megabits per second. That “turbo” speed is popular; Moel said the Dallas region has one of the highest percentages of turbo subscribers within Time Warner.

“People have a need for speed,” he quipped. 


To read more about Time Warner Cable as Operator of the Year, check out the Sept. 29 issue of Multichannel News, or click here.

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