Turning Up Telephone

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On Feb. 7, a mother of four teenagers in the St. Louis area became the 500,000th person to sign up for phone service from Charter Communications.

Her subscription capped a 14-month period in which the cable company more than doubled the number of homes that have access to its phone services. At the beginning of 2006, the company had enabled telephone service to systems passing 2.9 million homes. By the end of last year, phone service was accessible in 6.8 million Charter homes.

Currently, all but three of the cable operator's “key market” areas have launched telephone service. Company officials declined to identify those areas, nor detail when phone service will be deployed there, citing competitive pressures.

PROMOTIONAL PUSH

Growth has surged with availability. According to senior vice president and general manager of telephone services Ted Schremp, Charter opened 2006 with only 121,500 phone customers. The company had launched telephony on a limited basis in 2002, mostly through the acquisition of phone customers that had been served by a St. Louis-area AT&T Broadband system. Charter didn't really “put muscle” behind the product until late 2005 to early 2006, Schremp said.

Now, video subscribers in Charter's systems receive semi-weekly mailers, touting the service and such features as call waiting, call forwarding and anonymous call rejection. The cable operator prices its service at $44.99 on a standalone basis.

Charter is not marketing the service as a standalone, but still has managed to attract 6% of its customers on a telephone-only basis. Schremp said those subscribers may be direct-broadcast satellite homes.

“We don't actively market standalone, but if that's where they want to start, we'll take it,” he said.

Bundling is the main message in consumer mailers. Subscribers who take multiple products get $5 off their phone bill for each additional Charter service — digital cable and high-speed Internet — they buy. Discounts for a two-product customer bring the price of phone down to $29.99 per month.

Despite the heavy direct-marketing and cross-channel promotion, Schremp said the cost per sale is comparable with other products.

“We pitch triple play right out of the gate,” he said. “We get phone in the mix with each [service] call.”

As a result, 93% of the company's phone customers bought telephone service in a bundle with other products, he said. Of those, 73% are triple-play customers.

Schremp is most excited about the product's quarter-to-quarter growth. For instance, Charter gained 106,200 customers in the fourth quarter, which represented a 30 % increase in phone sales over the same period last year.

TAKING OFF THE 'CUFFS'

The company is also attracting Hispanic customers with a special package currently available only in its Fort Worth, Texas, Reno, Nev. and Southern California markets. The package offers immigrants from Mexico an unlimited calling package in the $45 range.

Taking the “measured handcuffs” off international calling for this segment has proved attractive, said Schremp, and the company is analyzing using the offer elsewhere.

The success of phone service is vitally important to the company. Analysts have said Charter's potential for growth hinges on the success of this product. Only early-launch markets in Wisconsin, though, are approaching 20% penetration levels, according to Charter.

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