Full-Speed Ahead In Iowa's Capital

BY MAVIS SCANLON

Mediacom solidified its hold on the farm belt's cable systems, especially in Iowa, in 2001 with a big acquisition from AT&T Broadband. Becoming the major operator in Des Moines and throughout Iowa was a big opportunity for the MSO, but also came with a challenge: Residents in Des Moines and beyond wanted 21st century services, and satellite companies were more than happy to deliver them.

The city of Des Moines, settled by homesteaders in the mid-1800s at the junction of the Des Moines and Raccoon Rivers in south central Iowa, has been trying to shed its image as a corn-belt farm town practically since the American Indians who were known as Mound Builders lived in the region.

Des Moines has been able to attract a huge insurance industry base; it's known as the third insurance capital of the world, after Hartford, Conn., and London. Despite its location in what some East Coasters call ?the flyover zone,? the state capital has kept up with trends in technology. Its tech savvy was underscored in December, when the Center for Digital Government awarded Des Moines the first-place prize for midsize cities in its survey on the use of technology by city government.

The city's website says Des Moines has ?big city bustle with a small-town atmosphere.? It's not quite New York City, but with a metro population approaching half a million, a new Science Center, a young and growing arts festival and a newly approved river-walk project that will bring more people downtown, Des Moines is coming into its own. It's a town where people take care of their own, and where those who leave are often lured back by the promise of single-family homes that cost less than $100,000, on average, and where the typical commute is about 18 minutes.

Like many cable systems in rural or semirural areas, the system in Des Moines had several owners throughout the 1990s. When owned by AT&T Broadband, Des Moines was just a small part of its Great Plains division. In 2001 Mediacom acquired the system from AT&T, part of a larger acquisition of about 800,000 subscribers that doubled Mediacom's size. Des Moines went from being a tiny fish in big pond, so to speak, to being the biggest fish in a small pond, says Steve Purcell, regional VP.

Job No. 1 for Mediacom in Des Moines was to complete the cable network upgrade that AT&T had started but never brought beyond the city limits. Wiring the suburbs for digital and new services was critical: Most of the growth in the metropolitan area was coming from areas outside Des Moines proper. Des Moines' growth was underscored by data from Census 2000: Between 1990 and 2000, the population in the Des Moines metropolitan area increased 16%, to over 456,000. That compares to a population increase of just 5% for Iowa as a whole.

In undertaking the upgrade, Mediacom CEO Rocco Commisso was determined to cut the number of head-ends inherited from the former AT&T systems he had bought. After the acquisition, Mediacom was serving about 319 communities throughout the state of Iowa, and was using approximately 250 head-ends to do so. The sheer number of head-ends not only created a maintenance nightmare, according to Charles King, VP North Central division, it was also an expensive proposition to replace equipment. As the upgrade proceeded to 860 MHz with a fiber overlay, the number of head-ends was reduced to about 15. In the greater Des Moines region, Mediacom interconnected and collapsed 25 headends into one.

?Life becomes simpler and much less expensive and, obviously, because you can spend more time in a head-end the likelihood of having a problem that affects customers for any length of time becomes nil,? King says.

The initial plan called for a two-year time frame to complete the upgrade, but it ended up taking 18 months, says regional engineer Don Dettman. Mediacom brought in a core group of engineers from its home office in Middletown, N.Y., to oversee the project. Executives from headquarters also flew in every other week to make sure everyone was on track. Purcell and his group had a huge flowchart that tracked every step of the upgrade, from ordering fiber and electronics, to the direct mailers that were sent out to customers, to tracking the teams of contractors that did the actual work.

?We found that once we got started, the economies of scale and the personnel abilities allowed us to speed it up,? Purcell says.

Not only were residents in the outlying communities clamoring for advanced services, there was decided pressure from another area ? satellite ? which meant Mediacom had to get its digital service up and running throughout the entire Des Moines service area.

To fight off satellite competition, which has picked up now that EchoStar Communications offers local channels (DirecTV also plans to offer the local stations soon), Mediacom has launched a dish buyback campaign that is running from March 1 through the end of this month. The system is offering a $400 credit over a 16-month period, or $25 a month, when satellite customers subscribe to the digital choice package.

Mediacom has been busy setting down roots in Des Moines, making sure that the customers become familiar with the new local cable company and know that it is there to stay. Purcell and his team have been working with local franchise authorities, reassuring them that Mediacom is meeting the promises it made when it acquired the systems. A new local channel was launched; one recent offering was a replay of the girls' high school basketball state championship game. The system is heavily involved in Cable in the Classroom and other educational programs, including a program that awards 25 $1,000 scholarships.

Mediacom also teamed up with OnMedia, the company's ad sales arm, and a California-based nonprofit organization for a public service campaign called ?Shoes That Fit.? About 2,000 pairs of shoes, along with coats and other clothing, were collected for local kids. By limiting retailers who wanted to be involved in the program to those that advertised with Mediacom, the company generated thousands of dollars in ad revenue as well.

One of the big issues the company faced in Iowa, according to King, was that under AT&T there was not ?as robust a channel lineup? as there was in other comparable-sized communities, ?and the pricing reflected that.? After Mediacom's upgrade, the company raised rates to reflect the new enhanced lineups. ?It was a challenge for us to communicate to our customers in an effective way? those changes, King explains. But the flip side was that it forced the company to shore up customer service operations. Mediacom's CSRs now answer 90% of calls within 30 seconds.

?What we're really trying to focus on is a one-call solution,? says Valerie Eagen, regional manager for customer service. There is one call center in Des Moines that handles most of the call traffic for the city and its suburbs, or about 2,500 calls a day.

Purcell and his team are hoping that Mediacom's new services, including video-on-demand and high-speed data, will keep folks from churning to satellite. Also in test mode is a telephony product.

High-speed data service is now available in 97% of the state, although Mediacom's HSD penetration of basic customers in the greater Des Moines area is about 21%, or about 33,000 customers. Cable modems are a big weapon against satellite competition, and Mediacom is trying to make the most of that power.

?March was one of our greatest months,? Purcell notes. ?It was an end-of-the-quarter push, but it's a push we put in place each month,? he adds. He declined to disclose the entire number of HSD subs added for the month or the quarter, but said that in the city of Des Moines alone, last month the system added about 700 HSD subs.

Mediacom is still expanding its video-on-demand efforts in Des Moines; currently the service is available to the core areas of the city proper. While VOD has been a ?mass market? campaign, Purcell says, a couple of software issues related to the set-top box have kept the system from a full rollout of SVOD.

The system hasn't launched HDTV on a huge scale, but it does offer customers an upgraded box, the Motorola DCT-5100, with which they can view HD feeds from HBO, Showtime and the local CBS affiliate. Additional content should be online within 30 days, King says. That full package of content, along with the box, will cost about $14.

When Mediacom bought the AT&T systems, it took over AT&T's media sales arm, AT&T Media Services. Rather than continue its third-party deals for ad sales, it brought those operations in-house through the AT&T sales division, changing the name to OnMedia. Mediacom has taken other third-party ad sales operations in-house in the areas where it made sense to do so, says Bob Montgomery, OnMedia's senior director of regional operations.

Montgomery has been spending more time than usual traveling between Iowa, where Mediacom has opened three new advertising zones, and Minneapolis, where he hired a sales manager, Alex Amory, and is looking for a couple more ad sales staffers to beef up that team. In addition to Montgomery, OnMedia has 16 sales reps and two managers in Iowa.

As it is for many cable systems, the automotive category is considered a bread-and-butter category in Des Moines. Depending on the area, local shops are also big advertisers, from a local dress shop to hardware stores, Montgomery says, as well as government-mandated PSAs from the tobacco and gaming industries.

As Mediacom's largest system, Des Moines is also the largest revenue producer when it comes to ad sales. Overall, Mediacom reported a 39% increase in ad sales in 2002, to $11.8 million (including $1.6 million in programming service fees). On a conference call in February, Mediacom CEO Commisso attributed the growth to ?much-improved market conditions? and ?the overall stellar performance of our in-house advertising group.?

Steve Litwer, OnMedia's VP, sales development, says there was no silver bullet behind the increase. He says the OnMedia sales team receives a constant barrage of tools, resources and reinforcement that collectively drives the better-than-expected performance. In addition to an online training course for new account executives ? which he says paid for itself in the first month ? OnMedia has rolled out a compete set of standard operating procedures for client services that streamlines what their account executives do and how they do it. OnMedia's internal website includes as reference tools ?every great proposal, script or pitch ever done? by any office in the company, Litwer says, while a monthly newsletter always includes a business advice section such as this month's ?how to maximize auto dealer revenue in a tough economy.? OnMedia also has launched a year-round recognition program for its top sales execs.

OnMedia is ?focusing only on things that bring clients ideas and motivate our own people,? Litwer says. ?I'm proud that as a small MSO we've been able to muster all of this together. We're not sitting here with 25 people in corporate ? there are five of us.?

In Des Moines and throughout the state of Iowa, the upgraded cable plant and new channel lineups have also helped to boost performance.

?All these upgrades are for the better,? says Kelli Conger, the media director at Flynn Wright, a longtime Des Moines ad agency. ?It allows for more local ad insertions on channels.?

Conger says that one of cable's biggest selling points to advertising clients used to be what she calls the ?geographic positioning? of cable. ?We have a lot of clients that are Des Moines metro-based. We wouldn't have any waste.?

Year after year, advertisers such as the Flynn agency's big cable clients Atlantic Bottling (the local Coca-Cola bottler), Joseph Jewelers and Iowa State Bank have seen results, so it was easy to make recommendations based on that. Now those clients can hit a lot of the metro area, but advertisers can also target areas west of the city and throughout the state, through one sales contact.