On L.A.'s South Side, People Get Around

BY ANDREA FIGLER

More top ten cable operators coexist in Los Angeles than in any city in America. In fact, five cable operators control all the franchises here. Adelphia takes up some of the prime real estate in Franklin Hills, Beverly Hills and Manhattan Beach. Time Warner Cable gets the valley, Cox the harbor areas and Charter just a tiny sliver of the city.

Then there's Comcast. Aside from a small allotment of premium beachfront realty near Marina Del Rey, the nation's largest MSO mostly covers the lower income boroughs of South Central, Korea town and the heavily Hispanic blue-collar cities of Southeast Los Angeles. Add the other portions of Comcast's Southern California market and the households it serves are 11% more likely to fall into the under-$50,000 income bracket than the top 75 market average, according to Scarborough Research.

More importantly for Comcast, the territory has been a historical magnet for transients; 67% of the people living in Comcast's service territory are more likely to rent than own their homes. Emigrants migrate in, move up the ladder and then relocate. Renters come into multiple dwelling units, then go out of them.

?About 53% of our homes passed are MDUs,? says Bill Erickson, Comcast's VP of sales and marketing for the region. ?It's a good news/bad news story.?

The good news: There's a lot more opportunity to get more subscribers per square foot, and some of those subscribers have a lot of disposable income.

The bad news: It makes it all the more difficult not only to keep subscribers when they move but also to keep them happy while they're still connected.

Perhaps that's why Comcast has the lowest market penetration in its franchise areas ? 34.2% ? of all the city's cable operators, even though it has the largest number of subscribers ? 264,730 at the end of last year, according to an annual report by the city's Information Technology Agency. (Comcast would not provide the subscriber count or market penetration for any of its territories throughout Southern California.)

?The fragmentation of the market makes it extremely unique,? says Deborah Picciolo, Comcast's senior regional VP for the division that oversees Los Angeles. ?We can't take advantage of mass media. We have to work twice as hard.?

The market's transient nature partially explains why Comcast inherited a pretty heinous customer service track record when it merged with AT&T Broadband this year, Picciolo says. When people move constantly, it creates more transactions and, subsequently, more calls to the operator and the city. Last year, AT&T Broadband had the highest percentage of noncompliance in terms of resolving customer complaints ? 55.7%, according to the city's annual report.

Overall complaints, however, did fall significantly, compared to 2001. Complaints totaled 1,636 last year, a 44.5% drop. Complaints per 100 subs also fell 45.8%, the second-highest complaint reduction for all operators in the city. At the same time, AT&T Broadband's subscribers grew 2.41% last year, compared with 2001, whereas subscriber growth for every other cable operator stagnated or dropped.

Picciolo attributes this small success to Comcast's move to give more control to local managers. ?We're really getting back to our roots,? she says. ?It was a little bit of a challenge over the years.?

AT&T Broadband wanted to centralize administrative decisions, which flattened any local initiatives that were imperative for the areas in Los Angeles. The call center, for one, was brought back in-house locally after Comcast took over, making Picciolo breathe a little easier. ?We brought all of those calls back,? she says. ?They said you make the business decisions. So far, it has been wonderful.?

The system's customer call center was significantly improved because of an upgraded phone system, which directs the appropriate calls to the right teams, says Rhonda Mohacsi, director of customer care. The upgrade makes it easier for customers to pay monthly bills by credit card. The new system also can automatically identify which area a consumer is calling from and play any appropriate message if, for instance, there's an outage.

The system also spread the billing cycle evenly across 28 days of the month, which reduces any call spikes concerning bills. Comcast also extended its billing hours, making it easier for any Angeleno to come in and pay on time.

But a lot of the service improvements stem from plain old communication, says Perry Parks, VP of government relations. Starting last July, Parks began meeting with the city on a quarterly basis to make sure that consumer calls coming into the system's call center and the city were on the same page.

?We wanted to make sure we were tracking and accounting the calls in the same manner,? Parks says. For example, if one customer called in with three different complaints, the city counted that call as three different calls. So the cable operator had to adapt to the city's way of thinking.

Parks also had to make the city realize that many calls coming in were due to the basic fact that Comcast has more transactions because of the transient, low-income nature of its service area. There are more people moving and more nonpay disconnects. Comparing Comcast's statistics to the other cable operators within Los Angeles is not necessarily comparing apples to apples, Parks explains.

Communication comes in all forms, though, including digital messages from a cable operator's head-end to a consumer's set-top box.

Ray Tyndall, director of field services, attributes some of the system's customer-care improvements last year to the Remote Addressable Digital Addressable Network Interface Server-Download Server, otherwise known as the RADD 6000. The RADD can poll converters for pay-per-view buys; send global refreshes to digital boxes; fix connections; and even upgrade on site.

Although the RADD has helped improve the field technician's job, Tyndall won't stop there. He and all the customer service folks want to reduce the window of time needed for a service call to two hours down from the typical four-hour window.

Customer care center executives also try to hire as many multilingual customer service representatives as possible, speaking languages from Russian to Korean and, most importantly, Spanish. Comcast's area is 225% more likely to have people of Hispanic origin than the top 75 market average, according to Scarborough Research. Therefore, the system has had an 800 number in Spanish for the past five years.

When it comes to marketing cable products, the system must go beyond language in order to win over noncable subscribers hiding in the ethnic pockets of Los Angeles. Just this month, Comcast sponsored the Fiesta Broadway, a special event celebrating Cinco de Mayo in downtown Los Angeles. It sponsors similar cultural events in Korea town.

On top of that, Comcast tailors its new product offerings to each market. For the Hispanic areas of South Central and the Southeast cities, the cable operator offers high-speed data service for the cost of dial-up for three to four months. Customers get a taste of the service for a low price and then, typically, pay the increased price of $42.95 for a cable modem with cable service, says Erickson. (He would not disclose the number of high-speed subscribers.)

High-definition television, which Comcast was scheduled to launch this month, also will be marketed locally. The operator plans to offer six channels (ABC, NBC, PBS, HBO, Showtime and Fox), for free if customers buy the hardware on their own.

With the system's area 97% rebuilt and reinforced with a sonet ring, video-on-demand should follow by the end of the year. The system has already tested VOD in two sections of Los Angeles ? Culver City and Westchester.

?We believe VOD is a significant competitive advantage,? says Picciolo. ?I think time will tell ultimately if that was a good decision.?

While Los Angeles has some over-builders ? RCN in Carson and Altrio in parts of Los Angeles ? they haven't seriously threatened Comcast to date, Picciolo says. RCN, which has between 700 and 800 customers, has stopped marketing its services there, she adds.

Pattie Eliason, RCN's VP of marketing for the California region, begs to differ. While RCN has not been promoting its cable package separately, RCN has been aggressively marketing its bundle package, all three services of high-speed data, phone and cable. And, she clarifies, RCN's marketing is paying off: The system has well over 1,000 subscribers.

Still, if Eliason's numbers are correct, that's not a huge amount for Comcast to worry about.

Satellite providers are a bit more of a headache. Satellite penetration is at 18% for the Southern California region, says Erickson.

Comcast is working to lower this percentage. It has switched more satellite subscribers to cable in the first four months of this year compared with the same period in 2002, Erickson adds, though he would not provide the numbers.

One thing Comcast can offer that satellite can't is targeted advertising in the second-largest DMA nationwide. Marty Sokoler, VP/GM of advertising sales for Comcast in Southern California, says targeting different pockets of Los Angeles makes Comcast's reach unique and, to put it bluntly, ?not white-bread.?

?It's a targeted business,? he says. ?You're not all things to all people. The growth potential of this industry is still in its infancy.?

Targeting the local community can produce some profitable results even if it's got a strong percentage of low-income residents. For example, the local retail music chain V.I.P. Music spends about $80,000 a year advertising to Comcast's Compton and South Central territories, says Kenneth Jerome Williams, the chain's supervisor.

Williams started monopolizing the local spots on Black Entertainment Television in the first quarter of 2001, buying about 50% of BET's prime-time commercial airtime and a smaller portion of MTV prime time. Sales doubled for the second quarter and tripled for the third quarter of 2001, he says.

?It was unheard of for a retailer to buy like that because the record companies weren't buying like that,? Williams says.

But, after his approach paid off, music industry representatives started coming to Williams if they wanted to advertise in that area. He had cornered that market in his targeted areas. It has proved so successful that rarely does he drop money into broadcast television, he says.

As for Comcast's part of the Los Angeles DMA, national media buyers tend to forego Comcast and rely on Adlink, the city's interconnect, to get spot cable, according to a supervisor for a major media buying agency who asked for anonymity. Most national buys come from the network level so the local spot cable gets overlooked unless there's a good sports game such as the Lakers or a UCLA basketball game, she explains. Even then, it's usually purchased through Adlink.

Comcast's Sokoler says the top industries buying local cable spots are automotive, retail and entertainment. Condo developers also like to target the area to convince those transient renters to invest in their own property, Sokoler adds.

So perhaps Comcast's territory in Los Angeles is best touted as a way to get local. After all, V.I.P. Music capitalizes on Comcast's ability to reach what the retailer's supervisor refers to as ?Black L.A.? ? Compton, Watts and South Central. It is this area where Williams films V.I.P. commercials. ?It's like a neighborhood kind of commercial,? he says.