When Blue Ice Piled High on Kentucky

BY JON LAFAYETTE

The staff of Insight Communications in Lexington, Ky., went through the proverbial trial by fire when a treacherous ice storm hit in February. For five days, 1 1/2 to 2 inches of ice froze on trees and utility poles. The storm knocked out electricity to many homes and ripped down the wires Insight customers depend on to deliver TV, high-speed Internet service and, most importantly, phone service.

?It's one of those things that really tested?the relationships that you have with one another in order to pull together to get things running again,? says Woody Hutton, Insight's SVP of operations, who runs the Lexington system.

?In a three-week period we responded to about 22,000 service calls, which is about eight months' work,? adds technical operations manager Winston Boggs. In that short period of time, Insight repaired 10,000 drops and 8 miles of plant.

The storm was a big test for Insight because it came only a few months after the MSO launched its telephone services. And while losing cable service is an annoyance, losing phone service is intolerable. ?We had 1,600 customers that?we had to get back on for obvious reasons,? Hutton says.

But that proved difficult in some cases. ?Telephone poles were coming down, falling trees were bringing down lines. We had a number of poles laying in people's back yards and up against their homes. So we ended up with about 27 customers that we were constantly going back to multiple times during the day.?

But phone service was largely unaffected. ?There were a lot of areas that didn't have power for ten days and we were shuffling around portable generators basically 24/7,? Boggs recalls. About 25% of the system is what Insight calls telephony certified, with backup generators and natural gas connections to prevent outages.

Keeping the Insight crew humming through three weeks of round-the-clock repair duty was also a chore. ?We brought in a caterer and had three squares catered every day,? says Hutton. Construction and installation crews from Insight systems in Indiana, Ohio and northern Kentucky were also recruited to help out.

Insight also made its customers happy by adding a week's worth of credit to every subscriber's bill. The MSO also provided studio space to WTVQ-TV. The local ABC affiliate's offices are underneath its transmission tower, and when the ice started to melt, it had to be evacuated. ?We let them come in and continue to broadcast their news,? Hutton says. ?We got plugs for some of the things we were doing and we built a little friendship along the way.?

The storm ended up costing Insight about $3 million. Some of that will be covered by insurance, but Hutton says the rest is going to be hard to make up. ?We're staying with our normal rate increase,? he says. ?There's no magical answer for when we're going to get it back.?

Things are a lot less hectic most of the time in Lexington. The first image that comes into most people's minds when they think of Lexington is horses, as expensive thoroughbreds are auctioned and raced here. But the city is also home to the University of Kentucky, a Toyota plant where Camrys are made, the world headquarters of Lexmark and a manufacturing plant for Trane.

Advertisers seeking to reach those employed by these entities turn to Insight Media Advertising, which is owned by Comcast. In addition to the Lexington system, the Comcast operation represents Adelphia systems in the 22 counties around Lexington, representing 94,000 subscribers.

Insight's Hutton says the relationship with the ad sales group is fairly well automated. ?They'll sell the commercials. They'll produce the commercials. They'll load them digitally into their equipment and they do all the billing,? he says. ?So the tie between us is a fiber line. We do communicate with them regularly because we have to flight our own cross channels through them, but it's a seamless, automated process.?

Hutton says he's pleased with the arrangement. ?The group here happens to be very successful. They've always been high producers and we certainly wouldn't want to do anything that would inhibit that from continuing. But any agreement, as it expires, it gives you a chance to sit down and reevaluate, and our agreement with Comcast will come up in the next couple of years.?

Chuck Crawford, GM of Insight Media Advertising, says his group sells ads specifically zoned to Insight's customers in Lexington, as well as spots designed to reach the entire TV market, including the Adelphia systems in outlying counties. ?We do a lot of zoned sales, but we look like a soft interconnect,? he says.

On the Insight system, there are 38 insertible networks. In some of the rural areas outside the city, the number drops off to between eight and 16.

Business has been outstanding so far this year, with sales 10% to 12% above last year, Crawford says. Those gains were coming both from increased volume and higher pricing.

Crawford declined to say how much in ad sales the system generated, but says, ?we drive a very good revenue per sub.? The ad sales staff is ?very mature,? and includes a general sales manager, two local sales managers, 16 local account executives and a national sales manager.

In prime time, spots for popular shows, such as TLC's Trading Spaces, fetch between $125 and $140 for 30 seconds. Spots bought as part of schedule rotators, of course, cost far less, but fewer clients are interested in buying spots randomly.

?When you start looking at large regional pieces of business, they tend to want to narrow dayparts and really narrow networks,? Crawford says. ?We're doing high sellout rates in Lexington with 18 to 20 networks per month.?

Larry Chiles, president and CEO of one of the area's largest ad agencies, Jordan-Chiles, says buying Insight is an important part of the television buys the agencies makes for its clients. ?They've got a penetration rate of over 80%, which is awfully effective,? he says. ?I'm impressed with their operations and their service.?

Jordan-Chiles spends in the six figures on cable during some months, Chiles says. Compared to the local broadcast stations, ?cable is very compeitive. We like the efficiencies.?

The agency tries to use a variety of channels to reach a wide audience. ?We really go for the rotators for maximum reach. We'll buy some fixed positions, but that usually applies to sports. The better way is to use multiple stations when putting a buy together, and then also to use it pretty broadly between 6 in the morning and midnight so we're getting a good distribution of all the different time periods and reaching different people.?

In addition to selling spots, Insight has a local commercial channel called Shopping the Bluegrass that offers businesses the opportunity to air two-minute spots. The channel was recently revamped, and the results have been phenomenal, according to Crawford. ?We went out and hired some professional talent. We have for the most part reformatted everything so it has a consistent look, very professionally done. The videography is very good, the talent will hold your attention.?

Huey Gray advertises on Insight to draw customers to Auto Banc, his used car business. He's been buying half-hour blocks on Insight's commercial channel to promote his ?Four New Tires? service, which promises four new tires on every car. The ads are produced by Insight and open and close with bloopers Gray's made while shooting spots. ?Everybody's got a great car, great gas mileage, great price, great interest rate. I just figure I have to do something different,? he says.

Gray spends 95% of his $20,000 to $24,000 monthly ad budget on TV, and most of that on cable. ?I'd say the bulk of the people that come in here is [because of] Insight.?

Insight also does local entertainment programming. Horse-racing channel TVG ?is a natural tie-in for us,? Hutton says. When the city's historic Keeneland Racetrack is in season, Insight tries to add some localism to TVG's coverage.

In addition to racing, the area is a center for the buying and selling of racehorses. ?We haven't consummated this deal yet, but we're trying to bring [in] the whole aspect and process of horse sales, which are huge events. You're having people flying in from all over the world,? Hutton says. While some of the material might appear on TVG, other parts would air on Insight's Channel 70, known as ICN70, which carries community-oriented programming. ICN70 also broadcasts 14 games per season of Lexington's Single-A minor league baseball team, the Legends, a Houston Astros affiliate.

The Lexington system was acquired by Insight in 1998. At that point, the rebuild of the system to 750 MHz was nearly completed, and digital service had been initiated.

But since the acquisition, Insight has moved more aggressively to introduce new products and technology. ?We repackaged [the digital service] to what we felt were more attractive packages for the consumer. We break the product up into different levels,? Hutton says. Instead of near video-on-demand, digital customers began getting video-on-demand. Lexington was also a test market for Commerce TV, which offered a virtual shopping mall over the digital platform. Insight is now rolling out its subscription VOD product.

The system had also just launched high-speed Internet service through Excite at the time of the purchase. ?I guess within nine or ten months, the whole fiasco came about and we launched the Insight ISP service, called Insight Broadband.? Now, Insight has about 12% penetration with its data service.

At that time, the system was also rolling out telephony. The upgraded plant needs a few modifications to handle phone service. New powering devices are being installed and the number of homes passed per node has been reduced to 1,200 from 15,000. ?We have telephone service in probably a little better than 25% of our homes passed,? Hutton says. ?We got slowed up with the ice storm, but by the end of this year we'll have it across our footprint.? (Hutton says Insight has 10% penetration in areas that support telephony.)

Insight is also rolling out its hi-def product, but is caught in an awkward position in terms of equipment. ?Because we're using Liberate as our middleware provider for the digital platforms, we currently have to use a dual-box scenario where we install a DCT-2000 and a 5100 for the hi-def customer,? Hutton explains. ?It's definitely not where we want to be long term.?

With more than 2,000 customers, Hutton feels the hi-def product is a success, ?and that's just basically with three broadcast channels.? Insight is now putting together a plan to roll out a true hi-def tier, he says.

Insight is marketing its product in bundles, offering price breaks to customers who take more than one service. ?Obviously we're going to continue to tweak the way the products come together and the discounting,? says Hutton. ?But the feedback we get from our customers is that they really like the one-bill concept, they like an alternative to the local exchange provider, and so every indication that we've gotten is that as soon as we get this telephone rebuild complete, that we'll continue on that type of pace for sales, so I think that's pretty hot right now.?