Kansans Have Gone Digital in a Big Way

BY K. C. NEEL

If there's one thing Time Warner Cable in Kansas City has gotten good at it's crisis and disaster management. In less than two years, the system has had to grapple with an ice storm that left parts of the city without power for weeks and a tornado that devastated a large swath of the metropolitan area.

?We learned a lot after dealing with the ice storm [in February 2002],? says director of field operations Steve Bennett. ?It all happened within four or five hours. You could hear trees falling and see wires popping and transformers going. It looked like a war zone in spots. The next day we were in shock at the damage and devastation.?

Time Warner Cable in Kansas City ? a 50/50 partnership between Comcast Corp. and TWC, which manages the property ? immediately rolled trucks and crews to assess the damage but learned that wasn't the most effective and efficient thing to do.

?We thought we had to do things right away,? Bennett says. ?But in hindsight, if we'd started 12 or 18 hours later, we'd have saved ourselves time, money and energy.?

Now, when disaster strikes ? as it did in early May when a string of tornados ran roughshod through the northern section of the city ? TWC sends out select crews to assess the damage before deploying repair crews. From those initial scouting trips, the company can more adequately determine what's required to restore service to customers, Bennett says.

Time Warner also has a contingency plan in place in case it needs additional construction and repair crews in a hurry. To help clean up and rebuild in the wake of the ice storm, it brought in ten construction crews from other TWC divisions and hired another 20 independent crews to restring and fix damaged plant.

?We brought in 70 or 80 people just to get drops back up,? Bennett recalls. ?The logistics were difficult. Just finding lodging and feeding those folks was hard and coordinating all of them at the same time was a challenge. We had people working 16 to 18 hours a day and they couldn't find food. Restaurants weren't open because they had no power. So we established what we call ?happy vans.? We dispatched six vans filled with food, snacks and drinks so that crews could eat while they were working.?

The system continued the happy van concept when the tornado struck in May and has expanded the program with what Bennett calls ?happy carts? as well. TWC's Kansas City system recently underwent a billing conversion from DST Innovis to Convergys and the carts were used to deliver snacks to overworked office workers trying to complete the conversion.

Within four weeks after the ice storm hit, TWC had 90% of its plant back up and running, but it took another three weeks to get all the drops back up. In total, TWC had to replace 200 miles of its 5,834 miles of plant and 45,000 drops after the ice storm. The tornado was less destructive overall: Only 35 miles of plant and 500 drops needed repair. But, Bennett notes, hundreds of homes didn't need drops because there were no homes to connect the wires to.

He says the ice storm cost the system millions of dollars to rebuild plant and reestablish service to customers. Initial estimates of the tornado put the damage to TWC's plant at around $1 million, but in the end Bennett says the damage ended up costing closer to $500,000.

Despite the natural disasters that have plagued Time Warner Cable in Kansas City in the past couple of years, the system is clicking right along when it comes to business. Over half of the company's 307,000 basic cable customers subscribe to digital cable service, says Rob Moel, president of the Kansas City division.

To date, 15% of the households in Kansas City subscribes to cable modem service, according to Scarborough Research. TWC puts the penetration rate at 19% of homes passed with over a third of its customers subscribing to HSD service.

Moel, who came on board in Kansas City last November after running Time Warner's Shreveport, La., division, has reorganized the system a bit. The Kansas City division had been geographically organized but now the management chain is more functionally organized. Today, for example, an installation group oversees the entire division rather than having four different groups in specific sections of the city. As a result, installation completion rates have gone from 70% to over 90%, Moel says.

It's not that the old way was wrong, he explains, but sometimes looking at and doing things differently can stimulate results. A voracious reader with an admittedly esoteric reading list (he's currently reading The Millennium Problems, which examines and dissects how some of the most complex math problems have been solved), Moel believes that looking at an issue or problem from a different point of view can produce good results.

?I took a test once where you had to find some words on a page of paper,? he recalls. ?If you looked at the page, you wouldn't be able to figure it out. But I turned the paper upside down and immediately saw the pattern. Sometimes you have to do that in business.?

Moel, an engineer with an M.B.A. degree, is stressing a return to the core fundamentals of the products and services the system sells. Initially, cable television was designed to fill a need, Moel says. People wanted to watch TV and cable brought them channels they couldn't get off air. Then they wanted variety and a whole host of networks were born to cater to that need. Today, he says, consumers want convenience and again, that's what cable is providing with on-demand programming and digital video recorders. It's incumbent upon Time Warner to sell the products that customers want, provide service that meets their expectations and repeat that time and again with every transaction, Moel says.

TWC has been offering on-demand programming since last fall and has had significant success with the product. The system rolled out DVRs in late May. Moel says the DVR launch has been somewhat soft so the system can satisfy the demand. One of the problems the system had when it introduced on-demand programming was keeping up with the high demand. Time Warner is selling its DVR product for $9.95 a la carte.

Time Warner has made a conscious effort to sell its digital product to as many customers as possible. And it's paid off. Every campaign and every transaction is designed to push digital, says Larry Peterson, VP of marketing. Today, the Kansas City system has one of the highest digital penetration rates in the country. When TWC bought Tele-Communications Inc.'s 90,000-subscriber property in neighboring Overland Park, Kan., a few years ago, the system hired 60 door-to-door salesmen to sell its digital offerings, Peterson says. ?We contacted 70% to 80% of the customers and got a 60% penetration rate in Overland Park.?

The Overland Park system, which was upgraded from an analog trapped property to a two-way digital system, also moved HBO from analog to digital. The decision worried HBO honchos who thought they might lose the bulk of their customer base in the transition. But the concern proved unfounded; TWC managed to migrate 80% of the existing HBO customers to digital and added new HBO customers in the market as well.

?HBO uses our migration program to digital as a case study for other systems contemplating similar changes,? Peterson says.

Time Warner still uses door-to-door salesmen extensively as a marketing tool to push new and existing products. One of its most recent pushes has been selling subscription video-on-demand. The product has gone over well, Peterson says, noting that 50,000 homes took the service within the first month of it being made available in Kansas City. But there was a trade-off, at least initially. Peterson says pay-per-view and video-on-demand revenue dropped when SVOD was first introduced.

?People didn't see the need to buy a single movie as much when they had so much choice at their fingertips with SVOD,? Peterson says. ?But VOD usage is back up now.?

Although Time Warner has a free VOD component, it is moving way from the free moniker. The company offers a slate of basic programming as part of its on-demand offering but is now calling the free- to-consumer programming ?I Control Favorites.?

SVOD has become a sales component in luring dish customers back into TWC's fold, Peterson says. But its dish-buyback program isn't aggressive. It doesn't really have to be because dish penetration is only 14% in Kansas City, 21% lower than the national average.

Time Warner also has hardwire competition from Everest, which has 20,000 customers in Lenexa, Overland Park and parts of Kansas City. The overbuilder, like others across the country, has had to curtail its expansion and is struggling under a heavy debt load. Moel admits TWC has lost some customers to Everest, but notes it's gotten some back as well.

Time Warner is a winner with advertisers, says Julie Roberts, a media buyer with Fasone Garrett Boehme Advertising/Marketing in Kansas City.

?They are great to work with and all our clients have some cable in their mix,? she says. ?In fact, cable is one of my client's No. 1 medium. It's been fantastic for him and put him on the map.?

That's music to ad sales director Mark St. Clair's ears. A 22-year advertising veteran who has been with Time Warner for two years, St. Clair is a cable bull.

?This is a strong media market,? he says. ?The broadcasters are all owned by major media companies and the newspaper is strong. But cable has arrived. It's no longer second-rate.?

Time Warner sells ads on behalf of Comcast, which serves 97,000 customers in outlying areas of the DMA, and has carved the market into five zones. The company currently inserts ads on 38 channels but will soon add another three to its mix. The system also plans to add online media to its offerings sometime this year as well, St. Clair notes. With HSD penetration above the national average, advertisers are beginning to see the potential in the new medium, he says.

Media buyer Roberts agrees but notes that online advertising sales are not a big priority with her clients just yet. Still, usage of the Internet in Kansas City for commerce is either average or above average in almost every category, according to Scarborough.

?The opportunity to sell spots across platforms is a positive with advertisers. It also is a positive for us in how our advertisers look to us as a resource for all their needs,? St. Clair says.

That's Moel's attitude about cable customers as well. ?We need to sell our products, connect with our customers through installations and construction, renew that connection through billing and flawless customer service and repeat the process over and over every month,? he says. ?That's how we'll be successful in this business.?