Comcast Aims to Put ‘Local’ Back in Cable TV
Comcast Aims to Put ‘Local’ Back in Cable TV
Source: The Oregonian
“Local,” “cable” and “television.”
When Comcast Cable President Steve Burke talks about the changes he is making at his new acquisition, AT&T Broadband, he can’t say those words enough.
That’s because his combined local cable-TV company wants to act more like a local cable-TV company. In this case, that requires changing everything from its priorities to its name.
So this weekend, Philadelphia-based Comcast is starting by officially putting its moniker on the former AT&T Broadband cable-TV networks in Oregon and Southwest Washington that it acquired in November. More substantially, it is redirecting its time and efforts to improving TV and Internet services, and it’s moving customer-service jobs back to local offices from out-of-town contractors.
And the 40-year-old cable company is shedding the focus on phone service that was at the core of AT&T. The once-titanic phone company in the late 1990s ventured into the cable-TV industry, dreaming of creating an even more massive communications empire. But it lost hundreds of thousands of cable-TV subscribers during the past few years — a failure Comcast executives attribute to lost focus and cut corners.
“The biggest change will be that we are a cable company,” Burke said. “We’re a cable-centric company, in contrast to AT&T, which was really a telephone company by sort of chemical constitution.”
But consumer advocates and regulators say the only way for Comcast to stop the AT&T bleeding is to keep a lid on prices without cutting costs so dramatically that service plummets. And Comcast’s 10 percent cut in Oregon and Southwest Washington staffing soon after it acquired AT&T Broadband created doubt about how local Comcast truly plans to be.
“The merger took two very powerful cable monopolies and united them into a larger monopoly,” said David Butler, a spokesman for Consumers Union, a consumer-advocate group based in Yonkers, N.Y.
“We are very skeptical it is in the best interests of customers.”
Big dreams dashed Throughout the late ’90s, AT&T became the nation’s largest cable company through a string of acquisitions. But its cable system failed to gain much praise from consumer groups.
The company had no experience with TV or cable-modem Internet service — the two staples of most cable companies. Nonetheless, AT&T saw the purchase as the linchpin of its strategy to take advantage of convergence — the promised revolution of one line for watching TV, talking on the phone and surfing the Internet.
The company’s cable lines already provided the TV and, in a growing number of areas, the Internet. And it already had the nation’s largest long-distance system. The big plan was to merge those assets and deliver full service — including long-distance and local phone service — into households via the cable hookup. They would steal customers from the Baby Bell phone companies such as Qwest Communications International.
For the past few years, it invested much of its capital budget in adding local phone service to some of its cable markets. Vancouver was among the first in the nation to hook in, followed by most of Portland’s western suburbs.
But the investment had its costs. AT&T built a substantial customer base for local phone service, but the venture distracted the company from improving Internet and TV services.
“In the AT&T world, the management style was kind of, do everything now and do it quickly,” said Curt Henninger, the senior vice president who ran the AT&T cable network in Oregon and Southwest Washington since August 2000. He will continue to head the 1,350 local employees under Comcast.
Because AT&T cut costs in the Internet and TV units, customer service suffered. It outsourced most consumer calls to contractors in Ohio and Texas, only to face hundreds of thousands of dollars in fines from Portland-area regulators for delays in answering calls.
“I think there were times the AT&T management folks got up in the morning and consciously decided how to shoot themselves in the foot,” said Rich Esposto , executive director of the Sacramento Metropolitan Cable Television Commission. Unlike Portland-area regulators, who are just becoming acquainted with Comcast, his area was served by Comcast until 2000, when AT&T acquired its local cable systems. Now his area is home to Comcast again.
“The best times we had here in Sacramento were with Comcast prior to AT&T,” Esposto said. “Where AT&T would swamp me with lawyers and intimidation, the Comcast folks sit down and say, ‘Here’s what’s going on; what can we do?’ ”
In 2002, AT&T’s subscriber count in Oregon and Southwest Washington stayed flat, at about 540,000 homes and 60 percent market penetration. That’s better than many of its other territories, which saw subscriber counts fall. But the company had wanted growth.
As the economy soured and the tech sector slowed, AT&T realized convergence wouldn’t be reality anytime soon. So in October 2000, it gave up on the dream, announcing plans to split its long-distance units from the wireless and cable companies. It spun off wireless in 2001 and the next year sold cable to Comcast.
Now Comcast has to clean up.
Refining the future One of Comcast’s first changes was to plan expansion of local call centers — the same ones where AT&T laid off employees — and gradually move away from outsourcing.
The company will expand its call center on the Tektronix campus in Beaverton. This year it will add 100 employees and begin taking billing calls from local TV customers.
“If they call and say, ‘I’m calling from Eugene,” you don’t want the operator to say, ‘Is that Eugene, Mass., or Eugene, Ore.?’ ” said Burke, the Comcast Cable president.
Comcast’s also put the brakes on expanding and marketing the local phone service. It will continue to offer connections, but it won’t promote or expand for the next year or two as it waits for cheaper, Internet-based phone technology to evolve.
And because it is no longer part of AT&T, it has little incentive to peddle long-distance service.
“To be successful, we should concentrate on a limited number of priorities,” Burke said.
Those priorities are its core TV assets, which it hopes to improve in the next year by expanding beyond parts of Lake Oswego and Tigard the availability of video-on-demand, which allows customers to order movies and programs for viewing whenever they want. And it also is negotiating contracts with local broadcasters to provide their high-definition television programs. Henninger hopes to offer HDTV by summer.
Both services will help it compete with satellite providers DISH Network and DirecTV, which have stolen customers during the past few years. Satellite providers don’t offer either video-on-demand or local programs in HDTV.
“We see these as being things that cable can do and satellite can’t do,” Burke said.
Comcast has increased its anti-satellite marketing efforts. AT&T provided $200 credits to customers who traded in their dishes for cable, and Comcast doubled that rebate. And last weekend, Comcast began a program in which it paid employees to spend their free time driving around neighborhoods and jotting down addresses that have satellite dishes, in exchange for $3 an address. The employees collected 22,000 addresses in the two days. Comcast will now send promotional materials to those customers.
“Where I would say we feel the most competitive intensity is the video business, competing with DirecTV and Dish,” Henninger said.
Local regulators say the new services are a smart move, especially in Oregon, where the downturn is causing many people to reconsider paying $39.04 a month plus taxes for standard cable. Services such as video-on-demand bring in additional revenue from those who can afford them, making up for business lost to the recession.
“They’re clearly changing some directions and, with video-on-demand, trying to capture a chunk of the market,” said Bruce Crest, administrator of the Metropolitan Area Communications Commission, which regulates cable in Washington County and the Tualatin Valley. “This is a new revenue stream.”
Work to be done While Comcast has big dreams, it has yet to win over consumer advocates and local regulators. Last month, it announced plans to cut 164 local jobs while simultaneously expanding the call centers.
Comcast said the cuts — such as the consolidation of two repair and installation departments — were made by local management. But Henninger said the company is trying to create Comcast-level efficiency out of the old AT&T systems.
“We understand where we need to be to hit the kind of cash-flow expectations that are consistent with what Comcast has been able to deliver,” Henninger said.
Crest said he was concerned about some of the cuts, such as the layoff of an employee who helps regulators handle consumer complaints.
“She knows the people. She knows the area. She knows the problems,” Crest said.
Dan Williams, a Comcast spokesman, said a new position with more responsibility is being created.
And Crest said he is curious to see whether cable rates will continue to rise much faster than inflation. In much of Portland, cable rates have risen 67 percent since deregulation of the telecommunications industry in 1996. In January, Comcast raised local rates by an average of 8.5 percent.
Burke wouldn’t offer any promises about cable rates, but he attributed the hikes to increased costs Comcast faces when paying cable networks to air their programs.
“We’re certainly sensitive to the fact that nobody likes to see rates go up, and we try to keep the increases as modest as possible, given the programming rates are going up,” Burke said.
Esposto, the Sacramento regulator, said both Comcast and AT&T jacked up rates at about the same pace.
“Comcast at least seemed to try to put something in to sweeten the pot,” he added. “They’d add a channel or two to make it more palatable.”
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To see more of The Oregonian, or to subscribe the newspaper, go to http://www.oregonian.com
(c) 2003, The Oregonian, Portland, Ore. Distributed by Knight Ridder/Tribune Business News.
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