Remember what it was like before cable TV? When the consumer had maybe five channels, all network-driven? Since then, our channel choices have multiplied into a glut so huge that remote controls are mandatory. During approximately the same time period we have also witnessed the development of the Internet as it has expanded exponentially becoming a facet of everyday life. Once delayed by dial-up tones and “image downloading” bars, we now demand usage of our media, data and communications with lightning-fast speed and constant access.
As the nation becomes more wired, we seek even greater control over the ‘what, when’s and where’s’ of our entertainment, and communications. To get to the next “best place faster” seems to be our obsession.
To get us there is Time Warner Cable’s mandate. Time Warner Cable has been a pioneer in the dynamic cable industry, bringing the digital age into America's living rooms and transforming the way Americans receive information and entertainment.
The company has been franchised to operate in the Charlotte region since the early ‘70s, conducting business under various names including Cablevision, ATC and Vision Cable. Through repeated acquisitions, it has gained the dominant position in the Charlotte market. Their morphing in the Charlotte market has been a mere microcosm of their activity as a national entity, the behemoth proportions of which are most significantly illustrated by the merger of their parent company, Time Warner Inc., with AOL in 2001.
The Charlotte Connection
Time Warner Cable (TWC) is a state-of-the-art operation that nationwide serves over 10.8 million customers. Of those, 395,000 are Time Warner Cable Charlotte’s (TWCC) customers, and that number is rapidly growing. David Auger president of the Charlotte Division, points out that in the past three years the company has added 85,000 high speed Internet customers and made 115,000 upgrades to digital cable. In the last 12 months alone, the Charlotte Division has seen a gain of 16,000 core video customers.
Auger attributes TWC’s success in Charlotte partly to its demographic profile. He explains, “Charlotte has a lot of young professional affluent constituents who want things their way and right now, so we are doing everything we
can to satisfy that.” “Plus,” he adds, “the growth of the Charlotte market has been phenomenal and relatively insulated from the economic downturn. The combination of these things positions Charlotte to demonstrate the future of what cable is to be in the next five to 30 years.”
TWC accomplished much of its early growth through “clustering,” which involves uniting various cable companies via acquisitions to create a more efficient pipeline to the customer. Clusters are cable divisions across the country serving 300,000 customers or more.
After forging this network, TWC underwent a $4.1 billion cable upgrade nationally, including the 12,000 miles of cable in the nine-county TWCC region. Fiber optic line married with existing copper cables increased the bandwidth of the line from 450 MHz to 750 MHz. Hence, the result is “broadband,” a thicker, faster connection that has led to the deployment of digital cable and high-speed internet services such as Road Runner, Earthlink and other Internet service providers.
Needless to say, the outcome of the investment has been very rewarding. The upgrade to what the company calls the “hybrid fiber-coax cable” allowed TWCC to launch high-speed Internet access with Roadrunner in Charlotte in early 1998.
Auger adds, “It was a very practical and efficient move for us to make. The original coaxial cable was already in people’s homes. So we could provide the extra bandwidth and do so without being intrusive.”
They also got to the customers first and delivered a sound product. Says Auger, “The strategy of ‘being first’ is very deliberate throughout the company. It is our mission not only to satisfy the status quo, but also to anticipate the customer’s future needs. This is the idea behind the “Now Anything is Possible/Flying Pig” ad campaign: to accomplish things that at one time we never thought possible.”
Local and National Competition
TWC has had local competition from some competitive products. Satellite has taken a large bite out of the cable subscriber base. And companies like BellSouth are aggressively marketing DSL connections to compete with TWC’s Road Runner.
Auger remains cool in the face of this competition. “We are seeing a lot of satellite customers return to us. The customers complain of unreliability and unmet expectations. We now have a warehouse full of satellite dish receivers that we have accumulated through our dish trade-in program.”
Auger admits DSL competition is a little trickier. “BellSouth has been really pushing hard with their marketing; however, since we have provided such a good product with our high speed access and since we did it first, our subscribers have been very loyal. They have had no need to change.”
National competition in the cable modem arena became somewhat more heated in the last year as Comcast, AOL Time Warner, and cox communications all vied for AT&T’s cable unit. Comcast was ultimately successful, resulting in the following numbers of subscribers for the various players according to the National Cable Telecommunications Association (as of June 2002): Comcast, 21.8 million (AT&T Merger 11/18/2002, all data proforma as of the second quarter 2002; Time Warner Cable, 12.8 million; Charter Communications, 6.8 million; and Cox Communications, 6.3 million.
Laying Down the Line
Despite these challenges, TWCC has had record growth over the past twelve months. Auger reports that, “October and November 2002 were the largest months of subscriber gains we’ve seen in many years.”
To accommodate this growth, TWCC has increased its local employees to 1,100, at a rate of about 10% per year. It has also launched a 24-hour news station, News 14, which employs an additional 92 people.
As if the sheer volume of new hires wasn’t enough to keep TWCC’s training facility busy, it has the added pressure of staying ahead of the technology curve, as well as responding successfully in customer service.
Auger explains, “We have a 7,500-square-foot training facility that has an actual house replica on stilts for technicians to learn wiring. We pull our customer service reps off the phones during slower times to make sure their skills are fresh. People are constantly practicing their jobs, and this is mandatory.”
Auger acknowledges that it’s no secret that cable companies were notorious for missed calls and late appointments, but he assures that these problems are a thing of the past. “We have spent millions of dollars on training, programs, and service improvements. This also includes hiring highly qualified employees, and keeping them informed. Five to seven years ago companies were known to hire someone off the street, train him or her for a month and that would be it. That cannot be the case if a business like this is to survive anymore.”
TWC’s new products also serve to reposition the company in a positive light. J.D. Power and Associates awarded it the highest customer service ranking in the country for its Road Runner Internet vehicle, and its digital service is increasing incrementally. It also now offers Video-On-Demand, where subscribers can order a movie from TWC’s servers for 24 hours and watch it, as many times they like, at any time of day. TWC is committed to continue new product development at a faster pace than ever before.
Just recently, in November, TWC was in the final testing stages for their PVR, Personal Video Recorder. Much like TIVO, TWC’s PVR will allow pausing, rewinding and fast-forwarding (as much as has been recorded) of a real-time broadcast. The converter stores the program onto a hard-drive and gives the viewer the freedom to watch at his or her convenience. Auger says he personally loves it for football games, “I can get up, make a sandwich, and not worry about missing that important play. Plus, I can go back to the game in real time at the flick of a switch.”
The PVR also allows two programs to be recorded simultaneously while the customer is watching a third. The product, according to Auger, exemplifies TWC’s dedication to the customer, giving them what they want, when they want it. He adds, “At a price of $4.95 for a digital subscriber, it is also a pretty reasonable value.”
Auger highlights two other products in the pipeline. The first is home networking, wherein high-speed Internet access users can have up to three computers online at once, with a wireless connection. The second is IP telephony, which is a telephone connection that travels via a residential cable line. Says Auger, “IP telephony is currently being tested in a couple of markets and is expected to give TWC a super competitive edge.”
The Costs of Connectivity
These flashy concepts come at a cost, however. In November, TWCC announced a 7percent rate hike. According to Auger, “The increase was necessary as a cost of our doing business. Our costs have skyrocketed. Our programming services have gone up 22 percent. So, you can see we have tried to keep the rate increase as minimal as we can to our customers.”
Sue Breckenridge, vice president of public affairs, adds, “A lot of people don’t realize that for all the programming we provide, we have to pay for the rights to broadcast. For example, sports programming like ESPN is arguably the most popular we offer. But the increases for that type of programming are some of the highest repeatedly year after year. For example, we pay ESPN to play their programs, and they pay the NFL for the rights to produce them. Consider some of the costs of production, royalties paid and so forth, and the incredible amounts become a little more understandable.”
Breckenridge adds, “Another thing that many customers don’t realize is how heavily regulated the cable industry is. In 1992 Congress re-regulated the cable industry and the FCC published the results of an extensive study to make sure our rates were justified. We are monitored by the FCC nationally, and are also regulated at the local level. So hopefully that also provides people with the comfort of knowing that we are not overcharging.”
Networking the Community
Both Auger and Breckenridge approach the consumer with earnestness and appreciation Auger emphasizes, “Yes, we are part of a huge entity, but we are a local company. My customers are my neighbors are my employees. We work to be a part of the community, to give back to our customers and appreciate them for their business.”
Adds Breckenridge, “Because cable comes into your home – it is like a personal service, and people take personal services very seriously. That makes it necessarily important to us as well. In addition to doing the best we can for you in your home, we also try to reach out. We wire schools, government buildings and libraries for free, and are working on educational product developments. People at every level of the company are working to better the community, volunteering time and resources.”
TWC has a big name and a big mission. Auger explains that “Eighty percent of what I have tried to do since I came here is change the culture and mindset of Charlotte’s Time Warner Cable to a purely customer focus. We interact differently now, we watch ahead for our customers so we can provide a service when they ask for it. The customer dictates our direction and our future.”
“We strive to bring the digital age into America's communities and transform the way Americans receive information and entertainment. With a combination of the world's most trusted brands, unparalleled Internet expertise, and experienced, focused management, we want to provide our customers with instant access to a breathtaking array of choices and new ways to connect to the ever-expanding online universe.
“We look ahead to the next few years and we see a more converged and interactive world. We want to lead that world in a responsive, responsible way that sets the standard of leadership in our industries and our communities. We define our success, not only by our bottom line, but also by how we act as a service provider, partner and corporate citizen.”