Competitive Market Activity
Robert Gessner
President, Massillon Cable TV, Inc.
System Information
Massillon Cable TV

Two counties in NE
Ohio



68,250 Homes Passed
46,900 Homes Served
43,325 Video




20,675 2-way Digital HH
14,500 HD HH
33,325 HSD
15,075 Phone Lines
Massillon Cable TV, Inc.

Two service areas

Consolidated headend



All-Digital/No-Analog
Typical HFC Plant



Redundant Fiber Interconnect
1,500 plant miles
750 MHz
Competitors




DBS
AT&T U-Verse (60%)
Embarq (35%)
Frontier/Verizon (5%)
System Details
Wayne County
Stark County
Wooster Vicinity
Massillon Vicinity
COUNTY
HOMES
PASSED
VIDEO
% of HP
DATA
% of HP
VOICE
% of HP
Stark
45,529
65.1%
50.6%
20.9%
Wayne
22,718
60.2%
48.8%
24.9%
Service Area Observations

Wayne County has lower video penetration


The result of more rural demographic and consistently
greater activity by satellite providers over the years.
Stark County has lower voice penetration

AT&T is a stronger competitor than Embarq.


AT&T record of consistently better service and lower rates.
Active marketing programs





Aggressive win-back programs
Massive direct mail budget
Widely varying offers
Low-priced, entry-level service.
Embarq has history of lower quality service,
higher rates and, until recently, a weak
win-back program.
Status of Competitors

Stark County has more competition is all service types

AT&T serves most of the Stark County area



Verizon (now Frontier) serves only small portions of Stark County.



Actively building and marketing U-Verse.
High recognition due to AT&T overbuild of Time Warner North East
Ohio (1.5 million customers in Cleveland, Akron, Youngstown,
Mansfield areas).
Provides data and voice only.
Virtually no competitive presence.
Wayne County has one competitor

Embarq



Provides data and voice only.
Legacy of United Telephone, high rates and moderate service, coupled
with the Sprint/Embarq divestiture allowed us a very open market for
quite some time.
Recent improvements in Embarq’s efforts.
Past Competitive Efforts
Past Competitive Efforts

Carefully examined competitive landscape in
2007. Three product lines had different
needs:



Video – flat to slightly falling penetration to
satellite and the prospect of U-Verse required
action to maintain our market share.
Data –clear market leader. We needed to
continue to innovate but could do so from a
position of strength.
Voice – Growing steadily. Typical bundle
marketing was serving us well.
Past Competitive Efforts - Video

Battle for video success framed by HD.
Competitors were defining the battleground.


Not just DirecTV & Dish. AT&T appearance imminent.
We launched our DTV Rollout to minimize the
competitive advantage enjoyed by satellite in
terms of the “hot item,” HD.





Obtained an FCC waiver to use integrated security
converters.
Developed low-cost DTA (Digital-To-Analog) with no-cost
guide.
Deployed 100,000 converters in 10 months. Three free
per customer.
Eliminated all analog video signals.
Launched 65+ additional HD signals to reach 95.
Past Competitive Efforts - Video

Did it work? Don’t know.



We lost some video customers due to the
requirement of a converter on every set.
We don’t know how many customers we did not
lose because we launched so much more HD.
Finished our project just as the economic
recession became big news (Q3 2009).


Some level of losses to vacant homes, lost jobs,
“right sizing” household budgets, etc.
More DTV Rollout Information
FCC Waiver
First Interim Report First Interim Report
Survey
Second Interim
Report
Final Report
Past Competitive Efforts - Video

Competitive Difference Trade-Off


Gave up our competitive difference as “whole house”
provider in this effort to equalize our video product with
satellite in terms of HD.
With analog, consumers have complex decision when
considering video providers.


They must ask themselves if they want converters on every set.
They can choose different providers depending on the answer.
That may be an advantage.
When all digital, consumers no longer have that factor in the
decision. They simply ask whose converters I prefer.


Certainly, we can give people converters, but that
is not the same thing.
I will return to this topic later.
Recent Competitive Efforts - Video

HD/DVR Survey

Recent survey of HD/DVR subs (1,500
responses).

Despite almost 100 HD networks, they want more.



42% about right, 57% not nearly enough, 1% too many
However, when challenged to name HD nets we
don’t carry, they have difficulty doing so.
Perhaps reached point of diminishing returns, but
can we stop adding and lose ground in advertising
battle?
HD/DVR Survey
Recent Competitive Efforts - Video

Availability of HD is working

Door-to-door survey team results show
customers are aware of broad HD selection
even if they don’t use it.

77% are aware we have 90+ HD networks.
Recent Competitive Efforts - Video

Same survey showed very high interest in

Increased DVR storage space





34% - Always enough storage
37% - Adequate
29% - Never enough storage space
Planning launch of 1000GB SATA drives in July. We
will sell (rather than rent) for about $100.
MRDVR


No specific question, but very frequently noted
among respondents.
Waiting for guide and converter suppliers to offer
MRDVR.
Recent Competitive Efforts - Video

First Door-To-Door effort

AT&T Inoculation Team





Built upon idea from NPG with very similar results.
Small team that works just ahead of AT&T to assure
satisfaction of current customers.
Goal is not sales, but verification that all services are
working properly.
About 10% of homes surveyed need a service call.
About 15% have some type of issue resolved at the
door (remote control programming, batteries,
Internet questions, etc.).
Recent Competitive Efforts - Video

AT&T Inoculation Team (cont)

Also using weekly reports to identify area signal issues.


Technical SWAT response to resolve very quickly.
Collecting information about non-subs



Current provider
If/why they left us
Likelihood of remaining with current provider
Test Results
Test Area
Control Areas
Base Accounts
920 % Change
3277 % Change
Change in
Base Accounts
-4
-0.43%
-31
-0.95%
Digital HH
10
1.09%
17
0.52%
Phone HH
0
0.00%
10
0.31%
HSD HH
19
2.07%
13
0.40%
Total Unit Change
25
2.72%
9
0.27%
Recent Competitive Efforts - HSD

DOCSIS 3.0




Transition to all-digital/no-analog created bandwidth to
offer DOCSIS 3.0 throughout the system.
Four downstream channels operating in all areas.
Working to recover DOCSIS 1.0 modems before
increasing upstream bandwidth to 6.4MHz (underway).
Seen benefits from DOCSIS 3.0 without new, higher
bandwidth packages.




Auto load balancing
Multiple return paths
Better performance for all customers.
Planning new DOCSIS 3.0 packages
in near future.
Recent Competitive Efforts - Voice

Challenge same as for all



Began commercial sales in early 2009


Slow sales
Cord cutting
Reasonably good results to date.
Question whether we need a cell phone
element to make our phone offering
complete.

Certainly seems to be the case, but
no winning combination of providers.
Recent Competitive Efforts - Voice

Stark County



Recognize need for low-cost, entry-level phone
service to meet AT&T with competitive offers.
Creates problem of margin due to Sprint
partnership.
Testing price points and response rates now.
Competitive Efforts - Other

System reliability


Allowed to slip during year we worked on DTV
Rollout.
Currently primary operational focus

Deliver higher quality technical signal with greater
reliability.




Still do as well as others technically and better from
customer service, but need to focus on absolute
performance.
New monitoring tools
New workforce distribution
New employee dedication
Competitive Efforts - Other

Current enhancement products

Carbonite



IT Guys



Hosted application for off-site backup.
Need to make concerted effort to evaluate
Great service to customers.
Keeps them coming back to our HSD.
Planned enhancement product

Home Security


Broadband based
Hope for new entrants due to “widgets”
and other flexibility.
My Competitive Crusade
Digital TV without a
Digital Box
Magid Study – October 2009
42% of these
sideliners
admit that
"options are
not worth the
fees."
One-third cite cost
and affordability as
the primary reasons
for not buying HD
service.
34% of HD
households do
not subscribe to
HD programming.
Magid Study
HDTV Sets without HD Service




Despite economic recession, consumers
replacing analog TV sets at a rapid pace.
A large percentage are choosing not to add
any HD programming.
Our experience as an all-digital/no-analog
system provides a unique perspective into
consumer use of digital TV sets.
We really did not know how they were using
HDTV sets until we removed all analog
signals.
HDTV Sets without HD Service

What are they watching?

Our experience from our DTV Rollout says ANALOG.



Why are they watching poor quality analog?



Only know this if you have eliminated analog signals.
Poor quality compared to digital signals (satellite or telco)
You aren’t making it possible for them to watch digital.
They don’t know how to use their digital TV set and you
aren’t teaching them.
What will they do when they notice?


Maybe they will subscribe to your HD service.
Maybe they will switch to another provider
because they assume analog quality is the
best you can deliver.
HDTV Sets without HD Service

Not just replacing the “BIG” TV anymore.



Since Digital TV Transition, all TV sets are
digital.
Stand at Wal-Mart, Best Buy or HHGregg and
watch the number of small digital TV sets
streaming out the door. Many homes have
replaced all analog TV sets with digital.
They may equip the “BIG” TV with a converter,
but the others are simply connected to the coax
system.
HDTV Sets without HD Service

Why don’t they have converters.


Magid Study says cost, affordability, options not
worth the cost.
Perhaps more factors, especially for AOs.






Cost
Complexity
Comfort
Aesthetics
Convenience
Stubbornness
HDTV Sets without HD Service

Wouldn’t it be better if we could deliver
digital quality signals to digital TV sets
without a converter?



WE CAN!
PSIP – Add small amount of data to SD signals
so digital TV sets can easily tune to them.
ClearQAM – Maintain a robust lineup of
unencrypted SD signals (including PSIP).
Consumer Continuum of Choice
Consumer Continuum of Choice
Legacy Analog TV
* Monthly Cost = $0.00
* 100+ linear TV Networks
*45 Music Networks
* Limited guide (better than
what they now have)
Stand-alone
Digital TV
* Monthly Cost = $0.00
* 100+ linear TV Networks
(Lifeline & Basic)
* 12 HD Networks
* 45 Music Networks
* Channel number same
as converter.
*On screen labels for
Network and Channel
number, but no guide.
Low-cost, limited
functionality
HD Converter
* Monthly Cost = $2.00
* 200+ linear TV Networks
(All linear services)
* 100+ HD Networks
* 45 Music Networks
* Limited Guide
(Full program information, but
not interactive).
Full-featured
HD Converter
* Monthly Cost = $7.00 - $12.00
* 200+ linear TV Networks
(All linear services)
* 100+ HD Networks
* 45 Music Networks
* All Interactive Services
(VOD, PPV, etc.)
* MRDVR
* Online Integration
*Fully Integrated Interactive
Program Guide
Consumer Continuum of Choice

Why is this important?

It is what customers want.



Choice
Value
Friendly



Our HDTV registry already tracks more than 5% of our HHs
who use at least one digital TV set without a converter.
Grows every day.
We are the only platform that can deliver it.



Competitive difference
Delivers digital quality at analog price
Affords easy migration path to other services.
Consumer Continuum of Choice

My proposal


Primarily status quo
Lifeline & Basic SD signals should be encrypted
at the operator’s election.


SD no different than analog in terms of signal quality
and need to secure from copying and illegal
distribution.
All HD and premium SD signals should be
encrypted at the programmer’s election.


Recognizes need to secure HD content from copying
and illegal distribution.
Allows programmer flexibility (QVC, HSN)
Consumer Continuum of Choice

Needs both PSIP and ClearQAM

PSIP-Program and System Information Protocol


ATSC protocol for metadata in an MPEG stream.
Available and, within limits, works well.


TV compatibility issues


Requires new discipline regarding spectrum utilization
Being resolved with practice.
ClearQAM

Required to maintain robust offering directly to digital
TV sets.
Consumer Continuum of Choice

Threats

Industry support

Comcast has no interest.




Want to encrypt everything to reduce truck rolls and theft.
Not sure of other MSOs
NCTA unwilling to consider in light of Comcast desire.
Not all systems in same situation as Comcast.


Fully support Comcast’s right to encrypt based on
their specific needs.
Problem - Comcast (due to their dominant position)
precludes my right to choose not to fully encrypt.
Consumer Continuum of Choice

Threats (continued)

Program Networks

No clear reason why they want us to encrypt SD.


Possible negotiating tactic – trade for something else.
Should not put program networks in position to
determine our capital expenditures


They don’t care what it costs us to secure their
signals.
Consider that you must eventually replace every DTA
and non-HD STB with a new one. The cost is
staggering.

Probably 3x the number of STBs today.
Consumer Continuum of Choice

My crusade may be more like
Quixote’s than Lancelot’s, but still
worth the attempt.



Creates a competitive difference.
Presents friendly, consumer-oriented
options.
Appeals to an activist FCC that will offer
many opportunities to raise the issue.
QUESTIONS?
Robert Gessner
Massillon Cable TV, Inc.
Email: [email protected]
Voice: 330-833-5509
Fax: 330-833-7522