A SLEEPY CITY WHERE HOPES RUN HIGH

BY ANTHONY CRUPI If there seems to be little to distinguish Harrisburg, Pa., from most other medium-sized cable markets, it’s probably a function of the area’s statistical “averageness.” Sifting through Scarborough Research data on the capital city is an exercise in near-perfect equilibrium; line by line, the demos paint a picture of a place that skews hard to the median in nearly every category. The ordinariness is uncanny. Which brings us to the “B” word. A familiar complaint among younger Harrisburg residents is that the city is boring. (Certainly, the concentration of state government employees working banker’s hours translates into a downtown district that rolls the sidewalks up at 5 p.m.) But a group called the Harrisburg Young Professionals is tired of hearing that same old refrain, and is hoping to use technology and social networking to breathe new life into the capital district. “People are looking for jobs and quality-of-life stuff,” said Julie DeSein, an HYP member who has been a leading proponent of the group’s “Growing a Younger Pennsylvania” initiative. “If the city continues to invest in infrastructure, especially technology infrastructure, that will attract and retain jobs.” Broadband is of particular importance to the revitalization of Harrisburg’s work force, DeSein said. “A wired community is a young community,” she said. According to the 2000 Census, Pennsylvania today ranks as the fourth-oldest state in the union, with a median age of 38. Overall, the state is one of the slowest growers in the country, adding just over 7,000 people between April 2000 and July 2002. An older population coupled with slow population growth can present significant challenges to boosting the state’s economic competitiveness, DeSein said. That’s where Comcast comes into the picture. If we were to pull focus a bit, we’d see that the cable business on the whole has already proven itself as a shot in the economic biceps, as it were. The recently released Bortz Media report (Reinvesting in America: An Analysis of the Cable Industry’s Impact on the U.S. Economy) found that the cable industry accounted for 1.1 million jobs in 2002, more than twice the 1990 figure. Over the same period, cable accounted for 3% of U.S. job growth. Not a bad little nugget of information to bring to the table when the local mucketymucks are making a fuss about franchise fees. Drilling down into the HLLY (“Hilly”) DMA — that stands for Harrisburg/Lancaster/Lebanon/York, a loose confederation of Pennsylvania townships with a collective population of about 1.6 million people — we can see that Comcast has an unassailable advantage in terms of its potential broadband take. DSL subs don’t even show up on Scarborough’s radar, such is the state of Verizon’s local presence. Here’s why Verizon is a dirty word in Hilly: In 1994, the telco was handed over $2 billion in cash and gifted $1.5 billion in tax incentives to rewire the state with fiber optics for broadband services. Essentially, the company promised it would replace its ancient copper wiring with fiber, which in turn would allow for breakneck data transfer speeds of 45 Mbps in both directions. Verizon also agreed to wire rural and urban areas with fiber-to-the-home. None of this came to pass. In a report filed in February 2003, Bruce Kushnick, chairman and executive director of New Networks Institute, concludes that Verizon’s “bait-and-switch” cost consumers up to $785 per household. In late July, however, state regulators let Verizon off the hook, saying that the language in the original agreement needn’t be followed to the letter and that the telco’s copper wiring could serve the 45 Mbps demand as well as fiber. (This, of course, is lunacy.) Pennsylvania Public Utility Commission Commissioner Terrance Fitzpatrick, who had long accused Verizon of backpedaling on the original agreement, was the lone voice of dissent in the 4-1 vote. “I do not believe this decision is equitable,” he wrote. That kind of public opprobrium hasn’t hurt Comcast HSD sales, said Michael Doyle, president of Comcast’s Eastern division, and de facto overseer of the HLLY DMA. “We’ve been growing HSD subs at a very high rate in a tight market,” Doyle said, citing a 20% Internet penetration rate in the division — roughly 1.5 million subs. Caffeinated young professionals who telecommute — or those who are just looking to download tons of, ahem, legal MP3 files — take heed: Comcast is not content to sit on its 1.5 Mbps laurels. Doyle confirmed that Harrisburg is “looking to double download speeds to 3 Mbps”; a trial of this sort of souped-up HSD service has already begun in the MSO’s Knoxville, Tenn., market. “We’re happy to make a big splash in the Hilly DMA,” Doyle said. “You can see that in our rollouts. What we’ve done is taken a traditionally tired market and made it very robust.” All of which meets HYP’s (that’s pronounced “hip,” not “hype”) stated purpose of retaining and attracting business in downtown Harrisburg. According to a recent Nielsen NetRatings survey of area SMBs with 100 employees or less, 71% used some kind of broadband connection, including cable and DSL. That’s in line with a national jump in business HSD use of 42% between January 2001 and 2002. Of course, a cable company’s only as good as its video service; TV remains the standard by which consumers judge their local operator. Comcast Harrisburg isn’t lagging on that front, either, having launched HD at the tail end of 2002. A full suite of on-demand services is on its way. “We’re getting ready to roll out a VOD service that will be just as robust as that offered in New York and Philadelphia,” Doyle said. Of about 1,400 hours of content made available on-demand, three-quarters will be “value added,” which is to say “free.” Rest assured, if recent history is anything to go by, the gratis VOD programming won’t prevent Comcast from cashing in on its rollout of advanced digital services. “Investing in technology has meant a lot to us in terms if operating cash flow,” Doyle said. “Before the upgrade, our average revenue per basic sub was relatively low. Now Hilly is set to follow the lead of the New England, New York and Philadelphia DMAs.” In just two years, he said, the average revenue per sub has gone up “19 bucks a month.” Moreover, cash flow is up 69% since 2000. As service becomes more robust, monthly rates must inevitably rise. On March 1, basic service increased from $11.80 a month to $12.74; standard basic jumped from $34.75 to $38.65; and the Digital Classic package went from $48.65 to $53.60. Doug Frank, the VP and GM of the Harrisburg system, said that complaints about the rate hikes were minimal. “Overall, rates went up by 6%,” he said. “We realize the sensitivity that such increases might bring and have been very proactive about communicating the changes to our customers.” “We have an iron-clad commitment to customer service. We’re always looking for ways to improve,” said Steve Rabbitt, area VP of the Central Pennsylvania/Eastern division. Comcast holds training programs for all of its customer contact personnel, which includes 255 field operations employees and desk operators in all. It recently opened a new, 20,000-square-foot customer service facility in nearby Shippensburg, complete with a payment center and a state-of-the-art, hands-on demonstration area. Kiosks loaded with the latest digital product offerings, including HSD, HD and VOD, are at the ready to provide visitors with a more immediate, user-friendly appreciation of how each application works. Because the Harrisburg system serves the capital district, there are more than a few policy wonks on Comcast’s subscriber rolls. Frank Lynch’s job is to ensure that the lines of communication between Comcast and local lawmakers remain open and uncluttered. “It’s all about relationships and strategic investments,” explained Lynch, the system’s director of government relations. “If a franchise official calls up and for some reason a customer brings a defective cable box into his office, we have to act on that immediately.” Comcast’s franchise agreement, signed in 2000, is good for ten years, but it never hurts to keep the state and local legislators happy. “We help them look good with their constituents,” Lynch said. “In a sense, we’re the gatekeepers. The last thing they need is to take grief about us.” Lynch is keenly aware of Comcast’s profile in the community. In fact, his enthusiasm for the city should qualify him for a position on the HYP board. “Harrisburg’s going through a renaissance,” he said. “All the state employees would flee to the suburbs after work and the place used to be a ghost town after 5:30. We’ve really been trying to entice people to stick around for a while, and spend some of their money here in town.” Besides cosponsoring downtown cultural events — in one instance, Comcast bailed out a local concert series that had run out of ready cash — the MSO is quick to exploit its close ties with some nearby sports teams. Former Philadelphia 76ers star and “Ambassador of Basketball” World B. Free has put on a free dunk clinic for kids, while alumni of the champion Flyers squads of the ’70s have skated in exhibition matches to help raise money for local youth. (Comcast owns both franchises.) As much as Comcast’s leveraging of its advanced digital services has helped Harrisburg to differentiate itself from similarly sized markets, the local advertising environment remains solidly middle-of-the-road. Annette Strothers, director of sales for the system, says the biggest ad categories are the old standbys: auto, retail, banking and financial. A total of 37 people work under Strothers over an eight-zone territory. But there’s room to branch out. Harrisburg’s relative proximity to the Philadelphia/South Jersey market gives the ad sales team the flexibility to target a full 36 zones, Strothers said. While the rapid-fire changes in the cable landscape have brought new opportunities on the ad sales side, much remains in the air. “The notable increase in cable ratings that we’ve seen over the last few years, coupled with our newly realized ability to offer network brands has pushed the industry light-years ahead,” Strothers said. The boom in original cable programming has helped cable ratings skyrocket — Harrisburg is a Nielsen diary market — but the cumulative effect of time-shifting applications such as VOD and DVR have yet to be proven. “We can’t tell exactly how these technologies will impact ad sales,” Strothers said. “Tech is going to change our entire business,” said Fidel Edwards, VP, call center operations. “But no matter what comes, we’ll continue to sell what we sell, which is the delivery of eyeballs.” DVR and VoIP have yet to be deployed in Harrisburg. Once one or the other is introduced, you can be certain of one thing: HYP and other local boosters will surely pounce on the new tech as a means to promote their city. EMPLOYEES: 255 HOMES PASSED: 286,000 MILES OF PLANT: 4,500 PERCENT UPGRADED: 100% at a minimum of 750 MHz; some 860 plant as well BASIC SUBSCRIBERS: 207,000 BASIC RATES: $11.26-14.25 DIGITAL SUBSCRIBERS: 58,000 DIGITAL RATES: $9.95 over standard basic rate HIGH-SPEED INTERNET SUBSCRIBERS: N/A HIGH-SPEED INTERNET RATES: $42.95/month (with basic cable), plus a $3/month modem rental fee VOD: Will launch before Q1 of 2004 HDTV: No additional charge; 3,000 takers thus far (launched late 2002 with HBO, Showtime, Comcast SportsNet) TELEPHONY: N/A AD INSERTIONS: Available on 32 analog channels SOURCE: COMCAST Rabbitt is responsible for more than 550,000 customers in the Susquehanna Valley. Prior to joining Comcast, he was president and COO at Digital Access, in Bala Cynwyd, Pa. He also served as SVP for Cablevision Systems in Bethany, N.Y., from 1998 to 2000. He holds a B.A. in education from the University of Bridgeport and an M.A. from Fairleigh Dickinson University. Frank oversees all operations in Harrisburg. He managed the system rebuild and its rollout of new products, including the digital upgrade, HDTV and high-speed Internet. Prior to joining Comcast, he was the GM for AT&T Broadband/Time Warner Cable in Pottsville and Hamburg, Pa. Frank received a B.S. in management from the University of Maryland. Prior to joining Comcast, Lynch was a PR consultant. He served in several roles in the Gov. Robert P. Casey’s administration, including deputy secretary for the Department of Labor and Industry. Before that he was a reporter for the Harrisburg Patriot-News. He received a B.A. in economics/history from Penn State. Strothers is responsible for all advertising sales initiatives in Comcast’s HLLY DMA. She has been with the MSO for three and a half years. Prior to joining Comcast, Strothers was the retail sales manager for Lancaster Newspapers. She received a B.S. from Shippensburg University. Edwards oversees 650 employees. In addition to overseeing call centers, technical operations and strategic and operational planning, he manages financial controls for the call center. Prior to joining Comcast in 2002, he was director of New York City operations for Cablevision. He received a B.A. in business management from New York University. Juffer is responsible for field operations, marketing and customer fulfillment. Prior to joining Comcast, Juffer was the GM of AT&T Broadband Iowa City. She also was a state manager with TCI in New Mexico and held various marketing positions with TCI in Colorado and New Mexico. Juffer received a B.A. in business administration from Central College in Pella, Iowa. Comparison of consumers in Comcast’s Harrisburg service area to the top 75 market average.