Jeff Abbas, president and CEO of the NCTC, recalls it like it was yesterday. In the summer of 1997, entertaining Armstrong Group CFO Kirby Campbell in his home, he showed off the wonders of digital television to the man who’s now Armstrong’s CEO.

"All those Starz channels, all the Discovery stuff, anything that was launched [at the time] was up on my TV set," Abbas recalls. "We got a look at what 200 channels of television looks like. That was a pretty cool experience to share with him, to show someone like a Kirby Campbell what digital television was." Abbas adds dryly: "They didn’t see any money in it."

But that wasn’t the equivalent of George Bailey thumbing his nose at "plastics" in Frank Capra’s It’s a Wonderful Life. It was a prescient realization that high-speed Internet access would be a more revolutionary product than this gee-whiz programming improvement.

"The Internet was really our primary focus when a lot of companies were pushing digital [TV]," says Jeff Ross, president of Armstrong Utilities Inc., the cable unit of the Armstrong Group of Companies. "We always believed that the Internet was a better product for our customer base, and we focused our marketing on that product." The Internet was becoming mainstream and demand was building, while digital TV carried high costs for new set-top boxes and relatively low margins, Ross says. "That business case was just not as strong as it was for Internet."

Many observers inside and outside the company see the summer 1997 rollout of Armstrong’s Zoom Internet as a foundation stone in a business plan that, a decade later, now has Armstrong pushing the digital envelope on everything from VOD and HD to digital telephone for its more than 230,000 rural and suburban customers. It was crucial that Armstrong was first to market with Internet, before the telcos launched DSL into their rural/suburban footprint.

Today, 90% of Armstrong’s plant is all-digital, and the penetration rates for advanced digital services in its largely rural footprint rival those of the top five MSOs in their most densely populated urban systems. Cable executives compliment Campbell and Ross for their technology leadership, praising Armstrong as a prime example of how independents can stay ahead of the competition by providing a full complement of advanced services, top-flight customer care and aggressive sales. Add to that acclaim for their generous cooperation with peers and aggressive advocacy for the interests of independents through the ACA and NCTC — plus the boatload of nominations from government officials, civic organizations and community groups throughout their service area — and you see why CableWorld named Armstrong its 2007 Independent Operator of the Year.

"They have taken their services to the next level," says ACA president and CEO Matt Polka. "Not only with their triple-play offerings, but really deploying these in remote areas of West Virginia and Maryland, Ohio and Pennsylvania that are not deep urban areas but are truly smaller and rural markets, and the farthest reaches of their service area."

Still a privately held, family-owned business after more than 50 years, Armstrong doesn’t disclose financial information, but says that "the company performs in line with available industry-standard benchmarks." Yet its penetration rates for high-margin advanced services speak volumes.

Not coincidentally, high-speed data leads Armstrong’s list of most deeply penetrated digital services, with nearly 142,000 Internet customers, or more than 61% of its basic subscribers and 42% of homes passed. And despite the late start, it has more than 102,000 digital TV subscribers, or 44% of its customer base, and that growth is accelerating. "We’ve almost doubled digital numbers since the beginning of our fiscal year in October," Ross says.

"That’s Cablevision-type basic penetration and Cablevision-type penetration in high-speed Internet," says Bruce Leichtman, president and principal analyst at Leichtman Research Group. Armstrong’s basic penetration at 68% blows away the aggregate for the top 10 MSOs at 52%, he says, while its broadband penetration of homes passed at 42% dwarfs the top 10 average of 27% penetration. "Obviously being a more rural operator creates even more challenges," he adds, "so those are very impressive numbers…that put them in the top of the industry in almost every category."

Though it stayed on the sidelines while other operators pumped digital TV, once Armstrong took the plunge, it did so with gusto. Last year it upgraded its infrastructure to support digital simulcast. That allows Armstrong to simulcast its analog basic lineup in digital, Ross says. The move saves millions of dollars in capital expenses by letting Armstrong deploy digital-only Motorola DCT 700 set-top boxes. It provides 20 HD channels in most markets and with continued enhancements to its digital network plans to double that to 40 by the end of the year.

Digital telephone service, launched only two years ago, has nearly 70,000 subscribers, a 30% penetration of its customer base and 20% of homes passed. "Phone continues to grow, and that’s becoming a core product for sure," Ross says. "With phone and our digital simulcast product, we’re really strengthening our triple play."

Back to the Future

Though Armstrong has offered digital phone service for only two years, the parent Armstrong Group of Companies started in the telephone business more than a half century ago. Founded as Armstrong County Line Construction in 1946 by Jud L. Sedwick and his brother Ned, the company ran two crews of six men, hanging telephone lines, setting poles and clearing right of way throughout western Pennsylvania. It began to own and operate independent telephone companies in the 1950s, and only expanded into the then-infant cable television business in the early 1960s. (A separate unit, Armstrong Telephone Co. owns and operates six local telephone companies in West Virginia, Maryland, Pennsylvania and New York, which coordinate their phone and DSL offerings with the cable operation where their markets overlap.)

From its original cable system on the south side of Butler, Pa., where the company is headquartered, Armstrong operates in five states and is the 16th largest MSO in the nation, according to rankings of the NCTA. The parent company employs 2,000, about 800 of whom work at the cable operation. The Butler system was the first in the nation to be built entirely with aluminum cable and multi-tap terminals, and in 1976 Armstrong was among the first to offer HBO.

Living on the Cutting Edge

For more than a decade Armstrong has demonstrated a penchant for cutting-edge technology. The deployment last year of its analog-digital simulcast (ADS) network allowed it to provide video services in digital all the way to the set-top box, centralize ingestion and processing of content, and replace decades-old analog modulators with new-generation edge modulators, providing stereo on every channel. Armstrong also plans to be at the forefront of switched digital video deployment. "We’ll be early," Ross says.

Its approach was evident as far back as its fiber build-out in the early 1990s, as it rebuilt its networks with a standard of 500 homes per fiber node (compared to a common industry benchmark of 2,000 homes per node). Its average size is just 120 homes per node, officials say, making it better able to deliver advertised data speeds and provide enough head room to allow voice to traverse its networks with minimal contention.

A critical part of Armstrong’s tech-strong approach is the company’s family-owned status, which gave it the flexibility to invest without having to be concerned about Wall Street’s lack of enthusiasm for capital expenditure. Armstrong was able to rebuild its network rather than just upgrade it to support digital. Its infrastructure is virtually brand new — featuring the higher density fiber nodes — which allows delivery of the advertised performance (up to 20 Mbps on the Zoom Professional). Other operators have struggled with contention and performance degradation on infrastructure that’s been upgraded piecemeal.

In 2005, Armstrong consolidated most of its head-ends into a 3,000-square-foot monolithic concrete bunker "super head-end," improving its ability to roll out new services and providing a higher level of security. Many Armstrong systems are connected via a state-of-the-art OC192 SONET network using Resilient Packet Ring (RPR) technology. The centralized architecture allows Armstrong to deploy digital ad insertion at the super head-end and distribute local video streams with market-specific advertisements to remote systems.

Armstrong maintains a centralized 250-seat call center and a variety of new tools to help keep pace with the addition of new services, officials say. Among them is a recently deployed, in-house-developed workforce management and auto-routing system that uses Blackberry wireless e-mail technology to place a wide array of back-office tools in the hands of field technicians. The company’s preventative maintenance program, consisting of quarterly signal leakage checks, quarterly power supply maintenance and biannual network sweeps, helped its network operations center achieve a 24-month network availability rate of 99.994% and a mean time to repair of just 1.01 hours.

On its annual customer satisfaction survey last year, subscribers gave the company an overall service rating of 4.4 on a 5-point scale, officials add.

"What they have done so effectively is to plan aggressively and progressively for full digital deployment and full advanced services," observes ACA’s Polka, who also gives Armstrong high marks for proactive industry leadership.

"They’re one of the most measured, managed companies I’ve ever seen," adds Abbas. "They measure every aspect of everything that they do, and they use that [data] to run their business. They live for understanding how their business is working at a very detailed level. I’ve [seen] the management report book that they tote around with them. It’s a ponderous tome."

"They’re showing by example that if you want to survive in what is a very difficult, competitive marketplace, you’ve got to have the bundle, no matter where you are," agrees Polka. "You don’t get a pass just because you’re in a rural area."

What Makes Armstrong 2007 Independent Operator of the Year?

Technology Leadership

  • HFC architecture, developed in 1995, is a node plus four design to 250 homes passed or fewer, with average node size of 120 homes passed

  • Analog-digital simulcast network deployed in 2006, provides all video services in digital to the set-top box, saving millions in capital expenses

Operational Excellence

  • Senior management team has a collective 263 years of industry experience

  • 24-month network availability rate of 99.994% and a mean time to repair of just 1.01 hours

  • Performs 100% of plant construction in-house, including all plant design and engineering, HFC/FTTH plant construction, all fiber and coax splicing, civic projects and complex plant maintenance projects

Industry/Community Involvement

  • Holds ACA and NCTC board seats

  • Numerous local community projects include developing an intranet for the Butler County Federated Library System and sponsoring the Armstrong Senior Classic golf tournament that raised some $170,000 for local charities last year

Source: Armstrong

Armstrong by the Numbers >


















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