Cox's Launching Pad Salutes the Customer

BY SHIRLEY BRADY During his 16 years overseeing Cox’s Hampton Roads, Va., system, former General Electric engineer-turned-marketer Franklin (but call him Frank) Bowers has won numerous awards for running the most profitable Cox system — but that’s not his only accolade. His subscriber base has mushroomed from 135,000 to more than 415,000 thanks to strategic acquisitions and savvy subscriber-growth tactics. The fifth-largest Cox system was also the first to launch Cox Business Services, and its success has made it the template for subsequent rollouts in other markets. It’s been a testing ground and launch pad for advanced services such as VOD, a measure of the confidence Cox corporate has in Bowers and his team. “Frank and his team have built a cohesive powerhouse system grown from several complex acquisitions of adjacent properties,” says Claus Kroeger, Cox’s SVP of operations. “Across their vast operating region, they consistently deliver to customers multiple digital services with a high degree of customer focus. Their spirit of total integration within the system and with the local community, maritime industries and government has created Cox Business Services’ largest revenue center in the country and a model for collaboration between ad sales, marketing and community outreach.” Butch Blanks, director of management services for Newport News, praises Cox’s performance during its upgrade. “They continue to be very responsive and committed to customer service in our city and have greatly enhanced its community service efforts,” he says. Bowers is particularly proud of the value Cox has brought to the Hampton Roads community, which is home to the world’s largest naval base, in Norfolk, and other military sites such as Langley Air Force Base on Virginia’s Tidewater peninsula. The area’s military bases are key customers of Cox Business Services, the system’s commercial broadband operation that grew out of the acquisition of Merrill Lynch’s Teleport Communications Group in 1992. The business unit offers bundled phone and high-speed Internet service. “We thought the business market was a very good market for us and started a small company called Cox Fibernet with a small number of employees,” says Bowers. “Dana Coltrin was put in charge of it — he was my VP of engineering technology — and he put in about 25% of his time into this little business. He found it was a full-time business and within 12 to 18 months it was cash-flow-positive.” Coltrin, who still runs Cox Business Services in Hampton Roads, launched the full-blown offering in 1993 by pitching Internet access and phone service to large business accounts such as Langley AFB, which now boasts more than 16,000 connections to Cox’s platform. The division reached out to Hampton Roads’ small and midsize businesses in 2001 with the Cox Office Solutions Pak, which includes high-speed data access, two digital business phone lines with four features per line and 100 long-distance minutes per line for a flat monthly rate plus one-time installation fee. The growth rate for the small business sector alone has been more than 50% a year, says Coltrin. “Over 60% of the employers with more than 1,000 employees in this market have Cox as their main phone and data supplier,” he notes. “And we have 80% of employers with more than 2,500 employees.” About 30% of Hampton Roads’ population is connected to the military in some way, thanks to Langley, the Norfolk Naval Base and several army bases. “The military presence makes us pay attention to women,” says Colette Jelineo, the system’s VP of marketing, referring to the company’s focus on keeping customers whose spouses are away from home. “The African-American and Filipino populations are also significant here, and that’s related to the military presence, so we do community outreach to them.” That outreach includes the Filipino Channel, a digital network costing $10.95 a month, and Sea Net, a naval affairs program that airs on local origination Channel 11 (dubbed WCOX) and is picked up in other Cox systems near naval bases such as Pensacola and San Diego. “We also have a lot of dependents here, so there are huge swings in population when the carrier battle group goes out,” says Bowers. “During the Gulf War, we saw about 60,000 people leave town over a three-month period and then after the war they came back, so we’re really affected by what’s going on beyond Hampton Roads.” The military routinely reaches out to Cox during times of crisis. “During certain emergency situations, such as when the Iowa — a battleship that came out of this base — blew up, we came in and put special communications in for the Navy so they could have a gathering area for dependents and families to hear what’s going on,” says Bowers. “We did the same thing during Desert Storm. When the military have emergency needs they come to us to provide access to CNN and emergency telephone services to various locations, so they know they can call us because we don’t ask any questions, we just get it done.” Given the transient nature of the military population, Jelineo and her team have targeted multiple dwelling units, such as apartments and group residences, in addition to joining forces with local realtors to sign up customers. “When customers are moving is when they make the decision about if they’re going to go to DBS or not,” she says. Local real estate agents are, in effect, Cox sales agents. They get a commission on each sale and promote Cox’s digital offerings to prospective clients. “When a home goes up for sale, the ‘for sale’ sign actually lists the Cox products that are available in that neighborhood,” says Jelineo. “From the realtors’ standpoint, they see it as a competitive advantage because they’re trying to make the move experience for their customers so easy and so positive, that they’ve got special customer service reps that support this program for us.” Jelineo’s team also launched “Cox Sales in the Community,” an initiative that lets community groups such as the Boy Scouts and the PTA sell Cox packages. “Rather than selling candy to raise funds, they’re selling Cox products,” she says. “They go into a neighborhood, knock on the door and ask, ‘Do you have Cox telephone or high-speed Internet?’ just like a direct sales rep would — except they’re in a Girl Scout uniform.” Maintaining a high profile at the neighborhood level has paid off in driving the company’s bundling strategy. “What we’ve been seeing is a cul-de-sac effect, where once you start penetrating the three-product bundle in a neighborhood, the neighbors just go with you,” Jelineo says. “Our neighborhoods have been willing to open their door to these kids, or their neighbors, and it’s something our competitor [DBS] can’t do.” This year she’ll be spreading the word on three new features: HDTV (scheduled to roll out in the first half with HD-ready Motorola boxes), home networking and VOD. “We’re finding about 35% of our customers have networked their computers together, while another 35% are interested,” Jelineo says. All of Cox’s high-speed data markets will launch Cox Home Networking by the end of this year. The service includes professional installation of either a $299 wired Ethernet network or a $349 wireless Ethernet version with the ability to link up to four computers. Once the network is installed, customers can make a one-year commitment to pay $9.95 monthly for round-the-clock technical support. Hampton Roads, which is based on a Motorola platform, was the first retail launch site (in October) for Motorola’s Digital Convergence Platform (DCP501) Home Theater System. A combo unit boasting a DVD/CD/MP3 player, digital audio/video receiver and an interactive digital cable receiver, the device carries a suggested retail price tag of $899. With each purchase, customers receive information on how to activate Cox digital cable. Hampton Roads is deploying VOD this quarter, following trials with Motorola’s DCT-2000 set-top, Concurrent’s MediaHawk hardware and software and movie content from In Demand. As in sister VOD market San Diego, the system is launching an entertainment-on-demand package that will include movies and subscription video-on-demand. “We will have a similar product to [Cox] San Diego’s FreeZone [VOD] service, but a little different,” says Bowers. “The FreeZone launch in San Diego is mostly national advertising, with some local tied into the San Diego Zoo. We are looking at some national but more focused on the local business model.” Localism is key to each of the services Cox offers residents and businesses in Hampton Roads, where DirecTV started offering local channels last year. “Cable is local, any way you cut it. Obviously we have national brands such as ESPN, but the community we serve is so important to our success,” Bowers says. “So we’re planning features such as local restaurant zones in our FreeZone.” Local advertising is another big revenue generator for Hampton Roads, one of nine Cox markets deploying SeaChange International’s local digital ad insertion technology. Sharon Frazier, VP and general manager of CableRep Advertising in Hampton Roads, has seen her team win larger shares of the area’s biggest advertisers during her tenure. “Automotive is our largest category, whereas it used to be that auto dealers would put only a small percentage into cable,” she says. Henry Ayer, who runs Pomoco Auto Group, didn’t take much convincing. “As soon as cable came into existence we jumped on it,” he says. “It offered us more channels and more avenues to put our message out there, at a better rate. Now we don’t buy broadcast ads at all, just 10% to radio, 60% on newspaper and 30% on cable.” Ayer has even appeared in a TV commercial for Hampton Roads CableRep and urges it on his friends outside the automotive business. “Cable took us from being a small mom-and-pop Chrysler store to a high-volume business,” he says of one of his dealerships. “I run the Nissan dealership, and our sales are up 20% for the year, which I credit to cable.” He likes the variety of networks available on cable, which Pomoco buys run-of-schedule. “We target women pretty heavily, although we have a broad demographic agewise and economically so we also try to hit the MTV crowd, sports fans with ESPN, lifestyle networks and business networks like MSNBC instead of a shotgun approach.” Frazier says the tide turned with other auto dealers during the GM strike a few years ago, when Cox ran a commercial saying “now’s a great time to buy a GM car.” “People thought dealerships were closed, and we just wanted to add our support — they really appreciated we were there for them,” she says. The next-largest ad categories are media, with local TV and radio stations buying spots on cable, followed by furniture retailers. The growth in ad sales has almost doubled the staff since 1996, from 35 to 67 CableRep employees and from two sales teams — in Newport News and Chesapeake — to four teams to handle the large geographic area. The system straddles the James River, creating two distinct markets known as “southside” (Virginia Beach, Chesapeake, Norfolk and Portsmouth) and “the peninsula” (Gloucester, Hampton, New Kent, Newport News, Poquoson, York County, James City County, West Point and Williamsburg). “We treat them as distinctive zones, so that’s an advantage for us,” says Frazier. “We can sell it all as one, or by zones. We used to sell cable as rotators, but now people are buying program-specific — TLC’s Trading Spaces is particularly big, which makes sense since the real estate market is so hot here — or time-specific slots such as 8 to 11p.m. We’re using ratings data much more than we have in the past.” “The geographic constraints of this market make cable an important part of the media buy,” says Becky Naujoks, associate media director at the Meridian Group in Virginia Beach. “With the DMA split into two parts, we’re separated into two distinct areas, with only two tunnels connecting us. That makes cable great for targeting a specific part of the DMA. For a campaign for a hospital on the peninsula, we used cable to reach viewers on that side, as folks on the southside won’t want to wait up to an hour via tunnel to get to its emergency room or new birthing center.” The system now offers 51 insertable networks, with BET, ESPN, Lifetime, USA, CNN, TNT and TBS being the strongest for local ad sales. The system’s residents also watch more TV news than average because of the military presence, which attracts advertising dollars to news nets. Advertisers can also buy 30-, 60- or 120-minute commercials on the Vacation Station, a network that Cox Hampton Roads provides to more than 4,000 hotel rooms on the Virginia Beach oceanfront. “Local origination Channel 11 is also a draw for local businesses such as plastic surgeons, auto dealers and lawyers,” Frazier adds, while the Weather Channel is strong thanks to the area’s nor’easters in winter and spring, summer tourism and fall hurricane season. Eight more nets were recently added on its digital tier — including, to reach women, Lifetime Movie Network, SoapNet and Oxygen. “Inserting on digital channels is very new for us, and our goal over the next couple of years is to launch more digital networks,” she says. The system also does a lot of local ad sales promotions, such as the contest which ran from Nov. 27 to Dec. 24 to select two winners for TLC’s A Makeover Story. The transformation of Hampton Roads is another makeover story Cox loves. “Cox has invested about $600 million in the last five years in this system,” says Bowers, “and we’re leveraging that platform into a breakout system for Cox.” Bowers joined Cox in 1981 as VP of Cox Cable’s Louisiana operations and was tapped to run the Hampton Roads operation in 1986. Prior to joining Cox he had a ten-year career at General Electric, where he held various management positions including at its plastics division. An engineer-turned-marketer-turned-cable-operator, he graduated from Syracuse University with a B.S. in chemistry/wood products engineering. He serves on the boards of numerous community and cable industry associations. As head of Cox’s commercial business in Hampton Roads, Coltrin also serves as VP of Cox Virginia Telecom Inc., which is the third-largest local exchange carrier in Virginia. He joined Cox in 1983 as plant manager of Cox Cable Tidewater Inc., now part of Hampton Roads. He was promoted to technical operations manager of the Hampton Roads system in 1988 and held that position until 1993, when he was tapped by Bowers to launch telephony and business services. Prior to joining Cox, Coltrin held a range of management and engineering positions with various MSOs. He has a B.S. in business administration from Robert Morris College in Pittsburgh and an associate degree in physics from St. Aloysius College in Cresson, Pa. Frazier was promoted from general sales manager to her current position in June 2000, giving her the responsibility for all advertising sales operations in CableRep’s Hampton Roads division, which she joined in 1996. Previously she held positions at WTKR and WTVZ (Fox and CBS affiliates) in Norfolk, Va. She received a B.S. in communications from Virginia Tech in Blacksburg, Va. Jelineo has spent more than 20 years in marketing and management positions in the telecommunications industry. Prior to joining Cox in 1997, she worked at Microsoft in end-user marketing, developing customer retention and loyalty strategies for residential customers. She joined Microsoft from Viacom, where she served as VP of marketing in its Seattle market, and has an M.B.A. from the University of Washington. EMPLOYEES: 2,000 MILES OF PLANT: 7,800 AREAS OF COVERAGE: Norfolk, Virginia Beach, Newport News, Williamsburg and other communities in Hampton Roads PERCENT UPGRADED: 99%; will be completed this quarter BASIC SUBS: More than 415,000 HOMES PASSED: 655,000 BASIC RATE: $8.05 to $12.40 for limited basic; $38.60 for expanded basic package of about 70 channels DIGITAL CUSTOMERS: N/A DIGITAL RATE: $9.45 to $12.45 for digital cable; optional Digital Gateway including Music Choice costs $6.95 HIGH-SPEED INTERNET RATE: $39.95 for subscribers; $49.95 for nonsubscribers TELEPHONE RATE: $12.95 for one residential line AD INSERTIONS: Available on 51 networks, including digital nets SOURCE: COX Comparison of Cox subscribers in Hampton Roads to the top 75 market average.