Diversity Reigns in the Pacific Northwest
Comcast Corp.’s system in Seattle scored big time at selling new services this month. Just two weeks ago, the system cut a deal with an undisclosed billion dollar corporation in Seattle to provide high-speed Internet connections and a virtual private network for its employees so they can work from home. At press time, the company and Comcast were still working on how they were going to announce this deal. But it’s quite a groovy gig for a cable operator, no? It makes you wonder. Did cable pioneers such as Martin Malarkey envision that cable would offer hundreds of thousands of secure Internet network connections when they started digging the first cable trenches 50 years ago? It’s doubtful that these pioneers could see so far into the future, but it doesn’t matter in the end. More importantly, the Seattle system’s high-speed data and VPN deal solidifies cable’s place in the Internet world, not to mention its position as a commercial service provider. In fact, Comcast’s Seattle system has one of the strongest penetrations of high-speed Internet subscribers nationwide. “Throughout the Seattle DMA, there are certain fiber nodes with high-speed data penetration exceeding 40%, which is the [industry’s] high-water benchmark,” says Rick Germano, senior regional VP for the system. More than 35,000 folks signed up for cable modems in June alone, he adds. Not bad for a system that serves 1 million basic video subscribers. And not bad for the diverse terrain, both geographically and economically, covered by the cable operator here. Comcast’s market in the state includes the southern areas of Tacoma and Federal Way, known for a strong blue-collar workforce; Washington state capital Olympia; the eastern suburbs and the city of Spokane; the downtown area and surrounding tech-savvy, high-income suburbs of Seattle; and northern Bellingham, which has a strong rural population on the Canadian border. This wide range of consumers makes it difficult both to operate and market a cable outfit. That’s why the system has three area VPs managing the Puget Sound region. But this diversity, in turn, gives cable an edge when it comes to advertising. “One of our unique attributes is the ability to hit each one of those individual areas,” says Rick Stanley, VP and GM of Comcast Ad Sales. With 16 zones, Comcast can tailor ads to specific communities that consume one product more than people in other regions might. Similar to other cable systems nationwide, auto dealers make up the bulk of Comcast’s advertising dollars in Seattle. Unlike other systems, however, foreign automakers recently have increased their ad buys in the 12th largest market in the U.S., Stanley says. While Stanley attributes part of this to the interconnect formed with Charter Communications and Millennium just months ago, there’s also a demographic reason behind this twist. Two distinct characteristics that make Seattle stand out from the other top markets nationwide are Asians and foreign cars. There are a lot of both in the Seattle market served by Comcast. And, oddly enough, the two groups may be linked, according to Matt Kopp, broadcast supervisor for media buyer OMD’s Seattle office. “There is a strong foreign category here in Seattle and I think a lot of that is Asian cars, especially Honda and Toyota,” Kopp says. Seattle residents living in the cable operator’s service area are 35% more likely to own a foreign car than any of the other top 75 markets nationwide, according to Scarborough Research. Kopp attributes this strong demand for foreign automobiles to the market’s massive Asian population. The Seattle market served by Comcast is 92% more likely to have Asian residents than any of the top 75 DMAs. “Cable is becoming such a niche, where you can get specific stations to handle specific targets,” Kopp says. Comcast offers a Korean channel, KOAM, a la carte for $14.99 to target the large Korean population in the southern region of Seattle. This ability to target consumers has drawn all of Kopp’s clients — including Nissan, McDonald’s, and ABC — to cable advertising in Seattle. (ABC spends 100% on cable since the other local broadcasters won’t take ABC ads, Kopp clarifies.) It also helps that cable ads are a bit cheaper, he says. For one of his most recent buys, he paid $300 for cable and $500 for broadcast. “Cable is closer to prime access or early fringe rather than prime on broadcast,” Kopp says. Aside from the Seattle system’s unique demographics, the particular cable networks offer unique advertising abilities. For example, Kopp would buy ads on the Travel Channel in a second if his client, cruise company Holland America, wanted to advertise on TV. The Tulalips, Native American tribes based in the Pacific Northwest, also take advantage of cable’s unique programming. Since the tribe owns a casino, it buys ads on the cable networks that attract the gambling crowd, says Pat Walker, media director for Agustavo Burrus Advertising. Comcast ad sales folks actually did the research for Walker to help him find where to place a quarter of the Tulalips’ ad budget. According to this research, gamblers watch TNT, Fox News, Discovery, USA Network, Comedy Central, TLC and TNN (or, more appropriately, the “First Network for Men” renamed Spike TV). Walker has doubled the amount of money he spends on cable compared with two years ago, which now totals $30,000 a month. Aside from shows such as Comedy Central’s The Man Show, the Tulalips buy ads and sponsor games for the Seattle Mariners. “As a casino, sports is an area where our casino goers are going,” Walker says. In Seattle, the boys of summer rule. “The Mariners are the most highly rated local baseball team in the country,” says John Dietrich, Comcast area VP of Puget Sound North. This interest prompted Comcast to cut an exclusive deal with Fox to broadcast Mariners games in hi-def starting last month. And since the games have begun, calls for HDTV have risen to 200 a day from the 20 to 40 when Comcast first launched HDTV last year, Dietrich says. This exclusivity helps Comcast, and other MSOs, win back subscribers who’ve defected to satellite, he adds. “Dish and satellite is by far the thing I worry about the most at night,” he says. Satellite penetration here averages between 15% and 18%, falling as low as 11% in metro Seattle and climbing as high as 25% in the more rural areas in Bellingham, says Dietrich. Similar to other Comcast systems, Seattle started a dish detective program in April. In 60 days, employees rounded up 150,000 homes with dishes. Another competitor — municipal overbuilder Click! Network — looms over the Southern region, or area VP Anne McMullen’s territory. Click! has about 22,000 subscribers in Tacoma, up from 18,000 two years ago. Some Comcast subscribers switched to Click! because the former AT&T Broadband reps were “not providing a high quality level of service,” McMullen says. “We didn’t have relationships with the city council. We weren’t getting the word out. We weren’t really listening to our employees.” Click! also offers lower prices, at least $2 less than Comcast for basic video service, McMullen says. But after much hard work, McMullen says she’s turned around the negative perception of the cable system. And even though her prices may be slightly higher than Click!, they are still lower than in other regions because her consumers have not only more choices but also less money to spend on cable services. Comcast charges $28.99 for basic video service in Tacoma but $36.99 in metro Seattle. VOD, scheduled for a test launch in October, should help win customers back from competitors. But first, Comcast must upgrade the entire system. Throughout the state, Comcast has been upgrading 100 miles of plant a month, the goal being to bring the entire state to at least 750 MHz by the end of the year. That means McMullen gets to complete upgrades of 120,000 homes in her area. While this schedule is aggressive (AT&T planned to complete the upgrades by 2008), it is almost imperative. The city of Seattle has one of the strongest customer service standard regulations in the country. The “Cable Customer Bill of Rights” was amended last year and has 29 pages of what a cable operator can and can’t do. It also details the credits an operator must offer for failing to meet these standards. Complaints about Comcast in the first half of the year are at about the same level as they were for AT&T during the same period, says Tony Perez, director of Seattle’s office of cable communications. A lot of complaints accumulated in the beginning of this year when Comcast raised prices, up by about 9% in some areas, Perez says. But Comcast management, still adjusting to the consolidation, seems attentive, he adds. “Generally, we work really well with the executive care folks at Comcast.” Comcast even agreed, as part of the negotiations about the transfer from AT&T Broadband, to provide about $72,000 a year to fund a city neighborhood center so residents can come pay their cable bills in the evening or on Saturdays. Hiring an additional 200 employees to bulk up staff for Comcast’s two customer service centers will certainly help improve city relations even further. Cindy Gallanger, VP of customer service, plans to complete new hires by the end of October. The key for Gallanger is to place the most experienced employees in the right center. With Microsoft headquartered in Seattle, customer service representatives dealing with high-speed data issues have to know their stuff above and beyond a typical representative. While the system already has 70% of all its complaints resolved in one call, Gallanger wants to increase that percentage to 90%. “The biggest task hasn’t been regulation, it’s been competition,” she says. “If we don’t handle a customer successfully, they go to dish.” EMPLOYEES: 2,500 HOMES PASSED: 1.6 million MILES OF PLANT: 20,012 PERCENT UPGRADED: 80% BASIC CABLE SUBSCRIBERS: 1 million BASIC CABLE RATES: $12.30 to $36.99 DIGITAL CABLE SUBSCRIBERS: N/A DIGITAL RATES: $11.99 to $51.99 on top of standard basic cable HIGH-SPEED INTERNET SUBSCRIBERS: N/A HIGH-SPEED INTERNET RATES: $42.95 to $49.95 VOD: Testing to begin fourth quarter, launch in the first quarter 2004 HDTV: Launched 2002 with HBO, Showtime (added Seattle Mariners games last month) TELEPHONY: Launched in 2001; prices range from $12.25 to $39.25 AD INSERTIONs: 41 channels SOURCE: COMCAST Germano, with Comcast for 17 years, oversees the nearly 2 million-customer-strong Northwest region. Most recently, he was the regional VP of Comcast’s western Pennsylvania region. Since joining the MSO, Germano has held numerous positions in New Jersey, Connecticut and California. Prior to joining Comcast he worked as a district manager for Showtime/The Movie Channel and as a marketing analyst for Times Mirror. McMullen has more than 20 years of cable experience, now leading an area of more than 300,000 customers in counties south of Seattle. A former Peace Corps volunteer, she began her career as a governmental affairs coordinator for Viacom in Dublin, Calif. She later held various marketing positions before becoming an operations manager for TCI’s Seattle system in 1989. Most recently, she was an area director for AT&T Broadband. Dietrich has more than 20 years of experience in entertainment and cable and now oversees a region with more than 500,000 customers. He joined TCI in 1996 as director of customer care in Denver and moved to Seattle in 1998 as the executive director of customer operations for the Northwest. Most recently, Dietrich was the VP of sales and customer care for AT&T Broadband’s Washington market. Rhoades returned to Comcast this year to run an area that includes the suburbs south of Seattle and properties in and around Spokane. He began his cable career with Storer Communications, joined Comcast in 1978 and rose to GM of the Tupelo, Miss., system. Most recently, he was the SVP of Citizen Communications. Gallanger began her cable television career 26 years ago as a customer service rep for Viacom, rising to director of customer service in 1996. She currently oversees more than 700 CSRs in two call centers, handling approximately 600,000 calls per month. Stanley joined Comcast in December to oversee ad sales in western Washington, following more than ten years managing sales for local broadcasters in Virginia, Texas and Illinois. Most recently, he was director of sales for WBBM-TV CBS in Chicago. Comparison of consumers in Comcast’s Seattle service area to the top 75 market average.