First Rochester, Then the Western World
The citizens of Rochester, N.Y., have a peculiar rivalry with their neighbors in the similarly sized industrial centers to the east and west. As winter dumps its frosty payload across Upstate, the cities of Rochester, Buffalo and Syracuse vie for the Golden Snowball, a trophy handed over to the town with the greatest yearly accumulation of the white stuff. The winner gets, uh, bragging rights for the year, the losers shrug and go back to their snow shovels. Alas, Rochester is a perennial bridesmaid in the friendly civic contest, as Syracuse routinely racks up the kind of precipitation totals that would give a Yeti pause. This year, Syracuse got socked in by 153.5 inches of snow, while Rochester came in second with a respectable 143 inches. That’s gotta sting a little. “Are you serious?” blurts a clearly bemused David Sackett. “Let them [Syracusans] keep the trophy for as long as they want. If that’s all they have going for them, by all means, they’re welcome to it.” It certainly can be argued that Sackett, 26, an engineer for Eastman Kodak in Rochester, has a valid point. Miserable weather doesn’t seem as though it should be something to be desired, and when compared to the wealth of opportunities Rochester affords its own citizenry, Syracuse appears to come up a little short. Boasting a solid economic foundation of high-tech companies such as Kodak, Xerox and Bausch & Lomb, Rochester has been able to weather economic downturns much more assertively than its neighbors. The economy alone doesn’t fully account for the enduring sense of civic pride that characterizes the area. A haven for outdoorsy types, the city boasts more than 11,000 acres of parklands and is surrounded by any number of freshwater lakes. Rochester’s cultural life is also particularly noteworthy, as the city supports a philharmonic orchestra, an acclaimed modern dance company and a Broadway-caliber theater. If that’s not enough, the city plays host to a handful of semipro athletic teams, including an AHL hockey franchise and a Triple-A baseball affiliate. All of which makes for a pleasant place to live, and a solid area in which to run a cable company, says Brian Wirth, VP of public and government affairs for Time Warner Cable of Rochester. “It’s a savvy market, one that’s always been hungry for new products and new experiences,” Wirth says. “We’ve got a lot of firsts under our belts.” True enough, Rochester has long been a favorite test market of consumer products of every stripe, from fluoride dentifrices to irradiated meat. While much of that can be chalked up to a demographic base that functions as a microcosm of the U.S. population at large, the sheer number of techies in the area is a key factor as well. “The makeup of the local market is why Time Warner Cable has done so many trials here,” says Mike Neal, the division’s VP of marketing. “This is a tech-friendly market, and a lot of very smart people live here, which is why we have been able to offer so many advanced services in this division. We leverage that and play off the fact that we deliver products and services that no other company can offer.” Indeed, there’s very little in the way of advanced services that TWC hasn’t already thrown into the mix — and without a net. Although division president Jeffrey Hirsch can rattle off the system’s achievements like he’s calling a horse race — Rochester was the first TWC system to install HFC plant, the first to make the initial upgrade to 550 MHz, the first to offer DVR — the speed of his delivery can’t disguise the pride he takes in his team’s accomplishments. “This is a very, very strong division,” Hirsch says. “A lot of what we’ve been able to implement here was brought here first because our people can handle just about anything you throw at them.” Hirsch, who joined the Rochester division after serving as VP and GM of Time Warner’s Columbia, S.C., system, oversees more than 180 franchises in the area. His two main areas of focus are rolling out new services — VOD came in on his watch — and maintaining the system’s stellar customer service record. “We do a fantastic job on the customer service side,” Hirsch says. “Our CSR reps are No. 1 in the entire company in four out of five tested categories. That goes a long way toward keeping our standing customers happy and winning over new ones.” As is the case with most cable systems across America, TWC Rochester has been particularly intent on fending off satellite. With a penetration rate of 17%, the DBS threat is growing in the area, which in turn has motivated the cable company to embark on an aggressive anti-dish marketing campaign. Neal says that Time Warner’s advanced digital services have helped draw in excess of 5,000 customers back from the maw of satellite. “A lot of our win-back marketing is focused on approaching former DBS customers and helping them relate their experience to current TWC customers,” Neal says. “A first-person account of how the weather can have a fundamental effect on getting a satellite picture is a very effective means of winning people over.” GM of advertising sales Dan Budzinski concurs. “Those customer testimonials have been remarkably effective,” he says. “As soon as people realize you’re on your own with satellite, they come back.” Over the last few years, the Rochester division has led Time Warner Cable in win-backs, Neal adds. One company that’s looking to gnaw away at Time Warner’s dominance in the Rochester market is United Cable Techs Inc., a small firm which offers satellite services and hookups to apartment dwellers. The company has about 1,600 customers in western New York and targets apartment buildings with at least 200 to 300 tenants. United Cable Techs offers bundled services, including digital video, telephony and high-speed Internet access. “The competition is always going to be a challenge,” Hirsch admits. “But it’s not just satellite we’re up against. Everything that the area has to offer in terms of entertainment is our direct competition.” The one competitor no cable operator wants to go up against is the local government that oversees its service area. Recently, TWC Rochester became embroiled in a dispute between itself, the city and four nearby municipalities over its refusal to hit up its HSD customers with a $2 monthly surcharge. Citing a federal ruling of March 2002, Time Warner stopped collecting the $2 HSD fee last year. The plaintiffs charge that the fee must be exacted in accordance with the public rights-of-way bylaws spelled out in TWC’s 1992 franchise agreement. Last month, Time Warner filed a countersuit in U.S. District Court arguing that under the FCC ruling it no longer has an obligation to pay the fees and requesting an injunction that would bar municipalities from imposing future penalties. The city of Rochester estimates the loss of the rights-of-way fee will end up costing it over $200,000 per year. As is the case with most urban areas, that’s a sum it can ill afford to lose. Wirth understands this, but asserts that the city is bound by the FCC’s decision. “The city’s budget deficit is real. As citizens of this community we are all concerned about it,” Wirth wrote in a recent Rochester Democrat and Chronicle editorial. “But the fair way to address the problem is not by creating select taxes that fall disproportionately on the shoulders of small groups of citizens and then ask a private company to collect that tax on the city’s behalf.” The operator won’t allow the legal skirmish to impinge on its relationship with the community, Hirsch says. Beyond the typical carping that accompanies annual rate hikes — the most recent, a standard service boost of $3, went into effect Jan. 1 — TWC customers are, on the whole, a satisfied lot. And while it’s absurd to suggest that a cable company can inspire a warm, fuzzy feeling in its subs, Time Warner’s involvement in the community goes a long way toward cementing its status as a good corporate citizen. “We do a lot of wonderful things in terms of community involvement,” Hirsch says. “For example, we’re very much involved in helping to bridge the digital divide by bringing computers and training to disadvantaged neighborhoods.” In conjunction with Science Linkages, an area outreach program that helps to plug kids into the digital culture, TWC has helped establish nine learning centers. Three more are on the way before year’s end. Science Linkages could do worse than ask Tom Foster to look after its learning centers. As the VP of engineering of TWC Rochester, Foster has been around for both upgrades (550 MHz and the ongoing 750-870 MHz changeover), and has spent 18 years in the guts of the network. As such, Foster has been instrumental in the introduction of each and every new digital service Time Warner has on offer. Rolling out a product that’s never been tested outside of a lab is like flying blind, but Foster’s team of 300 has handled each task handed down to it with remarkable aplomb. “It’s always a mutual learning process between us and our vendors,” Foster says. “It’s all a matter of taking things a step at a time. You implement equipment, look for bugs and then once the process is stable enough you go to friendlies and make sure back-end office support is available. Then you roll it out on a little larger scale.” The Rochester network is built future-proofed, Foster says. “We have to grow based on demand. That means we allow for the architecture to function in such a way that as challenges arise, we can grow where we need to grow.” All of which provides a clear path through which to get the product in the customer’s hands, says Neal. “You keep layering in all these new services, and when it all comes together, your next big job is to implement a new business structure for everything,” he says. Neal and his marketing team seem to have figured it all out. The take rate on DVR, which was introduced just eight months ago, has already reached 20,000. A full 45% of TWC’s customers have opted for digital; 35% subscribe to an HSD service. The ad market’s healthy, too. Rochester is only the 77th-largest U.S. media market, but the heft of the local businesses brings a lot of commercial dollars into their coffers. “There are a lot of cable believers in this market,” says Budzinski. “Out of all the networks we can put ads on, we have 36% of the total viewership you can buy. That’s more than any single source in Rochester.” For media buyers, TWC’s digital tier allows for a broader range of channels, which in turn gives advertisers more options. Still, questions remain about how services such as VOD or DVR will affect ad performance. Tracy Till of Butler/Till Media Services is skeptical about how DVR may change the advertising landscape. “I don’t see cable reaping any big benefits from [DVR] until the adoption rates are quite high,” Till says. “I think it has a ways to go.” Prior to being named to his current position in Rochester, Hirsch was the VP and GM of Time Warner Cable of South Carolina, where he spearheaded the launch of both VOD and HBO on Demand. He also served as assistant to the president for Time Warner Cable’s New York City division. Hirsch earned a B.A. in communications from the University of Pennsylvania and an MBA from the Amos Tuck School at Dartmouth. Foster has been with Time Warner Cable since 1978 in various technical positions. In 1992, he left TWC for two years to work for Scripps Howard Cable as director of operations in the Sacramento, Calif., system. He returned to Time Warner in 1994. Foster received his technical training while serving in the U.S. Coast Guard and is a graduate of Saint John Fisher College with a degree in management and economics. Neal has spent about 20 years in cable and telecommunications marketing, joining the Rochester division in 1999. Prior to that he was director of customer service and sales at Southern New England Telephone. He has also had stints as a marketing director in Comcast’s Little Rock, Ark., system and as an acquisitions and retention marketer at AT&T corporate. He is a graduate of Monmouth University with an M.B.A. in marketing. Budzinski joined Time Warner Cable in 1996 where he has overseen national, regional and local ad sales, traffic and billing, sales support and production for three DMAs (Rochester, Buffalo and Syracuse). He began his cable career in 1989 with Cable Media (now an Adelphia system) in Buffalo, N.Y., as senior account executive, before moving on to Mid-Atlantic Television (also an Adelphia system) as local sales manager in 1995. Wirth has extensive experience in the telecommunications industry, holding various management positions — including general management — and has served on the board of directors of the New Jersey Cable Television Association from 1986 to 1991. Prior to joining Time Warner in 1996, he worked with Bell Atlantic (Verizon) in New Jersey. EMPLOYEES: 919 MILES OF PLANT: 7,500 PERCENT UPGRADED: 65% to 870 MHz by August; the remaining 35% will continue at 750 MHz HOMES PASSED: 480,000 SUBSCRIBERS: 325,000 EXPANDED BASIC RATE: $46.75 for 66 channels DIGITAL RATE: from $51.75/month (plus $6.95 set-top rental) for 42 digital music channels and access to over 30 pay-per-view channels, plus over 40 digital channels and six premium megaplex services (HBO, Encore, Cinemax, Showtime, The Movie Channel, Starz!) HSD RATE: $39.95/month for Road Runner for customers, $44.95 for non-subs (no modem rental fee) TELEPHONY: VoIP in technical trials VOD: Launched in October 2002. SVOD is $6.95/month; MOD rates are $1.95 for classic titles, $3.95 for new releases and $7.95 for adult titles PVR: Launched in August 2002. Box rental is $9.95/month. HD: Launched in late 2002. AD INSERTIONS: Available on 38 analog channels SOURCE: TIME WARNER CABLE Comparison of consumers in Time Warner Cable’s Rochester service area to the top 75 market average.
