Similar to the Denver market, the great outdoors in and around Spokane, Wash., is the biggest competitive threat to cable operator Comcast Corp.’s television subscription business. Just look at the statistics. Spokane residents are 128% more likely to be out on the water zooming around in their powerboats; 104% more likely to be camping in the wilderness; and 84% more likely to be hunting than the residents of other top 75 markets, according to Scarborough Research. And let’s not forget hiking and backpacking. People in the Spokane market are 51% more likely to trudge up a big hill with some heavy stuff strapped to their backs than in the other top markets nationwide. “We have some of the most absolutely gorgeous country here,” says Ken Watts, GM for Comcast’s Spokane system. “So when we look at competition, it really has been folks just choosing not to have subscription television. We have good off-air stations…and that aspect combined with the outdoor activity really have been our competition.” Yes, the outdoors tends to win. But this can be good news for cable as well. If folks are outside doing stuff, they’re probably not subscribing to satellite television either. In fact, residents in the market are 22% less likely to own a satellite dish than people in the other top DMAs. Kris Workman, the Spokane system’s marketing manager, makes the most of this outdoor challenge, pitching the quality of cable. “If you’ve got five minutes in front of the TV, you want to make sure that the programming is quality,” Workman says. Enter Comcast. It has the ability to target a variety of demographics with an array of diverse programming, and can reach and win even the most rugged outdoorsmen. On top of that, the system offers high-speed Internet services. Bundling video and high-speed data keep Comcast customers subscribing to cable, Workman says. Customers particularly appreciate the ability to sign up for a cable modem without having to commit to a long-term agreement as required by competitive DSL providers in the area, he adds. And high-speed data subscribers are growing by the month. The system gained 2,200 net new modem subscribers in the month of June, says Watts. Growth is good because Spokane needs help when it comes to high-speed data subscribers. The city had one of the lowest percentages of homes using broadband Internet connections out of 75 cities surveyed by Scarborough Research, according to a study released in early August. It placed 73rd of 75 cities surveyed. While the system has doubled the amount of high-speed subscribers for the 12 months ending August compared to the same period last year, the cable executives would not reveal the actual subscriber total. Nevertheless, Spokane has other advantages when it comes to marketing. As its own DMA, the area is a small market separated from the Seattle metropolis by a huge mountain range. This allows the Spokane system to create unique marketing campaigns that won’t spill over into neighboring cities. At the same time, because the system is connected to Comcast’s larger metropolitan cluster on the coast, the Spokane area gets the benefits offered by economies of scale, Workman says. Ken Rhoades, area VP for Puget Sound East, sees that independent Spokane stays connected to Seattle. “My job is to make sure the focus is in the right area and we get results that we need,” Rhoades says of the Spokane area. He communicates constantly with Spokane’s executives to make sure they are getting “the most bang for the buck.” Rhoades is still overseeing the transformation from AT&T Broadband culture to Comcast, which means that new projects are on hold for the moment. Come next year, though, he will more than likely help the Spokane team launch video-on-demand. “Fortunately we have a really good group of people in Spokane,” he says. “A good part of my job is to stay out of their way.” This geographical divide between Seattle and Spokane also allows the system’s technical engineering folks to test new services before its brethren in the Pacific Northwest, says Matt Durand, technical operations manager. The system has already tested phone service via voice over Internet protocol, finding it wasn’t quite ready for prime time. The Spokane system also was one of the first to roll out the self-install high-speed modem kits before the rest of the Pacific Northwest. One of the biggest challenges for Comcast’s engineers in Spokane actually comes from the great outdoors. Where there’s a diverse range of geographical terrain, there’s usually great fluctuation in the weather. When the heat increases to 110 degrees, the system can’t transmit the upper frequencies of the cable spectrum through its pipe as well as when the temperature stabilizes at 70 degrees. To deal with this fluctuation, the system uses automatic gain controls. These controls allow for an automated change in the amplifiers to help open transmission lines when they get pressed by heat or cold. Besides that, the actual physical cable infrastructure expands and contracts in reaction to the temperature extremes. The pipe can actually fracture just from temperature fluctuations. But these temperature problems are nothing new. Durand says that he and his cohorts have a very aggressive plan in place to spot the problems and fix them before they create a nuisance. “We obviously have four true seasons here,” says Durand. “The heat in the summer can be a challenge.” If a problem does arise, typically the complaints are routed through large customer call centers based in Fife and Everett, Wash. The Spokane system takes advantage of the economies of scale provided by its connection to Seattle, which also uses the Fife and Everett call centers to field customer complaints. Comcast also maintains a presence in Spokane with a dispatch, check-in and cable store. It has one counter with typically two people handling customer traffic, says Shirley Parks, operations manager. More than 2,500 people on average come in to this small countertop operation each month, she adds. Still, some local residents inevitably get routed to the call center out West. And it causes a little discontentment among the 195,000 Spokane city residents, says Marlene Feist, public affairs officer for the city of Spokane. “They’ve lost some of the personal relationships that they liked from their cable company,” Feist explains. Feist also would like to see Comcast make a stronger effort to educate the public about the public access channel. In accordance with its franchise agreement, Comcast, which took over the system from AT&T Broadband, manages the public access channel rather than the city or a nonprofit organization. While Feist speaks highly of the public access channel, she says the residents underutilize it. “I think it needs to be brought to their attention more dramatically,” she says. Since the city has just begun its franchise renewal process with Comcast, it will most likely review this issue when negotiating with the company, she says. Comcast’s control over the channel may actually benefit the public, says Richard Einhorn, a New Yorker who started an informal group called the Public Access Movement to educate people about public access channels nationwide. “Municipalities and not-for-profits seem to be affected by political people or the chamber of commerce,” he says. “They seem to react to a different model of viewership rather than the fact that it’s just good for the public.” Diane Cortez, Comcast community programming manager, says the system’s control of the public access channel also helps prevent some potentially controversial public programming from making it on the air. “We wanted to maintain control over the contract,” she says. “Many people were running around naked and there were a lot of [law] suits.” Comcast uses this channel to help about 40 to 50 nonprofit organizations, such as the American Cancer Society, get the word out about their particular programs, Cortez says. In fact, she adds that the system committed $1.4 million of in-kind donations to nonprofits last year. With the local origination production in their hands, Comcast executives also have started to discuss creating some type of programs dedicated to local news or sports. Nothing specific has been set in stone yet. Local connections, however, are key when it comes to cable advertising. Similar to many cable systems across the country, local automotive dealers are the top advertisers for Spokane, says Jeff Johnson, GM for the Comcast Advertising Sales in Spokane. Canadian tourism companies also advertise in the area since Spokane is so close to the border. And furniture and appliance stores also buy heavy cable advertising. Fred’s Appliance, for example, recently bumped up cable a few notches, with the highest percentage of its ad budget going to cable this year and last. Comcast ads have been helping Fred’s business grow significantly, says Mike Pursel, owner of Mike Pursel Advertising, which handles Fred’s advertising. “In 2001, we [Fred’s] had our first $1 million month ever,” Pursel says of the company’s revenue. “Two years later, including the month of September, we will have seven $1 million months in a row.” Pursel attributes that massive revenue growth to cable advertising. In 2002, he started parceling out more and more of Fred’s advertising spending to cable. It worked every time. Even for smaller companies, cable is the perfect fit, Pursel says. One family-owned transmission company, for instance, spends $20,000 of its $25,000 annual ad budget on cable’s Seattle Mariners games. “If you take the right money and find the right programming on cable, you can make the right impact even with a small budget,” Pursel says. The biggest ad revenue stream for Comcast’s Spokane system actually comes from the Mariners games, followed by college basketball since Gonzaga University calls Spokane home, Comcast’s Johnson says. While Spokane may be small in comparison to Seattle, Comcast can reach a little over 70% of the DMA because it recently partnered with other systems in the area to create an interconnect. Cutting deals with Adelphia and Cable One, Comcast’s interconnect inserts on 34 networks. And while the weather does keep people away from their television sets, advertising executives know how to cope. Pursel, for example, directs more advertising to radio than television between May and September when everybody’s outdoors. But he flips that in the winter months. And most of that television advertising goes to cable. “There’s not as much waste to your advertising,” he says. EMPLOYEES: 145 HOMES PASSED: 164,000 MILES OF PLANT: 1,790 PERCENT UPGRADED: 100% BASIC CABLE CUSTOMERS: 97,000 BASIC CABLE RATES: $10.65 to $38.99 DIGITAL RATES: $11.99 to $51.99, in addition to standard cable HIGH SPEED INTERNET RATES: $42.95 to $49.95 VOD: Launch expected in 2004 HDTV: Launched early 2003, offering HBO, Showtime, ESPN HD AD INSERTIONS: 34 channels SOURCE: COMCAST Watts has been in the cable television industry for more than 25 years. He managed cable systems in Montana and Tucson, Ariz., before moving to Spokane in 1997. He is currently on the board of directors of the Broadband Communications Association of Washington. Rhoades joined Comcast earlier this year. He has served as VP of operations for Charter Communications’ Northwest region and had a previous stint with Comcast in 1978, serving in a variety of roles in the company’s South Central region. Rhoades is responsible for approximately 300,000 subscribers. Parks started her cable career in Spokane 22 years ago as a CSR with Cox Communications. She managed the system’s telecom and collections team through ownership changes to TCI and AT&T Broadband. She was named to her current position two years ago. Comparison of consumers in Comcast’s Spokane service area to the top 75 market average.

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