Meet the System: Gulf Coast, Fla.

Cox’s Smart Call in Florida: Cox’s Gulf Coast system had to choose between launching digital phone service or VOD in 2006. Verizon helped make that decision a little easier… Keith Gregory had a big decision to make last summer: give his customers telephony or video on demand. The VP and general manager of Cox’s Gulf Coast, Fla., system had solid arguments to back either launch. Introducing digital phone service would clear the way for Cox to offer a triple-play bundle to its 167,000 basic subscribers in Pensacola, Ft. Walton Beach and points nearby. It would also remove Gulf Coast from the short list of Cox systems without the triple-play option. Rolling out VOD would boost the system’s digital service penetration, open up new national spot and local ad sales opportunities and create a second window for content running on Cox 2 and Cox 6, the system’s local programming channels. Gregory chose telephony, and he’s pretty happy he did. "It has jump-started sales in every other product we offer. Our digital, high-speed, high-definition TV and basic subscriptions are up, and we’re seeing major reduction in churn," he says. Corporate policy prevents Gregory and Dale Tapley, Gulf Coast sales and marketing VP, from divulging how many customers have taken telephony or the triple-play combo since both became available throughout the area five months ago. But an upturn in the revenue generated locally by Cox Business Services, the MSO’s commercial unit, provides some evidence that Gregory made the right choice. Bernice Howard, GM for the CBS unit in the Gulf Coast division, estimates that the addition of digital phone and the triple play will lead to a 50% increase in commercial sales this year; 75% of CBS clients now buy triple-play or double-play packages, she says. "Instead of our people working so hard to prospect leads, more companies are coming to us and requesting service, happy they have a choice of phone providers to deal with." The specter of a fiber build-out by a telco influenced Gregory’s choice. Verizon, already operating FiOS TV near Tampa and other parts of Florida, hasn’t made a proposal yet to local Gulf Coast franchise authorities, according to Pensacola city manager Tom Bonfield. But Gregory deems telco competition inevitable, so better to have a powerful video/voice/data package in place when that competition comes. "The question is when, not if," he says. With 70.6% of Gulf Coast households taking Cox basic video service, and his system enjoying a low DBS penetration rate—7.3% in Pensacola and 5.8% in Ft. Walton Beach, according to Media Business Corp.—Gregory felt comfortable about bypassing a VOD launch. "On demand is an enhancement of video, and given we’re already competitive in video, we could postpone VOD to seize a bigger opportunity in phone," he notes. The system plans to deploy VOD in the first half of 2007, and Gregory anticipates nailing down the content by late fall. "We gave up some revenue," he acknowledges, but given how quickly on demand is growing elsewhere, he says advertisers will be ready to come aboard when VOD arrives. After Gregory made his choice on the telephony-VOD debate, Cox corporate picked Gulf Coast as one of its test markets for interactive TV services. After a few months of software development and technical trials, Cox Gulf Coast began offering free ITV service to digital subscribers earlier this year. Using their TV remotes, digital subscribers can access headlines, weather forecasts, local movie listings and e-mail. Subscribers also can make cable bill payments on-screen and get reminders of service call requests by date and appointment window. The ITV content is produced in-house, using material from information suppliers and data from the system’s billing software. So far, 25% of Gulf Coast digital customers are using ITV at least once each day, Gregory estimates. That usage rate is above initial projections. He anticipates higher usage when a few more ITV features are introduced this fall, including caller ID on the TV and PhoneTools, which allows digital phone subscribers to add or delete applications such as voicemail and call waiting. Games, ticketing and commerce features are in development, with late 2007-2008 the likely launch period, Gregory says. Cox’s "Unlimited Connection" triple play, incorporating digital phone, high-speed Internet and digital, sells for $43.95 a month. Customers taking phone and either digital or high-speed pay $49.95 a month, or $54.95 for phone only. Some mailers branded as "Cox Connections" tout a free month of high-speed when ordering high-speed/phone combos. This summer, Tapley is spending more on outdoor billboards and drive-time radio ads, taking advantage of people driving to or from area parks and resorts. No matter what medium Cox uses, the triple-play bundle is stressed. "The overriding message is that you get it all from one source and get it on one bill," Tapley says. Triple-play promotion is also being incorporated into several outreach activities. When the Champions (formerly Senior PGA) tour played its Boeing-sponsored tournament in Destin May 21-23, Cox wired all of the chalets near greens on the 17th and 18th holes of the Sandestin Golf and Beach Resort with digital video, digital phone and high-speed access. Gulf Coast employees also demonstrated all three services inside a separate tent near the clubhouse. By the Numbers Employees: 583 Miles of plant: 2,877 Homes passed: 236,627 Bandwidth: 750-860 MHz Percent upgraded: 100% Basic subs: 167,000 Basic penetration: 71% Basic rate: $43.23/mo. Digital tier rate range: $5.95-$17 /mo. HSD rate: $24.95-$54.95/mo. HDTV: 15 channels DVR rate: $3.75/mo. VoIP: launched Dec. 2005 VoIP rate: $10.13-$54.95/mo. Ad insertion: 52 channels Source: Cox Communications