Jerry Rotondo doesn’t have to go far when he needs relief from back pain caused, in part, by the stress of managing Wave Broadband’s cable system in Port Orchard, Wash. A chiropractor works out of an office next door to the system’s headquarters, and Rotondo is a loyal client. Must be that fierce satellite competition. "I need my back tweaked every once in a great while, so I go there about once a quarter," says Rotondo, Wave’s general manager. Mile Hill Chiropractic is a faithful subscriber to Wave’s high-speed Internet access service, which likely adds to the therapeutic atmosphere. Wave’s Port Orchard system indeed faces some serious competition from satellite, which has more than 6,000 customers in the area, amounting to 27% penetration, according to Media Business Corp. That compares with 18% average penetration among counties similar in population size to where Wave operates, and 22% nationally. Telecom player Qwest serves as a reseller for DirecTV in the area, enabling the satellite video service to be bundled as part of a triple play with Qwest’s phone and DSL Internet services. DirecTV’s Total Choice video package alone, with at least 155 channels, is priced at $41.99 per month. EchoStar’s basic multichannel package, with more than 70 channels, sells for $34.99/mo. Wave’s digital On Demand Pack costs $49.95/mo. and includes 78 analog and 19 digital channels. "The DBS people have done a good job using their ability to be all-digital from the start, available at a lower price, as weapons against us," Rotondo says. "That’s why penetration is high here. Our counter is providing unique services they don’t have, such as VOD, and promoting that uniqueness as strong as you can." STRONG RESULTS Wave’s high-speed Internet access pricing, in addition to cable-only services like VOD and local high school channel SKTV, have helped the system produce some encouraging operating numbers for 2005 (see charts). In particular, 71% of Wave’s basic customers subscribed to high-speed service in the fourth quarter of 2005, compared with 59% in the fourth quarter of 2004, according to the company. Since VOD was introduced to all digital customers in the first quarter of 2005, Wave has added about 1,000 digital households; nearly half of Wave’s video customers are now taking digital. The system even got a small bump in basic subscribers. That’s a different picture from Wave’s 2004 results, which left the system with little to crow about. Some 300 people dropped basic service and 1,000 dropped digital that year. EFFECTIVELY MARKETING SPEED Angela Higham, Wave’s marketing VP of systems in Washington state, lists last year’s launches of VOD and SKTV as major factors in the turnaround, but for her, the system’s biggest success was Wave’s Internet pricing and marketing strategy. Port Orchard, located southwest of Seattle and an hour’s drive from Seattle-Tacoma International Airport, originally offered 3 Mbps service at $35 per month for cable subs in 2004. It now offers a range of speeds. At the low end the speed is 120k and it’s 6 Mbps at the high end. Prices were set at $19.95 per month for the minimum 120k speed; $45 for 6 Mbps. Qwest offers 3 Mbps high-speed in Port Orchard at $44.99 per month. "We wanted a speed for everyone to make high-speed more attractive," Higham explains. "If you’re a speed junkie kind of customer, there was a product for you." To help drive Internet subscriptions, Higham and her marketing staff prepared cross-channel messages in which Port Orchard business and government officials touted the virtues of high-speed. Similar testimonial campaigns were done for VOD. Other regularly used marketing tactics included freestanding inserts and ads in the weekly Port Orchard Independent and Kitsap Sun newspapers, and bus-stop signage. Higham says 75% of Wave’s high-speed customers take the 6 Mbps service, attributing that figure to the cross-channel testimonials and discount programs. HOOKED ON VOD When Wave was just offering pay-per-view movies at $3.99 apiece, Port Orchard was averaging almost 80,000 buys over a three-month period. With VOD, nearly 150,000 buys were tallied in the first three months of availability. Wave anticipates cracking the 200,000 buy mark in the first three months of 2006. Wave’s VOD offering includes more than 1,500 titles per month, all supplied by California-based distributor TVN Entertainment. Titles include selected shows from Food Network, OLN, Cartoon Network and PBS Kids Sprout, as well as HBO’s subscription VOD package. PLAYING THE LOCAL CARD The addition of SKTV (South Kitsap School TV) further sharpened Wave Broadband’s local profile. Wave spent almost $30,000 on a fiber interconnect between its Port Orchard head-end and South Kitsap High School, plus digital production equipment inside the school, to get SKTV on digital basic. "People tell us it’s an important and valuable attraction in their digital viewing," Rotondo says. Students at the high school—one of the biggest in the state—produce the content, including promotional TV spots alerting the city at large about the channel. SKTV offers live football, coverage of school board meetings, plays, commencement exercises and other events, with technical quality close to local broadcast stations, Rotondo says. The most notable attraction is Wolf Tracks, a weekly magazine series looking at drug addiction and other social issues impacting teens. A BUNDLE OF ITS OWN Wave will directly confront the DirecTV/Qwest combo late this month when it launches its VoIP phone service. At press time, some technical issues with long-distance calling and voicemail functions were being addressed, but Port Orchard plant manager Kirby White anticipates the service will launch as planned. Wave’s phone service will cost $39.95 per month, and include call-waiting and caller ID features. Then comes an area blitz of triple-play bundle offers, in an effort to blunt DirecTV/Qwest’s sales. DBS BUYBACK Wave’s recent success in digital and Internet subscriptions has inspired the company to intensify its DBS buyback marketing. Direct sales employees are fanning the area offering $275 for a switch, paid out through $25 monthly service credits. The buyback offer is attracting 16-20 subscribers per month, says Wave; the number increased in January when Dish dropped Lifetime, even though Wave didn’t exploit the license-fee spat in its buyback marketing. Laurie McIntyre, office manager with Dish dealer affiliate Total Satellite in nearby Bremerton, says Wave’s buyback offer isn’t impacting DBS penetration one whit. "Just as they’re turning four or five of our clients to cable each month, we’re turning 10 of theirs our way," she says. "Wave is our best advertisement. Their prices go up while ours stay the same." Having 10 people switch from cable to satellite each month "might have been true in 2004, but it’s not true now," answers Wave’s Rotondo. "I don’t see that in our numbers." Wave Broadband Port Orchard by the Numbers EMPLOYEES: 49
MILES OF PLANT: 1,105
HOMES PASSED: 51,921
BANDWIDTH: 750 MHZ
PERCENT UPGRADED: 100%
BASIC SUBS: 24,823
BASIC PENETRATION: 47%
BASIC RATE: $46.50/MO.
DIGITAL SUBS: 11,805
DIGITAL PENETRATION: 48%
DIGITAL TIER RATE: $49.95/MO.
HSD SUBS: 17,696
HSD PENETRATION: 73%
HSD RATE: $19.95-45.95/MO.
HDTV SUBS: 2,393
HDTV RATE: $5/MO.
DVR SUBS: 2,011
DVR RATE: $10/MO.
VOIP: LAUNCHING THIS MONTH
VOIP RATE: $39.95-$49.95
AD INSERTION: 20 CHANNELS Source: Wave Broadband (as of Jan. 25)

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