Meet the System–Southern California: Adelphia Runs Up the Numbers Before the Deal Goes Down

As Adelphia Southern California enters a high-profile period of transition and battles against seriously aggressive satellite rivals, ramping up sales of advanced services will be job No. 1. Adelphia’s largest system lagged behind the rest of the industry in upgrading its network, but over the last couple of years it has made up for lost time. Now, with the upgrade to 750 and 860 MHz mostly complete, Adelphia Southern California’s restructured management team will concentrate on driving penetration of digital cable, high-speed data, video on demand, high definition and DVRs. The system will begin test-marketing Internet protocol phone service by the end of the year. System SVP Lee Perron plans to boost sales of advanced services by building on recent improvements in customer service and sharpening marketing efforts. His success surely would ease Adelphia’s shift to its new owners; Time Warner Cable will absorb the system’s 1.2 million customers when Time Warner and Comcast close their $17.6 billion acquisition of the company in the second half of next year. In April Perron eliminated two area VP positions and brought in Keith Hayes from Adelphia corporate as VP, operations. The sales and marketing functions, which previously were handled by one person, were split, and new VPs overseeing each area were added. We needed to "ensure that we’ve got the right focus and the right position in the marketplace," Perron says. "We have the broadest array of advanced video products and high-speed Internet products available to the widest footprint ever in this market. That gives us by far the strongest competitive positioning we’ve ever had, within one of the most competitive markets in the country." New marketing VP Karl Ossentjuk’s job is to improve customer retention and accelerate sales of advanced products. "The continued rollout of advanced video services is absolutely a priority," says Ossentjuk, who was formerly Adelphia’s VP, Internet product management. His team is charged with, among other things, scripting telemarketing pitches for both outbound and inbound calls. Targeted and segmented database marketing will play a larger role in his team’s efforts, says Ossentjuk. New VP of sales Wendy Cullen’s job is to ensure targets are met. "By having two functional experts we are able to focus very quickly and get people moving in the right direction to achieve the regional targets," says Cullen, a cable industry sales veteran who previously worked for Media One and AT&T Broadband. Her priority will be to instill a "sales culture" at all levels of customer contact—from call centers to installers. Cullen’s been getting up to speed by assessing operations at Adelphia call centers in Ontario, Calif., Colorado Springs, Colo., and Orlando, Fla. Satellite’s strong in Los Angeles, so Adelphia will need to muster all the sales and marketing muscle it can. While the MSO staggered in the wake of the Rigas corporate fraud case and the ensuing bankruptcy, DirecTV and EchoStar went on the marketing offensive. Satellite penetration in Adelphia’s service area stood at more than 25% at the end of March, according to Media Business Corp., up from 24% in December 2004 and 18% at the end of 2002. DirecTV and EchoStar are spending a disproportionate amount of money in Los Angeles relative to other markets, Ossentjuk says. Perron is well aware that his system has lost ground to satellite. But because of the system’s improvements over the past 18 to 24 months, "the expectation is you will start to see our performance improve. I don’t think that’s just the Southern California region—it’s the company as a whole." Reduced Complaints What’s more, he says, improvements in customer service may help bring customers back. Last year Adelphia reduced customer complaints in West Los Angeles by 54%, recording about four complaints per thousand customers. In 2003 Adelphia had the dubious distinction of serving the three franchise areas that generated the most customer complaints in the city of Los Angeles. (Time Warner Cable’s West San Fernando Valley service area garnered the lowest number of complaints per thousand.) In March 2004 Los Angeles’ Information Technology Agency, which oversees the city’s 14 municipal franchises (five of which are owned by Adelphia), set complaint reduction targets. It also set non-numeric goals for certain areas, such as improving communications with the franchising authority or with subscribers. The ITA set a 50% complaint reduction target for West L.A.; Adelphia reduced the ratio by 54%. In Sherman Oaks and Eagle Rock, Adelphia fell just shy of the ITA’s 60% target. Last fall the MSO created its Advanced Resolution Team (ART), which deals with customers who have serious service issues or who call to disconnect. Two squads—one in Coudersport, Pa., and one at the Colorado Springs call center—were trained in marketing, technology and promotions and armed with promotional offers, or "ambassador discounts." According to Scarborough Research, about 37% of the population in Adelphia’s service area is Hispanic. More than half of that population does not take cable, according to the research firm. Responding to the ITA’s request to improve communications in L.A.’s heavily Hispanic Boyle Heights neighborhood (only 21% cable penetration), Adelphia hired Spanish-speaking CSRs who are available 24/7 and sends Spanish-language mailers to area residents. A 2004 Spanish-language marketing campaign that featured reprints of glamorous old Mexican movie posters won a Golden Palm Award for multicultural marketing from CTAM’s Southern California chapter, one of four the system garnered. Streamlined Head-Ends Thanks to its upgraded plant, Adelphia added 1 million VOD homes in the fourth quarter of 2004, bringing the year-end total to 1.6 million. About 1,500 hours of content is available; Adelphia includes premium subscription on-demand services in a premium network’s monthly rate. Gerry Anstine, regional VP engineering and technical operations, continues to lead the ongoing system upgrade. The entire plant is two-way, with 65% upgraded to 860 MHz. The technical revolution came late to Adelphia’s Southern California system. Looking for a presence on the West Coast, Adelphia in the late 1990s cobbled together several large and small acquisitions. As recently as two years ago there were 50 head-ends, according to Anstine. Today there are 13, which will be consolidated to six by the end of the year. Anstine’s work in LA "allowed us to upgrade data speeds and increase reliability in video and high-speed data," says Hayes, who joined Adelphia in 2003 as VP, network planning and construction, to oversee the MSO’s network upgrades. All those head-ends meant dozens of channel lineups and dozens of rate structures. It fell to Pennie Contos, the former VP of the system’s Eastern operations, and Dan Deutsch, who managed the system’s Western half (he’s currently director of technical operations for the city of Los Angeles, West Hollywood and L.A. County’s beach towns), to streamline channel lineups and rate structures. Under the new management structure, operations directors (including Deutsch) for the system’s four geographic regions report to Hayes, an award-winning engineer who’s served as SCTE chairman. "Our mandate has always been to improve the customer experience, which in turn improves our financial results," Hayes says. Repairing Local Ties If Hayes is the king of operations, then Oleg Litvak is the king of local programming. During a tour of Adelphia’s Santa Monica production studios, not too far from regional headquarters, production manager Litvak ran though just a few of the programs produced there: Beyond the Beltway, Week in Review and the local political show A Conversation With. Adelphia also feeds these popular programs to the statewide California Channel. Adelphia’s vigorous local programming is coming in handy as a public relations tool while the system attempts to repair its frayed relations with franchise authorities. In 2003 Adelphia hired Tom Carlock to work with the 124 franchise boards throughout the six-county region it serves. "I’ve never worked harder," says Carlock, VP law and public policy. At first, franchise authorities were shocked to even get a return phone call from him. "There was a period of time where renewals or extensions were literally paralyzed and nothing was being done," Carlock says of the years that the Rigas family owned the system. Back then, all decisions had to go through unresponsive family members in Coudersport. Carlock’s job won’t get any easier as the transfer of Adelphia’s cable franchises to the new owner draws near. A recent report by the L.A. controller’s office chided the ITA for not performing more frequent cable system audits and for not renegotiating old franchises. Once the deal closes, Time Warner Cable will run a mammoth 1.9 million subscriber system (it will also take over Comcast’s 580,000 subs in the area). Last month the MSO said Roger Keating, who currently runs Time Warner’s L.A. division, will be named corporate EVP, operations, for the division. Although Time Warner has not indicated it will replace personnel, change is a fact of life in cable, says Perron. In his 25-year career, he’s "worked for 13 different companies and changed jobs once," he says. "What we’re focused on with our teams is the customer." Adelphia Southern California By the Numbers Employees: 2,300
Miles of plant: 20,000
Homes passed: 2.4 million
Bandwith: 65% at 860 MHz, 20% at 750 MHz, 15% at 550 MHz
Basic subs: 1.2 million
Basic rate: $46/mo.
Digital subs: n/a
Digital rate: $13.95/mo. (additional $5 for Digital Plus), $3.85 for receiver
HSD subs: n/a
HSD rate: $31.95-$59.95/mo.
DVR subs: n/a
DVR rate: $7.95/mo. for box, $4.95 for service
VOD availability: 75% of system
HDTV: ABC, CBS, NBC, Fox, PBS, HBO and Showtime.
HDTV rate: $7.95/mo. for HD box
VoIP: Will be tested late 2005.
Ad insertable networks: 38 (on average) Source: Adelphia