Meet the System–Toledo: Buckeye Excels at a Game Satellite Can’t Play

Buckeye CableSystem’s new 24/7 channel is the hottest thing to hit Toledo, Ohio, since Baby Louie, the first African elephant born at the Toledo Zoo, was delivered last April. The channel, BCSN, which focuses almost entirely on high school sports, is the latest offering from Buckeye, a small, innovative system that sets out to prove to its customers that bigger isn’t always better. Less than two weeks after the channel’s January launch, Tom Dawson, director of government and community affairs at Buckeye, was sitting in the bleachers at a high school basketball game when two BCSN cameramen walked in with their cameras but with no visible logos. As Dawson relates it, a kid sitting a couple rows down excitedly nudged his mom when he saw the crew and said, "Look, Mom, BCSN is going to cover this game." "Coke could spend millions, and they couldn’t accomplish that in two weeks," says Steve Piller, VP, ad sales, for the system. The driving force at Buckeye is Allan Block, the managing director at parent company Block Communications. A family-owned media company formed more than 100 years ago, Block owns five TV stations, including Toledo’s TV5, the market’s WB affiliate that Buckeye offers exclusively on cable, and two newspapers, one of which is the Toledo Blade, which this year won a Pulitzer Prize for its investigation of atrocities committed by an elite U.S. military group in Vietnam. BCSN was spearheaded by Block, who, judging by a recent visit to Buckeye’s Toledo headquarters, tolerates nothing short of excellence. Standing in the company’s plant-filled reception area, where a big-screen TV was tuned to BCSN, Block interspersed his explanation of the genesis of the channel with critiques of the camera angles used for the game that was on screen. Touring Buckeye’s 36,000-square-foot-network operations center or talking to the system’s executives, the theme of excellence comes up frequently, whether the subject is customer service, telephony or marketing. Buckeye’s network is 100% upgraded to 870 MHz; its 14 hubs are connected with redundant fiber, so if the fiber breaks on one side the signal can travel the other way. For emergencies, a 6,000-kilowatt generator stands at the ready, a feature that came in handy last August during the big Northeast power outage. "Allan’s stern direction was, `Make this reliable, make this cost effective, make it work,’" says CTO Joe Jensen. "And we’ve been working on that ever since. He really challenged us to come up with the best network we can at the best price." That network is the backbone of Buckeye’s suite of product offerings, from high-speed data to digital, HD and VOD to telephony. At midday on a recent Wednesday, four people manned the network operations room, which monitors every piece of customer-premise equipment, every fiber node, every power unit in the cable network. It is unique for an operation of Buckeye’s size to have this much dedication to the network side, Jensen explains. "In order to provide the level of service…we needed to make this investment to continue to support both our telephone and cable operations," he says. Sister company Buckeye Telesystem has captured 30% to 35% of the market and serves about 1,500 accounts, according to Jensen. A residential telephony product is currently in trials with employees; the company expects to roll it out next year. A Preemptive Phone Message Buckeye’s foray into the phone business underscores Block’s business savvy. Throughout the early 1990s he declined offers to form partnerships with big telcos that wanted to build networks or use Buckeye’s cable plant to enter the Toledo market. In August 1994, after a few years of stalling and keeping potential rivals out, Block Communications president Dave Huey alerted Block that U.S. Signal, Ameritech’s predecessor, was about to announce that it was entering the Toledo market, with or without Buckeye. Although Block was reluctant to get into the phone business at that time, the company already had done two feasibility studies. Block decided to preempt Signal’s move by announcing that Buckeye was starting its own telecom company. "With telephone we were just trying to keep others from starting something in Toledo and reserving our rights," Block says. After the official announcement, one day before U.S. Signal’s, it took the company two years to build a sonnet ring through the downtown areas. "Back then we were thinking small," Block adds, "and then we decided we were going to play offense…, and then we were executing. At the very beginning, there is no doubt we didn’t have credibility. Today we’re the one that sets the standard." On the programming side, BCSN is both an offensive and a defensive play—and it’s something that satellite can’t do. One Friday night about a year ago, Huey was dozing in front of the television when the phone rang. It was his boss, Block, who asked whether Huey was sitting down, and then said he had an idea that could help Buckeye ward off competition from satellite. (Buckeye’s Toledo customers had begun showing interest in DirecTV and EchoStar—i.e., they were starting to defect.) Block told Huey he wanted to start an all-sports channel. Then Block dropped the bomb: "I am thinking about doing it 24 hours a day 365 days a year." Within 12 months, BCSN was in operation. Give ‘Em What Satellite Can’t "One of the things BCSN shows is that it’s time to rethink the old, widely held cable axiom that local origination is bullshit, that it’s not something that we want to do," Block says. "I have to have programming people really want to pay for. This stuff does not have to have a rating in the rating book, but it has to create perceived value that people want to pay for. We feel BCSN is doing that." Buckeye’s area always has had low satellite penetration, in part because of the company’s slavish dedication to providing outstanding customer service. According the Media Business Corp., which compiles satellite penetration statistics, the average satellite penetration in Buckeye’s service area is below 10%; the national average is about 18%. BCSN seems to be helping the system to stem defections to satellite. In the first quarter of last year, the system lost several hundred subscribers. Chip Carstensen, general manager of the system, attributes the losses to the double whammy of satellite competition and a poor economy. But in the first quarter of 2004, the company gained subscribers. BCSN launched with six annual advertisers. In the first phase of a three-pronged strategy, Piller, the VP ad sales, contacted longtime advertisers in Buckeye’s other sports programs and asked them to become charter sponsors; the number of BCSN annual advertisers has grown to 16. He’s also had to expand the hourly inventory of avails from four to six minutes. Being sold out is "a good problem to have," says Piller, whose office is lined with pictures of his family, along with an array of blown-glass pieces, the results of a newfound hobby. During the first quarter, he focused on bringing in annual sponsors, who receive space in the Block-owned Toledo Blade as well as on BCSN.TV, an accompanying website. Gold sponsors got franchise positions in the newspaper along with the television package. "That was really a milestone," Piller says. "In all the years I’ve been here, we’ve never been able to successfully pull off a joint sales effort between us and the newspaper." The second phase of the BCSN sales effort is to bring in more of Buckeye’s regular advertisers; there were six advertisers at that level last month. In the third phase, Piller plans to sell sponsorships to smaller advertisers for all of the sports at a specific area high school. "The real estate guy, the local dry cleaner can have that kind of connection to the community." "The first phase was pretty much a home run," Piller says. "We hit our annual budget within two months." Naturally, Block then raised the budget, he adds. Toledo is seeing the benefits of the economy’s recovery as quickly as other parts of the country. Unemployment still hovers well above the national average, but Piller has seen a pickup in Buckeye’s overall advertising compared with early last year. Business is up 32% over last quarter on another channel Buckeye operates, on which advertisers can run longer-form ads three to five minutes in duration. That channel is primarily targeted to smaller businesses that might have just $1,000 in their advertising budgets, Piller notes. "Last year the channel didn’t do well," he says. "It was off $70,000 to $80,000 from 2002. I’m surprised at how substantially that’s picked up." The next strategic initiative for Piller is to split Buckeye’s service area into three zones—another unusual tactic for a company of its size. Piller is bringing on three new sales reps to his nine-person ad sales staff, one for each zone. They will be hitting the smallest of advertisers: the strip malls. On the marketing front, high-speed data will continue to be a priority this year, according to Florence Buchanan, VP, marketing. Buckeye’s cable-modem penetration is about 23%—among the highest rates in the industry. Earlier this year Buckeye created a new tier called Classic, which they will offer only to customers who call to cancel Internet service. It’s faster than dial-up, but for three months customers pay dial-up rates. Buchanan’s group also is using direct mail to tout this tier. A premier tier, Elite, gives customers the fastest speed offered by Buckeye—downloads up to 3.5 megs. "Our high-speed growth is something we are aggressively looking at," Buchanan says. "We’re getting more competition from DSL." Through the end of the first quarter, Buckeye met its goal of adding 9,000 new HSD subscribers, according to Buchanan. A second focus this year will be marketing awareness of VOD, Buchanan says, even as the company tries to increase its VOD programming. She plans cross-promotional advertising, and possibly focus groups to learn what people want or need to know about the service. A Marketing Lesson for the MSOs Buckeye recently took first place in the CTAM Broadband Case Study Competition’s operator category for its launch of HDTV last November, which kicked off with an ESPN Sunday Night Football tailgate party. While ESPN gave Buckeye a lot of support, it was Buckeye that did all the coordination in the market. Buckeye worked with a local retailer; the grand prize was a new high-definition TV set. After winning the award, Buchanan heard from several other small operators who were happy that it was a little guy that got recognized. Throughout the 1980s and 1990s, Buckeye watched as the industry consolidated and smaller operators sold out. Block concedes that it hasn’t been easy to be an operator of Buckeye’s size, but says they’re in it for the long haul. "We are a long-term operator going back to 1965-1966," he says. "There is no doubt that those who sold out in the late 1990s did very well. However, I believe there will be higher values for those who stay."