System of the Year: Charter Long Beach–Cable’s All-Digital Offensive Takes a Beachhead

It’s rare for a metropolitan area mayor to gab profusely over the phone with a trade press journalist, given the kinds of headaches city government leaders have to deal with day after day. For Beverly O’Neill, mayor of Long Beach, Calif., gabbing with us is time well spent, considering the subject is a first-of-its-kind cable development originating within her own political boundaries. That development is the nation’s first all-digital cable system, which Charter powered up in Long Beach July 4 . For Charter’s customers there and, by extension, customers of cable everywhere, all-digital and Internet protocol signal transmission unlock access to an unlimited amount of diverse services, including digital, VOD, ITV, high-speed data, voice and PVRs.Ultimately, that capacity can be interconnected to communications devices through home networks, paving the way for other advanced services under development. Long Beach’s numbers, so far, have been gaudy. During the third quarter, when Charter dropped nearly 60,000 subscribers nationwide, the Long Beach system’s sub count stayed relatively flat, sources say. Charter won’t disclose how many digital subscribers the Long Beach system has added since the July launch.

Wendy Rasmussen, Long Beach VP/GM: "We’re making all-digital a brand here. It’s about building value for the platform and its benefits, like picture quality. When we did a post-launch survey, 70% of the respondents gave that quality a 4 or 5 rating, 5 being the high mark."

The system’s digital pentration rate is among the industry’s highest, which was one of the main reasons Charter picked Long Beach to be its all-digital guinea pig. Of the more than 75,000 basic subscribers Charter serves in the city, 67% take digital tiers. For nearly six months, the 91 channels previously transmitted to them on an analog basic lineup have been delivered in digital, while non-digital customers continue to receive their analog service via what Charter calls a "simultrans," or simultaneous transmission process. Charter won’t say when simultrans delivery will be phased out, but it is safe to assume it will stay around as long as there’s a significant analog base (or until that base gets so low that Charter will opt to give the analog holdouts digital boxes). This puts Mayor O’Neill’s corner of the U.S. on the cutting edge when it comes to telecommunications technology. Charter’s system in Long Beach now has more than enough bandwidth capacity to handle all existing services and whatever new ones are developed. Being the first cable operator to come to bat with a big-market, all-digital system was enough for us to consider naming Charter’s Long Beach operation our 2004 System of the Year; the MSO’s success with that launch pretty much sealed it. "From everything we’ve seen, all-digital has been a hit with our residents," Mayor O’Neill says. "Charter made a big splash on this, and we’re pleased to be home to the pilot program. People here are getting better programming with better picture quality, and they have to pay a lot more attention to cable." As for DBS—all-digital from the start of its national footprint—Charter and the other top MSOs now have the answer to one of their rival’s biggest selling points, as more operators put similar infrastructures in place. Cable is on course to equal—and eventually surpass—DBS on channel capacity, says Charter EVP and CTO Wayne Davis. "The message from the competition was, `We’re digital and you’re not.’ This takes the wind out of their sails," Davis says. Initial Resistance From Programmers Charter president and CEO Carl Vogel says the decision to launch its first all-digital system in Long Beach began with capacity. "It’s a 750 to 860 plant throughout Long Beach," he says. "It had a single ad zone. It had high digital penetration. It had a management team that was capable of executing this. It had the characteristics that would allow us to implement this all-digital solution in fairly short order without a lot of operation distractions." The only surprise so far was the difficulty Charter had convincing some programmers that their signals wouldn’t be degraded by the conversion to all-digital. "In fact, [their signals were] going to be enhanced through the process," Vogel says. "This is improving their signals as well as giving us a competitive advantage—or, certainly, minimizing the competitive advantages of satellite. I was surprised at the time it took to deal with that particular issue, when it improves the picture quality in your experience considerably and it didn’t impact advertising at all." Now that programmers have seen what’s going on in Long Beach, Vogel hopes such resistance will fade as other systems make the transition to all-digital. "You’ll see others in the industry also look at digital solutions, which is good for everybody," he says. Charter will continue to promote all-digital cable deployment beyond Long Beach in 2005. A number of Charter systems—Davis won’t divulge how many—will make the all-digital/simultrans transition during 2005. The MSO is taking a big role in Next Generation Network Architecture, the joint effort started last spring by Comcast, Time Warner Cable and Cox to create the supercomputer equivalent of cable system and set-top box infrastructure. The goal: no more ripping up of streets or undertaking mass converter switch-outs every few years to increase channel capacity and service functionality. Upgrades become electronic, with added capacity transmitted through the plant and new services layered into existing set-tops. CableLabs assumed management of NGNA earlier this fall, and Charter has turned documentation from the Long Beach deployment over to the nonprofit research and development consortium. "I’m excited about what this effort will do for us, similar to what DOCSIS did for high-speed access," Davis says. "This goes beyond getting more bandwidth for more services. We’re out to make the infrastructure more reliable." Cutting-Edge Service With a Local Angle In Long Beach, it’s up to Wendy Rasmussen, the system’s VP and general manager, and her employees to push the area’s all-digital penetration beyond 67%—the highest digital footprint of any Charter system. To help meet that goal, Long Beach is adding new Spanish-language services to increase its appeal among Latino residents. In addition, Charter’s holiday marketing campaign, organized in association with other Charter systems in the Los Angeles area, invited analog customers to make the digital switch. "We’re making all-digital a brand here," Rasmussen says. "And when I say brand, it’s about building value for the platform and its benefits, like picture quality. When we did a post-launch survey, 70% of the respondents gave that quality a 4 or 5 rating, 5 being the high mark." Event participation is another part of Rasmussen’s game plan to increase the digital sub count. She’s hoping to come up with an event in 2005 that matches the impact of Charter’s all-digital kick-off last Independence Day—the annual city aquatics festival which doubled as the 2004 U.S. Olympics Swimming Trials. Charter, which served as co-sponsor, placed all-digital programming monitors around the site and ran messages on a Jumbotron board throughout the competition. System officials provided wireless high-speed Internet access facilities at the festival for athletes and journalists. As Charter tends to the matter of converting its analog population to digital, the MSO is in the midst of franchise renewal talks with Long Beach officials. Both O’Neill and Rasmussen are confident a new agreement will be reached, but refrained from offering specifics on renewal conversations. "We feel now we have a first-class communications infrastructure," O’Neill says. "Our relationship with Charter is very good. They have become very much a part of our community, and are working with us on our technology vision for this community. That vision is about making neighborhoods a center of interaction and connection with government. It’s also about facilitating technology on a person-to-person basis, and about libraries getting the appropriate online technology to reduce illiteracy." "They see what we’re doing as a model for what cities and cable systems can accomplish together," adds Rasmussen. "The mayor has ordered her staff to work collaboratively with us. And my staff has been instructed to get the franchise renewed quickly." Charter has taken the first step in the industry’s long march to all-digital operation of cable systems. Now it’s up to the rest of the cable industry to follow Charter’s lead and lay claim to the technological future while never losing sight of the most unique part of its past—its strong ties to local communities. Spreading the All-Digital Gospel Will other mayors around the country take after Long Beach, Calif., Mayor Beverly O’Neill and become boosters of all-digital cable service? We’ll check back with her around this time next year and find out. By then, O’Neill will be six months into her role as president of the U.S. Conference of Mayors, an organization that brings together the top officials from cities with 30,000 inhabitants or more. As president, O’Neill will be able to share her positive experience of the rollout of Charter’s all-digital platform in Long Beach, as well as show other mayors what to expect and how to reproduce that experience. How and when these dialogues will take place is not yet clear, O’Neill acknowledges. But take place they will. "The knowledge of what’s happening here will be taken to other people who want to know what you’re doing right," she says. —Simon Applebaum