Commentary By Steve Effros KEIRETSU THINKING Keiretsus are the closely linked "families" of companies famous for working together in Japan. Ownership, compatibility, and close working ties allow the Keiretsus, in theory, to extract maximum benefit from their interlocking relationships. But it doesn’t always work that way. On my recent trip to Japan, speaking to the Japan Cable Television Association convention, I became aware of some of the difficulties posed by "keiretsu thinking." The broadcasters originally built many of the cable systems in Japan as, in essence, repeaters for the broadcast signal. The two have had a relatively benign relationship with each other ever since. Neither really looked at the other’s business, because, as part of Keiretsu thinking, each had its own role to play and it would not be appropriate to "invade" the "partner’s" turf. The rough edges of competition have been smoothed over by this way of thinking. That works until the day another competitor, in this case the telephone giant in Japan, comes along and starts delivering video over its wires. Suddenly there is competition, and the members of the broadcast/cable Keiretsu have been caught unprepared since they have not honed their competitive skills or infrastructures. I bring this up because I think I am starting to see some "keiretsu thinking" in our industry, and it’s leading to questionable decisions that I think will work against us. One example I have used before: most cable companies, being part of larger organizations that also have programming arms, have adopted a keiretsu attitude when it comes to providing our customers with conveniences that they clearly would use, like the skip button on the DVR. Every study shows that a majority of DVR owners (and there are more every day) do, indeed, skip through commercials. Yet making that an easy task was nixed when cable operators bowed to the interests of the broadcast or programming "partners." With the exception of one company’s equipment, EchoStar, which does not have those affiliations, the skip button has disappeared. Consumers still skip commercials, but they now have to "fast forward" and fumble around to do it. This is not the way to take care of the cable customer. And, it’s not a terribly effective way to keep a Keiretsu partner happy either, since the skipping still occurs. But that’s not who you’re trying to serve! Eventually, with two-way, third-party DVRs and DVD recorders with CableCards in them, I bet we’ll see the skip button again, because that’s what the customer wants. We should be focused on that, not on what our "partners" would like. It’s a mistake to forget the customer in favor of a related business partner. Eventually the customer will go elsewhere. Another example, and this one should be fixed right away, is the slightly different problem of not recognizing that the consumer, while liking the benefits of the "bundle," still sees the services we offer differently. Telephone is still a utility. When there is a problem there should be a direct number to call to get it fixed! Forcing the customer to call one central number and wade through automated ads for cable, high-speed data and telephone before finding out where to report trouble is going to ultimately spell trouble for us. The point: remember the customer first, not just an abstract goal of "efficiency" or "partnership." It is the customer, after all, whose loyalty we need to seek.

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