Meet the System—Peoria, Ill.: Do Cable's New Services Trump DBS' Local Channels?

Cable World, Feb 21, 2005

Here's how Insight is finding out in Central Illinois... By Mavis Scanlon

Illinois may not have been a battleground state during last fall's presidential election, but for telecommunications providers, campaigns for the hearts and minds of consumers in the Midwestern state couldn't be more heated. If the state has a Gettysburg, it's Peoria, where Insight is waging a battle against two satellite competitors, both of which have blunted cable's edge by offering local broadcast channels.

"This will be our first year with both competitors here [offering local- into-local]," says John Niebur, Insight's area VP for the Peoria/Central Illinois district. "I can tell you right now it's a war out there."

Just before the December holidays, DirecTV introduced local broadcast channels in Peoria, which is situated about midway between Chicago and Springfield. The DirecTV local-into-local launch followed its rival EchoStar, which previously had launched local broadcast channels in the Peoria market. Even though the move was expected, it was not great news for Insight's system there, which also serves Bloomington and Normal, Ill., two cities about 45 miles from Peoria, and about two dozen smaller communities in an eight-county area on both sides of the Illinois River. Insight serves about 1.3 million customers in four states; Peoria serves about 125,000 customers, or 10% of Insight's subscriber base, and it is the third-largest of 13 districts within Insight's footprint. Satellite penetration in Insight's Peoria service area is about 13%, according to data from Media Business Corp.

Neither satellite company wasted time letting potential customers in the area know they could get local channels with no extra hassle. DirecTV's advertising in Peoria increased significantly since it launched local broadcast channels; SBC and EchoStar, which in 2003 partnered to offer a telephone/DSL/video bundle, plastered the region with ads and embarked on telemarketing campaigns. National ads promote both EchoStar and DirecTV, while retailers that sell satellite services tout the local channel offerings in area papers.

Insight Fights Fire With Fire

Insight is fighting back with an advertising blitz of its own--one that plays up cable's edge in advanced services. Although the Peoria district never before had advertised much on broadcast TV, it is now running ads promoting high-speed Internet and DVR services. In an attempt to underscore Insight as the local service provider, one ad with the tag line "That's my Insight" features Insight employees talking about digital cable, HSD and DVRs.

Niebur also is expanding Insight's retail presence. Insight Peoria has claimed shelf space at Best Buy through a deal set up at the corporate level; at the local level it has cut deals with furniture and electronics stores. Earlier this month, Insight opened its first kiosk at Northwoods Mall, the largest indoor shopping center in the area. From its perch in the mall's center court, Insight showcases--and sells--its products; customers eventually may be able to pay bills there as well. Niebur expects to open additional kiosks in other malls with heavy foot traffic. "We're trying everything we possibly can," he says.

The ultimate goals in Insight's battles against its DBS competitors are to retain digital customers and entice them to use new services. Another focus is increasing customer loyalty to the system's high-speed Internet service. Insight has had success in this area: More than 85% of new customers who sign up for Internet service are purchasing, rather than leasing, their modems, Niebur says.

"Once the customer owns the modem there is incentive to keep the service," he says.

Cable modem service through @Home was introduced in the city of Peoria in 2001. Penetration rates climbed fairly quickly soon afterwards. Peoria's early and rapid adoption of high-speed Internet service also can be attributed to the presence of 12 colleges in the area and employers such as State Farm, which has its world headquarters in Bloomington.

These days Peoria's high-speed penetration rate (14.5%) stands below the industry average. Still, that's a big improvement from a year ago, when it was less than 10%.

"We need to perform as well as the rest of the industry," Niebur says. Although most customers take high-speed service as part of a bundle, it is now also available on a stand-alone basis. Broadcast ads have helped Insight reach the 30-35% of the market that doesn't subscribe to cable. The ads inform those viewers that high-speed service is available even if they don't subscribe to Insight's video service. Last year, Peoria began offering a business-class Internet service. Still in its infancy, this service has attracted about 100 new clients, but Niebur expects to promote it more aggressively this year.

Although each of Insight's districts has been selling high-speed Internet service, there hasn't been a hard push to drive penetration until last year, says Dinni Jain, Insight EVP and COO. "Last year was really the year we made it far and away our No. 1 priority," he says. "That included selling it as a stand- alone service in addition to selling it as part of a bundle."