Building Stability In a Transient Town

Cable World, Oct 28, 2002

Byline: JON LAFAYETTE

"What makes Las Vegas the place to be is our growth," said Mark Lipford, the GM for Cox Cable's system here. "We build close to three or four hundred miles of plant every year. It's almost like building a small cable system, with 30 to 40,000 passings."

Las Vegas is in fact a fast-growing city. It is also among the nation's most transient.

"You have a lot of moving into the market," Lipford said, "and people moving out."

For a cable operator, that's a lot of churn. But Lipford isn't worried. Cox's churn rate in Vegas, he explained, doesn't have a material effect on finances. Margins are high, and capital expenditures are kept in line.

"From a financial perspective," he boasted, "this is a star performer [within] Cox."

Lipford himself has only been in town about 13 months. "The only experience I had prior to coming here and working was to come out mainly on golfing junkets," he said. "I was really thrilled to find out what it's like to live here, particularly from a family perspective. Not only is it a great place to raise kids, there's also a great city beyond the Strip."

Indeed, the city has worked hard to move away from depending solely on the casinos and resorts. "The Nevada Development Authority has worked for the past ten or 15 years to diversify the economy," said Joan Jungblut, media director at the Schadler Kramer Group, a Las Vegas ad agency.

Cox is bringing the latest in technology to the market, with high-definition television. HDTV customers pay $9.95 per month for a converter box, or just $6 extra if they're already digital customers. Content comes from the local CBS, ABC and CBS affiliates, plus subscribers to HBO and Showtime get HD feeds. Cox is also offering Discovery High Definition Theater for another $5 per month.

Offering HDTV is one way Cox has kept satellite at bay. "Satellite launched local into local here early in the summer, and we expected to get a blip in their penetration here," Lipford said. "I've got to give great kudos to the sales and marketing department here, they've done a wonderful job at keeping flat the penetration that you get from satellite TV."

Skytrend puts satellite penetration of the Las Vegas market at 11%.

Other things have helped Cox as well. It works with some other MSOs in a program that lets operators know where residents go when they leave a market. "They give that lead to us, which lets us then contact that customer hopefully before they've left their current address. That's very helpful," said Fritz Hoehne, VP of marketing.

HDTV won't be the last chip Cox bets to entice customers. "We're looking at launching EOD [entertainment-on-demand - what Cox calls VOD] in the near future. I think we'll be able to get it out this year, and if not, certainly early next year," Lipford said. "We're also looking for the Scientific-Atlanta or Pioneer box with the PVR built into it. We think that's something our customers are going to want."

He'd also like to get into telephony. "We'd like to do a VoIP trial, particularly in the hotels. One of the things about VoIP that's very interesting is you've got the 911 issues and backup battery power." That wouldn't be a problem in hotels, where emergency calls go through the front desk and the lights never go off in the casinos. This would allow Cox to test VoIP before rolling it out to residential customers.

Lipford believes in trying out new technologies. "Our overall philosophy since I've been here has been to hold my hand up and volunteer for all the new products and services Cox wants to launch," he said. "I'm a big believer that five years from now, everybody is going to have everything. Sprint and the telephone companies will have video. We'll have data. We'll have telephony. We'll have long distance. So if you really believe that, the more products and services I can get in a customer's home today, five years from now they're not going to want to go anywhere."

Lipford's attitude fits the market's. "We've got to set a direction and make a gamble, if you will, of where this business is going to go and get ahead of it."

Cox has three other operating groups in the market, each with its own GM. CableRep sells ad time, Commercial Business Services serves business customers, and the Hospitality Network provides video and data services, both in Vegas and nationally.

"Whether it's business or commercial or hospitality or residential [people] recognize one name: Cox Communications," Lipford said. "All three of us work very closely because a lot of the businesses and residences we work with overlap."

And from a business perspective, "I think it would be safe to say that when Atlanta looks at Las Vegas, it looks at all three entities as one combined P&L in terms of the cash flow and the other objectives we have for the system, even though it reports up through three separate divisions."

The ad market in Las Vegas appears strong. Local sources estimate the TV market at about $175 million, with Cox accounting for a 13% share, or $26 million.