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A Bundle Of Services Takes Root In Omaha

Cable World, Nov 3, 2003

Byline: K. C. NEEL

For a city with less than 400,000 people, Omaha is perhaps one of the most competitive telecommunications markets in the country.

"It's truly an example of what Congress had in mind when it passed the Telecommunications Act in 1996," says Mark Caniglia, Cox Communications' VP of marketing in Omaha.

Cox has been aggressively competing with telephone giant Qwest since 1994 when the telco's predecessor US West launched cable video service in West Omaha. The regional Bell operating company added cable modem service in 1998. At the same time, Cox responded by launching digital cable, high-speed data and local phone service throughout its entire Omaha area footprint.

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It was a good move for the MSO. Today, 35% of the residents that Cox passes take local phone service from the MSO. That translates into a 56% penetration rate - or 106,000 phone subscribers - of its basic video customer base of 192,300 customers. Qwest has secured 14,000 video customers in West Omaha, and hasn't expanded its video offerings beyond that area. Indeed, in 2001, the company counted 20,000 video customers.

While Qwest went into the Omaha market with aggressive video plans, it's the traditional phone and DSL arenas where the telco and MSO are really going head-to-head these days. Cox's biggest video competitors in Omaha are the DBS providers, Caniglia says. Even so, DBS penetration in Omaha is only 5.7%, he says, less than half the national average. Video growth has slowed this year and DBS penetration is growing faster than in years past since both EchoStar and DirecTV began offering local broadcast signals to customers, he says. Still, Cox is on track to add 7,000 basic video customers this year.

The MSO has also overbuilt an area west of Omaha that is also currently being served by Galaxy Cablevision. Cox had considered buying the properties, but then decided that it would be better and ultimately less expensive to build its own state-of-the-art plant and attract bundled customers, says VP/GM Janet Barnard. It's not a large area - about 1,500 homes - but Cox already has about a 50% penetration rate, she notes.

Cox credits part of its success in Omaha to its collection of voice, video and data products. But it's also worked hard to maintain a high level of customer service, and it's the company's commitment to exemplary customer care that will continue to differentiate Cox from its competitors, the executives at the system say.

"Our real value proposition is our customer care," says Bob Sebby, VP of customer care operations. "It's not our products or prices."

Caniglia agrees. "Qwest began pushing very hard this year by reducing its prices. We've taken a lot of their phone customers over the past several years, and they seemed to have finally woken up to that fact. Their prices are now lower than ours, but we made a conscious decision not to get into a price war with them because we know we can't win that war. But we can talk about our value, and our service and we think we come out on top of that battle every time."

While Cox is pushing the value of its bundle, it rarely uses that term to sell the concept.

"The term 'bundle' is a great word for internal use, but it's too complex for the public to embrace," Caniglia says. "We wanted to create an emotional value and that is how we came up with the Cox Family of Services concept. It makes it easier to communicate and we can have some fun with wordplays. For example, in August, we did an extended family campaign."

Cox may want to stay above the fray when it comes to a price war, but it's not afraid of playing hardball by rolling out campaigns proclaiming its superiority among its competitors. The company regularly runs ads that tell customers how much better Cox's video product is compared to the DBS services. And when Qwest began running ads with its employees telling viewers how great their service was, Cox countered by having customers give testimonials.

"We felt that having our customers tell people how much they liked their service was more powerful than having our employees do it," Caniglia says.

Cox also is quick to mention its recent Integrity Award from the Better Business Bureau and its ranking as one of the top five companies to work for in Omaha as determined by the Great Places to Work Institute of San Francisco. It's also very involved in the local community. And while that might not sway customers to switch to Cox for service, Caniglia believes it does help keep Cox customers in its fold when they are pitched to switch to the competition.

These awards and kudos also help local ad sales, says Annette Heaton, who's in charge of Cox's ad sales unit in Omaha. And unlike other markets where broadcast is the stiffest competition in the ad sales area, the Omaha World-Herald newspaper is Cox's chief competitor for ad dollars in Omaha, Heaton says.

That's mostly because 85% of Cox's ad revenue is generated by local advertisers, she says. Cox inserts ads on 58 channels, six of which are digital. Most of the local advertisers understand that broadcast share is diminishing, but the habit of buying newspaper ads runs deep in Omaha. Moreover, Cox is the UPN affiliate in Omaha, so any ad dollars that flow to that station actually go to Cox. The company segments its market into four zones, which is important for the majority of its mom-and-pop customers. Still, about half of the system's ad revenue comes from agencies.

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A Bundle Of Services Takes Root In Omaha

Cable World, Nov 3, 2003

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