Thinking Outside of the Box

How Telcos Are Differentiating Their TV Services

No HD, no VoD, no DVR. Just video over dated DSL lines. How could you expect a telco to compete in the world of IPTV while battling established satellite providers with no shortage of features and functionality?

The answer for Rural Telephone Co. is, simply, big bandwidth — very big bandwidth. You see, Rural Telephone delivers symmetrical 1gbps links to every subscriber. While giant AT&T Inc. has bandwidth limitations that allow it to deliver just one HD connection to the home at any one time, Rural Telephone offers bountiful bandwidth to the home for interactive gaming in this remote geographic region of Lenora, Kan.

An early IPTV adopter that’s bringing new services to customers in its tiny community, Rural Telephone is betting big on bandwidth, followed by VoD to be launched this summer, to differentiate itself from the ever-present competition.

While many rolling out IPTV services are focusing on price competition and features that give them a competitive edge for an increasingly finite amount of time, a growing number of technology and business-savvy service providers like Rural Telephone are looking to enable the future needs of consumers and keep them close through other means.

These are their stories.

At present, the lion’s share of newer IPTV service providers are focused on throwing video at the consumer in massive packages, including niche shows and demographically targeted programming. However, too often, the result is consumers viewing but a handful of favorite channels and little else.

That’s why Shane Broyles, R&D coordinator for Rural Telephone, decided to think way outside the box. Years of experience with the trials and tribulations of video over DSL drove the telco’s decision to bring fiber all the way to users in nine of the 10 exchanges it bought from Sprint Corp. not long ago.

“We’re rebuilding the remaining exchange using Occam [Networks Inc.] broadband access equipment over the next year to 18 months to give consumers the bandwidth for anything they want,” says Broyles, who’s looking forward to slashing the video delivery delays experienced using radio frequency technology over copper. “By offering a more powerful and granular service, we’ll also be providing small business a more targeted way to reach local markets with their ads as well.”

Rural Telephone also is looking to its high-fiber foundation to enable simpler use, and no delays, with a VoD demand system it plans to roll out to its customers this month. There’s no sense adding something like VoD if the infrastructure adversely impacts its performance, adds Broyles. Rural Telephone is aiming to reduce a 20-millisecond delay in program delivery to less than one millisecond by moving to the fiber-based video delivery method. “Gaming just won’t tolerate this type of delay,” admits Broyles.

In the meantime, Rural Telephone offers about 160 channels of standard definition TV, well aware the advanced compression coupled with the big fiber bandwidth will drive the HD limitations that many other providers experience out of town once and for all.

For Horry Telephone Cooperative Inc., differentiation is all about getting there first.

“People ask me how we can afford to be so high-touch with our customers. I answer with a question, asking them what it costs to regain a lost customer, or win one away from the competition.” — Horry Telephone’s Brent Groome

Under the telco’s “First to the Customer” program, Horry works with home builders to learn the identity of the planned first owners in its southern territory — Horry County, S.C. — known as a new construction mecca for those looking for better weather and/or to retire.

“We start as soon as a contract is signed and explain to the owners the options for structured cabling plans to ensure everything is installed and operating when they walk in the door,” says Brent Groome, chief executive for customer operations at Horry. “We spend a lot of time explaining the available services and related equipment, how everything works in great detail.”

This effort runs counter to that of many telcos that sell customers services and move on, hoping to save money by doing sales, education, ordering and even installation scheduling via the Internet.

“We believe that the more time you spend with the customer, the more services they’ll use,” says Groome. “This also leads to less calls to your customer service group, which reduces your costs, and positive referrals to others.”

Customer service for bundles is a high-stakes effort, according to Groome, whose company competes with Time Warner Cable. “If I lose a customer to them, I lose the whole bundle,” he says. “While, if I win one from them, I win the whole bundle.

“People ask me how we can afford to be so high-touch with our customers,” Groome continues. “I answer with a question, asking them what it costs to regain a lost customer, or win one away from the competition.”

So how is Verizon Communications Inc., one of the big dogs of IPTV, differentiating?

Verizon’s Joseph Ambeault

In a lot of ways, actually. Verizon initially led with its FTTH network. It also is trumpeting its multiroom DVR functionality. Verizon’s latest push for differentiation is around local programming.

Verizon launched its first local channel for the FiOS package March 31 in Washington, D.C. “It’s not a local news channel, but a local content channel that we developed to help reduce customer churn,” says Michelle Webb, executive producer and general manager for FiOS 1 Local Channel for Verizon Services. “It’s a mix of regional traffic and weather, original programming, local sports coverage and local news.”

Verizon’s strategy here was to partner with Rosenbloom & Associates to recruit and train citizen journalists on Sony cameras and editing software to produce a required 22 minutes of content per day of which Verizon has final editorial oversight, explains Webb. “We’re not in the business of staffing up local TV stations,” she adds.

Questions did arise as to whether Verizon’s local effort would overlap and or compete with current local TV programming. But Verizon says that should not be an issue. “We will enter markets where we believe our effort will not be duplicative,” says Joseph Ambeault, director of interactive applications for FiOS at Verizon. “It’s not in our plan to become content producers as a core business.” However, the company believes the Washington, D.C., market was underserved with local content.

In response, Verizon cut a deal with Georgetown University to show its athletic events and also plans to show area high school sports, including football games.

Verizon plans to launch local channels in an unspecified number of metro DMAs throughout 2007 and 2008, but at press time in late April would not say where.

Cox Finds There’s a Great Future in Plastics

With little national fanfare, cableco Cox Communications Inc. has launched the Cox Advantage Program, an initiative whereby its customers in northern Virginia and the Fredericksburg region receive major discounts at more than 100 local retailers.

The cableco is providing the rewards-like program to maintain and build customer loyalty in an industry crowded with competitors pitching multiservice bundles with low promotion pricing for as long as the first year of subscription.

While all types are stepping up their service marketing efforts, with TV ads, direct mail campaigns, newspaper inserts and high-profile kiosks at malls, Cox is taking a page from the marketing handbook of airline and credit card companies in offering rewards, in this case in the form of discounts at area retailers.

“We wanted to show our loyal customers just how much we appreciate their business,” says Janet Barnard, Cox Northern Virginia vice president and regional manager. Adding the program, she says, “will make being a Cox customer more beneficial than ever.”

Each Cox customer in good standing will receive a welcome kit in the mail, which will include a Cox Advantage membership card. The card initially will contain more than $600 in discounts at participating businesses, and Cox plans to add retailers each month.

Customers can use the rewards card at participating businesses, where merchants will swipe the cards and the balances will be automatically adjusted. Each month, card balances are cleared and reloaded with a new starting balance depending on merchant participation.

Cox plans to enroll all of its qualified customers in the program throughout 2007. Customers do not need to take any action after receiving the welcome kit in the mail. Cox customers can view their account balances, as well as participating businesses, by logging on to www.vipspree.com.

Local merchants benefit beyond anticipated additional business.

Those who participate in the Cox Advantage Program will be featured on cross channel (54 cable networks) insertions, on bill messages and inserts, and via the welcome kit that will be distributed to Cox’s customers.

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