Cable Operators

Comcast's Capitol Improvements

7/15/2005 8:00 PM Eastern

In the 1990s, top cable executives came to the uncomfortable realization that the Washington, D.C., cable system’s mixed reputation could warp the views of policy-makers.

“There was a perception that it gave the industry a bad image,” says Robert Sachs, principal at Continental Consulting Group and past president of the National Cable & Telecommunications Association. The NCTA board even discussed forming a consortium to take over the D.C. system from owner Tele-Communications Inc.

D.C. at a Glance
Population
2003 estimate: 563,384
Land area: 61 square miles
Persons per square mile: (2000): 9,316.4
Racial makeup (2000)
Black: 60%
White: 30.8%
Hispanic: 7.9%
Asian: 2.7%
Other: 6.6%
Households
2000: 248,338
Median household income (1999): $40,127
Persons below poverty level (1999): 20.2%
Source: U.S. Census Bureau

BOUGHT IN 2000

But then, in 2000, something changed: Comcast Corp. acquired the D.C. system as part of its merger with AT&T Broadband, which had swallowed TCI only about a year before. Consortium talk ended.

“Suddenly, it was in the hands of an operator that understood these issues,” recalls Sachs. “They were sensitive to the fact that they were entrusted with the system in Congress’ backyard.”

That backyard also includes the Federal Communications Commission, the Federal Trade Commission and a number of other important federal agencies and VIPs. In fact, the Washington, D.C., operation is perhaps the most watched and scrutinized cable system in the U.S.

By all indications, Comcast, which officially took over the District’s franchise in January 2001, has taken its responsibility seriously.

“In terms of technology, we had to rebuild the entire D.C. system to get it to acceptable Comcast technology standards,” says Jaye Gamble, Comcast’s senior regional vice president. “We did not touch, inspect, review or use a single component within the D.C. system that we did not replace. TCI might have invested some money in the system, but honestly … we couldn’t find any evidence.”

In fact, when Comcast took over, only one of the some 300 nodes in the system had been upgraded. Comcast has since spent more than $72 million to upgrade the cable infrastructure and about $10 million to buy and renovate its local headquarters. For all practical purposes, Comcast literally brought the D.C. system into the modern age, converting it from a 450-MHz dinosaur into an 860-MHz powerhouse.

All this allowed for a significant increase in the amount of programming offered. That was particularly important because some of the most popular cable channels weren’t available in D.C. Many were added just a few years ago. Comcast also introduced cable-modem service to the nation’s capital, along with new digital services such as video on demand and set-tops with built-in digital video recorders.

“Because of the kind of market D.C. is, D.C. will always be in good standing to get the latest releases,” says Tony Hollinger, the vice president and general manager of Comcast’s Washington, D.C., system. He says more HDTV programming, increased VOD offerings and improved digital video recorder features (such as TiVo Inc. software integration) are all in the works. In addition, voice-over-Internet protocol service is “in the pipeline,” but a launch date is still undetermined.

A VIP? WHAT VIP?

As for the federal presence, Hollinger insists it adds “no specific added pressure” and that he doesn’t even keep a VIP list of key lawmakers or regulators.

“It would be hard, if not impossible, to maintain something like that,” he says. “But we do have a need to know who the various groups are here in the city. There are some very interesting aspects of servicing the types of folks who are here in D.C.”

Local observers say Comcast certainly knows how to take care of its high-profile customers, even if it doesn’t necessarily know where all of them live. “Comcast is very quick to respond when a Congressman or a Hill staffer has a problem,” says Donald Fishman, who was general counsel in the D.C. Office of Cable Television from 2001 to 2004. “They definitely have key customers, and they know who their customers are.”

Indeed, Sachs notes that during his tenure at the NCTA, he would occasionally meet with lawmakers or FCC officials who had issues with their cable service. “Any time I’d pick up any feedback, I’d send Jaye [Gamble] an e-mail and let him know,” says Sachs. “He was incredibly responsive.”

But Gamble — who oversees the D.C. system, as well as several surrounding suburban systems where many of those VIPs live, says he doesn’t treat the D.C. operation any differently — even though observers sometimes insist as much.

“I’ve got to tell you, that’s not the case,” he says. “I have the same metrics. I have the same targets as any other Comcast market. I have the same capital-approval process. I’ve got the same investment strategy.

“Is it something that I think about from time to time? Yes, but it’s not a factor in the way we run our business.”

It’s unclear how many federal officials subscribe to Comcast’s services at home or even at the office. (Comcast doesn’t release specific customer data for privacy reasons.) Many also live in the suburbs, which are either served by other Comcast systems separate from the D.C. operation or by other companies, such as Cox Communications Inc., which covers the affluent suburbs in Fairfax County, Va.

Within D.C., Comcast has largely missed out on showing off its newly upgraded system to policy-makers. The FCC, for example, hasn’t subscribed to cable since 1998, when it moved its headquarters to The Portals complex in Southwest D.C.

DISH’S D.C. COUP

According to FCC spokesman David Fiske, it would have been prohibitively expensive to run cable out to that unpassed portion of town, so FCC officials now get their cable programming from EchoStar Communications Inc.’s Dish Network DBS service.

Meanwhile, Congress uses its own internal cable TV system, which provides a few dozen cable channels for offices in the U.S. Capitol building complex. Comcast is reportedly considering a way to serve the Capitol Hill offices, although Comcast officials won’t discuss its plans. A company spokeswoman would only say that Comcast is “always looking at new opportunities to provide cable service in the District.”

Of course, there’s another reason that Comcast has worked so hard to improve the system: competition. Unlike most cable systems in the U.S., the D.C. market has a well-heeled overbuilder — RCN Corp., which now covers some 80% of the city, even though it stopped its expansion a few years ago.

The D.C. Office of Cable Television reports that RCN served 33,000 subscribers as of 2003, compared to 100,000 Comcast subscribers as of the same period. Comcast doesn’t release current D.C. subscriber numbers and will only say that it serves more than 1 million customers in the D.C. metro region.

“I think the fact that [RCN] was here really forced Comcast to fast-forward its upgrade,” says Fishman. RCN, which began as an “open video system” in the late ’90s, has since converted to a cable system, inking its first cable franchise with the city just this summer.

Comcast’s D.C. operation may also someday face a greater threat from Verizon Communications Inc., which has been rolling out its fiber-to-the-premises (FTTP) networks in parts of 15 states, including the Washington, D.C., suburbs. Verizon plans to use its new FTTP network to launch a video service called FiOS TV in some areas of the country this year and more broadly in 2006. It has six franchises to date across its territory, but none are in the D.C. area. Citing “competitive reasons,” Verizon spokeswoman Sharon Cohen-Hagar declines to indicate whether the company plans to roll out FiOS TV in D.C. proper.

With a unique competitive landscape and customer makeup in D.C., Hollinger has stayed focused on improving the system in his roughly year-and-a-half at the helm.

On June 8, he launched the grand opening of Comcast’s newly renovated headquarters, nestled under a highway overpass in Northeast D.C.

“They could have moved and done it from another location,” notes Barbara Lang, president of the D.C. Chamber of Commerce, which named Comcast’s D.C. system “Business of the Year” last October. “But they chose to stay in an area that’s transitioning. It’s important to have a corporate entity there and positioned there.”

That philosophy extended to system upgrades, which began in some of the poorest areas of D.C.

“They started their rebuild in Anacostia,” notes Sachs. “There aren’t a lot of members of Congress who live in Anacostia.”

For Hollinger, the renovation—which includes sleek conference rooms and an employee fitness center—was a way to show the city that Comcast was staying in D.C. for the long haul.

“It’s a great location,” he says, sitting in his modest office only feet away from the cubicles where customer-service reps take calls. Hollinger has doubled the number of CSRs in the call center and increased the number of technicians making service calls, even adding in a mix of subcontractors to help out during busy periods or resolve technical problems quickly.

In fact, the D.C. system was recognized by Comcast’s corporate office as the most improved in customer service for 2004. Hollinger already plans to set up a learning lab for employees so they can familiarize themselves with the operator’s new products.

COMMUNITY SERVICE

Comcast also got involved in numerous community initiatives, including the D.C. mayor’s program to create Lifelong Learning Centers throughout the city and others to mentor disadvantaged high-school youth. Comcast also offers an annual $1,000 scholarship to one student from every D.C. public high school.

In addition, Comcast has also partnered with the city in HIV/AIDS outreach and education programs. And the company also provides $960,000 in free cable and broadband Internet access to D.C. schools, libraries and recreation centers.

Nonetheless, Washington consumers remain a finicky bunch. “They may be early adopters,” Hollinger says. “They do push a little bit in terms of what they think products and services should be doing, so we get to hear some of that feedback.”

Case in point: Despite all of Comcast’s improvements since it took over the system, Washingtonian magazine’s upscale readership still ranked it among the worst customer-service providers in the D.C. area in the July 2005 issue.

While decades-old perceptions are difficult to change, Comcast officials exude confidence that the D.C. system will eventually rank among the top systems in the Comcast empire.

“Tony’s doing a phenomenal job,” says Gamble, speaking of Hollinger. “In some categories, he still has a ways to go. But honestly, here we are in year four after the acquisition, and he’s a little bit ahead of schedule. So he’s doing quite well.”

September