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Cable Operators

Digital Phone Service Comes on Strong

2/17/2006 7:00 PM Eastern

Like Kevin Hyman, Terri McNulty, vice president and general manager of advanced broadband services, is another Bright House Networks executive from across the tracks.

A veteran of telephone company U S West and United Kingdom cabler Telewest Communications plc, McNulty is in charge of the Tampa system’s growing high-speed data and phone business.

She came to Tampa in 2004 to launch digital phone and was surprised by the reception from the community.

“When you arrive in town, you’re not afraid to say who you work for. The community embraces you,” she said of her first days at Bright House. “We rolled [digital phone] out somewhat slowly across the division [starting in July 2004],” she said, and “hit the pedal in 2005,” generating 100,000 subscribers and a weekly run rate that continues to grow, she said.

“Our customers love it,” she said. “It’s a very strong product, a product that almost sells itself. We’re still in the early-adopter phase.

“The bundling strategy is so important today,” she added. The service is priced at $39.95 a month for consumers who take digital cable or the high-speed data package. “We’re leading with digital phone. We’re going into the space as quickly as we can.”

But McNulty is also realistic. “If we can get a bundle that is competitive, we think we have a strong case. We’ll have some losses. But we’re secure with the customer base we have.”

There is a multilevel aspect to marketing advanced products. First is the upsell to existing video-only or video/data subscribers. Then comes selling to new apartment dwellers or homeowners, who are potentially changing service because of their household moves.

“That’s the biggest challenge marketing in the 21st century,” McNulty said. “We have to become pervasive on the Web site, with the chambers of commerce, with developers. We need to be getting ahead of the consumer in making arrangements. We’re trying to make sure we are the first thing that comes to subscribers’ minds,” she said, with billboards and advertising in the airport.

While digital phone is new, high-speed data is well established, and Bright House continues to tweak the service. Bright House does not break out its high-speed subscribers, but former sister company Time Warner Cable counts 4.8 million subscribers among 10,957,000 basic customers, for a 44% penetration. Bright House likely is in the same ballpark, with a high-speed subscriber count between 400,000 and 450,000.

“High-speed data is still selling very, very well,” McNulty said.

The company has added a 10 megabit and 15 megabit downstream service, for an extra $10 and $15 a month, respectively. “We lead with it,” McNulty said. “We attempt to bundle 10 megabits in the initial package offering. Our premium tiers are selling better here than the industry,” she said, although the standard 5 megabit tier accounts for the majority of sales. McNulty did not break out specific penetrations with those tiers of service.

Bright House still offers consumers a choice of outside Internet-service providers, including America Online, EarthLink Inc. and a small Florida ISP, Internet Junction. AOL is priced at $54.95 a month a la carte, while EarthLink and Internet Junction are priced at $44.94 a month. The multiple-ISP option is a vestige of the Time Warner Cable era, as that MSO was compelled by the Federal Trade Commission in 2001 to open its Internet pipes to competitors, as a condition of the America Online Inc.-Time Warner Inc. merger.

McNulty has no plans to eliminate those options.

“We see it in our strategy going forward,” she said. “It increases our channels to customers. We have AOL and EarthLink selling for us.

“As the marketplace gets more competitive, we need every single channel to the customers. We still have net gains each week with the ISPs, but they don’t rival the Road Runner net gains.”

And while some operators are adding content packages on top of their cable-modem service, McNulty is proceeding slowly. “We have some trials going on with premium content, but no decisions have been made. There is so much free content right now, subscribers have an expectation you’ll continue to upgrade the content” on the current service.

McNulty is looking ahead to offer more converged services. “With caller ID on the TV, we want to get there as quickly as we can. That one intrigues us a lot.”

As does Bright House’s eventual wireless play. “For us, it’s about convergence and value-added services: unified messaging, combining voice mail, Bay News 9 on your cell phone, with [a] weather-and-traffic forecast.”

September