Cable Operators

Getting Back to Pre-Katrina Business

2/16/2007 7:04 PM Eastern

Metairie, La.— The morning after this year’s State of the Union address, New Orleans once again felt abandoned.

The lead story in Big Easy newspapers and local newscasts was how President Bush didn’t even mention the stalled post-Hurricane Katrina reconstruction effort in the Gulf Coast.

But Greg Bicket, regional vice president and general manager for Cox Communications New Orleans, said he wasn’t surprised at the president’s omission.

“Well, we knew we’d be forgotten quickly,” Bicket said. “[As] to the national issues that affect New Orleans, most of the help that has been talked about remains promised. It’s in one committee or department or branch or another, and it’s yet to make itself broadly felt here.”

The New Orleans region continues to face vexing challenges some 18 months after Katrina wrought its devastation, but Cox’s cable system there has been on the road to a remarkable recovery, with its network repaired and operational in more than 90% of its pre-storm service area.

After Katrina, Cox’s New Orleans operation took a big hit in basic-cable subscribers. Right now, it has 74,000 fewer subscribers than it did before the storm, roughly 183,000 versus 257,000. Nonetheless, the system within the next few months expects to be back to the same number of revenue-generating units — a compilation of video, voice and data customers — that it had before Katrina, according to Bicket.

At a Glance
Cox New Orleans
Source: Cox New Orleans
Basic subscribers before Katrina: 257,000
Basic subscribers end 2006: 183,000
Decrease: 74,000
Service area: Orleans, Jefferson, St. Charles and St. Bernard parishes.

“The RGUs are a key metric of our growth, and we’re closing in on the volume of RGUs pre-storm,” he said.

That’s because since the hurricane, Cox has enjoyed success selling more services — namely phone and high-speed data — to fewer customers. Cox’s discounted triple-play package of video, voice and Internet access has increased its penetration in the Big Easy.

“Our customers are embracing the bundle much more vigorously than they did before,” Bicket said.

And in another landmark, this year the New Orleans operation will once again be cash-flow positive.

The cable system partially attributes its comeback, and bustling bundle sales, to the fact it had its phone and high-speed service, as well as video, up and running relatively quickly after Katrina, before other providers. Customers, residential and commercial, jumped on board.

“The ability to sell in that second and third product after the storm was night and day,” said Ellen Lloyd, the system’s vice president of marketing. “It was a land rush after Katrina. Whoever was up and there, and people had so many other important things to worry about, if we were there with all three products, [it was] 'Sign me up.’ ”

Cox’s cable plant endured extensive flood and wind damage from Katrina on Aug. 29, 2005, but today service has been restored to roughly 96% of its nodes and 93% of its network. In addition to that extensive reconstruction, Cox New Orleans has hummed along with a corporate-mandated, company-wide upgrade that is taking the system from 750 Megaherz to 860 MHz.

But the system still faces long-term challenges, as uncertainty about the region’s outlook looms. That hasn’t deterred parent Cox Communications from committing $550 million over a five-year period to the New Orleans system. Cox punctuated that investment by completing construction and opening a $4 million customer-care center in a formerly flood-ravaged area last July.

Bicket expressed cautious optimism about the future.

“I’m confident about the long-term renaissance and revival in Orleans Parish,” he said. “It’s going to be one that is going to take longer than anyone wanted. I never go anywhere where people don’t ask me if everything’s OK, and it just underscores the danger of people underestimating how massive this situation remains today.”

The system’s employees, some of whom lost their homes in the storm, are still trying to rebound and return to normalcy after Katrina, finishing up repairs on their damaged homes or building new ones in adjacent, hurricane-safe parishes.

Bicket’s executive assistant, Ruta Thibodeau, had a home in Chalmette in St. Bernard that was ruined. She moved to a new house last September in St. Tammany Parish.

“At first it was a big adjustment, getting used to new surroundings and environment,” she said. “It was starting completely over. You even need Band-Aids.”

The $64,000 question in New Orleans has been how many of its residents will return or rebuild. There have been several national press reports about the fact that the population of Orleans Parish, where the city proper and French Quarter are located, is only about half of what it was before Katrina, or roughly 200,000, compared with 440,000.

Bicket argued that the situation is not as bleak as it has been portrayed, and that the impact on Cox is somewhat mitigated. That’s because Cox New Orleans not only serves Orleans Parish, but also St. Charles, Jefferson and St. Bernard parishes. And some of the residents who left Orleans have relocated to those neighboring areas.

“In terms of south Louisiana, as long as you embrace the New Orleans metro area — which is really the four parishes and the North Shore [a suburb on Lake Pontchartrain], if you include the bedroom communities of New Orleans — we’re just displaced, we’re not down and out,” Bicket said. “One of the parishes we serve is at 122% of the occupancy that lived there before the storm, St. Charles. So we’re scrambling to serve new customers out there.”

As of Katrina’s first anniversary last August, Cox in New Orleans had 187,500 video and non-video subscribers, with 178,200 of those basic customers. As of the end of the year, the system had 194,600 video and non-video subscribers, with 183,000 of those basic customers.

Cox New Orleans completed a door-to-door audit last August that determined that of the area’s former 505,000 so-called “homes passed,” 130,000 were “impaired” after the storm, said Franklin Vincent, vice president of finance and business operations. In a somewhat encouraging sign, the number of damaged homes, which are located mostly in Orleans and St. Bernard, has already dropped by 5,000 to about 125,000, Vincent said.

And helping to offset those residents who left, New Orleans is seeing an influx of workers for the construction and waste-management companies that are participating in the recovery effort, according to Bicket.

“You’ll find that there’s an economic energy flowing to these surrounding parishes and the North Shore that come from the repairs that are being undertaken in New Orleans,” he said. “The old architecture that was damaged really requires artisans to repair, so there are a lot of very esoteric, sophisticated businesses that are coming here that we’re really excited to see.”

Cox has been marketing its triple-play bundle to residents, newcomers and area old-timers alike. It wasn’t until after Katrina that Cox New Orleans launched an official triple-play bundle, according to Lloyd. Before Katrina, the system was selling video, voice and phone, but customers could only buy all three as part of a discounted three-month package. There wasn’t a permanent price point for all three products together, Lloyd said.

Many New Orleans residents, looking for simplicity, took Cox up on its offer of multiple products from one company on one bill.

“They needed to get their lives back together, and here was one way to put a piece of the puzzle back in place,” Lloyd said. “We exceeded the 50% penetration mark on digital and [high-speed-Internet] to our basic customers, and this system wasn’t anywhere near that before this storm.”

Residents who lost their TVs and computers in the storm had to buy new ones, and often replaced them with HDTV sets and state-of-the-art PCs. In many ways, that turned into a silver lining for Cox, in terms of its HD and high-speed data offerings.

New Orleans now has a very high ratio of HDTV sets to residents. Roughly 30% of homes in New Orleans now have an HDTV set, compared to 20% nationally.

“We’re seeing them turning to Cox for our HD product,” Bicket said. “Same thing happened with computers. Dial-up was OK with the old computer, because that was as fast as it could think anyway. But now you want a fast connection.”

Cox New Orleans has been expanding and enhancing its HDTV lineup, and is in talks with local broadcasters about adding their HD feeds to Cox’s HDTV package. The system has been in thorny negotiations with Belo Corp. for the HD signal of its CBS affiliate.

The cable system also is targeting the Hispanic workers that have flooded into New Orleans to find jobs in the reconstruction effort. The Big Easy’s Hispanic population prior to the storm was mostly of Central-American descent, but the recent influx has been of Mexican heritage, according to Lloyd.

In response, Cox has been trying to tailor its “Paquete Latino” Hispanic tier to this new population, by adding more Mexican-oriented programming. To reach these Latino New Orleans newcomers, Cox had done “lots of grass roots and guerrilla marketing,” like putting TVs with digital service in popular Hispanic restaurants, Lloyd said.

Cox also plans some joint marketing efforts with a local Hispanic entrepreneur who is launching a Telemundo affiliate in the market, Lloyd said.

Cox’s cable system wouldn’t have been able to bounce back, registering success with its bundle, if its plant wasn’t substantially back up and running. At the end of 2005, Cox in New Orleans had roughly 60% of its network back online, and now about 96% has been restored, according to system vice president of engineering Mike Latino.

Last year Cox “dealt with the restoration in the hardest hit areas of the city — all of the New Orleans East and St. Bernard areas — that took a considerable amount of flooding and flood damage,” Latino said.

“So that was one of the major initiatives that we had ongoing throughout the year [2006], and still continues a little bit today,” he said.

Right now, much of the remaining restoration effort relates to nodes that serve large multiple dwelling units, MDUs, that remain unoccupied, Latino said.

“The storm impacted and flooded probably somewhere in the neighborhood of 21,000 MDU units,” Latino said. “The latest projections we saw is they expect about 12,000 of those units to come back in calendar year ’07. Those are areas where we have to time our delivery to be consistent, [and] back, as they rebuild those units.”

Cox isn’t rehanging drops — its lines that run directly to customers’ homes — to residences that are not actively taking service, according to Latino.

“There is still a large amount of home recovery and demolition that has to take place,” he said. “So there’s still some areas where we still don’t have complete access to backyard easements, but there’s really nobody in those areas at this point.”

In about 10 remaining miles of Cox’s plant, there are cars, boats and other debris blocking the company’s access to backyard easements, according to Latino.

“There are probably about two and a half miles of that [10 miles] we’re in the process of redesigning, and actually redeploying those network assets in the front yard, to serve customers that maybe farther down the line who are being impacted by our inability to access the backyard easement,” he said.

It will probably be a while before Cox gets beyond 96% of its nodes restored and 93% of its plant miles, Latino said.

“That last 4% of the nodes and 7% of the mileage is going to be really slowly gained and is going to come at the pace of restoration in some of those units, especially the MDU units,” he said.

Last year, New Orleans also began a system-wide bandwidth upgrade, taking our network from 750 MHz to 860 MHz, as part of Cox’s “E.O.N.,” or Extendable Optical Network, initiative. In 2006, New Orleans completed about 85% of that project, which combines of variety of options — such as bandwidth expansion, digital simulcast and node-splitting — to “future-proof” Cox’s network. The system is expected to complete the upgrade early in the second quarter this year.

Citing the post-Katrina reconstruction and E.O.N. upgrade, Latino said, “Either one of those two events of themselves would be a massive undertaking for a system, and to do both of them in the same year has been quite a feat. We’ve had a lot of hard work and dedication from our folks, and they’ve done a really good job pulling it off.”

Cox New Orleans, which has switched phone service, launched a hybrid switched-voice-over-Internet Protocol phone service Feb. 7.

With that hybrid phone service, Cox will be able to expand its phone service much more economically in MDUs, according to Bicket.

“The VoIP technology costs a fraction to deliver product in multiple dwelling units,” he said.

Before Katrina, the company’s New Orleans operations had 850 employees. Shortly after Katrina, only 650 were back, with the others opting to permanently relocate or work at other Cox systems. During the past year, the system has hired field-service technicians and customer-service reps and is now at 702 workers, according to vice president of human resources John Holly.

The system has also expanded some of its facilities to offer technical training, he said.

Cox had offered psychological counselors on-site starting shortly after Katrina, and just stopped bringing them in last December, Holly said.

“We have not scheduled it thus far in 2007,” he said.

Employees in New Orleans are still feeling the “lingering effects” of Katrina, according to Holly, as they try to deal with insurance claims and try to rebuild their homes and find open schools for their children.

Thibodeau and her fiancée, who live with her mother and three dogs in their new house, have postponed wedding plans originally set for last year until they settle in. Many of their former neighbors from St. Bernard, which was not only flooded but suffered an oil spill during Katrina, have also relocated near them in St. Tammany.

Erin Levins, now working as a Cox Business Services marketing specialist, spent close to a year gutting and repairing his home in Gentilly, near Bayou St. John, which was flooded. He and his family move back in last July. About half his neighbors are back, but Levins said the house next to his remains “untouched” since Katrina.

His block has undergone other changes, according to Levins.

“It’s still very quiet,” he said. “Pre-flood, people would spend a lot of time tending their yards, cooking out, doing things outdoors at their houses, and that’s changed, because they’re busy doing other things at their house or at their workplace.”

In some instances, the good times have begun to roll again for the Big Easy. The New Orleans Saints football team enjoyed a stellar season, even though it ultimately lost the National Football Conference Championship. “The spirits of the city and the whole area were lifted by the Saints,” Levins said. “That was very real. It was a nice distraction.”

And local homes have begun decorating — with yellow-purple-green wreaths and fleur-de-lis flags — for the region’s favorite holiday.

“We are about to have an incredible Mardi Gras,” said Bicket, urging visitors to come to town.

September