Competition for TV services dials up

By Tim Krohn
Free Press Staff Writer

MANKATO November 30, 2007 11:45 pm

— If you live in Mankato or North Mankato, you’re wanted.
You’re wanted by HickoryTech and you’re wanted by Charter Communications.
And don’t forget Dish Network and Direct TV. They want you, too.
The battle for television, Internet and telephone customers in the area has hit an unprecedented pitch.
“We just keep trying to add more niches, more services to compete. It’s a constant battle,” said Tucker Carlson, a spokesman for Charter in Minnesota.
Charter, one of the nation’s largest cable operators, has held much of the local TV business, with its primary competitors in recent years being satellite TV.
Now Mankato-based HickoryTech, the 110-year-old phone company, is taking Charter head-on.
For consumers, it brings a flurry of sometimes confusing solicitations for limited-time introductory offers with a dizzying number of options.
‘Bundling’ services
The most popular offerings for consumers are “bundled” packages of services — getting digital TV, high-speed Internet and telephone service from one provider.
“Bundling is the big thing. One package, one bill and it’s the best value,” Carlson said.
Determining the lowest cost or best value is a moving target. Both HickoryTech and Charter offer a bundle of three services for about $70 a month for 12 months.
For packages that don’t include premium movie channels, the “regular” cost after the 12-month promo period is in the $100 range, plus a variety of government fees and taxes. Even those extra fees can vary based on the exact services and because the cable and telephone industries are regulated differently.
Comparing each service is also difficult because the companies offer slightly different channel lineups and packages.
HickoryTech touts its free installation, no-rental-fee digital box, the ability for customers to pick some of the channels they want to add to their service, and the fact it’s a local company.
Charter points to its larger offering of high-definition channels, a large library of free movies for premium customers and its long experience in the business.
Carlson said that in the end, each consumer decides what the best value is for them.
“You stay competitive by adding extras, by filling more and more niches. Everyone has different needs and see a different perceived value.”
DeeDra Vosburg, senior marketing manager for HickoryTech, says its competitive edge comes with cutting-edge technology, good prices and customer support. “We just did a survey and had an over 90 percent satisfaction rating from our digital TV customers.”
Jennifer Spaude, director of public and investor relations for HickoryTech, said customers like knowing the company is based locally. “Our entire support network is based right here in Mankato.”
She said the digital network HickoryTech has built — in which TV and other digital data is sent via the Internet — makes it easier to add new services and features in the fast-changing digital industry.
“We were the first in the state to have (Internet Protocol) TV and we’re still one of only a few. It is very cutting-edge technology,” Spaude said.
Mankato roll-out
HickoryTech has in recent years been building an expanded digital system and has TV, Internet and telephone service in several area communities. Its launch into the Mankato and North Mankato markets has been its biggest step — one it’s been doing incrementally.
“We’ve launched it a neighborhood at a time,” Vosburg said. “We’re trying to do it incrementally so the installations don’t get pushed too far out and to make sure it’s done right.”
HickoryTech’s expanded services are now available in all of North Mankato. Last month they began offering TV and Internet services in parts of west Mankato and LeHillier. They expect to have coverage in all of Mankato by the end of 2008.
The company won’t disclose the exact sign-up rate in the Mankato market, but the public company’s financial reports show a steady increase in television business.
At the end of 2006, HickoryTech had 4,632 digital television customers. By the end of September of this year they had added 1,000 more.
“We’ve been very happy with the number of sign-ups,” Vosburg said.
The company’s expansion hasn’t been without glitches. A week ago, HickoryTech offered all its customers a free preview of premium movie channels. But the preview created some software glitches that caused a variety of problems for customers for a few days, from channels being black to channels freezing up.
The problems were cleared up in a couple of days. Spaude said HickoryTech will offer the preview again this month.
A new landscape
More than a decade ago Congress eased the way for competition to cable providers. That law — along with improvements to digital technology — has transformed the information industry.
Carlson said a number of big companies jumped into the business. “It was pretty hot after the ’96 Cable Act.”
But, he said, many of the start-ups and the existing cable giants were hit by a competitor many underestimated.
“No one really anticipated the success of the satellites. People thought satellite was just a little niche, but satellites have over 30 percent of the marketplace now,” Carlson said.
Satellite TV, not needing the big infrastructure costs of cable or fiber-optic lines, have an edge in pricing on their TV services. But cable and telecom companies have large customer bases and an infrastructure allowing them to offer a range of services.
Carlson said the cable industry has changed in the face of the competition.
“What you’ve seen in the last 10 years is Comcast, MediaCom, Charter have all consolidated. They’re getting the efficiencies to better compete.”
He said the most of the competition now is focused on the add-ons.
“The competition is going for the higher-end product, the on-demand, the premium channels.”
Vosburg and Carlson say an ongoing battle for providers is to negotiate competitive prices with a growing number of cable channels.
“We’re constantly negotiating with the different channels,” Vosburg said.
“Negotiating with channels is getting tougher,” Carlson said. “They’ve consolidated, too, and they’re all looking for a competitive edge.”
Niche cable channels are growing and even sports leagues are starting there own small networks aimed at relatively small but lucrative markets.
Carlson said that beside the economic complications of providers dealing with a multitude of channels, the fragmentation of viewership has brought societal changes.
“Six years ago, for the first time, cable channels pulled in more viewers than prime time (network) TV. That was a significant threshold,” he said.
“The old ‘Roseanne’ show in the ’90s was being watched by 30 million homes a night. Now the top shows, ‘CSI’ or ‘Dancing with the Stars’ might get 20 million.
“There isn’t that shared societal interest from TV — you don’t have a ‘Who Shot J.R.’ or everyone watching the Super Bowl,” Carlson said.
“Now you have 200,000 people watching a news channel or the History Channel. It’s more and more customized and fragmented.”

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