Monday, January 10, 2005

Cox "Triple Play" Ploy Shows Why LUS Will Succeed

Back in the day, when Cox Regional VP Gary Cassard was barnstorming the parish touting his company's prowess and the woe that awaited LUS (and its ratepayers) if our municipally-owned utility built its fiber network and began offering services, Cassard told anyone who would listen that Cox had a trump card that would lay waste to the best laid plans of LUS.

The trump card? The Cox "Triple Play" — voice, data and video for about $85 per month.

Being a Cox customer for about a year, I have looked forward with some anticipation to the unveiling of Cox's telephone service, which finally rolled out in the last quarter of 2004. At my house, we have all four tiers of the Cox digital cable service (plus the HBO package) and high-speed Internet. The monthly bill runs right at $130. Fairly steep, but it represents a significant improvement over what we were paying when I had a BellSouth DSL line and Dish Network satellite service. Dish was cheaper than Cox, but BellSouth was sticking me something awful for the DSL line.

So, when the Cox phone service rolled out, we decided to check it out. A friend of my wife had told her that she (the friend) had received discounts on the cable and Internet service when they signed up for the phone service.

So, between Christmas and New Year's, I made the call to make the phone service switch from AT&T to Cox.

There are three tiers of Cox phone service. The deluxe (my name for it) is about $55 per month, but you get pretty much unlimited calling in North America. The second tier (let's call it "middlin'") offers 1,000 minutes of calling anywhere in North America for $39.99. The basic phone service, which provides unlimited calling in Lafayette Parish is $12.95 per month.

I asked about the discounts I'd heard might be available. I was told that because we are digital cable and high-speed Internet customers, I could knock off $10 whole dollars off the deluxe and middlin' prices, but that the basic was locked in at $12.95.

I asked about Mr. Cassard's promise of the $85 Triple Play. What followed was an explanation of why Cox and BellSouth have so little credibility with the general public here — there was, as usual, some fine print in Cassard's promise.

Yes, I could get that Triple Play package for $85 per month, but I'd have to ratchet down to basic cable and basic Internet. On the other hand, I would get the deluxe phone package! Woo-Hoo!

So, I could get the Triple Play at the touted $85 per month rate, but only if I was willing to give up the things that (in the view of those in my household) make the current costs worthwhile.

On the other hand, if I want to add the deluxe telephone service to my package (a telephone package designed for people without national calling plans on their cell phones) my bill would actually be about $185.

Not in my lifetime, thank you!

We're going to go with the basic phone package ($12.95 per month), which will bring our bill up to about $144 per month.

Now, LUS has premised their projections on what percentage of market share they can win on the idea of eventually winning about half of the cable, telephone and Internet customer base in its service area.

LUS will offer a triple play package, too. Their package (based on comments made by LUS head Terry Huval and consultant Doug Dawson before the Parish Council and other public meetings) will consist of a basic cable package of about 85 channels (the Cox website won't show my the channel list of the Basic Cable package here), telephone (probably packaged somewhat similarly to the tiers now offered by Cox) and high-speed Internet (at a minimum speed of about six times faster than Cox's high-speed service) and do that for 20 percent less than the incumbent.

Well, this package is going to hold powerful appeal for Internet users in Lafayette, particularly those (like me) currently using 'high-speed' services. I think the Internet package offered by LUS will draw a higher percentage of Internet users to its service than was represented in the LUS market survey conducted last spring.

As I recall, Internet usage was important to something like 40 percent of those surveyed. But, as a person who knows a fair number of Internet users, I believe LUS will attract a very high percentage of those who rated Internet access as important to them.

I think many of these people probably have some form of high-speed Internet access now — either DSL or cable modem-based service. Those are premium services for both Cox and BellSouth. In fact, the only way to get Cox high-speed Internet is to have digital cable service.

So, based on that, my guess is that a large percentage of the early adopters of LUS's offerings (I am convinced that this system will be built) will consist of former premium services customers of Cox and BellSouth.

This is significant for a number of reasons. First, it indicates just the kind of threat that the LUS plan presents to Cox (BellSouth is hardly worth mentioning on this because they can't offer Triple Play now and probably will not be able to do so for at least five years). These high-speed Internet customers are the best customers Cox has in Lafayette. Cox's digital cable package runs about $70 per month. Cox High-Speed Internet runs about $40 per month. So, these Cox High-Speed Internet customers are paying a minimum of $100 per month for their service. Add Cox basic telephone ($12.95 per month) and the Internet-heavy, phone-basic Cox Triple Play package comes to about $115.

LUS says it will beat market prices by 20 percent. So, pricing of a competitive LUS package would be about $92 per month.

So, a prospective Internet savvy LUS customer could get about five times the bandwidth for $23 per month less than they are currently paying for a high-speed Internet package from Cox.

The significance of this is that a high percentage of first adopters of LUS will not be looking for savings compared against the Cox basic package or whatever jack-leg phone and satellite gig BellSouth can patch together in the next 24 months. Instead, they'll be switching to get the LUS version of REALLY High-Speed Internet and be getting discounts based on the premium service packages currently being offered by Cox.

These bandwidth hungry early adopters will mean higher revenues per customer for LUS than customers who are primarily interested in cable or telephone. And, these higher per customer revenues will put the LUS project on the fast track to fiscal stability.

Those opposing this plan don't want us to understand this. But, of course, they have not wanted any accurate information about LUS's prospects to see the light of day.

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