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How Time Warner is winning over Rochester with telephony

Thu, 02/29/1996 - 7:00pm
Roger Brown

With the passage last month of the telecom reform bill, many are now predicting all-out war between cable MSOs, long distance carriers, local exchange carriers and every other communications provider as they skirmish to beat one another at their own game.

In fact, battlelines are beginning to take shape in several locations, especially between the telcos themselves. AT&T and MCImetro were talking about working together to enter the local loop in competition with the LECs. Bell Atlantic wants to provide long distance service.

Oddly, there are few head-to-head fights underway, however. Jones Intercable spent millions to fend off impending competition from Bell Atlantic, and BA backed down. US West is reportedly doing well in Omaha, but has pulled back its plans to build broadband networks throughout the West. Pacific Bell has been stringing cable, but can't get authorization from the Federal Communications Commission to offer service. Southern New England Telephone got so tired of waiting for the FCC to act, it decided to go for a statewide cable franchise.

All of this has led some industry observers to note that competition will actually occur in unlikely places insidiously rather than by revolution. That's not a far-fetched notion; and one need look no further than Rochester, N.Y. This upstate community of 250,000 people, nestled neatly near the shores of Lake Ontario, is leading the competitive pack, offering the nation's first integrated package of voice and video services over a single, hybrid fiber/coax network. Soon, high-speed data will also come on-line, too.

For Time Warner, the decision to enter the residential and commercial telephony business was made after it concluded that a cable system, after being segmented into nodes with fiber optics, makes an excellent platform to provide other services. Why Rochester?

But why did Time Warner zero in on Rochester? Why didn't the company focus on the New York metropolitan area, where it built the world's first 1-GHz cable system? The answer is actually a combination of several things. First, Rochester is completely dominated by the company, especially with the recent acquisition of properties formerly held by Cablevision Industries. The Rochester cable network now covers the entire Rochester advertising market, an 11-county area that includes almost all the cities and towns between Buffalo and Syracuse. That covers about 300,000 cable TV subscribers, served by nearly 3,000 miles of plant.

"Rochester is a perfect example of Time Warner's clustering strategy carried out successfully," says Jim Chiddix, senior VP of engineering and technology for the Connecticut-based company.

Strangely, however, not only is Time Warner competing with Frontier in Rochester, it's a partner of sorts as well. Even as Time Warner sales forces are out in the community attempting to steal customers and marketshare, it's also reselling Frontier's cellular service. Furthermore, the two companies continue to negotiate over interconnection, co-location of equipment, number portability and Time Warner's use of services such as directory and operator assistance in order to provide customers with seamless service.

"It's been going reasonably well," reports Ann Burr, president of Time Warner Communications in Rochester, in reference to the ongoing relationship with Frontier. While Burr declined to provide details about the negotiations, it's clear that it has gone better in Rochester than it has in Ohio, where Time Warner is in litigation over a variety of issues related to entering the telephony market.

Rochester is also a homogeneous community with plenty of well-educated customers, that boasts an attractive base of commercial customers, including several Fortune 500-sized firms. For example, Kodak, Xerox and Bausch & Lomb all call Rochester home and welcome the entrance of competitive telecommunications providers. After all, it gives them an opportunity to save anywhere from 10 percent to 30 percent on their telephone bills by going to a competitor.

Finally, the Rochester core system recently underwent a major upgrade that took it from a 330-MHz network (in some older pockets, the system only offered 270 MHz of bandwidth) to a state-of-the-art 750 MHz system that has been spaced for a full 1 GHz of service, according to Tom Foster, VP of network services and engineering in Rochester. Although the upgrade was driven by a franchise renewal, Time Warner chose to push fiber deeply into the system, making it an ideal candidate for new services such as telephony and high-speed data transport. In all, the Rochester system presently consists of about 800 fiber nodes, each of which passes an average of 412 homes.

The headend in Rochester is very much a work in progress.

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Powering options

Being a newly rebuilt system with a large amount of fiber, the network would easily be considered reliable enough if all that was being offered was entertainment video, notes Chiddix. But in the telephony marketplace, where the benchmark is established by the incumbent and where a challenger must be as reliable, if not more so, Time Warner has to take significantĐand expensiveĐsteps to bulletproof its network.

In fact, Foster and his crew are mulling several different options related to power. Time Warner has already implemented three-hour battery back-up units and in some cases uses natural gas generators that kick in when commercial power is lost. But generators are best used in a "centralized" powering scheme, which mandates the use of 90-volt power supplies. If the system shifts to 90 volts, there appears to be an issue with amplifiers and hum modulation that may force a swapout of amps.

One unusual option that appears to be promising is a deal with Rochester Gas and Electric, the local utility, to develop a redundant power scheme where each major power node would actually be served by two separate substations. This would dramatically improve network reliability, according to Foster, because except in the case of catastrophic failure, it's extremely rare that two substations would go dark. In addition, such an arrangement removes power from Time Warner's operating responsibility and puts it back on the expertsĐthe power company.

"We prefer not to be in the power business," notes Steve Pearse, senior VP of engineering, operations and information systems at Time Warner Communications, "but if we have to be, we will."

Perhaps the most daunting task was finding ways to make the modem equipment work in the hostile return path environment, says Chiddix. Time Warner wanted a solution that did not rely on high-pass filters or bridger switching that helps isolate noise and ingress from individual homes. Instead, Chiddix wanted hardware that could stand on its own two legs and reside in the real world. Therefore, the vendors had to be creative. Solutions include dynamic frequency agility and forward error correction, but, according to Chiddix, the effort has paid off. "We have very high reliability service," he is proud to report.

And Time Warner can prove it; the system has extensive diagnostic electronics that report both locally and via frame relay to the company's national operations center in Denver. In fact, even the network interface unit located on the side the house has intelligence, allowing engineers to monitor network performance all the way to the home.

In a couple of nodes, they're even monitoring the return lasers in the amplifiers. "We're overkilling on purpose," notes Pearse. "That way we can determine just where we have to monitor in the future."

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Central operations in Rochester monitors the video feeds and provides dispatch functions.

A success story

So, just how is Time Warner doing in Rochester? Well enough to upgrade its 9,600-line switch to support a total of 52,000 lines and 17,000 trunks. While Time Warner officials refuse to disclose exactly how many residential and commercial customers are hooked up until a "magic number" is reached, those close to the project report there are already nearly 1,000 paying customers.

Like many service start-ups, one of the keys to winning converts is to get them to try the service. For Time Warner, that typically means offering free telephone service, complete with advanced calling features like call waiting, call forwarding, caller ID and voice mail messaging for a month or so to allay consumer reservations about the quality of the service. According to Foster, the conversion rate from free service to paid customers is running at about 95 percent Đ a phenomenal success story.

As for business customers, "they simply want to know how quickly they can hook up," reports Mark Lipford, a former telephone company employee who is now the VP of business services in Rochester.

Of course, it helps that the cable company Đ formerly known as Greater Rochester Cable Đ has been vigilant in its effort to build good plant, establish good rapport with its customers and be a good corporate citizen within the community. "There is no anti-cable stigma here," says Lipford, which goes a long way toward getting a foot in the door with commercial accounts.

Why are the local businesses so eager to switch providers? Lipford says it's the person selling the service and the after-sale support that's extremely important to the business customer. "It's been my experience that companies buy the salesperson, not the provider," notes Lipford. "So, it's important to steal good sales people" from the incumbent telephony provider. "But the key to keeping them as customers is the post sales support."

To address that, Time Warner has a "customer advocate" within the company who is charged with looking out for the business customer. After a customer signs on, the advocate gets in touch with the new account, helps them through the cutover to Time Warner and continually follows up to make sure there are no open, unaddressed issues or questions.

"In the end, the technology will even out," says Lipford. "What will separate us is our people."

Training and education

Preparing Time Warner employees for the transition from "cable TV" personnel to "communications" personnel fell to Greg Hunt, VP of operations and customer service. He started by analyzing the way a cable system operates and comparing it to the way a telephone company operates. He found a lot of overlap. "Essentially, we both take orders and provision service," he says. But telephone networks are inherently more complex, and the customer service reps had to understand basic telephony, tariff structures and the different products and services in order to handle customer inquiries, problems and complaints.

Time Warner gives its seasoned CSRs an additional week of telephony classroom training, followed by another week of on-the-job training before letting them loose on customers. So far, half the Rochester CSRs have completed the training, and half the technicians have also.

"There was some apprehension at first," reports Hunt, "but then everyone took to it like ducks to water."

Employees - and for that matter, the Rochester community at large - had to be retrained to think of the company as a provider of integrated communication services, not just entertainment video. Hence the name change to Time Warner Communications and a media blitz that included direct mail pieces, billboard and electronic advertising and other high-profile marketing efforts.

In retrospect, would Hunt do anything differently? "I think I'd emphasize the fact that there's going to be constant change. We have had to change directions based on new technologies that are coming on line, new architectures and new policies. It has caused havoc, but I think our personnel adapted to the changes quite well."

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Time Warner is using Tellabs telephony modems in Rochester.

That's remarkable, given that Time Warner is doing what many think could be impossible - melding two separate cultures into one. But it says a lot about the employees that they're taking to it well.

"You have to find people who fit into this culture," says Lipford. "Look for people who are already in a competitive environment, like at a vendor or an interexchange carrier, or people who feel stifled at the telephone company."

Even with that, there are those who will be stunned at the differences in the way cable companies operate versus the way the local telephone company works. "We have one technical manager here who is shocked at how much gets done here in a short time," says Hunt.

Lipford concurs. "This (kind of pioneering work) would never have worked at a telco," he says. "They work too slow, study things for too long, have way too many meetings regarding policies and procedures — and still don't get anything done. We meet in the hall, make high-level policy on the fly and then let the CSRs make decisions from there."

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