Evansville, Ind., resident Kathleen Lane came home one day to find an intriguing tag on her door.
A new telecommunications provider was in town, with a familiar-looking brand: Sigecom LLC.
The firm-an affiliate of local gas-and-electric utility Sigecorp-offered Lane several packages and a variety of discounts. Take cable TV-service and Internet access and save 10 percent off the total bill, the door tag promised. Sign up for three services, save 20 percent.
At the time, Lane subscribed to the incumbent cable operator, Insight Communications Co. Inc. But after reading the marketing material, Lane changed her mind.
"It was so much cheaper if you got all three.and they made such a publicity pitch," said Lane. "I switched about six weeks ago."
She's not the only one. Evansville is home to the first completed cable overbuild by a joint venture of Utilicom Networks LLC of Franklin, Mass., and Vectren Corp., itself a partnership of power companies Sigcorp Inc. and Indiana Energy. Sigecom, which markets its bundled services as TOTALink, began its Evansville build-out two years ago. The system now passes 80,000 connections; 6,000 of them are businesses.
Sigecom LLC hasn't completed its first pass at direct marketing and has done no general-market promotion, general manager Gary Houston said. Another 4,000 to 5,000 homes must still be contacted, he added.
But 30 percent of the homes reached so far have signed up for video, according to Houston. Another 14,000 have become telephone customers, he said.
Other Utilicom executives have said the system buy-in rate is 2.5 services per home.
WHAT'S HAPPENING?
Why so much interest? Factors include the discounts, plus the boost from a good power-company brand, multiplied by some community dissatisfaction with the incumbent.
Insight, which took over the Evansville system from Tele-Communications Inc. about two years ago, is playing catch-up. Research demonstrated that despite years of service to the community, TCI was not a well-known brand and had not promoted its municipal involvement, said Insight COO and CFO Kim Kelly.
But on Sigecom's side of the fence, "our greatest selling point is our brand recognition. That got us into some doors," Houston said. Discounts closed the sales, he noted.
There isn't much difference between Insight and Sigecom's offerings, in terms of basic-cable choice or price. Sigecom offers a 78-channel analog expanded-basic package for $24.99. Insight's charge is about $1 more. Both offer digital-cable services for an average of $13 more.
But in the coming months, Sigecom will differentiate itself through discounts, while Insight will use new-product rollouts to make its mark.
Sigecom came into town with a bankroll from Sigecorp, its utility affiliate; Advanced Communications Inc.; Williams Communications; and, interestingly, $45 million in senior secured notes through AT&T Commercial Finance Corp. The overbuild ultimately will deploy 1,000 miles of digital optical fiber in a self-healing SONET ring. As a result, Sigecom was able to offer digital cable from the start.
Insight, for its part, recognized the need for a rebuild when it took the reins of the TCI system.
"We inherited an old plant that was the cause of a number of outages," Kelly said.
There was no link between the speed at which Insight conducted its rebuild and the presence of an overbuilder, Kelly added.
"We believe and have always felt that we operate in competitive markets," whether there is a hard-wire overbuilder or not, Kelly said. To that end, Insight has launched rebuilds throughout its footprint.
Evansville's rebuild was completed in the last week of October. Overall, 90 percent of Insight's upgrades are now done, according to Kelly.
Kelly disputed Sigecom's claim of 20,000 customers. "That's not what our data shows," she said.
According to Kelly, the competitor is picking up Insight's worst customers, who pay their bills late or not at all. Houston counters Insight's characterization of its new customers.
"Our bad debt is less than the industry average," he said. Utility brand identity may be a factor in that data, too. Consumers may not want to anger the company that delivers the electricity to their homes, he conjectured.
SATELLITE GAINS, TOO
Other competitors in the market have indicated that Sigecom's growth has been at Insight's expense.
John Friday of Consumer Satellite Systems-a direct-broadcast satellite system wholesaler-said DBS hardware sales have increased consistently through the metropolitan Evansville market.
People still turn to satellite systems when they don't like other providers' policies or service, no matter what the source, Friday indicated. In Evansville, DBS still has the competitive benefit of offering multiplexed premium channels at the same price the cable operators charge for fewer feeds, he said.
"We haven't found our slice of the pie cut any thinner," said Time Dame of retailer Tech Direct in Evansville. DirecTV Inc.'s strong branding efforts mean that cable isn't necessarily a consumer's first thought when seeking home-entertainment options, he added.
Additionally, satellite service shines when it comes to sports packages. Evansville has minor-league sports teams, including baseball's Evansville Otters. But for serious sports fans looking to follow major-league teams located more than 150 miles away for an entire season, sports packages are a major drawing card.
"They are a great closing tool for us," Dame said.
Though Sigecom cites its brand as a plus in selling telecommunications services, Dame said, some of his DBS customers said they've sought out a competitive alternative because they "don't want to give any more damn money to the power company."
Overbuilders, including utility partnerships and so-called green-field companies peopled by executives bumped loose in the wave of cable consolidation, have found city regulators to be supportive audiences for their business plans. Elected officials often claim a second operator will stem the tide of rate increases and give constituents a choice in telecommunications providers.
Elected Evansville officials did not return multiple calls for comment on the competitive situation there. But the city controller's office, which collects franchise-fee payments and fields some complaints, reported that the head-to-head competition has not resulted in rate decreases.
The companies confirm that a rate war is not in the offing.
MSO'S NO K-MART
"I don't want to be the Kmart of cable," said Kelly, referring to the low-price retailer. Instead, Insight is investing in new technology, she said. The Evansville system is rolling out video-on-demand and content like LocalSource, which allows digital customers to access information such as theater listings through their TVs.
Insight has an operating partner in the region, AT&T Broadband. Through that partnership, Insight's consumer message is: "We're bringing high tech to you."
The system is rolling out Excite@Home Corp. high-speed data service, and Insight has teamed with Diva Systems Corp. to provide OnSet On Demand TV, a branded video-on-demand service, she noted.
Sigecom also is looking up, rate-wise, rather than back.
The system is in the midst of its budget season and an analysis of its growth to date. That data will determine whether a rate increase is in the offing.
And although new technology has been introduced in town, the city controller's office reported, there are still complaints about the same problems once attributed to monopoly service providers.
"People still call us and say the companies just don't answer their phones," said city controller Billie Sanders.
The city doesn't really have a complaint-resolution process, so consumers are advised to call and work it out with the cable provider. Few bounce back to the city after that, Sanders said.
Sanders said Sigecom marketers approached her at home. Her response? "My TV works. I don't really want to hear about it," she said she told the telemarketer.
But now that she deals with the company's finances, "I'm more interested because I have this job." She wishes she could hear the pitch again.
She may get her wish. Houston said the cable operation hasn't even started to mine the co-promotion possibilities possible with its sister utility. A general-market promotional blitz is anticipated next year.
