What is VOD?The cable system this week adds a long-awaited service: Video on Demand, or VOD. It’s already offered on other cable systems and on MI-Connection’s main competition – satellite. MI-Connection will offer 3,000 hours of TV shows, movies and sports – some free and some for a fee. To get it, you’ll need a digital cable plan. |
The MI-Connection cable system quietly celebrated a big milestone Thursday – completion of a $22.5 million system upgrade that has allowed it to add and improve services. With new equipment and increased network capacity now in place, officials are hoping their package of video, internet and telephone services will help hold onto existing customers and attract new ones. The system has 5 percent fewer customers than when Davidson and Mooresville bought it in December 2007.
Although work was finished earlier in some areas (Davidson was completed in February), this week marked its completion throughout MI-Connection’s territory, which includes Davidson, Cornelius and parts of Mecklenburg County, and Mooresville and parts of Iredell County. It included the replacement of key equipment at the network’s headquarters on Academy Street in Mooresville.
The company marked the occasion Thursday with a lunch for employees at its headquarters – and little additional fanfare. That may be because the most difficult part lies ahead – selling the bundle of new services that the upgraded system makes possible.
“It feels good,” said Junior Miller, the system’s general manager. “Now it’s just getting down to business.”
The upgrade is a critical part of the strategy of the 17-month-old company, which was formed in December 2007 when the towns of Davidson and Mooresville purchased the system for about $60 million. The purchase followed a bitter battle with Time Warner Cable, which had acquired the Lake Norman area system after the bankruptcy of former operator Adelphia Communications.
HOPING FOR GROWTH
When they bought the system, the towns borrowed additional money to pay for a badly needed upgrade of the network, which they say had been neglected under Adelphia.
MI-Connection hopes the re-built communications network will help it begin growing again. Officials said Thursday it currently has about 15,150 cable TV customers, about 5 percent fewer than it started with.
Executives blame the shrinkage on something that wasn’t in their business plan – the faltering economy – and on customers’ moving or being dropped because of failure to pay their bills.
“Most of it seems to be the downturn in the economy,” said Sandra Munsey, marketing director for BVU Focus, the Virginia company Davidson and Mooresville hired to manage the system.
TRIPLE PLAY OF SERVICES
Ms. Munsey said the upgrade gives MI-Connection the ability to offer a “triple-play” of TV, telephone and high-speed internet services. The company hopes customers will decide to purchase all three services in a package. “With regard to the upgrade, that’s probably the biggest advantage – one-stop shopping,” she said.
Right now, about 60 percent of MI-Connection’s TV customers also get internet access. As more add telephone services as well, revenues per customer would increase, and boost the company’s bottom line.
The system improvements replaced outdated equipment, added cable, and expanded the network center in Mooresville to handle additional channels, telephone service and faster internet speeds.
One of the major tasks was the addition of more high-capacity fiber optic cable connecting neighborhoods to the system’s headquarters. Mr. Miller said the system now has “10 times the fiber” than it had before.
Completion of the upgrade is “the fulfillment of the promise made 18 months ago,” said Paul Reilly, the system’s marketing manager.
VIDEO ON DEMAND
Just this week, MI-Connection introduced video-on-demand, or VOD, a service that lets customers of its higher-priced digital cable TV services purchase or watch free thousands of hours of movies and television programs whenever they want. New release movies are $3.95 or $4.95.
Special event prices vary, as they do on traditional pay-per-view services. But unlike traditional pay-per-view, viewers can watch VOD programs whenever they want, and programs may be paused, rewound and advanced.
That new service comes on top of the addition of 100 new channels since the towns bought the system.
In January, MI-Connection began offering local phone service, venturing onto the turf of local phone companies such as AT&T, which serves Davidson, Cornelius and Mecklenburg County, and WindStream Communiations, the local phone company in Mooresville and parts of Iredell County.
With the network upgrade, MI-Connection also is rolling out a series of new, faster Internet access plans. Right now, the fastest service allows downloads at 6 megabits per second, with uploads of 756 kilobits per second.
The new service permits downloads of 16 megabits per second or more, and uploads of 2 megabits per second, faster than other services available in the area.
BETTER SERVICE, TOO?
The new services could be a lure for new customers, though MI-Connection faces stiff competition for video customers from satellite services such as DirecTV and Dish Network. It also faces challenges in parts of its territory from Time Warner Cable, which is building its own cable lines in the some areas, and from AT&T local phone company AT&T, which is beginning to roll out a new home video system over telephone lines.
MI-Connection officials say the network upgrade gives them the capacity and the technology to compete. And they say they can provide better customer service than their competitors – something that drove customers away from the old Adelphia system.
Mr. Miller said Thursday that MI-Connection technicians are now responding to 51 percent of “trouble calls” within 24 hours. That’s up from 41 percent reported eight months ago.
MARKETING PLANS
While MI-Connection now has a state-of-the-art system technologically, it still must figure out how to counter the marketing budgets and muscle of big competitors such as DirecTV, AT&T and Time Warner.
Asked what plans they have to take advantage of the upgrade, MI-Connection officials Thursday said only that they’re planning a late summer marketing campaign to “relaunch” MI-Connection.
In the meantime, they’re continuing with direct mail and limited advertising. One direct-mail piece going out in the next few weeks will make a big push to expand customers for now-faster high-speed internet service. A flier describes the new offering as “Extreme High Speed Internet.”
The flier offers the 3-way bundle of voice, digital cable with video-on-demand, and “Extreme” high speed internet for $100 a month total, with price guaranteed for 12 months. That’s a big discount over purchasing all three services alone, or from separate providers.
It also offers either cable TV or telephone service for $40 each for the first six months.
Ms. Munsey said it also will include a coupon for a free Video on Demand movie. (CORRECTED: The original version of this article had incorrect information about the planned coupon.)
LINKS
MI-Connection website, www.mi-connection.com
MI-Connection expanded channel lineups, now available, CLICK HERE>
Previous coverage of the MI-Connection system on DavidsonNews.net, CLICK HERE>
MI-Connection’s business plan was based on steadily growing the customer base both by increasing market share and by a growing population. This is not happening.
The Town Board should subject MI-Connection to a “stress test” just as the government has done with the banking industry. This type of test would help show what could happen financially if this economic downturn continues, or if other financial assumptions do not materialize as planned. Those results should be shared with the public so that collectively a recovery plan can be developed.
The financial information that has been shared about MI-Connection shows that MI-Connection is already losing money, even before paying the interest bill or accounting for depreciation (EBITDA in the accounting parlance). It is evident that the combination of being heavily leveraged (ie “In debt”) and a declining customer base could result in negative cash flows for years to come. Any ongoing concern eventually has to show positive cashflow from normal operations instead of generating cash by going to the bank for another loan or to the taxpayers.
The time for blaming Time-Warner, Adelphia, the economy, etc. is long over. It goes without saying that when you spend $80 million on something it entails risks. Data is often incorrect, competitors aren’t (surprise) always helpful, and every few years we have a recession. Everybody who looked at this venture critically saw this coming.
I fear that if this enterprise is not turned around we’ll face a situation where the taxpayers of Davidson will be asked to provide more and more tax dollars to support having VOD, phone, and 350 cable channels, instead of providing the basic services such as road maintenance, parks and recreation, and fire and police service that a town government should provide. This would not be a good outcome for anyone.
I have lived in the Davidson area for over 30 years. To date I have never met a citizen (other than an elected official or someone involved with the purchase of the system) who thought purchasing the system was a good idea. It has always puzzled me why the Town would purchase something with taxpayer dollars that was free for the Town in the first place. Andy Beard.