Cable vs. the Dish

Budget-conscious Spokane resident Reagan Oliver has seen plenty of ads urging her to stop feeding “the cable pig.” A subscriber to Comcast Corp.’s digital cable service, Oliver and her husband, Ronny, have talked often about switching to satellite-TV service. Their cable bill is now nearly $60 a month, and like many residents, they would like to save money.

But the Olivers always stop short of actually switching.

Reagan, who works for the Transportation Security Administration at Spokane International Airport, says she sees nearly as many ads warning her that satellite service isn’t all it’s cracked up to be.

Driving home recently, Oliver spotted a ladder leaning against a neighborhood home, perched next to a rooftop satellite dish.

“I am held hostage,” she said. “I don’t want to have to deal with service problems if we subscribe to a satellite system.”

Those print, TV, radio and bus ads Oliver and others in this area encounter are not going away soon.

The companies paying for those ads — Comcast, Dish Network’s EchoStar Communications Corp., and DirecTV Group, Inc. — say Spokane and North Idaho are a hotly contested battleground for pay-TV viewers.

Huge advertising budgets are being spent, in large part because viewers in this area have earned a reputation as ‘flippers’ — customers willing to switch sides in response to product advertising.

Also, some in the advertising industry say, Spokane’s media gives advertisers a clear way to measure results. The region is geographically self-contained, so advertisers find good results here because of the absence of competing media, said Dennis Magner, president of Spokane ad agency Magner Sanborn Renouard.

“There’s less clutter, as you’d find in other bigger markets,” said Magner.

“Another reason for the intense ad campaign is we’re a big TV town,” he added. “That’s what a lot of people do in the winter.”

DirecTV, EchoStar and Comcast won’t reveal how much they’re spending to win or keep customers in the Spokane area.

The Comcast campaign has been focused on Spokane County, where it accounts for 80 percent of all cable subscribers. Comcast, which is also the nation’s largest cable company, has roughly 97,000 cable subscribers in the Spokane area.

The two satellite systems see their battleground as the entire “dominant market area,” which runs from Wenatchee to Montana, and from Canada down to Oregon. Their campaign includes North Idaho, where the predominant cable provider is Colorado-based Adelphia Communications.

“Clearly, Spokane is ground zero in the cable-vs.-satellite battle,” said Bob Ochsner, spokesman for El Segundo, Calif.-based DirecTV.

Another DirecTV spokesman in El Segundo, Robert Mercer, said the contest between satellite and cable will generate heavy consumer marketing for at least another year as both sides bring out new products to win customers.

DirecTV has announced it’s targeting cable-TV subscribers in 15 “high-lift” cities, including Spokane. Those cities, based on the company’s market research, show the greatest number of cable TV watchers switching to satellite, said Mercer.

“They are the markets that we’ve seen a significant spike in customers after the launch, a year ago, of our local channels,” said Mercer. DirecTV officials believe some of the response is based on the satellite service’s lower prices and some of it is based on dissatisfaction with cable.

At one point during market testing, Spokane consumers registered the fastest change from cable to satellite among the 15 cities, Ochsner said.

From 2003 to 2004, DirecTV said it enjoyed a 14 percent customer gain — about 5,000 total new customers — in the Inland Northwest dominant market area (DMA). DirecTV officials would not say how many subscribers the company gained inside Spokane County.

EchoStar spokesman Mark Cicero declined to provide Dish Network’s subscriber numbers for the Inland Northwest.

But Ken Watts, manager of Spokane’s Comcast operation, asserts that most — though not all — of satellite’s gains have come outside Spokane County, in rural communities that traditionally have not had cable-TV service.

In the past few years Comcast’s Spokane County market penetration — the percent of homes that could receive cable who subscribe — has stayed about the same, at about 67 percent, according to Watts.

In Kootenai County, the penetration rate for Adelphia cable customers is about 50 percent.

Comcast’s latest counterattack has had a dual focus, Watts said. One is a strong push for digital video recorders, or DVRs, which are devices that allow subscribers the option of pausing, recording and rewinding live TV programs. Comcast is offering DVRs to new subscribers at reduced prices and is offering them as inducements for existing customers to switch from basic service to higher-priced digital cable.

The second marketing push centers on a Red Carpet theme, extolling the company’s commitment to quick service. Comcast’s goal is to ensure two-hour response to a customer’s technical problem.

Comcast also has launched a win-back campaign aimed directly at those who’ve already switched to satellite. Adelphia’s plans to hold onto cable customers in North Idaho will rely on the same basic addition of new products that Comcast in introducing. Those North Idaho customers will see those products come into this market more quickly once federal regulators approve the sale of Adelphia’s national system to Comcast and to Time Warner Cable.

Once approved, the switch will mean Time Warner, the No. 2 national cable company behind Comcast, will take over the franchises in Post Falls and Coeur d’Alene.

As the satellite systems maintain pressure for customers, Comcast is betting its next big innovation, video on demand, will win new customers and keep others from switching. Expected to be launched in Spokane this summer, the new feature allows digital cable subscribers to order view-on-demand programs from a database of movies and other content.

Over the next two years Comcast also has plans to bring Voice over Internet Protocol telephone service to area customers, said Watts. That technology allows phone calls to be routed via digital packets, the same as e-mail. Combined with Comcast’s high-speed Internet service, the company hopes customers see an advantage in having one company provide video, Internet and phone service, all delivered over one line into the home.

Mercer, of DirecTV, said Comcast’s efforts won’t stop satellite providers from keeping the heat on the cable industry. Satellite-TV providers began offering DVRs a few years ago, he said, and sometime this summer, DirecTV will bring out newer-version DVRs that allow a subscriber to create a home network for video programming.

“Anyone watching ‘Law and Order’ in one room can stop, move to a TV set in their bedroom and not skip a beat. They can ship the (program) from one room to the other, thanks to the new technology we’re introducing,” Mercer said.

Will Spokane and North Idaho customers care about those features?

Analysts and media specialists say it’s not a sure thing Spokane TV customers care about new features as much as they care about the impact on their pocketbooks.

Bill Robinson, president of Robinson Research, a Spokane market research firm, said not only is Spokane a test market for new campaigns, it’s also a community infused with a penny-pinching consumerism.

Years ago, when Cox Cable was the cable provider here, residents learned that by snipping one wire inside their cable box, they would receive premium channels they hadn’t paid for.

Robinson said his sources told him that Spokane’s number of cable pirates far surpassed, on a percent basis, any other city served by Cox that had the same problem. That told him, Robinson said, that “we’re either dishonest. Or cheap. Or both.”

Personally, Robinson said he currently subscribes to Comcast’s cable service and is satisfied with the service, if not with the price.

What he really wants, he said, is one service that would provide him a good lineup of TV programs plus high-speed Internet service, and charge him a monthly rate that doesn’t increase after three to six months.

“If someone else would guarantee me all that and not increase it for a full year, I’d switch in a heartbeat,” he said.