Introducing a New TCI? Well, Maybe . . .
Earlier this month, when Tele-Communications Inc. addressed analysts in New York, the presentation was devoid of the usual financial runs and profit, revenue and debt forecasts. Instead, the nation’s largest cable systems operator used the occasion to unveil a TCI reinvented for braving the new world of competition against better-heeled telephone companies.
The company introduced the management team built over the last two years and drawn from the consumer products, computer and telephone industries, among others. And TCI said that by year-end, it would finally deliver on a long-promised package of new products--namely telephone, digital TV and high-speed data services delivered at a competitive price, with dependability and service unparalleled in the industry.
“In the early ‘80s, TCI made an acquisition a week to build economies [of scale],” said Brendan Clouston, who since 1994 has been president and chief operating officer of TCI Communications, the company’s cable arm, which reaches about 13 million U.S. homes. “In the ‘90s, growth will come from launching new products, and the differentiator will be in giving consumers control and convenience.”
TCI drove home that message again in Los Angeles on Monday at the opening session of the annual cable industry convention, which dwelt heavily on how the industry can differentiate itself from new competition.
The message is a dramatic departure for a monopolistic industry whose service is so widely mocked it provides the premise for a summer movie, “The Cable Guy.”
It is equally remarkable coming from a company whose chief executive, John Malone, has been called the Darth Vader of cable, someone seen in Washington as a price gouger. Malone’s promise of a 500-channel digital future has been slow to materialize. The unkept promise, along with a staggering debt of $13 billion, has kept TCI’s stock price lagging.
“This is a major shift in philosophy at TCI,” said Raymond Katz, a cable analyst at Bear, Stearns & Co. “They’re trying to change the corporate culture to one with a marketing and customer focus, and that’s not easily done.”
Uncharacteristically, the imposing Malone attended neither the Wall Street briefing nor the convention in downtown Los Angeles. Although TCI said he had the flu, some analysts wondered whether his absences were intentional, to give all the spotlight to the new management team, which, together with the company’s directors, controls a significant share of the company’s stock.
Some cable executives and investors wonder privately if the sudden media-friendliness of a traditionally unfriendly giant signals that Malone might be positioning the capital-intensive hard-wire business for sale. That would allow him to concentrate on “content,” of which he owns a portfolio of cable channel investments through Liberty Media Corp.
The stakes are higher now that Washington has lifted barriers keeping cable, long-distance and local phone companies out of one another’s business. Consolidation has picked up, with phone companies agreeing to merge and buying into the video business. US West is purchasing No. 3 cabler Continental Cablevision, and AT&T; is investing in DirecTv, the satellite service.
Alone among cablers, TCI has the scale and national scope of a long-distance carrier. If it completes all its announced acquisitions, its subscribers will total 18 million, almost a third of all households with cable.
Perhaps because it is so geographically scattered, TCI has enjoyed a weaker reputation for service than smaller rivals such as Cox, Comcast and Continental. Said Tom Wolzien, an analyst at Sanford Bernstein & Co.: “While it has upgraded its systems in markets where competition will be greatest . . . it still has a lot of older 36-channel systems in small communities that are difficult to maintain.”
Some critics say TCI’s programming decisions are driven more by economics than by what customers would like to see. Executives at systems taken over by TCI say they were told that room would have to be made for Liberty’s Starz and Encore networks. But Clouston insists that such decisions are made locally. “It has never been true that TCI has dictated what goes on its own systems. We do tremendous research to find out what the customer wants.”
To raise customer satisfaction, TCI says it is setting up an elaborate apparatus that will offer 24-hour service anywhere in the country. “This kind of support has never been offered in cable,” Wolzien said.
At the heart of the effort is a software system built over the last three years called Summitrak, which assembles market research, customer billing histories, pay-per-view orders and orders for new services like telephone and high-speed data transmissions. Clouston says TCI may lease the system to other cable and telephone companies.
Feeding data into the system will be six to eight regional customer service centers, the first two of which will open in Denver and Boise, Idaho, before year-end. These centers will take complaints and inquiries, and deploy service technicians 24 hours a day. They will depend on an intensive retraining of the work force, according to Barbara Mowry, who joined TCI last year in the newly created position of senior vice president of customer satisfaction.
Mowry, who created the award-winning frequent-flier program for United Airlines, is typical of the top executives Clouston has recruited. Sadie Decker, who built Summitrak, previously built a rocket-launching system for Martin Marietta. Camille Jaynes came from consumer products, with experience at Procter & Gamble and in banking. At TCI, she is introducing the company’s digital TV service in October, converting as many as 2 million customers in the near term.
Bear Stearns analyst Katz predicted that the changes could reduce customer turnover, which he said averages 30% a year in the industry, mostly because of relocations. “At the corporate level, they are doing and saying all the right things,” Katz said. “The issue is whether it can filter down to the general manager level.”
That could be TCI’s Achilles heel. Industry executives say TCI has lower pay scales for middle managers than many smaller rivals, which makes it more difficult for the company to attract the best.