Competitive Market ActivityRobert Gessner

President, Massillon Cable TV, Inc.

System Information

Massillon Cable TV Two counties in NE

Ohio 68,250 Homes

Passed 46,900 Homes

Served 43,325 Video

20,675 2-way Digital HH

14,500 HD HH 33,325 HSD 15,075 Phone Lines

Massillon Cable TV, Inc. Two service areas

Consolidated headend Redundant Fiber Interconnect

All-Digital/No-Analog Typical HFC Plant

1,500 plant miles 750 MHz Competitors

DBS AT&T U-Verse (60%) Embarq (35%) Frontier/Verizon (5%)

System Details

COUNTY

HOMESPASSED

VIDEO% of

HPDATA

% of HPVOICE

% of HP

Stark 45,529 65.1% 50.6% 20.9%

Wayne 22,718 60.2% 48.8% 24.9%

Stark County

Massillon Vicinity

Wayne County

Wooster Vicinity

Why?!?!

Service Area Observations Wayne County has lower video penetration

The result of more rural demographic and consistently greater activity by satellite providers over the years.

Stark County has lower voice penetration AT&T is a stronger competitor than Embarq.

AT&T record of consistently better service and lower rates. Active marketing programs

Aggressive win-back programs Massive direct mail budget Widely varying offers Low-priced, entry-level service.

Embarq has history of lower quality service,higher rates and, until recently, a weak win-back program.

Status of Competitors Stark County has more competition is all service

types AT&T serves most of the Stark County area

Actively building and marketing U-Verse. High recognition due to AT&T overbuild of Time Warner North

East Ohio (1.5 million customers in Cleveland, Akron, Youngstown, Mansfield areas).

Verizon (now Frontier) serves only small portions of Stark County.

Provides data and voice only. Virtually no competitive presence.

Wayne County has one competitor Embarq

Provides data and voice only. Legacy of United Telephone, high rates and moderate service,

coupled with the Sprint/Embarq divestiture allowed us a very open market for quite some time.

Recent improvements in Embarq’s efforts.

Past Competitive Efforts

Past Competitive Efforts Carefully examined competitive

landscape in 2007. Three product lines had different needs: Video – flat to slightly falling penetration to

satellite and the prospect of U-Verse required action to maintain our market share.

Data –clear market leader. We needed to continue to innovate but could do so from a position of strength.

Voice – Growing steadily. Typical bundle marketing was serving us well.

Past Competitive Efforts - Video Battle for video success framed by HD.

Competitors were defining the battleground. Not just DirecTV & Dish. AT&T appearance

imminent. We launched our DTV Rollout to minimize

the competitive advantage enjoyed by satellite in terms of the “hot item,” HD. Obtained an FCC waiver to use integrated

security converters. Developed low-cost DTA (Digital-To-Analog) with

no-cost guide. Deployed 100,000 converters in 10 months.

Three free per customer. Eliminated all analog video signals. Launched 65+ additional HD signals to reach 95.

Past Competitive Efforts - Video Did it work? Don’t know.

We lost some video customers due to the requirement of a converter on every set.

We don’t know how many customers we did not lose because we launched so much more HD.

Finished our project just as the economic recession became big news (Q3 2009).

Some level of losses to vacant homes, lost jobs, “right sizing” household budgets, etc.

More DTV Rollout InformationFCC Waiver First Interim ReportFirst Interim Report

SurveySecond Interim

ReportFinal Report

Past Competitive Efforts - Video Competitive Difference Trade-Off

Gave up our competitive difference as “whole house” provider in this effort to equalize our video product with satellite in terms of HD.

With analog, consumers have complex decision when considering video providers.

They must ask themselves if they want converters on every set. They can choose different providers depending on the answer. That may be an advantage.

When all digital, consumers no longer have that factor in the decision. They simply ask whose converters I prefer.

Certainly, we can give people converters, but that is not the same thing.

I will return to this topic later.

Recent Competitive Efforts - Video

HD/DVR Survey Recent survey of HD/DVR subs (1,500

responses). Despite almost 100 HD networks, they want

more. 42% about right, 57% not nearly enough, 1% too

many However, when challenged to name HD nets

we don’t carry, they have difficulty doing so. Perhaps reached point of diminishing returns,

but can we stop adding and lose ground in advertising battle?

HD/DVR Survey

Recent Competitive Efforts - Video

Availability of HD is working Door-to-door survey team results show

customers are aware of broad HD selection even if they don’t use it.

77% are aware we have 90+ HD networks.

Recent Competitive Efforts - Video

Same survey showed very high interest in Increased DVR storage space

34% - Always enough storage 37% - Adequate 29% - Never enough storage space Planning launch of 1000GB SATA drives in July.

We will sell (rather than rent) for about $100. MRDVR

No specific question, but very frequently noted among respondents.

Waiting for guide and converter suppliers to offer MRDVR.

Recent Competitive Efforts - Video

First Door-To-Door effort AT&T Inoculation Team

Built upon idea from NPG with very similar results.

Small team that works just ahead of AT&T to assure satisfaction of current customers.

Goal is not sales, but verification that all services are working properly.

About 10% of homes surveyed need a service call.

About 15% have some type of issue resolved at the door (remote control programming, batteries, Internet questions, etc.).

Recent Competitive Efforts - Video

AT&T Inoculation Team (cont) Also using weekly reports to identify area signal issues.

Technical SWAT response to resolve very quickly. Collecting information about non-subs

Current provider If/why they left us Likelihood of remaining with current provider

  Test Results Test Area Control Areas

Base Accounts 920 % Change 3277 % Change

Change in        

Base Accounts -4 -0.43% -31 -0.95%

Digital HH 10 1.09% 17 0.52%

Phone HH 0 0.00% 10 0.31%

HSD HH 19 2.07% 13 0.40%

Total Unit Change 25 2.72% 9 0.27%

Recent Competitive Efforts - HSD

DOCSIS 3.0 Transition to all-digital/no-analog created

bandwidth to offer DOCSIS 3.0 throughout the system.

Four downstream channels operating in all areas. Working to recover DOCSIS 1.0 modems before

increasing upstream bandwidth to 6.4MHz (underway).

Seen benefits from DOCSIS 3.0 without new, higher bandwidth packages.

Auto load balancing Multiple return paths Better performance for all customers.

Planning new DOCSIS 3.0 packagesin near future.

Recent Competitive Efforts - Voice

Challenge same as for all Slow sales Cord cutting

Began commercial sales in early 2009 Reasonably good results to date.

Question whether we need a cell phone element to make our phone offering complete. Certainly seems to be the case, but

no winning combination of providers.

Recent Competitive Efforts - Voice

Stark County Recognize need for low-cost, entry-level

phone service to meet AT&T with competitive offers.

Creates problem of margin due to Sprint partnership.

Testing price points and response rates now.

Competitive Efforts - Other System reliability

Allowed to slip during year we worked on DTV Rollout.

Currently primary operational focus Deliver higher quality technical signal with

greater reliability. Still do as well as others technically and better from

customer service, but need to focus on absolute performance.

New monitoring tools New workforce distribution New employee dedication

Competitive Efforts - Other Current enhancement products

Carbonite Hosted application for off-site backup. Need to make concerted effort to evaluate

IT Guys Great service to customers. Keeps them coming back to our HSD.

Planned enhancement product Home Security

Broadband based Hope for new entrants due to “widgets”

and other flexibility.

My Competitive Crusade

Digital TV without a Digital Box

Magid Study – October 2009

34% of HD households do not subscribe to HD programming.

42% of these sideliners admit that "options are not worth the fees."

One-third cite cost and affordability as the primary reasons for not buying HD service.

Magid Study

HDTV Sets without HD Service Despite economic recession, consumers

replacing analog TV sets at a rapid pace. A large percentage are choosing not to

add any HD programming. Our experience as an all-digital/no-

analog system provides a unique perspective into consumer use of digital TV sets.

We really did not know how they were using HDTV sets until we removed all analog signals.

HDTV Sets without HD Service What are they watching?

Our experience from our DTV Rollout says ANALOG. Only know this if you have eliminated analog signals. Poor quality compared to digital signals (satellite or telco)

Why are they watching poor quality analog? You aren’t making it possible for them to watch

digital. They don’t know how to use their digital TV set and

you aren’t teaching them. What will they do when they notice?

Maybe they will subscribe to your HD service. Maybe they will switch to another provider

because they assume analog quality is thebest you can deliver.

HDTV Sets without HD Service Not just replacing the “BIG” TV

anymore. Since Digital TV Transition, all TV sets are

digital. Stand at Wal-Mart, Best Buy or HHGregg

and watch the number of small digital TV sets streaming out the door. Many homes have replaced all analog TV sets with digital.

They may equip the “BIG” TV with a converter, but the others are simply connected to the coax system.

HDTV Sets without HD Service Why don’t they have converters.

Magid Study says cost, affordability, options not worth the cost.

Perhaps more factors, especially for AOs. Cost Complexity Comfort Aesthetics Convenience Stubbornness

HDTV Sets without HD Service Wouldn’t it be better if we could

deliver digital quality signals to digital TV sets without a converter? WE CAN! PSIP – Add small amount of data to SD

signals so digital TV sets can easily tune to them.

ClearQAM – Maintain a robust lineup of unencrypted SD signals (including PSIP).

Consumer Continuum of Choice

Consumer Continuum of Choice

Legacy Analog TV

Low-cost, limitedfunctionality

HD ConverterFull-featuredHD Converter

* Monthly Cost = $0.00* 100+ linear TV Networks(Lifeline & Basic)* 12 HD Networks* 45 Music Networks* Channel number sameas converter.*On screen labels forNetwork and Channelnumber, but no guide.

* Monthly Cost = $0.00* 100+ linear TV Networks*45 Music Networks* Limited guide (better thanwhat they now have)

Stand-aloneDigital TV

* Monthly Cost = $2.00* 200+ linear TV Networks(All linear services)* 100+ HD Networks* 45 Music Networks* Limited Guide(Full program information, butnot interactive).

* Monthly Cost = $7.00 - $12.00* 200+ linear TV Networks(All linear services)* 100+ HD Networks* 45 Music Networks* All Interactive Services(VOD, PPV, etc.)* MRDVR* Online Integration*Fully Integrated InteractiveProgram Guide

Consumer Continuum of Choice Why is this important?

It is what customers want. Choice Value Friendly

Our HDTV registry already tracks more than 5% of our HHs who use at least one digital TV set without a converter.

Grows every day. We are the only platform that can deliver it.

Competitive difference Delivers digital quality at analog price Affords easy migration path to other services.

Consumer Continuum of Choice My proposal

Primarily status quo Lifeline & Basic SD signals should be

encrypted at the operator’s election. SD no different than analog in terms of signal

quality and need to secure from copying and illegal distribution.

All HD and premium SD signals should be encrypted at the programmer’s election.

Recognizes need to secure HD content from copying and illegal distribution.

Allows programmer flexibility (QVC, HSN)

Consumer Continuum of Choice Needs both PSIP and ClearQAM

PSIP-Program and System Information Protocol

ATSC protocol for metadata in an MPEG stream.

Available and, within limits, works well. Requires new discipline regarding spectrum utilization

TV compatibility issues Being resolved with practice.

ClearQAM Required to maintain robust offering directly to

digital TV sets.

Consumer Continuum of Choice Threats

Industry support Comcast has no interest.

Want to encrypt everything to reduce truck rolls and theft. Not sure of other MSOs

NCTA unwilling to consider in light of Comcast desire.

Not all systems in same situation as Comcast. Fully support Comcast’s right to encrypt based on

their specific needs. Problem - Comcast (due to their dominant position)

precludes my right to choose not to fully encrypt.

Consumer Continuum of Choice Threats (continued)

Program Networks No clear reason why they want us to encrypt SD.

Possible negotiating tactic – trade for something else.

Should not put program networks in position to determine our capital expenditures

They don’t care what it costs us to secure their signals.

Consider that you must eventually replace every DTA and non-HD STB with a new one. The cost is staggering.

Probably 3x the number of STBs today.

Consumer Continuum of Choice My crusade may be more like

Quixote’s than Lancelot’s, but still worth the attempt. Creates a competitive difference. Presents friendly, consumer-

oriented options. Appeals to an activist FCC that will

offer many opportunities to raise the issue.

QUESTIONS?

Robert GessnerMassillon Cable TV, Inc.

Email: rbgessner@massilloncabletv.comVoice: 330-833-5509Fax: 330-833-7522