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GTE Steps Up Marketing Efforts in Hawaii

GTE Media Ventures began an islandwide marketing campaign
late last month to help drive penetration of its new digital-wireless-cable service on the
Hawaiian island of Oahu.

The company commercially launched the Americast
digital-video service there in April. Now, GTE is running full-page newspaper ads in an
aggressive promotional campaign that's also backed by radio and direct mail.

According to Alain Louchez, general manager of GTE Media
Ventures, GTE is offering new subscribers free system installation through the end of
August. After that, installation will cost $149.95. For the duration of the promotion, GTE
is also offering eight free Express Cinema pay-per-view movies.

The promotions are designed to catch the attention of
consumers in Honolulu and other Oahu towns, which are already heavily serviced by cable.

Kit Beuret, director of public affairs for Oceanic Cable,
the Hawaii division of Time Warner Entertainment, called Hawaii the most cabled state in
the United States.

He added that cable penetration on Oahu is about 74
percent. Oceanic's Oahu franchise passes about 340,000 homes and serves about 248,000
paying subscribers.

Beuret suggested that if initial consumer reaction to
GTE's digital-wireless product had been better, GTE would not need to offer such
aggressive discounts so early in the product launch. "We believe that they're
devaluing their product," he added.

He also predicted that GTE won't be able to keep up
the promotional pace forever. "Eventually, they have to start charging for the
service," he said.

In the meantime, Oceanic has no immediate plans to engage
GTE in a price war. As the entrenched competitor, Beuret said, "we have to be
careful, from a legal standpoint. Predatory pricing is one concern."

GTE's basic-programming package costs $39.95 per month
for 68 video and 32 audio channels. Set-top boxes rent for $4.95 per month; there's a
separate fee for each tuner needed for additional TVs.

Louchez said GTE's digital service offers consistent
quality across all of its channels and gives viewers access to impulse PPV.

Oceanic has upgraded to two-way fiber-to-the-neighborhood,
Beuret said, and employees are now field-testing different digital set-top boxes. "We
will be able to offer digital by the end of the year," he added. The company will not
abandon its analog service, but it will add digital tiers to its lineup.

Eventually, Oceanic plans to offer true video-on-demand
over its digital systems -- something that its wireless cable and direct-broadcast
satellite competitors will remain unable to deliver. The lack of a true VOD product may
hurt GTE's chances of penetrating the bustling hotel industry. Oceanic currently
offers a VOD service to certain hotel properties on Waikiki Beach.

Louchez said GTE has seen interest in its service from
hotels. The challenge in selling to hotels and apartment buildings is that the owners
often already have other contracts in place, he added.

Because its research saw a demand for Hispanic programming,
GTE is offering both Galavision and Univision. The company also plans to add a
Japanese-language channel, although it has not completed those negotiations.

GTE hopes to exploit the differences in its programming as
it markets to Hawaiian residents. Louchez said Hawaii features more cultural diversity
than the mainland does. "That has an impact on the programming that we offer,"
he added.

"In the very near term, we will lose business to any
new service," Beuret conceded. "People in our community are early adopters and
eager adopters. People like their gadgets here."

And it's not just GTE that will offer new competition
to Oceanic: EchoStar Communications Corp.'s Dish Network direct-broadcast satellite
service plans to enter the Hawaiian market sometime in August with more than 80 channels,
Dish Network president John Reardon said.

Still, Beuret believes that there's something to be
said about having a local reputation. "We're 'kama-aina,'" he
said. "That means we're 'of the land.'"

As the competition starts pitching its new wares, Oceanic
intends to remind its customers that it's been in the Hawaiian market for 30 years.

"Our competitor provides a good product," Louchez
said, refusing to pinpoint just how big a piece of Oceanic's customer base GTE is
targeting. "We hope to take a substantial share."

Cable has been successful on Oahu at least in part because
the island's mountainous terrain does not lend itself well to off-air broadcast
reception. But that same terrain poses challenges for wireless cable. GTE may need to add
signal repeaters to reach some customers living in the bottom of a valley, for example.

And right now, GTE's transmission tower does not reach
Oahu's North Shore. To serve that sparsely populated part of the island, GTE would
need to add another tower, Louchez said.

But the same mountainous terrain also helps GTE by allowing
it to place its transmitter 2,700 feet above sea level, where much of the island will be
able to have good line of sight.

When asked whether GTE plans to expand its
digital-wireless-cable service to other Hawaiian islands, Louchez said the priority is to
focus first on Oahu, which is by far the most heavily populated of the islands.