Home court advantage MSOs box out against telco competitors >BY SHIRA LEVINE, New Media Editor

Tele-Communications Inc. chose to tantalize consumers with a smorgasbord of advanced services in Hartford, Conn., suburban Chicago and the San Francisco Bay area-all regions where the local telco had at least planned to aggressively build out hybrid fiber/coax networks. Cox Communications dramatically slashed its prices when U S West launched its TeleChoice cable TV service in Omaha. And Continental Cablevision blasted its Highway1 cable modem service into the Detroit market, where Ameritech has landed several cable TV franchises.

Coincidence? With the exception of Continental, most multiple systems operators admit that their rollout of advanced services in markets targeted by telcos is intentional (see story on page 42).

But delivering new services is only one weapon in the arsenals of incumbent cable operators as telcos begin assailing their markets.

"Telephone companies entering the video industry cause cable operators to suddenly come alive," said Harry Cushing, president of Competitive Concepts in Cable TV and Video. "It's advantageous for cities and counties to encourage telco competitors to come in because the newcomer forces the cable company to become a much better community member.

Even in communities where the promise of cable competition didn't pan out, the incumbent cable operator has upgraded its systems much more extensively than if that promise had never existed, Cushing said.

One reason is that customer service takes on new importance when there's a competitor in town. "In any newly competitive environment, whether you're the incumbent cable operator or the town's only pizza parlor, when someone new comes in, you do a lot of self-evaluation," said Jim Hires, general manager of Jones Intercable's system in Naperville, Ill., where Ameritech is building an HFC network. "You take stock of what you can do and what you can offer to keep your customers with you.

For Jones, that has entailed conducting customer surveys and following through by implementing on-time guarantees and adding to its customer service support staff.

And while Continental says that decisions regarding its Detroit-area systems are not driven by Ameritech, the MSO has used customer suggestions to develop new premium services packages and has expanded its channel lineup from about 60 to 78 channels, said a company spokesman.

The Highway1 service also gives Continental a big leg up on Ameritech, he added-a fact that even Ameritech admits.

"If they have a product that we don't, we're at a disadvantage," said Patrick Campbell, executive vice president of corporate strategy and business development at Ameritech. "But our advantage is that we can easily add cable modems to our system when we feel that we're ready to roll them out.

Beleaguered MSOs are also emphasizing their place in the community.

"We'd like for our subscribers to think of us as their local provider, as opposed to a large corporate telco," Hires said. "People like to do business with people they know, and we're re-introducing ourselves and pointing out our community involvement.

For example, unlike Ameritech, Jones delivers local programming such as high school graduation ceremonies and sports events, as well as other shows centered around community interests, Hires said.

Continental will similarly leverage its position in the community by developing local content for the Highway1 system and working with schools to install cable modems, training teachers on new technology and helping students create their own content.

But both Jones and Continental were quick to point out that these were all initiatives planned long before Ameritech reared its head in their markets, tactics they merely renewed once competition came around.

In fact, according to figures released by Continental, Ameritech has gained only 6% of the market in the Detroit suburbs, even with a door-to-door sales force, direct mail marketing and a strong advertising campaign.

At least one analyst says he wouldn't be surprised if those figures are accurate.

"In all the cases I've seen where there are two landline systems offering service, one or both of the carriers were losing money badly," said David Roddy, chief telecommunications economist for Deloitte & Touche Consulting Group. "In terms of landline cable TV, there may only be enough business to support one carrier. The idea that you're going to make a substantial amount of money by overbuilding is ridiculous. I think it will be a long hard road.

Though declining to reveal specific numbers, Ameritech said its road is well-paved with subscribers.

"We see statistics from cable companies that say they haven't lost subscribers to Americast," Campbell said. "I don't know where they get their numbers from, but we certainly have ours."