Cable Operators

The System That Roared: Iowa Giant Rings Up Success

2/24/2006 7:00 PM Eastern

When Mediacom Communications Corp. bought cable systems counting around 800,000 customers from AT&T Broadband in 2001, it didn’t just double the size of Mediacom’s footprint — it made the company the largest cable operator in Iowa.

The properties had long been neglected by the previous owners. Mediacom came in and upgraded the plant, reduced the number of headends, laid thousands of miles of fiber and rolled out a slew of new services.

Mediacom Des Moines
Homes Passed 312,800
Basic Subscribers 155,400
Number of Employees 275
Source: Mediacom Communications Corp.

“Rocco [Commisso, Mediacom’s chairman, CEO and founder] came in and not only upgraded all those properties, he connected them with fiber, enabling the company to offer broadband services, local programming and now telephone service,” said Tom Graves, executive director of the Iowa Cable & Telecommunications Association. “And they did it so every town could get those services, not just Des Moines.”

Des Moines is Mediacom’s largest market and not just in Iowa. It’s the MSO’s largest system, period. The property serves 312,000 basic customers and is the cornerstone of operations in the state.

Mediacom serves a total 435,000 basic customers in 319 communities in Iowa, representing 88% of the state’s cable homes. In 2001, Mediacom had 219 headends in Iowa. Today, there are nine, said senior vice president of Mediacom’s North Central division Charles King, and all customers have access to high-speed Internet access, HDTV, video on demand and digital video recorders.

Commisso visited every town personally during franchise-transfer negotiations, King said. He promised all of them state-of-the-art systems and pledged to do it in three years. “We did it in 18 months,” King said.

That went a long way with regulators, who had been used to a long string of broken promises by previous cable-system owners.

It was probably the first time any top level corporate cable executive had ever been to many of those towns, Graves said. Regulators in Des Moines have been pleased with the things Mediacom has done. But complaints still continue, said Des Moines city manager Mike Mathes.

“Mediacom has come in, upgraded the property and added services,” he said. “Most of our complaints are due to the cost of the products they offer at this point. They have a basic package, but it’s not really programming that people want. I think a lot of people feel they don’t have much choice, even though there are the [direct-broadcast satellite] providers.”

Still, King said, Mediacom’s local connection, in terms of local programming and company representation, is crucial to customers in Iowa who are used to being taken care of by local utility providers. He makes a point of visiting every community Mediacom serves several times a year. And along the way, he has figured out ways to not only help some of those communities with their issues, he has expanded Mediacom’s business opportunities and blunted potential competition.

Mediacom took over Marshalltown’s citywide wireless-Internet network last fall, just two months after the town launched the service. In exchange, according to The Des Moines Register, the city dropped its plans for a municipal communications utility. King said the partnership in Marshalltown will benefit the city, its residents and Mediacom.

“Communities across the state are looking for ways to become visible and attract new business,” he said. “Mediacom wants to be partners in businesses that make sense, and it clearly made sense in Marshalltown. We want to become part of the economic-development plans in the communities we serve. We’re working with other communities on similar deals.”

Mediacom launched local phone service in Des Moines late last year and King said the product has been well received by customers. However, the company’s efforts to extend its service to other Iowa communities has been stifled by a number of independent phone companies, which have so far refused to agree to interconnection deals.

There are 153 independent phone companies in Iowa — more than any other state, said Dave Duncan, executive director of the Iowa Telecommunications Association. The Iowa Utilities Board is currently working to sort the issue out. Phone service should be the ace in Mediacom’s hole, King said. But even without that service, the MSO is bringing back customers.

“We’re recovering a significant number of lost customers, even those we lost before Mediacom came to Iowa,” King said. “We have so many more services than our competitors. For instance, our Connections Channel is extremely important here. We have no major league sporting teams, so our college and high school sports are very important and we cover as many as we can. We also have public access channels that are very popular. I truly believe that satellite penetration is below the national average in Iowa City because we have six public access channels that people use and watch.”

September