News

Kagan Panelists: 'It's Not Easy to Focus'

9/16/2001 8:00 PM Eastern

New York— A panel of cable executives — visibly shaken by Tuesday's terrorist attack on the World Trade Center — plodded on at the Kagan Seminars Inc. Broadband Summit here last week.

The presentation from the panelists — including Mediacom Communications Corp. chairman Rocco Commisso, Insight Communications Co. president Michael Willner, Cablevision Systems Corp. senior vice president of data services Gemma Toner, UnitedGlobalCom Inc. president Michael Fries and AOL Time Warner Inc. Broadband senior vice president Lou Borrelli — was the first and only presentation of the scheduled two-day conference.

Participants were obviously concerned about the safety of loved ones and colleagues. Many financial houses are headquartered in downtown Manhattan, the center of the attack. Willner, the first speaker, summed up the audience's feelings with his opening statement: "It's not easy to focus on business issues on a day like today."

Willner focused on Insight's introduction of new services, mainly high-speed data, interactive digital television and telephony. He added that Insight's interactive offering — called Insight Digital — brings in an additional $20 per month per subscriber in incremental revenue.

Digital penetration rates average about 27 percent in areas in which the service is offered, he said, with churn rates standing at about 1.4 percent per month, one-third of the industry average.

Telephony — which Insight offers through AT&T Corp. — has about 2,100 customers in two markets. Telephony penetration is about 4.2 percent in the markets it is available. Willner expects those penetration rates to climb to 30 percent in five years.

Commisso, who also expressed his sadness for the victims of the tragedy, perked up when asked whether affiliation negotiations between operators and programmers would change once newer services come online.

"Eighty percent to 90 percent of the money we're giving out is to the major four or five programmers," Commisso said. "If they want to form a partnership with me, they have to stop taking advantage. Just because advertising revenue is down doesn't mean they can make up those advertising revenues through my subscribers."

Commisso chafed at annual 10 percent to 15 percent increases in programming costs at a time when cable operators are struggling to rebuild plant and keep rate increases at 5 percent or less.

The average rate Mediacom charges to consumers works out to about 60 cents per channel, Commisso said.

"How can we make money paying ESPN $1.80 [per subscriber]?" he asked. "Once we see the fact that you recognize our issues and that over time we can't just pass these costs along to our subscribers, we're going to be that much nicer frankly on how we treat the different organizations we do business with."

He added that Mediacom — which more than doubled its subscriber base to 1.6 million customers earlier this year, via the acquisition of 800,000 customers from AT&T Broadband — has not seen programming rates go down, even with the company's added scale.

"Since we've bought [systems] from the AT&Ts and Coxs [Communications Inc.] of the world, our programming costs have gone up," Commisso said. "If we have to launch new services, our costs should go down, not up."

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