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Overbuilder Gears for Denver Launch

3/18/2001 7:00 PM Eastern

Once the only game in town, AT&T Broadband was bracing last week for the first real competition it has faced in the metropolitan Denver cable market.

By month's end, WideOpenWest LLC, a start-up headed by former RCN Corp. executives, will offer broadband services to some 1,500 households in the suburb of Lakewood, Colo. Its target is 32,000 AT&T subscribers in Lakewood, and almost 500,000 across the metro area.

Lakewood will be the first system activated by WideOpenWest, which plans to serve 13 area communities that are home to some 800,000 Coloradans. It's also committed to launching in Dallas-another AT&T stronghold-later this year.

The Denver-based industry newcomer plans to shave as much as 10 percent off AT&T's price for a bundled package of cable, Internet and local phone service.

Wrestling away AT&T's customers won't be easy, however. The MSO is in the midst of a $200 million upgrade that it hopes to complete by 2003, thereby earning itself a five-year franchise extension.

Denver is also already one of a handful of markets where AT&T has signed up more than 100,000 subscribers for its digital-programming package.

In Lakewood, the MSO has offered its high-speed AT&T@Home service since 1999, and telephone-over-cable for the last year.

"We believe that given a choice, consumers will stay with AT&T," said spokeswoman Jeannine Hansen.

Lakewood officials aren't so sure.

"They'll definitely find an audience," said Lakewood spokeswoman Joan Inman. "Our citizens have wanted choice for years. And if WideOpenWest's management is any indication, I think they'll be a fierce competitor."

WideOpenWest is proceeding slowly in Lakewood, hoping to take advantage of cable's poor reputation for customer service.

"I'm counting on that reputation, because from here on, it's all about customer service," said Dave Haverkate, vice president of market development. "With competition, if you don't take care of people, it's pretty easy to get them to switch."

Haverkate said WideOpenWest has another advantage: a brand new network that will deliver 75 analog channels, 200 digital channels, multiplexed premium services and digital music. AT&T, he said, will try to make due with an upgraded "legacy system." High-speed-data is the centerpiece of WideOpenWest's business plan, and where Haverkate expects to "blow AT&T out of the water."

The company's plant contains fiber optic-strands earmarked solely for delivering data services. This allows for a capability of up to 3 megabits per second, both upstream and downstream, Haverkate said.

By comparison, AT&T can deliver 1.5 megabits downstream, but just 156 kilobits upstream, he said.

DSL ISN'T EVERYWHERE

"Data services is going to be what separates us from everybody else," Haverkate said.

To sell its services, WideOpenWest plans a focused marketing campaign of direct mailings, door hangers and door-to-door sales, but just in the areas where its plant has been activated, rather than across all of metro Denver. That's a mistake the competition has made, Haverkate said.

"Somebody flying into Denver would think that DSL [digital subscriber line] service is available everywhere, when in fact it's only available in limited areas," he said. "If we did that, we'd get a ton of phone calls, but would have to tell folks that [they] can't get it."

Once the initial Lakewood build is complete, construction will turn east into the cities of Denver and Aurora.

AT&T and WideOpenWest won't have the metro market to themselves.

Area regulators are predicting that Colorado-based Qwest Communications International Inc., the state's largest local-exchange carrier, will seek to protect its share of the telephone market by launching its own cable operations in the affluent communities of Boulder and Douglas County.

Boulder telecommunications coordinator Richard Varness said the RBOC has indicated it will proceed with an overbuild project it inherited from US West Inc.

In Douglas County, Qwest has been testing its video digital subscriber line (VDSL) technology since last November, according to municipal officials.

"They haven't given us a timetable, but they have indicated that they plan to move forward," said Douglas County spokeswoman Kristin French.

Another indicator of the company's plans was its recent annual inquiry about whether Denver would be willing to grant Qwest a limited franchise to offer cable service at the abandoned Lowry Air Force Base, now being redeveloped into one of the city's most upscale communities.

It probably didn't like the answer it got.

"We've been there, done that," said Dean Smits, director of the Denver Office of Telecommunications. "The city's position has always been that any provider of cable service must provide service to the entire city."

WideOpenWest's arrival on the scene could alter the city's position.

"If we already had an alternative service provider serving the entire city, we might look at things a little differently," Smits said.

Predictably, Qwest is playing it close to the vest and refusing to confirm any plans to expand into the video business.

"What I'm saying is that we're testing equipment in Boulder and Douglas County," said spokeswoman Claire Maledom. "It's a possibility, but we have to take all things into account and see if it makes sense to proceed."

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