News

Comcast Refutes Little Rock Estimates

1/24/1999 7:00 PM Eastern

Comcast Corp. has come out with both guns blazing in an
attempt to discredit a consultant's report recommending that five communities
surrounding Little Rock, Ark., build their own municipal cable-television system.

According to the MSO's analysis, the municipal system
will cost too much, it will take too long to build and it could prove financially
disastrous for the communities involved.

On the other hand, the cities that commissioned the study
last year were pleased with the report, and they called Comcast's analysis nothing
more than a desperate effort to preserve its monopoly.

In October, the five communities -- Little Rock, North
Little Rock, Jacksonville, Maumelle and Sherwood -- commissioned United Telesystems Inc.,
a Savannah, Ga.-based consultant, to look into the creation of a municipal cable network.
UTI presented its findings to the city governments Jan. 6.

UTI determined that the cities would have to spend about
$97 million to build 2,274 miles of plant. The system would be state-of-the-art --
860-megahertz, hybrid fiber-coaxial and two-way -- and it would include plans for
high-speed Internet access.

The report stated that the entire system could be built in
three years -- after financing and permit approval were obtained -- and that it would pass
152,000 homes. According to UTI, the municipalities could expect penetration rates of 32
percent during the system's first year of operation and 36 percent after three years.

Comcast hired its own consultant, Alan Hahn, president of
Hickory Mountain Associates Inc., a Ridgewood, N.J.-based engineering firm. Hahn said not
only are UTI's numbers wrong, but they don't even come close.

Hahn's main concern with the report is the penetration
rate that the municipalities expect once the system is built: 36 percent.

"I don't know of any overbuilder that has gotten
anywhere near that," Hahn said.

Dave Scott, senior vice president of the south-central
region for Comcast, pointed to other larger overbuilders -- namely Southern New England
Telecommunications Corp. in Connecticut and BellSouth Corp. in Atlanta -- that have had
much lower penetration rates.

"In Connecticut, SNET has a 13 percent-penetration
rate," Scott said. "SNET is a credible company. There's no real reason why
they couldn't have success if this was viable. In Atlanta, BellSouth, after three
years, hasn't cracked 12 percent yet. How can you even think about 36 percent?"

Hahn also took exception to UTI's failure to run an
analysis of lower-penetration models and what it would mean to the residents of the
various municipalities.

"I think that the city should ask UTI what the payback
really is," Hahn added.

J. Allen Davis, president of UTI, refuted Comcast's
claims, stating that in six of the communities where he has recommended municipal
overbuilds, each one has exceeded the penetration rates estimated for Little Rock.

While Davis said a confidentiality agreement prevented him
from revealing the rates of those other communities, he added that the Little Rock
subscriber estimates are not far-fetched considering that they are for homes passed.

"What we are saying is that roughly one of every three
potentially serviceable customers in the market will elect to become a subscriber [to the
municipal service]," Davis said.

Hahn also had problems with the cost of the municipal
system, saying that at $42,000 per mile, it was quite high.

Davis did not refute that number, but he said the real
financial viability is expressed in how many homes per mile the system will have.
According to his calculations, the system will pass about 66.8 homes per mile -- more than
enough to justify the cost.

Michael Keck, vice mayor of the city of Little Rock, said
that while the city government is still evaluating UTI's report, he is confident that
a municipal system will be cost-effective.

Keck also characterized Comcast's criticism of the
report as sour grapes. "I would expect them to be critical of anything that we put
forward," he said.

Want to read more stories like this?
Get our Free Newsletter Here!
September
October

VR 20/20

The Times Center, New York, NY