Boston Hot for Telco Competition

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MediaOne Group Inc. has been selling telephone lines likegangbusters over the past three months, increasing its number of telephony subscribers by6,000 between Sept. 30 and Dec. 31, and its number of access lines by 8,000 during thesame period.

According to its most recent financial statement, MediaOnehad 10,000 telephony customers and 13,000 access lines in its six markets nationwide as ofDec. 31. That's up from 4,000 customers and 5,000 access lines Sept. 30.

MediaOne offers telephony in six markets: Atlanta; LosAngeles; Pompano and Jacksonville, Fla.; Richmond, Va.; and suburban Boston.

Suburban Boston is one of MediaOne's newest markets --it began offering telephony there in September -- and it is apparently one of thecompany's hottest areas for telephone service.

The Boston market has a high concentration ofhigh-technology companies -- particularly around Route 128, the so-called Miracle Mile. Asa result, the market has a large number of people who are technologically savvy. Thistranslates well for MediaOne, which offers a package of high-speed Internet service, cabletelevision and local and long-distance telephony.

MediaOne would not discuss individual telephony markets,nor would it confirm or deny its rumored subscriber growth in the Boston area.

However, the company has acknowledged that it is steppingup its efforts in the telephony arena, and Boston is one of its many important markets.

Currently, telephony service is available to about 300,000homes in 27 communities in the suburban Boston market, said Linda Laskowski, vicepresident of broadband and telephony services for MediaOne in Massachusetts. MediaOne alsoexpects to double its Boston-area footprint by the end of the year.

Although Laskowski would not give specific figures for thestate, she said some MediaOne markets are experiencing telephony-penetration rates ofbetween 7 percent and 8 percent.

While that is not the penetration rate in Boston, she said,that market has exceeded expectations.

"We didn't expect it to grow quite thisquickly," Laskowski added.

She said customers are signing up for MediaOne telephony inBoston for three reasons: choice, value and customer service.

For example, in the suburban Boston market, MediaOne offersone telephone line with 17 different calling features -- including call waiting, three-waycalling and caller ID -- for $26.95 per month, or about 27 percent less than the incumbentprovider, Bell Atlantic Corp.

If the customer adds another telephone line to thefull-featured package, the savings are even greater -- about 50 percent versus BellAtlantic -- at $42.95 per month.Laskowski claimed that MediaOne provides faster responsetimes than Bell Atlantic, shorter outage times and even Saturday installs.

Carol Mann, director, cable and satellite TV for TheStrategis Group, a Washington, D.C.-based telecommunications-consulting firm, said thatcoupled with lower prices, that kind of customer service can be a powerful marketing tool.

"They're entering into another monopolymarket," Mann said. "They need something to set themselves apart from the RBOC[regional Bell operating company]. Plus, Boston is a very young city. There are a lot ofcollege students with limited incomes. Price will make even more of a difference."

MediaOne is not the only cable-telephony competitor in themarket: Princeton, N.J.-based cable and telecommunications company RCN Corp. has beenoffering service in parts of the city since 1996.

Recently RCN has begun to expand to cities and townssurrounding Boston, including Arlington, Somerville, Newton and Newbury, Mass. RCN wouldnot reveal its subscriber numbers for the Boston market either, but it said the area hasbeen ripe for competition.

RCN provides cable, telephone and Internet services inseveral markets along the East Coast, including Washington, D.C.

Jim Maiella, a spokesman for RCN, said the company selectedthat region because it was served by telephone companies that had old infrastructure andpoor service.

"Demand is high everywhere," Maiella said."This is one of the first markets where competition is evolving in full form. Thechoices are really very plentiful in the Boston market."

Although MediaOne and RCN do not go head-to-head in most oftheir markets, there is one area where they and Bell Atlantic are competing: Arlington.And although it is still too early to determine which company is going to be the ultimatewinner in that area, it does provide an interesting test ground for telecommunicationscompetition.

Maiella said he believes that RCN will come out on topbecause of the quality of its network. He added that MediaOne is primarily operating aphone system on a retrofitted cable network, and Bell Atlantic is providing service overplant that is more than 100 years old.

"Our approach is different," Maiella said."We are building a network from scratch, from the ground up. In the long run, that isgoing to be more successful, because the costs are lower and the service will bebetter."

John Johnson, a spokesman for Bell Atlantic in Boston, saidthat although competition has been a way of life for Bell Atlantic for more than a decade,MediaOne's success is not forcing the Baby Bell to do anything different.

Although both MediaOne and RCN claim success in the Bostonarea, their total number of access lines is dwarfed by that of Bell Atlantic. According tothe Massachusetts Department of Telecommunications and Energy, Bell Atlantic had about4.47 million residential and business access lines in the state in 1997, the latestfigures available.

But this doesn't mean that the incumbent provider istaking its competition lightly.

"MediaOne has been very aggressive with cable andlocal [telephone service], and now toll calling, as well," Johnson said."We're going down an irreversible path that was started well over a decade ago... It just underscores that it is well past the time to let Bell Atlantic into longdistance."

Bell Atlantic is countering MediaOne's moves byexpanding its digital-subscriber-line services -- the telco answer to high-speed cableInternet service -- and beefing up its satellite-TV offerings in the Boston market.

Johnson said DSL service will be available in the Bostonmarket next month. The RBOC expects to begin offering customers in Massachusettsdirect-broadcast satellite service from DirecTV Inc. between April and June.

And if the Federal Communications Commission allows theBaby Bells into the long-distance market, Bell Atlantic said it will have a package ofservices comparable with MediaOne's offering, or with that of any othercable/telephone company that decides to offer service.

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