Cable Modem with That Latt, Sir?


By next year, consumers in Seattle may need a scorecard to track the various telecommunications outfits jockeying for position in the market.

Presumably, five cable operators may be operating in Seattle by 2001, each competing for 150,000 local subscribers currently controlled by AT & T Broadband and Millennium Digital Media.

It's believed Seattle may be the first market in the nation to have that many different service providers battling for shares of the local telecommunications market.

All five will also be struggling to sell high-speed Internet access, along with local and long-distance phone services, to a population of 500,000 mostly well-educated consumers with median household incomes approaching $50,000 per year.

Adding to the competitive landscape will be a host of digital-subscriber-line service providers, including U S West, which theoretically could begin eyeing the local video market after its merger with Qwest Communications International Inc. closes.

But until that happens, "We're still going to have the potential for five different [cable] wires to the home," said Brenda Trainor, interim director for the Seattle Cable Office, the local agency that has been fielding inquiries from service providers.

Also fueling the competitive fire in Seattle is AT & T Broadband's desire to overbuild Millennium in the Queen Ann District near downtown, while Millennium has moved into AT & T Broadband's central district territory, where it's targeting lucrative multiple-dwelling units.

The local cable market is currently divided between AT & T Broadband, which serves some 130,000 subscribers in three franchising districts, and Millennium, with about 20,000 customers in the downtown wharf area.

Located on Elliot Bay, the Greater Seattle area is one of the fastest-growing areas in the nation. Composed of Snohomish, King, Pierce, Kitsap, Thurston and Island counties, it has an overall population of more than 3 million squeezed into 218 square miles some 182 miles below the Canadian border.

Its economy is driven by the aerospace, software, computer, electronics, medical-equipment and biotechnology industries, featuring such well-known names as Microsoft Corp., The Boeing Co., SAFECO Corp., Starbucks Corp. and Alaska Air Group Inc.

Not surprising, then, it's an affluent community that is drawing the attention of multiple telecommunications companies.

"It's attractive because it's a big market and the interest in high-bandwidth services is high," said Mark Haverkate, president of WideOpenWest LLC, a Denver-based start-up that is challenging AT & T Broadband in several of its largest markets.

As of last week, the city was hammering out language on proposed franchises for RCN Corp., a Princeton, N.J.-based overbuilder, as well as WOW.

It was not immediately clear when the franchise agreements would go before the City Council.


In the past, cable franchises in Seattle were awarded on a district-by-district basis. The new entrants want to change that. "[RCN and WOW] want to serve the entire city," Trainor said.

Meanwhile, a third newcomer to the market, Denver-based Western Integrated Networks LLC, was planning to submit its own request for a local franchise, possibly as early as this week.

With three new entities seeking access to the city's rights-of-way, Trainor predicted tough times ahead as the city tries to accommodate each new market entrant without having its streets constantly torn up.

"I wouldn't characterize it as a nightmare, but it's going to take a lot of internal coordination," she said. "But we're very interested in getting competition into town."

With a new competitor seemingly popping up each day, AT & T Broadband is racing to ensure that it remains "the provider of choice" in Seattle, spokesman Steve Kipp said.

With its systems upgraded to 750-megahertz capacity, the MSO launched its high-speed AT & T@Home Internet service earlier this year, and now boasts 21,000 customers in the Seattle, Tacoma and Everett area.

"If you look at the curve, it's like a rocket going straight up," Kipp said. "You're talking about an affluent population that is hungry for Internet access. Those are all of the ingredients for a customer base that's going to demand high-speed services."

Local telephone over cable has also debuted in Seattle, with the first paying customer coming online in March.

Although the cost of a single line is comparable to the price U S West charges, AT & T Broadband officials hope their strategy of offering deep discounts on second and third lines will attract a steady stream of customers.

The company has also tackled its long-standing customer-service problems in Seattle.

In the past 18 months, it has raised the response time for the number of customer calls it answers within 30 seconds from an admittedly "dismal" 60 percent to more than 90 percent.

Five different customer call centers have been consolidated into two massive centers in Fife and Everett, where employees use upgraded computers and telephone systems to serve customers.


Also gone are the days when customers had to choose from between 27 different telephone numbers to reach the company, replaced by a single toll-free number.

"More people, more training. You name it, we've done it," Kipp said. "It's the basic blocking and tackling: good customer service, providing quality and choice, in the form of high-speed Internet access and local telephone service. Our strategy is to focus on value."

Meanwhile, the obvious question is: Can the local marker support five different service providers? The answer depends on whom you ask.

Despite concerns in some quarters, WOW executives believe Seattle can accommodate that many entrants.

"When you talk about Seattle, you're thinking of the entire metro area, not just the city," Haverkate said. "As such, you're looking at approximately 1 million homes. From a competitive standpoint, it makes sense that more than one company will be able to participate."

But RCN senior vice president Scott Burnside isn't sold on the notion that Seattle can support five different companies, each competing for the same dollar.

"From a regulatory or licensing perspective, yes," he said. "From a business standpoint, I don't see it happening. You're not talking about the density of a Manhattan. I would think somewhere along the line, somebody is going to blink. I can guarantee you it isn't going to be RCN, however."

Armed with an infusion of cash from Microsoft co-founder Paul Allen, RCN is making a push into the Pacific Northwest, with a second franchise application filed in Portland, Ore., another AT & T Broadband stronghold.

Its overbuild experience includes competing networks in Boston and Washington, D.C. Unlike those venues, however-where it is partnering with local electrical utilities-it will likely have to go it alone in Seattle, where power is furnished by a municipal utility.

"But on the other hand, being a municipal utility, you might not have the same problems in terms of things like pole attachment that you might have with a private utility, which often will see you as a competitor," Burnside said.

"If a city grants a second franchise, it's essentially telling its municipal electrical utility to work with these people. So I hope and expect that any business relationship between RCN and Seattle will be a good one."


WIN spokesman Bill Mahon was not worried about his company being potentially the last one to enter the market.

"We think these opportunities are driven by technology and customer service," he said. "And we believe we can compete with any other operator. Obviously, though, there are advantages to being in the market sooner, rather than later. We'd like to be in there as soon as possible."

WIN already has franchises in Austin, Texas, and Sacramento, Calif.

Still to be decided, Trainor said, is where the city will come down on the open-access issue. Under its new franchise with AT & T Broadband, the city has the right to revisit the matter at a future date.

Theoretically, the city could demand that all operators unbundle their networks.

"Can and would are two different questions," Trainor said. "Frankly, I haven't heard much anxiety up here over open access. After all, five different companies would give us a lot of choices."

But the issue may be forced on AT & T Broadband.

In its other franchises, WOW agreed to open its network to unaffiliated Internet-service providers that want to provide high-speed broadband services-a position that AT & T Broadband opposes.

At RCN, meanwhile, the party line seems to be, "We'll do whatever is required of the others," Trainor said.

RCN has recently indicated that it would be willing to accommodate supporters of open access in its bid to acquire a franchise in San Francisco.