Cables Gunslingers Flock to Alamo City

Author:
Publish date:
Updated on

San Antonio, home of this week's Texas Show 2000, may
soon be one of the ripest competitive markets for bundled telecommunications services in
the country.

Consumers may say, "WOW," or, "I want
WIN," or, "Make mine Grande," or, "I'll stick with that Paragon
of operators, Time Warner Cable."

City fathers cheered the possibility of a cable battle
across the alley from the Alamo. "Competition keeps rates in check," city
finance director Octavio Pena said.

Pena confirmed that Austin, Texas-based Grande
Communications Inc. has filed initial documents to secure a franchise to deliver cable,
high-speed data and telephony to San Antonio.

Two other overbuilders that have surfaced in other
communities -- Western Integrated Networks and WideOpenWest LLC -- are scheduled to visit
personally with city officials by the end of next week.

San Antonio is already served by a well-entrenched
incumbent in Time Warner, as well as a microwave service and satellite-dish dealers. Pena
added that there are four telephone companies, with six others waiting in the wings.

Why San Antonio? Do competitors sense weakness in Time
Warner and SBC Communications Inc.'s Southwestern Bell?

Grande chief executive Bill Morrow quickly rattled off
several reasons. "It's a dense market. It's a technically oriented part of
the state. There are smart people we can hire, and there's a good potential customer
base," he said.

Grande is part of the rising tide of
"second-generation" telecommunications operators, peopled by cable executives
who were cashiered or cashed out of their former companies. Its executives include Robert
Hughes, who founded Prime Corp. in 1979 and sold it for a reported $3.1 billion in 1998.
He has since formed Prime New Ventures, a venture-capital company.

Morrow is a veteran of Knology Holdings Inc., which built
similar networks in Columbus, Ga., and Montgomery, Ala.

Morrow said most of the company's executives are Texas
natives. Grande wants to stake its claim along the I-35 corridor, including franchises in
Austin, New Braunfels and San Marcos, in addition to San Antonio.

Morrow said Grande has 12 investors from the
venture-capital and banking worlds and, with their help, it will close on $200 million in
funding this week.

Grande anticipates constructing plant more fiber-rich than
that of Time Warner. That cable operator serves 500 homes per node, while Grande will
serve 24 per node. Bundles -- including cable, local phone and up to 300 minutes of long
distance -- may be offered for about $70 per month.

Although San Antonio is pleased about the raft of
competitors, analysts and other cities facing overbuilding have projected that competitors
must capture at least 20 percent of a marketplace to remain viable. Given that math, four
bundled operators seem improbable long-term.

"There's not going to be three [competitors]. It
will be whoever gets in and builds the market first," Morrow said.

But the wave is cresting at a good time, regulationwise,
for the Texas city. Time Warner's franchise expires in three years, so authorities
can renegotiate that pact, and those of competitors, with equivalent terms, Pena said.

Texas isn't the only target of the telecommunications
new wave. The Rhode Island Department of Public Utilities and Carriers confirmed that
Boston-based American Broadband Inc. has applied to compete in about 75 percent of the
state against dominant incumbent Cox Communications Inc.

American Broadband is presided over by Continental
Cablevision Inc. veteran Edward Holleran Jr. Its chief technical officer is Almis Kuolas,
who also served at Continental, American Cablesystems Corp. and MCI WorldCom Inc.

The firm was formed in October with venture-capital firm
Great Hill Partners LLC. The firm and its backers anticipate spending $170 million over
five years to build its system in Rhode Island.

"We're not targeting Cox," Holleran said.
"Our goal is to be the leading broadband provider in medium-sized markets in the
East. There may be some opportunities in markets where the operator does not have as
advanced a network."

Cox currently serves 96 percent of the state. Other homes
are served by small operators Full Channel Cable TV and Block Island Cable TV.

American Broadband has applied to serve Barrington,
Bristol, Central Falls, Coventry, Cumberland, Dranston, East Greenwich, East and North
Providence, Johnston, Lincoln, North Smithfield, Pawtucket, Providence, Scituact,
Smithfield, Warren, Warwick, West Warwick and Woonsocket. It will deliver cable,
high-speed data and telephony.

The competitor hopes to begin building within a year, but
state cable administrator Eric Palazzo said that depends on the speed of the approval
process and whether there are any intervenors. The DPUC is currently evaluating the
company's submission to determine if the state needs more information on the
application.

The state is definitely pro-competition. Several local
governments have passed pro-competitive ordinances, spurred by consumer complaints over
fall rate hikes and packaging changes by Cox, Palazzo said.

Related