Cablevision Gets Digital—in Boston

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Cablevision Systems Corp.'s plan to launch digital cable to about 200,000 subscribers in Boston and its surrounding suburbs this fall has some interesting twists.

For one thing, Cablevision has a deal in place to sell the Boston-area systems to AT & T Broadband, which could close just weeks after the digital rollout begins.

And unlike Cablevision's core New York market, where it will deploy advanced digital set-tops from Sony Corp., Cablevision will use Motorola Broadband Communications Sector "DCT-2000" digital boxes in Boston.

Liberate Technologies and Source Media Inc. disclosed the Boston plans last week in announcing they would supply middleware and an interactive program guide for Cablevision's systems there.

In April, Cablevision cut a $1.8 billion deal with AT & T Broadband that involved a swap of Cablevision systems in Boston and surrounding suburbs, counting 357,850 subscribers, for AT & T Broadband systems in the New York suburbs with 125,550 subscribers. AT & T Corp. also agreed to kick in $1.2 billion in stock and cash.

Analysts valued the sale of Cablevision's Boston-area systems at about $5,000 per subscriber.

As for the digital-launch timing, some sources said Cablevision was feeling the effects of competition in the market, which includes local-to-local packages from direct-broadcast satellite providers EchoStar Communications Corp. and DirecTV Inc. and an aggressive overbuilder in RCN Corp. Verizon Communications also offers a bundle of local calling, digital-subscriber-line data service and DirecTV there.

But Cablevision spokesman Charles Schueler said competition wasn't part of the equation. "Our launch of digital has nothing to do with any competitive threat whatsoever and everything to do with leveraging the hundreds of millions of dollars we are spending to rebuild our system there," he said.

One source noted that Cablevision agreed to certain capital expenditures when it struck the AT & T Broadband deal, including the rollout of digital on some Cablevision systems.

AT & T Broadband officials declined to comment on any aspect of the Boston digital rollout, including questions about what role it may have played in selecting hardware and software vendors.

In April, when Cablevision announced the AT & T Broadband deal, it counted 357,850 subscribers in Boston and eastern Massachusetts. Schueler declined to say exactly how many subscribers Cablevision now has in Boston, but he insisted that it was the same number announced as part of the AT & T Broadband deal.

RCN has overbuilt Cablevision in Boston and several suburbs: Framingham, Lexington, Hyde Park, Brookline and Allston/Brighton. The company passes 328,000 Cablevision homes, and is offering bundled packages of video, telephony and high-speed data in most of the areas where it competes with Cablevision, RCN spokeswoman Nancy Bavec said.

She added that RCN is aggressively marketing its "Resi-Link" package, sending marketers door-to-door to sign up new subscribers. RCN wouldn't say how many subscribers it has in the Boston area.

DirecTV and EchoStar, meanwhile, are shopping DBS offerings, which now include local over-the-air feeds. A DirecTV spokeswoman said 65 percent of new subscribers in Boston are also taking the company's local package, which includes local ABC, CBS, NBC and Fox network affiliates, plus a national PBS feed.

In addition to local feeds of the "Big Four" networks, EchoStar offers local United Paramount Network affiliate WSBK-TV and local PBS station WGBH-TV. Nationally, 56 percent of new subscribers are taking its local package, spokesman Marc Lumpkin said.

For Liberate and Source, Cablevision's lame-duck status in Boston raises questions. Will AT & T Broadband dump the software Cablevision selected when it takes over the system? Or will the vendors be able to parlay the Boston digital launch into a deal with Cablevision for its digital rollout in the New York metro market with Sony next year?

AT & T Broadband has selected Gemstar-TV Guide International Inc. as the IPG supplier for its digital rollout, and Microsoft Corp. will be providing middleware for advanced digital services.

Liberate senior vice president of corporate development David Limp called the Boston deal a unique situation, although he wouldn't rule out a possible deal to be included in Cablevision's digital platform in New York.

"Cablevision has moved [Boston] to digital as one of their fastest properties not using Sony-based technology, which they are using for their bigger systems. Second, obviously, Boston is being overbuilt, so the need to be digital there is that much of a higher priority," Limp noted.

Regarding AT & T, Limp would only say that Liberate is talking with all top MSOs about supplying software for their digital rollouts. "There's not one where we don't have someone knocking on the door, AT & T included," he added.

For Source, the Cablevision launch is the first distribution deal struck with any MSO other than Insight Communications Co. Inc., which bought equity in Source after rolling out its product.

Cablevision licensed the company's "SourceGuide" IPG, but it did not license its "LocalSource" interactive-programming service, Source CEO Steve Palley said.

Palley conceded that there was no guarantee that AT & T Broadband would not dump the SourceGuide IPG and replace it with the Gemstar-TV Guide product, in which the company is an investor.

Nonetheless, Palley said he was hopeful that AT & T Broadband would continue to operate the Boston-area systems it gets from Cablevision with his IPG.

He's also optimistic that Source will leverage the Boston deployment into a deal to supply an IPG for Cablevision's digital rollout in New York. And the Boston launch could be a springboard to deals with other MSOs.

"The deal alone is just the beginning of what I think is going to be an increased number of digital deployments. I think it evidences our ability to be one of the real contenders for the non-Gemstar-TV Guide opportunities," Palley added.

Cablevision wouldn't disclose how many DCT-2000 set-tops it has ordered from Motorola Broadband for the Boston rollout. But the vendor's selection is noteworthy.

In May, Cablevision CEO Jim Dolan told Multichannel News one of the reasons why Cablevision chose Sony over Motorola Broadband or Scientific-Atlanta Inc. for New York is that those vendors don't offer Cablevision the same volume discounts they do to larger MSOs.

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