Cox Continues Digital-TV Push

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Cox Communications Inc. signaled its continued
aggressiveness as far as digital last week by selecting Scientific-Atlanta Inc.'s
Explorer 2000 for its next launch -- in Las Vegas, its fifth-largest system, comprising
about 300,000 subscribers.

Late last month, the MSO launched "Cox Digital
TV" in its 10th market, San Diego, closely following a similar launch in Phoenix.

Las Vegas becomes the fourth Cox system -- along with
Phoenix, Oklahoma City and San Diego -- where the MSO has selected S-A as its
digital-video-equipment supplier. Cox utilized General Instrument Corp. in its first eight
digital markets, according to Anthony Surratt, director of public relations for Cox.

"We have intended all along to be multiple-sourced and
to evaluate products and make decisions locally," Surratt said. "There are
several suppliers out there, and we intend to be multiple-sourced."

And there's no sign that the MSO is planning to take a
breather before continuing its push to roll out digital across its systems

"Cox has been one of the more disciplined -- and,
therefore, more successful -- operators to launch digital," said Greg Mills, vice
president of digital strategy at Encore Media Group. Mills added that it was critical for
cable to move forward aggressively with digital rollouts in order to stave off satellite
competition.

Cox chose the Explorer 2000 in part because of the advanced
interactive services -- including video-on-demand and electronic commerce -- that the
platform supports, Surratt said. He declined to say when Cox would introduce digital to
Las Vegas, adding that it would happen "when it's economical feasible to do
so."

Lynne Elander, director of product development for Cox,
said San Diego is an important market for the MSO, in part because it has already rolled
out its other two advanced services there: digital telephony and high-speed data.

In San Diego, virtually all plant for the 710,000 homes
passed in the local Cox system has been upgraded to digital, but the company decided to
launch Cox Digital TV in a relatively small footprint.

"We want to make sure that we can provide the level of
service that we think our customers deserve," Elander said in explaining why the
service was not immediately made available to all 501,000 of Cox's San Diego
customers.

As in its previous markets, Cox began its digital launch in
San Diego neighborhoods with a large number of "digital-friendly" customers,
meaning multipay households, she said.

While the interactive programming guide and digital music
also provide benefits to digital-television customers, consumers are buying programming,
and not technology, Elander asserted.

"The primary benefit is the multiple tiers of premium
movies," she said.

And it's not just the premium channels that attract
customers: It's also the nine-channel movie tier, with The Independent Film Channel,
Sundance Channel, Flix, Encore and five Encore thematic channels.

The movie package is one of three programming tiers that
Cox Digital TV offers. There's also an eight-channel sports-and-information package,
with services like ZDTV and CNN/SI, as well as a six-channel variety tier, which includes
BET on Jazz and BBC America.

Mills said Encore looks at Cox's model of bundling
digital basic with the hardware and adding low-cost digital-programming tiers as one of
three that operators will copy as they roll out their own digital-video services.

Mills called an alternative model "fat basic,"
where all of the additional channels are packaged together with the cost of the digital
box. He said that model appeals most to small and midsized cable companies that don't
have the marketing support to differentiate among multiple digital packages.

A third model involves renting the digital equipment a la
carte, with no programming attached, so that consumers have access to the on-screen guide
and to pay-per-view channels.

"The jury is still out on which will emerge as the
dominant model," Mills said, adding, "Access to movies can drive digital faster
than anything else."

In the year-and-a-half since Cox launched its first
digital-video service, "one of the lessons that we've learned is not to make it
so overwhelming," Elander said. Instead of promoting every digital benefit equally,
"we stress commercial-free movie programming," she added.

That's not to say that the other programming tiers are
neglected. And Elander pointed out that 10 percent of Cox Digital TV customers to date are
basic-only customers.

Because it's hard to convey the benefits of the
on-screen programming guide to people who've never seen it, Cox promotes the feature
through local-origination channels and in product demonstrations at local malls.

In the first year after Cox launched its first
digital-video service in Orange County, Calif., in September 1997, the MSO brought digital
to eight markets, and it had signed 65,000 digital customers by November. The company is
expected to release year-end-1998 subscriber numbers Thursday (Feb. 18).

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