Davenport: Let Data Services Begin

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Bridled for a year by what was a sluggish pace in two-way
upgrades, Tele-Communications Inc.'s TCI.NET is now jazzed by plans for simultaneous
metro launches of the @Home Network high-speed-data service, starting this summer. Rob
Davenport, president of TCI.NET since October, said the wait was worth it: The extra time
was funneled into extensive preparations and penciling in confident check marks next to
TCI.NET's to-do chores. Leslie Ellis, senior broadband editor for
Multichannel
News, caught up with Davenport last week for a status check on TCI's data-services
arm. An edited transcript follows:

MCN: Let's start with TCI.NET's progress, to date
-- success and challenges?

Davenport: We've been pretty pleased in terms of
getting our execution model burnished. It's obviously a pretty complicated set of
logistics for ourselves, for @Home and for our field organization to get systems launched
and to get the service deployed. We've gotten to the point where that process is
pretty well-baked. The launch schedule, which relates very closely to our upgrade
schedule, is quite a bit back-end-loaded for this year -- overwhelmingly so.

MCN: Back-end loaded?

Davenport: Most of the two-way-capable homes are going
to come on in the second half of this year. The good news is that it gives us a chance to
shake out the process and to make sure that it's working as well as we'd like it
to. We'll be moving at a pretty brisk clip.

MCN: How many data customers do you have now?

Davenport: We have over a half-million homes that are
@Home-marketable, if you will. We have on the order of 10,000 customers to date, and we
expect to have well over 2.5 million homes in total this year that are marketable for the
@Home service.

MCN: That's 2.5 million homes that are two-way-active?

Davenport: And that are targeted for launch of the
@Home service by year-end. So obviously, with respect to challenges, we have a scale issue
that we'll be tackling head-on as we move into the summer months. We know that we can
do one system, and even several systems at a time, but we have perhaps dozens of systems
that are launching in different areas around the country, and it will be quite a
logistical challenge. It's one that we think we're quite well-organized for, but
we're quite respectful of that process.

MCN: Those launches are in the metro clusters?

Davenport: Absolutely. The idea is to get larger, more
contiguous clusters around natural markets. That being the case, one emphasis as we roll
out the @Home service is to get as deep a rollout within these major-market clusters as we
can manage, and as quickly as possible. [That way], we can get the operational synergies
and benefits associated with tackling larger pieces of geography at a time.

The alternative is that you're somewhat more
scattered, which makes for a less efficient process.

MCN: Refresh me on the markets where you're up and
running?

Davenport: The San Francisco Bay area; Arlington
Heights, Ill.; Seattle; and Hartford, Conn. We're also in beta [deployment mode] in
Garland, Texas, which is in the Dallas area.

MCN: What does next year look like? The ground-swell year?

Davenport: Well, I think that we get into the fat part
of the curve beginning this summer, and that will push right on through all of next year,
with 2000 being the wrap-up year. What we do next year obviously depends on what we get
accomplished this year.

MCN: What is the checklist of things that you have to do
when you're preparing for multiple and simultaneous launches?

Davenport: It's a rather long checklist. But, to
give you a flavor for it, there's a tremendous amount of coordination between us and
@Home to make sure that the routing table can be established for customers on a
node-by-node basis as they come on board.

We start with a prelaunch network-architecture review with
@Home, to make sure that we're in sync. In the meantime, we're out in the
systems, getting system employees trained on the product: how to fulfill it, how it's
supported in our call center and what that portends for their dispatch operations.

There are a whole series of marketing things, as well, such
as getting the systems filled up on the tactical sales plan, which includes a number of
direct-mail pieces and door-hangers, as well as print ads and events.

MCN: What are your thoughts on the retail availability of
cable modems?

Davenport: To ultimately have the DOCSIS [Data Over
Cable Service/Interoperability Specification] product on consumer shelves so that they buy
directly, or to have it installed in a computer that consumers may be purchasing from a
store or a mail-order purveyor, vastly simplifies the installation process.

It can also reduce a barrier to entry for the product,
which is a healthy installation fee. With preinstalled [cable modems], we believe that
we'll be able to reduce that significantly. We'll also be able to reduce the
complexity of the installation.

MCN: Which leads right into my next question: How are the
installs going?

Davenport: We've been very pleased with the
progress. In many markets, we're actually able to go out with a single installer who
can handle both the RF and the data sides of the installation, and do so in a 90-minute
time frame.

MCN: What's the latest with your cable-modem request
for proposals?

Davenport: We've gotten through the process and
selections have been made, and we'll be communicating that around the time of the
[National] Show.

MCN: How's the customer-service end of it going?

Davenport: Pretty well. This is an opportunity for us
as a company and, frankly, as an industry, to change the customer-service paradigm a bit.
We go out and survey our customers, as does @Home, using independent vendors to assess
customer satisfaction. I'm pleased to report that we've gotten consistently high
customer-satisfaction ratings. There's always room for improvement, and there are
some things that we're working on, like an online customer-support module.

MCN: How does that work?

Davenport: It's designed to give the customer
flexibility and control over how they access the support that they need.

Online support is a real-time, interactive, 3-D Web space
where a customer is able to go in and indicate where they'd like to get some insight,
and then find a number of options. One might be a referral to a library, where they could
access an index and look up a topic. They might access a list of FAQs, or frequently asked
questions, to address their issue. Or they may be invited into a moderated chat session
that has been scheduled. This is all on a real-time basis, and it directs customers to
where they want or need to be.

Ultimately, with video telephony, customers could reach a
CSR [customer-service representative] live, on a window on their screens.

It may very well turn out that we have a tool developed for
the data products that migrates very nicely into our core entertainment business.

MCN: At TCI, then, is it TCI.NET that is handling some of
the packet-based services that are being discussed, which straddle both the cable-modem
and digital set-top environments?

Davenport: Correct. We're one of the primary
drivers of the whole PacketCable initiative at CableLabs [Cable Television Laboratories
Inc.]. There is a pretty significant overlap, particularly when you start talking about
the advanced set-top-box platform and what we expect to do with that from a service
standpoint.

PacketCable is specifically focused on what I characterize
as advanced-connectivity services. That's distinct from advanced products, such as
digital cable. So I do see a pretty fundamental juncture between the activities of
PacketCable and the kinds of things that we're focused on here at TCI.NET, and
what's going on in the entertainment side of the house, with respect to the
development of advanced digital products.

MCN: When cable modems become a standard feature within
advanced digital set-tops, what kinds of services do you envision?

Davenport: There's a lot of work under way.
Obviously, it gives us tremendous flexibility. The advanced set-top box may end up being a
hub for a wide range of communications and entertainment options for our customers, some
of which would be embedded into the baseline product, and others that could be premium
services, such as @Home.

To give you a flavor of the sorts of things that we're
contemplating, there are various flavors of an @Home service and IP (Internet-protocol)
voice and video-service sets. Electronic commerce is another one. One of the prominent
examples of that is the recent deal between us, Intuit [Inc.] and BankAmerica [Corp.] to
provide banking services to TCI's customers across the advanced set-top platform.

No matter what we come up with, the market will almost
surely take this technology to where they'd like it to be. It's incumbent on us
to make sure that we have a platform that is robust and capable, but flexible, so that we
can respond to the various market demands.

MCN: You mentioned video and IP telephony. Where do those
rank in the service mix?

Davenport: Video telephony is high on the list. TCI and
the cable industry are ideally positioned to offer both to residences and to commercial
customers.

One phenomenon that I find particularly interesting is
JenniCam. The JenniCam site is being hit about 500,000 times a day. That shows that
there's an interest in seeing life as it is, as opposed to the very highly stylized
and packaged depictions of life on other programming options, like on TV.

That shows interest from what we may consider average
consumers, such as a grandmother who wants a JenniCam-like setup with the camera pointed
right at her grandbaby's crib, so that she could tune in whenever she chooses. With
the Internet and enabling technologies, these kinds of sociological changes are happening.

MCN: When do you suppose video telephony will become a
practical reality over broadband?

Davenport: Real-time, high-quality, competitively
priced video telephony is something that will be technically feasible by the middle of
next year. We're aggressively pursuing voice and video lab and field tests over the
course of this year. A business model and implementation plan will be devised as we move
into the middle of next year.

MCN: Comcast Corp. is pushing it out a little further than
that: They're saying 2000.

Davenport: I hear them. The question is: When does it
become a material-revenue flow? And the answer to that question would lead me to concur
with [Comcast]. But technically, I think that mid-'99 is when many of the network and
client issues are sorted out.

MCN: A couple of months ago, TCI selected @Home as the
integrator of IP services over advanced digital set-tops. What's the status of that
project?

Davenport: Proceeding at pace. Obviously, it's a
very critical aspect of what we have in mind for the [General Instrument Corp.] DCT-5000.
Work has begun to implement, for instance, e-mail, with a view toward building on that
baseline. With additional, advanced-connectivity services, @Home is going to play a very
critical role.

MCN: What are you most focused on now?

Davenport: We're really, really focused on
execution. In building an infrastructure -- both organizationally and from a product
standpoint -- that enables us to scale the service very, very rapidly. Across that
platform, we expect to be able to offer these services, like IP voice and video, in the
not-too-distant future. It's a very exciting time for us.

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