East Coast Show Highlights Phone, Data

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Baltimore -- Although customer-penetration levels still
pale beside cable's core video-business levels, new high-speed Internet and telephone
services generated a great deal of interest last week at the East Coast Cable '99 regional
convention here.

As they seek to make good on promises to generate higher
rates of revenue per subscriber, top MSOs examined the challenges and rewards of marketing
high-speed data and digital telephony.

Cablevision Systems Corp. plans later this year to take
advantage of its investment in The Wiz retail stores to increase the visibility of its
"Optimum Online" data service and to help shift some costs of modem hardware and
installation to the consumer, executives said during panel sessions here last week.

Cable modems should hit The Wiz stores on Long Island,
N.Y., and in Connecticut -- where the system's plant is already DOCSIS-compliant (Data
Over Cable Service Interface Specification) -- within the next few weeks, Cablevision area
vice president of consumer telecommunications services Andy Heeren said.

A heavy marketing push will follow as soon as Cablevision
is confident that the customer experience is going smoothly at retail. Additional retail
rollouts in New Jersey will follow plant upgrades, Heeren added.

Ultimately, the MSO plans to get out of the modem-rental
business completely. Hardware discounts will be tied to service subscriptions.
Installation pricing has not been finalized, but the company could charge an hourly rate
or a flat fee, as other computer-service technicians do.

As retailers do with printers and other PC peripherals, The
Wiz will try to get consumers to connect their modems to their computers by themselves.
Cablevision plans to support self-installers with step-by-step diagrams and videotapes.

Comcast Corp.'s Comcast Online Communications has deals in
place with Dell Computer Corp., Circuit City Stores Inc. and Compaq Computer Corp. to help
sell modems at retail.

But while retailers may help the MSO out with simple data
installations, they're less likely to be able to do the RF-installation work needed to
bring the cable to an online customer's computer, Comcast Online vice president Richard
Rasmus said.

As for encouraging consumers to install their own cable
modems, Rasmus said, "Self-provisioning is very important, but we're a long way from
there."

In the meantime, finding and keeping enough data
technicians to meet demand for new online services will continue to be a challenge, a
number of operators said.

Training employees on the new technology is a good start.
But skilled employees must also be properly compensated, lest they be lured away by
competitors such as local phone companies branching into digital subscriber line.

Time Warner Cable of New York City plans to distribute Road
Runner demonstration kiosks not only to local computer and consumer-electronics stores,
such as P.C. Richard & Sons, but also to entertainment chains such as record stores,
vice president of marketing David Goldberg said.

Those retail plans might not be implemented in the near
term because the system just launched Road Runner in Manhattan last month, and it is still
fighting to keep up with initial demand, Goldberg said.

Reaching the first 2 percent penetration for data services
in a new market is relatively easy, Rasmus said. Comcast sells its Comcast@Home service in
nine markets, and it averages 4 percent penetration, including recent launches. In some
areas with better demographics, Rasmus said, penetration is as high as 25 percent.

On the telephone side, Cablevision estimated that it will
have 8,000 subscribers to its consumer telephone service, "Optimum Telephone,"
in Norwalk, Conn., and Long Island -- out of 210,000 marketable homes -- by the end of
this year.

"Adding phone service essentially triples the revenue
per subscriber," Cablevision vice president of business products Kevin Curran said. A
monthly bill may go from $40 or $50 for a video-only customer to $150 or more once
telephony is factored in.

To date, Cablevision offers consumer phone service only as
a bundle with video. A total of 10 percent of each customer's phone bill is subtracted
from the monthly cable bill. The discount goes up to 25 percent for phone bills over $200,
and customers who buy more than $250 in phone services get free cable for the month --
premium channels and all.

"As soon as we sign a phone customer, we immediately
try to upsell the cable package," Curran said, adding that discounts are charged to
the telephone division as marketing expenses.

While it has relied mainly on direct sales to sell the
telephone service, Cablevision plans to expand its telemarketing efforts for people who
don't want to sit through sales pitches.

On Long Island, Cablevision faces competitive challenges
from local phone incumbent Bell Atlantic Corp., which, analysts believe, is close to
winning the government go-ahead to start selling long-distance service.

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