Forum: Futureville Shows the Cable Industrys Potential

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"Cable Clicks." The theme of this year's
Western Show captures the myriad of opportunities that this industry has at its fingertips
to "Deliver the Goods" (the title of the show's opening panel) to our
customers.

"Just a Click Away." From video, voice, data and
more, we are living in exciting times.

Just a "click" south of Anaheim, Calif., is a
100-mile strip of land that extends from Orange County, through San Diego, to the
U.S.-Mexico border, and it is blessed with some of California's finest beaches and
weather that rivals the best anywhere in the world.

Adjacent to these pristine beaches is a 100-mile corridor
containing one of cable's most fully built-out fiber networks. This area -- dubbed
"Futureville" in an article in The Economist -- lays claim to more
academic degrees, more personal computers and more miles of fiber optics than any other
region in the U.S. It is an area where the "cacophony of clicks" on the
broadband network will soon reach a digital chorus.

This region has long been an early adopter of technology.
San Diego enjoys some of the country's highest cable penetration (nearing 80 percent)
and computer ownership (average 60 percent).

Coupled with people's curiosity to try new technology,
this area provided the fertile ground to draw early and robust investment from Cox
Communications Inc., Time Warner Cable and Daniels Cablevision. This plethora of
technology users, totaling 1 million cable customers, has already attracted an estimated
$750 million of capital to the region.

Nearly every cabled home enjoys the "clicks" of
the digital age -- 100,000 new-product customers are already enjoying new digital-TV
packages, digital data or digital-telephone services from their cable companies. Virtually
every home in the 100-mile corridor has access to at least one new digital,
broadband-delivered cable product today. Some of the early lessons from operators in the
region will be shared on panels throughout the Western Show.

Uniquely, all 1 million Southern California cable customers
will enjoy access to the high-speed on-ramp to the Internet through cable modems by
year-end. More than 50,000 customers already enjoy high-speed-data products from Cox, Time
Warner and Daniels, achieving a regionwide penetration of 5 percent, with no demand
slowdown in sight.

Customer satisfaction is extremely high with the
often-quoted Orange County customer who possessively claimed that the only way that you
could get the cable modem away from him was "to pry it out of my cold, dead
fingers!"

One challenge that we will have to better understand on the
data front is customer support. Recently, my friend Larry mentioned that he had called our
care center with a question about his Cox@Home service. He described how friendly and
helpful our people were each time he called. "How often do you call each month?"
I asked. "Oh, six times or so," Larry replied.

It occurred to me that we are teaching Larry how to use a
computer. Customers call with software and computer problems, as well as for instruction
on how to navigate the Internet. How we manage these calls is clearly an emerging critical
question, as the cost and volume could overwhelm us. Today, Larry and others expect us to
do it all as their access points to the superhighway.

Switched-circuit residential telephone service is alive and
thriving in Southern California. This area, Futureville, will enjoy competitive
residential telephone service in one-half of the region by the end of 1999. The early
indicators are very encouraging, as customers are offered a 10 percent to 30 percent
discount over incumbent local phone companies, and penetration in marketed nodes is
ranging from 12 percent to 20 percent.

One of the key factors to success is working with the local
regional Bell operating companies to "hand off" calls and customers between one
another seamlessly. Since I personally experienced a nightmarish situation in the early
stages of phone competition in the U.K. market, I know how vulnerable to anti-competitive
behavior we are and how important the handoff is to customers' perceptions.

Initially, there are problems. When they occur, don't
immediately jump to the conclusion that they are purposeless. Experience suggests that the
highly bureaucratic phone companies are "challenged" in adapting to new
procedures in the residential market that change the ways that they conduct daily
business.

In San Diego, following a public debate before the Chamber
of Commerce about the merits of the local phone company entering the long-distance market
(it was unsuccessful in gaining Chamber support for its filing), it became clear to both
the local phone company and to Cox that we were their best "story" (residential
competitor) to demonstrate that their market was open to the Public Utilities Commission
and the Federal Communications Commission.

The cooperation levels have improved considerably,
especially when a friendly reminder phone call to a key counterpart gets the problem
resolved. Look for the cable-telephony technical session on Thursday afternoon to hear
more about the early challenges of entry into residential phone.

Rolling out digital TV is proving to be as exciting as
introducing set-top boxes 20 years ago. During the first half of 1999, this entire
100-mile region and its 1 million customers will have digital TV available. Cox's
experience suggests that so far, it's delivering "the goods" on the
customer front.

Customer satisfaction is high -- 80 percent would recommend
it to a friend. Focus groups' unaided feedback corroborates this positive perception.
"It's not more TV, it's better TV." "I'll never buy a
dish." "I can finally always find something that I want to see." Wait until
video-on-demand and e-mail are here. The incremental revenue is there in the early stages,
with an average of $15 to $18 per customer, per month, from subscriptions and increased
PPV.

Another positive signal is the increase in premium
subscriptions from the early adopters. Popularity and enthusiasm may exceed the
introduction of set-top boxes years ago. However, digital TV is not just plugging in a new
set-top -- managing a sophisticated two-way system has its engineering challenges. Cox
senior vice president of engineering Alex Best will lead a panel Thursday on digital video
to discuss the lessons learned.

Digital-cable pioneer Leo Brennan, from Cox in Orange
County, will lead a panel Thursday titled "Managing the Whole Enchilada," to
discuss how this digital regional epicenter is achieving rapid growth and coping with the
engineering, customer-care and competitive challenges.

How do you manage activity levels that will double from two
years ago? Our region alone is projected to produce 150,000 net adds from core and new
products next year. Can we continue to produce solid core-cable growth (up nearly 4
percent in 1998) and achieve "velocity" on new-product growth? Can we resolve
the customer-support challenges from the data world that are much different than those in
video? Will we continue to see cooperation from RBOCs as they lose the regulatory
encouragement of the checklist?

Cable's broadband pipe and the business opportunities
from this delivery system are squarely in front of us here in Southern California.
It's a matter of achieving optimum "velocity" through focused execution.
The early signs are very encouraging, yet it's still early in the growth cycle. Next
year will be the truly affirming year, and this area may prove to be a bellwether for our
industry.

Enjoy this year's Western Show: It's an exciting
time for our industry.

William Geppert is vice president and general manager of
Cox Communications Inc.'s Cox Cable San Diego.

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