Idaho Phone Co-Op Dents AT & T

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In south-central Idaho, a rural telephone cooperative decided to go up against the big guy to see if it could make a business of cable TV.

The little telephone guys built a system devoid of digital video or deep discounts.

The incumbent-Tele-Communications Inc., now AT & T Broadband-did little to counteract the threat, executives acknowledged.

At least not until upstart Project Mutual Telephone Cooperative Association Inc. of Burley took away about one-half of the incumbent's cable customers in its first launch market.

The telco serves communities along the Highway 84 corridor between Boise and Pocatello. Its first rollout, in Rupert, poached 600 customers from AT & T Broadband, according to the incumbent.

"That was before my watch," said Stewart Butler, AT & T Broadband's director of marketing for the Nevada-Idaho region, discussing the competitor at a recent meeting of cable executives.

Project Mutual is no stranger to the community, having been formed in 1918 to serve member-owners. It expanded by reselling services from U S West beyond its own plant. It also offers dial-up Internet connections and digital subscriber lines. It committed to an $8 million expansion of fiber deployment and added video in 1998.

Pat Campbell, director of marketing for the rural telco, said customers had a good perception about Project Mutual's 750-megahertz overbuild.

"TCI had a black eye to overcome," Campbell said. Picture quality was an issue, and TCI had no local office to serve Rupert, Paul, Heyburn, Burley and North Burley.

Project Mutual employees, on the other hand, "live here and have a commitment to quality." For instance, after the start-up discovered poor signals due to worn plant in a dwelling, it recabled entire homes.

The rural telco passes 6,000 homes, with a fiber ring connected to a single headend.

Project Mutual charges more for its basic (off-airs only) package: $17.95, versus AT & T Broadband's $11.95. But for expanded basic, the companies offer similar lineups and competitive prices: about $28.

AT & T Broadband has reacted. Butler said the area never had a general manager, but it does now. The area was also moved up on AT & T's digital schedule.

The incumbent wins a few subscribers back each time it adds a popular niche network, such as recent Spanish-language additions, Campbell said.

Campbell also noted that AT & T Broadband has initiated retention-marketing programs. For instance, consumers can get vouchers for free movies or discounts off their basic bills, but the vouchers are good only for future months.

"I think we can continue to grow," Campbell said, noting that the system is still under construction. Indeed, it reaches only 40 percent of the co-op members.

He added that Project Mutual expects to go digital, but it has no time line yet. Realistically, that would occur next year at the earliest.

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