Insight Posts Sub Gains in Overbuilt City

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Insight Communications Co.'s competitive Columbus, Ohio, system has finally added subscribers, posting year-over-year subscriber growth as its focus on digital cable and cable-modem service takes hold.

Insight bought a 75-percent stake in the former Coaxial Communications Inc. system in 1998, absorbing the rest of the operation last year. For the first time in Insight's tenure in Columbus, the fourth-quarter 2000 subscriber count showed a year-over-year gain — up 1.4 percent, to 85,415 from 84,469 customers in the same period in 1999, according to UBS Warburg cable analyst Aryeh Bourkoff.

The figure is still well below the system's peak of 92,000 in 1997, under Coaxial. But Insight is sustaining an upward cycle in Columbus after some rough times.

Because Insight sold publicly traded bonds to pay for the Coaxial acquisition, it must report the Columbus numbers separately, as Insight Communications of Central Ohio. That situation offers an unusually detailed look at one overbuilt system's results over time.

Ameritech New Media won a Columbus franchise in 1996, overbuilt Coaxial and Time Warner Cable systems there, and poached subscribers from Coaxial's antiquated operation. Coaxial fought back — slashing its rates by as much as 40 percent. But Insight ended that practice, choosing to invest in a system rebuild and to compete based on its service quality.

The subscriber trough for Insight came in the fourth quarter of 1999, when the system pared away low-paying subscribers and declined to 84,236 homes.

"What we wanted to prove to ourselves in Columbus is that no matter how competitive the marketplace may be, if we launch an advanced interactive and attractive product to our customers we don't have to cut prices," Insight CEO Michael Willner said last week. "We will win them back on technology and service. Columbus absolutely confirmed that belief."

Though subscriber numbers declined, revenue per subscriber grew to $48.87 in the fourth quarter of 2000 from $43.30 in the third quarter of 1998.

The fourth-quarter subscriber gains coincided with the three-month period of digital cable availability in Columbus, Bourkoff noted.

Insight Ohio reported about 13,400 digital customers in the quarter, a 28 percent rate of penetration. There were 4,900 high-speed data customers for a 4.5 percent penetration rate.

Fourth-quarter 2000 cash flow also rose to $4.92 million, up 6.2 percent from the prior quarter and 10.3 percent from the same period a year ago.

Insight Ohio spent about $36 million on upgrades in 2000, reaching about 46 percent of its subscribers with 870-megahertz plant and the rest with 450-MHz capacity. About 84 percent of subscribers will be served by upgraded plant by year's end.

Bourkoff thinks 2001 could be the breakout year for Insight Ohio. He expects above-average top line growth in the system for 2001 and beyond.

Ameritech parent SBC Communications Inc. has shopped its cable systems but apparently there have been no takers, so Insight might not face reinvigorated competition in Columbus anytime soon, Bourkoff noted. Ameritech passes 77 percent of Insight's customer homes in Columbus.

Bourkoff predicted that subscriber growth will trend up to 2.2 percent in 2001 and 3 percent in 2002. Digital penetration should rise to 25 percent, or 44,600 subscribers, by 2002.

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