InterMedia Finds Modems Hot Seller

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InterMedia Partners' Kingsport, Tenn., franchise has
declared its high-speed-data operation to be in the black and way ahead of schedule.

The 33,000-subscriber system anticipated that 1,400 to
1,500 homes would be signed on by now, but 1,800 customers are on board after only 12
months, representing more than 5 percent penetration of a combination of dial-up Internet
and cable-modem customers.

"We were recently voted the No. 1 ISP
[Internet-service provider] in a readers' choice poll in the local paper," said
Greg Perica, general manager for InterMedia in Kingsport. The cable company's
high-speed offering beat out five competitors in the Kingsport Times poll.

The system launched data with the assistance of its vendor,
Online System Services, initially using one-way telco-return technology. InterMedia has
completed a rebuild, and it will sell its high-speed service, dubbed "i2u," as a
two-way service.

Perica said the reasons for the quick success are many, but
he offered one major piece of advice to other operators jumping into the category.

"Don't try to run this business with cable
guys," he said.

The system hired people with experience in technical
support for online services like Prodigy Services Co.

"I'd advertise for help-desk people and get
hundreds of applications. If I advertise for a CSR [customer-service representative],
I'm lucky if I get 10," he said, adding that people are anxious to work in this
field.

InterMedia and its vendor partner believe that their
success can be replicated in other systems. Kingsport is not an affluent or high
tech-identified community -- it is primarily blue-collar, with a median annual income of
$27,000.

But the cable system used the benefits of its core business
(cross-channel promotion, a good community image) to nurture the new product. Also key
were alliances with local retailers and community groups. With the former, InterMedia
struck a deal with Computer Associated Technology to be its "official computer
store."

The retailer offers personal-computer buyers one free month
of InterMedia Internet service if the consumer buys a PC that is preloaded with the i2u
Internet-access software. Two other computer stores -- Computer World and AAA Computers --
earn finder's fees equal to the customers' first-month bills for every Internet
customer that they sign up, Perica said.

And i2u customers benefit from access to proprietary local
content, which boasts 30,000 visitors per month. InterMedia showcases Web sites from the
local ABC TV affiliate, an FM-radio station, a local business coalition named Kingsport
Tomorrow and the Chamber of Commerce.

The media companies also advertise the Internet product
over their airwaves. The system earns between $500 and $1,000 per month, per business
producing Web sites for local companies. InterMedia hopes to improve that by designing
more sophisticated sites for which it can charge $10,000 to $15,000.

The local content is among the factors that have prompted
people into paying InterMedia $17.95 per month for unlimited-use dial-up Web access or
$29.95 for cable-modem service.

Modem customers can buy the hardware from local retailers
for $199 (95 percent have taken the purchase option) or rent the equipment monthly for
$10. Installation is $105. Perica said no customers have been allowed to self-install, but
that will be an option when OpenCable-compliant modems come on the market.

InterMedia is the only wired-cable customer signed with
OSS, said Bill Cullen, a cable veteran and chief operating officer of the company.
Although Kingsport is not technically a beta site for the Internet product, OSS did
upgrade the software twice based on what it learned there, and two more are on the drawing
board, he said.

"We're just getting started in the wired area.
We're pleased with the validation and verification of the product" in Kingsport,
he added.

The vendor provides headend equipment, a proprietary
account-management system and training, and it shares Internet revenues with the operator.

The cable Internet offering has succeeded with a very
competitive price. Some 95 percent of the customers also take cable, and those homes get a
$2 monthly discount on their Internet bill from the operator.

Perica is already contemplating expansion: The service will
migrate into the Knoxville, Tenn., InterMedia system, which will add 50,000 homes passed.
And the general manager also plans to talk to neighboring Comcast Corp. and Rifkin &
Associates Inc. systems about expanding into their counties in exchange for finder's
fees to the local operator.

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