New Services Pay Off for Small Ops

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Baltimore-Despite the cost of launching new services like high-speed data and digital cable, small cable operators have found that the payoff is relatively quick-even in rural areas.

A panel of small operators-some with as few as 4,500 subscribers-touted the benefits of launching digital and high-speed data service almost to a man during a conference at the East Coast Cable 2000 show here. And the one exception-Clearview Partners president William Domurad-said that digital and data are high on his to-do list.

Clearview considered offering digital cable and high-speed data for about two years, Domurad, said, but had other priorities, such as building out its plant. With the build-out behind it, the operator is still a little cautious about rolling out digital and data.

"The system we currently have could support the services we're looking to put on, but not comfortably," Domurad said. "We don't want to misstep and bring a service out there too soon. If you misstep, word gets out quicker."

Clearview still plans to deliver digital and high-speed data-its customers' most requested service-but not until its plant can handle it, which should be in about 6 months.

"If you're looking for a digital and Internet success strategy, we don't have any," Domurad said. "But talk to me next year."

Other operators have had an easier time, although the success of new services wasn't immediately apparent.

Armstrong Cable Services launched high-speed Internet in its Connellsville, Pa., system in November 1997 to basically tepid reviews. After three months, penetration was less than 1 percent and climbed to just 3.2 percent after one year.

While things picked up in 1999-penetration was 7 percent-data-over-cable didn't really begin to take off until this year, when penetration nearly doubled to 13 percent in August.

What apparently made the difference was relatively simple: offering customers a free Ethernet card for their computer.

"It required two trips to the home, it cost $75 [per customer] to get done, but it was worth it," said Michael Haislip, president of Armstrong Cable.

Armstrong Cable's success story was mirrored in several other small cable systems, which have seen relatively small investments pay off fairly quickly.

Shen-Heights TV Associates Inc. president and CEO Marty Brophy said that despite the small size of his system-4,500 subscribers in rural Pennsylvania-it plans to launch digital service from AT & T Broadband's Headend In The Sky in October. The operator already offers high-speed data through High Speed Access Corp.

Shen-Heights upgraded its plant to 450-megahertz capacity about five years ago, Brophy said, but quickly found that to be insufficient. Contracting with HSA for high-speed Internet helped the operator avoid some of the cost and "technically tighten" its plant.

Mediacom Communications Corp. may be one of the bigger small operators-its 750,000 subscribers make it the No. 9 U.S. operator-but its systems are primarily in rural areas.

Don Zagorski, the MSO's Mid-Atlantic region general manager, said high-speed data is an effective counter to

direct-broadcast satellite competition in rural markets. The MSO is also launching digital service, and plans to make that available to 1 million homes by 2002. "Competition in the high-speed market is asleep," Zagorski said.

Mediacom also has a dish buyback program that has been successful in about 25 percent of the homes in which it is offered, he added.

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