Having pocketed a $1.65 billion investment from Paul Allen,
RCN Corp. is focusing on an aggressive buildout strategy that will add 20 new markets by
Executives at the competitive cable, telecommunications and
Internet provider told analysts recently that they will focus on three areas: refining the
"Resilink" bundled cable and telecommunications rollout and expanding test
markets; launching new markets; and migrating existing customers to fiber-based services.
RCN currently has about 37 markets under construction, and
it plans to build eight new markets in 2000 -- representing about 700,000 net new homes --
and to add 12 more in 2001 (with 1.4 million net new homes).
The company said subscriber activations will begin in the
Delaware/Montgomery County, Md., region by the end of the year, and it is completing its
hub buildout in South San Francisco/San Mateo, Calif.
A lot of the hoopla surrounding RCN has been over its
telephony services, but video is turning out to be the main driver for consumer
penetration, company officials said at the investor conference. Data penetration has been
highest in markets where RCN has competition and consumer awareness of the service
category is high.
The company claimed that voice-penetration rates -- at
about 5 percent six months after service activation -- more than doubled after 12 months.
On the video side, penetration rates have doubled to 30 percent after 12 months.
High-speed-data penetration is running at about 2.5 percent.
Ultimately, RCN believes video/voice penetrations will
reach the low-30 percent range, with revenue per connection, per month in the $40 range.
The company has also been making significant inroads in its two largest markets, New York
RCN has about 469 buildings on its advanced fiber network
in New York, representing about 90,000 homes. In buildings added in the second quarter of
1997, video penetration is more than 50 percent, and voice penetration is as high as 41
percent. The average New York customer generates $54 per month on voice, $33 on video and
$37 on data on a monthly basis.
In Boston, 168,000 homes have been added to the network
since 1997, with homes added during the second quarter of that year sporting 45 percent
video penetration and 37 percent voice penetration.
The average Boston customer generates $52 per month from
voice, $35 from video and $37 from data.
SG Cowen Securities Corp. analyst Gary Farber wrote shortly
after the conference that penetration in Boston and New York was "particularly
impressive," exceeding management's and analysts' expectations.
Farber reiterated his "buy" rating on the stock
and set a $50 price target. RCN stock closed at $49.44 per share Nov. 19. The stock was
off slightly to $49.19 in early trading Nov. 22.