New York -- Small cable companies will not be locked out of
the race to provide voice, digital-video and data products to their customers. And in some
cases, they are ahead of their larger counterparts, according to three top midsized cable
operators speaking at a Kagan Seminars Inc. conference here last week.
Although smaller operators are seen as hampered by capital
constraints, this really depends on how the systems are configured.
Mediacom LLC chairman and CEO Rocco Commisso said providing
upgraded service is critical to making second-tier markets viable.
"We have been in a total acquisition mode for the past
couple of years," Commisso said. "We found that in all of our acquisitions, no
matter who it was, the [selling] operator was not fulfilling the needs of the customer.
They were not doing the job they were doing in the bigger markets. If you give us access
to those businesses, we're going to get to advanced services, digital and high-speed
data faster than the larger companies."
As an example, Commisso offered a system his company bought
in Nogales, Texas, which was upgraded to 550 megahertz three months after the purchase. He
added that a Cox Communications Inc. system located nearby has not yet been upgraded to
Mediacom also has ambitious upgrade plans for the rest of
its markets. Commisso said Mediacom is rebuilding an average of 3,500 to 4,000 miles of
plant each year, and by the end of the year, 80 percent of its plant miles will be
upgraded to either 550MHz or 750MHz.
Mediacom also expects to activate digital services in 33
percent of its homes passed by year-end, and it is aggressively trying to activate two-way
plant to provide cable-modem service.
Despite the capital costs involved in the upgrades --
Mediacom said last year that it would spend about $80 million on upgrades over the next
few years -- the company has seen its cash flow grow.
Commisso said cash flow was up 24 percent at Mediacom last
year, and he expects that figure to exceed 15 percent this year, despite an acquisition
binge that has grown the company from just 20,000 subscribers two years ago to 725,000
once its recent acquisition of Triax Midwest Associates L.P. is complete.
TCA Cable TV Inc. president Fred Nichols said his company
has been providing its own branded cable-modem-based Internet service in its home city of
Tyler, Texas, since last July. The company has expanded its reach to include Bryan/College
Station and Amarillo, Texas, and it offers a telco-return Internet service in Lafayette,
TCA is also moving toward offering its own telephony
product, and Nichols said the company is in the process of filling nine new positions
related to the telephone business.
"We have three primary objectives in 1999: to increase
the miles of plant rebuilt by 50 percent, to launch cable-data-modem services -- we have
four markets launched, and we will have 12 more launched by the end of the year -- and
finding good people to get us into the telco business," Nichols said.
Classic Cable CEO J. Merritt Belisle likened the cost
structure of rebuilding cable plant to Moore's Law -- an axiom stating that the
computer industry will double the computing power of a microchip every 18 months.
"Can you effectively offer digital and Internet
services in smaller markets? Of course you can," Belisle said.
"If you look back in the cable industry, it used to
cost $12,000 to build an aerial mile of plant at 220 MHz," he added. "Now, it
costs $12,000 to $14,000 to build a mile at 550 MHz. Moore's Law has exploded the
amount of bandwidth you can physically take to the house."