New York -- Size may not matter to midmarket MSOs, but some
smaller operators want to at least act big.
Insight Communications Co. Inc. CEO Michael Willner said
that while his company's 1 million subscribers may look puny when compared with
AT&T Broadband & Internet Services, Comcast Corp. or Charter Communications,
Insight is structured to act big.
"Our company may not have 5 [million], 6 [million] or
7 million subscribers nationally, but it looks like one [that does]," Willner said
during a panel discussion at a Kagan Seminars Inc. conference here last week.
"We set forth on a strategy that creates large system
clusters with a large number of subscribers per headend," he added. "We average
100,000 subscribers per headend across the company."
Consolidating headends is nothing new. But Classic Cable
chairman Merritt Belisle said it hasn't always been the most cost-effective method
for smaller systems.
"We're basically a big-pipe business,"
Belisle said. "I don't want to run 15 miles of fiber through a cornfield with no
subscribers just to get rid of a headend."
Headend consolidation goes hand-in-hand with upgrade plans,
according to Mediacom LLC chairman Rocco Commisso. He said Mediacom, with about 360,000
subscribers, intends to spend about $210 million over the next three years on upgrades,
including headend consolidation.
About 70 percent of Mediacom's subscribers are already
in systems with between 550-megahertz and 750-MHz capacity. Within six to nine months,
that number will increase to 85 percent. And by 2002, 91 percent of the company's
subscribers will be at either 550 MHz or 750 MHz.
Mediacom also plans to eliminate about 360 of its 415
headends, to deploy 8,000 miles of fiber and to activate two-way capability in that time
"Our mission from day one was to upgrade,"
Commisso said. "In markets where we have upgraded, we're ahead of the game. In
Pensacola [Fla.], we launched digital, and Cox [Communications Inc.'s system nearby]
hasn't. In Mobile [Ala.], we rebuilt and launched digital, and Comcast hasn't.
Our biggest markets aren't tier-one systems."
Those upgrades also mean that smaller operators are poised
to deliver advanced services like high-speed data, digital cable and telephony. Willner
said Insight is planning to launch high-speed data and telephony as early as next year.
Small operators will often deliver advanced services
through third parties, using High Speed Access Corp. and SoftNet Systems Inc.'s ISP
Channel for data and AT&T Broadband's Headend in the Sky for digital. In
addition, telephony also will be done through partnerships.
Although having a partner cuts into the revenue take, most
small operators believe there is more than enough to go around.
Belisle said being small has advantages, especially when it
comes time to raise rates.
"Being local is very important," he said.
"You establish a relationship with the superintendent of schools, and the next thing
you know, you've got high-speed cable modems covering all of the schools and the
public library, and they all love you. That $1 [per month] rate increase because you added
HGTV [Home & Garden Television] becomes a lot easier."