Overbuilder Grande Communications Inc. now has Austin, Texas, as an ally in its efforts to oppose Time Warner Cable's request for local rate deregulation.
In a Feb. 1 letter to the Federal Communications Commission, city manager Jesus Garza contended that Time Warner — which based its request on the presence of "effective competition" — would use its "market strength and financial reserve" to "eradicate" Grande if Austin loses the ability to regulate some rates.
Time Warner has applied for deregulation due to competition from direct-broadcast satellite providers, as well as from Grande.
Texas has certified Grande as a local-exchange carrier, but the company is still in the early stages of its Austin build-out. Since it launched service last March, Grande's bundled package of video, high-speed data and telephony has attracted 13,000 customers.
Grande now offers service to 5 percent of the Austin market, according to the company. Time Warner has 265,000 subscribers in the state capital, according to city figures.
Time Warner irked city officials, who believe the MSO has offered unpublished discount rates to some consumers as part of a "win-back" strategy. Such a move would violate geographic uniform-rate requirements.
Austin officials have fielded complaints from several consumers who were told of such discounts by their neighbors, said telecommunications and regulatory affairs officer Rondella Pugh. The consumers told city officials that when they queried Time Warner, the operator denied the discount package's existence, she said.
Time Warner would not discuss specifics on discounts or packages. Company spokesman Mike Luftman said the win-back strategy — which offers former consumers deep discounts to return to the fold — has been very effective. But terms are set at the system level, and Luftman declined to discuss Austin's specific criticisms.
"We'll deal with the city directly," he said.
Time Warner charges Austin residents $46.67 per month for basic service, expanded basic and digital access. Converter box fees ($5.95) and programming tiers are added to that price.
Grande emphasizes its inclusive package ($165 for phone, data and digital video), but also offers a 70-channel analog package, with local phone service, for $40. A 200-channel digital cable package, local telephone service and 150 long-distance minutes are available for $95.
The overbuilder argues that its rates are 13 percent lower than comparable services from Time Warner and BellSouth Corp.
The city claims Time Warner has contacted competitors' customers, offering a $16.68 discount off the published digital cable rate and a $28.58 discount on a digital package plus a single premium channel.
One man told city officials that Time Warner wouldn't even verify the rate it offered to his neighbor, said Pugh.
Austin's attorneys are examining whether the win-back program is legal.
Time Warner's tactics have attracted a few defectors, said Grande executive vice president of corporate policy and services Martha Smiley.
"But we've had customer who wouldn't go back, and we're encouraged by that," she said.