By deciding to invade the St. Louis and Minneapolis-St. Paul, Minn., markets, WideOpenWest LLC is again hitting AT & T Broadband where it believes the MSO is most vulnerable.
Whether in Portland, Ore.; Dallas; St. Louis; or Seattle, experts said, poor service and endless rate hikes at former Tele-Communications Inc. systems inherited by AT & T Broadband have left consumers thirsting for alternative cable providers.
Not surprisingly, then, WOW recently stepped into the fray by applying for cable franchises in some 120 cities in Minnesota and Missouri where it hopes to offer video, high-speed Internet-access and telephone services.
WOW had previously announced that it would build systems in such AT & T Broadband strongholds as Denver, Dallas, Portland and Seattle.
"Some of these are classic TCI systems," said one industry observer, who asked for anonymity. "That means two things: One, people and local regulators didn't like TCI very much, and two, AT & T hasn't done much to make things better. So if WideOpenWest believes AT & T is vulnerable in some of these markets, it's probably right."
WOW's applications in Missouri and Minnesota represent more than 2 million households. Moreover, it abandoned plans for Austin and San Antonio, Texas, in order to focus on Dallas, where local regulators were mad enough at AT & T Broadband last month to try to block a measly 2.8 percent increase in basic rates.
Included on the list of communities where WOW is focusing its efforts are the cities of Dallas and St. Louis-venues where AT & T Broadband inherited a host of service problems when it acquired TCI and where relations with local officials are less than warm.
As such, WOW officials expect to sign their first franchises in and around these communities within 60 days, and they hope to have some 500 households under contract by year's end.
As usual, WOW's business model focuses on the seemingly endless demand for high-speed Internet access.
"We're the first competitor to come into these high-density areas," WOW spokesman Mike Steinkirchner said, noting that some areas in St. Louis County boost 100 homes per square mile. "And we're discovering that the high-speed Internet business has been undeserved there."
WOW expects to be on equal footing with AT & T Broadband in St. Louis, where the MSO has delayed introduction of its high-speed AT & T@Home service because of a recent open-access ordinance and a franchise that must be renewed prior to September.
As with most of its franchises, WOW is offering these communities something AT & T Broadband has opposed, at least in theory: a system that will be open to outside Internet-service providers seeking to offer their own high-speed broadband services.
That may have been resolved by a recent Ninth Circuit Court of Appeals ruling that shot down the attempt by Portland to require AT & T Broadband to unbundle its network. It will depend on whether St. Louis officials want to push their open-access ordinance, since the court's decision does not apply to Missouri.
Meanwhile, AT & T Broadband officials scoffed at notions that the company opposes open access or that WOW believes any different, for that matter.
"We're not opposed to open access," AT & T Broadband spokeswoman Deb Seidel said. "We just don't believe in government-mandated open access. And while I can't speak for WideOpenWest, I don't think they're for the government requiring it, either."
Some sources believe a franchise for the city of St. Louis may elude WOW for a while yet.
City officials reportedly want to complete renewal negotiations with AT & T Broadband before tackling the question of competition in the local cable market. Presumably, by signing AT & T Broadband to a new deal, local regulators can then pass a cable ordinance requiring exactly the same from WOW or any other service provider.
"They have to be careful what they take to the Board of Aldermen," one source familiar with the negotiations said. "Right now, what WideOpenWest has put on the table is not as much as what AT & T has put on the table."
As a result, WOW may find more success in dozens of smaller communities surrounding St. Louis-venues that have historically had to settle for less in their franchises-one source said.
"Several of these communities would be glad to make a WideOpenWest agreement their new baseline," one observer said.
WOW officials, meanwhile, appeared unconcerned that AT & T Broadband is likely to have completed a $250 million upgrade launched by its predecessor, MediaOne Group Inc., in dozens of communities surrounding the Minneapolis/St. Paul market long before any competitor can get its network up and running.
"In fact, we see it as an advantage for us," Steinkirchner said. "If the incumbent upgrades to 750 megahertz, then we come in with an 860-MHz system, what are the chances that the incumbent is going to go back and redo everything? It's not going to happen."
Moreover, problems associated with MediaOne's upgrade have made area consumers less willing "to cut [AT & T Broadband] any slack," said Coralie Wilson, executive director of the Northern Suburban Communications Commission, a local regulatory body representing 10 communities in the area.
MediaOne's service had already become a problem, Wilson said, noting that a recent rash of calls to the company's customer-care center were parked on hold for more than one hour. Factor in a series of rate hikes, and you have the makings of a warm reception for a potential competitor like WOW, she added.
"For the first three months of the year, we have been taking calls from people wanting to know, 'Why don't we have a choice here?'" Wilson said.