The Wiz Showcases Modems for Cablevision

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Cablevision Systems Corp. shifted gears last week in the
way it markets its "Optimum Online" high-speed cable-modem service -- at least
in Connecticut.

Following a relatively quiet, two-week "soft
launch" of DOCSIS-compatible 3Com Corp. cable modems at its The Wiz store in Norwalk,
Conn., the MSO began an aggressive multimedia ad campaign designed to promote the
product's retail availability and to encourage self-installation.

"We believe strongly in retail as the distribution
medium of choice," Cablevision vice president of interactive products Tom Hagopian
said. "We no longer bring a modem to your house in Connecticut."

Cablevision isn't the first MSO to market cable modems
through retail. Analysts have said most cable operators want consumers to purchase their
own hardware so operators can eliminate a capital expense from their books.
Self-installation also eliminates the need to roll a truck to every new modem customer,
potentially speeding market rollouts.

But Cablevision executives suggested last week that there
are consumer benefits to shopping at retail rather than scheduling an appointment and
waiting at home for an installer.

According to Cablevision senior vice president of retail
business Pat Falese, retail gives customers "a dynamically fun experience where they
can pick up information on new technologies."

In its first weeks at retail, Cablevision has found that
"the vast majority of customers" opt for self-installation, Falese said. She
added that the company positions self-installation as a benefit to new subscribers, who
can walk into The Wiz to buy a cable modem today and be online by tonight.

Of course, there's also a hefty financial incentive to
self-install. The Wiz sells a self-installation kit for $14.95, while professional
installation runs from $30 to $150, depending on whether an installer needs to open up the
PC, run cable from the television, or both.

Connecticut Cablevision subscribers may encounter rides of
up to 30 minutes to buy cable modems at either the Norwalk store or the new mall-based The
Wiz site in Milford, which opened last week to market the modems, Hagopian estimated.

Optimum Online customers who currently rent their modems
can continue to do so, but as new customers request service, they will be directed to The
Wiz.

Norwalk was chosen as the first retail site due to
Cablevision's near-ubiquitous DOCSIS (Data Over Cable Service Interface
Specification) plant in its Connecticut systems. Cablevision plans to bring Optimum Online
to The Wiz stores on Long Island, N.Y., before Thanksgiving.

"In the consumer-electronics business, we know 40
percent of the business happens in November and December," Hagopian said. "We
wanted to make sure we were there to capitalize on that."

Sometime next year, Cablevision will introduce its
cable-modem service in New Jersey; Westchester County, N.Y.; and parts of New York City.
Modem rental will not be an option: Optimum Online will go straight to retail as
Cablevision launches modems in new markets.

To support the cable-modem market and prepare for retail
sales of digital cable and telephone services, Cablevision has reorganized its company to
integrate The Wiz more closely with its telecommunications-services group. The stores are
being renovated to better display and demonstrate the new products.

In Norwalk, cable modems enjoy prominent real estate at the
front entrance of The Wiz, with live computer kiosks behind a modem-filled table right
inside the front door. There's also a second, larger demonstration area next to the
home-office department.

And further back, there's an Optimum-branded
"store-within-a-store," where Cablevision customers can not only sign up for the
online service, but also pay their cable bills or upgrade to a premium-movie package.

"It's a prototype for how we'll roll forward
not only with modems, but with digital cable, as well," Hagopian said.

One advantage that Cablevision has in owning both the cable
company and its retail partner is that all The Wiz stores selling cable products will be
fully lit with fiber. Some MSOs have had to rely on CD-ROM demonstrations for
cable-modem-service sales at their retail partners.

The Wiz's Norwalk store has 20 computer screens
connected to the Optimum Online service, each one offering full Internet access -- apart
from objectionable sites blocked out by filter screens.

Cablevision also made a conscious effort to put America
Online Inc.'s familiar service on all of its computer display models, Hagopian said.
Customers can sign in as guests on the AOL screens as long as they have their own
passwords.

"We want them to see that they can keep AOL" if
they want to, Hagopian said, adding that Cablevision also wants AOL customers to know what
the service looks like when operated at high speed.

Not only is AOL included on the in-store displays, but
Cablevision advertises the fact that Optimum Online is AOL-compatible in all of its
marketing materials, including its Web site (www.optimumonline.com). The MSO tells
potential subscribers that AOL charges a $9.95 monthly fee on top of the Optimum Online
costs.

Hagopian said customers opting to buy both AOL and Optimum
Online might not be paying more than they would for a dial-up service alone because many
dial-up customers end up paying for dedicated phone lines.

Cablevision is playing up the fact that Optimum Online
customers don't need to dial in with its marketing tag line, "Log on once for
the rest of your life."

Hagopian said the new ads that launched last week are tied
to Optimum Online's most extensive marketing campaign to date.

"One of the challenges in marketing this is that we
have to target geographically," he added.

In addition to heavy cross-channel cable spots, the
campaign will include local newspaper ads, direct-mail drops, billboards, train-station
platform ads, local radio and movie-theater ads at Clearview Cinemas, which is also owned
by Cablevision.

Hagopian said Cablevision started developing a specialized
retail-training course nine months ago to make sure Optimum Online customers had good
experiences in the stores.

According to early indications, the efforts are paying off.
"We're seeing very strong results out of the Norwalk store," Falese said,
declining to reveal specific numbers. "We're ahead of expectations for cable
modems and overall retail sales."

Optimum Online costs $29.95 per month for Cablevision video
customers who subscribe to anything more robust than a basic-cable package. Customers who
want the online service on a second computer need to buy an additional modem and pay an
extra $19.95 per month in service fees.

Cablevision is exploring the possibility of allowing
multiple computers in the home to be networked, but it still faces some technical issues,
Hagopian said.

The 3Com modem costs $299, with a $200 rebate good through
the end of the year.

Kinetics Strategies Inc. president Michael Harris, a
broadband-industry analyst, said it's important for MSOs to keep the cost of entry
low enough to help deploy cable modems before digital-subscriber-line services or
"free PCs" bundled with long-term Internet access take potential customers out
of the market.

Harris recommended rebates that lower the cost of entry
without lowering the perceived value of the hardware. "The key thing with the
Cablevision deal is that they're trying to establish customer loyalty and retention
before DSL comes to town," he said.

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