Wolfer Maps MediaOnes Course

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It's been just under six months since Jerry Wolfer
officially moved over to MediaOne as senior vice president of engineering, and his
handiwork is already showing. Born and raised on an Indian reservation in South Dakota,
with experience at telcos around the world, Wolfer says he's now completely hooked on
broadband -- and is implementing an engineering strategy that almost makes the MSO sound
like a manufacturer, with processes to shorten time-to-market and provide tools and
project funding to system employees. Leslie Ellis, senior broadband editor of
Multichannel
News, caught up with Wolfer in his new Englewood, Colo., offices. An edited transcript
follows.

MCN: Let's start with a re-cap of your upgrade plans.
You're doing all 750 megahertz now, not a combination of 550 MHz and 750 MHz depending on
the market?

Wolfer: It's all 750 MHz. Anybody who talks about 550 MHz
is in the wrong spot here. It's 750, 750, 750. We've put the money and resources around
it, because we've got to have the inventory ready to go.

MCN: What dictates upgrade priority -- demographics or
franchise issues?

Wolfer: Demographics. Clearly, business opportunities.

MCN: How do you blend all of this into a construction
strategy?

Wolfer: We're on a strategy called "one pass" for
upgrades. See, this company and other MSOs tend to upgrade their networks, and put in
their core basic services -- TV. Then they come back and put some money in to upgrade for
high-speed data and two-way. Later, they hit the network a third time, for lifeline
telephony. That's three different times, and it makes the time to market for services
terrible. And it's very, very costly. So, I instituted this one-pass directive.

MCN: One pass meaning you do everything all at once?

Wolfer: Right. You touch the network once. Whether it's
upgrade, rebuild or line extension, it's a one-pass process. You go in, you upgrade,
you're done. You're ready to go in with services. It really is improving our time to
market, and our efficiency.

MCN: The regions like this strategy?

Wolfer: I have to admit, for a company that was basically
autonomous in each regional group, getting that data collected was really a challenge. But
everybody's just been great. We're blessed with people here. They're just awesome.

MCN: Digital video -- do you still feel that digital boxes
are too expensive, given the bandwidth you've gotten from upgrades, combined with advanced
analog boxes? I know you have got some digital video activity in Detroit. What about
elsewhere?

Wolfer: In our digital transition strategy, there are lots
of pieces. Advanced analog, standard digital TV.

MCN: By that you mean downstream broadcast only?

Wolfer: Yes. And there's video-on-demand, HDTV, high
definition VOD -- you don't hear people talking about that, do you? It's part of our
strategy. There's all these pieces.

MCN: As you move toward digital, do you use the HITS
(Headend in the Sky) feed?

Wolfer: We're not real excited about the HITS quality.

MCN: You mean the 12-to-1 compression ratio?

Wolfer: The 12-to-1. We'd prefer more an 8-to-1 range.

MCN: So do you negotiate that with HITS, or do it yourself,
or work with Time Warner's Hauppauge, N.Y., uplink?

Wolfer: Well, yes, yes, yes. [laughs] I don't believe we'll
do 12-to-1. That doesn't mean HITS won't gearshift down. I don't know.

MCN: You're looking at all three options, then.

Wolfer: Absolutely. Don't forget: Those pioneers on the
digital side are paying loss leader prices for the boxes. Once the set-top box is truly a
computer, which is where it's headed, it goes into Moore's Law. Every 12 months, you get
twice the power at half the price. Once that hits, we're going to really have to be on our
toes to make this work for us and our customers. The first implementations are really
hardwired boxes.

MCN: Aren't you going to be a loss leader, too, because of
your deal with General Instrument for the equity warrants and lower-priced boxes?

Wolfer: Probably not.

MCN: Why?

Wolfer: We'll jump in from a trial standpoint, but I'm not
going to jump in for millions. Detroit, that's about being in business, and it's a nice
competitive response. We've learned a lot there. There's a lot of things we don't like,
and a lot of things we do like.

But before you jump in with millions of boxes, you have to
make the right decision. We're fortunate to have a nice transition plan. We have plant and
bandwidth. So, let's do that: Buy some time, make sure that we're involved with OpenCable.
We really like open and retail.

MCN: When do you take the plunge then, for digital?

Wolfer: It'll take a year or so, until we're comfortable
that the boxes will take us where we want to go.

MCN: Where do you stand on telephony -- circuit switched or
packet?

Wolfer: Circuit switched. Not packet today. I believe in
packet voice. It's wonderfully efficient. What's going to drive us to packet telephony is
a brand new service set that customers get with packet voice, that they really want.

MCN: Like what?

Wolfer: I don't know. If somebody would tell me, I'll
absolutely do it, right now! There's no new service set yet. When that comes, and
customers say, 'I've got to have that,' we want them to have it. We'll do it, right away.
Plus there's such a longer term cost advantage. It's not "if." It's
"when."

MCN: When, then?

Wolfer: When it can meet basic voice services functionality
as an entry point. All the basics: Three-way calling, call waiting, call-forwarding,
caller-ID, voice mail. That will come. And when there's that cost advantage. It'll take
two or three years.

MCN: What's your capital strategy?

Wolfer: There are several layers. The first is an
architecture, a standard and design method we've come up with to say, 'This is how we're
going to handle plant.'

After that, we have a materials review board, which takes
members from each one of our regions, and we get together and standardize on coax, fiber,
amplifiers, power plant, connectors, and so forth. We've done that, to a large extent.

MCN: You're talking about an approved vendors list, where
the suppliers all meet some basic level of requirements?

Wolfer: Yes. It follows the request for quotes, to requests
for proposals, then bench tests. In that environment, not everybody is happy, because a
lot of times we pick a product that wasn't used in region A, but is used in region B.

But by doing it that way, we're already approaching $300
million in savings that we've identified. We're really excited about the power of large
volume purchases. The suppliers are happy; we're happy. That part is working well.

That all leads into the next part, which is what we call
the "magic mile" per region. We have a magic mile benchmark for each region.

MCN: That identifies what you want to spend, per mile, per
region?

Wolfer: Right.

MCN: What's the magic number?

Wolfer: I'm not going to reveal that, because it varies by
region. It varies whether a system is urban or rural, or by given densities.

MCN: Can you say what it includes?

Wolfer: It's part of the budgeting process, so that the
benchmark for the systems is their magic mile. They budget against that magic mile. We
track that on a per month basis, and we track actual magic mile versus regional magic
mile.

We also have what we call "program funding
authorities." Every project has a program authority. It's a document that comes from
each of the regions -- it's been painful getting there, but we are there. They develop a
project -- a node, multiple nodes, it may even be a switch, or a hub building. Then we
have an items list against that project, and that's our way to police, if you will. I hate
to say that. It's our way of saying, 'Are we doing this strategically, and meeting design
requirements?' Because we are building a very reliable broadband platform.

MCN: Thank you for not saying "robust."

Wolfer: (Laughs). Well, OK, it's reliable. It'll stand the
test of time. And it's also extremely future-proof.

So, for 1999, we've actually put together budgeting books.
They have the targets.

MCN: Target spending?

Wolfer: Target spending for projects. Specific for each
region. We now know, pretty accurately, what's going to be built in 1999, and what it's
going to cost us. The high-level piece is done, based on the company's magic mile, and
what we'll have accomplished for homes-passed.

MCN: This strikes me as quite different from how
Continental [the MSO forerunner to MediaOne] did capital spending in the past. We do a
capital expenditure roundup each year, and I remember calling each of the regions to get
their numbers -- it was never one call.

Wolfer: It's a definite change. It's a challenging change.
These are all new methods and procedures and processes. It takes time that they may have
been out digging in the dirt -- now they're in digging in the paper. But we have to do it.

We're a publicly held company. The enterprise has to know
where we're at. It's pretty doggone hard otherwise.

MCN: Would you describe this company now as one that's more
centralized, for engineering and purchasing?

Wolfer: Much more so for purchasing, yes. I prefer to call
it shared responsibilities, not centralized.

My engineering philosophy is this: The vice presidents of
engineering own and are responsible for running our markets. I don't want to take that
away from them. I will not take that away from them.

My job is to be their advocate. My job is to stand in front
of the board, and in front of the senior management team, and get engineering what they
need to do their job. I will not support anything that is auditing, if you will, or
second-guessing. I've been on the other end, so maybe that's why I feel that way.

MCN: How much will you spend next year? Still $1 billion
per year?

Wolfer: It's pretty consistent. This year we'll spend more
than that. Next year, too. After that we'll drop off pretty dramatically, especially after
2001.

MCN: With your telco background, are you sold on HFC? If
you had to pick between DSL over copper, or cable modems over HFC, would you pick HFC?

Wolfer: Are you serious? [laughs] I'm an HFC bigot. I know
so much about both of these networks -- it's scary -- and this is the right strategy.

HFC is not new for me. I've been on it since 1992. On
paper, in models and in practice, it's absolutely future-proof. We can't go wrong. We can
go wrong in spending timing, but we can't go wrong on the architecture. I could go on
about this for hours! This has gotten me as excited as I was in 1983, when I was involved
in introducing cellular phone service.

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