While other Tele-Communications Inc. allies keep falling
into the @Home Network camp, TCA Cable TV Inc. is still flying solo on the high-speed-data
front.
TCA took 150,000 former TCI subscribers under its wing in
February, when the companies closed a joint-venture deal. Other MSOs that cut similar
deals -- including Bresnan Communications, Century Communications Corp. and Insight
Communications Co. -- later became @Home affiliates. InterMedia Partners signed up for
@Home earlier, as did Cablevision Systems Corp., which bought most of TCI's New
York-area systems in a stock deal.
Lenfest Communications Corp., which is 50 percent-owned by
TCI, recently became an @Home affiliate, too.
@Home was co-founded by TCI, and TCI Ventures Group remains
its controlling shareholder. Officials at some MSOs that have negotiated system
partnerships with TCI said TCI insisted that its subscribers remain part of the @Home
universe.
But TCA remains unaffiliated with either @Home or Time
Warner Cable's Road Runner. It has been introducing cable modems on its own, buying
Internet-service providers in its hometown of Tyler, Texas, and in its Bryan/College
Station, Texas, market, and ordering 10,000 cable modems from Terayon Communication
Systems.
Last week, in a conference call to discuss the
company's latest quarterly financial results, TCA chairman Fred Nichols said he was
so impressed with the managers at Myriad Corp. -- an ISP that TCA bought in September --
that he hired them to oversee TCA's data rollouts.
TCA has about 870,000 subscribers, and it plans to make
cable modems available to one-half of its customer base by the end of 1999, Nichols said.
Analysts have estimated that TCA might be able to sign up 4,000 data customers by the Oct.
31 end of its fiscal year.
Nichols told analysts that he thinks that TCA's
high-speed-data service will hit the 30 percent-penetration mark in five years. One-half
of that penetration should come from higher-margin business customers, he added.
Bryan/College Station, TCA's first Internet market,
boasts 15 percent penetration with a combination of cable-modem and telephone dial-up
customers.
TCA is targeting businesses, which otherwise probably
wouldn't even take cable, Nichols said. In one market, currently in
"prelaunch" mode, TCA's business customers are paying an average of $200
per month, versus the $49.95 monthly fee charged to residential users.
One reason why TCA chose Terayon's technology is
because businesses can lease bandwidth, which they can then parse out among individual
users. A law office, for example, can link 24 personal computers to a single modem,
Nichols said. "That's very competitive with the phone offerings."
@Home and Road Runner bring brand names, backbone services
and content to affiliates. But it isn't free. @Home takes a 35 percent revenue cut on
residential service. Other turnkey outfits, such as HSANet and ISP Channel Inc., also help
MSOs to get into the data business, for a revenue cut.
Nichols said TCA is working out a plan to interconnect its
own data headends, but it has left the issue of customized content for a later day. TCA
hasn't ruled out signing on with either Road Runner or @Home, he said, adding,
"At this point in time, we don't see a need to affiliate."
Robert Roseman, TCA's vice president of business
development, elaborated later in the week on TCA's situation. He said TCA likes both
@Home and Road Runner, but, at least in the former TCI systems, it would lean toward
@Home.
"We talked to TCI a lot about this when we formed our
partnership," Roseman said. "But what we're taking on is small to midsized
markets: And that's not on [@Home's] radar screen."
@Home generally targets markets with populations of 50,000
or more served from single headends, MSO executives have said.
@Home's and Road Runner's backbone and content
services add value, Roseman said, but the economics don't work yet in smaller
markets. And TCA's clustered Southwestern markets can be interconnected with fiber,
he added.
Murray Arenson, who follows TCA for Dallas-based brokerage
Hoak Breedlove Wesneski & Co., said Nichols may have held out for more data
flexibility than was afforded to other TCI joint-venture partners.
"I think that it makes sense logistically for Fred to
kind of stand his ground here," Arenson said.
During the call, Nichols repeated his newfound affection
for another service that TCA inherited from TCI: digital cable. TCI had launched digital
cable in Bossier City and Lake Charles, La., before contributing those systems to the
venture that is 80 percent-owned by TCA.
Nichols said he used to think that digital cable was a
required defensive play to retain customers who had jumped to direct-broadcast satellite.
Now, especially after having the service in his home for a while, he said he's
"gone from thinking that it's a defensive strategy to thinking that it's a
positive strategy."
The electronic navigator is an especially popular feature
in the Nichols home, he added.
