Excellent article, Brian, and illustrates the point I made here a short time ago.
It appears that RCN's strategy to enter the Philly market could not be viewed as a very good one in light of the circumstances of the incumbent with whom RCN wishes to compete. Nevertheless, its struggle is illustrative of the problems faces by many overbuilders who wish to compete on the cable platform where local control is unfortunately not in the control of a completely disinterested legislative body as could be the case if ultimate control were in the hands of the state PUC or FCC.
I am not intimately familiar with the Philly cable market, but my guess is that Comcast has served the City very well. It is HQ'd there; it owns several sports teams; the CEO is a mover and shaker in the local business community. IMHO, RCN could not have picked a worse target to seek overbuilder status. In this respect I question management's strategy and their understanding of local politics, which is undoubtedly critical in Philly as it is in most major US cities.
The situation here in LA, though similar, is somewhat different as the largest incumbent MSOs, AT&T (MediaOne) and Adelphia, don't have the local presence that Comcast has in Philly, though they strive to achieve an equivalent. Nevertheless, the same political maneuverings are being exercised by City politicians at the behest and benefit of the incumbent MSOs. What IS DIFFERENT in LA that I can speak personally to is that the largest MSOs, particularly Adelphia, has NOT SERVED the City's captivated subscribers well. To this day there is no cable modem access among its City of LA franchises, which encompass most of the wealthier, computer savvy, media savvy areas of the City, and certainly of the country.
In short, the residents of the City suffer. Those who live in detached single family homes such as I can opt for a dish to receive state-of-the art digital programming and free oneself of a 30-year old antiquated analog system that has got to be among the oldest systems in operation in Southern California. Cable modem is non-existent, and is a lower priority than present efforts to installed an extremely watered-down digital TV upgrade, followed by telephony in 2001. Upstream plant is expensive, time consuming, and a low priority. Yet the plight of the residents of the City don't enter into the lobbying effort of RCN, don't enter into the policy making minds of the local politicians who are more inclined to listen to the arguments of the incumbent MSOs for apparent reasons. The Philly situation is likely different. But in the case of LA, yet I have yet to see RCN pull this arrow from its quiver. I wrote them to offer my support. My e-mail fell on deaf ears; I got no response. As I result, I am still inclined to think that the management of this Company remains more clueless than they would like to admit.
I don't own stock in RCN; never have. I thought about jumping when the stock went public, but shied away. Fortunate for me. Time for the guys that run this company to get their act together. Time to assess not only the demographics of potential markets, but the political environment as well. Regardless of the 1996 Act, if you can't gain the support of the local politicians; are blind to potential allies from within their constituency; and play victim to the strong lobbying efforts of the incumbents who will naturally to what they need to do to defend their monopolistic turf, then its time to call it quits and refocus your strategy where management efforts will pay off.
If I were RCN, I would abandoned all efforts in Philly. Its just not going to be a smooth process. If in-fact, RCN gains council approval, you can be sure that Comcast, and influential City powers, will continually make it difficult for RCN to compete. The game is nine innings long, and gaining council approval, IMHO, would just be the 1st of a 9-inning game. One has to think there are more "easier" markets out there in which to be a successful overbuilder.
JMO. |
