Ameritech(Americast) looks at Chicago for Video over builds. In Columbus, their trucks are all over. Can't drive 3 miles without
seeing one or more......................
multichannel.com
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Ameritech Eyes TCI in Chicago
By LINDA HAUGSTED & JOE ESTRELLA
The eyes of Wall Street were on the Windy City last week as Ameritech New Media blew into town, making formal its intent to overbuild Tele-Communications Inc.'s franchise on the South Side.
Meanwhile, TCI was acting behind the scenes to consolidate its power in the area, working a deal with MediaOne for a possible system swap that would leave the No. 1 MSO as the dominant operator in the Greater Chicago area. TCI is also said to be in talks with other MSOs to consolidate its hold in the market.
An ANM franchise would make the nation's third-largest city the most competitive video marketplace in the U.S. If the telco is successful, then two of the city's five franchises will have hardwire overbuilds, in addition to direct-broadcast satellite competition. The other overbuilder, 21st Century Cable TV Inc., will begin service to 5,000 customers in Area 1, serving the Loop area and the upscale Gold Coast on the near North Side, and launching with 100 analog video channels and high-speed-data access.
Chicago's City Council voted July 30 to give cable administrator Joyce Gallagher authority to negotiate a deal with the telco to provide video in franchise Area 5, which covers the South Side.
In other Illinois cities, incumbents have gone to court to challenge ANM franchises, or they have asked for immediate franchise concessions, alleging that the telco's deals are less onerous than incumbent franchises. Cable operators most frequently challenge ANM's franchise-fee formulas and access-programming support.
Just last week, a federal appeals court judge ruled in favor of Jones Intercable Inc. in Naperville. Jones alleged that the ANM franchise there violates the law, and it asked the city for modifications to its own franchise (see story, page 37).
"It's not going to happen here," Gallagher said. She noted that the city's franchise with 21st Century is on par with that of TCI. Referring to that franchising outcome, she added, "Everyone knows the rules."
The market appears ripe for an overbuilder. TCI has struggled for years there, perhaps reaching its nadir in 1996, when it was named one of the nation's worst cable operations by readers of Consumer Reports.
Since then, however, the company has poured $35 million in improvements into its three municipal franchises. It recently completed a $5 million call center and eliminated the use of subcontractors.
Gallagher said the call center has improved service, but complaints remain over service outages.
Yet, with all of the improvements, city data show that TCI has topped 40 percent penetration in only one franchise -- which, ironically, is Area 5. Only about 79,000 of the 195,000 homes passed there take service from TCI.
ANM vice president Donna Garofano said her company is determined to serve Area 5 because of its dense population and good demographic mix. It is also adjacent to suburban areas of interest to ANM, she said, adding that the telco has no aspirations at this time for other urban Chicago franchises.
Although Chicago may be the most prominent market for Ameritech Corp.'s video arm, it will not be the telco's largest franchise. The Columbus, Ohio, market has more homes passed.
Meanwhile, TCI worked last week to engineer a systems swap with U S West Media Group, MediaOne's parent, that would give it control of more than one-half of the Chicago-area cable market.
TCI reportedly wants to trade 350,000 Florida subscribers for an equal number of Chicago-area customers currently served by MediaOne.
TCI officials would not comment publicly, except to say that the MSO is "in discussions," and that details remain "in flux."
A U S West Media Group spokesman also declined to comment.
TCI is also supposedly interested in systems owned by Prime Cable, Jones and Cablevision Systems Corp. totaling more than 500,000 subscribers, or another 32 percent of the regional cable market.
Sources familiar with the talks said the deal would be a straight swap of assets, rather than one of the joint ventures that TCI has created recently in order to get certain systems -- and their associated debt -- off its books.
"There's no way that TCI would put Chicago into a joint venture," said one industry analyst. "They want to control the Chicago market."
On another front, TCI appeared ready to mail down its latest joint venture -- a deal with Time Warner Entertainment, under which both companies would funnel systems in Houston and Portland, Ore.
Because of the small size of the Houston franchise, TCI would throw in operations in Tampa, Orlando and Daytona Beach, Fla.
"It doesn't surprise me that Houston would be on the block," said an analyst. "Because of its size and inefficiencies, it sits out there by itself. And you throw in the systems in Florida to balance the equation."
A Houston swap would add to what is already Time Warner's largest cluster, serving 250,000 customers.
Time Warner would reportedly contribute its 127,000 subscribers on Portland's east side to the joint venture to add to TCI's 85,000-subscriber west-side system.
Rumors of TCI's machinations appeared to have impressed Wall Street. Its stock peaked at a 12-month high July 31, at $17.25 per share, but it fell back to $17.125 by the end of the trading day.
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