Fascinating article from Business Week Online:
businessweek.com
BW ONLINE DAILY BRIEFING
NEWS FLASH December 17, 1999
Paul Allen Adds Another Circuit to His Wired World
The Microsoft co-founder will join a cable company and local-phone provider as a start on a nationwide network
Billionaire Paul Allen is on the verge of creating a national phone and cable empire. So says one of his top executives, Jerald L. Kent, president and chief exec of Charter Communications, the Allen-owned cable company. Allen, co-founder of Microsoft with Bill Gates, has been busy assembling pieces of what he calls his "wired world" strategy, which anticipates a future where people conduct many of their daily activities over the Internet. Allen's strategy now includes building a national phone system, which would compete directly with telcos such as AT&T.
According to Kent, Allen figures he can offer phone, video, and digital services to much of the country by linking two of his largest holdings: Charter Cable, which has nearly 6 million subscribers, and RCN, a Princeton (N.J.)-based upstart that has quietly been buying up smaller phone systems throughout the country. Allen paid $1.65 billion for 30% of RCN in October. "RCN is a premier competitor in local telephony that also provides video, and we're a video company that also provides telephony," Kent said on Dec. 15 at the Western Cable show in Los Angeles. "Today, RCN and Charter have the makings of a national footprint."
The details of rolling out combined service nationwide are still a bit murky. RCN, which has about 1 million customers, primarily serves businesses. But it has also begun to build systems in local communities to serve consumers, and it plans to offer video and data services in addition to local phone service.
MARKING TERRITORY. RCN already offers such a package in Waltham, Mass., and in San Francisco, where it competes against AT&T's cable operations. On Dec. 14, RCN said it would pay $345 million to buy a small system in Chicago as well. Charter's 6 million subscribers, on the other hand, are scattered throughout much of the country, with large concentrations in the Southeast and West Coast. Presumably, both Charter and RCN would continue to buy or build in areas not currently served by either.
Charter sources say RCN is also seeking approval from Los Angeles officials to build a system costing as much as $1.4 billion to provide phone and other services to consumers in the upscale areas of Pacific Palisades, Sherman Oaks, and Van Nuys. Allen had sought to buy into some of those territories, which had been serviced by cable operator Century Communications. But Allen was outbid for them in March by Adelphia Communications, which agreed to pay $5.2 billion for Century. RCN and Charter have also discussed combining forces in Culver City, Calif., where Charter already provides cable TV and has recently begun offering some phone service as well.
Los Angeles could provide the model for a national rollout of services by Charter and RCN. Using superfast fiber optic lines, the companies would provide video, telephone, and data services in a bundle that would be priced well below the piecemeal offerings of other competitors. In places like Waltham, for instance, consumers can sign up for RCN's package of cable, phone, and Internet access for $109 a month. That's 30% less than they would have to pay if they bought the services from other local providers including AT&T, according to RCN.
Allen still has a long way to go before his phone service looks anything like a national provider. But as one of the world's wealthiest men, his moves are sure to be closely watched.
By Ronald Grover at the Western Cable Show in Los Angeles
EDITED BY PAUL JUDGE |
