Baby steps for TCI All TV rollout going slowly
Denver Business Journal
Fri, Jun 27 1997
Business Journal Staff Reporter Tele-Communications Inc.'s new All TV digital video service is rolling out in fits and starts in Colorado. The Greeley launch, originally scheduled for June 1, has been postponed to July 1. And TCI's 400,000 subscribers in Denver won't see All TV until sometime in the fourth quarter, said Steve Santamaria, manager of TCI's Denver metro system. According to press reports, Denver was supposed to launch on July 21, but Santamaria said that date was never confirmed. "We won't roll out anything that's not ready," he said. A group of employees is testing it now, but Santamaria said it's too soon to say exactly when All TV will be ready for prime time in Denver. Greeley delayed its launch while it reworked the channel lineup. But an equally important factor was the June 28 Evander Holyfield-Mike Tyson boxing match on pay-per-view television. Promoters estimate the fight could generate $100 million in revenue, and Greeley TCI subscribers are big boxing fans, said Kathy Stewart, area manager for TCI-Greeley. "Certain names in boxing always generate a big spike in our pay-per-view business," she said. Last November's Tyson-Holyfield fight drew 800 orders, and Stewart said she expects this one to generate 1,000 orders. "We felt we couldn't handle both" demand for the fight and demand for the new service, she said. Once the bout's over, Greeley will ramp up to roll out the new digital service. All TV is TCI's answer to direct-broadcast satellite services, which offer hundreds of channels and digitally crisp pictures and sound. All TV allows cable operators to increase the number of channels electronically by digitally compressing six to 14 channels into the space currently occupied by one. What cable operators don't have to do is dig up the ground to install new fiber-coaxial cable to get the enhanced services. Englewood-based TCI, with 14 million customers nationwide, is two years behind schedule with a digital TV product. But company officials are so impressed with the possibilities of All TV that they dramatically accelerated roll-out plans last April. By year end, TCI expects to have All TV available to 95 percent of the households it serves. Deployment has slowed from the ambitious schedule announced in April, not because of glitches in the technology or consumer resistance, said Camille Jayne, TCI's senior vice president for the digital product. "This is one digital package of programming nationwide, and we have been working on refining what's in it and what it should cost," she said. "Big picture: By the end of August we expect to have 15 to 20 {systems} deployed nationwide," she said. Each system that installs All TV has to be able to handle the billing, which will grow more complex because the digital service is interactive, allowing customers to order pay-per-view shows directly from the screen rather than calling an operator on the phone. To accommodate those demands, TCI has to ensure that billing systems made by CableData Corp. and CSG Systems Inc. are upgraded as well. Analysts say TCI needs All TV to succeed. It is a direct response to DBS, which is making inroads on its subscribers. At the same time, if subscribers take to it, All TV will generate a substantial new revenue stream, which TCI needs to pay for costly system upgrades. TCI slashed its capital spending budget from $1.5 billion in 1996 to $750 million this year. Although cash flow, which had stalled by the end of last year, increased 10 percent in the first quarter of 1997, to $675 million, the company posted a loss of $831 million in the quarter ended March 31. A new service, such as All TV, will put another source of predictable revenue on its books, analysts say. One big selling point for All TV is that it costs considerably less than a system upgrade. John Harris, technical operations manager for the Greeley system, said the company had spent about $4 million over "two extremely tense years" rebuilding 230 miles of its 280-mile network. According to Jayne, the cost of the equipment and software at the cable headend is $75,000 to $100,000. The compression is handled at TCI's National Digital Television Center in Littleton, and the signal is fed to the system headend where it's sent to customers who have signed up for the service. In Greeley's case, the electronic upgrade will boost its 62-channel analog system to 119, including 27 channels of Digital Music Express and a host of premium services, as well as 12 new special-interest channels. Package prices will range from $37.99 a month to $57.99. "It's driven by consumer demand," Stewart said. "If a customer doesn't want 60 new channels, they don't have to pay for them." The strategy has another plus. Chuck Kersch, analyst for Neidiger Tucker Bruner, figures that roughly 45 percent of the monthly fee will be available for system upgrades, after covering the cost of the new digital settop boxes and headend upgrades. And he thinks a 30 percent penetration rate is "easily achievable." Even though the digital set-top boxes - which are the key to the system - cost around $400, TCI is able to spread the amount among all the subscribers in they system in an equipment-averaging pool. That means the cost of the box will be "minimal," said Jayne. The company is careful to emphasize that subscribers who don't lease a set-top box now and don't in the future won't be charged. "It's a fair way to do it," said Stewart. "The service is optional to the customer." Analysts say it's a way to keep the cost of deployment down, making it more affordable for cable operators and subscribers. Initially, Jayne said, TCI will promote the product to its customers who buy premium channels. "They can see what a good value the packages are," she said. The $47.99 and $57.99 packages in Greeley include two of four premium services in the monthly charge, a roughly $20 value. Stewart said she already has a waiting list of about 80 potential All TV customers. The plan is to serve them first before she launches a full-scale marketing campaign to the rest of the system's 24,000 subscribers. The system serves customers in Windsor and portions of Evans and Weld counties. "We're taking baby steps," Stewart says. "Have you ever been to a new restaurant and the staff isn't quite ready? We're trying to troubleshoot before we open." |
