'98 Spending: Cable Ops Will Stay the Course.......................
multichannel.com
By LESLIE ELLIS
Network operators are split on their capital-budget plans for next year, although even those MSOs with conservative plans insisted that they are not scaling back their broadband ambitions.
While most operators are still wrapping up their budget plans, early indications pointed to heavy spending next year among some operators, largely on components needed to widen bandwidth and to activate the return path for services that require two-way signaling.
Cox Communications Inc., for example, is planning to spend more next year than the $650 million budgeted for 1997, said Alex Best, the MSO's senior vice president of engineering. Because Cox's 1998 spending plans "aren't soup yet," Best said he couldn't provide details on next year's plan.
Holding steady at 1997 spending levels for next year are Time Warner Cable, MediaOne and Comcast Corp.
Time Warner will again spend roughly $1.5 billion on plant projects next year, said James Chiddix, chief technical officer for the MSO. "We expect no great surprises -- this is an ongoing, systematic project for us."
The same goes for MediaOne, which did not disclose dollar amounts, but which plans to buy gear to support a plan for 75 percent of its systems to be at two-way, 750-megahertz status by the end of next year, said Rob Stoddard, a corporate spokesman.
"We will be undeterred in that goal -- I'm not aware of any slowdown or acceleration of those plans," said Stoddard.
Comcast also said it will spend about the same amount next year on network upgrades -- $600 million -- despite its recent $1 billion cash infusion from Microsoft Corp.
The wild card is Tele-Communications Inc., which hacked its capital budget in 1996, but which recently kicked in a plan to spend $750 million on network projects this year. Analysts said TCI executives have recently hinted that capital spending might pick up soon, as the company looks to exert its improved financial status in order to add system bandwidth.
Between now and 2002, TCI's current plans are to spend between $1.7 billion and $2.5 billion on upgrades to 450 MHz, reasoning that digital-compression technology will provide the bandwidth punch that it needs for additional services.
But persistent reports last week of two separate mega-deals involving TCI -- with Microsoft Corp. and with a long-distance carrier -- could also affect the amount of cash that the MSO spends on plant projects and digital set-tops next year.
"AT&T [Corp.] is without a dance partner, and TCI is a lightning rod, because they're the biggest and they have no aggressive telephony plans," said Ted Henderson, an analyst with Denver-based Janco Partners. "A deal between them makes sense, because TCI needs cash for upgrades, and AT&T needs a wire into the home."
TCI's stock price continues to rise, which, in turn, has lifted some key technology-supplier stocks -- despite recent earnings announcements by parts of the TCI-reliant vendor community that were less than encouraging. At press time, however, NextLevel Systems Inc. and Scientific-Atlanta Inc. had dipped last week.
"We don't see TCI hitting the pace of their upgrade programs until the first quarter of '98," said Jim Bauer, senior vice president of administration for Antec Corp. -- one of the suppliers with a plumped-up stock price last week, despite lower-than-predicted third- quarter earnings.
Bauer said the flurry of TCI system swaps and joint-venture arrangements with other operators, which will total 21 deals when complete, also damped the 1997 capital-expenditure cycle.
"If you're selling your house, and you have a buyer, you're not going to put up new wallpaper," Bauer said of slowed upgrades within the TCI system-swap and joint-venture groups.
Tony Werner, senior vice president of engineering and technical operations for TCI, said last week that he doesn't anticipate any slowdown in 1998 that relates to the joint ventures.
Patti Reali, an analyst with the DataQuest division of the Gartner Group, cited numbers from its soon-to-be-released "Broadband Equipment Market" report that put the combined spending of TCI, Time Warner, MediaOne, Comcast, Cox and Cablevision Systems Corp. at just under $2 billion next year, up from $1.1 billion in 1997.
That figure doesn't include labor, customer-premise devices and network passives, like taps and splitters, Reali said.
"Time Warner will be the biggest spender through 2000. TCI is a lot lower, comparatively, but their levels should double between this year and next," Reali said.
Two weeks ago, TCI hosted a vendor briefing at the Radisson Hotel in Englewood, Colo., to describe its latest purchasing plans since the departure this summer of Bobby Zachariah, formerly TCI's vice president of purchasing.
Taking over is a team led by Chuck Schultz, vice president of purchasing and materials management. Also on board to shepherd the new plan is Sam Barney, director of procurement, a former Viacom Cable purchasing executive.
TCI told the estimated 100 vendors that it will start by using up existing, warehoused material, valued at roughly $100 million.
Depleting existing materials will not alter TCI's spending plans, Werner said, because the inventory was taken into account when the spending allowances were calculated.
Already, TCI is developing a master-materials handbook that will include up to three approved vendors for each product used in the plant. That book will be completed in about six months, and it will be distributed to TCI regions and systems so that purchasing decisions are made locally, vendor executives said.
Plus, the MSO will consider dismantling its three huge materials-support centers over time, in keeping with top-down directions to move decision-making -- including purchasing -- to the regions.
"This is a team-based, back-to-basics approach to purchasing," said Werner.
At the same time, TCI told vendors that it wants to handle construction with what it calls "modified turnkey projects," meaning that vendors propose not only equipment prices, but also installation and construction costs, to TCI.
Several vendors present for the half-day meeting complimented the new purchasing plan.
"This is absolutely fantastic, compared to the last 'new plan' that brought me to Denver for a TCI vendor meeting," said one manufacturing executive attendee. "This plan makes sense."
Kent Gibbons contributed to this story. |
