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The Big Three

The more things change in the ranks of cable, the more they remain (somewhat) the same 4/30/2000 08:00:00 PM Eastern

The world of cable is getting ever smaller. The huge pace of acquisitions over the past two years has dramatically shifted Broadcasting & Cable's annual ranking of the 25 largest MSOs. Players with decades of history in the business have exited, not only shattering the clubby makeup of the industry, but dramatically changing its character.

The new ownership of the top-three cable operators illustrates what's happening. Almost 60% of cable subscribers will be in the hands of AT & T, Time Warner and Charter-players whose agendas are much different from those of traditional cable operators.

AT & T took over Tele-Communications Inc. for $50 billion primarily to use its wires to get into the local phone business. America Online is acquiring Time Warner for $181 billion primarily for access to its high-speed Internet pipes. And Microsoft co-founder Paul Allen has amassed a huge $20 billion portfolio under the Charter Communications umbrella primarily to develop interactive services.

These recent entrants regard cable almost as an afterthought.

In some ways, the new players give longtime operators added muscle in the financial and regulatory communities on issues, something about which all MSOs can agree. But they also risk splintering the once-cohesive industry as some operators'agendas increasingly diverge and conflict.

A little number crunching reveals some interesting results.

For example, the MSOs that are most aggressive in deploying digital cable aren't necessarily the best at actually selling it to customers. When it comes to that portion of its systems that are ready for digital cable, Comcast's 85% level lags behind AT & T, Time Warner and Cox. But Comcast ranks second when it comes to selling digital, 9% of basic customers, about 2 points more than Cox and double Time Warner.

The same goes for Insight Communications, ninth in deploying digital with 52% of its homes being digital ready. But 7.6% of its basic subscribers actually have digital.

It's no surprise that small fry like Buckeye Cablevision and Blue Ridge Cable don't have any digital-ready homes.

But what about top 10 MSO Cablevision Systems? Zero digital-ready homes and of course, zero digital subscribers. That's because Cablevision has bigger plans, putting digital converters in every home that already has some sort of set-top device. That's 65% of all subscribers getting the pricey equipment, even if they don't actually add a subscription to digital cable.

Cablevision CEO James Dolan contends that once he gets the box in the house, subscribers will pay for it by using interactive services and buying video-on-demand movies. That rollout starts later this year.

And it's not just the big operators that are focusing on new products.

While Cox has been the most aggressive about prepping systems to deliver high-speed Internet service, tiny GS Communications isn't far behind, reporting that 80% of its basic homes are Internet ready compared to 82% for Cox. Susquehanna comes in fourth with 71%, just behind third-ranked Time Warner cable. Even AT & T, which boasts the most about Internet services, has only readied 37% of its subscribers for high-speed data. That's just above Service Electric's 35.7%.

But no cable operator is very impressive when it comes to actually selling high-speed Internet subscriptions. Sales leader Cox has signed up just 4% of its basic subscribers to Internet services, followed by Time Warner (3.5%) and small-fry Armstrong (2.9%).

Seven members of our 1999 list have disappeared into larger MSOs or are about to: Falcon Cable, Jones Intercable, Bresnan Communications, Prime Cable, Multimedia, Fanch Communications, Garden State Cable.

What's more, Time Warner is in the process of selling out to America Online, though its cable division will remain intact. MediaOne, which last year had just cut a deal to sell out to AT & T, is still trying to complete its exit. Ten members of our list the year before-1998-were swallowed up in 1999.

Last year, the 25th-largest MSO was Galaxy Cablevision. It's only moved up one notch because Galaxy executives have been hurriedly selling off systems to keep their bankers at bay. Last year's 24th largest MSO, Susquehanna, has moved up to 19th without acquiring a single system. The 25th largest operator two years ago, venerable Service Electric, perhaps the oldest operator still in business, is now 12th, purely through attrition of the larger operators.

Looking at the chances of larger operators such as Cablevision Systems, Adelphia or Classic Communications trying to sell out in the next two or three years, it's easy to see Service Electric moving up even further.

So for all the changes sweeping the industry, late cable-pioneer John Walson's old company could again become a top-10 operator, just as he was in the 1950s.

The data were gathered primarily from the companies themselves and the ranking was determined by the number of basic subscribers. In the case of uncooperative companies, we rely on securities and other regulatory filings or estimates by analysts and industry executives-sometimes, former employees of the company. In a few instances, no reliable estimates were available. Those items are marked NA.

The list also does not include DBS services EchoStar and DirecTV, although they are among the largest multichannel video providers. DirecTV's 8.3 million customers makes the DBS service bigger than third-ranked MSO Charter, while EchoStar's 3.9 million customers makes it bigger than ninth-ranked Cablevision Systems.


Top 25 cable operators

MSO Total subs

1

AT & T Broadband

16,400,000

2

Time Warner

12,700,000

3

Charter

6,138,000

4

Cox

6,100,000

5

Comcast

5,719,800

6

Adelphia

4,990,092

7

Cablevision

3,135,370

8

Insight

1,435,000

9

Mediacom

747,000

10

Cable One

741,000

11

Classic

413,000

12

Service Electric

294,000

13

RCN Corp.

292,204

14

Ameritech

280,000

15

Tele-Media

266,919

16

Northland

260,615

17

Midcontinent

215,371

18

Armstrong

204,950

19

Susquehanna

188,543

20

Millennium

175,000

21

Blue Ridge

167,000

22

Buckeye

161,520

23

U.S. Cable

140,129

24

Galaxy

126,861

25

GS Comm.

119,219

6. Adelphia Communications

5 West 3rd Street

Coudersport, Pa. 16915

(814) 274-9830

www.adelphia.net

Top executive: John Rigas, chairman

Ownership: publicly traded; controlled by Rigas family

Homes passed: 7,722,933

Basic subscribers: 4,990,092

Basic penetration: 64.6%

Digital-ready homes: 2,300,000

Digital subs: 233,949

Digital penetration: 10%

Internet-ready homes: 940,000

Internet subs: 37,495

Internet penetration: 4%

7. Cablevision Systems

1111 Stewart Avenue

Bethpage, N.Y. 11714

(516) 803-2300

www.cablevision.com

Top executive: Charles Dolan, chairman; James Dolan, president and CEO

Ownership: publicly traded; major investors include the Dolan family, AT & T and Gabelli Funds Inc.

Homes passed: 4,603,695

Basic subscribers: 3,135,370

Basic penetration: 68.1%

Digital-ready homes: NA

Digital subs: year-end launch

Digital penetration: NA

Internet-ready homes: 874,000

Internet subs: 52,100

Internet penetration: 6%

8. Insight Communications

810 Seventh Avenue

New York, N.Y. 10019

(212) 371-2266

www.insight-com.com

Top Executive: Michael Willner, president and CEO

Ownership: publicly traded, major shareholder Vestar Capital Partners and Willner

Homes passed: 2,392,000

Basic subscribers: 1,435,000

Basic penetration: 60%

Digital-ready homes: 750,000

Digital subs: 109,000

Digital penetration: 14.5%

Internet-ready homes: 900,000

Internet subs: 18,000

Internet penetration: &1%

9. Mediacom

100 Crystal Run Road

Middletown, N.Y. 10941

(914) 695-2600

www.mediacomllc.com

Top Executive: Rocco Commisso, chairman

Ownership: publicly traded, Commisso controls company; Morris Communications owns 31% equity

Homes passed: 1,100,000

Basic subscribers: 747,000

Basic penetration: 67.9%

Digital-ready homes: 168,000

Digital subs: 5,300

Digital penetration: 3.2%

Internet-ready homes: 120,000

Internet subs: 500

Internet penetration: &1%

10. Cable One

1314 N. 3rd Street

3rd Floor

Phoenix, Ariz. 85004

(602) 364-6000

www.cableone.net

Top Executive: Tom Might, chairman

Ownership: Washington Post Co.; Graham family controls company

Homes passed: 1,032,000

Basic subscribers: 741,000

Basic penetration: 71.8%

Digital-ready homes: 459,420

Digital subs: May 2000 launch

Digital penetration: NA

Internet-ready homes: 192,956

Internet subs: 300

Internet penetration: &1%

11. Classic Cable

515 Congress Ave., Suite 2626

Austin, Texas 78701

(512) 476-9095

www.classic-cable.com

Top Executive: J. Merritt Belisle, chairman

Ownership: publicly traded; major investors include Brera Capital Partners (38%) and Austin Ventures

Homes passed: 707,000

Basic subscribers: 413,000

Basic penetration: 58.4%

Digital-ready homes: 174,000

Digital subs: 5,000

Digital penetration: 2.9%

Internet-ready homes: 113,000

Internet subs: 1,200

Internet penetration: 1%

12. Service Electric Television

201 West Centre Street

Mahanoy City, Pa. 17948

(570) 773-2585

Top Executive: Margaret Walson, CEO

Ownership: the Walson family

Homes passed: 412,000

Basic subscribers: 294,000

Basic penetration: 71.4%

Digital-ready homes: 100,000

Digital subs: 10,500

Digital penetration: 10.5%

Internet-ready homes: 105,000

Internet subs: 2,150

Internet penetration: 2%

13. RCN Corp.

105 Carnegie Center

Princeton, N.J. 08540

(609) 734-3700

www.rcn.com

Top Executive: David McCourt, chairman

Ownership: publicly traded; major investors Vulcan Ventures, Level 3 Comm.

Homes passed: 713,823*

Basic subscribers: 292,204*

Basic penetration: 19.4%

Digital-ready homes: 292,204

Digital subs: 15,000

Digital penetration: 5%

Internet-ready homes: 713,823

Internet subs: 21,654

Internet penetration: 3%

*Basic subs include RCN's core advanced video systems plus conventional cable systems and a wireless cable system. Penetration reflects advanced system subscribers only.

14. Ameritech New Media

300 S. Riverside

Suite 1800 N.

Chicago, Ill. 60606

800-257-0902

www.ameritech.com

Top Executive: David Mahachek, president, SBC CATV

Ownership: SBC Corp.

Homes passed: 1,300,000

Basic subscribers: 280,000

Basic penetration: 21.5%

Digital-ready homes: None

Digital subs: None

Digital penetration: None

Internet-ready homes: None

Internet subs: None

Internet penetration: None

15. Tele-Media Corporation

320 West College Avenue

P.O. Box 5301

Pleasant Gap, Pa.

(814) 359-3481

Top Executive: Robert E. Tudek, chairman, president and CEO

Ownership: Tudek and Everett I. Mundy

Homes passed: 357,430

Basic subscribers: 266,919

Basic penetration: 74.7%

Digital-ready homes: NA

Digital subs: NA

Digital penetration: NA

Internet-ready homes: NA

Internet subs: NA

Internet penetration: NA

16. Northland Communications

1201 Third Avenue

Seattle, Wash. 98101

(206) 621-1351

Top Executive: John S. Whetzell, chairman

Ownership: Whetzell owns 22%

Homes passed: 410,473

Basic subscribers: 260,615

Basic penetration: 63.5%

Digital-ready homes: 6,684

Digital subs: 495

Digital penetration: 7.4%

Internet-ready homes: 13,191

Internet subs: 275

Internet penetration: 2.1%

17. Midcontinent Communications Inc.

7900 Xerxes Ave. S., Suite 1100

Minneapolis, Minn. 55431

(952) 844-2600

www.midcomm.com

Top Executive: N. Lawrence Bentson, chairman and CEO

Ownership: partnership, Joseph Floyd and N. Lawrence Bentson

Homes passed: 327,953

Basic subscribers: 215,371

Basic penetration: 65.7%

Digital-ready homes: 234,594

Digital subs: 9,085

Digital penetration: 3.9%

Internet-ready homes: 234,594

Internet subs: 3,669

Internet penetration: 1.6%

18. Armstrong Utilities

One Armstrong Place

Butler, Pa. 16001

(724) 283-0925

Top Executive: Michael Haislip, president, Armstrong Cable Services

Ownership: privately held; owned by the Sedwick family

Homes passed: 259,404

Basic subscribers: 204,950

Basic penetration: 79%

Digital-ready homes: 4,400

Digital subs: launching May 15, 2000

Digital penetration: NA

Internet-ready homes: 125,418

Internet subs: 5,887

Internet penetration: 4.7%

19. Susquehanna Cable

330 Basin Street

Williamsport, Pa. 17701

(717) 848-5500

www.susqcomm.com

Top Executive: James D. Munchel, president, COO

Ownership: Susquehanna Pfaltzgraff Co.

Homes passed: 244,267

Basic subscribers: 188,543

Basic penetration: 77%

Digital-ready homes: 101,400

Digital subs: 7,185

Digital penetration: 7.1%

Internet-ready homes: 134,100

Internet subs: 4,751

Internet penetration: 3.5%

20. Millennium Digital Media

120 South Central Avenue

Suite 150

St. Louis, Mo. 63105

(314) 802-2400

www.mdm.net

Top Executive: Kelvin R. Westbrook, president, CEO

Ownership: privately held

Homes passed: 303,000

Basic subscribers: 175,000

Basic penetration: 58%

Digital-ready homes: 49,500

Digital subs: NA

Digital penetration: NA

Internet-ready homes: 95,500

Internet subs: NA

Internet penetration: NA

21. Blue Ridge Cable/Pencor Services

613 Third Street

Palmerton, Pa. 18071

(610) 826-2552

Top Executive: Don Reinhard, chairman

Ownership: Reinhard family

Homes passed: 201,000

Basic subscribers: 167,000

Basic penetration: 83%

Digital-ready homes: None

Digital subs: None

Digital penetration: None

Internet-ready homes: 30,000

Internet subs: 750

Internet penetration: 2.5%

22. Buckeye Cablevision

5566 Southwyck Blvd.

Toledo, Ohio 43614

(419) 724-9802

www.buckeyecablesystem.com

Top Executive: Allan Block, vice chairman, Blade Communication

Ownership: Blade Communication

Homes passed: 258,789

Basic subscribers: 161,520

Basic penetration: 59%

Digital-ready homes: fourth quarter 2000

Digital subs: None

Digital penetration: None

Internet-ready homes: 210,000

Internet subs: 3,000

Internet penetration: 1.4%

23. U. S. Cable Corp.

Montvale Plaza

28 West Grand Ave.

Montvale, N.J. 07645

(201) 930-9000

Top Executive: James Pearson, president, CEO

Ownership: U.S. Cable Partners and AT & T-BIS

Homes passed: 241,352

Basic subscribers: 140,129

Basic penetration: 58%

Digital-ready homes: 36,767

Digital subs: 2,857

Digital penetration: 7.8%

Internet-ready homes: None

Internet subs: None

Internet penetration: None

24. Galaxy Cablevision

1220 North Main St.

Sikeston, Mo. 63801

(573) 472-8200

www.galaxycable.com

Top Executive: Tom Gleason Jr., chairman and CEO

Ownership: privately held; majority owned by the Gleason family

Homes passed: 214,341

Basic subscribers: 126,861

Basic penetration: 59%

Digital-ready homes: 5,000

Digital subs: 1,000

Digital penetration: 20%

Internet-ready homes: 1,100

Internet subs: 44

Internet penetration: &1%

25. GS Communications

P.O. Box 398

Frederick, Md. 21705-0398

(301) 662-6822

www.gscommunications.com

Top Executive: Robert W. Cole, president

Ownership: Great Southern Printing & Manufacturing Co.

Homes passed: 160,063

Basic subscribers: 119,219

Basic penetration: 74.5%

Digital-ready homes: 102,475

Digital subs: 8,559

Digital penetration: 8.3%

Internet-ready homes: 94,949

Internet subs: 875

Internet penetration: &1%

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