| Q
You
successfully negotiated renewal of your franchises in
Fairfax County and northern Virginia with new 15-year
agreements. Will this require significant investment?
A
Yes,
but an investment which will provide us with a
very good return. In essence, we have agreed to
improve our infrastructure with fiber upgrades
which, upon completion, will result in a 21st
Century cable system fully equipped to compete
in a constantly changing technological marketplace.
Q
What
is the time-frame involved with the construction
of this new system and what is the objective?
A
While
our franchise agreement allows four years for
completion, we are planning for a compressed construction
schedule in order to both reduce costs and to
permit us to offer new services more quickly,
thereby increasing revenues.
Q
What
are these new services you mention, and why are
they needed?
A
First,
we’ll be able to provide our subscribers
with Internet access that is considerably faster
than other currently available services. Telephone
service is another likelihood, and a number of
other products including digital video and video
conferencing are also on the horizon — and
each offers opportunities for increased revenues.
Q
Are
you convinced that the market for these new services
is real, and that subscribers will be willing
to pay for them?
A
Without
question. Simply put, Fairfax is perhaps the best
market in the nation. It consistently ranks among
the wealthiest counties in the United States,
with the highest median family income. We currently
serve nearly 242,000 subscribers in Fairfax alone
where our system passes more than 343,000 households.
And more than 75 percent of these households have
personal computers. Our penetration level there
currently is more than 70 percent and we’re
confident that additional system enhancements
and product offerings will attract additional
users.
Q
Programming
expenses seem to rise sharply each year. Is this
something cable companies simply will have to
live with?
A
Those
expenses continued their upward trend in 1998,
although we have been able to somewhat lessen
the impact through a coalition we’ve joined
with ten other cable operators. This combined
subscriber base numbers five million, and we have
been able to negotiate better licensing fees as
a result. The bottom line, however, is that our
subscribers demand quality program offerings,
and they expect us to provide it.
Q
Do
you expect premium pay channels to remain an important
part of your product offerings going forward?
A
We
certainly do. While our core basic service generates
some 63 percent of our revenues, premium channels
such as HBO and Cinemax represent nearly 19 percent.
Today, half of our subscribers take at least one
premium channel, far surpassing most other systems.
Indeed, in the latest rankings from cable expert
Paul Kagan, Media General Cable is first in pay-to-homes
passed among the largest 100 cable operators,
and second in pay-to-basic penetration. Additionally,
our extensive pay-per-view business is another
success story, and we now operate 11 pay-per-view
channels with a wide range of programming.
Q
The
communications landscape is constantly changing.
What do you see affecting your cable operations
in the years ahead?
A
I
believe there are three significant and key trends.
They are convergence, competition, and consolidation.
Convergence is rapidly breaking down all barriers.
Eventually, we will be a full service provider
making video, voice and data available to all
of our customers, and I suspect our major competition
will be the regional Bell companies, as well as
any number of other players, including wireless
and utilities. The rush to consolidate continues
unabated, and some observers believe that within
a short period the five largest operators will
represent more than 90 percent of all U.S. cable
households. To compete in this changing world
we intend to remain independent while seeking
intelligent relationships with others in the marketplace.
Q
There
is speculation in the industry that a system your
size can’t successfully compete. You obviously
don’t agree?
A
Absolutely
not. We continue to outperform our peers in the
cable television industry. Based on Paul Kagan’s
July 1998 fact book, we were the nation’s
28th largest operator with more than 258,000 subscribers.
Our Cable Division’s penetration rate was
70.3 percent versus the national average of 68.5
percent. The national average monthly revenue
per subscriber was $33.45, while ours was $47.40,
a result of the breadth and scope of our program
offerings. We will continue to provide product
offerings that our customers want and — in
the case of premium channels and programming —
are willing to pay for. We serve an upscale market
eager to take advantage of the opportunities offered
by today’s changing communications landscape,
and we are fully committed to serving that market
better than anyone else.
|
