If you merge it, they will call.
That belief seems to be part of the driving force behind the recent merger of AT&T — the country’s largest long-distance telephone-service provider — and TCI, the nation’s second-largest cable company. AT&T gets a conduit for breaking into the local telephone market (10.5 million U.S. customers have cable running into their homes — a major communications network that bypasses local telephone lines). And TCI gets the support of a big-bucks, high-tech benefactor, one with inroads into the potentially explosive Internet market.
But what does Asheville get?
Because TCI is a minority partner in the company that holds the city’s cable franchise (Brenmor — operating under the name InterMedia), Asheville residents and business owners could find they have an alternative local-phone provider in the next few years — one likely to also offer high-speed Internet service, digital television and other data-transmission services.
One point of contention in the ongoing franchise negotiations has been the data-handling capacity of InterMedia’s newly rebuilt 550-megahertz system: Should Asheville hold out for a higher-capacity 750-MHz system, such as InterMedia had considered installing. And, if the city accepts the 550-MHz system, will it be able to handle the additional services? Or will it mean that voice-telephone, data-transmission and other services pass us by?
“I’m just raising the question,” says Wally Bowen, director of both Citizens for Media Literacy and the Mountain Area Information Network. Bowen has been tracking Asheville officials’ cable-franchise renegotiations with InterMedia over the past few months. He has often questioned whether a 550-MHz system will limit the city’s chances of attracting high-tech industries.
“A 550-MHz system won’t — technically speaking — preclude [InterMedia] from providing local phone service over cable lines,” says James Brogan, a Minneapolis attorney who often represents municipalities in cable-franchise disputes. “It depends on how [the company] has set up the system.”
Joe Haight, general manager for InterMedia in Asheville, claims the rebuilt system — now 96 percent complete, with high-capacity fiber-optics lines replacing the old coaxial cables — is already capable of providing voice telephony, with the addition of customer-interface equipment for those want the service. “The system we have constructed … can do all the services that have been announced [in the merger]: telephony, digital television and Internet,” says Haight. “We’ve got the backbone of what we need.”
“I’m a little bit skeptical that [AT&T and TCI] are going to roll out telephony service any time soon,” cautions Andrew Afflerbach, senior engineer at Columbia Telecom in Maryland. “It’s not clear, with the merger, if AT&T and TCI are going to really team up to put local phone service everywhere.”
Bigger markets served by TCI — such as Kansas City and Nashville — are more likely to get telephony before Asheville does, Brogan speculates. “It’s a cost issue. … For smaller communities, companies are less likely to invest money in the system,” he says.
That may have been true of the cash-strapped TCI, , overall, but InterMedia has invested $17.5 million in the Asheville system in just the past two years, counters Haight. “We’ve got one of the top systems in North Carolina, and we’re in position to go forward with new services, such as the Internet,” he asserts.
Asheville’s 550 system could be a limiting factor, argues Afflerbach — depending on how much of that capacity InterMedia fills with video channels, as well as how costly it turns out to be to upgrade the system, down the road. But “the fact that you have 550 is better than many [municipalities] are getting,” he adds.
Haight responds that InterMedia plans to carry just 200 digital channels on the new system, which has the capacity to deliver nearly 1,000. That should leave plenty of room for telephony, Internet and other data-transmission services, he argues. And if residential or business customers want the extra capacity now, they can negotiate with InterMedia for it — so the cost would not be borne by all local cable customers. “Why should the majority of users pay for something they won’t use?” asks Haight.
That brings him to another point: Asheville may be a medium-sized city and, thus, unlikely to be first on the list for new services such as voice telephony. But this “market area” — which includes Greenville and Spartanburg, as well as Asheville — is considered an “area of dominant influence.” That means, says Haight, that anything one city gets, the others do — because it allows TCI certain economies of scale.
InterMedia’s planned Internet service for Asheville, for example, will be routed through satellite equipment in Greenville.
But if it would be so easy (and relatively inexpensive) to upgrade to 750 in the future, why not go ahead and do it now, Brogan and others wonder.
“The real benefit to 750 … is that the extra 200-MHz is reserved for voice and data transmission,” Brogan argues. “If InterMedia were truly interested in going into those service markets, they’d go ahead and upgrade now.”
Haight replies that, with recent advances in data-compression technology, a 550 system carries the same capacity that a 750 system did, just a year or two ago. InterMedia will go to a higher capacity, “if it makes sense. It’s got to make economic sense,” stresses Haight.
But it’s hard to tell what’s down the road, in terms of either future technological developments or what, exactly, AT&T plus TCI turns out to equal. “I think it’ll take a couple of years for it all to shake down,” says Haight, reflecting on the merger.
And, while Bowen calls the merger “the first real breakthrough since the 1996 Telecommunication Act, which promised competitive rates and services,” he still insists that the city should negotiate hard for a shorter franchise term — one that will leave Asheville in a more flexible position in a rapidly changing situation. To date, city staff have whittled InterMedia down from a 17- to a 12-year franchise agreement.
City Council members are scheduled to vote on that proposal on July 14.
Says Bowen, reflecting on Council’s upcoming vote as much as on the big merger, “Everyone’s trying to read the tea leaves right now.”