Monday, February 15, 1999
Eyes on Lebanon in risky cable war
City offering its own service
BY RICHELLE THOMPSON
The Cincinnati Enquirer
LEBANON — The kids loved Disney channel, but when cable prices went up, Coleen Crusham dropped it from her TV lineup. She's looking forward to getting Disney back in March — and at about $15 less a month.
Eighteen months after Lebanon City Council approved building a telecommunications system and $7 million later, the first group of residents is expected to receive cable service from the city by the end of the week.
CABLE RATES
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The prices between Lebanon and Time Warner are difficult to compare because the two systems offer different stations and have several packages. Overall, Lebanon's prices are cheaper.
• Basic cable: Lebanon $5.99 for 27 channels; Time Warner $7.74 plus franchise fees for 23 channels.
• Standard cable: Lebanon $20.98 for 61 channels; Time Warner $28.17, plus franchise fees for 67 channels.
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Mrs. Crusham already has decided to switch from the city's primary provider, Time Warner, to the city's system.
“Lebanon is less expensive,” the two-year resident said. “And I kinda just wanted to support the city of Lebanon instead of Time Warner.”
The combination of cost and community commitment is integral to Lebanon's success in a venture that is considered risky by most industry experts. Lebanon is one of about 20 cities in the country and the second in Ohio to build and operate its own cable system.
But it may not be the last. Cities and cable companies throughout the country are watching to see how well Lebanon competes with the behemoth Time Warner, which serves more than 1.5 million customers in Ohio and 230,000 in southeastern Ohio. Should Lebanon succeed, other cities may follow.
“This is the beginning in my mind,” said Michael Humphrey, business director for telecommunications and information for Public Technology Inc., a Washington, D.C., non-profit group that serves and helps municipalities with technology issues.
“I think every time a local government is successful in developing high-speed communication services, other governments will follow,” he said.
Already, 11 Northern Kentucky cities have banded together with plans to build a $50 million fiber-optic com munications system for television, cable and Internet use. The Northern Kentucky Telecommunications Authority's goal is to make it easier for communication companies to enter the market, thereby creating competition, lowering rates and providing viewers more choices. The 31 Cincinnati suburban communities involved in the Intercommunity Cable Regulatory Commission are taking a wait-and-see approach to municipal cable, Executive Director Pat Stern said.
“It's a pretty large investment required by a community,” she said. “Only time will tell if that investment will truly pay off.”
Still, Lebanon's initiative encourages competition, she said, and “I think competition is good. It usually drives the price down and the quality up.”
That's what happened in Wadsworth, a city of 17,000 about 35 miles south of Cleveland. Lebanon and Wadsworth operate the only Ohio municipally owned cable systems.
Since January 1997, when Wadsworth hooked up the first customers, Time Warner has dropped its prices by about $15 a month to match the city's rate.
Bill Lyren, Wadsworth's director of public service, said he thinks the competition has spurred both the city and Time Warner to give customers better service.
Bill Jasso, Time Warner's vice president of public affairs for Northeast Ohio, considers the low prices a short-term benefit.
“Wadsworth cannot continue to charge rates lower than market value for long,” Mr. Jasso said. “This is not a short-term business.”
He expects Wadsworth to ask taxpayers within the next five years for a levy to support the system. Meanwhile, Mr. Jasso admits, Time Warner is taking a short-term loss to protect its market share. Already the company has lost about a third of its customers.
Lebanon's latest figures show the city could make a profit by 2001, said Jim Baldwin, deputy director of telecommunications. That's despite the initial price of $5 million jumping another $2 million.
The increase primarily is the result of 800 lots either under construction or recently completed, he said. The city's growth means there's a potential of 8,000 customers, not the 6,000 in original plans.
About 70 percent of Lebanon — mostly residents south of South Street — is wired for cable, said Jim Baldwin, deputy director of telecommunications. The rest should be wired by the end of March.
More than 1,700 customers are signed up for the city service. The first two of 16 nodes or sections of the city are slated to officially go online Saturday. City staff are testing the system this week.
Of those 816 homes that could receive city cable, 393 already have signed up, Mr. Baldwin said.
When the system is fully operational at the end of the year, Mr. Baldwin hopes to have 4,000 customers. The Lebanon network will also offer high-speed Internet access, and the city plans to implement an automatic meter-reading system for water and electric lines.
Time Warner doesn't expect the city's cable system to eat into its Lebanon customer base of 3,000, said Jennifer Mooney, vice president of public affairs for the Cincinnati division.
“I believe that we will compete effectively with the city, and we will continue to provide great service to the customers,” she said.
Mrs. Mooney said it was premature to speculate whether Time Warner would lower its prices for Lebanon rates. The company already offers flexible plans for con sumers, starting at about $9 a month, she said.
One challenge for Time Warner is that it will be competing with the city of Lebanon, which also regulates the company's franchise agreement. The company pays more than $70,000 a year to the city in franchise fees, Mrs. Mooney said.
In response to Lebanon's system, Time Warner plans to kick off a marketing strategy “geared toward keeping (Lebanon residents) as customers.”
Mr. Baldwin doesn't think it will matter.
“I think they're going to lose Lebanon, whether they like it or not,” Mr. Baldwin said. “Lebanon has an extremely strong identity. People care about this city.”
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