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Sun sets on cable provider's monopoly
2 firms expected to get council's OK for TV, phone, Web services Monday, but some critics are raising concerns.
By Dana Knight
Indianapolis Star
August 26, 2000
Two high-tech companies are poised to enter the Indianapolis market, battle the cable
monopoly and as much as triple consumers' choices of phone, Internet access and cable
service providers. Franchise agreements between the city and communications newcomers Totalink and Digital Access, negotiated early this month, are to be voted on Monday by the City-County Council. "The answer will be overwhelmingly in favor," said Majority Leader Phil Borst. "We all know no matter how good the companies are now, competition makes it better. It helps to keep you on your toes."
The pending agreement means that for the first time, customers will have a choice in who
wires their homes. Currently, many Indianapolis residents living inside the I-465 loop who want cable must turn to Time Warner. Those living outside the interstate, but within Marion County lines, are serviced by Comcast. For phone service, there is one choice --
Ameritech.
Totalink and Digital Access saw Indianapolis as a prime city on which to pounce. The out-of-state companies say they offer better customer service than local providers, lower prices and discounts for customers who bundle, or buy more than one service. Time Warner and Comcast say they have strategies to keep current customers from switching.
Time Warner, which provides only cable TV to its 70,000 Indianapolis customers, plans to beat the new rivals at their own game by offering digital cable by the end of the year.
High-speed Internet access will follow, said spokesman Al Aldridge. "We know people want this. They're calling every day asking, 'When are you going to start offering this?' " he said. "We don't have a problem with competition as long as we're on a level playing field." Comcast already offers digital cable, Internet service and bundling discounts to its
153,000 customers. It says it has fared well in a market where satellite companies have
snatched part of its cable TV business.
Comcast spokesman Mark Apple questions the need for two more companies in the Indianapolis area. But the new companies mean more than cable service to the city, said Rick Maultra, director of the Cable Communications Agency for Indianapolis and Marion County. Together, they will invest more than $600 million to lay thousands of miles of fiber-optic lines, boost the city's economy and bring in more than 500 new jobs.
"This is going to be tremendous for the city in terms of quality of life," he said. "And for
the residents, there will be competition. What do you think this is going to mean? There will be better customer service, lower prices and discounts."
If given the go-ahead Monday, Digital Access said, it will begin laying lines within months and will offer service to its first customers by the middle of 2001. Totalink has
taken eight to 10 months to get up and running in other cities, such as Evansville. For Traci Christler, 29, switching to a new company would come only after plenty of
research. "I would want to wait and see exactly what it was about," she said. Christler, a Time Warner customer, pays $60 a month for cable service, which includes HBO and other movie channels. But even if she didn't swap companies, Christler likes the idea of competition. After all, it could lower prices. "I sure the heck hope so," she said.
While in principle the arrival of competition sounds good, Marc Bilodeau, associate
professor of economics at Indiana University, says consumers should beware. More rivalry doesn't necessarily mean prices will drop. Because cable is a regulated industry, even without competition, one firm can't charge a monopoly price, he said. With three or four firms, the need for regulation could cease. "It is not going to be better for consumers
in the long term to have three competing firms than to have one firm regulated," he said.
"Running three cables parallel is going to cost a lot of money, and that's going to cost
consumers." Because the customer base will be spread out among three companies instead of one, prices eventually will have to rise to pay for the millions of dollars' worth of cables, Bilodeau said. Don't expect the companies to keep tabs on one another, he added. "Three firms can easily collude or agree to (raise prices) illegally," he said. "With one firm, we can have the lowest average cost. Neither of the three may ever have the lowest cost."
Cable prices remained fairly steady in Evansville, where Totalink (called Sigecom there) arrived two years ago. But customer loyalty didn't. The company has taken 17,000 cable
customers from Insight Communications -- the local provider. "We could have more, but we've actually been controlling our growth," said Richard Wadman, general manager of Totalink in Evansville. "We've never done any advertising, and we get 100 new customers a day. We actually have been turning people down."
City officials said they don't have data tracking customers' cable choice, and they did not return phone calls to comment on service by Totalink. However, Wadman said, his company has prompted Insight to upgrade its service. "I have to be brutally honest: Even our competition's service has gotten much better," he said. "It raises the bar for everyone." For Arthur "Smokey" Weber, 49, one of the biggest perks to using a company such as Totalink is fiber-optic lines. "I'm telling you on my TV set, I have no lines running through and I have no dark channels," he said. With the broadband lines, Weber can dial into the Internet and still have an open phone line. "I was one of the first to sign up for this when they came to Evansville, because for 10 years I was having so much trouble with my
cable company," he said. "I was very, very skeptical at first, and I'm not going to put my
final stamp on anything unless I know what it is. This has my 100 percent final stamp."
One of the less-recognized perks of a multiservice provider comes with billing, said
Joseph Cece, chief executive officer of Digital Access. If customers bundle, they receive one bill outlining costs for all the services. Digital Access already is setting up shop in
Kansas City, Mo., and Milwaukee. Indianapolis is one of a handful of large cities to hook up to such a network, Cece said.
City-County Council member Karen Celestino Horseman, who served on the Rules and Policy Committee that negotiated the agreements Aug. 8, says the entire deal has
come together too quickly. "This is brand new with brand-new technology, so we're blazing new ground," she said. "We need to take a little more time with this. This is too big a deal." As part of the agreement, both companies will be required to lay an enhanced
institutional line that will connect and allow interaction, such as videoconferencing, among 40 governmental buildings and agencies in Marion County. That section, which wasn't written into the agreement at the original committee vote, was decided in a 30-minute meeting, Horseman said. The committee will meet to vote on those amendments before the council meeting Monday. Horseman also wants to add restrictions against "red-lining." She fears the companies will get approval to lay cables in Indianapolis,
then move immediately to suburbia without offering the competition to inner-city
neighborhoods. The agreement requires the companies to build throughout Marion County within the next five years, but it doesn't offer a penalty if they fail to do so. "I think it's a likely scenario that they will come in and immediately head out to the Carmels and Geists," she said. "And Indianapolis will get nothing."
Contact Dana Knight at (317) 633-1012 or
via e-mail at dana.knight@starnews.com.
Copyright 2000 Indiana Newspapers Inc.
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