Comcast big now, thinking bigger

Deals: Comcast Corp. the nation's No. 3 cable company, has set itself up as the cable provider for virtually the entire Baltimore-Washington corridor.

June 27, 1999|By Mark Ribbing | Mark Ribbing,SUN STAFF

Sometimes a monopoly just isn't enough.

For years, Comcast Corp. has been the sole provider of cable TV service in a broad suburban swath that includes parts of Harford, Howard and Baltimore counties. It's been a nice gig -- cable has come to rank not so very far below electricity and water as a basic household service, and Comcast is where 300,000 households in the three counties go for their fix.

But this is the late 1990s, the age of the ever-expanding, gotta-have-it-all communications behemoth. Telephone, cable and Internet companies that used to putter contentedly in their own cozy, tightly defined service territories are now joining forces, cutting deals and waxing rhapsodic about all the new markets they plan to grab.

Comcast is no exception. The Philadelphia-based company, which has cable properties scattered across 21 states and is now the third-largest cable firm in the country, is seeking to consolidate its territories and offer customers the whole range of communications services, from high-speed Internet access to telephone connections.

"Comcast is not simply your neighborhood cable company," said company spokesman David Nevins. "Comcast seeks to become known as a significant national telecommunications provider."

This campaign could directly affect the way people in Baltimore and throughout the mid-Atlantic region receive those services. In Baltimore City, for example, Comcast will likely become the new cable company, replacing TCI Communications of Baltimore.

In a series of recent acquisitions and agreements, Comcast has set itself up as the cable provider for virtually the entire Baltimore-Washington corridor, from Harford County to Northern Virginia. The company also sells cable service in much of the Eastern Shore and Delaware.

Such large, contiguous service areas, known in the industry as "clusters," are quickly replacing the old patchwork of cable systems around the country. By sewing together cable properties in an affluent, densely populated region, Comcast hopes to cut marketing costs, boost advertising revenue and improve the quality and scope of its networks.

"The cluster they have teed up is going to be unprecedented in terms of its reach," said Spencer Grimes, an analyst with Salomon Smith Barney in New York.

Comcast wants to be more than just a cable provider in this territory. Taking advantage of its high-capacity cable lines, the company has already begun selling Internet access in its suburban Baltimore markets and is testing telephone service.

"They'd be negligent if they didn't do it," Grimes said of Comcast's attempt to find all possible uses for its muscular networks. "I think they're doing it at a nice, measured pace. It's going to be a winning strategy."

Comcast's strategy for offering bundled services throughout the region has been shaped by three major deals. First, the company said May 25, 1998, that it would acquire a stake in Jones Intercable Inc. The agreement gave Comcast cable properties in Anne Arundel, Prince George's, Calvert, Charles and St. Mary's counties and parts of Northern Virginia.

Next, on Dec. 11, Comcast and Prime Communications LLC announced a pact that could lead to Comcast's acquisition of Prime for an estimated $1.45 billion. This agreement, which is contingent on some Prime network upgrades that are expected to be finished by the summer of 2002, would give Comcast new markets in Montgomery County and in Arlington County, Va.

Even with these two agreements, there were still twolarge holes in Comcast's emerging fiefdom: the cities of Baltimore and Washington. Both were held by TCI.

This presented numerous potential headaches for Comcast. Most obviously, it meant that the two biggest cities in the area were sealed off from Comcast, limiting the company's customer base and its attractiveness to advertisers. In addition, Comcast would have to circumvent the cities as it built up its network. Furthermore, the lack of Baltimore and Washington meant that a chunk of the company's marketing budget was essentially wasted on advertising to city residents who couldn't buy Comcast service even if they wanted to.

In short, Comcast needed Baltimore and Washington to fill out its cluster. On May 4, the company announced a large swap of cable properties with AT&T Corp. The long-distance king was rapidly establishing itself as the country's largest cable company. It had recently bought TCI of Baltimore's parent company, Tele-Communications Inc. of Englewood, Colo., and had just beaten out Comcast in a high-profile bidding war for another major cable chain, MediaOne Group Inc.

Among the markets that AT&T agreed to transfer to Comcast were Baltimore and Washington. The Comcast-AT&T accord is expected to close within a year. If all of the pending deals are completed, Comcast expects to have 1.5 million subscribers in Maryland, the District of Columbia, Delaware and Northern Virginia.

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