(cont)... Telecommunications War

Jul. 30--Comcast and Qwest Communications International are each poised to sell Internet service to Isaak Jordan in Minneapolis. Too bad the 27-year-old Time Warner Cable customer despises them both.

Cable and phone companies never used to compete. Now they're trying to steal each other's lunch. As cable giants like Philadelphia-based Comcast approach the saturation point for cable customers, they need to sell telephone service in order to grow. Meanwhile, Baby Bells like Denver-based Qwest are losing tens of thousands of phone customers a year to wireless competitors, so they've added satellite TV services to fight back. Both industries are bundling together phone, TV and high-speed Internet connectivity in discount packages to lure customers like Jordan to their side of the street.

On the local battlefront of this war, the competition is about to go nuclear. Time Warner is bowing out of the picture, leaving Comcast, the nation's biggest cable company, and Qwest, Minnesota's dominant phone provider, to slug it out for the telecommunications championship of the Twin Cities.

But the harder each side tries, the crankier their potential customers get.

Jordan, for instance, gets his poor opinion of Comcast from visits with his twin brother, Ben, who uses Comcast in Washington, D.C.

"Every single time I go there, they have a service outage. They really do have the most god-awful service," Jordan said.

He doesn't consider Qwest any better. "I had it four or five years ago and I had to reset my router all the time."

Jordan wants to stay with Time Warner. "I've just never had to call them," he said. "No problems."

But soon he and 205,000 other subscribers in Minnesota can expect to be handed over to Comcast. It's part of a complex, $17.6 billion deal cut last year by Comcast and Time Warner, the two largest U.S. cable companies, to jointly acquire bankrupt Adelphia's cable business and then consolidate their holdings around the country, creating local strongholds.

Time Warner's territory includes 78,000 subscribers in Minneapolis, 120,000 more in the suburbs and the rest in towns like New Ulm. By swapping some Comcast turf on the West Coast for Time Warner's parcels in the Twin Cities and elsewhere, Comcast consolidates its power in the Upper Midwest and the East from Boston to Washington, D.C.

Federal regulators recently cleared the deal, and the settlement of a lawsuit against Time Warner by the city of Minneapolis two weeks ago eliminated the last local hurdle.

So now Comcast, which serves 350,000 homes in St. Paul and two-thirds of the metro area, is poised to inherit every cable franchise around the Twin Cities, save for a handful, such as Apple Valley and Lakeville, served by Charter Communications, and a ring around Lake Minnetonka served by Mediacom.

A lot of Time Warner customers don't know about the impending swap because neither company has told them. "Time Warner is switching to Comcast? Is there anything they DON'T own?" Nicole Nyarko lamented via e-mail. The 32-year-old Minneapolis woman moved from Eagan two months ago and was looking forward to switching to Time Warner Cable.

Comcast and Time Warner officials said they haven't told West metro customers of the transfer because the deal isn't final, though that could happen Monday.

Qwest has used the lack of communication as an opportunity to jab its opponent. Last month, it mailed out cards and letters telling Time Warner customers that, based on the experiences of St. Paul and East metro cable users when Comcast bought the old AT&T Broadband in 2002, they can expect "service interruptions and frustrations" when the switchover takes place.

The mailings offer Qwest's bundle of services, including DirecTV satellite service, as an alternative.

"This is a significant opportunity," said Qwest Minnesota President John Stanoch, who signed the letters. "With the transfer to Comcast, (Time Warner) customers are going to be looking around and we want Qwest to be first and foremost in their minds."

Stanoch said many Time Warner customers have thanked Qwest for informing them of the proposed swap, but the mailings are riling others.

Richfield subscriber Steven Lindgren calls Stanoch's attempt to scare Time Warner customers "outrageous."

"We're not used to this type of tactic in the Twin Cities. If he has a company he wants to promote, he should promote it," Lindgren said. (Lindgren is president of the Richfield Chamber of Commerce, but emphasizes he's speaking for himself and not the chamber on this matter.)

Neither Qwest nor Comcast win many popularity contests, but St. Paul's cable officer Mike Reardon says, based on recent performance, west metro cable customers should not fear Comcast. Last year, his office got 196 complaints about Comcast out of a 51,000-customer base, and for the first six months of this year, it's had only 40, he said.

Comcast says Qwest's accusations are unfounded, pointing out that it has invested $250 million on its network to introduce services like video on demand and high-definition television.

"It points to a level of desperation," said Bill Wright, Comcast regional vice president for the Twin Cities.

Desperate or not, the competition is benefiting consumers. Comcast this year offered its first bundle of voice, video and Internet services for $99 a month, while Qwest countered with its own triple-play package for $87 a month, including a new one that throws in a DirecTV satellite exclusive, all National League Football games every Sunday.

But financial analyst Donna Jaegers of Denver-based investment banking firm Janco Partners had a warning: "Read the fine print."

The promotions have expiration dates and all services are not equal, she said.

Furthermore, neither Qwest nor Comcast wants to get into a true price war like the one long-distance companies got into in the '90s, she said. When customers were trained to wait for lower prices, then switch, the long-distance carriers bled money.

The way to compete is on service, she said, but neither Qwest nor Comcast rate highly there. Both got mediocre scores on the latest J.D. Power & Associates customer satisfaction ratings for phone service.

The average score in the West region, which includes Minnesota, was 675 out of 1,000. Qwest ranked third in the region, scoring 673, while Comcast finished fifth with 661.

Qwest did get the highest rating in the nation for service technician visits, but Frank Perazzini, director of telecommunications research at J.D. Power, said the two companies "are statistically on a par" for overall satisfaction. Since people in the Twin Cities will be losing a cable alternative, that could affect people's attitudes, Perazzini said.

"When people perceive there could be fewer choices in the market, that makes them a little edgy."

Leslie Brooks Suzukamo covers telecommunications and technology. He can be reached at lsuzukamo@pioneerpress.com or 651-228-5475.


http://www.redorbit.com/news/technol...e=r_technology