By Max Jarman
The Arizona Republic
June 12, 2000

Cox Communications has an arsenal of new products and services in the pipeline for its war with US West for dominance of the Phoenix market.

The new products - video-on-demand, TV on demand and interactive television - also could help stem customers' migration to satellite networks such as Direct TV and Dish Network.

The new products also offer the Atlanta company a wealth of new revenue sources.

With more than 700,000 cable television customers, Phoenix is Cox's largest market. It also may be the most competitive arena and the front line in its crusade to deliver bundled television, telephone and Internet services.

This is one of the few markets nationwide where two major companies are offering all three services, albeit not to everyone. Both companies are scrambling to complete equipment upgrades that will enable them to offer all of the products Valleywide.

Cox plans to begin testing its long-awaited video-on-demand service in Phoenix in August; a broader rollout could come early next year. The service will allow Cox cable subscribers to rent on-demand movies, concert videos, sports programs and other content from a video library being developed by Cox.

Another product, called iTV, is being tested in San Diego. The service eventually will be rolled out in Phoenix and allows customers to access the Internet and send and receive e-mail via their televisions.

A third new product, called TV on demand, is being tested in Las Vegas and also will eventually be available in Phoenix. The product, developed with TiVo Inc., will allow Cox subscribers to access pre-broadcast television programs as well as pause, fast-forward and rewind real-time television programming.

Jim Robbins, Cox's president and chief executive officer, told telecommunications analysts at a recent meeting in San Diego that the company was disturbed by the loss of cable customers to USWest's VDSL cable television service. USWest won't say how many of Cox's video customers it has taken, but it is thought to be 30,000 to 50,000, similar to the number of telephone customers Cox has taken away from USWest.

Robbins said the new products, particularly on-demand video, would give the company a competitive edge in the market.

For video-on-demand, Cox will partner with Concurrent Computer Corp. of Atlanta which is working with Time Warner in Tampa Bay, Fla., Comcast in California and Time Warner Oceanic Cable in Hawaii to launch similar service.

Time Warner launched a video-on-demand service in Orlando in the early 1990s. But the technology was cumbersome and the equipment expensive. Now, with equipment costs coming down, industry observers believe the product can be successful.

Companies like USWest and Cox believe that providing a bundle of telephone, television and Internet services will make customers less likely to change providers.

Once the customer is locked in, Cox's strategy is to increase their average monthly bill with add-on products and services.

Video-on-demand, for example, will bring in an estimated $3.50 per rental, and as much as $9.95 for adult movies and $1.95 for older releases. TV on demand will charge 25 cents to $2 per program and from $5 to $10 per month for the ability to pause, reverse and fast-forward real-time TV programming.

Interactive e-mail would add $3 to the average cable bill; Web browsing an additional $5 to $15. The company also sees opportunities to sell advertising at the beginning of its video-on-demand products and Internet TV screens.

"The opportunity to generate $10 to $25 per month in new revenue is a real possibility," Robbins said.

The video-on-demand trials in Phoenix will start with 50 employees and later expand to 2,000 customers. Early next year, it should be available to all of Cox's approximately 700,000 Phoenix area cable customers, spokesman Alex Horwitz said. The interactive TV product also should be available to Arizona customers early next year.

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Reach the reporter at: Max.Jarman@ArizonaRepublic

Acquisition nets cheap Mexico calls

Phoenix-based Inter-Tel Inc.'s wholly owned, Internet-based, long-distance carrier has acquired a Houston company that will give it access to markets in Mexico and eventually South America.

The acquisition of Intercomm Americas Inc. will enable Inter-Tel.net's customers to place calls between Mexico and the United States for as low as 2.9 cents per minute, said Ross McAlpine, president of Inter-Tel.net. AT&T's lowest rate is 14 cents per minute to border cities and 35 cents a minute to areas around Mexico City.

"The Mexican market has tremendous potential," McAlpine said.

He said Intercomm Americas was acquired with a combination of cash and stock in its parent, Inter-Tel Inc. Specific terms were not disclosed.

Long-distance carriers that use the Internet, like Inter-Tel.net, switch calls originating from conventional telephones onto the Internet for routing. At their destinations, the calls are downloaded from the Internet and routed over conventional telephone lines for the last mile. By using the Internet, the companies avoid conventional long-distance charges, so they can price their services lower than other carriers.

Inter-Tel.net sells long-distance air time to international long-distance carriers and distributors of prepaid calling cards. Customers access the service through a dial-up number on the calling card.

McAlpine said the Intercomm Americas acquisition positions Inter-Tel.net among the top five Internet Protocol telephony companies in the country. The two companies combined handled 900,000 calls during April for 21 million minutes of calling time.

Bus tours 'New Markets'

Brand-new warehouses, lush golf courses and tile-roofed, four-bedroom homes being built on hilltops are routine deals for Arizona bankers with money to lend.

But it's a different matter when the warehouses are just blocks from dusty used-car lots, when the courses have wild horses nibbling the trees and when the housing starts come courtesy of casino money.

Nearly 50 bankers and government officials got firsthand looks Wednesday at new developments and gaping needs during a first-ever "New Markets Express" bus tour of south Phoenix, the town of Guadalupe and three Valley-area Indian communities.

The tour was designed to show them possible business opportunities in such New Markets - the Clinton administration's code words for minority- and women-owned businesses and low-income areas that traditionally have been overlooked as deal sources.

"These communities are not new, but they are new in some aspects of their economic development," said Robert Blaney, Arizona district director for the U.S. Small Business Administration.

Among the sights:

The area stretching from downtown to south Phoenix offers everything ranging from old school sites the city hopes to have developed with housing, retail and offices to vacant lots ready for new building projects, Phoenix City Councilman Cody Williams said. Watkins Street bustles with commercial and industrial buildings, and the area around Sky Harbor International Airport is planned for consolidation of rental-car businesses.

Guadalupe has been working on self-help housing projects, in which families help each other build homes to replace structures often built of plywood and sometimes lacking indoor plumbing, Assistant Town Manager Mary Hoy said.

The Gila River Indian Community has 43 tenant businesses in its Lone Butte Industrial Park and has spent $5 million on roads and sewers for an area where a resort and golf course are planned, Assistant Community Manager Ardell Ruiz said.

The Salt River Pima-Maricopa Indian Communityis home to a $22 million-a-year chain of gas stations and convenience stores and the Chaparral Office Park development, but one of the biggest concerns is getting the capital and technical assistance for community members to become entrepreneurs, tribal staffer Zoar Fulwilder said.

The Fort McDowell Yavapai Nationhas seven business enterprises, including a sand-and-gravel company, a mesquite-firewood seller and a farm with pecan and citrus trees, tribal planner Rory Majenty said.