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AT&T Cuts Another Blow To Former Cable Camelot

This city's reign as the capital of cable TV is over.

Consolidation, a stressed economy and the natural ebb and flow of a maturing industry have put the Mile High City on a gradual downhill traverse from its peak years, when it was arguably cable's first — and only — capital.

The most recent evidence: AT&T Broadband said last week it will eliminate 675 Denver-based jobs by mid-December and a total of 1,700 by July 2003, as part of its pending merger with Comcast Corp.

Initial job cuts will come from such administration sectors as accounting, marketing, legal and information technology, all at the MSO's Denver headquarters. The layoffs are the first phase of employment cuts related to the $48 billion merger.

But more than 4,000 employees will remain in Denver, including 2,000 who will manage AT&T Comcast Corp.'s system-operations functions here and another 2,000 who will run its Digital Media Center, Network Operations Center and its national customer-care center.

"This is largely about finding synergies when two corporations merge," AT&T Broadband CEO Bill Schleyer said last week. "There was a fairly significant amount of job duplication, which is unfortunate, because we have such high-quality people that have accomplished a lot. But it's just the way it goes.

"Headquarters is in Philadelphia, and a lot of people were offered jobs, but just couldn't move."

AT&T is offering generous severance packages: Employees will be paid anywhere from four months to more than one year in salary, as well as 18 months of health-care benefits and outplacement assistance.

The MSO had previously announced that Schleyer and COO Ron Cooper would leave the company after the merger. Schleyer said system-level MSO employees would be "largely unaffected" by the layoffs.

Just a few years ago, a dozen MSOs with more than 23 million subscribers called Denver home, with major cable-network affiliates nestling close by. Equipment vendors, venture capitalists and a gaggle of cable wannabes all knew that the road to cable peaked in Denver.

The industry even moved its storied past from Pennsylvania to the newly opened Cable Center at the University of Denver. And though some insist there never really has been a cable capital, per se, Denver was probably as close as the industry could get. But that was then.

"As a salesperson going to Denver five years ago, you could knock off all the MSOs in one trip," said John Boland, vice president and general manager of advertising systems for nCUBE Corp. "Not now. With Time Warner [Cable] and AT&T [Broadband] pulling out of Denver, those were the last straws."

The streaming-media equipment provider is moving its offices — and 100 local employees — from Louisville, Colo., a Denver suburb that's also home to Cable Television Laboratories Inc., to Beaverton, Ore.

The parade of MSOs, programmers, equipment vendors, software and hardware companies exiting Denver can be viewed as a little depressing. But many believe it's simply the city's turn to redefine itself in the communications space.

"Denver is at risk, but we were bound to see consolidation in the cable and communications industries," said South Metro Denver Economic Development Group director Jim Kircheimer. "However, we aren't taking the approach that this is just the way it is. There's real opportunity here."

Denver's pool of quality communications professionals runs deep, and is likely to get deeper once the AT&T-Comcast merger is consummated, experts maintain.

Unfortunately for Denver, that deep pool is the result of cable's exodus.

"The talent pool is very fresh here," said Martin Pocs, vice chairman of DHR International, the fifth-largest executive search firm in the world. "They're multitalented, and that translates well to other industries. We get lots of calls for cable people from around the globe. Denver is just redefining itself."

Storied past

Early on, calling Denver cable's capital was a no-brainer. Banker and cable-system builder Bill Daniels, Tele-Communications Inc. founder Bob Magness, Jones Intercable Inc. founder Glenn Jones, UnitedGlobalCom chairman Gene Schneider and a stable full of cable's entrepreneurial legends began Denver's ascent to cable's mountaintop. Others followed.

"Bill Daniels was really the defining force," said Trygve Myhren, president of Myhren Media and Ventures and former CEO of American Television and Communications Corp., a cable MSO that folded into Time Warner Cable. "He made it happen in Denver.

"Then, it was Time [Inc.]'s merger with Warner [Communications Inc.] in 1989 that started cable's consolidation. But at the same time, TCI, Jones, Rifkin [& Associates] and others were growing their businesses. They just happened to be based in Denver."

Denver-based MSOs such as Fanch Communications Inc., FrontierVision Partners L.P., Harmon, Jones and Triax Telecommunications Co. followed the consolidation and acquisition routes.

Some industry experts maintain that Denver's place in cable is simply being reinvented through a shift from its status as the industry's distribution center to its financial, content and international hub.

"Clearly, Denver has shifted from the distribution center, but the content is still here with Liberty Media [Corp.], Crown Media [Holdings Inc.] and others, while [billing vendor] CSG [Systems Inc.], Daniels [& Associates] and more remain," said Ted Henderson, cable industry analyst for Denver-based Stifel, Nicolaus and Co.

"And globally, you must go through Denver because of [international MSOs] UnitedGlobalCom, Callahan Associates and Liberty. The nod goes to Denver as a cable hub. There is no true cable capital," Henderson added.

"The industry certainly has consolidated quite a bit, but the issue is how much influence does Denver wield now. I think quite a bit," added Brian Deevy, CEO of Daniels & Associates, the late Bill Daniels's investment bank.

Denver's international influence is growing, particularly with the likes of satellite provider EchoStar Communications Corp. and Liberty headquartered in or near Denver.

"The first two names people mention when Denver is brought up are [EchoStar chairman] Charlie Ergen and [Liberty chairman] John Malone," chuckled Jim Carlson, a former Jones Intercable executive who now runs his own public relations firm, Carlson & Associates.

Nets are leaving

Nonetheless, MSOs have left or are leaving and with that, programmer presence has diminished. Companies such as Showtime Networks Inc. and A&E Television Networks are either leaving or downsizing their Denver operations.

Only ESPN has expanded its presence in Denver, by closing its Burbank, Calif., office and tapping Denver as its regional headquarters.

Time Warner Cable's impending move from Denver to Charlotte, N.C., and Herndon, Va. — which affects about 200 local employees — coupled with AT&T Broadband's acquisition by Comcast, have essentially ended Denver's claim as cable's distribution capital.

But regardless of Denver's industry status, many in the rank and file are facing the harsh realities of a nasty economy and a downsized cable presence.

Many have been there before, and said that leaving Denver's lifestyle isn't an option.

"This is a very livable area, with big-city opportunities without the downsides of a big city," related Tracy Baumgartner, an AT&T Broadband official and veteran of cable's acquisition game, having worked for MediaOne Group Inc. and Jones Intercable. "The seasons are gorgeous and the scenery spectacular."

She added: "We've been through this before and the second time is always easier, especially when it's in Denver."

For bankrupt companies such as Denver-based Western Integrated Networks — a fledgling multi-service provider with a $200 million gold-plated system in Sacramento, Calif., that recently sold for $12 million on the auction block — it's never been easy.

"The reality was, capital investors dropped out," said vice president of sales and marketing Bill Brovsky. Fifty Denver employees were affected.

Some are less troubled by cable's fortunes — or lack thereof — in the Mile High City.

"Consolidation is something we've adjusted to," said CSG executive director of public relations Carrie Schafer. "We're a global entity and located in the right place, but all of Colorado is affected, and that's unfortunate. There are highly talented people here who won't leave this quality of life."

The same goes for the National Cable Television Institute (NCTI) and AT&T's Digital Media Center, both of which are located in Littleton, 12 miles southwest of Denver.

"For suppliers, there's no concentration here. For us, however, 90 percent of our time is spent at the systems," said NCTI president Tom Brooksher. "And with the Cable Center here, training will continue."

Center of interest

Yet without the likes of AT&T Broadband and TWC as the last remnants of Denver's once-burgeoning MSO crowd, questions inevitably arise about the future of the city's industry institutions. That's particularly true for the Cable Center, whose existence is greatly dependent on the generosity of top executives from the departed MSOs.

"There's no denying there aren't 12 MSOs here, and we have to work hard not to be just an historical reference," said Cable Center CEO Jim O'Brien, former president of Jones Intercable. "The pure tonnage may be gone, but the same amount of intellectual capital is here, and that's the next evolution for cable."

In the meantime, Denver will need all the smarts it can muster to prevent that from happening.

Said Myhren: "Many early cable people found it wasn't a good business for them anymore. Now, they've started ventures and new companies. It reflects the same entrepreneurial spirit that made Denver cable's capital in the first place. Now, capital means something different."

A number of former cable stars — such as Bill Elsner, Jack Tankersley, Fred Vierra, John Sieman and others — have established venture-capital companies in Denver, Myhren said. WideOpenWest LLC is still forging ahead as a multi-service provider. And a host of equipment vendors, software companies and other cable related businesses remain in Colorado.

The telecommunications and broadcasting sector — which includes all cable-related industries in Denver from telco Qwest Communications International Inc. to EchoStar — employed 50,000 people at mid-year 2002 and ranks third in the country for employment concentration percentage at 3.5 percent.

Only Atlanta and Middlesex County, N.J., have a higher concentration of employment by percentage in that sector. And only Atlanta has a higher absolute number of employees in that sector, at 84,000, according to Patty Silverstein, president of Development Research Partners, the chief economic consultant to the Denver Chamber of Commerce.

Yet losing its once-lofty status as cable's capital can be painful to Denver's ego — and not exactly a Chamber of Commerce public-relations strategy. Mix in Qwest's deepening problems, the demise of data-over-cable provider High Speed Access Inc. and others, and the city's bruises become even more noticeable.

Admitted Pocs: "There's a certain degree of civic pride in saying Denver is cable's capital. A bummer? Yeah. But no one is taking its place. And who's to say [St. Louis-based MSO] Charter [Communications Inc.] won't be back here in six months?"

Most are saying cable's co-capitals now include Atlanta, Denver, Los Angeles, New York, Philadelphia and St. Louis — with each claiming a piece of the industry's capital mystique.

Said Deevy: "How can you not include cities like L.A., with all the creative stuff they're doing and new technology trials. Now, you have to deal with everyone across the board, but Denver will always be a player and center of influence."

Steve Donohue contributed to this story.