Facing assaults in some of its own systems by overbuilder RCN Corp., Cablevision Systems plans to counterattack by overbuilding nine New Jersey towns where RCN operates its few conventional cable systems.
Cablevision has contacted city officials in towns with 60,000 homes about building a cable system that would compete directly with RCN by offering advanced video, telephone and high-speed Internet services. The plan mirrors RCN's core business: constructing advanced networks to compete with operators' existing systems.
RCN plans to overbuild Cablevision in Hudson and Bergen counties in New Jersey. The Princeton, N.J.-based company has been fighting Cablevision for three years in Boston, although Cablevision is selling that operation to AT & T.
RCN, spawned by MSO and small-market telco C-TEC in 1996, still owns conventional cable systems serving 122,000 subscribers in New York, New Jersey and Pennsylvania. Its old cable systems are generally low-capacity and outmoded and are being upgraded.
Cablevision called its plan a "pilot" program to overbuild what it considers weak systems. Of course, it doesn't include systems owned by a traditional operator like Comcast, which operates properties contiguous to Cablevision's.
"New Jersey is very central to our strategy," Cablevision spokesman Charles Scheuler said. "There may be occasion for systems-especially ones that abut our systems and may be underserved by a provider-to offer services they want." RCN executives did not return calls seeking comment.
Bear, Stearns & Co. media analyst Ray Katz said overbuilding RCN would cost Cablevision about $54 million and damage to RCN would be rather small. The systems generate just $8 million in annual cash flow, but the company's capital spending to build new systems will total $1.4 billion.
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