Cox Express Speeds Digital Rollout in Ariz.

Faced with heated competition from digital-subscriber line and direct-broadcast satellite services, Cox Communications Inc.'s Phoenix division will accelerate deployment of digital-video and high-speed data services even before it completes its digital build-out.

Rather than wait until its plant is fully upgraded throughout the valley, the MSO will address pent-up demand by offering more modest versions of its Cox Digital video service and Cox@Home high-speed-data offering in the short term.

"We have a large system with 12,000 miles of plant," said Cox Phoenix vice president Ivan Johnson. "You don't upgrade that overnight."

Last week, Cox announced that it will start offering "Cox Digital Express" and "Cox@Home Express" next month to nearly 220,000 homes in the Phoenix area, including the towns of Glendale, Gilbert, Scottsdale, Tempe and Fountain Hills, as well as Mesa's Dobson Ranch. The company expects nearly 85 percent of its 1.24 million homes passed to have access to some form of digital service by the end of this year.

Cox Digital Express adds 40 digital-video channels, 45 digital-audio channels and an electronic programming guide on top of the system's analog offerings. The service uses the same digital set-top box that Cox Digital customers use, so future upgrades won't require an equipment swap.

Cox@Home Express is a one-way broadband service that requires a telephone-return path. It uses a two-way-capable, high-speed modem.

Without the intermediary digital services, some Phoenix-area customers would have to wait until 2002 before the full Cox@Home and Cox Digital video services become available.

"We felt that speed to market is a critical ingredient to our success in meeting consumer demand," Cox Phoenix general manager Gregg Holmes said. "Based on the demand for these products, finding a way to accelerate their launch was crucial."

Cable & Telecommunications Association for Marketing president Char Beales concurred. "If you're in an intensely competitive situation, that makes sense, because you don't want to lose the household to the competition," she said.

Cox had to "think outside the box" to determine how to re-engineer its network for the new Express services. Deploying those products throughout a relatively wide geographic area also requires the operator to step up marketing efforts and expenditures.

But Holmes said Cox would not slow down its plant upgrades as it launches the new Express services. Instead, the operator plans to hire as many as 1,000 new employees this year to help market and install them.

"The whole key is not to delay the deployment of the full-service digital video and data products, but to layer on by adding additional people," he said.

Phoenix is a particularly competitive market. Regional Bell operating company U S West offers both standard DSL and video-over-DSL products.

Cox Digital Express offers half the digital-video channels available on the full Cox Digital service, at a fraction of the price. Typically, the full service costs $7.95 for one of three tiers, or $12.95 for all three tiers. Analog customers must upgrade to a Scientific-Atlanta Inc. set-top box to see the digital channels.

In upgrading the plant for the Digital Express service, Cox will temporarily take down two channels in each of the six service areas affected. The channels include Travel Channel, C-SPAN 2, Scottsdale Community College Channel and InDemand 2. In some cases, other networks will be temporarily moved on the channel lineup.

"Any time you touch your channel lineup, you're going to have people that are unhappy because people are habitual," Johnson said. "The changes we're making our temporary."

Cox@Home Express customers receive a $10 discount off the regular price of the two-way service, Cox@Home Phoenix marketing manager Phil Weintraut said. Once the rebuild is complete and a customer can access the two-way service, the one-way service and price will no longer be an option.

The operator is installing Motorola Inc.'s model SB3100D cable modems, which are both one-way and two-way capable, Weintraut said.

While Holmes acknowledged that Cox has lost some subscribers to the competition, he said customer demand is what has driven the operator to accelerate its digital service plans.

"We're certainly mindful of the competition," he said, "but if we watch the competition and not the customer, we have our eyes on the wrong ball."