Dolan: AOL Would Be Fine Cablevision Shareholder

New York— Cablevision Systems Corp. CEO James Dolan wouldn't mind seeing AOL Time Warner Inc. replace AT&T Corp. as a shareholder in his company.

He said so at a New York Cable Club luncheon here on April 16.

On April 5, AT&T asked Cablevision to register 30 million shares it owns in the Bethpage, N.Y.-based cable operator for possible sale.

While AT&T could end up retaining the stock — which has limited voting rights — Dolan said the decision is ultimately AT&T's to make.

"I think it's a very valuable piece of equity," Dolan told the audience at Manhattan's Tavern on the Green. "My hope is that whatever entity ends up with the stock, it is someone who shares the same enthusiasm we have."

Dolan went on to name a company he wouldn't mind seeing pick up those shares — AOL Time Warner — and one he'd rather not see as a buyer: regional Bell operating company Verizon Communications Inc.

"AOL's strategy and ours are very similar," Dolan said. "We already relate to that company very well."

Several industry analysts have speculated that AOL Time Warner could use the AT&T interest in Cablevision as a means to eventually buy the MSO. Cablevision, which has about 2.8 million subscribers in the New York metropolitan area, would be a perfect fit with AOL Time Warner's 1.2 million cable subscribers in Manhattan and parts of Brooklyn and Queens.

But purchasing the stake wouldn't give AOL Time Warner any control of Cablevision: That would still rest squarely with the Dolan family. AT&T's two seats on Cablevision's board of directors would not transfer to a new owner.

Earlier, Dolan told the group that despite being "slow," Cablevision is moving forward with its planned digital-cable rollout in September.

Cablevision signed an agreement to use digital set-top boxes from Sony Corp. in 1999. The company first expected to begin rolling out those boxes in January 2000, but later pushed that date back to September.

"The technology is ready," Dolan said. "We will be deploying it in September."

Dolan said that Cablevision has focused more on rolling out its Optimum Online cable-modem product because customers are more familiar with the benefits of high-speed Internet service. The MSO now has a cable-modem penetration rate of about 15 percent.

"It [cable-modem service] is a good precursor to digital," Dolan said. "The [digital] set-top box is more capable than the modem in both installation and usage. Most customers who purchase a modem have been on the Internet. It's not their first call."

Because the majority of Cablevision's customers are already Internet users, selling them high-speed data is much easier than digital cable, he added.

"Sixty percent of our customers are Internet users," Dolan said. "We don't have to teach them to use it. We never intended to use the set-top box to add more channels. We already carry 90 channels.

"The set-top box is about connectivity. It is not for us to take a 550 megahertz system and add 50 channels because we're fighting DirecTV [Inc.]."

Once Cablevision goes digital, Dolan said, channels that may not have been able to get on the company's analog systems will find room on the digital tier. And that includes services like Lifetime Movie Network and Oxygen, women's networks that compete with Cablevision-owned WE: Women's Entertainment.

"With digital, the intention is to carry as much as we can," Dolan said. "The idea of having underlying content that works with this technology will be very attractive. If you're developing underlying content, we have room for you."