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Home-Builder Latest to Compete Vs. Cable

Move over, telephone companies and municipalities: Now, a
home-builder is getting into the act of competing against incumbent cable operators.

The Sacramento Metropolitan Cable Commission recently
awarded a cable license in the California capital to Strategic Holdings Inc., a wholly
owned subsidiary of developer Lennar Corp. of Miami. Lennar, which has built properties in
Florida, Texas and California, recently bought out a California developer, which gave the
Florida firm 2,100 homes, 300 acres and a 30-home backlog in Sacramento.

The license (the city and county of Sacramento do not
franchise cable operations) was awarded in the face of opposition from incumbent operator
Comcast Corp.

Ruth Blank, Comcast's general manager, said she's
concerned that the home developer will not provide PEG-access (public, education and
government) channels. But more important, the developer may have an unfair advantage on
pricing, she argued.

'If they form a homeowner's association, then
they can do a bulk [rate] deal for the whole development,' she said.

Robert Rubin, president of SHI, said the developer, which
has at least two active cable systems elsewhere, has used bulk contracts for programming,
but the company hasn't decided yet how to handle the Sacramento development.

Initially, the company intends to serve only the
development area for which it was licensed. But if the developer is successful there, it
may apply for a broader license and expand against Comcast's 240,000-subscriber
Sacramento Cable, Rubin said.

Historically, housing developers have included cable
pre-wiring in some tracts, selling or leasing the plant at the conclusion of construction
to a local incumbent. John White, SHI's general manager, California cable division,
explained that Lennar executives got tired of waiting, sometimes for months, for cable
operators to commit to line extensions to their developments.

'So we developed our own cable company that will work
on our own time line,' White said.

SHI now sells custom homes that can also include alarm
service, cable and other amenities, ready to switch on at occupancy.

White said cable systems thrive in northern Los Angeles
County and Dade County, Fla. In the latter location, nearby communities asked for SHI to
extend service, in part because the company undercuts incumbent MediaOne's rates by
20 percent. Now, 80 percent of that system's customers reside in non-Lennar homes, he
said.

MediaOne is also the competitor in the Los Angeles area,
where White said SHI serves 2,200 customers in a development in the Santa Clarita area.

White said his company can compete strongly on price; he
also believes that local control will improve the programming mix.

As far as Sacramento, White said he's been reviewing
Comcast's programming package and he intends to improve on the company's
offering with more channels at a better price.

With the arrival of SHI in the Sacramento market, that area
will be served by Comcast; another wireline operator (CableAmerica, with 1,000 subscribers
from 6,000 homes passed); a wireless operator, Wireless Broadcasting Inc.; and
direct-broadcast satellite companies.

But local regulators do not consider that effort to be
'effective competition,' in the legal sense. Rich Esposto, the executive
director of the local cable commission that serves the city and the county, said that
group has sent a letter to Congress decrying escalating costs and the lack of competition
in the video marketplace.