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Mas! Arizona Could Help Cox Compete

Cox Communications Inc., looking to super-serve Hispanics and better compete with an aggressive telco challenger, next week will launch a Spanish-language cable news channel in Phoenix.

The 24-hour service, Mas! Arizona, is a partnership between Cox and Belo, whose KTVK-TV will contribute news-gathering resources. The cable operator and broadcaster are building on a relationship they started with Arizona NewsChannel, an existing joint venture borne from retransmission consent.

"This kind of arrangement is not new to us," said Sue Schwartz, general manager of independent KTVK, the top-rated broadcaster in the DMA. "We know it's an arrangement that works very well."

Starting Oct. 16, Mas! Arizona will be available to 456,000 expanded-basic subscribers in the upgraded portion of Cox's Phoenix systems. It will eventually roll out to all 615,000 homes in the cluster.

To date, Cox has upgraded 75 percent of its hybrid fiber-coaxial cable network in Phoenix, where it offers high-speed Internet access, telephony and video-the same services that rival Qwest Communications International Inc. hawks in that market. U S West, now owned by Qwest, began offering video over telephone lines in Phoenix in 1998, using very-high-speed digital subscriber line (VDSL) technology.

With both Arizona NewsChannel and Mas! Arizona on its lineup, Cox officials in Phoenix think the system has a nice leg up on both of its local rivals-Qwest and the direct-broadcast satellite providers.

"This is helping to differentiate us from our competitors," said Ivan Johnson, Cox's vice president of community relations and televideo in Phoenix. "One of our focuses is to meet the needs of the very significant and growing Hispanic customer base in Phoenix."

About 20 percent of residents of Maricopa County, which includes Phoenix, are Hispanic. To court these viewers, Cox in July launched TeleLatina, a digital tier of Spanish-language services.

The tier debuted with nine Spanish-language networks and recently added a 10th, the Hispanic Television Network. So far, 5,000 subscribers have taken the TeleLatina tier.

"Nobody else in this market has that package," Johnson said. "It's been very well received."

But Qwest officials noted that their Phoenix system does offer a variety of Spanish-language services.

Although Mas! Arizona will be based at KTVK, it will have its own on-air look and staff. Roughly 20 people will be hired for the fledgling Hispanic news operation, officials said. Mas! Arizona is certainly the only Spanish-language news channel in the Southwest, according to Belo senior vice president Skip Cass. And he isn't aware of anything similar in any other part of the country.

The all-news Spanish-language channel will be jointly managed by Schwartz and Fran Mallace, general manager of CableRep, the ad-sales arm of Cox Communications in Phoenix. CableRep will sell national and local advertising for the network.

Phoenix is a key battleground for Cox, and one that Wall Street is keeping its eye on. In July, shares of Cox and other MSOs dropped when stock analysts grew concerned about Cox's competitive woes, particularly in Phoenix.

For the second quarter, Cox's cash flow and revenue growth trailed analysts' expectations, in part because of high marketing costs in Phoenix, the MSO's largest system and most competitive market.

Shortly thereafter, in August, veteran general manager Gregg Holmes left the Phoenix system. Steve Rizley, regional vice president of CableRep in Phoenix, has stepped in to serve as interim general manager.

To date, Qwest has signed up 50,000 to 55,000 subscribers in Phoenix, according to a telco spokesman who couldn't break out how many of those were former Cox subscribers who switched.

In September, Cox rolled out several new products and instituted other changes in Phoenix. It introduced an entry-level digital package, restructured rates and rejiggered its channel lineup.

But a software bug and other snafus resulted in a barrage of telephone calls to the cable operator. Call centers were also swamped by those looking to sign up for a new digital offering at priced $39.95-a mere $4 more than expanded basic.

The volume of phone calls was so great that some subscribers complained about receiving busy signals for a week. That situation was chronicled in the local newspaper,The Arizona Republic.Johnson said Cox had increased its number of phone trunks to 345 from 207 to accommodate the deluge of calls it expected. But even that capacity increase wasn't enough to keep up with the initial volume.

He compared Cox's many changes in September toThe Perfect Storm,in that all of the activity hit at once. But Johnson said the system had to shift gears quickly in order to compete in Phoenix.

"You have to be nimble and constantly reordering your priorities," he said.

Wall Street is definitely paying attention to Cox in Phoenix.

"The Phoenix market was a good lesson for the company and the industry," said SG Cowen Securities Corp. analyst Gary Farber. "It's a market that is going to have more investor interest going forward, but it's probably going to have more focus from Cox as well, because it's not as upgraded as some of the other ones.

"Long-term, it will probably turn out to be a plus for the company, because it will take their largest market and put a more aggressive focus around it, like they did in San Diego."

Cox CEO James Robbins, interviewed on CNBC last Wednesday, addressed the Phoenix efforts.

"We are redoubling our efforts to be very precise in our marketing and to run that system for the long haul," he said, noting that Qwest is reportedly re-evaluating the economics of video over VDSL.

"In Phoenix, we are being very, very aggressive in a competitive marketplace," Robbins added.

Mas! Arizona, on channel 55, will utilize a 30-minute news-wheel programming format, including updated news and headlines all day. The schedule will include news, weather, sports and coverage of local issues and communities.

The Spanish-language channel is the fourth cable-news partnership for Cox and Belo. In addition to Mas! Arizona and Arizona NewsChannel, they run similar operations in Hampton-Norfolk, Va. and New Orleans.

Johnson said Cox is talking to several professional sports teams in Phoenix about acquiring Spanish-language rights for Mas! Arizona. He declined to name them.Mike Farrell contributed to this story.