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No Digital Patch Here

Which MSO now boasts that it has the highest penetration of cable modems in the industry, even though it was out of the box later than the rest? Hint: That same MSO also dropped Excite@Home Corp. last year.

Still don't know? Well, that same operator has not yet launched a digital-video service, though most of its peers have been at it for years.

Give up? It's Cablevision Systems Corp., which disappointed last week when it announced it would delay its rollout of the Sony Corp. digital service until September. Cablevision said it needed more time to hone its customer-service infrastructure.

Investors exhibited some impatience and Cablevision's stock dropped 7 percent, even though most of the news from its earnings report last week was pretty positive.

Given the heat, you have to give Cablevision some credit for sticking to its guns here and not rushing to the marketplace. That's especially so given that it's the only MSO that has opted for the unknown: the Sony platform.

Cablevision's absence from the digital rollout scene stands out like a sore thumb because all of its peers have been most aggressive in rolling out digital. Most MSOs believe digital offers the best protection from subscriber defection to direct-broadcast satellite services.

And Cablevision is very much aware of DBS' threat to its 3 million subscriber base. The MSO has taken its lumps. According to the company's own figures, DBS services grew 5.1 percent in the New York area in 2000.

More recent figures, however, show that DBS growth has slowed somewhat in early 2001, tracking at 3.7 percent.

Cablevision remains a different animal. Years earlier, several MSOs-including Cablevision-had embarked on another course to stem DBS erosion. They offered an advanced-analog package of 70 to 100 channels, along with an interactive programming guide, one of the most popular features of DBS and now digital services.

Cablevision refers to much of that earlier digital technology that other MSOs were doing as a "digital patch" that gave early advocates the ability to add 45-50 channels quickly without doing a costly rebuild.

The MSO describes its upcoming Sony digital offering as "not just TV," but as a truly interactive experience, with "real e-mail, real video-on- demand" and a great potential for Internet-protocol telephony.

And Cablevision, unlike other MSOs, will employ the "whole-house strategy," by hooking up all of the television sets in a given home to digital, rather than just one, making subscribers less likely to switch to DBS.

To some in the marketing community, that could be a big advantage for Cablevision. Research has shown interactivity is a highly segmented activity.

With more than one TV set in a household hooked up to digital, kids could play games in one room while their parents watch a VOD offering on another set.

It all sounds great, but why is this digital rollout taking so long? Cablevision insists the Sony technology is fine and works, despite critics' questions that it might not be ready for primetime.

But technology often runs way ahead of marketing issues, and that's what Cablevision is now busy addressing. There are complex issues involved here, such as training customer-service reps about the intricacies of the offering and a whole slew of marketing concerns.

Cablevision owns consumer-electronics retailer The Wiz, which will serve as another avenue of distribution for the Sony set-tops. So the company's subscribers will have the option to do self-installs, as they have successfully done with cable modems from The Wiz.

Factor in the field and operations issues, and it becomes infinitely more understandable why Cablevision is taking its time. Cablevision says it learned a lot of lessons from its cable-modem rollout, and the company just wants to do it right.

A year will tell if that was the right approach with digital.