- increased leverage for negotiating programming contracts; and
- increased influence on the evolution of important new technologies
affecting our business.
In addition, we recognize the benefits of "swapping" cable systems with other
cable operators to reinforce the advantages of our "clustering" strategy.
UPGRADING OUR SYSTEMS. Over the next three years, we plan to spend
approximately $900 million, or $1.2 billion pro forma for the recent
acquisitions and pending acquisitions, to upgrade our systems' bandwidth
capacity to 550 MHz or greater so that we may offer advanced cable services,
increase program offerings and permit two-way communication. Today,
approximately 55% of our customers are served by cable systems with at least 550
MHz bandwidth capacity, and approximately 37% of our customers have two-way
communication capability. By year end 2001, we expect that approximately 92% of
our customers will be served by cable systems with at least 550 MHz bandwidth
capacity and two-way communication capability. A bandwidth capacity of 550 MHz
enables us to offer our customers up to 82 channels of analog video service as
well as advanced cable services.
EMPHASIZING INNOVATIVE MARKETING. We have developed and successfully
implemented a variety of innovative marketing techniques to attract new
customers and enhance the level of service provided to our existing customers.
Successful implementation of these marketing techniques has resulted in internal
customer growth rates in excess of the cable industry averages in each year from
1995 through 1998 for the cable systems we owned prior to merging with Marcus
Cable Holdings, LLC. The cable systems we acquired upon the merger with Marcus
Cable Holdings, LLC came under common management with us in October 1998, and we
have begun to implement our marketing techniques throughout those systems.
OFFERING NEW PRODUCTS AND SERVICES. By upgrading our systems, we will be
able to expand the array of services and advanced products we can offer to our
customers. Using digital technology, we plan to offer additional channels on our
existing service tiers, create new service tiers, introduce multiplexing of
premium services and increase the number of pay-per-view channels. We also plan
to add digital music services and interactive program guides. In addition to
these expanded cable services, we also plan to provide advanced services
including high-speed Internet access and interactive services. We have entered
into agreements with several providers of high-speed Internet and other
interactive services, including EarthLink Network, Inc., High Speed Access
Corp., WorldGate Communications, Inc., Wink Communications, Inc. and At Home
In the second quarter of 1999, we completed two transactions in which we
acquired cable systems serving a total of approximately 195,000 customers in 4
states for a total purchase price of approximately $699.0 million. For the year
ended December 31, 1998, the cable systems we acquired in these recent
acquisitions had revenues of $57.2 million and earnings before interest, taxes,
depreciation and amortization of approximately $28.3 million.