AOL, Time Warner Merger Will Open More Options for Subscribers, Says CaritaSoft.

Business Editors & High-Tech Writers

AUSTIN, Texas--(BUSINESS WIRE)--Jan. 16, 2001

As Incumbents and New Service Providers Battle

for Limited Subscriber Base, Customer Knowledge Will

be Key Driver in Profitability

TREND:

In approving the AOL, Time-Warner merger on Jan. 11, the Federal Communications Commission stated that the combined company must open its cable lines up to other video and Internet service providers.

By opening up the network, subscribers will now be given a greater choice of service providers. In fact, Time-Warner has already reached a deal with EarthLink for the right to carry Internet signals on Time Warner's cable networks.

Additionally, there are several new entrants in the market, such as Grande Communications, WIN, WOW, DirecTV and EchoStar that offer consumers virtually the same products. For a company to succeed, it must face the challenge of increasing profitability while providing the services needed to retain customers.

As the competition heats up, providers are challenged with promoting and delivering an increasingly complex set of video, data and voice services to a captured customer base. Success for cable and broadband providers will depend on how well they execute in three customer-focused areas: delivering targeted services, reducing customer churn -- which will remain a significant challenge -- and quickly acquiring customers. All of this has to be done while reducing costs and increasing revenue. Personalized customer service is key, which requires an end-to-end customer management system with a 'single view' of customer information.

STATISTICS:

-- On average, it may cost a cable provider more than a $1,000 to acquire a new
customer. (Cable Industry Ratio Report)

-- Customer churn rate varies from 28 percent for basic video subscribers, to
as high as 70 percent for premium video subscribers. (Cable Industry Ratio
Report)

-- CRM is the hottest technology trend for 2001 and will be a huge area for
communications providers. (InfoWorld)

-- Customer service is the first reason that comes to mind for the largest
percentage of consumers -- 40 percent -- who would select their preferred
provider over the others. (CTAM Pulse)

-- Only 16 percent of customers perceive cable providers (excluding AT&T
Broadband) as having "Excellent or Very Good" quality, compared with 22 percent
for telco providers. (Strategis Group)

INDUSTRY OPINIONS:

"By 2003, an estimated 30 percent of users will have made the switch from dial-up to broadband. Now, with multiple ISP choices, we think that number will be even greater." -- Garry Betty, chief executive officer, EarthLink

"I envision a broadband oasis where anybody who wants to compete in this broadband marketplace and make the investment to deploy should be able to do so in an unregulated or a significantly deregulated environment. That is the fastest way to get broadband out to the American public." -- William Kennard, chairman of the Federal Communications Commission, in a September 1999 speech

"The basic premise in this new world is that the value of your company is equal to the value of your customer." -- Ronni Marshak, senior vice president, Patricia Seybold Group

EXPERT SOURCES:

Michael D'Eath, chief executive office of CaritaSoft, can address the issue of 'single view' and how to implement a customized Customer Relationship Management (CRM) solution that benefits subscriber-based companies. D'Eath can also attest to the importance of customer service and one-to-one marketing in the newly deregulated and highly competitive communications industry.