The Little Cable Company That Could -- Summit Goes Head-To-Head With Goliath Tci

James Hirshfield's little cable-TV business is surrounded by the biggest competitor he could possibly have. The biggest in the world. A company so big its quarterly report this week cited billions in revenue and 12.2 million subscribers nationwide.

Family-owned Summit Communications Inc. of Bellevue, with a mere 40,000 cable customers in Washington, Oregon and Idaho, is surrounded in Seattle by mammoth Tele-Communications Inc. (TCI), based in Denver.

And yet Hirshfield plans to string wire on the same city-owned poles as TCI, and offer many of the same channels. He'll compete head-to-head with what many regard as the most powerful, most diverse conveyer of entertainment and information on the planet.

"We are as sound (financially), perhaps a little more sound than TCI," said Hirshfield, who with his wife owns about 70 percent of Summit. "We just have a lot fewer zeroes at the end of all our numbers, and cable TV is pretty much incremental in costs."

Summit now serves primarily the Central Area, South Seattle and areas of downtown, where there already is some overlap with TCI. With city approval expected soon, Summit plans to expand slowly into other adjacent areas served by TCI.

Why would TCI subscribers switch? And why would new cable customers choose Summit?

"We've tailored our product offering in Seattle toward the type of people we serve in Seattle - a lot of Asian programming, for instance," Hirshfield said. "Whereas a big company probably tailors their product offering based on what corporate in Denver says."

Summit's market-research suggests that TCI and Viacom customers are interested - sometimes very interested - in an alternative.

"We think we've got much better service, higher technical quality, we're local and we put programming on that the community wants," said Steven Weed, Summit's vice president and chief operating officer.

The notion that municipal-cable franchises can be granted to just one company in a given area is common but wrong. Federal law, in fact, mandates that cable franchises be "nonexclusive."

There are few places in the country, however, where two cable companies serve the same area. Until recently, stringing cable in an area already served was regarded as a gamble, which might be one reason why the industry term for it is "overbuild."

"In the cable business, you spend all the money first and then you hope you did it right," Hirshfield said.

With telephone companies talking about getting into the cable-TV business, and after a long period of disgruntlement among cable customers nationally, side-by-side competition is becoming more attractive.

Moreover, cable companies intend to offer telephone service eventually, so serving large contiguous areas will be important.

"We expect to see competition from them, and we expect to compete in their areas," said Bill Bennett, general manager of TCI Cable of Seattle, referring to Summit.

In Seattle, Summit serves about 13,000 households. TCI has around 80,000 subscribers, and Viacom has 60,000. TCI is in the process of buying Viacom's systems nationwide and together they dominate metropolitan Seattle-Tacoma.

Although Summit charges a little more than TCI, it offers up to 54 channels, compared with TCI's 38. But that advantage is about to be lost.

TCI is rebuilding its system with high-capacity fiber-optic cable to neighborhoods. Viacom has already done so and will exceed Summit's channel capacity next month. Both are poised to offer 70 channels and, with eventual digitization, many more - plus Internet access for computers.

Summit says it can match that and already has installed a fiber-optic loop from which to build.

The city and Summit are working out the finer points of a new cable franchise that will allow the expansion, and the requirements will be nearly identical to those in a new 10-year franchise agreement with TCI.

After several years of negotiations, City Council approval for both could come by year's end. An updated franchise agreement for Summit's core service area would come next.

The new cable franchises, with their modern technical specifications, and TCI's absorption of Viacom will make 1996 a pivotal year for Seattle cable-TV customers.

But Hirshfield said it will be business as usual for Summit. The expansion in Seattle is just another chapter in the company's methodical growth from a basement operation into a midsized business with 115 employees.

Hirshfield and his wife Mary started Summit in 1973, building systems in small towns such as Friday Harbor in the San Juan Islands and Buhl, Idaho. Most of Summit's systems serve small towns, but the biggest is the Seattle franchise, acquired in 1987.

"Either this company succeeds or we're on Social Security," Hirshfield said. "We have a little extra money put aside, but basically what we have is right here. So anything that's done is not done lightheartedly. It's done because you seriously believe it will work."