Annual Report Index

Thomas E. Waldrop, president, Cable Television Division

A: The Cable Television Division is an important asset in Media General’s business mix because it provides us with access to one of the most dynamic consumer and business markets in the country — Fairfax County, Virginia. In addition, this Division has proven to be a strong performer, generating solid cash flow and an impressive return on assets. In 1997, the Cable Television Division accounted for 17 percent of Media General’s revenues, 25 percent of operating income, and 26 percent of operating cash flow.

Q: Is Fairfax County planning to renew Media General’s cable franchises?

A: We will renew our franchises in northern Virginia by early summer of 1998. They will be 15-year franchises. We will upgrade our cable infrastructure with fiber down to an average of 2,000 home nodes. This will provide an information and communications system that will launch us into the 21st century. It will not only provide more reliability and better signals for our customers, but will allow us great versatility in providing our subscribers new services. Our intent is to launch digital compression into our system by the early part of 1999, and introduce high speed data services throughout our market. Also, we will have fully interactive capability throughout our system, and we will use it to provide new services that subscribers want, and that have a reasonable return on our investment. We will also continue our commitment to public, educational and community access, as well as an institutional network for the county, that will meet the needs of the future. The renewal of these franchises will create a strong partnership between our Company and the county, and will benefit Media General Cable, the county and our customers.

Q: Will this upgrade require a significant capital investment?

A: Yes; but although the investment required by Media General is sizable, we believe the long-term value for the Company far exceeds our investment.

Q: What are the benefits of this capital investment?

A: The installation of an advanced fiber optic and coaxial cable network will enable us to maintain our position as the leading provider of video services in northern Virginia. It will enhance our ability to participate in emerging service categories, such as broadband Internet connectivity for personal computers and television sets. It also will ensure future distribution opportunities for electronic content produced by our sister companies, including the Virginia Business magazine, Media General Financial Services, Gateway Virginia on-line service and others.

Q: How do you plan to expand this business?

A: Our central strategy is to increase opportunities at our core business units while adding new, complementary lines of business that utilize our infrastructure. Our strategy includes maximizing our systems’ broadband potential, employing aggressive product marketing and packaging strategies, delivering outstanding customer service and implementing continuous improvement programs. Focusing on these strategies will allow us not only to maintain our current customer base, but to generate incremental revenues from ancillary services.

Q: What is the competitive environment that you face?

A: Currently we compete for market share with satellite video providers and with the Internetfor time share in the lives of our consumers. The good news is that Media General Cable controls its own destiny. If we efficiently upgrade our network, using proven cable and data communications technology, we can be a leader in both the video and Internet businesses in Fairfax County for the foreseeable future. In doing so, we can deliver strong revenue growth for our Division, and excellent value for stockholders.