Necessity drives small ops to new technologies
If necessity is indeed the mother of invention, then smaller cable operators are fast becoming Mom's favorite sons. Out of necessity, and in some cases just plain fear, smaller cable operators are becoming more innovative, and inventive, in their use of advancing technologies to further their businesses and to reach those elusive customers and the resultant revenues that in the past were out of reach.
The mix of good old business savvy and some leading-edge technology is allowing smaller operators the opportunity to not only upgrade their back offices and reach their customers in a kinder, gentler way, but is inspiring a more fluid work environment as the front office becomes more accessible and customer-friendly, the back office becomes more fluid, and field personnel keep in closer touch with both. And, what's really pushing the technology hot buttons among smaller operators is the chance to add real value to their operations through Internet and intranet access, digital video, and more.
Computer hardware and software advances and upgrades, along with digital, are big reasons for the groundswell of interest in technologies which are advancing smaller operators' businesses. But, a more visionary attitude by a group of operators who seem determined to grow their companies using new technologies is clearly speeding them toward viable new businesses beyond traditional entertainment video.
"Smaller cable operators will play a significant role in providing services other than cable TV to their rural customers. With new technologies, plant quality and expanded capabilities, cable is probably better positioned to provide these services than anyone else," says Matt Polka, president of the Small Cable Business Association.
A big reason for the newly-found enthusiasm among smaller operators to explore the business of Internet, intranet, Headend in the Sky (HITS) and other technologies is simple economics. Says Polka, "The main reason smaller operators are able to use these new technologies is the Telecommunications Act of 1996. Because of regulation, we didn't have access to capital markets, and as a result, no access to emerging technologies. We said 'if you remove regulation, we'll have access to capital and new services,' and that happened. Without the threat of regulation, the markets loosened up."
Though some will argue that the capital markets still have certain vise-grip qualities, more and more operators are moving ahead with advancing technologies, knowing that they'll get lost if they hesitate. "We can't just be defensive now, we must not only defend our core business vs. DBS, but find ways to develop other revenue streams in small markets," says Dave Kinley, president of Sun Country Cable, which is certified as a long distance reseller.
An explorer into the new business/technology territory is Eagle Communications of Hays, Kan. It has moved into high-speed data with great success, says Larry Braun, engineer for Eagle. "Two years ago, we were dabbling in high-speed data with just moderate success using straight coaxial plant. So, we installed a hybrid fiber/coax system, and it opened several new doors for us. There is a definite learning curve to it, but it's certainly worth it. We now want to expand even more."
The next logical step, according to Braun, is to install fiber networking "business-to-business," using the Internet. "We want to take the Internet to businesses first. The ones who live on the Internet could provide a good revenue stream. We're just now starting to get our arms around the technology."
Eagle has expanded its high-speed data links to include "telemedicine" through the local hospital. Using its fiber network, nurses and doctors can administer to patients at assisted care facilities via cameras which are placed in selected rooms at the facilities. "Nurses and patients alike have said how helpful it is. It's like having a nurse visit each day, and there is a financial benefit to the hospital too, since its nurses and doctors can spend their time more efficiently," says Braun.
It has been a revenue boost for Eagle as well. The cost per data link is $350 a month, with an $800 installation charge and a 20 percent discount offered by Eagle when more than five links are installed. Says Pete Collins, vice president, cable division, for Eagle, "We began this ancillary business with the opinion that we had to have a business that paid as it went along. But, we've had a positive cash flow since the get-go." Eagle has also ventured into tele-education, using the same fee structure as its telemedicine business.
High-speed data and the Internet have opened new windows of opportunity for smaller operators willing to combine their innovative minds with an entrepreneur's business savvy. Bill Bauer of Windbreak Cable in Gering, Neb. is another smaller operator making the best of the Internet and intranet. "Getting into Internet takes a lot, and you must understand networks. But, for instance, with an Internet phone, if we bring this technology to the cable plant, we can put intelligent call convertors into customers' homes and carry it back through the cable system, hand it off to a long distance (LD) carrier, and supply an alternate route for the LD carrier. We don't have to deal with the Internet, or change a phone number to do it. We've talked with long distance carriers, and they're extremely interested in finding new ways to their customers."
But, is the business there? "There are lots of challenges; the LD carrier must want to play with you, and the economies of scale must be there. You must have partnerships," says Bauer.
However, Bauer insists that with the newly-found access to advancing technologies, smaller operators now have a chance to show their innovative stuff. "I'm not hearing my customers asking for more channels, because I'm providing them with services like Internet, and that's what they want. I ask, 'going down the path, what can I do that's better than everyone else?' But it must be profitable, and have customers that will buy the service."
The service, according to Dean Peterson, president of Southwest Missouri Cable, is a seven letter word: D-I-G-I-T-A-L. "That's the future," he says. "Chrysler will save more than $2 billion by the year 2000 by using its Intranet in designing automobiles. With digital, it's a whole new situation, and Internet services will take on a whole new form. There are many challenges, but we're putting together an organization to do Internet."
The challenges include creating new strategic alliances and moving into a "commerce" mentality, according to Peterson. "It's the local intranet that has the business community excited. With the intranet, they can promote and sell their products with high-speed data. This is a very powerful part of commerce, of which cable operators have the capability of playing in. That will drive the Internet and intranet for us."
Driving toward the Internet is the strategy for Internet of Beaufort County Cable in Bellhaven, N.C. as well. "I want to get my feet wet with Internet because it's such a natural. I see it co-existing with cable. They were made for each other," says Guinn Leverett, president of BCT Inc. in Bellhaven.
But how do small operators, whose only brush with the Internet may be an occasional day of surfing, use available technologies to help their businesses? Though not exactly out there on technology's edge, Sumner Cable in Wellington, Kan. has made good use of its Auto Page software program to speed up its response time to customers during outages. Says Phil Brown, manager technician for Sumner, "Using the Auto Page program, we can automatically page our technician. We've seen a significant reduction in customer response time, and our customers really appreciate that."
The use of these technologies always comes with a caveat: do customers need them, and will they buy them? But just thinking about them as a business has many small operators grinning. Concludes Leverett, with a scenario from Alice in Wonderland: "Imagine two impossible things before breakfast. Well, 18-1 compression is wonderland stuff."