Cable operators go the distance
With all the focus on residential telephony provision over HFC networks, many lose sight of the fact that a wide range of "other" telephony services can be profitably provided by cable operators to their customers. Services such as shared-tenant services, coin phones, business-to-business services and the like are all ripe for the picking.
Another is long-distance service, and one company that's making a strong pitch to cable operators is Austin, Texas-based IXC Communications.
With four key executives who have cable TV in their blood, the company has a keen understanding of what can work for today's cable companies.
To help them seize those opportunities, IXC offers a suite of "products" aimed at allowing cable operators to compete, immediately, in the telecom arena.
For example, Adelphia Communications and its competitive local exchange carrier subsidiary Hyperion Communications recently signed a three-year deal with IXC for long distance services. Under terms of the non-exclusive arrangement, IXC is offering Adelphia a turnkey, self-branded service that includes a full range of calling services, including "1 plus" domestic and international service, 800/888 toll-free calling, calling cards and debit or prepaid cards.
Adelphia will offer long distance services to its cable TV customers, while Hyperion will market the services to its customers, which are primarily businesses.
Under this scenario, Adelphia doesn't need to construct telecom facilities, because IXC takes care of customer connection and switching. "We call this a switchless arrangement," says Del Henry, senior VP of emerging markets at IXC.
In addition to offering calling services, IXC is also targeting cable operators with its set of billing, order entry, customer care and collections services. The idea is to allow cable companies to enter the telecom arena immediately, yet avoid all barriers to entry.
"We're a bridge so they can launch these services quickly," says Henry.
Adelphia is currently able to offer long distance telephony services, under the Adelphia brand name, to about 1.5 million cable subscribers. The company is also offering in-bound 800 access. Adelphia tested the service for roughly 18 months before signing the three-year, $12 million deal with IXC.
IXC, because of its executives' backgrounds, might be uniquely positioned to understand and focus on cable TV companies as potential customers. Henry spent 31 years in the cable industry, starting as a door-to-door salesman, knocking on doors alongside Jeff Marcus and others. He was later president of American Cable in Phoenix, and at one time was part owner of Gill Cable.
IXC President and CEO Ralph Swett, Executive VP of Finance and CFO Jim Guthrie, and Director of Strategic Operations John Breithaupt all have backgrounds with Times Mirror as well. Swett is a former president and CEO of Times' cable division; Guthrie was CFO; and Breithaupt was VP of customer operations in the Phoenix system. Apparently, the message that Henry and Co. bring is striking a chord with the audience. He says deals have already been struck with three of the top seven MSOs, and a couple of others are presently being negotiated.
And now that industry heavyweight Tele-Communications Inc. is about to be acquired by telecom giant AT&T, other MSOs have inundated IXC with inquiries, according to Henry.
"The interest level we've had from cable operators over the past four months is 50 times that of the last 18 months," he gushes. "AT&T's move will be great for IXC, because the industry won't want to have just a single supplier. We hope they do very, very well," says Henry.
Cable companies that are considering entering the long distance telecom market have to make one fundamental decision early on, Henry notes. They can offer a "switchless" solution, where their capital investment is nearly zero; they can choose to deliver residential services over the hybrid fiber/coax network; or they can focus on the business customer through a CLEC subsidiary.
Clearly, any approach can be lucrative, says Henry. He points out that Comcast, Cox, Cablevision and MediaOne have all rolled out HFC telephony successfully, while Time Warner chose to focus on the CLEC market through its Time Warner Telecom entity. Each and every one of those companies, Henry says, has been stunned by its success where service has been launched.
"I believe (the residential market) is there, and it's going to work," says Henry. "But building the network is laborious and tedious." That's because there are myriad interconnection agreements and licenses that have to be applied for and received; and the network hardware is both a bit too expensive and hard to come by today.
In spite of all that, Henry is bullish about the future of telephony services coming from cable companies. "I expect most of the Top 20 cable companies to be in telephony in the next 18 to 24 months," he predicts. "Most of the Top 10 already are." Time Warner Telecom partnered with IXC in a two-year deal to offer services for its business customers. This past summer, Time Warner connected Albany, Austin, Binghamton, Charlotte, Cincinnati, Columbus, Greensboro, Houston, Indianapolis, New York, Memphis, Milwaukee, Orlando, Raleigh, Rochester, San Antonio, San Diego and Tampa.
IXC is hardly resting on its laurels, however. The company is about to launch an IP-based network in recognition that the market is moving in that direction, according to Mike Vent, executive VP of engineering and operations. Vent is charged with expanding IXC's network, which already reaches coast-to-coast.
Under Vent's supervision, IXC is expected to have 13,000 route miles of fiber active by early 1999. The company is constructing a state-of-the-art Sonet-based network. IXC last fall implemented what is believed to be the first long-haul, 80 gigabit OC-192 network. The company employs dense wave division multiplexing technology to offer its customers incredible bandwidth.