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New kids on the block

Sun, 12/31/2000 - 7:00pm
Angela Langowski, Associate Editor and Dana Mendell, Executive Editor
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inDEPTH:A series of  special reports  from the editors of CED

As U.S. cable and telecommunications companies have grown ever-larger in size via consolidation, a rash of small, regional service providers have sprung up around the country. Theyre promising to bring new services at reasonable prices to their customers. Theyre promising killer customer service. Theyre promising bundled services on a single bill.

In short, theyre hoping to replicate the cable industrys approach from several years ago, when community was an integral part of any successful cable companys mantra. These are companies focused on providing the global reach of the Internet, with local content and care. Because theyre small, they hope to be nimble and add services faster than any corporate Goliath could convene a meeting.

Call them what you willoverbuilders, broadband service providers or competitive service providersthese companies all see an opportunity to capitalize on the advancements being made in the voice, video and data industries and provide their customers with nearly every service imaginable. Some are highly ambitiousothers are more modest in their goals. But all of them represent the groundswell of interest in providing ubiquitous information and entertainment, on demand.

What follows are brief snapshots of some of the better-known service providers and the strategies they've put in place to compete.

E-mail: dmendell@cahners.com

 
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Altrio Communications  at a glance:
Executive team:
Edward G. Liebst Jr.—CFO
David Rozelle—CEO
David Large—CTO
Investors:
Frontenac Company
Bessemer Holdings
Soros Private Equity Partners
SSB Capital Partners
Salomon Smith Barney
RBC Partners
Bank of America Capital Investors
Grove Street Advisors
Cities network being built in:
Los Angeles

Several years ago, during the time when Dave Large was still a telecommunications consultant, he was asked by several of his clients if it made economic sense to have more than one broadband supplier operating in a single community. Larges answer was always, hell no, because the business model of offering just cable TV as a competitor to the incumbent simply wasnt strong enough to support two competitors.

But the answer has changed as the suite of services has broadened over the years and encouraged competition. Last October, Large, along with former colleagues David Rozelle and Edward Liebst Jr., formed Altrio, a full-service broadband communications provider, and intend to build a voice, video and high-speed data network in Los Angeles.

Our conclusion was that there was room for more than one (competitive service provider), says Large, who is CTO of the company. Its certainly not a business that contemplates driving any incumbents out. I think that would be a dumb kind of business plan.

The Alt in the name stands for alternative; trio for the three types of services the company plans to provide. Its a generic kind of name that has a lot of implications and no real meaning, says Large. Its easy to pronounce, easy to spell and easy to remember.

Before founding the company, CEO Rozelle, CTO Large and CFO Liebst all worked together in exactly the same positions as partners of Media Connections Group, a boutique consulting company that specialized in broadband communications and all its aspects, but not exclusively cable television. Before that, they all worked as the operating team at InterMedia Partners, a cable operator that was eventually bought by Tele-Communications Inc. Collectively, they bring a total of 75 years of experience in the cable television industry. 

Altrios network

Altrio intends to build a hybrid fiber/coax network and will transport services such as high-speed data, video and local- and long-distance telephone.

Basically, if you looked at it from 1,000 feet away, youd say it looks like a compromise between the RCN Network and a Cox (Communications) architecture, says Large.

The network architecture consists of a redundantly routed fiber ring between a headend and regional hubs, says Large. Redundantly routed fiber rings are also included between the hubs and clusters of nodes. Comparing Altrios network to Coxs ring-in-ring architecture, Large says the difference is Altrio will be running more fibers to the node and paying more attention to the design of the nodes in an effort to build nodes that serve only a small cluster of homes. The actual number of homes passed by each node is yet to be determined, Large says.

 We start with 500-home clusters, but how many nodes that represents is a purely customer-driven number, says Large. Its what the bandwidth demand is. It evolves all the way down to something that looks like fiber-to-the-curb and ultimately evolves to fiber-to-the-home.

Large says the reason Altrio starts with a 500-home cluster is to control the way the network is powered. Were very concerned, as I know cities are, about street furniture as they call it, says Large. The problem with fiber-to-the-curb architecture that some people are building is making the phone ring when the power is out.

We dont feel that makes sense to backpower the network from peoples homes, he says. We dont want to have the responsibility for batteries that are going to wear out from maintaining thousands and thousands of power packs in peoples homes. Our cluster is governed by how we network power.

The 870 MHz network uses a combination of analog and digital technologies. Its an architecture where the company has pulled the signal processing equipment into the headend rather than pushing it out onto the edge of the network, says Large. This was done for maintainability of the network. (The network) is similar to the best thats being built in the cable industry today, says Large.

Investors

Altrios investor group collectively committed $125 million for the first phase of Altrios business plan. Frontenac Company and Bessemer Holdings lead the investor group. Other investors include Soros Private Equity Partners, SSB Capital Partners (the private equity arm of Royal Bank Financial Group), Bank of America Capital Investors, and Grove Street Advisors.

The equity commitment will be supported by senior debt in an amount up to $150 million to fully fund Altrios initial phase.

Advantages over incumbents

Large understands that as a new company, Altrio has some barriers to overcome before it will be welcomed with open arms into the Los Angeles community. Some of the companys competitors include Pacific Bell, Time Warner, Adelphia, Charter, AT&T and Cox. But, Large says, Altrio has several advantages over these incumbents, including:

Talent. Were bringing an MSO-level team to bear in a single market, says Large. We think its difficult finding the needed talent so weve chosen to bring the corporate level talent and plug it into a single market.

Experience. Were very experienced at this industry, Large says. We think we understand competitive marketing and we understand what makes customers choose one supplier over another. I dont think a lot of existing cable operators recognize what it takes to work in that day-to-day environment where every single one of your customers is only a phone call away from being a competitors customer.

Design. We have the advantage a new network operator has in that we can design a network that is optimized for today, Large says. In almost every case, the incumbent cable operator is going to have upgraded a network from something else. There are compromises involved with that. You dont end up with a network that is optimized to scale.

Large doesnt see Altrios lack of name recognition as a disadvantage.

Thats always a challenge for any new operator, Large says. But name recognition is both a positive and a negative even with very good cable operators. Just bringing in competition and not being named the same thing as your competitor is worth something. Will it take us awhile to build a name? Certainly it will.Angela Langowski, Associate Editor

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Carolina Broadband at a glance:
Executive team:
William A. Schuler—CEO
Phil Klein—CTO
James Romanelli—VP broadband engineering
Russell Ridgeway—VP operations
Kathleen Davis—VP government relations
Investors:
M/C Venture Partners
Morgan Stanley Private Equity
Chase Capital Partners
First Union Capital Partners
Bank of America Capital Investors
Carousel Capital
Providence Equity Partners
Spectrum Equity
Fleet Equity Partners
HarbourVest Partners LLC
California State Teachers Retirement System
J.H. Whitney & Co.
Cities network being built in:
North Carolina:
Chapel Hill, Charlotte, Durham
Gastonia, Greensboro, High Point, Raleigh, Winston-Salem
South Carolina:
Columbia, Greenville, Spartanburg

Even though Carolina Broadband doesnt expect to finish building its fiber optic cable network in North and South Carolina for another four years, that hasnt stopped curious people from coming up to the companys installers and asking when they can sign up for the service.

Carolina Broadband has officially only been in business since January 2000, although William Schuler, the founder and CEO, has 21 years of experience in the cable industry. Schuler had become interested in competitive cable TV providers and had done considerable research on it as a business, says Kathleen Davis, the companys vice president of government relations. He became convinced it was a business he wanted to become involved in, she says.

Schuler was also able to convince enough venture partners to become involved. In fact, he was so successful that the company said that it had been funded to the tune of $402 million when the company was announced last May. Twelve venture capital firms and investment banks participated in the first-round equity funding for the competitive broadband technical company.

This is a very capital-intensive business, says Davis. You need a range of investors to put together the amount of capital you need to deploy the kind of system that were anticipating.

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Schuler

The North and South Carolina region was picked as the place to build the network after Schulers research determined it was the best market to build the network in. He focused on the Carolinas because it was a growing market, is in a growing high-tech area and was a very exciting center of business, says Davis.

Its also the location of several of the companies that are also investors, including Bank of America, First Union and Carousel Capital.

Carolina Broadbands network

The privately-held company is building an 860 MHz HFC network that will be able to serve up to 80 analog and 250 digital television channels; video-on-demand with video store selections and full VCR-like functionality; interactive television service that allows for Web browsing while viewing regular TV programming; Internet access and data connectivity at up to 100 times dial-up connection speeds; a full range of local and long-distance digital telephone services; real-time video conferencing and work sessions; and streaming video and audio capability.

Carolina Broadband is competing in this region with Time Warner, BellSouth, Verizon and Sprint.

Advantages over incumbents

The fact is, were building a brand new, state-of-the-art system, says Davis, referring to one of the several advantages the company has over its better-known competitors.

We know our system will be more technologically advanced, obviously completely brand new and extremely reliable with an excellent signal.

The company is also very customer-service focused, says Davis. We have heard many complaints relayed to us by cable administrators in the cities weve talked to. (This includes) everything from long waiting times for service and poor signal quality to unresponsive customer service. In every city we go into, the cable administrators tell us they get these complaints from residents.

Thats another reason why Carolina Broadband chose this region in which to build the network. Cable administrators who have followed the competitive issue very closely asked for competition to come to their cities, says Brian Crenshaw, a spokesman for Carolina Broadband.

The professionalism and level of knowledge among the cable administrators that we have come into contact with has been impressive, says Davis. It was one of the things that encouraged us to come here; the people who work in the cities were so sophisticated in their understanding of where the industry has been and what competition can bring that we felt our story would be well received.

The company has already received approval to build its network in Raleigh and Charlotte, where it is headquartered. It began construction in Raleigh in late 2000 and is scheduled to begin construction in Charlotte in the beginning of 2001. People should start receiving services by summer 2001, according to information on the companys Web site.

Other than plenty of positive press and curious people coming up to the companys trucks, the other incumbent cable companies havent exactly rolled out the welcome mat. Those companies have raised various objections in cities where the company has applied for franchises, says Davis. In our opinion, theyve offered no legitimate objections, says Davis. In Charlotte, one incumbent argued that the franchise that was about to be awarded was unfair to (their company), says Davis. The company attempted to convince the city it was illegal to award a franchise to a new competitor unless the competitor was required to build the entire city.

Of course, there is no such law at the federal or state level, says Davis. The city considered all (the companys) arguments and rejected them and proceeded to grant us the franchise by unanimous vote of the city council.

Because the company is in the Carolinas only and because its name is Carolina Broadband, Davis says, she doesnt think it will have a name recognition problem. We have people calling us now asking us when they can sign up for cable service, says Davis. Its been gratifying to know people are so excited about the competition.AL

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Grande Communications at a glance:
Executive team:
Robert W. Hughes—chairman
William E. Morrow—vice chairman, CEO
Jerry L. James—President
Investors:
J.H. Whitney
Centennial Funds
Prime New Ventures
Cities network being built in:
Texas: Austin, New Braunfels
San Antonio

When William Morrow worked for Knology and Utilicom, he dreamt about starting his own broadband communications company. That dream became a reality when he founded Grande Communications in 1999.

Morrow, CEO of Grande, has several years of experience in working for broadband service providers. He was one of the early partners in Franklin, Mass.-based Utilicom, a company that is now building networks in Indiana and Ohio. He was also chairman/CEO of Georgia-based Knology. While at Knology, he helped create and sits on the board of ClearSource, an Austin, Texas-based broadband communications company that is building an HFC network in Waco, Odessa and Corpus Christi, Texas.

We were broadband before broadband was cool, Morrow says.

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Morrow

Grande is working with Knology and ClearSource to build an HFC network in the Central Texas corridor, including Austin, San Marcos, New Braunfels, San Antonio and surrounding communities. Grande already provides telephone service to ClearSources customers.

Besides building a bundled voice, video and data network from the ground up, Grande has a wholesale strategy as well. This past summer it acquired a CLEC, picking up the account of another telephony business. Grande has a wholesale division serving the communications needs of other service providers and carriers by selling network products, services and professional support staff for carriers, ISPs, CLECs, etc. Grandes revenues include hundreds of millions of dollars a month from telephony, and it bills for hundreds of millions of minutes on the data side, Morrow says.

The company then leverages that volume and those pipes for its retail business, giving it a very dramatic cost structure that improves its margins in the residential and small business sectors from its telephony and data offerings.

Unlike most of the other broadband companies that have spun up this last year, weve actually started construction in Austin, San Marcos and San Antonio, Morrow says. The company has the switch, headend and telephony services in position and was expected to go live with test customers in November. It expected to start its commercial launch by the beginning of this year.

Morrow decided to build the network in central Texas because he and the members of his management team grew up in the area. Therefore, he and his managers know the markets well and are well connected to them.

Grandes management team includes Jerry James, president, who has 32 years of telecommunications experience; and Robert Hughes, chairman, who founded Prime Cable in 1979.

Grandes network

Grande plans to offer local- and long-distance telephone service, analog and digital cable service with more than 200 channels, and high-speed Internet service over its 860 MHz network.

Were actually taking fiber closer to the home than any other networks that are being deployed in the nation today, Morrow says. Grande will be using Marconi equipment in the network, which will drive fiber down to nodes that serve just 24 homes. At the node, the network will be passive, which means we have no points of failure past that fiber optic node, Morrow says, putting emphasis on network reliability.

Despite all that, Grandes data offering is one of the most exciting aspects of the network, Morrow says. By having our fiber so deep into the community, we have (more) bandwidth closer to the home than an RBOC does or the incumbent cable operator by many times, Morrow says.

A typical cable operator will have 10 Mbps as its ceiling of capacity shared, at best, across 500 homes, Morrow says. Our floor is 10 Mbps shared across 24 homes, he says. So right there we have a 20 times better capacity position. Thats where we see the upside. Those incumbent networks are going to continue to falter, whereas our network is uniquely positioned for that hockey stick of growth.

The Marconi network allows Grande to offer a choice of either DOCSIS or Ethernet modems. The company will also be using Motorola set-top boxes for video services.

Building in Central Texas

Morrow decided to build the Grande network in the central Texas corridor because of his long background and history in Texas. Another competitor, WINfirst, which is also based in Colorado, has received approval to build a network in Dallas, Houston, Austin and San Antonio.

Since Grande has already started building its network and has more than 340 employees in the company, Morrow doesnt see WINfirsts plans as a threat to his network. We dont think its now made sense for two new people to build, so we really believe the people that get in and get entrenched and get their network deployed go a long way towards securing those markets, Morrow says.

The franchises Grande has received will give the company the right to build past 1.6 million homes.

Investors

In February 2000, Grande set a Texas initial equity fundraising record of $233 million. The funding, which was led by J. H. Whitney and The Centennial Funds, included Texas-based Austin Ventures, Prime New Ventures and Hoak Communications. Other investors include HarbourVest; AltaComm; Weiss, Peck & Greer; CIBC; Trinity Ventures; BancBoston; Toronto Dominion; Kinetic; South Atlantic and Convergent.

Advantages over incumbents

The press Grande has received in Texas has helped it overcome the name recognition factor, Morrow says. We were the largest cash for equity deal in Texas, he says. Weve been doing some unique deals. Our franchises got us a lot of press. People know what were doing here in central Texas.

The companys competition in-cludes Southwestern Bell and Time Warner, which Morrow agrees, have strong brand names. However, we believe with the image were creating and a friendly Grande person knocking on your door that well get our market niche, Morrow says. While we were funded about the same time as the other broadband groups, were one of the few, if not the only one, that is actually actively building networks already.

Most of the other (BSP companies) are still focused on kind of a (2001) type of strategy, Morrow says. We believe weve differentiated ourselves from that perspective.AL

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Seren Innovations at a glance:
Executive officers:
Keith Wietecki—president and CEO
Laurie Derechin—VP of sales, marketing and products
Nancy Fuchs—VP of finance and controller
Jim GamblevVP, strategic planning and administration
Peter GlassvVP and general counsel
William L. Kaphing—VP of construction
Brad Zuehlke—VP of engineering
Funding:
Parent company: Xcel Energy Inc. (formerly Northern States Power Company)
Cities where the company has franchises:
Minnesota:
Brooklyn Center, Brooklyn Park, Crystal, Golden Valley, Maple Grove, Minden Township, New Hope, Osseo, Plymouth, Robbinsdale, Sartell, Sauk Rapids, St. Cloud, St. Joseph, Waite Park
California:
Concord, Walnut Creek
Cities where the company has applied for franchises:
California:
Antioch, Clayton, Contra Costa County, Danville, Martinez, Pleasant Hill, Pittsburg

A new CEO, the launch of video-on-demand, new deals with the business market sector, and winning more franchises have been the latest mile markers that Seren Innovations has passed on the road to offering competitive broadband services. Since CED last profiled the Minneapolis-based overbuilder (May 2000, page 102), Seren President, CEO and founding member Glynis Hinschberger left the company, to be replaced by energy executive Keith Wietecki, a member of the Seren board since 1997 and former chairman and CEO of a Northern States Power Company subsidiary. And there have been changes in corporate structure as wellthis past August, Serens parent company, NSP, merged with New Century Energies of Colorado to become Xcel Energy Inc.

Adding to its advanced services arsenal, the company launched its AstoundNOW video-on-demand service this past October in both St. Cloud, Minn. and Concord, Calif., using DemandVideos platform.

The service provider has now also extended its reach beyond the consumer market to the business arena, as it looks for ways to tailor broadband solutions to the needs of specific companies. One case-in-point: Seren recently constructed a direct fiber link from St. Johns University, in the St. Joseph, Minn. area, to sister college St. Benedicts.

They had their own network, which was working fine, but they needed that speed, and it was a lot easier for them to do a direct fiber link with us than to add T-1 lines, says Janey Palmer, director of corporate communications and public relations for Seren. This wasnt a case where they would just buy our Internet service or a derivation of our cable service, but this was really a custom solution for them, she adds.

Expansion in Minnesota, California

Seren has also been busy adding more franchises to its cache. Most recently, in mid-November, the company received a franchise for nine communities in the northwestern suburbs of the Minneapolis/St. Paul area, including Brooklyn Park, Brooklyn Center, Crystal, Maple Grove, New Hope, Osseo, Plymouth, Robbinsdale and Golden Valley. In these Twin Cities suburbs, Seren will be going up against incumbent cable provider AT&T Broadband. The competitive broadband service provider estimates it will take four years to build its network in the entire nine-community franchise area.

In California, in addition to its two existing franchisesConcord and Walnut CreekSeren is trying for about a dozen more, encompassing the communities of Danville, Clayton, Pleasant Hill, Contra Costa County, Martinez, Antioch and Pittsburg.

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Palmer

Seren is currently offering its Astound package of analog and digital video, high-speed Internet access and local and long distance telephone services in Sartell, Sauk Rapids, St. Cloud and Waite Park, Minn., as well as in Concord.

The St. Cloud-area build is just about completed, according to Palmer, though the California systems are still in the early stages of construction.

But while the company continues to add more franchises in Minnesota and California, Seren has scotched its plans to pursue franchises in the northern Front Range communities of Colorado. Former President and CEO Hinschberger said in a statement issued this past August that the Colorado market had changed substantially in the eight months since the company announced its intention to go after franchises in the state, elaborating that while Northern Colorado is an extremely attractive market, we prefer to place our resources in markets where there are more appealing prospects for return on our investment.

If the environment changes and other choice providers are not able to fulfill their plans, we will take another look at the Colorado market, Hinschberger added.

Palmer says that its now quite common for Seren to run up against other overbuilders in its quest to secure new franchises. When I first started, about two years ago, people didnt understand that you could have a competitive cable provider...And now, they are popping up all over the place, Palmer notes. Dana Mendell, Executive Editor

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Utilicom Networks at a glance:
Executive team:
E. Craig Sanders—CEO/president
Michael J. Angi—COO
Donald S. Loftiss—EVP, Utility Alliances
John Van Luling—CFO
Investors:
Affiliates of Blackstone Capital
Partners III
Cities network being built in:
Currently operating in Evansville, Ind. as TOTALink of Indiana; 
operating in Dayton, Ohio as TOTALink of Ohio; has also been awarded franchises in Indianapolis, Ind. and Louisville, Ky.

Utilicom Networks of Franklin, Mass. is offering up telecommunications competition in Indiana and Ohio, but with a twist. By partnering with electric and gas utilities to build and operate broadband networks, Utilicom hopes to leverage existing rights-of-way and, in some cases, existing fiber, to offer a rich feature set of services to consumers and businesses alike.

The company is focusing on second- and third-tier markets and is serving business and residential customers.

Founded in late 1995 by Chuck Cadle, an entrepreneur with a finance and telecom background, and Don Loftis, who came from Scientific-Atlanta, the company came up with the idea of working with utilities to help it develop telecommunications companies. This means Utilicom helps utilities design telecom networks, hire the staff and help run the new operations.

In Evansville, Ind., Utilicom formed a joint venture with SIGECO (Southern Indiana Gas and Electric Co.) to form SIGECOM, which is the multiservice telecommunications carrier that services customers in Evansville, and, soon, Indianapolis. Through the ownership of Utilicom, SIGECOM is building a 900-mile fiber optic network that will pass about 88,000 businesses and homes in Evansville and Newburgh, Ind.

In 1999, SIGECO merged with Indiana Energy to form a company called Vectren Corp. Vectren also recently acquired Dayton Power and Light. The company provides natural gas to more than 1 million customers in Indiana and Ohio.

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Hanssel

Each time we build a new network in one of these new markets, we form a new joint venture, Hanssel says. We kind of originated the idea of the joint venture concept.

The company began offering video services in Evansville in March 1999, and a couple of months later, started offering high-speed Internet, digital cable and then voice.

Hanssel says the companys residential penetration rate in Indiana is 30 percent and that its business penetration rate is more than 20 percent.

Utilicoms network

The full suite of services that Utilicom is offering includes bundled local voice plus applications, Internet access, long-distance, video and teleconferencing and analog and digital cable.

Utilicom is using Sonet (synchronous optical network) and IDOC (interactive data over cable) architecture to build an 860 MHz, fiber-rich optical network. The IDOC concept was invented four years ago by Utilicom technicians, Hanssel says. The IDOC has a single node where the fiber meets the IDOC network, making the network more robust because there is only a single point of failure, Hanssel says. Because its Sonet-based, the network should be highly reliable. It is uncommon in the residential space to build a redundant circuit, Hanssel says. Were offering a much higher reliability for all our services as a result of that.

The company is in the process of rolling out interactive TV, Internet and e-mail access over the television. It expects to eventually offer VOD.

Executive team/investors

Utilicom got a new CEO/president in May 1999 named E. Craig Sanders. Previously, he was the president and CEO of Peoples Telephone Company and held a senior management position at Sprint. Cadle, the company founder, remains on the board.

In February 2000, Utilicom received a $100 million investment from affiliates of Blackstone Capital Partners III to fund the companys build out and operations.

Advantages over incumbents

Utilicoms advantages over its incumbents include its focus on small business owners from the get-go. What distinguishes us from the new builders is their focus is exclusively residential with a little SOHO thrown in, Hanssel says. We do a complete SOHO/enterprise medium as a customer offering on the voice and data side. Any data service that a customer can buy from a large ISP or datacom provider like AT&T or WorldCom, we sell those as well.

Hanssel knows his competitors are going to be the incumbents he competes with now. These competitors include Ameritech, Insight Communications and Adelphia in Evansville; Time Warner and Comcast in Indianapolis; Ameritech and Time Warner in Dayton; and BellSouth in Louisville. But he also knows what it takes to compete: killer customer service.

In any situation where you come in as the new kid on the block, you can help with that by providing a higher level of customer care, Hanssel says. We offer a complete bundle of services along with very aggressive discounts. People want choice. Historically, they havent had choice in local phone and on the broadband side, which is what were offering.AL

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WINfirst at a glance:
Executive team:
James C. Vaughn—chairman/CEO
Frank L. Casazza—president/COO
James M. Kane—CFO
Investors:
J.P. Morgan Investment Corp.
Blackstone Group
Columbia Capital
First Union Capital Partners
Madison Dearborn Partners LLC
Providence Equity
Cities network being built in:
Sacramento and San Diego, Calif.
Austin, Dallas, Houston and San Antonio, Texas, Portland, Ore.

John Vaughn isnt interested in just retiring to a life of leisure. WINfirst, a company that is gaining fame as a provider of a fiber-to-the-home network, was founded by Vaughn to solve the last mile bottleneck problem in telecommunications.

Vaughn is a cable veteran who hails most recently from Denver-based cable company Frontier Vision Partners, which was sold for $2.1 billion in 1999.

People are faced with the problem of very slow speeds on the data side because there isnt currently a data network to the home, says Shiraj Moosajee, VP of business development for WINfirst. Cable and phone networks are fundamentally different than data networks, and were designed for completely different purposes. Because of that, they dont adapt well for data-centric services, Moosajee argues.

People are trying to force (DSL and cable modem networks ) to do strange and unnatural thingsto become data networks, Moosajee says. Vaughn looked at that and said people in the DSL and cable worlds were trying to solve the wrong problem, Moosajee says.

The problem they were trying to solve is how to extend the life of those two networks, Moosajee says. Jims solution was pretty straightforward: build a new network and call it the third network. It would be the first network optimized for data.

But how do you build a third network? You have to solve low-tech problems such as digging trenches and pulling wire, Moosajee says. Jims view is that it is cheaper and better to go out and build this network than everybody elses view, which says it is better to retrofit an existing network, Moosajee says.

WINfirsts network

The network will be comprised of two components: a traditional 860 MHz coaxial network for delivering broadcast analog and digital cable television services; and a dedicated fiber optic network providing 100-megabit Ethernet for data and voice applications, including plain old telephone service (POTS) and Internet access.

The great strength about this company is weve tried to create a fiber optic company, Moosajee says. We brought in skill sets from the telephony, optical, cable TV and Internet worlds.

The network will take a piece of singlemode fiber optic cable all the way to the home, Moosajee says. Fiber optic cable allows the company to transport voice and data services and perform the necessary switching and routing functions. The company will also use coaxial cable to allow it to offer video service. The system is capable of pushing data through at speeds up to 100 Mbps.

Were building a fiber-to-the-home network, Moosajee says. Thats a completely different kind of proposition. Its an optical IP network, not an RF coaxial network (which is what other broadband service providers are building). When you talk about the other overbuilders, those guys are building a cable network disguised as a broadband network, Moosajee argues.

WINfirsts network will take both fiber and coaxial wires to the home, Moosajee says. The purpose of that is to use the coaxial cable for the delivery of broadcast, analog and traditional video. The fiber optic cable will be used for data and voice.

The fastest way to move something is at the speed of light, Moosajee says. The best way to send that is through a piece of fiber optic glass. We are building a data network first and foremost. Were building the greatest data network that, as a matter of fact, can also do the voice and video alongside it.

Moosajee says WINfirsts network is unique because it offers the following services:

Video. Because theres so much free bandwidth available, the companys network can carry a lot more channels as uncompressed channels in analog format. We dont have to worry about allocating to data and voice so we can use it all for video, Moosajee says.

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Mossajee

Voice. On the voice side, we will have a great voice system because were using fiber optic cable deep into the home, Moosajee says. The phone company does a good job of providing voice. Are we going to be technically superior? I think so but not because were trying to be. Its just because were taking fiber all the way to the home.

Data. Here, nothing will touch us, Moosajee says. Were using the fiber optic cable to deliver a true 100-megabit service. The same capacity going up to the house as down to the house, which is very important. No one in the world has that!

Management team and partners

WINfirsts management team includes: Frank Casazza, president and COO, who has 35 years of experience building and leading telecommunications enterprises for Contel, Boeing and Pacific Bell; and James Kane, CFO, who has spent 10 years in finance and development positions.

WINfirst is also working with a group of strategic partners that include Bechtel Corp., Lucent Technologies and Andersen Consulting.

Bechtel will provide program management, construction and procurement services for WINfirst. WINfirst recently announced an $800 million agreement with Lucent for equipment, software and services. Andersen Consulting will assist in the design, management and integration of the WINfirst business support and operations support systems platform.

Investors

Winfirst is a privately held company that raised $830 million in initial equity financing from a group of blue chip investors including: J.P. Morgan Investment Corp.; Blackstone Group; Columbia Capital; First Union Capital Partners; Madison Dearborn Partners LLC; and Providence Equity.

Advantages over incumbents

Before deciding which cities to build the WINfirst network in, the company performed a lengthy analysis and examined a number of things like demographics, acceptance of the companys services and the amount of money people were spending on services.

It became quite clear that 50 percent of the worlds data came from the states were focusing on (California and Texas), Moosajee says. Since were building a data network, we need to go where the usage is. Right now were focused on meeting our commitments in those communities we have a relationship with.

Why do they need to choose us? Moosajee says. We have three mantras here. In terms of products, we have the widest choice of cable TV, programs and services. In terms of the phone, we are a fresh alternative to your local- and long-distance service. In terms of the Internet, we are the fastest route to the Internet and back. We recognize we are not an incumbent, and we have to fight for every customer and, therefore, we better be damned good at what we do and do it with a smile.AL

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WideOpenWest at a glance:
Executive team:
Mark Haverkate—president and CEO
John Gdovin—EVP
Michael Brody—CTO
Julia McGrath—COO, Texas
Mark Dineen—COO, Colorado
Dan Morley—SVP, telephone and commercial services
Jim Higgins—SVP, business development
Scott Besselievre—SVP, customer care
Michael Steinkirchner—VP, marketing and public relations
Investors:
ABRY Partners
Oak Hill Capital Partners
Cities where WOW has franchises:
Colorado:
Arvada, Aurora, Boulder, Colorado Springs, Commerce City, Denver, Greeley, Greenwood Village, Jefferson County, Lakewood, Littleton, Loveland, Parker
Texas:
Bedford, Flower Mound, Fort Worth, Grand Prairie, Irving, Lewisville, Richland Hills
Missouri:
St. Peters
Arizona:
Tucson
Total:
WOW has been awarded broadband franchises in 13 cities along Colorados Front Range, representing 780,000 homes. The company also has 600,000 homes under franchise in and around Fort Worth, Texas, and other cities throughout the Western U.S.

A lot has happened in Michael Brodys office since last spring (see CED May 2000, page 108). At that time, the chief technical officer for competitive service provider WideOpenWest was mulling over his options to surpass the DOCSIS (Data-Over-Cable Service Interface Specification) cable modem platform with a technology that could deliver more bandwidth to the consumer. He has now come up with a plan for data delivery to the companys subscribers.

The plan revolves around a strategic alliance WOW signed with Orem, Utah-based SwitchPoint Networks Inc. in mid-November. SwitchPoint (formerly AirSwitch Corp.) says it has developed a technology to unclog the last mile bottleneck, which will enable broadband Internet access at speeds up to 100 Mbps. The companys Ethernet-based technology has thus far been deployed in test sites in Utah; WideOpenWest will first deploy the technology in a technical market trial in its Lakewood, Colo. system, in about 160 miles of plant, passing some 20,000 to 25,000 homes, according to WOW CTO Brody.

In essence, WideOpenWests ap-proach is dual: a hybrid fiber/coax network for analog video, digital video and video-on-demand delivery, and an Ethernet architecture for data communications services delivery.

As WOW will configure it, the SwitchPoint technology is optical from the headend to an optical node, which is, in reality, an Ethernet node. That Ethernet node will be co-located with a standard HFC nodetogether, the two would serve a maximum of 200 homes. Coming out of the node, and reflecting the duality of the architecture, are two wires: standard 0.625 coax plant, alongside a CAT 5 wirethe Ethernet cable. While the coax portion of the plant would feature standard amplifiers, taps, etc., the Ethernet side has a Layer 2 switch/repeater.

At the drop, the company will deliver the digital RF services over RG-6 quad shielded Siamese cable, while it will deliver the Ethernet service over CAT 5 wiring. This eliminates the cable modem, explains Brody. The connection will be between the switch in the pedestal or on the pole right to the NIC (network interface card) in the PC.

For now, WOW is using a DWDM (dense wavelength division multiplexing) approach for the HFC architecture, and a pure two fibers to the node for the Ethernet architecture. But eventually, possibly as early as mid-2001, Brody expects that he will be able to shrink that configuration down to a single wavelength carrying the Ethernet traffic (as opposed to a separate fiber), with multiple wavelengths carrying the analog and digital video services.

Why did Brody pick this architecture? Its 100 megabits symmetrical... The second thing is, the node will be scalable to a gigabit...And, we found that we could do this at about the same price that you could deploy DOCSIS today at 3 megabits. Now, no one does that today, so its hard to say how it (really) compares cost-wise. But this can do 100 meg symmetricalDOCSIS could never do that, he explains.

WOW has already begun construction of the dual architecture in its Lakewood system and tentatively predicts that it will be ready to serve customers the first week of March.

VoIP

WideOpenWest has also made progress on the telephony front. This past September, WOW signed a three-year agreement with PhoneFree.com, a company which provides a gateway to the public switched telephone network. WOW will use voice-over-IP to offer second-line service to the residential market, by installing a network interface device (NID) on the side of the home thats powered via AC house power.

Buildouts continue

Headquartered in Littleton, Colo. (a Denver suburb), WOW is first focusing on system construction in its own backyard. The company started underground plant construction in its Lakewood, Colo. township systems (another Denver suburb) this past November, while predicting that its area headend would be operational by the end of 2000.

Our goal is to have our fiber buildout occur in the January/February timeframe, to the point where we can activate customers, actually have customers on by the first or second week in March, at the latest, says Brody. I expect to have some trial customers on as early as February.

The companys other Colorado systems, meanwhile, are still in the engineering/design phase. Brody notes that until the new dual architecture is deployed and fully proven in one system, WOW cant go full speed in other markets with the technology. .DM

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