Cable Wireless - No Oxymoron

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Wi Fi's new role = "Technology of Last Resort"?

Q. When does a company whose ethos and identity are wrapped around a WIRE LINE (CABLE) INFRASTRUCTURE become a company that provides BROADBAND SERVICES?
A. When it has exhausted all other options, apparently.

Back in my days at the UT Graduate School of Business, we were taught the maxim, "Don't ever become a Buggy Whip manufacturer!" That is, of course, because those companies no longer exist, because they went away with the horse-drawn buggy, as automobiles became the dominant form of people transport. We also talked about the failure of the Railroad giants to maintain their hegemony when cars came on the scene because they defined themselves in the "railroad" business, rather than the "transportation services" business. They let their infrastructure define them, rather than the services they provided their customers, rather than the market niche they filled so uniquely. GE could have stuck to light bulbs, but they didn't.

But it's taken the cables a long time to come around, even just one of them. Only when this particular cable company, the regional Cablevision, had the figurative gun to its head (competition from FIOS on the one hand and WiMAX on the other) did it opt for Wi Fi Mesh as the most viable solution to the strategic box it found itself in. As a network option of last resort, all of sudden the warts of Wi Fi Mesh faded into the woodwork, as Cablevision held its nose and opened its mind - and low and behold, there was a beauty queen of sorts, the perfect bride, the medicine that Cablevision needed to stay competitive, given the changing competitive landscape: a Wi Fi Mesh solution.

Cablevision's wi fi strategy has several things going for it. It is relatively cheap to deploy (as compared with winning licenses and building a wireless infrastructure) and can be deployed right away. Indeed, according to DSL Reports, deployment is well under way already. That gets Cablevision subscribers hooked on this form of mobility for their wireless services before Verizon can get its new 4G network up and running. Also, since it is much cheaper, customers won't have to buy a separate expensive wireless package to get what amounts to a "poor mans wireless" in Cablevision's service area.

Of course, this sort of wireless fall back will lack many of the features that future VZ wireless/wireline bundle will have - at least in the short term. But for Cablevision, it is an open question whether it will need to provide things like national coverage to compete. But my feeling is that while this limits Cablevision's ability to expand its enterprise market penetration (where high end customers will place great value on a top-notch national mobile network that works seamlessly with a wireline product and is indistinguishable from a present-day DSL connection), it is perfectly adequate for retaining customers in the face of FIOS. Cablevision has so far managed to stave off widespread defections to FIOS.

This form of poor man's mobility network is a reasonable antidote to the FIOS speed challenge - giving Cablevision time to upgrade its own capacity on the ground if FIOS gets too far ahead on speed. As noted above, most of the residential subscribers Cablevision wants to keep live on Long Island and work in NYC. WiFi access of this nature will be a real boon to them, even if it doesn't come with roaming. Verizon could respond in kind, but doing so would cannibalize a significant amount of wireless revenue by allowing easy text messaging via wifi and possibly shifting customers to VOIP-enabled devices using wifi rather than using minutes on their wireless plan. Wetmachine: Harold Feld's Tales of the Sausage Factory

It will take some time for Wi Fi Mesh to shed the tarnished image that Earthlink et al gave it. Too many still think "Wi Fi" means "Free." Maybe Cablevision is going that way, only their Wi Fi service will only be free if they give it to their customers as a bribe to stay with them. Even then, it may only be a temporary strategy to buy them more time.

In the event Verizon's quadruple play does prove attractive enough to overcome the stickiness of wifi access and switching costs generally, Cablevision can always look to other partnership options. Between Sprint and T-Mobile and Time Warner, there are plenty of folks in the NYC metro area for Cablevision to partner with in an effort to beat back the Verizon/AT&T wireless dominance. There is even a possibility that some time down the road, Cablevision could find a way to monetize its new wifi network, although that would merely be icing on the cake and I think it very unlikely. As the ongoing shake out in commercial muni wifi projects demonstrates, commercial wifi networks are likely to be low-margin businesses even where they can turn a profit at all. But again, I don't think Cablevision is trying to turn this into a new moneymaker so much as a way to stave off customer loss.

As they say, any port in a storm, and a temporary strategy is often preferred because it is "good enough for now," and so it avoids the judgment a more permanent strategy would face. If this move buys Cablevision sufficiient time to preserve its revenues, for that is really the goal of a productive network business, to hold onto current customers as long as possible, then it will have served its purpose. I wonder how many customers a Wi Fi Network needs to retain at a $1000/per subscriber multiple in order to be an attractive solution?

Harold continues ...

Where this potentially falls down is if mobile television becomes a serious technology and a serious competitive hook. But that is a sufficient long shot that it is reasonable to ignore for the moment.

So all in all, I think Cablevision has a smart strategy here - provided short-sighted analysts carping about capital investment don't drive down the stock and scare them off. It does not have the potential to become the sort of moneymaker capturing licenses in AWS or 700 MHz might have had, but it will do the job of locking customers in.

Now all we have to do is convince Cablevision that to pump up their wifi network to competitive levels, they need to push to open the broadcast white spaces.

Meet the new Wi Fi Mesh solution: "I may not be perfect, or even carrier grade, but I am cheap, I do work, and I'm available now." Works for me.

It will be interesting to see how many other regional players look into this solution as the competitive pressure builds.

Posted on May 29, 2008 at 01:38 PM | Comments (0)

DSL Ruling Will Be A Landmark

FCC eases rules on DSL providers A spate of articles on the Internet offer preliminary analysis of the FCC ruling from Friday, August 5. In case you haven't heard, the FCC took another step to "level the playing field" between the two dominant broadband technologies: cable and telecom-based DSL. See the other three articles at the bottom of this blog for alternative perspectives on the FCC DSL ruling.

Six weeks ago in the Brand X decision, when the Supreme Court disagreed with the 9th Circuit and reaffirmed the FCC's contention that cable broadband was an information service, and so not subject to traditional telecom regulations, we heard the final word on a long-held question - is broadband a telecom or an information service?

While Congress in a rewrite of the Federal Telecom Act of 1996 is likely to speak further on the regulation of broadband, the Supreme Court's action left the FCC with a perceived imbalance, because if cable broadband was information service, why wouldn't telecom DSL broadband be information service also? So they corrected this awkward policy position on Friday by giving telecom-based DSL the same treatment - its broadband service is an information service also, so not subject to telecom regulations, which will be phased out.

According to the telecom establishment, a broadband tsunami will be unleashed by this ruling, as the lack of control of their infrastructure (they were required to let competitors onto their networks) kept the Bells hamstrung, and prevented them from waging an aggessive rollout of broadband infrastructure. Now, finally, they can get going. But their reliance on wired infrastructure means that it will take time to deploy networks.

So what does cable/DSL broadband competition look like? We could look a lot of places, but my hometown paper offered a convenient article (Deals galore for Net access) today, so let's check that out.

Competition like we've become accustomed to with cellphones may be coming to broadband soon, according to this article. So far, I haven't seen it (I'm still paying $45/month for Time Warner broadband, reluctant to switch to DSL), but here in the most wired city in the US, maybe we'll be on the front row.

One way to cut prices is to hop from promotion to promotion, but providers have figured that out and tend to tie in a commitment, as with SBC, which has cut its price even more this year, down to $14.95 a month with a 12-month contract. And they're starting to break up service into levels, ranging from a little faster than dial-up to multiple-megs.

In recent months, SBC, Time Warner and other companies have been slashing prices, with cut-rate offers that make some grades of broadband as affordable as old-fashioned and far slower dial-up service.

Citing penetration of about 35 million U.S. households with some form of high-speed Internet access since it came about in the late 1990s, the Statesman says the target of the rate cuts is the estimated 36 million dial-up users (at the end of 2004) who might switch to broadband if the price were right — and who might then become customers for other services the companies sell.

Time Warner Cable, the dominant cable provider in the Austin area, responded to aggressive moves by SBC by promoting Road Runner Lite, a slower version of its high-speed service, for $19.95 a month, which I may consider, but I wonder how "lite" it is and if I'll notice the difference.

Broadband Internet service is moving from a novelty to a necessity, thus my hesitation to go down in speed in order to go down in price. I like my high-speed Internet. Would you seriously consider cutting your phone bill in half if it meant that the sound quality would go crackly now and then, and sometimes your phone wouldn't ring? I'm not buying that I have to go down in quality in order to get a discount. It's one thing when your standard of comparison is dial up, but another when you've been using high-speed for years. So, they are not focused on winning me over.

But a lot of consumers are more price-sensitive than I am. Clearly, this is the growth area for cable and DSL broadband providers, not only dial up users, but price sensitive broadband users. And there is more at stake than broadband, as the price skirmishes are part of a bigger war between cable and phone companies.

Each industry is trying to expand onto the other's turf. Both are offering broadband as part of a bundle of services that include phone, Internet and cable television. It's the so-called triple play that the industry believes will be the basis for business well into the future.

"Both these industries see where their rivals are headed, and they are trying to capture customers now and keep them," Brumfield said. "They are trying to rope in service to the home."

The goal is to lure new customers with bargain prices and hope they like broadband service enough to keep it after the introductory price expires.

What I hate is the irony of this marketing, where they seem to be begging me to switch. I don't feel loved by my broadband provider. Get this, they are actually nicer to the customers they don't have, than the ones that they do have - that's not real competitive behavior, in my book. Most of the promotional offers are not open to that provider's current broadband customers. And indeed, that was the case when I talked to Time Warner last week. So, I'm hesitantly banking on FCC Chairman Martin's wisdom, and will be watching from a ring-side seat as two of the biggest broadband providers duke it out in one of the most penetrated markets in the US. But I'm also promoting wireless at the same time, more or less written off in all the discussion this weekend - I really believe that a wireless network inserted into a duopoly wired network will keep all the players more honest, and result in even more competition.

Let's watch the Bells closely and the cables even closer. "The phone companies' voice business is already drying up," Brumfield said. "That's why they are making sure they get as much market share as possible as quickly as possible before the cable companies come in and eat their lunch with low-cost phone service. They are really trying to solidify as many customer relationships as they can before the real competition arrives."

SBC and its peers have been losing phone customers over the past few years, as more people rely on cell phones or switch to new services such as cable's Internet phone service... and Brumfield and other analysts said the cable companies are cutting prices grudgingly.

"The cable companies don't want to harm their profit margins," Brumfield said. "They don't want to get into a commodity competition."

Time Warner, Brumfield said, is not promoting Road Runner Lite on a national basis. "This is very much specific to markets where they are feeling some competitive heat."

See these three articles for further perspective on this complicated issue.

FCC removes DSL network-sharing rules | InfoWorld | By Grant Gross, IDG News Service This article by Grant Gross provides a good overview - picked up by many Internet news providers, so you will start to read the same article over and over again as you surf.

The Progress & Freedom Foundation Blog: Bravo on Broadband FCC protects property rights of telecom companies, finally coming to their senses. Pheww!!

PCWorld.com - DSL Deregulation Effort Sparks Opposition Consumers Union and other consumer groups' prayers go unanswered as FCC deregulates telecom DSL to create a duopoly. Consumer groups predict dire consequences, and hey they called it right with FTA 96...

Posted on August 07, 2005 at 02:34 PM | Comments (0) | TrackBack

Cable's Perspective: A Level Playing Field is Good

The Policy Council - House Commerce Committee Testimony on the Changing Face of Communications In this testimony of David L. Cohen, Executive Vice President, Comcast Corporation before the House Committee on Energy and Commerce, Subcommittee on Telecommunications and the Internet, from back in April 2005, we get a glimpse at the perspective of the cable industry on the pending, now current changes to the regulation of cable and telecom companies that would seek to provide the Triple Play: broadband, video, and voice telephony. Again, good background to better understand the ruling by the FCC on Friday.

Posted on August 06, 2005 at 10:11 AM | Comments (0) | TrackBack

Cable Broadband on Steroids

Daily Times - Site Edition Don't you just love the Internet...take this story about a development in Finland - coming to us from a website that is, you guessed it, "A New Voice for a New Pakistan." Well, anyway, however it gets here, the content is intriguing. Imagine speeds of up to 100 Mbs through your TV cable. Thats what Teleste, a Finnish rival of Scientific Atlanta and Cisco, hopes to bring to market as early as next Spring. Lots of video and just about anything else can go over a pipe like that!

Posted on July 25, 2005 at 03:28 PM | Comments (0) | TrackBack