|
Jim Barthold
To listen to Coax Corp., there's money to be made in smaller cable systems.
The company builds proprietary digital headends that it says let smaller systems get into the new realms of digital television, high-speed Internet and telephony services.
The decision to pursue that market was easy because it's a market that's underserved, says CEO Winston Hodges.
"We said the top 60% (of all cable systems) are too big for us; the bottom 10% are too small. We took the 30% in the middle, and, by doing that and assuming we could pick up 14%, 15% of the marketplace, we're producing a company that boggles your imagination in terms of sales in year five," he says.
For now, sales are non-existent as Hodges and his partners try to convince operators that Coax's unique IP-based technology will bridge the digital gap, as well as add capabilities for enhanced Internet-based services.
"Our break-even is around 50,000 subscribers," admits VP-investor relations Mike Draper. At 100,000 subs, the company would be making good money, he adds.
"A lot of operators want to see something when it's ready. They don't want to commit to something because this market is so dynamic," he concedes. "We've met with about 10 to 15 strong MSOs in our target market who have indicated when Coax has this system ready, they are certainly very interested to get into a beta participation basis."
The system, says Hodges, makes it possible for operators with non-upgraded all-coax systems to provide the same services delivered by bigger players with upgraded hybrid fiber/coaxial (HFC) plant.
Rather than relying on OC-3 telephony interfaces for its Internet connection, Coax's headend uses Internet Protocol. This headend is then connected, via coaxial cable, to digital set-tops in subscriber residences that can decrypt incoming MPEG-2 video streams and digital data.
More importantly, the boxes can talk back to the headend and request services that will add funds to the operators' coffers, such as VOD movies.
"A set-top box makes a request that comes running down the coax over to our convergent broadband gateway, and it checks to see if the movie is in the server," Hodges explains. The gateway simultaneously checks other factors such as whether the subscriber's service is paid up and whether there are any parental control restrictions applicable to the requested flick. If approved, the gateway assigns a conventional cable channel and multiplex stream for the movie.
"Once we've done that, we send the set-top box a key that enables them to decrypt the movie," he says. All this will cost the operator something - but it won't be a fixed price, Hodges says.
"Since our headends are so inexpensive, if we sold them we wouldn't make much money," he relates. "We thought we'd take the telephone company model, circa 1950 when everything was all one unit, and would give the equipment away for free and charge for the service."
That doesn't include the set-tops, which Hodges says will comply with digital schemes being developed by Motorola and Scientific-Atlanta.
"As a new company, we wouldn't be very qualified to cope with building a million set-top boxes," he admits.
Back to this issue
|
