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January 2003 Issue

Case Study

Everest Gets Busy in the Business Market

Dedicated Data Delivers Dollars

By Ken Johnson, Everest Connections

How one operator is tapping new revenue by offering carrier-class data services to small- and medium-sized businesses.

Everest Connections provides video, voice, and data services to more than 7,000 homes and businesses in greater Kansas City, Mo. Currently serving the suburbs of Lenexa, Overland Park and Shawnee, we are rapidly expanding into the Kansas City metro area. We are achieving penetration rates above 45 percent and almost zero customer churn, which we attribute to our bundled service offerings at attractive price points. With approximately 550,000 potential cable customers in Kansas City, there is a strong market opportunity for us.

Small business bonanza

Our current service area includes many small- and medium-sized businesses (SMBs) that have favored well in the regional economic climate over the past few years. With more than three million square feet of business park development, there exists an abundant potential SMB customer base. In fact, our hybrid fiber/coax (HFC) cable plant currently passes about 2,700 SMBs, with another 48,800 located in the rest of Kansas City.

We use a standard cable modem platform to serve the smallest of these businesses, but companies with 10 or more employees require carrier-class dedicated bandwidth. Everest has deployed a new solution to meet the dedicated bandwidth needs of these customers.

Market opportunity

Deploying a dedicated bandwidth solution essentially turns our HFC plant into a wide-area network. With this capability we are able to offer services such as local loop replacement and remote site connectivity. For example, we have one customer planning to link 14 local sites through this system, improving access speeds and productivity, receiving service to all facilities from a single provider, and gaining favorable pricing.

We can substantially increase the revenue we earn from each node by marketing a dedicated bandwidth solution to SMBs passed by that portion of the network. While our cable modem subscribers typically pay $30-$45 per month (when bundled with other services), the pricing for SMB dedicated bandwidth begins at $400 per month (based on regional T-1 level services). At these rates, the revenue from one SMB customer equals that from about 10 cable modem subscribers.

In the near term, our HFC network should reach approximately 80 percent of the 2,700 SMBs in our current service area. We've been able to achieve nearly 40 percent penetration in the residential segment, and we expect to meet a 15 percent penetration goal for the SMB segment as our build-out continues.

As shown in Table 1,, annual revenues should reach $1.6 million for dedicated bandwidth service to SMBs in our current service area. Longer term, we project annual revenues could reach $30 million from serving about 6,240 of the 52,000 SMBs in the entire Kansas City area.

HFC plant and the solution

With a new 860 MHz HFC plant built on a 150 homes-per-node architecture, we have significant bandwidth available. To meet the SMB requirement for dedicated bandwidth, we are deploying a dedicated bandwidth platform that operates over our existing plant with no external modifications. With channel agility, this system can operate on available channels within the 860 MHz spectrum, thus no new out-of-band test equipment or procedures are required.

Advent Networks, based in Austin, Texas, supplies us its Ultraband Internet protocol (IP) packet delivery platform that offers dedicated bandwidth to each subscriber allowing us to deliver advanced IP services, including virtual private networks (VPN), videoconferencing, voice over IP (VoIP), and other business communications services. The Ultraband system consists of a switch router at the headend and a gateway at the customer site. This is the only equipment needed to provision the dedicated IP service.

With dedicated bandwidth, we can offer each customer the individual bandwidth required to meet enterprise business needs. Downstream bandwidth from 5 Mbps to 40 Mbps can be scaled in 5 Mbps increments and dynamically adjusted by our personnel through an on-line provisioning process. Upstream bandwidth from 0.5 Mbps to 8 Mbps can be scaled in increments of 0.5 Mbps.

A good example of this bandwidth flexibility is demonstrated with our service to local multimedia services company, Premier Studios. Since November 2001, Premier has been allocated a dedicated 10 Mbps downstream Ethernet connection and 2 Mbps upstream Ethernet link to speed the uploading of large multimedia production files to an external host server for client review.

Dedicated bandwidth components

To supply such services, we need a carrier-class platform with complete redundancy and fault tolerance from the switching to the physical interface layer to serve our SMB customers. The heart of the dedicated bandwidth system is the USR 8800 switch router. This chassis is located at our headend. This platform employs an 80 Gigabit per seconds (Gbps) switch fabric and high density QAM (quadrature amplitude modulation) technology. The switch router functions as the Gigabit Ethernet interface into our Internet backbone.

The switch router performs our dedicated bandwidth subscriber activation and provisioning functions and allocates an individual IP address to the UAG 210 Access Gateway that is deployed at each premise. The centralized routing and distributed forwarding architecture enables wire-speed Layer 3 routing with the further capability of adding advanced Layer 4-7 IP services.

At the subscriber premises, an access gateway translates the dedicated bandwidth digital point-to-point connection into a low-cost standard Ethernet interface. The dedicated bandwidth signals are transparent to other signals carried over the coaxial cable. Each gateway receives only the traffic destined for it, enhancing network security.

Platform management and provisioning

We also use the system's Ultraband Management Console software to configure and manage customer gateways and bandwidth allocations, as shown in Figure 1 . We can add new customers using the following five-step provisioning process:

1) Select "gateway management"

2) Click "add subscriber"

3) Select the bandwidth allocation desired by the customer

4) Enter gateway serial number and IP address

5) Click "add" to finish

This system can be accessed from anywhere on our local area network (LAN), providing the flexibility to perform remote configuration and maintenance of the system. The management console runs on a Web server and is an open-standards, Java-based element management tool that uses an Internet browser to interact with the switch router. We can access all management functionality through a 10/100 Ethernet connection to the chassis. The management console software also can be used as a subscriber and billing management portal for integration with our operational support systems.

Network integration

The dedicated bandwidth system integrates directly into our HFC network, and the platform conforms to the standard DOCSIS signal mask of our other equipment. (See Figure 2 )At the headend, the switch router connects directly into our combining network. At the subscriber premises, the HFC coaxial plant connects directly to the gateway. No additional network elements are needed. The ease with which this system deployed into our network minimized installation labor hours and expenditures.

SMB revenues increase network value

By deploying a dedicated bandwidth system, we are able to serve the high-yield SMB market in addition to the residential sector. Our strategy of beginning in an economically strong area of Kansas City provides a lucrative SMB market base that is generating strong cash flows to financially support our expansion plans. Our deployment of a dedicated bandwidth system to meet SMB customer needs will enhance this success.

Ultimately, we are able to offer a competitive alternative for SMBs that also enhances the return on investment of our HFC network.

BOTTOM LINE

SMB Market Means Money

Cable is not just for residential consumers anymore. Everest Connections is tapping into the lucrative small- and medium-sized business (SMB) market by using a dedicated bandwidth solution. While legacy cable modems cannot provide the throughput and quality of service (QoS) that businesses require, Everest has deployed a dedicated bandwidth system that meets these needs, and is enabling Everest to take its revenues to a higher plane.

Ken Johnson is the senior vice president of technology services with Everest Connections in Kansas City, Mo. Contact him at .

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