Archives

By Arthur Cole, Contributing Editor

Depending on whom you ask, cable overbuilders will see either a shining future as their state-of-the-art networks continue to outclass all rivals, or they will fall victim to stiff competition and a hostile equity environment.

Research from The Strategis Group confirms that a new breed of bundled network providers is eager to take on all comers, not just the cable industry.

These new players, such as Grande Communications of San Marcos, Texas, are building OC-48 or better backbones tied to 850 MHz hybrid fiber/coax (HFC) networks with nodes as small as 120 homes. With lots of fiber in the ground, operators expect to be able to provide even the most advanced services.

"They are building future-proof networks in phased rollouts," says Keith Kennebeck, an analyst with Strategis.

But Strategis highlights some big challenges for these up-and-comers. First, there is the question of competition, and whether these network providers can achieve sustainable penetration rates. Failing to gain adequate market share leads to the second major challenge: access to equity markets.

"They need to get favorable penetration rates in order to get positive cash flow," Kennebeck says. "We question their ability to raise more capital. Will more money be available, and (if so) at what cost?"

The third challenge is regulatory. Since the 1996 Telecom Act, there has been broad support of competition in the local loop, but only for those not making excessive franchise and construction demands.

A contender speaks

The challenges--especially in the equity markets--are real. Digital Access Inc. was one of the many new providers that had attracted cable veterans to its ranks. A year ago, it was busy deploying fiber. In March, it closed shop.

Those who have survived the drill, such as Western Integrated Networks and RCN, remain upbeat. Grande founder and CEO Bill Morrow says the business plan for a "bundled communications company" is sound. Grande's main strength, he says, is that its network was designed from the ground up for broadband services.

"We've built a data-rich plant that gives us a footprint not only in the residential community but into the small and medium business markets," he says. "And we can wholesale the backbone element of our network to pass large businesses."

Morrow says Grande is competing for all types of information services, including high-speed data, multi-channel video and even lifeline telephone service.

Grande is uniquely positioned for the moment when bandwidth demand catches up with Internet take rates, unlike the cable operators or telcos, Morrow says.

Operators such as Grande will pursue a growth pattern similar to electric, gas and telephone concerns, Morrow predicts. Small regional players will slowly morph into national giants, with plenty of room for multiple providers of broadband communication services.

 Back to June 2001 Issue

Access Intelligence's CABLE GROUP
Communications Technology | CableFAX Daily | CableFAX's CableWORLD | CT's Pipeline
CableFAX Magazine | CableFAX databriefs | Broadband Leaders Retreat | CableFAX Leaders Retreat