In this age of MSO consolidation, it is easy to overlook America’s small cable system operators. But they’re still out there, aggressively pursuing creative solutions for providing video, data and even telephony.
So what defines a small system operator? Mathematically, it is a mix of total subscribers, total systems and areas served. For instance, Alaska’s GCI Cable has 137,000 basic subs and covers 90 percent of the largest state in the union. Meanwhile, St. Louis-based Cequel III, which manages Classic Cable’s 325,000 subs over ten states, “averages 1,500 subs per system,” says Terry Cordova, Cequel III’s senior vice president of engineering.
However, being a small system operator isn’t just a matter of numbers, but attitude. It’s knowing that technical solutions designed for dense urban markets don’t always make money in smaller rural systems. It’s banding together with other small operators to buy equipment in bulk, to realize the same discounts that big MSOs and direct broadcast satellite (DBS) providers get. And fundamentally, a small system’s attitude means facing the realities of rural and low-density urban markets, and catering to them. Enough preamble. Here’s how successful small system operators are tackling the engineering behind video, data and even telephony in their own unique ways. Measured video upgrades
First and foremost, cable is about video, and cable’s competition in this arena is definitely DBS. This is why MSOs of all sizes are rolling out digital cable, and why smaller systems are managing digital cable expenses by using third-party signal delivery systems such as HITS (Headend in The Sky). That said, as the recent shutdown of signal delivery carrier WSNet proved, relying on others for programming content can be a risky proposition for smaller MSOs.
Of course, rolling out digital cable requires extra bandwidth, which is why small system operators such as Cequel III have been boosting bandwidth through plant upgrades. However, in contrast to larger MSOs, Cequel III has opted to expand to 550 MHz, rather than 750 MHz or higher. The reason? “You have to understand the average household income in the markets where we provide service,” Cordova explains. “This requires that we manage the content that we load onto the system, and avoid simply adding costs to the customer without knowing if it is content the customer is looking for.” Knowing that price is an issue to its customers, Cequel III decided that a 550 MHz upgrade made the best sense. This bandwidth is sufficient for each system to carry 50 to 55 analog channels, 12 to 17 channels of digital cable, two channels dedicated to data, with a couple of channels held back for high-definition TV (HDTV). By upgrading to 550 MHz, Cequel III has been able to buy good-quality, used equipment from larger MSOs moving to 750/860 MHz. Add the fact that offering fewer channels keeps programming costs down, and Cequel III has found a cost-effective way to upgrade while keeping its price sensitivity advantage. Meanwhile, Pennsylvania’s Susquehanna Communications, which serves 207,000 basic subscribers across eight systems in five states, is using interactive gaming channels such as Scientific-Atlanta’s Classic Games and BuzzTime Trivia to keep subs loyal. “This is a big differentiator with DBS,” says SusCom President/COO Jim Munchel. “Interactive gaming channels are very popular with our customers; particularly the younger demo.” Deploying data For small system operators, providing high-speed Internet access is a major weapon in their battle to survive. Small wonder: the same rural and low-density urban markets that make it expensive to offer digital cable also make digital subscriber line (DSL) rollouts costly to the competition. Mindful of this, systems such as Cequel III have come to view “high-speed data as our second core competency,” says Cordova.
To capitalize on high-speed data, Armstrong Cable has upgraded its networks using fiber-optic backbones. To save money, “we do everything in-house when it comes to HFC networks,” says Armstrong Vice President of New Technologies Mike Giobbi.
“We cover design to deployment, and even have three vans outfitted with fiber fusion splicing equipment.” The result: Armstrong’s 500 kbps high-speed data service costs the same or less than DSL ($39.95-$49.95 a month), and comes with free installation and modems. That said, it isn’t always cost-effective for small systems to create their own terrestrial backbones. This is why GCI is using the GALAXY Xr satellite to deliver high-speed Internet to 152 rural Alaskan communities. The satellite link is based on Via-Sat’s LINKWAY VSAT (very small aperture terminal) product. “Alaska is just too big and too sparsely populated to deploy statewide fiber-optic networks,” explains David Morris, GCI’s vice president of corporate relations. “This is why, with the exception of Anchorage, Fairbanks, Juneau and their surrounding areas, all of our Internet nodes are connected by satellite.” Tuned to telephony
For cable operators big and small, telephony is the Next Great Frontier. The question is, how should small system operators prepare themselves to deploy it?
For SusCom, the answer has been a 50-percent stake (the other half owned by Adelphia) in a local/long distance CLEC serving commercial customers in York, Penn. “Our CLEC partnership … has provided SusCom with limited operational experience since our partnership responsibility is to build and maintain fiber facilities only,” Munchel says. Still, “In light of the success that MSOs are having selling bundled voice, video and data services to residential customers, we look forward to developments in voice technology and OSS systems that will provide us with an opportunity to enter the voice business.”
Since 1957, Armstrong has run small independent carriers in Maryland, New York, Pennsylvania and West Virginia through its Armstrong Telephone Company. With 250,000 telephony access lines now supported, it’s safe to say that the company is a telco pro. As a result, it is not surprising that Armstrong became the first cable company to sign a co-branding deal with the broadband telephone carrier Vonage in June 2003. Under the deal, Vonage subscribers will get local and long distance Canada/U.S. carriage over Armstrong Cable’s HFC plant, for a flat monthly fee. “We see this product as an enhancement to our broadband Internet service,” says Armstrong President Dru Sedwick. “Armstrong has offered high-speed Internet for over five years, and now has 30 percent penetration companywide. Digital Voice is a natural addition to our service and one that will offer customers even more value.” In Alaska, GCI is offering switched CLEC telephone service in Anchorage, Fairbanks and Juneau. “Today, we have about 20 percent of the state telephone market,” Morris says. “This will give us an advantage when transitioning these customers to cable telephony.” Needed: more money
To stay at the cutting edge of technology, small operators need more than technical savvy. They also need lots of cash.
The problem is that bankers aren’t too forthcoming with capital these days, says Matt Polka, president of the American Cable Association. It has 1,000 members serving eight million subs in 50 states. “Technically, it is not a challenge to launch these new services, but it is financially challenging to do so,” Polka observes.
“As well, for self-serving reasons, the big MSOs and equipment manufacturers have come up with standards that suit them but do not necessarily work for small system providers,” he adds. Citing plug-and-play HDTV set-top boxes as an example, Polka says, “So far we don’t know what these will cost to provide, let alone to support. We’re not sure our members will be able to afford them.” America’s small systems operators aren’t giving up. In fact, they’re determined to stay in the game, no matter what blows DBS and telco-backed DSL deliver. James Careless is V.P. of TJT Design & Communication. Email him at [email protected].