A Small-Town Strategy10/21/2005 8:00 PM Eastern
While the large regional Bell operating companies stake out their positions in the video space, plenty of smaller telcos that face a competitive pinch are turning to digital subscriber line technology and increased fiber to offer video packages to customers.
Many of them believe they can find a successful niche through a combination of unique feature sets, advanced technology and appealing bundled-services pricing.
Bixby Telephone Co. of Bixby, Okla. — a suburban area south of Tulsa — counts 10,000 access lines and 1,800 DSL subscribers across 8,000 homes. It's been deploying fiber-to-the premises technology in “greenfield” developments over the past year and is prepping MPEG-4 (Moving Picture Experts Group)-based Internet-protocol television for launch later this year.
Bixby competes against Cox Communications Inc., but believes there are underserved geographical niches and new services it can provide to generate perhaps a video-penetration rate as high as 30% over the next few years.
“We're doing this to protect market share,” said Bob Rozell, Bixby's chief operating officer and chief financial officer. “It's not how many new subscribers we can take. It's how many we stand to lose if we don't get involved in this marketplace.”
Bixby launched DSL in 2002, according to Lynn Pike, the company's CEO. It has steadily rebuilt its plant, with copper loops at less than 5,000 feet. All new greenfield subdivisions are getting fiber to the home, to the tune of about 200 new homes per year, Pike said. That subdivision growth has helped offset second-line losses, he said.
“We just launched 4-Megabit service,” Pike said, and Bixby is shifting DSL equipment to the Calix platform, which it will use for IPTV. The FTTH homes will also likely get the 4-Mbps service.
VIDEO IN THEIR BLOOD
Pike and Rozell had been with telephone companies that attempted video rollouts using gear from NextLevel Communications Inc. (now Motorola Broadband Communications Sector), so video was in their blood when they arrived at Bixby.
The company chose Calix's transport system and Tut Systems Inc. to supply headend gear, Pike said.
Bixby also chose Conklin-Intracom, a Greek company, to supply middleware. “They've got a number of systems deployed in Europe, and they are bending over backwards to work with us,” Pike said of Conklin.
“They really are feature-rich,” he added, allowing Bixby to offer text messaging on-screen and MPEG-4 digital video recorder set-tops.
Conklin has also been showcasing its encryption system to such content providers as the Hollywood studios.
“They are close to getting everyone to buy off on it,” he said.
VENDORS FOR BOXES
Pike said Bixby is buying set-tops from Wegener Corp. and Amino Communications plc, and hopes to have test boxes by November or December. The goal is to have 40 hours of hard drive space on the DVR.
Bixby chose Siemens to supply the side-of-the-home optical network terminal. Pike said Bixby will likely use external batteries for the power supply. The ONT will have two Ethernet ports.
In new homes, Bixby will use category-5 wiring, as well as existing coaxial cable in older homes.
Bixby is discussions with the National Cable Television Cooperative to provide content for its IPTV launch. Pike said the company has received a cable franchise to provide video service.
Pike plans a full offering of cable networks, as well as video on demand, HDTV and DVR. Entone is supplying the servers and may used on the content acquisition front, Pike said.
20 MEGS TO THE HOME
Pike believes Bixby can get its DSL platform to deliver 20 Mbps of throughput to the home — enough bandwidth to serve three standard-definition set-tops and one HDTV box.
“With any new service, you have to bring something to the table in terms of price, features and bundling,” Rozell said. “We've searched pretty hard to find what gives us an edge and we believe we've found that. It's not just a me-too cable service. You can pick up e-mail on the TV set, have caller ID on screen and text messaging.”
He added that using MPEG-4 will mean better picture quality and much quicker channel change.
Pike believes Bixby has an opportunity to do well. “The first 10% to 15% just seem to come,” he said, of early penetrations. “They like the phone company or they just want a change.”
The challenge is the next 10% to 15% of customers, he said. Bixby hopes to reach 30% video penetration, but Rozell said the company can be profitable below that level.
There are also parts of its territory where Cox hasn't built out its plant, Pike said. In those locales, he believes Bixby can make some solid video inroads.