News

Subs Tune In to Telco's Bundle

8/11/2002 8:00 PM Eastern

For an independent telco, adding video service to the product lineup can be worth a bundle.

That's true for All West Communications, an independent that serves northwest Utah and southwest Wyoming. After adding a very-high-speed digital subscriber line (VDSL)-powered video service to its lineup, it has gained about 1,500 bundled customers in three towns.

That may seem small, but it makes up 70 percent of All West's existing customer base in those markets — and in two of the three markets, All West is the incumbent phone provider.

Plans are in the works to expand the three services to pass some 16,000 surrounding communities.

Kamas, Utah-based All West installed a Next Level Communications Inc. VDSL system offering voice, video and data in Kamas, Coalville, Utah and Evanston, Wyo.

In Coalville, All West is the incumbent telephone provider and competes with MSO AT&T Broadband for video customers. In Evanston, it competes with Adelphia Communications Corp. and telco Qwest Communications International Inc.

Able to pump from 16 to 26 megabits per second of throughput into homes, the Next Level system supports an 80-channel video service including local channels, cable networks and premium channels Home Box Office, Showtime and Encore at rates between $12.95 and $60.80.

ONE MONTH FREE

The DSL service ranges from as low as $29.95 per month for a 128 kilobit per second hookup to $129.95 for a 1.5 mbps connection.

In recently launched Evanston, All West has offered free service for one month, giving customers the option to start paying for any combination of service they want thereafter. That has resulted in a 50 percent uptake rate for all three offerings, according to All West vice president of operations Tony DiStefano.

"We are getting up to 75 percent by the time we go back around a second time," he added. "Because the neighbors are yacking, they are telling everyone what is going on and next thing you know they are calling us.

"We are averaging five a week, of people we have passed already calling back in and saying, 'Hey, we want you.' "

VIDEO, DATA BUNDLE

But it is the video and DSL bundle incentive that's gained significant interest. Customers who sign up for the entry-level 128K DSL service get it for the same price as dial-up if they also subscribe to the video service. That has generated a 70 percent take rate.

All West's video penetration rates are not just a fluke, according to Geoff Burke, Next Level's director of marketing services. "It's a revolutionary service for towns like this, because suddenly they have gone from having really crappy cable services to something that is on par with the best of services anywhere from a programming perspective, and in addition to that, these towns in rural Utah have more bandwidth to the home than any metropolitan area in the U.S," he said. "They are getting 26 megabits into the home."

In Kamus, All West was also the incumbent cable provider. But when the telco looked to upgrade the locality's service, it decided to scrap the analog coax plant and go with an upgraded copper-based network.

"We had maxed out," DiStefano said of the analog cable system. "We either had to go all digital and spend a lot of money on the analog, or go digital and use what we had in place as far as what we had in copper line. And that's why we did it."

Nationwide, Next Level's VDSL system has now been deployed with 45 smaller operators that offer voice, video and data. While larger incumbent telcos are still on the VDSL sidelines, the technology does offer advantages to compete with cable operators who are adding telephony to the product mix just as quickly.

DiStefano said All West is on track to turn a profit on the video-delivery system within two years. Part of that has to do with the fact that the telco already had a lot of fiber-optic cable in the ground before it opted for the Next Level video gear.

"We are close," he said. "I think that if it is over two years, it won't be very far over two years."

ADSL TRIAL SEEN

All West will also stage a trial of Next Level's new ADSL-based system, which can deliver 10 mbps of bandwidth, thus supporting two digital video channels, voice and data for customers within 10,000 feet of a central office. It will mean eliminating one video channel, but with the increased distance from the central office to the customer, "it will cover people I can't cover," DiStefano noted.

Telcos that add the video element "are a really unique example of the power of bundling from a marketing standpoint," Burke said. "When an incumbent telco leverages its position, it is really advantageous versus a big company like Adelphia or AT&T, or a Dish Network for that matter, in being able to respond from a programming perspective to the unique programming needs of the community."

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