Analyst: Vyyo Could Help Cox in N.O.

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In order to better compete with rivals like BellSouth Corp., Cox Communications Inc. is likely to rebuild its New Orleans system using a traditional hybrid fiber-coaxial architecture, but with more fiber than coax, according to a Wall Street analyst.

Needham & Co. Inc.’s Anton Wahlman issued a report Monday upgrading Vyyo Inc., a supplier of broadcast-wireless-access systems, to a buy recommendation, based in part on what the analyst believes will happen when Cox rebuilds its system in New Orleans, which was badly damaged by Hurricane Katrina Aug. 29.

He estimated that about 200,000 cable homes will have to be almost completely rebuilt, and that Cox may have an insurance claim of $46 million, or $2,300 per home. Cox has said that it has restored service to more than one-half of its 270,000 subscribers in New Orleans.

The Big Easy is an increasingly cutthroat market.

“In New Orleans, BellSouth has also started offering WiMax-style wireless-broadband service … This is yet another competitor in the high-speed Internet-access game, against which the cable-TV operators would have to compete based on speed, rather than coverage/flexibility/portability,” Wahlman wrote.

In order to combat rivals like BellSouth and Verizon Communications Inc., cable operators need to increase their upstream and downstream bandwidth capacity, which can be done with infrastructure upgrades incorporating Vyyo equipment, according to Wahlman.

“Given that insane regulatory reasons may preclude an FTTH [fiber-to-the-home] option, we believe it is reasonable to believe that Cox will instead install a traditional HFC architecture, but with a lot more F than C,” Wahlman wrote.

He also suggested that Cox will upgrade and deploy 3-gigahertz passive taps -- perhaps one per four homes -- to help “future-proof” its network.

“At 200,000 homes, that makes 50,000 taps at $20 apiece [some $2 more than a normal 1-GHz tap], or $1 million total,” Wahlman wrote. “We believe this revenue opportunity could benefit Vyyo as soon as early 2006.”

Cox officials couldn’t be reached for comment Monday. Wahlman didn’t say so in his report, but Cox said in 2003 that Xtend Networks -- the bandwidth-extending firm Vyyo bought last year -- was an approved vendor after tests at the cable company.

This past August, Cox approved the use of Xtend technology to offer T-1 data and telephony services over cable plant.

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