Quick Take from HITS Boosts Small Op Hopes

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Small cable operators may have found their competitive edge in Quick Take, a blend of available technologies and creative new business models now on trial in markets across the country.

And some even suggest that it could save small cable, a species which for years has been plagued by such maladies as low economies of scale, rising programming costs, lack of access to capital and thorny regulatory issues.

Quick Take could provide for a low-cost alternative to costly digital headends while adding dozens of additional channels and generating more revenue per subscriber — two desperately needed components that would greatly enhance a small operator's ability to compete with direct-broadcast satellite in an increasingly competitive environment, industry observers said.

Quick Take is an inexpensive digital headend solution that allows operators to deploy 150 or more channels without incurring the typical $150,000 or more in costs. Many small systems can launch the technology for less than $15,000 in headend equipment, while significantly reducing installation and operational costs.

A similar Quick Take model — WSNet Inc.'s Quick Take Plus — is also in the trial stage.

Quick Take uses AT&T Broadband's Headend in the Sky technology and a combination of satellite-delivered signals, simple transcoders and scaled-down set-top boxes. The mix of technology and a business model aimed straight at small-market systems has earned the undivided attention of a growing number of smaller operators, many of whom are eager to deploy the new concept.

"It's the first economic solution that makes sense for small operators who are struggling," said Ben Hooks, CEO of the 70,000-subscriber, 11-system Buford Media LLC. "It's opening the door to new revenues and will allow us to compete. It's what we've been waiting for."

Buford recently launched Quick Take and will deploy the HITS-based technology in all of its systems by January.

"We see the HITS Quick Take model as easier to handle and connect," said Hooks. "It's more expensive up front than HITS2Home and HITS, but with 20 percent of our subscribers moving each year, it will lower churn and offer significantly more channels.

"We'll also use the WSNet model, which is better for systems with bandwidth-capacity issues."

WSNet is currently trialing its Quick Take Plus model in a handful of smaller systems to determine its effectiveness. It's aimed at systems with roughly 1,500 subscribers and a capacity of 450 megahertz or less.

"We're trying to gather data about subscriber retention, increased subscriber rates and revenues, and we expect smaller operators to increase their revenues through more channels, [pay-per-view] and customer service," said WSNet COO Stuart Lefkowitz. "Quick Take Plus is a way to inexpensively upgrade their TV business, but there must be convincing evidence. The trials will try to define that."

Quick Take and HITS are nearly identical, with Quick Take essentially HITS2Home without a dish. WSNet's Quick Take Plus includes a quadrature amplitude modulation (QAM) model, which retains local and off-air channels in analog format while redeploying basic and expanded-basic satellite channels in digital format, via WSNet transponders.

HITS's Quick Take offers content from its transponders as a digital overlay, while WSNet allows access to additional transponders and channels, along with the ability to move to an all-digital model.

Quick Take Plus is less expensive to deploy up front but more expensive in the long run: the service requires expenditures for licensing and programming deals, as well as a set-top box in every home. However, it eliminates the time and cost of securing programming deals and allows for increased bandwidth capacity and more channels.

BOTH MODELS TOUTED

Both models have great potential for smaller operators, experts said.

"There are 200 cable systems committed to deploying Quick Take and 10,000 set-top boxes delivered," said HITS vice president of operations Paul Bambei. "It's becoming a lifeline to compete with DBS, which will be a very formidable competitor if EchoStar and DirecTV merge. That's 900 channels between them."

HITS is moving quickly to build its Quick Take product and support staff, Bambei noted.

"We've fleshed out the business model and the economics and feel the model is designed for the 1,500 to 3,000 subscriber range," he added. "We're targeting the NCTC's [National Cable Television Cooperative] 12,000 members, 15 percent of whom are HITS customers. But it's very early and we're learning from the trials."

Quick Take and Quick Take Plus trials are taking place across the country. For some, the trials are over and Quick Take is on the books — and looking good so far.

"It's everything we had hoped it would be," said Steve Weed, president of Millenium Digital Media's 70,000-subscriber Northwest region. "It looks just like a rebuilt cable system with hundreds of channels, digital music, PPV, and you get zero fixed cost and higher revenue per subscriber.

"Our sell-in rate is 30 percent versus 12 percent for HITS2Home, mainly because subscribers don't want a dish on their homes. And Quick Take's installation process is very simple."

Millenium's early Quick Take numbers have been encouraging, Weed noted. "We've added an extra 50 channels and are getting an additional $7 per sub per month, plus PPV and digital music, and all for less than $15,000 in headend equipment and about $250 each for the set top boxes, which is expensive, but those costs are recoverable."

How quickly those costs are recovered could be an issue for Quick Take and smaller operators. Admitted Weed: "The ROI (return on investment) isn't all that thrilling, but we're changing from a sinking business to a good one and we'll make enough to recover those costs and make our customers happy. We now have a product to compete with DBS and until you do this, you can't compete."

Despite smaller operators' upbeat response to the Quick Take and Quick Take Plus models, some pressing issues still remain.

MOTOROLA BOX

"PPV isn't doing as well as we expected because Quick Take requires a phone line since it's not two-way capable, and we have to bill and activate services through HITS' authorization center, so a third party controls the boxes, which are 'cold' boxes, so we have to wait for the system to download," noted Weed. "But it's a very appealing business model, because all of the revenue is incremental."

Motorola Inc.'s DSR 470 set-top box is the only unit that will enable Quick Take and doesn't allow for two-way service. The 470 looks for digital-cable and QAM signals and is equipped with a digital and analog cable tuner. It can integrate the two services when satellite signals are coded into the set-top box. Transmodulators from Drake and Blonder Tongue Laboratories Inc. take the satellite signal.

Most smaller operators are getting the Quick Take lifeline message, including Galaxy Cablevision LP, a Sikeston, Mo.-based small system operator which is testing Quick Take Plus at a small system in South Carolina and preparing to launch Quick Take.

"Technically, all of the testing is done and we're now in the marketing phase," said Galaxy president Jim Gleason. "We expect to see some technical issues, but it looks sound. Now, we have to get the product out there.

"We're very bullish on these solutions. It's the only way for us to compete," noted Gleason, whose MSO has lost 4.5 percent of its subscribers in each of the past four years.

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