They Come, They See, They Conquer - Industry Trend or Event

Independent broadband overbuilders are like Caesar: they come, they see, they conquer.

Because they attack with a greenfield approach, new network providers -- who deplore the term overbuilders -- can implement more advanced services more quickly than operators with existing networks.

"We have a clean sheet," agreed Bruce Weintraub, VP-network development for start-up Digital Access Inc. "We will be provisioning voice, video and data over a network which is going to be more reliable than networks that you've seen in the past."

Digital Access will start service this year in four markets that already have broadband providers: Kansas City, Milwaukee, Nashville and Indianapolis, offering converged voice and data services.

It's the kind of strategy that Knology Holdings Inc. also follows.

"We get a chance to offer the whole bundle," said Knology's president/CEO Rodger Johnson. "Some of the big guys haven't put all the pieces in the puzzle."

Those big guys, through local franchises, have been in some of these markets for decades. Doesn't this make Knology and Digital Access and others like them, a Wal-Mart invading the dime store's territory?

"I don't know if you could actually call us the chain store," Johnson bristled. "I would actually almost look at it the other way. I would look at the big guys as the chain stores, who are larger and maybe don't focus on the personal service that we do. I would call us the independent local businessmen who have tied ourselves together in affiliation across some of these middle tier markets."

Southern comfort

To his way of thinking, Knology is the "corner drugstore who relies on high quality service and a local identity."

Before getting too homey, Johnson admits that Knology's movements are calculated like any big business.

"Typically, what happens is we do a demographic analysis, a competitive analysis, a cost-of-construction analysis and we create kind of a waiting schedule," he said. "In Knology's case, we looked at 20 different markets in the Southeastern United States earlier this year knowing that our goal is to add about 14 more markets to our universe over the next several years."

That look included a competitive ranking of the players.

"We're initiating dialog with a half dozen of those under the expectation that in the process of negotiating franchises, some will happen relatively quickly, (and) some will be longer term ... because of all the things you have to go through. By talking to a half-dozen or so, we can find out who's the most interested in getting us into their community the quickest," he said.

Knology is already in Montgomery and Huntsville, Ala; West Point, Columbia and Augusta, Ga.; Charleston, S.C. and Panama City, Fla.

"Our focus is regional. We're a Southeastern provider" with no plans to extend outward from there, he emphasized.

Johnson, like Weintraub likes being able to go in and start from scratch. In many cases', the incumbents help he said.

"We've actually seen in certain markets a reaction by prospective customers when the big guys don't do what they say they're going to do," he said. "This does provide, in some instances, an opening for us."

Helping hand

Interestingly, although both companies are well financed, they get a boost from an organization formed to help level the playing field for all small operators: the National Cable Television Cooperative Inc. (NCTC).

The NCTC helps lower equipment prices by buying in bulk for its members, including long-time members Classic Communications Inc., of Tyler, Texas, which is upgrading its networks for high-speed Internet and digital and consolidating headends throughout its 500 systems in nine states.

"We will have our hands full in the next few years trying to upgrade our systems and keep up with the digital headends and high-speed modems," said engineering VP Don Enas, calling the Internet "a good revenue source" and pointing to DBS competition.

Headend consolidation like this is typical for its members because they "have a whole lot of these little systems, none of which on their own can they justify the capital investment to roll out digital or become an ISP," said the NCTC hardware VP Mark Bishop.

Network headends change the equation.

"We're just selling tons and tons of fiber and the nodes necessary to make that happen," he agreed.

In fact, the co-op, like an armaments supplier, sells bullets to everyone. Bishop emphasized that the independent players, including a growing number of local telephone companies, are not in hand-to-hand combat with each other, they're nipping at the heels of the industry giants.

Doing battle

"The guys who are being very aggressive about it are typically going after the AT&Ts and the Time Warners," he said.

For that, he said, the giants have only themselves to blame. They're the ones who are publicizing what they can do -- even if they're not planning to bring it to the hinterlands.

"If I'm a mid-sized market with AT&T and I'm not getting all these wonderful new services, I'm calling somebody to say, `You bring me all these wonderful new services,'" Bishop explained.

In fact, he said, many of his non-competitive members are just as interested in establishing advanced services.

"They're not worried about being overbuilt. They're not worried about the Time Warners of the world coming in and taking over, but (are upgrading) just out of pure interest of being on the cutting edge, doing the very best for

their subscribers and making the most of their revenue opportunities," he said.

Competition, however it comes, is helping push the smaller operators.

"We have tough competition from direct-to-home satellite guys," added Michael Panzik, NCTC president, adding yet another ingredient to the mix. "I think the cable industry is better for the existence of an EchoStar or a DirecTV then we would have been if they had never been developed."

Karen Brown contributed to this article.

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