Cablevision Ups the Broadband Ante with New Optimum Online Speed Tiers

On November 7th Cablevision has announced that it is introducing two new Optimum Online premium tiers: a 30 Mbps/2 Mbps "Boost" tier and a symmetrical 50 Mbps "Ultra" tier for business data services.

Recommended Competitive Responses

► Broadband competitors to Cablevision should point out the cable provider's lack of reach outside New York City.

► Traditional telco competitors such as Verizon should point to the lack of details in Cablevision's Optimum Online services, particularly the Ultra tier.

► Competitors can point out that Cablevision's Optimum Online basic service and Boost tier are no different from any other service. That is, they do not offer guaranteed throughput, but rather "best effort" service.

Recommended End User/Customer Responses

► At 15 Mbps downstream and 2 Mbps up for $29.95 for the first year, Cablevision's basic Optimum Online Internet access service is the best deal around. After the first year, the service cost rises to $44.95 to $49.95 a month, equivalent to FiOS, but Cablevision's VoIP service is likely to be priced more favorably than an equivalent Verizon FiOS voice/data bundle.

► Given Cablevision's track record and its obvious intent to beat Verizon's FiOS initiative - it's a good bet the cable company will strive hard to meet or beat the RBOC's offers. This probably won't be the last salvo in the price/performance competition between Verizon's FiOS and Cablevision's services.

► Potential Optimum Online Ultra customers will have to get details of price and service guarantees from Cablevision, whether they intend to use it as a symmetrical 50 Mbps data service or as a high-speed dedicated Internet access service. Since Cablevision employs a technology for Ultra that is an overlay running at frequencies above its standard hybrid fiber/coax network, the carrier may be limited in the number of customers it can support in those higher frequencies.

Broadwing Takes Flight with New Managed Security Services

On October 31st Broadwing Communications launched a Managed Security Suite of services designed to help thwart IT security threats ranging from malicious access to corporate systems to email-based threats such as SPAM and viruses. Customizable for enterprise sites ranging from a branch office to a Fortune 100 headquarters location, the product suite combines both premises-based and network-based approaches to identify and eliminate security threats where they are most effectively defeated.

Recommended Competitive Responses

► Competitors should look at offering specific vertical niche offerings that are designed to meet the unique security needs and regulatory demands of sectors in the government, healthcare, financial, and manufacturing verticals as Broadwing has taken a broad approach with this initial rollout.

► Competitors such as AT&T and Sprint that currently leverage network ownership to differentiate their services with offerings such as AT&T Internet Protect and Sprint's IP Defender Service should tout themselves as market leaders that currently offer services that are some of the most proactive in the market.

Recommended End User/Customer Responses

► End users will want to inquire about Broadwing's product and services rollout roadmap, as the company looks to expand beyond this initial offering and step up its competitive positioning in the market.

► Existing customers will want to inquire about possible bundled services discount as Broadwing looks to ramp up its customer portfolio quickly, and show some positive revenue results with this new suite of services.

Cox Sells Off a Portion of Its Second Tier Cable TV Markets to Cebridge Connections

On November 1st Cox Communications is selling cable TV systems in multiple markets to Cebridge Connections, managed by Cequel III. The transition will close in Q2 2006 with Cebridge acquiring 940,000 basic cable subscribers in the Cox markets of west Texas, North Carolina, Humboldt/Bakersfield, and Middle America.

Recommended Competitive Responses

► Leading satellite TV providers should start targeted marketing campaigns in the markets where consumers are losing Cox service for the smaller, lesser-known Cebridge, and get those customers interested in satellite TV since their video service is already in transition. Cebridge has not shown great interest in adding telephone service to its cable plant, which might make its customer base more vulnerable to churn.

► Incumbent local telephone competitors can out-bundle Cox by using wireless, a key bundling component that Cox currently lacks. Cox's DSL rivals, such as SBC and Verizon, need to highlight their partnerships with content providers (Yahoo! and MSN, respectively), which offer advanced e-mail features and video streaming at no additional cost and are valued around $10 a month.

► Incumbent local telephone competitors can out-bundle Cox by using wireless, a key bundling component that Cox currently lacks. Cox's DSL rivals, such as SBC and Verizon, need to highlight their partnerships with content providers (Yahoo! and MSN, respectively), which offer advanced e-mail features and video streaming at no additional cost and are valued around $10 a month.

► The RBOCs should stress the reliability of their circuit-switched local networks, as opposed to cable telephony, which might suffer outages when the cable television network has problems.

Recommended End User/Customer Responses

► Cox customers affected by the acquisition of cable markets by Cebridge should research how their new provider is with service selection and bundle discounts compared to the existing offers they have through Cox. Also they need to consider independent VoIP carriers like Vonage, satellite TV operators like DIRECTV and the RBOCs like SBC with the quadruple play of voice, wireless, DSL and satellite TV.

► Consumers in Cox's service territory should review their monthly communications bills and compare the packages offered by Cox for telephone, Internet, and cable services to others. Cox may be a great deal for some consumers, while others may end up paying for services in bundles they do not really use just to get a bigger overall discount.

Level 3 to Pluck WilTel from Leucadia

On October 31st Level 3 has agreed to acquire WilTel from its lead investor Leucadia National for $370 million cash and 115 million Level 3 shares, an estimated total of around $680 million. The deal, which is expected to close around Q1 2006, includes WilTel's partnership with SBC and its Vyvx video transport business, but not WilTel's headquarters, its debt or mortgage obligations, and select financial assets and liabilities that remain with Leucadia.

Recommended Competitive Responses

► All competitors on stable financial footing can say Level 3's acquisition of WilTel is a very expensive way to try to direct attention away from Level 3's difficult financial problem of its $6 billion debt, which they can say is slowly crushing the carrier under its interest payments and re-financing issues.

► For large national wholesale providers with plenty of sales resources, such as SBC/AT&T, Verizon/MCI, Qwest, and Sprint, the next year or so will be a good time to use their significant sales forces to pounce on WilTel accounts.

► Broadwing, Global Crossing, and other fiber-based optical services specialists should direct a small dedicated sales effort at any identified WilTel smaller enterprise accounts.

► All wholesale competitors offering legacy services might have an opportunity to lure WilTel accounts that still rely on "legacy" circuit-switched voice and/or data services, such as ATM and frame relay, away from Level 3.

Recommended End User/Customer Responses

► For the world's large bandwidth consumers currently served by WilTel, whether the serving wholesale provider is Level 3 or WilTel is not that big a difference as long as the services they need are offered, the service levels remain consistent, and the price is right. When the existing contract comes up for renewal, the customer can put it out to bid and see how Level 3 measures up to the wholesale competition.

► Enterprise customers served by WilTel should keep an eye out on how Level 3 chooses to address these accounts. Level 3 may choose simply to carry forward existing WilTel enterprise accounts, or it is plausible that the carrier may spin them out to be served indirectly through a Level 3 affiliate.

► WilTel customers using its circuit-switched voice, frame relay, ATM, EWAN Ethernet, or StorageXtend managed storage business should be wary, as Level 3 will review the profitability of these services and may discontinue some or all of these lines of business at some point after the SBC relationship winds down.

Texas Telecom Reform Hands Licensing Shortcuts to SBC and Verizon IPTV Plans

The state of Texas has signed Senate Bill 5, the Telecommunications Reform Act, into law. The Act cites that "significant technology changes" have occurred since Texas passed its last Public Utilities Regulatory Act a decade ago. The overhaul goes into great detail governing regulations for broadband over power lines (BPL), should electric utilities choose to provide these services.

Among other changes, the Act also clears the way to deregulate all incumbent local exchange carriers (ILECs), redefining them as "transitioning companies" that can qualify as non-dominant carriers in major markets that present at least token local competition.

But most important, the Act aims to bypass the traditional local video franchise system, establishing a way for the RBOCs to receive statewide video franchises. Texas Governor Rick Perry signed the legislation into law on September 7, 2005, and the next day the Texas Cable & Telecommunications Association (TCTA) filed suit in federal court against the Act.

The Texas Telecommunications Reform Act could not have represented the interests of the RBOCs better if they had written it themselves.

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