San Francisco: NorthPoint's Point Market
By Matt Stump
San Francisco is one the longest running DSL deployments of a true DSL pioneer. Two years after launch, it's no surprise San Francisco is one of four NorthPoint markets where the DSL carrier is EBITDA positive.
NorthPoint counts 62,000 subscribers across 51 activated markets, but 60 percent of its new subscribers are coming from its top 10 markets such as San Francisco, says Jeff Thompson, executive director of marketing at NorthPoint. "We're still focusing our efforts there. A lot of it is a marketing game right now."
NorthPoint launched commercial DSL service to San Francisco businesses in 1998. It added residential service using ADSL technology in April 1999 and has extended its Bay area DSL footprint south to San Jose, east to Oakland and north to the city's North Bay region. NorthPoint is using SDSL for business, where the equivalent downstream and upstream speeds appealed to enterprises looking for web hosting and large file transfers technology. SDSL also allowed NorthPoint to recoup its costs more quickly by focusing on small- and medium-sized business, says Caroline Howell, a spokeswoman for NorthPoint.
The company serves more than 30 ISPs that operate in the area. With an assist from NorthPoint, the ISPs market service to end users. Data traffic is routed from the end user through NorthPoint's network to an SBC central office.
NorthPoint's constructed a cage in SBC's central office to house the company's DSLAM equipment. NorthPoint laid DS-3 lines from SBC's central office to several node sites throughout the city.
ISPs handle the traffic from NorthPoint's nodes to the Internet.
When NorthPoint deployed residential ADSL service last year, it used Cisco Systems and Copper Mountain equipment. NorthPoint uses the DSL G.lite technology, which allows consumers to do their own ADSL installations.
Individual ISPs set final pricing, but most residential subscribers pay $39 a month, Howell says.
NorthPoint doesn't release individual market subscriber counts. The majority are business customers, who pay between $79 and several hundred dollars for service.
NorthPoint has used radio, print, direct mail and online marketing to generate subscriber growth in what's a highly competitive high-speed marketplace. "A lot of businesses with dial-up connections are migrating to DSL," Howell says.
The biggest operational challenge is scalability and keeping up with demand, Howell says. The company has implemented a new automated back office system that's hastened installs. ISPs pass on leads to NorthPoint, which asks SBC for a phone line. Now that SBC has also automated it's back office functions, service install time has been cut to between two and four weeks, Thompson says, down from the national average of four to six weeks.
San Francisco is prototypical of a market that's driving NorthPoint's business, Thompson says. "We're clearly finding the mature markets are driving our business," he says. "DSL is still a pretty young technology. In Tier one markets we're still doing a lot of basic awareness."
There's plenty of growth among the nation's estimated seven million small- and medium-sized businesses.
Small customers are NorthPoint's key market. "Our sweet spot is the 20-person or fewer business," Thompson says. "It's a very compelling economic advantage."
But NorthPoint is looking beyond the early adopters for more subscribers and more services. The company is looking to add videoconferencing, broadband content and ASP services. "A lot of that is moving slightly up the food chain," he says.
NorthPoint also is looking to strengthen marketing efforts with the more than 30 partner ISPs in San Francisco. "Earthlink has become extremely aggressive" in pushing DSL, Thompson says. NorthPoint also has a partnership with MSN and it sees Sprint, WorldCom and AT&T also getting more active.
Although NorthPoint remains open to working with all ISPs, Thompson acknowledges it's a logistical challenge to work with all of them and is looking to perhaps cut back in the future.
"We're trying to become much more of a marketing powerhouse," he says, by educating consumers on what a broadband connection can do. NorthPoint is trialing voice over DSL service, ASP services, videoconferencing and locally aggregated broadband content to drive penetration. Adding real-time content and videostreaming "has a tremendous impact on our network," he says. NorthPoint would likely add caching servers at its two San Francisco node sites or central offices to handle broadband content.
New product rollouts will likely happen early next year. "Those services will be critical to our success," he says.
NorthPoint's joint venture with RBOC giant Verizon will help it build and market services beyond its current base of 98 total metro areas. "The race is how quickly can you get to EBITDA positive in each market," Thompson says.
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Pronto Extends SBC's DSL in Houston
By Matt Stump
Eighteen months after it first launched DSL service in Houston, SBC Communications is plowing ahead with phase two, activating by year's end over 33 percent of the Project Pronto residential gateways that will extend DSL's reach to more residents and consumers, according to a company spokesman.
The gateways are part of SBC's $6 billion Project Pronto rebuild project that will make high-speed Internet access available to 80 percent of its subscriber base.
Houston is one of SBC's major DSL markets. The RBOC launched DSL service on April 1, 1999, lighting up 10 central offices. Two weeks later, another 18 central offices were fired up, giving 300,000 Houston homes and businesses access to SBC's ADSL service, the company said.
For $39.95 a month, SBC provides users downstream bandwidth between 384 kilobits and 1.5 megabits. Upstream bandwidth is guaranteed at 128 kilobits. SBC's business service, priced at $129.95 a month, guarantees speeds of at least 1.5 megabits to 6 megabits.
By February 2000, SBC had activated 43 central offices for DSL service, capable of reaching 610,000 homes and businesses. Today, SBC has all but two of its 52 central offices in Houston activated for DSL, covering 645,000 potential homes and businesses.
But that wasn't enough. Throughout the spring and summer, the telco began installing its Project Pronto residential gateways while it awaited final FCC approval for the service.
Project Pronto is SBC's three-year initiative to extend DSL service further into neighborhoods. Traditionally, DSL customers have to be within 17,500 feet of a central office to receive DSL service. Pronto technology moves DSL central office capabilities closer to consumers.
The gateway, built by Alcatel, combines POTS service, DSLAMs that split data and voice, and ATM technology and splitters. The gateways basically replace the remote telephony terminals SBC built to serve roughly 600 homes. Those terminals housed SBC's digital loop carrier equipment.
In Houston, SBC will activate 275 Pronto gateways by year's end, and 717 in total over three years.
Not only will Pronto extend the reach of DSL, it will increase the speed consumers see on their PCs, the company said. The 384 kilobits downstream will jump to 1.5 megabits, SBC claims. Upstream, speeds will increase to 6 megabits, allowing for videoconferencing and video-on-demand applications.
SBC doesn't release individual market subscriber counts. The telco reports 435,000 DSL subscribers in 13 states.
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Winstar's SONET In the Sky
By Karen J. Bannan
When the radio was invented, there were people who thought evil spirits possessed the devices. Today, as fixed wireless takes on more importance in the broadband arena, there are still some who say radio waves are a tool of the devil, but for many, the wireless spectrum may lead to eternal salvation. In fact, for some companies such as Winstar Communications, fixed wireless is a savior.
Winstar's network comprises a combination of wired and wireless technologies. The Local Multipoint Distribution Service-based (LMDS) wireless portion uses the 28 GHz and 38 GHz spectrums, which are so high in frequency, few people wanted them or knew what to do with them before Winstar's founder Bill Rouhana figured out what they were good for: Connectivity.
And not just plain vanilla connectivity, says Dave Ackerman, the company's group executive of its Network and Systems Services, end-to-end connectivity. The six-year-old company owns its own fiber backbone, data centers and local access hubs, right down to the customer premise.
Using its existing network, Winstar can connect its customers from the desktop to the Internet backbone. How? By creating wireless hubs and connecting those hubs via antennas and transmitters located on the tops of buildings. But instead of pointing the dishes skyward, as satellite providers might do, the dishes are pointed at each other, creating somewhat of a SONET ring in the sky, says Ackerman. Wireless LANs take the data the literal last mile-down to the customer's desktop.
Using this network, Winstar is going beyond simple bandwidth and access and offering a bevy of communication products and services, including Web hosting, video and broadband data, and local and long distance services. In addition, it offers managed services such as network management, application service provider (ASP) capabilities, and content development.
Because every customer is different, pricing is based on a particular company's needs. Winstar charges $24,375 a year for T-3 access.
The combination of content and connectivity is definitely unique, but what's really unusual about Winstar is its target audience: Everyone. "There are very few companies that can span local access using fixed wireless to a broad spectrum of businesses-small, medium and large," says Kneko Burney, a new market opportunities analyst with Cahners' In-Stat Group. "Winstar sees far beyond access and its products reflect it."
The company's breadth has contributed to its success with small businesses, most of which elect bundled services from the get-go, says Ackerman. For example, many small companies are buying voice and data products as well as logging on to Winstar's free Office.com virtual office portal. Large businesses also are signing on in droves. The company has acquired more than 27,500 total business customers.
What makes the service appealing to customers is Winstar's wireless network capacity. The company can take one channel of spectrum to create an OC-3 connection using one radio and one antenna, says Ackerman. Radios that will enable OC-6 and OC-12 connections are expected by the end of this year and next, respectively. This is significant since Winstar has licenses covering more than 98 percent of the country.
Today, the company averages 1,000 megahertz per market in its top 60 U.S. markets with large cities such as New York boasting double that capacity. "We're able to deploy more bandwidth per spectrum at a lower cost. Cost per bit is dropping considerably and we can pass that on to the consumer," he says. The high bandwidth and overlapping coverage also contributes to its service guarantee of five nines (99.999 percent) uptime, says Ackerman.
Winstar also is continuing to build out its network's reach. At the end of the third quarter, Winstar was on track to hit the 3,000 on-net buildings mark. That number will more than triple by the end of next year, shooting up to 9,700, according to a recent report by Mark Kastan, an analyst with Credit Suisse First Boston.
Such lofty plans cost money, but Winstar has lowered its exposure by partnering with technology vendors. The company inked a deal with Lucent Technologies, which is both its technology provider and an investor, that allows Winstar to pay only for what it actually uses. In addition, Winstar didn't have to lay any of its own fiber for its backbone. Instead, it purchased three pairs of dark fiber along Williams Communications' 15,000-route network.
Finding a way to create a fiber backbone without laying fiber wasn't the company's only problem. The other hurdle Winstar needed to jump over relates directly to the nature of LMDS spectrum: Line of sight. If there's an object in between the terminal and the hub, the system hits a roadblock. Ackerman says Winstar gets around this two ways, by positioning the hubs closer together and employing a spoke-and-hub design that lets it literally get around buildings.
Winstar is up against some big players, including Sprint, AT&T, Teligent and Nextlink, so it's still anyone's game. But In-Stat's Burney says as long as Winstar keeps its focus, it should fare well. "There is going to be a reality check in the service provider industry," she says. "In order to get past competition and avoid the pain of churn, companies are going to have to offer products that go far beyond access. Winstar is right on track."
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Cox Expands Services With Broadband Plant
By Karen J. Bannan
Cable operators have taken a lot of punches lately. Between ISPs that demand open access and well-placed CLECs airing a series of humorous DSL television commercials that point out cable's shared access limitations, is it any wonder that some analysts say the industry may hit the mat a few times before getting to its feet?
But not every cable operator is taking it on the chin. Cox Communications, the fifth-largest MSO in the U.S., is right in the thick of deploying broadband services, including digital cable, the likely precursor to interactive TV, and high-speed Internet access.
"You're seeing Cox roll out services at a pretty good clip. It's one of the more solid broadband competitors," says Ian Olgeirson, an analyst with Paul Kagan Associates. As of June 30, the company boasted 560,000 digital cable and 320,000 cable modem subscribers across its base of 6.2 million video customers. Its fledgling telephony business is also making inroads, signing up more than 167,000 telephone customers.
In the future, Cox will sell even more services, including video-on-demand and interactive television.
Cox's cable systems are highly clustered, making it more cost efficient to deploy new technology for new services. This includes the broadband build-out.
Today, Cox's broadband voice, video and data services ride on its newly refurbished network, 68 percent of which will be upgraded to 750 MHz by year-end. By 2001, 80 percent will be fully upgraded, with 84 percent two-way capable. Cox also has adapted well to the computer-centric world of broadband, monitoring its nodes from its network operations center so it can proactively route traffic or add new nodes before a customer notices a difference in service.
To add to its network's capacity, the company is building out with fiber. "Our strategy since the early '90s has been to put as much fiber in the backbone and reduce amplifier cascades. By doing that, we've opened up the cable plant to a number of new opportunities," says Dallas Clement, the company's senior vice president of strategy and development.
Cox also is looking to take fuller advantage of its existing technology investment, says Clement, by adding security monitoring, energy demand management, MP3 streaming and home networking services to the mix. Also in the works is an IP telephony offering. And, unlike other cable operators, it's looking to expand its broadband user base past its residential roots and branch out into servicing small- and medium-sized businesses.
"Our networks don't go past industrial parks, but they certainly go past the strip malls, the florists, the accountants and the lawyers. We're developing sales training so we can develop these markets," says Clement. Cox will start targeting these companies as early as this quarter, he says.
Cox also is focusing on up-selling existing customers with packages that focus on the same economies of scale that contributed to its system upgrades and price figures prominently in most of its offerings.
"There aren't any competitors that do what we do. And we can usually do better with price," says Clement. "Our network allows us to be price competitive and scale our infrastructure to deliver on our promises," he says.
Cox sells its high-speed data service for $29.95 per month to customers who buy their own modems and already subscribe to an additional service. Phone service is even more aggressive. Customers pay 10 percent less for Cox's primary line service than for the incumbent's offering in a given area and 30 to 50 percent less for a second line.
Despite its lofty goals, Cox's Clement says one of the company's biggest challenges is getting consumers and businesses to think of a cable company as a broadband, full-service company, a lament that is heard in most MSOs' boardrooms.
"In our markets, we've done a pretty good job of focusing on the customer and explaining what's going on," says Clement. "Under promising and over delivering, but the biggest challenge is always going to be trying to deliver somewhere near the hype level."
And Clement says the problem will only escalate for Cox and its brethren as interactive services like enhanced TV are added to the product offerings. "Who are customers going to call when the pizza they order over the [set-top] box doesn't come after 45 minutes? Us. We need to be ready to tackle every problem that consumers throw at us."
Fighting words from a sound competitor.
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