Charter/Cable Telephony/Vendors incl. NTOP
Janco Partners, Inc.
9th Annual Media & Telecommunications Conference
March 17 – Charter Communications
from Charter Communications presentation today (NTOP & IDT present Thursday, March 18th):
ccbn.compuserve.com
Charter – will use Voice over IP for certain markets:
We’ve decided we’ve got to focus on new products.
deploy them as fast was we can …. Including telephony services. Have capacity and backbone to handle this.
Everybody is talking about telephony. I’ve heard telephony is a year away for the last 10 years. Well, telephony is here. And it’s really here, and we’ve seen great economies of scale in some of the equipment. Our goal is to expand from roughly a 100,000 homes passed as we stand here today to 1 million homes passed at the end of the year, available for telephony services.
What we are really trying to do is set ourselves up for ’05, ’06, ’07 and get this product rolled out across our footprint if we can. We are going to increase our voIP deployments in three markets. We haven’t announced those yet for competitive reasons. We have CELEC certification in 12 states. We are in the process of filing for CELEC certification in an additional 14 states, to give us the option to go it alone if necessary. To do the necessary interconnect agreements and really to provide a full complement of service to our customers.
We are looking at the potential of doing smaller market joint ventures. We’ve had a lot of conversations with Sprint, MCI, AT&T, Net2Phone and others. We had an RFP that we put out at the beginning of the year. We’ve had the responses to that come in in the last couple of weeks. We’ll be making a decision shortly as to where we may go. Into the other markets. Our goal here is to build off of the existing foundation. We have an operating business today with about 30,000 telephony customers against about 100,000 homes passed in St. Louis.. So we’ve got the order processing, we’ve got the process and procedures. We’ve got the automation. The troubleshooting. Everything that we can roll across the footprint in scale. And in telephony you’ve got to have that first. It is somewhat unlike digital, which was plug and play. Somewhat unlike like data, which is a little easier to understand. Obviously, the operation requirements of telephony are significant.
To give you an idea of where we see ourselves deploying telephony is in the red is our primary line telephony markets (chart). And these essentially represent our top 8 markets. And our top 8 markets represent about 35% of our customer base. We are the largest operator in Wisconsin. We obviously have a significant footprint in St. Louis. Our Michigan properties are our highest data penetrated properties. Worchester, Massachusetts, just outside of Boston, 220,000 customers – an outstanding market. Greenville, Spartanburg down in the southeast, Birmingham, Alabama. Fort Worth, Texas and certainly Los Angeles. This is where we’ve essentially gone. We either have CELEC certification or will have CELEC certification shortly.
The other markets, when you add them all up there’s 98 add-ins on here. Those 98 add-ins represent about 87% of our customer base. And these markets we’re not quite sure what we’re going to do. That’s why we’ve got out with the RFP to find out really what’s available to us so we get the best economic return and we can leverage the infrastructure that we’ve already got. We don’t have to be all things to all people in all markets, and that’s why we’re going to take the approach that I outlined. Primary line markets is our top 8. Thirty-five percent of the base. Get busy on that in ’04 and ’05. And then move out through the other markets as we move through the year.
,,,, (other services)
We want to leverage our existing telephony infrastructure – principally in St. Louis – to support a commercial telephony trial as well. This isn’t just a residential opportunity, this is a commercial opportunity as we see it. And again to get efficient use out of our infrastructure, we’re …. And the cable doesn’t come in. In that particular case, we’re using wireless technology to get into office parts. To get into buildings. To build a client base, and then pull our fiber in behind it. And take that wireless application and move it over to a different location. I had some experience with this when I was at Liberty with companies like Teligent and others. So this is an opportunity we think makes a lot of sense. It’s an efficient use of capital. It allows us to build a revenue base before we deploy additional capital. And we’re very excited about our opportunities there.
Q&A:
Telephony rollout costs: !!
Ans. It isn’t going to impact our operating costs. There will be some modest impact from a marketing standpoint. But I think the way we roll it out, we don’t think it is going to have any material effect on our margins. And again, we’re going to roll it out as I described. The top 8 markets – see how it goes. And then see if we can do some other things that are potentially less dilutive operationally. The other thing is that we’ve put together – we have 20 call centers that now serve 92% of our base. All of these call centers have gone through building conversions. We’ve got that building infrastructure in place. And we’ve got the operational processes to pull in from our St. Louis experience. So we don’t see a huge operational negative as we roll out this pipe. But there will be some impact.
The great thing about the telephony as we’ve seen, and as I think Comcast has seen … once you ramp that business, once you shut it off, the cash flow generation is extraordinary. I mean we did very little marketing in St. Louis this year. And that business on a stand-alone basis was generating 40% incremental margins. So, we’ll be pleased about that.
Telephony vendors/infrastructure: !!
They’ve been pretty aggressive. I think – you know I don’t want to get into what their provisioning costs and the elements of their package are. But I think if you took a $40 incremental revenue opportunity and you – I think (those guys) are looking to get maybe 25% to 35% kind of for providing your 911, your CALEA, your backbone, you know – your billing interface, etc. And as I said, we went through an RFP process. We’ll see how that plays itself out. But again, I don’t think that is for us in every market. But I think in places where we’re a little more geographically dispersed, that may make some sense.
Telephony – primary line: !!
Our thinking at the moment is certainly primary line in the top 8 markets. Whether we go primary line alone or with a partner in the remaining markets is something that we’re thinking about. But we see that this is a substitute service for the RBOC and we think that there’s lots of opportunities for us to work together with others and to do it our own. But it is essentially a primary line service in the long run.
--secondary markets account for 87% of Charter’s subscriber base.
[excellent speaker; excellent presentation] |
