Re: Glut of competitors. Here's a lengthy, but interesting, update from Austin: Digital network providers poised for battle
By Kirk Ladendorf
American-Statesman Staff
Monday, October 23, 2000
austin360.com
In the race to rewire Austin for high-speed communications, two startups are playing an expensive game of high-tech chicken.
The winner will help shape the future of bandwidth for Central Texans by delivering a bundle of cable television, telephone and high-speed Internet services over a single network. The loser will have made a very costly miscalculation.
One contender is Grande Communications, a San Marcos-based startup with $250 million in investor backing that is already building in Austin. Grande started in East Austin, the poorest section of the city, as a sign of its commitment to serve all parts of Austin.
The other is WINfirst, a Denver-based company formerly known as Western Integrated Networks. WINfirst says it has raised $830 million to begin building high-speed networks in Sacramento, San Diego, Dallas and the Austin-San Antonio corridor.
Why all this competition for Austin? The companies and industry analysts say areas such as Austin offer the right combination of growth, affluence, high-tech savvy and a thirst for more communications bandwidth.
Industry analysts say it would be highly unusual for both companies to actually go ahead and spend hundreds of millions of dollars each to build separate, competing digital networks in Austin.
If both companies go ahead and build their expensive networks here, ``it could be bloody,'' said analyst Christin Flynn with the Yankee Group consulting company in Boston.
Adds Atlanta telecommunications analyst Jeffrey Kagan: ``These companies are making multibillion-dollar bets (nationwide), and we are really not going to know who the winners and losers are for several more years."
The winner in the matchup between Grande and WINfirst will have other big fights ahead, including taking customers away from entrenched service providers such as Time Warner Cable and SBC Corp.'s Southwestern Bell Telephone Co. Both of those companies are spending heavily to prepare for more Austin competition.
Despite Grande's head start, WINfirst says it isn't backing off. The company pulled back on some early engineering in Austin, but WINfirst officials say it will soon turn over its build-out work to construction giant Bechtel Corp., which is an investor in the company. WINfirst also says it will build a more ambitious kind of network that would take high-speed fiber-optic lines right up to customers' homes.
But Grande executives counter that WINfirst is betting on technology that isn't commercially available yet.
``We are building with proven technology that takes fiber-optic cable deeper than any market in the nation today,'' Grande Chief Executive Bill Morrow said. When fiber-to-the-home technology becomes commercially available, Morrow said his company will start using that technology in its network.
A costly competition
Both startups need to poach customers from Time Warner Cable and Southwestern Bell by offering faster communications and a wider variety of cable programming, as well as the convenience of bundling cable, phone and Internet services into one service from one company.
But competing against the cable company, the phone company and a competing high-speed network company is likely to create a costly marketing nightmare for both startup companies. The prospect of head-to-head competition between two high-speed networking companies scare investors in both companies. That, in turn, could hurt the companies' ability to secure more funding.
Grande's Morrow said he believes the race is already over because of WINfirst's decision to suspend preliminary engineering activity in Austin. Morrow says that's a signal that WINfirst will concentrate its efforts on other markets.
Part of Grande's strength, Morrow said, is that it has been focused on Central Texas. After the Austin-San Antonio network is well under way, Grande will start building in Houston. WINfirst, Morrow is convinced, will shy away from competition in Austin.
WIN says it isn't backing off. ``We have taken a little more time, but we have come back with a revolutionary network design,'' said WINfirst spokesman Shiraz Moosajee. ``We are going to be building our networks in all of the markets where we have received franchises, including Austin."
To understand the differences in the two companies' technology approach, it helps to understand the communications network that Time Warner Cable built in Austin in the late 1990s. The cable operator spent heavily to construct a network that is a mix of high-speed fiber-optic trunk lines that serve all parts of the Austin area from Round Rock to San Marcos.
When it gets to neighborhoods of 500 homes or so, Time Warner's fiber lines connect to network devices called ``nodes.'' From those nodes, Time Warner delivers its entertainment and information services to users over coaxial cable -- the kind of cable that traditionally is present in homes with cable television service.
Time Warner's Austin network, which offers digital cable service and a high-speed cable modem Internet access called Road Runner, is considered by industry experts to be among the more modern cable networks serving a major city.
Grande plans to surpass Time Warner's service by placing its highest-speed fiber-optic trunk lines deeper into neighborhoods -- to within 700 feet or so of all the homes and businesses it will serve.
Its neighborhood nodes will be smaller, serving only 24 homes or fewer with coaxial cable for delivery of television programming and high-speed Internet service. Smaller nodes and shorter coaxial connections mean Grande should be able to deliver more communications capacity to each of its customers. More communications capacity potentially means more and better kinds of services.
WINfirst proposes to take high-speed fiber lines still farther -- all the way to each home it will serve. Taking fiber to the home should give WINfirst's network the greatest speed, but it will cost more. The Denver company says it will spend $1,000 for each home that its network passes.
Fiber-to-the-home used to be very costly, but WINfirst's Moosajee said his company is betting heavily on a new product developed by Lucent Technologies that will serve as a high-speed terminal at each house attached to its network. Lucent's device includes a laser that will send and receive information over fiber at blistering speeds.
Speed is of the essence
WINfirst's network will have huge amounts of communications bandwidth -- 100 megabits a second both to and from its homes just for its Internet and data communications service. Its cable television and telephone delivery services will have their own dedicated communications bandwidth.
But the speed at which WINfirst can build its networks is uncertain, because it is limited by the availability of Lucent's new gear. Moosajee said his company will start construction in Austin sometime next year.
Grande's network is less revolutionary, which means it probably can be built more quickly. Grande's primary technology partner is a division of London-based Marconi Corp. Its network will deliver a minimum of 10 megabits a second of data communications bandwidth to each of its neighborhood nodes. That should enable the company to guarantee each of its customers high-speed Internet access of at least 1 megabit per second.
That may not sound too thrilling next to WINfirst's promise of 100 megabits, but it is considerably faster than most cable modem users now receive. Time Warner doesn't make service guarantees for its Road Runner service, but it tries to deliver information to its customers at a speed of at least 128 kilobits (.128 megabits) per second and sometimes considerably faster, depending upon time of day and the number of users on its network.
Grande's Morrow added that his company is in talks with other technology providers that could boost the Internet communications speed that it will offer to customers.
While the race to higher communications speeds holds the promise of exciting consumers who are hungry for more bandwidth, the actual construction of Grande's network will occur gradually over four or more years.
Grande says it will begin testing in Austin in December. It expects to begin offering service to East Austin customers by late January. Once East Austin is installed, the company will expand its network to Southeast Austin, Central Austin, Southwest Austin and North Austin.
Why is Grande starting first in the poorest part of Austin?
City of Austin officials asked the company to start there as a sign of good faith that it would serve more than just Austin's affluent neighborhoods. ``We are not here to cherry pick,'' Morrow said. ``We are here to provide service to the entire area." |
