Sacramento Business Journal | September 29, 2003 print edition | By Mark Larson The cable-TV game in Greater Sacramento is heating up, with new competition for subscribers entering single-provider markets from Elk Grove to Roseville to Lincoln. The latest volleys in the new battles come from SureWest Broadband -- which is seeking a piece of the Lincoln market now held by Starstream Communications, and awaiting approval to compete with cable giant Comcast in Roseville -- and from Frontier Communications, the Elk Grove telephone company that now wants to add cable-TV service there, delivered over its phone lines. The moves come mere weeks after SureWest won the right to offer cable TV, phone and high-speed Internet service in Elk Grove, where Comcast had been the sole TV provider, and after Greenfield Communications sought the right to go head to head with Starstream in Lincoln. Sacramento is becoming a national proving ground of how competing technologies for telecommunications services fare when pitted against each other, said Tom Reiman, a Sacramento broadband consultant who works on projects all over the country. By competing technologies, he means all-fiber systems, co-axial cable/fiber hybrids and phone-line based systems. But the robust competition is costly and the players may teeter to the brink of failure. "It's good, it's encouraging," Reiman said, "but it doesn't mitigate the risks." Aiming a big gun: The most aggressive moves come from Roseville-based SureWest, which just notified Lincoln city officials that it wants to bring its fiber-to-the-home offering there. It would compete with longtime incumbent Starstream, offering its "triple play" of local and long-distance phone service, cable TV, and high-speed Internet connections on one fiber-optic line. For a year SureWest has been rolling out that same service neighborhood-by-neighborhood in Sacramento County, where Comcast has been king for years. Comcast, though, has been drawing some competition from wireless rivals -- and lately, a growing push for subscribers by aggressive satellite TV providers. SureWest got its broadband firepower by buying a $200 million system built here by Denver-based WINfirst; the purchase out of bankruptcy last year cost SureWest a pittance -- $12 million. Last month, SureWest got regulatory approval to offer its broadband service to Elk Grove , the booming new city in southern Sacramento County. Some service is targeted to begin next summer. Meanwhile, Frontier Communications, Elk Grove's telephone company, is applying to provide cable-TV service to Elk Grove customers through their phone lines, using a system called VDSL, or video digital subscriber line. SureWest also is expected to find out next week if it gets the Roseville City Council's approval to provide cable service in its home city, another market where Comcast has been the only game in town. It's likely; the city's public utilities district has already given SureWest a green light. SureWest in Roseville would provide its cable service over beefed-up phone lines (VDSL) where necessary, and likely via fiber in the newer parts of town. And SureWest Broadband's service in its added territory isn't going to be aimed just at residents. It is packaging its high-speed Internet services for businesses in the areas it serves, competing with the T-1 lines offered by phone companies. SureWest plans to offer competitive prices for capacities up to 5 megabytes per second; a T-1 line can handle 1.5 megabytes. Robert Dugan, public affairs manager for SureWest, said the company will see how its planned forays into Elk Grove, Roseville and Lincoln pan out before considering service to any other outlying areas. All this sounds good to Rich Esposto, executive director of the Sacramento Metropolitan Cable Television Commission, which regulates Sacramento County cable companies. " This is what this office is all about," said Esposto, "bringing competing telecom service to the area. There are not a lot of places with two, much less three competitors. Throw in satellite (providers) and it can be four." The impetus for fostering competition is to encourage better service and lower prices for customers and businesses that for many years didn't have the option of switching companies for a better deal. Esposto said he'll be "watching closely" how the various cable competitors play the game to win customers. Belt and suspenders? But broadband consultant Reiman, while convinced that the added competition is good for the market, cautions the rivals to mind the high cost of deployment. " Competition is always healthy in any community," said Reiman, noting that cable monopolies have resulted in inflated cable rates. "But I still question the economics of an overbuild," in which competing companies build separate systems to reach the same customer base. SureWest is overbuilding the incumbent cable system in Sacramento County with its fiber-to-the-home network and has the same notion for Lincoln and Elk Grove. Reiman gives SureWest points for targeting Lincoln, a fast-growing city that is likely to annex much more territory and therefore give the company a lot more growth potential there. But he questions overbuilding in communities with dimmer prospects, because costs are steep and take years to recoup. The video DSL phone line-delivered technology which Frontier has told the regulators it will use for cable TV in Elk Grove, for example, "works fine, but it's extremely expensive," Reiman said. A Frontier spokesman familiar with the planned service was unavailable for comment this week. Litigation is fairly rare: Lincoln city manager Jerry Johnson is handling the heightened interest by cable companies in his city. Starstream has been threatening to sue the city over its cable franchising rules, complaining about what it considered too-easy entry requirements for Greenfield Communications of San Juan Capistrano. Greenfield has proposed to wire the city with cable-TV fiber as an extension of its planned installation of the same technology for the 3,000-home Lincoln Crossing development. Now SureWest is knocking on the door. Before either Greenfield or SureWest can apply for service, the city is reworking its dated cable franchise rules, adopting a model which licenses any qualifying applicants. Among the requirements would be time limits on digging up city streets to install fiber, and full-city deployment to avoid serving only the rich neighborhoods. While Johnson said the suit threats have continued from Starstream, the city expects the new rules will be in place for Greenfield and SureWest by late November or early December. " I think what Lincoln is trying to do is the right thing," said Reiman. Rewriting cable franchise rules for a city is key, he added, because technology has changed, old rules don't apply, and fostering competition among new technologies can bring economic development to a city. He's also seen incumbent cable franchises threaten to sue over incoming competition. " Rarely have I seen litigation come to pass," he said. Johnson said Starstream hasn't offered a low-cost basic service. "They've also had monopoly service for 20 years," he said. "They don't mention that." Beyond that, he added, "We're very excited for our residents to have at least the potential of having new competition." © 2003 American City Business Journals Inc.
TecHome Builder Magazine | September/October 2003 print edition | By Michael Bordenaro Technology master planning is coming to a community near you. Will you be a part of it? • Developers' standards can be quite detailed but will, at minimum, require builders to offer a base-level structured wiring package. • Builders may have to submit their homes to technology inspections, and make voice, data and video services available at move-in. Think of a technology master plan as a master-planned community’s technology code. But unlike building codes, which address safety concerns, most technology plans are market-driven. Using demographic profiles of buyers, developers work with technology consultants to come up with an infrastructure plan and a menu of services that will appeal to buyers. The consultant designs the physical infrastructure, develops a vision statement to sell buyers on the plan’s benefits, and works with regulators to encourage competition and better pricing for services. How does all this affect the builder? At its simplest, a technology plan might require the developer to bring a fiber connection to each lot, and each builder to offer a specified base-level structured wiring package. Required builder qualifications could range from an understanding of what makes a good structured wiring package to the ability to market community amenities. Builder Requirements At the very least, builders who want to work in these communities will need to demonstrate their ability to install the basic wiring package, whether they use staff installers or a technology subcontractor. They may have to submit their homes to technology inspections, and be willing to make voice, data and video services available on move-in. They may also have to explain the benefits of various technology options to buyers. Familiarity with local area network (LAN) configurations and other protocols for delivering electronic services will help here, as will willingness to track emerging technologies. “It is part of our strategy to identify and work with the more sophisticated homebuilders,” says Eric Teed-Bois, director of community development at Trimark Communities’ Mountain House community in California’s San Joaquin County, 60 miles east of San Francisco. When complete in 15 to 20 years, the community will include 16,000 residential units and more than 1 million square feet of commercial space. As part of the screening process, builders who want to work in the development have to do a formal presentation of their technology qualifications. The more detailed the builder’s knowledge, the better his chances of landing a contract. “If you market and sell technology, it is important to be able to deliver it,” says Thomas A. Reiman, president of The Broadband Group, a Sacramento, Calif.-based consultant that helped Mountain House with its technology master plan. “If you crimp a Cat 5 wire incorrectly, you won’t get Cat 5 performance, and consumers who buy technology typically understand when they aren’t getting the proper performance.” This means the combination of services and the wiring supporting them needs to be up to standard, or the homeowner will not be satisfied. Developers’ standards can be quite detailed. Craig Lobel, director of community technologies for Newland Communities, La Jolla, Calif., is in the process of establishing a structured wiring performance guideline for homebuilders. The guideline will include sections titled “Structured Wiring: Why It Is important to the Owner,” “Residential Wiring Architectural Requirements,” “Security Wiring,” and “Universal Drop Requirements.” Lobel wants to make sure that builders understand how to meet Newland’s technology master plans, because of technology’s importance as an amenity. “A community intranet is like a swimming pool, golf course or tennis courts, only the intranet is transparent and it is used more than the pool, golf course and tennis courts combined,” Lobel says. Of course wise developers won’t reject an otherwise good builder just because the builder doesn’t have experience with home technology. Instead, they will provide training. Reiman has been hired to conduct builder seminars on subjects ranging from installation to sales, create structured wiring installation guidelines, train installers, inspect installations and provide post-occupancy systems tests. Costs and Rewards Some builders will question whether the above effort is worth it. Robert Picchi, president of Blue Ridge Advisory Services Group, a technology consultant based in Blowing Rock, N.C., advises builders to carefully weigh the costs and benefits of working in such communities. “If the plan cost is negligible, then the builder will probably embrace the plan as one that will enhance the marketability of his finished product.” Reiman insists that the returns should outweigh the costs. “In communities with a technology master plan, builders have realized substantially higher returns than in communities without one,” he says. “We are improving the value of the home by creating a forum on which greater margins can be built.” Of course it’s easier to sell high-margin upgrades if customers come to the table asking for them. That’s why developers and consultants work hard to create demand for technological amenities. Reiman creates a vision statement of how technology will be used in the new community, including a description of how technology can help homeowners live. He tries to paint this picture without using the word “technology.” Instead, he uses images of Little League games being sent to grandparents by streaming video, of intranet baby-sitter groups that help working mothers, of schools that let parents go online to check on their children’s progress, and of remote meter-reading capabilities. Mountain House is a good example of how buyers respond to such efforts. Lennar and Putle Homes completed the first residences this year. With homes priced from $300,000 to $500,000, the development is attracting first-time homebuyers who find this price range affordable compared to developments closer to San Francisco Bay. According to Teed-Bois, many of these people want to take advantage of the community’s high-speed Internet connections. “The structured wiring is actually a very good selling point for a lot of our buyers who have a sophisticated understanding of technology and are moving here, in part, to allow more telecommuting to work,” Teed-Bois says. Such buyers are making technology a crucial part of focus of community life. Newland’s Lobel noted that when an intranet went live in one of its communities, “within weeks there were 40 or 50 user groups established. It changes the way people live day-to-day,” he says. Newland has established a newsletter series to help residents, vendors, and homebuilders understand the role of technology in its communities. The series addresses issues ranging from terminology to performance standards to services availability. By being an active educator of all parties, says Lobel, Nelwand finds it is easier to fulfill its technology master plan in its communities. THB Michael Bordenaro is a Chicago-based freelance writer. SIDEBARS Challenging Change How The Pinehills found stability in an unstable industry. The one constant about technology is that it changes. Products become outdated. Vendors come and go, or change their offerings. To be effective, a technology plan needs to be able to respond to the unexpected. That’s what happened at The Pinehills, a planned community in Plymouth, Mass., which has been heralded as having one of the most advanced technology master plans in the country. When its vendor partner Verizon withdrew data and video distribution from its service offerings, the community quickly needed a back-up plan. John Judge, president of The Pinehills, LLC, had only three months to find an alternate way to provide high-speed video services to homeowners. After evaluating the options, he made the bold decision to have the development purchase, install and own the needed fiber and head-end equipment itself. “We considered outsourcing the project, but we realized no one had the passion to realize the full value of the master plan better than we did,” Judge says. This arrangement allows The Pinehills to bring fiber all the way to the home, and gives the buyers the opportunity to take advantage of this new “utility.” More than 95 percent of the buyers are taking advantage of the fiber system. Gatehouse Networks, a telecommunication company based in Greenwich, Conn., provided the head-end equipment, and Livermore, Calif.-based Alloptic provided the fiber and portal connections at the residences. While meeting the 3-month installation schedule for the head end building was a challenge, Judge saw advantages in taking ownership of the video and data distribution. “To begin with, it provides some consistency in a highly fluctuating industry,” Judge says, noting the ever-changing ownership and services provided by telecom, video and data vendors. “The real value is in being thoughtful to how the community might grow in the future,” Judge says. “The cost of not doing it right the first time means you have to do it twice. Because if you invest in copper wire and other technologies outstrip it, you are faced with a demand to step it up, which will be more expensive.” Five to ten times as expensive, according to Reiman. His studies conclude that data, video or voice vendors who want to bring new services to the development after it's complete may have to pay ten times more than if they had been involved in the initial land development. That's why some community developers install empty conduit to allow new services to be added later on.
Broadband Central, a Draper, Utah, start-up using Wi-Fi technology, plans to sell wireless broadband connections to residential customers in the Sacramento region beginning in September Sacramento Business Journal | August 8, 2003 print edition | Mark Larson The company is the first with plans to blanket the area with broadband antennas, creating what the company calls "blue zones." The goal is to sign customers who either physically can't get fast Internet connections or who want a low-cost alternative to access over phone lines, cable fiber optics or the few existing wireless links. Rivals include telecom giants SBC Communications Inc. and Verizon Wireless, which this week announced plans to expand the use of Wi-Fi technology. SBC said it would create a network of 20,000 Wi-Fi access points nationwide, aimed mainly at commercial locations. Broadband Central says it will charge at least $19.95 a month and is chasing the "low-hanging fruit" of potential residential customers. It's not the same Wi-Fi now showing up in cafes, because home computers would still be wired to an outside antenna that would then send and receive data from Broadband Central antennas. " We intend to cover the entire Sacramento area," said company spokesman David Politis. "We're not announcing the (local) cities and neighborhoods we'll be deployed in, but we're doing site surveys now." Faster than digging a ditch: Wireless Internet connections cost less to install than fiber or cable, and take less time to deploy. But the platform is less secure than other Internet connections, some analysts say, and like any technology it could be made obsolete by something better. Nevertheless, investors apparently aren't afraid to take a risk on Wi-Fi. Intel Capital, the investment arm of the technology giant, last autumn announced it would invest $150 million in its Wi-Fi ventures. Its Cometa Networks, a joint project with International Business Machines Corp. and AT&T Corp., is building a national network of "hot spots" where people with Wi-Fi-compatible laptops can go online without wiring their computers into anything. Intel is targeting the laptop market for the Wi-Fi chips; wireless access is expected to be a common feature in portables. Business users are the intended mass market, although retailers such as McDonald's Corp. and Borders Groups Inc. plan to install Wi-Fi hot spots in their shops for customers. Broadband Central sees green in people who want low-cost broadband connections at home. Early last month the company inked a $17.5 million sponsorship agreement with Accelerated Communications Corp. of Lehi, Utah, to deploy blue zone antennas in California, Georgia and Texas over the next year. All in all, Broadband Central has announced plans to launch its services in 3,700 blue zones, also including Arizona, Idaho, Georgia, Nevada, New Mexico, Texas, Oregon and Washington. Chief executive officer Tali Haleua said the company intends to deploy a nationwide network faster than its competitors can. How they do it, what it costs: Each blue zone beams wireless broadband connections to users within a half-mile radius. The company installs a 22-inch cell site in each zone, connected to three antennas. Customers get an eight-inch antenna attached to their dwelling on an outside eave, wired to the client's computer. Broadband Central is trying to undercut the typical broadband charge of around $50 a month and up. Its transmission speeds start at 128 kilobits per second, comparable to Integrated Services Digital Network (ISDN) speed and about 10 times normal dial-up speed. For about $30 a month, it offers 256 kbps, which is comparable to DSL, or Digital Subscriber Line, speeds offered over copper phone lines. For $40 a month, users can get cable modem speeds of 512 kbps, and $50 gets 1 megabit per second. In Sacramento, SureWest Broadband offers Internet connections at the blazing pace of 1.5 megabits per second. The local company offers that access, plus phone and pay TV services, for around $100 a month. It also offers DSL services in parts of its market. A SureWest spokesman on Tuesday said the company had no one available for comment on the local Wi-Fi competition. One small startup, called FastKat Wireless, has set up wireless Internet service for residents in a five-mile radius of Diamond Creek, a home development near Roseville. Entrepreneur Craig Fine pooled $112,000 in investments to set it up. It sells 1.5 megabits of broadband connectivity to local subscribers for $60 a month plus $260 for hardware to receive the signal. His move, begun in September, was prompted by the large gap in broadband service in the area. He's pulled in a reported 150 customers so far, and hopes for 500 over the next year. Skepticism: Broadband Central was started in November by co-founders Tali Haleua, Randy Conklin and Jon Webb with undisclosed capital. The company shares profits with sponsors for specific blue zone antennas. It doesn't give out specific financials. Tom Reiman, a Sacramento-based broadband consultant, doesn't see Wi-Fi competitors such as Broadband Central as a threat to the market base of cable, phone or fiber-based broadband vendors. " The technology was never built for security, even for narrow band data connections," said Reiman. "It's a nice niche, a proven technology. But it's quickly outdateable. Change is constant in this area." Of Broadband Central's deployment plans, he added, "Anytime there is a rush to install, I'm nervous about it. Things change too fast." Reiman sees Wi-Fi Internet connections as best for Web browsing and "one-way connectivity, not uploading." But Keith Waryas, a Wi-Fi market analyst with International Data Corp. in Massachusetts, said he's not sure there's a huge security risk in the use of Wi-Fi. He's also not sure that the current Wi-Fi technology will be quickly surpassed. A next-generation system, Wi-Max, covers about 30 miles but its standards have yet to be approved. Waryas hasn't seen any applications for Wi-Fi in the homes, but sees logic in Broadband Central's move. Installing it costs less, theoretically reducing prices to the customer. Still, he sees some big hurdles for the company, including the Internet broadband connections of the antennas. He's skeptical that a phone company selling competing DSL service would be anxious to sell the company Internet connectivity for its blue zones. And he wonders about the negotiations to put antennas on telephone poles. Those poles, he said, are the most efficient places to put antennas, but they're highly regulated, and using them can be costly. " I would not dismiss them offhand," Waryas said of Broadband Central. "At the same time, you have to take it with a grain of salt." Still a tough gig: In the late 1990s, many fiber-optic companies loaded with venture cash had ambitious deployment plans for high-speed Internet services that went south when their investment cash dried up. One reason that happened was that the companies were overextended and profits were too far off for investors to keep in the game. Broadband Central may not be comparable to a fiber venture of only a few years ago. But, Reiman cautioned, "There's no magic in this business, and there are no easy solutions. The consumer is very demanding."
Sacramento Business Journal | June 20, 2003 print edition | Mark Larson On May 29, three of the largest Baby Bells -- SBC Communications Inc., BellSouth and Verizon -- made a giant lockstep move toward a future world of fiber-optic connections to every home. They agreed to back a certain type of technology, which is seen as the most cost-efficient, and put out a joint request for proposals. They're asking builders of fiber systems to bid on building the lowest-priced home networks. "It's a very important first step," says Sacramento-based telecommunications consultant Tom Reiman. "The question is, will it happen in our lifetime?" Long term, high-bandwidth fiber-optic networks are seen as the ultimate replacement for both copper phone lines and cable, because of their capacity to handle vast amounts of data transmission in the form of video, high-speed Internet connections and phone service all on one line. And as fiber costs have come down in recent years, fiber networks have been deployed in a scattering of new-home developments around the country as a way to lure tech-hungry homebuyers. However, connecting fiber optics to the home has been costly, roughly double the price of installing copper phone lines or co-axial cable. Reiman cautions that before fiber to the home is commonplace, many hurdles besides cost must be cleared, including government requirements to sell lines to other telecom competitors, and phone companies' inexperience in vending cable TV, to name just two. Builders, SureWest see potential: Lincoln Crossing, a 3,000-home project under construction in south Placer County, is putting in its own fiber network for residents to get telephone, Internet and cable TV, along with a community Web site and e-mail. That service will be figured into the community's monthly homeowners' association dues. Part of the city of Lincoln's requirement in the deal is that all homes within its borders and beyond the massive new-home project be provided with fiber services. Two other new-home developments, one in North Natomas and the other in Rancho Cordova, are also planning fiber connections for residents, to get at least cable TV and high-speed Internet access. And in one of the country's only fiber "overbuild" projects, SureWest Broadband is installing fiber-to-the-home connections in Sacramento County, where Comcast Cable already has about 265,000 customers and satellite pay-TV vendors have an estimated 107,000 customers. SureWest last year bought WINfirst, a Denver-based fiber venture that went bankrupt trying to overbuild the market. SureWest bought Winfirst for a bargain-basement price of $12 million, and is continuing to build out the system, but with seemingly much more attention to the bottom line than Winfirst. As of March 31, its triple-tiered service of Internet, cable and phone service has totaled 15,042 customers, reflecting 4,663 phone subscribers, 5,248 video customers and 5,131 data service buyers. That's up from 12,959 as of last year's fourth quarter, and 11,923 for the third quarter of 2002 when SureWest first offered the service. The company continues to add to its coverage in Sacramento County, one neighborhood at a time. Consultant Reiman says the SureWest overbuild "is a pure overbuild for the most part, but it's not a model that has proven successful." Still, because of its technological superiority to cable and copper, he gives it a "reasonable" chance of success. Mission Bay offerings: SBC, meanwhile, has one fiber-to-the-home project with the Mission Bay development in San Francisco, 6,000 new condominiums being built by Catellus Development Corp. SBC spokesman Shawn Dainas says early units of the project, which sit across the street from Pacific Bell Park, offer Internet and phone service, but no video. However, a video service offering movies on demand is planned. But beyond the regulatory hurdles in the fiber market, phone companies face technical issues in supplying the video portion of the triple play of phone, cable and video service. Getting into cable programming is a new venture for phone companies, and Reiman expects debates over program rights. So far, Hollywood has been reluctant to release movies over the Internet, he says, fearing it isn't secure enough to prevent pirating. SBC expects to initially deploy fiber in new-home developments, says Dainas, and in the huge mass of homes that already have copper and cable. "We're not exactly sure on deployment plans," says Dainas. "We'll look at that when we know any regulatory issues." A recent Federal Communications Commission ruling made it clear that phone companies selling fiber services to the home won't be required to sell that same access to telecommunications competitors as they have as owners of local phone networks. That alone should spur fiber deployment in new-home developments. But because federal regulations are still murky for homes already wired with phone and cable lines, the big phone companies in those areas will likely delay deployment of fiber until the law becomes more clear. Lotsa hype: Fiber consultant Reiman estimates up to 50 new-home communities around the country have either planned or deployed fiber. But he's skeptical about how many of them will actually work. So far, he says, he's seen "a mine field of failures" by developers trying to deploy fiber. "There's so much hype out there," he says. Lack of service choice, Reiman says, is a big problem. "Developers that impose services without the consumer's opportunity to choose are walking into a challenging situation," Reiman says. "It's still a very complex business with a lot of legacy (current phone system) regulation." Telephone company requirements are many, he says, which "most in the development business don't have the time or inclination to learn." Fiber market waits: Still, developers building fiber connections to new homes collectively have yet to put much of a dent in the national landscape, Reiman says. The mass market of homes, existing and planned, is still sitting out there, up for grabs. And the three phone companies are moving toward it. The technology they've agreed upon, called a "passive optical network" is a good one, he says, because it works and is cost-effective. It is operated remotely, and has no active electronics in the field. A fiber line with service can be routed into a house with minimal cost and intrusion. Meanwhile, wireless broadband is another technology poised for increased deployment, and Intel Corp., for one, sees it as a big future market for its microchips. It is less expensive to deploy than fiber. But Mike Render, a Tulsa, Okla.-based fiber market analyst, expects both to develop shoulder to shoulder. At the same time, he sees the alliance of SBC, Verizon and BellSouth see the fiber-to-the-home market as significant. "We're really at a crossover point," he says. "The (fiber) revenue structure is longer, with more services, and that means higher revenue." And he notes a general, national push toward connecting homes to fiber. "I think its almost inevitable that it will gain momentum," Render says. He sees the fiber market -- at home and otherwise -- demanding data-heavy content, such as classes taken via streaming video, which can only be sent and received on ever-increasing bandwidth. "It will create a consumer demand," says Render, "that will pull it through." © 2003 American City Business Journals Inc.
RanchoMurieta.com | Published March 31, 2003 The Rancho Murieta Association has taken some strides toward a high-tech future for the community in the past year, but it may well be a giant leap that's needed next. The association is embarking on a technology master plan that would take the cable TV system and the broadband Internet access operation to a higher level. Recently, 15 residents participated in a workshop conducted by The Broadband Group, the consultant the RMA hired to do a draft version of a technology master plan. "I really don't expect this to be a technology session," Thomas A. Reiman, president of the company, told the group. The technology is not in doubt, he said; the question is whether it could "be delivered cost-effectively … and whether or not the community wants to take a cable or broadband system to the next level." The Broadband Group, based in Sacramento, "focuses on personalizing telecommunications for master planned communities," Reiman said. He referred to other communities in the country where his company has developed technology systems with applications for education, health services, entertainment and telecommuting. Ranch Murieta "has a unique opportunity," he told the session, held March 21. "There is a very strong connection between economic development, community development and telecommunications." Realtor Pat Shaffer, one of the workshop participants, said RMA's broadband service, launched less than a year ago, has enhanced the community's appeal for homebuyers. The consensus among the participants by the end of the 41/2-hour session was residents would be likely to agree to pay higher RMA dues if they knew they could get 100 TV channels and high-speed Internet access in return. Erin Reed spoke for many in the group when she said it would be a matter of educating people about what they would receive. Caryl Abshire was among the participants who liked the idea that people would be able to watch RMA meetings online in real time and be able to participate without leaving home. It's only one of the many applications in the broadband future described by The Broadband Group. But higher dues wouldn't be the only costs for a system capable of delivering video and high-speed data services. "Infrastructure today is bound to fail," Reiman said. As for RMA's successful broadband operation, "You just haven't had your problems yet," he remarked. To meet future demands for bandwidth, Reiman said fiber-optic cable would have to replace coaxial cable now in use. The current system would have to be evaluated, redesigned and upgraded to provide "vast amounts of data transmission," he explained. Every existing home would need retro-fitting at a cost of about $1,000 apiece, he estimated. "The future is fiber to the home," he said. Considering that the RMA can't fund anything more than the $5,000 draft version of the technology master plan at this point -- The Broadband Group estimates the final plan will cost about $50,000, and no one was projecting the total costs for the high-tech scenario being outlined -- where would the funds come from for a new, fiber-rich infrastructure if that's what the community desires? The Communications Committee is putting together a community survey based on the one filled out by workshop participants. It will be used to gauge community interest and support. According to the cable services agreement that goes along with the cable system, the RMA is obligated to provide service to all of Rancho Murieta, not only the dues-paying North and South. "When you start stretching outside of that, it's a really difficult task (to provide service)," said Michael Burnett, the RMA director who chairs the Communications Committee and attended the workshop. It's a situation that will be exacerbated if new development brings separate homeowners associations, as planned. Several other participants brought up another problem facing the RMA in raising funds to carry out plans for an advanced telecommunications system. John Weatherford and others cited residents' "resistance to RMA-run operations." Participant Ryan Fogleman said in his experience as the contractor who created and runs the RMA broadband operation, he finds broadband customers "are surprised and delighted" that it's his company and not the RMA that serves them. Weatherford said, "I'm convinced we need a change of ownership." The suggestion was made that the Community Services District should take over ownership of the cable TV and broadband systems since it is within the powers granted to the district. In addition, the CSD serves the whole community. Burnett said he thought it was appropriate because "CSD is like the engineering department of a city." The general manager of the CSD, Ed Crouse, who was present at the workshop, replied succinctly, "You should be asking my board." Burnett said RMA President Mike Schieberl plans to talk with CSD President Wayne Kuntz soon about the matter. The other CSD staff person in attendance, Greg Hall, director of administrative services, said the district almost took over the cable system from the RMA in the late 1980s, when an agreement was drawn up but never signed. Reiman suggested the technology master plan could serve as the district's due diligence if it considers acquiring the system.
With potential buyers asking tons of questions, builders get smart about selling wired homes. Builer Online | From the March 2, 2003 print edition | Amy E. Lemen "I spent two years looking for a home like this," he says. "The whole reason we moved in was because it was a connected community." Velotta lives in Brambleton, a 2,000-acre master planned development in Northern Virginia that provides its residents with fiber-to-the-home Internet access, video/cable service, Category 5 wiring in each house, and community intranet. Located in the heart of tech country, the developer wanted to provide some form of advanced technology -- something flexible to accommodate the tech lifestyle, says Kim Adams, marketing director for The Brambleton Group. But deciding on the exact form was a challenge. Adams says they hired The Broadband Group, a consulting firm that helps builders weed through technology options, to help narrow down their choices. Wiring communities is an expertise that few builders or developers possess, says Tom Reiman, consultant and owner of The Broadband Group. "It alters a land use plan, you have to think about granting easements in a different way, and it's more expensive initially to the builder. But buyers are demanding access," he says. Tim Woods, ecosystems director of the Internet Home Alliance, seconds that notion. "We have very savvy consumers," he says. "Developers and builders are getting more money per acre and selling land for more money because the value proposition with a connected community is greater." The Pitch Many builders see home networking as a competitive differentiator. Some 34 percent of builders now offer structured wiring packages as standard or optional amenities, according to the National Association of Home Builders. "Telecommunications is a huge marketing tool," says Reiman. "Buyers are demanding it, and builders stay competitive by offering it." But how is the system presented and sold to buyers like Michael Velotta? What features are offered -- and what were buyers willing to pay to get access? In most cases, builders and developers choose to partner with a well-known telecom company. Not only does it provide a higher degree of reliability, it takes the pressure off the home builder to find services. Brambleton ended up negotiating a deal with Verizon to provide and install fiber, then worked with builders' wiring companies to ensure specs were met. Costs are built into homeowners' association dues -- about $125/month; residents contract with the provider of their choice for voice service. Terrabrook, a privately held land development company, has included high-speed broadband access in its Houston offerings -- Cinco Ranch and Eagle Springs, which also features a community intranet. "We chose to partner with Time Warner to provide broadband to the community," says Ted Nelson, vice president and general manager for Terrabrook in Houston. "We looked at a lot of smaller providers, but weren't comfortable that they'd be around for the long term. Why would you take a gamble on an unknown company?" Nelson says home buyers deal directly with the telecom provider -- Terrabrook is only involved to the extent that they've contracted with the company. Broadband service in the Houston area runs about $100 monthly for video and data; home buyers usually contract separately for voice services. "Builders don't want to not wire the house, but they try to stay away from it, too," Nelson says. "They're more concerned with what they need in terms of wiring -- after that, call your provider." Beazer Homes has chosen to make structured wiring an option in its homes. But Trevor White, Beazer's director of business systems integration, says it's impossible to use just one access provider. "Telecom is a very fragmented market with local providers in local areas so each division chooses its own provider," he says.Sidebar Wired Suppliers At Ladera Ranch in Orange County, Calif., there exists an exclusive contract between the community's master maintenance company and Cox Communications -- so builders don't have to worry about researching broadband providers. "Builders can select their own services for structured wiring and also have the opportunity to sell upgrade packages to buyers like enhanced networking or audio," says Paul Johnson, vice president of community development for Rancho Mission Viejo. All homes are pre-wired, and community intranet ("Ladera Life") and high-speed access services are included in homeowner's association fees -- about $145 per month. Because developer Rancho Mission Viejo has an exclusive relationship with Cox Communications, residents also get a bundled services discount for phone and cable services. At D.C. Ranch, in Phoenix, developer DMB Associates (co-owner of Ladera Ranch) partnered with Lucent and Quest to provide both broadband and cable service, which is built into a $50 per month association fee. "It's about deciding if broadband connection is mandatory or optional," says Brent Herrington, DMB vice president. "Communities who are buying Internet connections are operating as telecommunities. It works if everybody's doing it." Published in BIG BUILDER Magazine, February 2003
Its new futuristic facility continues to amaze bargain-hunting SureWest Communications Sacramento Business Journal | February 28, 2003 print edition | Mark Larson The legacy of broadband provider WINfirst is a modern-day mother lode of telecom tomorrowland built at McClellan Park with $200 million in venture capital. But when the venture-capital money dried up at telecom startups here, there and everywhere, Denver-based Western Integrated Networks LLC left its Sacramento-area plant in bankruptcy. As a result, it was a Merry Christmas for Roseville-based SureWest Communications, which bought the supersonic system last year for a used dune buggy price of $12 million. SureWest's buy of Winfirst's assets was a coup, by any standard. It bought itself a telecom services rocket launcher with the potential to bring it a windfall of market share, revenue and profit. SureWest is working hard to make that happen, devoting 130 employees to this part of the company. SureWest has reorganized Winfirst's chaotic fiber construction plan into a methodical schedule, drawing on its many years of experience of installing communications systems. But it's the building itself that gives the former Roseville Telephone Co. its biggest advantage. When SureWest got the keys to the McClellan plant, company officials kept learning more about how much they got in the deal. It was a lot. No tomorrow: The plant occupies 187,000 square feet of a former hangar used by mechanics and machinists to refurbish military jet engines. When the Air Force left McClellan, and the base became a business park, one of the first private lessees to come into the park was WINfirst in September 2000. The company said at the time it was armed with a half-billion dollars in investor cash. A look at all the equipment it put in at the McClellan plant gives ample evidence that Winfirst definitely wasn't worried about pinching pennies. It spent $200 million on the plan and the beginning of a fiber system in Sacramento County. This was during the high-tech boom, when few investors worried about costs. Money was being thrown around like confetti at a hero's parade. Winfirst completely transformed the massive hangar into a modern telecommunications showcase, giving it a daring futuristic look of Mission Control, Hollywood-style. The plant was designed for big things, to be the nerve center of a fiber-to-the-home system in Sacramento County and 10 other similar markets nationwide. The plan was that it would eventually employ 600 people either in the building or out in the field. The McClellan plant got built. It is a seamless, ultrafast, fully integrated digital network built to deliver three things at once over one fiber-optic connection: multichannel pay TV, 10 megabits of Internet connectivity speed, and phone service — all for about $100 a month. Winfirst managed to hook up about 5,000 customers before the cash ran out. And almost to a customer, all are happy to be getting the service. A one-stop shop for communications services is a new model of competition for traditional providers of cable TV, phone service and online connections. But there weren't any prospects for profit after hundreds of millions were spent. And that became a big problem. Investors want profit, or at least a prospect of it to justify keeping their money hoses blasting. As Greg Chamberlain, who worked for WINfirst and who now works for SureWest Broadband, says, it amounts to a simple tenet of business: "You can't spend capital and not have revenue coming in." With only a speck of revenue compared to spending, the big-money Winfirst investors cut their money supply and Winfirst went into Chapter 11 bankruptcy reorganization in March 2002. If ya got it, flaunt it: When you walk through the McClellan facility, it feels like you're in a futuristic space station: Two stories of multicolored square panels of glass front the modest lobby, separated from the rest of the building by another wall of glass and push-through doors. Long hallways, curved and straight, are paved with new-smelling carpet and lined by bold-colored walls. Just beyond the lobby is a reception area with a large counter and sink, offering ready space for catered food and cocktails. The doors leading into secure areas have badge scanners. Two floors of sales and marketing offices partially frame a massive ground-floor call center of workstations and operators. We walk into the first-floor conference room where a long, maple-topped table awaits, surrounded by walls with built-in maple cabinets. A button is pushed and a curtain at the far end of the room raises, revealing a glass window and a view of a two-story room with a massive $35,000 television screen, framed by smaller plasma screens on each side. The side screens monitor various parts of the SureWest network. Why the big screen? "It's just for show," I'm told. Winfirst execs apparently wanted to wow anybody visiting its conference room. The wall of screens sit above a room of all-black workstations, each with a 19-inch flat-screen monitor. This is a "network operating center" designed to keep constant tabs on the various parts of the network that Winfirst expected would grow to 11 markets. SureWest has two such network operations centers of its own in Roseville. Because this place has so much capacity, says general manager Terry Perkinson, SureWest will be moving those centers here. "We saw they did an excellent job with this building," says Perkinson. Chamberlain, who went to work for Winfirst after a 20-year career with Pacific Bell, and who now is with SureWest, has been awed by the advanced design and technology of the building. "I believed then and I believe now, this is just the forefront of what everybody's going to have to do," he says. SBC and satellite programming providers like DirectTV are trying the three-in-one bundle, he says. But they're not there yet. Among the other big features of the plant are a software lab/air-cooled server room, a satellite dish farm in the back of the building where it imports TV programming, a sound-insulated back-up diesel-powered generator, an inventory control system to keep missing service installation parts at a minimum, and many rows and stacks of unused office furniture from other Winfirst offices closed in Denver and Dallas. The plan: SureWest plans to drop the coaxial cable part of its TV offering and make it fiber-fed, along with its data and phone options. And it will fold its wireless service into its broadband package for a four-in-one offering. Meanwhile it is continuing to build the fiber system in Sacramento County that Winfirst only got started on. It now passes 42,000 homes and has about 5,800 subscribers. Over the next year, SureWest will run its fiber network past another 80,000 homes in North Natomas, Sierra Oaks and Carmichael. While the SureWest Broadband price has been around $100 a month, it will likely go up with the addition of cell-phone service, and observers say that setting a price that will lure a critical mass of takers will be key for SureWest's success with the service. Because profit is the goal, it can't afford to give too much away. In a competitive telecom services market, which Sacramento has become in recent years, price is a major factor in the battle for customers. Programming price has become a point of competition between Comcast, the biggest Sacramento-area cable provider, and satellite-based pay TV vendors such as Dish Network. Comcast has about 265,000 subscribers, and satellite vendors have an estimated 105,000 local takers, estimates local cable regulator Rich Esposto. While satellite vendors claim they've gotten local cable subscribers to switch because of rate increases, a cable industry spokesman "vehemently disagrees," with that notion in this market and others. Brian Dietz, former local manager for AT&T Broadband, prior to its being bought out by Comcast, is now spokesman for the National Cable & Telecommunications Association in Washington, D.C. Dietz says industry figures show that cable rate increases have been smaller during the deregulation of the industry than they were prior. Where SureWest lands as a third entrant in the competition has yet to play out. A good start: Tom Reiman, a Sacramento-based broadband consultant, has familiarized himself with SureWest's foray into Winfirst. Last September, Reiman wondered how SureWest would fare as a first-time cable programming provider. The business is known for its complex regulatory hurdles and getting programming viewers want can be a challenge. But Reiman gives good marks to SureWest's progress. The company has brought in video-on-demand (pay-per-view), which is ahead of Comcast, the local cable provider. Comcast's regional manager, Ruth Blank, says her company has no prediction as to when it will offer video-on-demand locally. "They still have a cost-of-infrastructure challenge," says Reiman of SureWest Broadband. "But I think they are aware of that." He believes the company has a superior video and data product to cable offerings. But he believes SureWest Broadband must sell its high-speed Internet connections to businesses, where there's much more money to be made. The 10-megabyte connection of SureWest is equivalent to a high-end DSL (copper enhanced to be a faster data pipe) costing from $6,000 to $8,000 monthly, he says. He says the SureWest data product is "vastly superior" to those offered by SBC or Comcast. Such moves, by the way, are in SureWest Broadband's plans. With the recent rulings out of the Federal Communications Commission on telecommunications competition, Reiman figures the big phone companies will now pursue broadband development, first through DSL, and eventually fiber. And SureWest is already well on its way. "I'm pretty high on SureWest," says Reiman. "They understand the economics of what they've acquired." © 2003 American City Business Journals Inc.
Sacramento Business Journal | Febuary 28, 2003 print edition | Kent Hoover and Mark Larson The Federal Communications Commission's new rules for telephone competition bring good and bad news for small firms. The good news, according to small-business advocacy groups, is that the FCC preserved competition for local telephone service by continuing to force Baby Bells to lease network elements to competitors at state-regulated rates. The bad news, they say, is the FCC reduced competition in the broadband market by freeing the Bells from limits on how much they can charge competitors for access to new high-speed lines. This "will lead to higher DSL service prices and less broadband availability for small-business customers," said Karen Kerrigan, chairwoman of the Small Business Survival Committee. But telecommunications analyst Jeff Kagan said small firms could face a bigger problem as a result of the FCC's decision: a "capacity crisis" for voice service. The Bells will have no incentive to invest in their networks because they must give rivals access to them at below-cost rates, Kagan said. Competitors will have little incentive to build their own telephone networks. "Everybody will piggyback on the Bell networks until they break," said Kagan, an independent industry analyst in Atlanta. In a year or two, the "all circuits are busy" message could become common, Kagan said. This capacity crisis could be averted if states set rates low enough to allow Bell competitors to survive but high enough to encourage them to build their own telecommunications infrastructure, Kagan said. Sacramento broadband consultant Tom Reiman disagreed. He sees the rules as giving the Baby Bells a green light to more broadband development. "I'm optimistic that this will encourage greater investment in broadband," said Reiman. "This doesn't require them to open up their broadband networks. Now they shouldn't have the constraints of selling broadband at a loss to someone else." Reiman sees DSL development by the Baby Bells as an initial foray into broadband that will eventually be dropped when the cost of fiber drops enough to make its replacement of DSL copper connections feasible. Washington politics are certain to continue to roil on this issue. Interested parties from a Verizon executive to an association of Internet service providers lambasted parts of the FCC decision, as did Rep. Billy Tauzin, a Louisiana Republican who chairs the House Energy and Commerce Committee, and FCC Chairman Michael Powell, who voted against his agency's decision. © 2003 American City Business Journals Inc.