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.