Add Video to Voice and Data Bundles

Next Level Communications' new hardware gives ILECs and CLECs a competitive shot in the arm, boosting revenue and leveling the playing field in competition with cable operators.

by Ted Stevenson ISP-Planet Executive Editor [May 29, 2002]

Earlier this month, Next Level Communications announced the availability of its upgraded ADSL+ transport technology, sporting a new chipset that allows the platform to deliver up to 10Mbps of bandwidth to customers more than ten thousand feet (nearly two miles) from a central office or substation—over existing copper phone lines.

This, combined with other components of the company's product line, allows ILECs and CLECs to deliver a powerful new product: a voice, data, and video bundle. "It's a robust business model for telcos," said Jeff Parnell, Next Level's senior vice president for marketing.

Indeed, while voice/data bundles are commonplace, most phone companies are hard-pressed to offer their customers digital video service. This has conferred a major advantage on up-to-date cable operators, said Parnell, as they are increasingly able to offer voice service to their constituents to complement the data and video services that have long been their core offerings. "And the [cable-based] voice quality is good," added Parnell.

The ADSL+ transport service supports voice, 1.5 Mbps Internet, and two simultaneous digital video streams. The full platform comprises Next Level's Broadband Digital Terminal, (which connects the PSTN switch, the fiber Internet feed, and the cable head-end), and the Universal Services Access Multiplexer that sends the combined signals to Next Level's Residential Gateway.

One telco that recently added ADSL+ to its list of product offerings is the Glasgow, Ky.-based South Central Rural Telephone Cooperative. Echoing Parnell's point, SCRTC general manager Daryl Wyatt said, "Other telcos can't give DSL services away, but Next Level's bundled services platform has created a wonderful business opportunity for us. Bundled services that include digital video are the 'killer app' for broadband."

Next Level claims more than 100 customers in North America, including such large providers as Qwest and Bell Canada. About half of its customers, however, are relatively small, providing 10,000-15,000 access connections (compared to tens of millions for the biggies). Overall, about 40 percent of customers are buying the video option, said Geoff Burke, Next Level's director of marketing services.

The key here is an increased revenue opportunity. SCRTC, mentioned above, is adding between $27 and $35 per month for basic (21 local channels) and "expanded" (82 channels) TV service, with premium channels a further extra-cost option.

According to Burke, adding the video option raises the typical monthly bill from about $50 per month for voice/data service to between $110 and $130 per month for the video-enhanced bundle.

This is a much needed revenue opportunity for telcos of all sizes, according to Burke. It's also a major product differentiator in a crowded market. Claims Burke, "many ILECs are using our system to 'CLEC over' into surrounding communities," further enhancing their revenue flow.

On the expense side of the ledger, the total cost of getting a video subscriber currently runs between $800 and $1,000—down dramatically from the roughly $2,400-per-customer figure of a couple of years back. This includes customer premise equipment, the Next Level platform capacity, network costs, installation, and "headend" or content costs. Next Level estimates that payback time is typically less than two years.

To acquire the digital TV signal, smaller telcos deal with the same content aggregators that serve small cable companies, for example the National Cable Television Cooperative (NCTC) or WS Net. Next Level reports that some of its telco customers—including SCRTC—are forming consortia for increased negotiating power. Providers on the Qwest end of the scale have direct relationships with the studios.

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