Cable Transformations Illuminate Upside to Rural Broadband Story

Diane Quennoz, SVP, marketing & customer experience

Diane Quennoz, SVP, marketing & customer experience

Vyve Shows What Can Be Done with Prudent Investments in Small Systems

By Fred Dawson

August 10, 2017 – As government officials argue over how to deal with the sad state of broadband coverage in rural America they would do well to consider what the experiences of some aggressive Tier 2 cable operators say about what’s doable with resources at hand.

Of course, not every community and certainly not every farm has access to a cable network, but, too often, those that do are served by antiquated plant run by small operators whose stewardship leaves the wrong impression about the value of those facilities. Getting them up to speed will cost money, but the costs are not so great as to foreclose the likelihood of a reasonable return on investment.

Confidence in that supposition is reflected in the hundreds of millions of dollars flowing into small market cable acquisitions and plant upgrades over the past few years, notwithstanding an industry-wide pay TV margin squeeze that has hit small operators much harder than their larger brethren. There’s been plenty of time to determine whether the earliest expansion strategies pegged to high-speed broadband were a good idea. That the investments keep coming suggests the case has been made.

For example, the pacesetters in implementation of 1 Gig broadband service across large multi-state footprint have been Tier 2 MSOs like Cable One, now reaching 70 percent of 1.7 million homes passed with its GigaONE service, and Midco, which reached the 50 percent mark at midyear with its Xstream Gig service on its way to 100 percent coverage by year’s end. That would put the 1 Gig service in reach of 600,000 households in 335 communities across North and South Dakota, Minnesota, Wisconsin and Kansas.

The sense of opportunity in smaller markets is fueling ever more announcements of data rates in the 100 Mbps-1Gbps range and ongoing buyouts of smaller MSOs by larger companies. And with the broadband expansion, most of these companies have made connectivity to businesses a key part of their strategies.

One of the more recent consolidation deals came at the start of the year with Cable One’s $735-million acquisition of NewWave Communications, which, as previously reported, was recapitalized four years ago to become the leading broadband provider for businesses as well as consumers in its markets. With 1 Gig available across much of its 440,000 household footprint, NewWave has built a commercial service business from scratch that now accounts for 13.6 percent of company revenues.

Another even smaller Tier 2 operator demonstrating the success of a broadband-focused strategy is Vyve Broadband, which five years ago began transforming old cable systems into the kinds of high-capacity multi-service operations small towns and villages everywhere are looking for. Today, with HFC networks passing about 315,000 households in nine states, Vyve offers 200 Mbps access in three quarters of its franchises and has reached 1 Gbps in two of them: Shawnee and Ketchum, OK.

With cable systems in Texas, Arkansas, Kansas, Louisiana, Tennessee, Georgia, Colorado and Wyoming as well as Oklahoma, Vyve has put a good deal of capital into interconnecting its markets via fiber rings to facilitate headend consolidation and other efficiencies essential to profitably operating over such an expanse. Last year, the company completed buildout of a 400-mile fiber ring around central and eastern Oklahoma.

The 48-fiber ring feeds seven main city hubs, which provide direct service to over 40 municipalities across the state. It connects with a larger network tied to Tulsa, Oklahoma City, Dallas and Atlanta, and also feeds signals into links connecting to local systems in rural areas of these and the other states.

Vyve is offering a triple-play service with digital TV and voice in all its markets. It also has a unit dedicated to delivering business services, which include optical Ethernet, PRI (Primary Rate Interface) and hosted voice.

The emphasis on broadband hasn’t diverted the company from developing a 140+-channel HD service that would be competitive in any market. Indeed, the company is considering new service elements that would take it a step beyond what’s typically on offer from operators in much larger markets.

“Vyve is always on the cutting front,” says Diane Quennoz, senior vice president of marketing and customer experience at the Rye Brook, NY-based company. For example, she notes, Vyve is just now rolling out the first iteration of hybrid video service offering Netflix with the MSO’s linear and VOD lineup for unified navigation through the TiVo UI running on Evolution Digital’s eBOX, which combines QAM-delivered traditional linear TV with IP delivered VOD and OTT on the HDMI 1 input.

“We’re really excited about bringing OTT subscriptions into the linear lineup,” Quennoz says. “People want live and local TV but many want to get their movies through OTT. Now they can have it all through one input.”

Along with universal navigation, support for recommendations and other features, the TiVo UI offers viewers the option to choose between a grid-style traditional interface and the more graphically rich personalized format taking hold throughout the industry. “With TiVo we’ve always had a very user-friendly UI,” she adds. “As we’ve evolved into whole-home DVR and ultimately the eBOX we’ve been able to maintain the same look and feel while benefitting from the things TiVo has done to make navigation easier.”

Vyve pioneered use of Evolution’s DTA with the TiVo UI three years ago as a way to deliver a feature-rich service to legacy analog as well as HD TV sets. The eBOX IP hybrid STB builds on the DTA capabilities to enable operators to cap QAM-based delivery in a smooth migration to all-IP video. The terminal has caught on among smaller operators, many of whom are deploying it through an affiliation Evolution established with the National Cable Television Cooperative.

Next up may be cloud DVR. Vyve is looking at options but hasn’t made any decisions, Quennoz says.

Where the OTT tie-in leads is anybody’s guess. Quennoz acknowledges skinny bundling of live TV channels by OTT providers has had an impact. “We’ve seen our share of decline in video market for sure,” she acknowledges.

For now Vyve sees Netflix as “the go-to service” for ensuring the company is keeping pace with what customers want. “But let’s see what takes off and what makes sense for consumers,” she says, noting the company may look at options that could include new combinations of OTT and smaller bundles as the market evolves.

What matters is keeping customers engaged through high-speed broadband with offerings of value-added services that they can’t get in pure a la carte OTT mode. Along with the unified navigational advantage of providing live and local programming with OTT on-demand content, Vyve sees opportunities tied to a whole-home robust Wi-Fi service and smart-home applications.

“We have to own the Wi-Fi and the Internet in the home,” Quennoz says. “We’re working through various solutions that go beyond using our DOCSIS 3.0 modems with extenders.”

The search for a whole-home Wi-Fi solution operators can offer as a better experience over traditional modes is accelerating across the industry as the number of wireless devices used to access video and other content from any point in the home or business multiplies. This is another area where Midco has played a leading role, having been the first MSO in North America to deploy the mesh Wi-Fi solution offered by AirTies to support a whole-home wireless service, which it offers at $7.95 per month.

“We’re looking at a couple of providers in the market, conducting tests to see what’s working and what’s affordable,” Quennoz says. “The question is how you calculate the value for customers and sell it. Is it part of our broadband offering or a different product set? But we definitely want to be part of that home Wi-Fi opportunity.”

Where smart-home services are concerned, “we’re looking to see what makes sense for our customers,” she says. “We’re testing stuff every day and trying to determine whether this is something we should own or provide access to. A challenge with a lot of these solutions is the hardware is quite expensive.”

It’s still unclear how far consumers in rural markets will go in embracing the smart-home concept and the many applications associated with the Internet of Things, she adds. Vyve is offering home security in one of its markets, but “I wouldn’t say we’re on the forefront of any solutions,” she says. “But we want to determine where our customers are heading and get there before they need it.”

That’s a pretty good way of summing up how Vyve and the other cable players who see opportunity in the smaller markets are approaching the business. So far, they’re demonstrating it’s a winning strategy.