Access for Sale: Are There Any Buyers?

Cable World, Feb 7, 2000 by K.C. Neel

Internet providers around the country may be biting and scratching to get access to cable operators' big pipe. Yet at least one broadband player says it's not been approached by one ISP in any of its markets.

RCN Corp., an upstart overbuilder that's aggressively building voice, video and data systems on both East and West coasts and the Midwest, has plenty of capacity to sell access on all its various broadband networks. And it's willing to offer it to anyone willing to pay the right price, says Scott Burnside, SVP-regulatory and governmental affairs. But so far, no ISPs have contacted RCN about getting access on any of its networks, he adds.

That surprises other broadband providers around the country. Deb Stewart, GM of Click!, a municipally owned telecommunications provider in Tacoma, Wash., says Click! has gotten so much interest from prospective ISPs wanting access that it's had to set up guidelines for companies.

And WideOpenWest LLC just got its first franchise in the Denver area and has already been contacted by several local and national ISPs asking about carriage, says WOW president Mike Haverkate.

Click!, a division of Tacoma Power & Light, was designed from the beginning to be agnostic toward ISP carriers. "We could've made more money quicker had we gone with an ISP that wanted proprietary access," Stewart says. "But that was never the point for us. We don't want to be an ISP. We want to be a transport for ISPs."

Future revenue

WOW has the same philosophy. Indeed, Haverkate says the company decided to design its networks with an open architecture believing that it presents big revenue opportunities down the road. It also immediately differentiates WOW from the incumbent operators it'll compete against.

Open access has become a boil that has yet to be pierced on the cable industry's backside. That despite the apparent defection of America Online Inc. -- openNET Coalition's founding member and up to now most ardent defender -- when it became a de facto MSO last month after it agreed to buy Time Warner Inc.

Many operators hoped AOLs acquisition of Time Warner would cool smaller and less-well-funded ISPs' jets. Instead, the ISPs are more riled and determined than ever to force MSOs to open their networks. Many ISPs continue to believe they must fight for access on advanced cable system platforms and many are backing local and state initiatives that would mandate open access.

Yet Burnside maintains RCN hasn't had any interest from ISPs. RCN isn't actively selling its network to other ISPs, he says, but it's not because the company wants to keep its networks closed to competitors.

"Do we have a specific plan if an ISP comes to us and wants on?" he asks. "Not really, but it's really pretty simple and we'll accommodate those companies when and if they come to us no matter which market it is."

Can we talk?

Burnside believes part of the reason RCN hasn't been approached may be because it's still building its networks in many markets and doesn't have the high penetration incumbent operators have. But WOW hasn't even begun construction of its network in the Denver suburbs and Haverkate says he's already talking to prospective ISP affiliates.

Repeated calls to the openNET Coalition and several ISPs in RCN's Massachusetts territory went unanswered.

Clearly, RCN and other overbuilders are better prepared to open their networks to competitors than most incumbents. For instance, Burnside says RCN is using only about 20% of its backbone capacity so it's going to be in the company's best interest in the long run to sell that capacity.

"We have no problem with opening up our networks," Burnside says. "But we don't want someone to tell us how to open our network, or how much we can charge or what kind of return we should get."

In that, RCN is aligned philosophically with cable operators like AT&T Broadband & Internet Services, which have furiously fought to keep their networks proprietary. Indeed, RCN sister company Charter Communications Inc. has been a virulent opponent to open access. Charter has spent more than $1 million in its St. Louis market alone fighting a provision that would force operators to open their networks to competitors.

RCN has some common allegiances to the openNET Coalition folks because it's one of the larger dial-up ISPs in the country. RCN purchased a slew of independent access providers last year to form RCN.com and today the company counts some 800,000 customers. Only a few thousand are hooked up to cable modems at this point. RCN hopes to migrate those customers to high-speed modems, but many still live outside areas where RCN's activated plant.

"I guess we could go to other cable operators and fight to get on their networks," Burnside says. "But why would we want to do that in the markets we compete? We'd rather have the bundled customers all on our network."

* RCN Markets
  * Boston
  * New York
  * Washington
  * Philadelphia
  * Chicago (through its
    purchase of 21st
    Century Telecom)
  * Several Chicago area communities
    including Berwyn; Cicero;
    Evanston; Morton Grove; Oak Park; Palatine;
    Schaumburg; Wilmette and Winnetka
  * San Francisco
  * Los Angeles
  * San Diego
  * Portland, Ore. (pursuing franchise)
  * Seattle (pursuing franchise)

* WOW at a Glance
  * First franchise: Jefferson County, Colo. (60,000 homes passed)
  * Negotiating franchises in metro areas of Denver, Portland,
    Ore., Dallas, Forth Worth and Austin, Texas.
  * Formed by former RCN Corp. executive Mark Haverkate

* Click! at a Glance
  * Division of Tacoma Power & Light
  * Offers video service to more than 11,000 customers in
    Tacoma, Wash.
  * First ISP customer HarborNet has signed up more than 200
    high-speed customers since affiliating with Click! in December.