WATCHING TV EVOLVE

When D&E Communications announced in April it had chosen Motorola/NextLevel's access platform and Tut Systems' headend equipment to offer triple-play (voice, data and video) service over its copper plant, it became one of the biggest telcos to name vendors for its rollout. D&E's move is providing what amounts to a sneak peek of a larger independent carrier moving into the telco TV market, which is what most of the RBOCs will face if they eventually make the jump. (SureWest, the 16th largest ILEC in the country, certainly has been among the most aggressive with its rollout and is larger than D&E, but its efforts largely were spurred by the acquisition of WinFirst's assets).

D&E, which is the 19th largest telco in the U.S. with about 175,000 access lines in three areas across central Pennsylvania, began its triple-play trial in an acquired area but with a radically different profile. Buffalo Valley Telephone, which was acquired when D&E bought up Conestoga Enterprises in 2002, had no cable TV infrastructure and looked much like any other small telco serving middle America. Also like many small towns, the “burgs” that dot the Buffalo Valley area were ripe for a competitive cable operator. Mifflenburg and Lewisburg, which D&E chose as its first test markets, were looking for anyone to pay attention to them, according to Scott Sandler, VP of marketing for D&E.

“There was a lot of pent up frustration because they're small towns and were being ignored,” he said. “Charter [Mifflenburg's incumbent operator] did have a digital TV capability, but Mifflenburg didn't have cable modems. In Lewisburg, [the incumbent] is CATV out of Danville, Penn. They're still in the process of upgrading, though. There hasn't been a lot of competitive pressure.”

D&E's video network in both towns gets its source from the company's existing headend in State College, where it operates as an incumbent cable provider. From there, it is compressed using Tut's Astria content process and sent over an ATM network using IP packaging. Like most larger telcos, D&E is trying to leverage its existing ATM infrastructure.

“It's a little more efficient to go just ATM, but the flexibility of using IP over ATM outweighs the efficiency,” said Tom Pizza, an account executive with Tut who handles the D&E account.

On the other end, video streams along with data and voice are fed into Motorola's access platform, which is the only one currently on the market that comes with its own middleware. In the home, the company is using Motorola's residential gateway to direct the multiple traffic streams.

D&E initially started with a small deployment in part because it wanted to get an understanding of the nuances of rolling out a competitive video service as part of a broadband package. One of the initial discoveries: The first people to jump from incumbents or satellite providers are likely to be among the most demanding.

In its initial rollout, D&E planned to offer two streams of video plus a high-speed data service and voice in a bundle. Based on early customer reaction, though, the company has boosted that to a maximum of four video streams.

“We did hear from some of our initial customers that they'd like to have four,” Sandler said. “The lion's share of customers are doing two steams.”

Customers also are showing more price sensitivity than anticipated, forcing the company to come up with selling schemes that involved more than simply telling people they could have the same as dial-up but faster.

“We were getting a slice of people for DSL, but there were a lot not willing to spend $38 for it,” Sandler said. “We elected to offer an entry-level 128 kb/s speed and roll it into an entry-level bundle [with 69 channels].”

On the high end of the bundle, the company offers 109 channels of video combined with a 512 kb/s Internet connection. Both bundles include the typical assortment of features including on-screen caller ID, which is among the most well liked services.

“Having the digital TV with integrated on-screen caller ID changed their lifestyle,” Sandler said. “They don't pick up their phone to check if they've got voice mail; they turn on their TV. For many households, there's a lot activity around the TV. We all have a certain amount of coach potato-ness in us.”