FTTH deployments face predatory cable pricing

HOUSTON – Two local organizations that have succeeded in building fiber-to-the-home (FTTH) networks say they are still facing challenges in the form of highly competitive pricing from a cable incumbent, Cox Communications. Speaking at the 2009 FTTH Conference & Expo here today, representatives of Lafayette Utility Systems and EATEL, both based in Louisiana, said cable prices in their communities have dropped considerably since their FTTH networks opened for business.

“Cox froze the cable rates in Lafayette, and they didn’t freeze the rates in other areas,” said Terry Huval, director of LUS, a municipally owned utility company which fought major incumbent opposition before building an FTTH network in Lafayette and starting to offer service earlier this year. “We figured our citizens saved over $3 million in cable rates even before we could offer them service.”

Cox has also deployed DOCSIS 3.0 technology in Lafayette, Huval said.

Trae Russell, communications manager for EATEL, the local telephone franchise in Ascension, La., and some surrounding communities, had seen the same thing happen in his area, when EATEL started offering FTTH-based services in 2006. In fact, EATEL went so far as to take out an ad in the Lafayette newspaper, alerting cable customers there to the discounts that Ascension customers were getting and forecasting similar lower rates in Lafayette once the LUS network was in the works.

“It was an incredibly bold move on our part,” Russell said. “Cox came in with an incredibly aggressive promotion for TV service with every bell and whistle you could imagine. We couldn’t figure out how they could even make money on it. So we took out an ad in the Lafayette newspaper that basically said, ‘Hey Lafayette, look at the great prices you are going to get from Cox.’ Cox was not amused.”

But Cox continues to battle local FTTH-based bundles with aggressive pricing, the two men said, forcing companies such as LUS and EATEL to be more aggressive themselves.

In some cases, Russell said, EATEL tries to match pricing for customers who call to disconnect service to take up the cable offer. EATEL has battled Cox on the business front as well, redoubling its efforts to establish strong ties with small to mid-sized businesses through good service and personal sales relationships.

“The bandwidth advantage hasn’t played to our advantage as we hoped it would,” Russell said. “Pricing has been our issue. Cox is cherry-picking our business customers. We have to work hard to maintain relationships, make sure our sales guys are stopping in on the small business customers and asking them what they need. One way we fight [pricing competition] is with contracts – we are able to give customers substantial discounts for [longer-term] contracts.”

Russell expects the price competition to heat up in Baton Rouge, which is 20 minutes from his base of operations, now that AT&T is offering U-verse in that area.

Kris Ward, business development manager for ATMC, a telephone cooperative with the largest FTTH deployment in North Carolina, serving the southeastern tip of that state, has seen both AT&T and Time Warner Cable target competitive offerings to his customers, and advised other organizations that want to offer FTTH to constantly track what their competitors are doing, to be able to stay price competitive.

Both Ward and Russell have seen real estate developers and agents get more interested in the local FTTH options as the housing market has cooled. EATEL now has about 150 realtors in a realtor incentive program that gives the realtor a commission for giving their home-buying customers a promotional offer from EATEL. 

“When houses were selling, they (realtors and developers) didn’t want to talk to us,” said Ward, whose footprint covered a fast-growing coastal area. Now, they will talk, Ward said, but there is greater price sensitivity.

Paul Elswick, co-founder and CEO of Sunset Digital Communications, which designed and built a FTTH network covering three counties in the far southwestern tip of Virginia, said the communities have been able to attract the economic development the network was intended to attract, including call centers, a medical records facility and a data center. But the area faces a new challenge: Rural electrical coops are struggling to produce the power needed to attract other data centers and high-tech operations, Elswick said.