Cablevision's plan: Surround the Big Apple

The geographic area where Cablevision Systems offers business telecommunications services isn't big, but it's choice: Long Island, the suburban counties north of New York City, southwestern Connecticut, and the New Jersey counties within commuting distance of the Big Apple.

“[The area] represents about 10% of the total U.S. telecommunications marketplace,” said Eric Tveter, senior vice president of business telecommunications services at Cablevision. “The market size of the region we serve is about $15 billion. By focusing [on that area], we're not spreading ourselves too thin as a management team; our execution has been good. We're operating cashflow positive.”

Third-quarter revenues (the latest available at press time) for Cablevision's CLEC operation were $22 million, and operating cash flow was $13 million, up 23% and 24%, respectively, from the third quarter of 1999.

Cablevision offers local and long-distance service, Centrex, route diversity, fractional T-1, operator services, high-speed Internet access via cable modems, Ethernet connections, virtual private network service, private lines up to OC-48, dedicated access, frame relay service, ATM, point-to-point circuits and video.

Like other cable companies attracted to the business market, Cablevision aims at small and medium-sized businesses, and it has made some progress with larger customers in certain markets. Tveter said that Cablevision serves “80% of the hospital market on Long Island,” for example. The government of Westchester County, N.Y., Stamford Hospital in Connecticut and the Westchester County Medical Center in Valhalla, N.Y., are also customers.

Unlike Adelphia Communications and Time Warner, Cablevision has not created a separate company to address the business market. Rather, Cablevision has created a separate brand name, Lightpath, and an organization to make the brand name known. Lightpath services travel over the Cablevision infrastructure — all 10,000 route miles of it — wherever possible, Tveter said. However, the company does new construction where warranted.

Separate name or not, Lightpath is positioned as “a service of Cablevision.”

“We think Cablevision is good for Lightpath,” Tveter said. “We want people to know we're part of Cablevision.”

Cablevision got its first certification as a local exchange carrier in New York in 1990 — six years before there was really such a thing as a competitive local exchange carrier. The Lightpath brand was rolled out in 1993, and the first Class 5 switch installed in 1994. Connecticut certified Cablevision in 1996; New Jersey in 1998.

Tveter said that two of the challenges analysts see for cable companies in the business market are not major issues for Lightpath: a lingering reputation for bad service and the fact that cable plant doesn't usually run by businesses.

Lightpath's lifeblood consists of precisely those strip-mall enterprises that blanket suburbia: doctors' and lawyers' offices, small restaurants, real estate agencies and the like, Tveter said. “We have a significant number of commercial TV customers,” he said. “Our commercial video sales have risen 40% [in 2000].”

Like the hiker chased by a bear who needs only to outrun his partner to avoid being eaten, cable companies need only outshine their own competition — in Cablevision's case, Verizon and Southern New England Telecommunications, a subsidiary of SBC Communications. This, Tveter said, is not that much of a challenge. “When you call our network operations center, you talk to technicians,” he said. “They're not buffered by customer service reps who may not be able to talk the talk. We rotate technicians in and out of the NOC [and the field]. That's a big differentiator for us.”

But just to be on the safe side, Lightpath's Web site points out that those technicians are telecom people — not cable guys — and they're recruited from the same companies Cablevision competes against.