By Larry Kessler, InteliCable
Finally, the incorrect phrase “A New Millennium” will soon be put to rest. Actually, we are just finishing the old Millennium. And as of 12:01 am on January 1, 2001 we will enter the 21st Century, actually a more momentous event. And we will also be entering the third millennium. According to the Gregorian calendar, which is the calendar used to tract time today, the 1st millennium comprised the years AD 1-1000. The 2nd millennium comprises the years AD 1001-2000. The 3rd millennium will begin with AD 2001 and continue through AD 3000. Does your brain hurt yet?
And so goes the story of multifamily housing property owners (MDUs - Multi Dwelling Units) and private operators of video, high speed Internet and telephone systems. Whether jousting in an academic debate of when a century or millennium begins and ends, or how many votes for President of the United States do or do not count, or over the desire of MDUs to select a private system operator over a franchise system operator, no one seems able to agree on exactly what the facts are.
Hindsight
The numerous retrospective views of the past millennium or century offered by both the television and print publications are sure to entertain us for some time. However, both the private system operator and MDU markets are hard pressed to look back more than one year.
During 2000, the Federal Communications Commission (FCC) made further impact on the ability of competitive providers for voice, video and data services to continue staying in business. At the same time, many of the same FCC decisions favorably impacted MDU owners.
The private cable industry and MDU owners alike watched one of the ugliest years in history for private cable. Optel, the nation’s largest private operator filed for bankruptcy, as did CablePlus. After ResNet and ICS closed their doors for business, they took what remained of very small portfolios and created Global Interactive Communications during 1999 and began selling every asset available to any franchise cable operators willing to by the price. And to everyone’s shock and surprise, BellSouth Entertainment, the only Bell company to not use DirecTV as its source for video, placed a 90 day moratorium on either continuing work on new projects or entering into new agreements. This all contributed to leaving many MDU owners with a bad taste for private cable. But the franchise cable industry had also done little this year to bolster their own positions.
Franchise cable operators did begin a more rapid deployment schedule of system and MDU property upgrades for digital video, high speed Internet and telephony services. However, this eventually began to slow severely toward the end of the year. A nail in the coffin on this issue was AT&T (in some regions) placing a 90 day moratorium on spending to complete existing MDU projects or for entering into new deals. This moratorium happened on shortly before AT&T announced the need to chop up the company into separate operational entities, as well as divest themselves of some assets.
The Little Dutch Boy
Like the tale of a Dutch boy who once held his thumb in a hole in the damn above his town in an attempt to save the town from a flood, so too have the capital markets been encouraging and keeping the voice, video and data industries afloat. However, beginning in August the capital began drying up. Even the largest service providers were having trouble acquiring capital. As such, so too were private system operators regardless of their size. However, capital continues to flow from franchise cable system operators to private system operators who are willing to sell the MDU property systems. Now that we are in December, the lack of capital still appears to be the driving factors controlling a private system operators ability to hold his breath, grow or sell out. And the same situation is being played out with the MDU high speed Internet access providers.
From Sixty To Zero
The time it takes to bring a car from zero mph to 60 mph has always been a measurement of speed. But for a number of private broadband access and content providers, MDU owners are wondering how long it takes for them to go from 60 mph to zero mph.
This year began with a continued exciting and explosive entrance from companies such Darwin Networks, BroadbandNow, Reflex and CAIS. Each reached out to MDU owners to provide service and to private system operators for creating strategic alliances. As an example, a trend among the MDU high speed data groups is being played out by CAIS. Although CAIS signed some rather large MDU deals this year, they announced in November layoffs, a steep loss for the third quarter and the scaling back of their growth in the multifamily market in order to preserve capital and maximize profits.
Seize The Day
Regardless of what you end up celebrating on New Year’s Eve, the new century, the beginning of the third millennium or just the fact that you are moving into a new year, simply celebrate. As private operators evolving into this new breed called the Private Broadband Operator, the opportunities to move forward will be plentiful this coming new year.
For the first time in telecommunications history, all providers or services be they private or franchise have taken a hit on the chin. The response of the capital markets seems to indicate that growth in the voice, video and data market sectors should slow and stabilize, allowing profits and services to stabilize. The reward will be a return to the flow of operating capital from both public and private sources.
While the MDU owner has grown weary of unstable providers, surprise bankruptcies and a failure to deliver services over the long term or even the services promised, he is also keenly aware of the advantages to working with private broadband technologies. He is aware of where companies like WSNet have stepped up to the plate for bringing a digital platform other than DirecTV and EchoStar. He is aware of the experience high speed data providers have had in working through countless technological and legal hurdles, allowing the MDU industry to better envision private branded high speed access and all of the benefits it brings. But most importantly, he realizes that it is easier to turn around a canoe on a lake than it is to turn a battleship on the same lake.
Today’s private broadband operators are capable of responding to changes in the MDU marketplace much faster than their incumbent competitors. Many MDU owners are looking to do the same within their industry. As such, this new century must be ushered in by private operators committing to riding out this storm with its existing customers, fulfilling every commitment the best they can. The reward will be renewed and growing interest from both the capital markets and MDU owners. But you better get started today, because the 21st Century clock will soon be ticking.