TV Service Providers See Green in New Housing Developments

While many are seeing red thanks to widespread home foreclosures and a seriously struggling economy, savvy service providers are seeing fields of green in partnering with builders and developers to deliver their service bundles to high-end greenfield housing projects. Considering the fact that the housing bubble and mortgage crisis is the spark that sent the economy into turmoil, it’s ironic that telco TV providers are finding a wide-open opportunity in new builds.

“There’s a lot of money to be made in upscale greenfields, such as resorts and hospitality locations,” noted Russell Frisby, a law partner with Fleischman & Harding LLP and former seven-year president of COMPTEL. Frisby strongly urges CLECs to move quickly and aggressively on the opportunity to block builders from cutting deals with the RBOCs, which often are better known than CLEC brands to IT-challenged developers. “Many developers don’t know what the possibilities are or don’t know where to go,” Frisby said.

To improve on that advantage, some incumbent triple-play providers are taking aggressive measures to address this market actively. Verizon Communications Inc., for instance, cut a deal with Reichert Financial Services, which provides financing and related services to home buyers, to give customers coming into its 500 locations nationwide a pitch on Verizon service bundles when buying a home. Verizon’s FiOS package will be listed on the firm’s Web site, which is designed to provide a one-stop shop for services home buyers need when purchasing a residence in a new neighborhood; buyers can disconnect service at their old place and purchase TV, Internet and voice services for their new dwelling. Verizon also sweetened its own innovative arrangement with Reichert by providing customers a Visa card worth up to $100 for buying services from the operator.

AT&T Inc. also saw the “green” in greenfield when it looked in the direction of the University of Houston, announcing what the telco said is the nation’s first deployment of its U-verse bundle to student housing in a college campus. Its TV and Internet service will be included in every room of a new, sprawling, $108 million facility, entitled “Calhoun Lofts.” The residence hall, now under construction, will contain more than 700 one- and two-bedroom apartments and 10,000 square feet of retail space, with a lucrative total of 1,000 U-verse connections. More such deals likely will follow; Texas still is getting an influx of transplanted people, and the RBOC has U-verse deployed widely in its home state, thanks to a state policy letting video providers secure a statewide franchise. That watershed event obviated the need for operators to seek agreements in every town and city in which they wish to offer services.

But smaller telcos and CLECs can beat the RBOCs by being savvy and swift in talking to real estate developers. One early mover is Shenandoah Telecommunications Co. (Shentel), which heard the greenfield opportunity knocking before the economy started to slide and the only crunch was the high cost of gasoline.

Shentel announced last year that it would provide broadband video, data and voice services to the residents of Preston Lake, an upscale residential/retail/office development located about one mile east of Harrisonburg, Va. The master-planned community will combine retail and office space along with a mix of more than 500 residential condominiums, traditional row houses, cottages and estate homes. Upscale retail and dining destinations are part of the plan, too. It all presents a rich field for Shentel to plant with services, such as an extensive broadband video line-up, including high-definition TV and pay-per-view, as well as broadband phone service, home security monitoring and broadband Internet, with the advantage of scalable bandwidth for telecommuters and home offices. The CLEC also is providing wireless hotspots for the community’s “Waterfront Clubhouse” and in the Main Street area. The deal is so good that Shentel plans to continue tapping new builds going forward. “Serving upscale communities like Preston Lake promotes Shentel’s strategy of continued growth and diversification,” said Shentel President and CEO Christopher French.

The key to success in this strategy is convincing residential community builders to see the big benefits of offering such service bundles. As the economy weakens, more people could turn to home entertainment, enabled by broadband communications. Builders that can fulfill that demand will find it to be a differentiator. “Collaborating with Shentel enables us to provide premier telecommunications services to Preston Lake residents today and ensures they will be able to readily take advantage of future technology as it becomes available,” said Richard Hine, president of The Hine Group, a developer. “We believe this level of service clearly sets Preston Lake apart from other new developments and communities.”

Hine isn’t alone. For similar reasons, Mercury Development is bringing FTTH infrastructure to its Wendell Falls master-planned community, in Wake County, N.C. “We wanted to bring 21st Century technology to our home buyers,” said Greg Ferguson, a partner with Mercury Development. “So, we knew we wanted FTTH and we investigated a number of companies.”

Wendell Falls, located 12 minutes from downtown Raleigh, N.C., will have 4,000 homes, its own elementary school and a 125-acre country park. “With 100 people a day moving to Wake County, Wendell Falls’ various property types will provide an outstanding home ownership opportunity for virtually all price ranges,” added Ferguson. The first homes should be delivered by the end of 2008.

To make the housing development opportunity even more attractive, some companies are offering themselves as enablers. Connexion Technologies Inc. is building a profitable business by designing, building, installing and managing FTTH delivery networks for unserved, underserved or just new communities and developments, so telcos don’t have to. Its model requires only that telcos pay to use the all-fiber infrastructure. Avoiding capital expenditures for new builds or extensions in a sliding economy is music to the ears of telco execs and also lets them serve eager customers that might otherwise be beyond their reach — and budget. Connexion eliminates that capex risk by buying and building PON-based networks powered by infrastructure equipment from Alcatel-Lucent, Motorola Inc. and Tellabs Inc., among others. It also buys and can operate billing and OSS systems, maintains a sizable staff to field calls from customers and does its own truck rolls (traditionally a huge cost item for telcos, more so now when you consider the climbing cost of gas). “We have double the field staff per house than you see in the industry,” said Eric Fichtner, executive vice president of products and services at Connexion.

But the list doesn’t stop with the delivery network and back office. Connexion also can provide furniture (think home entertainment centers) for new dwellings. “This is one of the concierge services we provide as part of our Nordstrom approach to delivering services,” said Fichtner. “We call ourselves a ‘real estate telecom company.’”

So far, so good: Connexion has added five deals with far-flung property developers in Miami, Milwaukee, Greenville, S.C., and a pair of communities in Walls, Miss. Service providers like CenturyTel Inc., Embarq Holdings Company LLC and NuVox Communications Inc., as well as several smaller and lesser-known service providers, have taken up what Connexion is offering. It also works with developers. “We pitch developers a future-proof network as an amenity to their properties that we handle,” explained Fichtner. “In a down market, we’ve seen increased interest from them because it’s estimated it can add $5,000 to $10,000 in value to a [dwelling].

It all translates into a good opportunity even as the market softens. No wonder Fleischman & Harding’s Frisby, the former COMPTEL president, strongly urges CLECs, ILECs and other non-national names to take the initiative in connecting with and partnering with developers and builders: “If a CLEC is looking to provide a variety of services, it’s a market it shouldn’t ignore.”

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