Cashing in on Connectivity

Once thought to be merely a retention tool for high-speed data customers, cable operators are increasingly stepping up efforts to take WiFi to the next level, looking to wireless as a possible future profit center and as a means to cut down on plant costs.

Cablevision Systems started the WiFi ball rolling in 2008, committing about $300 million to build out the service in its New York metropolitan area mainly as a means to keep profitable high-speed data customers happy. Today, Cablevision leads the cable industry with more than 100,000 WiFi hotspots in its service territory.

“When we first rolled it out, the initial thought was, ‘Well a lot of our customers have laptops and they’re going to need connectivity, so let’s roll out WiFi,’” Cablevision vice chairman and chief financial officer Greg Seibert said recently. “It’s now become smartphones; it’s now become tablets. We continue to believe it’s going to be a very significant differentiator, not only for us, but for the rest of the cable industry.”

Connectivity has been a major focus for Cablevision. CEO James Dolan has talked up the potential, telling analysts that “by being the best connectivity provider both in the home and out of the home, we think that is where the growth opportunity is going to lie.”

Some analysts see extending WiFi into a telephone product as a future revenue opportunity.

Seibert said Cablevision has tested a dual-purpose phone in the past and it is a possibility for the future. But the real strength of the network lies in its flexibility, he said. “We continue to believe this WiFi network we have will morph to meet customer needs.”

Others are taking the same tack. Time Warner Cable, which along with Comcast, Cablevision, Bright House Networks and Cox Communications formed the Cable WiFi Alliance, a roaming agreement that allows customers of each company seamlessly connect with more than 200,000 hotspots across the U.S., has doubled the number of hotspots in its footprint to about 30,000 in the past 10 months.

Rounding out the Cable WiFi Alliance, Cox has about 1,600 outdoor hotspots and Bright House has about 25,000 in its footprint. That leaves about 45,000 for Comcast, which does not release outdoor figures but claims it has about 1 million access points, including indoor, outdoor, residential and business locations.

Operators that have put WiFi deployment on the back burner are also beginning to step up. Charter Communications CEO Tom Rutledge said the MSO has held off on WiFi deployment as it focused its priorities on more pressing concerns. “In the long run, I think there is a wireless play for us,” he told investors at the recent Deutsche Bank conference. “Supporting Wi-Fi is in our best interest.”

That could take several forms over the next three years, including as a replacement for wireline physical plant.

“There are whole bunch of opportunities in the wireless space and how you take Wi-Fi to the next level, how we begin to provision customers through Wi-Fi and not have to do truck trips. In three years, we can take our speed capacity up to 10 Gigabits per second, and even do something along the lines of a wireless drop where you might not require a line to the street. ” Rutledge said.

Cablevision is focused on raising customer awareness of its WiFi capabilities. Although the MSO more than doubled the number of Wi-Fi sessions in 2013, only about 40% of Cablevision’s HSD customers have tried Wi-Fi.

“We want to get that percentage up,” Seibert said.

The Wi-Fi value proposition also is making its way to Cablevision’s marketing efforts, pushing out the old message of triple play availability at discounted prices.

“We’re basic trying to highlight the various pieces and get away from just shouting ‘Triple Play’ and ‘Best Dollar Price,’” Seibert said.

And that means touting WiFi’s potential cost savings — using the network regularly could shave between $10 and $20 per month from mobile broadband bills.

“Everyone knows what the triple play is. Not everyone knows what Wi-Fi is,” Seibert said. “Not everyone knows that if you use Wi-Fi on a consistent basis you can reduce the amount you pay your mobile provider. That’s valuable.”