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Full Battle Mode

Jerry Sparks is staring out the window of the Sylvester Stallone Suite, on the 18th floor of the newly refurbished Aladdin Hotel in Las Vegas. Soon, in fact, new signs will go up all around the resort rechristening it the Planet Hollywood Resort & Casino, as its new owners wish.

Across the Las Vegas Strip, the digital-services manager is watching his future competition work the dirt. His iconic casino and getaway was built for $12 million in 1962 by the inventor of the dice and card game Yahtzee.

Soon, it will be facing off against CityCenter, a $7 billion hotel, casino, mall and condo development spearheaded by MGM Mirage, the town’s second biggest resort operator. Already, 10,000 cubic yards of concrete have been poured and framing of the first 12 floors of its 4,000-room gaming resort is under way.

Sparks’s job is to figure out how Planet Hollywood can use technology to help it compete effectively for affluent customers against stiff, newer and flashier rivals.

So far, he’s made sure visitors have ubiquitous and reliable wireless Internet access. If guests want to work or play poolside on digital devices, so be it. And if the fastest “twitchers” around want to hold the World Cyber Games here, so be it. Make sure they have the bandwidth.

Now, he’s looking to make a whole host of hotel services available at the summons of their fingers with an interactive guestbook. In its fullest form, guests would not only view the night’s menus at in-house restaurants, but book reservation times not just for eating, but golfing, spa visits and the like. They’d also get guides to the often-confusing layout of the Planet Hollywood complex.

Across town, John Steffy is punching on a screen in the garage of the showroom of Findlay Automotive Group, operator of auto malls for such brands as Chevrolet, Buick, Pontiac, GMC, Cadillac, Saab, Honda and Hyundai.

The group’s information-technology director is showing how a customer can narrow down the choices desired in vehicles sold at this locations. He or she can even find out if a vehicle is in stock before approaching a salesperson.

This is how competition in communications is playing out. The new battlefield, at least for cable operators, is the business place.

For Sparks and Steffy, the telephone and Internet provider is Cox Business Services, a unit of Cox Communications, the Atlanta-based operator of cable systems in 15 states.

For telephone companies, cable is the first competitor that runs its own wires through the battlefield. AT&T, Verizon Communications and smaller providers have been able to largely fend off local competition by making access to their networks as difficult as possible, within legal bounds.

But with complete control of their own networks — and lots of costs sunk into building the capacity needed to serve TV customers — cable operators spot a huge opportunity in extending what they do to business communications.

Cablevision Systems, a champion of reaching out to small- and medium-sized companies, sees business communications as a $6 billion opportunity in its footprint, basically the New York City metropolitan area.

If it can split that with the incumbent carriers — primarily Verizon — its annual revenue of $6 billion would increase by 50%.

In the past two years, Cablevision spent months identifying all the businesses on every street that it could target for its communications services. It put 600,000 “serviceable” companies in its database, according to CEO Tom Rutledge — that is, a Cablevision cable ran in front of the business’s building.

The company put in place in-bound, outbound and door-to-door sales forces. It created a separate, 24-hour-a-day service center for customer calls. And it began to market services in earnest.

“We’re in full battle mode,” Rutledge told investors in March at a Banc of America Securities media and entertainment conference in New York.

His most effective weapons? Price and technology.

“Basically, we charge half of what AT&T or Verizon charges for the same service and we provide a lot more sophisticated services, because it’s all-IP,” Rutledge said.

“IP” is Internet Protocol, a set of communication standards that transfers voices, images, and text as data, slicing documents, conversations, videos and other communications into same-sized pieces of data, often called packets.

Using these packets means a cable operator such as Cablevision can deliver services that are driven and managed by software. A computer now does the work of the switchboard or its more recent incarnation, the switch — a piece of equipment with those switching instructions hard-wired in.

With IP, cable operators can put softswitches in the businesses they serve. New features can be added by simply sending a new package of software instructions. Problems can be diagnosed and often remedied remotely.

Telephone companies began putting softswitches in place years ago. But the telcos employ a stew of different technologies, from time-division multiplexing to asynchronous transfer mode packets, a precursor to IP packets. A transition to softswitches also can be expensive.

“The fact is that we do have a very, very broad and deep portfolio of services that meet literally any customer requirement,” said Bobbi Phillips, director of business product strategy for Verizon corporate marketing.

Verizon tries to make sure that basic dialtone stays up during a power blackout — which may be tough for cable operators’ IP services — and that the most demanding financial transactions aren’t interrupted by a dropped digit that turns a billion into a million.

But cable operators are demonstrating that their IP-based services can not only alter business life, but care for human lives.

Six years ago, officials in Westchester County, N.Y., contracted with Cablevision to handle all the communications and data-transport needs of the county’s libraries, fire departments, police departments, hospitals and schools. And all municipal governments, including the county itself.

Now, all medical and emergency centers in Westchester are served by a “hot phone” service. In the event of a sudden outbreak of disease or illness, a disaster or a terrorist attack, phones ring in a prescribed set of response centers. And when handsets are lifted, a customized message is delivered to the individuals who pick up.

Businesses in the county also can take advantage of the software-driven services. Westchester has established more than a dozen teleconferencing centers that private enterprises can reserve to conduct international business. The quality of the video communications is higher than what the companies themselves could manage, said Westchester County chief information officer Norm Jacknis. And if that means more business, that produces a stronger local economy — and more tax revenue.

Next up: video arraignments and video diagnoses of medical ailments for prisoners in county jails. This would save the transportation costs and increase public safety in the process.


Pascack Valley Hospital in Westwood, N.J., is a medium-sized medical center, with 291 beds. Until four years ago, it bought local phone service from Verizon and long-distance service from AT&T.

At the time, it struggled to contain costs increasing by 15% to 20% a year, according to chief information officer Joe Palombit.

So Pascack Valley Hospital aggregated local, long-distance and Internet service into a single package and sent out a request for proposals to see whether those costs could be contained. Among the recipients: Verizon, AT&T, Sprint, Extranet, Worldcom/MCI and Cablevision.

Cablevision, with its packet-switched Lightpath service, won.

“Pricewise, it looked about 40% better,” Palombit says. “When all was said and done, it turned out to be 60%.”

In 2002, Pascack Valley Hospital had paid $450,000 to AT&T and Verizon for long-distance and local traffic. If its costs had continued to rise even by 11% a year, that would have escalated to $683,000 last year.

A 5% increase — one-third to one-fourth of what it had been — would still have driven the bill up to $550,000, he projected. The actual bill in 2006 with Lightpath was $184,000.

Verizon responds that 100 years of overhead makes it harder to react on price. “Yeah, we’re probably more expensive. We’re a regulated entity,” Phillips said. “We don’t have the luxury of being able to change our prices as easily or drop our prices as readily. Basically, whenever we want to change a rate, we have to go get permission from various and sundry regulatory bodies in order to do so.”

But in addition to saving money, Palombit said Pascack Valley’s $184,000 covered “quadruple the bandwidth for Internet” access.


Service also improved, he said. Now, the hospital calls just one person to get a technical issue resolved. Before, it could take three calls just to identify the problem. It was the hospital’s job to call Verizon or its equipment suppliers, Avaya and Lucent, to address a problem.

Cablevision now runs down the problem to the point where there is a call for an emergency response to a glitch. “This may sound crazy, but I haven’t had to do that,” Palombit said.

Similarly, Cervalis, a provider of high-reliability data-storage services to large corporations in Stamford, Conn., says it couldn’t get Verizon to commit to specific times when it would install new services for its customers. That’s changed with a switch to Cablevision.

Cable operators don’t show up yet in J.D. Power and Associates ratings of customer satisfaction for business local and long-distance service.

In data services, Verizon topped the 2007 list for large enterprises, as well as small and mid-sized businesses. Cox and Time Warner Cable topped the ratings among small and mid-sized businesses in 2006, but were No. 2 and No. 3 this year. Moreover, “they’ve got a few hundred small business customers,’’ Verizon’s Phillips said. “We have several million.”

And that points to a weakness of the upstart cable competition: Comcast and other cable operators are still confined to their local areas of service.

Cablevision or Time Warner Cable, the other main operator in the New York region, can effectively manage the shipment of CAT scans, TEP scans and CT scans for a 760-bed medical center such a Staten Island University Hospital. But they can’t begin to serve a national operation like the Hospital Corporation of America or Bank of America.

AT&T, on the other hand, has large account teams focused on clearly identified nationwide industries, such as health care, education, government, manufacturing or whatnot.

Its strategy is to deliver a largely prepackaged answer to a medical institution’s needs — to store and transport electronic medical records or digital pictures, for instance. It’ll come up with a branded product, such as Carestream, for the purpose, and direct attention to the “value” it can add in managing such a service, rather than the pure cost.

The tack is to evaluate where it and competitors fare best and worst in delivering a particular service. How each “ranked and stanked,” said AT&T vice president of business marketing John Regan.

Helping a business assess strengths and weaknesses and how communications can change results is how AT&T steers the competition away from a profit-draining focus on price. This “value proposition is our play,” said Reagan. “That is our strength.’’

Cable operators have only skimmed off a very small portion of the business market for telecommunications. Insight Research of Boonton, N.J. estimates emerging competitors such as cable operators have managed to take away about $1.0 billion a year of business line revenue from telephone companies, recently. All told, the losses could be $6.25 billion between 2007 and 2012.

That’s out of some $250 billion-plus spent annually in the United States for business telecommunications services, according to Yankee Group and other estimators.

And the size of the annual market for Internet Protocol-based business in North America for the kinds of businesses that cable operators are targeting is only going to hit $11.6 billion by 2012, according to ABI Research of New York.

Cable operators are only starting to become a factor in many parts of the country. Comcast, the nation’s largest cable provider, is just beginning to market communications services to businesses and had no significant commercial customers that it could identify by press time.

“There’s a lot of pent-up demand for an alternative,” said Al McConnell, vice president of sales for Cox Business Services in Las Vegas.


Cable operators have at least one inherent advantage when they try to reach the so-called small-business market, or companies with revenues under $100 million a year. It’s called television.

Soleil Securities Group, based in New York, got started in the last five years in the wake of a probe by then-New York State Attorney General Eliot Spitzer that forced investment companies to split their stock-research operations from their stock-selling businesses. And give customers some independently developed research along the way.

It set up a network of 30 freelance securities analysts across the country. It then picked Time Warner Cable as communications supplier, because it could provide highly reliable connections to that network, even to the “analyst in his underwear in Idaho,” according to chief operating officer Ken Dengler.

Cost wasn’t the driving consideration. Functionality was. E-mail had to be automatically reviewed for possible securities-law violations.

Then there’s the video aspect. On its main floor of operations in New York, where research is coalesced and market dynamics are monitored by the minute, Soleil has installed 15 television sets, fed by news services provided by Time Warner Cable.

Soleil wanted CNBC and CNN, Dengler said. “And, of course, Cartoon Network.”