Case Study
Time Warner Cable Commercial Services
Road Runner Business Class and Korcett Holdings
Austin TX, 1/15/04 - Present
Background
The Multi-Dwelling Unit (MDU) market represents over one-third of the total households worldwide and is an enormous current and future market for broadband services. The good news is the number of MDU in-building subscribers is expected to grow ten-fold by the end of 2008. The bad news is that the competitive nature of the broadband market place has driven service prices to the point where it is difficult for service providers to make an adequate margin.
To address this market and create long term relationships, Time Warner Cable Commercial Services has introduced a new MDU service offering called HiSpeedUp. With a base service of guaranteed bandwidth over fiber optic networks, HiSpeedUp provides scalable bandwidth for tenants of bulk Internet MDU customers. Tenants can choose to upgrade broadband services on an "as needed" basis starting at a base rate of 768K by 256K and up to 5 Mbps synchronous through an Internet credit card transaction.
When combined with revenue sharing options, this program has already established long term business relationships with MDU developers that have holdings in a wide cross section of TWC regional markets. Based on the success of these accounts in Austin, we can now begin to "seed" solution driven business in other TWC regions.
Strategies & Tactics
In developing this program, we created a simple, repeatable business model that would self replicate in other TWC regional markets. By driving LAN standardization with larger MDU developers, we also drive infrastructure standardization across TWC regional markets. This will allow TWC to leverage greater economy of scale when dealing with network equipment manufactures and help drive down regional operating expenses.
For the MDU developers HiSpeedUp becomes an additional source of revenue (optional) and creates a very attractive amenity for tenants. In its entirety, the service will help increase and maintain MDU occupancy. The addition of these value added services will strengthen the relationship between MDU developers and TWC.
Finally, as HiSpeedUp services propagate through TWC regional markets, it potentially becomes a very lucrative installed foundation for content delivery as the infrastructure shifts from DOCSIS to IP and thereby improves value for TWC stock holders.
Results
We currently have 12 pleased MDUs on HiSpeedUp services in Austin. To date, we have not had a single MDU that has not expressed a high level of interest.
From an operational perspective, conversion from DOCSIS to HiSpeedUp services has resulted in more than an 80% reduction in trouble calls and truck rolls, reducing on-going operational expenses by roughly $2,000 per month per apartment complex (depending on the size of the complex) for Time Warner Cable Commercial Services in Austin, TX.
An important element of the additional bandwidth revenue, is that it comes from oversubscription sales within the MDU LAN (ie, no addition cost of goods for TWC).