November 5, 2009

Cablevision Exploits Wi-Fi Advantage

A week ago, Cablevision Systems announced that its Optimum Wi-Fi service was available throughout Madison Square Garden (MSG), having deployed more than 100 access points throughout the facility.

A free-to-subscriber service, Optimum Wi-Fi is not a revenue item on Cablevision earnings reports, such as that presented on Tuesday (for more click here), but BernsteinResearch Senior Analyst Craig Moffett included one telling remark in his report on Cablevision’s strong numbers: “Perhaps it’s time to start giving Cablevision’s free Wi-Fi network some of the credit.”

One of the companies that is supplying Cablevision with the wireless transmission equipment clearly believes that the return-on-investment is a no-brainer.

“The basic business case can be constituted only on subscriber churn,” Stephen Rayment, CTO of BelAir Networks, said. ”Free Wi-Fi is one reason why (Cablevision subs) haven’t switched to Verizon.”

(Ed note: BelAir is supplying about two-thirds of Cablevision’s outdoor strand-mount footprint; Cisco is supplying one-third of the strand-mount and all of Cablevision’s indoor installations.)

Assuming (conservatively) that a Wi-Fi deployment generate a 10 percent reduction in churn, the BelAir model indicates that every dollar invested in Wi-Fi infrastructure yields five dollars in lifetime subscriber revenue.

Exactly how much Cablevision has spent to date is unclear, although LightReading’s Jeff Baumgartner reported that the deployment is “ahead of schedule and 15 percent under budget so far.” (For more click here.)

Meanwhile, subscriber use of the service is ramping up like a New York Rangers hockey stick.

At the Cable Show in April, 2009, Cablevision said that its high-speed data customers had accessed the Internet over Optimum Wi-Fi more than 1 million times. In June that number had doubled. By last week, when Cablevision announced not only the MSG deployment but also additional wireless access in Brooklyn, The Bronx and New Jersey, that number had crossed the 5 million mark.

The rollout indicates excellent timing between a technology and consumer demand. But this success to date has other drivers.

“Cable operators have a tremendous unfair competitive advantage when it comes to Wi-Fi,” Rayment said.

In particular, he said operators sit on the other side of the three biggest hurdles facing any mobile wireless provider: site acquisition, powering, and backhaul. All three are already “on the strand.”

“Mobile carriers would kill for this,” he said.

These synergies between Wi-Fi and MSOs have been explored previously, for instance, in a two-part series on “Wi-Fi: Friend or Foe,” published in Communications Technology in 2007. (For more, click here and here.)

But as MSOs expand into the WiMAX arena, the case for Wi-Fi—certainly in the concentrated Cablevision footprint and targeted public sites—seems none the weaker.

In any case, BelAir is covering its bases, having now begun to deploy a Wi-Fi access point, mobile WiMAX (802.16e) base station and DOCSIS cable modem, in one strand-mounted device, the BelAir 100 (SX).

—Jonathan Tombes