Wilson's Greenlight Ahead of Schedule, Deals with TWC Predatory Pricing

Wilson's Greenlight community fiber network is ahead of schedule. They continue to operate ahead of the business plan, despite a few difficulties that offer lessons to up and coming community networks.

We recently covered the fallout from their application to the broadband stimulus program where they had to disclose network information to their competitors.

Fortunately, that was not the only news last month from North Carolina's first all-fiber citywide network. They also surpassed 5000 subscribers and remain 6-9 months ahead of their business plan in take rate, according to the Wilson Times.

The number of customers is expected to reach 5,300 by the end of the fiscal year if the current trend continues, according to Dathan Shows, assistant city manager for Broadband and Technical Services. The city's current business plan calls for Greenlight to reach 5,000 customers by the end of the third full year of operation, which will be June 2011.

This is not the first time the network has exceeded projections; the network was built faster than expected and quickly jumped out ahead of take rate expectations.

One of the reasons Greenlight may be growing is its attention to local needs, as illustrated by the network finding a way to televise local football matches that otherwise would not have been available.

However, the Wilson Times story goes into much greater detail regarding the competition from Time Warner Cable. As we regularly see, Time Warner Cable is engaging in what appears to be predatory pricing to retain customers and starve Greenlight of new subscribers.

A lesson to other community networks, Wilson is documenting the deals TWC uses to keep subscribers. All communities should keep these records.

"Time Warner Cable's market tactics include anti-competitive pricing that interferes with Wilson's ability to secure customers through normal marketing," the application [for broadband stimulus] states. "TWC offers below-market rates to customers seeking to switch to Greenlight, locking them into multi-year deals in exchange for name-your-price rates that are not advertised and made on an ad hoc basis when customers call to switch to Greenlight."

Running the numbers of these discounts leads to a total community savings of over $1million a year that subscribers to Time Warner Cable are saving over what they would be paying in absence of a community network.

The article goes on to quote Catharine Rice, someone who has a very strong grasp on the reality of broadband in communities across the country.

Rice describes what Time Warner Cable is doing as "cross-subsidizing" and charging higher rates elsewhere so it can offer lower rates in Wilson. Rice said Time Warner Cable is keeping pricing below cost in Wilson to try to drive Greenlight out of business.

"Somebody has to start looking at what Time Warner is doing in Wilson," Rice said. "When I step back and look at this whole thing, it's clear as a bell what's going on. Time Warner doesn't want to upgrade its cable plant."

Let's take a look at the broadband Time Warner Cable offers and compare it to Greenlight. All speeds in Mbps. Time Warner Cable does not make it easy to understand what the upstream speeds are, so I tried to piece it together from a variety of sources.

TWC has much slower options, from a .768/.384 package up to a "turbo" 15/1 (for $56.90). Wilson offers only one internet-only package - a 20/20 connection for $59.95. If bundling, Wilson has 5 packages from 10/10 at $34.95/month to 100/100 for $300/month.

It should be noted that the 15Mbps down TWC offer is faster that what TWC offers in nearby communities, suggesting they either upgraded their Wilson plant slightly or they are just being more bold in exaggerating their services. Either way, I'm willing to bet that the actual TWC "up to" 15 Mbps is slower than the 10Mbps service from Greenlight.

It is hard to compare TWC to Greenlight, much like comparing a Vespa to a Ducati. Nonetheless, TWC's size and market power allow it to try to run competition out of the market.

Finishing up, another lesson to communities who are planning to build their own next-generation network: be aware that you will have to deal with people who do not pay their bills. Wilson has had to deal with what seems to be an abnormally high number of these:

To date, Greenlight has disconnected just over 1,000 customers due to nonpayment. Shows said these are customers who received Greenlight service but never paid a bill. As a result, the city has had to "tighten standards," Shows said, on deposits. How much a customer pays for a deposit is based on their credit rating and on the services to which they subscribe. The city's finance department handles collections for Greenlight.

Comments

GreenLight

Wilson will need to contend with TWC's march forward on DOCSIS 3 upgrades across the state. They just managed to upstage Fibrant, offering free speed upgrades to the entire region around Charlotte effective Monday. Their new super-speed Wideband services also arrive there this week. Time Warner's increasingly standardized speeds are as follows:

Barely Competitive Markets

Standard Speed: 7/384kbps Midwest, Mid-Atlantic region, little competition from telco
Turbo Speed: 10/1 or 10/512kbps

Moderately Competitive Markets

Standard Speed: 10/1 (New York, New England)
Turbo Speed: 15/1

Telco TV/Verizon FiOS markets

Standard Speed: 10/1
Turbo Speed: 15/1, 15/2
+ hurried DOCSIS 3 upgrades

You will increasingly find the standard speeds gravitating towards 10/1 for standard, 15/1 or 15/2 for "turbo." Road Runner Extreme is the future sweet spot for Time Warner Cable speed cravers, delivering 30/5 service for $20 over standard pricing (just $10 above current Turbo prices).

Their 50/5 service is priced for boasting primarily. They have very few takers for the overpriced $99 service.

Fiber networks -must- be willing to show off their capacity to kick the competition in the pants when it comes to broadband speeds, especially for small businesses. Fibrant, for example, needs to do much better than just 25Mbps, as TWC's move illustrates.

Municipal networks should not, however, engage in fierce price wars for the precise reason Wilson encountered -- cross-subsidization. It is the way the cable industry has always dealt with overbuilders... for decades. The one with the deepest pockets wins, usually buying out the competitor.

We'd love to hear about some specific deals from Time Warner customers successfully naming their own price to stay with the cable company. Documenting those numbers will be especially important.

As far as the delinquent accounts go, it's probably a safe bet these were customers delinquent with TWC as well and figured this was their way back in. Cable companies now routinely pull credit reports on customers and require deposits for those with strained credit, so it's no surprise GreenLight is in the same position.

Phillip Dampier
Stop the Cap!

Thanks Phillip

Thanks for the info, I saw your post on this subject. I would take issue with your claim that TWC "upstaged" Fibrant. Fibrant continues to offer the superior service - the question is whether they can market it successfully as such. Regarding your criticism that they should offer faster speeds, I agree with a caveat: I would bet that any resident wanting a 100/100 connection with Fibrant could pick up the phone and work it out. But when it comes to managing perceptions, I agree that there is a benefit in offering higher speed tiers because bragging rights are not trivial.

Upstaged

Service quality is a slippery thing to market for a brand new service. I'd agree Fibrant is going to be more responsive in the marketplace because they live and work there, but I can't see getting someone to switch providers (assuming TWC works for them) just because future service calls might be better. EPB's model is better -- the wow factor can mean a lot, especially for the early adopters who are going to become your evangelists later on with friends and family.

I've also found people don't often understand the benefits of synchronous broadband -- they look at raw numbers. If TWC markets 30/5 service for the same price Fibrant sells 25/25 service, more than a few are going to see TWC's deal as superior.

You should take a look at the absolutely surreal world of comments being left on the Salisbury Post website about Fibrant. Bizarroworld. A Time Warner employee is there along with some folks that are convinced WiMax is faster than fiber(!) There is also a ton of criticism about speeds, because customers are getting half-the-story speed test results thrown off by gimmicks like PowerBoost. They're convinced Time Warner is faster because the speed test says so.

This is exactly my broader point. You and I understand the technical implications of a fiber to the home network and the speeds it can deliver. You and I know if someone wanted faster speeds they could probably call Fibrant. But more than a few citizens of Salisbury, some of whom are now claiming to organize a new campaign to shut the whole project down, do not. They see slower service, high prices, and incomplete rollouts. And Time Warner's convenient speed increase this week and at least one employee in the newspaper's online comment system makes for more mischief. Fibrant must control their own message and not allow someone else to define them first. Offense... not defense.

The simple way out of this is to hand out some speed upgrades just above the downstream levels TWC is selling and use the upstream speed bonus as one of the extra benefits, not a main selling point. So 15/15 should be 20/20 and 25/25 should be at least 30/30 if not 35/35.

(The other thing they need is a simplified price schedule because it is confusing and the add-on charges on the right panel belong on a back page. And more than a few are hung up on the early termination installation charge. That kind of stuff, as much as I hate to admit it, belongs in fine print, not at the top of the third panel where people can fixate on it.)

You'll understand my point of view better once you wade into the Twilight Zone at the bottom of this example article (in the comments): http://www.salisburypost.com/News/110210-City-launches-Fibrant-beta-test...

(This isn't unique to Fibrant, BTW. It was the same nonsense in Alabama and Utah, too.)