When in doubt, do it yourself. At least, that's what Eagle Broadband advocates. The company is working with towns nationwide to help them lay fiber, building de facto cable systems without support from a local cable operator—if one even exists. In turn, it allows the community to offer cable offerings with up to 200 channels, broadband access, telephone service, and even burglar alarms and surveillance cameras. Randy Shapiro, vice president of Eagle Broadband, discussed his company's plan and opportunity with B&C.
I know cable operators look at the triple play (video, voice, data) as a great way to drive revenue. But you've been working with some communities in Texas and Las Vegas to help them set up their own offerings. Are there a lot of communities that will create their own systems?
What is happening is the incumbent cable and phone companies have focused their efforts on large, major metropolitan areas, densely populated cities. There are literally millions of subscribers in other cities where the incumbents can't economically justify putting in the triple-play infrastructure. So the communities have been begging and pleading with the incumbents to put in those services, but they haven't been successful. Now they're taking control of their own destiny and putting in their own fiber networks.
What does that require?
First, it requires a financially viable business model, which is something we've been trying to help out with. That way, communities don't need to raise financing through municipal-bond initiatives. We're doing private financing to get those projects done and working on a revenue-share basis, whereby they get a piece of the subscriber revenues. Then they can support the debt service and reinvest any surplus back into the community.
Who actually builds the network?
We work with the community on the design piece. Then they hire a builder to build the network. We have a group that does structured wiring, but we really aren't a construction company.
Even with private financing, it is a bit of a public-works effort. How long does it take for the community to see a return on investment?
It depends. The town of Truckee, Calif., for example, is looking into putting in a system that will serve 12,000 homes and businesses. A survey showed that 60%-70% would subscribe to some of the services. At a conservative take rate of 30%, the network will be paid for in 10-12 years. In the interim, they'll have a combination of funding and subscriber revenues that will allow them to be self-supporting.
Do you see your company as a competitor to cable?
The market opportunity exists because smaller and even larger cable operators have decided not to make investments in these communities. What we're trying to do is offer a true fiber network and partner with the communities.