Want to see the future of telecommunications? Rent an apartment.
That's where the much ballyhooed convergence of television, telephones, and the Internet is taking place first. And it's not being done by industry giants. A handful of small, virtually unknown companies is taking advantage of several technologies to steal a march on their bigger competitors. Forget AT&T and TCI. Meet US Online and Peter Kiewit Sons' Inc.
It's not hard to hook up apartment complexes and condominiums to the future. By sticking a telephone switch, cable-television link, and a few computers in the basement, these companies are ready to roll. They already know who all their potential customers are, so marketing is easy. By hooking up several large complexes in the same city, they can spread their costs over thousands of tenants.
In Boston, a Peter Kiewit Sons' subsidiary, RCN Corp., is marketing packages of telecommunications services to apartment dwellers and condominium owners. RCN acts as a kind of middleman. It buys local and long-distance telephone service from MFS Communications. It also buys cable-TV service wholesale. Then it resells the package to tenants.
Tenants have a choice of sticking with their current telephone and cable companies or switching to RCN. The advantage of the latter is that all services come from a single company, often at a slightly lower price, and with more extras. RCN, for example, gives away some telephone services that the local company charges for, such as call-forwarding, call-waiting, and speed-calling. It also offers Internet access.
The company saves money because the same fiber-optic cable and computers that carry and route all the telephone signals also transmit the cable-TV video and sound. That's what convergence is all about. All the telecommunications signals are being translated into the computer language of 1s and 0s, so a single wire, antenna, or satellite dish can carry them all.
Of course, big telecommunications companies are scrambling to do the same thing. Spurred by new legislation, America's cable and telephone companies want to play in each other's sandboxes. But doing this requires massive upgrades of their networks.
By buying these services wholesale and then bundling them together, the smaller companies are proving to be more nimble. US Online, for example, is only a year old but is already selling telecommunications packages to apartment dwellers in Dallas, San Antonio, and Austin, Texas, as well as Chicago, and expanding to Denver and Atlanta. So far, some 10,000 apartments are wired up or are being built to be hooked up to its services. Within a year, the company expects to have 40,000 units signed up.
Although the offerings are priced slightly lower than what the tenants would otherwise pay, the company's real focus is on service. "This is about making the customer happy," says John Orehek, a Seattle-based entrepreneur and part-owner of US Online. Other resellers who have tried the same thing - not to mention the cable and local-phone companies that until recently monopolized the business - have often turned off customers because of their lack of service.
The same resellers could also serve nursing homes and college campuses, says Bill Davidson, a partner with Deloitte & Touche Consulting Group in Atlanta. "When you add all those things up, it's a market of significant size." By the year 2000, resellers and those operating their own locally based networks will grab 15 percent of local-telephone service and nearly 25 percent of the long-distance phone business, he forecasts.
But consumers won't see that. They'll see what apartment dwellers are beginning to experience: a single company filling all their telecommunications needs.
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