Kansas City Offers a Glimpse Into the Crowded Future

KC Competition The cable industry has seen the future of the telecommunications landscape, and it is ... Kansas City.

This all-American city and the surrounding metropolitan area is famous for steaks and as the birthplace of jazz musician and composer Charlie Parker. It now is home to four substantial wireline providers: Time Warner Cable, AT&T, Consolidated Communications and Google Fiber.

In addition, Comcast serves some of the suburbs. There are wireless providers - including Sprint, whose headquarters is in nearby Overland Park, KS, and has a huge presence in the city. Comcast, of course, is in the process of acquiring Time Warner Cable, and may become a much bigger presence in Kansas City.

The general overview is that the players are lining up to expand services in the Kansas City metro, but that the lion’s share of the buildout will occur during the next few years. There is a lot of competitive jockeying and, therefore, not a lot of hard and fast information available. More uncertainty is added by the likely move of Time Warner Cable to Comcast.

One thing is clear, however. A lot will be learned about new reality from the way things play out in Kansas City.

A rundown on where each of the players is:

Consolidated Communications' antecedent, overbuilder Everest, launched in 2002. That company was acquired by SureWest, which in turn, was acquired by Consolidated two years ago. Consolidated said last month that it is launching 1 Gigabit per second (Gbps) symmetrical Internet service based on fiber-to-the-home (FTTH) architecture.

The provider is far more concentrated on the Kansas side of the Missouri River. There, says Consolidated Communications Senior Director of Products Rob Koester, it runs roughly even with AT&T and Time Warner Cable. Google, at this point, is “a rounding error” in the total. The bottom line is that Consioldated knows it has a battle on its hands. “We operate in 11 states, and Kansas City is by far the most competitive,” Koester said. “A lot of it is because there are overbuilders and there is not the duopoly you see in other areas.”

Time Warner Cable is making Kansas City one of its “TWC Maxx” markets. This means that it will provide top Web speeds of 300 Mbps downstream and 20 Mbps upstream. Network preparations are ongoing now, but rollout will not begin until the second quarter of next year. The lion’s share of the system is expected to be upgraded by the end of next year.

Perry Watson, TWC's area Vice President for Kansas City and Southeast Nebraska, was that the MSO's KC operation - which started as a TCI system and may soon be replacing TWC with Comcast logos - maintains the speed differential is only one part of the bigger picture. There is no public timetable on DOCSIS 3.1 deployment. Right now, the system only is aiming at significantly slower and asymmetrical services.

Watson said the speed is only one of a number of variables that people consider when deciding upon their provider. He maintains that TWC has deeper relationships, more “boots on the ground” and a stronger retail presence than its competitors. “Speed is one component of multiple things that the customers are looking for,” he said.

AT&T said Kansas City would be a “candidate city” for its U-verse-based GigaPower service. A recent press release said the network is capable of reaching Gigabit speeds, but didn’t say that speed would be reached in Kansas City. A spokesman for the company said U-verse subscribers currently have access to 45 Mbps.

The company provided no timetable for moving to 1 Gbps in Kansas City. Last month, the Kansas City Business Journal reported that Google Fiber had abandoned plans to build in the Kansas City suburb of Leawood and that AT&T had agreed to provide GigaPower services to the community.

The wild card - and basic stimulant - in the market is Google Fiber. The irony is that to date it is more of a paper tiger than real competitor. The operator, since it doesn’t have existing infrastructure and can cherry pick municipalities, is harder to pin down. It has announced plans to build in a number of communities in and around Kansas City but so far has a minority of subscribers in the neighborhoods it serves, which it refers to as “fiberhoods.”

Dale Fox, a telecommunications consultant and director of Digital Drive, a group that was formed when Google announced it was coming to the city, said there will be “no weak sister” among the four in terms of likely products and capabilities.

The macro environment may be changing, however. In cable’s bygone era, two providers - let alone four - would have a hard time making a go of it in a city even of great demand. Fox, however, suggested that the changes of the last couple of decades makes the zero-sum scorched earth economics of overbuilding far more viable - perhaps viable enough to support four wireline players, smaller wireline and wireless entities.

There may be enough demand to go around. “In the old days, it was video only,” he said. “Overbuilders with less than 50% marketshare would not stay in business. The addition of products such as VoIP initially and the addition of new revenue streams on the Internet side - including advertising, search and OTT - I think are opening up opportunities for additional providers to exist below the 50% market share level.”

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