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Cable Technology Feature Article

February 27, 2013

TDS Acquires Cable Company: What Does That Tell You?

By Gary Kim, Contributing Editor

Telephone and Data Systems is acquiring a Southwest-based U.S. cable company capable of selling service to 212,000 homes, with approximately 74,000 video subscribers, 56,000 high-speed broadband subscribers and 15,000 digital voice subscribers.

About 96 percent of Baja Broadband’s network is equipped to deliver high-speed, high-capacity broadband and video services.

The deal has several strategic and tactical angles. Though it might once have been less common, the deal has a legacy telco acquiring a cable TV company, well outfitted to deliver broadband services.

For some, that might be a signal about the value of modern cable assets, compared to copper-based telco networks. "Baja's strong network capabilities will enable us to deliver highly competitive data services, while reducing the need for future capital investment," said David A. Wittwer, TDS Telecom president and CEO.

Read one way, that simply means the network already has been upgraded to support Docsis 3.0 services (access up to 100 Mbps, for example), and does not require immediate and heavy new upgrading. On another level, though, an upgraded cable network is seen as fully equivalent to a telco DSL network with fiber distribution.

That doesn’t necessarily mean the same value might be provided by a telco style to home network, compared to a hybrid fiber cable network with small serving nodes. Still, as a practical matter, some might see a cable hybrid fiber coax network as a more capable platform than a fiber to neighborhood approach with twisted pair drops.

In other ways, the deal shows the obvious revenue growth path in a business (fixed network communications and entertainment) that arguably is growing painfully slowly, and is quite mature. Whatever else might be done to create new replacement revenue streams, in the near term, will simply be faster to acquire new customers in the same or complementary lines of  business, out of region.

That, in turn, is just one more example of service provider consolidation, a process that will continue in virtually all segments of the business, and probably at a faster pace over the next several years.

Also, one part of the deal is that TDS gains greater exposure to business customer segments – something many out of region growth efforts also seek.

Baja Broadband is a full-service communications company, providing video, high-speed broadband and voice services to residential and commercial customers in Colorado, New Mexico, Texas and Utah.

Edited by Braden Becker

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