IPTV Startup Has Big Plans for Texas

The Texas video tales are getting taller by the day.

Just when you thought SBC Communications Inc. (NYSE: SBC), Verizon Communications Inc. (NYSE: VZ), and others had big plans to provide digital video services, along comes Optical Entertainment Network with a whopper. (See OEN Launches Big FTTH Project.)

The one year-old, 24-person startup doesn't have a physical network, but does have a mission to reach some 1.6 million Houston households with fiber-fed IPTV -- and the company is aiming to pull off an IPO in Europe during the first half of 2006.

Tom Wendt, president and CEO of OEN, says his company's service is built for high-bandwidth fiber delivery -- a difference that will set it apart from what cable and telecom providers can offer. "They're converting legacy technologies and they have legacy limitations," he says. (See Even Video Is Big in Texas.)

Under the covers and behind the scenes, OEN uses Minerva Networks Inc. middleware, fiber access gear from Alloptic Inc., Highdeal Inc. transaction management software, NetCentrex SA softswitches, Amino Technologies plc set-top boxes, and last-mile cabling kit from Nexans. (See OEN Selects Amino STBs and Alloptic Wins OEN GPON Contract.) The company also says it has lots of its own software to manage an ad-insertion scheme that can be programmed to serve up a different ad to each specific set-top box, based on the viewing habits, time of day, and location of that particular consumer.

OEN is paying to use the network built by a service provider that has its own services portfolio, including digital cable TV and high-speed Internet access. Wendt says the network reaches 200,000 household easements and is within 100 to 500 yards of approximately 1.6 million more households in Houston.

The company's deployment plan is to go one zip code at a time over the next few months, stringing fiber for the last few yards, connecting homes, and turning on services. Most of Phonoscope's fiber network is aerial, so Wendt says there won't be too much yard-digging necessary in order to hook up homes. And, if a customer wants service right now, ahead of OEN's schedule, Wendt says OEN can hook them up for a $1,500 fee that's amortized over 60 months.

Otherwise, for a price point of about $100 a month, OEN says it can offer some 400 video channels, unlimited local and long-distance phone service, and a 100-Mbit/s symmetrical Internet connection. In the second quarter of next year, Wendt says, OEN will have a network-based personal video recorder service up and running, so folks can record and play-back their favorite shows, without having to add any hardware to their homes.

Wendt says OEN has raised $3 million in funding so far from members of the Houston Angel Network, friends, and family. He says the company is "close to closing" another $15 million round soon. As soon as that's done, Wendt aims to make OEN a publicly traded company in Europe early next year, though he won't say which country and won't divulge the investment banks he's hired to pull it off.

What Wendt has said is that incumbent carriers may not necessarily have anything to fear from OEN. He lists his firm's biggest competitors as the cable companies, especially Time Warner Cable in Houston, and says that "over time, we'll end up partnering with the RBOCs because we solve a big problem for them." Not only can OEN offer targeted ads, IPTV that works, and big bandwidth, but the company also claims to have struck "IP carriage" content deals far and wide with all sorts of entertainment networks. "We've been able to get network deals done that no one else can," Wendt says.

— Phil Harvey, News Editor, Light Reading