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Cablevision High on WiFi

Cablevision Systems Corp. (NYSE: CVC) has some big wireless plans in place, but none of them have to do with Wednesday's big WiMax deal involving Comcast Corp. (Nasdaq: CMCSA, CMCSK), Time Warner Cable Inc. (NYSE: TWC), Bright House Networks , and the other folks linked financially to the "new" Clearwire LLC (Nasdaq: CLWR). (See Cable Plays Clearwire Card and Sprint, Clearwire Create $14.5B WiMax Giant.)

Speaking this morning during a conference call to discuss the company's solid first quarter, Cablevision COO Tom Rutledge said the operator is embarking on a deployment that will throw a WiFi-powered canopy over Cablevision's entire footprint in New York and Connecticut.

The WiFi mesh network is two years from completion, but Cablevision plans to give its base of cable modem customers free access to it to, and offer it to non-subs for a yet-to-be-determined fee. As designed, consumers will be able to hook in using any WiFi-capable device.

The wireless net will initially focus on Internet connectivity, offering speeds up to 1.5 Mbit/s, but will "eventually be a mobile voice-capable network," Rutledge said.

Rutledge estimated the WiFi buildout would cost about $70 per home passed. "Most of the spending for wireless mesh is in front of us, not behind us," he added. "Creating this value proposition for customers will enhance our service and cement our relationship with customers for the long-haul."

With a high-speed Internet penetration rate of 50 percent, Cablevision now has the "critical mass" to move ahead with such a wireless offering, Rutledge explained. Likewise, Cablevision has found that about half of its customers have WiFi routers in their homes. The MSO added 61,000 high-speed data subs in the first quarter, extending its total to 2.34 million.

Cablevision did not go into details about vendor selection for the WiFi project, but potential partners include BelAir Networks Inc. , Motorola Inc. (NYSE: MOT), and Cisco Systems Inc. (Nasdaq: CSCO).

BelAir created a cable technology advisory committee in early 2006 to help the vendor develop wireless gear designed to lash onto hybrid fiber/coax networks. "We work very closely with cable operators, [but] we have no public announcements with Cablevision," a BelAir official said.

Cisco, meanwhile, gathered some early traction for its Cable ServiceMesh platform last year with BendBroadband . (See Cisco Meshes With Cable.)

Fighting FiOS
Wireless strategies aside, Cablevision continued to supply the rest of the cable industry with a blueprint for success against heavy competition from Verizon Communications Inc. (NYSE: VZ)'s FiOS platform.

The MSO made gains across the board, but, most surprisingly, Cablevision managed to add about 2,000 basic subs in the period, versus a loss of 14,000 subs last year. (See Cablevision Reports Q1.)

Cablevision also added 41,000 digital video subs, up 6.3 percent versus year-ago figures, and 93,000 voice customers, up 27.8 percent.

First-quarter cable division revenues hit $1.214 billion, up 10.5 percent.

"Their remarkable string of positive surprises on the cable side simply can't be sustained, we'd argue, in the face of the Verizon onslaught. And yet each time, we've been positively surprised," Sanford C. Bernstein & Co. Inc. analyst Craig Moffett said in a note issued Thursday.

He estimates that Verizon offers FiOS in nearly 30 percent of Cablevision's footprint. Cablevision, meanwhile, believes Verizon has launched FiOS to 1.3 million homes in the cable operator's service area, with 1.1 million of those homes capable of getting the telco's video product.

Moffett maintained his "Outperform" rating on Cablevision and a stock price target of $45. Cablevision shares were down 20 cents (0.84%) to $23.55 each in early trading Thursday.

— Jeff Baumgartner, Site Editor, Cable Digital News

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