Completing its first round of financing for its @Home Solutions joint venture, the Net-over-cable company collected $20 million from technology and equipment partners 3Com, Cisco Systems, Motorola, and Falcon.
@Home first unveiled its plan to create the new venture in December. The firm already has partnership agreements with 18 of the largest cable operators in North America, but anticipates a large opportunity within smaller markets, as it says some 15 million homes and businesses are served by small and medium-sized cable operators.
Falcon claims some 1 million subscribers, and its cable systems reach about 1.2 million homes in California, Oregon, and throughout the Midwest states.
Falcon said it welcomes the chance to jump into the high-speed Net fray. "We wanted to pursue the opportunity and as the founding partner we feel that we'll have a major role in the development of the company," said Falcon chief operating officer Frank Intiso.
The service, which will be called Falcon@Home, will be available commercially late this summer and will retail for about $40 per month.
Intiso estimates that less than 25 percent of Falcon's cable wires are upgraded to two-way cable, a prerequisite for sending and receiving data. Falcon will spend $100 million this year to upgrade its networks and will continue to invest in upgrades down the line, he said.
In the meantime, executives said they will consider offering a so-called telco return service in some areas until Falcon's and other cable partners' networks are upgraded. "Telco return" means users can download Internet and data via cable lines, and upload files and email via a dial-up modem and telephone line.
Under the deal, Falcon will have at least one executive on the @Home Solutions board of directors.
Covering smaller markets
@Home Solutions was created to bring the advantages of a larger cable operator--such as consolidated billing, marketing, and advertising services--to smaller cable companies. In turn, @Home Solutions will take a larger revenue cut than it does with its original service.
"The vast majority of our [cable partners] will use us for billing," said Mark Mangiola, vice president and general manager for @Home Solutions. "They see the economies of scale, our first-class back office, billing, and customer care services, and they want to sign up."
Executives say many smaller cable companies would be unable to deliver high-speed Internet access on their own.
"It's inevitable that [broadband services] would come to these markets. But this is a much safer approach for the small operator who wants to offer Internet, and that much faster than they could have done it on their own," said Mike Dolbec, 3Com's vice president of business development.
@Home Solutions executives said they expect to announce additional partners to the venture before the end of the second quarter. Just last month, the company named executives to the @Home Solutions executive management team.
HSA filed for a $120 million IPO last month.