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The July 31, 2002 Issue Provided by System Dynamics Inc.
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Taking Services Into Their Own Hands: One Builder's Approach

Toll Brothers is the eighth largest US home builder by revenue and builds homes in twenty-one states. They generally serve the upscale market, with an average delivered home price of $500,000 in fiscal 2001. Advanced Broadband, a competitive communications provider, is their wholly-owned subsidiary, offering cable TV and high speed Internet access. We visited Toll Brothers Regency at Monroe property in New Jersey to learn more about Advanced Broadband's operations.

In communities where their services are offered, basic cable, community Intranet and high speed Internet are generally part of the Home Owners Agreement and thus bundled as part of the home purchase; because their facilities are all on private property, they do not need to open their infrastructure to other providers. Basic cable TV is available to all homeowners and includes local broadcast TV stations, at least 38 basic cable TV stations, and up to three private community TV channels. Premium packages are available for an additional charge, competitively priced. Basic high-speed Internet service is also provided to all residents under the HOA and includes provision of a DOCSIS cable modem and 3 e-mail addresses; higher-tiered premium services carry an extra charge.

Mike Zammit of Advanced Broadband --> Click for larger pictureWe met with Mike Zammit, who came from Telcordia and is now responsible for the design and operation of Advanced Broadband, to get an inside look at the infrastructure behind these services. One of the challenges for Advanced Broadband is getting a service functioning when the first residents move into a new community. Roads and houses are still under construction and workers can inadvertently cause outages. The facilities for all the equipment are a construction-site trailer, which belies the sophisitication of the equipment housed inside and the back-up powering necessary to insure continuing service. Headend in trailer --> Click for larger picture

Advanced Broadband offers video and data services, but leaves telephone service to the incumbent carrier. Mike said that they are not staffed to provide appropriate response for lifeline telephone service and do not want the risks involved.

Their network is HFC based, with fiber terminating at an optical node serving an average of 100-150 homes.They have a joint trenching agreement with the utilities and use conduit for their fiber. They use WSNet to assemble their digital channel line up and also use satellite to obtain local channel feeds. They monitor the plant for outages using SNMP data from the CMTS and cable modems; because they have a modem in every home and can correlate MAC addresses with their plant topolgy, they have excellent visibility into any plant problems. Mike said that their cost per subscriber including the head-end is less than $1000.

Toll Bros. wall map --> Click for larger picture Advanced Broadband currently serves about 1200 homes in 6 communities. They expect this to rise rapidly to 8000 as homes are completed in their currently-served developments, and to 15,000 when they serve the homes currently under contract in new developments.

Although Toll Brothers formed Advanced Broadband to "bring the latest in communication technology to Toll Brothers' communities," their Web site descriptions regarding amenities in their communities did not include a single word about these services. We can only conclude that granite counter kitchen tops still draw the consumer's attention much more than broadband services.

Although we were impressed with the cost effective approach used by Advanced Broadband to provide their services, we were disappointed to note the absense of an appropriate structured-wiring offering in the homes being built in this community. CAT5 is provided only for telephone service, and all the cables are brought to a common termination outside the house; a homeowner who wants to network PCs will have to pull new wiring through the walls, or fall back on other forms of home networking. These are lower-priced retirement "cottages" in a golf community, and Toll Brothers evidently assumed that buyers would not need structured wiring even though cable modem service was included in the home price; Mike assured us that structured wiring is a major offering in other communities, and we are looking forward to visiting one in the future.

We'll check back in about a year to see how they are doing in terms of subscribers served and whether any other home builders have decided to follow their lead in taking services into their own hands.

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