What Happened to Prime Time, Straight from the Horse’s Mouth

When the Salt Lake Tribune published their story as to what’s going on with Prime Time Communications, they noted that they were unable to reach anyone for comment. Yours truly, however, scored a 40-minute phone interview with Bryon Wentzlaff, one of their VPs. From the sounds of things, it’s just one more example of why telecom is a tough business to break into no matter who you are. Prime Time hit a point where they were not making money and didn’t project doing so for the foreseeable future.

Bryon gave me a breakdown of their expenses. Right off the bat, $125K/mo goes to UTOPIA for transport. That’s about half of their monthly gross right there and reportedly higher than what several other providers are paying. There’s a possibility that part of that is to pay down debt from MSTAR. They also inherited a bum deal for data transport from MSTAR using Center 7. Originally, they were required to pay in the neighborhood of $90K/mo which they negotiated down to $35K/mo. They got quotes from other carriers like Level 3 that put the price at $10K/mo. For those who don’t know, Center 7 and MSTAR were in the same group of companies, and one of the investors inked a 5-year deal just before selling the company as a way to extract more money from the deal on the side. Given that this same group also owns (owned?) SCO, it’s not surprising to hear about that kind of sleaze.

So far, you have around $160K/mo in expenses on $250K/mo in revenues. That, however, doesn’t include basic operating expenses, the cost of video programming, or the cost of phone service. On a $90/mo triple-play, Prime Time had to shell out $30 in programming, $35 in transport, and $7 for phone, leaving a scant $18/mo to cover all operating expenses. They also sunk around $2M into purchasing new set-top boxes and ATAs to replace the ones MSTAR was using. With no more than $54K/mo in revenue after video, data, and phone service expenses and all that money tied up in equipment, it would be a real feat to pull off profitability.

Their projections also ended up being off, but that’s not entirely their fault. UTOPIA has around 8500 homes currently attached to the network that can be subscribed to services; Prime Time had 3,000 of them. They had banked on another 10,000 homes being available per UTOPIA’s projections and had planned accordingly. Without those additional homes, it becomes hard to justify cross-subsidizing from other business units to keep things going, especially when several of those have folded.

So where does this leave current subscribers? Prime Time has said that they’re going to keep providing service to UTOPIA customers until they have some kind of transition plan. It could mean that another provider will step in and buy up the customer base, it could mean that customers will be told to switch to another provider.

One problem we discussed is that lots of new providers are coming on, but not a lot of new potential subscribers. Each provider can only get a smaller and smaller slice of the pie, and those slices aren’t really enough customers to keep a company going on its own. This leaves the providers to try and find new revenue streams with services, just like the big boys. It could be selling backup services, rolling a creative VOD solution, implementing some kind of remote computer, you name it. The margins are so thin on traditional triple-play that you have to do this, make it up on volume, or score some large commercial clients. Even if UTOPIA starts a rapid expansion (and I mean going to 20K+ homes by the end of 2011), I don’t doubt we’ll see some other providers call it quits.

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9 Responses to What Happened to Prime Time, Straight from the Horse’s Mouth

  1. Doofus says:

    Great info, Jesse! Clearly a provider’s success is dependent on volume. But if that’s true it makes me wonder if providers somehow think Utopia “owes” them a client base. Utopia came to my neighborhood three years ago. I signed on with MStar/PTC because they rang my doorbell and offered a good deal. Since then, nobody in our neighboorhood has heard a single word from any provider asking for their business. No marketing = no new customers!

    BTW, for 3 years I’ve had a screaming fast and dependable connection. I haven’t had any reason to contact PTC for support. I’ll miss ’em when they’re gone.

  2. Jesse says:

    The hardest part of marketing is that the customer base is spread over a huge geographic area and isn’t particularly concentrated. Going from Payson to Brigham chasing some of 8500 total homes isn’t very efficient and MSTAR burned millions doing so without much success. I don’t think providers can really do a lot until there are larger areas to go to.

  3. Papa Ed says:

    I was the first and as far as I know only one in my neighborhood to sign up with Mstar/PTC when they “knocked on my door” (like Doofus) and have enjoyed like Doofus for 3+ years a screaming fast connection. However, unlike Doofus I have suffered several interruptions in service, both data and phone, and every time it was painful dealing with both Mstar and PTC…so in that regard I won’t miss them. Having said that, I am dreading having to change providers, because I just know it won’t be a happy-face experience. Jesse, do you have any thoughts or recommendations on PTC replacement providers? BTW I live in Murray.

  4. Jesse says:

    If you’re looking for first-party triple-play, you can go with Veracity or Connected Lyfe. I think some of the other providers are offering video via Connected Lyfe (which is really the market they want to be in, not a direct service provider), but I’m not sure which off the top of my head. Personally, I’m pretty happy with streaming and downloaded video.

  5. If Veracity is now offering IPTV on the UTOPIA network, it is a new development and I was unaware of it (on UTOPIA, anyway; I’m sure the continue to provide IPTV on the iProvo network)

    Connected Lyfe and XMission both were reselling UTOPIA IPTV, and then Connected Lyfe bought ownership of that head end. It is still maintained by UTOPIA, however, and XMission continues to resell it. The retail rates of that service are negotiated and agreed to, so it is quite literally the same service regardless of the name on the provider. (Caveat: as it is up to the service provider to supply the set top boxes, each handles that a little differently.)

    Prime Time was the only other “first-party” triple play provider.

  6. Jesse says:

    Whoops. Wasn’t thinking clearly. I definitely should get more sleep. Veracity isn’t doing video on UTOPIA yet. I’m sure it will just be a matter of time, though.

  7. Papa Ed says:

    Well I’m only interested in phone and data, so I am leaning towards Veracity and Xmission at this point. Looks like Veracity has a sale going on now for both, but I really like Xmission from long ago when I was a corporate IT manager and they were a great company to do business with. Plus I have a lot of respect for Pete.

  8. Doofus says:

    It finally happened…
    I got a letter in today’s snail mail telling me that on 9/1/11 “MSTAR” (no mention of PTC) will no longer be my provider and I’ll automagically be switched over to Veracity. And oh-by-the-way, we’re jacking up your price by 17%.

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