Layer3 TV to Launch in Chicago Soon, Backed by Altice and John Paulson (EXCLUSIVE)

Secretive cable TV upstart Layer3 TV is getting ready to launch in Chicago in the coming weeks, Variety has learned. Some of the money used to finance the launch comes from two previously unannounced investors: French telco Altice, through newly acquired U.S. subsidiary Suddenlink, and Paulson Co., the investment company of famed hedge fund investor John Paulson.

A Layer3 spokesperson declined to comment on unannounced investors, but confirmed plans to launch in Chicago soon. “After an oversubscribed trial run in Texas, we look forward to making the Second City first in cable,” he said.

Layer3 TV wants to compete with traditional cable companies by offering consumers a modern, 4K-ready set-top box, a DVR that records up to eight shows at the same time and no long-term contract obligations. The company launched a beta test under the Umio brand in late 2015 in Texas, and is now getting ready to enter a second market with its debut in Chicago.

Layer3 TV has started to hire sales representatives and other necessary staffers to prepare for its roll-out in the city, and targeted local consumers with banner ads like the one displayed above. Sources familiar with the company’s plans told Variety that a launch in the city is slated for the coming weeks.

Unlike in Texas, Layer3 TV is going to actually be using its company name as branding for the service in Chicago. The difference in branding is more than just a marketing exercise: For its launch in Texas, Layer3 TV actually teamed up with local incumbent Suddenlink. The cabler even founded a new subsidiary, dubbed SL3TV LLC, to run Umio.

Suddenlink’s partnership with Layer3 had long been a subject of speculation, but Variety has now learned that the two companies actually have been quite cozy with each other for some time. As part of the deal, Suddenlink even invested in Layer3TV, sources confirmed.

The TV upstart has raised a total of $100 million in equity and debt financing to date. The company previously disclosed North Bridge and Evolution Media Partners as investors. Variety has now learned that in addition to Suddenlink, the company has also gotten money from John Paulson’s Paulson Co., which has in the past held large stakes in media and telco companies like Time Warner Cable, Cablevision and T-Mobile.

Both the investments as well as the launch in Chicago have some interesting implications for the company. Chicago is a unique market for Layer3 because it’s the first city where the company will actually have to take on a powerful incumbent: Many of the city’s TV households are being served by Comcast, which has been in the process of migrating its customer base to newer DVRs as well.

However, Chicago also has more competition that other U.S. cities, with local cabler RCN and AT&T also serving customers. More competition means more switchers, so it may be easier for Layer3 to convince customers to say goodbye to their existing cable company.

Suddenlink’s tie-up with Layer3 on the other hand got even more interesting in recent weeks. Last year, Suddenlink got acquired by European telco giant Altice, which quickly followed by snapping up Cablevision as well, and combining both companies under the Altice USA umbrella. At least in theory, this could open up an opportunity for Layer3 to one day also target customers in Charter’s footprint.

Layer3 executives have said in the past that they wanted to be in multiple markets this year. The company itself is located in Denver, which could be a natural next step. However, Layer3 TV is also hiring installation technicians in Virginia, hinting at plans to launch in the state as well.

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