Til the Cows Come Home
The most aggressive competitors large incumbent telephone companies face today are often small incumbent telephone companies, disguised as competitive local exchange carriers.
Across the U.S., in the rural regions of California, Illinois, Maine, Michigan, Mississippi, Kansas, Kentucky, Washington and West Virginia, small, independent phone companies are moving in on their bigger Bell company brethren. They are banking on at least three market realities: first, that the Bells are too busy to bother with technology deployment in rural areas; second, that these rural areas are hungry for broadband access; and third, that even conservative businessmen will trust a telephone company with local roots.
So it is in Lewiston and Portland, Maine, and surrounding communities that Pine Tree Networks formerly Pine Tree Telephone and Telegraph offers voice and data service bundles over either T1 (1.5 megabits per second) or DSL to businesses that cant get similar service from Verizon Communications. Using technology from CopperCom to provide voice service over a data network, Pine Tree is able to extend the reach of its local telephone franchise, which serves the largely residential communities in its region.
"Our franchise area is largely residential, but as a [competitive carrier], were serving businesses," says Trevor Jones, Pine Trees director of marketing. One of the companys main selling points, however, is its decades of local phone service experience. Businesses hear about competitive carriers going bankrupt and they are less likely to want to give them their phone business, he says.
"Because of our history and our existing revenue base, we have the picture of more stability than the average [competitive carrier]," he adds. Pine Tree plans to parlay that reputation into an expanded competitive footprint reaching throughout Northern New England.
Pine Trees backing comes from a new parent company, Country Road Communications, a New Jersey operation that is buying rural telephone companies with the intention of first bringing broadband services to the franchise turf, and then expanding as a competitor in nearby areas.
Old News, New Service
The concept is already old news to rural telephone Service Co. of Lenora, Kansas. It began offering DSL service in 1998, ahead of Southwestern Bell, and found itself in the enviable position of being invited into the northwest Kansas communities of Alamena, Hayes and Norton as a competitive carrier willing to offer high-speed data access. In Alamena and Norton, Rural is the only competitor to SBC Communications, and it has captured more than 80 percent of both markets, says Shane Broyles, research and development coordinator.
"Because of its size [fewer than 400 people], Alamena would never get DSL through the Bell company," Broyles says. "Its just too small an area to make the investment worthwhile."
For an independent that is already operating in the area, however, extending the reach of a data network can be practical and even lucrative.
"We have people that live in the area, so if there are issues, they solve the problems," says Jim Mitchell, president of Armstrong Telephone, which operates six telephone companies in Maryland, New York, Pennsylvania and West Virginia. The local touch is appealing when rolling out new services, he adds. "People dont like the fact that if you call customer service at Verizon, which serves our area, the phone is answered in Tampa, [Fla.]."
Technology is also evolving to the advantage of companies that can respond quickly to customer demand. Multiple equipment vendors, including AFC Communications, Alcatel, Catena Networks, Lucent Technologies, Marconi, NextLevel Systems and Occam Networks, have devised ways to upgrade digital loop carrier systems to provide DSL. Because the loop lengths are longer in rural communities, having broadband DLCs is more important.
Companies such as AFC which has a history of serving independent carriers and a customer list of more than 700 as well as newer players such as Catena and Occam, are designing equipment that can be initially deployed at a relatively lower cost and then upgraded with more enhanced electronics as services are sold.
Charles Industries, which has been selling outside plant equipment to independent telephone companies for decades, developed a pair-gain system for its QuadPOTS product that puts three voice lines and a high-speed data link onto a single pair of copper wires and can support that service at distances of up to 56,000 feet.
Broadband wireless technology is also targeting the rural markets. Raze Technologies gets up to 40 inquiries per week from independents about its systems, which can work in unlicensed spectrum that is more likely to be useable in rural areas, says Nick Thomas, Razes senior vice president of marketing and sales.
The vendors say independents can be much quicker to buy new technology, because they arent as burdened by bureaucracy.
"The sales cycle is much shorter," says Rob Avery, director of marketing of Gluon Networks, which developed a system that combines a softswitch with DSL support, a media gateway and other functions. "If you can show them a system that works and they can deliver services, they are much quicker to move."