Deploying Fiber to Unserved Broadband Markets
Between intense competitive pressures, hyper-rapid technology evolution and pending regulatory reform, ILECs all over the country are facing what is surely the most difficult period in the history of the industry. The resolve of many to fight on in the face of these pressures is commendable. For some companies, that fight will be lost to wireless or other competitors despite their best efforts, but others may just succeed in their drive to reinvent themselves. In this series, entitled “Fighting the Good Fight,” I will profile various ILECs and RLECs and summarize how they are tackling these challenges.
Red River Telephone, based in Abercrombie, ND, was awarded a $9m combination of grant and loan funds under the Broadband Stimulus program, and $1m in private investment funds. While the BB Stimulus program has not turned out to be quite the panacea that was hoped a year ago, Red River GM Jeffrey Olson believes that receipt of the funding will make a difference for the company. I spoke with Olson earlier this week about the company’s plans and strategies.
Red River intends to use the funding to run 700 miles of fiber out to its most rural exchanges. Specifically, Red River owns four exchanges that it acquired in two transactions in 1996 and 2003—Fairmount, Hankinson, Lidgerwood and Wyndmere—where there is presently little or no broadband service.
Even with the funding, Olson said that the deployment will take two to three years, pointing out that its territory, which includes markets in North Dakota, South Dakota and Minnesota, has a very short construction period. Presently the company is still waiting for its stimulus funds to be released and Olson added that a short delay could translate to a year lost in its buildout timeline. Red River announced late last month that it has contracted with Calix (NYSE:CALX) for the deployment.
The fiber deployment will pass more than 1,200 homes and businesses, and when complete Red River’s exchanges will be 75% served by fiber. The cost will run into “the thousands” of dollars per home passed.
Red River sees two reasons for making the investment. First, in many of its exchanges there is no cable competition. Satellite service is the only video option in these areas presently, but Olson says the plan is to offer video service in a bundle with broadband and voice service as soon as possible. Right now the company is just waiting to get its funding and it will evaluate its ability to incorporate video services into the bundle at the end of the year.
Olson also noted that the company is very dependent upon NECA settlement and said, “We think we could be better off if it’s based on broadband” following completion of the pending regulatory reform. That said, Olson emphasized that it’s a very uncertain situation. “It remains to be seen if we get enough…the change could be very scary.”
Red River serves 4,100 access lines and Olson said that it has just under 2,000 broadband customers. The nearly 50% penetration level is thanks to the lack of cable competition in several markets, and also the company’s progressive offerings. Olson said that Red River is part of an Internet coop that includes five companies and offers data center and other services. Red River has also launched a fixed wireless broadband service which serves about 500 customers.
Olson conceded that there are some concerns with the reporting requirements and other Stimulus program obligations, but at the end of the day, “Without the broadband funds it would take us ten years to do fiber; it will only be three years with the funds.”