Entries in Paul Bunyan Telephone (2)

Thursday
Dec292011

2011's Broadband Bonanza Means New "Explorations" in 2012

While researching for a profile on Paul Bunyan Communications several months ago, I was struck by the cooperative's 60-plus years of underdog status—a fitting 2011 year-end metaphor for many of the companies I talk to across the country. There, in Minnesota, was a cooperative that organized in 1950 to connect underserved areas, and was helped along in its goal by federal legislation that sought to improve rural telephone service. Now, as 2011 draws to a close and we look ahead to what 2012 will bring, many companies I've interviewed this year are still trying to reach underserved areas—this time with broadband—and doing so is part of the larger, national plan to bring valuable high-speed internet connections to every home and business, in every community. With the year ending, these companies and co-ops are also hoping that broadband subs will help offset landline losses; this may be the last year for such a ying-yang balance, too, as broadband growth slows and it becomes less likely these adds will be able to offset the losses going forward.

A sweeping dedication to broadband will certainly continue into 2012, but boy has the game gotten more complex.Thanks to the recent detailed analysis offered by our own Cassandra Heyne, I won't use this space to parse out the specifics of federal funding for broadband or other regulatory hurdles facing rural providers. But I would like to reflect on what 2011 has meant for the rural service providers, cooperatives, start-ups, and advocacy groups I've spent the year researching and interviewing. Whether the goal was to tap into vertical markets, harness the potential of the cloud, or test out new services and platforms, without a question the name of the game this year was broadband—how to build-out fiber networks, how to increase speeds, how to offers services via broadband, how to pool resources and efforts through alliances and consortiums, how to share resources and infrastructure, how to get into the data storage market, and so on. Ultimately 2011 centered on a challenge and a source of opportunity; both are captured in the phrase I heard over and over again—“broadband build-out."

2011: Betting on Broadband

Just last week, new ceo of 3 Rivers Communications David Gibson summed up one of the most fitting characterizations for rural and independent companies. In an interview for the Great Falls Tribune, he said that, without a doubt, “Fiber is the way of the future... When you replace all that copper [with fiber] the service quality is better; you get much faster broadband speeds. You can offer IPTV. It's just good all around, it's where we need to be to position ourselves.” But Gibson went on to note the snags in building out rural broadband—threats to funding by “problems... in the mechanics” of the new Connect America fund and threats of stiff competition from satellite and wireless broadband, encroaching cable companies, municipal-owned broadband and others.

This year, I've talked to rural co-ops, independent providers, advocacy groups and consortiums in Kentucky, Ohio, Minnesota, Tennessee, Virginia, Georgia, South Carolina, West Virginia, Texas and the Dakotas, and for all of them, broadband was central to their goal of providing new services and connecting unserved or underserved rural communities. In some cases, broadband meant better connectivity for local high schools, community colleges or universities; in other cases, there were advances in telemedicine, improvements for tribal communities, or farming technologies. But in every case, the directors and spokespersons I interviewed insisted that broadband brought with it the possibilities for a changed community and more vibrant opportunities for rural residents and businesses. And they had examples of these improvements... many, many examples.

The question remains, however, do these broadband build-outs actually mean more stability for the ILECs and co-ops, many who find themselves in an increasingly competitive market? Will all of the federal dollars in broadband grants and build-outs in 2011 equal more advancements to rural areas in 2012? Will rural providers need to delve more deeply into new options like LTE and cloud services to remain relevant? Or will fiber as the “way of the future” actually mean subscriber retention and added revenue? These are all questions to investigate in the coming year, by talking to the experts on the front lines: the rural providers themselves.

2012: Building on Broadband, Exploring New Territory

Just recently we've seen announcements about IPTV and LTE—two services that are getting attention from rural ILECs and co-ops who consider them potential golden tickets. Most likely, 2012 will bring more in-depth look at what these services might mean for the independent communications provider industry—most specifically for the rural companies I talk to regularly. LTE's potential is up in the air (pun intended), but IPTV has already become a key talking point for ILECs who want to attract and retain customers in their communities. Earlier this year, we ran the numbers and found that, for the companies who disclosed that they provided video services, “their rate of decline in access lines... was sharply lower than those in the survey who did not provide data on video subscribers.”

Several of the companies I profiled to this year—Palmetto Rural Telephone Cooperative and Paul Bunyan Communications, to name two—named IPTV as central to their business strategy going forward. Earlier this month, Texas ILEC Valley Telephone Cooperative announced that it would offer a hybrid IPTV service that combines HDTV, DVR and cloud services through a single TV input and interface. And last month, Griswold Cooperative Telephone Company announced it would use its hefty $12.7m RUS loan, in part, to lay fiber that would support advanced services like IPTV.

As for LTE, it will be interesting to see what comes of the partnership between rural ILECs/ rural cellular providers and Verizon's Rural 4G LTE Program. Just last week, Pioneer Cellular (of Kingfisher, OK-based Pioneer Telephone) announced its first successful end-to-end data test with Verizon's 700 MHz spectrum, and so far Pioneer is just one of 13 rural providers partnering with Verizon for use of its LTE network. The goal, of course, is to provide LTE services in areas where Verizon does not plan to extend coverage, and, through the program, rural partners are allowed to build and operate their own LTE network, using some elements of Verizon's core network. Just as cooperatives and partnerships have helped bring fiber to rural areas, it's possible that partnerships between small, rural providers and the Big Guys could supplement existing services and retain customers. It's possible.

Ultimately the influence of LTE in rural areas remains to be seen, but it is a step toward spectrum use that so many rural providers have looked into but not developed. In my own discussions this year, I have heard numerous company spokespersons say that they were currently “exploring the possibilities” of spectrum for a variety of services, but had not made any definite commitments. Perhaps 2012 will bear the fruit of these, and many other, “explorations.”

Wednesday
Nov092011

Paul Bunyan Communications Bets on Broadband 

As Traditional Services Decline, Cooperative Says Broadband is THE Future

As our Richelle Elberg reported last week, telcos providing broadband serve about half of all broadband connections in the U.S.—numbers that, so far, are holding steady against cable-provided broadband connections. In the same study, Richelle predicted that ILEC broadband connections would overtake the number of access lines as early as 2015, as ILECs increasingly are deploying fiber and upgrading their broadband offerings.

As a case in point, Paul Bunyan Communications in Minnesota has aggressively incorporated broadband into its business strategy and is about to complete its final year of a fiber-to-the-home upgrade for its entire 4,500-square-mile service area. The cooperative's broadband initiative has been well-received, too, with take-rates at 60%, representing some 17k subscribers.

But Paul Bunyan isn't just a small company benefiting from a forward-thinking business plan; it's an ILEC that attests to the collective power of a cooperative to implement broadband buildouts and forge strategic partnerships with local electric co-ops.

In fact, the Minnesota cooperative has made broadband a focus of service for many years, according to Brian Bissonette, marketing supervisor for the company. Paul Bunyan first started offering broadband in its service areas in 1999, and now Bissonette says that 100% of its service area has broadband access. In the majority of its service area, Paul Bunyan is the only provider of high-speed Internet. “In rural areas [of the state], there are no real competitors. Wireless and satellite service is available, but it's much more expensive, with slower speeds, and less reliability,” Bissonette said.

Paul Bunyan's service packs a good punch too, with speeds up to 10Mbps for both upload and download, and up to 25Mbps service and higher available. The co-op's extensive fiber build has allowed it to offer digital and high-definition television services to all its customers as well, complete with DVR and On Demand. According to Bissonette, these television services have about a 50% take-rate so far. The company now uses vendors like Calix, Minerva, ADB, and Clearfield, but Bissonette said television services will be transitioning to offer the Microsoft Mediaroom IPTV platform.

Last month, Minnesota received some press for the release of Connect Minnesota's Consumer Broadband Adoption Survey, which reported that “only” 28% of Minnesota's consumers do not subscribe to a broadband service. Among those who don't subscribe, the majority said they don't need broadband or that there isn't content relevant to them on the internet; the second reason was that it was too cost-prohibitive. But while that 28% figure is lower than the national average of 35% non-subscribers, once again there was a marked gap in broadband availability in rural communities versus more populated areas. In rural parts of the state, 39% of Minnesotans do not have broadband, usually due to lack of availability, not lack of desire.

Because Paul Bunyan's service area is primarily rural, Bissonette said its diverse services and broadband deployment are even more dependent on federal stimulus monies. Just this year, the cooperative was awarded a $19.7m Rural Utility Service (RUS) grant through the USDA, and will use the funding to expand broadband FTH service into two more underserved areas—rural areas of Park Rapids and Trout Lake.

Overall Paul Bunyan has seen a steady increase in broadband subscribers and revenue, something Bissonette credits to the “millions of dollars” the company has invested in “upgrading and expanding our network to offer broadband services. And they have been well received.” He says that back in 1998, the company had just 8k access lines and no broadband Internet customers. “Today we have more than 28k access lines and more than 17k broadband subs,” Bissonette said. But even while noting these gains, he added, “This could be radically affected by access and universal service reforms if they are unfavorable to high-cost-to-serve rural areas.”

According to Bissonette, service availability is overwhelmingly contingent on sustained FCC funding. “The biggest challenge we face is intercarrier compensation and universal service reform,” he said. “The majority of our service area is rural and high-cost to serve. If these mechanisms are eliminated or drastically reduced, the result would be much higher costs for the services to consumers. That would create a significant barrier to receive the services that most [of our customers] consider essential. We'd also be unable to continue to expand our broadband services to those rural areas, and that includes our planned expansion with the recent $19.7m RUS loan.”

As a cooperative, Paul Bunyan has also realized the advantages that come from local and regional partnerships. Bissonette cited one such example in Paul Bunyan's alliance with Beltrami Electric Cooperative. Together, the two formed Cooperative Development, “a construction company that serves both cooperative's network expansion and replacement needs,” Bissonette said. “This greatly reduces the need for both cooperatives to outsource this work and provides dozens of full-time local jobs during the construction season.”

Paul Bunyan has also partnered with seven regional electric co-ops to form Northern Safety and Security—an entity that provides security systems, smoke and carbon monoxide sensors, a latch-key feature, gas leak monitoring, agricultural environment sensors, camera systems, and more, along with a 24/7 response center. Together, Bissonette said the group “shares investment costs and a resource base providing a variety of services to 52k co-op members and 150k households throughout Minnesota and eastern North Dakota."

Going forward, the cooperative is planning on taking advantage of cloud services for its data hosting and online backups, which it already provides for some of its larger customers. Ultimately, Bissonette said it all returns to broadband and its potential—be it for cloud services, high-speed internet, or IPTV. Facing the current reality for telecommunications providers, Bissonette stated, “We anticipate that wrapping more service around our broadband will be important in the future, as our traditional services decline.”