Entries in Pioneer Telephone (3)


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.”


Rural Associations Launch "Save Rural Broadband"

An Advocacy Campaign to Educate Consumers, Pressure Congress and FCC on USF Reform

With an impending FCC decision on Universal Service Fund reform looming over the telecom industry, NTCA, OPASTCO and the Western Telecommunications Alliance (WTA) launched a website and a social media campaign to educate consumers, the FCC and Congress about how the FCC’s reform plans threaten the viability of rural America. The new website, www.saveruralbroadband.org, provides consumers an opportunity to send a letter to legislators explaining that the FCC’s actions could result in job loss, stifle economic development and cause higher prices for telecom services. In addition to the informative website, consumers and rural telecom advocates can also get involved with Save Rural Broadband on social networking sites Facebook and Twitter.  According to the rural associations, the mission of Save Rural Broadband is to: “(1) show the Congress and Obama Administration how rule changes being considered by the FCC will have a negative effect on broadband networks in rural communities, and (2) urge Congress and the Obama Administration to intercede.”

NTCA, OPASTCO and WTA held a press conference about Save Rural Broadband on Capitol Hill on Thursday, July 14, which I attended. Representative Lee Terry (R-NE) and Senator Mark Begich (D-AK) joined Shirley Bloomfield (ceo of NTCA), Kelly Worthington (evp at WTA), and John Rose (president of OPASTCO) to discuss the importance of broadband for rural areas. Bloomfield warned of dire consequences for the rural telecom industry and rural Americans if USF reform is not undertaken very carefully, and she emphasized that USF reform should be about getting broadband to rural Americans, keeping it there, and keeping it affordable for everyone.

I was very inspired by Rep. Terry’s comments—he actually expressed great optimism during a time when rural telecom perspectives on USF reform are overwhelmingly negative. Terry discussed how he has been involved in USF reform efforts for 8 years, but we are finally “nearing the end” as he expects a resolution by the end of the year. Terry commented that “we’ve learned that [RLECs] like certainty,” referring to rate-of-return, and he added that it appears as though rate-of-return is no longer in danger of being eliminated anytime soon—something that I considered to be very good news. He also said that he is making progress in convincing his colleagues that reverse auctions are an unworkable solution and they will end up stranding investments in rural broadband. Terry is hopeful that the end result on USF reform will be a “win-win” for everyone (including the FCC), and it will help “get this economy booming again.”

Senator Begich also expressed optimism at the bipartisan progress—so far, 30 senators have signed on to a letter to the FCC asking that “new rules and regulations do not have unintended consequences and hamper our investment in rural communities.” Begich noted that it is a pretty significant accomplishment to get so many members of Congress—from both parties—on the same page on one specific issue. However, he said that USF and broadband is truly a bipartisan issue, and if USF reform is not done right there will be negative consequences down the road.  Begich described the unique broadband challenges in “extremely rural” Alaska, and he stressed that broadband is necessary for young people in rural Alaska, jobs, business, telemedicine, and education. He told a story of one community where the telecom co-op provides 31 jobs—in a subsistence economy where a gallon of milk costs $11.

As if USF reform couldn’t get any more challenging and stressful, today I was informed that Congress is pushing to “raid the USF to pay down the federal debt,” to the tune of $1b. A statement by NTCA explained that this “misguided plan” will result in RLECs being unable to repay RUS loans or make private investments in broadband, and will ultimately “end up adding to the federal government’s already out-of-control debt.” Senator Begich addressed this new challenge with concern, asserting that he is definitely against any proposal to cut $1b from USF. Begich said that this is not the time to “chip away at the telecom backbone,” especially if America has any intentions of being the best broadband economy in the world; he said, “that’s not what we strive for if we want to be the best.” I was extremely frustrated when I heard that Congress wants to cut $1b from USF because USF is not a tax in the sense that it is collected by the US Treasury. USF is a subsidy collected from telecommunications service fees for Congressionally-mandated telecommunications services, and it is definitely not a means to control the country’s debt problem. I was very pleased to hear that Begich is standing strong against this far-fetched idea.

To conclude the Save Rural Broadband campaign launch today, several RLEC executives answered questions from the media. John Rose asked the participants what will happen if the FCC’s plan goes into effect. Nancy White (ceo, North Central Telephone Cooperative) said that her company simply will not have the funds to repay loans for a FTTH project in rural Tennessee, which will have significant negative impacts on this rural community. She added that her RLEC is “the engine for economic development” in its isolated rural area, and there is really no business case for the “big guys” to step in and provide broadband if her company goes out of business. Mark Gailey (president, Totah Telephone Company) also agreed that his company would not be able to repay loans, and the community’s schools and public safety departments depend on the company’s broadband service. Catherine Moyer (Director of Legal & Regulatory Affairs, Pioneer Communications) added that there is a great deal of agribusiness in her Kansas RLEC’s territory, and she is most concerned about what will happen to the customers if there is a huge decline in revenue as a result of losing USF and ICC support.

All in all, it was a day of both positive and negative news. I am very happy about the bipartisan House and Senate efforts on USF reform—they seem like the real advocates of RLECs and rural broadband right now, which is definitely empowering. But, the FCC has been pointedly hostile towards RLECs and it may be a much bigger challenge to finally get them on our side, even with considerable bipartisan support from Congress. I definitely encourage everyone to check out http://www.saveruralbroadband.org/ and get involved in the campaign for reasonable USF reform.


Broadband Stimulus Recipients Announced

Rush of Awards Before Impending Round Two Deadline

Over the last several weeks NTIA and RUS have announced a multitude of Broadband Stimulus grants and loans.  The awards, part of President Obama’s $7.2b Broadband Stimulus program, are designed to bring high speed Internet to communities that currently have little or no access.  By our count, RUS and NTIA have awarded more than $2.0b in grants and loans thus far. 

The pace of award announcements picked up dramatically in the last month, due in part to efforts by NTIA and RUS to announce as many round one awards as possible before the deadline for submissions for round two.  Initially, round two applications were due by March 15, 2010, but both NTIA and RUS granted a small extension – until March 26 for NTIA-administered BTOP Comprehensive Community Infrastructure projects, and March 29 for RUS-administered BIP infrastructure projects.  The other project categories still hold the same March 15 deadline.  Round two applicants have expressed frustration because they might be disqualified if they propose projects in the same places where first round awards are granted.  NTIA and RUS are supposed to issue approximately $4b of funding in the first round, and in a recent statement from RUS, the agency said: “USDA is continuing to review broadband applications currently on file and expects to make additional announcements concerning awards throughout the current fiscal year.” 

There are a number of states that so far are emerging as the “winners” of a significant share of the awards.  Texas is at the top of the list, having received $164.6m, or 8.20% of total announced funding.  The next five largest award winners are Louisiana (7.14%), West Virginia (6.84%), Pennsylvania (6.40%), Kansas (6.23%), and Alaska (5.84%).  On the other end of the spectrum are a few surprises.  Predominantly rural states including Arkansas, Montana, Vermont and Wyoming have not received any Broadband Stimulus funds.  Other surprises include American Samoa and Puerto Rico, which received $91m (4.54% of total awards) and $13m (0.64%) respectively. 

There were 17 incumbent local exchange carriers that received funding among the approximately 64 awards announced recently.  Fiber optic cable continues to form the basis of the majority of middle and last mile projects receiving funding, although other technologies will be utilized as well. 

For example, Canby, Oregon-based Canby Telephone Association received $496,090 grant and $248,046 loan funding to deploy advanced DSL infrastructure in underserved areas of Clackamas County, and in Alaska, Copper Valley Telephone Cooperative affiliate Copper Valley Wireless received $1.8m grant and $1.8m loan funding to provide wireless broadband services in Cordova.  Kingfisher, Okla.-based Pioneer Telephone Cooperative affiliate Pioneer Long Distance received $1.8m grant and $1.8m loan funding to provide wireless broadband service to unserved and underserved areas in Western Oklahoma. 

Some projects will use a combination of technology to extend broadband into underserved areas.  In New Mexico, Peñasco Valley Telephone Cooperative received $4.8m in grant funding to deploy fiber and electronics, including wireless capabilities for hard to reach areas.  In Texas, XIT Rural Telephone Cooperative received $3.1m grant, and will contribute $3.2m in matching funds, for a project that will utilize both fiber-to-the-premises and fiber-to-the-node VDSL2 in and around the communities of Dalhart and Stratford. 

Other funding recently awarded to ILECs are for fiber-based projects.  In Colorado, Wiggins Telephone Association was awarded $2.2m grant and $248,046 loan funding to provide FTTP in the Weldona-Goodrich-Orchard area. 

Celina, Ohio-based Wabash Mutual Telephone Company received $2.2m grant and $2.2m loan funding to provide a FTTH network.  Also in Ohio, Benton Ridge Telephone Company received $1.5m grant and $1.6m loan awards to build FTTH in the Benton Ridge exchange in South Central Ohio, including dedicated fiber optic connections for each customer. 

Ochelata, Okla.-based Totah Communications received $3.7m grant and $4.9m loan funding to upgrade existing copper fed DSL nodes to fiber-fed DSL nodes and to install additional fiber-fed DSL nodes throughout the service area, including 152 total route miles.  The service will reach approximately 800 new customers. 

Guymon, Okla.-based Panhandle Telephone Cooperative was awarded $10.1m grant and $3.4m loan funding, and will contribute $23.3m in private investment to provide fiber-based infrastructure in the Oklahoma panhandle. 

In nearby Texas, Wes-Tex Telephone Cooperative received $16.9m grant and $16.9m loan awards, and will provide $28.4m private investment to provide broadband infrastructure in Western Texas. 

Halstad, Minn.-based Halstad Telephone Company received funding for two different projects.  The company received $3.3m grant and $3.3m loan funding to provide FTTP broadband in five towns and surrounding rural areas in Norman and Polk Counties using 320 miles of fiber optic cable.  Additionally, the company received $246,500 grant and $246,500 loan funding, and will contribute an additional $7,000 in matching funds to install electronic enhancements to existing DSL in 800 locations in Hillsboro, Traill County, North Dakota. 

Also in North Dakota, Dakota Central Telecommunications received $2.3m grant and will contribute $2.5m in private investment to provide FTTP broadband services in the Streeter and Gackle exchanges. 

Lost River, West Virginia-based Hardy Telecommunications received $3.2m grant funding to build a middle mile fiber optic network in Hardy County. 

ENMR Telephone Cooperative, based in Clovis, New Mexico, received $11.3m grant to construct middle mile infrastructure that will support critical community facilities and community anchor institutions. 

In Kansas, Medicine Lodge-based South Central Telephone Association received $871,200 grant funding to provide FTTH service in the Lake and Sun City exchanges.  Additionally, the project includes a private investment of $3.6m.  Madison-based Madison Telephone Company was awarded $3.5m grant and $3.5m loan funding, and will contribute an additional $763,634 in matching funds to construct FTTP throughout its service area. 

Other notable awards include $12.9m grant awarded to Iniciativa Tecnolégica Centro Oriental, Inc. (INTECO)—to build a 515-mile network that will include both wireless and fiber connections in some of the neediest areas of Puerto Rico.  INTECO will provide $3.4m in matching funds. 

Notable for its size, an $80.6m grant was awarded to the State of Louisiana Board of Regents—to target 21 parishes in rural Louisiana including those in the Louisiana Delta region and four Federally-recognized Native American Indian Tribes.  The project provides access and use of broadband services. 

Other large grants announced recently include an $81m grant and $10m loan to the American Samoa Telecommunications Authority to replace deteriorating legacy copper infrastructure with fiber optic cable connecting the main islands of American Samoa, and the $84.3m network infrastructure grant awarded to the Northwest Open Access Network for network infrastructure development in the State of Washington. 

Other Broadband Stimulus Developments 

Perhaps not surprisingly, as funding begins to be distributed across the country, the awards have given rise to a number of related issues.  For instance, the Recovery Act does not explicitly make the awards exempt from taxation.  As a result, NTIA, RUS and recipients are unsure which awards are taxable, and what impact, if any, the tax status will have on the projects themselves.  Based on guidance from the IRS, “grant payments under BTOP will qualify for exclusion from income under section 118 under the Internal Revenue Code in some circumstances, but not in others.”  Needless to say the uncertainty may be causing some companies to delay the projects until the tax status can be clarified.

Particular projects have become contentious in some states.  In West Virginia, the governor’s office was awarded a grant to build a middle mile back-bone network.  The aim of the project was to connect community anchor institutions, and to make it cost effective for last mile providers to extend service to residential and business customers.  The governor’s office announced it plans to use Verizon Communications—its current vendor—to build the network.  When construction is complete, Verizon will own the network. A group of telecommunications companies have united over concern they won’t be treated fairly after Verizon builds the network. FiberNet, Citynet, and nTelos and seven others have formed the West Virginia Broadband Coalition and have called for a 60-day pause “so everyone can understand what the state contract provides, the Public Service Commission provides – so questions can be answered and we can come back with recommendations on what can be done within the context of the existing contract and grant and decide the best way forward.”  A 60-day pause is unlikely as the grant requires the project to be substantially complete within 24 months and finished in 36 months. 

Even beleaguered FairPoint Communications has devoted resources to trying to derail the “Three Ring Binder” project aimed at building a 1,100-mile open access fiber optic network in the State of Maine.  The project, a partnership between the University of Maine and Biddeford Internet Corporation, received $25.4m grant funding, but despite receiving the award the project failed to get CLEC status in Maine, and is now fighting FairPoint to gain access to state utility poles.  For some projects, it seems, receiving funding doesn’t necessarily mean expanding broadband will be easy.