Beyond IPTV

Rural Telcos Expand with VoIP, Broadband Wireless

VoIP and wireless local loop technologies have become two important tools for many rural telcos looking to balance losses from wireline replacement, and address new competition from cablecos and Internet telephony service providers.

A prime example of this trend is TCT, formerly known as Tri-County Telephone and TCT West, an IOC in rural Wyoming that now has competition from cellular and satellite companies as well as Vonage and services like AOL and Skype. This relatively new competitive environment led TCT to add IPTV services to its portfolio. Around that same time, TCT wanted to realize cost savings relative to its circuited-switched voice infrastructure, so it collapsed its Lucent Class 5 setup from nine switching centers to just one. That was the first step in an evolution that eventually led TCT to move to an all IP-based voice infrastructure. As of May 2006, TCT fully decommissioned its legacy switch and began serving its entire subscriber base with a MetaSwitch softswitch.

On the access side, TCT has been building an out-of-region fiber network, but it also is using wireless to reach customers. Just last year, TCT purchased Big Horn Wireless, a high-speed wireless Internet company that serves the Billings, Colstrip and Hardin, areas of southern Montana. Big Horn Wireless has 29 tower locations and approximately 500 customers that joined TCT Wireless services in Laurel and Billings, Mont. TCT offers broadband Internet access as well as VONtel, a broadband telephone solution, over those wireless connections.

“TCT is a great example of a rural independent company that’s just completely reinvented their business,” says Andy Randall, vice president of marketing at MetaSwitch.

Mescalero Apache Telecom Inc., a tribal-owned rural telco out of New Mexico, also is offering VoIP services out of region over a broadband wireless network, Randall adds. In this case, the wireless network is owned by a separate wireless ISP. The telco replaced its Siemens Class 5 switch with a softswitch in region and then used that softswitch — along with wireless local loop connections — to help it expand out of region.

Randall says these out-of-region strategies can have enormously positive impacts on rural telcos. “If you’re a small telephone company with 5,000 to 10,000 subscribers, if you’re next to a big city that has 100,000 people, you could very quickly look at doubling your effective subscriber base by just taking 10 percent of the market adjacent to you,” Randall explains. He adds that because rurals often have great reputations for customer service, 10 percent penetration can be a very realistic expectation.

Rural Telephone Service/Nex-Tech’s Rhonda Goddard speaks with another telco employee at a company central office.

Mark Reams, chief business officer at Penasco Valley Telecommunications (PVT) in New Mexico, says wireless local loop technology is a great, low-cost, low-maintenance way to reach its out-of-region/ CLEC customers with VoIP and data services. PVT, which a few years ago in an FCC auction won enough 700MHz spectrum to cover about 40 miles, is using a broadband system from Vecima Networks Inc. Reams says the base station costs less than $100,000, and the CPE is less than $300. The company, which offers 1.5mbps service to subscribers in its wireless coverage area, is waiting for the next 700MHz spectrum.

“We’re working to bolster our CLEC business to balance” what’s happening on the IOC side, he says.

David Schmidt, general manager at Heart of Iowa Communications, says his company, which now uses 900MHz to reach customers outside its traditional region (there would be too much interference at this frequency to use it in region, he says), also is looking forward to the FCC’s 700MHz auction in 2008, at which he says he expects HOI to be a bidder.

Rhonda Goddard, CTO at Rural Telephone Co./ Nex-Tech of Lenora, Kan., says her company started looking into VoIP in 2004 and by mid-2005 had launched VoIP services in two of its Kansas communities (Hays and Russell) in which the local cable company, Eagle Communications Inc., also offers voice services.

The telco, which previously had done circuit-switched voice in those towns, deployed a Santera softswitch and a VocalData application server (both vendors are now part of Tekelec) to do the job, says Goddard. As a result of the cost-saving infrastructure, Goddard says the telco can offer a low-cost calling package of $16.95 per month (less $2 if a subscriber buys broadband) for 500 minutes. The company only has about 200 VoIP customers at this point, says Goddard, who attributes the low penetration to the fact that it hasn’t heavily promoted the offer because it cannibalizes the company’s PSTN service. But it does allow the company to better compete with the cableco, she says, adding that unlike Eagle Communications, the telco is able to offer E911 (although not mobile E911) as part of its VoIP service.

Indeed, Rob Russell, director of product marketing for Tekelec’s switching group, says VoIP can allow rurals to deliver “find-me/follow-me and full call log capability and conferencing and can deploy that into their POTS base [in region] as well as into their VoIP base,” Russell says, “so, in that way, they’re in some ways doing things that the guys in the big cities are not even coming close to.”

On the access side, Nex-Tech has blanketed western and central Kansas with 900MHz and 5.7MHz wireless networks, powered by Motorola’s Canopy gear. Goddard says the CLEC also is testing 700MHz systems and in the research stage with WiMAX. “By 2008, we hope to have a WiMAX deployment somewhere in our network,” she says.

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