Front Page: Vendors Chase Rural Telco Business

The leaves are falling from the trees and Thanksgiving is just around the corner, but make no mistake, it's independents day.

The day for independent telephone companies, that is.

These rural service providers are now the hot new prospects in a market that has seen the CLECs largely disappear and the long-purchase-cycle RBOCs dramatically reduce their capital expenditures.

The smaller incumbents, which sometimes have CLEC operations as well, are attractive because they are garnering grants and low-cost loans from the U.S. Department of Agriculture's Rural Utilities Services fund; gaining girth by jumping on the rural access lines RBOCs are shedding; and aggressively moving to deploy video services as they see cable companies threaten their core voice services. All that adds up to what looks to be a good opportunity for the ailing vendor community.

Indeed, many vendors in recent months have come out with low-cost, scaled-down products and marketing campaigns aimed at independents (many of these products also appeal to the RBOCs, which are investing very incrementally these days). At the same time, having "RUS-approved" products has come in to vogue. And state telecom events are becoming the new stomping grounds for sales and marketing folks from communications vendors of all stripes.

Indeed. Class 5 switch replacement vendor Taqua intends to double its sales force of 12 in the next six months and beef up its marketing and customer support teams exclusively to better target the independents, says Charles Vogt, Taqua's president and CEO.

Taqua also recently won RUS approval after spending 15 months on the process. (Telcos receiving funds from the RUS fund can spend that money only on products that are RUS approved. For more on RUS funding and the approval process, see next month's issue of xchange.) In addition, the company goes to 30 independent trade shows a year, he says, adding each state has 60 to 100 telcos. "Every single telco is facilities-based, so they all need a switch," he says. "And this market is sitting on switches that are 17 to 25 years old. A lot have been discontinued or don't offer GR303."

The independent opportunity only is expected to grow as RBOCs continue selling off their rural access lines and the federal government considers upping funding available through RUS, adds Vogt. He explains the House of Representatives is considering $1 billion in new funding for RUS. Vogt says the independents, which now account for between 22 million and 23 million access lines, should account for 43 million to 45 million lines within five to seven years. "That's no slouchy kind of market," he says.

ADTRAN agrees. This well-known equipment company recently began a marketing campaign focused on the independent local exchange carriers. While these smaller incumbents long have been part of the vendor's customer base, ADTRAN only in the past eight months has been working diligently to help educate rural carriers about how its products can fit into their networks, explains P. Steven Locke, vice president of marketing at ADTRAN's carrier networks division.

Locke says the company used the United States Telecom Association's membership book and its own resources to target independent telcos through direct mail appeals that discuss how ADTRAN fits in with their broadband deployments. In addition to the direct mail campaign, visits to various independent telco headquarters and attendance at shows like USTA, ADTRAN in April obtained RUS approval for its products, says Locke.

While ADTRAN has obtained RUS approval and undertaken the new marketing campaign, the company didn't have to make any changes to its product line to appeal to the independents, although the applications of some of its solutions are different in rural environments, says David Williams, market manager for the vendor's carrier networks division. For example, ADTRAN's Total Access OPTI-3, product, which delivers OC3 to three DS3 multiplexing, commonly is used as an edge solution by RBOCs, he says. However, it also fits the backbone networking needs of smaller telcos, Williams says.

ADTRAN also is promoting other existing products in the independent telco market. These products include the Total Access MX2800, a DS3 to T1 demultiplexer selling for under $3,000; the Total Access 3000, a blade-based system supporting inverse muxing over ATM, TDM muxing and aggregation, DSL, T1, HDSL2 and HDSL4; the Total Access 1500, which supports 96 POTS channels and special services in a 3.5-inch package; the Total Access 4303, a central office product supporting up to 128 DS1 interfaces, up to four DS3 or STS1 interfaces, and full GR-303 and DCS functionality; and the company's HDSL product. "We're the industry leaders in HDSL, and we want to stay that way," says Williams. He adds that HDSL has been around for a long time "but the word has not gotten out to the independents."

The applications for these products are pretty much the same for independents as they would be for an RBOC, but independents could use a multipurpose platform such as the Total Access 3000 to run multiple functions on a single platform, while an RBOC would probably dedicate a platform for one particular service.

In addition to the low-cost entry points and scalability of the products, Locke says independents buying from ADTRAN get the added peace of mind that comes from the knowledge that all of these platforms already have been through extensive lab tests and field use by other carriers.

Nevertheless, many vendors are coming out with new boxes aimed specifically at the independents. For example, CopperCom recently unveiled the CSX1100, a Class 4/5 switch that serves 500 to 5000 lines. Meanwhile, Net to Net Technologies is hawking a new 12-port ADSL MicroDSLAM that allows independent telcos to offer Ethernet-based DSL from remote terminals without having to completely upgrade their remote terminals with next-generation technology, among others. (For more on independents in video, see next month's xchange.)

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