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Tiny ILECs See the Big Picture

Phil Harvey
1/16/2006
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Little by little, the nation's tiny incumbent carriers in the hinterlands are warming up to IPTV.

Today, in fact, Pannaway Networks announced its gear had been picked as the broadband service and IPTV delivery gear of choice for Arthur Mutual Telephone Company, a rural ILEC in northwest Ohio that has about 1,350 customers spread over 47 square miles. (See Arthur Deploys Pannaway.)

Arthur was founded in 1905 by a group of farmers, says the company's Website, which lists its mailing address as "Defiance, Ohio."

This isn't a huge deal in dollars or boxes deployed. But it's symbolic of a mindset that has changed. Smallish carriers are now buying into IPTV by name -- rather than just reselling satellite services or partnering with someone else to provide video services.

The change began late last year as the National Rural Telecommunications Cooperative (NRTC) and the National Telecommunications Cooperative Association (NTCA) -- two groups that are the voice of 1,700 rural phone companies and cable systems -- got together and started actively promoting IPTV to their members. (See NRTC, SES Take IPTV Rural.) More on that later.

The upshot is that some of the small carrier IPTV dollars that were frozen in 2005 may start to show up in a flurry of little deals during the next few months.

Arthur Mutual, part of Com Net, an Ohio-based consortium of 21 ILECs, says it picked Pannaway over comparable offerings from Occam Networks Inc. (Nasdaq: OCNW), Zhone Technologies Inc. (Nasdaq: ZHNE), Calix Inc. (NYSE: CALX), and TelStrat International . Though the willingness to deploy IPTV has finally kicked in, some technical hang-ups remain, according to general manager Janet Scholl.

The carrier hasn't, for instance, finalized what its channel line-up will be, or from where it will source its content. Also, it's still waiting on MPEG-4 capable set-top boxes, probably from Amino Technologies plc (London: AMO), to hit the market so it can deploy with the latest video compression available. "Since this is a whole new project for us, I really want to make sure I know what I'm doing," Scholl says.

This market momentum is good for smaller gear providers such as Pannaway, which has also won deals with other Com Net members, including Middlepoint Home Telephone Company, Ayersville Telephone Company, Fort Jennings Telephone Company, Vaughnsville Telephone Company, and Glandorf Telephone Company.

In addition to the deals that Pannaway and other gear providers will win here and there, the NRTC will soon begin to ramp up its IPTV marketing. The group is set to begin trialing its IPTV service, IP-PRIME, with member phone companies in four markets sometime this month.

The service is the result of a deal struck between the NRTC and SES Americom . A full commercial launch of that IPTV service will take place in the second quarter, though the specific carriers and markets haven't yet been announced.

— Phil Harvey, News Editor, Light Reading

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RTL Rules
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RTL Rules,
User Rank: Light Beer
12/5/2012 | 4:08:44 AM
re: Tiny ILECs See the Big Picture
Looks like more video customers are served by the Motorola (ex-NLC) system at MTS (50,000) than at Qwest (43,000).

http://www.motorola.com/mediac...

http://telephonyonline.com/mag...

RTL
opticalwatcher
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opticalwatcher,
User Rank: Light Beer
12/5/2012 | 4:08:53 AM
re: Tiny ILECs See the Big Picture
"Actually, all of those items are available in all major metro areas today on cable."

I'm in the SF area and I can assure you that cable does not offer 20Mb/sec and their price is higher than what Surewest is offering. That's why you see so many satellite dishes in the SF area.
paolo.franzoi
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paolo.franzoi,
User Rank: Light Sabre
12/5/2012 | 4:08:53 AM
re: Tiny ILECs See the Big Picture

You see sattelite because of Sunday ticket. And check the number of lines you can get 20Mb/s at Surewest (it is around 1,000 - their total video base is around 1500 or so). And those customers can not get 20M/bs when they are watching video.

Price is a separate factor and has nothing to do with technology. So, if SBC showed up with an IPTV offering at less than your satellite would you switch? They will be doing so theoretically in 6 months or so.

Again, where there is competition the 2nd provider gets a lot lower take rate. Satellite has between 15 - 20% of the video market. That's it and they have been at it for 10+ years.

seven
paolo.franzoi
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paolo.franzoi,
User Rank: Light Sabre
12/5/2012 | 4:08:54 AM
re: Tiny ILECs See the Big Picture

Actually, all of those items are available in all major metro areas today on cable. For example, the major metro area near SureWest is San Franscisco. Comcast has all of those services including HDTV and VoD and DVR available today. So, today SureWest would NOT be competitive in San Francisco.

The point of this is that Surewest is not in a major metro area. They have actually a very small number of video customers and video is not available on their entire network. The fact that they are not in a major metro area means that they do not have the same level of competition. That was my entire point earlier, which for some reason you disputed. Thank you for having made my point for me.

seven
opticalwatcher
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opticalwatcher,
User Rank: Light Beer
12/5/2012 | 4:08:54 AM
re: Tiny ILECs See the Big Picture
"Actually Surewest is east of Sacramento. You belive that a cable system with the same specs would not take over 50% of the business? Given that they would be the incumbent? Get it now?"

Yeah, I get it. I'm talking about what Surewest is offering now, which greatly surpasses what is available on cable in most places today.

Talking about 'a cable system with the same specs' is playing the game of fantasy broadband.

Certainly cable will offer more in the future (I'm curious to see how DODSIS 3.0 will pan out). But like any competitive industry, it is a constant game of leapfrog.
opticalwatcher
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opticalwatcher,
User Rank: Light Beer
12/5/2012 | 4:08:57 AM
re: Tiny ILECs See the Big Picture
"Hello, have you ever been to one of these places? There is not the competition seen in New York City. How many MSOs in say Salina, Kansas have 20+ HDTV channels, VoD, and plans for 100Mb/s Cable Modems? Thanks."

If you look at SureWest (in Sacramento), they offer 10Mb/sec or 20MB/sec DSL, IPTV, HDTV (in beta), 250 channels, at a reasonable price, I'm not sure that any realistic competition (not some 100Mb/sec fantasy) would have any affect on the outcome.

paolo.franzoi
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paolo.franzoi,
User Rank: Light Sabre
12/5/2012 | 4:08:57 AM
re: Tiny ILECs See the Big Picture

Actually Surewest is east of Sacramento. You belive that a cable system with the same specs would not take over 50% of the business? Given that they would be the incumbent? Get it now?

seven
firstmile
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firstmile,
User Rank: Light Sabre
12/5/2012 | 4:09:01 AM
re: Tiny ILECs See the Big Picture
Rural guys have always 6+ years been deploying "IPTV", even when it was actually ATM PVCs on ADSL. They (the rural guys) typically have a much easier time of it for the following reason:
--the folks in their community didn't get 200 plus channels from the cable company. So when the local IOC showed up with 36 channels that was fantastic!

Also, did Lightready REALLY write a story about a carrier with 1350 lines???? what gives???
...first
paolo.franzoi
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paolo.franzoi,
User Rank: Light Sabre
12/5/2012 | 4:09:03 AM
re: Tiny ILECs See the Big Picture

1 - I am sorry but deploying the world's most expensive broadband upgrades to deliver 1.5 Mb/s (which is what NECA specifies) and then wholesaling it to a non-reg subsidiary is a scam.

2 - Hello, have you ever been to one of these places? There is not the competition seen in New York City. How many MSOs in say Salina, Kansas have 20+ HDTV channels, VoD, and plans for 100Mb/s Cable Modems? Thanks.

3 - They didn't buy the cable company. It is a local municipality co-op that funded the cable and the telephone company. These are less focussed on profit, because they are taxpayer funded and deliver the services the town wishes to offer.

The business case of an Mom and Pop IOC has nothing to do with the business case of an RBOC.

seven
rbkoontz
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rbkoontz,
User Rank: Light Beer
12/5/2012 | 4:09:03 AM
re: Tiny ILECs See the Big Picture
Mindset change? There has easily got to be 200 IOCs in some form of video over DSL/fiber deployment and another 300 in evaluation mode. This has to be one of the least significant announcements and LR stories I have ever read. Well, I guess that's what I get for looking for news on a national holiday...
ip_power
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ip_power,
User Rank: Light Beer
12/5/2012 | 4:09:03 AM
re: Tiny ILECs See the Big Picture
Get really this is the story, Listen and open your eyes. The RBOC's are not doing any thing. It is being done at the Statewide level and it is because of the market pressure from MSO's VOIP and CELL.

"1 - They can scam NECA and RUS to help fund/pay for these services by some clever accounting means."

WRONG this is called subsidizing a subsidary. Now I am not saying some of the OSP plant reduction isnt also part of the NG DLC. But it is the consolidation of the mess AFC an NT left.

"2 - They have generally lowered competition. There is always satellite, but cable if there is generally analog."

WRONG, MSO are fastly moving digital in the honey pot areas and the true cost to IOC is the customer at 30K feet from the CO (outside of town). If the MSO wants to be treated fairly the should also build the Rural not the Biways. As for those Multimillion line ILEC, they are nto much different the the RBOCS - ATM/Sonet all the way (change, what)... MPLS and ethernet is here wake up.

"3 - They are often the cable company. This means that the taxpayer is paying for a digital upgrade of the cable plant by going to SDV."

WHAT... They bought the cable companies to generate revenue that is "Lost for settlementS" (which by the way has not really hit as big as you all said it would by now) and to provide that which they are best at and the MSO is poor at - Customer Care. These small Mom and pops are doing things that the RBOC and Teir 1/2 markets are only promising, in order to get things changed in there favor. I hope they loose and become wireless. Atleast it will be stable.

Its time to pay attention to that which has been proven, if it can be done on and in several state wide networks with multiple access vendors and IP stays unregulated without filtering or ACL then we might have a chance in staying on top as a service provider nation, we have already outsource the labor to overseas.



paolo.franzoi
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paolo.franzoi,
User Rank: Light Sabre
12/5/2012 | 4:09:06 AM
re: Tiny ILECs See the Big Picture

I imagine there are people that are changing their views on this. But as palaezoic says, this has been around for a long time. It is also quite distinct from what SBC is doing, but we can leave that to another time.

Many of the Mom and Pops have 3 elements of the business proposition that makes IP Video (SDV over IP) more attractive than for other carriers:

1 - They can scam NECA and RUS to help fund/pay for these services by some clever accounting means.

2 - They have generally lowered competition. There is always satellite, but cable if there is generally analog.

3 - They are often the cable company. This means that the taxpayer is paying for a digital upgrade of the cable plant by going to SDV.

In those circumstances, this is a no brainer. As competition grows or the loopholes get closed, this is a tougher business case. Remember many of the Mom and Pops are actually local co-ops. This means that the town wants a digital video service and this is how they are building it.

But seriously, this is an OLD phenomenon. It grows over time, but remember outside of Qwest...this is where NLC's business was and is. So, will this succeed? Well, in some ways it already has. Most Mom and Pop telcos use video capability as their one of their product selection criteria. But deployments are smaller and rarer than announcements. Commercial service is smaller still. Fundamentally profitable service is probably still a big nut to crack. But for a lot of these carriers profitability is a smaller concern.

seven
palaeozoic
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palaeozoic,
User Rank: Light Beer
12/5/2012 | 4:09:06 AM
re: Tiny ILECs See the Big Picture
Well, actually, IOCs and small ILECs gave up on satellite years ago and began moving to what is now called IPTV (back then it went under the moniker SDV). Keep in mind that many of these operators also owned cable franchises, so they've always viewed satellite as the competition. There are now, literally, hundreds of service providers with 100s of thousands of true IPTV subs up and running. Mindset change? Not really.

Maybe now that Pannaway has one of these as a potential customer it is viewed as a mindset change up in New Hampshire. But nowhere else.
alchemy
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alchemy,
User Rank: Light Beer
12/5/2012 | 4:09:06 AM
re: Tiny ILECs See the Big Picture
Phil Harvey writes:
A lot of IOCs I've talked to in recent years trashed IPTV in favor of reselling a satellite service.

Now several of them are embracing IPTV, in word and -- sometimes -- in deed. But I have no clue if it'll pay off.

Your thoughts?


If you've been to any trade show in the last year, you know that IPTV has huge hype behind it and you're in the stone age if you're a telco and aren't planning to deploy it. There are going to be a certain number of sheep among the Ma and Pa independent telcos who get caught up in the hype even if they can't make a business case for it.
DCITDave
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DCITDave,
User Rank: Light Beer
12/5/2012 | 4:09:07 AM
re: Tiny ILECs See the Big Picture
re: "Change in mindset?"

A lot of IOCs I've talked to in recent years trashed IPTV in favor of reselling a satellite service.

Now several of them are embracing IPTV, in word and -- sometimes -- in deed. But I have no clue if it'll pay off.

Your thoughts?
ph
paolo.franzoi
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paolo.franzoi,
User Rank: Light Sabre
12/5/2012 | 4:09:07 AM
re: Tiny ILECs See the Big Picture

Change in mindset?

Next Level (now Motorola) and others have been doing IPTV and equivalents for more than 5 years. The real questions come from:

1 - What happens if NECA plugs the loopholes that help fund this buildout?

2 - Does this style of deployment (which is a lot simpler than what AT&T is doing) compete well if there is a viable cable operator in the area?

3 - Where are the multi-million line IOCs (Sprint, Valor [was Alltel], Centurytel, and Frontier) in all of this?

seven
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