Tiny ILECs See the Big Picture

Phil Harvey
News Analysis
Phil Harvey, US Bureau Chief
1/16/2006



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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