Rural Phone Companies Are (Finally) Getting Into VoIP

By Ted Stevenson | Apr 26, 2010 | Print this Page
http://www.enterprisenetworkingplanet.com/unified_communications/Rural-Phone-Companies-Are-Finally-Getting-Into-VoIP-3878671.htm

There's a revolution going on in the U.S. rural phone industry. Small operators—used to running their networks without competition from others—are finding it necessary to broaden their offerings to replace revenues lost with declining landline use.

Fortunately for them, the real push to do this—after a decade of indifference to IP-based communications technologies—is coming at a time when the government is actively subsidizing the move to broadband IP.

Also fortunate is the existence of a heretofore largely invisible group of intermediate service providers who can ease the path to broadband and IP voice services, making it possible for small operators both to expand without capital outlay and also to sidestep the ability of the large regional ILECs (def.) to control bandwidth pricing, as they have done in the past.

"If you're an ISP in rural Idaho, you may be paying as much as 15 or 20 times the bandwidth costs of somebody that's in Seattle," Brian Worthen, president and founder of Wyoming-based Mammoth Networks, told Enterprise VoIPplanet.com.

Mammoth is one of the new breed of service providers just mentioned. Calling itself a "data services aggregator," it buys private circuits from a small handful of preferred provider/carriers, and resells them to smaller ILECs." What they gain through the intervention of an aggregator like Mammoth is buying power.

"The benefit that gives our customers is a mix of carriers that gives them the best fit for the market they're trying to hit," Worthen said. "If they're trying to hit Las Cruces N.M., I can give them options for that. If they reach out to a carrier, that carrier is going to give them one option."

And that single option will be at the price the carrier decides to charge. "Traditionally, that group [small ILECs] is treated as if they're hamstrung, They serve a small city that has 3,000 people, and the RBOC [Regional Bell Operating Company] surrounds them. They have no choice but to use them. People treat them as hostages."

But Mammoth is changing all that. The data networking business is very reseller-centric, Worthen explained. If a small phone company reaches out to a provider, it's likely to be either to a traditional carrier, or to a middleman that doesn't even own any equipment.

"We're sort of in the middle; we have our own equipment and we resell the very best carriers," Worthen told VoIPplanet.com. "We have our own equipment in a number of places, like Seattle, the Bay Area, throughout the Rocky Mountains—Billings Mont., Casper Wyo., Colorado, Phoenix, Tucson, Albuquerque. We also have facilities in Minneapolis—we just built out a POP in Atlanta and so forth."

This lets Mammoth provide lined in the entire lower 48 states. "We're especially strong West of the Mississippi," Worthen said.

But IP bandwidth is only one part of the expansion story for rural ILECs and cable operators moving to IP voice—albeit a crucial one. The other side is, of course, voice services. That's where longtime Mammoth partner Dash Carrier Services comes into the picture.

Dash is one of the three premier suppliers of outsourced 911 services for both VoIP and traditional TDM phone providers. More recently, though, Dash has established itself as a provider of what Dash representative Kevin Breault called "complementary" wholesale voice services—origination, termination, phone numbers, directory assistance and listing services, and the like.

(Breault was quick to point out that Dash's offering include no features: "We're strictly wholesale—no voice mailboxes, no call forwarding, etc.")

Local phone providers were notoriously difficult to deal with in years past, Breault explained to VoIPplanet.com. "They operated in a closed world for a long time" he said.

"Now, with the penetration of cellular, etc. they're experiencing revenue loss because people are letting their wireline go, just like they are with AT&T and Verizon. They need to plug that gap, so now they have a sense of urgency and a purpose, so, they now want to expand their services—add some sort of IP, maybe hosted PBX, residential VoIP, maybe some SIP trunking."

As they begin to think expansion, Brealut said, they also discover that "if I'm in Denver, I could almost as easily offer these services in Utah. Or if they're in Albuquerque, they could begin offering it in Santa Fe."

"Many times they'll have a [sophisticated PBX] that allows them to expand their feature set, but they don't have the other tools to do so. They don't necessarily want to go file and build out their network, because that requires capital, but they can turn to [the Mammoth/Dash] relationship and all of a sudden they're in the game." Breault explained.

Moreover, with Mammoth's private lines, ILECs can manage the networks as they're accustomed to doing, maintaining whatever quality of service level they like.

All of this has stirred up a veritable flurry of expansion on the part of small phone providers. Ironically, Breault pointed out—because the small ILECs were the last market segment to embrace IP—"now that they're ready to do it, they've even got the government to help them pay for it."

All of this will bring vast and rapid changes to the telephony landscape. "As soon as they go outside their regulated world, and start using IP,"Breault explained, "they're in new territory and they can enter another ILEC's area." Increased competition is a fairly certain outcome for customers, but other contours of the landscape will be harder to predict with any certainty.