As early as 2000, Indiana’s Rochester Telephone Co. (RTC) realized that customers’ “thirst for speed” demanded a long-term strategic investment in a next-generation broadband network to replace its existing copper build. From a business standpoint, this wasn’t about growing revenue, but replacing it, as competition from cellular providers and cable companies threatened to erode its customer base.

“If we had wanted to remain a dial-tone only company we would have been in a death spiral,” said Ron Riggle, RTC’s Vice President of Operations. “As it was, we saw the opportunity to get into the cable industry and to be a full service provider of broadband Triple Play services -- Internet, cable, and telephone -- and maintain a good subscriber base. Instead of making money, this would allow us to fill in where we would be losing money.”

RTC realized that the most effective means through which to deliver such broadband services lay in bringing optical fiber all the way into the homes and businesses of its customer base. No other broadband infrastructure offered the same combination of ultra-fast transmission speeds, reliability, cost, and scalability, to evolve with advancements in technology.

Though RTC had deployed fiber to connect all of the community’s public schools in 1994, the savvy ILEC knew the real challenges they faced rolling it out to their market. RTC had to define a viable business plan that would allow it to deploy fiber on a much larger scale without breaking the bank or disrupting service to its community.

The relatively small size and geographical spread of its customer base posed specific challenges. Fulton County Indiana is a rural area with 21,500 residents spread over 370 square miles, characterized by light manufacturing, farming, and supporting service industries. By Riggle’s measure, the community hospital is likely the county’s largest employer. The town of Rochester is the county’s seat and principal community, with about 7,500 people. (See Figure 1.)

Figure 1.

Even more challenging is the fact that RTC covers a 150-square-mile area in the heart of the county that includes the town and the adjacent rural area. RTC serves about 6,000 subscriber premises in total, representing 7,200 access lines. (The remaining areas of the county are served by other telcos such as CenturyLink and Verizon.)

To build out its Fiber-to-the-Home (FTTH) network, RTC realized that it needed a phased deployment plan that would gradually transition residents from copper with the support of third-party funding, and a partnership with a supplier of broadband access equipment that the ILEC could trust to serve its needs over the long-term.

Way back in September 2002, RTC’s board approved the $9 million FTTH project, dubbed “FiberConnect”, to bring high-speed Internet, telephone, and cable TV to the town of Rochester and the surrounding countryside. In April 2003, the first FiberConnect customer came online.

Seven years later, RTC is in the final phases of passing the last few hundred rural customers with fiber. The penetration rate of its broadband services -- the number of homes, businesses and institutions that have subscribed to services over the fiber network -- is running at 60 to 65 per cent, a strong rate of adoption by industry standards. According to Riggle, there was no secret sauce for this success -- it was consumer demand, plain and simple.

The objective of this article is to explore the slow and steady approach RTC used in proceeding with its fiber build. The hope is to provide insight for other small ILECs who may be considering a similar investment in fiber. That said, let’s dive into the challenges and lessons learned.

The True Story Unfolds
To truly understand the process, we must begin with the Telecommunications Act of 1996. About that time, RTC installed a new central office switch, and began offering Internet services. The company also decided to try its hand at operating a competitive local exchange carrier (CLEC). RTC set up a CLEC in a neighboring community served by Verizon. Here it experimented with cable TV by building an analog headend for the CLEC, and also installed fiber-to-the-curb.

Due to the nascent state of the Ethernet market, however, RTC employed a business model in which it offered DSL Internet service side-by-side with fiber for RF video. From 1998 to 2001, RTC overbuilt about 700 subscribers to the CLEC.

“Once this project was complete in 2001, we thought about catching our breath,” Riggle said. “Then we realized the thirst for speed on Internet service was going to continue. Dial-up and DSL were not going to cut it. But, with our Fiber-to-the-Curb (FTTC) design, the bandwidth we needed was sitting at the curb.”

At that point, RTC started investigating FTTH solutions for the home exchange back in Rochester with the help of external consultants. Seeking this kind of outside help was new for the ILEC, but so too was the provision of advanced broadband services.

“Historically we always made our own decisions on our switches and outside plant, but suddenly we were faced with a whole new world,” Riggle said. “Rather than go it alone, we wanted to find someone who could provide the professional backing to go before our board and say ‘this is the way to do it and it will work.’ There were so many unknowns at the time.”

However, RTC did not rely on external consultants to tell it what it should do, but to provide it with the impartial advice and due diligence required to make informed decisions that were in its best interests.

“We worked with consultants we already knew well in the industry,” Riggle said. “They took a middle-of-the-road approach and said ‘here are your options.’ They remained neutral and the final decision was ours.”

To fund the fiber build, RTC changed from an average schedule company to a cost company, thus increasing its qualification financial support.

“This allowed us to qualify for financial support through the Universal Service Administrative Company (USAC) -- an independent, not-for-profit corporation that administers the FCC’s Universal Service Fund,” Riggle said. “This fund helps telecom service providers overcome the high costs associated with deploying services to rural areas with sparse populations.”

RTC considered 5 vendors of FTTH systems for its deployment, but found that most were pushing solutions that involved costly hardware investments to retrofit DSL platforms for fiber. Instead, RTC focused on a pair of vendors that were offering passive optical network, or PON, architectures.

The ILEC ultimately chose the Last Mile Link Access Platform from Wave 7 Optics, a partnership that continues today through Enablence, following its acquisition of Wave 7 Optics in 2008. Following the initial deployment with the LML platform, RTC adopted the TRIDENT7 Access Platform from Enablence. It’s an IP/Ethernet-based PON chassis ideal for municipal and telco fiber deployments and overbuilds of existing infrastructure.

The ILEC had designed its outside plant, and put splitters in the field to cover 100 per cent of its subscribers with the initial build. However, since not all the premises passed by fiber took up services on the new network, this created inefficiencies in the network. RTC responded by switching to a cross-connect concept in which splitters would be served out of the cross-connects on a customer-demand basis. Instead of attempting a wholesale change of its customers from copper to fiber, RTC could instead build out its infrastructure incrementally as needed to capture pent-up demand.

“We could see the writing on the wall,” Riggle said. “This would be an evolutionary march.”

Seven Years Later
After passing 3,500 to 4,000 premises in the initial rollout, which was completed in 2005, the ILEC broke up its remaining rural customers in areas defined by demographics and the deployment of the time division multiplexing (TDM) nodes that manage subscriber traffic over its copper network. The initial rollout and subsequent build to reach rural customers was supported by 2 TRIDENT7s.

Four areas remain to be connected by fiber, of which 3 will be completed this year. The last, to connect 150 far-flung rural subscribers, will demand "quite a bit of mileage of cable," said Riggle. In town, cable has been pole-mounted to avoid trenching through asphalt and concrete, but direct-buried outside of town.

For RTC, taking such a methodical and phased approach hasn't only been about budgeting.

"We feel that doing it ourselves at a slower pace has given us the quality we want," Riggle said. "Sometimes when you have too much contract labor, it is difficult to manage and you don't always get the best quality work. Also, we didn't want to hire a bunch of people only to lay them off."

Throughout this process, RTC has had to maintain service to residents still on the copper network, and contend with the inevitable outcry from residents impatient to enjoy the same broadband services as their neighbors. Installing and connecting customers that have been passed by fiber continues on a daily basis, a process that is time consuming and expensive. Most homes are not wired with CAT5 wiring necessary for high-speed home networks that can handle Ethernet and IPTV. Summer lightning storms are also a recurring threat that incur added maintenance time and repair costs.

RTC hopes to have fully transitioned its remaining copper customers to fiber within the next 2 to 3 years. At present, it is installing a new softswitch that will allow it to run all fiber convergent and copper customers on the same switch.

Converting residents simply for phone service is not RTC's objective. Increasing take rate of bundled services, led by the appeal of Internet and cable, is fundamental to RTC's business plan. However, Riggle acknowledges that at some point, the ILEC will likely have to switch over the last holdouts interested only in phone service to finalize the transition and pull the plug on its copper network.

Through the process of deployment, the services offered over the network have also continued to evolve. Two years ago, RTC began offering digital IPTV in addition to analog, which required set-top boxes and a whole new skill set for technical staff to learn.

"Our guys have really stepped up and are learning as best as they can on the job without a lot of formal training. There are times when it gets above them and they have to rely on Enablence's technical support," Riggle said.

Meeting the Competitive Threat
One major challenge that has arisen, however, has had nothing to do with the logistics of RTC's evolution from copper. The community's incumbent cable television provider has responded to RTC's fiber build by beefing up its own TV offering and providing Triple Play services over its traditional hybrid fiber-coaxial (HFC) cable infrastructure.

"What started out as easy pickings has become quite a battlefield," said Riggle. "It has been tough to meet this competitive threat on a regulatory and cost-factor front."

However, RTC can claim a significant home court advantage. Founded 115 years ago by a group of local businessmen, the ILEC remains tightly held by a group of local shareholders, many of whom are third and fourth-generation descendants of the founders. RTC enjoys strong customer loyalty, and a gives extensively to the community to a degree unmatched by the cable company. Beyond that, it's a simple matter of horsepower.

"The cable company will advertise these high speeds, but they are optimum levels that can't commonly be realized," Riggle said. "We, on the other hand, have symmetrical 6 Mbs per second, up and down, all the time, and even faster speed options depending on the need. Copper and HFC are simply no competition for what fiber allows us to do."

Figure 2. This technician is installing on the home owner's premises, what Rochester calls a "fiber optic gateway", also known as an optical line terminal or ONT. This is an outdoor version, but it is also available for indoor use. The ONT is the optical modem that converts the light pulses from the optical fiber to electrical or Ethernet signals and back again to provide the home's television, phone, and Internet services.

Figure 3.

Figure 4.

Figure 5.

Figures 3, 4, and 5. These 3 images show various angles of a pedestal telephone head. Traditionally, this carried the copper loops for traditional telephone and DSL Internet service to residential neighborhoods. But as it transitions its subscribers from copper to fiber, Rochester is using the same telephone heads to carry both cables rather than add visual pollution by installing completely new pedestals. Eventually, the copper will be entirely shut down. Fiber from Rochester's central office runs out to these pedestals and is then split into multiple fibers, each of which connects a nearby home to the network.

©Couvrette/Ottawa
About the Author
Peter Kallai is Vice President of Strategic Analysis and Marketing at Enablence Technologies Inc., a supplier of FTTH equipment for Triple Play residential and business services; and optical components and subsystems for access, metro, and long-haul markets. Learn more at www.enablence.com or email info@enablence.com. Peter can be contacted at email peter.kallai@enablence.com.

For more information about Rochester Telephone Company (RTC), visit www.rtc1.com.

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