IPTV is a key component of rural Minnesota telco's broadband stimulus projects

Halstad Telephone Company has the distinction of having won three broadband stimulus awards after applying for a total of four—an impressive feat for a 14-person company in a program in which the vast majority of applications were rejected. The projects are bringing fiber-to-the-home and fiber-to-the neighborhood to rural areas of northwestern Minnesota, including areas where HTC operates as an incumbent or competitive local exchange carrier.

“Two of the projects are done and we’re still hooking up new customers,” HTC chief executive Tom Maroney told Connected Planet this week. The third project recently got restarted after delays resulting from an industry-wide fiber shortage. “We plan on being done this fall,” Maroney said.

The project areas previously had either no broadband or had DSL service at relatively low 256 kb/s or 512 kb/s speeds. Maroney said he believes that reality was a big factor in the Rural Utilities Service’s decision to award a total of $11 million to HTC on a 50/50 grant/loan basis. The total value of the awards was $11 million.

Maroney said the company would not have been able to make a business case to support the deployment without the grant money. “The grant really helped in the more rural parts of the project areas,” Maroney said. HTC might have been able to cost-justify a deployment in population centers only. But as a coop, Maroney said, “We don’t look at it that way.”

Video is key

In the completed project areas, HTC already has seen broadband take rates well above 50%. The company bundles data with voice service at speeds of either 1, 3 or 10 Mb/s and can go higher in response to special requests.

“We push the three-meg service,” Maroney said, noting that 3 Mb/s service offers sufficient bandwidth for most users, including those who stream movies using Netflix. He added, though, that, “we’re selling more 10-meg service all the time.” And with the company’s traffic to the Internet doubling every one to two years, that trend is likely to be even more pronounced in the future.

The company also uses its new network platform, based on equipment from Calix, to support a triple play offering that includes IPTV as well as data and voice. The IPTV offering has 280 channels, including HDTV, as well as a digital video recorder.

HTC doesn’t make much profit on the IPTV offering, but Maroney said it helps sell the broadband and voice services and enhances customer loyalty. “Customers were asking for it and as a coop, we’re going to try to do what customers want,” noted Maroney.

The company’s plans were detailed in its broadband stimulus application. “We could prove financially we could make it,” Maroney said.

Job creation

HTC hired five temporary workers as a result of the stimulus project and expects to end up with one net new permanent employee. The construction company working on the project also has made new hires.

Long term, Maroney believes the availability of broadband will help create indirect jobs as well.

“Companies want to come to smaller towns because the work ethics are really great, but they have to have broadband,” Maroney said.