Yukon gold

When one thinks of Alaska, it often brings to mind drifting snow, ice floes, oil rigs and polar bears. But Liane Pelletier, president and CEO of Alaska Communications Systems, is quick to point out that the areas her company services are a bit off from what folks in the Lower 48 might envision. Sure, ACS has some desolate pockets of customers, but the majority of its footprint is quite different.

“There are some tricky ones, and there's some great stories and pictures about some of our cell sites on mountaintops, where you have to helicopter in, and things like that, but it's not everywhere,” Pelletier said. “[It's] more urban clusters in a gorgeous park.”

Pelletier wants to change people's preconceptions of her company from just another RLEC to a regional power with a major presence in Alaska's largest three metro areas. Even a brief delve into the recent history and current projects of ACS reveals a company with big aspirations in a big state.

Pelletier has moved ACS forward with an aggressive wireless strategy since joining the company and now has turned an eye toward expanding enterprise services with a major infrastructure buildout. But an old competitor, a new market entrant and the economic and demographic realities of the state itself — in addition to the hard facts facing all regional service providers — stand as potential obstacles to plans that analysts say will make or break Pelletier's legacy with ACS and determine the continued success of the company.

“Alaska has historically been the most competitive telecommunications market in the country,” said Chris King, principal analyst for Stifel Nicolaus.

Back in the late '90s and early '00s, King said, Alaska had a very progressive, pro-competition public services commission that enabled ACS' primary competitor, cable company GCI, to obtain low unbundled network element rates to compete against ACS in wireline.

In addition to its regulatory environment, Alaska boasts one of the most skewed population distributions in the U.S. Roughly 90% of the populace lives on 5% of the land area, with only 1% of Alaskans owning their own property. This makes competition for the state's three main urban centers — Anchorage, Fairbanks and Juneau — all the more heated.

But there also are some benefits to operating in the nation's largest state. The median household income in Alaska is 23% higher than the rest of the U.S.; there is no income tax; Internet penetration is the nation's second highest at 73%; and perhaps most interestingly, citizens get a cut of oil revenues as part of the Alaska Permanent Fund. (Citizens received checks of more than $1600 last year.) Rising energy prices only benefit Alaska. A 2007 state revenue report estimated that a $1 increase in the price of a barrel of oil resulted in around $150 million in additional revenue for Alaska.