CANBY TELEPHONE COMES FULL CIRCLE WITH A TWIST ON VIDEO

In 2001, Canby Telephone Association sold its incumbent cable operation to Willamette Broadband in a transaction that was fairly typical. Around the same time, Tier 1 telcos such as the former Ameritech and SNET were on the verge of selling off their own cable assets. Canby, however, made the sale knowing it was going to return to the market.

“We were just waiting,” said Jim Rennard, vice president of finance for Canby. “The time is always right or never right.”

Fast forward two years and the company was beginning to contemplate its future as a converged services provider.

“Pretty much every business plan that we looked at, we came to the conclusion that you have to be able to offer that or you will lose,” Rennard said.

In response, the company surveyed customers in the Canby area — which sits just south of Portland, Ore. — on their existing telecom services.

“Our customers indicated that they were not pleased with the current offering [of cable],” said Keith Galitz, president of Canby Tel. “There was a window of opportunity for us to get back into it, but we needed to move quicker rather than later. In that interim window, we did a lot of research on the technical aspects and what else we needed to do. One of the things we decided was that if you're not in IPTV, the potential loss is much greater than the additional investment required to get in.”

In November 2005, Canby Tel became the first carrier in Oregon to offer the quadruple play and the first to offer IPTV. But instead of cobbling together a me-too service or loading up on hundreds of channels, the company took a more targeted approach.

Canby, not unlike many independents, serves a market that relies heavily on agriculture to drive the economic engine. Yet this isn't the type of agriculture that lends itself to large farm machines and vast acreage.

“Shrubs are a major part of the economy here,” Galitz said.

That translates into a vast labor force, most of whom don't speak English as their native language. In fact, about 15% to 20% of the area's population is comprised of Mexican immigrants. Reaching that customer base requires conducting business in Spanish, adapting to the business mores of the culture and, perhaps most important, providing the right video content.

“It's always been a part of the Canby community,” Rennard said. “For years we've had bilingual customer service representatives. One of the things you have to pay attention to is where they're from. Spanish-speaking countries have very different tastes.”

Indeed, in its initial rollout of IPTV, the company is offering perhaps the largest selection of Spanish-language programming, with a heavy emphasis on programs from Mexico, among telco video providers. Verizon, it should be noted, does offer a Spanish-language tier with its FiosTV offering in its Texas and Florida markets, but not quite to the extent or specificity as Canby.

“The channels we're offering are right from Mexico as opposed to our competitor that offers more general Spanish programs,” said Kevin Kutcher, marketing director for Canby Tel. “Our programming is the programming that they were watching when they were in Mexico.”

Reaching out to the Mexican population also means conducting business a little differently. While many independents still have a high percentage of customers who like to pay their bills in person, Canby has an inordinate amount who prefer to do it in cash.

“Culturally, they're a cash-based society,” Kutcher said, adding that the company brings in more staff to handle large crowds during certain times of the month. “You also can't do the same kind of credit check on someone who doesn't have credit cards. They're very relational in a way that is not what you would normally see. In a lot of cases, you just have to take chances.”

To be sure, the company isn't just focusing on the Spanish-speaking market. Before even rolling out IPTV, Canby did a fair amount of pre-marketing of the service and put on a publicity blitz. It also secured a state-wide franchise. The result? On the date of the launch, the company was fully booked for several weeks with installations and currently is well ahead of its business plan.

“We are about six months ahead of schedule in terms of penetration rate,” Rennard said. “What our business flow projected was cash-flow break-even after five years.”

That the company would even think it could make money on IPTV in that time frame is fairly unusual, Rennard added. “It's not that you're going to make a lot of money on the stand-alone product, but if you look at the amount of loss you're going to get in telephony, it's significantly at risk.”