DON'T GET MAD, GET ILEC

If all goes well, a small wooded stretch of Northern Michigan will receive basic phone service for the first time in history this summer. Not just any service but one provided over fiber-to-the-premises using Gigabit passive optical networking, or GPON, technology, some of the most advanced stuff the industry has to offer.

It will come from Allband Communications, the nation's first new ILEC in some 40-odd years — perhaps the only phone company in America formed mainly out of spite.

Allband's story began in the late 1990s, when John Reigle, a former mortician and funeral industry consultant, was moving his business from New York to northern Michigan, not far from where he grew up in Flint. Building a house on land his grandparents owned, he requested a new phone line installation from what was then GTE. Because the house was far from town, the company told him installation would cost $2000. Reigle wrote them a check. Shortly thereafter, GTE upped the price to $23,000. Reigle needed the service, so he gave in and paid, with a suggestion from his lawyer that they fight it out in court later. Then, two days before Reigle was to move into the house, GTE changed its story again, refusing to offer phone service at all.

As it turned out, the area surrounding Reigle's house — a woodsy, 117-square mile patch known as Robbs Creek — had never been assigned an incumbent phone provider. And small wonder: With fewer than two potential customers per square mile, it probably contains more deer than people. Many of the area's 300 homes are weekend retreats for those who like to hunt and fish in Robbs Creek's abundant wilderness. (Paul Hartman, Allband's general manager, said a Verizon Communications representative told him the company would not serve that area today because there are no businesses there. He replied, “Isn't the reason there are no businesses there because there's no phone service?”)

Legally, GTE couldn't be forced into Robbs Creek, thanks to no less redoubtable an authority than the Bill of Rights. The U.S. Constitution's Fifth Amendment prohibits the taking of private property for public purposes. “If a company doesn't agree to take it, you can't make them take it unless you make it in their best financial interest,” said Ron Choura, a member of the Michigan Public Service Commission (PSC). “They can just plead the Fifth and not do it.”

Forced to run his business from a pay phone, Reigle's only recourse was to file a complaint with the PSC. But that made all the difference, as it introduced him to Choura, who taught night classes on telecom at Michigan State University and had worked doggedly to bring phone service to unassigned areas throughout his 30-year tenure on the PSC.

“This is a pet peeve of mine,” Choura said. “It's just kind of embarrassing. We can talk to people on the moon but not in rural Michigan.”

Reigle shared Choura's umbrage about the unassigned. And where Choura had know-how, Reigle had resolve, determined to get even with GTE. “He said, ‘I'm so mad, I want to start my own phone company,’” Choura recalled. So Allband Communications was born.

Choura showed Reigle everything he needed to know to start his own phone cooperative, donating countless hours to the cause, working weekends and fielding questions at 3 a.m. Choura also brought a novel solution to Reigle's lack of capital by assigning much of the development work (composing business plans, conducting market surveys, evaluating technologies, etc.) to his students, who did it for free as a kind of internship. Given a real-world problem rather than a hypothetical, Choura said, “[Students] will put in hundreds of hours of their own time. I had over 300 students working on this.”

Of course, rather than found a company with no capital in an industry entirely foreign to him built on confounding technology, Reigle could have simply moved somewhere that already had phone service. “That would have been the right answer,” he said. “That's just not me.”

Allband's directors decided it would deliver not only the area's first phone service but also high-speed Internet access over fiber. Surveys indicated about 60% of customers would sign up for broadband for $40 to $60 per month. (A few opposed even phone service, but Choura said further digging revealed multiple opinions per household. “[Their spouses] said, ‘don't listen to him; I'm going to pay the bills no matter what he says,’” he said.) Eventually, Allband will offer video.

After reviewing several wireless and wireline technology options (and what was, for the ex-mortician, a thoroughly bewildering trip to the Supercomm trade show), Allband's leaders decided to build their new network using GPON gear from Calix. (Since that decision, Calix has unveiled new 2.5 Gb/s products, which means, “Calix and I get to have a talk,” Hartman said. “I only got 1.5 Mb/s.”)

Over the first few years, Hartman expects more than 80% of Allband's revenue to come from the government's universal service fund. The company obtained an $8 million loan from the rural development allocations of the U.S. Dept. of Agriculture. But Allband can't use that money until it has paying customers, and even then, it takes time to process. So the company started off with $1 million in interim financing from the Rural Telephone Finance Cooperative. But Hartman realized the company would need about $1.3 million to turn up its first customer. “That's a problem,” he said.

After being certified as an ILEC last August, Allband began construction on its network last October, digging conduit to interconnect with Verizon's fiber 26 miles north of Robbs Creek. The same month, Allband urgently asked the state PSC to declare it eligible to access the USDA loan, warning that the company would run out of money at the end of November unless it was able to dip into the $8 million. In early November, the PSC granted that request.

But before November ended, construction halted, as Michigan's winter weather turned ugly. (There are varying accounts of the construction delay. Reigle said it began with the onset of deer hunting season, which could put construction workers in danger. Choura said construction started late because the construction firm was delayed by Gulf Coast restoration efforts following Hurricane Katrina.)

Allband's leaders hope to resume construction in May, turn up their first customer in July and complete the network next year. After that, the company hopes to build networks serving some of the 15 or so undeclared areas remaining in Michigan. The experience already has left its mark on Reigle, who now does less mortuary consulting and more economic development of rural areas.

In the meantime, cash burn is kept low on the company's shoestring budget. Hartman says it's no coincidence Allband's Hillman, Mich., headquarters are located inside a mental health facility building. “You have to be nuts to do this,” he said.

Or if not nuts, at least a little mad.